ESAB Corp 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm - Internal Controls Over Financial Reporting (Ernst & Young LLP, Tysons, VA, Auditor Firm ID: 42 ) 46 Report of Independent Registered Public Accounting Firm - Consolidated and Combined Financial Statements (Ernst & Young LLP, Tysons, VA, Auditor Firm ID: 42 ) 47 Consolidated and Combined Statements of Operations 49 Consolidated and Combined Statements of Comprehensive Income 50 Consolidated Balance Sheets 51 Consolidated and Combined Statements of Equity 52 Consolidated and Combined Statements of Cash Flows 53 Notes to Consolidated and Combined Financial Statements 54 Note 1. Organization and Basis of Presentation 54 Note 2. Summary of Significant Accounting Policies 55 Note 3. Recently Issued Accounting Pronouncements 60 Note 4. Discontinued Operations 61 Note 5. Acquisitions 61 Note 6. Revenue 61 Note 7. Earnings per Share from Continuing Operations 62 Note 8. Income Taxes 63 Note 9. Goodwill and Intangible Assets 67 Note 10. Property, Plant and Equipment, Net 67 Note 11. Inventories, Net 68 Note 12. Leases 68 Note 13. Accrued and Other Liabilities 69 Note 14. Benefit Plans 70 Note 15. Debt 75 Note 16. Derivatives 77 Note 17. Fair Value Measurements 79 Note 18. Equity 81 Note 19. Commitments and Contingencies 85 Note 20. Segment Information 87 Note 21. Related Party Transactions 89 Note 22. Subsequent Events 90 45 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of ESAB Corporation Opinion on Internal Control Over Financial Reporting We have audited ESAB Corporation’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, ESAB Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated and combined statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2024 and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 20, 2025 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tysons, Virginia February 20, 2025 46 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of ESAB Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of ESAB Corporation (the Company) as of December 31, 2024 and 2023, the related consolidated and combined statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 20, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 47 Asbestos Liability Description of the Matter At December 31, 2024, the Company’s asbestos liability balance was $294.1 million. As discussed in Note 19 of the consolidated financial statements, certain of the Company’s subsidiaries are defendants in a large number of lawsuits that claim personal injury as a result of exposure to asbestos from products manufactured with components that are alleged to have contained asbestos. The Company records an asbestos liability for probable pending and future claims over the period that the Company believes it can reasonably estimate such claims. Auditing the asbestos liability was complex and highly judgmental due to the significant estimation of numerous variables required in determining the asbestos obligation. In particular, the estimates were sensitive to significant assumptions such as the period of time over which claims activity can be reasonably predicted, the number of future asbestos-related claims that may be received, the type and severity of disease alleged by each claimant, dismissal rates, the latency period associated with asbestos exposure, and settlement values. These assumptions have a significant effect on the asbestos liability. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to estimate the asbestos liability, including controls related to estimates of expected future claims and other key assumptions underlying the calculation of the obligation. We also tested management’s controls over the completeness and accuracy of the data used in the calculation. To audit the asbestos liability recorded by management, we performed procedures that included, among others, evaluating the methodology applied and the significant assumptions used in the Company’s calculation. For example, we assessed management’s assumptions for the nature and rate of future claims, claims disposition and settlement patterns by comparing these assumptions to the Company’s historical experience and industry data. We considered the Company’s historical data and industry data in evaluating the adequacy of the Company’s projections. We developed, with the assistance of an internal actuarial specialist, an independent range of estimated asbestos liability. We tested the completeness and accuracy of the claims data used by management. We also performed analyses to determine the sensitivity of changes in certain assumptions, such as the period over which claims can be estimated, to the calculated liability. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2021. Tysons, Virginia February 20, 2025 48 ESAB CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS Dollars in thousands, except per share amounts Year Ended December 31, 2024 2023 2022 Net sales $ 2,740,803 $ 2,774,766 $ 2,593,480 Cost of sales 1,703,348 1,759,015 1,707,950 Gross profit 1,037,455 1,015,751 885,530 Selling, general and administrative expense 579,778 587,475 533,369 Restructuring and other related charges 10,227 24,110 23,096 Operating income 447,450 404,166 329,065 Pension settlement loss (gain) 12,155 — ( 9,136 ) Interest expense and other, net 64,890 85,074 37,950 Income from continuing operations before income taxes 370,405 319,092 300,251 Income tax expense 77,348 95,727 69,170 Net income from continuing operations 293,057 223,365 231,081 Loss from discontinued operations, net of taxes ( 22,309 ) ( 12,341 ) ( 3,068 ) Net income 270,748 211,024 228,013 Income attributable to noncontrolling interest, net of taxes ( 5,906 ) ( 5,739 ) ( 4,266 ) Net income attributable to ESAB Corporation $ 264,842 $ 205,285 $ 223,747 Earnings (loss) per share - basic Income from continuing operations $ 4.73 $ 3.59 $ 3.75 Loss on discontinued operations ( 0.37 ) ( 0.20 ) ( 0.05 ) Net income per share - basic $ 4.36 $ 3.39 $ 3.70 Earnings (loss) per share - diluted Income from continuing operations $ 4.68 $ 3.56 $ 3.74 Loss on discontinued operations ( 0.37 ) ( 0.20 ) ( 0.05 ) Net income per share - diluted $ 4.31 $ 3.36 $ 3.69 See Notes to Consolidated and Combined Financial Statements. 49 ESAB CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME Dollars in thousands Year Ended December 31, 2024 2023 2022 Net income $ 270,748 $ 211,024 $ 228,013 Other comprehensive (loss) income: Foreign currency translation, net of tax expense (benefit) of $ 6,141 , $ 4,545 and $( 2,930 ) ( 108,472 ) 47,258 ( 175,719 ) Unrealized (loss) gain on derivatives designated and qualifying as cash flow hedges, net of tax (benefit) expense of $( 1,611 ), $( 1,087 ) and $ 3,240 ( 5,554 ) ( 3,732 ) 11,102 Defined benefit pension and other post-retirement plan activity, net of tax expense (benefit) of $ 2,458 , $ 2,639 and $( 1,840 ) 8,918 7,338 6,192 Other comprehensive (loss) income ( 105,108 ) 50,864 ( 158,425 ) Comprehensive income 165,640 261,888 69,588 Less: comprehensive income attributable to noncontrolling interest 4,394 5,887 678 Comprehensive income attributable to ESAB Corporation $ 161,246 $ 256,001 $ 68,910 See Notes to Consolidated and Combined Financial Statements. 50 ESAB CORPORATION CONSOLIDATED BALANCE SHEETS Dollars in thousands, except share and per share amounts December 31, 2024 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 249,358 $ 102,003 Trade receivables, less allowance for credit losses of $ 23,850 and $ 25,477 370,321 385,198 Inventories, net 403,711 392,858 Prepaid expenses 55,665 61,771 Other current assets 69,327 55,890 Total current assets 1,148,382 997,720 Property, plant and equipment, net 298,347 294,305 Goodwill 1,651,993 1,588,331 Intangible assets, net 487,993 499,535 Lease asset - right of use 89,859 95,607 Other assets 357,401 353,131 Total assets $ 4,033,975 $ 3,828,629 LIABILITIES AND EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 15,000 $ — Accounts payable 318,493 306,593 Accrued liabilities 298,558 313,489 Total current liabilities 632,051 620,082 Long-term debt 1,060,739 1,018,057 Other liabilities 532,936 542,833 Total liabilities 2,225,726 2,180,972 Equity: Common stock - $ 0.001 par value - Authorized 600,000,000 ; 60,517,574 and 60,295,634 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 61 60 Additional paid-in capital 1,901,337 1,881,054 Retained earnings 597,180 350,557 Accumulated other comprehensive loss ( 729,574 ) ( 624,272 ) Total ESAB Corporation equity 1,769,004 1,607,399 Noncontrolling interest 39,245 40,258 Total equity 1,808,249 1,647,657 Total liabilities and equity $ 4,033,975 $ 3,828,629 See Notes to Consolidated and Combined Financial Statements. 51 ESAB CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY Dollars in thousands, except share and per share amounts Common Stock Additional Paid-in Capital Retained Earnings Former Parent’s Investment Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shares Amount Balance at January 1, 2022 — $ — $ — $ — $ 2,921,623 $ ( 460,888 ) $ 40,993 $ 2,501,728 Net income — — — 168,310 55,437 — 4,266 228,013 Distributions to noncontrolling owners — — — — — — ( 3,420 ) ( 3,420 ) Dividends declared ($ 0.15 per share) — — — ( 9,079 ) — — — ( 9,079 ) Former Parent Common stock-based award activity — — — — 1,728 — — 1,728 Net Transfers from Former Parent, including Separation Adjustments — — 4,346 — 70,643 ( 59,263 ) — 15,726 Net consideration paid to Former Parent, in connection with the Separation — — — — ( 1,200,000 ) — — ( 1,200,000 ) Issuance of common stock in connection with the Separation and reclassification of Net Investment from Former Parent 60,034,311 60 1,849,371 — ( 1,849,431 ) — — — Other comprehensive loss, net of tax benefit of $ 1,530 — — — — — ( 154,837 ) ( 3,588 ) ( 158,425 ) Former Parent Common stock-based award activity 60,414 — 12,187 — — — — 12,187 Balance at December 31, 2022 60,094,725 $ 60 $ 1,865,904 $ 159,231 $ — $ ( 674,988 ) $ 38,251 $ 1,388,458 Net income — — — 205,285 — — 5,739 211,024 Dividends declared ($ 0.23 per share) — — — ( 13,959 ) — — — ( 13,959 ) Distributions to noncontrolling owners — — — — — — ( 3,880 ) ( 3,880 ) Other comprehensive income, net of tax expense of $ 6,097 — — — — — 50,716 148 50,864 Common stock-based award activity 200,909 — 15,150 — — — — 15,150 Balance at December 31, 2023 60,295,634 $ 60 $ 1,881,054 $ 350,557 $ — $ ( 624,272 ) $ 40,258 $ 1,647,657 Net income — — — 264,842 — — 5,906 270,748 Dividends declared ($ 0.30 per share) — — — ( 18,219 ) — — — ( 18,219 ) Distributions and purchases relating to noncontrolling interest — — 2,860 — — ( 1,706 ) ( 5,407 ) ( 4,253 ) Other comprehensive loss, net of tax expense of $ 6,988 — — — — — ( 103,596 ) ( 1,512 ) ( 105,108 ) Common stock-based award activity 221,940 1 17,423 — — — — 17,424 Balance at December 31, 2024 60,517,574 $ 61 $ 1,901,337 $ 597,180 $ — $ ( 729,574 ) $ 39,245 $ 1,808,249 See Notes to Consolidated and Combined Financial Statements. 52 ESAB CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS Dollars in thousands Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income $ 270,748 $ 211,024 $ 228,013 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other impairment charges 66,790 75,034 65,978 Stock-based compensation expense 19,780 16,122 12,964 Deferred income tax ( 2,601 ) ( 25,408 ) ( 20,199 ) Non-cash interest expense 2,886 1,195 1,972 Pension settlement loss (gain) 12,155 — ( 9,136 ) Changes in operating assets and liabilities: Trade receivables, net ( 4,848 ) ( 6,006 ) ( 8,142 ) Inventories, net ( 22,495 ) 17,958 ( 10,066 ) Accounts payable 31,861 ( 19,819 ) ( 28,794 ) Other operating assets and liabilities ( 18,877 ) 60,394 ( 18,232 ) Net cash provided by operating activities 355,399 330,494 214,358 Cash flows from investing activities: Purchases of property, plant and equipment ( 51,779 ) ( 48,178 ) ( 40,243 ) Proceeds from sale of property, plant and equipment 3,805 4,600 4,849 Acquisitions, net of cash received ( 153,664 ) ( 18,665 ) ( 149,029 ) Other investing ( 4,058 ) — — Net cash used in investing activities ( 205,696 ) ( 62,243 ) ( 184,423 ) Cash flows from financing activities: Proceeds from borrowings on Senior Notes 700,000 — — Proceeds from borrowings on Term Loans — — 1,000,000 Proceeds from borrowings on revolving credit facility and other 205,000 574,150 805,881 Repayments of borrowings on Term Loans ( 602,500 ) ( 12,500 ) — Repayments of borrowings on revolving credit facility and other ( 237,005 ) ( 763,173 ) ( 585,491 ) Payment of debt issuance costs and other ( 13,156 ) ( 972 ) ( 6,206 ) Payment of dividends ( 16,992 ) ( 13,342 ) ( 6,054 ) Consideration to Former Parent in connection with the Separation — — ( 1,200,000 ) Distributions to noncontrolling interest holders ( 3,678 ) ( 3,880 ) ( 3,420 ) Transfers from Former Parent, net — — 2,847 Net cash provided by (used in) financing activities 31,669 ( 219,717 ) 7,557 Effect of foreign exchange rates on Cash and cash equivalents ( 34,017 ) ( 18,555 ) ( 6,677 ) Increase in Cash and cash equivalents 147,355 29,979 30,815 Cash and cash equivalents, beginning of period 102,003 72,024 41,209 Cash and cash equivalents, end of period $ 249,358 $ 102,003 $ 72,024 Supplemental disclosures: Interest payments, net $ 62,280 $ 79,148 $ 34,678 Income tax payments, net $ 94,525 $ 132,902 $ 85,659 See Notes to Consolidated and Combined Financial Statements. 53 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation Founded in 1904, ESAB Corporation (“ESAB” or the “Company”) is a focused premier industrial compounder. ESAB provides its partners with fabrication technology advanced equipment, consumables, gas control equipment, robotics and digital solutions. The Company’s rich history of innovative products, workflow solutions and its business management system, ESAB Business Excellence (“EBX”), enables the Company’s 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. The Company conducts its operations through two reportable segments. These segments consist of the “Americas,” which includes operations in North America and South America and “EMEA & APAC,” which includes Europe, Middle East, India, Africa and Asia Pacific. The Company’s fiscal year ends December 31. The Company’s first three quarters end on the last business day of the 13th week after the end of the prior quarter. Separation from Enovis On April 4, 2022 (the “Distribution Date”), Colfax Corporation (“Colfax,” “Enovis” or the “Former Parent”) completed the spin-off of Colfax’s Fabrication Technology business and certain other corporate entities, through a tax-free, pro rata distribution (the “Distribution”) of 90 % of the outstanding common stock of ESAB to Colfax stockholders (the spin-off and related distribution, collectively, the “Separation”). 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. As of the year ended December 31, 2022, Enovis no longer owned any of the Company’s outstanding common stock. In connection with the Separation, on April 4, 2022, ESAB and Enovis entered into a separation and distribution agreement as well as various other related agreements (collectively the “Separation Agreements”) that govern the Separation and the relationships between the parties going forward, including a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement and license agreement for EBX. Refer to Note 21, “Related Party Transactions” for further details. Russia and Ukraine Conflict The invasion of Ukraine by Russia and the sanctions imposed in response have increased the level of economic and political uncertainty. While ESAB continues to closely monitor the situation and evaluate options, the Company is meeting current contractual obligations while addressing applicable laws and regulations. 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. The Company is closely monitoring developments in Ukraine and Russia. Changes in laws and regulations or other factors impacting the Company’s ability to fulfill contractual obligations could have an adverse effect on the results of operations and cash flows. Basis of Presentation The accompanying Consolidated and Combined Financial Statements present the Company’s historical financial position, results of operations, changes in equity and cash flows in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) in conformity with generally accepted accounting principles in the United States (“GAAP”). The Consolidated and Combined Financial Statements reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated. Intercompany transactions and accounts are eliminated in consolidation. The combined financial statements for the period 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 have been included in the combined financial statements. Prior to the Separation, the combined financial statements also 54 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) included allocations of certain general, administrative, sales and marketing expenses from Enovis’s corporate office and from other Enovis businesses to the Company 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 the Company been an entity that operated independently of Enovis during the applicable periods. Related party allocations prior to the Separation, including the method for such allocation, are discussed further in Note 21, “Related Party Transactions.” 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 ended December 31, 2022. For the periods subsequent to April 4, 2022, the financial statements are presented on a consolidated basis and no longer include any allocations of expenses from Enovis, as the Company became a standalone public company. 2. Summary of Significant Accounting Policies Principles of Consolidation The Company’s Consolidated and Combined Financial Statements include all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities or joint ventures for which the Company has a controlling financial interest or is the primary beneficiary. When protective rights, substantive rights or other factors exist, further analysis is performed to determine whether or not there is a controlling financial interest. The Consolidated and Combined Financial Statements reflect the assets, liabilities, revenues and expenses of consolidated subsidiaries and the noncontrolling parties’ ownership share is presented as a noncontrolling interest. All significant intercompany accounts and transactions have been eliminated. Equity Method Investments Investments accounted for under the equity method are initially recorded at the amount of the Company’s initial investment and adjusted each period for the Company’s share of the investee’s income or loss and dividends paid. All equity investments are reviewed periodically for indications of other-than-temporary impairment, including, but not limited to, significant and sustained decreases in quoted market prices or a series of historic and projected operating losses by investees. If the decline in fair value is considered to be other-than-temporary, an impairment loss is recorded and the investment is written down to a new carrying value. Revenue Recognition The Company recognizes revenue when control of promised goods or services is transferred to the customer. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for transferring the goods or services. The Company provides a variety of products and services to its customers. Most of the Company’s contracts consist of a single, distinct performance obligation or promise to transfer goods or services to a customer. For contracts that include multiple performance obligations, we allocate the total transaction price to each performance obligation using our best estimate of the stand-alone selling price of each identified performance obligation. A significant majority of our revenue relates to the shipment of off-the-shelf products that is recognized when control is transferred to the customer. On a limited basis, we have agreements with customers that have multiple performance obligations. In determining whether there are multiple performance obligations, we first assess the goods or services promised in the customer arrangement and then consider the guidance in ASC 606, Revenue from Contracts with Customers , to evaluate whether goods and services are capable of being distinct and are considered distinct within the customer arrangement. To determine whether promised goods or services are separately identifiable (i.e., whether a promise to transfer a good or service is distinct in the context of the contract), we evaluate whether the contract is to deliver (1) multiple promised goods or services or (2) a combined item that comprises the individual goods or services promised in the contract. Substantially all revenue involving development and application engineering projects consists of a single performance obligation and is recognized at a point in time. As mentioned above, a majority of revenue recognized by the Company relates to contracts with customers for standard or off-the-shelf products. As control typically transfers to the customer upon shipment of the product in these circumstances, revenue is generally recognized at that point in time. Revenue recognition and billing typically occur simultaneously for 55 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) contracts recognized at a point in time. Therefore, we do not have material revenues in excess of customer billings or billings to customers in excess of recognized revenues. Refer to Note 6, “Revenue” and Note 13, “Accrued and Other Liabilities” for additional information on the Company’s contract liability balances and related information. The period of benefit for the Company’s incremental costs of obtaining a contract generally have less than a one-year duration; therefore, the Company applies the practical expedient available and expenses costs to obtain a contract when incurred. Taxes Collected from Customers and Remitted to Governmental Authorities The Company collects various taxes and fees as an agent in connection with the sale of products and remits these amounts to the respective taxing authorities. These taxes and fees have been presented on a net basis within Net sales in the Consolidated and Combined Statements of Operations and are recorded as a component of Accrued liabilities in the Consolidated Balance Sheets until remitted to the respective taxing authority. Research and Development Expense Research and development costs of $ 39.2 million , $ 38.8 million and $ 36.0 million for the years ended December 31, 2024 , 2023 and 2022 , respectively, are expensed as incurred and are included in Selling, general and administrative expense in the Consolidated and Combined Statements of Operations. These amounts do not include development and application engineering costs incurred in conjunction with fulfilling customer orders and executing customer projects. Cash and Cash Equivalents Cash and cash equivalents include all financial instruments purchased with an initial maturity of three months or less. Trade Receivables Trade receivables are presented net of an allowance for credit losses. The estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Estimated credit losses are reviewed periodically. Inventories Inventories are valued at the lower of cost or net realizable value. Fixed manufacturing overhead costs are allocated to inventory based on normal production capacity and abnormal manufacturing activities are recognized as period costs. As of December 31, 2023 , cost for a substantial portion of United States inventories was determined using the last-in, first-out (“LIFO”) method. The value of inventory stated on a LIFO basis as of December 31, 2023 was $ 107.8 million and t he valuation of LIFO inventories was made at the end of the year based on inventory levels and costs at that time. Cost of other inventories is determined by costing methods that approximate a first-in, first-out (“FIFO”) method. During the fourth quarter of 2024 , the Company changed its inventory costing methodology from the previously disclosed LIFO method to the FIFO method for a portion of its inventory, as of the year ended December 31, 2024 all inventory is valued under FIFO. The Company performed this change because it believes FIFO is preferable given it provides a more consistent method for valuing inventory across the Company, better matches costs with revenues, improves comparability with peers and better reflects the current value of inventory at the balance sheet date. The LIFO expense for the years ended December 31, 2023 and 2022 were $ 2.1 million and $ 3.3 million, respectively which are not considered material to the Company’s financial statements. The Company recorded the pre-tax cumulative benefit related to this change in accounting principle of $ 4.3 million as a reduction of Cost of sales for the year ended December 31, 2024. Since these amounts are immaterial to all periods presented, the impact of this change was not retrospectively reflected in prior years. For further information, refer to Note 11, “Inventories, Net.” Reserves are maintained for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the net realizable value based upon assumptions about future demand and market conditions. The reserve for excess and obsolete inventory was $ 41.2 million and $ 47.6 million as of December 31, 2024 and 2023, respectively. 56 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Property, Plant and Equipment Property, plant and equipment, net is stated at historical cost, which includes the fair values of such assets acquired through acquisitions and depreciated by the straight-line method over the estimated useful lives of the related assets. Repair and maintenance expenditures are expensed as incurred unless the repair extends the useful life of the asset. Impairment of Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the costs in excess of the fair value of net assets acquired through acquisitions by the Company. The Company evaluates the recoverability of Goodwill and indefinite-lived intangible assets annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount. The annual impairment test date elected by the Company is the first day of its fourth quarter. Goodwill and indefinite-lived intangible assets are considered to be impaired when the carrying value of a reporting unit or asset exceeds its fair value. As of the annual impairment test date, the Company had three reporting units: Americas, EMEA & APAC and Gas Control Equipment (“GCE”). In the evaluation of goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting entity is less than its carrying value. If the Company determines that it is more likely than not for a reporting unit’s fair value to be greater than its carrying value, a calculation of the fair value is not performed. If the Company determines that it is more likely than not for a reporting unit’s fair value to be less than its carrying value, a calculation of the reporting unit’s fair value is performed and compared to the carrying value of that reporting unit. In certain instances, the Company may elect to forgo the qualitative assessment and proceed directly to the quantitative impairment test. If the carrying value of a reporting unit exceeds its fair value, goodwill of that reporting unit is impaired and an impairment loss is recorded equal to the excess of the reporting unit’s carrying value over its fair value. When a quantitative impairment test is needed, the Company measures fair value of reporting units based on a present value of future discounted cash flows. The discounted cash flow models indicate the fair value of the reporting units based on the present value of the cash flows that the reporting units are expected to generate in the future. Significant estimates in the discounted cash flow models include the weighted-average cost of capital, net sales and profitability of our business. For the years ended December 31, 2024, 2023 and 2022, a qualitative Goodwill impairment assessment was performed for the three reporting units, all of which indicated no impairment existed and therefore, no impairment charges were recorded for the respective periods. No material events that would represent impairment indicators have occurred subsequent to the performance of the 2024 annual impairment test. In the evaluation of indefinite-lived intangible assets for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value. If the Company determines that it is more likely than not for the indefinite-lived intangible asset’s fair value to be greater than its carrying value, a calculation of the fair value is not performed. If the Company determines that it is more likely than not that the indefinite-lived intangible asset’s fair value is less than its carrying value, a fair value calculation is performed and compared to the carrying value of the asset. In certain instances, the Company may elect to forgo the qualitative assessment and proceed directly to the quantitative impairment test. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Company measures the fair value of its indefinite-lived intangible assets using the “relief from royalty” method. Significant estimates in this approach include projected revenues and royalty and discount rates for each trade name evaluated. At the impairment testing date, the first day of the fourth quarter, quantitative impairment tests were performed for all the indefinite-lived trade name brands for the years ended December 31, 2024, 2023 and 2022, all of which indicated no impairment existed. Impairment of Long-Lived Assets Other than Goodwill and Indefinite-Lived Intangible Assets Definite-lived intangible assets primarily represent acquired trade names, customer relationships, acquired technology and software license agreements. The Company uses accelerated and straight-line methods of amortization with lives ranging from five to thirty years . The Company assesses its long-lived assets and definite-lived intangible assets for impairment whenever facts and circumstances indicate that the carrying amounts may not be fully recoverable. To analyze recoverability, the Company projects 57 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) undiscounted net future cash flows over the remaining lives of such assets. If these projected cash flows are less than the carrying amounts, an impairment loss equal to the difference between the carrying amount of the asset and its fair value would be recognized, resulting in a write-down of the assets with a corresponding charge to earnings. The Company determined that no significant impairment indicators were evident during the years ended December 31, 2024, 2023 and 2022. Derivatives The Company uses derivative instruments to manage exposures to interest rates and net investment exposures. The Company does not enter into derivatives for trading or speculative purposes. All derivatives are recognized at fair value on the Company’s Consolidated Balance Sheets. The accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. The Company formally documents the relationship of the hedge with the hedged item as well as the risk-management strategy for all designated hedges. Both at inception and on an ongoing basis, the hedging instrument is assessed as to its effectiveness, when applicable. If and when a derivative is determined not to be highly effective as a hedge, the underlying hedged transaction is no longer likely to occur, or the derivative is terminated, hedge accounting is discontinued. The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. The Company manages individual counterparty exposure by monitoring the credit rating of the counterparty and the size of financial commitments and exposures between the Company and the counterparty. Certain interest rate swap agreements are qualified and designated as cash flow hedges. The effective portion of the fair value unrealized gain or loss on cash flow hedges are reported as a component of Accumulated other comprehensive loss ("AOCL") with offsetting amounts recorded in the Company’s Consolidated Balance Sheets depending on the position and the duration of the contract. The gain or loss on the derivative instrument due to the change in fair value is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. If a derivative is deemed to be ineffective, the change in fair value of the derivative is recognized directly in earnings. Certain cross-currency swap agreements are designated and qualify as a net investment hedge. The changes in the fair value of these instruments are recorded in AOCL in equity, partially offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in AOCL. Offsetting amounts are recorded in the Company’s Consolidated Balance Sheets depending on the position and the duration of the contract. The Company has certain foreign currency contracts that are not designated as hedges. These derivatives are held as offsets to certain balance sheet exposures. The gains or losses on these contracts are recognized in Interest expense and other, net, in the Company’s Consolidated and Combined Statement of Operations. Warranty Costs Estimated expenses related to product warranties are accrued as the revenue is recognized on products sold to customers and included in Cost of sales in the Consolidated and Combined Statements of Operations. Estimates are established using historical information as to the nature, frequency and average costs of warranty claims. Income Taxes Prior to the Separation, the Company’s domestic and foreign operating results were included in the income tax returns of Enovis. The Company accounted for income taxes under the separate return method. 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 Company accounts 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. Deferred income tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets and liabilities are reported in Other assets and Other liabilities in the Consolidated Balance Sheets, respectively. The effect on deferred income tax assets and liabilities of a change in tax rates is generally recognized in Income tax expense in the period that includes the enactment date. Global Intangible Low-Taxed Income is accounted for as a current tax expense in the year the tax is incurred. 58 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Valuation allowances are recorded if it is more likely than not that some portion of the deferred income tax assets will not be realized. In evaluating the need for a valuation allowance, the Company considers various factors, including the expected level of future taxable income and available tax planning strategies. Any changes in judgment about the valuation allowance are recorded through Income tax expense and are based on changes in facts and circumstances regarding realizability of deferred tax assets. The Company must presume that an income tax position taken in a tax return will be examined by the relevant tax authority and determine whether it is more likely than not that the tax position will be sustained upon examination based upon the technical merits of the position. An income tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Company establishes a liability for unrecognized income tax benefits for income tax positions for which it is more likely than not that a tax position will not be sustained upon examination by the respective taxing authority to the extent such tax positions reduce the Company’s income tax liability. The Company recognizes interest and penalties related to unrecognized income tax benefits in Income tax expense in the Consolidated and Combined Statements of Operations. Interest Expense and Other, Net Interest expense and other, net is comprised of interest-bearing deposits of certain foreign subsidiaries, interest costs for the Company’s debt, amortization of debt issuance costs and interest expense of derivatives designated in hedging relationships. In addition, it is comprised of: • other non-operating expense (income) items, including certain pension-related activities, • foreign exchange exposure on cash and intercompany positions and interest income or expense on foreign currency contracts not designated in hedging relationships and • Argentina highly inflationary accounting transaction exchange loss on cash and cash equivalent remeasured into the Brazilian real - the direct parent’s currency. See “Foreign Currency Exchange Gains and Losses” and “Argentina Highly Inflationary Accounting” policies below for additional information. Foreign Currency Exchange Gains and Losses The Company’s Consolidated and Combined Financial Statements are presented in U.S. Dollars. The functional currencies of the Company’s operating subsidiaries are generally the local currencies of the countries in which each subsidiary is located. Assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the balance sheet date. The amounts recorded in each year in Foreign currency translation in Equity are net of income taxes to the extent the underlying equity balances in the entities are not deemed to be permanently reinvested. Revenues and expenses are translated at average rates of exchange in effect during the year. Transactions in foreign currencies are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated for inclusion in the Consolidated Balance Sheets are recognized in Selling, general and administrative expense or Interest expense and other, net in the Consolidated and Combined Statements of Operations for that period. The following table summarizes the Company’s net foreign transaction gains and losses included within the Consolidated and Combined Statements of Operations. Year Ended December 31, 2024 2023 2022 (In thousands) (1) Selling, general and administrative expense $ 7,136 $ 11,389 $ 2,597 Interest expense and other, net ( 158 ) 1,719 109 Foreign currency transaction loss, net (2) $ 6,978 $ 13,108 $ 2,706 (1) This table excludes the foreign currency exchange impacts of applying highly inflationary accounting for the Company’s Argentina operations, as described in the “Argentina Highly Inflationary Accounting” paragraph below. 59 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) (2) During 2023, the weakening of the Ruble and certain South American currencies drove the increase in the loss on transactions denominated in foreign currencies. Argentina Highly Inflationary Accounting Argentina is deemed to have a highly inflationary economy, resulting in the remeasurement of the Company’s Argentinian operations into Brazilian real, the functional currency of the Argentinian entity’s direct parent. Gains and losses from the remeasurement are recorded in the Company’s Consolidated and Combined Statements of Operations. In December 2023, the Argentine peso significantly devalued due to changes in the foreign currency exchange policy introduced by the Argentine government. For the year ended December 31, 2024 , the remeasurement of the financial statements of the Company’s subsidiary operating in a highly inflationary economy has resulted in a transaction foreign currency exchange loss to Cost of sales of $ 8.9 million , Selling, general and administrative benefit of $ 0.6 million and Interest expense and other, net loss of $ 0.3 million . For the year ended December 31, 2023, the remeasurement of the financial statements of the Company’s subsidiary operating in a highly inflationary economy has resulted in a transaction foreign currency exchange loss to Cost of sales of $ 11.5 million, Selling, general and administrative benefit of $ 6.7 million and Interest expense and other, net loss of $ 26.2 million. For the year ended December 31, 2022 , the remeasurement of the financial statements of the Company’s subsidiary operating in a highly inflationary economy has resulted in a transaction foreign currency exchange loss to Cost of sales of $ 6.6 million , Selling, general and administrative expense of $ 3.3 million and Interest expense and other, net loss of $ 2.4 million . Use of Estimates The Company makes certain estimates and assumptions in preparing its Consolidated and Combined Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated and Combined Financial Statements and the reported amounts of revenues and expenses for the period presented. Actual results may differ from those estimates. 3. Recently Issued Accounting Pronouncements The Company assesses the adoption impacts of recently issued accounting pronouncements on the Company’s Consolidated and Combined Financial Statements as well as material updates to previous assessments. Accounting Guidance Implemented in 2024 In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances segment reporting by expanding the breadth and frequency of disclosures through incremental information about significant segment expenses. The guidance also requires disclosure of the Chief Operating Decision Maker’s (the “CODM”) position and detail of how the CODM uses financial reporting to assess the segment’s performance. The new guidance is effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. The Company has adopted this guidance for the year ending December 31, 2024, and as discussed above, the primary impact is increased disclosure of certain financial information by segment. Refer to Note 20. “Segment Information” for further information on the impact on the Company’s disclosures. Recently Issued Accounting Guidance Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures , which expands disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the effect the adoption of the ASU may have on its disclosures. 60 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) 4. Discontinued Operations The Company holds certain asbestos-related contingencies and insurance coverages from divested businesses that it does not have an interest in the ongoing operations. The Company has classified asbestos-related activity included in its Consolidated and Combined Statements of Operations as part of Loss from discontinued operations, net of taxes. This activity consists primarily of expected settlements, legal and administrative expenses associated with the above liabilities. Discontinued operations consist primarily of Selling, general and administrative expense, with an associated tax impact that is considered immaterial. See Note 19, “Commitments and Contingencies” for further information. Cash used in operating activities related to discontinued operations was $ 15.0 million, $ 15.2 million and $ 23.1 million for the years ended December 31, 2024, 2023 and 2022 , respectively. 5. Acquisitions The Company continually evaluates potential acquisitions that either strategically fit with our existing portfolio or expand our portfolio into a new and attractive business area. The Company has completed a number of acquisitions that have been accounted for under the acquisition method of accounting. The Company makes an initial allocation of the purchase price at the date of acquisition based upon our understanding of the fair value of the acquired assets and assumed liabilities. The Company obtains this information during due diligence and through other sources. As the Company obtains additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learns more about the newly acquired business, the Company is able to refine the estimates of fair value and more accurately allocate the purchase price. The Company makes appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required. The following describes our acquisition activity for the three years ended December 31, 2024. On October 31, 2024, the Company completed the acquisition of SUMIG Soluções para Solda e Corte Ltda., a South American light automation and equipment business for approximately $ 68 million, net of cash received, to open market opportunities and expand our portfolio in the Americas. The Company recognized intangible assets and goodwill of approximately $ 23 million and $ 37 million, respectively. On July 2, 2024, the Company completed the acquisition of ESAB Bangladesh Private Limited (formerly known as Linde Industries Private Limited), a leading welding company in Bangladesh, for approximately $ 69 million, net of cash received, to extend the Company’s position in this fast-growing region. The Company recognized intangible assets and goodwill of approximately $ 15 million and $ 46 million, respectively. On February 26, 2024, the Company completed the acquisition of Sager S.A., a welding repair and maintenance product and service leader in South America, for approximately $ 18 million, net of cash received, to expand our portfolio in the Company’s Americas region. On January 11, 2023, the Company completed the acquisition of Therapy Equipment Limited, a regional leader in oxygen regulators, for approximately $ 19 million, net of cash received, to strengthen the Company’s leading global gas control equipment portfolio. On October 31, 2022, the Company completed the acquisition of Swift Cut Automation Limited, a provider of light industrial cutting systems, for approximately $ 22 million, net of cash received. This acquisition provides a market-leading automated cutting portfolio. On October 14, 2022, the Company completed the acquisition of Ohio Medical, LLC, a United States based global leader in oxygen regulators and central gas systems, for approximately $ 127 million, net of cash received. This acquisition expands the Company’s presence in industrial specialty gas applications and products and broadens the Company’s United States presence. The Company recognized intangible assets and goodwill of approximately $ 50 million and $ 60 million, respectively. 6. Revenue The Company provides fabrication technology advanced equipment, consumables, gas control equipment, robotics and digital solutions. Substantially all revenue is recognized at a point in time. The Company disaggregates its revenue into the product groups included in the table below. 61 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Year Ended December 31, 2024 2023 2022 (In thousands) Equipment $ 893,313 $ 854,949 $ 740,824 Consumables 1,847,490 1,919,817 1,852,656 Total $ 2,740,803 $ 2,774,766 $ 2,593,480 The sales mix in the above table is relatively consistent across both reportable segments. The consumables product grouping generally has less production complexity and shorter production cycles than equipment products. Given the nature of the business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of December 31, 2024 is immaterial. In some circumstances, customers are billed in advance of revenue recognition, resulting in contract liabilities. As of December 31, 2024, 2023 and 2022, total contract liabilities were $ 26.4 million , $ 31.2 million and $ 25.9 million, respectively, and are included in Accrued liabilities on the Consolidated Balance Sheets. During the years ended December 31, 2024 and 2023, substantially all amounts included in the contract liability balance at the beginning of the respective year were recognized as revenue in the following year. The table below summarizes the activity in the Company’s Allowance for credit losses included within Trade receivables in the Consolidated Balance Sheets. Year Ended December 31, 2024 Balance at Beginning of Period Charged to Expense, net Write-Offs and Deductions Foreign Currency Translation Balance at End of Period (In thousands) Allowance for credit losses $ 25,477 $ 2,248 $ ( 2,423 ) $ ( 1,452 ) $ 23,850 7. Earnings per Share from Continuing Operations The Company has unvested share-based payment awards with a right to receive non-forfeitable dividends that are considered participating securities. The table below summarizes how the Company allocates earnings to participating securities and computed earnings per share using the two-class method. Year Ended December 31, 2024 2023 2022 (In thousands, except share and per share data) Computation of earnings per share from continuing operations – basic: Income from continuing operations attributable to ESAB Corporation (1) $ 287,151 $ 217,626 $ 226,815 Less: distributed and undistributed earnings allocated to nonvested shares ( 1,370 ) ( 1,555 ) ( 1,600 ) Income from continuing operations attributable to common stockholders $ 285,781 $ 216,071 $ 225,215 Weighted-average shares of Common stock outstanding – basic 60,427,743 60,233,623 60,054,930 Income per share from continuing operations – basic $ 4.73 $ 3.59 $ 3.75 Computation of earnings (loss) per share from continuing operations – diluted: Income from continuing operations attributable to common stockholders $ 285,781 $ 216,071 $ 225,215 Weighted-average shares of Common stock outstanding – basic 60,427,743 60,233,623 60,054,930 Net effect of potentially dilutive securities (2) 674,320 422,123 98,129 Weighted-average shares of Common stock outstanding – dilution 61,102,063 60,655,746 60,153,059 Net income per share from continuing operations – diluted $ 4.68 $ 3.56 $ 3.74 (1) Net income from continuing operations attributable to ESAB Corporation for the respective periods is calculated using Net income from continuing operations, less Income attributable to noncontrolling interest, net of taxes, o f $ 5.9 million, $ 5.7 million and $ 4.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. (2) Potentially dilutive securities include stock options, performance-based restricted stock units and non performance-based restricted stock units. 62 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) 8. Income Taxes Separation from Enovis Prior to the Separation, our operating results were included in the Former Parent’s various consolidated United States federal and certain state income tax returns, as well as certain non-United States returns. For periods prior to the Separation, our combined financial statements reflect Income tax expense and deferred tax balances as if we had filed tax returns on a standalone basis separate from the Former Parent. The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if we were a separate taxpayer and a standalone enterprise for the periods prior to the Separation. For periods prior to the Separation, our pretax operating results include any transactions with the Former Parent as if it were an unrelated party. In connection with the Separation, we entered into agreements with the Former Parent, including a Tax Matters Agreement. The Tax Matters Agreement distinguishes between the treatment of tax matters for “joint” filings compared to “separate” and “unitary state” filings prior to the Separation. “Joint” filings are returns, such as the United States federal return, which include operations from both Former Parent legal entities and the Company. By contrast, “separate” filings are tax returns (primarily United States state returns and non-United States returns) that exclusively include either the Former Parent’s or the Company’s operations. “Unitary state” filings are state tax returns, which may include legal entities of both the Company and the Former Parent. In accordance with the Tax Matters Agreement, the Company is liable for and has indemnified the Former Parent against all income tax liabilities involving “separate” and “unitary state” filings for periods prior to the Separation, except to the extent a unitary state filing includes a legal entity of the Former Parent and the adjustment relates to that legal entity. The Company is also liable for fifty percent of all cash taxes paid as a result of any adjustment or redetermination or otherwise in connection with any tax contest relating to any joint return. Additionally, under the Separation Agreement, the Company is responsible for any tax indemnity related to the discontinued operations by the Former Parent. Income from continuing operations before income taxes and Income tax expense consisted of the following per the table below. Year Ended December 31, 2024 2023 2022 (In thousands) Income from continuing operations before income taxes: Domestic operations $ 50,212 $ 37,364 $ ( 19,234 ) Foreign operations 320,193 281,728 319,485 $ 370,405 $ 319,092 $ 300,251 Income tax expense: Current: Federal $ 15,717 $ 18,034 $ 8,928 State 2,635 3,760 2,451 Foreign 58,761 99,036 77,728 77,113 120,830 89,107 Deferred: Federal 2,489 ( 11,897 ) ( 7,501 ) State ( 126 ) ( 1,341 ) 358 Foreign ( 2,128 ) ( 11,865 ) ( 12,794 ) 235 ( 25,103 ) ( 19,937 ) $ 77,348 $ 95,727 $ 69,170 63 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) The Company’s Income tax expense differs from the amount that would be computed by applying the United States federal statutory rate as follows in the table below. Year Ended December 31, 2024 2023 2022 (In thousands) Taxes calculated at the United States federal statutory rate $ 77,785 $ 67,010 $ 63,053 State taxes 1,956 1,630 2,809 Effect of tax rates on international operations 1,823 1,548 ( 9,010 ) Changes in tax reserves ( 4,206 ) 10,753 ( 350 ) Research and development tax credits ( 980 ) ( 714 ) ( 542 ) Effect of United States taxation on international operations 5,239 1,527 310 Permanent differences, net ( 4,061 ) 10,077 7,209 Provision to return ( 8,350 ) 703 ( 7,055 ) Withholding taxes 6,634 11,172 12,133 Capital gain — — ( 3,655 ) Valuation Allowance ( 761 ) ( 12,308 ) 4,503 Other 2,269 4,329 ( 235 ) Income tax expense $ 77,348 $ 95,727 $ 69,170 For the year ended December 31, 2024, the Company’s effective rate of 20.9 % differs from the United States federal statutory rate of 21% 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. The Company’s effective tax rate of 30.0 % for the year ended December 31, 2023 differed from the United States federal statutory rate of 21% due to changes in tax reserves, permanent differences relating to foreign subsidiaries and withholding taxes, partially offset by the favorable impact from changes in valuation allowances. The Company’s effective tax rate of 23.0 % for the year ended December 31, 2022 differed from the United States federal statutory rate of 21% due to the impact of withholding taxes and permanent differences relating to foreign subsidiaries, partially offset by the favorable impact of the jurisdictional mix of income. Certain countries in which we operate have adopted Pillar Two legislation effective January 1, 2024. Pillar Two did not have a material impact on our 2024 effective tax rate. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. All deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other liabilities in the accompanying Consolidated Balance Sheets. The table below shows the temporary differences that gave rise to the significant components of deferred tax assets and liabilities. 64 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) December 31, 2024 2023 (In thousands) Deferred tax assets: Post-retirement benefit obligation $ 1,229 $ 1,350 Expenses currently not deductible 59,518 52,526 Net operating loss carryforward 86,716 107,395 Tax credit carryforward 5,137 4,581 Depreciation and amortization 4,286 7,404 Inventory 10,795 12,238 Capitalized R&D costs 20,556 18,178 Leases 21,490 23,987 Other — 2,867 Valuation allowance ( 65,007 ) ( 79,355 ) Deferred tax assets, net $ 144,720 $ 151,171 Deferred tax liabilities: Depreciation and amortization $ ( 125,227 ) $ ( 120,055 ) Leases ( 22,084 ) ( 23,987 ) Outside basis differences and other ( 87,434 ) ( 79,985 ) Total deferred tax liabilities ( 234,745 ) ( 224,027 ) Total deferred tax liabilities, net $ ( 90,025 ) $ ( 72,856 ) Deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other liabilities in the accompanying Consolidated Balance Sheets on a net jurisdictional basis as broken out in the table below. December 31, 2024 2023 (In thousands) Other assets $ 44,816 $ 46,602 Other liabilities ( 134,841 ) ( 119,458 ) Deferred tax liability, net $ ( 90,025 ) $ ( 72,856 ) The Company evaluates the recoverability of its deferred tax assets on a jurisdictional basis by considering whether deferred tax assets will be realized on a more likely than not basis. To the extent a portion or all of the applicable deferred tax assets do not meet the more likely than not threshold, a valuation allowance is recorded. During the year ended December 31, 2024, the valuation allowance decreased from $ 79.4 million to $ 65.0 million primarily due to a net decrease in the valuation allowance and underlying deferred tax balance of $ 12.5 million. The decrease related to changes in the underlying deferred balances primarily relates to the reversal of the valuation allowance and the associated deferred balances in connection with a legal entity rationalization. In determining how much of the relevant deferred tax asset could be realized on a more likely than not basis, consideration was given to tax planning strategies and, when applicable, future taxable income. The Company has United States federal net operating loss carryforwards of $ 5.1 million as of December 31, 2024 expiring in years 2029 through 2036. The Company’s ability to use these various carryforwards to offset any taxable income generated in future taxable periods may be limited under Section 382 and other federal tax provisions. As of December 31, 2024 the Company also has $ 331.1 million foreign net operating loss carryforwards primarily in the United Kingdom, Germany and the Netherlands that may be subject to local tax restriction limitations. The foreign net operating losses can be carried forward indefinitely, except in applicable jurisdictions that make up less than five percent of the available net operating losses. During the year ended December 31, 2024, the Company has not made any material changes to its indefinite reinvestment assertion with respect to earnings reinvested in its foreign operations. The majority of our global unremitted foreign earnings have been taxed or would be exempt from United States tax upon repatriation. The Company has made no provision for United States income taxes or additional non-United States taxes on certain undistributed earnings or outside basis differences of non-United States subsidiaries in which the Company remains indefinitely reinvested. A portion of these undistributed earnings may 65 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) be subject to foreign and United States tax consequences upon remittance. The Company cannot practically estimate the amount of additional taxes that might be payable on those undistributed earnings. The Company records a liability for certain unrecognized income tax benefits for which it is more likely than not that a tax position will not be sustained upon examination by the respective taxing authority (“uncertain tax positions”). This liability for such uncertain tax positions includes the amount of benefit included in (i) its previously filed income tax returns and (ii) its financial results expected to be included in income tax returns to be filed for periods through the date of its Consolidated and Combined Financial Statements. The Company’s total unrecognized tax benefits were $ 17.1 million, $ 30.9 million and $ 20.2 million as of December 31, 2024, 2023 and 2022, respectively, inclusive of $ 4.7 million, $ 12.1 million and $ 5.6 million, respectively, of interest and penalties. The Company records interest and penalties on uncertain tax positions as a component of Income tax expense, which was a benefit of $ 6.2 million, an expense of $ 7.9 million and a benefit of $ 0.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. The table below includes a reconciliation of the beginning and ending amount of gross unrecognized tax benefits (inclusive of associated interest and penalties). (In thousands) Balance, January 1, 2022 $ 37,681 Addition for tax positions taken in prior periods 1,971 Addition for tax positions taken in the current period 1,171 Reductions related to settlements with taxing authorities ( 922 ) Reductions resulting from a lapse of applicable statute of limitations ( 2,801 ) Other, including the impact of foreign currency translation and United States tax rate changes ( 16,897 ) Balance, December 31, 2022 20,203 Addition for tax positions taken in prior periods 13,514 Reductions related to settlements with taxing authorities ( 4,160 ) Transfer from Former Parent, impact of foreign currency translation and other ( 473 ) Other, including the impact of foreign currency translation and United States tax rate changes 1,787 Balance, December 31, 2023 30,871 Addition for tax positions taken in prior periods 6,436 Reductions for tax positions taken in prior periods ( 7,825 ) Reductions related to settlements with taxing authorities ( 9,255 ) Reductions resulting from a lapse of applicable statute of limitations ( 51 ) Other, including the impact of foreign currency translation ( 3,092 ) Balance, December 31, 2024 $ 17,084 The Company files numerous group and separate tax returns in Unites States federal and state jurisdictions, as well as international jurisdictions. The Company is routinely examined by various United States and non-United States taxing authorities. The Company is subject to audit by the United States, various states and foreign jurisdictions. In accordance with the Tax Matters Agreement with Former Parent, the Company is the primary obligor for (i) ESAB separate company state returns for all periods; (ii) unitary state returns that include only ESAB legal entities for all periods; and (iii) ESAB separate foreign returns for all periods. Pursuant to United States tax law, the Company filed its initial United States federal income tax return for the post-Separation period in October 2023. The Company reviews its global tax provisions on a quarterly basis. The Company accrues or adjusts contingent tax liabilities based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions and the expiration of the statutes of limitations. Due to the difficulty in predicting with reasonable certainty when tax audits will be fully resolved and closed, the range of reasonably possible significant increases or decreases in the liability for unrecognized tax benefits that may occur within the next 12 months is difficult to ascertain. The Company does not believe the total amount of unrecognized benefits will change by a material amount within the next 12 months due to the settlement of audits and expirations of statutes of limitations. 66 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) 9. Goodwill and Intangible Assets The following table summarizes Goodwill activity by segment for the years ended December 31, 2024 and 2023. Americas EMEA & APAC Total (In thousands) Balance, January 1, 2023 $ 585,845 $ 943,922 $ 1,529,767 Goodwill attributable to acquisition 1,664 13,912 15,576 Impact of foreign currency translation 2,366 40,622 42,988 Balance, December 31, 2023 589,875 998,456 1,588,331 Goodwill attributable to acquisitions 44,505 46,691 91,196 Impact of foreign currency translation ( 4,675 ) ( 22,859 ) ( 27,534 ) Balance, December 31, 2024 $ 629,705 $ 1,022,288 $ 1,651,993 The following table summarizes the Company’s Intangible assets, excluding Goodwill. December 31, 2024 2023 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization (In thousands) Indefinite-Lived Intangible Assets: Trade names $ 173,912 $ — $ 185,301 $ — Definite-Lived Intangible Assets: Customer relationships 506,226 ( 248,920 ) 496,483 ( 231,848 ) Technology 71,912 ( 55,539 ) 73,288 ( 55,288 ) Trade names 28,878 ( 11,832 ) 23,966 ( 10,983 ) Software 78,122 ( 62,391 ) 80,203 ( 61,920 ) Other intangible assets 30,424 ( 22,799 ) 22,878 ( 22,545 ) $ 889,474 $ ( 401,481 ) $ 882,119 $ ( 382,584 ) Amortization expense related to intangible assets of $ 36.0 million , $ 39.7 million and $ 35.6 million for the years ended December 31, 2024, 2023 and 2022, respectively, are included in the Selling, general and administrative expense in the Consolidated and Combined Statements of Operations. The Company’s expected annual amortization expense for acquired intangible assets for the next five years is as follows. December 31, 2024 (In thousands) 2025 $ 30,754 2026 29,231 2027 25,626 2028 22,828 2029 21,399 10. Property, Plant and Equipment, Net December 31, Depreciable Life 2024 2023 (In years) (In thousands) Land n/a $ 14,484 $ 15,095 Buildings and improvements 5 - 40 176,077 178,682 Machinery and equipment 3 - 15 409,045 394,318 599,606 588,095 Accumulated depreciation ( 301,259 ) ( 293,790 ) $ 298,347 $ 294,305 67 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Depreciation expense for the years ended December 31, 2024 , 2023 and 2022 was $ 30.6 million , $ 30.0 million and $ 29.5 million, respectively. 11. Inventories, Net December 31, 2024 2023 (In thousands) Raw materials $ 151,248 $ 156,583 Work in process 41,698 43,561 Finished goods 251,994 244,580 444,940 444,724 LIFO reserve — ( 4,279 ) Less: allowance for excess, slow-moving and obsolete inventory ( 41,229 ) ( 47,587 ) $ 403,711 $ 392,858 At December 31, 2023, approximately 27.4 % of total inventories were valued using the LIFO method. During 2024, the Company changed its costing methodology to only using FIFO method, as the Company believes FIFO is preferable given it provides a more consistent method for valuing inventory across the Company, better matches costs with revenues, improves comparability with peers and better reflects the current value of inventory at the balance sheet date. Therefore, the Company recorded the pre-tax cumulative benefit related to this change in accounting principle of $ 4.3 million as a reduction of Cost of sales for the year ended December 31, 2024. Refer to Note 2, “Summary of Significant Accounting Policies” for further information regarding this change in accounting policy. 12. Leases The Company leases certain office spaces, warehouses, production facilities, vehicles and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include renewal options, which can extend the lease term into the future. The Company determines the lease term by assuming options that are reasonably certain of being renewed will be exercised. Certain of the Company’s leases include rental payments adjusted for inflation. The right-of-use lease asset is recorded on the Consolidated Balance Sheets, with the current lease liability being included in Accrued liabilities and noncurrent lease liability being included in Other liabilities. Operating lease expense was $ 24.9 million, $ 25.4 million and $ 21.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. December 31, 2024 (In thousands) Future lease payments by year: 2025 $ 24,478 2026 17,555 2027 12,403 2028 9,861 2029 8,438 Thereafter 25,628 Total 98,363 Less: present value discount ( 10,862 ) Present value of lease liabilities $ 87,501 Weighted-average remaining lease term (in years): Operating leases 6.18 Weighted-average discount rate: Operating leases 4.4 % 68 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) 13. Accrued and Other Liabilities The table below includes a summarized breakout of Accrued and Other liabilities in the Consolidated Balance Sheets. December 31, 2024 December 31, 2023 Current Noncurrent Current Noncurrent (In thousands) Accrued taxes and deferred tax liabilities $ 46,395 $ 151,642 $ 45,681 $ 144,662 Compensation and related benefits 80,451 48,350 97,052 52,589 Asbestos liability 40,779 253,287 32,908 234,796 Contract liability 26,390 — 31,248 — Lease liability 21,459 66,042 22,794 76,609 Warranty liability 12,794 — 12,606 — Third-party commissions 17,346 — 18,711 — Restructuring liability 4,732 374 5,345 354 Accrued interest 8,077 — 711 — Other 40,135 13,241 46,433 33,823 $ 298,558 $ 532,936 $ 313,489 $ 542,833 The table below summarizes the activity in the Company’s warranty liability included in Accrued liabilities in the Company’s Consolidated Balance Sheets. Year Ended December 31, 2024 2023 (In thousands) Warranty liability, beginning of period $ 12,606 $ 12,946 Accrued warranty expense 10,570 5,794 Changes in estimates related to pre-existing warranties 1,624 3,097 Cost of warranty service work performed ( 11,426 ) ( 10,710 ) Foreign exchange translation effect and other ( 580 ) 1,479 Warranty liability, end of period $ 12,794 $ 12,606 The Company’s restructuring programs include a series of actions to reduce the structural costs of the Company. The table below summarizes the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Consolidated Balance Sheets. Year Ended December 31, 2024 Balance at Beginning of Period Charges Payments Foreign Currency Translation Balance at End of Period (In thousands) Restructuring and other related charges: Termination benefits (1) $ 4,595 $ 4,538 $ ( 5,288 ) $ — $ 3,845 Facility closure costs and other (2) 1,104 5,689 ( 5,112 ) ( 420 ) 1,261 $ 5,699 $ 10,227 $ ( 10,400 ) $ ( 420 ) $ 5,106 (1) Includes severance and other termination benefits, including outplacement services. (2) Includes the cost of relocating associates, relocating equipment and other costs in connection with the closure and optimization of facilities and product lines. 69 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Year Ended December 31, 2023 Balance at Beginning of Period Charges Payments Foreign Currency Translation Balance at End of Period (In thousands) Restructuring and other related charges: Termination benefits (1) $ 4,910 $ 10,017 $ ( 10,223 ) $ ( 109 ) $ 4,595 Facility closure costs (2) 2,908 8,637 ( 10,483 ) 42 1,104 Subtotal $ 7,818 18,654 $ ( 20,706 ) $ ( 67 ) $ 5,699 Non-cash charges (3) 5,456 $ 24,110 (1) Includes severance and other termination benefits, including outplacement services. (2) Includes 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 impairment of long-lived assets in connection with the closure and optimization of facilities and product lines. 14. Benefit Plans The Company sponsors various defined benefit plans and other post-retirement benefits plans, including health and life insurance, for certain eligible employees or former employees. The other post-retirement benefit plans are immaterial. The Company uses December 31 st as the measurement date for all of its employee benefit plans. 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. 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. These amounts are reflected in the Pension settlement loss (gain) line item in the Consolidated and Combined Statements of Operations. 70 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) The following table summarizes the total changes in the Company’s total and foreign pension benefits and plan assets and includes a statement of the plans’ funded status. All Pension Benefits Foreign Pension Benefits Year Ended December 31, Year Ended December 31, 2024 2023 2024 2023 (In thousands) Change in benefit obligation: Projected benefit obligation, beginning of year $ 242,743 $ 256,022 $ 99,215 $ 99,401 Service cost 1,429 1,439 1,429 1,439 Interest cost 8,828 11,170 2,576 4,148 Plan amendments ( 9 ) 175 ( 9 ) 175 Actuarial (gain) loss ( 5,945 ) 802 1,178 335 Foreign exchange effect ( 5,386 ) 4,079 ( 5,386 ) 4,079 Benefits paid ( 21,242 ) ( 27,720 ) ( 4,561 ) ( 7,138 ) Settlements ( 31,583 ) ( 3,584 ) ( 31,583 ) ( 3,584 ) Other 1,039 360 1,039 360 Projected benefit obligation, end of year 189,874 242,743 63,898 99,215 Accumulated benefit obligation, end of year $ 186,689 $ 239,578 $ 60,713 $ 96,049 Change in plan assets: Fair value of plan assets, beginning of year $ 211,472 $ 219,050 $ 65,278 $ 70,821 Actual return on plan assets 12,389 19,651 2,024 1,262 Employer contributions (1) 4,309 ( 857 ) 4,175 ( 1,015 ) Foreign exchange effect ( 2,028 ) 3,162 ( 2,028 ) 3,162 Benefits paid ( 21,242 ) ( 27,720 ) ( 4,561 ) ( 7,138 ) Settlements ( 43,283 ) ( 2,505 ) ( 43,283 ) ( 2,505 ) Other 289 691 289 691 Fair value of plan assets, end of year 161,906 211,472 21,894 65,278 Funded status, end of year $ ( 27,968 ) $ ( 31,271 ) $ ( 42,004 ) $ ( 33,937 ) Amounts recognized on the Consolidated Balance Sheets as of December 31: Non-current assets $ 17,228 $ 17,300 $ 2,072 $ 13,426 Current liabilities ( 3,113 ) ( 3,186 ) ( 2,979 ) ( 3,052 ) Non-current liabilities ( 42,083 ) ( 45,385 ) ( 41,097 ) ( 44,311 ) $ ( 27,968 ) $ ( 31,271 ) $ ( 42,004 ) $ ( 33,937 ) (1) The employer contribution amount for the year ended December 31, 2023 includes a refund of assets totaling $ 5.1 million to the Company arising from a completed wind up of a foreign defined benefit plan. For pension plans with accumulated benefit obligations in excess of plan assets, the accumulated benefit obligation and fair value of plan assets were $ 49.3 million and $ 6.3 million, respectively, as of December 31, 2024 and $ 50.7 million and $ 3.9 million, respectively, as of December 31, 2023. For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and fair value of plan assets were $ 52.4 million and $ 7.2 million, respectively, as of December 31, 2024 and $ 55.6 million and $ 7.0 million, respectively, as of December 31, 2023. 71 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Expected contributions to the Company’s pension benefit plans for the year ending December 31, 2025 are $ 4.5 million. The table below includes the benefit payments that are expected to be paid during each respective fiscal year. Pension Benefits All Plans Foreign Plans (In thousands) 2025 $ 19,136 $ 5,735 2026 18,347 5,368 2027 17,986 5,455 2028 17,243 5,133 2029 16,917 5,309 2030 - 2034 76,386 26,156 The Company’s primary investment objective for its pension plan assets is to provide a source of retirement income for the plans’ participants and beneficiaries. The assets are invested with the goal of preserving principal while providing a reasonable rate of return over the long term. Diversification of assets is achieved through strategic allocations to various asset classes. Actual allocations to each asset class vary due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions and the timing of benefit payments and contributions. The asset allocation is monitored and rebalanced as required, as frequently as on a quarterly basis in some instances. The target allocation for plan assets varies by plan and jurisdiction. The table below shows the actual allocation percentages for the Company’s pension plan assets. Actual Asset Allocation December 31, 2024 2023 United States Plans: Equity securities: United States 37 % 38 % International 13 % 12 % Fixed income 50 % 49 % Cash and cash equivalents 0 % 1 % Foreign Plans: Equity securities 4 % 1 % Fixed income securities 15 % 48 % Cash and cash equivalents 1 % 1 % Insurance contracts 44 % 38 % Investment funds (1) 36 % 12 % (1) Represents various fixed income and equity securities. 72 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) The table below summarizes the Company’s pension plan assets for each fair value hierarchy level for the periods presented (see Note 17, “Fai r Value Measurements” for further description of the levels within the fair value hierarchy). December 31, 2024 December 31, 2023 Measured at Net Asset Value (1) Level One Level Two Level Three Total Measured at Net Asset Value (1) Level One Level Two Level Three Total (In thousands) (In thousands) United States Plans: Cash and cash equivalents $ — $ 379 $ — $ — $ 379 $ — $ 1,237 $ — $ — $ 1,237 Equity securities: United States large cap 28,803 — — — 28,803 29,289 — — — 29,289 United States small/mid cap 9,456 13,481 — — 22,937 10,130 16,033 — — 26,163 International 17,566 — — — 17,566 18,078 — — — 18,078 Fixed income mutual funds: United States government and corporate 69,152 — — — 69,152 70,283 — — — 70,283 Other — 1,175 — — 1,175 — 1,145 — — 1,145 Foreign Plans: Cash and cash equivalents (2) — 238 — — 238 — 547 — — 547 Equity securities — 904 — — 904 — 921 — — 921 Non-United States government and corporate bonds — 3,198 — — 3,198 — 31,147 — — 31,147 Insurance contracts — — 9,608 — 9,608 — — 24,592 — 24,592 Investment funds — — 7,919 — 7,919 — — 8,050 — 8,050 Other — — 27 — 27 — — 20 — 20 $ 124,977 $ 19,375 $ 17,554 $ — $ 161,906 $ 127,780 $ 51,030 $ 32,662 $ — $ 211,472 (1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient (the “NAV”) have not been classified in the fair value hierarchy. These investments, consisting of common/collective trusts, are valued using the NAV provided by the Trustee. The NAV is based on the underlying investments held by the fund, which are traded in an active market, less its liabilities. These investments are able to be redeemed in the near-term. (2) The weighted-average interest crediting rates received in Cash and cash equivalents of foreign plans are immaterial relative to total plan assets. 73 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) The following table sets forth the components of net periodic benefit (income) cost and Other comprehensive income of the Company’s total and foreign defined benefit pension plans. All Pension Benefits Foreign Pension Benefits Year Ended December 31, Year Ended December 31, 2024 2023 2022 2024 2023 2022 (In thousands) Components of Net Periodic Benefit Cost (Income): Service cost $ 1,429 $ 1,439 $ 1,684 $ 1,429 $ 1,439 $ 1,684 Interest cost 8,828 11,170 5,874 2,576 4,148 2,161 Amortization 1,634 1,206 4,313 130 40 687 Settlement loss (gain) 12,155 — ( 9,114 ) 12,155 — ( 9,114 ) Other ( 179 ) — 92 ( 179 ) ( 331 ) 92 Expected return on plan assets ( 9,410 ) ( 11,391 ) ( 11,519 ) ( 1,038 ) ( 2,475 ) ( 2,063 ) Net periodic benefit cost (income) $ 14,457 $ 2,424 $ ( 8,670 ) $ 15,073 $ 2,821 $ ( 6,553 ) Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Gain) Loss: Transfer from Former Parent (1) $ — $ — $ 53,134 $ — $ — $ — Current year net actuarial (gain) loss ( 9,598 ) ( 7,021 ) 949 ( 483 ) 1,984 ( 12,262 ) Current year prior service cost ( 9 ) 175 862 ( 9 ) 175 862 Less amounts included in net periodic benefit cost: Amortization of net (loss) ( 1,676 ) ( 1,575 ) ( 4,340 ) ( 172 ) ( 78 ) ( 714 ) Settlement / divestiture / other loss ( 455 ) ( 1,079 ) ( 67 ) ( 454 ) ( 1,079 ) ( 67 ) Amortization of prior service cost 42 38 ( 1,067 ) 42 38 ( 1,067 ) Total recognized in Other comprehensive income $ ( 11,696 ) $ ( 9,462 ) $ 49,471 $ ( 1,076 ) $ 1,040 $ ( 13,248 ) (1) As part of the Separation, certain United States defined benefit plans, formerly sponsored by the Former Parent were transferred to the Company as of March 21, 2022 (“Transfer Date”). Each component of net periodic benefit cost (income) is included in the Company’s Consolidated and Combined Statements of Operations for the years ended December 31, 2024, 2023 and 2022. Service cost is included within Selling, general and administrative expense with the non-service costs net of expected return on plan assets and settlement loss (gain) included within Interest expense and other, net. Settlement loss (gain) is recorded within Pension settlement loss (gain) on the Company’s Consolidated and Combined Statement of Operations. The table below shows the components of net unrecognized pension benefit cost included in AOCL in the Consolidated Balance Sheets that have not been recognized as a component of net periodic benefit cost. Pension Benefits December 31, 2024 2023 (In thousands) Net actuarial loss $ 49,917 $ 61,573 Prior service income ( 122 ) ( 81 ) $ 49,795 $ 61,492 The key economic assumptions used in the measurement of the Company’s pension benefits are included in the table below. Pension Benefits December 31, 2024 2023 Weighted-average discount rate: All plans 4.8 % 4.4 % Foreign plans 3.7 % 3.9 % Weighted-average rate of increase in compensation levels for active foreign plans (1) 3.1 % 3.1 % 74 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) (1) Weighted-average rate of increase is only applicable to plans with compensation increase assumptions. The key economic assumptions used in the computation of net periodic benefit cost are as included in the table below. Pension Benefits Year Ended December 31, 2024 2023 2022 Weighted-average discount rate: All plans 4.4 % 4.6 % 2.2 % Foreign plans 3.9 % 4.3 % 1.9 % Weighted-average expected return on plan assets: All plans 5.1 % 5.0 % 4.8 % Foreign plans 4.4 % 4.1 % 3.2 % Weighted-average rate of increase in compensation levels for active foreign plans (1) 3.1 % 3.2 % 3.2 % (1) Weighted-average rate of increase is only applicable to plans with compensation increase assumptions. In determining discount rates, the Company utilizes the single discount rate equivalent to discounting the expected future cash flows from each plan using the yields at each duration from a published yield curve as of the measurement date. The expected long-term rate of return on plan assets is determined using the calculated value of plan assets, which is based on the Company’s investment policy target allocation of the asset portfolio between various asset classes and the expected real returns of each asset class over various periods of time that are consistent with the long-term nature of the underlying obligations of these plans. The Company maintains defined contribution plans covering certain union and non-union employees. The Company’s expense for the years ended December 31, 2024, 2023 and 2022 was $ 7.5 million, $ 7.6 million and $ 8.7 million, respectively. 15. Debt The table below shows the components of the Company’s debt. December 31, 2024 2023 (In thousands) Term loans $ 385,000 $ 987,500 Senior unsecured notes 700,000 — Revolving credit facility — 32,000 Total debt 1,085,000 1,019,500 Current portion of long-term debt ( 15,000 ) — Unamortized deferred financing fees ( 9,261 ) ( 1,443 ) Long-term debt $ 1,060,739 $ 1,018,057 Senior Notes, Term Loans and Revolving Credit Facility On April 4, 2022, the Company entered into a credit agreement (as amended and restated from time-to-time, the “Credit Agreement”) in connection with the Separation. The Credit Agreement initially consisted of a $ 750 million revolving credit facility (the “Revolving Facility”) with a maturity date of April 4, 2027, 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 a $ 600 million 364 -day senior term loan facility (the “Term Loan A-2 Facility”) with a maturity date of April 3, 2023. The Revolving Facility contains a $ 300 million foreign currency sublimit and a $ 50 million swing line loan sub-facility. On April 4, 2022, the Company drew down $ 1.2 billion available under the credit facilities made up of (i) $ 200 million under the Revolving Facility, (ii) $ 400 million under the Term Loan A-1 Facility and (iii) $ 600 million under the Term Loan A-2 Facility. The Company 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 the Company by Enovis in connection with the Separation. 75 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) On June 28, 2022, the Company 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 facility (the “Term Loan A-3 Facility,” collectively the “Term Facilities” with the Term A-1 Facility and Term A-2 Facility) with a maturity date of April 3, 2025 to refinance the Company’s existing Term Loan A-2 Facility. Also on June 28, 2022, the Company borrowed the entire $ 600 million under Term Loan A-3 Facility to fund the repayment of the Term Loan A-2 Facility. On April 9, 2024, the Company issued $ 700 million in aggregate principal amount of 6.25 % senior notes due 2029 (the “Senior Notes”) governed by an indenture (the “Indenture”). The Senior Notes have a contractual maturity interest rate of 6.25 % and maturity date of April 15, 2029. The Company used the net proceeds from the Senior Notes to pay off its Term Loan A-3 Facility and pay fees associated with the offering. As of December 31, 2024, the Credit Agreement and the Indenture consist of the following facilities: • A $ 750 million Revolving Facility with a maturity date of April 4, 2027 with zero dollars drawn; • A Term A-1 Facility with an aggregate principal amount of $ 385 million, with maturity dates through April 4, 2027; and • Senior Notes with an aggregate principal amount of $ 700 million with a maturity date of April 15, 2029. The Credit Agreement and the Indenture contain customary covenants. These covenants limit the ability of the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends. In addition, the Credit Agreement requires that the Company maintains certain financial covenants and the Company was in compliance with all of its debt covenants as of December 31, 2024. The Credit Agreement and the Indenture contain various events of default (including failure to comply with the covenants under the Credit Agreement and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Term A-1 Facility, Senior Notes and the Revolving Facility. Certain United States subsidiaries of the Company have agreed to guarantee the obligations of the Company under the Credit Agreement and the Senior Notes. Loans made under the Term A-1 Facility will bear interest, at the election of the Company, at either the base rate (as defined in the Credit Agreement) or at the term Secured Overnight Financing Rate (“SOFR”) plus an adjustment (as defined in the Credit Agreement), in each case, plus the applicable interest rate margin. Loans made under the Revolving Facility will bear interest, at the election of the Company, at either the base rate or, (i) in the case of loans denominated in dollars, the term SOFR plus an adjustment or the daily simple SOFR plus an adjustment, (ii) in the case of loans denominated in Euros, the adjusted Euro Interbank Offered Rate (“EURIBOR”) and, (iii) in the case of loans denominated in sterling, Sterling Overnight Index Average (“SONIA”) plus an adjustment (as all such rates are defined in the Credit Agreement Amendment), in each case, plus the applicable interest rate margin. The applicable interest rate margin changes based upon the Company’s total leverage ratio (ranging from 1.125 % to 1.750 % or in the case of the base rate margin, 0.125 % to 0.750 %). Each swing line loan denominated in dollars will bear interest at the base rate plus the applicable interest rate margin. To manage exposures to currency exchange rates and interest rates arising in Long-term debt, the Company entered into interest rate and cross-currency swap agreements. Refer to Note 16, “Derivatives” for additional information. As of December 31, 2024, the weighted-average interest rate of borrowings under the Credit Agreement and the Indenture was 5.24 %, including the net impact from the interest rate and cross-currency swaps and excluding accretion of deferred financing fees, and there was $ 750 million of borrowing capacity available on the Revolving Facility, subject to the Company meeting financial covenants and other requirements. Other Indebtedness In addition to the debt agreements discussed above, the Company has the ability to incur approximately $ 50 million of indebtedness pursuant to certain uncommitted credit lines, consisting of an uncommitted credit line that the Company currently has in place that the Company has used from time to time in the past for short-term working capital needs. 76 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) The Company is party to letter of credit facilities with an aggregate capacity of $ 107.0 million. Total letters of credit of $ 27.2 million were outstanding as of December 31, 2024. Deferred Financing Fees In total, the Company had deferred financing fees of $ 9.9 million included in its Consolidated Balance Sheets as of December 31, 2024, which will be charged to Interest expense and other, net, over the term of the related debt instruments. The costs associated with the Term Facilities and Senior Notes noted above will be amortized over the contractual term of the related facility and the costs associated with these will be amortized over the life of the Credit Agreement or the Indenture, respectively. Of the $ 9.9 million, $ 0.6 million of deferred financing fees relating to the Revolving Facility are included in Other assets and $ 9.3 million of deferred financing fees relating to the Term Facilities and Senior Notes are recorded as a contra-liability within Long-term debt. Other The Company’s minimum principal payments for the next five years are broken out in the table below. December 31, 2024 (in thousands) 2025 $ 15,000 2026 20,000 2027 350,000 2028 — 2029 700,000 Total debt (1) $ 1,085,000 (1) Total debt excludes $ 9.3 million of related unamortized deferred financing fees. 16. Derivatives The Company uses derivative instruments to manage exposures to currency exchange rates and interest rates arising in connection with Long-term debt and the normal course of business. The Company has established policies and procedures that govern the risk management of these exposures. Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable. The Company is subject to the credit risk of counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. None of the concentrations of risk with an individual counterparty was considered significant as of December 31, 2024. The Company does not expect any counterparties to fail to meet their obligations. The Company records derivatives in the Consolidated Balance Sheets at fair value. Cash Flow Hedges On July 14, 2022, the Company entered into two interest rate swap agreements to manage interest rate risk exposure. The aggregate notional amount of these contracts was $ 600 million, maturing in April 2025. These interest rate swap agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating-rate debt to a fixed rate of 3.293 %, plus a spread, thus reducing the impact of interest-rate changes on future interest expense. The applicable spread may vary between 1.125 % to 1.750 %, depending on the total leverage ratio of the Company. In March 2024, the Company settled one of the interest rate swaps associated with the Company’s floating-rate debt and received $ 5.5 million in connection with that settlement. The termination of the interest rate swap was related to the repayment of the Term A-3 Facility in April 2024. Refer to Note 15, “Debt” for further information. As this interest rate swap was designated as a cash flow hedge, $ 5.5 million was deferred in AOCL and is being recognized in earnings over the period the originally forecasted hedged transaction impacts earnings. The remaining $ 300 million swap is expected to continue to be hedged against the remaining floating-rate debt. For the remaining swap, the spread was 1.250 % as of December 31, 2024. This agreement involves the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the life of the agreement without an exchange of the underlying principal amount. This interest rate swap agreement is designated and qualifies as a cash flow hedge and as such, the gain or 77 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) loss on the derivative instrument due to the change in fair value is reported as a component of AOCL and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. If a derivative is deemed to be ineffective, the change in fair value of the derivative is recognized directly in earnings. The Company did not have any ineffectiveness related to cash flow hedges during the year ended December 31, 2024. The cash inflows and outflows associated with the Company’s interest rate swap agreements designated as cash flow hedges are classified in cash flows from operating activities in the accompanying Consolidated and Combined Statements of Cash Flows. The Company expects a gain o f $ 0.7 million, net of tax, related to interest rate swap agreements to be reclassified from AOCL to earnings through such agreement’s maturity in April 2025 as the hedged transactions are realized. The expected gain to be reclassified is based on current forward rates in active markets as of December 31, 2024. The table below shows the effects of designated cash flow hedges on the Company’s Consolidated and Combined Statements of Operations. Year Ended December 31, Derivative type (Gain) recognized in the Consolidated and Combined Statements of Operations 2024 2023 (In thousands) Interest rate swap agreement(s) Interest expense and other, net $ ( 9,104 ) $ ( 11,053 ) Net Investment Hedges On July 22, 2022, the Company entered into two cross-currency swap agreements, set to mature in April 2025, to partially hedge its net investment in its Euro denominated subsidiaries against adverse movements in exchange rates between the U.S. Dollar and the Euro. The cross-currency swap agreements included provisions to exchange fixed-rate payments in U.S. Dollar for fixed-rate payments in Euro and were designated and qualify as a net investment hedge. These contracts had a Euro aggregate notional amount of approximately € 270 million and a U.S. Dollar aggregate notional amount of $ 275 million. Prior to the maturity of these two cross-currency swaps, on June 25, 2024, the Company de-designated these swaps and entered into four new cross-currency swaps for the same above notional amounts that mature in October 2026. On August 22, 2024, the Company entered into two additional cross-currency swap agreements, set to mature in October 2026. These contracts have a Euro aggregate notional amount of approximately € 90 million and a U.S. dollar aggregate notional amount of $ 100 million. These swaps are designated and accounted for as a net investment hedge. The changes in the spot rate of these instruments are recorded in AOCL in equity, partially offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in AOCL. The Company uses the spot method of assessing hedge effectiveness and as such, the initial value of the hedge components excluded from the assessment of effectiveness is recognized in the Interest expense and other, net line item in the Consolidated and Combined Statement of Operations under a systematic and rational method over the life of the cross-currency swap agreements. Any ineffective portions of net investment hedges are reclassified from AOCL into earnings during the period of change. Due to the de-designation transaction above on June 25, 2024, the Company will keep the balance in AOCL related to the original derivative for the duration that the investment is held. The Company did not have any ineffectiveness related to net investment hedges during the year ended December 31, 2024. The cash inflows and outflows associated with the excluded components of the Company’s cross-currency swap agreements designated as net investment hedges are classified in operating activities in the accompanying Consolidated and Combined Statements of Cash Flows. 78 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) The table below shows the effects of the excluded components of designated net investment hedges on the Company’s Consolidated and Combined Statements of Operations. Year Ended December 31, Derivative type (Gain) recognized in the Consolidated and Combined Statements of Operations 2024 2023 Cross currency-swap agreements Interest expense and other, net $ ( 4,687 ) $ ( 4,779 ) The table below shows the fair value of the derivatives recognized in the Company’s Consolidated Balance Sheets. December 31, 2024 December 31, 2023 Designated as hedging instruments Other Liabilities Other Assets Other Liabilities Other Assets (In thousands) Cross-currency swap agreements $ 1,830 $ — $ 22,232 $ — Interest rate swap agreement(s) — 842 — 9,522 Total $ 1,830 $ 842 $ 22,232 $ 9,522 Derivatives Not Designated as Hedging Instruments The Company has certain foreign currency contracts that are not designated as hedges. As of December 31, 2024 and December 31, 2023, the Company had foreign currency contracts related to purchases and sales with notional values of $ 178.7 million and $ 232.5 million, respectively. The table below shows the fair value of derivative instruments not designated in a hedging relationship recognized in the Company’s Consolidated Balance Sheets. December 31, 2024 December 31, 2023 Not designated as hedging instruments Accrued Liabilities Other Current Assets Accrued Liabilities Other Current Assets (In thousands) Foreign currency contracts $ 379 $ 255 $ 596 $ 1,088 The amounts in the table above as of December 31, 2024 reflect the fair value of the Company’s foreign currency contracts on a net basis where allowable under master netting agreements. Had these amounts been recognized on a gross basis, the impact would have been a $ 0.4 million increase in Other current assets with a corresponding increase in Accrued liabilities. The Company recognized the following in its Consolidated and Combined Financial Statements related to its derivative instruments not designated in a hedging relationship: Year Ended December 31, Foreign currency contracts 2024 2023 2022 (In thousands) Change in unrealized (loss) gain $ ( 616 ) $ ( 1,023 ) $ 1,338 Realized gain (loss) (1) $ 1,490 $ ( 2,928 ) $ ( 17,601 ) (1) The year ended December 31, 2022 includes realized losses relating to certain corporate entities contributed to ESAB Corporation that are reflected within Interest expense and other, net, in the Consolidated and Combined Statements of Operations. These realized losses are offset by unrealized gains which are also reflected within Interest expense and other, net, in the Consolidated and Combined Statements of Operations . 17. Fair Value Measurements The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy based on the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level One: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. 79 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Level Two: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level Three: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The carrying values of financial instruments, including Trade receivables and Accounts payable, approximate their fair values due to their short-term maturities. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future. A summary of the Company’s assets and liabilities that are measured at fair value for each fair value hierarchy level for the periods presented is in the table below (see Note 14, “Benefit Plan s” for classification of the assets of the Company’s benefit plans within the fair value hierarchy). December 31, 2024 December 31, 2023 Level One Level Two Level Three Total Level One Level Two Level Three Total (In thousands) (In thousands) Assets: Cash equivalents $ 8,990 $ — $ — $ 8,990 $ 6,027 $ — $ — $ 6,027 Foreign currency contracts — 657 — 657 — 2,261 — 2,261 Interest rate swap agreement — 842 — 842 — 9,522 — 9,522 Deferred compensation plans — 5,242 — 5,242 — 3,488 — 3,488 $ 8,990 $ 6,741 $ — $ 15,731 $ 6,027 $ 15,271 $ — $ 21,298 Liabilities: Foreign currency contracts $ — $ 781 $ — $ 781 $ — $ 1,769 $ — $ 1,769 Cross-currency swap agreements — 1,830 — 1,830 — 22,232 — 22,232 Deferred compensation plans — 5,242 — 5,242 — 3,488 — 3,488 $ — $ 7,853 $ — $ 7,853 $ — $ 27,489 $ — $ 27,489 The Company’s cash equivalents consist of investments in foreign interest-bearing deposit accounts and foreign money market mutual funds that are valued based on quoted market prices. The fair value of these investments approximate cost due to their short-term maturities and the high credit quality of the issuers of the underlying securities. The Company measures the fair value of foreign currency contracts, cross-currency swap agreements and interest rate swap agreement(s) using Level Two inputs based on observable spot and forward rates in active markets. Additionally, the fair value of derivatives designated in hedging relationships includes a credit valuation adjustment to appropriately incorporate nonperformance risk for the Company and the respective counterparty. For the year ended December 31, 2024, the impact of the credit valuation adjustment on the Company’s derivatives is immaterial. Refer to Note 16, “Derivatives” for additional information. There were no transfers in or out of Level One, Two or Three during the years ended December 31, 2024 and 2023. Concentration of Credit Risk Financial instruments potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. Concentrations of credit risk are considered to exist when there are amounts collectible from multiple counterparties with similar characteristics, which could cause their ability to meet contractual obligations to be similarly impacted by economic or other conditions. The Company performs credit evaluations of its customers prior to delivery or commencement of services and normally does not require collateral. Letters of credit are occasionally required when the Company deems n ecessary. There are no customers that represent more than 10% of the Company’s Trade receivables, net as of December 31, 2024 and 2023. 80 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) 18. Equity Share 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 repurchase authorization. Accumulated Other Comprehensive Loss The following table presents the changes in the balances of each component of AOCL including reclassifications out of AOCL for the years ended December 31, 2024, 2023 and 2022. All amounts are net of tax and noncontrolling interest, if any. 81 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Accumulated Other Comprehensive Loss Components Net Unrecognized Pension and Other Post-Retirement Benefit Cost Foreign Currency Translation Adjustment Net Investment Hedges Cash Flow Hedges Total (In thousands) Balance at January 1, 2022 $ ( 21,196 ) $ ( 439,692 ) $ — $ — $ ( 460,888 ) Other comprehensive (loss) income before reclassifications: Amounts contributed by Former Parent (2) ( 50,504 ) ( 8,759 ) — — ( 59,263 ) Net actuarial gain 113 — — — 113 Foreign currency translation adjustment 1,712 ( 82,351 ) ( 8,336 ) — ( 88,975 ) Loss on long-term intra-entity foreign currency transactions — ( 83,105 ) — — ( 83,105 ) Unrealized gain on cash flow hedges — — — 10,782 10,782 Other comprehensive (loss) income before reclassifications ( 48,679 ) ( 174,215 ) ( 8,336 ) 10,782 ( 220,448 ) Amounts reclassified from Accumulated other comprehensive loss ((1)(3) 6,028 — — 320 6,348 Net current period Other comprehensive (loss) income ( 42,651 ) ( 174,215 ) ( 8,336 ) 11,102 ( 214,100 ) Balance at December 31, 2022 ( 63,847 ) ( 613,907 ) ( 8,336 ) 11,102 ( 674,988 ) Other comprehensive income (loss) before reclassifications: Net actuarial gain 8,969 — — — 8,969 Foreign currency translation adjustment ( 3,285 ) ( 11,143 ) ( 8,879 ) — ( 23,307 ) Gain on long-term intra-entity foreign currency transactions — 70,428 — — 70,428 Unrealized gain on cash flow hedges — — — 4,834 4,834 Other comprehensive income (loss) before reclassifications 5,684 59,285 ( 8,879 ) 4,834 60,924 Amounts reclassified from Accumulated other comprehensive loss (1)(3) ( 1,642 ) — — ( 8,566 ) ( 10,208 ) Net current period Other comprehensive income (loss) 4,042 59,285 ( 8,879 ) ( 3,732 ) 50,716 Balance at December 31, 2023 ( 59,805 ) ( 554,622 ) ( 17,215 ) 7,370 ( 624,272 ) Other comprehensive income (loss) before reclassifications: Net actuarial gain 9,069 — — — 9,069 Foreign currency translation adjustment 530 ( 137,599 ) 15,968 — ( 121,101 ) Gain on long-term intra-entity foreign currency transactions — 14,136 — — 14,136 Unrealized gain on cash flow hedges — — — 4,426 4,426 Other comprehensive income (loss) before reclassifications 9,599 ( 123,463 ) 15,968 4,426 ( 93,470 ) Amounts reclassified from Accumulated other comprehensive loss (1)(3) ( 146 ) — — ( 9,980 ) ( 10,126 ) Purchase related to noncontrolling interest — ( 1,706 ) — — ( 1,706 ) Net current period Other comprehensive income (loss) 9,453 ( 125,169 ) 15,968 ( 5,554 ) ( 105,302 ) Balance at December 31, 2024 $ ( 50,352 ) $ ( 679,791 ) $ ( 1,247 ) $ 1,816 $ ( 729,574 ) (1) The amounts on this line within the Net Unrecognized Pension and Other Post-Retirement Benefit Cost column are included in the computation of net periodic benefit cost. See Note 14, “Benefit Plans” for additional details. (2) Includes unrecognized pension and other post-retirement costs and accumulated currency translation adjustments of certain entities that were part of the Corporate segment of the Former Parent and were transferred to ESAB Corporation in anticipation of the Separation. (3) The amounts on this line within the Cash Flow Hedges column are a component of Interest expense and other, net. See Note 16, “Derivatives,” for additional details. 82 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Share-Based Payments In connection with the Separation, the Company adopted the 2022 Omnibus Incentive Plan (the “Stock Plan”) that became effective upon the Separation. Outstanding equity awards of the Former Parent held by ESAB employees at the Separation date were converted into or replaced with awards of ESAB common stock under the Stock Plan, with the intent to maintain the economic value of the equity awards immediately before and after the Distribution. The terms of the equity awards period, exercisability and vesting schedule, as applicable, generally continued unchanged. Other than converted or replacement equity awards of ESAB issued in replacement of the Former Parent’s RSUs and stock options, the terms of the converted or replacement equity awards of ESAB (e.g., vesting date and expiration date) continued unchanged. For the three months ended April 1, 2022, $ 0.7 million of stock-based compensation expense was allocated to the Company. Following the Separation, the Company independently incurs stock compensation expenses as a stand-alone company. The Company measures and recognizes compensation expense related to share-based payments based on the fair value of the instruments issued. Stock-based compensation expense is generally recognized as a component of Selling, general and administrative expense in the Consolidated and Combined Statements of Operations. Stock Options Under the Stock Plan, the Company may grant options to purchase common stock, with a maximum term of 10 years at a purchase price equal to the market value of the Company’s common stock on the date of grant. Stock-based compensation expense for stock option awards is based upon the grant-date fair value using the Black-Scholes option pricing model. The Company recognizes compensation expense for stock option awards on a straight-line basis over the requisite service period of the entire award. For the year ended December 31, 2024, the Stock-based compensation expense for the stock option awards was $ 2.7 million. As of December 31, 2024 , the Company had $ 2.4 million of unrecognized compensation expense related to stock option awards that will be recognized over a weighted-average period of 1.8 years. Restricted Stock Units During the year ended December 31, 2023 and 2022, the Company granted certain employees performance-based restricted stock units (“PRSUs”), the vesting of which is fully based on company specific performance metrics over a three-year performance period. The awards also have a service requirement that equals the respective performance periods. These PRSUs are valued at the market value of a share of common stock on the date of grant taking into consideration the probability of achieving the specified performance goal. The ultimate payout of PRSUs with a performance metric adjusts the cumulative expense based on its estimate and the percent of the requisite service period that has elapsed. During the year ended December 31, 2024, the Company granted certain employees PRSUs, the calculation of the final achievement of which is based on Company-specific performance metrics as well as a modifier for the Company’s total shareholder return ranking among a peer group over a three-year performance period. The awards also have a service requirement that equals the respective performance periods. The related compensation expense for each of the awards is recognized on a straight-line basis over the vesting period. For the year ended December 31, 2024, the Stock-based compensation expense for the PRSUs was $ 5.7 million. Under the Stock Plan, the Compensation Committee may also award RSUs to select executives, employees and outside directors, which typically vest over three years after the date of grant. With limited exceptions, the employee must remain in service until the vesting date. The Compensation Committee determines the terms and conditions of each award, including any restriction period and other criteria applicable to the awards. For the year ended December 31, 2024, the Stock-based compensation expense for the RSUs was $ 11.4 million . 83 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) The activity of the Company’s PRSUs and RSUs is included in the table below. PRSUs RSUs Number of Units Weighted- Average Grant-Date Fair Value Number of Units Weighted-Average Grant-Date Fair Value Balance at December 31, 2023 143,875 $ 55.86 464,730 $ 55.21 Granted 56,767 100.33 122,155 95.23 Vested — — ( 191,802 ) 56.54 Forfeited and expired — — ( 21,463 ) 65.79 Balance at December 31, 2024 200,642 $ 68.44 373,620 $ 67.02 The fair value of shares vested during the year ended December 31, 2024 was $ 10.7 million . As of December 31, 2024 , the Company had $ 18.5 million of unrecognized compensation expense related to PRSU and RSU awards that will be recognized over a weighted-average period of 1.8 years. 84 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) 19. Commitments and Contingencies Asbestos Contingencies Certain entities that became subsidiaries of ESAB Corporation in connection with the Separation are the legal obligor for certain asbestos obligations including long-term asbestos insurance assets, long-term asbestos insurance receivables, accrued asbestos liabilities, long-term asbestos liabilities, asbestos indemnity expenses, asbestos-related defense costs and asbestos insurance recoveries related to the asbestos obligations from the Former Parent’s other legacy industrial businesses. As a result, the Company holds certain asbestos-related contingencies and insurance coverages. These subsidiaries are each one of many defendants in a large number of lawsuits that claim personal injury as a result of exposure to asbestos from products manufactured or used with components that are alleged to have contained asbestos. Such components were acquired from third-party suppliers and were not manufactured by any of the Company’s, or Former Parent’s, subsidiaries nor were the subsidiaries producers or direct suppliers of asbestos. The manufactured products that are alleged to have contained or used asbestos generally were provided to meet the specifications of the subsidiaries’ customers, including the United States Navy. The subs idiaries settle asbestos claims for amounts the Company considers reasonable given the facts and circumstances of each claim. The annual average settlement payment per asbestos claimant has fluctuated during the past several years while the number of cases has steadily declined, except for 2024 when they have been substantially even versus prior year. The Company expects fluctuations to continue in the future based upon, among other things, the number and type of claims settled in a particular period and the jurisdictions in which such claims arise. To date, the majority of settled claims have been dismissed for no payment. The Company has classified asbestos-related activity in Loss from discontinued operations in the Consolidated and Combined Statements of Operations. This is consistent with the Former Parent’s classification on the basis that, pursuant to the purchase agreement from the Former Parent’s Fluid Handling business divestiture, the Former Parent retained its asbestos-related contingencies and insurance coverages. However, as the Former Parent did not retain an interest in the ongoing operations of the business subject to the contingencies, asbestos-related activity was classified as part of Loss from discontinued operations, net of taxes in the Consolidated Statements of Operations of the Former Parent. The Company has projected each subsidiary’s 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. Consistent with the Former Parent, it is ESAB’s policy to record a liability for asbestos-related liability costs for the longest period of time that ESAB management can reasonably estimate. The Company believes that it can reasonably estimate the asbestos-related liability for pending and future claims that will be resolved in the next 15 years and has recorded that liability as its best estimate. While it is reasonably possible that the subsidiaries will incur costs after this period, the Company does not believe the reasonably possible loss or a range of reasonably possible losses is estimable at the current time. 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 related to efforts to recover insurance from the subsidiaries’ insurers are expensed as incurred. Each subsidiary has separate insurance coverage acquired prior to Company ownership. The Company estimates the insurance assets for each subsidiary based upon the applicable policy language, expected recoveries and allocation methodologies and law pertaining to the affected subsidiary’s insurance policies. 85 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) The table below summarizes the Asbestos-related claims activity since December 31, 2023 and 2022, respectively. Year Ended December 31, 2024 2023 (Number of claims) Claims unresolved, beginning of period 13,648 14,106 Claims filed (1) 5,005 4,627 Claims resolved (2) ( 4,895 ) ( 5,085 ) Claims unresolved, end of period 13,758 13,648 (In dollars) Average cost of resolved claims (3) $ 10,574 $ 9,524 (1) Claims filed include all asbestos claims for which notification has been received or a file has been opened. (2) Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based upon agreements or understandings in place with counsel for the claimants. (3) Excludes claims settled in Mississippi for which the majority of claims have historically been resolved for no payment and insurance recoveries. The Company’s Consolidated Balance Sheets include the amounts related to asbestos-related litigation shown in the table below. December 31, 2024 2023 (In thousands) Long-term asbestos insurance asset (1) $ 234,951 $ 221,489 Long-term asbestos insurance receivable (1) 16,961 17,868 Accrued asbestos liability (2) 40,779 32,908 Long-term asbestos liability (3) $ 253,287 $ 234,796 (1) Included in Other assets in the Consolidated Balance Sheets. (2) Represents current accruals for probable and reasonably estimable asbestos-related liability costs that the Company believes the subsidiaries will pay and unpaid legal costs related to defending themselves against asbestos-related liability claims and legal action against the Company’s insurers, which is included in Accrued liabilities in the Consolidated Balance Sheets. (3) Included in Other liabilities in the Consolidated Balance Sheets. Management’s analyses are based on currently known facts and assumptions. Projecting future events, such as new claims to be filed each year, the average cost of resolving each claim, coverage issues among layers of insurers, the method in which losses will be allocated to the various insurance policies, interpretation of the effect on coverage of various policy terms and limits and their interrelationships, the continuing solvency of various insurance companies, the amount of remaining insurance available, as well as the numerous uncertainties inherent in asbestos litigation could cause the actual liabilities and insurance recoveries to be higher or lower than those projected or recorded that could materially affect the Company’s financial condition, results of operations or cash flow. From time to time, other asbestos allegations related to former businesses of the Former Parent are brought against the Company. Management currently believes no loss is probable or estimable for these other matters. General Litigation The Company is involved in various pending legal proceedings arising out of the ordinary course of the Company’s business. None of these legal proceedings is expected to have a material adverse effect on the financial condition, results of operations or cash flow of the Company. With respect to these proceedings, and the litigation and claims described in the proceeding paragraphs, management of the Company believes that it will either prevail, has adequate insurance coverage or has established appropriate accruals to cover potential liabilities. Legal costs related to proceedings or claims are recorded when incurred. Other costs that management estimates may be paid related to the claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adverse to the Company, there could be a material adverse effect on the financial condition, results of operations or cash flow of the Company. 86 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Off-Balance Sheet Arrangements As of December 31, 2024, the Company had $ 143.3 million of unconditional purchase obligations with suppliers, the majority of which is expected to be paid by December 31, 2025. 20. Segment Information ESAB is a focused industrial compounder. Our rich history of innovating products, workflow solutions and our business system, EBX, enables our purpose of Shaping the world we imagine TM. . Our products include fabrication technology advanced equipment, consumables, gas control equipment, robotics and digital solutions. The Company conducts its operations through two reportable segments. These segments consist of the “Americas,” which includes operations in North America and South America and “EMEA & APAC,” which includes Europe, Middle East, India, Africa and Asia Pacific. We serve a global customer base across multiple markets through a combination of direct sales and third-party distribution channels. Our customer base is highly diversified in the industrial end markets. The Company’s management considers its Chief Operating Decision Maker (“CODM”) as Shyam Kambeyanda, President, Chief Executive Officer and Director. The Company’s management and CODM evaluate the operating results of each reportable segments, including assessment of profit or loss, performance and allocation of resources, based upon Net sales and Adjusted EBITDA, which represents Net income from continuing operations excluding the impact of Income tax expense, Interest expense and other, net, Pension settlement loss (gain), Restructuring and other related charges, Separation costs, Acquisition - amortization and other related charges and Depreciation and other amortization . Segment results reflect the allocation of corporate overhead costs, which primarily consist of Selling, general and administrative expense. The Company’s segment results are included in the table below. Year Ended December 31, 2024 2023 2022 (In thousands) Net sales (1) : Americas $ 1,176,745 $ 1,214,998 $ 1,128,306 EMEA & APAC 1,564,058 1,559,768 1,465,174 $ 2,740,803 $ 2,774,766 $ 2,593,480 Cost of sales: Americas $ 711,082 $ 760,134 $ 752,641 EMEA & APAC 992,266 998,881 955,309 $ 1,703,348 $ 1,759,015 $ 1,707,950 Allocated corporate overhead operating expense: Americas $ 64,517 $ 64,668 $ 55,328 EMEA & APAC 97,807 103,984 85,527 $ 162,324 $ 168,652 $ 140,855 Other operating expense: Americas $ 161,946 $ 165,454 $ 131,760 EMEA & APAC 184,411 180,543 176,161 $ 346,357 $ 345,997 $ 307,921 Adjusted EBITDA (2) : Americas $ 239,200 $ 224,742 $ 188,577 EMEA & APAC 289,574 276,360 248,177 $ 528,774 $ 501,102 $ 436,754 Depreciation, amortization and other impairment charges: Americas $ 31,193 $ 34,589 $ 29,281 EMEA & APAC 35,978 40,445 36,697 $ 67,171 $ 75,034 $ 65,978 Capital expenditures: Americas $ 22,648 $ 21,576 $ 18,005 EMEA & APAC 29,131 26,602 22,238 $ 51,779 $ 48,178 $ 40,243 87 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) (1) For the years ended December 31, 2024, 2023 and 2022, the total Net sales originating from the United States were $ 595.6 million, $ 619.1 million and $ 583.0 million, respectively. (2) The following is a reconciliation of Net income from continuing operations to Adjusted EBITDA: Year Ended December 31, 2024 2023 2022 (In thousands) Net income from continuing operations $ 293,057 $ 223,365 $ 231,081 Income tax expense 77,348 95,727 69,170 Interest expense and other, net 64,890 85,074 37,950 Pension settlement loss (gain) 12,155 — ( 9,136 ) Restructuring and other related charges (1) 10,227 24,110 23,096 Separation costs (2) — — 15,545 Acquisition - amortization and other related charges (3) 34,479 36,851 34,196 Depreciation and other amortization 36,618 35,975 34,852 Adjusted EBITDA $ 528,774 $ 501,102 $ 436,754 (1) I ncludes 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) I ncludes non-recurrin g charges and employee costs related to the planning and execution of t he Separation 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. December 31, 2024 2023 (In thousands) Investments in equity method investees: Americas $ — $ — EMEA & APAC 28,885 30,633 $ 28,885 $ 30,633 Total assets: Americas $ 1,796,167 $ 1,671,634 EMEA & APAC 2,237,808 2,156,995 $ 4,033,975 $ 3,828,629 December 31, 2024 2023 (In thousands) Property, plant and equipment, net (1) : United States $ 73,036 $ 68,398 Czech Republic 55,554 60,948 India 31,506 31,258 Mexico 20,495 23,922 Poland 17,227 14,661 Russia 12,225 15,550 Other foreign countries 88,304 79,568 $ 298,347 $ 294,305 (1) As the Company does not allocate all long-lived assets, specifically intangible assets, to each individual country, evaluation of long-lived assets in total is impracticable. 88 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) 21. Related Party Transactions Related Party Agreements On April 4, 2022, in connection with the Separation, the Company entered into several agreements with Enovis that govern the Separation and provide a framework for the relationship between the parties going forward including a separation and distribution agreement, transition services agreement, tax matters agreement, employee matters agreements, stockholders and registration rights agreement, intellectual property matters agreement and license agreement for EBX. Separation and Distribution Agreement The Company entered into a separation and distribution agreement (the “Separation Agreement”) with Enovis immediately prior to the distribution of the Company’s common stock to Enovis stockholders. The Separation Agreement sets forth the Company’s agreements with Enovis regarding the principal actions to be taken in connection with the Separation. The Separation Agreement contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of ESAB and Enovis as part of the Separation, (ii) cash distribution made to Enovis in partial consideration of the transfer of ESAB Assets to the Company in connection with the Separation and (iii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of ESAB’s business with ESAB and financial responsibility for the obligations and liabilities of Enovis’s remaining business with Enovis. Transition Services Agreement The transition services agreement sets forth the terms and conditions pursuant to which the Company and its subsidiaries and Enovis and its subsidiaries will provide to each other various services. As of the year ended December 31, 2024, the related obligations have been closed out. Tax Matters Agreement The tax matters agreement governs the Company’s and Enovis’s respective rights, responsibilities and obligations after the Separation with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes. Employee Matters Agreement The employee matters agreement sets forth, among other things, the allocation of assets, liabilities and responsibilities relating to employee compensation and benefit plans and programs and other related matters in connection with the Separation, including the treatment of outstanding equity and other incentive awards and certain retirement and welfare benefit obligations. Stockholders and Registration Rights Agreement The stockholders and registration rights agreement sets forth the rights of the stockholders when requiring the Company to facilitate the resale of shares. Intellectual Property Matters Agreement The intellectual property matters agreement sets forth the terms and conditions pursuant to which Enovis and the Company have mutually granted certain personal, generally irrevocable, non-exclusive, worldwide and royalty-free rights to use certain intellectual property. The Company and Enovis are able to sublicense their rights in connection with activities relating to their businesses, but not for independent use by third parties. EBX License Agreement The EBX license agreement sets forth the terms and conditions pursuant to which Enovis has granted a royalty-free, non-exclusive, worldwide and nontransferable license to the Company to use EBX, solely in support of its businesses. The Company will be able to sublicense such license solely to direct and indirect wholly-owned subsidiaries. In addition, under the EBX license agreement, Enovis and the Company each license to each other improvements made by such party to EBX during the first two years of the term of the EBX license agreement. 89 ESAB CORPORATION NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) Allocated Expenses Prior to the Separation, the Company operated as part of the Former Parent and not as a stand-alone company. Accordingly, the Former Parent allocated certain shared costs to the Company that are reflected as expenses in these financial statements. These amounts included, but were not limited to, items such as general management and executive oversight, compliance, human resources, procurement and legal functions and financial management, including public company reporting, consolidated tax filings and tax planning. Management considered the allocation methodologies used by the Former Parent to be reasonable and to appropriately reflect the related expenses attributable to the Company for purposes of the three months ended April 1, 2022 combined financial statements; however, the expenses reflected in these financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if the Company had operated as a separate stand-alone entity. The Company had no stock-based compensation plans prior to the Separation; however, certain employees of the Company participated in the Former Parent’s stock-based compensation plans, which provided for the grants of stock options and RSUs among other types of awards. The expense associated with the Company's employees who participated in the plans of the Former Parent was allocated to the Company in the accompanying Consolidated and Combined Statements of Operations through the date of Separation. The Company’s allocated expenses from the Former Parent were $ 6.0 million for the three months ended April 1, 2022, and is included in the Selling, general and administrative expense in the Consolidated and Combined Statements of Operations. Following the Separation, the Company independently incurs expenses as a stand-alone company. Refer to Note 14, “Benefit Plans,” for allocations of net periodic benefit associated with a Former Parent sponsored benefit plan. 22. Subsequent Events The dividend of $ 4.9 million included in Accrued liabilities in the Consolidated Balance Sheets at December 31, 2024 was paid on January 17, 2025, to stockholders of record as of December 31, 2024. On February 18, 2025, the Company entered into an agreement to acquire Bavaria Schweisstechnik, a European provider of submerged-arc welding applications, for approximately € 60 million of cash consideration. This acquisition is expected to be completed during 2025, subject to the receipt of applicable regulatory approvals and customary closing conditions. 90 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.