Results

ESAB Corporation

02/20/2026 | Press release | Distributed by Public on 02/20/2026 05:44

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of our financial statements with a narrative from the perspective of Company's management. This MD&A is divided into five main sections:
•Overview;
•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. "Risk Factors" and the accompanying Consolidated Financial Statements and Notes to Consolidated Financial Statements (the "Notes") included in Item 8. of this Form 10-K. The MD&A includes forward-looking statements. 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."
Overview
See Part I, Item 1. "Business" of this Form 10-K for a discussion of ESAB's objectives and methodologies for delivering stockholder value.
We are a focused premier industrial compounder. Our rich history of innovating products, workflow solutions and our business system, EBXai, enables our purpose of Shaping the world we imagineTM.. We conduct our operations through two reportable segments. These segments consist of the "Americas," which includes operations in North America and South America, and "EMEA & APAC," which includes Europe, the Middle East, India, Africa and Asia Pacific. We serve a global customer base across multiple markets through a combination of direct sales and third-party distribution channels. Our customer base is highly diversified in the industrial end markets.
Outlook
We believe that we are well positioned to grow our businesses organically over the long term by enhancing our product offerings and expanding our customer base. We believe our business mix is well balanced between sales in high growth and developed markets, and equipment and consumables. We believe that our geographic and end market diversity helps mitigate the effects from cyclical industrial market exposures. 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. We believe that our extensive experience of acquiring and effectively integrating acquisition targets should enable us to capitalize on future opportunities. We believe our recent acquisitions are aligned with this strategic direction. Refer to Note 5, "Acquisitions" and Note 21, "Subsequent Events" in the accompanying Notes contained elsewhere in this Form 10-K for additional information.
On January 31, 2026, the Company entered into an agreement to acquire Eddyfi, a global leader in advanced inspection and monitoring technologies headquartered in Quebec, Canada, for approximately $1.45 billion. The acquisition is expected to be funded with a combination of cash on hand, debt and approximately $318 million of fully committed equity. 2026 Eddyfi projected annual revenue is approximately $270 million. This acquisition is expected to be completed in mid-2026, subject to the receipt of applicable regulatory approvals and customary closing conditions.
We face a number of challenges and opportunities, including the successful integration of acquired businesses, the application and expansion of our EBXai tools to improve business performance and the rationalization of assets and costs. We expect AI investment and infrastructure to contribute to supporting our margin expansion through initiatives such as operational
efficiencies. For additional information about these challenges and opportunities, refer to Part I, Item 1A. "Risk Factors" of this 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, 2025 and 2024. We have elected not to include a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2024 and 2023 in this report in reliance upon Instruction 1 to Item 303(b) of Regulation S-K. This discussion can be found in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 20, 2025.
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.
Items Affecting Comparability of Reported Results
The comparability of our operating results for the years ended December 31, 2025 and 2024 are affected by the following additional significant items:
Russia and Ukraine conflict
The invasion of Ukraine by Russia and the sanctions and other actions taken by governments in response to this crisis have increased the level of economic and political uncertainty. Refer to Note 1, "Organization and Basis of Presentation" in the accompanying Notes contained elsewhere as well as inPart I, Item 1A. "Risk Factors" section in this Form 10-K.
Tariffs
The Company continues to actively monitor changes in United States policy regarding international trade, including the recent progress in reaching or progressing international trade agreements with major counterparties. As reflected in the discussions that follow, the United States policy regarding international trade and actions taken in response to it have had a variety of impacts on our results of operations during 2025, including decreased sales levels and increased raw material costs.
For additional information on risks to the Company's operations related to United States policy regarding international trade, refer to the Part I, Item 1A. "Risk Factors" section of this Form 10-K.
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.
Foreign Currency Fluctuations
During 2025 and 2024, a significant portion of our Net sales, 80% and 78%, respectively, were derived from operations outside of the United States with the majority of those sales denominated in currencies other than the U.S. Dollar. Because much of our manufacturing and employee costs are outside the United States, a significant portion of our costs are also denominated in currencies other than the U.S. Dollar. Changes in foreign exchange rates can translationally impact our results of operations and are quantified when significant.
For the year ended December 31, 2025 compared to 2024, fluctuations in foreign currencies increased Net sales by 0.6%, Gross profit by 0.8% and Selling, general and administrative expense by 1.4%.
Seasonality
Our European operations typically experience a slowdown during the July and August vacation seasons.
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. While we seek to take actions to manage this risk, future changes in component and raw material costs may adversely impact earnings. During the year ended December 31, 2025, we experienced higher material costs primarily driven by the impact of tariffs.
Sales and Cost Mix
The Gross profit margins within our business vary in relation to the relative mix of many factors, including the type of product, the location in which the product is manufactured, the end market application for which the product is designed, and the percentage of total revenue represented by consumables, which often have lower margins than equipment.
The mix of sales was as follows for the periods presented.
Year Ended December 31,
2025 2024
Consumables 66 % 67 %
Equipment 34 % 33 %
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. ESAB presents this non-GAAP financial measure including and excluding Russia due to economic and political volatility caused by the Russia and Ukraine conflict, which we believe results in enhanced investor interest in these alternate presentations. Adjusted EBITDA excludes from Net income from continuing operations the effect of Income tax expense, Interest expense and other, net, Pension settlement loss, Restructuring and other related charges, acquisition transaction, due diligence and integration expenses, amortization of intangibles and fair value charges on acquired inventories and depreciation and other amortization. We also present Adjusted EBITDA margin, which is subject to the same adjustments as Adjusted EBITDA. Further, we present these non-GAAP performance measures on a segment basis subject to the same adjustments described above. We also present Core adjusted EBITDA and Core adjusted EBITDA margin, which are subject to the same adjustments as Adjusted EBITDA and Adjusted EBITDA margin, respectively, and which remove the impact of Russia for the years ended December 31, 2025 and 2024. Adjusted EBITDA, Adjusted EBITDA margin, Core adjusted EBITDA and Core adjusted EBITDA margin assist management in comparing our operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to unusual events or discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity and core business. 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. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.
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, 2025 and 2024.
Year Ended December 31, 2025
Americas EMEA & APAC Total
(Dollars in millions)(1)
Net income from continuing operations (GAAP) $ 259.1
Income tax expense 69.2
Interest expense and other, net 83.9
Operating income (GAAP) $ 167.8 $ 244.3 $ 412.2
Adjusted to add:
Restructuring and other related charges(2)
11.6 16.1 27.8
Acquisition-amortization and other related charges(3)
29.2 42.9 72.1
Depreciation and other amortization 16.7 31.0 47.7
Adjusted EBITDA (non-GAAP) 225.4 334.3 559.7
Adjusted EBITDA attributable to Russia (non-GAAP)(4)
- 19.7 19.7
Core adjusted EBITDA (non-GAAP) $ 225.4 $ 314.7 $ 540.0
Adjusted EBITDA margin (non-GAAP) 19.9 % 19.5 % 19.7 %
Core adjusted EBITDA margin (non-GAAP)(5)
19.9 % 20.0 % 20.0 %
(1) Numbers may not sum due to rounding.
(2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.
(3)Includes transaction, diligence and integration expenses totaling $31.5 million and amortization of intangibles and fair value charges on acquired inventories totaling $40.5 million for the year ended December 31, 2025, respectively.
(4)Numbers calculated following the same definition as Adjusted EBITDA for total Company.
(5) Net sales were $142.2 millionrelating to Russia for the year ended December 31, 2025.
Year Ended December 31, 2024
Americas EMEA & APAC Total
(Dollars in millions)(1)
Net income from continuing operations (GAAP) $ 293.1
Income tax expense 77.3
Interest expense and other, net 64.9
Pension settlement loss 12.2
Operating income (GAAP) $ 203.2 $ 244.2 $ 447.5
Adjusted to add:
Restructuring and other related charges(2)
3.0 7.2 10.2
Acquisition-amortization and other related charges(3)
18.6 15.9 34.5
Depreciation and other amortization 14.5 22.2 36.6
Adjusted EBITDA (non-GAAP) 239.2 289.6 528.8
Adjusted EBITDA attributable to Russia (non-GAAP)(4)
- 18.1 18.1
Core adjusted EBITDA (non-GAAP) $ 239.2 $ 271.5 $ 510.7
Adjusted EBITDA margin (non-GAAP) 20.3 % 18.5 % 19.3 %
Core adjusted EBITDA margin (non-GAAP)(5)
20.3 % 19.2 % 19.7 %
(1) Numbers may not sum due to rounding.
(2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.
(3) Includes transaction, diligence and integration expenses totaling $4.2 million and amortization of intangibles and fair value charges on acquired inventories totaling $30.3 million for the year ended December 31, 2024, respectively.
(4)Numbers calculated following the same definition as Adjusted EBITDA for total Company.
(5) Net sales were $149.6 millionrelating to Russia for the year ended December 31, 2024.
Total Company
Sales
Net salesincreased for the year ended December 31, 2025as compared with the year ended December 31, 2024. The following table presents the components of changes in our consolidated Net sales.
Net Sales
$ %
(Dollars in millions)
For the year ended December 31, 2024
$ 2,740.8
Components of change:
Existing businesses (organic sales)(1)
(31.4) (1.1) %
Acquisitions(2)
115.9 4.2 %
Foreign currency translation(3)
17.3 0.6 %
Total Net sales growth 101.8 3.7 %
For the year ended December 31, 2025
$ 2,842.6
(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.
(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.
(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.
Net sales from existing businesses decreased $31.4 million during the year ended December 31, 2025 compared to the prior year period, due to decreasedsales volumes of $60.8 million driven primarily by lower volumes in Russia and the impact of tariffs in the Americas partially offset by $29.4 million of customer pricing increases. The increase in Net sales from acquisitions of $115.9 million was attributable to the acquisitions of Sager S.A. ("Sager"), ESAB Bangladesh Private Limited ("ESAB Bangladesh"), SUMIG Soluções para Solda e Corte Ltda. ("SUMIG"), Bavaria Schweisstechnik ("Bavaria"), DeltaP s.r.l. ("DeltaP"), Aktiv Technologies Private Limited ("Aktiv") and EWM GmbH ("EWM"). The changes in foreign exchange rates caused a $17.3 million favorable currency translation impact.
Net sales excluding Russia
Net sales excluding Russia ("Core sales") for ESAB increasedfor the year ended December 31, 2025 as compared with the year ended December 31, 2024. The following table presents the components of changes in our consolidated Core sales.
Core Sales(1)(6)
$ %
(Dollars in millions)
For the year ended December 31, 2024
$ 2,591.2
Components of change:
Existing businesses (core organic sales)(2)
(5.1) (0.2) %
Acquisitions(3)
115.9 4.5 %
Foreign Currency translation(4)
(1.5) (0.1) %
Total Core sales growth(5)
109.2 4.2 %
For the year ended December 31, 2025
$ 2,700.4
(1) Numbers may not sum due to rounding.
(2) 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.
(3) 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.
(4) 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.
(5) Numbers calculated following the same definition as total sales growth for total Company.
(6) Represents sales excluding Russia for the year ended December 31, 2025 and 2024, respectively.
Core sales from existing businesses decreased$5.1 million during the year ended December 31, 2025, compared to the prior year period due to decreasedsales volumes of $33.6 million driven primarily by the impact of tariffs in the Americas partially offset by $28.5 million of customer pricing increases. The increase in Core sales from acquisitions of $115.9 million was attributable to the acquisitions of the Sager, ESAB Bangladesh, SUMIG, Bavaria, DeltaP, Aktiv and EWM. The changes in foreign exchange rates caused a $1.5 million unfavorable currency translation impact.
Operating Results
The following table summarizes our results for the comparable periods.
Year Ended December 31,
2025 2024
(Dollars in millions)
Gross profit $ 1,048.3 $ 1,037.5
Gross profit margin 36.9 % 37.9 %
Selling, general and administrative expense $ 608.4 $ 579.8
Net income from continuing operations $ 259.1 $ 293.1
Net income margin from continuing operations 9.1 % 10.7 %
Adjusted EBITDA (non-GAAP) $ 559.7 $ 528.8
Adjusted EBITDA margin (non-GAAP) 19.7 % 19.3 %
Core adjusted EBITDA (non-GAAP) $ 540.0 $ 510.7
Core adjusted EBITDA margin (non-GAAP) 20.0 % 19.7 %
Items excluded from Adjusted EBITDA:
Restructuring and other related charges(1)
$ 27.8 $ 10.2
Pension settlement loss - 12.2
Acquisition - amortization and other related charges(2)
72.1 34.5
Interest expense and other, net 83.9 64.9
Income tax expense 69.2 77.3
Depreciation and other amortization 47.7 36.6
Items excluded from Core adjusted EBITDA:
Adjusted EBITDA attributable to Russia (non-GAAP)(3)
$ 19.7 $ 18.1
(1) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.
(2)Includes transaction, diligence and integration expenses totaling $31.5 million and $4.2 million and amortization of intangibles and fair value charges on acquired inventories totaling $40.5 million and $30.3 million for the years ended December 31, 2025 and 2024, respectively.
(3)Numbers calculated following the same definition as Adjusted EBITDA for total Company.
Gross profit increased $10.8 million during 2025 in comparison to 2024, which was primarily attributable to accretion from acquisitions, foreign currency impact and benefits from price increases partially offset by higher material costs, decreases in sales volume and tariff impacts. Gross profit margin declined 100 basis points during the same period, primarily due to inflation and tariff-related cost increases partially offset by customer pricing increases, leading to margin compression.
Selling, general and administrative expense increased $28.6 million during 2025 in comparison to 2024 primarily driven by incremental costs from acquisitions partially offset by benefits from lower employee costs and EBXai driven savings. Restructuring and other related charges increased $17.6 million during 2025 in comparison to 2024 primarily driven by strategic initiatives to improve margins in the Americas for future years and integrate the recent EWM acquisition. During the year ended December 31, 2024, the Company recognized a non-cash Pension settlement loss of $12.2 million related to the transfer of plan assets to a third party as part of externalizing the risk associated with a foreign defined benefit plan. No such settlement occurred during the year ended December 31, 2025. Interest expense and other, net, increased in comparison to 2024,primarily driven by a higher Debt balance related to acquisitions.
The effective tax rate for 2025 and 2024 was 21.1% and 20.9%, respectively. The difference was primarily due to changes in tax reserves and valuation allowances. In 2025, the effective tax rate was higher than the United States federal statutory rate of 21.0% primarily due to the jurisdictional mix of earnings, including foreign withholding tax partially offset by the release of a valuation allowance. In 2024, the rate was lower than the United States federal statutory rate of 21.0% due to favorable impacts from an agreement with a taxing authority on the treatment of subsidy income in a foreign jurisdiction, favorable changes in tax reserves primarily related to a final ruling in a tax case in a foreign jurisdiction partially offset by withholding taxes.
Net income from continuing operations decreased in 2025 compared to 2024, due to the changes discussed above. Adjusted EBITDA increased $30.9 million and Adjusted EBITDA margin expanded by 40 basis points in 2025 compared to 2024 due to
the aforementioned factors.Core adjusted EBITDA increased $29.3 million and Core adjusted EBITDA margin expanded by 30 basis points primarily due tothe aforementioned factors.
Reportable Segments
We report results in two reportable segments: Americas and EMEA & APAC.
Americas
The following table summarizes selected financial data for our Americas segment.
Year Ended December 31,
2025 2024
(Dollars in millions)
Net sales $ 1,130.3 $ 1,176.7
Gross profit $ 437.2 $ 465.7
Gross profit margin 38.7 % 39.6 %
Selling, general and administrative expense $ 247.2 $ 257.6
Adjusted EBITDA (non-GAAP) $ 225.4 $ 239.2
Adjusted EBITDA margin (non-GAAP) 19.9 % 20.3 %
Items excluded from Adjusted EBITDA:
Restructuring and other related charges $ 11.6 $ 3.0
Acquisition - amortization and other related charges 29.2 18.6
Depreciation and other amortization $ 16.7 $ 14.5
Net sales in our Americas segment decreased by $46.4 million during 2025 compared to 2024. Net sales from existing business decreased by $43.0 million primarily due to reduced sales volumes primarily driven by tariffs and related impacts partially offset by pricing increases. Net sales from acquisitions contributed $27.9 million. In addition, there was $31.3 million in unfavorable currency translation. Gross profit decreased primarily due to a decrease in sales volumes and higher material costs, including tariffs, partially offset by acquisitions, price increases and foreign exchange impact. Gross profit margin declined 90 basis points, primarily due to inflation and tariff-related cost increases partially offset by customer pricing increases, leading to margin compression. Selling, general and administrative expense decreased compared with the prior year period primarily due to benefits from lower employee costs and EBXai driven savings partially offset by acquisitions. Restructuring and other related charges increased $8.6 million during 2025 in comparison to 2024 primarily driven by strategic initiatives to improve margins in the Americas for future years. Adjusted EBITDA decreased by $13.8 million and margin declined 40 basis points primarily due to the aforementioned factors.
EMEA & APAC
The following table summarizes selected financial data for our EMEA & APAC segment.
Year Ended December 31,
2025 2024
(Dollars in millions)
Net sales $ 1,712.2 $ 1,564.1
Gross profit $ 611.1 $ 571.8
Gross profit margin 35.7 % 36.6 %
Selling, general and administrative expense $ 329.7 $ 317.9
Adjusted EBITDA (non-GAAP) $ 334.3 $ 289.6
Adjusted EBITDA margin (non-GAAP) 19.5 % 18.5 %
Core adjusted EBITDA (non-GAAP) $ 314.7 $ 271.5
Core adjusted EBITDA margin (non-GAAP) 20.0 % 19.2 %
Items excluded from Adjusted EBITDA:
Restructuring and other related charges $ 16.1 $ 7.2
Acquisition - amortization and other related charges 42.9 15.9
Depreciation and other amortization 31.0 22.2
Items excluded from Core adjusted EBITDA:
Adjusted EBITDA attributable to Russia (non-GAAP) $ 19.7 $ 18.1
Net sales increased for our EMEA & APAC segment by $148.1 million during 2025 compared to 2024. Net sales from existing business increased by $11.6 million primarily resulting from increases in sales volume partially offset by lower customer pricing. Net sales from acquisitions contributed $88.0 million. In addition, there was $48.5 million in favorablecurrency translation. Gross profit increased primarily due to acquisitions, favorable foreign exchange impact and increased sales volumes partially offset by lower pricing and higher material costs.Gross profit margin declined 90basis points, primarily due to inflation and cost increases partially offset by customer pricing increases, leading to margin compression. Selling, general and administrative expense increased over the same period primarily due to acquisitions and related costs partially offset by a gain on disposition of property. Restructuring and other related charges increased $8.9 millionduring 2025 in comparison to 2024 primarily driven by the EWM acquisition. Adjusted EBITDA increased by $44.7 million and margin expanded100 basis points primarily due to the aforementioned factors. Core adjusted EBITDA increased by $43.2 millionand margin expandedby 80 basis points due to the aforementioned factors.
Liquidity and Capital Resources
Overview
We expect to finance our liquidity requirements through cash flows from operating activities. We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures, restructuring and asbestos-related cash outflows, debt service and required principal payments, stock repurchases and, subject to approval from the BOD, payment of cash dividends.
As of December 31, 2025, we were in compliance with the covenants under the A&R Credit Agreement and the Indenture. The Company's weighted average interest rate of borrowings under the A&R Credit Agreement and the Indenture was5.40%, excluding accretion of deferred financing fees. As of end of the year, we had the capacity for additional indebtedness of up to $865 million available on the senior revolving credit facility ("Revolving Facility"). Additionally, we have the ability to incur $50 million of indebtedness pursuant to certain uncommitted credit lines, consisting primarily of an uncommitted credit line that we currently have in place, which we have used from time to time in the past for short-term working capital needs. Refer to Note 15, "Debt" and Note 16, "Derivatives" in the accompanying Notes contained elsewhere in this Form 10-K for more information related to the Company's debt and derivative instruments. We believe that we could raise additional funds in the form of debt or equity if it were determined to be appropriate for strategic acquisitions or other corporate purposes. 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.
Stock Repurchase Program
On August 13, 2024, the BOD authorized and approved a stock repurchase program to repurchase up to five million shares of the Company's common stock, par value $0.001 per share, from time-to-time on the open market, in privately negotiated transactions or as may otherwise be determined by the Company's management in its discretion. No repurchases of the Company's common stock have been made through the year ended December 31, 2025 since program inception. The timing
and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions, applicable legal requirements and other factors. There is no term associated with the remaining repurchase authorization.
Cash Flows
As of December 31, 2025, we had $185.9 million of Cash and cash equivalents, a decrease of $63.5 million from $249.4 million as of December 31, 2024. The following table summarizes the change in Cash and cash equivalents during the periods indicated.
Year Ended December 31,
2025 2024
(In millions)(1)
Net cash provided by operating activities $ 260.6 $ 355.4
Purchases of property, plant and equipment (47.3) (51.8)
Proceeds from sale of property, plant and equipment 6.5 3.8
Acquisitions, net of cash received (438.3) (153.7)
Other investing (0.8) (4.1)
Net cash used in investing activities (479.9) (205.7)
Proceeds from borrowings on Senior Notes - 700.0
Proceeds from borrowings on Term Loan 350.0 -
Proceeds from borrowings on revolving credit facilities and other 410.7 205.0
Repayments of borrowings on Term Loan (385.0) (602.5)
Repayments of borrowings on revolving credit facilities and other (217.1) (237.0)
Payment of debt issuance costs (5.4) (10.4)
Payment of dividends (21.9) (17.0)
Distributions to noncontrolling interest holders (4.2) (3.7)
Other financing (13.4) (2.7)
Net cash provided by financing activities 113.7 31.7
Effect of foreign exchange rates on Cash and cash equivalents 42.1 (34.0)
(Decrease) increase in Cash and cash equivalents $ (63.5) $ 147.4
(1) Numbers may not sum due to rounding.
Cash flows from operating activities can fluctuate significantly from period to period due to changes in working capital and the timing of payments for items such as restructuring program funding, acquisition deal expenses and asbestos-related costs. Changes in significant operating cash flow items are discussed below.
•Operating cash flow for the year ended December 31, 2025 decreased compared to the prior year period due to higher working capital, higher interest expenses and transaction costs associated with acquisition activity.
•Discontinued operations outflows for the years ended December 31, 2025 and 2024 were $15.0 million, which were primarily asbestos related.
•Restructuring initiative payments of $14.9 million and $10.4 million for the years ended December 31, 2025 and 2024, respectively, which 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.
Cash flows used in investing activities during the year ended December 31, 2025 was primarily comprised of approximately $438 million of cash used for our Bavaria, DeltaP, Aktiv and EWM acquisitions and during the year ended December 31, 2024 was primarily comprised of approximately $154 million for our Sager, ESAB Bangladesh and SUMIG acquisitions.
Cash flows provided by financing activities during the year ended December 31, 2025 were $113.7 million, primarily attributable to acquisition-related financing activities. Proceeds from debt borrowings of $760.7 million were partially offset by net repayment of $602.1 million and cash dividend payments totaling $21.9 million.
Our Cash and cash equivalents as of December 31, 2025 include $173.4 millionheld in jurisdictions outside the United States. Cash repatriation of non-United States cash into the United States may be subject to taxes, other local statutory restrictions and minority owner distributions.
Contractual Obligations
Debt
As of December 31, 2025, the Company's senior term loan A facility and Senior Notes had principal amounts outstanding of $350.0 million and $700.0 million, respectively, as well as $185.0 million drawn on the Revolving Facility. In addition to the outstanding principal on our debt, we are subject to contractual obligations and commitments to make future interest payments on the senior term loan A facility and Senior Notes on various payment dates as provided in the A&R Credit Agreement and the Indenture. Refer to Note 15, "Debt" in the accompanying Notes contained elsewhere in this Form 10-K for expiration dates and maturity schedules on our outstanding debt obligations for the next five years.
Operating Leases
The Company leases certain office spaces, warehouses, facilities, vehicles and equipment. As of December 31, 2025, the Company had fixed lease payment obligations of $151.5 million, with $28.4 million payable within 12 months.
Purchase Obligations
As of December 31, 2025, the Company had other purchase obligations of $162.4 million, with $155.2 million payable within 12 months.
We have funding requirements associated with our pension benefit plans as of December 31, 2025, which are estimated to be $5.2 million for the year ending December 31, 2026. Other long-term liabilities, such as those for other legal claims, employee benefit plan obligations, deferred income taxes and liabilities for unrecognized income tax benefits, are excluded from this disclosure since they are not contractually fixed as to timing and amount.
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 Financial Statements at December 31, 2025 other than outstanding letters of credit of $33.7 million and unconditional purchase obligations with suppliers noted above.
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. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what our management anticipates and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.
We believe the following accounting policies are the most critical in that they are important to the financial statements and they require the most difficult, subjective or complex judgments in the preparation of the financial statements. For a detailed discussion on the application of these and other accounting policies, see Note 2, "Summary of Significant Accounting Policies" in the accompanying Notes included elsewhere in this Form 10-K.
Impairment of Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the costs in excess of the fair value of net assets acquired associated with our business acquisitions. Indefinite-lived intangible assets consist of certain trade names.
We evaluate the recoverability of Goodwill and indefinite-lived intangible assets annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount. The annual impairment test date elected by the Company is the first day of the fourth quarter. Goodwill and indefinite-lived intangible assets are considered to be impaired when the carrying value of a reporting unit or asset exceeds its fair value. As of the annual impairment test date, the Company had three reporting units: Americas, EMEA & APAC and Gas Control Equipment ("GCE").
In the evaluation of Goodwill for impairment, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting entity is less than its carrying value. If we determine that it is more likely than not for a reporting unit's fair value to be greater than its carrying value, a calculation of the fair value is not performed. If we determine that it is more likely than not for a reporting unit's fair value to be less than its carrying value, a calculation of the fair value is performed and compared to the carrying value of that reporting unit. In certain instances, we may elect to forgo the qualitative assessment and proceed directly to the quantitative impairment test. If the carrying value of a reporting unit exceeds its fair value, Goodwill of that reporting unit is impaired and an impairment loss is recorded equal to the excess of the carrying value over its fair value.
Generally, we measure fair value of reporting units based on a present value of future discounted cash flows. The discounted cash flow models indicate the fair value of the reporting units based on the present value of the cash flows that the reporting units are expected to generate in the future. Significant estimates in the discounted cash flow models include the weighted average cost of capital, revenue growth rates, long-term rate of growth and profitability of our business.
An evaluation of Goodwill for impairment was performed for the three reporting units for the years ended December 31, 2025 and 2024, which indicated no impairment existed.
For the year ended December 31, 2025, a quantitative assessment was performed for the three reporting units. The carrying amount of Goodwill of the Americas, EMEA & APAC and GCE reporting units as of December 31, 2025 were $647.0 million, $1,137.9 million and $164.8 million, respectively. Determining the fair value of a reporting unit requires the application of judgment and involves the use of significant estimates and assumptions that can be affected by changes in business climate, economic conditions, the competitive environment and other factors. We base these fair value estimates on assumptions our management believes to be reasonable but are unpredictable and inherently uncertain. Future changes in the judgments, assumptions and estimates could result in significantly different estimates of fair value in the future. 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.
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. 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. If we determine that it is more likely than not that the indefinite-lived intangible asset's fair value is less than its carrying value, a calculation is performed and compared to the carrying value of the asset. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We measure the fair value of our indefinite-lived intangible assets using the relief from royalty method. Significant estimates in this approach include projected revenues and royalty and discount rates for each trade name evaluated.
A quantitative impairment test was performed for all the indefinite-lived trade name brands for the years ended December 31, 2025 and 2024, which indicated no impairment existed.
A sustained decline in our end-markets and geographic markets could increase the risk of impairments in future years. Actual results could differ from our estimates and projections, which would also affect the assessment of impairment. As of December 31, 2025, we have Goodwill of $1,949.7 million and indefinite-lived trade names of $197.1 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.
Income Taxes
We account for income taxes under ASC 740, Income Taxes("ASC 740"), which requires recognition of deferred income tax assets and liabilities reflecting the tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the Consolidated Financial Statements and their respective tax basis. Deferred income tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets and liabilities are reported in Other assets and Other liabilities in the Consolidated Balance Sheets, respectively. The effect on deferred income tax assets and liabilities of a change in tax rates is generally recognized in Income tax expense in the period that includes the enactment date. Global Intangible Low-Taxed Income is accounted for as a current tax expense in the year the tax is incurred.
Valuation allowances are recorded if it is more likely than not that some portion of the deferred income tax assets will not be realized. In evaluating the need for a valuation allowance, we consider various factors, including the expected level of future taxable income and available tax planning strategies. Any changes in judgment about the valuation allowance are recorded through Income tax expense and are based on changes in facts and circumstances regarding realizability of deferred tax assets.
We must presume that an income tax position taken in a tax return will be examined by the relevant tax authority and determine whether it is more likely than not that the tax position will be sustained upon examination based upon the technical merits of the position. An income tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. We establish a liability for unrecognized income tax benefits for income tax positions for which it is more likely than not that a tax position will not be sustained upon examination by the respective taxing authority to the extent such tax positions reduce our income tax liability. We recognize interest and penalties related to unrecognized income tax benefits in Income tax expense in the Consolidated Statements of Operations.
Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $18.6 millionand $17.1 million as of December 31, 2025 and 2024, respectively, and are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated Balance Sheets.
Revenue Recognition
We recognize revenue when control of promised goods or services is transferred to the customer. The amount of revenue recognized reflects the consideration to which we expect to be entitled in exchange for transferring the goods or services.
We provide a variety of products and services to our customers. Most of our contracts consist of a single, distinct performance obligation or promise to transfer goods or services to a customer. For contracts that include multiple performance obligations, we allocate the total transaction price to each performance obligation using our best estimate of the stand-alone selling price of each identified performance obligation. A significant majority of our revenue relates to the shipment of off-the-shelf products that is recognized when control is transferred to the customer. On a limited basis, we have agreements with customers that have multiple performance obligations. In determining whether there are multiple performance obligations, we first assess the goods or services promised in the customer arrangement and then consider the guidance in ASC 606, Revenue from Contracts with Customers, to evaluate whether goods and services are capable of being distinct and are considered distinct within the customer arrangement.
To determine whether promised goods or services are separately identifiable (i.e., whether a promise to transfer a good or service is distinct in the context of the contract), we evaluate whether the contract is to deliver (1) multiple promised goods or services or (2) a combined item that comprises the individual goods or services promised in the contract. Substantially all revenue involving development and application engineering projects consists of a single performance obligation and is recognized at a point in time.
A majority of the revenue we recognize relates to contracts with customers for standard or off-the-shelf products. As control typically transfers to the customer upon shipment of the product in these circumstances, revenue is generally recognized at that point in time. For service contracts, we recognize revenue ratably over the period of performance as the customer simultaneously receives and consumes the benefits of the services provided.
Any recognized revenues in excess of customer billings are recorded as a component of Trade receivables. Billings to customers in excess of recognized revenues are recorded as a component of Accrued liabilities. Each contract is evaluated individually to determine the net asset or net liability position. Substantially all of our revenue is recognized at a point in time, and revenue recognition and billing typically occur simultaneously.
The period of benefit for our incremental costs of obtaining a contract would generally have less than a one-year duration; therefore, we apply the practical expedient available and expense costs to obtain a contract when incurred.
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 losseswas $21.8 million as of December 31, 2025 compared to $23.9 million as of December 31, 2024.
Asbestos Liabilities and Insurance Assets
Certain entities are the legal obligor for certain asbestos obligations including long-term asbestos insurance assets, long-term asbestos insurance receivables, accrued asbestos liabilities, long-term asbestos liabilities, asbestos indemnity expenses, asbestos-related defense costs and asbestos insurance recoveries related to the asbestos obligations of the Former Parent's other legacy industrial businesses. As a result, we hold certain asbestos-related contingencies and insurance coverages.
These subsidiaries are each one of many defendants in a large number of lawsuits that claim personal injury as a result of exposure to asbestos from products manufactured or used with components that are alleged to have contained asbestos. Such components were acquired from third-party suppliers, and were not manufactured by any of our subsidiaries nor were the subsidiaries producers or direct suppliers of asbestos. The manufactured products that are alleged to have contained or used asbestos generally were provided to meet the specifications of the subsidiaries' customers, including the United States Navy. The subsidiaries settle asbestos claims for amounts we consider reasonable given the facts and circumstances of each claim. The annual number of cases and average settlement payment per asbestos claimant has fluctuated during the past several years. The Company expects such settlement value fluctuations to continue in the future based upon, among other things, the number and type of claims settled in a particular period and the jurisdictions in which such claims arise. To date, the majority of settled claims have been dismissed for no payment to plaintiffs.
We have projected future asbestos-related liability costs with regard to pending and future unasserted claims based upon the Nicholson methodology. The Nicholson methodology is a standard approach used by experts and has been accepted by numerous courts. This methodology is based upon risk equations, exposed population estimates, mortality rates and other demographic statistics. In applying the Nicholson methodology for each subsidiary we performed: (1) an analysis of the estimated population likely to have been exposed or claim to have been exposed to products manufactured by the subsidiaries based upon national studies undertaken of the population of workers believed to have been exposed to asbestos; (2) a review of epidemiological and demographic studies to estimate the number of potentially exposed people that would be likely to develop asbestos-related diseases in each year; (3) an analysis of the subsidiaries' recent claims history to estimate likely filing rates for these diseases and (4) an analysis of the historical asbestos liability costs to develop average values, which vary by disease type, jurisdiction and the nature of claim, to determine an estimate of costs likely to be associated with currently pending and projected asbestos claims. Our projections, based upon the Nicholson methodology, estimate both claims and the estimated cash outflows related to the resolution of such claims for periods up to and including the endpoint of asbestos studies referred to in item (2) above.
It is our policy to record a liability for asbestos-related liability costs for the longest period of time that we can reasonably estimate. Accordingly, no accrual has been recorded for any costs that may be paid after the next 15 years.
Projecting future asbestos-related liability costs is subject to numerous variables that are difficult to predict, including, among others, the number of future claims that might be received, the type and severity of the disease alleged by each claimant, the latency period associated with asbestos exposure, dismissal rates, costs of medical treatment, the financial resources of other companies that are co-defendants in the claims, funds available in post-bankruptcy trusts, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, including fluctuations in the timing of court actions and rulings, and the impact of potential changes in legislative or judicial standards, including potential tort reform. Furthermore, any projections with respect to these variables are subject to even greater uncertainty as the projection period lengthens. These trend factors have both positive and negative effects on the dynamics of asbestos litigation in the tort system and the related best estimate of our asbestos liability, and these effects do not move in linear fashion but rather change over multiple year periods.
Accordingly, we monitor these trend factors over time and periodically assess whether an alternative forecast period is appropriate. Taking these factors into account and the inherent uncertainties, we believe that we can reasonably estimate the asbestos-related liability for pending and future claims that will be resolved in the next 15 years and have recorded that liability as our best estimate. While it is reasonably possible that the subsidiaries will incur costs after this period, we do not believe the reasonably possible loss or range of reasonably possible loss is estimable at the current time. Accordingly, no accrual has been recorded for any costs that may be paid after the next 15 years. Defense costs associated with asbestos-related liabilities as well as costs incurred in connection with pursuing insurance coverage from these subsidiaries' insurers are expensed as incurred.
We assessed these subsidiaries' existing insurance arrangements and agreements, estimated the applicability of insurance coverage for existing and expected future claims, analyzed publicly available information bearing on the current creditworthiness and solvency of the various insurers, and employed such insurance allocation methodologies as we believed appropriate to ascertain the probable insurance recoveries for asbestos liabilities. The analysis took into account self-insurance retentions, policy exclusions, pending litigation, liability caps and gaps in coverage, existing and potential insolvencies of insurers as well as how legal and defense costs will be covered under the insurance policies.
Each subsidiary has separate insurance coverage acquired prior to our ownership of each independent entity. In our evaluation of the insurance asset, we use differing insurance allocation methodologies for each subsidiary based upon the applicable law pertaining to the affected subsidiary.
Our analyses are based on currently known facts and a number of assumptions. 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.
See Note 19, "Commitments and Contingencies" in the accompanying Notes for additional information regarding our asbestos liabilities and insurance assets.
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