What changed in this filing

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Item 1. Financial Statements

2024-07-31 compared with 2024-04-25 · 198 added, 113 removed, 392 unchanged (44% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net sales (Note 2)

4 unchanged sentences

Interest expense, net

Other income (expense)

Income before income taxes

7 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive (loss) income, net of tax:

Unrealized gain on derivatives designated and qualifying as cash flow hedges

Unrealized (loss) gain on derivatives designated and qualifying as cash flow hedges

Defined benefit pension plan activity

6 unchanged sentences

(In thousands)

March 31, 2024

June 30, 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 – $ 0.71 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at June 30, 2024

( 2,839,641 )

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share amounts)

Comprehensive

10 unchanged sentences

( 2,519,299 )

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 )

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

(Increase) decrease in inventories

Decrease (increase) in other current assets

Increase in other current assets

Increase in trade accounts payable

4 unchanged sentences

Capital expenditures

Acquisition of businesses, net of cash acquired

Proceeds from sale of property, plant and equipment

Other investing activities

Purchase of marketable securities

NET CASH USED BY INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from (payments on) short-term borrowings

Payments on short-term borrowings

Proceeds from long-term borrowings

Payments on long-term borrowings

18 unchanged sentences

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

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

Operating results for the six months ended June 30, 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.

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.

In May 2024, the Company disposed of its Russian entity and completed its exit from the Russian market.

As a result, $ 22,566 of cumulative translation adjustment previously recognized within Other comprehensive income (loss) was recorded to Rationalization and asset impairment charges on the Consolidated Statements of Income in the three and six months ended June 30, 2024.

New Accounting Pronouncements:

30 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

10 unchanged sentences

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

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.

At June 30, 2024, the Company recorded $ 21,454 related to advance customer payments and $ 72,642 related to billings in excess of revenue recognized.

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

2 unchanged sentences

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

At March 31, 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.

At June 30, 2024 and December 31, 2023, the Company recorded $ 51,071 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Denominator (shares in 000's):

4 unchanged sentences

Diluted earnings per share

For the three months ended 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.

For the three months ended June 30, 2024 and 2023, common shares subject to equity-based awards of 25,472 and 76 , 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, 2024 and 2023, common shares subject to equity-based awards of 18,008 and 115 , 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 June 3, 2024, the Company acquired 100 % ownership of Inrotech A/S (“Inrotech”), a privately held automation system integration and technology firm headquartered in Odense, Denmark.

The purchase price was $ 42,968 , net of cash acquired.

Inrotech specializes in automated welding systems that are differentiated by proprietary adaptive intelligence software and computer vision which guides and optimizes the welding process without the need for programming or the use of computer aided design files.

The state-of-the-art vision-based technology is used in the shipbuilding, energy, and heavy industry sectors, where welding accessibility can be challenging for traditional automated systems, but precision and quality are mission critical.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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.

The purchase price was $ 109,686 , net of cash acquired.

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

3 unchanged sentences

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

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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.

The purchase price was $ 29,572 , net of cash acquired.

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.

During the three and six months ended June 30, 2024, the Company recognized acquisition costs of $ 2,182 and $ 3,944 , respectively, which are included in Selling, general & administrative expenses on the Consolidated Statements of Income and are expensed as incurred.

The acquired companies are accounted for as business combinations and are included in the consolidated financial statements as of the date of acquisition.

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.

as such, pro forma information related to these acquisitions has not been presented.

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 March 31, 2024

Three Months Ended June 30, 2024

Inter-segment sales

Adjusted EBIT

Special items charge (gain) (1)

Interest income

Interest expense

Income before income taxes

Three Months Ended June 30, 2023

Inter-segment sales

Adjusted EBIT

Special items charge (2)

2 unchanged sentences

Income before income taxes

Three Months Ended March 31, 2023

Six Months Ended June 30, 2024

Inter-segment sales

4 unchanged sentences

Income before income taxes

Six Months Ended June 30, 2023

Inter-segment sales

Adjusted EBIT

Special items charge (4)

Interest income

Interest expense

Income before income taxes

(1) In the three months ended June 30, 2024, special items include Rationalization and asset impairment net charges of $ 26,284 in International Welding, primarily due to the impact of the Company’s disposition of its Russian entity, as discussed in Note 6, a loss on asset disposal of $ 4,950 recorded to Other income (expense) in International Welding and acquisition transaction costs of $ 2,182 in Corporate/Eliminations.

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

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

(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.

(3) In the six months ended June 30, 2024, special items include Rationalization and asset impairment net charges of $ 29,354 in International Welding, primarily due to the impact of the Company’s disposition of its Russian entity, and $ 1,396 in The Harris Products Group, as discussed in Note 6, a loss on asset disposal of $ 4,950 recorded to Other income (expense) in International Welding and acquisition transaction costs of $ 3,944 in Corporate/Eliminations.

(4) In the six months ended June 30, 2023, special items include amortization of step up in value of acquired inventories of $ 5,742 in Americas Welding and $ 1,659 in International Welding, Rationalization and asset impairment net charges of $ 3,544 in International Welding and a gain on asset disposal of $ 1,646 in International Welding.

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 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.

At June 30, 2024, liabilities of $ 7,897 and $ 351 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 $ 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.

The Company recorded Rationalization and asset impairment net charges of $ 29,354 in International Welding in the six months ended June 30, 2024, of which $ 22,566 is associated with the disposal of the Company’s Russian entity.

In addition, the Company incurred Rationalization and asset impairment net charges of $ 1,396 in The Harris Products Group in the six months ended June 30, 2024.

The Company believes the rationalization actions will positively impact future results of operations and will not have a material effect on liquidity and sources and uses of capital.

The Company continues to evaluate its cost structure and additional rationalization actions may result in charges in future periods.

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

The following table summarizes the activity related to rationalization liabilities for the six months ended June 30, 2024:

International

3 unchanged sentences

Charged to expense

Balance at March 31, 2024

Balance at June 30, 2024

LINCOLN ELECTRIC HOLDINGS, INC.

3 unchanged sentences

The following tables set forth the total changes in AOCI by component, net of taxes:

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Unrealized gain

3 unchanged sentences

qualifying as cash

Balance at December 31, 2023

Other comprehensive income (loss) before reclassification

Balance at March 31, 2024

Other comprehensive (loss) before reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive income (loss)

Net current-period other comprehensive (loss) income

Balance at June 30, 2024

Three Months Ended June 30, 2023

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

qualifying as cash

Balance at March 31, 2023

Three Months Ended March 31, 2023

Other comprehensive (loss) income before reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive (loss) income

Balance at June 30, 2023

Six Months Ended June 30, 2024

Unrealized gain

4 unchanged sentences

Balance at December 31, 2023

Other comprehensive income before reclassification

Other comprehensive income (loss) before reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive income

Balance at March 31, 2023

Net current-period other comprehensive income (loss)

Balance at June 30, 2024

LINCOLN ELECTRIC HOLDINGS, INC.

1 unchanged sentence

Dollars in thousands, except per share amounts

Six Months Ended June 30, 2023

Unrealized gain

(loss) on derivatives

designated and

Defined benefit

qualifying as cash

Balance at December 31, 2022

Other comprehensive income before reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive income (loss)

Balance at June 30, 2023

NOTE 8 — INVENTORIES

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

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Finished goods

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.

At June 30, 2024 and December 31, 2023, approximately 35 % 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 $ 127,171 and $ 129,946 at June 30, 2024 and December 31, 2023, respectively.

NOTE 9 — LEASES

2 unchanged sentences

Balance Sheet Classification

March 31, 2024

June 30, 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 $ 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.

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 $ 6,572 and $ 12,733 in the three and six months ended June 30, 2024 and $ 5,322 and $ 11,173 in the three and six months ended June 30, 2023, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three and six months ended June 30, 2024, respectively, were $ 4,098 and $ 8,147 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, 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.

Right-of-use assets obtained in exchange for operating lease liabilities were $ 7,071 and $ 10,617 during the three and six months ended June 30, 2024 and $ 1,438 and $ 5,334 during the three and six months ended June 30, 2023, respectively.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

March 31, 2024

June 30, 2024

Total lease payments

1 unchanged sentence

Operating lease liabilities

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

As of June 30, 2024 the weighted average remaining lease term is 6.6 years and the weighted average discount rate used to determine the operating lease liability is 3.7 %.

N OTE 10 — DEBT

Revolving Credit Agreements

On April 23, 2021, the Company amended and restated the agreement governing its line of credit by entering into the Second Amended and Restated Credit Agreement (“Credit Agreement”).

The Credit Agreement has a line of credit totaling $ 500,000 , has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $ 150,000 .

On March 8, 2023, the Credit Agreement was amended to replace the LIBOR rate to a term secured overnight finance rate (“SOFR”);

as such, the interest rate on borrowings is based on SOFR plus a spread of 0.85 % to 1.85 % based on (1) the Company’s net leverage ratio and (2) a credit spread adjustment.

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

As of March 31, 2024, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement.

On June 20, 2024, the Company terminated its existing $ 500,000 revolving credit facility and entered into a new $ 1 billion revolving credit facility, which may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $ 300,000 .

The new revolving credit facility matures on June 20, 2029.

The new revolving credit facility will initially bear interest on outstanding borrowings at a per annum rate equal to secured overnight finance rate (“SOFR”) plus 1.10 % and could fluctuate based on the Company’s total net leverage ratio at a spread ranging from SOFR plus 1.10 % to SOFR plus 1.60 %.

The financial covenants consist of a maximum net leverage ratio of 3.5 x EBITDA and a minimum interest coverage ratio of 2.5 x EBITDA.

The new revolving credit facility 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, 2024, the Company was in compliance with all of its covenants and had no outstanding borrowings under the new revolving credit facility.

The Company has other lines of credit and debt agreements totaling $ 37,412 .

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 .

As of June 30, 2024, the Company was in compliance with all of its covenants and had outstanding debt under short-term lines of credit of $ 6,254 .

Senior Unsecured Notes

On June 20, 2024, the Company entered into a Note Purchase Agreement (the “NPA”) pursuant to which it agreed to issue new senior unsecured notes (“2024 Notes”) in an aggregate principal amount of $ 550,000 , at par.

Pursuant to the NPA, the Company issued one series of the 2024 Notes in the aggregate principal amount of $ 400,000 on June 20, 2024, and will issue two series of the 2024 Notes each in the aggregate principal amount of $ 75,000 on August 22, 2024.

The maturity and interest rates of the 2024 Notes are as follows:

Maturity Date

Interest Rate

August 22, 2029

August 22, 2031

June 20, 2034

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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.

1 unchanged sentence

Interest on the Notes is paid semi-annually.

The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3 % and 10.1 years, respectively.

The proceeds of the Notes were used for general corporate purposes.

The Notes contain certain affirmative and negative covenants.

As of March 31, 2024, the Company was in compliance with all of its debt covenants relating to the Notes.

The Company’s total weighted average effective interest rate and remaining weighted average tenure of the senior unsecured notes is 4.08 %, including the impact from terminated swap agreements as discussed in Note 12, and 9.5 years, respectively.

The senior unsecured notes contain certain affirmative and negative covenants.

As of June 30, 2024, the Company was in compliance with all of its debt covenants relating to the senior unsecured 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.

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.

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.

On June 20, 2024, the Company used the net proceeds from the issuance of the initial series of 2024 Notes to repay the Term Loan in full.

In June 2024, the Company terminated the interest rate swaps that were associated with the Term Loan and realized a gain of $ 2,428 , which is recorded in Other income (expense).

Fair Value of Debt

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.

At June 30, 2024 and December 31, 2023, the fair value of long-term debt, including the current portion, was approximately $ 1,017,606 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 $ 1,098,434 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.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 11 — INCOME TAXES

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.

The Company recognized $ 70,031 of tax expense on pretax income of $ 295,154 , resulting in an effective income tax rate of 23.7 % for the six months ended June 30, 2024.

The effective income tax rate was 21.1 % for the six months ended June 30, 2023.

The effective tax rate was higher for the six months ended June 30, 2024, as compared with the same period in 2023, primarily due to mix of earnings and discrete tax items.

As of June 30, 2024, the Company had $ 13,410 of unrecognized tax benefits.

If recognized, approximately $ 10,841 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 $ 1,864 in previously unrecognized tax benefits by the end of the first quarter 2025.

It is reasonably possible there could be a reduction of $ 1,855 in previously unrecognized tax benefits by the end of the second quarter 2025.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 12 — DERIVATIVES

1 unchanged sentence

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

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

Hedge ineffectiveness was immaterial in the three and six months ended June 30, 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 March 31, 2024.

None of the concentrations of risk with any individual counterparty was considered significant at June 30, 2024.

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 $ 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.

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 dollar equivalent gross notional amount of these short-term contracts was $ 92,413 at June 30, 2024 and $ 84,148 at December 31, 2023.

The Company had interest rate forward starting swap agreements that were qualified and designated as cash flow hedges that were terminated as of June 30, 2024.

At December 31, 2023, the dollar equivalent gross notional amount of the contracts was $ 100,000 .

Upon termination of the contracts in the second quarter of 2024, the Company had a gain of $ 25,852 recorded in AOCI that will be amortized to Interest expense, net over the life of the associated debt.

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.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The Notional amount of these contracts were 100,000 pounds and 200,000 pounds at June 30, 2024 and December 31, 2023, respectively.

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 June 2024, the Company terminated the interest rate swaps that were associated with the Term Loan and realized a gain of $ 2,428 , which is recorded in Other income (expense).

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 $ 117,578 at March 31, 2024 and $ 119,607 at December 31, 2023.

The dollar equivalent gross notional amount of these contracts was $ 116,645 and $ 119,607 at June 30, 2024 and December 31, 2023, respectively.

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 $ 416,200 and $ 492,600 at March 31, 2024 and December 31, 2023, respectively.

The dollar equivalent gross notional amount of these contracts was $ 385,255 and $ 492,600 at June 30, 2024 and December 31, 2023, respectively.

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

March 31, 2024

June 30, 2024

December 31, 2023

10 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Derivatives by hedge designation

5 unchanged sentences

The effects of designated hedges on AOCI and the Company’s Consolidated Statements of Income consisted of the following:

Total gain recognized in AOCI, net of tax

March 31, 2024

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

June 30, 2024

December 31, 2023

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 $ 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 March 31,

The Company expects a loss of $ 886 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

5 unchanged sentences

Cost of goods sold

Forward starting swap agreements

Interest expense, net

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 13 - FAIR VALUE

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

The following table provides a summary of assets and liabilities as of June 30, 2024, measured at fair value on a recurring basis:

Quoted Prices in

4 unchanged sentences

Observable Inputs

March 31, 2024

June 30, 2024

Inputs (Level 3)

2 unchanged sentences

Commodity contracts

Interest rate swap agreements

Forward starting swap agreements

Pension surplus

Foreign exchange contracts

Forward starting swap agreements

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, 2023, measured at fair value on a recurring basis:

17 unchanged sentences

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 March 31, 2024.

The pension surplus assets are invested in money market and short-term duration bond funds at June 30, 2024.

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 March 31, 2024 and December 31, 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 14 – SUPPLIER FINANCING PROGRAM

4 unchanged sentences

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.

At June 30, 2024 and December 31, 2023, Trade accounts payable included $ 36,081 and $ 29,111 , respectively, payable to suppliers that have elected to participate in the supplier financing program.

NOTE 15 – SUBSEQUENT EVENTS

On July 30, 2024, the Company acquired 100 % ownership of Vanair Manufacturing, LLC (“Vanair”), a privately held, Michigan City, Indiana-based, manufacturer for an agreed upon purchase price of $ 116,000 .

In 2023, Vanair generated sales of approximately $ 100,000 (unaudited).

Vanair offers the industry’s most comprehensive portfolio of mobile power solutions, including vehicle-mounted compressors, generators, welders, hydraulics, chargers/boosters, and electrified power equipment.

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