Lincoln Electric Annual Report 2018

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FY2018 Annual Report · Lincoln Electric

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2018 ANNUAL REPORT

WELD AUTOMATE EDUCATE CONSERVE
TO A

TABLE OF CONTENTS

PURPOSE
& VALUES

FINANCIAL
HIGHLIGHTS

LETTER TO
SHAREHOLDERS

NON-GAAP
FINANCIAL
MEASURES

CORPORATE
INFORMATION

FORM 10-K

PART I
Item 1 Business

Item 1A Risk Factors

Item 1B Unresolved Staff Comments

Item 1C Executive Office of the Registrant

Item 2 Properties

Item 3 Legal Proceedings

Item 4 Mine Safety Disclosures

PART II
Item 5 Market for Registrant’s Common Equity, Related

Stockholder Matters and Issuer Purchases of

Equity Securities

Item 6 Selected Financial Data

Item 7 Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Item 7A Quantitative and Qualitative Disclosures About

PART IV
Item 15 Exhibits and Financial Statement Schedules

SIGNATURES

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 1

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 2

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEETS

Market Risk

CONSOLIDATED STATEMENTS OF EQUITY

Item 8 Financial Statements and Supplementary Data

Item 9 Changes in and Disagreements with Accountants on

CONSOLIDATED STATEMENTS OF CASH FLOWS

Accounting and Financial Disclosures

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

PART III
Item 10 Directors, Executive Officers and Corporate Governance

Item 11 Executive Compensation

Item 12 Security Ownership of Certain Beneficial Owners and

Management and Related Stockholder Matters

Item 13 Certain Relationships and Related Transactions, and

Director Independence

Item 14 Principal Accountant Fees and Services

OUR PURPOSE:

O P E R A T I N G B Y A H I G H E R S T A N D A R D T O B U I L D A B E T T E R W O R L D

OUR GUIDING PRINCIPLE—THE GOLDEN RULE:

T R E A T O T H E R S H O W Y O U W O U L D L I K E T O B E T R E A T E D

CUSTOMER FOCUSED
We prioritize our customers
needs ﬁrst and deliver
exceptional service.

INTEGRITY
We follow the
“Golden Rule” and treat others
with respect and dignity.

COMMITMENT
We honor our
commitments, are
dependable and
operate
responsibly.

PERFORMANCE
We strive for
excellence in
all that we
do and recognize
and reward
success.

THE GOLDEN RULE

EMPLOYEE DEVELOPMENT
We provide
opportunities for growth
and development.

QUALITY
We provide world-class
solutions and continuously
improve our
operations.

L I N C O L N E L E C T R I C H O L D I N G S , I N C .

FINANCIAL HIGHLIGHTS

YEARS ENDED DECEMBER 31,
(dollars in millions, except per share)

Net Sales

Net Income

Adjusted Net Income(1)

Diluted Earnings per Share

Adjusted Diluted Earnings per Share(1)

Cash Provided by Operations

Cash Dividends per Share of Common Stock(2)

Average Operating Working Capital Ratio(3)

Return on Invested Capital(1)

Current Ratio

Total Assets

Total Equity

2018

$3,029

2017

$2,624

2016

$2,275

287

317

4.37

4.82

329

1.56

16.5 %

20.7 %

2.3

248

253

3.71

3.79

335

1.40

15.9 %

16.2 %

2.6

198

224

2.91

3.29

313

1.28

15.6 %

16.6 %

2.7

$2,350

888

$2,407

932

$1,943

712

(1) Adjusted Net Income, Adjusted Diluted Earnings per Share, Return on Invested Capital and Adjusted Operating Income Margin are non-GAAP financial
measures that management believes are important to investors to evaluate and compare the Company’s financial performance from period to period.
Management uses this information in assessing and evaluating the Company’s underlying operating performance. Non-GAAP financial measures should be
read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures.
Please refer to the reconciliation tables of non-GAAP results to our most closely comparable GAAP results on the “Non-GAAP Financial Measures” page.

(2) Reflects Board-approved annual dividend amounts.

(3) Average Operating Working Capital Ratio is defined as net operating working capital as of period end divided by annualized rolling three months of

sales. Net operating working capital is defined as Accounts receivable plus Inventory, less Trade accounts payable.

NET SALES AND ADJUSTED OPERATING INCOME MARGIN
NET SALES AND ADJUSTED OPERATING INCOME MARGIN

ADJUSTED DILUTED EARNINGS PER SHARE
ADJUSTED DILUTED EARNINGS PER SHARE

($ in millions)
($ in millions)

($ per share)
($ per share)

2018
2018

2017
2017

2016
2016

$3,029
$3,029
13.4%
13.4%

$2,624
$2,624
13.5%
13.5%

$2,275
$2,275
14.0%
14.0%

2018
2018

2017
2017

2016
2016

$4.82
$4.82

$3.79
$3.79

$3.29
$3.29

CASH PROVIDED BY OPERATIONS
CASH PROVIDED BY OPERATIONS

($ in millions)
($ in millions)

CASH RETURNED TO SHAREHOLDERS
CASH RETURNED TO SHAREHOLDERS

($ in millions) dividends and share repurchases
($ in millions) dividends and share repurchases

2018
2018

2017
2017

2016
2016

$329
$329

$335
$335

$313
$313

$304
$304

$136
$136

2018
2018

2017
2017

2016
2016

$429
$429

P A G E O N E

L E T T E R F R O M O U R C H A I R M A N , P R E S I D E N T A N D C E O

DEAR FELLOW SHAREHOLDERS,

We achieved record sales and earnings performance in 2018. We leveraged our leading product portfolio, auto-
mation offering, and application experts to capitalize on solid industrial demand. Strong operational execution
advanced the business towards our “2020 Vision & Strategy” financial and environmental goals, and we suc-
cessfully navigated through inflationary pressures and dynamic trade and tariff uncertainties to deliver value
for all of our stakeholders. I am thankful to the Lincoln Electric organization who worked tirelessly to achieve
these results and the continued support of our customers, shareholders and supply chain partners.

2018 FINANCIAL PERFOR M ANCE

2018 sales increased approximately 15% to a record $3.0 billion, driven

by 6.7% organic sales growth and a 9.1% benefit from acquisitions. Our

Americas Welding and Harris Product Group segments achieved solid

organic growth from a continued uptick in end market demand, price

management and favorable mix. International Welding Segment sales

compressed due to the integration activities we are implementing to

shape the European business for long-term competitive success and

from slower economic growth in the region.

The organization successfully mitigated broad inflationary pressures,

exacerbated by trade tariffs. Pricing actions and tariff surcharges

recovered mounting costs and resulted in approximately 15% higher

adjusted operating income and a relatively steady adjusted operating

income margin of 13.4%. We achieved this while continuing to invest in

commercial initiatives, employee development and rolling out several

global programs to support our long-term growth.

Our diluted earnings per share (EPS) increased to $4.37 and our adjusted EPS

increased 27% to a record $4.82. Cash flow from operations held relatively

steady at $329 million reflecting good working capital management. We

achieved top-tier return on invested capital (ROIC) performance with a

450 basis point improvement to 20.7% ROIC. In 2018, we deployed $477

million towards growth investments and the return of cash to our share-

holders through our dividend program and share repurchases. Our Board

of Directors increased the 2019 dividend payout rate 21%, marking 23

years of consecutive dividend increases.

2020 VISION & STR ATEGY UPDATE

Structural changes made to the business as part of the 2020 strategy have

resulted in a much more efficient, profitable and agile organization. We

achieved an 8% sales CAGR by leveraging our balance sheet to aggressively

fund growth through innovation and acquisitions. We targeted differentiated

technologies and solutions, such as enhanced equipment systems, specialty

metals, IoT, automation, and broader engineering expertise. By focusing on

providing value to our customers and continuous improvement in our

points above our prior peak margin in 2008. A commitment to operational

excellence also resulted in improved cash generation and conversion,

better safety, waste and energy efficiency and a reduced carbon footprint.

We have generated tremendous momentum from our achievements and

I am pleased that all of our stakeholders have benefited from the success

of the program.

2020 STRATEGY FINANCIAL METRICS (2009-2018)

GOAL 10% Sales compounded average growth rate (CAGR)
PROGRESS 8% CAGR (ex-FX and Venezuela)

GOAL Average 15% Adjusted operating income margin through
an economic cycle
PROGRESS 14.1%

GOAL Average operating working capital ratio of 15% at 2020
PROGRESS 16.5% in 2018

GOAL Average return on invested capital (ROIC) of 15% through
an economic cycle
PROGRESS 17.1% average 2009-2018

2020 STRATEGY SUSTAINABILITY METRICS (2009-2018)

GOAL SAFETY: Improve DART1 rate by 75%
PROGRESS Improved 70%

GOAL
PROGRESS Reduced 22%

Reduce by 15%

GOAL ENERGY INTENSITY: Reduce by 30%
PROGRESS Reduced 30%

GOAL RECYCLING & REUSE: Achieve a 70% recycle & reuse rate
(all materials)
PROGRESS 73% Rate (95% for eligible recyclables)

operations, we generated an average 14.1% adjusted operating income

1 DART = Days Away, Restrictions & Transfers incidents per 100 equivalent workers

margin in the last 5 years. This performance is approximately 200 basis

P A G E T W O

We expanded our Shanghai and Dubai tech cen-
ters in 2018 and use our 36 global tech centers
to showcase technologies, test applications and
consult on solutions.

We successfully launched our Welding Technology
& Training Center with a 200% increase in student
enrollment and 500+ educators in our Welding
Educator workshops in 2018.

Our 3D metal additive process is used to build
an industrial part. Our additive service offering
will launch in 2019.

POSITIONING FOR LONG-TERM GROWTH

We continued to invest in growth in 2018. We achieved a 34% vitality
index 1 of new products as a percent of sales with numerous product
launches. Our innovations focused on our customers by simplifying the

user experience, improving safety and productivity levels through digital

robotic additive cells ahead of our mid-2019 launch. We expect this unique

service will significantly improve customers’ cycle times, designs and

quality, and will provide an attractive new revenue stream for our business.

DRIVING OPER ATIONAL E XCELLENCE

interfaces, enhanced CAD-to-path programming of automated systems,

We are committed to improving our quality, costs and processes. In 2018,

and “smart” positioners, which leverage machine connectivity, ergonomics,

we maintained a rigorous schedule of continuous improvement projects

and data collection. We continue to enhance the versatility of our systems

leveraging lean and six sigma tools and continued to invest in new systems

with multi-process capabilities, remote control systems, patented

and processes to improve productivity. Key investments include:

Waveform Control Technology® for advanced arc performance and fume

management, and are furthering our cloud-based production and quality

• Deployment of a manufacturing execution system to improve better
connectivity, analytics and planning on our production floor to opti-

monitoring solutions.

mize operations;

We completed four acquisitions to broaden our portfolio and application

expertise. These include an enhanced weld monitoring technology that

• Enhanced adoption of our CRM tool to improve customer service and
commercial team effectiveness; and

complements our cloud-based CheckPoint® monitoring system; a 3D auto-

mated plasma cutting solution for structural steel applications; a highly

• A new Human Resource Management System for our global operations.

engineered robotic integrator, which will help diversify our end market mix;

We measure operational excellence across a number of metrics and pri-

as well as the addition of premium solder and fluxes, and certain brazing

oritize safety, greenhouse gas emissions, energy efficiency and waste

assets. These acquisitions represent approximately $90 million in revenue.

reduction. In 2018, we incorporated the former Air Liquide Welding manu-

As customers seek greater productivity, quality and capacity in a tight

labor market, our industry-leading automation portfolio grew to over

$400 million in sales. In 2019, we are leveraging our core competencies in

automation, software development, and metallurgy (filler metals) to
launch an exciting new metal additive manufacturing service that will

manufacture large-scale, 3D metal printed parts, prototypes and tooling

for industrial and aerospace customers. We have invested in a new

Cleveland property, assembled a development team, and are installing

facturing platform into our environmental, health and safety assessments

and I am pleased that our EH&S results successfully demonstrated the

positive impact of our programs. Our greenhouse gas emissions, energy

intensity and waste reduction performance continued to exceed our 2020

goals. Our safety performance held relatively steady year-over-year, and

continues to progress closely to the 2020 goal. We are establishing our

new long-term sustainability goals, which will build upon the momentum

we have generated.

1 Vitality index represents the percent of sales from new products launched in the last five years. The index excludes the International Welding segment.

P A G E T H R E E

Over $2 million donated in grants,
employee gifts, in-kind gifts and
disaster relief efforts in 2018.

Lincoln Electric was named one of the
2019 World’s Most Ethical Companies
by Ethisphere® Institute.

Lincoln Electric ranked as a TOP 100 U.S.
internship program by WayUp® in 2018.

Launched a comprehensive
sustainability site in 2018.
https://sustainability.lincolnelectric.com

RANKED
TOP 100

U.S. INTERNSHIP PROGRAM

“World’s Most Ethical Companies” and “Ethisphere” names and marks are registered trademarks of Ethisphere LLC.

INVESTING IN OUR EMPLOYEES

Our employees are the cornerstone of our success. In 2018, we instituted

a global employee engagement survey to assess our best practices and

identify opportunities for improvement and greater employee engage-

ment. Our program achieved a 71% favorability score and created a strong

foundation from which to build. Employees ranked our safe, ethical and

sustainable practices as a key strength, as well as trust among teams.

Solutions & Value: Developing solutions that improve our customers’ abil-
ity to make their products better, safer and easier. Key initiatives include

achieving $1 billion in sales from automation, including the successful

development of our new 3D metal additive manufacturing service,

improved interfaces and software tools that will leverage IoT and artificial

intelligence, as well as designing greater efficiency and sustainability into

our new products.

That employees see our values in action underscores the strength of our

culture and the commitment we have for one another. These attributes

Operational Excellence: Improving our quality, costs and processes by
maximizing continuous improvement using our “Lincoln Business

give us great confidence that our employees recognize the importance

System,” investing in greater digitization of our operations and processes,

of living by the “Golden Rule.”

and achieving our 2025 sustainability goals.

We identified that career development planning needs further invest-

ment. We launched a 10-month program to enhance managerial skills

Employee Development: Improving opportunities for our employees to
learn and grow through new development programs, resource groups,

through courses in talent management, employee engagement funda-

engagement initiatives, and enhanced HR systems and tools.

mentals, communications, negotiations, financial management, and

project management. We also developed the Lincoln Electric Educational

Development (LEed) program, which guides employees through available

learning and training curricula. We will be expanding LEed programming

in the quarters ahead, among other engagement initiatives to further

invest in employees.

HIGHER STANDARD 2025 STR ATEGY

As we near the end of our “2020 Vision & Strategy”

program, we are transitioning to a new long-

term strategy: Higher Standard 2025 Strategy

(HS2025). Our new strategy amplifies our

efforts to grow the business while achieving

best in class financial and sustainability per-

formance and increase employee engagement.

HS2025 focuses on key investments and

initiatives in four strategic areas:

Customer Focused: Enhancing our value proposition and the ease of doing
business by leveraging our CRM system, investments in industry-segment

teams and product portfolios and our growing footprint of technical centers.

All trademarks and registered trademarks are the property of their respective owners.

P A G E F O U R

I am confident that our successful execution of HS2025 will generate

superior value for all of our stakeholders and further differentiate

Lincoln Electric’s leadership position in our industry.

LOOK ING TO 2019

We have accomplished a lot as an organization, but have more work

ahead of us in 2019 as we execute against our key initiatives. We will be

engaging our stakeholders in our Higher Standard 2025 Strategy and dis-

cussing how our efforts can generate the most value for them. As we

approach our 125th Anniversary in 2020, we are excited about our future,

the opportunities that lay ahead and our ability to execute on our Higher

Standard 2025 Strategy. On behalf of the Board of Directors and the

employees at Lincoln Electric, thank you for your continued support as

our shareholder. Together, we are operating to a higher standard to

build a better world.

Christopher L. Mapes

Chairman, President and Chief Executive Officer

NON-GAAP FINANCIAL MEASURES

NON-GAAP FINANCIAL MEASURES
Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted Net Income, Adjusted EBIT, Adjusted effective tax rate, Adjusted Diluted
Earnings per Share, and Return on Invested Capital are non-GAAP financials measures that management believes are important to investors to evaluate
and compare the Company’s financial performance from period to period. Management uses this information in assessing and evaluating the Company’s
underlying operating performance.

ADJUSTED OPERATING INCOME
The following table presents a reconciliation of Operating Income as reported to Adjusted operating income for the years ended December 31, 2016 to 2018:

YEAR ENDED DECEMBER 31,
($ in millions)

Operating income (as reported)
Special items (pre-tax):

Rationalization and asset impairment charges (1)
Loss on deconsolidation of Venezuelan subsidiary (2)
Acquisition transaction and integration costs (3)
Amortization of step up in value of acquired inventories (3)
Bargain purchase gain (3)

Adjusted operating income
Adjusted operating income margin

2018

$ 375.5

25.3
—
4.5
—
—
$ 405.3

2017

$ 376.9

6.6
—
15.0
4.6
(49.7)
$ 353.5

2016

$ 283.6

—
34.3
—
—
—
$ 318.0

13.4%

13.5%

14.0%

ADJUSTED NET INCOME, ADJUSTED EBIT, ADJUSTED EFFECTIVE TAX RATE, AND ADJUSTED DILUTED EARNINGS PER SHARE
The following table presents reconciliations of Net income to Adjusted net income and Adjusted EBIT, Effective tax rate as reported to Adjusted effective
tax rate, and Diluted earnings per share as reported to Adjusted diluted earnings per share for the years ended December 31, 2016 to 2018:

YEAR ENDED DECEMBER 31,
($ in millions except per share amounts)

Net Income as reported
Special items:

Rationalization and asset impairment charges (1)
Loss on deconsolidation of Venezuelan subsidiary (2)
Pension settlement charges (3)
Acquisition transaction and integration costs (4)
Amortization of step up in value of acquired inventories (4)
Bargain purchase gain (4)
Tax effect of Special items (5)

Adjusted net income

Non-controlling interests in subsidiaries’ earnings (loss)
Interest expense, net
Income taxes as reported
Tax effect of Special items

Adjusted EBIT
Effective tax rate as reported
Net Special item tax impact
Adjusted effective tax rate
Diluted earnings per share as reported
Special items per share
Adjusted diluted earnings per share

2018

$ 287.1

25.3
—
6.7
4.5
—
—
(6.9)
$ 316.6
(0.07)
17.6
81.7
6.9
$ 422.7

22.2%
(0.3)%
21.9%

$ 4.37
0.45
$ 4.82

2017

$ 247.5

6.6
—
8.2
15.0
4.6
(49.7)
20.5
$ 252.7
(0.03)
19.4
118.8
(20.5)
$ 370.3

32.4%
(4.4)%
28.0%

$ 3.71
0.08
$ 3.79

2016

$ 198.4

—
34.3
—
—
—
—
(8.3)
$ 224.5
(0.03)
17.0
79.0
8.3
$ 328.7

28.5%
(0.5)%
28.0%

$ 2.91
0.38
$ 3.29

(1) Charges consist of employee severance, gains or losses on the disposal of assets and other related costs, non-cash goodwill impairment charges and net non-cash asset impairment charges.
(2) Loss on deconsolidation of the Venezuelan subsidiary as of June 30, 2016.
(3) Charges related to lump sum payments.
(4) Acquisition-related costs and a bargain purchase gain related to the Air Liquide Welding acquisition as discussed in Note 4 to the consolidated financial statements in the attached Form 10-K.
(5) Includes the net tax impact of Special items recorded during the respective periods, including the net impact of the U.S. Tax Act of $0.4 and $28.6 in the years ended December 31,

2018 and 2017, respectively. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax
rates reflect the taxable jurisdiction and nature of each Special item.

RETURN ON INVESTED CAPITAL (ROIC)
The following table presents calculations of ROIC for the years ended December 31, 2016 to 2018:

YEAR ENDED DECEMBER 31,
($ in millions)

Adjusted net income (1)

Plus: Interest expense (after-tax)
Less: Interest income (after-tax)

Net operating profit after taxes
Invested Capital (2)
Return on Invested Capital (ROIC)

(1) See reconciliation of Net income to Adjusted net income in the table above.
(2) Invested capital is defined as total debt plus total equity.

2018

$ 316.6
18.4
5.2
$ 329.8
1,590.3

2017

$ 252.7
14.9
3.0
$ 264.7
1,638.7

2016

$ 224.5
11.8
1.3
$ 234.9
1,417.8

20.7%

16.2%

16.6%

2018 FORM 10-K

WELD AUTOMATE EDUCATE CONSERVE
TO A

TABLE OF CONTENTS

PART I

Page

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 1C. Executive Officers of the Registrant

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

PART II

Equity Securities

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

PART III

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Signatures

PART IV

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

Commission file number 0-1402

LINCOLN ELECTRIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Ohio
(State or other jurisdiction of
incorporation or organization)

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

34-1860551
(I.R.S. Employer Identification No.)

44117
(Zip Code)

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

(216) 481-8100

(Registrant's telephone number, including area code)

Common Shares, without par value
(Title of each class)

The NASDAQ Stock Market LLC
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K

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

Large accelerated filer

Non-accelerated filer

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

The aggregate market value of the common shares held by non-affiliates as of June 29, 2018 was $5,556,447,259 (affiliates, for this purpose,
have been deemed to be Directors and Executive Officers of the Company and certain significant shareholders).

The number of shares outstanding of the registrant's common shares as of January 31, 2019 was 63,238,446.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-K incorporates by reference certain information from the registrant's definitive proxy statement
with respect to the registrant's 2019 Annual Meeting of Shareholders.

PART I

ITEM 1. BUSINESS

General

As used in this Annual Report on Form 10-K, the term "Company," except as otherwise indicated by the context, means
Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest.
The Lincoln Electric Company began operations in 1895 and was incorporated under the laws of the State of Ohio in 1906.
During 1998, The Lincoln Electric Company reorganized into a holding company structure, and Lincoln Electric Holdings, Inc.
became the publicly-held parent of Lincoln Electric subsidiaries worldwide, including The Lincoln Electric Company.

The Company is one of only a few worldwide broad-line manufacturers of welding, cutting and brazing products. Welding
products include arc welding power sources, plasma cutters, wire feeding systems, robotic welding packages, integrated
automation systems, fume extraction equipment, consumable electrodes, fluxes and welding accessories and specialty welding
consumables and fabrication. The Company's product offering also includes computer numeric controlled ("CNC") plasma and
oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. In addition, the Company
has a leading global position in the brazing and soldering alloys market.

The arc welding power sources and wire feeding systems manufactured by the Company range in technology from basic units
used for light manufacturing and maintenance to highly sophisticated robotic applications for high volume production welding
and fabrication. Three primary types of arc welding electrodes are produced: (1) coated manual or stick electrodes; (2) solid
electrodes produced in coil, reel or drum forms for continuous feeding in mechanized welding; and (3) cored electrodes
produced in coil form for continuous feeding in mechanized welding.

The Company has, through wholly-owned subsidiaries or joint ventures, manufacturing facilities located in the United States,
Australia, Brazil, Canada, China, Colombia, Egypt, France, Germany, India, Italy, Mexico, the Netherlands, Poland, Romania,
Russia, Spain, Turkey and the United Kingdom.

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 cutting, soldering and brazing businesses, as well as the retail
business in the United States.

Customers

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

The Company's major end-user markets include:

•
•
•
•
•

general fabrication,
energy and process industries,
heavy industries (heavy fabrication, ship building and maintenance and repair),
automotive and transportation, and
construction and infrastructure.

The Company is not dependent on a single customer or a few customers and no individual customer currently accounts for
more than ten percent of total Net sales. However, the loss of a large customer could have an adverse effect on the Company's
business. The Company's operating results are sensitive to changes in general economic conditions. The arc welding and
cutting industry is generally a mature industry in developed markets such as North America and Western Europe and is cyclical
in nature. Overall demand for arc welding and cutting products is largely determined by economic cycles and the level of
capital spending in manufacturing and other industrial sectors. The Company experiences some variability in reported period-
to-period results as demand for the Company's products are mildly seasonal with generally higher demand in the second and
third quarters. See "Item 1A. Risk Factors" for further discussion regarding risks associated with customers, general economic
conditions and demand.

Competition

Conditions in the arc welding and cutting industry are highly competitive. The Company believes it is the world's largest
manufacturer of consumables and equipment with relatively few major broad-line competitors worldwide, but numerous
smaller competitors in specific geographic markets. The Company continues to pursue strategies to heighten its
competitiveness in domestic and international markets, which includes positioning low cost manufacturing facilities in most
geographical markets. Competition in the arc welding and cutting industry is based on brand preference, product quality, price,
performance, warranty, delivery, service and technical support. The Company believes its performance against these factors
has contributed to the Company's position as the leader in the industry.

Most of the Company's products may be classified as standard commercial articles and are manufactured for stock. The
Company believes it has a competitive advantage in the marketplace because of its highly trained technical sales force and the
support of its welding research and development staff to assist customers in optimizing their welding applications. This allows
the Company to introduce its products to new users and to establish and maintain close relationships with its customers. This
close relationship between the technical sales force and the direct customers, together with its supportive relationship with its
distributors, who are particularly interested in handling the broad range of the Company's products, is an important element of
the Company's market success and a valuable asset of the Company.

Raw Materials

The principal raw materials essential to the Company's business are steel, electronic components, engines, brass, copper, silver,
aluminum alloys, robotic components and various chemicals, all of which are normally available for purchase in the open
market.

Patents and Trademarks

The Company holds many valuable patents, primarily in arc welding, and actively protects its innovations as research and
development has progressed in both the United States and major international jurisdictions. The Company believes its
trademarks are an important asset and aggressively pursues brand management.

Environmental Regulations

The Company's facilities are subject to environmental regulations. To date, compliance with these environmental regulations
has not had a material adverse effect on the Company's earnings. The Company is ISO 14001 certified at most significant
manufacturing facilities in North America and Europe and is progressing towards certification at its remaining facilities
worldwide. In addition, the Company is ISO 9001 certified at 47 facilities worldwide.

International Operations

The Company conducts a significant amount of its business and has a number of operating facilities in countries outside the
United States. As a result, the Company is subject to business risks inherent to non-U.S. activities, including political
uncertainty, import and export limitations, exchange controls and currency fluctuations.

Employees

The number of persons employed by the Company worldwide at December 31, 2018 was approximately 11,000. See "Part I,
Item 1C" for information regarding the Company's executive officers, which is incorporated herein by reference.

Website Access

The Company's website, www.lincolnelectric.com, is used as a channel for routine dissemination of important information,
including news releases and financial information. The Company posts its filings as soon as reasonably practicable after they
are electronically filed with, or furnished to, the SEC, including annual, quarterly and current reports on Forms 10-K, 10-Q and
8-K; proxy statements; and any amendments to those reports or statements. The Company also posts its Code of Corporate
Conduct and Ethics on its website. All such postings and filings are available on the Company's website free of charge. In
addition, this website allows investors and other interested persons to sign up to automatically receive e-mail alerts when news
releases and financial information is posted on the website. The SEC also maintains a website, www.sec.gov, that contains
reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The
content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Annual Report
unless expressly noted.

ITEM 1A. RISK FACTORS

From time to time, information we provide, statements by our employees or information included in our filings with the SEC
may contain forward-looking statements that are not historical facts. Those statements are "forward-looking" within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by
the use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "forecast," "guidance" or words
of similar meaning. Actual results may differ materially from such statements due to a variety of factors that could adversely
affect the Company's operating results. Forward-looking statements, and our future performance, operating results, financial
position and liquidity, are subject to a variety of factors that could materially affect results, including those risks described
below. Forward-looking statements made in this report speak only as of the date of the statement, and, except as required by
law, we undertake no obligation to update those statements. Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed
as historical data.

In the ordinary course of our business, we face various strategic, operating, compliance and financial risks. These risks could
have a material impact on our business, financial condition, operating results and cash flows. Our Enterprise Risk Management
("ERM") process seeks to identify and address significant risks. Our ERM process is a company-wide initiative that is
designed with the intent of prioritizing risks and allocating appropriate resources to address such risks. We use the integrated
risk framework of the Committee of Sponsoring Organizations to assess, manage and monitor risks.

Management has identified and prioritized critical risks based on the severity and likelihood of each risk and assigned an
executive to address each major identified risk area and lead action plans to monitor and mitigate risks, where possible. Our
Board of Directors provides oversight of the ERM process and systematically reviews identified critical risks. The Audit
Committee also reviews major financial risk exposures and the steps management has taken to monitor and control them.

Our goal is to pro-actively manage risks in a structured approach and in conjunction with the strategic planning process, with
the intent to preserve and enhance shareholder value. However, these and other risks and uncertainties could cause our results
to vary materially from recent results or from our anticipated future results. The risk factors and uncertainties described below,
together with information incorporated by reference or otherwise included elsewhere in this Annual Report on Form 10-K,
should be carefully considered. Additional risks and uncertainties of which we are currently unaware or that we currently
believe to be immaterial may also adversely affect our business.

General economic and market conditions may adversely affect our financial condition, results of operations and access
to capital markets.

Our operating results are sensitive to changes in general economic conditions. Recessionary economic cycles, higher interest
rates, inflation, higher labor costs, trade barriers in the world markets, financial turmoil related to sovereign debt and changes in
tax laws or trade laws or other economic factors affecting the countries and industries in which we do business could adversely
affect demand for our products. An adverse change in demand could impact our results of operations, collection of accounts
receivable and our expected cash flow generation from current and acquired businesses, which may adversely impact our
financial condition and access to capital markets.

Economic and supply disruptions associated with events beyond our control, such as war, acts of terror, political unrest,
pandemic, labor disputes or natural disasters could adversely affect our supply chain and distribution channels or result
in loss of sales and customers.

Our facilities and operations, and the facilities and operations of our suppliers and customers, could be disrupted by events
beyond our control, such as war, political unrest, pandemic, labor disputes or natural disasters. Any such disruption could
cause delays in the production and distribution of our products and the loss of sales and customers. Insurance proceeds may
not adequately compensate the Company for the losses.

Availability of and volatility in energy costs or raw material prices may adversely affect our performance.

In the normal course of business, we are exposed to market risks related to the availability of and price fluctuations in the
purchase of energy and commodities used in the manufacture of our products (primarily steel, brass, copper, silver, aluminum
alloys, electronic components, electricity and natural gas). The availability and prices for energy costs and raw materials,
including steel, nonferrous metals and chemicals, are subject to volatility and are influenced by worldwide economic
conditions. They are also influenced by import duties and tariffs (including the Section 232 steel and aluminum tariffs initiated
by the U.S. government in 2018), speculative action, world supply and demand balances, inventory levels, availability of
substitute materials, currency exchange rates, anticipated or perceived shortages, government trade practices and regulations
and other factors.

Increases in the cost of raw materials and components may adversely affect our profitability if we are unable to pass along to
our customers these cost increases in the form of price increases or otherwise reduce our cost of goods sold. Although most of
the raw materials and components used in our products are commercially available from a number of sources and in adequate
supply, any disruption in the availability of such raw materials and components, our inability to timely or otherwise obtain
substitutes for such items, or any deterioration in our relationships with or the financial viability of our suppliers could
adversely affect our business.

We are a co-defendant in litigation alleging asbestos induced illness. Liabilities relating to such litigation could reduce
our profitability and impair our financial condition.

As of December 31, 2018, we were a co-defendant in cases alleging asbestos induced illness involving claims by
approximately 3,336 plaintiffs. In each instance, we are one of a large number of defendants. The asbestos claimants allege
that exposure to asbestos contained in welding consumables caused the plaintiffs to develop adverse pulmonary diseases,
including mesothelioma and other lung cancers.

Since January 1, 1995, we have been a co-defendant in asbestos cases that have been resolved as follows: 54,977 of those
claims were dismissed, 23 were tried to defense verdicts, 7 were tried to plaintiff verdicts (which were reversed or resolved
after appeal), 1 was resolved by agreement for an immaterial amount and 890 were decided in favor of the Company following
summary judgment motions.

The long-term impact of the asbestos loss contingency, in the aggregate, on operating results, operating cash flows and access
to capital markets is difficult to assess, particularly since claims are in many different stages of development and we benefit
significantly from cost-sharing with co-defendants and insurance carriers. While we intend to contest these lawsuits
vigorously, and believe we have applicable insurance relating to these claims, there are several risks and uncertainties that may
affect our liability for personal injury claims relating to exposure to asbestos, including the future impact of changing cost
sharing arrangements or a change in our overall trial experience.

Asbestos use in welding consumables in the U.S. ceased in 1981.

We may incur material losses and costs as a result of product liability claims that may be brought against us.

Our business exposes us to potential product liability risks that are inherent in the design, manufacture, sale and application of
our products and the products of third-party suppliers that we utilize or resell. Our products are used in a variety of
applications, including infrastructure projects such as oil and gas pipelines and platforms, buildings, bridges and power
generation facilities, the manufacture of transportation and heavy equipment and machinery and various other construction
projects. We face risk of exposure to product liability claims in the event that accidents or failures on these projects result, or
are alleged to result, in bodily injury or property damage. Further, our products are designed for use in specific applications,
and if a product is used inappropriately, personal injury or property damage may result. In certain cases, we design automated
welding systems for use in a customer’s production facilities (including automotive production facilities), which could expose
us to financial losses or professional liability.

The occurrence of defects in or failures of our products, or the misuse of our products in specific applications, could cause
termination of customer contracts, increased costs and losses to us, our customers and other end users. We cannot be assured
that we will not experience any material product liability losses in the future or that we will not incur significant costs to defend
those claims. Further, we cannot be assured that our product liability insurance coverage will be adequate for any liabilities
that we may ultimately incur or that product liability insurance will continue to be available on terms acceptable to us. Even if
we are successful defending such claims or product liability coverage is adequate, claims of this nature could cause customers
to lose confidence in our products and our company. Warranty claims are not generally covered by insurance and we may incur
significant warranty costs in the future for which we would not be reimbursed.

The cyclical nature and maturity of the arc welding and cutting industry in developed markets may adversely affect our
performance.

The arc welding and cutting industry is generally a mature industry in developed markets such as North America and Western
Europe and is cyclical in nature. Overall demand for arc welding and cutting products is largely determined by the level of
capital spending in manufacturing and other industrial sectors, and the welding industry has historically experienced
contraction during periods of slowing industrial activity. If economic, business and industry conditions deteriorate, capital
spending in those sectors may be substantially decreased, which could reduce demand for our products, our revenues and our
results of operations.

We may not be able to complete our acquisition or divestiture strategies, successfully integrate acquired businesses and
in certain cases we may be required to retain liabilities for certain matters.

Part of our business strategy is to pursue targeted business acquisition opportunities, including foreign investment
opportunities. We cannot be certain that we will be successful in pursuing potential acquisition candidates or that the
consequences of any acquisition would be beneficial to us. Future acquisitions may expose us to unexpected liabilities and
involve the expenditure of significant funds and management time. Further, we may not be able to successfully integrate an
acquired business with our existing businesses or recognize the expected benefits from any completed acquisition. Integration
efforts may include significant rationalization activities that could be disruptive to the business. Our current operational cash
flow is sufficient to fund our acquisition plans, but a significant acquisition could require access to the capital markets.

Additionally, from time to time we may identify assets for strategic divestitures that would increase capital resources available
for other activities and create organizational and operational efficiencies. Various factors could materially affect our ability to
dispose of such assets or complete announced divestitures, including the receipt of approvals of governmental agencies or third
parties and the availability of purchasers willing to acquire the interests or purchase the assets on terms and at prices acceptable
to us.

Sellers typically retain certain liabilities or indemnify buyers for certain matters. The magnitude of any such retained liability
or indemnification obligation may be difficult to quantify at the time of the transaction and ultimately may be material. Also,
as is typical in divestitures, third parties may be unwilling to release us from guarantees or other credit support provided prior
to the sale of the divested assets. As a result, after a divestiture, we may remain secondarily liable for the obligations
guaranteed or supported to the extent that the buyer of the assets fails to perform these obligations.

If we cannot continue to develop, manufacture and market products that meet customer demands, continue to enforce
the intellectual property rights on which our business depends or if third parties assert that we violate their intellectual
property rights, our revenues, gross margins and results of operations may suffer.

Our continued success depends, in part, on our ability to continue to meet our customers' needs for welding and cutting
products through the introduction of innovative new products and the enhancement of existing product design and performance
characteristics. We must remain committed to product research and development and customer service in order to remain
competitive. We cannot be assured that new products or product improvements, once developed, will meet with customer
acceptance and contribute positively to our operating results, or that we will be able to continue our product development
efforts at a pace to sustain future growth. Further, we may lose customers to our competitors if they demonstrate product
design, development or manufacturing capabilities superior to ours.

We rely upon patent, trademark, copyright and trade secret laws in the United States and similar laws in foreign countries, as
well as agreements with our employees, customers, suppliers and other third parties, to establish and maintain our intellectual
property rights. However, any of our intellectual property rights could be challenged, invalidated or circumvented, or our
intellectual property rights may not be sufficient to provide a competitive advantage. Further, the laws and their application in
certain foreign countries do not protect our proprietary rights to the same extent as U.S. laws. Accordingly, in certain countries,
we may be unable to protect our proprietary rights against unauthorized third-party copying or use, which could impact our
competitive position.

Further, third parties may claim that we or our customers are infringing upon their intellectual property rights. Even if we
believe that those claims are without merit, defending those claims and contesting the validity of patents can be time
consuming and costly. Claims of intellectual property infringement also might require us to redesign affected products, enter
into costly settlements or license agreements, pay costly damage awards or face a temporary or permanent injunction
prohibiting us from manufacturing, marketing or selling certain of our products.

The competitive pressures we face could harm our revenue, gross margins and prospects.

We operate in a highly competitive global environment and compete in each of our businesses with other broad-line
manufacturers and numerous smaller competitors specializing in particular products. We compete primarily on the basis of
brand, product quality, price, performance, warranty, delivery, service and technical support. We have previously initiated, and
may in the future initiate significant rationalization activities to align our business to market conditions and improve our overall
competitiveness, including with respect to the integration of acquired businesses. Such rationalization activities could fail to
deliver the desired competitive cost structure and could result in disruptions in customer service. If our products, services,
support and cost structure do not enable us to compete successfully based on any of the criteria listed above, our operations,
results and prospects could suffer.

Further, in the past decade, the arc welding industry in the United States and other developed countries has been subject to
increased levels of foreign competition as low cost imports have become more readily available. Our competitive position
could be harmed if new or emerging competitors become more active in the arc welding business. For example, while steel
manufacturers traditionally have not been significant competitors in the domestic arc welding industry, some foreign integrated
steel producers manufacture selected consumable arc welding products and robotic arm manufacturers compete in the
automated welding and cutting space. In addition, in certain markets of the world, distributors manufacture and sell arc
welding products. Our sales and results of operations, as well as our plans to expand in some foreign countries, could be
adversely affected by this practice.

We conduct our sales and distribution operations on a worldwide basis and maintain manufacturing facilities in a
number of foreign countries, which subjects us to risks associated with doing business outside the United States.

As a growing global enterprise, the share of sales and profits we derive from our international operations and exports from the
United States is significant. This trend increases our exposure to the performance of many developing economies in addition to
the developed economies outside of the United States. If international economies were to experience significant slowdowns, it
could adversely affect our financial condition, results of operations and cash flows. There are a number of risks in doing
business internationally, which may impede our ability to achieve our strategic objectives relating to our foreign operations,
including:

• Political and economic uncertainty and social turmoil;

• Corporate governance and management challenges in consideration of the numerous U.S. and foreign laws and regulations,
including regulations relating to import-export control, technology transfer restrictions, repatriation of earnings and funds,
exchange controls, labor regulations, nationalization, tariffs, anti-boycott provisions and anti-bribery laws (such as the
Foreign Corrupt Practices Act and the Organization for Economic Cooperation and Development Convention);

• International terrorism and hostilities;

• Changes in the global regulatory environment, including revised or newly created laws, regulations or standards relating to

the Company, our products or the markets in which we operate; and

• Significant fluctuations in relative currency values; in particular, an increase in the value of the U.S. dollar against foreign
currencies could have an adverse effect on our profitability and financial condition, as well as the imposition of exchange
controls, currency devaluations and hyperinflation.

Our operations depend on maintaining a skilled workforce, and any interruption in our workforce could negatively
impact our results of operations and financial condition.

Our success depends in part on the efforts and abilities of our management team and key employees. Their skills, experience
and industry knowledge significantly benefit our operations and performance. Our future success will also depend on our
ability to identify, attract and retain highly qualified managerial and technical (including research and development) personnel.
Competition for these individuals is intense, and we may not succeed in identifying, attracting or retaining qualified personnel.
With our strategy to expand internationally into developing markets, we may incur additional risks as some developing
economies lack a sufficiently trained labor pool.

Any interruption of our workforce, including rationalization efforts related to the integration of acquired businesses,
interruptions due to unionization efforts, changes in labor relations or shortages of appropriately skilled individuals could
impact our results of operations and financial condition.

Our defined benefit pension plans are subject to financial market trends, such as changes in discount rates and actual
investment return on pension assets, which could adversely affect our results of operations and cash flows.

The performance of the financial markets and interest rates impact our funding obligations under our defined benefit pension
plans. Significant changes in discount rates, decreases in the fair value of plan assets and investment losses on plan assets may
increase our benefit obligations and adversely impact our results of operations, shareholders' equity and cash flows through our
annual measurement of plan assets and liabilities. During the fourth quarter 2016, the Company made amendments to freeze all
benefit accruals under the Lincoln Electric Retirement Annuity Program and the domestic Supplemental Executive Retirement
Plan, effective December 31, 2016 and November 30, 2016, respectively. For further details on the plan freeze and a
discussion regarding how the financial statements have been affected, refer to Note 12 to the Company's consolidated financial
statements.

Changes in tax rates or exposure to additional income tax liabilities could affect profitability.

Our business is subject to income taxes in the United States and various foreign jurisdictions. Domestic and international tax
liabilities are subject to the allocation of income among various tax jurisdictions. Our effective tax rate could be adversely
affected by changes in the mix among earnings in countries with differing statutory tax rates, changes in the valuation
allowances of deferred tax assets or changes in tax laws.

The amount of income taxes paid is subject to ongoing audits by United States federal, state and local tax authorities and by
foreign tax authorities. If these audits result in assessments different from amounts reserved, future financial results may
include unfavorable adjustments which could have a material adverse effect on our results of operations.

We are subject to risks relating to our information technology systems.

The conduct and management of our business relies extensively on information technology systems, which contain confidential
information related to our customers, suppliers and employees and other proprietary business information. We maintain some
of these systems and are also dependent on a number of critical corporate infrastructure services provided by third parties
relating to, among other things, human resources, electronic communication services and finance functions. If these systems
are damaged, cease to function properly or are subject to a significant cyber security breach, we may suffer an interruption in
our ability to manage and operate the business and our results of operations and financial condition could be adversely affected.
Furthermore, a security breach could result in financial loss, unfavorable publicity, damage to our reputation, loss of our trade
secrets and other competitive information, allegations by our customers that we have not performed our contractual obligations,
litigation by affected parties and fines and other sanctions resulting from any related breaches of data privacy regulations. Any
of these could have an adverse effect on our results of operations and financial condition.

Our global operations are subject to increasingly complex environmental regulatory requirements.

We are subject to increasingly complex environmental regulations affecting international manufacturers, including those related
to air and water emissions, waste management and climate change. Some environmental laws impose strict, retroactive and
joint and several liability for the remediation of the release of hazardous substances, even for conduct that was lawful at the
time it occurred, or for the conduct of or conditions caused by prior operators, predecessors or third parties. Failure to comply
with environmental laws could expose us to penalties or clean-up costs, civil or criminal liability and sanctions on certain of
our activities, as well as damage to property or natural resources. These liabilities, sanctions, damages and remediation efforts
related to any non-compliance with such laws and regulations could negatively impact our ability to conduct our operations and
our financial condition and results of operations. In addition, there can be no assurances that we will not be adversely affected
by costs, liabilities or claims with respect to existing or subsequently acquired operations or under present laws and regulations
or those that may be adopted or imposed in the future.

Changes in environmental laws or regulations could result in higher expenses and payments, and uncertainty relating to
environmental laws or regulations may also affect how we conduct our operations and structure our investments and could limit
our ability to enforce our rights. Changes in environmental and climate change laws or regulations, including laws relating to
greenhouse gas emissions, could subject us to additional costs and restrictions, including increased energy and raw material
costs. If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and
compliance requirements upon us or our products, they could negatively impact our business, capital expenditures, results of
operations, financial condition and competitive position.

It is our policy to apply strict standards for environmental protection to all of our operations inside and outside of the United
States, even when we are not subject to local government regulations. We may incur substantial costs, including cleanup costs,
fines and civil or criminal sanctions, liabilities resulting from third-party property damage or personal injury claims, or our
products could be prohibited from entering certain jurisdictions, if we were to violate or become liable under environmental
laws, if our products become non-compliant with environmental laws or if we were to undertake environmental protection
actions voluntarily.

We also face increasing complexity in our products design and procurement operations as we adjust to new and future
requirements relating to the design, production and labeling of our products that are sold worldwide in multiple jurisdictions.
The ultimate costs under environmental laws and the timing of these costs are difficult to predict.

We may incur additional restructuring charges as we continue to contemplate rationalization actions in an effort to
optimize our cost structure and may not achieve the anticipated savings and benefits of these actions.

We may take additional actions in the future to further optimize our cost structure and improve the efficiency of our operations,
which will reduce our profitability in the periods incurred. As a result of these actions, we will likely continue to incur charges,
which may include but are not be limited to asset impairments, employee severance costs, charges for pension and other
postretirement contractual benefits and pension settlements, any of which could be significant, and could adversely affect our
financial condition and results of operations. In addition, we may not realize anticipated savings or benefits from past or future
rationalization plans in full or in part or within the time periods we expect. Failure to realize anticipated savings or benefits
from our cost reduction actions could have a material adverse effect on our business, financial condition, liquidity, results of
operations and cash flows. For more information regarding rationalization plans, refer to the rationalization and asset
impairment related disclosure under Note 7 to the Company's consolidated financial statements.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS OF THE REGISTRANT

Name
Christopher L. Mapes

Position

Age
57 Chairman of the Board effective December 21, 2013. President and Chief Executive Officer
effective December 31, 2012; Chief Operating Officer from September 1, 2011 to December
31, 2012; Director since February 2010. Prior to his service with the Company, Mr. Mapes
was an Executive Vice President of A.O. Smith Corporation (a global manufacturer with a
water heating and water treatment technologies business), a position he held from 2004
through August 2011, and the President of its former Electrical Products unit, a position he
held from September 2004 through August 2011.

Vincent K. Petrella

58 Executive Vice President, Chief Financial Officer and Treasurer since February 19, 2014;
Senior Vice President, Chief Financial Officer and Treasurer from October 7, 2005 to
February 19, 2014; Vice President, Chief Financial Officer and Treasurer from February 4,
2004 to October 7, 2005.

Jennifer I. Ansberry

45 Executive Vice President, General Counsel and Secretary since April 20, 2017; Vice

President, Deputy General Counsel from 2004 until April 20, 2017.

George D. Blankenship

56 Executive Vice President, President, Americas Welding since February 18, 2016; Executive
Vice President, President, Lincoln Electric North America from February 19, 2014 to
February 18, 2016; Senior Vice President; President, Lincoln Electric North America from
July 30, 2009 to February 19, 2014; Senior Vice President, Global Engineering from
October 7, 2005 to July 30, 2009; Senior Vice President; President, Lincoln Cleveland of The
Lincoln Electric Company from January 8, 2008 to July 30, 2009; Senior Vice President, U.S.
Operations of The Lincoln Electric Company from October 7, 2005 to January 8, 2008.

Gabriel Bruno

51 Executive Vice President, Finance since January 1, 2019; Chief Human Resources Officer

Steven B. Hedlund

from July 1, 2016 to December 31, 2018; Executive Vice President, Chief Human Resources
Officer and Chief Information Officer from February 18, 2016 to July 1, 2016; Executive
Vice President, Chief Information Officer and Interim Chief Human Resources Officer from
March 7, 2015 to February 18, 2016; Executive Vice President, Chief Information Officer
from February 19, 2014 to March 7, 2015; Vice President, Chief Information Officer from
May 1, 2012 to February 19, 2014; Vice President, Corporate Controller from 2005 to May 1,
2012.

52 Executive Vice President and President, International Welding since June 1, 2017; Senior
Vice President and President, Global Automation from January 22, 2015 to June 1, 2017;
Senior Vice President, Strategy & Business Development from February 19, 2014 to January
22, 2015; Vice President, Strategy and Business Development from September 15, 2008 to
February 19, 2014. Prior to his service with the Company, Mr. Hedlund was the Vice
President, Growth and Innovations with Master Lock, LLC (a security products company)
from June 1, 2005 to July 1, 2008.

Michele R. Kuhrt

52 Executive Vice President, Chief Human Resources Officer since February 25, 2019;

Executive Vice President, Chief Information Officer from July 1, 2016 to February 24, 2019;
Senior Vice President, Tax from 2006 to July 1, 2016.

Geoffrey P. Allman

48 Senior Vice President, Strategy and Business Development since January 1, 2019; Senior

Vice President, Corporate Controller from January 14, 2014 to December 31, 2018; Corporate
Controller from July 1, 2012 to January 14, 2014; Director, Regional Finance North America
from October 1, 2009 to June 30, 2012.

Thomas A. Flohn

58 Senior Vice President, President, Asia Pacific Region since February 19, 2014; Vice

President, Regional President, Lincoln Electric Asia Pacific Region from November 4, 2013
to January 14, 2014. Vice President; President, Lincoln Electric Europe, Middle East & Africa
(EMEA) from July 1, 2010 to November 4, 2013; Vice President; President, Lincoln Asia
Pacific from January 1, 2005 to June 30, 2010.

David J. Nangle

62 Executive Vice President, President, Harris Products Group since February 19, 2014; Vice

President, Group President of Brazing, Cutting and Retail Subsidiaries from January 12, 2006
to February 19, 2014.

Douglas S. Lance

51 Senior Vice President, President, Cleveland Operations, North America since September 1,
2016; Senior Vice President, North American Operations from February 19, 2014 to August
31, 2016; Vice President, Operations from January 1, 2012 to February 18, 2014.

Michael Mintun

56 Senior Vice President, Sales and Marketing, North America since February 19, 2014; Vice

President, Sales and Marketing, North America from January 1, 2013 to February 18, 2014;
Vice President, Sales, North America from January 1, 2008 to December 31, 2012.

Michael J. Whitehead

45 Senior Vice President, President, Global Automation, Cutting and Additive Business since

January 1, 2019; Senior Vice President, Strategy and Business Development from August 1,
2016 to December 31, 2018; President, Lincoln Canada from January 1, 2015 to July 31,
2016; Director, New Product Development, Consumables R&D from January 1, 2012 to
December 31, 2014.

The Company has been advised that there is no arrangement or understanding among any one of the officers listed and any
other persons pursuant to which he or she was elected as an officer. The executive officers are elected by the Board of
Directors normally for a term of one year and/or until the election of their successors.

ITEM 2. PROPERTIES

The Company's corporate headquarters and principal United States manufacturing facilities are located in the Cleveland, Ohio
area. Total Cleveland area property consists of 244 acres, of which present manufacturing facilities comprise an area of
approximately 3,017,090 square feet.

The Company has 60 manufacturing facilities, including operations and joint ventures in 19 countries, the significant locations
(grouped by operating segment) of which are as follows:

Americas Welding:

United States

Brazil
Canada
Colombia
Mexico

International Welding:

Australia
China
Egypt
France
Germany
India
Italy
Netherlands
Poland
Romania
Russia
Spain
Turkey
United Kingdom

Cleveland, Coldwater and Fort Loramie, Ohio; San Diego and Anaheim, California; Reno,
Nevada; Ladson, South Carolina; Chattanooga, Tennessee; Detroit, Michigan; Fort Collins,
Colorado; Bettendorf, Iowa; Churubusco, Indiana.

Guarulhos; Indaiatuba.
Toronto; Mississauga; Hamilton; Montreal; Hawkesbury; Vankleek Hill.
Bogota.
Mexico City; Torreon.

Newcastle; Gladstone.
Shanghai; Nanjing; Zhengzhou; Luan County; Hangzhou.
Cairo.
Grand-Quevilly; Partheny.
Essen; Eisenberg; Frankfurt.
Chennai.
Corsalone; Due Carrere; Verona; Storo.
Nijmegen.
Bielawa; Dzierzoniow.
Buzau.
Mtsensk.
Zaragoza.
Istanbul.
Sheffield, England; Port Talbot, Wales.

The Harris Products Group:

United States
Brazil
Poland

Mason, Ohio; Gainesville, Georgia; Winston Salem, North Carolina.
Maua.
Dzierzoniow.

All properties relating to the Company's Cleveland, Ohio headquarters and manufacturing facilities are owned by the Company.
Most of the Company's foreign subsidiaries own manufacturing facilities in the country where they are located. The Company
believes that its existing properties are in good condition and are suitable for the conduct of its business.

In addition, the Company maintains operating leases for some manufacturing facilities, distribution centers and sales offices
throughout the world. Refer to Note 18 to the consolidated financial statements for information regarding the Company's lease
commitments.

ITEM 3. LEGAL PROCEEDINGS

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

As of December 31, 2018, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by
approximately 3,336 plaintiffs, which is a net decrease of 133 claims from those previously reported. In each instance, the
Company is one of a large number of defendants. The asbestos claimants seek compensatory and punitive damages, in most
cases for unspecified sums. Since January 1, 1995, the Company has been a co-defendant in other similar cases that have been
resolved as follows: 54,977 of those claims were dismissed, 23 were tried to defense verdicts, 7 were tried to plaintiff verdicts
(which were reversed or resolved after appeal), 1 was resolved by agreement for an immaterial amount and 890 were decided in
favor of the Company following summary judgment motions.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES

The Company's common shares are traded on The NASDAQ Global Select Market under the symbol "LECO." The number of
record holders of common shares at December 31, 2018 was 1,745.

Issuer purchases of equity securities for the fourth quarter 2018 were:

Period

October 1-31, 2018

November 1-30, 2018

December 1-31, 2018

Total

Total Number of
Shares Repurchased

Average Price
Paid Per Share

455,734 (1) $
391,845
99,898 (1)
947,477

86.10

83.50

82.26

84.62

Total Number of
Shares Repurchased
as Part of Publicly
Announced Plans or
Programs

Maximum Number of
Shares that May Yet be
Purchased Under the
Plans or Programs (2)

455,442

391,845

85,658

932,945

6,654,727

6,262,882

6,177,224

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

restricted awards.

(2) On April 20, 2016, the Company announced that the Board of Directors authorized a new share repurchase program, which
increased the total number of the Company’s common shares authorized to be repurchased to 55 million shares. Total
shares purchased through the share repurchase program were 48.8 million shares at a cost of $1.9 billion for a weighted
average cost of $38.52 per share through December 31, 2018.

The following line graph compares the yearly percentage change in the cumulative total shareholder return on the Company's
common stock against the cumulative total return of the S&P Composite 500 Stock Index ("S&P 500") and the S&P 400
MidCap Index ("S&P 400") for the five-year calendar period commencing January 1, 2014 and ending December 31, 2018.
This graph assumes that $100 was invested on December 31, 2013 in each of the Company's common shares, the S&P 500 and
the S&P 400. A peer-group index for the welding industry, in general, is not readily available because the industry is comprised
of a large number of privately held competitors and competitors that are smaller parts of large publicly traded companies.

ITEM 6. SELECTED FINANCIAL DATA

(Dollars in thousands, except per share amounts)

Net sales

Net income

Basic earnings per share

Diluted earnings per share

Cash dividends declared per share

Total assets

Long-term debt, less current portion

2018 (1)

2017 (2)

Year Ended December 31,
2016 (3)

2015 (4)

2014 (5)

3,028,674

2,624,431

2,274,614

2,535,791

2,813,324

287,066

247,503

198,399

127,478

254,686

4.42

4.37

1.64

3.76

3.71

1.44

2.94

2.91

1.31

1.72

1.70

1.19

3.22

3.18

0.98

2,349,825

702,549

2,406,547

704,136

1,943,437

703,704

1,784,171

350,347

1,939,215

2,488

(1) Results for 2018 include charges of $25,285 ($19,966 after-tax) in rationalization and asset impairment charges and
gains or losses on the disposal of assets, $6,686 ($5,017 after-tax) in pension settlement charges and $4,498 ($3,682
after-tax) of transaction and integration costs related to the acquisition of Air Liquide Welding. Results also include
charges of $399 related to the net impact of the U.S. Tax Act (as defined in Item 7).

(2) Results for 2017 include charges related to the acquisition of Air Liquide Welding, including $15,002 ($11,559 after-
tax) of transaction and integration costs, $4,578 ($3,453 after-tax) in amortization of step up in value of acquired
inventories and a $49,650 bargain purchase gain. Results also include $8,150 ($5,030 after-tax) in pension settlement
charges, $6,590 ($6,198 after-tax) in rationalization and asset impairment charges and charges of $28,616 related to
the net impact of the U.S. Tax Act.

(3) Results for 2016 include a loss of $34,348 ($33,251 after-tax) on the deconsolidation of the Company's Venezuelan
subsidiary, partially offset by a $7,196 income tax valuation allowance reversal related to a legal entity change to
realign the Company’s tax structure. Long-term debt includes the issuance in 2016 of additional Senior Unsecured
Notes in the aggregate principal amount of $350,000 through a private placement.

(4) Results for 2015 include $13,719 ($11,943 after-tax) of rationalization charges and non-cash net impairment charges

of $6,239. Results also include pension settlement charges of $142,738 ($87,310 after-tax) and charges of $27,214
related to Venezuelan remeasurement losses. Long-term debt includes the issuance of Senior Unsecured Notes in
2015 in the aggregate principal amount of $350,000 through a private placement.

(5) Results for 2014 include $32,742 ($32,706 after-tax) of non-cash asset impairment charges partially offset by gains of
$3,930 ($2,754 after-tax) related to the sale of assets. Associated with the impairment of long-lived assets is an
offsetting special item of $805 representing portions attributable to non-controlling interests. Results also include
charges of $21,133 related to Venezuelan remeasurement losses.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

(Dollars in thousands, except per share amounts)

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with
"Selected Financial Data," the Company's consolidated financial statements and other financial information included elsewhere
in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements that involve risks
and uncertainties. Actual results may differ materially from those indicated in the forward-looking statements. See "Item 1A.
Risk Factors" for more information regarding forward-looking statements.

General

The Company is the world's largest designer and manufacturer of arc welding and cutting products, manufacturing a broad line
of arc welding equipment, consumable welding products and other welding and cutting products.

The Company is one of only a few worldwide broad-line manufacturers of welding, cutting and brazing products. Welding
products include arc welding power sources, plasma cutters, wire feeding systems, robotic welding packages, integrated
automation systems, fume extraction equipment, consumable electrodes, fluxes and welding accessories and specialty welding
consumables and fabrication. The Company's product offering also includes CNC plasma and oxy-fuel cutting systems and
regulators and torches used in oxy-fuel welding, cutting and brazing. In addition, the Company has a leading global position in
the brazing and soldering alloys market.

The Company invests in the research and development of arc welding products in order to continue its market leading product
offering. The Company continues to invest in technologies that improve the quality and productivity of welding products. In
addition, the Company actively protects its innovations as research and development has progressed in both the United States
and other major international jurisdictions. The Company believes its significant investment in research and development and
its highly trained technical sales force coupled with its extensive distributor network provide a competitive advantage in the
marketplace.

The Company's major end-user markets include:

•
•
•
•
•

general fabrication,
energy and process industries,
heavy industries (heavy fabrication, ship building and maintenance and repair),
automotive and transportation, and
construction and infrastructure.

The U.S. Tax Cuts and Jobs Act (the "U.S. Tax Act") was enacted on December 22, 2017. The U.S. Tax Act reduced the U.S.
federal corporate income tax rate to 21% from 35%, required companies to pay a one-time transition tax on earnings of certain
foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign-sourced earnings. The SEC staff
issued Staff Accounting Bulletin No. 118 ("SAB 118") related to the U.S. Tax Act, which provided for a one-year measurement
period and guidance for the application of Accounting Standards Codification ("ASC") Topic 740, Income Taxes. At December
31, 2017, the Company had not completed its accounting related to the U.S. Tax Act. All provisional amounts were based on
reasonable estimates using the best information available at the time. At December 31, 2018, the Company has completed its
accounting related to the U.S. Tax Act. Refer to Note 14 to the consolidated financial statements for further information on the
financial statement impact of the U.S. Tax Act.

During the first quarter of 2016, the Company realigned its organizational and leadership structure. The new structure allowed
for further integration of operational and product development processes across regions and supported growth strategies. In
accordance with this organizational change, beginning with quarterly reporting for the three months ended March 31, 2016, the
Company reported three operating segments as follows: Americas Welding, International Welding and The Harris Products
Group. Refer to Note 6 to the consolidated financial statements for segment and geographic area information.

As further described in Note 1 to the consolidated financial statements, effective June 30, 2016, the Company determined that it
no longer had control of its subsidiary in Venezuela as a result of restrictive exchange controls and Venezuelan operating

restrictions that have significantly impacted the ability to make key operational decisions. As a result, the Company
deconsolidated its subsidiary in Venezuela effective June 30, 2016 and began reporting the results under the cost method of
accounting. Beginning July 1, 2016, the Company no longer includes the results of the Venezuelan subsidiary in its
consolidated financial statements.

Key Indicators

Key economic measures relevant to the Company include industrial production trends, steel consumption, purchasing manager
indices, capacity utilization within durable goods manufacturers and consumer confidence indicators. Key industries which
provide a relative indication of demand drivers to the Company include steel, farm machinery and equipment, construction and
transportation, fabricated metals, electrical equipment, ship and boat building, defense, truck manufacturing, energy and
railroad equipment. Although these measures provide key information on trends relevant to the Company, the Company does
not have available a more direct correlation of leading indicators which can provide a forward-looking view of demand levels
in the markets which ultimately use the Company's welding products.

Key operating measures utilized by the operating units to manage the Company include orders, sales, inventory and fill-rates,
all of which provide key indicators of business trends. These measures are reported on various cycles including daily, weekly
and monthly depending on the needs established by operating management.

Key financial measures utilized by the Company's executive management and operating units in order to evaluate the results of
its business and in understanding key variables impacting the current and future results of the Company include: sales; gross
profit; selling, general and administrative expenses; operating income; earnings before interest and taxes; earnings before
interest, taxes and bonus; net income; adjusted operating income; adjusted earnings before interest and income taxes; adjusted
earnings before interest, taxes and bonus; adjusted net income; adjusted diluted earnings per share; operating cash flows; and
capital expenditures, as well as applicable ratios such as return on invested capital and average operating working capital to
sales. These measures are reviewed at monthly, quarterly and annual intervals and compared with historical periods, as well as
objectives established by the Board of Directors of the Company.

Results of Operations

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

Year Ended December 31,

2018

2017

2016

Amount

$ 3,028,674

2,000,153

% of
Sales

Amount

$ 2,624,431

1,749,324

% of
Sales

Amount

$ 2,274,614

1,488,055

Increase (Decrease)
Actual vs. Prior Year

% of
Sales

2018 vs.
2017

2017 vs.
2016

15.4%

14.3%

15.4%

17.6%

11.3%

1,028,521

34.0%

875,107

33.3%

786,559

34.6%

17.5%

627,697

20.7%

541,225

20.6%

468,597

20.6%

16.0%

15.5%

25,285

—

—
375,539

17,565

10,686

12.4%

81,667

22.2%

286,993

(73)

287,066

9.5% $

6,590

—
(49,650)
376,942

19,432

8,726

366,236

118,761

32.4%

247,475

(28)
247,503

—

283.7% 100.0%

34,348

—
283,614

16,987

10,761

—

(100.0%)

(100.0%)
(0.4%)

100.0%
32.9%

12.5%

(9.6%)

14.4%

22.5%

(18.9%)

14.4%

79,015

28.5%

198,373

(26)
198,399

9.4% $

(31.2%)

32.0%

50.3%

16.0%

24.8%

160.7%

8.7%

16.0%

7.7%

24.8%

4.37

3.71

2.91

Net sales

Cost of goods sold

Gross profit

Selling, general &
administrative expenses

Rationalization and asset
impairment charges

Loss on deconsolidation of
Venezuelan subsidiary

Bargain purchase gain
Operating income

Interest expense, net

Other income (expense)

Income taxes

Effective tax rate

Net income including non-
controlling interests

Non-controlling interests in
subsidiaries' loss

Net income

Diluted earnings per share

Net Sales:

Income before income taxes

368,660

12.2%

14.0%

277,388

12.2%

0.7%

The following table summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for
the twelve months ended December 31, 2018 on a consolidated basis:

Lincoln Electric Holdings, Inc.

2,624,431

27,792

$ 239,242

$ 146,193

(8,984)

$ 3,028,674

Net Sales
2017

Volume

Acquisitions

Price

Foreign
Exchange

Net Sales
2018

Change in Net Sales due to:

% Change

Lincoln Electric Holdings, Inc.

1.1%

9.1%

5.6%

(0.3%)

15.4%

Net sales increased primarily as a result of stronger organic sales and the acquisition of Air Liquide Welding within Americas
Welding and International Welding.

The following table summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for
the twelve months ended December 31, 2017 on a consolidated basis:

Lincoln Electric Holdings, Inc.

$ 2,274,614

95,171

$ 181,900

55,078

17,668

$ 2,624,431

Net Sales
2016

Volume

Acquisitions

Price

Foreign
Exchange

Net Sales
2017

Change in Net Sales due to:

% Change

Lincoln Electric Holdings, Inc.

4.2%

8.0%

2.4%

0.8%

15.4%

Net sales increased primarily as a result of acquisitions, improved volume due to higher demand and increased product pricing.
Net sales for 2016 include $10,813 in sales from the Company's Venezuelan operations. The increase in Net sales from
acquisitions for 2017 was driven by the acquisition of Air Liquide Welding within Americas Welding and International
Welding.

Gross Profit:

Gross profit for 2018 increased, as a percent of sales, compared to the prior year due to price management and segment mix.
The year ended December 31, 2018 includes a last-in, first-out ("LIFO") charge of $10,990, as compared with a LIFO charge of
$7,312 in the prior year.

Gross profit for 2017 decreased, as a percent of sales, compared to the prior year due to the acquisition of Air Liquide Welding
and rising input costs. The year ended December 31, 2017 includes a last-in, first-out ("LIFO") charge of $7,312, as compared
with a LIFO charge of $1,564 in the prior year.

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

The increase in SG&A expense in 2018 as compared to 2017 was due to SG&A from acquisitions and higher compensation
costs and professional fees.

The increase in SG&A expense in 2017 as compared to 2016 was due to SG&A from acquisitions, higher compensation costs
and acquisition transaction and integration costs, partially offset by lower professional fees.

Rationalization and Asset Impairment Charges:

In 2018, the Company recorded $25,285 ($19,966 after-tax) in charges primarily related to employee severance, asset
impairment charges and gains or losses on the disposal of assets.

In 2017, the Company recorded $6,590 ($6,198 after-tax) in charges primarily related to employee severance and asset
impairment charges.

Refer to Note 7 to the consolidated financial statements for additional details.

Loss on Deconsolidation of Venezuela:

In 2016, the Company recorded a loss of $34,348 ($33,251 after-tax) related to the deconsolidation of its Venezuelan
subsidiary. Refer to Note 1 to the consolidated financial statements for additional details.

Bargain Purchase Gain:

In 2017, the Company recorded a bargain purchase gain of $49,650, which had no tax impact, related to the Air Liquide
Welding acquisition. Refer to Note 4 to the consolidated financial statements for additional details.

Interest Expense, Net:

The decrease in 2018 as compared to 2017 was due to higher interest income on marketable securities in 2018.

The increase in 2017 as compared to 2016 was due to higher interest expense on higher borrowings in 2017.

Other Income (Expense):

The increase in 2018 as compared to 2017 was due to higher equity earnings in affiliates.

The decrease in 2017 as compared to 2016 was primarily due to higher net periodic pension cost.

Income Taxes:

The 2018 effective tax rate was lower than 2017 due to the U.S. Tax Act that reduced the U.S. federal corporate income tax rate
to 21%, partially offset by rationalization charges in regions with low or no tax benefit. The 2017 rate reflects the higher U.S.
federal tax rate and the one-time transition tax, offset by the non-taxable bargain purchase gain recorded in 2017 in connection
with the Air Liquide Welding acquisition.

The effective income tax rate was higher in 2017 as compared to 2016 primarily due to the net impact of the U.S. Tax Act. The
effective tax rate increase was partially offset by the nontaxable bargain purchase gain recorded in connection with the Air
Liquide Welding acquisition and the change in the reporting of excess tax benefits from the exercise of stock based
compensation awards.

Net Income:

As compared to the prior year, reported Net income for 2018 increased primarily due to higher Net sales and a lower effective
tax rate, partially offset by higher SG&A costs, higher rationalization and asset impairment charges and the bargain purchase
gain related to the Air Liquide Welding acquisition in the prior year.

As compared to the prior year, reported Net income for 2017 increased primarily due to higher volumes and the bargain
purchase gain related to the Air Liquide Welding acquisition, offset by the net impact of the U.S. Tax Act, rising input costs,
higher SG&A costs and higher interest expense.

Segment Results

Net Sales:

The table below summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the
twelve months ended December 31, 2018:

Operating Segments

Americas Welding

International Welding

The Harris Products Group

% Change

Americas Welding

International Welding

The Harris Products Group

Net Sales
2017

Volume (1)

Acquisitions (2)

Price (3)

Foreign
Exchange (4)

Net Sales
2018

Change in Net Sales due to:

1,609,779

82,258

11,644

$ 111,038

724,024

290,628

(66,963)

12,497

227,598

—

34,777

378

(8,205)
335
(1,114)

$ 1,806,514

919,771

302,389

5.1%

(9.2%)

4.3%

0.7%

31.4%

—

6.9%

4.8%

0.1%

(0.5%)
—
(0.4%)

12.2%

27.0%

4.0%

(1) Increase for Americas Welding due to improving demand in a broad range of end markets. Decrease for International

Welding due to a repositioning of the Company's channel strategy in the European market and restructuring activities.
Increase for The Harris Products Group driven primarily by demand in the retail sector.

(2) Increase primarily due to the acquisition of Air Liquide Welding within Americas Welding and International Welding.

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

(3) Increase in all segments due to increased product pricing as a result of higher input costs.

(4) Decrease in the Americas Welding segment due to a stronger U.S. dollar.

The table below summarizes the impacts of volume, acquisitions, price and foreign currency exchange rates on Net sales for the
twelve months ended December 31, 2017:

Operating Segments

Americas Welding

International Welding

The Harris Products Group

% Change

Americas Welding

International Welding

The Harris Products Group

Net Sales
2016

Volume (1)

Acquisitions (2)

Price (3)

Foreign
Exchange (4)

Net Sales
2017

Change in Net Sales due to:

1,494,982

67,306

8,470

36,009

3,012

$ 1,609,779

507,289

272,343

12,503

15,362

173,430

—

18,327

742

12,475

2,181

724,024

290,628

4.5%

2.5%

5.6%

0.6%

34.2%

—

2.4%

3.6%

0.3%

0.2%

2.5%

0.8%

7.7%

42.7%

6.7%

(1) Increase for Americas and International Welding due to improving demand in a broad range of end markets. Increase

for The Harris Products Group due to higher volumes.

(2) Increase primarily due to the acquisition of Air Liquide Welding within Americas Welding and International Welding.

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

(3) Increase in all segments due to increased product pricing as a result of higher input costs.

(4) Increase in the International Welding segment due to a weaker U.S. dollar.

Adjusted Earnings Before Interest and Income Taxes (“Adjusted EBIT”):

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

The following table presents Adjusted EBIT by segment:

December 31,

Increase (Decrease)
2018 vs. 2017

Increase (Decrease)
2017 vs. 2016

2018

2017

2016

Americas Welding:

Net sales

$ 1,806,514

$ 1,609,779

$ 1,494,982

Inter-segment sales

118,936

97,382

93,612

Total Sales

$ 1,925,450

$ 1,707,161

$ 1,588,594

196,735

21,554

218,289

12.2% 114,797

22.1%

3,770

12.8% 118,567

Adjusted EBIT (4)

$ 340,744

$ 291,866

$ 266,633

48,878

16.7%

25,233

As a percent of total sales (1)

17.7%

17.1%

16.8%

0.6%

7.7%

4.0%

7.5%

9.5%

0.3%

International Welding:

Net sales

$ 919,771

$ 724,024

$ 507,289

Inter-segment sales

18,576

18,860

15,975

Total Sales

$ 938,347

$ 742,884

$ 523,264

195,747
(284)
195,463

27.0% 216,735

(1.5%)

2,885

26.3% 219,620

42.7%

18.1%

42.0%

Adjusted EBIT (5)

54,273

41,721

29,146

12,552

30.1%

12,575

43.1%

As a percent of total sales (2)

5.8%

5.6%

0.2%

—

The Harris Products Group:

Net sales

Inter-segment sales

Total Sales

$ 302,389

$ 290,628

$ 272,343

6,969

8,190

8,709

$ 309,358

$ 298,818

$ 281,052

11,761
(1,221)
10,540

Adjusted EBIT

36,564

36,442

32,380

122

As a percent of total sales (3)

11.8%

12.2%

11.5%

4.0%

(14.9%)

3.5%

0.3%

(0.4%)

18,285
(519)
17,766

4,062

6.7%

(6.0%)

6.3%

12.5%

0.7%

Corporate / Eliminations:

Inter-segment sales
Adjusted EBIT (6)

Consolidated:

Net sales

Net income

As a percent of total sales
Adjusted EBIT (7)

$ (144,481)

$ (124,432)

(8,887)

309

$ (118,296)
564

20,049
(9,196)

16.1%

(2,976.1%)

6,136
(255)

5.2%

45.2%

$ 3,028,674

$ 2,624,431

$ 2,274,614

$ 287,066

$ 247,503

$ 198,399

404,243

39,563

15.4% 349,817

16.0%

49,104

9.5%

9.4%

8.7%

0.1%

$ 422,694

$ 370,338

$ 328,723

52,356

14.1%

41,615

15.4%

24.8%

0.7%

12.7%

(0.4%)

As a percent of total sales

14.0%

14.1%

14.5%

(0.1%)

(1) 2018 increase as compared to 2017 driven by stronger organic sales.

2017 increase as compared to 2016 driven by higher Net sales volumes, partially offset by rising input costs.

(2) 2018 increase as compared to 2017 driven by favorable sales mix.

2017 remained flat as compared to 2016 driven by higher Net sales volumes, offset by higher costs related to
acquisitions.

(3) 2018 decrease as compared to 2017 driven by the impact of unfavorable price/cost.

2017 increase as compared to 2016 driven by higher Net sales volume.

(4) 2018 excludes pension settlement charges of $6,686 related to lump sum pension payments.

2017 excludes pension settlement charges of $8,150 related to lump sum pension payments, as well as non-cash
charges of $1,091 related to the impairment of goodwill.

(5) 2018 excludes charges of $25,285 related to employee severance, asset impairments and other related costs.

2017 excludes amortization of step up in value of acquired inventories of $4,578 related to the Air Liquide Welding
acquisition as discussed in Note 4 to the consolidated financial statements, as well as charges of $5,499 related to
employee severance, asset impairments and other related costs.

(6) 2018 excludes acquisition transaction and integration costs of $4,498 related to the Air Liquide Welding acquisition as

discussed in Note 4 to the consolidated financial statements.

2017 excludes a bargain purchase gain of $49,650 and acquisition transaction and integration costs of $15,002 related
to the Air Liquide Welding acquisition as discussed in Note 4 to the consolidated financial statements.

2016 excludes a loss of $34,348 related to the deconsolidation of the Company's Venezuelan subsidiary.

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

Non-GAAP Financial Measures

The Company reviews Adjusted operating income, Adjusted EBIT, Adjusted net income, Adjusted effective tax rate, Adjusted
diluted earnings per share and Return on invested capital, all non-GAAP financial measures, in assessing and evaluating the
Company's underlying operating performance. These non-GAAP financial measures exclude the impact of special items on the
Company's reported financial results. Non-GAAP financial measures should be read in conjunction with the generally accepted
accounting principles in the United States ("GAAP") financial measures, as non-GAAP measures are a supplement to, and not a
replacement for, GAAP financial measures. From time to time, management evaluates and discloses to investors the following
non-GAAP measures: Free cash flow ("FCF") defined as Net cash provided by operating activities less Capital expenditures
(the Company considers FCF to be a liquidity measure that provides useful information to management and investors about
how the amount of cash generated by our business, after the purchase of property and equipment, can be used for debt service,
acquisitions, paying dividends and repurchasing our common shares); Cash conversion defined as FCF divided by Adjusted net
income; Organic sales defined as sales excluding the effects of foreign currency and acquisitions.

The following table presents a reconciliation of Operating income as reported to Adjusted operating income:

Operating income as reported

Special items (pre-tax):

Year Ended December 31,

2018

2017

2016

375,539

376,942

283,614

25,285

—
4,498

—

405,322

6,590

—
15,002

4,578
(49,650)
353,462

—

34,348
—

—

317,962

(1) Charges consist of employee severance, gains or losses on the disposal of assets and other related costs, non-cash

goodwill impairment charges and net non-cash asset impairment charges.

(2) Loss on deconsolidation of the Venezuelan subsidiary as of June 30, 2016.

(3) Acquisition-related costs and a bargain purchase gain related to the Air Liquide Welding acquisition as discussed in

Note 4 to the consolidated financial statements.

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

Net income as reported

Special items:

Adjusted net income

Non-controlling interests in subsidiaries’ earnings (loss)

Interest expense, net

Income taxes as reported
Tax effect of Special items (5)
Adjusted EBIT

Effective tax rate as reported

Net special item tax impact

Adjusted effective tax rate

Diluted earnings per share as reported

Special items per share

Adjusted diluted earnings per share

Year Ended December 31,

2018

2017

2016

287,066

247,503

198,399

25,285

—

6,686

4,498

—

(6,896)

316,639

(73)

17,565

81,667

6,896

6,590

—

8,150

15,002

4,578

(49,650)

20,536

252,709

(28)

19,432

118,761

(20,536)

—

34,348

—

(8,293)

224,454

(26)

16,987

79,015

8,293

422,694

370,338

328,723

22.2 %

(0.3)%

21.9 %

4.37

0.45

4.82

32.4 %

(4.4)%

28.0 %

3.71

0.08

3.79

28.5 %

(0.5)%

28.0 %

2.91

0.38

3.29

(1) Charges consist of employee severance, gains or losses on the disposal of assets and other related costs, non-cash

goodwill impairment charges and non-cash asset impairment charges.

(2) Loss on deconsolidation of the Venezuelan subsidiary as of June 30, 2016.

(3) Charges related to lump sum pension payments.

(4) Acquisition-related costs and a bargain purchase gain related to the Air Liquide Welding acquisition as discussed in

Note 4 to the consolidated financial statements.

(5) Includes the net tax impact of Special items recorded during the respective periods, including the net impact of the

U.S. Tax Act of $399 and $28,616 in the years ended December 31, 2018 and 2017, respectively.

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

Liquidity and Capital Resources

The Company's cash flow from operations can be cyclical. Operational cash flow is a key driver of liquidity, providing cash
and access to capital markets. In assessing liquidity, the Company reviews working capital measurements to define areas for
improvement. Management anticipates the Company will be able to satisfy cash requirements for its ongoing businesses for
the foreseeable future primarily with cash generated by operations, existing cash balances, borrowings under its existing credit
facilities and raising debt in capital markets.

The Company continues to expand globally and periodically looks at transactions that would involve significant investments.
The Company can fund its global expansion plans with operational cash flow, but a significant acquisition may require access
to capital markets, in particular, the long-term debt market, as well as the syndicated bank loan market. The Company’s
financing strategy is to fund itself at the lowest after-tax cost of funding. Where possible, the Company utilizes operational

cash flows and raises capital in the most efficient market, usually the United States, and then lends funds to the specific
subsidiary that requires funding. If additional acquisitions providing appropriate financial benefits become available,
additional expenditures may be made.

The following table reflects changes in key cash flow measures:

Cash provided by operating activities(1)
Cash provided by (used by) investing activities(2)

Capital expenditures

Acquisition of businesses, net of cash acquired

Purchase of marketable securities, net of proceeds

Cash used by financing activities(3)

(Payments on) proceeds from long-term
borrowings, net

Purchase of shares for treasury

Cash dividends paid to shareholders

Increase (decrease) in Cash and cash equivalents (4)

Year Ended December 31,

$ Change

2018

2017

2016

2018 vs. 2017

2017 vs. 2016

329,152

20,841
(71,246)
(101,792)
179,124
(302,130)

(107)
(201,650)
(102,058)
32,148

334,845
(272,027)
(61,656)
(72,468)
(140,204)
(135,037)

(5)
(43,164)
(92,452)
(52,478)

312,557
(159,946)
(49,877)
(71,567)
(38,920)
(72,008)

349,780
(342,003)
(87,330)
74,996

(5,693) $

292,868
(9,590)
(29,324)
319,328
(167,093)

(102)
(158,486)
(9,606)

22,288
(112,081)
(11,779)
(901)
(101,284)
(63,029)

(349,785)
298,839
(5,122)

(1) Cash provided by operating activities decreased for the twelve months ended December 31, 2018 compared with the

twelve months ended December 31, 2017 due to increased investment in working capital, partially offset by improved
Company performance. Cash provided by operating activities increased for the twelve months ended December 31,
2017 compared with the twelve months ended December 31, 2016 primarily due to improved Company performance.

(2) Cash provided by investing activities increased predominately due to the proceeds from marketable securities in 2018,
partially offset by cash used in the acquisition of businesses. Cash used by investing activities increased in the twelve
months ended December 31, 2017 compared with the twelve months ended December 31, 2016 predominantly due to
the purchase of marketable securities in 2017. The Company currently anticipates capital expenditures of $70,000 to
$80,000 in 2019. Anticipated capital expenditures include investments for capital maintenance to improve operational
effectiveness. Management critically evaluates all proposed capital expenditures and expects each project to increase
efficiency, reduce costs, promote business growth or improve the overall safety and environmental conditions of the
Company’s facilities.

(3) Cash used by financing activities increased in the twelve months ended December 31, 2018 compared with the twelve
months ended December 31, 2017 due to higher purchases of common shares for treasury. Cash used by financing
activities increased in the twelve months ended December 31, 2017 compared with the twelve months ended
December 31, 2016 due to higher proceeds from long-term borrowings in 2016 partially offset by higher purchases of
common shares for treasury in 2016.

(4) Cash and cash equivalents increased 9.8%, or $32,148, to $358,849 during the twelve months ended December 31,

2018, from $326,701 as of December 31, 2017. The increase was predominately due to cash provided by operating
activities and proceeds from marketable securities, partially offset by purchases of common shares for treasury and
cash dividends paid to shareholders. Cash and cash equivalents decreased 13.8%, or $52,478, to $326,701 during the
twelve months ended December 31, 2017, from $379,179 as of December 31, 2016. This decrease was predominantly
due to the purchase of marketable securities.

The Company paid $102,058 and $92,452 in cash dividends to its shareholders in the twelve months ended December 31, 2018
and 2017, respectively, reflecting a 10.4% increase in dividends paid. In January 2019, the Company paid a cash dividend of
$0.47 per share, or $29,867, to shareholders of record on December 31, 2018.

Working Capital Ratios

Average operating working capital to net sales (1)
Days sales in Inventories

Days sales in Accounts receivable

Average days in Trade accounts payable

2018

December 31,

2017

2016

16.5%

95.1

52.7

55.5

15.9%

88.9

52.4

54.5

15.6%

92.1

47.7

48.9

(1) Average operating working capital to net sales is defined as the sum of Accounts receivable and Inventories less Trade

accounts payable as of period end divided by annualized rolling three months of Net sales.

Rationalization and Asset Impairments

Refer to Note 7 to the consolidated financial statements for a discussion of the Company's rationalization plans. 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.

Acquisitions

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

Debt

At December 31, 2018 and 2017, the fair value of long-term debt, including the current portion, was approximately $649,714
and $687,428, respectively, which was determined using available market information and methodologies requiring judgment.
Since judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount which
could be realized in a current market exchange.

Senior Unsecured Notes

On April 1, 2015, the Company entered into a Note Purchase Agreement pursuant to which it issued senior unsecured notes (the
"2015 Notes") in the aggregate principal amount of $350,000 through a private placement. On October 20, 2016, the
Company entered into a Note Purchase Agreement pursuant to which it issued senior unsecured notes (the "2016 Notes") in the
aggregate principal amount of $350,000 through a private placement. Interest on the notes are payable semi-annually. The
proceeds were used for general corporate purposes. The 2015 Notes and 2016 Notes contain certain affirmative and negative
covenants. As of December 31, 2018, the Company was in compliance with all of its debt covenants.

The Company's total weighted average effective interest rate and remaining weighted average term, inclusive of the 2015 Notes
and 2016 Notes, is 3.3% and 15 years, respectively.

Revolving Credit Agreement

The Company has a line of credit totaling $400,000 through the Amended and Restated Credit Agreement (the “Credit
Agreement”). The Credit Agreement has a five-year term and may be increased, subject to certain conditions, by an additional
amount up to $100,000. The interest rate on borrowings is based on either the London Inter-Bank Offered Rate ("LIBOR") or
the prime rate, plus a spread based on the Company’s leverage ratio, at the Company’s election. The Company amended and
restated the Credit Agreement on June 30, 2017, extending the maturity of the line of credit to June 30, 2022. The Credit
Agreement contains customary affirmative, negative and financial covenants for credit facilities of this type, including
limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions,
dispositions of assets, transactions with affiliates, a fixed charges coverage ratio and total leverage ratio. As of December 31,
2018, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit
Agreement.

Shelf Agreements

On November 27, 2018, the Company entered into seven uncommitted master note facilities (the "Shelf Agreements") that
allow borrowings up to $700,000 in the aggregate. The Shelf Agreements have a five-year term and the average life of
borrowings cannot exceed 15 years. The Company is required to comply with covenants similar to those contained in the 2015
Notes and 2016 Notes. As of December 31, 2018, the Company was in compliance with all of its covenants and had no
outstanding borrowings under the Shelf Agreements.

Short-term Borrowings

The Company had short-term borrowings included in Amounts due banks of $2,020 at December 31, 2017. Amounts due
banks included the borrowings of subsidiaries at weighted average interest rates of 31.8% at December 31, 2017.

Return on Invested Capital

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

ROIC for the years ended December 31, 2018, 2017 and 2016 were as follows:

Return on Invested Capital
Adjusted net income (1)

Plus: Interest expense (after-tax)

Less: Interest income (after-tax)

Net operating profit after taxes

Invested capital

Return on invested capital

2018

2017

2016

316,639

252,709

224,454

18,386

5,206

329,819

1,590,252

14,947

2,955

264,701

1,638,720

11,775

1,291

234,938

1,417,799

20.7%

16.2%

16.6%

(1) See “Non-GAAP Financial Measures” section for a tabular reconciliation of Net income to Adjusted net income.

Contractual Obligations and Commercial Commitments

The Company's contractual obligations and commercial commitments as of December 31, 2018 are as follows:

Payments Due By Period

Total

2019

2020 to
2021

2022 to
2023

2024 and
Beyond

Long-term debt, including current portion

711,015

204

10,712

374,828

54,957

184,202

18,697

23,295

16,920

183,211

833

46,584

19,635

991

—

46,501

8,369

—

852

700,000

258,448

10,033

—

17,012

1,343,699

224,358

67,414

66,434

985,493

Interest on long-term debt

Operating leases

Purchase commitments(1)

Transition Tax(2)

Total

(1) Purchase commitments include contractual obligations for raw materials and services.

(2) Federal income taxes on the Company's transition tax pursuant to the U.S. Tax Act is payable over eight years.

Amounts reflect the utilization of 2017 overpayments and foreign tax credits.

As of December 31, 2018, there were $15,562 of tax liabilities related to unrecognized tax benefits and a $26,524 liability for
deferred compensation. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with
these liabilities, the Company is unable to estimate the years in which settlement will occur. Additionally, in connection with
prior acquisitions, there were liabilities with total fair values as of December 31, 2018 of $2,100 for contingent consideration
arrangements. The amount of future cash flows associated with these liabilities will be contingent upon actual results of the
acquired entities. Refer to Notes 14 and 16 to the consolidated financial statements for further discussion.

Stock-Based Compensation

On April 23, 2015, the shareholders of the Company approved the 2015 Equity and Incentive Compensation Plan ("Employee
Plan"), which replaced the 2006 Equity and Performance Incentive Plan, as amended ("EPI Plan"). The Employee Plan
provides for the granting of options, appreciation rights, restricted shares, restricted stock units and performance-based awards
up to an additional 5,400,000 of the Company's common shares. In addition, on April 23, 2015, the shareholders of the
Company approved the 2015 Stock Plan for Non-Employee Directors ("2015 Director Plan"), which replaced the 2006 Stock
Plan for Non-Employee Directors ("2006 Director Plan"). The 2015 Director Plan provides for the granting of options,
restricted shares and restricted stock units up to an additional 300,000 of the Company's common shares. At December 31,
2018, there were 3,710,464 common shares available for future grant under all plans.

Under these plans, options, restricted shares and restricted stock units granted were 322,338 in 2018, 341,770 in 2017 and
449,415 in 2016. The Company issued common shares from treasury upon all exercises of stock options, vesting of restricted
stock units and the granting of restricted stock awards in 2018, 2017 and 2016.

Expense is recognized for all awards of stock-based compensation by allocating the aggregate grant date fair value over the
vesting period. No expense is recognized for any stock options, restricted or deferred shares or restricted stock units ultimately
forfeited because recipients fail to meet vesting requirements. Total stock-based compensation expense recognized in the
Consolidated Statements of Income for 2018, 2017 and 2016 was $18,554, $12,698 and $10,332, respectively, with a related
tax benefit of $4,632, $4,861 and $3,955, respectively. As of December 31, 2018, total unrecognized stock-based
compensation expense related to non-vested stock options, restricted shares and restricted stock units was $21,223, which is
expected to be recognized over a weighted average period of approximately 2.0 years.

The aggregate intrinsic value of options outstanding and exercisable which would have been received by the optionees had all
awards been exercised at December 31, 2018 was $22,411 and $23,714, respectively. The total intrinsic value of awards
exercised during 2018, 2017 and 2016 was $4,779, $19,328 and $30,967 respectively.

Product Liability Costs

Product liability costs incurred can be volatile and are largely related to trial activity. The costs associated with these claims are
predominantly defense costs which are recognized in the periods incurred.

The long-term impact of product liability contingencies, in the aggregate, on operating results, operating cash flows and access
to capital markets is difficult to assess, particularly since claims are in many different stages of development and the Company
benefits significantly from cost sharing with co-defendants and insurance carriers. Moreover, the Company has been largely
successful to date in its defense of these claims.

Off-Balance Sheet Arrangements

The Company utilizes letters of credit to back certain payment and performance obligations. Letters of credit are subject to
limits based on amounts outstanding under the Company's Credit Agreement.

New Accounting Pronouncements

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

Critical Accounting Policies and Estimates

The Company's consolidated financial statements are based on the selection and application of significant accounting policies,
which require management to make estimates and assumptions. These estimates and assumptions are reviewed periodically by
management and compared to historical trends to determine the accuracy of estimates and assumptions used. If warranted,
these estimates and assumptions may be changed as current trends are assessed and updated. Historically, the Company's
estimates have been determined to be reasonable. No material changes to the Company's accounting policies were made during
2018. The Company believes the following accounting policies are some of the more critical judgment areas affecting its
financial condition and results of operations.

Legal and Tax Contingencies

The Company, like other manufacturers, is subject from time to time to a variety of civil and administrative proceedings arising
in the ordinary course of business. Such claims and litigation include, without limitation, product liability claims,
administrative claims, regulatory claims and health, safety and environmental claims, some of which relate to cases alleging
asbestos induced illnesses. The costs associated with these claims are predominantly defense costs, which are recognized in the
periods incurred. Insurance reimbursements mitigate these costs and, where reimbursements are probable, they are recognized
in the applicable period. With respect to costs other than defense costs (i.e., for liability and/or settlement or other resolution),
reserves are recorded when it is probable that the contingencies will have an unfavorable outcome. The Company accrues its
best estimate of the probable costs after a review of the facts with management and counsel and taking into account past

experience. If an unfavorable outcome is determined to be reasonably possible but not probable, or if the amount of loss cannot
be reasonably estimated, disclosure would be provided for material claims or litigation. Many of the current cases are in
differing procedural stages and information on the circumstances of each claimant, which forms the basis for judgments as to
the validity or ultimate disposition of such actions, varies greatly. Therefore, in many situations a range of possible losses
cannot be made. Reserves are adjusted as facts and circumstances change and related management assessments of the
underlying merits and the likelihood of outcomes change. Moreover, reserves only cover identified and/or asserted claims.
Future claims could, therefore, give rise to increases to such reserves.

The Company is subject to taxation from U.S. federal, state, municipal and international jurisdictions. The calculation of
current income tax expense is based on the best information available and involves significant management judgment. The
actual income tax liability for each jurisdiction in any year can in some instances be ultimately determined several years after
the financial statements are published. The Company applied guidance in SAB 118 when accounting for the enactment-date
effects of the U.S. Tax Act in 2017 and throughout 2018. At December 31, 2017, the Company had not completed its
accounting related to the U.S. Tax Act. All provisional amounts were based on reasonable estimates using the best information
available at the time. At December 31, 2018, the Company has now completed its accounting related to the U.S. Tax Act. The
Company reports income taxes based upon the application of regulations and guidance around the provisions of the U.S. Tax
Act, which could be further modified, clarified or restated by the Department of Treasury and Internal Revenue Service.

The Company maintains liabilities for uncertain income tax positions for many jurisdictions. Liabilities are settled primarily
through the completion of audits within each individual tax jurisdiction or the closing of a statute of limitation. Liabilities can
also be affected by changes in applicable tax law or other factors, which may cause management to believe a revision of past
estimates is appropriate. Management believes that an appropriate liability has been established for uncertain income tax
positions; however, actual results may materially differ from these estimates. Refer to Note 14 to the consolidated financial
statements for further discussion of uncertain income tax positions.

Deferred Income Taxes

Deferred income taxes are recognized at currently enacted tax rates for temporary differences between the GAAP and income
tax basis of assets and liabilities and operating loss and tax credit carry-forwards. At December 31, 2017, the Company
remeasured its deferred tax assets and liabilities as a result of passage of the U.S Tax Act. The provisional amount recorded for
the remeasurement was a tax benefit of $14,532. The Company finalized the remeasurement of deferred tax assets and
liabilities during 2018. The result was an increase of $329 to the December 31, 2017 provisional benefit.

The Company previously considered the earnings in non-U.S. subsidiaries to be indefinitely reinvested and, accordingly,
recorded no deferred income taxes. As a result of the U.S. Tax Act, at December 31, 2017 the Company determined that it
would repatriate earnings for certain non-U.S. subsidiaries, which are subject to foreign withholding taxes. At December 31,
2017, the provisional amount recorded for such foreign withholding taxes was $6,667. Based on the Company’s final U.S. Tax
Act transition tax calculations, an adjustment of $4,424 was recorded in 2018 to reduce the foreign withholding taxes
associated with the planned repatriation set forth in 2017. The Company considers remaining earnings in all other non-U.S.
subsidiaries to be indefinitely reinvested and has not recorded any deferred taxes as such estimate is not practicable.

At December 31, 2018, the Company had approximately $116,296 of gross deferred tax assets related to deductible temporary
differences and tax loss and credit carry-forwards which may reduce taxable income in future years. In assessing the
realizability of deferred tax assets, the Company assesses whether it is more likely than not that a portion or all of the deferred
tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies
and projected future taxable income in making this assessment. At December 31, 2018, a valuation allowance of $69,400 was
recorded against certain deferred tax assets based on this assessment. The Company believes it is more likely than not that the
tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable
could be increased or reduced in the future if the Company's assessment of future taxable income or tax planning strategies
changes.

Pensions

The Company maintains a number of defined benefit ("Pension") and defined contribution plans to provide retirement benefits
for employees. These plans are maintained and contributions are made in accordance with the Employee Retirement Income
Security Act of 1974 ("ERISA"), local statutory law or as determined by the Board of Directors. The plans generally provide
benefits based upon years of service and compensation. Pension plans are funded except for a domestic non-qualified pension
plan for certain key employees and certain foreign plans. In October 2016, the Company amended the Lincoln Electric
Retirement Annuity Program ("RAP") and the Supplemental Executive Retirement Plan ("SERP") to freeze all benefit accruals
for participants under the plans effective as of December 31, 2016 and November 30, 2016, respectively. Refer to Note 12 to
the consolidated financial statements for additional information.

A significant element in determining the Company's pension expense is the expected return on plan assets. At the end of each
year, the expected return on plan assets is determined based on the weighted average expected return of the various asset
classes in the plan's portfolio and the targeted allocation of plan assets. The asset class return is developed using historical asset
return performance as well as current market conditions such as inflation, interest rates and equity market performance. The
Company determined this rate to be 4.9% and 5.8% at December 31, 2018 and 2017, respectively. The assumed long-term rate
of return on assets is applied to the market value of plan assets. This produces the expected return on plan assets included in
pension expense. The difference between this expected return and the actual return on plan assets is deferred and, for frozen
plans, is amortized over the average remaining life expectancy of plan participants expected to receive benefits under the plan.
During 2018, investment returns were a loss of 3.8% compared with a return of 14.8% in 2017. A 25 basis point change in the
expected return on plan assets would increase or decrease pension expense by approximately $1,300.

Another significant element in determining the Company's pension expense is the discount rate for plan liabilities. To develop
the discount rate assumption, the Company refers to the yield derived from matching projected pension payments with
maturities of a portfolio of available non-callable bonds rated AA or an equivalent quality. The Company determined this rate
to be 3.8% at December 31, 2018 and 4.1% at December 31, 2017. A 10 basis point change in the discount rate would not have
a significant impact to pension expense.

The Company's defined benefit plan expense was $3,068, $2,517 and $13,988 in 2018, 2017 and 2016, respectively. Pension
expense includes $6,289 and $8,252 in settlement charges in 2018 and 2017, respectively. The Company's defined contribution
plan expense was $26,477, $25,285 and $8,361 in 2018, 2017 and 2016, respectively. Excluding the pension settlement
charges in 2018, the Company expects total 2019 expense related to retirement plans to increase by a range of approximately
$2,500 to $3,500. The increase is the result of lower expected return on assets. Refer to Note 12 to the consolidated financial
statements for additional information.

The Accumulated other comprehensive loss, excluding tax effects, recognized on the Consolidated Balance Sheet was $111,771
as of December 31, 2018 and $116,690 as of December 31, 2017. The decrease is primarily the result of the amortization of net
losses and settlements in 2018.

The Company made contributions to its defined benefit plans of $2,777, $1,739 and $21,373 in 2018, 2017 and 2016,
respectively. The Company does not expect to make significant contributions to the defined benefit plans in 2019.

Inventories

Inventories are valued at the lower of cost or net realizable value. Fixed manufacturing overhead costs are allocated to
inventory based on normal production capacity and abnormal manufacturing costs are recognized as period costs. Cost for a
substantial portion of U.S. inventories is determined on a LIFO basis. LIFO was used for 37% and 32% of total inventories at
December 31, 2018 and 2017, respectively. Cost of other inventories is determined by costing methods that approximate a
FIFO basis. The valuation of LIFO inventories is made at the end of each year based on inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of expected year-end inventory levels and costs.
Actual year-end inventory levels and costs may differ from interim LIFO inventory valuations. The excess of current cost over
LIFO cost was $79,626 at December 31, 2018 and $68,641 at December 31, 2017.

The Company reviews the net realizable value of inventory on an on-going basis with consideration given to deterioration,
obsolescence and other factors. If actual market conditions differ from those projected by management, and the Company's
estimates prove to be inaccurate, write-downs of inventory values and adjustments to Cost of goods sold may be required.
Historically, the Company's reserves have approximated actual experience.

Accounts Receivable

The Company maintains an allowance for doubtful accounts for estimated losses from the failure of its customers to make
required payments for products delivered. The Company estimates this allowance based on the age of the related receivable,
knowledge of the financial condition of customers, review of historical receivables and reserve trends and other pertinent
information. If the financial condition of customers deteriorates or an unfavorable trend in receivable collections is
experienced in the future, additional allowances may be required. Historically, the Company's reserves have approximated
actual experience.

Long-Lived Assets

available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques,
including the discounted value of estimated future cash flows.

Goodwill and Intangibles

The Company performs an annual impairment test of goodwill and indefinite-lived intangible assets in the fourth quarter using
the same dates each year or more frequently if changes in circumstances or the occurrence of events indicate potential
impairment.

The fair value of each indefinite-lived intangible asset is compared to its carrying value and an impairment charge is recorded if
the carrying value exceeds the fair value. For goodwill, the Company first assesses qualitative factors to determine whether it
is more likely than not that the fair value of a reporting unit is less than its carrying amount, and whether it is necessary to
perform the quantitative goodwill impairment test. The quantitative test is required only if the Company concludes that it is
more likely than not that a reporting unit’s fair value is less than its carrying amount. For quantitative testing, the Company
compares the fair value of each reporting unit with its carrying amount. If the carrying amount exceeds the fair value, an
impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to
exceed the total amount of goodwill allocated to that reporting unit.

Fair values are determined using established business valuation techniques and models developed by the Company, estimates of
market participant assumptions of future cash flows, future growth rates and discount rates to value estimated cash flows.
Changes in economic and operating conditions, actual growth below the assumed market participant assumptions or an increase
in the discount rate could result in an impairment charge in a future period.

Acquisitions

Upon acquisition of a business, the Company uses the income, market or cost approach (or a combination thereof) for the
valuation as appropriate. The valuation inputs in these models and analyses are based on market participant assumptions.
Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous
market for the asset or liability.

Fair value estimates are based on a series of judgments about future events and uncertainties and rely heavily on estimates and
assumptions. Management values property, plant and equipment using the cost approach supported where available by
observable market data, which includes consideration of obsolescence. Management values acquired intangible assets using
the relief from royalty method, a form of the income approach supported by observable market data for peer companies.
Acquired inventories are marked to fair value. For certain items, the carrying value is determined to be a reasonable
approximation of fair value based on information available to the Company. Refer to Note 4 to the consolidated financial
statements for additional details.

Revenue Recognition

On January 1, 2018, the Company adopted ASU 2014-09 (“Topic 606”) using the modified retrospective method applied to
those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018
are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the
Company's historic accounting.

Revenue is recognized when obligations under the terms of a contract are satisfied and control is transferred to the customer.
Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for goods or services.
The Company recognizes any discounts, credits, returns, rebates and incentive programs based on reasonable estimates as a
reduction of sales to arrive at Net sales at the same time the related revenue is recorded. Taxes collected by the Company,
including sales tax and value add tax, are excluded from Net sales. The Company recognizes freight billed as a component of
Net sales and shipping costs as a component of Cost of goods sold when control transfers to the customer. Sales commissions
are expensed when incurred because the amortization period is generally one year or less. These costs are recorded within
Selling, general and administrative expenses in the Company's Consolidated Statements of Income.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary financial market risks include fluctuations in currency exchange rates, commodity prices and interest
rates. The Company manages these risks by using derivative financial instruments in accordance with established policies and
procedures. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes.

Included below is a sensitivity analysis based upon a hypothetical 10% weakening or strengthening in the U.S. dollar compared
to foreign currency exchange rates at December 31, 2018 and a 100 basis point increase in effective interest rates at
December 31, 2018. The derivative, borrowing and investment arrangements in effect at December 31, 2018 were compared to
the hypothetical foreign exchange or interest rates in the sensitivity analysis to determine the effect on the Company's current
period consolidated financial statements.

Foreign Currency Exchange Risk

The Company enters into forward foreign exchange contracts principally to hedge the currency fluctuations in transactions
denominated in foreign currencies, thereby limiting the Company's risk that would otherwise result from changes in exchange
rates.

At December 31, 2018, the Company hedged certain third-party and intercompany purchases and sales. The gross notional
amount of these foreign exchange contracts at December 31, 2018 was $45,909. At December 31, 2018, a hypothetical 10%
strengthening or weakening in the U.S. dollar would have changed Accumulated other comprehensive income (loss) by $1,241.

In addition, the Company enters into forward foreign exchange contracts to hedge transaction exposures or significant cross-
border intercompany loans by either purchasing or selling specified amounts of foreign currency at a specified date. The gross
notional amount of these foreign exchange contracts at December 31, 2018 was $328,534. A hypothetical 10% change in the
year-end exchange rates would have resulted in an increase or decrease to Income before income taxes of $5,751 related to
these positions. However, any loss (or gain) resulting from a hypothetical 10% change would be offset by the associated gain
(or loss) on the underlying balance sheet exposure and would ultimately not materially affect the Company’s financial
statements.

Commodity Price Risk

From time to time, the Company uses various hedging arrangements to manage exposures to price risk from commodity
purchases. These hedging arrangements have the effect of fixing for specified periods the prices the Company will pay for the
volume to which the hedge relates. The Company had no commodity contracts outstanding during 2018.

Interest Rate Risk

At December 31, 2018, the Company had various floating interest rate swaps used to convert $125,000 of its outstanding fixed-
rate, long-term borrowings into short-term variable interest rates. The fixed-rate nature of the remaining long-term borrowings
limits the Company's exposure to changes in near-term interest rates. An increase in interest expense resulting from a
hypothetical increase of 100 basis points in the December 31, 2018 floating rate, would not materially affect the Company’s
financial statements. A hypothetical 100 basis point increase to effective interest rates would also impact the fair value of
interest rate swaps. However, any loss resulting from this hypothetical scenario would be offset by the associated gain on the
underlying debt and have no impact on the Company’s consolidated financial statements.

The fair value of the Company's cash and cash equivalents at December 31, 2018 approximated cost due to the short-term
duration. These financial instruments are subject to concentrations of credit risk. The Company has minimized this risk by
entering into investments with a number of major banks and financial institutions and investing in high-quality instruments.
The Company does not expect any counter-parties to fail to meet their obligations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is submitted in a separate section of this Annual Report on Form 10-K following the signature page.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES

None.

ITEM 9A. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial
Officer, the Company conducted an evaluation of disclosure controls and procedures, as such term is defined in Rule 13a-15(e)
of the Exchange Act. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on
Form 10-K.

Management's Report on Internal Control Over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the
effectiveness of internal control over financial reporting as of December 31, 2018 based on the 2013 framework in "Internal
Control – Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on the Company's evaluation under such framework, management concluded that the Company's internal control over financial
reporting was effective as of December 31, 2018.

The effectiveness of the Company's internal control over financial reporting as of December 31, 2018 has been audited by
Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included elsewhere in
this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting that occurred during the fourth quarter
of 2018 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial
reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The Company is expected to file its 2019 proxy statement pursuant to Regulation 14A of the Exchange Act within 120 days
after December 31, 2018.

Except for the information set forth within Part I, Item 1C section of this Annual Report on Form 10-K concerning our
Executive Officers, the information required by this item is incorporated by reference from the 2019 proxy statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from the 2019 proxy statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

The information required by this item is incorporated by reference from the 2019 proxy statement.

For further information on the Company's equity compensation plans, see Note 1 and Note 10 to the Company's consolidated
financial statements.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference from the 2019 proxy statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference from the 2019 proxy statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

The following consolidated financial statements of the Company are included in a separate section of this report following
the signature page and certifications:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Consolidated Statements of Income – Years ended December 31, 2018, 2017 and 2016

Consolidated Statements of Comprehensive Income – Years ended December 31, 2018, 2017 and 2016

Consolidated Balance Sheets – December 31, 2018 and 2017

Consolidated Statements of Equity – Years ended December 31, 2018, 2017 and 2016

Consolidated Statements of Cash Flows – Years ended December 31, 2018, 2017 and 2016

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

The following consolidated financial statement schedule of the Company is included in a separate section of this report
following the signature page:

Schedule II – Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted.

(a)(3) Exhibits

Exhibit No.
3.1

Description
Amended and Restated Code of Regulations of Lincoln Electric Holdings, Inc. (filed as Exhibit 3.1 to Form 8-
K of Lincoln Electric Holdings, Inc. filed on April 29, 2014, SEC file No. 0-1402 and incorporated herein by
reference and made a part hereof).

3.2

3.3

10.1

10.2

10.3

Amended and Restated Articles of Incorporation of Lincoln Electric Holdings, Inc. (filed as Exhibit 3.1 to
Form 8-K of Lincoln Electric Holdings, Inc. filed on September 27, 2011, SEC file No. 0-1402 and
incorporated herein by reference and made a part hereof).

Amended and Restated Articles of Incorporation of Lincoln Electric Holdings, Inc. as amended on February 18,
2019 (filed as Exhibit 3.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on February 21, 2019, SEC file
No. 0-1402 and incorporated herein by reference and made a part hereof).

Amended and Restated Credit Agreement, dated as of June 30, 2017, by and among Lincoln Electric Holdings,
Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc.,
Techalloy, Inc., Wayne Trail Technologies, Inc., Lincoln Global, Inc., the Lenders and KeyBank National
Association (filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on July 6, 2017 SEC File
No. 0-1402 and incorporated herein by reference and made a part hereof).

Note Purchase Agreement, dated as of April 1, 2015, by and among Lincoln Electric Holdings, Inc., The
Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc., Lincoln
Global, Inc., Techalloy, Inc., Wayne Trail Technologies, Inc. and the purchasers party thereto (filed as Exhibit
10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on April 2, 2015, SEC File No. 0-1402 and
incorporated herein by reference and made a part hereof).

Note Purchase Agreement, dated as of October 20, 2016, by and among Lincoln Electric Holdings, Inc., The
Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc., Techalloy,
Inc. and Wayne Trail Technologies, Inc. and the purchaser party thereto (filed as Exhibit 10.4 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2016, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).

Exhibit No.
10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11*

10.12*

10.13*

10.14*

10.15*

10.16*

Description
Uncommitted Master Note Facility, dated as of November 27, 2018, by and among Lincoln Electric Holdings,
Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc.,
Lincoln Global, Inc., Techalloy, Inc., Wayne Trail Technologies, Inc., MetLife Investment Advisors, LLC and/
or one or more of its affiliates or related funds, as purchasers thereunder (filed as Exhibit 10.1, to Form 8-K of
Lincoln Electric Holdings, Inc. filed on November 29, 2018, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Uncommitted Master Note Facility, dated as of November 27, 2018, by and among Lincoln Electric Holdings,
Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc.,
Lincoln Global, Inc., Techalloy, Inc., Wayne Trail Technologies, Inc., Voya Retirement Insurance and Annuity
Company and/or one or more of its affiliates or related funds, as purchasers thereunder (filed as Exhibit 10.2, to
Form 8-K of Lincoln Electric Holdings, Inc. filed on November 29, 2018, SEC File No. 0-1402 and
incorporated herein by reference and made a part hereof).

Uncommitted Master Note Facility, dated as of November 27, 2018, by and among Lincoln Electric Holdings,
Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc.,
Lincoln Global, Inc., Techalloy, Inc., Wayne Trail Technologies, Inc., State Farm Life Insurance Company and/
or one or more of its affiliates or related funds, as purchasers thereunder (filed as Exhibit 10.3, to Form 8-K of
Lincoln Electric Holdings, Inc. filed on November 29, 2018, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Uncommitted Master Note Facility, dated as of November 27, 2018, by and among Lincoln Electric Holdings,
Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc.,
Lincoln Global, Inc., Techalloy, Inc., Wayne Trail Technologies, Inc., AIG Asset Management (U.S.), LLC and/
or one or more of its affiliates or related funds, as purchasers thereunder (filed as Exhibit 10.4, to Form 8-K of
Lincoln Electric Holdings, Inc. filed on November 29, 2018, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Uncommitted Master Note Facility, dated as of November 27, 2018, by and among Lincoln Electric Holdings,
Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc.,
Lincoln Global, Inc., Techalloy, Inc., Wayne Trail Technologies, Inc., John Hancock Life Insurance Company
(U.S.A.) and/or one or more of its affiliates or related funds, as purchasers thereunder (filed as Exhibit 10.5, to
Form 8-K of Lincoln Electric Holdings, Inc. filed on November 29, 2018, SEC File No. 0-1402 and
incorporated herein by reference and made a part hereof).

Uncommitted Master Note Facility, dated as of November 27, 2018, by and among Lincoln Electric Holdings,
Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc.,
Lincoln Global, Inc., Techalloy, Inc., Wayne Trail Technologies, Inc., Thrivent Financial for Lutherans and/or
one or more of its affiliates or related funds, as purchasers thereunder (filed as Exhibit 10.6, to Form 8-K of
Lincoln Electric Holdings, Inc. filed on November 29, 2018, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Uncommitted Master Note Facility, dated as of November 27, 2018, by and among Lincoln Electric Holdings,
Inc., The Lincoln Electric Company, Lincoln Electric International Holding Company, J.W. Harris Co., Inc.,
Lincoln Global, Inc., Techalloy, Inc., Wayne Trail Technologies, Inc., Allianz Life Insurance Company of North
America and/or one or more of its affiliates or related funds, as purchasers thereunder (filed as Exhibit 10.7, to
Form 8-K of Lincoln Electric Holdings, Inc. filed on November 29, 2018, SEC File No. 0-1402 and
incorporated herein by reference and made a part hereof).

Supplemental Executive Retirement Plan (Amended and Restated as of December 31, 2008) (filed as
Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on January 7, 2009, SEC File No. 0-1402 and
incorporated herein by reference and made part hereof).

Amendment No. 1 to Supplemental Executive Retirement Plan (As Amended and Restated as of December 31,
2008) dated November 29, 2016 (filed as Exhibit 10.6 to Form 10-K of Lincoln Electric Holdings, Inc. for the
year ended December 31, 2016, SEC File No. 0-1402 and incorporated herein by reference and made a part
hereof).

Deferred Compensation Plan for Certain Retention Agreements and Other Contractual Arrangements
(Amended and Restated as of January 1, 2004) (filed as Exhibit 10(i) to Form 10-K of Lincoln Electric
Holdings, Inc. for the year ended December 31, 2003, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Non-Employee Directors' Deferred Compensation Plan (Amended and Restated as of December 31, 2008)
(filed as Exhibit 10.3 to Form 8-K of Lincoln Electric Holdings, Inc. filed on January 7, 2009, SEC File
No. 0-1402 and incorporated herein by reference and made a part hereof).

Non-Employee Directors' Deferred Compensation Plan (Amended and Restated as of January 1, 2019) (filed
herewith).
2005 Deferred Compensation Plan for Executives (Amended and Restated as of January 1, 2018) (filed as
Exhibit 10.10 to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2017, SEC File
No. 0-1402 and incorporated herein by reference and made a part hereof).

Exhibit No.
10.17*

Description
The Lincoln Electric Company Restoration Plan (filed as Exhibit 4.3 to Form S-8 of Lincoln Electric Holdings,
Inc. filed on December 19, 2016, SEC File No. 333-215168, and incorporated herein by reference and made a
part hereof).

10.18*

10.19*

The Lincoln Electric Company Employee Savings Plan As Amended and Restated Effective January 1, 2017
dated December 20, 2016 (filed as Exhibit 10.11 to Form 10-K of Lincoln Electric Holdings, Inc. for the year
ended December 31, 2016, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).

Amendment No. 1 to The Lincoln Electric Company Employee Savings Plan As Amended and Restated
Effective January 1, 2017 dated July 25, 2017 (filed as Exhibit 10.13 to Form 10-K of Lincoln Electric
Holdings, Inc. for the year ended December 31, 2017, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

10.20*

The Lincoln Electric Company Employee Savings Plan As Amended and Restated Effective January 1, 2019
(filed herewith).

10.21*

10.22*

10.23*

10.24*

10.25*

10.26*

10.27*

10.28*

10.29*

10.30*

10.31*

Form of Change in Control Severance Agreement (as entered into by the Company and its executive officers)
(filed as Exhibit 10.1 to Form 8-K of Lincoln Electric Holdings, Inc. filed on November 21, 2017, SEC File
No. 0-1402 and incorporated herein by reference and made a part hereof).

2006 Equity and Performance Incentive Plan (Restated as of March 3, 2011) (filed as Annex A to Lincoln
Electric Holdings, Inc. proxy statement filed on March 18, 2011, SEC File No. 0-1402 and incorporated herein
by reference and made a part hereof).

2006 Stock Plan for Non-Employee Directors (filed as Appendix C to Lincoln Electric Holdings, Inc. proxy
statement dated March 28, 2006, SEC File No. 0-1402 and incorporated herein by reference and made a part
hereof).

Amendment No. 1 to the 2006 Stock Plan for Non-Employee Directors dated October 20, 2006 (filed as
Exhibit 10.2 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended March 31, 2007, SEC
file No. 0-1402 and incorporated herein by reference and made a part hereof).

Amendment No. 2 to the 2006 Stock Plan for Non-Employee Directors dated July 26, 2007 (filed as
Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc. for the three months ended September 30, 2007,
SEC file No. 0-1402 and incorporated herein by reference and made a part hereof).

Amendment No. 3 to the 2006 Stock Plan for Non-Employee Directors dated December 15, 2014 (filed as
Exhibit 10.20 to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2014, SEC file
No. 0-1402 and incorporated herein by reference and made a part hereof).

2015 Equity and Incentive Compensation Plan (filed as Appendix B to Lincoln Electric Holdings, Inc.
definitive proxy statement filed on March 18, 2015, SEC File No. 0-1402, and incorporated herein by reference
and made a part hereof).

2015 Stock Plan for Non-Employee Directors (filed as Appendix C to Lincoln Electric Holdings, Inc. definitive
proxy statement filed on March 18, 2015, SEC File No. 0-1402, and incorporated herein by reference and made
a part hereof).

Amendment No. 1 to the 2015 Stock Plan for Non-Employee Directors (filed as Appendix C to Lincoln Electric
Holdings, Inc. proxy statement dated March 20, 2017, SEC File No. 0-1402 and incorporated by reference and
made a part hereof).

Form of Restricted Share Agreement for Non-Employee Directors (filed as Exhibit 10.1 to Form 8-K of
Lincoln Electric Holdings, Inc. filed on July 29, 2015, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Form of Restricted Share Agreement for Non-Employee Directors (filed as Exhibit 10.24 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2017, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).

10.32*

Form of Restricted Stock Unit Agreement for Non-Employee Directors (filed herewith).

10.33*

10.34*

10.35*

Form of Stock Option Agreement for Executive Officers (filed as Exhibit 10.4 to Form 10-Q of Lincoln
Electric Holdings, Inc. for the three months ended September 30, 2010, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).

Form of Stock Option Agreement for Executive Officers (filed as Exhibit 10.37 to Form 10-K of the Lincoln
Electric Holdings, Inc. for the year ended December 31, 2010, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Form of Stock Option Agreement for Executive Officers (filed as Exhibit 10.27 to Form 10-K of Lincoln
Electric Holdings, Inc. for the year ended December 31, 2017, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Exhibit No.
10.36*

Form of Stock Option Agreement for Executive Officers (filed as Exhibit 10.28 to Form 10-K of Lincoln
Electric Holdings, Inc. for the year ended December 31, 2017, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Description

10.37*

Form of Stock Option Agreement for Executive Officers (filed herewith).

10.38*

10.39*

10.40*

Form of Restricted Stock Unit Agreement for Executive Officers (filed as Exhibit 10.33 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2013, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).

Form of Restricted Stock Unit Agreement for Executive Officers (filed as Exhibit 10.21 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2015, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).

Form of Restricted Stock Unit Agreement for Executive Officers (filed as Exhibit 10.33 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2017, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).

10.41*

Form of Restricted Stock Unit Agreement for Executive Officers (filed herewith).

10.42*

10.43*

Form of Performance Share Award Agreement for Executive Officers (filed as Exhibit 10.22 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2015, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).

Form of Performance Share Award Agreement for Executive Officers (filed as Exhibit 10.35 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2017, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).

10.44*

Form of Performance Share Award Agreement for Executive Officers (filed herewith).

10.45*

10.46*

31.1

31.2

32.1

Form of Officer Indemnification Agreement (effective February 23, 2012) (filed as Exhibit 10.1 to Form 8-K of
Lincoln Electric Holdings, Inc. filed on February 29, 2012, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Form of Director Indemnification Agreement (effective February 23, 2012) (filed as Exhibit 10.2 to Form 8-K
of Lincoln Electric Holdings, Inc. filed on February 29, 2012, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof).

Subsidiaries of the Registrant.

Consent of Independent Registered Public Accounting Firm.

Powers of Attorney.

Certification by the Chairman, President and Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.

Certification by the Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a)
of the Securities Exchange Act of 1934.

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 15(b) of this
report.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

LINCOLN ELECTRIC HOLDINGS, INC.

By:

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman
Senior Vice President, Strategy and Business Development
(principal accounting officer)
February 27, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ CHRISTOPHER L. MAPES
Christopher L. Mapes,
Chairman, President and Chief Executive Officer
(principal executive officer)
February 27, 2019

/s/ VINCENT K. PETRELLA

Vincent K. Petrella,
Executive Vice President, Chief Financial Officer and
Treasurer
(principal financial officer)
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman,
Senior Vice President, Strategy and Business Development
(principal accounting officer)
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
Patrick P. Goris, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
Michael F. Hilton, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
Kathryn Jo Lincoln, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
Phillip J. Mason, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
Hellene S. Runtagh, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
Curtis E. Espeland, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
Stephen G. Hanks, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
G. Russell Lincoln, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
William E. MacDonald, III, Director
February 27, 2019

/s/ GEOFFREY P. ALLMAN

Geoffrey P. Allman as
Attorney-in-Fact for
Ben Patel, Director
February 27, 2019

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Lincoln Electric Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lincoln Electric Holdings, Inc. (the Company) as of
December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, equity, and cash flows,
for each of the three years in the period ended December 31, 2018, and the related notes and the financial statement schedule
listed in the Index as Item 15 (a) (2) (collectively referred to as the "consolidated financial statements"). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 27, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company's auditor since at least 1923, but we are unable to determine the specific year.

Cleveland, OH

February 27, 2019

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Lincoln Electric Holdings, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Lincoln Electric Holdings, Inc.'s internal control over financial reporting as of December 31, 2018, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Lincoln Electric Holdings, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the
COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the related consolidated
statements of income, comprehensive income, equity and cash flows, for each of the three years in the period ended
December 31, 2018, and the related notes and the financial statement schedule listed in the Index as Item 15 (a) (2), and our
report dated February 27, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Cleveland, Ohio

February 27, 2019

F-2

LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)

Net sales

Cost of goods sold

Gross profit

Selling, general & administrative expenses

Rationalization and asset impairment charges (Notes 5 and 7)

Loss on deconsolidation of Venezuelan subsidiary (Note 1)

Bargain purchase gain (Note 4)

Operating income

Interest expense, net

Other income (expense) (Note 13)

Income before income taxes

Income taxes (Note 14)

Net income including non-controlling interests

Non-controlling interests in subsidiaries' loss

Net income

Basic earnings per share

Diluted earnings per share

Cash dividends declared per share

Year Ended December 31,

2018

2017

2016

3,028,674

2,624,431

2,274,614

2,000,153

1,028,521

627,697

25,285

—

375,539

17,565

10,686

368,660

81,667

286,993
(73)
287,066

4.42

4.37

1.64

1,749,324

1,488,055

875,107

541,225

6,590

—
(49,650)
376,942

19,432

8,726

366,236

118,761

247,475
(28)
247,503

3.76

3.71

1.44

786,559

468,597

—

34,348

—

283,614

16,987

10,761

277,388

79,015

198,373
(26)
198,399

2.94

2.91

1.31

See notes to these consolidated financial statements.

F-3

LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

Net income including non-controlling interests

Other comprehensive income (loss), net of tax:

Unrealized gain on derivatives designated and qualifying as cash flow
hedges, net of tax of $346 in 2018; $17 in 2017; $(21) in 2016

Defined pension plan activity, net of tax of $1,691 in 2018; $19,252 in
2017; $4,297 in 2016

Currency translation adjustment

Other comprehensive income (loss)

Comprehensive income

Comprehensive income (loss) attributable to non-controlling interests

Comprehensive income attributable to shareholders

Year Ended December 31,

2018

2017

2016

286,993

247,475

198,373

819

288

3,228
(50,693)
(46,646)
240,347
(166)
240,513

10,662

71,016

81,966

329,441

329,354

3,837
(36,752)
(32,876)
165,497
(132)
165,629

See notes to these consolidated financial statements.

F-4

LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

ASSETS

Current Assets

Cash and cash equivalents

Accounts receivable (less allowance for doubtful accounts of $12,827 in
2018; $15,943 in 2017)

Inventories (Note 17)

Marketable securities

Other current assets
Total Current Assets

Property, plant and equipment, net (Note 1)

Intangibles, net (Note 5)

Goodwill (Note 5)

Deferred income taxes (Note 14)

Other assets

TOTAL ASSETS
LIABILITIES AND EQUITY

Current Liabilities

Amounts due banks (Note 9)

Trade accounts payable

Accrued employee compensation and benefits

Dividends payable

Customer advances

Other current liabilities

Current portion of long-term debt (Note 9)

Total Current Liabilities

Long-term debt, less current portion (Note 9)

Deferred income taxes (Note 14)

Other liabilities
Total Liabilities
Shareholders' Equity

Preferred shares, without par value – at stated capital amount;
authorized – 5,000,000 shares; issued and outstanding – none

Common shares, without par value – at stated capital amount;
authorized – 240,000,000 shares; issued – 98,581,434 shares in 2018 and 2017;
outstanding – 63,545,878 shares in 2018 and 65,662,546 shares in 2017

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Treasury shares, at cost – 35,035,556 shares in 2018 and 32,918,888 shares in 2017

Total Shareholders' Equity

Non-controlling interests
Total Equity
TOTAL LIABILITIES AND EQUITY

See notes to these consolidated financial statements.

F-5

December 31,

2018

2017

358,849

326,701

396,885

361,829

—

120,236

1,237,799

478,801

147,946

281,294

20,395

395,279

348,667

179,125

123,836

1,373,608

477,031

127,452

234,582

15,937

183,590
2,349,825

177,937
2,406,547

— $

268,600

94,202

29,867

17,023

128,379

111

538,182

702,549

45,985

175,517

2,020

269,763

91,902

25,608

19,683

119,655

111

528,742

704,136

40,716

200,500

1,462,233

1,474,094

—

9,858

360,308

2,564,440
(293,739)
(1,753,925)
886,942

9,858

334,309

2,388,219
(247,186)
(1,553,563)
931,637

650

816

887,592
2,349,825

932,453
2,406,547

LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except per share amounts)

Balance at December 31, 2015

Net income

Unrecognized amounts from defined benefit pension plans, net of tax

Unrealized gain on derivatives designated and qualifying as cash flow hedges,
net of tax

Currency translation adjustment

Cash dividends declared – $1.31 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at December 31, 2016

Net income

Unrecognized amounts from defined benefit pension plans, net of tax

Unrealized gain on derivatives designated and qualifying as cash flow hedges,
net of tax

Currency translation adjustment

Cash dividends declared – $1.44 per share

Stock-based compensation activity

Purchase of shares for treasury

Balance at December 31, 2017

Net income

Unrecognized amounts from defined benefit pension plans, net of tax

Unrealized gain on derivatives designated and qualifying as cash flow hedges,
net of tax

Currency translation adjustment

Cash dividends declared – $1.64 per share

Stock-based compensation activity

Purchase of shares for treasury

Other

Balance at December 31, 2018

Common
Shares
Outstanding

Common
Shares

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Treasury
Shares

Non-
controlling
Interests

70,693

9,858

272,908

2,125,838

(296,267) $ (1,180,750) $

861

198,399

3,837

(36,646)

843

(5,862)

65,674

470

(481)

(88,166)

36,509

7,921

(342,003)

9,858

309,417

2,236,071

(329,037)

(1,514,832)

247,503

10,662

288

70,901

(95,355)

24,892

4,433

(43,164)

65,663

9,858

334,309

2,388,219

(247,186)

(1,553,563)

287,066

158

(2,275)

(106,802)

21,956

4,043

(4,043)

3,228

819

(50,600)

1,288

(201,650)

(26)

(106)

729

(28)

115

816

(73)

(93)

Total

932,448

198,373

3,837

(36,752)

(88,166)

44,430

(342,003)

712,206

247,475

10,662

288

71,016

(95,355)

29,325

(43,164)

932,453

286,993

3,228

819

(50,693)

(106,802)

23,244

(201,650)

—

63,546

9,858

360,308

2,564,440

(293,739) $ (1,753,925) $

650

887,592

See notes to these consolidated financial statements.

F-6

LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Year Ended December 31,

2018

2017

2016

287,066

247,503

198,399

CASH FLOWS FROM OPERATING ACTIVITIES
Net income

Non-controlling interests in subsidiaries' loss

Net income including non-controlling interests

Adjustments to reconcile Net income including non-controlling interests to Net cash

provided by operating activities:

Rationalization and asset impairment net (gains) charges (Notes 5 and 7)

Loss on deconsolidation of Venezuelan subsidiary (Note 1)

Bargain purchase gain (Note 4)

Net impact of U.S. Tax Act (Note 14)

Depreciation and amortization

Equity earnings in affiliates, net

Deferred income taxes (Note 14)

Stock-based compensation (Note 10)

Pension expense, settlements and curtailments (Note 12)

Other, net

Changes in operating assets and liabilities, net of effects from acquisitions:

Increase in accounts receivable

(Increase) decrease in inventories

Decrease (increase) in other current assets

Increase in trade accounts payable

Decrease in other current liabilities

Net change in other assets and liabilities

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures

Acquisition of businesses, net of cash acquired (Note 4)

Proceeds from sale of property, plant and equipment

Purchase of marketable securities

Proceeds from marketable securities

Other investing activities

NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings

Payments on short-term borrowings

Amounts due banks, net

Proceeds from long-term borrowings

Payments on long-term borrowings

Proceeds from exercise of stock options

Purchase of shares for treasury

Cash dividends paid to shareholders

Other financing activities

NET CASH USED BY FINANCING ACTIVITIES

Effect of exchange rate changes on cash and cash equivalents

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at beginning of year

(73)

286,993

(5,978)

—

399

72,346

(3,034)

1,490

18,554

3,068

(11,002)

(4,061)

(23,904)

1,324

3,636

(13,657)

2,978

329,152

(71,246)

(101,792)

16,755

(268,335)

447,459

(2,000)

20,841

—

(835)

—

(107)

4,690

(201,650)

(102,058)

(2,170)

(302,130)

(15,715)

32,148

326,701

(28)

247,475

1,441

—

(49,650)

28,616

68,115

(337)

4,058

12,698

2,517

1,402

(16,811)

19,448

(8,143)

17,871

(13)

6,158

334,845

(61,656)

(72,468)

2,301

(205,584)

65,380

—

(26)

198,373

—

34,348

—

65,073

(261)

(9,805)

10,332

13,988

(26,560)

(12,314)

14,601

1,532

29,627

(9,286)

2,909

312,557

(49,877)

(71,567)

1,127

(38,920)

—

(709)

(272,027)

(159,946)

—

(491)

(39)

16,627

(43,164)

(92,452)

(15,552)

(135,037)

19,741

(52,478)

379,179

1,892

(1,822)

1,469

350,261

(481)

25,049

(342,003)

(87,330)

(19,043)

(72,008)

(5,607)

74,996

304,183

379,179

CASH AND CASH EQUIVALENTS AT END OF YEAR

358,849

326,701

See notes to these consolidated financial statements.

F-7

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and 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.

General Information

The Company is a manufacturer of welding, cutting and brazing products. Welding products include arc welding power
sources, plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction
equipment, consumable electrodes, fluxes and welding accessories and specialty welding consumables and fabrication. The
Company's product offering also includes computer numeric controlled ("CNC") plasma and oxy-fuel cutting systems and
regulators and torches used in oxy-fuel welding, cutting and brazing. In addition, the Company has a leading global position in
the brazing and soldering alloys market.

Translation of Foreign Currencies

Asset and liability accounts are translated into U.S. dollars using exchange rates in effect at the dates of the Consolidated
Balance Sheets; revenue and expense accounts are translated at average monthly exchange rates. Translation adjustments are
reflected as a component of Total equity. For subsidiaries operating in highly inflationary economies, both historical and
current exchange rates are used in translating balance sheet accounts and translation adjustments are included in Net income.

The translation of assets and liabilities originally denominated in foreign currencies into U.S. dollars is for consolidation
purposes, and does not necessarily indicate that the Company could realize or settle the reported value of those assets and
liabilities in U.S. dollars. Additionally, such a translation does not necessarily indicate that the Company could return or
distribute the reported U.S. dollar value of the net equity of its foreign operations to shareholders.

Foreign currency transaction gains and losses are included in Selling, general & administrative expenses and were gains of
$4,885, $5,654 and $3,741 in 2018, 2017 and 2016, respectively.

Venezuela – Deconsolidation

Effective June 30, 2016, the Company determined that deteriorating conditions in Venezuela had led the Company to no longer
meet the accounting criteria for control over its Venezuelan subsidiary. The restrictive exchange controls in Venezuela and the
lack of access to U.S. dollars through official currency exchange mechanisms resulted in an other-than-temporary lack of
exchangeability between the Venezuela bolivar and the U.S. dollar, and restricted the Venezuela operations ability to pay
dividends and satisfy other obligations denominated in U.S. dollars. Additionally, other operating restrictions including
government controls on pricing, profits, imports and restrictive labor laws significantly impacted the Company’s ability to make
key operational decisions, including the ability to manage its capital structure, purchasing, product pricing and labor relations.
Therefore, as of June 30, 2016, the Company deconsolidated the financial statements of its subsidiary in Venezuela and began
reporting the results under the cost method of accounting.

As a result of the deconsolidation, the Company recorded a pretax charge of $34,348 ($33,251 after-tax) in the second quarter
of 2016. The pretax charge includes the write-off of the Company’s investment in Venezuela, including all inter-company
balances and $283 of Cash and cash equivalents. Additionally, the charge includes foreign currency translation losses and
pension losses previously included in Accumulated other comprehensive loss.

Beginning July 1, 2016, the Company no longer includes the results of the Venezuelan subsidiary in its consolidated financial
statements. Under the cost method of accounting, if cash were to be received from the Venezuela entity in future periods from
the sale of inventory, dividends or royalties, income would be recognized. The Company does not anticipate dividend or
royalty payments being made in the foreseeable future and has no outstanding receivables or payables with the Venezuelan
entity. The factors that led to the Company’s conclusion to deconsolidate at June 30, 2016 continued to exist through December
31, 2018. The Company expects these conditions to continue for the foreseeable future.

Subsequent to the deconsolidation under the voting interest consolidation model, the Company determined that the Venezuelan
subsidiary is considered to be a variable interest entity ("VIE"). As the Company does not have the power to direct the
activities that most significantly affect the Venezuela subsidiary's economic performance, the Company is not the primary
beneficiary of the VIE and therefore would not consolidate the entity under the VIE consolidation model. Due to the lack of
ability to settle U.S. dollar obligations, the Company does not intend to sell into nor purchase inventory from the Venezuela

F-8

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

entity at this time. Additionally, the Company has no remaining financial commitments to the Venezuelan subsidiary and
therefore believes the exposure to future losses are not material.

Prior to deconsolidation, the financial statements of the Company’s Venezuelan operation had been reported under highly
inflationary accounting rules since January 1, 2010. Under highly inflationary accounting, the financial statements of the
Company’s Venezuelan operation had been remeasured into the Company’s reporting currency and exchange gains and losses
from the remeasurement of monetary assets and liabilities were reflected in current earnings.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash
equivalents.

Accounts Receivable

The Company maintains an allowance for doubtful accounts for estimated losses from the failure of its customers to make
required payments for products delivered. The Company estimates this allowance based on the age of the related receivable,
knowledge of the financial condition of customers, review of historical receivables and reserve trends and other pertinent
information. If the financial condition of customers deteriorates or an unfavorable trend in receivable collections is experienced
in the future, additional allowances may be required. Historically, the Company's reserves have approximated actual
experience.

Marketable Securities

The Company's marketable securities consist of short-term highly liquid investments classified as available-for-sale and
recorded at fair value using quoted market prices for similar assets at the end of the reporting period.

Inventories

Inventories are valued at the lower of cost or net realizable value. Fixed manufacturing overhead costs are allocated to
inventory based on normal production capacity and abnormal manufacturing costs are recognized as period costs. Cost for a
substantial portion of U.S. inventories is determined on a last-in, first-out (“ LIFO”) basis. At December 31, 2018 and 2017,
approximately 37% and 32% of total inventories, respectively, were valued using the LIFO method. Cost of other inventories is
determined by costing methods that approximate a first-in, first-out (“FIFO”) basis. Refer to Note 17 to the consolidated
financial statements for additional details.

Reserves are maintained for estimated obsolescence or excess inventory equal to the difference between the cost of inventory
and the estimated net realizable value based upon assumptions about future demand and market conditions. The reserve for
excess and obsolete inventory was $24,502 and $27,544 at December 31, 2018 and 2017, respectively.

Prepaid Expenses

Prepaid expenses include prepaid insurance, prepaid rent, prepaid service contracts and other prepaid items. Prepaid expenses
are included in Other current assets in the accompanying Consolidated Balance Sheets and amounted to $17,078 and $15,599 at
December 31, 2018 and 2017, respectively.

Equity Investments

Investments in businesses which the Company does not own a majority interest and does not have the ability to exercise
significant influence over operating and financial policies are accounted for using the equity method. The Company's 50%
ownership interest in equity investments includes investments in Turkey and Chile. The amount of retained earnings that
represents undistributed earnings of 50% or less owned equity investments was $22,704 and $19,670 at December 31, 2018 and
2017, respectively.

F-9

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Property, Plant and Equipment

Property, plant and equipment are stated at cost and include improvements which significantly increase capacities or extend the
useful lives of existing plant and equipment. Depreciation and amortization are computed using a straight-line method over
useful lives ranging from three to 20 years for machinery, tools and equipment, and up to 40 years for buildings. Net gains or
losses related to asset dispositions are recognized in earnings in the period in which dispositions occur.

Routine maintenance, repairs and replacements are expensed as incurred. The Company capitalizes interest costs associated
with long-term construction in progress.

Property, plant and equipment, net in the Consolidated Balance Sheet is comprised of the following components:

Land

Buildings

Machinery and equipment

Less accumulated depreciation

Total

Goodwill and Intangibles

December 31,

2018

2017

61,784

414,698

781,136

1,257,618

778,817
478,801

66,653

421,722

776,436

1,264,811

787,780
477,031

Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired.
Intangible assets other than goodwill are recorded at fair value at the time acquired or at cost, if applicable. Intangible assets
that do not have indefinite lives are amortized in line with the pattern in which the economic benefits of the intangible asset are
consumed. If the pattern of economic benefit cannot be reliably determined, the intangible assets are amortized on a straight-
line basis over the shorter of the legal or estimated life. Goodwill and indefinite-lived intangibles assets are not amortized, but
are tested for impairment in the fourth quarter using the same dates each year or more frequently if changes in circumstances or
the occurrence of events indicate potential impairment.

In performing the annual impairment test, the fair value of each indefinite-lived intangible asset is compared to its carrying
value and an impairment charge is recorded if the carrying value exceeds the fair value. For goodwill, the Company first
assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its
carrying amount, and whether it is necessary to perform the quantitative goodwill impairment test. The quantitative test is
required only if the Company concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying
amount. For quantitative testing, the Company compares the fair value of each reporting unit with its carrying amount. If the
carrying amount exceeds the fair value, an impairment charge is recognized for the amount by which the carrying amount
exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Long-Lived Assets

The Company periodically evaluates whether current facts or circumstances indicate that the carrying value of its depreciable
long-lived assets to be held and used may not be recoverable. If such circumstances are determined to exist, an estimate of
undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared to the
carrying value to determine whether impairment exists. If an asset is determined to be impaired, a loss is recognized to the
extent that carrying value exceeds fair value. Fair value is measured based on quoted market prices in active markets, if
available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques,
including the discounted value of estimated future cash flows. Refer to Notes 5 and 7 to the consolidated financial statements
for additional details.

F-10

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Fair Value Measurements

Financial assets and liabilities, such as the Company's defined benefit pension plan assets and derivative contracts, are valued at
fair value using the market and income valuation approaches. Fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).
The following hierarchy is used to classify the inputs that measure fair value:

Level 1

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2

Inputs to the valuation methodology include:

• Quoted prices for similar assets or liabilities in active markets;

• Quoted prices for identical or similar assets or liabilities in inactive markets;

• Inputs other than quoted prices that are observable for the asset or liability; and

• Inputs that are derived principally from or corroborated by observable market data by correlation or other

means.

If the asset or liability has a specific (contractual) term, the Level 2 input must be observable for substantially the
full term of the asset or liability.

Level 3

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Refer to Notes 12 and 16 to the consolidated financial statements for additional details.

Product Warranties

The Company accrues for product warranty claims based on historical experience and the expected material and labor costs to
provide warranty service. Warranty services are generally provided for periods up to three years from the date of sale. The
accrual for product warranty claims is included in Other current liabilities. Refer to Note 20 to the consolidated financial
statements for additional details.

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09 (“Topic 606”) using the modified
retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods
beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be
reported in accordance with the Company's historic accounting. The cumulative impact of adopting Topic 606 as of January 1,
2018 did not have a material impact to the consolidated financial statements. The Company does not expect the impact of the
adoption of Topic 606 to be material to the consolidated financial statements on an ongoing basis.

The Company’s payment terms vary by the type and location of the customer and the products or services offered. The
Company does not offer any payment terms that would meet the requirements for consideration as a financing component under
Topic 606.

Distribution Costs

Distribution costs, including warehousing and freight related to product shipments, are included in Cost of goods sold.

Stock-Based Compensation

Common stock issuable upon the exercise of employee stock options is excluded from the calculation of diluted earnings per
share when the calculation of option equivalent shares is anti-dilutive. Refer to Note 10 to the consolidated financial statements
for additional details.

F-11

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Financial Instruments

The Company uses derivative instruments to manage exposures to interest rates, commodity prices and currency exchange rate
fluctuations on certain purchase and sales transactions, balance sheet and net investment exposures. Derivative contracts to
hedge currency and commodity exposures are generally written on a short-term basis, but may cover exposures for up to two
years while interest rate contracts may cover longer periods consistent with the terms of the underlying debt. The Company
does not enter into derivatives for trading or speculative purposes.

All derivatives are recognized at fair value on the Company's Consolidated Balance Sheets. The accounting for gains and
losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for
hedge accounting. The Company formally documents the relationship of the hedge with the hedged item as well as the risk-
management strategy for all designated hedges. Both at inception and on an ongoing basis, the hedging instrument is assessed
as to its effectiveness, when applicable. If and when a derivative is determined not to be highly effective as a hedge, the
underlying hedged transaction is no longer likely to occur, or the derivative is terminated, hedge accounting is discontinued.
The cash flows from settled derivative contracts are recognized in Net cash provided by operating activities in the Company's
Consolidated Statements of Cash Flows.

The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of
major banks and financial institutions. The Company manages individual counterparty exposure by monitoring the credit rating
of the counterparty and the size of financial commitments and exposures between the Company and the counterparty.

Cash flow hedges

Certain foreign currency forward contracts are qualified and designated as cash flow hedges. The effective portion of the fair
value unrealized gain or loss on cash flow hedges are reported as a component of Accumulated other comprehensive income
("AOCI") with offsetting amounts recorded as Other current assets, Other assets, Other current liabilities or Other liabilities
depending on the position and the duration of the contract. At settlement, the realized gain or loss is recorded in Cost of goods
sold or Net sales for hedges of purchases and sales, respectively, in the same period or periods during which the hedged
transaction affects earnings. The ineffective portion on cash flow hedges is recognized in current earnings.

Fair value hedges

Certain interest rate swap agreements were qualified and designated as fair value hedges. The interest rate swap agreements
designated as fair value hedges meet the shortcut method requirements under accounting standards for derivatives and hedging.
Accordingly, changes in the fair value of these agreements are considered to exactly offset changes in the fair value of the
underlying long-term debt. Changes in fair value are recorded in Other assets or Other liabilities with offsetting amounts
recorded as a fair value adjustment to the carrying value of Long-term debt, less current portion.

Net investment hedges

For derivative instruments that qualify as a net investment hedge, the effective portion of the fair value gains or losses are
recognized in AOCI with offsetting amounts recorded as Other current assets, Other assets, Other current liabilities or Other
liabilities depending on the position and the duration of the contract. The gains or losses are subsequently reclassified to
Selling, general and administrative expenses, as the underlying hedged investment is liquidated.

Derivatives not designated as hedging instruments

The Company has certain foreign exchange forward contracts which are not designated as hedges. These derivatives are held as
hedges of certain balance sheet exposures. The gains or losses on these contracts are recognized in Selling, general and
administrative expenses, offsetting the losses or gains on the exposures being hedged. Refer to Note 15 to the consolidated
financial statements for additional details.

Research and Development

Research and development costs are charged to Selling, general & administrative expenses as incurred and totaled $54,168,
$47,899 and $44,720 in 2018, 2017 and 2016, respectively.

Bonus

Included in Selling, general & administrative expenses are the costs related to the Company's discretionary employee bonus
programs, which for certain U.S.-based employees are net of hospitalization costs. Bonus costs were $123,799, $97,392 and
$83,620 in 2018, 2017 and 2016, respectively.

F-12

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Income Taxes

Deferred income taxes are recognized at currently enacted tax rates for temporary differences between the GAAP and income
tax basis of assets and liabilities and operating loss and tax credit carry-forwards. In assessing the realizability of deferred tax
assets, the Company assesses whether it is more likely than not that a portion or all of the deferred tax assets will not be
realized.

Provisions of the U.S. Tax Cuts and Jobs Act ("U.S. Tax Act") became effective for the Company in 2018. The Foreign-
Derived Intangible Income (“FDII”) provision generates a deduction against the Company’s U.S. taxable income for U.S.
earnings derived offshore that utilize intangibles held by the Company in the U.S. Conversely, the Global Intangible Low-
Taxed Income (“GILTI”) provision requires the Company to subject to U.S. taxation a portion of its foreign subsidiary earnings
that exceed an allowable return. The Company has elected to treat any GILTI inclusion as a period expense in the year
incurred. Refer to Note 14 to the consolidated financial statements for additional details.

Acquisitions

Fair value estimates are based on a series of judgments about future events and uncertainties and rely heavily on estimates and
assumptions. Management values property, plant and equipment using the cost approach supported where available by
observable market data, which includes consideration of obsolescence. Management values acquired intangible assets using the
relief from royalty method, a form of the income approach supported by observable market data for peer companies. Acquired
inventories are marked to fair value. For certain items, the carrying value is determined to be a reasonable approximation of
fair value based on information available to the Company. Refer to Note 4 to the consolidated financial statements for
additional details.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions in
certain circumstances that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual
results could differ from these estimates.

Reclassification

Certain reclassifications have been made to prior year financial statements to conform to current year classifications.

F-13

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

New Accounting Pronouncements

The following section provides a description of new ASUs issued by the Financial Accounting Standards Board ("FASB") that
are applicable to the Company.

The following ASUs were adopted as of January 1, 2018 and did not have a significant financial impact on the Company's
consolidated financial statements unless otherwise described within the table below:

Standard
ASU No. 2017-12, Derivatives and
Hedging (Topic 815): Targeted
Improvements to Accounting for
Hedging Activities, issued August
2017.
ASU No. 2017-07, Compensation -
Retirement Benefits (Topic 715):
Improving the Presentation of Net
Period Pension Cost and Net Periodic
Postretirement Benefit Cost, issued
March 2017.

ASU No. 2017-01, Business
Combinations (Topic 805): Clarifying
the Definition of a Business, issued
January 2017.

Description
ASU 2017-12 provides updated guidance to more closely align hedge accounting
with a company's risk management strategy, to simplify the application of hedge
accounting and to better portray the economic results of hedging instruments in the
financial statements. The Company early adopted the ASU on January 1, 2018.

ASU 2017-07 requires an entity to report the service cost component of the net
periodic benefit cost in the same income statement line item as other employee
compensation costs. The other components of the net periodic benefit cost are
required to be presented in the income statement separately from the service cost
component and outside of any subtotal of operating income. Additionally, only the
service cost component will be eligible for capitalization in assets. The impact of the
adoption resulted in the reclassification of the other components of net periodic
benefit cost from Cost of goods sold and Selling, general and administrative expenses
to Other income (expense). The reclassification resulted in a decrease in Operating
income of $769 as a result of increases in Cost of goods sold of $5,219 and Selling,
general & administrative expenses of $3,700 partially offset by a decrease in Pension
settlement charges of $8,150 for the year ended December 31, 2017. The
reclassification resulted in a decrease in Operating income of $4,660 as a result of a
increases in Cost of goods sold of $2,739 and Selling, general and administrative
expenses of $1,921 for the year ended December 31, 2016. Refer to Note 12 to the
consolidated financial statements for further details.

ASU 2017-01 provides updated guidance for evaluating whether certain transactions
should be accounted for as an acquisition (or disposal) of an asset or a business.

ASU No. 2016-18, Statement of Cash
Flows (Topic 230): Restricted Cash,
issued November 2016.

ASU 2016-18 requires amounts generally described as restricted cash and restricted
cash equivalents be included with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the statement of cash
flows.

ASU No. 2016-16, Income Taxes
(Topic 740): Intra-Entity Transfers of
Assets Other Than Inventory, issued
October 2016.

ASU 2016-15, Statement of Cash
Flows (Topic 230): Classification of
Certain Cash Receipts and Cash
Payments, issued August 2016.

ASU 2014-09, Revenue from
Contracts with Customers (Topic 606)
issued May 2014 and ASU 2015-14,
Revenue from Contracts with
Customers (Topic 606): Deferral of
the Effective Date, issued August
2015.

ASU 2016-16 requires an entity to recognize the income tax consequences of an
intra-entity transfer of an asset other than inventory when the transfer occurs.

ASU 2016-15 reduces existing diversity in practice by addressing eight specific cash
flow issues related to how certain cash receipts and cash payments are presented and
classified in the statement of cash flows.

ASU 2014-09 requires an entity to recognize revenue in a manner that depicts the
transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods
or services. The standard also specifies the accounting of some costs to obtain or
fulfill a contract with a customer and expands the disclosure requirements around
contracts with customers. ASU 2015-14 deferred the effective date of ASU 2014-09
to annual reporting periods beginning after December 15, 2017, and interim periods
within those fiscal years. The Company adopted ASU 2014-09 as of January 1, 2018
using the modified retrospective transition method applied to those contracts that
were not completed as of that date. The adoption did not have a material impact on
the consolidated financial statements. Refer to Note 2 to the consolidated financial
statements for further details.

F-14

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

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

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

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

ASU No. 2018-02, Income Statement
- Reporting Comprehensive Income
(Topic 220), issued February 2018.

ASU No. 2016-02, Leases (Topic
842), issued February 2016

Description
ASU 2018-14 modifies disclosure requirements for employers that sponsor defined
benefit pension or other postretirement plans. The ASU also requires an entity to
disclose the weighted-average interest crediting rates for cash balance plans and to
explain the reasons for significant gains and losses related to changes in the benefit
obligation. The ASU is effective January 1, 2020 and early adoption is permitted.

ASU 2018-13 eliminates, amends and adds disclosure requirements related to fair
value measurements. The ASU impacts various elements of fair value disclosure,
including but not limited to, changes in unrealized gains or losses, significant
unobservable inputs and measurement uncertainty. The ASU is effective January 1,
2020 and early adoption is permitted.

ASU 2018-02 allows a reclassification from accumulated other comprehensive
income to retained earnings for stranded tax effects resulting from the U.S. Tax Act
(as defined within Note 14 to the consolidated financial statements). The ASU only
applies to the income tax effects of the U.S. Tax Act, all other existing guidance
remains the same. The ASU is effective January 1, 2019, early adoption is permitted
and the ASU should be applied retrospectively to each period impacted by the U.S.
Tax Act.

ASU 2016-02 ("Topic 842") aims to increase transparency and comparability among
organizations by recognizing a right of use asset and lease liability on the balance
sheet for all leases with a lease term greater than twelve months. Topic 842 also
requires the disclosure of key information about leasing agreements. The Company
adopted Topic 842 on January 1, 2019 using the modified retrospective transition
option of applying the new standard at the adoption date. The Company also elected
the package of practical expedients, which among other things, allows it to not
reassess the identification, classification and initial direct costs of leases commencing
before the effective date of Topic 842.

Although the Company is finalizing its review of operating leases as of the adoption
date, the Company expects to record a right of use asset and lease liability for its
operating leases of less than three percent of Total assets. The Company also expects
to provide additional disclosures in the periods subsequent to adoption. The
Company does not expect Topic 842 to have a material impact to the Consolidated
Statements of Income, Cash Flows or debt covenants.

F-15

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

NOTE 2 — REVENUE RECOGNITION

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

Consumables

Equipment

Net sales

Year Ended December 31,

2018

1,755,652

1,273,022

3,028,674

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, robotic
welding packages, integrated automation 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.

Substantially all of the Company's sales arrangements are short-term in nature involving a single performance obligation. The
Company recognizes revenue when the performance obligation is satisfied and control of the product is transferred to the
customer based upon shipping terms.

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. In addition, certain customized automation performance obligations
within the Equipment product line, are accounted for over time. Under this method, revenue recognition is primarily based
upon the ratio of costs incurred to date compared with estimated total costs to complete. The cumulative impact of revisions to
total estimated costs is reflected in the period of the change, including anticipated losses. Less than 10% of the Company's Net
sales are recognized over time.

At December 31, 2018, the Company recorded $17,023 related to advance customer payments and $17,013 related to billings in
excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Condensed Consolidated
Balance Sheets. At January 1, 2018, the balances related to advance customer payments and billings in excess of revenue
recognized were $19,683 and $11,132, 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 December 31, 2018 and January 1, 2018, $25,032 and $22,229,
respectively, related to these future customer receivables was included in Other current assets in the Condensed Consolidated
Balance Sheets. Contract asset amounts are expected to be billed within the next twelve months.

NOTE 3 - EARNINGS PER SHARE

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

Numerator:

Net income

Denominator:

Basic weighted average shares outstanding

Effect of dilutive securities - Stock options and awards

Diluted weighted average shares outstanding

Basic earnings per share

Diluted earnings per share

Year Ended December 31,

2018

2017

2016

287,066

247,503

198,399

64,886

796

65,682

4.42

4.37

65,739

904

66,643

3.76

3.71

67,462

694

68,156

2.94

2.91

For the years ended December 31, 2018, 2017 and 2016, common shares subject to equity-based awards of 324,688, 157,033 and
774,502, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would
be anti-dilutive.

F-16

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

NOTE 4 – ACQUISITIONS

During December 2018, the Company acquired the soldering business of Worthington Industries (“Worthington”). The
Worthington business, based in Winston Salem, North Carolina, broadens the Harris Products Group’s portfolio of industry-
leading consumables with the addition of premium solders and fluxes.

Also during December 2018, the Company acquired Coldwater Machine Company (“Coldwater”) and Pro Systems. Coldwater,
based in Coldwater, Ohio, is a flexible automation integrator and precision machining and assembly manufacturer serving
diverse end markets. Pro Systems, based in Churubusco, Indiana, is an automation systems designer and integrator serving
automotive, industrial, electrical and medical applications. The acquisitions accelerate growth and expand the Company’s
industry-leading portfolio of automated cutting and joining solutions.

Also during December 2018, the Company acquired Inovatech Engineering Corporation (“Inovatech”). Inovatech, based in
Ontario, Canada, is a manufacturer of advanced robotic plasma cutting solutions for structural steel applications. The
acquisition scales our automated cutting solutions and application expertise and supports long-term growth in that market.

During July 2017, the Company completed its acquisition of Air Liquide Welding, a subsidiary of Air Liquide. The agreed
upon purchase price was $135,123, which was adjusted for certain debt like obligations, for a net purchase price of $61,953, net
of cash acquired. The primary debt like obligation was a pension liability. The acquisition was accounted for as a business
combination. The funding of the cash portion of the purchase price and acquisition costs was provided for with available cash.

The complementary business enhanced the Company’s global specialty consumables portfolio and extended its channel reach
for equipment systems and cutting, soldering and brazing solutions in Europe. The acquisition also offered European customers
more comprehensive welding solutions, greater technical application expertise and improved service levels.

The fair value of the net assets acquired exceeded the purchase consideration by $49,650, resulting in a bargain purchase gain at
acquisition, which is included in Bargain purchase gain in the Company’s Consolidated Statements of Income. The Company
believes that the bargain purchase gain was primarily the result of the divestiture by Air Liquide of the welding business, which
was outside Air Liquide’s core business, as part of an overall repositioning of its core business.

The following table summarizes the purchase price allocation for the Air Liquide Welding acquisition:

Assets acquired and liabilities assumed

As of July 31, 2017

Accounts receivable
Inventory (1)
Property, plant and equipment (2)
Intangible assets (3)
Accounts payable

Pension liability

Bargain purchase gain
Net other assets and liabilities (4)
Total purchase price, net of cash acquired(5)

89,442

97,803

73,056

11,715
(65,640)
(67,563)
(49,650)
(27,210)
61,953

(1) Inventories acquired were sold in 2017 resulting in a $4,578 increase in cost of sales for the amortization of step up in

the value of acquired inventories.

(2) Property, plant and equipment acquired includes a number of manufacturing and distribution sites, including the
related facilities, land and leased sites, and machinery and equipment for use in manufacturing operations.

(3) $7,099 of the intangible asset balance was assigned to a trade name expected to have an indefinite life. Of the

remaining amount, $1,183 was assigned to a finite-lived trade name (10 year weighted average useful life) and $3,433
was assigned to other intangible assets (9 year weighted average life).

(4) Consists primarily of other accrued liabilities.

(5) Reflects a receivable from seller for an agreed upon purchase price adjustment. The payment of $10,983 was received

in the first quarter of 2018.

In 2018 and 2017, the Company recognized $4,498 and $15,002, respectively, in acquisition transaction and integration costs
related to the acquisition of Air Liquide Welding. Such costs were expensed as incurred and are included in the "Selling,
general and administrative expenses" line item in the Consolidated Statements of Income.

F-17

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Beginning August 1, 2017, the Company's Consolidated Statements of Income include the results of the Air Liquide Welding
businesses, including sales revenue of $182 million through December 31, 2017. The impact on net income in the year ended
December 31, 2017 from Air Liquide Welding businesses was immaterial.

During May 2016, the Company acquired Vizient Manufacturing Solutions ("Vizient"). Vizient, based in Bettendorf, Iowa, is a
robotic integrator specializing in custom engineered tooling and automated arc welding systems for general and heavy
fabrication applications. The acquisition assisted in diversifying end-market exposure and broadening global growth
opportunities.

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

NOTE 5 – GOODWILL AND INTANGIBLES

The changes in the carrying amount of goodwill by reportable segments for the years ended December 31, 2018 and 2017 were
as follows:

Balance as of December 31, 2016
Additions and adjustments (1)
Impairment charges (2)
Foreign currency translation

Balance as of December 31, 2017
Additions and adjustments (3)
Foreign currency translation

Balance as of December 31, 2018

Americas
Welding

International
Welding

The Harris
Products
Group

Consolidated

196,378
(76)
(1,091)
2,048

197,259

44,408
(2,452)
239,215

23,664
—

—

2,003

25,667

1,224
(2,643)
24,248

11,877
(301)
—

11,656

6,525
(350)
17,831

231,919
(377)
(1,091)
4,131

234,582

52,157
(5,445)
281,294

(1) Adjustments to Harris Products Group include the tax benefit attributable to the amortization of tax deductible

goodwill in excess of goodwill recorded for financial reporting purposes.

(2) The Company performed an interim goodwill impairment test, using a combination of income and market valuation
approaches, resulting in a non-cash impairment charge to the carrying value of goodwill. The impairment charge is
recorded within Rationalization and asset impairment charges in the accompanying Consolidated Statements of
Income.

(3) Additions to Americas Welding reflect goodwill recognized in the acquisitions of Coldwater, Pro Systems and

Inovatech in 2018. Additions to The Harris Products Group reflect goodwill recognized in the acquisition of
Worthington in 2018.

Gross carrying values and accumulated amortization of intangible assets other than goodwill by asset class were as follows:

Intangible assets not subject to amortization

Trademarks and trade names
Intangible assets subject to amortization
Trademarks and trade names
Customer relationships
Patents
Other
Total intangible assets subject to amortization

December 31, 2018

December 31, 2017

Gross
Amount

Accumulated
Amortization

Gross
Amount

Accumulated
Amortization

23,385

50,458
113,837
26,848
60,373
251,516

26,357
52,518
13,307
34,773
126,955

24,235

41,203
93,139
27,777
57,351
219,470

24,147
47,175
12,978
31,953
116,253

F-18

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

During 2018, the Company acquired intangible assets either individually or as part of a group of assets, with an initial purchase
price allocation and weighted-average lives as follows:

Acquired intangible assets subject to amortization

Trademarks and trade names

Customer relationships

Other

Total acquired intangible assets subject to amortization

Year Ended December 31, 2018

Purchase Price
Allocation

Weighted
Average Life

8,786

21,493

5,632

35,911

Aggregate amortization expense was $15,744, $15,671 and $14,525 for 2018, 2017 and 2016, respectively. Estimated annual
amortization expense for intangible assets for each of the next five years is $17,316 in 2019, $16,101 in 2020, $15,264 in 2021,
$13,801 in 2022 and $12,441 in 2023.

NOTE 6 – SEGMENT INFORMATION

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

During the first quarter of 2016, the Company realigned its organizational and leadership structure into three operating
segments to support growth strategies and enhance the utilization of the Company's worldwide resources and global sourcing
initiatives. 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
primarily includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the
Company's global 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 Equity earnings in affiliates and Other income. Segment EBIT is adjusted for special items as determined by management
such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets. The
accounting principles applied at the operating segment level are generally the same as those applied at the consolidated
financial statement level with the exception of LIFO. Segment assets include inventories measured on a FIFO basis while
consolidated inventories include inventories reported on a LIFO basis. Segment and consolidated income before interest and
income taxes include the effect of inventories reported on a LIFO basis. At December 31, 2018, 2017 and 2016 approximately
37%, 32% and 40%, respectively, of total inventories were valued using the LIFO method. LIFO is used for a substantial
portion of U.S. inventories included in Americas Welding. Inter-segment sales are recorded at agreed upon prices that
approximate arm's length prices and are eliminated in consolidation. Corporate-level expenses are allocated to the operating
segments.

F-19

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Financial information for the reportable segments follows:

For the Year Ended
December 31, 2018

Net sales

Inter-segment sales

Total

Adjusted EBIT

Special items charge (gain)

EBIT

Interest income

Interest expense

Income before income taxes

Total assets

Equity investments in affiliates

Capital expenditures

Depreciation and amortization

For the Year Ended
December 31, 2017

Net sales

Inter-segment sales

Total

Adjusted EBIT

Special items charge (gain)

EBIT

Interest income

Interest expense

Income before income taxes

Total assets

Equity investments in affiliates

Capital expenditures

Depreciation and amortization

For the Year Ended
December 31, 2016

Net sales

Inter-segment sales

Total

Adjusted EBIT

Special items charge

EBIT

Interest income

Interest expense

Income before income taxes

Total assets

Equity investments in affiliates

Capital expenditures

Depreciation and amortization

Americas
Welding (1)

International
Welding (2)

The Harris
Products
Group

Corporate /
Eliminations (3)

Consolidated

1,806,514

118,936

1,925,450

340,744

6,686

334,058

919,771

18,576

938,347

54,273

25,285

28,988

302,389

6,969

309,358

36,564

—

36,564

— $

3,028,674

(144,481) $

—

(144,481) $

3,028,674

(8,887) $

422,694

4,498

36,469

(13,385) $

386,225

6,938

(24,503)

368,660

1,418,905

827,132

203,095

(99,307) $

2,349,825

4,204

42,053

47,008

27,024

26,284

22,384

—

2,909

3,045

— $

(91) $

31,228

71,246

72,346

1,609,779

97,382

1,707,161

291,866

9,242

282,624

724,024

18,860

742,884

41,721

10,076

31,645

290,628

8,190

298,818

36,442

—

36,442

— $

2,624,431

(124,432) $

—

(124,432) $

2,624,431

309

370,338

(34,648) $

(15,330)

34,957

385,668

1,253,411

919,995

175,151

57,990

4,037

43,158

47,038

24,489

14,549

18,364

—

3,949

2,885

— $

(172) $

4,788

(24,220)

366,236

2,406,547

28,526

61,656

68,115

1,494,982

93,612

1,588,594

266,633

—

266,633

507,289

15,975

523,264

29,146

—

29,146

272,343

8,709

281,052

32,380

—

32,380

— $

2,274,614

(118,296) $

—

(118,296) $

2,274,614

564

34,348

328,723

34,348

(33,784) $

294,375

2,092

(19,079)

277,388

1,278,417

529,223

161,391

(25,594) $

1,943,437

3,946

35,314

47,359

23,355

12,354

15,063

—

2,209

2,860

— $

(209) $

27,301

49,877

65,073

(1) Special items in 2018 reflect pension settlement charges of $6,686 in Americas Welding related to lump sum pension

payments.

2017 special items reflect pension settlement charges of $8,150 related to lump sum pension payments, as well as non-
cash charges of $1,091 related to the impairment of goodwill.

F-20

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

(2) 2018 special items reflect charges of $25,285 related to employee severance, asset impairments, gains or losses on

disposal of assets and other related costs.

2017 special items reflect amortization of step up in value of acquired inventories of $4,578 related to the Air Liquide
Welding acquisition as discussed in Note 4 to the consolidated financial statements, as well as charges of $5,498
related to employee severance, asset impairments and other related costs.

(3) 2018 special items reflect acquisition and acquisition transaction and integration costs of $4,498 related to the Air

Liquide Welding acquisition as discussed in Note 4 to the consolidated financial statements.

2017 special items reflect a bargain purchase gain of $49,650 and acquisition transaction and integration costs of
$15,002 related to the Air Liquide Welding acquisition as discussed in Note 4 to the consolidated financial statements.

2016 special items reflect a loss of $34,348 related to the deconsolidation of the Company's Venezuelan subsidiary.

Export sales (excluding inter-company sales) from the United States were $160,064 in 2018, $151,630 in 2017 and $134,216 in
2016. No individual customer comprised more than 10% of the Company's total revenues for any of the three years ended
December 31, 2018.

The geographic split of the Company's Net sales, based on the location of the customer, and property, plant and equipment were
as follows:

Net sales:

United States

Foreign countries

Total

Property, plant and equipment, net:

United States

Foreign countries

Eliminations

Total

Year Ended December 31,

2018

2017

2016

1,554,688

1,473,986

3,028,674

1,388,816

1,235,615

2,624,431

1,308,635

965,979

2,274,614

December 31,

2018

2017

2016

214,943

194,491

264,110
(252)
478,801

282,931
(391)
477,031

176,041

196,679
(343)
372,377

NOTE 7 – RATIONALIZATION AND ASSET IMPAIRMENTS

The Company recorded rationalization and asset impairment net charges of $25,285 and $6,590 for the years ended
December 31, 2018 and 2017. The charges are primarily related to employee severance, asset impairments and gains or losses
on the disposal of assets. A description of each restructuring plan and the related costs follows:

International Welding Plans:

During 2018, the Company initiated rationalization plans within International Welding. The plans include headcount
restructuring and the consolidation of manufacturing operations to better align the cost structures with economic conditions and
operating needs. At December 31, 2018, liabilities relating to the International Welding plans of $10,903 were recognized in
Other current liabilities. The Company does not anticipate significant additional charges related to the completion of these
plans.

During 2017, the Company initiated rationalization plans within International Welding. The plans include headcount
restructuring and the consolidation of manufacturing operations to better align the cost structures with economic conditions and
operating needs. Liabilities related to these plans were substantially paid at December 31, 2018.

F-21

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

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

Balance at December 31, 2016

Payments and other adjustments

Charged to expense

Balance at December 31, 2017

Payments and other adjustments

Charged to expense

Balance at December 31, 2018

Consolidated

5,190
(3,536)
5,149

6,803
(26,874)
31,263

11,192

NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ("AOCI")

The following tables set forth the total changes in AOCI by component, net of taxes, for the years ended December 31, 2018
and 2017:

Unrealized gain
(loss) on
derivatives
designated and
qualifying as
cash flow
hedges

Defined benefit
pension plan
activity

Currency
translation
adjustment

Total

Balance at December 31, 2016

Other comprehensive income (loss) before
reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive
income (loss)

Balance at December 31, 2017

Other comprehensive income (loss) before
reclassification

Amounts reclassified from AOCI

Net current-period other comprehensive
income (loss)

Balance at December 31, 2018

587

(95,939)

(233,685)

(329,037)

(2,074)
2,362 (1)

288

875

624
195 (1)

819

1,694

2,736 (2)
7,926 (2)

10,662
(85,277)

(4,396) (2)
7,624 (2)

3,228
(82,049)

70,901 (3)
—

70,901
(162,784)

(50,600) (3)
—

(50,600)
(213,384)

71,563
10,288

81,851
(247,186)

(54,372)
7,819

(46,553)
(293,739)

(1) During 2018, this AOCI reclassification is a component of Net sales of $(152) (net of tax of $(73) and Cost of goods
sold of $43 (net of tax of $(40)); during 2017, the reclassification is a component of Net sales of $1,860 (net of tax of
$693) and Cost of goods sold of $502 (net of tax of $93). Refer to Note 15 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 $1,691 and $19,252
during the years ended December 31, 2018 and 2017, respectively). Refer to Note 12 to the consolidated financial
statements for additional details.

(3) The Other comprehensive income before reclassifications excludes $(93) and $115 attributable to Non-controlling

interests in the years ended December 31, 2018 and 2017, respectively. The reclassified AOCI component is included
in the computation of Non-controlling interests. Refer to the Consolidated Statements of Equity for additional details.

F-22

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

NOTE 9 – DEBT

At December 31, 2018 and 2017, debt consisted of the following:

December 31,

2018

2017

Long-term debt

Senior Unsecured Notes due through 2045, interest at 2.8% to 4.0% (net of debt
issuance costs of $1,392 and $1,491 at December 31, 2018 and 2017, respectively),
swapped $125,000 to variable interest rates of 3.1% to 4.4%

691,877

Other borrowings due through 2023, interest up to 8.0%

Less current portion

Long-term debt, less current portion

Short-term debt

Amounts due banks, interest at 31.8% in 2017

Current portion long-term debt

Total short-term debt

Total debt

10,783

702,660

111

702,549

—

111

111
702,660

693,424

10,823

704,247

111

704,136

2,020

111

2,131
706,267

Senior Unsecured Notes

On April 1, 2015, the Company entered into a Note Purchase Agreement pursuant to which it issued senior unsecured notes (the
"2015 Notes") in the aggregate principal amount of $350,000 through a private placement. On October 20, 2016 the Company
entered into a Note Purchase Agreement pursuant to which it issued senior unsecured notes (the "2016 Notes") in the aggregate
principal amount of $350,000 through a private placement. Interest on the notes are payable semi-annually. The proceeds
were used for general corporate purposes. The 2015 Notes and 2016 Notes contain certain affirmative and negative covenants.
As of December 31, 2018, the Company was in compliance with all of its debt covenants.

The maturity and interest rates of the 2015 Notes and 2016 Notes are as follows:

2015 Notes

Series A
Series B

Series C

Series D
2016 Notes

Series A

Series B

Series C

Series D

Amount

Maturity Date

Interest Rate

100,000
100,000

50,000

100,000

50,000

August 20, 2025
August 20, 2030

April 1, 2035

October 20, 2028

October 20, 2033

October 20, 2037

October 20, 2041

3.15%
3.35%

3.61%

4.02%

2.75%

3.03%

3.27%

3.52%

The Company's total weighted average effective interest rate and remaining weighted average term, inclusive of the 2015 Notes
and 2016 Notes, is 3.3% and 15 years, respectively.

Revolving Credit Agreement

F-23

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

the prime rate, plus a spread based on the Company’s leverage ratio, at the Company’s election. The Company amended and
restated the Credit Agreement on June 30, 2017, extending the maturity of the line of credit to June 30, 2022. The Credit
Agreement contains customary affirmative, negative and financial covenants for credit facilities of this type, including
limitations on the Company and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions,
dispositions of assets, transactions with affiliates, a fixed charges coverage ratio and total leverage ratio. As of December 31,
2018, the Company was in compliance with all of its covenants and had no outstanding borrowings under the Credit
Agreement.

Shelf Agreements

Other

Maturities of long-term debt, including payments for amounts due banks, for the five years succeeding December 31, 2018 are
$111 in 2019, $114 in 2020, $110 in 2021, $107 in 2022, $10,607 in 2023 and $700,000 thereafter. Total interest paid was
$23,790 in 2018, $23,820 in 2017 and $15,332 in 2016. The difference between interest paid and interest expense is due to the
accrual of interest associated with the Senior Unsecured Notes and adjustments to the swap contract discussed in Note 16 to the
consolidated financial statements.

NOTE 10 – STOCK PLANS

Stock Options

The following table summarizes stock option activity for the year ended December 31, 2018 under all Plans:

Balance at beginning of year
Options granted

Options exercised

Options canceled

Balance at end of year

Exercisable at end of year

Number of
Options

1,362,448
171,843
(101,272)
(1,981)
1,431,038

1,070,594

Weighted
Average
Exercise
Price

58.45
90.70

46.20

58.79

63.19

56.70

Options granted under both the Employee Plan and its predecessor plans may be outstanding for a maximum of 10 years from
the date of grant. The majority of options granted vest ratably over a period of three years from the grant date. The exercise
prices of all options were equal to the quoted market price of the Company's common shares at the date of grant. The Company
issued shares of common stock from treasury upon all exercises of stock options in 2018. In 2018, all options issued were
under the Employee Plan.

The Company uses the Black-Scholes option pricing model for estimating fair values of options. In estimating the fair value of
options granted, the expected option life is based on the Company's historical experience. The expected volatility is based on

F-24

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

historical volatility. The weighted average assumptions for each of the three years ended December 31 were as follows:

2018

2017

2016

Expected volatility

Dividend yield

Risk-free interest rate

Expected option life (years)

25.36%

1.92%

2.69%

4.6

25.77%

1.62%

1.90%

4.5

Weighted average fair value per option granted during the year

18.97

17.50

The following table summarizes non-vested stock options for the year ended December 31, 2018:

28.86%

1.70%

1.27%

4.5

12.55

Balance at beginning of year

Granted
Vested

Balance at end of year

Number of
Options

Weighted
Average
Fair Value at
Grant Date

409,559
171,843
(220,958)
360,444

15.47
18.97
15.75
17.21

The following table summarizes information about awards outstanding as of December 31, 2018:

Outstanding

Weighted
Average
Exercise
Price

Number of
Stock
Options

447,315

217,143

766,580

1,431,038

39.78

58.12

78.28

Weighted
Average
Remaining
Life (years)

Number of
Stock
Options

Exercisable

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Life (years)

3.0

7.1

7.0

5.8

447,315

144,768

478,511

1,070,594

39.79

58.11

72.09

3.0

7.1

5.9

4.9

Exercise Price Range

Under $49.99

$50.00 - $59.99

Over $60.00

Restricted Share Awards ("RSAs")

The following table summarizes restricted share award activity for the year ended December 31, 2018 under all Plans:

Balance at beginning of year
Shares granted
Shares vested
Shares forfeited
Balance at end of year

Number of
Shares

Weighted
Average
Grant Date
Fair Value

47,856
1,662
(32,922)
(4,158)
12,438

71.54
91.02
82.48
78.65
80.98

RSAs are valued at the quoted market price on the grant date. The majority of RSAs vest over a period of one to three years.
The Company issued common shares from treasury upon the granting of RSAs in 2018. Restricted shares issued in 2018 were
under the 2015 Director Plan. The remaining weighted average vesting period of all non-vested RSAs is 1 year as of
December 31, 2018.

F-25

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Restricted Stock Units ("RSUs") and Performance Share Units ("PSUs")

The following table summarizes RSU and PSU activity for the year ended December 31, 2018 under all Plans:

Balance at beginning of year

Units granted

Units vested

Units forfeited

Balance at end of year

Number of
Units

418,966

148,833
(49,653)
(12,116)
506,030

Weighted
Average
Grant Date
Fair Value

69.98

89.51

69.24

74.16

75.69

RSUs are valued at the quoted market price on the grant date. The majority of RSUs vest over a period of three to five years.
The Company issues shares of common stock from treasury upon the vesting of RSUs and any earned dividend equivalents.
Conversion of 1,980 RSUs to common shares in 2018 were deferred as part of the 2005 Deferred Compensation Plan for
Executives (the "2005 Plan"). As of December 31, 2018, 99,801 RSUs, including related dividend equivalents, have been
deferred under the 2005 Plan. These units are reflected within dilutive shares in the calculation of earnings per share. In 2018,
117,073 RSUs were issued under the Employee Plan and the 2015 Director Plan. The remaining weighted average vesting
period of all non-vested RSUs is 1.4 years as of December 31, 2018.

PSUs are valued at the quoted market price on the grant date. PSUs vest over a three year period and are based on the
Company's performance relative to pre-established performance goals. The Company issues common stock from treasury upon
the vesting of PSUs and any earned dividend equivalents. In 2018, the Company issued 31,760 PSU's and has 107,045 PSUs
outstanding under the Employee Plan at a weighted average fair value of $76.20 per share. The remaining weighted average
vesting period of all non-vested PSUs is 1 year as of December 31, 2018.

Stock-Based Compensation Expense

Expense is recognized for all awards of stock-based compensation by allocating the aggregate grant date fair value over the
vesting period. No expense is recognized for any stock options, restricted or deferred shares, RSUs or PSUs ultimately
forfeited because recipients fail to meet vesting requirements. Total stock-based compensation expense recognized in the
Consolidated Statements of Income for 2018, 2017 and 2016 was $18,554, $12,698 and $10,332, respectively. The related tax
benefit for 2018, 2017 and 2016 was $4,632, $4,861 and $3,955, respectively. As of December 31, 2018, total unrecognized
stock-based compensation expense related to non-vested stock options, RSAs, RSUs and PSUs was $21,223, which is expected
to be recognized over a weighted average period of approximately 2 years.

Lincoln Stock Purchase Plan

The 1995 Lincoln Stock Purchase Plan provides employees the ability to purchase open market shares on a commission-free
basis up to a limit of ten thousand dollars annually. Under this plan, 800,000 shares have been authorized to be purchased.
Shares purchased were 8,324 in 2018, 10,458 in 2017 and 15,827 in 2016.

NOTE 11 – COMMON STOCK REPURCHASE PROGRAM

The Company has a share repurchase program for up to 55 million of the Company's common shares. At management's
discretion, the Company repurchases its common shares from time to time in the open market, depending on market conditions,
stock price and other factors. During the year ended December 31, 2018, the Company purchased a total of 2.3 million shares
at an average cost per share of $88.84. As of December 31, 2018, 6.2 million shares remained available for repurchase under
the stock repurchase program. The treasury shares have not been retired.

F-26

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

NOTE 12 – RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS

The Company maintains a number of defined benefit and defined contribution plans to provide retirement benefits for
employees. These plans are maintained and contributions are made in accordance with the Employee Retirement Income
Security Act of 1974 ("ERISA"), local statutory law or as determined by the Board of Directors. The plans generally provide
benefits based upon years of service and compensation. Pension plans are funded except for a domestic non-qualified pension
plan for certain key employees and certain foreign plans. The Company uses a December 31 measurement date for its plans.

The Company does not have, and does not provide for, any postretirement or postemployment benefits other than pensions and
certain non-U.S. statutory termination benefits.

Defined Benefit Plans

Contributions are made in amounts sufficient to fund current service costs on a current basis and to fund past service costs, if
any, over various amortization periods.

Obligations and Funded Status

Change in benefit obligations

Benefit obligations at beginning of year

Service cost

Interest cost

Plan participants' contributions
Acquisitions & other adjustments (1)
Actuarial (gain) loss

Benefits paid
Settlements/curtailments (2)
Currency translation

Benefit obligations at end of year

Change in plan assets

Fair value of plan assets at beginning of year

Actual return on plan assets

Employer contributions

Plan participants' contributions
Acquisitions (1)
Benefits paid
Settlements (2)
Currency translation

Fair value of plan assets at end of year

Funded status at end of year

Unrecognized actuarial net loss

Unrecognized prior service cost

Unrecognized transition assets, net

Net amount recognized

December 31,

2018

2017

U.S. pension
plans

Non-U.S.
pension plans

U.S. pension
plans

Non-U.S.
pension plans

$ 507,075

$ 193,523

$ 484,758

79,972

3,252

3,703

196
(5,322)
(5,674)
(9,723)
(1,886)
(9,258)
168,811

113,344
(2,855)
2,087

196

586
(5,904)
(1,455)
(5,812)
100,187

(68,624)
25,581

534

139

18,084

—

—
(46,924)
(7,973)
(31,456)
—

438,945

568,388
(23,012)
690

—

—
(7,047)
(26,941)
—

512,078

73,133

85,624

—

$ 158,757

608

19,497

—

46,144
(6,409)
(37,523)
—

2,678

3,253

176

100,551

4,926
(4,909)
(700)
7,576

507,075

193,523

528,744

82,732

—

—
(5,620)
(37,523)
—

70,341

5,770

1,684

176

32,599
(3,196)
(22)
5,992

568,388

113,344

61,313

90,679

—

(80,179)
25,987
(11)
35
$ (54,168)

—
$ (42,477) $ 151,992

(1) Acquisitions in 2017 relate to acquisition of Air Liquide Welding as discussed in Note 4 to the consolidated financial

statements.

F-27

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

(2) Settlements in 2018 and 2017 resulting from lump sum pension payments.

In October 2016, The Lincoln Electric Company amended the plan to freeze all benefit accruals for participants under the
Lincoln Electric Retirement Annuity Program ("RAP") effective as of December 31, 2016. The RAP includes approximately
1,500 domestic employees who fully transitioned to The Lincoln Electric Company Employee Savings Plan (“Savings Plan”), a
defined contribution retirement savings plan. The Company recorded pension curtailment gains of $2,206 for the year ended
December 31, 2016 related to the amendment. The Company did not make significant contributions to the defined benefit plans
in the United States in 2018 or 2017.

The after-tax amounts of unrecognized actuarial net loss, prior service costs and transition assets included in Accumulated other
comprehensive loss at December 31, 2018 were $81,580, $446 and $23, respectively. The actuarial loss represents changes in
the estimated obligation not yet recognized in the Consolidated Income Statement. The pre-tax amounts of unrecognized
actuarial net loss, prior service credits and transition obligations expected to be recognized as components of net periodic
benefit cost during 2019 are $3,924, $59 and $3, respectively.

Amounts Recognized in Consolidated Balance Sheets

December 31,

2018

2017

U.S. pension
plans

Non-U.S.
pension plans

U.S. pension
plans

Non-U.S.
pension plans

Prepaid pensions (1)
Accrued pension liability, current (2)
Accrued pension liability, long-term (3)
Accumulated other comprehensive loss, excluding tax effects

Net amount recognized in the balance sheets

87,786
(786)
(13,867)
85,624

$ 158,757

(1) Included in Other assets.

(2) Included in Other current liabilities.

(3) Included in Other liabilities.

Components of Pension Cost for Defined Benefit Plans

77
(2,996)
(65,705)
26,147

81,485
(5,332)
(14,840)
90,679
$ (42,477) $ 151,992

368
(3,483)
(77,064)
26,011
$ (54,168)

Year Ended December 31,

2018

2017

2016

U.S. pension
plans

Non-U.S.
pension plans

U.S. pension
plans

Non-U.S.
pension plans

U.S. pension
plans

Non-U.S.
pension plans

Service cost

139

3,252

608

2,678

15,474

2,215

Interest cost
Expected return on plan assets

Amortization of prior service cost
Amortization of net loss (1)
Settlement/curtailment loss (gain) (2)
Pension cost for defined benefit plans (3)

18,084
(27,052)

—

1,498

6,686

(645) $

3,703
(5,057)
1

2,211
(397)
3,713

19,497
(31,530)
—

2,133

8,150
(1,142) $

3,253
(4,270)
15

1,881

102

3,659

20,676
(31,682)
(412)
7,717
(1,062)
10,711

2,902
(4,034)
18

2,176

—

3,277

(1) The amortization of net loss includes a $959 charge resulting from the deconsolidation of the Venezuelan subsidiary

during the year ended December 31, 2016.

(2) Pension settlement charges for the years ended December 31, 2018 and 2017 resulting from lump sum pension

payments.

(3) The decrease in pension cost for defined benefit plans for the years ended December 31, 2018 and 2017 was due to the

U.S. plan freeze effective December 31, 2016.

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

F-28

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets

Projected benefit obligation

Accumulated benefit obligation

Fair value of plan assets

December 31,

2018

2017

U.S. pension
plans

Non-U.S.
pension plans

U.S. pension
plans

Non-U.S.
pension plans

14,653

$ 158,746

26,149

$ 182,512

14,406

—

152,724

90,076

25,870

5,977

174,667

102,107

The total accumulated benefit obligation for all plans was $600,998 as of December 31, 2018 and $691,827 as of December 31,
2017.

Benefit Payments for Plans

Benefits expected to be paid for the plans are as follows:

Estimated Payments

2019

2020

2021

2022

2023

2024 through 2028

Assumptions

U.S. pension
plans

Non-U.S.
pension plans

28,101

31,581

26,998

28,754

30,593

8,278

8,243

8,513

8,055

7,966

137,369

42,925

Weighted average assumptions used to measure the benefit obligation for the Company's significant defined benefit plans as of
December 31, 2018 and 2017 were as follows:

Discount Rate

Rate of increase in compensation

December 31,

2018

2017

U.S. pension
plans

Non-U.S.
pension plans

U.S. pension
plans

Non-U.S.
pension plans

4.4%

2.5%

2.3%

2.6%

3.7%

2.5%

2.0%

2.7%

Weighted average assumptions used to measure the net periodic benefit cost for the Company's significant defined benefit plans
for each of the three years ended December 31 were as follows:

2018

December 31,

2017

2016

U.S. pension
plans

Non-U.S.
pension plans

U.S. pension
plans

Non-U.S.
pension plans

U.S. pension
plans

Non-U.S.
pension plans

Discount rate

Rate of increase in compensation

Expected return on plan assets

3.7%

2.5%

5.0%

2.0%

2.7%

4.6%

4.2%

2.5%

6.0%

2.2%

2.5%

4.5%

2.6%

6.2%

3.9%

3.7%

5.7%

To develop the discount rate assumptions, the Company refers to the yield derived from matching projected pension payments
with maturities of bonds rated AA or an equivalent quality. The expected long-term rate of return assumption is based on the
weighted average expected return of the various asset classes in the plans' portfolio and the targeted allocation of plan assets.
The asset class return is developed using historical asset return performance as well as current market conditions such as
inflation, interest rates and equity market performance. The rate of compensation increase is determined by the Company based
upon annual reviews.

F-29

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Pension Plans' Assets

The primary objective of the pension plans' investment policy is to ensure sufficient assets are available to provide benefit
obligations when such obligations mature. Investment management practices must comply with ERISA or any other applicable
regulations and rulings. The overall investment strategy for the defined benefit pension plans' assets is to achieve a rate of
return over a normal business cycle relative to an acceptable level of risk that is consistent with the long-term objectives of the
portfolio. The target allocation for plan assets is 10% to 20% equity securities and 80% to 90% debt securities.

The following table sets forth, by level within the fair value hierarchy, the pension plans' assets as of December 31, 2018:

Cash and cash equivalents
Equity securities (1)
Fixed income securities (2)

U.S. government bonds

Corporate debt and other obligations

Investments measured at NAV (3)

Common trusts and 103-12 investments (4)
Private equity funds (5)
Total investments at fair value

Pension Plans' Assets at Fair Value as of December 31, 2018

Quoted Prices
in Active Markets
for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

13,029

— $

3,851

16,743

—

392,090

—

33,623

392,090

— $

Total

13,029

3,851

16,743

392,090

151,153

35,399

612,265

The following table sets forth, by level within the fair value hierarchy, the pension plans' assets as of December 31, 2017:

Cash and cash equivalents
Equity securities (1)
Fixed income securities (2)

U.S. government bonds

Corporate debt and other obligations

Investments measured at NAV (3)

Common trusts and 103-12 investments (4)
Private equity funds (5)
Total investments at fair value

Pension Plans' Assets at Fair Value as of December 31, 2017

Quoted Prices
in Active Markets
for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

8,922

4,566

33,205

—

— $

—

398,578

—

46,693

398,578

— $

Total

8,922

4,566

33,205

398,578

199,066

37,395

681,732

(1) Equity securities are primarily comprised of corporate stock and mutual funds directly held by the plans. Equity

securities are valued using the closing price reported on the active market on which the individual securities are traded.

(2) Fixed income securities are primarily comprised of governmental and corporate bonds directly held by the plans.

Governmental and corporate bonds are valued using both market observable inputs for similar assets that are traded on
an active market and the closing price on the active market on which the individual securities are traded.

(3) Certain assets that are measured at fair value using the net asset value ("NAV") practical expedient have not been

classified in the fair value hierarchy.

F-30

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

(4) Common trusts and 103-12 investments (collectively "Trusts") are comprised of a number of investment funds that

invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, equity and credit
indexes and money markets. Trusts are valued at the NAV as determined by their custodian. NAV represents the
accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the
total shares outstanding at the reporting dates.

(5) Private equity funds consist of four funds seeking capital appreciation by investing in private equity investment

partnerships and venture capital companies. Private equity fund valuations are based on the NAV of the underlying
assets. Funds are comprised of unrestricted and restricted publicly traded securities and privately held securities.
Unrestricted securities are valued at the closing market price on the reporting date. Restricted securities may be valued
at a discount from such closing public market price, depending on facts and circumstances. Privately held securities
are valued at fair value as determined by the fund directors and general partners.

Supplemental Executive Retirement Plan

The Company maintained a domestic unfunded Supplemental Executive Retirement Plan ("SERP") under which non-qualified
supplemental pension benefits are paid to certain employees in addition to amounts received under the Company's qualified
retirement plan which is subject to Internal Revenue Service ("IRS") limitations on covered compensation. The annual cost of
this program has been included in the determination of total net pension costs shown above and was $1,268, $772 and $2,113 in
2018, 2017 and 2016, respectively. The projected benefit obligation associated with this plan is also included in the pension
disclosure shown above and was $12,183, $17,047 and $16,738 at December 31, 2018, 2017 and 2016, respectively.

In October 2016, the Company announced an amendment to freeze and vest all benefit accruals under the SERP, effective
November 30, 2016. The Company recorded a curtailment loss of $1,144 for the year ended December 31, 2016 related to the
amendment. The value of the frozen vested benefit was converted into an account balance and deferred. In addition, the
Company created The Lincoln Electric Company Restoration Plan (“Restoration Plan”) effective January 1, 2017. The
Restoration Plan is a domestic unfunded plan maintained for the purpose of providing certain employees the ability to fully
participate in standard employee retirement offerings, which are limited by IRS regulations on covered compensation.

Defined Contribution Plans

Substantially all U.S. employees are covered under defined contribution plans. In October 2016, the Company announced a
plan redesign of the Savings Plan that was effective January 1, 2017. The Savings Plan provides that eligible employees
receive up to 6% of employees' annual compensation through Company matching contributions of 100% of the first 3% of
employee compensation contributed to the plan, and automatic Company contributions equal to 3% of annual compensation. In
addition, certain employees affected by the RAP freeze are also eligible to receive employer contributions equal to 6% of
annual compensation for a minimum period of five years or to the end of the year in which they complete thirty years of
service.

The annual costs recognized for defined contribution plans were $26,477, $25,285 and $8,361 in 2018, 2017 and 2016,
respectively.

Other Benefits

The Cleveland, Ohio, area operations have a Guaranteed Continuous Employment Plan covering substantially all employees
which, in general, provides that the Company will provide work for at least 75% of every standard work week (presently
40 hours). This plan does not guarantee employment when the Company's ability to continue normal operations is seriously
restricted by events beyond the control of the Company. The Company has reserved the right to terminate this plan effective at
the end of a calendar year by giving notice of such termination not less than six months prior to the end of such year.

F-31

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

NOTE 13 — OTHER INCOME (EXPENSE)

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

Equity earnings in affiliates
Other components of net periodic pension (cost) income (1)
Other income

Total Other income (expense)

Year Ended December 31,

2018

2017

2016

5,481

502

4,703

10,686

2,742

769

5,215

2,928

4,660

3,173

8,726

10,761

(1) Other components of net periodic pension (cost) income includes pension settlements and curtailments. Refer to Note

12 to the consolidated financial statements for details.

NOTE 14 – INCOME TAXES

The components of income before income taxes for the three years ended December 31, 2018 were as follows:

U.S.
Non-U.S.
Total

Year Ended December 31,

2018

2017

2016

255,088
113,572
368,660

213,171
153,065
366,236

209,409
67,979
277,388

The components of income tax expense (benefit) for the three years ended December 31, 2018 were as follows:

Current:
Federal
Non-U.S.
State and local

Deferred:
Federal
Non-U.S.
State and local

Total

Year Ended December 31,

2018

2017

2016

45,521
28,894
10,515
84,930

(691)
(3,121)
549
(3,263)
81,667

89,182
25,746
7,640
122,568

(4,391)
(82)
666
(3,807)
118,761

57,090
23,344
8,386
88,820

(1,716)
(8,261)
172
(9,805)
79,015

F-32

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

The U.S. Tax Act was enacted on December 22, 2017. The U.S. Tax Act reduced the U.S. federal corporate income tax rate to
21% from 35%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were
previously tax deferred and created new taxes on certain foreign-sourced earnings. The SEC staff issued SAB 118 related to
the U.S. Tax Act, which provided for a one-year measurement period and guidance for the application of ASC Topic 740,
Income Taxes. At December 31, 2017, the Company had not completed its accounting related to the U.S. Tax Act. All
provisional amounts were based on reasonable estimates using the best information available at the time. At December 31,
2018, the Company has completed its accounting related to the U.S. Tax Act. In 2018, the Company recognized a net
adjustment of $399 to provisional amounts recorded at December 31, 2017, resulting in an increase to income tax expense. As
described in more detail below, the net adjustment includes additional transition tax expense, offset by a tax benefit from the
remeasurement of deferred tax assets and liabilities and a reduction of foreign withholding taxes.

The one-time transition tax is based on total post-1986 earnings and profits for which the Company had previously deferred
from U.S. income taxes. At December 31, 2017, the Company recorded a provisional amount of $36,387 for the one-time
transition tax resulting in an increase to income tax expense. The transition tax is based partially on the earnings and profits
held in cash and partially on the earnings and profits invested in assets. Considering all additional guidance and regulations
proposed and issued during the year, the Company finalized calculations of the transition tax liability during 2018. The result
was an increase of $5,152 to the December 31, 2017 provisional amount. The Company has elected to pay the transition tax
liability over the eight-year period provided in the U.S. Tax Act.

At December 31, 2017, the Company recorded a provisional tax benefit of $14,532 related to the remeasurement of deferred
tax assets and liabilities as a result of the U.S. Tax Act. The Company finalized the remeasurement of deferred tax assets and
liabilities during 2018. The result was an increase of $329 to the December 31, 2017 provisional benefit.

At December 31, 2017, the provisional amount recorded for taxes on the planned repatriation of certain earnings and profits
subject to the transition tax was $6,667. This additional tax pertains to foreign withholding taxes associated with the
repatriation of earnings that are not indefinitely reinvested in the foreign operations. Based on the Company’s final transition
tax calculations, an adjustment of $4,424 was recorded in 2018 to reduce the foreign withholding taxes associated with the
planned repatriation set forth in 2017.

Other provisions of the U.S. Tax Act became effective for the Company in 2018. The Foreign-Derived Intangible Income
(“FDII”) provision generates a deduction against the Company’s U.S. taxable income for U.S. earnings derived offshore that
utilize intangibles held by the Company in the U.S. Conversely, the Global Intangible Low-Taxed Income (“GILTI”) provision
requires the Company to subject to U.S. taxation a portion of its foreign subsidiary earnings that exceed an allowable return.
The Company has elected to treat any GILTI inclusion as a period expense in the year incurred.

F-33

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

The differences between total income tax expense and the amount computed by applying the statutory federal income tax rate
to income before income taxes for the three years ended December 31, 2018 were as follows:

Year Ended December 31,

2018

2017

77,419

128,182

Statutory rate applied to pre-tax income

State and local income taxes, net of federal tax benefit

Excess tax benefits resulting from exercises of stock-based compensation

Net impact of the U.S. Tax Act

Foreign withholding taxes

Intangible and asset impairments/(write-off)

Foreign rate variance

Venezuela deconsolidation/devaluation

Bargain purchase gain

Valuation allowances

Manufacturing deduction

Research and development credit

Other

Total

Effective tax rate

8,844
(1,094)
4,823
(4,424)
—
(4,560)
—

—

5,596

—
(3,859)
(1,078)
81,667

2016

97,086

5,554

—

—
(4,438)
(8,128)
5,192

—
(8,525)
(5,190)
(2,748)
212

5,671
(6,276)
21,949

6,667

—
(13,929)
—
(17,556)
102
(5,922)
(2,688)
2,561

118,761

79,015

22.2%

32.4%

28.5%

The 2018 effective tax rate is impacted by the reduced corporate income tax rate associated with the U.S. Tax Act,
rationalization charges in regions with low or no tax benefit, as well as the incremental adjustments recognized in 2018 related
to the U.S. Tax Act provisional amounts, as discussed in the paragraphs above. Total income tax payments, net of refunds,
were $85,805 in 2018, $81,691 in 2017 and $72,965 in 2016.

Deferred Taxes

Significant components of deferred tax assets and liabilities at December 31, 2018 and 2017, were as follows:

December 31,

2018

2017

Deferred tax assets:

Tax loss and credit carry-forwards

Inventory

Other accruals
Employee benefits

Pension obligations

Other

Deferred tax assets, gross

Valuation allowance

Deferred tax assets, net

Deferred tax liabilities:

Property, plant and equipment

Intangible assets

Inventory

Pension obligations

Other

Deferred tax liabilities

Total deferred taxes

60,756

3,544

13,172
22,963

12,122

3,739

116,296
(69,400)
46,896

28,606

10,950

4,814

19,346

8,770

72,486
(25,590) $

F-34

60,454

2,501

14,873
18,468

12,363

4,923

113,582
(68,694)
44,888

21,427

10,729

5,891

16,137

15,483

69,667
(24,779)

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

At December 31, 2018, certain subsidiaries had net operating loss carry-forwards of approximately $61,931 that expire in
various years from 2019 through 2034, plus $214,438 for which there is no expiration date.

In assessing the realizability of deferred tax assets, the Company assesses whether it is more likely than not that a portion or all
of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax
planning strategies and projected future taxable income in making this assessment. At December 31, 2018, a valuation
allowance of $69,400 was recorded against certain deferred tax assets based on this assessment. The Company believes it is
more likely than not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred
tax assets considered realizable could be increased or reduced in the future if the Company's assessment of future taxable
income or tax planning strategies changes.

Unrecognized Tax Benefits

Liabilities for unrecognized tax benefits are classified as Other liabilities unless expected to be paid in one year, with a portion
recorded to Deferred income taxes to offset tax attributes. The Company recognizes interest and penalties related to
unrecognized tax benefits in Income taxes. Current income tax expense included benefits of $1,277 for the year ended
December 31, 2018 and expense of $1,079 for the year ended December 31, 2017 for interest and penalties. For those same
years, the Company's accrual for interest and penalties related to unrecognized tax benefits totaled $6,655 and $8,135,
respectively.

The following table summarizes the activity related to unrecognized tax benefits:

Balance at beginning of year

Increase related to current year tax provisions

Increase related to prior years' tax positions

Increase related to acquisitions

Decrease related to settlements with taxing authorities

Resolution of and other decreases in prior years' tax liabilities

Other

Balance at end of year

2018

2017

28,449

1,431

4,917

—
(111)
(1,501)
(4,381)
28,804

18,499

1,448

1,460

8,223
(522)
(1,734)
1,075

28,449

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $25,069 at
December 31, 2018 and $25,024 at December 31, 2017.

The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the
Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years
before 2014. The Company is currently subject to U.S. federal, various state audits and non-U.S. income tax audits. The
Company is generally not able to precisely estimate the ultimate settlement amounts or timing until after the close of an audit.
The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local
authorities and may not be fully sustained.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including
progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes
that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax
benefits. It is reasonably possible there could be a further reduction of $1,759 in prior years' unrecognized tax benefits in 2019.

NOTE 15 – DERIVATIVES

The Company uses derivative instruments to manage exposures to currency exchange rates, interest rates and commodity prices
arising in the normal course of business. Both at inception and on an ongoing basis, the derivative instruments that qualify for
hedge accounting are assessed as to their effectiveness, when applicable. Hedge ineffectiveness was immaterial for each of the
three years in the period ended December 31, 2018.

F-35

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of
major banks and financial institutions. None of the concentrations of risk with any individual counterparty was considered
significant at December 31, 2018. The Company does not expect any counterparties to fail to meet their obligations.

Cash flow hedges

Certain foreign currency forward contracts are qualified and designated as cash flow hedges. The dollar equivalent gross
notional amount of these short-term contracts was $45,909 at December 31, 2018 and $35,489 at December 31, 2017.

Fair value hedges

Certain interest rate swap agreements were qualified and designated as fair value hedges. At December 31, 2018, the Company
had interest rate swap agreements outstanding that effectively convert notional amounts of $125,000 of debt from a fixed
interest rate to a variable interest rate based on three-month LIBOR plus a spread of between 0.5% and 1.8%. The variable
rates reset every three months, at which time payment or receipt of interest will be settled.

Net investment hedges

From time to time, the Company executes foreign currency forward contracts that qualify and are designated as net investment
hedges. No such contracts were outstanding at December 31, 2018 and December 31, 2017.

Derivatives not designated as hedging instruments

The Company has certain foreign exchange forward contracts which are not designated as hedges. These derivatives are held as
hedges of certain balance sheet exposures. The dollar equivalent gross notional amount of these contracts was $328,534 at
December 31, 2018 and $340,884 at December 31, 2017.

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

Derivatives by hedge designation

Designated as hedging instruments:

Foreign exchange contracts

Interest rate swap agreements

Not designated as hedging instruments:

December 31, 2018

December 31, 2017

Other
Current
Assets

Other
Current
Liabilities

Other
Assets

Other
Liabilities

Other
Current
Assets

Other
Current
Liabilities

Other
Liabilities

647

404

$ — $

— $

519

604

—

302

7,033

—

5,085

Foreign exchange contracts

6,375

829

—

2,257

3,747

—

Total derivatives

$ 7,022

$ 1,233

302

7,033

$ 2,776

$ 4,351

$ 5,085

The effects of undesignated derivative instruments on the Company's Consolidated Statements of Income for the years ended
December 31, 2018 and 2017 consisted of the following:

Derivatives by hedge designation
Not designated as hedges:

Classification of gains

Year Ended December 31,

2018

2017

Foreign exchange contracts

Selling, general & administrative expenses

7,452

17,590

The effects of designated cash flow hedges on AOCI and the Company's Consolidated Statements of Income for the years
ended December 31, 2018 and 2017 consisted of the following:

Total gain (loss) recognized in AOCI, net of tax

Foreign exchange contracts

Net investment contracts

December 31,

2018

2017

173

1,521

(224)
1,099

The Company expects a gain of $173 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the
next 12 months as the hedged transactions are realized.

F-36

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

Derivative type
Foreign exchange contracts

Gain (loss) reclassified from AOCI to:
Net sales
Cost of goods sold

Year Ended December 31,

2018

2017

(225) $
(3)

1,860
502

NOTE 16 – FAIR VALUE

The following table provides a summary of fair value assets and liabilities as of December 31, 2018 measured at fair value on a
recurring basis:

Description

Assets:

Foreign exchange contracts

Interest rate swap agreements

Total assets

Liabilities:

Foreign exchange contracts

Interest rate swap agreements

Contingent considerations

Deferred compensation

Total liabilities

Balance as of
December 31, 2018

Quoted Prices in
Active Markets for
Identical Assets or
Liabilities
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs (Level 3)

7,022

302

7,324

1,233

7,033

2,100

26,524

— $

—

— $

—

7,022

302

7,324

1,233

7,033

—

26,524

36,890

— $

34,790

—

2,100

—

2,100

The following table provides a summary of fair value assets and liabilities as of December 31, 2017 measured at fair value on a
recurring basis:

Description

Assets:

Foreign exchange contracts

Marketable securities

Total assets

Liabilities:

Foreign exchange contracts

Interest rate swap agreements

Contingent considerations

Deferred compensation

Total liabilities

Balance as of
December 31, 2017

Quoted Prices in
Active Markets for
Identical Assets or
Liabilities
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs (Level 3)

2,776

179,125

181,901

4,351

5,085

7,086

25,397

— $

—

— $

—

2,776

179,125

181,901

4,351

5,085

—

25,397

41,919

— $

34,833

—

7,086

—

7,086

The Company's derivative contracts are valued at fair value using the market approach. The Company measures the fair value
of foreign exchange contracts and interest rate swap agreements using Level 2 inputs based on observable spot and forward
rates in active markets. During the year ended December 31, 2018, there were no transfers between Levels 1, 2 or 3.

The Company measures the fair value of marketable securities using Level 2 inputs based on quoted market prices for similar
assets in active markets.

In connection with acquisitions, the Company recorded contingent consideration liabilities, which will be paid based upon
actual financial results of the acquired entity for specified future periods. The fair value of the contingent considerations are a
Level 3 valuation and fair valued using either a probability weighted discounted cash flow analysis or an option pricing model.

F-37

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

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

The Company has various financial instruments, including cash and cash equivalents, short and long-term debt and forward
contracts. While these financial instruments are subject to concentrations of credit risk, the Company has minimized this risk
by entering into arrangements with a number of major banks and financial institutions and investing in several high-quality
instruments. The Company does not expect any counterparties to fail to meet their obligations. The fair value of Cash and cash
equivalents, Accounts receivable, Amounts due banks and Trade accounts payable approximated book value due to the short-
term nature of these instruments at both December 31, 2018 and December 31, 2017. Refer to Note 9 to the consolidated
financial statements for the fair value estimate of debt.

NOTE 17 – INVENTORY

Inventories in the Consolidated Balance Sheet is comprised of the following components:

Raw materials
Work-in-process

Finished goods

Total

December 31,

2018

2017

103,820
53,950

204,059

361,829

97,577
50,695

200,395

348,667

The valuation of LIFO inventories is made at the end of each year based on inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs.
Actual year-end inventory levels and costs may differ from interim LIFO inventory valuations. At December 31, 2018 and
2017, approximately 37% and 32% of total inventories, respectively, were valued using the LIFO method. The excess of
current cost over LIFO cost was $79,626 at December 31, 2018 and $68,641 at December 31, 2017.

NOTE 18 – LEASES

The Company leases sales offices, manufacturing facilities, warehouses and distribution centers, transportation equipment,
office equipment and information technology equipment. Such leases, some of which are noncancelable and, in many cases,
include renewals, expire at various dates. The Company pays most insurance, maintenance and taxes relating to leased assets.
Rental expense was $25,720 in 2018, $20,450 in 2017 and $16,897 in 2016.

At December 31, 2018, total future minimum lease payments for noncancelable operating leases were $16,920 in 2019, $11,915
in 2020, $7,720 in 2021, $4,744 in 2022, $3,625 in 2023 and $10,033 thereafter.

F-38

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

NOTE 19 – CONTINGENCIES

The Company accrues its best estimate of the probable costs, after a review of the facts with management and counsel and
taking into account past experience. For claims or litigation that are material, if an unfavorable outcome is determined to be
reasonably possible and the amount of loss can be reasonably estimated, or if an unfavorable outcome is determined to be
probable and the amount of loss cannot be reasonably estimated, disclosure would be provided. Many of the current cases are
in differing procedural stages and information on the circumstances of each claimant, which forms the basis for judgments as to
the validity or ultimate disposition of such actions, varies greatly. Therefore, in many situations a range of possible losses
cannot be made. Reserves are adjusted as facts and circumstances change and related management assessments of the
underlying merits and the likelihood of outcomes change. Moreover, reserves only cover identified and/or asserted claims.
Future claims could, therefore, give rise to increases to such reserves.

Based on the Company's historical experience in litigating product liability claims, including a significant number of dismissals,
summary judgments and defense verdicts in many cases and immaterial settlement amounts, as well as the Company's current
assessment of the underlying merits of the claims and applicable insurance, the Company believes resolution of these claims
and proceedings, individually or in the aggregate, will not have a material effect on the Company's consolidated financial
statements.

NOTE 20 – PRODUCT WARRANTY COSTS

The changes in product warranty accruals for 2018, 2017 and 2016 were as follows:

Balance at beginning of year

Accruals for warranties

Settlements
Foreign currency translation and other adjustments (1)

Balance at end of year

December 31,

2018

2017

2016

22,029

21,053

8,897
(11,403)
255

9,901
(11,500)
2,575

19,778

22,029

19,469

13,058
(11,434)
(40)
21,053

(1) At December 31, 2017, Foreign currency translation and other adjustments includes $2,299 for an acquired liability
related to the Air Liquide Welding acquisition as discussed in Note 4 to the consolidated financial statements.

F-39

LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)

NOTE 21 – QUARTERLY FINANCIAL DATA (UNAUDITED)

2018

Net sales

Gross profit

Income before income taxes

Net income
Basic earnings per share (5)
Diluted earnings per share (5)
2017

Net sales

Gross profit

Income before income taxes

Net income
Basic earnings per share (5)
Diluted earnings per share (5)

First (1)

Second (2)

Third (3)

Fourth (4)

757,696

790,052

737,099

256,554

84,198

60,824

0.93

0.92

580,897

202,663

77,900

55,844

0.85

0.84

270,116

94,263

68,864

1.05

1.04

626,858

216,311

83,966

61,352

0.93

0.92

251,552

95,744

70,539

1.09

1.07

669,491

217,881

130,642

106,126

1.61

1.59

743,827

250,299

94,455

86,839

1.36

1.35

747,185

238,252

73,728

24,181

0.37

0.36

(1) 2018 includes special item charges of $758 ($569 after-tax) for pension settlement charges, $10,175 ($7,870 after-tax)

for rationalization and asset impairment charges, an adjustment to taxes on unremitted foreign earnings related to the
U.S. Tax Act of $2,500 and $1,907 ($1,520 after-tax) for acquisition transaction and integration costs.

2017 includes special item charges of $3,615 ($2,734 after-tax) related to acquisition transaction costs.

(2) 2018 includes special item charges of $11,542 ($10,362 after-tax) for rationalization and asset impairment charges and

$788 ($675 after-tax) for acquisition transaction and integration costs.

2017 includes special item charges of $4,498 ($3,494 after-tax) related to acquisition transaction and integration costs.

(3) 2018 includes special item charges of $4,232 ($3,176 after-tax) for pension settlement charges, $2,636 ($2,575 after-

tax) for rationalization and asset impairment charges, an adjustment to taxes on unremitted foreign earnings related to
the U.S. Tax Act of $2,323 and acquisition-related items including $970 ($797 after-tax) for acquisition transaction and
integration costs.

2017 includes special item charges of $5,283 ($3,260 after-tax) for pension settlement charges and acquisition-related
items including $2,314 ($1,745 after-tax) in amortization of step up in value of acquired inventories, $3,273 ($2,229
after-tax) for acquisition transaction and integration costs and a $51,585 bargain purchase gain.

(4) 2018 includes special item charges of $1,696 ($1,272 after-tax) for pension settlement charges, $932 ($841 gain after-
tax) for rationalization and asset impairment charges and gains or losses on the disposal of assets, a $4,424 credit
related to the U.S. Tax Act and acquisition-related items including $833 ($690 after-tax) for acquisition transaction and
integration costs.

2017 includes special item charges of $2,867 ($1,770 after-tax) for pension settlement charges, $6,590 ($6,198 after-
tax) for rationalization and asset impairment charges, $28,616 for the net impact of the U.S. Tax Act and acquisition-
related items including $2,264 ($1,708 after-tax) in amortization of step up in value of acquired inventories, $3,616
($3,102 after-tax) for acquisition transaction and integration costs and a $1,935 adjustment to the bargain purchase
gain.

(5) The quarterly earnings per share ("EPS") amounts are each calculated independently. Therefore, the sum of the

quarterly EPS amounts may not equal the annual totals.

F-40

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
LINCOLN ELECTRIC HOLDINGS, INC.
(In thousands)

Description

Allowance for doubtful accounts:

Additions

Balance at
Beginning
of Period

Charged to
Costs and
Expenses

Charged
(Credited) to
Other Accounts (1)

Deductions (2)

Balance at End
of Period

Year Ended December 31, 2018

15,943

1,743

Year Ended December 31, 2017

Year Ended December 31, 2016

7,768

7,299

1,172

1,657

(1,037) $
9,501

3,822

2,498

1,260

12,827

15,943

7,768

Deferred tax asset valuation allowance:

Year Ended December 31, 2018

68,694

1,891

2,437

Year Ended December 31, 2017

Year Ended December 31, 2016

47,849

51,294

16,222

3,704

4,854

3,923

(3,622) $
(231)
(11,072)

69,400

68,694

47,849

(1) Currency translation adjustment, additions from acquisitions and other adjustments.

(2) For the Allowance for doubtful accounts, deductions relate to uncollectible accounts written-off, net of recoveries. For the Deferred

tax asset valuation allowance, deductions relate to the reversal of valuation allowances due to the realization of net operating loss
carryforwards.

F-41

L I N C O L N E L E C T R I C H O L D I N G S , I N C .

CORPORATE INFORMATION

BOA R D OF DIR ECTOR S

Curtis E. Espeland
Executive Vice President and
Chief Financial Officer,
Eastman Chemical Company

Patrick P. Goris
Senior Vice President and
Chief Financial Officer,
Rockwell Automation, Inc.

Stephen G. Hanks
Former President and
Chief Executive Officer,
Washington Group International, Inc.

Michael F. Hilton
President and Chief Executive Officer,
Nordson Corporation

G. Russell Lincoln
President, N.A.S.T. Inc.

Kathryn Jo Lincoln
Chair and Chief Investment Officer,
Lincoln Institute of Land Policy

William E. MacDonald III
Former Vice Chairman,
National City Corporation

Christopher L. Mapes
Chairman, President and
Chief Executive Officer,
Lincoln Electric

Phillip J. Mason
Former President, Ecolab EMEA sector

Ben P. Patel
Senior Vice President and
Chief Technology Officer,
Tenneco Inc.

Hellene S. Runtagh
Former President and
Chief Executive Officer,
Berwind Group

COMPANY OFFICERS AND
EXECUTIVE MANAGEMENT

Geoffrey P. Allman*
Senior Vice President
Strategy and Business Development

Jennifer I. Ansberry*
Executive Vice President
General Counsel and Secretary

Anthony K. Battle
Senior Vice President, Internal Audit and
Chief Compliance Officer

CORPORATE INFORMATION

For additional corporate information and copies of
Lincoln Electric’s 2018 Annual Report and Form 10-K,
please contact Amanda Butler in Investor Relations
at (216) 383-2534, email: Amanda_Butler@
lincolnelectric.com, 22801 St. Clair Avenue, Cleveland,
Ohio 44117-1199 USA, or visit www.lincolnelectric.com.

TRANSFER AGENT AND REGISTRAR

Inquiries about dividends, shareholder records, share
transfers, changes in ownership and address changes
should be directed to Computershare Inc.:

Mail
Computershare
Attn: Shareholder Services
P.O. Box 505000
Louisville, Kentucky 40233-5000

Courier
Computershare
Attn: Shareholder Services
462 South 4th Street, Suite 1600
Louisville, Kentucky 40202

Direct
(800) 763-3001 or (781) 575-3100
Email: webqueries@computershare.com
Online: www.computershare.com

SUSTAINABILITY

Visit https://sustainability.lincolnelectric.com to
learn about our policies and programs.

INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

Ernst & Young LLP

ANNUAL MEETING

Wednesday, April 24, 2019
11:00 a.m. Eastern Time
Lincoln Electric Welding Technology & Training Center
22800 St. Clair Avenue, Cleveland, Ohio 44117

STOCK INFORMATION

The Company’s stock is traded on the NASDAQ Stock
Market (“NASDAQ”) under the symbol LECO.

Number of record holders of common shares at
December 31, 2018: 1,745

George D. Blankenship*
Executive Vice President
President, Americas Welding

Gabriel Bruno*
Executive Vice President
Finance

Thomas A. Flohn*
Senior Vice President
President, Asia Pacific Region

Steven B. Hedlund*
Executive Vice President
President, International Welding

Michele R. Kuhrt*
Executive Vice President
Chief Human Resources Officer

Douglas S. Lance*
Senior Vice President
President, Cleveland Operations

Christopher L. Mapes*
Chairman, President and
Chief Executive Officer

William T. Matthews
Senior Vice President, Technology and
Research and Development

Michael S. Mintun*
Senior Vice President
North America Sales & Marketing

David J. Nangle*
Executive Vice President
President, Harris Products Group

Vincent K. Petrella*
Executive Vice President
Chief Financial Officer and Treasurer

Michael J. Whitehead*
Senior Vice President
President, Global Automation,
Cutting & Additive Businesses

*Member of the Management Committee

OPERATE JOIN BUILD DESIGN CUT ENGAGE

L IN C O L N E L E C T R I C H O L D IN G S , IN C .

22801 St. Clair Avenue
Cleveland, Ohio 44117-1199 U.S.A.