What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-31 compared with 2025-04-30 · 121 added, 47 removed, 198 unchanged (46% of the section changed)

18 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Favorable (Unfavorable)

4 unchanged sentences

Interest expense, net

Other income (expense)

Income before income taxes

1 unchanged sentence

Diluted earnings per share

Six Months Ended June 30,

Favorable (Unfavorable)

Cost of goods sold

Selling, general & administrative expenses

Rationalization and asset impairment net charges

Operating income

Interest expense, net

Income before income taxes

Effective tax rate

Diluted earnings per share

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,

Three Months Ended June 30,

Change in Net Sales due to:

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Lincoln Electric Holdings, Inc.

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.

Six Months Ended June 30,

Change in Net Sales due to:

Lincoln Electric Holdings, Inc.

Net sales increased for the three and six months ended June 30, 2025 primarily due to an increase in organic sales and a benefit from acquisitions.

The increase in organic sales for both the three and six months ended June 30, 2025 is driven by an increase in pricing primarily due to higher input costs, partially offset by lower volumes.

Gross Profit:

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.

Gross profit as a percentage of sales decreased 0.3% for the three months ended June 30, 2025 as compared to the same 2024 period, driven by lower volumes offset by higher operational efficiencies.

Gross profit as a percentage of sales decreased 0.8% for the six months ended June 30, 2025 as compared to the same 2024 period, driven by lower volumes partially offset by higher operational efficiencies.

The three and six months ended June 30, 2025 includes last-in, first-out (“LIFO”) charges of $8,523 and $10,284, respectively, which are primarily due to rising input costs.

This compares with a benefit of $2,244 and $2,774 in the comparable 2024 periods.

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

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.

SG&A expenses increased in the three and six months ended June 30, 2025 as compared to the same 2024 periods, primarily due to increase in employee costs and acquisitions, partially offset by effective cost management.

Operating Income:

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.

Operating income as a percentage of sales was 17.6% for the three months ended June 30, 2025 as compared to 14.6% in the prior year period.

Excluding special items, Operating income as a percentage of sales was 17.9% for the three months ended June 30, 2025 as compared to 17.4% in the prior year period.

Operating income as a percentage of sales was 17.1% for the six months ended June 30, 2025 as compared to 15.7% in the prior year period.

Excluding special items, Operating income as a percentage of sales, was 17.4% for both comparable periods.

Refer to explanations above for additional details.

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

Rationalization and Asset Impairment Net Charges:

Charges in 2025 relate to rationalization plans initiated within all three reportable segments .

Charges in 2024 primarily relate to rationalization plans initiated within International Welding, including the impact of the Company’s disposition of its Russian entity.

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

Income Taxes:

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.

The effective tax rate was lower for the three and six months ended June 30, 2025 as compared to the same periods in 2024, primarily due to mix of earnings and timing of discrete tax items.

Segment Results

The following table presents components of sales by segment:

Three Months Ended March 31,

Three Months Ended June 30,

Change in Net Sales due to:

7 unchanged sentences

The Harris Products Group

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

Six Months Ended June 30,

Change in Net Sales due to:

Acquisitions (3)

Operating Segments

Americas Welding

International Welding

The Harris Products Group

Americas Welding

International Welding

The Harris Products Group

(1) Decrease for the three and six months ended June 30, 2025 for Americas Welding and International Welding due to lower volumes on equipment sales.

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

1 unchanged sentence

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 (expense) income.

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.

1 unchanged sentence

Favorable (Unfavorable)

Three Months Ended March 31,

Three Months Ended June 30,

Americas Welding:

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As a percent of sales

(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.

(1) Decrease for the three months ended June 30, 2025 as compared to June 30, 2024 primarily driven by the unfavorable impact of lower volumes and the impact of acquisitions.

(2) Increase for the three months ended June 30, 2025 as compared to June 30, 2024 primarily reflects effective cost management and a favorable prior year comparison due to operational inefficiencies in 2024 which were not repeated in the current year.

(3) Increase for the three months ended June 30, 2025 as compared to June 30, 2024 primarily reflects higher organic sales, effective cost management and operational improvements.

(4) The three months ended June 30, 2025 exclude Rationalization and asset impairment net charges of $905 as discussed in Note 6.

(5) The three months ended June 30, 2025 exclude Rationalization and asset impairment net charges of $1,551 as discussed in Note 6.

The three months ended June 30, 2024 exclude Rationalization and asset impairment net charges of $26,284 primarily due to the impact of the Company’s disposition of its Russian entity as discussed in Note 6 and a loss on asset disposal of $4,950.

(6) The three months ended June 30, 2025 exclude Rationalization and asset impairment net charges of $86 as discussed in Note 6.

(7) The three months ended June 30, 2025 exclude acquisition transaction costs of $429 as discussed in Note 4.

The three months ended June 30, 2024 exclude acquisition transaction costs of $2,182.

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

Favorable (Unfavorable)

Six Months Ended June 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 six months ended June 30, 2025 as compared to June 30, 2024 primarily driven by the unfavorable impact of lower volumes and the impact of acquisitions.

(2) Increase for the six months ended June 30, 2025 as compared to June 30, 2024 primarily reflects effective cost management and a favorable prior year comparison due to operational inefficiencies in 2024 which were not repeated in the current year .

(3) Increase for the six months ended June 30, 2025 as compared to June 30, 2024 primarily reflects higher organic sales, effective cost management and operational improvements.

(4) The six months ended June 30, 2025 exclude Rationalization and asset impairment net charges of $3,040 as discussed in Note 6.

(5) The six months ended June 30, 2025 exclude Rationalization and asset impairment net charges of $3,103 as discussed in Note 6.

The six months ended June 30, 2024 exclude Rationalization and asset impairment net charges of $29,354 primarily due to the impact of the Company’s disposition of its Russian entity as discussed in Note 6 and a loss on asset disposal of $4,950.

(6) The six months ended June 30, 2025 exclude Rationalization and asset impairment net charges of $264 as discussed in Note 6.

The six months ended June 30, 2024 exclude Rationalization and asset impairment net charges of $1,396 primarily due to restructuring activities as discussed in Note 6.

(7) The six months ended June 30, 2025 exclude acquisition transaction costs of $1,231 as discussed in Note 4.

The six months ended June 30, 2024 exclude acquisition transaction costs of $3,944.

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

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.

The Company reviews Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share, 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.

1 unchanged sentence

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,

Three Months Ended June 30,

Six Months Ended June 30,

Operating income as reported

10 unchanged sentences

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

Loss on asset disposal (4)

Tax effect of Special items (5)

13 unchanged sentences

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

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

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

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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 .

As of June 30, 2025, the Company had $299,481 of cash and cash equivalents on hand and $5,319 of outstanding borrowings under its $1,033,662 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.

8 unchanged sentences

The following table reflects changes in key cash flow measures:

Three Months Ended March 31,

Six Months Ended June 30,

Cash provided by operating activities (1)

1 unchanged sentence

Capital expenditures

Acquisition of businesses, net of cash acquired

Cash used by financing activities (2)

(Payments on) proceeds from short-term borrowings

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 (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.

Decrease in Cash and cash equivalents

(1) Cash provided by operating activities increased for the six months ended June 30, 2025, compared with the six months ended June 30, 2024 primarily due to improved working capital.

(2) Cash used by financing activities increased for the six months ended June 30, 2025, compared with the six months ended June 30, 2024 primarily due to the increase in purchases of shares for treasury.

As of June 30, 2025, the Company had cash of $299,481, of which $257,675 was held by international subsidiaries.

In July 2025, the Company paid a cash dividend of $0.75 per share, or $41,390, to shareholders of record on June 30, 2025.

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

4 unchanged sentences

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.

As of June 30, 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 $28,343 as of June 30, 2025.

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

Working Capital Ratios

March 31, 2025

June 30, 2025

December 31, 2024

March 31, 2024

June 30, 2024

Average operating working capital to Net sales (1)

5 unchanged sentences

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.

As of June 30, 2025, there were 5.5 million shares available under the authorization.

The Company is not obligated to make any repurchases.

10 unchanged sentences

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

Twelve Months Ended March 31,

Twelve Months Ended June 30,

Net income as reported

11 unchanged sentences

Invested Capital

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

Short-term debt

15 unchanged sentences

general economic, financial and market conditions;

the effectiveness of operating initiatives;

the effectiveness of commercial and operating initiatives;

the effectiveness of information systems and cybersecurity systems;

presence of artificial intelligence technologies;

completion of planned divestitures;

7 unchanged sentences

global regulatory complexity;

the effects of changes in tax law;

the effects of changes in tax law, including any changes from the new legislation implemented in the One Big Beautiful Bill Act;

tariff rates in the countries where the Company conducts business;

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

and the possible effects of events beyond our control, including but not limited to, the ongoing geopolitical conflicts, 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” presented herein, as well as in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and on Form 10-Q for the quarter ended March 31, 2025.

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