What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-30 compared with 2026-04-30 · 104 added, 44 removed, 198 unchanged (43% of the section changed)

13 unchanged sentences

Results of Operations

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

Three Months Ended March 31,

The following tables show the Company’s results of operations:

Three Months Ended June 30,

Favorable (Unfavorable)

4 unchanged sentences

Interest expense, net

Other (expense) income

Income before income taxes

1 unchanged sentence

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,

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 tables summarize 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:

1 unchanged sentence

Lincoln Electric Holdings, Inc.

Net sales increased for the three months ended March 31, 2026 due to an increase in organic sales and a benefit from acquisitions and foreign exchange.

The increase in organic sales for the three months ended March 31, 2026 is driven by an increase in pricing primarily due to higher input costs, partially offset by lower volumes.

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, 2026 due to an increase in organic sales and a benefit from acquisitions and foreign exchange.

The increase in organic sales for the three months ended June 30, 2026 is driven by an increase in pricing, primarily due to higher input costs, as well as higher volumes.

The increase in organic sales for the six months ended June 30, 2026 is driven by an increase in pricing, primarily due to higher input costs.

Gross Profit:

Gross profit as a percentage of sales decreased 0.8% for the three months ended March 31, 2026 as compared to the same 2025 period, driven by an unfavorable impacts from volumes and product mix.

The three months ended March 31, 2026 and 2025 includes last-in, first-out (“LIFO”) charges of $838 and $1,761, respectively, which was primarily due to rising input costs.

Gross profit as a percentage of sales decreased 0.5% and 0.6% for the three and six months ended June 30, 2026, respectively, as compared to the same 2025 periods, driven by unfavorable impacts from product mix and higher input costs.

This includes last-in, first-out (“LIFO”) charges of $4,186 and $5,024 for the three and six months ended June 30, 2026 and LIFO charges of $8,523 and $10,284 for the three and six months ended June 30, 2025, respectively, which are primarily due to rising input costs.

Selling, General & Administrative Expenses:

Selling, general & administrative expenses increased in the three months ended March 31, 2026 as compared to the same 2025 period, primarily due to increases in discretionary spend, employee costs and the unfavorable impact of foreign currency translation.

Selling, general & administrative expenses increased in the three and six months ended June 30, 2026 as compared to the same 2025 periods, primarily due to increases in spend related to the Company’s RISE strategic initiatives, acquisitions and the unfavorable impact of foreign currency translation.

Selling, general & administrative expenses as a percentage of sales decreased primarily due to higher organic sales.

Operating Income:

Operating income as a percentage of sales was 16.6% for the three months ended March 31, 2026 as compared to 16.4% in the prior year period.

Excluding special items, Operating income as a percentage of sales was 16.9% for both the three months ended March 31, 2026 and 2025.

Operating income as a percentage of sales was 18.1% for the three months ended June 30, 2026 as compared to 17.6% in the prior year period.

Excluding special items, Operating income as a percentage of sales was 18.4% for the three months ended June 30, 2026 as compared with 17.9% in the prior year period.

Operating income as a percentage of sales was 17.4% for the six months ended June 30, 2026 as compared to 17.1% in the prior year period.

Excluding special items, Operating income as a percentage of sales was 17.6% in the six months ended June 30, 2026 as compared with 17.4% in the prior year period.

Refer to explanations above for additional details.

1 unchanged sentence

Income Taxes:

The effective tax rate was lower for the three months ended March 31, 2026 as compared to the same 2025 period, primarily due to the mix of earnings and timing of discrete tax items.

The effective tax rate was higher for the three and six months ended June 30, 2026 as compared to the same 2025 periods, primarily due to the mix of earnings and timing of discrete tax items.

Segment Results

The following table presents components of Net sales by segment:

Three Months Ended March 31,

The following tables present components of Net sales by segment:

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, 2026 in International Welding is primarily related to lower project volumes within the Automation product line and the Middle East conflict.

(2) Increase in Americas Welding and The Harris Products Group due to price actions taken in response to higher input costs.

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) Increase for the three and six months ended June 30, 2026 in Americas Welding is primarily due to improved industrial demand and higher project volumes within the automation product line.

Decrease for the three months ended June 30, 2026 in International Welding is primarily due to slowing industrial activity in Europe and the Middle East conflict.

Decrease for the six months ended June 30, 2026 in International Welding is primarily due to slowing industrial activity in Europe, the Middle East conflict and lower project volumes within the automation product line.

Decrease for the three and six months ended June 30, 2026 in The Harris Products Group is primarily due to a challenging prior year comparison resulting from expanded market presence in retail.

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

(3) Increase in International Welding due to the acquisition discussed in Note 4 to the consolidated financial statements.

(4) Increase for the three months ended March 31, 2026 for all three segments relates to the weaker U.S.

(4) Increase for the three and six months ended June 30, 2026 for all three segments was primarily attributable to the favorable impact of a stronger 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.

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:

(Unfavorable)

The following tables presents Adjusted EBIT by segment:

Favorable (Unfavorable)

Three Months Ended June 30,

Americas Welding:

17 unchanged sentences

As a percent of sales

(1) Adjusted EBIT increased for the three months ended March 31, 2026 as compared to March 31, 2025 driven by the 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 the timing of pricing actions, higher employee costs and an increase in allocated corporate costs related to strategic initiatives.

(2) Adjusted EBIT and Adjusted EBIT as a percent of sales decreased for the three months ended March 31, 2026 as compared to March 31, 2025 primarily driven by the unfavorable impact of lower volumes and an increase in allocated corporate costs related to strategic initiatives, partially offset by the benefit of acquisitions.

(3) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for the three months ended March 31, 2026 as compared to March 31, 2025 primarily driven by operating leverage from higher organic sales.

(4) The three months ended March 31, 2026 and 2025 exclude Rationalization and asset impairment net charges of $573 and $2,135, respectively, as discussed in Note 6 to the consolidated financial statements.

(5) The three months ended March 31, 2026 and 2025 exclude Rationalization and asset impairment net charges of $1,772 and $1,552, respectively, as discussed in Note 6 to the consolidated financial statements.

(6) The three months ended March 31, 2026 and 2025 exclude Rationalization and asset impairment net gains of $182 and net charges of $178, respectively, as discussed in Note 6 to the consolidated financial statements.

(7) The three months ended March 31, 2026 and 2025 exclude transaction costs of $653 and $802, respectively, as discussed in Note 4 to the consolidated financial statements.

(1) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for the three months ended June 30, 2026 as compared to June 30, 2025 primarily driven by the favorable net impact of organic sales partially offset by rising input costs.

(2) Adjusted EBIT and Adjusted EBIT as a percent of sales decreased for the three months ended June 30 , 2026 as compared to June 30 , 2025 primarily driven by unfavorable impact of lower volumes and higher input costs, partially offset by the benefit of acquisitions.

(3) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for the three months ended June 30 , 2026 as compared to June 30 , 2025 primarily driven by operating leverage from higher organic sales.

(4) The three months ended June 30 , 2026 and 2025 exclude Rationalization and asset impairment net charges of $1,012 and $905, respectively, as discussed in Note 6 to the consolidated financial statements.

(5) The three months ended June 30 , 2026 and 2025 exclude Rationalization and asset impairment net charges of $2,282 and $1,551, respectively, as discussed in Note 6 to the consolidated financial statements.

(6) The three months ended June 30 , 2026 and 2025 exclude Rationalization and asset impairment net charges of $187 and $86, respectively, as discussed in Note 6 to the consolidated financial statements.

(7) The three months ended June 30 , 2026 and 2025 exclude transaction costs of $15 and $429, respectively, as discussed in Note 4 to the consolidated financial statements.

(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 (1) (4)

As a percent of total sales (1)

International Welding:

Inter-segment sales

Adjusted EBIT (2) (5)

As a percent of total sales (2)

The Harris Products Group:

Inter-segment sales

Adjusted EBIT (3) (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) Adjusted EBIT and Adjusted EBIT as a percent of sales increased for the six months ended June 30, 2026 as compared to June 30, 2025 driven by a favorable net impact of organic sales, partially offset by rising input costs.

(2) Adjusted EBIT and Adjusted EBIT as a percent of sales decreased for the six months ended June 30 , 2026 as compared to June 30 , 2025 primarily driven by the unfavorable impact of lower volumes and higher input costs, partially offset by the benefit of acquisitions.

(3) Adjusted EBIT and Adjusted EBIT as a percentage of sales increased for the six months ended June 30 , 2026 as compared to June 30 , 2025 primarily driven by operating leverage from higher organic sales .

(4) The six months ended June 30 , 2026 and 2025 exclude Rationalization and asset impairment net charges of $1,585 and $3,040, respectively, as discussed in Note 6 to the consolidated financial statements.

(5) The six months ended June 30 , 2026 and 2025 exclude Rationalization and asset impairment net charges of $4,054 and $3,103, respectively, as discussed in Note 6 to the consolidated financial statements.

(6) The six months ended June 30 , 2026 and 2025 exclude Rationalization and asset impairment net charges of $5 and $264, respectively, as discussed in Note 6 to the consolidated financial statements.

(7) The six months ended June 30 , 2026 and 2025 exclude transaction costs of $668 and $1,231, respectively, as discussed in Note 4 to the consolidated financial statements.

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

Non-GAAP Financial Measures

3 unchanged sentences

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

30 unchanged sentences

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

As of March 31, 2026, the Company had $298,903 of cash and cash equivalents on hand and $163,502 of outstanding borrowings under its $1,024,982 revolving credit facilities .

As of June 30, 2026, the Company had $242,443 of cash and cash equivalents on hand and no outstanding borrowings under its $1,047,482 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

Proceeds from (payments on) short-term borrowings, net

Payments on short-term borrowings, net

Purchase of shares for treasury

Cash dividends paid to shareholders

(Decrease) increase in Cash and cash equivalents

(1) Cash provided by operating activities decreased for the three months ended March 31, 2026, compared with the three months ended March 31, 2025 primarily due to unfavorable working capital.

As of March 31, 2026, the Company had cash of $298,903, of which $281,612 was held by international subsidiaries.

In April 2026, the Company paid a cash dividend of $0.79 per share, or $43,282, to shareholders of record on March 31, 2026.

Decrease in Cash and cash equivalents

(1) Cash provided by operating activities increased for the six months ended June 30, 2026, compared with the six months ended June 30, 2025 primarily due to favorable working capital.

As of June 30, 2026, the Company had cash of $242,443, of which $181,012 was held by international subsidiaries.

In July 2026, the Company paid a cash dividend of $0.79 per share, or $43,060, to shareholders of record on June 30, 2026.

The Company currently anticipates capital expenditures of $110,000 to $130,000 in 2026.

5 unchanged sentences

Additionally, the Company has other lines of credit with total availability of $47,482.

As of March 31, 2026, the Company had total availability of $861,480 under its revolving credit facilities.

As of June 30, 2026, the Company had total availability of $1,047,482 under its revolving credit facilities.

Refer to Note 10 to the consolidated financial statements for further information on our revolving lines of credit.

Working Capital Ratios

March 31, 2026

June 30, 2026

December 31, 2025

March 31, 2025

June 30, 2025

Average operating working capital to Net sales (1)

3 unchanged sentences

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

(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

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, 2026, there were 4.9 million shares available under the authorization.

As of June 30, 2026, there were 4.6 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

7 unchanged sentences

Amortization of step up in value of acquired inventories

Loss on asset disposal

Tax effect of Special items (1)

1 unchanged sentence

Invested Capital

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

Short-term debt

37 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