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LINCOLN ELECTRIC HOLDINGS INC - Quarter Report: 2022 September (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number:  0-1402

Graphic

LINCOLN ELECTRIC HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Ohio

 

34-1860551

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

22801 St. Clair Avenue, Cleveland, Ohio

44117

(Address of principal executive offices)

(Zip Code)

(216) 481-8100

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Shares, without par value

LECO

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “small reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  No 

The number of shares outstanding of the registrant’s common shares as of September 30, 2022 was 57,738,400.

Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

4

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

5

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

6

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

8

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

36

Item 4. Controls and Procedures

36

 

 

PART II. OTHER INFORMATION

37

Item 1. Legal Proceedings

37

Item 1A. Risk Factors

37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 4. Mine Safety Disclosures

37

Item 6. Exhibits

38

Signatures

39

EX-31.1

Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

 

EX-31.2

Certification of the Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

 

EX-32.1

Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

EX-101

Instance Document

 

EX-101

Schema Document

 

EX-101

Calculation Linkbase Document

 

EX-101

Label Linkbase Document

 

EX-101

Presentation Linkbase Document

 

EX-101

Definition Linkbase Document

 

2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(In thousands, except per share amounts)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

    

2022

    

2021

Net sales (Note 2)

    

$

935,240

    

$

806,454

    

$

2,830,277

    

$

2,389,929

Cost of goods sold

 

625,722

 

538,282

 

1,857,501

 

1,593,981

Gross profit

 

309,518

 

268,172

 

972,776

 

795,948

Selling, general & administrative expenses

 

159,045

 

149,118

 

492,523

 

446,351

Rationalization and asset impairment charges (Note 6)

 

8,364

 

3,484

 

9,405

 

8,277

Operating income

 

142,109

 

115,570

 

470,848

 

341,320

Interest expense, net

 

8,210

 

5,714

 

20,867

 

16,736

Other income (expense) (Note 14)

 

3,588

 

(71,441)

 

7,088

 

(71,155)

Income before income taxes

 

137,487

 

38,415

 

457,069

 

253,429

Income taxes (Note 15)

 

28,262

 

6,658

 

93,991

 

51,259

Net income including non-controlling interests

 

109,225

 

31,757

 

363,078

 

202,170

Non-controlling interests in subsidiaries’ income (loss)

 

 

 

 

131

Net income

$

109,225

$

31,757

$

363,078

$

202,039

Basic earnings per share (Note 3)

$

1.89

$

0.54

$

6.24

$

3.40

Diluted earnings per share (Note 3)

$

1.87

$

0.53

$

6.17

$

3.36

Cash dividends declared per share

$

0.56

$

0.51

$

1.68

$

1.53

See notes to these consolidated financial statements.

3

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

    

2022

    

2021

Net income including non-controlling interests

    

$

109,225

    

$

31,757

    

$

363,078

    

$

202,170

Other comprehensive income (loss), net of tax:

 

  

 

  

 

  

 

  

Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $3,234 and $8,079 in the three and nine months ended September 30, 2022; $707 and $1,493 in the three and nine months ended September 30, 2021

 

7,777

 

2,876

22,082

5,412

Defined benefit pension plan activity, net of tax of $47 and $506 in the three and nine months ended September 30, 2022; $18,759 and $19,005 in the three and nine months ended September 30, 2021

 

85

 

55,558

148

58,916

Currency translation adjustment

 

(52,129)

 

(19,120)

 

(94,193)

 

(28,284)

Other comprehensive income (loss):

 

(44,267)

 

39,314

 

(71,963)

 

36,044

Comprehensive income

 

64,958

 

71,071

 

291,115

 

238,214

Comprehensive income (loss) attributable to non-controlling interests

 

(13)

 

(58)

 

102

 

(196)

Comprehensive income attributable to shareholders

$

64,971

$

71,129

$

291,013

$

238,410

See notes to these consolidated financial statements.

4

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

September 30, 2022

December 31, 2021

(UNAUDITED)

(NOTE 1)

ASSETS

    

  

    

  

Current Assets

 

  

 

  

Cash and cash equivalents

$

141,307

$

192,958

Accounts receivable (less allowance for doubtful accounts of $10,009 in 2022; $11,105 in 2021)

 

463,106

 

429,074

Inventories (Note 9)

 

632,376

 

539,919

Other current assets

 

158,609

 

127,642

Total Current Assets

 

1,395,398

 

1,289,593

Property, plant and equipment (less accumulated depreciation of $863,983 in 2022; $868,036 in 2021)

489,961

511,744

Goodwill

 

424,505

 

430,162

Other assets

 

342,101

 

360,808

TOTAL ASSETS

$

2,651,965

$

2,592,307

LIABILITIES AND EQUITY

 

 

  

Current Liabilities

 

 

  

Short-term debt (Note 12)

$

68,375

$

52,730

Trade accounts payable

 

329,890

 

330,230

Accrued employee compensation and benefits

 

183,638

 

108,562

Other current liabilities

 

238,425

 

264,383

Total Current Liabilities

 

820,328

 

755,905

Long-term debt, less current portion (Note 12)

 

711,250

 

717,089

Other liabilities

 

196,159

 

255,404

Total Liabilities

 

1,727,737

 

1,728,398

Shareholders' Equity

 

 

  

Common Shares

 

9,858

 

9,858

Additional paid-in capital

 

471,172

 

451,268

Retained earnings

 

3,237,200

 

2,970,303

Accumulated other comprehensive loss

 

(329,451)

 

(257,386)

Treasury Shares

 

(2,464,460)

 

(2,309,941)

Total Shareholders' Equity

 

924,319

 

864,102

Non-controlling interests

 

(91)

 

(193)

Total Equity

 

924,228

 

863,909

TOTAL LIABILITIES AND TOTAL EQUITY

$

2,651,965

$

2,592,307

See notes to these consolidated financial statements.

5

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)

    

    

    

    

    

Accumulated

    

    

    

Common

Additional

Other

Non-

Shares

Common

Paid-In

Retained

Comprehensive

Treasury

Controlling

    

Outstanding

    

Shares

    

Capital

    

Earnings

    

Income (Loss)

    

Shares

    

Interests

    

Total

Balance at December 31, 2021

 

58,787

$

9,858

$

451,268

$

2,970,303

$

(257,386)

$

(2,309,941)

$

(193)

$

863,909

Net income

 

126,030

1

 

126,031

Unrecognized amounts from defined benefit pension plans, net of tax

 

107

 

107

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax

 

5,355

 

5,355

Currency translation adjustment

 

(7,583)

134

 

(7,449)

Cash dividends declared - $0.56 per share

 

(32,505)

 

(32,505)

Stock-based compensation activity

 

116

10,834

1,349

 

12,183

Purchase of shares for treasury

 

(805)

(104,579)

 

(104,579)

Other

 

115

(107)

 

8

Balance at March 31, 2022

 

58,098

$

9,858

$

462,217

$

3,063,721

$

(259,507)

$

(2,413,171)

$

(58)

$

863,060

Net income

 

127,823

(1)

 

127,822

Unrecognized amounts from defined benefit pension plans, net of tax

 

(44)

 

(44)

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax

 

8,950

 

8,950

Currency translation adjustment

 

(34,596)

(19)

 

(34,615)

Cash dividends declared – $0.56 per share

 

(32,698)

 

(32,698)

Stock-based compensation activity

 

15

5,428

146

 

5,574

Purchase of shares for treasury

 

(191)

(25,119)

 

(25,119)

Other

 

(2,021)

2,074

 

53

Balance at June 30, 2022

 

57,922

$

9,858

$

465,624

$

3,160,920

$

(285,197)

$

(2,438,144)

$

(78)

$

912,983

Net income

 

 

  

 

 

109,225

 

 

 

 

109,225

Unrecognized amounts from defined benefit pension plans, net of tax

 

85

 

85

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax

 

7,777

 

7,777

Currency translation adjustment

 

(52,116)

(13)

 

(52,129)

Cash dividends declared – $0.56 per share

 

(32,580)

 

(32,580)

Stock-based compensation activity

 

14

5,158

202

 

5,360

Purchase of shares for treasury

 

(198)

(26,518)

 

(26,518)

Other

 

390

(365)

 

25

Balance at September 30, 2022

57,738

$

9,858

$

471,172

$

3,237,200

$

(329,451)

$

(2,464,460)

$

(91)

$

924,228

6

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LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)

    

    

    

    

    

Accumulated

    

    

    

Common

Additional

Other

Non-

Shares

Common

Paid-In

Retained

Comprehensive

Treasury

Controlling

    

Outstanding

    

Shares

    

Capital

    

Earnings

    

Income (Loss)

    

Shares

    

Interests

    

Total

Balance at December 31, 2020

 

59,641

$

9,858

$

409,958

$

2,821,359

$

(302,190)

$

(2,149,714)

$

979

$

790,250

Net income

 

74,177

(44)

 

74,133

Unrecognized amounts from defined benefit pension plans, net of tax

 

5,060

 

5,060

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax

 

7,290

 

7,290

Currency translation adjustment

 

(22,584)

(159)

 

(22,743)

Cash dividends declared – $0.51 per share

 

(30,572)

 

(30,572)

Stock-based compensation activity

 

134

7,680

1,502

 

9,182

Purchase of shares for treasury

 

(237)

(28,459)

 

(28,459)

Other

 

891

(741)

(883)

 

(733)

Balance at March 31, 2021

 

59,538

$

9,858

$

418,529

$

2,864,223

$

(312,424)

$

(2,176,671)

$

(107)

$

803,408

Net income

 

 

  

 

 

96,105

 

 

 

175

 

96,280

Unrecognized amounts from defined benefit pension plans, net of tax

 

 

  

 

 

 

(1,702)

 

 

 

(1,702)

Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax

 

 

  

 

 

 

(4,754)

 

 

 

(4,754)

Currency translation adjustment

 

 

  

 

 

 

13,689

 

 

(110)

 

13,579

Cash dividends declared – $0.51 per share

 

 

  

 

 

(30,552)

 

 

 

 

(30,552)

Stock-based compensation activity

 

46

 

  

 

8,638

 

 

 

503

 

 

9,141

Purchase of shares for treasury

 

(197)

 

  

 

 

 

 

(25,229)

 

 

(25,229)

Other

 

 

  

 

409

 

(957)

 

 

 

 

(548)

Balance at June 30, 2021

 

59,387

$

9,858

$

427,576

$

2,928,819

$

(305,191)

$

(2,201,397)

$

(42)

$

859,623

Net income

 

 

  

 

 

31,757

 

 

 

 

31,757

Unrecognized amounts from defined benefit pension plans, net of tax

 

 

  

 

 

 

55,558

 

 

 

55,558

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax

 

 

  

 

 

 

2,876

 

 

 

2,876

Currency translation adjustment

 

 

  

 

 

 

(19,062)

 

 

(58)

 

(19,120)

Cash dividends declared – $0.51 per share

 

 

  

 

 

(30,379)

 

 

 

 

(30,379)

Stock-based compensation activity

 

34

 

  

 

7,449

 

 

 

364

 

 

7,813

Purchase of shares for treasury

 

(373)

(50,160)

(50,160)

Other

 

 

  

 

(239)

 

164

 

 

 

 

(75)

Balance at September 30, 2021

59,048

$

9,858

$

434,786

$

2,930,361

$

(265,819)

$

(2,251,193)

$

(100)

$

857,893

7

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LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

Nine Months Ended September 30, 

    

    

2022

    

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

  

Net income

$

363,078

$

202,039

Non-controlling interests in subsidiaries' income (loss)

 

 

131

Net income including non-controlling interests

 

363,078

 

202,170

Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:

 

 

  

Rationalization and asset impairment net charges (gains) (Note 6)

 

7,776

 

(1,162)

Depreciation and amortization

 

59,009

 

60,558

Equity earnings (loss) in affiliates, net

 

254

 

(399)

Deferred income taxes

 

(34,403)

 

(28,428)

Stock-based compensation

 

20,949

 

18,215

Pension settlement charges

80,098

Other, net

 

15,867

 

(754)

Changes in operating assets and liabilities, net of effects from acquisitions:

 

 

  

Increase in accounts receivable

 

(64,569)

 

(71,212)

Increase in inventories

 

(135,578)

 

(128,856)

Increase in other current assets

 

(34,368)

 

(10,610)

Increase in trade accounts payable

 

19,572

 

54,981

Increase in other current liabilities

 

66,838

 

89,569

Net change in other assets and liabilities

 

(12,841)

 

(9,045)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

271,584

 

255,125

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

  

Capital expenditures

 

(52,301)

 

(46,440)

Acquisition of businesses, net of cash acquired

 

(22,294)

 

(158,605)

Proceeds from sale of property, plant and equipment

 

2,338

 

3,847

Other investing activities

 

 

6,500

NET CASH USED BY INVESTING ACTIVITIES

 

(72,257)

 

(194,698)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

  

Net change in borrowings

 

14,999

 

32,295

Proceeds from exercise of stock options

 

2,168

 

7,921

Purchase of shares for treasury (Note 8)

 

(156,216)

 

(103,848)

Cash dividends paid to shareholders

 

(98,377)

 

(91,717)

Other financing activities

 

 

(763)

NET CASH USED BY FINANCING ACTIVITIES

 

(237,426)

 

(156,112)

Effect of exchange rate changes on Cash and cash equivalents

 

(13,552)

 

(1,035)

DECREASE IN CASH AND CASH EQUIVALENTS

 

(51,651)

 

(96,720)

Cash and cash equivalents at beginning of period

 

192,958

 

257,279

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

141,307

$

160,559

See notes to these consolidated financial statements.

8

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest (the “Company”) after elimination of all inter-company accounts, transactions and profits.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. However, in the opinion of management, these unaudited consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

The accompanying Consolidated Balance Sheet at December 31, 2021 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

In March 2022, in response to Russia’s invasion of Ukraine, the Company announced it was ceasing operations in Russia and implementing plans to support its Russian employees. Although the Company’s Net sales and Total assets in Russia are less than 1% of consolidated Net sales for the year ended December 31, 2021 and less than 1% of consolidated Total assets as of December 31, 2021, 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. The Company continues to monitor the Russia-Ukraine conflict and its potential impacts.

Turkey – Highly Inflationary Economy

An economy is considered highly inflationary under GAAP if the cumulative inflation rate for a three-year period meets or exceeds 100 percent. The Turkish economy exceeded the three-year cumulative inflation rate of 100 percent during the second quarter of 2022. As a result, the financial statements of the Company’s Turkish operation are reported under highly inflationary accounting rules as of April 1, 2022. Under highly inflationary accounting, the financial statements of the Company’s Turkish operation have been remeasured into the Company’s reporting currency (U.S. dollar). Beginning April 1, 2022, the exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than “Accumulated other comprehensive loss” on the balance sheet. As of September 30, 2022, this impact was not significant to the Company’s results.

Management has evaluated and disclosed all material events occurring subsequent to the date of the financial statements up to October 27, 2022, the filing date of this Quarterly Report on Form 10-Q.

New Accounting Pronouncements:

This section provides a description of new accounting pronouncements (“Accounting Standard Update” or “ASU”) issued by the Financial Accounting Standards Board (“FASB”) that are applicable to the Company.

9

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The Company is currently evaluating the impact on its financial statements of the following ASU:

Standard

Description

ASU No. 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50), issued September 2022.

Requires disclosure about a company’s supplier finance program, including key terms, amount outstanding, assets pledged as applicable, presentation on the balance sheet and a period-over-period balance roll forward. Except for the roll forward requirement, the ASU is effective for interim and annual periods beginning January 1, 2023 and should be applied retrospectively. The roll forward requirement is effective January 1, 2024 and should be applied prospectively. Early adoption of the roll forward requirement is permitted.

NOTE 2 — REVENUE RECOGNITION

The following table presents the Company’s Net sales disaggregated by product line:

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

    

2022

    

2021

Consumables

$

547,596

$

465,829

$

1,655,613

$

1,375,567

Equipment

 

387,644

 

340,625

 

1,174,664

 

1,014,362

Net sales

$

935,240

$

806,454

$

2,830,277

$

2,389,929

Consumable sales consist of electrodes, fluxes, specialty welding consumables and brazing and soldering alloys. Equipment sales consist of arc welding power sources, welding accessories, fabrication, plasma cutters, wire feeding systems, automated joining, assembly and cutting systems, fume extraction equipment, CNC plasma and oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. Consumable and Equipment products are sold within each of the Company’s operating segments.

Within the Equipment product line, there are certain customer contracts related to automation products that may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines the standalone selling price based on the prices charged to customers or using expected cost plus margin. Less than 10% of the Company’s Net sales are recognized over time.

At September 30, 2022, the Company recorded $42,552 related to advance customer payments and $31,772 related to billings in excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Condensed Consolidated Balance Sheets. At December 31, 2021, the balances related to advance customer payments and billings in excess of revenue recognized were $72,047 and $40,450, respectively. Substantially all of the Company’s contract liabilities are recognized within twelve months based on contract duration. The Company records an asset for contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services. At September 30, 2022 and December 31, 2021, the Company recorded $37,488 and $25,300, respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets. Contract asset amounts are expected to be billed within the next twelve months.

10

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 3 — EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

 

2021

 

2022

 

2021

Numerator:

 

 

  

 

  

 

  

Net income

$

109,225

$

31,757

$

363,078

$

202,039

Denominator (shares in 000's):

 

 

 

 

Basic weighted average shares outstanding

 

57,823

 

59,289

 

58,148

 

59,465

Effect of dilutive securities - Stock options and awards

 

703

 

766

 

667

 

703

Diluted weighted average shares outstanding

 

58,526

 

60,055

 

58,815

 

60,168

Basic earnings per share

$

1.89

$

0.54

$

6.24

$

3.40

Diluted earnings per share

$

1.87

$

0.53

$

6.17

$

3.36

For the three months ended September 30, 2022 and 2021, common shares subject to equity-based awards of 52,495 and 2,126, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. For the nine months ended September 30, 2022 and 2021, common shares subject to equity-based awards of 120,106 and 150,254, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

On March 1, 2022, the Company acquired 100% ownership of Kestra Universal Soldas, Industria e Comercio, Imporacao e Exportacao Ltda. (“Kestra”), a privately held manufacturer headquartered in Atibaia, Sao Paulo State, Brazil. The net purchase price was $22,294, net of cash acquired and accounted for as a business combination. In 2021, Kestra generated sales of approximately $15,000. Beginning March 1, 2022, the Company’s Consolidated Statements of Income include the results of Kestra, including Net sales of $11,906 through September 30, 2022 and the impact on net income for the three and nine months ended September 30, 2022 was not material. Kestra manufactures and provides specialty welding consumables, wear plates and maintenance and repair services for alloy and wear-resistant products commonly used in mining, steel, agricultural and industrial mill applications. The acquisition broadens the Company’s specialty alloys portfolio and services.

On July 28, 2021, the Company acquired 100% ownership of Overstreet-Hughes Company, Inc. and Shoals Tubular, Inc. (“FTP”). The net purchase price was $71,716, net of cash acquired and accounted for as a business combination. The Company recognized $346 in acquisition transaction costs in 2021 which were expensed as incurred and are included in “Selling, general, and administrative expenses” in the Consolidated Statements of Income. In 2020, FTP generated sales of approximately $50,000. Beginning July 28, 2021, the Company’s Consolidated Statements of Income include the results of FTP, including Net sales of $24,953 through December 31, 2021 and the impact on net income for the year ended December 31, 2021 was not material. FTP manufactures copper and aluminum headers, distributor assemblies and manifolds in the United States and Mexico for the heating, ventilation, and air conditioning sector (“HVAC”). The acquisition further differentiated The Harris Products Group’s competitive position serving HVAC original equipment manufacturers with a comprehensive portfolio of solutions for the fabrication of HVAC coils and accelerates growth in this market.

On April 1, 2021, the Company acquired 100% ownership of Zeman Bauelemente Produktionsgesellschaft m.b.H. (“Zeman"), a division of the Zeman Group. The net purchase price was $84,390, net of cash acquired and accounted for as a business combination. The Company recognized $1,577 in acquisition transaction costs in 2021 which were expensed as incurred and are included in “Selling, general, and administrative expenses” in the Consolidated Statements of Income. In 2020, Zeman generated sales of approximately $40,000. Beginning April 1, 2021, the Company’s

11

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Consolidated Statements of Income include the results of Zeman, including Net sales of $24,473 through December 31, 2021 and the impact on net income for the year ended December 31, 2021 was not material. Zeman, based in Vienna, Austria, is a leading designer and manufacturer of robotic assembly and arc welding systems that automate the tacking and welding of steel beams. The acquisition expanded the Company’s international automation capabilities to serve customers in the structural steel and infrastructure sectors.

The acquired companies discussed above are not material individually, or in the aggregate, to the actual or pro forma Consolidated Statements of Income or Consolidated Statements of Cash Flows; as such, pro forma information related to these acquisitions have not been presented. The preliminary purchase price allocations are expected to be finalized within the allowable measurement period.

NOTE 5 — SEGMENT INFORMATION

The Company’s business units are aligned into three operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global oxy-fuel cutting, soldering and brazing businesses as well as its retail business in the United States.

Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the adjusted earnings before interest and income taxes (“Adjusted EBIT”) profit measure. EBIT is defined as Operating income plus Other income (expense). EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets.

12

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following table presents Adjusted EBIT by segment:

The Harris

Americas

International

Products

Corporate /

    

Welding

    

Welding

    

Group

    

Eliminations

    

Consolidated

Three Months Ended September 30, 2022

 

  

 

  

 

  

 

  

 

  

Net sales

$

585,628

$

216,497

$

133,115

$

$

935,240

Inter-segment sales

 

35,353

9,994

2,642

(47,989)

Total

$

620,981

$

226,491

$

135,757

$

(47,989)

$

935,240

Adjusted EBIT

$

118,804

$

25,225

$

14,432

$

(1,685)

$

156,776

Special items charge (gain) (1)

 

(353)

8,364

3,068

11,079

EBIT

$

119,157

$

16,861

$

14,432

$

(4,753)

$

145,697

Interest income

376

Interest expense

(8,586)

Income before income taxes

 

 

 

$

137,487

Three Months Ended September 30, 2021

 

  

 

  

 

  

 

  

 

  

Net sales

$

461,508

$

227,165

$

117,781

$

$

806,454

Inter-segment sales

 

37,480

 

7,078

 

1,945

 

(46,503)

Total

$

498,988

$

234,243

$

119,726

$

(46,503)

$

806,454

Adjusted EBIT

$

84,557

$

29,032

$

15,980

$

(4,704)

$

124,865

Special items charge (gain) (3)

 

73,574

 

6,615

 

547

 

80,736

EBIT

$

10,983

$

22,417

$

15,433

$

(4,704)

$

44,129

Interest income

 

  

 

  

 

  

 

333

Interest expense

 

  

 

  

 

  

 

(6,047)

Income before income taxes

 

  

 

  

 

  

$

38,415

Nine Months Ended September 30, 2022

 

 

  

Net sales

$

1,715,342

$

711,167

$

403,768

$

$

2,830,277

Inter-segment sales

 

92,540

 

25,749

 

8,570

 

(126,859)

Total

$

1,807,882

$

736,916

$

412,338

$

(126,859)

$

2,830,277

Adjusted EBIT

$

348,439

$

97,321

$

51,952

$

(10,470)

$

487,242

Special items charge (gain) (2)

 

(3,627)

 

9,865

 

 

3,068

9,306

EBIT

$

352,066

$

87,456

$

51,952

$

(13,538)

$

477,936

Interest income

 

  

 

  

 

  

 

980

Interest expense

 

  

 

  

 

  

 

(21,847)

Income before income taxes

 

  

 

  

 

  

$

457,069

Nine Months Ended September 30, 2021

 

 

  

Net sales

$

1,344,218

$

702,596

$

343,115

$

$

2,389,929

Inter-segment sales

 

109,993

 

18,260

 

6,376

 

(134,629)

Total

$

1,454,211

$

720,856

$

349,491

$

(134,629)

$

2,389,929

Adjusted EBIT

$

245,308

$

77,845

$

52,889

$

(10,048)

$

365,994

Special items charge (gain) (3)

 

79,664

 

13,695

 

547

 

1,923

95,829

EBIT

$

165,644

$

64,150

$

52,342

$

(11,971)

$

270,165

Interest income

 

  

 

  

 

  

 

1,185

Interest expense

 

  

 

  

 

  

 

(17,921)

Income before income taxes

 

  

 

  

 

  

$

253,429

(1)In the three months ended September 30, 2022, special items exclude an adjustment to the amortization of the step up in value of acquired inventories of $353 in Americas Welding, Rationalization and asset impairment charges of $8,364 in International Welding as discussed in Note 6 and acquisition transaction costs of $3,068 in Corporate/Eliminations related to the contemplated acquisition discussed in Note 18.
(2)In the nine months ended September 30, 2022, special items exclude a favorable adjustment related to the termination of a pension plan of $3,735, the amortization of the step up in value of acquired inventories of $1,106 and Rationalization and asset impairment net gains of $998 in Americas Welding, Rationalization and

13

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

asset impairment charges of $10,403 in International Welding as discussed in Note 6 and acquisition costs transaction costs of $3,086 in Corporate/Eliminations related to the contemplated acquisition discussed in Note 18.
(3)In the three and nine months ended September 30, 2021, special items reflect Rationalization and asset impairment charges of $3,484 and $8,277, respectively, primarily in International Welding, amortization of the step up in value of acquired inventories of $3,690 and $5,531, respectively, related to the acquisitions of Zeman in International Welding and FTP in The Harris Products Group, pension settlement charges of $73,562 and $79,652, respectively, in Americas Welding and $446 in International Welding in the nine months ended September 30, 2021. Also in the nine months ended September 30, 2021, special items reflect acquisition transaction costs of $1,923 in Corporate/Eliminations related to acquisitions as discussed in Note 4.

NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS

The Company recorded Rationalization and asset impairment net charges of $9,405 and $8,277 in the nine months ended September 30, 2022 and 2021, respectively. The charges are primarily related to employee severance, non-cash asset impairments and gains or losses on the disposal of assets.

During 2021, the Company initiated rationalization plans within the International Welding segment. The plans include headcount restructuring and the consolidation of manufacturing operations to better align the Company’s cost structure with economic conditions and operating needs. At September 30, 2022, liabilities of $1,097 for International Welding were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

The Company believes the rationalization actions will positively impact future results of operations and will not have a material effect on liquidity and sources and uses of capital. The Company continues to evaluate its cost structure and additional rationalization actions may result in charges in future periods.

The following table summarizes the activity related to rationalization liabilities for the nine months ended September 30, 2022:

    

International

    

    

Welding

    

Consolidated

Balance at December 31, 2021

$

2,990

$

2,990

Payments and other adjustments

 

(3,522)

 

(3,522)

Charged to expense

 

1,629

 

1,629

Balance at September 30, 2022

$

1,097

$

1,097

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Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ("AOCI")

The following tables set forth the total changes in accumulated other comprehensive income (loss) ("AOCI") by component, net of taxes:

Three Months Ended September 30, 2022

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

Currency

qualifying as cash

pension plan

translation

flow hedges

activity

adjustment

Total

Balance at June 30, 2022

$

22,399

$

(13,168)

$

(294,428)

$

(285,197)

Other comprehensive income (loss) before reclassification

 

8,142

(52,116)

3

(43,974)

Amounts reclassified from AOCI

 

(365)

1

85

2

(280)

Net current-period other comprehensive income (loss)

 

7,777

 

85

 

(52,116)

 

(44,254)

Balance at September 30, 2022

$

30,176

$

(13,083)

$

(346,544)

$

(329,451)

Three Months Ended September 30, 2021

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

Currency

qualifying as cash

pension plan

translation

flow hedges

activity

adjustment

Total

Balance at June 30, 2021

$

5,023

$

(98,412)

$

(211,802)

$

(305,191)

Other comprehensive income (loss) before reclassification

 

3,162

 

(235)

 

(19,062)

3

 

(16,135)

Amounts reclassified from AOCI

 

(286)

1

 

55,793

2

 

 

55,507

Net current-period other comprehensive income (loss)

 

2,876

 

55,558

 

(19,062)

 

39,372

Balance at September 30, 2021

$

7,899

$

(42,854)

$

(230,864)

$

(265,819)

(1)During the three months ended September 30, 2022, the AOCI reclassification is a component of Net sales of $155 (net of tax of $74) and Cost of goods sold of $(210) (net of tax of $(44)); during the three months ended September 30, 2021, the reclassification is a component of Net sales of $304 (net of tax of $135) and Cost of goods sold of $18 (net of tax of $26). See Note 16 to the consolidated financial statements for additional details.

(2)This AOCI component is included in the computation of net periodic pension costs (net of tax of $30 and $18,677) during the three months ended September 30, 2022 and 2021, respectively. See Note 13 to the consolidated financial statements for additional details.
(3)The Other comprehensive income (loss) before reclassifications excludes $(13) and $(58) attributable to Non-controlling interests in the three months ended September 30, 2022 and 2021, respectively.

15

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Nine Months Ended September 30, 2022

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

Currency

qualifying as cash

pension plan

translation

flow hedges

activity

adjustment

Total

Balance at December 31, 2021

$

8,094

$

(13,231)

$

(252,249)

$

(257,386)

Other comprehensive income (loss) before reclassification

 

23,430

(94,295)

3

(70,865)

Amounts reclassified from AOCI

 

(1,348)

1

148

2

(1,200)

Net current-period other comprehensive income (loss)

 

22,082

 

148

 

(94,295)

 

(72,065)

Balance at September 30, 2022

$

30,176

$

(13,083)

$

(346,544)

$

(329,451)

Nine Months Ended September 30, 2021

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

Currency

qualifying as cash

pension plan

translation

flow hedges

activity

adjustment

Total

Balance at December 31, 2020

$

2,487

$

(101,770)

$

(202,907)

$

(302,190)

Other comprehensive income (loss) before reclassification

 

6,275

 

(2,220)

 

(27,957)

3

 

(23,902)

Amounts reclassified from AOCI

 

(863)

1

 

61,136

2

 

 

60,273

Net current-period other comprehensive income (loss)

 

5,412

 

58,916

 

(27,957)

 

36,371

Balance at September 30, 2021

$

7,899

$

(42,854)

$

(230,864)

$

(265,819)

(1)During the nine months ended September 30, 2022, the AOCI reclassification is a component of Net sales of $409 (net of tax of $181) and Cost of goods sold of $(939) (net of tax of $(223)); during the nine months ended September 30, 2021, the reclassification is a component of Net sales of $1,611 (net of tax of $692) and Cost of goods sold of $748 (net of tax of $270). See Note 16 to the consolidated financial statements for additional details.
(2)This AOCI component is included in the computation of net periodic pension costs (net of tax of $209 and $21,578) during the nine months ended September 30, 2022 and 2021, respectively. See Note 13 to the consolidated financial statements for additional details.
(3)The Other comprehensive income (loss) before reclassifications excludes $102 and $ (327) attributable to Non-controlling interests in the nine months ended September 30, 2022 and 2021, respectively.

NOTE 8 — COMMON STOCK REPURCHASE PROGRAM

From time to time at management’s discretion, the Company is authorized to repurchase its common shares in the open market, depending on market conditions, stock price and other factors. During the three months ended September 30, 2022, the Company purchased a total of 0.2 million shares at an average cost per share of $133.74. During the nine months ended September 30, 2022, the Company purchased a total of 1.2 million shares at an average cost per share of $130.90. As of September 30, 2022, 9.1 million common shares remained available for repurchase. The repurchased common shares remain in treasury and have not been retired.

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Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 9 — INVENTORIES

Inventories in the Condensed Consolidated Balance Sheets are comprised of the following components:

    

    

September 30, 2022

    

December 31, 2021

Raw materials

$

190,369

$

143,394

Work-in-process

 

106,212

 

97,834

Finished goods

 

335,795

 

298,691

Total

$

632,376

$

539,919

At September 30, 2022 and December 31, 2021, approximately 40% and 36%, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method. The excess of current cost over LIFO cost was $134,597 and $114,176 at September 30, 2022 and December 31, 2021, respectively.

NOTE 10 — LEASES

The table below summarizes the right-of-use assets and lease liabilities in the Company’s Condensed Consolidated Balance sheets:

Operating Leases

    

Balance Sheet Classification

    

September 30, 2022

    

December 31, 2021

Right-of-use assets

 

Other assets

$

45,222

$

47,966

Current liabilities

 

Other current liabilities

$

9,963

$

10,218

Noncurrent liabilities

 

Other liabilities

 

36,636

 

38,960

Total lease liabilities

 

  

$

46,599

$

49,178

Total lease expense, which is included in Cost of goods sold and Selling, general & administrative expenses in the Company’s Consolidated Statements of Income, was $5,109 and $15,415 in the three and nine months ended September 30, 2022, respectively, and $5,619 and $16,279 in the three and nine months ended September 30, 2021, respectively. Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2022 were $2,930 and $9,101, respectively, and are included in Net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2021 were $5,896 and $12,548, respectively, and are included in Net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. Right-of-use assets obtained in exchange for operating lease liabilities were $4,739 and $8,217 during the three and nine months ended September 30, 2022, respectively, and $3,218 and $12,912 for the three and nine months ended September 30, 2021, respectively.

17

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The total future minimum lease payments for noncancelable operating leases were as follows:

    

September 30, 2022

2022

$

2,868

2023

 

10,794

2024

 

9,313

2025

 

6,307

2026

 

5,124

After 2026

 

17,915

Total lease payments

$

52,321

Less: Imputed interest

 

5,722

Operating lease liabilities

$

46,599

As of September 30, 2022, the weighted average remaining lease term is 7.9 years and the weighted average discount rate used to determine the operating lease liability is 3.0%.

NOTE 11 — PRODUCT WARRANTY COSTS

The changes in the carrying amount of product warranty accruals are as follows:

Nine Months Ended September 30, 

    

2022

    

2021

Balance at beginning of year

$

20,466

$

21,760

Accruals for warranties

 

9,790

 

8,446

Settlements

 

(10,346)

 

(8,809)

Foreign currency translation and other adjustments

 

(723)

 

(306)

Balance at end of period

$

19,187

$

21,091

NOTE 12 — DEBT

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 Credit Agreement has a line of credit totaling $500,000, has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $150,000. The interest rate on borrowings is based on LIBOR plus a spread based on the Company’s net leverage ratio. The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. As of September 30, 2022, the Company was in compliance with all of its covenants and had $37,000 of outstanding borrowings under the Credit Agreement.

The Company has other lines of credit and debt agreements totaling $104,293. As of September 30, 2022, the Company was in compliance with all of its covenants and had $20,338 outstanding at September 30, 2022.

Senior Unsecured Notes

On April 1, 2015 and October 20, 2016, the Company entered into separate Note Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

have an aggregate principal amount of $350,000, comprised of four different series ranging from $50,000 to $100,000, with maturity dates ranging from August 20, 2025 through April 1, 2045, and interest rates ranging from 2.75% to 4.02%. Interest on the Notes is paid semi-annually. The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and 11.6 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of September 30, 2022, the Company was in compliance with all of its debt covenants relating to the Notes.

Shelf Agreements

On November 27, 2018, the Company entered into seven uncommitted master note facilities (the "Shelf Agreements") that allow borrowings up to $700,000 in the aggregate. The Shelf Agreements have a term of 5 years and the average life of borrowings cannot exceed 15 years. The Company is required to comply with covenants similar to those contained in the Notes. As of September 30, 2022, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

Fair Value of Debt

At September 30, 2022 and December 31, 2021, the fair value of long-term debt, including the current portion, was approximately $597,972 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 $722,287 and $717,855, respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange.

NOTE 13 — RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

The components of total pension cost were as follows:

Three Months Ended September 30, 

Nine Months Ended September 30, 

2022

2021

2022

2021

U.S. pension

Non-U.S.

U.S. pension

Non-U.S.

U.S. pension

Non-U.S.

U.S. pension

Non-U.S.

    

plans

 

pension plans

 

plans

 

pension plans

 

plans

 

pension plans

 

plans

 

pension plans

    

Service cost

$

50

$

254

$

49

$

395

$

149

$

827

$

146

$

1,190

Interest cost

 

66

607

 

2,622

 

924

 

197

 

1,947

 

8,675

 

1,932

Expected return on plan assets

 

(759)

 

(3,888)

 

(1,487)

 

 

(2,637)

 

(12,595)

 

(2,996)

Amortization of prior service cost

 

 

 

1

 

 

(1)

 

 

12

Amortization of net loss

 

44

71

 

616

 

291

 

133

 

225

 

1,867

 

737

Settlement charges (gains) (1)

 

 

73,562

 

 

(3,735)

 

 

79,652

 

446

Defined benefit plans

160

173

72,961

124

(3,256)

361

77,745

1,321

Multi-employer plans

74

138

289

640

Defined contribution plans

7,850

679

6,572

898

20,180

2,284

17,606

2,296

Total pension cost

$

8,010

$

926

$

79,533

$

1,160

$

16,924

$

2,934

$

95,351

$

4,257

(1)Gains in the nine months ended September 30, 2022 related to the final settlement associated with the termination of a pension plan. Charges in the three and nine months ended September 30, 2021 primarily resulting from lump sum pension payments also related to the termination of a pension plan.

The defined benefit plan components of Total pension cost, other than service cost, are included in Other income (expense) in the Company’s Consolidated Statements of Income.

19

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 14 — OTHER INCOME (EXPENSE)

The components of Other income (expense) were as follows:

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

    

2022

    

2021

Equity earnings (loss) in affiliates

$

(434)

 

$

108

$

(254)

$

399

Other components of net periodic pension (cost) income (1)

 

(29)

 

 

(72,641)

 

3,871

 

(77,730)

Other income (expense)

 

4,051

 

 

1,092

 

3,471

 

6,176

Total Other income (expense)

$

3,588

 

$

(71,441)

$

7,088

$

(71,155)

(1)Other components of net periodic pension (cost) income includes pension settlements and curtailments as discussed in Note 13 to the consolidated financial statements.

NOTE 15 — INCOME TAXES

The Company recognized $93,991 of tax expense on pretax income of $457,069, resulting in an effective income tax rate of 20.6% for the nine months ended September 30, 2022. The effective income tax rate was 20.2% for the nine months ended September 30, 2021.

The effective tax rate was higher for the nine months ended September 30, 2022, as compared with the same period in 2021, primarily due to the geographic mix of earnings and the impact of favorable discrete tax adjustments in 2021.

As of September 30, 2022, the Company had $18,375 of unrecognized tax benefits. If recognized, approximately $15,195 would be reflected as a component of income tax expense.

The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2017. The Company is currently subject to U.S., various state and non-U.S. income tax audits.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a reduction of $3,655 in previously unrecognized tax benefits by the end of the third quarter 2023.

NOTE 16 — DERIVATIVES

The Company uses derivative instruments to manage exposures to currency exchange rates, interest rates and commodity prices arising in the normal course of business. Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable. Hedge ineffectiveness was immaterial in the nine months ended September 30, 2022 and 2021.

The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. None of the concentrations of risk with any individual counterparty was considered significant at September 30, 2022. The Company does not expect any counterparties to fail to meet their obligations.

20

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Cash Flow Hedges

The Company has certain foreign currency forward contracts that are qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $54,600 at September 30, 2022 and $72,630 at December 31, 2021.

The Company has interest rate forward starting swap agreements that are qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at September 30, 2022 and December 31, 2021 and have a termination date of August 2025.

The Company has commodity contracts with a notional amount of 1,475,000 pounds and 975,000 pounds at September 30, 2022 and December 31, 2021, respectively, which are qualified and designated as cash flow hedges.

Net Investment Hedges

The Company has cross currency swap agreements that are qualified and designated as net investment hedges. The dollar equivalent gross notional amount of these contracts is $25,000 as of September 30, 2022 and December 31, 2021, respectively.

The Company has foreign currency forward contracts that qualify and are designated as net investment hedges. The dollar equivalent gross notional amount of these short-term contracts was $81,398 at September 30, 2022 and $94,479 at December 31, 2021.

Derivatives Not Designated as Hedging Instruments

The Company has certain foreign exchange forward contracts that are not designated as hedges. These derivatives are held as economic hedges of certain balance sheet exposures. The dollar equivalent gross notional amount of these contracts was $260,594 and $301,685 at September 30, 2022 and December 31, 2021, respectively.

Fair values of derivative instruments in the Company’s Condensed Consolidated Balance Sheets follow:

September 30, 2022

December 31, 2021

Other

Other

Other

Other

Current

Current

Other

Other

Current

Current

Other

Other

Derivatives by hedge designation

Assets

    

Liabilities

    

Assets

    

Liabilities

    

Assets

    

Liabilities

    

Assets

    

Liabilities

Designated as hedging instruments:

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Foreign exchange contracts

$

2,039

$

508

$

$

$

772

$

535

$

$

Forward starting swap agreements

19,479

6,990

Net investment contracts

13,394

2,718

2,095

608

Commodity contracts

547

311

Not designated as hedging instruments:

 

 

 

 

 

  

Foreign exchange contracts

 

1,684

3,394

 

4,656

 

3,445

 

 

Total derivatives

$

17,117

$

4,449

$

22,197

$

$

7,834

$

3,980

$

6,990

$

608

21

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The effects of undesignated derivative instruments on the Company’s Consolidated Statements of Income consisted of the following:

    

    

Three Months Ended September 30, 

    

Nine Months Ended September 30, 

Derivatives by hedge designation

    

Classification of gain (loss)

    

2022

    

2021

    

2022

    

2021

Not designated as hedges:

  

  

 

  

  

 

  

Foreign exchange contracts

Selling, general
& administrative expenses

$

(3,374)

$

(878)

$

(2,836)

$

5,000

Commodity Contracts

Cost of goods sold

(319)

(40)

The effects of designated hedges on AOCI and the Company’s Consolidated Statements of Income consisted of the following:

    

    

Total gain (loss) recognized in AOCI, net of tax

    

September 30, 2022

    

December 31, 2021

    

Foreign exchange contracts

$

1,325

$

284

Forward starting swap agreements

14,133

5,232

Net investment contracts

15,000

 

2,339

Commodity Contracts

 

(282)

 

239

The Company expects a gain of $1,043 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized.

    

    

Three Months Ended September 30, 

    

Nine Months Ended September 30, 

Gain (loss) recognized in the

Derivative type

    

Consolidated Statements of Income:

    

2022

    

2021

    

2022

    

2021

Foreign exchange contracts

 

Sales

$

229

$

439

$

590

$

2,303

 

Cost of goods sold

 

573

 

(44)

 

1,202

 

(1,018)

Commodity contracts

Cost of goods sold

(319)

(40)

22

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 17 - FAIR VALUE

The following table provides a summary of assets and liabilities as of September 30, 2022, measured at fair value on a recurring basis:

    

    

Quoted Prices in

    

    

Active Markets for

Identical Assets or

Significant Other

Significant

Balance as of

Liabilities

Observable Inputs

Unobservable

Description

    

September 30, 2022

    

(Level 1)

    

(Level 2)

    

Inputs (Level 3)

Assets:

 

  

 

  

 

  

 

  

Foreign exchange contracts

$

3,723

$

$

3,723

$

Net investment contracts

16,112

16,112

Forward starting swap agreements

 

19,479

 

 

19,479

 

Pension surplus

62,750

62,750

Total assets

$

102,064

$

62,750

$

39,314

$

Liabilities:

 

  

 

  

 

  

 

  

Foreign exchange contracts

$

3,902

$

$

3,902

$

Commodity contracts

547

547

Deferred compensation

 

38,189

 

 

38,189

 

Total liabilities

$

42,638

$

$

42,638

$

The following table provides a summary of assets and liabilities as of December 31, 2021, measured at fair value on a recurring basis:

    

    

Quoted Prices in

    

    

Active Markets for

Identical Assets or

Significant Other

Significant

Balance as of

Liabilities

Observable Inputs

Unobservable

Description

    

December 31, 2021

    

(Level 1)

    

(Level 2)

    

Inputs (Level 3)

Assets:

 

  

 

  

 

  

 

  

Foreign exchange contracts

$

5,428

$

$

5,428

$

Net investment contracts

2,095

2,095

Commodity contracts

311

311

Forward starting swap agreements

 

6,990

 

 

6,990

 

Total assets

$

14,824

$

$

14,824

$

Liabilities:

 

  

 

  

 

  

 

  

Foreign exchange contracts

$

3,980

$

$

3,980

$

Net investment contracts

 

608

 

 

608

 

Deferred compensation

 

41,612

 

 

41,612

 

Total liabilities

$

46,200

$

$

46,200

$

The Company’s derivative contracts are valued at fair value using the market approach. The Company measures the fair value of foreign exchange contracts, swap agreements and net investment contracts using Level 2 inputs based on observable spot and forward rates in active markets.

The deferred compensation liability is the Company’s obligation under its executive deferred compensation plan. The Company measures the fair value of the liability using the market values of the participants’ underlying investment fund elections.

23

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The fair value of Cash and cash equivalents, Accounts receivable, Short-term debt excluding the current portion of long-term debt and Trade accounts payable approximated book value due to the short-term nature of these instruments at both September 30, 2022 and December 31, 2021.

The fair value of the Company’s pension surplus assets are based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy. The pension surplus assets are invested in money market and short-term duration bond funds at September 30, 2022.

The Company has various financial instruments, including cash and cash equivalents, short and long-term debt and forward contracts. While these financial instruments are subject to concentrations of credit risk, the Company has minimized this risk by entering into arrangements with a number of major banks and financial institutions and investing in several high-quality instruments. The Company does not expect any counterparties to fail to meet their obligations.

NOTE 18 – SUBSEQUENT EVENTS

On October 14, 2022, the Company entered into a definitive agreement to acquire Fori Automation, Inc. (the “contemplated acquisition”).  Upon completion of the contemplated acquisition, the acquired business will extend the Company’s market presence within the automotive sector, better position it to capitalize on accelerating investments in automotive electric vehicle platforms, offer cross-selling growth opportunities to industrial customers and expand the Company’s international automation footprint.

The definitive agreement provides for a cash purchase price of $427,000, subject to a customary working capital adjustment. The Company intends to fund the transaction with cash on hand and arranged credit. The contemplated acquisition is subject to regulatory approval and other customary closing conditions and is expected to close in the fourth quarter of 2022.

For the three and nine months ended September 30, 2022, the Company has incurred $3,068, respectively, of acquisition transaction costs related to the contemplated acquisition.  These costs were expensed as incurred and are included in “Selling, general, and administrative expenses” in the Consolidated Statements of Income.

24

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share amounts)

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with the Company’s unaudited consolidated financial statements and other financial information included elsewhere in this Quarterly Report on Form 10-Q.

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. Welding products include arc welding power sources, computer numerical control and plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes, welding accessories and specialty welding consumables and fabrication. The Company’s product offering also includes oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. In addition, the Company has a leading global position in the brazing and soldering alloys market.

The Company’s products are sold in both domestic and international markets. In the Americas, products are sold principally through industrial distributors, retailers and directly to users of welding products. Outside of the Americas, the Company has an international sales organization comprised of Company employees and agents who sell products from the Company’s various manufacturing sites to distributors and product users.

The Company’s business units are aligned into three operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global oxy-fuel cutting, soldering and brazing businesses as well as its retail business in the United States.

Russia Operations

In March 2022, in response to Russia’s invasion of Ukraine, the Company announced it was ceasing operations in Russia and implementing plans to support its Russian employees. Although the Company’s Net sales and Total assets in Russia are less than 1% of consolidated Net sales for the year ended December 31, 2021 and less than 1% of consolidated Total assets as of December 31, 2021, 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. The Company continues to monitor the Russia-Ukraine conflict and its potential impacts.

25

Table of Contents

Results of Operations

The following table shows the Company’s results of operations:

Three Months Ended September 30, 

 

Favorable  (Unfavorable) 

 

2022

2021

2022 vs. 2021

Amount

    

% of Sales

    

Amount

    

% of Sales

    

$

    

%

 

Net sales

$

935,240

$

806,454

 

$

128,786

 

16.0

%

Cost of goods sold

 

625,722

 

 

538,282

 

  

(87,440)

 

(16.2)

%

Gross profit

 

309,518

 

33.1

%

 

268,172

 

33.3

%

 

41,346

 

15.4

%

Selling, general & administrative expenses

 

159,045

 

17.0

%

 

149,118

 

18.5

%

 

(9,927)

 

(6.7)

%

Rationalization and asset impairment charges

 

8,364

 

0.9

%

 

3,484

 

0.4

%

  

(4,880)

 

(140.1)

%

Operating income

 

142,109

 

15.2

%

 

115,570

 

14.3

%

 

26,539

 

23.0

%

Interest expense, net

 

8,210

 

 

5,714

 

 

(2,496)

 

(43.7)

%

Other income (expense)

 

3,588

 

 

(71,441)

 

  

75,029

 

105.0

%

Income before income taxes

 

137,487

 

14.7

%

 

38,415

 

4.8

%

 

99,072

 

257.9

%

Income taxes

 

28,262

 

 

6,658

 

 

(21,604)

 

(324.5)

%

Effective tax rate

 

20.6

%  

 

 

17.3

%  

  

(3.3)

%  

Net income

$

109,225

 

11.7

%

$

31,757

 

3.9

%

$

77,468

 

243.9

%

Diluted earnings per share

$

1.87

$

0.53

 

  

$

1.34

 

253.4

%

Nine Months Ended September 30, 

 

Favorable  (Unfavorable) 

 

2022

2021

2022 vs. 2021

Amount

    

% of Sales

    

Amount

    

% of Sales

    

$

    

%

 

Net sales

$

2,830,277

$

2,389,929

 

$

440,348

 

18.4

%

Cost of goods sold

 

1,857,501

 

 

1,593,981

 

  

(263,520)

 

(16.5)

%

Gross profit

 

972,776

 

34.4

%

 

795,948

 

33.3

%

 

176,828

 

22.2

%

Selling, general & administrative expenses

 

492,523

 

17.4

%

 

446,351

 

18.7

%

 

(46,172)

 

(10.3)

%

Rationalization and asset impairment charges

 

9,405

 

0.3

%

 

8,277

 

0.3

%

  

(1,128)

 

(13.6)

%

Operating income

 

470,848

 

16.6

%

 

341,320

 

14.3

%

 

129,528

 

37.9

%

Interest expense, net

 

20,867

 

 

16,736

 

 

(4,131)

 

(24.7)

%

Other income (expense)

 

7,088

 

 

(71,155)

 

  

78,243

 

110.0

%

Income before income taxes

 

457,069

 

16.1

%

 

253,429

 

10.6

%

 

203,640

 

80.4

%

Income taxes

 

93,991

 

 

51,259

 

 

(42,732)

 

(83.4)

%

Effective tax rate

 

20.6

%  

 

 

20.2

%  

  

(0.4)

%  

Net income including non-controlling interests

 

363,078

 

 

202,170

 

 

160,908

 

79.6

%

Non-controlling interests in subsidiaries' loss

 

 

 

131

 

  

(131)

 

(100.0)

%

Net income

$

363,078

 

12.8

%

$

202,039

 

8.5

%

$

161,039

 

79.7

%

Diluted earnings per share

$

6.17

$

3.36

 

  

$

2.81

 

83.6

%

26

Table of Contents

Net Sales:

The following table summarizes the impact of volume, acquisitions, price and foreign currency exchange rates on Net sales on a consolidated basis:

Three Months Ended September 30, 

    

    

Change in Net Sales due to:

    

 

Net Sales

Foreign

Net Sales

    

2021

    

Volume

    

Acquisitions

    

Price

    

Exchange

    

2022

 

Lincoln Electric Holdings, Inc.

$

806,454

$

71,148

$

10,276

$

100,739

 

$

(53,377)

$

935,240

% Change

 

  

 

  

 

  

 

  

 

  

Lincoln Electric Holdings, Inc.

 

8.8

%

 

1.3

%  

 

12.5

%  

(6.6)

%

16.0

%

Nine Months Ended September 30, 

    

    

Change in Net Sales due to:

    

 

Net Sales

Foreign

Net Sales

    

2021

    

Volume

    

Acquisitions

    

Price

    

Exchange

    

2022

 

Lincoln Electric Holdings, Inc.

$

2,389,929

$

123,118

$

68,949

$

385,357

 

$

(137,076)

$

2,830,277

% Change

 

  

 

  

 

  

 

  

 

  

Lincoln Electric Holdings, Inc.

 

5.2

%

 

2.9

%  

 

16.1

%  

(5.7)

%

18.4

%

Net sales increased in the three and nine months ended September 30, 2022 driven by higher demand levels, increased product pricing as a result of higher input costs and the impact of acquisitions, partially offset by unfavorable foreign exchange.

Gross Profit:

Gross profit for the three and nine months ended September 30, 2022 increased 15.4% and 22.2%, respectively, driven by higher volumes, the impact of cost reduction initiatives and pricing actions taken to offset higher input costs. Last-in, first-out (“LIFO”) charges were $3,108 and $20,420 in three and nine months ended September 30, 2022, respectively, as compared with charges of $10,908 and $24,236 in the same 2021 periods.

Selling, General & Administrative ("SG&A") Expenses:

SG&A expenses increased for the three and nine months ended September 30, 2022 as compared to the same 2021 period, primarily due to higher employee costs.

Other Income (Expense):

The increase in Other income (expense) for the three and nine months ended September 30, 2022 as compared to the same period in 2021 was primarily due to non-cash pension settlement charges resulting from the termination of a pension plan in 2021. Refer to Note 13 to the consolidated financial statements for details.

Income Taxes:

The effective tax rate was higher for the three and nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to the geographic mix of earnings and the impact of favorable discrete tax in 2021.

27

Table of Contents

Segment Results

Three Months Ended September 30, 

    

Change in Net Sales due to:

    

    

 

Net Sales

Foreign

Net Sales

2021

  

Volume

  

Acquisitions (1)

  

Price (2)

  

 Exchange (3)

  

2022

Operating Segments

Americas Welding

$

461,508

$

52,521

$

4,724

$

69,888

 

$

(3,013)

$

585,628

International Welding

227,165

 

5,538

 

 

31,430

 

(47,636)

 

216,497

The Harris Products Group

117,781

 

13,089

 

5,552

 

(579)

 

(2,728)

 

133,115

% Change

  

 

  

 

  

 

  

 

  

 

  

Americas Welding

11.4

%

 

1.0

%

15.1

%

(0.7)

%

26.9

%

International Welding

2.4

%

 

13.8

%

(21.0)

%

(4.7)

%

The Harris Products Group

11.1

%

 

4.7

%

(0.5)

%

(2.3)

%

13.0

%

Nine Months Ended September 30, 

    

Change in Net Sales due to:

    

    

 

Net Sales

    

Foreign

    

Net Sales

 

2021

Volume

  

Acquisitions (1)

  

Price (2)

  

 Exchange (3)

2022

Operating Segments

Americas Welding

$

1,344,218

$

119,809

$

11,906

$

243,960

 

$

(4,551)

$

1,715,342

International Welding

702,596

 

(12,348)

 

17,632

 

130,433

 

(127,146)

 

711,167

The Harris Products Group

343,115

 

15,657

 

39,411

 

10,964

 

(5,379)

 

403,768

% Change

  

 

  

 

  

 

  

 

  

 

  

Americas Welding

8.9

%

 

0.9

%

18.1

%

(0.3)

%

27.6

%

International Welding

(1.8)

%

 

2.5

%

18.6

%

(18.1)

%

1.2

%

The Harris Products Group

4.6

%

 

11.5

%

3.2

%

(1.6)

%

17.7

%

(1)Increases for the three and nine months ended September 30, 2022 were due to the acquisitions discussed in Note 4 to the consolidated financial statements.
(2)Increase for the three and nine months ended September 30, 2022 in Americas Welding and International Welding reflects increased product pricing as a result of higher input costs. Increase for The Harris Products Group in the nine months ended September 30, 2022 was primarily due to increased product pricing.
(3)Decrease for the three and nine months ended September 30, 2022 in International Welding primarily due to the devaluation of the Turkish Lira and Euro.

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Adjusted Earnings Before Interest and Income Taxes:

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 (expense). EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets.

The following table presents Adjusted EBIT by segment:

Favorable (Unfavorable) 

 

Three Months Ended September 30, 

2022 vs. 2021

 

    

2022

    

2021

    

$

    

%

 

Americas Welding:

 

  

 

  

 

  

  

Net sales

$

585,628

$

461,508

$

124,120

26.9

%

Inter-segment sales

 

35,353

 

37,480

 

(2,127)

(5.7)

%

Total Sales

$

620,981

$

498,988

121,993

24.4

%

Adjusted EBIT (4)

$

118,804

$

84,557

34,247

40.5

%

As a percent of total sales (1)

 

19.1

%  

 

16.9

%  

2.2

%

International Welding:

 

 

  

  

  

Net sales

$

216,497

$

227,165

(10,668)

(4.7)

%

Inter-segment sales

 

9,994

 

7,078

2,916

41.2

%

Total Sales

$

226,491

$

234,243

(7,752)

(3.3)

%

Adjusted EBIT (5)

$

25,225

$

29,032

(3,807)

(13.1)

%

As a percent of total sales (2)

 

11.1

%  

 

12.4

%  

(1.3)

%

The Harris Products Group:

 

 

  

  

  

Net sales

$

133,115

$

117,781

15,334

13.0

%

Inter-segment sales

 

2,642

 

1,945

697

35.8

%

Total Sales

$

135,757

$

119,726

16,031

13.4

%

Adjusted EBIT (6)

$

14,432

$

15,980

(1,548)

(9.7)

%

As a percent of total sales (3)

 

10.6

%  

 

13.3

%  

(2.7)

%

Corporate / Eliminations:

 

 

  

  

  

Inter-segment sales

$

(47,989)

$

(46,503)

(1,486)

(3.2)

%

Adjusted EBIT (7)

 

(1,685)

 

(4,704)

3,019

64.2

%

Consolidated:

 

 

  

  

  

Net sales

$

935,240

$

806,454

128,786

16.0

%

Net income

$

109,225

$

31,757

77,468

243.9

%

As a percent of total sales

 

11.7

%  

 

3.9

%  

7.8

%

Adjusted EBIT (8)

$

156,776

$

124,865

31,911

25.6

%

As a percent of sales

 

16.8

%  

 

15.5

%  

 

1.3

%

(1)Increase for the three months ended September 30, 2022 as compared to September 30, 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.
(2)Decrease for the three months ended September 30, 2022 as compared to September 30, 2021 was impacted by the timing of pricing actions and product mix.
(3)Decrease for the three months ended September 30, 2022 as compared to September 30, 2021 primarily driven by acquisition integration activities, unfavorable mix and declining commodity pricing in certain metal offerings.

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(4)The three months ended September 30, 2022 exclude an adjustment to the amortization of the step up in value of acquired inventories of $353 related to an acquisition as discussed in Note 4 to the consolidated financial statements. The three months ended September 30, 2021 exclude pension settlement charges of $73,562.
(5)The three months ended September 30, 2022 exclude Rationalization and asset impairment charges of $8,364 primarily due to impairment charges as discussed in Note 6 to the consolidated financial statements. The three months ended September 30, 2021 excludes the amortization of the step up in value of acquired inventories of $3,143, related to an acquisition as discussed in Note 4 to the consolidated financial statements.
(6)The three months ended September 30, 2021 exclude the amortization of the step up in value of acquired inventories of $547 as discussed in Note 4 to the consolidated financial statements.
(7)The three months ended September 30, 2022 exclude acquisition transaction costs of $3,068 related to the contemplated acquisition as defined in Note 18 to the consolidated financial statements.
(8)See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT.

    

    

 

    

Favorable (Unfavorable) 

 

Nine Months Ended September 30, 

2022 vs. 2021

 

    

2022

    

2021

    

$

    

%

 

    

Americas Welding:

 

  

 

  

 

  

  

 

Net sales

$

1,715,342

$

1,344,218

$

371,124

27.6

%

Inter-segment sales

 

92,540

 

109,993

 

(17,453)

(15.9)

%

Total Sales

$

1,807,882

$

1,454,211

353,671

24.3

%

Adjusted EBIT (4)

$

348,439

$

245,308

103,131

42.0

%

As a percent of total sales (1)

 

19.3

%  

 

16.9

%  

2.4

%

International Welding:

 

 

  

  

  

Net sales

$

711,167

$

702,596

8,571

1.2

%

Inter-segment sales

 

25,749

 

18,260

7,489

41.0

%

Total Sales

$

736,916

$

720,856

16,060

2.2

%

Adjusted EBIT (5)

$

97,321

$

77,845

19,476

25.0

%

As a percent of total sales (2)

 

13.2

%  

 

10.8

%  

2.4

%

The Harris Products Group:

 

 

  

  

  

Net sales

$

403,768

$

343,115

60,653

17.7

%

Inter-segment sales

 

8,570

 

6,376

2,194

34.4

%

Total Sales

$

412,338

$

349,491

62,847

18.0

%

Adjusted EBIT (6)

$

51,952

$

52,889

(937)

(1.8)

%

As a percent of total sales (3)

 

12.6

%  

 

15.1

%  

(2.5)

%

Corporate / Eliminations:

 

 

  

  

  

Inter-segment sales

$

(126,859)

$

(134,629)

7,770

5.8

%

Adjusted EBIT (7)

 

(10,470)

 

(10,048)

(422)

(4.2)

%

Consolidated:

 

 

  

  

  

Net sales

$

2,830,277

$

2,389,929

440,348

18.4

%

Net income

$

363,078

$

202,039

161,039

79.7

%

As a percent of total sales

 

12.8

%  

 

8.5

%  

4.3

%

Adjusted EBIT (8)

$

487,242

$

365,994

121,248

33.1

%

As a percent of sales

 

17.2

%  

 

15.3

%  

 

1.9

%

(1)Increase for the nine months ended September 30, 2022 as compared to September 30, 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.

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(2)Increase for the nine months ended September 30, 2022 as compared to September 30, 2021 primarily driven by pricing actions taken to offset higher input costs and cost reduction initiatives.
(3)Decrease for the nine months ended September 30, 2022 as compared to September 30, 2021 driven primarily by acquisition integration activities, unfavorable mix and declining commodity pricing in certain metal offerings.
(4)The nine months ended September 30, 2022 exclude a favorable adjustment related to the termination of a pension plan of $3,735, the amortization of the step up in value of acquired inventories of $1,106 as discussed in Note 4 to the consolidated financial statements and Rationalization and asset impairment net gains of $988 as discussed in Note 6 to the consolidated financial statements. The nine months ended September 30, 2021 exclude pension settlement charges of $79,652.
(5)The nine months ended September 30, 2022 exclude Rationalization and asset impairment charges of $10,403 primarily due to impairment charges as discussed in Note 6 to the consolidated financial statements. The nine months ended September 30, 2021 excludes the amortization of the step up in value of acquired inventories of $4,984, as discussed in Note 4 to the consolidated financial statements and pension settlement charges of $446.
(6)The nine months ended September 30, 2021 excludes the amortization of the step up in value of acquired inventories of $547 as discussed in Note 4 to the consolidated financial statements.
(7)The nine months ended September 30, 2022 exclude acquisition transaction costs of $3,068 related to the contemplated acquisition as defined in Note 18 to the consolidated financial statements. The nine months ended September 30, 2021 exclude acquisition transaction costs of $1,923 related to the acquisition as discussed in Note 4 to the consolidated financial statements.
(8)See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT.

Non-GAAP Financial Measures

The Company reviews Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share (“EPS”), Adjusted return on invested capital (“ROIC”), Adjusted net operating profit after taxes, Cash conversion and Organic sales, all non-GAAP financial measures, in assessing and evaluating the Company’s underlying operating performance. These non-GAAP financial measures exclude the impact of special items on the Company’s reported financial results. Non-GAAP financial measures should be read in conjunction with the generally accepted accounting principles in the United States ("GAAP") financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures.

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Table of Contents

The following table presents the reconciliations of Operating income as reported to Adjusted operating income, Net income as reported to Adjusted net income and Adjusted EBIT, Effective tax rate as reported to Adjusted effective tax rate and Diluted earnings per share as reported to Adjusted diluted earnings per share:

    

Three Months Ended September 30, 

    

Nine Months Ended September 30, 

 

    

2022

    

2021

    

2022

    

2021

 

Operating income as reported

$

142,109

$

115,570

$

470,848

$

341,320

Special items (pre-tax):

 

  

 

  

 

  

 

  

Rationalization and asset impairment charges (1)

 

8,364

 

3,484

 

9,405

 

8,277

Acquisition transaction costs (2)

 

3,068

 

 

3,068

 

1,923

Amortization of step up in value of acquired inventories (3)

 

(353)

 

3,690

 

1,106

 

5,531

Adjusted operating income

$

153,188

$

122,744

$

484,427

$

357,051

Net income as reported

$

109,225

 

$

31,757

$

363,078

$

202,039

Special items:

 

 

 

  

 

Rationalization and asset impairment charges (1)

 

8,364

 

 

3,484

 

9,405

8,277

Acquisition transaction costs (2)

 

3,068

 

 

 

3,068

1,923

Pension charges and other net gains (4)

 

 

 

73,562

 

(4,273)

80,098

Amortization of step up in value of acquired inventories (3)

 

(353)

 

 

3,690

 

1,106

5,531

Tax effect of Special items (5)

 

(731)

 

 

(18,743)

 

58

(20,737)

Adjusted net income

119,573

 

93,750

372,442

277,131

Non-controlling interests in subsidiaries’ income (loss)

 

131

Interest expense, net

 

8,210

 

 

5,714

 

20,867

16,736

Income taxes as reported

 

28,262

 

 

6,658

 

93,991

51,259

Tax effect of Special items (5)

 

731

 

 

18,743

 

(58)

20,737

Adjusted EBIT

$

156,776

 

$

124,865

$

487,242

$

365,994

Effective tax rate as reported

 

20.6

%  

 

17.3

%

20.6

%  

20.2

%

Net special item tax impact

 

(1.1)

%  

 

4.0

%

(0.5)

%  

0.4

%

Adjusted effective tax rate

 

19.5

%  

 

21.3

%

20.1

%  

20.6

%

Diluted earnings per share as reported

$

1.87

 

$

0.53

$

6.17

$

3.36

Special items per share

 

0.17

 

 

1.03

 

0.16

1.25

Adjusted diluted earnings per share

$

2.04

 

$

1.56

$

6.33

$

4.61

(1)Primarily related to non-cash asset impairment charges as discussed in Note 6 to the consolidated financial statements.
(2)Costs related to the contemplated acquisition and are included in SG&A expenses.
(3)Costs related to acquisitions and are included in Cost of Goods Sold.
(4)Primarily includes the final settlement associated with the termination of a pension plan and settlement charges due to lump sum pension payments and are included in Other income (expense).
(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.

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Table of Contents

Liquidity and Capital Resources

The Company’s cash flow from operations can be cyclical. Operational cash flow is a key driver of liquidity, providing cash and access to capital markets. In assessing liquidity, the Company reviews working capital measurements to define areas for improvement. Management anticipates the Company will be able to satisfy cash requirements for its ongoing businesses for at least the next twelve months and the foreseeable future thereafter primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets.

The Company continues to expand globally and periodically looks at transactions that would involve significant investments. The Company can fund its global expansion plans with operational cash flow, but a significant acquisition may require access to capital markets, in particular, the long-term debt market, as well as the syndicated bank loan market. The Company’s financing strategy is to fund itself at the lowest after-tax cost of funding. Where possible, the Company utilizes operational cash flows and raises capital in the most efficient market, usually the United States, and then lends funds to the specific subsidiary that requires funding. If additional acquisitions providing appropriate financial benefits become available, additional expenditures may be made.

The following table reflects changes in key cash flow measures:

    

Nine Months Ended September 30, 

2022

    

2021

    

$ Change

Cash provided by operating activities (1)

$

271,584

$

255,125

$

16,459

Cash used by investing activities (2)

 

(72,257)

 

(194,698)

 

122,441

Capital expenditures

 

(52,301)

 

(46,440)

 

(5,861)

Acquisition of businesses, net of cash acquired

 

(22,294)

 

(158,605)

 

136,311

Cash used by financing activities (3)

 

(237,426)

 

(156,112)

 

(81,314)

Net change in borrowings

 

14,999

 

32,295

 

(17,296)

Purchase of shares for treasury

 

(156,216)

 

(103,848)

 

(52,368)

Cash dividends paid to shareholders

 

(98,377)

 

(91,717)

 

(6,660)

Decrease in Cash and cash equivalents (4)

 

(51,651)

 

(96,720)

 

45,069

(1)Cash provided by operating activities increased for the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021 primarily due to higher company earnings.
(2)Cash used by investing activities decreased for the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021 primarily due to higher cash used in the acquisition of businesses in 2021. The Company currently anticipates capital expenditures of $70,000 to $80,000 in 2022. Anticipated capital expenditures include investments for capital maintenance and projects to increase efficiency, reduce costs, promote business growth or improve the overall safety and environmental conditions of the Company’s facilities.
(3)Cash used by financing activities increased in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021 due to increased purchase of shares for treasury and lower borrowings in 2022.
(4)Cash and cash equivalents decreased 26.8%, or $51,651, to $141,307 during the nine months ended September 30, 2022, from $192,958 as of December 31, 2021. This decrease was predominantly due to cash used for the purchase of common shares for treasury, dividends paid to shareholders and capital expenditures, partially offset by cash from operations and proceeds from borrowings. At September 30, 2022, $72,920 of Cash and cash equivalents was held by international subsidiaries.

In October 2022, the Company paid a cash dividend of $0.56 per share, or $32,334, to shareholders of record as of September 30, 2022.

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Table of Contents

Working Capital Ratios

September 30, 2022

    

December 31, 2021

 

September 30, 2021

 

Average operating working capital to Net sales (1) (2)

 

19.5

%  

16.3

%

18.6

%

Days sales in Inventories (2)

 

129.0

 

121.0

124.7

Days sales in Accounts receivable

 

48.4

 

50.3

53.9

Average days in Trade accounts payable

 

54.0

 

59.8

60.1

(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.
(2)In order to minimize potential supply chain disruptions in serving customers in a challenging operating environment, the Company increased inventories relative to expected Net sales resulting in higher Days sales in Inventories and had an unfavorable impact on Average operating working capital to Net sales.

Return on Invested Capital

The Company reviews ROIC in assessing and evaluating the Company’s underlying operating performance. As discussed in the Non-GAAP Financial Measures section above, Adjusted ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company’s financial performance. The calculation may be different than the method used by other companies to calculate ROIC. Adjusted ROIC is defined as rolling 12 months of Adjusted net income excluding tax-effected interest income and expense divided by invested capital. Invested capital is defined as total debt, which includes Short-term debt and Long-term debt, less current portions, plus Total equity.

The following table presents the reconciliations of ROIC and Adjusted ROIC to net income:

Twelve Months Ended September 30, 

    

2022

    

2021

 

Net income as reported

$

437,505

 

$

267,117

Plus: Interest expense (after-tax)

20,732

17,520

Less: Interest income (after-tax)

1,019

1,193

Net operating profit after taxes

$

457,218

$

283,444

Special items:

Rationalization and asset impairment charges

 

10,955

 

 

17,729

Acquisition transaction costs

 

3,068

 

 

1,923

 

Pension settlement charges

 

42,131

 

 

81,695

Amortization of step up in value of acquired inventories

 

1,379

 

 

5,531

Tax effect of Special items (1)

 

(26,393)

 

 

(21,868)

Adjusted net operating profit after taxes

$

488,358

 

$

368,454

 

 

Invested Capital

    

September 30, 2022

    

September 30, 2021

Short-term debt

$

68,375

$

41,404

Long-term debt, less current portion

711,250

717,787

Total debt

779,625

759,191

Total equity

 

924,228

 

857,893

Invested capital

$

1,703,853

$

1,617,084

Return on invested capital as reported

 

26.8

%  

 

17.5

%

Adjusted return on invested capital

 

28.7

%  

 

22.8

%

(1)Includes the net tax impact of Special items recorded during the respective periods.

The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.

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Table of Contents

New Accounting Pronouncements

Refer to Note 1 to the consolidated financial statements for a discussion of new accounting pronouncements.

Acquisitions

Refer to Note 4 to the consolidated financial statements for a discussion of the Company’s recent acquisitions.

Debt

Fair Value of Debt

At September 30, 2022 and December 31, 2021, the fair value of long-term debt, including the current portion, was approximately $597,972 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 $722,287 and $717,855, respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange.

Revolving Credit Agreement

On April 23, 2021, the Company amended and restated the agreement governing its line of credit by entering into the Second Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement has a line of credit totaling $500,000, has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $150,000. The interest rate on borrowings is based on LIBOR plus a spread based on the Company’s net leverage ratio. The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. As of September 30, 2022, the Company was in compliance with all of its covenants and had $37,000 of outstanding borrowings under the Credit Agreement.

The Company has other lines of credit and debt agreements totaling $104,293. As of September 30, 2022, the Company was in compliance with all of its covenants and had $20,338 outstanding at September 30, 2022.

Senior Unsecured Notes

On April 1, 2015 and October 20, 2016, the Company entered into separate Note Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each have an aggregate principal amount of $350,000, comprised of four different series ranging from $50,000 to $100,000, with maturity dates ranging from August 20, 2025 through April 1, 2045, and interest rates ranging from 2.75% and 4.02%. Interest on the Notes is paid semi-annually. The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and 11.6 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of September 30, 2022, the Company was in compliance with all of its debt covenants relating to the Notes.

Shelf Agreements

On November 27, 2018, the Company entered into seven uncommitted master note facilities (the "Shelf Agreements") that allow borrowings up to $700,000 in the aggregate. The Shelf Agreements have a term of 5 years and the average life of borrowings cannot exceed 15 years. The Company is required to comply with covenants similar to those contained in the Notes. As of September 30, 2022, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

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Table of Contents

Forward-looking Statements

The Company’s expectations and beliefs concerning the future contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current expectations and involve a number of risks and uncertainties. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results. The factors include, but are not limited to: general economic, financial and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as the impact of the Russia-Ukraine conflict, political unrest, acts of terror, natural disasters and pandemics, including the current coronavirus disease (“COVID-19”) pandemic, on the Company or its customers, suppliers and the economy in general. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and on Form 10-Q for the quarter ended March 31, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s exposure to market risk since December 31, 2021. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2022.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject, from time to time, to a variety of civil and administrative proceedings arising out of its normal operations, including, without limitation, product liability claims, regulatory claims and health, safety and environmental claims. Among such proceedings are the cases described below.

As of September 30, 2022, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by approximately 1,489 plaintiffs, which is a net decrease of 12 claims from those previously reported. In each instance, the Company is one of a large number of defendants. The asbestos claimants seek compensatory and punitive damages, in most cases for unspecified sums. Since January 1, 1995, the Company has been a co-defendant in other similar cases that have been resolved as follows: 56,866 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.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, which could materially affect the Company’s business, financial condition or future results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer purchases of its common shares during the third quarter of 2022 were as follows:

Total Number of

    

    

    

Shares

    

Maximum Number

Repurchased

of Shares that May

Total Number of

as Part of Publicly

Yet be Purchased

Shares

Average Price

Announced Plans or

Under the Plans or

Period

Repurchased

Paid Per Share

Programs

Programs (2)

July 1 - 31, 2022

 

77,284

(1)

$

124.35

 

76,396

 

9,204,553

August 1 - 31, 2022

 

65,707

(1)

 

143.18

 

65,288

 

9,139,265

September 1 - 30, 2022

 

55,319

(1)

 

135.56

 

55,319

 

9,083,946

Total

 

198,310

 

133.72

 

197,003

 

  

(1)The above share repurchases include the surrender of the Company’s common shares in connection with the vesting of restricted awards.
(2)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. Total shares purchased through the share repurchase programs were 0.9 million shares at a total cost of $120.9 million for a weighted average cost of $131.35 per share through September 30, 2022.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 6. EXHIBITS

(a)Exhibits

31.1

Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2

Certification of the Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1

Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

104

Cover page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    

LINCOLN ELECTRIC HOLDINGS, INC.

/s/ Gabriel Bruno

Gabriel Bruno

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

October 27, 2022

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XBRL-Only Content Section

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