UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~September 30, 2020

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

For the transition period from _____________ to _____________

Commission File Number: 0-1402

LINCOLN ELECTRIC HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



Ohio						34-1860551
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

22801 St. Clair Avenue, Cleveland,Ohio 44117

~~(Address~~ (Address of principal executive offices) (Zip Code)

(216) 481-8100

(Registrant's telephone number, including area code)


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

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



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

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

Yes ý No ☐

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

Yes ý No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

☐

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

Yes ☐ No ý

The number of shares outstanding of the registrant’s common shares as of ~~June~~September 30, 2020 was ~~59,366,551.~~59,470,712.

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)		3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)		4
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)		5
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)		6
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)		8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3. Quantitative and Qualitative Disclosures About Market Risk		35
Item 4. Controls and Procedures		35

PART II. OTHER INFORMATION		36
Item 1. Legal Proceedings		36
Item 1A. Risk Factors		36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3736
Item 4. Mine Safety Disclosures		3736
Item 6. Exhibits		3736
Signatures		38
~~EX-31.1~~EX-10.1	Amendment No. 1 to 2005 Deferred Compensation Plan for Executives (Amended and Restated as of January 1, 2018) dated August 1, 2020 (filed herewith).
EX-10.2	Amendment No. 1 to Non-Employee Directors' Deferred Compensation Plan (Amended and Restated as of January 1, 2019) dated August 1, 2020 (filed herewith).
EX-10.3	Amendment No. 1 to The Lincoln Electric Company Restoration Plan dated August 1, 2020 (filed herewith).
EX-10.4	Amendment No. 2 to Supplemental Executive Retirement Plan (As Amended and Restated as of December 31, 2008) dated August 1, 2020 (filed herewith).
EX-10.5	Amendment No. 1 to Form of Change in Control Severance Agreement (as entered into by the Company and its executive officers) dated August 1, 2020 (filed herewith).
EX-31.1	Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
EX-31.2	Certification of the Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
EX-32.1	Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-101	Instance Document
EX-101	Schema Document
EX-101	Calculation Linkbase Document
EX-101	Label Linkbase Document
EX-101	Presentation Linkbase Document
EX-101	Definition Linkbase Document

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(In thousands, except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020		2019				2020		2019		2020		2019
Net sales (Note 2)	$	590,727		$	777,008		$	1,292,718	$	1,536,182		Net sales (Note 2)	$	668,888	$	730,783	$	1,961,606	$	2,266,965
Cost of goods sold	401,349			507,127			866,018		1,007,880			Cost of goods sold	453,501		492,432		1,319,519		1,500,312
Gross profit	189,378			269,881			426,700		528,302			Gross profit	215,387		238,351		642,087		766,653
Selling, general & administrative expenses	126,376			163,388			276,103		323,796			Selling, general & administrative expenses	131,337		148,312		407,440		472,108
Rationalization and asset impairment charges (Note 6)	23,238			1,307			29,759		4,842			Rationalization and asset impairment charges (Note 6)	6,257		1,495		36,016		6,337

Operating income	39,764			105,186			120,838		199,664			Operating income	77,793		88,544		198,631		288,208
Interest expense, net	5,881			5,898			11,339		11,221			Interest expense, net	5,552		6,400		16,891		17,621
Other income (expense) (Note 14)	(203		)	4,196			106		7,959			Other income (expense) (Note 14)	1,062		9,653		1,168		17,612

Income before income taxes	33,680			103,484			109,605		196,402			Income before income taxes	73,303		91,797		182,908		288,199
Income taxes (Note 15)	6,667			18,040			27,037		39,492			Income taxes (Note 15)	14,797		19,340		41,834		58,832
Net income including non-controlling interests	27,013			85,444			82,568		156,910			Net income including non-controlling interests	58,506		72,457		141,074		229,367
Non-controlling interests in subsidiaries’ income (loss)	17			(8		)	10		(22		)	Non-controlling interests in subsidiaries’ income (loss)	27		(4)		37		(26)
Net income	$	26,996		$	85,452		$	82,558	$	156,932		Net income	$	58,479	$	72,461	$	141,037	$	229,393

Basic earnings per share (Note 3)	$	0.45		$	1.37		$	1.38	$	2.50		Basic earnings per share (Note 3)	$	0.98	$	1.18	$	2.36	$	3.68
Diluted earnings per share (Note 3)	$	0.45		$	1.36		$	1.37	$	2.47		Diluted earnings per share (Note 3)	$	0.97	$	1.17	$	2.34	$	3.64
Cash dividends declared per share	$	0.49		$	0.47		$	0.98	$	0.94		Cash dividends declared per share	$	0.49	$	0.47	$	1.47	$	1.41

See notes to these consolidated financial statements.

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands)


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019				2020		2019		2020		2019
Net income including non-controlling interests	$	27,013		$	85,444		$	82,568		$	156,910		Net income including non-controlling interests	$	58,506	$	72,457	$	141,074	$	229,367
Other comprehensive income (loss), net of tax:													Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $317 and $(399) in the three and six months ended June 30, 2020; $(117) and $(60) in the three and six months ended June 30, 2019.	1,108			(301		)	(1,261		)	28
Defined benefit pension plan activity, net of tax of $(7,691) and $(7,527) in the three and six months ended June 30, 2020; $(90) and $137 in the three and six months ended June 30, 2019.	(23,036		)	1,091			(22,427		)	1,878
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $337 and $(62) in the three and nine months ended September 30, 2020; $(66) and $(121) in the three and nine months ended September 30, 2019.													Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $337 and $(62) in the three and nine months ended September 30, 2020; $(66) and $(121) in the three and nine months ended September 30, 2019.	639		(348)		(622)		(320)
Defined benefit pension plan activity, net of tax of $(776) and $(8,303) in the three and nine months ended September 30, 2020; $536 and $673 in the three and nine months ended September 30, 2019.													Defined benefit pension plan activity, net of tax of $(776) and $(8,303) in the three and nine months ended September 30, 2020; $536 and $673 in the three and nine months ended September 30, 2019.	(1,304)		613		(23,731)		2,491
Currency translation adjustment	14,468			4,849			(56,140		)	9,985			Currency translation adjustment	13,039		(24,025)		(43,101)		(14,040)
Other comprehensive income (loss):	(7,460		)	5,639			(79,828		)	11,891			Other comprehensive income (loss):	12,374		(23,760)		(67,454)		(11,869)
Comprehensive income	19,553			91,083			2,740			168,801			Comprehensive income	70,880		48,697		73,620		217,498
Comprehensive income (loss) attributable to non-controlling interests	—			(43		)	(48		)	(20		)	Comprehensive income (loss) attributable to non-controlling interests	62		254		14		234
Comprehensive income attributable to shareholders	$	19,553		$	91,126		$	2,788		$	168,821		Comprehensive income attributable to shareholders	$	70,818	$	48,443	$	73,606	$	217,264

See notes to these consolidated financial statements.

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	June 30, 2020			December 31, 2019				September 30, 2020		December 31, 2019
	(UNAUDITED)			(NOTE 1)				(UNAUDITED)		(NOTE 1)
ASSETS							ASSETS
Current Assets							Current Assets
Cash and cash equivalents	$	143,055		$	199,563		Cash and cash equivalents	$	152,479	$	199,563
Accounts receivable (less allowance for doubtful accounts of $16,428 in 2020; $16,002 in 2019)	339,102			374,649
Accounts receivable (less allowance for doubtful accounts of $15,657 in 2020; $16,002 in 2019)							Accounts receivable (less allowance for doubtful accounts of $15,657 in 2020; $16,002 in 2019)	373,044		374,649

Inventories (Note 9)	417,525			393,748			Inventories (Note 9)	396,214		393,748

Other current assets	108,097			107,621			Other current assets	104,474		107,621
Total Current Assets	1,007,779			1,075,581			Total Current Assets	1,026,211		1,075,581
Property, plant and equipment (less accumulated depreciation of $837,077 in 2020; $825,769 in 2019)	502,249			529,344

Property, plant and equipment (less accumulated depreciation of $858,288 in 2020; $825,769 in 2019)							Property, plant and equipment (less accumulated depreciation of $858,288 in 2020; $825,769 in 2019)	504,520		529,344

Goodwill	328,622			337,107			Goodwill	331,473		337,107
Other assets	360,389			429,181			Other assets	355,295		429,181
TOTAL ASSETS	$	2,199,039		$	2,371,213		TOTAL ASSETS	$	2,217,499	$	2,371,213

LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current Liabilities							Current Liabilities
Short-term debt (Note 12)	$	49,597		$	34,969		Short-term debt (Note 12)	$	1,147	$	34,969
Trade accounts payable	226,799			273,002			Trade accounts payable	226,494		273,002
Accrued employee compensation and benefits	99,543			83,033			Accrued employee compensation and benefits	121,967		83,033
Other current liabilities	192,632			172,131			Other current liabilities	183,553		172,131

Total Current Liabilities	568,571			563,135			Total Current Liabilities	533,161		563,135
Long-term debt, less current portion (Note 12)	715,817			712,302			Long-term debt, less current portion (Note 12)	715,687		712,302
Other liabilities	254,540			276,699			Other liabilities	257,907		276,699
Total Liabilities	1,538,928			1,552,136			Total Liabilities	1,506,755		1,552,136

Shareholders’ Equity							Shareholders’ Equity
Common shares	9,858			9,858			Common shares	9,858		9,858
Additional paid-in capital	394,692			389,446			Additional paid-in capital	404,086		389,446
Retained earnings	2,762,833			2,736,481			Retained earnings	2,790,579		2,736,481
Accumulated other comprehensive loss	(355,620		)	(275,850		)	Accumulated other comprehensive loss	(343,281)		(275,850)
Treasury shares	(2,152,509		)	(2,041,763		)	Treasury shares	(2,151,417)		(2,041,763)
Total Shareholders’ Equity	659,254			818,172			Total Shareholders’ Equity	709,825		818,172
Non-controlling interests	857			905			Non-controlling interests	919		905
Total Equity	660,111			819,077			Total Equity	710,744		819,077

TOTAL LIABILITIES AND TOTAL EQUITY	$	2,199,039		$	2,371,213		TOTAL LIABILITIES AND TOTAL EQUITY	$	2,217,499	$	2,371,213

See notes to these consolidated financial statements.

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)


	Common Shares Outstanding	Common Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Shares		Non-controlling Interests		Total
Balance at December 31, 2019	60,592	$	9,858	$	389,446	$	2,736,481	$	(275,850)	$	(2,041,763)	$	905	$	819,077
Net income						55,562						(7)		55,555
Unrecognized amounts from defined benefit pension plans, net of tax								609						609
Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax								(2,369)						(2,369)
Currency translation adjustment								(70,567)				(41)		(70,608)
Cash dividends declared – $0.49 per share						(29,280)								(29,280)
Stock-based compensation activity	152			2,826						1,912				4,738
Purchase of shares for treasury	(1,357)									(109,762)				(109,762)
Other				(5,176)		5,176								0
Balance at March 31, 2020	59,387	$	9,858	$	387,096	$	2,767,939	$	(348,177)	$	(2,149,613)	$	857	$	667,960
Net income						26,996						17		27,013
Unrecognized amounts from defined benefit pension plans, net of tax								(23,036)						(23,036)
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax								1,108						1,108
Currency translation adjustment								14,485				(17)		14,468
Cash dividends declared – $0.49 per share						(29,260)								(29,260)
Stock-based compensation activity	25			4,754						317				5,071
Purchase of shares for treasury	(45)									(3,213)				(3,213)
Other				2,842		(2,842)								0
Balance at June 30, 2020	59,367	$	9,858	$	394,692	$	2,762,833	$	(355,620)	$	(2,152,509)	$	857	$	660,111
Net income						58,479						27		58,506
Unrecognized amounts from defined benefit pension plans, net of tax								(1,304)						(1,304)
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax								639						639
Currency translation adjustment								13,004				35		13,039
Cash dividends declared – $0.49 per share						(29,326)								(29,326)
Stock-based compensation activity	106			8,493						1,315				9,808
Purchase of shares for treasury	(2)									(223)				(223)
Other				901		(1,407)								(506)

Balance at September 30, 2020	59,471	$	9,858	$	404,086	$	2,790,579	$	(343,281)	$	(2,151,417)	$	919	$	710,744

Common
Shares
Outstanding

Common
Shares

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Treasury
Shares

Non-controlling
Interests
Total
Balance at December 31, 2019 60,592
$ 9,858
$ 389,446
$ 2,736,481
$ (275,850 ) $ (2,041,763 ) $ 905
$ 819,077
Net income 55,562
(7 ) 55,555
Unrecognized amounts from defined benefit pension plans, net of tax 609
609
Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax (2,369 ) (2,369 )
Currency translation adjustment (70,567 ) (41 ) (70,608 )
Cash dividends declared – $0.49 per share (29,280 ) (29,280 )
Stock-based compensation activity 152
2,826
1,912
4,738
Purchase of shares for treasury (1,357 ) (109,762 ) (109,762 )
Other (5,176 ) 5,176
—
Balance at March 31, 2020 59,387
$ 9,858
$ 387,096
$ 2,767,939
$ (348,177 ) $ (2,149,613 ) $ 857
$ 667,960
Net income 26,996
17
27,013
Unrecognized amounts from defined benefit pension plans, net of tax (23,036 ) (23,036 )
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax 1,108
1,108
Currency translation adjustment 14,485
(17 ) 14,468
Cash dividends declared – $0.49 per share (29,260 ) (29,260 )
Stock-based compensation activity 25
4,754

317
5,071
Purchase of shares for treasury (45 )
(3,213 ) (3,213 )
Other 2,842
(2,842 )

—
Balance at June 30, 2020 59,367
$ 9,858
$ 394,692
$ 2,762,833
$ (355,620 ) $ (2,152,509 ) $ 857
$ 660,111

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)


	Common Shares Outstanding	Common Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Shares		Non-controlling Interests		Total
Balance at December 31, 2018	63,546	$	9,858	$	360,308	$	2,564,440	$	(293,739)	$	(1,753,925)	$	650	$	887,592
Net income						71,480						(14)		71,466
Unrecognized amounts from defined benefit pension plans, net of tax								787						787
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax								329						329
Currency translation adjustment								5,099				37		5,136
Cash dividends declared – $0.47 per share						(29,847)								(29,847)
Stock-based compensation activity	148			3,302						1,484				4,786
Purchase of shares for treasury	(894)									(75,584)				(75,584)
Other				808		(808)								0
Balance at March 31, 2019	62,800	$	9,858	$	364,418	$	2,605,265	$	(287,524)	$	(1,828,025)	$	673	$	864,665
Net income						85,452						(8)		85,444
Unrecognized amounts from defined benefit pension plans, net of tax								1,091						1,091
Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax								(301)						(301)
Currency translation adjustment								4,884				(35)		4,849
Cash dividends declared – $0.47 per share						(29,279)								(29,279)
Stock-based compensation activity	13			4,783						136				4,919
Purchase of shares for treasury	(1,034)									(85,330)				(85,330)
Other				(282)		282								0
Balance at June 30, 2019	61,779	$	9,858	$	368,919	$	2,661,720	$	(281,850)	$	(1,913,219)	$	630	$	846,058
Net income						72,461						(4)		72,457
Unrecognized amounts from defined benefit pension plans, net of tax								613						613
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax								(348)						(348)
Currency translation adjustment								(24,283)				258		(24,025)
Cash dividends declared – $0.47 per share						(28,931)								(28,931)
Stock-based compensation activity	107			7,996						1,111				9,107
Purchase of shares for treasury	(737)									(61,028)				(61,028)
Other				669		(764)								(95)

Balance at September 30, 2019	61,149	$	9,858	$	377,584	$	2,704,486	$	(305,868)	$	(1,973,136)	$	884	$	813,808

Common
Shares
Outstanding

Common
Shares

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Treasury
Shares

Non-controlling
Interests
Total
Balance at December 31, 2018 63,546
$ 9,858
$ 360,308
$ 2,564,440
$ (293,739 ) $ (1,753,925 ) $ 650
$ 887,592
Net income 71,480

(14 ) 71,466
Unrecognized amounts from defined benefit pension plans, net of tax 787
787
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax 329
329
Currency translation adjustment 5,099
37
5,136
Cash dividends declared – $0.47 per share (29,847 ) (29,847 )
Stock-based compensation activity 148
3,302
1,484
4,786
Purchase of shares for treasury (894 ) (75,584 ) (75,584 )
Other 808
(808 )

—
Balance at March 31, 2019 62,800
$ 9,858
$ 364,418
$ 2,605,265
$ (287,524 ) $ (1,828,025 ) $ 673
$ 864,665
Net income 85,452
(8 ) 85,444
Unrecognized amounts from defined benefit pension plans, net of tax 1,091
1,091
Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax (301 ) (301 )
Currency translation adjustment 4,884
(35 ) 4,849
Cash dividends declared – $0.47 per share (29,279 ) (29,279 )
Stock-based compensation activity 13
4,783
136
4,919
Purchase of shares for treasury (1,034 ) (85,330 ) (85,330 )
Other (282 ) 282
—
Balance at June 30, 2019 61,779
$ 9,858
$ 368,919
$ 2,661,720
$ (281,850 ) $ (1,913,219 ) $ 630
$ 846,058

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Six Months Ended June 30,							Nine Months Ended September 30,
	2020			2019				2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES							CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	82,558		$	156,932		Net income	$	141,037	$	229,393
Non-controlling interests in subsidiaries’ income (loss)	10			(22		)	Non-controlling interests in subsidiaries’ income (loss)	37		(26)
Net income including non-controlling interests	82,568			156,910			Net income including non-controlling interests	141,074		229,367
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:							Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
Rationalization and asset impairment net charges (Note 6)	21,905			1,069			Rationalization and asset impairment net charges (Note 6)	21,927		1,069

Depreciation and amortization	41,078			39,252			Depreciation and amortization	60,566		60,400
Equity earnings in affiliates, net	(243		)	(1,217		)	Equity earnings in affiliates, net	(323)		(1,266)
Deferred income taxes	(10,636		)	2,674			Deferred income taxes	(10,143)		4,045
Stock-based compensation	7,807			8,745			Stock-based compensation	11,656		12,602

Gain on change in control							Gain on change in control	0		(7,601)
Other, net	(2,459		)	(5,700		)	Other, net	(4,283)		(7,362)
Changes in operating assets and liabilities, net of effects from acquisitions:							Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease (increase) in accounts receivable	23,666			(21,271		)
(Increase) decrease in accounts receivable							(Increase) decrease in accounts receivable	(6,851)		24,103
Increase in inventories	(30,378		)	(27,767		)	Increase in inventories	(3,430)		(36,476)
Decrease in other current assets	3,241			11,135			Decrease in other current assets	8,027		3,227
Decrease in trade accounts payable	(40,115		)	(15,469		)	Decrease in trade accounts payable	(42,333)		(34,202)
Increase in other current liabilities	29,169			2,812			Increase in other current liabilities	38,615		31,113
Net change in other assets and liabilities	410			812			Net change in other assets and liabilities	1,059		1,647
NET CASH PROVIDED BY OPERATING ACTIVITIES	126,013			151,985			NET CASH PROVIDED BY OPERATING ACTIVITIES	215,561		280,666

CASH FLOWS FROM INVESTING ACTIVITIES							CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(25,011		)	(36,513		)	Capital expenditures	(37,116)		(53,551)
Acquisition of businesses, net of cash acquired	—			(107,843		)	Acquisition of businesses, net of cash acquired	0		(136,735)
Proceeds from sale of property, plant and equipment	6,218			8,712			Proceeds from sale of property, plant and equipment	6,957		9,491

Other investing activities	—			2,000			Other investing activities	0		2,000
NET CASH USED BY INVESTING ACTIVITIES	(18,793		)	(133,644		)	NET CASH USED BY INVESTING ACTIVITIES	(30,159)		(178,795)

CASH FLOWS FROM FINANCING ACTIVITIES							CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings	40			—

Payments on short-term borrowings	(1,752		)	—			Payments on short-term borrowings	(3,504)		0
Amounts due banks, net	16,818			29,982			Amounts due banks, net	(29,619)		2,439

Payments on long-term borrowings	(11		)	(5		)	Payments on long-term borrowings	(12)		(6)
Proceeds from exercise of stock options	2,002			960			Proceeds from exercise of stock options	7,961		6,210

Purchase of shares for treasury (Note 8)	(112,975		)	(160,914		)	Purchase of shares for treasury (Note 8)	(113,198)		(221,942)
Cash dividends paid to shareholders	(59,814		)	(60,101		)	Cash dividends paid to shareholders	(88,945)		(89,162)

NET CASH USED BY FINANCING ACTIVITIES	(155,692		)	(190,078		)	NET CASH USED BY FINANCING ACTIVITIES	(227,317)		(302,461)

Effect of exchange rate changes on Cash and cash equivalents	(8,036		)	2,749			Effect of exchange rate changes on Cash and cash equivalents	(5,169)		(1,647)
DECREASE IN CASH AND CASH EQUIVALENTS	(56,508		)	(168,988		)	DECREASE IN CASH AND CASH EQUIVALENTS	(47,084)		(202,237)

Cash and cash equivalents at beginning of period	199,563			358,849			Cash and cash equivalents at beginning of period	199,563		358,849
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	143,055		$	189,861		CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	152,479	$	156,612

See notes to these consolidated financial statements.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

As used in this report, the term “Company,” except as otherwise indicated by the context, means Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest.

The consolidated financial statements include the accounts of all legal entities in which the Company holds a controlling interest. The Company is also considered to have a controlling interest in a variable interest entity (“VIE”) if the Company determines it is the primary beneficiary of the VIE. Investments in legal entities in which the Company does not own a majority interest but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. However, in the opinion of management, these unaudited consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the ~~six~~nine months ended~~June~~ September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020~~.2020.

The accompanying Consolidated Balance Sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~.2019.

COVID-19 Assessment

In March 2020, the World Health Organization categorized the current coronavirus disease (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. COVID-19 continues to spread throughout the United States and other countries across the world, and the ultimate duration and severity on the Company's business remains unknown. New and changing government actions to address the COVID-19 pandemic continue to ~~occur on a regular basis.~~occur. As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions may have ~~had~~ to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although ~~many~~most of the Company’s customers have ~~begun to re-open or increase~~re-opened and increased operating levels, such customers may be forced to close or limit operations as any new COVID-19 outbreaks occur. Even as government restrictions are lifted and economies ~~gradually~~ reopen, the ultimate shape of the economic recovery is uncertain and may continue to negatively impact the Company's results of operations, cash flows and financial position in subsequent quarters. Given this current level of economic and operational uncertainty over the impacts of COVID-19, the ultimate financial impact cannot be reasonably estimated at this time. The Company’s consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. Such estimates and assumptions affect, among other things, the Company’s goodwill, long-lived asset and indefinite-lived intangible asset valuation; inventory valuation; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; the allowance for doubtful accounts; measurement of compensation cost for certain share-based awards and cash bonus plans; and pension plan assumptions. Events and changes in circumstances arising after ~~June~~September 30, 2020, including those resulting from the continued impacts of COVID-19, will be reflected in management’s estimates for future periods.

New Accounting Pronouncements:

This section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.

~~The following ASUs were adopted as of January 1,~~ ~~2020, unless otherwise noted below:~~

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following ASUs were adopted as of January 1, 2020, unless otherwise noted below:

Standard

Description

ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), issued August 2018.

ASU 2018-14 modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU also requires an entity to disclose the weighted-average interest crediting rates for cash balance plans and to explain the reasons for significant gains and losses related to changes in the benefit obligation. These disclosure requirements will be reflected in the Notes to the consolidated financial statements in the Company's Form 10-K for the year ended December 31, ~~2020 Form 10-K.~~2020.

ASU No. 2018-13, Fair Value Measurement (Topic 944), issued August 2018.

ASU 2018-13 eliminates, amends and adds disclosure requirements related to fair value measurements. The ASU removes disclosure requirements pertaining to the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. Refer to Note 17 to the consolidated financial statements for further details.

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), issued June 2016.

ASU 2016-13 modifies disclosure and measurement requirements related to credit losses. Topic 326 requires that an entity estimate impairment of trade receivables based on expected losses rather than incurred losses. The adoption did not have a material impact on the Company's consolidated financial statements.

ASU No. 2020-04, Reference Rate Reform (Topic 848), issued March 2020.

ASU 2020-04 provides temporary optional guidance to ease the financial reporting burden associated with the expected market transition from the London Inter-Bank Offer Rate ("LIBOR") to alternative reference rates. The Company adopted the ASU on March 12, 2020 and it is effective through December 31, 2022. As of ~~June~~September 30, 2020, the Company has not utilized any of the optional ~~guidance,~~guidance; however, it will continue to assess the potential impact on the Company’s debt contracts and hedging relationships through the effective period.

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



Standard			Description
ASU No. 2019-12, Income Taxes (Topic 740), issued December 2019.			ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The ASU is effective January 1, 2021 and early adoption is permitted.

NOTE 2 — REVENUE RECOGNITION

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

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Consumables $ 333,671
$ 444,850
$ 739,511
$ 887,808
Equipment 257,056
332,158
553,207
648,374
Net sales $ 590,727
$ 777,008
$ 1,292,718
$ 1,536,182


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Consumables	$	379,177	$	420,980	$	1,118,688	$	1,308,788
Equipment	289,711		309,803		842,918		958,177
Net sales	$	668,888	$	730,783	$	1,961,606	$	2,266,965

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

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

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

At ~~June~~September 30, 2020, the Company recorded ~~$14,136~~$15,749 related to advance customer payments and ~~$12,754~~$14,090 related to billings in excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Condensed Consolidated Balance Sheets. At December 31, 2019, the balances related to advance customer payments and billings in excess of revenue recognized were $16,040 and $16,274, respectively. Substantially all of the Company’s contract liabilities are recognized within twelve months based on contract duration. The Company records an asset for contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services. At ~~June~~September 30, 2020 and December 31, 2019, ~~$34,817~~$29,688 and $33,566, respectively, related to these future customer receivables was included in Other current assets in the Condensed Consolidated Balance Sheets. Contract asset amounts are expected to be billed within the next twelve months.

NOTE 3 — EARNINGS PER SHARE

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

Three months ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Numerator:

Net income $ 26,996
$ 85,452
$ 82,558
$ 156,932
Denominator (shares in 000's):

Basic weighted average shares outstanding 59,354
62,305
59,769
62,733
Effect of dilutive securities - Stock options and awards 477
665
531
686
Diluted weighted average shares outstanding 59,831
62,970
60,300
63,419
Basic earnings per share $ 0.45
$ 1.37
$ 1.38
$ 2.50
Diluted earnings per share $ 0.45
$ 1.36
$ 1.37
$ 2.47


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator:
Net income	$	58,479	$	72,461	$	141,037	$	229,393
Denominator (shares in 000's):
Basic weighted average shares outstanding	59,426		61,380		59,655		62,282
Effect of dilutive securities - Stock options and awards	592		681		547		690
Diluted weighted average shares outstanding	60,018		62,061		60,202		62,972
Basic earnings per share	$	0.98	$	1.18	$	2.36	$	3.68
Diluted earnings per share	$	0.97	$	1.17	$	2.34	$	3.64

For the three months ended ~~June~~September 30, 2020 and 2019, common shares subject to equity-based awards of ~~852,159~~557,198 and 548,049, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. For the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, common shares subject to equity-based awards of ~~779,404~~547,329 and ~~346,168~~,514,402, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

During July 2019, the Company acquired the controlling stake of Kaynak Tekniği Sanayi ve Ticaret A.Ş. (“Askaynak”). Askaynak, based in Turkey, is a supplier and manufacturer of welding consumables, arc welding equipment, including plasma and oxy-fuel cutting equipment and robotic welding systems. The acquisition ~~advances~~advanced the Company's regional growth strategy in Europe, the Middle East and Africa.

During April 2019, the Company acquired Baker Industries, Inc. ("Baker"). Baker, based in Detroit, Michigan, is a provider of custom tooling, parts and fixtures primarily serving automotive and aerospace markets. The acquisition ~~compliments~~complimented the Company's automation portfolio and its metal additive manufacturing service business.

Pro forma information related to the acquisitions discussed above has not been presented because the impact on the Company’s Consolidated Statements of Income is not material. Acquired companies are included in the Company's consolidated financial statements as of the date of acquisition.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 5 — SEGMENT INFORMATION

The Company's business units are aligned into 3 operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global oxy-fuel cutting, soldering and brazing businesses as well as its retail business in the United States.

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

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following table presents Adjusted EBIT by segment:


	Americas Welding		International Welding		The Harris Products Group		Corporate / Eliminations		Consolidated
Three Months Ended September 30, 2020
Net sales	$	371,535	$	196,937	$	100,416	$	0	$	668,888
Inter-segment sales	29,368		4,898		1,898		(36,164)		0
Total	$	400,903	$	201,835	$	102,314	$	(36,164)	$	668,888

Adjusted EBIT	$	59,120	$	13,432	$	17,587	$	(1,839)	$	88,300
Special items charge (gain) ⁽¹⁾	7,044		2,401		0		0		9,445
EBIT	$	52,076	$	11,031	$	17,587	$	(1,839)	$	78,855
Interest income									293
Interest expense									(5,845)
Income before income taxes									$	73,303
Three Months Ended September 30, 2019
Net sales	$	443,521	$	205,378	$	81,884	$	0	$	730,783
Inter-segment sales	31,101		4,441		1,857		(37,399)		0
Total	$	474,622	$	209,819	$	83,741	$	(37,399)	$	730,783

Adjusted EBIT	$	74,110	$	10,184	$	11,038	$	(1,632)	$	93,700
Special items charge (gain) ⁽²⁾	0		(4,497)		0		0		(4,497)
EBIT	$	74,110	$	14,681	$	11,038	$	(1,632)	$	98,197
Interest income									491
Interest expense									(6,891)
Income before income taxes									$	91,797
Nine Months Ended September 30, 2020
Net sales	$	1,123,299	$	572,027	$	266,280	$	0	$	1,961,606
Inter-segment sales	81,644		13,667		5,376		(100,687)		0
Total	$	1,204,943	$	585,694	$	271,656	$	(100,687)	$	1,961,606

Adjusted EBIT	$	176,524	$	29,729	$	41,792	$	(4,902)	$	243,143
Special items charge (gain) ⁽¹⁾	34,241		9,103		0		0		43,344
EBIT	$	142,283	$	20,626	$	41,792	$	(4,902)	$	199,799
Interest income									1,576
Interest expense									(18,467)
Income before income taxes									$	182,908
Nine Months Ended September 30, 2019
Net sales	$	1,377,847	$	635,770	$	253,348	$	0	$	2,266,965
Inter-segment sales	95,300		12,838		5,837		(113,975)		0
Total	$	1,473,147	$	648,608	$	259,185	$	(113,975)	$	2,266,965

Adjusted EBIT	$	240,713	$	38,699	$	35,045	$	(8,643)	$	305,814
Special items charge (gain) ⁽²⁾	3,115		(4,925)		0		1,804		(6)
EBIT	$	237,598	$	43,624	$	35,045	$	(10,447)	$	305,820
Interest income									2,047
Interest expense									(19,668)
Income before income taxes									$	288,199

Americas Welding International Welding
The Harris
Products Group

Corporate /
Eliminations
Consolidated
Three Months Ended June 30, 2020

Net sales $ 333,229
$ 177,167
$ 80,331
$ —
$ 590,727
Inter-segment sales 27,493
4,286
1,753
(33,532 ) —
Total $ 360,722
$ 181,453
$ 82,084
$ (33,532 ) $ 590,727

Adjusted EBIT $ 46,702
$ 9,682
$ 11,713
$ (1,964 ) $ 66,133
Special items charge (gain) ⁽¹⁾
26,007
565
—
—
26,572
EBIT $ 20,695
$ 9,117
$ 11,713
$ (1,964 ) $ 39,561
Interest income 424
Interest expense (6,305 )
Income before income taxes $ 33,680
Three Months Ended June 30, 2019

Net sales $ 476,607
$ 212,306
$ 88,095
$ —
$ 777,008
Inter-segment sales 34,811
4,188
2,113
(41,112 ) —
Total $ 511,418
$ 216,494
$ 90,208
$ (41,112 ) $ 777,008

Adjusted EBIT $ 84,851
$ 15,178
$ 13,488
$ (3,969 ) $ 109,548
Special items charge (gain) ⁽²⁾
1,779
(2,627 ) —
1,014
166
EBIT $ 83,072
$ 17,805
$ 13,488
$ (4,983 ) $ 109,382
Interest income 592
Interest expense (6,490 )
Income before income taxes $ 103,484
Six Months Ended June 30, 2020

Net sales $ 751,764
$ 375,090
$ 165,864
$ —
$ 1,292,718
Inter-segment sales 52,276
8,769
3,478
(64,523 ) —
Total $ 804,040
$ 383,859
$ 169,342
$ (64,523 ) $ 1,292,718

Adjusted EBIT $ 117,404
$ 16,297
$ 24,205
$ (3,063 ) $ 154,843
Special items charge (gain) ⁽¹⁾
27,197
6,702
—
—
33,899
EBIT $ 90,207
$ 9,595
$ 24,205
$ (3,063 ) $ 120,944
Interest income

1,284
Interest expense

(12,623 )
Income before income taxes

$ 109,605
Six Months Ended June 30, 2019

Net sales $ 934,326
$ 430,392
$ 171,464
$ —
$ 1,536,182
Inter-segment sales 64,199
8,397
3,980
(76,576 ) —
Total $ 998,525
$ 438,789
$ 175,444
$ (76,576 ) $ 1,536,182

Adjusted EBIT $ 166,603
$ 28,515
$ 24,007
$ (7,011 ) $ 212,114
Special items charge (gain) ⁽²⁾
3,115
(428 ) —
1,804
4,491
EBIT $ 163,488
$ 28,943
$ 24,007
$ (8,815 ) $ 207,623
Interest income

1,556
Interest expense

(12,777 )
Income before income taxes

$ 196,402


~~(1)~~	In the three months ended June 30, 2020, special items reflect Rationalization and asset impairment charges of $22,673 and $565 in Americas Welding and International Welding, respectively, and pension settlement charges of $3,334 in

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

~~Americas Welding.~~ (1)In the ~~six~~three months ended ~~June~~September 30, 2020, special items reflect Rationalization and asset impairment charges of ~~$23,863~~$3,856 and ~~$5,896~~$2,401 in Americas Welding and International Welding, respectively, and pension settlement charges of $3,188 in Americas Welding. In the nine months ended September 30, 2020, special items reflect Rationalization and asset impairment charges of $27,719 and $8,297 in Americas Welding and International Welding, respectively, amortization of step up in value of acquired inventories of $806 related to an acquisition in International Welding and pension settlement charges of ~~$3,334~~$6,522 in Americas Welding.

~~(2)~~

In the three months ended June 30, 2019, special items reflect Rationalization and asset impairment charges of $380 in Americas Welding and $927 in International Welding, amortization of step up in value of acquired inventories of $1,399 in Americas Welding, gains on disposal of assets of $3,554 in International Welding and transaction and integration costs of $1,014 in Corporate / Eliminations related to the Air Liquide Welding acquisition. In the six months ended June 30, 2019, special items reflect Rationalization and asset impairment charges of $1,716 and $3,126 in Americas Welding and International Welding, respectively, amortization of step up in value of acquired inventories of $1,399 in Americas Welding, gains on disposals of assets of $3,554 in International Welding and acquisition transaction and integration costs of $1,804 in Corporate / Eliminations related to the Air Liquide Welding acquisition.

(2)In the three months ended September 30, 2019, special items reflect Rationalization and asset impairment charges $1,495, amortization of step up in value of acquired inventories of $1,609 related to the acquisition of Askaynak and a gain on change in control of $7,601 related to the acquisition of Askaynak in International Welding. In the nine months ended September 30, 2019, special items reflect Rationalization and asset impairment charges of $1,716 and $4,621 in Americas Welding and International Welding, respectively, amortization of step up in value of acquired inventories of $1,399 in Americas Welding and $1,609 related to the acquisition of Askaynak in International Welding, gains on disposals of assets of $3,554 in International Welding and acquisition transaction and integration costs of $1,804 in Corporate / Eliminations related to the Air Liquide Welding acquisition and a gain on change in control of $7,601 related to the acquisition of Askaynak in International Welding.

NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS

The Company recorded Rationalization and asset impairment net charges of ~~$29,759~~$36,016 and ~~$4,842~~$6,337 in the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. The charges are primarily related to employee severance, non-cash asset impairments of long-lived assets and gains or losses on the disposal of assets.

During 2020, the Company initiated rationalization plans within Americas Welding and International Welding segments. The plans include headcount restructuring and the consolidation of manufacturing facilities to better align the cost structure with economic conditions and operating needs. At ~~June~~September 30, 2020, liabilities of ~~$510~~$218 and ~~$7,833~~$6,592 for Americas Welding and International Welding, respectively, were recognized in Other current liabilities in the Company's Condensed Consolidated Balance Sheet.

During 2019, the Company initiated rationalization plans within International Welding. The plans include headcount restructuring and the consolidation of manufacturing operations to better align the cost structure with economic conditions and operating needs. At ~~June~~September 30, 2020, liabilities of ~~$3,563~~$4,934 were recognized in Other current liabilities in the Company's Condensed Consolidated Balance Sheet.

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

The following table summarizes the activity related to rationalization liabilities for the ~~six~~nine months ended ~~June~~September 30, 2020:









	Americas Welding		International Welding		Consolidated
Balance, December 31, 2019	$	0	$	8,202	$	8,202
Payments and other adjustments	(5,367)		(5,180)		(10,547)
Charged to expense	5,585		8,504		14,089
Balance, September 30, 2020	$	218	$	11,526	$	11,744

Americas Welding International Welding Consolidated
Balance, December 31, 2019 $ —
$ 8,202
$ 8,202
Payments and other adjustments (1,219 ) (2,931 ) (4,150 )
Charged to expense 1,729
6,125
7,854
Balance, June 30, 2020 $ 510
$ 11,396
$ 11,906

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

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

Three Months Ended June 30, 2020
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges Defined benefit pension plan activity Currency translation adjustment Total
Balance at March 31, 2020 $ (743 ) $ (69,937 ) $ (277,497 ) $ (348,177 )
Other comprehensive income (loss)
before reclassification 112
(26,127 )
²
14,485
³
(11,530 )
Amounts reclassified from AOCI 996
¹
3,091
²
—
4,087
Net current-period other
comprehensive income (loss) 1,108
(23,036 ) 14,485
(7,443 )
Balance at June 30, 2020 $ 365
$ (92,973 ) $ (263,012 ) $ (355,620 )

Three Months Ended June 30, 2019
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges Defined benefit pension plan activity Currency translation adjustment Total
Balance at March 31, 2019 $ 2,023
$ (81,262 ) $ (208,285 ) $ (287,524 )
Other comprehensive income (loss)
before reclassification 107
—
4,884
³
4,991
Amounts reclassified from AOCI (408 )
¹
1,091
²
—
683
Net current-period other
comprehensive income (loss) (301 ) 1,091
4,884
5,674
Balance at June 30, 2019 $ 1,722
$ (80,171 ) $ (203,401 ) $ (281,850 )

~~(1)~~

During the 2020 period, this AOCI reclassification is a component of Net sales of $(1,065) (net of tax of $(398)) and Cost of goods sold of $(69) (net of tax of $(77)); during the 2019 period, the reclassification is a component of Net sales of $286 (net of tax of $101) and Cost of goods sold of $(122) (net of tax of $(30)). See Note 16 to the consolidated financial statements for additional details.

~~(2)~~

This AOCI component is included in the computation of net periodic pension costs (net of tax of $(7,691) and $(90) during the three months ended June 30, 2020 and 2019, respectively). See Note 13 to the consolidated financial statements for additional details.

~~(3)~~

~~The Other comprehensive income (loss) before reclassifications excludes $(17) and $(35) attributable to Non-controlling interests in the three months ended June 30, 2020 and 2019, respectively.~~


	Three Months Ended September 30, 2020
	Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges			Defined benefit pension plan activity			Currency translation adjustment			Total
Balance at June 30, 2020	$	365		$	(92,973)		$	(263,012)		$	(355,620)
Other comprehensive income (loss) before reclassification	(104)			(4,411)		²	13,004		³	8,489
Amounts reclassified from AOCI	743		¹	3,107		²	0			3,850
Net current-period other comprehensive income (loss)	639			(1,304)			13,004			12,339
Balance at September 30, 2020	$	1,004		$	(94,277)		$	(250,008)		$	(343,281)

	Three Months Ended September 30, 2019
	Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges			Defined benefit pension plan activity			Currency translation adjustment			Total
Balance at June 30, 2019	$	1,722		$	(80,171)		$	(203,401)		$	(281,850)
Other comprehensive income (loss) before reclassification	(268)			0			(24,283)		³	(24,551)
Amounts reclassified from AOCI	(80)		¹	613		²	0			533
Net current-period other comprehensive income (loss)	(348)			613			(24,283)			(24,018)
Balance at September 30, 2019	$	1,374		$	(79,558)		$	(227,684)		$	(305,868)

(1)During the 2020 period, this AOCI reclassification is a component of Net sales of $(551) (net of tax of $(205)) and Cost of goods sold of $192 (net of tax of $8); during the 2019 period, the reclassification is a component of Net sales of $(15) and Cost of goods sold of $(95) (net of tax of $(22)). See Note 16 to the consolidated financial statements for additional details.

(2)This AOCI component is included in the computation of net periodic pension costs (net of tax of $(776) and $536 during the three months ended September 30, 2020 and 2019, respectively). See Note 13 to the consolidated financial statements for additional details.

(3)The Other comprehensive income (loss) before reclassifications excludes $35 and $258 attributable to Non-controlling interests in the three months ended September 30, 2020 and 2019, respectively.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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


	Nine Months Ended September 30, 2020
	Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges			Defined benefit pension plan activity			Currency translation adjustment			Total
Balance at December 31, 2019	$	1,626		$	(70,546)		$	(206,930)		$	(275,850)
Other comprehensive income (loss) before reclassification	(2,304)			(30,538)		²	(43,078)		³	(75,920)
Amounts reclassified from AOCI	1,682		¹	6,807		²	0			8,489
Net current-period other comprehensive income (loss)	(622)			(23,731)			(43,078)			(67,431)
Balance at September 30, 2020	$	1,004		$	(94,277)		$	(250,008)		$	(343,281)

	Nine Months Ended September 30, 2019
	Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges			Defined benefit pension plan activity			Currency translation adjustment			Total
Balance at December 31, 2018	$	1,694		$	(82,049)		$	(213,384)		$	(293,739)
Other comprehensive income (loss) before reclassification	521			0			(14,300)		³	(13,779)
Amounts reclassified from AOCI	(841)		¹	2,491		²	0			1,650
Net current-period other comprehensive income (loss)	(320)			2,491			(14,300)			(12,129)
Balance at September 30, 2019	$	1,374		$	(79,558)		$	(227,684)		$	(305,868)

(1)During the 2020 period, this AOCI reclassification is a component of Net sales of $(1,657) (net of tax of $(624)) and Cost of goods sold of $25 (net of tax of $(92)); during the 2019 period, this AOCI reclassification is a component of Net sales of $557 (net of tax of $203) and Cost of goods sold of $(284) (net of tax of $(82)). See Note 16 to the consolidated financial statements for additional details.

(2)This AOCI component is included in the ~~six~~computation of net periodic pension costs (net of tax of $(8,303) and $673 during the nine months ended ~~June~~September 30, 2020 and ~~2019:~~

Six Months Ended June 30, 2020
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges Defined benefit pension plan activity Currency translation adjustment Total
Balance at December 31, 2019 $ 1,626
$ (70,546 ) $ (206,930 ) $ (275,850 )
Other comprehensive income (loss)
before reclassification (2,200 ) (26,127 )
²

(56,082 )
³

(84,409 )
Amounts reclassified from AOCI 939
¹

3,700
²

—
4,639
Net current-period other
comprehensive income (loss) (1,261 ) (22,427 ) (56,082 ) (79,770 )
Balance at June 30, 2020 $ 365
$ (92,973 ) $ (263,012 ) $ (355,620 )

Six Months Ended June 30, 2019
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges Defined benefit pension plan activity Currency translation adjustment Total
Balance at December 31, 2018 $ 1,694
$ (82,049 ) $ (213,384 ) $ (293,739 )
Other comprehensive income (loss)
before reclassification 789
—
9,983
³

10,772
Amounts reclassified from AOCI (761 )
¹

1,878
²

—
1,117
Net current-period other
comprehensive income (loss) 28
1,878
9,983
11,889
Balance at June 30, 2019 $ 1,722
$ (80,171 ) $ (203,401 ) $ (281,850 )

2019, respectively). See Note 13 to the consolidated financial statements for additional details.

~~(1)~~

During the 2020 period, the AOCI reclassification is a component of Net sales of $(1,106) (net of tax of $(419)) and Cost of goods sold of $(167) (net of tax of $(101)); during the 2019 period, the AOCI reclassification is a component of Net sales of $572 (net of tax of $203) and Cost of goods sold of $(189) (net of tax of $(60)). See Note 16 to the consolidated financial statements for additional details.


~~(2)~~	The AOCI component is included in the computation of net periodic pension costs (net of tax of $(7,527) and $137 during the six months ended June 30, 2020 and 2019, respectively). See Note 13 to the consolidated financial statements for additional details.


~~(3)~~	~~The Other comprehensive income (loss) before reclassifications excludes $(58) and $2 attributable to Non-controlling interests in the six months ended June 30, 2020 and 2019, respectively.~~

(3)The Other comprehensive income (loss) before reclassifications excludes $(23) and $260 attributable to Non-controlling interests in the nine months ended September 30, 2020 and 2019, respectively.

NOTE 8 — COMMON STOCK REPURCHASE PROGRAM

The Company has a ~~total~~ share repurchase program for up to 55 million shares of the Company's common shares. On February 12, 2020, the Company's Board of Director's approved a new share repurchase program authorizing the Company to repurchase, in the aggregate, up to an additional 10 million shares of its outstanding common shares under this program. From time to time at management's discretion, the Company repurchases its common shares in the open market, depending on market conditions, stock price and other factors. During the ~~three~~nine months ended ~~June 30, 2020, the Company purchased a total of 43.1 thousand shares at an average cost per share of $69.62. During the six months ended June~~September 30, 2020, the Company purchased a total of 1.4 million shares at an average cost per share of $80.22. As of ~~June~~September 30, 2020, there remained ~~1.5~~11.5 million common shares available for repurchase under ~~this program.~~these programs. The repurchased common shares remain in treasury and have not been retired.

On February 12, 2020, the Company's Board of Director's approved a new share repurchase program authorizing the Company to repurchase, in the aggregate, up to 10 million shares of its outstanding common stock.

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 9 — INVENTORIES

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

June 30, 2020 December 31, 2019
Raw materials $ 121,108
$ 116,716
Work-in-process 67,122
63,744
Finished goods 229,295
213,288
Total $ 417,525
$ 393,748


	September 30, 2020		December 31, 2019
Raw materials	$	110,590	$	116,716
Work-in-process	69,501		63,744
Finished goods	216,123		213,288
Total	$	396,214	$	393,748

At ~~June~~September 30, 2020 and December 31, 2019, approximately ~~38%~~35% and 36%, respectively, of total inventories were valued using the last-in, first-out ("LIFO") method. The excess of current cost over LIFO cost was ~~$75,428~~$76,204 and $75,292 at ~~June~~September 30, 2020 and December 31, 2019, respectively.

NOTE 10 — LEASES

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

Operating Leases Balance Sheet Classification June 30, 2020 December 31, 2019
Right-of-use assets Other assets $ 45,689
$ 51,533

Current liabilities Other current liabilities $ 12,905
$ 13,572
Noncurrent liabilities Other liabilities 36,347
39,076
Total lease liabilities
$ 49,252
$ 52,648


Operating Leases	Balance Sheet Classification	September 30, 2020		December 31, 2019
Right-of-use assets	Other assets	$	46,626	$	51,533

Current liabilities	Other current liabilities	$	12,821	$	13,572
Noncurrent liabilities	Other liabilities	36,949		39,076
Total lease liabilities		$	49,770	$	52,648

The Company determines if an agreement is a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at commencement date to present value the lease payments.

The Company has operating leases for sales offices, manufacturing facilities, warehouses and distribution centers, transportation equipment, office equipment and information technology equipment. Some of these leases are noncancelable. Variable or short-term lease costs contained within the Company’s operating leases are not material. Most leases include one or more options to renew, which can extend the lease term from 1 year to 11 years or more. The exercise of lease renewal options is at the Company's sole discretion. Certain leases also include options to purchase the leased property. Leases with an initial term of 12 months or less are not recorded on the Company's Condensed Consolidated Balance sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Total lease expense, which is included in Cost of goods sold and Selling, general and administrative expenses in the Company's Consolidated Statements of Income, was ~~$5,990~~$5,655 and ~~$11,209~~$17,665 in the three and ~~six~~nine months ended ~~June~~September 30, 2020 and ~~$6,546~~$6,290 and ~~$12,435~~$18,725 in the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively. Cash paid for amounts included in the measurement of lease liabilities for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, were ~~$3,897~~$3,733 and ~~$7,994~~$11,727 and are included in Net cash provided by operating activities in the Company's Consolidated Statements of Cash Flows. Cash paid for amounts included in the measurement of lease liabilities for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, were ~~$4,549~~$4,528 and ~~$9,233~~$13,761 and are included in Net cash provided by operating activities in the Company's Consolidated Statements of Cash Flows. Right-of-use assets obtained in exchange for operating lease liabilities were $0$214 and ~~$2,035~~$2,249 during the three and ~~six~~nine months ended ~~June~~September 30, 2020 and ~~$9,717~~$1,550 and ~~$14,673~~$16,223 for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively.

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

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

June 30, 2020
2020 $ 7,459
2021 13,051
2022 9,474
2023 7,808
2024 6,355
After 2025 11,127
Total lease payments $ 55,274
Less: Imputed interest (6,022 )
Operating lease liabilities $ 49,252


	September 30, 2020
2020	$	3,218
2021	13,619
2022	9,962
2023	8,233
2024	6,754
After 2025	14,544
Total lease payments	$	56,330
Less: Imputed interest	(6,560)
Operating lease liabilities	$	49,770

As of ~~June~~September 30, 2020, the weighted average remaining lease term is ~~6.3~~7.1 years and the weighted average discount rate used to determine the operating lease liability is ~~3.6%~~3.5%.

NOTE 11 — PRODUCT WARRANTY COSTS

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


	Nine Months Ended September 30,
	2020		2019
Balance at beginning of year	$	20,650	$	19,778
Accruals for warranties	13,629		12,494
Settlements	(10,699)		(11,787)
Foreign currency translation and other adjustments	(126)		(125)
Balance at September 30	$	23,454	$	20,360

Six Months Ended June 30,
2020 2019
Balance at beginning of year $ 20,650
$ 19,778
Accruals for warranties 7,835
5,121
Settlements (6,940 ) (5,720 )
Foreign currency translation and other adjustments (206 ) 33
Balance at June 30 $ 21,339
$ 19,212

NOTE 12 — DEBT

Revolving Credit ~~Agreement~~Agreements

The Company has a line of credit totaling ~~$400,000~~$400,000 through the Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement has a term of 5 years with a maturity date of June 30, 2022 and may be increased, subject to certain conditions, by an additional amount up to ~~$100,000~~.$100,000. 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. 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 ~~June~~September 30, 2020, the Company was in compliance with all of its covenants and had ~~$40,000 of~~no outstanding borrowings under the Credit Agreement.

The Company has other lines of credit totaling $50,000. As of September 30, 2020 the Company was in compliance with all of its covenants and had $1,039 outstanding at September 30, 2020.

Senior Unsecured Notes

On April 1, 2015 and October 20, 2016,, the Company entered into separate Note Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each have an aggregate principal amount of ~~$350,000~~,$350,000, comprised of four different series ranging from ~~$50,000~~$50,000 to ~~$100,000~~,$100,000, with maturity dates ranging from August 20, 2025 through April 1, 2045,, and interest rates ranging from 2.75% ~~and~~ to 4.02%. Interest on the Notes is paid semi-annually. The Company's total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and ~~13.9~~13.6 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of ~~June~~September 30, 2020, the Company was in compliance with all of its debt covenants relating to the Notes.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Shelf Agreements

On November 27, 2018,, the Company entered into seven uncommitted master note facilities (the "Shelf Agreements") that allow borrowings up to $700,000 in the aggregate. The Shelf Agreements have a term of 5 years and the average life of borrowings cannot exceed 15 years. The Company is required to comply with covenants similar to those contained in the Notes. As of ~~June~~September 30, 2020, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

Fair Value of Debt

At ~~June~~September 30, 2020 and December 31, 2019, the fair value of long-term debt, including the current portion, was ~~approximately $777,171 and~~approximately $785,579 and $721,494, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was ~~$715,925~~$715,795 and $712,414, respectively. Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which could be realized in a current market exchange.

NOTE 13 — RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

The components of total pension cost were as follows:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
U.S. pension plans Non-U.S. pension plans U.S. pension plans Non-U.S. pension plans U.S. pension plans Non-U.S. pension plans U.S. pension plans Non-U.S. pension plans
Service cost $ 39
$ 742
$ 35
$ 701
$ 78
$ 1,498
$ 70
$ 1,429
Interest cost 4,051
683
4,653
922
8,101
1,379
9,306
1,858
Expected return on plan assets (5,711 ) (1,014 ) (6,245 ) (1,106 ) (11,422 ) (2,021 ) (12,490 ) (2,230 )
Amortization of prior service cost —
16
—
15
—
31
—
31
Amortization of net loss 203
540
414
572
406
1,095
827
1,157
Settlement charges ⁽¹⁾
3,334
—
—
—
3,334
—
—
—
Defined benefit plans 1,916

967
(1,143 ) 1,104
497
1,982
(2,287 ) 2,245
Multi-employer plans —
257
—
243
—
526
—
490
Defined contribution plans 4,751
773
5,791
424
10,377
1,475
11,699
923
Total pension cost $ 6,667
$ 1,997
$ 4,648
$ 1,771
$ 10,874
$ 3,983
$ 9,412
$ 3,658


	Three Months Ended September 30,														Nine Months Ended September 30,
	2020						2019						2020				2019
	U.S. pension plans		Non-U.S. pension plans		U.S. pension plans		Non-U.S. pension plans		U.S. pension plans		Non-U.S. pension plans		U.S. pension plans		Non-U.S. pension plans
Service cost	$	39	$	718	$	35	$	697	$	117	$	2,216	$	105	$	2,126
Interest cost	3,346		673		4,652		903		11,447		2,052		13,958		2,761
Expected return on plan assets	(6,009)		(1,076)		(6,245)		(1,087)		(17,431)		(3,097)		(18,735)		(3,317)
Amortization of prior service cost	0		15		0		16		0		46		0		47
Amortization of net loss	459		468		413		720		865		1,563		1,240		1,877

Settlement charges ⁽¹⁾	3,188		0		0		0		6,522		0		0		0
Defined benefit plans	1,023		798		(1,145)		1,249		1,520		2,780		(3,432)		3,494
Multi-employer plans	0		274		0		227		0		800		0		717
Defined contribution plans	4,945		931		5,506		692		15,322		2,406		17,205		1,615
Total pension cost	$	5,968	$	2,003	$	4,361	$	2,168	$	16,842	$	5,986	$	13,773	$	5,826

(1) Pension settlement charges resulting from lump sum pension payments in the three and ~~six~~nine months ended ~~June~~September 30, 2020.

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

In March 2020, the Company approved an amendment to terminate the Lincoln Electric Company Retirement Annuity Program plan effective as of December 31, 2020. The Company provided notice to participants of the intent to terminate the plan and applied for a determination letter. Pension obligations will be distributed through a combination of lump sum payments to eligible plan participants and through the purchase of a group annuity contract. Upon settlement of the pension obligations, the Company will reclassify unrecognized actuarial gains or losses, currently recorded in AOCI, to the Company's Consolidated Statements of Income as settlement gains or charges in the second half of 2021. The Company anticipates the termination process will take approximately two years to complete.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 14 — OTHER INCOME (EXPENSE)

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Equity earnings in affiliates	$	81	$	206	$	323	$	3,002
Other components of net periodic pension (cost) income	(1,064)		628		(1,967)		2,169
Other income (expense)⁽¹⁾	2,045		8,819		2,812		12,441
Total Other income (expense)	$	1,062	$	9,653	$	1,168	$	17,612

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Equity earnings in affiliates $ 81
$ 1,790
$ 243
$ 2,796
Other components of net periodic pension (cost) income (2,102 ) 775
(903 ) 1,541
Other income (expense) 1,818
1,631
766
3,622
Total Other income (expense) $ (203 ) $ 4,196
$ 106
$ 7,959
(1) Includes a gain on change in control related to the acquisition of Askaynak in the three and nine months ended September 30, 2019 of $7,601. Refer to Note 4 to the consolidated financial statements for details.

NOTE 15 — INCOME TAXES

The Company recognized ~~$27,037~~$41,834 of tax expense on pretax income of ~~$109,605,~~$182,908, resulting in an effective income tax rate of ~~24.7%~~22.9% for the ~~six~~nine months ended ~~June~~September 30, 2020. The effective income tax rate was ~~20.1%~~20.4% for the ~~six~~nine months ended ~~June~~September 30, 2019.

The increase in the effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2020, as compared with the same period in 2019, was primarily due to recording the tax expense associated with a valuation allowance in 2020, smaller tax benefits related to the vesting of stock based compensation in 2020 and income tax benefits for the settlement of tax items recorded in 2019.

The U.S. Department of Treasury and the Internal Revenue Service released proposed and final regulations on July 20, 2020 pertaining to the Global Intangible Low-Taxed Income and other provisions of the Internal Revenue Code. The Company is assessing the impact of the regulations and potential for early election of the regulations for prior years.

As of ~~June~~September 30, 2020, the Company had ~~$20,235~~$20,481 of unrecognized tax benefits. If recognized, approximately ~~$17,259~~$17,043 would be reflected as a component of income tax expense.

The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before ~~2015.~~2016. The Company is currently subject to U.S., various state and non-U.S. income tax audits.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a reduction of ~~$2,165~~$865 in previously unrecognized tax benefits by the end of the ~~second~~third quarter 2021.

NOTE 16 — DERIVATIVES

The Company uses derivative instruments to manage exposures to currency exchange rates, interest rates and commodity prices arising in the normal course of business. Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable. Hedge ineffectiveness was immaterial in the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019.

The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. None of the concentrations of risk with any individual counterparty was considered significant at ~~June~~September 30, 2020. The Company does not expect any counterparties to fail to meet their obligations.

Cash Flow Hedges

Certain foreign currency forward contracts were qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was ~~$66,201~~$66,566 at ~~June~~September 30, 2020 and $59,982 at December 31, 2019.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

During March and April 2020, in anticipation of future debt issuance associated with the Notes referenced in Note 12, the Company entered into interest rate forward starting swap agreements to hedge the variability of future changes in interest rates. The forward starting swap agreements were qualified and designated as a cash flow hedge. The changes in fair value are recorded as part of AOCI, and upon completion of debt issuance and termination of the swaps, are amortized to interest expense over the life of the underlying debt. The dollar equivalent gross notional amount of the long-term contracts was $100,000 at ~~June~~September 30, 2020 and have a termination date of August 2025.

~~Table of Contents~~

~~LINCOLN ELECTRIC HOLDINGS, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Dollars in thousands, except per share amounts~~

Fair Value Hedges

From time to time the company will enter into certain interest rate swap agreements that are qualified and designated as fair value hedges. At ~~June~~September 30, 2020, the Company had no interest rate swap agreements outstanding. The Company terminated ~~$50,000~~$50,000 of interest rate swaps in the ~~six~~nine months ended ~~June~~September 30, 2020, which resulted in a gain of $6,629 that will be amortized to interest expense over the remaining life of the underlying debt.

Net Investment Hedges

The Company has cross currency swap agreements that are qualified and designated as net investment hedges. The dollar equivalent gross notional amount of these contracts is $50,000 as of ~~June~~September 30, 2020 and December 31, 2019, respectively.

Derivatives Not Designated as Hedging Instruments

The Company has certain foreign exchange forward contracts that are not designated as hedges. These derivatives are held as economic hedges of certain balance sheet exposures. The dollar equivalent gross notional amount of these contracts was ~~$375,396~~$390,926 and $363,820 at ~~June~~September 30, 2020 and December 31, 2019, respectively.

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

June 30, 2020 December 31, 2019
Derivatives by hedge designation Other Current Assets Other Current Liabilities Other Assets Other Liabilities Other Current Assets Other Current Liabilities Other Assets Other Liabilities
Designated as hedging instruments:

Foreign exchange contracts $ 567
$ 2,886
$ —
$ —
$ 1,288
$ 522
$ —
$ —
Interest rate swap agreements —
—
—
—
—
—
2,964
—
Forward starting swap agreements —
—
312
87
—
—
—
—
Cross currency swap agreements —
—
469
—
—
—
—
653
Not designated as hedging instruments:

Foreign exchange contracts 1,541
3,236
—
—
2,397
973
—
—
Total derivatives $ 2,108
$ 6,122
$ 781
$ 87
$ 3,685
$ 1,495
$ 2,964
$ 653


	September 30, 2020														December 31, 2019
Derivatives by hedge designation	Other Current Assets		Other Current Liabilities		Other Assets		Other Liabilities		Other Current Assets		Other Current Liabilities		Other Assets		Other Liabilities
Designated as hedging instruments:
Foreign exchange contracts	$	1,034	$	1,476	$	0	$	0	$	1,288	$	522	$	0	$	0
Interest rate swap agreements	0		0		0		0		0		0		2,964		0
Forward starting swap agreements	0		0		1,876		0		0		0		0		0
Cross currency swap agreements	0		0		0		1,877		0		0		0		653
Not designated as hedging instruments:
Foreign exchange contracts	3,067		2,872		0		0		2,397		973		0		0

Total derivatives	$	4,101	$	4,348	$	1,876	$	1,877	$	3,685	$	1,495	$	2,964	$	653

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

Three Months Ended June 30, Six Months Ended June 30,
Derivatives by hedge designation Classification of gain (loss) 2020 2019 2020 2019
Foreign exchange contracts Selling, general & administrative expenses $ 3,624
$ 1,010
$ (18,509 ) $ 6,417


		Three Months Ended September 30,						Nine Months Ended September 30,
Derivatives by hedge designation	Classification of gain (loss)	2020		2019		2020		2019

Foreign exchange contracts	Selling, general & administrative expenses	$	6,381	$	(710)	$	(12,141)	$	5,707

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


Total gain (loss) recognized in AOCI, net of tax	September 30, 2020		December 31, 2019
Foreign exchange contracts	$	(468)	$	620
Forward starting swap agreements	1,407		0
Net investment contracts	65		1,006

Total gain (loss) recognized in AOCI, net of tax June 30, 2020 December 31, 2019
Foreign exchange contracts $ (1,778 ) $ 620
Forward starting swap agreements 257
—
Net investment contracts 1,886
1,006

The Company expects a loss of ~~$1,778~~$468 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.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Three Months Ended June 30, Six Months Ended June 30,
Derivative type Gain (loss) recognized in the Consolidated Statements of Income: 2020 2019 2020 2019
Foreign exchange contracts Sales $ (1,463 ) $ 387
$ (1,525 ) $ 775
Cost of goods sold 146
152
268
249


		Three Months Ended September 30,						Nine Months Ended September 30,
Derivative type	Gain (loss) recognized in the Consolidated Statements of Income:	2020		2019		2020		2019
Foreign exchange contracts	Sales	$	(756)	$	(15)	$	(2,281)	$	760
	Cost of goods sold	(200)		117		67		366

NOTE 17 - FAIR VALUE

The following table provides a summary of assets and liabilities as of ~~June~~September 30, 2020,, measured at fair value on a recurring basis:


Description	Balance as of June 30, 2020		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Description	Balance as of September 30, 2020		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:									Assets:
Foreign exchange contracts	$	2,108	$	—	$	2,108	$	—	Foreign exchange contracts	$	4,101	$	0	$	4,101	$	0
Cross currency swap agreements	469		—		469		—
Forward-starting swap agreements	312		—		312		—

Forward starting swap agreements									Forward starting swap agreements	1,876		0		1,876		0
Total assets	$	2,889	$	—	$	2,889	$	—	Total assets	$	5,977	$	0	$	5,977	$	0

Liabilities:									Liabilities:
Foreign exchange contracts	6,122		—		6,122		—		Foreign exchange contracts	4,348		0		4,348		0
Forward starting swap agreements	87		—		87		—

Cross currency swap agreements									Cross currency swap agreements	1,877		0		1,877		0

Deferred compensation	28,859		—		28,859		—		Deferred compensation	29,728		0		29,728		0
Total liabilities	$	35,068	$	—	$	35,068	$	—	Total liabilities	$	35,953	$	0	$	35,953	$	0

The following table provides a summary of assets and liabilities as of December 31, 2019, measured at fair value on a recurring basis:

Description Balance as of December 31, 2019
Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets:

Foreign exchange contracts $ 3,685
$ —
$ 3,685
$ —
Interest rate swap agreements 2,964
—
2,964
—
Total assets $ 6,649
$ —
$ 6,649
$ —

Liabilities:

Foreign exchange contracts $ 1,495
$ —
$ 1,495
$ —
Cross currency swap agreements 653
—
653
—
Contingent considerations 470
—
—
470
Deferred compensation 29,170
—
29,170
—
Total liabilities $ 31,788
$ —
$ 31,318
$ 470


Description	Balance as of December 31, 2019		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Foreign exchange contracts	$	3,685	$	0	$	3,685	$	0
Interest rate swap agreements	2,964		0		2,964		0

Total assets	$	6,649	$	0	$	6,649	$	0

Liabilities:
Foreign exchange contracts	$	1,495	$	0	$	1,495	$	0
Cross currency swap agreements	653		0		653		0


Contingent considerations	470		0		0		470

Deferred compensation	29,170		0		29,170		0
Total liabilities	$	31,788	$	0	$	31,318	$	470

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

~~Table of Contents~~

~~LINCOLN ELECTRIC HOLDINGS, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Dollars in thousands, except per share amounts~~

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

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The fair value of Cash and cash equivalents, Accounts receivable, Short-term debt excluding the current portion of long-term debt and Trade accounts payable approximated book value due to the short-term nature of these instruments at both ~~June~~September 30, 2020 and December 31, 2019.

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

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

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

General

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

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

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

COVID-19 Assessment

During the COVID-19 pandemic, substantially all of the Company’s global businesses have continued to operate within a critical infrastructure sector (as established by the Cybersecurity & Infrastructure Security Agency of the U.S. Department of Homeland Security, as well as other governments worldwide) and as a result, the Company has been able to meet the demand of its customers in the various markets it serves. For the ~~three~~nine months ended ~~June~~September 30, 2020, the Company ~~experienced~~continued to experience weakened global demand trends resulting in a decrease in Net sales and Net income primarily related to COVID-19. To date, the trough in demand occurred in April 2020 with negative impacts continuing to ease through the end of the third quarter. The Company has taken actions to protect the health and well-being of employees, while maintaining its workforce to serve customer requirements. These actions did not and are not expected to have a material negative impact on the Company’s profitability.

New and changing government actions to address the COVID-19 pandemic continue to ~~occur on a regular basis.~~occur. As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions may have ~~had~~ to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although ~~many~~most of the Company’s customers have ~~begun to re-open or increase~~re-opened and increased operating levels, such customers may be forced to close or limit operations as any new COVID-19 outbreaks occur. Even as government restrictions are lifted and economies ~~gradually~~ reopen, the ultimate shape of the economic recovery is uncertain and may continue to negatively impact the Company's results of operations, cash flows and financial position in subsequent quarters. Given this current level of economic and operational uncertainty over the impacts of COVID-19, the ultimate financial impact cannot be reasonably estimated at this time. The Company’s consolidated financial statements and discussion and analysis of financial condition and results of operations reflect estimates and assumptions made by management as of ~~June~~September 30, 2020. Events and changes in circumstances arising after ~~June~~September 30, 2020, including those resulting from the continued impacts of COVID-19, will be reflected in management’s estimates for future periods.

During March 2020, the Coronavirus Aid, Relief and Economic Security Act, the Families First Coronavirus Response Act and several other state and local legislative acts were signed and enacted into law. The Company continues to evaluate the impact of the new laws on its business, and does not expect a material impact to its consolidated financial statements.

For further discussion of this matter, refer “Item 1A. Risk Factors” in Part II of this report.

Results of Operations

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


	Three Months Ended September 30,
	2020								2019							Favorable (Unfavorable) 2020 vs. 2019
	Amount			% of Sales		Amount			% of Sales		$			%
Net sales	$	668,888				$	730,783				$	(61,895)		(8.5	%)
Cost of goods sold	453,501					492,432					38,931			7.9	%
Gross profit	215,387			32.2	%	238,351			32.6	%	(22,964)			(9.6	%)
Selling, general & administrative expenses	131,337			19.6	%	148,312			20.3	%	16,975			11.4	%
Rationalization and asset impairment charges	6,257			0.9	%	1,495			0.2	%	(4,762)			(318.5	%)



Operating income	77,793			11.6	%	88,544			12.1	%	(10,751)			(12.1	%)
Interest expense, net	5,552					6,400					848			13.3	%
Other income (expense)	1,062					9,653					(8,591)			(89.0	%)





Income before income taxes	73,303			11.0	%	91,797			12.6	%	(18,494)			(20.1	%)
Income taxes	14,797					19,340					4,543			23.5	%
Effective tax rate	20.2		%			21.1		%			0.9		%
Net income including non-controlling interests	58,506					72,457					(13,951)			(19.3	%)
Non-controlling interests in subsidiaries’ loss	27					(4)					31			775.0	%
Net income	$	58,479		8.7	%	$	72,461		9.9	%	$	(13,982)		(19.3	%)
Diluted earnings per share	$	0.97				$	1.17				$	(0.20)		(17.1	%)

	Nine Months Ended September 30,
	2020								2019							Favorable (Unfavorable) 2020 vs. 2019
	Amount			% of Sales		Amount			% of Sales		$			%
Net sales	$	1,961,606				$	2,266,965				$	(305,359)		(13.5	%)
Cost of goods sold	1,319,519					1,500,312					180,793			12.1	%
Gross profit	642,087			32.7	%	766,653			33.8	%	(124,566)			(16.2	%)
Selling, general & administrative expenses	407,440			20.8	%	472,108			20.8	%	64,668			13.7	%
Rationalization and asset impairment charges	36,016			1.8	%	6,337			0.3	%	(29,679)			(468.3	%)



Operating income	198,631			10.1	%	288,208			12.7	%	(89,577)			(31.1	%)
Interest expense, net	16,891					17,621					730			4.1	%
Other income (expense)	1,168					17,612					(16,444)			(93.4	%)


Income before income taxes	182,908			9.3	%	288,199			12.7	%	(105,291)			(36.5	%)
Income taxes	41,834					58,832					16,998			28.9	%
Effective tax rate	22.9		%			20.4		%			(2.5		%)
Net income including non-controlling interests	141,074					229,367					(88,293)			(38.5	%)
Non-controlling interests in subsidiaries’ loss	37					(26)					63			242.3	%
Net income	$	141,037		7.2	%	$	229,393		10.1	%	$	(88,356)		(38.5	%)
Diluted earnings per share	$	2.34				$	3.64				$	(1.30)		(35.7	%)

Three Months Ended June 30,
2020 2019 Favorable (Unfavorable)
2020 vs. 2019
Amount % of Sales Amount % of Sales $ %
Net sales $ 590,727
$ 777,008
$ (186,281 ) (24.0 %)
Cost of goods sold 401,349
507,127
105,778
20.9 %
Gross profit 189,378
32.1 % 269,881
34.7 % (80,503 ) (29.8 %)
Selling, general & administrative expenses 126,376
21.4 % 163,388
21.0 % 37,012
22.7 %
Rationalization and asset impairment charges 23,238
3.9 % 1,307
0.2 % (21,931 ) (1,678.0 %)
Operating income 39,764
6.7 % 105,186
13.5 % (65,422 ) (62.2 %)
Interest expense, net 5,881
5,898
17
0.3 %
Other income (expense) (203 ) 4,196
(4,399 ) (104.8 %)
Income before income taxes 33,680
5.7 % 103,484
13.3 % (69,804 ) (67.5 %)
Income taxes 6,667
18,040
11,373
63.0 %
Effective tax rate 19.8 % 17.4 % (2.4 )%

Net income including non-controlling interests 27,013
85,444
(58,431 ) (68.4 %)
Non-controlling interests in subsidiaries’ loss 17
(8 ) 25
312.5 %
Net income $ 26,996
4.6 % $ 85,452
11.0 % $ (58,456 ) (68.4 %)
Diluted earnings per share $ 0.45
$ 1.36
$ (0.91 ) (66.9 %)

Six Months Ended June 30,
2020 2019
Favorable (Unfavorable)
2020 vs. 2019
Amount % of Sales Amount % of Sales $ %
Net sales $ 1,292,718

$ 1,536,182

$ (243,464 ) (15.8 %)
Cost of goods sold 866,018

1,007,880

141,862
14.1 %
Gross profit 426,700
33.0 % 528,302
34.4 % (101,602 ) (19.2 %)
Selling, general & administrative expenses 276,103
21.4 % 323,796
21.1 % 47,693
14.7 %
Rationalization and asset impairment charges 29,759
2.3 % 4,842
0.3 % (24,917 ) (514.6 %)
Operating income 120,838
9.3 % 199,664
13.0 % (78,826 ) (39.5 %)
Interest expense, net 11,339

11,221

(118 ) (1.1 %)
Other income (expense) 106

7,959

(7,853 ) (98.7 %)
Income before income taxes 109,605
8.5 % 196,402
12.8 % (86,797 ) (44.2 %)
Income taxes 27,037

39,492

12,455
31.5 %
Effective tax rate 24.7 % 20.1 % (4.6 %)
Net income including non-controlling interests 82,568

156,910

(74,342 ) (47.4 %)
Non-controlling interests in subsidiaries’ loss 10

(22 )

32
145.5 %
Net income $ 82,558
6.4 % $ 156,932
10.2 % $ (74,374 ) (47.4 %)
Diluted earnings per share $ 1.37
$ 2.47
$ (1.10 ) (44.5 %)

Table of Contents

Net Sales:

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


Three Months Ended September 30,			Change in Net Sales due to:
	Net Sales 2019		Volume			Acquisitions		Price			Foreign Exchange			Net Sales 2020
Lincoln Electric Holdings, Inc.	$	730,783	$	(69,531)		$	—	$	8,860		$	(1,224)		$	668,888


% Change
Lincoln Electric Holdings, Inc.			(9.5		%)	—		1.2		%	(0.2		%)	(8.5		%)

Three Months Ended June 30, Change in Net Sales due to:
Net Sales
2019 Volume Acquisitions Price Foreign Exchange Net Sales
2020
Lincoln Electric Holdings, Inc. $ 777,008
$ (190,378 ) $ 15,219
$ (2,407 ) $ (8,715 ) $ 590,727
% Change

Lincoln Electric Holdings, Inc.
(24.5 %) 2.0 % (0.3 %) (1.1 %) (24.0 %)


Nine Months Ended September 30,																		Nine Months Ended September 30,			Change in Net Sales due to:
																			Net Sales 2019		Volume			Acquisitions			Price		Foreign Exchange			Net Sales 2020
Lincoln Electric Holdings, Inc.																		Lincoln Electric Holdings, Inc.	$	2,266,965	$	(325,308)		$	39,711		$	(307)	$	(19,455)		$	1,961,606

Six Months Ended June 30,			Change in Net Sales due to:
	Net Sales 2019		Volume			Acquisitions			Price			Foreign Exchange			Net Sales 2020
Lincoln Electric Holdings, Inc.	$	1,536,182	$	(255,777	)	$	39,711		$	(9,167	)	$	(18,231	)	$	1,292,718
% Change																		% Change
Lincoln Electric Holdings, Inc.			(16.7		%)	2.6		%	(0.6		%)	(1.2		%)	(15.8		%)	Lincoln Electric Holdings, Inc.			(14.3		%)	1.8		%	—		(0.9		%)	(13.5		%)

Net sales decreased in the three and ~~six~~nine months ended ~~June~~September 30, 2020 as a result of lower organic sales driven by the impact of COVID-19 on global demand and unfavorable foreign ~~exchange, partially offset by acquisitions.~~exchange. The ~~increase~~decrease in Net sales ~~from acquisitions in~~for the ~~three~~nine months ended ~~June~~September 30, 2020 ~~was driven by the acquisition of Askaynak within International Welding. The increase in Net sales from acquisitions in the six months ended June 30, 2020 was driven~~were partially offset by the acquisitions of Baker within Americas Welding and Askaynak within International Welding. Refer to Note 4 to the consolidated financial statements for details.

Gross Profit:

Gross profit for the three and ~~six~~nine months ended ~~June~~September 30, 2020 decreased, as a percent of sales, compared to the prior year primarily due to lower volumes, ~~and product mix,~~ including the impact of COVID-19 on global demand.

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

SG&A expenses decreased for the three and ~~six~~nine months ended ~~June~~September 30, 2020 as compared to ~~June~~September 30, 2019 due to lower employee costs and discretionary ~~spending,~~spending. The decrease in SG&A expenses for the nine months ended September 30, 2020 was partially offset by higher expense from acquisitions.

Rationalization and Asset Impairment Charges:

The Company recorded net charges of ~~$23,238, $18,494~~$6,257, $5,142 after-tax, and ~~$29,759, $23,039~~$36,016, $28,181 after-tax, in the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, primarily related to severance charges, non-cash asset impairments of long-lived assets and gains or losses on the disposal of assets. The Company recorded net charges of ~~$1,307, $937~~$1,495, $1,240 after-tax, and ~~$4,842, $3,751~~$6,337, $4,991 after-tax, in the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, primarily related to severance, asset impairments and gains or losses on the disposal of assets.

Income Taxes:

The decrease in the effective tax rate for the three months ended September 30, 2020 as compared to September 30, 2019 was primarily due to tax benefits from the settlement of tax items in the third quarter of 2020.

The increase in the effective tax rate for the ~~three and six~~nine months ended ~~June~~September 30, 2020 as compared to ~~June~~September 30, 2019 was primarily due to recording ~~the~~ tax expense associated with a valuation allowance in 2020, smaller tax benefits related to the vesting of ~~stock-based~~stock based compensation in 2020 and income tax benefits for the settlement of tax items recorded in 2019.

Net Income:

The decrease in Net income for the three and ~~six~~nine months ended ~~June~~September 30, 2020 as compared to ~~June~~September 30, 2019 was primarily due to lower sales volumes, including the impact of COVID-19 on global demand, ~~and~~ higher Rationalization and asset impairment charges and higher pension settlement charges.

Table of Contents

Segment Results


Three Months Ended September 30,			Change in Net Sales due to:
	Net Sales 2019		Volume ⁽¹⁾			Acquisitions ⁽²⁾		Price ⁽³⁾			Foreign Exchange			Net Sales 2020
Operating Segments
Americas Welding	$	443,521	$	(69,028)		$	—	$	(682)		$	(2,276)		$	371,535
International Welding	205,378		(10,964)			—		70			2,453			196,937
The Harris Products Group	81,884		10,461			—		9,472			(1,401)			100,416




% Change
Americas Welding			(15.6		%)	—		(0.2		%)	(0.5		%)	(16.2		%)
International Welding			(5.3		%)	—		—			1.2		%	(4.1		%)
The Harris Products Group			12.8		%	—		11.6		%	(1.7		%)	22.6		%

Three months ended June 30, Change in Net Sales due to:
Net Sales
2019
Volume ⁽¹⁾

Acquisitions ⁽²⁾

Price ⁽³⁾

Foreign
Exchange
Net Sales
2020
Operating Segments

Americas Welding $ 476,607
$ (139,035 ) $ —
$ (1,405 ) $ (2,938 ) $ 333,229
International Welding 212,306
(44,452 ) 15,219
(1,280 ) (4,626 ) 177,167
The Harris Products Group 88,095
(6,891 ) —
278
(1,151 ) 80,331
% Change

Americas Welding
(29.2 %) —
(0.3 %) (0.6 %) (30.1 %)
International Welding
(20.9 %) 7.2 % (0.6 %) (2.2 %) (16.6 %)
The Harris Products Group
(7.8 %) —
0.3 % (1.3 %) (8.8 %)


Six Months Ended June 30,			Change in Net Sales due to:
Nine Months Ended September 30,																		Nine Months Ended September 30,			Change in Net Sales due to:
	Net Sales 2019		Volume ⁽¹⁾			Acquisitions ⁽²⁾			Price ⁽³⁾			Foreign Exchange			Net Sales 2020				Net Sales 2019		Volume ⁽¹⁾			Acquisitions ⁽²⁾			Price ⁽³⁾			Foreign Exchange			Net Sales 2020
Operating Segments																		Operating Segments
Americas Welding	$	934,326	$	(176,727	)	$	6,190		$	(6,797	)	$	(5,228	)	$	751,764		Americas Welding	$	1,377,847	$	(245,755)		$	6,190		$	(7,479)		$	(7,504)		$	1,123,299
International Welding	430,392		(74,959		)	33,521			(2,971		)	(10,893		)	375,090			International Welding	635,770		(85,923)			33,521			(2,901)			(8,440)			572,027
The Harris Products Group	171,464		(4,091		)	—			601			(2,110		)	165,864			The Harris Products Group	253,348		6,370			—			10,073			(3,511)			266,280

% Change																		% Change
Americas Welding			(18.9		%)	0.7		%	(0.7		%)	(0.6		%)	(19.5		%)	Americas Welding			(17.8		%)	0.4		%	(0.5		%)	(0.5		%)	(18.5		%)
International Welding			(17.4		%)	7.8		%	(0.7		%)	(2.5		%)	(12.8		%)	International Welding			(13.5		%)	5.3		%	(0.5		%)	(1.3		%)	(10.0		%)
The Harris Products Group			(2.4		%)	—			0.4		%	(1.2		%)	(3.3		%)	The Harris Products Group			2.5		%	—			4.0		%	(1.4		%)	5.1		%

(1) Decrease for three and ~~six~~nine months ended ~~June~~September 30, 2020 for ~~all segments~~Americas Welding and International Welding due to softer demand associated with the current economic environment and the impacts of COVID-19 on global demand. The Harris Products Group volume ~~declines~~increases were ~~partially offset by~~primarily due to higher retail volumes.

(2) Increase for the ~~three~~nine months ended ~~June 30, 2020 due to the acquisition of Askaynak within International Welding. Increase for the six months ended June~~September 30, 2020 due to the acquisition of Baker within Americas Welding and Askaynak within International Welding. Refer to Note 4 to the consolidated financial statements for details.

(3) Decrease for Americas Welding in the nine months ended September 30, 2020 reflects lower tariff-related surcharges in 2020 compared to 2019. Increase for The Harris Products Group in the three and nine months ended September 30, 2020 were due to increases in commodity costs.

Table of Contents

Adjusted Earnings Before Interest and Income Taxes:

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

The following table presents Adjusted EBIT by segment:


	Three Months Ended September 30,								Favorable (Unfavorable) 2020 vs. 2019
	2020			2019			$		%
Americas Welding:
Net sales	$	371,535		$	443,521		$	(71,986)	(16.2	%)
Inter-segment sales	29,368			31,101			(1,733)		(5.6	%)
Total Sales	$	400,903		$	474,622		(73,719)		(15.5	%)

Adjusted EBIT ⁽⁴⁾	$	59,120		$	74,110		(14,990)		(20.2	%)
As a percent of total sales ⁽¹⁾	14.7		%	15.6		%			(0.9	%)
International Welding:
Net sales	$	196,937		$	205,378		(8,441)		(4.1	%)
Inter-segment sales	4,898			4,441			457		10.3	%
Total Sales	$	201,835		$	209,819		(7,984)		(3.8	%)

Adjusted EBIT ⁽⁵⁾	$	13,432		$	10,184		3,248		31.9	%
As a percent of total sales ⁽²⁾	6.7		%	4.9		%			1.8	%
The Harris Products Group:
Net sales	$	100,416		$	81,884		18,532		22.6	%
Inter-segment sales	1,898			1,857			41		2.2	%
Total Sales	$	102,314		$	83,741		18,573		22.2	%

Adjusted EBIT	$	17,587		$	11,038		6,549		59.3	%
As a percent of total sales ⁽³⁾	17.2		%	13.2		%			4.0	%
Corporate / Eliminations:
Inter-segment sales	$	(36,164)		$	(37,399)		(1,235)		(3.3	%)
Adjusted EBIT	(1,839)			(1,632)			207		12.7	%
Consolidated:
Net sales	$	668,888		$	730,783		(61,895)		(8.5	%)
Net income	$	58,479		$	72,461		(13,982)		(19.3	%)
As a percent of total sales	8.7		%	9.9		%			(1.2	%)

Adjusted EBIT ⁽⁶⁾	$	88,300		$	93,700		(5,400)		(5.8	%)

As a percent of sales	13.2		%	12.8		%			0.4	%

(1)Decrease for the three months ended September 30, 2020 as compared to September 30, 2019 primarily driven by lower Net sales volumes driven by the COVID-19 impact on global demand, partially offset by cost reduction actions.

(2)Increase for the three months ended September 30, 2020 as compared to September 30, 2019 driven by cost reduction actions.

(3)Increase for the three months ended September 30, 2020 as compared to September 30, 2019 driven by retail volume increases.

(4)The three months ended September 30, 2020 exclude Rationalization and asset impairment charges of $3,856 related to severance charges as discussed in Note 6 to the consolidated financial statements. The three months ended September 30, 2020 also exclude pension settlement charges of $3,188 related to lump sum payments.

Table of Contents

Three months ended June 30, Favorable (Unfavorable)
2020 vs. 2019
2020 2019 $ %
Americas Welding:

Net sales $ 333,229
$ 476,607
$ (143,378 ) (30.1 %)
Inter-segment sales 27,493
34,811
(7,318 ) (21.0 %)
Total Sales $ 360,722
$ 511,418
(150,696 ) (29.5 %)

Adjusted EBIT ⁽³⁾
$ 46,702
$ 84,851
(38,149 ) (45.0 %)
As a percent of total sales ⁽¹⁾
12.9 % 16.6 %
(3.7 %)
International Welding:

Net sales $ 177,167
$ 212,306
(35,139 ) (16.6 %)
Inter-segment sales 4,286
4,188
98
2.3 %
Total Sales $ 181,453
$ 216,494
(35,041 ) (16.2 %)

Adjusted EBIT ⁽⁴⁾
$ 9,682
$ 15,178
(5,496 ) (36.2 %)
As a percent of total sales ⁽¹⁾
5.3 % 7.0 %
(1.7 %)
The Harris Products Group:

Net sales $ 80,331
$ 88,095
(7,764 ) (8.8 %)
Inter-segment sales 1,753
2,113
(360 ) (17.0 %)
Total Sales $ 82,084
$ 90,208
(8,124 ) (9.0 %)

Adjusted EBIT $ 11,713
$ 13,488
(1,775 ) (13.2 %)
As a percent of total sales ⁽²⁾
14.3 % 15.0 %
(0.7 %)
Corporate / Eliminations:
Inter-segment sales $ (33,532 ) $ (41,112 ) (7,580 ) (18.4 %)
Adjusted EBIT ⁽⁵⁾
(1,964 ) (3,969 ) (2,005 ) (50.5 %)
Consolidated:
Net sales $ 590,727
$ 777,008
(186,281 ) (24.0 %)
Net income $ 26,996
$ 85,452
(58,456 ) (68.4 %)
As a percent of total sales 4.6 % 11.0 % (6.4 %)

Adjusted EBIT ⁽⁶⁾
$ 66,133
$ 109,548
(43,415 ) (39.6 %)
As a percent of sales 11.2 % 14.1 %
(2.9 %)
(5)The three months ended September 30, 2020 and 2019 exclude Rationalization and asset impairment charges of $2,401 and $1,495, respectively, related to severance as discussed in Note 6 to the consolidated financial statements. The three months ended September 30, 2019 also excludes the amortization of step up in value of acquired inventories of $1,609 and a gain on change in control of $7,601 related to the Askaynak acquisition.


~~(1)~~	~~Decrease for the three months ended June 30, 2020 as compared to June 30, 2019 primarily driven by lower Net sales volumes driven by the COVID-19 impact on global demand.~~


~~(2)~~	Decrease for the three months ended June 30, 2020 as compared to June 30, 2019 driven by lower Net sales volumes driven by the COVID-19 impact on global demand, partially offset by retail volume increases.

~~(3)~~

The three months ended June 30, 2020 and 2019 exclude Rationalization and asset impairment charges of $22,673, and $380, respectively, related to severance charges and non-cash asset impairments of long-lived assets as discussed in Note 6 to the consolidated financial statements. The three months ended June 30, 2020 also exclude pension settlement charges of $3,334. The three months ended June 30, 2019 also exclude the amortization of step up in value of acquired inventories of $1,399 related to the Baker acquisition.

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


~~(4)~~	The three months ended June 30, 2020 and 2019 exclude Rationalization and asset impairment charges of $565 and $927, respectively, related to severance, asset impairments and gains or losses on the disposal of assets as discussed in Note 6 to the consolidated financial statements. The three months ended June 30, 2019 also exclude gains on disposal of assets of $3,554.


~~(5)~~	~~The three months ended June 30, 2019 exclude acquisition transaction and integration costs of $1,014 related to the Air Liquide Welding acquisition.~~


~~(6)~~	~~See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT.~~

The following table presents Adjusted EBIT by segment:


	Nine Months Ended September 30,								Favorable (Unfavorable) 2020 vs. 2019
	2020			2019			$		%
Americas Welding:
Net sales	$	1,123,299		$	1,377,847		$	(254,548)	(18.5	%)
Inter-segment sales	81,644			95,300			(13,656)		(14.3	%)
Total Sales	$	1,204,943		$	1,473,147		(268,204)		(18.2	%)

Adjusted EBIT ⁽³⁾	$	176,524		$	240,713		(64,189)		(26.7	%)
As a percent of total sales ⁽¹⁾	14.6		%	16.3		%			(1.7	%)
International Welding:
Net sales	$	572,027		$	635,770		(63,743)		(10.0	%)
Inter-segment sales	13,667			12,838			829		6.5	%
Total Sales	$	585,694		$	648,608		(62,914)		(9.7	%)

Adjusted EBIT ⁽⁴⁾	$	29,729		$	38,699		(8,970)		(23.2	%)
As a percent of total sales ⁽¹⁾	5.1		%	6.0		%			(0.9	%)
The Harris Products Group:
Net sales	$	266,280		$	253,348		12,932		5.1	%
Inter-segment sales	5,376			5,837			(461)		(7.9	%)
Total Sales	$	271,656		$	259,185		12,471		4.8	%

Adjusted EBIT	$	41,792		$	35,045		6,747		19.3	%
As a percent of total sales ⁽²⁾	15.4		%	13.5		%			1.9	%
Corporate / Eliminations:
Inter-segment sales	$	(100,687)		$	(113,975)		(13,288)		(11.7	%)
Adjusted EBIT ⁽⁵⁾	(4,902)			(8,643)			(3,741)		(43.3	%)
Consolidated:
Net sales	$	1,961,606		$	2,266,965		(305,359)		(13.5	%)
Net income	$	141,037		$	229,393		(88,356)		(38.5	%)
As a percent of total sales	7.2		%	10.1		%			(2.9	%)

Adjusted EBIT ⁽⁶⁾	$	243,143		$	305,814		(62,671)		(20.5	%)

As a percent of sales	12.4		%	13.5		%			(1.1	%)

(1)Decrease for the nine months ended September 30, 2020 as compared to September 30, 2019 primarily driven by lower Net sales volumes from softer demand in the current economic environment, including the impact of COVID-19 on global demand, partially offset by cost reduction actions.

(2)Increase for the nine months ended September 30, 2020 as compared to September 30, 2019 driven by retail volume increases.

(3)The nine months ended September 30, 2020 and 2019 exclude Rationalization and asset impairment charges of $27,719 and $1,716, respectively, related to severance charges and non-cash asset impairments of long-lived assets as discussed in Note 6 to the consolidated financial statements. The nine months ended September 30, 2020 also exclude pension settlement charges of $6,522. The nine months ended September 30, 2019 exclude the amortization of step up in value of acquired inventories of $1,399 related to the Baker acquisition.

Table of Contents

Six Months Ended June 30, Favorable (Unfavorable)
2020 vs. 2019
2020 2019 $ %
Americas Welding:

Net sales $ 751,764
$ 934,326
$ (182,562 ) (19.5 %)
Inter-segment sales 52,276
64,199
(11,923 ) (18.6 %)
Total Sales $ 804,040
$ 998,525
(194,485 ) (19.5 %)

Adjusted EBIT ⁽³⁾
$ 117,404
$ 166,603
(49,199 ) (29.5 %)
As a percent of total sales ⁽¹⁾
14.6 % 16.7 %
(2.1 %)
International Welding:

Net sales $ 375,090
$ 430,392
(55,302 ) (12.8 %)
Inter-segment sales 8,769
8,397
372
4.4 %
Total Sales $ 383,859
$ 438,789
(54,930 ) (12.5 %)

Adjusted EBIT ⁽⁴⁾
$ 16,297
$ 28,515
(12,218 ) (42.8 %)
As a percent of total sales ⁽¹⁾
4.2 % 6.5 %
(2.3 %)
The Harris Products Group:

Net sales $ 165,864
$ 171,464
(5,600 ) (3.3 %)
Inter-segment sales 3,478
3,980
(502 ) (12.6 %)
Total Sales $ 169,342
$ 175,444
(6,102 ) (3.5 %)

Adjusted EBIT $ 24,205
$ 24,007
198
0.8 %
As a percent of total sales ⁽²⁾
14.3 % 13.7 %
0.6 %
Corporate / Eliminations:
Inter-segment sales $ (64,523 ) $ (76,576 ) (12,053 ) (15.7 %)
Adjusted EBIT ⁽⁵⁾
(3,063 ) (7,011 ) (3,948 ) (56.3 %)
Consolidated:
Net sales $ 1,292,718
$ 1,536,182
(243,464 ) (15.8 %)
Net income $ 82,558
$ 156,932
(74,374 ) (47.4 %)
As a percent of total sales 6.4 % 10.2 % (3.8 %)

Adjusted EBIT ⁽⁶⁾
$ 154,843
$ 212,114
(57,271 ) (27.0 %)
As a percent of sales 12.0 % 13.8 %
(1.8 %)
(4)The nine months ended September 30, 2020 and 2019 exclude Rationalization and asset impairment charges of $8,297 and $4,621, respectively, related to severance, asset impairments and gains or losses on the disposal of assets as discussed in Note 6 to the consolidated financial statements. The nine months ended September 30, 2020 also excludes the amortization of step up in value of acquired inventories of $806 related to an acquisition. The nine months ended September 30, 2019 exclude the amortization of step up in value of acquired inventories of $1,609 and a gain on change in control of $7,601 related to the Askaynak acquisition and gains on disposal of assets of $3,554.


~~(1)~~	Decrease for the six months ended June 30, 2020 as compared to June 30, 2019 primarily driven lower Net sales volumes from softer demand in current economic environment, including the impact of COVID-19 on global demand.


~~(2)~~	~~Increase for the six months ended June 30, 2020 as compared to June 30, 2019 driven by retail volume increases.~~

~~(3)~~

The six months ended June 30, 2020 and 2019 exclude Rationalization and asset impairment charges of $23,863, and $1,716, respectively, related to severance charges and non-cash asset impairments of long-lived assets as discussed in Note 6 to the consolidated financial statements. The six months ended June 30, 2020 also exclude pension settlement charges of $3,334. The six months ended June 30, 2019 also exclude the amortization of step up in value of acquired inventories of $1,399 related to the Baker acquisition.

(5)The nine months ended September 30, 2019 exclude acquisition transaction and integration costs of $1,804 related to the Air Liquide Welding acquisition.

~~(4)~~

The six months ended June 30, 2020 and 2019 exclude Rationalization and asset impairment charges of $5,896 and $3,126, respectively, related to severance, asset impairments and gains or losses on the disposal of assets as discussed in Note 6 to the consolidated financial statements. The six months ended June 30, 2020 also excludes the amortization of step up in value of acquired inventories of $806 related to an acquisition and the six months ended June 30, 2019 exclude gains on disposal of assets of $3,554.


~~(5)~~	~~The six months ended June 30, 2019 exclude acquisition transaction and integration costs of $1,804 related to the Air Liquide Welding acquisition.~~


~~(6)~~	~~See non-GAAP Financial Measures for a reconciliation of Net income as reported and Adjusted EBIT.~~

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

Non-GAAP Financial Measures

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

Table of Contents

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


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,									Nine Months Ended September 30,
	2020			2019			2020			2019				2020			2019			2020			2019
Operating income as reported	$	39,764		$	105,186		$	120,838		$	199,664		Operating income as reported	$	77,793		$	88,544		$	198,631		$	288,208
Special items (pre-tax):													Special items (pre-tax):
Rationalization and asset impairment charges ⁽¹⁾	23,238			1,307			29,759			4,842			Rationalization and asset impairment charges ⁽¹⁾	6,257			1,495			36,016			6,337

Acquisition transaction and integration costs ⁽²⁾	—			1,014			—			1,804			Acquisition transaction and integration costs ⁽²⁾	—			—			—			1,804
Amortization of step up in value of acquired inventories ⁽³⁾	—			1,399			806			1,399			Amortization of step up in value of acquired inventories ⁽³⁾	—			1,609			806			3,008
Gains on asset disposals ⁽⁴⁾	—			(3,045		)	—			(3,045		)	Gains on asset disposals ⁽⁴⁾	—			—			—			(3,045)

Adjusted operating income	$	63,002		$	105,861		$	151,403		$	204,664		Adjusted operating income	$	84,050		$	91,648		$	235,453		$	296,312

Net income as reported	$	26,996		$	85,452		$	82,558		$	156,932		Net income as reported	$	58,479		$	72,461		$	141,037		$	229,393
Special items:													Special items:
Rationalization and asset impairment charges ⁽¹⁾	23,238			1,307			29,759			4,842			Rationalization and asset impairment charges ⁽¹⁾	6,257			1,495			36,016			6,337

Acquisition transaction and integration costs ⁽²⁾	—			1,014			—			1,804			Acquisition transaction and integration costs ⁽²⁾	—			—			—			1,804
Pension settlement charges ⁽⁵⁾	3,334			—			3,334			—			Pension settlement charges ⁽⁵⁾	3,188			—			6,522			—
Amortization of step up in value of acquired inventories ⁽³⁾	—			1,399			806			1,399			Amortization of step up in value of acquired inventories ⁽³⁾	—			1,609			806			3,008
Gains on asset disposals ⁽⁴⁾	—			(3,554		)	—			(3,554		)	Gains on asset disposals ⁽⁴⁾	—			—			—			(3,554)
Tax effect of Special items ⁽⁶⁾	(5,576		)	(4,751		)	(7,552		)	(5,564		)

Gain on change in control ⁽⁶⁾													Gain on change in control ⁽⁶⁾	—			(7,601)			—			(7,601)
Tax effect of Special items ⁽⁷⁾													Tax effect of Special items ⁽⁷⁾	(1,911)			(255)			(9,463)			(5,819)
Adjusted net income	47,992			80,867			108,905			155,859			Adjusted net income	66,013			67,709			174,918			223,568
Non-controlling interests in subsidiaries’ income (loss)	17			(8		)	10			(22		)	Non-controlling interests in subsidiaries’ income (loss)	27			(4)			37			(26)
Interest expense, net	5,881			5,898			11,339			11,221			Interest expense, net	5,552			6,400			16,891			17,621
Income taxes as reported	6,667			18,040			27,037			39,492			Income taxes as reported	14,797			19,340			41,834			58,832
Tax effect of Special items ⁽⁶⁾	5,576			4,751			7,552			5,564
Tax effect of Special items ⁽⁷⁾													Tax effect of Special items ⁽⁷⁾	1,911			255			9,463			5,819
Adjusted EBIT	$	66,133		$	109,548		$	154,843		$	212,114		Adjusted EBIT	$	88,300		$	93,700		$	243,143		$	305,814
Effective tax rate as reported	19.8		%	17.4		%	24.7		%	20.1		%	Effective tax rate as reported	20.2		%	21.1		%	22.9		%	20.4		%
Net special item tax impact	0.5		%	4.6		%	(0.6		%)	2.3		%	Net special item tax impact	—			1.3		%	(0.2		%)	2.0		%
Adjusted effective tax rate	20.3		%	22.0		%	24.1		%	22.4		%	Adjusted effective tax rate	20.2		%	22.4		%	22.7		%	22.4		%

Diluted earnings per share as reported	$	0.45		$	1.36		$	1.37		$	2.47		Diluted earnings per share as reported	$	0.97		$	1.17		$	2.34		$	3.64
Special items per share	0.35			(0.08		)	0.44			(0.01		)	Special items per share	0.13			(0.08)			0.57			(0.09)
Adjusted diluted earnings per share	$	0.80		$	1.28		$	1.81		$	2.46		Adjusted diluted earnings per share	$	1.10		$	1.09		$	2.91		$	3.55

(1) Charges primarily related to severance, ~~impairments~~impairment of long-lived assets and gains or losses on the disposal of assets as discussed in Note 6 to the consolidated financial statements.

(2) Costs related to the Air Liquide Welding acquisition and are included in ~~Selling, general & administrative expenses.~~SG&A.


~~(3)~~	~~Costs related to an acquisition and are included in Cost of goods sold.~~

(3) Costs related to an acquisition and are included in Cost of goods sold.

(4) Gains primarily included in Cost of goods sold.

(5) Related to lump sum pension payments and are included in Other income (expense).

(6) Gain on change in control related to the acquisition of Askaynak and is included in Other income (expense).

(7) Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the ~~three and six~~nine months ended ~~June~~September 30, 2019.

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

Liquidity and Capital Resources

The Company’s cash flow from operations can be cyclical. Operational cash flow is a key driver of liquidity, providing cash and access to capital markets. In assessing liquidity, the Company reviews working capital measurements to define areas for improvement. Management anticipates the Company will be able to satisfy cash requirements for its ongoing businesses for the foreseeable future primarily with cash generated by operations, existing cash balances, borrowings under its existing credit facilities and raising debt in capital markets. As the impact of the COVID-19 pandemic on the economy and the Company’s operations evolves, it will continue to assess liquidity needs. A continued worldwide disruption could materially affect the Company’s future access to its sources of liquidity, particularly cash flows from operations, financial condition, capitalization and capital investments. In the event of a sustained market deterioration, the Company may need additional liquidity, which would require it to evaluate available alternatives and take appropriate actions.

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

The following table reflects changes in key cash flow measures:


	Six Months Ended June 30,										Nine Months Ended September 30,
	2020			2019			$ Change				2020		2019		$ Change
Cash provided by operating activities ⁽¹⁾	$	126,013		$	151,985		$	(25,972	)	Cash provided by operating activities ⁽¹⁾	$	215,561	$	280,666	$	(65,105)
Cash used by investing activities ⁽²⁾	(18,793		)	(133,644		)	114,851			Cash used by investing activities ⁽²⁾	(30,159)		(178,795)		148,636
Capital expenditures	(25,011		)	(36,513		)	11,502			Capital expenditures	(37,116)		(53,551)		16,435
Acquisition of businesses, net of cash acquired	—			(107,843		)	107,843			Acquisition of businesses, net of cash acquired	—		(136,735)		136,735

Cash used by financing activities ⁽³⁾	(155,692		)	(190,078		)	34,386			Cash used by financing activities ⁽³⁾	(227,317)		(302,461)		75,144
Proceeds from short-term borrowings, net	15,106			29,982			(14,876		)
(Payments on) proceeds from short-term borrowings, net										(Payments on) proceeds from short-term borrowings, net	(33,123)		2,439		(35,562)

Purchase of shares for treasury	(112,975		)	(160,914		)	47,939			Purchase of shares for treasury	(113,198)		(221,942)		108,744
Cash dividends paid to shareholders	(59,814		)	(60,101		)	287			Cash dividends paid to shareholders	(88,945)		(89,162)		217

Decrease in Cash and cash equivalents ⁽⁴⁾	(56,508		)	(168,988		)				Decrease in Cash and cash equivalents ⁽⁴⁾	(47,084)		(202,237)

(1) Cash provided by operating activities decreased for the ~~six~~nine months ended ~~June~~September 30, 2020, compared with the ~~six~~nine months ended ~~June~~September 30, 2019 primarily due to lower company earnings.

(2) Cash used by investing activities decreased for the ~~six~~nine months ended ~~June~~September 30, 2020, compared with the ~~six~~nine months ended ~~June~~September 30, 2019 predominantly due to cash used in the acquisition of businesses in 2019. The Company currently anticipates capital expenditures of ~~$55,000~~$50,000 to ~~$65,000~~$60,000 in 2020. Anticipated capital expenditures include investments for capital maintenance ~~to improve operational effectiveness. Management critically evaluates all proposed capital expenditures~~ and ~~expects each project~~projects to increase efficiency, reduce costs, promote business growth or improve the overall safety and environmental conditions of the Company’s facilities.

(3) Cash used by financing activities decreased in the ~~six~~nine months ended ~~June~~September 30, 2020, compared with the ~~six~~nine months ended ~~June~~September 30, 2019 due to lower purchases of shares for treasury in 2020.

(4) Cash and cash equivalents decreased ~~28.3%~~23.6%, or ~~$56,508,~~$47,084, to ~~$143,055~~$152,479 during the ~~six~~nine months ended ~~June~~September 30, 2020, from $199,563 as of December 31, 2019. This decrease was predominantly due to payments on short-term borrowings, cash used in the purchases of common shares for treasury and cash dividends paid to shareholders, partially offset by ~~proceeds from short-term borrowings and~~ cash provided by operating activities. The decrease in Cash and cash equivalents during the ~~six~~nine months ended ~~June~~September 30, 2020 compares to a decrease of ~~47.1%~~56.4% during the ~~six~~nine months ended ~~June~~September 30, 2019. The decrease in 2019 was predominantly due to cash used in the acquisition of businesses, purchases of common shares for treasury and cash dividends paid to shareholders, partially offset by cash provided by operating activities. At ~~June~~September 30, 2020, ~~$139,302~~$130,267 of Cash and cash equivalents was held by international subsidiaries.

The Company's total debt levels ~~increased~~decreased compared to December 31, 2019 predominately due to ~~additional~~lower short-term borrowings. Total debt to total invested capital increased to ~~53.7%~~50.2% at ~~June~~September 30, 2020 from 47.7% at December 31, 2019.

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In ~~July~~October 2020, the Company paid a cash dividend of $0.49 per share, or ~~$29,090,~~$29,141, to shareholders of record as of ~~June~~September 30, 2020.

Working Capital Ratios


	June 30, 2020		December 31, 2019		June 30, 2019			September 30, 2020		December 31, 2019		September 30, 2019
Average operating working capital to Net sales ^{(1) (2)}	22.4	%	16.8	%	18.4	%	Average operating working capital to Net sales ^{(1) (2)}	20.3	%	16.8	%	19.2	%
Days sales in Inventories ⁽²⁾	131.4		99.9		98.4		Days sales in Inventories ⁽²⁾	111.6		99.9		106.2
Days sales in Accounts receivable	56.8		51.4		53.6		Days sales in Accounts receivable	55.2		51.4		53.9
Average days in Trade accounts payable	58.1		56.0		50.6		Average days in Trade accounts payable	51.3		56.0		51.1

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

(2) In order to minimize potential supply chain disruptions in serving customers due to the COVID-19 crisis, the Company increased inventories relative to expected Net sales resulting in higher Days sales in Inventories and higher Average operating working capital to Net sales.

Return on Invested Capital

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

The following table presents ROIC:


	Twelve Months Ended September 30,
	2020			2019
Net income	$	204,753		$	316,232
Rationalization and asset impairment charges	44,867			7,269


Acquisition transaction and integration costs	—			2,637
Pension settlement charges	6,522			1,696
Amortization of step up in value of acquired inventories	806			3,008
Gains on disposal of assets	—			(3,554)


Gain on change in control	—			(7,601)
Tax effect of Special items ⁽¹⁾	(11,030)			(12,583)
Adjusted net income	$	245,918		$	307,104
Plus: Interest expense, net of tax of $6,177 and $6,410 in 2020 and 2019, respectively	18,564			19,265
Less: Interest income, net of tax of $513 and $926 in 2020 and 2019, respectively	1,543			2,785
Adjusted net income before tax effected interest	$	262,939		$	323,584

Invested Capital	September 30, 2020			September 30, 2019
Short-term debt	$	1,147		$	13,293
Long-term debt, less current portion	715,687			713,884
Total debt	716,834			727,177
Total equity	710,744			813,808
Invested capital	$	1,427,578		$	1,540,985
Return on invested capital	18.4		%	21.0		%

(1)Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended September 30, 2019.

Twelve Months Ended June 30,
2020 2019
Net income $ 218,735
$ 314,310
Rationalization and asset impairment charges 40,105
8,410
Acquisition transaction and integration costs —
3,607
Pension settlement charges 3,334
5,928
Amortization of step up in value of acquired inventories 2,415
1,399
Gains on disposal of assets —
(3,554 )
Gain on change in control (7,601 ) —
Tax effect of Special items ⁽¹⁾
(9,374 ) (11,295 )
Adjusted net income $ 247,614
$ 318,805
Plus: Interest expense, net of tax of $6,439 and $6,178 in 2020 and 2019, respectively 19,348
18,569
Less: Interest income, net of tax of $563 and $1,302 in 2020 and 2019, respectively 1,691
3,912
Adjusted net income before tax effected interest $ 265,271
$ 333,462

Invested Capital June 30, 2020 June 30, 2019
Short-term debt $ 49,597
$ 30,110
Long-term debt, less current portion 715,817
710,458
Total debt 765,414
740,568
Total equity 660,111
846,058
Invested capital $ 1,425,525
$ 1,586,626
Return on invested capital 18.6 % 21.0 %

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~~(1)~~	Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended June 30, 2019.

New Accounting Pronouncements

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

Acquisitions

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

Debt

Revolving Credit ~~Agreement~~Agreements

The Company has a line of credit totaling $400,000 through the Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement has a term of 5 years with a maturity date of June 30, 2022 and may be increased, subject to certain conditions, by an additional amount up to $100,000. The interest rate on borrowings is based on either the London Inter-Bank Offered Rate ("LIBOR") or the prime rate, plus a spread based on the Company’s leverage ratio, at the Company’s election. 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 ~~June~~September 30, 2020, the Company was in compliance with all of its covenants and had no outstanding borrowings ~~of $40,000~~ under the Credit Agreement.

The Company has other lines of credit totaling $50,000. As of September 30, 2020 the Company was in compliance with all of its covenants and had $1,039 outstanding at September 30, 2020.

Senior Unsecured Notes

On April 1, 2015 and October 20, 2016,, the Company entered into separate Note Purchase Agreements pursuant to which it issued senior unsecured notes (the "Notes") through a private placement. The 2015 Notes and 2016 Notes each have an aggregate principal amount of ~~$350,000~~,$350,000, comprised of four different series ranging from ~~$50,000~~$50,000 to ~~$100,000~~,$100,000, with maturity dates ranging from August 20, 2025 through April 1, 2045,, and interest rates ranging from 2.75% and 4.02%. Interest on the Notes is paid semi-annually. The Company's total weighted average effective interest rate and remaining weighted average tenure of the Notes is 3.3% and ~~13.9~~13.6 years, respectively. The proceeds of the Notes were used for general corporate purposes. The Notes contain certain affirmative and negative covenants. As of ~~June~~September 30, 2020, the Company was in compliance with all of its debt covenants relating to the Notes.

Shelf Agreements

On November 27, 2018, the Company entered into seven uncommitted master note facilities (the "Shelf Agreements") that allow borrowings up to $700,000 in the aggregate. The Shelf Agreements have a term of 5 years and the average life of borrowings cannot exceed 15 years. The Company is required to comply with covenants similar to those contained in the Notes. As of ~~June~~September 30, 2020, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Shelf Agreements.

As discussed above, the Company’s debt agreements require that it maintain certain financial and other covenants. Although the Company currently expects continued compliance with debt covenants for the next twelve months and believes it has adequate liquidity, events resulting from the effects of COVID-19 may negatively impact the Company’s ability to comply with these covenants or require the Company to pursue alternative financing. The Company has no assurance that any such alternative financing, if required, could be obtained at acceptable terms or at all.

Pensions

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Forward-looking Statements

The Company’s expectations and beliefs concerning the future contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current expectations and involve a number of risks and uncertainties. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results. The factors include, but are not limited to: general economic, financial and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as political unrest, acts of terror, natural disasters and pandemics, including the COVID-19 outbreak, on the Company or its customers, suppliers and the economy in general. The Company has experienced the negative impacts of COVID-19 on its markets and operations; however, the ultimate duration and severity on the Company's business remains unknown. New and changing government actions to address the COVID-19 pandemic continue to ~~occur on a regular basis.~~occur. As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions may have ~~had~~ to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although ~~many~~most of the Company’s customers have ~~begun to re-open or increase~~re-opened and increased operating levels, such customers may be forced to close or limit operations as any new COVID-19 outbreaks occur. Even as government restrictions are lifted and economies ~~gradually~~ reopen, the ultimate shape of the economic recovery is uncertain and may continue to negatively impact the Company's results of operations, cash flows and financial position in subsequent quarters. Given this current level of economic and operational uncertainty over the impacts of COVID-19, the ultimate financial impact cannot be reasonably estimated at this time. For additional discussion, see “Item 1A. Risk Factors” ~~presented herein, as well as~~ in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and on Form 10-Q for the ~~quarter~~quarters ended March 31, 2020 and June 30, 2020.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s exposure to market risk since December 31, 2019. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of ~~June~~September 30, ~~2020~~.2020.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended ~~June~~September 30, 2020 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

As of ~~June~~September 30, 2020, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by approximately ~~2,790~~2,774 plaintiffs, which is a net decrease of ~~334~~16 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: ~~55,457~~55,481 of those claims were dismissed, 23 were tried to defense verdicts, 7 were tried to plaintiff verdicts (which were reversed or resolved after appeal), 1 was resolved by agreement for an immaterial amount and ~~1,006~~1,007 were decided in favor of the Company following summary judgment motions.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, the reader should carefully consider the factors discussed in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and on Form 10-Q for the ~~quarter~~quarters ended March 31, 2020 and ~~the Risk Factor described below,~~June 30, 2020, which could materially affect the Company’s business, financial condition or future results.

~~The COVID-19 pandemic could have a material adverse effect our ability to operate, results of operations, financial condition, liquidity and capital investments.~~

New and changing government actions to address the COVID-19 pandemic continue to occur on a regular basis. As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions have had to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although many of the Company’s customers have begun to re-open or increase operating levels, such customers may be forced to close or limit operations as any new COVID-19 outbreaks occur. Even as government restrictions are lifted and economies gradually reopen, the shape of the economic recovery is uncertain and may continue to negatively impact the Company's results of operations, cash flows and financial position in subsequent quarters. Given this current level of economic and operational uncertainty over the impacts of COVID-19, the ultimate financial impact cannot be reasonably estimated at this time.

The COVID-19 pandemic and similar issues in the future could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, and capital investments. In addition, preventive measures we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of certain locations, decreased employee availability, potential border closures, disruptions to the businesses of our channel partners and others. Our suppliers and customers may also face these and other challenges, which could lead to a disruption in our supply chain, as well as decreased customer demand for our products and services. These issues may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization and capital investments. Although these disruptions may continue to occur, the long-term economic impact and near-term financial impacts of such issues, including, but not limited to, possible impairment, restructuring and other charges, may not be reasonably estimated due to the uncertainty of future developments.

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

Issuer purchases of its common shares during the ~~second~~third quarter of 2020 were as follows:


Period	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) (3)}
July 1 - 31, 2020	123	⁽¹⁾	$	89.85	—	11,453,193
August 1 - 31, 2020	391	⁽¹⁾	95.42		—	11,453,193
September 1 - 30, 2020	1,786	⁽¹⁾	97.58		—	11,453,193
Total	2,300		96.80		—

Period
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) (3)}
April 1 - 30, 2020 43,597
⁽¹⁾
$ 69.73
43,098
11,453,193
May 1 - 31, 2020 835
⁽¹⁾
79.09
—
11,453,193
June 1 - 30, 2020 1,312
⁽¹⁾
82.02
—
11,453,193
Total 45,744
70.25
43,098

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


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

~~(2)~~

On April 20, 2016, the Company announced that the Board of Directors authorized a new share repurchase program, which increased the total number of the Company’s common shares authorized to be repurchased to 55 million shares. Total shares purchased through the share repurchase programs were 53.5 million shares at a total cost of $2.3 billion for a weighted average cost of $42.53 per share through June 30, 2020.


~~(3)~~	~~On February 12, 2020, the Company's Board of Directors authorized a new share repurchase program for up to an additional 10 million shares of the Company's common stock.~~

(2)On April 20, 2016, the Company announced that the Board of Directors authorized a new share repurchase program, which increased the total number of the Company’s common shares authorized to be repurchased to 55 million shares. Total shares purchased through the share repurchase programs were 53.5 million shares at a total cost of $2.3 billion for a weighted average cost of $42.53 per share through September 30, 2020.

(3)On February 12, 2020, the Company's Board of Directors authorized a new share repurchase program for up to an additional 10 million shares of the Company's common stock.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 6. EXHIBITS

(a) Exhibits



~~31.1~~10.1*						Amendment No. 1 to 2005 Deferred Compensation Plan for Executives (Amended and Restated as of January 1, 2018) dated August 1, 2020 (filed herewith).
10.2*						Amendment No. 1 to Non-Employee Directors' Deferred Compensation Plan (Amended and Restated as of January 1, 2019) dated August 1, 2020 (filed herewith).
10.3*						Amendment No. 1 to The Lincoln Electric Company Restoration Plan dated August 1, 2020 (filed herewith).
10.4*						Amendment No. 2 to Supplemental Executive Retirement Plan (As Amended and Restated as of December 31, 2008) dated August 1, 2020 (filed herewith).
10.5*						Amendment No. 1 to Form of Change in Control Severance Agreement (as entered into by the Company and its executive officers) dated August 1, 2020 (filed herewith).
31.1						Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2						Certification of the Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1						Certification of the Chairman, President and Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						Inline XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
104						Cover page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)

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SIGNATURES

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



						LINCOLN ELECTRIC HOLDINGS, INC.

						/s/ Gabriel Bruno
						Gabriel Bruno
						Executive Vice President, Chief Financial Officer and Treasurer
						(Principal Financial and Accounting Officer)
						~~July~~October 27, 2020



	Three Months Ended June 30, 2020
	Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges				Defined benefit pension plan activity				Currency translation adjustment				Total
Balance at March 31, 2020	$	(743	)		$	(69,937	)		$	(277,497	)		$	(348,177	)
Other comprehensive income (loss) before reclassification	112				(26,127		)	²	14,485			³	(11,530		)
Amounts reclassified from AOCI	996			¹	3,091			²	—				4,087
Net current-period other comprehensive income (loss)	1,108				(23,036		)		14,485				(7,443		)
Balance at June 30, 2020	$	365			$	(92,973	)		$	(263,012	)		$	(355,620	)

	Three Months Ended June 30, 2019
	Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges				Defined benefit pension plan activity				Currency translation adjustment				Total
Balance at March 31, 2019	$	2,023			$	(81,262	)		$	(208,285	)		$	(287,524	)
Other comprehensive income (loss) before reclassification	107				—				4,884			³	4,991
Amounts reclassified from AOCI	(408		)	¹	1,091			²	—				683
Net current-period other comprehensive income (loss)	(301		)		1,091				4,884				5,674
Balance at June 30, 2019	$	1,722			$	(80,171	)		$	(203,401	)		$	(281,850	)



	Six Months Ended June 30, 2020
	Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges				Defined benefit pension plan activity				Currency translation adjustment				Total
Balance at December 31, 2019	$	1,626			$	(70,546	)		$	(206,930	)		$	(275,850	)
Other comprehensive income (loss) before reclassification	(2,200		)		(26,127		)	²	(56,082		)	³	(84,409		)
Amounts reclassified from AOCI	939			¹	3,700			²	—				4,639
Net current-period other comprehensive income (loss)	(1,261		)		(22,427		)		(56,082		)		(79,770		)
Balance at June 30, 2020	$	365			$	(92,973	)		$	(263,012	)		$	(355,620	)

	Six Months Ended June 30, 2019
	Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges				Defined benefit pension plan activity				Currency translation adjustment				Total
Balance at December 31, 2018	$	1,694			$	(82,049	)		$	(213,384	)		$	(293,739	)
Other comprehensive income (loss) before reclassification	789				—				9,983			³	10,772
Amounts reclassified from AOCI	(761		)	¹	1,878			²	—				1,117
Net current-period other comprehensive income (loss)	28				1,878				9,983				11,889
Balance at June 30, 2019	$	1,722			$	(80,171	)		$	(203,401	)		$	(281,850	)



	June 30, 2020
2020	$	7,459
2021	13,051
2022	9,474
2023	7,808
2024	6,355
After 2025	11,127
Total lease payments	$	55,274
Less: Imputed interest	(6,022		)
Operating lease liabilities	$	49,252



	Twelve Months Ended June 30,
	2020			2019
Net income	$	218,735		$	314,310
Rationalization and asset impairment charges	40,105			8,410
Acquisition transaction and integration costs	—			3,607
Pension settlement charges	3,334			5,928
Amortization of step up in value of acquired inventories	2,415			1,399
Gains on disposal of assets	—			(3,554		)
Gain on change in control	(7,601		)	—
Tax effect of Special items ⁽¹⁾	(9,374		)	(11,295		)
Adjusted net income	$	247,614		$	318,805
Plus: Interest expense, net of tax of $6,439 and $6,178 in 2020 and 2019, respectively	19,348			18,569
Less: Interest income, net of tax of $563 and $1,302 in 2020 and 2019, respectively	1,691			3,912
Adjusted net income before tax effected interest	$	265,271		$	333,462

Invested Capital	June 30, 2020			June 30, 2019
Short-term debt	$	49,597		$	30,110
Long-term debt, less current portion	715,817			710,458
Total debt	765,414			740,568
Total equity	660,111			846,058
Invested capital	$	1,425,525		$	1,586,626
Return on invested capital	18.6		%	21.0		%