UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from _____________ to _____________
Commission File Number:
(Exact name of registrant as specified in its charter)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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.
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).
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.
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
The number of shares outstanding of the registrant’s common shares as of September 30, 2023 was
TABLE OF CONTENTS
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | ||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 36 | ||
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 37 | ||
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EX-101 | Instance Document | ||
EX-101 | Schema Document |
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EX-101 | Calculation Linkbase Document |
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EX-101 | Label Linkbase Document |
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EX-101 | Presentation Linkbase Document |
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EX-101 | Definition Linkbase Document |
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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 September 30, | Nine Months Ended September 30, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Net sales (Note 2) |
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Cost of goods sold |
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Gross profit |
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Selling, general & administrative expenses |
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Rationalization and asset impairment charges (Note 6) |
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Operating income |
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Interest expense, net |
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Other income (Note 11) |
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Income before income taxes |
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Income taxes (Note 12) |
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Net income | $ | | $ | | $ | | $ | | ||||
Basic earnings per share (Note 3) | $ | | $ | | $ | | $ | | ||||
Diluted earnings per share (Note 3) | $ | | $ | | $ | | $ | | ||||
Cash dividends declared per share | $ | | $ | | $ | | $ | |
See notes to these consolidated financial statements.
3
LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Net income |
| $ | |
| $ | |
| $ | |
| $ | |
Other comprehensive income (loss), net of tax: |
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Unrealized gain on derivatives designated and qualifying as cash flow hedges |
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Defined benefit pension plan activity |
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Currency translation adjustment |
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Other comprehensive (loss) income: |
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Comprehensive income | $ | | $ | | $ | | $ | |
See notes to these consolidated financial statements.
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LINCOLN ELECTRIC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, 2023 | December 31, 2022 | |||||
(UNAUDITED) | (NOTE 1) | |||||
ASSETS |
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Current Assets |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable (less allowance for doubtful accounts of $ |
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Inventories (Note 8) |
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Other current assets |
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Total Current Assets |
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Property, plant and equipment (less accumulated depreciation of $ | | | ||||
Goodwill |
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Other assets |
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TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND EQUITY |
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Current Liabilities |
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Short-term debt (Note 10) | $ | | $ | | ||
Trade accounts payable |
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Accrued employee compensation and benefits |
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Other current liabilities |
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Total Current Liabilities |
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Long-term debt, less current portion (Note 10) |
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Other liabilities |
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Total Liabilities |
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Shareholders' Equity |
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Common Shares |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Treasury Shares |
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Total Equity |
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TOTAL LIABILITIES AND TOTAL EQUITY | $ | | $ | |
See notes to these consolidated financial statements.
5
LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
(In thousands, except per share amounts)
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Common | Additional | Other | ||||||||||||||||||
Shares | Common | Paid-In | Retained | Comprehensive | Treasury | |||||||||||||||
| Outstanding |
| Shares |
| Capital |
| Earnings |
| Income (Loss) |
| Shares |
| Total | |||||||
Balance at December 31, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Net income |
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Unrecognized amounts from defined benefit pension plans, net of tax |
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Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax |
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Currency translation adjustment, net of tax |
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Cash dividends declared - $ |
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Stock-based compensation activity |
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Purchase of shares for treasury |
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Other |
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Balance at March 31, 2023 |
| | $ | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Net income |
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Unrecognized amounts from defined benefit pension plans, net of tax |
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Unrealized (loss) on derivatives designated and qualifying as cash flow hedges, net of tax |
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Currency translation adjustment, net of tax |
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Cash dividends declared – $ |
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Stock-based compensation activity |
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Purchase of shares for treasury |
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Other |
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Balance at June 30, 2023 |
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Net income |
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Unrecognized amounts from defined benefit pension plans, net of tax |
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Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax |
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Currency translation adjustment, net of tax |
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Cash dividends declared – $ |
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Stock-based compensation activity |
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Purchase of shares for treasury |
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Other |
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Balance at September 30, 2023 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | |
6
LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
(In thousands, except per share amounts)
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Common | Additional | Other | ||||||||||||||||||
Shares | Common | Paid-In | Retained | Comprehensive | Treasury | |||||||||||||||
| Outstanding |
| Shares |
| Capital |
| Earnings |
| Income (Loss) |
| Shares |
| Total | |||||||
Balance at December 31, 2021 |
| | $ | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Net income |
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Unrecognized amounts from defined benefit pension plans, net of tax |
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Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax |
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Currency translation adjustment |
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Cash dividends declared – $ |
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Stock-based compensation activity |
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Purchase of shares for treasury |
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Other |
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Balance at March 31, 2022 |
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Net income |
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Unrecognized amounts from defined benefit pension plans, net of tax |
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Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax |
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Currency translation adjustment |
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Cash dividends declared – $ |
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Stock-based compensation activity |
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Purchase of shares for treasury |
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Other |
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Balance at June 30, 2022 |
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Net income |
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Unrecognized amounts from defined benefit pension plans, net of tax |
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Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax |
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Currency translation adjustment |
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Cash dividends declared – $ |
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Stock-based compensation activity |
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Purchase of shares for treasury |
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Other |
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Balance at September 30, 2022 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | |
7
LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended September 30, | ||||||
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| 2023 |
| 2022 | ||
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income | $ | | $ | | ||
Adjustments to reconcile Net income to Net cash provided by operating activities: |
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Rationalization and asset impairment net charges |
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Depreciation and amortization |
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Equity (earnings) loss in affiliates, net |
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Deferred income taxes |
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Stock-based compensation |
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Other, net |
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Changes in operating assets and liabilities, net of effects from acquisitions: |
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Decrease (increase) in accounts receivable |
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Decrease (increase) in inventories |
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Increase in other current assets |
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(Decrease) increase in trade accounts payable |
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Increase in other current liabilities |
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Net change in other assets and liabilities |
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NET CASH PROVIDED BY OPERATING ACTIVITIES |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Capital expenditures |
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Acquisition of businesses, net of cash acquired |
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Proceeds from sale of property, plant and equipment |
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Purchase of marketable securities |
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NET CASH USED BY INVESTING ACTIVITIES |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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(Payments on) proceeds from short-term borrowings | ( | | ||||
(Payments on) proceeds from long-term borrowings |
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Proceeds from exercise of stock options |
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Purchase of shares for treasury |
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Cash dividends paid to shareholders |
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NET CASH USED BY FINANCING ACTIVITIES |
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Effect of exchange rate changes on Cash and cash equivalents |
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
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Cash and cash equivalents at beginning of period |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | | $ | |
See notes to these consolidated financial statements.
8
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except per share amounts
NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest (the “Company”) after elimination of all inter-company accounts, transactions and profits.
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. However, in the opinion of management, these unaudited consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.
The accompanying Condensed Consolidated Balance Sheet at December 31, 2022 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, 2022.
Certain reclassifications have been made to the prior period amounts to conform to the current period presentation, none of which are material.
Turkey – Highly Inflationary Economy
Effective April 1, 2022, the financial statements of the Company’s Turkish operation are reported under highly inflationary accounting rules. As a result, the financial statements of the Company’s Turkish operation have been remeasured into the Company’s reporting currency (U.S. dollar) and the exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than “Accumulated other comprehensive loss” on the balance sheet. For the nine months ended September 30, 2023, this impact was not significant to the Company’s results.
New Accounting Pronouncements:
This section provides a description of new accounting pronouncements (“Accounting Standards Updates” or “ASUs”) issued by the Financial Accounting Standards Board (“FASB”) that are applicable to the Company.
9
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, 2023:
The Company is currently evaluating the impact on its financial statements of the following ASUs:
NOTE 2 — REVENUE RECOGNITION
The following table presents the Company’s Net sales disaggregated by product line:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Consumables | $ | | $ | | $ | | $ | | ||||
Equipment |
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Net sales | $ | | $ | | $ | | $ | |
Consumable sales consist of welding, brazing and soldering filler metals. Equipment sales consist of arc welding, welding accessories, arc welding equipment, wire feeding systems, fume control equipment, plasma and oxy-fuel cutting systems, specialty gas regulators, and education solutions; as well as a comprehensive portfolio of automated solutions for joining, cutting, material handling, module assembly, and end of line testing. 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