Part I [Item 1. Business](index=2&type=section&id=Item%201.%20Business) Lincoln Electric is a global leader in arc welding products, automated systems, and cutting equipment, operating through three segments - The Company is a world leader in arc welding products, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment, and has a leading global position in brazing and soldering alloys[10](index=10&type=chunk) - The business is organized into three operating segments: Americas Welding (North and South America), International Welding (Europe, Africa, Asia, Australia), and The Harris Products Group (global cutting, soldering, brazing, and U.S. retail)[14](index=14&type=chunk) - Major end-user markets include general fabrication, energy, heavy industries, automotive/transportation, and construction/infrastructure, with no single customer accounting for more than **10% of total net sales**[15](index=15&type=chunk) - Competition is based on brand, product quality, price, performance, warranty, delivery, and technical support, leveraging its technical sales force and R&D staff as a competitive advantage[16](index=16&type=chunk)[17](index=17&type=chunk) - As of December 31, 2019, the company employed approximately **11,000 people worldwide**[22](index=22&type=chunk) [Item 1A. Risk Factors](index=4&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from economic conditions, supply chain, raw material prices, asbestos litigation, and international operations - The company's operating results are sensitive to changes in general economic conditions, interest rates, inflation, and trade barriers, which could adversely affect demand for its products[29](index=29&type=chunk) - The company is exposed to market risks from the availability and price fluctuations of key raw materials such as steel, brass, copper, silver, and electronic components, potentially affecting profitability if cost increases cannot be passed on to customers[32](index=32&type=chunk)[33](index=33&type=chunk) - As of December 31, 2019, the company was a co-defendant in asbestos-related illness cases involving approximately **3,233 plaintiffs**, presenting a risk of significant liability[34](index=34&type=chunk) - The business faces potential product liability risks inherent in the design and manufacture of its products, which are used in critical applications like infrastructure and transportation[38](index=38&type=chunk) - The arc welding and cutting industry is mature and cyclical in developed markets, with demand largely determined by capital spending in manufacturing and industrial sectors[41](index=41&type=chunk) - Significant international operations expose the company to risks including political and economic uncertainty, currency fluctuations, and complex foreign laws and regulations[50](index=50&type=chunk)[51](index=51&type=chunk) - The company's information technology systems are subject to cyber attacks, which could lead to business interruption, financial loss, and reputational damage if a significant breach occurs[57](index=57&type=chunk) [Item 1B. Unresolved Staff Comments](index=9&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[63](index=63&type=chunk) [Item 1C. Information About Our Executive Officers](index=10&type=section&id=Item%201C.%20Information%20About%20Our%20Executive%20Officers) This section lists the company's executive officers, including their age and position, elected by the Board of Directors Key Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Christopher L. Mapes | 58 | Chairman of the Board, President and Chief Executive Officer | | Vincent K. Petrella | 59 | Executive Vice President, Chief Financial Officer and Treasurer | | Jennifer I. Ansberry | 46 | Executive Vice President, General Counsel and Secretary | | George D. Blankenship | 57 | Executive Vice President, President, Americas Welding | | Steven B. Hedlund | 53 | Executive Vice President and President, International Welding | | David J. Nangle | 63 | Executive Vice President, President, Harris Products Group | [Item 2. Properties](index=13&type=section&id=Item%202.%20Properties) The company operates 59 manufacturing facilities globally across 18 countries, with its main U.S. facilities in Cleveland, Ohio - The company's corporate headquarters and main U.S. manufacturing facilities are in Cleveland, Ohio, with approximately **3,017,090 square feet of space**[70](index=70&type=chunk) - Globally, the company has **59 manufacturing facilities in 18 countries**, with significant locations in the U.S., Canada, Mexico, Brazil, China, Germany, Italy, and the UK[70](index=70&type=chunk) - Most of the company's manufacturing facilities are owned and are believed to be in good condition and suitable for business operations[70](index=70&type=chunk) [Item 3. Legal Proceedings](index=14&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in legal proceedings, primarily asbestos-related illness cases, with 3,233 plaintiffs as of December 31, 2019 - As of December 31, 2019, the Company was a co-defendant in cases alleging asbestos-induced illness involving approximately **3,233 plaintiffs**, a net decrease of 50 claims from the prior report[73](index=73&type=chunk) - Since January 1, 1995, the company has seen **55,114 asbestos-related claims dismissed**, won **23 defense verdicts**, and had **7 plaintiff verdicts reversed or resolved after appeal**[73](index=73&type=chunk) [Item 4. Mine Safety Disclosures](index=14&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[74](index=74&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=15&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common shares trade on NASDAQ, with significant share repurchases and a new 10 million share repurchase program authorized - The Company's common shares are traded on The NASDAQ Global Select Market under the symbol "LECO"[76](index=76&type=chunk) Issuer Purchases of Equity Securities (Q4 2019) | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | October 1-31, 2019 | 255 | $86.83 | | November 1-30, 2019 | 298,353 | $91.93 | | December 1-31, 2019 | 457,429 | $94.66 | | **Total** | **756,037** | **$93.58** | - On April 20, 2016, the Board authorized a share repurchase program, increasing the total authorized shares to **55 million**, with **52.2 million shares purchased at a cost of $2.2 billion** through December 31, 2019[76](index=76&type=chunk) - On February 12, 2020, the Board authorized a new share repurchase program for up to an additional **10 million shares**[76](index=76&type=chunk) [Item 6. Selected Financial Data](index=17&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes five-year financial data, showing stable net sales, increased net income and diluted EPS, and consistent dividend growth Five-Year Selected Financial Data (2015-2019) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $3,003,272 | $3,028,674 | $2,624,431 | $2,274,614 | $2,535,791 | | Net income | $293,109 | $287,066 | $247,503 | $198,399 | $127,478 | | Diluted EPS | $4.68 | $4.37 | $3.71 | $2.91 | $1.70 | | Cash dividends per share | $1.90 | $1.64 | $1.44 | $1.31 | $1.19 | | Total assets | $2,371,213 | $2,349,825 | $2,406,547 | $1,943,437 | $1,784,171 | | Long-term debt | $712,302 | $702,549 | $704,136 | $703,704 | $350,347 | - Results for 2019 include **$15.2 million in rationalization and asset impairment charges** and costs related to acquisitions, offset by gains on asset disposals and a gain on change in control related to the Askaynak acquisition[79](index=79&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=18&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A discusses 2019 financial performance, including a slight sales decrease, net income growth, improved operating cash flow, and capital management activities [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Net sales decreased 0.8% to $3.00 billion in 2019 due to volume and FX, while net income increased 2.1% to $293.1 million Consolidated Results of Operations (2019 vs. 2018) | Metric | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,003,272 | $3,028,674 | (0.8%) | | Gross Profit | $1,007,587 | $1,028,521 | (2.0%) | | Operating Income | $370,910 | $375,539 | (1.2%) | | Net Income | $293,109 | $287,066 | 2.1% | | Diluted EPS | $4.68 | $4.37 | 7.1% | Change in Net Sales (2019 vs. 2018) | Component | % Change | | :--- | :--- | | Volume | (4.7%) | | Acquisitions | 4.3% | | Price | 1.2% | | Foreign Exchange | (1.7%) | | **Total** | **(0.8%)** | - Gross profit as a percentage of sales decreased in 2019 compared to 2018 due to product mix, lower volumes, and acquisitions[97](index=97&type=chunk) - The effective tax rate decreased from **22.2% in 2018 to 20.5% in 2019**, primarily due to income tax benefits from the settlement of tax items and excess tax benefits from stock-based compensation[102](index=102&type=chunk) [Segment Results](index=23&type=section&id=Segment%20Results) Americas Welding sales grew slightly, International Welding sales declined, and Harris Products Group sales increased, reflecting varied segment performance Net Sales % Change by Segment (2019 vs. 2018) | Segment | Volume | Acquisitions | Price | Foreign Exchange | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Americas Welding | (4.4%) | 3.9% | 1.4% | (0.5%) | 0.5% | | International Welding | (7.8%) | 4.0% | 1.0% | (4.4%) | (7.1%) | | The Harris Products Group | 3.3% | 7.0% | 0.9% | (1.0%) | 10.2% | Adjusted EBIT by Segment (2019 vs. 2018) | Segment | 2019 Adjusted EBIT | 2018 Adjusted EBIT | % Change | 2019 Margin | 2018 Margin | | :--- | :--- | :--- | :--- | :--- | :--- | | Americas Welding | $315,719 | $340,744 | (7.3%) | 16.3% | 17.7% | | International Welding | $50,281 | $54,273 | (7.4%) | 5.8% | 5.8% | | The Harris Products Group | $45,701 | $36,564 | 25.0% | 13.4% | 11.8% | [Non-GAAP Financial Measures](index=25&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted Operating Income and Adjusted Net Income to assess performance, showing a slight decline in 2019 Reconciliation of Net Income to Adjusted Net Income and Adjusted EBIT | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net income as reported | $293,109 | $287,066 | | Special items (pre-tax) | $1,854 | $36,469 | | Tax effect of Special items | ($7,386) | ($6,896) | | **Adjusted net income** | **$294,568** | **$316,639** | | **Adjusted EBIT** | **$400,753** | **$422,694** | Reconciliation of Diluted EPS to Adjusted Diluted EPS | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Diluted EPS as reported | $4.68 | $4.37 | | Special items per share | $0.02 | $0.45 | | **Adjusted diluted EPS** | **$4.70** | **$4.82** | [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow increased to $403.2 million in 2019, supporting acquisitions, share repurchases, and dividends, with total debt at $747.3 million Key Cash Flow Measures (2019 vs. 2018) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $403,185 | $329,152 | | Net cash (used by) provided by investing activities | ($192,823) | $20,841 | | Net cash used by financing activities | ($371,944) | ($302,130) | | (Decrease) increase in Cash and cash equivalents | ($159,286) | $32,148 | - Cash used in financing activities increased due to higher purchases of common shares for treasury (**$292.7 million in 2019 vs. $201.7 million in 2018**) and a **15.5% increase in cash dividends paid**[121](index=121&type=chunk)[122](index=122&type=chunk) - The company has a **$400 million revolving credit agreement** maturing in June 2022, with **$23 million outstanding** as of December 31, 2019[129](index=129&type=chunk) Return on Invested Capital (ROIC) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net operating profit after taxes | $312,137 | $329,819 | | Invested capital | $1,566,348 | $1,590,252 | | **Return on invested capital** | **19.9%** | **20.7%** | Contractual Obligations as of Dec 31, 2019 | Obligation | Total | 2020 | 2021-2022 | 2023-2024 | 2025 and Beyond | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $710,916 | $101 | $208 | $10,607 | $700,000 | | Interest on long-term debt | $351,432 | $23,293 | $46,580 | $46,347 | $235,212 | | Operating leases | $59,446 | $15,235 | $20,275 | $13,007 | $10,929 | | Purchase commitments | $194,553 | $191,446 | $2,996 | $111 | — | | **Total** | **$1,336,879** | **$233,099** | **$73,083** | **$75,104** | **$955,593** | [Critical Accounting Policies and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment in areas such as legal and tax contingencies, pensions, inventories, and asset valuations - Key critical accounting policies involve significant management judgment and include: Legal and Tax Contingencies, Deferred Income Taxes, Pensions, Inventories (LIFO), Long-Lived Assets, Goodwill and Intangibles, Acquisitions, and Revenue Recognition[143](index=143&type=chunk)[144](index=144&type=chunk)[148](index=148&type=chunk) - For pensions, significant estimates include the expected return on plan assets (**4.9% in 2019**) and the discount rate for plan liabilities (**3.0% for U.S. plans in 2019**)[151](index=151&type=chunk)[152](index=152&type=chunk) - A substantial portion of U.S. inventories (**36% at year-end 2019**) is valued on a LIFO basis, which requires estimates of year-end inventory levels and costs[155](index=155&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or more frequently if indicators of impairment exist, with fair value determined using valuation techniques that rely on estimates of future cash flows, growth rates, and discount rates[159](index=159&type=chunk)[161](index=161&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from currency, commodity, and interest rate fluctuations using derivatives, with sensitivity analysis showing no material impact - Primary financial market risks include fluctuations in currency exchange rates, commodity prices, and interest rates[169](index=169&type=chunk) - The company uses forward foreign exchange contracts to hedge currency fluctuations, with gross notional amounts of **$59,982** for hedging transactions and **$363,820** for hedging balance sheet exposures at December 31, 2019[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) - Interest rate risk on long-term debt is managed with floating interest rate swaps, converting **$50,000 of fixed-rate debt to variable rates**, and a hypothetical **100 basis point increase in rates** would not materially affect the financial statements[176](index=176&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=34&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the consolidated financial statements and supplementary data, which are provided in a separate section of the Annual Report on Form 10-K - The response to this item is submitted in a separate section of this Annual Report on Form 10-K following the signature page[178](index=178&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=35&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None[179](index=179&type=chunk) [Item 9A. Controls and Procedures](index=35&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, excluding recent acquisitions - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of December 31, 2019[180](index=180&type=chunk) - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2019, with the assessment excluding the recently acquired Baker Industries Inc. and Askaynak[181](index=181&type=chunk)[182](index=182&type=chunk) - Changes to internal controls in 2019 included the implementation of the new lease accounting standard (ASU 2016-02, Topic 842) and the ongoing integration of systems and controls for the Baker and Askaynak acquisitions[184](index=184&type=chunk)[185](index=185&type=chunk) [Item 9B. Other Information](index=35&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[187](index=187&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=36&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the company's 2020 definitive proxy statement, excluding executive officer details - Information required by this item is incorporated by reference from the registrant's 2020 proxy statement[188](index=188&type=chunk) [Item 11. Executive Compensation](index=36&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the company's 2020 definitive proxy statement - Information required by this item is incorporated by reference from the 2020 proxy statement[189](index=189&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=36&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference from the company's 2020 definitive proxy statement - Information required by this item is incorporated by reference from the 2020 proxy statement[190](index=190&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=36&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information on related transactions and director independence is incorporated by reference from the company's 2020 definitive proxy statement - Information required by this item is incorporated by reference from the 2020 proxy statement[191](index=191&type=chunk) [Item 14. Principal Accountant Fees and Services](index=36&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the company's 2020 definitive proxy statement - Information required by this item is incorporated by reference from the 2020 proxy statement[192](index=192&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=37&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance and debt agreements - This item lists the consolidated financial statements, financial statement schedules (Schedule II – Valuation and Qualifying Accounts), and all exhibits filed with the report[194](index=194&type=chunk)[195](index=195&type=chunk) - Exhibits include key corporate documents, debt agreements (Credit Agreement, Note Purchase Agreements), executive compensation plans, and certifications required by the Sarbanes-Oxley Act[196](index=196&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk) [Item 16. Form 10-K Summary](index=45&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for this item - None[204](index=204&type=chunk) Financial Statements and Notes [Report of Independent Registered Public Accounting Firm](index=47&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued unqualified opinions on financial statements and internal controls, with critical audit matters on acquired intangibles and uncertain tax positions - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements[214](index=214&type=chunk) - The auditor also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2019[215](index=215&type=chunk)[230](index=230&type=chunk) - Critical Audit Matters highlighted by the auditor include the valuation of acquired intangible assets and the accounting for uncertain tax positions[218](index=218&type=chunk)[219](index=219&type=chunk)[223](index=223&type=chunk) [Consolidated Financial Statements](index=51&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show stable net sales, increased net income, improved operating cash flow, and a decrease in shareholders' equity in 2019 Consolidated Statement of Income Highlights | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net Sales | $3,003,272 | $3,028,674 | $2,624,431 | | Gross Profit | $1,007,587 | $1,028,521 | $875,107 | | Operating Income | $370,910 | $375,539 | $376,942 | | Net Income | $293,109 | $287,066 | $247,503 | | Diluted EPS | $4.68 | $4.37 | $3.71 | Consolidated Balance Sheet Highlights | Metric | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $1,075,581 | $1,237,799 | | Total Assets | $2,371,213 | $2,349,825 | | Total Current Liabilities | $563,135 | $538,182 | | Long-term debt | $712,302 | $702,549 | | Total Shareholders' Equity | $818,172 | $886,942 | Consolidated Statement of Cash Flows Highlights | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $403,185 | $329,152 | $334,845 | | Net Cash from Investing Activities | ($192,823) | $20,841 | ($272,027) | | Net Cash from Financing Activities | ($371,944) | ($302,130) | ($135,037) | [Notes to Consolidated Financial Statements](index=57&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, recent acquisitions, goodwill, debt, pensions, income taxes, and the adoption of the new lease accounting standard [Note 4 – Acquisitions](index=64&type=section&id=Note%204%20%E2%80%93%20Acquisitions) This note details recent acquisitions in 2019 (Askaynak, Baker) and late 2018, aimed at expanding regional growth and product portfolios - During July 2019, the Company acquired the controlling stake in Askaynak, a Turkish supplier of welding consumables and equipment[309](index=309&type=chunk) - During April 2019, the Company acquired Baker Industries, Inc., a provider of custom tooling, parts, and fixtures for automotive and aerospace markets[310](index=310&type=chunk) - The 2017 acquisition of Air Liquide Welding resulted in a bargain purchase gain of **$49,650**, primarily because the business was outside the seller's core focus[316](index=316&type=chunk) [Note 9 – Debt](index=72&type=section&id=Note%209%20%E2%80%93%20Debt) Total debt was $747.3 million as of December 31, 2019, primarily senior unsecured notes, with a $400 million revolving credit facility Debt Composition as of Dec 31, 2019 | Debt Component | Amount | | :--- | :--- | | Senior Unsecured Notes (net) | $701,681 | | Other borrowings | $10,733 | | **Total Long-term debt** | **$712,414** | | Amounts due banks | $34,857 | | Current portion long-term debt | $112 | | **Total short-term debt** | **$34,969** | | **Total debt** | **$747,271** | - The company has a **$400 million revolving credit agreement** maturing June 30, 2022, with **$23,000 outstanding** at year-end 2019[352](index=352&type=chunk) [Note 12 – Retirement Annuity and Guaranteed Continuous Employment Plans](index=76&type=section&id=Note%2012%20%E2%80%93%20Retirement%20Annuity%20and%20Guaranteed%20Continuous%20Employment%20Plans) The company maintains defined benefit and contribution plans, with U.S. pensions overfunded and non-U.S. plans underfunded in 2019 Pension Plan Funded Status (Dec 31, 2019) | Plan Type | Benefit Obligations | Fair Value of Plan Assets | Funded Status | | :--- | :--- | :--- | :--- | | U.S. pension plans | $492,511 | $589,551 | $97,040 | | Non-U.S. pension plans | $176,858 | $105,673 | ($71,185) | - The annual cost for defined contribution plans was **$24,835 in 2019**, compared to **$26,477 in 2018**[391](index=391&type=chunk) [Note 14 – Income Taxes](index=82&type=section&id=Note%2014%20%E2%80%93%20Income%20Taxes) The effective tax rate decreased to 20.5% in 2019 due to tax benefits, with $20.6 million in unrecognized tax benefits at year-end Effective Tax Rate Reconciliation | Description | 2019 | 2018 | | :--- | :--- | :--- | | Statutory U.S. federal rate | 21.0% | 21.0% | | State and local taxes, net | 2.4% | 2.4% | | Excess tax benefits (stock comp) | (0.9%) | (0.3%) | | Resolution of uncertain tax positions | (2.6%) | (0.1%) | | Foreign rate variance & other | 0.6% | (0.8%) | | **Effective tax rate** | **20.5%** | **22.2%** | - At December 31, 2019, the company had a liability for unrecognized tax benefits of **$20.6 million**, a decrease from **$28.8 million** at the beginning of the year[408](index=408&type=chunk) [Note 18 – Leases](index=89&type=section&id=Note%2018%20%E2%80%93%20Leases) The company adopted Topic 842 in 2019, recognizing $51.5 million in right-of-use assets and $52.6 million in lease liabilities - The company adopted ASU 2016-02 (Topic 842) on January 1, 2019, using the modified retrospective transition option[427](index=427&type=chunk) Lease Balances as of Dec 31, 2019 | Balance Sheet Item | Classification | Amount | | :--- | :--- | :--- | | Right-of-use assets | Other assets | $51,533 | | Current lease liabilities | Other current liabilities | $13,572 | | Noncurrent lease liabilities | Other liabilities | $39,076 | | **Total lease liabilities** | | **$52,648** |

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, 2019 or ☐ 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 ...

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 June 30, 2019 or ☐ 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) Ohi ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 or ¨ 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) (S ...

Part I [Business Overview](index=3&type=section&id=ITEM%201.%20BUSINESS) Lincoln Electric Holdings, Inc. is a global manufacturer of welding, cutting, and brazing products, operating through three segments and serving diverse industrial markets - The Company is a broad-line manufacturer of welding, cutting, and brazing products, including arc welding power sources, consumable electrodes, robotic welding packages, and CNC cutting systems[10](index=10&type=chunk) - Business operations are structured into three segments: Americas Welding (North and South America), International Welding (Europe, Africa, Asia, Australia), and The Harris Products Group (global cutting, soldering, brazing, and U.S. retail)[13](index=13&type=chunk) - Major end-user markets include general fabrication, energy, heavy industries, automotive/transportation, and construction/infrastructure; the company is not dependent on any single customer for more than **10% of its total net sales**[14](index=14&type=chunk) - Competition is based on brand, product quality, price, performance, and technical support; the company believes its technical sales force and R&D support provide a competitive advantage[15](index=15&type=chunk)[16](index=16&type=chunk) - As of December 31, 2018, the company employed approximately **11,000 people worldwide**[21](index=21&type=chunk) [Risk Factors](index=5&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces risks from economic conditions, supply chain, raw material prices, asbestos litigation, product liability, international operations, and cybersecurity - Operating results are sensitive to general economic conditions, as demand is tied to capital spending in manufacturing and industrial sectors[28](index=28&type=chunk) - The company is exposed to price fluctuations in key raw materials such as steel, copper, silver, and electronic components, which can be influenced by tariffs and global economic conditions[31](index=31&type=chunk) - As of December 31, 2018, the company was a co-defendant in cases involving approximately **3,336 plaintiffs** alleging asbestos-induced illness from welding consumables[33](index=33&type=chunk) - The business faces potential product liability risks inherent in the design and manufacture of its products, which are used in critical applications like infrastructure and transportation[37](index=37&type=chunk) - International operations are significant and expose the company to risks including political and economic uncertainty, currency fluctuations, and varying legal and regulatory environments[48](index=48&type=chunk)[50](index=50&type=chunk) - The business relies on information technology systems, and a significant cybersecurity breach could interrupt operations and result in financial loss or reputational damage[54](index=54&type=chunk) [Executive Officers](index=11&type=section&id=ITEM%201C.%20EXECUTIVE%20OFFICERS%20OF%20THE%20REGISTRANT) This section lists the company's executive officers, including their age, position, and professional background as of the reporting date Executive Officers of the Registrant | Name | Age | Position | | :--- | :--- | :--- | | Christopher L. Mapes | 57 | Chairman of the Board, President and Chief Executive Officer | | Vincent K. Petrella | 58 | Executive Vice President, Chief Financial Officer and Treasurer | | Jennifer I. Ansberry | 45 | Executive Vice President, General Counsel and Secretary | | George D. Blankenship | 56 | Executive Vice President, President, Americas Welding | | Gabriel Bruno | 51 | Executive Vice President, Finance | | Steven B. Hedlund | 52 | Executive Vice President and President, International Welding | | Michele R. Kuhrt | 52 | Executive Vice President, Chief Human Resources Officer | | Geoffrey P. Allman | 48 | Senior Vice President, Strategy and Business Development | | Thomas A. Flohn | 58 | Senior Vice President, President, Asia Pacific Region | | David J. Nangle | 62 | Executive Vice President, President, Harris Products Group | | Douglas S. Lance | 51 | Senior Vice President, President, Cleveland Operations, North America | | Michael Mintun | 56 | Senior Vice President, Sales and Marketing, North America | | Michael J. Whitehead | 45 | Senior Vice President, President, Global Automation, Cutting and Additive Business | [Properties](index=14&type=section&id=ITEM%202.%20PROPERTIES) The company's headquarters and principal U.S. manufacturing facilities are in Cleveland, Ohio, with 60 facilities across 19 countries - The company's corporate headquarters and main U.S. manufacturing facilities are in Cleveland, Ohio, covering **244 acres** with approximately **3 million square feet** of manufacturing space[67](index=67&type=chunk) - The company has **60 manufacturing facilities**, including joint ventures, in **19 countries**, with key locations detailed by operating segment[67](index=67&type=chunk) [Legal Proceedings](index=15&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, most notably asbestos-related claims, with a history of successful defense against these allegations - As of December 31, 2018, the Company was a co-defendant in cases alleging asbestos-induced illness involving claims by approximately **3,336 plaintiffs**, a net decrease of **133 claims** from the prior report[70](index=70&type=chunk) - Since January 1, 1995, the company has seen **54,977 asbestos-related claims dismissed**, won **23 defense verdicts**, and had **7 plaintiff verdicts reversed or resolved** after appeal[70](index=70&type=chunk) Part II [Market for Common Equity and Related Matters](index=16&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) This section details the company's common stock trading on NASDAQ, issuer share repurchases, and a five-year stock performance graph Issuer Purchases of Equity Securities (Q4 2018) | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | October 1-31, 2018 | 455,734 | $86.10 | | November 1-30, 2018 | 391,845 | $83.50 | | December 1-31, 2018 | 99,898 | $82.26 | | **Total** | **947,477** | **$84.62** | - Under its share repurchase program, the company is authorized to repurchase up to **55 million shares**; through December 31, 2018, **48.8 million shares** have been purchased at a cost of **$1.9 billion**[74](index=74&type=chunk) [Selected Financial Data](index=18&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section provides a five-year summary of key financial metrics, including net sales, net income, EPS, dividends, assets, and debt, with footnotes on special items Selected Financial Data (2014-2018) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales (in thousands) | $3,028,674 | $2,624,431 | $2,274,614 | $2,535,791 | $2,813,324 | | Net income (in thousands) | $287,066 | $247,503 | $198,399 | $127,478 | $254,686 | | Diluted earnings per share | $4.37 | $3.71 | $2.91 | $1.70 | $3.18 | | Cash dividends declared per share | $1.64 | $1.44 | $1.31 | $1.19 | $0.98 | | Total assets (in thousands) | $2,349,825 | $2,406,547 | $1,943,437 | $1,784,171 | $1,939,215 | | Long-term debt, less current portion (in thousands) | $702,549 | $704,136 | $703,704 | $350,347 | $2,488 | - **2018 results** include charges of **$25.3 million** for rationalization, **$6.7 million** for pension settlements, and **$4.5 million** for Air Liquide Welding acquisition costs[77](index=77&type=chunk) - **2017 results** were impacted by the Air Liquide Welding acquisition, including a **$49.7 million** bargain purchase gain and **$15.0 million** in transaction costs, as well as a **$28.6 million** charge related to the U.S. Tax Act[78](index=78&type=chunk) [Management's Discussion and Analysis (MD&A)](index=19&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) MD&A provides management's perspective on financial condition, operations, cash flows, liquidity, debt, and critical accounting policies, highlighting 2018 sales growth and tax rate impact [Results of Operations](index=21&type=section&id=Results%20of%20Operations) In 2018, net sales grew 15.4% to $3.03 billion, driven by acquisitions and pricing, while net income increased 16.0% due to a lower effective tax rate Consolidated Results of Operations (in thousands) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net sales | $3,028,674 | $2,624,431 | $2,274,614 | | Gross profit | $1,028,521 | $875,107 | $786,559 | | Operating income | $375,539 | $376,942 | $283,614 | | Net income | $287,066 | $247,503 | $198,399 | | Diluted EPS | $4.37 | $3.71 | $2.91 | Change in Net Sales (2018 vs. 2017) | Component | % Change | | :--- | :--- | | Volume | 1.1% | | Acquisitions | 9.1% | | Price | 5.6% | | Foreign Exchange | (0.3%) | | **Total** | **15.4%** | - The effective tax rate decreased to **22.2% in 2018** from **32.4% in 2017**, primarily due to the U.S. Tax Act which reduced the federal corporate income tax rate to 21%[106](index=106&type=chunk) - **Americas Welding sales grew 12.2%** in 2018, **International Welding sales increased 27.0%**, and **The Harris Products Group sales rose 4.0%**[111](index=111&type=chunk)[116](index=116&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity in 2018 with $329.2 million cash from operations, $358.8 million cash balance, and compliance with all debt covenants Key Cash Flow Measures (in thousands) | Cash Flow Activity | 2018 | 2017 | | :--- | :--- | :--- | | Net cash provided by operating activities | $329,152 | $334,845 | | Net cash provided by (used by) investing activities | $20,841 | $(272,027) | | Net cash used by financing activities | $(302,130) | $(135,037) | | Increase (decrease) in Cash and cash equivalents | $32,148 | $(52,478) | - The company repurchased **$201.7 million** of its common shares in 2018, a significant increase from **$43.2 million** in 2017[127](index=127&type=chunk) - Total debt stood at **$702.7 million** at year-end 2018, with no outstanding borrowings under its **$400 million revolving credit facility**[348](index=348&type=chunk)[351](index=351&type=chunk) - Return on Invested Capital (ROIC) improved to **20.7% in 2018** from **16.2% in 2017**[140](index=140&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management identifies critical accounting policies involving significant judgments for legal and tax contingencies, deferred income taxes, pension obligations, and asset valuations - Legal and Tax Contingencies: The company accrues its best estimate for probable costs related to litigation, such as asbestos claims, and maintains liabilities for uncertain tax positions[153](index=153&type=chunk)[156](index=156&type=chunk) - Pensions: Determining pension expense involves significant estimates, including the expected return on plan assets (**4.9% for 2018**) and the discount rate for liabilities (**3.8% for 2018**)[161](index=161&type=chunk)[162](index=162&type=chunk) - Inventories: A substantial portion of U.S. inventories (**37% in 2018**) is valued on a LIFO basis, requiring estimates of year-end inventory levels and costs[165](index=165&type=chunk) - Goodwill and Intangibles: Annual impairment tests rely on valuation models using estimates of future cash flows, growth rates, and discount rates[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) [Market Risk Disclosures](index=36&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company manages market risks from currency, commodity, and interest rate fluctuations using derivative instruments, with sensitivity analysis indicating no material impact - The company uses forward foreign exchange contracts to hedge currency fluctuations, with gross notional amounts of **$45.9 million** for transactions and **$328.5 million** for balance sheet exposures at year-end 2018[181](index=181&type=chunk)[182](index=182&type=chunk) - Interest rate risk on long-term debt is managed using floating interest rate swaps to convert **$125 million** of fixed-rate borrowings to variable rates[184](index=184&type=chunk) - A hypothetical **10% change** in year-end exchange rates would result in a **$5.8 million** change to pre-tax income, offset by the underlying balance sheet exposure[182](index=182&type=chunk) [Controls and Procedures](index=37&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - Based on an evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of December 31, 2018[188](index=188&type=chunk) - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2018, based on the COSO 2013 framework[189](index=189&type=chunk) Part III [Directors, Executive Compensation, and Corporate Governance](index=38&type=section&id=ITEMS%2010-14) Information for Items 10-14, covering directors, executive compensation, corporate governance, security ownership, and related transactions, is incorporated by reference from the 2019 proxy statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees and Services (Item 14) is incorporated by reference from the registrant's 2019 proxy statement[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=39&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the consolidated financial statements, schedules, and numerous exhibits, including corporate governance documents and material contracts, filed as part of the Form 10-K - This section includes the consolidated financial statements for the years ended December 31, 2018, 2017, and 2016, and the financial statement schedule for Valuation and Qualifying Accounts[200](index=200&type=chunk)[201](index=201&type=chunk) - A comprehensive list of exhibits is provided, including the company's articles of incorporation, credit agreements, note purchase agreements, and various equity and compensation plans for executives and directors[202](index=202&type=chunk)[204](index=204&type=chunk)[206](index=206&type=chunk)[208](index=208&type=chunk)