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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number:  0-1402

Graphic

LINCOLN ELECTRIC HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Ohio

 

34-1860551

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

22801 St. Clair Avenue, Cleveland, Ohio

44117

(Address of principal executive offices)

(Zip Code)

(216) 481-8100

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Shares, without par value

LECO

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “small reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  No

The number of shares outstanding of the registrant’s common shares as of September 30, 2024 was 56,425,803.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

4

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

5

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

6

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

8

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3. Quantitative and Qualitative Disclosures About Market Risk

34

Item 4. Controls and Procedures

34

 

 

PART II. OTHER INFORMATION

35

Item 1. Legal Proceedings

35

Item 1A. Risk Factors

35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 4. Mine Safety Disclosures

35

Item 5. Other Information

36

Item 6. Exhibits

35

Signatures

37

EX-31.1

Certification of the President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

EX-31.2

Certification of the Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

EX-32.1

Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-101

Instance Document

EX-101

Schema Document

EX-101

Calculation Linkbase Document

EX-101

Label Linkbase Document

EX-101

Presentation Linkbase Document

EX-101

Definition Linkbase Document

 

 

 

 

 

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(In thousands, except per share amounts)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2024

    

2023

    

2024

    

2023

Net sales (Note 2)

    

$

983,759

    

$

1,033,214

    

$

2,986,639

    

$

3,133,122

Cost of goods sold

 

631,681

 

667,584

 

1,882,349

 

2,038,707

Gross profit

 

352,078

 

365,630

 

1,104,290

 

1,094,415

Selling, general & administrative expenses

 

186,291

 

187,115

 

593,523

 

569,979

Rationalization and asset impairment charges (Note 6)

 

20,227

 

7,074

 

51,322

 

10,618

Operating income

 

145,560

 

171,441

 

459,445

 

513,818

Interest expense, net

 

11,974

 

10,809

 

31,414

 

35,708

Other (expense) income

 

(1,644)

 

801

 

(935)

 

11,727

Income before income taxes

 

131,942

 

161,433

 

427,096

 

489,837

Income taxes (Note 11)

 

31,186

 

32,090

 

101,217

 

101,232

Net income

$

100,756

$

129,343

$

325,879

$

388,605

Basic earnings per share (Note 3)

$

1.78

$

2.26

$

5.74

$

6.76

Diluted earnings per share (Note 3)

$

1.77

$

2.22

$

5.68

$

6.67

Cash dividends declared per share

$

0.71

$

0.64

$

2.13

$

1.92

See notes to these consolidated financial statements.

3

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2024

    

2023

    

2024

    

2023

Net income

    

$

100,756

    

$

129,343

    

$

325,879

    

$

388,605

Other comprehensive income (loss), net of tax:

 

  

 

  

 

  

 

  

Unrealized (loss) gain on derivatives designated and qualifying as cash flow hedges

 

(960)

 

2,665

(6)

6,908

Defined benefit pension plan activity

 

2,772

 

(15)

2,851

(821)

Currency translation adjustment

 

12,267

 

(32,297)

 

(8,824)

 

3,478

Other comprehensive income (loss):

 

14,079

 

(29,647)

 

(5,979)

 

9,565

Comprehensive income

$

114,835

$

99,696

$

319,900

$

398,170

See notes to these consolidated financial statements.

4

LINCOLN ELECTRIC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

September 30, 2024

December 31, 2023

(UNAUDITED)

(NOTE 1)

ASSETS

    

  

    

  

Current Assets

 

  

 

  

Cash and cash equivalents

$

404,218

$

393,787

Accounts receivable (less allowance for doubtful accounts of $10,853 in 2024; $11,464 in 2023)

 

517,035

 

538,830

Inventories (Note 8)

 

612,412

 

562,864

Other current assets

 

223,436

 

197,630

Total Current Assets

 

1,757,101

 

1,693,111

Property, plant and equipment (less accumulated depreciation of $882,322 in 2024; $876,990 in 2023)

624,403

575,316

Goodwill

 

818,828

 

694,452

Other assets

 

464,213

 

414,418

TOTAL ASSETS

$

3,664,545

$

3,377,297

LIABILITIES AND EQUITY

 

 

  

Current Liabilities

 

 

  

Short-term debt (Note 10)

$

111,993

$

2,435

Trade accounts payable

 

323,584

 

325,435

Accrued employee compensation and benefits

 

194,434

 

112,373

Other current liabilities

 

321,325

 

314,367

Total Current Liabilities

 

951,336

 

754,610

Long-term debt, less current portion (Note 10)

 

1,150,616

 

1,102,771

Other liabilities

 

223,403

 

211,064

Total Liabilities

 

2,325,355

 

2,068,445

Shareholders' Equity

 

 

  

Common Shares

 

9,858

 

9,858

Additional paid-in capital

 

561,148

 

523,357

Retained earnings

 

3,893,883

 

3,688,038

Accumulated other comprehensive loss

 

(235,826)

 

(229,847)

Treasury Shares

 

(2,889,873)

 

(2,682,554)

Total Equity

 

1,339,190

 

1,308,852

TOTAL LIABILITIES AND TOTAL EQUITY

$

3,664,545

$

3,377,297

See notes to these consolidated financial statements.

5

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)

    

    

    

    

    

Accumulated

    

    

Common

Additional

Other

Shares

Common

Paid-In

Retained

Comprehensive

Treasury

    

Outstanding

    

Shares

    

Capital

    

Earnings

    

Income (Loss)

    

Shares

    

Total

Balance at December 31, 2023

 

56,977

$

9,858

$

523,357

$

3,688,038

$

(229,847)

$

(2,682,554)

$

1,308,852

Net income

 

123,415

 

123,415

Defined benefit pension plan activity, net of tax

 

73

 

73

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax

 

3,715

 

3,715

Currency translation adjustment, net of tax

 

(13,395)

 

(13,395)

Cash dividends declared - $0.71 per share

 

(41,273)

 

(41,273)

Stock-based compensation activity

 

397

34,981

3,647

 

38,628

Purchase of shares for treasury

 

(466)

(110,405)

 

(110,405)

Other

 

2,101

(3,883)

 

(1,782)

Balance at March 31, 2024

 

56,908

$

9,858

$

560,439

$

3,766,297

$

(239,454)

$

(2,789,312)

$

1,307,828

Net income

 

101,708

 

101,708

Defined benefit pension plan activity, net of tax

 

6

 

6

Unrealized (loss) on derivatives designated and qualifying as cash flow hedges, net of tax

 

(2,761)

 

(2,761)

Currency translation adjustment, net of tax

 

(7,696)

 

(7,696)

Cash dividends declared – $0.71 per share

 

(40,236)

 

(40,236)

Stock-based compensation activity

 

9

4,646

86

 

4,732

Purchase of shares for treasury

 

(242)

(50,415)

 

(50,415)

Other

 

(5,758)

5,498

 

(260)

Balance at June 30, 2024

 

56,675

$

9,858

$

559,327

$

3,833,267

$

(249,905)

$

(2,839,641)

$

1,312,906

Net income

 

100,756

 

100,756

Defined benefit pension plan activity, net of tax

 

2,772

 

2,772

Unrealized (loss) on derivatives designated and qualifying as cash flow hedges, net of tax

 

(960)

 

(960)

Currency translation adjustment, net of tax

 

12,267

 

12,267

Cash dividends declared – $0.71 per share

 

(40,105)

 

(40,105)

Stock-based compensation activity

 

17

1,863

160

 

2,023

Purchase of shares for treasury

 

(267)

(50,392)

 

(50,392)

Other

 

(42)

(35)

 

(77)

Balance at September 30, 2024

56,425

$

9,858

$

561,148

$

3,893,883

$

(235,826)

$

(2,889,873)

$

1,339,190

6

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)

    

    

    

    

    

Accumulated

    

    

Common

Additional

Other

Shares

Common

Paid-In

Retained

Comprehensive

Treasury

    

Outstanding

    

Shares

    

Capital

    

Earnings

    

Income (Loss)

    

Shares

    

Total

Balance at December 31, 2022

 

57,624

$

9,858

$

481,857

$

3,306,500

$

(275,398)

$

(2,488,776)

$

1,034,041

Net income

 

121,931

 

121,931

Defined benefit pension plan activity, net of tax

 

560

 

560

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax

 

9,131

 

9,131

Currency translation adjustment, net of tax

 

14,818

 

14,818

Cash dividends declared – $0.64 per share

 

(36,971)

 

(36,971)

Stock-based compensation activity

 

143

12,475

1,635

 

14,110

Purchase of shares for treasury

 

(194)

(32,158)

 

(32,158)

Other

 

3,691

(3,917)

 

(226)

Balance at March 31, 2023

 

57,573

$

9,858

$

498,023

$

3,387,543

$

(250,889)

$

(2,519,299)

$

1,125,236

Net income

 

 

  

 

 

137,331

 

 

 

137,331

Defined benefit pension plan activity, net of tax

 

 

  

 

 

 

(1,366)

 

 

(1,366)

Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax

 

 

  

 

 

 

(4,888)

 

 

(4,888)

Currency translation adjustment, net of tax

 

 

  

 

 

 

20,957

 

 

20,957

Cash dividends declared – $0.64 per share

 

 

  

 

 

(36,917)

 

 

 

(36,917)

Stock-based compensation activity

 

152

 

  

 

12,818

 

 

 

1,697

 

14,515

Purchase of shares for treasury

 

(312)

 

  

 

 

 

 

(53,076)

 

(53,076)

Other

 

 

  

 

4,462

 

(4,830)

 

 

 

(368)

Balance at June 30, 2023

 

57,413

$

9,858

$

515,303

$

3,483,127

$

(236,186)

$

(2,570,678)

$

1,201,424

Net income

 

 

  

 

 

129,343

 

 

 

129,343

Defined benefit pension plan activity, net of tax

 

 

  

 

 

 

(15)

 

 

(15)

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax

 

 

  

 

 

 

2,665

 

 

2,665

Currency translation adjustment

 

 

  

 

 

 

(32,297)

 

(32,297)

Cash dividends declared – $0.64 per share

 

 

  

 

 

(36,876)

 

 

 

(36,876)

Stock-based compensation activity

 

26

 

  

 

6,513

 

 

 

285

 

6,798

Purchase of shares for treasury

 

(238)

(45,355)

(45,355)

Other

 

 

  

 

(2,665)

 

2,560

 

 

 

(105)

Balance at September 30, 2023

57,201

$

9,858

$

519,151

$

3,578,154

$

(265,833)

$

(2,615,748)

$

1,225,582

7

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

Nine Months Ended September 30, 

    

    

2024

    

2023

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

  

Net income

$

325,879

$

388,605

Adjustments to reconcile Net income to Net cash provided by operating activities:

 

 

  

Rationalization and asset impairment net charges

 

25,919

 

1,128

Depreciation and amortization

 

65,095

 

64,701

Deferred income taxes

 

(13,340)

 

3,201

Stock-based compensation

 

19,503

 

22,124

Pension settlement net charges

3,966

Other, net

 

3,321

 

(3,898)

Changes in operating assets and liabilities, net of effects from acquisitions:

 

 

  

Decrease in accounts receivable

 

36,166

 

6,695

(Increase) decrease in inventories

 

(21,696)

 

57,781

Increase in other current assets

 

(19,911)

 

(14,729)

Decrease in trade accounts payable

 

(6,888)

 

(24,672)

Increase in other current liabilities

 

67,310

 

57,975

Net change in other assets and liabilities

 

17,858

 

(13,031)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

503,182

 

545,880

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

  

Capital expenditures

 

(85,117)

 

(66,459)

Acquisition of businesses, net of cash acquired

 

(252,746)

 

(32,685)

Proceeds from sale of property, plant and equipment

 

2,506

 

4,596

Purchase of marketable securities

 

 

(6,561)

NET CASH USED BY INVESTING ACTIVITIES

 

(335,357)

 

(101,109)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

  

Proceeds from (payments on) short-term borrowings

5,521

(74,818)

Proceeds from long-term borrowings

 

550,000

 

Payments on long-term borrowings

 

(400,508)

 

(7,997)

Proceeds from exercise of stock options

 

25,880

 

13,299

Purchase of shares for treasury

 

(211,212)

 

(130,589)

Cash dividends paid to shareholders

 

(121,979)

 

(111,277)

NET CASH USED BY FINANCING ACTIVITIES

 

(152,298)

 

(311,382)

Effect of exchange rate changes on Cash and cash equivalents

 

(5,096)

 

12,128

INCREASE IN CASH AND CASH EQUIVALENTS

 

10,431

 

145,517

Cash and cash equivalents at beginning of period

 

393,787

 

197,150

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

404,218

$

342,667

See notes to these consolidated financial statements.

8

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest (the “Company”) after elimination of all inter-company accounts, transactions and profits.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. However, in the opinion of management, these unaudited consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024.

The accompanying Condensed Consolidated Balance Sheet at December 31, 2023 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Certain reclassifications have been made to the prior period amounts to conform to the current period presentation, none of which are material.

In March 2022, in response to Russia’s invasion of Ukraine, the Company announced it was ceasing operations in Russia and implementing plans to support its Russian employees. In May 2024, the Company disposed of its Russian entity and completed its exit from the Russian market. As a result, $22,566 of cumulative translation adjustment previously recognized within Other comprehensive income (loss) was recorded to Rationalization and asset impairment charges on the Consolidated Statements of Income in the nine months ended September 30, 2024.

New Accounting Pronouncements:

This section provides a description of new accounting pronouncements (“Accounting Standards Updates” or “ASUs”) issued by the Financial Accounting Standards Board (“FASB”) that are applicable to the Company.

9

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following ASUs were adopted as of January 1, 2024:

Standard

Description

ASU No. 2023-01, Leases-Common Control Arrangements (Topic 842), issued March 2023

Requires a lessee in a common-control arrangement to amortize leasehold improvements that it owns over the improvements’ useful life, regardless of the lease term. The requirements of the ASU are effective January 1, 2024 and the adoption did not have an impact on the Company’s consolidated financial statements.

ASU No. 2023-07, Segment Reporting (Topic 280), issued November 2023

Requires enhanced disclosures about significant segment expenses, including significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the title and position of the CODM, an amount for other segment items by reportable segment, and disclosures about segment profit or loss and assets on an annual and interim basis. The amendments are effective for annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025. Early adoption is permitted. The Company will adopt the required disclosures for the annual period.

ASU No. 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50), issued September 2022.

Requires disclosure about a company’s supplier finance programs, including a period-over-period balance roll forward. This requirement of the ASU is effective for annual periods beginning January 1, 2024 and should be applied prospectively. The Company will adopt the required disclosures for the annual period.

The Company is currently evaluating the impact on its financial statements of the following ASUs:

Standard

Description

ASU No. 2023-06, Disclosure Improvements, issued October 2023

Requires amending certain disclosure and presentation requirements for a variety of topics within the ASC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or S-K becomes effective, or June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited.

ASU No. 2023-09, Income Taxes (Topic 740), issued December 2023.

Requires disclosure of specific categories in rate reconciliation and additional information for reconciling items that meet a quantitative threshold, additional information about income taxes paid, and disclosure of disaggregated income tax information. The amendments are effective January 1, 2025 and early adoption is permitted.

ASU No. 2024-01, Compensation – Stock Compensation (Topic 718), issued March 2024

Requires determining whether a profits interest award should be accounted for as a share-based payment arrangement or other compensation in accordance with Topic 718. The amendments are effective for annual periods beginning January 1, 2025, and interim periods within those annual periods. Early adoption is permitted.

NOTE 2 — REVENUE RECOGNITION

The following table presents the Company’s Net sales disaggregated by product line:

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2024

    

2023

    

2024

    

2023

Consumables

$

514,575

$

543,132

$

1,588,734

$

1,690,725

Equipment

 

469,184

 

490,082

 

1,397,905

 

1,442,397

Net sales

$

983,759

$

1,033,214

$