What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-27 · 103 added, 125 removed, 295 unchanged (44% of the section changed)

8 unchanged sentences

The Company is one of only a few worldwide broad-line manufacturers of welding, cutting and brazing products.

The Company is the world leader in the design, development and manufacture of arc welding products, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment.

The Company is the world leader in the design, development and manufacture of arc welding products, automated joining,

assembly and cutting systems, plasma and oxy-fuel cutting equipment.

The Company also has a leading global position in brazing and soldering alloys.

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● construction and infrastructure.

The Company has, through wholly-owned subsidiaries, manufacturing facilities located in the United States, Australia, Austria, Brazil, Canada, China, Colombia, France, Germany, India, Italy, Mexico, Poland, Portugal, Romania, Russia, South Korea, Spain, Turkey and the United Kingdom.

The Company has, through wholly-owned subsidiaries, manufacturing facilities located in the United States, Australia, Austria, Brazil, Canada, China, Colombia, Denmark, France, Germany, India, Italy, Mexico, Poland, Portugal, Romania, South Korea, Spain, Turkey and the United Kingdom.

The principal raw materials essential to the Company’s business are steel, electronic components, engines, brass, copper, silver, aluminum alloys, robotic components and various chemicals, all of which are normally available for purchase in the open market.

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Key economic measures relevant to the Company include industrial production trends, steel consumption, purchasing manager indices, capacity utilization within durable goods manufacturers and consumer confidence indicators.

Key industries which provide a relative indication of demand drivers to the Company include steel, farm machinery and equipment, construction and transportation, fabricated metals, electrical equipment, ship and boat building, defense, truck manufacturing, energy and railroad equipment.

industries which provide a relative indication of demand drivers to the Company include steel, farm machinery and equipment, construction and transportation, fabricated metals, electrical equipment, ship and boat building, defense, truck manufacturing, energy and railroad equipment.

Although these measures provide key information on trends relevant to the Company, the Company does not have available a more direct correlation of leading indicators which can provide a forward-looking view of demand levels in the markets which ultimately use the Company’s welding products.

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and capital expenditures, as well as applicable ratios such as return on invested capital, adjusted return on invested capital and average operating working capital to sales.

These measures are reviewed at monthly, quarterly and annual intervals and are compared with historical periods, as well as objectives established by the Board of Directors of the Company.

These measures are reviewed at monthly, quarterly and annual intervals and are compared with historical periods, as well as objectives established by the Board of the Company.

The discussion that follows includes a comparison of our results of operations, liquidity and capital resources for fiscal years ended December 31, 2024 and 2023.

7 unchanged sentences

Selling, general & administrative expenses

Rationalization and asset impairment charges

Rationalization and asset impairment net charges

Operating income

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Lincoln Electric Holdings, Inc.

Net sales increased primarily due to the benefit of acquisitions, higher demand levels and increased product pricing as a result of higher input costs.

Net sales decreased primarily due to softer demand across all segments.

Gross Profit:

Gross profit increased for the year ended December 31, 2023 primarily due to pricing actions taken to offset higher inputs costs and favorable segment mix, which offset the impact of acquisitions.

Gross profit as a percentage of sales increased 1.7% as compared to 2023 driven by the benefit of effective cost management, cost reduction actions and operational efficiencies.

Selling, General & Administrative ("SG&A") Expenses:

SG&A expenses increased in 2023 as compared to 2022 primarily due to acquisitions and higher employee-related costs .

Rationalization and asset impairment charges:

In 2023, the Company recorded a gain of $11,314 primarily related to the sale of a property offset by rationalization and asset impairment charges within International Welding.

SG&A expenses increased in 2024 as compared to 2023 primarily due to SG&A associated with acquisitions, partially offset by lower employee-related costs .

Rationalization and Asset Impairment Net Charges:

Net charges in 2024 of $55,860 primarily relate to rationalization plans initiated in the third quarter of 2024 in all three segments, as well as previously initiated plans and the disposition of the Company’s Russian entity in International Welding .

Net gains in 2023 primarily reflect a gain on the sale of a property of $36,187, partially offset by Rationalization and asset impairment charges of $24,873 primarily within International Welding.

Refer to Note 7 to the consolidated financial statements for further information on the Company’s rationalization plans.

Operating Income:

Operating income as a percentage of sales was 15.9% in 2024 as compared to 17.1% in 2023.

Excluding special items, Operating income as a percentage of sales was 17.6% in 2024 as compared to 17.1% in the prior year.

Refer to explanations above for additional details.

Also refer to Non-GAAP Financial Measures for a reconciliation of Adjusted operating income.

Other Income:

Other income for 2024 primarily relates to the gain on termination of interest rate swaps and other miscellaneous income, partially offset by pension settlement charges and a loss on asset disposal.

Income taxes:

The effective tax rate was higher in 2024 as compared to 2023 primarily due to the mix of earnings and discrete tax items.

Segment Results

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The Harris Products Group

(1) Increase for Americas Welding due to higher volumes in all product groups.

Increase for International Welding due to higher equipment volumes.

Decrease for the Harris Products Group due to weakness in end markets.

(1) Decrease in all segments due to softer demand across broad industrial markets.

(2) Increase for Americas Welding and International Welding due to the acquisitions discussed in Note 4 to the consolidated financial statements.

(3) Increase for all segments reflects increased product pricing to offset higher input costs.

(3) Increase for The Harris Products Group due to price actions taken in response to higher commodity costs.

Adjusted Earnings Before Interest and Income Taxes (“Adjusted EBIT”):

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The following table presents Adjusted EBIT by segment:

Favorable (Unfavorable)

Year Ended December 31,

(Unfavorable)

Americas Welding:

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As a percent of sales

(1) Increase for 2023 as compared to 2022 primarily driven by higher volumes and effective cost management, partially offset by the impact of acquisitions.

(2) Increase for 2023 as compared to 2022 primarily driven by higher volumes and effective cost management.

(1) Increase for 2024 as compared to 2023 primarily driven by effective cost management, cost reduction actions, partially offset by the unfavorable impact of lower volumes.

(2) Decrease for 2024 as compared to 2023 primarily driven by unfavorable impact of lower volumes, partially offset by cost reduction actions.

(3) Increase for 2024 compared to 2023 primarily reflects effective cost management and operational improvements.

(4) 2023 excludes the amortization of step up in value of acquired inventories of $9,390 and Rationalization and asset impairment net charges of $468 .

2022 excludes a favorable adjustment related to the termination of a pension plan of $3,735, the amortization of step up in value of acquired inventories of $1,106 and Rationalization and asset impairment gains of $431 related to severance and gains or losses on the disposal of assets as discussed in Note 7 to the consolidated financial statements .

(5) 2023 excludes pension settlement charges of $845, a gain on asset disposal of $1,646, the amortization of step up in value of acquired inventories of $2,862 and Rationalization and asset impairment net gains of $11,782 as discussed in Note 7 to the consolidated financial statements .

2022 excludes Rationalization and asset impairment charges of $11,681 related to impairment charges as discussed in Note 7 to the consolidated financial statements.

(6) 2022 excludes the amortization of step up in value of acquired inventories of $820 related to an acquisition and non-cash pension settlement charges of $2,965 as discussed in Note 11 to the consolidated financial statements.

(7) 2022 excludes acquisition transaction and integration costs of $6,003 as discussed in Note 4 to the consolidated financial statements.

(4) 2024 excludes Rationalization and asset impairment net charges of $18,840, the amortization of step up in value of acquired inventories of $4,776 and pension settlement charges of $4,205 .

2023 excludes Rationalization and asset impairment net charges of $468 and the amortization of step up in value of acquired inventories of $9,390 .

(5) 2024 excludes Rationalization and asset impairment net charges of $32,960 primarily due to restructuring activities, including the impact of the Company’s disposition of its Russian entity as discussed in Note 7, a loss on asset disposal of $4,950, the amortization of the step up in value of acquired inventories of $250 and pension settlement gain of $413 .

2023 excludes pension settlement charges of $845, a gain on asset disposal of $1,646, the amortization of step up in value of acquired inventories of $2,862 and Rationalization and asset impairment net gains of $11,782.

(6) 2024 excludes Rationalization and asset impairment net charges of $3,955 as discussed in Note 7.

(7) 2024 excludes acquisition transaction costs of $7,042 as discussed in Note 4.

(8) See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT.

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Cash conversion, defined as FCF divided by Adjusted net income;

Organic sales, defined as sales excluding the effects of foreign currency and acquisitions.

Organic sales, reflects changes in volumes and prices, and excludes the effects of foreign currency and acquisitions.

The following table presents a reconciliation of Operating income as reported to Adjusted operating income:

2 unchanged sentences

Special items (pre-tax):

Rationalization and asset impairment charges (1)

Rationalization and asset impairment net charges (1)

Acquisition transaction costs (2)

1 unchanged sentence

Adjusted operating income

(1) 2023 reflects a gain on the sale of a property of $36,187, offset by rationalization and asset impairment charges of $24,873 within International Welding.

2022 charges are primarily related to employee severance, gains or losses on the disposal of assets and other related costs and non-cash asset impairment charges.

(2) Costs related to acquisitions and included in Selling, general & administrative expenses.

(3) Costs related to acquisitions and included in Cost of goods sold.

As a percent of total sales

(1) 2024 charges primarily relate to rationalization plans initiated in the third quarter of 2024 in all three segments, as well as previously initiated plans and the disposition of the Company’s Russian entity in International Welding .

2023 net gains primarily relates to the gain on sale of a property, partially offset by charges within International Welding.

(2) Transaction costs related to acquisitions which are included in Selling, general & administrative expenses.

(3) Costs related to acquisitions which are included in Cost of goods sold.

The following table presents the reconciliations of 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:

2 unchanged sentences

Special items:

Rationalization and asset impairment charges (1)

Rationalization and asset impairment net charges (1)

Acquisition transaction costs (2)

1 unchanged sentence

Amortization of step up in value of acquired inventories (4)

Gain on asset disposal (5)

Loss (gain) on asset disposal (5)

Tax effect of Special items (6)

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Adjusted diluted earnings per share

(1) 2023 reflects a gain on the sale of a property of $36,187, offset by rationalization and asset impairment charges of $24,873 within International Welding.

2022 charges are primarily related to employee severance, gains or losses on the disposal of assets and other related costs and non-cash asset impairment charges.

(2) Costs related to acquisitions, as discussed in Note 4 to the consolidated financial statements, and are included in Selling, general & administrative.

(3) 2023 charges related to pension settlement charges.

2022 net gains primarily related to the final settlement associated with the termination of a pension plan, as discussed in Note 11 to the consolidated financial statements.

(4) Costs related to acquisitions and included in Cost of goods sold.

(5) Gain on asset disposal and included in Other income.

(1) Items in 2024 primarily relate to rationalization plans initiated in the third quarter of 2024 in all three segments, as well as previously initiated plans and the disposition of the Company’s Russian entity in International Welding .

Items in 2023 reflects a gain on the sale of a property, partially offset by Rationalization and asset impairment charges within International Welding.

(2) Transaction costs related to acquisitions which are included in Selling, general and administrative expenses.

Refer to Note 4 for further discussion.

(3) Pension settlement net charges are primarily due to the final settlement associated with the termination of pension plans and are included in Other income.

Refer to Note 11 for further discussion.

(4) Costs related to acquisitions which are included in Cost of goods sold.

(5) Loss (gain) on asset disposal included in Other income.

(6) Includes the net tax impact of Special items recorded during the respective periods.

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Liquidity and Capital Resources

The Company’s primary sources of liquidity are operating cash flows and revolving credit facilities.

As of December 31, 2024, the Company had $377,262 of cash and cash equivalents on hand and $10,520 of outstanding borrowings under its $1,045,608 revolving credit facilities .

The Company’s capital allocation priorities include internal investment to support existing operations and organic growth, investment in acquisitions to grow the business and then returning capital to shareholders through dividends and share repurchases.

The Company’s cash flow from operations can be cyclical.

Operational cash flow is a key driver of liquidity.

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 the foreseeable future primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets.

Management anticipates we will be able to satisfy cash requirements for its ongoing businesses for the foreseeable future 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 consider acquisitions that would involve significant investments.

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Acquisition of businesses, net of cash acquired

Proceeds from the sale of property, plant and equipment

Cash (used by) provided by financing activities (3)

(Payments on) proceeds from short-term borrowings

(Payments on) proceeds from long-term borrowings

Proceeds from sale of property, plant and equipment

Cash used by financing activities (3)

Proceeds from (payments on) short-term borrowings

Proceeds from long-term borrowings

Payments on long-term borrowings

Purchase of shares for treasury

Cash dividends paid to shareholders

Increase in Cash and cash equivalents (4)

(1) Cash provided by operating activities increased for the twelve months ended December 31, 2023 compared with the twelve months ended December 31, 2022 primarily due to increased earnings and improved working capital.

(2) Cash used by investing activities decreased for the twelve months ended December 31, 2023 compared with the twelve months ended December 31, 2022 primarily due to less acquisition activity in 2023.

The Company currently anticipates capital expenditures of $90,000 to $110,000 in 2024.

Anticipated capital expenditures include investments to increase capacity and improve operational effectiveness.

Management critically evaluates all proposed capital expenditures and expects each project to increase efficiency, reduce costs, promote business growth or improve the overall safety and environmental conditions of the Company’s facilities.

(3) Cash used by financing activities increased in the twelve months ended December 31, 2023 compared with the twelve months ended December 31, 2022 primarily due to increased payments on short- and long-term borrowings as compared with the prior year.

(4) Cash and cash equivalents increased 99.7%, or $196,637, to $393,787 during the twelve months ended December 31, 2023, from $197,150 as of December 31, 2022.

The increase was predominantly due to higher cash provided by operating activities in 2023.

The Company paid $148,010 and $130,724 in cash dividends to its shareholders in the twelve months ended December 31, 2023 and 2022, respectively.

(Decrease) increase in Cash and cash equivalents

(1) Cash provided by operating activities decreased in 2024 as compared to 2023 primarily due to decreased earnings and working capital.

(2) Cash used by investing activities increased in 2024 as compared to 2023 primarily for capital expenditures and the acquisition of businesses in 2024.

(3) Cash used by financing activities decreased in 2024 as compared to 2023 primarily due to the proceeds from the 2024 Notes issuances, partially offset by the repayment of the Term Loan as described in Note 9 .

As of December 31, 2024, the Company had cash of $249,895 held by international subsidiaries.

The Company paid $162,143 and $148,010 in cash dividends to its shareholders during 2024 and 2023, respectively.

In January 2025, the Company paid a cash dividend of $0.75 per share, or $42,158, to shareholders of record on December 31, 2024, which reflects a 5.6% increase in the Company’s dividend payout rate.

The Company currently anticipates capital expenditures of $100,000 to $120,000 in 2025.

Anticipated capital expenditures include investments to increase capacity, improve operational effectiveness and for general maintenance.

Management critically evaluates all proposed capital expenditures and expects each project to increase efficiency, reduce costs, support sales growth or improve the overall safety and environmental conditions of the Company’s facilities.

Revolving Credit Agreements and Other Lines of Credit

On June 20, 2024, the Company terminated its existing $500,000 revolving credit facility and entered into a $1 billion revolving credit facility.

The revolving credit facility matures on June 20, 2029.

As of December 31, 2024, the Company had $1 billion of availability under the revolving credit facility.

Additionally, the Company has other lines of credit with total availability of $35,088 as of December 31, 2024.

Refer to Note 9 for further information on our revolving credit agreements and other lines of credit.

Working Capital Ratios

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(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.

(2) In 2022, Average operating working capital excluding Fori would have been 18.6% as a percent of Net Sales.

(3) In order to minimize supply chain disruptions in serving customers due to the impacts of the COVID-19 pandemic, the Company increased inventories relative to expected Net sales resulting in higher Days sales in Inventories in 2022.

Stock Repurchase Program

On February 12, 2020, the Company’s Board authorized a share repurchase program for up to 10 million shares of the Company’s common stock.

As of December 31, 2024, there were 6.7 million shares available under the authorization.

The Company is not obligated to make any repurchases.

Contractual Obligations

As of December 31, 2024, the total amount of debt outstanding was $1,261,075, which includes $110,524 in short-term debt.

Refer to Note 9 for further information on our debt and interest.

Lease Obligations

As of December 31, 2024, the Company’s total future minimum lease payments were $61,942, which includes $14,896 in short-term lease obligations.

Refer to Note 17 for further information on our lease obligations.

Purchase Commitments

Purchase commitments include contractual obligations for raw materials and services.

As of December 31, 2024, the Company had total purchase commitments of $91,028, which includes $89,792 in current liabilities.

Other Material Obligations

As of December 31, 2024, there was a total liability of $55,425 for deferred compensation, which includes $30,901 in Other current liabilities.

Off-Balance Sheet Arrangements

The Company utilizes letters of credit to back certain payment and performance obligations.

Letters of credit are subject to limits based on amounts outstanding under the Company’s revolving credit facility.

Rationalization and Asset Impairments

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Refer to Note 4 to the consolidated financial statements for a discussion of the Company’s recent acquisitions.

At December 31, 2023 and 2022, the total amount of debt outstanding was $1,105,210 and $1,203,879, respectively, while the fair value of long-term debt, including the current portion, was approximately $1,013,795 and $1,009,020, respectively, which was determined using available market information and methodologies requiring judgment.

The carrying value of this debt at such dates was $1,102,771 and $1,121,435, 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.

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 Notes each have an aggregate principal amount of $350,000.

Interest on the Notes are payable semi-annually.

The proceeds of the Notes were used for general corporate purposes.

The Notes contain certain affirmative and negative covenants.

As of December 31, 2023, the Company was in compliance with all of its debt covenants relating to the Notes.

The Company’s total weighted average effective interest rate and remaining weighted average term, inclusive of the 2015 Notes and 2016 Notes, is 3.3% and 10.4 years, respectively.

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 Term SOFR, plus a margin ranging from 0.75% to 1.75% based on the Company’s consolidated net

leverage ratio.

The proceeds of the Term Loan were used to pay a portion of the purchase price in connection with the acquisition of Fori.

The agreement governing the Term Loan (the “Term Loan Credit Agreement”) contains representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type, including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates.

The Term Loan Credit Agreement requires the Company to maintain a minimum consolidated fixed charges coverage ratio and maximum consolidated net leverage ratio.

As of December 31, 2023, the Company was in compliance with all of its covenants.

Revolving Credit Agreements

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 December 31, 2023, the Company was in compliance with all of its covenants and had no of outstanding borrowings under the Credit Agreement.

The Company has other lines of credit and debt agreements totaling $89,145.

As of December 31, 2023, the Company was in compliance with all of its covenants and had $2,435 outstanding at December 31, 2023.

Return on Invested Capital

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Special items:

Rationalization and asset impairment charges

Rationalization and asset impairment net charges

Acquisition transaction costs

1 unchanged sentence

Amortization of step up in value of acquired inventories

Gain on asset disposal

Loss (gain) on asset disposal

Tax effect of Special items (1)

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The applicable tax rate reflects the taxable jurisdiction and nature of each Special item.

Contractual and Other Obligations

The Company’s cash requirements for contractual and other obligations as of December 31, 2023 are as follows:

Payments Due By Period

Long-term debt, including current portion (Note 9)

Interest on long-term debt (Note 9)

Amounts due banks (Note 9)

Operating leases (Note 17)

Purchase commitments (1)

Transition Tax (2)

(1) Purchase commitments include contractual obligations for raw materials and services.

(2) Federal income taxes on the Company’s transition tax pursuant to the U.S.

Tax Act is payable over eight years.

Amounts reflect the utilization of 2018 overpayments and foreign tax credits.

As of December 31, 2023, there were $12,592 of tax liabilities related to unrecognized tax benefits and a $53,628 liability for deferred compensation.

Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, the Company is unable to estimate the years in which settlement will occur.

Stock-Based Compensation

On April 19, 2023, the shareholders of the Company approved the 2023 Equity and Incentive Compensation Plan ("2023 Employee Plan"), which replaced the 2015 Equity and Incentive Compensation Plan (“2015 Employee Plan”).

The 2023 Employee Plan provides for the granting of options, appreciation rights, restricted shares, restricted stock units and performance-based awards up to an additional 2,025,000 of the Company’s common shares.

In addition, on April 19, 2023, the shareholders of the Company approved the 2023 Stock Plan for Non-Employee Directors ("2023 Director Plan"), which replaced the 2015 Stock Plan for Non-Employee Directors (“2015 Director Plan”).

The 2023 Director Plan provides for the granting of options, restricted shares and restricted stock units up to an additional 200,000 of the Company’s common shares.

At December 31, 2023, there were 2,192,720 common shares available for future grant under all plans.

Under these plans, the number of options, restricted shares and restricted stock units granted were 241,824 in 2023 and 284,946 in 2022.

The Company issued common shares from treasury upon all exercises of stock options, vesting of restricted stock units and the granting of restricted stock awards in 2023 and 2022.

Total stock-based compensation expense recognized in the Consolidated Statements of Income for 2023 and 2022 was $26,223 and $25,276, respectively, with a related tax benefit of $6,711 and $6,363, respectively.

As of December 31, 2023, total unrecognized stock-based compensation expense related to non-vested stock options and restricted stock units was $17,254, which is expected to be recognized over a weighted average period of approximately one year.

The aggregate intrinsic value of options outstanding and exercisable, which would have been received by the optionees, had all awards been exercised at December 31, 2023 was $99,884 and $82,057, respectively.

The total intrinsic value of awards exercised during 2023 and 2022 was $35,414 and $7,082, respectively.

Product Liability Costs

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Moreover, the Company has been largely successful to date in its defense of these claims.

Off-Balance Sheet Arrangements

The Company utilizes letters of credit to back certain payment and performance obligations.

Letters of credit are subject to limits based on amounts outstanding under the Company’s Credit Agreement.

New Accounting Pronouncements

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The Company’s consolidated financial statements are based on the selection and application of significant accounting policies, which require management to make estimates and assumptions.

These estimates and assumptions are reviewed periodically by management and compared to historical trends to determine the accuracy of estimates and assumptions

These estimates and assumptions are reviewed periodically by management and compared to historical trends to determine the accuracy of estimates and assumptions used.

If warranted, these estimates and assumptions may be changed as current trends are assessed and updated.

Historically, the Company’s estimates have been determined to be reasonable.

No material changes to the Company’s accounting policies were made during 2023.

No material changes to the Company’s

accounting policies were made during 2024.

The Company believes the following accounting policies are some of the more critical judgment areas affecting its financial condition and results of operations.

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In assessing the realizability of deferred tax assets, the Company assesses whether it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized.

The Company considers the scheduled reversal of deferred tax

liabilities, tax planning strategies and projected future taxable income in making this assessment.

The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment.

At December 31, 2024, a valuation allowance of $35,284 was recorded against certain deferred tax assets based on this assessment.

The Company believes it is more-likely-than-not that the tax benefit of the remaining net deferred tax assets will be realized.

Company believes it is more-likely-than-not that the tax benefit of the remaining net deferred tax assets will be realized.

The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company’s assessment of future taxable income or tax planning strategies changes.

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Actual year-end inventory levels and costs may differ from interim LIFO inventory valuations.

The excess of current cost over LIFO cost was $129,946 at December 31, 2023 and $133,909 at December 31, 2022.

The excess of current cost over LIFO cost was $120,633 and $129,946 at December 31, 2024 and 2023, respectively.

The Company reviews the net realizable value of inventory on an on-going basis with consideration given to deterioration, obsolescence and other factors.

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If the carrying amount exceeds the fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Fair values are determined using established business valuation techniques and models developed by the Company, estimates of market participant assumptions of future cash flows, future growth rates and discount rates to value estimated cash flows.

estimated cash flows.

Changes in economic and operating conditions, actual growth below the assumed market participant assumptions or an increase in the discount rate could result in an impairment charge in a future period.

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The cumulative impact of revisions to total estimated costs is reflected in the period of the change, including anticipated losses.

Less than 10% of the Company’s Net sales are recognized over time.

Approximately 10% of the Company’s Net sales are recognized over time.

The Company recognizes any discounts, credits, returns, rebates and incentive programs based on reasonable estimates as a reduction of sales to arrive at Net sales at the same time the related revenue is recorded.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis