What changed in this filing

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Item 9A. Controls and Procedures

2022-02-18 compared with 2021-02-19 · 152 added, 203 removed, 1360 unchanged (21% of the section changed)

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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(a)(1) Financial Statements

The following consolidated financial statements of the Company are included in a separate section of this report following the signature page and certifications:

Report of Independent Registered Public Accounting Firm

The following reports and consolidated financial statements of the Company are included in a separate section of this report following the signature page and certifications:

Report of Independent Registered Public Accounting Firm (PCAOB ID 42 )

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

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0-1402, and incorporated herein by reference and made a part hereof).

Amended and Restated Code of Regulations of Lincoln Electric Holdings, Inc., as amended on February 18, 2019 (filed as Exhibit 3.1 to Form 8-K of Lincoln Electric Holdings, Inc.

filed on February 21, 2019, SEC File No.-0-1402, and incorporated herein by reference and made a part hereof).

Amended and Restated Code of Regulations of Lincoln Electric Holdings, Inc., as amended on October 19, 2021 (filed as Exhibit 3.1 to Form 8-K of Lincoln Electric Holdings, Inc.

filed on October 22, 2021, SEC File No.-0-1402, and incorporated herein by reference and made a part hereof).

Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.1 to Form 10-K of Lincoln Electric Holdings, Inc.

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0-1402, and incorporated herein by reference and made a part hereof).

Amended and Restated Credit Agreement, dated as of June 30, 2017, by and among Lincoln Electric Holdings, Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W.

Harris Co., Inc., Techalloy, Inc., Wayne Trail Technologies, Inc., Lincoln Global, Inc., the Lenders and KeyBank National Association (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc.

filed on July 6, 2017, SEC File No.

Second Amended and Restated Credit Agreement, dated as of April 23, 2021, by and among Lincoln Electric Holdings, Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W.

Harris Co., Inc., Lincoln Electric Automation, Inc., Lincoln Global, Inc., the Lenders and KeyBank National Association (filed as Exhibit 10.4 to Form 10-Q of Lincoln Electric Holdings, Inc.

for the quarter ended March 31, 2021, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

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0-1402, and incorporated herein by reference and made a part hereof).

Amendment No.

1 to Non-Employee Directors’ Deferred Compensation Plan (Amended and Restated as of January 1, 2019) (filed as Exhibit 10.2 to Form 10-Q of Lincoln Electric Holdings, Inc.

for the quarter ended September 30, 2020, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

Non-Employee Directors’ Deferred Compensation Plan (Amended and Restated as of January 1, 2021) (filed herewith).

2005 Deferred Compensation Plan for Executives (Amended and Restated as of January 1, 2021) (filed as Exhibit 10.21 to Form 10-K of Lincoln Electric Holdings, Inc.

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0-1402, and incorporated herein by reference and made a part hereof).

Amendment No.

1 to 2005 Deferred Compensation Plan for Executives (Amended and Restated as of January 1, 2018) (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc.

for the quarter ended September 30, 2020, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

2005 Deferred Compensation Plan for Executives (Amended and Restated as of January 1, 2021) (filed herewith).

The Lincoln Electric Company Restoration Plan (filed as Exhibit 4.3 to Form S-8 of Lincoln Electric Holdings, Inc.

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1 to The Lincoln Electric Company Employee Savings Plan As Amended and Restated Effective January 15, 2021 (filed herewith).

Amendment No.

2 to The Lincoln Electric Company Employee Savings Plan As Amended and Restated Effective January 15, 2021 (filed herewith).

Form of Change in Control Severance Agreement (as entered into by the Company and its executive officers) (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc.

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0-1402 and incorporated herein by reference and made a part hereof).

2006 Stock Plan for Non-Employee Directors (filed as Appendix C to Lincoln Electric Holdings, Inc.

proxy statement dated March 28, 2006, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

Amendment No.

1 to the 2006 Stock Plan for Non-Employee Directors dated October 20, 2006 (filed as Exhibit 10.2 to Form 10-Q of Lincoln Electric Holdings, Inc.

for the quarter ended March 31, 2007, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

Amendment No.

2 to the 2006 Stock Plan for Non-Employee Directors dated July 26, 2007 (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc.

for the quarter ended September 30, 2007, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

Amendment No.

3 to the 2006 Stock Plan for Non-Employee Directors dated December 15, 2014 (filed as Exhibit 10.20 to Form 10-K of Lincoln Electric Holdings, Inc.

for the year ended December 31, 2014, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

2015 Equity and Incentive Compensation Plan (filed as Appendix B to Lincoln Electric Holdings, Inc.

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0-1402, and incorporated herein by reference and made a part hereof).

Form of Restricted Stock Unit Agreement for Executive Officers (filed as Exhibit 10.33 to Form 10-K of Lincoln Electric Holdings, Inc.

for the year ended December 31, 2013, SEC File No.

Form of Stock Option Agreement for Executive Officers (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc.

for the quarter ended March 31, 2021, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

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0-1402, and incorporated herein by reference and made a part hereof).

Form of Performance Share Award Agreement for Executive Officers (filed as Exhibit 10.22 to Form 10-K of Lincoln Electric Holdings, Inc.

Form of Restricted Stock Unit Agreement for Executive Officers (filed as Exhibit 10.43 to Form 10-K of Lincoln Electric Holdings, Inc.

for the year ended December 31, 2019, SEC File No.

0-1402, and incorporated herein by reference and made a part hereof).

Form of Restricted Stock Unit Agreement for Executive Officers (filed as Exhibit 10.2 to Form 10-Q of Lincoln Electric Holdings, Inc.

for the quarter ended March 31, 2021, SEC File No.-0-1402, and incorporated herein by reference and made a part hereof).

Form of Performance Share Award Agreement for Executive Officers (filed as Exhibit 10.35 to Form 10-K of Lincoln Electric Holdings, Inc.

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0-1402, and incorporated herein by reference and made a part hereof).

Form of Performance Share Award Agreement for Executive Officers (filed as Exhibit 10.3 to Form 10-Q of Lincoln Electric Holdings, Inc., for the quarter ended March 31, 2021, SEC File No.-0-1402, and incorporated herein by reference and made a part hereof).

Form of Officer Indemnification Agreement (effective February 23, 2012) (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc.

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Gabriel Bruno as

Attorney-in-Fact for

Walker, Director

Chambers, Director

February 18, 2022

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Lincoln Electric Holdings, Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15 (a) (2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Uncertain tax positions

Description of the Matter

As disclosed in Note 14 to the consolidated financial statements, the Company operates in a multinational tax environment and is subject to laws and regulations in various jurisdictions, including U.S.

As disclosed in Notes 1 and 14 to the consolidated financial statements, the Company operates in a multinational tax environment and is subject to laws and regulations in various jurisdictions, including U.S.

federal, various U.S.

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For example, our procedures included testing the Company’s controls to determine the application of the relevant laws, regulations and tax rulings, including management’s process to recognize and measure the related tax positions.

In testing the recognition and measurement of income tax positions, we involved tax professionals to assist in assessing the technical merits of the Company’s tax positions.

In addition, we used our knowledge of and experience with the application of domestic and international income tax laws by the relevant tax authorities to evaluate the Company’s accounting for those tax positions.

Our audit procedures included, among others, testing the recognition and measurement of income tax positions.

We involved tax professionals to assist in assessing the technical merits of the Company’s tax positions.

We also assessed the Company’s assumptions and data used to support the measurement of the related tax positions and tested the accuracy of the calculations.

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Other comprehensive income (loss), net of tax:

Unrealized (loss) gain on derivatives designated and qualifying as cash flow hedges, net of tax of $ 605 in 2020;

Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $ 1,523 in 2021;

$ 605 in 2020;

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Comprehensive income (loss) attributable to non-controlling interests

Comprehensive income attributable to shareholders

Comprehensive income (loss) attributable to shareholders

See notes to these consolidated financial statements.

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Unrecognized amounts from defined benefit pension plans, net of tax

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

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

Currency translation adjustment

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Unrecognized amounts from defined benefit pension plans, net of tax

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

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

Currency translation adjustment

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

Rationalization and asset impairment net charges (Note 6)

Net impact of U.S.

Tax Act (Note 14)

Rationalization and asset impairment net (gains) charges (Note 7)

Depreciation and amortization

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Gain on change in control

Pension settlement charges

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

Decrease (increase) in accounts receivable

Decrease (increase) in inventories

Decrease in other current assets

(Decrease) increase in trade accounts payable

(Increase) decrease in accounts receivable

(Increase) decrease in inventories

(Increase) decrease in other current assets

Increase (decrease) in trade accounts payable

Increase (decrease) in other current liabilities

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Proceeds from sale of property, plant and equipment

Purchase of marketable securities

Proceeds from marketable securities

Other investing activities

NET CASH (USED BY) PROVIDED BY INVESTING ACTIVITIES

NET CASH USED BY INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Amounts due banks, net

Payments on long-term borrowings

Net change in borrowings

Proceeds from exercise of stock options

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Effect of exchange rate changes on Cash and cash equivalents

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at beginning of period

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The Company’s product offering also includes computer numeric controlled ("CNC") plasma and oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing.

COVID-19 Assessment

In March 2020, the World Health Organization categorized the current coronavirus disease (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.

COVID-19 continues to spread throughout the United States and other countries across the world, and the ultimate duration and severity on the Company's business remains unknown.

Although the Company’s customers have re-opened and increased operating levels, such customers may be forced to close or limit operations should a resurgence of COVID-19 cases occur.

Given this continued level of economic and operational uncertainty over the impacts of COVID-19, the ultimate financial impact cannot be reasonably estimated at this time.

Translation of Foreign Currencies

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The Company estimates this allowance based on the age of the related receivable, knowledge of the financial condition of customers, review of historical receivables and reserve trends and other pertinent information.

If the financial condition of customers deteriorates or an unfavorable trend in receivable collections is experienced in the future, additional allowances may be required.

If the financial condition of customers deteriorates or an unfavorable trend in receivable

collections is experienced in the future, additional allowances may be required.

Historically, the Company’s reserves have approximated actual experience.

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Prepaid expenses are included in Other current assets in the accompanying Consolidated Balance Sheets and amounted to $ 20,615 and $ 19,584 at December 31, 2021 and 2020, respectively.

Equity Investments

Investments in businesses which the Company does not own a majority interest and does not have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method.

The Company’s 50 % ownership interest in equity investments includes an investment in Chile at December 31, 2020 and 2019.

During July 2019, the Company acquired the controlling stake of its equity investment in Kaynak Tekniği Sanayi ve Ticaret A.Ş.

(“Askaynak”), located in Turkey.

The financial statements of Askaynak were consolidated into the Company at that time.

Long-lived Assets

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Property, plant and equipment are stated at cost and include improvements which significantly increase capacities or extend the useful lives of existing plant and equipment.

Depreciation and amortization are computed using a straight-line method over useful lives ranging from 3 years to 20 years for machinery, tools and equipment, and up to 40 years for

Depreciation and amortization are computed using a straight-line method over useful lives ranging from 3 years to 20 years for machinery, tools and equipment, and up to 40 years for buildings.

Net gains or losses related to asset dispositions are recognized in earnings in the period in which dispositions occur.

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Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at commencement date to present value the lease payments.

As most of the Company’s operating leases do not provide an

implicit rate, the Company uses its incremental borrowing rate based on information available at commencement date to present value the lease payments.

The Company has operating leases for sales offices, manufacturing facilities, warehouses and distribution centers, transportation equipment, office equipment and information technology equipment.

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Intangible assets other than goodwill are recorded at fair value at the time acquired or at cost, if applicable.

Intangible assets that do not have indefinite lives are amortized in line with the pattern in which the economic benefits of the

intangible asset are consumed.

Intangible assets that do not have indefinite lives are amortized in line with the pattern in which the economic benefits of the intangible asset are consumed.

If the pattern of economic benefit cannot be reliably determined, the intangible assets are amortized on a straight-line basis over the shorter of the legal or estimated life.

Goodwill and indefinite-lived intangibles assets are not amortized, but are tested for impairment in the fourth quarter using the same dates each year or more frequently if changes in circumstances or the occurrence of events indicate potential impairment.

These types of assets are assessed for impairment in a manner consistent with long-lived assets described above.

Goodwill and indefinite-lived intangible assets are not amortized, but are tested for impairment in the fourth quarter using the same date each year or more frequently if changes in circumstances or the occurrence of events indicate potential impairment.

In performing the annual impairment test, the fair value of each indefinite-lived intangible asset is compared to its carrying value and an impairment charge is recorded if the carrying value exceeds the fair value.

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Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09 (“Topic 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.

Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting.

The cumulative impact of adopting Topic 606 as of January 1, 2018 did not have a material impact to the consolidated financial statements.

The Company does not expect the impact of the adoption of Topic 606 to be material to the consolidated financial statements on an ongoing basis.

Revenue is recognized when obligations under the terms of a contract are satisfied and control is transferred to the customer.

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The Company uses derivative instruments to manage exposures to interest rates, commodity prices and currency exchange rate fluctuations on certain purchase and sales transactions, balance sheet and net investment exposures.

Derivative contracts to hedge currency and commodity exposures are generally written on a short-term basis, but may

cover exposures for up to 3 years while interest rate contracts may cover longer periods consistent with the terms of the underlying debt.

Derivative contracts to hedge currency and commodity exposures are generally written on a short-term basis, but may cover exposures for up to 3 years while interest rate contracts may cover longer periods consistent with the terms of the underlying debt.

The Company does not enter into derivatives for trading or speculative purposes.

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Cash flow hedges

Certain foreign currency forward contracts are qualified and designated as cash flow hedges.

Certain foreign currency forward contracts and commodity contracts are qualified and designated as cash flow hedges.

The effective portion of the fair value unrealized gain or loss on cash flow hedges are reported as a component of Accumulated other comprehensive income ("AOCI") with offsetting amounts recorded as Other current assets, Other assets, Other current liabilities or Other liabilities depending on the position and the duration of the contract.

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The ineffective portion on cash flow hedges is recognized in current earnings.

During March and April 2020, in anticipation of future debt issuance associated with the Notes referenced in Note 9, the Company entered into interest rate forward starting swap agreements to hedge the variability of future changes in interest rates.

In anticipation of future debt issuance associated with the Notes referenced in Note 9, the Company has interest rate forward starting swap agreements to hedge the variability of future changes in interest rates.

The forward starting swap agreements were qualified and designated as a cash flow hedge.

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Research and development costs are charged to Selling, general & administrative expenses as incurred and totaled $ 55,969 , $ 51,414 and $ 56,845 in 2021, 2020 and 2019, respectively.

Included in Selling, general & administrative expenses are the costs related to the Company’s discretionary employee bonus programs, which for certain U.S.-based employees are net of hospitalization costs.

The Company’s discretionary employee bonus programs, which for certain U.S.-based employees are net of medical costs, are included in Selling, general & administrative expenses.

Bonus costs were $ 120,686 , $ 87,407 and $ 100,381 in 2021, 2020 and 2019, respectively.

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Judgment is also used in measuring the related amount of tax benefit that qualifies for recognition, including the interpretation of applicable tax law, regulations and tax rulings.

Provisions of the U.S.

Tax Cuts and Jobs Act ("U.S.

Tax Act") became effective for the Company in 2018.

The Foreign-Derived Intangible Income (“FDII”) provision generates a deduction against the Company’s U.S.

taxable income for U.S.

earnings derived offshore that utilize intangibles held by the Company in the U.S.

Conversely, the Global Intangible Low-Taxed Income (“GILTI”) provision requires the Company to subject to U.S.

taxation a portion of its foreign subsidiary earnings that exceed an allowable return.

The Company elects to treat any GILTI inclusion as a period expense in the year incurred.

The Company elects to treat any Global Intangible Low Taxed Iincome inclusion as a period expense in the year incurred.

Refer to Note 14 to the consolidated financial statements for additional details.

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Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability.

Fair value estimates are based on a series of judgments about future events and uncertainties and rely heavily on estimates and assumptions.

Fair value estimates are based on a series of judgments about future events and uncertainties and rely on estimates and assumptions.

Management values property, plant and equipment using the cost approach supported where available by observable market data, which includes consideration of obsolescence.

Management values acquired intangible assets using the relief from royalty method or excess earnings method, forms of the income approach supported by observable market data for peer companies.

The significant assumptions used to estimate the value of the acquired intangible assets include discount rates and certain assumptions that form the basis of future cash flows (such as

revenue growth rates, customer attrition rates, and royalty rates).

The significant assumptions used to estimate the value of the acquired intangible assets include discount rates and certain assumptions that form the basis of future cash flows (such as revenue growth rates, customer attrition rates, and royalty rates).

Acquired inventories are marked to fair value.

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The following ASUs were adopted as of January 1, 2021 and did not have a significant financial impact on the Company’s consolidated financial statements unless otherwise described within the table below:

2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) , issued August 2018.

ASU 2018-14 modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The ASU also requires an entity to disclose the weighted-average interest crediting rates for cash balance plans and to explain the reasons for significant gains and losses related to changes in the benefit obligation.

Refer to Note 12 to the consolidated financial statements for further details.

2018-13, Fair Value Measurement (Topic 944) , issued August 2018.

ASU 2018-13 eliminates, amends and adds disclosure requirements related to fair value measurements.

The ASU removes disclosure requirements pertaining to the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements.

Refer to Note 16 to the consolidated financial statements for further details.

2016-13, Financial Instruments - Credit Losses (Topic 326) , issued June 2016.

ASU 2016-13 modifies disclosure and measurement requirements related to credit losses.

Topic 326 requires that an entity estimate impairment of trade receivables based on expected losses rather than incurred losses.

The adoption did not have a material impact on the Company's consolidated financial statements.

2020-04, Reference Rate Reform (Topic 848) , issued March 2020.

ASU 2020-04 provides temporary optional guidance to ease the financial reporting burden associated with the expected market transition from the London Inter-Bank Offer Rate ("LIBOR") to alternative reference rates.

The Company adopted the ASU on March 12, 2020 and it is effective through December 31, 2022.

As of December 31, 2020, the Company has not utilized any of the optional guidance, however, it will continue to assess the potential impact on the Company’s debt contracts and hedging relationships through the effective period.

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

2019-12 , Income Taxes (Topic 740) , issued December 2019.

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The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The ASU is effective January 1, 2021 and early adoption is permitted.

The adoption did not have a material impact on the Company’s consolidated financial statements.

NOTE 2 — REVENUE RECOGNITION

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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.

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.

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NOTE 4 – ACQUISITIONS

During July 2021, the Company acquired Overstreet-Hughes Company, Inc.

and Shoals Tubular, Inc.

FTP manufactures copper and aluminum headers, distributor assemblies and manifolds in the United States and Mexico for the heating, ventilation, and air conditioning sector (“HVAC”).

The acquisition further differentiates The Harris Products Group’s competitive position serving HVAC original equipment manufacturers with a comprehensive portfolio of solutions for the fabrication of HVAC coils and accelerates growth in this market.

During April 2021, the Company acquired Zeman Bauelemente Produktionsgesellschaft m.b.H.

(“Zeman"), a division of the Zeman Group.

Zeman, based in Vienna, Austria, is a leading designer and manufacturer of robotic assembly and arc welding systems that automate the tacking and welding of steel beams.

The acquisition expands the Company’s international automation capabilities to serve customers in the structural steel and infrastructure sectors.

During July 2019, the Company acquired the controlling stake in Askaynak.

Askaynak, based in Turkey, is a supplier and manufacturer of welding consumables, arc welding equipment, including plasma and oxy-fuel cutting equipment and robotic welding systems.

Askaynak, based in Turkey, is a supplier and manufacturer of welding consumables, arc welding equipment, including plasma and oxy-fuel cutting equipment

and robotic welding systems.

The acquisition advanced the Company’s regional growth strategy in Europe, the Middle East and Africa.

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The acquisition complimented the Company’s automation portfolio and its metal additive manufacturing service business.

During December 2018, the Company acquired the soldering business of Worthington Industries (“Worthington”).

The Worthington business, based in Winston Salem, North Carolina, broadened the Harris Products Group’s portfolio of industry-leading consumables with the addition of premium solders and fluxes.

Also during December 2018, the Company acquired Coldwater Machine Company (“Coldwater”) and Pro Systems.

Coldwater, based in Coldwater, Ohio, is a flexible automation integrator and precision machining and assembly manufacturer serving diverse end markets.

Pro Systems, based in Churubusco, Indiana, is an automation systems designer and integrator serving automotive, industrial, electrical and medical applications.

The acquisitions accelerated growth and expanded the Company’s industry-leading portfolio of automated cutting and joining solutions.

Also during December 2018, the Company acquired Inovatech Engineering Corporation (“Inovatech”).

Inovatech, based in Ontario, Canada, is a manufacturer of advanced robotic plasma cutting solutions for structural steel applications.

The acquisition scaled the Company’s automated cutting solutions and application expertise and supports long-term growth in that market.

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.

Acquired companies are included in the Company’s consolidated financial statements as of the date of acquisition.

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 – GOODWILL AND INTANGIBLES

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Balance as of December 31, 2021

(1) Additions to Americas Welding reflect goodwill recognized in the acquisition of Baker in 2019.

Additions to International Welding reflect goodwill recognized in the acquisition of Askaynak in 2019.

(1) Additions to International Welding reflect goodwill recognized in the acquisition of Zeman in 2021.

Additions to The Harris Products Group reflect goodwill recognized in the acquisition of FTP in 2021.

Gross carrying values and accumulated amortization of intangible assets other than goodwill by asset class were as follows:

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Total intangible assets subject to amortization

During 2021, the Company acquired intangible assets either individually or as part of a group of assets, with an initial purchase price allocation and weighted-average as follows:

Year Ended December 31, 2021

Purchase Price

Acquired intangible assets subject to amortization

Trademarks and trade names

Customer relationships

Total acquired intangible assets subject to amortization

Aggregate amortization expense was $ 21,155 , $ 20,363 and $ 20,755 for 2021, 2020 and 2019, respectively.

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The Company has aligned its organizational and leadership structure into three operating segments to support growth strategies and enhance the utilization of the Company’s worldwide resources and global sourcing initiatives.

operating segments consist of Americas Welding, International Welding and The Harris Products Group.

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.

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Depreciation and amortization

(1) 2021 special items reflect pension settlement charges of $ 123,091 .

2020 special items reflect Rationalization and asset impairment charges of $ 26,870 and pension settlement charges of $ 8,119 .

2019 special items reflect Rationalization and asset impairment charges of $ 1,716 and amortization of step up in value of acquired inventories of $ 1,399 related to the acquisition of Baker.

2018 special items reflect pension settlement charges of $ 6,686 in Americas Welding related to lump sum pension payments.

2019 special items reflect Rationalization and asset impairment charges of $ 1,716 and amortization of step up in value of acquired inventories of $ 1,399 related to an acquisition.

2019 special items reflect Rationalization and asset impairment charges of $ 11,702 , amortization of step up in value of acquired inventories of $ 1,609 related to the acquisition of Askaynak, gains on disposals of assets of $ 3,554 and a gain on change in control of $ 7,601 related to the acquisition of Askaynak.

2018 special items reflect Rationalization and asset impairment charges of $ 25,285 related to employee severance, asset impairments, gains or losses on disposal of assets and other related costs.

(2) 2021 special items reflect Rationalization and asset impairment charges of $ 9,804 , pension settlement charges of $ 446 , and amortization of step up in value of acquired inventories of $ 4,984 related to an acquisition.

2020 special items reflect Rationalization and asset impairment charges of $ 18,598 and amortization of step up in value of acquired inventories of $ 806 related to an acquisition.

2019 special items reflect Rationalization and asset impairment charges of $ 11,702 , amortization of step up in value of acquired inventories of $ 1,609 related to an acquisition, gains on disposals of assets of $ 3,554 and a gain on change in control of $ 7,601 related to an acquisition.

(3) 2021 special items reflect pension settlement charges of $ 2,965 and amortization of step up in value of acquired inventories of $ 820 related to an acquisition.

2019 special items reflect Rationalization and asset impairment charges of $ 1,770 .

(4) 2019 special items reflect acquisition transaction and integration costs of $ 1,804 related to the Air Liquide Welding acquisition as discussed in Note 4 to the consolidated financial statements.

2018 special items reflect acquisition transaction and integration costs of $ 4,498 related to the Air Liquide Welding acquisition as discussed in Note 4 to the consolidated financial statements.

(4) 2021 special items reflect acquisition transaction and integration costs of $ 1,923 related acquisitions as discussed in Note 4 to the consolidated financial statements

2019 special items reflect acquisition transaction and integration costs of $ 1,804 related to an acquisition as discussed in Note 4 to the consolidated financial statements.

Export sales (excluding inter-company sales) from the United States were $ 149,110 in 2021, $ 132,637 in 2020 and $ 147,145 in 2019.

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A description of each restructuring plan and the related costs follows:

During 2020, the Company initiated rationalization plans within Americas Welding and International Welding segments.

During 2020 and 2021, the Company initiated rationalization plans within the Americas Welding and International Welding segments.

The plans include headcount restructuring and the consolidation of manufacturing facilities to better align the cost structure with economic conditions and operating needs.

At December 31, 2020, liabilities of $ 25 and $ 12,560 for Americas Welding and International Welding, respectively, were recognized in Other current liabilities in the Company's

Consolidated Balance Sheet.

At December 31, 2021, liabilities of $ 2,990 for

International Welding were recognized in Other current liabilities in the Company's Consolidated Balance Sheet.

The Company does not anticipate significant additional charges related to the completion of these plans.

During 2019, the Company initiated rationalization plans within International Welding.

The plans primarily include headcount restructuring to better align the cost structures with economic conditions and operating needs.

Liabilities related to these plans were substantially paid at December 31, 2020.

During 2018, the Company initiated rationalization plans within International Welding.

The plans include headcount restructuring and the consolidation of manufacturing operations to better align the cost structures with economic conditions and operating needs.

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Charged to expense

Balance, December 31, 2019

Balance at December 31, 2020

Payments and other adjustments

Charged to expense

Balance, December 31, 2020

Balance at December 31, 2021

NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ("AOCI")

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Unrealized gain

(loss) on derivatives

designated and

qualifying as

Defined benefit

qualifying as cash

Balance at December 31, 2019

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Long-term debt

Senior Unsecured Notes due through 2045, interest at 2.8 % to 4.0 % (net of debt issuance costs of $ 1,178 and $ 1,282 at December 31, 2020 and 2019, respectively), swapped $ 50,000 to variable interest rates of 2.4 % to 2.6 % in 2019

Senior Unsecured Notes due through 2045, interest at 2.8 % to 4.0 % (net of debt issuance costs of $ 1,074 and $ 1,178 at December 31, 2021 and 2020, respectively)

Other borrowings due through 2030, interest up to 2.2 %

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At December 31, 2021 and 2020, the fair value of long-term debt, including the current portion, was approximately $ 776,655 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 $ 717,855 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.

Senior Unsecured Notes

On April 1, 2015 , the Company entered into a Note Purchase Agreement pursuant to which it issued senior unsecured notes (the "2015 Notes") in the aggregate principal amount of $ 350,000 through a private placement.

On October 20, 2016 the Company entered into a Note Purchase Agreement pursuant to which it issued senior unsecured notes (the "2016 Notes") in the aggregate principal amount of $ 350,000 through a private placement.

Interest on the notes are payable semi-annually.

The proceeds were used for general corporate purposes.

The 2015 Notes and 2016 Notes contain certain affirmative and negative covenants.

As of December 31, 2020, the Company was in compliance with all of its debt covenants.

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.

Interest on the Notes is paid semi-annually.

The proceeds of the Notes were used for general corporate purposes.

The Notes contain certain affirmative and negative covenants.

As of December 31, 2021, the Company was in compliance with all of its debt covenants relating to the Notes.

The maturity and interest rates of the 2015 Notes and 2016 Notes are as follows:

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Revolving Credit Agreement

The Company has a line of credit totaling $ 400,000 through the Amended and Restated Credit Agreement (the “Credit Agreement”).

The Credit Agreement has a term of 5 years with a maturity date of June 30, 2022 and may be increased, subject to certain conditions, by an additional amount up to $ 100,000 .

The interest rate on borrowings is based on either the London Inter-Bank Offered Rate ("LIBOR") or the prime rate, plus a spread based on the Company’s leverage ratio, at the Company’s election.

The Credit Agreement contains customary affirmative, negative and financial covenants for credit facilities of this type, including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets, transactions with affiliates, a fixed charges coverage ratio and total leverage ratio.

As of December 31, 2020, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement.

On April 23, 2021, the Company amended and restated the agreement governing its line of credit by entering into the Second Amended and Restated Credit Agreement (“Credit Agreement”).

The Credit Agreement has a line of credit totaling $ 500,000 , has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $ 150,000 .

The interest rate on borrowings is based on LIBOR plus a spread based on the Company’s net leverage ratio.

The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates.

As of December 31, 2021, the Company was in compliance with all of its covenants and had $ 40,000 of outstanding borrowings under the Credit Agreement .

The Company has other lines of credit totaling $ 91,309 .

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The Employee Plan provides for the granting of options, appreciation rights, restricted shares, restricted stock units and performance-based awards up to an additional 5,400,000 of the Company’s common shares.

addition, on April 23, 2015, the shareholders of the Company approved the 2015 Stock Plan for Non-Employee Directors ("2015 Director Plan").

In addition, on April 23, 2015, the shareholders of the Company approved the 2015 Stock Plan for Non-Employee Directors ("2015 Director Plan").

The 2015 Director Plan provides for the granting of options, restricted shares and restricted stock units up to an additional 300,000 of the Company’s common shares.

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The aggregate intrinsic value of options outstanding and exercisable which would have been received by the optionees had all awards been exercised at December 31, 2021 was $ 56,814 and $ 44,009 , respectively.

The total intrinsic value of

awards exercised during 2020, 2019 and 2018 was $ 13,269 , $ 13,964 and $ 4,779 , respectively.

The total intrinsic value of awards exercised during 2021, 2020 and 2019 was $ 20,442 , $ 13,269 and $ 13,964 , respectively.

The total fair value of options that vested during 2021, 2020 and 2019 was $ 2,983 , $ 3,564 and $ 3,012 , respectively.

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The Company has a share repurchase program for up to 55 million 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.

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 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 year ended December 31, 2021, the Company purchased a total of 1.2 million shares at an average cost per share of $ 132.32 .

As of December 31, 2020, there remained 11.5 million shares remained available for repurchase under the stock repurchase program.

As of December 31, 2021, 10.2 million shares remained available for repurchase under the stock repurchase program.

The treasury shares have not been retired.

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Plan participants' contributions

Acquisitions & other adjustments

Benefits paid

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Net amount recognized

(1) Actuarial losses in 2020 were primarily the result of a decrease in the Company’s U.S.

pension plan discount rate from 3.4 % in 2019 to 2.2 % in 2020.

(2) Settlements in 2020 resulting from lump sum pension payments.

(1) Actuarial gains in 2021 were primarily the result of an increase in the Company’s pension plan discount rates.

(2) Settlements in 2021 and 2020 resulting from lump sum pension payments and the purchase of a group annuity contract in October 2021 related to the termination of a pension plan.

The after-tax amounts of unrecognized actuarial net loss, prior service costs and transition assets included in Accumulated other comprehensive loss at December 31, 2021 were $ 13,230 , $( 16 ) and $ 17 , respectively.

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In March 2020, the Company approved an amendment to terminate the Lincoln Electric Company Retirement Annuity Program (“RAP”) 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 will be distributed through a combination of lump sum payments to eligible plan participants and through the purchase of a group annuity contract.

During the year

ended December 31, 2020 the asset allocation for RAP plan assets were adjusted in anticipation of the plan termination.

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

As of December 31, 2020, the Company had unrecognized losses related to the plan of $ 106,377 .

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

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

During 2021, pension obligations were distributed through a combination of lump sum payments to eligible plan participants and through the purchase of a group annuity contract in October 2021.

The lump sum payments and annuity purchase resulted in pre-tax settlement charges of

$ 126,056 in the twelve months ended December 31, 2021.

The remaining surplus assets of $ 68,458 at December 31, 2021 were transferred to a suspense account in January 2022 and will be used to fund employer matching contributions in the Company’s Savings Plan.

The surplus assets are recorded in Other current assets and Other assets in the Company’s Consolidated Balance Sheets.

Amounts Recognized in Consolidated Balance Sheets

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(1) Included in Other assets.

In 2021, U.S.

pension plans include $ 9,776 in Other current assets and $ 58,682 in Other assets.

(2) Included in Other current liabilities.

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Amortization of net loss

Settlement charges (1)

Settlement and curtailment charges (gains) (1)

Defined benefit plans

(1) Pension settlement charges resulting from lump sum pension payments.

(1) Pension settlement charges resulting from lump sum pension payments and the purchase of a group annuity contract in 2021.

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

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The overall investment strategy for the defined benefit pension plans’ assets is to achieve a rate of return over a normal business cycle relative to an acceptable level of risk that is consistent with the long-term objectives of the portfolio.

Excluding the RAP plan assets, the target allocation for plan assets is 10 % to 20 % equity securities and 80 % to 90 % debt securities.

Excluding the RAP plan assets, the target allocation for plan assets is 25 % to 35 % equity securities and 65 % to 75 % debt and other securities.

The following table sets forth, by level within the fair value hierarchy, the pension plans’ assets as of December 31, 2021:

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Fixed income securities (1)

government bonds

Corporate debt and other obligations

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Common trusts and 103-12 investments (3)

Private equity funds (4)

Total investments at fair value

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Unrestricted securities are valued at the closing market price on the reporting date.

Restricted securities may be

valued at a discount from such closing public market price, depending on facts and circumstances.

Restricted securities may be valued at a discount from such closing public market price, depending on facts and circumstances.

Privately held securities are valued at fair value as determined by the fund directors and general partners.

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employees are covered under defined contribution plans.

In October 2016, the Company announced a plan redesign of the Savings Plan that was effective January 1, 2017.

In October 2016, the Company announced a plan redesign of The Lincoln Electric Company Employee Savings Plan (“Savings Plan”) that was effective January 1, 2017.

The Savings Plan provides that eligible employees receive up to 6 % of employees’ annual compensation through Company matching contributions of 100 % of the first 3 % of employee compensation contributed to the plan, and automatic Company contributions equal to 3 % of annual compensation.

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Refer to Note 12 to the consolidated financial statements for details.

(2) Includes a gain on change in control related to the acquisition of Askaynak in the year ended December 31, 2019.

(2) Includes a gain on change in control related to an acquisition in the year ended December 31, 2019.

Refer to Note 4 to the consolidated financial statements for details .

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State and local income taxes, net of federal tax benefit

Net impact of the U.S.

Foreign withholding taxes

Excess tax benefits resulting from exercises of stock-based compensation

Resolution and settlements to uncertain tax positions

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Research and development credit

Pension plan termination adjustment

tax cost (benefit) of foreign source income

Effective tax rate

The 2020 effective tax rate was higher than 2019 primarily due to the impact of lower income tax benefits for the settlement of tax items.

The 2021 effective tax rate was lower than 2020 primarily due to the impact of a plan termination and utilization of certain loss carryforwards previously subject to valuation allowances in the current year offset by the impact of lower income tax benefits for the settlement of tax items recorded in the prior year.

Total income tax payments, net of refunds, were $ 87,288 in 2021, $ 59,360 in 2020 and $ 42,880 in 2019.

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The dollar equivalent gross notional amount of these short-term contracts was $ 72,630 at December 31, 2021 and $ 69,051 at December 31, 2020.

During March and April 2020, in anticipation of future debt issuance associated with the Notes referenced in Note 12, the Company entered into interest rate forward starting swap agreements to hedge the variability of future changes in interest rates.

The forward starting swap agreements were qualified and designated as a cash flow hedge.

The changes in fair value are recorded as part of AOCI, and upon completion of debt issuance and termination of the swaps, are amortized to interest expense over the life of the underlying debt.

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

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 December 31, 2021 and 2020 and have a termination date of August 2025.

The Company has commodity contracts with a notional amount of 975,000 pounds at December 31, 2021 that are qualified and designated as cash flow hedges.

Fair value hedges

Certain interest rate swap agreements are qualified and designated as fair value hedges.

At December 31, 2019, the Company had interest rate swap agreements outstanding that effectively convert notional amounts of $ 50,000 of debt from a fixed interest rate to a variable interest rate based on three-month LIBOR plus a spread of between 0.5 % and 0.6 %.

The variable rates reset every three months, at which time payment or receipt of interest will be settled.

The Company terminated the interest rate swaps in the year ended December 31, 2020, which resulted in a gain of $ 6,629 that is amortized to interest expense over the remaining life of the underlying debt.

At December 31, 2021, the Company had no interest rate swap agreements outstanding.

The Company terminated $ 50,000 of interest rate swaps in the year ended December 31, 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 swaps that are qualified and designated as net investment hedges.

The dollar equivalent gross notional amount of these contracts is $ 50,000 as of December 31, 2020.

The dollar equivalent gross notional amount of these contracts is $ 25,000 as of December 31, 2021 and was $ 50,000 at December 31, 2020.

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 $ 94,479 at December 31, 2021.

Derivatives not designated as hedging instruments

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Foreign exchange contracts

Interest rate swap agreements

Forward starting swap agreements

Cross currency swap agreements

Net investment contracts

Commodity contracts

Not designated as hedging instruments:

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Foreign exchange contracts

Selling, general & administrative expenses

Selling, general

& administrative expenses

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

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Net investment contracts

The Company expects a gain of $ 660 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.

Commodity contracts

The Company expects a loss of $ 284 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.

Year Ended December 31,

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Foreign exchange contracts

Net investment contracts

Commodity contracts

Forward starting swap agreements

Foreign exchange contracts

Cross currency swap agreements

Net investment contracts

Deferred compensation

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Foreign exchange contracts

Interest rate swap agreements

Forward starting swap agreements

Foreign exchange contracts

Cross currency swap agreements

Net investment contracts

Deferred compensation

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NOTE 18 – LEASES

On January 1, 2019, the Company adopted Topic 842 using the modified retrospective transition option.

The adoption of Topic 842 resulted in the recording of right-of-use assets and lease liabilities for the Company’s operating leases.

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

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Total lease liabilities

Topic 842 did not materially impact the Company’s consolidated net earnings, cash flows or debt covenants.

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 $ 21,630 , $ 23,499 and $ 25,389 in the years ended December 31, 2021, 2020 and 2019, respectively.

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Therefore, in many situations a range of possible losses cannot be made.

Reserves are adjusted as facts and circumstances change and related management assessments of the underlying merits and the likelihood of outcomes change.

Reserves are adjusted as facts and circumstances change

and related management assessments of the underlying merits and the likelihood of outcomes change.

Moreover, reserves only cover identified and/or asserted claims.

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURSIDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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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-K

Item 9A. Controls and Procedures