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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 March 31, 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 March 31, 2024 was 56,908,333.

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)

7

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8

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

21

Item 3. Quantitative and Qualitative Disclosures About Market Risk

29

Item 4. Controls and Procedures

29

 

 

PART II. OTHER INFORMATION

30

Item 1. Legal Proceedings

30

Item 1A. Risk Factors

30

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

30

Item 4. Mine Safety Disclosures

30

Item 5. Other Information

31

Item 6. Exhibits

31

Signatures

32

EX-10.1*

Form of Stock Option Agreement for Executive Officers (filed herewith).

EX-10.2*

Form of Restricted Stock Unit Agreement for Executive Officers (filed herewith).

EX-10.3*

Form of Performance Share Award Agreement for Executive Officers (filed herewith).

EX-31.1

Certification of the Chairman, 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

 

*
Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 15(b) of this report.

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 March 31, 

    

2024

    

2023

Net sales (Note 2)

    

$

981,197

    

$

1,039,343

Cost of goods sold

 

612,798

 

683,986

Gross profit

 

368,399

 

355,357

Selling, general & administrative expenses

 

198,747

 

190,116

Rationalization and asset impairment charges (Note 6)

 

4,605

 

877

Operating income

 

165,047

 

164,364

Interest expense, net

 

8,779

 

13,201

Other income

 

2,262

 

4,181

Income before income taxes

 

158,530

 

155,344

Income taxes (Note 11)

 

35,115

 

33,413

Net income

$

123,415

$

121,931

Basic earnings per share (Note 3)

$

2.17

$

2.12

Diluted earnings per share (Note 3)

$

2.14

$

2.09

Cash dividends declared per share

$

0.71

$

0.64

See notes to these consolidated financial statements.

3

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands)

Three Months Ended March 31, 

    

2024

    

2023

Net income

    

$

123,415

    

$

121,931

Other comprehensive (loss) income, net of tax:

 

  

 

  

Unrealized gain on derivatives designated and qualifying as cash flow hedges

3,715

9,131

Defined benefit pension plan activity

73

560

Currency translation adjustment

 

(13,395)

 

14,818

Other comprehensive (loss) income:

 

(9,607)

 

24,509

Comprehensive income

$

113,808

$

146,440

See notes to these consolidated financial statements.

4

LINCOLN ELECTRIC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

March 31, 2024

December 31, 2023

(UNAUDITED)

(NOTE 1)

ASSETS

    

  

    

  

Current Assets

 

  

 

  

Cash and cash equivalents

$

374,978

$

393,787

Accounts receivable (less allowance for doubtful accounts of $11,237 in 2024; $11,464 in 2023)

 

544,514

 

538,830

Inventories (Note 8)

 

567,279

 

562,864

Other current assets

 

192,979

 

197,630

Total Current Assets

 

1,679,750

 

1,693,111

Property, plant and equipment (less accumulated depreciation of $885,421 in 2024; $876,990 in 2023)

582,178

575,316

Goodwill

 

689,868

 

694,452

Other assets

 

427,921

 

414,418

TOTAL ASSETS

$

3,379,717

$

3,377,297

LIABILITIES AND EQUITY

 

 

  

Current Liabilities

 

 

  

Short-term debt (Note 10)

$

4,720

$

2,435

Trade accounts payable

 

327,798

 

325,435

Accrued employee compensation and benefits

 

114,770

 

112,373

Other current liabilities

 

301,585

 

314,367

Total Current Liabilities

 

748,873

 

754,610

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

 

1,102,677

 

1,102,771

Other liabilities

 

220,339

 

211,064

Total Liabilities

 

2,071,889

 

2,068,445

Shareholders' Equity

 

 

  

Common Shares

 

9,858

 

9,858

Additional paid-in capital

 

560,439

 

523,357

Retained earnings

 

3,766,297

 

3,688,038

Accumulated other comprehensive loss

 

(239,454)

 

(229,847)

Treasury Shares

 

(2,789,312)

 

(2,682,554)

Total Equity

 

1,307,828

 

1,308,852

TOTAL LIABILITIES AND TOTAL EQUITY

$

3,379,717

$

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

Unrecognized amounts from defined benefit pension plans, 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

    

    

    

    

    

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

Unrecognized amounts from defined benefit pension plans, 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

6

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

Three Months Ended March 31, 

    

    

2024

    

2023

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

  

Net income

$

123,415

$

121,931

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

 

 

  

Rationalization and asset impairment net charges

 

64

 

Depreciation and amortization

 

21,586

 

21,295

Deferred income taxes

 

(7,348)

 

(7,019)

Stock-based compensation

 

14,190

 

11,634

Other, net

 

5,104

 

(2,117)

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

 

 

  

Increase in accounts receivable

 

(9,603)

 

(27,664)

(Increase) decrease in inventories

 

(9,416)

 

5,881

Decrease (increase) in other current assets

 

3,331

 

(16,587)

Increase in trade accounts payable

 

3,957

 

6,841

(Decrease) increase in other current liabilities

 

(8,121)

 

10,505

Net change in other assets and liabilities

 

(3,865)

 

(769)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

133,294

 

123,931

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

  

Capital expenditures

 

(26,256)

 

(18,787)

Proceeds from sale of property, plant and equipment

 

316

 

3,314

Other investing activities

 

 

(576)

NET CASH USED BY INVESTING ACTIVITIES

 

(25,940)

 

(16,049)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

  

Proceeds from (payments on) short-term borrowings

2,016

(43,940)

Payments on long-term borrowings

 

(169)

 

(111)

Proceeds from exercise of stock options

 

24,438

 

2,476

Purchase of shares for treasury

 

(110,405)

 

(32,158)

Cash dividends paid to shareholders

 

(41,280)

 

(37,583)

NET CASH USED BY FINANCING ACTIVITIES

 

(125,400)

 

(111,316)

Effect of exchange rate changes on Cash and cash equivalents

 

(763)

 

5,087

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(18,809)

 

1,653

Cash and cash equivalents at beginning of period

 

393,787

 

197,150

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

374,978

$

198,803

See notes to these consolidated financial statements.

7

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 three months ended March 31, 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.

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.

8

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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 March 31, 

    

2024

    

2023

Consumables

$

527,738

$

569,684

Equipment

 

453,459

 

469,659

Net sales

$

981,197

$

1,039,343

Consumable sales consist of welding, brazing and soldering filler metals. Equipment sales consist of arc welding, welding accessories, arc welding equipment, wire feeding systems, fume control equipment, plasma and oxy-fuel cutting systems, specialty gas regulators, and education solutions; as well as a comprehensive portfolio of automated solutions

9

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

for joining, cutting, material handling, module assembly, and end of line testing. Consumable and Equipment products are sold within each of the Company’s operating segments.

Within the Equipment product line, there are certain customer contracts related to automation products that may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines the standalone selling price based on the prices charged to customers or using expected cost plus margin. Less than 10% of the Company’s Net sales are recognized over time.

At March 31, 2024, the Company recorded $37,609 related to advance customer payments and $55,401 related to billings in excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Condensed Consolidated Balance Sheets. At December 31, 2023, the balances related to advance customer payments and billings in excess of revenue recognized were $40,063 and $52,422, respectively. Substantially all of the Company’s contract liabilities are recognized within twelve months based on contract duration. The Company records an asset for contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services. At March 31, 2024 and December 31, 2023, the Company recorded $45,147 and $41,816, respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets. Contract asset amounts are expected to be billed within the next twelve months.

NOTE 3 — EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended March 31, 

    

2024

 

2023

Numerator:

 

  

 

  

Net income

$

123,415

$

121,931

Denominator (shares in 000's):

 

 

Basic weighted average shares outstanding

 

56,865

 

57,596

Effect of dilutive securities - Stock options and awards

 

776

 

821

Diluted weighted average shares outstanding

 

57,641

 

58,417

Basic earnings per share

$

2.17

$

2.12

Diluted earnings per share

$

2.14

$

2.09

For the three months ended March 31, 2024 and 2023, common shares subject to equity-based awards of 25,147 and 29,112, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

On April 1, 2024, the Company acquired 100% ownership of Superior Controls, LLC (“RedViking”), a privately held automation system integrator based in Plymouth, Michigan. The net purchase price was $115,000, net of cash acquired, and it was accounted for as a business combination. In 2023, RedViking generated sales of approximately $70,000 (unaudited). RedViking specializes in the development and integration of state-of-the-art autonomous guided vehicles and mobile robots, custom assembly and dynamic test systems, and proprietary manufacturing execution system software. The acquisition broadened the Company’s portfolio of automation solutions and extends the Company’s ability to serve customers in the growing aerospace and defense industries.

On May 3, 2023, the Company acquired 100% ownership of Powermig Automação e Soldagem Ltda. (“Powermig”), a privately held automation engineering firm headquartered in Caxias do Sul, Rio Grande do Sul, in Brazil. The net

10

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

purchase price was $29,572, net of cash acquired, and it was accounted for as a business combination. Beginning May 3, 2023, the Company’s Consolidated Statement of Income includes the results of Powermig, which were not material for the three months ended March 31, 2024. Powermig specializes in designing and engineering industrial welding automation solutions for the heavy industry and transportation sectors. The acquisition broadened the Company’s automation portfolio and capabilities.

In 2024, the Company recognized $1,762 in acquisition costs, which were expensed as incurred.

The acquired companies discussed above are not material individually, or in the aggregate, to the actual or pro forma Consolidated Statements of Income or Consolidated Statements of Cash Flows; as such, pro forma information related to these acquisitions have not been presented.

NOTE 5 — SEGMENT INFORMATION

The Company’s business units are aligned into three operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global oxy-fuel cutting, soldering and brazing businesses as well as its retail business in the United States.

Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the adjusted earnings before interest and income taxes (“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.

The following table presents Adjusted EBIT by segment:

The Harris

Americas

International

Products

Corporate /

    

Welding

    

Welding

    

Group

    

Eliminations

    

Consolidated

Three Months Ended March 31, 2024

 

  

 

  

 

  

 

  

 

  

Net sales

$

624,099

$

235,761

$

121,337

$

$

981,197

Inter-segment sales

 

29,978

8,408

3,093

(41,479)

Total

$

654,077

$

244,169

$

124,430

$

(41,479)

$

981,197

Adjusted EBIT

$

136,100

$

27,776

$

19,878

$

(10,078)

$

173,676

Special items charge (1)

 

3,069

1,536

1,762

6,367

EBIT

$

136,100

$

24,707

$

18,342

$

(11,840)

$

167,309

Interest income

3,221

Interest expense

(12,000)

Income before income taxes

 

 

 

$

158,530

Three Months Ended March 31, 2023

 

  

 

  

 

  

 

  

 

  

Net sales

$

658,645

$

252,416

$

128,282

$

$

1,039,343

Inter-segment sales

 

32,318

 

6,753

 

2,897

 

(41,968)

Total

$

690,963

$

259,169

$

131,179

$

(41,968)

$

1,039,343

Adjusted EBIT

$

132,453

$

29,598

$

18,983

$

(9,402)

$

171,632

Special items charge (2)

 

2,785

 

302

 

 

3,087

EBIT

$

129,668

$

29,296

$

18,983

$

(9,402)

$

168,545

Interest income

 

  

 

  

 

  

 

854

Interest expense

 

  

 

  

 

  

 

(14,055)

Income before income taxes

 

  

 

  

 

  

$

155,344

11

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

(1)In the three months ended March 31, 2024, special items include Rationalization and asset impairment charges of $3,069 and $1,536 in International Welding and The Harris Products Group, respectively, as discussed in Note 6 and Acquisition transaction costs of $1,762 in Corporate/Eliminations.
(2)In the three months ended March 31, 2023, special items include amortization of step up in value of acquired inventories of $2,785 and $1,071 in Americas and International Welding, respectively, Rationalization and asset impairment net charges of $877 in International Welding and a gain on disposal of $1,646 in International Welding.

NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS

The Company has rationalization plans within International Welding and The Harris Products Group segments. The plans include headcount restructuring and the consolidation of manufacturing operations to better align the Company’s cost structure with economic conditions and operating needs. At March 31, 2024, liabilities of $9,801 and $386 for International Welding and The Harris Products Group, respectively, were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet. The Company does not anticipate significant additional charges related to the completion of these plans.

The Company recorded Rationalization and asset impairment net charges of $3,069 and $1,536 in International Welding and The Harris Products Group in the three months ended March 31, 2024, respectively. The Company recorded Rationalization and asset impairment net charges of $877 in International Welding in the three months ended March 31, 2023. The charges are primarily related to restructuring activities.

The Company believes the rationalization actions will positively impact future results of operations and will not have a material effect on liquidity and sources and uses of capital. The Company continues to evaluate its cost structure and additional rationalization actions may result in charges in future periods.

The following table summarizes the activity related to rationalization liabilities for the three months ended March 31, 2024:

    

International

    

The Harris Products

    

Welding

    

Group

    

Consolidated

Balance at December 31, 2023

$

15,086

$

$

15,086

Payments and other adjustments

 

(8,290)

 

(1,150)

 

(9,440)

Charged to expense

 

3,005

 

1,536

 

4,541

Balance at March 31, 2024

$

9,801

$

386

$

10,187

12

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ("AOCI")

The following tables set forth the total changes in AOCI by component, net of taxes:

Three Months Ended March 31, 2024

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

Currency

qualifying as cash

pension plan

translation

flow hedges

activity

adjustment

Total

Balance at December 31, 2023

$

16,536

$

(1,996)

$

(244,387)

$

(229,847)

Other comprehensive income (loss) before reclassification

 

4,528

(13,395)

(8,867)

Amounts reclassified from AOCI

 

(813)

73

(740)

Net current-period other comprehensive income (loss)

 

3,715

 

73

 

(13,395)

 

(9,607)

Balance at March 31, 2024

$

20,251

$

(1,923)

$

(257,782)

$

(239,454)

Three Months Ended March 31, 2023

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

Currency

qualifying as cash

pension plan

translation

flow hedges

activity

adjustment

Total

Balance at December 31, 2022

$

13,909

$

(1,781)

$

(287,526)

$

(275,398)

Other comprehensive income before reclassification

 

10,134

 

 

14,818

 

24,952

Amounts reclassified from AOCI

 

(1,003)

 

560

 

 

(443)

Net current-period other comprehensive income

 

9,131

 

560

 

14,818

 

24,509

Balance at March 31, 2023

$

23,040

$

(1,221)

$

(272,708)

$

(250,889)

13

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 8 — INVENTORIES

Inventories in the Condensed Consolidated Balance Sheets are comprised of the following components:

    

    

March 31, 2024

    

December 31, 2023

Raw materials

$

141,217

$

160,809

Work-in-process

 

137,803

 

125,756

Finished goods

 

288,259

 

276,299

Total

$

567,279

$

562,864

At March 31, 2024 and December 31, 2023, approximately 36% and 37%, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method. The excess of current cost over LIFO cost was $129,415 and $129,946 at March 31, 2024 and December 31, 2023, respectively.

NOTE 9 — LEASES

The table below summarizes the right-of-use assets and lease liabilities in the Company’s Condensed Consolidated Balance sheets:

Operating Leases

    

Balance Sheet Classification

    

March 31, 2024

    

December 31, 2023

Right-of-use assets

 

Other assets

$

52,615

$

53,284

Current liabilities

 

Other current liabilities

$

13,191

$

13,104

Noncurrent liabilities

 

Other liabilities

 

40,747

 

41,576

Total lease liabilities

 

  

$

53,938

$

54,680

Total lease expense, which is included in Cost of goods sold and Selling, general & administrative expenses in the Company’s Consolidated Statements of Income, was $6,161 and $5,851 in the three months ended March 31, 2024 and 2023, respectively. Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2024 and 2023, respectively, were $4,049 and $3,145 and are included in Net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. Right-of-use assets obtained in exchange for operating lease liabilities were $3,546 and $3,896 during the three months ended March 31, 2024 and 2023, respectively.

The total future minimum lease payments for noncancelable operating leases were as follows: