LINCOLN ELECTRIC HOLDINGS INC 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, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number: 0-1402 LINCOLN ELECTRIC HOLDINGS, INC. (Exact name of registrant as specified in its charter) ​ ​ ​ ​ 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, 2021 was 59,048,285 . ​ ​ ​ ​ 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 24 Item 3. Quantitative and Qualitative Disclosures About Market Risk 35 Item 4. Controls and Procedures 35 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, ​ 2021 2020 2021 2020 Net sales (Note 2) $ 806,454 $ 668,888 $ 2,389,929 $ 1,961,606 Cost of goods sold ​ 538,282 ​ 453,501 ​ 1,593,981 ​ 1,319,519 Gross profit ​ 268,172 ​ 215,387 ​ 795,948 ​ 642,087 Selling, general & administrative expenses ​ 149,118 ​ 131,337 ​ 446,351 ​ 407,440 Rationalization and asset impairment charges (Note 6) ​ 3,484 ​ 6,257 ​ 8,277 ​ 36,016 Operating income ​ 115,570 ​ 77,793 ​ 341,320 ​ 198,631 Interest expense, net ​ 5,714 ​ 5,552 ​ 16,736 ​ 16,891 Other income (expense) (Note 14) ​ ( 71,441 ) ​ 1,062 ​ ( 71,155 ) ​ 1,168 Income before income taxes ​ 38,415 ​ 73,303 ​ 253,429 ​ 182,908 Income taxes (Note 15) ​ 6,658 ​ 14,797 ​ 51,259 ​ 41,834 Net income including non-controlling interests ​ 31,757 ​ 58,506 ​ 202,170 ​ 141,074 Non-controlling interests in subsidiaries’ income (loss) ​ — ​ 27 ​ 131 ​ 37 Net income ​ $ 31,757 ​ $ 58,479 ​ $ 202,039 ​ $ 141,037 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share (Note 3) ​ $ 0.54 ​ $ 0.98 ​ $ 3.40 ​ $ 2.36 Diluted earnings per share (Note 3) ​ $ 0.53 ​ $ 0.97 ​ $ 3.36 ​ $ 2.34 Cash dividends declared per share ​ $ 0.51 ​ $ 0.49 ​ $ 1.53 ​ $ 1.47 ​ 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, ​ 2021 2020 2021 2020 Net income including non-controlling interests $ 31,757 $ 58,506 $ 202,170 $ 141,074 Other comprehensive income (loss), net of tax: ​ ​ ​ ​ Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $ 707 and $ 1,493 in the three and nine months ended September 30, 2021; $ 337 and $( 62 ) in the three and nine months ended September 30, 2020 ​ 2,876 ​ 639 ​ ​ 5,412 ​ ​ ( 622 ) Defined benefit pension plan activity, net of tax of $ 18,759 and $ 19,005 in the three and nine months ended September 30, 2021; $( 776 ) and $( 8,303 ) in the three and nine months ended September 30, 2020 ​ 55,558 ​ ( 1,304 ) ​ ​ 58,916 ​ ​ ( 23,731 ) Currency translation adjustment ​ ( 19,120 ) ​ 13,039 ​ ( 28,284 ) ​ ( 43,101 ) Other comprehensive income (loss): ​ 39,314 ​ 12,374 ​ 36,044 ​ ( 67,454 ) Comprehensive income ​ 71,071 ​ 70,880 ​ 238,214 ​ 73,620 Comprehensive income (loss) attributable to non-controlling interests ​ ( 58 ) ​ 62 ​ ( 196 ) ​ 14 Comprehensive income (loss) attributable to shareholders ​ $ 71,129 ​ $ 70,818 ​ $ 238,410 ​ $ 73,606 ​ See notes to these consolidated financial statements. ​ ​ 4 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ December 31, 2020 ​ ​ (UNAUDITED) ​ (NOTE 1) ASSETS ​ ​ Current Assets ​ ​ Cash and cash equivalents ​ $ 160,559 ​ $ 257,279 Accounts receivable (less allowance for doubtful accounts of $ 13,059 in 2021; $ 14,779 in 2020) ​ 443,054 ​ 373,487 Inventories (Note 9) ​ 524,433 ​ 381,258 Other current assets ​ 107,912 ​ 100,319 Total Current Assets ​ 1,235,958 ​ 1,112,343 Property, plant and equipment (less accumulated depreciation of $ 879,395 in 2021; $ 884,647 in 2020) ​ ​ 520,081 ​ ​ 522,092 Goodwill ​ 436,039 ​ 335,593 Other assets ​ 376,719 ​ 344,425 TOTAL ASSETS ​ $ 2,568,797 ​ $ 2,314,453 LIABILITIES AND EQUITY ​ ​ ​ Current Liabilities ​ ​ ​ Short-term debt (Note 12) ​ $ 41,404 ​ $ 2,734 Trade accounts payable ​ 309,202 ​ 256,530 Accrued employee compensation and benefits ​ 156,128 ​ 98,437 Other current liabilities ​ 238,686 ​ 191,748 Total Current Liabilities ​ 745,420 ​ 549,449 Long-term debt, less current portion (Note 12) ​ 717,787 ​ 715,456 Other liabilities ​ 247,697 ​ 259,298 Total Liabilities ​ 1,710,904 ​ 1,524,203 Shareholders' Equity ​ ​ ​ Common Shares ​ 9,858 ​ 9,858 Additional paid-in capital ​ 434,786 ​ 409,958 Retained earnings ​ 2,930,361 ​ 2,821,359 Accumulated other comprehensive loss ​ ( 265,819 ) ​ ( 302,190 ) Treasury Shares ​ ( 2,251,193 ) ​ ( 2,149,714 ) Total Shareholders' Equity ​ 857,993 ​ 789,271 Non-controlling interests ​ ( 100 ) ​ 979 Total Equity ​ 857,893 ​ 790,250 TOTAL LIABILITIES AND TOTAL EQUITY ​ $ 2,568,797 ​ $ 2,314,453 ​ 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, 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ 6 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, 2019 60,592 ​ $ 9,858 ​ $ 389,446 ​ $ 2,736,481 ​ $ ( 275,850 ) ​ $ ( 2,041,763 ) ​ $ 905 ​ $ 819,077 Net income ​ ​ ​ 55,562 ​ ​ ​ ( 7 ) ​ 55,555 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ 609 ​ ​ ​ 609 Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ( 2,369 ) ​ ​ ​ ( 2,369 ) Currency translation adjustment ​ ​ ​ ​ ( 70,567 ) ​ ​ ( 41 ) ​ ( 70,608 ) Cash dividends declared – $ 0.49 per share ​ ​ ​ ( 29,280 ) ​ ​ ​ ​ ( 29,280 ) Stock-based compensation activity 152 ​ ​ 2,826 ​ ​ ​ 1,912 ​ ​ 4,738 Purchase of shares for treasury ( 1,357 ) ​ ​ ​ ​ ​ ( 109,762 ) ​ ​ ( 109,762 ) Other ​ ​ ( 5,176 ) ​ 5,176 ​ ​ ​ ​ — Balance at March 31, 2020 59,387 ​ $ 9,858 ​ $ 387,096 ​ $ 2,767,939 ​ $ ( 348,177 ) ​ $ ( 2,149,613 ) ​ $ 857 ​ $ 667,960 Net income ​ ​ ​ ​ ​ 26,996 ​ ​ ​ ​ ​ 17 ​ 27,013 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ ​ ​ ​ ( 23,036 ) ​ ​ ​ ​ ​ ( 23,036 ) Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ​ ​ ​ 1,108 ​ ​ ​ ​ ​ 1,108 Currency translation adjustment ​ ​ ​ ​ ​ ​ ​ 14,485 ​ ​ ​ ( 17 ) ​ 14,468 Cash dividends declared – $ 0.49 per share ​ ​ ​ ​ ​ ( 29,260 ) ​ ​ ​ ​ ​ ​ ​ ( 29,260 ) Stock-based compensation activity 25 ​ ​ 4,754 ​ ​ ​ ​ ​ 317 ​ ​ ​ 5,071 Purchase of shares for treasury ( 45 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 3,213 ) ​ ​ ​ ( 3,213 ) Other ​ ​ ​ 2,842 ​ ( 2,842 ) ​ ​ ​ ​ ​ ​ ​ — Balance at June 30, 2020 59,367 ​ $ 9,858 ​ $ 394,692 ​ $ 2,762,833 ​ $ ( 355,620 ) ​ $ ( 2,152,509 ) ​ $ 857 ​ $ 660,111 Net income ​ ​ ​ ​ ​ 58,479 ​ ​ ​ ​ ​ 27 ​ 58,506 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ ​ ​ ​ ( 1,304 ) ​ ​ ​ ​ ​ ( 1,304 ) Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ​ ​ ​ 639 ​ ​ ​ ​ ​ 639 Currency translation adjustment ​ ​ ​ ​ ​ ​ ​ 13,004 ​ ​ ​ 35 ​ 13,039 Cash dividends declared – $ 0.49 per share ​ ​ ​ ​ ​ ( 29,326 ) ​ ​ ​ ​ ​ ​ ​ ( 29,326 ) Stock-based compensation activity 106 ​ ​ 8,493 ​ ​ ​ ​ ​ 1,315 ​ ​ ​ 9,808 Purchase of shares for treasury ( 2 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 223 ) ​ ​ ​ ​ ​ ( 223 ) Other ​ ​ ​ 901 ​ ( 1,407 ) ​ ​ ​ ​ ​ ​ ​ ( 506 ) Balance at September 30, 2020 ​ 59,471 ​ $ 9,858 ​ $ 404,086 ​ $ 2,790,579 ​ $ ( 343,281 ) ​ $ ( 2,151,417 ) ​ $ 919 ​ $ 710,744 ​ ​ 7 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ Net income ​ $ 202,039 ​ $ 141,037 Non-controlling interests in subsidiaries' income (loss) ​ 131 ​ 37 Net income including non-controlling interests ​ 202,170 ​ 141,074 Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: ​ ​ ​ Rationalization and asset impairment net (gains) charges (Note 6) ​ ( 1,162 ) ​ 21,927 Depreciation and amortization ​ 60,558 ​ 60,566 Equity earnings in affiliates, net ​ ( 399 ) ​ ( 323 ) Deferred income taxes ​ ( 28,428 ) ​ ( 10,143 ) Stock-based compensation ​ 18,215 ​ 11,656 Pension settlement charges ​ ​ 80,098 ​ ​ 6,522 Other, net ​ ( 754 ) ​ ( 10,805 ) Changes in operating assets and liabilities, net of effects from acquisitions: ​ ​ ​ Increase in accounts receivable ​ ( 71,212 ) ​ ( 6,851 ) Increase in inventories ​ ( 128,856 ) ​ ( 3,430 ) (Increase) decrease in other current assets ​ ( 10,610 ) ​ 8,027 Increase (decrease) in trade accounts payable ​ 54,981 ​ ( 42,333 ) Increase in other current liabilities ​ 89,569 ​ 38,615 Net change in other assets and liabilities ​ ( 9,045 ) ​ 1,059 NET CASH PROVIDED BY OPERATING ACTIVITIES ​ 255,125 ​ 215,561 CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ Capital expenditures ​ ( 46,440 ) ​ ( 37,116 ) Acquisition of businesses, net of cash acquired ​ ( 158,605 ) ​ — Proceeds from sale of property, plant and equipment ​ 3,847 ​ 6,957 Other investing activities ​ 6,500 ​ — NET CASH USED BY INVESTING ACTIVITIES ​ ( 194,698 ) ​ ( 30,159 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ Amounts due banks, net ​ 32,295 ​ ( 33,135 ) Proceeds from exercise of stock options ​ 7,921 ​ 7,961 Purchase of shares for treasury (Note 8) ​ ( 103,848 ) ​ ( 113,198 ) Cash dividends paid to shareholders ​ ( 91,717 ) ​ ( 88,945 ) Other financing activities ​ ( 763 ) ​ — NET CASH USED BY FINANCING ACTIVITIES ​ ( 156,112 ) ​ ( 227,317 ) Effect of exchange rate changes on Cash and cash equivalents ​ ( 1,035 ) ​ ( 5,169 ) DECREASE IN CASH AND CASH EQUIVALENTS ​ ( 96,720 ) ​ ( 47,084 ) ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents at beginning of period ​ 257,279 ​ 199,563 CASH AND CASH EQUIVALENTS AT END OF PERIOD ​ $ 160,559 ​ $ 152,479 ​ See notes to these consolidated financial statements. ​ ​ 8 Table of Contents 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 As used in this report, the term “Company,” except as otherwise indicated by the context, means Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest. The consolidated financial statements include the accounts of all legal entities in which the Company holds a controlling interest. Investments in legal entities in which the Company does not own a majority interest but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. 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, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021. The accompanying Consolidated Balance Sheet at December 31, 2020 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, 2020. The current coronavirus disease (“COVID- 19”) pandemic has adversely impacted global economic conditions and has contributed to significant volatility in financial markets beginning in early calendar year 2020. Although the Company's estimates contemplate current conditions, the inputs into certain significant and critical accounting estimates include judgments and assumptions about the economic implications of the COVID-19 pandemic and how management expects them to change in the future. It is reasonably possible that actual results experienced may differ materially from the Company's estimates in future periods, which could affect our results of operations and financial condition. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 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. The following ASU was adopted as of January 1, 2021: ​ ​ ​ Standard Description ASU No. 2019-12, Income Taxes (Topic 740) , issued December 2019. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption did not have a material impact on the Company’s consolidated financial statements. ​ ​ ​ 9 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts 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, ​ 2021 2020 2021 2020 Consumables ​ $ 465,829 ​ $ 379,177 ​ $ 1,375,567 ​ $ 1,118,688 Equipment ​ 340,625 ​ 289,711 ​ 1,014,362 ​ 842,918 Net sales ​ $ 806,454 ​ $ 668,888 ​ $ 2,389,929 ​ $ 1,961,606 ​ 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, 2021, the Company recorded $ 33,860 related to advance customer payments and $ 52,588 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, 2020, the balances related to advance customer payments and billings in excess of revenue recognized were $ 14,920 and $ 21,396 , 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, 2021 and December 31, 2020, the Company recorded $ 26,665 and $ 22,113 , 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. ​ 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, ​ 2021 2020 2021 2020 Numerator: ​ ​ ​ ​ ​ Net income ​ $ 31,757 ​ $ 58,479 ​ $ 202,039 ​ $ 141,037 Denominator (shares in 000's): ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average shares outstanding ​ 59,289 ​ 59,426 ​ 59,465 ​ 59,655 Effect of dilutive securities - Stock options and awards ​ 766 ​ 592 ​ 703 ​ 547 Diluted weighted average shares outstanding ​ 60,055 ​ 60,018 ​ 60,168 ​ 60,202 Basic earnings per share ​ $ 0.54 ​ $ 0.98 ​ $ 3.40 ​ $ 2.36 Diluted earnings per share ​ $ 0.53 ​ $ 0.97 ​ $ 3.36 ​ $ 2.34 ​ For the three months ended September 30, 2021 and 2020, common shares subject to equity-based awards of 2,126 and 557,198 , respectively, were excluded from the computation of diluted earnings per share because the effect 10 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts of their exercise would be anti-dilutive. For the nine months ended September 30, 2021 and 2020, common shares subject to equity-based awards of 150,254 and 547,329 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. NOTE 4 — ACQUISITIONS During July 2021, the Company acquired Overstreet-Hughes Company, Inc. (“FTP”) and Shoals Tubular, Inc. (“Shoals”). FTP and Shoals manufacture copper and aluminum headers, distributor assemblies and manifolds in the United States and Mexico for the heating, ventilation, and air conditioning sector (“HVAC”). The acquisitions further differentiate 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 their growth in this market. ​ During April 2021, the Company acquired Zeman Bauelemente Produktionsgesellschaft m.b.H. (“Zeman Bauelemente"), a division of the Zeman Group. Zeman Bauelemente, 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 expands the Company’s international automation capabilities to serve customers in the structural steel and infrastructure sectors. ​ Pro forma information related to the acquisitions discussed above has not been presented because the impact on the Company’s Consolidated Statements of Income is not material. The preliminary purchase price allocations are expected to be finalized within the allowable measurement period. The acquired companies are included in the Company's consolidated financial statements as of the date of acquisition. ​ 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. 11 Table of Contents 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, 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) (1) ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2020 ​ ​ ​ ​ ​ Net sales ​ $ 371,535 ​ $ 196,937 ​ $ 100,416 ​ $ — ​ $ 668,888 Inter-segment sales ​ 29,368 ​ 4,898 ​ 1,898 ​ ( 36,164 ) ​ ​ — Total ​ $ 400,903 ​ $ 201,835 ​ $ 102,314 ​ $ ( 36,164 ) ​ $ 668,888 Adjusted EBIT ​ $ 59,120 ​ $ 13,432 ​ $ 17,587 ​ $ ( 1,839 ) ​ $ 88,300 Special items charge (gain) (2) ​ 7,044 ​ 2,401 ​ — ​ — ​ ​ 9,445 EBIT ​ $ 52,076 ​ $ 11,031 ​ $ 17,587 ​ $ ( 1,839 ) ​ $ 78,855 Interest income ​ ​ ​ ​ ​ ​ ​ 293 Interest expense ​ ​ ​ ​ ​ ​ ​ ( 5,845 ) Income before income taxes ​ ​ ​ ​ ​ ​ ​ $ 73,303 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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) (1) ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,123,299 ​ $ 572,027 ​ $ 266,280 ​ $ — ​ $ 1,961,606 Inter-segment sales ​ 81,644 ​ 13,667 ​ 5,376 ​ ( 100,687 ) ​ ​ — Total ​ $ 1,204,943 ​ $ 585,694 ​ $ 271,656 ​ $ ( 100,687 ) ​ $ 1,961,606 Adjusted EBIT ​ $ 176,524 ​ $ 29,729 ​ $ 41,792 ​ $ ( 4,902 ) ​ $ 243,143 Special items charge (gain) (2) ​ 34,241 ​ 9,103 ​ — ​ — ​ ​ 43,344 EBIT ​ $ 142,283 ​ $ 20,626 ​ $ 41,792 ​ $ ( 4,902 ) ​ $ 199,799 Interest income ​ ​ ​ ​ ​ ​ ​ 1,576 Interest expense ​ ​ ​ ​ ​ ​ ​ ( 18,467 ) Income before income taxes ​ ​ ​ ​ ​ ​ ​ $ 182,908 ​ (1) 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 Bauelemente in International Welding and FTP and Shoals 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. 12 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts (2) In the three months ended September 30, 2020, special items reflect Rationalization and asset impairment charges of $ 3,856 and $ 2,401 in Americas Welding and International We lding , respectively, and pension settlement charges of $ 3,188 in Americas Welding. In the nine months ended September 30, 2020, special items reflect Rationalization and asset impairment charges of $ 27,719 and $ 8,297 in Americas Welding and International We lding , respectively, amortization of the step up in value of acquired inventories of $ 806 related to an acquisition in International Welding and pension settlement charges of $ 6,522 in Americas Welding. ​ NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS The Company recorded Rationalization and asset impairment net charges of $ 8,277 and $ 36,016 in the nine months ended September 30, 2021 and 2020, respectively. The charges are primarily related to employee severance, non-cash asset impairments of long-lived assets and gains or losses on the disposal of assets. During 2020 and 2021, the Company initiated rationalization plans within Americas Welding and International Welding segments. 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, 2021, liabilities of $ 6,791 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, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ International ​ ​ ​ Americas Welding Welding Consolidated Balance at December 31, 2020 ​ $ 25 ​ $ 13,597 ​ $ 13,622 Payments and other adjustments ​ ( 25 ) ​ ( 16,245 ) ​ ( 16,270 ) Charged to expense ​ — ​ 9,439 ​ 9,439 Balance at September 30, 2021 ​ $ — ​ $ 6,791 ​ $ 6,791 ​ ​ 13 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, 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 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2020 ​ ​ 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, 2020 ​ $ 365 ​ $ ( 92,973 ) ​ $ ( 263,012 ) ​ $ ( 355,620 ) Other comprehensive income (loss) before reclassification ​ ( 104 ) ​ ( 4,411 ) ​ 13,004 3 8,489 Amounts reclassified from AOCI ​ 743 1 3,107 2 — ​ 3,850 Net current-period other comprehensive income (loss) ​ 639 ​ ( 1,304 ) ​ 13,004 ​ 12,339 Balance at September 30, 2020 ​ $ 1,004 ​ $ ( 94,277 ) ​ $ ( 250,008 ) ​ $ ( 343,281 ) ​ (1) During the three months ended September 30, 2021, the AOCI 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 ); during the three months ended September 30, 2020, the reclassification is a component of Net sales of $ ( 551 ) (net of tax of $( 205 ) ) and Cost of goods sold of $ 192 (net of tax of $ 8 ). 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 $ 18,677 and $ 1,023 during the three months ended September 30, 2021 and 2020, respectively. See Note 13 to the consolidated financial statements for additional details. (3) The Other comprehensive income (loss) before reclassifications excludes $( 58 ) and $ 35 attributable to Non-controlling interests in the three months ended September 30, 2021 and 2020, respectively. 14 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, 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 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2020 ​ ​ 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, 2019 ​ $ 1,626 ​ $ ( 70,546 ) ​ $ ( 206,930 ) ​ $ ( 275,850 ) Other comprehensive income (loss) before reclassification ​ ( 2,304 ) ​ ( 30,538 ) ​ ( 43,078 ) 3 ( 75,920 ) Amounts reclassified from AOCI ​ 1,682 1 6,807 2 — ​ 8,489 Net current-period other comprehensive income (loss) ​ ( 622 ) ​ ( 23,731 ) ​ ( 43,078 ) ​ ( 67,431 ) Balance at September 30, 2020 ​ $ 1,004 ​ $ ( 94,277 ) ​ $ ( 250,008 ) ​ $ ( 343,281 ) (1) During the nine months ended September 30, 2021, the AOCI 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 ); during the nine months ended September 30, 2020, the reclassification is a component of Net sales of $( 1,657 ) (net of tax of $( 624 ) ) and Cost of goods sold of $ 25 (net of tax of $( 92 ) ). 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 $ 21,578 and $ 2,189 ) during the nine months ended September 30, 2021 and 2020, respectively. See Note 13 to the consolidated financial statements for additional details. (3) The Other comprehensive income (loss) before reclassifications excludes $( 327 ) and $( 23 ) attributable to Non-controlling interests in the nine months ended September 30, 2021 and 2020, respectively. NOTE 8 — COMMON STOCK REPURCHASE PROGRAM The Company has a share repurchase program for up to 55 million shares of the Company’s common shares. On February 12, 2020, the Company’s Board of Director’s approved a new share repurchase program authorizing the Company to repurchase, in the aggregate, up to an additional 10 million shares of its outstanding common shares under this program. From time to time at management’s discretion, the Company repurchases its common shares in the open market, depending on market conditions, stock price and other factors. During the three months ended September 30, 2021, the Company purchased a total of 0.4 million shares at an average cost per share of $ 134.62 . During the nine months ended September 30, 2021, the Company purchased a total of 0.8 million shares at an average cost per share of $ 129.11 . As of September 30, 2021, 10.7 million common shares remained available for repurchase under these programs. The repurchased common shares remain in treasury and have not been retired. 15 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, 2021 December 31, 2020 Raw materials ​ $ 141,006 ​ $ 111,888 Work-in-process ​ 99,505 ​ 60,341 Finished goods ​ 283,922 ​ 209,029 Total ​ $ 524,433 ​ $ 381,258 ​ At September 30, 2021 and December 31, 2020, approximately 35 % of total inventories were valued using the last-in, first-out ("LIFO") method. The excess of current cost over LIFO cost was $ 99,817 and $ 75,581 at September 30, 2021 and December 31, 2020, 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, 2021 December 31, 2020 Right-of-use assets Other assets ​ $ 49,325 ​ $ 43,570 ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities Other current liabilities ​ $ 10,814 ​ $ 11,502 Noncurrent liabilities Other liabilities ​ 40,063 ​ 33,988 Total lease liabilities ​ $ 50,877 ​ $ 45,490 ​ Total lease expense, which is included in Cost of goods sold and Selling, general and administrative expenses in the Company’s Consolidated Statements of Income, was $ 5,619 and $ 16,279 in the three and nine months ended September 30, 2021, respectively, and $ 5,655 and $ 17,665 in the three and nine months ended September 30, 2020, respectively. 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. Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2020 were $ 3,733 and $ 11,727 , 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 $ 3,218 and $ 12,912 during the three and nine months ended September 30, 2021, respectively, and $ 214 and $ 2,249 for the three and nine months ended September 30, 2020, respectively. 16 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, 2021 2021 ​ $ 3,467 2022 ​ 11,382 2023 ​ 9,348 2024 ​ 7,715 2025 ​ 4,809 After 2025 ​ 21,164 Total lease payments ​ $ 57,885 Less: Imputed interest ​ 7,008 Operating lease liabilities ​ $ 50,877 ​ As of September 30, 2021, the weighted average remaining lease term is 8.6 years and the weighted average discount rate used to determine the operating lease liability is 3.1 %. NOTE 11 — PRODUCT WARRANTY COSTS The changes in the carrying amount of product warranty accruals are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2021 2020 Balance at beginning of year ​ $ 21,760 ​ $ 20,650 Accruals for warranties ​ 8,446 ​ 13,629 Settlements ​ ( 8,809 ) ​ ( 10,699 ) Foreign currency translation and other adjustments ​ ( 306 ) ​ ( 126 ) Balance at end of year ​ $ 21,091 ​ $ 23,454 ​ ​ 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, 2021, the Company was in compliance with all of its covenants and had $ 20,000 of outstanding borrowings under the Credit Agreement. The Company has other lines of credit totaling $ 97,848 . As of September 30, 2021, the Company was in compliance with all of its covenants and had $ 20,644 outstanding at September 30, 2021. 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 17 Table of Contents 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 12.6 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, 2021, 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, 2021, 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, 2021 and December 31, 2020, the fair value of long-term debt, including the current portion, was approximately $ 772,551 and $ 793,591 , respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $ 718,548 and $ 715,567 , 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, ​ ​ 2021 ​ 2020 ​ 2021 ​ 2020 ​ ​ 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 ​ $ 49 ​ $ 395 ​ $ 39 ​ $ 718 ​ $ 146 ​ $ 1,190 ​ $ 117 ​ $ 2,216 Interest cost ​ 2,622 ​ ​ 924 ​ 3,346 ​ 673 ​ 8,675 ​ 1,932 ​ 11,447 ​ 2,052 Expected return on plan assets ​ ( 3,888 ) ​ ​ ( 1,487 ) ​ ( 6,009 ) ​ ( 1,076 ) ​ ( 12,595 ) ​ ( 2,996 ) ​ ( 17,431 ) ​ ( 3,097 ) Amortization of prior service cost ​ — ​ ​ 1 ​ — ​ 15 ​ — ​ 12 ​ — ​ 46 Amortization of net loss ​ 616 ​ ​ 291 ​ 459 ​ 468 ​ 1,867 ​ 737 ​ 865 ​ 1,563 Settlement charges (1) ​ 73,562 ​ ​ — ​ 3,188 ​ — ​ 79,652 ​ 446 ​ 6,522 ​ — Defined benefit plans ​ ​ 72,961 ​ ​ 124 ​ ​ 1,023 ​ ​ 798 ​ ​ 77,745 ​ ​ 1,321 ​ ​ 1,520 ​ ​ 2,780 Multi-employer plans ​ ​ — ​ ​ 138 ​ ​ — ​ ​ 274 ​ ​ — ​ ​ 640 ​ ​ — ​ ​ 800 Defined contribution plans ​ ​ 6,572 ​ ​ 898 ​ ​ 4,945 ​ ​ 931 ​ ​ 17,606 ​ ​ 2,296 ​ ​ 15,322 ​ ​ 2,406 Total pension cost ​ $ 79,533 ​ $ 1,160 ​ $ 5,968 ​ $ 2,003 ​ $ 95,351 ​ $ 4,257 ​ $ 16,842 ​ $ 5,986 ​ (1) Pension settlement charges primarily resulting from lump sum pension payments in the three and nine months ended September 30, 2021 and 2020. 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. 18 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts In March 2020, the Company approved an amendment to terminate the Lincoln Electric Company Retirement Annuity Program plan effective as of December 31, 2020. The Company provided notice to participants of the intent to terminate the plan and applied for a determination letter. Pension obligations were distributed through lump sum payments to eligible plan participants during 2021 and resulted in pre-tax pension settlement charges of $ 73,562 and $ 79,652 in the three and nine months ended September 30, 2021, respectively. In October 2021, the remaining pension obligations were distributed through the purchase of a group annuity contract and the Company will reclassify any remaining unrecognized actuarial gains or losses, currently recorded in AOCI, net of tax, to the Company’s Consolidated Statements of Income as settlement charges. The Company estimates the fourth quarter 2021 pre-tax settlement charge to be approximately $ 35,000 - $ 45,000 . The Company anticipates using any remaining assets after liquidation to fund employer contributions in a different qualified plan. The Company expects the termination process will be substantially complete by the end of 2021. NOTE 14 — OTHER INCOME (EXPENSE) The components of Other income (expense) were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2021 2020 2021 2020 Equity earnings in affiliates ​ $ 108 $ 81 ​ $ 399 ​ $ 323 Other components of net periodic pension (cost) income (1) ​ ( 72,641 ) ( 1,064 ) ​ ( 77,730 ) ​ ( 1,967 ) Other income (expense) ​ 1,092 2,045 ​ 6,176 ​ 2,812 Total Other income (expense) ​ $ ( 71,441 ) $ 1,062 ​ $ ( 71,155 ) ​ $ 1,168 ​ (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 $ 51,259 of tax expense on pretax income of $ 253,429 , resulting in an effective income tax rate of 20.2 % for the nine months ended September 30, 2021. The effective income tax rate was 22.9 % for the nine months ended September 30, 2020. The effective tax rate was lower for the nine months ended September 30, 2021, as compared with the same period in 2020, primarily due to favorable discrete tax adjustments in 2021, as well as higher tax expense associated with a valuation allowance recorded in 2020. As of September 30, 2021, the Company had $ 17,733 of unrecognized tax benefits. If recognized, approximately $ 14,008 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 $ 937 in previously unrecognized tax benefits by the end of the third quarter 2022. 19 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts 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, 2021 and 2020. 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, 2021. The Company does not expect any counterparties to fail to meet their obligations. Cash Flow Hedges Certain foreign currency forward contracts were qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $ 77,691 at September 30, 2021 and $ 69,051 at December 31, 2020. 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, 2021 and December 31, 2020 and have a termination date of August 2025. Fair Value Hedges From time to time, the company will enter into certain interest rate swap agreements that are qualified and designated as fair value hedges. At September 30, 2021, the Company had no interest rate swap agreements outstanding. The Company terminated $ 50,000 of interest rate swaps in the nine months ended September 30, 2020, which resulted in a gain of $ 6,629 that is amortized to interest expense over the remaining life of the underlying debt. 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 $ 50,000 as of September 30, 2021 and December 31, 2020, 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 $ 96,147 at September 30, 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 $ 312,682 and $ 391,112 at September 30, 2021 and December 31, 2020, respectively. 20 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts Fair values of derivative instruments in the Company’s Condensed Consolidated Balance Sheets follow: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ December 31, 2020 ​ 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 $ 898 ​ $ 914 ​ $ — ​ $ — ​ $ 2,451 ​ $ 1,124 ​ $ — ​ $ — Forward starting swap agreements ​ — ​ ​ — ​ ​ 9,185 ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,876 ​ ​ — Net investment contracts ​ 1,517 ​ ​ — ​ ​ — ​ ​ 1,894 ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,308 Not designated as hedging instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign exchange contracts 1,558 ​ ​ 2,097 ​ ​ — ​ ​ — ​ 1,398 ​ 3,485 ​ — ​ — Total derivatives $ 3,973 ​ $ 3,011 ​ $ 9,185 ​ $ 1,894 ​ $ 3,849 ​ $ 4,609 ​ $ 4,876 ​ $ 4,308 ​ 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) 2021 2020 2021 2020 Not designated as hedges: ​ ​ ​ ​ ​ ​ ​ Foreign exchange contracts ​ Selling, general & administrative expenses ​ $ ( 878 ) ​ $ 6,381 ​ $ 5,000 ​ $ ( 12,141 ) ​ 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, 2021 December 31, 2020 Foreign exchange contracts ​ $ 30 ​ $ 660 ​ Forward starting swap agreements ​ ​ 6,874 ​ ​ 3,649 ​ Net investment contracts ​ ​ 989 ​ ( 1,822 ) ​ ​ The Company expects a loss of $ 36 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: 2021 2020 2021 2020 Foreign exchange contracts Sales ​ $ 439 ​ $ ( 756 ) ​ $ 2,303 ​ $ ( 2,281 ) ​ Cost of goods sold ​ ( 44 ) ​ ( 200 ) ​ ( 1,018 ) ​ 67 ​ ​ ​ ​ 21 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, 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 September 30, 2021 (Level 1) (Level 2) Inputs (Level 3) Assets: ​ ​ ​ ​ Foreign exchange contracts ​ $ 2,456 ​ $ — ​ $ 2,456 ​ $ — Net investment contracts ​ ​ 1,517 ​ ​ — ​ ​ 1,517 ​ ​ — Forward starting swap agreements ​ 9,185 ​ — ​ 9,185 ​ — Total assets ​ $ 13,158 ​ $ — ​ $ 13,158 ​ $ — Liabilities: ​ ​ ​ ​ Foreign exchange contracts ​ $ 3,011 ​ $ — ​ $ 3,011 ​ $ — Net investment contracts ​ ​ 1,894 ​ ​ — ​ ​ 1,894 ​ ​ — Deferred compensation ​ 41,227 ​ — ​ 41,227 ​ — Total liabilities ​ $ 46,132 ​ $ — ​ $ 46,132 ​ $ — ​ The following table provides a summary of assets and liabilities as of December 31, 2020, 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, 2020 (Level 1) (Level 2) Inputs (Level 3) Assets: ​ ​ ​ ​ Foreign exchange contracts ​ $ 3,849 ​ $ — ​ $ 3,849 ​ $ — Forward starting swap agreements ​ 4,876 ​ — ​ 4,876 ​ — Total assets ​ $ 8,725 ​ $ — ​ $ 8,725 ​ $ — Liabilities: ​ ​ ​ ​ Foreign exchange contracts ​ $ 4,609 ​ $ — ​ $ 4,609 ​ $ — Net investment contracts ​ 4,308 ​ — ​ 4,308 ​ — Deferred compensation ​ 41,539 ​ — ​ 41,539 ​ — Total liabilities ​ $ 50,456 ​ $ — ​ $ 50,456 ​ $ — ​ 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. 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, 2021 and December 31, 2020. 22 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts 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. ​ ​ 23 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. The current coronavirus disease (“COVID- 19”) pandemic has adversely impacted global economic conditions and has contributed to significant volatility in financial markets beginning in early calendar year 2020. Although the Company's estimates contemplate current conditions, the inputs into certain significant and critical accounting estimates include judgments and assumptions about the economic implications of the COVID-19 pandemic and how management expects them to change in the future. It is reasonably possible that actual results experienced may differ materially from the Company's estimates in future periods, which could affect our results of operations and financial condition. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 24 Table of Contents Results of Operations The following table shows the Company’s results of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ 2021 ​ 2020 ​ 2021 vs. 2020 ​ ​ Amount % of Sales Amount % of Sales $ % Net sales $ 806,454 ​ ​ ​ ​ $ 668,888 ​ ​ $ 137,566 20.6 % Cost of goods sold 538,282 ​ ​ ​ 453,501 ​ ​ (84,781) (18.7) % Gross profit 268,172 ​ 33.3 % 215,387 32.2 % 52,785 24.5 % Selling, general & administrative expenses 149,118 ​ 18.5 % 131,337 19.6 % (17,781) (13.5) % Rationalization and asset impairment charges 3,484 ​ 0.4 % 6,257 0.9 % 2,773 44.3 % Operating income 115,570 ​ 14.3 % 77,793 11.6 % 37,777 48.6 % Interest expense, net 5,714 ​ ​ ​ 5,552 ​ ​ (162) (2.9) % Other income (expense) (71,441) ​ ​ ​ 1,062 ​ ​ (72,503) (6,827.0) % Income before income taxes 38,415 ​ 4.8 % 73,303 11.0 % (34,888) (47.6) % Income taxes 6,658 ​ ​ ​ 14,797 ​ ​ 8,139 55.0 % Effective tax rate 17.3 % ​ ​ 20.2 % ​ ​ 2.9 % ​ ​ Net income including non-controlling interests 31,757 ​ ​ ​ 58,506 ​ ​ (26,749) (45.7) % Non-controlling interests in subsidiaries' loss — ​ ​ ​ 27 ​ ​ (27) (100.0) % Net income $ 31,757 ​ 3.9 % $ 58,479 8.7 % $ (26,722) (45.7) % Diluted earnings per share $ 0.53 ​ ​ ​ ​ $ 0.97 ​ $ (0.44) (44.9) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ 2021 ​ 2020 ​ 2021 vs. 2020 ​ ​ Amount % of Sales Amount % of Sales $ % Net sales $ 2,389,929 ​ ​ ​ ​ $ 1,961,606 ​ ​ $ 428,323 21.8 % Cost of goods sold 1,593,981 ​ ​ ​ 1,319,519 ​ ​ (274,462) (20.8) % Gross profit 795,948 ​ 33.3 % 642,087 32.7 % 153,861 24.0 % Selling, general & administrative expenses 446,351 ​ 18.7 % 407,440 20.8 % (38,911) (9.6) % Rationalization and asset impairment charges 8,277 ​ 0.3 % 36,016 1.8 % 27,739 77.0 % Operating income 341,320 ​ 14.3 % 198,631 10.1 % 142,689 71.8 % Interest expense, net 16,736 ​ ​ ​ 16,891 ​ ​ 155 0.9 % Other income (expense) (71,155) ​ ​ ​ 1,168 ​ ​ (72,323) (6,192.0) % Income before income taxes 253,429 ​ 10.6 % 182,908 9.3 % 70,521 38.6 % Income taxes 51,259 ​ ​ ​ 41,834 ​ ​ (9,425) (22.5) % Effective tax rate 20.2 % ​ ​ 22.9 % ​ ​ 2.7 % ​ ​ Net income including non-controlling interests 202,170 ​ ​ ​ 141,074 ​ ​ 61,096 43.3 % Non-controlling interests in subsidiaries' loss 131 ​ ​ ​ 37 ​ ​ 94 254.1 % Net income $ 202,039 ​ 8.5 % $ 141,037 7.2 % $ 61,002 43.3 % Diluted earnings per share $ 3.36 ​ ​ ​ ​ $ 2.34 ​ $ 1.02 43.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25 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 ​ ​ 2020 Volume Acquisitions Price Exchange 2021 Lincoln Electric Holdings, Inc. ​ $ 668,888 ​ $ 48,506 ​ $ 13,251 ​ $ 73,771 $ 2,038 ​ $ 806,454 ​ % Change ​ ​ ​ ​ ​ ​ ​ ​ ​ Lincoln Electric Holdings, Inc. ​ ​ ​ ​ 7.3 % 2.0 % 11.0 % ​ 0.3 % ​ 20.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ Change in Net Sales due to: ​ ​ ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2020 Volume Acquisitions Price Exchange 2021 Lincoln Electric Holdings, Inc. ​ $ 1,961,606 ​ $ 221,408 ​ $ 16,836 ​ $ 158,920 $ 31,159 ​ $ 2,389,929 ​ % Change ​ ​ ​ ​ ​ ​ ​ ​ ​ Lincoln Electric Holdings, Inc. ​ ​ ​ ​ 11.3 % 0.9 % 8.1 % ​ 1.6 % ​ 21.8 % Net sales increased in the three and nine months ended September 30, 2021 driven by higher demand reflecting recovery from the impacts of the pandemic, increased product pricing as a result of higher input costs and favorable foreign exchange. The increase in Net sales from acquisitions was driven by the acquisitions of Zeman Bauelemente within International Welding and FTP and Shoals within The Harris Products Group. Refer to Note 4 to the consolidated financial statements for details. Gross Profit: Gross profit for the three and nine months ended September 30, 2021 increased 24.5% and 24.0%, respectively, and to 33.3% as a percent of sales, driven by higher volumes and pricing actions which offset higher input costs. Last-in, first-out (“LIFO”) charges were $10,908 and $24,236 in the three and nine months ended September 30, 2021, respectively, as compared with charges of $597 and $732 in the same 2020 periods, respectively. Selling, General & Administrative ("SG&A") Expenses: SG&A expenses increased for the three and nine months ended September 30, 2021 as compared to the same 2020 periods, primarily due to higher employee costs. Rationalization and Asset Impairment Charges: The Company recorded charges of $3,484 ($3,383 after-tax) and $8,277 ($8,033 after-tax) in the three and nine months ended September 30, 2021, respectively, primarily related to severance charges and gains or losses on the disposal of assets. The Company recorded charges of $6,257 ($5,142 after-tax) and $36,016 ($28,181 after-tax) in the three and nine months ended September 30, 2020, respectively, primarily related to severance charges, non-cash asset impairments of long-lived assets, and gains or losses on the disposal of assets. Other Income (Expense): The decrease in Other income (expense) for the three and nine months ended September 30, 2021 as compared to September 30, 2020 was primarily due to non-cash pension settlement charges resulting from lump sum pension payments related to the termination of the Lincoln Electric Company Retirement Annuity Program (“RAP”) plan. Refer to Note 13 to the consolidated financial statements for details. 26 Table of Contents Income Taxes: The effective tax rate was lower for the three and nine months ended September 30, 2021 as compared to the same 2020 periods, primarily due to favorable discrete tax adjustments in 2021, as well as higher tax expense associated with a valuation allowance recorded in the nine months ended September 30, 2020. Segment Results ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ Change in Net Sales due to: ​ ​ Net Sales ​ ​ ​ ​ ​ ​ ​ Foreign ​ Net Sales ​ ​ 2020 Volume (1) Acquisitions (2) Price (3) Exchange 2021 ​ Operating Segments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas Welding $ 371,535 ​ $ 42,341 ​ $ — ​ $ 43,957 $ 3,675 ​ $ 461,508 ​ International Welding ​ 196,937 ​ 7,452 ​ 3,371 ​ 21,205 ​ (1,800) ​ 227,165 ​ The Harris Products Group ​ 100,416 ​ (1,287) ​ 9,880 ​ 8,609 ​ 163 ​ 117,781 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ ​ ​ Americas Welding ​ ​ ​ ​ 11.4 % — ​ ​ 11.8 % ​ 1.0 % ​ 24.2 % International Welding ​ ​ ​ ​ 3.8 % 1.7 % ​ 10.8 % ​ (0.9) % ​ 15.3 % The Harris Products Group ​ ​ ​ ​ (1.3) % 9.8 % ​ 8.6 % ​ 0.2 % ​ 17.3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ Change in Net Sales due to: ​ ​ Net Sales ​ ​ ​ ​ ​ ​ Foreign Net Sales ​ 2020 ​ Volume (1) Acquisitions (2) Price (3) ​ Exchange ​ 2021 ​ Operating Segments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas Welding $ 1,123,299 ​ $ 128,836 ​ $ — ​ $ 80,352 $ 11,731 ​ $ 1,344,218 ​ International Welding ​ 572,027 ​ 63,797 ​ 6,956 ​ 40,537 ​ 19,279 ​ 702,596 ​ The Harris Products Group ​ 266,280 ​ 28,775 ​ 9,880 ​ 38,031 ​ 149 ​ 343,115 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ ​ ​ Americas Welding ​ ​ ​ ​ 11.5 % — ​ ​ 7.2 % ​ 1.0 % ​ 19.7 % International Welding ​ ​ ​ ​ 11.2 % 1.2 % ​ 7.1 % ​ 3.4 % ​ 22.8 % The Harris Products Group ​ ​ ​ ​ 10.8 % 3.7 % ​ 14.3 % ​ 0.1 % ​ 28.9 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Increases for three and nine months ended September 30, 2021 for Americas Welding and International Welding was primarily due to higher demand reflecting recovery from the impacts of the COVID-19 pandemic. (2) Increase for the three and nine months ended September 30, 2021 were due to the acquisition of Zeman Bauelemente in International Welding and FTP and Shoals in The Harris Products Group, as discussed in Note 4 to the consolidated financial statements. (3) Increase for the three and nine months ended September 30, 2021 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 three and nine months ended September 30, 2021 was due to increased commodity costs. 27 Table of Contents 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, ​ 2021 vs. 2020 ​ 2021 2020 $ % Americas Welding: ​ ​ ​ ​ ​ Net sales ​ $ 461,508 ​ $ 371,535 ​ $ 89,973 ​ 24.2 % Inter-segment sales ​ 37,480 ​ 29,368 ​ 8,112 ​ 27.6 % Total Sales ​ $ 498,988 ​ $ 400,903 ​ ​ 98,085 ​ 24.5 % Adjusted EBIT (3) ​ $ 84,557 ​ $ 59,120 ​ ​ 25,437 ​ 43.0 % As a percent of total sales (1) ​ 16.9 % 14.7 % ​ ​ ​ 2.2 % International Welding: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 227,165 ​ $ 196,937 ​ ​ 30,228 ​ 15.3 % Inter-segment sales ​ 7,078 ​ 4,898 ​ ​ 2,180 ​ 44.5 % Total Sales ​ $ 234,243 ​ $ 201,835 ​ ​ 32,408 ​ 16.1 % Adjusted EBIT (4) ​ $ 29,032 ​ $ 13,432 ​ ​ 15,600 ​ 116.1 % As a percent of total sales (1) ​ 12.4 % 6.7 % ​ ​ ​ 5.7 % The Harris Products Group: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 117,781 ​ $ 100,416 ​ ​ 17,365 ​ 17.3 % Inter-segment sales ​ 1,945 ​ 1,898 ​ ​ 47 ​ 2.5 % Total Sales ​ $ 119,726 ​ $ 102,314 ​ ​ 17,412 ​ 17.0 % Adjusted EBIT (5) ​ $ 15,980 ​ $ 17,587 ​ ​ (1,607) ​ (9.1) % As a percent of total sales (2) ​ 13.3 % 17.2 % ​ ​ ​ (3.9) % Corporate / Eliminations: ​ ​ ​ ​ ​ ​ ​ Inter-segment sales ​ $ (46,503) ​ $ (36,164) ​ ​ (10,339) ​ (28.6) % Adjusted EBIT ​ (4,704) ​ (1,839) ​ ​ (2,865) ​ (155.8) % Consolidated: ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 806,454 ​ $ 668,888 ​ ​ 137,566 ​ 20.6 % Net income ​ $ 31,757 ​ $ 58,479 ​ ​ (26,722) ​ (45.7) % As a percent of total sales ​ 3.9 % 8.7 % ​ ​ ​ (4.8) % Adjusted EBIT (6) ​ $ 124,865 ​ $ 88,300 ​ ​ 36,565 ​ 41.4 % As a percent of sales ​ 15.5 % 13.2 % ​ ​ 2.3 % ​ (1) Increase for the three months ended September 30, 2021 as compared to September 30, 2020 primarily driven by higher volumes and pricing actions offsetting higher input and employee costs. The increase for International Welding was also driven by cost reduction actions. (2) Decrease for the three months ended September 30, 2021 as compared to September 30, 2020 driven primarily by higher input costs, product mix and integration activities. (3) The three months ended September 30, 2021 and 2020 exclude pension settlement charges of $73,562 and $3,188, respectively. The three months ended September 30, 2020 also excludes Rationalization and asset impairment charges of $3,856 related to severance charges as discussed in Note 6 to the consolidated financial statements. 28 Table of Contents (4) The three months ended September 30, 2021 and 2020 exclude Rationalization and asset impairment charges of $3,472 and $2,401, respectively, related to severance and gains or losses on the disposal of assets as discussed in Note 6 to the consolidated financial statements. The three months ended September 30, 2021 also exclude amortization of the step up in value of acquired inventories of $3,143 related to the acquisition of Zeman Bauelemente as discussed in Note 4 to the consolidated financial statements. (5) The three months ended September 30, 2021 exclude amortization of the step up in value of acquired inventories of $547 related to the acquisition of FTP and Shoals as discussed in Note 4 to the consolidated financial statements. (6) See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Favorable (Unfavorable) ​ ​ ​ Nine Months Ended September 30, ​ 2021 vs. 2020 ​ ​ 2021 2020 $ % Americas Welding: ​ ​ ​ ​ ​ Net sales ​ $ 1,344,218 ​ $ 1,123,299 ​ $ 220,919 ​ 19.7 % ​ Inter-segment sales ​ 109,993 ​ 81,644 ​ 28,349 ​ 34.7 % ​ Total Sales ​ $ 1,454,211 ​ $ 1,204,943 ​ ​ 249,268 ​ 20.7 % ​ Adjusted EBIT (3) ​ $ 245,308 ​ $ 176,524 ​ ​ 68,784 ​ 39.0 % ​ As a percent of total sales (1) ​ 16.9 % 14.6 % ​ ​ ​ 2.3 % ​ International Welding: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 702,596 ​ $ 572,027 ​ ​ 130,569 ​ 22.8 % ​ Inter-segment sales ​ 18,260 ​ 13,667 ​ ​ 4,593 ​ 33.6 % ​ Total Sales ​ $ 720,856 ​ $ 585,694 ​ ​ 135,162 ​ 23.1 % ​ Adjusted EBIT (4) ​ $ 77,845 ​ $ 29,729 ​ ​ 48,116 ​ 161.8 % ​ As a percent of total sales (1) ​ 10.8 % 5.1 % ​ ​ ​ 5.7 % ​ The Harris Products Group: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 343,115 ​ $ 266,280 ​ ​ 76,835 ​ 28.9 % ​ Inter-segment sales ​ 6,376 ​ 5,376 ​ ​ 1,000 ​ 18.6 % ​ Total Sales ​ $ 349,491 ​ $ 271,656 ​ ​ 77,835 ​ 28.7 % ​ Adjusted EBIT (5) ​ $ 52,889 ​ $ 41,792 ​ ​ 11,097 ​ 26.6 % ​ As a percent of total sales (2) ​ 15.1 % 15.4 % ​ ​ ​ (0.3) % ​ Corporate / Eliminations: ​ ​ ​ ​ ​ ​ ​ ​ Inter-segment sales ​ $ (134,629) ​ $ (100,687) ​ ​ (33,942) ​ (33.7) % ​ Adjusted EBIT (6) ​ (10,048) ​ (4,902) ​ ​ (5,146) ​ (105.0) % ​ Consolidated: ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 2,389,929 ​ $ 1,961,606 ​ ​ 428,323 ​ 21.8 % ​ Net income ​ $ 202,039 ​ $ 141,037 ​ ​ 61,002 ​ 43.3 % ​ As a percent of total sales ​ 8.5 % 7.2 % ​ ​ ​ 1.3 % ​ Adjusted EBIT (7) ​ $ 365,994 ​ $ 243,143 ​ ​ 122,851 ​ 50.5 % ​ As a percent of sales ​ 15.3 % 12.4 % ​ ​ 2.9 % ​ (1) Increase for the nine months ended September 30, 2021 as compared to September 30, 2020 primarily driven higher volumes and pricing actions, which offset higher input costs, and cost reduction actions. (2) Decrease for the nine months ended September 30, 2021 as compared to September 30, 2020 primarily driven by higher input costs and product mix. (3) The nine months ended September 30, 2021 and 2020 exclude pension settlement charges of $79,652 and $6,522, respectively. The nine months ended September 30, 2020 also exclude Rationalization and asset impairment charges of $27,719 related to severance charges and non-cash asset impairments of long-lived assets as discussed in Note 6 to the consolidated financial statements. 29 Table of Contents (4) The nine months ended September 30, 2021, and 2020 exclude Rationalization and asset impairment charges of $8,265 and $8,297, respectively, related to severance, asset impairments and gains or losses on the disposal of assets discussed in Note 6 to the consolidated financial statements. The nine months ended September 30, 2021 and 2020 also excludes amortization of the step up in value of acquired inventories of $4,984 and $806, respectively, related to acquisitions as discussed in Note 4 to the consolidated financial statements . The nine months ended September 30, 2021 exclude pension settlement charges of $446. (5) The nine months ended September 30, 2021 excludes amortization of the step up in value of acquired inventories of $547 related to the acquisition of FTP and Shoals as discussed in Note 4 to the consolidated financial statements . (6) The nine months ended September 30, 2021 exclude acquisition transaction costs of $1,923 related to acquisitions. (7) 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, Return on invested capital, Cash conversion, Organic sales, and Earnings before interest, taxes, depreciation and amortization, 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. 30 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, ​ 2021 2020 2021 2020 Operating income as reported ​ $ 115,570 ​ $ 77,793 ​ $ 341,320 ​ $ 198,631 ​ Special items (pre-tax): ​ ​ ​ ​ ​ Rationalization and asset impairment charges (1) ​ 3,484 ​ 6,257 ​ 8,277 ​ 36,016 ​ Acquisition transaction costs (2) ​ — ​ — ​ 1,923 ​ — ​ Amortization of step up in value of acquired inventories (3) ​ 3,690 ​ — ​ 5,531 ​ 806 ​ Adjusted operating income ​ $ 122,744 ​ $ 84,050 ​ $ 357,051 ​ $ 235,453 ​ Net income as reported ​ $ 31,757 $ 58,479 ​ $ 202,039 ​ $ 141,037 ​ Special items: ​ ​ ​ ​ ​ ​ ​ ​ Rationalization and asset impairment charges (1) ​ 3,484 6,257 ​ 8,277 ​ ​ 36,016 ​ Acquisition transaction costs (2) ​ — — ​ 1,923 ​ ​ — ​ Pension settlement charges (4) ​ 73,562 3,188 ​ 80,098 ​ ​ 6,522 ​ Amortization of step up in value of acquired inventories (3) ​ 3,690 — ​ 5,531 ​ ​ 806 ​ Tax effect of Special items (5) ​ (18,743) (1,911) ​ (20,737) ​ ​ (9,463) ​ Adjusted net income ​ ​ 93,750 ​ 66,013 ​ ​ 277,131 ​ ​ 174,918 ​ Non-controlling interests in subsidiaries’ income (loss) ​ ​ — ​ 27 ​ ​ 131 ​ ​ 37 ​ Interest expense, net ​ 5,714 5,552 ​ 16,736 ​ ​ 16,891 ​ Income taxes as reported ​ 6,658 14,797 ​ 51,259 ​ ​ 41,834 ​ Tax effect of Special items (5) ​ 18,743 1,911 ​ 20,737 ​ ​ 9,463 ​ Adjusted EBIT ​ $ 124,865 $ 88,300 ​ $ 365,994 ​ $ 243,143 ​ Effective tax rate as reported ​ 17.3 % 20.2 % 20.2 % ​ 22.9 % Net special item tax impact ​ 4.0 % — % 0.4 % ​ (0.2) % Adjusted effective tax rate ​ 21.3 % 20.2 % 20.6 % ​ 22.7 % Diluted earnings per share as reported ​ $ 0.53 $ 0.97 ​ $ 3.36 ​ $ 2.34 ​ Special items per share ​ 1.03 0.13 ​ 1.25 ​ ​ 0.57 ​ Adjusted diluted earnings per share ​ $ 1.56 $ 1.10 ​ $ 4.61 ​ $ 2.91 ​ ​ (1) Charges primarily related to severance as discussed in Note 6 to the consolidated financial statements. (2) Costs related to acquisitions and are included in SG&A expenses. (3) Costs related to acquisitions and are included in Cost of goods sold. (4) Settlement charges related to lump sum pension payments associated with the termination of a pension plan 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. 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 31 Table of Contents businesses for the foreseeable future primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets. 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, ​ ​ 2021 2020 $ Change Cash provided by operating activities (1) ​ $ 255,125 ​ $ 215,561 ​ $ 39,564 Cash used by investing activities (2) ​ (194,698) ​ (30,159) ​ (164,539) Capital expenditures ​ (46,440) ​ (37,116) ​ (9,324) Acquisition of businesses, net of cash acquired ​ (158,605) ​ — ​ (158,605) Cash used by financing activities (3) ​ (156,112) ​ (227,317) ​ 71,205 Proceeds from short-term borrowings, net ​ 32,295 ​ (33,123) ​ 65,418 Purchase of shares for treasury ​ (103,848) ​ (113,198) ​ 9,350 Cash dividends paid to shareholders ​ (91,717) ​ (88,945) ​ (2,772) Decrease in Cash and cash equivalents (4) ​ (96,720) ​ (47,084) ​ (49,636) ​ (1) Cash provided by operating activities increased for the nine months ended September 30, 2021 , compared with the nine months ended September 30, 2020 primarily due to higher company earnings. (2) Cash used by investing activities increased for the nine months ended September 30, 2021 , compared with the nine months ended September 30, 2020 primarily due to cash used in the acquisition of businesses. The Company currently anticipates capital expenditures of $65,000 to $70,000 in 2021. 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 decreased in the nine months ended September 30, 2021 , compared with the nine months ended September 30, 2020 due to higher proceeds from short-term borrowings. (4) Cash and cash equivalents decreased 37.6%, or $96,720, to $160,559 during the nine months ended September 30, 2021 , from $257,279 as of December 31, 2020. This decrease was predominantly due to cash used in the acquisition of businesses, purchases of common shares for treasury and cash dividends paid to shareholders, partially offset by cash provided by operating activities. At September 30, 2021, $155,914 of Cash and cash equivalents was held by international subsidiaries. In October 2021, the Company paid a cash dividend of $0.51 per share, or $30,115, to shareholders of record as of September 30, 2021. Working Capital Ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 December 31, 2020 September 30, 2020 Average operating working capital to Net sales (1) (2) 18.6 % 17.4 % 20.3 % Days sales in Inventories (2) 124.7 104.7 ​ 111.6 ​ Days sales in Accounts receivable 53.9 53.5 ​ 55.2 ​ Average days in Trade accounts payable 60.1 56.5 ​ 51.3 ​ 32 Table of Contents ​ (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 due to the COVID-19 pandemic, 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 return on invested capital ("ROIC") in assessing and evaluating the Company’s underlying operating performance. ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company’s financial performance and may be different than the method used by other companies to calculate ROIC. 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 ROIC: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended September 30, ​ ​ 2021 2020 Net income ​ $ 267,117 $ 204,753 ​ Rationalization and asset impairment charges ​ 17,729 44,867 ​ Acquisition transaction costs ​ 1,923 — Pension settlement charges ​ 81,695 6,522 ​ Amortization of step up in value of acquired inventories ​ 5,531 806 ​ Tax effect of Special items (1) ​ (21,868) (11,030) ​ Adjusted net income ​ $ 352,127 $ 245,918 ​ Plus: Interest expense, net of tax of $5,893 and $6,177 in 2021 and 2020, respectively ​ 17,520 ​ 18,564 ​ Less: Interest income, net of tax of $402 and $513 in 2021 and 2020, respectively ​ 1,193 ​ 1,543 ​ Adjusted net income before tax effected interest ​ $ 368,454 $ 262,939 ​ ​ ​ ​ ​ ​ ​ ​ ​ Invested Capital September 30, 2021 September 30, 2020 ​ Short-term debt ​ $ 41,404 ​ $ 1,147 ​ Long-term debt, less current portion ​ ​ 717,787 ​ ​ 715,687 ​ Total debt ​ ​ 759,191 ​ ​ 716,834 ​ Total equity ​ 857,893 ​ 710,744 ​ Invested capital ​ $ 1,617,084 ​ $ 1,427,578 ​ Return on invested capital ​ 22.8 % 18.4 % ​ (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. New Accounting Pronouncements Refer to Note 1 to the consolidated financial statements for a discussion of new accounting pronouncements. 33 Table of Contents Acquisitions Refer to Note 4 to the consolidated financial statements for a discussion of the Company’s recent acquisitions. Debt 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, 2021, the Company was in compliance with all of its covenants and had $20,000 of outstanding borrowings under the Credit Agreement. The Company has other lines of credit totaling $97,848. As of September 30, 2021, the Company was in compliance with all of its covenants and had $20,644 outstanding at September 30, 2021. 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 12.6 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, 2021, 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, 2021, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements. 34 Table of Contents Pensions In March 2020, the Company approved an amendment to terminate the Lincoln Electric Company Retirement Annuity Program plan effective as of December 31, 2020. The Company provided notice to participants of the intent to terminate the plan and applied for a determination letter. Pension obligations were distributed through lump sum payments to eligible plan participants during 2021 and resulted in pre-tax pension settlement charges of $73,562 and $79,652 in the three and nine months ended September 30, 2021, respectively. In October 2021, the remaining pension obligations were distributed through the purchase of a group annuity contract and the Company will reclassify any remaining unrecognized actuarial gains or losses, currently recorded in AOCI, net of tax, to the Company’s Consolidated Statements of Income as settlement charges. The Company estimates the fourth quarter 2021 pre-tax settlement charge to be approximately $35,000 - $45,000. The Company anticipates using any remaining assets after liquidation to fund employer contributions in a different qualified plan. The Company expects the termination process will be substantially complete by the end of 2021. 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 political unrest, acts of terror, natural disasters and pandemics, including the 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, 2020. 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, 2020. 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, 2020. 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, 2021. 35 Table of Contents 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, 2021 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ​ 36 Table of Contents 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, 2021, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by approximately 2,768 plaintiffs, which is a net increase of 17 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: 55,550 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 1,008 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 report, 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, 2020, which could materially affect the Company’s business, financial condition or future results. The reader should not interpret the disclosure of any risk factor to imply that the risk has not already materialized. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Issuer purchases of its common shares during the third quarter of 2021 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) (3) July 1 - 31, 2021 62,786 (1) ​ $ 134.23 62,573 10,987,097 August 1 - 31, 2021 63,945 (1) ​ 139.33 63,148 10,923,949 September 1 - 30, 2021 245,853 (1) ​ 133.51 245,683 10,678,266 Total 372,584 ​ 134.63 371,404 ​ (1) The above share repurchases include the surrender of the Company’s common shares in connection with the vesting of restricted awards. (2) On April 20, 2016, the Company announced that the Board of Directors authorized a new share repurchase program, which increased the total number of the Company’s common shares authorized to be repurchased to 55 million shares. Total shares purchased through the share repurchase programs were 54 million shares at a total cost of $2.4 billion for a weighted average cost of $43.77 per share through September 30, 2021 . (3) On February 12, 2020, the Company’s Board of Directors authorized a new share repurchase program for up to an additional 10 million shares of the Company’s common stock. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 37 Table of Contents ​ 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) ​ ​ ​ ​ 38 Table of Contents 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 28, 2021 ​ ​ ​ ​ ​ ​ 39