What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-30 compared with 2025-07-31 · 84 added, 71 removed, 248 unchanged (38% of the section changed)

15 unchanged sentences

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.

The Company has taken actions to address the impact of these 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 June 30,

Three Months Ended September 30,

Favorable (Unfavorable)

8 unchanged sentences

Diluted earnings per share

Six Months Ended June 30,

Nine Months Ended September 30,

Favorable (Unfavorable)

4 unchanged sentences

Interest expense, net

Other income (expense)

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 June 30,

Three Months Ended September 30,

Change in Net Sales due to:

1 unchanged sentence

Lincoln Electric Holdings, Inc.

Six Months Ended June 30,

Nine Months Ended September 30,

Change in Net Sales due to:

1 unchanged sentence

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.

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

The increase in organic sales for both the three and nine months ended September 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.

Gross profit as a percentage of sales increased 0.9% for the three months ended September 30, 2025 as compared to the same 2024 period, driven by effective cost management and favorable mix.

Gross profit as a percentage of sales decreased 0.2% for the nine months ended September 30, 2025 as compared to the same 2024 period, driven by lower volumes partially offset by effective cost management.

The three and nine months ended September 30, 2025 includes last-in, first-out (“LIFO”) charges of $4,804 and $15,088, respectively, which are primarily due to rising input costs.

This compares with a benefit of $1,196 and $3,971 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.

Selling, General & Administrative Expenses:

Selling, general and administrative expenses increased in the three and nine months ended September 30, 2025 as compared to the same 2024 periods, primarily due to increases 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.

Operating income as a percentage of sales was 16.6% for the three months ended September 30, 2025 as compared to 14.8% in the prior year period.

Excluding special items, Operating income as a percentage of sales was 17.4% for the three months ended September 30, 2025 as compared to 17.3% in the prior year period.

Operating income as a percentage of sales was 16.9% for the nine months ended September 30, 2025 as compared to 15.4% in the prior year period.

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

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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.

Charges in 2025 and 2024 relate to rationalization plans within all three reportable segments .

Charges in 2024 include 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 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.

The effective tax rate was higher for the three months ended September 30, 2025 as compared to the same 2024 period, primarily driven by the impact of the One Big Beautiful Bill Act (“OBBBA”), as discussed in Note 11, partially offset by the 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,

Three Months Ended September 30,

Change in Net Sales due to:

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The Harris Products Group

Six Months Ended June 30,

Nine Months Ended September 30,

Change in Net Sales due to:

7 unchanged sentences

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) Decrease for the three and nine months ended September 30, 2025 for Americas Welding and International Welding due to weakened industrial demand trends.

Increase for the three and nine months ended September 30, 2025 for The Harris Products Group due to the expanded market presence.

(2) Increase 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.

(4) Increase for the three months ended September 30, 2025 for International Welding relates to the weaker U.S.

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.

Adjusted EBIT is defined as Operating income plus Other income (expense), 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.

The following table presents Adjusted EBIT by segment:

Favorable (Unfavorable)

Three Months Ended June 30,

Three Months Ended September 30,

Americas Welding:

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As a percent of sales

(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.

(1) Adjusted EBIT increased for the three months ended September 30, 2025 as compared to September 30, 2024 primarily driven by favorable net impact of organic sales, partially offset by unfavorable impact of product mix;

Adjusted EBIT as a percent of sales decreased for the same period due to unfavorable product mix.

(2) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for the three months ended September 30, 2025 as compared to September 30, 2024 primarily as a result of the benefit of acquisitions, partially offset by the unfavorable impact of lower volumes.

(3) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for the three months ended September 30, 2025 as compared to September 30, 2024 primarily as a result of the favorable impact of organic sales, partially offset by unfavorable impact of higher input costs.

(4) The three months ended September 30, 2025 exclude Rationalization and asset impairment net charges of $4,150 as discussed in Note 6.

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

(5) The three months ended September 30, 2025 exclude Rationalization and asset impairment net charges of $1,365 as discussed in Note 6 and the amortization of the step up in value of acquired inventories of $1,397.

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

(6) The three months ended September 30, 2025 exclude Rationalization and asset impairment net charges of $316 as discussed in Note 6.

The three months ended September 30, 2024 exclude Rationalization and asset impairment net charges of $1,269 primarily due to restructuring activities.

(7) The three months ended September 30, 2025 exclude acquisition transaction costs of $452 as discussed in Note 4.

The three months ended September 30, 2024 exclude acquisition transaction costs of $610.

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

Favorable (Unfavorable)

Six Months Ended June 30,

Nine Months Ended September 30,

Americas Welding:

17 unchanged sentences

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.

(1) Adjusted EBIT and Adjusted EBIT as a percent of sales decreased for the nine months ended September 30, 2025 as compared to September 30, 2024 primarily driven by the unfavorable impact of lower volumes, product mix and acquisitions.

(2) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for the nine months ended September 30, 2025 as compared to September 30, 2024 primarily as a result of t he benefit of acquisitions , effective cost management and a favorable prior year comparison due to operational inefficiencies in 2024 which were not repeated in the current year .

(3) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for the nine months ended September 30, 2025 as compared to September 30, 2024 primarily as a result of higher organic sales, effective cost management and operational improvements.

(4) The nine months ended September 30, 2025 exclude Rationalization and asset impairment net charges of $7,190 as discussed in Note 6.

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

(5) The nine months ended September 30, 2025 exclude Rationalization and asset impairment net charges of $4,468 as discussed in Note 6 and the amortization of the step up in value of acquired inventories of $1,257 .

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, a loss on asset disposal of $4,950 and the amortization of the step up in value of acquired inventories of $250.

(6) The nine months ended September 30, 2025 exclude Rationalization and asset impairment net charges of $580 as discussed in Note 6.

The nine months ended September 30, 2024 exclude Rationalization and asset impairment net charges of $2,666 primarily due to restructuring activities.

(7) The nine months ended September 30, 2025 exclude acquisition transaction costs of $1,683 as discussed in Note 4.

The nine months ended September 30, 2024 exclude acquisition transaction costs of $4,551.

(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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating income as reported

9 unchanged sentences

Acquisition transaction costs (3)

Pension settlement charges (4)

Amortization of step up in value of acquired inventories (5)

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Adjusted diluted earnings per share (1)

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

(1) Adjusted operating income, adjusted net income, adjusted EBIT, adjusted effective tax rate and adjusted diluted EPS are non-GAAP financial measures.

Refer to Non-GAAP Information section.

(2) 2025 and 2024 net charges p rimarily relate to rationalization plans within all three segments .

Charges in 2024 include the impact of the Company’s disposition of its Russian entity.

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

(4) Pension settlement charges primarily due to the final settlement associated with the termination of a pension plan and are included in Other income (expense).

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

3 unchanged sentences

The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.

(8) During the third quarter of 2025, the Company recognized tax expense of approximately $8,800, reflecting the cumulative impact of the OBBBA provisions.

Refer to Note 11 for further detail.

Liquidity and Capital Resources

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 .

As of September 30, 2025, the Company had $292,997 of cash and cash equivalents on hand and $88,199 of outstanding borrowings under its $1,031,386 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.

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The following table reflects changes in key cash flow measures:

Six Months Ended June 30,

Nine Months Ended September 30,

Cash provided by operating activities (1)

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Cash used by financing activities (2)

Payments on short-term borrowings

Proceeds from short-term borrowings

Proceeds from long-term borrowings

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Cash dividends paid to shareholders

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.

(Decrease) increase in Cash and cash equivalents

(1) Cash provided by operating activities increased for the nine months ended September 30, 2025, compared with the nine months ended September 30, 2024 primarily due to the net impacts of the OBBBA and improved working capital.

(2) Cash used by financing activities increased for the nine months ended September 30, 2025, compared with the nine months ended September 30, 2024 primarily due to the increase in purchases of shares for treasury and proceeds from long-term borrowings in the prior year.

As of September 30, 2025, the Company had cash of $292,997, of which $272,870 was held by international subsidiaries.

In October 2025, the Company paid a cash dividend of $0.75 per share, or $41,270, to shareholders of record on September 30, 2025.

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

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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.

As of September 30, 2025, the Company had $915,000 of availability under the revolving credit facility.

Additionally, the Company has other lines of credit with total availability of $28,187 as of September 30, 2025.

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

Working Capital Ratios

June 30, 2025

September 30, 2025

December 31, 2024

June 30, 2024

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

As of September 30, 2025, there were 5.3 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 June 30,

Twelve Months Ended September 30,

Net income as reported

5 unchanged sentences

Acquisition transaction costs

Pension settlement charges

Pension settlement net (gains) charges

Amortization of step up in value of acquired inventories

3 unchanged sentences

Invested Capital

June 30, 2025

June 30, 2024

September 30, 2025

September 30, 2024

Short-term debt

3 unchanged sentences

Adjusted return on invested capital

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

(1) Includes the net tax impact of Special items recorded during the respective periods, including the cumulative impact of the OBBBA provisions.

The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate.

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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;

the effects of changes in tax law, including any changes from the new legislation implemented in the OBBBA;

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

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.

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 Quarterly Report 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