ESAB CORPORATION
CONSOLIDATED AND CONDENSED BALANCE SHEETS
Dollars in thousands, except share and per share amounts
(Unaudited)
| | | | | | | | | | | |
| July 3, 2026 | | December 31, 2025 |
| ASSETS | | | |
| CURRENT ASSETS: | | | |
| Cash and cash equivalents | $ | 217,491 | | | $ | 185,863 | |
Trade receivables, less allowance for credit losses of $22,538 and $21,765 | 554,147 | | | 451,298 | |
| Inventories, net | 581,541 | | | 481,765 | |
| Prepaid expenses | 84,482 | | | 66,103 | |
| Other current assets | 90,802 | | | 76,876 | |
| Total current assets | 1,528,463 | | | 1,261,905 | |
| Property, plant and equipment, net | 389,848 | | | 381,876 | |
| Goodwill | 2,746,209 | | | 1,949,702 | |
| Intangible assets, net | 1,372,088 | | | 673,006 | |
| Lease assets - right of use | 143,382 | | | 113,310 | |
| Other assets | 382,621 | | | 386,295 | |
| Total assets | $ | 6,562,611 | | | $ | 4,766,094 | |
| | | |
| LIABILITIES AND EQUITY | | | |
| CURRENT LIABILITIES: | | | |
| Current portion of long-term debt | $ | 5,940 | | | $ | 2,412 | |
| Accounts payable | 407,428 | | | 360,391 | |
| Accrued liabilities | 365,639 | | | 301,986 | |
| Total current liabilities | 779,007 | | | 664,789 | |
| Long-term debt | 2,391,350 | | | 1,232,540 | |
| Other liabilities | 808,037 | | | 657,236 | |
| Total liabilities | 3,978,394 | | | 2,554,565 | |
| Equity: | | | |
Preferred stock, $0.001 par value, 20,000,000 shares authorized: | | | |
6.50% Series A Mandatory Convertible Preferred Stock, 175,000 shares issued and outstanding at July 3, 2026; no shares issued or outstanding at December 31, 2025 | 171,097 | | | — | |
Common stock - $0.001 par value - 600,000,000 shares authorized, 62,167,669 and 60,721,079 shares outstanding as of July 3, 2026 and December 31, 2025, respectively | 62 | | | 61 |
| Additional paid-in capital | 2,049,885 | | | 1,904,889 |
| Retained earnings | 865,809 | | | 800,806 |
| Accumulated other comprehensive loss | (548,172) | | | (539,716) | |
| Total ESAB Corporation equity | 2,538,681 | | | 2,166,040 |
| Noncontrolling interest | 45,536 | | | 45,489 |
| Total equity | 2,584,217 | | | 2,211,529 |
| Total liabilities and equity | $ | 6,562,611 | | | $ | 4,766,094 | |
See Notes to Consolidated and Condensed Financial Statements.
ESAB CORPORATION
CONSOLIDATED AND CONDENSED STATEMENTS OF EQUITY
Dollars in thousands, except share and per share amounts
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mandatory Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total |
| Shares | Amount | Shares | Amount |
Balance at December 31, 2025 | — | | $ | — | | 60,721,079 | | $ | 61 | | $ | 1,904,889 | | $ | 800,806 | | $ | (539,716) | | $ | 45,489 | | $ | 2,211,529 | |
| Net income | — | | — | | — | | — | | — | | 47,644 | | — | | 1,593 | | 49,237 | |
Dividends declared ($0.10 per share) | — | | — | | — | | — | | — | | (6,107) | | — | | — | | (6,107) | |
| Distributions to noncontrolling owners | — | | — | | — | | — | | — | | — | | — | | (1,117) | | (1,117) | |
Other comprehensive loss, net of tax expense of $(2,984) | — | | — | | — | | — | | — | | — | | (17,297) | | (1,087) | | (18,384) | |
| Common stock-based award activity | — | | — | | 160,478 | | — | | 510 | | — | | — | | — | | 510 | |
Balance at April 3, 2026 | — | | — | | 60,881,557 | | 61 | | 1,905,399 | | 842,343 | | (557,013) | | 44,878 | | 2,235,668 | |
| Net income | — | | — | | — | | — | | — | | 32,354 | | — | | 1,634 | | 33,988 | |
Dividends declared ($0.12 per share) | — | | — | | — | | — | | — | | (7,498) | | — | | — | | (7,498) | |
| | | | | | | | | |
| | | | | | | | | |
Other comprehensive income, net of tax benefit of $186 | — | | — | | — | | — | | — | | — | | 8,841 | | (976) | | 7,865 | |
| Common stock-based award activity | — | | — | | 31,857 | | — | | 4,690 | | — | | — | | — | | 4,690 | |
| Issuance of mandatory convertible preferred stock, net | 175,000 | | 171,097 | | — | | — | | — | | — | | — | | — | | 171,097 | |
| Mandatory convertible preferred stock dividends | — | | — | | — | | — | | — | | (1,390) | | — | | — | | (1,390) | |
| Issuance of Common stock, net | — | | — | | 1,254,255 | | 1 | | 139,796 | | — | | — | | — | | 139,797 | |
Balance at July 3, 2026 | 175,000 | | $ | 171,097 | | 62,167,669 | | $ | 62 | | $ | 2,049,885 | | $ | 865,809 | | $ | (548,172) | | $ | 45,536 | | $ | 2,584,217 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total |
| | | Shares | Amount |
Balance at December 31, 2024 | | | 60,517,574 | | $ | 61 | | $ | 1,901,337 | | $ | 597,180 | | $ | (729,574) | | $ | 39,245 | | $ | 1,808,249 | |
| Net income | | | — | | — | | — | | 67,363 | | — | | 2,469 | | 69,832 | |
Dividends declared ($0.08 per share) | | | — | | — | | — | | (4,868) | | — | | — | | (4,868) | |
| Distributions to noncontrolling owners | | | — | | — | | — | | — | | — | | (1,168) | | (1,168) | |
Other comprehensive income, net of tax benefit of $4,808 | | | — | | — | | — | | — | | 77,717 | | 118 | | 77,835 | |
| Common stock-based award activity | | | 105,162 | | — | | 512 | | — | | — | | — | | 512 | |
Balance at April 4, 2025 | | | 60,622,736 | | 61 | | 1,901,849 | | 659,675 | | (651,857) | | 40,664 | | 1,950,392 | |
| Net income | | | — | | — | | — | | 66,883 | | — | | 1,221 | | 68,104 | |
Dividends declared ($0.10 per share) | | | — | | — | | — | | (6,091) | | — | | — | | (6,091) | |
| Distributions to noncontrolling owners | | | — | | — | | — | | — | | — | | (6) | | (6) | |
Other comprehensive income, net of tax benefit of $7,153 | | | — | | — | | — | | — | | 102,158 | | 262 | | 102,420 | |
| Common stock-based award activity | | | 74,050 | | — | | (3,048) | | — | | — | | — | | (3,048) | |
Balance at July 4, 2025 | | | 60,696,786 | $ | 61 | | $ | 1,898,801 | | $ | 720,467 | | $ | (549,699) | | $ | 42,141 | | $ | 2,111,771 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
See Notes to Consolidated and Condensed Financial Statements.
ESAB CORPORATION
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands
(Unaudited)
| | | | | | | | | | | |
| Six Months Ended |
| July 3, 2026 | | July 4, 2025 |
| Cash flows from operating activities: | | | |
| Net income | $ | 83,225 | | | $ | 137,936 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and other impairment charges | 51,736 | | | 36,846 | |
| Net gain on sale of property, plant and equipment | (60) | | | (5,703) | |
| Stock-based compensation expense | 10,382 | | | 9,900 | |
| Deferred income tax benefit | (15,183) | | | (6,761) | |
| Amortization of debt issuance costs | 7,304 | | | 1,255 | |
| | | |
| Changes in operating assets and liabilities: | | | |
| Trade receivables, net | (39,541) | | | (49,161) | |
| Inventories, net | (51,522) | | | (37,407) | |
| Accounts payable | 36,345 | | | 23,183 | |
| Other operating assets and liabilities | (2,348) | | | (28,051) | |
| Net cash provided by operating activities | 80,338 | | | 82,037 | |
| Cash flows from investing activities: | | | |
| Purchases of property, plant and equipment | (31,448) | | | (16,474) | |
| Proceeds from sale of property, plant and equipment | 359 | | | 4,732 | |
| Acquisitions, net of cash received | (1,469,372) | | | (86,252) | |
| Other investing | — | | | (500) | |
| Net cash used in investing activities | (1,500,461) | | | (98,494) | |
| Cash flows from financing activities: | | | |
| Proceeds from issuance of Preferred Stock, net | 171,097 | | | — | |
| | | |
| Proceeds from issuance of Common Stock, net | 139,796 | | | — | |
| | | |
| Proceeds from borrowings on Senior Notes | 1,000,000 | | | — | |
| | | |
| | | |
| Repayments of borrowings on Term Loans | — | | | (5,000) | |
| Proceeds from borrowings on revolving credit facilities and other | 904,267 | | | 8,674 | |
| Repayments of borrowings on revolving credit facilities and other | (730,816) | | | — | |
| | | |
| Payment of debt issuance costs | (17,813) | | | — | |
| | | |
| Payment of dividends | (12,201) | | | (9,729) | |
| | | |
| Distributions to noncontrolling interest holders | (1,117) | | | (1,174) | |
| Other financing | (5,198) | | | (12,418) | |
| Net cash provided by (used in) financing activities | 1,448,015 | | | (19,647) | |
| Effect of foreign exchange rates on Cash and cash equivalents | 3,736 | | | 44,969 | |
| Increase in Cash and cash equivalents | 31,628 | | | 8,865 | |
| Cash and cash equivalents, beginning of period | 185,863 | | | 249,358 | |
| Cash and cash equivalents, end of period | $ | 217,491 | | | $ | 258,223 | |
See Notes to Consolidated and Condensed Financial Statements.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Basis of Presentation
Founded in 1904, ESAB Corporation (“ESAB” or the “Company”) is a focused premier industrial compounder providing technologies that enable the fabrication, control, inspection and monitoring of critical products and infrastructure. The portfolio includes welding and cutting systems, consumables, gas control equipment, automation and robotics, digital software and advanced inspection technologies across a variety of sectors. The Company’s rich history of innovative products, workflow solutions and its business management system, ESAB Business Excellence (“EBXai”), enables the Company’s purpose of Shaping the world we imagineTM. 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, the Middle East, India, Africa and Asia Pacific.
The Company’s fiscal year ends December 31. The Company’s second quarter ends on the last business day of the 13th complete week after the end of the prior quarter. As used herein, the second quarter results for 2026 and 2025 refer to the 13-week periods ended July 3, 2026 and July 4, 2025, respectively.
Eddyfi Acquisition
On June 1, 2026, ESAB completed its previously announced acquisition of Eddyfi Holding Inc. (“Eddyfi”), a global leader in advanced inspection and monitoring technologies, incorporated under the laws of the Province of Québec. See Note 3, “Acquisitions” for further information.
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 three and six months ended July 3, 2026, Russia represented approximately 5% of the Company’s Net sales and contributed $1.3 million and $(0.1) million to the Company’s Net income, respectively. Russia also has approximately 4% of the Company’s total net assets as of July 3, 2026, including approximately $50 million of Cash and cash equivalents that have been, and may continue to 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 $100 million as of July 3, 2026, which would 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 Consolidated and Condensed Financial Statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with the accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to SEC rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading.
The Consolidated and Condensed 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.
In the normal course of business, the Company incurs research and development costs related to new product development, which are expensed as incurred and included in Selling, general and administrative expense on the Company’s Consolidated and Condensed Statements of Operations. Research and development costs were $13.3 million and $25.8 million during the three and six months ended July 3, 2026, respectively, and $10.5 million and $20.6 million for the three and six months ended July 4, 2025, respectively. These amounts do not include development and application engineering costs incurred in conjunction with fulfilling customer orders and executing customer projects, nor do they include costs related to securing third party product rights. The Company expects to continue making significant expenditures for research and development to maintain and improve its competitive positions.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The accompanying interim Consolidated and Condensed Financial Statements and the related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”), filed with the SEC on February 20, 2026.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which expands disclosure requirements for more detailed information about the types of expenses in commonly presented expense captions. The ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted and the amendments may be applied either prospectively or retrospectively. The Company is currently evaluating the effect the adoption of the ASU may have on its disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for costs incurred to develop internal-use software including which costs are required to be recognized as an asset. The ASU is effective for annual and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the effect the adoption of the ASU may have on its consolidated financial statements and disclosures.
2. Discontinued Operations
The Company holds certain asbestos-related contingencies and insurance coverages from divested businesses for which it does not have an interest in the ongoing operations. The Company has classified asbestos-related activity included in its Consolidated and Condensed Statements of Operations as part of Loss from discontinued operations, net of taxes. This activity consists primarily of expected settlement, 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 13, “Commitments and Contingencies” for further information.
Cash used in operating activities related to discontinued operations was $7.5 million and $11.8 million for the three and six months ended July 3, 2026, respectively, and $4.9 million and $7.2 million for the three and six months ended July 4, 2025, respectively.
3. Acquisitions
The Company continually evaluates potential acquisitions that either strategically fit with its existing portfolio or expand its portfolio into a new and attractive business area. The Company makes appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required. Only facts and circumstances that existed as of the acquisition date are considered for subsequent adjustment. Refer to Note 5, “Acquisitions” in the Company’s 2025 Form 10-K for further information on the Company’s accounting treatment of acquisitions.
On June 1, 2026, ESAB completed its previously announced acquisition of Eddyfi, a global leader in advanced inspection and monitoring technologies, incorporated under the laws of the Province of Québec (such transaction, the “Acquisition”). ESAB acquired all of the issued and outstanding shares of Eddyfi for consideration transferred of approximately $1.5 billion, net of cash received, which included customary purchase price adjustments set forth in the Purchase Agreement. The operations of Eddyfi are reflected across both of the Company’s reportable segments, Americas and EMEA & APAC, based on the geographic location of the respective operation.
The Company financed the Acquisition with cash on hand, proceeds from the March 2026 offering of 5.625% senior notes due 2031 and proceeds from a drawdown on its revolving facility as described in Note 9, “Debt” and the proceeds from the private placements of Series A Mandatory Convertible Preferred Stock and Common Stock described in Note 12, “Equity.”
For the three and six months ended July 3, 2026, the Acquisition added $21.4 million to Net sales and contributed an immaterial amount to Net income.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Preliminary purchase price allocation
Under the acquisition method of accounting, the Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities from information obtained during due diligence and through other sources. The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed at the date of acquisition based on information that is currently available. The preliminary fair value of the assets acquired and liabilities assumed is determined based upon certain preliminary valuations and studies that have yet to be finalized. Accordingly, the assets acquired and liabilities assumed are subject to adjustment once the detailed analyses are completed, which adjustments could be material, management is continuing to finalize its valuation and will complete its purchase price allocation within one year of the date of acquisition.
The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of Acquisition:
| | | | | |
| Cash and cash equivalents | $ | 24,673 | |
| Trade receivables | 60,002 | |
| Inventories | 49,851 | |
| |
| Goodwill | 811,409 | |
| Intangible assets | 735,000 | |
| |
| Deferred income taxes | (156,908) | |
Other, net(1)(2) | (30,013) | |
| $ | 1,494,014 | |
(1) Includes current and non-current amounts.
(2) Includes approximately $40 million of Lease assets - right of use and lease liability.
Goodwill arises because purchase price exceeds fair value of acquired identifiable net assets due to anticipated future earnings and cash flow potential of the acquired businesses; prevailing market multiples applied to earnings and cash flows in comparable transactions; the competitive nature of the acquisition process; the strategic benefits of accelerating market entry or enhancing existing product offerings without incurring the time, cost and risk associated with internal development; and the complementary fit and expected synergies these businesses contribute to the Company’s existing operations. The Company preliminarily recorded $811.4 million of goodwill related to Eddyfi, none of which is expected to be deductible for income tax purposes. This has been allocated across the Company's reportable segments based on the geographic location of the entity, with $621.0 million allocated to the Americas segment and $190.4 million allocated to the EMEA & APAC segment.
The following summarizes the preliminary estimated fair value of significant, identifiable intangible assets acquired, excluding goodwill, as of June 1, 2026:
| | | | | | | | | | | |
| Intangible Asset | | Amortization period |
| (in thousands) | | (years) |
| Customer relationships | $ | 563,000 | | | 15-20 |
| Trade names | 66,000 | | | 5-20 |
| Technology | 89,000 | | | 10 |
| Backlog | 17,000 | | | 2 |
| $ | 735,000 | | | |
Preliminary fair value adjustments were made to intangible assets and inventories upon acquisition. Deferred taxes were preliminarily adjusted to record the book-tax basis difference of acquisition accounting adjustments primarily related to amounts allocated to intangible assets, inventories and other liabilities. The fair value of the property, plant and equipment, cash and cash equivalents, trade receivables and other assets and liabilities were estimated to approximate their book values.
Pro forma financial information
The Acquisition was accounted for as a business combination using the acquisition method of accounting and accordingly the Consolidated and Condensed Financial Statements include the financial position and results of operations from the date of the Acquisition. The unaudited pro forma information for the periods set forth below gives effect to the Acquisition as if it had occurred as of January 1, 2025. The unaudited pro forma information is presented for informational purposes only and is not
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
necessarily indicative of the results of operations that actually would have been achieved had the Acquisition been consummated as of that time:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| July 3, 2026 | | July 4, 2025 | | July 3, 2026 | | July 4, 2025 |
| (in thousands) |
| Net sales | $ | 847,135 | | | $ | 766,493 | | | $ | 1,649,895 | | | $ | 1,498,759 | |
| Net income attributable to common stockholders | 17,537 | | | 42,423 | | | 52,088 | | | 92,326 | |
| | | | | | | |
The pro forma combined historical results for the three and six months ended July 3, 2026 and July 4, 2025 were adjusted for the following: a reduction of interest and other financing expenses as a result of the repayment of outstanding indebtedness of Eddyfi; an increase in interest and other financing expenses as a result of the debt incurred by ESAB for the purpose of financing the Acquisition; the inclusion of the MCPS dividend at a rate of 6.50% per annum; an increase in amortization expense due to the intangible assets and inventory fair value step-up recorded. The pro forma combined results of operations do not include any adjustments to eliminate the impact of acquisition-related costs incurred by ESAB or Eddyfi or any cost savings or other synergies that resulted or may result from the Acquisition.
Acquisition-related transaction costs
The Company incurred approximately $17 million and $23 million of acquisition-related transaction costs in the three and six months ended July 3, 2026, respectively. These costs were recorded in Selling, general and administrative expense in the Consolidated Condensed Statements of Operations.
For a description of the Company’s acquisition activity for the year ended December 31, 2025, refer to the financial statements as of and for the year ended December 31, 2025 and Note 5, “Acquisitions” thereto in the Company’s 2025 Form 10-K.
4. Revenue
The Company’s portfolio includes welding and cutting systems, consumables, gas control equipment, automation and robotics, digital software and advanced inspection technologies across a variety of sectors. Substantially all revenue is recognized at a point in time. The Company disaggregates its revenue into the following product groups:
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| Three Months Ended | | Six Months Ended |
| July 3, 2026 | | July 4, 2025 | | July 3, 2026 | | July 4, 2025 |
| (in thousands) |
| Equipment | $ | 313,015 | | | $ | 231,939 | | | $ | 577,748 | | | $ | 464,427 | |
| Consumables | 494,612 | | | 483,647 | | | 975,476 | | | 929,297 | |
| $ | 807,627 | | | $ | 715,586 | | | $ | 1,553,224 | | | $ | 1,393,724 | |
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 our business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of July 3, 2026 is immaterial. In some circumstances, customers are billed in advance of revenue recognition, resulting in contract liabilities. As of December 31, 2025 and December 31, 2024, total contract liabilities were $19.7 million and $26.4 million, respectively, and were included in Accrued liabilities on the Consolidated and Condensed Balance Sheets. During the three and six months ended July 3, 2026, revenue recognized that was included in the contract liabilities balance at the beginning of the year was $1.9 million and $12.3 million, respectively. During the three and six months ended July 4, 2025, revenue recognized that was included in the contract liabilities balance at the beginning of the year was $3.6 million and $13.6 million, respectively. As of July 3, 2026 and July 4, 2025, total contract liabilities were $40.7 million and $25.1 million, respectively.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Allowance for Credit Losses
A summary of the activity in the Company’s allowance for credit losses included within Trade receivables in the Consolidated and Condensed Balance Sheets is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended July 3, 2026 |
| Balance at
Beginning
of Period | | Charged to Expense, net | | Write-Offs and Deductions | | Foreign
Currency
Translation and Other | | Balance at
End of
Period |
| (In thousands) |
| Allowance for credit losses | $ | 21,765 | | | $ | 1,463 | | | $ | (2,411) | | | $ | 1,721 | | | $ | 22,538 | |
5. Earnings per Share from Continuing Operations
Basic earnings per share is calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding for the applicable period. Diluted earnings per share is computed based on the weighted average number of common shares outstanding increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased with the proceeds from the issuance of the potentially dilutive shares. The Company has unvested share-based payment awards with a right to receive non-forfeitable dividends, which are considered participating securities. The Company allocates earnings to participating securities and computed earnings per share using the two-class method as per the table below. For the three and six months ended July 3, 2026 and July 4, 2025 no options to purchase shares were excluded from the diluted earnings per share calculation as their inclusion would have been anti-dilutive.
The impact of the MCPS (as described and defined in Note 12, “Equity”) calculated under the if-converted method was anti-dilutive, and as such, shares underlying the MCPS were excluded from the diluted earnings per share calculation for the three and six months ended July 3, 2026.
The market-based stock price condition applicable to the Performance Option Awards (as described and defined in Note 12, “Equity”) had not been satisfied, and accordingly no shares were contingently issuable under the Performance Option Awards for purposes of the diluted earnings per share calculation. As a result, 2.4 million shares underlying the Performance Option Awards had no effect on, and were excluded from, the diluted earnings per share calculation for the three and six months ended July 3, 2026.
Information related to the calculation of net earnings per share is summarized as follows:
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| Three Months Ended | | Six Months Ended |
| July 3, 2026 | | July 4, 2025 | | July 3, 2026 | | July 4, 2025 |
| (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) | $ | 34,767 | | | $ | 68,591 | | | $ | 84,965 | | | $ | 138,686 | |
| Distributed and undistributed earnings allocated to non-vested shares | (173) | | | (166) | | | (427) | | | (415) | |
| | | | | | | |
| Mandatory convertible preferred stock dividends | (1,390) | | | — | | | (1,390) | | | — | |
| Income from continuing operations attributable to common stockholders | $ | 33,204 | | | $ | 68,425 | | | $ | 83,148 | | | $ | 138,271 | |
| Weighted-average shares of Common stock outstanding – basic | 61,333,967 | | | 60,739,891 | | | 61,057,590 | | | 60,651,238 | |
| Income per share from continuing operations – basic | $ | 0.54 | | | $ | 1.13 | | | $ | 1.36 | | | $ | 2.28 | |
| | | | | | | |
| Computation of earnings per share from continuing operations – diluted: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Income from continuing operations attributable to common stockholders | $ | 33,204 | | | $ | 68,425 | | | $ | 83,148 | | | $ | 138,271 | |
| Weighted-average shares of Common stock outstanding – basic | 61,333,967 | | | 60,739,891 | | | 61,057,590 | | | 60,651,238 | |
Net effect of potentially dilutive securities(2) | 296,633 | | | 572,853 | | | 390,625 | | | 645,694 | |
| Weighted-average shares of Common stock outstanding – dilution | 61,630,600 | | | 61,312,744 | | | 61,448,215 | | | 61,296,932 | |
| Net income per share from continuing operations – diluted | $ | 0.54 | | | $ | 1.12 | | | $ | 1.35 | | | $ | 2.26 | |
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
(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, of $1.6 million and $3.2 million for the three and six months ended July 3, 2026, respectively, and $1.2 million and $3.7 million for the three and six months ended July 4, 2025, respectively.
(2) Potentially dilutive securities include stock options, performance-based restricted stock units and non-performance-based restricted stock units.
6. Income Taxes
During the three and six months ended July 3, 2026, Income from continuing operations before income taxes was $48.1 million and $113.0 million, respectively, while Income tax expense was $11.7 million and $24.8 million, respectively. The effective tax rate was 24.3% and 22.0% for the three and six months ended July 3, 2026, respectively. The effective tax rate differed from the 2026 U.S. federal statutory rate of 21.0% primarily due to the tax effects related to the Eddyfi transaction.
During the three and six months ended July 4, 2025, Income from continuing operations before income taxes was $88.1 million and $181.2 million, respectively, while Income tax expense was $18.3 million and $38.8 million, respectively. The effective tax rate was 20.8% and 21.4% for the three and six months ended July 4, 2025, respectively. The effective tax rate differed from the 2025 U.S. federal statutory rate of 21.0% primarily due to the mix of income outside of the U.S. taxed at different statutory tax rates.
7. Inventories, Net
Inventories, net consisted of the following:
| | | | | | | | | | | |
| July 3, 2026 | | December 31, 2025 |
| (In thousands) |
| Raw materials | $ | 218,416 | | | $ | 173,458 | |
| Work in process | 49,191 | | | 40,033 | |
| Finished goods | 354,361 | | | 307,517 | |
| 621,968 | | | 521,008 | |
| Allowance for excess, slow-moving and obsolete inventory | (40,427) | | | (39,243) | |
| $ | 581,541 | | | $ | 481,765 | |
8. Accrued and Other Liabilities
Accrued and Other liabilities in the Consolidated and Condensed Balance Sheets consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| July 3, 2026 | | December 31, 2025 |
| Current | | Noncurrent | | Current | | Noncurrent |
| (In thousands) |
| Accrued taxes and deferred tax liabilities | $ | 57,260 | | | $ | 329,359 | | | $ | 53,728 | | | $ | 182,898 | |
| Compensation and related benefits | 82,042 | | | 50,770 | | | 68,535 | | | 52,706 | |
| Asbestos liability | 43,069 | | | 255,857 | | | 42,242 | | | 269,829 | |
| Contract liabilities | 40,691 | | | — | | | 19,663 | | | — | |
| Lease liabilities | 26,106 | | | 116,101 | | | 22,081 | | | 88,141 | |
| Warranty liability | 12,896 | | | — | | | 12,573 | | | — | |
| Third-party commissions | 13,798 | | | — | | | 19,371 | | | — | |
| Restructuring liability | 12,896 | | | 146 | | | 17,297 | | | 319 | |
| Accrued interest | 24,166 | | | — | | | 8,570 | | | — | |
| | | | | | | |
| Dividends payable | 8,886 | | | — | | | 6,098 | | | — | |
| Other | 43,829 | | | 55,804 | | | 31,828 | | | 63,343 | |
| $ | 365,639 | | | $ | 808,037 | | | $ | 301,986 | | | $ | 657,236 | |
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Accrued Warranty Liability
A summary of the activity in the Company’s warranty liability included in Accrued liabilities in the Company’s Consolidated and Condensed Balance Sheets is as follows:
| | | | | | | | | | | |
| Six Months Ended |
| July 3, 2026 | | July 4, 2025 |
| (In thousands) |
| Warranty liability, beginning of period | $ | 12,573 | | | $ | 12,794 | |
| Accrued warranty expense | 4,844 | | | 4,428 | |
| Changes in estimates related to pre-existing warranties | 1,031 | | | 697 | |
| Cost of warranty service work performed | (5,966) | | | (6,125) | |
| | | |
| Foreign exchange translation effect and other | 414 | | | 1,474 | |
| Warranty liability, end of period | $ | 12,896 | | | $ | 13,268 | |
Accrued Restructuring Liability
The Company’s restructuring programs include a series of actions to reduce the structural costs of the Company. A summary of the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Consolidated and Condensed Balance Sheets is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended July 3, 2026 |
| Balance at Beginning of Period | | | | Charges | | Payments | | Foreign Currency Translation and Other | | Balance at End of Period |
| (In thousands) |
| Americas: | | | | | | | | | | | |
Termination benefits(1) | $ | 8,827 | | | | | $ | 423 | | | $ | (2,245) | | | $ | (75) | | | $ | 6,930 | |
Facility closure costs and other(2) | 1,677 | | | | 16,306 | | | (15,686) | | | — | | | 2,297 | |
| Subtotal | 10,504 | | | | | 16,729 | | | (17,931) | | | (75) | | | 9,227 | |
Non-cash charges(2) | | | | | 10,534 | | | | | | | |
| | | | | 27,263 | | | | | | | |
| EMEA & APAC: | | | | | | | | | | | |
Termination benefits(1) | 6,223 | | | | | 136 | | | (3,041) | | | (31) | | | 3,287 | |
Facility closure costs and other(2) | 889 | | | | 1,079 | | | (1,440) | | | — | | | 528 | |
| Subtotal | 7,112 | | | | | 1,215 | | | (4,481) | | | (31) | | | 3,815 | |
| Non-cash charges | | | | | — | | | | | | | |
| | | | | 1,215 | | | | | | | |
| | | | | | | | | | | |
| Total | $ | 17,616 | | | | | 17,944 | | | $ | (22,412) | | | $ | (106) | | | $ | 13,042 | |
Non-cash charges(2) | | | | | 10,534 | | | | | | | |
| Total Provision | | | | | $ | 28,478 | | | | | | | |
(1) Includes severance and other termination benefits, including outplacement services.
(2) Includes the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets, costs associated with disposing of discontinued products and other costs in connection with the closure and optimization of facilities and product lines.
9. Debt
The following table shows the components of the Company’s debt:
| | | | | | | | | | | | | |
| July 3, 2026 | | December 31, 2025 | | |
| (In thousands) |
| Term loans | $ | 350,000 | | | $ | 350,000 | | | |
| Senior unsecured notes | 1,700,000 | | | 700,000 | | | |
| Revolving credit facility | 360,000 | | | 185,000 | | | |
| Other debt | 6,614 | | | 8,215 | | | |
| Total debt | 2,416,614 | | | 1,243,215 | | | |
| Current portion of debt | (5,940) | | | (2,412) | | | |
| Unamortized deferred financing fees | (19,324) | | | (8,263) | | | |
| Long-term debt | $ | 2,391,350 | | | $ | 1,232,540 | | | |
Senior Notes, Term Loans and Revolving Credit Facility
On April 4, 2022, the Company entered into a credit agreement that initially consisted of (i) a $750 million revolving credit facility with a maturity date of April 4, 2027, (ii) a senior term loan A-1 facility with an initial aggregate principal amount of $400 million with a maturity date of April 4, 2027 and (iii) a $600 million 364-day senior term loan A-2 facility with a maturity date of April 3, 2023. The senior term loan A-2 facility was subsequently refinanced in June 2022 extending its maturity date to April 3, 2025 to become a senior term loan A-3 facility.
On April 9, 2024, the Company issued $700 million in aggregate principal amount of 6.25% senior notes due 2029 (the “2029 Senior Notes”) governed by an indenture (the “2029 Indenture”). The 2029 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 2029 Senior Notes to pay off its senior term loan A-3 facility and pay fees associated with the offering.
On October 16, 2025, the Company entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) that, among other things, provides for (i) a senior term loan A facility (the “Term Loan A Facility”) in an aggregate principal amount of $350 million and (ii) a senior revolving credit facility (the “Revolving Facility”) in the amount of $1.05 billion to replace the Company’s existing $400 million senior term loan A-1 facility and $750 million revolving credit facility and pay off the outstanding principal and interest thereunder. Both facilities mature on October 16, 2030, subject to a springing maturity date under certain circumstances. The Revolving Facility contains a $300 million foreign currency sublimit and a $50 million swing line loan sub-facility.
On March 26, 2026, the Company issued $1.0 billion in aggregate principal amount of 5.625% senior notes due 2031 (the “2031 Senior Notes” and, together with the 2029 Senior Notes, the “Senior Notes”) governed by an indenture (the “2031 Indenture” and together with the 2029 Indenture, the “Indentures”). The 2031 Senior Notes have a contractual maturity interest rate of 5.625% and maturity date of April 1, 2031. The Company used $240 million of the net proceeds to pay down the revolving line of credit and used the remaining net proceeds from the sale of the 2031 Senior Notes to pay a portion of the acquisition price of Eddyfi and associated costs and expenses. Refer to Note 3, “Acquisitions” for additional information. The Indentures also provide for certain optional or mandatory redemptions or prepayments in other circumstances, none of which are currently expected by management as of July 3, 2026.
The A&R Credit Agreement and the Indentures 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 A&R Credit Agreement requires that the Company maintains certain financial covenants and the Company was in compliance with all of its debt covenants as of July 3, 2026. The A&R Credit Agreement and the Indentures contain various events of default (including failure to comply with the covenants under the A&R Credit Agreement) 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 Loan A 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 A&R Credit Agreement and Senior Notes.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Loans made under the Term Loan A Facility will bear interest, at the election of the Company, at either the base rate (as defined in the A&R Credit Agreement) or at the term Secured Overnight Financing Rate (“SOFR”) plus an adjustment (as defined in the A&R 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”) rate 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 A&R Credit Agreement), in each case, plus the applicable interest rate margin. The applicable interest rate margin changes based upon the Company’s total leverage ratio (consolidated total net debt divided by EBITDA, as defined in the credit agreement and 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 cross-currency swap agreements. Refer to Note 10, “Derivatives” for additional information.
As of July 3, 2026, the weighted-average interest rate of borrowings under the Credit Agreement and Indentures was 5.39%, including the net impact from the cross-currency swaps and excluding accretion of deferred financing fees, and there was $690 million of borrowing capacity available under the Revolving Facility, subject to the Company meeting financial covenants and other requirements.
Bridge Loan Commitment Letter
On January 31, 2026, the Company entered into a commitment letter with JPMorgan Chase Bank, N.A. to provide a $1.0 billion aggregate principal senior unsecured bridge term loan facility (the “Bridge Loan”) to fund the Acquisition and related fees and expenses. On March 26, 2026, following the issuance of the 2031 Senior Notes, the Company terminated the Bridge Loan. The Company never drew down on the Bridge Loan and paid $4.8 million for customary upfront fees related to the Bridge Loan that were expensed through Interest expense and other, net upon termination of the Bridge Loan.
Other Indebtedness
In addition to the debt agreements discussed above, the Company also has the ability to incur $72.9 million of indebtedness pursuant to certain uncommitted credit lines, consisting of a $50.0 million uncommitted credit line and a €20.0 million uncommitted credit line. The Company has used these facilities from time to time in the past for short-term working capital needs.
The Company is party to letter of credit facilities with an aggregate capacity of $118.1 million. Total letters of credit of $53.7 million were outstanding under these facilities, resulting in $64.4 million of remaining available capacity as of July 3, 2026.
Deferred Financing Fees
The Company had total deferred financing fees of $22.9 million included in its Consolidated and Condensed Balance Sheets as of July 3, 2026, which will be charged to Interest expense and other, net, over the term of the related debt instruments. The costs associated with the Term Loan A Facility and Senior Notes noted above will be amortized over the contractual term of the related facility. Of the $22.9 million, $3.6 million of deferred financing fees relating to the Revolving Facility are included in Other assets and $19.3 million of deferred financing fees relating to the Term Loan A Facility and Senior Notes are recorded as a contra-liability within Long-term debt. The deferred financing fees related to the 2031 Senior Notes make up approximately $12.3 million of the $19.3 million.
10. Derivatives
The Company uses derivative instruments to manage exposures to currency exchange 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.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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 July 3, 2026. The Company does not expect any counterparties to fail to meet their obligations. The Company records derivatives in the Consolidated and Condensed Balance Sheets at fair value.
Net Investment Hedges
On July 22, 2022, the Company entered into two cross-currency swap agreements with a maturity date of April 3, 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 qualified 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 Accumulated Other Comprehensive Loss (“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 Condensed Statements 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 six months ended July 3, 2026.
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 Condensed Statements of Cash Flows.
The table below shows the fair value of the derivatives recognized in the Consolidated and Condensed Balance Sheets:
| | | | | | | | | | | | | | | | | | | | | | | |
| July 3, 2026 | | December 31, 2025 |
| Designated as Hedging Instruments | Other Liabilities | | Other Assets | | Other Liabilities | | Other Assets |
| (In thousands) |
| Cross-currency swap agreements | $ | 37,327 | | | $ | — | | | $ | 48,778 | | | $ | — | |
| | | | | | | |
| | | | | | | |
Derivatives Not Designated as Hedging Instruments
The Company has certain foreign currency contracts that are not designated as hedges. As of July 3, 2026 and December 31, 2025, the Company had foreign currency contracts related to purchases and sales with notional values of $126.6 million and $105.2 million, respectively.
The table below shows the fair value of derivative instruments not designated in a hedging relationship recognized in the Consolidated and Condensed Balance Sheets:
| | | | | | | | | | | | | | | | | | | | | | | |
| July 3, 2026 | | December 31, 2025 |
| Not Designated as Hedging Instruments | Accrued Liabilities | | Other Current Assets | | Accrued Liabilities | | Other Current Assets |
| (In thousands) |
| Foreign currency contracts | $ | 835 | | | $ | 2,543 | | | $ | 183 | | | $ | 780 | |
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The amounts in the table above as of July 3, 2026 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 $0.2 million increase in Other current assets with a corresponding increase in Accrued liabilities.
The gains or losses on foreign currency contracts are usually offset by foreign exchange exposure on cash and intercompany positions, all of which are recognized in Interest expense and other, net, in the Consolidated and Condensed Statements of Operations.
11. Financial Instruments and Fair Value Measurements
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 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| July 3, 2026 | | December 31, 2025 |
| Level
One | | Level
Two | | Level
Three | | Total | | Level
One | | Level
Two | | Level
Three | | Total |
| (In thousands) |
| Assets: | | | | | | | | | | | | | | | |
| Cash equivalents | $ | 20,515 | | | $ | — | | | $ | — | | | $ | 20,515 | | | $ | 11,965 | | | $ | — | | | $ | — | | | $ | 11,965 | |
| Foreign currency contracts | — | | | 2,730 | | | — | | | 2,730 | | | — | | | 857 | | | — | | | 857 | |
| | | | | | | | | | | | | | | |
| Deferred compensation plans | — | | | 7,775 | | | — | | | 7,775 | | | — | | | 7,214 | | | — | | | 7,214 | |
| $ | 20,515 | | | $ | 10,505 | | | $ | — | | | $ | 31,020 | | | $ | 11,965 | | | $ | 8,071 | | | $ | — | | | $ | 20,036 | |
| | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | |
| Foreign currency contracts | $ | — | | | $ | 1,022 | | | $ | — | | | $ | 1,022 | | | $ | — | | | $ | 260 | | | $ | — | | | $ | 260 | |
| Cross-currency swap agreements | — | | | 37,327 | | | — | | | 37,327 | | | — | | | 48,778 | | | — | | | 48,778 | |
| Deferred compensation plans | — | | | 7,775 | | | — | | | 7,775 | | | — | | | 7,214 | | | — | | | 7,214 | |
| $ | — | | | $ | 46,124 | | | $ | — | | | $ | 46,124 | | | $ | — | | | $ | 56,252 | | | $ | — | | | $ | 56,252 | |
The Company measures the fair value of foreign currency contracts and cross-currency swap agreements 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 six months ended July 3, 2026, the impact of the credit valuation adjustment on the Company’s derivatives is immaterial. Refer to Note 10, “Derivatives” for additional information. There were no transfers in or out of Level One, Two or Three during the six months ended July 3, 2026.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
12. Equity
Share Repurchase Program
On August 13, 2024, the Board of Directors authorized and approved a share 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 share repurchase program since inception. 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.
Performance-Based Stock Option Awards
On June 10, 2026 and July 1, 2026, the Company granted performance-based non-qualified stock option awards (the “Performance Option Awards”) covering an aggregate of 2,394,496 shares of Common stock under the Company’s Amended and Restated 2022 Omnibus Incentive Plan. The June 10, 2026 awards covering 2,336,440 shares have an exercise price of $82.92 per share, equal to the closing price of the Company’s Common stock on that date, and a seven-year contractual term expiring June 9, 2033. The July 1, 2026 awards covering 58,056 shares have an exercise price of $93.69 per share, equal to the closing price of the Company’s Common stock on that date, and a seven-year contractual term expiring June 30, 2033. As of July 3, 2026, all 2,394,496 Performance Option Awards were outstanding.
Each Performance Option Award is divided into three equal tranches, with vesting contingent upon both a market-based stock price condition and a service condition. The stock price condition requires the Company’s 30-trading-day average closing stock price to equal or exceed $140.00, $170.00 and $200.00 per share for Tranches One, Two and Three, respectively, during the four-year performance period commencing on the second anniversary of the applicable grant date. The shares within each tranche vest ratably across three service vesting dates, being the fourth, fifth and sixth anniversaries of the applicable grant date, provided that the award recipient remains continuously employed by the Company through each such vesting date, and each vesting portion is treated as a separate award for expense recognition purposes, with compensation cost recognized ratably for each tranche over its respective service period. Any tranche for which the applicable stock price hurdle is not achieved during the performance period will be forfeited in full.
Valuation Assumptions
The grant-date fair value of each tranche was estimated using a Monte Carlo simulation model. The June 10, 2026 and July 1, 2026 grants were valued separately as of their respective grant dates using the weighted-average assumptions included in the tables below. The weighted-average grant-date fair value of Performance Option Awards granted during the six months ended July 3, 2026 was $26.90 per option, with a total aggregate grant-date fair value of $64.4 million.
The weighted-average assumptions used in the Monte Carlo simulation were as follows:
| | | | | |
| |
Expected annualized volatility(1) | 32.0 | % |
Risk-free interest rate(2) | 4.4 | % |
| Expected dividend yield | 0.6 | % |
| Contractual term | 7.0 years |
(1) Expected volatility based on the average historical stock price volatility of a group of peer companies over a seven-year period consistent with the contractual term of the award.
(2) Risk-free rate based on the U.S. Treasury yield curve at the applicable grant date for a seven-year period consistent with the contractual term of the award.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Compensation Expense and Unrecognized Cost
During the three and six months ended July 3, 2026, the Company recognized $0.7 million of stock-based compensation expense related to the Performance Option Awards, included in Selling, general and administrative expense on the Company’s Consolidated and Condensed Statements of Operations.
As of July 3, 2026, total unrecognized compensation cost related to the Performance Option Awards was $63.7 million, which is expected to be recognized over a weighted-average period of approximately 4.9 years.
Mandatory Convertible Preferred Stock and Common Stock Issuance
On June 1, 2026, in connection with the closing of the Acquisition, the Company completed the previously announced private placements of (i) 175,000 shares (the “Preferred Shares”) of its 6.50% Series A Mandatory Convertible Preferred Stock (“MCPS”), par value $0.001 per share, pursuant to that certain Preferred Stock Purchase Agreement dated February 2, 2026, between the Company and certain institutional investors thereto, for aggregate gross proceeds of approximately $175.0 million and (ii) 1,254,255 shares of its Common stock in accordance with that certain Common Stock Purchase Agreement dated February 2, 2026 (the “Common Stock Agreement”) between the Company and certain institutional investors thereto for aggregate gross proceeds of approximately $143 million.
The MCPS was issued at a price of $1,000 per Preferred Share and the net proceeds to the Company, after deducting the fees payable to the placement agents, was $171.1 million. The gross proceeds were recorded to MCPS with the related issuance costs of $3.9 million recorded as a reduction to MCPS.
The Common stock was issued at a price of $114.00 per share and the net proceeds to the Company, after deducting the fees payable to the placement agent, was $139.8 million. In connection with the Common Stock Agreement, the Company agreed to provide the purchasers of Common stock with certain customary registration rights with respect to the shares of Common stock issued thereunder. The gross proceeds were recorded to Common Stock at par value and the remainder was recorded to additional paid-in capital within shareholders’ equity. The related issuance costs of $3.2 million were recorded as a reduction to additional paid-in capital.
The MCPS purchasers include one or more entities affiliated with Mitchell Rales, the Executive Chair of the Board of Directors, and one or more entities affiliated with Steven Rales, Mr. Rales’ brother, who purchased $100.0 million and $25.0 million, respectively, of the MCPS for investment purposes. The remaining $50.0 million was purchased by other third parties. The pricing and other terms of the MCPS were negotiated with the unaffiliated institutional investors participating in the private placement, and the entities affiliated with Mitchell Rales and Steven Rales purchased their MCPS on the same terms and at the same price as agreed upon with those unaffiliated investors.
The MCPS was issued on the Acquisition closing date June 1, 2026 and will mandatorily convert into common stock on the mandatory conversion date, which is approximately three years from issuance, unless earlier converted by the holder or upon a fundamental change. The shares accrue cumulative dividends at a rate of 6.50% per annum ($65.00 per share per annum), payable in cash quarterly when, as and if declared. If any Preferred Stock remains outstanding, no dividends may be declared or paid on Common Stock or other junior stock unless all accumulated and unpaid dividends on the Preferred Stock have been declared and paid in full.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The Fixed Conversion Rates are subject to customary anti-dilution adjustments for stock dividends, share splits and combinations, rights or warrant issuances, certain distributions, cash dividends exceeding $0.10 per share per quarter, and tender or exchange offers. Unless previously converted, each share will automatically convert on the conversion date at a rate ranging from 7.1806 to 8.2576 shares of Common stock, depending on the average market price during the specified settlement period and subject to certain customary anti‑dilution and other protective adjustment provisions. In the aggregate, conversion of all 175,000 shares of Preferred Stock would result in the issuance of between approximately 1,256,605 and 1,445,080 shares of Common Stock. No fractional shares will be issued; the Company will pay cash in lieu thereof. Holders may elect early conversion at the minimum conversion rate, subject to adjustments for unpaid dividends. The preferred stock has a liquidation preference senior to common equity and is not redeemable, except for limited redemptions required to address regulatory ownership restrictions.
Holders of the MCPS generally do not have voting rights except as required by Delaware law. However, upon a nonpayment (failure to declare and pay dividends for six or more dividend periods), holders may elect two additional directors to the Board, and certain protective matters (including issuance of senior stock or adverse amendments to the Certificate of Designations) require the affirmative vote of at least two-thirds of the outstanding MCPS.
Accumulated Other Comprehensive Loss
The following tables present the changes in the balances of each component of AOCL including reclassifications out of AOCL for the six months ended July 3, 2026 and July 4, 2025. All amounts are net of tax and noncontrolling interest, if any.
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| Accumulated Other Comprehensive Loss Components |
| Net Unrecognized Pension and Other Post-Retirement Benefit Cost | | Foreign Currency Translation Adjustment | | Net Investment Hedges | | | | Total |
| (In thousands) |
Balance at December 31, 2025 | $ | (51,677) | | | $ | (450,325) | | | $ | (37,714) | | | | | $ | (539,716) | |
| Other comprehensive income (loss) before reclassifications: | | | | | | | | | |
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| Foreign currency translation adjustment | 110 | | | (29,642) | | | 6,729 | | | | | (22,803) | |
| Gain on long-term intra-entity foreign currency transactions | — | | | 5,137 | | | — | | | | | 5,137 | |
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| Other comprehensive income (loss) before reclassifications | 110 | | | (24,505) | | | 6,729 | | | | | (17,666) | |
Amounts reclassified from Accumulated other comprehensive loss(1) | 369 | | | — | | | — | | | | | 369 | |
| Net current period Other comprehensive income (loss) | 479 | | | (24,505) | | | 6,729 | | | | | (17,297) | |
Balance at April 3, 2026 | $ | (51,198) | | | $ | (474,830) | | | $ | (30,985) | | | | | $ | (557,013) | |
| Other comprehensive income before reclassifications: | | | | | | | | | |
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| Foreign currency translation adjustment | 47 | | | 3,816 | | | 2,902 | | | | | 6,765 | |
| Gain on long-term intra-entity foreign currency transactions | — | | | 1,994 | | | — | | | | | 1,994 | |
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| Other comprehensive income before reclassifications | 47 | | | 5,810 | | | 2,902 | | | | | 8,759 | |
Amounts reclassified from Accumulated other comprehensive loss(1) | 82 | | | — | | | — | | | | | 82 | |
| Net current period Other comprehensive income | 129 | | | 5,810 | | | 2,902 | | | | | 8,841 | |
Balance at July 3, 2026 | $ | (51,069) | | | $ | (469,020) | | | $ | (28,083) | | | | | $ | (548,172) | |
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(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.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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| 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, 2024 | $ | (50,352) | | | $ | (679,791) | | | $ | (1,247) | | | $ | 1,816 | | | $ | (729,574) | |
| Other comprehensive (loss) income before reclassifications: | | | | | | | | | |
| Net actuarial loss | 48 | | | — | | | — | | | — | | | 48 | |
| Foreign currency translation adjustment | (421) | | | 94,613 | | | (15,371) | | | — | | | 78,821 | |
| Gain on long-term intra-entity foreign currency transactions | — | | | 391 | | | — | | | — | | | 391 | |
| Unrealized gain on cash flow hedges | — | | | — | | | — | | | 16 | | | 16 | |
| Other comprehensive (loss) income before reclassifications | (373) | | | 95,004 | | | (15,371) | | | 16 | | | 79,276 | |
Amounts reclassified from Accumulated other comprehensive loss(1)(2) | 273 | | | — | | | — | | | (1,832) | | | (1,559) | |
| Net current period Other comprehensive (loss) income | (100) | | | 95,004 | | | (15,371) | | | (1,816) | | | 77,717 | |
Balance at April 4, 2025 | $ | (50,452) | | | $ | (584,787) | | | $ | (16,618) | | | $ | — | | | $ | (651,857) | |
| Other comprehensive (loss) income before reclassifications: | | | | | | | | | |
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| Foreign currency translation adjustment | (431) | | | 117,446 | | | (25,027) | | | — | | | 91,988 | |
| Gain on long-term intra-entity foreign currency transactions | — | | | 9,968 | | | — | | | — | | | 9,968 | |
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| Other comprehensive (loss) income before reclassifications | (431) | | | 127,414 | | | (25,027) | | | — | | | 101,956 | |
Amounts reclassified from Accumulated other comprehensive loss(1) | 202 | | | — | | | — | | | — | | | 202 | |
| Net current period Other comprehensive (loss) income | (229) | | | 127,414 | | | (25,027) | | | — | | | 102,158 | |
Balance at July 4, 2025 | $ | (50,681) | | | $ | (457,373) | | | $ | (41,645) | | | $ | — | | | $ | (549,699) | |
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(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.
(2) The amount within the Cash Flow Hedges column is a component of Interest expense and other, net. See Note 10, “Derivatives” for additional details.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
13. Commitments and Contingencies
Asbestos Contingencies
Certain subsidiaries of the Company are the legal obligor, or owner, 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 of the Company’s 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 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 subsidiaries settle asbestos claims for amounts the Company considers reasonable given the facts and circumstances of each claim. For additional information on these asbestos claims, refer to Note 19, “Commitments and Contingencies” thereto in the Company’s 2025 Form 10-K.
The annual number of cases and average settlement payment per asbestos claimant has fluctuated during the past several years. The Company expects such settlement value 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 to plaintiffs.
The Company has classified asbestos-related activity in Loss from discontinued operations, net of taxes in the Consolidated and Condensed Statements of Operations.
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. 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 at 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 collection of insurance recoveries from the subsidiaries’ insurers are expensed as incurred.
Each subsidiary has separate insurance coverage that was 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.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Asbestos-related claims activity since December 31 is as follows:
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| Six Months Ended |
| July 3, 2026 | | July 4, 2025 |
| (Number of claims) |
| Claims unresolved, beginning of period | 14,836 | | | 13,758 | |
Claims filed(1) | 3,206 | | | 2,529 | |
Claims resolved(2) | (2,128) | | | (1,467) | |
| Claims unresolved, end of period | 15,914 | | | 14,820 | |
(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.
The Company’s Consolidated and Condensed Balance Sheets included the following amounts related to asbestos-related litigation:
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| July 3, 2026 | | December 31, 2025 |
| (In thousands) |
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Long-term asbestos insurance asset(1) | $ | 225,403 | | | $ | 235,361 | |
Long-term asbestos insurance receivable(1) | 18,907 | | | 16,811 | |
Accrued asbestos liability(2) | 43,069 | | | 42,242 | |
Long-term asbestos liability(3) | 255,857 | | | 269,829 | |
(1) Included in Other assets in the Consolidated and Condensed 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 and Condensed Balance Sheets.
(3) Included in Other liabilities in the Consolidated and Condensed 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 the Company’s legacy industrial businesses 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 are 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 preceding 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.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
14. Segment Information
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, the Middle East, India, Africa and Asia Pacific.
The Company’s management considers its Chief Operating Decision Maker (“CODM”) to be Shyam Kambeyanda, President, Chief Executive Officer and Director. The Company’s management and CODM evaluate the operating results of each reportable segment, 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, Restructuring and other related charges, acquisition transaction, due diligence and integration expenses, amortization of intangibles and fair value step up on acquired inventories, depreciation and other amortization and compensation expense related to the Performance Option Awards. Segment results reflect the allocation of overhead costs, which primarily consist of Selling, general and administrative expense.
The Company’s segment results were as follows:
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| Three Months Ended | | Six Months Ended |
| July 3, 2026 | | July 4, 2025 | | July 3, 2026 | | July 4, 2025 |
| (In thousands) |
| Net sales: | | | | | |
| Americas | $ | 315,884 | | | $ | 282,729 | | | $ | 604,249 | | | $ | 563,394 | |
| EMEA & APAC | 491,743 | | | 432,857 | | | 948,975 | | | 830,330 | |
| $ | 807,627 | | | $ | 715,586 | | | $ | 1,553,224 | | | $ | 1,393,724 | |
| Cost of sales: | | | | | | | |
| Americas | $ | 189,542 | | | $ | 171,558 | | | $ | 366,412 | | | $ | 342,166 | |
| EMEA & APAC | 310,874 | | | 277,981 | | | 604,489 | | | 530,309 | |
| $ | 500,416 | | | $ | 449,539 | | | $ | 970,901 | | | $ | 872,475 | |
| Allocated operating expense: | | | | | | | |
| Americas | $ | 15,286 | | | $ | 10,077 | | | $ | 28,756 | | | $ | 27,517 | |
| EMEA & APAC | 23,795 | | | 24,365 | | | 45,147 | | | 51,159 | |
| $ | 39,081 | | | $ | 34,442 | | | $ | 73,903 | | | $ | 78,676 | |
| Other operating expense: | | | | | |
| Americas | $ | 47,021 | | | $ | 44,331 | | | $ | 89,041 | | | $ | 82,428 | |
| EMEA & APAC | 69,728 | | | 43,776 | | | 131,447 | | | 82,747 | |
| $ | 116,749 | | | $ | 88,107 | | | $ | 220,488 | | | $ | 165,175 | |
Adjusted EBITDA(1): | | | | | | | |
| Americas | $ | 64,035 | | | $ | 56,763 | | | $ | 120,040 | | | $ | 111,283 | |
| EMEA & APAC | 87,338 | | | 86,735 | | | 167,892 | | | 166,115 | |
| $ | 151,373 | | | $ | 143,498 | | | $ | 287,932 | | | $ | 277,398 | |
| Depreciation, amortization and other impairment charges: | | | | | | | |
| Americas | $ | 12,934 | | | $ | 8,644 | | | $ | 21,607 | | | $ | 16,848 | |
| EMEA & APAC | 14,934 | | | 10,711 | | | 30,129 | | | 19,998 | |
| $ | 27,868 | | | $ | 19,355 | | | $ | 51,736 | | | $ | 36,846 | |
| Capital expenditures: | | | | | | | |
| Americas | $ | 7,227 | | | $ | 4,381 | | | $ | 11,619 | | | $ | 8,116 | |
| EMEA & APAC | 10,518 | | | 4,799 | | | 19,829 | | | 8,358 | |
| $ | 17,745 | | | $ | 9,180 | | | $ | 31,448 | | | $ | 16,474 | |
(1) The following is a reconciliation of Net income from continuing operations to Adjusted EBITDA.
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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| Three Months Ended | | Six Months Ended |
| July 3, 2026 | | July 4, 2025 | | July 3, 2026 | | July 4, 2025 |
| (In thousands) |
| Net income from continuing operations | $ | 36,401 | | | $ | 69,812 | | | $ | 88,192 | | | $ | 142,376 | |
| Income tax expense | 11,701 | | | 18,283 | | | 24,812 | | | 38,782 | |
| Interest expense and other, net | 30,623 | | | 20,999 | | | 56,200 | | | 37,781 | |
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Restructuring and other related charges(1) | 18,317 | | | 1,390 | | | 28,478 | | | 5,889 | |
Acquisition - amortization and other related charges(2) | 41,308 | | | 21,592 | | | 64,102 | | | 31,193 | |
| Depreciation and other amortization | 12,335 | | | 11,422 | | | 25,460 | | | 21,377 | |
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Performance option awards compensation expense(3) | 688 | | | — | | | 688 | | | — | |
| Adjusted EBITDA | $ | 151,373 | | | $ | 143,498 | | | $ | 287,932 | | | $ | 277,398 | |
(1) Includes severance and other termination benefits, including outplacement services, as well as the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets, costs associated with disposing of discontinued products and other costs in connection with the closure and optimization of facilities and product lines.
(2) Includes transaction, diligence and integration expenses totaling $24.8 million and $35.1 million for the three and six months ended July 3, 2026, respectively, and $12.8 million and $14.2 million for the three and six months ended July 4, 2025, respectively. Additionally, it includes amortization of intangibles and fair value step up on acquired inventories totaling $16.5 million and $29.0 million for the three and six months ended July 3, 2026, respectively, and $8.8 million and $17.0 million for the three and six months ended July 4, 2025, respectively.
(3) Represents the impact of the Performance Option Awards granted in June and July 2026. These awards were non-cash, one-time, non-recurring grants with a different structure and size than the Company’s annual equity compensation program. Refer to Note 12, “Equity” for further details on these awards.
The Company’s investments in equity method investees and total assets by segment were as follows:
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| July 3, 2026 | | December 31, 2025 |
| (In thousands) |
| Investments in equity method investees: | |
| Americas | $ | — | | | $ | — | |
| EMEA & APAC | 25,723 | | | 29,558 | |
| $ | 25,723 | | | $ | 29,558 | |
| Total assets: | | | |
| Americas | $ | 3,169,393 | | | $ | 1,717,390 | |
| EMEA & APAC | 3,393,218 | | | 3,048,704 | |
| $ | 6,562,611 | | | $ | 4,766,094 | |
ESAB CORPORATION
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The Company’s property, plant and equipment, net by geography were as follows:
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| July 3, 2026 | | December 31, 2025 |
| (In thousands) |
Property, plant and equipment, net(1): | | | |
| United States | $ | 72,020 | | | $ | 72,617 | |
| Czech Republic | 72,862 | | | 75,028 | |
| Germany | 45,409 | | | 48,245 | |
| India | 30,897 | | | 31,437 | |
| Mexico | 26,365 | | | 23,464 | |
| Other foreign countries | 142,295 | | | 131,085 | |
| $ | 389,848 | | | $ | 381,876 | |
(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.
15. Subsequent Event
The Common stock dividend of $7.5 million included in Accrued liabilities in the Consolidated and Condensed Balance Sheets at July 3, 2026 was paid on July 17, 2026 to stockholders of record as of July 3, 2026.