What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-29 · 109 added, 171 removed, 335 unchanged (46% of the section changed)

1 unchanged sentence

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of Company’s management.

This MD&A is divided into seven main sections:

• Basis of Presentation;

This MD&A is divided into five main sections:

• Results of Operations;

6 unchanged sentences

For a discussion of important factors that could cause actual results to differ materially from the results referred to in these forward-looking statements, see “Special Note Regarding Forward-Looking Statements.”

Separation from Enovis

On April 4, 2022 (the “Distribution Date”), Colfax Corporation completed the spin-off of Colfax’s Fabrication Technology business and certain other corporate entities through the Distribution of 90% of the outstanding common stock of ESAB to Colfax stockholders as discussed in the “Separation from Enovis” section within Note 1 , “Organization and Basis of Presentation” in the accompanying Notes contained elsewhere in this Form 10-K.

To effect the Separation, each Colfax stockholder of record as of close of business on March 23, 2022 received one share of ESAB common stock for every three shares of Colfax common stock held on the record date.

Upon completion of the Distribution, Colfax changed its name to Enovis Corporation and continued to hold 10% of the outstanding common stock of ESAB.

In November 2022, Enovis sold a total of 6.0 million shares of our common stock as part of a secondary offering.

After the secondary offering, Enovis no longer owned any of our outstanding common stock.

In connection with the Separation, on April 4, 2022, ESAB and Enovis entered into the separation agreements that govern the Separation and the relationships between the parties going forward, including a separation and distribution agreement, a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement and license agreement for EBX.

Basis of Presentation

The accompanying Consolidated and Combined Financial Statements present our historical financial position, results of operations, changes in equity and cash flows in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The combined financial statements for periods prior to the Separation were derived from Enovis’s consolidated financial statements and accounting records and prepared in accordance with GAAP for the preparation of carved-out combined financial statements.

Through the date of the Separation, all revenues and costs as well as assets and liabilities directly associated with ESAB and certain corporate entities have been included in the Combined financial statements.

Prior to the Separation, the Combined financial statements also included allocations of certain general, administrative, sales and marketing expenses from Enovis’s corporate office and from other Enovis businesses to us and allocations of related assets, liabilities and the Former Parent’s investment, as applicable.

The allocations were determined on a reasonable basis, however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had we been an entity that operated independently of Enovis during the applicable periods.

During the years ended December 31, 2023 and 2022, the additional costs we incurred as a separate public company costs exceeded the costs that have been historically allocated to us.

During the three months ended April 1, 2022, the Former Parent allocated costs were $6.0 million, as included in the accompanying Notes contained elsewhere in this Form 10-K.

Following the Separation, the consolidated financial statements include ESAB and its wholly-owned subsidiaries and no longer include any allocations of expenses from Enovis.

• The Consolidated Balance Sheet as of December 31, 2023 and December 31, 2022 con sists of the consolidated balances of ESAB.

• The Consolidated Statement of Operations, Statement of Comprehensive Income (Loss), Statement of Changes in Equity and Statement of Cash Flows for the year ended December 31, 2023 consist of the consolidated results of ESAB.

• The Consolidated and Combined Statement of Operations, Statement of Comprehensive Income (Loss), Statement of Changes in Equity and Statement of Cash Flows for the year ended December 31, 2022 consist of the activities of ESAB for the nine months ended December 31, 2022 and the combined activity of the former Fabrication Technology business of Enovis for the three months ended April 1, 2022.

Our Consolidated and Combined Financial Statements may not be indicative of our results had we been a separate stand-alone entity throughout the periods presented, nor are the results stated herein indicative of what our financial position, results of operations and cash flows may be in the future.

Former Parent’s investment, which included retained earnings, represented Enovis’s interest in our recorded net assets.

All significant transactions between us and the Former Parent prior to the Separation have been included in the accompanying Financial Statements.

Transactions with the Former Parent are reflected in the accompanying Consolidated and Combined Statements of Equity as “Net Transfers from Former Parent, including Separation Adjustments” for the year December 31, 2022.

Included below are year-over-year co mparisons between 2023 and 2022.

For further information on year-over-year comparisons between 2022 and 2021 not covered in the results below, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Comp any’s Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 7, 2023.

See Part I, Item 1.

1 unchanged sentence

We are a focused premier industrial compounder.

Our rich history of innovative products, workflow solutions and our business system EBX, enables our purpose of Shaping the world we imagine TM .

The Company’s products are utilized to solve challenges in a wide range of industries, including cutting, joining and automated welding.

Our rich history of innovating products, workflow solutions and our business system, EBX, enables our purpose of Shaping the world we imagine TM.

We conduct our operations through two reportable segments.

2 unchanged sentences

Our customer base is highly diversified in the industrial end markets.

Integral to our operations is EBX, our business management system.

EBX is our culture and includes our values, a comprehensive set of tools and repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, stockholders and associates.

We believe that our management team’s access to, and experience in, the application of the EBX methodology is one of our primary competitive strengths.

We believe that we are well positioned to grow our businesses organically over the long term by enhancing our product offerings and expanding our customer base.

We believe that our business mix is well balanced between sales in emerging and developed markets and equipment and consumables.

We intend to continue to utilize our strong global presence and worldwide

network of salespeople and distributors to capitalize on growth opportunities by selling regionally-developed and/or marketed products and solutions throughout our served markets.

We believe our business mix is well balanced between sales in high growth and developed markets, and equipment and consumables.

We believe that our geographic and end market diversity helps mitigate the effects from cyclical industrial market exposures.

2 unchanged sentences

We expect strategic acquisitions to contribute to our growth.

We believe that the extensive experience of our leadership team in acquiring and effectively integrating acquisition targets should enable us to capitalize on future opportunities.

We believe the acquisitions of Ohio Medical, LLC (“Ohio Medical”) and Swift-Cut Automation Limited (“Swift-Cut Limited”) in 2022 as well as the acquisition of Therapy Equipment Limited in 2023 and [Sager S.A.

in 2024], are aligned with this strategic direction.

Refer to Note 5, “Acquisitions” and Note 22 “Subsequent Events” in the accompanying Notes contained elsewhere in this Form 10-K for additional information.

We face a number of challenges and opportunities, including the successful integration of acquired businesses, the application and expansion of our EBX tools to improve business performance, the ability to realize the expected benefits of the Separation and operate as an independent, public company, and the rationalization of assets and costs.

We believe that our extensive experience of acquiring and effectively integrating acquisition targets should enable us to capitalize on future opportunities.

We believe our recent acquisitions of Therapy Equipment Limited (“Therapy Equipment”) in 2023 as well as Sager S.A.

(“Sager”), ESAB Bangladesh Private Limited (“ESAB Bangladesh”) (formerly known as Linde Industries Private Limited) and SUMIG Soluções para Solda e Corte Ltda.

(“SUMIG”) in 2024, are aligned with this strategic direction.

Refer to Note 5, “Acquisitions” in the accompanying Notes contained elsewhere in this Form 10-K for additional information.

For additional information about these challenges and opportunities, refer to Part I, Item 1A.

1 unchanged sentence

The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2024 and 2023.

We have elected not to include a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2023 and 2022 in this report in reliance upon Instruction 1 to

Item 303(b) of Regulation S-K.

This discussion can be found in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024.

Results of Operations

5 unchanged sentences

The invasion of Ukraine by Russia and the sanctions and other actions taken by governments in response to the crisis have increased the level of economic and political uncertainty.

For the year ended December 31, 2024, Russia represented approximately 5% of the Company’s total revenue, and approximately $13 million of its Net income.

Excluding any goodwill allocation, Russia has approximately 4% of the Company’s total net assets as of December 31, 2024, including approximately $30 million of Cash and cash equivalents that may be subject to delays in withdrawing from Russia, based upon the current environment at that time.

In case of the disposition of the Russia business, a portion of goodwill would need to be allocated and disposed of at the relative fair value attributable to the Russia business.

Russia has a cumulative translation loss of approximately $130 million as of December 31, 2024, which could be realized upon a transition out.

For additional information of the associated risks, refer to the Part I, Item 1A.

3 unchanged sentences

The change in Net sales due to acquisitions for the periods presented in this filing represents the incremental sales as a result of acquisitions.

The COVID Pandemic

The COVID virus and actions taken in response to it have had a variety of impacts on our results of operations during 2022, including sales levels and other supply chain challenges.

For additional information on the risks of COVID to the Company’s operations, refer to the Part I, Item 1A.

“Risk Factors” section.

Global Operations

Our products and services are available worldwide.

The manner in which our products and services are sold differs by region.

During 2023 and 2022, 78% of our net sales were derived from operations outside of the United States.

During both 2023 and 2022, 44% of our net sales were derived from the Americas and 56% of our net sales were derived from EMEA &

Accordingly, we are affected by market demand, economic and political factors in countries throughout the world.

Our ability to grow and our financial performance will be affected by our ability to address a variety of challenges and opportunities that are a consequence of our global operations, including efficien tly utilizing our global sales, manufacturing and distribution capabilities, participating in the expansion of market opportunities in emerging markets, successfully completing global acquisitions and engineering innovative new product applications for end users in a variety of geographic markets.

However, we believe that our geographic, end market, customer and product diversification may limit the impact that any one country or economy could have on our combined results.

Foreign Currency Fluctuations

As discussed above, a significant portion of our net sales are outside the United States, with the majority of those sales denominated in currencies other than the U.S.

During 2024 and 2023, a significant portion of our Net sales, 78% in each period, were derived from operations outside of the United States with th e majority of those sales denominated in currencies other than the U.S.

Because much of our manufacturing and employee costs are outside the United States, a significant portion of our costs are also denominated in currencies other than the U.S.

Changes in foreign exchange rates can impact our results of operations and are quantified when significant.

Changes in foreign exchange rates can translationally impact our results of operations and are quantified when significant.

For the year ended December 31, 2024 compared to 2023, fluctuation s in foreign currencies reduced N et sales by 3.2%, Gross profit by 2.8% and Selling, general and administrative expenses by 1.2%.

In addition, as Argentina is deemed to have a highly inflationary economy, the significant peso devaluation during December 2023 resulted in a loss of $26.2 million recorded in Interest expense and other, net, in our Consolidated Statement of Operations for the year ended December 31, 2023.

Refer to Note 2, “Summary of Significant Accounting Policies” in the accompanying Notes contained elsewhere in this Form 10-K for additional information.

Our European operations typically experience a slowdown during the July and August vacation seasons.

4 unchanged sentences

While we seek to take actions to manage this risk, future changes in component and raw material costs may adversely impact earnings.

In 2022, we experienced increasing raw material costs due to inflation, which we have passed through to customers to maintain our profit but has resulted in some margin compression.

Sales and Cost Mix

7 unchanged sentences

ESAB presents this non-GAAP financial measure including and excluding Russia due to economic and political volatility caused by th e Russia and Ukraine conflict, which we believe results in enhanced investor interest in these alternate presentations.

Adjusted EBITDA excludes from Net income from continuing operations the effect of Income tax expense, Interest expense and other, net, Pension settlement gain, Restructuring and other related charges, separation costs, acquisition-amortization and other related charges and depreciation and other amortization.

We also present Adjusted EBITDA margins, which is subject to the same adjustments as Adjusted EBITDA.

Further, we present these non-GAAP performance measures on a segment basis, where we exclude the impact of Restructuring and other related charges, separation costs, acquisition-amortization and other related charges and depreciation and other amortization from operating income.

We also present Core Adjusted EBITDA and Core Adjusted EBITDA margins, which are subject to the same adjustments as Adjusted EBITDA and Adjusted EBITDA margins, respectively, and which remove the impact of Russia for the years ended December 31, 2023 and 2022.

Adjusted EBITDA excludes from Net income from continuing operations the effect of Income tax expense, Interest expense and other, net, Pension settlement loss, Restructuring and other related charges, acquisition-amortization and other related charges and depreciation and other amortization.

We also present Adjusted EBITDA margin, which is subject to the same adjustments as Adjusted EBITDA.

Further, we present these non-GAAP performance measures on a segment basis, where we exclude the impact of Restructuring and other related charges, acquisition-amortization and other related charges and depreciation and other amortization from operating income.

We also present Core adjusted EBITDA and Core adjusted EBITDA margin, which are subject to the same adjustments as Adjusted EBITDA and Adjusted EBITDA margin, respectively, and which remove the impact of Russia for the years ended December 31, 2024 and 2023.

Adjusted EBITDA, Adjusted EBITDA margin, Core adjusted EBITDA and Core adjusted EBITDA margin assist management in comparing our operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to unusual events or discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity and core business.

9 unchanged sentences

Interest expense and other, net 64.9

Pension settlement loss 12.2

Operating income (GAAP) $ 203.2 $ 244.2 $ 447.5

1 unchanged sentence

Restructuring and other related charges (2)

6.5 17.6 24.1

Acquisition-amortization and other related charges (3)

8 unchanged sentences

(1) Numbers may not sum due to rounding.

(2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expense, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines .

(3) Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses.

(2) Includes severance and other termination benefits, including outplacement services, as well as the cost of relocating associates, relocating equipment, lease termination expenses and other costs in connection with the closure and optimization of facilities and product lines .

(3) Includes transaction expenses, amortization of acquired intangibles, fair value charges on acquired inventories and integration expenses.

(4) Numbers calculated following the same definition as Adjusted EBITDA for total Company.

6 unchanged sentences

Interest expense and other, net 85.1

Pension settlement gain (9.1)

Operating income (GAAP) $ 182.5 $ 221.7 $ 404.2

Adjusted to add (deduct):

Adjusted to add:

Restructuring and other related charges (2)

6.5 17.6 24.1

Separation costs (3)(4)

Acquisition-amortization and other related charges (3)

8 unchanged sentences

(1) Numbers may not sum due to rounding.

(2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses and other costs in connection with the closure and optimization of facilities and product lines.

(3) Includes non-re curring charges and employee costs related to the planning and execution of the separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Statements of Operations.

(4) Amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment.

(5) Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses.

(2) Includes severance and other termination benefits, including outplacement services, as well as the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.

(3) Includes transaction expenses, amortization of acquired intangibles, fair value charges on acquired inventories and integration expenses.

(4) Numbers calculated following the same definition as Adjusted EBITDA for total Company.

(5) Net sales were $153.8 million relati ng to Russia for the year ended December 31, 2023.

Total Company

Net sales increased for the year ended December 31, 2023 as compared with the year ended December 31, 2022 .

The following table presents the components of changes in our consolidated and combined Net sales.

Net sales decreased for the year ended December 31, 2024 as compared with the year ended December 31, 2023 .

The following table presents the components of changes in our consolidated Net sales.

Net Sales (1)

(Dollars in millions)

5 unchanged sentences

(89.7) (3.2) %

Total sales growth 181.3 7.0 %

Total Net sales decline (34.0) (1.2) %

For the year ended December 31, 2024

(1) Numbers may not sum due to rounding.

(2) Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to factors such as price, product mix and volume.

1 unchanged sentence

(4) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

Net sales from existing businesses increased $161.6 million during 2023 compared to 2022 primarily due to inflation-related customer pricing increases of $94.3 million and increased sales volumes of $67.3 million.

The strengthening of the U.S.

dollar relative to other currencies caused a $44.2 million unfavorable currency translation impact during the year.

Net sales from existing businesses increased $32.3 million during the year ended December 31, 2024 compared to the prior year period, due to customer pricing increases of $19.9 million and increased sales volumes of $12.4 million .

The increase in Net sales from acquisitions of $23.5 million was primarily attributable to the Sager, ESAB Bangladesh and SUMIG acquisitions.

The changes in foreign exchange rates caused a $89.7 million unfavorable currency translation impact.

Sales excluding Russia

Sales excluding Russia (“Core Sales”) for ESAB increased fo r the year ended December 31, 2023 as compared with the year ended December 31, 2022.

The following table presents the components of changes in our consolidated and combined Net sales.

Sales excluding Russia (“Core sales”) for ESAB decreased fo r the year ended December 31, 2024 as compared with the year ended December 31, 2023.

The following table presents the components of changes in our consolidated Core sales.

Core Sales (1)(6)

6 unchanged sentences

(77.9) (3.0) %

Total core sales growth (5)

Total Core sales decline (5)

(29.8) (1.1) %

For the year ended December 31, 2024

3 unchanged sentences

(4) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

(5) Numbers calculated following the same definition as total sales growth for total Company.

(5) Numbers calculated following the same definition as total sales decline for total Company.

(6) Represents sales excluding Russia for the year ended December 31, 2024 and 2023, respectively.

Core Sales from existing businesses for ESAB increased $144.1 million during the year ended December 31, 2023, compared to the year ended December 31, 2022 primarily due to inflation-related customer pricing increases of $88.7 million and increased sales volumes of $55.4 million d uring the year ended December 31, 2023.

T he strengthening of the U.S.

dollar relative to other currencies caused a $17.0 million unfavorable currency translation impact during the year ended December 31, 2023 .

Core sales from existing businesses increased $24.6 million during the year ended December 31, 2024 , compared to the prior year period due to customer pricing increases of $15.4 million and increased sales volumes of $9.2 million.

The increase in Core sales from acquisitions of $23.5 million was primarily attributable to the Sager, ESAB Bangladesh and SUMIG acquisitions.

T he changes in foreign exchange rates caused a $77.9 million unfavorable currency translation impact .

Operating Results

14 unchanged sentences

$ 10.2 $ 24.1

Pension settlement gain $ — $ (9.1)

Separation costs (2)

Pension settlement loss 12.2 —

Acquisition - amortization and other related charges (2)

$ 36.9 $ 34.2

Interest expense (income) and other, net $ 85.1 $ 38.0

Interest expense and other, net 64.9 85.1

Income tax expense 77.3 95.7

3 unchanged sentences

$ 18.1 $ 18.4

(1) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expense, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.

(2) Includes non-recurring charges and employee costs related to the planning and execution of the separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Statements of Operations.

(3) Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses.

(4) Adjusted EBITDA relating to Russia for the year ended December 31, 2023 and 2022 respectively.

Gross profit increased $130.3 million during 2023 in comparison to 2022.

This increase was attributable to benefits from price increases, acquisitions and sales volumes, partially offset by inflation-related costs increases and approximately $22.5 million of unfavorable foreign currency impacts.

Gross profit margin expanded 250 basis points to 36.6% which was primarily due to the benefit from price increases and to a lesser extent sales volume, as well as restructuring initiatives, partially offset by inflation-related cost increases and unfavorable foreign currency impact.

Selling, general and administrative expense increased in comparison to 2022.

This increase was driven by incremental costs from acquisitions, growth initiatives and inflation, partially offset by savings from restructuring initiatives.

During the year ended December 31, 2022, the Company recognized a Pension settlement gain of $9.1 million related to a completed buy-out of a foreign defined benefit plan by a third party plus the merger of two Company pension plans resulting in one plan benefiting from the surplus assets in the other plan.

(1) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.

(2) Includes transaction expenses, amortization of acquired intangibles, fair value charges on acquired inventories and integration expenses.

(3) Numbers calculated following the same definition as Adjusted EBITDA for total Company.

Gross profit increased $21.7 million during 2024 in comparison to 2023, which was attributable to benefits from price increases, lower material costs, productivity gains and accretion from acquisitions, partially offset by unfavorable foreign currency impacts.

Gross profit margin expanded 130 basis points to 37.9%, which was primarily due to aforementioned factors.

Selling, general and administrative expense decreased in comparison to 2023 primarily driven by savings from restructuring initiatives and favorable foreign currency impacts, partially offset by incremental costs from acquisitions and growth initiatives.

During the year ended December 31, 2024, the Company recognized a non-cash Pension settlement loss of $12.2 million related to the transfer of plan assets to a third party as part of externalizing the risk associated with a foreign defined benefit plan.

Interest expense and other, net, decreased in comparison to 2023, primarily driven by the hyperinflationary impact in Argentina recorded in 2023 , which resulted in a loss of $26.2 million in Interest expense and other, net.

The effective tax rate for 2024 and 2023 w as 20.9% and 30.0% , respectively.

This difference year-over-year and from the United States federal statutory rate of 21.0% is primarily due to changes in tax reserves, the impact of permanent differences relating to foreign subsidiaries and withholding taxes, net of the favorable impact from the change in valuation allowances.

The change in tax reserves in 2023 is largely the result of an adverse court ruling in an unrelated taxpayer’s tax case in a foreign jurisdiction.

Net income from continuing operations decreased in 2023 compared to 2022, due to changes discussed above as well as the increased interest expense related to our term loan facility and revolving credit facility which was in place for the full year in 2023.

Additionally, in December 2023, the Argentine peso significantly devalued due to changes in their foreign exchange policy introduced by Argentina’s government that largely contributed to the full year significant foreign exchange loss.

R efer to Note 2, “Summary of Significant Accounting Policies” in t he accompanying Notes contained elsewhere in this Form 10-K for additional information.

These drivers were offset by improved Gross profit.

Net income margin from continuing operations decreased primarily due to the items discussed above.

Adjusted EBITDA, Core adjusted EBITDA and related margins increased primarily due to improved sales, partially offset by inflation-related pricing and cost increases.

Business Segments

We formulate, develop, manufacture and supply consumable products and equipment, including cutting, joining and automated welding products, as well as gas control equipment.

Our products are marketed under several brand names, most notably ESAB, providing a wide range of products with innovative technologies to solve challenges in virtually any industry.

ESAB’s comprehensive range of welding consumables includes electrodes, cored and solid wires and fluxes using a wide range of specialty and other materials and cutting consumables including electrodes, nozzles, shields and tips.

ESAB’s equipment ranges from portable welding machines to large customized automated cutting and welding systems.

ESAB also offers a range of software and digital solutions to help its customers increase their productivity, remotely monitor their welding operations and digitize their documentation.

Products are sold into a wide range of end markets, including general industry, infrastructure, renewable energy, medical & life sciences, transportation, construction and energy.

The difference was primarily due to changes in tax reserves and withholding tax on dividends.

In 2024, the effective tax rate was lower than the United States federal statutory rate of 21.0% primarily due to favorable impacts from an agreement with a taxing authority on the treatment of subsidy income in a foreign jurisdiction, favorable changes in tax reserves primarily related to a final ruling in a tax case in a foreign jurisdiction, partially offset by withholding taxes and the impact of jurisdictional mix of income in 2023.

Net income from continuing operations increased in 2024 compared to 2023, due to changes discussed above.

Net income margin from continuing operations expanded primarily due to the items discussed above.

Adjusted EBITDA increased $27.7 million and Adjusted EBITDA margin expanded by 120 basis points in 2024 compared to 2023 due to the aforementioned factors.

Core adjusted EBITDA increased $28.0 million and Core adjusted EBITDA margin expanded by 130 basis points primarily due to the aforementioned factors.

Reportable Segments

We report results in two reportable segments:

12 unchanged sentences

Acquisition - amortization and other related charges 18.6 20.9

Separation costs $ — $ 7.5

Depreciation and other amortization $ 14.5 $ 14.8

Net sales in our Americas segment increased by $86.7 million during 2023 compared to 2022.

Net sales from existing business increased by $60.5 million primarily due to inflation-related pricing increases and acquisitions contributed $43.7 million.

These increases were partially offset by $17.5 million of unfavorable currency translation.

Gross profit and related margin increased primarily due to benefit from price increases and acquisitions partially offset by inflation-related cost increases and unfavorable foreign currency impacts.

Selling, general and administrative expense increased primarily due to growth initiatives, acquisitions and increased employee costs.

Adjusted EBITDA increased by $36.1 million to $224.7 million and margins expanded 180 basis points to 18.5% primarily because of the aforementioned factors.

Net sales in our Americas segment decreased by $38.3 million during 2024 compared to 2023.

Net sales from existing business increased by $23.0 million primarily due to customer price increases partially offset by lower sales volume.

Net sales from acquisitions contributed $14.3 million.

These increases were more than offset by $75.5 million of unfavorable currency translation.

Gross profit and related margin increased primarily due to benefit from price increases, productivity gains and acquisitions partially offset by unfavorable foreign currency impacts and decreased sales volumes.

Selling, general and administrative expense decreased primarily due to favorable foreign currency impacts and savings from restructuring initiatives partially offset by growth initiatives and acquisitions.

Adjusted EBITDA increased by $14.5 million and margin expanded 180 basis points primarily due to the aforementioned factors.

The following table summarizes selected financial data for our EMEA & APAC segment.

12 unchanged sentences

Acquisition - amortization and other related charges 15.9 15.9

Separation costs $ — $ 8.1

Depreciation and other amortization 22.2 21.2

2 unchanged sentences

Net sales increased for our EMEA & APAC segment by $4.3 million during 2024 compared to 2023.

Net sales from existing business increased by $101.1 million and acquisitions contributed $20.2 million.

Net sales from existing business increased by $9.3 million driven by higher sales volume, partially offset by lower customer pricing.

Net sales from acquisitions contributed $9.2 million.

These increases were partially offset by $14.2 million in unfavorable currency translation .

Gross profit and related margin increased primarily due to the benefit from increased sales volume, acquisitions and savings from restructuring initiatives.

Selling, general and administrative expense increased over the same period primarily d ue to inflation, increased employee costs and growth initiative spending.

Adjusted EBITDA increased by $28.2 million to $276.4 million compared to 2022 and margins expanded 80 basis points to 17.7% primarily because of the aforementioned factors.

Core adjusted EBITDA increased from $219.8 million to $258.0 million, and the related Core adjusted EBITDA margins expanded by 150 basis points from 16.9% to 18.4%.

Gross profit and related margin increased primarily due to the benefit from increased sales volume, lower material costs and productivity gains partially offset by unfavorable foreign currency impact and lower customer pricing .

Selling, general and administrative expense decreased over the same period primarily d ue to savings from restructuring initiatives partially offset by spending on growth initiatives.

Adjusted EBITDA increased by $13.2 million and margin expanded 80 basis points primarily due to the aforementioned factors.

Core adjusted EBITDA increased by $13.5 million and margin expanded by 80 basis points due to the aforementioned factors.

Liquidity and Capital Resources

Prior to the completion of the Separation, we financed our working capital requirements through cash flows from operating activities and arrangements with our Former Parent.

In conjunction with the Separation on April 4, 2022, the Company entered into a credit agreement as amended and restated from time-to-time, (the “Credit Agreement”).

The Credit Agreement initially consisted of (i) a $750 million revolving credit facility (the “Revolving Facility”) with a maturity date of April 4, 2027, (ii) a Term A-1 loan with an initial aggregate principal amount of $400 million (the “Term Loan A-1 Facility”), with a maturity date of April 4, 2027;

and (iii) a $600 million 364-day senior term loan facility (the “Term Loan A-2 Facility”) with a maturity date of April 3, 2023.

We drew down $1.2 billion under the Credit Agreement and used these proceeds to make payments to Enovis of $1.2 billion, which was used as part of the consideration for the contribution of certain assets and liabilities to us by Enovis in connection with the Separation.

We currently expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures and restructuring related cash outflows, asbestos-related cash outflows and debt service and required amortization of principal and, pending Board approval, payment of cash dividends.

On June 28, 2022, we amended and restated the Credit Agreement by entering into Amendment No.

2 to Credit Agreement (the “Credit Agreement Amendment”).

The Credit Agreement Amendment provides for a $600 million Term Loan A-3 Facility with a maturity date of April 3, 2025 to refinance our existing Term Loan A-2 Facility (the “Term Loan A-3 Facility” and, together with the Term Loan A-1 Facility, the “Term Loans”).

Also on June 28, 2022, we borrowed the entire $600 million under Term Loan A-3 Facility to fund the repayment of the Term Loan A-2 Facility.

The Company’s total borrowing capacity under the Credit Agreement remains unchanged.

As of December 31, 2023, we were in compliance with the covenants under Credit Agreement.

As of December 31, 2023, the weighted average interest rate of borrowings under the Credit Agreement was 5.223%, excluding accretion of deferred financing fees .

Re fer to Note 16, “Derivatives” in the accompanying Notes contained elsewhere in this Form 10-K for more information related to swap agreements.

As of end of the year, we had the capacity for additional indebtedness of up to $718 million a vailable on the Revolving Facility.

We expect to finance our liquidity requirements through cash flows from operating activities.

We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures and restructuring related cash outflows, asbestos-related cash outflows, debt service and required amortization of principal, stock repurchases and, pending approval from the Board of Directors, payment of cash dividends.

As of December 31, 2024, we were in compliance with the covenants under the Credit Agreement and the Indenture.

The Company’s weighted average interest rate of borrowings under the Credit Agreement and the Indenture was 5.24%, excluding accretion of deferred financing fees and net of interest rate hedge impacts .

As of end of the year, we had the capacity for additional indebtedness of up to $750 million a vailable on the revolving credit facility.

Additionally, we have the ability to i ncur $50 million of indebtedness pursuant to certain uncommitted credit lines, consisting primarily of an uncommitted credit line that we currently have in place, whi ch we have used from time to time in the past for short-term working capital needs.

Refer to Note 15, “Debt” in t he accompanying Notes contained elsewhere in this Form 10-K for more information related to the credit facilities.

We believe that we could raise additional funds in the form of debt or equity if it was determined to be appropriate for strategic acquisitions or other corporate purposes.

Re fer to Note 15, “Debt” and Note 16, “Derivatives” in the accompanying Notes contained elsewhere in this Form 10-K for more information related to the Company’s debt and derivative instruments.

We believe that we could raise additional funds in the form of debt or equity if it were determined to be appropriate for strategic acquisitions or other corporate purposes.

We believe that our sources of liquidity between debt and cash flows from operating activities are adequate to fund our operations for the next twelve months and thereafter.

Stock Repurchase Program

On August 13, 2024, the Board of Directors authorized and approved a stock repurchase program to repurchase up to five million shares of the Company’s common stock, par value $0.001 per share, from time-to-time on the open market, in privately negotiated transactions or as may otherwise be determined by the Company’s management in its discretion.

No repurchases of the Company’s common stock have been made through the year ended December 31, 2024 .

The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions, applicable legal requirements and other factors.

There is no term associated with the remaining repurchase authorization.

As of December 31, 2024, we had $249.4 million of Cash and cash equivalents, an increase of $147.4 million from $102.0 million as of December 31, 2023.

6 unchanged sentences

Acquisitions, net of cash received (153.7) (18.7)

Other investing (4.1) —

Net cash used in investing activities (205.7) (62.2)

Proceeds from borrowings on term credit facility — 1,000.0

Proceeds from borrowings on Senior Notes 700.0 —

Proceeds from borrowings on revolving credit facility and other 205.0 574.2

Repayments of borrowings on term credit facility (12.5) —

Repayments of borrowings on Term Loans (602.5) (12.5)

Repayments of borrowings on revolving credit facility and other (237.0) (763.2)

Payment of deferred financing fees and other (1.0) (4.7)

Payment of deferred consideration — (1.5)

Payment of debt issuance costs and other (13.2) (1.0)

Payment of dividends (17.0) (13.3)

Distribution to noncontrolling interest holders (3.7) (3.9)

Consideration to Former Parent in connection with the Separation — (1,200.0)

Transfers from Former Parent, net — 2.8

Net cash provided by (used in) financing activities 31.7 (219.7)

4 unchanged sentences

Changes in significant operating cash flow items are discussed below.

• Operating cash flow was positively impacted by increased operating income and improvements in working capital turns offset by higher interest payments for the year ended December 31, 2023, which were related to our Term Loans and Revolving Facility.

• Discontinued operations outflows for the years ended December 31, 2023 and 2022 were $15.2 million and $23.1 million, respectively, which were mainly asbestos related.

• Restructuring initiatives of $20.7 million for the year ended December 31, 2023 and $22.7 million for the year ended December 31, 2022, which includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expense and other costs in connection with the closure and optimization of facilities and product lines.

Cash flows used in investing activities during 2023 includes $18.7 million of cash used for our Therapy Equipment acquisition.

• Operating cash flow was positively impacted by increased operating income and lower interest and income tax payments, partially offset by lower other operating cash flow for the year ended December 31, 2024.

• Discontinued operations outflows for the years ended December 31, 2024 and 2023 were $15.0 million and $15.2 million, respectively, which were primarily asbestos related.

• Restructuring initiative payments of $10.4 million and $20.7 million for the years ended December 31, 2024 and 2023, respectively, which includes severance and other termination benefits, including outplacement services, as well as the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.

Cash flows used in investing activities include $153.7 million of cash used for our Sager, ESAB Bangladesh and SUMIG acquisitions during the year ended December 31, 2024 and $18.7 million of cash used for our Therapy Equipment acquisition during the year ended December 31, 2023.

Refer to Note 5, “Acquisitions” in the accompanying Notes contained elsewhere in this Form 10-K for additional information.

Cash outflows used in financing activities in 2023 was driven by net repayment of borrowings on the Revolving Facility of $189.0 million, net repayment of borrowings on the Term Loans of $12.5 million, distributions to non-controlling interest holders of $3.9 million and payment of four cash dividends totaling $13.3 million.

Cash flows provided by financing activities of $31.7 million during the year ended December 31, 2024 was primarily driven by proceeds from borrowings on long-term debt of $905.0 million partially offset by net repayment of borrowings on the long-term debt of $839.5 million, payment of debt issuance costs of $10.4 million and payment of four cash dividends totaling $17.0 million.

Our Cash and cash equivalent s as of December 31, 2024 include $213.4 million h eld in jurisdictions outside the United States.

1 unchanged sentence

Contractual Obligations

A s of December 31, 2023, the Company’s Term Loans and Revolving Facility had principal amounts outstanding of $987.5 million and $32.0 million, respectively.

There are no required principal payments due on the Term Loan or Revolving Facility within 12 months.

In addition to the outstanding principal on our debt, we are subject to contractual obligations and commitments to make future interest payments on the Term Loans and the Revolving Facility on various payment dates as provided in the Credit Agreement Amendment.

As of December 31, 2024, the Company’s Term A-1 loan and Senior Notes had principal amounts outstanding of $385.0 million and $700.0 million, respectively.

In addition to the outstanding principal on our debt, we are subject to contractual obligations and commitments to make future interest payments on the Term Loans and Senior Notes on various payment dates as provided in the Credit Agreement Amendment and the Indenture.

Refer to Note 15, “Debt” in the accompanying Notes contained elsewhere in this Form 10-K for expiration dates and maturity schedules on our outstanding debt obligations for the next five years.

1 unchanged sentence

The Company leases certain office spaces, warehouses, facilities, vehicles and equipment.

As of December 31, 2023, the Company had fixed lease payment obligat ions o f $111.4 million, with $25.8 million payable within 12 months.

As of December 31, 2024, the Company had fixed lease payment obligations of $98.4 million, with $24.5 million payable within 12 months.

Purchase Obligations

As of December 31, 2024, the Company had other purchase obligation s of $143.3 million, with $132.8 million payable within 12 months.

We have funding requirements associated with our pension and other post-retirement benefit plans as of December 31, 2023, which are estimated to be $5.2 million for the year ending December 31, 2024.

We have funding requirements associated with our pension benefit plans as of December 31, 2024, which are estimated to be $4.5 million for the year ending December 31, 2025.

Other long-term liabilities, such as those for other legal claims, employee benefit plan obligations, deferred income taxes and liabilities for unrecognized income tax benefits, are excluded from this disclosure since they are not contractually fixed as to timing and amount.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that provide liquidity, capital resources, market or credit risk support that expose us to any liability that is not reflected in our Consolidated and Combined Financial Statements at December 31, 2023 other than outstanding letters of credit of $28.6 million and unconditional purchase obligations with suppliers of $131.8 million.

We do not have any off-balance sheet arrangements that provide liquidity, capital resources, market or credit risk support that expose us to any liability that is not reflected in our Consolidated and Combined Financial Statements at December 31, 2024 other than outstanding letters of credit of $27.2 million and unconditional purchase obligations with suppliers noted above.

Critical Accounting Policies

25 unchanged sentences

The carrying amount of Goodwill of the Americas, EMEA & APAC and Gas Control Equipment reporting units as of December 31, 2024 we re $629.7 million, $896.3 million and $126.0 million, respectively.

Determining the fair value of a reporting unit requires the application of judgment and involves the use of significant estimates and assumptions which can be affected by changes in business climate, economic conditions, the competitive environment and other factors.

We base these fair value estimates on assumptions our management believes to be reasonable but which are unpredictable and inherently uncertain.

Future changes in the judgment, assumptions and estimates could result in significantly different estimates of fair value in the future.

Determining the fair value of a reporting unit requires the application of judgment and involves the use of significant estimates and assumptions that can be affected by changes in business climate, economic conditions, the competitive environment and other factors.

We base these fair value estimates on assumptions our management believes to be reasonable but are unpredictable and inherently uncertain.

Future changes in the judgments, assumptions and estimates could result in significantly different estimates of fair value in the future.

An increase in discount rates, a reduction in projected cash flows due to lower revenue growth rates or lower margins compared to our projections, or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.

14 unchanged sentences

Under this approach, the Company determined its deferred tax assets and liabilities and related tax expense as if it were filing separate tax returns.

The accompanying Combined Balance Sheet for the year ended December 31, 2021 did not contain current income tax payable or other long-term income tax payable liabilities, with the exception of certain unrecognized tax benefits for which ESAB could have reasonably been considered to be the primary obligor.

The amounts are deemed settled with Enovis when they were due and therefore were included in Parent’s equity.

We account for income taxes under ASC 740, Income Taxes (“ASC 740”), which requires recognition of deferred income tax assets and liabilities reflecting the tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the Consolidated and Combined Financial Statements and their respective tax basis.

10 unchanged sentences

We recognize interest and penalties related to unrecognized income tax benefits in Income tax expense in the Consolidated and Combined Statements of Operations.

Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $30.9 million and $20.2 million as of December 31, 2023 and 2022, respectively, and are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated Balance Sheet.

Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $17.1 million and $30.9 million as of December 31, 2024 and 2023, respectively, and are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated Balance Sheets.

Revenue Recognition

32 unchanged sentences

We have projected future asbestos-related liability costs with regard to pending and future unasserted claims based upon the Nicholson methodology.

The Nicholson methodology is a standard approach used by experts and has been accepted by numerous courts.

The Nicholson methodology is a standard approach used by experts and has been accepted by

numerous courts.

This methodology is based upon risk equations, exposed population estimates, mortality rates and other demographic statistics.

5 unchanged sentences

It is our policy to record a liability for asbestos-related liability costs for the longest period of time that we can reasonably estimate.

Accordingly, no accrual has been recorded for any costs which may be paid after the next 15 years.

Accordingly, no accrual has been recorded for any costs that may be paid after the next 15 years.

Projecting future asbestos-related liability costs is subject to numerous variables that are difficult to predict, including, among others, the number of future claims that might be received, the type and severity of the disease alleged by each claimant, the latency period associated with asbestos exposure, dismissal rates, costs of medical treatment, the financial resources of other companies that are co-defendants in the claims, funds available in post-bankruptcy trusts, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, including fluctuations in the timing of court actions and rulings, and the impact of potential changes in legislative or judicial standards, including potential tort reform.

4 unchanged sentences

While it is reasonably possible that the subsidiaries will incur costs after this period, we do not believe the reasonably possible loss or range of reasonably possible loss is estimable at the current time.

Accordingly, no accrual has been recorded for any costs which may be paid after the next 15 years.

Accordingly, no accrual has been recorded for any costs that may be paid after the next 15 years.

Defense costs associated with asbestos-related liabilities as well as costs incurred in connection with pursuing insurance coverage from these subsidiaries’ insurers are expensed as incurred.

13 unchanged sentences

Refer to Note 21, “Related Party Transactions” in the accompanying Notes for a description of our corporate allocations and related-party transactions.

Recently Issued Accounting Pronouncements

For detailed information regarding recently issued accounting pronouncements and the expected impact on our financial statements, see Note 3, “ Recently Issued Accounting Pronouncements” in the accompanying Notes included elsewhere in this Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis