LINCOLN ELECTRIC HOLDINGS INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share amounts ) This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with the Company’s unaudited consolidated financial statements and other financial information included elsewhere in this Quarterly Report on Form 10-Q. General The Company is the world’s largest designer and manufacturer of arc welding and cutting products, manufacturing a broad line of arc welding equipment, consumable welding products and other welding and cutting products. Welding products include arc welding power sources, computer numerical control and plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes, welding accessories and specialty welding consumables and fabrication. The Company’s product offering also includes oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. In addition, the Company has a leading global position in the brazing and soldering alloys market. The Company’s products are sold in both domestic and international markets. In the Americas, products are sold principally through industrial distributors, retailers and directly to users of welding products. Outside of the Americas, the Company has an international sales organization comprised of Company employees and agents who sell products from the Company’s various manufacturing sites to distributors and product users. The Company’s business units are aligned into three operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global oxy-fuel cutting, soldering and brazing businesses as well as its retail business in the United States. 21 Table of Contents Results of Operations The following table shows the Company’s results of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ 2024 ​ 2023 ​ 2024 vs. 2023 ​ ​ Amount % of Sales Amount % of Sales $ % Net sales $ 981,197 ​ ​ ​ ​ $ 1,039,343 ​ ​ $ (58,146) (5.6) % Cost of goods sold 612,798 ​ ​ ​ 683,986 ​ ​ 71,188 10.4 % Gross profit 368,399 ​ 37.5 % 355,357 34.2 % 13,042 3.7 % Selling, general & administrative expenses 198,747 ​ 20.3 % 190,116 18.3 % (8,631) (4.5) % Rationalization and asset impairment charges 4,605 ​ 0.5 % 877 0.1 % (3,728) (425.1) % Operating income 165,047 ​ 16.8 % 164,364 15.8 % 683 0.4 % Interest expense, net 8,779 ​ ​ ​ 13,201 ​ ​ 4,422 33.5 % Other income 2,262 ​ ​ ​ 4,181 ​ ​ (1,919) (45.9) % Income before income taxes 158,530 ​ 16.2 % 155,344 14.9 % 3,186 2.1 % Income taxes 35,115 ​ ​ ​ 33,413 ​ ​ (1,702) (5.1) % Effective tax rate 22.2 % ​ ​ 21.5 % ​ ​ (0.7) % ​ ​ Net income $ 123,415 ​ 12.6 % $ 121,931 11.7 % $ 1,484 1.2 % Diluted earnings per share $ 2.14 ​ ​ ​ ​ $ 2.09 ​ $ 0.05 2.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Sales: The following table summarizes the impact of volume, acquisitions, price and foreign currency exchange rates on Net sales on a consolidated basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ Change in Net Sales due to: ​ ​ ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2023 Volume Acquisitions Price Exchange 2024 Lincoln Electric Holdings, Inc. ​ $ 1,039,343 ​ $ (63,781) ​ $ 4,164 ​ $ (283) $ 1,754 ​ $ 981,197 ​ % Change ​ ​ ​ ​ ​ ​ ​ ​ ​ Lincoln Electric Holdings, Inc. ​ ​ ​ ​ (6.1) % 0.4 % 0.0 % ​ 0.2 % ​ (5.6) % ​ Net sales decreased for the three months ended March 31, 2024 primarily due to softer demand across segments. Gross Profit: Gross profit increased for the three months ended March 31, 2024 driven by favorable mix and effective cost management. The three months ended March 31, 2024 includes a last-in, first-out (“LIFO”) benefit of $ 531 , as compared with charges of $ 2,191 in the comparable 2023 period. Selling, General & Administrative ("SG&A") Expenses: SG&A expenses increased for the three months ended March 31, 2024 as compared to the same 2023 period, primarily due to higher employee-related costs. Income Taxes: The effective tax rate was higher for the three months ended March 31, 2024 as compared to the same period in 2023, primarily due to mix of earnings and discrete tax items. 22 Table of Contents Segment Results ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ Change in Net Sales due to: ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2023 Volume (1) Acquisitions Price Exchange 2024 ​ Operating Segments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas Welding $ 658,645 ​ $ (42,653) ​ $ 4,164 ​ $ 2,284 $ 1,659 ​ $ 624,099 ​ International Welding ​ 252,416 ​ (12,272) ​ — ​ (4,010) ​ (373) ​ 235,761 ​ The Harris Products Group ​ 128,282 ​ (8,856) ​ — ​ 1,443 ​ 468 ​ 121,337 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ ​ ​ Americas Welding ​ ​ ​ ​ (6.5) % 0.6 % ​ 0.3 % ​ 0.3 % ​ (5.2) % International Welding ​ ​ ​ ​ (4.9) % — ​ ​ (1.6) % ​ (0.1) % ​ (6.6) % The Harris Products Group ​ ​ ​ ​ (6.9) % — ​ ​ 1.1 % ​ 0.4 % ​ (5.4) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Decrease for the three months ended March 31, 2024 for all segments due to softer demand. Adjusted Earnings Before Interest and Income Taxes: Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the Adjusted EBIT profit measure. EBIT is defined as Operating income plus Other income (expense). EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets. ​ 23 Table of Contents The following table presents Adjusted EBIT by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ ​ Three Months Ended March 31, ​ 2024 vs. 2023 ​ 2024 2023 $ % Americas Welding: ​ ​ ​ ​ ​ Net sales ​ $ 624,099 ​ $ 658,645 ​ $ (34,546) ​ (5.2) % Inter-segment sales ​ 29,978 ​ 32,318 ​ (2,340) ​ (7.2) % Total Sales ​ $ 654,077 ​ $ 690,963 ​ ​ (36,886) ​ (5.3) % Adjusted EBIT (3) ​ $ 136,100 ​ $ 132,453 ​ ​ 3,647 ​ 2.8 % As a percent of total sales (1) ​ 20.8 % 19.2 % ​ ​ ​ 1.6 % International Welding: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 235,761 ​ $ 252,416 ​ ​ (16,655) ​ (6.6) % Inter-segment sales ​ 8,408 ​ 6,753 ​ ​ 1,655 ​ 24.5 % Total Sales ​ $ 244,169 ​ $ 259,169 ​ ​ (15,000) ​ (5.8) % Adjusted EBIT (4) ​ $ 27,776 ​ $ 29,598 ​ ​ (1,822) ​ (6.2) % As a percent of total sales ​ 11.4 % 11.4 % ​ ​ ​ — ​ The Harris Products Group: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 121,337 ​ $ 128,282 ​ ​ (6,945) ​ (5.4) % Inter-segment sales ​ 3,093 ​ 2,897 ​ ​ 196 ​ 6.8 % Total Sales ​ $ 124,430 ​ $ 131,179 ​ ​ (6,749) ​ (5.1) % Adjusted EBIT (5) ​ $ 19,878 ​ $ 18,983 ​ ​ 895 ​ 4.7 % As a percent of total sales (2) ​ 16.0 % 14.5 % ​ ​ ​ 1.5 % Corporate / Eliminations: ​ ​ ​ ​ ​ ​ ​ Inter-segment sales ​ $ (41,479) ​ $ (41,968) ​ ​ 489 ​ 1.2 % Adjusted EBIT (6) ​ (10,078) ​ (9,402) ​ ​ (676) ​ (7.2) % Consolidated: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 981,197 ​ $ 1,039,343 ​ ​ (58,146) ​ (5.6) % Net income ​ $ 123,415 ​ $ 121,931 ​ ​ 1,484 ​ 1.2 % As a percent of total sales ​ 12.6 % 11.7 % ​ ​ ​ 0.9 % Adjusted EBIT (7) ​ $ 173,676 ​ $ 171,632 ​ ​ 2,044 ​ 1.2 % As a percent of sales ​ 17.7 % 16.5 % ​ ​ 1.2 % ​ (1) Increase for the three months ended March 31, 2024 as compared to March 31, 2023 primarily driven by effective cost management. (2) Increase for the three months ended March 31, 2024 as compared to March 31, 2023 primarily driven by effective cost management. (3) The three months ended March 31, 2023 exclude the amortization of the step up in value of acquired inventories of $2,785. (4) The three months ended March 31, 2024 exclude rationalization and asset impairment charges of $3,069 primarily due to restructuring activities as discussed in Note 6 of the consolidated financial statements. The three months ended March 31, 2023 exclude Rationalization and asset impairment net charges of $877 primarily due to restructuring activities as discussed in Note 6 to the consolidated financial statements, the amortization of the step up in value of acquired inventories of $1,071 and a gain on asset disposal of $1,646. (5) The three months ended March 31, 2024 exclude Rationalization and asset impairment net charges of $1,536 primarily due to restructuring activities as discussed in Note 6 to the consolidated financial statements. (6) The three months ended March 31, 2024 exclude Acquisition transaction costs of $1,762 as discussed in Note 4 to the consolidated financial statements. (7) See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT. 24 Table of Contents ​ Non-GAAP Financial Measures The Company reviews Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share (“EPS”), Adjusted return on invested capital (“Adjusted ROIC”), Adjusted net operating profit after taxes, Cash conversion and Organic sales, all non-GAAP financial measures, in assessing and evaluating the Company’s underlying operating performance. These non-GAAP financial measures exclude the impact of special items on the Company’s reported financial results. Non-GAAP financial measures should be read in conjunction with the generally accepted accounting principles in the United States ("GAAP") financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. The following table presents the reconciliations of Operating income as reported to Adjusted operating income, Net income as reported to Adjusted net income and Adjusted EBIT, Effective tax rate as reported to Adjusted effective tax rate and Diluted earnings per share as reported to Adjusted diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2024 2023 Operating income as reported $ 165,047 ​ $ 164,364 ​ Special items (pre-tax): ​ ​ Rationalization and asset impairment charges (1) 4,605 ​ 877 ​ Acquisition transaction costs (2) 1,762 ​ — ​ Amortization of step up in value of acquired inventories (3) — ​ 3,856 ​ Adjusted operating income $ 171,414 ​ $ 169,097 ​ ​ ​ ​ ​ ​ ​ ​ Net income as reported $ 123,415 ​ $ 121,931 ​ Special items: ​ ​ ​ ​ ​ Rationalization and asset impairment charges (1) 4,605 ​ ​ 877 ​ Acquisition transaction costs (2) 1,762 ​ ​ — ​ Amortization of step up in value of acquired inventories (3) — ​ ​ 3,856 ​ Gain on asset disposal (4) — ​ ​ (1,646) ​ Tax effect of Special items (5) (1,126) ​ ​ (818) ​ Adjusted net income ​ 128,656 ​ ​ 124,200 ​ Interest expense, net 8,779 ​ ​ 13,201 ​ Income taxes as reported 35,115 ​ ​ 33,413 ​ Tax effect of Special items (5) 1,126 ​ ​ 818 ​ Adjusted EBIT $ 173,676 ​ $ 171,632 ​ Effective tax rate as reported ​ 22.2 % ​ 21.5 % Net special item tax impact ​ (0.2) % ​ 0.1 % Adjusted effective tax rate ​ 22.0 % ​ 21.6 % Diluted earnings per share as reported $ 2.14 ​ $ 2.09 ​ Special items per share 0.09 ​ ​ 0.04 ​ Adjusted diluted earnings per share $ 2.23 ​ $ 2.13 ​ ​ (1) Primarily related to restructuring activities as discussed in Note 6 to the consolidated financial statements. (2) Costs related to acquisitions and are included in Selling, general & administrative expenses. (3) Costs related to acquisitions and are included in Cost of goods sold. (4) Gain on asset disposal and included in Other income (5) Includes the net tax impact of Special items recorded during the respective periods. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item. 25 Table of Contents Liquidity and Capital Resources The Company’s cash flow from operations can be cyclical. Operational cash flow is a key driver of liquidity, providing cash and access to capital markets. In assessing liquidity, the Company reviews working capital measurements to define areas for improvement. Management anticipates the Company will be able to satisfy cash requirements for its ongoing businesses for at least the next twelve months and the foreseeable future thereafter primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets. The Company continues to expand globally and periodically looks at transactions that would involve significant investments. The Company can fund its global expansion plans with operational cash flow, but a significant acquisition may require access to capital markets, in particular, the long-term debt market, as well as the syndicated bank loan market. The Company’s financing strategy is to fund itself at the lowest after-tax cost of funding. Where possible, the Company utilizes operational cash flows and raises capital in the most efficient market, usually the United States, and then lends funds to the specific subsidiary that requires funding. If additional acquisitions providing appropriate financial benefits become available, additional expenditures may be made. The following table reflects changes in key cash flow measures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2024 2023 $ Change Cash provided by operating activities ​ $ 133,294 ​ $ 123,931 ​ $ 9,363 Cash used by investing activities (1) ​ (25,940) ​ (16,049) ​ (9,891) Capital expenditures ​ (26,256) ​ (18,787) ​ (7,469) Cash used by financing activities (2) ​ (125,400) ​ (111,316) ​ (14,084) Proceeds from (payments on) short-term borrowings ​ 2,016 ​ (43,940) ​ 45,956 Purchase of shares for treasury ​ (110,405) ​ (32,158) ​ (78,247) Cash dividends paid to shareholders ​ (41,280) ​ (37,583) ​ (3,697) (Decrease) increase in Cash and cash equivalents (3) ​ (18,809) ​ 1,653 ​ (20,462) ​ (1) Cash used by investing activities increased for the three months ended March 31, 2024 , compared with the three months ended March 31, 2023 primarily due to capital expenditures. The Company currently anticipates capital expenditures of $90,000 to $110,000 in 2024. Anticipated capital expenditures include investments for capital maintenance and projects to increase efficiency, reduce costs, promote business growth or improve the overall safety and environmental conditions of the Company’s facilities. (2) Cash used by financing activities increased in the three months ended March 31, 2024 , compared with the three months ended March 31, 2023 primarily due to increased purchase of treasury stock in 2024. (3) Cash and cash equivalents decreased 4.8%, or $18,809, to $374,978 during the three months ended March 31, 2024 , from $393,787 as of December 31, 2023. At March 31, 2024, $179,657 of Cash and cash equivalents was held by international subsidiaries. In April 2024, the Company paid a cash dividend of $0.71 per share, or $40,405, to shareholders of record as of March 31, 2024. ​ 26 Table of Contents Working Capital Ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 December 31, 2023 March 31, 2023 Average operating working capital to Net sales (1) 18.8 % 17.1 % 19.6 % Days sales in Inventories 120.5 104.6 ​ 122.4 ​ Days sales in Accounts receivable 53.6 50.0 ​ 52.9 ​ Average days in Trade accounts payable 54.9 47.6 ​ 53.9 ​ ​ (1) Average operating working capital to net sales is defined as the sum of Accounts receivable, Inventories and contract assets less Trade accounts payable and contract liabilities as of period end divided by annualized rolling three months of Net sales. Return on Invested Capital The Company reviews ROIC in assessing and evaluating the Company’s underlying operating performance. As discussed in the Non-GAAP Financial Measures section above, Adjusted ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company’s financial performance. The calculation may be different than the method used by other companies to calculate ROIC. Adjusted ROIC is defined as rolling 12 months of Adjusted net income excluding tax-effected interest income and expense divided by invested capital. Invested capital is defined as total debt, which includes Short-term debt and Long-term debt, less current portions, plus Total equity. The following table presents the reconciliations of ROIC and Adjusted ROIC to net income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended March 31, ​ ​ 2024 2023 Net income as reported ​ $ 546,733 $ 468,125 ​ Plus: Interest expense (after-tax) ​ ​ 36,519 ​ ​ 28,875 ​ Less: Interest income (after-tax) ​ ​ 6,793 ​ ​ 1,560 ​ Net operating profit after taxes ​ $ 576,459 ​ $ 495,440 ​ Special items: ​ ​ ​ ​ ​ ​ ​ Rationalization and asset impairment charges ​ (7,586) 10,780 ​ Acquisition transaction costs ​ 1,762 6,003 Pension settlement charges ​ 845 — ​ Amortization of step up in value of acquired inventories ​ 8,397 4,962 ​ Gain on asset disposal ​ — (1,646) ​ Tax effect of Special items (1) ​ 2,228 (3,051) ​ Adjusted net operating profit after taxes ​ $ 582,105 $ 512,488 ​ ​ ​ ​ ​ ​ ​ Invested Capital March 31, 2024 March 31, 2023 ​ Short-term debt ​ $ 4,720 ​ $ 49,340 ​ Long-term debt, less current portion ​ ​ 1,102,677 ​ ​ 1,110,626 ​ Total debt ​ ​ 1,107,397 ​ ​ 1,159,966 ​ Total equity ​ 1,307,828 ​ 1,125,236 ​ Invested capital ​ $ 2,415,225 ​ $ 2,285,202 ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on invested capital as reported ​ 23.9 % 21.7 % Adjusted return on invested capital ​ 24.1 % 22.4 % ​ (1) Includes the net tax impact of Special items recorded during the respective periods. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item. 27 Table of Contents New Accounting Pronouncements Refer to Note 1 to the consolidated financial statements for a discussion of new accounting pronouncements. Acquisitions Refer to Note 4 to the consolidated financial statements for a discussion of the Company’s recent acquisitions. Debt Fair Value of Debt At March 31, 2024 and December 31, 2023, the fair value of long-term debt, including the current portion, was approximately $981,481 and $1,013,795, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $1,102,677 and $1,102,771, respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange. Revolving Credit Agreement On April 23, 2021, the Company amended and restated the agreement governing its line of credit by entering into the Second Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement has a line of credit totaling $500,000, has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $150,000. On March 8, 2023, the Credit Agreement was amended to replace the LIBOR rate to a term secured overnight finance rate (“SOFR”); as such, the interest rate on borrowings is based on SOFR plus a spread of 0.85% to 1.85% based on (1) the Company’s net leverage ratio and (2) a credit spread adjustment. The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. As of March 31, 2024, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement. The Company has other lines of credit and debt agreements totaling $90,945. As of March 31, 2024, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $4,720. Senior Unsecured Notes On April 1, 2015 and October 20, 2016, the Company entered into separate Note Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each have an aggregate principal amount of $350,000, comprised of four different series ranging from $50,000 to $100,000, with maturity dates ranging from August 20, 2025 through April 1, 2045, and interest rates ranging from 2.75% and 4.02%. Interest on the Notes is paid semi-annually. The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and 10.1 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of March 31, 2024, the Company was in compliance with all of its debt covenants relating to the Notes. Term Loan On November 29, 2022, the Company entered into a term loan in the aggregate principal amount of $400,000 (the “Term Loan”), which was borrowed in full. The Term Loan matures on November 29, 2025. The Term Loan bears an interest at a rate based on SOFR, plus a margin ranging from 0.75% to 1.75% based on the Company’s consolidated net leverage ratio. As of March 31, 2024, the Company was in compliance with all of its covenants. 28 Table of Contents In March 2023, the Company entered into interest rate swap agreements to effectively convert the interest rate on $150,000 of the Term Loan from a variable rate to a fixed rate. Forward-looking Statements The Company’s expectations and beliefs concerning the future contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current expectations and involve a number of risks and uncertainties. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results. The factors include, but are not limited to: general economic, financial and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as the impact of the Russia-Ukraine conflict, political unrest, acts of terror, natural disasters and pandemics, on the Company or its customers, suppliers and the economy in general. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the Company’s exposure to market risk since December 31, 2023. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.