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What changed in ESAB Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ESAB Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+328 added−373 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-07)

Top changes in ESAB Corp's 2023 10-K

328 paragraphs added · 373 removed · 277 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

37 edited+2 added−8 removed17 unchanged
Biggest changeDepartment of State, Directorate of Defense Trade Controls, which, among other things, imposes license requirements on the export from the United States of defense articles and defense services (which are items specifically designed or adapted for a military application and/or listed on the United States Munitions List); • the Export Administration Regulations administered by the U.S.
Biggest change“Risk Factors—Risks Related to Business.” Export/Import Compliance We are required to comply with various United States export/import control and economic sanctions laws, including: • the International Traffic in Arms Regulations administered by the United States Department of State, Directorate of Defense Trade Controls, which, among other things, imposes license requirements on the export from the United States of defense articles and defense services (which are items specifically designed or adapted for a military application and/or listed on the United States Munitions List); 8 • the Export Administration Regulations administered by the United States Department of Commerce, Bureau of Industry and Security, which, among other things, impose licensing requirements on the export or re-export of certain dual-use goods, technology and software (which are items that potentially have both commercial and military applications); • the regulations administered by the United States Department of Treasury, Office of Foreign Assets Control, which implement economic sanctions imposed against designated countries, governments and persons based on United States foreign policy and national security considerations; and • the import regulatory activities of the United States Customs and Border Protection.
Because we compete in selected niches of these markets and due to the diversity of our products and services, no single company competes directly with us across all our markets. We encounter a wide variety of competitors that differ by product line, including well-established regional competitors, competitors with greater specialization in particular markets, as well as larger competitors.
Because we compete in selected niches of these markets and due to the diversity of our products and services, no single company competes directly with us across all of our markets. We encounter a wide variety of competitors that differ by product line, including well-established regional competitors, competitors with greater specialization in particular markets, as well as larger competitors.
We have achieved external certification of our QEHS Management Systems to the ISO 9001, ISO 14001 and ISO 45001 standards for the majority of ESAB’s operations, activities, people, and units globally. 8 We maintain an Environment, Health & Safety Policy to ensure compliance with all applicable laws and regulations and promote safety and environmental protection as core business values.
We have achieved external certification of our QEHS Management Systems to the ISO 9001, ISO 14001 and ISO 45001 standards for the majority of ESAB’s operations, activities, people and units globally. We maintain an Environment, Health & Safety Policy to ensure compliance with all applicable laws and regulations and promote safety and environmental protection as core business values.
You may also request a copy of these filings, at no cost, by writing or telephoning us at: Investor Relations, ESAB Corporation, 909 Rose Avenue, 8th Floor, Bethesda, MD 20852, telephone (301) 323-9099. Information contained on our website is not incorporated by reference in this report.
You may also request a copy of these filings, at no cost, by writing or telephoning us at: Investor Relations, ESAB Corporation, 909 Rose Avenue, 8th Floor, North Bethesda, MD 20852, telephone (301) 323-9099. Information contained on our website is not incorporated by reference in this report.
The markets that we compete in are also served by Lincoln Electric and the welding business within Illinois Tool Works, Inc. Our customer base is broadly diversified across many sectors of the economy, and we believe customers place a premium on quality, reliability, availability, design and application engineering support.
The markets that we compete in are also served by Lincoln Electric and the welding business within Illinois Tool 6 Works, Inc. Our customer base is broadly diversified across many sectors of the economy and we believe customers place a premium on quality, reliability, availability, design and application engineering support.
We expect to continue making significant expenditures for research and development to maintain and improve our competitive positions. 7 Intellectual Property We rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secrets and contractual provisions to protect our intellectual property both in the United States and around the world for our business.
We expect to continue making significant expenditures for research and development to maintain and improve our competitive positions. Intellectual Property We rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secrets and contractual provisions to protect our intellectual property, both in the United States and around the world for our business.
Approximately 50% of our 2022 revenues were derived from developing markets, which we define as South America, Eastern Europe, India, Asia, Australia and the Middle East, and which are expected to grow at greater than twice the rate of more mature markets in North America and Europe based on publicly available economic data from sources such as IHS Markit and the International Monetary Fund.
Approximately 50% of our 2023 revenues were derived from developing markets, which we define as South America, Eastern Europe, India, Asia, Australia and the Middle East, and which are expected to grow at greater than twice the rate of more mature markets in North America and Europe, based on publicly available economic data from sources such as IHS Markit and the International Monetary Fund.
We have used EBX to accelerate our growth and improve business performance. 6 Industry Overview Our products and services are marketed worldwide, and the markets we serve are fragmented and competitive.
We have used EBX to accelerate our growth and improve business performance. Industry Overview Our products and services are marketed worldwide and the markets we serve are fragmented and competitive.
We believe that our sources of raw materials are adequate for our needs for the foreseeable future and the loss of any one supplier would not have a material adverse effect on our business or results of operations. Seasonality Our European operations typically experience a slowdown during the July, August and December vacation seasons for our business.
We believe that our sources of raw materials are adequate for our needs for the foreseeable future and the loss of any one supplier would 7 not have a material adverse effect on our business or results of operations. Seasonality Our European operations typically experience a slowdown during the July and August vacation seasons.
Products are sold into a wide range of global end markets, including general industry, infrastructure, renewable energy, medical and life sciences, transportation, construction and energy. Our sales channels include both independent distributors and direct salespeople who, depending on geography and end market, sell our products to our end users.
Products are sold into a wide range of global end markets, including general industry, infrastructure, renewable energy, medical and life sciences, transportation, construction and energy. Our sales channels include both independent distributors and direct salespeople that, depending on geography and end market, sell our products to our end users.
We believe our company, which competes in an estimated $30 billion market, is one of the prominent industry players with a substantial position in every major market in the world, combining global scale with regional agility to maximize growth and profits.
We believe our Company, which competes in an estimated $30 billion m arket, is one of the prominent industry players with a substantial position in every major market in the world, combining global scale with regional agility to maximize growth and profits.
We define our addressable market as established equipment products and new products in automation, software and services, and estimate its size based on public data from peer companies, customer surveys, and market analysis conducted by our sales function.
We define our addressable market as established fabrication technology equipment products and new products in automation, software and services, and estimate its size based on public data from peer companies, customer surveys and market analysis conducted by our sales function.
Research and development expens e was $36.0 million, $39.7 million and $34.8 million for the years ended December 31, 2022, 2021 and 2020, 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.
Research and development expens e was $38.8 million, $36.0 million and $39.7 million for the years ended December 31, 2023, 2022 and 2021, 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.
In addition, approximately 37% of our non-U.S. associates are represented by foreign trade unions and work councils in Europe, Asia, Central and South America, Canada, Africa and Australia, which could subject us to arrangements very similar to collective bargaining agreements. We have not experienced any work stoppages or strikes that have had a material adverse impact on operations.
In addition, approximately 42% of our non-United States associates are represented by foreign trade unions and work councils in Europe, Asia, Central and South America, Canada, Africa and Australia, which could subject us to arrangements very similar to collective bargaining agreements. We have not experienced any work stoppages or strikes that have had a material adverse impact on operations.
These regulations include significant new requirements for medical devices, including enhanced requirements for clini cal evidence and documentation, increased focus on device identification and traceability, and additional post-market surveillance and diligence.
These regulations include significant new requirements for medical devices, including enhanced requirements for clinical evidence and documentation, increased focus on device identification and traceability and additional post-market surveillance and diligence.
Our rich history of innovative products and workflow solutions and our business system, ESAB Business Excellence (“EBX”), allows us to realize our purpose of Shaping the world we imagine. Our products are utilized to solve challenges in a wide range of industries, including cutting, joining and automated welding.
Our rich history of innovative products and workflow solutions and our business system, ESAB Business Excellence (“EBX”), enables our purpose of Shaping the world we imagine TM . Our products are utilized to solve challenges in a wide range of industries, including cutting, joining and automated welding.
Failure to comply with various sanction and embargo laws may result in enforcement or other regulatory actions” and “Risk Factors—Risks Related to Litigation and Regulatory Compliance—If we fail to comply with export control regulations, we could be subject to substantial fines or other sanctions, which could have a material adverse effect on our business, financial condition and results of operations.” Human Capital Management Employee Profile As of December 31, 2022, we employed approximately 9,000 persons, of whom approximately 1,200 were employed in the United States and approximately 7,800 were employed outside of the United States.
Failure to comply with various sanction and embargo laws may result in enforcement or other regulatory actions ” and “Risk Factors—Risks Related to Litigation and Regulatory Compliance— If we fail to comply with export control regulations, we could be subject to substantial fines or other sanctions, which could have a material adverse effect on our business, financial condition and results of operations .” Human Capital Management Employee Profile As of December 31, 2023, we employed approximately 9,000 associates, of whom approximately 1,300 were employed in the United States and approximately 7,700 were employed outside of the United States.
We believe the principal elements of competition in our served markets are the technical ability to meet customer specifications, product quality and reliability, brand names, price, application expertise and engineering capabilities, timely delivery and strong aftermarket support. We believe that we are a leading competitor in each of our markets.
We believe the principal elements of competition in our served markets are the technical ability to meet customer specifications, product quality and reliability, brand names, price, application expertise and engineering capabilities, timely delivery and strong aftermarket support. We believe that we are a leading competitor in each of our markets. Reportable Segments We conduct our operations through two reportable segments.
Talent Development In our effort to enable our purpose, “Shaping the World We Imagine”, we strive to find extraordinary people and support them across their entire associate lifecycle, so they stay engaged in building, growing and sustaining the company. As a result, we’re committed to a “Talent First” strategy which starts with our associates’ health and safety.
Talent Development In our effort to enable our purpose, Shaping the world we imagine TM , we strive to find extraordinary people and support them across their entire associate lifecycle, so they stay engaged in building, growing and sustaining the Company. As a result, we are committed to a “Talent First” strategy which starts with our associates’ health and safety.
During the year ended December 31, 2022, we completed two acquisitions and we expect to complete more acquisitions in the following years. See Note 5, “Acquisitions” in Item 8 of this Form 10-K for further information. The Company The Company has been built through a series of acquisitions, as well as organic growth.
During the year ended December 31, 2023, we completed one acquisition and we expect to complete more acquisitions in the following years. See Part II, Item 8, Note 5, “Acquisitions” of this Form 10-K for further information. The Company The Company has been built through a series of acquisitions, as well as organic growth.
In addition, we believe that our exposure to developing economies will provide additional opportunities for growth in the future. Our principal markets as a whole outside the United States are Europe, Asia, South America, and the Middle East. Our international operations subject us to certain risks. See Item 1A. “Risk Factors — Risks Related to Our Business”.
In addition, we believe that our exposure to developing economies will provide additional opportunities for growth in the future. Our principal markets outside the United States are Europe, Asia, South America and the Middle East. Our international operations subject us to certain risks. See Item 1A.
Our gas control business is also well-positioned in attractive markets like healthcare and life sciences. Acquisitions are a core part of our strategy and are used to strengthen our company and accelerate growth. Acquisitions follow our disciplined process to ensure strategic alignment, rapid integration and attractive long-term financial returns.
Our gas control business is also well-positioned in attractive markets such as medical and specialty gas control. Acquisitions are a core part of our strategy and are used to strengthen our Company and accelerate growth. Acquisitions follow our disciplined process to ensure strategic alignment, rapid integration and attractive long-term financial returns.
However, the business impact caused by the COVID-19 pandemic, as well as general economic conditions, may distort the effects of historical seasonality patterns and impact future seasonal variations. Working Capital We maintain an adequate level of working capital to support our business needs. There are no unusual industry practices or requirements related to working capital items.
However, the business impact caused by general economic conditions, geopolitical conflicts and other disruptions, may distort the effects of historical seasonality patterns and impact future seasonal variations. Working Capital We maintain an adequate level of working capital to support our business needs. There are no unusual industry practices or requirements related to working capital items.
We seek to build an enduring premier global enterprise by applyi ng EBX, our business management system to continuously improve our Company and pursue growth in revenues and improvements in profit and cash flow. EBX is integral to our operations.
We seek to build an enduring premier global enterprise by applying EBX to continuously improve our Company and pursue growth in revenues and improvements in profit and cash flow. EBX is integral to our operations.
Research and Development Our research and development focus on innovation; developing new products, software and services, as well as the enhancement of existing products with the latest technology and updated designs; creating new applications for existing products; lowering the cost of manufacturing our existing products; and, redesigning existing product lines to increase efficiency, improve durability, enhance performance and usability.
We are subject to specific risks associated with international operations.” Research and Development Our research and development focus on innovation; developing new products, software and services, as well as the enhancement of existing products with the latest technology and updated designs; creating new applications for existing products; lowering the cost of manufacturing our existing products; and redesigning existing product lines to increase efficiency, improve durability, enhance performance and usability.
The Company is committed to continual improvement of its environment, health and safety management system through assessments, actionable planning and implementation of best practices. 9 Compensation and Benefits As a global employer, the Company is committed to providing market-competitive compensation and benefits to attract and retain great talent across its global footprint.
The Company is committed to continually improving its environment, health and safety management system through assessments, actionable planning, and evaluation and benchmarking of best practices. Compensation and Benefits As a global employer, the Company is committed to providing market-competitive compensation and benefits to attract and retain great talent across its global footprint.
Specific compensation and benefits vary worldwide and are based on regional practices. Diversity and Inclusion As a world leader for welding, cutting, fabrication, and gas control technology solutions, ESAB is dedicated to creating an inclusive, welcoming culture in which every voice is valued. To advance this commitment, we have developed our Diversity, Equity and Inclusion Strategy.
Specific compensation and benefits vary worldwide and are based on regional practices. Diversity and Inclusion ESAB is dedicated to creating an inclusive, welcoming culture in which every voice is valued. To advance this commitment, we have developed our Diversity, Equity and Inclusion Strategy.
For a description of risks related to the regulations that our businesses are subject to, please refer to “Risk Factors—Risks Related to Our Business.” So me of our gas control pro ducts are related to medical device products and are subject to extensive regulation by the United States Food and Drug Administration (the “FDA”), EU Medical Device Regulation (the “EU MDR”), and numerous other federal, state, and foreign governmental authorities.
“Risk Factors—Risks Related to Our Business.” So me of our gas control products are related to medical device products and are subject to extensive regulation by the United States Food and Drug Administration (the “FDA”), European Union Medical Device Regulation (the “EU MDR”) and numerous other federal, state and foreign governmental authorities.
Other nations’ governments have implemented similar export and import control regulations, which may affect our operations or transactions subject to their jurisdictions.
Other nations’ governments have implemented similar export and import control regulations, which may affect our operations or transactions subject to their jurisdictions. For a discussion of risks related to export/import control and economic sanctions laws, refer to Item 1A.
Our strategy is about embracing diversity & inclusion in our everyday actions while empowering and elevating others, leading inclusively, learning about celebrating our differences and ensuring every voice is valued. Labor Relations Approximately 18% o f our U.S. associates are covered by collective bargaining agreements with U.S. trade unions.
Our strategy is about embracing diversity and inclusion in our everyday actions while empowering and elevating others through equal opportunities, leading inclusively and ensuring every voice is valued. 9 Labor Relations Approximate ly 17% of our United States associates are covered by collective bargaining agreements with United States trade unions.
For a discussion of risks related to export/import control and economic sanctions laws, please refer to “Risk Factors—Risks Related to Litigation and Regulatory Compliance—We have done and may continue to do business in countries subject to U.S. sanctions and embargoes.
“Risk Factors—Risks Related to Litigation and Regulatory Compliance— We have done and may continue to do business in countries subject to United States sanctions and embargoes.
The majority of our sales are derived from international operations. We are subject to specific risks associated with international operations.
“Risk Factors — Risks Related to Our Business - The majority of our sales are derived from international operations.
Guided by the Company's Environment, Health & Safety Policy, ESAB strives every day to foster a proactive safety culture.
Employee Safety The safety and well-being of ESAB's associates around the world has been, and always will be, a top priority. Guided by the Company's Environment, Health & Safety Policy, ESAB strives every day to foster a proactive safety culture.
Our talent strategy is also about attracting great talent, elevating the associate experience, retaining our workforce, and building the leadership bench strength needed for our future growth and success. Employee Safety The safety and well-being of ESAB's colleagues around the world has been, and always will be, a top priority.
Our talent strategy is also focused on attracting great talent, elevating the associate experience, retaining our workforce and building the leadership bench strength needed for our future growth and success. We know associate development is critical to our success.
ESAB Corporation is based in North Bethesda, Maryland and employs approximately 9,000 associates and serves customers in approximately 150 countries. ESAB Corporation is a Delaware corporation and was incorporated in 2021 for the purpose of holding the fabrication technology business of Colfax in connection with the separation of ESAB from Colfax.
ESAB is based in North Bethesda, Maryland and employs approximately 9,000 associates and serves customers in approximately 150 countries.
Item 1. Business General Founded in 1904, ESAB Corporation is a world leader in connected fabrication technology and gas control solutions. We provide our partners with advanced equipment, consumables, gas control equipment, robotics and digital solutions.
Item 1. Business General Founded in 1904, ESAB Corporation, is a focused premier industrial compounder. On April 4, 2022, ESAB completed its Separation from Colfax Corporation and became an independent, publicly-traded company, listed on the New York Stock Exchange (“NYSE”). We provide our partners with advanced equipment, consumables, gas control equipment, robotics and digital solutions.
For a discussion of risks related to compliance with environmental and health and safety laws and risks related to past or future releases of, or exposures to, hazardous substances, please refer to “Risk Factors—Risks Related to Business.” Export/Import Compliance We are required to comply with various U.S. export/import control and economic sanctions laws, including: • the International Traffic in Arms Regulations administered by the U.S.
For a discussion of risks related to compliance with environmental and health and safety laws and risks related to past or future releases of, or exposures to, hazardous substances, refer to Item 1A.
Removed
On December 29, 2021, in anticipation of the Distribution (as defined below), certain subsidiaries of Colfax were transferred into the ownership of ESAB in a common-control transaction. We completed the Separation on April 4, 2022 and became an independent, publicly-traded company, listed on the New York Stock Exchange.
Added
For a description of risks related to the regulations that our businesses are subject to, refer to Item 1A.
Removed
The Separation was effected through a pro-rata distribution of 90% of the then outstanding shares of common stock of ESAB Corporation to the holders of common stock of the Former Parent (the “Distribution”). Upon completion of the Distribution, Colfax changed its name to Enovis and continued to hold 10% of the outstanding common stock of ESAB.
Added
To nurture talent and build our bench strength, we offer a variety of global learning and development opportunities available to associates at all levels of our organization. We also offer mechanisms by which our associates can steer and request their own development. Our suite of programs focuses on leadership, business skills and compliance.
Removed
In November 2022, Enovis sold a total of 6.0 million shares of the Company’s common stock as part of a secondary offering. After the secondary offering, Enovis no longer owned any of the Company’s outstanding common stock.
Removed
We continue to actively monitor the effects of COVID-19, including the rise, prevalence and severity of variants of the virus, the related government regulations, and the impacts on our results and operations.
Removed
The pandemic and actions taken in response to it have had a variety of impacts on our results of operations including sales levels, and together with other market dynamics has contributed to inflation and widespread supply chain challenges; including labor, raw materials, and component shortages. For additional information on the risks of COVID-19 to our operations refer to Item 1A.
Removed
“Risk Factors — Risks Related to Our Business — The effects of the COVID-19 pandemic have adversely impacted, and may in the future adversely impact, our results of operations, financial condition, and overall financial performance.” Reportable Segments We conduct our operations through two reportable segments.
Removed
Department of Commerce, Bureau of Industry and Security, which, among other things, impose licensing requirements on the export or re-export of certain dual-use goods, technology and software (which are items that potentially have both commercial and military applications); • the regulations administered by the U.S.
Removed
Department of Treasury, Office of Foreign Assets Control, which implement economic sanctions imposed against designated countries, governments and persons based on United States foreign policy and national security considerations; and • the import regulatory activities of the U.S. Customs and Border Protection.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

117 edited+26 added−48 removed135 unchanged
Biggest changeIf the Distribution, together with certain related transactions, fails to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, Enovis and its stockholders could incur significant tax liabilities, and we could be required to indemnify Enovis for taxes that could be material pursuant to indemnification obligations under the tax matters agreement that we entered into with Enovis on April 4, 2022. 24 The Distribution was conditioned upon, among other things, Colfax’s receipt of a private letter ruling from the IRS and the opinion of Latham & Watkins LLP, tax counsel to Colfax, both of which Colfax received, regarding the qualification of the Distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code.
Biggest changeIf the Distribution, together with certain related transactions, fails to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, Enovis and its stockholders could incur significant tax liabilities, and we could be required to indemnify Enovis for taxes that could be material pursuant to indemnification obligations under the tax matters agreement that we entered into with Enovis on April 4, 2022.
We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The instruments that govern our indebtedness restrict our ability to dispose of assets and may restrict the use of proceeds from those dispositions.
We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The instruments that govern our indebtedness restrict our ability to dispose of assets and may restrict the use of any proceeds from dispositions.
However, our ability to do so will depend on a number of steps, including our ability to: obtain debt or equity financing that we may need to complete proposed acquisitions; identify suitable acquisition candidates; negotiate appropriate acquisition terms; complete the proposed acquisitions; and integrate the acquired business into our existing operations.
However, our ability to do so will depend on a number of steps, including our ability to: identify suitable acquisition candidates; negotiate appropriate acquisition terms; obtain debt or equity financing that we may need to complete proposed acquisitions; complete the proposed acquisitions; and integrate the acquired business into our existing operations.
These registration rights, which pursuant to the agreement will become available to the Rales Holders one year post the Distribution, would facilitate the resale of such securities into the public market, and any such resale would increase the number of shares of our common stock available for public trading.
These registration rights, which pursuant to the agreement will become available to the Rales Holders one year post the Distribution, would facilitate the resale of such securities into public market, and any such resale would increase the number of shares of our common stock available for public trading.
Pursuant to the Separation Agreement, the tax matters agreement, and certain other agreements with Enovis, Enovis has agreed to indemnify us for certain liabilities.
Pursuant to the Separation Agreements, the tax matters agreement, and certain other agreements with Enovis, Enovis has agreed to indemnify us for certain liabilities.
Additionally, some of our hedging activity addresses long-term exposures, such as our net investment in our subsidiaries. If we fail to comply with hedge accounting requirements, the gains or losses on those hedges could be recognized before the offsetting exposure materializes to offset them, potentially causing volatility in our cash or debt balances and therefore our leverage.
Additionally, some of our hedging activity addresses long-term exposures, such as our net investment in our subsidiaries. If we fail to comply with hedge accounting requirements, the gains or losses on those hedges could be recognized before the offsetting exposure materializes to offset them, potentially causing volatility in our earnings, cash or debt balances and therefore our leverage.
Some of our competitors may also have greater financial, marketing and research and development resources than we have or stronger name recognition. As a result, those competitors may be better able to withstand the effects of periodic economic downturns. 17 In addition, pricing pressures could cause us to adjust the prices of some of our products to stay competitive.
Some of our competitors may also have greater financial, marketing and research and development resources than we have or stronger name recognition. As a result, those competitors may be better able to withstand the effects of periodic economic downturns. In addition, pricing pressures could cause us to adjust the prices of some of our products to stay competitive.
Failure to comply with the regulations referenced above or any other regulations could result in civil and criminal, monetary and non-monetary penalties, and any such failure or alleged failure could also damage our reputation, disrupt our business, limit our ability to manufacture, import, export, and sell products and services, result in loss of customers and cause us to incur significant legal and investigatory fees.
Failure to comply with the regulations referenced above or any other regulations could result in civil and criminal, monetary and non-monetary penalties, and any 22 such failure or alleged failure could also damage our reputation, disrupt our business, limit our ability to manufacture, import, export and sell products and services, result in loss of customers and cause us to incur significant legal and investigatory fees.
If our associates represented by trade unions or works councils engage in a strike, work stoppage or other slowdown or if the representation committees responsible for negotiating with such trade unions or works councils are unsuccessful in negotiating new and acceptable agreements when the existing agreements with associates covered by collective bargaining expire, we could experience business disruptions or increased costs.
If our associates represented by trade unions or works councils engage in a strike, work stoppage or other slowdown or if the representation committees responsible for negotiating with such trade unions or works councils are 16 unsuccessful in negotiating new and acceptable agreements when the existing agreements with associates covered by collective bargaining expire, we could experience business disruptions or increased costs.
Moreover, even if we ultimately succeed in recovering from Enovis or such insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks could negatively affect our businesses, financial position, results of operations and cash flows.
Moreover, even if we ultimately succeed 23 in recovering from Enovis or such insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks could negatively affect our businesses, financial position, results of operations and cash flows.
If we are unable to identify suitable acquisition candidates, complete any proposed acquisitions or successfully integrate the businesses we acquire, our growth strategy may not succeed and we may not realize the anticipated benefits of our acquisitions . We intend to seek acquisition opportunities both to expand into new markets and to enhance our position in our existing markets.
If we are unable to identify suitable acquisition candidates, complete proposed acquisitions or successfully integrate the businesses we acquire, our growth strategy may not succeed and we may not realize the anticipated benefits of our acquisitions. We intend to seek acquisition opportunities both to expand into new markets and to enhance our position in our existing markets.
These provisions include, among others: • the inability of our stockholders to call a special meeting; • the inability of our stockholders to act by written consent; • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; • the right of the Board to issue preferred stock without stockholder approval; • the division of the Board into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; • provision that stockholders may only remove directors with cause; and 28 • the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board.
These provisions include, among others: • the inability of our stockholders to call a special meeting; • the inability of our stockholders to act by written consent; 26 • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; • the right of the Board to issue preferred stock without stockholder approval; • the division of the Board into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; • provision that stockholders may only remove directors with cause; and • the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board.
For example, in 2020, we experienced a decline in customer demand for our products and services as a result of the COVID-19 pandemic. Any reduced demand could have a material adverse effect on our business, financial condition and results of operations. The majority of our sales are derived from international operations.
For example, in 2020, we experienced a decline in customer demand for our products and services as a result of the COVID pandemic. Any reduced demand could have a material adverse effect on our business, financial condition and results of operations. The majority of our sales are derived from international operations.
Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar.
Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollar using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar.
Risks Related to Shares of Our Common Stock If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected .
Risks Related to Shares of Our Common Stock If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected .
Pursuant to that certain registration rights agreement we entered into with Mitchell P. Rales and Steven M. Rales (together, the “Rales Holders”), the Rales Holders and their permitted transferees have registration rights for the resale of certain shares of our common stock.
Pursuant to that certain restriction rights agreement we entered into with Mitchell P. Rales and Steven M. Rales (together, the “Rales Holders”), the Rales Holders and their permitted transferees have registration rights for the resale of certain shares of our common stock.
We rely on information technology networks and systems, including the Internet, cloud-based services and third-party service providers, to process, transmit and store electronic information, personally identifiable information, credit card and other financial information, and to manage or support a variety of business processes and activities, including procurement, manufacturing, distribution, invoicing, collection, communication with our employees, customers, dealers and suppliers, business acquisitions and other corporate transactions, compliance with regulatory, legal and tax requirements, and research and development.
We rely on electronic information systems, including our own and third-party networks, the Internet, cloud-based services and third-party service providers, to process, transmit and store electronic information, personally identifiable information, credit card and other financial information and to manage or support a variety of business processes and activities, including procurement, manufacturing, distribution, invoicing, collection, communication with our employees, customers, dealers and suppliers, business acquisitions and other corporate transactions, compliance with regulatory, legal and tax requirements and research and development.
We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due. In addition, we conduct our operations through our subsidiaries.
We may not be able to consummate dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due. In addition, we conduct our operations through our subsidiaries.
Continuing political and social attention to the issue of climate change has resulted in both existing and pending international agreements and national, regional or local legislation and regulatory measures to limit greenhouse gas emissions, such as cap and trade regimes, carbon taxes, restrictive permitting, increased fuel efficiency standards and incentives or mandates for renewable energy.
Continuing political and social attention to the issue of climate change has resulted in both existing and pending international agreements and national, regional or local legislation and regulatory measures to limit greenhouse gas emissions, such as cap and trade regimes, enhanced disclosure regimes, carbon taxes, restrictive permitting, increased fuel efficiency standards and incentives or mandates for renewable energy.
We may not be able to compete successfully with our existing competitors or with new competitors. If we fail to compete successfully, the failure may have a material adverse effect on our business, financial condition and results of operations. Please see “Business—Industry and Competition” for a dditional information about the competitive markets in which we operate.
We may not be able to compete successfully with our existing competitors or with new competitors. If we fail to compete successfully, the failure may have a material adverse effect on our business, financial condition and results of operations. See Item1. “Business—Industry and Competition” for a dditional information about the competitive markets in which we operate.
We expect to continue to confront efforts by hackers and other third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information technology systems and networks and those of third parties upon which we rely. Any such attacks could have a material adverse effect on our business, financial condition, results of operations or liquidity.
We expect to continue to confront efforts by hackers and other third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information systems and those of third parties upon which we rely. Any such attacks could have a material adverse effect on our business, financial condition, results of operations or liquidity.
In addition, our information technology networks and system and those of third parties upon which we rely are subject to security threats and sophisticated cyber-based attacks, including, but not limited to, denial-of-service attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, or physical breaches, that can cause deliberate or unintentional damage, destruction or misuse, manipulation, denial of access to or disclosure of confidential or important information, either directly or by our employees, suppliers or third-party service providers.
In addition, our information system and those of third parties upon which we rely are subject to security threats and sophisticated cyber-based attacks, including, but not limited to, denial-of-service attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, vulnerabilities, or physical breaches, that can cause deliberate or unintentional damage, destruction or misuse, manipulation, denial of access to or disclosure of confidential or important information, either directly or by our employees, suppliers or third-party service providers.
In addition, some of our products contain components manufactured by third parties, which may also have defects. Our product liability insurance policies have limits that may not be sufficient to cover claims made. In addition, this insurance may not continue to be available at a reasonable cost.
In addition, some of our products contain components manufactured by third parties, which may also have defects. Our product liability insurance policies have limits that may not be sufficient to cover claims made against us. In addition, this insurance may not continue to be available at a reasonable cost.
The Russian invasion of Ukraine and the sanctions imposed in response to this crisis have increased the level of economic and political uncertainty in Russia. While we continue to closely monitor the situation and evaluate options, we are meeting current contractual obligations while addressing applicable laws and regulations.
The Russian invasion of Ukraine and the sanctions imposed in response have increased the level of economic and political uncertainty in Russia. While we continue to closely monitor the situation and evaluate options, we are meeting current contractual obligations while addressing applicable laws and regulations.
If operations at any of our manufacturing facilities were to be disrupted as a result of a significant equipment failure, natural disaster or adverse weather conditions (including events that may be caused or exacerbated by climate change), power outage, fire, explosion, terrorism, cyber-based attack, pandemic or other contagious outbreak (such as the COVID-19 pandemic), labor dispute or shortage or other reason, our financial performance could be adversely affected as a result of our inability to meet customer demand for our products.
If operations at any of our manufacturing facilities were to be disrupted as a result of a significant equipment failure, natural disaster or adverse weather conditions (including events that may be caused or exacerbated by climate change), power outage, fire, explosion, terrorism, war, civil disobedience, cyber-based attack, pandemic or other contagious outbreak (such as the COVID pandemic), labor dispute or shortage or other reason, our financial performance could be adversely affected as a result of our inability to meet customer demand for our products.
As the manufacturer of equipment for use in industrial markets, we may be subject to product liability claims. Component failures, manufacturing nonconformances, design defects, or inadequate disclosure of product-related risks or product-related information with respect to our products could result in unsafe conditions, injury or death.
As the manufacturer of equipment for use in industrial markets and healthcare facilities, we may be subject to product liability claims. Component failures, manufacturing nonconformances, design defects, or inadequate disclosure of product-related risks or product-related information with respect to our products could result in unsafe conditions, injury or death.
Specifically, from time to time, certain of our independent foreign subsidiaries sell products to companies and entities located in, or controlled by the governments of, certain countries that are or have previously been subject to sanctions and embargoes imposed by the U.S. government, the United Nations or other countries where we maintain operations.
Specifically, from time to time, certain of our independent foreign subsidiaries sell products to companies and entities located in, or controlled by the governments of, certain countries that are or have previously been subject to sanctions and embargoes imposed by the United States government, the United Nations or other countries where we maintain operations.
For example, pursuant to the Separation Agreement, we have agreed to indemnify Enovis for, among other things, the retained asbestos-related contingencies and liabilities related to the sale of Colfax’s FH and AGH businesses.
For example, pursuant to the Separation Agreements, we have agreed to indemnify Enovis for, among other things, the retained asbestos-related contingencies and liabilities related to the sale of Colfax’s FH and AGH businesses.
For example, from 2016 through 2020, one of our foreign subsidiaries engaged in certain transactions, a limited number of which included U.S. origin goods, either directly or indirectly through distributors, involving sales to specially designated nationals and/or to the Crimea region of Ukraine, which may have been made in violation of relevant trade sanctions or export control laws.
For example, from 2016 through 2020, one of our foreign subsidiaries engaged in certain transactions, a limited number of which included United States origin goods, either directly or indirectly through distributors, involving sales to specially designated nationals and/or to the Crimea region of Ukraine, which may have been made in violation of relevant trade sanctions or export control laws.
Because certain of our independent foreign subsidiaries may have contact with and transact limited business in certain U.S. sanctioned countries, including sales to enterprises controlled by agencies of the governments of such countries, our reputation may suffer due to our association with these countries, which may have a material adverse effect on the price of our common stock and our business, financial condition and results of operations.
Because certain of our independent foreign subsidiaries may have contact with and transact limited business in certain United States sanctioned countries, including sales to enterprises controlled by agencies of the governments of such countries, our reputation may suffer due to our association with these countries, which may have a material adverse effect on the price of our common stock and our business, financial condition and results of operations.
The failure to successfully integrate acquired businesses in a timely manner, or at all, or the incurrence of significant unanticipated expenses associated with integration activities, including information technology integration fees, legal compliance costs, facility closure costs and other restructuring expenses, could have an adverse effect on our business, financial condition and results of operations.
The failure to successfully integrate acquired businesses in a timely manner, or at all, or the occurrence of significant unanticipated expenses associated with integration activities, including information technology integration fees, legal costs, compliance costs, facility closure costs and other restructuring expenses, could have an adverse effect on our business, financial condition and results of operation.
We submitted a voluntary disclosure report to relevant U.S. government agencies regarding these transactions. On March 26, 2021 and August 26, 2021, Colfax received letters from BIS and OFAC, respectively, warning Colfax against future violations, and closing their respective matters without further action. No further communications from any other relevant U.S. government agencies have been received.
We submitted a voluntary disclosure report to relevant United States government agencies regarding these transactions. On March 26, 2021 and August 26, 2021, Colfax received letters from BIS and OFAC, respectively, warning Colfax against future violations, and closing their respective matters without further action. No further communications from any other relevant United States government agencies have been received.
The California Privacy Rights Act, which went into effect in January 2023, amended the CCPA to provide for additional privacy protections. Similar legislation has been adopted in Virginia, Colorado, Utah and Connecticut, all of which will go into effect in 2023.
The California Privacy Rights Act, which went into effect in January 2023, amended the CCPA to provide for additional privacy protections. Similar legislation has been adopted in Virginia, Colorado, Utah and Connecticut, all of which came into effect in 2023.
Actual or alleged violations of these laws could lead to substantial fines or other sanctions which could result in substantial costs. In addition, Syria, Sudan and Iran and certain other sanctioned countries currently are identified by the U.S. State Department as state sponsors of terrorism and have been subject to restrictive sanctions.
Actual or alleged violations of these laws could lead to substantial fines or other sanctions which could result in substantial costs. In addition, Syria, Sudan and Iran and certain other sanctioned countries currently are identified by the United States State Department as state sponsors of terrorism and have been subject to restrictive sanctions.
In addition to the environmental, health, safety, anti-corruption, export control, privacy, data protection, data security and other regulations noted above, our businesses are also subject to extensive regulation by U.S. and non-U.S. governmental and self-regulatory entities at the supranational, federal, state, local, and other jurisdictional levels.
In addition to the environmental, health, safety, anti-corruption, export control, privacy, data protection, data security and other regulations noted above, our businesses are also subject to extensive regulation by United States and non-United States governmental and self-regulatory entities at the supranational, federal, state, local and other jurisdictional levels.
The separation and certain other agreements with Enovis, which we entered into with Enovis on April 4, 2022 in connection with the Separation (the “Separation Agreement”), provides for, among other things, indemnification obligations (for uncapped amounts) designed to make us financially responsible for all liabilities that Enovis may incur or may exist relating to our business activities (as currently and historically conducted) and those of Colfax’s divested FH and AGH businesses, whether incurred prior to or after the Separation.
The separation and certain other agreements with Enovis, which we entered into with Enovis on April 4, 2022 in connection with the Separation (collectively referred to as the “Separation Agreements”), provide for, among other things, indemnification obligations (for uncapped amounts) designed to make us financially responsible for all liabilities that Enovis may incur or may exist relating to our business activities (as currently and historically conducted) and those of Colfax’s divested FH and AGH businesses, whether incurred prior to or after the Separation.
Our ability to engage in equity transactions could be limited or restricted in order to preserve, for U.S. federal income tax purposes, the qualification of the Distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code.
Our ability to engage in equity transactions could be limited or restricted in order to preserve, for United States federal income tax purposes, the qualification of the Distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code.
If the Distribution is ultimately determined not to so qualify for tax free treatment, the Distribution could be treated as a taxable disposition of shares of ESAB stock by Enovis and as a taxable dividend or capital gain to Enovis’s stockholders for U.S. federal income tax purposes.
If the Distribution is ultimately determined not to so qualify for tax free treatment, the Distribution could be treated as a taxable disposition of shares of ESAB stock by Enovis and as a taxable dividend or capital gain to Enovis’s stockholders for United States federal income tax purposes.
If any of these factual assumptions, representations, or undertakings are incorrect or not satisfied, Enovis may not be able to rely on the private letter ruling or opinion, and Enovis and its stockholders could be subject to significant U.S. federal income tax liabilities.
If any of these factual assumptions, representations, or undertakings are incorrect or not satisfied, Enovis may not be able to rely on the private letter ruling or opinion, and Enovis and its stockholders could be subject to significant United States federal income tax liabilities.
Certain of our independent foreign subsidiaries have conducted and may continue to conduct business in countries subject to U.S. sanctions and embargoes or may engage in business dealings with parties whose property or property interests may be blocked under non-country-specific U.S. sanctions programs.
Certain of our independent foreign subsidiaries have conducted and may continue to conduct business in countries subject to United States sanctions and embargoes or may engage in business dealings with parties whose property or property interests may be blocked under non-country-specific United States sanctions programs.
See “Business—Legal Proceedings.” In connection with the Separation, Enovis agreed to indemnify us for certain liabilities. However, there can be no assurance that such indemnity will be sufficient to insure us against the full amount of such liabilities, or that Enovis’s ability to satisfy its indemnification obligations will not be impaired in the future.
See Item 3. “Legal Proceedings.” In connection with the Separation, Enovis agreed to indemnify us for certain liabilities. However, there can be no assurance that such indemnity will be sufficient to insure us against the full amount of such liabilities, or that Enovis’s ability to satisfy its indemnification obligations will not be impaired in the future.
With the exception of the U.S. sanctions against Cuba and Iran, the applicable sanctions and embargoes generally do not prohibit our foreign subsidiaries from selling non-U.S.-origin products and services to countries that are or have previously been subject to sanctions and embargoes.
With the exception of the United States sanctions against Cuba and Iran, the applicable sanctions and embargoes generally do not prohibit our foreign subsidiaries from selling non-United States-origin products and services to countries that are or have previously been subject to sanctions and embargoes.
However, our U.S. personnel, each of our domestic subsidiaries, as well as our employees of foreign subsidiaries who are U.S. citizens, are prohibited from participating in, approving or otherwise facilitating any aspect of the business activities in those countries or with persons prohibited under U.S. sanctions.
However, our United States personnel, each of our domestic subsidiaries, as well as our employees of foreign subsidiaries who are United States citizens, are prohibited from participating in, approving or otherwise facilitating any aspect of the business activities in those countries or with persons prohibited under United States sanctions.
Certain of our gas control products are classified as medical devices that are subject to regulation by the U.S. Food and Drug Administration and under the European Union Medical Device Regulation, as well as by other federal and local governmental agencies, and by certain accrediting bodies.
Certain of our gas control products are classified as medical devices that are subject to regulation by the United States Food and Drug Administration and under the European Union Medical Device Regulation, as well as by other federal and local governmental agencies and by certain accrediting bodies.
This could materially adversely affect our business, financial condition, or results of operations and result in a diversion of the time and resources of our management and Board of Directors. 29
This 27 could materially adversely affect our business, financial condition, or results of operations and result in a diversion of the time and resources of our management and Board of Directors. 28
In addition, volatility in commodity prices can negatively affect the level of these new activities and can result in postponement of capital spending decisions or the delay or cancellation of existing orders.
In addition, volatility in commodity prices can negatively affect the level of these new activities and can postpone capital spending decisions or the delay or cancellation of existing orders.
In addition, certain U.S. states and municipalities have enacted legislation regarding investments by pension funds and other retirement systems in companies that have business activities or contacts with countries that have been identified as state sponsors of terrorism and similar legislation may be pending in other states.
In addition, certain states and municipalities within the United States have enacted legislation regarding investments by pension funds and other retirement systems in companies that have business activities or contacts with countries that have been identified as state sponsors of terrorism and similar legislation may be pending in other states.
Failure to comply with these laws could harm our business by subjecting us to sanctions by the U.S. government, including substantial monetary penalties, denial of export privileges and debarment from U.S. government contracts.
Failure to comply with these laws could harm our business by subjecting us to sanctions by the United States government, including substantial monetary penalties, denial of export privileges and debarment from United States government contracts.
Additional tariffs imposed by the United States on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, could result in an increase in supply chain costs that we may not be able to offset or otherwise adversely impact our results of operations.
Additional tariffs imposed by the United States on imports from China or other countries, or retaliatory trade measures in response, could result in an increase in supply chain costs that we may not be able to offset or otherwise adversely impact our results of operations.
These risks include: economic or political instability; partial or total expropriation of international assets; limitations on ownership or participation in local enterprises; trade protection measures by the United States or other nations including China, including tariffs or import-export restrictions or licensing requirements, and other changes in trade relations; currency exchange rate fluctuations and restrictions on currency repatriation; inflation; labor, employment and environmental, health and safety laws and regulations that may be more restrictive than in the United States; changes in laws and regulations, including taxation policies, or in how such provisions are interpreted or administered difficulties in enforcing our rights outside the United States, including intellectual property rights; difficulties in hiring and maintaining qualified staff and managing geographically diverse operations; the disruption of operations from natural disasters or adverse weather conditions (including events that may be caused or exacerbated by climate change), world health events, including the COVID-19 pandemic, labor or political disturbances, terrorist activities, insurrection or war; the imposition of additional foreign governmental controls or regulations on the sale of our products; 11 increased costs of transportation or shipping; the transition away from LIBOR to the Secured Overnight Financing Rate as a benchmark reference for short-term interests; and uncertainties arising from local business practices and cultural considerations.
These risks include: economic or political instability; partial or total expropriation of international assets; limitations on ownership or participation in local enterprises; trade protection measures by the United States or other nations, including tariffs or import-export restrictions or licensing requirements and other changes in trade relations; currency exchange rate fluctuations and restrictions on currency repatriation; inflation; labor, employment and environmental, health and safety laws and regulations that may be more restrictive than in the United States; changes in laws and regulations, including taxation policies, or in how such provisions are interpreted or administered; difficulties in enforcing our rights outside the United States, including intellectual property rights; difficulties in hiring and maintaining qualified staff and managing geographically diverse operations; the disruption of operations from natural or man- 11 made disasters or adverse weather conditions (including events that may be caused or exacerbated by climate change), world health events, including COVID, labor or political disturbances, terrorist activities, insurrection or war; the imposition of additional foreign governmental controls or regulations on the sale of our products; increased costs of transportation or shipping; and uncertainties arising from local business practices and cultural considerations.
The market price and trading volume of our common stock has fluctuated substantially and may continue to do so due to a number of factors, some of which may be beyond our control, including: • our quarterly or annual earnings, or those of other companies in our industry; 23 • the failure of securities analysts to cover our common stock; • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • changes to the regulatory and legal environment in which we operate; • the effects of COVID-19; • overall market fluctuations and domestic and worldwide economic conditions; and • other factors described in these “Risk Factors” and elsewhere in this Form 10-K.
The market price and trading volume of our common stock has fluctuated substantially and may continue to do so due to a number of factors, some of which may be beyond our control, including: • our quarterly or annual earnings, or those of other companies in our industry; • the failure of securities analysts to cover our common stock; • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; 25 • the operating and stock price performance of other comparable companies; • changes to the regulatory and legal environment in which we operate; • the impact of global conflicts, natural or man-made disasters or global health events; • overall market fluctuations and domestic and worldwide economic conditions; and • other factors described in these “Risk Factors” and elsewhere in this Form 10-K.
A failure of or breach in information technology security of our own systems, or those of our third-party vendors, could expose us and our employees, customers, dealers and suppliers to risks of misuse of information or systems, the compromise of confidential information, denial of access to, manipulation or destruction of data, defective products, production downtimes and operations disruptions.
A failure of or breach in information technology security of our own systems, or those of our 14 third-party vendors, could expose us and our employees, customers, dealers and suppliers to risks of unauthorized access, exfiltration, loss, disclosure or misuse of our, customer, employee or other third-party information or systems, the compromise of confidential information, denial of access to, manipulation or destruction of data, defective products, production downtimes and operations disruptions.
We are subject to specific risks associated with international operations. In the yea r ended December 31, 2022, we derived 78% of our sales from operations outside of the United States and, as of that date, we had principal manufacturing facilities in 25 countries in addition to the United States.
We are subject to specific risks associated with international operations. In the year ended December 31, 2023, we derived 78% of our sales from operations outside of the United States and, as of that date, we had principal manufacturing facilities in 13 countries in addition to the United States.
See “Description of Certain Indebtedness.” This debt could have important, adverse consequences to us and our investors, including: • requiring a substantial portion of our cash flow from operations to make interest payments; • making it more difficult to satisfy other obligations; • increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our businesses; • limiting our ability to pay dividends; • limiting our flexibility in planning for, or reacting to, changes in our businesses and industries; and • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares of our common stock. 14 The instruments governing the debt financing contain restrictive covenants that limit our ability to engage in activities that may be in our long-term interest, including for example EBITDA-based leverage and interest coverage ratios.
See “Description of Certain Indebtedness.” This debt could have important, adverse consequences to us and our investors, including: • requiring a substantial portion of our cash flow from operations to make interest payments; • making it more difficult to satisfy other obligations; • increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our businesses; • limiting our ability to pay dividends; • limiting our flexibility in planning for, or reacting to, changes in our businesses and industries; and • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares of our common stock.
These information technology networks and systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures or computer viruses.
These information systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, computer viruses or other cybersecurity incidents.
In such case, Enovis and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities.
In such case, Enovis and its stockholders that are subject to United States federal income tax could incur significant United States federal income tax liabilities.
As of December 31, 2022, approximately 34% of our associates were represented by a number of different trade unions and works councils. Further, as of that date, we had approxim ately 7,800 associates, representing approximately 87% of ou r worldwide associate base, in foreign locations.
As of December 31, 2023, approximately 38% of our associates were represented by a number of different trade unions and works councils. Further, as of that date, we had approxim ately 7,700 associates, representing approximately 86% of ou r worldwide associate base, in foreign locations.
Significant disruptions in, or breaches in security of, our information technology infrastructure or data can adversely affect our business and financial statements.
Significant disruptions in, or breaches in security of, our electronic information systems or data can adversely affect our business and financial statements.
For the year ended December 31, 2022, our operations in Russia represented approximately 6% of our total revenue, and approximately $20 million in Net income. Russia also had approximately 5% of our total net assets as of December 31, 2022.
For the year ended December 31, 2023, our operations in Russia represented approximately 6% of our total revenue, and approximately $12 million in Net income. Russia also had approximately 4% of our total net assets as of December 31, 2023.
For information about our business in Russia, see also “—Our operations in Russia are exposed to risks related to the Russian invasion of Ukraine and the international response to the invasion.” Our efforts to comply with U.S. and other applicable sanction and embargo laws may not be effective, and as a consequence we may face enforcement or other actions if our compliance efforts are not or are perceived as not being wholly effective.
For information about our business in Russia, see also “ Our operations are exposed to risks related to the Russian invasion of Ukraine and could be impacted by other wars and geopolitical turmoil .” Our efforts to comply with United States and other applicable sanction and embargo laws may not be effective, and as a consequence we may face enforcement or other actions if our compliance efforts are not or are perceived as not being wholly effective.
We could be subject to environmental liabilities in the future as a result of historic or current operations that have resulted or will result in contamination. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
We could be subject to environmental liabilities in the future as a result of historic or current operations, including historic operations at properties we acquire from third parties, which have resulted or will result in contamination. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
As of December 31, 2022, we have approximately $1.2 billion of outstanding indebtedness with the ability to borrow incremental $500 million under the credit facility and an additional $77 million of indebtedness pursuant to certain uncommitted credit lines. This indebtedness could adversely affect our businesses and our ability to meet our obligations and pay dividends.
As of December 31, 2023, we have approximately $1 billion of outstanding indebtedness with the ability to borrow increment al $718 million under the credit facility and an additional $78 million pursuant to certain uncommitted credit lines. This indebtedness could adversely affect our businesses and our ability to meet our obligations and pay dividends.
Continuing ownership of shares of Enovis common stock and equity awards could create, or appear to create, potential conflicts of interest if we and Enovis face decisions that could have implications for both Enovis and us. 25 In addition, one of Enovis’s former executive officers is a member of our Board, and two members of Enovis’s board of directors serve on our Board, any of which could create, or appear to create, potential conflicts of interest when we and Enovis encounter opportunities or face decisions that could have implications for both companies or in connection with the allocation of such director’s time between Enovis and us.
In addition, one of Enovis’s former executive officers is a member of our Board, and one member of Enovis’s board of directors serves on our Board, any of which could create, or appear to create, potential conflicts of interest when we and Enovis encounter opportunities or face decisions that could have implications for both companies or in connection with the allocation of such director’s time between Enovis and us.
As a result, pension funds and other retirement systems may be subject to reporting requirements with respect to investments in companies such as ESAB or may be subject to limits or prohibitions with respect to those investments that may have a material adverse effect on the price of our common stock and our business, financial condition and results of operations. 20 If we fail to comply with export control regulations, we could be subject to substantial fines or other sanctions, which could have a material adverse effect on our business, financial condition and results of operations.
As a result, pension funds and 20 other retirement systems may be subject to reporting requirements with respect to investments in companies such as ESAB or may be subject to limits or prohibitions with respect to those investments that may have a material adverse effect on the price of our common stock and our business, financial condition and results of operations.
See “Business—Legal Proceedings” and “Note 19 Commitments and Contingencies.” 19 For purposes of our financial statements, we have estimated the future claims exposure and the amount of insurance available based upon certain assumptions with respect to future claims and liability costs.
Note 19, “Commitments and Contingencies.” For purposes of our financial statements, we have estimated the future claims exposure and the amount of insurance available based upon certain assumptions with respect to future claims and liability costs.
The markets we serve are highly competitive and some of our competitors may have superior resources. If we are unable to respond successfully to this competition, this could reduce our sales and operating margins. Our business operates in highly fragmented and competitive markets.
The markets we serve are highly competitive. If we are unable to respond successfully to this competition, this could reduce our sales and operating margins. Our business operates in highly fragmented and competitive markets.
We and our business are subject to international, federal, state and local environmental and safety laws and regulations, including laws and regulations governing emissions of regulated air pollutants and greenhouse gases; discharges of wastewater and storm water; storage and handling of raw materials; the use, manufacture, handling, storage and disposal of hazardous materials; generation, storage, transportation and disposal of regulated wastes; and laws and regulations governing worker safety.
We and our business are subject to international, federal, state and local environmental and safety laws and regulations, including laws and regulations governing emissions of regulated air pollutants and greenhouse gases; discharges of wastewater and storm water; storage and handling of raw materials; the use, manufacture, handling, storage and disposal of hazardous materials; generation, storage, transportation and disposal of regulated wastes; and laws and regulations governing worker safety. 21 These requirements impose certain responsibilities on our business, including the obligation to obtain and maintain various environmental permits.
See “Business—Legal Proceedings.” We have done and may continue to do business in countries subject to U.S. sanctions and embargoes. Failure to comply with various sanction and embargo laws may result in enforcement or other regulatory actions.
See Item 3.”Legal Proceedings.” We have done and may continue to do business in countries subject to United States sanctions and embargoes. Failure to comply with various sanction and embargo laws may result in enforcement or other regulatory actions.
Our operations in Russia are exposed to risks related to the Russian invasion of Ukraine and the international response to the invasion. The Russian invasion of Ukraine has significantly escalated tensions among the United States, the North Atlantic Treaty Organization (“NATO”) member states, and Russia, and has led to macroeconomic and geopolitical instability.
Our operations are exposed to risks related to the Russian invasion of Ukraine and could be impacted by other wars and geopolitical turmoil. The Russian invasion of Ukraine has significantly escalated tensions among the United States, the North Atlantic Treaty Organization (“NATO”) member states and Russia and has led to macroeconomic and geopolitical instability.
A number of countries where we do business, including the United States and many countries in the European Union, have implemented, and are considering implementing, changes in relevant tax, accounting and other laws, regulations and interpretations. Additionally, longs tanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are subject to potential evolution.
A number of the countries where we operate have implemented, and are considering implementing, changes in relevant tax, accounting and other laws, regulations and interpretations. Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are subject to potential evolution.
Some of our products manufactured or assembled in the United States are subject to the U.S. Export Administration Regulations, administered by the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”), which require that an export license is obtained before such products can be exported to certain countries, and the U.S.
Some of our products manufactured or assembled in the United States are subject to the United States Export Administration Regulations, administered by the United States Department of Commerce, Bureau of Industry and Security (“BIS”), which require that an export license is obtained before such products can be exported to certain countries, and the United States Treasury Department’s Office of Foreign Assets Control’s (“OFAC”) trade and economic sanctions programs.
In connection with the Separation, we agreed to indemnify the Former Parent for, among other things, the retained asbestos-related contingencies and liabilities related to these businesses.
In connection with the Separation, we agreed to indemnify the Former Parent for, among other things, the retained asbestos-related contingencies 19 and liabilities related to these businesses. See Item 3. “Legal Proceedings” and Part II, Item 8.
Accordingly, the historical financial information for periods prior to the Separation included in this Form 10-K does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below: • prior to the Separation, our businesses were operated by Colfax as part of its broader corporate organization, rather than as a separate, publicly traded company.
Accordingly, the historical financial information for periods prior to the Separation included in this Form 10-K does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future.
While local and global supply chains have been impacted by the conflict, particularly with respect to the sourcing and cost of certain raw materials, our supply chain has not been materially adversely impacted as of the date of this Form 10-K.
While local and global supply chains have been impacted by the conflict, particularly with respect to the sourcing and cost of certain raw materials, our supply chain has not been materially adversely impacted as of the date of this Form 10-K. Further, we have incorporated applicable sanctions and export controls into our existing screening and monitoring procedures in Russia.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures, or to dispose of material assets or operations, alter our dividend policy, seek additional debt or equity capital or restructure or refinance our indebtedness.
We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. 15 If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures, or to dispose of material assets or operations, alter our dividend policy, seek additional debt or equity capital or restructure or refinance our indebtedness.
In addition, under various federal, state and local laws, regulations and ordinances, and, in some instances, international laws, relating to the protection of the environment, a current or former owner or operator of real property may be liable for the cost to remove or remediate contamination on, under, or released from such property and for any damage to natural resources, such as soil or groundwater, resulting from such contamination. 21 Similarly, a generator of waste can be held responsible for contamination resulting from the treatment or disposal of such waste at any off-site location (such as a landfill), regardless of whether the generator arranged for the treatment or disposal of the waste in compliance with applicable laws.
In addition, under various federal, state and local laws, regulations and ordinances, and, in some instances, international laws, relating to the protection of the environment, a current or former owner or operator of real property may be liable for the cost to remove or remediate contamination on, under, or released from such property and for any damage to natural resources, such as soil or groundwater, resulting from such contamination.
We are subject to a variety of increasingly stringent environmental and health and safety laws for which compliance, or related liabilities, could be costly.
Moreover, if we fail to comply with these laws and regulations, we could be subject to fines and other penalties. We are subject to a variety of increasingly stringent environmental and health and safety laws for which compliance, or related liabilities, could be costly.
Additionally, political and economic instability and changes in government regulations in China and other parts of Asia or any pandemics or other contagious outbreaks (such as the COVID-19 pandemic), could affect our ability to continue to receive materials from suppliers there.
Additionally, changes in government regulations, any pandemics or other contagious outbreaks, or political and economic instability could affect our ability to continue to receive materials from suppliers in the impacted region.
These requirements impose certain responsibilities on our business, including the obligation to obtain and maintain various environmental permits. If we were to fail to comply with these requirements or fail to obtain or maintain a required permit, we could be subject to penalties and be required to undertake corrective action measures to achieve compliance.
If we were to fail to comply with these requirements or fail to obtain or maintain a required permit, we could be subject to penalties and be required to undertake corrective action measures to achieve compliance.
Each plan’s funding position is affected by the investment performance of the plan’s investments, changes in the fair value of the plan’s assets, the type of investments, the life expectancy of the plan’s members, changes in the actuarial assumptions used to value the plan’s liabilities, changes in the rate of inflation and interest rates, our financial position, as well as other changes in economic conditions. 16 Furthermore, since a significant proportion of the plans’ assets are invested in publicly traded debt and equity securities, they are, and will be, affected by market risks.
Each plan’s funding position is affected by the investment performance of the plan’s investments, changes in the fair value of the plan’s assets, the type of investments, the life expectancy of the plan’s members, changes in the actuarial assumptions used to value the plan’s liabilities, changes in the rate of inflation and interest rates, our financial position, as well as other changes in economic conditions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2022 we had a total of five production facilities in the United States, representing a total of 0.6 million and 0.5 million square feet of owned and leased space, respectively, and 25 production facilities outside the U.S., representing a total of 9.9 million and 1.9 million square feet of owned and leased space, respectively, in 14 countries in Central and Eastern Europe, Central and South America and Asia.
Biggest changeAs of December 31, 2023 we had a total of 5 production facilities in the United States, representing a total of 0.6 million and 0.5 million square feet of owned and leased space, respectively, and 22 production facilities outside the United States, representing a total of 9.6 million and 1.6 million square feet of owned and leased space, respectively, in 13 countries in Central and Eastern Europe, Central and South America and Asia.
Item 2. Properties Our corporate headquarters are located in North Bethesda, Maryland in a facility that we lease.
Item 2. Properties Our corporate headquarters are located in North Bethesda, Maryland in a leased facility.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeHe began his legal career at Schulte Roth & Zabel LLP in New York. Mr. Jewell earned his bachelor’s degree in Philosophy and Political Science from Washington University in St. Louis, and his law degree from The University of Pennsylvania Carey Law School, where he also received a Certificate in Business and Public Policy from The Wharton School.
Biggest changeJewell was in private practice at Hogan Lovells LLP, where he focused on securities law and corporate governance, mergers and acquisitions and capital market transactions. He began his legal career at Schulte Roth & Zabel LLP in New York. Mr. Jewell earned his bachelor’s degree in Philosophy and Political Science from Washington University in St.
Johnson is qualified as a CPA in Australia and holds an undergraduate degree (BSSc) from Queens University, Northern Ireland, a master’s degree in accounting (MAcc) from Macquarie University, Australia, and an M.B.A. from Hasselt University, Belgium. Olivier Biebuyck has been President, Fabrication Technology of ESAB since January 2023. Prior to his current role, Mr.
Johnson is a qualified Australian CPA and holds an undergraduate degree (BSSc) from Queens University, Northern Ireland, a master’s degree in accounting (MAcc) from Macquarie University, Australia, and an M.B.A. from Hasselt University, Belgium. Olivier Biebuyck has been President, Fabrication Technology of ESAB since January 2023. Prior to his current role, Mr.
Mlingo worked for Ingersoll Rand, where he served in various roles of increasing responsibility within corporate development and strategy, product management, and capital markets. Mr. Mlingo holds a bachelor’s degree with Honors from the University of Zimbabwe and an MBA from Howard University. 32 PART II
Mlingo worked for Ingersoll Rand, a diversified industrial company, where he served in various roles of increasing responsibility within corporate development and strategy, product management and capital markets. Mr. Mlingo holds a bachelor’s degree with Honors from the University of Zimbabwe and an MBA from Howard University. 32 PART II
Prior to joining ESAB, Mr. Kambeyanda most recently served as the President Americas for Eaton Corporation’s Hydraulics Group. Mr. Kambeyanda joined Eaton in 1995 and held a variety of positions of increasing responsibility in engineering, quality, e-commerce, product strategy, and operations management in the U.S., Mexico, Europe and Asia. Mr.
Prior to joining ESAB, Mr. Kambeyanda most recently served as the President Americas for Eaton Corporation’s Hydraulics Group. Mr. Kambeyanda joined Eaton in 1995 and held a variety of positions of increasing responsibility in engineering, quality, e-commerce, product strategy and operations management in the United States, Mexico, Europe and Asia. Mr.
Kambeyanda 52 President and Chief Executive Officer and Director Kevin Johnson 47 Chief Financial Officer Olivier Biebuyck 52 President, Fabrication Technology Michele Campion 46 Chief Human Resources Officer John Dion 58 Senior Vice President, ESAB Business Excellence Curtis Jewell 41 Senior Vice President, General Counsel and Corporate Secretary Eleanor Lukens 58 President, Americas Vusa Mlingo 53 Senior Vice President, Strategy and Business Development Shyam P.
Kambeyanda 53 President and Chief Executive Officer and Director Kevin Johnson 48 Chief Financial Officer Olivier Biebuyck 53 President, Fabrication Technology Michele Campion 47 Chief Human Resources Officer Curtis Jewell 42 Senior Vice President, General Counsel and Corporate Secretary Eleanor Lukens 59 President, Americas Vusa Mlingo 54 Senior Vice President, Strategy and Business Development Shyam P.
Kevin Johnson has been Chief Financial Officer of ESAB since May 2019. From 2017 to 2019, he served as Vice President, Finance, of Colfax, where his responsibilities included leading investor relations, financial planning and analysis and supporting acquisition diligence and integration. Prior to that, Mr.
From 2017 to 2019, he served as Vice President, Finance, of Colfax Corporation (now Enovis), where his responsibilities included leading investor relations, financial planning and analysis and supporting acquisition diligence and integration. Prior to that, Mr.
Johnson held a number of senior finance and system implementation roles at Colfax companies from 2001 to 2017, during which time he gained extensive global experience in roles of increasing responsibility including as Chief Financial Officer for Howden Africa, a South African publicly-listed company. Mr.
Johnson joined Howden in 2001 and held several roles of increasing responsibility, during which time he gained extensive global experience in Asia, Europe and Africa including as Executive Director and Chief Financial Officer for Howden Africa, a South African publicly-listed company. Mr.
Campion earned a bachelor’s degree in Biology from University of Pittsburgh at Johnstown and an M.S. degree in Biotechnology with a concentration in Biotech Enterprise from Johns Hopkins University. 31 John Dion has been Senior Vice President, ESAB Business Excellence (EBX) since February 2023. Mr. Dion joined ESAB in May 2022 as Vice President, ESAB Business Excellence. Mr.
Campion earned a bachelor’s degree in Biology from University of Pittsburgh at Johnstown and an M.S. degree in Biotechnology with a concentration in Biotech Enterprise from Johns Hopkins University. 31 Curtis Jewell has been Senior Vice President and Corporate Secretary of ESAB Corporation since April 2022 and previously served as General Counsel of ESAB.
Kambeyanda maintains a keen international perspective on driving growth and business development in emerging markets. Mr. Kambeyanda holds bachelor’s degrees in Physics and General Science from Coe College in Iowa and in Electrical Engineering from Iowa State University. Mr. Kambeyanda also earned his M.B.A from Kellogg School of Management at Northwestern University and is a Six Sigma Green Belt.
Kambeyanda holds bachelor’s degrees in Physics and General Science from Coe College in Iowa and in Electrical Engineering from Iowa State University. Mr. Kambeyanda also earned his M.B.A from Kellogg School of Management at Northwestern University and is a Six Sigma Green Belt. Kevin Johnson has been Chief Financial Officer of ESAB since May 2019.
Eleanor Lukens has been President, Americas of ESAB Corporation since January 2023. Ms. Lukens oversees ESAB’s fabrication technology business in North America and South America. Before joining ESAB, Ms. Lukens served in multiple leadership roles at AMETEK, a leading global manufacturer of electronic instruments and electromechanical devices, for fifteen years.
Lukens served in multiple leadership roles at AMETEK, a leading global manufacturer of electronic instruments and electromechanical devices, for fifteen years.
Prior to his appointment at ESAB, he was the Corporate Secretary of Colfax Corporation, where he held roles of increasing responsibility since joining in February 2011. Before joining Colfax, Mr. Jewell was in private practice at Hogan Lovells LLP, where he focused on securities law and corporate governance, mergers and acquisitions, and capital market transactions.
He has significant experience leading legal teams through complex acquisitions and crossborder initiatives while driving process improvement. Prior to his appointment at ESAB, he was the Corporate Secretary of Colfax Corporation, where he held roles of increasing responsibility since joining in February 2011. Before joining Colfax, Mr.
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Dion is responsible for leading ESAB’s EBX journey globally. In this role, he develops and leads the strategy and roadmap for strengthening and scaling the EBX culture. He is an industry executive with 35 years of industrial and life sciences experience. For over twenty years, Mr.
Added
Kambeyanda maintains a keen international perspective on driving growth and business development in emerging markets. Mr. Kambeyanda also serves on the board of directors and Audit Committee of Veralto Corporation, a global leader in essential water and product quality solutions that was spun off from Danaher Corporation in October 2023. Mr.
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Dion held positions of increasing responsibility at Danaher Corporation, most recently serving as a Senior Vice President with responsibility for service, customer service and the Danaher Business System within Danaher’s Pall business from May 2016 to April 2019 and Chief Transition Officer and Danaher Business System Leader in connection with Danaher’s acquisition of GE BioPharma from April 2019 until May 2021.
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He leads the Company’s financial planning, controlling, tax, treasury, investor relations and information technology functions and is responsible for developing and executing the financial strategy to support the achievement of the Company’s business objectives.
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Mr. Dion provided consulting services to ESAB and PHC Holdings Corporation from February 2022 until he joined ESAB in May 2022. Mr. Dion earned degrees in Electrical Engineering and Business Administration from the University of Connecticu t.
Added
Louis, and his law degree from The University of Pennsylvania Carey Law School, where he also received a Certificate in Business and Public Policy from The Wharton School. Eleanor Lukens has been President, Americas of ESAB Corporation since January 2023. Ms. Lukens oversees ESAB’s fabrication technology business in North America and South America. Before joining ESAB, Ms.
Removed
Curtis Jewell has been Senior Vice President and Corporate Secretary of ESAB Corporation since April 2022 and previously served as General Counsel of ESAB. He has significant experience leading legal teams through complex acquisitions and crossborder initiatives while driving process improvement.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe payment of dividends in the future and the timing and amount thereof, to our stockholders will fall within the discretion of our Board.
Biggest changeIn addition, on February 22, 2024, our Board declared a quarterly cash dividend of $0.06 per share of ESAB’s common stock to our stockholders of record as of March 29, 2024. The payment of dividends to our stockholders in the future, and the timing and amount thereof will fall within the discretion of our Board.
The graph tracks the performance of a $100 investment, assuming reinvestment of dividends, in our common stock and in each index from April 5, 2022, the date our stock commenced regular-way trading on the New York Stock Exchange, to December 31, 2022.
The graph tracks the performance of a $100 investment, assuming reinvestment of dividends, in our common stock and in each index from April 5, 2022, the date our stock commenced regular-way trading on the New York Stock Exchange, to December 31, 2023. 33
The Board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our then existing debt agreements, industry practice, legal requirements and other factors that the Board deems relevant.
The Board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our then existing debt agreements, industry practice, legal requirements and other factors that the Board deems relevant. Issuer Repurchase of Equity Securities None. Recent Issuances of Unregistered Securities None.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock began trading on the New York Stock Exchange under the symbol ESAB on April 5, 2022. As of February 28, 2023, ther e were 1,337 holders of record of our Common stock.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock began trading on the New York Stock Exchange under the symbol ESAB on April 5, 2022. As of February 22, 2024, there were 1,554 holders of record of our common stock.
Issuer Repurchase of Equity Securities None Recent Issuances of Unregistered Securities None Stock Performance Graph The graph below compares the cumulative total return of holders of our common stock with the cumulative total return of the S&P MidCap 400 Index ("S&P 400") and the S&P MidCap 400 Industrials Index ("S&P 400 Industrials”).
Stock Performance Graph The graph below compares the cumulative total return of holders of our common stock with the cumulative total return of the S&P MidCap 400 Index (the "S&P 400") and the S&P MidCap 400 Industrials Index (the "S&P 400 Industrials”).
We declared and paid a quarterly dividend of $0.05 per share of ESAB’s common stock to our stockholders of record for the second, third and fourth quarters of 2022. In addition, on March 2, 2023, our Board declared a quarterly cash dividend of $0.05 per share of ESAB’s common stock to our stockholders of record as of March 31, 2023.
We declared and paid a quarterly dividend of $0.05 per share of ESAB’s common stock to our stockholders of record for the first quarter of 2023 and a quarterly dividend of $0.06 per share of ESAB’s common stock to our stockholders of record for the second, third and fourth quarters of 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

95 edited+17 added−35 removed75 unchanged
Biggest changeYear Ended December 31, 2021 Americas EMEA & APAC Total (Dollars in millions) Net income from continuing operations (GAAP) $ 238.7 Income tax expense 80.4 Interest expense (income) and other, net (1.7) Pension settlement gain (11.2) Operating income (GAAP) $ 111.2 $ 195.0 $ 306.2 Operating income margin 11.1 % 13.7 % 12.6 % Adjusted to add (deduct): Restructuring and other related charges (1) 11.6 7.4 19.0 Separation costs (2)(3) 1.2 1.7 2.9 Acquisition-amortization and other related charges (4) 18.5 17.4 35.9 Depreciation and other amortization 15.0 23.5 38.5 Other (5) 2.1 (0.4) 1.7 Adjusted EBITDA (non-GAAP) $ 159.6 $ 244.6 $ 404.2 Adjusted EBITDA attributable to Russia (non-GAAP) (6) — 28.0 28.0 Core adjusted EBITDA (non-GAAP) $ 159.6 $ 216.6 $ 376.2 Adjusted EBITDA margin (non-GAAP) 15.9 % 17.2 % 16.6 % Core adjusted EBITDA margin (non-GAAP) (7) 15.9 % 16.8 % 16.4 % (1) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, and other costs in connection with the closure and optimization of facilities and product lines.
Biggest changeYear Ended December 31, 2023 Americas EMEA & APAC Total (Dollars in millions) (1) Net income from continuing operations (GAAP) $ 223.4 Income tax expense 95.7 Interest expense and other, net 85.1 Operating income (GAAP) $ 182.5 $ 221.7 $ 404.2 Adjusted to add: Restructuring and other related charges (2) 6.5 17.6 24.1 Acquisition-amortization and other related charges (3) 20.9 15.9 36.9 Depreciation and other amortization 14.8 21.2 36.0 Adjusted EBITDA (non-GAAP) $ 224.7 $ 276.4 $ 501.1 Adjusted EBITDA attributable to Russia (non-GAAP) (4) — 18.4 18.4 Core adjusted EBITDA (non-GAAP) $ 224.7 $ 258.0 $ 482.7 Adjusted EBITDA margin (non-GAAP) 18.5 % 17.7 % 18.1 % Core adjusted EBITDA margin (non-GAAP) (5) 18.5 % 18.4 % 18.4 % (1) Numbers may not sum due to rounding.
“Risk Factors” and the accompanying Consolidated and Combined Financial Statements and Notes to Consolidated and Combined Financial Statements (“Notes”) included in Item 8. of this Form 10-K. The MD&A includes forward-looking statements.
“Risk Factors” and the accompanying Consolidated and Combined Financial Statements and Notes to Consolidated and Combined Financial Statements (the “Notes”) included in Item 8. of this Form 10-K. The MD&A includes forward-looking statements.
The following table presents the components of changes in our consolidated and combined Net sales.
The following table presents the components of changes in our consolidated and combined Net sales.
On June 28, 2022, we amended and restated the Credit Agreement by entering into Amendment No. 2 to Credit Agreement (“Credit Agreement Amendment”).
On June 28, 2022, we amended and restated the Credit Agreement by entering into Amendment No. 2 to Credit Agreement (the “Credit Agreement Amendment”).
However, 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 and collectability of claims tendered, 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 which could materially affect our financial condition, results of operations or cash flow. 51 See Note 19, “Commitments and Contingencies” in the accompanying Notes for additional information regarding our asbestos liabilities and insurance assets.
However, 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 and collectability of claims tendered, 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 which could materially affect our financial condition, results of operations or cash flow. 49 See Note 19, “Commitments and Contingencies” in the accompanying Notes for additional information regarding our asbestos liabilities and insurance assets.
We intend to continue to utilize our strong global presence and worldwide network of salespeople and distributors to capitalize on growth opportunities by selling regionally-developed and/or marketed products and solutions throughout our served markets. We believe that our geographic and end market diversity helps mitigate the effects from cyclical industrial market exposures.
We intend to continue to utilize our strong global presence and worldwide 35 network of salespeople and distributors to capitalize on growth opportunities by selling regionally-developed and/or marketed products and solutions throughout our served markets. We believe that our geographic and end market diversity helps mitigate the effects from cyclical industrial market exposures.
An increase in discount rates, a reduction in projected cash flows due to lower revenue growth rates or lower margins compared to our projections, or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year. 48 In the evaluation of indefinite-lived intangible assets for impairment, we first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value.
An increase in discount rates, a reduction in projected cash flows due to lower revenue growth rates or lower margins compared to our projections, or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year. 46 In the evaluation of indefinite-lived intangible assets for impairment, we first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value.
The effect on deferred income tax assets and liabilities of a change in tax rates is generally recognized in Income tax expense in the period that includes the enactment date. Global Intangible Low-Taxed Income (“GILTI”) is accounted for as a current tax expense in the year the tax is incurred.
The effect on deferred income tax assets and liabilities of a change in tax rates is generally recognized in Income tax expense in the period that includes the enactment date. Global Intangible Low-Taxed Income is accounted for as a current tax expense in the year the tax is incurred.
Deferred income tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets and liabilities are reported in Other assets and Other liabilities in the Consolidated and Combined Balance Sheets, respectively.
Deferred income tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets and liabilities are reported in Other assets and Other liabilities in the Consolidated Balance Sheets, respectively.
The annual average settlement payment per asbestos claimant has fluctuated during the past several years while the number of cases has steadily declined. 50 We expect such 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.
The annual average settlement payment per asbestos claimant has fluctuated during the past several years while the number of cases has steadily declined. 48 We expect such 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.
(2) Includes non-re curring charges and employee costs related to the planning and execution of the separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Statements of Operations. (3) Amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment.
(3) Includes non-re curring charges and employee costs related to the planning and execution of the separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Statements of Operations. (4) Amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment.
Management also believes that presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with U.S. GAAP.
Management also believes that presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP.
Adjusted EBITDA excludes from Net income from continuing operations the effect of Income tax expense, Interest expense (income) and other, net, Pension settlement gains, Restructuring and other related charges, separation costs, acquisition-amortization and other related charges and depreciation and other amortization. We also present Adjusted EBITDA margins, which is subject to the same adjustments as Adjusted EBITDA.
Adjusted EBITDA excludes from Net income from continuing operations the effect of Income tax expense, Interest expense and other, net, Pension settlement gain, Restructuring and other related charges, separation costs, acquisition-amortization and other related charges and depreciation and other amortization. We also present Adjusted EBITDA margins, which is subject to the same adjustments as Adjusted EBITDA.
A quantitative impairment test was performed for all the indefinite-lived trade name brands for the years ended December 31, 2022 and 2021, which indicated no impairment existed. A sustained decline in our end-markets and geographic markets could increase the risk of impairments in future years.
A quantitative impairment test was performed for all the indefinite-lived trade name brands for the years ended December 31, 2023 and 2022, which indicated no impairment existed. A sustained decline in our end-markets and geographic markets could increase the risk of impairments in future years.
The following tables set forth a reconciliation of Net income from continuing operations, the most directly comparable financial statement measure, to Adjusted EBITDA, Adjusted EBITDA margin, Core adjusted EBITDA and Core adjusted EBITDA margin by segment for the years ended December 31, 2022 and 2021.
The following tables set forth a reconciliation of Net income from continuing operations, the most directly comparable financial statement measure, to Adjusted EBITDA, Adjusted EBITDA margin, Core adjusted EBITDA and Core adjusted EBITDA margin by segment for the years ended December 31, 2023 and 2022.
During the three months ended April 1, 2022, the Former Parent allocated costs were $6.0 million, as included in the accompanying Notes contained elsewhere in this Form 10-K. Following the Separation, the Consolidated and Combined Financial Statements include the accounts of ESAB and its wholly-owned subsidiaries and no longer include any allocations of expenses from Enovis.
During the three months ended April 1, 2022, the Former Parent allocated costs were $6.0 million, as included in the accompanying Notes contained elsewhere in this Form 10-K. 34 Following the Separation, the consolidated financial statements include ESAB and its wholly-owned subsidiaries and no longer include any allocations of expenses from Enovis.
We have funding requirements associated with our pension and other post-retirement benefit plans as of December 31, 2022, which are estimated to be $5.2 million for the year ending December 31, 2023.
We have funding requirements associated with our pension and other post-retirement benefit plans as of December 31, 2023, which are estimated to be $5.2 million for the year ending December 31, 2024.
Recently Issued Accounting Pronouncements For detailed information regarding recently issued accounting pronouncements and the expected impact on our financial statements, see Note 3, “ Recently Issued Accounting Pronouncements” in the accompanying Notes included elsewhere in this Form 10-K. 52
Recently Issued Accounting Pronouncements For detailed information regarding recently issued accounting pronouncements and the expected impact on our financial statements, see Note 3, “ Recently Issued Accounting Pronouncements” in the accompanying Notes included elsewhere in this Form 10-K. 50
An evaluation of Goodwill for impairment was performed for the three reporting units for the years ended December 31, 2022 and 2021, which indicated no impairment existed. For the year ended December 31, 2022 a qualitative assessment was performed for the three reporting units.
An evaluation of Goodwill for impairment was performed for the three reporting units for the years ended December 31, 2023 and 2022, which indicated no impairment existed. For the year ended December 31, 2023, a qualitative assessment was performed for the three reporting units.
The accompanying Combined Balance Sheets for the year ended December 31, 2021 did not contain current income tax payable or other long-term income tax payable liabilities, with the exception of certain unrecognized tax benefits for which ESAB could have reasonably be considered to be the primary obligor.
The accompanying Combined Balance Sheet for the year ended December 31, 2021 did not contain current income tax payable or other long-term income tax payable liabilities, with the exception of certain unrecognized tax benefits for which ESAB could have reasonably been considered to be the primary obligor.
For a discussion of important factors that could cause actual results to differ materially from the results referred to in these forward-looking statements, see “Special Note Regarding Forward-Looking Statements.” Separation from Enovis On April 4, 2022 (the “Distribution Date”), Colfax Corporation completed the spin-off of Colfax’s Fabrication Technology business and certain other corporate entities as discussed in the “Separation from Enovis” section within Note 1 , “Organization and Basis of Presentation” in the accompanying Notes contained elsewhere in this Form 10-K through a tax-free, pro rata distribution (the “Distribution”) of 90% of the outstanding common stock of ESAB to Colfax stockholders (the “Separation”).
For a discussion of important factors that could cause actual results to differ materially from the results referred to in these forward-looking statements, see “Special Note Regarding Forward-Looking Statements.” Separation from Enovis On April 4, 2022 (the “Distribution Date”), Colfax Corporation completed the spin-off of Colfax’s Fabrication Technology business and certain other corporate entities through the Distribution of 90% of the outstanding common stock of ESAB to Colfax stockholders as discussed in the “Separation from Enovis” section within Note 1 , “Organization and Basis of Presentation” in the accompanying Notes contained elsewhere in this Form 10-K.
Additionally, we have the ability to i ncur $77 million of indebtedness pursuant to certain uncommitted credit lines, consisting of an uncommitted credit line that we currently have in place whi ch we have used from time to time in the past for short-term working capital needs.
Additionally, we have the ability to i ncur $78 million of indebtedness pursuant to certain uncommitted credit lines, consisting primarily of an uncommitted credit line that we currently have in place whi ch we have used from time to time in the past for short-term working capital needs.
The mix of sales was as follows for the periods presented: Year Ended December 31, 2022 2021 Consumables 71 % 69 % Equipment 29 % 31 % 38 Non-GAAP Measures Adjusted EBITDA is a non-GAAP performance measure that we include in this report because it is a key metric used by our management to assess our operating performance.
The mix of sales was as follows for the periods presented: Year Ended December 31, 2023 2022 Consumables 69 % 71 % Equipment 31 % 29 % 37 Non-GAAP Measures Adjusted EBITDA is a non-GAAP performance measure that we include in this report because it is a key metric used by our management to assess our operating performance.
Such components were acquired from third-party suppliers, and were not manufactured by any of our, or our Former Parent’s, subsidiaries nor were the subsidiaries, producers or direct suppliers of asbestos. The manufactured products that are alleged to have contained or used asbestos generally were provided to meet the specifications of the subsidiaries’ customers, including the U.S. Navy.
Such components were acquired from third-party suppliers, and were not manufactured by any of our, or our Former Parent’s, subsidiaries nor were the subsidiaries, producers or direct suppliers of asbestos. The manufactured products that are alleged to have contained or used asbestos generally were provided to meet the specifications of the subsidiaries’ customers, including the United States Navy.
Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable U.S. GAAP financial measures.
Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.
This MD&A is divided into five main sections: • Basis of Presentation; • Overview; • Results of Operations; • Liquidity and Capital Resources; and • Critical Accounting Policies. The following MD&A should be read together with Part I, Item 1A.
This MD&A is divided into seven main sections: • Basis of Presentation; • Overview; • General; • Outlook; • Results of Operations; • Liquidity and Capital Resources; and • Critical Accounting Policies. The following MD&A should be read together with Part I, Item 1A.
In conjunction with the Separation on April 4, 2022, we drew down $1.2 billion under the Credit Agreement and used these proceeds to make payments to Enovis of $1.2 billion, which was used as part of the consideration for the contribution of certain assets and liabilities to us by Enovis in connection with the Separation.
We drew down $1.2 billion under the Credit Agreement and used these proceeds to make payments to Enovis of $1.2 billion, which was used as part of the consideration for the contribution of certain assets and liabilities to us by Enovis in connection with the Separation.
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that provide liquidity, capital resources, market or credit risk support that expose us to any liability that is not reflected in our Consolidated and Combined Financial Statements at December 31, 2022 other than outstanding letters of credit of $31.5 million and unconditional purchase obligations with suppliers of $104.8 million. 47 Critical Accounting Policies The methods, estimates and judgments we use in applying our critical accounting policies have a significant impact on our results of operations and financial position.
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that provide liquidity, capital resources, market or credit risk support that expose us to any liability that is not reflected in our Consolidated and Combined Financial Statements at December 31, 2023 other than outstanding letters of credit of $28.6 million and unconditional purchase obligations with suppliers of $131.8 million. 45 Critical Accounting Policies The methods, estimates and judgments we use in applying our critical accounting policies have a significant impact on our results of operations and financial position.
Actual results could differ from our estimates and projections, which would also affect the assessment of impairment. As of December 31, 2022, we have Goodwill of $1,529.8 million and indefinite lived trade names of $180.7 million that are subject to at least annual review for impairment. See Note 9, “Goodwill and Intangible Assets” in the accompanying Notes for further information.
Actual results could differ from our estimates and projections, which would also affect the assessment of impairment. As of December 31, 2023, we have Goodwill of $1,588.3 million and indefinite-lived trade names of $185.3 million that are subject to at least annual review for impairment. See Note 9, “Goodwill and Intangible Assets” in the accompanying Notes for further information.
We expect strategic acquisitions to contribute to our growth. We believe that the extensive experience of our leadership team in acquiring and effectively integrating acquisition targets should enable us to capitalize on future opportunities.
We believe that the extensive experience of our leadership team in acquiring and effectively integrating acquisition targets should enable us to capitalize on future opportunities.
The following table summarizes the change in Cash and cash equivalents during the periods indicated: Year Ended December 31, 2022 2021 (Dollars in millions) (1) Net cash provided by operating activities $ 214.4 $ 250.7 Purchases of property, plant and equipment (40.2) (35.6) Proceeds from sale of property, plant and equipment 4.8 5.2 Acquisitions, net of cash received (149.0) (4.9) Net cash used in investing activities (184.4) (35.3) Proceeds from borrowings on term credit facility 1,000.0 — Proceeds from borrowings on revolving credit facility and other 805.9 0.7 Repayments of borrowings on revolving credit facility and other (585.5) — Payment of deferred financing fees and other (4.7) — Payment of deferred consideration (1.5) — Payment of dividends (6.1) — Distributions to noncontrolling interest holders (3.4) (3.7) Consideration to Former Parent in connection with the Separation (1,200.0) — Transfers from (to) Former Parent, net 2.8 (218.5) Net cash provided by (used in) financing activities 7.6 (221.5) Effect of foreign exchange rates on Cash and cash equivalents (6.7) (1.9) Increase (decrease) in Cash and cash equivalents $ 30.8 $ (8.0) (1) Numbers may not sum due to rounding.
The following table summarizes the change in Cash and cash equivalents during the periods indicated: Year Ended December 31, 2023 2022 (Dollars in millions) (1) Net cash provided by operating activities $ 330.5 $ 214.4 Purchases of property, plant and equipment (48.2) (40.2) Proceeds from sale of property, plant and equipment 4.6 4.8 Acquisitions, net of cash received (18.7) (149.0) Net cash used in investing activities (62.2) (184.4) Proceeds from borrowings on term credit facility — 1,000.0 Proceeds from borrowings on revolving credit facility and other 574.2 805.9 Repayments of borrowings on term credit facility (12.5) — Repayments of borrowings on revolving credit facility and other (763.2) (585.5) Payment of deferred financing fees and other (1.0) (4.7) Payment of deferred consideration — (1.5) Payment of dividends (13.3) (6.1) Distribution to noncontrolling interest holders (3.9) (3.4) Consideration to Former Parent in connection with the Separation — (1,200.0) Transfers from Former Parent, net — 2.8 Net cash provided by (used in) financing activities (219.7) 7.6 Effect of foreign exchange rates on Cash and cash equivalents (18.6) (6.7) Increase in Cash and cash equivalents $ 30.0 $ 30.8 (1) Numbers may not sum due to rounding.
ESAB presents this non-GAAP financial measure including and excluding Russia due to economic and political volatility caused by th e Russia and Ukraine conflict, which results in enhanced investor interest in this information.
ESAB presents this non-GAAP financial measure including and excluding Russia due to economic and political volatility caused by th e Russia and Ukraine conflict, which we believe results in enhanced investor interest in these alternate presentations.
We believe that our sources of liquidity between debt and cash flows from operating activities are adequate to fund our operations for the next twelve months. 45 Cash Flows As of December 31, 2022, we had $72.0 million of Cash and cash equivalents, an increase of $30.8 million from $41.2 million as of December 31, 2021.
We believe that our sources of liquidity between debt and cash flows from operating activities are adequate to fund our operations for the next twelve months and thereafter. Cash Flows As of December 31, 2023, we had $102.0 million of Cash and cash equivalents, an increase of $30.0 million from $72.0 million as of December 31, 2022.
Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $20.2 million and $37.7 million as of December 31, 2022 and 2021, respectively, an d are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated and Combined Balance Sheet. 49 Revenue Recognition We recognize revenue when control of promised goods or services is transferred to the customer.
Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $30.9 million and $20.2 million as of December 31, 2023 and 2022, respectively, and are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated Balance Sheet. 47 Revenue Recognition We recognize revenue when control of promised goods or services is transferred to the customer.
The strengthening of the U.S. dollar relative to other currencies caused a $102.3 million unfavorable currency translation impact during the year. Sales excluding Russia Sales excluding Russia (“Core Sales”) for ESAB increased for the year ended December 31, 2022 as compared with the year ended December 31, 2021.
The strengthening of the U.S. dollar relative to other currencies caused a $44.2 million unfavorable currency translation impact during the year. Sales excluding Russia Sales excluding Russia (“Core Sales”) for ESAB increased fo r the year ended December 31, 2023 as compared with the year ended December 31, 2022.
The estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The allowance for credit losses was $23.5 million as of December 31, 2022 compared to $23.9 million as of December 31, 2021.
Trade receivables are presented net of an allowance for credit losses. The estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The allowance for credit losses was $25.5 million as of December 31, 2023 compared to $23.5 million as of December 31, 2022.
We currently expect to finance our working capital requirements through cash flows from operating activities. 44 We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures and restructuring related cash outflows, asbestos-related cash outflows, and debt service and required amortization of principal and, pending Board approval, payment of cash dividends.
We currently expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures and restructuring related cash outflows, asbestos-related cash outflows and debt service and required amortization of principal and, pending Board approval, payment of cash dividends.
For further information on year-over-year comparisons between 2021 and 2020 not covered in the results below, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Comp any’s Form 10 for the period which was filed with the SEC on March 17, 2022. Please see Part I, Item 1.
For further information on year-over-year comparisons between 2022 and 2021 not covered in the results below, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Comp any’s Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 7, 2023. See Part I, Item 1.
Our management evaluates the operating results of each of its reportable segments based upon Net sales, Adjusted EBITDA and Core adjusted EBITDA as defined in the “Non-GAAP Measures” section.
Results of Operations The following discussion of Results of Operations addresses the comparison of the periods presented. Our management evaluates the operating results of each of its reportable segments based upon Net sales, Adjusted EBITDA and Core adjusted EBITDA as defined in the “Non-GAAP Measures” section.
There are no required principal payments due on the Term Loan or Revolving Facility within 12 months. In addition to the outstanding principal on our debt, we are subject to contractual obligations and commitments to make future interest payments on the Term Loans and the Revolving Facility on various payment dates as provided in the Credit Agreement Amendment.
In addition to the outstanding principal on our debt, we are subject to contractual obligations and commitments to make future interest payments on the Term Loans and the Revolving Facility on various payment dates as provided in the Credit Agreement Amendment.
The strengthening of the U.S. Dollar relative to other currencies caused a $124.2 million unfavorable currency translation impact during the year ended December 31, 2022. Operating Results The following table summarizes our results for the comparable periods.
T he strengthening of the U.S. dollar relative to other currencies caused a $17.0 million unfavorable currency translation impact during the year ended December 31, 2023 . 40 Operating Results The following table summarizes our results for the comparable periods.
Americas The following table summarizes selected financial data for our Americas segment: Year Ended December 31, 2022 2021 (Dollars in millions) Net sales $ 1,128.3 $ 1,004.2 Gross profit $ 357.7 $ 342.5 Gross profit margin 31.7 % 34.1 % Selling, general and administrative expense $ 228.0 $ 219.6 Adjusted EBITDA (non-GAAP) $ 188.6 $ 159.6 Adjusted EBITDA margin (non-GAAP) 16.7 % 15.9 % Items excluded from Adjusted EBITDA: Restructuring and other related charges $ 11.4 $ 11.6 Acquisition - amortization and other related charges $ 20.1 $ 18.5 Separation costs $ 7.5 $ 1.2 Depreciation and other amortization $ 13.4 $ 15.0 43 2022 Compared to 2021 Net sales in our Americas segment increased $124.1 million during 2022 compared to 2021.
Americas The following table summarizes selected financial data for our Americas segment: Year Ended December 31, 2023 2022 (Dollars in millions) Net sales $ 1,215.0 $ 1,128.3 Gross profit $ 454.9 $ 357.7 Gross profit margin 37.4 % 31.7 % Selling, general and administrative expense $ 265.8 $ 228.0 Adjusted EBITDA (non-GAAP) $ 224.7 $ 188.6 Adjusted EBITDA margin (non-GAAP) 18.5 % 16.7 % Items excluded from Adjusted EBITDA: Restructuring and other related charges $ 6.5 $ 11.4 Acquisition - amortization and other related charges $ 20.9 $ 20.1 Separation costs $ — $ 7.5 Depreciation and other amortization $ 14.8 $ 13.4 Net sales in our Americas segment increased by $86.7 million during 2023 compared to 2022.
Net Sales $ % (Dollars in millions) For the year ended December 31, 2021 $ 2,428.1 Components of Change: Existing businesses (organic sales growth) (1) 254.2 10.5 % Acquisitions (2) 13.5 0.6 % Foreign currency translation (3) (102.3) (4.2) % Total sales growth 165.4 6.8 % For the year ended December 31, 2022 $ 2,593.5 (1) Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to factors such as price, product mix and volume.
Net Sales $ % (Dollars in millions) For the year ended December 31, 2022 $ 2,593.5 Components of Change: Existing businesses (organic sales growth) (1) 161.6 6.2 % Acquisitions (2) 63.9 2.5 % Foreign currency translation (3) (44.2) (1.7) % Total sales growth 181.3 7.0 % For the year ended December 31, 2023 $ 2,774.8 (1) Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to factors such as price, product mix and volume.
Year Ended December 31, 2022 2021 (Dollars in millions) Gross profit $ 885.5 $ 838.0 Gross profit margin 34.1 % 34.5 % Selling, general and administrative expense $ 533.4 $ 512.8 Net income from continuing operations $ 231.1 $ 238.7 Net income margin from continuing operations 8.9 % 9.8 % Adjusted EBITDA (non-GAAP) $ 436.8 $ 404.2 Adjusted EBITDA margin (non-GAAP) 16.8 % 16.6 % Core adjusted EBITDA (non-GAAP) $ 416.8 $ 376.2 Core adjusted EBITDA margin (non-GAAP) 16.9 % 16.4 % Items excluded from Adjusted EBITDA: Restructuring and other related charges (1) $ 23.1 $ 19.0 Pension settlement gain $ (9.1) $ (11.2) Separation costs (2)(3) $ 15.5 $ 2.9 Acquisition - amortization and other related charges (4) $ 34.2 $ 35.9 Interest expense (income) and other, net (5) $ 38.0 $ — Income tax expense $ 69.2 $ 80.4 Depreciation and other amortization $ 34.9 $ 38.5 Items excluded from Core adjusted EBITDA: Adjusted EBITDA attributable to Russia (non-GAAP) (6) $ 20.0 $ 28.0 (1) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expense, and other costs in connection with the closure and optimization of facilities and product lines.
Year Ended December 31, 2023 2022 (Dollars in millions) Gross profit $ 1,015.8 $ 885.5 Gross profit margin 36.6 % 34.1 % Selling, general and administrative expense $ 587.5 $ 533.4 Net income from continuing operations $ 223.4 $ 231.1 Net income margin from continuing operations 8.0 % 8.9 % Adjusted EBITDA (non-GAAP) $ 501.1 $ 436.8 Adjusted EBITDA margin (non-GAAP) 18.1 % 16.8 % Core adjusted EBITDA (non-GAAP) $ 482.7 $ 408.4 Core adjusted EBITDA margin (non-GAAP) 18.4 % 16.8 % Items excluded from Adjusted EBITDA: Restructuring and other related charges (1) $ 24.1 $ 23.1 Pension settlement gain $ — $ (9.1) Separation costs (2) $ — $ 15.5 Acquisition - amortization and other related charges (3) $ 36.9 $ 34.2 Interest expense (income) and other, net $ 85.1 $ 38.0 Income tax expense $ 95.7 $ 69.2 Depreciation and other amortization $ 36.0 $ 34.9 Items excluded from Core adjusted EBITDA: Adjusted EBITDA attributable to Russia (non-GAAP) (4) $ 18.4 $ 28.4 (1) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expense, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.
We also present Core Adjusted EBITDA and Core Adjusted EBITDA margins which are subject to the same adjustments as Adjusted EBITDA and Adjusted EBITDA margins, respectively, further removing the impact of Russia for the nine months ended December 31, 2022 and December 31, 2021, respectively.
We also present Core Adjusted EBITDA and Core Adjusted EBITDA margins, which are subject to the same adjustments as Adjusted EBITDA and Adjusted EBITDA margins, respectively, and which remove the impact of Russia for the years ended December 31, 2023 and 2022.
On April 4, 2022, ESAB and Enovis entered into a separation and distribution agreement as well as various other related agreements that govern the Separation and the relationships between the parties going forward, including a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement, and license agreement for ESAB Business Excellence System ("EBX").
In connection with the Separation, on April 4, 2022, ESAB and Enovis entered into the separation agreements that govern the Separation and the relationships between the parties going forward, including a separation and distribution agreement, a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement and license agreement for EBX.
The Credit Agreement Amendment provides for a $600 million Term Loan A-3 Facility with a maturity date of April 3, 2025 to refinance our existing Term Loan A-2 Facility (the “Term Loan A-3 Facility” and, together with the Term Loan A-1 Facility, the “Term Loans”).
The Credit Agreement Amendment provides for a $600 million Term Loan A-3 Facility with a maturity date of April 3, 2025 to refinance our existing Term Loan A-2 Facility (the “Term Loan A-3 Facility” and, together with the Term Loan A-1 Facility, the “Term Loans”). 43 Also on June 28, 2022, we borrowed the entire $600 million under Term Loan A-3 Facility to fund the repayment of the Term Loan A-2 Facility.
Material Costs Our results may be sensitive to cost changes in our raw materials. Our largest material purchases are for components and raw materials including steel, iron, copper and aluminum. Historically, we have been generally successful in passing raw material cost increases on to our customers in the form of higher prices.
Our largest material purchases are for components and raw materials including steel, iron, copper and aluminum. Historically, we have been generally successful in passing raw material cost increases on to our customers in the form of higher prices. While we seek to take actions to manage this risk, future changes in component and raw material costs may adversely impact earnings.
Accordingly, none of Enovis’s cash, cash equivalents or debt at the corporate level has been assigned to us in these financial statements. Former Parent’s investment, which included retained earnings, represented Enovis’s interest in our recorded net assets. All significant transactions between us and the Former Parent prior to the Separation have been included in the accompanying Financial Statements.
Former Parent’s investment, which included retained earnings, represented Enovis’s interest in our recorded net assets. All significant transactions between us and the Former Parent prior to the Separation have been included in the accompanying Financial Statements.
Instead, our individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and outlook for the future. 36 We face a number of challenges and opportunities, including the successful integration of acquired businesses, the application and expansion of our EBX tools to improve business performance, the ability to realize the expected benefits of the Separation and operate as an independent, public company, and the rationalization of assets and costs.
We face a number of challenges and opportunities, including the successful integration of acquired businesses, the application and expansion of our EBX tools to improve business performance, the ability to realize the expected benefits of the Separation and operate as an independent, public company, and the rationalization of assets and costs.
“Business” in our Form 10-K, for a discussion of ESAB’s objectives and methodologies for deliver ing stockholder va lue. General We are a world leader in connected fabrication technology and gas control solutions. Our rich history of innovative products and workflow solutions and our business system (EBX) allows us to realize our purpose of Shaping the world we imagine.
“Business” in our Form 10-K, for a discussion of ESAB’s objectives and methodologies for deliver ing stockholder va lue. General We are a focused premier industrial compounder. Our rich history of innovative products, workflow solutions and our business system EBX, enables our purpose of Shaping the world we imagine TM .
EMEA & APAC The following table summarizes the selected financial data for our EMEA & APAC segment: Year Ended December 31, 2022 2021 (Dollars in millions) Net sales $ 1,465.2 $ 1,423.9 Gross profit $ 509.9 $ 495.5 Gross profit margin 34.8 % 34.8 % Selling, general and administrative expense $ 305.4 $ 293.2 Adjusted EBITDA (non-GAAP) $ 248.2 $ 244.6 Adjusted EBITDA margin (non-GAAP) 16.9 % 17.2 % Core adjusted EBITDA (non-GAAP) $ 228.2 $ 216.6 Core adjusted EBITDA margin (non-GAAP) 17.0 % 16.8 % Items excluded from Adjusted EBITDA: Restructuring and other related charges $ 11.7 $ 7.4 Acquisition - amortization and other related charges $ 14.1 $ 17.4 Separation costs $ 8.1 $ 1.7 Depreciation and other amortization $ 21.5 $ 23.5 Items excluded from Core adjusted EBITDA: Adjusted EBITDA attributable to Russia (non-GAAP) $ 20.0 $ 28.0 2022 Compared to 2021 Net sales increased for our EMEA & APAC segment by $41.3 million during 2022 compared to 2021.
Adjusted EBITDA increased by $36.1 million to $224.7 million and margins expanded 180 basis points to 18.5% primarily because of the aforementioned factors. 42 EMEA & APAC The following table summarizes selected financial data for our EMEA & APAC segment: Year Ended December 31, 2023 2022 (Dollars in millions) Net sales $ 1,559.8 $ 1,465.2 Gross profit $ 560.9 $ 509.9 Gross profit margin 36.0 % 34.8 % Selling, general and administrative expense $ 321.6 $ 305.4 Adjusted EBITDA (non-GAAP) $ 276.4 $ 248.2 Adjusted EBITDA margin (non-GAAP) 17.7 % 16.9 % Core adjusted EBITDA (non-GAAP) $ 258.0 $ 219.8 Core adjusted EBITDA margin (non-GAAP) 18.4 % 16.9 % Items excluded from Adjusted EBITDA: Restructuring and other related charges $ 17.6 $ 11.7 Acquisition - amortization and other related charges $ 15.9 $ 14.1 Separation costs $ — $ 8.1 Depreciation and other amortization $ 21.2 $ 21.5 Items excluded from Core adjusted EBITDA: Adjusted EBITDA attributable to Russia (non-GAAP) $ 18.4 $ 28.4 Net sales increased for our EMEA & APAC segment by $94.6 million during 2023 compared to 2022.
The Combined Statement of Cash Flows for the years ended December 31, 2021 and 2020 consist of the combined activity of the former Fabrication Technology business of Enovis. 35 Our Consolidated and Combined Financial Statements may not be indicative of our results had we been a separate stand-alone entity throughout the periods presented, nor are the results stated herein indicative of what our financial position, results of operations and cash flows may be in the future.
Our Consolidated and Combined Financial Statements may not be indicative of our results had we been a separate stand-alone entity throughout the periods presented, nor are the results stated herein indicative of what our financial position, results of operations and cash flows may be in the future.
As of December 31, 2022, the Company had fixed lease payment obligat ions of $108.2 million , with $21.6 million payable within 12 months. Purchase Obligations As of December 31, 2022, the Company had other purchase obligation s of $104.8 million, with $100.4 million payable within 12 months.
As of December 31, 2023, the Company had fixed lease payment obligat ions o f $111.4 million, with $25.8 million payable within 12 months. Purchase Obligations As of December 31, 2023, the Company had other purchase obligation s of $131.8 million, with $126.6 million payable within 12 months.
The carrying amount of Goodwill of the Americas, EMEA & APAC and Gas Control Equipment reporting units as of December 31, 2022, we re $585.8 million , $829.0 million, and $114.9 million respectively.
The carrying amount of Goodwill of the Americas, EMEA & APAC and Gas Control Equipment reporting units as of December 31, 2023 we re $589.9 million, $879.9 million and $118.5 million, respectively.
Year Ended December 31, 2022 Americas EMEA & APAC Total (Dollars in millions) (1) Net income from continuing operations (GAAP) $ 231.1 Income tax expense 69.2 Interest expense (income) and other, net 38.0 Pension settlement gain (9.1) Operating income (GAAP) $ 136.2 $ 192.8 $ 329.1 Operating income margin 12.1 % 13.2 % 12.7 % Adjusted to add: Restructuring and other related charges (2) 11.4 11.7 23.1 Separation costs (3)(4) 7.5 8.1 15.5 Acquisition-amortization and other related charges (5) 20.1 14.1 34.2 Depreciation and other amortization 13.4 21.5 34.9 Adjusted EBITDA (non-GAAP) $ 188.6 $ 248.2 $ 436.8 Adjusted EBITDA attributable to Russia (non-GAAP) (6) — 20.0 20.0 Core adjusted EBITDA (non-GAAP) $ 188.6 $ 228.2 $ 416.8 Adjusted EBITDA margin (non-GAAP) 16.7 % 16.9 % 16.8 % Core adjusted EBITDA margin (non-GAAP) (7) 16.7 % 17.0 % 16.9 % (1) Numbers may not sum due to rounding. 39 (2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, and other costs in connection with the closure and optimization of facilities and product lines.
(5) Net sales were $153.8 million re lating to Russia for the year ended December 31, 2023. 38 Year Ended December 31, 2022 Americas EMEA & APAC Total (Dollars in millions) (1) Net income from continuing operations (GAAP) $ 231.1 Income tax expense 69.2 Interest expense and other, net 38.0 Pension settlement gain (9.1) Operating income (GAAP) $ 136.2 $ 192.8 $ 329.1 Adjusted to add (deduct): Restructuring and other related charges (2) 11.4 11.7 23.1 Separation costs (3)(4) 7.5 8.1 15.5 Acquisition-amortization and other related charges (5) 20.1 14.1 34.2 Depreciation and other amortization 13.4 21.5 34.9 Adjusted EBITDA (non-GAAP) $ 188.6 $ 248.2 $ 436.8 Adjusted EBITDA attributable to Russia (non-GAAP) — 28.4 28.4 Core adjusted EBITDA (non-GAAP) $ 188.6 $ 219.8 $ 408.4 Adjusted EBITDA margin (non-GAAP) 16.7 % 16.9 % 16.8 % Core adjusted EBITDA margin (non-GAAP) (6) 16.7 % 16.9 % 16.8 % (1) Numbers may not sum due to rounding.
Selling, general and administrative expense increased primarily due to inflation-related cost increases and increased costs related to being an independent public company, partially offset by currency fluctuations. 42 During the year ended December 31, 2022, the Company recognized a Pension settlement gain of $9.1 million related to a completed buy-out of a foreign defined benefit plan by a third party plus the merger of two Company pension plans resulting in one plan benefiting from the surplus assets in the other plan.
During the year ended December 31, 2022, the Company recognized a Pension settlement gain of $9.1 million related to a completed buy-out of a foreign defined benefit plan by a third party plus the merger of two Company pension plans resulting in one plan benefiting from the surplus assets in the other plan.
If we determine that it is more likely than not for the indefinite-lived intangible asset’s fair value to be greater than its carrying value, a calculation of the fair value is not performed.
If we determine that it is more likely than not for the indefinite-lived intangible asset’s fair value to be greater than its carrying value, a calculation of the fair value is not performed. In certain instances, the Company may elect to forgo the qualitative assessment and proceed directly to the quantitative impairment test.
Refer to Note 15, “Debt” in the accompanying Notes contained elsewhere in this Form 10-K for additional information on the Credit Agreement. Basis of Presentation The accompanying Consolidated and Combined Financial Statements present our historical financial position, results of operations, changes in equity and cash flows in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
Basis of Presentation The accompanying Consolidated and Combined Financial Statements present our historical financial position, results of operations, changes in equity and cash flows in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
While we seek to take actions to manage this risk, future changes in component and raw material costs may adversely impact earnings. In 2022, we have experienced increasing raw material costs due to inflation, which we have passed through to customers to maintain our profit, but has resulted in some margin compression.
In 2022, we experienced increasing raw material costs due to inflation, which we have passed through to customers to maintain our profit but has resulted in some margin compression.
Acquisitions We complement our organic growth plans with acquisitions and other investments. Acquisitions can significantly affect our reported results, and we report the change in our Net sales between periods both from existing and acquired businesses. The change in Net sales due to acquisitions for the periods presented in this filing represents the incremental sales as a result of acquisitions.
For additional information of the associated risks, refer to the Part I, Item 1A. “Risk Factors” section. Acquisitions We complement our organic growth plans with acquisitions and other investments. Acquisitions can significantly affect our reported results, and we report the change in our Net sales between periods both from existing and acquired businesses.
The Combined Statement of Operations and Statement of Comprehensive Income for the years ended December 31, 2021 and 2020 consist of the combined results of the former Fabrication Technology business of Enovis. • The Consolidated and Combined Statement of Changes in Equity for the year December 31, 2022 consists of the consolidated activities of ESAB for the nine months ended December 31, 2022 and the combined activity of the former Fabrication Technology business of Enovis and the certain entities discussed in the “Separation from Enovis” section above for the three months ended April 1, 2022.
Accordingly: • The Consolidated Balance Sheet as of December 31, 2023 and December 31, 2022 con sists of the consolidated balances of ESAB. • The Consolidated Statement of Operations, Statement of Comprehensive Income (Loss), Statement of Changes in Equity and Statement of Cash Flows for the year ended December 31, 2023 consist of the consolidated results of ESAB. • The Consolidated and Combined Statement of Operations, Statement of Comprehensive Income (Loss), Statement of Changes in Equity and Statement of Cash Flows for the year ended December 31, 2022 consist of the activities of ESAB for the nine months ended December 31, 2022 and the combined activity of the former Fabrication Technology business of Enovis for the three months ended April 1, 2022.
For the year ended December 31, 2022 compared to 2021, fluctuation s in foreign currencies reduced N et sales by 4.2%, Gross profit by 4.6% and Selling, general and administrative expenses by 5.4%. Seasonality Our European operations typically experience a slowdown during the July, August and December vacation seasons.
For the year ended December 31, 2023 compared to 2022, fluctuation s in foreign currencies reduced N et sales by 1.7%, Gross profit by 2.1% and Selling, general and administrative expenses by 0.6%.
Liquidity and Capital Resources Overview Prior to the completion of the Separation, we financed our working capital requirements through cash flows from operating activities and arrangements with our Former Parent.
Core adjusted EBITDA increased from $219.8 million to $258.0 million, and the related Core adjusted EBITDA margins expanded by 150 basis points from 16.9% to 18.4%. Liquidity and Capital Resources Overview Prior to the completion of the Separation, we financed our working capital requirements through cash flows from operating activities and arrangements with our Former Parent.
(2) Represents the incremental sales in comparison to the portion of the prior period during which we did not own the business. (3) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.
(2) Represents the incremental sales attributable to acquired businesses in comparison to the portion of the prior period during which we did not own the business.
Prior to the Separation, the Combined financial statements also included allocations of certain general, administrative, sales and marketing expenses from Enovis’s corporate office and from other Enovis businesses to us and allocations of related assets, liabilities, and the Former Parent’s investment, as applicable. 34 The allocations were determined on a reasonable basis, however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had we been an entity that operated independently of Enovis during the applicable periods.
Prior to the Separation, the Combined financial statements also included allocations of certain general, administrative, sales and marketing expenses from Enovis’s corporate office and from other Enovis businesses to us and allocations of related assets, liabilities and the Former Parent’s investment, as applicable.
Transactions with the Former Parent are reflected in the accompanying Consolidated and Combined Statements of Equity as “Transfers to Former Parent, net” and in the accompanying Consolidated and Combined Balance Sheets within “Former Parent’s investment”. Overview Included below are year-over-year co mparisons between 2022 and 2021.
Transactions with the Former Parent are reflected in the accompanying Consolidated and Combined Statements of Equity as “Net Transfers from Former Parent, including Separation Adjustments” for the year December 31, 2022. Overview Included below are year-over-year co mparisons between 2023 and 2022.
(4) Represents sales excluding Russia from April 2, 2022 to December 31, 2022, and April 3, 2021 to December 31, 2021. 41 Core Sales from existing businesses for ESAB increased $290.5 million during the year ended December 31, 2022, compared to the year ended December 31, 2021 primarily due to inflation-related customer pricing increases of $259.2 million and new product initiatives during the year ended December 31, 2022.
Core Sales from existing businesses for ESAB increased $144.1 million during the year ended December 31, 2023, compared to the year ended December 31, 2022 primarily due to inflation-related customer pricing increases of $88.7 million and increased sales volumes of $55.4 million d uring the year ended December 31, 2023.
(2) Includes non-recurring charges and employee costs related to the planning and execution of the separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Statements of Operations. (3) Amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment.
(2) Includes non-recurring charges and employee costs related to the planning and execution of the separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Statements of Operations. (3) Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses.
(6) Adjusted EBITDA relating to Russia from April 2, 2022 to December 31, 2022, and April 3, 2021 to December 31, 2021 respectively. 2022 Compared to 2021 Gross profit increased $47.5 million during 2022 in comparison to 2021, primarily attributable to benefit from price increases and new product initiatives partially offset by inflation-related costs increases, approximately $44 million of unfavorable foreign currency impacts and, to a lesser extent, reduced sales volume due to the Russia and Ukraine conflict.
(4) Adjusted EBITDA relating to Russia for the year ended December 31, 2023 and 2022 respectively. Gross profit increased $130.3 million during 2023 in comparison to 2022. This increase was attributable to benefits from price increases, acquisitions and sales volumes, partially offset by inflation-related costs increases and approximately $22.5 million of unfavorable foreign currency impacts.
(5) Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses. (6) Adjusted EBITDA relating to Russia from April 2, 2022 to December 31, 2022, respectively. (7) Net sales were $122.6 million relating to Russia from April 2, 2022 to December 31, 2022.
(5) Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses. (6) Net sales were $163.6 million relati ng to Russia for the year ended December 31, 2022. Total Company Sales Net sales increased for the year ended December 31, 2023 as compared with the year ended December 31, 2022 .
Given this balance, management does not use indices other than general economic trends and business initiatives to predict the overall outlook for the Company.
Given this balance, management does not use indices other than general economic trends and business initiatives to predict the overall outlook for the Company. Instead, our individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and outlook for the future. We expect strategic acquisitions to contribute to our growth.
In prior years, these payments were made by our Former Parent and not reflected in our cash flow statements. • Separation payments of $19.0 million for the year ended December 31, 2022 related to one-time non-recurring professional fees and employee costs incurred in the planning and execution of the Separation from Enovis. • Restructuring initiatives of $22.7 million for the year ended December 31, 2022 and $15.4 million for the year ended December 31, 2021, which includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expense, and other cost in connection with the closure and optimization of facilities and product lines. • Interest payments of $34.7 million for the year ended December 31, 2022 related to our Term Loans and Revolving Facility.
Changes in significant operating cash flow items are discussed below. • Operating cash flow was positively impacted by increased operating income and improvements in working capital turns offset by higher interest payments for the year ended December 31, 2023, which were related to our Term Loans and Revolving Facility. 44 • Discontinued operations outflows for the years ended December 31, 2023 and 2022 were $15.2 million and $23.1 million, respectively, which were mainly asbestos related. • Restructuring initiatives of $20.7 million for the year ended December 31, 2023 and $22.7 million for the year ended December 31, 2022, which includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expense and other costs in connection with the closure and optimization of facilities and product lines.
Our products are marketed under several brand names, most notably ESAB, providing a wide range of products with innovative technologies to solve challenges in virtually any industry. ESAB’s comprehensive range of welding consumables includes electrodes, cored and solid wires, and fluxes using a wide range of specialty and other materials, and cutting consumables including electrodes, nozzles, shields, and tips.
Business Segments We formulate, develop, manufacture and supply consumable products and equipment, including cutting, joining and automated welding products, as well as gas control equipment. Our products are marketed under several brand names, most notably ESAB, providing a wide range of products with innovative technologies to solve challenges in virtually any industry.
Net sales from existing business increased $127.3 million primarily due to inflation-related pricing increases. Gross profit increased primarily due to benefit from price increases partially offset by inflation-related cost increases, while gross profit margin decreased 240 basis points due to dilution effect caused by inflation-related pricing and cost increases.
Net sales from existing business increased by $60.5 million primarily due to inflation-related pricing increases and acquisitions contributed $43.7 million. These increases were partially offset by $17.5 million of unfavorable currency translation. Gross profit and related margin increased primarily due to benefit from price increases and acquisitions partially offset by inflation-related cost increases and unfavorable foreign currency impacts.
Core Sales (4) $ % (Dollars in millions) For the year ended December 31, 2021 $ 2,291.1 Components of Change: Existing businesses (core organic sales growth) (1) 290.5 12.7 % Acquisitions (2) 13.5 0.6 % Foreign Currency translation (3) (124.2) (5.4) % Total core sales growth 179.8 7.8 % For the year ended December 31, 2022 $ 2,470.9 (1) Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to organic growth factors such as price, product mix and volume.
Core Sales (6) $ % (Dollars in millions) (1) For the year ended December 31, 2022 $ 2,429.9 Components of Change: Existing businesses (core organic sales growth) (2) 144.1 5.9 % Acquisitions (3) 63.9 2.6 % Foreign Currency translation (4) (17.0) (0.7) % Total core sales growth (5) 191.0 7.9 % For the year ended December 31, 2023 $ 2,620.9 (1) Numbers may not sum due to rounding.
As reflected in the discussions that follow, the pandemic and actions taken in response to it have had a variety of impacts on our results of operations during 2021 and 2022, including sales levels, and together with other market dynamics has contributed to ongoing inflation and supply chain challenges, including labor, raw material, and component shortages.
The change in Net sales due to acquisitions for the periods presented in this filing represents the incremental sales as a result of acquisitions. The COVID Pandemic The COVID virus and actions taken in response to it have had a variety of impacts on our results of operations during 2022, including sales levels and other supply chain challenges.
As of end of the year, we had the capacity for additional indebtedness of up to $529 million a vailable on the Revolving Facility.
Re fer to Note 16, “Derivatives” in the accompanying Notes contained elsewhere in this Form 10-K for more information related to swap agreements. As of end of the year, we had the capacity for additional indebtedness of up to $718 million a vailable on the Revolving Facility.
During 2022 and 2021, 44% and 41% of our Net sales, respectively, were derived from the Americas and 56% and 59%, respectively, from EMEA & APAC. Accordingly, we are affected by market demand, economic and political factors in countries throughout the world.
Accordingly, we are affected by market demand, economic and political factors in countries throughout the world.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2022 and 2021. Results of Operations The following discussion of Results of Operations addresses the comparison of the periods presented.
For additional information about these challenges and opportunities, refer to Part I, Item 1A. “Risk Factors” in our Form 10-K The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2023 and 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+3 added−1 removed2 unchanged
Biggest changeDollar and against the currencies of other countries in which we manufacture and sell products and services. During 2022, approxima tely 78% of our sales were derived from operations outside the U.S. We have significant manufacturing operations in European countries that are not part of the Eurozone. Sales are more highly weighted toward the Euro and U.S. Dollar.
Biggest changeAs a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of other countries in which we manufacture and sell products and services. During 2023, approxima tely 78% of our sales were derived from operations outside the United States.
Interest Rate Risk We entered into certain credit facilities pursuant to the terms of a credit agreement on April 4, 2022. Please refer to Note 15, “Debt” in our Notes included in this Form 10-K for additional information regarding our credit facilities. We are exposed to interest rate risk on the new variable-rate term loans under these facilities.
Interest Rate Risk We entered into certain credit facilities pursuant to the terms of a credit agreement on April 4, 2022. Refer to Note 15, “Debt” in our Notes included in this Form 10-K for additional information regarding our credit facilities. We are exposed to interest rate risk on the new variable-rate term loans under these facilities.
A hypothetical increase in interest rates of 1% during the year ended December 31, 2022 would have increased interest expense by approximatel y $6.2 million. I n order to mitigate our interest risk, in July 2022, we entered into interest rate swaps to hedge approximately $600 million of our variable interest rate debt.
A hypothetical increase in interest rates of 1% during the year ended December 31, 2023 would have increased interest expense by approximatel y $4.2 million. I n order to mitigate our interest risk, in 2022, we entered into interest rate swaps to hedge approximately $600 million of our variable interest rate debt.
We also face exchange rate risk from transactions from intercompany transactions between affiliates. Although we use the U.S. Dollar as our functional currency for reporting purposes, we have manufacturing sites throughout the world, and a substantial portion of our costs are incurred and sales are generated in foreign currencies.
Although we use the U.S. dollar as our functional currency for reporting purposes, we have manufacturing sites throughout the world, and a substantial portion of our costs are incurred and sales are generated in foreign currencies.
See Note 16 “Derivatives” in our Notes included in this Form 10-K for additional information. Exchange Rate Risk We have manufacturing sites throughout the world and sell our products globally. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S.
See Note 16, “Derivatives” in our Notes included in this Form 10-K for additional information. Exchange Rate Risk We have manufacturing sites throughout the world and sell our products globally.
Dollar as of December 31, 2022, would result in a reduction in Equity of approximat ely $151 million . During 2022 we entered into two fixed-to-fixed cross-currency swaps which will provide a hedge to a portion of our European net asset position. See Note 16 “Derivatives” in our Notes included in this Form 10-K for additional information.
During 2022, we entered into two fixed-to-fixed cross-currency swaps which will provide a hedge to a portion of our European net asset position. See Note 16, “Derivatives” in our Notes included in this Form 10-K for additional information. We also face exchange rate risk from transactions from intercompany transactions between affiliates.
See Note 16, “Deriva tives” in the accompanying Notes to Consolidated and Combined Financial Statements included in this 10-K for additional information regarding our derivative instruments. 53
In order to manage commodity price risk, we periodically enter into fixed price contracts directly with suppliers. See Note 16, “Deriva tives” in the accompanying Notes to Consolidated and Combined Financial Statements included in this 10-K for additional information regarding our derivative instruments. 51
We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries. The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the Accumulated other comprehensive loss component of Equity. A 10% depreciation in major curren cies, relative to the U.S.
The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the Accumulated other comprehensive loss component of Equity. A 10% depreciation in major curren cies, relative to the U.S. dollar as of December 31, 2023, would result in a reduction in Equity of approximat ely $170 million.
We also have significant contractual obligations in U.S. Dollars that are met with cash flows in other currencies as well as U.S. Dollars. To better match revenue and expense as well as cash needs from contractual liabilities, we regularly enter into foreign currency swaps and forward contracts.
To better match revenue and expense as well as cash needs from contractual liabilities, we regularly enter into foreign currency swaps and forward contracts. We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries.
Removed
Similarly, tax costs may increase or decrease as local currencies strengthen or weaken against the U.S. Dollar. Commodity Price Risk We are exposed to changes in the prices of raw materials used in our production processes. In order to manage commodity price risk, we periodically enter into fixed price contracts directly with suppliers.
Added
We have significant manufacturing operations in European countries that are not part of the Eurozone. Sales are more highly weighted toward the Euro and U.S. dollar. We also have significant contractual obligations in U.S. dollars that are met with cash flows in other currencies as well as U.S. dollars.
Added
Similarly, tax costs may increase or decrease as local currencies strengthen or weaken against the U.S. dollar. In addition, Argentina is deemed to have a highly inflationary economy, resulting in the remeasurement of the Company’s Argentine operations into Brazilian real, the functional currency of the Argentine entity’s direct parent.
Added
Gains and losses from the remeasurement are recorded in the Company’s Consolidated and Combined Statements of Operations for all years included in the Consolidated and Combined Financial Statements included elsewhere this Form 10-K. Commodity Price Risk We are exposed to changes in the prices of raw materials used in our production processes.

Other ESAB 10-K year-over-year comparisons