| | | | Standard | Description | | | ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities2023-06, Disclosure Improvements, issued August 2017.October 2023 | ASU 2017-12 provides updated guidance to more closely align hedge accounting withRequires amending certain disclosure and presentation requirements for a company's risk management strategy, to simplifyvariety of topics within the application of hedge accounting and to better portray the economic results of hedging instrumentsASC. The effective date for each amended topic in the financial statements.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 ASU isamendments are effective January 1, 20192025 and early adoption is permitted. On the date of adoption, the ASU applies to all existing hedging relationships and should be reflected as of the beginning of the respective fiscal year. | ASU No. 2017-09, 2024-01, Compensation -– Stock Compensation (Topic 718): Scope of Modification Accounting, , issued May 2017.March 2024 | ASU 2017-09 provides updated guidance about which changes to the terms and conditions ofRequires determining whether a profits interest award should be accounted for as a share-based payment award require an entity to apply modification accounting. Under this ASU, an entity should accountarrangement or other compensation in accordance with Topic 718. The amendments are effective for the effects of an award modification unless the fair value, vesting conditions and equity or liability classification of the modified award are the same as the original award. The ASU is effectiveannual periods beginning January 1, 2018, early2025, and interim periods within those annual periods. Early adoption is permitted and the ASU should be applied prospectively.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
LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts
| | | ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost, issued March 2017.
| ASU 2017-07 requires an entity to report the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs. The other components of the net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside of any subtotal of operating income. Additionally, only the service cost component will be eligible for capitalization in assets. The ASU is effective January 1, 2018, early adoption is permitted and the ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost in the income statement and prospectively for the capitalization of the service cost component. The Company estimates the adoption of the ASU in 2018 will reduce Operating income by $9 million for the twelve months ended December 31, 2017. Income before income taxes and Net income will not be affected by the adoption of the ASU. | ASU No. 2017-04, Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, issued January 2017.
| ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this ASU, an entity should perform the Step 1 annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the fair value, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The ASU is effective January 1, 2020, early adoption is permitted and the ASU should be applied prospectively. | ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, issued January 2017.
| ASU 2017-01 provides updated guidance for evaluating whether certain transactions should be accounted for as an acquisition (or disposal) of an asset or a business. The ASU is effective January 1, 2018, early adoption is permitted and the ASU should be applied prospectively. | ASU No. 2016-18, Statement of Cash Flows(Topic 230): Restricted Cash, issued November 2016.
| ASU 2016-18 requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU is effective January 1, 2018, early adoption is permitted and the ASU should be applied retrospectively. | ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, issued October 2016.
| ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The ASU is effective January 1, 2018, early adoption is permitted and the ASU should be applied using a modified retrospective approach, through a cumulative-effect adjustment directly to retained earnings, as of the beginning of the period of adoption. | ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, issued August 2016.
| ASU 2016-15 reduces existing diversity in practice by addressing eight specific cash flow issues related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU is effective January 1, 2018, early adoption is permitted and the ASU should be applied retrospectively (or prospectively as of earliest date practicable). | ASU No. 2016-02, Leases (Topic 842), issued February 2016.
| ASU 2016-02 aims to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing agreements. Entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The ASU is effective January 1, 2019, early adoption is permitted and the ASU should be applied using either a modified retrospective or modified retrospective with practical expedients approach. |
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. LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts
NOTE 23 — EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | 2017 | | 2016 | | 2017 | | 2016 | | Numerator: | |
| | |
| | |
| | |
| | Net income | $ | 106,126 |
| | $ | 60,049 |
| | $ | 223,322 |
| | $ | 145,004 |
| | Denominator (shares in 000's): | |
| | |
| | |
| | |
| | Basic weighted average shares outstanding | 65,806 |
| | 66,477 |
| | 65,769 |
| | 68,081 |
| | Effect of dilutive securities - Stock options and awards | 896 |
| | 705 |
| | 910 |
| | 703 |
| | Diluted weighted average shares outstanding | 66,702 |
| | 67,182 |
| | 66,679 |
| | 68,784 |
| | Basic earnings per share | $ | 1.61 |
| | $ | 0.90 |
| | $ | 3.40 |
| | $ | 2.13 |
| | Diluted earnings per share | $ | 1.59 |
| | $ | 0.89 |
| | $ | 3.35 |
| | $ | 2.11 |
|
| | | | | | | | | 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 September 30, 2017March 31, 2024 and 2016,2023, common shares subject to equity-based awards of 182,61525,147 and 803,741,29,112, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. For the nine months ended September 30, 2017 and 2016, common shares subject to equity-based awards of 149,888 and 807,763, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.
Upon acquisition of a business,On April 1, 2024, the Company uses the income, market, or cost approach (oracquired 100% ownership of Superior Controls, LLC (“RedViking”), a combination thereof) for the valuation as appropriate.privately held automation system integrator based in Plymouth, Michigan. The valuation inputs in these models and analyses are based on market participant assumptions. Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Management values properties using the cost approach supported where available by observable market data, which includes consideration of obsolescence. Management values acquired intangible assets using the relief from royalty method, a form of the income approach supported by observable market data for peer companies. Acquired inventories are marked to fair value. For certain items, the carrying value is determined to be a reasonable approximation of fair value based on information available to the Company.
2017 Acquisitions
On July 31, 2017, the Company completed its acquisition of Air Liquide Welding, a subsidiary of Air Liquide. The agreed uponnet purchase price was $135,123, which was adjusted for certain debt like obligations, for a net purchase price of $72,468,$115,000, net of cash acquired. The primary debt like obligation was a pension liability. The acquisitionacquired, 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 funding of the cash portion of the purchase price and acquisition costs was provided for with available cash.
The complementary business will enhancebroadened the Company’s global specialty consumables portfolio of automation solutions and extend its channel reach for equipment systems and cutting, soldering and brazing solutions in Europe. The acquisition will also offer Europeanextends the Company’s ability to serve customers more comprehensive welding solutions, greater technical application expertise and improved service levels.
The preliminary fair value of the net assets acquired exceeded the purchase consideration by $51,585, resulting in a bargain purchase gain at acquisition, which is included in Bargain purchase gain in the Company’s Consolidated Statements of Operations. The Company believes that the bargain purchase gain was primarily the result of the divestiture by Air Liquide of the welding business, which was outside Air Liquide’s core business, as part of an overall repositioning of its core business. The Company anticipates future integration initiatives are necessary in order to achieve commercialgrowing aerospace and operational synergies. The Company is in the process of reassessing the recognition and measurement of identifiable assets and liabilities acquired, including further redefining the values of certain identifiable assets and liabilities, deferred income taxes and contractual arrangements. Asdefense industries. On May 3, 2023, the Company finalizes the fair valueacquired 100% ownership of assets acquired, liabilities assumed and purchase price, additional purchase price adjustments may be recorded during the measurement period. This may also resultPowermig Automação e Soldagem Ltda. (“Powermig”), a privately held automation engineering firm headquartered in a corresponding changeCaxias do Sul, Rio Grande do Sul, in the amount of the bargain purchase gain recorded in the Company’s Consolidated Statements of Operations.Brazil. The net
LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts
The following table summarizes the preliminary purchase price allocationwas $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 Air Liquide Welding acquisition: | | | | | | | Assets acquired and liabilities assumed | | As of July 31, 2017 | | Accounts receivable | | $ | 89,710 |
| Inventory (1) | | 98,529 |
| Property, plant and equipment (2) | | 79,619 |
| Intangible assets (3) | | 11,715 |
| | Accounts payable | | (66,959 | ) | | Pension liability | | (67,563 | ) | | Bargain purchase gain | | (51,585 | ) | Net other assets and liabilities (4) | | (20,998 | ) | | Total purchase price, net of cash acquired | | $ | 72,468 |
|
| | (1) | A portion of inventories acquired were sold in the third quarter of 2017 resulting in a $2,314 increase in cost of sales for the amortization of step up in the value of acquired inventories. |
| | (2) | Property, plant and equipment acquired includes a number of manufacturing and distribution sites, including the related facilities, land and leased sites, and machinery and equipment for use in manufacturing operations. |
| | (3) | $7,099 of the intangible asset balance was assigned to a trade name expected to have an indefinite life. Of the remaining amount, $1,183 was assigned to a finite-lived trade name (10 year weighted average useful life) and $3,433 was assigned to other intangible assets (9 year weighted average life). |
| | (4) | Consists primarily of other accrued liabilities. |
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 2017,2024, the Company recognized $11,386$1,762 in acquisition transaction and integration costs, related to the acquisition of Air Liquide Welding. Such costswhich were expensed as incurred andincurred. The acquired companies discussed above are includednot material individually, or in the "Selling, general and administrative expenses" line item inaggregate, to the actual or pro forma Consolidated Statements of Operations. In 2016, the Air Liquide Welding businesses generated sales of approximately $400 million. Beginning August 1, 2017, the Company'sIncome or Consolidated Statements of Operations include the results of the Air Liquide Welding businesses, including sales revenue of $63 million through September 30, 2017. The impact on net income in the third quarter of 2017 from Air Liquide Welding businesses was immaterial. ProCash Flows; as such, pro forma information related to this acquisition hasthese acquisitions have not been presented because the impact on the Company’s Consolidated Statements of Operations is not material.
2016 Acquisitions
During May 2016, the Company acquired Vizient Manufacturing Solutions ("Vizient"). Vizient, based in Bettendorf, Iowa, is a robotic integrator specializing in custom engineered tooling and automated arc welding systems for general and heavy fabrication applications. The acquisition assisted in diversifying end-market exposure and broadening global growth opportunities. Pro forma information related to this acquisition has not been presented because the impact on the Company’s Consolidated Statements of Income is not material. Vizient is included in the Company’s consolidated financial statements as of the date of acquisition.
NOTE 45 — SEGMENT INFORMATION The Company'sCompany’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 profit measure being the adjusted earnings before interest and income taxes (“Adjusted EBIT”). profit measure. EBIT is defined as Operating income plus Equity earnings in affiliates and Other income.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 | | | | | | | | | | | | | | | | |
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. |
Financial information 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 reportable segments follows: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 |
| | | | | | | | | | | | | | | | | | | | | | | Americas Welding (1) | | International Welding (1) | | The Harris Products Group | | Corporate / Eliminations (1) | | Consolidated | | Three Months Ended September 30, 2017 | |
| | |
| | |
| | |
| | |
| | Net sales | $ | 398,289 |
| | $ | 197,617 |
| | $ | 73,585 |
| | $ | — |
| | $ | 669,491 |
| | Inter-segment sales | 25,546 |
| | 5,451 |
| | 2,064 |
| | (33,061 | ) | | — |
| | Total | $ | 423,835 |
| | $ | 203,068 |
| | $ | 75,649 |
| | $ | (33,061 | ) | | $ | 669,491 |
| | | | | | | | | | | | | Adjusted EBIT | $ | 74,096 |
| | $ | 10,612 |
| | $ | 9,244 |
| | $ | 570 |
| | $ | 94,522 |
| | Special items charge (gain) | 5,283 |
| | 2,314 |
| | — |
| | (48,312 | ) | | (40,715 | ) | | EBIT | $ | 68,813 |
| | $ | 8,298 |
| | $ | 9,244 |
| | $ | 48,882 |
| | $ | 135,237 |
| | Interest income | |
| | |
| | |
| | |
| | 1,327 |
| | Interest expense | |
| | |
| | |
| | |
| | (5,922 | ) | | Income before income taxes | |
| | |
| | |
| | |
| | $ | 130,642 |
| | Three Months Ended September 30, 2016 | |
| | |
| | |
| | |
| | |
| | Net sales | $ | 377,520 |
| | $ | 119,564 |
| | $ | 70,562 |
| | $ | — |
| | $ | 567,646 |
| | Inter-segment sales | 22,386 |
| | 3,688 |
| | 1,856 |
| | (27,930 | ) | | — |
| | Total | $ | 399,906 |
| | $ | 123,252 |
| | $ | 72,418 |
| | $ | (27,930 | ) | | $ | 567,646 |
| | | | | | | | | | | | | Adjusted EBIT | $ | 68,285 |
| | $ | 5,796 |
| | $ | 8,757 |
| | $ | 913 |
| | $ | 83,751 |
| | Special items charge (gain) | — |
| | — |
| | — |
| | — |
| | — |
| | EBIT | $ | 68,285 |
| | $ | 5,796 |
| | $ | 8,757 |
| | $ | 913 |
| | $ | 83,751 |
| | Interest income | |
| | |
| | |
| | |
| | 360 |
| | Interest expense | |
| | |
| | |
| | |
| | (3,815 | ) | | Income before income taxes | |
| | |
| | |
| | |
| | $ | 80,296 |
| | Nine Months Ended September 30, 2017 | |
| | |
| | |
| | |
| | |
| | Net sales | $ | 1,186,760 |
| | $ | 468,003 |
| | $ | 222,483 |
| | $ | — |
| | $ | 1,877,246 |
| | Inter-segment sales | 75,380 |
| | 15,214 |
| | 6,763 |
| | (97,357 | ) | | — |
| | Total | $ | 1,262,140 |
| | $ | 483,217 |
| | $ | 229,246 |
| | $ | (97,357 | ) | | $ | 1,877,246 |
| | | | | | | | | | | | | Adjusted EBIT | $ | 217,317 |
| | $ | 29,713 |
| | $ | 27,491 |
| | $ | 369 |
| | $ | 274,890 |
| | Special items charge (gain) | 5,283 |
| | 2,314 |
| | — |
| | (40,199 | ) | | (32,602 | ) | | EBIT | $ | 212,034 |
| | $ | 27,399 |
| | $ | 27,491 |
| | $ | 40,568 |
| | $ | 307,492 |
| | Interest income | |
| | |
| | |
| | |
| | 3,349 |
| | Interest expense | |
| | |
| | |
| | | | (18,333 | ) | | Income before income taxes | |
| | |
| | |
| | |
| | $ | 292,508 |
| | Nine Months Ended September 30, 2016 | |
| | |
| | |
| | |
| | |
| | Net sales | $ | 1,124,900 |
| | $ | 376,684 |
| | $ | 209,202 |
| | $ | — |
| | $ | 1,710,786 |
| | Inter-segment sales | 69,673 |
| | 11,955 |
| | 6,983 |
| | (88,611 | ) | | — |
| | Total | $ | 1,194,573 |
| | $ | 388,639 |
| | $ | 216,185 |
| | $ | (88,611 | ) | | $ | 1,710,786 |
| | | | | | | | | | | | | Adjusted EBIT | $ | 194,924 |
| | $ | 21,699 |
| | $ | 25,752 |
| | $ | 1,812 |
| | $ | 244,187 |
| | Special items charge (gain) | — |
| | — |
| | — |
| | 34,348 |
| | 34,348 |
| | EBIT | $ | 194,924 |
| | $ | 21,699 |
| | $ | 25,752 |
| | $ | (32,536 | ) | | $ | 209,839 |
| | Interest income | |
| | |
| | |
| | |
| | 1,225 |
| | Interest expense | |
| | |
| | |
| | |
| | (11,828 | ) | | Income before income taxes | |
| | |
| | |
| | |
| | $ | 199,236 |
|
LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts
(1) In the three and nine months ended September 30, 2017, special items reflect pension settlement charges in Americas Welding, amortization of step up in value of acquired inventories in International Welding and transaction and integration costs offset by a bargain purchase gain in Corporate / Eliminations related to the Air Liquide Welding acquisition as discussed in Note 3. In the nine months ended September 30, 2016, special items in Corporate / Eliminations reflect a loss on the deconsolidation of the Venezuelan subsidiary.
Changes in equity for the nine months endedSeptember 30, 2017 are as follows:
| | | | | | | | | | | | | | | Shareholders’ Equity | | Non-controlling Interests | | Total Equity | | Balance at December 31, 2016 | $ | 711,477 |
| | $ | 729 |
| | $ | 712,206 |
| | Comprehensive income (loss): | |
| | |
| | |
| | Net income | 223,322 |
| | (32 | ) | | 223,290 |
| | Other comprehensive income (loss) | 78,688 |
| | 79 |
| | 78,767 |
| | Total comprehensive income (loss) | 302,010 |
| | 47 |
| | 302,057 |
| | | | | | | | | Cash dividends declared - $1.05 per share | (69,622 | ) | | — |
| | (69,622 | ) | | Issuance of shares under benefit plans | 24,299 |
| | — |
| | 24,299 |
| | Purchase of shares for treasury | (23,012 | ) | | — |
| | (23,012 | ) | | Balance at September 30, 2017 | $ | 945,152 |
| | $ | 776 |
| | $ | 945,928 |
|
On April 20, 2016, the Company announced that the Board of Directors authorized a new share repurchase program, which increased the total number of the Company's common shares authorized to be repurchased to 55 million shares. At management’s discretion, the Company repurchases its common shares from time to time in the open market, depending on market conditions, stock price and other factors. As of September 30, 2017, there remained 8.6 million common shares available for repurchase under this program. The repurchased common shares remain in treasury and have not been retired.
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts
The following tables set forth the total changes in accumulated other comprehensive income (loss)7 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ("AOCI") by component, net of taxes, for the three months ended September 30, 2017 and 2016:
| | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2017 | | | | Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges | | Defined benefit pension plan activity | | Currency translation adjustment | | Total | | Balance at June 30, 2017 | | $ | 1,834 |
| | $ | (94,513 | ) | | $ | (179,844 | ) | | $ | (272,523 | ) | Other comprehensive income (loss)
before reclassification | | (1,814 | ) | | — |
| | 18,900 |
| 3 |
| 17,086 |
| | Amounts reclassified from AOCI | | 1,130 |
| 1 |
| 3,958 |
| 2 |
| — |
| | 5,088 |
| Net current-period other
comprehensive income (loss) | | (684 | ) | | 3,958 |
| | 18,900 |
| | 22,174 |
| | Balance at September 30, 2017 | | $ | 1,150 |
| | $ | (90,555 | ) | | $ | (160,944 | ) | | $ | (250,349 | ) | | | | | | | | | | | | | | Three Months Ended September 30, 2016 | | | | Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges | | Defined benefit pension plan activity | | Currency translation adjustment | | Total | | Balance at June 30, 2016 | | $ | 739 |
| | $ | (95,541 | ) | | $ | (191,752 | ) | | $ | (286,554 | ) | Other comprehensive income (loss)
before reclassification | | 170 |
| | — |
| | (3,024 | ) | 3 |
| (2,854 | ) | | Amounts reclassified from AOCI | | (345 | ) | 1 |
| 1,313 |
| 2 |
| — |
| | 968 |
| Net current-period other
comprehensive income (loss) | | (175 | ) | | 1,313 |
| | (3,024 | ) | | (1,886 | ) | | Balance at September 30, 2016 | | $ | 564 |
| | $ | (94,228 | ) | | $ | (194,776 | ) | | $ | (288,440 | ) | | | | | | | | | | |
| | (1) | During the 2017 period, this AOCI reclassification is a component of Net sales of $968 (net of tax of $398) and Cost of goods sold of $162 (net of tax of $25); during the 2016 period, the reclassification is a component of Net sales of $(174) (net of tax of $(71)) and Cost of goods sold of $(171) (net of tax of $(46)). See Note 13 to the consolidated financial statements for additional details. |
| | (2) | This AOCI component is included in the computation of net periodic pension costs (net of tax of $2,170 and $778 during the three months ended September 30, 2017 and 2016, respectively). See Note 11 to the consolidated financial statements for additional details. |
| | (3) | The Other comprehensive income (loss) before reclassifications excludes $31 and $(6) attributable to Non-controlling interests in the three months ended September 30, 2017 and 2016, respectively. |
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts
The following tables set forth the total changes in AOCI by component, net of taxes, for the nine months ended September 30, 2017 and 2016: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) |
| | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30, 2017 | | | | Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges | | Defined benefit pension plan activity | | Currency translation adjustment | | Total | | Balance at December 31, 2016 | | $ | 587 |
| | $ | (95,939 | ) | | $ | (233,685 | ) | | $ | (329,037 | ) | Other comprehensive income (loss)
before reclassification | | (1,547 | ) | | — |
| | 72,741 |
| 3 |
| 71,194 |
| | Amounts reclassified from AOCI | | 2,110 |
| 1 |
| 5,384 |
| 2 |
| — |
| | 7,494 |
| Net current-period other
comprehensive income (loss) | | 563 |
| | 5,384 |
| | 72,741 |
| | 78,688 |
| | Balance at September 30, 2017 | | $ | 1,150 |
| | $ | (90,555 | ) | | $ | (160,944 | ) | | $ | (250,349 | ) | | | | | | | | | | | | | | Nine Months Ended September 30, 2016 | | | | Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges | | Defined benefit pension plan activity | | Currency translation adjustment | | Total | | Balance at December 31, 2015 | | $ | 548 |
| | $ | (99,776 | ) | | $ | (197,039 | ) | | $ | (296,267 | ) | Other comprehensive income (loss)
before reclassification | | 1,530 |
| | (15 | ) | | (580 | ) | 3 |
| 935 |
| | Amounts reclassified from AOCI | | (1,514 | ) | 1 |
| 5,563 |
| 2 |
| 2,843 |
| 4 |
| 6,892 |
| Net current-period other
comprehensive income (loss) | | 16 |
| | 5,548 |
| | 2,263 |
| | 7,827 |
| | Balance at September 30, 2016 | | $ | 564 |
| | $ | (94,228 | ) | | $ | (194,776 | ) | | $ | (288,440 | ) | | | | | | | | | | |
| | (1) | During the 2017 period, the AOCI reclassification is a component of Net sales of $1,580 (net of tax of $602) and Cost of goods sold of $530 (net of tax of $214); during the 2016 period, the AOCI reclassification is a component of Net sales of $(1,113) (net of tax of $(418)) and Cost of goods sold of $(401) (net of tax of $(41)). See Note 13 to the consolidated financial statements for additional details. |
| | (2) | The AOCI component is included in the computation of net periodic pension costs (net of tax of $2,532 and $2,821 during the nine months ended September 30, 2017 and 2016, respectively). See Note 11 to the consolidated financial statements for additional details. |
| | (3) | The Other comprehensive income (loss) before reclassifications excludes $79 and $(41) attributable to Non-controlling interests in the nine months ended September 30, 2017 and 2016, respectively. |
| | (4) | The reclassification from AOCI reflects foreign currency translation losses recognized due to the Company's deconsolidation of its Venezuelan subsidiary. See Note 1 to the consolidated financial statements for additional details. |
LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts
INVENTORIESInventories in the Condensed Consolidated Balance Sheet isSheets are comprised of the following components: | | | | | | | | | | | September 30, 2017 | | December 31, 2016 | | Raw materials | $ | 104,713 |
| | $ | 76,811 |
| | Work-in-process | 62,901 |
| | 40,556 |
| | Finished goods | 222,108 |
| | 138,039 |
| | Total | $ | 389,722 |
| | $ | 255,406 |
|
The valuation | | | | | | | | | | | | | | | | 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 inventories is made at the end of each year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. Actual year-end costs and inventory levels may differ from interim LIFO inventory valuations.method. The excess of current cost over LIFO cost was $67,185$129,415 and $129,946 at September 30, 2017March 31, 2024 and $61,329 at December 31, 2016. 2023, respectively. NOTE 9 — LEASES The increasetable below summarizes the right-of-use assets and lease liabilities in total Inventories was primarily the result of the Air Liquide Welding acquisition as discussed in Note 3 to the consolidated financial statements.
NOTE 7 — ACCRUED EMPLOYEE BONUS
Other current liabilities at September 30, 2017 and 2016 include accruals for year-end bonuses and related payroll taxes of $74,816and $69,433, respectively, related to the Company’s employees worldwide. The paymentCondensed 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 bonuses is discretionarygoods sold and subject to approvalSelling, 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 BoardCompany’s Consolidated Statements of Directors. A majority of annual bonuses are paidCash Flows. Right-of-use assets obtained in December, resulting in an increasing bonus accrualexchange for operating lease liabilities were $3,546 and $3,896 during the Company’s fiscal year.
NOTE 8 — CONTINGENCIES
three months ended March 31, 2024 and 2023, respectively.The Company, like other manufacturers,total future minimum lease payments for noncancelable operating leases were as follows: | | | | | | March 31, 2024 | 2024 | | $ | 11,281 | 2025 | | | 12,540 | 2026 | | | 9,807 | 2027 | | | 7,148 | 2028 | | | 5,191 | After 2028 | | | 14,394 | Total lease payments | | $ | 60,361 | Less: Imputed interest | | | 6,423 | Operating lease liabilities | | $ | 53,938 |
As of March 31, 2024, the weighted average remaining lease term is subject from time to time to a variety of civil and administrative proceedings arising in the ordinary course of business. Such claims and litigation include, without limitation, product liability claims, regulatory claims and health, safety and environmental claims, some of which relate to cases alleging asbestos induced illnesses. The claimants in the asbestos cases seek compensatory and punitive damages, in most cases for unspecified amounts. The Company believes it has meritorious defenses to these claims and intends to contest such suits vigorously. The Company accrues its best estimate of the probable costs, after a review of the facts with management and counsel and taking into account past experience. If an unfavorable outcome is determined to be reasonably possible but not probable6.8 years and the amount of loss can be reasonably estimated, or if an unfavorable outcomeweighted average discount rate used to determine the operating lease liability is determined to be probable and the amount of loss cannot be reasonably estimated, disclosure would be provided for material claims or litigation. Many of the current cases are in differing procedural stages and information on the circumstances of each claimant, which forms the basis for judgments as to the validity or ultimate disposition of such actions, varies greatly. Therefore, in many situations a range of possible losses cannot be made. Reserves are adjusted as facts and circumstances change and related management assessments of the underlying merits and the likelihood of outcomes change. Moreover, reserves only cover identified and/or asserted claims. Future claims could, therefore, give rise to increases to such reserves.3.6%.
Based on the Company's historical experience in litigating product liability claims, including a significant number of dismissals, summary judgments and defense verdicts in many cases and immaterial settlement amounts, as well as the Company's current assessment of the underlying merits of the claims and applicable insurance, the Company believes resolution of these claims and proceedings, individually or in the aggregate, will not have a material effect on the Company's consolidated financial statements.14
LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts
NOTE 9 — PRODUCT WARRANTY COSTS
The changes in the carrying amount of product warranty accruals are as follows:
| | | | | | | | | | | Nine Months Ended September 30, | | | 2017 | | 2016 | | Balance at beginning of year | $ | 21,053 |
| | $ | 19,469 |
| | Accruals for warranties | 8,118 |
| | 9,222 |
| | Settlements | (8,672 | ) | | (8,529 | ) | Foreign currency translation and other adjustments (1) | 2,368 |
| | 111 |
| | Balance at September 30 | $ | 22,867 |
| | $ | 20,273 |
|
(1) At September 30, 2017, Foreign currency translation and other adjustments includes $2,114 in an acquired liability related to the Air Liquide Welding acquisition as discussed in Note 3 to the consolidated financial statements.
Revolving Credit Agreement TheAgreementsOn April 23, 2021, the Company has aamended and restated the agreement governing its line of credit totaling $400,000 throughby entering into the Second Amended and Restated Credit Agreement (the “Credit(“Credit Agreement”). The Credit Agreement has a five-yearline of credit totaling $500,000, has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $100,000. The$150,000. On March 8, 2023, the Credit Agreement was amended to replace the LIBOR rate to a term secured overnight finance rate (“SOFR”); as such, the interest rate on borrowings is based on either the London Inter-Bank Offered Rate ("LIBOR") or the prime rate,SOFR plus a spread of 0.85% to 1.85%based on (1) the Company’s net leverage ratio at the Company’s election. The Company amended and restated the Credit Agreement on June 30, 2017, extending the maturity of the line of(2) a credit to June 30, 2022.spread adjustment. The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates and a fixed charges coverage ratio and total leverage ratio. affiliates. As of September 30, 2017,March 31, 2024, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement.The Company has other lines of credit and debt agreements totaling $90,945. As of March 31, 2024, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $4,720. Senior Unsecured Notes On April 1, 2015 and October 20, 2016, the Company entered into aseparate Note Purchase AgreementAgreements pursuant to which it issued senior unsecured notes (the "2015 Notes""Notes") in thethrough a private placement. The 2015 Notes and 2016 Notes each have an aggregate principal amount of $350,000, comprised of four different series ranging from $50,000 to $100,000, with maturity dates ranging from August 20, 2025 through a private placement.April 1, 2045, and interest rates ranging from 2.75% to 4.02%. Interest on the Notes is paid semi-annually. The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and 10.1 years, respectively. The proceeds of the Notes were used for general corporate purposes. The 2015 Notes, as shown in the table below, have original maturities ranging from 10 to 30 years with a weighted average effective interest rate of 3.5%, excluding accretion of original issuance costs, and an initial average tenure of 19 years. Interest is payable semi-annually. The 2015 Notes contain certain affirmative and negative covenants. As of September 30, 2017,March 31, 2024, the Company was in compliance with all of its debt covenants relating to the 2015 Notes. The maturity and interest rates of the 2015 Notes are as follows:
| | | | | | | | | | | | Amount | | Maturity Date | | Interest Rate | | Series A | $ | 100,000 |
| | August 20, 2025 | | 3.15 | % | | Series B | 100,000 |
| | August 20, 2030 | | 3.35 | % | | Series C | 50,000 |
| | April 1, 2035 | | 3.61 | % | | Series D | 100,000 |
| | April 1, 2045 | | 4.02 | % |
Term Loan On October 20, 2016,November 29, 2022, the Company entered into a Note Purchase Agreement pursuant to which it issued senior unsecured notes (the "2016 Notes")term loan in the aggregate principal amount of $350,000 through$400,000 (the “Term Loan”), which was borrowed in full. The Term Loan matures on November 29, 2025. The Term Loan bears an interest at a private placement. The proceeds are being used for general corporate purposes. The 2016 Notes, as shown in the table below, have original maturitiesrate based on SOFR, plus a margin ranging from 120.75% to 25 years with a weighted average effective interest rate of 3.1%, excluding accretion of original issuance costs, and an initial average tenure of 18 years. Interest is payable semi-annually. The 2016 Notes contain certain affirmative and negative covenants.1.75% based on the Company’s consolidated net leverage ratio. As of September 30, 2017,March 31, 2024, the Company was in compliance with all of its covenants. In March 2023, the Company entered into interest rate swap agreements to effectively convert the interest rate on $150,000 of the Term Loan from a variable rate to a fixed rate. Fair Value of Debt At March 31, 2024 and December 31, 2023, the fair value of long-term debt, covenants relating toincluding the 2016 Notes.current portion, was approximately $981,481 and $1,013,795, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $1,102,677 and $1,102,771, respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange.
LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts
The maturity and interest rates of the 2016 Notes are as follows:
| | | | | | | | | | | | Amount | | Maturity Date | | Interest Rate | | Series A | $ | 100,000 |
| | October 20, 2028 | | 2.75 | % | | Series B | 100,000 |
| | October 20, 2033 | | 3.03 | % | | Series C | 100,000 |
| | October 20, 2037 | | 3.27 | % | | Series D | 50,000 |
| | October 20, 2041 | | 3.52 | % |
The Company's total weighted average effective interest rate and weighted average initial tenure, inclusive of the 2015 Notes and 2016 Notes, is 3.3% and 18 years, respectively.
NOTE 11 —RETIREMENT AND POSTRETIREMENT BENEFIT PLANSThe components of total pension cost were as follows:
| | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | 2017 | | 2016 | | 2017 | | 2016 | | Service cost | $ | 925 |
| | $ | 4,116 |
| | $ | 2,394 |
| | $ | 12,985 |
| | Interest cost | 5,769 |
| | 5,906 |
| | 16,843 |
| | 17,935 |
| | Expected return on plan assets | (9,469 | ) | | (8,850 | ) | | (26,710 | ) | | (26,608 | ) | | Amortization of prior service cost | 4 |
| | (98 | ) | | 12 |
| | (296 | ) | Amortization of net loss (1) | 983 |
| | 2,142 |
| | 2,994 |
| | 8,456 |
| Settlement charges (2) | 5,283 |
| | — |
| | 5,283 |
| | — |
| | Defined benefit plans | 3,495 |
| | 3,216 |
| | 816 |
| | 12,472 |
| | Multi-employer plans | 217 |
| | 192 |
| | 634 |
| | 587 |
| | Defined contribution plans | 6,179 |
| | 2,244 |
| | 18,748 |
| | 6,405 |
| Total pension cost (3) | $ | 9,891 |
| | $ | 5,652 |
| | $ | 20,198 |
| | $ | 19,464 |
|
(1) The amortization of net loss during the nine months ended September 30, 2016 includes a $959 charge resulting from the deconsolidation of the Venezuelan subsidiary.
| | (2) | Pension settlement charges resulting from lump sum pension payments in the three and nine months ended September 30, 2017. |
(3) The increase for the three and nine months ended September 30, 2017 as compared to the prior year periods reflect pension settlement charges and higher defined contribution plan expense related to the Company's amended U.S. defined contribution plan that was effective January 1, 2017, partially offset by lower service cost and lower amortization of net losses related to the defined benefit plan freeze effective December 31, 2016.
NOTE 12 — INCOME TAXES
The Company recognized $69,218$35,115 of tax expense on pretax income of $292,508,$158,530, resulting in an effective income tax rate of 23.7%22.2% for the ninethree months ended September 30, 2017.March 31, 2024. The effective income tax rate was 27.2%21.5% for the ninethree months ended September 30, 2016. March 31, 2023. The 2017 effective tax rate was lower thanhigher for the Company's statutory ratethree months ended March 31, 2024, as compared with the same period in 2023, primarily due to the nontaxable bargain purchase gain recorded during the current period in connection with the acquisitionmix of Air Liquide Welding, excessearnings and discrete tax benefits resulting from exercising of stock-based compensation awards and income earned in lower tax rate jurisdictions. The 2016 effective tax rate was lower than the Company's statutory rate primarily due to the utilization of U.S. tax credits, income earned in lower tax rate jurisdictions, the reversal of an income tax valuation allowance as a result of a legal entity change and an income tax benefit related to a worthless stock deduction of a foreign subsidiary. items.As of September 30, 2017,March 31, 2024, the Company had $16,006$12,855 of unrecognized tax benefits. If recognized, approximately $11,876$10,304 would be reflected as a component of income tax expense.
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts
The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2013.2019. The Company is currently subject to U.S., various state and non-U.S. income tax audits. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a reduction of $1,379$1,864 in previously unrecognized tax benefits by the end of the thirdfirst quarter2018.
2025.NOTE 1312 — DERIVATIVES The Company uses derivative instruments to manage exposures to currency exchange rates, interest rates and commodity prices arising in the normal course of business. Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable. Hedge ineffectiveness was immaterial in the ninethree months ended September 30, 2017March 31, 2024 and 2016. 2023.The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. None of the concentrations of risk with any individual counterparty was considered significant at September 30, 2017.March 31, 2024. The Company does not expect any counterparties to fail to meet their obligations. Certain foreign currency forward contracts wereare qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $43,998$98,808 at September 30, 2017March 31, 2024 and $36,385$84,148 at December 31, 2016.2023.The Company has interest rate forward starting swap agreements that are qualified and designated as cash flow hedges. In the first quarter 2024, the Company entered into short-term contracts with the dollar equivalent gross notional amount of $100,000 at March 31, 2024 and have a termination date of June 2024. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at March 31, 2024 and December 31, 2023 and have a termination date of August 2025. The Company has commodity contracts that are qualified and designated as cash flow hedges. The Notional amount of these contracts were 150,000 pounds and 200,000 pounds at March 31, 2024 and December 31, 2023, respectively. Certain
Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts In March 2023, the Company entered into interest rate swap agreements, which were qualified and designated as fair value hedges. At September 30, 2017, the Company hadcash flow hedges, with an aggregate notional amount of $150,000. The interest rate swap agreements outstanding thatswaps will effectively convert notional amountsthe interest rate on $150,000 of $100,000 of debtthe Term Loan discussed in Note 10 from a fixed interest rate to a variable interest rate based on three-month LIBOR plusone-month SOFR to a spread of between 0.6% and 1.8%. The variable rates reset every three months, at which time payment or receipt of interest will be settled. fixed rate.Net Investment Hedges From time to time, theThe Company executeshas foreign currency forward contracts that qualify and are designated as net investment hedges. No suchThe dollar equivalent gross notional amount of these contracts were outstandingwas $117,578 at September 30, 2017March 31, 2024 and $119,607 at December 31, 2016. 2023.Derivatives Not Designated as Hedging Instruments The Company has certain foreign exchange forward contracts that are not designated as hedges. These derivatives are held as economic hedges of certain balance sheet exposures. The dollar equivalent gross notional amount of these contracts was $381,921$416,200 and $492,600 at September 30, 2017March 31, 2024 and $261,168 at December 31, 2016. 2023, respectively.Fair values of derivative instruments in the Company’s Condensed Consolidated Balance Sheets follow: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2017 | | December 31, 2016 | | Derivatives by hedge designation | | Other Current Assets | | Other Current Liabilities | | Other Liabilities | | Other Current Assets | | Other Current Liabilities | | Other Liabilities | | Designated as hedging instruments: | | |
| | |
| | | | |
| | |
| | | | Foreign exchange contracts | | $ | 598 |
| | $ | 323 |
| | $ | — |
| | $ | 439 |
| | $ | 923 |
| | $ | — |
| | Interest rate swap agreements | | — |
| | — |
| | 4,476 |
| | — |
| | — |
| | 5,439 |
| | Not designated as hedging instruments: | | | | | | | | | | | | | | Foreign exchange contracts | | 702 |
| | 2,573 |
| | — |
| | 746 |
| | 1,529 |
| | — |
| | Total derivatives | | $ | 1,300 |
| | $ | 2,896 |
| | $ | 4,476 |
| | $ | 1,185 |
| | $ | 2,452 |
| | $ | 5,439 |
|
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts
| | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2024 | | December 31, 2023 | | Other | | Other | | | | | | | | Other | | Other | | | | | | | | Current | | Current | | Other | | Other | | Current | | Current | | Other | | Other | Derivatives by hedge designation | Assets | | Liabilities | | Assets | | Liabilities | | Assets | | Liabilities | | Assets | | Liabilities | Designated as hedging instruments: | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | $ | 2,391 | | $ | 238 | | $ | — | | $ | — | | $ | 1,548 | | $ | 687 | | $ | — | | $ | — | Interest rate swap agreements | | — | | | — | | | 2,649 | | | — | | | — | | | — | | | 1,460 | | | — | Forward starting swap agreements | | — | | | — | | | 23,005 | | | 40 | | | — | | | — | | | 20,377 | | | — | Net investment contracts | | 1,261 | | | — | | | — | | | — | | | — | | | 3,351 | | | — | | | — | Commodity contracts | | 52 | | | — | | | — | | | — | | | 45 | | | — | | | — | | | — | Not designated as hedging instruments: | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | 1,617 | | | 998 | | | — | | | — | | | 4,063 | | | 623 | | | — | | | — | Total derivatives | $ | 5,321 | | $ | 1,236 | | $ | 25,654 | | $ | 40 | | $ | 5,656 | | $ | 4,661 | | $ | 21,837 | | $ | — |
The effects of undesignated derivative instruments on the Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016Income consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Derivatives by hedge designation | | Classification of gain (loss) | | 2017 | | 2016 | | 2017 | | 2016 | | Not designated as hedges: | | | | |
| | |
| | | | | | Foreign exchange contracts | | Selling, general & administrative expenses | | $ | 1,788 |
| | $ | (2,952 | ) | | $ | 23,031 |
| | $ | (9,862 | ) | | Commodity contracts | | Cost of goods sold | | — |
| | — |
| | — |
| | (742 | ) |
| | | | | | | | | | | | | Three Months Ended March 31, | Derivatives by hedge designation | | Classification of (loss) gain | | 2024 | | 2023 | Not designated as hedges: | | | | | | | | | Foreign exchange contracts | | Selling, general
& administrative expenses | | $ | (1,615) | | $ | 6,690 |
The effects of designated hedges on AOCI and the Company’s Consolidated Statements of OperationsIncome consisted of the following: | | | | | | | | | | | | | | | | Total gain recognized in AOCI, net of tax | | March 31, 2024 | | December 31, 2023 | | Foreign exchange contracts | | $ | 1,628 | | $ | 721 | | Interest rate swap agreements | | | 2,198 | | | 1,085 | | Forward starting swap agreements | | | 16,386 | | | 14,696 | | Net investment contracts | | | 9,089 | | | 7,136 | | Commodity contracts | | | 39 | | | 34 | |
Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts | | | | | | | | | | | Total gain (loss) recognized in AOCI, net of tax | | September 30, 2017 | | December 31, 2016 | | Foreign exchange contracts | | $ | 51 |
| | $ | (512 | ) | | Net investment contracts | | 1,099 |
| | 1,099 |
|
The Company expects a gain of $51$1,667 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized. | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Derivative type | | Gain (loss) reclassified from AOCI to: | | 2017 | | 2016 | | 2017 | | 2016 | | Foreign exchange contracts | | Sales | | $ | 968 |
| | $ | (174 | ) | | $ | 1,580 |
| | $ | (1,113 | ) | | | | Cost of goods sold | | 162 |
| | (171 | ) | | 530 |
| | (401 | ) |
| | | | | | | | | | | | | Three Months Ended March 31, | | | Gain recognized in the | | | | | | | Derivative type | | Consolidated Statements of Income: | | 2024 | | 2023 | Foreign exchange contracts | | Sales | | $ | 839 | | $ | 1,206 | | | Cost of goods sold | | | 232 | | | 3 | Commodity contracts | | Cost of goods sold | | | 2 | | | 179 |
The following table provides a summary of assets and liabilities as of September 30, 2017,March 31, 2024, measured at fair value on a recurring basis: | | | | | | | | | | | | | | | | | | Quoted Prices in | | | | | | | | | | | | Active Markets for | | | | | | | | | | | | Identical Assets or | | Significant Other | | Significant | | | Balance as of | | Liabilities | | Observable Inputs | | Unobservable | Description | | March 31, 2024 | | (Level 1) | | (Level 2) | | Inputs (Level 3) | Assets: | | | | | | | | | | | | | Foreign exchange contracts | | $ | 4,008 | | $ | — | | $ | 4,008 | | $ | — | Net investment contracts | | | 1,261 | | | — | | | 1,261 | | | — | Commodity contracts | | | 52 | | | — | | | 52 | | | — | Interest rate swap agreements | | | 2,649 | | | — | | | 2,649 | | | — | Forward starting swap agreements | | | 23,005 | | | — | | | 23,005 | | | — | Pension surplus | | | 38,323 | | | 38,323 | | | — | | | — | Total assets | | $ | 69,298 | | $ | 38,323 | | $ | 30,975 | | $ | — | Liabilities: | | | | | | | | | | | | | Foreign exchange contracts | | $ | 1,236 | | $ | — | | $ | 1,236 | | $ | — | Forward starting swap agreements | | | 40 | | | — | | | 40 | | | — | Deferred compensation | | | 54,126 | | | — | | | 54,126 | | | — | Total liabilities | | $ | 55,402 | | $ | — | | $ | 55,402 | | $ | — |
| | | | | | | | | | | | | | | | | | | Description | | Balance as of
September 30, 2017 | | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Assets: | | |
| | |
| | |
| | |
| | Foreign exchange contracts | | $ | 1,300 |
| | $ | — |
| | $ | 1,300 |
| | $ | — |
| | Marketable securities | | 179,284 |
| | — |
| | 179,284 |
| | — |
| | Total assets | | $ | 180,584 |
| | $ | — |
| | $ | 180,584 |
| | $ | — |
| | | | | | | | | | | | Liabilities: | | |
| | |
| | |
| | |
| | Foreign exchange contracts | | $ | 2,896 |
| | $ | — |
| | $ | 2,896 |
| | $ | — |
| | Interest rate swap agreements | | 4,476 |
| | — |
| | 4,476 |
| | — |
| | Contingent considerations | | 7,067 |
| | — |
| | — |
| | 7,067 |
| | Deferred compensation | | 28,227 |
| | — |
| | 28,227 |
| | — |
| | Total liabilities | | $ | 42,666 |
| | $ | — |
| | $ | 35,599 |
| | $ | 7,067 |
|
LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts
The following table provides a summary of assets and liabilities as of December 31, 2016,2023, measured at fair value on a recurring basis: | | | | | | | | | | | | | | | | | | | Description | | Balance as of December 31, 2016 | | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Assets: | | |
| | |
| | |
| | |
| | Foreign exchange contracts | | $ | 1,185 |
| | $ | — |
| | $ | 1,185 |
| | $ | — |
| | Marketable securities | | 38,922 |
| | — |
| | 38,922 |
| | — |
| | Total assets | | $ | 40,107 |
| | $ | — |
| | $ | 40,107 |
| | $ | — |
| | | | | | | | | | | | Liabilities: | | |
| | |
| | |
| | |
| | Foreign exchange contracts | | $ | 2,452 |
| | $ | — |
| | $ | 2,452 |
| | $ | — |
| | Interest rate swap agreements | | 5,439 |
| | — |
| | 5,439 |
| | — |
| | Contingent considerations | | 8,154 |
| | — |
| | — |
| | 8,154 |
| | Forward contract | | 15,272 |
| | — |
| | — |
| | 15,272 |
| | Deferred compensation | | 25,244 |
| | — |
| | 25,244 |
| | — |
| | Total liabilities | | $ | 56,561 |
| | $ | — |
| | $ | 33,135 |
| | $ | 23,426 |
|
| | | | | | | | | | | | | | | | | | Quoted Prices in | | | | | | | | | | | | Active Markets for | | | | | | | | | | | | Identical Assets or | | Significant Other | | Significant | | | Balance as of | | Liabilities | | Observable Inputs | | Unobservable | Description | | December 31, 2023 | | (Level 1) | | (Level 2) | | Inputs (Level 3) | Assets: | | | | | | | | | | | | | Foreign exchange contracts | | $ | 5,611 | | $ | — | | $ | 5,611 | | $ | — | Interest rate swap agreements | | | 1,460 | | | — | | | 1,460 | | | — | Commodity contracts | | | 45 | | | — | | | 45 | | | — | Forward starting swap agreements | | | 20,377 | | | — | | | 20,377 | | | — | Pension Surplus | | | 41,849 | | | 41,849 | | | — | | | — | Total assets | | $ | 69,342 | | $ | 41,849 | | $ | 27,493 | | $ | — | Liabilities: | | | | | | | | | | | | | Foreign exchange contracts | | $ | 1,310 | | $ | — | | $ | 1,310 | | $ | — | Net investment contracts | | | 3,351 | | | — | | | 3,351 | | | — | Deferred compensation | | | 53,628 | | | — | | | 53,628 | | | — | Total liabilities | | $ | 58,289 | | $ | — | | $ | 58,289 | | $ | — |
The fair value of the Company’s pension surplus assets are based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy. The pension surplus assets are invested in money market and short-term duration bond funds at March 31, 2024. The Company’s derivative contracts are valued at fair value using the market approach. The Company measures the fair value of foreign exchange contracts, forward starting swap agreements, net investment contracts and interest rate swap agreements using Level 2 inputs based on observable spot and forward rates in active markets. During the nine months ended September 30, 2017, there were no transfers between Levels 1, 2 or 3. The Company measures the fair value of marketable securities using Level 2 inputs based on quoted market prices for similar assets in active markets.
In connection with acquisitions, the Company recorded contingent considerations fair valued at $7,067 as of September 30, 2017. Under the contingent consideration agreements, the amounts to be paid are based upon actual financial results of the acquired entity for specified future periods. The fair value of the contingent considerations are a Level 3 valuation and fair valued using either a probability weighted discounted cash flow analysis or an option pricing model.
In connection with an acquisition, the Company obtained a controlling financial interest in the acquired entity and at the same time entered into a forward contract to obtain the remaining financial interest in the entity over a three-year period. The final payment associated with the forward contract was paid by the Company in the second quarter of 2017.
The deferred compensation liability is the Company’s obligation under its executive deferred compensation plan. The Company measures the fair value of the liability using the market values of the participants’ underlying investment fund elections. The fair value of Cash and cash equivalents, Marketable securities, Accounts receivable, Short-term debt excluding the current portion of long-term debt and Trade accounts payable approximated book value due to the short-term nature of these instruments at both September 30, 2017 and DecemberMarch 31, 2016. The fair value of long-term debt at September 30, 20172024 and December 31, 2016,2023.The Company has various financial instruments, including cash and cash equivalents, short and long-term debt and forward contracts. While these financial instruments are subject to concentrations of credit risk, the current portion, was approximately $676,997Company has minimized this risk by entering into arrangements with a number of major banks and $669,209, respectively, which was determined using available market informationfinancial institutions and methodologies requiring judgment.investing in several high-quality instruments. The carrying valueCompany does not expect any counterparties to fail to meet their obligations. Table of this debtContents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts NOTE 14 – SUPPLIER FINANCING PROGRAM The Company’s suppliers, at such dates was $704,913 and $703,835, respectively. Since considerable judgment is required in interpreting market information, the fair valuesupplier’s sole discretion, are able to factor receivables due from the Company to a financial institution on terms directly negotiated with the financial institution without affecting the Company’s balance sheet classification of the debt iscorresponding payable. The Company pays the financial institution the stated amount of the confirmed invoices from its designated suppliers on the original maturity dates of the invoices. Invoices with suppliers have terms between 120 and 180 days. The Company does not necessarilyprovide secured legal assets or other forms of guarantees under the amountarrangement and has no involvement in establishing the terms or conditions of the arrangement between its suppliers and the financial institution. The amounts due to the financial institution for suppliers that could be realizedparticipate in a current market exchange.the supplier financing program are included in Trade accounts payable on the Company’s Condensed Consolidated Balance Sheets, and the associated payments are included in operating activities in the Consolidated Statements of Cash Flows. At March 31, 2024 and December 31, 2023, Trade accounts payable included $35,936 and $29,111, respectively, payable to suppliers that have elected to participate in the supplier financing program. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share amounts) This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with the Company’s unaudited consolidated financial statements and other financial information included elsewhere in this Quarterly Report on Form 10-Q. The Company is the world’s largest designer and manufacturer of arc welding and cutting products, manufacturing a broad line of arc welding equipment, consumable welding products and other welding and cutting products. Welding products include arc welding power sources, CNCcomputer numerical control and plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes, and welding accessories and specialty welding consumables and fabrication. The Company'sCompany’s product offering also includes oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. In addition, the Company has a leading global position in the brazing and soldering alloys market. The Company’s products are sold in both domestic and international markets. In the Americas, products are sold principally through industrial distributors, retailers and directly to users of welding products. Outside of the Americas, the Company has an international sales organization comprised of Company employees and agents who sell products from the Company’s various manufacturing sites to distributors and product users. The Company'sCompany’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. Effective June 30, 2016, the Company concluded that it no longer met the accounting criteria for control over its Venezuelan subsidiary based on deteriorating conditions in Venezuela; therefore, the Company deconsolidated the financial statements21
The following table shows the Company'sCompany’s results of operations: | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | | 2017 | | 2016 | | Increase (Decrease)
2017 vs 2016 | | | Amount | | % of Sales | | Amount | | % of Sales | | $ | | % | | Net sales | $ | 669,491 |
| | | | $ | 567,646 |
| | | | 101,845 |
| | 17.9 | % | | Cost of goods sold | 449,975 |
| | | | 367,834 |
| | | | 82,141 |
| | 22.3 | % | | Gross profit | 219,516 |
| | 32.8 | % | | 199,812 |
| | 35.2 | % | | 19,704 |
| | 9.9 | % | | Selling, general & administrative expenses | 132,748 |
| | 19.8 | % | | 117,983 |
| | 20.8 | % | | 14,765 |
| | 12.5 | % | | Pension settlement charges | 5,283 |
| | | | — |
| | | | 5,283 |
| | 100.0 | % | | Bargain purchase gain | (51,585 | ) | | | | — |
| | | | 51,585 |
| | 100.0 | % | | Operating income | 133,070 |
| | 19.9 | % | | 81,829 |
| | 14.4 | % | | 51,241 |
| | 62.6 | % | | Interest income | 1,327 |
| | | | 360 |
| | | | 967 |
| | 268.6 | % | | Equity earnings in affiliates | 766 |
| | | | 619 |
| | | | 147 |
| | 23.7 | % | | Other income | 1,401 |
| | | | 1,303 |
| | | | 98 |
| | 7.5 | % | | Interest expense | (5,922 | ) | | | | (3,815 | ) | | | | 2,107 |
| | 55.2 | % | | Income before income taxes | 130,642 |
| | 19.5 | % | | 80,296 |
| | 14.1 | % | | 50,346 |
| | 62.7 | % | | Income taxes | 24,531 |
| | | | 20,257 |
| | | | 4,274 |
| | 21.1 | % | | Effective tax rate | 18.8 | % | | | | 25.2 | % | | | | | | | | Net income including non-controlling interests | 106,111 |
| | | | 60,039 |
| | | | 46,072 |
| | 76.7 | % | | Non-controlling interests in subsidiaries’ loss | (15 | ) | | | | (10 | ) | | | | 5 |
| | 50.0 | % | | Net income | $ | 106,126 |
| | 15.9 | % | | $ | 60,049 |
| | 10.6 | % | | 46,077 |
| | 76.7 | % | | Diluted earnings per share | $ | 1.59 |
| | | | $ | 0.89 |
| | | | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30, | | | 2017 | | 2016 | | Increase (Decrease) 2017 vs 2016 | | | Amount | | % of Sales | | Amount | | % of Sales | | $ | | % | | Net sales | $ | 1,877,246 |
| |
|
| | $ | 1,710,786 |
| |
|
| | 166,460 |
| | 9.7 | % | | Cost of goods sold | 1,236,386 |
| |
|
| | 1,118,945 |
| |
|
| | 117,441 |
| | 10.5 | % | | Gross profit | 640,860 |
| | 34.1 | % | | 591,841 |
| | 34.6 | % | | 49,019 |
| | 8.3 | % | | Selling, general & administrative expenses | 384,964 |
| | 20.5 | % | | 352,290 |
| | 20.6 | % | | 32,674 |
| | 9.3 | % | | Pension settlement charges | 5,283 |
| |
|
| | — |
| |
|
| | 5,283 |
| | 100.0 | % | | Loss on deconsolidation of Venezuelan subsidiary | — |
| |
|
| | 34,348 |
| |
|
| | (34,348 | ) | | (100.0 | %) | | Bargain purchase gain | (51,585 | ) | | | | — |
| | | | 51,585 |
| | 100.0 | % | | Operating income | 302,198 |
| | 16.1 | % | | 205,203 |
| | 12.0 | % | | 96,995 |
| | 47.3 | % | | Interest income | 3,349 |
| |
|
| | 1,225 |
| |
|
| | 2,124 |
| | 173.4 | % | | Equity earnings in affiliates | 2,001 |
| |
|
| | 2,084 |
| |
|
| | (83 | ) | | (4.0 | %) | | Other income | 3,293 |
| |
|
| | 2,552 |
| |
|
| | 741 |
| | 29.0 | % | | Interest expense | (18,333 | ) | |
|
| | (11,828 | ) | |
|
| | 6,505 |
| | 55.0 | % | | Income before income taxes | 292,508 |
| | 15.6 | % | | 199,236 |
| | 11.6 | % | | 93,272 |
| | 46.8 | % | | Income taxes | 69,218 |
| |
|
| | 54,264 |
| |
|
| | 14,954 |
| | 27.6 | % | | Effective tax rate | 23.7 | % | | | | 27.2 | % | | | | | | | | Net income including non-controlling interests | 223,290 |
| |
|
| | 144,972 |
| |
|
| | 78,318 |
| | 54.0 | % | | Non-controlling interests in subsidiaries’ loss | (32 | ) | |
|
| | (32 | ) | |
|
| | — |
| | — |
| | Net income | $ | 223,322 |
| | 11.9 | % | | $ | 145,004 |
| | 8.5 | % | | 78,318 |
| | 54.0 | % | | Diluted earnings per share | $ | 3.35 |
| | | | $ | 2.11 |
| | | |
|
| |
|
|
| | | | | | | | | | | | | | | | | | Three Months Ended March 31, | | | | | | | | | | | | | | Favorable (Unfavorable) | | | 2024 | | 2023 | | 2024 vs. 2023 | | | Amount | | % of Sales | | Amount | | % of Sales | | $ | | % | | Net sales | $ | 981,197 | | | | | $ | 1,039,343 | | | | $ | (58,146) | | (5.6) | % | Cost of goods sold | | 612,798 | | | | | | 683,986 | | | | | 71,188 | | 10.4 | % | Gross profit | | 368,399 | | | 37.5 | % | | 355,357 | | 34.2 | % | | 13,042 | | 3.7 | % | Selling, general & administrative expenses | | 198,747 | | | 20.3 | % | | 190,116 | | 18.3 | % | | (8,631) | | (4.5) | % | Rationalization and asset impairment charges | | 4,605 | | | 0.5 | % | | 877 | | 0.1 | % | | (3,728) | | (425.1) | % | Operating income | | 165,047 | | | 16.8 | % | | 164,364 | | 15.8 | % | | 683 | | 0.4 | % | Interest expense, net | | 8,779 | | | | | | 13,201 | | | | | 4,422 | | 33.5 | % | Other income | | 2,262 | | | | | | 4,181 | | | | | (1,919) | | (45.9) | % | Income before income taxes | | 158,530 | | | 16.2 | % | | 155,344 | | 14.9 | % | | 3,186 | | 2.1 | % | Income taxes | | 35,115 | | | | | | 33,413 | | | | | (1,702) | | (5.1) | % | Effective tax rate | | 22.2 | % | | | | | 21.5 | % | | | | (0.7) | % | | | Net income | $ | 123,415 | | | 12.6 | % | $ | 121,931 | | 11.7 | % | $ | 1,484 | | 1.2 | % | Diluted earnings per share | $ | 2.14 | | | | | $ | 2.09 | | | | $ | 0.05 | | 2.4 | % |
Net Sales: The following tables summarizetable summarizes the impact of volume, acquisitions, price and foreign currency exchange rates on Net sales for the three and nine months ended September 30, 2017 on a consolidated basis: | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30th | | | | Change in Net Sales due to: | | | | | | Net Sales
2016 | | Volume | | Acquisitions | | Price | | Foreign Exchange | | Net Sales
2017 | | Lincoln Electric Holdings, Inc. | | $ | 567,646 |
| | $ | 21,439 |
| | $ | 62,660 |
| | $ | 10,039 |
| | $ | 7,707 |
| | $ | 669,491 |
| | | | | | | | | | | | | | | | % Change | | |
| | |
| | |
| | |
| | |
| | |
| | Lincoln Electric Holdings, Inc. | | |
| | 3.8 | % | | 11.0 | % | | 1.8 | % | | 1.4 | % | | 17.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30th | | | | Change in Net Sales due to: | | | | | | Net Sales
2016 | | Volume | | Acquisitions | | Price | | Foreign Exchange | | Net Sales
2017 | | Lincoln Electric Holdings, Inc. | | $ | 1,710,786 |
| | $ | 56,622 |
| | $ | 67,352 |
| | $ | 37,099 |
| | $ | 5,387 |
| | $ | 1,877,246 |
| | Lincoln Electric Holdings, Inc. (excluding Venezuela) | | 1,699,973 |
| | 67,435 |
| | 67,352 |
| | 37,099 |
| | 5,387 |
| | 1,877,246 |
| | | | | | | | | | | | | | | | % Change | | |
| | |
| | |
| | |
| | |
| | |
| | Lincoln Electric Holdings, Inc. | | |
| | 3.3 | % | | 3.9 | % | | 2.2 | % | | 0.3 | % | | 9.7 | % | | Lincoln Electric Holdings, Inc. (excluding Venezuela) | | | | 4.0 | % | | 4.0 | % | | 2.2 | % | | 0.3 | % | | 10.4 | % |
| | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, | | | | | Change in Net Sales due to: | | | | | | | Net Sales | | | | | | | | | | | Foreign | | Net Sales | | | | 2023 | | Volume | | Acquisitions | | Price | | Exchange | | 2024 | | Lincoln Electric Holdings, Inc. | | $ | 1,039,343 | | $ | (63,781) | | $ | 4,164 | | $ | (283) | | $ | 1,754 | | $ | 981,197 | | % Change | | | | | | | | | | | | | | | | | | | | Lincoln Electric Holdings, Inc. | | | | | | (6.1) | % | | 0.4 | % | | 0.0 | % | | 0.2 | % | | (5.6) | % |
Net sales increased in the three and nine months ended September 30, 2017 primarily as a result of acquisitions, improved volume due to higher demand and increased product pricing. Net sales for the nine months ended September 30, 2016 include $10,813 in sales from the Company's Venezuelan operations. The increase in net sales from acquisitions in the three and nine months ended September 30, 2017 was driven by acquired companies within Americas Welding and International Welding. Gross Profit:
Gross profitdecreased for the three and nine months ended September 30, 2017 decreased, as a percent of sales, compared to the prior yearMarch 31, 2024 primarily due to rising input costs.softer demand across segments.Gross Profit: Gross profit increased for the three months ended March 31, 2024 driven by favorable mix and effective cost management. The three and nine months ended September 30, 2017March 31, 2024 includes a last-in, first-out ("LIFO"(“LIFO”) chargebenefit of $2,196 and $5,855, respectively,$531, as compared with a LIFO chargecharges of $452 and $2,474, respectively,$2,191 in the three and nine months ended September 30, 2016. comparable 2023 period.Selling, General & Administrative ("SG&A") Expenses: SG&A expenses increased for the three and nine months ended September 30, 2017March 31, 2024 as compared to September 30, 2016the same 2023 period, primarily due to SG&A from acquisitions, higher compensation costs, as well as acquisition transaction and integration costs, partially offset by lower legal professional fees. Pension Settlement Charges
In the three and nine months ended September 30, 2017, the Company recorded pension settlement charges of $5,283, $3,260 after-tax, related to lump sum pension payments.
Loss on Deconsolidation of Venezuelan Subsidiary:
In the nine months ended September 30, 2016, the Company recorded a loss of $34,348, $33,251 after-tax, related to the deconsolidation of its Venezuelan subsidiary. See Note 1 to the consolidated financial statements for additional information.
Bargain Purchase Gain:
In the three and nine months ended September 30, 2017, the Company recorded a bargain purchase gain of $51,585 related to the Air Liquide Welding acquisition. See Note 3 to the consolidated financial statements for additional information.
Equity Earnings in Affiliates:
Equity earnings in affiliates has remained relatively flat in the comparable periods.
Interest Expense:
The increase in interest expense for both the three and nine months ended September 30, 2017 as compared to September 30, 2016 was due to interest accrued on higher borrowings in 2017.
employee-related costs.Income Taxes: The effective income tax rate is lowerwas higher for the three months ended September 30, 2017 as compared to September 30, 2016 primarily due to the nontaxable bargain purchase gain recorded during the current period in connection with the acquisition of Air Liquide Welding partially offset by the income tax benefit related to a worthless stock deduction of a foreign subsidiary recorded during the prior year. The effective income tax rate is lower for the nine months ended September 30, 2017 as compared to September 30, 2016 primarily due to the nontaxable bargain purchase gain in connection with the acquisition of Air Liquide Welding and the change in the reporting of excess tax benefits resulting from the exercise of stock based compensation awards recorded in the current year. In 2016, the effective income tax rate was also higher due to the impact of the deconsolidation of the Company’s Venezuelan subsidiary, partially offset by the reversal of a valuation allowance as a result of a legal entity change and an income tax benefit related to a worthless stock deduction of a foreign subsidiary recorded during the prior year.
Net Income:
Net income for three and nine months ended September 30, 2017 increasedMarch 31, 2024 as compared to the prior yearsame period in 2023, primarily due to higher volumesmix of earnings and the bargain purchase gain related to the Air Liquide Welding acquisition, offset by rising input costs, higher SG&A costs, pension settlement charges and higher interest expense. Net income for the nine months ended September 30, 2016 includes a loss related to the deconsolidationdiscrete tax items.
Net Sales: The tables below summarize the impact of volume, acquisitions, price and foreign currency exchange rates on Net sales for the three and nine months ended September 30, 2017:
| | | | | | | | | | | | | | | | | | | Three Months Ended March 31, | | | | Change in Net Sales due to: | | | | | | Net Sales | | | | | | | | Foreign | | Net Sales | | | 2023 | | Volume (1) | | Acquisitions | | Price | | Exchange | | 2024 | | Operating Segments | | | | | | | | | | | | | | | | | | | Americas Welding | $ | 658,645 | | $ | (42,653) | | $ | 4,164 | | $ | 2,284 | | $ | 1,659 | | $ | 624,099 | | International Welding | | 252,416 | | | (12,272) | | | — | | | (4,010) | | | (373) | | | 235,761 | | The Harris Products Group | | 128,282 | | | (8,856) | | | — | | | 1,443 | | | 468 | | | 121,337 | | | | | | | | | | | | | | | | | | | | | % Change | | | | | | | | | | | | | | | | | | | Americas Welding | | | | | (6.5) | % | | 0.6 | % | | 0.3 | % | | 0.3 | % | | (5.2) | % | International Welding | | | | | (4.9) | % | | — | | | (1.6) | % | | (0.1) | % | | (6.6) | % | The Harris Products Group | | | | | (6.9) | % | | — | | | 1.1 | % | | 0.4 | % | | (5.4) | % |
| (1) | Decrease for the three months ended March 31, 2024 for all segments due to softer demand. |
| | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30th | | | Change in Net Sales due to: | | | | | Net Sales
2016 | | Volume (1) | | Acquisitions (2) | | Price (3) | | Foreign Exchange | | Net Sales
2017 | | Operating Segments | |
| | |
| | |
| | |
| | |
| | |
| | Americas Welding | $ | 377,520 |
| | $ | 8,401 |
| | $ | 1,140 |
| | $ | 9,197 |
| | $ | 2,031 |
| | $ | 398,289 |
| | International Welding | 119,564 |
| | 7,988 |
| | 61,520 |
| | 3,446 |
| | 5,099 |
| | 197,617 |
| | The Harris Products Group | 70,562 |
| | 5,050 |
| | — |
| | (2,604 | ) | | 577 |
| | 73,585 |
| | | | | | | | | | | | | | | % Change | |
| | |
| | |
| | |
| | |
| | |
| | Americas Welding | |
| | 2.2 | % | | 0.3 | % | | 2.4 | % | | 0.5 | % | | 5.5 | % | | International Welding | |
| | 6.7 | % | | 51.5 | % | | 2.9 | % | | 4.3 | % | | 65.3 | % | | The Harris Products Group | |
| | 7.2 | % | | — |
| | (3.7 | %) | | 0.8 | % | | 4.3 | % |
(1) Increase for Americas Welding due to higher consumable volumes. Increase for International Welding due to improving demand in a broad range of end markets. Increase for The Harris Products Group due to higher consumable volumes.
(2) Increase due to the acquisition of Air Liquide Welding within Americas Welding and International Welding (refer to Note 3 to the consolidated financial statements for a discussion of the Company's recent acquisitions).
(3) Increase for Americas Welding and International Welding segments due to increased product pricing as a result of higher input costs. Decrease for The Harris Products Group due to declines in the cost of silver compared to the prior year period.
| | | | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30th | | | Change in Net Sales due to: | | | | | Net Sales 2016 | | Volume (1) | | Acquisitions (2) | | Price (3) | | Foreign Exchange | | Net Sales 2017 | | Operating Segments | |
| | |
| | |
| | |
| | |
| | |
| | Americas Welding | $ | 1,124,900 |
| | $ | 29,928 |
| | $ | 5,832 |
| | $ | 25,225 |
| | $ | 875 |
| | $ | 1,186,760 |
| | International Welding | 376,684 |
| | 15,712 |
| | 61,520 |
| | 11,068 |
| | 3,019 |
| | 468,003 |
| | The Harris Products Group | 209,202 |
| | 10,982 |
| | — |
| | 806 |
| | 1,493 |
| | 222,483 |
| | | | | | | | | | | | | | | % Change | |
| | |
| | |
| | |
| | |
| | |
| | Americas Welding | |
| | 2.7 | % | | 0.5 | % | | 2.2 | % | | 0.1 | % | | 5.5 | % | | International Welding | |
| | 4.2 | % | | 16.3 | % | | 2.9 | % | | 0.8 | % | | 24.2 | % | | The Harris Products Group | |
| | 5.2 | % | | — |
| | 0.4 | % | | 0.7 | % | | 6.3 | % |
(1) Increase in all segments due to improving demand in a broad range of end markets.
(2) Increase due to the acquisitions of Vizient Manufacturing Solutions and Air Liquide Welding within Americas Welding and Air Liquide Welding within International Welding (refer to Note 3 to the consolidated financial statements for a discussion of the Company's recent acquisitions).
(3) Increase for Americas Welding and International Welding segments due to increased product pricing as a result of higher input costs.
Adjusted Earnings Before Interest and Income Taxes: Segment performance is measured and resources are allocated based on a number of factors, the primary profit measure being the Adjusted EBIT.EBIT profit measure. EBIT is defined as Operating income plus Equity earnings in affiliates and Other income.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 for the three months ended September 30, 2017: | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Increase (Decrease) 2017 vs. 2016 | | | 2017 | | 2016 | | $ | | % | | Americas Welding: | |
| | |
| | |
| | |
| | Net sales | $ | 398,289 |
| | $ | 377,520 |
| | 20,769 |
| | 5.5 | % | | Inter-segment sales | 25,546 |
| | 22,386 |
| | 3,160 |
| | 14.1 | % | | Total Sales | $ | 423,835 |
| | $ | 399,906 |
| | 23,929 |
| | 6.0 | % | | | | | | | | | | Adjusted EBIT (3) | $ | 74,096 |
| | $ | 68,285 |
| | 5,811 |
| | 8.5 | % | As a percent of total sales (1) | 17.5 | % | | 17.1 | % | | |
| | 0.4 | % | | International Welding: | |
| | |
| | |
| | |
| | Net sales | $ | 197,617 |
| | $ | 119,564 |
| | 78,053 |
| | 65.3 | % | | Inter-segment sales | 5,451 |
| | 3,688 |
| | 1,763 |
| | 47.8 | % | | Total Sales | $ | 203,068 |
| | $ | 123,252 |
| | 79,816 |
| | 64.8 | % | | | | | | | | | | Adjusted EBIT (4) | $ | 10,612 |
| | $ | 5,796 |
| | 4,816 |
| | 83.1 | % | As a percent of total sales (2) | 5.2 | % | | 4.7 | % | | |
| | 0.5 | % | | The Harris Products Group: | |
| | |
| | |
| | |
| | Net sales | $ | 73,585 |
| | $ | 70,562 |
| | 3,023 |
| | 4.3 | % | | Inter-segment sales | 2,064 |
| | 1,856 |
| | 208 |
| | 11.2 | % | | Total Sales | $ | 75,649 |
| | $ | 72,418 |
| | 3,231 |
| | 4.5 | % | | | | | | | | | | | Adjusted EBIT | $ | 9,244 |
| | $ | 8,757 |
| | 487 |
| | 5.6 | % | | As a percent of total sales | 12.2 | % | | 12.1 | % | | |
| | 0.1 | % | | Corporate / Eliminations: | | | | | | | | | Inter-segment sales | $ | (33,061 | ) | | $ | (27,930 | ) | | 5,131 |
| | 18.4 | % | Adjusted EBIT (5) | 570 |
| | 913 |
| | (343 | ) | | (37.6 | %) | | Consolidated: | | | | | | | | | Net sales | $ | 669,491 |
| | $ | 567,646 |
| | 101,845 |
| | 17.9 | % | | | | | | | | | | | Adjusted EBIT | $ | 94,522 |
| | $ | 83,751 |
| | 10,771 |
| | 12.9 | % | | | | | | | | | | | As a percent of sales | 14.1 | % | | 14.8 | % | | |
| | (0.7 | %) |
segment: | | | | | | | | | | | | | | | | | | | | | Favorable (Unfavorable) | | | | Three Months Ended March 31, | | 2024 vs. 2023 | | | | 2024 | | 2023 | | $ | | % | | Americas Welding: | | | | | | | | | | | | | Net sales | | $ | 624,099 | | $ | 658,645 | | $ | (34,546) | | (5.2) | % | Inter-segment sales | | | 29,978 | | | 32,318 | | | (2,340) | | (7.2) | % | Total Sales | | $ | 654,077 | | $ | 690,963 | | | (36,886) | | (5.3) | % | Adjusted EBIT (3) | | $ | 136,100 | | $ | 132,453 | | | 3,647 | | 2.8 | % | As a percent of total sales (1) | | | 20.8 | % | | 19.2 | % | | | | 1.6 | % | International Welding: | | | | | | | | | | | | | Net sales | | $ | 235,761 | | $ | 252,416 | | | (16,655) | | (6.6) | % | Inter-segment sales | | | 8,408 | | | 6,753 | | | 1,655 | | 24.5 | % | Total Sales | | $ | 244,169 | | $ | 259,169 | | | (15,000) | | (5.8) | % | Adjusted EBIT (4) | | $ | 27,776 | | $ | 29,598 | | | (1,822) | | (6.2) | % | As a percent of total sales | | | 11.4 | % | | 11.4 | % | | | | — | | The Harris Products Group: | | | | | | | | | | | | | Net sales | | $ | 121,337 | | $ | 128,282 | | | (6,945) | | (5.4) | % | Inter-segment sales | | | 3,093 | | | 2,897 | | | 196 | | 6.8 | % | Total Sales | | $ | 124,430 | | $ | 131,179 | | | (6,749) | | (5.1) | % | Adjusted EBIT (5) | | $ | 19,878 | | $ | 18,983 | | | 895 | | 4.7 | % | As a percent of total sales (2) | | | 16.0 | % | | 14.5 | % | | | | 1.5 | % | Corporate / Eliminations: | | | | | | | | | | | | | Inter-segment sales | | $ | (41,479) | | $ | (41,968) | | | 489 | | 1.2 | % | Adjusted EBIT (6) | | | (10,078) | | | (9,402) | | | (676) | | (7.2) | % | Consolidated: | | | | | | | | | | | | | Net sales | | $ | 981,197 | | $ | 1,039,343 | | | (58,146) | | (5.6) | % | Net income | | $ | 123,415 | | $ | 121,931 | | | 1,484 | | 1.2 | % | As a percent of total sales | | | 12.6 | % | | 11.7 | % | | | | 0.9 | % | Adjusted EBIT (7) | | $ | 173,676 | | $ | 171,632 | | | 2,044 | | 1.2 | % | As a percent of sales | | | 17.7 | % | | 16.5 | % | | | | 1.2 | % |
| | | (1) | Increase for the three months ended September 30, 2017March 31, 2024 as compared to September 30, 2016March 31, 2023 primarily driven by higher Net sales volumes, partially offset by rising input costs.effective cost management. |
| | | (2) | Increase for the three months ended September 30, 2017March 31, 2024 as compared to September 30, 2016March 31, 2023 primarily driven by higher Net sales volumes.effective cost management. |
| | | (3) | The three months ended September 30, 2017 excludes pension settlement charges related to lump sum pension payments as discussed in Note 11 toMarch 31, 2023 exclude the consolidated financial statements. |
| | (4) | The three months ended September 30, 2017 excludes amortization of the step up in value of acquired inventories relatedof $2,785. |
| (4) | The three months ended March 31, 2024 exclude rationalization and asset impairment charges of $3,069 primarily due to the Air Liquide Welding acquisitionrestructuring activities as discussed in Note 36 of the consolidated financial statements. The three months ended March 31, 2023 exclude Rationalization and asset impairment net charges of $877 primarily due to restructuring activities as discussed in Note 6 to the consolidated financial statements. |
| | (5) | The three months ended September 30, 2017 excludes a bargain purchase gain and acquisition transaction and integration costs related tostatements, the Air Liquide Welding acquisition as discussed in Note 3 to the consolidated financial statements. |
The following table presents Adjusted EBIT by segment for the nine months ended September 30, 2017: | | | | | | | | | | | | | | | | | Nine Months Ended September 30, | | Increase (Decrease)
2017 vs. 2016 | | | 2017 | | 2016 | | $ | | % | | Americas Welding: | |
| | |
| | |
| | |
| | Net sales | $ | 1,186,760 |
| | $ | 1,124,900 |
| | 61,860 |
| | 5.5 | % | | Inter-segment sales | 75,380 |
| | 69,673 |
| | 5,707 |
| | 8.2 | % | | Total Sales | $ | 1,262,140 |
| | $ | 1,194,573 |
| | 67,567 |
| | 5.7 | % | | | | | | | | | | Adjusted EBIT (3) | $ | 217,317 |
| | $ | 194,924 |
| | 22,393 |
| | 11.5 | % | As a percent of total sales (1) | 17.2 | % | | 16.3 | % | | |
| | 0.9 | % | | International Welding: | |
| | |
| | |
| | |
| | Net sales | $ | 468,003 |
| | $ | 376,684 |
| | 91,319 |
| | 24.2 | % | | Inter-segment sales | 15,214 |
| | 11,955 |
| | 3,259 |
| | 27.3 | % | | Total Sales | $ | 483,217 |
| | $ | 388,639 |
| | 94,578 |
| | 24.3 | % | | | | | | | | | | Adjusted EBIT (4) | $ | 29,713 |
| | $ | 21,699 |
| | 8,014 |
| | 36.9 | % | As a percent of total sales (2) | 6.1 | % | | 5.6 | % | | |
| | 0.5 | % | | The Harris Products Group: | |
| | |
| | |
| | |
| | Net sales | $ | 222,483 |
| | $ | 209,202 |
| | 13,281 |
| | 6.3 | % | | Inter-segment sales | 6,763 |
| | 6,983 |
| | (220 | ) | | (3.2 | %) | | Total Sales | $ | 229,246 |
| | $ | 216,185 |
| | 13,061 |
| | 6.0 | % | | | | | | | | | | | Adjusted EBIT | $ | 27,491 |
| | $ | 25,752 |
| | 1,739 |
| | 6.8 | % | | As a percent of total sales | 12.0 | % | | 11.9 | % | | |
| | 0.1 | % | | Corporate / Eliminations: | | | | | | | | | Inter-segment sales | $ | (97,357 | ) | | $ | (88,611 | ) | | 8,746 |
| | 9.9 | % | Adjusted EBIT (5) | 369 |
| | 1,812 |
| | (1,443 | ) | | (79.6 | %) | | Consolidated: | | | | | | | | | Net sales | $ | 1,877,246 |
| | $ | 1,710,786 |
| | 166,460 |
| | 9.7 | % | | | | | | | | | | | Adjusted EBIT | $ | 274,890 |
| | $ | 244,187 |
| | 30,703 |
| | 12.6 | % | | | | | | | | | | | As a percent of sales | 14.6 | % | | 14.3 | % | | |
| | 0.3 | % |
| | (1) | Increase for the nine months ended September 30, 2017 as compared to September 30, 2016 driven by higher Net sales volumes, partially offset by rising input costs. |
| | (2) | Increase for the nine months ended September 30, 2017 as compared to September 30, 2016 driven by higher Net sales volumes, partially offset by higher SG&A costs as a percent of sales related to acquisitions. |
| | (3) | The nine months ended September 30, 2017 excludes pension settlement charges related to lump sum pension payments as discussed in Note 11 to the consolidated financial statements. |
| | (4) | The nine months ended September 30, 2017 excludes amortization of the step up in value of acquired inventories relatedof $1,071 and a gain on asset disposal of $1,646. |
| (5) | The three months ended March 31, 2024 exclude Rationalization and asset impairment net charges of $1,536 primarily due to the Air Liquide Welding acquisitionrestructuring activities as discussed in Note 36 to the consolidated financial statements. |
| (6) | | (5) | The ninethree months ended September 30, 2017 excludes a bargain purchase gain and acquisitionMarch 31, 2024 exclude Acquisition transaction and integration costs related to the Air Liquide Welding acquisitionof $1,762 as discussed in Note 34 to the consolidated financial statements. The nine months ended September 30, 2016 excludes the loss related to deconsolidation |
| (7) | See non-GAAP Financial Measures for a reconciliation of the Company's Venezuelan subsidiaryNet income as discussed in Note 1 to the consolidated financial statements.reported and Adjusted EBIT. |
Non-GAAP Financial Measures The Company reviews Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share and Return(“EPS”), Adjusted return on invested capital (“Adjusted ROIC”), Adjusted net operating profit after taxes, Cash conversion and Organic sales, all non-GAAP financial measures, in assessing and evaluating the Company'sCompany’s underlying operating performance. These non-GAAP financial measures exclude the impact of special items on the Company'sCompany’s reported financial results. Non-GAAP financial measures should be read in conjunction with the generally accepted accounting principles in the United States ("GAAP") financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. The following table presents a reconciliationthe 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 operating income, Adjusted net income and Adjusteddiluted earnings per share: | | | | | | | | Three Months Ended March 31, | | | 2024 | | 2023 | | Operating income as reported | $ | 165,047 | | $ | 164,364 | | Special items (pre-tax): | | | | | | | Rationalization and asset impairment charges (1) | | 4,605 | | | 877 | | Acquisition transaction costs (2) | | 1,762 | | | — | | Amortization of step up in value of acquired inventories (3) | | — | | | 3,856 | | Adjusted operating income | $ | 171,414 | | $ | 169,097 | | | | | | | | | Net income as reported | $ | 123,415 | | $ | 121,931 | | Special items: | | | | | | | Rationalization and asset impairment charges (1) | | 4,605 | | | 877 | | Acquisition transaction costs (2) | | 1,762 | | | — | | Amortization of step up in value of acquired inventories (3) | | — | | | 3,856 | | Gain on asset disposal (4) | | — | | | (1,646) | | Tax effect of Special items (5) | | (1,126) | | | (818) | | Adjusted net income | | 128,656 | | | 124,200 | | Interest expense, net | | 8,779 | | | 13,201 | | Income taxes as reported | | 35,115 | | | 33,413 | | Tax effect of Special items (5) | | 1,126 | | | 818 | | Adjusted EBIT | $ | 173,676 | | $ | 171,632 | | Effective tax rate as reported | | 22.2 | % | | 21.5 | % | Net special item tax impact | | (0.2) | % | | 0.1 | % | Adjusted effective tax rate | | 22.0 | % | | 21.6 | % | Diluted earnings per share as reported | $ | 2.14 | | $ | 2.09 | | Special items per share | | 0.09 | | | 0.04 | | Adjusted diluted earnings per share | $ | 2.23 | | $ | 2.13 | |
| (1) | Primarily related to restructuring activities as discussed in Note 6 to the consolidated financial statements. |
| (2) | Costs related to acquisitions and are included in Selling, general & administrative expenses. |
| (3) | Costs related to acquisitions and are included in Cost of goods sold. |
| (4) | Gain on asset disposal and included in Other income |
| (5) | Includes the net tax impact of Special items recorded during the respective periods. |
The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item. | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | 2017 | | 2016 | | 2017 | | 2016 | | Operating income as reported | $ | 133,070 |
| | $ | 81,829 |
| | $ | 302,198 |
| | $ | 205,203 |
| | Special items (pre-tax): | | | | | | | | Pension settlement charges (1) | 5,283 |
| | — |
| | 5,283 |
| | — |
| Loss on deconsolidation of Venezuelan subsidiary (2) | — |
| | — |
| | — |
| | 34,348 |
| Acquisition transaction and integration costs (4) | 3,273 |
| | — |
| | 11,386 |
| | — |
| Amortization of step up in value of acquired inventories (4) | 2,314 |
| | — |
| | 2,314 |
| | — |
| Bargain purchase gain (4) | (51,585 | ) | | — |
| | (51,585 | ) | | — |
| | Adjusted operating income | $ | 92,355 |
| | $ | 81,829 |
| | $ | 269,596 |
| | $ | 239,551 |
| | | | | | | | | | | Net income as reported | $ | 106,126 |
| | $ | 60,049 |
| | $ | 223,322 |
| | $ | 145,004 |
| | Special items (after-tax): | | | | | | | | Pension settlement charges (1) | 3,260 |
| | — |
| | 3,260 |
| | — |
| Loss on deconsolidation of Venezuelan subsidiary (2) | — |
| | — |
| | — |
| | 33,251 |
| Income tax valuation reversal (3) | — |
| | — |
| | — |
| | (7,196 | ) | Acquisition transaction and integration costs (4) | 2,229 |
| | — |
| | 8,457 |
| | — |
| Amortization of step up in value of acquired inventories (4) | 1,745 |
| | — |
| | 1,745 |
| | — |
| Bargain purchase gain (4) | (51,585 | ) | | — |
| | (51,585 | ) | | — |
| | Adjusted net income | $ | 61,775 |
| | $ | 60,049 |
| | $ | 185,199 |
| | $ | 171,059 |
| | | | | | | | | | | Diluted earnings per share as reported | $ | 1.59 |
| | $ | 0.89 |
| | $ | 3.35 |
| | $ | 2.11 |
| | Special items | (0.66 | ) | | — |
| | (0.57 | ) | | 0.38 |
| | Adjusted diluted earnings per share | $ | 0.93 |
| | $ | 0.89 |
| | $ | 2.78 |
| | $ | 2.49 |
|
(1) Three and nine months ended September 30, 2017 includes pension settlement charges related to lump sum pension payments.
(2) Nine months ended September 30, 2016 includes a loss on the deconsolidation of the Venezuelan subsidiary as discussed in Note 1 to the consolidated financial statements.
(3) Nine months ended September 30, 2016 includes the reversal of an income tax valuation allowance as a result of a legal entity change.
(4) Three and nine months ended September 30, 2017 include costs and a bargain purchase gain related to the Air Liquide Welding acquisition as discussed in Note 3 to the consolidated financial statements.
Liquidity and Capital Resources The Company’s cash flow from operations can be cyclical. Operational cash flow is a key driver of liquidity, providing cash and access to capital markets. In assessing liquidity, the Company reviews working capital measurements to define areas for improvement. Management anticipates the Company will be able to satisfy cash requirements for its ongoing businesses for
at least the next twelve months and the foreseeable future thereafter primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets. The Company continues to expand globally and periodically looks at transactions that would involve significant investments. The Company can fund its global expansion plans with operational cash flow, but a significant acquisition may require access to capital markets, in particular, the long-term debt market, as well as the syndicated bank loan market. The Company’s financing strategy is to fund itself at the lowest after-tax cost of funding. Where possible, the Company utilizes operational cash flows and raises capital in the most efficient market, usually the United States, and then lends funds to the specific subsidiary that requires funding. If additional acquisitions providing appropriate financial benefits become available, additional expenditures may be made. The following table reflects changes in key cash flow measures: | | | | | | | | | | | | Three Months Ended March 31, | | | 2024 | | 2023 | | $ Change | Cash provided by operating activities | | $ | 133,294 | | $ | 123,931 | | $ | 9,363 | Cash used by investing activities (1) | | | (25,940) | | | (16,049) | | | (9,891) | Capital expenditures | | | (26,256) | | | (18,787) | | | (7,469) | Cash used by financing activities (2) | | | (125,400) | | | (111,316) | | | (14,084) | Proceeds from (payments on) short-term borrowings | | | 2,016 | | | (43,940) | | | 45,956 | Purchase of shares for treasury | | | (110,405) | | | (32,158) | | | (78,247) | Cash dividends paid to shareholders | | | (41,280) | | | (37,583) | | | (3,697) | (Decrease) increase in Cash and cash equivalents (3) | | | (18,809) | | | 1,653 | | | (20,462) |
| (1) | Cash used by investing activities increased for the three months ended March 31, 2024, compared with the three months ended March 31, 2023 primarily due to capital expenditures. The Company currently anticipates capital expenditures of $90,000 to $110,000 in 2024. Anticipated capital expenditures include investments for capital maintenance and projects to increase efficiency, reduce costs, promote business growth or improve the overall safety and environmental conditions of the Company’s facilities. |
| (2) | Cash used by financing activities increased in the three months ended March 31, 2024, compared with the three months ended March 31, 2023 primarily due to increased purchase of treasury stock in 2024. |
| (3) | Cash and cash equivalents decreased 4.8%, or $18,809, to $374,978 during the three months ended March 31, 2024, from $393,787 as of December 31, 2023. At March 31, 2024, $179,657 of Cash and cash equivalents was held by international subsidiaries. |
| | | | | | | | | | | | | | Nine Months Ended September 30, | | | 2017 | | 2016 | | $ Change | Cash provided by operating activities (1) | $ | 245,354 |
| | $ | 240,180 |
| | 5,174 |
| Cash used by investing activities (2) | (249,796 | ) | | (110,291 | ) | | (139,505 | ) | | Capital expenditures | (38,959 | ) | | (39,377 | ) | | 418 |
| | Acquisition of businesses, net of cash acquired | (72,468 | ) | | (71,567 | ) | | (901 | ) | | Purchase of marketable securities, net of proceeds | (140,363 | ) | | — |
| | (140,363 | ) | Cash used by financing activities (3) | (93,928 | ) | | (179,341 | ) | | 85,413 |
| | (Payments on) proceeds from short-term borrowings, net | (602 | ) | | 183,465 |
| | (184,067 | ) | | Purchase of shares for treasury | (23,012 | ) | | (288,594 | ) | | 265,582 |
| | Cash dividends paid to shareholders | (69,083 | ) | | (66,180 | ) | | (2,903 | ) | Decrease in Cash and cash equivalents (4) | (79,726 | ) | | (47,255 | ) | | |
(1) Cash provided by operating activities increased for the nine months ended September 30, 2017, compared with the nine months ended September 30, 2016 primarily due to improved company performance.
(2) Cash used by investing activities increased for the nine months ended September 30, 2017, compared with the nine months ended September 30, 2016 predominantly due to the purchase of marketable securities in 2017. The Company currently anticipates capital expenditures of $55,000 in 2017. Anticipated capital expenditures include investments for capital maintenance to improve operational effectiveness. Management critically evaluates all proposed capital expenditures and expects each project to increase efficiency, reduce costs, promote business growth or improve the overall safety and environmental conditions of the Company’s facilities.
(3) Cash used by financing activities decreased in the nine months ended September 30, 2017, compared with the nine months ended September 30, 2016. The decrease was due to lower purchases of common shares for treasury, partially offset by higher proceeds from short-term borrowings in 2016.
(4) Cash and cash equivalents decreased 21.0%, or $79,726, to $299,453 during the nine months ended September 30, 2017, from $379,179 as of December 31, 2016. This decrease was predominantly due to cash provided by operating activities offset by the purchase of marketable securities, cash paid for acquisition of businesses, net of cash acquired and cash dividends paid to shareholders.The decrease in Cash and cash equivalents during the nine months ended September 30, 2017 compares to a decrease of 15.5% during the nine months ended September 30, 2016. The decrease in 2016 was primarily due to cash paid for the acquisition of a business and the purchase of common shares for treasury, partially offset by proceeds from short-term borrowings. At September 30, 2017, $254,291 of Cash and cash equivalents was held by international subsidiaries and may be subject to U.S. income taxes and foreign withholding taxes if repatriated to the U.S.
The Company's total debt remained consistent as compared to December 31, 2016. Total debt to total invested capital decreased to 42.8% at September 30, 2017 from 49.8% at December 31, 2016.
In October 2017,April 2024, the Company paid a cash dividend of $0.35$0.71 per share, or $23,014,$40,405, to shareholders of record as of September 29, 2017.March 31, 2024.
| | | | | | | | | | March 31, 2024 | | December 31, 2023 | | March 31, 2023 | | Average operating working capital to Net sales (1) | | 18.8 | % | 17.1 | % | 19.6 | % | Days sales in Inventories | | 120.5 | | 104.6 | | 122.4 | | Days sales in Accounts receivable | | 53.6 | | 50.0 | | 52.9 | | Average days in Trade accounts payable | | 54.9 | | 47.6 | | 53.9 | |
| (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. |
| | | | | | | | | | | | | | September 30, 2017 | | December 31, 2016 | | September 30, 2016 | Average operating working capital to net sales (1) | | 20.5 | % | | 15.6 | % | | 17.7 | % | | Days sales in Inventories | | 108.8 | | 92.1 | | 100.3 | | Days sales in Accounts receivable | | 58.6 | | 47.7 | | 48.2 | | Average days in Trade accounts payable | | 54.8 | | 48.9 | | 45.3 |
(1) Average operating working capital to net sales is defined as the sum of Accounts receivable and Inventories less Trade accounts payable as of period end divided by annualized rolling three months of Net sales.
Return on Invested Capital The Company reviews return on invested capital ("ROIC")ROIC in assessing and evaluating the Company'sCompany’s underlying operating performance. As discussed in the Non-GAAP Financial Measures section above, Adjusted ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company’s financial performance andperformance. The calculation may be different than the method used by other companies to calculate ROIC. Adjusted ROIC is defined as rolling 12 months of Adjusted net income excluding tax-effected interest income and expense divided by invested capital. Invested capital is defined as total debt, which includes Short-term debt and Long-term debt, less current portions, plus Total equity. The following table presents the reconciliations of ROIC and Adjusted ROIC to net income: | | | | | | | | | | Twelve Months Ended March 31, | | | | 2024 | | 2023 | | Net income as reported | | $ | 546,733 | | $ | 468,125 | | Plus: Interest expense (after-tax) | | | 36,519 | | | 28,875 | | Less: Interest income (after-tax) | | | 6,793 | | | 1,560 | | Net operating profit after taxes | | $ | 576,459 | | $ | 495,440 | | Special items: | | | | | | | | Rationalization and asset impairment charges | | | (7,586) | | | 10,780 | | Acquisition transaction costs | | | 1,762 | | | 6,003 | | Pension settlement charges | | | 845 | | | — | | Amortization of step up in value of acquired inventories | | | 8,397 | | | 4,962 | | Gain on asset disposal | | | — | | | (1,646) | | Tax effect of Special items (1) | | | 2,228 | | | (3,051) | | Adjusted net operating profit after taxes | | $ | 582,105 | | $ | 512,488 | | | | | | | | | | Invested Capital | | March 31, 2024 | | March 31, 2023 | | Short-term debt | | $ | 4,720 | | $ | 49,340 | | Long-term debt, less current portion | | | 1,102,677 | | | 1,110,626 | | Total debt | | | 1,107,397 | | | 1,159,966 | | Total equity | | | 1,307,828 | | | 1,125,236 | | Invested capital | | $ | 2,415,225 | | $ | 2,285,202 | | | | | | | | | | Return on invested capital as reported | | | 23.9 | % | | 21.7 | % | Adjusted return on invested capital | | | 24.1 | % | | 22.4 | % |
| (1) | Includes the net tax impact of Special items recorded during the respective periods. |
The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item. ROIC for the twelve months ended September 30, 2017 and 2016 were as follows:27 | | | | | | | | | | | | | Twelve Months Ended September 30, | | | | 2017 | | 2016 | | Net income | | $ | 276,717 |
| | $ | 193,696 |
| | Rationalization and asset impairment charges, net of tax of ($16) | | — |
| | 450 |
| | Pension settlement charges, net of tax of $2,023 and $2,438 in 2017 and 2016, respectively | | 3,260 |
| | 3,969 |
| | Loss on deconsolidation of Venezuelan subsidiary, net of tax of $1,097 | | — |
| | 33,251 |
| | Income tax valuation reversals | | — |
| | (7,196 | ) | | Venezuela currency devaluation | | — |
| | 708 |
| | Acquisition transaction and integration costs, net of tax of $2,929 | | 8,457 |
| | — |
| | Amortization of step up in value of acquired inventories, net of tax of $569 | | 1,745 |
| | — |
| | Bargain purchase gain | | (51,585 | ) | | — |
| | Adjusted net income | | $ | 238,594 |
| | $ | 224,878 |
| | Plus: Interest expense, net of tax of $9,795 and $6,816 in 2017 and 2016, respectively | | 15,789 |
| | 13,342 |
| | Less: Interest income, net of tax of $1,614 and $596 in 2017 and 2016, respectively | | 2,602 |
| | 1,182 |
| | Adjusted net income before tax effected interest | | $ | 251,781 |
| | $ | 237,038 |
| | | | | | | | Invested Capital | | September 30, 2017 | | September 30, 2016 | | Short-term debt | | $ | 2,135 |
| | $ | 183,827 |
| | Long-term debt, less current portion | | 704,804 |
| | 359,831 |
| | Total debt | | 706,939 |
| | 543,658 |
| | Total equity | | 945,928 |
| | 752,917 |
| | Invested capital | | $ | 1,652,867 |
| | $ | 1,296,575 |
| | Return on invested capital | | 15.2 | % | | 18.3 | % |
New Accounting Pronouncements Refer to Note 1 to the consolidated financial statements for a discussion of new accounting pronouncements.
Accounting Standard Update ("ASU") 2017-07 requires a change in the income statement line item classification of the components of net periodic pension costs. The Company estimates the adoption of ASU 2017-07 in 2018 will reduce Operating income by $9 million for the twelve months ended December 31, 2017. Income before income taxes and Net income will not be affected by the adoption of ASU 2017-07.
Refer to Note 34 to the consolidated financial statements for a discussion of the Company'sCompany’s recent acquisitions.
ReferFair Value of Debt At March 31, 2024 and December 31, 2023, the fair value of long-term debt, including the current portion, was approximately $981,481 and $1,013,795, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $1,102,677 and $1,102,771, respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange. Revolving Credit Agreement On April 23, 2021, the Company amended and restated the agreement governing its line of credit by entering into the Second Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement has a line of credit totaling $500,000, has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $150,000. On March 8, 2023, the Credit Agreement was amended to replace the LIBOR rate to a term secured overnight finance rate (“SOFR”); as such, the interest rate on borrowings is based on SOFR plus a spread of 0.85% to 1.85% based on (1) the Company’s net leverage ratio and (2) a credit spread adjustment. The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. As of March 31, 2024, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement. The Company has other lines of credit and debt agreements totaling $90,945. As of March 31, 2024, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $4,720. Senior Unsecured Notes On April 1, 2015 and October 20, 2016, the Company entered into separate Note 10Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each have an aggregate principal amount of $350,000, comprised of four different series ranging from $50,000 to $100,000, with maturity dates ranging from August 20, 2025 through April 1, 2045, and interest rates ranging from 2.75% and 4.02%. Interest on the Notes is paid semi-annually. The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and 10.1 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of March 31, 2024, the Company was in compliance with all of its debt covenants relating to the Notes. Term Loan On November 29, 2022, the Company entered into a term loan in the aggregate principal amount of $400,000 (the “Term Loan”), which was borrowed in full. The Term Loan matures on November 29, 2025. The Term Loan bears an interest at a rate based on SOFR, plus a margin ranging from 0.75% to 1.75% based on the Company’s consolidated financial statements for a discussionnet leverage ratio. As of March 31, 2024, the Company was in compliance with all of its covenants. In March 2023, the Company entered into interest rate swap agreements to effectively convert the interest rate on $150,000 of the Company's debt.
Term Loan from a variable rate to a fixed rate.Forward-looking Statements The Company’s expectations and beliefs concerning the future contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current expectations and involve a number of risks and uncertainties. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results. The factors include, but are not limited to: general economic, financial and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate the Air Liquide Welding business acquisition;acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as the impact of the Russia-Ukraine conflict, political unrest, acts of terror, and natural disasters and pandemics, on the Company or its customers, suppliers and the economy in general. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the Company’s exposure to market risk since December 31, 2016.2023. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2017.March 31, 2024.Changes in Internal Control Over Financial Reporting During the quarter ended September 30, 2017, the Company acquired Air Liquide Welding. The acquired business operated under its own set of systems and internal controls and the Company is currently maintaining those systems and much of that control environment until it is able to incorporate their processes into the Company's own systems and control environment. The Company expects to complete the incorporation of the acquired business' operations into the Company's systems and control environment in fiscal year 2018.
Except for changes in connection with the Company's acquisition of the Air Liquide Welding business noted above, thereThere have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2017March 31, 2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is subject, from time to time, to a variety of civil and administrative proceedings arising out of its normal operations, including, without limitation, product liability claims, regulatory claims and health, safety and environmental claims. Among such proceedings are the cases described below. As of September 30, 2017,March 31, 2024, the Company was a co-defendant in cases alleging asbestos-inducedasbestos induced illness involving claims by approximately 3,7511,367 plaintiffs, which is a net decrease of 3320 claims from those previously reported. In each instance, the Company is one of a large number of defendants. The asbestos claimants seek compensatory and punitive damages, in most cases for unspecified sums. Since January 1, 1995, the Company has been a co-defendant in other similarasbestos cases that have been resolved as follows: 54,57357,005 of those claims were dismissed, 23 were tried to defense verdicts, seven7 were tried to plaintiff verdicts (one of which was appealed by defendants and was remanded to the trial court for a new trial)(which were reversed or resolved after appeal), one1 was resolved by agreement for an immaterial amount and 7741,017 were decided in favor of the Company following summary judgment motions.
In addition to the other information set forth in this report,Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2023, which could materially affect the Company’s business, financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Issuer purchases of its common shares during the thirdfirst quarter of 20172024 were as follows: | | | | | | | | | | | | | | | | Period | | Total Number of Shares Repurchased | | Average Price Paid Per Share | | Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (1) | | July 1 - 31, 2017 | | — |
| | $ | — |
| | — |
| | 8,802,894 |
| | August 1 - 31, 2017 | | 98,297 |
| | 86.65 |
| | 98,297 |
| | 8,704,597 |
| | September 1 - 30, 2017 | | 75,722 |
| | 89.10 |
| | 75,722 |
| | 8,628,875 |
| | Total | | 174,019 |
| | 87.72 |
| | 174,019 |
| | |
| | | | | | | | | | | | | | | | | Total Number of | | | | | | | | | | Shares | | Maximum Number | | | | | | | | Repurchased | | of Shares that May | | | Total Number of | | | | | as Part of Publicly | | Yet be Purchased | | | Shares | | Average Price | | Announced Plans or | | Under the Plans or | Period | | Repurchased | | Paid Per Share | | Programs | | Programs (2) | January 1 - 31, 2024 | | 161,478 | (1) | $ | 215.54 | | 160,459 | | 7,698,061 | February 1 - 29, 2024 | | 160,627 | (1) | | 237.17 | | 140,167 | | 7,557,894 | March 1 - 31, 2024 | | 144,090 | (1) | | 253.91 | | 121,818 | | 7,436,076 | Total | | 466,195 | | | 234.85 | | 422,444 | | |
| | | (1) | The above share repurchases include the surrender of the Company’s common shares in connection with the vesting of restricted awards. |
| (2) | On April 20, 2016,February 12, 2020, the Company announced that theCompany’s Board of Directors authorized a new share repurchase program which increased the total numberfor up to an additional 10 million shares of the Company’s common shares authorized to be repurchased to 55 million shares.stock. Total shares purchased through the share repurchase programs were 46.42.6 million shares at a total cost of $1.7 billion$444.4 million for a weighted average cost of $35.85$170.40 per share through September 30, 2017.March 31, 2024. |
ITEM 4. MINE SAFETY DISCLOSURES ITEM 5. OTHER INFORMATION During the quarter ended March 31, 2024, none of the Company’s directors or officers adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408(a) of Regulation S-K. (a) Exhibits
SIGNATURESSIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | | | | | | | | LINCOLN ELECTRIC HOLDINGS, INC. | | | | | |
Gabriel Bruno | | | Geoffrey P. AllmanGabriel Bruno | | | SeniorExecutive Vice President, Corporate ControllerChief Financial Officer and Treasurer | | | (principal accounting officer)Principal Financial and Accounting Officer) | | | October 30, 2017April 25, 2024 |
|
