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What changed in LINCOLN ELECTRIC HOLDINGS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LINCOLN ELECTRIC HOLDINGS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+157 added−169 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-21)

Top changes in LINCOLN ELECTRIC HOLDINGS INC's 2023 10-K

157 paragraphs added · 169 removed · 125 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

8 edited+0 added−1 removed33 unchanged
Biggest changeThe Fori acquisition will extend the Company’s market presence within the automotive sector as well as its automation footprint in the International Welding segment. ​ Customers The Company’s products are sold in both domestic and international markets. In the Americas, products are sold principally through industrial distributors, retailers and also directly to users of welding products (OEMs, manufacturers and integrators).
Biggest changeCustomers The Company’s products are sold in both domestic and international markets. In the Americas, products are sold principally through industrial distributors, retailers and also directly to users of welding products (OEMs, manufacturers and integrators).
The Company’s systems are guided by the Corporate EHS&Q Policy, global directives and corporate standards that establish consistent guidelines for the management, measurement and reporting of environmental, health and safety activities, as well as quality across the Company’s global platform.
The Company’s systems are guided by Corporate EHS&Q Policy, global directives and corporate standards that establish consistent guidelines for the management, measurement and reporting of environmental, health and safety activities, as well as quality across the Company’s global platform.
In addition, the Company supports community educational / career programming among secondary and high school students in order to address skills gaps in the industry and maintain awareness of attractive career pathways in manufacturing. ​ See "Part I, Item 1C" for information regarding the Company’s executive officers, which is incorporated herein by reference. ​ 4 Table of Contents ​ ​ Website Access The Company’s website, www.lincolnelectric.com, is used as a channel for routine dissemination of important information, including news releases and financial information.
In addition, the Company supports community educational / career programming among secondary and high school students in order to address skills gaps in the industry and maintain awareness of attractive career pathways in manufacturing. ​ See "Part I, Item 1D" for information regarding the Company’s executive officers, which is incorporated herein by reference. ​ 4 Table of Contents ​ ​ Website Access The Company’s website, www.lincolnelectric.com, is used as a channel for routine dissemination of important information, including news releases and financial information.
As a result, the Company is subject to business risks inherent to non-U.S. activities, including political uncertainty, import and export limitations, exchange controls and currency fluctuations. Human Capital Management Employee Profile ​ The Company’s employees are its most valuable asset as they represent the foundation of the Company and its future success.
As a result, the Company is subject to business risks inherent to non-U.S. activities, including political uncertainty, import and export limitations, environmental regulation, exchange controls and currency fluctuations. Human Capital Management Employee Profile ​ The Company’s employees are its most valuable asset as they represent the foundation of the Company and its future success.
The Company has implemented several measures that focus on ensuring that accountability exists for making progress in diversity. The CEO and other senior leaders have diversity and inclusion objectives as part of their annual 3 Table of Contents ​ performance goals. The Company focuses on diverse talent sourcing strategies and partners with external organizations that develop and supply diverse talent.
The Company has implemented several measures that focus on accountability for making progress in diversity. 3 Table of Contents ​ The CEO and other senior leaders have diversity and inclusion objectives as part of their annual performance goals. The Company focuses on diverse talent sourcing strategies and partners with external organizations that develop and supply diverse talent.
The number of persons employed by the Company worldwide at December 31, 2022 was approximately 12,000. ​ Employee Engagement ​ The Company strongly believes that employee engagement drives better business results and that a highly engaged workforce can increase innovation, productivity and bottom-line performance while reducing costs.
The number of persons employed by the Company worldwide at December 31, 2023 was approximately 12,000. ​ Employee Engagement ​ The Company strongly believes that employee engagement drives better business results and that a highly engaged workforce can increase innovation, productivity and bottom-line performance while reducing costs.
This evaluation includes the Company’s CEO, as well as segment business and functional leaders, and focuses on high potential talent, diverse talent and succession within the Company’s most critical roles. ​ The Company believes that the practices outlined above result in sustained increases in shareholder value and reflect its compensation philosophy of aligning long-term pay and performance. ​ Health and Safety ​ Health and safety is a priority for the Company, its vision is an accident-free workplace with zero safety incidents.
This evaluation includes the Company’s CEO, as well as segment business and functional leaders who focus on high potential and diverse talent, as well as planning succession within the Company’s most critical roles. ​ The Company believes that the practices outlined above result in sustained increases in shareholder value and reflect its compensation philosophy of aligning long-term pay and performance. ​ Health and Safety ​ Health and safety is a priority for the Company, and its vision is an accident-free workplace with zero safety incidents.
The Company is ISO 14001 certified at most significant manufacturing facilities in North America and Europe and is progressing towards certification at its remaining facilities worldwide. In addition, the Company is ISO 9001 certified at 42 facilities worldwide.
The Company is ISO 14001 certified at most significant manufacturing facilities in North America and Europe and is progressing towards certification at its remaining facilities worldwide. In addition, the Company is ISO 9001 certified at 46 facilities worldwide.
Removed
On December 1, 2022, the Company acquired Fori Automation, LLC (“Fori”) for a cash purchase price of $427,000, subject to customary working capital adjustments. Fori is a leading designer and manufacturer of complex, multi-armed automated welding systems, with an extensive range of automated assembly systems, automated material handling solutions, automated large-scale, industrial guidance vehicles, and end of line testing systems.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWarranty claims are not generally covered by insurance and we may incur significant warranty costs in the future for which we would not be reimbursed. 10 Table of Contents ​ We may incur losses if we do not achieve contractual commitments, including project performance requirements or project schedules.
Biggest changeWe may incur losses if we do not achieve contractual commitments, including project performance requirements or project schedules. Project performance can be affected by a number of factors, including but not limited to, availability of materials, changes in the project scope of services, environmental conditions or labor disruptions.
Although the Company’s Net sales and Total assets in Russia were less than 1% of consolidated Net sales and Total assets for the year ended December 31, 2022, the Russia-Ukraine conflict and sanctions imposed globally may result in economic and supply chain disruptions, the ultimate financial impact of which cannot be reasonably estimated at this time.
Although the Company’s Net sales and Total assets in Russia were less than 1% of consolidated Net sales and Total assets for the year ended December 31, 2023 and 2022, the Russia-Ukraine conflict and sanctions imposed globally may result in economic and supply chain disruptions, the ultimate financial impact of which cannot be reasonably estimated at this time.
As a result of these actions, we will likely continue to incur charges, which may include but are not limited to asset impairments, employee severance costs, charges for pension and other postretirement contractual benefits and pension settlements, any of which could be 9 Table of Contents ​ significant, and could adversely affect our financial condition and results of operations.
As a result of these actions, we will likely continue to incur charges, which may include but are not limited to asset impairments, employee severance costs, charges for pension and other postretirement contractual benefits and pension settlements, any of which could be significant, and could adversely affect our financial condition and results of operations.
Project cancellations, scope adjustments, deferrals or changes in cost estimates may reduce the dollar amount of revenue and profits that we actually earn. Changes in tax rates or exposure to additional income tax liabilities could affect profitability. Our business is subject to income taxes in the United States and various foreign jurisdictions.
Project cancellations, scope adjustments, deferrals or changes in cost estimates may reduce the dollar amount of revenue and profits that we actually earn. 10 Table of Contents ​ Changes in tax rates or exposure to additional income tax liabilities could affect profitability. Our business is subject to income taxes in the United States and various foreign jurisdictions.
We are subject to risks relating to our information technology systems. The conduct and management of our business relies extensively on information technology systems, which contain confidential information related to our customers, suppliers and employees and other proprietary business information.
We are subject to risks relating to our information systems and data. The conduct and management of our business relies extensively on information systems, which contain confidential information related to our customers, suppliers and employees and other proprietary business information.
Since January 1, 1995, we have been a co-defendant in asbestos cases that have been resolved as follows: 56,877 of those claims were dismissed, 23 were tried to defense verdicts, 7 were tried to plaintiff verdicts (which were reversed or resolved after appeal), 1 was resolved by agreement for an immaterial amount and 1,012 were decided in favor of the Company following summary judgment motions.
Since January 1, 1995, we have been a co-defendant in asbestos cases that have been resolved as follows: 56,986 of those claims were dismissed, 23 were tried to defense verdicts, 7 were tried to plaintiff verdicts (which were reversed or resolved after appeal), 1 was resolved by agreement for an immaterial amount and 1,015 were decided in favor of the Company following summary judgment motions.
Our goal is to pro-actively manage risks in a structured approach and in conjunction with the strategic planning process, with the intent to preserve and enhance shareholder value. However, these and other risks and uncertainties could cause our results to vary materially from recent results or from our anticipated future results.
Our goal is to proactively manage risks in a structured approach and in conjunction with the strategic planning process, with the intent to preserve and enhance shareholder value. However, these and other risks and uncertainties could cause our results to vary materially from recent results or from our anticipated future results.
We may incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, liabilities resulting from third-party property damage or personal injury claims, or our products could be prohibited from entering certain jurisdictions, if we were to violate or become liable under environmental laws, if our products become non-compliant with environmental laws or if we were to undertake environmental protection actions voluntarily.
We may incur substantial costs, including 11 Table of Contents ​ cleanup costs, fines and civil or criminal sanctions, liabilities resulting from third-party property damage or personal injury claims, or our products could be prohibited from entering certain jurisdictions, if we were to violate or become liable under environmental laws, if our products become non-compliant with environmental laws or if we were to undertake environmental protection actions voluntarily.
We cannot be assured that new products or product improvements, once developed, will meet with customer acceptance and contribute positively to our operating results, or that we will be able to continue our product development efforts at a pace to sustain future growth.
We cannot be assured that new products or product improvements, once developed, will meet with customer acceptance and contribute positively to our operating results, or that we will be able to continue our 8 Table of Contents ​ product development efforts at a pace to sustain future growth.
Any of these could have an adverse effect on our results of operations and financial condition. Risks Related to Human Capital Our operations depend on maintaining a skilled workforce, and any interruption in our workforce could negatively impact our results of operations and financial condition.
Any of these events could have an adverse effect on our results of operations and financial condition. 7 Table of Contents ​ Risks Related to Human Capital Our operations depend on maintaining a skilled workforce, and any interruption in our workforce could negatively impact our results of operations and financial condition.
The availability and prices for energy costs and raw materials, including steel, nonferrous metals and chemicals, are subject to volatility and are influenced by worldwide economic conditions, including the current rising inflationary pressure.
The availability and prices for energy costs and raw materials, including steel, nonferrous metals and chemicals, are subject to volatility and are influenced by worldwide economic conditions.
A number of governments and agencies in the U.S. and in foreign jurisdictions have proposed and may continue to introduce regulatory changes to address climate change, including regulations related to greenhouse gas emissions.
We may be exposed to certain regulatory and financial risks related to climate change. A number of governments and agencies in the U.S. and in foreign jurisdictions have proposed and may continue to introduce regulatory changes to address climate change, including regulations related to greenhouse gas emissions.
Our global operations are subject to increasingly complex environmental regulatory requirements. We are subject to increasingly complex environmental regulations affecting international manufacturers, including those related to air and water emissions, waste management and climate change.
We are subject to increasingly complex environmental regulations affecting international manufacturers, including those related to air and water emissions, waste management and climate change.
We also face increasing complexity in our products design and procurement operations as we adjust to new and future requirements relating to the design, production and labeling of our products that are sold worldwide in multiple jurisdictions.
We also face increasing complexity in our products design and procurement operations as we adjust to new and future requirements relating to the design, production and labeling of our products that are sold worldwide in multiple jurisdictions. The ultimate costs under environmental laws and the timing of these costs are difficult to predict.
For more information regarding rationalization plans, refer to the rationalization and asset impairment related disclosure under Note 7 to the Company’s consolidated financial statements. Risks Related to Legal, Compliance and Regulatory Matters ​ We are a co-defendant in litigation alleging asbestos induced illness. Liabilities relating to such litigation could reduce our profitability and impair our financial condition.
For more information regarding rationalization plans, refer to the rationalization and asset impairment related disclosure under Note 7 to the Company’s consolidated financial statements. ​ 9 Table of Contents ​ Risks Related to Legal, Compliance and Regulatory Matters ​ We are a co-defendant in litigation alleging asbestos induced illness.
Nevertheless, due to the nature of cyber threats, there can be no assurance that our preventive efforts can fully mitigate the risks of all cyber incidents, and a significant security breach could result in financial loss, unfavorable publicity, damage to our reputation, loss of our trade secrets and other competitive information, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties and fines and other sanctions resulting from any related breaches of data privacy regulations.
Nevertheless, due to the nature of cybersecurity threats, there can be no assurance that our preventive efforts can fully mitigate the risks of all cybersecurity threats and cybersecurity incidents, and a significant cybersecurity incident could result in financial loss, unfavorable publicity, damage to our reputation, loss of data, including our trade secrets and other competitive information, allegations by our customers and business partners that we have not performed our contractual obligations, litigation by affected parties, governmental investigations, and related monetary damages, injunctive requirements, and fines or other sanctions.
We maintain some of these systems and are also dependent on a number of critical corporate infrastructure services provided by third parties relating to, among other things, human resources, electronic communication services and finance functions. Like many multinational companies, our systems are subject to regular cyber attacks and other malicious efforts to cause cyber security incidents.
We maintain some of these systems and are also dependent on a number of critical information technology and other infrastructure services provided by third parties relating to, among other things, human resources, electronic communication services and finance functions.
Our facilities and operations, and the facilities and operations of our suppliers and customers, could be disrupted by events beyond our control, such as war, political unrest, pandemics, including the current coronavirus disease (“COVID-19”) pandemic , labor disputes and natural disasters, including events caused by climate change.
Our facilities and operations, and the facilities and operations of our suppliers and customers, could be disrupted by events beyond our control, such as war, political unrest, pandemics, labor disputes and natural disasters, including events caused by climate change. Any such disruption could cause delays in the production and distribution of our products and the loss of sales and customers.
As a result, after a divestiture, we may remain secondarily liable for the obligations guaranteed or supported to the extent that the buyer of the assets fails to perform these obligations. 8 Table of Contents ​ If we cannot continue to develop, manufacture and market products that meet customer demands, continue to enforce the intellectual property rights on which our business depends or if third parties assert that we violate their intellectual property rights, our revenues, gross margins and results of operations may suffer.
If we cannot continue to develop, manufacture and market products that meet customer demands, continue to enforce the intellectual property rights on which our business depends or if third parties assert that we violate their intellectual property rights, our revenues, gross margins and results of operations may suffer.
Availability of and volatility in energy costs or raw material prices may adversely affect our performance.
Insurance proceeds may not adequately compensate the Company for the losses. Availability of and volatility in energy costs or raw material prices may adversely affect our performance.
The Company continues 7 Table of Contents ​ to invest in cyber security, including maintaining and improving cyber security resilience, and the Company’s cyber security risks are regularly monitored by the Audit Committee of our Board of Directors.
The Company continues to invest in cybersecurity, including measures intended to maintain and enhance cybersecurity resilience, and the Company’s cybersecurity risks are regularly monitored by the Audit Committee of our Board of Directors.
Even if we are successful defending such claims or product liability coverage is adequate, claims of this nature could cause customers to lose confidence in our products and our Company.
Even if we are successful defending such claims or product liability coverage is adequate, claims of this nature could cause customers to lose confidence in our products and our Company. Warranty claims are not generally covered by insurance and we may incur significant warranty costs in the future for which we would not be reimbursed.
Project performance can be affected by a number of factors, including but not limited to, availability of materials, changes in the project scope of services, environmental conditions or labor disruptions. In addition, our backlog consists of the expected revenue from projects for which we have an executed contract or commitment with a customer.
In addition, our backlog consists of the expected revenue from projects for which we have an executed contract or commitment with a customer.
As of December 31, 2022, we were a co-defendant in cases alleging asbestos induced illness involving claims by approximately 1,483 plaintiffs. In each instance, we are one of a large number of defendants. The asbestos claimants allege that exposure to asbestos contained in welding consumables caused the plaintiffs to develop adverse pulmonary diseases, including mesothelioma and other lung cancers.
Liabilities relating to such litigation could reduce our profitability and impair our financial condition. As of December 31, 2023, we were a co-defendant in cases alleging asbestos induced illness involving claims by approximately 1,387 plaintiffs. In each instance, we are one of a large number of defendants.
Removed
Any such disruption could cause delays in the production and distribution of our products and the loss of sales and customers. Insurance proceeds may not adequately compensate the Company for the losses. We continue to experience supply shortages and inflationary pressures for certain components and raw materials due to the effects of the COVID-19 pandemic.
Added
Like many companies, our information systems and those of third parties who provide products or services to us may be subject to cybersecurity threats and cybersecurity incidents. To date, no such cybersecurity incidents have had a material impact on our business or operations.
Removed
We expect these supply chain challenges and cost impacts to continue for the foreseeable future as markets recover. Although we have secured additional supply from existing and alternate suppliers and have taken other mitigating actions to mitigate supply disruptions, we cannot guarantee that we can continue to do so in the future.
Added
However, cybersecurity threats or cybersecurity incidents involving our systems or those of our third party service providers could interrupt our ability to manage and operate the business, impact data, and adversely affect our results of operations and financial condition.
Removed
In this event, our business, results and financial condition could be adversely affected. Maintaining higher inventory levels to service customers may result in excess or obsolete inventory and related charges if demand for these products is lower than our expectations. This may adversely affect financial results.
Added
As a result, after a divestiture, we may remain secondarily liable for the obligations guaranteed or supported to the extent that the buyer of the assets fails to perform these obligations.
Removed
To date, these attacks have not had a material impact on our business or operations.
Added
The asbestos claimants allege that exposure to asbestos contained in welding consumables caused the plaintiffs to develop adverse pulmonary diseases, including mesothelioma and other lung cancers.
Removed
However, if as a result of future attacks, our systems are significantly damaged, cease to function properly or are subject to a significant cyber security breach, we may suffer an interruption in our ability to manage and operate the business, and our results of operations and financial condition could be adversely affected.
Added
There can be no assurance that changes in tax laws or regulations, both within the United States and the various foreign jurisdictions in which we operate, such as the proposed 15% global minimum tax under the Organisation for Economic Co-operation and Development (the “OECD”) Pillar Two, Global Anti-Base Erosion Rules (The “Pillar Two Rules”), will not materially and adversely affect our effective tax rate, tax payments, financial condition and results of operations.
Removed
The ultimate costs under environmental laws and the timing of these costs are difficult to predict. 11 Table of Contents ​ We may be exposed to certain regulatory and financial risks related to climate change.
Added
Evolving international laws and enforcement relating to data privacy could adversely affect our operations.
Added
Our business is also subject to increasingly complex and changing laws and regulations enacted to protect business and personal information in the United States and other jurisdictions regarding privacy, data protection and data security, including those related to the collection, storage, use, transmission and protection of personal information and other customer, vendor or employee data.
Added
Laws and regulations addressing personal information, including with respect to the European Union’s General Data Protection Regulation ("GDPR"), and the interpretation and enforcement of these and similar laws and regulations, are continuously evolving and there is significant uncertainty with respect to how compliance with these laws and regulations may develop and the costs and complexity of future compliance.
Added
In addition, as a result of existing or new data protection requirements, we incur and expect to continue to incur ongoing costs as part of our efforts to comply with applicable law.
Added
Any failure, or perceived failure, to comply with data protection or privacy-related legal obligations may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our operations and financial condition. ​ Our global operations are subject to increasingly complex environmental regulatory requirements.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Removed
ITEM 1C. INFORMATION ABOUT OUR EXECUTIVE OFFICERS EXECUTIVE OFFICERS OF THE REGISTRANT ​ ​ ​ ​ ​ ​ Name Age Position Christopher L. Mapes ​ 61 ​ Chairman of the Board effective December 21, 2013; President and Chief Executive Officer effective December 31, 2012; Chief Operating Officer from September 1, 2011 to December 31, 2012; Director since February 2010.
Added
ITEM 1C. CYBERSECURITY ​ Risk Management and Strategy Our cybersecurity risk management process is integrated into our Enterprise Risk Management “ERM” process as described in Item 1A. Risk Factors. Cybersecurity has been identified as a critical risk.
Removed
Gabriel Bruno ​ 55 ​ Executive Vice President, Chief Financial Officer and Treasurer since April 22, 2020; Executive Vice President, Finance from January 1, 2019 to April 22, 2020; Executive Vice President, Chief Human Resources Officer from July 1, 2016 to January 1, 2019; Executive Vice President, Chief Human Resources Officer and Chief Information Officer from February 18, 2016 to July 1, 2016; Executive Vice President, Chief Information Officer and Interim Chief Human Resources Officer from March 7, 2015 to February 18, 2016; Executive Vice President, Chief Information Officer from February 19, 2014 to March 7, 2015; Vice President, Chief Information Officer from May 1, 2012 to February 19, 2014; Vice President, Corporate Controller from 2005 to May 1, 2012.
Added
To identify, assess, and manage material cybersecurity risks, we regularly evaluate and take steps to enhance our cybersecurity protocols to protect against or mitigate cyber threats. We conduct third-party and internal assessments of our environments, including system penetration testing, test our recovery and response processes, and we consider industry standards when developing our information security program.
Removed
Jennifer I. Ansberry ​ 49 ​ Executive Vice President, General Counsel and Secretary since April 20, 2017; Vice President, Deputy General Counsel from August 1, 2014 to April 20, 2017; Deputy General Counsel from 2004 to August 1, 2014. Steven B.
Added
The Company has an information security training program, which calls for training all computer-based employees twice per year, through various employee training modules relative to information security matters and phishing simulation events with employees to raise cybersecurity awareness.
Removed
Hedlund ​ 56 ​ Executive Vice President, Chief Operating Officer since May 9, 2022; Executive Vice President and President, Americas and International Welding from October 21, 2020 to May 9, 2022; Executive Vice President and President, International Welding from June 1, 2017 to October 21, 2020; Senior Vice President and President, Global Automation from January 22, 2015 to June 1, 2017; Senior Vice President, Strategy & Business Development from February 19, 2014 to January 22, 2015; Vice President, Strategy and Business Development from September 15, 2008 to February 19, 2014.
Added
From time to time, we engage third-party assessors, consultants, auditors and others to assist us with evaluating, enhancing, implementing and monitoring our cybersecurity risk-management programs.
Removed
Michele R. Kuhrt ​ 56 ​ Executive Vice President, Chief Human Resources Officer since February 25, 2019; Executive Vice President, Chief Information Officer from July 1, 2016 to February 25, 2019; Senior Vice President, Tax from 2006 to July 1, 2016. Lisa A. Dietrich ​ 50 ​ Executive Vice President, Chief Information Officer since May 9, 2022.
Added
We maintain processes to oversee and identify cybersecurity risks associated with our use of third-party service providers such as vigilant contract and vendor due diligence review, as well as annual review of the service providers’ independent audit report where applicable.
Removed
Senior Vice President and Chief Information Officer, American Greetings Corporation (a global leader in the large and enduring Celebrations marketplace) from March 2018 until April 2022; Vice President of Business Transformation and Executive Director, American Greetings Corporation from January 2011 to March 2018. Geoffrey P.
Added
Like many companies, our systems and those of our third party providers who provide us with services and products may be subject to cybersecurity threats and cybersecurity incidents. To date, no such cybersecurity incidents have had a material impact on our business or operations.
Removed
Allman ​ 52 ​ Senior Vice President, Strategy and Business Development since January 1, 2019; Senior Vice President, Corporate Controller from January 14, 2014 to January 1, 2019; Corporate Controller from July 1, 2012 to January 14, 2014; Director, Regional Finance North America from October 1, 2009 to July 1, 2012. Michael J.
Added
However, if as a result of any future incidents or our systems are significantly damaged, cease to function properly or are subject to a significant cybersecurity incident, we may suffer an interruption in our ability to manage and operate the business, and our results of operations and financial condition could be adversely affected.
Removed
Whitehead ​ 49 ​ Senior Vice President, President, Global Automation, Cutting and Additive Businesses since January 1, 2019; Senior Vice President, Strategy and Business Development from August 1, 2016 to January 1, 2019; President, Lincoln Canada from January 1, 2015 to August 1, 2016; Director, New Product Development, Consumables R&D from January 1, 2012 to January 1, 2015. Peter M.
Added
The Company maintains an insurance policy with respect to cybersecurity and has 12 Table of Contents ​ undergone several simulation, preparedness and response exercises. See “Risks Related to Manufacturing and Operations” in Item 1A.
Removed
Pletcher ​ 49 ​ Senior Vice President, President International since August 1, 2022.
Added
Risk Factors. ​ Governance Our Board oversees the management of our risks, including risks from cybersecurity threats, on an enterprise-wide basis, and the Lead Independent Director promotes our Board’s engagement in this process. Our Board has delegated oversight of the risk assessment and mitigation process with respect to cybersecurity to the Audit Committee of our Board.
Removed
Senior Vice President, President, International Welding from December 10, 2020 to August 1, 2022; Vice President, President, Europe Welding from April 1, 2019 to December 10, 2020; Vice President, President, Global Automation from January 1, 2018 to April 1, 2019; Director, Business Development, Cutting Products from January 1, 2016 to January 1, 2018.
Added
The Audit Committee regularly monitors the Company’s cybersecurity risks and receives updates from the Chief Information Officer (“CIO”) at each meeting. In addition, the Audit Committee regularly reviews the overall effectiveness of the information technology security environment. The CIO reports to the full Board about cybersecurity on an annual basis. Lisa Dietrich is our CIO. Ms.
Removed
Gregory Doria ​ 46 ​ Senior Vice President, President, Harris Products Group since October 1, 2021; Senior Vice President, Chief Operating Officer, Harris Products Group from April 21, 2021 to September 30, 2021; Vice President, Marketing from July 1, 2019 to April 20, 2021; Director, Global Industry Segments from March 1, 2017 to June 30, 2019; Regional Sales Manager, West Region from October 6, 2014 to February 28, 2017. ​ The Company has been advised that there is no arrangement or understanding among any one of the officers listed and any other persons pursuant to which he or she was elected as an officer.
Added
Dietrich has 25 years of experience in the Information Technology (“IT”) and cybersecurity industry. In her role as CIO, Ms. Dietrich is responsible for assessing and managing material risks from cybersecurity threats, including monitoring the prevention, detection, mitigation and remediation of cybersecurity incidents. On at least a quarterly basis, Ms.
Removed
The executive officers are elected by the Board of Directors normally for a term of one year and/or until the election of their successors. ​
Added
Dietrich chairs the IT Governance Committee, which includes the executive management team. The purpose of this committee is to inform and make strategic decisions on IT related matters, including the prevention, detection, mitigation and remediation of cybersecurity incidents. In addition, Ms. Dietrich regularly reviews key cybersecurity risk metrics and reporting designed to measure the effectiveness of related processes and procedures.
Added
Ms. Dietrich utilizes this information in her reporting to the Board and Audit Committee of the Board.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn March 2022, in response to Russia’s invasion of Ukraine, the Company ceased operations in Russia. In addition, the Company maintains operating leases for some manufacturing facilities, distribution centers and sales offices throughout the world. Refer to Note 17 to the consolidated financial statements for information regarding the Company’s lease commitments. ​ 14 Table of Contents ​
Biggest changeThe Company believes that its existing properties are in good condition and are suitable for the conduct of its business. In March 2022, in response to Russia’s invasion of Ukraine, the Company ceased operations in Russia. In addition, the Company maintains operating leases for some manufacturing facilities, distribution centers and sales offices throughout the world.
Poland ​ Bielawa; Dzierzoniow. Romania ​ Buzau. Russia ​ Mtsensk. South Korea ​ Siheung-si. Spain ​ Valencia; Zaragoza. Turkey ​ Istanbul. United Kingdom ​ Sheffield, England; Port Talbot, Wales. The Harris Products Group: ​ ​ United States ​ Mason, Ohio; Gainesville, Georgia; Winston Salem, North Carolina; Gordonsville, Carthage, Tennessee; Florence, Alabama. Brazil ​ Maua. Italy ​ Verona. Mexico ​ Guadalupe.
Italy ​ Corsalone. Poland ​ Bielawa; Dzierzoniow. Romania ​ Buzau. Russia ​ Mtsensk. South Korea ​ Siheung-si. Spain ​ Valencia; Zaragoza. Turkey ​ Istanbul. United Kingdom ​ Sheffield, England; Port Talbot, Wales. The Harris Products Group: ​ ​ United States ​ Mason, Ohio; Gainesville, Georgia; Winston Salem, North Carolina; Gordonsville, Carthage, Tennessee; Florence, Alabama. Brazil ​ Maua. Italy ​ Verona.
Total Cleveland area property consists of 244 acres, of which present manufacturing facilities comprise an area of approximately 3,017,090 square feet. 13 Table of Contents ​ The Company has 71 manufacturing facilities, including operations and joint ventures in 20 countries, the significant locations (grouped by operating segment) of which are as follows: ​ ​ ​ ​ Americas Welding: ​ United States ​ Cleveland, Columbus, Coldwater, Fort Loramie, and Orrville, Ohio; Reno, Nevada; Ladson, South Carolina; Chattanooga, Tennessee; Detroit, Michigan; Fort Collins, Colorado; Bettendorf, Iowa; Churubusco, Indiana.
Total Cleveland area property consists of 244 acres, of which present manufacturing facilities comprise an area of approximately 3,017,090 square feet. 14 Table of Contents ​ The Company has 71 manufacturing and automation system integration facilities, including operations and joint ventures across 21 countries, the significant locations (grouped by operating segment) of which are as follows: ​ ​ ​ ​ Americas Welding: ​ United States ​ Cleveland, Columbus, Coldwater, Fort Loramie, and Orrville, Ohio; Reno, Nevada; Ladson, South Carolina; Chattanooga, Tennessee; Detroit, Michigan; Fort Collins, Colorado; Bettendorf, Iowa; Churubusco, Indiana.
Brazil ​ Atibaia; Guarulhos; Sao Paulo. Canada ​ Toronto; Mississauga; Hamilton; Montreal; Vankleek Hill. Colombia ​ Bogota. Mexico ​ Mexico City; Torreon; Saltillo. International Welding: ​ ​ Australia ​ Newcastle; Gladstone. Austria ​ Scheifling. China ​ Tangshan; Shanghai; Beijing. France ​ Grand-Quevilly; Partheny. Germany ​ Essen; Eisenberg; Frankfurt; Merzig. India ​ Chennai; Pune. Italy ​ Corsalone; Due Carrare.
Brazil ​ Atibaia; Guarulhos; Sao Paulo; Caxias do Sul. Canada ​ Toronto; Mississauga; Hamilton; Montreal; Vankleek Hill. Colombia ​ Bogota. Chile ​ Santiago. Mexico ​ Mexico City; Torreon; Saltillo. International Welding: ​ ​ Australia ​ Newcastle; Gladstone. Austria ​ Scheifling. China ​ Tangshan; Shanghai; Beijing. France ​ Grand-Quevilly; Partheny. Germany ​ Essen; Eisenberg; Frankfurt; Merzig. India ​ Chennai; Pune.
Poland ​ Dzierzoniow. Portugal ​ Albergaria-a-Velha. ​ All properties relating to the Company’s Cleveland, Ohio headquarters and manufacturing facilities are owned by the Company. Most of the Company’s foreign subsidiaries own manufacturing facilities in the country where they are located. The Company believes that its existing properties are in good condition and are suitable for the conduct of its business.
Mexico ​ Guadalupe. Poland ​ Dzierzoniow. Portugal ​ Albergaria-a-Velha. ​ All properties relating to the Company’s Cleveland, Ohio headquarters and manufacturing facilities are owned by the Company. Most of the Company’s foreign subsidiaries own manufacturing facilities in the country where they are located.
Added
Refer to Note 17 to the consolidated financial statements for information regarding the Company’s lease commitments. ​ 15 Table of Contents ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs of December 31, 2022, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by approximately 1,483 plaintiffs, which is a net decrease of 6 claims from those previously reported. In each instance, the Company is one of a large number of defendants.
Biggest changeAs of December 31, 2023, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by approximately 1,387 plaintiffs, which is a net decrease of 22 claims from those previously reported. In each instance, the Company is one of a large number of defendants.
Since January 1, 1995, the Company has been a co-defendant in other similar cases that have been resolved as follows: 56,877 of those claims were dismissed, 23 were tried to defense verdicts, 7 were tried to plaintiff verdicts (which were reversed or resolved after appeal), 1 was resolved by agreement for an immaterial amount and 1,012 were decided in favor of the Company following summary judgment motions. ​
Since January 1, 1995, the Company has been a co-defendant in other similar cases that have been resolved as follows: 56,986 of those claims were dismissed, 23 were tried to defense verdicts, 7 were tried to plaintiff verdicts (which were reversed or resolved after appeal), 1 was resolved by agreement for an immaterial amount and 1,015 were decided in favor of the Company following summary judgment motions. ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal shares purchased through the share repurchase program were 55 million shares at a cost of $2.5 billion for a weighted average cost of $44.89 per share through December 31, 2022. (3) On February 12, 2020, the Company’s Board of Directors authorized a new share repurchase program for up to an additional 10 million shares of the Company’s common stock.
Biggest change(2) On February 12, 2020, the Company’s Board of Directors authorized a share repurchase program for up to 10 million shares of the Company’s common stock.
This graph assumes that $100 was invested on December 31, 2017 in each of the Company’s common shares, the S&P 500 and the S&P 400.
This graph assumes that $100 was invested on December 31, 2018 in each of the Company’s common shares, the S&P 500 and the S&P 400.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common shares are traded on The NASDAQ Global Select Market under the symbol "LECO." The number of record holders of common shares at December 31, 2022 was 2,238.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common shares are traded on The NASDAQ Global Select Market under the symbol "LECO." The number of record holders of common shares at December 31, 2023 was 2,214.
Total shares purchased through the share repurchase program were 1.1 million shares at a total cost of $145.3 million for a weighted average cost of $132.65 per share through December 31, 2022. 15 Table of Contents ​ The following line graph compares the yearly percentage change in the cumulative total shareholder return on the Company’s common stock against the cumulative total return of the S&P Composite 500 Stock Index ("S&P 500") and the S&P 400 MidCap Index ("S&P 400") for the five-year calendar period commencing January 1, 2018 and ending December 31, 2022.
Total shares purchased through the share repurchase program were 2.1 million shares at a total cost of $334.9 million for a weighted average cost of $156.37 per share through December 31, 2023. 16 Table of Contents ​ The following line graph compares the yearly percentage change in the cumulative total shareholder return on the Company’s common stock against the cumulative total return of the S&P Composite 500 Stock Index ("S&P 500") and the S&P 400 MidCap Index ("S&P 400") for the five-year calendar period commencing January 1, 2019 and ending December 31, 2023.
Issuer purchases of equity securities for the fourth quarter 2022 were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares ​ Maximum Number ​ ​ ​ ​ ​ ​ ​ Purchased ​ of Shares that May ​ ​ Total Number of ​ ​ ​ ​ as Part of Publicly ​ Yet be Purchased ​ ​ Shares ​ Average Price ​ Announced Plans or ​ Under the Plans Period ​ Purchased ​ Paid Per Share ​ Programs ​ or Programs (2) (3) October 1 - 31, 2022 65,983 (1) ​ $ 128.36 65,429 9,018,517 November 1 - 30, 2022 57,782 (1) ​ 145.39 57,772 8,960,745 December 1 - 31, 2022 56,476 (1) ​ 145.31 56,419 8,904,326 Total 180,241 ​ 139.13 179,620 ​ (1) The above share repurchases include the surrender of the Company’s common shares in connection with the vesting of restricted awards.
Issuer purchases of equity securities for the fourth quarter 2023 were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares ​ Maximum Number ​ ​ ​ ​ ​ ​ ​ Purchased ​ of Shares that May ​ ​ Total Number of ​ ​ ​ ​ as Part of Publicly ​ Yet be Purchased ​ ​ Shares ​ Average Price ​ Announced Plans or ​ Under the Plans Period ​ Purchased ​ Paid Per Share ​ Programs ​ or Programs (2) October 1 - 31, 2023 100,749 (1) ​ $ 179.12 98,253 8,107,766 November 1 - 30, 2023 132,659 (1) ​ 188.51 132,617 7,975,149 December 1 - 31, 2023 120,132 (1) ​ 209.13 116,629 7,858,520 Total 353,540 ​ 192.84 347,499 ​ (1) The above share repurchases include the surrender of the Company’s common shares in connection with the vesting of restricted awards.
Removed
(2) 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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor a comparison of the Company’s results of operations, liquidity and capital resources for the fiscal years ended December 31, 2021 and 2020, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 18, 2022. 18 Table of Contents ​ Results of Operations The following table shows the Company’s results of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ 2022 ​ 2021 ​ 2022 vs. 2021 ​ ​ Amount % of Sales Amount % of Sales $ % Net sales (Note 2) $ 3,761,211 ​ ​ ​ ​ $ 3,234,180 ​ ​ $ 527,031 16.3 % Cost of goods sold 2,480,451 ​ ​ ​ 2,165,575 ​ ​ (314,876) (14.5) % Gross profit 1,280,760 ​ 34.1 % 1,068,605 33.0 % 212,155 19.9 % Selling, general & administrative expenses 656,636 ​ 17.5 % 597,109 18.5 % (59,527) (10.0) % Rationalization and asset impairment charges (Note 7) 11,788 ​ 0.3 % 9,827 0.3 % (1,961) (20.0) % Operating income 612,336 ​ 16.3 % 461,669 14.3 % 150,667 32.6 % Interest expense, net 29,500 ​ ​ ​ 22,214 ​ ​ (7,286) (32.8) % Other income (expense) (Note 12) 9,991 ​ ​ ​ (114,457) ​ ​ 124,448 108.7 % Income before income taxes 592,827 ​ 15.8 % 324,998 10.0 % 267,829 82.4 % Income taxes (Note 13) 120,603 ​ ​ ​ 48,418 ​ ​ (72,185) (149.1) % Effective tax rate (Note 13) 20.3 % ​ ​ 14.9 % ​ ​ (5.4) % ​ ​ Net income including non-controlling interests 472,224 ​ ​ ​ 276,580 ​ ​ 195,644 70.7 % Non-controlling interests in subsidiaries' income — ​ ​ ​ 114 ​ ​ (114) (100.0) % Net income $ 472,224 ​ 12.6 % $ 276,466 8.5 % $ 195,758 70.8 % Diluted earnings per share (Note 3) $ 8.04 ​ ​ ​ ​ $ 4.60 ​ $ 3.43 74.6 % ​ Net Sales: T he following table summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the twelve months ended December 31, 2022 on a consolidated basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Net Sales due to: ​ ​ ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2021 Volume Acquisitions Price Exchange 2022 Lincoln Electric Holdings, Inc. ​ $ 3,234,180 ​ $ 160,362 ​ $ 74,645 ​ $ 468,925 $ (176,901) ​ $ 3,761,211 ​ % Change ​ ​ ​ ​ ​ ​ ​ ​ ​ Lincoln Electric Holdings, Inc. ​ ​ ​ ​ 5.0 % 2.3 % 14.5 % ​ (5.5) % ​ 16.3 % ​ Net sales increased primarily as a result of higher demand levels, increased product pricing as a result of higher input costs and the impact of acquisitions, partially offset by unfavorable foreign exchange.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 21, 2023. 19 Table of Contents ​ Results of Operations The following table shows the Company’s results of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ 2023 ​ 2022 ​ 2023 vs. 2022 ​ ​ Amount % of Sales Amount % of Sales $ % Net sales $ 4,191,636 ​ ​ ​ ​ $ 3,761,211 ​ ​ $ 430,425 11.4 % Cost of goods sold 2,726,191 ​ ​ ​ 2,480,451 ​ ​ (245,740) (9.9) % Gross profit 1,465,445 ​ 35.0 % 1,280,760 34.1 % 184,685 14.4 % Selling, general & administrative expenses 758,910 ​ 18.1 % 656,636 17.5 % (102,274) (15.6) % Rationalization and asset impairment charges (11,314) ​ (0.3) % 11,788 0.3 % 23,102 196.0 % Operating income 717,849 ​ 17.1 % 612,336 16.3 % 105,513 17.2 % Interest expense, net 44,371 ​ ​ ​ 29,500 ​ ​ (14,871) (50.4) % Other income 13,388 ​ ​ ​ 9,991 ​ ​ 3,397 34.0 % Income before income taxes 686,866 ​ 16.4 % 592,827 15.8 % 94,039 15.9 % Income taxes 141,618 ​ ​ ​ 120,603 ​ ​ (21,015) (17.4) % Effective tax rate 20.6 % ​ ​ 20.3 % ​ ​ (0.3) % ​ ​ Net income $ 545,248 ​ 13.0 % $ 472,224 12.6 % $ 73,024 15.5 % Diluted earnings per share $ 9.37 ​ ​ ​ ​ $ 8.04 ​ $ 1.33 16.5 % ​ Net Sales: T he following table summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the twelve months ended December 31, 2023 on a consolidated basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Net Sales due to: ​ ​ ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2022 Volume Acquisitions Price Exchange 2023 Lincoln Electric Holdings, Inc. ​ $ 3,761,211 ​ $ 85,686 ​ $ 276,571 ​ $ 64,146 $ 4,022 ​ $ 4,191,636 ​ % Change ​ ​ ​ ​ ​ ​ ​ ​ ​ Lincoln Electric Holdings, Inc. ​ ​ ​ ​ 2.3 % 7.4 % 1.7 % ​ 0.1 % ​ 11.4 % ​ Net sales increased primarily due to the benefit of acquisitions, higher demand levels and increased product pricing as a result of higher input costs.
The Company’s systems are guided by the Corporate EHS&Q Policy, global directives and corporate standards that establish consistent guidelines for the management, measurement and reporting of environmental, health and safety activities, as well as quality across the Company’s global platform.
The Company’s systems are guided by Corporate EHS&Q Policy, global directives and corporate standards that establish consistent guidelines for the management, measurement and reporting of environmental, health and safety activities, as well as quality across the Company’s global platform.
Key financial measures utilized by the Company’s executive management and operating units in order to evaluate the results of its business and in understanding key variables impacting the current and future results of the Company include: sales; gross profit; selling, general and administrative expenses; operating income; earnings before interest and taxes; earnings before interest, taxes and bonus; net income; adjusted operating income; adjusted earnings before interest and income taxes; adjusted earnings before interest, taxes and bonus; adjusted net income; adjusted diluted earnings per share; operating cash flows; and capital expenditures, as well as applicable ratios such as return on invested capital and average operating working capital to sales.
Key financial measures utilized by the Company’s executive management and operating units in order to evaluate the results of its business and in understanding key variables impacting the current and future results of the Company include: sales; gross profit; selling, general and administrative expenses; operating income; earnings before interest and taxes; earnings before interest, taxes and bonus; net income; adjusted operating income; adjusted earnings before interest and income taxes; adjusted earnings before interest, taxes and bonus; adjusted net income; adjusted diluted earnings per share; operating cash flows; and capital expenditures, as well as applicable ratios such as return on invested capital, adjusted return on invested capital and average operating working capital to sales.
These measures are reviewed at monthly, quarterly and annual intervals and compared with historical periods, as well as objectives established by the Board of Directors of the Company. ​ The discussion that follows includes a comparison of our results of operations, liquidity and capital resources for fiscal years ended December 31, 2022 and 2021.
These measures are reviewed at monthly, quarterly and annual intervals and are compared with historical periods, as well as objectives established by the Board of Directors of the Company. ​ The discussion that follows includes a comparison of our results of operations, liquidity and capital resources for fiscal years ended December 31, 2023 and 2022.
To date, compliance with these environmental regulations has not had a material adverse effect on the Company’s earnings. The Company is ISO 14001 certified at most significant manufacturing facilities in North America and Europe and is progressing towards certification at its remaining facilities worldwide. In addition, the Company is ISO 9001 certified at 42 facilities worldwide.
To date, compliance with these environmental regulations has not had a material adverse effect on the Company’s earnings. The Company is ISO 14001 certified at most significant manufacturing facilities in North America and Europe and is progressing towards certification at its remaining facilities worldwide. In addition, the Company is ISO 9001 certified at 46 facilities worldwide.
The Term Loan Credit Agreement requires the Company to maintain a minimum consolidated fixed charges coverage ratio and maximum consolidated net leverage ratio. As of December 31, 2022, the Company was in compliance with all of its covenants.
The Term Loan Credit Agreement requires the Company to maintain a minimum consolidated fixed charges coverage ratio and maximum consolidated net leverage ratio. As of December 31, 2023, the Company was in compliance with all of its covenants.
General 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. 16 Table of Contents ​ The Company is one of only a few worldwide broad-line manufacturers of welding, cutting and brazing products.
General 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. 17 Table of Contents ​ The Company is one of only a few worldwide broad-line manufacturers of welding, cutting and brazing products.
The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of December 31, 2022, the Company was in compliance with all of its debt covenants relating to the Notes.
The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of December 31, 2023, the Company was in compliance with all of its debt covenants relating to the Notes.
(2) In order to minimize potential supply chain disruptions in serving customers due to the continued impacts of the COVID-19 pandemic, the Company increased inventories relative to expected Net sales resulting in higher Days sales in Inventories. (3) Average operating working capital excluding Fori would have been 18.6% as a percent of Net sales.
(2) In 2022, Average operating working capital excluding Fori would have been 18.6% as a percent of Net Sales. (3) In order to minimize supply chain disruptions in serving customers due to the impacts of the COVID-19 pandemic, the Company increased inventories relative to expected Net sales resulting in higher Days sales in Inventories in 2022.
In assessing the realizability of deferred tax assets, the Company assesses whether it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment.
In assessing the realizability of deferred tax assets, the Company assesses whether it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax 30 Table of Contents ​ liabilities, tax planning strategies and projected future taxable income in making this assessment.
Judgment is also used in measuring the related amount of tax benefit that qualifies for recognition, including the interpretation of applicable tax law, regulation and tax ruling. Liabilities are settled primarily through the completion of audits within each individual tax jurisdiction or the closing of a statute of limitation.
Judgment is also used in measuring the related amount of tax benefit that qualifies for recognition, including the interpretation of applicable tax law, regulation and tax ruling. Liabilities are settled primarily through the completion of audits within each individual tax jurisdiction or the closing of the statute of limitations.
These estimates and assumptions are reviewed periodically by management and compared to historical trends to determine the accuracy of estimates and assumptions used. If warranted, these estimates and assumptions may be changed as current trends are assessed and updated. Historically, the Company’s estimates have been determined to be reasonable.
These estimates and assumptions are reviewed periodically by management and compared to historical trends to determine the accuracy of estimates and assumptions 29 Table of Contents ​ used. If warranted, these estimates and assumptions may be changed as current trends are assessed and updated. Historically, the Company’s estimates have been determined to be reasonable.
The Company repatriates earnings for certain non-U.S. subsidiaries, which are subject to foreign withholding taxes. The Company considers remaining earnings in all other non-U.S. subsidiaries to be indefinitely reinvested and has not recorded any deferred taxes as such estimate is not practicable.
The Company will repatriate earnings for certain non-U.S. subsidiaries, which are subject to foreign withholding taxes. The Company considers any remaining earnings and outside basis in all other non-U.S. subsidiaries to be indefinitely reinvested and has not recorded any deferred taxes as such estimate is not practicable.
Historically, the Company’s reserves have approximated actual experience. Long-Lived Assets The Company periodically evaluates whether current facts or circumstances indicate that the carrying value of its depreciable long-lived assets, including leases and intangible assets that do not have indefinite lives, to be held and used may not be recoverable.
Long-Lived Assets The Company periodically evaluates whether current facts or circumstances indicate that the carrying value of its depreciable long-lived assets, including leases and intangible assets that do not have indefinite lives, to be held and used may not be recoverable.
No material changes to the Company’s 28 Table of Contents ​ accounting policies were made during 2022. The Company believes the following accounting policies are some of the more critical judgment areas affecting its financial condition and results of operations.
No material changes to the Company’s accounting policies were made during 2023. The Company believes the following accounting policies are some of the more critical judgment areas affecting its financial condition and results of operations.
At December 31, 2022, the Company had approximately $142,430 of gross deferred tax assets related to deductible temporary differences and tax loss and credit carry-forwards, which may reduce taxable income in future years.
At December 31, 2023, the Company had approximately $172,734 of gross deferred tax assets related to deductible temporary differences and tax loss and credit carry-forwards, which may reduce taxable income in future years.
(6) 2021 excludes the amortization of step up in value of acquired inventories of $820 related to an acquisition and non-cash pension settlement charges of $2,965 as discussed in Note 11 to the consolidated financial statements.
(6) 2022 excludes the amortization of step up in value of acquired inventories of $820 related to an acquisition and non-cash pension settlement charges of $2,965 as discussed in Note 11 to the consolidated financial statements. (7) 2022 excludes acquisition transaction and integration costs of $6,003 as discussed in Note 4 to the consolidated financial statements.
At December 31, 2022, a valuation allowance of $44,627 was recorded against certain deferred tax assets based on this assessment. The 29 Table of Contents ​ Company believes it is more-likely-than-not that the tax benefit of the remaining net deferred tax assets will be realized.
At December 31, 2023, a valuation allowance of $36,876 was recorded against certain deferred tax assets based on this assessment. The Company believes it is more-likely-than-not that the tax benefit of the remaining net deferred tax assets will be realized.
As of December 31, 2022, total unrecognized stock-based compensation expense related to non-vested stock options and restricted stock units was $17,610, which is expected to be recognized over a weighted average period of approximately 1.3 years.
As of December 31, 2023, total unrecognized stock-based compensation expense related to non-vested stock options and restricted stock units was $17,254, which is expected to be recognized over a weighted average period of approximately one year.
In January 2023, the Company paid a cash dividend of $0.64 per share, or $36,879, to shareholders of record on December 31, 2022, which reflects a 14.3% increase in the Company’s dividend payout rate. ​ 24 Table of Contents ​ Working Capital Ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 (3) 2021 Average operating working capital to Net sales (1) (2) 20.9 % 16.3 % Days sales in Inventories (2) 132.5 121.0 ​ Days sales in Accounts receivable 57.0 50.3 ​ Average days in Trade accounts payable 57.0 59.8 ​ ​ (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.
In January 2024, the Company paid a cash dividend of $0.71 per share, or $40,453, to shareholders of record on December 31, 2023, which reflects a 11% increase in the Company’s dividend payout rate. ​ 25 Table of Contents ​ Working Capital Ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Average operating working capital to Net sales (1) (2) 17.1 % 20.9 % Days sales in Inventories (3) 104.6 132.5 ​ Days sales in Accounts receivable 50.0 57.0 ​ Average days in Trade accounts payable 47.6 57.0 ​ ​ (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.
The Company paid $130,724 and $121,851 in cash dividends to its shareholders in the twelve months ended December 31, 2022 and 2021, respectively.
The Company paid $148,010 and $130,724 in cash dividends to its shareholders in the twelve months ended December 31, 2023 and 2022, respectively.
(2) Cash used by investing activities increased for the twelve months ended December 31, 2022 compared with the twelve months ended December 31, 2021 due to cash used in the acquisition of businesses in 2022. The Company currently anticipates capital expenditures of $80,000 to $100,000 in 2023. Anticipated capital expenditures include investments to increase capacity and improve operational effectiveness.
(2) Cash used by investing activities decreased for the twelve months ended December 31, 2023 compared with the twelve months ended December 31, 2022 primarily due to less acquisition activity in 2023. The Company currently anticipates capital expenditures of $90,000 to $110,000 in 2024. Anticipated capital expenditures include investments to increase capacity and improve operational effectiveness.
(2) Federal income taxes on the Company’s transition tax pursuant to the U.S. Tax Act is payable over eight years. Amounts reflect the utilization of 2017 overpayments and foreign tax credits. 27 Table of Contents ​ As of December 31, 2022, there were $17,424 of tax liabilities related to unrecognized tax benefits and a $39,090 liability for deferred compensation.
(2) Federal income taxes on the Company’s transition tax pursuant to the U.S. Tax Act is payable over eight years. Amounts reflect the utilization of 2018 overpayments and foreign tax credits. 28 Table of Contents ​ As of December 31, 2023, there were $12,592 of tax liabilities related to unrecognized tax benefits and a $53,628 liability for deferred compensation.
EBIT is defined as Operating income plus Equity earnings in affiliates and Other income. 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.
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.
Liquidity and Capital Resources The Company’s cash flow from operations can be cyclical. Operational cash flow is a key driver of liquidity. In assessing liquidity, the Company reviews working capital measurements to define areas for improvement.
The applicable tax rates reflect the taxable jurisdiction and nature of each Special item. Liquidity and Capital Resources The Company’s cash flow from operations can be cyclical. Operational cash flow is a key driver of liquidity. In assessing liquidity, the Company reviews working capital measurements to define areas for improvement.
Debt At December 31, 2022 and 2021, the total amount of debt outstanding was $1,203,879 and $769,819, respectively, while the fair value of long-term debt, including the current portion, was approximately $1,009,020 and $776,655, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $1,121,435 and $717,855, respectively.
Debt At December 31, 2023 and 2022, the total amount of debt outstanding was $1,105,210 and $1,203,879, respectively, while the fair value of long-term debt, including the current portion, was approximately $1,013,795 and $1,009,020, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $1,102,771 and $1,121,435, respectively.
Management 23 Table of Contents ​ anticipates the Company will be able to satisfy cash requirements for its ongoing businesses for the foreseeable future primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets.
Management anticipates the Company will be able to satisfy cash requirements for its ongoing businesses for the foreseeable future primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets. 24 Table of Contents ​ The Company continues to expand globally and periodically consider acquisitions that would involve significant investments.
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.
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 needing or requiring funding. If additional acquisitions providing appropriate financial benefits become available, additional expenditures may be made.
The aggregate intrinsic value of options outstanding and exercisable, which would have been received by the optionees, had all awards been exercised at December 31, 2022 was $58,282 and $49,024, respectively. The total intrinsic value of awards exercised during 2022 and 2021 was $7,082 and $20,442, respectively.
The aggregate intrinsic value of options outstanding and exercisable, which would have been received by the optionees, had all awards been exercised at December 31, 2023 was $99,884 and $82,057, respectively. The total intrinsic value of awards exercised during 2023 and 2022 was $35,414 and $7,082, respectively.
(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.
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 rate reflects the taxable jurisdiction and nature of each Special item.
As of December 31, 2022, the Company was in compliance with all of its covenants and had $45,000 of outstanding borrowings under the Credit Agreement. The Company has other lines of credit and debt agreements totaling $92,078. As of December 31, 2022, the Company was in compliance with all of its covenants and had $37,444 outstanding at December 31, 2022.
As of December 31, 2023, the Company was in compliance with all of its covenants and had no of outstanding borrowings under the Credit Agreement. The Company has other lines of credit and debt agreements totaling $89,145. As of December 31, 2023, the Company was in compliance with all of its covenants and had $2,435 outstanding at December 31, 2023.
The Employee Plan provides for the granting of options, appreciation rights, restricted shares, restricted stock units and performance-based awards up to an additional 5,400,000 of the Company’s common shares. In addition, on April 23, 2015, the shareholders of the Company approved the 2015 Stock Plan for Non-Employee Directors ("2015 Director Plan").
In addition, on April 19, 2023, the shareholders of the Company approved the 2023 Stock Plan for Non-Employee Directors ("2023 Director Plan"), which replaced the 2015 Stock Plan for Non-Employee Directors (“2015 Director Plan”). The 2023 Director Plan provides for the granting of options, restricted shares and restricted stock units up to an additional 200,000 of the Company’s common shares.
(2) Costs related to acquisition and included in Selling, general & administrative expenses. (3) Costs related to acquisitions and included in Cost of goods sold.
(2) Costs related to acquisitions and included in Selling, general & administrative expenses.
Under this method, revenue recognition is primarily based upon the ratio of costs incurred to date compared with estimated total costs to complete. The cumulative impact of revisions to total estimated costs is reflected in the period of the change, including anticipated losses. Less than 10% of the Company’s Net sales are recognized over time.
The cumulative impact of revisions to total estimated costs is reflected in the period of the change, including anticipated losses. Less than 10% of the Company’s Net sales are recognized over time.
Inventories Inventories are valued at the lower of cost or net realizable value. Fixed manufacturing overhead costs are allocated to inventory based on normal production capacity and abnormal manufacturing costs are recognized as period costs. Cost for a substantial portion of U.S. inventories is determined on a LIFO basis.
Fixed manufacturing overhead costs are allocated to inventory based on normal production capacity and abnormal manufacturing costs are recognized as period costs. Cost for a substantial portion of U.S. inventories is determined on a LIFO basis. LIFO was used for 37% and 38% of total inventories at December 31, 2023 and 2022, respectively.
Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, the Company is unable to estimate the years in which settlement will occur. Stock-Based Compensation On April 23, 2015, the shareholders of the Company approved the 2015 Equity and Incentive Compensation Plan ("Employee Plan").
Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, the Company is unable to estimate the years in which settlement will occur.
Invested capital is defined as total debt, which includes Amounts due banks, Current portion of long-term debt and Long-term debt, less current portions, plus Total equity. ​ 26 Table of Contents ​ The following table presents the reconciliation of ROIC and Adjusted ROIC to net income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on Invested Capital 2022 2021 Net income as reported ​ $ 472,224 ​ $ 276,466 ​ Plus: Interest expense (after-tax) ​ 23,276 ​ 17,794 ​ Less: Interest income (after-tax) ​ 1,202 ​ 1,172 ​ Net operating profit after taxes ​ $ 494,298 ​ $ 293,088 ​ Special items: ​ ​ ​ ​ ​ ​ ​ Rationalization and asset impairment charges ​ ​ 11,788 ​ ​ 9,827 ​ Acquisition transaction costs ​ ​ 6,003 ​ ​ 1,923 ​ Pension settlement net charges ​ ​ (4,273) ​ ​ 126,502 ​ Amortization of step up in value of acquired inventories ​ ​ 1,106 ​ ​ 5,804 ​ Tax effect of Special items (1) ​ ​ (1,192) ​ ​ (47,188) ​ Adjusted net operating profit after taxes ​ $ 507,730 ​ $ 389,956 ​ ​ ​ ​ ​ ​ ​ ​ ​ Invested Capital ​ ​ ​ ​ ​ ​ ​ Short-term debt ​ $ 93,483 ​ $ 52,730 ​ Long-term debt, less current portion ​ ​ 1,110,396 ​ ​ 717,089 ​ Total debt ​ ​ 1,203,879 ​ ​ 769,819 ​ Total equity ​ ​ 1,034,041 ​ ​ 863,909 ​ Invested capital ​ $ 2,237,920 ​ $ 1,633,728 ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on invested capital as reported (2) ​ ​ 22.1 % ​ 17.9 % Adjusted return on invested capital (2) ​ 22.7 % 23.9 % ​ (1) Includes the net tax impact of Special items recorded during the respective periods.
Invested capital is defined as total debt, which includes Amounts due banks, Current portion of long-term debt and Long-term debt, less current portions, plus Total equity. ​ 27 Table of Contents ​ The following table presents the reconciliation of ROIC and Adjusted ROIC to net income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on Invested Capital 2023 2022 Net income as reported ​ $ 545,248 ​ $ 472,224 ​ Plus: Interest expense (after-tax) ​ 38,050 ​ 23,276 ​ Less: Interest income (after-tax) ​ 5,033 ​ 1,202 ​ Net operating profit after taxes ​ $ 578,265 ​ $ 494,298 ​ Special items: ​ ​ ​ ​ ​ ​ ​ Rationalization and asset impairment charges ​ ​ (11,314) ​ ​ 11,788 ​ Acquisition transaction costs ​ ​ — ​ ​ 6,003 ​ Pension settlement net charges ​ ​ 845 ​ ​ (4,273) ​ Amortization of step up in value of acquired inventories ​ ​ 12,252 ​ ​ 1,106 ​ Gain on asset disposal ​ ​ (1,646) ​ ​ — ​ Tax effect of Special items (1) ​ ​ 2,537 ​ ​ (1,192) ​ Adjusted net operating profit after taxes ​ $ 580,939 ​ $ 507,730 ​ ​ ​ ​ ​ ​ ​ ​ ​ Invested Capital ​ ​ ​ ​ ​ ​ ​ Short-term debt ​ $ 2,439 ​ $ 93,483 ​ Long-term debt, less current portion ​ ​ 1,102,771 ​ ​ 1,110,396 ​ Total debt ​ ​ 1,105,210 ​ ​ 1,203,879 ​ Total equity ​ ​ 1,308,852 ​ ​ 1,034,041 ​ Invested capital ​ $ 2,414,062 ​ $ 2,237,920 ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on invested capital as reported ​ ​ 24.0 % ​ 22.1 % Adjusted return on invested capital ​ 24.1 % 22.7 % ​ (1) Includes the net tax impact of Special items recorded during the respective periods.
The following table presents a reconciliation of Operating income as reported to Adjusted operating income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Operating income as reported ​ $ 612,336 ​ $ 461,669 ​ Special items (pre-tax): ​ ​ ​ Rationalization and asset impairment charges (1) ​ 11,788 ​ 9,827 ​ Acquisition transaction costs (2) ​ 6,003 ​ 1,923 ​ Amortization of step up in value of acquired inventories (3) ​ 1,106 ​ 5,804 ​ Adjusted operating income ​ $ 631,233 ​ $ 479,223 ​ ​ 22 Table of Contents ​ (1) Charges primarily consist of employee severance, gains or losses on the disposal of assets and other related costs and non-cash asset impairment charges.
The following table presents a reconciliation of Operating income as reported to Adjusted operating income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Operating income as reported ​ $ 717,849 ​ $ 612,336 ​ Special items (pre-tax): ​ ​ ​ Rationalization and asset impairment charges (1) ​ (11,314) ​ 11,788 ​ Acquisition transaction costs (2) ​ — ​ 6,003 ​ Amortization of step up in value of acquired inventories (3) ​ 12,252 ​ 1,106 ​ Adjusted operating income ​ $ 718,787 ​ $ 631,233 ​ ​ (1) 2023 reflects a gain on the sale of a property of $36,187, offset by rationalization and asset impairment charges of $24,873 within International Welding. 2022 charges are primarily related to employee severance, gains or losses on the disposal of assets and other related costs and non-cash asset impairment charges.
LIFO was used for 38% and 36% of total inventories at December 31, 2022 and 2021, respectively. Cost of other inventories is determined by costing methods that approximate a FIFO basis. The valuation of LIFO inventories is made at the end of each year based on inventory levels and costs at that time.
Cost of other inventories is determined by costing methods that approximate a FIFO basis. The valuation of LIFO 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.
The Company invests in the research and development of arc welding products in order to continue its market leading product offering. The Company continues to invest in technologies that improve the quality and productivity of welding products.
The Company invests in the research and development of arc welding products in order to continue its market leading product offering and improve the quality and productivity of welding applications. In addition, the Company actively protects its innovations with patents and trade secrets globally.
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 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.
(5) 2022 excludes Rationalization and asset impairment gains of $11,681 related to impairment charges as discussed in Note 7 to the consolidated financial statements . 2021 excludes Rationalization and asset impairment charges of $9,804 related to severance and gains or losses on the disposal of assets as discussed in Note 7 to the consolidated financial statements, the amortization of step up in value of acquired inventories of $4,984 related to an acquisition and pension settlement charges of $446 .
(5) 2023 excludes pension settlement charges of $845, a gain on asset disposal of $1,646, the amortization of step up in value of acquired inventories of $2,862 and Rationalization and asset impairment net gains of $11,782 as discussed in Note 7 to the consolidated financial statements . 2022 excludes Rationalization and asset impairment charges of $11,681 related to impairment charges as discussed in Note 7 to the consolidated financial statements.
(3) Decrease for 2022 compared to 2021 primarily driven by acquisition integration activities, unfavorable mix and declining commodity pricing in certain metal offerings . 21 Table of Contents ​ (4) 2022 excludes a favorable adjustment related to the termination of a pension plan of $3,735, the amortization of step up in value of acquired inventories of $1,106 and Rationalization and asset impairment gains of $431 related to severance and gains or losses on the disposal of assets as discussed in Note 7 to the consolidated financial statements . 2021 excludes non-cash pension settlement charges of $123,091 as discussed in Note 11 to the consolidated financial statements .
(4) 2023 excludes the amortization of step up in value of acquired inventories of $9,390 and Rationalization and asset impairment net charges of $468 . 22 Table of Contents ​ 2022 excludes a favorable adjustment related to the termination of a pension plan of $3,735, the amortization of step up in value of acquired inventories of $1,106 and Rationalization and asset impairment gains of $431 related to severance and gains or losses on the disposal of assets as discussed in Note 7 to the consolidated financial statements .
The following table presents the reconciliations of 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 diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Net income as reported ​ $ 472,224 $ 276,466 ​ Special items: ​ ​ ​ Rationalization and asset impairment charges (1) ​ 11,788 9,827 ​ Acquisition transaction costs (2) ​ 6,003 1,923 ​ Pension settlement net charges (3) ​ (4,273) 126,502 ​ Amortization of step up in value of acquired inventories (4) ​ 1,106 5,804 ​ Tax effect of Special items (5) ​ (1,192) (47,188) ​ Adjusted net income ​ $ 485,656 $ 373,334 ​ Non-controlling interests in subsidiaries’ earnings (loss) ​ ​ — ​ 114 ​ Interest expense, net ​ 29,500 22,214 ​ Income taxes as reported ​ 120,603 48,418 ​ Tax effect of Special items (5) ​ 1,192 47,188 ​ Adjusted EBIT ​ $ 636,951 $ 491,268 ​ Effective tax rate as reported ​ 20.3 % 14.9 % Net special item tax impact ​ (0.2) % 5.5 % Adjusted effective tax rate ​ 20.1 % 20.4 % Diluted earnings per share as reported ​ $ 8.04 $ 4.60 ​ Special items per share ​ 0.23 1.62 ​ Adjusted diluted earnings per share ​ $ 8.27 $ 6.22 ​ ​ (1) Charges primarily consist of employee severance, gains or losses on the disposal of assets and other related costs and non-cash asset impairment charges.
(3) Costs related to acquisitions and included in Cost of goods sold. 23 Table of Contents ​ The following table presents the reconciliations of 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 diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Net income as reported ​ $ 545,248 $ 472,224 ​ Special items: ​ ​ ​ Rationalization and asset impairment charges (1) ​ (11,314) 11,788 ​ Acquisition transaction costs (2) ​ — 6,003 ​ Pension settlement net charges (3) ​ 845 (4,273) ​ Amortization of step up in value of acquired inventories (4) ​ 12,252 1,106 ​ Gain on asset disposal (5) ​ (1,646) — ​ Tax effect of Special items (6) ​ 2,537 (1,192) ​ Adjusted net income ​ $ 547,922 $ 485,656 ​ Interest expense, net ​ 44,371 29,500 ​ Income taxes as reported ​ 141,618 120,603 ​ Tax effect of Special items (6) ​ (2,537) 1,192 ​ Adjusted EBIT ​ $ 731,374 $ 636,951 ​ Effective tax rate as reported ​ 20.6 % 20.3 % Net special item tax impact ​ (0.4) % (0.2) % Adjusted effective tax rate ​ 20.2 % 20.1 % Diluted earnings per share as reported ​ $ 9.37 $ 8.04 ​ Special items per share ​ 0.04 0.23 ​ Adjusted diluted earnings per share ​ $ 9.41 $ 8.27 ​ ​ (1) 2023 reflects a gain on the sale of a property of $36,187, offset by rationalization and asset impairment charges of $24,873 within International Welding. 2022 charges are primarily related to employee severance, gains or losses on the disposal of assets and other related costs and non-cash asset impairment charges.
The Term Loan bears an interest at a rate based on Term SOFR, plus a margin ranging from 0.75% to 1.75% based on the Company’s consolidated net leverage ratio. The proceeds of the Term Loan were used to pay a portion of the purchase price in connection with the acquisition of Fori.
The Term Loan matures on November 29, 2025. The Term Loan bears an interest at a rate based on Term SOFR, plus a margin ranging from 0.75% to 1.75% based on the Company’s consolidated net 26 Table of Contents ​ leverage ratio.
Fair values are determined using established business valuation techniques and models developed by the Company, estimates of market participant assumptions of future cash flows, future growth rates and discount rates to value estimated cash flows.
If the carrying amount exceeds the fair value, an impairment charge is recognized 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. 31 Table of Contents ​ Fair values are determined using established business valuation techniques and models developed by the Company, estimates of market participant assumptions of future cash flows, future growth rates and discount rates to value estimated cash flows.
Substantially all of the Company’s sales arrangements are short-term in nature involving a single performance obligation. The Company recognizes revenue when the performance obligation is satisfied and control of the product is transferred to the customer based upon shipping terms. In addition, certain customized automation performance obligations are accounted for over time.
The Company recognizes revenue when the performance obligation is satisfied and control of the product is transferred to the customer based upon shipping terms. In addition, certain customized automation performance obligations are accounted for over time. Under this method, revenue recognition is primarily based upon the ratio of costs incurred to date compared with estimated total costs to complete.
The Company reviews the net realizable value of inventory on an on-going basis with consideration given to deterioration, obsolescence and other factors. If actual market conditions differ from those projected by management, 30 Table of Contents ​ and the Company’s estimates prove to be inaccurate, write-downs of inventory values and adjustments to Cost of goods sold may be required.
If actual market conditions differ from those projected by management, and the Company’s estimates prove to be inaccurate, write-downs of inventory values and adjustments to Cost of goods sold may be required. Historically, the Company’s reserves have approximated actual experience.
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 Company’s total weighted average effective interest rate and remaining weighted average term, inclusive of the 2015 Notes and 2016 Notes, is 3.3% and 10.4 years, respectively. 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.
(3) Decrease for 2022 in International Welding primarily due to the devaluation of the Turkish Lira and Euro . 20 Table of Contents ​ Adjusted Earnings Before Interest and Income Taxes (“Adjusted EBIT”): Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the Adjusted EBIT profit measure.
(3) Increase for all segments reflects increased product pricing to offset higher input costs. 21 Table of Contents ​ Adjusted Earnings Before Interest and Income Taxes (“Adjusted EBIT”): Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the Adjusted EBIT profit measure. EBIT is defined as Operating income plus Other income.
Total stock-based compensation expense recognized in the Consolidated Statements of Income for 2022 and 2021 was $25,276 and $23,787, respectively, with a related tax benefit of $6,363 and $5,988, respectively.
The Company issued common shares from treasury upon all exercises of stock options, vesting of restricted stock units and the granting of restricted stock awards in 2023 and 2022. Total stock-based compensation expense recognized in the Consolidated Statements of Income for 2023 and 2022 was $26,223 and $25,276, respectively, with a related tax benefit of $6,711 and $6,363, respectively.
Refer to Note 4 to the consolidated financial statements for additional details. 31 Table of Contents ​ Revenue Recognition Revenue is recognized when obligations under the terms of a contract are satisfied and control is transferred to the customer. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for goods or services.
For certain items, the pre-acquisition carrying value is determined to be a reasonable approximation of fair value based on information available to the Company. Refer to Note 4 to the consolidated financial statements for additional details. Revenue Recognition Revenue is recognized when obligations under the terms of a contract are satisfied and control is transferred to the customer.
(3) Cash provided by (used by) financing activities increased in the twelve months ended December 31, 2022 compared with the twelve months ended December 31, 2021 due to higher long-term borrowings in 2022 partially offset by an increase in the purchase of shares for treasury.
(3) Cash used by financing activities increased in the twelve months ended December 31, 2023 compared with the twelve months ended December 31, 2022 primarily due to increased payments on short- and long-term borrowings as compared with the prior year.
The Company’s total weighted average effective interest rate and remaining weighted average term, inclusive of the 2015 Notes and 2016 Notes, is 3.3% and 11.4 years, respectively. 25 Table of Contents ​ Revolving Credit Agreements 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”).
Revolving Credit Agreements 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 following table reflects changes in key cash flow measures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 $ Change Cash provided by operating activities (1) ​ $ 383,386 ​ $ 365,063 ​ $ 18,323 Cash used by investing activities (2) ​ (504,691) ​ (205,356) ​ (299,335) Capital expenditures ​ (71,883) ​ (62,531) ​ (9,352) Acquisition of businesses, net of cash acquired ​ (436,298) ​ (156,106) ​ (280,192) Cash provided by (used by) financing activities (3) ​ 133,725 ​ (221,940) ​ 355,665 Proceeds from short-term borrowings ​ 34,351 ​ 46,476 ​ (12,125) Proceeds from (payments on) long-term borrowings ​ ​ 405,444 ​ ​ (508) ​ ​ 405,952 Purchase of shares for treasury ​ (181,293) ​ (164,526) ​ (16,767) Cash dividends paid to shareholders ​ (130,724) ​ (121,851) ​ (8,873) Increase (decrease) in Cash and cash equivalents (4) ​ 4,192 ​ (64,321) ​ 68,513 ​ (1) Cash provided by operating activities increased for the twelve months ended December 31, 2022 compared with the twelve months ended December 31, 2021 primarily due to higher company earnings.
The following table reflects changes in key cash flow measures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 $ Change Cash provided by operating activities (1) ​ $ 667,542 ​ $ 383,386 ​ $ 284,156 Cash used by investing activities (2) ​ (74,729) ​ (504,691) ​ 429,962 Capital expenditures ​ (90,987) ​ (71,883) ​ (19,104) Acquisition of businesses, net of cash acquired ​ (32,685) ​ (436,298) ​ 403,613 Proceeds from the sale of property, plant and equipment ​ ​ 49,494 ​ ​ 3,331 ​ ​ 46,163 Cash (used by) provided by financing activities (3) ​ (412,392) ​ 133,725 ​ (546,117) (Payments on) proceeds from short-term borrowings ​ (79,873) ​ 34,351 ​ (114,224) (Payments on) proceeds from long-term borrowings ​ ​ (8,109) ​ ​ 405,444 ​ ​ (413,553) Purchase of shares for treasury ​ (198,765) ​ (181,293) ​ (17,472) Cash dividends paid to shareholders ​ (148,010) ​ (130,724) ​ (17,286) Increase in Cash and cash equivalents (4) ​ 196,637 ​ 4,192 ​ 192,445 ​ (1) Cash provided by operating activities increased for the twelve months ended December 31, 2023 compared with the twelve months ended December 31, 2022 primarily due to increased earnings and improved working capital.
The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company’s assessment of future taxable income or tax planning strategies changes. Pensions The Company maintains a number of defined benefit ("Pension") and defined contribution plans to provide retirement benefits for employees.
The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company’s assessment of future taxable income or tax planning strategies changes. Inventories Inventories are valued at the lower of cost or net realizable value.
(2) Costs related to acquisitions as discussed in Note 4 to the consolidated financial statements. (3) Net charges related to lump sum pension payments and the purchase of a group annuity contract as discussed in Note 11 to the consolidated financial statements. (4) Costs related to acquisitions and included in Cost of goods sold.
(2) Costs related to acquisitions, as discussed in Note 4 to the consolidated financial statements, and are included in Selling, general & administrative. (3) 2023 charges related to pension settlement charges. 2022 net gains primarily related to the final settlement associated with the termination of a pension plan, as discussed in Note 11 to the consolidated financial statements.
Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. Actual year-end inventory levels and costs may differ from interim LIFO inventory valuations. The excess of current cost over LIFO cost was $133,909 at December 31, 2022 and $114,176 at December 31, 2021.
Actual year-end inventory levels and costs may differ from interim LIFO inventory valuations. The excess of current cost over LIFO cost was $129,946 at December 31, 2023 and $133,909 at December 31, 2022. The Company reviews the net realizable value of inventory on an on-going basis with consideration given to deterioration, obsolescence and other factors.
Fori’s balance sheet is included in the Company’s Consolidated Balance Sheet as of December 31, 2022. ​ Key Indicators Key economic measures relevant to the Company include industrial production trends, steel consumption, purchasing manager indices, capacity utilization within durable goods manufacturers and consumer confidence indicators.
The Company’s products support our customers' sustainable operations through enhanced worker safety, reduced emissions, improved energy efficiency, reduced waste and regulatory compliance. 18 Table of Contents ​ Key Indicators Key economic measures relevant to the Company include industrial production trends, steel consumption, purchasing manager indices, capacity utilization within durable goods manufacturers and consumer confidence indicators.
(4) Cash and cash equivalents increased 2.2%, or $4,192, to $197,950 during the twelve months ended December 31, 2022, from $192,958 as of December 31, 2021.
(4) Cash and cash equivalents increased 99.7%, or $196,637, to $393,787 during the twelve months ended December 31, 2023, from $197,150 as of December 31, 2022. The increase was predominantly due to higher cash provided by operating activities in 2023.
The 2015 Director Plan provides for the granting of options, restricted shares and restricted stock units up to an additional 300,000 of the Company’s common shares. At December 31, 2022, there were 1,381,427 common shares available for future grant under all plans.
At December 31, 2023, there were 2,192,720 common shares available for future grant under all plans. Under these plans, the number of options, restricted shares and restricted stock units granted were 241,824 in 2023 and 284,946 in 2022.
The following table presents Adjusted EBIT by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ ​ ​ Year Ended December 31, ​ 2022 vs. 2021 ​ ​ 2022 2021 $ % Americas Welding: ​ ​ ​ ​ ​ Net sales ​ $ 2,288,934 ​ $ 1,824,481 ​ $ 464,453 ​ 25.5 % ​ Inter-segment sales ​ 122,019 ​ 140,650 ​ (18,631) ​ (13.2) % ​ Total Sales ​ $ 2,410,953 ​ $ 1,965,131 ​ $ 445,822 ​ 22.7 % ​ Adjusted EBIT (4) ​ $ 462,819 ​ $ 329,016 ​ $ 133,803 ​ 40.7 % ​ As a percent of total sales (1) ​ 19.2 % 16.7 % ​ ​ ​ 2.5 % ​ International Welding: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 954,281 ​ $ 948,125 ​ $ 6,156 ​ 0.6 % ​ Inter-segment sales ​ 31,503 ​ 26,331 ​ ​ 5,172 ​ 19.6 % ​ Total Sales ​ $ 985,784 ​ $ 974,456 ​ $ 11,328 ​ 1.2 % ​ Adjusted EBIT (5) ​ $ 120,157 ​ $ 106,208 ​ $ 13,949 ​ 13.1 % ​ As a percent of total sales (2) ​ 12.2 % 10.9 % ​ ​ ​ 1.3 % ​ The Harris Products Group: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 517,996 ​ $ 461,574 ​ $ 56,422 ​ 12.2 % ​ Inter-segment sales ​ 11,040 ​ 8,096 ​ ​ 2,944 ​ 36.4 % ​ Total Sales ​ $ 529,036 ​ $ 469,670 ​ $ 59,366 ​ 12.6 % ​ Adjusted EBIT (6) ​ $ 64,008 ​ $ 68,447 ​ $ (4,439) ​ (6.5) % ​ As a percent of total sales (3) ​ 12.1 % 14.6 % ​ ​ ​ (2.5) % ​ Corporate / Eliminations: ​ ​ ​ ​ ​ ​ ​ ​ Inter-segment sales ​ $ (164,562) ​ $ (175,077) ​ $ 10,515 ​ 6.0 % ​ Adjusted EBIT (7) ​ (10,033) ​ (12,403) ​ ​ 2,370 ​ 19.1 % ​ Consolidated: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 3,761,211 ​ $ 3,234,180 ​ $ 527,031 ​ 16.3 % ​ Net income ​ $ 472,224 ​ $ 276,466 ​ $ 195,758 ​ 70.8 % ​ As a percent of total sales ​ 12.6 % 8.5 % ​ ​ ​ 4.1 % ​ Adjusted EBIT (8) ​ $ 636,951 ​ $ 491,268 ​ $ 145,683 ​ 29.7 % ​ As a percent of sales ​ 16.9 % 15.2 % ​ ​ 1.7 % ​ ​ (1) Increase for 2022 as compared to 2021 primarily driven by higher volumes, the impact of profit improvement initiatives and pricing actions taken to offset higher input costs, partially offset by higher employee costs.
The following table presents Adjusted EBIT by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ ​ ​ Year Ended December 31, ​ 2023 vs. 2022 ​ ​ 2023 2022 $ % Americas Welding: ​ ​ ​ ​ ​ Net sales ​ $ 2,655,546 ​ $ 2,288,934 ​ $ 366,612 ​ 16.0 % ​ Inter-segment sales ​ 127,536 ​ 122,019 ​ 5,517 ​ 4.5 % ​ Total Sales ​ $ 2,783,082 ​ $ 2,410,953 ​ $ 372,129 ​ 15.4 % ​ Adjusted EBIT (4) ​ $ 538,269 ​ $ 462,819 ​ $ 75,450 ​ 16.3 % ​ As a percent of total sales (1) ​ 19.3 % 19.2 % ​ ​ ​ 0.1 % ​ International Welding: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,040,006 ​ $ 954,281 ​ $ 85,725 ​ 9.0 % ​ Inter-segment sales ​ 31,498 ​ 31,503 ​ ​ (5) ​ — ​ ​ Total Sales ​ $ 1,071,504 ​ $ 985,784 ​ $ 85,720 ​ 8.7 % ​ Adjusted EBIT (5) ​ $ 136,497 ​ $ 120,157 ​ $ 16,340 ​ 13.6 % ​ As a percent of total sales (2) ​ 12.7 % 12.2 % ​ ​ ​ 0.5 % ​ The Harris Products Group: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 496,084 ​ $ 517,996 ​ $ (21,912) ​ (4.2) % ​ Inter-segment sales ​ 10,641 ​ 11,040 ​ ​ (399) ​ (3.6) % ​ Total Sales ​ $ 506,725 ​ $ 529,036 ​ $ (22,311) ​ (4.2) % ​ Adjusted EBIT (6) ​ $ 74,144 ​ $ 64,008 ​ $ 10,136 ​ 15.8 % ​ As a percent of total sales (3) ​ 14.6 % 12.1 % ​ ​ ​ 2.5 % ​ Corporate / Eliminations: ​ ​ ​ ​ ​ ​ ​ ​ Inter-segment sales ​ $ (169,675) ​ $ (164,562) ​ $ (5,113) ​ (3.1) % ​ Adjusted EBIT (7) ​ (17,536) ​ (10,033) ​ ​ (7,503) ​ (74.8) % ​ Consolidated: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 4,191,636 ​ $ 3,761,211 ​ $ 430,425 ​ 11.4 % ​ Net income ​ $ 545,248 ​ $ 472,224 ​ $ 73,024 ​ 15.5 % ​ As a percent of total sales ​ 13.0 % 12.6 % ​ ​ ​ 0.4 % ​ Adjusted EBIT (8) ​ $ 731,374 ​ $ 636,951 ​ $ 94,423 ​ 14.8 % ​ As a percent of sales ​ 17.4 % 16.9 % ​ ​ 0.5 % ​ ​ (1) Increase for 2023 as compared to 2022 primarily driven by higher volumes and effective cost management, partially offset by the impact of acquisitions.
The Company’s products are sold in both domestic and international markets. In the Americas, products are sold principally through industrial distributors, retailers and also directly to users of welding products.
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. The Company’s products are sold globally. In the Americas, products are sold principally through industrial distributors, retailers and also directly to users of welding products.
Segment Results Net Sales: The table below summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the twelve months ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Net Sales due to: ​ ​ Net Sales ​ ​ ​ ​ ​ ​ Foreign Net Sales ​ 2021 ​ Volume Acquisitions (1) Price (2) ​ Exchange (3) ​ 2022 ​ Operating Segments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas Welding $ 1,824,481 ​ $ 156,561 ​ $ 17,602 ​ $ 298,928 $ (8,638) ​ $ 2,288,934 ​ International Welding ​ 948,125 ​ (9,019) ​ 17,632 ​ 159,130 ​ (161,587) ​ 954,281 ​ The Harris Products Group ​ 461,574 ​ 12,820 ​ 39,411 ​ 10,867 ​ (6,676) ​ 517,996 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ ​ ​ Americas Welding ​ ​ ​ ​ 8.6 % 1.0 % ​ 16.4 % ​ (0.5) % ​ 25.5 % International Welding ​ ​ ​ ​ (1.0) % 1.9 % ​ 16.8 % ​ (17.0) % ​ 0.6 % The Harris Products Group ​ ​ ​ ​ 2.8 % 8.5 % ​ 2.4 % ​ (1.4) % ​ 12.2 % ​ (1) Increase due to the acquisitions discussed in Note 4.
Rationalization and asset impairment charges: In 2023, the Company recorded a gain of $11,314 primarily related to the sale of a property offset by rationalization and asset impairment charges within International Welding. 20 Table of Contents ​ Segment Results Net Sales: The table below summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the twelve months ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Net Sales due to: ​ ​ Net Sales ​ ​ ​ ​ ​ ​ Foreign Net Sales ​ 2022 ​ Volume (1) Acquisitions (2) Price (3) ​ Exchange ​ 2023 ​ Operating Segments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas Welding $ 2,288,934 ​ $ 109,860 ​ $ 222,493 ​ $ 37,125 $ (2,866) ​ $ 2,655,546 ​ International Welding ​ 954,281 ​ 12,519 ​ 54,078 ​ 14,691 ​ 4,437 ​ 1,040,006 ​ The Harris Products Group ​ 517,996 ​ (36,693) ​ — ​ 12,330 ​ 2,451 ​ 496,084 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ ​ ​ Americas Welding ​ ​ ​ ​ 4.8 % 9.7 % ​ 1.6 % ​ (0.1) % ​ 16.0 % International Welding ​ ​ ​ ​ 1.3 % 5.7 % ​ 1.5 % ​ 0.5 % ​ 9.0 % The Harris Products Group ​ ​ ​ ​ (7.1) % — ​ ​ 2.4 % ​ 0.5 % ​ (4.2) % ​ (1) Increase for Americas Welding due to higher volumes in all product groups.
Contractual and Other Obligations The Company’s cash requirements for contractual and other obligations as of December 31, 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due By Period ​ ​ ​ 2024 to 2026 to 2028 and ​ Total ​ 2023 ​ 2025 ​ 2027 ​ Beyond Long-term debt, including current portion (Note 9) $ 1,118,336 ​ $ 11,039 ​ $ 507,297 ​ $ — ​ $ 600,000 Interest on long-term debt (Note 9) 345,782 ​ 45,448 ​ 88,157 ​ 39,970 ​ 172,207 Amounts due banks (Note 9) ​ 82,444 ​ ​ 82,444 ​ ​ — ​ ​ — ​ ​ — Operating leases (Note 17) 51,798 ​ 11,342 ​ 16,588 ​ 9,310 ​ 14,558 Purchase commitments (1) 2,003,872 ​ 1,999,751 ​ 3,579 ​ 355 ​ 187 Transition Tax (2) 11,459 ​ — ​ 11,459 ​ — ​ — Total $ 3,613,691 ​ $ 2,150,024 ​ $ 627,080 ​ $ 49,635 ​ $ 786,952 ​ (1) Purchase commitments include contractual obligations for raw materials and services.
Contractual and Other Obligations The Company’s cash requirements for contractual and other obligations as of December 31, 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due By Period ​ ​ ​ 2025 to 2027 to 2029 and ​ Total ​ 2024 ​ 2026 ​ 2028 ​ Beyond Long-term debt, including current portion (Note 9) $ 1,100,009 ​ $ 4 ​ $ 500,005 ​ $ 100,000 ​ $ 500,000 Interest on long-term debt (Note 9) 258,448 ​ 23,135 ​ 43,120 ​ 39,970 ​ 152,223 Amounts due banks (Note 9) ​ 2,435 ​ ​ 2,435 ​ ​ — ​ ​ — ​ ​ — Operating leases (Note 17) 61,229 ​ 14,574 ​ 20,808 ​ 11,200 ​ 14,647 Purchase commitments (1) 107,903 ​ 106,869 ​ 1,000 ​ 34 ​ — Transition Tax (2) 5,788 ​ — ​ 5,788 ​ — ​ — Total $ 1,535,812 ​ $ 147,017 ​ $ 570,721 ​ $ 151,204 ​ $ 666,870 ​ (1) Purchase commitments include contractual obligations for raw materials and services.
(2) Increase for 2022 as compared to 2021 primarily driven by profit improvement initiatives including cost reduction activities.
(2) Increase for 2023 as compared to 2022 primarily driven by higher volumes and effective cost management. (3) Increase for 2023 compared to 2022 primarily reflects effective cost management and operational improvements .
Gross Profit: Gross profit for 2022 increased, as a percent of sales, compared to the prior year primarily due to higher volumes, the benefit of profit improvement and cost reduction actions, which offset higher input costs. Last-in, first-out (“LIFO”) charges were $19,733 in the twelve months ended December 31, 2022 as compared with charges of $38,595 in the prior year.
Gross Profit: Gross profit increased for the year ended December 31, 2023 primarily due to pricing actions taken to offset higher inputs costs and favorable segment mix, which offset the impact of acquisitions. Selling, General & Administrative ("SG&A") Expenses: SG&A expenses increased in 2023 as compared to 2022 primarily due to acquisitions and higher employee-related costs .
The interest rate on borrowings is based on LIBOR plus a spread based on the Company’s net leverage ratio.
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.
Removed
In addition, the Company actively protects its innovations as research and development has progressed in both the United States and other major international jurisdictions. The Company believes its significant investment in research and development and its highly trained technical sales force coupled with its extensive distributor network provide a competitive advantage in the marketplace.
Added
For a comparison of the Company’s results of operations, liquidity and capital resources for the fiscal years ended December 31, 2022 and 2021, see “Item 7.
Removed
The Company’s products support our customers' sustainable operations through enhanced worker safety, reduced emissions, improved energy efficiency, reduced waste and regulatory compliance. 17 Table of Contents ​ On December 1, 2022, the Company acquired Fori Automation, LLC (“Fori”) for a cash purchase price of $427,000, subject to customary working capital adjustments.
Added
Increase for International Welding due to higher equipment volumes. Decrease for the Harris Products Group due to weakness in end markets. (2) Increase for Americas Welding and International Welding due to the acquisitions discussed in Note 4 to the consolidated financial statements.
Removed
The Company funded the transaction with available cash on hand and a $400,000 senior unsecured term loan. Fori is a leading designer and manufacturer of complex, multi-armed automated welding systems, with an extensive range of automated assembly systems, automated material handling solutions, automated large-scale, industrial guidance vehicles, and end of line testing systems.
Added
(4) Costs related to acquisitions and included in Cost of goods sold. (5) Gain on asset disposal and included in Other income. (6) 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.
Removed
The Fori acquisition will extend the Company’s market presence within the automotive sector as well as its automation footprint in the International Welding segment.
Added
The proceeds of the Term Loan were used to pay a portion of the purchase price in connection with the acquisition of Fori.
Removed
Selling, General & Administrative ("SG&A") Expenses: SG&A expense increased in 2022 as compared to 2021 was primarily due to higher employee costs . 19 Table of Contents ​ Other Income (Expense): The increase in 2022 as compared to 2021 was primarily due to non-cash pension settlement charges in 2021 related to the termination of a pension plan.
Added
Stock-Based Compensation On April 19, 2023, the shareholders of the Company approved the 2023 Equity and Incentive Compensation Plan ("2023 Employee Plan"), which replaced the 2015 Equity and Incentive Compensation Plan (“2015 Employee Plan”).
Removed
Refer to Note 12 to the consolidated financial statements for details. Income Taxes: The 2022 effective tax rate was higher than 2021 primarily due to a change in the mix of earnings, as well as the impact of the 2021 pension plan termination.
Added
The 2023 Employee Plan provides for the granting of options, appreciation rights, restricted shares, restricted stock units and performance-based awards up to an additional 2,025,000 of the Company’s common shares.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt December 31, 2022, a hypothetical 10% change in the price would have resulted in an increase or decrease to the value of the contracts by $319.
Biggest changeThe notional amount of these contracts was 200,000 pounds at December 31, 2023. At December 31, 2023, a hypothetical 10% change in the price would have resulted in an increase or decrease to the value of the contracts by $74.
The fair value of the Company’s cash and cash equivalents at December 31, 2022 approximated cost due to the short-term duration. These financial instruments are subject to concentrations of credit risk. The Company has minimized this risk by entering into investments with a number of major banks and financial institutions and investing in high-quality instruments.
The fair value of the Company’s cash and cash equivalents at December 31, 2023 approximated cost due to the short-term duration. These financial instruments are subject to concentrations of credit risk. The Company has minimized this risk by entering into investments with a number of major banks and financial institutions and investing in high-quality instruments.
Interest Rate Risk In anticipation of future debt issuance associated with the Notes referenced in Note 9 to the consolidated financial statements, the Company has interest rate forward starting swap agreements to hedge the variability of future changes in interest rates. The gross notional dollar value of these contracts was $100,000 at December 31, 2022.
Interest Rate Risk In anticipation of future debt issuance associated with the Notes referenced in Note 9 to the consolidated financial statements, the Company has interest rate forward starting swap agreements to hedge the variability of future changes in interest rates. The gross notional dollar value of these contracts was $100,000 at December 31, 2023.
Foreign Currency Exchange Risk The Company enters into forward foreign exchange contracts principally to hedge the currency fluctuations in transactions denominated in foreign currencies, thereby limiting the Company’s risk that would otherwise result from changes in exchange rates. At December 31, 2022, the Company hedged certain third-party and intercompany purchases and sales.
Foreign Currency Exchange Risk The Company enters into forward foreign exchange contracts principally to hedge the currency fluctuations in transactions denominated in foreign currencies, thereby limiting the Company’s risk that would otherwise result from changes in exchange rates. At December 31, 2023, the Company hedged certain third-party and intercompany purchases and sales.
The derivative, borrowing and investment arrangements in effect at December 31, 2022 were compared to the hypothetical foreign exchange or interest rates in the sensitivity analysis to determine the effect on the Company’s current period consolidated financial statements.
The derivative, borrowing and investment arrangements in effect at December 31, 2023 were compared to the hypothetical foreign exchange or interest rates in the sensitivity analysis to determine the effect on the Company’s current period consolidated financial statements.
Included below is a sensitivity analysis based upon a hypothetical 10% weakening or strengthening in the U.S. dollar compared to foreign currency exchange rates at December 31, 2022, a 10% change in pricing of commodity contracts and a 100 basis point increase in effective interest rates at December 31, 2022.
Included below is a sensitivity analysis based upon a hypothetical 10% weakening or strengthening in the U.S. dollar compared to foreign currency exchange rates at December 31, 2023, a 10% change in pricing of commodity contracts 32 Table of Contents ​ and a 100 basis point increase in effective and variable interest rates at December 31, 2023.
A hypothetical 10% change in the year-end exchange rates would have resulted in an increase or decrease to Income before income taxes of $12,936 related to these positions.
A hypothetical 10% change in the year-end exchange rates would have resulted in an increase or decrease to Income before income taxes of $25,267 related to these positions.
The Company enters into forward foreign exchange contracts to hedge transaction exposures or significant cross-border intercompany loans by either purchasing or selling specified amounts of foreign currency at a specified date. The gross notional dollar amount of these foreign exchange contracts at December 31, 2022 was $380,443.
The Company enters into forward foreign exchange contracts to hedge transaction exposures or significant cross-border intercompany loans by either purchasing or selling specified amounts of foreign currency at a specified date. The gross notional dollar amount of these foreign exchange contracts at December 31, 2023 was $492,600.
The gross notional dollar amount of these foreign exchange contracts at December 31, 2022 was $66,296. At December 31, 2022, a hypothetical 10% strengthening or weakening in the U.S. dollar would have changed Accumulated other comprehensive income (loss) by $284.
The gross notional dollar amount of these foreign exchange contracts at December 31, 2023 was $84,148. At December 31, 2023, a hypothetical 10% strengthening or weakening in the U.S. dollar would have changed Accumulated other comprehensive income (loss) by $1,744.
The Company does not expect any counter-parties to fail to meet their obligations. ​
The Company does not expect any counter-parties to fail to meet their obligations. ​ 33 Table of Contents ​
The Company also has a foreign currency forward contract hedge designated as a net 32 Table of Contents ​ investment hedge with a notional dollar amount of $88,843 at December 31, 2022. At December 31, 2022, a hypothetical 10% strengthening or weakening in the U.S. dollar would have changed Accumulated other comprehensive income (loss) by $8,758.
The Company also has a foreign currency forward contract hedge designated as a net investment hedge with a notional dollar amount of $119,607 at December 31, 2023. At December 31, 2023, a hypothetical 10% strengthening or weakening in the U.S. dollar would have changed Accumulated other comprehensive income (loss) by $11,658.
Commodity Price Risk From time to time, the Company uses various hedging arrangements to manage exposures to price risk from commodity purchases. These hedging arrangements have the effect of fixing for specified periods the prices the Company will pay for the volume to which the hedge relates. The notional amount of these contracts was 875,000 pounds at December 31, 2022.
Commodity Price Risk From time to time, the Company uses various hedging arrangements to manage exposures related to price risk from commodity purchases. These hedging arrangements have the effect of fixing for specified periods the prices the Company will pay for the volume to which the hedge relates.
At December 31, 2022, a hypothetical 100 basis point increase to effective interest rates would have changed Accumulated other comprehensive income (loss) by $7,584. At December 31, 2022, a hypothetical 100 basis point increase to variable interest rates would have changed Interest expense by approximately $5,600.
At December 31, 2023, a hypothetical 100 basis point increase to effective interest rates would have changed Accumulated other comprehensive income (loss) by $6,054. At December 31, 2023, a hypothetical 100 basis point increase to variable interest rates would have changed Interest expense by approximately $2,500.
Added
In March 2023, the Company entered into interest rate swap agreements, which were qualified and designated as cash flow hedges, with an aggregate notional amount of $150,000. At December 31, 2023, a hypothetical 100 basis point increase to effective interest rates would have changed Accumulated other comprehensive income (loss) by $2,599.

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