What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-26 · 81 added, 86 removed, 312 unchanged (35% of the section changed)

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Risk Factors" for more information regarding forward-looking statements.

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.

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

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

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

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

The Company’s products include arc welding, brazing and soldering filler metals (consumables), arc welding equipment, plasma and oxyfuel cutting systems, wire feeding systems, fume control equipment, welding accessories, specialty gas regulators, and education solutions;

as well as a comprehensive portfolio of automated solutions for joining, cutting, material handling, module assembly, and end of line testing.

The Company invests in the research and development of arc welding products in order to continue its market leading product offering and improve the quality and productivity of welding applications.

The Company is a high-performance industrial machinery and technology leader who helps customers manufacture and maintain vital equipment and infrastructure.

The Company’s innovative solutions enable higher quality and productivity across a variety of processes including welding, cutting, brazing, machining, process automation, and field repair.

The Company’s products include arc welding equipment, filler metals (welding, brazing and soldering consumables), cutting systems (laser, plasma and oxyfuel), wire feeding systems, fume control equipment, welding accessories, specialty gas regulators, mobile power equipment, wear solutions, software, and education solutions;

as well as a comprehensive portfolio of automated solutions and system integration services for joining, cutting, material handling, module assembly, and end of line testing.

Services include additive manufacturing, precision fabrication, wear services, upfitting, and training.

Solutions range in technology and features from basic units used for personal, maintenance and light manufacturing use to highly sophisticated robotic solutions for complex fabrication and production activities.

The Company invests in the research and development of its solutions in order to continue its market leading product offering and improve the quality, productivity and sustainability of its solutions.

In addition, the Company actively protects its innovations with patents and trade secrets globally.

The Company believes its significant investment in research and development, its highly trained technical sales force and its extensive distributor network provide a competitive advantage in the marketplace.

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 products are sold globally through industrial distributors, direct to end users, retailers and wholesalers.

The Company’s major end-user markets include:

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● construction and infrastructure.

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

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

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

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 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’s facilities are subject to environmental regulations.

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In addition, the Company is ISO 9001 certified at 49 facilities worldwide.

The Company ensures compliance and the continuous improvement of the environmental performance of its products and operations through its global Environmental, Health, Safety and Quality (“EHS&Q”) systems.

The Company ensures compliance and the continuous improvement of the environmental performance of its products and operations through its global EHS&Q systems.

The Company’s systems are guided by Corporate EHS&Q Policy, global directives and corporate standards that establish consistent guidelines for the management, measurement and reporting of environmental, health and safety activities, as well as quality across the Company’s global platform.

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

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

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

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

Key operating measures utilized by the operating units to manage the Company include orders, backlog, sales, inventory and fill-rates, all of which provide key indicators of business trends.

These measures are reported on various cycles including daily, weekly and monthly depending on the needs established by operating management.

Key financial measures utilized by the Company’s executive management and operating units in order to evaluate the results of its business and in understanding key variables impacting the current and future results of the Company include:

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earnings before interest and taxes;

earnings before interest, taxes and bonus;

adjusted operating income;

adjusted earnings before interest and income taxes;

adjusted earnings before interest, taxes and bonus;

adjusted net income;

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Diluted earnings per share

T he following table summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the twelve months ended December 31, 2024 on a consolidated basis:

T he following table summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the year ended December 31, 2025 on a consolidated basis:

Change in Net Sales due to:

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Lincoln Electric Holdings, Inc.

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

Net sales increased for the year ended December 31, 2025 primarily due to an increase in organic sales and a benefit from acquisitions.

The increase in organic sales 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 increased 1.7% as compared to 2023 driven by the benefit of effective cost management, cost reduction actions and operational efficiencies.

Gross profit as a percentage of sales decreased 0.5% for 2025 as compared to 2024 driven by lower volumes partially offset by effective cost management.

The year ended December 31, 2025 includes a last-in, first-out (“LIFO”) charge of $17,956, which is primarily due to rising input costs.

This compares with a LIFO benefit of $9,313 in 2024.

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

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

SG&A expenses increased in 2025 as compared to 2024 primarily due to acquisitions.

SG&A expenses as a percentage of sales decreased primarily due to effective cost management.

Rationalization and Asset Impairment Net Charges:

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

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

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

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Operating income as a percentage of sales was 17.0% in 2025 as compared to 15.9% in 2024.

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

Excluding special items, Operating income as a percentage of sales was 17.6% for both 2025 and 2024.

Refer to explanations above for additional details.

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Other Income:

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

Other income for 2025 primarily relates to the non-recurring items such as equity income and other non-operating gains.

Income Taxes:

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

The effective tax rate was higher in 2025 as compared to 2024 primarily driven by the impact of the One Big Beautiful Bill Act (“OBBBA”), partially offset by the mix of earnings and timing of discrete tax items.

Refer to Note 13 to the consolidated financial statements for further details.

Segment Results

The table below summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the twelve months ended December 31, 2024:

The table below summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the year ended December 31, 2025:

Change in Net Sales due to:

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The Harris Products Group

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

(1) Decrease in Americas Welding and International Welding due to lower capital spending impacting equipment and automation, as well as weakened industrial demand trends in portions of International Welding.

Increase in The Harris Products Group due to the expanded market presence in the retail channel.

(2) Increase in all 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.

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

(4) Increase for International Welding relates to the weaker U.S.

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

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.

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, 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:

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Consolidated:

As a percent of total sales

As a percent of Net sales

Adjusted EBIT (8)

As a percent of sales

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

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

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

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

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

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

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

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

As a percent of Net sales

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

Adjusted EBIT as a percent of sales decreased for the same period due to the unfavorable impact of lower volumes, product mix and acquisitions.

(2) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for 2025 as compared to 2024 primarily as a result of acquisitions and effective cost management, partially offset by the unfavorable impact of lower volumes.

(3) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for 2025 as compared to 2024 primarily as a result of higher organic sales and effective cost management.

(4) 2025 primarily excludes Rationalization and asset impairment net charges of $9,838 and pension settlement charges of $647 .

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

(5) 2025 primarily excludes Rationalization and asset impairment net charges of $7,293, the amortization of the step up in value of acquired inventories of $3,739 and pension settlement charges of $72 .

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

(6) 2025 excludes Rationalization and asset impairment net charges of $1,068.

2024 excludes Rationalization and asset impairment net charges of $3,955.

(7) 2025 excludes acquisition transaction costs of $2,401 as discussed in Note 4.

2024 excludes acquisition transaction costs of $7,042.

(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 EBIT, Adjusted net income, adjusted effective tax rate, Adjusted diluted earnings per share, Adjusted return on invested capital, and Adjusted net operating profit after taxes, 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, Free cash flow, 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.

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

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

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:

Year Ended December 31,

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Adjusted operating income

As a percent of total sales

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

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

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

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

The following table presents the reconciliations of Net income as reported to Adjusted net income and Adjusted EBIT, Effective tax rate as reported to Adjusted effective tax rate and Diluted earnings per share as reported to Adjusted diluted earnings per share:

Year Ended December 31,

As a percentage of net sales

Net income as reported

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Acquisition transaction costs (2)

Pension settlement net charges (3)

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

Loss (gain) on asset disposal (5)

Pension settlement net charges (4)

Loss on asset disposal (5)

Tax effect of Special items (6) (7)

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Adjusted diluted earnings per share

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

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

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

Refer to Note 4 for further discussion.

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

Refer to Note 11 for further discussion.

(1) 2025 and 2024 net charges primarily relate to rationalization plans within all three segments.

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

(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.

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

(4) Pension settlement net charges are included in Other income.

2024 net charges are primarily due to the final settlement associated with the termination of a pension plan.

Refer to Note 11 to the consolidated financial statements for further discussion.

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

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

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

(7) During 2025, the Company recognized tax expense of approximately $11,700, reflecting the cumulative impact of the OBBBA provisions.

Refer to Note 13 to the consolidated financial statements for further details.

Liquidity and Capital Resources

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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 can fund its global expansion plans with operational cash flow, but a significant acquisition may require access to capital markets, particularly 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.

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Acquisition of businesses, net of cash acquired

Proceeds from sale of property, plant and equipment

Cash used by financing activities (2)

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(Decrease) increase in Cash and cash equivalents

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

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

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

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

(1) Cash provided by operating activities increased in 2025 as compared to 2024 primarily due to the net favorable impacts of the election of provisions from the OBBBA, partially offset by unfavorable working capital.

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

As of December 31, 2025, the Company had cash of $308,789, of which $294,130 was held by international subsidiaries.

The Company paid $168,240 and $162,143 in cash dividends to its shareholders during 2025 and 2024, respectively.

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

Revolving Credit Agreements and Other Lines of Credit

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

The revolving credit facility matures on June 20, 2029.

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

Revolving Credit Agreements

The Company has a $1 billion revolving credit facility which matures on June 20, 2029.

As of December 31, 2025, the Company had $858,000 of availability under the revolving credit facility.

Additionally, the Company has other lines of credit with total availability of $25,074 as of December 31, 2025.

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

Refer to Note 9 to the consolidated financial statements for further information on our revolving credit agreements.

Working Capital Ratios

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(1) Average operating working capital to Net sales is defined as the sum of Accounts receivable, Inventories and contract assets less Trade accounts payable and contract liabilities as of period end divided by annualized rolling three months of Net sales.

(2) Due to the strategic increase of inventory to serve customers, the Company had higher inventories relative to expected Net sales resulting in higher Days sales in Inventories and Average operating working capital to Net sales.

Stock Repurchase Program

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As of December 31, 2025, the total amount of debt outstanding was $1,294,008, which includes $143,780 in short-term debt.

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

Refer to Note 9 to the consolidated financial statements for further information on our debt and interest.

Lease Obligations

As of December 31, 2025, the Company’s total future minimum lease payments were $59,773, which includes $15,232 in short-term lease obligations.

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

Refer to Note 17 to the consolidated financial statements for further information on our lease obligations.

Purchase Commitments

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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 Amounts due banks, Current portion of long-term debt and Long-term debt, less current portions, plus Total equity.

Invested capital is defined as total debt, which includes Amounts due to banks, Current portion of long-term debt and Long-term debt, less current portions, plus Total equity.

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

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Amortization of step up in value of acquired inventories

Loss (gain) on asset disposal

Loss on asset disposal

Tax effect of Special items (1)

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

No material changes to the Company’s

accounting policies were made during 2024.

No material changes to the Company’s accounting policies were made during 2025.

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

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

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

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

At December 31, 2025,

a valuation allowance of $4,802 was recorded against certain deferred tax assets based on this assessment.

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

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

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The excess of current cost over LIFO cost was $138,589 and $120,633 at December 31, 2025 and 2024, respectively.

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

If actual market conditions differ from those projected by management, and the Company’s estimates prove to be inaccurate, write-downs of inventory values and adjustments to Cost of goods sold may be required.

Historically, the Company’s reserves have approximated actual experience.

Long-Lived Assets

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The quantitative test is only required if the Company concludes that it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount.

The Company may also perform a quantitative test in instances where the more-likely-than-not threshold has not been met, including when general macroeconomic conditions or changes to the reporting unit warrant a refresh of the baseline used in a qualitative test.

The Company may also perform a quantitative test in instances where the more-likely-than-not threshold has not been met, including when general macroeconomic conditions, changes to the reporting unit or the passage of time warrants a refresh of the baseline used in a qualitative test.

For quantitative testing, the Company compares the fair value of each reporting unit with its carrying amount.

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

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

estimated cash flows.

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis