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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 June 30, 2022

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 June 30, 2022 was 57,919,337.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (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

24

Item 3. Quantitative and Qualitative Disclosures About Market Risk

35

Item 4. Controls and Procedures

35

 

 

PART II. OTHER INFORMATION

36

Item 1. Legal Proceedings

36

Item 1A. Risk Factors

36

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

36

Item 4. Mine Safety Disclosures

36

Item 6. Exhibits

37

Signatures

38

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

 

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 June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net sales (Note 2)

    

$

969,589

    

$

826,454

    

$

1,895,037

    

$

1,583,475

Cost of goods sold

 

636,108

 

552,445

 

1,231,779

 

1,055,699

Gross profit

 

333,481

 

274,009

 

663,258

 

527,776

Selling, general & administrative expenses

 

166,792

 

151,557

 

333,478

 

297,233

Rationalization and asset impairment charges (Note 6)

 

(844)

 

630

 

1,041

 

4,793

Operating income

 

167,533

 

121,822

 

328,739

 

225,750

Interest expense, net

 

6,459

 

5,663

 

12,657

 

11,022

Other income (expense) (Note 14)

 

(1,134)

 

1,702

 

3,500

 

286

Income before income taxes

 

159,940

 

117,861

 

319,582

 

215,014

Income taxes (Note 15)

 

32,118

 

21,581

 

65,729

 

44,601

Net income including non-controlling interests

 

127,822

 

96,280

 

253,853

 

170,413

Non-controlling interests in subsidiaries’ income (loss)

 

(1)

 

175

 

 

131

Net income

$

127,823

$

96,105

$

253,853

$

170,282

Basic earnings per share (Note 3)

$

2.20

$

1.62

$

4.35

$

2.86

Diluted earnings per share (Note 3)

$

2.18

$

1.60

$

4.30

$

2.83

Cash dividends declared per share

$

0.56

$

0.51

$

1.12

$

1.02

See notes to these consolidated financial statements.

3

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net income including non-controlling interests

    

$

127,822

    

$

96,280

    

$

253,853

    

$

170,413

Other comprehensive income (loss), net of tax:

 

  

 

  

 

  

 

  

Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $2,794 and $4,845 in the three and six months ended June 30, 2022; $(1,012) and $1,297 in the three and six months ended June 30, 2021

 

8,950

 

(4,754)

14,305

2,536

Defined benefit pension plan activity, net of tax of $382 and $459 in the three and six months ended June 30, 2022; $(569) and $246 in the three and six months ended June 30, 2021

 

(44)

 

(1,702)

63

3,358

Currency translation adjustment

 

(34,615)

 

13,579

 

(42,064)

 

(9,164)

Other comprehensive income (loss):

 

(25,709)

 

7,123

 

(27,696)

 

(3,270)

Comprehensive income

 

102,113

 

103,403

 

226,157

 

167,143

Comprehensive income (loss) attributable to non-controlling interests

 

(20)

 

65

 

115

 

(138)

Comprehensive income attributable to shareholders

$

102,133

$

103,338

$

226,042

$

167,281

See notes to these consolidated financial statements.

4

LINCOLN ELECTRIC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

June 30, 2022

December 31, 2021

(UNAUDITED)

(NOTE 1)

ASSETS

    

  

    

  

Current Assets

 

  

 

  

Cash and cash equivalents

$

152,796

$

192,958

Accounts receivable (less allowance for doubtful accounts of $10,227 in 2022; $11,105 in 2021)

 

518,371

 

429,074

Inventories (Note 9)

 

639,393

 

539,919

Other current assets

 

154,643

 

127,642

Total Current Assets

 

1,465,203

 

1,289,593

Property, plant and equipment (less accumulated depreciation of $876,354 in 2022; $868,036 in 2021)

503,088

511,744

Goodwill

 

431,615

 

430,162

Other assets

 

341,907

 

360,808

TOTAL ASSETS

$

2,741,813

$

2,592,307

LIABILITIES AND EQUITY

 

 

  

Current Liabilities

 

 

  

Short-term debt (Note 12)

$

125,458

$

52,730

Trade accounts payable

 

364,495

 

330,230

Accrued employee compensation and benefits

 

144,253

 

108,562

Other current liabilities

 

269,477

 

264,383

Total Current Liabilities

 

903,683

 

755,905

Long-term debt, less current portion (Note 12)

 

712,908

 

717,089

Other liabilities

 

212,239

 

255,404

Total Liabilities

 

1,828,830

 

1,728,398

Shareholders' Equity

 

 

  

Common Shares

 

9,858

 

9,858

Additional paid-in capital

 

465,624

 

451,268

Retained earnings

 

3,160,920

 

2,970,303

Accumulated other comprehensive loss

 

(285,197)

 

(257,386)

Treasury Shares

 

(2,438,144)

 

(2,309,941)

Total Shareholders' Equity

 

913,061

 

864,102

Non-controlling interests

 

(78)

 

(193)

Total Equity

 

912,983

 

863,909

TOTAL LIABILITIES AND TOTAL EQUITY

$

2,741,813

$

2,592,307

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

Non-

Shares

Common

Paid-In

Retained

Comprehensive

Treasury

Controlling

    

Outstanding

    

Shares

    

Capital

    

Earnings

    

Income (Loss)

    

Shares

    

Interests

    

Total

Balance at December 31, 2021

 

58,787

$

9,858

$

451,268

$

2,970,303

$

(257,386)

$

(2,309,941)

$

(193)

$

863,909

Net income

 

126,030

1

 

126,031

Unrecognized amounts from defined benefit pension plans, net of tax

 

107

 

107

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

 

5,355

 

5,355

Currency translation adjustment

 

(7,583)

134

 

(7,449)

Cash dividends declared - $0.56 per share

 

(32,505)

 

(32,505)

Stock-based compensation activity

 

116

10,834

1,349

 

12,183

Purchase of shares for treasury

 

(805)

(104,579)

 

(104,579)

Other

 

115

(107)

 

8

Balance at March 31, 2022

 

58,098

$

9,858

$

462,217

$

3,063,721

$

(259,507)

$

(2,413,171)

$

(58)

$

863,060

Net income

 

127,823

(1)

 

127,822

Unrecognized amounts from defined benefit pension plans, net of tax

 

(44)

 

(44)

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

 

8,950

 

8,950

Currency translation adjustment

 

(34,596)

(19)

 

(34,615)

Cash dividends declared – $0.56 per share

 

(32,698)

 

(32,698)

Stock-based compensation activity

 

15

5,428

146

 

5,574

Purchase of shares for treasury

 

(191)

(25,119)

 

(25,119)

Other

 

(2,021)

2,074

 

53

Balance at June 30, 2022

 

57,922

$

9,858

$

465,624

$

3,160,920

$

(285,197)

$

(2,438,144)

$

(78)

$

912,983

6

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)

    

    

    

    

    

Accumulated

    

    

    

Common

Additional

Other

Non-

Shares

Common

Paid-In

Retained

Comprehensive

Treasury

Controlling

    

Outstanding

    

Shares

    

Capital

    

Earnings

    

Income (Loss)

    

Shares

    

Interests

    

Total

Balance at December 31, 2020

 

59,641

$

9,858

$

409,958

$

2,821,359

$

(302,190)

$

(2,149,714)

$

979

$

790,250

Net income

 

74,177

(44)

 

74,133

Unrecognized amounts from defined benefit pension plans, net of tax

 

5,060

 

5,060

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

 

7,290

 

7,290

Currency translation adjustment

 

(22,584)

(159)

 

(22,743)

Cash dividends declared – $0.51 per share

 

(30,572)

 

(30,572)

Stock-based compensation activity

 

134

7,680

1,502

 

9,182

Purchase of shares for treasury

 

(237)

(28,459)

 

(28,459)

Other

 

891

(741)

(883)

 

(733)

Balance at March 31, 2021

 

59,538

$

9,858

$

418,529

$

2,864,223

$

(312,424)

$

(2,176,671)

$

(107)

$

803,408

Net income

 

 

  

 

 

96,105

 

 

 

175

 

96,280

Unrecognized amounts from defined benefit pension plans, net of tax

 

 

  

 

 

 

(1,702)

 

 

 

(1,702)

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

 

 

  

 

 

 

(4,754)

 

 

 

(4,754)

Currency translation adjustment

 

 

  

 

 

 

13,689

 

 

(110)

 

13,579

Cash dividends declared – $0.51 per share

 

 

  

 

 

(30,552)

 

 

 

 

(30,552)

Stock-based compensation activity

 

46

 

  

 

8,638

 

 

 

503

 

 

9,141

Purchase of shares for treasury

 

(197)

 

  

 

 

 

 

(25,229)

 

 

(25,229)

Other

 

 

  

 

409

 

(957)

 

 

 

 

(548)

Balance at June 30, 2021

 

59,387

$

9,858

$

427,576

$

2,928,819

$

(305,191)

$

(2,201,397)

$

(42)

$

859,623

7

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

Six Months Ended June 30, 

    

    

2022

    

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

  

Net income

$

253,853

$

170,282

Non-controlling interests in subsidiaries' income (loss)

 

 

131

Net income including non-controlling interests

 

253,853

 

170,413

Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:

 

 

  

Rationalization and asset impairment net gains (Note 6)

 

(113)

 

(1,374)

Depreciation and amortization

 

39,759

 

38,508

Equity earnings in affiliates, net

 

(180)

 

(291)

Deferred income taxes

 

(21,772)

 

(20,995)

Stock-based compensation

 

16,340

 

12,651

Other, net

 

9,254

 

3,524

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

 

 

  

Increase in accounts receivable

 

(103,959)

 

(87,571)

Increase in inventories

 

(112,594)

 

(83,186)

Increase in other current assets

 

(26,169)

 

(12,007)

Increase in trade accounts payable

 

44,252

 

63,275

Increase in other current liabilities

 

47,343

 

59,128

Net change in other assets and liabilities

 

(4,713)

 

3,159

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

141,301

 

145,234

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

  

Capital expenditures

 

(34,602)

 

(27,768)

Acquisition of businesses, net of cash acquired

 

(22,095)

 

(83,723)

Proceeds from sale of property, plant and equipment

 

1,692

 

2,557

Other investing activities

 

 

6,500

NET CASH USED BY INVESTING ACTIVITIES

 

(55,005)

 

(102,434)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

  

Net change in borrowings

 

71,829

 

1,163

Proceeds from exercise of stock options

 

1,417

 

5,672

Purchase of shares for treasury (Note 8)

 

(129,698)

 

(53,688)

Cash dividends paid to shareholders

 

(65,914)

 

(61,379)

Other financing activities

 

 

(763)

NET CASH USED BY FINANCING ACTIVITIES

 

(122,366)

 

(108,995)

Effect of exchange rate changes on Cash and cash equivalents

 

(4,092)

 

(200)

DECREASE IN CASH AND CASH EQUIVALENTS

 

(40,162)

 

(66,395)

Cash and cash equivalents at beginning of period

 

192,958

 

257,279

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

152,796

$

190,884

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 six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

The accompanying Consolidated Balance Sheet at December 31, 2021 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, 2021.

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. Although the Company’s Net sales and Total assets in Russia are less than 1% of consolidated Net sales for the year ended December 31, 2021 and less than 1% of consolidated Total assets as of December 31, 2021, the Russia-Ukraine conflict and sanctions imposed globally may result in economic and supply chain disruptions, the ultimate financial impact of which cannot be reasonably estimated at this time. The Company will continue to monitor the Russia-Ukraine conflict and its potential impacts.

Turkey – Highly Inflationary Economy

An economy is considered highly inflationary under GAAP if the cumulative inflation rate for a three-year period meets or exceeds 100 percent. The Turkish economy exceeded the three-year cumulative inflation rate of 100 percent during the second quarter of 2022. As a result, the financial statements of the Company’s Turkish operation are reported under highly inflationary accounting rules as of April 1, 2022. Under highly inflationary accounting, the financial statements of the Company’s Turkish operation have been remeasured into the Company’s reporting currency (U.S. dollar). For the second quarter 2022, the exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than “Accumulated other comprehensive loss” on the balance sheet. As of June 30, 2022, this impact was not significant to the Company’s results.

Management has evaluated and disclosed all material events occurring subsequent to the date of the financial statements up to July 28, 2022, the filing date of this Quarterly Report on Form 10-Q.

New Accounting Pronouncements:

There were no new accounting pronouncements ("Accounting Standard Updates" or "ASUs") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company as of January 1, 2022.

9

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 2 — REVENUE RECOGNITION

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

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Consumables

$

568,855

$

475,559

$

1,108,017

$

909,738

Equipment

 

400,734

 

350,895

 

787,020

 

673,737

Net sales

$

969,589

$

826,454

$

1,895,037

$

1,583,475

Consumable sales consist of electrodes, fluxes, specialty welding consumables and brazing and soldering alloys. Equipment sales consist of arc welding power sources, welding accessories, fabrication, plasma cutters, wire feeding systems, automated joining, assembly and cutting systems, fume extraction equipment, CNC plasma and oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. 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 June 30, 2022, the Company recorded $62,793 related to advance customer payments and $32,728 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, 2021, the balances related to advance customer payments and billings in excess of revenue recognized were $72,047 and $40,450, 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 June 30, 2022 and December 31, 2021, the Company recorded $38,651 and $25,300, 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 June 30, 

Six Months Ended June 30, 

    

2022

 

2021

 

2022

 

2021

Numerator:

 

 

  

 

  

 

  

Net income

$

127,823

$

96,105

$

253,853

$

170,282

Denominator (shares in 000's):

 

 

 

 

Basic weighted average shares outstanding

 

58,016

 

59,464

 

58,311

 

59,553

Effect of dilutive securities - Stock options and awards

 

672

 

700

 

659

 

676

Diluted weighted average shares outstanding

 

58,688

 

60,164

 

58,970

 

60,229

Basic earnings per share

$

2.20

$

1.62

$

4.35

$

2.86

Diluted earnings per share

$

2.18

$

1.60

$

4.30

$

2.83

For the three months ended June 30, 2022 and 2021, common shares subject to equity-based awards of 62,987 and 179,861, respectively, were excluded from the computation of diluted earnings per share because the

10

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

effect of their exercise would be anti-dilutive. For the six months ended June 30, 2022 and 2021, common shares subject to equity-based awards of 108,497 and 134,388, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

During March 2022, the Company acquired Kestra Universal Soldas, Industria e Comercio, Imporacao e Exportacao Ltda. (“Kestra”), a privately held manufacturer headquartered in Atibaia, Sao Paulo State, Brazil. Kestra manufactures and provides specialty welding consumables, wear plates and maintenance and repair services for alloy and wear-resistant products commonly used in mining, steel, agricultural and industrial mill applications. The acquisition broadens the Company’s specialty alloys portfolio and services.

During July 2021, the Company acquired Overstreet-Hughes Company, Inc. and Shoals Tubular, Inc. (“FTP”). FTP manufactures copper and aluminum headers, distributor assemblies and manifolds in the United States and Mexico for the heating, ventilation, and air conditioning sector (“HVAC”). The acquisition further differentiated The Harris Products Group’s competitive position serving HVAC original equipment manufacturers with a comprehensive portfolio of solutions for the fabrication of HVAC coils and accelerates growth in this market.

During April 2021, the Company acquired Zeman Bauelemente Produktionsgesellschaft m.b.H. (“Zeman"), a division of the Zeman Group. Zeman, based in Vienna, Austria, is a leading designer and manufacturer of robotic assembly and arc welding systems that automate the tacking and welding of steel beams. The acquisition expanded the Company’s international automation capabilities to serve customers in the structural steel and infrastructure sectors.

Pro forma information related to the acquisitions discussed above has not been presented because the impact on the Company’s Consolidated Statements of Income is not material. The preliminary purchase price allocations are expected to be finalized within the allowable measurement period. The acquired companies are included in the Company's consolidated financial statements as of the date of acquisition.

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.

11

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following table presents Adjusted EBIT by segment: