ESAB Corp 10-Q for FY2024 Q1

ESAB Corp (ESAB)

10-Q 2024-05-01 For: 2024-03-29

Added on April 12, 2026

About this 10-Q

ESAB Corp filed this 10-Q on May 1, 2024, covering the quarter ended March 29, 2024 (FY2024 Q1).

Headline figures

Quarter ended March 29, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $689.74M; up 0.8% from $684M a year earlier
Net income: $59.95M; up 87.9% from net income of $31.9M a year earlier
Diluted EPS: $0.98; up 88.5% from $0.52 a year earlier

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Delaware									87-0923837
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification Number)

909 Rose Avenue, 8th Floor
North Bethesda, Maryland									20852
(Address of principal executive offices)									(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	ESAB	New York Stock Exchange


			Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements			2
Consolidated and Condensed Statements of Operations			2
Consolidated and Condensed Statements of Comprehensive Income			3
Consolidated and Condensed Balance Sheets			4
Consolidated and Condensed Statements of Equity			5
Consolidated and Condensed Statements of Cash Flows			6
Notes to Consolidated and Condensed Financial Statements			7
Note 1. Organization and Basis of Presentation			7
Note 2. Discontinued Operations			8
Note 3. Acquisitions			8
Note 4. Revenue			9
Note 5. Earnings Per Share from Continuing Operations			9
Note 6. Income Taxes			10
Note 7. Inventories, Net			10
Note 8. Accrued and Other Liabilities			10
Note 9. Benefit Plans			11
Note 10. Debt			11
Note 11. Derivatives			13
Note 12. Financial Instruments and Fair Value Measurements			15
Note 13. Equity			17
Note 14. Commitments and Contingencies			18
Note 15. Segment Information			19
Note 16. Subsequent Events			20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			33
Item 4. Controls and Procedures			35

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3. Defaults Upon Senior Securities			36
Item 4. Mine Safety Disclosures			36
Item 5. Other Information			36
Item 6. Exhibits			37

SIGNATURES			38


	Three Months Ended
	March 29, 2024		March 31, 2023

Net sales	$	689,744	$	684,000
Cost of sales	434,717		436,611
Gross profit	255,027		247,389
Selling, general and administrative expense	142,450		147,282
Restructuring and other related charges	1,924		9,444
Operating income	110,653		90,663
Pension settlement loss	12,155		—
Interest expense and other, net	17,091		19,510
Income from continuing operations before income taxes	81,407		71,153
Income tax expense	18,504		37,024
Net income from continuing operations	62,903		34,129
Loss from discontinued operations, net of taxes	(1,309)		(913)
Net income	61,594		33,216
Income attributable to noncontrolling interest, net of taxes	(1,643)		(1,313)
Net income attributable to ESAB Corporation	$	59,951	$	31,903
Earnings (loss) per share – basic
Income from continuing operations	$	1.01	$	0.54
Loss on discontinued operations	$	(0.02)	$	(0.02)
Net income per share	$	0.99	$	0.52
Earnings (loss) per share – diluted
Income from continuing operations	$	1.00	$	0.54
Loss on discontinued operations	$	(0.02)	$	(0.02)
Net income per share – diluted	$	0.98	$	0.52


	Three Months Ended
	March 29, 2024		March 31, 2023
Net income	$	61,594	$	33,216
Other comprehensive (loss) income:
Foreign currency translation, net of tax expense of $1,531 and $45	(25,354)		42,084
Unrealized income (loss) on derivatives designated and qualifying as cash flow hedges, net of tax expense (benefit) of $295 and $(1,045)	1,013		(3,581)
Defined benefit pension and other post-retirement plan activity, net of tax expense of $203 and $66	629		277
Other comprehensive (loss) income	(23,712)		38,780
Comprehensive income	37,882		71,996
Comprehensive income attributable to noncontrolling interest	(1,320)		(1,814)
Comprehensive income attributable to ESAB Corporation	$	36,562	$	70,182


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


(301)			323-9099
(Registrant’s telephone number, including area code)


	March 29, 2024		December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	76,495	$	102,003
Trade receivables, less allowance for credit losses of $25,424 and $25,477	430,149		385,198
Inventories, net	405,601		392,858
Prepaid expenses	60,415		61,771
Other current assets	70,088		55,890
Total current assets	1,042,748		997,720
Property, plant and equipment, net	290,431		294,305
Goodwill	1,586,943		1,588,331
Intangible assets, net	484,219		499,535
Lease assets - right of use	94,162		95,607
Other assets	328,986		353,131
Total assets	$	3,827,489	$	3,828,629

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	338,399	$	306,593
Accrued liabilities	292,903		313,489
Total current liabilities	631,302		620,082
Long-term debt	992,798		1,018,057
Other liabilities	521,011		542,833
Total liabilities	2,145,111		2,180,972
Equity:
Common stock - $0.001 par value - 600,000,000 shares authorized, 60,424,421 and 60,295,634 shares outstanding as of March 29, 2024 and December 31, 2023, respectively	60		60
Additional paid-in capital	1,881,534		1,881,054
Retained earnings	406,867		350,557
Accumulated other comprehensive loss	(647,661)		(624,272)
Total ESAB Corporation equity	1,640,800		1,607,399
Noncontrolling interest	41,578		40,258
Total equity	1,682,378		1,647,657
Total liabilities and equity	$	3,827,489	$	3,828,629


	Common Stock			Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
	Shares	Amount
Balance at December 31, 2023	60,295,634	$	60	$	1,881,054	$	350,557	$	(624,272)	$	40,258	$	1,647,657
Net income	—	—		—		59,951		—		1,643		61,594
Dividends declared ($0.06 per share)	—	—		—		(3,641)		—		—		(3,641)

Other comprehensive loss, net of tax expense of $2,029	—	—		—		—		(23,389)		(323)		(23,712)
Common stock-based award activity	128,787	—		480		—		—		—		480
Balance at March 29, 2024	60,424,421	$	60	$	1,881,534	$	406,867	$	(647,661)	$	41,578	$	1,682,378


	Three Months Ended March 29, 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	$	651	$	(439)	$	(265)	$	25,424


	March 29, 2024				December 31, 2023
	Current		Noncurrent		Current		Noncurrent
	(In thousands)
Accrued taxes and deferred tax liabilities	$	44,727	$	144,214	$	45,681	$	144,662
Compensation and related benefits	75,906		50,750		97,052		52,589
Asbestos liability	34,111		223,829		32,908		234,796
Contract liabilities	29,548		—		31,248		—
Lease liabilities	22,936		73,995		22,794		76,609
Warranty liability	12,936		—		12,606		—
Third-party commissions	11,224		—		18,711		—
Restructuring liability	4,045		256		5,345		354
Other	57,470		27,967		47,144		33,823
	$	292,903	$	521,011	$	313,489	$	542,833


	Three Months Ended March 29, 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	$	1,320	$	(1,507)	$	(352)	$	4,056
Facility closure costs and other(2)	1,104		604		(1,404)		(59)		245
Total	$	5,699	$	1,924	$	(2,911)	$	(411)	$	4,301


	March 29, 2024				December 31, 2023
Designated as hedging instruments	Other Liabilities		Other Assets		Other Liabilities		Other Assets
	(In thousands)
Cross currency swap agreements	$	15,783	$	—	$	22,232	$	—
Interest rate swap agreements	—		5,174		—		9,522
Total	$	15,783	$	5,174	$	22,232	$	9,522


	March 29, 2024				December 31, 2023
Not designated as hedging instruments	Accrued Liabilities		Other Current Assets		Accrued Liabilities		Other Current Assets
	(In thousands)
Foreign currency contracts	$	431	$	874	$	596	$	1,088


FORM			10-Q


	Three Months Ended
	March 29, 2024		March 31, 2023

Cash flows from operating activities:
Net income	$	61,594	$	33,216
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other impairment charges	16,387		21,871

Stock-based compensation expense	4,133		2,994
Deferred income tax	(638)		2,290
Non-cash interest expense	1,062		299
Pension settlement loss	12,155		—
Changes in operating assets and liabilities:
Trade receivables, net	(48,946)		(21,048)
Inventories, net	(16,078)		(21,611)
Accounts payable	36,196		28,480
Other operating assets and liabilities	(21,398)		(8,424)
Net cash provided by operating activities	44,467		38,067
Cash flows from investing activities:
Purchases of property, plant and equipment	(7,414)		(7,709)
Proceeds from sale of property, plant and equipment	368		681
Acquisition, net of cash received	(18,067)		(18,721)
Other	(1,501)		—
Net cash used in investing activities	(26,614)		(25,749)
Cash flows from financing activities:

Proceeds from borrowings on revolving credit facility	115,000		187,000
Repayments of borrowings on term credit facility	(6,250)		—
Repayments of borrowings on revolving credit facility and other	(139,035)		(189,765)



Payment of dividends	(3,635)		(3,033)
Distributions to noncontrolling interest holders	—		(1,249)

Net cash used in financing activities	(33,920)		(7,047)
Effect of foreign exchange rates on Cash and cash equivalents	(9,441)		4,769
(Decrease) increase in Cash and cash equivalents	(25,508)		10,040
Cash and cash equivalents, beginning of period	102,003		72,024


	March 29, 2024		December 31, 2023
	(In thousands)
Raw materials	$	153,072	$	156,583
Work in process	48,627		43,561
Finished goods	253,643		244,580
	455,342		444,724
LIFO reserve	(4,980)		(4,279)
Allowance for excess, slow-moving and obsolete inventory	(44,761)		(47,587)
	$	405,601	$	392,858


	Three Months Ended
	March 29, 2024		March 31, 2023
	(In thousands)
Warranty liability, beginning of period	$	12,606	$	12,946
Accrued warranty expense	2,457		1,393
Changes in estimates related to pre-existing warranties	727		672
Cost of warranty service work performed	(2,647)		(2,678)

Foreign exchange translation effect	(207)		964
Warranty liability, end of period	$	12,936	$	13,297


	March 29, 2024
	Level One		Level Two		Level Three		Total
	(In thousands)
Assets:
Cash equivalents	$	2,968	$	—	$	—	$	2,968
Foreign currency contracts - not designated as hedges	—		1,457		—		1,457
Interest rate swap agreements	—		5,174		—		5,174
Deferred compensation plans	—		4,281		—		4,281
	$	2,968	$	10,912	$	—	$	13,880

Liabilities:
Foreign currency contracts - not designated as hedges	$	—	$	1,014	$	—	$	1,014
Cross currency swap agreements	—		15,783		—		15,783
Deferred compensation plans	—		4,281		—		4,281
	$	—	$	21,078	$	—	$	21,078


	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 December 31, 2023	$	(59,805)	$	(554,622)	$	(17,215)	$	7,370	$	(624,272)
Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment	243		(38,265)		4,995		—		(33,027)
Gain on long-term intra-entity foreign currency transactions	—		7,996		—		—		7,996
Unrealized loss on cash flow hedges	—		—		—		3,920		3,920
Other comprehensive income (loss) before reclassifications	243		(30,269)		4,995		3,920		(21,111)
Amounts reclassified from Accumulated other comprehensive loss(1)(2)	629		—		—		(2,907)		(2,278)
Net current period Other comprehensive income (loss)	872		(30,269)		4,995		1,013		(23,389)
Balance at March 29, 2024	$	(58,933)	$	(584,891)	$	(12,220)	$	8,383	$	(647,661)


	Three Months Ended March 29, 2024
	Americas			EMEA & APAC			Total
	(Dollars in millions)(1)
Net income from continuing operations (GAAP)							$	62.9
Income tax expense							18.5
Interest expense and other, net							17.1
Pension settlement loss							12.2
Operating income (GAAP)	46.0			64.7			110.7

Adjusted to add:
Restructuring and other related charges(2)	0.2			1.7			1.9
Acquisition-amortization and other related charges(3)	4.4			3.3			7.7
Depreciation and other amortization	3.5			5.3			8.8
Adjusted EBITDA (non-GAAP)	$	54.1		$	75.0		$	129.1
Adjusted EBITDA attributable to Russia (non-GAAP)(4)	—			5.9			5.9
Core adjusted EBITDA (non-GAAP)	$	54.1		$	69.1		$	123.2
Adjusted EBITDA margin (non-GAAP)	18.3		%	19.1		%	18.7		%
Core adjusted EBITDA margin (non-GAAP)(5)	18.3		%	19.2		%	18.8		%


	Three Months Ended March 31, 2023
	Americas			EMEA & APAC			Total
	(Dollars in millions)(1)
Net income from continuing operations (GAAP)							$	34.1
Income tax expense							37.0
Interest expense and other, net							19.5

Operating income (GAAP)	39.9			50.8			90.7
Adjusted to add:
Restructuring and other related charges(2)	0.9			8.5			9.4

Acquisition-amortization and other related charges(3)	5.3			4.0			9.3
Depreciation and other amortization	3.3			5.3			8.6

Adjusted EBITDA (non-GAAP)	$	49.4		$	68.5		$	118.0
Adjusted EBITDA attributable to Russia (non-GAAP)(4)	—			5.3			5.3
Core adjusted EBITDA (non-GAAP)	$	49.4		$	63.2		$	112.7
Adjusted EBITDA margin (non-GAAP)	17.0		%	17.5		%	17.2		%
Core adjusted EBITDA margin (non-GAAP)(5)	17.0		%	17.8		%	17.4		%


	Three Months Ended
	Net Sales		Change %
	(Dollars in millions)
For the three months ended March 31, 2023	$	684.0
Components of Change:
Existing businesses (organic sales growth)(1)	16.6		2.4	%
Acquisitions(2)	1.0		0.1	%
Foreign currency translation(3)	(11.9)		(1.7)	%
Total sales growth	5.7		0.8	%
For the three months ended March 29, 2024	$	689.7


	Three Months Ended
	Core Sales(1)(5)		Change %
	(Dollars in millions)
For the three months ended March 31, 2023	$	646.9
Components of Change:
Existing businesses (core organic sales growth)(2)	13.0		2.0	%
Acquisitions(3)	1.0		0.2	%
Foreign currency translation(4)	(4.8)		(0.7)	%
Total core sales growth	9.2		1.4	%
For the three months ended March 29, 2024	$	656.1


Exhibit No.			Exhibit Description





















































4.1			Indenture, dated as of April 9, 2024, by and among ESAB Corporation, as issuer, the guarantors named therein, and U.S. Bank Trust Company, National Association, as trustee.(incorporated by reference to Exhibit 4.1 to ESAB Corporation’s Form 8-K (File No. 001-41297) as filed with the SEC on April 9, 2024).

4.2			Form of Global Note (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.2 to ESAB Corporation’s Form 8-K (File No. 001-41297) as filed with the SEC on April 9, 2024).

31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document.

101.CAL			Inline XBRL Extension Calculation Linkbase Document.

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File - The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 29, 2024 is formatted in Inline XBRL (included as Exhibit 101).


1.			I have reviewed this quarterly report on Form 10-Q of ESAB Corporation;


2.			Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.			Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.			The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


			(a)			Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


			(b)			Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;


			(c)			Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


			(d)			Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


			(a)			All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


			(b)			Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


/s/ Shyam P. Kambeyanda
Shyam P. Kambeyanda President and Chief Executive Officer (Principal Executive Officer)


/s/ Kevin Johnson
Kevin Johnson Chief Financial Officer (Principal Financial Officer)