What changed in this filing

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Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 186 added, 86 removed, 430 unchanged (39% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net sales (Note 2)

16 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income including non-controlling interests

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $ 2,051 and $ 2,309 in the three months ended March 31, 2022 and 2021

Defined benefit pension plan activity, net of tax of $ 14 and $ 815 in the three months ended March 31, 2022 and 2021

Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $ 2,794 and $ 4,845 in the three and six months ended June 30, 2022;

$( 1,012 ) and $ 1,297 in the three and six months ended June 30, 2021

Defined benefit pension plan activity, net of tax of $ 382 and $ 459 in the three and six months ended June 30, 2022;

$( 569 ) and $ 246 in the three and six months ended June 30, 2021

Currency translation adjustment

Other comprehensive loss:

Other comprehensive income (loss):

Comprehensive income

5 unchanged sentences

(In thousands)

March 31, 2022

June 30, 2022

December 31, 2021

45 unchanged sentences

( 2,413,171 )

Unrecognized amounts from defined benefit pension plans, net of tax

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

Currency translation adjustment

Cash dividends declared – $ 0.56 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at June 30, 2022

( 2,438,144 )

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share amounts)

Comprehensive

10 unchanged sentences

( 2,176,671 )

Unrecognized amounts from defined benefit pension plans, net of tax

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

Currency translation adjustment

Cash dividends declared – $ 0.51 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at June 30, 2021

( 2,201,397 )

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

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

Rationalization and asset impairment net charges (Note 6)

Rationalization and asset impairment net gains (Note 6)

Depreciation and amortization

21 unchanged sentences

Cash dividends paid to shareholders

Other financing activities

NET CASH USED BY FINANCING ACTIVITIES

14 unchanged sentences

However, in the opinion of management, these unaudited consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

The accompanying Consolidated Balance Sheet at December 31, 2021 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements.

3 unchanged sentences

The Company will continue to monitor the Russia-Ukraine conflict and its potential impacts.

Subsequent Events

Cumulative inflation in Turkey over the preceding three-year period reached 100 % during the first quarter of 2022.

As a result, the Company changed the functional currency of its Turkish subsidiary to the U.S.

dollar as of April 1, 2022.

Management has evaluated and disclosed all material events occurring subsequent to the date of the financial statements up to April 28, 2022, the filing date of this Quarterly Report on Form 10-Q.

Turkey – Highly Inflationary Economy

An economy is considered highly inflationary under GAAP if the cumulative inflation rate for a three-year period meets or exceeds 100 percent.

The Turkish economy exceeded the three-year cumulative inflation rate of 100 percent during the second quarter of 2022.

As a result, the financial statements of the Company’s Turkish operation are reported under highly inflationary accounting rules as of April 1, 2022.

Under highly inflationary accounting, the financial statements of the Company’s Turkish operation have been remeasured into the Company’s reporting currency (U.S.

For the second quarter 2022, the exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than “Accumulated other comprehensive loss” on the balance sheet.

As of June 30, 2022, this impact was not significant to the Company’s results.

Management has evaluated and disclosed all material events occurring subsequent to the date of the financial statements up to July 28, 2022, the filing date of this Quarterly Report on Form 10-Q.

New Accounting Pronouncements:

6 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

5 unchanged sentences

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

At March 31, 2022, the Company recorded $ 70,096 related to advance customer payments and $ 33,284 related to billings in excess of revenue recognized.

At June 30, 2022, the Company recorded $ 62,793 related to advance customer payments and $ 32,728 related to billings in excess of revenue recognized.

These contract liabilities are included in Other current liabilities in the Condensed Consolidated Balance Sheets.

2 unchanged sentences

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

At March 31, 2022 and December 31, 2021, the Company recorded $ 43,941 and $ 25,300 , respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets.

At June 30, 2022 and December 31, 2021, the Company recorded $ 38,651 and $ 25,300 , respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets.

Contract asset amounts are expected to be billed within the next twelve months.

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Denominator (shares in 000's):

4 unchanged sentences

Diluted earnings per share

For the three months ended June 30, 2022 and 2021, common shares subject to equity-based awards of 62,987 and 179,861 , respectively, were excluded from the computation of diluted earnings per share because the

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

For the three months ended March 31, 2022 and 2021, common shares subject to equity-based awards of 69,614 and 89,592 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

effect of their exercise would be anti-dilutive.

For the six months ended June 30, 2022 and 2021, common shares subject to equity-based awards of 108,497 and 134,388 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

2 unchanged sentences

Kestra manufactures and provides specialty welding consumables, wear plates and maintenance and repair services for alloy and wear-resistant products commonly used in mining, steel, agricultural and industrial mill applications.

The acquisition broadens the Company’s specialty alloys portfolio and services.

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

23 unchanged sentences

International

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Inter-segment sales

4 unchanged sentences

Income before income taxes

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Inter-segment sales

4 unchanged sentences

Income before income taxes

(1) In the three months ended March 31, 2022, special items reflect Rationalization charges of $ 1,885 in International Welding and the final settlement related to the termination of a pension plan of $ 3,735 in Americas Welding.

(2) In the three months ended March 31, 2021, special items reflect Rationalization and asset impairment charges of $ 4,163 in International We lding , pension settlement charges of $ 4,440 and $ 446 in Americas Welding and International Welding, respectively, and acquisition transaction costs of $ 1,113 in Corporate/Eliminations related to an acquisition.

Six Months Ended June 30, 2022

Inter-segment sales

Adjusted EBIT

Special items charge (gain) (1)

Interest income

Interest expense

Income before income taxes

Six Months Ended June 30, 2021

Inter-segment sales

Adjusted EBIT

Special items charge (gain) (2)

Interest income

Interest expense

Income before income taxes

(1) In the three and six months ended June 30, 2022, special items reflect Rationalization and asset impairment net gains of $ 998 in Americas Welding and net charges of $ 154 and $ 2,039 , respectively, in International Welding and amortization of step up in value of acquired inventories of $ 1,459 in Americas Welding.

In the six months ended June 30, 2022, the final settlement related to the termination of a pension plan of $ 3,735 in Americas Welding.

(2) In the three and six months ended June 30, 2021, special items reflect Rationalization and asset impairment charges of $ 630 and $ 4,793 , respectively, in International Welding, amortization of step up in value of acquired

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

inventories of $ 1,841 in International Welding and pension settlement charges of $ 1,650 and $ 6,536 in Americas Welding, respectively, and $ 446 in International Welding in the six months ended June 30, 2021.

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

NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS

The Company recorded Rationalization and asset impairment net charges of $ 1,885 and $ 4,163 in the three months ended March 31, 2022 and 2021, respectively.

The Company recorded Rationalization and asset impairment net charges of $ 1,041 and $ 4,793 in the six months ended June 30, 2022 and 2021, respectively.

The charges are primarily related to employee severance, non-cash asset impairments of long-lived assets and gains or losses on the disposal of assets.

1 unchanged sentence

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

At March 31, 2022, liabilities of $ 1,770 for International Welding were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

At June 30, 2022, liabilities of $ 1,871 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.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following table summarizes the activity related to rationalization liabilities for the three months ended March 31, 2022:

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

International

Balance at December 31, 2021

1 unchanged sentence

Charged to expense

Balance at March 31, 2022

Balance at June 30, 2022

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 March 31, 2022

Three Months Ended June 30, 2022

Unrealized gain

3 unchanged sentences

qualifying as cash

Balance at December 31, 2021

Balance at March 31, 2022

Other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current-period other comprehensive income (loss)

Balance at March 31, 2022

Three Months Ended March 31, 2021

Balance at June 30, 2022

Three Months Ended June 30, 2021

Unrealized gain

3 unchanged sentences

qualifying as cash

Balance at December 31, 2020

Balance at March 31, 2021

Other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current-period other comprehensive income (loss)

Balance at March 31, 2021

(1) During the three months ended March 31, 2022, the AOCI reclassification is a component of Net sales of $ 132 (net of tax of $ 48 ) and Cost of goods sold of $ 362 (net of tax of $ 93 );

during the three months ended March 31, 2021, the reclassification is a component of Net sales of $ 102 (net of tax of $ 42 ) and Cost of goods sold of $ 326 (net of tax of $ 133 ).

Balance at June 30, 2021

(1) During the three months ended June 30, 2022, the AOCI reclassification is a component of Net sales of $ 122 (net of tax of $ 59 ) and Cost of goods sold of $( 367 ) (net of tax of $( 86 ) );

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

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 $ 14 and $ 1,456 ) during the three months ended March 31, 2022 and 2021, respectively.

(2) This AOCI component is included in the computation of net periodic pension costs (net of tax of $ 165 and $ 1,445 ) during the three months ended June 30, 2022 and 2021, respectively.

See Note 13 to the consolidated financial statements for additional details.

(3) The Other comprehensive income (loss) before reclassifications excludes $ 134 and $( 159 ) attributable to Non-controlling interests in the three months ended March 31, 2022 and 2021, respectively.

(3) The Other comprehensive income (loss) before reclassifications excludes $( 19 ) and $( 110 ) attributable to Non-controlling interests in the three months ended June 30, 2022 and 2021, respectively.

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

Six Months Ended June 30, 2022

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

qualifying as cash

Balance at December 31, 2021

Other comprehensive income (loss) before reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive income (loss)

Balance at June 30, 2022

Six Months Ended June 30, 2021

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

qualifying as cash

Balance at December 31, 2020

Other comprehensive income (loss) before reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive income (loss)

Balance at June 30, 2021

(1) During the six months ended June 30, 2022, the AOCI reclassification is a component of Net sales of $ 254 (net of tax of $ 107 ) and Cost of goods sold of $( 729 ) (net of tax of $( 179 ) );

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

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 $ 179 and $ 2,901 ) during the six months ended June 30, 2022 and 2021, respectively.

See Note 13 to the consolidated financial statements for additional details.

(3) The Other comprehensive income (loss) before reclassifications excludes $ 115 and $ ( 269 ) attributable to Non-controlling interests in the six months ended June 30, 2022 and 2021, respectively.

NOTE 8 — COMMON STOCK REPURCHASE PROGRAM

1 unchanged sentence

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 March 31, 2022, the Company purchased a total of 0.8 million shares at an average cost per share of $ 129.97 .

As of March 31, 2022, 9.5 million common shares remained available for repurchase under these programs.

During the three months ended June 30, 2022, the Company purchased a total of 0.2 million shares at an average cost per share of $ 131.68 .

During the six months ended June 30, 2022, the Company purchased a total of 1.0 million shares at an average cost per share of $ 130.31 .

As of June 30, 2022, 9.3 million common shares remained available for repurchase under these programs.

The repurchased common shares remain in treasury and have not been retired.

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:

March 31, 2022

June 30, 2022

December 31, 2021

2 unchanged sentences

Finished goods

At March 31, 2022 and December 31, 2021, approximately 36 % of total inventories were valued using the last-in, first-out ("LIFO") method.

The excess of current cost over LIFO cost was $ 121,064 and $ 114,176 at March 31, 2022 and December 31, 2021, respectively.

At June 30, 2022 and December 31, 2021, approximately 37 % and 36 %, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method.

The excess of current cost over LIFO cost was $ 131,488 and $ 114,176 at June 30, 2022 and December 31, 2021, respectively.

NOTE 10 — LEASES

2 unchanged sentences

Balance Sheet Classification

March 31, 2022

June 30, 2022

December 31, 2021

5 unchanged sentences

Total lease liabilities

Total lease expense, which is included in Cost of goods sold and Selling, general and administrative expenses in the Company’s Consolidated Statements of Income, was $ 5,198 and $ 5,051 in the three months ended March 31, 2022 and 2021, respectively.

Cash paid for amounts included in the measurement of lease liabilities at March 31, 2022 and 2021, respectively, were $ 3,187 and $ 3,389 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 during the three months ended March 31, 2022 and 2021 were $ 2,737 and $ 0 , respectively.

Total lease expense, which is included in Cost of goods sold and Selling, general & administrative expenses in the Company’s Consolidated Statements of Income, was $ 5,862 and $ 11,061 in the three and six months ended June 30, 2022 and $ 5,608 and $ 10,660 in the three and six months ended June 30, 2021, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three and six months ended June 30, 2022, respectively, were $ 2,984 and $ 6,171 and are included in Net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows.

Cash paid for amounts included in the measurement of lease liabilities for the three and six months ended June 30, 2021, respectively, were $ 3,263 and $ 6,652 and are included in Net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows.

Right-of-use assets obtained in exchange for operating lease liabilities were $ 742 and $ 3,479 during the three and six months ended June 30, 2022 and $ 9,694 for the three and six months ended June 30, 2021, respectively.

LINCOLN ELECTRIC HOLDINGS, INC.

2 unchanged sentences

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

March 31, 2022

June 30, 2022

Total lease payments

1 unchanged sentence

Operating lease liabilities

As of March 31, 2022, the weighted average remaining lease term is 8.3 years and the weighted average discount rate used to determine the operating lease liability is 3.03 %.

As of June 30, 2022, the weighted average remaining lease term is 8.2 years and the weighted average discount rate used to determine the operating lease liability is 3.02 %.

NOTE 11 — PRODUCT WARRANTY COSTS

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

Three Months Ended March 31,

Six Months Ended June 30,

Balance at beginning of year

1 unchanged sentence

Foreign currency translation and other adjustments

Balance at end of year

Balance at end of period

NOTE 12 — DEBT

4 unchanged sentences

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

As of March 31, 2022, the Company was in compliance with all of its covenants and had $ 110,000 of outstanding borrowings under the Credit Agreement.

As of June 30, 2022, the Company was in compliance with all of its covenants and had $ 85,000 of outstanding borrowings under the Credit Agreement.

The Company has other lines of credit totaling $ 103,956 .

As of March 31, 2022, the Company was in compliance with all of its covenants and had $ 40,022 outstanding at March 31, 2022.

As of June 30, 2022, the Company was in compliance with all of its covenants and had $ 29,421 outstanding at June 30, 2022.

Senior Unsecured Notes

9 unchanged sentences

The Notes contain certain affirmative and negative covenants.

As of March 31, 2022, the Company was in compliance with all of its debt covenants relating to the Notes.

As of June 30, 2022, the Company was in compliance with all of its debt covenants relating to the Notes.

Shelf Agreements

2 unchanged sentences

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

As of March 31, 2022, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

As of June 30, 2022, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

Fair Value of Debt

At March 31, 2022 and December 31, 2021, the fair value of long-term debt, including the current portion, was approximately $ 693,298 and $ 776,655 , respectively, which was determined using available market information and methodologies requiring judgment.

At June 30, 2022 and December 31, 2021, the fair value of long-term debt, including the current portion, was approximately $ 639,863 and $ 776,655 , respectively, which was determined using available market information and methodologies requiring judgment.

The carrying value of this debt at such dates was $ 723,945 and $ 717,855 , respectively.

2 unchanged sentences

The components of total pension cost were as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

pension plans

Interest cost

7 unchanged sentences

Total pension cost

(1) Gains in the three months ended March 31, 2022 related to the final settlement associated with the termination of a pension plan.

Charges primarily resulting from lump sum pension payments in the three months ended March 31, 2021.

(1) Gains in the six months ended June 30, 2022 related to the final settlement associated with the termination of a pension plan.

Charges primarily resulting from lump sum pension payments in the three and six months ended June 30, 2021.

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

4 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Equity earnings in affiliates

4 unchanged sentences

NOTE 15 — INCOME TAXES

The Company recognized $ 33,611 of tax expense on pretax income of $ 159,642 , resulting in an effective income tax rate of 21.1 % for the three months ended March 31, 2022.

The effective income tax rate was 23.7 % for the three months ended March 31, 2021.

The effective tax rate was lower for the three months ended March 31, 2022, as compared with the same period in 2021, primarily due to favorable discrete tax adjustments in 2022 and geographic mix of earnings.

As of March 31, 2022, the Company had $ 19,590 of unrecognized tax benefits.

The Company recognized $ 65,729 of tax expense on pretax income of $ 319,582 , resulting in an effective income tax rate of 20.6 % for the six months ended June 30, 2022.

The effective income tax rate was 20.7 % for the six months ended June 30, 2021.

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

As of June 30, 2022, the Company had $ 19,890 of unrecognized tax benefits.

If recognized, approximately $ 16,649 would be reflected as a component of income tax expense.

8 unchanged sentences

Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits.

It is reasonably possible there could be a reduction of $ 3,873 in previously unrecognized tax benefits by the end of the first quarter 2023.

It is reasonably possible there could be a reduction of $ 3,649 in previously unrecognized tax benefits by the end of the second quarter 2023.

NOTE 16 — DERIVATIVES

1 unchanged sentence

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 three months ended March 31, 2022 and 2021.

Hedge ineffectiveness was immaterial in the six months ended June 30, 2022 and 2021.

The Company is subject to the credit risk of the counterparties to derivative instruments.

Counterparties include a number of major banks and financial institutions.

None of the concentrations of risk with any individual counterparty was considered significant at March 31, 2022.

None of the concentrations of risk with any individual counterparty was considered significant at June 30, 2022.

The Company does not expect any counterparties to fail to meet their obligations.

4 unchanged sentences

The Company has certain foreign currency forward contracts that are qualified and designated as cash flow hedges.

The dollar equivalent gross notional amount of these short-term contracts was $ 58,707 at March 31, 2022 and $ 72,630 at December 31, 2021.

The dollar equivalent gross notional amount of these short-term contracts was $ 58,312 at June 30, 2022 and $ 72,630 at December 31, 2021.

The Company has interest rate forward starting swap agreements that are qualified and designated as cash flow hedges.

The dollar equivalent gross notional amount of the long-term contracts was $ 100,000 at March 31, 2022 and December 31, 2021 and have a termination date of August 2025.

The Company has commodity contracts with a notional amount of 900,000 pounds and 975,000 pounds at March 31, 2022 and December 31, 2021, respectively, that are qualified and designated as cash flow hedges.

The dollar equivalent gross notional amount of the long-term contracts was $ 100,000 at June 30, 2022 and December 31, 2021 and have a termination date of August 2025.

The Company has commodity contracts with a notional amount of 800,000 pounds and 975,000 pounds at June 30, 2022 and December 31, 2021, respectively, that are qualified and designated as cash flow hedges.

Net Investment Hedges

The Company has cross currency swap agreements that are qualified and designated as net investment hedges.

The dollar equivalent gross notional amount of these contracts is $ 25,000 as of March 31, 2022 and December 31, 2021, respectively.

The dollar equivalent gross notional amount of these contracts is $ 25,000 as of June 30, 2022 and December 31, 2021, respectively.

The Company has foreign currency forward contracts that qualify and are designated as net investment hedges.

The dollar equivalent gross notional amount of these short-term contracts was $ 91,881 at March 31, 2022 and $ 94,479 at December 31, 2021.

The dollar equivalent gross notional amount of these short-term contracts was $ 86,992 at June 30, 2022 and $ 94,479 at December 31, 2021.

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

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

The dollar equivalent gross notional amount of these contracts was $ 257,585 and $ 301,685 at March 31, 2022 and December 31, 2021, respectively.

The dollar equivalent gross notional amount of these contracts was $ 223,992 and $ 301,685 at June 30, 2022 and December 31, 2021, respectively.

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

March 31, 2022

June 30, 2022

December 31, 2021

12 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Derivatives by hedge designation

6 unchanged sentences

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

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

The Company expects a loss of $ 732 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Gain (loss) recognized in the

3 unchanged sentences

Cost of goods sold

Commodity contracts

Cost of goods sold

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 17 - FAIR VALUE

The following table provides a summary of assets and liabilities as of March 31, 2022, measured at fair value on a recurring basis:

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

Quoted Prices in

4 unchanged sentences

Observable Inputs

March 31, 2022

June 30, 2022

Inputs (Level 3)

3 unchanged sentences

Forward starting swap agreements

Pension surplus

Foreign exchange contracts

Net investment contracts

Commodity contracts

Deferred compensation

Total liabilities

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

19 unchanged sentences

The Company measures the fair value of the liability using the market values of the participants’ underlying investment fund elections.

The fair value of Cash and cash equivalents, Accounts receivable, pension surplus assets, 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 March 31, 2022 and December 31, 2021.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

The fair value of the Company’s pension surplus assets are based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy.

The pension surplus assets are invested in money market and short-term duration bond funds at June 30, 2022.

The Company has various financial instruments, including cash and cash equivalents, short and long-term debt and forward contracts.

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements