LINCOLN ELECTRIC HOLDINGS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 2022 2021 Net sales (Note 2) $ 935,240 $ 806,454 $ 2,830,277 $ 2,389,929 Cost of goods sold ​ 625,722 ​ 538,282 ​ 1,857,501 ​ 1,593,981 Gross profit ​ 309,518 ​ 268,172 ​ 972,776 ​ 795,948 Selling, general & administrative expenses ​ 159,045 ​ 149,118 ​ 492,523 ​ 446,351 Rationalization and asset impairment charges (Note 6) ​ 8,364 ​ 3,484 ​ 9,405 ​ 8,277 Operating income ​ 142,109 ​ 115,570 ​ 470,848 ​ 341,320 Interest expense, net ​ 8,210 ​ 5,714 ​ 20,867 ​ 16,736 Other income (expense) (Note 14) ​ 3,588 ​ ( 71,441 ) ​ 7,088 ​ ( 71,155 ) Income before income taxes ​ 137,487 ​ 38,415 ​ 457,069 ​ 253,429 Income taxes (Note 15) ​ 28,262 ​ 6,658 ​ 93,991 ​ 51,259 Net income including non-controlling interests ​ 109,225 ​ 31,757 ​ 363,078 ​ 202,170 Non-controlling interests in subsidiaries’ income (loss) ​ — ​ — ​ — ​ 131 Net income ​ $ 109,225 ​ $ 31,757 ​ $ 363,078 ​ $ 202,039 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share (Note 3) ​ $ 1.89 ​ $ 0.54 ​ $ 6.24 ​ $ 3.40 Diluted earnings per share (Note 3) ​ $ 1.87 ​ $ 0.53 ​ $ 6.17 ​ $ 3.36 Cash dividends declared per share ​ $ 0.56 ​ $ 0.51 ​ $ 1.68 ​ $ 1.53 ​ See notes to these consolidated financial statements. ​ 3 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 2022 2021 Net income including non-controlling interests $ 109,225 $ 31,757 $ 363,078 $ 202,170 Other comprehensive income (loss), net of tax: ​ ​ ​ ​ Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $ 3,234 and $ 8,079 in the three and nine months ended September 30, 2022; $ 707 and $ 1,493 in the three and nine months ended September 30, 2021 ​ 7,777 ​ 2,876 ​ ​ 22,082 ​ ​ 5,412 Defined benefit pension plan activity, net of tax of $ 47 and $ 506 in the three and nine months ended September 30, 2022; $ 18,759 and $ 19,005 in the three and nine months ended September 30, 2021 ​ 85 ​ 55,558 ​ ​ 148 ​ ​ 58,916 Currency translation adjustment ​ ( 52,129 ) ​ ( 19,120 ) ​ ( 94,193 ) ​ ( 28,284 ) Other comprehensive income (loss): ​ ( 44,267 ) ​ 39,314 ​ ( 71,963 ) ​ 36,044 Comprehensive income ​ 64,958 ​ 71,071 ​ 291,115 ​ 238,214 Comprehensive income (loss) attributable to non-controlling interests ​ ( 13 ) ​ ( 58 ) ​ 102 ​ ( 196 ) Comprehensive income attributable to shareholders ​ $ 64,971 ​ $ 71,129 ​ $ 291,013 ​ $ 238,410 ​ See notes to these consolidated financial statements. ​ ​ 4 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ December 31, 2021 ​ ​ (UNAUDITED) ​ (NOTE 1) ASSETS ​ ​ Current Assets ​ ​ Cash and cash equivalents ​ $ 141,307 ​ $ 192,958 Accounts receivable (less allowance for doubtful accounts of $ 10,009 in 2022; $ 11,105 in 2021) ​ 463,106 ​ 429,074 Inventories (Note 9) ​ 632,376 ​ 539,919 Other current assets ​ 158,609 ​ 127,642 Total Current Assets ​ 1,395,398 ​ 1,289,593 Property, plant and equipment (less accumulated depreciation of $ 863,983 in 2022; $ 868,036 in 2021) ​ ​ 489,961 ​ ​ 511,744 Goodwill ​ 424,505 ​ 430,162 Other assets ​ 342,101 ​ 360,808 TOTAL ASSETS ​ $ 2,651,965 ​ $ 2,592,307 LIABILITIES AND EQUITY ​ ​ ​ Current Liabilities ​ ​ ​ Short-term debt (Note 12) ​ $ 68,375 ​ $ 52,730 Trade accounts payable ​ 329,890 ​ 330,230 Accrued employee compensation and benefits ​ 183,638 ​ 108,562 Other current liabilities ​ 238,425 ​ 264,383 Total Current Liabilities ​ 820,328 ​ 755,905 Long-term debt, less current portion (Note 12) ​ 711,250 ​ 717,089 Other liabilities ​ 196,159 ​ 255,404 Total Liabilities ​ 1,727,737 ​ 1,728,398 Shareholders' Equity ​ ​ ​ Common Shares ​ 9,858 ​ 9,858 Additional paid-in capital ​ 471,172 ​ 451,268 Retained earnings ​ 3,237,200 ​ 2,970,303 Accumulated other comprehensive loss ​ ( 329,451 ) ​ ( 257,386 ) Treasury Shares ​ ( 2,464,460 ) ​ ( 2,309,941 ) Total Shareholders' Equity ​ 924,319 ​ 864,102 Non-controlling interests ​ ( 91 ) ​ ( 193 ) Total Equity ​ 924,228 ​ 863,909 TOTAL LIABILITIES AND TOTAL EQUITY ​ $ 2,651,965 ​ $ 2,592,307 ​ See notes to these consolidated financial statements. ​ ​ ​ 5 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Common ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ Non- ​ ​ ​ ​ ​ Shares ​ Common ​ Paid-In ​ Retained ​ Comprehensive ​ Treasury ​ Controlling ​ ​ ​ ​ Outstanding Shares Capital Earnings Income (Loss) Shares Interests Total Balance at December 31, 2021 58,787 ​ $ 9,858 ​ $ 451,268 ​ $ 2,970,303 ​ $ ( 257,386 ) ​ $ ( 2,309,941 ) ​ $ ( 193 ) ​ $ 863,909 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ 126,030 ​ ​ ​ ​ ​ ​ ​ ​ 1 ​ 126,031 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 107 ​ ​ ​ ​ ​ ​ ​ 107 Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5,355 ​ ​ ​ ​ ​ ​ ​ 5,355 Currency translation adjustment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 7,583 ) ​ ​ ​ ​ ​ 134 ​ ( 7,449 ) Cash dividends declared - $ 0.56 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 32,505 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 32,505 ) Stock-based compensation activity 116 ​ ​ ​ ​ ​ 10,834 ​ ​ ​ ​ ​ ​ ​ ​ 1,349 ​ ​ ​ ​ 12,183 Purchase of shares for treasury ( 805 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 104,579 ) ​ ​ ​ ​ ( 104,579 ) Other ​ ​ ​ ​ ​ ​ 115 ​ ​ ( 107 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8 Balance at March 31, 2022 58,098 ​ $ 9,858 ​ $ 462,217 ​ $ 3,063,721 ​ $ ( 259,507 ) ​ $ ( 2,413,171 ) ​ $ ( 58 ) ​ $ 863,060 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ 127,823 ​ ​ ​ ​ ​ ​ ​ ​ ( 1 ) ​ 127,822 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 44 ) ​ ​ ​ ​ ​ ​ ​ ( 44 ) Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8,950 ​ ​ ​ ​ ​ ​ ​ 8,950 Currency translation adjustment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 34,596 ) ​ ​ ​ ​ ​ ( 19 ) ​ ( 34,615 ) Cash dividends declared – $ 0.56 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 32,698 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 32,698 ) Stock-based compensation activity 15 ​ ​ ​ ​ ​ 5,428 ​ ​ ​ ​ ​ ​ ​ ​ 146 ​ ​ ​ ​ 5,574 Purchase of shares for treasury ( 191 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 25,119 ) ​ ​ ​ ​ ( 25,119 ) Other ​ ​ ​ ​ ​ ​ ( 2,021 ) ​ ​ 2,074 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 53 Balance at June 30, 2022 57,922 ​ $ 9,858 ​ $ 465,624 ​ $ 3,160,920 ​ $ ( 285,197 ) ​ $ ( 2,438,144 ) ​ $ ( 78 ) ​ $ 912,983 Net income ​ ​ ​ ​ ​ 109,225 ​ ​ ​ ​ ​ — ​ 109,225 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 85 ​ ​ ​ ​ ​ ​ ​ 85 Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,777 ​ ​ ​ ​ ​ ​ ​ 7,777 Currency translation adjustment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 52,116 ) ​ ​ ​ ​ ​ ( 13 ) ​ ( 52,129 ) Cash dividends declared – $ 0.56 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 32,580 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 32,580 ) Stock-based compensation activity 14 ​ ​ ​ ​ ​ 5,158 ​ ​ ​ ​ ​ ​ ​ ​ 202 ​ ​ ​ ​ 5,360 Purchase of shares for treasury ( 198 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 26,518 ) ​ ​ ​ ​ ( 26,518 ) Other ​ ​ ​ ​ ​ ​ 390 ​ ​ ( 365 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25 Balance at September 30, 2022 ​ 57,738 ​ $ 9,858 ​ $ 471,172 ​ $ 3,237,200 ​ $ ( 329,451 ) ​ $ ( 2,464,460 ) ​ $ ( 91 ) ​ $ 924,228 ​ ​ ​ ​ ​ ​ ​ ​ ​ 6 Table of Contents ​ ​ ​ ​ ​ ​ ​ LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Common ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ Non- ​ ​ ​ ​ ​ Shares ​ Common ​ Paid-In ​ Retained ​ Comprehensive ​ Treasury ​ Controlling ​ ​ ​ ​ Outstanding Shares Capital Earnings Income (Loss) Shares Interests Total Balance at December 31, 2020 59,641 ​ $ 9,858 ​ $ 409,958 ​ $ 2,821,359 ​ $ ( 302,190 ) ​ $ ( 2,149,714 ) ​ $ 979 ​ $ 790,250 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ 74,177 ​ ​ ​ ​ ​ ​ ​ ​ ( 44 ) ​ 74,133 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5,060 ​ ​ ​ ​ ​ ​ ​ 5,060 Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,290 ​ ​ ​ ​ ​ ​ ​ 7,290 Currency translation adjustment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 22,584 ) ​ ​ ​ ​ ​ ( 159 ) ​ ( 22,743 ) Cash dividends declared – $ 0.51 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 30,572 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 30,572 ) Stock-based compensation activity 134 ​ ​ ​ ​ ​ 7,680 ​ ​ ​ ​ ​ ​ ​ ​ 1,502 ​ ​ ​ ​ 9,182 Purchase of shares for treasury ( 237 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 28,459 ) ​ ​ ​ ​ ( 28,459 ) Other ​ ​ ​ ​ ​ ​ 891 ​ ​ ( 741 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 883 ) ​ ( 733 ) Balance at March 31, 2021 59,538 ​ $ 9,858 ​ $ 418,529 ​ $ 2,864,223 ​ $ ( 312,424 ) ​ $ ( 2,176,671 ) ​ $ ( 107 ) ​ $ 803,408 Net income ​ ​ ​ ​ ​ 96,105 ​ ​ ​ ​ ​ 175 ​ 96,280 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ ​ ​ ​ ( 1,702 ) ​ ​ ​ ​ ​ ( 1,702 ) Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ​ ​ ​ ( 4,754 ) ​ ​ ​ ​ ​ ( 4,754 ) Currency translation adjustment ​ ​ ​ ​ ​ ​ ​ 13,689 ​ ​ ​ ( 110 ) ​ 13,579 Cash dividends declared – $ 0.51 per share ​ ​ ​ ​ ​ ( 30,552 ) ​ ​ ​ ​ ​ ​ ​ ( 30,552 ) Stock-based compensation activity 46 ​ ​ 8,638 ​ ​ ​ ​ ​ 503 ​ ​ ​ 9,141 Purchase of shares for treasury ( 197 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 25,229 ) ​ ​ ​ ( 25,229 ) Other ​ ​ ​ 409 ​ ( 957 ) ​ ​ ​ ​ ​ ​ ​ ( 548 ) Balance at June 30, 2021 59,387 ​ $ 9,858 ​ $ 427,576 ​ $ 2,928,819 ​ $ ( 305,191 ) ​ $ ( 2,201,397 ) ​ $ ( 42 ) ​ $ 859,623 Net income ​ ​ ​ ​ ​ 31,757 ​ ​ ​ ​ ​ — ​ 31,757 Unrecognized amounts from defined benefit pension plans, net of tax ​ ​ ​ ​ ​ ​ ​ 55,558 ​ ​ ​ ​ ​ 55,558 Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax ​ ​ ​ ​ ​ ​ ​ 2,876 ​ ​ ​ ​ ​ 2,876 Currency translation adjustment ​ ​ ​ ​ ​ ​ ​ ( 19,062 ) ​ ​ ​ ( 58 ) ​ ( 19,120 ) Cash dividends declared – $ 0.51 per share ​ ​ ​ ​ ​ ( 30,379 ) ​ ​ ​ ​ ​ ​ ​ ( 30,379 ) Stock-based compensation activity 34 ​ ​ 7,449 ​ ​ ​ ​ ​ 364 ​ ​ ​ 7,813 Purchase of shares for treasury ( 373 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 50,160 ) ​ ​ ​ ​ ​ ( 50,160 ) Other ​ ​ ​ ( 239 ) ​ 164 ​ ​ ​ ​ ​ ​ ​ ( 75 ) Balance at September 30, 2021 ​ 59,048 ​ $ 9,858 ​ $ 434,786 ​ $ 2,930,361 ​ $ ( 265,819 ) ​ $ ( 2,251,193 ) ​ $ ( 100 ) ​ $ 857,893 ​ ​ 7 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ Net income ​ $ 363,078 ​ $ 202,039 Non-controlling interests in subsidiaries' income (loss) ​ — ​ 131 Net income including non-controlling interests ​ 363,078 ​ 202,170 Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: ​ ​ ​ Rationalization and asset impairment net charges (gains) (Note 6) ​ 7,776 ​ ( 1,162 ) Depreciation and amortization ​ 59,009 ​ 60,558 Equity earnings (loss) in affiliates, net ​ 254 ​ ( 399 ) Deferred income taxes ​ ( 34,403 ) ​ ( 28,428 ) Stock-based compensation ​ 20,949 ​ 18,215 Pension settlement charges ​ ​ — ​ ​ 80,098 Other, net ​ 15,867 ​ ( 754 ) Changes in operating assets and liabilities, net of effects from acquisitions: ​ ​ ​ Increase in accounts receivable ​ ( 64,569 ) ​ ( 71,212 ) Increase in inventories ​ ( 135,578 ) ​ ( 128,856 ) Increase in other current assets ​ ( 34,368 ) ​ ( 10,610 ) Increase in trade accounts payable ​ 19,572 ​ 54,981 Increase in other current liabilities ​ 66,838 ​ 89,569 Net change in other assets and liabilities ​ ( 12,841 ) ​ ( 9,045 ) NET CASH PROVIDED BY OPERATING ACTIVITIES ​ 271,584 ​ 255,125 CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ Capital expenditures ​ ( 52,301 ) ​ ( 46,440 ) Acquisition of businesses, net of cash acquired ​ ( 22,294 ) ​ ( 158,605 ) Proceeds from sale of property, plant and equipment ​ 2,338 ​ 3,847 Other investing activities ​ — ​ 6,500 NET CASH USED BY INVESTING ACTIVITIES ​ ( 72,257 ) ​ ( 194,698 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ Net change in borrowings ​ 14,999 ​ 32,295 Proceeds from exercise of stock options ​ 2,168 ​ 7,921 Purchase of shares for treasury (Note 8) ​ ( 156,216 ) ​ ( 103,848 ) Cash dividends paid to shareholders ​ ( 98,377 ) ​ ( 91,717 ) Other financing activities ​ — ​ ( 763 ) NET CASH USED BY FINANCING ACTIVITIES ​ ( 237,426 ) ​ ( 156,112 ) Effect of exchange rate changes on Cash and cash equivalents ​ ( 13,552 ) ​ ( 1,035 ) DECREASE IN CASH AND CASH EQUIVALENTS ​ ( 51,651 ) ​ ( 96,720 ) ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents at beginning of period ​ 192,958 ​ 257,279 CASH AND CASH EQUIVALENTS AT END OF PERIOD ​ $ 141,307 ​ $ 160,559 ​ See notes to these consolidated financial statements. ​ ​ 8 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Dollars in thousands, except per share amounts NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest (the “Company”) after elimination of all inter-company accounts, transactions and profits. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. However, in the opinion of management, these unaudited consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the nine months ended September 30, 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. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In March 2022, i n response to Russia’s invasion of Ukraine, the Company announced it was ceasing operations in Russia and implementing plans to support its Russian employees. Although the Company’s Net sales and Total assets in Russia are less than 1 % of consolidated Net sales for the year ended December 31, 2021 and less than 1 % of consolidated Total assets as of December 31, 2021, the Russia-Ukraine conflict and sanctions imposed globally may result in economic and supply chain disruptions, the ultimate financial impact of which cannot be reasonably estimated at this time. The Company continues to monitor the Russia-Ukraine conflict and its potential impacts. ​ 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. dollar). Beginning April 1, 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 September 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 October 27, 2022, the filing date of this Quarterly Report on Form 10-Q. ​ ​ New Accounting Pronouncements: This section provides a description of new accounting pronouncements (“Accounting Standard Update” or “ASU”) issued by the Financial Accounting Standards Board (“FASB”) that are applicable to the Company. ​ 9 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts The Company is currently evaluating the impact on its financial statements of the following ASU: Standard Description ASU No. 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50) , issued September 2022. Requires disclosure about a company’s supplier finance program, including key terms, amount outstanding, assets pledged as applicable, presentation on the balance sheet and a period-over-period balance roll forward. Except for the roll forward requirement, the ASU is effective for interim and annual periods beginning January 1, 2023 and should be applied retrospectively. The roll forward requirement is effective January 1, 2024 and should be applied prospectively. Early adoption of the roll forward requirement is permitted. ​ ​ NOTE 2 — REVENUE RECOGNITION The following table presents the Company’s Net sales disaggregated by product line: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 2022 2021 Consumables ​ $ 547,596 ​ $ 465,829 ​ $ 1,655,613 ​ $ 1,375,567 Equipment ​ 387,644 ​ 340,625 ​ 1,174,664 ​ 1,014,362 Net sales ​ $ 935,240 ​ $ 806,454 ​ $ 2,830,277 ​ $ 2,389,929 ​ Consumable sales consist of electrodes, fluxes, specialty welding consumables and brazing and soldering alloys. Equipment sales consist of arc welding power sources, welding accessories, fabrication, plasma cutters, wire feeding systems, automated joining, assembly and cutting systems, fume extraction equipment, CNC plasma and oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. Consumable and Equipment products are sold within each of the Company’s operating segments. Within the Equipment product line, there are certain customer contracts related to automation products that may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines the standalone selling price based on the prices charged to customers or using expected cost plus margin. Less than 10 % of the Company’s Net sales are recognized over time. At September 30, 2022, the Company recorded $ 42,552 related to advance customer payments and $ 31,772 related to billings in excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Condensed Consolidated Balance Sheets. At December 31, 2021, the balances related to advance customer payments and billings in excess of revenue recognized were $ 72,047 and $ 40,450 , respectively. Substantially all of the Company’s contract liabilities are recognized within twelve months based on contract duration. The Company records an asset for contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services. At September 30, 2022 and December 31, 2021, the Company recorded $ 37,488 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. ​ 10 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts NOTE 3 — EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 2022 2021 Numerator: ​ ​ ​ ​ ​ Net income ​ $ 109,225 ​ $ 31,757 ​ $ 363,078 ​ $ 202,039 Denominator (shares in 000's): ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average shares outstanding ​ 57,823 ​ 59,289 ​ 58,148 ​ 59,465 Effect of dilutive securities - Stock options and awards ​ 703 ​ 766 ​ 667 ​ 703 Diluted weighted average shares outstanding ​ 58,526 ​ 60,055 ​ 58,815 ​ 60,168 Basic earnings per share ​ $ 1.89 ​ $ 0.54 ​ $ 6.24 ​ $ 3.40 Diluted earnings per share ​ $ 1.87 ​ $ 0.53 ​ $ 6.17 ​ $ 3.36 ​ For the three months ended September 30, 2022 and 2021, common shares subject to equity-based awards of 52,495 and 2,126 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. For the nine months ended September 30, 2022 and 2021, common shares subject to equity-based awards of 120,106 and 150,254 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. NOTE 4 — ACQUISITIONS On March 1, 2022, the Company acquired 100 % ownership of Kestra Universal Soldas, Industria e Comercio, Imporacao e Exportacao Ltda. (“Kestra”), a privately held manufacturer headquartered in Atibaia, Sao Paulo State, Brazil. The net purchase price was $ 22,294 , net of cash acquired and accounted for as a business combination. In 2021, Kestra generated sales of approximately $ 15,000 . Beginning March 1, 2022, the Company’s Consolidated Statements of Income include the results of Kestra, including Net sales of $ 11,906 through September 30, 2022 and the impact on net income for the three and nine months ended September 30, 2022 was not material. 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. ​ On July 28, 2021, the Company acquired 100 % ownership of Overstreet-Hughes Company, Inc. and Shoals Tubular, Inc. (“FTP”). The net purchase price was $ 71,716 , net of cash acquired and accounted for as a business combination. The Company recognized $ 346 in acquisition transaction costs in 2021 which were expensed as incurred and are included in “Selling, general, and administrative expenses” in the Consolidated Statements of Income. In 2020, FTP generated sales of approximately $ 50,000 . Beginning July 28, 2021, the Company’s Consolidated Statements of Income include the results of FTP, including Net sales of $ 24,953 through December 31, 2021 and the impact on net income for the year ended December 31, 2021 was not material. 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 differentiated 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. ​ On April 1, 2021, the Company acquired 100 % ownership of Zeman Bauelemente Produktionsgesellschaft m.b.H. (“Zeman"), a division of the Zeman Group. The net purchase price was $ 84,390 , net of cash acquired and accounted for as a business combination. The Company recognized $ 1,577 in acquisition transaction costs in 2021 which were expensed as incurred and are included in “Selling, general, and administrative expenses” in the Consolidated Statements of Income. In 2020, Zeman generated sales of approximately $ 40,000 . Beginning April 1, 2021, the Company’s 11 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts Consolidated Statements of Income include the results of Zeman, including Net sales of $ 24,473 through December 31, 2021 and the impact on net income for the year ended December 31, 2021 was not material. 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 expanded the Company’s international automation capabilities to serve customers in the structural steel and infrastructure sectors. ​ The acquired companies discussed above are not material individually, or in the aggregate, to the actual or pro forma Consolidated Statements of Income or Consolidated Statements of Cash Flows; as such, pro forma information related to these acquisitions have not been presented. The preliminary purchase price allocations are expected to be finalized within the allowable measurement period. ​ NOTE 5 — SEGMENT INFORMATION The Company’s business units are aligned into three operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global oxy-fuel cutting, soldering and brazing businesses as well as its retail business in the United States. Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the adjusted earnings before interest and income taxes (“Adjusted EBIT”) profit measure. EBIT is defined as Operating income plus Other income (expense). EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets. 12 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts The following table presents Adjusted EBIT by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Harris ​ ​ ​ ​ ​ ​ ​ ​ Americas ​ International ​ Products ​ Corporate / ​ ​ ​ ​ Welding Welding Group Eliminations Consolidated Three Months Ended September 30, 2022 ​ ​ ​ ​ ​ Net sales ​ $ 585,628 ​ $ 216,497 ​ $ 133,115 ​ $ — ​ $ 935,240 Inter-segment sales ​ 35,353 ​ ​ 9,994 ​ ​ 2,642 ​ ​ ( 47,989 ) ​ ​ — Total ​ $ 620,981 ​ $ 226,491 ​ $ 135,757 ​ $ ( 47,989 ) ​ $ 935,240 Adjusted EBIT ​ $ 118,804 ​ $ 25,225 ​ $ 14,432 ​ $ ( 1,685 ) ​ $ 156,776 Special items charge (gain) (1) ​ ( 353 ) ​ ​ 8,364 ​ ​ — ​ ​ 3,068 ​ ​ 11,079 EBIT ​ $ 119,157 ​ $ 16,861 ​ $ 14,432 ​ $ ( 4,753 ) ​ $ 145,697 Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 376 Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 8,586 ) Income before income taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 137,487 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2021 ​ ​ ​ ​ ​ Net sales ​ $ 461,508 ​ $ 227,165 ​ $ 117,781 ​ $ — ​ $ 806,454 Inter-segment sales ​ 37,480 ​ 7,078 ​ 1,945 ​ ( 46,503 ) ​ ​ — Total ​ $ 498,988 ​ $ 234,243 ​ $ 119,726 ​ $ ( 46,503 ) ​ $ 806,454 Adjusted EBIT ​ $ 84,557 ​ $ 29,032 ​ $ 15,980 ​ $ ( 4,704 ) ​ $ 124,865 Special items charge (gain) (3) ​ 73,574 ​ 6,615 ​ 547 ​ — ​ ​ 80,736 EBIT ​ $ 10,983 ​ $ 22,417 ​ $ 15,433 ​ $ ( 4,704 ) ​ $ 44,129 Interest income ​ ​ ​ ​ ​ ​ ​ 333 Interest expense ​ ​ ​ ​ ​ ​ ​ ( 6,047 ) Income before income taxes ​ ​ ​ ​ ​ ​ ​ $ 38,415 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,715,342 ​ $ 711,167 ​ $ 403,768 ​ $ — ​ $ 2,830,277 Inter-segment sales ​ 92,540 ​ 25,749 ​ 8,570 ​ ( 126,859 ) ​ ​ — Total ​ $ 1,807,882 ​ $ 736,916 ​ $ 412,338 ​ $ ( 126,859 ) ​ $ 2,830,277 Adjusted EBIT ​ $ 348,439 ​ $ 97,321 ​ $ 51,952 ​ $ ( 10,470 ) ​ $ 487,242 Special items charge (gain) (2) ​ ( 3,627 ) ​ 9,865 ​ — ​ 3,068 ​ ​ 9,306 EBIT ​ $ 352,066 ​ $ 87,456 ​ $ 51,952 ​ $ ( 13,538 ) ​ $ 477,936 Interest income ​ ​ ​ ​ ​ ​ ​ 980 Interest expense ​ ​ ​ ​ ​ ​ ​ ( 21,847 ) Income before income taxes ​ ​ ​ ​ ​ ​ ​ $ 457,069 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,344,218 ​ $ 702,596 ​ $ 343,115 ​ $ — ​ $ 2,389,929 Inter-segment sales ​ 109,993 ​ 18,260 ​ 6,376 ​ ( 134,629 ) ​ ​ — Total ​ $ 1,454,211 ​ $ 720,856 ​ $ 349,491 ​ $ ( 134,629 ) ​ $ 2,389,929 Adjusted EBIT ​ $ 245,308 ​ $ 77,845 ​ $ 52,889 ​ $ ( 10,048 ) ​ $ 365,994 Special items charge (gain) (3) ​ 79,664 ​ 13,695 ​ 547 ​ 1,923 ​ ​ 95,829 EBIT ​ $ 165,644 ​ $ 64,150 ​ $ 52,342 ​ $ ( 11,971 ) ​ $ 270,165 Interest income ​ ​ ​ ​ ​ ​ ​ 1,185 Interest expense ​ ​ ​ ​ ​ ​ ​ ( 17,921 ) Income before income taxes ​ ​ ​ ​ ​ ​ ​ $ 253,429 ​ (1) In the three months ended September 30, 2022, special items exclude an adjustment to the amortization of the step up in value of acquired inventories of $ 353 in Americas Welding, Rationalization and asset impairment charges of $ 8,364 in International Welding as discussed in Note 6 and acquisition transaction costs of $ 3,068 in Corporate/Eliminations related to the contemplated acquisition discussed in Note 18. (2) In the nine months ended September 30, 2022, special items exclude a favorable adjustment related to the termination of a pension plan of $ 3,735 , the amortization of the step up in value of acquired inventories of $ 1,106 and Rationalization and asset impairment net gains of $ 998 in Americas Welding, Rationalization and 13 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts asset impairment charges of $ 10,403 in International Welding as discussed in Note 6 and acquisition costs transaction costs of $ 3,086 in Corporate/Eliminations related to the contemplated acquisition discussed in Note 18. (3) In the three and nine months ended September 30, 2021, special items reflect Rationalization and asset impairment charges of $ 3,484 and $ 8,277 , respectively, primarily in International Welding, amortization of the step up in value of acquired inventories of $ 3,690 and $ 5,531 , respectively , related to the acquisitions of Zeman in International Welding and FTP in The Harris Products Group, pension settlement charges of $ 73,562 and $ 79,652 , respectively, in Americas Welding and $ 446 in International Welding in the nine months ended September 30, 2021. Also in the nine months ended September 30, 2021, special items reflect acquisition transaction costs of $ 1,923 in Corporate/Eliminations related to acquisitions as discussed in Note 4. ​ NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS The Company recorded Rationalization and asset impairment net charges of $ 9,405 and $ 8,277 in the nine months ended September 30, 2022 and 2021, respectively. The charges are primarily related to employee severance, non-cash asset impairments and gains or losses on the disposal of assets. During 2021, the Company initiated rationalization plans within the International Welding segment. The plans include headcount restructuring and the consolidation of manufacturing operations to better align the Company’s cost structure with economic conditions and operating needs. At September 30, 2022, liabilities of $ 1,097 for International Welding were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet. The Company believes the rationalization actions will positively impact future results of operations and will not have a material effect on liquidity and sources and uses of capital. The Company continues to evaluate its cost structure and additional rationalization actions may result in charges in future periods. The following table summarizes the activity related to rationalization liabilities for the nine months ended September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ International ​ ​ Welding Consolidated Balance at December 31, 2021 ​ $ 2,990 ​ $ 2,990 Payments and other adjustments ​ ( 3,522 ) ​ ( 3,522 ) Charged to expense ​ 1,629 ​ 1,629 Balance at September 30, 2022 ​ $ 1,097 ​ $ 1,097 ​ ​ 14 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ("AOCI") The following tables set forth the total changes in accumulated other comprehensive income (loss) ("AOCI") by component, net of taxes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2022 ​ ​ Unrealized gain ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (loss) on derivatives ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ designated and ​ Defined benefit ​ Currency ​ ​ ​ ​ ​ qualifying as cash ​ pension plan ​ translation ​ ​ ​ ​ ​ flow hedges ​ activity ​ adjustment ​ Total Balance at June 30, 2022 ​ $ 22,399 ​ $ ( 13,168 ) ​ $ ( 294,428 ) ​ $ ( 285,197 ) Other comprehensive income (loss) before reclassification ​ 8,142 ​ ​ — ​ ​ ( 52,116 ) 3 ​ ( 43,974 ) Amounts reclassified from AOCI ​ ( 365 ) 1 ​ 85 2 ​ — ​ ​ ( 280 ) Net current-period other comprehensive income (loss) ​ 7,777 ​ 85 ​ ( 52,116 ) ​ ( 44,254 ) Balance at September 30, 2022 ​ $ 30,176 ​ $ ( 13,083 ) ​ $ ( 346,544 ) ​ $ ( 329,451 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2021 ​ ​ Unrealized gain ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (loss) on derivatives ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ designated and ​ Defined benefit ​ Currency ​ ​ ​ ​ ​ qualifying as cash ​ pension plan ​ translation ​ ​ ​ ​ ​ flow hedges ​ activity ​ adjustment ​ Total Balance at June 30, 2021 ​ $ 5,023 ​ $ ( 98,412 ) ​ $ ( 211,802 ) ​ $ ( 305,191 ) Other comprehensive income (loss) before reclassification ​ 3,162 ​ ( 235 ) ​ ( 19,062 ) 3 ( 16,135 ) Amounts reclassified from AOCI ​ ( 286 ) 1 55,793 2 — ​ 55,507 Net current-period other comprehensive income (loss) ​ 2,876 ​ 55,558 ​ ( 19,062 ) ​ 39,372 Balance at September 30, 2021 ​ $ 7,899 ​ $ ( 42,854 ) ​ $ ( 230,864 ) ​ $ ( 265,819 ) ​ (1) During the three months ended September 30, 2022, the AOCI reclassification is a component of Net sales of $ 155 (net of tax of $ 74 ) and Cost of goods sold of $( 210 ) (net of tax of $( 44 ) ); during the three months ended September 30, 2021, the reclassification is a component of Net sales of $ 304 (net of tax of $ 135 ) and Cost of goods sold of $ 18 (net of tax of $ 26 ). 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 $ 30 and $ 18,677 ) during the three months ended September 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 $( 13 ) and $( 58 ) attributable to Non-controlling interests in the three months ended September 30, 2022 and 2021, respectively. ​ ​ ​ ​ ​ 15 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2022 ​ ​ Unrealized gain ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (loss) on derivatives ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ designated and ​ Defined benefit ​ Currency ​ ​ ​ ​ ​ qualifying as cash ​ pension plan ​ translation ​ ​ ​ ​ ​ flow hedges ​ activity ​ adjustment ​ Total Balance at December 31, 2021 ​ $ 8,094 ​ $ ( 13,231 ) ​ $ ( 252,249 ) ​ $ ( 257,386 ) Other comprehensive income (loss) before reclassification ​ 23,430 ​ ​ — ​ ​ ( 94,295 ) 3 ​ ( 70,865 ) Amounts reclassified from AOCI ​ ( 1,348 ) 1 ​ 148 2 ​ — ​ ​ ( 1,200 ) Net current-period other comprehensive income (loss) ​ 22,082 ​ 148 ​ ( 94,295 ) ​ ( 72,065 ) Balance at September 30, 2022 ​ $ 30,176 ​ $ ( 13,083 ) ​ $ ( 346,544 ) ​ $ ( 329,451 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2021 ​ ​ Unrealized gain ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (loss) on derivatives ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ designated and ​ Defined benefit ​ Currency ​ ​ ​ ​ ​ qualifying as cash ​ pension plan ​ translation ​ ​ ​ ​ ​ flow hedges ​ activity ​ adjustment ​ Total Balance at December 31, 2020 ​ $ 2,487 ​ $ ( 101,770 ) ​ $ ( 202,907 ) ​ $ ( 302,190 ) Other comprehensive income (loss) before reclassification ​ 6,275 ​ ( 2,220 ) ​ ( 27,957 ) 3 ( 23,902 ) Amounts reclassified from AOCI ​ ( 863 ) 1 61,136 2 — ​ 60,273 Net current-period other comprehensive income (loss) ​ 5,412 ​ 58,916 ​ ( 27,957 ) ​ 36,371 Balance at September 30, 2021 ​ $ 7,899 ​ $ ( 42,854 ) ​ $ ( 230,864 ) ​ $ ( 265,819 ) (1) During the nine months ended September 30, 2022, the AOCI reclassification is a component of Net sales of $ 409 (net of tax of $ 181 ) and Cost of goods sold of $( 939 ) (net of tax of $( 223 ) ); during the nine months ended September 30, 2021, the reclassification is a component of Net sales of $ 1,611 (net of tax of $ 692 ) and Cost of goods sold of $ 748 (net of tax of $ 270 ). 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 $ 209 and $ 21,578 ) during the nine months ended September 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 $ 102 and $ ( 327 ) attributable to Non-controlling interests in the nine months ended September 30, 2022 and 2021, respectively. NOTE 8 — COMMON STOCK REPURCHASE PROGRAM From time to time at management’s discretion, the Company is authorized to repurchase its common shares in the open market, depending on market conditions, stock price and other factors. During the three months ended September 30, 2022, the Company purchased a total of 0.2 million shares at an average cost per share of $ 133.74 . During the nine months ended September 30, 2022, the Company purchased a total of 1.2 million shares at an average cost per share of $ 130.90 . As of September 30, 2022, 9.1 million common shares remained available for repurchase. The repurchased common shares remain in treasury and have not been retired. 16 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts NOTE 9 — INVENTORIES Inventories in the Condensed Consolidated Balance Sheets are comprised of the following components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 Raw materials ​ $ 190,369 ​ $ 143,394 Work-in-process ​ 106,212 ​ 97,834 Finished goods ​ 335,795 ​ 298,691 Total ​ $ 632,376 ​ $ 539,919 ​ At September 30, 2022 and December 31, 2021, approximately 40 % 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 $ 134,597 and $ 114,176 at September 30, 2022 and December 31, 2021, respectively. NOTE 10 — LEASES The table below summarizes the right-of-use assets and lease liabilities in the Company’s Condensed Consolidated Balance sheets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Leases Balance Sheet Classification September 30, 2022 December 31, 2021 Right-of-use assets Other assets ​ $ 45,222 ​ $ 47,966 ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities Other current liabilities ​ $ 9,963 ​ $ 10,218 Noncurrent liabilities Other liabilities ​ 36,636 ​ 38,960 Total lease liabilities ​ $ 46,599 ​ $ 49,178 ​ 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 $ 5,109 and $ 15,415 in the three and nine months ended September 30, 2022, respectively, and $ 5,619 and $ 16,279 in the three and nine months ended September 30, 2021, respectively. Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2022 were $ 2,930 and $ 9,101 , respectively, and are included in Net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2021 were $ 5,896 and $ 12,548 , respectively, and are included in Net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. Right-of-use assets obtained in exchange for operating lease liabilities were $ 4,739 and $ 8,217 during the three and nine months ended September 30, 2022, respectively, and $ 3,218 and $ 12,912 for the three and nine months ended September 30, 2021, respectively. 17 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts The total future minimum lease payments for noncancelable operating leases were as follows: ​ ​ ​ ​ ​ ​ September 30, 2022 2022 ​ $ 2,868 2023 ​ 10,794 2024 ​ 9,313 2025 ​ 6,307 2026 ​ 5,124 After 2026 ​ 17,915 Total lease payments ​ $ 52,321 Less: Imputed interest ​ 5,722 Operating lease liabilities ​ $ 46,599 ​ As of September 30, 2022, the weighted average remaining lease term is 7.9 years and the weighted average discount rate used to determine the operating lease liability is 3.0 %. NOTE 11 — PRODUCT WARRANTY COSTS The changes in the carrying amount of product warranty accruals are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2022 2021 Balance at beginning of year ​ $ 20,466 ​ $ 21,760 Accruals for warranties ​ 9,790 ​ 8,446 Settlements ​ ( 10,346 ) ​ ( 8,809 ) Foreign currency translation and other adjustments ​ ( 723 ) ​ ( 306 ) Balance at end of period ​ $ 19,187 ​ $ 21,091 ​ ​ NOTE 12 — DEBT Revolving Credit Agreements On April 23, 2021, the Company amended and restated the agreement governing its line of credit by entering into the Second Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement has a line of credit totaling $ 500,000 , has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $ 150,000 . The interest rate on borrowings is based on LIBOR plus a spread based on the Company’s net leverage ratio. The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. As of September 30, 2022, the Company was in compliance with all of its covenants and had $ 37,000 of outstanding borrowings under the Credit Agreement. The Company has other lines of credit and debt agreements totaling $ 104,293 . As of September 30, 2022, the Company was in compliance with all of its covenants and had $ 20,338 outstanding at September 30, 2022. Senior Unsecured Notes On April 1, 2015 and October 20, 2016, the Company entered into separate Note Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each 18 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts have an aggregate principal amount of $ 350,000 , comprised of four different series ranging from $ 50,000 to $ 100,000 , with maturity dates ranging from August 20, 2025 through April 1, 2045, and interest rates ranging from 2.75 % to 4.02 %. Interest on the Notes is paid semi-annually. The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3 % and 11.6 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of September 30, 2022, the Company was in compliance with all of its debt covenants relating to the Notes. Shelf Agreements On November 27, 2018, the Company entered into seven uncommitted master note facilities (the "Shelf Agreements") that allow borrowings up to $ 700,000 in the aggregate. The Shelf Agreements have a term of 5 years and the average life of borrowings cannot exceed 15 years . The Company is required to comply with covenants similar to those contained in the Notes. As of September 30, 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 September 30, 2022 and December 31, 2021, the fair value of long-term debt, including the current portion, was approximately $ 597,972 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 $ 722,287 and $ 717,855 , respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange. NOTE 13 — RETIREMENT AND POSTRETIREMENT BENEFIT PLANS The components of total pension cost were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 ​ ​ ​ U.S. pension ​ Non-U.S. ​ U.S. pension ​ Non-U.S. ​ U.S. pension ​ Non-U.S. ​ U.S. pension ​ Non-U.S. ​ ​ plans pension plans plans pension plans plans pension plans plans pension plans Service cost ​ $ 50 ​ $ 254 ​ $ 49 ​ $ 395 ​ $ 149 ​ $ 827 ​ $ 146 ​ $ 1,190 ​ Interest cost ​ 66 ​ ​ 607 ​ 2,622 ​ 924 ​ 197 ​ 1,947 ​ 8,675 ​ 1,932 ​ Expected return on plan assets ​ — ​ ​ ( 759 ) ​ ( 3,888 ) ​ ( 1,487 ) ​ — ​ ( 2,637 ) ​ ( 12,595 ) ​ ( 2,996 ) ​ Amortization of prior service cost ​ — ​ ​ — ​ — ​ 1 ​ — ​ ( 1 ) ​ — ​ 12 ​ Amortization of net loss ​ 44 ​ ​ 71 ​ 616 ​ 291 ​ 133 ​ 225 ​ 1,867 ​ 737 ​ Settlement charges (gains) (1) ​ — ​ ​ — ​ 73,562 ​ — ​ ( 3,735 ) ​ — ​ 79,652 ​ 446 ​ Defined benefit plans ​ ​ 160 ​ ​ 173 ​ ​ 72,961 ​ ​ 124 ​ ​ ( 3,256 ) ​ ​ 361 ​ ​ 77,745 ​ ​ 1,321 ​ Multi-employer plans ​ ​ — ​ ​ 74 ​ ​ — ​ ​ 138 ​ ​ — ​ ​ 289 ​ ​ — ​ ​ 640 ​ Defined contribution plans ​ ​ 7,850 ​ ​ 679 ​ ​ 6,572 ​ ​ 898 ​ ​ 20,180 ​ ​ 2,284 ​ ​ 17,606 ​ ​ 2,296 ​ Total pension cost ​ $ 8,010 ​ $ 926 ​ $ 79,533 ​ $ 1,160 ​ $ 16,924 ​ $ 2,934 ​ $ 95,351 ​ $ 4,257 ​ ​ (1) Gains in the nine months ended September 30, 2022 related to the final settlement associated with the termination of a pension plan. Charges in the three and nine months ended September 30, 2021 primarily resulting from lump sum pension payments also related to the termination of a pension plan. 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. 19 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts NOTE 14 — OTHER INCOME (EXPENSE) The components of Other income (expense) were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 2022 2021 Equity earnings (loss) in affiliates ​ $ ( 434 ) $ 108 ​ $ ( 254 ) ​ $ 399 Other components of net periodic pension (cost) income (1) ​ ( 29 ) ( 72,641 ) ​ 3,871 ​ ( 77,730 ) Other income (expense) ​ 4,051 1,092 ​ 3,471 ​ 6,176 Total Other income (expense) ​ $ 3,588 $ ( 71,441 ) ​ $ 7,088 ​ $ ( 71,155 ) ​ (1) Other components of net periodic pension (cost) income includes pension settlements and curtailments as discussed in Note 13 to the consolidated financial statements. NOTE 15 — INCOME TAXES The Company recognized $ 93,991 of tax expense on pretax income of $ 457,069 , resulting in an effective income tax rate of 20.6 % for the nine months ended September 30, 2022. The effective income tax rate was 20.2 % for the nine months ended September 30, 2021. The effective tax rate was higher for the nine months ended September 30, 2022, as compared with the same period in 2021, primarily due to the geographic mix of earnings and the impact of favorable discrete tax adjustments in 2021. As of September 30, 2022, the Company had $ 18,375 of unrecognized tax benefits. If recognized, approximately $ 15,195 would be reflected as a component of income tax expense. The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2017. The Company is currently subject to U.S., various state and non-U.S. income tax audits. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a reduction of $ 3,655 in previously unrecognized tax benefits by the end of the third quarter 2023. NOTE 16 — DERIVATIVES The Company uses derivative instruments to manage exposures to currency exchange rates, interest rates and commodity prices arising in the normal course of business. Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable. Hedge ineffectiveness was immaterial in the nine months ended September 30, 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 September 30, 2022. The Company does not expect any counterparties to fail to meet their obligations. 20 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts Cash Flow Hedges 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 $ 54,600 at September 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 September 30, 2022 and December 31, 2021 and have a termination date of August 2025. The Company has commodity contracts with a notional amount of 1,475,000 pounds and 975,000 pounds at September 30, 2022 and December 31, 2021, respectively, which 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 September 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 $ 81,398 at September 30, 2022 and $ 94,479 at December 31, 2021. Derivatives Not Designated as Hedging Instruments The Company has certain foreign exchange forward contracts that are not designated as hedges. These derivatives are held as economic hedges of certain balance sheet exposures. The dollar equivalent gross notional amount of these contracts was $ 260,594 and $ 301,685 at September 30, 2022 and December 31, 2021, respectively. Fair values of derivative instruments in the Company’s Condensed Consolidated Balance Sheets follow: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ December 31, 2021 ​ Other ​ Other ​ ​ ​ ​ ​ ​ ​ Other ​ Other ​ ​ ​ ​ ​ ​ ​ Current ​ Current ​ Other ​ Other ​ Current ​ Current ​ Other ​ Other Derivatives by hedge designation Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities Designated as hedging instruments: ​ ​ ​ ​ ​ ​ ​ ​ Foreign exchange contracts $ 2,039 ​ $ 508 ​ $ — ​ $ — ​ $ 772 ​ $ 535 ​ $ — ​ $ — Forward starting swap agreements ​ — ​ ​ — ​ ​ 19,479 ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,990 ​ ​ — Net investment contracts ​ 13,394 ​ ​ — ​ ​ 2,718 ​ ​ — ​ ​ 2,095 ​ ​ — ​ ​ — ​ ​ 608 Commodity contracts ​ — ​ ​ 547 ​ ​ — ​ ​ — ​ ​ 311 ​ ​ — ​ ​ — ​ ​ — Not designated as hedging instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign exchange contracts 1,684 ​ ​ 3,394 ​ ​ — ​ ​ — ​ 4,656 ​ 3,445 ​ — ​ — Total derivatives $ 17,117 ​ $ 4,449 ​ $ 22,197 ​ $ — ​ $ 7,834 ​ $ 3,980 ​ $ 6,990 ​ $ 608 ​ 21 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts The effects of undesignated derivative instruments on the Company’s Consolidated Statements of Income consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, Nine Months Ended September 30, Derivatives by hedge designation Classification of gain (loss) 2022 2021 2022 2021 Not designated as hedges: ​ ​ ​ ​ ​ ​ ​ Foreign exchange contracts ​ Selling, general & administrative expenses ​ $ ( 3,374 ) ​ $ ( 878 ) ​ $ ( 2,836 ) ​ $ 5,000 Commodity Contracts ​ Cost of goods sold ​ ​ ( 319 ) ​ ​ — ​ ​ ( 40 ) ​ ​ — ​ The effects of designated hedges on AOCI and the Company’s Consolidated Statements of Income consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total gain (loss) recognized in AOCI, net of tax September 30, 2022 December 31, 2021 Foreign exchange contracts ​ $ 1,325 ​ $ 284 ​ Forward starting swap agreements ​ ​ 14,133 ​ ​ 5,232 ​ Net investment contracts ​ ​ 15,000 ​ 2,339 ​ Commodity Contracts ​ ( 282 ) ​ 239 ​ ​ The Company expects a gain of $ 1,043 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, Nine Months Ended September 30, ​ ​ Gain (loss) recognized in the ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative type Consolidated Statements of Income: 2022 2021 2022 2021 Foreign exchange contracts Sales ​ $ 229 ​ $ 439 ​ $ 590 ​ $ 2,303 ​ Cost of goods sold ​ 573 ​ ( 44 ) ​ 1,202 ​ ( 1,018 ) Commodity contracts ​ Cost of goods sold ​ ​ ( 319 ) ​ ​ — ​ ​ ( 40 ) ​ ​ — ​ ​ 22 Table of Contents LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Dollars in thousands, except per share amounts NOTE 17 - FAIR VALUE The following table provides a summary of assets and liabilities as of September 30, 2022, measured at fair value on a recurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted Prices in ​ ​ ​ ​ ​ ​ ​ ​ ​ Active Markets for ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Identical Assets or ​ Significant Other ​ Significant ​ ​ Balance as of ​ Liabilities ​ Observable Inputs ​ Unobservable Description September 30, 2022 (Level 1) (Level 2) Inputs (Level 3) Assets: ​ ​ ​ ​ Foreign exchange contracts ​ $ 3,723 ​ $ — ​ $ 3,723 ​ $ — Net investment contracts ​ ​ 16,112 ​ ​ — ​ ​ 16,112 ​ ​ — Forward starting swap agreements ​ 19,479 ​ — ​ 19,479 ​ — Pension surplus ​ ​ 62,750 ​ ​ 62,750 ​ ​ — ​ ​ — Total assets ​ $ 102,064 ​ $ 62,750 ​ $ 39,314 ​ $ — Liabilities: ​ ​ ​ ​ Foreign exchange contracts ​ $ 3,902 ​ $ — ​ $ 3,902 ​ $ — Commodity contracts ​ ​ 547 ​ ​ — ​ ​ 547 ​ ​ — Deferred compensation ​ 38,189 ​ — ​ 38,189 ​ — Total liabilities ​ $ 42,638 ​ $ — ​ $ 42,638 ​ $ — ​ The following table provides a summary of assets and liabilities as of December 31, 2021, measured at fair value on a recurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted Prices in ​ ​ ​ ​ ​ ​ ​ ​ ​ Active Markets for ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Identical Assets or ​ Significant Other ​ Significant ​ ​ Balance as of ​ Liabilities ​ Observable Inputs ​ Unobservable Description December 31, 2021 (Level 1) (Level 2) Inputs (Level 3) Assets: ​ ​ ​ ​ Foreign exchange contracts ​ $ 5,428 ​ $ — ​ $ 5,428 ​ $ — Net investment contracts ​ ​ 2,095 ​ ​ — ​ ​ 2,095 ​ ​ — Commodity contracts ​ ​ 311 ​ ​ — ​ ​ 311 ​ ​ — Forward starting swap agreements ​ 6,990 ​ — ​ 6,990 ​ — Total assets ​ $ 14,824 ​ $ — ​ $ 14,824 ​ $ — Liabilities: ​ ​ ​ ​ Foreign exchange contracts ​ $ 3,980 ​ $ — ​ $ 3,980 ​ $ — Net investment contracts ​ 608 ​ — ​ 608 ​ — Deferred compensation ​ 41,612 ​ — ​ 41,612 ​ — Total liabilities ​ $ 46,200 ​ $ — ​ $ 46,200 ​ $ — ​ The Company’s derivative contracts are valued at fair value using the market approach. The Company measures the fair value of foreign exchange contracts, swap agreements and net investment contracts using Level 2 inputs based on observable spot and forward rates in active markets. The deferred compensation liability is the Company’s obligation under its executive deferred compensation plan. The Company measures the fair value of the liability using the market values of the participants’ underlying investment fund elections. 23 Table of Contents 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 September 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 September 30, 2022. The Company has various financial instruments, including cash and cash equivalents, short and long-term debt and forward contracts. While these financial instruments are subject to concentrations of credit risk, the Company has minimized this risk by entering into arrangements with a number of major banks and financial institutions and investing in several high-quality instruments. The Company does not expect any counterparties to fail to meet their obligations. ​ NOTE 18 – SUBSEQUENT EVENTS On October 14, 2022, the Company entered into a definitive agreement to acquire Fori Automation, Inc. (the “contemplated acquisition”). Upon completion of the contemplated acquisition, the acquired business will extend the Company’s market presence within the automotive sector, better position it to capitalize on accelerating investments in automotive electric vehicle platforms, offer cross-selling growth opportunities to industrial customers and expand the Company’s international automation footprint. ​ The definitive agreement provides for a cash purchase price of $ 427,000 , subject to a customary working capital adjustment. The Company intends to fund the transaction with cash on hand and arranged credit. The contemplated acquisition is subject to regulatory approval and other customary closing conditions and is expected to close in the fourth quarter of 2022. ​ For the three and nine months ended September 30, 2022, the Company has incurred $ 3,068 , respectively, of acquisition transaction costs related to the contemplated acquisition. These costs were expensed as incurred and are included in “Selling, general, and administrative expenses” in the Consolidated Statements of Income. ​ ​ ​ ​ 24 Table of Contents