What changed in this filing

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Item 1. Financial Statements

2021-10-28 compared with 2021-07-27 · 144 added, 116 removed, 486 unchanged (35% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net sales (Note 2)

16 unchanged sentences

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net income including non-controlling interests

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $( 1,012 ) and $ 1,297 in the three and six months ended June 30, 2021;

$ 317 and $( 399 ) in the three and six months ended June 30, 2020

Defined benefit pension plan activity, net of tax of $( 569 ) and $ 246 in the three and six months ended June 30, 2021;

$( 7,691 ) and $( 7,527 ) in the three and six months ended June 30, 2020

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

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

Currency translation adjustment

7 unchanged sentences

(In thousands)

June 30, 2021

September 30, 2021

December 31, 2020

53 unchanged sentences

( 2,201,397 )

Unrecognized amounts from defined benefit pension plans, net of tax

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

Currency translation adjustment

Cash dividends declared – $ 0.51 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at September 30, 2021

( 2,251,193 )

LINCOLN ELECTRIC HOLDINGS, INC.

21 unchanged sentences

( 2,152,509 )

Unrecognized amounts from defined benefit pension plans, net of tax

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

Currency translation adjustment

Cash dividends declared – $ 0.49 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at September 30, 2020

( 2,151,417 )

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Stock-based compensation

Pension settlement charges

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

(Increase) decrease in accounts receivable

Increase in accounts receivable

Increase in inventories

34 unchanged sentences

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 six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

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.

18 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Consumable sales consist of electrodes, fluxes, specialty welding consumables and brazing and soldering alloys.

5 unchanged sentences

Less than 10 % of the Company’s Net sales are recognized over time.

At June 30, 2021, the Company recorded $ 22,283 related to advance customer payments and $ 50,357 related to billings in excess of revenue recognized.

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.

2 unchanged sentences

The Company records an asset for contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services.

At June 30, 2021 and December 31, 2020, the Company recorded $ 23,294 and $ 22,113 , respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets.

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.

1 unchanged sentence

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Denominator (shares in 000's):

4 unchanged sentences

Diluted earnings per share

For the three months ended June 30, 2021 and 2020, common shares subject to equity-based awards of 179,861 and 852,159 , respectively, were excluded from the computation of diluted earnings per share because the

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

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

effect of their exercise would be anti-dilutive.

For the six months ended June 30, 2021 and 2020, common shares subject to equity-based awards of 134,388 and 779,404 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

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.

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.

2 unchanged sentences

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 acquisition discussed above has not been presented because the impact on the Company’s Consolidated Statements of Income is not material.

The preliminary purchase price allocation is expected to be finalized within the allowable measurement period.

The acquired company is included in the Company's consolidated financial statements as of the date of acquisition.

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

12 unchanged sentences

International

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Inter-segment sales

4 unchanged sentences

Income before income taxes

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Inter-segment sales

4 unchanged sentences

Income before income taxes

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Inter-segment sales

4 unchanged sentences

Income before income taxes

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Inter-segment sales

4 unchanged sentences

Income before income taxes

(1) In the three and six months ended June 30, 2021, special items reflect Rationalization and asset impairment charges of $ 630 and $ 4,793 , respectively, in International Welding, amortization of step up in value of acquired inventories of $ 1,841 related to the acquisition of Zeman Bauelemente in International Welding and pension settlement charges of $ 1,650 and $ 6,536 in Americas Welding, respectively, and $ 446 in International Welding in the six months ended June 30, 2021.

Also in the three and six months ended June 30, 2021, special items reflect acquisition transaction costs of $ 810 and $ 1,923 , respectively, in Corporate/Eliminations related to an acquisition.

(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.

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

(2) In the three months ended June 30, 2020, special items reflect Rationalization and asset impairment charges of $ 22,673 and $ 565 in Americas Welding and International We lding , respectively, and pension settlement charges of $ 3,334 in Americas Welding.

In the six months ended June 30, 2020, special items reflect Rationalization and asset impairment charges of $ 23,863 and $ 5,896 in Americas Welding and International We lding , respectively, amortization of step up in value of acquired inventories of $ 806 related to an acquisition in International Welding and pension settlement charges of $ 3,334 in Americas Welding.

(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 $ 4,793 and $ 29,759 in the six months ended June 30, 2021 and 2020, respectively.

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.

1 unchanged sentence

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 June 30, 2021, liabilities of $ 12,353 for International Welding were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

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 six months ended June 30, 2021:

The following table summarizes the activity related to rationalization liabilities for the nine months ended September 30, 2021:

International

3 unchanged sentences

Charged to expense

Balance at June 30, 2021

Balance at September 30, 2021

LINCOLN ELECTRIC HOLDINGS, INC.

3 unchanged sentences

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Unrealized gain

3 unchanged sentences

qualifying as cash

Balance at March 31, 2021

Balance at June 30, 2021

Other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current-period other comprehensive income (loss)

Balance at June 30, 2021

Three Months Ended June 30, 2020

Balance at September 30, 2021

Three Months Ended September 30, 2020

Unrealized gain

3 unchanged sentences

qualifying as cash

Balance at March 31, 2020

Balance at June 30, 2020

Other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current-period other comprehensive income (loss)

Balance at June 30, 2020

(1) During the three months ended June 30, 2021, the AOCI reclassification is a component of Net sales of $ 70 (net of tax of $ 27 ) and Cost of goods sold of $ 405 (net of tax of $ 90 );

during the three months ended June 30, 2020, the reclassification is a component of Net sales of $ ( 1,065 ) (net of tax of $( 398 ) ) and Cost of goods sold of $( 69 ) (net of tax of $( 77 ) ).

Balance at September 30, 2020

(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 $ 1,445 and $ 1,002 ) during the three months ended June 30, 2021 and 2020, respectively.

(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 $( 110 ) and $( 17 ) attributable to Non-controlling interests in the three months ended June 30, 2021 and 2020, respectively.

(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.

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Unrealized gain

7 unchanged sentences

Net current-period other comprehensive income (loss)

Balance at June 30, 2021

Six Months Ended June 30, 2020

Balance at September 30, 2021

Nine Months Ended September 30, 2020

Unrealized gain

7 unchanged sentences

Net current-period other comprehensive income (loss)

Balance at June 30, 2020

(1) During the six months ended June 30, 2021, the AOCI reclassification is a component of Net sales of $ 172 (net of tax of $ 69 ) and Cost of goods sold of $ 731 (net of tax of $ 243 );

during the six months ended June 30, 2020, the reclassification is a component of Net sales of $( 1,106 ) (net of tax of $( 419 ) ) and Cost of goods sold of $( 167 ) (net of tax of $( 101 ) ).

Balance at September 30, 2020

(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 $ 2,901 and $ 1,166 ) during the six months ended June 30, 2021 and 2020, respectively.

(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 $( 269 ) and $( 58 ) attributable to Non-controlling interests in the six months ended June 30, 2021 and 2020, respectively.

(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

2 unchanged sentences

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 June 30, 2021, the Company purchased a total of 0.2 million shares at an average cost per share of $ 127.73 .

During the six months ended June 30, 2021, the Company purchased a total of 0.4 million shares at an average cost per share of $ 124.04 .

As of June 30, 2021, 11.0 million common shares remained available for repurchase under these programs.

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.

4 unchanged sentences

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

June 30, 2021

September 30, 2021

December 31, 2020

2 unchanged sentences

Finished goods

At June 30, 2021 and December 31, 2020, approximately 35 % and 35 %, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method.

The excess of current cost over LIFO cost was $ 88,909 and $ 75,581 at June 30, 2021 and December 31, 2020, respectively.

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

2 unchanged sentences

Balance Sheet Classification

June 30, 2021

September 30, 2021

December 31, 2020

5 unchanged sentences

Total lease liabilities

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 $ 5,608 and $ 10,660 in the three and six months ended June 30, 2021 and $ 5,990 and $ 11,209 in the three and six months ended June 30, 2020, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three and six months ended June 30, 2021, respectively, were $ 3,263 and $ 6,652 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 six months ended June 30, 2020, respectively, were $ 3,897 and $ 7,994 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 $ 9,694 during the three and six months ended June 30, 2021 and $ 0 and $ 2,035 for the three and six months ended June 30, 2020, respectively.

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.

LINCOLN ELECTRIC HOLDINGS, INC.

2 unchanged sentences

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

June 30, 2021

September 30, 2021

Total lease payments

1 unchanged sentence

Operating lease liabilities

As of June 30, 2021, the weighted average remaining lease term is 8.7 years and the weighted average discount rate used to determine the operating lease liability is 3.5 %.

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:

Six Months Ended June 30,

Nine Months Ended September 30,

Balance at beginning of year

8 unchanged sentences

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 June 30, 2021, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement.

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 June 30, 2021, the Company was in compliance with all of its covenants and had $ 9,787 outstanding at June 30, 2021.

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

9 unchanged sentences

The Notes contain certain affirmative and negative covenants.

As of June 30, 2021, the Company was in compliance with all of its debt covenants relating to the Notes.

As of September 30, 2021, the Company was in compliance with all of its debt covenants relating to the Notes.

Shelf Agreements

2 unchanged sentences

The Company is required to comply with covenants similar to those contained in the Notes.

As of June 30, 2021, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

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 June 30, 2021 and December 31, 2020, the fair value of long-term debt, including the current portion, was approximately $ 776,643 and $ 793,591 , respectively, which was determined using available market information and methodologies requiring judgment.

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.

2 unchanged sentences

The components of total pension cost were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

pension plans

11 unchanged sentences

Total pension cost

(1) Pension settlement charges primarily resulting from lump sum pension payments in the three and six months ended June 30, 2021 and 2020.

(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.

4 unchanged sentences

The Company provided notice to participants of the intent to terminate the plan and applied for a determination letter.

Pension obligations will be distributed through a combination of lump sum payments to eligible plan participants and through the purchase of a group annuity contract.

Upon settlement of the pension obligations, the Company will reclassify unrecognized actuarial gains or losses, currently recorded in AOCI, to the Company’s Consolidated Statements of Income as settlement gains or charges in the second half of 2021.

The Company anticipates the termination process will be substantially complete by the end of 2021.

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Equity earnings in affiliates

2 unchanged sentences

Total Other income (expense)

(1) Other components of net periodic pension (cost) income includes pension settlements and curtailments.

(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 $ 44,601 of tax expense on pretax income of $ 215,014 , resulting in an effective income tax rate of 20.7 % for the six months ended June 30, 2021.

The effective income tax rate was 24.7 % for the six months ended June 30, 2020.

The effective tax rate was lower for the six months ended June 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 June 30, 2021, the Company had $ 18,210 of unrecognized tax benefits.

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.

8 unchanged sentences

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 $ 1,645 in previously unrecognized tax benefits by the end of the second quarter 2022.

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 six months ended June 30, 2021 and 2020.

It is reasonably possible there could be a reduction of $ 937 in previously unrecognized tax benefits by the end of the third quarter 2022.

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

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 June 30, 2021.

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.

1 unchanged sentence

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 $ 66,588 at June 30, 2021 and $ 69,051 at December 31, 2020.

During March and April 2020, the Company entered into interest rate forward starting swap agreements to hedge the variability of future changes in interest rates.

The dollar equivalent gross notional amount of the long-term contracts was $ 100,000 at June 30, 2021 and December 31, 2020 and have a termination date of August 2025.

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 June 30, 2021, the Company had no interest rate swap agreements outstanding.

The Company terminated $ 50,000 of interest rate swaps in the six months ended June 30, 2020, which resulted in a gain of $ 6,629 that is amortized to interest expense over the remaining life of the underlying debt.

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 June 30, 2021 and December 31, 2020, respectively.

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 $ 98,334 at June 30, 2021.

The dollar equivalent gross notional amount of these short-term contracts was $ 96,147 at September 30, 2021.

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

These derivatives are held as economic hedges of certain balance sheet exposures.

The dollar equivalent gross notional amount of these contracts was $ 425,603 and $ 391,112 at June 30, 2021 and December 31, 2020, respectively.

The dollar equivalent gross notional amount of these contracts was $ 312,682 and $ 391,112 at September 30, 2021 and December 31, 2020, respectively.

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:

June 30, 2021

September 30, 2021

December 31, 2020

7 unchanged sentences

Total derivatives

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Derivatives by hedge designation

2 unchanged sentences

Foreign exchange contracts

Selling, general & administrative expenses

Selling, general

& administrative expenses

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

June 30, 2021

September 30, 2021

December 31, 2020

3 unchanged sentences

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Gain (loss) recognized in the

3 unchanged sentences

Cost of goods sold

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 June 30, 2021, measured at fair value on a recurring basis:

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

4 unchanged sentences

Observable Inputs

June 30, 2021

September 30, 2021

Inputs (Level 3)

Foreign exchange contracts

Net investment contracts

Forward starting swap agreements

3 unchanged sentences

Total liabilities

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following table provides a summary of assets and liabilities as of December 31, 2020, measured at fair value on a recurring basis:

17 unchanged sentences

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 June 30, 2021 and December 31, 2020.

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.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements