What changed in this filing

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Item 1. Financial Statements

2023-10-27 compared with 2023-07-27 · 167 added, 143 removed, 470 unchanged (40% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net sales (Note 2)

4 unchanged sentences

Interest expense, net

Other income (expense) (Note 11)

Other income (Note 11)

Income before income taxes

7 unchanged sentences

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Other comprehensive income (loss), net of tax:

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

Defined benefit pension plan activity, net of tax

Unrealized gain on derivatives designated and qualifying as cash flow hedges

Defined benefit pension plan activity

Currency translation adjustment

Other comprehensive income (loss):

Other comprehensive (loss) income:

Comprehensive income

3 unchanged sentences

(In thousands)

June 30, 2023

September 30, 2023

December 31, 2022

37 unchanged sentences

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

Currency translation adjustment

Currency translation adjustment, net of tax

Cash dividends declared - $ 0.64 per share

5 unchanged sentences

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

Currency translation adjustment

Currency translation adjustment, net of tax

Cash dividends declared – $ 0.64 per share

3 unchanged sentences

( 2,570,678 )

Unrecognized amounts from defined benefit pension plans, net of tax

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

Currency translation adjustment, net of tax

Cash dividends declared – $ 0.64 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at September 30, 2023

( 2,615,748 )

LINCOLN ELECTRIC HOLDINGS, INC.

21 unchanged sentences

( 2,438,144 )

Unrecognized amounts from defined benefit pension plans, net of tax

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

Currency translation adjustment

Cash dividends declared – $ 0.56 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at September 30, 2022

( 2,464,460 )

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile Net income to Net cash provided by operating activities:

Rationalization and asset impairment net charges (Note 6)

Rationalization and asset impairment net charges

Depreciation and amortization

Equity earnings in affiliates, net

Equity (earnings) loss in affiliates, net

Deferred income taxes

1 unchanged sentence

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

Increase in accounts receivable

Decrease (increase) in accounts receivable

Decrease (increase) in inventories

Increase in other current assets

Increase in trade accounts payable

(Decrease) increase in trade accounts payable

Increase in other current liabilities

29 unchanged sentences

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

Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.

Operating results for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.

The accompanying Condensed Consolidated Balance Sheet at December 31, 2022 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.

5 unchanged sentences

dollar) and 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 six months ended June 30, 2023, this impact was not significant to the Company’s results.

For the nine months ended September 30, 2023, this impact was not significant to the Company’s results.

New Accounting Pronouncements:

10 unchanged sentences

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

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

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

2023-01, Leases-Common Control Arrangements (Topic 842) , issued March 2023

Requires a lessee in a common-control arrangement to amortize leasehold improvements that it owns over the improvements’ useful life, regardless of the lease term.

The requirement of the ASU is effective January 1, 2024.

2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50) , issued September 2022.

3 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Consumable sales consist of welding, brazing and soldering filler metals.

6 unchanged sentences

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

At June 30, 2023, the Company recorded $ 85,321 related to advance customer payments and $ 48,235 related to billings in excess of revenue recognized.

At September 30, 2023, the Company recorded $ 60,312 related to advance customer payments and $ 58,971 related to billings in excess of revenue recognized.

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

1 unchanged sentence

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 June 30, 2023 and December 31, 2022, the Company recorded $ 49,310 and $ 35,252 , 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.

The Company records an asset for

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services.

At September 30, 2023 and December 31, 2022, the Company recorded $ 55,078 and $ 35,252 , respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets.

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

NOTE 3 — EARNINGS PER SHARE

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Denominator (shares in 000's):

4 unchanged sentences

Diluted earnings per share

For the three months ended June 30, 2023 and 2022, common shares subject to equity-based awards of 76 and 62,987 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

For the six months ended June 30, 2023 and 2022, common shares subject to equity-based awards of 115 and 108,497 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

For the three months ended September 30, 2023 and 2022, common shares subject to equity-based awards of 19,368 and 52,495 , 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, 2023 and 2022, common shares subject to equity-based awards of 67,549 and 120,106 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

3 unchanged sentences

In 2022, Powermig generated sales of approximately $ 15,000 (unaudited).

Beginning May 3, 2023, the Company’s Consolidated Statement of Income includes the results of Powermig and was not material for the three months ended June 30, 2023.

Beginning May 3, 2023, the Company’s Consolidated Statement of Income includes the results of Powermig, which were not material for the three and nine months ended September 30, 2023.

Powermig specializes in designing and engineering industrial welding automation solutions for the heavy industry and transportation sectors.

The acquisition broadens the Company’s automation portfolio and capabilities.

The acquisition broadened the Company’s automation portfolio and capabilities.

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 $ 468,683 , or $ 416,353 net of cash acquired, before final and customary adjustments.

1 unchanged sentence

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 extends the Company’s market presence within the automotive sector as well as its automation footprint in the International Welding segment.

For the three and six months ended June 30, 2023, the Company’s Consolidated Statements of Income include the results of Fori, including Net Sales of $ 47,787 and $ 97,002 , respectively, while net income for the period was not material.

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

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

For the three and nine months ended September 30, 2023, the Company’s Consolidated Statements of Income include the results of Fori, including Net Sales of $ 77,674 and $ 174,675 , respectively, while net income for the periods was not material.

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

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

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

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

As of and for the three and six months ended June 30, 2023, these revisions did not have a material impact on the Condensed Consolidated Balance Sheets or Consolidated Statement of Income.

As of and for the three and nine months ended September 30, 2023, these revisions did not have a material impact on the Condensed Consolidated Balance Sheets or Consolidated Statements of Income.

Assets acquired and liabilities assumed

18 unchanged sentences

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

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

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

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;

17 unchanged sentences

International

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Inter-segment sales

Adjusted EBIT

Special items charge (gain) (1)

Special items charge (1)

Interest income

1 unchanged sentence

Income before income taxes

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Inter-segment sales

4 unchanged sentences

Income before income taxes

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Inter-segment sales

Adjusted EBIT

Special items charge (gain) (1)

Special items charge (1)

Interest income

1 unchanged sentence

Income before income taxes

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Inter-segment sales

4 unchanged sentences

Income before income taxes

(1) In the three and six months ended June 30, 2023, special items include amortization of step up in value of acquired inventories of $ 2,957 and $ 5,742 in Americas Welding and $ 588 and $ 1,659 in International Welding, respectively, and Rationalization and asset impairment net charges of $ 2,667 and $ 3,544 in International Welding.

In the six months ended, special items reflect a gain on asset disposal of $ 1,646 in International Welding.

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

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

(1) In the three and nine months ended September 30, 2023, special items exclude amortization of step up in value of acquired inventories of $ 3,648 and $ 9,390 in Americas Welding and $ 1,204 and $ 2,862 in International Welding, respectively, and Rationalization and asset impairment net charges of $ 408 in Americas Welding and $ 6,666 and $ 10,210 in International Welding as discussed in Note 6 .

In the nine months ended September 30, 2023, special items reflect a gain on asset disposal of $ 1,646 in International Welding.

(2) 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 an acquisition.

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

(3) 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 asset impairment charges of $ 10,403 in International Welding as discussed in Note 6 and acquisition transaction costs of $ 3,086 in Corporate/Eliminations related to an acquisition.

NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS

1 unchanged sentence

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

At June 30, 2023, liabilities of $ 660 for International Welding were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

At September 30, 2023, liabilities of $ 6,360 for International Welding were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

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

The Company recorded Rationalization and asset impairment net charges of $ 3,544 and $ 1,041 in the six months ended June 30, 2023 and 2022, respectively.

The Company recorded Rationalization and asset impairment net charges of $ 10,618 and $ 9,405 in the nine months ended September 30, 2023 and 2022, respectively.

The charges are primarily related to restructuring activities.

1 unchanged sentence

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 six months ended June 30, 2023:

The following table summarizes the activity related to rationalization liabilities for the nine months ended September 30, 2023:

Balance at December 31, 2022

1 unchanged sentence

Charged to expense

Balance at June 30, 2023

Balance at September 30, 2023

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 AOCI by component, net of taxes:

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Unrealized gain

3 unchanged sentences

qualifying as cash

Balance at March 31, 2023

Balance at June 30, 2023

Other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current-period other comprehensive income (loss)

Balance at June 30, 2023

Three Months Ended June 30, 2022

Balance at September 30, 2023

Three Months Ended September 30, 2022

Unrealized gain

3 unchanged sentences

qualifying as cash

Balance at March 31, 2022

Balance at June 30, 2022

Other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current-period other comprehensive income (loss)

Balance at June 30, 2022

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

(1) During the three months ended June 30, 2023, the AOCI reclassification is a component of Net sales of $ 1,404 (net of tax of $ 480 ) and Cost of goods sold of $( 25 ) (net of tax of $( 18 ) );

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

Balance at September 30, 2022

(1) During the three months ended September 30, 2023, the AOCI reclassification is a component of Net sales of $ 1,287 (net of tax of $ 470 ) and Cost of goods sold of $( 111 ) (net of tax of $( 45 ) );

during the three months ended September 30, 2022, the 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 ) ).

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

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Unrealized gain

7 unchanged sentences

Net current-period other comprehensive income (loss)

Balance at June 30, 2023

Six Months Ended June 30, 2022

Balance at September 30, 2023

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

7 unchanged sentences

Net current-period other comprehensive income (loss)

Balance at June 30, 2022

(1) During the six months ended June 30, 2023, the AOCI reclassification is a component of Net sales of $ 2,269 (net of tax of $ 821 ) and Cost of goods sold of $( 163 ) (net of tax of $( 61 ) );

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

Balance at September 30, 2022

(1) During the nine months ended September 30, 2023, the AOCI reclassification is a component of Net sales of $ 3,555 (net of tax of $ 1,292 ) and Cost of goods sold of $( 275 ) (net of tax of $( 106 ) );

during the nine months ended September 30, 2022, the 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 ) ).

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

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 8 — INVENTORIES

Inventories in the Condensed Consolidated Balance Sheets are comprised of the following components:

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Finished goods

At June 30, 2023 and December 31, 2022, approximately 35 % and 38 %, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method.

The excess of current cost over LIFO cost was $ 136,411 and $ 133,909 at June 30, 2023 and December 31, 2022, respectively.

At September 30, 2023 and December 31, 2022, approximately 36 % and 38 %, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method.

The excess of current cost over LIFO cost was $ 135,088 and $ 133,909 at September 30, 2023 and December 31, 2022, respectively.

NOTE 9 — LEASES

2 unchanged sentences

Balance Sheet Classification

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

Total lease liabilities

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 $ 5,322 and $ 11,173 in the three and six months ended June 30, 2023 and $ 5,862 and $ 11,061 in the three and six months ended June 30, 2022, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three and six months ended June 30, 2023, respectively, were $ 3,077 and $ 6,222 and are included in Net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows.

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

Right-of-use assets obtained in exchange for operating lease liabilities were $ 1,438 and $ 5,334 during the three and six months ended June 30, 2023 and $ 742 and $ 3,479 for the three and six months ended June 30, 2022, respectively.

Total lease expense, which is included in Cost of goods sold and Selling, general & administrative expenses in the Company’s Consolidated Statements of Income, was $ 5,322 and $ 11,173 in the three and nine months ended September 30, 2023 and $ 5,109 and $ 15,415 in the three and nine months ended September 30, 2022, respectively.

Cash paid for

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2023, respectively, were $ 3,494 and $ 9,716 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, 2022, respectively, were $ 2,930 and $ 9,101 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 $ 1,077 and $ 6,410 during the three and nine months ended September 30, 2023 and $ 4,739 and $ 8,217 for the three and nine months ended September 30, 2022, respectively.

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

June 30, 2023

September 30, 2023

Total lease payments

1 unchanged sentence

Operating lease liabilities

As of June 30, 2023, the weighted average remaining lease term is 7.5 years and the weighted average discount rate used to determine the operating lease liability is 3.3 %.

As of September 30, 2023, the weighted average remaining lease term is 7.1 years and the weighted average discount rate used to determine the operating lease liability is 3.4 %.

NOTE 10 — DEBT

5 unchanged sentences

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

As of June 30, 2023, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement.

As of September 30, 2023, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement.

The Company has other lines of credit and debt agreements totaling $ 84,876 .

As of June 30, 2023, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $ 10,406 .

As of September 30, 2023, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $ 7,482 .

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 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 %.

The 2015 Notes and 2016 Notes each have an aggregate principal amount of $ 350,000 , comprised of four different series ranging from $ 50,000 to $ 100,000 ,

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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.

2 unchanged sentences

The Notes contain certain affirmative and negative covenants.

As of June 30, 2023, the Company was in compliance with all of its debt covenants relating to the Notes.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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 June 30, 2023, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

As of September 30, 2023, the Company was in compliance with all of its debt covenants relating to the Notes.

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.

2 unchanged sentences

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

As of June 30, 2023, the Company was in compliance with all of its covenants.

As of September 30, 2023, the Company was in compliance with all of its covenants.

In March 2023, the Company entered into interest rate swap agreements to effectively convert the interest rate on $ 150,000 of the Term Loan from a variable rate to a fixed rate.

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, 2023, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

Fair Value of Debt

At June 30, 2023 and December 31, 2022, the fair value of long-term debt, including the current portion, was approximately $ 1,006,609 and $ 1,009,020 , respectively, which was determined using available market information and methodologies requiring judgment.

At September 30, 2023 and December 31, 2022, the fair value of long-term debt, including the current portion, was approximately $ 974,061 and $ 1,009,020 , respectively, which was determined using available market information and methodologies requiring judgment.

The carrying value of this debt at such dates was $ 1,103,076 and $ 1,121,435 , 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 11 — OTHER INCOME (EXPENSE)

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

Three Months Ended June 30,

Six Months Ended June 30,

Equity earnings in affiliates

NOTE 11 — OTHER INCOME

The components of Other income were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Equity earnings (loss) in affiliates

Other components of net periodic pension (cost) income (1)

Other income (expense) (2)

Total Other income (expense)

Other income (2)

Total Other income

(1) In 2022, Other components of net periodic pension (cost) income includes pension settlements and curtailments .

(2) In 2023, Other income (expense) primarily relates to non-recurring items such as royalty and other non-operating gains.

NOTE 12 — INCOME TAXES

The Company recognized $ 69,142 of tax expense on pretax income of $ 328,404 , resulting in an effective income tax rate of 21.1 % for the six months ended June 30, 2023.

The effective income tax rate was 20.6 % for the six months ended June 30, 2022.

(2) In 2023, Other income primarily relates to non-recurring items such as royalty and other non-operating gains.

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

The effective tax rate was slightly higher for the six months ended June 30, 2023, as compared with the same period in 2022, primarily due to mix of earnings and discrete tax items.

As of June 30, 2023, the Company had $ 13,435 of unrecognized tax benefits.

NOTE 12 — INCOME TAXES

The Company recognized $ 101,232 of tax expense on pretax income of $ 489,837 , resulting in an effective income tax rate of 20.7 % for the nine months ended September 30, 2023.

The effective income tax rate was 20.6 % for the nine months ended September 30, 2022.

The effective tax rate was slightly higher for the nine months ended September 30, 2023, as compared with the same period in 2022, primarily due to mix of earnings and discrete tax items.

As of September 30, 2023, the Company had $ 13,750 of unrecognized tax benefits.

If recognized, approximately $ 10,714 would be reflected as a component of income tax expense.

8 unchanged sentences

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

It is reasonably possible there could be a reduction of $ 1,295 in previously unrecognized tax benefits by the end of the second quarter 2024.

It is reasonably possible there could be a reduction of $ 1,203 in previously unrecognized tax benefits by the end of the third quarter 2024.

NOTE 13 — DERIVATIVES

1 unchanged sentence

Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable.

Hedge ineffectiveness was immaterial in the three and six months ended June 30, 2023 and 2022.

Hedge ineffectiveness was immaterial in the three and nine months ended September 30, 2023 and 2022.

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 June 30, 2023.

None of the concentrations of risk with any individual counterparty was considered significant at September 30, 2023.

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

1 unchanged sentence

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

The dollar equivalent gross notional amount of these short-term contracts was $ 67,912 at June 30, 2023 and $ 66,296 at December 31, 2022.

The dollar equivalent gross notional amount of these short-term contracts was $ 68,390 at September 30, 2023 and $ 66,296 at December 31, 2022.

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 June 30, 2023 and December 31, 2022 and have a termination date of August 2025.

The Company has commodity contracts with a notional amount of 225,000 pounds and 875,000 pounds at June 30, 2023 and December 31, 2022, respectively, which 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, 2023 and December 31, 2022 and have a termination date of August 2025.

The Company has no commodity contracts outstanding at September 30, 2023.

The Company had commodity contracts with a notional amount of 875,000 pounds at December 31, 2022, which were qualified and designated as cash flow hedges.

In March 2023, the Company entered into interest rate swap agreements, which were qualified and designated as cash flow hedges, with an aggregate notional amount of $ 150,000 .

The interest rate swaps will effectively convert the interest rate on $ 150,000 of the Term Loan discussed in Note 10 from a variable rate based on one-month SOFR to a fixed rate.

Net Investment Hedges

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

The dollar equivalent gross notional amount of these contracts was $ 90,561 at June 30, 2023 and $ 88,843 at December 31, 2022.

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

Net Investment Hedges

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

The dollar equivalent gross notional amount of these contracts was $ 87,748 at September 30, 2023 and $ 88,843 at December 31, 2022.

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

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

The dollar equivalent gross notional amount of these contracts was $ 439,732 and $ 380,443 at June 30, 2023 and December 31, 2022, respectively.

The dollar equivalent gross notional amount of these contracts was $ 403,802 and $ 380,443 at September 30, 2023 and December 31, 2022, respectively.

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

June 30, 2023

September 30, 2023

December 31, 2022

10 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Derivatives by hedge designation

5 unchanged sentences

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

June 30, 2023

Total gain recognized in AOCI, net of tax

September 30, 2023

December 31, 2022

4 unchanged sentences

Commodity contracts

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The Company expects a gain of $ 715 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 June 30,

Six Months Ended June 30,

Gain recognized in the

Three Months Ended September 30,

Nine Months Ended September 30,

Gain (loss) recognized in the

Derivative type

4 unchanged sentences

Cost of goods sold

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 14 - FAIR VALUE

The following table provides a summary of assets and liabilities as of June 30, 2023, measured at fair value on a recurring basis:

The following table provides a summary of assets and liabilities as of September 30, 2023, measured at fair value on a recurring basis:

Quoted Prices in

4 unchanged sentences

Observable Inputs

June 30, 2023

September 30, 2023

Inputs (Level 3)

1 unchanged sentence

Net investment contracts

Commodity contracts

Interest rate swap agreements

2 unchanged sentences

Foreign exchange contracts

Commodity contracts

Deferred compensation

Total liabilities

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

16 unchanged sentences

Total liabilities

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, 2023.

The Company’s derivative contracts are valued at fair value using the market approach.

The Company measures the fair value of foreign exchange contracts, forward starting swap agreements, net investment contracts and interest rate swap agreements using Level 2 inputs based on observable spot and forward rates in active markets.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The deferred compensation liability is the Company’s obligation under its executive deferred compensation plan.

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

The fair value of Cash and cash equivalents, Marketable securities, Accounts receivable, Short-term debt excluding the current portion of long-term debt and Trade accounts payable approximated book value due to the short-term nature of these instruments at both June 30, 2023 and December 31, 2022.

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

The pension surplus assets are invested in money market and short-term duration bond funds at June 30, 2023.

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

1 unchanged sentence

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

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 15 – SUPPLIER FINANCING PROGRAM

3 unchanged sentences

The Company does not provide secured legal assets or other forms of guarantees under the arrangement and has no involvement in establishing the terms or conditions of the arrangement between its suppliers and the financial institution.

The amounts due to the financial institution for suppliers that participate in the supplier financing program are included in Accounts payable on the Company’s Consolidated Balance Sheets, and the associated payments are included in operating activities in the Consolidated Statements of Cash Flows.

At June 30, 2023 and December 31, 2022, Accounts payable included $ 37,022 and $ 33,475 , respectively, payable to suppliers that have elected to participate in the supplier financing program.

The amounts due to the financial institution for suppliers that participate in the supplier financing program are included in Trade accounts payable on the Company’s Consolidated Balance Sheets, and the associated payments are included in operating activities in the Consolidated Statements of Cash Flows.

At September 30, 2023 and December 31, 2022, Trade accounts payable included $ 35,745 and $ 33,475 , respectively, payable to suppliers that have elected to participate in the supplier financing program.

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

What changed 10-Q

Item 1. Financial Statements