What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-21 compared with 2022-02-18 · 208 added, 174 removed, 1338 unchanged (22% of the section changed)

6 unchanged sentences

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2022 based on the 2013 framework in "Internal Control – Integrated Framework"

issued by the Committee of Sponsoring Organizations of the Treadway Commission.

issued by the Committee of Sponsoring

Organizations of the Treadway Commission.

Based on the Company’s evaluation under such framework, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2022.

During 2022, the Company completed the acquisition of Fori.

Fori’s assets are included in the Company’s Consolidated Balance Sheet from the date of the acquisition and constituted approximately 14.6% of total assets as of December 31, 2022.

As permitted by guidance issued by the Securities and Exchange Commission, the Company has elected to exclude Fori from our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included elsewhere in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In December 2022, the Company acquired Fori.

The acquired business operated under its own set of systems and internal controls and the Company is currently maintaining those systems and much of that control environment until it is able to incorporate its processes into the Company’s own systems and control environment.

The Company expects to complete the incorporation of the acquired business’ operations into the Company’s systems and control environment in 2023.

Except for changes in connection with the Company’s acquisition of Fori business noted above, there have been no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2022 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

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(a)(3) Exhibits

Amended and Restated Articles of Incorporation of Lincoln Electric Holdings, Inc.

(filed as Exhibit 3.1 to Form 8-K of Lincoln Electric Holdings, Inc.

filed on September 27, 2011, SEC File No.

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

filed on October 22, 2021, SEC File No.

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

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

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

Amended and Restated Code of Regulations of Lincoln Electric Holdings, Inc., as amended on February 15, 2023 (filed as Exhibit 3.1 to Form 8-K of Lincoln Electric Holdings, Inc.

filed on February 17, 2023, SEC File No.-0-1402, and incorporated herein by reference and made a part hereof).

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

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

Credit Agreement, dated as of November 29, 2022, by and among Lincoln Electric Holdings, Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W.

Harris Co., Inc., Lincoln Electric Automation, Inc., Lincoln Global, Inc., the Lenders and PNC Bank, National Association (filed as Exhibit 10.1 to form 8-K of Lincoln Electric Holdings, Inc.

filed on December 1, 2022, SEC File No.

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

Note Purchase Agreement, dated as of April 1, 2015, by and among Lincoln Electric Holdings, Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W.

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

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

The Lincoln Electric Company Employee Savings Plan As Amended and Restated Effective January 15, 2021 (filed as Exhibit 10.20 to Form 10 K of Lincoln Electric Holdings, Inc.

for the year ended December 31, 2021, SEC File No.

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

Amendment No.

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

1 to The Lincoln Electric Company Employee Savings Plan As Amended and Restated Effective January 15, 2021 (filed as Exhibit 10.21 to Form 10 K of Lincoln Electric Holdings, Inc.

for the year ended December 31, 2021, SEC File No.

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

Amendment No.

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

2 to The Lincoln Electric Company Employee Savings Plan As Amended and Restated Effective January 15, 2021 (filed as Exhibit 10.22 to Form 10 K of Lincoln Electric Holdings, Inc.

for the year ended December 31, 2021, SEC File No.

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

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

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

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

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

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

for the quarter ended March 31, 2022, SEC File No.

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

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

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

for the year ended December 31, 2017, SEC File No.

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

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

for the quarter ended March 31, 2022, SEC File No.-0-1402, and incorporated herein by reference and made a part hereof).

Form of Performance Share Award Agreement for Executive Officers (filed as Exhibit 10.44 to Form 10-K of Lincoln Electric Holdings, Inc.

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

Form of Performance Share Award Agreement for Executive Officers (filed as Exhibit 10.3 to Form 10-Q of Lincoln Electric Holdings, Inc., for the quarter ended March 31, 2022, SEC File No.-0-1402, and incorporated herein by reference and made a part hereof).

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

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Attorney-in-Fact for

Chambers, Director

Espeland, Director

Goris, Director

February 21, 2023

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Attorney-in-Fact for

Hanks, Director

Goris, Director

Hilton, Director

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Attorney-in-Fact for

Russell Lincoln, Director

Kathryn Jo Lincoln, Director

February 18, 2022

/s/ Gabriel Bruno

Gabriel Bruno as

Attorney-in-Fact for

MacDonald, III, Director

Mason, Director

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Gabriel Bruno as

Attorney-in-Fact for

Walker, Director

Chambers, Director

February 21, 2023

February 18, 2022

Report of Independent Registered Public Accounting Firm

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

Uncertain tax positions

Goodwill impairment evaluation – Reporting Unit within International Welding Segment

Description of the Matter

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

federal, various U.S.

state and non-U.S.

jurisdictions.

Uncertain tax positions may arise from interpretations and judgments made by the Company in the application of the relevant laws, regulations and tax rulings.

The Company uses judgment in (1) determining whether the technical merits of tax positions in certain jurisdictions are more-likely-than-not to be sustained and (2) measuring the related amount of tax benefit that qualifies for recognition.

Auditing the tax positions related to certain jurisdictions was complex because the recognition and measurement of the tax positions is judgmental and is based on interpretations of laws, regulations and tax rulings.

As disclosed in Note 5 to the consolidated financial statements, at December 31, 2022, the Company’s total goodwill was $665.3 million, of that, $129.9 million relates to the International Welding segment.

As disclosed in Note 1 to the consolidated financial statements, goodwill is tested for impairment in the fourth quarter using the same date each year or more frequently if changes in circumstances or the occurrence of events indicate potential impairment.

The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount and whether it is necessary to perform a quantitative goodwill impairment test.

The Company may perform a quantitative test in instances where the more-likely-than-not threshold has not been met, including when general macroeconomic conditions or changes to the reporting unit warrant a refresh of the baseline used in a qualitative test.

The Company performed a quantitative assessment for a reporting unit within the International Welding segment and determined that the fair value of the reporting unit was in excess of the carrying value.

Auditing the annual goodwill impairment test for the aforementioned reporting unit under the quantitative assessment was complex and judgmental due to the significant estimation required in determining the fair value of the reporting unit.

In particular, the fair value estimate using the income approach was sensitive to significant assumptions such as the weighted average cost of capital and the terminal period revenue growth rate.

Elements of these significant assumptions are forward-looking and could be affected by future economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to assess the technical merits of certain tax positions and controls over the Company’s process for accounting for uncertain tax positions.

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

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

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

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

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

Lastly, we evaluated the Company’s income tax disclosures related to the Company’s uncertain tax positions.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment evaluation, including controls over the significant assumptions mentioned above.

To test the estimated fair value used in the Company’s annual goodwill impairment test for the reporting unit within the International Welding segment, our audit procedures included, among others, assessing the valuation methodology, testing the significant assumptions discussed above, and testing the completeness and accuracy of the underlying data used by the Company in its analysis.

As it pertains to the terminal period revenue growth rate, we compared the significant assumptions used by management to third party industry data and economic trends, changes to the Company’s business model, customer base or product mix, as applicable.

We involved valuation specialists to assist with our evaluation of the methodology applied and the reasonableness of certain assumptions selected by management, including, the weighted average cost of capital.

Specifically, we evaluated the components of the weighted average cost of capital assumptions used by performing an independent corroborative analysis with involvement of valuation specialists.

We performed sensitivity analyses of assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the significant assumptions.

/s/ Ernst & Young LLP

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Fori Automation, LLC (Fori), which is included in the 2022 consolidated financial statements of the Company and constituted 14.6% of total assets as of December 31, 2022.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Fori.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2022 consolidated financial statements of the Company and our report dated February 21, 2023 expressed an unqualified opinion thereon.

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Net income including non-controlling interests

Non-controlling interests in subsidiaries’ income (loss)

Non-controlling interests in subsidiaries’ income

Basic earnings per share (Note 3)

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Other comprehensive income (loss), net of tax:

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

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax of $ 3,099 in 2022;

$ 1,523 in 2021;

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Currency translation adjustment

Other comprehensive income (loss):

Other comprehensive (loss) income:

Comprehensive income

Comprehensive income (loss) attributable to non-controlling interests

Comprehensive income (loss) attributable to shareholders

Comprehensive income attributable to shareholders

See notes to these consolidated financial statements.

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Intangibles, net (Note 5)

Goodwill (Note 5)

Deferred income taxes (Note 13)

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Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive loss (Note 8)

Treasury shares, at cost - 40,957,895 shares in 2022 and 39,794,658 shares in 2021

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Unrecognized amounts from defined benefit pension plans, net of tax

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

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

Currency translation adjustment

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

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

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

Depreciation and amortization

Equity earnings in affiliates, net

Deferred income taxes

Deferred income taxes (Note 13)

Stock-based compensation

Gain on change in control

Pension settlement charges

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Increase (decrease) in trade accounts payable

Increase (decrease) in other current liabilities

(Decrease) increase in other current liabilities

Net change in other assets and liabilities

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Capital expenditures

Acquisition of businesses, net of cash acquired

Acquisition of businesses, net of cash acquired (Note 4)

Proceeds from sale of property, plant and equipment

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CASH FLOWS FROM FINANCING ACTIVITIES

Net change in borrowings

Proceeds from (payments on) short-term borrowings

Proceeds from (payments on) long-term borrowings

Proceeds from exercise of stock options

Purchase of shares for treasury (Note 11)

Purchase of shares for treasury

Cash dividends paid to shareholders

Other financing activities

NET CASH USED BY FINANCING ACTIVITIES

NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES

Effect of exchange rate changes on Cash and cash equivalents

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at beginning of period

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The Company also has a leading global position in brazing and soldering alloys.

The Company’s products include arc welding power sources, plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes and welding accessories and specialty welding consumables and fabrication.

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

The Company’s products include arc welding, brazing and soldering filler metals (consumables), arc welding equipment, plasma and oxyfuel cutting systems, wire feeding systems, fume control equipment, welding accessories, specialty gas regulators, and education solutions;

as well as a comprehensive portfolio of automated solutions for joining, cutting, material handling, module assembly, and end of line testing.

In March 2022, in 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 and Total assets as of December 31, 2022, 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.

Translation of Foreign Currencies

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For subsidiaries operating in highly inflationary economies, both historical and current exchange rates are used in translating balance sheet accounts and translation adjustments are included in Net income.

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.

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.

For the year ended December 31, 2022, this impact was not significant to the Company’s results.

The translation of assets and liabilities originally denominated in foreign currencies into U.S.

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The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Accounts Receivable

The Company maintains an allowance for doubtful accounts for estimated losses from the failure of its customers to make required payments for products delivered.

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

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

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

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

Inventories are valued at the lower of cost or net realizable value.

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The reserve for excess and obsolete inventory was $ 30,164 and $ 23,087 at December 31, 2022 and 2021, respectively.

Prepaid Expenses

Prepaid expenses include prepaid insurance, prepaid rent, prepaid service contracts and other prepaid items.

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

Long-lived Assets

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

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

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

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

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

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The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company periodically evaluates whether current facts or circumstances indicate that the carrying value of its depreciable long-lived assets, including right-of-use assets, to be held and used may not be recoverable.

If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether impairment exists.

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For goodwill, the Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, and whether it is necessary to perform the quantitative goodwill impairment test.

The quantitative test is required only if the Company concludes that it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount.

The quantitative test is only required if the Company concludes that it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount.

The Company may also perform a quantitative test in instances where the more-likely-than-not threshold has not been met, including when general macroeconomic conditions or changes to the reporting unit warrant a refresh of the baseline used in a qualitative test.

For quantitative testing, the Company compares the fair value of each reporting unit with its carrying amount.

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Refer to Notes 11 and 15 to the consolidated financial statements for additional details.

Product Warranties

The Company accrues for product warranty claims based on historical experience and the expected material and labor costs to provide warranty service.

Warranty services are generally provided for periods up to 3 years from the date of sale.

The accrual for product warranty claims is included in Other current liabilities.

Refer to Note 20 to the consolidated financial statements for additional details.

Revenue Recognition

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The interest rate swap agreements designated as fair value hedges meet the shortcut method requirements under accounting standards for derivatives and hedging.

Accordingly, changes in the fair value of these agreements are considered to exactly offset changes in the fair value of the underlying long-term debt.

Accordingly, changes in the fair value of these agreements are considered to exactly offset

changes in the fair value of the underlying long-term debt.

Changes in fair value are recorded in Other assets or Other liabilities with offsetting amounts recorded as a fair value adjustment to the carrying value of Long-term debt, less current portion.

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

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

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

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

Upon acquisition of a business, the Company uses the income, market or cost approach (or a combination thereof) for the valuation as appropriate.

The valuation inputs in these models and analyses are based on market participant assumptions.

The valuation inputs in these models and analyses are based on market participant

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

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Acquired inventories are marked to fair value.

For certain items, the carrying value is determined to be a reasonable approximation of fair value based on information available to the Company.

For certain items, the pre-acquisition carrying value is determined to be a reasonable approximation of fair value based on information available to the Company.

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

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New Accounting Pronouncements

The following section provides a description of new ASUs issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.

The following section provides a description of new Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.

The following ASUs were adopted as of January 1, 2022 and did not have a significant financial impact on the Company’s consolidated financial statements unless otherwise described within the table below:

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

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

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

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

2022-06, Reference Rate Reform (Topic 848) , issued December 2022.

dollar LIBOR rates will no longer be published and regulators have identified alternative reference rates that are more observable or transparent-based and less susceptible to manipulation.

This ASU provides optional relief in accounting for the impact of reference rate reform by deferring the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

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

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

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Year Ended December 31,

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 sales consist of brazing and soldering filler metals.

Equipment sales consist of arc welding, welding accessories, arc welding equipment, wire feeding systems, fume control equipment, plasma and oxy-fuel cutting systems, specialty gas regulators, and education solutions;

as well as a comprehensive portfolio of automated solutions for joining, cutting, material handling, module assembly, and end of line testing.

Consumable and Equipment products are sold within each of the Company’s operating segments.

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NOTE 4 – ACQUISITIONS

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

On December 1, 2022, the Company acquired 100 % ownership of Fori Automation, LLC (“Fori”) for an agreed upon purchase price of $ 427,000 , which was adjusted for certain debt like obligations, for total purchase price consideration of $ 465,598 or $ 413,268 net of cash acquired.

Fori is a leading designer and manufacturer of complex, multi-armed automated welding systems, with an extensive range of automated assembly systems, automated material handling solutions, automated large-scale, industrial guidance vehicles, and end of line testing systems.

The acquisition of Fori will extend the Company’s market presence within the automotive sector as well as its automation footprint in the International Welding segment.

In 2022, Fori generated sales of approximately $ 200,000 (unaudited).

The acquisition of Fori has been accounted for as a business combination which requires the assets and liabilities assumed be recognized at their respective fair values as of the acquisition date.

The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.

The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date.

These preliminary estimates are based on available information and may be revised during the measurement period, not to exceed 12 months from the acquisition date, as third-party valuations are finalized, further information becomes available and additional analyses are performed.

The Company does not expect any such revisions to have a material impact on the Company's preliminary purchase price allocation.

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

Assets Acquired and Liabilities Assumed

Preliminary Purchase Price Allocation

Cash and cash equivalents

Accounts receivable

Property, plant and equipment (1)

Intangible assets (2)

Accounts payable

Net other assets and liabilities (3)

Total purchase price consideration

Property, plant and equipment acquired includes a number of manufacturing and distribution sites, including the related facilities, land and leased sites, and machinery and equipment for use in manufacturing operations.

Intangible asset balances of $ 22,000 and $ 18,700 , respectively, were assigned to trade names and customer relationships ( 15 year weighted average useful life).

Of the remaining amount, $ 24,900 was assigned to technology know-how ( 10 year weighted average useful life) and $ 4,250 was assigned to restrictive covenants ( 4 year weighted average life).

Consists primarily of goodwill of $ 237,445 .

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Fori.

A portion of the goodwill is deductible for tax purposes.

See Note 5 for additional information about goodwill and other intangible assets.

Acquisition-related transaction costs totaled $ 6,003 in 2022.

These costs were expensed as incurred and are included in “Selling, general, and administrative expenses” in the Consolidated Statements of Income.

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 (unaudited).

Beginning March 1, 2022, the Company’s Consolidated Statements of Income include the results of Kestra, including Net sales of $ 17,602 through December 31, 2022 and the impact on net income for the year ended December 31, 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.

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 (unaudited).

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

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

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 (unaudited).

Beginning April 1, 2021, the Company’s 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 expands the Company’s international automation capabilities to serve customers in the structural steel and infrastructure sectors.

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

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

and robotic welding systems.

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

During April 2019, the Company acquired Baker Industries, Inc.

("Baker").

Baker, based in Detroit, Michigan, is a provider of custom tooling, parts and fixtures primarily serving automotive and aerospace markets.

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

Pro forma information related to the acquisitions discussed above has not been presented because the impact on the Company’s Consolidated Statements of Income is not material.

The preliminary purchase price allocations are expected to be finalized within the allowable measurement period.

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

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.

NOTE 5 – GOODWILL AND INTANGIBLES

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

(2) Additions to Americas Welding reflect goodwill recognized in the acquisition of Fori and Kestra in 2022.

International Welding reflect goodwill recognized in the acquisition of Fori in 2022.

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

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Aggregate amortization expense was $ 21,908 , $ 21,155 and $ 20,363 for 2022, 2021 and 2020, respectively.

During the second quarter of 2020, the Company determined that for certain intangible assets, the carrying value of the assets exceeded the fair value resulting in an impairment.

The Company recognized non-cash impairment charges of $ 45,468 which are recorded in Rationalization and asset impairment charges in the Company’s Consolidated Statements of Income.

Estimated annual amortization expense for intangible assets for each of the next five years is $ 21,059 in 2022, $ 18,572 in 2023, $ 16,960 in 2024, $ 16,086 in 2025 and $ 15,231 in 2026.

During 2020 and 2022, the Company determined that for certain intangible assets, the carrying value of the assets exceeded the fair value resulting in an impairment.

The Company recognized non-cash impairment charges of $ 1,018 and $ 45,468 in 2022 and 2020, respectively, which are recorded in Rationalization and asset impairment charges in the Company’s Consolidated Statements of Income.

During 2022, the Company Estimated annual amortization expense for intangible assets for each of the next five years is $ 25,327 in 2023, $ 23,728 in 2024, $ 22,823 in 2025, $ 21,372 in 2026 and $ 19,302 in 2027.

NOTE 6 – SEGMENT INFORMATION

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The Company also has a leading global position in brazing and soldering alloys.

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

as well as a comprehensive portfolio of automated solutions for joining, cutting, material handling, module assembly, and end of line testing.

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

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The International Welding segment includes welding operations in Europe, Africa, Asia and Australia.

The Harris Products Group includes the Company’s global cutting, soldering and brazing businesses as well as its retail business in the United States.

The Harris Products Group includes the Company’s global cutting, soldering and brazing businesses, specialty gas equipment, 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.

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Depreciation and amortization

(1) 2022 special items reflect Rationalization and asset impairment gains of $ 431 , final settlement gains related to the termination of a pension plan of $ 3,735 and amortization of step up in value of acquired inventories of $ 1,106 .

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

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

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

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

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

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

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

(2) 2022 special items reflect Rationalization and asset impairment charges of $ 11,681 .

2021 special items reflect Rationalization and asset impairment charges of $ 9,804 , pension settlement charges of $ 446 and amortization of step up in value of acquired inventories of $ 4,984 .

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

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

(4) 2022 special items reflect acquisition transaction and integration costs of $ 6,003 related acquisitions as discussed in Note 4 to the consolidated financial statements.

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

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

Export sales (excluding inter-company sales) from the United States were $ 173,033 in 2022, $ 149,110 in 2021 and $ 132,637 in 2020.

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NOTE 7 – RATIONALIZATION AND ASSET IMPAIRMENTS

The Company recorded rationalization and asset impairment net charges of $ 9,827 , $ 45,468 and $ 15,188 for the years ended December 31, 2021, 2020 and 2019, respectively.

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

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

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

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

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

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

At December 31, 2022, liabilities of $ 2,207 for International Welding were recognized in Other current liabilities in the Company's Consolidated Balance Sheet.

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

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

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

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

The Company recorded rationalization and asset impairment net charges of $ 11,788 , $ 9,827 and $ 45,468 for the years ended December 31, 2022, 2021 and 2020, respectively, related to these plans.

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

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.

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International

Americas Welding

Balance at December 31, 2020

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Refer to the Consolidated Statements of Equity for additional details.

(4) Includes a gain of $ 9,440 from derivatives designated as net investment hedges.

NOTE 9 – DEBT

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Senior Unsecured Notes due through 2045, interest at 2.8 % to 4.0 % (net of debt issuance costs of $ 1,585 and $ 1,074 at December 31, 2022 and 2021, respectively)

Term Loan due through 2025

Other borrowings due through 2030, interest up to 16.0 %

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As of December 31, 2022, the Company was in compliance with all of its covenants and had $ 45,000 of outstanding borrowings under the Credit Agreement .

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

The Company has other lines of credit and debt agreements totaling $ 92,078 .

As of December 31, 2022 the Company was in compliance with all of its covenants and had $ 37,444 outstanding at December 31, 2022.

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

On November 29, 2022, the Company entered into a term loan in the aggregate principal amount of $ 400,000 (the “Term Loan”), which was borrowed in full.

The Term Loan matures on November 29, 2025.

The Term Loan bears an interest at a rate based on SOFR, plus a margin ranging from 0.75 % to 1.75 % based on the Company’s consolidated net leverage ratio.

The proceeds of the Term Loan were used to pay a portion of the purchase price in connection with the acquisition of Fori.

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

The Term Loan Credit Agreement requires the Company to maintain a minimum consolidated fixed charges coverage ratio and maximum consolidated net leverage ratio.

As of December 31, 2022, the Company was in compliance with all of its covenants.

Maturities of long-term debt, including payments for amounts due banks, for the five years succeeding December 31, 2022 are $ 93,483 in 2023, $ 5 in 2024, $ 507,292 in 2025, $ 0 in 2026, $ 0 in 2027 and $ 600,000 thereafter.

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Under this plan, 800,000 shares have been authorized to be purchased.

Shares purchased were 9,070 in 2021, 13,667 in 2020 and 13,300 in 2019.

NOTE 11 – COMMON STOCK REPURCHASE PROGRAM

The Company has a share repurchase program for up to 55 million of the Company’s common shares.

On February 12, 2020, the Company’s Board of Director’s approved a new share repurchase program authorizing the Company to repurchase, in the aggregate, up to an additional 10 million of its outstanding common shares under this program.

From time to time at management's discretion, the Company repurchases its common shares in the open market, depending on market conditions, stock price and other factors.

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

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

The treasury shares have not been retired.

There were no shares purchased in 2022, 9,070 in 2021 and 13,667 in 2020.

NOTE 11 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS

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Plan participants' contributions

Acquisitions & other adjustments

Benefits paid

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

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

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

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

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

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

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

contract in October 2021.

The lump sum payments and annuity purchase resulted in pre-tax settlement charges of $ 126,056 in the twelve months ended December 31, 2021.

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

The surplus assets as of December 31, 2022 were $ 56,418 and are recorded in Other current assets and Other assets in the Company’s Consolidated Balance Sheets.

Amounts Recognized in Consolidated Balance Sheets

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Defined benefit plans

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

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

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

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Investment management practices must comply with ERISA or any other applicable regulations and rulings.

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

long-term objectives of the portfolio.

Excluding the RAP plan assets, the target allocation for plan assets is 30 % to 40 % equity securities and 60 % to 70 % debt and other securities.

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Fixed income securities (1)

government bonds

Corporate debt and other obligations

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Common trusts and 103-12 investments (3)

Private equity funds (4)

Total investments at fair value

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NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates.

(4) Private equity funds consist of four funds seeking capital appreciation by investing in private equity investment partnerships and venture capital companies.

Private equity fund valuations are based on the NAV of the underlying assets.

Funds are comprised of unrestricted and restricted publicly traded securities and privately held securities.

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

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

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

Supplemental Executive Retirement Plan

The Company maintained a domestic unfunded Supplemental Executive Retirement Plan ("SERP") under which non-qualified supplemental pension benefits are paid to certain employees in addition to amounts received under the Company’s qualified retirement plan which is subject to IRS limitations on covered compensation.

The annual cost of this program has been included in the determination of total net pension costs shown above and was $ 213 , $ 1,225 and $ 576 in 2021, 2020 and 2019, respectively.

The annual cost of this program has been included in the determination of total net pension costs shown above and was $ 253 , $ 213 and

$ 1,225 in 2022, 2021 and 2020, respectively.

The projected benefit obligation associated with this plan is also included in the pension disclosure shown above and was $ 7,339 , $ 7,947 and $ 8,194 at December 31, 2022, 2021 and 2020, respectively.

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Total Other income (expense)

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

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

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

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

(1) Other components of net periodic pension (cost) income includes pension settlements and curtailments as discussed in Note 11 to the consolidated financial statements.

NOTE 13 – INCOME TAXES

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Effective tax rate

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

The 2022 effective tax rate was higher than 2021 primarily due to a change in the mix of earnings, as well as the impact of the 2021 pension plan termination.

Total income tax payments, net of refunds, were $ 151,818 in 2022, $ 87,288 in 2021 and $ 59,360 in 2020.

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Other accruals

Research and development capitalization

Employee benefits

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Intangible assets

Pension obligations

Pension and other benefit liabilities

Deferred tax liabilities

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Net investment hedges

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

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

The Company has held cross currency swaps that are qualified and designated as net investment hedges.

The dollar equivalent gross notional amount of these contracts was $ 0 and $ 25,000 , respectively, as of December 31, 2022 and 2021.

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

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Classification of gain (loss)

Not designated as hedges:

Foreign exchange contracts

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Commodity contracts

The Company expects a loss of $ 284 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized.

The Company expects a gain of $ 718 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized.

Year Ended December 31,

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Cost of goods sold

Commodity contracts

Cost of goods sold

NOTE 15 – FAIR VALUE

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Foreign exchange contracts

Net investment contracts

Commodity contracts

Forward starting swap agreements

Pension surplus

Foreign exchange contracts

Net investment contracts

Commodity contracts

Deferred compensation

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Foreign exchange contracts

Net investment contracts

Commodity Contracts

Forward starting swap agreements

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

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 December 31, 2022.

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

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Actual year-end inventory levels and costs may differ from interim LIFO inventory valuations.

At December 31, 2021 and 2020, approximately 36 % and 35 % of total inventories, respectively, were valued using the LIFO method.

At December 31,

2022 and 2021, approximately 38 % and 36 % of total inventories, respectively, were valued using the LIFO method.

The excess of current cost over LIFO cost was $ 133,909 at December 31, 2022 and $ 114,176 at December 31, 2021.

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For claims or litigation that are material, if an unfavorable outcome is determined to be reasonably possible and the amount of loss can be reasonably estimated, or if an unfavorable outcome is determined to be probable and the amount of loss cannot be reasonably estimated, disclosure would be provided.

Many of the current cases are in differing procedural stages and information on the circumstances of each claimant, which forms the basis for judgments as to the validity or ultimate disposition of such actions, varies greatly.

Many of the current cases are in differing procedural stages and information on the circumstances of each claimant,

which forms the basis for judgments as to the validity or ultimate disposition of such actions, varies greatly.

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

Reserves are adjusted as facts and circumstances change

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

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

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

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Based on the Company’s historical experience in litigating product liability claims, including a significant number of dismissals, summary judgments and defense verdicts in many cases and immaterial settlement amounts, as well as the Company’s current assessment of the underlying merits of the claims and applicable insurance, the Company believes resolution of these claims and proceedings, individually or in the aggregate, will not have a material effect on the Company’s consolidated financial statements.

NOTE 20 – PRODUCT WARRANTY COSTS

The changes in product warranty accruals were as follows:

Balance at beginning of year

Accruals for warranties

Foreign currency translation and other adjustments

Balance at end of year

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

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

What changed 10-K

Item 9A. Controls and Procedures