| For the fiscal year ended December 31, | Commission file number 0-1402 | |
The Company's major end-user markets include: Patents and Trademarks The number of persons employed by the Company worldwide at December 31, any amendments to those reports or statements. The Company also posts its Code of Corporate Conduct and Ethics on its website. All such postings and filings are available on the Company's website free of charge. In addition, this website allows investors and other interested persons to sign up to automatically receive e-mail alerts when news releases and financial information is posted on the website. The SEC also maintains a website, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Annual Report unless expressly noted. General economic and market conditions may adversely affect the Company's financial condition, results of operations and access to capital markets. contained in welding consumables caused the plaintiffs to develop adverse pulmonary diseases, including mesothelioma and other lung cancers. The Further, in the past decade, the arc welding industry in the United States and other developed countries has been subject to increased levels of foreign competition as low cost imports have become more readily available. Our competitive position could also be harmed if new or emerging competitors become more active in the arc welding business. For example, while steel manufacturers traditionally have not been significant competitors in the domestic arc welding industry, some foreign integrated steel producers manufacture selected consumable arc welding products. Our sales and results of operations, as well as our plans to expand in some foreign countries, could be adversely affected by this practice. For example, during Any interruption of our workforce, including interruptions due to unionization efforts, changes in labor relations or shortages of appropriately skilled individuals could impact our results of operations and financial condition. with differing statutory tax rates, changes in the valuation United States Canada Mexico France Germany Italy Netherlands Poland Portugal Russia Turkey United Kingdom China India Indonesia Brazil Colombia Venezuela United States Brazil Mexico Poland which a judgment is reached. 1,719. 15. The dividend that the Company would normally have paid in January 2013 was paid on December 28, 2012. First quarter Second quarter Third quarter Fourth quarter Issuer purchases of equity securities for the fourth quarter October 1-31, 2011 November 1-30, 2011 December 1-31, 2011 Total Net sales Net income Basic earnings per share(1) Diluted earnings per share(1) Cash dividends declared per share(1) Total assets Long-term debt The Company has aligned its business units into five operating segments to enhance the utilization of the Company's worldwide resources and global end user and sourcing initiatives. The operating segments consist of North America Welding, Europe Welding, Asia Pacific Welding, South America Welding and The Harris Products Group. The North America Welding segment includes welding operations in the United States, Canada and Mexico. The Europe Welding segment includes welding operations in Europe, Russia, Africa and Net sales Cost of goods sold Gross profit Selling, general & administrative expenses Rationalization and asset impairment charges (gains) Operating income Interest income Equity earnings (loss) in affiliates Other income Interest expense Income before income taxes Income taxes Net income including noncontrolling interests Noncontrolling interests in subsidiaries' (loss) earnings Net income 2012 Operating Segments North America Welding Europe Welding Asia Pacific Welding South America Welding The Harris Products Group Consolidated % Change North America Welding Europe Welding Asia Pacific Welding South America Welding The Harris Products Group Consolidated Operating Segments North America Welding Europe Welding Asia Pacific Welding South America Welding The Harris Products Group Consolidated % Change North America Welding Europe Welding Asia Pacific Welding South America Welding The Harris Products Group Consolidated Company's reported financial results. Non-GAAP financial measures should be read in conjunction with the generally accepted accounting principles ("GAAP") financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. Operating income as reported Special items (pre-tax): Rationalization charges (gains) Impairment charges Venezuela – functional currency change and devaluation Pension settlement gain Adjusted operating income Net income as reported Special items (after-tax): Rationalization charges (gains) Impairment charges Venezuela – functional currency change and devaluation Pension settlement gain Loss associated with the acquisition of Jin Tai Gain on sale of property Income from tax adjustment resulting from change in applicable tax regulations Adjustment for tax audit settlements Noncontrolling interests charges associated with special Adjusted net income Diluted earnings per share as reported Special items per share Adjusted diluted earnings per share with cash generated by operations, existing cash balances and, if necessary, borrowings under its existing credit facilities. Cash provided by operating activities: Cash used by investing activities: Capital expenditures Acquisition of businesses, net of cash acquired Proceeds from the sale of property, plant and equipment Cash used by financing activities: Proceeds (payments) on short-term borrowings, net Payments on long-term borrowings, net Proceeds from exercise of stock options Tax benefit from exercise of stock options Purchase of shares for treasury Cash dividends paid to Other (Decrease) increase in Cash and cash equivalents the current period. 2012 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 U.S., 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. 2013. ®. The acquisition broadens the Company's portfolio of automated cutting and welding process solutions. At December 31, certain conditions, by an additional amount up to Long-term debt, including current portion Interest on long-term debt Capital lease obligations Short-term debt Interest on short-term debt Operating leases Purchase commitments(1) Total As of December 31, judgment areas See Note 12 to the Company's consolidated financial statements and the "Item 3. Legal Proceedings" section of this Annual Report on Form 10-K for further discussion of tax contingencies. On February 8, 2013, the Venezuelan government announced the devaluation of its currency relative to the U.S. dollar. Effective February 13, 2013 the official rate moved from 4.3 to 6.3 bolivars to the U.S. dollar. The devaluation of the bolivar resulted in a foreign currency transaction loss of $8,081 in Selling, general & administrative expenses and higher Cost of goods sold of $4,117 due to the liquidation of inventory valued at the historical exchange rate. In January 2014, the Venezuelan government announced the formation of the National Center of Foreign Trade ("CENCOEX") to replace the Commission for the Administration of Currency Exchange ("CADIVI"). In addition, the government announced the CENCOEX would utilize the rate used in the SICAD auction-based exchange rate program (the "SICAD rate") for certain transactions as opposed to the official rate. Transactions executed at the SICAD rate most recently used a rate of 11.7 bolivars to the U.S. dollar. In February 2014, the government announced a new foreign exchange system, SICAD 2, which is expected to use a currency mechanism based on bond swaps. At this time, the Company expects to continue to use the official rate of 6.3 bolivars to the U.S. dollar to translate its Venezuelan subsidiary's financial results. The Company will continue to assess the information available relative to Venezuelan exchange rates, however, the future impact on the Company's financial statements is uncertain. Deferred Income Taxes rate. 2012 long-lived asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether impairment exists. If an asset is determined to be impaired, a loss is recognized to the extent that carrying value exceeds fair value. Fair value is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. accumulated other comprehensive loss. The analysis takes into consideration any offset that would result from changes in the value of the hedged asset or liability. 2013 ASSETS Current Assets Cash and cash equivalents Accounts receivable (less allowance for doubtful accounts of $7,079 in 2011; $7,855 in 2010) Inventories Raw materials Work-in-process Finished goods Total inventory Deferred income taxes Other current assets Total Current Assets Property, Plant and Equipment Land Buildings Machinery and equipment Less accumulated depreciation Property, Plant and Equipment, Net Other Assets Prepaid pensions Equity investments in affiliates Intangibles, net Goodwill Long-term investments Deferred income taxes Other non-current assets Total Other Assets TOTAL ASSETS LIABILITIES AND EQUITY Current Liabilities Amounts due banks Trade accounts payable Accrued employee compensation and benefits Accrued expenses Accrued taxes, including income taxes Accrued pensions Dividends payable Other current liabilities Current portion of long-term debt Total Current Liabilities Long-Term Liabilities Long-term debt, less current portion Accrued pensions Deferred income taxes Accrued taxes Other long-term liabilities Total Long-Term Liabilities Shareholders' Equity Preferred shares, without par value – at stated capital amount; authorized – 5,000,000 shares; issued and outstanding – none Common shares, without par value – at stated capital amount; authorized – 240,000,000 shares; issued – 98,581,434 shares in 2011 and 2010; outstanding – 83,757,366 shares in 2011 and 84,241,600 shares in 2010 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury shares, at cost – 14,824,068 shares in 2011 and 14,339,834 shares in 2010 Total Shareholders' Equity Noncontrolling interests Total Equity TOTAL LIABILITIES AND EQUITY Net sales Cost of goods sold Gross profit Selling, general & administrative expenses Rationalization and asset impairment charges (gains) Operating income Other income (expense): Interest income Equity earnings (loss) in affiliates Other income Interest expense Total other income (expense) Income before income taxes Income taxes Net income including noncontrolling interests Noncontrolling interests in subsidiaries' (loss) earnings Net income Basic weighted average shares outstanding Effect of dilutive securities – stock options and awards Diluted weighted average shares outstanding Basic earnings per share Diluted earnings per share Cash dividends declared per share Balance January 1, 2009 Comprehensive income: Net income Unrecognized amounts from defined benefit pension plans, net of tax of $12,242 Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax of $1,477 Currency translation adjustment Total comprehensive loss Cash dividends declared – $0.545 per share Issuance of shares under benefit plans Purchase of noncontrolling interest shares Purchase of shares for treasury Balance December 31, 2009 Comprehensive income: Net income Unrecognized amounts from defined benefit pension plans, net of tax of $893 Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax of $302 Currency translation adjustment Total comprehensive income Cash dividends declared – $0.575 per share Issuance of shares under benefit plans Purchase of shares for treasury Balance December 31, 2010 Comprehensive income: Net income Unrecognized amounts from defined benefit pension plans, net of tax of $47,413 Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax of $264 Currency translation adjustment Total comprehensive income Cash dividends declared – $0.635 per share Issuance of shares under benefit plans Purchase of shares for treasury Balance December 31, 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net income Noncontrolling interests in subsidiaries' (loss) earnings Net income including noncontrolling interests Adjustments to reconcile Net income including noncontrolling interests to Net cash provided by operating activities: Rationalization and asset impairment charges (gains) Depreciation and amortization Equity (earnings) loss in affiliates, net Deferred income taxes Stock-based compensation Amortization of terminated interest rate swaps Amortization of actuarial losses and prior service costs Other non-cash items, net Changes in operating assets and liabilities, net of effects from acquisitions: (Increase) decrease in accounts receivable (Increase) decrease in inventories (Increase) decrease in other current assets Increase (decrease) in accounts payable Increase (decrease) increase in other current liabilities Decrease in accrued pensions Net change in other long-term assets and liabilities NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures Acquisition of businesses, net of cash acquired Additions to equity investment in affiliates Proceeds from sale of property, plant and equipment NET CASH USED BY INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Payments on short-term borrowings Amounts due banks, net Proceeds from long-term borrowings Payments on long-term borrowings Proceeds from exercise of stock options Tax benefit from exercise of stock options Purchase of shares for treasury Cash dividends paid to shareholders Other NET CASH USED BY FINANCING ACTIVITIES Effect of exchange rate changes on cash and cash equivalents (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR respectively. On February 8, 2013, the Venezuelan government announced the devaluation of its currency relative to the U.S. dollar. Effective February 13, 2013 the official rate moved from 4.3 to 6.3 bolivars to the U.S. dollar. The devaluation of the bolivar resulted in a foreign currency transaction loss of $8,081 in Selling, general & administrative expenses and higher Cost of goods sold of $4,117 due to the liquidation of inventory valued at the historical exchange rate. 2012 Goodwill and Intangibles under the terms of the contracts using current market information as of the reporting date. The following hierarchy is used to classify the inputs used to measure fair value: Common stock issuable upon the exercise of employee stock options is excluded from the calculation of diluted earnings per share when the calculation of option equivalent shares is anti-dilutive. amounts) Included in ®. The acquisition broadens the Company's portfolio of automated cutting and welding process solutions. The changes in the carrying amount of goodwill by reportable Balance as of January 1, 2010 Additions Foreign currency translation Balance as of December 31, 2010 Additions Foreign currency translation Balance as of December 31, 2011 excess of goodwill recorded for financial reporting purposes. Gross and net intangible assets other than goodwill by asset class as of December 31, Trademarks and trade names Customer relationships Patents Other Total Trademarks and trade names Customer relationships Patents Other Total For the year ended December 31, 2011 Net sales Inter-segment sales Total EBIT, as adjusted Special items charge (gain) EBIT Interest income Interest expense Income before income taxes Total assets Equity investments in affiliates Capital expenditures Depreciation and amortization For the year ended December 31, 2010 Net sales Inter-segment sales Total EBIT, as adjusted Special items charge (gain) EBIT Interest income Interest expense Income before income taxes Total assets Equity investments in affiliates Capital expenditures Depreciation and amortization For the year ended December 31, 2009 Net sales Inter-segment sales Total EBIT, as adjusted Special items charge (gain) EBIT Interest income Interest expense Income before income taxes Total assets Equity investments in affiliates Capital expenditures Depreciation and amortization Asia Pacific Welding segments special items also include a loss of 2013 Net sales: United States China Other foreign countries Total Property, plant and equipment, net: United States China Other foreign countries Eliminations Total 2014. Additional charges related to the completion of this plan are expected to be immaterial. Balance at December 31, 2010 Payments and other adjustments Charged to expense Balance at December 31, 2011 Balance at December 31, 2009 Payments and other adjustments Charged to expense Balance at December 31, 2010 Defined benefit pension plans, net of tax Currency translation adjustment Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax Total Accumulated other comprehensive loss Long-term debt Senior Unsecured Notes due 2012, interest at 6.36% Capital leases due through 2017, interest at .90% to 6.25% Other borrowings due through 2023, interest up to 6.00% Less current portion Total long-term debt Short-term debt Amounts due banks, interest at 11.61% (17.10% in 2010) Current portion long-term debt Total short-term debt Total debt Maturities of long-term debt, including payments under capital leases and amounts due banks, for the five years succeeding December 31, thousands, except share and per share amounts) Stock Options Balance at beginning of year Options granted Options exercised Options canceled Balance at end of year Exercisable at end of year Expected volatility Dividend yield Risk-free interest rate Expected option life (years) Weighted average fair value per option granted during the year The following table summarizes Balance at beginning of year Granted Vested Forfeited Balance at end of year Under $17.50 $17.50 - $20.00 Over $20.00 Restricted Share Awards ("RSAs") Balance at beginning of year Shares granted Shares vested* Shares forfeited Balance at end of year Balance at beginning of year Granted Vested Forfeited Balance at end of year Restricted Stock Units ("RSUs") Nonvested at beginning of year Units granted Units vested Units canceled Nonvested at end of year Obligations and Funded Status Change in benefit obligations Benefit obligations at beginning of year Service cost Interest cost Plan participants' contributions Actuarial loss Benefits paid Settlement/curtailment Currency translation Benefit obligations at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Plan participants' contributions Benefits paid Settlement Currency translation Fair value of plan assets at end of year Funded status at end of year Unrecognized net loss Unrecognized prior service cost Unrecognized transition assets, net Net amount recognized Prepaid pensions Accrued pension liability, current Accrued pension liability, long-term Accumulated other comprehensive loss, excluding tax effects Net amount recognized in the balance sheets Service cost Interest cost Expected return on plan assets Amortization of prior service cost Amortization of net loss Settlement/curtailment (gain) loss Pension cost for defined benefit plans assets. U.S. pension plans Projected benefit obligation Accumulated benefit obligation Fair value of plan assets Non-U.S. pension plans Projected benefit obligation Accumulated benefit obligation Fair value of plan assets The total accumulated benefit obligation for all plans was 2012 2012 2013 2014 2015 2016 2017 through 2021 Weighted average assumptions used to measure the benefit obligation for the Company's significant defined benefit plans as of December 31, Discount rate Rate of increase in compensation Discount rate Rate of increase in compensation Expected return on plan assets targeted allocation of plan assets. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance. The rate of compensation increase is determined by the Company based upon annual reviews. Corporate stock(1) Cash and cash equivalents Insurance company nonpooled separate account(2) Cash and cash equivalents Corporate and other obligations Common trusts and 103-12 investments(3) Private equity funds(4) Total assets at fair value The following table sets forth, by level within the fair value hierarchy, the pension plans' assets as of Corporate stock(1) Cash and cash equivalents Insurance company nonpooled separate account(2) Cash and cash equivalents Corporate and other obligations Common trusts and 103-12 investments(3) Private equity funds(4) Total assets at fair value The table below sets forth a summary of changes in the fair value of the Level 3 pension plans' assets for the year ended December 31, Balance at the beginning of year Purchases, sales, issuances and settlements Realized and unrealized (losses) gains Balance at the end of year The amount of total (losses) gains during the period attributable to the change in unrealized (losses) gains relating to Level 3 net assets still held at the reporting date The annual costs recognized for defined contribution plans were U.S. Non-U.S. Total The components of income tax expense (benefit) for the three years ended Current: Federal Non-U.S. State and local Deferred: Federal Non-U.S. State and local Total Statutory rate of 35% applied to pre-tax income Effect of state and local income taxes, net of federal tax benefit Taxes (less) more than the U.S. tax rate on non-U.S. earnings, including utilization of tax loss carryforwards, losses with no benefit and changes in non-U.S. valuation allowance Manufacturing deduction U.S. tax cost (benefit) of foreign source income Resolution and adjustments to uncertain tax positions Other Total Effective tax rate Deferred tax assets: Tax loss and credit carryforwards Inventory Other accruals Employee benefits Pension obligations Other Deferred tax assets, gross Valuation allowance Deferred tax assets, net Deferred tax liabilities: Property, plant and equipment Intangible assets Inventory Pension obligations Other Deferred tax liabilities Total Deferred taxes taxes associated with the remittance of these earnings. Deferred income taxes associated with earnings of Balance at January 1 Increase related to current year tax provisions Increase related to prior years' tax positions Increase related to acquisitions Decrease related to settlements with taxing authorities Resolution of and other decreases in prior years' tax liabilities Other Balance at December 31 2012 2013. Fair values of derivative instruments in the Company's Consolidated Balance Sheets follow: Designated as hedging instruments: Foreign exchange contracts Not designated as hedging instruments: Foreign exchange contracts Commodity contracts Total derivatives Not designated as hedges: Foreign exchange contracts Commodity contracts Commodity contracts Foreign exchange contracts Foreign exchange contracts Commodity contracts Assets: Foreign exchange contracts Commodity contracts Total assets Liabilities: Foreign exchange contracts Contingent consideration Deferred Compensation Total liabilities Assets: Foreign exchange contracts Liabilities: Foreign exchange contracts Commodity contracts Deferred Compensation Total liabilities December 31, 2015 and will be paid in 2016 based on actual sales during the 2012 The following table summarizes assets held under capital leases and included in property, plant and equipment: Buildings Machinery and equipment Less: accumulated depreciation Net capital leases Future claims could, therefore, give rise to increases to such reserves. Balance at beginning of year Accruals for warranties Settlements Foreign currency translation Balance at end of year 2011 Net sales Gross profit Income before income taxes Net income Basic earnings per share Diluted earnings per share 2010 Net sales Gross profit Income before income taxes Net income Basic earnings per share Diluted earnings per share non-controlling interests. South America Welding segment. Allowance for doubtful accounts: Year ended December 31, 2011 Year ended December 31, 2010 Year ended December 31, 2009Ohio 34-1860551 34-1860551
(I.R.S. Employer Identification No.)22801 St. Clair Avenue, Cleveland, Ohio 44117 (Address of principal executive offices)
44117
(Zip Code)(216) 481-8100 (Registrant's telephone number, including area code) Common Shares, without par value (Title of each class) The NASDAQ Stock Market LLC (Title of each class) (Name of each exchange on which registered) o¨o¨ No þo¨o¨þ¨ o Accelerated filer o Non-accelerated filer(Do
reporting company) o Smaller reporting companyo¨ No þ20112013 was $2,979,840,528$4,591,044,854 (affiliates, for this purpose, have been deemed to be Directors and Executive Officers of the Company and certain significant shareholders).20112013 was 83,757,366.81,010,084.23, 201221, 2014 with respect to the registrant's 20122014 Annual Meeting of Shareholders. Australia, Brazil, Canada, China, Colombia, France, Germany, India, Indonesia, Italy, Mexico, the Netherlands, Poland, Portugal, Russia, Turkey, the United Kingdom and Venezuela, of which 3539 are ISO 9001 certified.Africa.the Middle East. The other two welding segments include welding operations in Asia Pacific and South America, respectively. The fifth segment, The Harris Products Group, includes the Company's global cutting, soldering and brazing businesses as well as the retail business in the United States. See Note 45 to the Company's consolidated financial statements for segment and geographic area information, which is incorporated herein by reference.••••••••Employees20112013 was 9,929.approximately 10,000. See "Part III,I, Item 10"1C" for information regarding the Company's executive officers, which is incorporated herein by reference.Stock SplitOn April 29, 2011, the Company announced a two-for-one stock split of the Company's common shares effective in the form of a 100% stock dividend. The record date for the stock split was May 16, 2011 and the additional shares were distributed on May 31, 2011. Accordingly, all per share amounts, average shares outstanding, shares outstanding, shares repurchased and equity based compensation presented in this Annual Report on Form 10-K have been retroactively adjusted to reflect the stock split. Shareholders' equity has been retroactively adjusted to give effect to the stock split for all periods presented by reclassifying the stated value of the additional shares issued in connection with the stock split to Common shares from Additional paid-in capital.proactivelypro-actively manage risks in a structured approach and in conjunction with the strategic planning process, with the intent to preserve and enhance shareholder value. However, these and other risks and uncertainties could cause our results to vary materially from recent results or from our anticipated future results. The risk factors and uncertainties described below, together with information incorporated by reference or otherwise included elsewhere in this Annual Report on Form 10-K, should be carefully considered. Additional risks and uncertainties of which we are currently unaware or that we currently believe to be immaterial may also adversely affect our business.RecessionaryFurther recessionary economic cycles, higher interest rates, inflation, higher labor costs, trade barriers in the world markets, financial turmoil related to sovereign debt and changes in tax laws or other economic factors affecting the countries and industries in which we do business could adversely affect demand for the Company's products, thereby impacting our results of operations, collection of accounts receivable and our expected cash flow generation from current and acquired businesses, which may adversely impact our financial condition and access to capital markets. The price of steel used to manufacture our products has experienced periods of significant price volatility and has been subject to periodic shortages due to global economic factors. We have also experienced substantial volatility in prices for other raw materials, including nonferrous metals, chemicals and energy costs. litigation alleging manganese induced illness and litigation alleging asbestos induced illness. Liabilities relating to such litigation could reduce our profitability and impair our financial condition.2011,2013, we were a co-defendant in cases alleging manganese induced illness involving claims by approximately 806 plaintiffs and a co-defendant in cases alleging asbestos induced illness involving claims by approximately 16,78114,601 plaintiffs. In each instance, we are one of a large number of defendants. In the manganese cases, theThe asbestos claimants allege that exposure to manganese contained in welding consumables caused the plaintiffs to develop adverse neurological conditions, including a condition known as manganism. In the asbestos cases, the claimants allege that exposure to asbestosSince January 1, 1995, we have been a co-defendant in manganese cases that have been resolved as follows: 16,031 of those claims were dismissed, 23 were tried to defense verdicts in favor of us and five were tried to plaintiff verdicts (three of which were reversed on appeal and one of which has post-trial motions pending). In addition, 13 claims were resolved by agreement for immaterial amounts and one claim was decided in favor of the Company following a summary judgment motion. 39,19941,832 of those claims were dismissed, 1822 were tried to defense verdicts, seven were tried to plaintiff verdicts (two(one of which areis being appealed), one was resolved by agreement for an immaterial amount and 585633 were decided in favor of the Company following summary judgment motions.Defense costs remain significant. manganese and asbestos loss contingencies, in each casecontingency, in the aggregate, on operating results, operating cash flows and access to capital markets is difficult to assess, particularly since claims are in many different stages of development and we benefit significantly from cost-sharing with co-defendants and insurance carriers. While we intend to contest these lawsuits vigorously, and believe we have applicable insurance relating to these claims, there are several risks and uncertainties that may affect our liability for personal injury claims relating to exposure to manganese and asbestos, including the future impact of changing cost sharing arrangements or a change in our overall trial experience. In addition, in January 2012, the Company and 18 co-defendants entered into an agreement that provides for the dismissal with prejudice of substantially all of the pending manganese claims if certain conditions precedent are satisfied. Failure to satisfy those conditions could lead to the resumption of that litigation and increased defense costs.Manganese is an essential element of steel and cannot be eliminated from welding consumables. cyclicalitycyclical nature and maturity of the arc welding and cutting industry in developed markets may adversely affect our performance.Netnet sales, there are customers to which we sell a large amount of product. The loss of any of these customers could have an adverse effect on our revenue, gross margins and profit.2011,2013, refer to the pension related disclosure under "Part II, Item 7 – Critical Accounting Policies" and Note 1011 to the Company's consolidated financial statements.allowanceallowances of deferred tax assets or changes in tax laws.None.Name Age Position Christopher L. Mapes 52 Chairman of the Board effective December 21, 2013. President and Chief Executive Officer effective December 31, 2012; Chief Operating Officer from September 1, 2011 to December 31, 2012; Director since February 2010. Prior to his service with the Company, Mr. Mapes was an Executive Vice President of A.O. Smith Corporation (a global manufacturer with a water heating and water treatment technologies business) a position he held from 2004 through August 2011, and the President of its former Electrical Products unit, a position he held from September 2004 through August 2011. Vincent K. Petrella 53 Senior Vice President, Chief Financial Officer and Treasurer since October 7, 2005. Frederick G. Stueber 60 Senior Vice President, General Counsel and Secretary since 1996. George D. Blankenship 51 Gabriel Bruno 46 Gretchen A. Farrell 51 Thomas A. Flohn 53 Mathias Hallmann 51 Steven B. Hedlund 47 David J. Nangle 57 Vice President, Group President of Brazing, Cutting and Retail Subsidiaries since January 12, 2006. 4248 manufacturing facilities, including operations and joint ventures in 19 countries, the significant locations (grouped by operating segment) of which are as follows:North America Welding: Cleveland and Fort Loramie, Ohio; San Diego and Oceanside,Anaheim, California; Reno, Nevada; Baltimore, Maryland.Maryland; Ladson, South Carolina; Chattanooga, Tennessee. Toronto; Mississauga.Mississauga; Hamilton. Mexico City; Torreon.
Europe Welding:
Grand-Quevilly. Essen. Genoa; Corsalone. Nijmegen. Bielawa; Dzierzoniow. Lisbon. Mtsensk; Orel.Mtsensk. Istanbul. Sheffield; Chertsey.Sheffield and Chertsey, England.
Asia Pacific Welding:
AustraliaSydney. Shanghai; Jinzhou; Nanjing; Zhengzhou; Luan County. Chennai. Cikarang.
South America Welding:
Sao Paulo. Bogota. Maracay.
The Harris Products Group:
Mason, Ohio; Gainesville, Georgia; Santa Fe Springs, California. Guarulhos. Tijuana. Dzierzoniow. At December 31, 2011, $0.8 million of indebtedness under capital leases was secured by property with a book value of $3.8 million.1516 to the Company's consolidated financial statements for information regarding the Company's lease commitments.2011,2013, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by approximately 16,78114,601 plaintiffs, which is a net decrease of 116455 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: 39,19941,832 of those claims were dismissed, 1822 were tried to defense verdicts, seven were tried to plaintiff verdicts (two(one of which areis being appealed), one was resolved by agreement for an immaterial amount and 585633 were decided in favor of the Company following summary judgment motions.At December 31, 2011,wasreceived a co-defendant in cases alleging manganese induced illness involving claimsNotice of Reassessment from the Canada Revenue Agency (the “CRA”) for 2004 to 2011, which would disallow the deductibility of inter-company dividends. These adjustments would increase Canadian federal and provincial tax due. The Company disagrees with the position taken by approximately 806 plaintiffs, whichthe CRA and believes it is a net decreasewithout merit. The Company will vigorously contest the assessment through the Tax Court of 52 claims from those previously reported. Canada. A trial date has not yet been scheduled.each instance,connection with the litigation process, the Company is onerequired to deposit no less than one-half of the tax and interest assessed by the CRA. The Company has elected to deposit the entire amount of the dispute in order to suspend the continuing accrual of a large number of defendants. The claimants in cases alleging manganese induced illness seek compensatory and punitive damages, in most cases for unspecified sums. The claimants allege that exposure to manganese contained in welding consumables caused the plaintiffs to develop adverse neurological conditions, including a condition known as manganism. At December 31, 2011, cases involving 87 claimants were filed in or transferred to federal court where the Judicial Panel on MultiDistrict Litigation has consolidated these cases for pretrial proceedings5% interest charge. Any Canadian tax ultimately due will be creditable in the Northern Districtparent company's U.S. federal tax return. The Company expects to be able to utilize the full amount of Ohio. Since January 1, 1995,foreign tax credits generated in the statutorily allowed carry-back and carry-forward periods. Accordingly, should the Company not prevail in this dispute, the income statement charge will approximate the deficiency interest, net of tax.co-defendant in similar cases that have been resolved as follows: 16,031 of those claims were dismissed, 23 were tried to defense verdicts in favor ofmaterial effect on the Company and five were tried to plaintiff verdicts (three of which were reversed on appeal and one of which has post-trial motions pending). In addition, 13 claims were resolved by agreement for immaterial amounts and one claim was decided in favor of the Company following a summary judgment motion. On January 18, 2012, the Company and 18 co-defendants entered into an agreement with plaintiffs' counsel that provides for the dismissal with prejudice of substantially all of the pending manganese claims provided certain conditions precedent are satisfied.On December 13, 2006, the Company filed a complaint in U.S. District Court (Northern District of Ohio) against Illinois Tool Works, Inc. seeking a declaratory judgment that eight patents owned by the defendant relating to certain inverter power sources have not and are not being infringed and that the subject patents are invalid. Illinois Tool Works filed a motion to dismiss this action, which the Court denied on June 21, 2007. On September 7, 2007, the Court stayed the litigation, referencing pending reexaminations before the U.S. Patent and Trademark Office. On June 17, 2008, the Company filed a motion to amend its pleadingsCompany's financial statements in the foregoing matter to include several additional counts, including specific allegations of fraud on the U.S. Patent and Trademark Office with respect to portable professional welding machines and resulting monopoly powerperiod in that market.20112013 was 1,748.20112013 was $51.9 million.$49.3 million. During 2011,2013, dividends were paid quarterly on January 14, April 15, July 15 and October 14. 2011 2010(1) Stock Price Stock Price 2013 2012 Dividends
Declared Dividends
Declared Stock Price Stock Price High Low High Low High Low High Low (1) $ 38.50 $ 32.69 $ 0.155 $ 29.21 $ 23.05 $ 0.14 $ 57.63 $ 49.06 $ 0.20 $ 47.87 $ 38.96 $ 0.17 (1) 39.62 32.30 0.155 31.43 25.01 0.14 60.58 49.94 0.20 50.36 41.42 0.17 39.18 27.47 0.155 29.32 24.14 0.14 69.35 56.75 0.20 46.11 37.83 0.17 40.10 26.84 0.17 33.59 28.05 0.155 74.57 65.45 0.23 49.00 37.63 0.20 (1)Stock prices and dividends declared have been retroactively adjusted to give effect to the two-for-one stock split on May 31, 2011.20112013 were: Total Number of
Shares Repurchased Average Price
Paid Per Share Total Number of
Shares Repurchased
as Part of Publicly
Announced Plans or
Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(2) – $ – – 5,367,322 178,547 (1) 36.45 168,200 5,199,122 77,365 36.96 77,365 5,121,757 255,912 36.60 245,565 Period October 1-31, 2013 162,100 $ 67.84 162,100 16,257,131 November 1-30, 2013 270,847 71.26 270,847 15,986,284 December 1-31, 2013 334,584 71.56 315,525 15,670,759 Total 767,531 70.67 748,472 (1) (2) (1)The above share repurchases include the surrender of 10,347 shares of the Company's common stock to satisfy minimum income tax withholding requirements related to the vesting of 44,600 restricted shares granted pursuant to the Company's 2006 Equity and Performance Incentive Plan.(2)The Company's Board of Directors authorized a share repurchase program for up to 30 million shares of the Company's common stock. Total shares purchased through the share repurchase programs were 24,878,243 shares at a cost of $349.9 million for a weighted average cost of $14.07 per share through December 31, 2011.20072009 and ending December 31, 2011.2013. This graph assumes that $100 was invested on December 31, 20062008 in each of the Company's common stock,shares, the S&P 500 and the S&P 400. A peer-group index for the welding industry, in general, was not readily available because the industry is comprised of a large number of privately held competitors and competitors that are smaller parts of large publicly traded companies.
Year Ended December 31, Year Ended December 31, 2011(2) 2010(3) 2009(4) 2008(5) 2007(6) $ 2,694,609 $ 2,070,172 $ 1,729,285 $ 2,479,131 $ 2,280,784 $ 2,852,671 $ 2,853,367 $ 2,694,609 $ 2,070,172 $ 1,729,285 217,186 130,244 48,576 212,286 202,736 293,780 257,411 217,186 130,244 48,576 2.60 1.54 0.57 2.49 2.36 2.56 1.53 0.57 2.47 2.34 0.635 0.575 0.545 0.51 0.455 Basic earnings per share 3.58 3.10 2.60 1.54 0.57 Diluted earnings per share 3.54 3.06 2.56 1.53 0.57 Cash dividends declared per share 0.830 0.710 0.635 0.575 0.545 1,976,776 1,783,788 1,705,292 1,718,805 1,645,296 2,151,867 2,089,863 1,976,776 1,783,788 1,705,292 1,960 84,627 87,850 91,537 117,329 3,791 1,599 1,960 84,627 87,850 (1)Earnings per share and cash dividends declared per share have been retroactively adjusted to give effect to the two-for-one stock split on May 31, 2011.(2)Results for 2011 include rationalization and asset impairment net charges of $282 ($237 after-tax) resulting from rationalization activities primarily initiated in 2009 and a gain of $4,844 related to a favorable adjustment for tax audit settlements.(3)Results for 2010 include rationalization and asset impairment net gains of $384 ($894 after-tax) which include net gains of $3,684 ($3,725 after-tax) related to the sale of property and asset disposals, impairment charges of $883 ($801 after-tax) and $2,417 ($2,030 after-tax) in rationalization charges. Results also include a net charge of $3,123 ($3,560 after-tax) related to the change in functional currency and devaluation of the Venezuelan currency, income of $5,092 was recognized due to an adjustment in tax liabilities for a change in applicable tax regulations, a gain of $108 after-tax in noncontrolling interests related to the impairment of assets for a majority-owned consolidated subsidiary and a charge of $1,890 after-tax in noncontrolling interests related to gains on the disposal of assets in a majority-owned consolidated subsidiary.(4)Results for 2009 include rationalization and asset impairment net charges of $29,897 ($23,789 after-tax). The net charges include rationalization charges of $26,957 ($21,529 after-tax) and impairment charges of $2,940 ($2,260 after-tax) for certain indefinite-lived intangible assets. Results also include a loss of $7,943 ($7,943 after-tax) associated with the acquisition of a business in China and the related disposal of an interest in Taiwan, a pension settlement gain of $2,144 ($2,144 after-tax), a charge of $601 after-tax in noncontrolling interests associated with the pension settlement gain for a majority-owned consolidated subsidiary, and a gain on the sale of a property by the Company's joint venture in Turkey of $5,667 ($5,667 after-tax).(5)Results for 2008 include a charge of $2,447 ($1,698 after-tax) relating to the Company's rationalization programs that began in the fourth quarter 2008. Results for 2008 also include $16,924 ($16,615 after-tax) in asset impairment charges including $13,194 of goodwill and $2,388 of long-lived assets related to two businesses in China (with no tax benefit) as well as an impairment charge of $1,342 ($1,033 after-tax) for intangible assets.(6)Results for 2007 include a net gain of $188 ($107 after-tax) relating to the Company's rationalization programs.(1) (2) Results for 2012 include rationalization and asset impairment net charges of $9,354 ($7,442 after-tax) which include $7,512 ($6,153 after-tax) in rationalization charges and asset disposal and impairment charges of $1,842 ($1,289 after-tax). Results also include a charge of $1,381 ($906 after-tax) related to the change in Venezuelan labor law, which provides for increased employee severance obligations. (3) Results for 2011 include rationalization and asset impairment net charges of $282 ($237 after-tax) resulting from rationalization activities primarily initiated in 2009 and a gain of $4,844 related to a favorable adjustment for tax audit settlements. (4) Results for 2010 include rationalization and asset impairment net gains of $384 ($894 after-tax) which include net gains of $3,684 ($3,725 after-tax) related to the sale of property and asset disposals, impairment charges of $883 ($801 after-tax) and $2,417 ($2,030 after-tax) in rationalization charges. Results also include a net charge of $3,123 ($3,560 after-tax) related to the change in functional currency and devaluation of the Venezuelan currency, income of $5,092 was recognized due to an adjustment in tax liabilities for a change in applicable tax regulations, a gain of $108 after-tax in non-controlling interests related to the impairment of assets for a majority-owned consolidated subsidiary and a charge of $1,890 after-tax in non-controlling interests related to gains on the disposal of assets in a majority-owned consolidated subsidiary. (5) Results for 2009 include rationalization and asset impairment net charges of $29,897 ($23,789 after-tax). The net charges include rationalization charges of $26,957 ($21,529 after-tax) and impairment charges of $2,940 ($2,260 after-tax) for certain indefinite-lived intangible assets. Results also include a loss of $7,943 ($7,943 after-tax) associated with the acquisition of a business in China and the related disposal of an interest in Taiwan, a pension settlement gain of $2,144 ($2,144 after-tax), a charge of $601 after-tax in non-controlling interests associated with the pension settlement gain for a majority-owned consolidated subsidiary and a gain on the sale of a property by the Company's joint venture in Turkey of $5,667 ($5,667 after-tax). •••••••• Australia, Brazil, Canada, China, Colombia, France, Germany, India, Indonesia, Italy, Mexico, the Netherlands, Poland, Portugal, Russia, Turkey, the United Kingdom and Venezuela.Africa.the Middle East. The other two welding segments include welding operations in Asia Pacific and South America, respectively. The fifth segment, The Harris Products Group, includes the Company's global cutting, soldering and brazing businesses as well as the retail business in the United States. See Note 45 to the Company's consolidated financial statements for segment and geographic area information, which is incorporated herein by reference. Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 Amount % of Sales Amount % of Sales Amount % of Sales Amount % of Sales Amount % of Sales Amount % of Sales $ 2,694,609 100.0% $ 2,070,172 100.0% $ 1,729,285 100.0% $ 2,852,671 100.0 % $ 2,853,367 100.0 % $ 2,694,609 100.0 % 1,957,872 72.7% 1,506,353 72.8% 1,273,017 73.6% 1,910,017 67.0 % 1,986,711 69.6 % 1,957,872 72.7 % 736,737 27.3% 563,819 27.2% 456,268 26.4% 942,654 33.0 % 866,656 30.4 % 736,737 27.3 % 439,775 16.3% 377,773 18.2% 333,138 19.3% 527,206 18.5 % 495,221 17.4 % 439,775 16.3 % 282 – (384 ) – 29,897 1.7% 8,463 0.3 % 9,354 0.3 % 282 — 296,680 11.0% 186,430 9.0% 93,233 5.4% 406,985 14.3 % 362,081 12.7 % 296,680 11.0 % 3,121 0.1% 2,381 0.1% 3,462 0.2% 3,320 0.1 % 3,988 0.1 % 3,121 0.1 % 5,385 0.2% 3,171 0.2% (5,025 ) (0.3% ) Equity earnings in affiliates 4,806 0.2 % 5,007 0.2 % 5,385 0.2 % 2,849 0.1% 1,817 0.1% 3,589 0.2% 4,194 0.1 % 2,685 0.1 % 2,849 0.1 % (6,704 ) (0.2% ) (6,691 ) (0.3% ) (8,521 ) (0.5% ) (2,864 ) (0.1 %) (4,191 ) (0.1 %) (6,704 ) (0.2 %) 301,331 11.2% 187,108 9.0% 86,738 5.0% 416,441 14.6 % 369,570 13.0 % 301,331 11.2 % 84,318 3.1% 54,898 2.7% 37,905 2.2% 124,754 4.4 % 112,354 3.9 % 84,318 3.1 % 217,013 8.1% 132,210 6.4% 48,833 2.8% (173 ) – 1,966 0.1% 257 – 291,687 10.2 % 257,216 9.0 % 217,013 8.1 % (2,093 ) (0.1 %) (195 ) — (173 ) — $ 217,186 8.1% $ 130,244 6.3% $ 48,576 2.8% $ 293,780 10.3 % $ 257,411 9.0 % $ 217,186 8.1 % 20112013 Compared with 2010acquisition,acquisitions, price and foreign currency exchange rates on Net sales for the twelve months ended December 31, 2013: Change in Net Sales due to: Volume Acquisitions Price Foreign Exchange Operating Segments North America Welding $ 1,580,818 $ (22,962 ) $ 91,442 $ 7,785 $ (4,314 ) $ 1,652,769 Europe Welding 452,227 (18,518 ) — (5,696 ) 1,535 429,548 Asia Pacific Welding 324,482 (48,964 ) — (4,947 ) (4,289 ) 266,282 South America Welding 161,483 13,269 — 29,730 (8,587 ) 195,895 The Harris Products Group 334,357 1,276 — (24,748 ) (2,708 ) 308,177 Consolidated $ 2,853,367 $ (75,899 ) $ 91,442 $ 2,124 $ (18,363 ) $ 2,852,671 % Change North America Welding (1.5 %) 5.8 % 0.5 % (0.3 %) 4.6 % Europe Welding (4.1 %) — (1.3 %) 0.3 % (5.0 %) Asia Pacific Welding (15.1 %) — (1.5 %) (1.3 %) (17.9 %) South America Welding 8.2 % — 18.4 % (5.3 %) 21.3 % The Harris Products Group 0.4 % — (7.4 %) (0.8 %) (7.8 %) Consolidated (2.7 %) 3.2 % 0.1 % (0.6 %) — Twelve Months Ended December 31, 2013 2012 $ Change % Change North America Welding: Net sales $ 1,652,769 $ 1,580,818 71,951 4.6 % Inter-segment sales 127,254 131,062 (3,808 ) (2.9 %) Total Sales $ 1,780,023 $ 1,711,880 68,143 4.0 % EBIT, as adjusted $ 318,507 $ 293,070 25,437 8.7 % As a percent of total sales 17.9 % 17.1 % 0.8 % Europe Welding: Net sales $ 429,548 $ 452,227 (22,679 ) (5.0 %) Inter-segment sales 19,911 16,048 3,863 24.1 % Total Sales $ 449,459 $ 468,275 (18,816 ) (4.0 %) EBIT, as adjusted $ 36,247 $ 37,299 (1,052 ) (2.8 %) As a percent of total sales 8.1 % 8.0 % 0.1 % Asia Pacific Welding: Net sales $ 266,282 $ 324,482 (58,200 ) (17.9 %) Inter-segment sales 14,906 14,829 77 0.5 % Total Sales $ 281,188 $ 339,311 (58,123 ) (17.1 %) EBIT, as adjusted $ 1,815 $ 7,247 (5,432 ) (75.0 %) As a percent of total sales 0.6 % 2.1 % (1.5 %) South America Welding: Net sales $ 195,895 $ 161,483 34,412 21.3 % Inter-segment sales 233 38 195 513.2 % Total Sales $ 196,128 $ 161,521 34,607 21.4 % EBIT, as adjusted $ 57,306 $ 18,301 39,005 213.1 % As a percent of total sales 29.2 % 11.3 % 17.9 % The Harris Products Group: Net sales $ 308,177 $ 334,357 (26,180 ) (7.8 %) Inter-segment sales 9,605 8,549 1,056 12.4 % Total Sales $ 317,782 $ 342,906 (25,124 ) (7.3 %) EBIT, as adjusted $ 27,826 $ 29,477 (1,651 ) (5.6 %) As a percent of total sales 8.8 % 8.6 % 0.2 % 2011:2012: Change in Net Sales due to: Change in Net Sales due to: Net Sales
2010 Volume Acquisitions Price Foreign Exchange Net Sales
2011 Volume Acquisitions Price $ 1,013,193 $ 194,618 $ 54,452 $ 41,839 $ 5,397 $ 1,309,499 $ 1,309,499 $ 112,898 $ 124,830 $ 37,124 $ (3,533 ) $ 1,580,818 359,925 42,376 66,425 20,390 19,576 508,692 508,692 (36,199 ) 8,322 4,874 (33,462 ) 452,227 324,092 26,198 – 3,305 22,681 376,276 376,276 (54,289 ) — 1,646 849 324,482 117,419 24,209 – 11,618 3,438 156,684 156,684 (1,284 ) — 15,584 (9,501 ) 161,483 255,543 18,625 – 65,753 3,537 343,458 343,458 13,683 — (13,427 ) (9,357 ) 334,357 $ 2,070,172 $ 306,026 $ 120,877 $ 142,905 $ 54,629 $ 2,694,609 $ 2,694,609 $ 34,809 $ 133,152 $ 45,801 $ (55,004 ) $ 2,853,367 19.2% 5.4% 4.1% 0.5% 29.2% 8.6 % 9.5 % 2.8 % (0.3 %) 20.7 % 11.8% 18.5% 5.7% 5.4% 41.3% (7.1 %) 1.6 % 1.0 % (6.6 %) (11.1 %) 8.1% – 1.0% 7.0% 16.1% (14.4 %) — 0.4 % 0.2 % (13.8 %) 20.6% – 9.9% 2.9% 33.4% (0.8 %) — 9.9 % (6.1 %) 3.1 % 7.3% – 25.7% 1.4% 34.4% 4.0 % — (3.9 %) (2.7 %) (2.6 %) 14.8% 5.8% 6.9% 2.6% 30.2% 1.3 % 4.9 % 1.7 % (2.0 %) 5.9 % volumevolumes for 20112012 increased for all operatingthe North America Welding and The Harris Products Group segments as abecause of growth within the domestic markets. Volume decreases for the Europe Welding, Asia Pacific Welding and South America Welding segments are the result of highersoftening demand levels from expanding industrial economies associated with the improved global economy and modest market share gains.in these international markets. Product pricing increased for all operating segments from prior year levels, except for The Harris Products Group segment, due to the realization of price increases implemented in response to increases in raw material costs. Product pricing in the South America Welding segment continues to reflectreflects a higher inflationary environment, particularly in Venezuela. Product pricing increased indecreased for The Harris Products Group segment duebecause of significant decreases in the costs of silver and copper as compared to the pass-through effect of higher commodity costs, particularly silver and copper.prior year period. The increase in Net sales from acquisitions was due to the acquisitions of Kaliburn in November 2012, Wayne Trail in May 2012, Weartech in March 2012, Techalloy in July 2011, Applied Robotics, Inc. (d/b/a Torchmate) ("Torchmate") in July 2011 and SSCO Manufacturing, Inc. (d/b/a Arc Products) ("Arc Products") in January 2011 Techalloy Company, Inc. and certain assets of its parent company, Central Wire Industries Ltd. (collectively, "Techalloy") and Applied Robotics, Inc. (d/b/a Torchmate) ("Torchmate") in July 2011 in the North America Welding segment and the acquisitionsacquisition of OOO Severstal-metiz: welding consumables ("Severstal")Severstal in March 2011 and Mezhgosmetiz-Mtsensk OAO ("MGM") in October 2010 in the Europe Welding segment (see the "Acquisitions" section below for additional information regarding the acquisitions). With respect to changes in Net sales due to foreign exchange, all segments, increasedexcept for the Asia Pacific Welding segment, decreased due to a weakerstronger U.S. dollar.Gross Profit:Earnings Before Interest and Income Taxes (“EBIT”), as Adjusted: Segment performance is measured and resources are allocated based on a number of factors, the primary profit measure being EBIT, as adjusted. The following table presents EBIT, as adjusted for 2012 Gross profit increased 30.7% to $736,737 during 2011by segment compared with $563,8192011: Twelve Months Ended December 31, 2012 2011 $ Change % Change North America Welding: �� Net sales $ 1,580,818 $ 1,309,499 271,319 20.7 % Inter-segment sales 131,062 136,314 (5,252 ) (3.9 %) Total Sales $ 1,711,880 $ 1,445,813 266,067 18.4 % EBIT, as adjusted $ 293,070 $ 227,924 65,146 28.6 % As a percent of total sales 17.1 % 15.8 % 1.3 % Europe Welding: Net sales $ 452,227 $ 508,692 (56,465 ) (11.1 %) Inter-segment sales 16,048 17,422 (1,374 ) (7.9 %) Total Sales $ 468,275 $ 526,114 (57,839 ) (11.0 %) EBIT, as adjusted $ 37,299 $ 36,171 1,128 3.1 % As a percent of total sales 8.0 % 6.9 % 1.1 % Asia Pacific Welding: Net sales $ 324,482 $ 376,276 (51,794 ) (13.8 %) Inter-segment sales 14,829 15,614 (785 ) (5.0 %) Total Sales $ 339,311 $ 391,890 (52,579 ) (13.4 %) EBIT, as adjusted $ 7,247 $ 2,629 4,618 175.7 % As a percent of total sales 2.1 % 0.7 % 1.4 % South America Welding: Net sales $ 161,483 $ 156,684 4,799 3.1 % Inter-segment sales 38 494 (456 ) (92.3 %) Total Sales $ 161,521 $ 157,178 4,343 2.8 % EBIT, as adjusted $ 18,301 $ 12,895 5,406 41.9 % As a percent of total sales 11.3 % 8.2 % 3.1 % The Harris Products Group: Net sales $ 334,357 $ 343,458 (9,101 ) (2.6 %) Inter-segment sales 8,549 8,496 53 0.6 % Total Sales $ 342,906 $ 351,954 (9,048 ) (2.6 %) EBIT, as adjusted $ 29,477 $ 25,151 4,326 17.2 % As a percent of total sales 8.6 % 7.1 % 1.5 % 2010. As a percentage of Net sales, Gross profit increased slightly to 27.3% in 20112012 as compared with 27.2%2011. The North America Welding segment growth was primarily due to improved leverage on an 8.6% increase in 2010.volumes and price increases of 2.8%. The increase at the Europe Welding segment was the result of pricing increasesprimarily due to improved product mix. The Asia Pacific Welding segment increase was due to improved profitability resulting from prior rationalization actions in Australia and operating leverage offset by rising material costs and lower margins from the acquisitions of MGM, Severstal and Techalloy. In the prior year period, theimproved product mix. The South America Welding segment recorded charges of $5,755 resulting from the change in functional currency and related devaluation of the Venezuelan currency. Foreign currency exchange rates had an $11,125 favorable translation impact in 2011.Selling, General & Administrative ("SG&A") Expenses: SG&A expenses increased 16.4% to $439,775 during 2011 compared with $377,773 in 2010. The increase was primarily due to higher bonus expense of $30,714, higher selling, administrative and research and development expenses of $15,546, incremental SG&A expenses from acquisitions of $8,600, higher foreign currency translation of $7,257 and higher foreign exchange transaction losses of $4,531 partially offset by lower legal expenses of$4,124. In the prior year period, the South America Welding segment recorded a gain of $2,632 resulting from the change in Venezuela's functional currency to the U.S. dollar and the devaluation of the bolivar.Rationalization and Asset Impairment Charges (Gains): In 2011, the Company recorded $282 ($237 after-tax) in charges primarily related to rationalization actions initiated in 2009. See "Rationalization and Asset Impairments" for additional information.Interest Income: Interest income increased to $3,121 in 2011 from $2,381 in 2010. The increase was largely due to interest income received on a sales tax refund.Equity Earnings (Loss) in Affiliates: Equity earnings in affiliates were $5,385 in 2011 compared with earnings of $3,171 in 2010. The increase was due to an increase in earnings of $1,895 in Turkey and an increase of $319 in Chile.Interest Expense: Interest expense remained flat at $6,704 in 2011 as compared to $6,691 in 2010, primarily as a result of higher interest rates offset by lower levelsproduct pricing increases of debt in the current period.Income Taxes:9.9% The Company recorded $84,318 of tax expense on pre-tax income of $301,331, resulting in an effective tax rate of 28.0% for 2011. The effective income tax rate is lower than the Company's statutory rate primarily due to income earned in lower tax rate jurisdictions, the utilization of foreign tax loss carryforwards for which valuation allowances had been previously provided and a tax benefit of $4,844 for tax audit settlements.The effective income tax rate of 29.3% for 2010 was primarily due to income earned in lower tax rate jurisdictions and the utilization of foreign tax loss carryforwards for which valuation allowances had been previously provided.Net Income: Net income for 2011 was $217,186 compared with $130,244 in the prior year. Diluted earnings per share for 2011 were $2.56 compared with diluted earnings of $1.53 per share in 2010. Foreign currency exchange rate movements had a favorable translation effect of $2,948 and $762 on Net income for 2011 and 2010, respectively.2010 Compared with 2009Net Sales: The table below summarizes the impacts of volume, acquisition, price and foreign currency exchange rates on Net sales for the twelve months ended December 31, 2010: Change in Net Sales due to: Net Sales
2009 Volume Acquisitions Price Foreign
Exchange Net Sales
2010 $ 858,180 $ 150,814 $ – $ (7,709 ) $ 11,908 $ 1,013,193 346,383 30,175 5,331 (9,668 ) (12,296 ) 359,925 208,280 20,077 86,235 (3,165 ) 12,665 324,092 99,171 25,724 – 7,432 (14,908 ) 117,419 217,271 16,264 – 19,303 2,705 255,543 $ 1,729,285 $ 243,054 $ 91,566 $ 6,193 $ 74 $ 2,070,172 17.6% – (0.9% ) 1.4% 18.1% 8.7% 1.5% (2.8% ) (3.5% ) 3.9% 9.6% 41.4% (1.5% ) 6.1% 55.6% 25.9% – 7.5% (15.0% ) 18.4% 7.5% – 8.9% 1.2% 17.6% 14.1% 5.3% 0.4% – 19.7% Net sales volume for 2010 increased for all operating segments as a result of higher demand levels associated with the improved global economy. Increased sales volumes in the South America Welding segment also reflect market share expansion. Product pricing was higher in the South America Welding segment primarily due to high inflation in Venezuela. Product pricing increased inexceeding inflationary cost. The Harris Products Group segment due to the pass-through effect of higher commodity costs, particularly silver and copper. Product pricing decreased due to changes in pricing required to remain competitive asgrowth was primarily a result of lower material costs inimproved product mix on equipment sales volume.segments. The increase in Net sales from acquisitions was duesegments excluded special item charges of $827, $3,534 and $4,993, respectively, primarily related to employee severance and other costs associated with the acquisitionconsolidation of Jinzhou Jin Tai Welding and Metal Co, Ltd. ("Jin Tai") in July 2009 in the Asia Pacific Welding segment and the acquisition of MGM in October 2010 in the Europe Welding segment (see the "Acquisitions" section below for additional information regarding the acquisitions).With respect to changes in Net sales due to foreign exchange, the North America Welding segment increased primarily due to a stronger Canadian dollar and Mexican peso. The Europe Welding segment decreased primarily due to a weaker euro offset by a stronger Polish zloty. The Asia Pacific Welding segment increased primarily due to a stronger Australian dollar and Chinese renminbi.manufacturing operations. The South America Welding segment decreased primarily due to the devaluationEBIT, as adjusted, excluded a special item charge of the Venezuelan bolivar offset by a stronger Brazilian real and Colombian peso. The Harris Products Group segment increased primarily duestronger Brazilian real offset by a weaker euro.Gross Profit: Gross profit increased 23.6% to $563,819 during 2010 compared with $456,268 in 2009. As a percentage of Net sales, Gross profit increased to 27.2% in 2010 from 26.4% in 2009. The increase was primarily a result of higher sales and production volumes, cost reduction initiatives and lower product liability costs of $2,905 (See "Product Liability Costs" for additional information) partially offset by an increase to the LIFO reserve of $8,459 compared with a decrease of $28,467 in the prior year. In addition, the South America Welding segment experienced higher inventory costs of $5,755 resulting from the change in Venezuela's functional currency to the U.S. dollar and the devaluation of the bolivar. Foreign currency exchange rates had a $4,135 favorable translation impact in 2010.Selling, General & Administrative ("SG&A") Expenses: SG&A expensesVenezuelan labor law, which provides for increased 13.4% to $377,773 during 2010 compared with $333,138 in 2009. The increase was primarily due to higher bonus expense of $28,890, higher selling, administrative and research and development expenses of $11,562, incremental SG&A expenses from acquisitions of $4,743 and higher legal expense of $4,237 partially offset by lower retirement costs in the U.S. of $3,794 and a gain of $2,632 resulting from the change in Venezuela's functional currency to the U.S. dollar and the devaluation of the bolivar.Rationalization and Asset Impairment Charges (Gains): In 2010, the Company recorded $384 ($894 after-tax) in gains primarily related to the sale of assets at rationalized operations. Gains recognized on the sale of assets of $4,555 ($4,596 after-tax) in the Asia Pacific Welding segment were offset by net charges of $871 ($871 after-tax) relating to environmental costs associated with the sale of property in The Harris Products Group segment. Also, charges of $3,300 ($2,831 after-tax), consisting of employee severance and other related costs of $2,417 ($2,030 after-tax) and asset impairment charges of $883 ($801 after-tax)obligations.were recognized on the continuation of activities initiated in 2009 to consolidate certain manufacturing operations inEBIT, as adjusted, for the Europe Welding and Asia Pacific Welding segments. See "Rationalizationsegments excluded special item net charges of $188 and Asset Impairments" for additional information.Interest Income: Interest income decreased$93, respectively, primarily related to $2,381 in 2010 from $3,462 in 2009.employee severance and other cost associated with the consolidation of manufacturing operations. The decrease was primarily due to lower interest rates on Cash and cash equivalents in 2010 when compared with 2009.Equity Earnings (Loss) in Affiliates: Equity earnings in affiliates were $3,171 in 2010 compared withEurope Welding segment special items also include a loss of $5,025 in 2009. The equity loss in 2009 includes a loss of $7,943 associated with the acquisition of Jin Tai and the related disposal of the Company's 35% interest in Kuang Tai Metal Industry Co., Ltd. ("Kuang Tai") and earnings of $5,667 on the Company's share of a gain realized$204 on the sale of assets at a property by the Company's joint venture in Turkey. See "Acquisitions" for additional information.Interest Expense: Interest expense decreased to $6,691 in 2010 from $8,521 in 2009 primarily as a result of the translation impact of the devaluation of the Venezuelan currency that resulted in lower interest expense from the Company's Venezuelan operation and a decrease in average debt levels.Income Taxes:rationalized operation. The Company recorded $54,898 of tax expense on pre-tax income of $187,108, resulting in an effective tax rate of 29.3% for 2010. The effective income tax rate is lower than the Company's statutory rate primarily because of income earned in lower tax rate jurisdictions and the utilization of foreign tax loss carryforwards for which valuation allowances had been previously recognized offset by losses with no tax benefit at certain non-U.S. entities. In addition, tax expense includes a decrease of $5,092 in unrecognized tax benefits in the Asia Pacific Welding segment resulting fromspecial items also include a change in applicable tax regulations.The effective income tax rategain of 43.7% for 2009 was primarily due to losses$203 on the sale of assets at certain non-U.S. entities for which no tax benefit was provided, partially offset by a benefit for the utilization of foreign tax credits.Net Income:rationalized operation. Net income for 2010 was $130,244 compared with $48,576 in the prior year. Diluted earnings per share for 2010 were $1.53 compared with diluted earnings of $0.57 per share in 2009. Foreign currency exchange rate movements had a favorable translation effect of $762 and $612 on Net income for 2010 and 2009, respectively. Year Ended December 31, 2011 2010 2009 $ 296,680 $ 186,430 $ 93,233 282 (1,267 ) 26,957 – 883 2,940 – 3,123 – – – (2,144 ) $ 296,962 $ 189,169 $ 120,986 Year Ended December 31, 2013 2012 2011 Operating income as reported $ 406,985 $ 362,081 $ 296,680 Special items (pre-tax): Rationalization and asset impairment charges 8,463 9,354 282 Loss on the sale of land 705 — — Venezuela currency devaluation 12,198 — — Venezuela statutory severance obligation — 1,381 — Adjusted operating income $ 428,351 $ 372,816 $ 296,962 20112013 include net rationalization and asset impairment charges of $282,$8,463 primarily related to employee severance and other costs associated with the consolidation of manufacturing operations and impairment of long-lived assets and a loss on the sale of land of $705. Special items for 2013 also include charges of $12,198 related to the devaluation of the Venezuelan currency.Special items included in Operating income during 2010 include net rationalization gains of $1,267 primarily related to gains on the disposal of assets at rationalized operations offset by charges associated with the consolidation of manufacturing operations initiated in 2009, asset impairment charges of $883 and a net charge of $3,123 related to the change in functional currency for the Company's operation in Venezuela to the U.S. dollar and the devaluation of the Venezuelan currency. The net charge of $3,123 relating to the Venezuelan operations is recorded as an increase in Cost of goods sold of $5,755 and a reduction in SG&A expenses of $2,632.Special items included in Operating income during 2009 include rationalization and asset impairment charges of $29,897. The Company's rationalization activities to align the business to current market conditions resulted in charges of $26,957 and impairment charges of $2,940 which were recognized for certain indefinite-lived intangible assets. Special items also include a pension settlement gain of $2,144. Year Ended December 31, 2011 2010 2009 $ 217,186 $ 130,244 $ 48,576 237 (1,695 ) 21,529 – 801 2,260 – 3,560 – – – (2,144 ) – – 7,943 – – (5,667 ) – (5,092 ) – (4,844 ) – –
items – 1,782 601 $ 212,579 $ 129,600 $ 73,098
$
2.56
$
1.53
$
0.57 (0.05 ) (0.01 ) 0.29 $ 2.51 $ 1.52 $ 0.86 Year Ended December 31, 2013 2012 2011 Net income as reported $ 293,780 $ 257,411 $ 217,186 Special items (after-tax): Rationalization and asset impairment charges 7,573 7,442 237 Loss on the sale of land 705 — — Venezuela currency devaluation 12,198 — — Venezuela statutory severance obligation — 906 — Adjustment for tax audit settlements — — (4,844 ) Non-controlling interests associated with special items (1,068 ) — — Adjusted net income $ 313,188 $ 265,759 $ 212,579 Diluted earnings per share as reported $ 3.54 $ 3.06 $ 2.56 Special items per share 0.23 0.10 (0.05 ) Adjusted diluted earnings per share $ 3.77 $ 3.16 $ 2.51 20112013 includes net rationalization and asset impairment charges of $237$7,573 primarily related to employee severance and other costs associated with the consolidation of manufacturing operations and impairment of long-lived assets and a loss on the sale of land of $705. Associated with the impairment of long-lived assets and loss on the sale of land is an offsetting special item of $1,068 attributable to non-controlling interests. Special items for 2013 also include charges of $12,198 related to the devaluation of the Venezuelan currency. Adjusted net income for 2013 includes $37,812, or $0.46 per diluted share, from the Company's Venezuelan operations.$4,844$4,844 related to a favorable adjustment for tax audit settlements.The Company's 2010 rationalization activities to align the business to current market conditions resulted in net gains of $1,695 primarily related to the sale of property and asset disposals and asset impairment charges of $801. Net income also includes a net charge of $3,560 related to the change in functional currency and devaluation of the Venezuelan currency, income of $5,092 due to an adjustment in tax liabilities for a change in applicable tax regulations, a gain of $108 in noncontrolling interests related to the impairment of assets for a majority-owned consolidated subsidiary and a charge of $1,890 in noncontrolling interests related to the disposal of assets for a majority-owned consolidated subsidiary.Net income for 2009 includes rationalization and asset impairment charges of $23,789. The Company's rationalization activities to align the business to current market conditions resulted in charges of $21,529 and impairment charges of $2,260, which were recognized for certain indefinite-lived intangible assets. Net income also includes a loss of $7,943 associated with the acquisition of Jin Tai, a pension settlement gain of $2,144, a charge of $601 in noncontrolling interests associated with the pension settlement gain for a majority-owned consolidated subsidiary and a gain on the sale of a property by the Company's joint venture in Turkey of $5,667. Year Ended December 31, $ Change 2011 2010 2009 2011 vs. 2010 2010 vs. 2009 Year Ended December 31, $ Change $ 193,518 $ 156,978 $ 250,350 $ 36,540 $ (93,372 ) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Cash provided by operating activities $ 338,894 $ 327,484 $ 193,518 $ 11,410 $ 133,966 (130,796 ) (69,400 ) (63,581 ) (61,396 ) (5,819 ) (129,500 ) (187,471 ) (130,796 ) 57,971 (56,675 ) (65,813 ) (60,565 ) (38,201 ) (5,248 ) (22,364 ) (76,015 ) (52,715 ) (65,813 ) (23,300 ) 13,098 (66,229 ) (18,856 ) (25,449 ) (47,373 ) 6,593 (53,161 ) (134,602 ) (66,229 ) 81,441 (68,373 ) 1,246 10,021 557 (8,775 ) 9,464 1,393 1,387 1,246 6 141 Other investing activities (1,717 ) (1,541 ) — (176 ) (1,541 ) (63,370 ) (109,507 ) (89,072 ) 46,137 (20,435 ) (194,184 ) (216,838 ) (63,370 ) 22,654 (153,468 ) 8,981 (18,599 ) (12,954 ) 27,580 (5,645 ) (Payments) proceeds on short-term borrowings, net (1,451 ) (4,533 ) 8,981 3,082 (13,514 ) (1,032 ) (8,580 ) (30,874 ) 7,548 22,294 (389 ) (84,770 ) (1,032 ) 84,381 (83,738 ) 11,351 3,508 705 7,843 2,803 20,297 18,776 11,351 1,521 7,425 2,916 1,210 195 1,706 1,015 Excess tax benefit from stock-based compensation 10,602 7,819 2,916 2,783 4,903 (36,997 ) (39,682 ) (343 ) 2,685 (39,339 ) (167,879 ) (81,018 ) (36,997 ) (86,861 ) (44,021 )
shareholders (51,935 ) (47,364 ) (45,801 ) (4,571 ) (1,563 ) (49,277 ) (73,112 ) (51,935 ) 23,835 (21,177 ) 3,346 – – 3,346 – (5,092 ) (21,943 ) 103,804 Transactions with non-controlling interests (6,087 ) — — (6,087 ) — Other financing activities — — 3,346 — (3,346 ) Increase (decrease) in Cash and cash equivalents 13,361 (74,637 ) (5,092 ) decreased 1.4%increased4.7%, or $5,092,$13,361, to $361,101$299,825 during the twelve months ended December 31, 2013, from $286,464 as of December 31, 2011, from $366,193 as2012. This increase was predominantly due to cash provided by operating activities offset by capital expenditures of $76,015, cash used in the acquisition of businesses, net of cash acquired of $53,161, purchases of common shares for treasury of $167,879 and cash dividends paid to shareholders of $49,277. Additionally, in the twelve months ended December 31, 2010. This compares with2012 a decreasedeposit of 5.7%, or $21,943,$89,448 for tax and interest assessed by the Canada Revenue Agency (“CRA”) was made, which did not recur in Cash and cash equivalents during 2010.2011 increased $36,540 from 2010.the twelve months ended December 31, 2013 compared with the twelve months ended December 31, 2012. The increase was predominantly relateddue to an increase inincreased Net income for the twelve months ended December 31, 2013, compared with the twelve months ended December 31, 2012 and a deposit of $89,448 for tax and interest assessed by the CRA made in 2012, which did not recur in the current period, offset by increasesa slight improvement in net operating working capital requiredrequirements in the twelve months ended December 31, 2013 as compared to support higher sales levels.a significant improvement in the twelve months ended December 31, 2012. Net operating working capital, defined as the sum of Accounts receivable and Total inventory less Trade accounts payable, increased $110,525decreased$8,667 in 20112013 compared with an increasea decrease of $29,547$102,155 in 2010.2012. Net operating working capital to sales, defined as net operating working capital divided by annualized rolling three months of Net sales, increaseddecreased to 21.0%17.6% at December 31, 20112013 compared with 20.7%18.8% at December 31, 2010.2012. Days sales in inventory increaseddecreased to 92.593.2 days at December 31, 20112013 from 89.894.3 days at December 31, 2010.2012. Accounts receivable days decreased to 53.550.3 days at December 31, 20112013 from 55.451.8 days at December 31, 2010.2012. Average days in accounts payable decreasedincreased to 35.145.5 days at December 31, 20112013 from 35.243.9 days at December 31, 2010.increased by $61,396 for 2011in the twelve months ended December 31, 2013 compared with 2010. This reflects an increase in capital expenditures of $5,248 from 2010 and an increasethe twelve months ended December 31, 2012 decreased by $57,971. The decrease was predominantly due to a decrease in the acquisition of businesses of $47,373 from 2010.$81,441 offset by an increase in capital expenditures of $23,300. The Company anticipates capital expenditures of $65,000$60,000 to $80,000 in 2012.2014. Anticipated capital expenditures reflect investments for capital maintenance, to improve operational effectiveness and the Company's continuing international expansion. Management critically evaluates all proposed capital expenditures and requires each project to increase efficiency, reduce costs, promote business growth, or to improve the overall safety and environmental conditions of the Company's facilities.for 2011 decreased $46,137 from 2010.$22,654 in the twelve months ended December 31, 2013 compared with the twelve months ended December 31, 2012. The decrease was predominantly due to higher net proceeds from short-term borrowings of $27,580, decreasedlower net payments of long-term borrowings of $7,548,$84,381, lower cash dividends paid to shareholders of $23,835 offset by higher proceeds from the exercisepurchases of stock options and related tax benefitscommon shares for treasury of $9,549 and $3,346 received in government grants. There were no Senior Unsecured Note maturities in 2011.$86,861.increaseddecreased from $97,705$20,275 at December 31, 20102012 to $103,378$19,087 at December 31, 2011 predominantly due to net increases in short-term borrowings at certain foreign subsidiaries.2013. Debt to total capitalization increasedinvested capital decreased to 8.0%1.2% at December 31, 20112013 from 7.8%1.5% at December 31, 2010. Included2012.Company's debt levels attwelve months ended December 31, 2011 is a senior unsecured note with a balance of $80,000, which is due in March 2012. The Company expects to repay this balance with cash generated by operations, existing cash balances or through borrowings under its existing credit facilities.A total of $51,935 in dividends was paid during 2011. In January 2012, the Company paid a quarterly cash dividend of $0.17 per share, or $14,186, to shareholders of record on December 31, 2011.3045 million shares of the Company's common stock. At management's discretion, the Company repurchases its common stock from time to time in the open market, depending on market conditions, stock price and other factors. During the yeartwelve months ended December 31, 2011,2013, the Company purchased 1,041,2292,671,614 shares at a cost of $35,709.$164,755. As of December 31, 2011, 5,121,7572013, 15,670,759 shares remained available for repurchase under the stock repurchase program.$30,000, $41,500$75,216, $60,277 and $45,000$30,000 in 2011, 20102013, 2012 and 2009,2011, respectively. The Company expects to voluntarily contribute approximately $30,000$20,000 to its U.S. plans in 2012.2014. Based on current pension funding rules, the Company does not anticipate that contributions to the plans would be required in 2012.2014.The$282 for$8,463 resulting from rationalization activities primarily initiated in 2012 and the year ended December 31,third quarter 2013. The 2013 net charges include $3,658 primarily related to employee severance and other related costs and $4,961 in asset impairment charges, partially offset by gains from sales of assets of $156.In 2010, the Company recorded rationalization and asset impairment net gains of $384 resulting from rationalization activities primarily initiated in the third and second quarters of 2009. The 2010 net gains include $4,555 primarily related to asset disposals offset by charges of $2,417 primarily related to employee severance and other related costs, $871 related to environmental costs associated with the sale of property and $883 in asset impairment charges.In 2009, the Company recorded rationalization and asset impairment net charges of $29,897 resulting from rationalization activities primarily initiated in the third and second quarters. The 2009 net charges include $27,142 primarily related to employee severance costs, $2,061 in long-lived asset impairment charges and a gain of $185 recognized in connection with the partial settlement of a pension plan. Rationalization activities during the year affected 1,063 employees and included the closure of two manufacturing operations. Impairment charges on certain indefinite-lived intangible assets of $879 were also included under this caption.AcquisitionsDuring November 2013, the Company acquired an ownership interest in Burlington. Burlington, based in Hamilton, Ontario, Canada, is a leader in the design and manufacture of 3D robotic plasma cutting systems whose products are sold under the brand name Python XTechalloy, for approximately $36,900 in cash and assumed debt. The fair value of assets acquired was $32,814, resulting in goodwillof $4,086.Techalloy. Techalloy, based in Baltimore, Maryland, wasis a privately-held manufacturer of nickel alloy and stainless steel welding consumables. The acquisition added to the Company's consumables portfolio. Annual sales for Techalloy at the date of acquisition were approximately $70,000.Torchmate for approximately $8,280 in cash. The fair value of assets acquired was $2,361, resulting in goodwill of $5,919.Torchmate. Torchmate, based in Reno, Nevada, provides a wide selection of computer numeric controlled plasma cutter and oxy-fuel cutting systems. The acquisition added to the Company's plasma and oxy-fuel cutting product offering. Annual sales for Torchmate at the date of acquisition were approximately $13,000.$13,000.Severstal for approximately $16,861 in cash and assumed debt. The fair value of the assets acquired was $8,049, resulting in goodwill of $8,812.Severstal. Severstal is a leading manufacturer of welding consumables in Russia and was a subsidiary of OAO Severstal, one of the world's leading vertically integrated steel and mining companies. This acquisition expanded the Company's capacity and distribution channels in Russia and the Commonwealth of Independent States ("CIS"). Sales for Severstal during 2010 were approximately $40,000.$40,000.Products for approximately $3,280 in cash and a contingent consideration liability fair valued at $3,806. The contingent consideration is based upon estimated sales for the five-year period ending December 31, 2015 and will be paid in 2016 based on actual sales during the five-year period. The fair value of the assets acquired was $3,613, resulting in goodwill of $3,473.Products. Arc Products wasis a privately-held manufacturer of orbital welding systems and welding automation components based in Southern California. Orbital welding systems are designed to automatically weld pipe and tube in difficult to access locations and for mission-critical applications requiring high weld integrity and sophisticated quality monitoring capabilities. The acquisition will complement the Company's ability to serve global customers in the nuclear, power generation and process industries worldwide. Sales for Arc Products during 2010 were not significant.On October 29, 2010, thesignificantall of the outstanding stock of MGM, a privately-held welding wire manufacturer based in the Orel region of Russia,Techalloy, Torchmate, Severstal and Arc Products for approximately $28,500$65,321 in cash and assumed debt. This acquisition represented the Company's first manufacturing operation in Russia as well as established distribution channels to serve the growing Russiandebt and CIS welding markets. Annuala contingent consideration liability fair valued at $3,806. The contingent consideration is based upon estimated sales for MGM at the date ofrelated acquisition were approximately $30,000.On July 29, 2009,for the Company completedfive-year period ending December 31, 2015 and will be paid in 2016 based on actual sales during the acquisition of 100% of Jin Tai, based in Jinzhou, China. This transaction expanded the Company's customer base and gave the Company control of significant cost-competitive solid wire manufacturing capacity. The Company previously held a 21% direct interest in Jin Tai and a further 27% indirect interest via its 35% ownership in Kuang Tai. Under the terms of the purchase agreement, the Company exchanged its 35% interest in Kuang Tai, which had an estimated fair value of $22,723, paid cash of $35,531 and committed to pay an additional $4,181 in cash over a three-year period after close.five-year period. The fair value of the Company's previous non-controlling direct interestnet assets acquired was Jin Tai was $8,675. The carrying valuesgoodwill of the Company's interests in Kuang Tai and Jin Tai were $29,368 and $9,973, respectively. The excess carrying value over fair value of these interests resulted in a loss on the transaction of $7,943 recorded in "Equity earnings (loss) in affiliates." The Company previously reported its proportional share of Jin Tai's net income under the equity method in "Equity earnings (loss) in affiliates." Jin Tai's sales were $186,774 in 2008 and $74,834 in 2009 prior to the acquisition. Jin Tai's sales of $53,956 after the acquisition were included in "Net sales" for 2009.$22,290.DebtDuring March 2002, the Company issued Senior Unsecured Notes (the "Notes") totaling $150,000 through a private placement. The Notes have original maturities ranging from five to ten years with a weighted-average interest rate of 6.1% and an average tenure of eight years. Interest is payable semi-annually in March and September. The proceeds are being used for general corporate purposes, including acquisitions, and are generally invested in short-term, highly liquid investments. The Notes contain certain affirmative and negative covenants, including restrictions on asset dispositions and financial covenants (interest coverage and funded debt-to-EBITDA, as defined in the Notes agreement, ratios). As of December 31, 2011, the Company was in compliance with all of its covenants under the Notes agreement. The Company repaid the $40,000 Series A Notes and the $30,000 Series B Notes in March 2007 and March 2009, respectively, reducing the balance outstanding of the Notes to $80,000, which is due in March 2012.During March 2002, the Company entered into floating rate interest rate swap agreements totaling $80,000 to convert a portion of the Notes outstanding from fixed to floating rates. These swaps were designated as fair value hedges and, as such, the gains or losses on the derivative instrument, as well as the offsetting gains or losses on the hedged item attributable to the hedged risk, were recognized in earnings. Net payments or receipts under these agreements were recognized as adjustments to "Interest expense." In May 2003, these swap agreements were terminated. The gain of $10,613 on the termination of these swaps was deferred and is being amortized as an offset to "Interest expense" over the remaining life of the Notes. The amortization of this gain reduced "Interest expense" by $206 in 2011, $206 in 2010 and $313 in 2009, and is expected to reduce annual "Interest expense" by $30 in 2012.During July 2003 and April 2004, the Company entered into various floating rate interest rate swap agreements totaling $110,000 to convert a portion of the Notes outstanding from fixed to floating rates based on the London Inter-Bank Offered Rate ("LIBOR"). These swaps were designated and qualified as fair value hedges and, as such, the gains or losses on the derivative instrument, as well as the offsetting gains or losses on the hedged item, were recognized in earnings. Net payments or receipts under these agreements were recognized as adjustments to "Interest expense."During February 2009, the Company terminated swaps with a notional value of $80,000 and realized a gain of $5,079. This gain was deferred and is being amortized over the remaining life of the Notes. The amortization of this gain reduced "Interest expense" by $1,661 in 2011, $1,661 in 2010 and $1,429 in 2009, and is expected to reduce annual "Interest expense" by $328 in 2012.During March 2009, swaps designated as fair value hedges that converted the $30,000 Series B Notes from fixed to floating interest rates matured with the underlying Notes. The Company has no interest rate swaps outstanding at December 31, 2011. The weighted average effective rate on the Notes, net of the impact of swaps, was 4.0% for both 2011 and 2010.20112013 and 2010,2012, the fair value of long-term debt, including the current portion, was approximately $84,110$4,212 and $88,120,$1,919, respectively, which was determined using available market information and methodologies requiring judgment. Since considerable 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.On November 18, 2009, theentered into anhas a line of credit totaling $300,000 through the Amended and Restated Credit Agreement ("Credit Agreement"(the “Credit Agreement”) for a $150,000 revolving credit facility to be used for general corporate purposes. The Credit Agreement has a three-year term that is set to expire in November 2012. At any time notlater than 180 days prior to the last day of the term, the Credit Agreement may be increased, subject to certain conditions, by an additional amount up to $75,000. The interest rate, which was entered into on borrowings is based on either LIBOR or the prime rate, plus a spread based on the Company's leverage ratio, at the Company's election. A quarterly facility fee is payable based upon the daily aggregate amount of commitments and the Company's leverage ratio. The Company expects to replace the Credit Agreement prior to its expiration in November although there can be no assurances that the Company can replace the Credit Agreement or that satisfactory terms will be reached.. The Credit Agreement contains customary affirmative, negative and financial covenants for credit facilities of this type, including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets, transactions with affiliates and a fixed charges coverage ratio and total leverage ratio. As of December 31, 2011,2013, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement, but had letters of credit outstanding totaling $60, which reduced the availability under theAgreement. The Credit Agreement has a five-year term and may be increased, subject to $149,940."AmountsAmounts due banks"banks were $19,922$14,581 and $11,283$18,220 at December 31, 20112013 and 2010,2012, respectively, and represent the borrowings of foreign subsidiaries at weighted average interest rates of 11.6%11.3% and 17.1%11.3%, respectively. The primary reason for the decrease in the weighted average interest rate is the shift during 2011 in short-term borrowings from geographic areas with higher interest rates to areas with lower interest rates.20112013 are as follows: Payments Due By Period Total 2014 2015 to
2016 2017 to
2018 2019 and
BeyondLong-term debt, including current portion $ 2,722 $ 644 $ 854 $ 450 $ 774 Interest on long-term debt 311 107 104 54 46 Capital lease obligations 236 72 127 37 — Short-term debt 14,581 14,581 — — — Interest on short-term debt 1,019 1,019 — — — Operating leases 48,170 13,263 18,631 9,708 6,568 164,232 160,987 2,983 175 87 Total $ 231,271 $ 190,673 $ 22,699 $ 10,424 $ 7,475 (1) Purchase commitments include contractual obligations for raw materials and services. Payments Due By Period Total 2012 2013 to
2014 2015 to
2016 2017 and
Beyond $ 82,197 $ 80,496 $ 721 $ 272 $ 708 2,816 2,634 90 34 58 901 643 136 76 46 19,922 19,922 – – – 1,034 1,034 – – – 36,216 10,620 13,163 7,169 5,264 197,859 197,173 673 13 – $ 340,945 $ 312,522 $ 14,783 $ 7,564 $ 6,076 (1)Purchase commitments include contractual obligations for raw materials and services.2011,2013, there was $26,656$25,907 of tax liabilities related to unrecognized tax benefits. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, the Company is unable to estimate the years in which settlement will occur with the respective taxing authorities. See Note 1112 to the Company's consolidated financial statements for further discussion.$30,000$20,000 to the U.S. pension plans in 2012.
2014.2011,2013, there were 3,061,3462,315,239 common shares available for future grant under all plans. 603,874 in 2010 and 772,610 in 2009.. The Company issued shares of common stock from treasury upon all exercises of stock options and the granting of restricted stock awards in 2011, 20102013, 2012 and 2009.2011.2011, 20102013, 2012 and 20092011 was $6,610, $8,213$9,734, $8,961 and $5,432,$6,610, respectively. The related tax benefit for 2011, 20102013, 2012 and 20092011 was $2,515, $3,112$3,727, $3,409 and $2,058,$2,515, respectively. As of December 31, 2011,2013, total unrecognized stock-based compensation expense related to nonvestednon-vested stock options, restricted shares and restricted stock units was $18,898,$21,633, which is expected to be recognized over a weighted average period of approximately 37 months.3.3 years.thatwhich would have been received by the optionees had all awards been exercised at December 31, 2011,2013, was $47,467$85,404 and $41,192,$76,076, respectively. The total intrinsic value of awards exercised during 20112013, 2012 and 20102011 was $15,781$20,297, $18,776 and $5,006,$10,028 respectively.welding fumeasbestos claims. Costs incurred are volatile and are largely related to trial activity. The costs associated with these claims are predominantly defense costs which are recognized in the periods incurred. Product liability costs decreased $1,387$767 in 20112013 compared with 20102012 primarily due to reduced trial activity.welding fumeasbestos loss contingency, in the aggregate, on operating results, operating cash flows and access to capital markets is difficult to assess, particularly since claims are in many different stages of development and the Company benefits significantly from cost sharing with co-defendants and insurance carriers. Moreover, the Company has been largely successful to date in its defense of these claims and indemnity payments have been immaterial. In January 2012, the Company and 18 co-defendants entered into an agreement that provides for the dismissal with prejudice of substantially all of the pending manganese claims if certain conditions precedent are satisfied. Lastly, if cost sharing dissipates for some currently unforeseen reason, or the Company's trial experience changes overall, it is possible on a longer term basis that the cost of resolving this loss contingency could materially reduce the Company's operating results, cash flows and restrict capital market access.
claims.September 2011,July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-09,2013-11, "Compensation – Retirement Benefits-Multiemployer Plans (Subtopic 715-80)Income Taxes (Topic 740): Disclosures aboutPresentation of an Employer's Participation inUnrecognized Tax Benefit When a Multiemployer Plan." The objective of ASU 2011-09 is to address concerns regarding the lack of transparency with respect to an employer's participation inNet Operating Loss Carryforward, a multiemployer pension plan. For employers that participate in multiemployer pension plans, the update will require additional quantitative and qualitative disclosures including: the significant multiemployer plans in which the employer participates; the level of participations in those plans; the financial health of the plans, including funded status and; the nature of the employer commitments to the plan. This standard is effective for annual periods for fiscal years ending after December 15, 2011. The amendments should be applied retrospectively for all prior periods presented. ASU 2011-09 was adopted by the Company for the fiscal year ended December 31, 2011 and did not haveSimilar Tax Loss, or a significant impact on the Company's financial statements.In December 2010, the FASB issued ASU No. 2010-29,Tax Credit Carryforward Exists."Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations a consensus of the FASB Emerging Issues Task Force." The objective of ASU 2010-29 is to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. This standard is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. ASU 2010-29 was adopted by the Company on January 1, 2011 and did not have an impact on the Company's financial statements.In October 2009, the FASB issued ASU No. 2009-13,"Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force." This update provides amendments to the criteria in Accounting Standards Codification ("ASC") Subtopic 605-25. ASU 2009-13 provides principles for allocating consideration among multiple-elements and accounting for separate deliverables under an arrangement. ASC 605-25, as amended, introduces an estimated selling price method for valuing the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available and significantly expands related disclosure requirements. This standard is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, adoption may be on a retrospective basis. ASU 2009-13 was adopted by the Company on January 1, 2011 and did not have a significant impact on the Company's financial statements.New Accounting Standards to be Adopted:In December 2011, the FASB issued ASU No. 2011-11,"Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities." ASU 2011-112013-11 requires an entity to disclose information about financial instruments and derivative instruments that are subject to offsetting, master netting or other similar arrangements, to illustrate the effect or potential effect of those arrangements on the Company's financial position. The amendments are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The amendments should be appliedretrospectively for all prior periods presented. The Company is currently evaluating the impact of the adoption of ASU 2011-11 on the Company's financial statements.In September 2011, the FASB issued ASU No. 2011-08,"Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment." ASU 2011-08 providespresent an entity the option to first assess qualitative factors to determine whether the existence of events or circumstance leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the entity determines it is not more likely than not that the fair value is less than the carrying amount, then performing the two-step impairment test is unnecessary. However, if the entity concludes otherwise, it is required to perform the first step of the two-step impairment test. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company does not expect the adoption of this standard to have an impact on the Company's financial statements.In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income." This update provides amendments to ASC Topic 220, Comprehensive Income. ASU 2011-05 provides an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income eitherunrecognized tax benefit in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. Further, ASC 2011-05 requires the presentation on the face of the financial statements items that are reclassified from other comprehensive incomeas a reduction to a deferred tax asset for a net income in the statement(s) where the components of net income and the components of other comprehensive income are presented.operating loss carryforward, a similar tax loss or a tax credit carryforward, with limited exceptions. The amendment to present reclassification adjustments was deferred in December 2011, when the FASB issued ASU No. 2011-12,"Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05." All remaining amendments of ASU 2011-05 are unaffected by this update. ASU 2011-05 should be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company does not expect adoption of this standard to have a significant impact on the Company's financial statements.In May 2011, the FASB issued ASU No. 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS's." ASU 2011-04 amends ASC Topic 820, resulting in common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards ("IFRS"). Consequently, the amendments change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. These amendments are to be applied prospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.2013. Early adoption and retrospective application is not permitted. The Company is currently evaluating the impact of the adoption of ASU 2013-11, but does not expect adoption of this standard toit will have a significant impact on the Company's financial statements.2011.2013. The Company believes the following accounting policies are some of the more criticalin the application of its accounting policies that affectaffecting its financial condition and results of operations.and manganese-inducedinduced illnesses. The costs associated with these claims are predominantly defense costs, which are recognized in the periods incurred. Insurance reimbursements mitigate these costs and, where reimbursements are probable, they are recognized in the applicable period. With respect to costs other than defense costs (i.e., for liability and/or settlement or other resolution), reserves are recorded when it is probable that the contingencies will have an unfavorable outcome. The Company accrues its best estimate of the probable costs, after a review of the facts with management and counsel and taking into account past experience. If an unfavorable outcome is determined to be reasonably possible but not probable, or if the amount of loss cannot be reasonably estimated, disclosure is provided for material claims or litigation. Many of the current cases are in differing procedural stages and information on the circumstances of each claimant, which forms the basis for judgments as to the validity or ultimate disposition of such actions, varies greatly. Therefore, in many situations a range of possible losses cannot be made. Reserves are adjusted as facts and circumstances change and related management assessments of the underlying merits and the likelihood of outcomes change. Moreover, reserves only cover identified and/or asserted claims. Future claims could, therefore, give rise to increases to such reserves. See Note 16 to the Company's consolidated financial statements and "Item 3. Legal Proceedings" section of this Annual Report on Form 10-K for further discussion of legal contingencies."Selling,Selling, general & administrative expenses"expenses and were $7,759, $4,608 and $4,904 $118in 2013, 2012 and $226 in 2011 2010 and 2009,, respectively.Venezuela – Foreign CurrencyEffective January 1, 2010, the financial statements of the Company's Venezuelan operation have been remeasured into the Company's reporting currency (U.S. dollar). A currency control board exists in Venezuela that is responsible for foreign exchange procedures, including approval of requests for exchanges of the Venezuelan currency (the "bolivar") for U.S. dollars at the official (government established) exchange rates. An unregulated parallel market that existed for exchanging bolivars for U.S. dollars through securities transactions was terminated by the Venezuelan government on May 17, 2010 and subsequently established as a regulated market on June 9, 2010.The official exchange rate in Venezuela had been fixed at 2.15 bolivars to 1 U.S. dollar for several years. On January 8, 2010, the Venezuelan government announced the devaluation of its currency relative to the U.S. dollar. The official exchange rate for imported goods classified as essential changed from 2.15 to 2.60 (the "Essential Rate"), while the official exchange rate for other non-essential goods moved to an exchange rate of 4.30 (the "Non-Essential Rate"). In remeasuring the financial statements the Non-Essential Rate is used as this is the rate expected to be applicable to dividend repatriations.In December 2010, the Venezuelan government announced the elimination of the Essential Rate effective as of January 1, 2011. The impact of the elimination of the Essential Rate did not have a significant impact on the Company's consolidated financial statements.generally accepted accounting principles ("GAAP").GAAP. As a result, the financial statements of the Company's Venezuelan operation are reported under highly inflationary accounting rules as of January 1, 2010. Under highly inflationary accounting, the financial statements of the Company's Venezuelan operation have been remeasured into the Company's reporting currency and exchange gains and losses from the remeasurementre-measurement of monetary assets and liabilities are reflected in current earnings.$6,826$38,633 at December 31, 2011, compared to a net liability position2013, which includes $50,642 of $4,715cash and cash equivalents, and $31,545 at December 31, 2010.2012, which includes $32,610 of cash and cash equivalents. The increased exposure was due to the limited opportunities to convert bolivars into U.S. dollars.In 2010, For example, a future devaluation in the Venezuelan currency to a rate of 12.6 would result in the Company participated in Venezuelan sovereign debt offerings as a meansrealizing additional charges of converting bolivarsapproximately $3,000 to U.S. dollars. The conversionCost of bolivarsgoods sold based on current inventory levels and $20,000 to U.S. dollars through Venezuelan sovereign debt offerings generated foreign currency transaction losses as the debt was purchased at the Non-Essential Rate and subsequently sold at a discount. During 2010, the Company acquired $7,672 of Venezuelan sovereign debt at the Non-Essential Rate, which was immediately sold at a discount for $6,022. The sale of the Venezuelan sovereign debt resulted in a loss of $1,650 recognized in "Selling,Selling, general and administrative expenses." In 2011,expenses based upon the Company was not successful in utilizing this vehicle as a meanscurrent bolivar-denominated monetary net asset position. Additionally, the various restrictions on the distribution of converting bolivars to U.S. dollars.The devaluation of the bolivar and the change to the U.S. dollar as the functional currency resulted in a foreign currency transaction gain of $2,632by the Venezuelan government could affect the Company's ability to pay obligations and maintain normal production levels in "Selling, general & administrative expenses" and higher "Cost of goods sold" of $5,755 due to the liquidation of inventory valued at the historical exchange rate for the year ended December 31, 2010.carryforwards.carry-forwards. The Company does not provide deferred income taxes on unremitted earnings of certain non-U.S. subsidiaries, which are deemed permanently reinvested. It is not practicable to calculate the deferred taxes associated with the remittance of these earnings. Deferred income taxes associated with earnings of $3,776$8,354 that are not expected to be permanently reinvested were not significant. At December 31, 2011,2013, the Company had approximately $160,271$102,128 of gross deferred tax assets related to deductible temporary differences and tax loss and credit carryforwardscarry-forwards which may reduce taxable income in future years.2011,2013, a valuation allowance of $31,713$49,684 was recorded against these deferred tax assets based on this assessment. The Company believes it is more likely than not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company's assessment of future taxable income or tax planning strategies changes.7.9%7.4% and 7.7% at December 31, 20112013 and 2010.2012, respectively. The assumed long-term rate of return on assets is applied to the market value of plan assets. This produces the expected return on plan assets included in pension expense. The difference between this expected return and the actual return on plan assets is deferred and amortized over the average remaining service period of active employees expected to receive benefits under the plan. The amortization of the net deferral of past losses will increase future pension expense. During 2011,2013, investment returns were 4.1%12.4% compared with a return of 13.2%11.1% in 2010.2012. A 25 basis point change in the expected return on plan assets would increase or decrease pension expense by approximately $1,600.$1,900. to be used, the Company refers to the yield derived from matching projected pension payments with maturities of a portfolio of available non-callable bonds rated AA- or better. The Company determined this rate to be 4.2%4.7% at20112013 and 5.3%3.8% at December 31, 2010.2012. A 10 basis point change in the discount rate would increase or decrease pension expense by approximately $1,000.$1,100.$26,370, $29,123$29,908, $36,258 and $34,774$26,370 in 2011, 20102013, 2012 and 2009,2011, respectively. The Company expects 20122014 defined benefit pension expense to increasedecrease by a range of approximately $7,000$15,000 to $9,000 as a result of actuarial losses.$18,000.$408,000$256,260 as of December 31, 20112013 and $280,652$417,967 as of December 31, 2010.2012. The increasedecrease is primarily the result of an increase in actuarial losses.gains recorded during the year. Actuarial lossesgains arising during 20112013 are primarily attributable to a lowerhigher discount rate and lower actual return on plan assets compared with the expected return on plan assets.$30,000, $41,500$75,216, $60,277 and $45,000$30,000 in 2011, 20102013, 2012 and 2009,2011, respectively. The Company expects to voluntarily contribute $30,000$20,000 to its U.S. plans in 2012.2014. Based on current pension funding rules, the Company does not anticipate that contributions to the plans would be required in 2012.2014.An actualThe valuation of the inventory under the LIFO method can beinventories is made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management's estimates of expected year-end inventory levels and costs. Because these estimates are subject to many factors beyond management's control, annual resultsActual year-end costs and inventory levels may differ from interim results as they are subject to the final year-end LIFO inventory valuation.valuations. The excess of current cost over LIFO cost was $78,292$70,882 at December 31, 20112013 and $70,906$72,173 at December 31, 2010.10%20% as of the testing date during the fourth quarter of 2011.2013. Key assumptions in estimating the reporting unit's fair value include assumed market participant assumptions of revenue growth, operating margins and the rate used to discount future cash flows. Actual revenue growth and operating margins below the assumed market participant assumptions or an increase in the discount rate would have a negative impact on the fair value of the reporting unit that could result in a goodwill impairment charge in a future period.2011,2013, a 10% change in commodity prices, and a 100 basis point increase in effective interest rates under the Company's current borrowing arrangements. The contractual derivative and borrowing arrangements in effect at December 31, 20112013 were compared to the hypothetical foreign exchange, commodity price, or interest rates in the sensitivity analysis to determine the effect on income before taxes, interest expense, or2011,2013, the Company hedged certain third-party and intercompanyinter-company purchases and sales. At December 31, 2011,2013, the Company had foreign exchange contracts with a notional value of approximately $65,721.$36,880. At December 31, 2011,2013, a hypothetical 10% weakening of the U.S. dollar would not materially affect the Company's financial statements.20112013 would not materially affect the Company's financial statements.2011,2013, the Company had no interest rate swaps outstanding. Additionally, the Company had no outstanding borrowings under the Credit Agreement, therefore an interest rate increase would have no effect on interest expense.20112013 approximated carrying value. The Company's financial instruments are subject to concentrations of credit risk. The Company has minimized this risk by entering into investments with a number of major banks and financial institutions and investing in high-quality instruments. The Company does not expect any counterpartiescounter-parties to fail to meet their obligations.20112013 based on the 1992 framework in "Internal Control – Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company's evaluation under such framework, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2011.20112013 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included elsewhere in this Annual Report on Form 10-K and is incorporated herein by reference.20112013 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.None.20122014 proxy statement pursuant to Regulation 14A of the Exchange Act prior to April 30, 2012.2014.belowwithin Part I, Item 1C section of this Annual Report on Form 10-K concerning our Executive Officers, the information required by this item is incorporated by reference from the 20122014 proxy statement.EXECUTIVE OFFICERS OF THE REGISTRANTNameAgePositionJohn M. Stropki, Jr.61Chairman of the Board since October 13, 2004; Director since 1998; Chief Executive Officer and President since June 3, 2004; Chief Operating Officer from May 1, 2003 to June 3, 2004; Executive Vice President from 1995 to June 3, 2004; and President, North America from 1996 to 2003.Christopher L. Mapes50Director since February 2010 and Chief Operating Officer since September 1, 2011. Prior to his service with the Company, Mr. Mapes was Executive Vice President of A.O. Smith Corporation (a global manufacturer with a water heating and water treatment technologies business and an electric motor and motor solutions business) a position he held from 2006 through August 2011, and the President of its Electrical Products unit, a position he held from September 2004 through August 2011.Vincent K. Petrella51Senior Vice President, Chief Financial Officer and Treasurer since October 7, 2005; Vice President, Chief Financial Officer and Treasurer from February 4, 2004 to October 7, 2005; and Vice President, Corporate Controller from 2001 to 2003.Frederick G. Stueber58Senior Vice President, General Counsel and Secretary since 1996.George D. Blankenship49Senior Vice President; President, Lincoln Electric North America since July 30, 2009; Senior Vice President, Global Engineering from October 7, 2005 to July 30, 2009; Vice President, Global Engineering from May 5, 2005 to October 7, 2005; President, Lincoln Electric North America of The Lincoln Electric Company since July 30, 2009; Senior Vice President; President, Lincoln Cleveland of The Lincoln Electric Company from January 8, 2008 to July 30, 2009; Senior Vice President, U.S. Operations of The Lincoln Electric Company from October 7, 2005 to January 8, 2008; Vice President, Cleveland Operations of The Lincoln Electric Company from June 6, 2005 to October 7, 2005; and Vice President, Engineering and Quality Assurance of The Lincoln Electric Company from 2000 to June 6, 2005.Gabriel Bruno44Vice President, Corporate Controller since 2005.Gretchen A. Farrell49Senior Vice President, Human Resources and Compliance since July 30, 2009; Vice President, Human Resources from May 5, 2005 to July 30, 2009; and Vice President, Human Resources of The Lincoln Electric Company since March 5, 2003.NameAgePositionThomas A. Flohn51Vice President; President, Lincoln Electric Europe, Middle East & Africa (EMEA) since July 1, 2010; Vice President; President, Lincoln Asia Pacific from January 1, 2005 to June 30, 2010; and Vice President of Sales and Marketing, Lincoln Electric Asia Pacific from May 1, 1999 to December 31, 2004.Steven B. Hedlund45Vice President, Strategy and Business Development since September 15, 2008. Prior to his service with the Company, Mr. Hedlund was the Vice President, Growth and Innovations with Master Lock, LLC (a security products company) from June 1, 2005 to July 1, 2008.David M. LeBlanc47Senior Vice President; President, Lincoln Electric International since July 30, 2009; Vice President; President, Lincoln Electric Europe and Russia from March 10, 2008 to July 30, 2009; Vice President; President, Lincoln Electric Europe from September 1, 2005 to March 10, 2008; and Vice President; President, Lincoln Electric Latin America from January 1, 2002 to August 31, 2005.The Company has been advised that there is no arrangement or understanding among any one of the officers listed and any other persons pursuant to which he or she was elected as an officer. The executive officers are elected by the Board of Directors normally for a term of one year and/or until the election of their successors.20122014 proxy statement.20122014 proxy statement.89 to the Company's consolidated financial statements.20122014 proxy statement.20122014 proxy statement.20112013 and 201020122011, 20102013, 2012 and 200920112011, 20102013, 2012 and 200920112011, 20102013, 2012 and 20092011Exhibit No. Description 3.1 Amended and Restated Articles of Incorporation of Lincoln Electric Holdings, Inc. (filed as Exhibit 3.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on September 27, 2011, SEC file No. 0-1402 and incorporated herein by reference and made a part hereof).
3.2
Amended and Restated Code of Regulations of Lincoln Electric Holdings, Inc. (as Amended on November 3, 2009) (filed as Exhibit 3.2 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended September 30, 2009, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).
10.1
November 18, 2009as of July 26, 2012, by and among Lincoln Electric Holdings, Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc., Vernon Tool Co.Techalloy, Inc., Ltd.Wayne Trail Technologies, Inc., Lincoln Global, Inc., the financial institutions listed in Annex A thereof,Lenders and KeyBank National Association, as Letter of Credit Issuer and Administrative Agent (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on November 20, 2009,July 31, 2012, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).Exhibit No.Description10.210.2* Note Purchase Agreement dated March 12, 2002 between Lincoln Electric Holdings, Inc. and The Lincoln Electric Company and the Purchasers listed in Schedule A thereof (filed as Exhibit 10(q) to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended March 31, 2002, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.3Amended and Restated Note Purchase and Private Shelf Agreement between Lincoln Electric Holdings, Inc., The Lincoln Electric Company and The Prudential Insurance Company of America dated as of April 30, 2002 (filed as Exhibit 10(v) to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended June 30, 2002, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.4Amendment No. 1 to the Amended and Restated Note Purchase and Private Shelf Agreement dated as of December 14, 2006 (filed as Exhibit 10(d) to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2006, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.5*
1998 Stock Plan (Amended, Restated and Renamed as of May 1, 2003) (filed as Appendix B to the Lincoln Electric Holdings, Inc. proxy statement dated March 31, 2003, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.6*10.3*
Amendment No. 1 to the 1998 Stock Plan (Amended, Restated and Renamed Effective May 1, 2003) dated October 20, 2006 (filed as Exhibit 10.6 to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2007, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.7*10.4*
1988 Incentive Equity Plan (filed as Exhibit 28 to the Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-25209 and incorporated herein by reference and made a part hereof) as adopted and amended by Lincoln Electric Holdings, Inc. pursuant to an Instrument of Adoption and Amendment dated December 29, 1998 (filed as Exhibit 10(d) to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 1998, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.8*10.5*
Amendment No. 2 to the 1988 Incentive Equity Plan dated October 20, 2006 (filed as Exhibit 10.8 to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2007, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.9*10.6*
Form of Indemnification Agreement (filed as Exhibit A to The Lincoln Electric Company 1987 proxy statement, SEC File No. 0-1402, and incorporated herein by reference and made a part hereof).10.10*
Supplemental Executive Retirement Plan (Amended and Restated as of December 31, 2008) (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on January 7, 2009, SEC File No. 0-1402 and incorporated herein by reference and made part hereof).10.11*Exhibit No. Description 10.7* Deferred Compensation Plan for Certain Retention Agreements and Other Contractual Arrangements (Amended and Restated as of January 1, 2004) (filed as Exhibit 10(i) to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2003, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). Exhibit No.Description10.12*10.8* Non-Employee Directors' Deferred Compensation Plan (Amended and Restated as of December 31, 2008) (filed as Exhibit 10.3 to Form 8-K of Lincoln Electric Holdings, Inc. filed on January 7, 2009, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 10.13*10.9*
2005 Deferred Compensation Plan for Executives (Amended and Restated as of August 1, 2011) (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on August 4, 2011, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.14*10.10*
Description of Management Incentive Plan (filed as Exhibit 10(e) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1995, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.15*10.11*
Description of Long-Term Performance Plan (filed as Exhibit 10(f) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1997, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.16*10.12*
Form of Severance Agreement (as entered into by the Company and the following executive officers: Messrs. Stropki, Mapes, Petrella, Stueber, LeBlanc and Blankenship) (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended June 30, 2009, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.17*10.13*
Stock Option Plan for Non-Employee Directors (filed as Exhibit 10(p) to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended March 31, 2000, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.18*10.14*
Amendment No. 1 to the Stock Option Plan for Non-Employee Directors dated October 20, 2006 (filed as Exhibit 10.26 to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2007, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.19*10.15*
Summary of Cash Long-Term Incentive Plan, as amended (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on April 6, 2005, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.20*10.16*
Letter Agreement between John M. Stropki, Jr.2006 Equity and Performance Incentive Plan (Restated as of March 3, 2011) (filed as Annex A to the Lincoln Electric Holdings, Inc. proxy statement dated October 12, 2004 (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on OctoberMarch 18, 2004,2011, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.21*2006 Equity and Performance Incentive Plan (filed as Appendix B to the Lincoln Electric Holdings, Inc. proxy statement dated March 28, 2006, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.22*Amendment No. 1 to the 2006 Equity and Performance Incentive Plan dated October 20, 2006 (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended March 31, 2007, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.23*Amendment No. 2 to the 2006 Equity and Performance Incentive Plan (filed as Exhibit 10.5 to Form 8-K of Lincoln Electric Holdings, Inc. filed on January 7, 2009, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).Exhibit No.Description10.24*10.17* 2006 Stock Plan for Non-Employee Directors (filed as Appendix C to the Lincoln Electric Holdings, Inc. proxy statement dated March 28, 2006, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 10.25*10.18*
Amendment No. 1 to the 2006 Stock Plan for Non-Employee Directors dated October 20, 2006 (filed as Exhibit 10.2 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended March 31, 2007, SEC file No. 0-1402 and incorporated herein by reference and made a part hereof).10.26*10.19*
Amendment No. 2 to the 2006 Stock Plan for Non-Employee Directors dated July 26, 2007 (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended September 30, 2007, SEC file No. 0-1402 and incorporated herein by reference and made a part hereof).10.27*10.20*
2007 Management Incentive Compensation Plan (Amended and Restated as of December 31, 2008) (filed as Exhibit 10.4 to Form 8-K of Lincoln Electric Holdings, Inc. filed on January 7, 2009, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.28*10.21*
Form of Restricted Shares Agreement for Non-Employee Directors (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended September 30, 2010, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.29*10.22*
Form of Restricted Shares Agreement for Executive Officers (filed as Exhibit 10.2 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended September 30, 2010, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.30*10.23*
Form of Stock Option Agreement for Non-Employee Directors (filed as Exhibit 10.3 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended September 30, 2010, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.31*10.24*
Form of Stock Option Agreement for Executive Officers (filed as Exhibit 10.4 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended September 30, 2010, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.32*10.25*
Form of Restricted Shares Agreement for Non-Employee Directors (for awards made on or after December 1, 2010) (filed as Exhibit 10.35 to Form 10-K of the Lincoln Electric Holdings, Inc. for the year ended December 31, 2010, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).10.33*Exhibit No. Description 10.26* Form of Restricted Shares Agreement for Executive Officers (for awards made on or after December 1, 2010) (filed as Exhibit 10.36 to Form 10-K of the Lincoln Electric Holdings, Inc. for the year ended December 31, 2010, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 10.34*10.27*
Form of Stock Option Agreement for Executive Officers (for awards made on or after December 1, 2010) (filed as Exhibit 10.37 to Form 10-K of the Lincoln Electric Holdings, Inc. for the year ended December 31, 2010, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).Exhibit No.Description10.35*10.28* Form of Restricted Stock Unit Agreement for Executive Officers (filed as Exhibit 10.2 to Form 8-K of Lincoln Electric Holdings, Inc. filed on August 4, 2011, SEC File No. 0-1402 and incorporated herein by reference and made a part thereof). 2110.29*
10.30* 10.31* Form of Amendment to Restricted Shares Agreement for Executive Officers (for awards granted prior to December 2013) (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on December 20, 2013, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 10.32* Form of Amendment to Restricted Stock Unit Agreement for Executive Officers (for awards granted prior to December 2013) (filed as Exhibit 10.2 to Form 8-K of Lincoln Electric Holdings, Inc. filed on December 20, 2013, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 10.33* Form of Restricted Stock Unit Agreement for Executive Officers (for awards granted on or after December 16, 2013) (filed herewith). 21 Subsidiaries of the Registrant.
23
Consent of Independent Registered Public Accounting Firm.
24
Powers of Attorney.
31.1
Certification by the President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2
Certification by the Senior Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS**101.INS
XBRL Instance Document101.SCH**101.SCH
XBRL Taxonomy Extension Schema Document101.CAL**101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document101.LAB**101.LAB
XBRL Taxonomy Extension Label Linkbase Document101.PRE**101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document101.DEF**101.DEF
XBRL Taxonomy Extension Definition Linkbase Document*Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 15(b) of this report.**In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.* Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 15(b) of this report. LINCOLN ELECTRIC HOLDINGS, INC.
By:By:
/s/ VINCENT K. PETRELLA24, 201221, 2014/s/ JOHN M. STROPKI, JR.John M. Stropki, Jr., Chairman of theBoard, President and Chief ExecutiveOfficer (principal executive officer)February 24, 2012CHRISTOPHER L. MAPES /s/ VINCENT K. PETRELLA 24, 201221, 2014/s/ VINCENT K. PETRELLA Vincent K. Petrella asAttorney-in-Fact forChristopher L. Mapes, Director and Chief Operating OfficerFebruary 24, 2012
/s/ VINCENT K. PETRELLA24, 201221, 2014Vincent K. Petrella as
Attorney-in-Fact for
Curtis E. Espeland, Director
February 24, 201221, 2014
/s/ VINCENT K. PETRELLA Vincent K. Petrella asAttorney-in-Fact forDavid H. Gunning, DirectorFebruary 24, 2012/s/ VINCENT K. PETRELLA Vincent K. Petrella as
Attorney-in-Fact for
Stephen G. Hanks, Director
February 24, 201221, 2014
/s/ VINCENT K. PETRELLA Vincent K. Petrella asAttorney-in-Fact forRobert J. Knoll, DirectorFebruary 24, 2012/s/ VINCENT K. PETRELLA 24, 201221, 2014
/s/ VINCENT K. PETRELLA /s/ VINCENT K. PETRELLA Vincent K. Petrella as
Attorney-in-Fact for
Kathryn Jo Lincoln, Director
February 24, 201221, 2014/s/ VINCENT K. PETRELLA24, 201221, 2014
/s/ VINCENT K. PETRELLA Vincent K. Petrella asAttorney-in-Fact forHellene S. Runtagh, DirectorFebruary 24, 2012/s/ VINCENT K. PETRELLA /s/ VINCENT K. PETRELLA 24, 201221, 2014
20112013 and 2010,2012, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2011.2013. Our audits also included the financial statement schedule listed in the Index as Item 15 (a) (2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.20112013 and 2010,2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2011,2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.2011,2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated February 24, 201221, 2014 expressed an unqualified opinion thereon.24, 201221, 20142011,2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Lincoln Electric Holdings, Inc. and subsidiaries' management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting in Item 9A. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.2011,2013, based on the COSO criteria.20112013 and 2010,2012, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 20112013 of Lincoln Electric Holdings, Inc. and subsidiaries and our report dated February 24, 201221, 2014 expressed an unqualified opinion thereon.24, 201221, 2014 December 31, December 31, 2011 2010 2013 2012 $ 361,101 $ 366,193 $ 299,825 $ 286,464 386,197 321,948 367,134 360,662 117,194 85,232 112,478 119,963 42,103 38,706 38,963 41,805 213,941 167,792 198,522 203,122 373,238 291,730 349,963 364,890
19,687
26,754 10,922 16,670 79,047 75,887 102,931 104,130 1,219,270 1,082,512 1,130,775 1,132,816 42,891 43,701 48,369 44,510 322,626 313,861 373,373 343,867 724,801 712,362 723,715 732,461 1,145,457 1,120,838 1,090,318 1,069,924 619,867 591,358 661,452 634,602 470,451 478,566 484,005 486,236 – 588 36,116 — 24,618 22,909 26,618 24,606 94,471 81,258 147,012 132,902 65,101 45,952 174,715 132,903 30,176 29,803 32,763 31,187 57,568 22,161 3,556 44,639 15,121 20,039 116,307 104,574 287,055 222,710 537,087 470,811
$
1,976,776
$
1,783,788 $ 2,151,867 $ 2,089,863 December 31, December 31, 2011 2010 2013 2012 $ 19,922 $ 11,283 $ 14,581 $ 18,220 176,312 147,111 212,799 209,647 55,670 48,976 68,263 68,698 30,243 29,647 29,613 29,420 21,964 21,760 46,109 45,505 10,348 4,068 10,564 3,639 14,186 12,987 18,619 — Customer advances 24,319 26,335 60,901 57,965 31,335 38,347 81,496 1,795 715 456 471,042 335,592 456,917 440,267 1,960 84,627 3,791 1,599 232,175 121,994 26,999 216,189 17,606 19,766 48,103 8,349 35,693 48,837 36,149 35,550 25,058 23,494 49,220 29,588 312,492 298,718 164,262 291,275 – – — — 9,858 9,858 9,858 9,858 179,104 162,447 240,519 205,124 1,484,393 1,320,552 1,908,462 1,682,668 (247,881 ) (141,948 ) (151,941 ) (235,400 ) (248,528 ) (217,412 ) Treasury shares, at cost – 17,571,350 shares in 2013 and 15,636,617 shares in 2012 (480,296 ) (319,877 ) 1,176,946 1,133,497 1,526,602 1,342,373 16,296 15,981 Non-controlling interests 4,086 15,948 1,193,242 1,149,478 1,530,688 1,358,321
$
1,976,776
$
1,783,788 $ 2,151,867 $ 2,089,863 Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 $ 2,694,609 $ 2,070,172 $ 1,729,285 $ 2,852,671 $ 2,853,367 $ 2,694,609 1,957,872 1,506,353 1,273,017 1,910,017 1,986,711 1,957,872 736,737 563,819 456,268 942,654 866,656 736,737
439,775
377,773
333,138 527,206 495,221 439,775 282 (384 ) 29,897 Rationalization and asset impairment charges 8,463 9,354 282 296,680 186,430 93,233 406,985 362,081 296,680 3,121 2,381 3,462 3,320 3,988 3,121 5,385 3,171 (5,025 ) Equity earnings in affiliates 4,806 5,007 5,385 2,849 1,817 3,589 4,194 2,685 2,849 (6,704 ) (6,691 ) (8,521 ) (2,864 ) (4,191 ) (6,704 ) 4,651 678 (6,495 ) 9,456 7,489 4,651
301,331
187,108
86,738 416,441 369,570 301,331 84,318 54,898 37,905 124,754 112,354 84,318 217,013 132,210 48,833 (173 ) 1,966 257 Net income including non-controlling interests 291,687 257,216 217,013 Non-controlling interests in subsidiaries' loss (2,093 ) (195 ) (173 ) $ 217,186 $ 130,244 $ 48,576 $ 293,780 $ 257,411 $ 217,186
83,681
84,407
84,782 1,027 816 486 84,708 85,223 85,268
$
2.60
$
1.54
$
0.57 $ 3.58 $ 3.10 $ 2.60 $ 2.56 $ 1.53 $ 0.57 $ 3.54 $ 3.06 $ 2.56 $ 0.635 $ 0.575 $ 0.545 $ 0.830 $ 0.710 $ 0.635 EQUITY
COMPREHENSIVE INCOMEthousands, except per share amounts)thousands) Common
Shares
Outstanding Common
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury
Shares Noncontrolling
Interests Total 85,044 $ 9,858 $ 150,609 $ 1,236,810 $ (218,254 ) $ (183,807 ) $ 14,757 $ 1,009,973 48,576 257 48,833 20,835 452 21,287 1,444 1,444 46,571 659 47,230 118,794 (46,382 ) (46,382 ) 246 3,902 2,527 6,429 (2,796 ) (2,796 ) (16 ) (343 ) (343 ) 85,274 9,858 154,511 1,239,004 (149,404 ) (181,623 ) 13,329 1,085,675 130,244 1,966 132,210 (2,024 ) (2,024 ) 292 292 9,188 686 9,874 140,352 (48,696 ) (48,696 ) 374 7,936 3,893 11,829 (1,406 ) (39,682 ) (39,682 ) 84,242 9,858 162,447 1,320,552 (141,948 ) (217,412 ) 15,981 1,149,478 217,186 (173 ) 217,013 (79,936 ) (79,936 ) 1,264 1,264 (27,261 ) 488 (26,773 ) 111,568 (53,345 ) (53,345 ) 593 16,657 5,881 22,538 (1,078 ) (36,997 ) (36,997 ) 83,757 $ 9,858 $ 179,104 $ 1,484,393 $ (247,881 ) $ (248,528 ) $ 16,296 $ 1,193,242 Year Ended December 31, 2013 2012 2011 Net income including non-controlling interests $ 291,687 $ 257,216 $ 217,013 Other comprehensive income, net of tax: Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $(141) in 2013; $(201) in 2012; $264 in 2011 289 (832 ) 1,264 Defined pension plan activity, net of tax of $60,556 in 2013; $(3,492) in 2012; $(47,413) in 2011 101,151 (6,475 ) (79,936 ) Currency translation adjustment (19,955 ) 19,635 (26,773 ) Transactions with non-controlling interests 155 — — Other comprehensive income (loss) 81,640 12,328 (105,445 ) Comprehensive income 373,327 269,544 111,568 Comprehensive (loss) income attributable to non-controlling interests (3,912 ) (348 ) 315 Comprehensive income attributable to shareholders $ 377,239 $ 269,892 $ 111,253 CASH FLOWS
EQUITYthousands)thousands, except per share amounts) Year Ended December 31, 2011 2010 2009 $ 217,186 $ 130,244 $ 48,576 (173 ) 1,966 257 217,013 132,210 48,833 23 (4,391 ) 2,940 62,051 57,357 56,598 (1,971 ) (600 ) 8,554 15,139 4,387 (7,090 ) 6,610 8,213 5,432 (1,867 ) (1,867 ) (1,742 ) 21,754 20,786 25,064 2,928 (1,553 ) 1,770 (67,518 ) (47,958 ) 60,913 (51,679 ) (28,912 ) 127,739 (2,857 ) 4,956 10,222 8,672 47,323 (30,364 ) 20,838 8,836 (22,778 ) (31,776 ) (38,806 ) (39,185 ) (3,842 ) (3,003 ) 3,444 193,518 156,978 250,350 (65,813 ) (60,565 ) (38,201 ) (66,229 ) (18,856 ) (25,449 ) – – (488 ) 1,246 10,021 557 (130,796 ) (69,400 ) (63,581 ) 23,224 13,319 12,452 (15,446 ) (12,896 ) (34,780 ) 1,203 (19,022 ) 9,374 909 150 531 (1,941 ) (8,730 ) (31,405 ) 11,351 3,508 705 2,916 1,210 195 (36,997 ) (39,682 ) (343 ) (51,935 ) (47,364 ) (45,801 ) 3,346 – – (63,370 ) (109,507 ) (89,072 )
(4,444
)
(14
)
6,107 (5,092 ) (21,943 ) 103,804
366,193
388,136
284,332 $ 361,101 $ 366,193 $ 388,136 Total Balance at December 31, 2010 84,242 $ 9,858 $ 162,447 $ 1,320,552 $ (141,948 ) $ (217,412 ) $ 15,981 $ 1,149,478 Net income 217,186 (173 ) 217,013 Unrecognized amounts from defined benefit pension plans, net of tax (79,936 ) (79,936 ) Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax 1,264 1,264 Currency translation adjustment (27,261 ) 488 (26,773 ) (53,345 ) (53,345 ) Issuance of shares under benefit plans 593 16,657 5,881 22,538 Purchase of shares for treasury (1,078 ) (36,997 ) (36,997 ) Balance at December 31, 2011 83,757 9,858 179,104 1,484,393 (247,881 ) (248,528 ) 16,296 1,193,242 Net income 257,411 (195 ) 257,216 Unrecognized amounts from defined benefit pension plans, net of tax (6,475 ) (6,475 ) Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax (832 ) (832 ) Currency translation adjustment 19,788 (153 ) 19,635 (59,136 ) (59,136 ) Issuance of shares under benefit plans 985 26,020 9,669 35,689 Purchase of shares for treasury (1,797 ) (81,018 ) (81,018 ) Balance at December 31, 2012 82,945 9,858 205,124 1,682,668 (235,400 ) (319,877 ) 15,948 1,358,321 Net income 293,780 (2,093 ) 291,687 Unrecognized amounts from defined benefit pension plans, net of tax 101,151 101,151 Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax 289 289 Currency translation adjustment (18,136 ) (1,819 ) (19,955 ) (67,986 ) (67,986 ) Issuance of shares under benefit plans 787 33,693 7,460 41,153 Purchase of shares for treasury (2,722 ) (167,879 ) (167,879 ) Transactions with non-controlling interests 1,702 155 (7,950 ) (6,093 ) Balance at December 31, 2013 81,010 $ 9,858 $ 240,519 $ 1,908,462 $ (151,941 ) $ (480,296 ) $ 4,086 $ 1,530,688 Year Ended December 31, 2013 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 293,780 $ 257,411 $ 217,186 Non-controlling interests in subsidiaries' loss (2,093 ) (195 ) (173 ) Net income including non-controlling interests 291,687 257,216 217,013 Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: Rationalization and asset impairment charges 5,092 1,740 23 Depreciation and amortization 68,883 65,334 62,051 Equity (earnings) loss in affiliates, net (1,660 ) 160 (1,971 ) Deferred income taxes 17,817 (2,137 ) 15,139 Stock-based compensation 9,734 8,961 6,610 Pension expense 29,774 35,515 26,370 Pension contributions and payments (87,356 ) (69,646 ) (36,322 ) Other, net 1,910 2,688 991 Changes in operating assets and liabilities, net of effects from acquisitions: (Increase) decrease in accounts receivable (5,437 ) 57,759 (67,518 ) Decrease (increase) in inventories 13,310 28,286 (51,679 ) Decrease (increase) in other current assets 2,811 (9,506 ) (2,857 ) Increase in accounts payable 794 16,110 8,672 (Decrease) increase in other current liabilities (7,785 ) 21,887 20,838 Net change in other long-term assets and liabilities (680 ) (86,883 ) (3,842 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 338,894 327,484 193,518 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (76,015 ) (52,715 ) (65,813 ) Acquisition of businesses, net of cash acquired (53,161 ) (134,602 ) (66,229 ) Proceeds from sale of property, plant and equipment 1,393 1,387 1,246 Other investing activities (1,717 ) (1,541 ) — NET CASH USED BY INVESTING ACTIVITIES (129,500 ) (187,471 ) (130,796 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings 1,230 2,518 23,224 Payments on short-term borrowings (2,164 ) (4,293 ) (15,446 ) Amounts due banks, net (517 ) (2,758 ) 1,203 Proceeds from long-term borrowings 61 918 909 Payments on long-term borrowings (450 ) (85,688 ) (1,941 ) Proceeds from exercise of stock options 20,297 18,776 11,351 Excess tax benefit from stock-based compensation 10,602 7,819 2,916 Purchase of shares for treasury (167,879 ) (81,018 ) (36,997 ) Cash dividends paid to shareholders (49,277 ) (73,112 ) (51,935 ) Transactions with non-controlling interests (6,087 ) — — Other financing activities — — 3,346 NET CASH USED BY FINANCING ACTIVITIES (194,184 ) (216,838 ) (63,370 ) Effect of exchange rate changes on cash and cash equivalents (1,849 ) 2,188 (4,444 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,361 (74,637 ) (5,092 ) Cash and cash equivalents at beginning of year 286,464 361,101 366,193 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 299,825 $ 286,464 $ 361,101 intercompanyinter-company accounts, transactions and profits.CNCcomputer numeric controlled ("CNC") plasma and oxy-fuel cutting systems, regulators and torches used in oxy-fuel welding, cutting and brazing and consumables used in the brazing and soldering alloys market.On April 29, 2011, the Company announced a two-for-one stock split of the Company's common shares effective in the form of a 100% stock dividend. The record date for the stock split was May 16, 2011 and the additional shares were distributed on May 31, 2011. Accordingly, all per share amounts, average shares outstanding, shares outstanding, shares repurchased and equity based compensation presented have been retroactively adjusted to reflect the stock split. Shareholders' equity has been retroactively adjusted to give effect to the stock split for all periods presented by reclassifying the stated value of the additional shares issued in connection with the stock split to Common shares from Additional paid-in capital."Selling,Selling, general & administrative expenses"expenses and were $7,759, $4,608 and $4,904 $118in 2013, 2012 and $226 in 2011, 2010 and 2009, respectively.Venezuela – Foreign CurrencyEffective January 1, 2010, the financial statements of the Company's Venezuelan operation have been remeasured into the Company's reporting currency (U.S. dollar). A currency control board exists in Venezuela that is responsible for foreign exchange procedures, including approval of requests for exchanges of the Venezuelan currency (the "bolivar") for U.S. dollars at the official (government established) exchange rates. An unregulated parallel market that existed for exchanging bolivars for U.S. dollars through securities transactions was terminated by the Venezuelan government on May 17, 2010 and subsequently established as a regulated market on June 9, 2010.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)2011NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (Continued)The official exchange rate in Venezuela had been fixed at 2.15 bolivars to 1 U.S. dollar for several years. On January 8, 2010, the Venezuelan government announced the devaluation of its currency relative to the U.S. dollar. The official exchange rate for imported goods classified as essential changed from 2.15 to 2.60 (the "Essential Rate"), while the official exchange rate for other non-essential goods moved to an exchange rate of 4.30 (the "Non-Essential Rate"). In remeasuring the financial statements the Non-Essential Rate is used as this is the rate expected to be applicable to dividend repatriations.In December 2010, the Venezuelan government announced the elimination of the Essential Rate effective as of January 1, 2011. The impact of the elimination of the Essential Rate did not have a significant impact on the Company's consolidated financial statements.remeasurementre-measurement of monetary assets and liabilities are reflected in current earnings.$6,826$38,633 at December 31, 2011, compared to a net liability position2013, which includes $50,642 of $4,715cash and cash equivalents and $31,545 at December 31, 2010.2012, which includes $32,610 of cash and cash equivalents. The increased exposure was due to the limited opportunities to convert bolivars into U.S. dollars.In 2010, the Company participated in Venezuelan sovereign debt offerings as a means of converting bolivars to U.S. dollars. The conversion of bolivars to U.S. dollars through Venezuelan sovereign debt offerings generated foreign currency transaction losses as the debt was purchased at the Non-Essential Rate and subsequently sold at a discount. During 2010, the Company acquired $7,672 of Venezuelan sovereign debt at the Non-Essential Rate, which was immediately sold at a discount for $6,022. The sale of the Venezuelan sovereign debt resulted in a loss of $1,650 recognized in "Selling, general and administrative expenses."The devaluation of the bolivar and the change to the U.S. dollar as the functional currency resulted in a foreign currency transaction gain of $2,632 in "Selling, general & administrative expenses" and higher "Cost of goods sold" of $5,755 due to the liquidation of inventory valued at the historical exchange rate for the year ended December 31, 2010.NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (Continued)accounting on a one-month lag basis.accounting. The Company's 50% ownership interest in equity investments includes investments in Turkey and Chile. The amount of retained earnings that represents undistributed earnings of 50% or less owned equity investments was $15,190$16,694 at December 31, 20112013 and $13,219$15,034 at December 31, 2010.costcosts associated with long-term construction in progress.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (Continued) periodically evaluates whether current facts or circumstances indicate that the carrying value of its depreciable long-lived assets to be held and used may not be recoverable. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether impairment exists. If an asset is determined to be impaired, a loss is recognized to the extent that carrying value exceeds fair value. Fair value is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (Continued)Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2
Inputs to the valuation methodology include: • Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in inactive markets; • Inputs other than quoted prices that are observable for the asset or liability; and • Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specific (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.The Company recognizes revenue"CostCost of goods sold."LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (Continued) The calculation of diluted earningsexcludes anti-dilutive shares of 626,135 in 2011, 1,504,346 in 2010 and 1,419,024 in 2009.and balance sheet and net investment exposures. Contracts are generally written on a short-term basis but may cover exposures for up to two years and are not held for trading or speculative purposes. The Company uses interest rate swaps from time to time to hedge changes in the fair value of debt. The Company recognizes derivative instruments as either assets or liabilities at fair value. The accounting for changes in the fair value of derivative instruments depends on whether it has been designated and qualifies as part of a hedging relationship and on the type of hedging relationship."AccumulatedAccumulated other comprehensive loss"loss with offsetting amounts recorded as "OtherOther current assets," "Other Other non-current assets," "Other Other current liabilities"liabilities or "OtherOther long-term liabilities"liabilities depending on the position and the duration of the contract. At settlement, the realized gain or loss is reflected in earnings in the same period or periods during which the hedged transaction affects earnings. Any remaining gain or loss on the derivative instrument is recognized in earnings. For derivative instruments not designated as hedges, the gain or loss from changes in the fair value of the instruments is recognized in earnings. The Company does not hedge its net investments in foreign subsidiaries.Advertising CostsAdvertising costs are charged to "Selling, general & administrative expenses" as incurred and totaled $11,269, $9,222 and $7,982 in 2011, 2010 and 2009, respectively."Selling,Selling, general & administrative expenses"expenses as incurred and totaled $32,834, $29,489$42,126, $37,305 and $27,567$32,834 in 2011, 20102013, 2012 and 2009,2011, respectively.Bonus"Selling,Selling, general & administrative expenses"expenses are the costs related to the Company's discretionary employee bonus programs, which for certain U.S.- based employees are net of hospitalization costs. Bonus costs of $104,361were $123,571 in 2011, $73,1972013, $124,947 in 20102012 and $43,919$104,361 in 2009.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)2011NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (Continued).carryforwards.carry-forwards. In assessing the realizability of deferred tax assets, the Company assesses whether it is more likely than not that a portion or all of the deferred tax assets will not be realized.September 2011,July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-09,2013-11, "Compensation – Retirement Benefits-Multiemployer Plans (Subtopic 715-80)Income Taxes (Topic 740): Disclosures aboutPresentation of an Employer's Participation inUnrecognized Tax Benefit When a Multiemployer Plan." The objective of ASU 2011-09 is to address concerns regarding the lack of transparency with respect to an employer's participation inNet Operating Loss Carryforward, a multiemployer pension plan. For employers that participate in multiemployer pension plans, the update will require additional quantitative and qualitative disclosures including: the significant multiemployer plans in which the employer participates; the level of participations in those plans; the financial health of the plans, including funded status and; the nature of the employer commitments to the plan. This standard is effective for annual periods for fiscal years ending after December 15, 2011. The amendments should be applied retrospectively for all prior periods presented. ASU 2011-09 was adopted by the Company for the fiscal year ended December 31, 2011 and did not haveSimilar Tax Loss, or a significant impact on the Company's financial statements.In December 2010, the FASB issued ASU No. 2010-29,Tax Credit Carryforward Exists."Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations a consensus of the FASB Emerging Issues Task Force." The objective of ASU 2010-29 is to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. This standard is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. ASU 2010-29 was adopted by the Company on January 1, 2011 and did not have an impact on the Company's financial statements.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (Continued)In October 2009, the FASB issued ASU No. 2009-13,"Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force." This update provides amendments to the criteria in Accounting Standards Codification ("ASC") Subtopic 605-25. ASU 2009-13 provides principles for allocating consideration among multiple-elements and accounting for separate deliverables under an arrangement. ASC 605-25, as amended, introduces an estimated selling price method for valuing the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available and significantly expands related disclosure requirements. This standard is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, adoption may be on a retrospective basis. ASU 2009-13 was adopted by the Company on January 1, 2011 and did not have a significant impact on the Company's financial statements.New Accounting Standards to be Adopted:In December 2011, the FASB issued ASU No. 2011-11,"Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities." ASU 2011-112013-11 requires an entity to disclose information about financial instruments and derivative instruments that are subject to offsetting, master netting or other similar arrangements, to illustrate the effect or potential effect of those arrangements on the Company's financial position. The amendments are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The amendments should be applied retrospectively for all prior periods presented. The Company is currently evaluating the impact of the adoption of ASU 2011-11 on the Company's financial statements.In September 2011, the FASB issued ASU No. 2011-08,"Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment." ASU 2011-08 providespresent an entity the option to first assess qualitative factors to determine whether the existence of events or circumstance leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the entity determines it is not more likely than not that the fair value is less than the carrying amount, then performing the two-step impairment test is unnecessary. However, if the entity concludes otherwise, it is required to perform the first step of the two-step impairment test. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company does not expect the adoption of this standard to have an impact on the Company's financial statements.In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income." This update provides amendments to ASC Topic 220, Comprehensive Income. ASU 2011-05 provides an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income eitherunrecognized tax benefit in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. Further, ASC 2011-05 requires the presentation on the face of the financial statements items that are reclassified from other comprehensive incomeas a reduction to a deferred tax asset for a net income in the statement(s) where the components of net income and the components of other comprehensive income are presented.operating loss carryforward, a similar tax loss or a tax credit carryforward, with limited exceptions. The amendment to present reclassification adjustments wasLINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (Continued)deferred in December 2011, when the FASB issued ASU No. 2011-12,"Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05." All remaining amendments of ASU 2011-05 are unaffected by this update. ASU 2011-05 should be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company does not expect adoption of this standard to have a significant impact on the Company's financial statements.In May 2011, the FASB issued ASU No. 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS's." ASU 2011-04 amends ASC Topic 820, resulting in common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards ("IFRS"). Consequently, the amendments change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. These amendments are to be applied prospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.2013. Early adoption and retrospective application is not permitted. The Company is currently evaluating the impact of the adoption of ASU 2013-11, but does not expect adoption of this standard toit will have a significant impact on the Company's financial statements. Year Ended December 31, 2013 2012 2011 Numerator: Net income $ 293,780 $ 257,411 $ 217,186 Denominator: Basic weighted average shares outstanding 81,978 83,087 83,681 Effect of dilutive securities - Stock options and awards 1,064 1,088 1,027 Diluted weighted average shares outstanding 83,042 84,175 84,708 Basic earnings per share $ 3.58 $ 3.10 $ 2.60 Diluted earnings per share $ 3.54 $ 3.06 $ 2.56 , for approximately $36,900 in cash and assumed debt. The fair value of assets acquired was $32,814, resulting in goodwill of $4,086.. Techalloy, based in Baltimore, Maryland, wasis a privately-held manufacturer of nickel alloy and stainless steel welding consumables. The acquisition added to the Company's consumables portfolio. Annual sales for Techalloy at the date of acquisition were approximately $70,000.$70,000. for approximately $8,280 in cash. The fair value of assets acquired was $2,361, resulting in goodwill of $5,919.. Torchmate, based in Reno, Nevada, provides a wide selection of computer numeric controlled plasma cutter and oxy-fuel cutting systems. The acquisition added to the Company's plasma and oxy-fuel cutting product offering. Annual sales for Torchmate at the date of acquisition were approximately $13,000.$13,000. for approximately $16,861 in cash and assumed debt. The fair value of the assets acquired was $8,049, resulting in goodwill of $8,812.. Severstal is a leading manufacturer of welding consumables in Russia and was a subsidiary of OAO Severstal, one of the world's leading vertically integrated steel and mining companies. This acquisition expanded the Company's capacity and distribution channels in Russia and the Commonwealth of Independent States ("CIS"). Sales for Severstal during 2010 were approximately $40,000.$40,000. for approximately $3,280 in cash and a contingent considerationLINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 2 – ACQUISITIONS (Continued)liability fair valued at $3,806. The contingent consideration is based upon estimated sales for the five-year period ending December 31, 2015 and will be paid in 2016 based on actual sales during the five-year period. The fair value of the assets acquired was $3,613, resulting in goodwill of $3,473.. Arc Products wasis a privately-held manufacturer of orbital welding systems and welding automation components based in Southern California. Orbital welding systems are designed to automatically weld pipe and tube in difficult to access locations and for mission-critical applications requiring high weld integrity and sophisticated quality monitoring capabilities. The acquisition will complement the Company's ability to serve global customers in the nuclear, power generation and process industries worldwide. Sales for Arc Products during 2010 were significant.On October 29, 2010, thesignificantall of the outstanding stock of Mezhgosmetiz-Mtsensk OAO ("MGM"), a privately-held welding wire manufacturer based in the Orel region of Russia,Techalloy, Torchmate, Severstal and Arc Products for approximately $28,500$65,321 in cash and assumed debt. This acquisition represented the Company's first manufacturing operation in Russia as well as established distribution channels to serve the growing Russiandebt and CIS welding markets. Annuala contingent consideration liability fair valued at $3,806. The contingent consideration is based upon estimated sales for MGM at the date ofrelated acquisition were approximately $30,000.On July 29, 2009,for the Company completedacquisition of 100% of Jinzhou Jin Tai Welding and Metal Co. ("Jin Tai"), based in Jinzhou, China. This transaction expanded the Company's customer base and gave the Company control of significant cost-competitive solid wire manufacturing capacity. The Company previously held a 21% direct interest in Jin Tai and a further 27% indirect interest via its 35% ownership in Kuang Tai Metal Industry Co., Ltd. ("Kuang Tai"). Under the terms of the purchase agreement, the Company exchanged its 35% interest in Kuang Tai, which had an estimated fair value of $22,723, paid cash of $35,531 and committed to pay an additional $4,181 in cash over a three-year period after close.five-year period. The fair value of the Company's previous non-controlling direct interestnet assets acquired was $46,837, resulting in Jin Tai was $8,675. The carrying valuesgoodwill of the Company's interests in Kuang Tai and Jin Tai were $29,368 and $9,973, respectively. The excess carrying value over fair value of these interests resulted in a loss on the transaction of $7,943 recorded in "Equity earnings (loss) in affiliates." The Company previously reported its proportional share of Jin Tai's net income under the equity method in "Equity earnings (loss) in affiliates." Jin Tai's sales were $186,774 in 2008 and $74,834 in 2009 prior to the acquisition. Jin Tai's sales of $53,956 after the acquisition were included in "Net sales" for 2009.$22,290.34 – GOODWILL AND INTANGIBLESThe Company performs an annual impairment test of goodwill and indefinite-lived intangible assets in the fourth quarter using the same dates each year or more frequently if changes in circumstances or the occurrence of events indicate potential impairment. The fair value of each indefinite-lived intangible asset is compared to its carrying value and an impairment charge is recorded if the carrying value exceeds the fair value. Goodwill is tested by comparing the fair value of each reporting unit with its carrying value. If the carrying value of the reporting unit exceeds its fair value, the implied value ofLINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 3 – GOODWILL AND INTANGIBLES (Continued)goodwill is compared to its carrying value and impairment is recognized to the extent that the carrying value exceeds the implied fair value.Fair values are determined using established business valuation multiples and models developed by the Company that incorporate allocations of certain assets and cash flows among reporting units, estimates of market participant assumptions of future cash flows, future growth rates and the applicable discount rates to value estimated cash flows. Changes in economic and operating conditions impacting these assumptions could result in asset impairments in future periods. The Company's annual impairment test of goodwill and indefinite-lived intangible assets in 2011 resulted in no impairment loss being recognized.segmentsegments for the years ended December 31, 201120102012 were as follows: North
America
Welding Europe
Welding Asia
Pacific
Welding South
America
Welding The Harris
Products
Group Consolidated $ 4,993 $ 9,292 $ 4,914 $ 531 $ 19,824 $ 39,554
and adjustments (3 ) 7,473 – – (1,246 ) 6,224 79 (386 ) 116 34 331 174 5,069 16,379 5,030 565 18,909 45,952
and adjustments 13,478 9,543 – – (1,247 ) 21,774 (33 ) (2,055 ) 179 (5 ) (711 ) (2,625 ) $ 18,514 $ 23,867 $ 5,209 $ 560 $ 16,951 $ 65,101 Consolidated Balance at December 31, 2011 $ 18,514 $ 23,867 $ 5,208 $ 561 $ 16,951 $ 65,101 Additions and adjustments 67,740 66 — — (1,109 ) 66,697 Foreign currency translation 23 1,424 40 53 (435 ) 1,105 Balance as of December 31, 2012 86,277 25,357 5,248 614 15,407 132,903 Additions and adjustments 44,446 — — — (1,027 ) 43,419 Foreign currency translation (284) (927 ) 111 (52 ) (455 ) (1,607 ) Balance as of December 31, 2013 $ 130,439 $ 24,430 $ 5,359 $ 562 $ 13,925 $ 174,715 and adjustments to goodwill primarily reflect goodwill recognized in the acquisitionacquisitions of MGMRobolution and Burlington in 20102013 and the acquisitions of Arc Products, Severstal, TorchmateWeartech, Wayne Trail, Kaliburn and TechalloyTenn Rand in 20112012 (see Note 2), and3). Reductions to goodwill result from the tax benefit attributable to the amortization of tax deductible goodwill.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollarsgoodwill in thousands, except per share amounts)NOTE 3 – GOODWILL AND INTANGIBLES (Continued)20112013 and 20102012 were as follows: December 31, 2011 December 31, 2013 Weighted
Average Life Gross
Amount Accumulated
Amortization Indefinite
Lived Assets Total Intangible,
Net 13 $ 18,559 $ 8,020 $ 18,081 $ 28,620 12 $ 38,566 $ 11,898 $ 18,310 $ 44,978 19 40,818 7,875 – 32,943 14 74,935 16,837 — 58,098 18 18,677 3,927 – 14,750 20 23,861 6,205 — 17,656 17 33,148 14,990 – 18,158 14 49,578 23,298 — 26,280 $ 111,202 $ 34,812 $ 18,081 $ 94,471 $ 186,940 $ 58,238 $ 18,310 $ 147,012 December 31, 2010 December 31, 2012 Gross
Amount Accumulated
Amortization Indefinite
Lived Assets Total Intangible,
Net $ 14,886 $ 7,180 $ 18,193 $ 25,899 $ 30,611 $ 9,493 $ 18,276 $ 39,394 35,649 5,928 – 29,721 63,906 12,099 — 51,807 16,224 3,124 – 13,100 20,882 5,103 — 15,779 25,321 12,783 – 12,538 44,769 18,847 — 25,922 $ 92,080 $ 29,015 $ 18,193 $ 81,258 $ 160,168 $ 45,542 $ 18,276 $ 132,902 $6,661, $5,390$13,342, $10,641 and $4,524$6,661 for 2011, 20102013, 2012 and 2009,2011, respectively. Estimated annual amortization expense for intangible assets for each of the next five years is $6,745$15,745 in 2012, $6,0232014, $15,337 in 2013, $5,3522015, $14,367 in 2014, $5,1262016, $12,228 in 20152017 and $4,882$11,484 in 2016.2018.45 – SEGMENT INFORMATIONAfrica.the Middle East. The other two welding segments include welding operations in Asia Pacific and South America, respectively. The fifth segment, The Harris Products Group, includes the Company's global cutting, soldering and brazing businesses as well as the retail business in the United States.2011, 20102013, 2012 and 2009,2011, approximately 31%38%, 30%34% and 31%, respectively, of total inventories were valued using the LIFO method. LIFO is used for certain domestic inventories included in the North America Welding segment. Inter-segment sales are recorded at agreed upon prices that approximate arm's length prices and are eliminated in consolidation. Corporate-level expenses are allocated to the operating segments on a basis that management believes to be reasonable. Certain corporate-level expenses may not be allocated to the operating segments and are reported as Corporate/Eliminations.NOTE 4 – SEGMENT INFORMATION (Continued) North
America
Welding Europe
Welding Asia
Pacific
Welding South
America
Welding The Harris
Products
Group Corporate /
Eliminations Consolidated Consolidated $ 1,309,499 $ 508,692 $ 376,276 $ 156,684 $ 343,458 $ – $ 2,694,609 $ 1,652,769 $ 429,548 $ 266,282 $ 195,895 $ 308,177 $ — $ 2,852,671 136,314 17,422 15,614 494 8,496 (178,340 ) – 127,254 19,911 14,906 233 9,605 (171,909 ) $ — $ 1,445,813 $ 526,114 $ 391,890 $ 157,178 $ 351,954 $ (178,340 ) $ 2,694,609 $ 1,780,023 $ 449,459 $ 281,188 $ 196,128 $ 317,782 $ (171,909 ) $ 2,852,671 $ 227,924 $ 36,171 $ 2,629 $ 12,895 $ 25,151 $ 426 $ 305,196 $ 318,507 $ 36,247 $ 1,815 $ 57,306 $ 27,826 $ (4,350 ) $ 437,351 – 392 (110 ) – – – 282 1,052 2,045 6,071 12,198 — — $ 21,366 $ 227,924 $ 35,779 $ 2,739 $ 12,895 $ 25,151 $ 426 $ 304,914 $ 317,455 $ 34,202 $ (4,256 ) $ 45,108 $ 27,826 $ (4,350 ) $ 415,985 3,121 3,320 (6,704 ) (2,864 ) $ 301,331 $ 416,441 $ 771,315 $ 436,327 $ 380,282 $ 110,781 $ 181,916 $ 96,155 $ 1,976,776 $ 1,048,412 $ 403,094 $ 325,656 $ 169,027 $ 162,496 $ 43,182 $ 2,151,867 – 20,500 – 4,118 – – 24,618 — 23,315 — 3,303 — — $ 26,618 31,826 8,566 21,498 2,314 1,792 (183 ) 65,813 41,181 10,305 2,073 20,840 3,931 (2,315 ) $ 76,015 29,237 11,736 14,663 2,033 4,714 (332 ) 62,051 39,086 10,933 13,559 1,893 3,636 (224 ) $ 68,883 $ 1,013,193 $ 359,925 $ 324,092 $ 117,419 $ 255,543 $ – $ 2,070,172 $ 1,580,818 $ 452,227 $ 324,482 $ 161,483 $ 334,357 $ — $ 2,853,367 108,849 13,330 12,546 1,216 6,641 (142,582 ) – 131,062 16,048 14,829 38 8,549 (170,526 ) $ — $ 1,122,042 $ 373,255 $ 336,638 $ 118,635 $ 262,184 $ (142,582 ) $ 2,070,172 $ 1,711,880 $ 468,275 $ 339,311 $ 161,521 $ 342,906 $ (170,526 ) $ 2,853,367 $ 162,192 $ 17,023 $ 1,752 $ 7,554 $ 12,311 $ (6,675 ) $ 194,157 $ 293,070 $ 37,299 $ 7,247 $ 18,301 $ 29,477 $ (4,886 ) $ 380,508 – 2,486 (3,741 ) 3,123 871 – 2,739 827 3,534 4,993 1,381 — — $ 10,735 $ 162,192 $ 14,537 $ 5,493 $ 4,431 $ 11,440 $ (6,675 ) $ 191,418 $ 292,243 $ 33,765 $ 2,254 $ 16,920 $ 29,477 $ (4,886 ) $ 369,773 2,381 3,988 (6,691 ) (4,191 ) $ 187,108 $ 369,570 $ 611,725 $ 413,789 $ 350,975 $ 94,836 $ 193,474 $ 118,989 $ 1,783,788 $ 980,093 $ 451,654 $ 350,189 $ 134,650 $ 195,881 $ (22,604 ) $ 2,089,863 – 19,194 – 3,715 – – 22,909 — 21,798 — 2,808 — — $ 24,606 25,746 10,373 22,973 3,573 884 (2,984 ) 60,565 36,834 5,372 8,833 899 831 (54 ) $ 52,715 27,652 9,527 13,542 1,564 5,012 60 57,357 33,479 11,008 15,102 1,878 3,934 (67 ) $ 65,334 $ 858,180 $ 346,383 $ 208,280 $ 99,171 $ 217,271 $ – $ 1,729,285 $ 1,309,499 $ 508,692 $ 376,276 $ 156,684 $ 343,458 $ — $ 2,694,609 85,630 8,725 4,051 308 7,739 (106,453 ) – 136,314 17,422 15,614 494 8,496 (178,340 ) $ — $ 943,810 $ 355,108 $ 212,331 $ 99,479 $ 225,010 $ (106,453 ) $ 1,729,285 $ 1,445,813 $ 526,114 $ 391,890 $ 157,178 $ 351,954 $ (178,340 ) $ 2,694,609 $ 134,544 $ (2,196 ) $ (18,835 ) $ 10,648 $ 1,009 $ (3,344 ) $ 121,826 $ 227,924 $ 36,171 $ 2,629 $ 12,895 $ 25,151 $ 426 $ 305,196 10,386 4,335 9,006 528 5,774 – 30,029 — 392 (110 ) — — — $ 282 $ 124,158 $ (6,531 ) $ (27,841 ) $ 10,120 $ (4,765 ) $ (3,344 ) $ 91,797 $ 227,924 $ 35,779 $ 2,739 $ 12,895 $ 25,151 $ 426 $ 304,914 3,462 3,121 (8,521 ) (6,704 ) $ 86,738 $ 301,331 $ 606,846 $ 359,093 $ 310,329 $ 81,734 $ 181,753 $ 165,537 $ 1,705,292 $ 771,315 $ 436,327 $ 380,282 $ 110,781 $ 181,916 $ 96,155 $ 1,976,776 – 19,455 – 3,444 – – 22,899 — 20,500 — 4,118 — — $ 24,618 13,726 7,543 15,887 796 2,457 (2,208 ) 38,201 31,826 8,566 21,498 2,314 1,792 (183 ) $ 65,813 30,254 9,779 9,397 1,543 5,485 140 56,598 29,237 11,736 14,663 2,033 4,714 (332 ) $ 62,051 $188$188 and $93$93 for rationalization actions in the Europe Welding and Asia Pacific Welding segments, respectively, primarily related to employee severance and other costs associated with the consolidation of manufacturing operations. The Europe Welding andLINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 4 – SEGMENT INFORMATION (Continued)$204$203,$203, respectively, on the sale of assets at rationalized operations.In 2010, special items include a charge of $1,990 for rationalization actions and $496 in related asset impairment charges for the Europe Welding segment. The Asia Pacific Welding segment includes a gain of $4,555 related to the disposal of assets, a charge of $427 for rationalization actions and $387 in asset impairment charges. The South America Welding segment includes a net charge of $3,123 related to the change in functional currency and devaluation of the Venezuelan currency. The Harris Products Group segment includes a net charge of $871 related to environmental costs associated with the sale of property at a rationalized operation.In 2009, special items include a charge of $10,386 for rationalization actions for the North America Welding segment. The Europe Welding segment includes a charge of $9,615 for rationalization actions, $253 in related asset impairment charges, $134 in intangible asset impairment charges and a gain of $5,667 on the sale of a property. The Asia Pacific Welding segment includes a charge of $1,692 for rationalization actions, $1,515 in related asset impairment charges, a gain of $2,144 on the settlement of a pension obligation and a loss of $7,943 associated with the acquisition of Jin Tai and related divestiture of Kuang Tai. The South America Welding segment includes a charge of $528 for rationalization actions. The Harris Products Group segment includes a charge of $4,736 for rationalization actions, $293 in related asset impairment charges and $745 in intangible asset impairment charges.intercompanyinter-company sales) from the United States were $242,380$260,195 in 2011, $197,0572013, $268,331 in 20102012 and $154,526$242,380 in 2009.2011. No individual customer comprised more than 10% of the Company's total revenues for any of the three years ended December 31, 2011.netNet sales, based on the location of the customer, and property, plant and equipment were as follows: Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 $ 1,092,838 $ 825,371 $ 722,638 $ 1,350,309 $ 1,283,066 $ 1,092,838 286,121 250,981 156,233 219,490 229,996 286,121 1,315,650 993,820 850,414 1,282,872 1,340,305 1,315,650 $ 2,694,609 $ 2,070,172 $ 1,729,285 $ 2,852,671 $ 2,853,367 $ 2,694,609 December 31, 2013 2012 2011 Property, plant and equipment, net: United States $ 162,357 $ 170,831 $ 149,637 China 83,416 92,744 96,374 Other foreign countries 238,685 223,050 224,801 Eliminations (453 ) (389 ) (361 ) Total $ 484,005 $ 486,236 $ 470,451 NOTE 4 – SEGMENT INFORMATION (Continued) December 31, 2011 2010 2009 $ 149,637 $ 149,185 $ 153,342 96,374 87,722 73,559 224,801 242,084 233,514 (361 ) (425 ) (354 ) $ 470,451 $ 478,566 $ 460,061 56 – RATIONALIZATION AND ASSET IMPAIRMENTSand asset impairment net charges of $282$8,463, $9,354 and $282 for the years ended December 31, 2013, 2012 and 2011, respectively. The 2013 net charges include $3,658 primarily related to employee severance and $4,961 in asset impairment charges, partially offset by gains of $156 related to sale of assets. A description of each restructuring plan and the related costs follows:2011 resulting from rationalization activities primarily initiated2013, the Company recorded charges of $1,832 related to these activities. The amount represents employee severance and other related costs of $1,599 and asset impairment charges of $233. At December 31, 2013, a liability relating to these actions of $1,209 was recognized in Other current liabilities. The Company expects to incur additional charges in the third and second quartersrange of 2009. The$400 to $700 related to the completion of this plan.a numbervarious rationalization plans within the Europe Welding segment. Plans for the segment include the consolidation of rationalization activitiesmanufacturing facilities in 2009 to alignRussia, relocation of its businessItalian machine manufacturing operations to current marketfacilities in Poland and headcount restructuring at various other manufacturing operations within the segment to better align the cost structure and capacity requirements with current economic needs and conditions. The 2011These actions impacted 285 employees within the Europe Welding segment. During the year ended December 31, 2013, the Company recorded net charges include $259 primarilyof $213 related to these activities. The amount represents employee severance and other related costs and $23 in asset impairment charges.In 2010, the Company recorded rationalization and asset impairment net gains of $384 resulting from rationalization activities primarily initiated in the third and second quarters of 2009. The 2010 net gains include $4,555 primarily related to asset disposals offset by charges of $2,417 primarily related to employee severance and other related costs, $871 related to environmental costs associated with the sale of property and $883 in asset impairment charges.In 2009, the Company recorded rationalization and asset impairment net charges of $29,897 resulting from rationalization activities primarily initiated in the third and second quarters. The 2009 net charges include $27,142 primarily related to employee severance costs, $2,061 in long-lived asset impairment charges, andpartially offset by a gain on sale of $185 recognized in connection with the partial settlement of a pension plan. Rationalization activities during the year affected 1,063 employees and included the closure of two manufacturing operations. Impairment charges on certain indefinite-lived intangible assets of $879 were also included under this caption.During the third quarter of 2009, the Company initiated various rationalization actions including the consolidation of certain manufacturing operations. These actions impacted 81 employees in the Europe Welding segment, 193 employees in the Asia Pacific Welding segment and nine employees in the South America Welding segment in 2009. The Company recognized a net charge of $282 for the year ended assets. At 2011 related to these activities. This net charge includes a charge of $204 and a gain of $203 on the sale of property and other assets at rationalized operations. The Company also recognized charges associated with the continuation of the consolidation of certain manufacturing operations of $166 and $93 in the Europe Welding and Asia Pacific Welding segments, respectively, and asset impairment charges of $22 in the Europe Welding segment. At December 31, 2011,2013, a liability relating to these actions of $173$1,226 was recognized in "OtherOther current liabilities." The Company does not expect to recognize any material costs associated with these actions in 2012 as they were substantially completed in 2011 and should be substantially paid by the end of 2012.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 5 – RATIONALIZATION AND ASSET IMPAIRMENTS (Continued)During the second quarter of 2009, the Company initiated various rationalization activities including the closure of a manufacturing operation in The Harris Products Group segment. No additional charges related to this action were recognized in the year ended December 31, 2011. At December 31, 2011, a liability of $82 related primarily to employee severance benefits due to these rationalization actions was recognized in "Other current liabilities",liabilities, which will be substantially paid in 2012. North America Welding Consolidated Balance at December 31, 2011 $ — $ 173 $ — $ 82 $ 255 Payments and other adjustments (827 ) (1,797 ) (2,107 ) (82 ) (4,813 ) Charged to expense 827 3,637 3,151 — 7,615 Balance at December 31, 2012 $ — $ 2,013 $ 1,044 $ — $ 3,057 Payments and other adjustments (586 ) (1,343 ) (1,510 ) — (3,439 ) Charged to expense 1,052 1,765 841 — 3,658 Balance at December 31, 2013 $ 466 $ 2,435 $ 375 $ — $ 3,276 20112013 and 2010: Europe
Welding Asia
Pacific
Welding The Harris
Products
Group Consolidated $ 411 $ 90 $ 930 $ 1,431 (404 ) (183 ) (848 ) (1,435 ) 166 93 – 259 $ 173 $ – $ 82 $ 255 Unrealized (loss) gain on derivatives designated and qualifying as cash flow hedges Defined benefit pension plan activity Currency translation adjustment Total Balance at December 31, 2011 $ 912 $ (255,369 ) $ 6,576 $ (247,881 ) Other comprehensive income (loss) before reclassification (1,997 ) (26,373 ) 19,555 (8,815 ) Amounts reclassified from AOCI 1,165 19,898 233 21,296 Net current-period other comprehensive income (loss) (832 ) (6,475 ) 19,788 12,481 Balance at December 31, 2012 $ 80 $ (261,844 ) $ 26,364 $ (235,400 ) Other comprehensive income (loss) before reclassification (681 ) 82,050 (19,316 ) 62,053 Amounts reclassified from AOCI 970 19,101 1,335 21,406 Net current-period other comprehensive income (loss) 289 101,151 (17,981 ) 83,459 Balance at December 31, 2013 $ 369 $ (160,693 ) $ 8,383 $ (151,941 ) Europe
Welding Asia
Pacific
Welding The Harris
Products
Group Consolidated $ 3,081 $ 831 $ 2,445 $ 6,357 (4,660 ) (1,168 ) (1,515 ) (7,343 ) 1,990 427 – 2,417 $ 411 $ 90 $ 930 $ 1,431 NOTE 6 – ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOMEThe components of Accumulated other comprehensive loss are as follows: December 31, 2011 2010 $ (255,369 ) $ (175,433 ) 6,576 33,837 912 (352 ) $ (247,881 ) $ (141,948 ) The balance of Accumulated other comprehensive (loss) income in noncontrolling interests relates to foreign currency translation and amounted to $1,798 and $1,631 at December 31, 2011 and 2010, respectively.1 2 3 78 – DEBT20112013 and 2010,2012, debt consisted of the following: December 31, December 31, 2011 2010 2013 2012 $ 80,358 $ 82,225 901 1,869 2,197 2,328 Capital leases due through 2017, interest at 1.12% to 3.63% $ 236 $ 267 Other borrowings due through 2023, interest up to 4.00% 4,270 1,788 83,456 86,422 4,506 2,055 81,496 1,795 715 456 1,960 84,627 Long-term debt, less current portion 3,791 1,599 19,922 11,283 Amounts due banks, interest at 11.28% (11.32% in 2012) 14,581 18,220 81,496 1,795 715 456 101,418 13,078 15,296 18,676 $ 103,378 $ 97,705 $ 19,087 $ 20,275 Senior Unsecured NotesAt During March 2002, the Company issued Senior Unsecured Notes (the "Notes") totaling $150,000 through a private placement. The Notes have original maturities ranging from five to ten years with a weighted-average interest rate of 6.1% and an average tenure of eight years. Interest is payable semi-annually in March and September. The proceeds are being used for general corporate purposes, including acquisitions, and are generally invested in short-term, highly liquid investments. The Notes contain certain affirmative and negative covenants, including restrictions on asset dispositions and financial covenants (interest coverage and funded debt-to-EBITDA, as defined in the Notes agreement, ratios). As of December 31, 2011, the Company was in compliance with all of its covenants under the Notes agreement. The Company repaid the $40,000 Series A Notes2013 and the $30,000 Series B Notes in March 2007 and March 2009, respectively, reducing the balance outstanding of the Notes to $80,000, which is due in March 2012.During March 2002, the Company entered into floating rate interest rate swap agreements totaling $80,000 to convert a portion of the Notes outstanding from fixed to floating rates. These swaps were designated as fair value hedges and, as such, the gains or losses on the derivative instrument, as well as the offsetting gains or losses on the hedged item attributable to the hedged risk, were recognized in earnings. Net payments or receipts under these agreements were recognized as adjustments to "Interest expense." In May 2003, these swap agreements were terminated. The gain of $10,613 on the termination of these swaps was deferred and is being amortized as an offset to "Interest expense" over the remaining life of the Notes. The amortization of this gain reduced "Interest expense" by $206 in 2011, $206 in 2010 and $313 in 2009, and is expected to reduce annual "Interest expense" by $30 in 2012.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)2012NOTE 7 – DEBT (Continued)During July 2003 and April 2004, the Company entered into various floating rate interest rate swap agreements totaling $110,000 to convert a portion of the Notes outstanding from fixed to floating rates based on the London Inter-Bank Offered Rate ("LIBOR"). These swaps were designated and qualified as fair value hedges and, as such, the gains or losses on the derivative instrument, as well as the offsetting gains or losses on the hedged item, were recognized in earnings. Net payments or receipts under these agreements were recognized as adjustments to "Interest expense."During February 2009, the Company terminated swaps with a notional value of $80,000 and realized a gain of $5,079. This gain was deferred and is being amortized over the remaining life of the Notes. The amortization of this gain reduced "Interest expense" by $1,661 in 2011, $1,661 in 2010 and $1,429 in 2009, and is expected to reduce annual "Interest expense" by $328 in 2012.During March 2009, swaps designated as fair value hedges that converted the $30,000 Series B Notes from fixed to floating interest rates matured with the underlying Notes. The Company has no interest rate swaps outstanding at December 31, 2011. The weighted average effective rate on the Notes, net of the impact of swaps, was 4.0% for both 2011 and 2010.At December 31, 2011 and 2010,, the fair value of long-term debt, including the current portion, was approximately $84,110$4,212 and $88,120,$1,919, respectively, which was determined using available market information and methodologies requiring judgment. Since considerable 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.On November 18, 2009, theentered into anhas a line of credit totaling $300,000 through the Amended and Restated Credit Agreement ("Credit Agreement"(the “Credit Agreement”) for a $150,000 revolving credit facility to be used for general corporate purposes. The Credit Agreement has a three-year term that is set to expire in November 2012. At any time not later than 180 days prior to the last day of the term, the Credit Agreement may be increased, subject to certain conditions, by an additional amount up to $75,000. The interest rate, which was entered into on borrowings is based on either LIBOR or the prime rate, plus a spread based on the Company's leverage ratio, at the Company's election. A quarterly facility fee is payable based upon the daily aggregate amount of commitments and the Company's leverage ratio. The Company expects to replace the Credit Agreement prior to its expiration in NovemberJuly 26, 2012 although there can be no assurances that the Company can replace the Credit Agreement or that satisfactory terms will be reached.. The Credit Agreement contains customary affirmative, negative and financial covenants for credit facilities of this type, including limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, dispositions of assets, transactions with affiliates and a fixed charges coverage ratio and total leverage ratio. As of December 31, 2011,2013, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit Agreement, but had letters of credit outstanding totaling $60, which reduced the availability under theAgreement. The Credit Agreement has a five-year term and may be increased, subject to $149,940.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
certain conditions, by an additional amount up to (Dollars in thousands, except per share amounts)$100,000NOTE 7 – DEBT (Continued). The interest rate on borrowings is based on either LIBOR or the prime rate, plus a spread based on the Company’s leverage ratio, at the Company’s election.20112013 and 2010, $9012012, $236 and $1,869$267 of capital lease indebtedness was secured by property, plant and equipment, respectively.Other20112013 are $101,060$15,297 in 2012, $4632014, $535 in 2013, $3942015, $446 in 2014, $2172016, $285 in 2015, $1322017, $202 in 20162018 and $754$774 thereafter. Total interest paid was $6,979$2,864 in 2011, $7,4462013, $4,423 in 20102012 and $11,339$6,979 in 2009.2011. The primary difference between interest expense and interest paid in 2012 and 2011 is the amortization of the gains on terminated interest rate swaps."AmountsAmounts due banks"banks were $19,922$14,581 and $11,283$18,220 at December 31, 20112013 and 2010,2012, respectively, and represent the borrowings of foreign subsidiaries at weighted average interest rates of 11.6%11.3% and 17.1%11.3%, respectively. The primary reason for the decreasethe weighted average interest rate is the shift during 2011 in short-term borrowings from geographic areas with higher interest rates to areas with lower interest rates.89 – STOCK PLANS2011,2013, there were 3,061,3462,315,239 common shares available for future grant under all plans.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 8 – STOCK PLANS (Continued)each of the three years ended December 31, 2013, 2012 and 2011, under all Plans: Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 Options Weighted
Average
Exercise
Price Options Weighted
Average
Exercise
Price Options Weighted
Average
Exercise
Price Options Options Options 3,779,824 $ 23.99 3,596,884 $ 22.28 3,110,978 $ 21.37 3,060,944 $ 30.98 3,632,463 $ 26.05 3,779,824 $ 23.99 459,263 35.34 491,010 31.29 583,660 26.31 273,105 70.88 412,980 47.66 459,263 35.34 (572,795 ) 19.82 (260,084 ) 13.49 (59,102 ) 11.92 (774,783 ) 26.20 (962,029 ) 19.52 (572,795 ) 19.82 (33,829 ) 26.62 (47,986 ) 27.84 (38,652 ) 25.75 (106,618 ) 40.54 (22,470 ) 24.07 (33,829 ) 26.62 3,632,463 26.05 3,779,824 23.99 3,596,884 22.28 2,452,648 36.52 3,060,944 30.98 3,632,463 26.05 2,677,071 23.73 2,749,168 22.40 2,668,692 20.91 1,837,014 29.93 2,208,455 27.19 2,677,071 23.73 ten10 years from the date of grant. The majority of options granted vest ratably over a period of three years from the grant date. The exercise prices of all options were equal to the quoted market price of the Company's common shares at the date of grant. The Company issued shares of common stock from treasury upon all exercises of stock options in 2011, 20102013, 2012 and 2009.2011.20112013 were as follows: Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 41.92% 42.15% 40.48% 32.97 % 45.67 % 41.92 % 1.63% 2.02% 2.15% 1.40 % 1.66 % 1.63 % 0.80% 1.64% 2.04% 1.52 % 0.70 % 0.80 % 4.3 4.9 4.7 4.4 4.5 4.3 $ 10.97 $ 10.01 $ 8.03 $ 18.14 $ 15.87 $ 10.97 NOTE 8 – STOCK PLANS (Continued)nonvestednon-vested stock options for the year ended December 31, 2011: Year Ended
December 31, 2011 Year Ended December 31, 2013 Number of
Options Weighted
Average Fair
Value at Grant
Date 980,926 $ 8.74 852,489 $ 13.63 459,263 12.02 273,105 18.14 (483,245 ) 7.95 (410,542 ) 12.50 (27,562 ) 8.39 (99,418 ) 14.04 929,382 10.78 615,634 16.32 2011,2013 was $47,467$85,404 and $41,192,$76,076, respectively. The total intrinsic value of awards exercised during 2013, 2012 and 2011 was $20,297, $18,776and 2010 was $15,781 and $5,006,$10,028, respectively.2011:2013: Outstanding Exercisable Number of
Stock
Options Weighted
Average
Exercise
Price Number of
Stock
Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Life (years) 341,076 $ 12.59 341,076 $ 12.59 1.6 755,547 18.88 755,547 18.88 3.4 2,535,840 30.00 1,580,448 28.46 7.6 3,632,463 2,677,071 6.2 Outstanding Exercisable Exercise Price Range Under $29.99 738,614 $ 23.41 738,614 $ 23.41 4.6 $30.00 - $39.99 1,092,456 33.20 1,001,199 33.00 6.2 Over $40.00 621,578 57.93 97,201 47.85 9.4 2,452,648 1,837,014 6.5 LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 8 – STOCK PLANS (Continued)each of the three years ended December 31, 2013, 2012 and 2011, under all Plans: Year Ended December 31, 2013 2012 2011 Shares Shares Shares Balance at beginning of year 336,808 $ 28.49 379,233 $ 28.06 523,730 $ 27.36 Shares granted 14,464 70.88 20,099 47.81 22,779 35.55 Shares vested* (224,021 ) 25.68 (62,524 ) 32.10 (159,842 ) 26.97 Shares forfeited (11,935 ) 25.76 — — (7,434 ) 24.67 Balance at end of year 115,316 39.55 336,808 28.49 379,233 28.06 * Includes shares vested but not exercisable Year Ended December 31, 2011 2010 2009 Shares Weighted
Average
Grant Date
Fair Value Shares Weighted
Average
Grant Date
Fair Value Shares Weighted
Average
Grant Date
Fair Value 523,730 $ 27.36 435,770 $ 26.61 321,056 $ 25.68 22,779 35.55 112,864 31.05 188,950 26.30 (159,842 ) 26.97 (24,904 ) 31.07 (74,236 ) 21.82 (7,434 ) 24.67 – – – – 379,233 28.06 523,730 27.36 435,770 26.61 *Includes shares vested but not exercisableRestricted share awardsRSAs are valued at the quoted market price on the grant date. The majority of restricted share awardsRSAs vest over a period of three to five years. The Company issued shares of common stock from treasury upon the granting of restricted share awardsRSAs in 2011, 20102013, 2012 and 2009. Under the EPI Plan, the Company issued 82,9922011. All restricted shares at a weighted average market price of $30.97 per shareissued in 20102013, 2012 and 171,886 restricted shares at a weighted average market price of $26.29 per share in 2009. The Company issued 22,779 restricted shares at a weighted average market price of $35.55 per share, 29,872 restricted shares at a weighted average market price of $31.28 per share and 17,064 restricted shares at a market price of $26.362011, were under the the Director Plan in 2011, 2010 and 2009, respectively.Plan. The remaining weighted average life of all nonvested restricted share awardsnon-vested RSAs is 2.41.8 years as of December 31, 2011.nonvestednon-vested restricted share awards for the year ended December 31, 2011:2013: Year Ended
December 31, 2011 Number of
Restricted
Shares Weighted
Average
Fair Value
at Grant Date 492,430 $ 27.36 22,779 35.55 (151,842 ) 26.79 (7,434 ) 24.67 355,933 28.18 Year Ended December 31, 2013 Number of Restricted Shares Weighted Average Fair Value at Grant Date Balance at beginning of year 318,088 $ 28.74 Shares granted 14,464 70.88 Shares vested (205,301 ) 25.80 Shares forfeited (11,935 ) 25.76 Balance at end of year 115,316 39.55 LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 8 – STOCK PLANS (Continued)yearyears ended December 31, 2013, 2012 and 2011, under all Plans: Year Ended December 31, 2011 Units Weighted
Average
Grant Date
Fair Value – $ – 166,519 34.55 – – – – 166,519 34.55 Year Ended December 31, 2013 2012 2011 Units Units Units Balance at beginning of year 288,669 $ 40.83 166,519 $ 34.55 — $ — Units granted 69,925 67.17 133,944 47.97 166,519 34.55 Units vested (33,698 ) 39.20 (10,499 ) 33.06 — — Units forfeited (40,952 ) 41.70 (1,295 ) 35.55 — — Balance at end of year 283,944 47.38 288,669 40.83 166,519 34.55 Restricted stock unitsrestricted stock unitsRSUs vest over a period of three to five years. UnderThe Company will issue shares of common stock from treasury upon the vesting of RSUs and any earned dividend equivalents. Conversion of 31,552 RSUs to common stock in 2013 were deferred as part of the 2005 Deferred Compensation Plan for Executives (the "2005 Plan"). As of December 31, 2013, 43,012 RSUs, including related dividend equivalents, have been deferred under the 2005 Plan. These units are reflected within dilutive shares in the calculation of earnings per share. All RSUs issued in 2013, 2012 and 2011, were under the the EPI Plan, the Company issued 166,519 restricted stock units at a weighted average market price of $34.55 per share in 2011. Restricted stock units were not granted prior to 2011.Plan. The remaining weighted average life of all nonvested restricted stock unitsnon-vested RSUs is 4.84.1 years as of December 31, 2011.2013.2011, 20102013, 2012 and 20092011 was $6,610, $8,213$9,734, $8,961 and $5,432,$6,610, respectively. The related tax benefit for 2011, 20102013, 2012 and 20092011 was $2,515, $3,112$3,727, $3,409 and $2,058,$2,515, respectively. As of December 31, 2011,2013, total unrecognized stock-based compensation expense related to nonvestednon-vested stock options, restricted shares and restricted stock units was $18,898,$21,633, which is expected to be recognized over a weighted average period of approximately 37 months.3.3 years.4,4664,653 in 2011, 4,2402013, 4,908 in 20102012 and 7,6364,466 in 2009.2011.910 – COMMON STOCK REPURCHASE PROGRAM3045 million shares of the Company's common stock. At management's discretion, the Company repurchases its common stock from time to time in the open market, depending on market conditions, stock price and other factors. During the year ended December 31, 2011,2013, the Company purchased 1,041,2292,671,614 shares at an average cost per share of $34.29.$61.67. As of December 31, 2011, there2013, 15,670,759 shares remained 5,121,757 shares available for repurchase under the stock repurchase program. The treasury shares have not been retired.1011 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANSThe defined benefit plans generally provide benefits based upon years of service and compensation. The plans are funded except for a domestic non-qualified pension plan for certain key employees and certain foreign plans. The contributionsLINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 10 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued) December 31, December 31, 2011 2010 2013 2012 $ 851,948 $ 777,521 $ 1,033,725 $ 991,979 17,331 15,371 23,188 21,538 44,161 42,730 37,225 41,584 365 365 221 334 121,800 57,707 Plan amendments 1,623 (3,681 ) Actuarial (gain) loss (91,851 ) 70,015 (40,345 ) (38,839 ) (59,296 ) (86,722 ) (2,434 ) (4,553 ) (1,390 ) (3,946 ) (847 ) 1,646 (2,003 ) 2,624 Benefit obligations at end of year 941,442 1,033,725 991,979 851,948 726,474 636,758 813,897 749,456 29,470 83,750 101,044 83,156 33,994 44,766 85,456 68,029 365 365 221 334 (37,960 ) (36,529 ) (57,644 ) (85,238 ) (2,415 ) (4,355 ) (1,390 ) (3,798 ) (472 ) 1,719 (1,589 ) 1,958 Fair value of plan assets at end of year 939,995 813,897 749,456 726,474
(242,523
)
(125,474
) (1,447 ) (219,828 ) 408,474 281,431 Unrecognized actuarial net loss 258,781 422,042 (515 ) (843 ) (2,547 ) (4,101 ) 41 64 26 26 $ 165,477 $ 155,178 $ 254,813 $ 198,139 creditscosts and transition obligationsassets included in "AccumulatedAccumulated other comprehensive loss"loss at December 31, 20112013 were $255,795, $(461)$162,983, $(2,307) and $35,$17, respectively. The actuarial loss represents changes in the estimated obligation not yet recognized in the Consolidated Income Statement. Actuarial losses arising during 2011 are primarily attributable to a lower discount rate. The pre-tax amounts of unrecognized actuarial net loss, prior service credits and transition obligations expected to be recognized as components of net periodic benefit cost during 20122014 are $31,138, $(95)$16,104, $(618) and $4,$4, respectively.NOTE 10 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued) December 31, December 31, 2011 2010 2013 2012 $ – $ 588 $ 36,116 $ — (10,348 ) (4,068 ) (10,564 ) (3,639 ) (232,175 ) (121,994 ) (26,999 ) (216,189 ) 408,000 280,652 256,260 417,967 $ 165,477 $ 155,178 $ 254,813 $ 198,139 Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 $ 17,331 $ 15,371 $ 12,755 $ 23,188 $ 21,538 $ 17,331 44,161 42,730 43,097 37,225 41,584 44,161 (57,405 ) (50,424 ) (43,802 ) (61,244 ) (58,754 ) (57,405 ) (62 ) (44 ) (23 ) (613 ) (90 ) (62 ) 21,816 20,830 25,087 30,929 31,085 21,816 529 660 (2,340 ) Settlement/curtailment loss 423 895 529 $ 26,370 $ 29,123 $ 34,774 $ 29,908 $ 36,258 $ 26,370 Pension costs in 2011 for thean increase ina lower interest cost and a higher expected return on plan assets partially offset by higher service cost, interest cost and amortization of prior year losses. December 31, December 31, 2011 2010 2013 2012 $ 921,469 $ 784,905 $ 37,355 $ 956,837 883,157 755,390 33,416 905,541 696,802 670,958 10,028 755,491 $ 70,507 $ 54,289 $ 49,990 $ 76,884 66,332 50,394 42,593 70,492 52,652 42,182 39,753 58,403 LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 10 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued)$949,48920112013 and $818,292$976,033 as of December 31, 2010.$30,000$20,000 to all pensionits defined benefit plans during 2012.in the United States in 2014. The actual amounts to be contributed to the pension plans in 20122014 will be determined at the Company's discretion. $ 49,085 41,549 42,834 $ 61,755 48,615 53,992 46,130 61,654 260,371 2017 59,570 2018 58,422 2019 through 2023 307,094 Assumptions20112013 and 20102012 were as follows: December 31, December 31, 2011 2010 2013 2012 4.2 % 5.3 % 4.7 % 3.8 % 4.0 % 4.0 % 4.2 % 4.0 % 20112013 were as follows: December 31, December 31, 2011 2010 2009 2013 2012 2011 5.3 % 5.8 % 6.2 % 3.8 % 4.2 % 5.3 % 4.0 % 4.0 % 4.0 % 4.1 % 4.0 % 4.0 % 7.9 % 7.9 % 8.2 % 7.4 % 7.7 % 7.9 % LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 10 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued)2011:2013: Pension Plans' Assets at Fair Value as of December 31, 2011 Quoted Prices
in
Active Markets
for Identical
Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total $ 94,407 $ – $ – $ 94,407 1,582 – – 1,582 – 15,371 – 15,371 – 8,288 650 8,938 – 611,361 – 611,361 – – 17,797 17,797 $ 95,989 $ 635,020 $ 18,447 $ 749,456 Pension Plans' Assets at Fair Value as of December 31, 2013 Total Cash and cash equivalents $ — $ 4,686 $ — $ 4,686 Common trusts and 103-12 investments — 902,746 — 902,746 — — 32,563 32,563 Total assets at fair value $ — $ 907,432 $ 32,563 $ 939,995 LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 10 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued)2010: Pension Plans' Assets at Fair Value as of December 31, 2012 Total $ 107,763 $ — $ — $ 107,763 Cash and cash equivalents 5,170 — — 5,170 — 412 — 412 — 673,469 — 673,469 — — 27,083 27,083 Total assets at fair value $ 112,933 $ 673,881 $ 27,083 $ 813,897 Pension Plans' Assets at Fair Value as of December 31, 2010 Quoted Prices
in
Active Markets
for Identical
Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total $ 111,828 $ – $ – $ 111,828 2,440 – – 2,440 – 21,757 – 21,757 – 9,806 1,489 11,295 – 570,133 – 570,133 – – 9,021 9,021 $ 114,268 $ 601,696 $ 10,510 $ 726,474 (1)This investment category includes publicly traded equity investments directly held by the plans. Investments are valued at the unadjusted quoted close prices reported on the reporting date.(2)The insurance company nonpooled separate account is focused on capital preservation and invests in fixed-income securities and money market instruments. Account is composed of publically traded and privately held corporate bonds, money market and mortgage backed assets. Publically traded bonds, money market and mortgage backed securities are valued at the closing market price on the reporting date. Privately held bonds are valued at fair value as determined by the fund directors and general partners.(3)Common trusts and 103-12 investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, equity and credit indexes, and money markets. Trusts are valued at the net asset value ("NAV") as determined by their custodian. NAV represent the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates.(4)Private equity funds consist of four funds seeking capital appreciation by investing in private equity investment partnerships and venture capital companies. Funds are comprised of unrestricted and restricted publicly traded securities and privately held securities. Unrestricted securities are valued at the closing market price on the reporting date. Restricted securities may be valued at a discount from such closing public market price, depending on facts and circumstances. Privately held securities are valued at fair value as determined by the fund directors and general partners.(1) Common trusts and 103-12 investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, equity and credit indexes, and money markets. Trusts are valued at the net asset value ("NAV") as determined by their custodian. NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates. (2) Private equity funds consist of four funds seeking capital appreciation by investing in private equity investment partnerships and venture capital companies. Funds are comprised of unrestricted and restricted publicly traded securities and privately held securities. Unrestricted securities are valued at the closing market price on the reporting date. Restricted securities may be valued at a discount from such closing public market price, depending on facts and circumstances. Privately held securities are valued at fair value as determined by the fund directors and general partners. (3) This investment category includes publicly traded equity investments directly held by the plans. Investments are valued at the unadjusted quoted close prices reported on the reporting date. (4) This investment category is composed of publicly traded bonds and asset backed securities which are valued at the quoted closing market prices on the reporting date. NOTE 10 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued)2011: Insurance
Company
Nonpooled
Separate
Account Private
Equity
Funds Total $ 1,489 $ 9,021 $ 10,510 $ 27,083 (463 ) 7,294 6,831 2,186 (376 ) 1,482 1,106 Realized and unrealized gains 3,294 $ 650 $ 17,797 $ 18,447 $ 32,563 $ (264 ) $ 1,407 $ 1,143 The amount of total gains during the period attributable to the change in unrealized gains relating to Level 3 net assets still held at the reporting date $ 3,035 $2,110, $2,118$2,329, $2,254 and $2,088$2,110 in 2011, 20102013, 2012 and 2009,2011, respectively. The projected benefit obligation associated with this plan is also included in the pension disclosure shown above and was $23,930, $21,412$22,877, $25,646 and $20,442$23,930 at December 31, 2011, 20102013, 2012 and 2009,2011, respectively. The Company suspended the match provision for all of 2009 as part of the Company's actions to reduce costs in light of existing market conditions. On January 1, 2010, the match provision was reinstated for the 401(k) savings plan.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 10 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued)$8,478, $7,039$4,810$8,478 in 2011, 20102013, 2012 and 2009,2011, respectively.$966, $1,052$1,048, $972 and $1,322$966 in 2011, 20102013, 2012 and 2009,2011, respectively.1112 – INCOME TAXES (loss) before income taxes for the three years ended December 31, 20112013 were as follows: Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 $ 204,667 $ 135,756 $ 110,909 $ 281,724 $ 243,382 $ 204,667 96,664 51,352 (24,171 ) 134,717 126,188 96,664 $ 301,331 $ 187,108 $ 86,738 $ 416,441 $ 369,570 $ 301,331 LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 11 – INCOME TAXES (Continued)20112013 were as follows: Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 $ 42,510 $ 30,642 $ 25,688 $ 58,099 $ 72,809 $ 42,510 19,970 15,532 15,943 40,348 33,510 19,970 6,699 4,337 3,364 8,490 8,172 6,699 106,937 114,491 69,179 69,179 50,511 44,995 12,140 6,802 (4,612 ) 21,946 (1,673 ) 12,140 2,768 (2,640 ) (2,735 ) (5,734 ) (750 ) 2,768 231 225 257 1,605 286 231 17,817 (2,137 ) 15,139 15,139 4,387 (7,090 ) $ 84,318 $ 54,898 $ 37,905 $ 124,754 $ 112,354 $ 84,318 20112013 were as follows: Year Ended December 31, Year Ended December 31, 2011 2010 2009 2013 2012 2011 $ 105,466 $ 65,488 $ 30,358 $ 145,754 $ 129,350 $ 105,466 4,585 3,044 2,443 7,124 5,598 4,585 (13,637 ) (1,417 ) 18,484 Taxes (less) more than the U.S. tax rate on non-U.S. earnings, including utilization of tax loss carry-forwards, losses with no benefit and changes in non-U.S. valuation allowance (17,352 ) (11,263 ) (13,637 ) (5,330 ) (3,900 ) (2,310 ) (6,386 ) (6,287 ) (5,330 ) 145 (3,282 ) (14,486 ) 995 (4,766 ) 145 (5,103 ) (3,204 ) 4,275 (313 ) (1,493 ) (5,103 ) (1,808 ) (1,831 ) (859 ) (5,068 ) 1,215 (1,808 ) $ 84,318 $ 54,898 $ 37,905 $ 124,754 $ 112,354 $ 84,318 27.98% 29.34% 43.70% 29.96 % 30.40 % 27.98 % 20112013 effective tax rate is impacted by the geographic mix of earnings and taxes at lower rates in foreign jurisdictions, including Canada, Mexico, Poland and the U.K., as well as loss utilization in other foreign jurisdictions. Total income tax payments, net of refunds, were $62,600$84,567 in 2011, $40,9702013, $78,506 in 20102012 and $33,522$62,600 in 2009.2011.NOTE 11 – INCOME TAXES (Continued)20112013 and 2010,2012, were as follows: December 31, December 31, 2011 2010 2013 2012 $ 32,313 $ 45,383 Tax loss and credit carry-forwards $ 51,762 $ 40,373 8,224 8,190 1,277 1,328 15,652 16,024 15,709 14,981 17,600 17,304 18,909 17,904 79,371 36,251 4,643 82,903 7,111 13,662 9,828 12,686 160,271 136,814 102,128 170,175 (31,713 ) (38,451 ) (49,684 ) (38,799 ) 128,558 98,363 52,444 131,376 40,806 37,191 38,653 41,380 13,251 15,170 24,014 19,545 2,973 5,246 7,311 5,783 1,676 2,239 7,315 2,940 9,685 9,369 8,777 8,769 68,391 69,215 86,070 78,417 $ 60,167 $ 29,148 $ (33,626 ) $ 52,959 2011,2013, certain subsidiaries had tax loss carryforwardscarry-forwards of approximately $114,733$121,044 that will expire in various years from 20122014 through 2030, except for $30,070$77,380 for which there is no expiration date.2011,2013, a valuation allowance of $31,713$49,684 was recorded against certain deferred tax assets based on this assessment. The Company believes it is more likely than not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable could be increased or decreased in the future if the Company's assessment of future taxable income or tax planning strategies changes.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 11 – INCOME TAXES (Continued)$3,776a benefitan expense of $505$492 for the year ended December 31, 20112013 and an expense of $312$893 for the year ended December 31, 20102012 for interest and penalties. For those same years, the Company's accrual for interest and penalties related to unrecognized tax benefits totaled $9,039$10,257 and $10,443,$10,295, respectively. 2011 2010 2013 2012 $ 38,393 $ 42,840 $ 25,255 $ 26,656 2,221 1,830 1,990 3,838 3,250 1,163 208 212 – 438 3,528 1,274 (3,424 ) (507 ) (95 ) (940 ) (13,460 ) (4,950 ) (3,491 ) (5,964 ) (324 ) (2,421 ) (1,488 ) 179 $ 26,656 $ 38,393 $ 25,907 $ 25,255 $17,325$13,739 at December 31, 20112013 and $22,925$14,839 at December 31, 2010.a Russianan Indian tax audit for 20082012 - 2010, a German tax audit for 2007 - 2009, a Canadian tax audit for 2003 - 20072013 and an Indonesian tax audit for 2003 and 2005 - 2007.$7,082$4,284 in prior years' unrecognized tax benefits in 2012.2014.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)1213 – DERIVATIVES2011.2011.2013. The Company does not expect any counterparties to fail to meet their obligations.$65,721$36,880 at December 31, 20112013 and $33,221$39,597 at December 31, 2010.2012. The effective portions of the fair value gains or losses on these cash flow hedges are recognized in "AccumulatedAccumulated other comprehensive income"income ("AOCI") and subsequently reclassified to "CostCost of goods sold"sold or "Sales"Sales for hedges of purchases and sales, respectively, as the underlying hedged transactions affected earnings.$161,026$186,158 at December 31, 20112013 and $173,116$189,259 at December 31, 2010.2012. The fair value gains or losses from these contracts are recognized in "Selling,Selling, general and administrative expenses," offsetting the losses or gains on the exposures being hedged.a notional amountamounts of 340,000290,000 troy ounces and 375,000 pounds, respectively, at December 31, 20112013 and 380,000short-term silver and copper forward contracts with notional amounts of 275,000 troy ounces and 375,000 pounds, respectively, at December 31, 2010.2012. Realized and unrealized gains and losses on these contracts were recognized in earnings.Cost of goods sold.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 12 – DERIVATIVES (Continued) December 31, 2011 December 31, 2010 December 31, 2013 December 31, 2012 Other
Current
Assets Other
Current
Liabilities Other
Current
Assets Other
Current
Liabilities $ 801 $ 531 $ 381 $ 728 $ 706 $ 219 $ 352 $ 325 726 1,026 252 1,228 766 228 510 902 1,559 – – 1,051 262 47 731 — $ 3,086 $ 1,557 $ 633 $ 3,007 $ 1,734 $ 494 $ 1,593 $ 1,227 20112013 and 20102012 consisted of the following: Year Ended December 31, Year Ended December 31, Classification of gains (losses) 2011 2010 Classification of gains (losses) 2013 2012 Selling, general & administrative expenses $ 92 $ (1,481 ) Selling, general & administrative expenses $ 215 $ 3,711 Cost of goods sold 1,167 (4,451 ) Cost of goods sold 2,882 (1,117 ) Other income (12 ) (112 ) 20112013 and 20102012 consisted of the following: December 31, 2011 2010 December 31, Total gain recognized in AOCI, net of tax 2013 2012 $ 912 $ (352 ) $ 369 $ 80 $912$369 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized. Year Ended December 31, Year Ended December 31, Gain (loss) reclassified from AOCI to: 2011 2010 Gain (loss) reclassified from AOCI to: 2013 2012 Sales $ (91 ) $ 137 Sales $ 619 $ 931 Cost of goods sold (1,292 ) (720 ) Cost of goods sold 418 234 Cost of goods sold – (1,029 ) Net investment contracts Selling, general & administrative expenses (67 ) — LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)1314 – FAIR VALUE20112013 measured at fair value on a recurring basis: Balance as of
December 31, 2011 Quoted Prices in
Active Markets for
Identical Assets or
Liabilities
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs (Level 3) Balance as of December 31, 2013 $ 1,527 $ – $ 1,527 $ – $ 1,472 $ — $ 1,472 $ — 1,559 – 1,559 – 262 — 262 — $ 3,086 $ – $ 3,086 $ – $ 1,734 $ — $ 1,734 $ — $ 1,557 $ – $ 1,557 $ – $ 447 $ — $ 447 $ — Commodity contracts 47 — 47 — 4,297 – – 4,297 5,375 — — 5,375 14,936 – 14,936 – Forward contract 16,974 — — 16,974 Deferred compensation 20,132 — 20,132 — $ 20,790 $ – $ 16,493 $ 4,297 $ 42,975 $ — $ 20,626 $ 22,349 20102012 measured at fair value on a recurring basis: Balance as of
December 31, 2010 Quoted Prices in
Active Markets for
Identical Assets or
Liabilities
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs (Level 3) Balance as of December 31, 2012 $ 633 $ – $ 633 $ – $ 862 $ — $ 862 $ — Commodity contracts 731 — 731 — Total assets $ 1,593 $ — $ 1,593 $ — $ 1,956 $ – $ 1,956 $ – $ 1,227 $ — $ 1,227 $ — 1,051 – 1,051 – 14,380 – 14,380 – Contingent consideration 4,894 — — 4,894 Deferred compensation 16,882 — 16,882 — $ 17,387 $ – $ 17,387 $ – $ 23,003 $ — $ 18,109 $ 4,894 2011,2013, there were no transfers between Levels 1, 2 or 3.the Arc Productsan acquisition, the Company recorded a contingent consideration fair valued at $3,806 at January 31, 2011 and $4,297 at $5,375 as of December 31, 2011, reflecting $491 of non-cash accretion.2013, which reflects a $481 increase in the liability from December 31, 2012. The contingent consideration is based upon estimated sales for the five-yearfive-year period endingLINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 13 – FAIR VALUE (Continued)five-year period. The fair value of the contingent consideration is considered a Level 3 valuation and is estimatedfair valued using a probability weighted discounted cash flow analysis.liabilityobligation under its executive deferred compensation plan. The Company measures the fair value of the liability using the net assetmarket values of the participants' underlying investment fund elections.20112013 and December 31, 2010.2012. See Note 78 for the fair value estimate of debt.1415 – INVENTORYAn actualThe valuation of the inventory under the LIFO method can beinventories is made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management's estimates of expected year-end inventory levels and costs. Because these estimates are subject to many factors beyond management's control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation. At December 31, 20112013 and 2010,2012, approximately 31%38% and 30%34%, respectively, of total inventories were valued using the LIFO method. The excess of current cost over LIFO cost was $78,292$70,882 at December 31, 20112013 and $70,906$72,173 at December 31, 2010.1516 – LEASESdata processinginformation technology equipment. Such leases, some of which are noncancelable and, in many cases, include renewals, expire at various dates. The Company pays most insurance, maintenance and taxes relating to leased assets. Rental expense was $15,221$18,642 in 2011, $14,1552013, $17,751 in 20102012 and $14,275$15,221 in 2009.2011.2011,2013, total future minimum lease payments for noncancelable operating leases were $10,620$13,263 in 2012, $7,7202014, $10,391 in 2013, $5,4432015, $8,240 in 2014, $3,8392016, $5,637 in 2015, $3,3302017, $4,071 in 20162018 and $5,264$6,568 thereafter.LINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 15 – LEASES (Continued) December 31, December 31, 2011 2010 2013 2012 $ 6,236 $ 6,449 $ 461 $ 441 179 984 110 209 (2,494 ) (2,134 ) (100 ) (163 ) $ 3,921 $ 5,299 $ 471 $ 487 1617 – CONTINGENCIESand manganese induced illnesses. The claimants in the asbestos and manganese cases seek compensatory and punitive damages, in most cases for unspecified amounts. The Company believes it has meritorious defenses to these claims and intends to contest such suits vigorously.primarily for product liability claims, was $11,312$2,735 as of December 31, 20112013 and $5,711$5,636 as of December 31, 2010.2012. The accrual is included in "OtherOther current liabilities." also recognizedaccrues its best estimate of the probable costs, after a review of the facts with management and counsel and taking into account past experience. If an assetunfavorable outcome is determined to be reasonably possible but not probable, or if the amount of loss cannot be reasonably estimated, disclosure is provided for recoveries from insurance carriers relatedmaterial claims or litigation. Many of the current cases are in differing procedural stages and information on the circumstances of each claimant, which forms the basis for judgments as to the insured claims outstandingvalidity or ultimate disposition of $4,516such actions, varies greatly. Therefore, in many situations a range of possible losses cannot be made. Reserves are adjusted as of December 31, 2011facts and $1,616 as of December 31, 2010. The asset is included in "Other current assets." The increase in the accrual for contingent liabilitiescircumstances change and related recoveries from insurance carriers is due to an agreement the Company entered into in January 2012 with its co-defendants and plaintiffs' counsel that provides for the dismissal with prejudice of substantially allmanagement assessments of the pending manganeseunderlying merits and the likelihood of outcomes change. Moreover, reserves only cover identified and/or asserted claims.1718 – PRODUCT WARRANTY COSTS the carrying amount of product warranty accruals for 2011, 20102013, 2012 and 20092011 were as follows: December 31, December 31, 2011 2010 2009 2013 2012 2011 $ 16,879 $ 16,768 $ 13,736 $ 15,304 $ 15,781 $ 16,879 10,395 11,406 11,359 12,786 10,872 10,395 (11,260 ) (11,065 ) (8,718 ) (12,794 ) (11,477 ) (11,260 ) (233 ) (230 ) 391 (116 ) 128 (233 ) $ 15,781 $ 16,879 $ 16,768 $ 15,180 $ 15,304 $ 15,781 1819 – QUARTERLY FINANCIAL DATA (UNAUDITED) First Second Third Fourth First Second Third Fourth 2013 $ 599,179 $ 699,293 $ 701,624 $ 694,513 $ 718,573 $ 727,432 $ 691,875 $ 714,791 161,438 195,504 185,452 194,343 226,572 240,338 232,697 243,047 60,537 81,494 75,873 83,427 90,679 106,534 97,840 121,388 46,910 57,013 55,530 57,733 66,806 72,606 66,044 88,324 $ 0.56 $ 0.69 $ 0.66 $ 0.69 $ 0.81 $ 0.88 $ 0.81 $ 1.09 $ 0.55 $ 0.68 $ 0.66 $ 0.68 $ 0.80 $ 0.87 $ 0.80 $ 1.07 2012 $ 470,958 $ 515,584 $ 519,338 $ 564,292 $ 727,122 $ 744,045 $ 697,552 $ 684,648 123,333 148,583 144,071 147,832 215,265 224,997 213,362 213,032 34,741 51,572 48,819 51,976 92,919 98,157 90,889 87,605 23,728 32,540 32,473 41,503 64,243 66,319 64,765 62,084 $ 0.28 $ 0.38 $ 0.39 $ 0.49 $ 0.77 $ 0.80 $ 0.78 $ 0.75 $ 0.28 $ 0.38 $ 0.38 $ 0.49 $ 0.76 $ 0.79 $ 0.77 $ 0.74 June 30, 2011December 31, 2013 includes rationalization and asset impairment net gains of $75 ($44 after-tax) primarily related to the gain on sale of assets at rationalized operations in the Asia Pacific Welding segment resulting from actions initiated in 2009.The quarter ended March 31, 2011 includes rationalization and asset impairment net charges of $357$259 ($281223 after-tax) primarily related to employee severance and other costs associated with the consolidation of manufacturing operations in theNorth America Welding, Europe Welding and Asia Pacific Welding segments resulting from actions initiated in 2009 and a gaincharge of $4,844$705 related to a favorable adjustment for tax audit settlements in the North America Welding segment.The quarter ended December 31, 2010 includes a rationalization net charge of $1,788 ($1,697 after-tax) for costs associated with the consolidation of manufacturing operations initiated in 2009 and related asset impairment charges of $387 ($305 after-tax) offset by gainsloss on the disposalsale of assets at rationalized operations, a gain of $108 after-tax in noncontrolling interests related to the impairment ofLINCOLN ELECTRIC HOLDINGS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Dollars in thousands, except per share amounts)NOTE 18 – QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)assets for a majority-owned consolidated subsidiaryland in the Asia Pacific Welding segment and incomesegment. Associated with the loss on the sale of $5,092 recognized dueland is a charge of $47 attributable to an adjustment in tax liabilities for a change in applicable tax regulations in the Asia Pacific Welding segment.20102013 includes rationalization net gains of $227 ($231 after-tax) primarily related to the costs associated with the consolidation of manufacturing operations initiated in 2009 and related asset impairment charges of $496 ($496 after-tax) offset by gains on the disposal of assets at rationalized operations, a charge of $815 ($815 after-tax) in Cost of goods sold related to the change in functional currency for the Company's operation in Venezuela to the U.S. dollar and devaluation of the Venezuelan currency and a charge of $44 after-tax in noncontrolling interests associated with gains recognized on the disposal of assets for a majority-owned consolidated subsidiary.The quarter ended June 30, 2010 includes rationalization net gains of $3,629 ($3,773 after-tax) primarily related to gains on the sale of assets at rationalized operations in the Europe Welding and Asia Pacific Welding segments, a charge of $2,319 ($2,319 after-tax) in Cost of goods sold for the South America Welding segment related to the change in functional currency for the Company's operation in Venezuela to the U.S. dollar and devaluation of the Venezuelan currency and a charge of $1,846 after-tax in noncontrolling interests associated with the rationalization gain for a majority-owned consolidated subsidiary.The quarter ended March 31, 2010 includes rationalization net charges of $801$1,627 ($6121,595 after-tax) primarily related to employee severance and other costs associated with the consolidation of manufacturing operations in theNorth America Welding, Europe Welding and Asia Pacific Welding segments resulting from actions initiated in 2009 and a net gain of $11 (a net charge of $426$4,675 ($4,503 after-tax) forrelated to impairment of long-lived assets in the Asia Pacific Welding segment. Associated with impairment of long-lived assets is a charge of $1,021 attributable to non-controlling interests.segmentsegment.functional currency for the Company's subsidiary in Venezuela to the U.S. dollar and devaluation of the Venezuelan currency.(EPS)("EPS") amounts are each calculated independently. Therefore, the sum of the quarterly EPS amounts may not equal the annual totals. Additions Balance at
Beginning
of Period Charged to
Costs and
Expenses (1)
Charged to
Other
Accounts (2)
Deductions Balance at End of Period $ 7,855 $ 2,173 $ (303 ) $ 2,646 $ 7,079 8,174 3,146 (425 ) 3,040 7,855 7,673 2,685 368 2,552 8,174 Additions Description Balance at End of Period Allowance for doubtful accounts: Year Ended December 31, 2013 $ 8,654 $ 2,671 $ 49 $ 2,976 $ 8,398 Year Ended December 31, 2012 7,079 3,368 68 1,861 8,654 Year Ended December 31, 2011 7,855 2,173 (303 ) 2,646 7,079 (1) Currency translation adjustment. (2) Uncollectible accounts written-off, net of recoveries. (1)Currency translation adjustment.(2)Uncollectible accounts written-off, net of recoveries.