What changed in this filing

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Item 1. Financial Statements

2024-04-25 compared with 2023-10-27 · 127 added, 259 removed, 378 unchanged (51% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Net sales (Note 2)

4 unchanged sentences

Interest expense, net

Other income (Note 11)

Income before income taxes

7 unchanged sentences

(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Other comprehensive income (loss), net of tax:

Three Months Ended March 31,

Other comprehensive (loss) income, net of tax:

Unrealized gain on derivatives designated and qualifying as cash flow hedges

7 unchanged sentences

(In thousands)

September 30, 2023

March 31, 2024

December 31, 2023

43 unchanged sentences

( 2,789,312 )

Unrecognized amounts from defined benefit pension plans, net of tax

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

Currency translation adjustment, net of tax

Cash dividends declared – $ 0.64 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at June 30, 2023

( 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.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share amounts)

Comprehensive

4 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

3 unchanged sentences

( 2,519,299 )

Unrecognized amounts from defined benefit pension plans, net of tax

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

Currency translation adjustment

Cash dividends declared – $ 0.56 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at June 30, 2022

( 2,438,144 )

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)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

Depreciation and amortization

Equity (earnings) loss in affiliates, net

Deferred income taxes

1 unchanged sentence

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

Decrease (increase) in accounts receivable

Decrease (increase) in inventories

Increase in other current assets

(Decrease) increase in trade accounts payable

Increase in other current liabilities

Increase in accounts receivable

(Increase) decrease in inventories

Decrease (increase) in other current assets

Increase in trade accounts payable

(Decrease) increase in other current liabilities

Net change in other assets and liabilities

2 unchanged sentences

Capital expenditures

Acquisition of businesses, net of cash acquired

Proceeds from sale of property, plant and equipment

Purchase of marketable securities

Other investing activities

NET CASH USED BY INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

(Payments on) proceeds from short-term borrowings

(Payments on) proceeds from long-term borrowings

Proceeds from (payments on) short-term borrowings

Payments on long-term borrowings

Proceeds from exercise of stock options

3 unchanged sentences

Effect of exchange rate changes on Cash and cash equivalents

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at beginning of period

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

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024.

The accompanying Condensed Consolidated Balance Sheet at December 31, 2023 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.

1 unchanged sentence

Certain reclassifications have been made to the prior period amounts to conform to the current period presentation, none of which are material.

Turkey – Highly Inflationary Economy

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

As a result, the financial statements of the Company’s Turkish operation have been remeasured into the Company’s reporting currency (U.S.

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

New Accounting Pronouncements:

4 unchanged sentences

The following ASUs were adopted as of January 1, 2024:

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, and presentation on the balance sheet.

Refer to Note 15 for the impacts on the Company’s consolidated financial statements.

2021-08, Business Combinations (Subtopic 805) , issued October 2021.

Requires the acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

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 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.

The requirements of the ASU are effective January 1, 2024 and the adoption did not have an impact on the Company’s consolidated financial statements.

2023-07, Segment Reporting (Topic 280), issued November 2023

Requires enhanced disclosures about significant segment expenses, including significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the title and position of the CODM, an amount for other segment items by reportable segment, and disclosures about segment profit or loss and assets on an annual and interim basis.

The amendments are effective for annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025.

Early adoption is permitted.

The Company will adopt the required disclosures for the annual period.

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

Requires disclosure about a company’s supplier finance program, including a period-over-period balance roll forward.

This requirement of the ASU is effective January 1, 2024 and should be applied prospectively.

Requires disclosure about a company’s supplier finance programs, including a period-over-period balance roll forward.

This requirement of the ASU is effective for annual periods beginning January 1, 2024 and should be applied prospectively.

The Company will adopt the required disclosures for the annual period.

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

2023-06, Disclosure Improvement s , issued October 2023

Requires amending certain disclosure and presentation requirements for a variety of topics within the ASC.

The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or S-K becomes effective, or June 30, 2027, if the SEC has not removed the requirements by that date.

Early adoption is prohibited.

2023-09, Income Taxes (Topic 740), issued December 2023.

Requires disclosure of specific categories in rate reconciliation and additional information for reconciling items that meet a quantitative threshold, additional information about income taxes paid, and disclosure of disaggregated income tax information.

The amendments are effective January 1, 2025 and early adoption is permitted.

2024-01, Compensation – Stock Compensation (Topic 718), issued March 2024

Requires determining whether a profits interest award should be accounted for as a share-based payment arrangement or other compensation in accordance with Topic 718.

The amendments are effective for annual periods beginning January 1, 2025, and interim periods within those annual periods.

Early adoption is permitted.

NOTE 2 — REVENUE RECOGNITION

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Consumable sales consist of welding, 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.

as well as a comprehensive portfolio of automated solutions

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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.

3 unchanged sentences

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

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.

At March 31, 2024, the Company recorded $ 37,609 related to advance customer payments and $ 55,401 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

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

At March 31, 2024 and December 31, 2023, the Company recorded $ 45,147 and $ 41,816 , respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets.

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

1 unchanged sentence

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Denominator (shares in 000's):

4 unchanged sentences

Diluted earnings per share

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.

For the three months ended March 31, 2024 and 2023, common shares subject to equity-based awards of 25,147 and 29,112 , respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

On April 1, 2024, the Company acquired 100 % ownership of Superior Controls, LLC (“RedViking”), a privately held automation system integrator based in Plymouth, Michigan.

The net purchase price was $ 115,000 , net of cash acquired, and it was accounted for as a business combination.

In 2023, RedViking generated sales of approximately $ 70,000 (unaudited).

RedViking specializes in the development and integration of state-of-the-art autonomous guided vehicles and mobile robots, custom assembly and dynamic test systems, and proprietary manufacturing execution system software.

The acquisition broadened the Company’s portfolio of automation solutions and extends the Company’s ability to serve customers in the growing aerospace and defense industries.

On May 3, 2023, the Company acquired 100 % ownership of Powermig Automação e Soldagem Ltda.

(“Powermig”), a privately held automation engineering firm headquartered in Caxias do Sul, Rio Grande do Sul, in Brazil.

The net purchase price was $ 29,572 , net of cash acquired, and it was accounted for as a business combination.

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, 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 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.

In 2022, the Company recognized $ 5,196 in acquisition costs related to Fori and were expensed as incurred.

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 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 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.

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

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 $ 18,200 , 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 $ 245,625 .

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.

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 it was accounted for as a business combination.

In 2022, the Company recognized $ 365 in acquisition costs related to Kestra and were expensed as incurred.

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 broadened the Company’s specialty alloys portfolio and services.

purchase price was $ 29,572 , net of cash acquired, and it was accounted for as a business combination.

Beginning May 3, 2023, the Company’s Consolidated Statement of Income includes the results of Powermig, which were not material for the three months ended March 31, 2024.

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

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

In 2024, the Company recognized $ 1,762 in acquisition costs, which were expensed as incurred.

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.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 5 — SEGMENT INFORMATION

7 unchanged sentences

EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following table presents Adjusted EBIT by segment:

International

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Inter-segment sales

4 unchanged sentences

Income before income taxes

Three Months Ended September 30, 2022

Inter-segment sales

Adjusted EBIT

Special items charge (gain) (2)

Interest income

Interest expense

Income before income taxes

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2023

Inter-segment sales

4 unchanged sentences

Income before income taxes

Nine Months Ended September 30, 2022

Inter-segment sales

Adjusted EBIT

Special items charge (gain) (3)

Interest income

Interest expense

Income before income taxes

(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.

(1) In the three months ended March 31, 2024, special items include Rationalization and asset impairment charges of $ 3,069 and $ 1,536 in International Welding and The Harris Products Group, respectively, as discussed in Note 6 and Acquisition transaction costs of $ 1,762 in Corporate/Eliminations.

(2) In the three months ended March 31, 2023, special items include amortization of step up in value of acquired inventories of $ 2,785 and $ 1,071 in Americas and International Welding, respectively, Rationalization and asset impairment net charges of $ 877 in International Welding and a gain on disposal of $ 1,646 in International Welding.

NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS

The Company has rationalization plans within the International Welding segment.

The Company has rationalization plans within International Welding and The Harris Products Group segments.

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

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

At March 31, 2024, liabilities of $ 9,801 and $ 386 for International Welding and The Harris Products Group, respectively, 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 $ 10,618 and $ 9,405 in the nine months ended September 30, 2023 and 2022, respectively.

The Company recorded Rationalization and asset impairment net charges of $ 3,069 and $ 1,536 in International Welding and The Harris Products Group in the three months ended March 31, 2024, respectively.

The Company recorded Rationalization and asset impairment net charges of $ 877 in International Welding in the three months ended March 31, 2023.

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 nine months ended September 30, 2023:

The following table summarizes the activity related to rationalization liabilities for the three months ended March 31, 2024:

International

The Harris Products

Balance at December 31, 2023

1 unchanged sentence

Charged to expense

Balance at September 30, 2023

Balance at March 31, 2024

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

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 September 30, 2023

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

qualifying as cash

Balance at June 30, 2023

Other comprehensive income (loss) before reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive income (loss)

Balance at September 30, 2023

Three Months Ended September 30, 2022

Three Months Ended March 31, 2024

Unrealized gain

3 unchanged sentences

qualifying as cash

Balance at June 30, 2022

Balance at December 31, 2023

Other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current-period other comprehensive income (loss)

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.

Nine Months Ended September 30, 2023

Balance at March 31, 2024

Three Months Ended March 31, 2023

Unrealized gain

6 unchanged sentences

Amounts reclassified from AOCI

Net current-period other comprehensive income (loss)

Balance at September 30, 2023

Net current-period other comprehensive income

Balance at March 31, 2023

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

Nine Months Ended September 30, 2022

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

qualifying as cash

Balance at December 31, 2021

Other comprehensive income (loss) before reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive income (loss)

Balance at 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.

NOTE 8 — INVENTORIES

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

September 30, 2023

March 31, 2024

December 31, 2023

2 unchanged sentences

Finished goods

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.

At March 31, 2024 and December 31, 2023, approximately 36 % and 37 %, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method.

The excess of current cost over LIFO cost was $ 129,415 and $ 129,946 at March 31, 2024 and December 31, 2023, respectively.

NOTE 9 — LEASES

2 unchanged sentences

Balance Sheet Classification

September 30, 2023

March 31, 2024

December 31, 2023

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 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.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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 $ 6,161 and $ 5,851 in the three months ended March 31, 2024 and 2023, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2024 and 2023, respectively, were $ 4,049 and $ 3,145 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 $ 3,546 and $ 3,896 during the three months ended March 31, 2024 and 2023, respectively.

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

September 30, 2023

March 31, 2024

Total lease payments

1 unchanged sentence

Operating lease liabilities

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 %.

As of March 31, 2024, the weighted average remaining lease term is 6.8 years and the weighted average discount rate used to determine the operating lease liability is 3.6 %.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

As of March 31, 2024, 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 $ 90,945 .

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 .

As of March 31, 2024, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $ 4,720 .

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 ,

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 %.

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 %.

Interest on the Notes is paid semi-annually.

2 unchanged sentences

The Notes contain certain affirmative and negative covenants.

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

As of March 31, 2024, 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.

1 unchanged sentence

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.

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

As of March 31, 2024, 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 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.

At March 31, 2024 and December 31, 2023, the fair value of long-term debt, including the current portion, was approximately $ 981,481 and $ 1,013,795 , respectively, which was determined using available market information and methodologies requiring judgment.

The carrying value of this debt at such dates was $ 1,102,677 and $ 1,102,771 , 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

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 (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 primarily relates to non-recurring items such as royalty and other non-operating gains.

LINCOLN ELECTRIC HOLDINGS, INC.

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NOTE 11 — 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.

The Company recognized $ 35,115 of tax expense on pretax income of $ 158,530 , resulting in an effective income tax rate of 22.2 % for the three months ended March 31, 2024.

The effective income tax rate was 21.5 % for the three months ended March 31, 2023.

The effective tax rate was higher for the three months ended March 31, 2024, as compared with the same period in 2023, primarily due to mix of earnings and discrete tax items.

As of March 31, 2024, the Company had $ 12,855 of unrecognized tax benefits.

If recognized, approximately $ 10,304 would be reflected as a component of income tax expense.

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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 $ 1,203 in previously unrecognized tax benefits by the end of the third quarter 2024.

It is reasonably possible there could be a reduction of $ 1,864 in previously unrecognized tax benefits by the end of the first quarter 2025.

NOTE 12 — DERIVATIVES

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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 nine months ended September 30, 2023 and 2022.

Hedge ineffectiveness was immaterial in the three months ended March 31, 2024 and 2023.

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

Counterparties include a number of major banks and financial institutions.

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

None of the concentrations of risk with any individual counterparty was considered significant at March 31, 2024.

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

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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 $ 68,390 at September 30, 2023 and $ 66,296 at December 31, 2022.

The dollar equivalent gross notional amount of these short-term contracts was $ 98,808 at March 31, 2024 and $ 84,148 at December 31, 2023.

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

The dollar equivalent gross notional amount of the long-term contracts was $ 100,000 at September 30, 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.

In the first quarter 2024, the Company entered into short-term contracts with the dollar equivalent gross notional amount of $ 100,000 at March 31, 2024 and have a termination date of June 2024.

The dollar equivalent gross notional amount of the long-term contracts was $ 100,000 at March 31, 2024 and December 31, 2023 and have a termination date of August 2025.

The Company has commodity contracts that are qualified and designated as cash flow hedges.

The Notional amount of these contracts were 150,000 pounds and 200,000 pounds at March 31, 2024 and December 31, 2023, respectively.

LINCOLN ELECTRIC HOLDINGS, INC.

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Dollars in thousands, except per share amounts

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 $ 87,748 at September 30, 2023 and $ 88,843 at December 31, 2022.

The dollar equivalent gross notional amount of these contracts was $ 117,578 at March 31, 2024 and $ 119,607 at December 31, 2023.

Derivatives Not Designated as Hedging Instruments

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

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

The dollar equivalent gross notional amount of these contracts was $ 416,200 and $ 492,600 at March 31, 2024 and December 31, 2023, respectively.

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

September 30, 2023

March 31, 2024

December 31, 2023

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Derivatives by hedge designation

Classification of gain (loss)

Classification of (loss) gain

Not designated as hedges:

4 unchanged sentences

Total gain recognized in AOCI, net of tax

September 30, 2023

March 31, 2024

December 31, 2023

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The Company expects a gain of $ 1,667 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized.

Three Months Ended September 30,

Nine Months Ended September 30,

Gain (loss) recognized in the

Three Months Ended March 31,

Gain recognized in the

Derivative type

5 unchanged sentences

NOTE 13 - FAIR VALUE

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

The following table provides a summary of assets and liabilities as of March 31, 2024, measured at fair value on a recurring basis:

Quoted Prices in

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Observable Inputs

September 30, 2023

March 31, 2024

Inputs (Level 3)

1 unchanged sentence

Net investment contracts

Commodity contracts

Interest rate swap agreements

2 unchanged sentences

Foreign exchange contracts

Forward starting swap agreements

Deferred compensation

13 unchanged sentences

Foreign exchange contracts

Interest rate swap agreements

Commodity contracts

3 unchanged sentences

Net investment contracts

Commodity contracts

Deferred compensation

1 unchanged sentence

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 pension surplus assets are invested in money market and short-term duration bond funds at March 31, 2024.

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

2 unchanged sentences

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

The fair value of Cash and cash equivalents, 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 September 30, 2023 and December 31, 2022.

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

9 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 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.

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 Condensed Consolidated Balance Sheets, and the associated payments are included in operating activities in the Consolidated Statements of Cash Flows.

At March 31, 2024 and December 31, 2023, Trade accounts payable included $ 35,936 and $ 29,111 , 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