What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-10-31 · 74 added, 151 removed, 171 unchanged (57% of the section changed)

5 unchanged sentences

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.

The Company’s products are sold globally.

In the Americas, products are sold principally through industrial distributors, retailers and also 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.

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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.

In 2025, the U.S.

government announced a series of tariffs on imported goods into the U.S., which prompted retaliatory actions from some of its trading partners.

The Company has taken actions to address the impact of these initial trade policies and while the Company cannot predict the ultimate impact on its business, the Company will continue to monitor evolving trade negotiations to determine if additional measures are warranted.

Results of Operations

The following table shows the Company’s results of operations:

Three Months Ended September 30,

Favorable (Unfavorable)

Cost of goods sold

Selling, general & administrative expenses

Rationalization and asset impairment charges

Operating income

Interest expense, net

Other (expense) income

Income before income taxes

Effective tax rate

Diluted earnings per share

Nine Months Ended September 30,

Three Months Ended March 31,

Favorable (Unfavorable)

1 unchanged sentence

Selling, general & administrative expenses

Rationalization and asset impairment charges

Rationalization and asset impairment net charges

Operating income

Interest expense, net

Other (expense) income

Income before income taxes

2 unchanged sentences

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 September 30,

Change in Net Sales due to:

Lincoln Electric Holdings, Inc.

Nine Months Ended September 30,

Three Months Ended March 31,

Change in Net Sales due to:

1 unchanged sentence

Lincoln Electric Holdings, Inc.

Net sales decreased for the three and nine months ended September 30, 2024 primarily due to softer demand across all segments.

Net sales increased for the three months ended March 31, 2025 primarily due to a benefit from acquisitions, partially offset by a decrease in organic sales due to softer demand and an unfavorable foreign exchange impact.

Gross Profit:

Gross profit as a percentage of sales increased 0.4% and 2.1%, respectively, for the three and nine months ended September 30, 2024 as compared to the same 2023 periods, driven by the benefit of effective cost management and operational improvements.

The three and nine months ended September 30, 2024 includes a last-in, first-out (“LIFO”) benefit of $1,196 and $3,971, respectively, as compared with a benefit of $1,323 and a charge of $1,179 in each of the comparable 2023 periods.

Gross profit as a percentage of sales decreased 1.1% for the three months ended March 31, 2025 as compared to the same 2024 period, driven by unfavorable impact from acquisitions and operational inefficiencies.

The three months ended March 31, 2025 includes a last-in, first-out (“LIFO”) charge of $1,761, as compared with a benefit of $531 in the comparable 2024 period.

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

SG&A expenses decreased in the three months ended September 30, 2024 as compared to the same 2023 period, primarily due to reductions in employee costs partially offset by acquisitions.

SG&A expenses increased for the nine months ended September 30, 2024 as compared to the same 2023 period, primarily due to acquisitions.

Rationalization and Asset Impairment Charges:

Rationalization and asset impairment charges increased for the three and nine months ended September 30, 2024 as compared to the same 2023 periods, primarily due to the rationalization plans initiated during the third quarter of 2024 and the disposal of the Company’s Russian entity in the second quarter of 2024.

Refer to Note 6 to the consolidated financial statements for further information on the Company’s rationalization plans.

SG&A expenses decreased in the three months ended March 31, 2025 as compared to the same 2024 period, primarily due to reductions in employee costs partially offset by acquisitions.

Operating Income:

Operating income as a percentage of sales was 14.8% for the three months ended September 30, 2024 as compared to 16.6% in the prior year period.

Excluding special items, Operating income as a percentage of sales was 17.3% for the three months ended September 30, 2024 as compared to 17.7% in the prior year period.

Operating income as a percentage of sales was 15.4% for the nine months ended September 30, 2024 as compared to 16.4% in the prior year period.

Excluding special items, Operating income as a percentage of sales was 17.4% for the nine months ended September 30, 2024 as compared to 17.1% in the prior year period.

Operating income as a percentage of sales was 16.4% for the three months ended March 31, 2025 as compared to 16.8% in the prior year period.

Excluding special items, Operating income as a percentage of sales was 16.9% for the three months ended March 31, 2025 as compared to 17.5% in the prior year period.

Refer to explanations above for additional details.

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

Other (Expense) Income:

Other (expense) income for the three months ended September 30, 2024 primarily relates to the pension settlement charges.

Other (expense) income for the nine months ended September 30, 2024 also includes the loss on asset disposal, partially offset by the gain on termination of interest rate swaps.

Income Taxes:

The effective tax rate was higher for the three and nine months ended September 30, 2024 as compared to the same periods in 2023, primarily due to mix of earnings and discrete tax items.

The effective tax rate was higher for the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to mix of earnings and discrete tax items.

Segment Results

Three Months Ended September 30,

Change in Net Sales due to:

Operating Segments

Americas Welding

International Welding

The Harris Products Group

Americas Welding

International Welding

The Harris Products Group

Nine Months Ended September 30,

The following table presents components of sales by segment:

Three Months Ended March 31,

Change in Net Sales due to:

Acquisitions (3)

Operating Segments

5 unchanged sentences

The Harris Products Group

(1) Decrease for the three and nine months ended September 30, 2024 for all segments due to softer demand.

(1) Decrease for the three months ended March 31, 2025 for Americas Welding and International Welding due to softer demand.

(2) Increase for all the segments due to price actions taken in response to higher input costs.

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

Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the Adjusted EBIT profit measure.

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Favorable (Unfavorable)

Three Months Ended September 30,

Americas Welding:

Inter-segment sales

Adjusted EBIT (4)

As a percent of total sales (1)

International Welding:

Inter-segment sales

Adjusted EBIT (5)

As a percent of total sales (2)

The Harris Products Group:

Inter-segment sales

Adjusted EBIT (6)

As a percent of total sales (3)

Corporate / Eliminations:

Inter-segment sales

Adjusted EBIT (7)

Consolidated:

As a percent of total sales

Adjusted EBIT (8)

As a percent of sales

(1) Decrease for the three months ended September 30, 2024 as compared to September 30, 2023 primarily driven by the unfavorable impact of lower volumes and the impact of acquisitions.

(2) Decrease for the three months ended September 30, 2024 as compared to September 30, 2023 primarily driven by the unfavorable impact of lower volumes.

(3) Increase for the three months ended September 30, 2024 as compared to September 30, 2023 primarily reflects effective cost management and operational improvements.

(4) The three months ended September 30, 2024 exclude Rationalization and asset impairment net charges of $16,282 primarily due to restructuring activities as discussed in Note 6, the amortization of the step up in value of acquired inventories of $3,109 as discussed in Note 4 and pension settlement charges of $3,966.

The three months ended September 30, 2023 exclude Rationalization and asset impairment net charges of $408 and the amortization of the step up in value of acquired inventories of $3,648.

(5) The three months ended September 30, 2024 exclude Rationalization and asset impairment net charges of $2,676 primarily due to restructuring activities as discussed in Note 6 and the amortization of the step up in value of acquired inventories of $250 as discussed in Note 4.

The three months ended September 30, 2023 exclude Rationalization and asset impairment net charges of $6,666 and the amortization of the step up in value of acquired inventories of $1,204.

(6) The three months ended September 30, 2024 exclude Rationalization and asset impairment net charges of $1,269 primarily due to restructuring activities as discussed in Note 6.

(7) The three months ended September 30, 2024 exclude acquisition transaction costs of $610 as discussed in Note 4.

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

Favorable (Unfavorable)

Nine Months Ended September 30,

Three Months Ended March 31,

Americas Welding:

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As a percent of sales

(1) Increase for the nine months ended September 30, 2024 as compared to September 30, 2023 primarily driven by effective cost management and favorable mix.

(2) Decrease for the nine months ended September 30, 2024 as compared to September 30, 2023 primarily driven by the unfavorable impact of lower volumes and operational inefficiencies.

(3) Increase for the nine months ended September 30, 2024 as compared to September 30, 2023 primarily reflects effective cost management and operational improvements.

(4) The nine months ended September 30, 2024 exclude Rationalization and asset impairment net charges of $16,521 primarily due to restructuring activities as discussed in Note 6, the amortization of the step up in value of acquired inventories of $3,224 and pension settlement charges of $3,966.

The nine months ended September 30, 2023 exclude Rationalization and asset impairment net charges of $408 and the amortization of the step up in value of acquired inventories of $9,390 .

(5) The nine months ended September 30, 2024 exclude Rationalization and asset impairment net charges of $32,030 primarily due to restructuring activities, including the impact of the Company’s disposition of its Russian entity as discussed in Note 6, a loss on asset disposal of $4,950 and the amortization of the step up in value of acquired inventories of $250.

The nine months ended September 30, 2023 exclude Rationalization and asset impairment net charges of $10,210, the amortization of the step up in value of acquired inventories of $2,862 and a gain on asset disposal of $1,646.

(6) The nine months ended September 30, 2024 exclude Rationalization and asset impairment net charges of $2,666 primarily due to restructuring activities as discussed in Note 6.

(7) The nine months ended September 30, 2024 exclude acquisition transaction costs of $4,551 as discussed in Note 4.

(1) Decrease for the three months ended March 31, 2025 as compared to March 31, 2024 primarily driven by the unfavorable impact of lower volumes and the impact of acquisitions.

(2) Decrease for the three months ended March 31, 2025 as compared to March 31, 2024 primarily driven by the unfavorable impact of lower volumes.

(3) Increase for the three months ended March 31, 2025 as compared to March 31, 2024 primarily reflects effective cost management and operational improvements.

(4) The three months ended March 31, 2025 exclude Rationalization and asset impairment net charges of $2,135 as discussed in Note 6.

(5) The three months ended March 31, 2025 exclude Rationalization and asset impairment net charges of $1,552 as discussed in Note 6.

The three months ended March 31, 2024 exclude Rationalization and asset impairment net charges of $3,069 as discussed in Note 6.

(6) The three months ended March 31, 2025 exclude Rationalization and asset impairment net charges of $178 as discussed in Note 6.

The three months ended March 31, 2024 exclude Rationalization and asset impairment net charges of $1,536 as discussed in Note 6.

(7) The three months ended March 31, 2025 exclude acquisition transaction costs of $802 as discussed in Note 4.

The three months ended March 31, 2024 exclude acquisition transaction costs of $1,762.

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

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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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating income as reported

9 unchanged sentences

Acquisition transaction costs (2)

Pension settlement net gains (3)

Amortization of step up in value of acquired inventories (3)

Loss (gain) on asset disposal (5)

Tax effect of Special items (4)

10 unchanged sentences

Adjusted diluted earnings per share

(1) Items in 2024 primarily relate to rationalization plans initiated during 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 primarily relate to plans previously initiated within International Welding.

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

(3) Pension settlement charges are included in Other (expense) income.

(4) Related to acquisitions and are included in Cost of goods sold.

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

(1) Primarily related to restructuring activities as discussed in Note 6 to the consolidated financial statements.

(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.

(4) Includes the net tax impact of Special Items recorded during the respective periods.

2 unchanged sentences

Liquidity and Capital Resources

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

As of March 31, 2025, the Company had $394,705 of cash and cash equivalents on hand and $4,391 of outstanding borrowings under its $1,031,457 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, 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.

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.

The Company continues to expand globally and periodically consider acquisitions 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:

Nine Months Ended September 30,

Three Months Ended March 31,

Cash provided by operating activities (1)

1 unchanged sentence

Capital expenditures

Acquisition of businesses, net of cash acquired

Cash used by financing activities (2)

Proceeds from (payments on) short-term borrowings

Proceeds from long-term borrowings

Payments on long-term borrowings

(Payments on) proceeds from short-term borrowings

Purchase of shares for treasury

Cash dividends paid to shareholders

Increase in Cash and cash equivalents (3)

(1) Cash used by investing activities increased for the nine months ended September 30, 2024 , compared with the nine months ended September 30, 2023 primarily for the acquisition of businesses in 2024.

Increase (decrease) in Cash and cash equivalents

(1) Cash provided by operating activities increased for the three months ended March 31, 2025, compared with the three months ended March 31, 2024 primarily due to improved working capital.

(2) Cash used by financing activities increased for the three months ended March 31, 2025, compared with the three months ended March 31, 2024 primarily due to a decrease in proceeds from exercise of stock options.

As of March 31, 2025, the Company had cash of $394,705, of which $298,917 was held by international subsidiaries.

In April 2025, the Company paid a cash dividend of $0.75 per share, or $41,870, to shareholders of record on March 31, 2025.

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

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 decreased for the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023 primarily due to the proceeds from the 2024 Notes issuances, partially offset by the repayment of the Term Loan as described in Note 10.

(3) Cash and cash equivalents increased 2.6%, or $10,431, to $404,218 during the nine months ended September 30, 2024 , from $393,787 as of December 31, 2023.

At September 30, 2024, $265,575 of Cash and cash equivalents was held by international subsidiaries.

In October 2024, the Company paid a cash dividend of $0.71 per share, or $40,062, to shareholders of record as of September 30, 2024.

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

On June 20, 2024, the Company entered into a $1 billion revolving credit facility.

The revolving credit facility matures on June 20, 2029.

As of March 31, 2025, the Company had $1 billion of availability under the revolving credit facility.

Additionally, the Company has other lines of credit with total availability of $27,066 as of March 31, 2025.

Refer to Note 10 for further information on our revolving credit agreements.

Working Capital Ratios

September 30, 2024

March 31, 2025

December 31, 2024

September 30, 2023

March 31, 2024

Average operating working capital to Net sales (1)

3 unchanged sentences

(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.

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 March 31, 2025, there were 6.2 million shares available under the authorization.

The Company is not obligated to make any repurchases.

Rationalization and Asset Impairments

Refer to Note 6 to the consolidated financial statements for a discussion of the Company’s rationalization plans.

The Company believes the rationalization actions will positively impact future results of operations and will not have a material effect on liquidity and sources and uses of capital.

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

Return on Invested Capital

5 unchanged sentences

The following table presents the reconciliations of ROIC and Adjusted ROIC to net income:

Twelve Months Ended September 30,

Twelve Months Ended March 31,

Net income as reported

3 unchanged sentences

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

Loss (gain) on asset disposal

Loss on asset disposal

Tax effect of Special items (1)

1 unchanged sentence

Invested Capital

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Short-term debt

3 unchanged sentences

Adjusted return on invested capital

(1) The decrease in Adjusted ROIC is primarily related to the increase in long-term debt as discussed in Note 10.

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

3 unchanged sentences

Refer to Note 1 to the consolidated financial statements for a discussion of new accounting pronouncements.

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

Fair Value of Debt

At September 30, 2024 and December 31, 2023, the fair value of long-term debt, including the current portion, was approximately $1,235,998 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 $1,250,620 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 June 20, 2024, the Company terminated its existing $500,000 revolving credit facility and entered into a new $1 billion revolving credit facility, which may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $300,000.

The new revolving credit facility matures on June 20, 2029.

The new revolving credit facility will initially bear interest on outstanding borrowings at a per annum rate equal to secured overnight finance rate (“SOFR”) plus 1.10% and could fluctuate based on the Company’s total net leverage ratio at a spread ranging from SOFR plus 1.10% to SOFR plus 1.60%.

The financial covenants consist of a maximum net leverage ratio of 3.5x EBITDA and a minimum interest coverage ratio of 2.5x EBITDA.

The new revolving credit facility 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 September 30, 2024, the Company was in compliance with all of its covenants and had no outstanding borrowings under the new revolving credit facility.

The Company has other lines of credit and debt agreements totaling $39,993.

As of September 30, 2024, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $11,993.

Senior Unsecured Notes

On June 20, 2024, the Company entered into a Note Purchase Agreement (the “NPA”) pursuant to which it agreed to issue new senior unsecured notes (“2024 Notes”) in an aggregate principal amount of $550,000, at par.

Pursuant to the NPA, the Company issued one series of the 2024 Notes in the aggregate principal amount of $400,000 on June 20, 2024, and two series of the 2024 Notes each in the aggregate principal amount of $75,000 on August 22, 2024.

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% to 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 senior unsecured notes is 4.08%, including the impact from terminated swap agreements as discussed in Note 12, and 9.2 years, respectively.

The senior unsecured notes contain certain affirmative and negative covenants.

As of September 30, 2024, the Company was in compliance with all of its debt covenants relating to the senior unsecured notes.

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.

On June 20, 2024, the Company used the net proceeds from the issuance of the initial series of 2024 Notes to repay the Term Loan in full.

In June 2024, the Company terminated the interest rate swaps that were associated with the Term Loan and realized a gain of $2,428, which is recorded in Other (expense) income.

Forward-looking Statements

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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.

and the possible effects of events beyond our control, including but not limited to, the ongoing conflicts between Russia and Ukraine and in the Middle East, 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.

Risk Factors” presented herein, as well as in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

3 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-Q

Item 2. Management’s Discussion and Analysis