Financial Performance - Q3 2023 net sales increased by 10.5% year-over-year to $1033.2 million[10], compared to $935.2 million in Q3 2022[10] - Q3 2023 adjusted operating income increased by 19.7% year-over-year to $183.4 million[10], representing 17.7% of sales[10], compared to $153.2 million in Q3 2022, which was 16.4% of sales[10] - Q3 2023 adjusted diluted EPS increased by 17.6% year-over-year to $2.40[10], compared to $2.04 in Q3 2022[10] - The company returned $82 million to shareholders through dividends and share repurchases[7] - Q3 2023 cash flow from operations increased by 71% year-over-year[27] Segment Performance - Americas Welding segment net sales increased by 13.6% year-over-year[32] - International Welding segment net sales increased by 11.8% year-over-year[36] - The Harris Products Group net sales decreased by 5.4% year-over-year[21] Sales Trends - Q3 organic sales increased by 0.4%[7], but were negatively impacted by approximately 230 bps due to fewer shipping days[8] - Equipment sales were up mid-single digit percent[8] - Consumables sales were down low-single digit percent in HPG (HVAC)[8] Market Performance - Energy sector sales were up mid-teens percent[8] - Heavy Industries sector sales were up mid-to-high single digit percent[8] - Automotive sector sales declined mid-teens percent[8] Outlook - The company anticipates low-double digit percent sales growth for the full year 2023, with mid-single digit percent organic sales growth[47]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number: 0-1402 LINCOLN ELECTRIC HOLDINGS, INC. (Exact name of registrant as specified in its charter ...

Financial Data and Key Metrics Changes - The company reported a consolidated second quarter sales increase of 9% to $1.061 billion, driven by a 5.2% benefit from acquisitions and a 3.6% increase in volumes [30][31] - Gross profit dollars increased approximately 12% or $40 million year-over-year, with a gross profit margin increase of 80 basis points to 35.2% [18][30] - Adjusted operating income increased 10% to $184 million, with an adjusted operating income margin of 17.4% [31][32] - The adjusted return on invested capital (ROIC) was maintained at 22.9%, with $90 million returned to shareholders in the quarter [12][57] Business Line Data and Key Metrics Changes - The Americas Welding segment's adjusted EBIT increased approximately 19% to $140 million, with an adjusted EBIT margin of 19.8% [20][55] - The Industrial Welding segment's adjusted EBIT decreased 3.5% to $34 million, but improved sequentially by 150 basis points [21] - The Harris Products Group's adjusted EBIT increased approximately 9% to $19.5 million, with an adjusted EBIT margin of 14.7% [34] Market Data and Key Metrics Changes - Strong growth was observed in the energy sector, particularly in midstream activities, while automotive transportation faced a decline due to timing issues [27][15] - General industry sales growth was strong in the U.S., but there was softness in Europe and retail sectors [40][41] - International Welding achieved a 4% volume growth despite macroeconomic challenges in Europe [103] Company Strategy and Development Direction - The company is focused on advancing its automation portfolio, with expectations to drive margins from low double digits to mid-teens by 2025 [12] - The planned production and launch of a 150-kilowatt DC fast charger is on schedule, with a compatible version expected in early 2024 [26] - The company is maintaining its full-year assumptions but adjusting the mix of organic growth drivers to reflect volume strength [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through dynamic operating conditions and maintain a neutral price-cost position [11] - The outlook for automotive is expected to improve in the second half of the year, driven by the completion of automation projects [28] - Management acknowledged potential risks in the international business but remains optimistic about demand trends in the Americas [90] Other Important Information - The company recognized approximately $7 million of other income in the quarter, which includes non-recurring items [54] - SG&A expenses increased approximately 16% due to higher compensation and unfavorable foreign exchange impacts [53] - The company is committed to maintaining a disciplined approach to pricing in an inflationary environment [84] Q&A Session Summary Question: Insights on automotive and general industries performance - Management noted that the decline in automotive was driven by capital projects and large equipment purchases, but consumables volume was up, indicating strong demand [40] Question: Impact of capital spending timing on Q3 and Q4 - Management confirmed that there was no softness in demand or operational issues affecting the timing of capital projects [44] Question: Outlook for pricing and volume growth - Management indicated that pricing actions have moderated due to overall inflation trends, but volumes are expected to increase, particularly in automotive and automation [84][106] Question: Long-term growth opportunities - Management highlighted the potential for automation and EV charging initiatives to drive future growth, with a focus on expanding customer relationships [99][102]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides a comprehensive overview of the company's financial performance, position, and cash flows for the period ended June 30, 2023, along with management's analysis and disclosures on market risks and internal controls [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended June 30, 2023, show a notable increase in Net Sales and Net Income compared to the same period in 2022, with total assets growing primarily due to increases in current assets and goodwill, and significantly higher cash flow from operating activities [Consolidated Statements of Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) For the three and six months ended June 30, 2023, the company reported increased Net Sales and Net Income compared to the prior-year periods, with diluted EPS rising to **$2.36** for the second quarter and **$4.44** for the six months Consolidated Statements of Income (in millions) | Financial Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $1,060.6 | $969.6 | $2,099.9 | $1,895.0 | | **Gross Profit** | $373.4 | $333.5 | $728.8 | $663.3 | | **Operating Income** | $178.0 | $167.5 | $342.4 | $328.7 | | **Net Income** | $137.3 | $127.8 | $259.3 | $253.9 | | **Diluted EPS** | $2.36 | $2.18 | $4.44 | $4.30 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2023, total assets increased to **$3,311.2 million** from **$3,180.5 million** at December 31, 2022, driven by increases in accounts receivable, goodwill, and other current assets, while total equity rose to **$1,201.4 million** Condensed Consolidated Balance Sheets (in millions) | Balance Sheet Item | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $1,646.2 | $1,557.8 | | **Total Assets** | $3,311.2 | $3,180.5 | | **Total Current Liabilities** | $810.8 | $852.9 | | **Total Liabilities** | $2,109.8 | $2,146.5 | | **Total Equity** | $1,201.4 | $1,034.0 | [Consolidated Statements of Cash Flows](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2023, net cash provided by operating activities significantly increased to **$322.8 million** from **$141.3 million** in the prior-year period, with cash used in investing and financing activities primarily for capital expenditures, acquisitions, share repurchases, and dividends Consolidated Statements of Cash Flows (Six Months Ended June 30, in millions) | Cash Flow Activity (Six Months Ended June 30) | 2023 | 2022 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $322.8 | $141.3 | | **Net Cash Used by Investing Activities** | ($76.3) | ($55.0) | | **Net Cash Used by Financing Activities** | ($226.9) | ($122.4) | | **Increase (Decrease) in Cash** | $23.3 | ($40.2) | | **Cash and Cash Equivalents at End of Period** | $220.5 | $152.8 | [Notes to Unaudited Consolidated Financial Statements](index=11&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail significant accounting policies, revenue recognition by product line, and recent acquisitions, including Powermig in May 2023 and the ongoing integration of Fori Automation, which contributed **$97.0 million** in net sales for the first six months of 2023 - On May 3, 2023, the Company acquired 100% of Powermig Automação e Soldagem Ltda., a Brazilian automation engineering firm, for a net purchase price of **$29.6 million**, net of cash acquired[35](index=35&type=chunk) - The acquisition of Fori Automation in December 2022 contributed Net Sales of **$47.8 million** for the three months and **$97.0 million** for the six months ended June 30, 2023[36](index=36&type=chunk) Net Sales by Product Line (Six Months Ended June 30, in millions) | Net Sales by Product Line (Six Months Ended June 30) | 2023 | 2022 | | :--- | :--- | :--- | | **Consumables** | $1,147.6 | $1,108.0 | | **Equipment** | $952.3 | $787.0 | | **Total Net Sales** | $2,099.9 | $1,895.0 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **10.8%** increase in net sales for the first six months of 2023 to higher demand, increased pricing, and contributions from acquisitions, partially offset by unfavorable foreign exchange, while maintaining a strong liquidity position with significantly increased operating cash flow Change in Net Sales (Six Months Ended June 30, 2023 vs 2022) | Change in Net Sales (Six Months Ended June 30, 2023 vs 2022) | Percentage Change | | :--- | :--- | | **Volume** | 3.9% | | **Acquisitions** | 5.4% | | **Price** | 2.6% | | **Foreign Exchange** | (1.0)% | | **Total Net Sales Change** | 10.8% | - Gross profit increased due to higher volumes and pricing actions, with LIFO charges significantly lower in H1 2023 (**$2.5 million**) compared to H1 2022 (**$17.3 million**)[98](index=98&type=chunk) - SG&A expenses increased primarily due to acquisitions and higher employee-related costs[99](index=99&type=chunk) [Segment Results](index=33&type=section&id=Segment%20Results) For the first six months of 2023, Americas Welding net sales grew **18.2%** to **$1,335.6 million**, International Welding sales increased by **2.3%** to **$505.8 million**, and The Harris Products Group saw a **4.5%** decline in sales to **$258.5 million** Segment Net Sales (Six Months Ended June 30, 2023, in millions) | Segment Net Sales (Six Months Ended June 30, 2023) | Net Sales | % Change vs 2022 | | :--- | :--- | :--- | | **Americas Welding** | $1,335.6 | 18.2% | | **International Welding** | $505.8 | 2.3% | | **The Harris Products Group** | $258.5 | (4.5)% | Segment Adjusted EBIT (Six Months Ended June 30, 2023, in millions) | Segment Adjusted EBIT (Six Months Ended June 30, 2023) | Adjusted EBIT | % Change vs 2022 | | :--- | :--- | :--- | | **Americas Welding** | $272.3 | 18.6% | | **International Welding** | $63.4 | (12.1)% | | **The Harris Products Group** | $38.5 | 2.6% | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity remains strong, with cash from operations increasing to **$322.8 million** in the first half of 2023, driven by improved working capital, while key uses of cash included capital expenditures, acquisitions, share repurchases, and dividends - Cash provided by operating activities increased by **$181.5 million** in H1 2023 compared to H1 2022, primarily due to an improved working capital position[118](index=118&type=chunk)[119](index=119&type=chunk) - The company repurchased **$85.2 million** of its shares and paid **$74.5 million** in dividends during the first six months of 2023[118](index=118&type=chunk) - Adjusted return on invested capital (ROIC) was **22.9%** for the twelve months ended June 30, 2023, compared to **26.3%** for the prior-year period[122](index=122&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes in its exposure to market risk since December 31, 2022, referring readers to its Annual Report on Form 10-K for detailed disclosure - There have been no material changes in the Company's exposure to market risk since December 31, 2022[136](index=136&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with the integration of the recently acquired Fori business systems and control environment expected to be completed in 2023 - The company's management concluded that disclosure controls and procedures were effective as of June 30, 2023[137](index=137&type=chunk) - The company is currently integrating the systems and internal controls of the Fori acquisition, with completion expected in 2023[138](index=138&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, other information, and a list of exhibits filed with the Form 10-Q [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company is a co-defendant in numerous cases alleging asbestos-induced illness, with approximately **1,458 plaintiffs** having claims against the company as of June 30, 2023, representing a net decrease of 9 claims - As of June 30, 2023, the Company was a co-defendant in cases alleging asbestos-induced illness involving claims by approximately **1,458 plaintiffs**[142](index=142&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed, and the report directs readers to the detailed discussion in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - The company refers readers to the risk factors discussed in its Annual Report on Form 10-K for the year ended December 31, 2022, for potential risks that could materially affect the business[143](index=143&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the second quarter of 2023, the company repurchased a total of **311,974** common shares at an average price of **$170.13** per share as part of publicly announced share repurchase programs Share Repurchases (2023) | Period (2023) | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | **April** | 50,648 | $160.90 | | **May** | 118,209 | $169.40 | | **June** | 143,117 | $174.00 | | **Q2 Total** | 311,974 | $170.13 | - As of June 30, 2023, **8,441,786** shares remained authorized for repurchase under the company's current program[144](index=144&type=chunk)[146](index=146&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) The report discloses that Steve Hedlund, Executive Vice President & Chief Operating Officer, terminated a Rule 10b5-1 trading plan on May 11, 2023, which covered the sale of **8,235** shares - Executive Vice President & Chief Operating Officer Steve Hedlund terminated a Rule 10b5-1 trading plan on May 11, 2023, which was originally adopted on November 30, 2022, for the sale of **8,235** shares[148](index=148&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various management compensation agreements, officer certifications required by the Sarbanes-Oxley Act, and Inline XBRL data files - Exhibits filed include forms of various stock and performance award agreements for directors and executive officers, as well as certifications from the CEO and CFO[149](index=149&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the quarterly period ended March 31, 2023, encompassing income, balance sheet, equity, and cash flow statements with accompanying notes [Consolidated Statements of Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20(UNAUDITED)) The company reported net sales of **$1,039.3 million** and net income of **$121.9 million** for Q1 2023, with diluted EPS at **$2.09** Q1 2023 vs Q1 2022 Income Statement Highlights (In thousands, except per share amounts) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net sales | $1,039,343 | $925,448 | | Gross profit | $355,357 | $329,777 | | Operating income | $164,364 | $161,206 | | Net income | $121,931 | $126,030 | | Diluted earnings per share | $2.09 | $2.13 | | Cash dividends declared per share | $0.64 | $0.56 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20(UNAUDITED)) As of March 31, 2023, total assets increased to **$3.25 billion** from **$3.18 billion** at year-end 2022, primarily driven by accounts receivable and goodwill growth Balance Sheet Highlights (In thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $198,803 | $197,150 | | Inventories | $664,599 | $665,451 | | Total Current Assets | $1,610,491 | $1,557,790 | | Goodwill | $679,385 | $665,257 | | **TOTAL ASSETS** | **$3,253,201** | **$3,180,546** | | **Liabilities & Equity** | | | | Total Current Liabilities | $835,939 | $852,897 | | Long-term debt | $1,110,626 | $1,110,396 | | **Total Liabilities** | **$2,127,965** | **$2,146,505** | | **Total Equity** | **$1,125,236** | **$1,034,041** | [Consolidated Statements of Cash Flows](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) Net cash provided by operating activities significantly increased to **$123.9 million** in Q1 2023, driven by improved working capital management Q1 2023 vs Q1 2022 Cash Flow Highlights (In thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $123,931 | $43,090 | | Net cash used by investing activities | ($16,049) | ($40,116) | | Net cash used by financing activities | ($111,316) | ($40,597) | | Increase (decrease) in cash | $1,653 | ($38,585) | [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail accounting policies, revenue recognition by product line, the **Fori Automation acquisition**, and segment performance for Americas Welding, International Welding, and The Harris Products Group Net Sales by Product Line (In thousands) | Product Line | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Consumables | $569,684 | $539,162 | | Equipment | $469,659 | $386,286 | | **Total Net sales** | **$1,039,343** | **$925,448** | - On December 1, 2022, the Company acquired Fori Automation, LLC for a total purchase price consideration of **$468.7 million**. Fori contributed **$49.2 million** in net sales in Q1 2023[33](index=33&type=chunk) - The company has rationalization plans within the International Welding segment to align its cost structure, with liabilities of **$1.6 million** recognized as of March 31, 2023[43](index=43&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial results, highlighting a **12.3% increase in net sales** driven by acquisitions, volume, and pricing, alongside segment performance, liquidity, and non-GAAP reconciliations Components of Net Sales Change - Q1 2023 vs Q1 2022 | Component | % Change | | :--- | :--- | | Volume | 4.2% | | Acquisitions | 5.7% | | Price | 4.3% | | Foreign Exchange | (1.9)% | | **Total Net Sales Change** | **12.3%** | Segment Performance - Q1 2023 vs Q1 2022 (In thousands) | Segment | Net Sales (Q1 2023) | Net Sales Change | Adjusted EBIT (Q1 2023) | Adjusted EBIT Change | | :--- | :--- | :--- | :--- | :--- | | Americas Welding | $658,645 | +23.3% | $132,453 | +18.7% | | International Welding | $252,416 | -2.2% | $29,598 | -20.2% | | The Harris Products Group | $128,282 | -3.8% | $18,983 | -3.1% | Non-GAAP Reconciliation Highlights - Q1 2023 | Metric | As Reported | Adjusted | | :--- | :--- | :--- | | Operating Income | $164,364 | $169,097 | | Net Income | $121,931 | $124,200 | | Diluted EPS | $2.09 | $2.13 | - Cash provided by operating activities increased to **$123.9 million** in Q1 2023 from **$43.1 million** in Q1 2022, primarily due to an improved working capital position[105](index=105&type=chunk)[107](index=107&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in the Company's exposure to market risk have occurred since December 31, 2022 - There have been no material changes in the Company's exposure to market risk since December 31, 2022[125](index=125&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2023, with integration of the acquired Fori business's internal control systems ongoing - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023[126](index=126&type=chunk) - The company is currently integrating the systems and internal controls of the acquired Fori business, with completion expected in 2023[127](index=127&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including cases with approximately **1,467 plaintiffs** alleging asbestos-induced illnesses as of March 31, 2023 - As of March 31, 2023, the Company was a co-defendant in cases alleging asbestos-induced illness involving claims by approximately **1,467 plaintiffs**[131](index=131&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the comprehensive discussion of risk factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 - Readers are directed to "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, for a comprehensive discussion of potential risks[132](index=132&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **193,823 common shares** at an average price of **$165.91 per share** during the first quarter of 2023 Issuer Purchases of Equity Securities - Q1 2023 | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2023 | 51,971 | $154.15 | | February 2023 | 66,257 | $172.23 | | March 2023 | 75,595 | $168.47 | | **Total** | **193,823** | **$165.91** | - On February 12, 2020, the Board authorized a new share repurchase program for up to **10 million shares**. Through March 31, 2023, **1.2 million shares** have been purchased under this program[135](index=135&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[134](index=134&type=chunk) [Other Information](index=43&type=section&id=Item%205.%20Other%20Information) A typographical error in the 'Purchase commitments' section of the 2022 Form 10-K was corrected in this filing - A typographical error related to Purchase commitments in the 2022 Form 10-K was corrected in this filing[137](index=137&type=chunk) [Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including an amendment to the credit agreement and required CEO and CFO certifications - Exhibits filed include an amendment to the credit agreement (10.1), forms of stock option and restricted stock unit agreements for executive officers (10.2, 10.3, 10.4), and CEO/CFO certifications (31.1, 31.2, 32.1)[138](index=138&type=chunk)

Non-GAAP 4) Pension net gains primarily due to the final settlement associated with the termination of a pension plan and are included in Other income (expense). Measures April 27, 2023 LINCOLN ELECTRIC HOLDINGS, INC. Q1 2023 Earnings Safe Harbor and Regulation G Disclosures Forward-Looking Statements: Statements made during this presentation which are not historical facts may be considered forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual events ...

Financial Performance and Targets - Lincoln Electric aims for a high teens to low 20% adjusted EPS CAGR (Compound Annual Growth Rate) from 2020 to 2025[7] - The company targets an average adjusted operating income margin of 16% (+/- 150 bps) as part of its Higher Standard 2025 Strategy[39] - Lincoln Electric targets an average ROIC (Return on Invested Capital) of 18% to 20%, aiming for top quartile performance[7, 39] - The company is targeting 15% average operating working capital as part of the 2025 strategy[7, 43] Growth Strategy and Market Position - Lincoln Electric is the 1 leader in the growing arc welding & cutting industry[7] - The company's automation sales run rate is $850 million, growing at a high single-digit to low double-digit organic sales rate with a low double-digit operating income margin[52] - Approximately 57% of 2022 equipment sales came from new products, reflecting a focus on innovation[43, 74] - Lincoln Electric estimates that 10% to 15% of its revenue serves infrastructure, EV (Electric Vehicle), and renewable energy applications[14, 51] Capital Allocation and Cash Flow - Lincoln Electric targets 100+% cash conversion[7, 43] - The company has a consecutive 27-year dividend increase history with a 13% CAGR (2018-2022)[7] Sustainability and ESG - Lincoln Electric is targeting a 52% reduction in safety incidents by 2025 compared to 2018, with a 25% reduction achieved by 2022[84]

Financial Performance - Net sales for 2022 increased to $3,761,211, a 16.3% increase from $3,234,180 in 2021[109] - Gross profit for 2022 was $1,280,760, representing 34.1% of sales, up from 33.0% in 2021, with a $212,155 increase year-over-year[109] - Operating income rose to $612,336 in 2022, a 32.6% increase compared to $461,669 in 2021[109] - Net income for 2022 was $472,224, a significant increase of 70.7% from $276,580 in 2021[109] - Consolidated net income rose by 70.8% to $472,224 in 2022 compared to $276,466 in 2021[119] - Adjusted EBIT for the consolidated entity increased by 29.7% to $636,951 in 2022 from $491,268 in 2021[119] - Adjusted diluted earnings per share increased to $8.27 in 2022 from $6.22 in 2021[128] Tax and Debt - The effective tax rate for 2022 was 20.3%, up from 14.9% in 2021, primarily due to a change in the mix of earnings[115] - The effective tax rate as reported was 20.3% in 2022, compared to 14.9% in 2021[128] - The total amount of debt outstanding as of December 31, 2022, was $1,203,879, an increase from $769,819 in 2021[142] - The Company’s total weighted average effective interest rate is 3.3%, with a remaining weighted average term of 11.4 years[144] - The Company entered into a term loan of $400,000 on November 29, 2022, maturing on November 29, 2025[147] - As of December 31, 2022, the Company had $45,000 of outstanding borrowings under its revolving credit agreement[145] - The Company had $1,118,336 in long-term debt, including the current portion, as of December 31, 2022[153] - The Company was in compliance with all debt covenants as of December 31, 2022[145] Segment Performance - The Americas Welding segment reported net sales of $2,288,934, a 25.5% increase from the previous year, driven by higher demand and product pricing[116] - International Welding segment net sales were $954,281, reflecting a slight increase of 0.6% despite unfavorable foreign exchange impacts[116] - Americas Welding net sales increased by 25.5% to $2,288,934 in 2022 from $1,824,481 in 2021[119] Cash Flow and Investments - Cash provided by operating activities increased by $18,323 to $383,386 in 2022 from $365,063 in 2021[135] - Cash used by investing activities rose significantly by $299,335 to $(504,691) in 2022 from $(205,356) in 2021, primarily due to acquisitions[135] - The company anticipates capital expenditures of $80,000 to $100,000 in 2023 to enhance capacity and operational effectiveness[137] Working Capital and Dividends - Average operating working capital to net sales increased to 20.9% in 2022 from 16.3% in 2021[139] - The company paid cash dividends of $130,724 in 2022, reflecting a 14.3% increase in the dividend payout rate[136] Investments and Expenses - The Company continues to invest in research and development to maintain its market-leading position in arc welding products[97] - The total stock-based compensation expense recognized in 2022 was $25,276, compared to $23,787 in 2021[158] - The Company's defined benefit plan expense was $(2,280) million in 2022, a significant decrease from $124,929 million in 2021, while defined contribution plan expense increased to $29,569 million in 2022 from $26,281 million in 2021[177] - The Company expects total 2023 expense related to retirement plans to increase by approximately $500 million to $1,500 million, excluding settlement charges[177] Financial Risk Management - The Company manages financial market risks, including currency exchange rates, commodity prices, and interest rates, using derivative financial instruments[194] - The gross notional dollar amount of foreign exchange contracts at December 31, 2022, was $66,296 million, with a hypothetical 10% change in the U.S. dollar potentially affecting accumulated other comprehensive income (loss) by $284 million[197] - The notional amount of commodity hedging contracts was 875,000 pounds at December 31, 2022, with a hypothetical 10% price change resulting in a value change of $319 million[200] - The gross notional dollar value of interest rate forward starting swap agreements was $100,000 million at December 31, 2022, with a hypothetical 100 basis point increase in effective interest rates potentially changing accumulated other comprehensive income (loss) by $7,584 million[201] Other Financial Metrics - The adjusted return on invested capital (ROIC) for 2022 was 22.7%, down from 23.9% in 2021[151] - The Company’s invested capital as of December 31, 2022, was $2,237,920, up from $1,633,728 in 2021[151] - The accumulated other comprehensive loss, excluding tax effects, decreased to $3,759 million as of December 31, 2022, down from $16,173 million as of December 31, 2021[178] - The excess of current cost over LIFO cost was $133,909 million at December 31, 2022, compared to $114,176 million at December 31, 2021[180] Revenue Recognition - The Company recognizes revenue primarily when control of the product is transferred to the customer, with less than 10% of net sales recognized over time[191]

Lincoln Electric Holdings, Inc. (NASDAQ:LECO) Q4 2022 Earnings Conference Call February 21, 2023 10:00 AM ET Company Participants Amanda Butler - Vice President of Investor Relations and Communications Chris Mapes - Chairman, President and Chief Executive Officer Steve Hedland - Chief Operating Officer Gabe Bruno - Chief Financial Officer Conference Call Participants Saree Boroditsky - Jefferies Bryan Blair - Oppenheimer Mig Dobre - Baird Adam Farley - Stifel Dillon Cumming - Morgan Stanley Steve Barger - K ...

Financial Performance Highlights - Full Year 2022 adjusted Return on Invested Capital (ROIC) was 22.7%[9] - Record 2022 adjusted Earnings Per Share (EPS) increased by 33% compared to the prior year[9] - Record 2022 sales increased by 16% compared to the prior year, with organic sales up by 20%[16] - Returned $312 million to shareholders through dividends and share repurchases[16] - Q4 organic sales increased 14%[10] Q4 2022 Income Statement Analysis - Net sales increased by 10.3% year-over-year, reaching $930.9 million[17] - Adjusted operating income increased by 20.2% year-over-year, reaching $146.8 million[17] - Net income increased by 46.6% year-over-year, reaching $109.1 million[17] - Adjusted diluted EPS increased by 20.5% year-over-year, reaching $1.94[17] Segment Performance in Q4 2022 - Americas Welding segment net sales increased by 19.4% year-over-year, reaching $573.6 million[19] - International Welding segment net sales decreased by 1.0% year-over-year, reaching $243.1 million[21] - The Harris Products Group net sales decreased by 3.6% year-over-year, reaching $114.2 million[25] Cash Flow and Capital Allocation - Cash flow from operations increased by 5% compared to the prior year[9] - Capital expenditure was $820 million[40] - Return to shareholders totaled $57 million in Q4[40] - The company has total debt of $1.2 billion and net debt of $1.0 billion[44]