LINCOLN ELECTRIC HOLDINGS INC 10-Q

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