LINCOLN ELECTRIC HOLDINGS INC [LECO] Filings

10-Q 1 leco-20220930x10q.htm 10-Q

Table of Contents

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 September 30, 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 September 30, 2022 was 57,738,400.

Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)		3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)		4
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)		5
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)		6
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)		8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		36
Item 4. Controls and Procedures		36

PART II. OTHER INFORMATION		37
Item 1. Legal Proceedings		37
Item 1A. Risk Factors		37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		37
Item 4. Mine Safety Disclosures		37
Item 6. Exhibits		38
Signatures		39

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net sales (Note 2)	$	935,240	$	806,454	$	2,830,277	$	2,389,929
Cost of goods sold		625,722		538,282		1,857,501		1,593,981
Gross profit		309,518		268,172		972,776		795,948
Selling, general & administrative expenses		159,045		149,118		492,523		446,351
Rationalization and asset impairment charges (Note 6)		8,364		3,484		9,405		8,277
Operating income		142,109		115,570		470,848		341,320
Interest expense, net		8,210		5,714		20,867		16,736
Other income (expense) (Note 14)		3,588		(71,441)		7,088		(71,155)
Income before income taxes		137,487		38,415		457,069		253,429
Income taxes (Note 15)		28,262		6,658		93,991		51,259
Net income including non-controlling interests		109,225		31,757		363,078		202,170
Non-controlling interests in subsidiaries’ income (loss)		—		—		—		131
Net income	$	109,225	$	31,757	$	363,078	$	202,039

Basic earnings per share (Note 3)	$	1.89	$	0.54	$	6.24	$	3.40
Diluted earnings per share (Note 3)	$	1.87	$	0.53	$	6.17	$	3.36
Cash dividends declared per share	$	0.56	$	0.51	$	1.68	$	1.53

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income including non-controlling interests	$	109,225	$	31,757	$	363,078	$	202,170
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $3,234 and $8,079 in the three and nine months ended September 30, 2022; $707 and $1,493 in the three and nine months ended September 30, 2021		7,777		2,876		22,082		5,412
Defined benefit pension plan activity, net of tax of $47 and $506 in the three and nine months ended September 30, 2022; $18,759 and $19,005 in the three and nine months ended September 30, 2021		85		55,558		148		58,916
Currency translation adjustment		(52,129)		(19,120)		(94,193)		(28,284)
Other comprehensive income (loss):		(44,267)		39,314		(71,963)		36,044
Comprehensive income		64,958		71,071		291,115		238,214
Comprehensive income (loss) attributable to non-controlling interests		(13)		(58)		102		(196)
Comprehensive income attributable to shareholders	$	64,971	$	71,129	$	291,013	$	238,410

See notes to these consolidated financial statements.

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	September 30, 2022		December 31, 2021
	(UNAUDITED)		(NOTE 1)
ASSETS
Current Assets
Cash and cash equivalents	$	141,307	$	192,958
Accounts receivable (less allowance for doubtful accounts of $10,009 in 2022; $11,105 in 2021)		463,106		429,074
Inventories (Note 9)		632,376		539,919
Other current assets		158,609		127,642
Total Current Assets		1,395,398		1,289,593
Property, plant and equipment (less accumulated depreciation of $863,983 in 2022; $868,036 in 2021)		489,961		511,744
Goodwill		424,505		430,162
Other assets		342,101		360,808
TOTAL ASSETS	$	2,651,965	$	2,592,307
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt (Note 12)	$	68,375	$	52,730
Trade accounts payable		329,890		330,230
Accrued employee compensation and benefits		183,638		108,562
Other current liabilities		238,425		264,383
Total Current Liabilities		820,328		755,905
Long-term debt, less current portion (Note 12)		711,250		717,089
Other liabilities		196,159		255,404
Total Liabilities		1,727,737		1,728,398
Shareholders' Equity
Common Shares		9,858		9,858
Additional paid-in capital		471,172		451,268
Retained earnings		3,237,200		2,970,303
Accumulated other comprehensive loss		(329,451)		(257,386)
Treasury Shares		(2,464,460)		(2,309,941)
Total Shareholders' Equity		924,319		864,102
Non-controlling interests		(91)		(193)
Total Equity		924,228		863,909
TOTAL LIABILITIES AND TOTAL EQUITY	$	2,651,965	$	2,592,307

See notes to these consolidated financial statements.

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)


								Accumulated
	Common			Additional				Other				Non-
	Shares	Common		Paid-In		Retained		Comprehensive		Treasury		Controlling
	Outstanding	Shares		Capital		Earnings		Income (Loss)		Shares		Interests		Total
Balance at December 31, 2021	58,787	$	9,858	$	451,268	$	2,970,303	$	(257,386)	$	(2,309,941)	$	(193)	$	863,909
Net income							126,030						1		126,031
Unrecognized amounts from defined benefit pension plans, net of tax									107						107
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax									5,355						5,355
Currency translation adjustment									(7,583)				134		(7,449)
Cash dividends declared - $0.56 per share							(32,505)								(32,505)
Stock-based compensation activity	116				10,834						1,349				12,183
Purchase of shares for treasury	(805)										(104,579)				(104,579)
Other					115		(107)								8
Balance at March 31, 2022	58,098	$	9,858	$	462,217	$	3,063,721	$	(259,507)	$	(2,413,171)	$	(58)	$	863,060
Net income							127,823						(1)		127,822
Unrecognized amounts from defined benefit pension plans, net of tax									(44)						(44)
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax									8,950						8,950
Currency translation adjustment									(34,596)				(19)		(34,615)
Cash dividends declared – $0.56 per share							(32,698)								(32,698)
Stock-based compensation activity	15				5,428						146				5,574
Purchase of shares for treasury	(191)										(25,119)				(25,119)
Other					(2,021)		2,074								53
Balance at June 30, 2022	57,922	$	9,858	$	465,624	$	3,160,920	$	(285,197)	$	(2,438,144)	$	(78)	$	912,983
Net income							109,225						—		109,225
Unrecognized amounts from defined benefit pension plans, net of tax									85						85
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax									7,777						7,777
Currency translation adjustment									(52,116)				(13)		(52,129)
Cash dividends declared – $0.56 per share							(32,580)								(32,580)
Stock-based compensation activity	14				5,158						202				5,360
Purchase of shares for treasury	(198)										(26,518)				(26,518)
Other					390		(365)								25
Balance at September 30, 2022	57,738	$	9,858	$	471,172	$	3,237,200	$	(329,451)	$	(2,464,460)	$	(91)	$	924,228

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(In thousands, except per share amounts)


								Accumulated
	Common			Additional				Other				Non-
	Shares	Common		Paid-In		Retained		Comprehensive		Treasury		Controlling
	Outstanding	Shares		Capital		Earnings		Income (Loss)		Shares		Interests		Total
Balance at December 31, 2020	59,641	$	9,858	$	409,958	$	2,821,359	$	(302,190)	$	(2,149,714)	$	979	$	790,250
Net income							74,177						(44)		74,133
Unrecognized amounts from defined benefit pension plans, net of tax									5,060						5,060
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax									7,290						7,290
Currency translation adjustment									(22,584)				(159)		(22,743)
Cash dividends declared – $0.51 per share							(30,572)								(30,572)
Stock-based compensation activity	134				7,680						1,502				9,182
Purchase of shares for treasury	(237)										(28,459)				(28,459)
Other					891		(741)						(883)		(733)
Balance at March 31, 2021	59,538	$	9,858	$	418,529	$	2,864,223	$	(312,424)	$	(2,176,671)	$	(107)	$	803,408
Net income							96,105						175		96,280
Unrecognized amounts from defined benefit pension plans, net of tax									(1,702)						(1,702)
Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax									(4,754)						(4,754)
Currency translation adjustment									13,689				(110)		13,579
Cash dividends declared – $0.51 per share							(30,552)								(30,552)
Stock-based compensation activity	46				8,638						503				9,141
Purchase of shares for treasury	(197)										(25,229)				(25,229)
Other					409		(957)								(548)
Balance at June 30, 2021	59,387	$	9,858	$	427,576	$	2,928,819	$	(305,191)	$	(2,201,397)	$	(42)	$	859,623
Net income							31,757						—		31,757
Unrecognized amounts from defined benefit pension plans, net of tax									55,558						55,558
Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax									2,876						2,876
Currency translation adjustment									(19,062)				(58)		(19,120)
Cash dividends declared – $0.51 per share							(30,379)								(30,379)
Stock-based compensation activity	34				7,449						364				7,813
Purchase of shares for treasury	(373)										(50,160)				(50,160)
Other					(239)		164								(75)
Balance at September 30, 2021	59,048	$	9,858	$	434,786	$	2,930,361	$	(265,819)	$	(2,251,193)	$	(100)	$	857,893

Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	363,078	$	202,039
Non-controlling interests in subsidiaries' income (loss)		—		131
Net income including non-controlling interests		363,078		202,170
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
Rationalization and asset impairment net charges (gains) (Note 6)		7,776		(1,162)
Depreciation and amortization		59,009		60,558
Equity earnings (loss) in affiliates, net		254		(399)
Deferred income taxes		(34,403)		(28,428)
Stock-based compensation		20,949		18,215
Pension settlement charges		—		80,098
Other, net		15,867		(754)
Changes in operating assets and liabilities, net of effects from acquisitions:
Increase in accounts receivable		(64,569)		(71,212)
Increase in inventories		(135,578)		(128,856)
Increase in other current assets		(34,368)		(10,610)
Increase in trade accounts payable		19,572		54,981
Increase in other current liabilities		66,838		89,569
Net change in other assets and liabilities		(12,841)		(9,045)
NET CASH PROVIDED BY OPERATING ACTIVITIES		271,584		255,125
CASH FLOWS FROM INVES

LINCOLN ELECTRIC HOLDINGS INC [LECO] Filings
10-Q	[2022-10-27]
10-Q	[2022-07-28]
10-Q	[2022-04-28]
10-K	[2022-02-18]
10-Q	[2021-10-28]
10-Q	[2021-07-27]
10-Q	[2021-04-27]
10-K	[2021-02-19]
10-Q	[2020-10-27]
10-Q	[2020-07-27]
10-Q	[2020-04-27]
10-K	[2020-02-27]
10-Q	[2019-10-30]
10-Q	[2019-07-26]
10-Q	[2019-04-26]
10-K	[2019-02-27]
10-Q	[2018-10-26]
10-Q	[2018-07-27]
10-Q	[2018-05-09]
10-K	[2018-02-27]
10-Q	[2017-10-30]
10-Q	[2017-07-26]
10-Q	[2017-04-21]
10-K	[2017-02-24]
10-Q	[2016-10-24]
10-Q	[2016-07-26]
10-Q	[2016-04-22]
10-K	[2016-02-25]
10-Q	[2015-10-30]
10-Q	[2015-07-27]
10-Q	[2015-04-24]
10-K	[2015-02-20]
10-Q	[2014-10-30]
10-Q	[2014-07-28]
10-Q	[2014-04-25]
10-K	[2014-02-21]
10-Q	[2013-11-01]
10-Q	[2013-07-31]
10-Q	[2013-04-26]
10-K	[2013-02-22]
10-Q	[2012-11-02]
10-Q	[2012-07-31]
10-Q	[2012-04-30]
10-K	[2012-02-24]