LINCOLN ELECTRIC HOLDINGS INC [LECO] Filings

10-Q 1 leco-20220331x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2022

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

For the transition period from _____________ to _____________

Commission File Number: 0-1402

LINCOLN ELECTRIC HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


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

22801 St. Clair Avenue, Cleveland, Ohio		44117
(Address of principal executive offices)		(Zip Code)

(216) 481-8100

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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


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

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

Yes  No ☐

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

Yes  No ☐

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


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

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

☐

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

Yes ☐ No 

The number of shares outstanding of the registrant’s common shares as of March 31, 2022 was 58,097,417.

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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)		7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29

PART II. OTHER INFORMATION		30
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31
Item 4. Mine Safety Disclosures		31
Item 6. Exhibits		32
Signatures		33

EX-10.1	Form of Stock Option Agreement for Executive Officers (filed herewith).
EX-10.2	Form of Restricted Stock Unit Agreement for Executive Officers (filed herewith).
EX-10.3	Form of Performance Share Award Agreement for Executive Officers (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

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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 March 31,
	2022		2021
Net sales (Note 2)	$	925,448	$	757,021
Cost of goods sold		595,671		503,254
Gross profit		329,777		253,767
Selling, general & administrative expenses		166,686		145,676
Rationalization and asset impairment charges (Note 6)		1,885		4,163
Operating income		161,206		103,928
Interest expense, net		6,198		5,359
Other income (expense) (Note 14)		4,634		(1,416)
Income before income taxes		159,642		97,153
Income taxes (Note 15)		33,611		23,020
Net income including non-controlling interests		126,031		74,133
Non-controlling interests in subsidiaries’ income (loss)		1		(44)
Net income	$	126,030	$	74,177

Basic earnings per share (Note 3)	$	2.15	$	1.24
Diluted earnings per share (Note 3)	$	2.13	$	1.23
Cash dividends declared per share	$	0.56	$	0.51

See notes to these consolidated financial statements.

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LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands)


	Three Months Ended March 31,
	2022		2021
Net income including non-controlling interests	$	126,031	$	74,133
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $2,051 and $2,309 in the three months ended March 31, 2022 and 2021		5,355		7,290
Defined benefit pension plan activity, net of tax of $14 and $815 in the three months ended March 31, 2022 and 2021		107		5,060
Currency translation adjustment		(7,449)		(22,743)
Other comprehensive loss:		(1,987)		(10,393)
Comprehensive income		124,044		63,740
Comprehensive income (loss) attributable to non-controlling interests		135		(203)
Comprehensive income attributable to shareholders	$	123,909	$	63,943

See notes to these consolidated financial statements.

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LINCOLN ELECTRIC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	March 31, 2022		December 31, 2021
	(UNAUDITED)		(NOTE 1)
ASSETS
Current Assets
Cash and cash equivalents	$	154,373	$	192,958
Accounts receivable (less allowance for doubtful accounts of $10,665 in 2022; $11,105 in 2021)		516,231		429,074
Inventories (Note 9)		599,781		539,919
Other current assets		157,448		127,642
Total Current Assets		1,427,833		1,289,593
Property, plant and equipment (less accumulated depreciation of $877,707 in 2022; $868,036 in 2021)		511,873		511,744
Goodwill		437,141		430,162
Other assets		359,497		360,808
TOTAL ASSETS	$	2,736,344	$	2,592,307
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt (Note 12)	$	150,560	$	52,730
Trade accounts payable		369,415		330,230
Accrued employee compensation and benefits		109,797		108,562
Other current liabilities		297,880		264,383
Total Current Liabilities		927,652		755,905
Long-term debt, less current portion (Note 12)		715,032		717,089
Other liabilities		230,600		255,404
Total Liabilities		1,873,284		1,728,398
Shareholders' Equity
Common Shares		9,858		9,858
Additional paid-in capital		462,217		451,268
Retained earnings		3,063,721		2,970,303
Accumulated other comprehensive loss		(259,507)		(257,386)
Treasury Shares		(2,413,171)		(2,309,941)
Total Shareholders' Equity		863,118		864,102
Non-controlling interests		(58)		(193)
Total Equity		863,060		863,909
TOTAL LIABILITIES AND TOTAL EQUITY	$	2,736,344	$	2,592,307

See notes to these consolidated financial statements.

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LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)


								Accumulated
	Common			Additional				Other				Non-
	Shares	Common		Paid-In		Retained		Comprehensive		Treasury		Controlling
	Outstanding	Shares		Capital		Earnings		Income (Loss)		Shares		Interests		Total
Balance at December 31, 2021	58,787	$	9,858	$	451,268	$	2,970,303	$	(257,386)	$	(2,309,941)	$	(193)	$	863,909
Net income							126,030						1		126,031
Unrecognized amounts from defined benefit pension plans, net of tax									107						107
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax									5,355						5,355
Currency translation adjustment									(7,583)				134		(7,449)
Cash dividends declared - $0.56 per share							(32,505)								(32,505)
Stock-based compensation activity	116				10,834						1,349				12,183
Purchase of shares for treasury	(805)										(104,579)				(104,579)
Other					115		(107)								8
Balance at March 31, 2022	58,098	$	9,858	$	462,217	$	3,063,721	$	(259,507)	$	(2,413,171)	$	(58)	$	863,060


								Accumulated
	Common			Additional				Other				Non-
	Shares	Common		Paid-In		Retained		Comprehensive		Treasury		Controlling
	Outstanding	Shares		Capital		Earnings		Income (Loss)		Shares		Interests		Total
Balance at December 31, 2020	59,641	$	9,858	$	409,958	$	2,821,359	$	(302,190)	$	(2,149,714)	$	979	$	790,250
Net income							74,177						(44)		74,133
Unrecognized amounts from defined benefit pension plans, net of tax									5,060						5,060
Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax									7,290						7,290
Currency translation adjustment									(22,584)				(159)		(22,743)
Cash dividends declared – $0.51 per share							(30,572)								(30,572)
Stock-based compensation activity	134				7,680						1,502				9,182
Purchase of shares for treasury	(237)										(28,459)				(28,459)
Other					891		(741)						(883)		(733)
Balance at March 31, 2021	59,538	$	9,858	$	418,529	$	2,864,223	$	(312,424)	$	(2,176,671)	$	(107)	$	803,408

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LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Three Months Ended March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	126,030	$	74,177
Non-controlling interests in subsidiaries' income (loss)		1		(44)
Net income including non-controlling interests		126,031		74,133
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
Rationalization and asset impairment net charges (Note 6)		1,188		60
Depreciation and amortization		19,891		19,118
Equity earnings in affiliates, net		(113)		(177)
Deferred income taxes		(18,207)		(16,115)
Stock-based compensation		11,148		6,402
Other, net		(162)		9,016
Changes in operating assets and liabilities, net of effects from acquisitions:
Increase in accounts receivable		(86,120)		(65,795)
Increase in inventories		(55,407)		(42,568)
Increase in other current assets		(25,152)		(8,095)
Increase in trade accounts payable		39,284		42,325
Increase in other current liabilities		32,116		30,266
Net change in other assets and liabilities		(1,407)		(3,308)
NET CASH PROVIDED BY OPERATING ACTIVITIES		43,090		45,262
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(18,672)		(9,936)
Acquisition of businesses, net of cash acquired		(22,013)		—
Proceeds from sale of property, plant and equipment		569		584
Other investing activities		—		6,500
NET CASH USED BY INVESTING ACTIVITIES		(40,116)		(2,852)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings		96,308		1,307
Proceeds from exercise of stock options		1,035		2,780
Purchase of shares for treasury (Note 8)		(104,579)		(28,459)
Cash dividends paid to shareholders		(33,361)		(30,999)
NET CASH USED BY FINANCING ACTIVITIES		(40,597)		(55,371)
Effect of exchange rate changes on Cash and cash equivalents		(962)		(2,192)
DECREASE IN CASH AND CASH EQUIVALENTS		(38,585)		(15,153)

Cash and cash equivalents at beginning of period		192,958		257,279
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	154,373	$	242,126

See notes to these consolidated financial statements.

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

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

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

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

Subsequent Events

Cumulative inflation in Turkey over the preceding three-year period reached 100% during the first quarter of 2022. As a result, the Company changed the functional currency of its Turkish subsidiary to the U.S. dollar as of April 1, 2022.

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

New Accounting Pronouncements:

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

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 2 — REVENUE RECOGNITION

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


	Three Months Ended March 31,
	2022		2021
Consumables	$	539,162	$	434,179
Equipment		386,286		322,842
Net sales	$	925,448	$	757,021

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

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

At March 31, 2022, the Company recorded $70,096 related to advance customer payments and $33,284 related to billings in excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Condensed Consolidated Balance Sheets. At December 31, 2021, the balances related to advance customer payments and billings in excess of revenue recognized were $72,047 and $40,450, respectively. Substantially all of the Company’s contract liabilities are recognized within twelve months based on contract duration. The Company records an asset for contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services. At March 31, 2022 and December 31, 2021, the Company recorded $43,941 and $25,300, respectively, related to these contract assets which are included in Other current assets in the Condensed Consolidated Balance Sheets. Contract asset amounts are expected to be billed within the next twelve months.

NOTE 3 — EARNINGS PER SHARE

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


	Three Months Ended March 31,
	2022		2021
Numerator:
Net income	$	126,030	$	74,177
Denominator (shares in 000's):
Basic weighted average shares outstanding		58,606		59,642
Effect of dilutive securities - Stock options and awards		666		657
Diluted weighted average shares outstanding		59,272		60,299
Basic earnings per share	$	2.15	$	1.24
Diluted earnings per share	$	2.13	$	1.23

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

For the three months ended March 31, 2022 and 2021, common shares subject to equity-based awards of 69,614 and 89,592, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS

During March 2022, the Company acquired Kestra Universal Soldas, Industria e Comercio, Imporacao e Exportacao Ltda. (“Kestra”), a privately held manufacturer headquartered in Atibaia, Sao Paulo State, Brazil. Kestra manufactures and provides specialty welding consumables, wear plates and maintenance and repair services for alloy and wear-resistant products commonly used in mining, steel, agricultural and industrial mill applications.

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

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

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

NOTE 5 — SEGMENT INFORMATION

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

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

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LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

The following table presents Adjusted EBIT by segment:


					The Harris
	Americas		International		Products		Corporate /
	Welding		Welding		Group		Eliminations		Consolidated
Three Months Ended March 31, 2022
Net sales	$	534,055	$	258,041	$	133,352	$	—	$	925,448
Inter-segment sales		28,156		6,228		3,062		(37,446)		—
Total	$	562,211	$	264,269	$	136,414	$	(37,446)	$	925,448
Adjusted EBIT	$	111,568	$	37,087	$	19,598	$	(4,801)	$	163,452
Special items charge (gain) ⁽¹⁾		(3,735)		1,347		—		—		(2,388)
EBIT	$	115,303	$	35,740	$	19,598	$	(4,801)	$	165,840
Interest income										376
Interest expense										(6,574)
Income before income taxes									$	159,642

Three Months Ended March 31, 2021
Net sales	$	425,242	$	223,079	$	108,700	$	—	$	757,021
Inter-segment sales		32,748		4,285		2,147		(39,180)		—
Total	$	457,990	$	227,364	$	110,847	$	(39,180)	$	757,021
Adjusted EBIT	$	76,617	$	18,816	$	18,697	$	(1,456)	$	112,674
Special items charge (gain) ⁽²⁾		4,440		4,609		—		1,113		10,162
EBIT	$	72,177	$	14,207	$	18,697	$	(2,569)	$	102,512
Interest income										454
Interest expense										(5,813)
Income before income taxes									$	97,153

(1)

In the three months ended March 31, 2022, special items reflect Rationalization charges of $1,885 in International Welding and the final settlement related to the termination of a pension plan of $3,735 in Americas Welding.

(2)

In the three months ended March 31, 2021, special items reflect Rationalization and asset impairment charges of $4,163 in International Welding, pension settlement charges of $4,440 and $446 in Americas Welding and International Welding, respectively, and acquisition transaction costs of $1,113 in Corporate/Eliminations related to an acquisition.

NOTE 6 — RATIONALIZATION AND ASSET IMPAIRMENTS

The Company recorded Rationalization and asset impairment net charges of $1,885 and $4,163 in the three months ended March 31, 2022 and 2021, respectively. The charges are primarily related to employee severance, non-cash asset impairments of long-lived assets and gains or losses on the disposal of assets.

During 2021, the Company initiated rationalization plans within the International Welding segment. The plans include headcount restructuring and the consolidation of manufacturing operations to better align the Company’s cost structure with economic conditions and operating needs. At March 31, 2022, liabilities of $1,770 for International Welding were recognized in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

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

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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 summarizes the activity related to rationalization liabilities for the three months ended March 31, 2022:



	Consolidated
Balance at December 31, 2021	$	2,990
Payments and other adjustments		(1,917)
Charged to expense		697
Balance at March 31, 2022	$	1,770

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 March 31, 2022
	Unrealized gain
	(loss) on derivatives
	designated and			Defined benefit			Currency
	qualifying as cash			pension plan			translation
	flow hedges			activity			adjustment			Total
Balance at December 31, 2021	$	8,094		$	(13,231)		$	(252,249)		$	(257,386)
Other comprehensive income (loss) before reclassification		5,849			—			(7,583)	³		(1,734)
Amounts reclassified from AOCI		(494)	¹		107	²		—			(387)
Net current-period other comprehensive income (loss)		5,355			107			(7,583)			(2,121)
Balance at March 31, 2022	$	13,449		$	(13,124)		$	(259,832)		$	(259,507)


	Three Months Ended March 31, 2021
	Unrealized gain
	(loss) on derivatives
	designated and			Defined benefit			Currency
	qualifying as cash			pension plan			translation
	flow hedges			activity			adjustment			Total
Balance at December 31, 2020	$	2,487		$	(101,770)		$	(202,907)		$	(302,190)
Other comprehensive income (loss) before reclassification		7,066			602			(22,584)	³		(14,916)
Amounts reclassified from AOCI		224	¹		4,458	²		—			4,682
Net current-period other comprehensive income (loss)		7,290			5,060			(22,584)			(10,234)
Balance at March 31, 2021	$	9,777		$	(96,710)		$	(225,491)		$	(312,424)

(1)

During the three months ended March 31, 2022, the AOCI reclassification is a component of Net sales of $132 (net of tax of $48) and Cost of goods sold of $362 (net of tax of $93); during the three months ended March 31, 2021, the reclassification is a component of Net sales of $102 (net of tax of $42) and Cost of goods sold of $326 (net of tax of $133). 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 $14 and $1,456) during the three months ended March 31, 2022 and 2021, respectively. See Note 13 to the consolidated financial statements for additional details.

(3)

The Other comprehensive income (loss) before reclassifications excludes $134 and $(159) attributable to Non-controlling interests in the three months ended March 31, 2022 and 2021, respectively.

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

NOTE 8 — COMMON STOCK REPURCHASE PROGRAM

The Company has a share repurchase program for up to 10 million shares of the Company’s common shares. From time to time at management’s discretion, the Company repurchases its common shares in the open market, depending on market conditions, stock price and other factors. During the three months ended March 31, 2022, the Company purchased a total of 0.8 million shares at an average cost per share of $129.97. As of March 31, 2022, 9.5 million common shares remained available for repurchase under these programs. The repurchased common shares remain in treasury and have not been retired.

NOTE 9 — INVENTORIES

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



	March 31, 2022		December 31, 2021
Raw materials	$	174,515	$	143,394
Work-in-process		108,927		97,834
Finished goods		316,339		298,691
Total	$	599,781	$	539,919

At March 31, 2022 and December 31, 2021, approximately 36% of total inventories were valued using the last-in, first-out ("LIFO") method. The excess of current cost over LIFO cost was $121,064 and $114,176 at March 31, 2022 and December 31, 2021, respectively.

NOTE 10 — LEASES

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


Operating Leases	Balance Sheet Classification	March 31, 2022		December 31, 2021
Right-of-use assets	Other assets	$	49,372	$	47,966

Current liabilities	Other current liabilities	$	10,397