Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Part III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Part IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Unless otherwise indicated, references in this Annual Report on Form 10-K (this “Form 10-K”) to “ESAB,” “the Company,” “we,” “our” and “us” refer to ESAB Corporation and its subsidiaries.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Form 10-K that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that this Form 10-K is filed with the Securities and Exchange Commission (the “SEC”). All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including statements regarding: the impact of the war in Ukraine and conflicts in the Middle East and the resulting escalating geopolitical tensions on our business; projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, pension and benefit obligations and funding requirements, synergies or other financial items; plans, strategies and objectives of our management for future operations, including statements relating to potential acquisitions, compensation plans or purchase commitments; developments, performance or industry or market rankings relating to products or services; future economic conditions or performance, including the impact of inflationary pressures; the outcome of outstanding claims or legal proceedings, including asbestos-related liabilities and insurance coverage litigation; potential gains and recoveries of costs; assumptions underlying any of the foregoing; and any other statements that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements may be, but are not always, characterized by terminology such as “believe,” “anticipate,” “should,” “would,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “targets,” “aims,” “seeks,” “sees” and similar expressions. These statements are based on assumptions and assessments made by our management as of the filing date of this Form 10-K in light of their experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties and actual results or outcomes could differ materially due to numerous factors, including, but not limited to the following:
• the war in Ukraine and conflicts in the Middle East, escalating geopolitical tensions and the related impact on energy supplies and prices;
• changes in the general economy, including disruptions caused by geopolitical conflicts, as well as the cyclical nature of the markets we serve;
• supply chain constraints and backlogs, including risks affecting raw material, part and component availability, labor shortages and inefficiencies, freight and logistical challenges and inflation in raw material, part, component, freight and delivery costs and our ability to increase our prices to account for increased costs;
• volatility in the commodity markets and certain commodity prices, including oil and steel;
• our ability to identify, finance, acquire and successfully integrate attractive acquisition targets;
• our exposure to unanticipated liabilities resulting from acquisitions;
• significant movements in foreign currency exchange rates or inflation rates;
• the impact of natural or man-made disasters, adverse weather events or conditions, epidemics, pandemics and other global health events;
• our ability and the ability of our customers to access required capital at a reasonable cost;
• our ability to accurately estimate the cost of or realize savings from our restructuring programs;
• the amount of, a nd our ability to estimate and manage, our asbestos-related liabilities;
• the solvency of our insurers and the likelihood of their payment for asbestos-related costs;
• material disruptions at any of our manufacturing facilities;
• noncompliance with various laws and regulations associated with our international operations, including anti-bribery laws, export control regulations and sanctions;
• risks associated with our international operations, including risks from tariffs and other trade protection measures and other changes in trade relations;
• risks associated with the representation of our employees by trade unions and works councils;
• our exposure to product liability claims;
• potential costs and liabilities associated with environmental, health and safety laws and regulations;
• failure to maintain, protect and defend our intellectual property rights;
• our ability to attract and retain our employees, including the loss of key members of our leadership team;
• restrictions in our financing arrangements that may limit our flexibility in operating our business;
• impairment in the value of intangible assets;
• the funding requirements or obligations of our defined benefit pension plans and other postretirement benefit plans;
• new regulations and customer preferences reflecting an increased focus on environmental, social and governance issues, including regulations related to climate change and the use of conflict minerals;
• service interruptions, data corruption, cyber-based attacks or network security breaches affecting our electronic information systems;
• risks arising from changes in technology, including failure to successfully integrate new technologies such as artificial intelligence (“AI”);
• the competitive environment in our industries;
• changes in our tax rates, realizability of deferred tax assets, or exposure to additional income tax liabilities;
• our ability to manage and grow our business and execution of our business and growth strategies;
• the level of capital investment and expenditures by our customers in our strategic markets;
• our financial performance;
• difficulties and delays in integrating or fully realizing projected cost savings and benefits of our acquisitions; and
• other risks and factors set forth under Part I, Item 1A. “Risk Factors” of this Form 10-K.
Actual results and outcomes may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Forward-looking statements speak only as of the date of this Form 10-K. We do not assume any obligation and do not intend to update or revise any forward-looking statement except as required by law. See Part I, Item 1A. “Risk Factors” of this Form 10-K for a further discussion regarding some of the factors that may cause actual results to differ materially from those that we anticipate.
PART I
Item 1. Business
General
Founded in 1904, ESAB Corporation (“ESAB,” “we” or the “Company”), is a focused premier industrial compounder. ESAB provides its partners with fabrication technology advanced equipment, consumables, gas control equipment, robotics and digital solutions. The Company’s rich history of innovative products and workflow solutions and our business management system, ESAB Business Excellence (“EBXai”), enables the Company’s purpose of Shaping the world we imagine TM . We formulate, develop, manufacture and supply consumable products and equipment, including cutting, joining and welding robotics, 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. Our sales channels include both independent distributors and direct salespeople that, depending on geography and end market, sell our products to our end users. ESAB is based in North Bethesda, Maryland and employs approximately 10,300 associates and serves customers in approximately 150 countries.
We believe our Company, which competes in a m arket expected to be approximately $45 billion by the end of 2028, 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 fabrication technology and gas control 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. Approximately 52% of our 2025 revenues were derived from high growth markets, which we define as South America, Eastern Europe, India, Asia Pacific and the Middle East, and which are expected to grow at greater than twice the rate of more developed markets in North America and Europe, based on publicly available economic data from sources such as IHS Markit and the International Monetary Fund. 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. During the year ended December 31, 2025, we completed four acquisitions and we expect to complete more acquisitions in the future. See Part II, Item 8. Note 5, “Acquisitions” and Note 21, “Subsequent Events” 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. We seek to build an enduring premier global enterprise by applying EBXai to continuously improve our Company, pursue growth in revenues and improvements in profit and cash flow.
EBXai is integral to our operations. EBXai is our culture and includes our values, a comprehensive set of tools and repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, stockholders and associates. We believe that our management team’s access to, and experience in, the application of the EBXai methodology is one of our primary competitive strengths.
Industry Overview
Our products and services are marketed worldwide and the markets we serve are fragmented and competitive. 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. The markets that we compete in are also served by Lincoln Electric and the welding business within Illinois Tool Works. 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 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. 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.
The following discussions of International Operations , Research and Development, Intellectual Property, Raw Materials, Seasonality, Working Capital, Regulatory Environment, Human Capital Management and Company Information and Access to SEC Reports include information that is common to both of our reportable segments, unless indicated otherwise.
International Operations
Our products and services are available worldwide. We believe this geographic diversity allows us to draw on the skills of a global workforce, provides stability to our operations, allows us to drive economies of scale, provides revenue streams that may offset economic trends in individual economies and offers an opportunity to access new markets for products. In addition, we believe that our exposure to high growth economies will provide additional opportunities for growth in the future.
Our principal markets outside the United States are Europe, Asia Pacific, South America and the Middle East. Our international operations subject us to certain risks. See Item 1A. “Risk Factors — Risks Related to Our Business —The majority of our sales are derived from international operations. We are subject to specific risks associated with international operations” of this Form 10-K.
Research and Development
Our research and development focuses 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 of our existing products; and redesigning existing product lines to increase efficiency, improve durability, enhance performance and usability.
Research and development expens e was $44.0 million, $39.2 million and $38.8 million for the years ended December 31, 2025, 2024 and 2023, 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. 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. Although we highlight recent additions to our patent portfolio as part of our marketing efforts, we do not consider any one patent or trademark essential to our business as a whole or to any of our business operations. We also rely on proprietary product knowledge and manufacturing processes in our operations. We do not rely solely on our patents and other intellectual property rights to maintain our competitive position. We believe that the development and marketing of new products and improvement of existing ones is, and will continue to be, more important to our competitive position than relying solely on existing products and intellectual property.
Raw Materials
We obtain raw materials, component parts and supplies from a variety of global sources, generally each from more than one supplier. Our principal raw materials and components for our business are steel, iron, copper and aluminum. 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 and August vacation seasons. 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.
Regulatory Environment
We face extensive government regulation both within and outside the United States relating to the development, manufacture, marketing, sale and distribution of our products, software and services. The following sections describe certain significant regulations that we are subject to. These are not the only regulations that our businesses must comply with. For a description of risks related to the regulations that our businesses are subject to refer to Item 1A. “Risk Factors—Risks Related to Our Business” of this Form 10-K.
Medical Device Regulation
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, European Union Medical Device Regulation and numerous other federal, state and foreign governmental authorities. 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. The process of obtaining regulatory approvals to market these products can be costly and time consuming and approvals might not be granted for future products on a timely basis, if at all. Additionally, modifications to our existing products may require new regulatory approvals and we may be required to cease marketing or to recall any modified product until we obtain clearance or approval.
Environmental Laws and Regulations
Our operations and properties are subject to laws and regulations relating to environmental protection, including those governing air emissions, water discharges and waste management and workplace health and safety. In addition, we are or may become subject to new climate and sustainability laws and regulations, such as the European Union’s Corporate Sustainability Reporting Directive and the State of California’s new climate change disclosure rules.
Our Quality, Environmental and Occupational Health & Safety (“QEHS”) Management Systems apply to all of ESAB’s operations, activities, people and units globally. 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. We are committed to continual improvement of our environment, health and safety management system through assessments, actionable planning and implementation of best practices. We establish objectives and appropriate targets for significant environmental aspects of our business operations and activities including, but not limited to, the reduction of energy and water consumed and waste minimization.
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. “Risk Factors—Risks Related to Business” of this Form 10-K.
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 (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 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 (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.
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. “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. Failure to comply with various sanction 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 ” of this Form 10-K.
Human Capital Management
Employee Profile
As of December 31, 2025, we employed approximately 10,300 associates, of whom approximately 1,100 were employed in the United States and approximately 9,200 were employed outside of the United States.
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 journey, 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. 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. 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.
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. 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.
Inclusion
ESAB is dedicated to creating an inclusive, welcoming culture. Our strategy is about embracing inclusion in our everyday actions while empowering and elevating each of our associates through equal opportunities, leading inclusively and ensuring every voice is valued.
Labor Relations
Approximately 22% of our United States associates are covered by collective bargaining agreements with United States trade unions. In addition, approximately 39% of our non-United States associates are represented by foreign trade unions and work councils in Europe, Asia, Central and South America, Canada, Mexico 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. We consider our relations with our associates to be good.
Company Information and Access to SEC Reports
We were organized as a Delaware corporation in 2021. On April 4, 2022, ESAB became an independent, publicly-traded company, listed on the New York Stock Exchange. Our principal executive offices are located at 909 Rose Avenue, 8th Floor, North Bethesda, Maryland 20852, and our main telephone number at that address is (301) 323-9099. Our corporate website address is www.esabcorporation.com.
We make available, free of charge through our website at https://investors.esabcorporation.com/overview , our annual and quarterly reports on Form 10-K and Form 10-Q (including related filings in XBRL format), current reports on Form 8-K and any amendments to those reports as soon as practicable after filing or furnishing the material to the SEC. 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, Maryland 20852, telephone (301) 323-9099. Information contained on our website is not incorporated by reference in this report. Additionally, the SEC maintains an Internet site that contains our reports, proxy statements and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.
Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. The following discussion addresses material factors that make an investment in the Company speculative or risky. In determining whether to buy, hold or sell any of our securities you should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Form 10-K and other documents we file with the SEC. If any of the following risks were to occur, our business, financial condition, results of operations and liquidity could be materially adversely affected, the value of our common stock could decline and investors could lose all or part of the value of their investment in ESAB shares. The disclosures in this section reflect our beliefs and opinions as to factors that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. The occurrence of one of the events or risks discussed below may be material even when not initially recognized as such and does not preclude the possibility that a similar event or risk subsequently has a material adverse effect. Furthermore, the risks and uncertainties described below are those that we have identified as material but may not be the only risks to which ESAB might be exposed. Additional risks and uncertainties, which are currently unknown to us or that we do not currently consider to be material, could have material adverse effects on our business, financial condition and results of operations, including our prospects, and thereby impact the value of our common stock.
Risks Related to our Business
The cyclical nature and maturity of the welding and cutting industry in developed markets may adversely affect our performance.
The welding and cutting industry is generally a mature industry in developed markets such as North America and Western Europe and is cyclical in nature. Overall demand for welding and cutting products is largely determined by the level of capital spending in manufacturing and other industrial sectors, and the welding industry has historically experienced contraction during periods of slowing industrial activity. If economic, business and industry conditions deteriorate, capital spending in those sectors may substantially decrease, which could reduce demand for our products and have an adverse impact on our revenues and results of operations.
A significant or sustained decline in the levels of new capital investment and maintenance expenditures by certain of our customers could reduce the demand for our products and services and harm our operations and financial performance.
Demand for our products and services depends significantly on the level of new capital investment and planned maintenance expenditures by certain of our customers. The level of new capital expenditures by our customers is dependent upon many factors, including general economic conditions, availability of credit, economic conditions and investment activities within their respective industries and expectations of future market behavior. In addition, volatility in commodity prices can negatively affect the level of these new activities and can postpone capital spending decisions or delay or result in the cancellation of existing orders. A reduction in demand for our products and services has in the past resulted, and in the future could result in, the delay or cancellation of existing orders or excess manufacturing capacity, which unfavorably impacts our absorption of fixed manufacturing costs. 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. We are subject to specific risks associated with international operations.
In the year ended December 31, 2025, we derived approximately 80% of our sales from operations outside of the United States and, as of that date, we had principal manufacturing facilities in 16 countries in addition to the United States. For the year ended December 31, 2025, 40% and 60% of our Net sales were derived from the Americas and EMEA & APAC, respectively. Sales from international operations, export sales and the use of manufacturing facilities outside of the United States by us are subject to risks inherent in doing business outside the United States, which could have a material adverse effect on our business, financial condition and 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 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-made disasters or adverse weather conditions (including events that may be caused or exacerbated by climate change), world health events, 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.
Additionally, changes in United States policy regarding international trade, including import and export regulation and international trade agreements, could also negatively impact our business. For example, in 2025, the United States expanded and increased existing tariffs on steel and aluminum, imposing 50% tariffs on steel, aluminum and products containing steel and aluminum from a range of United States trading partners. The United States has also announced other significant tariffs on imports from a wide range of countries, including China, which was followed by retaliatory tariffs by China and a number of countries and a cycle of further retaliatory tariff announcements and trade actions. While certain of the tariffs have been and may be delayed, others have taken or may take effect. Further, tariffs announced or imposed by the United States could be altered or delayed through presidential actions, bilateral negotiations, judicial orders or congressional action, and tariffs announced or imposed by other countries can be affected by similar developments. These and future changes in tariffs and trade policies by the United States on imports from China or other countries, or retaliatory trade measures in response, have resulted and may continue to result in additional costs and pricing pressures, supply chain disruptions, volatile or unpredictable customer spending patterns and increased economic or geopolitical risk that we may not be able to offset or otherwise, any or all of which could adversely impact our business and relative competitive position, financial condition and results of operations, perhaps materially or in ways that we cannot predict.
In many foreign countries, particularly in those with high growth economies, there are companies that engage in business practices prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act of 1977, as amended, and the United Kingdom’s Bribery Act. Although we implement policies, procedures and training designed to facilitate compliance with these laws, our employees, contractors and agents, as well as those of the companies to which we outsource certain of our business operations, may take actions in violation of our policies, which could result in civil or criminal enforcement actions and penalties, create a substantial liability for us and also cause a loss of reputation in the market.
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. In response to Russia’s invasion of Ukraine, the United States, the European Union and other countries have imposed numerous sanctions on Russia, including its major financial institutions and certain other businesses and individuals. The conflict may also result in additional sanctions being enacted by the United States, other NATO member states, or other countries. The impact of these sanctions, along with the spillover effect of ongoing civil, political and economic disturbances on surrounding areas, may significantly devalue currencies utilized by the Company or have other adverse impacts including increased costs of raw materials and inputs, manufacturing or shipping delays, or result in reputational harm. 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. Although the sanctions and export controls enacted in response to the invasion have not materially impacted our ability to service our existing customer base as of the date of this Form 10-K, further changes in laws and regulations or other factors impacting our ability to fulfill our contractual obligations could have an adverse effect on our results of operations.
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. For the year ended December 31, 2025, our operations in Russia represented approximately 5% of our Net sales, and approximately $9 million in Net income. Excluding any goodwill allocation, Russia has approximately 5% of our total net assets as of December 31, 2025, including approximately $50 million of Cash and cash equivalents that may be subject to delays in withdrawing from Russia, based upon the current environment at that time. Our operations in Russia had a cumulative translation loss of approximately $110 million, which would be realized upon a transition out.
In addition, other wars and conflicts, turmoil in the geopolitical environment, terrorism and social unrest may put pressure on economic conditions, or international trade relations, which could lead to reduced demand for our products and services and have other adverse impacts including increased costs of raw materials and inputs, supply chain interruptions, delays in manufacturing or shipping delays. The impact of any war or conflict is unknown and could have a material adverse effect on our business.
We cannot predict the future impact of these or any similar events and any heightened military conflict or geopolitical instability that may follow, including heightened operating risks and production disruptions in Russia, Europe and the Middle East, additional sanctions or counter-sanctions, heightened inflation, cyber-disruptions or attacks, higher energy costs, higher manufacturing costs, disruptions in raw materials supplies, increased raw material costs and higher supply chain costs. Such events may negatively impact our results of operations, cash flows and financial condition.
Natural or man-made disasters, adverse weather events or conditions, epidemics, pandemics and other widespread health events have adversely impacted, and may in the future adversely impact, our results of operations, financial condition and overall financial performance.
As a global company with a large international footprint and a majority of our sales derived from international operations, including significant operations in high growth economies, we have and will continue to be subject to increased risk of damage or disruption to our operations, employees, facilities, partners, suppliers, distributors, resellers and customers due to, among other things, natural or man-made disasters, adverse weather events or conditions, epidemics, pandemics and other widespread health events, wherever located around the world. We may be unable or unsuccessful in our efforts to plan for, respond to, or mitigate the effects of such incidents, any of which could adversely impact our results of operations, financial condition and overall financial performance. We may be unable to insure against such events, and any insurance we purchase may not be sufficient to compensate us for or may not cover the full impact of such events. The potential for such future events, the national and international response to such events and the perceived risk of such events, have created, and may continue to create economic and political uncertainties.
Significant movements in foreign currency exchange rates have adversely impacted our financial results in the past and may adversely impact our results in the future.
We are exposed to fluctuations in currency exchange rates. During the year ended December 31, 2025, approximately 80% of our sales were derived from operations outside of the United States. A significant portion of our revenues and income are denominated in foreign currencies. Large fluctuations in the rate of exchange between foreign currencies and the U.S. Dollar could have a material adverse effect on our business, financial condition and results of operations. Changes in the currency exchange rates may impact our financial results positively or negatively in one period and not another, which may make it difficult to compare our results from different periods.
We also face exchange risk from transactions with customers in countries outside the United States and 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. 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. Further, we may be subject to foreign currency translation losses depending upon whether foreign nations devalue their currencies.
Acquisitions are a significant part of our growth strategy. 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 seek acquisition opportunities both to expand into new markets and to enhance our position in our existing markets. However, our ability to do so depends 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. If we fail to achieve any of these steps, our growth strategy may not be successful.
Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, systems, compliance and reporting controls, including internal control over financial reporting, technologies, personnel, services and products of the
acquired company; the potential loss of key employees, customers, suppliers and distributors of the acquired company; and the diversion of our management’s attention from other business concerns. 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.
In addition, the anticipated benefits of an acquisition may not be realized fully, or at all, or may take longer to realize, than we expect. Actual operating, technological, strategic and sales synergies, if achieved at all, may be less significant than we expect or may take longer to achieve than anticipated. If we are not able to realize the anticipated benefits and synergies from our acquisitions within a reasonable time, our business, financial condition and results of operations may be adversely affected.
Additionally, we may underestimate or fail to discover liabilities relating to acquisitions during our due diligence investigations, and we, as the successor owner of an acquired company, might be responsible for those liabilities. Such liabilities could have a material adverse effect on our business, financial condition and results of operations.
We may require additional capital to finance our acquisitions and operation needs, and such capital may not be available, impacting our ability to pursue our growth strategy.
Our growth strategy will require additional capital investment to complete acquisitions, integrate the completed acquisitions into our existing operations and expand into new markets. We intend to pay for future acquisitions using cash, capital stock, financing, assumption of indebtedness or any combination of the foregoing. For example, on January 31, 2026, the Company entered into an agreement to acquire Eddyfi Technologies (“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. To the extent that we do not generate sufficient cash internally to provide the capital we require to fund our growth strategy and future operations, we will require additional debt or equity financing. This additional financing may not be available or, if available, may not be on terms acceptable to us. Further, high volatility in the capital markets and in our stock price may make it difficult for us to access the capital markets at attractive prices, if at all. If we are unable to obtain sufficient additional capital in the future, it may limit our ability to fully implement our growth strategy. Even if future debt financing is available, it may result in (i) increased interest expense, (ii) increased term loan payments, (iii) increased leverage and (iv) decreased income available to fund further acquisitions and expansion. It may also limit our ability to withstand competitive pressures and make us more vulnerable to economic downturns. If future equity financing is available, issuances of our equity securities may significantly dilute our existing stockholders.
Our restructuring activities may subject us to additional uncertainty in our operating results.
We have implemented, and plan to continue to implement, restructuring programs designed to facilitate key strategic initiatives and maintain long-term sustainable growth. As such, we have incurred, and expect to continue to incur, expenses relating to restructuring activities. We may not achieve or sustain the anticipated benefits, including any anticipated savings, of these restructuring programs or initiatives. Further, restructuring efforts are inherently risky, and we may not be able to predict the cost and timing of such actions accurately or properly estimate their impact.
Any impairment in the value of our intangible assets, including Goodwill, would negatively affect our operating results and total capitalization.
Our Total assets reflect substantial intangible assets, primarily Goodwill. The Goodwill results from our acquisitions, representing the excess of cost over the fair value of the net assets we have acquired. We assess at least annually whether there has been impairment in the value of our indefinite-lived intangible assets. If future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, or if market conditions for an acquired business decline, we could incur, under current applicable accounting rules, a non-cash charge to operating earnings for Goodwill impairment. Any determination requiring the write-off of a significant portion of unamortized intangible assets would adversely affect our business, financial condition, results of operations and total capitalization, the effect of which could be material.
Our electronic information systems have been, and could in the future be, subject to service interruptions, data corruption, cyber-based attacks, network security breaches and other cybersecurity incidents. Significant disruptions in, or breaches in security of, our electronic information systems or data can adversely affect our business and financial statements.
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 face constant and evolving risks that threaten the confidentiality, integrity and availability of our information systems, which 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. If these information technology systems suffer severe damage, disruption or shutdown and business continuity plans do not effectively resolve the issues in a timely manner, our business, financial condition, results of operations and liquidity could be materially adversely affected.
In addition, our information systems 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. Additionally, advanced persistent attempts to gain unauthorized access or deny access to, or otherwise disrupt, our systems and those of third-party service providers we rely on are increasing in sophistication and frequency, including through artificial intelligence technologies, and are increasingly more difficult to detect and defend against. We expect to continue to confront efforts by hackers and other unauthorized parties, including criminal threat actors, nation-states, or insiders (including associates or third-party contractors engaged in fraudulent or malicious activities), 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. Furthermore, businesses that we have acquired, or may in the future acquire, may have cybersecurity weaknesses that could subject us to increased risks of cybersecurity incidents. While we are not aware of any material cybersecurity threats or incidents that have had or are reasonably likely to have a material effect on us, we can p rovide no assurance that our efforts to actively manage technology risks potentially affecting our systems have been or will be successful in deterring or mitigating risks to or intrusions into our systems, networks and data or in effectively detecting or resolving such risks or intrusions when they materialize. 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 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. Any of these events in turn could adversely affect our business or prospects, reputation and competitive position, including a material loss of customers and revenue, business, results of operations and liquidity. In addition, such breaches in security could result in litigation, regulatory action and potential liability, including liability under federal or state laws that protect the privacy of personal information, as well as the costs and operational consequences of implementing further data protection measures. Any of the foregoing may be exacerbated by a delay or failure to detect a cybersecurity incident, and it may take considerable time for us to investigate and evaluate the full impact of such incidents, particularly for sophisticated attacks, which may divert our management’s attention from other business concerns and inhibit our ability to provide prompt, full and reliable information about the incident to our customers, regulators and the public or the full extent of such incident. In addition, disclosure or media reports of actual or perceived security vulnerabilities to our systems or those of our third-party service providers, even if no breach has been attempted or occurred, could lead to reputational harm, loss of customers and revenue or increased regulatory actions oversight and scrutiny.
Our existing and any future indebtedness could adversely affect our businesses and our ability to meet our obligations and pay dividends.
We have outstanding debt and other financial obligations and unused borrowing capacity and may incur or assume more debt in the future. As of December 31, 2025, we have $1.2 billion of outstanding indebtedness. We also have the ability to incur an additional $50.0 million of indebtedness pursuant to certain uncommitted credit lines, access up to $865.0 million under our revolving credit facility under our A&R Credit Agreement (as defined below), and in the future we may incur
additional indebtedness. See “Liquidity and Capital Resources.” Our existing and any future 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 and principal amortization 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;
• reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our businesses;
• increasing our vulnerability to, and limiting our flexibility to plan for or react to, general adverse economic conditions or other changes in our business and industry; 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.
On April 4, 2022, the Company entered into a credit agreement (as amended and restated from time-to-time, the “Credit Agreement”). On October 16, 2025, the Company entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”). The A&R Credit Agreement, which governs our term loan and revolving credit facility, contains restrictive covenants, including for example, earnings before interest, taxes, depreciation and amortization (“EBITDA”) based leverage and interest coverage ratios, that limit our ability to engage in activities that may be in our long-term interest. If we breach any of these restrictions and are unable to obtain a waiver from the lenders on favorable terms, subject to applicable cure periods, the outstanding indebtedness (and any other indebtedness with cross-default provisions) could be declared immediately due and payable, which would adversely affect our liquidity and financial statements. On April 9, 2024, the Company issued $700.0 million in aggregate principal amount of 6.25% senior notes due 2029 (the “Senior Notes”) governed by an indenture (the “Indenture”). The Indenture also includes certain restrictive covenants. In addition, any failure to obtain and maintain credit ratings from independent rating agencies would adversely affect our cost of funds and could adversely affect our liquidity and access to the capital markets. See “Liquidity and Capital Resources.”
We may be unable to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. 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. In addition, our actual cash requirements in the future may be greater.
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 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. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our business, financial condition and results of operations and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock.
In addition, we conduct our operations through our subsidiaries. Accordingly, repayment of our indebtedness will depend on the generation of cash flow by our subsidiaries, including certain international subsidiaries, and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Our subsidiaries may not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make adequate distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity and, under certain circumstances, legal, tax and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.
A material disruption at any of our manufacturing facilities could adversely affect our ability to generate sales and meet customer demand.
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, 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.
Interruptions in production could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures to remedy the situation or rely on third-party manufacturers, which could negatively affect our profitability and financial condition.
Any recovery under our property damage and business interruption insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could adversely affect our business, financial condition and results of operations.
Failure to maintain and protect our intellectual property rights or challenges to these rights by third parties may affect our operations and financial performance.
The market for many of our products is, in part, dependent upon patent, trademark, copyright and trade secret laws, agreements with employees, customers and other third parties including confidentiality agreements, invention assignment agreements and proprietary information agreements, to establish and maintain our intellectual property rights. The protection and enforcement of these intellectual property rights is therefore material to our business. The failure to protect these rights may have a material adverse effect on our business, financial condition and results of operations. Litigation may be required to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights of others. It may be particularly difficult to enforce our intellectual property rights in countries where such rights are not highly developed or protected. Any action we take to protect or enforce our intellectual property rights could be costly and could absorb significant management time and attention. As a result of any such litigation, we could lose our proprietary rights.
In addition, third parties may claim that we or our customers are infringing upon their intellectual property rights. Any claims of intellectual property infringement may subject us to costly and time-consuming defense actions and, should our defenses not be successful, may result in the payment of damages, redesign of affected products, entry into settlement or license agreements, or a temporary or permanent injunction prohibiting us from manufacturing, marketing or selling certain of our products. It is also possible that others will independently develop technology that will compete with our patented or unpatented technology. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
We are dependent on the availability of raw materials, as well as parts and components used in our products.
While we manufacture many of the parts and components used in our products, we purchase a substantial amount of raw materials, parts and components from suppliers. The availability and prices for raw materials, parts and components may be subject to curtailment or change due to, among other things, suppliers’ allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and prevailing price levels, inflation (and related monetary policy actions by governments in response to inflation), trade disputes and increased tariffs.
Any significant change in the supply of, or price for, these raw materials, parts or components could materially affect our business, financial condition and results of operations. In addition, delays in the delivery of raw materials, parts or components by suppliers could cause delays in our delivery of products to our customers.
Additionally, changes in government regulations, including any trade protection measures or other actions by the United States or other nations, 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. The loss of suppliers in these areas, any other interruption or delay in the supply of required materials or our inability to obtain these materials at acceptable prices and within a reasonable amount of time could impair our ability to meet scheduled product deliveries to our customers and could hurt our reputation and cause customers to cancel orders.
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. To maintain and enhance our competitive position, we intend to, among other things, continue investing in manufacturing quality, marketing, customer service and support, distribution networks and research and development. We may not have sufficient resources to continue to make these investments and we may not be able to maintain our competitive position. Our competitors may develop products that are superior to our products or more widely accepted, develop methods of more efficiently and effectively providing products and services, adapt more quickly than us to new technologies or evolving customer requirements or have a larger product portfolio.
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 or other disruptions or challenges.
In addition, pricing pressures could cause us to adjust the prices of some of our products to stay competitive. The development of new technologies by competitors that may compete with our technologies could reduce demand for our products and affect our financial performance. Should we not be able to maintain or enhance the competitive values of our products or develop and introduce new products or technologies successfully, or if new products or technologies fail to generate sufficient revenues to offset research and development costs, our business, financial condition and operating results could be materially adversely affected.
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 Item 1. “Business—Industry and Competition” of this Form 10-K for a dditional information about the competitive markets in which we operate.
Changes in our tax rates or exposure to additional income tax liabilities could adversely affect our financial results.
Our future effective income tax rates could be unfavorably affected by various factors, including, among others, changes in tax rates, changes in mix of earnings and losses and changes in rules and regulations in jurisdictions in which we generate income. 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. For example, many countries have enacted, proposed, or are considering enacting changes to their legislation to implement the adoption of the Organization for Economic Co-operation and Development’s (“OECD”) model rules for the global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (commonly referred to as Pillar Two). While the United States has not adopted Pillar Two, and the Group of Seven countries have proposed to exempt United States multinational companies from Pillar Two by adopting a “side-by-side” system between Pillar Two and the existing United States global minimum tax provisions, various other jurisdictions in which we operate around the world have enacted legislation and the OECD continues to release additional guidance. Based upon existing legislation and OECD guidance, Pillar Two could increase our future tax obligations in the countries in which we operate. As these and other tax laws, regulations and norms change or evolve, our financial results could be materially impacted. Given the unpredictability of these possible changes, we currently cannot assess whether the overall effect of such potential tax changes could adversely impact our financial results. We are continuing to evaluate and monitor the impacts of Pillar Two legislation or other tax initiatives in the jurisdictions where we do business. On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was signed into law. The Act makes permanent key elements of the Tax Cuts and Jobs Act, including 100 percent bonus depreciation and domestic research cost expensing, and modifications to the international tax framework. The Act also makes modifications to the interest limitation rules that may result in a material increase in the amount of carryforward interest expense under Section 163(j) and our ability to utilize the carryforward would depend on the Company’s United States EBITDA in future years. The Act includes multiple effective dates, with certain provisions effective in 2025 and others phased-in through 2027. We continue to evaluate the impact of the Act's provisions that take effect in future years.
In addition, the amount of income taxes we pay is subject to ongoing audits by United States federal, state and local tax authorities and by non-United States tax authorities. If these audits result in assessments different from amounts recorded, our future financial results may include unfavorable tax adjustments.
Our business subjects us to the possibility of product liability lawsuits, which could harm our business.
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. 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. With respect to components manufactured by third-party suppliers, the contractual indemnification that we seek from our third-party suppliers may be limited and thus insufficient to cover claims made against us. If insurance coverage or contractual indemnification is insufficient to satisfy product liability claims made against us, the claims could have an adverse effect on our business and financial condition. Even claims without merit could harm our reputation, reduce demand for our products, cause us to incur substantial legal costs and distract the attention of our management. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
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.
As of December 31, 2025, approximately 37% of our associates were represented by a number of different trade unions and works councils. Further, as of that date, we had approximately 9,200 associates, representing approximately 90% of our worldwide associate base, in foreign locations. In Canada, Mexico, Australia, various countries in Europe, Asia and Central and South America, by law, certain of our associates are represented by a number of different trade unions and works councils, which subject us to employment arrangements very similar to collective bargaining agreements. Further, the laws of certain foreign countries may place restrictions on our ability to take certain employee-related actions or require that we conduct additional negotiations with trade unions, works councils or other governmental authorities before we can take such actions.
If our associates represented by trade unions or works councils were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations, which could lead to decreased productivity, increased labor costs and lost revenue as well as adversely impact our reputation. The representation committees that negotiate with the foreign trade unions or works councils on our behalf may not be successful in negotiating new collective bargaining agreements or other employment arrangements when the current ones expire. Furthermore, future labor negotiations could result in significant increases in our labor costs.
Our defined benefit pension plans and post-retirement medical and death benefit plans are or may become subject to funding requirements or obligations that could adversely affect our business, financial condition and results of operations.
We operate defined benefit pension plans and post-retirement medical and death benefit plans for current and former employees worldwide. 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.
Furthermore, since a significant proportion of the plans’ assets are invested in publicly traded debt securities, they are, and will be, affected by market risks. Any detrimental change in any of the factors described in the preceding paragraph is likely to worsen the funding position of each of the relevant plans, which could likely require the plans’ sponsoring employers, including one or more of our subsidiaries, to increase the contributions currently made to the plans to satisfy our obligations.
Our hedging activity could negatively impact our results of operations, cash flows, or leverage.
We have entered into derivatives to manage our exposure to interest rate and currency movements. If we do not accurately forecast our results of operations, execute contracts that do not effectively mitigate our economic exposure to interest rates, elect to not apply hedge accounting, or fail to comply with the complex accounting requirements for hedging, our results of operations and cash flows could be volatile, as well as negatively impacted. 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.
The loss of key leadership could have a material adverse effect on our ability to run our business.
We may be adversely affected if we lose members of our senior leadership. We are highly dependent on our senior leadership team as a result of their expertise in our industry and our business. The loss of key leadership or the inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our business, financial condition and results of operations.
Failure to successfully integrate new technologies, including artificial intelligence and machine learning, could limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow.
The continued creation, development, and advancement of new technologies, such as artificial intelligence and machine learning, amongst others, as well as other technologies in the future that are not foreseen today, continue to transform the Company’s processes, products, and services. In order to remain competitive, the Company will need to stay abreast of such technologies, require its employees to continue to learn and adapt to new technologies and be able to integrate them into its current and future business models, products, services and processes and also guard against disruptions to its business by existing and new competitors using such technologies. The Company’s strategy, operating model, and new product innovation pipeline all have important technological elements and many of the Company’s products and services are based on technological advances. In addition, the Company will need to compete for talent that is familiar with such technologies, including upskilling its workforce. There can be no assurance that the Company will continue to compete effectively with its industry peers as new technology evolves, which could result in a material adverse effect on the Company's business and results of operations.
Risks Related to Litigation and Regulatory Compliance
Available insurance coverage, the number of future asbestos-related claims and the average settlement value of current and future asbestos-related claims of certain subsidiaries could be different than current estimates, which could materially and adversely affect our business, financial condition and results of operations.
Certain of our subsidiaries, which were contributed by the Former Parent, Colfax Corporation now known as Enovis Corporation (“Former Parent”), immediately prior to the consummation of the separation from the Former Parent (the “Separation”) and pursuant to the terms of the separation agreement entered into with the Former Parent in connection with the Separation are among the many defendants named 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 these subsidiaries, nor were these subsidiaries producers or direct suppliers of asbestos. Additionally, pursuant to the definitive purchase agreements related to the sale of the Former Parent’s Fluid Handling (“FH”) and Air and Gas Handling (“AGH”) businesses, the Former Parent and its subsidiaries retained the asbestos-related contingencies and insurance coverage related to these businesses, even though the Former Parent sold the operating assets of its FH and AGH businesses. 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. See Item 3. “Legal Proceedings” and Part II, Item 8. Note 19, “Commitments and Contingencies” of this Form 10-K.
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. We estimate the liability costs to be incurred in resolving pending and forecasted claims for the next 15-year period as well as the amount of insurance proceeds available for such claims. We reevaluate these estimates regularly. Although we believe our current estimates are reasonable, a change in the time period used for forecasting liability costs, the actual number of future claims brought, the cost of resolving these claims, the likelihood of payment by, and the solvency of, insurers and the amount of remaining insurance available could be substantially different than the estimates, and future revaluation of liabilities and insurance recoveries could result in material adjustments to these estimates, any of which could materially and adversely affect our business, financial condition and results of operations.
In addition, we incur defense, settlement and/or judgment costs related to those claims, a portion of which has historically been reimbursed by insurers. We also incur legal costs in connection with efforts to recover insurance from certain of the contributed subsidiaries’ insurers relating to insurance coverage. These costs may be significant, and we may not be able to predict the amount or duration of such costs. Additionally, we may experience delays in receiving reimbursement from insurers, during which time we may be required to pay cash for settlement or legal defense costs. Any increase in the actual number of future claims brought against us, the costs of defending or resolving these claims, the costs of pursuing claims against our insurers, the likelihood and timing of payment by, and the solvency of, insurers and the amount of remaining insurance available, could materially and adversely affect our business, financial condition and results of operations. See Item 3.”Legal Proceedings” of this Form 10-K.
We have done and may continue to do business in countries subject to United States sanctions. Failure to comply with various sanction laws may result in enforcement or other regulatory actions.
Certain of our independent foreign subsidiaries have conducted and may continue to conduct business in countries subject to United States sanctions and other export controls. Failure to comply properly with various sanction laws to which we, our operations and certain of our independent foreign subsidiaries may be subject may result in enforcement or other regulatory actions. With the exception of the United States’ sanctions against Cuba and Iran, the applicable sanctions 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. 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 or otherwise facilitating any aspect of the business activities in those countries or with persons prohibited under United States sanctions. These constraints impose compliance costs and risks on our operations and may negatively affect the financial or operating performance of such business activities. In addition, the invasion of Ukraine by Russia and the sanctions imposed in response to this crisis have increased the level of economic and political uncertainty. 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 laws may not be effective, and consequently, we may face enforcement or other actions if our compliance efforts are not or are perceived as not being wholly effective. Actual or alleged violations of these laws could lead to substantial fines or other sanctions, which could result in substantial costs. Because certain of our independent foreign subsidiaries may have contact with and inadvertently transact limited business with 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.
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. 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.
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.
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. Such regulations may prohibit or restrict our ability to, directly or indirectly, conduct activities or dealings in or with certain countries or territories as well as with certain individuals or entities. 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. 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. We submitted a voluntary disclosure report to relevant United States government agencies regarding these transactions. On March 26, 2021 and August
26, 2021, the Former Parent received letters from BIS and OFAC, respectively, warning the Former Parent 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.
We are subject to a variety of continuously evolving and developing laws and regulations regarding privacy, data protection and data security.
To conduct our operations, we regularly move data across national borders, and consequently we are subject to a variety of continuously evolving and developing laws and regulations in the United States and foreign jurisdictions regarding privacy, data protection and data security. The scope of the laws that may be applicable to us is often uncertain and may be conflicting, particularly with respect to foreign laws. Foreign laws we are subject to include the European Union’s General Data Protection Regulation (the “GDPR”), the European Union’s Data Act and the domestic version of the GDPR adopted by the United Kingdom in January 2021. Other countries have enacted or are enacting data localization laws that require data to stay within their borders. The United States has also recently seen a significantly increased focus on the regulation of personal data, led by the passage of various comprehensive privacy and data protection laws at the state level. For example, the California Consumer Privacy Act (the “CCPA”) requires, among other things, covered companies to provide new disclosures to California consumers and affords such consumers certain rights, including the ability to opt out of certain types of data sharing and sales of their personal information. 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 and gone into effect in a number of states, and other states have proposed or adopted their own privacy bills that will come into effect over the coming years. The wave of similar legislative developments in other states in the United States creates the potential for a patchwork of overlapping but different state laws and could mark the beginning of a trend toward more stringent privacy legislation in the United States. All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time. Moreover, if we fail to comply with these laws and regulations, we could be subject to litigation, 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.
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.
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.
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.
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. Costs associated with liability for removal or remediation of contamination or damage to natural resources could be substantial and liability under these laws may attach without regard to whether the responsible party knew of, or was responsible for, the presence of the contaminants. Moreover, noncompliance could subject us to private claims for property damage or personal injury based on exposure to hazardous materials or unsafe working conditions. In addition, changes in applicable requirements or stricter interpretation of existing requirements may result in costly compliance requirements or otherwise subject us to future liabilities.
In addition, any environmental liability may be joint and several. Moreover, the presence of contamination or the failure to remediate contamination at our properties, or properties for which we are deemed responsible, may expose us to liability for property damage or personal injury, or materially adversely affect our ability to sell our real property interests or to borrow using the real property as collateral. 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.
We are exposed to certain regulatory and financial risks related to climate change, which could adversely affect our business, financial condition, results of operations and cash flows.
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. Such measures could subject us to additional costs and restrictions and require significant operating and capital expenditures, which could impact our business, financial condition, results of operations and cash flows. Additionally, such measures may impact our customers, which could impact their ability or desire to continue to operate at similar levels in certain jurisdictions as historically seen or as currently anticipated, which could negatively impact their demand for our products and services. Conversely, changing political and regulatory perspectives, delays in regulatory initiatives and uncertainty about potential changes, could cause customers to cancel or delay projects or initiatives, which could negatively impact their demand for our products and services. Our inability to effectively manage the rapidly evolving, varied and potentially confusing expectations with respect to products and services implicated by climate change and related sustainability considerations could similarly impact customer demand for our products and services and adversely affect our business.
Our businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our reputation and our business, financial condition and results of operations.
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. For example, 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. To varying degrees, these regulators require us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution and post-marketing surveillance of such products. We are also required to comply with ever changing labor and employment laws and regulations in multiple jurisdictions, as well as with disclosure and reporting rules relating to environmental, societal and sustainability-related topics. These changes could negatively impact our business or financial position.
These are not the only regulations that our businesses must comply with. The regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions. 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.
Compliance with these and other regulations may also affect our returns on investment, require us to incur significant expenses, or modify our business model or impair our flexibility in modifying product, marketing, pricing, or other strategies for growing our business. Our products and operations are also often subject to the rules of industrial standards bodies such as the International Standards Organization, and failure to comply with these rules could result in withdrawal of certifications needed to sell our products and services and otherwise adversely impact our reputation and our business, financial condition and results of operations.
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 .
As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls.
The process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation is time consuming, costly and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
Our stock price may fluctuate significantly, including from future sales of our common stock or the perception that such sales or resales may occur.
The price and trading volume of our common stock has been and may continue to be volatile and the value of an investment in our common stock could decline. Substantial fluctuations in our stock price and trading volume may be in response to a number of factors, some of which are beyond our control, including the occurrence of any of the events or factors addressed in these “Risk Factors” and elsewhere in this Form 10-K.
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. These registration rights 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. The sales by the Rales Holders or their permitted transferees of a substantial number of shares of our common stock in the public market, or the perception that such sales might occur, could have a material adverse effect on the price of our common stock.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.
We cannot guarantee the payment of dividends on our common stock, or the timing or amount of any such dividends.
We declared and paid a quarterly cash dividend of $0.08 per share of ESAB’s common stock to our stockholders of record for the first quarter of 2025 and a quarterly cash dividend of $0.10 per share of ESAB’s common stock to our stockholders of record for the second, third and fourth quarters of 2025. We cannot guarantee that we will continue to pay a dividend in the future. The payment of any dividends in the future, and the timing and amount thereof, to our stockholders will fall within the discretion of our Board of Directors (“BOD”).
The BOD’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 BOD deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets.
Issuance of our equity securities may significantly dilute our existing stockholders.
In the future, our stockholders’ percentage ownership in our common stock may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we will be granting to our directors, officers and employees. These additional awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.
In addition, our amended and restated certificate of incorporation (our “certificate of incorporation”) authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock respecting dividends and distributions, as the BOD generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. Similarly, the repurchase or
redemption rights or liquidation preferences that we could assign to holders of preferred stock could affect the residual value of the common stock.
Certain provisions in our certificate of incorporation and amended and restated bylaws (our “bylaws”), and of Delaware law, may prevent or delay an acquisition of us, which could decrease the trading price of our common stock.
Our certificate of incorporation and bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirers to negotiate with the BOD rather than to attempt an unsolicited takeover not approved by the BOD. These provisions include, among others, the inability of our stockholders to call a special meeting or to act by written consent, rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings, the right of the BOD to issue preferred stock without stockholder approval, 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 BOD) on the BOD.
In addition, because we have not chosen to be exempt from Section 203 of the Delaware General Corporation Law (the “DGCL”), this provision could also delay or prevent a change of control that you may favor. Section 203 of the DGCL imposes certain restrictions on mergers and other business combinations between the Company and any holder of 15% or more of our outstanding voting stock .
Our certificate of incorporation designates the exclusive forum for the resolution of certain types of actions and proceedings that may be initiated by our stockholders. These forum selection provisions could discourage lawsuits against us and our directors, officers, employees and stockholders.
Our certificate of incorporation provides that, unless we consent otherwise, the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, shall be the sole and exclusive forum for any derivative action or proceeding brought on behalf of us, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or stockholders to us or our stockholders, any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws, or any action asserting a claim governed by the internal affairs doctrine. This provision does not apply to claims brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
This forum selection clause may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Our certificate of incorporation further provides that, unless we consent otherwise, the federal district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. These forum selection provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors, officers, employees and stockholders. It is possible that a court may find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, in which case we may incur additional costs associated with resolving such matters in other jurisdictions. 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 BOD.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We maintain a cybersecurity program that is reasonably designed to protect our information against cybersecurity threats that may result in material adverse effects on the confidentiality, integrity and availability of our information systems as well as our business operations, financial condition and overall performance.
Internal Cybersecurity Team and Governance
The BOD maintains responsibility for oversight of risks that may affect the Company. Our BOD has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee. The Audit Committee reviews the Company’s policies with respect to risk assessment and enterprise risk management, including with respect to cybersecurity risks. Certain members of our Audit Committee have experience with respect to cybersecurity risk management.
The Audit Committee regularly reviews the measures implemented by the Company to identify and mitigate data protection and cybersecurity risks. As part of such reviews, the Audit Committee receives reports and presentations from members of the Company’s management team responsible for overseeing the Company’s cybersecurity risk program, including our Chief Information Officer (“CIO”). These reports and updates may address a wide range of topics, including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to the Company’s peers and third parties. The Audit Committee periodically reports to the BOD on data protection and cybersecurity matters. We also have protocols by which certain cybersecurity incidents are escalated within the Company and, in certain circumstances, reported to the BOD and/or Audit Committee in a timely manner.
At the management level, our CIO is responsible for overseeing and implementing a cybersecurity strategy aligned with the Company’s goals and needs. Our CIO has extensive experience with respect to cybersecurity matters as a result of over 20 years of relevant work experience. Our cybersecurity function is supported by highly trained cybersecurity personnel with substantial industry experience as well as our network of specialized consulting partners, regional IT leaders and our global IT infrastructure team. Our CIO receives ongoing updates from such individuals regarding the prevention, detection, mitigation and remediation of cybersecurity incidents.
In conjunction with management, the CIO regularly reviews risk management measures to identify and mitigate data protection and cybersecurity risks. Key performance indicators, emerging threats, current trends and notable detections are reported to members of the Company’s senior leadership team. The global cybersecurity team also works closely with our legal team to address legal, regulatory and contractual requirements.
Risk Management and Strategy
Cybersecurity related risks are integrated into our overall enterprise risk management (“ERM”) process. As a result, risks posed by cybersecurity threats are among the risks that the Company’s ERM process evaluates and assesses at least annually. The results of this risk assessment, including cybersecurity, are presented to the BOD annually .
The cybersecurity team implements, monitors and maintains controls that are aligned with the guidance defined by the National Institute of Standards and Technology CyberSecurity Framework. These controls are designed to protect the confidentiality, availability and integrity of information systems. Our cybersecurity processes include automated tools and technical safeguards managed and monitored by our cybersecurity team. We view cybersecurity as a responsibility shared by all of our associates. As an organization committed to continuous improvement, we periodically conduct incident response tabletop exercises with key members of our leadership team, including our Chief Executive Officer, perform internal and external assessments and engage consultants to help assess the design and effectiveness of our program. In addition, we expect all of our associates as well as our third-party vendors to help protect against cybersecurity risks, and we conduct periodic awareness campaigns, emerging threats communications and specific training.
We have adopted a Global Cybersecurity Incident Response Procedure that applies in the event of a cybersecurity threat or incident. These procedures include an incident response playbook that outlines the steps to be addressed in the event of a
cybersecurity incident, from incident detection to mitigation, recovery and notification within the Company and to the Audit Committee and/or BOD, as specified.
We also rely on information technology and third-party vendors to support our operations, including our secure processing of personal, confidential, sensitive, proprietary and other types of information. We employ systems and processes designed to oversee, identify and reduce the potential impact of a security incident at a third-party vendor, service provider or customer or otherwise implicating the third-party technology and systems we use . Despite ongoing efforts to continuously improve our holistic ability to protect against cyber incidents, we may not be able to protect all information systems, and such incidents may lead to reputational harm, disruption of our business operations, revenue and client loss, legal actions, or statutory penalties, among other consequences.
Due to evolving cybersecurity threats, it has and will continue to be difficult to prevent, detect, mitigate and remediate cybersecurity incidents. While we are not aware of any material cybersecurity threats or incidents that have had or are reasonably likely to materially affect us, including those having a long-term impact on our business strategy, results of operations or financial condition, there can be no guarantee that we will not be the subject of future successful attacks, threats or incidents. For additional information on the cybersecurity risks faced by our Company, refer to Item 1A. “Risk Factors—Risks Related to Our Business— Our electronic information systems have been and could in the future be, subject to service interruptions, data corruption, cyber-based attacks and network security breaches. Significant disruptions in, or breaches in security of, our electronic information systems or data can adversely affect our business and financial statements ” and “Risk Factors—Risks Related to Our Business— Failure to successfully integrate new technologies, including artificial intelligence and machine learning, could limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow ” of this Form 10-K.
Item 2. Properties
Our corporate headquarters are located in North Bethesda, Maryland in a leased facility. As of December 31, 2025, we had a total of 4 production facilities in the United States and 33 production facilities outside the United States in 16 countries in Europe, Mexico, South America, the Middle East, India and Southeast Asia.
Item 3. Legal Proceedings
Discussion of legal matters is incorporated by reference to Part II, Item 8. Note 19, “C ommitments and Contingencies,” in the Notes to Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
None.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Set forth below are the names, ages, positions and experience of our executive officers. All of our executive officers hold office at the pleasure of our BOD.
Name
Age
Position
Shyam P. Kambeyanda
President and Chief Executive Officer and Director
Kevin Johnson
Chief Financial Officer
Olivier Biebuyck
President, Fabrication Technology
Michele Campion
Chief Human Resources Officer
Curtis Jewell
Senior Vice President, General Counsel and Corporate Secretary
Shyam P. Kambeyanda has been President and Chief Executive Officer of ESAB since May 2016 and has served as a member of our BOD since April 2022. As the leader of ESAB, Mr. Kambeyanda has overseen the growth of the fabrication technology business, expanding ESAB’s global operations, improving financial performance and driving EBXai throughout the business. Mr. Kambeyanda also served as Executive Vice President at Colfax Corporation (now Enovis) from December 2019 until April 2022. 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 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. 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 ESAB’s Chief Financial Officer (“CFO”) since May 2019, managing financial planning, controlling, tax, treasury, investor relations, business development and information technology functions. From 2017 to 2019, he served as Vice President of Finance at Colfax Corporation (now Enovis), where he handled investor relations, financial planning and acquisition support. Prior to that, he held various senior financial positions at Howden starting in 2001, working in Australia, Europe and South Africa. Mr. Johnson is an Australian CPA with a bachelor’s degree from Queens University, Northern Ireland, a master’s degree in accounting 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. Biebuyck served as President, EMEA of ESAB from April 2021 to January 2023. Mr. Biebuyck joined ESAB in May 2017 as VP/GM of ESAB’s filler metals business and served in senior global positions with the company. Before joining ESAB, Mr. Biebuyck was an executive at Honeywell where he served as VP/GM of Honeywell Electronics Materials from July 2015 until April 2017 after being the Chief Marketing Officer of Honeywell Process Solutions from 2013 to 2015. Prior to that, Mr. Biebuyck was an executive at Lafarge where he held several P&L leadership roles and a senior management consultant with McKinsey & Company. Mr. Biebuyck holds a master’s degree in commercial engineering from the Solvay Business School at the Brussels University in Belgium.
Michele Campion has been ESAB’s Chief Human Resources Officer since April 2022 and previously served as Vice President, Human Resources of ESAB. Ms. Campion leads ESAB’s global human resources strategy in partnership with the executive team. Prior to joining ESAB, she served as Vice President, Human Resources at Under Armour, Inc. from November 2014 to September 2020. She also held a variety of roles of increasing responsibility in human resources at McCormick & Co., BP, International Partnership for Microbicides and Areas Global TB Vaccine Foundation. Ms. 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.
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. 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 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.
PART II
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 12, 2026, there were 398 holders of record of our common stock. The number of holders of record is based upon the actual number of holders registered at such date and does not include holders of shares in “street name” or persons, partnerships, associates, corporations or other entities identified in security position listings maintained by depositories.
We declared and paid a quarterly dividend of $0.08 per share of ESAB’s common stock to our stockholders of record for the first quarter of 2025 and a quarterly dividend of $0.10 per share of ESAB’s common stock to our stockholders of record for the second, third and fourth quarters of 2025.
The payment of dividends to our stockholders in the future, and the timing and amount thereof will fall within the discretion of our BOD. The BOD’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 BOD deems relevant.
Issuer Repurchase of Equity Securities
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 were made during 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 repurchase authorization.
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 (the "S&P 400") and the S&P MidCap 400 Industrials Index (the "S&P 400 Industrials”). 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, 2025.
Item 6. Reserved
Item 7. 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 deliver ing stockholder va lue.
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 imagine TM. . 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 in Part 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 sale s, 80% and 78%, respectively, were derived from operations outside of the United States with th e 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, fluctuation s in foreign currencies increased N et 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,
Consumables
Equipment
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 th e 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)
Income tax expense
Interest expense and other, net
Operating income (GAAP)
Adjusted to add:
Restructuring and other related charges (2)
Acquisition-amortization and other related charges (3)
Depreciation and other amortization
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA attributable to Russia (non-GAAP) (4)
Core adjusted EBITDA (non-GAAP)
Adjusted EBITDA margin (non-GAAP)
Core adjusted EBITDA margin (non-GAAP) (5)
(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) I ncludes 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 million re lating 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)
Income tax expense
Interest expense and other, net
Pension settlement loss
Operating income (GAAP)
Adjusted to add:
Restructuring and other related charges (2)
Acquisition-amortization and other related charges (3)
Depreciation and other amortization
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA attributable to Russia (non-GAAP) (4)
Core adjusted EBITDA (non-GAAP)
Adjusted EBITDA margin (non-GAAP)
Core adjusted EBITDA margin (non-GAAP) (5)
(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) I ncludes 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 million relati ng to Russia for the year ended December 31, 2024.
Total Company
Sales
Net sales increased for 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 Net sales.
Net Sales
(Dollars in millions)
For the year ended December 31, 2024
Components of change:
Existing businesses (organic sales) (1)
Acquisitions (2)
Foreign currency translation (3)
Total Net sales growth
For the year ended December 31, 2025
(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 decreased sales 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 increased fo r 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
Components of change:
Existing businesses (core organic sales) (2)
Acquisitions (3)
Foreign Currency translation (4)
Total Core sales growth (5)
For the year ended December 31, 2025
(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 decreased sales 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. T he 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,
(Dollars in millions)
Gross profit
Gross profit margin
Selling, general and administrative expense
Net income from continuing operations
Net income margin from continuing operations
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA margin (non-GAAP)
Core adjusted EBITDA (non-GAAP)
Core adjusted EBITDA margin (non-GAAP)
Items excluded from Adjusted EBITDA:
Restructuring and other related charges (1)
Pension settlement loss
Acquisition - amortization and other related charges (2)
Interest expense and other, net
Income tax expense
Depreciation and other amortization
Items excluded from Core adjusted EBITDA:
Adjusted EBITDA attributable to Russia (non-GAAP) (3)
(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) I ncludes 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 to the 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,
(Dollars in millions)
Net sales
Gross profit
Gross profit margin
Selling, general and administrative expense
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA margin (non-GAAP)
Items excluded from Adjusted EBITDA:
Restructuring and other related charges
Acquisition - amortization and other related charges
Depreciation and other amortization
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,
(Dollars in millions)
Net sales
Gross profit
Gross profit margin
Selling, general and administrative expense
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA margin (non-GAAP)
Core adjusted EBITDA (non-GAAP)
Core adjusted EBITDA margin (non-GAAP)
Items excluded from Adjusted EBITDA:
Restructuring and other related charges
Acquisition - amortization and other related charges
Depreciation and other amortization
Items excluded from Core adjusted EBITDA:
Adjusted EBITDA attributable to Russia (non-GAAP)
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 favorable currency 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 90 basis 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 million during 2025 in comparison to 2024 primarily driven by the EWM acquisition. Adjusted EBITDA increased by $44.7 million and margin expanded 100 basis points primarily due to the aforementioned factors. Core adjusted EBITDA increased by $43.2 million and margin expanded by 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 was 5.40%, excluding accretion of deferred financing fees . As of end of the year, we had the capacity for additional indebtedness of up to $865 million a vailable on the senior revolving credit facility (“Revolving Facility”). Additionally, we have the ability to i ncur $50 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. Re fer 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,
(In millions) (1)
Net cash provided by operating activities
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisitions, net of cash received
Other investing
Net cash used in investing activities
Proceeds from borrowings on Senior Notes
Proceeds from borrowings on Term Loan
Proceeds from borrowings on revolving credit facilities and other
Repayments of borrowings on Term Loan
Repayments of borrowings on revolving credit facilities and other
Payment of debt issuance costs
Payment of dividends
Distributions to noncontrolling interest holders
Other financing
Net cash provided by financing activities
Effect of foreign exchange rates on Cash and cash equivalents
(Decrease) increase in Cash and cash equivalents
(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 equivalent s as of December 31, 2025 include $173.4 million h eld 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 we re $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 million and $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 losses was $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.
