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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number: 0-1402

LINCOLN ELECTRIC HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

​

​ | ​ | ​
Ohio |  | 34-1860551
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
​ | ​ | ​
22801 St. Clair Avenue, Cleveland, Ohio | ​ | 44117 ​
(Address of principal executive offices) | ​ | (Zip Code) ​

​

(216) 481-8100

(Registrant’s telephone number, including area code)

​

​
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

​

Securities registered pursuant to Section 12(b) of the Act:

​

​ | ​ | ​
Title of each class | Trading Symbol | Name of exchange on which registered
Common Shares, without par value | LECO | The NASDAQ Stock Market LLC

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “small reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

​

​ | ​ | ​ | ​ | ​ | ​
Large accelerated filer | ☒ |  | Accelerated filer | ☐ | ​
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐ | ​
​ | ​ |  | Emerging growth company | ☐ | ​

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No 

The number of shares outstanding of the registrant’s common shares as of June 30, 2022 was 57,919,337.

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Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION | 3
Item 1. Financial Statements | 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | 3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | 4
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | 5
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) | 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS | 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 35
Item 4. Controls and Procedures | 35
PART II. OTHER INFORMATION | 36
Item 1. Legal Proceedings | 36
Item 1A. Risk Factors | 36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 36
Item 4. Mine Safety Disclosures | 36
Item 6. Exhibits | 37
Signatures | 38
​ | ​
EX-31.1 | Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
EX-31.2 | Certification of the Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
EX-32.1 | Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
EX-101 | Instance Document |
EX-101 | Schema Document |
EX-101 | Calculation Linkbase Document |
EX-101 | Label Linkbase Document |
EX-101 | Presentation Linkbase Document |
EX-101 | Definition Linkbase Document |

​

​

2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(In thousands, except per share amounts)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
Net sales (Note 2) |  | $ | 969,589 |  | $ | 826,454 |  | $ | 1,895,037 |  | $ | 1,583,475
Cost of goods sold | ​ |  | 636,108 | ​ |  | 552,445 | ​ |  | 1,231,779 | ​ |  | 1,055,699
Gross profit | ​ |  | 333,481 | ​ |  | 274,009 | ​ |  | 663,258 | ​ |  | 527,776
Selling, general & administrative expenses | ​ |  | 166,792 | ​ |  | 151,557 | ​ |  | 333,478 | ​ |  | 297,233
Rationalization and asset impairment charges (Note 6) | ​ |  | (844) | ​ |  | 630 | ​ |  | 1,041 | ​ |  | 4,793
Operating income | ​ |  | 167,533 | ​ |  | 121,822 | ​ |  | 328,739 | ​ |  | 225,750
Interest expense, net | ​ |  | 6,459 | ​ |  | 5,663 | ​ |  | 12,657 | ​ |  | 11,022
Other income (expense) (Note 14) | ​ |  | (1,134) | ​ |  | 1,702 | ​ |  | 3,500 | ​ |  | 286
Income before income taxes | ​ |  | 159,940 | ​ |  | 117,861 | ​ |  | 319,582 | ​ |  | 215,014
Income taxes (Note 15) | ​ |  | 32,118 | ​ |  | 21,581 | ​ |  | 65,729 | ​ |  | 44,601
Net income including non-controlling interests | ​ |  | 127,822 | ​ |  | 96,280 | ​ |  | 253,853 | ​ |  | 170,413
Non-controlling interests in subsidiaries’ income (loss) | ​ |  | (1) | ​ |  | 175 | ​ |  | — | ​ |  | 131
Net income | ​ | $ | 127,823 | ​ | $ | 96,105 | ​ | $ | 253,853 | ​ | $ | 170,282
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic earnings per share (Note 3) | ​ | $ | 2.20 | ​ | $ | 1.62 | ​ | $ | 4.35 | ​ | $ | 2.86
Diluted earnings per share (Note 3) | ​ | $ | 2.18 | ​ | $ | 1.60 | ​ | $ | 4.30 | ​ | $ | 2.83
Cash dividends declared per share | ​ | $ | 0.56 | ​ | $ | 0.51 | ​ | $ | 1.12 | ​ | $ | 1.02

​

See notes to these consolidated financial statements.

​

3

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
Net income including non-controlling interests |  | $ | 127,822 |  | $ | 96,280 |  | $ | 253,853 |  | $ | 170,413
Other comprehensive income (loss), net of tax: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $2,794 and $4,845 in the three and six months ended June 30, 2022; $(1,012) and $1,297 in the three and six months ended June 30, 2021 | ​ |  | 8,950 | ​ |  | (4,754) | ​ | ​ | 14,305 | ​ | ​ | 2,536
Defined benefit pension plan activity, net of tax of $382 and $459 in the three and six months ended June 30, 2022; $(569) and $246 in the three and six months ended June 30, 2021 | ​ |  | (44) | ​ |  | (1,702) | ​ | ​ | 63 | ​ | ​ | 3,358
Currency translation adjustment | ​ |  | (34,615) | ​ |  | 13,579 | ​ |  | (42,064) | ​ |  | (9,164)
Other comprehensive income (loss): | ​ |  | (25,709) | ​ |  | 7,123 | ​ |  | (27,696) | ​ |  | (3,270)
Comprehensive income | ​ |  | 102,113 | ​ |  | 103,403 | ​ |  | 226,157 | ​ |  | 167,143
Comprehensive income (loss) attributable to non-controlling interests | ​ |  | (20) | ​ |  | 65 | ​ |  | 115 | ​ |  | (138)
Comprehensive income attributable to shareholders | ​ | $ | 102,133 | ​ | $ | 103,338 | ​ | $ | 226,042 | ​ | $ | 167,281

​

See notes to these consolidated financial statements.

​

​

4

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30, 2022 | ​ | December 31, 2021
​ | ​ | (UNAUDITED) | ​ | (NOTE 1)
ASSETS |  | ​ |  |  | ​ |
Current Assets |  | ​ |  |  | ​ |
Cash and cash equivalents | ​ | $ | 152,796 | ​ | $ | 192,958
Accounts receivable (less allowance for doubtful accounts of $10,227 in 2022; $11,105 in 2021) | ​ |  | 518,371 | ​ |  | 429,074
Inventories (Note 9) | ​ |  | 639,393 | ​ |  | 539,919
Other current assets | ​ |  | 154,643 | ​ |  | 127,642
Total Current Assets | ​ |  | 1,465,203 | ​ |  | 1,289,593
Property, plant and equipment (less accumulated depreciation of $876,354 in 2022; $868,036 in 2021) | ​ | ​ | 503,088 | ​ | ​ | 511,744
Goodwill | ​ |  | 431,615 | ​ |  | 430,162
Other assets | ​ |  | 341,907 | ​ |  | 360,808
TOTAL ASSETS | ​ | $ | 2,741,813 | ​ | $ | 2,592,307
LIABILITIES AND EQUITY | ​ |  | ​ | ​ |  |
Current Liabilities | ​ |  | ​ | ​ |  |
Short-term debt (Note 12) | ​ | $ | 125,458 | ​ | $ | 52,730
Trade accounts payable | ​ |  | 364,495 | ​ |  | 330,230
Accrued employee compensation and benefits | ​ |  | 144,253 | ​ |  | 108,562
Other current liabilities | ​ |  | 269,477 | ​ |  | 264,383
Total Current Liabilities | ​ |  | 903,683 | ​ |  | 755,905
Long-term debt, less current portion (Note 12) | ​ |  | 712,908 | ​ |  | 717,089
Other liabilities | ​ |  | 212,239 | ​ |  | 255,404
Total Liabilities | ​ |  | 1,828,830 | ​ |  | 1,728,398
Shareholders' Equity | ​ |  | ​ | ​ |  |
Common Shares | ​ |  | 9,858 | ​ |  | 9,858
Additional paid-in capital | ​ |  | 465,624 | ​ |  | 451,268
Retained earnings | ​ |  | 3,160,920 | ​ |  | 2,970,303
Accumulated other comprehensive loss | ​ |  | (285,197) | ​ |  | (257,386)
Treasury Shares | ​ |  | (2,438,144) | ​ |  | (2,309,941)
Total Shareholders' Equity | ​ |  | 913,061 | ​ |  | 864,102
Non-controlling interests | ​ |  | (78) | ​ |  | (193)
Total Equity | ​ |  | 912,983 | ​ |  | 863,909
TOTAL LIABILITIES AND TOTAL EQUITY | ​ | $ | 2,741,813 | ​ | $ | 2,592,307

​

See notes to these consolidated financial statements.

​

​

​

5

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | Accumulated |  | ​ | ​ |  | ​ | ​ |  | ​ | ​
​ | ​ | Common | ​ | ​ | ​ | ​ | Additional | ​ | ​ | ​ | ​ | Other | ​ | ​ | ​ | ​ | Non- | ​ | ​ | ​
​ | ​ | Shares | ​ | Common | ​ | Paid-In | ​ | Retained | ​ | Comprehensive | ​ | Treasury | ​ | Controlling | ​ | ​ | ​
​ |  | Outstanding |  | Shares |  | Capital |  | Earnings |  | Income (Loss) |  | Shares |  | Interests |  | Total
Balance at December 31, 2021 |  | 58,787 | ​ | $ | 9,858 | ​ | $ | 451,268 | ​ | $ | 2,970,303 | ​ | $ | (257,386) | ​ | $ | (2,309,941) | ​ | $ | (193) | ​ | $ | 863,909
Net income |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 126,030 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1 | ​ |  | 126,031
Unrecognized amounts from defined benefit pension plans, net of tax |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 107 | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | 107
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 5,355 | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | 5,355
Currency translation adjustment |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (7,583) | ​ | ​ | ​ | ​ | ​ | 134 | ​ |  | (7,449)
Cash dividends declared - $0.56 per share |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (32,505) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | (32,505)
Stock-based compensation activity |  | 116 | ​ | ​ | ​ | ​ | ​ | 10,834 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,349 | ​ | ​ | ​ | ​ |  | 12,183
Purchase of shares for treasury |  | (805) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (104,579) | ​ | ​ | ​ | ​ |  | (104,579)
Other |  | ​ | ​ | ​ | ​ | ​ | ​ | 115 | ​ | ​ | (107) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | 8
Balance at March 31, 2022 |  | 58,098 | ​ | $ | 9,858 | ​ | $ | 462,217 | ​ | $ | 3,063,721 | ​ | $ | (259,507) | ​ | $ | (2,413,171) | ​ | $ | (58) | ​ | $ | 863,060
Net income |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 127,823 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (1) | ​ |  | 127,822
Unrecognized amounts from defined benefit pension plans, net of tax |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (44) | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | (44)
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 8,950 | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | 8,950
Currency translation adjustment |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (34,596) | ​ | ​ | ​ | ​ | ​ | (19) | ​ |  | (34,615)
Cash dividends declared – $0.56 per share |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (32,698) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | (32,698)
Stock-based compensation activity |  | 15 | ​ | ​ | ​ | ​ | ​ | 5,428 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 146 | ​ | ​ | ​ | ​ |  | 5,574
Purchase of shares for treasury |  | (191) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (25,119) | ​ | ​ | ​ | ​ |  | (25,119)
Other |  | ​ | ​ | ​ | ​ | ​ | ​ | (2,021) | ​ | ​ | 2,074 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | 53
Balance at June 30, 2022 |  | 57,922 | ​ | $ | 9,858 | ​ | $ | 465,624 | ​ | $ | 3,160,920 | ​ | $ | (285,197) | ​ | $ | (2,438,144) | ​ | $ | (78) | ​ | $ | 912,983

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Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | Accumulated |  | ​ | ​ |  | ​ | ​ |  | ​ | ​
​ | ​ | Common | ​ | ​ | ​ | ​ | Additional | ​ | ​ | ​ | ​ | Other | ​ | ​ | ​ | ​ | Non- | ​ | ​ | ​
​ | ​ | Shares | ​ | Common | ​ | Paid-In | ​ | Retained | ​ | Comprehensive | ​ | Treasury | ​ | Controlling | ​ | ​ | ​
​ |  | Outstanding |  | Shares |  | Capital |  | Earnings |  | Income (Loss) |  | Shares |  | Interests |  | Total
Balance at December 31, 2020 |  | 59,641 | ​ | $ | 9,858 | ​ | $ | 409,958 | ​ | $ | 2,821,359 | ​ | $ | (302,190) | ​ | $ | (2,149,714) | ​ | $ | 979 | ​ | $ | 790,250
Net income |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 74,177 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (44) | ​ |  | 74,133
Unrecognized amounts from defined benefit pension plans, net of tax |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 5,060 | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | 5,060
Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 7,290 | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | 7,290
Currency translation adjustment |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (22,584) | ​ | ​ | ​ | ​ | ​ | (159) | ​ |  | (22,743)
Cash dividends declared – $0.51 per share |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (30,572) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | (30,572)
Stock-based compensation activity |  | 134 | ​ | ​ | ​ | ​ | ​ | 7,680 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,502 | ​ | ​ | ​ | ​ |  | 9,182
Purchase of shares for treasury |  | (237) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (28,459) | ​ | ​ | ​ | ​ |  | (28,459)
Other |  | ​ | ​ | ​ | ​ | ​ | ​ | 891 | ​ | ​ | (741) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (883) | ​ |  | (733)
Balance at March 31, 2021 |  | 59,538 | ​ | $ | 9,858 | ​ | $ | 418,529 | ​ | $ | 2,864,223 | ​ | $ | (312,424) | ​ | $ | (2,176,671) | ​ | $ | (107) | ​ | $ | 803,408
Net income |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  | 96,105 | ​ |  | ​ | ​ |  | ​ | ​ |  | 175 | ​ |  | 96,280
Unrecognized amounts from defined benefit pension plans, net of tax |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  | ​ | ​ |  | (1,702) | ​ |  | ​ | ​ |  | ​ | ​ |  | (1,702)
Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  | ​ | ​ |  | (4,754) | ​ |  | ​ | ​ |  | ​ | ​ |  | (4,754)
Currency translation adjustment |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  | ​ | ​ |  | 13,689 | ​ |  | ​ | ​ |  | (110) | ​ |  | 13,579
Cash dividends declared – $0.51 per share |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  | (30,552) | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | (30,552)
Stock-based compensation activity |  | 46 | ​ |  |  | ​ |  | 8,638 | ​ |  | ​ | ​ |  | ​ | ​ |  | 503 | ​ |  | ​ | ​ |  | 9,141
Purchase of shares for treasury |  | (197) | ​ |  |  | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | (25,229) | ​ |  | ​ | ​ |  | (25,229)
Other |  | ​ | ​ |  |  | ​ |  | 409 | ​ |  | (957) | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | (548)
Balance at June 30, 2021 |  | 59,387 | ​ | $ | 9,858 | ​ | $ | 427,576 | ​ | $ | 2,928,819 | ​ | $ | (305,191) | ​ | $ | (2,201,397) | ​ | $ | (42) | ​ | $ | 859,623

​

​

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LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30,
|  | 2022 |  | 2021
CASH FLOWS FROM OPERATING ACTIVITIES |  | ​ |  | ​ | ​ |
Net income | ​ | $ | 253,853 | ​ | $ | 170,282
Non-controlling interests in subsidiaries' income (loss) | ​ |  | — | ​ |  | 131
Net income including non-controlling interests | ​ |  | 253,853 | ​ |  | 170,413
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | ​ |  | ​ | ​ |  |
Rationalization and asset impairment net gains (Note 6) | ​ |  | (113) | ​ |  | (1,374)
Depreciation and amortization | ​ |  | 39,759 | ​ |  | 38,508
Equity earnings in affiliates, net | ​ |  | (180) | ​ |  | (291)
Deferred income taxes | ​ |  | (21,772) | ​ |  | (20,995)
Stock-based compensation | ​ |  | 16,340 | ​ |  | 12,651
Other, net | ​ |  | 9,254 | ​ |  | 3,524
Changes in operating assets and liabilities, net of effects from acquisitions: | ​ |  | ​ | ​ |  |
Increase in accounts receivable | ​ |  | (103,959) | ​ |  | (87,571)
Increase in inventories | ​ |  | (112,594) | ​ |  | (83,186)
Increase in other current assets | ​ |  | (26,169) | ​ |  | (12,007)
Increase in trade accounts payable | ​ |  | 44,252 | ​ |  | 63,275
Increase in other current liabilities | ​ |  | 47,343 | ​ |  | 59,128
Net change in other assets and liabilities | ​ |  | (4,713) | ​ |  | 3,159
NET CASH PROVIDED BY OPERATING ACTIVITIES | ​ |  | 141,301 | ​ |  | 145,234
CASH FLOWS FROM INVESTING ACTIVITIES | ​ |  | ​ | ​ |  |
Capital expenditures | ​ |  | (34,602) | ​ |  | (27,768)
Acquisition of businesses, net of cash acquired | ​ |  | (22,095) | ​ |  | (83,723)
Proceeds from sale of property, plant and equipment | ​ |  | 1,692 | ​ |  | 2,557
Other investing activities | ​ |  | — | ​ |  | 6,500
NET CASH USED BY INVESTING ACTIVITIES | ​ |  | (55,005) | ​ |  | (102,434)
CASH FLOWS FROM FINANCING ACTIVITIES | ​ |  | ​ | ​ |  |
Net change in borrowings | ​ |  | 71,829 | ​ |  | 1,163
Proceeds from exercise of stock options | ​ |  | 1,417 | ​ |  | 5,672
Purchase of shares for treasury (Note 8) | ​ |  | (129,698) | ​ |  | (53,688)
Cash dividends paid to shareholders | ​ |  | (65,914) | ​ |  | (61,379)
Other financing activities | ​ |  | — | ​ |  | (763)
NET CASH USED BY FINANCING ACTIVITIES | ​ |  | (122,366) | ​ |  | (108,995)
Effect of exchange rate changes on Cash and cash equivalents | ​ |  | (4,092) | ​ |  | (200)
DECREASE IN CASH AND CASH EQUIVALENTS | ​ |  | (40,162) | ​ |  | (66,395)
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents at beginning of period | ​ |  | 192,958 | ​ |  | 257,279
CASH AND CASH EQUIVALENTS AT END OF PERIOD | ​ | $ | 152,796 | ​ | $ | 190,884

​

See notes to these consolidated financial statements.

​

​

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest (the “Company”) after elimination of all inter-company accounts, transactions and profits.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. However, in the opinion of management, these unaudited consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

The accompanying Consolidated Balance Sheet at December 31, 2021 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

In March 2022, in response to Russia’s invasion of Ukraine, the Company announced it was ceasing operations in Russia and implementing plans to support its Russian employees. Although the Company’s Net sales and Total assets in Russia are less than 1% of consolidated Net sales for the year ended December 31, 2021 and less than 1% of consolidated Total assets as of December 31, 2021, the Russia-Ukraine conflict and sanctions imposed globally may result in economic and supply chain disruptions, the ultimate financial impact of which cannot be reasonably estimated at this time. The Company will continue to monitor the Russia-Ukraine conflict and its potential impacts.

Turkey – Highly Inflationary Economy

An economy is considered highly inflationary under GAAP if the cumulative inflation rate for a three-year period meets or exceeds 100 percent. The Turkish economy exceeded the three-year cumulative inflation rate of 100 percent during the second quarter of 2022. As a result, the financial statements of the Company’s Turkish operation are reported under highly inflationary accounting rules as of April 1, 2022. Under highly inflationary accounting, the financial statements of the Company’s Turkish operation have been remeasured into the Company’s reporting currency (U.S. dollar). For the second quarter 2022, the exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than “Accumulated other comprehensive loss” on the balance sheet. As of June 30, 2022, this impact was not significant to the Company’s results.

Management has evaluated and disclosed all material events occurring subsequent to the date of the financial statements up to July 28, 2022, the filing date of this Quarterly Report on Form 10-Q.

​

New Accounting Pronouncements:

There were no new accounting pronouncements ("Accounting Standard Updates" or "ASUs") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company as of January 1, 2022.

​

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 2 — REVENUE RECOGNITION

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
Consumables | ​ | $ | 568,855 | ​ | $ | 475,559 | ​ | $ | 1,108,017 | ​ | $ | 909,738
Equipment | ​ |  | 400,734 | ​ |  | 350,895 | ​ |  | 787,020 | ​ |  | 673,737
Net sales | ​ | $ | 969,589 | ​ | $ | 826,454 | ​ | $ | 1,895,037 | ​ | $ | 1,583,475

​

Consumable sales consist of electrodes, fluxes, specialty welding consumables and brazing and soldering alloys. Equipment sales consist of arc welding power sources, welding accessories, fabrication, plasma cutters, wire feeding systems, automated joining, assembly and cutting systems, fume extraction equipment, CNC plasma and oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. Consumable and Equipment products are sold within each of the Company’s operating segments.

Within the Equipment product line, there are certain customer contracts related to automation products that may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines the standalone selling price based on the prices charged to customers or using expected cost plus margin. Less than 10% of the Company’s Net sales are recognized over time.

At June 30, 2022, the Company recorded $62,793 related to advance customer payments and $32,728 related to billings in excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Condensed Consolidated Balance Sheets. At December 31, 2021, the balances related to advance customer payments and billings in excess of revenue recognized were $72,047 and $40,450, respectively. Substantially all of the Company’s contract liabilities are recognized within twelve months based on contract duration. The Company records an asset for contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services. At June 30, 2022 and December 31, 2021, the Company recorded $38,651 and $25,300, respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets. Contract asset amounts are expected to be billed within the next twelve months.

​

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,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
Numerator: |  | ​ | ​ |  | ​ |  |  | ​ |  |  | ​ |
Net income | ​ | $ | 127,823 | ​ | $ | 96,105 | ​ | $ | 253,853 | ​ | $ | 170,282
Denominator (shares in 000's): | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​
Basic weighted average shares outstanding | ​ |  | 58,016 | ​ |  | 59,464 | ​ |  | 58,311 | ​ |  | 59,553
Effect of dilutive securities - Stock options and awards | ​ |  | 672 | ​ |  | 700 | ​ |  | 659 | ​ |  | 676
Diluted weighted average shares outstanding | ​ |  | 58,688 | ​ |  | 60,164 | ​ |  | 58,970 | ​ |  | 60,229
Basic earnings per share | ​ | $ | 2.20 | ​ | $ | 1.62 | ​ | $ | 4.35 | ​ | $ | 2.86
Diluted earnings per share | ​ | $ | 2.18 | ​ | $ | 1.60 | ​ | $ | 4.30 | ​ | $ | 2.83

​

For the three months ended June 30, 2022 and 2021, common shares subject to equity-based awards of 62,987 and 179,861, respectively, were excluded from the computation of diluted earnings per share because the

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

effect of their exercise would be anti-dilutive. For the six months ended June 30, 2022 and 2021, common shares subject to equity-based awards of 108,497 and 134,388, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

During March 2022, the Company acquired Kestra Universal Soldas, Industria e Comercio, Imporacao e Exportacao Ltda. (“Kestra”), a privately held manufacturer headquartered in Atibaia, Sao Paulo State, Brazil. 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.

​

During July 2021, the Company acquired Overstreet-Hughes Company, Inc. and Shoals Tubular, Inc. (“FTP”). FTP manufactures copper and aluminum headers, distributor assemblies and manifolds in the United States and Mexico for the heating, ventilation, and air conditioning sector (“HVAC”). The acquisition further differentiated The Harris Products Group’s competitive position serving HVAC original equipment manufacturers with a comprehensive portfolio of solutions for the fabrication of HVAC coils and accelerates growth in this market.

​

During April 2021, the Company acquired Zeman Bauelemente Produktionsgesellschaft m.b.H. (“Zeman"), a division of the Zeman Group. Zeman, based in Vienna, Austria, is a leading designer and manufacturer of robotic assembly and arc welding systems that automate the tacking and welding of steel beams. The acquisition expanded the Company’s international automation capabilities to serve customers in the structural steel and infrastructure sectors.

​

Pro forma information related to the acquisitions discussed above has not been presented because the impact on the Company’s Consolidated Statements of Income is not material. The preliminary purchase price allocations are expected to be finalized within the allowable measurement period. The acquired companies are included in the Company's consolidated financial statements as of the date of acquisition.

​

NOTE 5 — SEGMENT INFORMATION

The Company’s business units are aligned into three operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global oxy-fuel cutting, soldering and brazing businesses as well as its retail business in the United States.

Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the adjusted earnings before interest and income taxes (“Adjusted EBIT”) profit measure. EBIT is defined as Operating income plus Other income (expense). EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following table presents Adjusted EBIT by segment:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | The Harris | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Americas | ​ | International | ​ | Products | ​ | Corporate / | ​ | ​ | ​
​ |  | Welding |  | Welding |  | Group |  | Eliminations |  | Consolidated
Three Months Ended June 30, 2022 |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Net sales | ​ | $ | 595,659 | ​ | $ | 236,629 | ​ | $ | 137,301 | ​ | $ | — | ​ | $ | 969,589
Inter-segment sales | ​ |  | 29,031 | ​ | ​ | 9,527 | ​ | ​ | 2,866 | ​ | ​ | (41,424) | ​ | ​ | —
Total | ​ | $ | 624,690 | ​ | $ | 246,156 | ​ | $ | 140,167 | ​ | $ | (41,424) | ​ | $ | 969,589
Adjusted EBIT | ​ | $ | 118,067 | ​ | $ | 35,009 | ​ | $ | 17,922 | ​ | $ | (3,984) | ​ | $ | 167,014
Special items charge (gain) (1) | ​ |  | 461 | ​ | ​ | 154 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 615
EBIT | ​ | $ | 117,606 | ​ | $ | 34,855 | ​ | $ | 17,922 | ​ | $ | (3,984) | ​ | $ | 166,399
Interest income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 228
Interest expense | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (6,687)
Income before income taxes | ​ | ​ | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ | $ | 159,940
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Three Months Ended June 30, 2021 | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Net sales | ​ | $ | 457,468 | ​ | $ | 252,352 | ​ | $ | 116,634 | ​ | $ | — | ​ | $ | 826,454
Inter-segment sales | ​ |  | 39,765 | ​ |  | 6,897 | ​ |  | 2,284 | ​ |  | (48,946) | ​ | ​ | —
Total | ​ | $ | 497,233 | ​ | $ | 259,249 | ​ | $ | 118,918 | ​ | $ | (48,946) | ​ | $ | 826,454
Adjusted EBIT | ​ | $ | 84,134 | ​ | $ | 29,997 | ​ | $ | 18,212 | ​ | $ | (3,888) | ​ | $ | 128,455
Special items charge (gain) (2) | ​ |  | 1,650 | ​ |  | 2,471 | ​ |  | — | ​ |  | 810 | ​ | ​ | 4,931
EBIT | ​ | $ | 82,484 | ​ | $ | 27,526 | ​ | $ | 18,212 | ​ | $ | (4,698) | ​ | $ | 123,524
Interest income | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | 398
Interest expense | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | (6,061)
Income before income taxes | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ | $ | 117,861
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Six Months Ended June 30, 2022 | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  |
Net sales | ​ | $ | 1,129,714 | ​ | $ | 494,670 | ​ | $ | 270,653 | ​ | $ | — | ​ | $ | 1,895,037
Inter-segment sales | ​ |  | 57,187 | ​ |  | 15,755 | ​ |  | 5,928 | ​ |  | (78,870) | ​ | ​ | —
Total | ​ | $ | 1,186,901 | ​ | $ | 510,425 | ​ | $ | 276,581 | ​ | $ | (78,870) | ​ | $ | 1,895,037
Adjusted EBIT | ​ | $ | 229,635 | ​ | $ | 72,096 | ​ | $ | 37,520 | ​ | $ | (8,785) | ​ | $ | 330,466
Special items charge (gain) (1) | ​ |  | (3,274) | ​ |  | 1,501 | ​ |  | — | ​ |  | — | ​ | ​ | (1,773)
EBIT | ​ | $ | 232,909 | ​ | $ | 70,595 | ​ | $ | 37,520 | ​ | $ | (8,785) | ​ | $ | 332,239
Interest income | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | 604
Interest expense | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | (13,261)
Income before income taxes | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ | $ | 319,582
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Six Months Ended June 30, 2021 | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  |
Net sales | ​ | $ | 882,710 | ​ | $ | 475,431 | ​ | $ | 225,334 | ​ | $ | — | ​ | $ | 1,583,475
Inter-segment sales | ​ |  | 72,513 | ​ |  | 11,182 | ​ |  | 4,431 | ​ |  | (88,126) | ​ | ​ | —
Total | ​ | $ | 955,223 | ​ | $ | 486,613 | ​ | $ | 229,765 | ​ | $ | (88,126) | ​ | $ | 1,583,475
Adjusted EBIT | ​ | $ | 160,751 | ​ | $ | 48,813 | ​ | $ | 36,909 | ​ | $ | (5,344) | ​ | $ | 241,129
Special items charge (gain) (2) | ​ |  | 6,090 | ​ |  | 7,080 | ​ |  | — | ​ |  | 1,923 | ​ | ​ | 15,093
EBIT | ​ | $ | 154,661 | ​ | $ | 41,733 | ​ | $ | 36,909 | ​ | $ | (7,267) | ​ | $ | 226,036
Interest income | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | 852
Interest expense | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | (11,874)
Income before income taxes | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ | $ | 215,014

​

| (1) | 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, the final settlement related to the termination of a pension plan of $3,735 in Americas Welding.

| (2) | In the three and six months ended June 30, 2021, special items reflect Rationalization and asset impairment charges of $630 and $4,793, respectively, in International Welding, amortization of step up in value of acquired

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

|  | inventories of $1,841 in International Welding and pension settlement charges of $1,650 and $6,536 in Americas Welding, respectively, and $446 in International Welding in the six months ended June 30, 2021. Also in the three and six months ended June 30, 2021, special items reflect acquisition transaction costs of $810 and $1,923, respectively, in Corporate/Eliminations.

​

NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS

The Company recorded Rationalization and asset impairment net charges of $1,041 and $4,793 in the six months ended June 30, 2022 and 2021, respectively. The charges are primarily related to employee severance, non-cash asset impairments of long-lived assets and gains or losses on the disposal of assets.

During 2021, the Company initiated rationalization plans within the International Welding segment. The plans include headcount restructuring and the consolidation of manufacturing operations to better align the Company’s cost structure with economic conditions and operating needs. At June 30, 2022, liabilities of $1,871 for International Welding were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

The Company believes the rationalization actions will positively impact future results of operations and will not have a material effect on liquidity and sources and uses of capital. The Company continues to evaluate its cost structure and additional rationalization actions may result in charges in future periods.

The following table summarizes the activity related to rationalization liabilities for the six months ended June 30, 2022:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | International |  | ​
​ |  | Welding |  | Consolidated
Balance at December 31, 2021 | ​ | $ | 2,990 | ​ | $ | 2,990
Payments and other adjustments | ​ |  | (2,068) | ​ |  | (2,068)
Charged to expense | ​ |  | 949 | ​ |  | 949
Balance at June 30, 2022 | ​ | $ | 1,871 | ​ | $ | 1,871

​

​

13

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 7 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ("AOCI")

The following tables set forth the total changes in accumulated other comprehensive income (loss) ("AOCI") by component, net of taxes:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, 2022
​ | ​ | Unrealized gain | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | (loss) on derivatives | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | designated and | ​ | Defined benefit | ​ | Currency | ​ | ​ | ​
​ | ​ | qualifying as cash | ​ | pension plan | ​ | translation | ​ | ​ | ​
​ | ​ | flow hedges | ​ | activity | ​ | adjustment | ​ | Total
Balance at March 31, 2022 | ​ | $ | 13,449 | ​ | $ | (13,124) | ​ | $ | (259,832) | ​ | $ | (259,507)
Other comprehensive income (loss) before reclassification | ​ |  | 9,439 | ​ | ​ | — | ​ | ​ | (34,596) | 3 | ​ | (25,157)
Amounts reclassified from AOCI | ​ |  | (489) | 1 | ​ | (44) | 2 | ​ | — | ​ | ​ | (533)
Net current-period other comprehensive income (loss) | ​ |  | 8,950 | ​ |  | (44) | ​ |  | (34,596) | ​ |  | (25,690)
Balance at June 30, 2022 | ​ | $ | 22,399 | ​ | $ | (13,168) | ​ | $ | (294,428) | ​ | $ | (285,197)

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, 2021
​ | ​ | Unrealized gain | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | (loss) on derivatives | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | designated and | ​ | Defined benefit | ​ | Currency | ​ | ​ | ​
​ | ​ | qualifying as cash | ​ | pension plan | ​ | translation | ​ | ​ | ​
​ | ​ | flow hedges | ​ | activity | ​ | adjustment | ​ | Total
Balance at March 31, 2021 | ​ | $ | 9,777 | ​ | $ | (96,710) | ​ | $ | (225,491) | ​ | $ | (312,424)
Other comprehensive income (loss) before reclassification | ​ |  | (5,089) | ​ |  | (2,587) | ​ |  | 13,689 | 3 |  | 6,013
Amounts reclassified from AOCI | ​ |  | 335 | 1 |  | 885 | 2 |  | — | ​ |  | 1,220
Net current-period other comprehensive income (loss) | ​ |  | (4,754) | ​ |  | (1,702) | ​ |  | 13,689 | ​ |  | 7,233
Balance at June 30, 2021 | ​ | $ | 5,023 | ​ | $ | (98,412) | ​ | $ | (211,802) | ​ | $ | (305,191)

​

| (1) | During the three months ended June 30, 2022, the AOCI 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)); during the three months ended June 30, 2021, the reclassification is a component of Net sales of $70 (net of tax of $27) and Cost of goods sold of $405 (net of tax of $90). See Note 16 to the consolidated financial statements for additional details.

​

| (2) | This AOCI component is included in the computation of net periodic pension costs (net of tax of $165 and $1,445) during the three months ended June 30, 2022 and 2021, respectively. See Note 13 to the consolidated financial statements for additional details.

| (3) | The Other comprehensive income (loss) before reclassifications excludes $(19) and $(110) attributable to Non-controlling interests in the three months ended June 30, 2022 and 2021, respectively.

​

​

​

​

​

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30, 2022
​ | ​ | Unrealized gain | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | (loss) on derivatives | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | designated and | ​ | Defined benefit | ​ | Currency | ​ | ​ | ​
​ | ​ | qualifying as cash | ​ | pension plan | ​ | translation | ​ | ​ | ​
​ | ​ | flow hedges | ​ | activity | ​ | adjustment | ​ | Total
Balance at December 31, 2021 | ​ | $ | 8,094 | ​ | $ | (13,231) | ​ | $ | (252,249) | ​ | $ | (257,386)
Other comprehensive income (loss) before reclassification | ​ |  | 15,288 | ​ | ​ | — | ​ | ​ | (42,179) | 3 | ​ | (26,891)
Amounts reclassified from AOCI | ​ |  | (983) | 1 | ​ | 63 | 2 | ​ | — | ​ | ​ | (920)
Net current-period other comprehensive income (loss) | ​ |  | 14,305 | ​ |  | 63 | ​ |  | (42,179) | ​ |  | (27,811)
Balance at June 30, 2022 | ​ | $ | 22,399 | ​ | $ | (13,168) | ​ | $ | (294,428) | ​ | $ | (285,197)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30, 2021
​ | ​ | Unrealized gain | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | (loss) on derivatives | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | designated and | ​ | Defined benefit | ​ | Currency | ​ | ​ | ​
​ | ​ | qualifying as cash | ​ | pension plan | ​ | translation | ​ | ​ | ​
​ | ​ | flow hedges | ​ | activity | ​ | adjustment | ​ | Total
Balance at December 31, 2020 | ​ | $ | 2,487 | ​ | $ | (101,770) | ​ | $ | (202,907) | ​ | $ | (302,190)
Other comprehensive income (loss) before reclassification | ​ |  | 1,977 | ​ |  | (1,985) | ​ |  | (8,895) | 3 |  | (8,903)
Amounts reclassified from AOCI | ​ |  | 559 | 1 |  | 5,343 | 2 |  | — | ​ |  | 5,902
Net current-period other comprehensive income (loss) | ​ |  | 2,536 | ​ |  | 3,358 | ​ |  | (8,895) | ​ |  | (3,001)
Balance at June 30, 2021 | ​ | $ | 5,023 | ​ | $ | (98,412) | ​ | $ | (211,802) | ​ | $ | (305,191)

| (1) | During the six months ended June 30, 2022, the AOCI 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)); during the six months ended June 30, 2021, the reclassification is a component of Net sales of $172 (net of tax of $69) and Cost of goods sold of $731 (net of tax of $243). See Note 16 to the consolidated financial statements for additional details.

| (2) | This AOCI component is included in the computation of net periodic pension costs (net of tax of $179 and $2,901) during the six months ended June 30, 2022 and 2021, respectively. See Note 13 to the consolidated financial statements for additional details.

| (3) | The Other comprehensive income (loss) before reclassifications excludes $115 and $ (269) attributable to Non-controlling interests in the six months ended June 30, 2022 and 2021, respectively.

NOTE 8 — COMMON STOCK REPURCHASE PROGRAM

The Company has a share repurchase program for up to 10 million shares of the Company’s common shares. From time to time at management’s discretion, the Company repurchases its common shares in the open market, depending on market conditions, stock price and other factors. During the three months ended June 30, 2022, the Company purchased a total of 0.2 million shares at an average cost per share of $131.68. During the six months ended June 30, 2022, the Company purchased a total of 1.0 million shares at an average cost per share of $130.31. As of June 30, 2022, 9.3 million common shares remained available for repurchase under these programs. The repurchased common shares remain in treasury and have not been retired.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 9 — INVENTORIES

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ | ​ | ​
​ |  | June 30, 2022 |  | December 31, 2021
Raw materials | ​ | $ | 179,412 | ​ | $ | 143,394
Work-in-process | ​ |  | 111,748 | ​ |  | 97,834
Finished goods | ​ |  | 348,233 | ​ |  | 298,691
Total | ​ | $ | 639,393 | ​ | $ | 539,919

​

At June 30, 2022 and December 31, 2021, approximately 37% and 36%, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method. The excess of current cost over LIFO cost was $131,488 and $114,176 at June 30, 2022 and December 31, 2021, respectively.

NOTE 10 — LEASES

The table below summarizes the right-of-use assets and lease liabilities in the Company’s Condensed Consolidated Balance sheets:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating Leases |  | Balance Sheet Classification |  | June 30, 2022 |  | December 31, 2021
Right-of-use assets |  | Other assets | ​ | $ | 43,812 | ​ | $ | 47,966
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current liabilities |  | Other current liabilities | ​ | $ | 9,571 | ​ | $ | 10,218
Noncurrent liabilities |  | Other liabilities | ​ |  | 35,610 | ​ |  | 38,960
Total lease liabilities |  |  | ​ | $ | 45,181 | ​ | $ | 49,178

​

Total lease expense, which is included in Cost of goods sold and Selling, general & administrative expenses in the Company’s Consolidated Statements of Income, was $5,862 and $11,061 in the three and six months ended June 30, 2022 and $5,608 and $10,660 in the three and six months ended June 30, 2021, respectively. 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. Cash paid for amounts included in the measurement of lease liabilities for the three and six months ended June 30, 2021, respectively, were $3,263 and $6,652 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 $742 and $3,479 during the three and six months ended June 30, 2022 and $9,694 for the three and six months ended June 30, 2021, respectively.

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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:

​

​ | ​ | ​ | ​
​ |  | June 30, 2022
2022 | ​ | $ | 5,463
2023 | ​ |  | 10,378
2024 | ​ |  | 8,903
2025 | ​ |  | 5,852
2026 | ​ |  | 4,480
After 2026 | ​ |  | 15,926
Total lease payments | ​ | $ | 51,002
Less: Imputed interest | ​ |  | 5,821
Operating lease liabilities | ​ | $ | 45,181

​

As of June 30, 2022, the weighted average remaining lease term is 8.2 years and the weighted average discount rate used to determine the operating lease liability is 3.02%.

NOTE 11 — PRODUCT WARRANTY COSTS

The changes in the carrying amount of product warranty accruals are as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended June 30,
​ |  | 2022 |  | 2021
Balance at beginning of year | ​ | $ | 20,466 | ​ | $ | 21,760
Accruals for warranties | ​ |  | 6,330 | ​ |  | 7,637
Settlements | ​ |  | (6,957) | ​ |  | (6,603)
Foreign currency translation and other adjustments | ​ |  | (392) | ​ |  | (176)
Balance at end of period | ​ | $ | 19,447 | ​ | $ | 22,618

​

​

NOTE 12 — DEBT

Revolving Credit Agreements

On April 23, 2021, the Company amended and restated the agreement governing its line of credit by entering into the Second Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement has a line of credit totaling $500,000, has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $150,000. The interest rate on borrowings is based on LIBOR plus a spread based on the Company’s net leverage ratio. The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. As of June 30, 2022, the Company was in compliance with all of its covenants and had $85,000 of outstanding borrowings under the Credit Agreement.

The Company has other lines of credit totaling $103,956. As of June 30, 2022, the Company was in compliance with all of its covenants and had $29,421 outstanding at June 30, 2022.

Senior Unsecured Notes

On April 1, 2015 and October 20, 2016, the Company entered into separate Note Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each

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Dollars in thousands, except per share amounts

have an aggregate principal amount of $350,000, comprised of four different series ranging from $50,000 to $100,000, with maturity dates ranging from August 20, 2025 through April 1, 2045, and interest rates ranging from 2.75% to 4.02%. Interest on the Notes is paid semi-annually. The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and 11.9 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of June 30, 2022, the Company was in compliance with all of its debt covenants relating to the Notes.

Shelf Agreements

On November 27, 2018, the Company entered into seven uncommitted master note facilities (the "Shelf Agreements") that allow borrowings up to $700,000 in the aggregate. The Shelf Agreements have a term of 5 years and the average life of borrowings cannot exceed 15 years. The Company is required to comply with covenants similar to those contained in the Notes. As of June 30, 2022, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

Fair Value of Debt

At June 30, 2022 and December 31, 2021, the fair value of long-term debt, including the current portion, was approximately $639,863 and $776,655, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $723,945 and $717,855, respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange.

NOTE 13 — RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

The components of total pension cost were as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30, | ​
​ | ​ | 2022 | ​ | 2021 | ​ | 2022 | ​ | 2021 | ​
​ | ​ | U.S. pension | ​ | Non-U.S. | ​ | U.S. pension | ​ | Non-U.S. | ​ | U.S. pension | ​ | Non-U.S. | ​ | U.S. pension | ​ | Non-U.S. | ​
​ |  | plans |  | pension plans |  | plans |  | pension plans |  | plans |  | pension plans |  | plans |  | pension plans |
Service cost | ​ | $ | 49 | ​ | $ | 268 | ​ | $ | 48 | ​ | $ | 324 | ​ | $ | 99 | ​ | $ | 573 | ​ | $ | 97 | ​ | $ | 795 | ​
Interest cost | ​ |  | 65 | ​ | ​ | 636 | ​ |  | 3,072 | ​ |  | 392 | ​ |  | 131 | ​ |  | 1,340 | ​ |  | 6,053 | ​ |  | 1,008 | ​
Expected return on plan assets | ​ |  | — | ​ | ​ | (874) | ​ |  | (4,198) | ​ |  | (537) | ​ |  | — | ​ |  | (1,878) | ​ |  | (8,707) | ​ |  | (1,509) | ​
Amortization of prior service cost | ​ |  | — | ​ | ​ | — | ​ |  | — | ​ |  | (1) | ​ |  | — | ​ |  | (1) | ​ |  | — | ​ |  | 11 | ​
Amortization of net loss | ​ |  | 45 | ​ | ​ | 76 | ​ |  | 670 | ​ |  | 11 | ​ |  | 89 | ​ |  | 154 | ​ |  | 1,251 | ​ |  | 446 | ​
Settlement charges (gains) (1) | ​ |  | — | ​ | ​ | — | ​ |  | 1,650 | ​ |  | — | ​ |  | (3,735) | ​ |  | — | ​ |  | 6,090 | ​ |  | 446 | ​
Defined benefit plans | ​ | ​ | 159 | ​ | ​ | 106 | ​ | ​ | 1,242 | ​ | ​ | 189 | ​ | ​ | (3,416) | ​ | ​ | 188 | ​ | ​ | 4,784 | ​ | ​ | 1,197 | ​
Multi-employer plans | ​ | ​ | — | ​ | ​ | 105 | ​ | ​ | — | ​ | ​ | 258 | ​ | ​ | — | ​ | ​ | 215 | ​ | ​ | — | ​ | ​ | 502 | ​
Defined contribution plans | ​ | ​ | 6,295 | ​ | ​ | 980 | ​ | ​ | 5,872 | ​ | ​ | 553 | ​ | ​ | 12,330 | ​ | ​ | 1,605 | ​ | ​ | 11,034 | ​ | ​ | 1,398 | ​
Total pension cost | ​ | $ | 6,454 | ​ | $ | 1,191 | ​ | $ | 7,114 | ​ | $ | 1,000 | ​ | $ | 8,914 | ​ | $ | 2,008 | ​ | $ | 15,818 | ​ | $ | 3,097 | ​

​

| (1) | Gains in the six months ended June 30, 2022 related to the final settlement associated with the termination of a pension plan. Charges primarily resulting from lump sum pension payments in the three and six months ended June 30, 2021.

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

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 14 — OTHER INCOME (EXPENSE)

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
Equity earnings in affiliates | ​ | $ | 67 |  | $ | 114 | ​ | $ | 180 | ​ | $ | 291
Other components of net periodic pension (cost) income (1) | ​ |  | 52 |  |  | (1,059) | ​ |  | 3,900 | ​ |  | (5,089)
Other income (expense) | ​ |  | (1,253) |  |  | 2,647 | ​ |  | (580) | ​ |  | 5,084
Total Other income (expense) | ​ | $ | (1,134) |  | $ | 1,702 | ​ | $ | 3,500 | ​ | $ | 286

​

| (1) | Other components of net periodic pension (cost) income includes pension settlements and curtailments as discussed in Note 13 to the consolidated financial statements.

NOTE 15 — INCOME TAXES

The Company recognized $65,729 of tax expense on pretax income of $319,582, resulting in an effective income tax rate of 20.6% for the six months ended June 30, 2022. The effective income tax rate was 20.7% for the six months ended June 30, 2021.

The effective tax rate was lower for the six months ended June 30, 2022, as compared with the same period in 2021, primarily due to favorable discrete tax adjustments in 2022 and geographic mix of earnings.

As of June 30, 2022, the Company had $19,890 of unrecognized tax benefits. If recognized, approximately $16,649 would be reflected as a component of income tax expense.

The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2017. The Company is currently subject to U.S., various state and non-U.S. income tax audits.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a reduction of $3,649 in previously unrecognized tax benefits by the end of the second quarter 2023.

NOTE 16 — DERIVATIVES

The Company uses derivative instruments to manage exposures to currency exchange rates, interest rates and commodity prices arising in the normal course of business. Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable. Hedge ineffectiveness was immaterial in the six months ended June 30, 2022 and 2021.

The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. None of the concentrations of risk with any individual counterparty was considered significant at June 30, 2022. The Company does not expect any counterparties to fail to meet their obligations.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Cash Flow Hedges

The Company has certain foreign currency forward contracts that are qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $58,312 at June 30, 2022 and $72,630 at December 31, 2021.

The Company has interest rate forward starting swap agreements that are qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at June 30, 2022 and December 31, 2021 and have a termination date of August 2025.

The Company has commodity contracts with a notional amount of 800,000 pounds and 975,000 pounds at June 30, 2022 and December 31, 2021, respectively, that are qualified and designated as cash flow hedges.

Net Investment Hedges

The Company has cross currency swap agreements that are qualified and designated as net investment hedges. The dollar equivalent gross notional amount of these contracts is $25,000 as of June 30, 2022 and December 31, 2021, respectively.

The Company has foreign currency forward contracts that qualify and are designated as net investment hedges. The dollar equivalent gross notional amount of these short-term contracts was $86,992 at June 30, 2022 and $94,479 at December 31, 2021.

Derivatives Not Designated as Hedging Instruments

The Company has certain foreign exchange forward contracts that are not designated as hedges. These derivatives are held as economic hedges of certain balance sheet exposures. The dollar equivalent gross notional amount of these contracts was $223,992 and $301,685 at June 30, 2022 and December 31, 2021, respectively.

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | June 30, 2022 | ​ | December 31, 2021
​ | Other | ​ | Other | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Other | ​ | Other | ​ | ​ | ​ | ​ | ​ | ​
​ | Current | ​ | Current | ​ | Other | ​ | Other | ​ | Current | ​ | Current | ​ | Other | ​ | Other
Derivatives by hedge designation | Assets |  | Liabilities |  | Assets |  | Liabilities |  | Assets |  | Liabilities |  | Assets |  | Liabilities
Designated as hedging instruments: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Foreign exchange contracts | $ | 1,482 | ​ | $ | 365 | ​ | $ | — | ​ | $ | — | ​ | $ | 772 | ​ | $ | 535 | ​ | $ | — | ​ | $ | —
Forward starting swap agreements | ​ | — | ​ | ​ | — | ​ | ​ | 16,481 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 6,990 | ​ | ​ | —
Net investment contracts | ​ | 7,160 | ​ | ​ | — | ​ | ​ | 1,143 | ​ | ​ | — | ​ | ​ | 2,095 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 608
Commodity contracts | ​ | 9 | ​ | ​ | 346 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 311 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Not designated as hedging instruments: |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  |
Foreign exchange contracts |  | 2,400 | ​ | ​ | 446 | ​ | ​ | — | ​ | ​ | — | ​ |  | 4,656 | ​ |  | 3,445 | ​ |  | — | ​ |  | —
Total derivatives | $ | 11,051 | ​ | $ | 1,157 | ​ | $ | 17,624 | ​ | $ | — | ​ | $ | 7,834 | ​ | $ | 3,980 | ​ | $ | 6,990 | ​ | $ | 608

​

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | Three Months Ended June 30, |  | Six Months Ended June 30,
Derivatives by hedge designation |  | Classification of gain (loss) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Not designated as hedges: | ​ |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ |
Foreign exchange contracts | ​ | Selling, general & administrative expenses | ​ | $ | (1,359) | ​ | $ | 7,164 | ​ | $ | 538 | ​ | $ | 5,878
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

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, 2022 |  | December 31, 2021 |
Foreign exchange contracts | ​ | $ | 994 | ​ | $ | 284 | ​
Forward starting swap agreements | ​ | ​ | 12,429 | ​ | ​ | 5,232 | ​
Net investment contracts | ​ | ​ | 9,238 | ​ |  | 2,339 | ​
Commodity Contracts | ​ |  | (262) | ​ |  | 239 | ​

​

The Company expects a loss of $732 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 (loss) recognized in the | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative type |  | Consolidated Statements of Income: |  | 2022 |  | 2021 |  | 2022 |  | 2021
Foreign exchange contracts |  | Sales | ​ | $ | 181 | ​ | $ | 97 | ​ | $ | 361 | ​ | $ | 241
​ |  | Cost of goods sold | ​ |  | 343 | ​ |  | (495) | ​ |  | 628 | ​ |  | (974)
Commodity contracts | ​ | Cost of goods sold | ​ | ​ | 110 | ​ | ​ | — | ​ | ​ | 280 | ​ | ​ | —

​

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Dollars in thousands, except per share amounts

NOTE 17 - FAIR VALUE

The following table provides a summary of assets and liabilities as of June 30, 2022, measured at fair value on a recurring basis:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | Quoted Prices in |  | ​ | ​ |  | ​ | ​
​ | ​ | ​ | ​ | ​ | Active Markets for | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Identical Assets or | ​ | Significant Other | ​ | Significant
​ | ​ | Balance as of | ​ | Liabilities | ​ | Observable Inputs | ​ | Unobservable
Description |  | June 30, 2022 |  | (Level 1) |  | (Level 2) |  | Inputs (Level 3)
Assets: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Foreign exchange contracts | ​ | $ | 3,882 | ​ | $ | — | ​ | $ | 3,882 | ​ | $ | —
Net investment contracts | ​ | ​ | 8,303 | ​ | ​ | — | ​ | ​ | 8,303 | ​ | ​ | —
Commodity contracts | ​ | ​ | 9 | ​ | ​ | — | ​ | ​ | 9 | ​ | ​ | —
Forward starting swap agreements | ​ |  | 16,481 | ​ |  | — | ​ |  | 16,481 | ​ |  | —
Pension surplus | ​ | ​ | 61,625 | ​ | ​ | 61,625 | ​ | ​ | — | ​ | ​ | —
Total assets | ​ | $ | 90,300 | ​ | $ | 61,625 | ​ | $ | 28,675 | ​ | $ | —
Liabilities: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Foreign exchange contracts | ​ | $ | 811 | ​ | $ | — | ​ | $ | 811 | ​ | $ | —
Commodity contracts | ​ | ​ | 346 | ​ | ​ | — | ​ | ​ | 346 | ​ | ​ | —
Deferred compensation | ​ |  | 38,604 | ​ |  | — | ​ |  | 38,604 | ​ |  | —
Total liabilities | ​ | $ | 39,761 | ​ | $ | — | ​ | $ | 39,761 | ​ | $ | —

​

The following table provides a summary of assets and liabilities as of December 31, 2021, measured at fair value on a recurring basis:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | Quoted Prices in |  | ​ | ​ |  | ​ | ​
​ | ​ | ​ | ​ | ​ | Active Markets for | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Identical Assets or | ​ | Significant Other | ​ | Significant
​ | ​ | Balance as of | ​ | Liabilities | ​ | Observable Inputs | ​ | Unobservable
Description |  | December 31, 2021 |  | (Level 1) |  | (Level 2) |  | Inputs (Level 3)
Assets: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Foreign exchange contracts | ​ | $ | 5,428 | ​ | $ | — | ​ | $ | 5,428 | ​ | $ | —
Net investment contracts | ​ | ​ | 2,095 | ​ | ​ | — | ​ | ​ | 2,095 | ​ | ​ | —
Commodity contracts | ​ | ​ | 311 | ​ | ​ | — | ​ | ​ | 311 | ​ | ​ | —
Forward starting swap agreements | ​ |  | 6,990 | ​ |  | — | ​ |  | 6,990 | ​ |  | —
Total assets | ​ | $ | 14,824 | ​ | $ | — | ​ | $ | 14,824 | ​ | $ | —
Liabilities: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Foreign exchange contracts | ​ | $ | 3,980 | ​ | $ | — | ​ | $ | 3,980 | ​ | $ | —
Net investment contracts | ​ |  | 608 | ​ |  | — | ​ |  | 608 | ​ |  | —
Deferred compensation | ​ |  | 41,612 | ​ |  | — | ​ |  | 41,612 | ​ |  | —
Total liabilities | ​ | $ | 46,200 | ​ | $ | — | ​ | $ | 46,200 | ​ | $ | —

​

The Company’s derivative contracts are valued at fair value using the market approach. The Company measures the fair value of foreign exchange contracts, swap agreements and net investment contracts using Level 2 inputs based on observable spot and forward rates in active markets.

The deferred compensation liability is the Company’s obligation under its executive deferred compensation plan. The Company measures the fair value of the liability using the market values of the participants’ underlying investment fund elections.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The fair value of Cash and cash equivalents, Accounts receivable, Short-term debt excluding the current portion of long-term debt and Trade accounts payable approximated book value due to the short-term nature of these instruments at both June 30, 2022 and December 31, 2021.

The fair value of the Company’s pension surplus assets are based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy. The pension surplus assets are invested in money market and short-term duration bond funds at June 30, 2022.

The Company has various financial instruments, including cash and cash equivalents, short and long-term debt and forward contracts. While these financial instruments are subject to concentrations of credit risk, the Company has minimized this risk by entering into arrangements with a number of major banks and financial institutions and investing in several high-quality instruments. The Company does not expect any counterparties to fail to meet their obligations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share amounts)

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with the Company’s unaudited consolidated financial statements and other financial information included elsewhere in this Quarterly Report on Form 10-Q.

General

The Company is the world’s largest designer and manufacturer of arc welding and cutting products, manufacturing a broad line of arc welding equipment, consumable welding products and other welding and cutting products. Welding products include arc welding power sources, computer numerical control and plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes, welding accessories and specialty welding consumables and fabrication. The Company’s product offering also includes oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. In addition, the Company has a leading global position in the brazing and soldering alloys market.

The Company’s products are sold in both domestic and international markets. In the Americas, products are sold principally through industrial distributors, retailers and directly to users of welding products. Outside of the Americas, the Company has an international sales organization comprised of Company employees and agents who sell products from the Company’s various manufacturing sites to distributors and product users.

The Company’s business units are aligned into three operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global oxy-fuel cutting, soldering and brazing businesses as well as its retail business in the United States.

In March 2022, in response to Russia’s invasion of Ukraine, the Company announced it was ceasing operations in Russia and implementing plans to support its Russian employees. Although the Company’s Net sales and Total assets in Russia are less than 1% of consolidated Net sales for the year ended December 31, 2021 and less than 1% of consolidated Total assets as of December 31, 2021, the Russia-Ukraine conflict and sanctions imposed globally may result in economic and supply chain disruptions, the ultimate financial impact of which cannot be reasonably estimated at this time. The Company will continue to monitor the Russia-Ukraine conflict and its potential impacts.

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Results of Operations

The following table shows the Company’s results of operations:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Three Months Ended June 30, |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Favorable (Unfavorable) |
​ | 2022 | ​ | 2021 | ​ | 2022 vs. 2021 | ​
​ | Amount |  | % of Sales |  | Amount |  | % of Sales |  | $ |  | % |
Net sales | $ | 969,589 | ​ | ​ | ​ | ​ | $ | 826,454 |  | ​ | ​ | $ | 143,135 |  | 17.3 | %
Cost of goods sold |  | 636,108 | ​ |  | ​ | ​ |  | 552,445 |  | ​ | ​ |  | (83,663) |  | (15.1) | %
Gross profit |  | 333,481 | ​ |  | 34.4 | % |  | 274,009 |  | 33.2 | % |  | 59,472 |  | 21.7 | %
Selling, general & administrative expenses |  | 166,792 | ​ |  | 17.2 | % |  | 151,557 |  | 18.3 | % |  | (15,235) |  | (10.1) | %
Rationalization and asset impairment charges |  | (844) | ​ |  | 0.1 | % |  | 630 |  | 0.1 | % |  | 1,474 |  | 234.0 | %
Operating income |  | 167,533 | ​ |  | 17.3 | % |  | 121,822 |  | 14.7 | % |  | 45,711 |  | 37.5 | %
Interest expense, net |  | 6,459 | ​ |  | ​ | ​ |  | 5,663 |  | ​ | ​ |  | (796) |  | (14.1) | %
Other income (expense) |  | (1,134) | ​ |  | ​ | ​ |  | 1,702 |  | ​ | ​ |  | (2,836) |  | (166.6) | %
Income before income taxes |  | 159,940 | ​ |  | 16.5 | % |  | 117,861 |  | 14.3 | % |  | 42,079 |  | 35.7 | %
Income taxes |  | 32,118 | ​ |  | ​ | ​ |  | 21,581 |  | ​ | ​ |  | (10,537) |  | (48.8) | %
Effective tax rate |  | 20.1 | % |  | ​ | ​ |  | 18.3 | % | ​ | ​ |  | (1.8) | % | ​ | ​
Net income including non-controlling interests |  | 127,822 | ​ |  | ​ | ​ |  | 96,280 |  | ​ | ​ |  | 31,542 |  | 32.8 | %
Non-controlling interests in subsidiaries' loss |  | (1) | ​ |  | ​ | ​ |  | 175 |  | ​ | ​ |  | (176) |  | (100.6) | %
Net income | $ | 127,823 | ​ |  | 13.2 | % | $ | 96,105 |  | 11.6 | % | $ | 31,718 |  | 33.0 | %
Diluted earnings per share | $ | 2.18 | ​ | ​ | ​ | ​ | $ | 1.60 |  |  | ​ | $ | 0.58 |  | 36.7 | %

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Six Months Ended June 30, |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Favorable (Unfavorable) |
​ | 2022 | ​ | 2021 | ​ | 2022 vs. 2021 | ​
​ | Amount |  | % of Sales |  | Amount |  | % of Sales |  | $ |  | % |
Net sales | $ | 1,895,037 | ​ | ​ | ​ | ​ | $ | 1,583,475 |  | ​ | ​ | $ | 311,562 |  | 19.7 | %
Cost of goods sold |  | 1,231,779 | ​ |  | ​ | ​ |  | 1,055,699 |  | ​ | ​ |  | (176,080) |  | (16.7) | %
Gross profit |  | 663,258 | ​ |  | 35.0 | % |  | 527,776 |  | 33.3 | % |  | 135,482 |  | 25.7 | %
Selling, general & administrative expenses |  | 333,478 | ​ |  | 17.6 | % |  | 297,233 |  | 18.8 | % |  | (36,245) |  | (12.2) | %
Rationalization and asset impairment charges |  | 1,041 | ​ |  | 0.1 | % |  | 4,793 |  | 0.3 | % |  | 3,752 |  | 78.3 | %
Operating income |  | 328,739 | ​ |  | 17.3 | % |  | 225,750 |  | 14.3 | % |  | 102,989 |  | 45.6 | %
Interest expense, net |  | 12,657 | ​ |  | ​ | ​ |  | 11,022 |  | ​ | ​ |  | (1,635) |  | (14.8) | %
Other income (expense) |  | 3,500 | ​ |  | ​ | ​ |  | 286 |  | ​ | ​ |  | 3,214 |  | 1,123.8 | %
Income before income taxes |  | 319,582 | ​ |  | 16.9 | % |  | 215,014 |  | 13.6 | % |  | 104,568 |  | 48.6 | %
Income taxes |  | 65,729 | ​ |  | ​ | ​ |  | 44,601 |  | ​ | ​ |  | (21,128) |  | (47.4) | %
Effective tax rate |  | 20.6 | % |  | ​ | ​ |  | 20.7 | % | ​ | ​ |  | 0.1 | % | ​ | ​
Net income including non-controlling interests |  | 253,853 | ​ |  | ​ | ​ |  | 170,413 |  | ​ | ​ |  | 83,440 |  | 49.0 | %
Non-controlling interests in subsidiaries' loss |  | — | ​ |  | ​ | ​ |  | 131 |  | ​ | ​ |  | (131) |  | (100.0) | %
Net income | $ | 253,853 | ​ |  | 13.4 | % | $ | 170,282 |  | 10.8 | % | $ | 83,571 |  | 49.1 | %
Diluted earnings per share | $ | 4.30 | ​ | ​ | ​ | ​ | $ | 2.83 |  |  | ​ | $ | 1.47 |  | 51.9 | %

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​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

Net Sales:

The following table summarizes the impact of volume, acquisitions, price and foreign currency exchange rates on Net sales on a consolidated basis:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Three Months Ended June 30, | ​ |  | ​ |  | Change in Net Sales due to: | ​ |  | ​ |
​ | ​ | Net Sales | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Foreign | ​ | Net Sales | ​
​ |  | 2021 |  | Volume |  | Acquisitions |  | Price |  | Exchange |  | 2022 |
Lincoln Electric Holdings, Inc. | ​ | $ | 826,454 | ​ | $ | 27,848 | ​ | $ | 23,844 | ​ | $ | 141,487 |  | $ | (50,044) | ​ | $ | 969,589 | ​
% Change | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  |  |  | ​ | ​ |  |  | ​
Lincoln Electric Holdings, Inc. | ​ | ​ | ​ | ​ |  | 3.4 | % |  | 2.9 | % |  | 17.1 | % | ​ | (6.1) | % | ​ | 17.3 | %

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Six Months Ended June 30, | ​ |  | ​ |  | Change in Net Sales due to: | ​ |  | ​ |
​ | ​ | Net Sales | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Foreign | ​ | Net Sales | ​
​ |  | 2021 |  | Volume |  | Acquisitions |  | Price |  | Exchange |  | 2022 |
Lincoln Electric Holdings, Inc. | ​ | $ | 1,583,475 | ​ | $ | 51,970 | ​ | $ | 58,673 | ​ | $ | 284,618 |  | $ | (83,699) | ​ | $ | 1,895,037 | ​
% Change | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ |  |  |  |  | ​ | ​ |  |  | ​
Lincoln Electric Holdings, Inc. | ​ | ​ | ​ | ​ |  | 3.3 | % |  | 3.7 | % |  | 18.0 | % | ​ | (5.3) | % | ​ | 19.7 | %

​

Net sales increased in the three and six months ended June 30, 2022 driven by higher demand levels, increased product pricing as a result of higher input costs and the impact of acquisitions, partially offset by unfavorable foreign exchange.

Gross Profit:

Gross profit for the three and six months ended June 30, 2022 increased 21.7% and 25.7%, respectively, driven by higher volumes, the impact of cost reduction initiatives and pricing actions taken to offset higher input costs. Last-in, first-out (“LIFO”) charges were $10,424 and $17,312 in three and six months ended June 30, 2022, respectively, as compared with charges of $9,474 and $13,328 in the same 2021 periods.

Selling, General & Administrative ("SG&A") Expenses:

SG&A expenses increased for the three and six months ended June 30, 2022 as compared to the same 2021 period, primarily due to higher employee costs.

Other Income (Expense):

Other income (expense) includes non-operating income and expense, primarily including other components of net periodic pension costs. Refer to Note 14 to the consolidated financial statements for details.

Income Taxes:

The effective tax rate was higher for the three months ended June 30, 2022 as compared to the same period in 2021, primarily due to geographic mix of earnings. The effective tax rate was lower for the six months ended June 30, 2022 as compared to the same period in 2021, primarily due to favorable discrete tax adjustments in 2022 and geographic mix of earnings.

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Segment Results

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Three Months Ended June 30, | ​ | ​ |  | Change in Net Sales due to: |  |  | ​ |
​ | Net Sales | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Foreign | ​ | Net Sales | ​
​ | 2021 |  | Volume |  | Acquisitions (1) |  | Price (2) |  | Exchange (3) |  | 2022 | ​
Operating Segments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Americas Welding | $ | 457,468 | ​ | $ | 45,284 | ​ | $ | 5,437 | ​ | $ | 89,854 |  | $ | (2,384) | ​ | $ | 595,659 | ​
International Welding | ​ | 252,352 | ​ |  | (16,862) | ​ |  | — |  | ​ | 46,813 |  | ​ | (45,674) | ​ |  | 236,629 | ​
The Harris Products Group | ​ | 116,634 | ​ |  | (574) | ​ |  | 18,407 |  | ​ | 4,820 |  | ​ | (1,986) | ​ |  | 137,301 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
% Change | ​ |  | ​ |  |  | ​ |  |  |  | ​ |  |  | ​ |  | ​ |  |  | ​
Americas Welding | ​ | ​ | ​ | ​ | 9.9 | % |  | 1.2 | % | ​ | 19.6 | % | ​ | (0.5) | % | ​ | 30.2 | %
International Welding | ​ | ​ | ​ | ​ | (6.7) | % |  | — | ​ | ​ | 18.6 | % | ​ | (18.1) | % | ​ | (6.2) | %
The Harris Products Group | ​ | ​ | ​ | ​ | (0.5) | % |  | 15.8 | % | ​ | 4.1 | % | ​ | (1.7) | % | ​ | 17.7 | %

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Six Months Ended June 30, | ​ | ​ |  | Change in Net Sales due to: |  |  | ​ |
​ | Net Sales |  | ​ | ​ | ​ | ​ | ​ | ​ | Foreign |  | Net Sales |
​ | 2021 | ​ | Volume |  | Acquisitions (1) |  | Price (2) |  | Exchange (3) | ​ | 2022 | ​
Operating Segments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Americas Welding | $ | 882,710 | ​ | $ | 67,288 | ​ | $ | 7,182 | ​ | $ | 174,072 |  | $ | (1,538) | ​ | $ | 1,129,714 | ​
International Welding | ​ | 475,431 | ​ |  | (17,886) | ​ |  | 17,632 |  | ​ | 99,003 |  | ​ | (79,510) | ​ |  | 494,670 | ​
The Harris Products Group | ​ | 225,334 | ​ |  | 2,568 | ​ |  | 33,859 |  | ​ | 11,543 |  | ​ | (2,651) | ​ |  | 270,653 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
% Change | ​ |  | ​ |  |  | ​ |  |  |  | ​ |  |  | ​ |  | ​ |  |  | ​
Americas Welding | ​ | ​ | ​ | ​ | 7.6 | % |  | 0.8 | % | ​ | 19.7 | % | ​ | (0.2) | % | ​ | 28.0 | %
International Welding | ​ | ​ | ​ | ​ | (3.8) | % |  | 3.7 | % | ​ | 20.8 | % | ​ | (16.7) | % | ​ | 4.0 | %
The Harris Products Group | ​ | ​ | ​ | ​ | 1.1 | % |  | 15.0 | % | ​ | 5.1 | % | ​ | (1.2) | % | ​ | 20.1 | %

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

| (1) | Increases for the three and six months ended June 30, 2022 were due to the acquisitions discussed in Note 4 to the consolidated financial statements.

| (2) | Increase for the three and six months ended June 30, 2022 in Americas Welding and International Welding reflects increased product pricing as a result of higher input costs. Increase for The Harris Products Group was also due to increased commodity costs.

| (3) | Decrease for the three and six months ended June 30, 2022 in International Welding primarily due to the devaluation of the Turkish Lira and Euro.

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Adjusted Earnings Before Interest and Income Taxes:

Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the Adjusted EBIT profit measure. EBIT is defined as Operating income plus Other income (expense). EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets.

The following table presents Adjusted EBIT by segment:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Favorable (Unfavorable) |
​ | ​ | Three Months Ended June 30, | ​ | 2022 vs. 2021 |
​ |  | 2022 |  | 2021 |  | $ |  | % |
Americas Welding: |  | ​ |  |  | ​ |  | ​ |  |  | ​ |  | ​
Net sales | ​ | $ | 595,659 | ​ | $ | 457,468 | ​ | $ | 138,191 | ​ | 30.2 | %
Inter-segment sales | ​ |  | 29,031 | ​ |  | 39,765 | ​ |  | (10,734) | ​ | (27.0) | %
Total Sales | ​ | $ | 624,690 | ​ | $ | 497,233 | ​ | ​ | 127,457 | ​ | 25.6 | %
Adjusted EBIT (4) | ​ | $ | 118,067 | ​ | $ | 84,134 | ​ | ​ | 33,933 | ​ | 40.3 | %
As a percent of total sales (1) | ​ |  | 18.9 | % |  | 16.9 | % | ​ | ​ | ​ | 2.0 | %
International Welding: | ​ |  | ​ | ​ |  |  | ​ | ​ |  | ​ |  | ​
Net sales | ​ | $ | 236,629 | ​ | $ | 252,352 | ​ | ​ | (15,723) | ​ | (6.2) | %
Inter-segment sales | ​ |  | 9,527 | ​ |  | 6,897 | ​ | ​ | 2,630 | ​ | 38.1 | %
Total Sales | ​ | $ | 246,156 | ​ | $ | 259,249 | ​ | ​ | (13,093) | ​ | (5.1) | %
Adjusted EBIT (5) | ​ | $ | 35,009 | ​ | $ | 29,997 | ​ | ​ | 5,012 | ​ | 16.7 | %
As a percent of total sales (2) | ​ |  | 14.2 | % |  | 11.6 | % | ​ | ​ | ​ | 2.6 | %
The Harris Products Group: | ​ |  | ​ | ​ |  |  | ​ | ​ |  | ​ |  | ​
Net sales | ​ | $ | 137,301 | ​ | $ | 116,634 | ​ | ​ | 20,667 | ​ | 17.7 | %
Inter-segment sales | ​ |  | 2,866 | ​ |  | 2,284 | ​ | ​ | 582 | ​ | 25.5 | %
Total Sales | ​ | $ | 140,167 | ​ | $ | 118,918 | ​ | ​ | 21,249 | ​ | 17.9 | %
Adjusted EBIT | ​ | $ | 17,922 | ​ | $ | 18,212 | ​ | ​ | (290) | ​ | (1.6) | %
As a percent of total sales (3) | ​ |  | 12.8 | % |  | 15.3 | % | ​ | ​ | ​ | (2.5) | %
Corporate / Eliminations: | ​ |  | ​ | ​ |  |  | ​ | ​ |  | ​ |  | ​
Inter-segment sales | ​ | $ | (41,424) | ​ | $ | (48,946) | ​ | ​ | 7,522 | ​ | 15.4 | %
Adjusted EBIT (6) | ​ |  | (3,984) | ​ |  | (3,888) | ​ | ​ | (96) | ​ | (2.5) | %
Consolidated: | ​ |  | ​ | ​ |  |  | ​ | ​ |  | ​ |  | ​
Net sales | ​ | $ | 969,589 | ​ | $ | 826,454 | ​ | ​ | 143,135 | ​ | 17.3 | %
Net income | ​ | $ | 127,823 | ​ | $ | 96,105 | ​ | ​ | 31,718 | ​ | 33.0 | %
As a percent of total sales | ​ |  | 13.2 | % |  | 11.6 | % | ​ | ​ | ​ | 1.6 | %
Adjusted EBIT (7) | ​ | $ | 167,014 | ​ | $ | 128,455 | ​ | ​ | 38,559 | ​ | 30.0 | %
As a percent of sales | ​ |  | 17.2 | % |  | 15.5 | % |  | ​ | ​ | 1.7 | %

​

| (1) | Increase for the three months ended June 30, 2022 as compared to June 30, 2021 primarily driven by higher volumes, the impact of profit improvement initiatives and pricing actions taken to offset higher input costs, partially offset by higher employee costs.

| (2) | Increase for the three months ended June 30, 2022 as compared to June 30, 2021 primarily driven by pricing actions taken to offset higher input costs and cost reduction initiatives.

| (3) | Decrease for the three months ended June 30, 2022 as compared to June 30, 2021 primarily driven by acquisition integration activities, unfavorable mix and declining commodity pricing in certain metal offerings.

| (4) | The three months ended June 30, 2022 exclude the amortization of step up in value of acquired inventories of $1,459 related to an acquisition as discussed in Note 4 to the consolidated financial statements and

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|  | Rationalization and asset impairment net gains of $998 as discussed in Note 6 to the consolidated financial statements. The three months ended June 30, 2021 exclude pension settlement charges of $1,650.

| (5) | The three months ended June 30, 2022 and June 30, 2021 exclude Rationalization and asset impairment charges of $154 and $630, respectively, as discussed in Note 6 to the consolidated financial statements. The three months ended June 30, 2021 also exclude the amortization of step up in value of acquired inventories of $1,841, related to an acquisition as discussed in Note 4 to the consolidated financial statements.

| (6) | The three months ended June 30, 2021 exclude acquisition transaction costs of $810.

| (7) | See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT.

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Favorable (Unfavorable) |  | ​
​ | ​ | Six Months Ended June 30, | ​ | 2022 vs. 2021 |  | ​
​ |  | 2022 |  | 2021 |  | $ |  | % |  |
Americas Welding: |  | ​ |  |  | ​ |  | ​ |  |  | ​ |  | ​ |
Net sales | ​ | $ | 1,129,714 | ​ | $ | 882,710 | ​ | $ | 247,004 | ​ | 28.0 | % | ​
Inter-segment sales | ​ |  | 57,187 | ​ |  | 72,513 | ​ |  | (15,326) | ​ | (21.1) | % | ​
Total Sales | ​ | $ | 1,186,901 | ​ | $ | 955,223 | ​ | ​ | 231,678 | ​ | 24.3 | % | ​
Adjusted EBIT (4) | ​ | $ | 229,635 | ​ | $ | 160,751 | ​ | ​ | 68,884 | ​ | 42.9 | % | ​
As a percent of total sales (1) | ​ |  | 19.3 | % |  | 16.8 | % | ​ | ​ | ​ | 2.5 | % | ​
International Welding: | ​ |  | ​ | ​ |  |  | ​ | ​ |  | ​ |  | ​ | ​
Net sales | ​ | $ | 494,670 | ​ | $ | 475,431 | ​ | ​ | 19,239 | ​ | 4.0 | % | ​
Inter-segment sales | ​ |  | 15,755 | ​ |  | 11,182 | ​ | ​ | 4,573 | ​ | 40.9 | % | ​
Total Sales | ​ | $ | 510,425 | ​ | $ | 486,613 | ​ | ​ | 23,812 | ​ | 4.9 | % | ​
Adjusted EBIT (5) | ​ | $ | 72,096 | ​ | $ | 48,813 | ​ | ​ | 23,283 | ​ | 47.7 | % | ​
As a percent of total sales (2) | ​ |  | 14.1 | % |  | 10.0 | % | ​ | ​ | ​ | 4.1 | % | ​
The Harris Products Group: | ​ |  | ​ | ​ |  |  | ​ | ​ |  | ​ |  | ​ | ​
Net sales | ​ | $ | 270,653 | ​ | $ | 225,334 | ​ | ​ | 45,319 | ​ | 20.1 | % | ​
Inter-segment sales | ​ |  | 5,928 | ​ |  | 4,431 | ​ | ​ | 1,497 | ​ | 33.8 | % | ​
Total Sales | ​ | $ | 276,581 | ​ | $ | 229,765 | ​ | ​ | 46,816 | ​ | 20.4 | % | ​
Adjusted EBIT | ​ | $ | 37,520 | ​ | $ | 36,909 | ​ | ​ | 611 | ​ | 1.7 | % | ​
As a percent of total sales (3) | ​ |  | 13.6 | % |  | 16.1 | % | ​ | ​ | ​ | (2.5) | % | ​
Corporate / Eliminations: | ​ |  | ​ | ​ |  |  | ​ | ​ |  | ​ |  | ​ | ​
Inter-segment sales | ​ | $ | (78,870) | ​ | $ | (88,126) | ​ | ​ | 9,256 | ​ | 10.5 | % | ​
Adjusted EBIT (6) | ​ |  | (8,785) | ​ |  | (5,344) | ​ | ​ | (3,441) | ​ | (64.4) | % | ​
Consolidated: | ​ |  | ​ | ​ |  |  | ​ | ​ |  | ​ |  | ​ | ​
Net sales | ​ | $ | 1,895,037 | ​ | $ | 1,583,475 | ​ | ​ | 311,562 | ​ | 19.7 | % | ​
Net income | ​ | $ | 253,853 | ​ | $ | 170,282 | ​ | ​ | 83,571 | ​ | 49.1 | % | ​
As a percent of total sales | ​ |  | 13.4 | % |  | 10.8 | % | ​ | ​ | ​ | 2.6 | % | ​
Adjusted EBIT (7) | ​ | $ | 330,466 | ​ | $ | 241,129 | ​ | ​ | 89,337 | ​ | 37.0 | % | ​
As a percent of sales | ​ |  | 17.4 | % |  | 15.2 | % |  | ​ | ​ | 2.2 | % | ​

​

| (1) | Increase for the six months ended June 30, 2022 as compared to June 30, 2021 primarily driven by higher volumes, the impact of profit improvement initiatives and pricing actions taken to offset higher input costs, partially offset by higher employee costs.

| (2) | Increase for the six months ended June 30, 2022 as compared to June 30, 2021 primarily driven by pricing actions taken to offset higher input costs and cost reduction initiatives.

| (3) | Decrease for the six months ended June 30, 2022 as compared to June 30, 2021 driven primarily by acquisition integration activities, unfavorable mix and declining commodity pricing in certain metal offerings.

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| (4) | The six months ended June 30, 2022 exclude a favorable adjustment related to the termination of a pension plan of $3,735, the amortization of step up in value of acquired inventories of $1,459 as discussed in Note 4 to the consolidated financial statements and Rationalization and asset impairment net gains of $988 as discussed in Note 6 to the consolidated financial statements. The three months ended June 30, 2021 exclude pension settlement charges of $6,536.

| (5) | The six months ended June 30, 2022 and 2021 exclude Rationalization and asset impairment charges of $2,039 and $4,793, respectively, as discussed in Note 6 to the consolidated financial statements. The six months ended June 30, 2021 also excludes the amortization of step up in value of acquired inventories of $1,841, as discussed in Note 4 to the consolidated financial statements.

| (6) | The six months ended June 30, 2021 exclude acquisition transaction costs of $1,923.

| (7) | See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT.

Non-GAAP Financial Measures

The Company reviews Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share, Return on invested capital, Cash conversion and Organic sales, all non-GAAP financial measures, in assessing and evaluating the Company’s underlying operating performance. These non-GAAP financial measures exclude the impact of special items on the Company’s reported financial results. Non-GAAP financial measures should be read in conjunction with the generally accepted accounting principles in the United States ("GAAP") financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures.

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The following table presents the reconciliations of Operating income as reported to Adjusted operating income, Net income as reported to Adjusted net income and Adjusted EBIT, Effective tax rate as reported to Adjusted effective tax rate and Diluted earnings per share as reported to Adjusted diluted earnings per share:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended June 30, |  | Six Months Ended June 30, |
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021 |
Operating income as reported | ​ | $ | 167,533 | ​ | $ | 121,822 | ​ | $ | 328,739 | ​ | $ | 225,750 | ​
Special items (pre-tax): | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​
Rationalization and asset impairment charges (1) | ​ |  | (844) | ​ |  | 630 | ​ |  | 1,041 | ​ |  | 4,793 | ​
Acquisition transaction costs (2) | ​ |  | — | ​ |  | 810 | ​ |  | — | ​ |  | 1,923 | ​
Amortization of step up in value of acquired inventories (3) | ​ |  | 1,459 | ​ |  | 1,841 | ​ |  | 1,459 | ​ |  | 1,841 | ​
Adjusted operating income | ​ | $ | 168,148 | ​ | $ | 125,103 | ​ | $ | 331,239 | ​ | $ | 234,307 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net income as reported | ​ | $ | 127,823 |  | $ | 96,105 | ​ | $ | 253,853 | ​ | $ | 170,282 | ​
Special items: | ​ |  | ​ |  |  |  | ​ |  | ​ | ​ | ​ | ​ | ​
Rationalization and asset impairment charges (1) | ​ |  | (844) |  |  | 630 | ​ |  | 1,041 | ​ | ​ | 4,793 | ​
Acquisition transaction costs (2) | ​ |  | — |  |  | 810 | ​ |  | — | ​ | ​ | 1,923 | ​
Pension charges and other net gains (4) | ​ |  | — |  |  | 1,650 | ​ |  | (4,273) | ​ | ​ | 6,536 | ​
Amortization of step up in value of acquired inventories (3) | ​ |  | 1,459 |  |  | 1,841 | ​ |  | 1,459 | ​ | ​ | 1,841 | ​
Tax effect of Special items (5) | ​ |  | (252) |  |  | (433) | ​ |  | 789 | ​ | ​ | (1,994) | ​
Adjusted net income | ​ | ​ | 128,186 |  | ​ | 100,603 | ​ | ​ | 252,869 | ​ | ​ | 183,381 | ​
Non-controlling interests in subsidiaries’ income (loss) | ​ | ​ | (1) |  | ​ | 175 | ​ | ​ | — | ​ | ​ | 131 | ​
Interest expense, net | ​ |  | 6,459 |  |  | 5,663 | ​ |  | 12,657 | ​ | ​ | 11,022 | ​
Income taxes as reported | ​ |  | 32,118 |  |  | 21,581 | ​ |  | 65,729 | ​ | ​ | 44,601 | ​
Tax effect of Special items (5) | ​ |  | 252 |  |  | 433 | ​ |  | (789) | ​ | ​ | 1,994 | ​
Adjusted EBIT | ​ | $ | 167,014 |  | $ | 128,455 | ​ | $ | 330,466 | ​ | $ | 241,129 | ​
Effective tax rate as reported | ​ |  | 20.1 | % |  | 18.3 | % | ​ | 20.6 | % | ​ | 20.7 | %
Net special item tax impact | ​ |  | 0.1 | % |  | (0.4) | % | ​ | (0.2) | % | ​ | (0.5) | %
Adjusted effective tax rate | ​ |  | 20.2 | % |  | 17.9 | % | ​ | 20.4 | % | ​ | 20.2 | %
Diluted earnings per share as reported | ​ | $ | 2.18 |  | $ | 1.60 | ​ | $ | 4.30 | ​ | $ | 2.83 | ​
Special items per share | ​ |  | — |  |  | 0.07 | ​ |  | (0.01) | ​ | ​ | 0.21 | ​
Adjusted diluted earnings per share | ​ | $ | 2.18 |  | $ | 1.67 | ​ | $ | 4.29 | ​ | $ | 3.04 | ​

​

| (1) | Charges primarily related to severance, gains or losses on the disposal of assets.

| (2) | Costs related to acquisitions and are included in SG&A expenses.

| (3) | Costs related to acquisitions and are included in Cost of Goods Sold.

| (4) | Primarily includes the final settlement associated with the termination of a pension plan and settlement charges due to lump sum pension payments and are included in Other income (expense).

| (5) | Includes the net tax impact of Special items recorded during the respective periods.

The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.

Liquidity and Capital Resources

The Company’s cash flow from operations can be cyclical. Operational cash flow is a key driver of liquidity, providing cash and access to capital markets. In assessing liquidity, the Company reviews working capital measurements to define areas for improvement. Management anticipates the Company will be able to satisfy cash requirements for its ongoing

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businesses for at least the next twelve months and the foreseeable future thereafter primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets.

The Company continues to expand globally and periodically looks at transactions that would involve significant investments. The Company can fund its global expansion plans with operational cash flow, but a significant acquisition may require access to capital markets, in particular, the long-term debt market, as well as the syndicated bank loan market. The Company’s financing strategy is to fund itself at the lowest after-tax cost of funding. Where possible, the Company utilizes operational cash flows and raises capital in the most efficient market, usually the United States, and then lends funds to the specific subsidiary that requires funding. If additional acquisitions providing appropriate financial benefits become available, additional expenditures may be made.

The following table reflects changes in key cash flow measures:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Six Months Ended June 30,
​ | ​ | 2022 |  | 2021 |  | $ Change
Cash provided by operating activities (1) | ​ | $ | 141,301 | ​ | $ | 145,234 | ​ | $ | (3,933)
Cash used by investing activities (2) | ​ |  | (55,005) | ​ |  | (102,434) | ​ |  | 47,429
Capital expenditures | ​ |  | (34,602) | ​ |  | (27,768) | ​ |  | (6,834)
Acquisition of businesses, net of cash acquired | ​ |  | (22,095) | ​ |  | (83,723) | ​ |  | 61,628
Cash used by financing activities (3) | ​ |  | (122,366) | ​ |  | (108,995) | ​ |  | (13,371)
Net change in borrowings | ​ |  | 71,829 | ​ |  | 1,163 | ​ |  | 70,666
Purchase of shares for treasury | ​ |  | (129,698) | ​ |  | (53,688) | ​ |  | (76,010)
Cash dividends paid to shareholders | ​ |  | (65,914) | ​ |  | (61,379) | ​ |  | (4,535)
Decrease in Cash and cash equivalents (4) | ​ |  | (40,162) | ​ |  | (66,395) | ​ |  | 26,233

​

| (1) | Cash provided by operating activities decreased for the six months ended June 30, 2022, compared with the six months ended June 30, 2021 primarily due to increased investment in working capital.

| (2) | Cash used by investing activities decreased for the six months ended June 30, 2022, compared with the six months ended June 30, 2021 primarily due to higher cash used in the acquisition of businesses in 2021. The Company currently anticipates capital expenditures of $70,000 to $80,000 in 2022. Anticipated capital expenditures include investments for capital maintenance and projects to increase efficiency, reduce costs, promote business growth or improve the overall safety and environmental conditions of the Company’s facilities.

| (3) | Cash used by financing activities increased in the six months ended June 30, 2022, compared with the six months ended June 30, 2021 due to increased purchase of shares for treasury, partially offset by higher borrowings in 2022.

| (4) | Cash and cash equivalents decreased 20.8%, or $40,162 to $152,796 during the six months ended June 30, 2022, from $192,958 as of December 31, 2021. This decrease was predominantly due to cash used for the purchase of common shares for treasury, dividends paid to shareholders and capital expenditures, partially offset by cash from operations and proceeds from borrowings. At June 30, 2022, $146,705 of Cash and cash equivalents was held by international subsidiaries.

In July 2022, the Company paid a cash dividend of $0.56 per share, or $32,435, to shareholders of record as of June 30, 2022.

Working Capital Ratios

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30, 2022 |  | December 31, 2021 |  | June 30, 2021 |
Average operating working capital to Net sales (1) (2) |  | 19.0 | % | 16.3 | % | 17.2 | %
Days sales in Inventories (2) |  | 128.4 |  | 121.0 | ​ | 110.2 | ​
Days sales in Accounts receivable |  | 51.5 |  | 50.3 | ​ | 53.9 | ​
Average days in Trade accounts payable |  | 59.6 |  | 59.8 | ​ | 59.9 | ​

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​

| (1) | Average operating working capital to net sales is defined as the sum of Accounts receivable, Inventories and contract assets less Trade accounts payable and contract liabilities as of period end divided by annualized rolling three months of Net sales.

| (2) | In order to minimize potential supply chain disruptions in serving customers in a challenging operating environment, the Company increased inventories relative to expected Net sales resulting in higher Days sales in Inventories and had an unfavorable impact on Average operating working capital to Net sales.

Return on Invested Capital

The Company reviews return on invested capital ("ROIC") in assessing and evaluating the Company’s underlying operating performance. ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company’s financial performance and may be different than the method used by other companies to calculate ROIC. ROIC is defined as rolling 12 months of Adjusted net income excluding tax-effected interest income and expense divided by invested capital. Invested capital is defined as total debt, which includes Short-term debt and Long-term debt, less current portions, plus Total equity.

The following table presents ROIC:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Twelve Months Ended June 30, | ​
​ |  | 2022 |  | 2021 |
Net income | ​ | $ | 360,037 |  | $ | 293,839 | ​
Rationalization and asset impairment charges | ​ |  | 6,075 |  |  | 20,502 | ​
Acquisition transaction costs | ​ |  | — |  |  | 1,923 |
Pension settlement charges | ​ |  | 115,693 |  |  | 11,321 | ​
Amortization of step up in value of acquired inventories | ​ |  | 5,422 |  |  | 1,841 | ​
Tax effect of Special items (1) | ​ |  | (44,405) |  |  | (5,036) | ​
Adjusted net income | ​ | $ | 442,822 |  | $ | 324,390 | ​
Plus: Interest expense, net of tax of $6,336 and $5,843 in 2022 and 2021, respectively | ​ |  | 18,832 | ​ |  | 17,368 | ​
Less: Interest income, net of tax of $333 and $389 in 2022 and 2021, respectively | ​ |  | 986 | ​ |  | 1,166 | ​
Adjusted net income before tax effected interest | ​ | $ | 460,668 |  | $ | 340,592 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Invested Capital |  | June 30, 2022 |  | June 30, 2021 | ​
Short-term debt | ​ | $ | 125,458 | ​ | $ | 10,435 | ​
Long-term debt, less current portion | ​ | ​ | 712,908 | ​ | ​ | 718,137 | ​
Total debt | ​ | ​ | 838,366 | ​ | ​ | 728,572 | ​
Total equity | ​ |  | 912,983 | ​ |  | 859,623 | ​
Invested capital | ​ | $ | 1,751,349 | ​ | $ | 1,588,195 | ​
Return on invested capital | ​ |  | 26.3 | % |  | 21.4 | %

​

| (1) | Includes the net tax impact of Special items recorded during the respective periods.

The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.

New Accounting Pronouncements

Refer to Note 1 to the consolidated financial statements for a discussion of new accounting pronouncements.

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Acquisitions

Refer to Note 4 to the consolidated financial statements for a discussion of the Company’s recent acquisitions.

Debt

Fair Value of Debt

At June 30, 2022 and December 31, 2021, the fair value of long-term debt, including the current portion, was approximately $639,863 and $776,655, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $723,945 and $717,855, respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange.

Revolving Credit Agreement

On April 23, 2021, the Company amended and restated the agreement governing its line of credit by entering into the Second Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement has a line of credit totaling $500,000, has a term of 5 years with a maturity date of April 23, 2026 and may be increased, subject to certain conditions including the consent of its lenders, by an additional amount up to $150,000. The interest rate on borrowings is based on LIBOR plus a spread based on the Company’s net leverage ratio. The Credit Agreement contains customary representations and warranties, as well as customary affirmative, negative and financial covenants for credit facilities of this type (subject to negotiated baskets and exceptions), including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. As of June 30, 2022, the Company was in compliance with all of its covenants and had $85,000 of outstanding borrowings under the Credit Agreement.

The Company has other lines of credit totaling $103,956. As of June 30, 2022, the Company was in compliance with all of its covenants and had $29,421 outstanding at June 30, 2022.

Senior Unsecured Notes

On April 1, 2015 and October 20, 2016, the Company entered into separate Note Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each 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% and 4.02%. Interest on the Notes is paid semi-annually. The Company’s total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and 11.9 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of June 30, 2022, the Company was in compliance with all of its debt covenants relating to the Notes.

Shelf Agreements

On November 27, 2018, the Company entered into seven uncommitted master note facilities (the "Shelf Agreements") that allow borrowings up to $700,000 in the aggregate. The Shelf Agreements have a term of 5 years and the average life of borrowings cannot exceed 15 years. The Company is required to comply with covenants similar to those contained in the Notes. As of June 30, 2022, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

Forward-looking Statements

The Company’s expectations and beliefs concerning the future contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current expectations and involve a number of risks and uncertainties. Forward-looking statements generally can be

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identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results. The factors include, but are not limited to: general economic, financial and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as the impact of the Russia-Ukraine conflict, political unrest, acts of terror, natural disasters and pandemics, including the current coronavirus disease (“COVID-19”) pandemic, on the Company or its customers, suppliers and the economy in general. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and on Form 10-Q for the quarter ended March 31, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s exposure to market risk since December 31, 2021. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2022.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

​

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject, from time to time, to a variety of civil and administrative proceedings arising out of its normal operations, including, without limitation, product liability claims, regulatory claims and health, safety and environmental claims. Among such proceedings are the cases described below.

As of June 30, 2022, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by approximately 1,501 plaintiffs, which is a net decrease of 23 claims from those previously reported. In each instance, the Company is one of a large number of defendants. The asbestos claimants seek compensatory and punitive damages, in most cases for unspecified sums. Since January 1, 1995, the Company has been a co-defendant in other similar cases that have been resolved as follows: 56,849 of those claims were dismissed, 23 were tried to defense verdicts, 7 were tried to plaintiff verdicts (which were reversed or resolved after appeal), 1 was resolved by agreement for an immaterial amount and 1,012 were decided in favor of the Company following summary judgment motions.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, which could materially affect the Company’s business, financial condition or future results.

​

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer purchases of its common shares during the second quarter of 2022 were as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Total Number of | ​ | ​
​ |  | ​ |  | ​ | ​ |  | Shares |  | Maximum Number
​ | ​ | ​ | ​ | ​ | ​ | ​ | Repurchased | ​ | of Shares that May
​ | ​ | Total Number of | ​ | ​ | ​ | ​ | as Part of Publicly | ​ | Yet be Purchased
​ | ​ | Shares | ​ | Average Price | ​ | Announced Plans or | ​ | Under the Plans or
Period | ​ | Repurchased | ​ | Paid Per Share | ​ | Programs | ​ | Programs (2)
April 1 - 30, 2022 |  | 61,516 | (1)​ | $ | 131.77 |  | 60,743 |  | 9,409,669
May 1 - 31, 2022 |  | 52,721 | (1)​ |  | 132.78 |  | 52,531 |  | 9,357,138
June 1 - 30, 2022 |  | 76,477 | (1)​ |  | 130.93 |  | 76,189 |  | 9,280,949
Total |  | 190,714 | ​ |  | 131.71 |  | 189,463 |  |

​

| (1) | The above share repurchases include the surrender of the Company’s common shares in connection with the vesting of restricted awards.

| (2) | On February 12, 2020, the Company’s Board of Directors authorized a new share repurchase program for up to an additional 10 million shares of the Company’s common stock. Total shares purchased through the share repurchase programs were 0.7 million shares at a total cost of $94.6 million for a weighted average cost of $130.69 per share through June 30, 2022.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 6. EXHIBITS

(a) | Exhibits

​ | ​ | ​ | ​
31.1 | ​ | ​ | Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2 | ​ | ​ | Certification of the Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1 | ​ | ​ | Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
​ | ​ | ​ | ​
101.INS | ​ | ​ | Inline XBRL Instance Document
101.SCH | ​ | ​ | Inline XBRL Taxonomy Extension Schema Document
101.CAL | ​ | ​ | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB | ​ | ​ | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE | ​ | ​ | Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF | ​ | ​ | Inline XBRL Taxonomy Extension Definition Linkbase Document
104 | ​ | ​ | Cover page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)

​

​

​

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

​

​ | ​ | ​
​ |  | LINCOLN ELECTRIC HOLDINGS, INC.
​ | ​ | ​
​ | ​ | /s/ Gabriel Bruno
​ | ​ | Gabriel Bruno
​ | ​ | Executive Vice President, Chief Financial Officer and Treasurer
​ | ​ | (Principal Financial and Accounting Officer)
​ | ​ | July 28, 2022

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XBRL-Only Content Section

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