LINCOLN ELECTRIC HOLDINGS INC
For the period ended Jun 30, 2024. Filed Jul 31, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 31, 2024
LECO$275.35+1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-25.
0000059527-24-000015
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0000059527-24-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 52 previous paragraphs and 59 current paragraphs.
40 unchanged; 10 reworded; 8 added; 2 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 28 previous and 37 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Rationalization and Asset Impairment Charges:
Current report
Rationalization and asset impairment charges increased for the three and six months ended June 30, 2024 as compared to the same 2023 periods, primarily due to the disposal of the Company’s Russian entity.
Current report
Operating Income:
Current report
Operating income as a percentage of sales, was 14.6% for the three months ended June 30, 2024 as compared to 16.8% in the prior year. Excluding special items, Operating income as a percentage of sales, was 17.4% for both comparable periods. Operating income as a percentage of sales, was 15.7% for the six months ended June 30, 2024 as compared to 16.3% in the prior year. Excluding special items, Operating income as a percentage of sales, was 17.4% and 16.8%, respectively, for the comparable periods. Refer to explanations above for additional details. Also refer to Non-GAAP Financial Measures for a reconciliation of Adjusted operating income.
Current report
Other Income (Expense):
Current report
Other income (expense) for the three and six months ended June 30, 2024 primarily relates to the loss on asset disposal partially offset by the gain on termination of interest rate swaps.
Current report
On June 20, 2024, the Company entered into a Note Purchase Agreement (the “NPA”) pursuant to which it agreed to issue new senior unsecured notes (“2024 Notes”) in an aggregate principal amount of $550,000, at par. Pursuant to the NPA, the Company issued one series of the 2024 Notes in the aggregate principal amount of $400,000 on June 20, 2024, and will issue two series of the 2024 Notes each in the aggregate principal amount of $75,000 on August 22, 2024.
Current report
In June 2024, the Company terminated the interest rate swaps that were associated with the Term Loan and realized a gain of $2,428, which is recorded in Other income (expense).
Removed paragraphs (2)
Previous report
Adjusted Earnings Before Interest and Income Taxes:
Previous report
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.
Reworded paragraphs (10)
Previous wording
Net sales decreased for the three months ended March 31, 2024 primarily due to softer demand across segments.
Current wording
Net sales decreased for the three and six months ended June 30, 2024 primarily due to softer demand across segments.
Previous wording
Gross profit increased for the three months ended March 31, 2024 driven by favorable mix and effective cost management. The three months ended March 31, 2024 includes a last-in, first-out (“LIFO”) benefit of $531, as compared with charges of $2,191 in the comparable 2023 period.
Current wording
Gross profit as a percentage of sales increased 2.8% and 3.2%, respectively, for the three and six months ended June 30, 2024 as compared to the same 2023 periods, driven by the benefit of effective cost management and operational improvements. The three and six months ended June 30, 2024 includes a last-in, first-out (“LIFO”) benefit of $2,244 and $2,774, respectively, as compared with charges of $310 and $2,502 in the comparable 2023 periods.
Previous wording
SG&A expenses increased for the three months ended March 31, 2024 as compared to the same 2023 period, primarily due to higher employee-related costs.
Current wording
SG&A expenses increased for the three and six months ended June 30, 2024 as compared to the same 2023 periods, primarily due to acquisitions and higher employee-related costs.
Previous wording
The effective tax rate was higher for the three months ended March 31, 2024 as compared to the same period in 2023, primarily due to mix of earnings and discrete tax items.
Current wording
The effective tax rate was higher for the three and six months ended June 30, 2024 as compared to the same periods in 2023, primarily due to mix of earnings and discrete tax items.
Previous wording
In April 2024, the Company paid a cash dividend of $0.71 per share, or $40,405, to shareholders of record as of March 31, 2024.
Current wording
In July 2024, the Company paid a cash dividend of $0.71 per share, or $40,239, to shareholders of record as of June 30, 2024.
Previous wording
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.
Current wording
At June 30, 2024 and December 31, 2023, the fair value of long-term debt, including the current portion, was approximately $1,017,606 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 $1,098,434 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.
Previous wording
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.
Current wording
On June 20, 2024, the Company terminated its existing $500,000 revolving credit facility and entered into a new $1 billion revolving credit facility, which may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $300,000. The new revolving credit facility matures on June 20, 2029. The new revolving credit facility will initially bear interest on outstanding borrowings at a per annum rate equal to secured overnight finance rate (“SOFR”) plus 1.10% and could fluctuate based on the Company’s total net leverage ratio at a spread ranging from SOFR plus 1.10% to SOFR plus 1.60%. The financial covenants consist of a maximum net leverage ratio of 3.5x EBITDA and a minimum interest coverage ratio of 2.5x EBITDA. The new revolving credit facility 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 June 30, 2024, the Company was in compliance with all of its covenants and had no outstanding borrowings under the new revolving credit facility.
Previous wording
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.
Current wording
The Company has other lines of credit and debt agreements totaling $37,412. As of June 30, 2024, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $6,254.
Previous wording
On April 1, 2015 and October 20, 2016, the Company entered into separate Note Purchase 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.
Current wording
On April 1, 2015 and October 20, 2016, the Company entered into separate Note Purchase 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% to 4.02%. Interest on the Notes is paid semi-annually.
Previous wording
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 net leverage ratio. As of March 31, 2024, the Company was in compliance with all of its covenants.
Current wording
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. On June 20, 2024, the Company used the net proceeds from the issuance of the initial series of 2024 Notes to repay the Term Loan in full.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The Company’s total weighted average effective interest rate and remaining weighted average tenure of the senior unsecured notes is 4.08%, including the impact from terminated swap agreements as discussed in Note 12, and 9.5 years, respectively. The senior unsecured notes contain certain affirmative and negative covenants. As of June 30, 2024, the Company was in compliance with all of its debt covenants relating to the senior unsecured notes.