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 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. 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. 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. 23 Table of Contents Results of Operations The following table shows the Company’s results of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ 2025 ​ 2024 ​ 2025 vs. 2024 ​ ​ Amount % of Sales Amount % of Sales $ % Net sales $ 1,088,673 ​ ​ ​ ​ $ 1,021,683 ​ ​ $ 66,990 6.6 % Cost of goods sold 683,126 ​ ​ ​ 637,870 ​ ​ (45,256) (7.1) % Gross profit 405,547 ​ 37.3 % 383,813 37.6 % 21,734 5.7 % Selling, general & administrative expenses 210,861 ​ 19.4 % 208,485 20.4 % (2,376) (1.1) % Rationalization and asset impairment net charges 2,542 ​ 0.2 % 26,490 2.6 % 23,948 90.4 % Operating income 192,144 ​ 17.6 % 148,838 14.6 % 43,306 29.1 % Interest expense, net 12,619 ​ ​ ​ 10,661 ​ ​ (1,958) (18.4) % Other income (expense) 4,034 ​ ​ ​ (1,553) ​ ​ 5,587 359.8 % Income before income taxes 183,559 ​ 16.9 % 136,624 13.4 % 46,935 34.4 % Income taxes 40,163 ​ ​ ​ 34,916 ​ ​ (5,247) (15.0) % Effective tax rate 21.9 % ​ ​ 25.6 % ​ ​ 3.7 % ​ ​ Net income $ 143,396 ​ 13.2 % $ 101,708 10.0 % $ 41,688 41.0 % Diluted earnings per share $ 2.56 ​ ​ ​ ​ $ 1.77 ​ $ 0.79 44.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ 2025 ​ 2024 ​ 2025 vs. 2024 ​ ​ Amount % of Sales Amount % of Sales $ % Net sales $ 2,093,061 ​ ​ ​ ​ $ 2,002,880 ​ ​ $ 90,181 4.5 % Cost of goods sold 1,322,066 ​ ​ ​ 1,250,668 ​ ​ (71,398) (5.7) % Gross profit 770,995 ​ 36.8 % 752,212 37.6 % 18,783 2.5 % Selling, general & administrative expenses 407,526 ​ 19.5 % 407,232 20.3 % (294) (0.1) % Rationalization and asset impairment net charges 6,407 ​ 0.3 % 31,095 1.6 % 24,688 79.4 % Operating income 357,062 ​ 17.1 % 313,885 15.7 % 43,177 13.8 % Interest expense, net 24,746 ​ ​ ​ 19,440 ​ ​ (5,306) (27.3) % Other income 4,478 ​ ​ ​ 709 ​ ​ 3,769 531.6 % Income before income taxes 336,794 ​ 16.1 % 295,154 14.7 % 41,640 14.1 % Income taxes 74,911 ​ ​ ​ 70,031 ​ ​ (4,880) (7.0) % Effective tax rate 22.2 % ​ ​ 23.7 % ​ ​ 1.5 % ​ ​ Net income $ 261,883 ​ 12.5 % $ 225,123 11.2 % $ 36,760 16.3 % Diluted earnings per share $ 4.66 ​ ​ ​ ​ $ 3.91 ​ $ 0.75 19.2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 24 Table of Contents 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 June 30, ​ ​ Change in Net Sales due to: ​ ​ ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2024 Volume Price Acquisitions Exchange 2025 Lincoln Electric Holdings, Inc. ​ $ 1,021,683 ​ $ (23,847) ​ $ 52,975 ​ $ 30,507 $ 7,355 ​ $ 1,088,673 ​ % Change ​ ​ ​ ​ ​ ​ ​ ​ ​ Lincoln Electric Holdings, Inc. ​ ​ ​ ​ (2.3) % 5.2 % 3.0 % ​ 0.7 % ​ 6.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, ​ ​ Change in Net Sales due to: ​ ​ ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2024 Volume Acquisitions Price Exchange 2025 Lincoln Electric Holdings, Inc. ​ $ 2,002,880 ​ $ (61,448) ​ $ 78,706 ​ $ 78,649 $ (5,726) ​ $ 2,093,061 ​ % Change ​ ​ ​ ​ ​ ​ ​ ​ ​ Lincoln Electric Holdings, Inc. ​ ​ ​ ​ (3.1) % 3.9 % 3.9 % ​ (0.2) % ​ 4.5 % ​ 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 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 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 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. ​ 25 Table of Contents Income Taxes: 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 June 30, ​ ​ Change in Net Sales due to: ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2024 Volume (1) Price (2) Acquisitions (3) Exchange 2025 ​ Operating Segments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas Welding $ 648,936 ​ $ (22,346) ​ $ 42,265 ​ $ 30,192 $ (2,317) ​ $ 696,730 ​ International Welding ​ 238,758 ​ (16,172) ​ 852 ​ 315 ​ 9,071 ​ 232,824 ​ The Harris Products Group ​ 133,989 ​ 14,671 ​ 9,858 ​ — ​ 601 ​ 159,119 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ ​ ​ Americas Welding ​ ​ ​ ​ (3.4) % 6.5 % ​ 4.7 % ​ (0.4) % ​ 7.4 % International Welding ​ ​ ​ ​ (6.8) % 0.4 % ​ 0.1 % ​ 3.8 % ​ (2.5) % The Harris Products Group ​ ​ ​ ​ 11.0 % 7.4 % ​ — ​ ​ 0.4 % ​ 18.8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, ​ ​ ​ ​ Change in Net Sales due to: ​ ​ ​ ​ ​ Net Sales ​ ​ ​ ​ ​ ​ Foreign Net Sales ​ 2024 ​ Volume (1) Price (2) Acquisitions (3) Exchange ​ 2025 ​ Operating Segments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas Welding $ 1,273,035 ​ $ (47,086) ​ $ 55,634 ​ $ 77,519 $ (9,265) ​ $ 1,349,837 ​ International Welding ​ 474,519 ​ (29,820) ​ 1,680 ​ 1,130 ​ 4,376 ​ 451,885 ​ The Harris Products Group ​ 255,326 ​ 15,458 ​ 21,392 ​ — ​ (837) ​ 291,339 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ ​ ​ Americas Welding ​ ​ ​ ​ (3.7) % 4.4 % ​ 6.1 % ​ (0.8) % ​ 6.0 % International Welding ​ ​ ​ ​ (6.3) % 0.4 % ​ 0.2 % ​ 0.9 % ​ (4.8) % The Harris Products Group ​ ​ ​ ​ 6.1 % 8.4 ​ ​ — ​ ​ (0.4) % ​ 14.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (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. (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. 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. 26 Table of Contents The following table presents Adjusted EBIT by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ ​ Three Months Ended June 30, ​ 2025 vs. 2024 ​ 2025 2024 $ % Americas Welding: ​ ​ ​ ​ ​ Net sales ​ $ 696,730 ​ $ 648,936 ​ $ 47,794 ​ 7.4 % Inter-segment sales ​ 43,391 ​ 37,800 ​ 5,591 ​ 14.8 % Total Sales ​ $ 740,121 ​ $ 686,736 ​ ​ 53,385 ​ 7.8 % Adjusted EBIT (4) ​ $ 137,915 ​ $ 136,651 ​ ​ 1,264 ​ 0.9 % As a percent of total sales (1) ​ 18.6 % 19.9 % ​ ​ ​ (1.3) % International Welding: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 232,824 ​ $ 238,758 ​ ​ (5,934) ​ (2.5) % Inter-segment sales ​ 7,641 ​ 8,849 ​ ​ (1,208) ​ (13.7) % Total Sales ​ $ 240,465 ​ $ 247,607 ​ ​ (7,142) ​ (2.9) % Adjusted EBIT (5) ​ $ 30,550 ​ $ 25,709 ​ ​ 4,841 ​ 18.8 % As a percent of total sales (2) ​ 12.7 % 10.4 % ​ ​ ​ 2.3 % The Harris Products Group: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 159,119 ​ $ 133,989 ​ ​ 25,130 ​ 18.8 % Inter-segment sales ​ 5,110 ​ 3,272 ​ ​ 1,838 ​ 56.2 % Total Sales ​ $ 164,229 ​ $ 137,261 ​ ​ 26,968 ​ 19.6 % Adjusted EBIT (6) ​ $ 31,884 ​ $ 24,923 ​ ​ 6,961 ​ 27.9 % As a percent of total sales (3) ​ 19.4 % 18.2 % ​ ​ ​ 1.2 % Corporate / Eliminations: ​ ​ ​ ​ ​ ​ ​ Inter-segment sales ​ $ (56,142) ​ $ (49,921) ​ ​ (6,221) ​ (12.5) % Adjusted EBIT (7) ​ (1,200) ​ (6,264) ​ ​ 5,064 ​ 80.8 % Consolidated: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,088,673 ​ $ 1,021,683 ​ ​ 66,990 ​ 6.6 % Net income ​ $ 143,396 ​ $ 101,708 ​ ​ 41,688 ​ 41.0 % As a percent of total sales ​ 13.2 % 10.0 % ​ ​ ​ 3.2 % Adjusted EBIT (8) ​ $ 199,149 ​ $ 181,019 ​ ​ 18,130 ​ 10.0 % As a percent of sales ​ 18.3 % 17.7 % ​ ​ 0.6 % ​ (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. 27 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ ​ ​ Six Months Ended June 30, ​ 2025 vs. 2024 ​ ​ 2025 2024 $ % Americas Welding: ​ ​ ​ ​ ​ Net sales ​ $ 1,349,837 ​ $ 1,273,035 ​ $ 76,802 ​ 6.0 % ​ Inter-segment sales ​ 73,763 ​ 67,778 ​ 5,985 ​ 8.8 % ​ Total Sales ​ $ 1,423,600 ​ $ 1,340,813 ​ ​ 82,787 ​ 6.2 % ​ Adjusted EBIT (4) ​ $ 262,113 ​ $ 272,750 ​ ​ (10,637) ​ (3.9) % ​ As a percent of total sales (1) ​ 18.4 % 20.3 % ​ ​ ​ (1.9) % ​ International Welding: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 451,885 ​ $ 474,519 ​ ​ (22,634) ​ (4.8) % ​ Inter-segment sales ​ 14,473 ​ 17,257 ​ ​ (2,784) ​ (16.1) % ​ Total Sales ​ $ 466,358 ​ $ 491,776 ​ ​ (25,418) ​ (5.2) % ​ Adjusted EBIT (5) ​ $ 53,562 ​ $ 53,486 ​ ​ 76 ​ 0.1 % ​ As a percent of total sales (2) ​ 11.5 % 10.9 % ​ ​ ​ 0.6 % ​ The Harris Products Group: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 291,339 ​ $ 255,326 ​ ​ 36,013 ​ 14.1 % ​ Inter-segment sales ​ 9,094 ​ 6,365 ​ ​ 2,729 ​ 42.9 % ​ Total Sales ​ $ 300,433 ​ $ 261,691 ​ ​ 38,742 ​ 14.8 % ​ Adjusted EBIT (6) ​ $ 56,213 ​ $ 44,802 ​ ​ 11,411 ​ 25.5 % ​ As a percent of total sales (3) ​ 18.7 % 17.1 % ​ ​ ​ 1.6 % ​ Corporate / Eliminations: ​ ​ ​ ​ ​ ​ ​ ​ ​ Inter-segment sales ​ $ (97,330) ​ $ (91,400) ​ ​ (5,930) ​ (6.5) % ​ Adjusted EBIT (7) ​ (2,850) ​ (16,343) ​ ​ 13,493 ​ 82.6 % ​ Consolidated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 2,093,061 ​ $ 2,002,880 ​ ​ 90,181 ​ 4.5 % ​ Net income ​ $ 261,883 ​ $ 225,123 ​ ​ 36,760 ​ 16.3 % ​ As a percent of total sales ​ 12.5 % 11.2 % ​ ​ ​ 1.3 % ​ Adjusted EBIT (8) ​ $ 369,038 ​ $ 354,695 ​ ​ 14,343 ​ 4.0 % ​ As a percent of sales ​ 17.6 % 17.7 % ​ ​ (0.1) % ​ ​ (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. 28 Table of Contents (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, 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 June 30, Six Months Ended June 30, ​ 2025 2024 2025 2024 Operating income as reported ​ $ 192,144 ​ $ 148,838 ​ $ 357,062 ​ $ 313,885 ​ Special items (pre-tax): ​ ​ ​ ​ ​ Rationalization and asset impairment charges (1) ​ 2,542 ​ 26,490 ​ 6,407 ​ 31,095 ​ Acquisition transaction costs (2) ​ 429 ​ 2,182 ​ 1,231 ​ 3,944 ​ Amortization of step up in value of acquired inventories (3) ​ — ​ 112 ​ (140) ​ 112 ​ Adjusted operating income ​ $ 195,115 ​ $ 177,622 ​ $ 364,560 ​ $ 349,036 ​ As a percentage of net sales ​ ​ 17.9 % ​ 17.4 % ​ 17.4 % ​ 17.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income as reported ​ $ 143,396 $ 101,708 ​ $ 261,883 ​ $ 225,123 ​ Special items: ​ ​ ​ ​ ​ ​ ​ ​ Rationalization and asset impairment charges (1) ​ 2,542 26,490 ​ 6,407 ​ ​ 31,095 ​ Acquisition transaction costs (2) ​ 429 2,182 ​ 1,231 ​ ​ 3,944 ​ Amortization of step up in value of acquired inventories (3) ​ — 112 ​ (140) ​ ​ 112 ​ Loss on asset disposal (4) ​ — 4,950 ​ — ​ ​ 4,950 ​ Tax effect of Special items (5) ​ (755) (1,182) ​ (1,913) ​ ​ (2,308) ​ Adjusted net income ​ ​ 145,612 ​ 134,260 ​ ​ 267,468 ​ ​ 262,916 ​ Interest expense, net ​ 12,619 10,661 ​ 24,746 ​ ​ 19,440 ​ Income taxes as reported ​ 40,163 34,916 ​ 74,911 ​ ​ 70,031 ​ Tax effect of Special items (4) ​ 755 1,182 ​ 1,913 ​ ​ 2,308 ​ Adjusted EBIT ​ $ 199,149 $ 181,019 ​ $ 369,038 ​ $ 354,695 ​ Effective tax rate as reported ​ 21.9 % 25.6 % ​ 22.2 % ​ 23.7 % Net special item tax impact ​ 0.0 % (4.4) % ​ 0.1 % ​ (2.1) % Adjusted effective tax rate ​ 21.9 % 21.2 % ​ 22.3 % ​ 21.6 % Diluted earnings per share as reported ​ $ 2.56 $ 1.77 ​ $ 4.66 ​ $ 3.91 ​ Special items per share ​ 0.04 0.57 ​ 0.10 ​ ​ 0.66 ​ Adjusted diluted earnings per share ​ $ 2.60 $ 2.34 ​ $ 4.76 ​ $ 4.57 ​ ​ (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) Loss on asset disposal included in Other income (expense). 29 Table of Contents (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. Liquidity and Capital Resources Overview The Company’s primary sources of liquidity are operating cash flows and 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. The Company’s cash flow from operations can be cyclical. 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. 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 needing or requiring funding. If additional acquisitions providing appropriate financial benefits become available, additional expenditures may be made. Cash Flow ​ The following table reflects changes in key cash flow measures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, ​ ​ 2025 2024 $ Change ​ Cash provided by operating activities (1) ​ $ 329,521 ​ $ 303,981 ​ $ 25,540 ​ Cash used by investing activities ​ (79,470) ​ (200,746) ​ 121,276 ​ Capital expenditures ​ (52,392) ​ (49,395) ​ (2,997) ​ Acquisition of businesses, net of cash acquired ​ (32,309) ​ (152,654) ​ 120,345 ​ Cash used by financing activities (2) ​ (317,709) ​ (218,452) ​ (99,257) ​ Payments on short-term borrowings ​ (5,206) ​ (578) ​ (4,628) ​ Proceeds from long-term borrowings ​ ​ — ​ ​ 400,000 ​ ​ (400,000) ​ Payments on long-term borrowings ​ ​ (169) ​ ​ (400,339) ​ ​ 400,170 ​ Purchase of shares for treasury ​ (233,824) ​ (160,820) ​ (73,004) ​ Cash dividends paid to shareholders ​ (84,904) ​ (81,696) ​ (3,208) ​ Decrease in Cash and cash equivalents ​ (77,781) ​ (121,115) ​ 43,334 ​ ​ (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. 30 Table of Contents 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. 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 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2025 December 31, 2024 June 30, 2024 Average operating working capital to Net sales (1) 18.4 % 16.9 % 18.0 % Days sales in Inventories 117.3 106.0 ​ 117.0 ​ Days sales in Accounts receivable 49.4 46.9 ​ 51.9 ​ Average days in Trade accounts payable 56.6 45.8 ​ 56.3 ​ ​ (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 June 30, 2025, there were 5.5 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. Acquisitions Refer to Note 4 to the consolidated financial statements for a discussion of the Company’s recent acquisitions. 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. 31 Table of Contents The following table presents the reconciliations of ROIC and Adjusted ROIC to net income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended June 30, ​ ​ 2025 2024 Net income as reported ​ $ 502,868 $ 511,110 ​ Plus: Interest expense (after-tax) ​ ​ 42,688 ​ ​ 36,607 ​ Less: Interest income (after-tax) ​ ​ 6,636 ​ ​ 7,654 ​ Net operating profit after taxes ​ $ 538,920 ​ $ 540,063 ​ Special items: ​ ​ ​ ​ ​ ​ ​ Rationalization and asset impairment net charges ​ 31,172 16,237 ​ Acquisition transaction costs ​ 4,332 3,944 Pension settlement charges ​ 3,792 845 ​ Amortization of step up in value of acquired inventories ​ 4,771 4,964 ​ Loss on asset disposal ​ — 4,950 ​ Tax effect of Special items (1) ​ (11,118) 2,357 ​ Adjusted net operating profit after taxes ​ $ 571,869 $ 573,360 ​ ​ ​ ​ ​ ​ ​ Invested Capital June 30, 2025 June 30, 2024 ​ Short-term debt ​ $ 105,323 ​ $ 6,254 ​ Long-term debt, less current portion ​ ​ 1,150,395 ​ ​ 1,098,430 ​ Total debt ​ ​ 1,255,718 ​ ​ 1,104,684 ​ Total equity ​ 1,379,613 ​ 1,312,906 ​ Invested capital ​ $ 2,635,331 ​ $ 2,417,590 ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on invested capital as reported ​ 20.4 % 22.3 % Adjusted return on invested capital ​ 21.7 % 23.7 % ​ (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. New Accounting Pronouncements Refer to Note 1 to the consolidated financial statements for a discussion of new accounting pronouncements. 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 commercial and operating initiatives; the effectiveness of information systems and cybersecurity systems; presence of artificial intelligence technologies; 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, 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 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 32 Table of Contents 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. 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, 2024. 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, 2024.