LINCOLN ELECTRIC HOLDINGS INC

Lincoln Electric Holdings, Inc. is a high-performance industrial machinery and technology leader that helps customers manufacture and maintain vital equipment and infrastructure. The arc welding and cutting industry is generally a mature industry in developed markets such as North America and Western Europe and is cyclical in nature, with overall demand largely determined by economic cycles and the level of capital spending in manufacturing and other industrial sectors. The Company's major end-user markets include general fabrication, energy (oil and gas, power generation and process industries), heavy industries (heavy fabrication, ship building and maintenance and repair), automotive and transportation, and structural (non-residential construction and infrastructure).

The Company believes it is the world's largest manufacturer of arc welding solutions and has relatively few global broad-line competitors worldwide, but numerous smaller competitors in specific geographic markets. Competition in the arc welding and cutting industry is based on brand preference, product quality, price, performance, warranty, delivery, service, commercial programs, and technical support. The Company believes its performance against these factors has contributed to its position as the leader in the arc welding industry and leader in automation, cutting, mobile and power solutions. The Company believes it has a competitive advantage in the marketplace because of its highly trained engineers, technical sales force and the innovative solutions engineered by its welding research and development staff.

The Company generates revenue through the sale of arc welding equipment, filler metals (welding, brazing and soldering consumables), cutting systems (laser, plasma and oxyfuel), wire feeding systems, fume control equipment, welding accessories, specialty gas regulators, mobile power equipment, wear solutions, software, and education solutions, as well as a comprehensive portfolio of automated solutions and system integration services. Substantially all of the Company's sales arrangements are short-term in nature involving a single performance obligation, and approximately 10% of the Company's Net sales are recognized over time. Products are sold globally through industrial distributors, retailers, and directly to users of welding products (OEMs, manufacturers and integrators).

The Company's products include arc welding equipment, filler metals (welding, brazing and soldering consumables), cutting systems (laser, plasma and oxyfuel), wire feeding systems, fume control equipment, welding accessories, specialty gas regulators, mobile power equipment, wear solutions, software, and education solutions. Services include additive manufacturing, precision fabrication, wear services, upfitting, and training. Solutions range in technology and features from basic units used for personal, maintenance and light manufacturing use to highly sophisticated robotic solutions for complex fabrication and production activities. The Company's business units are aligned into three operating segments: 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, Middle East, Africa, Asia and Australia. The Harris Products Group includes the Company's global cutting, soldering and brazing businesses, specialty gas equipment, as well as the retail business which is primarily in the United States.

For the year ended December 31, 2025, Net sales were $4,233,003 ¹, compared to $4,008,670 ² in 2024. Net income was $520,533 ³ in 2025 versus $466,108 ⁴ in 2024. Diluted earnings per share were $9.32 ⁵ in 2025 compared to $8.15 ⁶ in 2024. Operating income was $718,059 ⁷ in 2025 versus $636,462 ⁸ in 2024. Cash provided by operating activities was $661,173 ⁹ in 2025 compared to $598,977 ¹⁰ in 2024.

On April 1, 2025, the Company acquired a 35% ¹¹ ownership interest in Alloy Steel Australia (Int) Pty Ltd., and on August 1, 2025, acquired the remaining 65% ¹² ownership interest, for a total purchase price of $131,427 ¹³, net of cash acquired. On July 30, 2024, the Company acquired 100% ownership of Vanair Manufacturing, LLC for a total purchase price of $108,651 ¹⁴, net of cash acquired. On June 3, 2024, the Company acquired 100% ownership of Inrotech A/S for a purchase price of $42,352 ¹⁵, net of cash acquired. On April 1, 2024, the Company acquired 100% ownership of Superior Controls, LLC (RedViking) for a purchase price of $107,447 ¹⁶, net of cash acquired. On May 3, 2023, the Company acquired 100% ownership of Powermig Automação e Soldagem Ltda. for a purchase price of $29,572 ¹⁷, net of cash acquired. During 2025, the Company repurchased 1,633 ¹⁸ thousand shares for treasury at a cost of $338,308 ¹⁹. Cash dividends paid to shareholders were $168,240 ²⁰ in 2025. In January 2026, the Company paid a cash dividend of $0.79 ²¹ per share, or $43,328 ²², to shareholders of record on December 31, 2025, which reflects a 5.3% ²³ increase in the Company's dividend payout rate.

Net sales increased 5.6% ²⁴ in 2025 compared to 2024, primarily due to an increase in organic sales and a benefit from acquisitions. Gross profit as a percentage of sales decreased 0.5% ²⁵ for 2025 as compared to 2024 driven by lower volumes partially offset by effective cost management. Operating income as a percentage of sales was 17.0% ²⁶ in 2025 as compared to 15.9% ²⁷ in 2024. Excluding special items, Operating income as a percentage of sales was 17.6% ²⁸ for both 2025 and 2024. Net income as a percent of Net sales was 12.3% ²⁹ in 2025 compared to 11.6% ³⁰ in 2024.

The Company currently anticipates capital expenditures of $110,000 ³¹ to $130,000 ³² in 2026. Anticipated capital expenditures include investments to increase capacity, improve operational effectiveness and for general maintenance.

The Company continues to expand globally and periodically consider acquisitions 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, particularly the long-term debt market, as well as the syndicated bank loan market. The Company's capital allocation priorities include internal investment to support existing operations and organic growth, investment in acquisitions to grow the business and then returning capital to shareholders through dividends and share repurchases.

The Company's capital allocation priorities include internal investment to support existing operations and organic growth, investment in acquisitions to grow the business and then returning capital to shareholders through dividends and share repurchases. The Company's financing strategy is to fund itself at the lowest after-tax cost of funding.

Management critically evaluates all proposed capital expenditures and expects each project to increase efficiency, reduce costs, support sales growth or improve the overall safety and environmental conditions of the Company's facilities. 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 currently anticipates capital expenditures of $110,000 ³³ to $130,000 ³⁴ in 2026. As of December 31, 2025, the Company had $308,789 ³⁵ of cash and cash equivalents on hand and $143,780 ³⁶ of outstanding borrowings under its $1,026,854 ³⁷ revolving credit facilities. The Company has a $1 billion ³⁸ revolving credit facility which matures on June 20, 2029. As of December 31, 2025, the Company had $858,000 ³⁹ of availability under the revolving credit facility. Additionally, the Company has other lines of credit with total availability of $25,074 ⁴⁰ as of December 31, 2025. On February 12, 2020, the Company's Board authorized a share repurchase program for up to 10 million ⁴¹ shares of the Company's common stock. As of December 31, 2025, there were 5.1 million ⁴² shares available under the authorization.

Recessionary economic cycles, global supply chain disruptions, higher logistics costs, high interest rates, inflation, higher raw materials costs, higher labor costs, trade barriers in the world markets, financial turmoil related to sovereign debt and changes in tax laws or trade laws or other economic factors and other challenges affecting the countries and industries in which we do business, including, but not limited to, geopolitical conflicts, could adversely affect demand for our products. The U.S. presidential administration has imposed tariffs on foreign imports into the United States and, in response, many foreign countries have implemented or increased tariffs on imports into their countries. The Company has taken actions to address the impact of these initial trade policies and will continue to monitor evolving trade negotiations to determine if additional measures are warranted, although these actions may not be successful.

The Company's operating results are sensitive to changes in general economic conditions, including an increase in interest rates, inflationary pressures and fluctuations in foreign currency rates. The arc welding and cutting industry is generally a mature industry in developed markets such as North America and Western Europe and is cyclical in nature. Overall demand for arc welding and cutting products is largely determined by the level of capital spending in manufacturing and other industrial sectors, and the welding industry has historically experienced contraction during periods of slowing industrial activity.

The Company is a co-defendant in cases alleging asbestos induced illness involving claims by approximately 1,126 ⁴³ plaintiffs as of December 31, 2025. Asbestos use in welding consumables in the United States ceased in 1981. Since January 1, 1995, 57,272 ⁴⁴ of those claims were dismissed, 23 ⁴⁵ were tried to defense verdicts, 7 ⁴⁶ were tried to plaintiff verdicts (which were reversed or resolved after appeal), 1 ⁴⁷ was resolved by agreement for an immaterial amount and 1,023 ⁴⁸ were decided in favor of the Company following summary judgment motions. The Company's operating results are sensitive to changes in general economic conditions, including an increase in interest rates, inflationary pressures and fluctuations in foreign currency rates. The arc welding and cutting industry is generally a mature industry in developed markets such as North America and Western Europe and is cyclical in nature. The Company's facilities and operations, and the facilities and operations of its suppliers and customers, could be disrupted by events beyond our control, such as war, acts of terror, political unrest, pandemics, labor disputes, trade policies, and natural disasters, including events caused by climate change.

Management's discussion emphasizes the Company's position as a high-performance industrial machinery and technology leader, highlighting innovative solutions that enable higher quality and productivity across welding, cutting, brazing, machining, process automation, and field repair. The Company believes its significant investment in research and development, its highly trained technical sales force and its extensive distributor network provide a competitive advantage in the marketplace. Management notes that the Company has taken actions to address the impact of trade policies and will continue to monitor evolving trade negotiations to determine if additional measures are warranted. The Company currently anticipates capital expenditures of $110,000 ⁴⁹ to $130,000 ⁵⁰ in 2026. In January 2026, the Company paid a cash dividend of $0.79 ⁵¹ per share, or $43,328 ⁵², to shareholders of record on December 31, 2025, which reflects a 5.3% ⁵³ increase in the Company's dividend payout rate.