esab-20220401

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


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

For the Quarterly Period Ended April 1, 2022


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

For the transition period from to

Commission file number - 001-41297

ESAB Corporation

(Exact name of registrant as specified in its charter)


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)


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

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☑

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☑

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of April 1, 2022, there were 60,034,311 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements			2
Combined Condensed Statements of Operations			2
Combined Condensed Statements of Comprehensive Income			3
Combined Condensed Balance Sheets			4
Combined Condensed Statements of Equity			5
Combined Condensed Statements of Cash Flows			6
Notes to Combined Condensed Financial Statements			7
Note 1. Organization and Basis of Presentation			7
Note 2. Discontinued Operations			8
Note 3. Revenue			9
Note 4. Earnings Per Share from Continuing Operations			10
Note 5. Income Taxes			10

Note 6. Inventories, Net			10
Note 7. Equity			11
Note 8. Accrued and Other Liabilities			12
Note 9. Benefit Plans			13
Note 10. Financial Instruments and Fair Value Measurements			14
Note 11. Commitments and Contingencies			16

Note 12. Segment Information			18
Note 13. Related Party Transactions			18
Note 14. Subsequent Events			19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			36

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 3. Defaults Upon Senior Securities			37
Item 4. Mine Safety Disclosures			37
Item 5. Other Information			37
Item 6. Exhibits			38

SIGNATURES			39

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ESAB CORPORATION

COMBINED CONDENSED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share amounts

(Unaudited)


	Three Months Ended
	April 1, 2022		April 2, 2021

Net sales	$	647,911	$	568,128
Cost of sales	423,580		368,333
Gross profit	224,331		199,795
Selling, general and administrative expense	135,413		124,419
Restructuring and other related charges	5,304		3,075
Operating income	83,614		72,301
Interest income and other, net	556		225

Income from continuing operations before income taxes	84,170		72,526
Income tax expense	25,746		13,992





Net income from continuing operations	58,424		58,534
Loss from discontinued operations, net of taxes	(2,021)		—
Net income	56,403		58,534
Less: Income attributable to noncontrolling interest, net of taxes	966		876
Net income attributable to ESAB Corporation	$	55,437	$	57,658
Earnings (loss) per share - basic
Income from continuing operations	$	0.96	$	0.96
Loss on discontinued operations	$	(0.03)	$	—
Net income per share	$	0.93	$	0.96
Earnings (loss) per share - diluted
Income from continuing operations	$	0.96	$	0.96
Loss on discontinued operations	$	(0.03)	$	—
Net income per share - diluted	$	0.93	$	0.96

See Notes to Combined Condensed Financial Statements.

ESAB CORPORATION

COMBINED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Dollars in thousands

(Unaudited)


	Three Months Ended
		April 1, 2022		April 2, 2021
Net income		$	56,403	$	58,534
Other comprehensive income (loss):
Foreign currency translation, net of tax expense of $338 and $1,491		(45,189)		(30,039)
Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $241 and $0		786		221


Other comprehensive loss		(44,403)		(29,818)
Comprehensive income		12,000		28,716
Less: comprehensive income attributable to noncontrolling interest		458		564
Comprehensive income attributable to ESAB Corporation		$	11,542	$	28,152

See Notes to Combined Condensed Financial Statements.

ESAB CORPORATION

COMBINED CONDENSED BALANCE SHEETS

Dollars in thousands

(Unaudited)


	April 1, 2022		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	56,631	$	41,209

Trade receivables, less allowance for credit losses of $27,484 and $23,912	410,201		383,496
Inventories, net	462,535		420,062
Prepaid expenses	59,017		51,949
Other current assets	59,703		67,357

Total current assets	1,048,087		964,073
Property, plant and equipment, net	280,592		286,278
Goodwill	1,513,943		1,532,993
Intangible assets, net	508,523		521,434
Lease assets - right of use	107,723		107,944
Other assets	322,481		48,540

Total assets	$	3,781,349	$	3,461,262

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	368,999	$	345,480

Accrued liabilities	283,411		251,109


Total current liabilities	652,410		596,589
Other liabilities	611,577		362,945

Total liabilities	1,263,987		959,534
Parent’s Equity:


Net Parent investment	3,040,898		2,921,623
Accumulated other comprehensive loss	(564,046)		(460,888)
Total Parent’s equity	2,476,852		2,460,735
Noncontrolling interest	40,510		40,993
Total equity	2,517,362		2,501,728
Total liabilities and equity	$	3,781,349	$	3,461,262

See Notes to Combined Condensed Financial Statements.

ESAB CORPORATION

COMBINED CONDENSED STATEMENTS OF EQUITY

Dollars in thousands

(Unaudited)


	Net Parent Investment	Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total

Balance at December 31, 2021		$	2,921,623	$	(460,888)	$	40,993	$	2,501,728

Net income		55,437		—		966		56,403
Distributions to noncontrolling owners		—		—		(941)		(941)
Other comprehensive income, net of tax expense of $579		—		(43,895)		(508)		(44,403)
Common stock-based award activity		1,728		—		—		1,728
Transfers from Parent, net		62,110		(59,263)		—		2,847
Balance at April 1, 2022		$	3,040,898	$	(564,046)	$	40,510	$	2,517,362

SEC Form 10-Q filed by ESAB Corporation