M E N U
BUILDING A BETTER WORLD
2019 Annual Report &
2020 Proxy Statement
M E N U
FINANCIAL HIGHLIGHTS
Years ended December 31 (dollars in millions, except per share)
Net Sales
Operating Income Margin*
non-GAAP
GAAP
Net Income*
GAAP
non-GAAP
3500
3000
2500
2000
1500
1000
500
0
500
400
300
200
100
0
$3,029
$3,003
$2,624
2017
2018
2019
Return on Invested Capital*
20.7%
19.9%
16.2%
25
20
15
10
5
0
14.4%
13.5%
13.4%
12.4%
12.4%
12.9%
$317
$287
$293
$295
$248
$253
350
300
250
200
150
100
50
0
2017
2018
2019
2017
2018
2019
Earnings Per Common Share*
GAAP
non-GAAP
Average Operating Working
Capital Ratio*
$4.82
$4.68
$4.70
$4.37
$3.71
$3.79
15.9%
16.5%
16.8%
20
15
10
5
0
15
12
9
6
3
0
5
4
3
2
1
0
2017
2018
2019
2017
2018
2019
2017
2018
2019
Cash Flow From Operations
Cash Conversion Ratio*
$335
$329
$403
108%
113%
81%
120
100
80
60
40
20
0
Annual Cash Dividend
per Common Share
$1.88
$1.40
$1.56
2.0
1.5
1.0
0.5
0.0
2017
2018
2019
2017
2018
2019
2017
2018
2019
*Please see Appendix A for definitions and reconciliation of non-GAAP results to the most comparable GAAP results.
SUSTAINABILITY HIGHLIGHTS
SAFETY
75% DART Reduction ( 2019 vs. 2011 )
2020 GOAL: 75% REDUCTION
WATER USAGE
24% Reduction ( 2019 vs. 2011 )
Please visit
https://sustainability.
lincolnelectric.com
to learn more about our
sustainability programs
and performance.
GHG EMISSIONS
3026% Reduction ( 2019 vs. 2011 )
2020 GOAL: 15% REDUCTION
RECYCLING
74% in 2019
2020 GOAL: 70%
ENERGY INTENSITY
32% Reduction ( 2019 vs. 2011 )
2020 GOAL: 30% REDUCTION
LANDFILL AVOIDANCE
95% in 2019
““World’s Most Ethical Companies” and “Ethisphere” names and marks are registered trademarks of Ethisphere LLC.
The CEO Action for Diversity & Inclusion™ is the largest CEO-driven business commitment to advance diversity and inclusion within the U.S. workplace.
M E N U
0 1
“ We’re operating by a
higher standard to BUILD
A BETTER WORLD.”
—Chris Mapes, Chairman, President & CEO
DEAR SHAREHOLDERS,
I am proud to celebrate Lincoln Electric’s 125th anniversary
as the leader in the arc welding and cutting industry. We
achieved this notable milestone through an unwavering
commitment to integrity, innovation and excellence, which
distinguishes our exceptional employees and our brand. Our
customers, shareholders and partners have been instrumental
in our success, and together, we share a common purpose of
operating by a higher standard to build a better world. On
behalf of the Board of Directors and the Executive Team, we
thank all of our stakeholders for their tremendous support.
We built our business on a returns-driven value proposition. Our focus
has always been to align the interests of our stakeholders to maximize their
individual returns. We do this by driving a balanced business model that
advances innovation, encourages employee engagement, and seeks to
achieve operational excellence, financial discipline and superior returns
over the long-term. This approach has been foundational to Lincoln Electric’s
competitiveness for 125-years.
In 2019, we made significant progress against our strategic initiatives and
operational priorities. We held sales relatively steady year-over-year despite
slowing industrial demand in key regions and end markets. We successfully
mitigated the unfavorable impact of lower volumes with acquisitions, a
strong pipeline of new product launches, diligent cost management, and
operational initiatives. We achieved relatively steady adjusted operating
income margin performance in our core business (excluding acquisitions),
record cash flow from operations, over 100 percent cash conversion, top
decile average operating working capital performance, and top quartile
returns on invested capital versus our proxy peers. In addition, we returned
$411 million to our shareholders through share repurchases and a higher
dividend payout rate. Our solid performance was achieved with improve-
ment across all of our safety and environmental metrics in 2019 and we con-
tinue to exceed three of our four 2020 safety and environmental goals.
| LINCOLN ELECTRIC : 2019 ANNUAL REPORT M E N U
“ Our culture has
been shaped by
integrity, ethics
and The Golden
Rule.”
0 2
We expanded our technologies and enhanced customer engagement to
deliver value to our customers. We launched over 40 new products in 2019
and are seeing strong pull through by customers, as reflected in a 100 basis
point increase in our equipment systems' Vitality Index1 to 53 percent. In
addition, we invested in our global network of weld tech centers with a new
flagship facility in Germany, as well as new sites and upgrades in Thailand,
Dubai, and Brazil. Our network of 38 weld tech centers allow us to
demonstrate and train customers locally and collaborate on customized
solutions for their unique applications. Additionally, we launched our new
additive solutions platform in 2019 and are actively working with aerospace,
automotive and industrial customers to test the viability of this new technology
in their manufacturing processes. To deliver customers with a “file-to-finished
part” solution, we acquired Baker Industries to provide downstream machining
capabilities of our 3D-printed parts and also expanded our capacity of
large-scale metal additive cells in Cleveland. While still in its early stages,
we are excited about the long-term growth opportunity that this new
technology offers.
In 2019, we rolled out our new “Higher Standard 2025 Strategy” (HS2025)
globally and departments aligned their key initiatives to HS2025 priorities on
“journey maps” centered on: serving customers, employee development,
valued solutions, and operational excellence. HS2025 seeks to build upon the
successes of our prior strategy by amplifying customer-focused initiatives
and employee engagement to help recruit and retain the next generation of
diverse Lincoln contributors and leaders. HS2025 also establishes new,
long-term safety and environmental goals for the organization to advance
responsible growth.
In 2020, our HS2025 priorities focus on:
• Investing in growth to ensure Lincoln is well-positioned as end markets
recover;
• Investing in new technologies and processes to enhance customers’
experience with us;
• Further engaging employees through enhanced connectivity and professional
development programs;
• Delivering substantial cost savings from further rationalization in our
international platform and cost reduction activities in Americas Welding;
• Achieving our safety and environmental goals; and
• Returning excess capital to shareholders.
I am confident that Lincoln Electric’s best days are ahead. By living our values,
staying true to our guiding principle and purpose, our industry-leading team,
strong product portfolio, and solid balance sheet will continue to bolster our
competitiveness and help us build a better world. All of us at Lincoln Electric
are thankful for your continued investment and support.
Chris Mapes
Chairman, President & CEO
1 Vitality Index represents the percentage of 2019 sales from new products launched in the last five
years. Excludes International Welding and customized automation sales.
| LINCOLN ELECTRIC : 2019 ANNUAL REPORT M E N U
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NOTICE OF ANNUAL MEETING
ANNUAL MEETING
OF SHAREHOLDERS
ITEMS TO BE VOTED ON
RECOMMENDATION
PROPOSAL 1
To elect eleven Director nominees
named in this Proxy Statement to hold
office until the 2021 Annual Meeting
✔ FOR all
Director nominees
PAGE 18
PROPOSAL 2
To ratify the appointment of Ernst & Young
LLP as Lincoln Electric’s independent
registered public accounting firm for the
year ending December 31, 2020
PROPOSAL 3
To approve, on an advisory basis, the
compensation of our named executive
officers (NEOs) for 2019
✔ FOR this proposal
PAGE 78
✔ FOR this proposal
PAGE 80
By Order of the Board of Directors,
Christopher L. Mapes
Chairman, President and
Chief Executive Officer
Jennifer I. Ansberry
Executive Vice President,
General Counsel and Secretary
WE WILL BEGIN MAILING THIS PROXY STATEMENT ON OR
ABOUT MARCH 20, 2020.
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held on April 22, 2020:
This Proxy Statement and the related form of proxy, along with our
2019 Annual Report on Form 10-K, are available free of charge at
www.lincolnelectric.com/proxymaterials.
DATE & TIME
WEDNESDAY, APRIL 22, 2020
11:00 am ET
PLACE
Online at www.virtualshareholdermeeting.com/
LECO2020
ACCESS
Visit www.virtualshareholdermeeting.com/
LECO2020 to access the Annual Meeting. You
must have your 16-digit control number that is
printed on your proxy card.
PARTICIPATION
Submit pre-meeting questions online by visiting
www.proxyvote.com before Monday April 20,
2020 at 5:00 pm ET.
RECORD DATE
Shareholders of record on the close of
business on February 28, 2020 are entitled
to vote at the 2020 Annual Meeting.
HOW TO CAST YOUR VOTE
Your vote is important! Please vote your
shares promptly in one of the following ways:
BY INTERNET
Visit www.proxyvote.com until
April 21, 2020
BY PHONE
Call 1-800-690-6903 by
April 21, 2020
BY MAIL
Sign, date and return your
proxy card or voting
instruction form, which must
be received by April 21, 2020
DURING MEETING
Vote online on April 22, 2020
during the Annual Meeting at
www.virtualshareholdermeeting.com/LECO2020
0 6
BUSINESS OVERVIEW
M E N U
FAST
FACTS
FOUNDED
1895
COUNTRY
FOOTPRINT/
DISTRIBUTION
18/160+
BROADEST
SOLUTIONS
PORTFOLIO
GLOBALLY
EMPLOYEES
WORLDWIDE
11,000
NASDAQ STOCK
SYMBOL
LECO
MANUFACTURING
FACILITIES
59
CORPORATE
HEADQUARTERS
CLEVELAND, OH
2019 REVENUE
$3.0B
LARGEST GLOBAL
NETWORK OF
WELD TECH
CENTERS
38
NEW PRODUCT
VITALITY INDEX1
34%
LARGEST
COMMERCIAL &
TECHNICAL TEAM
(1)
Vitality index represents the percentage of 2019 sales from new products
launched in the last five years. Excludes the International Welding
segment and customized automation sales.
OUR GLOBAL FOOTPRINT
Lincoln Electric is the world leader in the design,
development and manufacture of arc welding products,
automated joining, assembly and cutting systems, plasma
and oxyfuel cutting equipment, and has a leading global
position in brazing and soldering alloys. Headquartered in
Cleveland, Ohio, U.S., we operate 59 manufacturing
locations in 18 countries and distribute to over 160
countries. In 2019, we generated $3.0 billion in sales. As an
innovation leader with the broadest portfolio of solutions and
the industry’s largest team of technical sales representatives
and application experts, we are known as the Welding
Experts®. Our portfolio of welding and cutting solutions is
designed to help customers achieve greater productivity and
quality in their manufacturing and fabrication processes. We
leverage our global presence and broad distribution network
to serve an array of customers across various end markets
including: general metal fabrication, energy, structural
steel construction and infrastructure (commercial buildings
and bridges), heavy industries (agricultural, mining,
construction and rail equipment, as well as shipbuilding),
and automotive/transportation.
LOCATIONS
Global Headquarters
Cleveland, Ohio USA
Manufacturing
Tech Center
Sales Of f ices
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
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For 125 years, we have achieved success through innovation and
by aligning our stakeholders by providing:
• Customers with a market leading product offering and superior
technical application capability
• Employees with an incentive and results driven culture, and
• Shareholders with above market returns.
Our ten year “2020 Vision and Strategy” has focused on
expanding our position as a valued, technical solutions-provider in
our industry by accelerating innovation, operational excellence,
and achieving best-in-class financial results through an economic
cycle. The strategy is founded on our values and our six core
capabilities and competitive advantages to drive growth and
improve margin and return performance. Our six core capabilities
are: welding process expertise, commercial excellence, product
development, global network and reach, operational excellence
and financial discipline.
In executing our “2020 Vision and
Strategy,” we have pursued an
aggressive acquisition strategy,
accelerated our investments in R&D
to enhance the value proposition and
positioning of our solutions, and have
emphasized engineered solutions for
mission-critical applications. Additionally, we have focused on
expanding our brand’s geographic and channel reach into attractive
areas such as automation. Our efforts have largely been successful.
Contributions from acquisitions, a strong vitality index of new
products, and expanded market presence have helped improve
margin performance and returns. Our focus on operational
excellence, safety and sustainability initiatives have helped
structurally improve our operations and have contributed to
improved margins, cash flow generation and returns. We are well
positioned for improved long-term operating performance of the
business through the economic cycle.
Our financial performance against our “2020 Vision & Strategy” goals reflects progress across most metrics during the strategic
plan period:
Key Financial Metrics
2020 Goal
2009–2019 Achievement1
Key Initiatives and Focus
Sales Growth CAGR
10% CAGR
Operating Income Margin
15% Average
6% Reported Sales CAGR
// 7% Sales CAGR
excluding FX and
Venezuela results
12.1% Average Reported
12.9% Average Adjusted
(Achieved a 5-year
average 13.7% adjusted
margin)
Return on Invested
Capital (ROIC)
15% Average
17.3% Average
• Increase R&D investments to raise our new
product vitality index
• Active acquisition program
• Target attractive growth opportunities
• Richen the portfolio mix through differentiated
technologies and applications
• Operational excellence
• Disciplined acquisition program with stringent
ROIC and IRR goals
• Margin expansion
• Cash management
Average Operating
Working Capital Ratio
15% at 2020
16.8% at 2019
(640 bps improvement vs.
2009)
• Effective cash cycle management
• Inventory management
(1) See Appendix A for definitions and/or reconciliations of these metrics to results reported in accordance with generally accepted accounting principles
(GAAP).
M E N U
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In 2019, the Company introduced its new long-term strategy, the “Higher Standard 2025 Strategy”
(HS2025). HS2025 builds upon the financial and sustainability achievements from our “2020 Vision
and Strategy” to ensure Lincoln Electric continues to deliver superior value to its stakeholders. The
growth strategy leverages an active acquisition program and organic growth across our global
footprint emphasizing differentiated, value-added solutions and technologies. The strategy continues
to focus on achieving best-in-class financial and sustainability performance, as well as amplifying
employee engagement. HS2025 leverages local and regionally-led investments and initiatives to
advance four key areas in the Company, which will generate superior long-term value:
Customer Focused: Enhance our
value proposition and the ease
Employee Development: Improve
opportunities for our employees
Solutions & Value: Develop
solutions that improve customers’
Operational Excellence: Improve our
quality, costs and processes by
of doing business with us by
to learn and grow through new
ability to make their products
maximizing continuous
leveraging our leading CRM
development programs,
better, safer and easier. Key
improvement through our
system and investments in
resource groups, engagement
initiatives include accelerated
Lincoln Business System,
industry-segment market-facing
initiatives, and enhanced HR
growth in automated solutions
further digitization of our
teams, product portfolios and
systems and tools.
and additive services, enhanced
operations and processes, and
weld tech centers.
software (IoT and AI), and
achievement of our
designing greater efficiency and
sustainability goals.
sustainability into new products.
The Higher Standard 2025 Strategy continues to emphasize performance against the following key financial metrics, which align with
substantially all of the Company’s key short-term and long-term compensation metrics.
HS2025 STRATEGIC PRIORITIES
SHORT-TERM COMPENSATION
METRICS
LONG-TERM COMPENSATION
METRICS
Sales Growth
(organic & inorganic)
Operating income margin
expansion
Average Operating
Working Capital Ratio
Return on Invested
Capital (ROIC)
X
X
X
X
X
(Individual Performance Goals or
Business Unit Performance Goals
May include Sales Growth)
X1
(Representative of EBITB)
X1
X1
(1) Performance measures used in the design of the executive compensation program are defined in Appendix A
THE HIGHER STANDARD 2025 STRATEGY SUSTAINABILITY GOALS
The Higher Standard 2025 Strategy also incorporates new long-term 2025 safety and environmental goals as follows (goals reflect
targeted 2025 performance versus our 2018 baseline):
SAFETY
Reduce Total Recordable
Case Rates (TRCR) 52%
(10% YoY)
GREENHOUSE GAS
(GHG) EMISSIONS
Reduce Absolute GHG
emissions 10% (1.5% YoY)*
ENERGY
INTENSITY
Reduce intensity
16% (2.5% YoY)
RECYCLING &
LANDFILL AVOIDANCE
Increase recycling of all waste
to 80% and divert 97% of eli-
gible waste from landfills
WATER USE
Reduce absolute water
use 14% (2.1% YoY)
* Our GHG target is aligned with methodology 2 for science based targets and exceeds the annual threshold rate.
In addition, we focus on product stewardship to advance energy efficiency in our customers’ welding operations. We measure energy
efficiency improvements achieved in our welding equipment as we transition our equipment portfolio from a transformer-based platform to
a more efficient digital, inverter-based system.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
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PROXY SUMMARY
This section provides an overview of important items related to this Proxy Statement and the 2020 Annual Meeting.
We encourage you to read the entire Proxy Statement for more information before voting.
2019 PERFORMANCE HIGHLIGHTS
We achieved solid returns, record cash flow generation, and 113% cash conversion in 2019, despite slowing industrial sector demand and
weaker customer capital spending. Sales decreased approximately 1% to $3.0 billion primarily due to 3.5% lower organic sales, which were
partially offset by a 4.3% benefit to sales from acquisitions. We held both operating income margin and adjusted operating income margin
relatively steady by substantially mitigating the unfavorable impact of lower volumes on profitability with new products, price management,
disciplined expense controls and operational initiatives. Our focus on operational excellence was reflected in our ability to exceed three of
four of our long-term 2020 safety and environmental goals. These results demonstrate the continued structural improvements achieved in
the business through our “2020 Vision and Strategy” and how the organization continues to advance towards best-in-class performance.
CASH FLOW FROM
AVERAGE OPERATING WORKING CAPITAL TO
OPERATIONS
NET SALES RATIO
RETURN ON INVESTED CAPITAL
$403MRecord level
16.8%Top Decile vs. Peers
19.9%Top Quartile vs. Peers
OPERATING INCOME MARGIN
DILUTED EPS
Reported
Adjusted
Reported
Adjusted
12.4% 12.9%
flat vs. 2018
(50) bps vs. 2018
$4.68
7.1% vs. 2018
$4.70
(2.5%) vs. 2018
See Appendix A for definitions and/or reconciliation of these metrics to results reported in accordance with GAAP. Performance measures used in the design of the
executive compensation program are presented within the Compensation Discussion and Analysis section.
We continue to focus on generating long-term value for our shareholders. In 2019, we returned $411 million to shareholders through our
dividend program and share repurchases. Our financial performance and balanced approach to capital allocation resulted in a continued
trend of strong total shareholder returns as detailed below.
$411M
RETURNED TO SHAREHOLDERS
IN 2019
=
$293M
IN SHARE REPURCHASES
+
$118M
IN DIVIDENDS
TOTAL SHAREHOLDER RETURN
+33.6% +54.5%
3-Year
5-Year
1 0
CORPORATE GOVERNANCE HIGHLIGHTS
Lincoln Electric has a solid track record of integrity and corporate governance practices that promote thoughtful management by its
officers and Board of Directors, facilitating profitable growth while strategically balancing risk to maximize shareholder value. Below is a
summary of certain Board and governance information with respect to 2019:
M E N U
BOARD COMPOSITION AND PRACTICES
Size of Board
Number of independent Directors
Average age of Directors
11
10
63
Number of fully independent Board committees
Independent Directors meet without management
Director attendance at Board & committee meetings
4
✔
>75%
Percent diverse (among independent directors)
30%
Mandatory retirement age (75)
Board meetings held in 2019
New Directors in the last 5 years
Average tenure (years)
Annual election of Directors
Majority voting policy for Directors
Lead Independent Director
SHAREHOLDER PROTECTIONS
One share, One vote standard
Dual-class common stock or Poison pill
Cumulative voting
Vote standard for Code of Regulations amendment
Shareholder right to call a special meeting
Annual election of Directors
Majority voting policy for Directors
Lead Independent Director
Executive sessions without management present
5
3
Stock ownership guidelines for Directors
Annual Board and committee self-assessments
12.2
Code of Conduct and Ethics for Directors, officers & employees
✔
✔
✔
✔
✘
✘
67%
✔*
✔
✔
✔
✔
No overboarded Directors (per ISS or Glass Lewis)
Succession planning and implementation process
Strategy, environmental & risk management oversight
Corporate culture, diversity and inclusion oversight
COMPENSATION PRACTICES
Pay for Performance
Annual Say-on-Pay Advisory Vote
Compensation aligned with strategic goals and individual
performance
Incentive plans do not encourage excessive risk taking
No excessive perquisites
Robust stock ownership guidelines for NEOs
Clawback policy
Double-trigger change-in-control
Anti-hedging/pledging policy
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
* Special meetings can be called by shareholders holding not less than
CEO Pay Ratio
155:1
25% of the voting power
ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG) POLICIES
AND ENVIRONMENTAL GOALS
Board oversight of corporate culture, diversity and inclusion
Board oversight of ESG matters
Global Code of Conduct and Ethics
Human Rights Policy
No-Harassment Policy
Anti-Corruption Policy
Supplier Code of Conduct
Environmental, Health & Safety Policy
Long-term Safety and Environmental Goals
✔
✔
✔
✔
✔
✔
✔
✔
✔
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
1 1
DIRECTOR NOMINEES AND BOARD SUMMARY
PROPOSAL 1
Election of 11 Directors
to Serve until 2021
Annual Meeting
✔
➜
The Board recommends a vote FOR all Director Nominees.
Our Nominating and Corporate Governance Committee and our Board of Directors have
determined that each of the Director nominees possesses the right skills, qualifications and
experience to effectively oversee Lincoln Electric’s long-term business strategy.
See “Proposal 1 – Election of Directors” beginning on page 18 of this Proxy Statement.
You are being asked to vote on the election of eleven Director nominees. Selected biographical information of each Director nominee, as
well as committee membership and committee chair information is listed below. Additional information can be found in the Director biogra-
phies under Proposal 1.
DIRECTOR NOMINEES
Name
Curtis E. Espeland
(Lead Independent Director)
Executive Vice President,
Eastman Chemical Company
Patrick P. Goris
Senior Vice President and CFO,
Rockwell Automation, Inc.
Stephen G. Hanks
Retired President and CEO,
Washington Group International
Michael F. Hilton
Retired President and CEO,
Nordson Corporation
G. Russell Lincoln
President, N.A.S.T. Inc.
Kathryn Jo Lincoln
Chair and CIO,
Lincoln Institute of Land Policy
William E. MacDonald, III
Retired Vice Chairman,
National City Corporation
Christopher L. Mapes (Chairman)
President and CEO,
Lincoln Electric Holdings, Inc.
Phillip J. Mason
Retired President,
EMEA Sector of Ecolab, Inc.
Ben P. Patel
Senior Vice President and Chief
Technology Officer,
Cooper Tire & Rubber Company
Hellene S. Runtagh
Retired President and CEO,
Berwind Group
u Chair l Member
Director
Since
Age
Independent
Audit
Compensation
& Executive
Development
Nominating
& Corporate
Governance
Other Public
Company
Boards
Finance
l
l
u
l
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55
2012
48
2018
69
2006
65
2015
73
1989
65
1995
73
2007
58
2010
69
2013
52
2018
71
2001
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
l
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—
—
2
—
—
—
1
1
—
—
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COMPOSITION OF DIRECTOR NOMINEES
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DIVERSITY
TENURE
AGE
30%
Ethnic
and gender
diversity
among
independent
directors
0-5 years
6-9 years
10-14 years
15 years
or more
Under 50
50-59
60-69
70-75
(mandatory
retirement age)
Average tenure: 12.2 years
Average age: 63
SKILLS, EXPERIENCE AND BACKGROUND
Senior Leadership Management
Manufacturing Expertise
Other Public Company Board Service
Financial Acumen & Expertise
International Operations Excellence
M&A Experience
Innovation Experience
Sales/Marketing Experience
100%
73%
55%
100%
73%
91%
55%
73%
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
1 3
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM SUMMARY
PROPOSAL 2
Ratification of
Independent Registered
Public Accounting Firm
✔
➜
The Board recommends a vote FOR this proposal.
Our Board of Directors recommends that shareholders vote “FOR” the ratification of the
appointment Ernst & Young LLP as Lincoln Electric’s independent registered public
accounting firm for the year ending December 31, 2020.
See “Proposal 2 – Ratification of Independent Registered Public Accounting Firm” beginning
on page 78 of this Proxy Statement.
EXECUTIVE COMPENSATION PROGRAM HIGHLIGHTS
PROPOSAL 3
Approval, on an Advisory
Basis, of Named
Executive Officer
Compensation
✔
➜
The Board recommends a vote FOR this proposal.
Our Board of Directors recommends that shareholders vote “FOR” the approval, on an
advisory basis, of compensation of our named executive officers (NEOs) for 2019.
See “Proposal 3 – Approval, on an Advisory Basis, of Named Executive Officer
Compensation” beginning on page 80 of this Proxy Statement and “Compensation
Discussion and Analysis” beginning on page 37 of this Proxy Statement.
We have a long history of driving an incentive management culture, emphasizing pay for performance to align compensation with the
achievement of enterprise, segment and individual goals.
We believe our compensation program and practices provide an appropriate balance between profitability, cash flow and returns, on the
one hand, and suitable levels of risk-taking, on the other. This balance, in turn, aligns compensation strategies with shareholder interests,
as reflected by the consistently high level of shareholders voting for the compensation of our NEOs.
2019 NAMED EXECUTIVE OFFICERS
The Compensation Discussion and Analysis (CD&A) provides information regarding our executive compensation programs for the
following NEOs in 2019:
Christopher L. Mapes
Steven B. Hedlund
Chairman, President and Chief Executive
Officer
Executive Vice President, President,
International Welding
Vincent K. Petrella
Executive Vice President, Chief Financial
Officer and Treasurer
Jennifer I. Ansberry
Executive Vice President, General
Counsel and Secretary
George D. Blankenship
Executive Vice President, President,
Americas Welding
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
M E N U
1 4
ACTIONS TO FURTHER ALIGN EXECUTIVE COMPENSATION WITH SHAREHOLDER INTERESTS
The Compensation and Executive Development Committee of the Board reviews the framework of our executive compensation program to
ensure executive pay aligns with our pay for performance philosophy. Our Compensation and Executive Development Committee has made
a number of changes over the last few years to help ensure corporate performance aligns with shareholder interests, which has been
reflected in the high approval of our “say-on-pay” proposals on the compensation of our NEOs at the 2019 Annual Meeting. In 2019, our
Compensation and Executive Development Committee reviewed the overall design of our executive compensation program, particularly in
light of the transition to the Higher Standard 2025 Strategy. The overall design of our executive compensation program was held consistent
with policies developed in prior years.
2019 EXECUTIVE COMPENSATION PRACTICES
What We Do
What We Don’t Do
We have long-term compensation programs focused on
profitability, net income growth, ROIC and total
shareholder returns
✔ We do not allow hedging or pledging of our shares
We use targeted performance metrics to align pay with
performance
✔ We do not reprice stock options and do not issue
discounted stock options without shareholder approval
We maintain stock ownership guidelines (5x base salary for
CEO; 3x base salary for other NEOs)
We have shareholder-approved incentive plans
We have a broad clawback policy
We have a double-trigger change in control policy
✔ We do not provide excessive perquisites
✔
✔
✔
We do not have multi-year guarantees for compensation
increases
✘
✘
✘
✘
COMPENSATION FRAMEWORK & PHILOSOPHY
Our compensation program is designed to attract and retain exceptional employees. We also maintain a strong pay for performance culture.
As indicated below, we design our compensation system to reflect current best practices, including setting base pay below the competitive
market for each position, targeting incentive-based cash compensation above the competitive market and promoting quality corporate
governance in compensation decisions. We believe these practices result in sustained, long-term shareholder value and reflect our
philosophy that the pay for our best performers should align with the results of our long-term goals.
Percentile Rank
25th
45th
50th
65th
75th
100th
Base
Salary
LTI
Benefits
Target Total Cash
Compensation
(base + annual bonus)
Our executive compensation program consists of three primary elements of total direct compensation: base salary (fixed), short-term
incentive compensation (at-risk) in the form of an annual bonus (EMIP), and long-term incentive compensation (at-risk) in the form of stock
options, restricted stock units (RSUs) and performance shares.
• Base salary is the only component of total direct compensation that
• Long-term incentive compensation is based on our financial
is fixed
• Short-term incentive compensation is based on annual consolidated
and, if applicable, segment performance, and individual performance
performance over a three-year cycle
• Variable, “at risk,” pay is a significant percentage of total
compensation
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT AVERAGE MIX OF KEY COMPENSATION COMPONENTS AND KEY COMPENSATION METRICS
The following charts present the mix of 2019 target direct compensation for our Chief Executive Officer and all of our other NEOs. As
shown below, 85% of our CEO’s compensation value and, on average, 71% of all of our other NEOs’ compensation value was “at risk,”
with the actual amounts realized based on annual and long-term performance as well as our stock price.
M E N U
1 5
CEO Target Compensation Mix
All Other NEOs Target Compensation Mix
21%
15%
85%
At Risk
21%
22%
21%
15%
29%
15%
15%
26%
71%
At Risk
Base (fixed)
Annual Bonus (EMIP)
Stock Options
Restricted Stock Units
Performance Shares
Long-Term
We use the following six key financial performance measures to evaluate results across short-term and long-term periods.
Key Performance Metrics Tied to Executive Compensation
Metric
Short-Term
Compensation (Annual Bonus)
Long-Term Incentive Compensation
Program (3-yr Performance Cycle)
EBITB1,2 (Earnings before interest, taxes and bonus)
Average Operating Working Capital to Sales2 ratio
Consolidated, segment and individual performance
✔
✔
✔
Adjusted Net Income2 growth
Return on Invested Capital (ROIC)2
Total Shareholder Return (TSR)2
✔
✔
✔
(1) EBITB is an internal measure that tracks our adjusted operating income.
(2) Performance measures used in the design of the executive compensation program are defined in Appendix A.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 1 6
LINCOLN ELECTRIC HOLDINGS, INC.
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING
BUSINESS OVERVIEW
PROXY SUMMARY
PROPOSAL 1—ELECTION OF DIRECTORS
Director Nominees
Corporate Governance
Compensation-Related Risk
Related Party Transactions
Our Board Committees
Director Compensation
EXECUTIVE COMPENSATION
Compensation Discussion And Analysis
Compensation Committee Report
Executive Compensation Tables
Termination And Change In Control Arrangements
Pay Ratio
MANAGEMENT OWNERSHIP OF SHARES
Beneficial Ownership Table
Equity Compensation Plan Information
OTHER OWNERSHIP OF SHARES
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
ANNUAL MEETING PROPOSALS
Proposal 1—Election Of Directors
Proposal 2—Ratification Of Independent Registered Public Accounting Firm
Proposal 3—Approval, On An Advisory Basis, Of Named Executive Officer Compensation
AUDIT COMMITTEE REPORT
FAQS
APPENDIX A—DEFINITIONS AND NON-GAAP FINANCIAL MEASURES
5
6
9
18
19
25
29
29
30
32
36
37
59
60
69
73
74
74
75
76
77
78
78
78
80
83
84
88
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
1 7
Cautionary Note on Forward-Looking Statements: This Proxy Statement contains forward-looking statements regarding
Lincoln Electric’s strategy and current expectations within the applicable securities laws and regulations. These statements
reflect management’s current expectations and involve a number of risks and uncertainties. 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. The factors include, but are not limited to:
general economic and market conditions; the effectiveness of operating initiatives; completion of planned divestitures;
interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency
exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s
rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market
risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of
changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events
beyond our control, such as political unrest, acts of terror, natural disasters and pandemics (such as COVID-19/coronavirus),
on the Company or its customers, suppliers and the economy in general. For additional discussion, see “Item 1A. Risk
Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019. These forward-looking statements
speak only as of the date on which such statements were made, and we undertake no obligation to update these statements
except as required by federal securities law.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 1 8
M E N U
PROPOSAL 1—ELECTION OF
DIRECTORS
DIRECTOR NOMINEES
Curtis E. Espeland
Patrick P. Goris
Stephen G. Hanks
Michael F. Hilton
G. Russell Lincoln
Kathryn Jo Lincoln
Phillip J. Mason
Ben P. Patel
William E. MacDonald, III
Hellene S. Runtagh
Christopher L. Mapes
All of the Director nominees have been previously elected by our shareholders.
Each of the nominees has agreed to stand for re-election. The biographies of all of our Director nominees can be found
later in this section.
If any Director nominee is unable to stand for election, the Board may provide for a lesser number of nominees or designate
a substitute. In the latter event, shares represented by proxies solicited by the Directors may be voted for the substitute. We
have no reason to believe that any of the nominees will be unable to stand for election.
MAJORITY VOTING POLICY
The Director nominees receiving the greatest number of votes will be elected (plurality standard). However, our majority vot-
ing policy states that any Director who fails to receive a majority of the votes cast in an uncontested director election in his/
her favor is required to submit his/her resignation to the Board. The Nominating and Corporate Governance Committee of
the Board would then consider each resignation and determine whether to accept or reject it, with full Board approval of
such decision. Abstentions and broker non-votes will have no effect on the election of a Director and are not counted under
our majority voting policy. Holders of common stock do not have cumulative voting rights with respect to the election of a
Director.
YOUR BOARD RECOMMENDS A VOTE FOR EACH DIRECTOR NOMINEE LISTED ABOVE
ANNUAL MEETING ATTENDANCE; NO SPECIAL ARRANGEMENTS
Directors are expected to attend each annual meeting. The Director nominees plan to attend this year’s Annual Meeting. At
the 2019 Annual Meeting, all of our then-current Directors were in attendance, except for Mr. Goris, who was unable to
attend in person.
None of the Director nominees has any special arrangement or understanding with any other person pursuant to which the
Director nominee was or is to be selected as a Director or nominee. There are no family relationships, as defined by
Securities and Exchange Commission (SEC) rules, among any of our Directors or executive officers. SEC rules define the
term “family relationship” to mean any relationship by blood, marriage or adoption, not more remote than first cousin.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
1 9
DIRECTOR NOMINEES
CURTIS E. ESPELAND
Director since 2012
Lead Independent Director
since 2018
COMMITTEES:
Audit
Finance
AGE: 55
OTHER PUBLIC COMPANY
DIRECTORSHIPS: None
PATRICK P. GORIS
Director since 2018
COMMITTEES:
Audit
Nominating and Corporate
Governance
AGE: 48
OTHER PUBLIC COMPANY
DIRECTORSHIPS: None
Experience
Experience
Mr. Espeland has served as the Executive Vice President of
Mr. Goris has served as the Senior Vice President and Chief
Eastman Chemical Company, an advanced materials and
Financial Officer of Rockwell Automation, a global industrial
specialty additives manufacturer, since February 2020. He
automation and information solutions provider, since February
also served as Executive Vice President and Chief Financial
2017. He also served as Vice President, Investor Relations
Officer from January 2014 to February 2020, Senior Vice
and Vice President, Finance, Architecture and Software from
President and Chief Financial Officer from 2008 to January
2015 to 2017 and Vice President, Finance, Architecture and
2014 and Vice President, Finance and Chief Accounting
Software and Operations and Engineering Services from 2013
Officer from 2005 to 2008 at Eastman Chemical Company.
to 2015 at Rockwell Automation.
Reasons for Nomination
Reasons for Nomination
• Extensive experience in corporate finance and accounting,
• Relevant global financial expertise from serving in various
having served in various finance and accounting roles, and
finance roles, and ultimately as the Chief Financial Officer, of
ultimately as the Chief Financial Officer, at a large publicly-
a publicly-traded, multinational organization.
traded company.
• Extensive experience in accounting, financial planning and
• Significant experience in the areas of strategy, mergers and
analysis, investor relations and mergers and acquisitions.
acquisitions, taxation and enterprise risk management.
• Experience with a global industrial automation and
• International auditing experience having served as an
information solutions company provides Mr. Goris with broad
independent auditor at Arthur Andersen LLP, working in both
exposure to digital operations and “smart” manufacturing
the United States and abroad (Europe and Australia).
solutions using data and analytics, which enhances
• The Board has determined that Mr. Espeland’s extensive
accounting and financial experience qualifies him as an
“audit committee financial expert.”
• Valuable insight into advancing the business priorities of
Lincoln Electric’s international operations gained from his
international business experience.
• Valuable knowledge of key governance matters gained as
a director of Lincoln Electric.
operational intelligence, productivity and risk management in
manufacturing processes. These are key initiatives for our
business and our customers’ businesses.
• The Board has determined that Mr. Goris’ extensive
accounting and financial experience qualifies him as an
“audit committee financial expert.”
• Valuable knowledge of key governance matters gained as a
director of Lincoln Electric.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
2 0
STEPHEN G. HANKS
Director since 2006
COMMITTEES:
Audit (Chair)
Finance
AGE: 69
OTHER PUBLIC COMPANY
DIRECTORSHIPS: None
MICHAEL F. HILTON
Director since 2015
COMMITTEES:
Compensation and Executive
Development
Nominating and Corporate
Governance
AGE: 65
OTHER PUBLIC COMPANY
DIRECTORSHIPS:
Ryder Systems, Inc. (NYSE: R)
since 2012
Regal Beloit Corporation
(NYSE: RBC) since December
2019
Experience
Experience
Mr. Hanks spent 30 years with global engineering and
Mr. Hilton recently retired as the President and Chief Executive
construction company Morrison Knudsen Corporation and its
Officer of Nordson Corporation (Nasdaq: NDSN), a company
successor, Washington Group International, Inc., serving the
that engineers, manufactures and markets differentiated
last eight years as President, Chief Executive Officer and a
products and systems used for precision dispensing of
member of its Board of Directors, retiring in January 2008. Mr.
adhesives, coatings, sealants, biomaterials, polymers, plastics
Hanks also formerly served as Washington Group’s Executive
and other materials, fluid management, test inspection, UV
Vice President, Chief Legal Officer and Secretary. In addition,
curing and plasma surface treatment, a position he held since
Mr. Hanks has extensive board experience, previously serving
2010. During his tenure at Nordson Corporation, Mr. Hilton
as a director of McDermott International, Inc. (NYSE: MDR)
also served as a director. Prior to joining Nordson, Mr. Hilton
from 2009 to May 2018 and Babcock & Wilcox Enterprises,
was Senior Vice President and General Manager for Air
Inc. (NYSE: BW) from 2010 to March 2018.
Products and Chemicals, Inc., a global company that provides
Reasons for Nomination
• Executive leadership experience, both as CEO and CFO, of
a U.S., publicly-traded company with international reach.
• Diverse professional skill set, including finance (having
served as CFO of Morrison Knudsen) and legal and
governance competencies (such as enterprise risk
management, corporate compliance and legal strategy).
• The Board has determined that Mr. Hanks’ experience as a
CEO and CFO of a publicly-traded company qualifies him as
an “audit committee financial expert.”
a unique portfolio of atmospheric gases, process and specialty
gases, performance materials, and equipment and services,
with specific responsibility for leading its $2 billion global
Electronics and Performance Materials segment.
Reasons for Nomination
• With over 30 years of global manufacturing experience, Mr.
Hilton brings to the Board an intimate understanding of
management leadership.
• Extensive experience with strategy development and day-to-
day operations of a multi-national company, including product
line management, new product technology, talent
• Valuable knowledge of key governance matters gained as a
development, manufacturing, distribution and other sales
director of Lincoln Electric and several other publicly-traded
channels, business processes, international operations and
companies.
global markets expertise.
• Valuable knowledge of key governance matters gained as a
director of Lincoln Electric and several other publicly-traded
companies.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
2 1
G. RUSSELL LINCOLN
Director since 1989
COMMITTEES:
Audit
Finance
AGE: 73
OTHER PUBLIC COMPANY
DIRECTORSHIPS: None
K ATHRYN JO LINCOLN
Director since 1995
COMMITTEES:
Compensation and Executive
Development
Nominating and Corporate
Governance (Chair)
AGE: 65
OTHER PUBLIC COMPANY
DIRECTORSHIPS: None
Experience
Experience
Mr. Lincoln has served as the president of N.A.S.T. Inc., a
Ms. Lincoln has served as the Board Chair and Chief
personal investment firm, since 1996. Prior to joining N.A.S.T.
Investment Officer of the Lincoln Institute of Land Policy, an
Inc., Mr. Lincoln served as the Chairman and Chief Executive
independent, global foundation focused on addressing
Officer of Algan, Inc.
Reasons for Nomination
• As an entrepreneurial businessman with executive leadership
and investment experience, including 25 years running a $50
million business, Mr. Lincoln understands business risk and
the importance of hands on management.
significant policy issues through innovation land use and
taxation methods, since 1996. As Chief Investment Officer,
Ms. Lincoln manages and directs all aspects of the Institute’s
endowment, including strategic asset allocation and policy
development, which have contributed to its current $600
million asset base. In her role as Chair, she plays a crucial role
in the strategic direction and planning of the Institute, with
• Experience as a board member of various organizations,
ongoing involvement in the development of education
including as a board member of the Cleveland Museum of
programs, demonstration projects and impact measurement.
Natural History.
• As the grandson of James F. Lincoln and as a long-term
trustee, Mr. Lincoln provides the Board with his historic
perspective on the Company’s unique culture and its
incentive management system.
• Valuable knowledge of key governance matters gained as a
director of Lincoln Electric.
Ms. Lincoln is a member of the Board of HonorHealth
Network, and Claremont Lincoln University, and formerly
served as a director of Johnson Bank Arizona, N.A. She is
also the Co-Chair of the International Center for Land Policy
Studies and Training in Taiwan.
Reasons for Nomination
• Extensive leadership experience, addressing strategic
planning, asset allocation matters and corporate governance.
• As a Lincoln family member and long-standing Director of
Lincoln Electric, Ms. Lincoln has a keen sense of knowledge
about Lincoln Electric, its culture and the founding principles.
• Broad experience and commitment to board and corporate
governance excellence, named as a Board Leadership
Fellow of the National Association of Corporate Directors.
• Valuable knowledge of key governance matters gained
through her various directorships, including as a director of
Lincoln Electric.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
2 2
WILLIAM E. MACDONALD, III
Director since 2007
COMMITTEES:
Compensation and Executive
Development (Chair)
Finance
AGE: 73
OTHER PUBLIC COMPANY
DIRECTORSHIPS: None
CHRISTOPHER L. MAPES
Director since 2010
Chairman since 2013
COMMITTEES:
None
AGE: 58
OTHER PUBLIC COMPANY
DIRECTORSHIPS:
The Timken Company
(NYSE: TKR) since 2014
Experience
Experience
Mr. MacDonald is the former Vice Chairman of National City
Mr. Mapes is the Chairman, President and Chief Executive
Corporation, a diversified financial holding company, a position
Officer of Lincoln Electric. Mr. Mapes has served as President
he held from 2001 until his retirement in 2006, where he was
and Chief Executive Officer since December 2012. In
responsible for its seven-state regional and national corporate
December 2013, Mr. Mapes was appointed as Chairman of the
banking businesses, the Risk Management and Credit
Board in addition to his other responsibilities. From September
Administration unit, Capital Markets and the Private Client
2011 to December 2012, Mr. Mapes served as the Chief
Group. Mr. MacDonald joined National City in 1968 and,
Operating Officer of Lincoln Electric. From 2004 to August
during his tenure, held a number of key management
2011, Mr. Mapes served as an Executive Vice President of
positions, including Senior Executive Vice President of
A.O. Smith Corporation, a global manufacturer with a water
National City Corporation and President and Chief Executive
heating and water treatment technologies business, which has
Officer of National City’s Ohio bank.
residential, commercial, industrial and consumer applications,
Reasons for Nomination
• Extensive experience leading a large corporate organization
with over 35,000 employees and structuring complex
financing solutions for large and middle-market businesses.
• Experience addressing human resources and development
challenges facing a publicly-traded company.
• Valuable knowledge of key governance matters gained as a
director of Lincoln Electric and several other publicly-traded
and the President of its former Electrical Products unit.
Mr. Mapes started his career with General Motors and has
held roles in industrial manufacturing for over 35 years.
Reasons for Nomination
• Extensive leadership experience in large, global publicly-
traded companies engaged in manufacturing operations.
• Keen understanding of the manufacturing industry and
challenges organizations face growing globally.
companies.
• In addition to business management experience, Mr. Mapes
has an MBA and a law degree.
• Valuable knowledge of key governance matters gained as a
director of Lincoln Electric.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
2 3
PHILLIP J. MASON
Director since 2013
COMMITTEES:
Compensation and Executive
Development
Finance (Chair)
AGE: 69
OTHER PUBLIC COMPANY
DIRECTORSHIPS:
GCP Applied Technologies
(NYSE: GCP) since 2016
BEN P. PATEL
Director since 2018
COMMITTEES:
Audit
Nominating and Corporate
Governance
AGE: 52
OTHER PUBLIC COMPANY
DIRECTORSHIPS: None
Experience
Experience
Mr. Mason is the former President of the Europe, Middle East
Mr. Patel has served as Senior Vice President, Chief
& Africa Sector (EMEA Sector) of Ecolab, Inc., a leading
Technology Officer of Cooper Tire & Rubber Company, a
provider of food safety, public health and infection prevention
global manufacturer of specialized passenger car, light truck,
products and services, a position he held from 2010 until his
medium truck, motorcycle and racing tires since November
retirement in 2012. Prior to leading Ecolab’s EMEA Sector, Mr.
2019. He previously served as Senior Vice President and
Mason had responsibility for Ecolab’s Asia Pacific and Latin
Chief Technology Officer of Tenneco, Inc., a manufacturer of
America businesses as President of Ecolab’s International
automotive emission control and ride control products and
Sector from 2005 to 2010 and as Senior Vice President,
systems. During his 8-year tenure at Tenneco, beginning in
Strategic Planning in 2004.
Reasons for Nomination
• Executive leadership experience in an international business
unit for a U.S. publicly-traded company, providing Mr. Mason
extensive international business expertise, business-to-
business and industrial sector experience.
• Extensive international business experience, starting,
developing and growing businesses abroad, in both mature
and emerging markets, having established businesses in
2011, he held roles leading regional advanced technology
development and establishing a global research and
development organization. Prior to joining Tenneco, Mr. Patel
held numerous positions with increasing responsibility,
including senior scientist, at the General Electric Company
during his thirteen-year tenure with the organization.
Reasons for Nomination
• Over 20 years of experience serving with publicly-traded,
global products and technology companies.
China, South Korea, Southeast Asia, Brazil, India, Russia,
• Broad expertise in material science, automation and “smart”
Africa and the Middle East.
systems, as well as extensive research and development
• Strong finance and strategic planning proficiency, including
experience.
merger and acquisition experience, along with significant
• Mr. Patel has been a leader in global innovation and research
experience working with and advising boards on diverse
initiatives, which lends tremendous support to our focus on
issues confronting companies with international operations.
being an innovation leader in our industry and our advanced
• Valuable knowledge of key governance matters gained as a
director of Lincoln Electric.
manufacturing growth strategy, which helps customers
identify value and efficiencies in their welding and cutting
operations.
• Valuable knowledge of key governance matters gained as a
director of Lincoln Electric.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
2 4
HELLENE S. RUNTAGH
Director since 2001
COMMITTEES:
Compensation and Executive
Development
Nominating and Corporate
Governance
AGE: 71
OTHER PUBLIC COMPANY
DIRECTORSHIPS: None
Experience
Ms. Runtagh is the former President and Chief Executive
Officer of the Berwind Group, a diversified pharmaceutical
services, industrial manufacturing and real estate company, a
position she held in 2001. From 1997 through 2001, Ms.
Runtagh was Executive Vice President of Universal Studios, a
media and entertainment company. Prior to joining Universal
Studios, Ms. Runtagh spent 27 years at General Electric
Company, a diversified industrial company, in a variety of
leadership positions. In addition, Ms. Runtagh has extensive
board experience, previously serving as a director of Harman
International Industries (NYSE: HAR) from 2008 to 2017,
NeuStar, Inc. (NYSE: NSR) from 2006 to 2017, and several
other publicly-traded companies.
Reasons for Nomination
• Over 30 years of experience in management positions with
technology focused global companies, with responsibilities in
management ranging from marketing and sales to finance,
as well as engineering and manufacturing.
• Diverse management experience, including growing
businesses while maintaining high corporate governance
standards.
• Extensive experience as a director of publicly-traded
companies.
• Valuable knowledge of key governance matters gained as a
director of Lincoln Electric and several other publicly-traded
companies.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
2 5
CORPORATE GOVERNANCE
GOVERNANCE FRAMEWORK
At Lincoln Electric, we are committed to effective corporate governance and high ethical standards. We adhere to our
ethical commitments in every aspect of our business, including our commitments to each other, in the marketplace and in
the global, governmental and political arenas. These commitments are spelled out in our Code of Corporate Conduct and
Ethics, which applies to all of our employees (including our principal executive and senior financial officers) and Directors.
We encourage you to visit our website at www.lincolnelectric.com, where you can find detailed information about our
corporate governance programs/policies including:
• Code of Corporate Conduct and Ethics
• Charters for our Board Committees
• Governance Guidelines
• Director Independence Standards
CORPORATE GOVERNANCE HIGHLIGHTS
BOARD OF DIRECTORS
BOARD ALIGNMENT WITH SHAREHOLDERS
• Our Board held five meetings in 2019
• Annual equity grants align interests of Directors
• During 2019, each of our Directors attended at
and officers with shareholders
least 75% of the total full Board meetings and
• Annual advisory approval of named executive
meetings of committees on which he or she served
officer compensation
• Size of Board—11
• No poison pill
• Plurality vote with director resignation policy for
• Stock ownership guidelines for Directors and officers
failures to receive a majority vote in uncontested
director elections
• Lead Independent Director
• All Directors are expected to attend the Annual
Meeting
BOARD COMPOSITION
COMPENSATION
• No employment agreements
• Executive compensation is tied to
performance—85% of CEO target pay and 71% of
all of our other NEO target pay is performance-
based (at risk)
• Number of independent Directors—10
• Anti-hedging and anti-pledging policies for
• Diverse Board including a complementary mix of
Directors and officers
backgrounds, experiences and expertise, as well as
• Recoupment/clawback policy
balanced mix of ages, tenure of service and gender
• Several current and former CEOs
• Global experience
• Audit Committee has multiple financial experts
BOARD PROCESSES
• Independent Directors meet without management
present
INTEGRITY AND COMPLIANCE
• Code of Conduct and Ethics for employees, officers
and Directors
• Environmental, health and safety guidelines and
goals, including long-term sustainability goals
• Annual compliance training relative to ethical
behavior
• Annual Board and Committee self-assessments
• Enterprise risk management program with Board
• Board orientation program
• Governance Guidelines approved by Board
• Board plays active role in risk oversight
• Full Board review of succession planning annually
oversight
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 2 6
M E N U
SHAREHOLDER ENGAGEMENT
Lincoln Electric is committed to engaging in constructive conversations with shareholders and nurturing long-term
relationships with the investment community. We maintain an active shareholder engagement program where executives
and management from various departments meet with shareholders regularly to discuss a variety of topics including
business performance, strategic initiatives, corporate governance practices, corporate sustainability initiatives, executive
compensation, and other matters of shareholder interest. In addition, director attendance at our annual meeting provides
shareholders an opportunity to communicate with Board members. The Board values an active investor relations program
as they believe that shareholder input strengthens their role as an informed and engaged fiduciary.
Our shareholder engagement program includes participation at investor conferences, holding meetings and tours at Lincoln
Electric, visiting investors at their offices, hosting tradeshow tours, being accessible to shareholder inquiries throughout the
year and communicating with transparency. In 2019, we implemented an investment community perception study and
sought participation from shareholders who represent over 41 percent of our outstanding shares, sellside analysts, and
nonshareholders. In addition, we reached out to investors representing over 44 percent of our outstanding shares to discuss
corporate governance and sustainability matters. We gained good insights on our practices and policies and received
positive feedback on the execution of our strategy, corporate governance, executive compensation, environmental, health
and safety practices, and our investor relations program.
CORPORATE SUSTAINABILITY MATTERS
The Board recognizes the importance of achieving our goals responsibly and the alignment of our key stakeholders drives
long-term value creation.
Our approach to sustainability began 125 years ago by our founders who established the Company under the guiding principle
of The Golden Rule: Treating others how you would like to be treated. Our culture, values and our commitment to diversity and
inclusion reflect The Golden Rule and guide our purpose of operating by a higher standard to build a better world.
Our governance structure for sustainability includes Board oversight with sustainability metrics incorporated into our CEO’s
annual goals. Our Executive Vice President and General Counsel oversees environmental, health and safety (EH&S)
initiatives and global reporting, and works closely with business unit leadership and local facilities to implement, monitor
and measure our results.
The following policies and business practices exemplify Lincoln Electric’s commitment to sustainability matters:
• Our guiding principle is The Golden Rule;
• Training and development programs to attract and retain
• Our Code of Conduct and Ethics;
• Our Supplier Code of Conduct;
• Health, safety and wellness initiatives for our employees,
customers and communities, including diversity councils
and various resource groups;
• Our Human Rights Policy;
• Equal employment opportunities, along with our pledge to
treat employees fairly, with dignity, and without
discrimination in any form;
high performing employees and help them reach their full
potential;
• Community engagement through employee-led
fundraisers, grants provided by The Lincoln Electric
Foundation, in-kind gifts, and an employee matching and
“Dollars for Doers” program to support volunteerism; and
• Positively impacting manufacturing and industry by
promoting the art and science of welding among
students and young professionals through our business
initiatives, partnerships with schools and associations,
• Focus on improving environmental performance,
and programming at the J.F. Lincoln Foundation.
including long-term safety and environmental goals and
reporting;
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
2 7
OUR BOARD OF DIRECTORS
Our Board oversees management in the long-term interest of Lincoln Electric and our shareholders. The Board’s major
responsibilities include:
• Overseeing the conduct of our business
• Establishing an appropriate governance structure,
• Reviewing and approving key financial objectives, strategic
including appropriate Board composition and succession
and operating plans and other significant actions
planning
• Evaluating CEO and senior management performance and
• Overseeing enterprise risk management
determining executive compensation
• Overseeing the ethics and compliance program
• Planning for CEO succession and monitoring
• Overseeing ESG and diversity matters
management’s succession planning for other key executives
HOW WE SELECT DIRECTOR NOMINEES
In evaluating Director candidates, including persons nominated by shareholders, the Nominating and Corporate
Governance Committee expects that any candidate must have these minimum qualifications:
• Demonstrates character, integrity and judgment
• Specialized experience and background that will add to the
• High-level managerial experience or experience dealing
depth and breadth of the Board
with complex business matters
• Independence as defined by the Nasdaq listing standards
• Ability to work effectively with others
(for non-employee Directors)
• Sufficient time to devote to the affairs of Lincoln Electric
• Financial literacy
BOARD DIVERSITY
To maintain Board diversity, the Nominating and Corporate Governance Committee is committed to include in each director
candidate search individuals that represent diversity of race and gender. The Nominating and Corporate Governance
committee also considers diversity of national origin, professional background and capabilities, knowledge of specific
industries, and geographic experience. Throughout 2019, the Nominating and Corporate Governance Committee reviewed
the skills, qualifications and experience of each Director nominee to ensure that each can effectively oversee Lincoln
Electric’s long-term business strategy.
Lincoln Electric is also committed to having Director candidates that can provide perspective on the industry challenges that
we face and our long-term commitment to a pay for performance culture. When recruiting new Director candidates, the
process typically involves a recognized search firm, the CEO and/or a member of the Nominating and Corporate
Governance Committee (usually, the Chair) contacting the prospective director to gauge his or her interest and availability.
The candidate will then meet with several members of the Board, including our Lead Independent Director. At the same
time, the search firm will contact references for the prospect. A background check is completed before a final
recommendation is made to the Board to appoint a candidate to the Board.
Shareholders may nominate one or more persons for election as Director of Lincoln Electric. The process for doing so is set
forth in the FAQs section of this Proxy Statement.
DIRECTOR INDEPENDENCE
Each of our non-employee Directors meets the independence standards set forth in the Nasdaq listing standards, which are
reflected in our Director Independence Standards. To be considered independent, the Nominating and Corporate
Governance Committee must affirmatively determine that the director has no material relationship with Lincoln Electric.
During 2019, the independent Directors met in regularly scheduled Executive Sessions in conjunction with each of the
Board meetings. The Lead Independent Director presided over these sessions.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 2 8
M E N U
BOARD LEADERSHIP
Our Chairman, President and CEO is responsible for planning, formulating and coordinating the development and execution
of our corporate strategy, policies, goals and objectives. He is accountable for Lincoln Electric’s performance and:
• reports directly to our Board, who reviews and approves
• establishes procedures to govern our Board’s work;
his annual performance objectives;
• oversees the execution of the financial and other decisions
• works closely with our management to develop our
of our Board;
strategic plan;
• makes available to all members of our Board opportunities
• works with our management on transactional matters by
to acquire sufficient knowledge and understanding of our
networking with strategic relationships;
business to enable them to make informed judgments;
• promotes and monitors the Board’s fulfillment of its
• presides over meetings of our shareholders; and
oversight and governance responsibilities;
• sets the agenda for, and presides over, Board meetings.
• encourages the Board to set and implement our goals and
strategies;
Mr. Mapes, our President and CEO, serves as Chairman in addition to his other responsibilities. Our Board believes having
one individual serve as Chairman and CEO is beneficial to us because the dual role enhances Mr. Mapes’ ability to provide
direction and insight on strategic initiatives impacting us and our shareholders. The Board also believes the dual role is
consistent with good corporate governance practices because it is complemented by a Lead Independent Director.
LEAD INDEPENDENT DIRECTOR
Our Lead Independent Director focuses on overseeing the
Board’s processes and prioritizing the right areas of focus.
Our Lead Independent Director is appointed each year by
the independent Directors and serves as a liaison between
the Chairman of the Board and the independent Directors.
Specifically, the Lead Independent Director has the following
duties, responsibilities, and expectations:
Mr. Curtis Espeland currently serves
as our Lead Independent Director, a
position he has held since the 2018
Annual Meeting. Mr. Espeland was
elected to our Board in February
2012. During his tenure on our
Board, he has established strong working relationships
with his fellow directors, and assisted with the onboarding
• Collaborates with the Chairman, the Secretary and senior
of our two most recently elected directors.
management on the format and adequacy of the
information that Directors receive and on the effectiveness
of the Board meeting process.
• Calls meetings of the independent Directors as he or she
• Acts independently of the Chairman to review and approve
sees fit, presiding over such meetings.
Board meeting agendas and schedules.
• Speaks on behalf of Lincoln Electric, as the Board
• Acts as a sounding board to the Chairman of the Board on
key aspects of the business, and assists in promoting
sound corporate governance practices.
determines necessary.
BOARD ROLE IN ENTERPRISE RISK MANAGEMENT
In the ordinary course of business, we face various strategic, operating and compliance risks. Our enterprise risk
management process seeks to identify and address risks to the organization. Our Board oversees the management of
these risks on an enterprise-wide basis, and the Lead Independent Director promotes our Board’s engagement in this
process. A fundamental part of the process is to understand the Company’s risks, and to provide oversight as to how
management is addressing these risks. The full Board reviews with management its process for enterprise risk
management. In addition, the Audit Committee is charged with overseeing the Company’s risk assessment and
management process each year, including ensuring that management has instituted processes to identify critical risks and
has developed plans to manage such risks.
The Company maintains a risk management review process where risk is assessed throughout our entire organization, and
is reported to a corporate risk committee comprised of members of our various business units and control functions. Each
year, the committee identifies critical risks to the organization and those that are determined to be “high priority” risks are
reported to the executive management committee and the Board. Thereafter, “high priority” risks are assigned, as
appropriate, to various Board Committees, or to the Board as a whole, for further review, analysis and development of
appropriate plans for management and mitigation.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
M E N U
2 9
BOARD ROLE IN STRATEGY OVERSIGHT
One of the Board’s key responsibilities is overseeing the Company’s strategic planning process, including reviewing the
steps taken to develop strategic plans and approving the final plans. In 2019, this included overseeing the implementation
and execution of the Higher Standard 2025 Strategy. Developing the Higher Standard 2025 Strategy involved a high level of
engagement between senior management and the Board. Our Board regularly discusses the key priorities of our Company,
taking into consideration global economic, consumer and other significant trends. The Company’s long-term strategic plan is
reviewed regularly with the Board, along with its annual operating plan, capital structure and sustainability performance.
COMPENSATION-RELATED RISK
We regularly assess risks related to our compensation and benefit programs, including our executive compensation
programs, and our Compensation and Executive Development Committee is actively involved in those assessments. In
addition, Willis Towers Watson, a compensation consultant engaged by management, has provided a risk assessment of
our executive compensation programs in the past. Although we have a long history of pay for performance and incentive-
based compensation, we believe our compensation programs contain many mitigating factors to ensure that our employees
are not encouraged to take unnecessary risks.
As a result of all these efforts, we do not believe the risks arising from our executive compensation policies and practices
are reasonably likely to have a material adverse effect on Lincoln Electric.
RELATED PARTY TRANSACTIONS
Any related party transactions concerning Lincoln Electric and any of its Directors, officers or other employees (or any of
their immediate family members) are to be disclosed to, reviewed by and approved by the Chief Compliance Officer and the
Audit Committee. We define “related party transactions” generally as transactions in which the self-interest of the employee,
officer or Director may be at odds or conflict with the interests of Lincoln Electric, such as doing business with entities that
are or may be controlled or significantly influenced by such persons or their immediate family members. We have adopted a
related party transaction policy which has been approved by our full Board.
In February 2020, the Audit Committee considered and approved a related party transaction involving P&R Specialty, Inc., a
supplier to Lincoln Electric. Greg D. Blankenship, the brother of George D. Blankenship, our Executive Vice President,
President, Americas Welding, is the sole stockholder and President of P&R Specialty, Inc. During 2019, we purchased
approximately $2.2 million worth of products from P&R Specialty in ordinary course of business transactions. George D.
Blankenship has no ownership interest in or any involvement with P&R Specialty. We believe that the transactions with P&R
Specialty were, and are, on terms no less favorable to us than those that could have been obtained from unaffiliated parties.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 3 0
M E N U
OUR BOARD COMMITTEES
We have separately designated standing Audit, Compensation and Executive Development, and Nominating and Corporate
Governance Committees established in accordance with applicable provisions of the Securities Exchange Act of 1934 (the
“Exchange Act”) and SEC and Nasdaq rules. The Board also has designated a standing Finance Committee.
Each committee has a charter, which details all of the committee’s roles and responsibilities. The following summaries set
forth the principal responsibilities of each of committee, as well as other information regarding their makeup and operations.
A copy of each committee’s charter may be found on our website at www.lincolnelectric.com.
Audit Committee
Chair:
Stephen G. Hanks (Chair)
Members:
Curtis E. Espeland
Patrick P. Goris
G. Russell Lincoln
Ben P. Patel
Meetings held in 2019: 7
Key Responsibilities
• Independent auditor engagement
• Reviews financial statements and disclosures, interim
financial reports and earnings press releases
• Reviews significant litigation and legal matters
• Oversees enterprise risk management, risk assessment,
ethics and compliance programs
• Reviews and evaluates the scope and performance of the
internal audit function
• Review of internal controls over financial reporting
Compensation and Executive Development
Committee
Chair:
William E. MacDonald, III
Meetings held in 2019: 6
Members:
Michael F. Hilton
Kathryn Jo Lincoln
Phillip J. Mason
Hellene S. Runtagh
Key Responsibilities
• Reviews and recommends to the Board total compensation
of our CEO, and reviews and establishes total
compensation of our other executive officers
• Evaluates performance (along with full Board) of our CEO
and other executive officers
• Monitors development, selection process and succession
planning of key management
• Reviews and recommends to the Board, in conjunction
with the Nominating and Corporate Governance
Each of the members of our Audit Committee meets the
Committee, the appointment and removal of elected
independence standards set forth in the Nasdaq listing
officers
standards and have likewise been determined by the Board
to have the financial competency required by the listing
standards. In addition, because of the professional training
and past employment experience of Messrs. Hanks,
Espeland and Goris, the Board has determined that they are
• Oversees executive compensation policies, practices and
programs, as further described in the CD&A
• Reviews and recommends to the Board new or amended
executive compensation plans with our executive officers
financially sophisticated Audit Committee Members under
Each of the members of our Compensation and Executive
the Nasdaq listing standards and qualify as “audit
Development Committee meets the independence standards
committee financial experts” in accordance with SEC rules.
set forth in the Nasdaq listing standards and each of whom
Shareholders should understand that the designation of
is deemed to be (1) an outside Director within the meaning
Messrs. Hanks, Espeland and Goris as “audit committee
of Section 162(m) of the U.S. Internal Revenue Code, and (2) a
financial experts” is a disclosure requirement and that it
“non-employee director” within the meaning of Rule 16b-3 of
does not impose upon them any duties, obligations or
the Exchange Act. The Compensation and Executive
liabilities that are greater than those generally imposed on
Development Committee may, in its discretion, delegate
them as members of the Audit Committee and the Board.
specific duties, responsibilities and authority to a
subcommittee, one or more Committee members or one or
more executive officers, to the extent permitted by
applicable law and stock exchange rules and regulations.
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Nominating and Corporate Governance
Committee
Chair:
Kathryn Jo Lincoln
Meetings held in 2019: 6
Members:
Patrick P. Goris
Michael F. Hilton
Ben P. Patel
Hellene S. Runtagh
Key Responsibilities
• Reviews our corporate governance framework including
external developments related to corporate governance
matters
• Reviews appropriate composition of the Board, identifies
Board candidates and recommends Director nominees
• Reviews shareholder proposals and shareholder
engagement activities
• Reviews non-employee Director compensation program in
light of best practices and makes recommendations to the
Board
• Reviews Director independence and makes
recommendations to the Board
• Oversees the self-evaluation process of the Board and
Committees
• Reviews environmental, social and governance matters
Each of the members of our Nominating and Corporate
Governance Committee meets the independence standards
set forth in the Nasdaq listing standards.
Chair:
Phillip J. Mason
Finance Committee
Members:
Curtis E. Espeland
Stephen G. Hanks
G. Russell Lincoln
William E. MacDonald, III
Meetings held in 2019: 5
Key Responsibilities
• Reviews financial performance, including comparing
financial performance to budgets and goals
• Reviews capital allocation strategy, dividend and share
repurchasing strategies
• Reviews operating budgets
• Reviews capital expenditures
• Reviews M&A activity and integration performance
• Oversees strategic planning and financial policy matters
Each of the members of our Finance Committee meets the
independence standards set forth in the Nasdaq listing
standards. All of our Directors typically attend the Finance
Committee meetings, a practice that has been in place for
the past several years.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 3 2
M E N U
DIRECTOR COMPENSATION
OUR BOARD COMPENSATION PROGRAM
Based upon the recommendations of the Nominating and Corporate Governance Committee, the Board determines our
non-employee Director compensation. The Nominating and Corporate Governance Committee periodically reviews all
elements of Board compensation in relation to our proxy peer group (as identified in the CD&A), trends in Board
compensation and other factors it deems appropriate. In connection with its review in 2019, with Korn Ferry as an
independent advisor, the Nominating and Corporate Governance Committee recommended certain adjustments to Board
compensation to better align with our peer group. As a result of that review, in July 2019, the Board approved the following
adjustments to our non-employee Director compensation program:
• Effective with the December 2019 award, an increase in
• Effective January 2020, an increase in the retainer for the
the approximate value of the annual restricted stock unit
Lead Independent Director from $25,000 to $28,000, an
award (and the initial equity award for any newly elected
increase in the retainer for the Audit Committee Chair
director) from $125,000 to $135,000 per year.
from $18,000 to $20,000, and an increase in the retainer
for the other Committee Chairs from $13,000 (with respect
to the Compensation and Executive Development
Committee) and $10,000 (with respect to the Finance
Committee and Nominating and Corporate Governance
Committee) to $15,000.
The objectives of our non-employee Director compensation programs are to attract highly qualified and diverse individuals
to serve on our Board and to align their interests with those of our shareholders. An employee of Lincoln Electric who also
serves as a Director does not receive any additional compensation for serving as a Director.
All non-employee Directors receive cash retainers and an annual stock-based award for serving on our Board. Stock-based
compensation is provided under our 2015 Stock Plan for Non-Employee Directors.
GOOD GOVERNANCE PRACTICES
Lincoln Electric seeks to attract and retain highly qualified individuals to serve on the Board of Directors. To that end,
Lincoln Electric maintains the philosophy of paying non-employee Directors fairly and reasonably, considering external
market factors, consistent with good governance practices. With respect to our non-employee Director compensation
program, our governance practices include:
What We Do
What We Don’t Do
Reasonable limits on non-employee Directors’ annual
equity awards included in 2015 Stock Plan for Non-
Employee Directors
✔ No Hedging or Pledging of Lincoln Electric Stock
Total compensation is positioned at the peer median
✔ No Excessive Perquisites
Non-employee Director compensation approved by full
Board
✔ No Excise Tax Gross-Ups or Tax Reimbursements
✘
✘
✘
Full-value equity award granted at a fixed-value
Double Trigger Provisions for Change in Control
Stock Ownership Guidelines
✔
✔
✔
Independent Compensation Committee and Consultant ✔
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The following is a summary of our current Director compensation program:
Director Compensation Mix
60%
36%
4%
Restricted Stock Units
Committee and Chair Fees
Board Retainer Fees
Board Level
Lead Independent
Director
Committee Chairs
Retainer
$ 80,000
Additional
$28,000
Additional
$20,000 for Audit
$15,000 for Compensation and Executive
Development, Finance and Nominating
and Corporate Governance
Meeting Fees1
—
Annual Restricted
Stock Unit Award approx. value2
Initial Restricted
Stock Unit Award approx. value3
$135,000
$135,000
–
–
–
–
–
–
h
s
a
C
y
t
i
u
q
E
(1) We do not have separate meeting fees, except if there are more than eight full Board or Committee meetings in any given year, Directors
will receive $1,500 for each full Board meeting in excess of eight meetings and Committee members will receive $1,000 for each
Committee meeting in excess of eight meetings in total.
(2) Directors have the ability to defer restricted stock units under the Non-Employee Directors’ Deferred Compensation Plan.
(3) The initial award will be pro-rated based on the Director’s length of service during the twelve-month period preceding the next regularly
scheduled annual equity grant, which normally occurs in the fourth quarter of each year.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
3 4
2019 DIRECTOR COMPENSATION TABLE
Director
Curtis E. Espeland
Patrick P. Goris
Stephen G. Hanks
Michael F. Hilton
G. Russell Lincoln
Kathryn Jo Lincoln
William E. MacDonald, III
Phillip J. Mason
Ben P. Patel
Hellene S. Runtagh
M E N U
Fees Earned or
Paid in Cash
($)
Stock
Awards1
($)
Total
($)
105,0002
134,920
239,920
80,0002
134,920
214,920
98,000
80,000
80,000
134,920
232,920
134,920
214,920
134,920
214,920
90,0002
134,920
224,920
93,000
90,000
134,920
227,920
134,920
224,920
80,0002
134,920
214,920
80,000
134,920
214,920
(1) On December 12, 2019, 1,406 restricted stock units were granted to each non-employee Director under our 2015 Stock Plan for Non-
Employee Directors.
The Stock Awards column represents the grant date fair value under Accounting Standards Codification (ASC) Topic No. 718 based on a
closing price of $95.96 per share on December 12, 2019. Assumptions used in the calculation of these amounts are included in footnote
10 to our audited financial statements for the fiscal year ended December 31, 2019 included in our Annual Report on Form 10-K filed with
the SEC on February 27, 2020.
As of December 31, 2019, the number of restricted stock units held by each non-employee Director was 1,406.
(2) All of Messrs. Espeland’s, Goris’ and Patel’s and Ms. Lincoln’s Board fees were deferred under our Non-Employee Directors’ Deferred
Compensation Plan.
OTHER ARRANGEMENTS
We reimburse Directors for reasonable out-of-pocket expenses incurred in connection with attendance at Board meetings,
or when traveling in connection with the performance of their services for Lincoln Electric.
CONTINUING EDUCATION
Directors are reimbursed up to $5,000 for continuing education expenses (inclusive of travel expenses) for programs each
Director may elect to attend.
STOCK OWNERSHIP GUIDELINES
In keeping with the philosophy that Directors’ interests should be aligned with the shareholders’ interest and as part of the
Board’s continued focus on corporate governance, all of our non-employee Directors must adhere to our stock ownership
guidelines. Restricted stock unit awards count toward the stock ownership amount; shares held in another person’s name
(including a relative) do not. The stock ownership guidelines can be met by satisfying one of the two thresholds noted in the
chart below. As of December 31, 2019, all of our non-employee Directors had satisfied the stock ownership guidelines, with
the exception of Mr. Goris and Mr. Patel due to their recent elections to the Board in 2018.
Directors have five years from the date of election to the Board to satisfy the stock ownership guidelines. The Nominating
and Corporate Governance Committee reviews the guidelines at least every two-and-a-half years to ensure that the
components and values are appropriate—a review was conducted during 2019, with the assistance of Korn Ferry as an
independent advisor, and it was determined that no changes to the guidelines were necessary at this time, as the 5 times
annual retainer guideline was consistent with the peer group median. As there was no modification and this was a mid-cycle
review, the absolute share target remained unchanged. The next review is anticipated to occur in 2021.
Retainer Multiple
Shares valued at 5x annual Board retainer ($400,000)
OR
Number of Shares
4,368*
* Represents shares equal to $400,000 based on the closing price of Lincoln Electric stock as of December 29, 2017 (the last trading day of
the calendar year) of $91.58.
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EQUITY AWARDS
The non-employee Directors’ restricted stock units awards are granted under the 2015 Stock Plan for Non-Employee
Directors. Under the terms of the awards, restricted stock unit awards vest in full one year after the date of grant, with
accelerated vesting in the event of a change in control of Lincoln Electric if the Director’s service is terminated or if the
award is not assumed upon the change in control, or upon the death or disability of the Director. During the period in which
restricted stock units remain unvested, dividend equivalents pay out in cash when dividends are generally paid to
shareholders.
DEFERRED COMPENSATION PLAN
The Non-Employee Directors’ Deferred Compensation Plan allows the non-employee Directors to defer payment of all or a
portion of their annual cash compensation and restricted stock units granted to them. This plan allows each participating
non-employee Director to elect to begin payment of the deferred amounts as of the earlier of termination of services as a
Director, death or a date not less than one full calendar year after the year the fees are initially deferred.
The investment elections available under the plan for cash compensation deferred are the same as those available to
executives under our Top Hat Plan, which is discussed in the narrative under 2019 Deferred Compensation Benefits.
Restricted stock unit deferrals are invested solely in a Lincoln Electric Stock fund, and no other plan deferrals are eligible
for investment into that fund.
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EXECUTIVE COMPENSATION
Our long-term strategy is focused on key actions and initiatives that generate long-term profitable growth within our targeted
markets through value-added solutions and operational excellence. We believe this approach engages our business team in
creating a long-term value proposition for shareholders that generates above-market returns through an economic cycle while
maintaining a short-term focus on improving profitability and driving operating excellence. More information on our business and
strategy can be found in the “Business Overview” section at the beginning of this Proxy Statement.
The Compensation Discussion and Analysis (CD&A) describes our executive compensation programs and how they apply to our
NEOs. The CD&A contains statements regarding future performance targets and goals. These targets and goals are disclosed in
the context of our compensation programs and should not be understood to be statements of management’s expectations or
estimates of results or other guidance. We caution investors not to apply these statements in other contexts.
Executive Compensation Table of Contents
For 2019, our NEOs were:
Executive Summary
Our Compensation Philosophy
Elements of Executive Compensation
Other Arrangements, Policies and Practices
Summary of 2019 Compensation Elements
2019 Summary Compensation Table
2019 Grants of Plan-Based Awards Table
Holdings of Equity-Related Interests
2019 Pension Benefits Table
2019 Deferred Compensation Benefits
Termination and Change in Control Arrangements
37
43
48
55
60
61
63
64
66
67
69
CHRISTOPHER L. MAPES
Chairman, President and Chief Executive
Officer
VINCENT K. PETRELLA
Executive Vice President, Chief Financial
Officer and Treasurer
GEORGE D. BLANKENSHIP
Executive Vice President, President,
Americas Welding
STEVEN B. HEDLUND
Executive Vice President, President,
International Welding
JENNIFER I. ANSBERRY
Executive Vice President, General
Counsel and Secretary
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COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
Our approach to executive compensation is generally the same as our approach to employee-wide compensation, with a
strong belief in pay for performance and a long-standing commitment to incentive-based compensation.
While maintaining our performance-driven culture, our executive compensation program is designed to achieve the
following objectives:
Align Interests
Align the interests of management
Incentivize Management
Design compensation elements to
Support Long-Term Strategy
Define performance drivers which
(and employees) with long-term
incentivize management to deliver
support key financial and strategic
interests of our shareholders and other
above-market financial results
business objectives
stakeholders
Good Governance Practices
Help ensure we are following good
Address Challenges
Address specific business
Pay for Performance
Link incentive-based compensation
governance practices in the design
challenges, including economic
to the company’s short-term and
and operation of our executive
circumstances, employee turnover
long-term financial and operational
compensation program, including
and retention considerations
performance
consideration of the risks associated
with those practices
CEO Target Pay “At Risk”
All Other NEOs Target Pay “At Risk”
Say-on-Pay Vote
At Risk
85%
At Risk
71%
98% Approval
At our 2019 Annual Meeting, shareholders
again showed strong support for our exec-
utive compensation programs with 98% of
the shareholders who voted approving, on
an advisory basis, the compensation of
our NEOs
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 3 8
M E N U
KEY FINANCIAL PERFORMANCE
We have a strong track record of delivering increased value to our shareholders and we have typically delivered above-
market performance across various financial metrics over many economic cycles. Our long-term strategy seeks to achieve
profitable sales growth both organically and through acquisitions by emphasizing value-added solutions and differentiated
technologies. We anticipate this strategy will yield improved profit margins and returns, and will generate best-in-class
financial performance measured against our peer group.
We achieved solid returns with a 19.9% ROIC, record cash flow generation, and 113% cash conversion in 2019, despite
slowing industrial sector demand and weaker customer capital spending. Sales decreased approximately 1% to $3.0 billion
primarily due to 3.5% lower organic sales, which were partially offset by a 4.3% benefit to sales from acquisitions. We held
both operating income margin and adjusted operating income margin relatively steady by substantially mitigating the
unfavorable impact of lower volumes on profitability with new products, price management, disciplined expense controls
and operational initiatives. Our focus on operational excellence resulted in exceeding three of four long-term 2020 safety
and environmental goals. These results demonstrate the continued structural improvements achieved in the business
through our “2020 Vision and Strategy” and how the organization continues to advance towards best-in-class performance.
We continued to pursue the development of innovative solutions and acquisitions to invest in long-term growth. In 2019, we
closed three transactions that contributed new products and services that reach across all three reportable segments. We
increased our R&D spend by 5% to approximately 1.9% of revenue. Our investments in innovation generated a sales vitality
index from new products launched in the last five years of 34%, and we achieved a 53% vitality index in equipment systems.
The vitality index represents the percentage of 2019 sales from new products launched in the last five years, excluding the
International Welding Segment and customized automation sales.
OPERATING INCOME MARGIN
DILUTED EPS
Reported
Adjusted
Reported
Adjusted
12.4% 12.9%
flat vs. 2018
(50) bps vs. 2018
$4.68
7.1% vs. 2018
$4.70
(2.5%) vs. 2018
CASH FLOW FROM
AVERAGE OPERATING WORKING CAPITAL TO
RETURN ON INVESTED CAPITAL
OPERATIONS
NET SALES RATIO
$403MRecord level
16.8%Top Decile vs. Peers
19.9%Top Quartile vs. Peers
CASH CONVERSION RATIO
DIVIDEND PAYOUT RATE INCREASE
NEW PRODUCT VITALITY INDEX
113%
21%
34%
See Appendix A for definitions and/or reconciliation of these metrics to results reported in accordance with GAAP. Performance measures
used in the design of the executive compensation program are presented within this Compensation Discussion and Analysis section.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
3 9
We remain focused on generating long-term value for our shareholders through a disciplined capital allocation strategy. In 2019,
we deployed approximately $615 million towards a combination of growth investments (capital expenditures and acquisitions)
and the return of cash to shareholders through our dividend program and share repurchases. In the last five years, we have
repurchased an aggregate amount of $1.3 billion in shares and have increased the dividend payout rate by 69%. Our Board
increased the dividend payout rate for 2020 by an additional 4.3%, marking 24 years of consecutive dividend increases.
$411M
RETURNED TO SHAREHOLDERS
IN 2019
=
$293M
IN SHARE REPURCHASES
+
$118M
IN DIVIDENDS
TOTAL SHAREHOLDER RETURN
+33.6% +54.5%
3-Year
5-Year
FINANCIAL MEASURES USED FOR COMPENSATION PURPOSES
We consider various types of widely reported financial metrics, each of which is related to our executive compensation
programs in some way. Some of these financial metrics directly impact our executive compensation programs, while others
are the closest approximation to the metrics that we use in our programs. We believe that all of these financial metrics are
critical to the short-term and long-term growth and performance of our organization.
Short-term financial metrics used to evaluate operational performance and used in our annual bonus (EMIP) design are:
• Adjusted earnings before interest, taxes and bonus (EBITB), and
• Average operating working capital to net sales ratio (AOWC/Sales) for Compensation Purposes.
The following charts illustrate our performance in these or comparable metrics.
Adjusted Operating Income1
Representative of EBITB
($ in millions)
AOWC/Sales for Compensation Purposes2
$372
$318
$353
$405
$388
21.9% 21.2% 19.8%
21.7%
21.7%
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
(1) Excluding special items where applicable. Definitions and a reconciliation of non-GAAP results to our most closely comparable GAAP
results are included in Appendix A.
(2) See Appendix A for definition of AOWC/Sales for Compensation Purposes.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 4 0
M E N U
Financial metrics considered in our long-term incentive compensation program include:
• Growth of Adjusted Net Income for Compensation Purposes
• Share price appreciation, including dividends (TSR), versus
(over a three-year cycle),
various indices over a three-year period.
• Three-year average ROIC for Compensation Purposes
indexed to peer performance, and
The following charts illustrate Lincoln Electric’s Adjusted Net Income for Compensation Purposes and ROIC for Compensation
Purposes. The results for ROIC for Compensation Purposes are compared to our peer group, the S&P 400 Midcap Index (S&P
400), in which we participate, and the S&P 400 Midcap Manufacturing Index. The ROIC for Compensation Purposes percentile
rankings show the position of our financial results compared to the particular group, with a 50th percentile ranking indicating
median (or market) performance. Percentiles below 50 indicate below-market performance, while percentiles above 50 indicate
above-market performance. Information is based on the most recently available public information (as accumulated by an
independent third party), as of January 2020 when the analysis was performed.
Adjusted Net Income
for Compensation Purposes1
($ in millions)
Adjusted Net Income
for Compensation Purposes1
($ in millions)
Return on Invested Capital for
Compensation Purposes1
Return on Invested Capital for
Compensation Purposes1
31.3%
3 Year
Performance
’19 vs. ’16
31.3%
3 Year
Performance
’19 vs. ’16
$256
$218
$248
$311
2015
2016
2017
2018
$256
$286
2015
2019
$218
$248
$311
$286
15.7%
16.0%
15.7%
15.1% 18.1% 19.2%
16.0%
15.1% 18.1% 19.2%
2016
2017
2018
2019
2015
2016
2017
2018
2015
2019
2016
2017
2018
2019
3-Year Average ROIC for Compensation
Purposes1,2 Performance and Percentile Rank
to Peers and Select Indices
3-Year Average ROIC for Compensation
Purposes1,2 Performance and Percentile Rank
to Peers and Select Indices
3-Year (2017-2019) TSR Performance
Percentile Rank to Peers and
Select Indices
3-Year (2017-2019) TSR Performance
Percentile Rank to Peers and
Select Indices
90th
88th
78th
90th
88th
78th
Line graph
represents
Lincoln Electric’s
percentile rank
Line graph
represents
Lincoln Electric’s
percentile rank
17.9% 11.9% 7.4% 8.9% $311
17.9% 11.9% 7.4% 8.9% $311
25th
41st
53rd
51st
25th
41st
53rd
51st
Lincoln
Electric
Peers
S&P
Midcap
400
S&P
Midcap
400 Mfg
Lincoln
Electric
Peers
S&P
Midcap
400
S&P
Midcap
400 Mfg
Peers
S&P 500
S&P
Midcap
400
S&P
Midcap
400 Mfg
Peers
S&P 500
S&P
Midcap
400
S&P
Midcap
400 Mfg
(1) Excludes certain items as approved by the Compensation and Executive Development Committee where applicable. See discussion and
definitions on page 53 in the Performance Shares Financial Metrics section and in Appendix A.
(2) As of September 30, 2019.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT Adjusted Net Income
for Compensation Purposes1
($ in millions)
$256
$218
$248
$311
$286
TOTAL SHAREHOLDER RETURN (TSR)
M E N U
4 1
The following 3-Year (2017-2019) TSR Performance Percentile Rank chart illustrates our TSR performance compared to our
peer group, the S&P Composite 500 Stock Index (S&P 500), the S&P 400, and the S&P 400 Midcap Manufacturing Index.
Return on Invested Capital for
Compensation Purposes1
31.3%
3 Year
Performance
’19 vs. ’16
The TSR percentile rankings show the position of our TSR Performance compared to the particular group, with a 50th
percentile ranking indicating median (or market) performance. Percentiles below 50 indicate below-market performance,
while percentiles above 50 indicate above-market performance. This information is based on the most recently available
public information (as accumulated by an independent third party), as of January 2020 when the analysis was performed.
The following 3-Year and 5-Year TSR charts compare the change in the cumulative total shareholder return on our common stock
against the cumulative total shareholder return of the S&P 500 and the S&P 400 for the three-year and five-year periods ended
December 31, 2019. The 3-Year and 5-Year TSR charts assume that $100 was invested at the beginning of each period in each
15.7%
16.0%
15.1% 18.1% 19.2%
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
of our common stock, the S&P 500 and the S&P 400 and assumes dividends were reinvested.
Total Shareholder Returns (TSR)1
3-Year Average ROIC for Compensation
Purposes1,2 Performance and Percentile Rank
to Peers and Select Indices
3-Year (2017-2019) TSR Performance
Percentile Rank to Peers and
Select Indices
3-Year TSR
5-Year TSR
90th
88th
78th
Line graph
represents
Lincoln Electric’s
percentile rank
17.9% 11.9% 7.4% 8.9% $311
25th
41st
53rd
51st
$133
$153
$130
$154
$173
$154
Lincoln
Electric
Peers
S&P
Midcap
400
S&P
Midcap
400 Mfg
Peers
S&P 500
S&P
Midcap
400
S&P
Midcap
400 Mfg
(1) See Appendix A for definition of TSR.
PAY FOR PERFORMANCE, OBJECTIVES AND PROCESS
Lincoln
Electric
S&P
500
S&P
400
Lincoln
Electric
S&P
500
S&P
400
In designing our executive compensation programs, a core philosophy is that our executives should be rewarded when they
deliver financial results that provide value to our shareholders. Therefore, we have established a program that ties executive
compensation to superior financial performance.
To assess pay for performance, we evaluate the relationship between CEO pay and TSR performance considering the ISS
methodology. This allows us to understand the relative degree of alignment over a three-year period between the pay
opportunity delivered to the CEO and the performance achieved by shareholders relative to the ISS peer group. The ISS peer
group for this analysis is comprised of 24 companies of which 11 companies overlap with our peer group. In conjunction with
ISS resources, this analysis is performed by management’s compensation consultant, Willis Towers Watson, which is reviewed
by the Compensation and Executive Development Committee (the “Committee”) and by its independent consultant, Korn Ferry.
In evaluating pay and performance alignment, the analysis focuses on CEO pay primarily as reflected in the Summary
Compensation Table, with the exception of valuing equity-based awards. All stock-based awards (both time- and
performance-vesting) are calculated by multiplying the number of underlying shares by the closing stock price on the grant
date, and option awards are calculated using the ISS Black-Scholes option pricing model. This means that for us, the CEO
is evaluated based on the following compensation elements for the applicable three-year period:
• Base pay;
• Annual bonus (EMIP);
• The value of stock options granted (based on the ISS
Black-Scholes pricing model as of the grant date);
• The value of restricted stock units (“RSUs”) granted (based on
• Actual nonqualified deferred compensation earnings; and
the closing price of our common stock as of the grant date);
• The value at target of performance shares granted (based on
the closing price of our common stock as of the grant date);
• All other compensation for the applicable three-year period.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 4 2
M E N U
As the following chart demonstrates, our ranking for TSR performance was slightly below the median of the ISS peer group
for the most recent three-year period. For the same period, our ranking for CEO pay was above the median. Comparing our
ranking for TSR performance with our ranking for CEO pay for the 2017-2019 time frame resulted in a -18.6% relative
degree of alignment. A medium concern level would be triggered using the 2020 ISS methodology with a relative degree of
alignment of -50% or more.
Lincoln Electric Holdings, Inc. Pay for Performance
3-Year CEO Pay Percentile Rank vs. 3-Year TSR Percentile Rank
Low Pay for
High Performance
Pay for Performance Alignment
LECO (2016-2018)
LECO (2015-2017)
LECO (2017-2019)
LECO
Pay Rank = 64%
TSR Rank = 45%
High Pay for
Low Performance
k
n
a
R
e
l
i
t
n
e
c
r
e
P
R
S
T
r
a
e
Y
-
3
)
s
r
e
e
P
S
S
I
o
t
e
v
i
t
a
l
e
R
(
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
3-Year CEO Pay Rank
(Relative to ISS Peers)
While we consider the ISS methodology in assessing pay for performance, we view it as one of the variables for evaluating
pay for performance alignment. We have provided the ISS analysis in assessing pay for performance for investors that
might be utilizing it in evaluating pay for performance.
2019 EXECUTIVE COMPENSATION ACTIONS
During 2019, the Committee reviewed the design of our executive compensation programs to ensure consistency with our pay for
performance philosophy. The Committee has taken a number of actions over the last few years to better align executive
compensation to value drivers in line with our financial performance and shareholder interests. At our 2019 Annual Meeting, we
received over 98% approval, based on the total votes cast, for our annual advisory say-on-pay vote to approve the compensation
of our named executive officers. The Committee considered this result, in connection with its review of the overall design of our
executive compensation programs, particularly in light of the transition to the Higher Standard 2025 Strategy. The Committee
believes the voting results demonstrate significant support for our named executive officer compensation program, and the
Committee chose not to make any substantial changes to the existing program for 2019 specifically in response to the 2019 say-
on-pay voting results. The Committee expects, however, to continue to work with its compensation consultant to monitor changes
in executive compensation to keep our executive compensation programs aligned with best practices in our competitive market.
GOOD GOVERNANCE PRACTICES
In addition to our emphasis on above-market financial performance and pay for performance, we design our executive
compensation programs to be current with best practices and good corporate governance. We also consider the risks
associated with any particular program, design or compensation decision. We believe these assessments result in
sustained, long-term shareholder value. Some of those governance practices are described in the Compensation-Related
Risk section in this Proxy Statement.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
M E N U
4 3
The following table highlights certain of our good governance practices relative to our executive compensation programs:
What We Do
What We Don’t Do
Pay for Performance Focus
(Compensation programs weighted heavily toward variable,
“at risk,” compensation; perform annual reviews of market
competitiveness and the relationship of compensation to
financial performance)
Balanced Compensation
(Compensation opportunities linked to both short-term and
long-term periods of time, while aligning compensation with
several financial performance metrics that are critical to
achievement of sustained growth and shareholder value
creation)
✔
No Guaranteed Pay
(No multi-year guarantees for compensation increases,
including base pay, and no guaranteed bonuses)
✔ No Repricing or Replacement of Underwater Stock Options
without Prior Shareholder Approval
Double Trigger Provisions for Change in Control
✔ No Payment of Dividends on Unvested Equity
Stock Ownership Guidelines for all Executive Officers
✔ No Excessive Perquisites
Clawback Policy
✔ No Excise Tax Gross-Ups or Tax Reimbursements
Independent Compensation Committee and Consultant
✔ No Hedging or Pledging of Lincoln Electric Stock
✘
✘
✘
✘
✘
✘
OUR COMPENSATION PHILOSOPHY
CORE PRINCIPLES
The primary components of our executive compensation programs, summarized below, ensure that we maintain our
performance-driven culture:
Type
Component and Competitive
Target
Philosophy and Objective
Fixed Compensation
Base Pay
Incentive-Based Compensation
Target
Total Cash
Compensation
with Annual
Bonus (EMIP)
Long-Term
Incentive
Compensation
45th
Percentile
45th
Percentile
65th
Percentile
45th
Percentile
65th
Percentile
50th
Percentile
65th
Percentile
50th
Percentile
50th
Percentile
• Targeted at the 45th percentile of market (below market) to place
stronger emphasis on incentive-compensation
• Provide market-competitive fixed pay reflective of an executive
officer’s role, responsibilities and individual performance in order
to attract and retain top talent
• Targeted above the competitive market, so that target total cash
compensation (base pay and annual bonus which incorporates
financial targets) is set at 65th percentile of market
• Drive financial performance, including adjusted earnings before
interest, taxes and bonus (EBITB) and average operating
working capital to net sales ratio
• Deliver individual performance against specific business
objectives, including executing on our Higher Standard 2025
Strategy, increasing our customer satisfaction, developing and
engaging a diverse and talented workforce, driving sustainable
innovation and improving operating efficiencies
• Targeted at the 50th percentile of market (at market)
• Divided equally among 3 programs: (1) stock options;
(2) restricted stock units (RSUs); and (3) Performance Shares
• Incentivize achievement of long-term value creation through
financial performance objectives weighted more heavily toward
rewards for share price appreciation and long-term profitability
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 4 4
M E N U
In addition to the primary components of our executive compensation programs, we provide benefits and perquisites that
we believe, taken as a whole, are at the market median.
Individual performance also plays a key role in determining the amount of compensation delivered to an individual in many
of our programs, with our philosophy being that the best performers should receive the greatest rewards. In addition, for
2019, as the following charts demonstrate, 85% of the CEO’s compensation mix was “at risk” and 71% of our other NEOs’
compensation mix was “at risk,” with the actual amounts realized based on annual and long-term performance as well as
our stock price.
CEO Target Compensation Mix
All Other NEOs Target Compensation Mix
21%
15%
85%
At Risk
21%
22%
21%
15%
29%
15%
15%
26%
71%
At Risk
Base (fixed)
Annual Bonus (EMIP)
Stock Options
Restricted Stock Units
Performance Shares
Long-Term
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
4 5
THE ROLES OF THE COMMITTEE, EXTERNAL ADVISORS AND MANAGEMENT
The Committee, which consists solely of non-employee Directors, has primary responsibility for reviewing, establishing and
monitoring all elements of our executive compensation programs. The Committee is advised by its independent executive
compensation consultant, Korn Ferry, and independent legal counsel. Management provides recommendations and
analysis to the Committee, and is supported in those efforts by its own executive compensation consultant, Willis Towers
Watson.
ROLE OF THE COMMITTEE
Compensation-Related Tasks
Organizational Tasks
Reviews, approves and administers all of our executive
Evaluates the performance of the CEO, including
compensation plans, including our equity plans
consideration of tone and embodiment of core values, with
input from all non-employee Directors
Establishes performance objectives under our short-term and
long-term incentive compensation programs1
Reviews the performance capabilities of the other
executive officers, including consideration of tone and
embodiment of core values, based on input from the CEO
Determines the attainment of performance objectives and the
Reviews succession planning for officer positions,
awards to be made to our executive officers under our short-
term and long-term incentive compensation programs1
including the position of the CEO
Determines the compensation for our executive officers,
Reviews proposed organization or responsibility changes
including salary and short-term and long-term incentive
compensation opportunities1
at the officer level
Reviews compensation practices relating to key employees to
Reviews our practices for the recruitment and
confirm that these practices remain equitable and competitive
development of a diverse talent pool
Reviews new employee benefit plans or significant changes
Retains the services of independent legal counsel from
in such plans or changes with a disproportionate effect on our
time to time to provide input on various matters
officers or primarily benefiting key employees
(1) The Board takes such action with respect to the CEO.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 4 6
ROLE OF EXTERNAL ADVISORS
Korn Ferry
M E N U
• Independent executive compensation consultant for the
• Discusses the CEO’s recommendations with the
Committee
• Advises on matters including competitive compensation
analysis, executive compensation trends and plan design,
Committee to ensure the compensation recommendations
are in line with stated compensation philosophies and are
reasonable when compared to the competitive market
peer group company configuration, competitive financial
• The Committee is not bound by Korn Ferry’s
performance and financial target setting
recommendation
• Reviews analysis and data collected by management
• Considering all relevant factors (as required by
(particularly the CEO, the CFO and the Chief Human
compensation consultant independence standards set
Resources Officer) and Willis Towers Watson
forth in applicable SEC rules and Nasdaq listing
• Reports directly to the Chairperson of the Committee
• Meets with the Committee in executive session without
the participation of management
Willis Towers Watson
standards), we are not aware of any conflict of interest
that has been raised by the work performed by Korn Ferry
• Provides executive compensation analysis and other
• Considering all relevant factors (as required by
services directly to management
compensation consultant independence standards set
• Performs data analysis on competitive compensation,
competitive financial performance and financial target
setting
• Provides analysis to Korn Ferry in advance to allow Korn
Ferry to comment upon the findings and
recommendations made by management
ROLE OF CEO AND MANAGEMENT
forth in applicable SEC rules and Nasdaq listing
standards), we are not aware of any conflict of interest
that has been raised by the work performed by Willis
Towers Watson
• Provides compensation-related recommendations to the
• Performs individual performance assessments based on
Committee
• The CEO recommends the compensation for other
achievement of various financial and leadership
objectives set by the CEO
executive management positions and provides the
• Receives suggestions from the Committee for
Committee with assessments of their individual performance
modifications to financial and leadership objectives where
(both of which are subject to Committee review)
warranted
OUR METHODOLOGIES
SELECTION OF COMPENSATION ELEMENTS
As part of its annual review, the Committee evaluates whether changes in the philosophy or structure are warranted in light
of emerging trends, business needs and/or financial performance. The Committee then uses competitive market data,
performance assessments, and independent executive compensation consultants and management recommendations to
set the pay components along the targets described above (for example, 45th percentile for base pay). Actual pay for
executive management will generally fall within a range of these targets (plus or minus 20%). Absent significant increases
due to promotion, increases for break-through individual performance or significant changes in the competitive market data,
pay increases are generally in line with national trends.
MARKET COMPARISON DATA
We collect competitive market compensation data from multiple nationally published surveys, from proxy data for a peer group of
companies and from proxy data for companies in the S&P 400. Nationally published survey market compensation data is
statistically determined (through regression analysis) to approximate our revenue size and aged to approximate more current data.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
4 7
PEER GROUP
We use a peer group of publicly traded industrial companies that are headquartered in the U.S. that serve a number of
different market segments and that have significant foreign operations. These are companies for which Lincoln Electric
competes for talent and shareholder investment. In addition, we only select companies with solid historical financial results
(removing companies from the peer group when their financial performance has consistently fallen below an acceptable
level) and companies with sales that are within 2.5 times that of Lincoln Electric, with the exception of Illinois Tool Works
(ITW), as ITW is a global competitor with its largest presence in the U.S. The Committee conducts an annual review of our
peer group, with the assistance of Korn Ferry as an independent advisor. In 2019, the Committee determined that no
changes to the peer group were necessary, but it would continue to monitor SPX Corporation due to various changes in its
business.
For 2019, our peer group consisted of the following 18 publicly traded industrial corporations:
Ametek Inc.
Flowserve Corporation
Kennametal Inc.
SPX Corporation
Carlisle Companies Incorporated
Graco Inc.
Nordson Corporation
The Timken Company
Colfax Corporation
IDEX Corporation
Regal Beloit Corporation
The Toro Company
Crane Co.
Illinois Tool Works Inc.
Roper Technologies, Inc.
Donaldson Company, Inc.
ITT Inc.
Snap-On, Incorporated
EXECUTIVE COMPENSATION STRUCTURE
In evaluating our executive compensation structure, the Committee considers three primary elements: (1) business needs;
(2) individual performance and (3) pay for performance review.
Business Needs
Individual Performance
Pay for Performance Review
• Independent compensation
• Individual performance is a
• The Committee conducts an annual
consultant (Korn Ferry) provides
information about emerging trends in
executive compensation, along with
Committee members’ own reading
and study
significant factor in determining
annual changes (up or down) to pay
components
assessment of our financial
performance and pay for
performance, in determining whether
changes will be made to the existing
philosophy or structure and before
setting compensation levels for the
upcoming year
• Trends considered in light of our
compensation philosophies and
various business needs
• Annual bonus (EMIP) includes an
• The annual assessments are used to
individual performance component in
determining the percentage of target
bonus to be paid (described below
and noted in the 2019 EMIP Matrix)
evaluate whether executive
compensation is properly aligned with
our financial performance
• Business needs that are evaluated
can include: talent attraction or
retention strategies, growth
expectations, strategic programs,
cost-containment initiatives,
management development needs
and our company culture
• Individual performance is measured
against how well an executive
demonstrates proficiency in key
leadership competencies, as well as
the executive’s achievement against
objectives established for him or her
at the beginning of the year
• No single factor guides whether
changes will be made, as the
Committee uses a holistic approach,
considering a variety of factors
• For the past three years, individual
performance ratings for the annual
bonus for officers have ranged from
107% to 130%
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 4 8
M E N U
The following chart highlights the process and timing of compensation determinations and payouts:
Before Year End
First Quarter of Year
During Year
• Committee reviews our compensation
program and philosophy, including
determining if our compensation levels
are competitive with our peer group and
if any changes should be made to the
program for the next year
• Committee determines the principal
components of compensation for the NEOs
•
Management engages compensation
consultant (Willis Towers Watson) to
provide a competitive market assess-
ment of pay levels for the executive
officers, including the NEOs
• Committee determines the individual
performance goals of the CEO (with Board
approval) and sets the performance goals
for each corporate-based (financial)
component
• Committee meets
regularly throughout the
year, with management
and in executive session
• Ongoing review of
Company performance
against performance goals
• CEO sets individual performance goals
for each of the other NEOs, which are
reviewed by the Committee
• Individual performance goals of CEO and
the other NEOs are designed to drive our
corporate goals and our Higher Standard
2025 Strategy
• Base pay, annual bonus targets and long-
term incentive awards are set at a
regularly scheduled Committee meeting
• Payout amounts for the annual bonus
(EMIP) and Performance Shares are
Committee meeting (normally in
February) or a subsequent special
meeting (normally in March), once
ELEMENTS OF EXECUTIVE COMPENSATION
Each compensation component for our NEOs is described below, with specific actions that were taken during 2019 noted.
For 2019 compensation amounts, please refer to the Summary Compensation Table and other accompanying tables below.
BASE PAY
Base salary is provided to our executives to compensate them for their time and proficiency in their positions, as well as the
value of their job relative to other positions at Lincoln Electric. Base salaries are set based on a subjective evaluation of the
executive’s experience, expertise, level of responsibility, leadership qualities, individual accomplishments and other factors.
That being said, we aim to set base salaries at approximately the 45th percentile of the market (slightly below market) in
keeping with our philosophy that greater emphasis should be placed on variable compensation.
2019 AND 2020 BASE PAY
During 2019, the Committee reviewed officer pay, including all NEOs, as compared to the market. The Committee approved
certain increases in NEO base salaries as detailed below, bringing the base pay within the competitive framework.
NEO
Increase %
2019 Base Salary
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
3.6%
10.7%
3.0%
7.6%
4.5%
$1,000,000
$553,350
$515,000
$425,000
$411,730
The 2019 base salary increase for Mr. Petrella was to bring his base pay within the competitive benchmark reflective of his
years of experience, and the increase for Mr. Hedlund was to bring his base pay within the competitive framework. For
2020, in alignment with Lincoln Electric’s cost-containment initiatives, management did not recommend, and the Committee
did not approve, increases for any NEO’s 2020 base salary.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
4 9
ANNUAL BONUS (EMIP) AND TOTAL CASH COMPENSATION
The Executive Management Incentive Plan (EMIP) provides executive officers, including the NEOs, with an opportunity to
receive an annual cash bonus. We believe that, given base pay is below market, annual cash bonus opportunities should be
above average to balance some of the risk associated with greater variable compensation. However, we also believe that
above-market pay should only be available for superior individual and financial performance. Therefore, we target total cash
compensation (base pay and target annual bonus) at the 65th percentile of the market, but use a structure that provides
payments of above-average bonuses only where the individual’s performance, the performance of the consolidated company,
and the performance of his or her particular segment or business unit, warrant it.
ANNUAL BONUS (EMIP) MATRIX
The percentage of target annual bonus actually paid is based upon a matrix that takes into account financial performance
and an executive’s individual performance, interpolating the results to calculate the actual percentage paid. If either of these
factors is not met, the percentage of target annual bonus paid is reduced, with the potential that no bonus will be paid. If
either of these factors exceeds expectations, the percentage of annual bonus paid can be above the target amount.
The 2019 EMIP matrix is consistent with prior years. To the extent that financial performance or an individual’s performance
rating exceeds the maximum amounts set forth below, the payout percentage is capped.
2019 EMIP Matrix
Individual
Performance
Rating
130
120
110
100
95
90
85
80
75
50%
60%
70%
80%
90%
100%
110%
120%
Financial Performance
Percentage Payout
0
0
0
0
0
0
0
0
0
50%
40%
30%
20%
0
0
0
0
0
80%
70%
60%
50%
20%
0
0
0
0
100%
130%
150%
160%
180%
90%
80%
60%
50%
20%
0
0
0
120%
135%
150%
160%
110%
120%
140%
150%
90%
80%
50%
20%
0
0
100%
135%
145%
90%
80%
50%
20%
0
115%
125%
100%
110%
60%
30%
0
70%
50%
0
The Committee has discretion to approve EMIP payments outside of the strict application of this matrix. There were no such
adjustments made for the 2019 EMIP payments for any NEO. EMIP payout determinations for the 2019 performance period
were made in the first quarter of 2020.
ANNUAL BONUS (EMIP) INDIVIDUAL PERFORMANCE GOALS
Individual performance goals are set annually. A significant portion of our executive officers’ individual performance goals is
tied to one or more aspects of our long-term strategy. For 2019, the performance goals for our CEO (which flow down to our
other NEOs) relate to our operating budget, financial performance, and key initiatives relative to 2019, including successful
implementation and execution of our new long-term strategy, the Higher Standard 2025 Strategy, while working toward
closing out the current long-term strategy “2020 Vision and Strategy.”
In assessing the individual performance of our NEOs, the Committee reviews the performance rating recommended by the
CEO with respect to each of the other NEOs and recommends revisions, as needed, prior to the Committee approval of such
rating. The CEO’s rating is determined based on a review of performance against underlying goals with the final rating being
approved by the full Board.
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ANNUAL BONUS (EMIP) FINANCIAL METRICS
A portion of the EMIP financial component is based upon achievement of company consolidated financial performance
against budget and another portion may be attributable to segment financial performance against budget, depending upon
the individual’s span of responsibility. By varying the financial metrics used based upon areas of responsibility, it is possible
that certain participants will receive a higher percentage of target bonus while others will receive a lower percentage of
target where the segment performance for one participant is better than the segment performance for the other. This is a
key component of our pay for performance and incentive-based philosophies. For 2019, consolidated results and segment
results (with the exception of the Harris Products Group) were below budget.
2019 EMIP payouts for all officers ranged between 73% below and 49% above target, with an average payout of 11% above
target. The above target results were driven by individual performance against goals, despite the financial results being
below budget.
The following is a summary of the financial components used for 2019 for the NEOs:
2019 Annual Bonus (EMIP)—Financial Metrics Used
NEOs
Consolidated Results
Segment Results
Christopher L. Mapes—Chairman, President & CEO
Vincent K. Petrella—EVP, CFO & Treasurer
George D. Blankenship—EVP, President, Americas Welding
Steven B. Hedlund–EVP, President, International Welding
Jennifer I. Ansberry–EVP, General Counsel & Secretary
100%
100%
50%
50%
100%
—
—
50% Americas Welding
50% International Welding
—
EBITB. One of the EMIP financial metrics is the achievement of earnings before interest, taxes and the bonus referred to
above (EBITB) as compared to budget. Since 2011, this metric accounts for 75% of the EMIP financial component. EBITB to
budget has been used as the financial metric for the annual bonus since its inception in 1997 because it is an important
indicator of profitability. Budgets are set aggressively (based on the local and global economic climate), at the beginning of
the year, are reviewed by the Finance Committee of the Board and are approved by the full Board. The following is a
summary of historical consolidated results:
Historical EBITB to Budget (Consolidated Results 2015-2019)
Average
Highest Level
Lowest Level
Consolidated Results
97%
110%
86%
When performance goals are set, we believe that there is an equal probability of achieving EBITB to budget in any year,
although the cyclical nature of our business may increase the probability in some years and decrease it in others. For 2019,
the consolidated EBITB budget was set at $583 million and actual performance for 2019, as adjusted, measured at budgeted
exchange rates, was $498.5 million, or an achievement of 85.5% of budget. The Americas Welding Segment EBITB actual
performance for 2019, as adjusted, measured at budgeted exchange rates, was $402.7 million, or an achievement of 85.2%
of budget. The International Welding Segment EBITB actual performance for 2019, as adjusted, measured at budgeted
exchange rates, was $90.8 million, or an achievement of 79.3% of budget. The EBITB performance results were adjusted for
the same types of special items that impact Adjusted Operating Income and Adjusted Net Income as disclosed in Appendix A.
AOWC/Sales for Compensation Purposes. Since 2007, a second EMIP financial metric, namely the achievement of budget
for average operating working capital as compared to sales (AOWC/Sales for Compensation Purposes), has been used as
a reflection of our commitment to improving cash flow. Since 2011, AOWC/Sales for Compensation Purposes has
accounted for 25% of the EMIP financial component. The following is a summary of historical consolidated results:
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Historical AOWC/Sales to Budget (Consolidated Results 2015-2019)
Average
Highest Level
Lowest Level
Consolidated Results
100%
105%
96%
Like EBITB, we believe that there is an equal probability of achieving AOWC/Sales for Compensation Purposes to budget in any
given year, although the cyclical nature of our business may increase the probability in some years and decrease it in others. For
2019, the consolidated AOWC/Sales for Compensation Purposes budget was set at 20.9% and actual performance for 2019,
excluding businesses acquired during the year, was 21.7%, or an achievement of 95.9% of budget. The Americas Welding
Segment AOWC/Sales for Compensation Purposes actual performance for 2019, excluding businesses acquired during the year,
was 17%, or an achievement of 95.9% of budget. The International Welding Segment AOWC/Sales for Compensation Purposes
actual performance for 2019, excluding businesses acquired during the year, was 31.6%, or an achievement of 85.2% of budget.
2019 ANNUAL BONUS (EMIP) AND TOTAL CASH COMPENSATION
The 2019 EMIP annual bonus targets for the NEOs were established according to the principles discussed above. The 2019
EMIP targets for the NEOs placed their total targeted cash compensation (base pay and target annual bonus), on average,
slightly below the 65th percentile of market.
In approving the 2019 EMIP payouts, the Committee assessed our EBITB performance and AOWC/Sales for Compensation
Purposes performance against budget for consolidated and segments, as applicable. On average, 2019 EMIP payments for
the NEOs were 17% above their 2019 target amounts, as shown in the following table.
NEO
Opportunity
% of Base Salary
on Matrix
Actual Award
% of Target
Target Award
Opportunity as a
Opportunity Based
Actual Award as a
Target Award
Maximum Award
Christopher L. Mapes
$1,450,000
145%
$2,610,000
$1,718,830
Vincent K. Petrella
$ 515,550
George D. Blankenship
$ 460,000
Steven B. Hedlund
Jennifer I. Ansberry
$ 375,000
$ 319,770
93%
89%
88%
78%
$927,990
$828,000
$675,000
$575,586
$ 633,250
$ 538,798
$ 399,825
$ 375,602
119%
123%
117%
107%
117%
On average, 2019 EMIP payments for the NEOs were 18% lower than the 2018 EMIP payments.
2020 ANNUAL BONUS (EMIP) AND TOTAL CASH COMPENSATION
The 2020 EMIP targets for the NEOs, approved in the first quarter of 2020, were established by the Committee in
consultation with Korn Ferry, based on our compensation philosophies as well as competitive market data as discussed
above. The 2020 bonus targets were held flat in alignment with Lincoln Electric’s cost-containment initiatives to the 2019
target amounts for the NEOs. The bonus targets still fall within the competitive benchmark and the NEOs remain, on
average, slightly below the 65th percentile on targeted total cash compensation.
LONG-TERM INCENTIVE COMPENSATION
We believe that long-term incentive compensation should be provided to focus rewards on factors that deliver long-term
sustainability and should be established at the median (or 50th percentile) of the market. We have targeted the median of
the market, in keeping with our pay for performance philosophy, because we believe that superior long-term financial
growth itself should be the main driver of above-market long-term incentive compensation. We also believe that different
financial metrics help drive long-term performance. Therefore, we have established a structure for long-term incentives that
combines several different long-term metrics, with the greatest emphasis placed on share appreciation and equity awards.
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For 2019, our long-term incentive compensation program consist of three components: (1) stock options, (2) RSUs and (3)
Performance Shares (LTIP). The value of each is weighted equally. This provides an even balance with respect to the
different attributes and timing associated with each type of award. Annual awards of all three components are made to
EMIP participants, including the NEOs. A long-term incentive plan (LTIP) has been in place for officers (EMIP participants)
since 1997. The LTIP previously paid out in cash, however during 2015, to further align executive interests with our
stockholders, the Committee replaced the long-term cash incentive (Cash LTIP) with Performance Shares.
The following is a summary of the three components of our long-term incentive compensation program:
Total Employees Receiving
Grant in 2019
24 employees, including NEOs,
all EMIP participants and other
senior leaders
488 employees, including
NEOs, all EMIP participants,
other senior leaders, managers
and significant contributors,
regardless of their position
within Lincoln Electric
15 employees, including NEOs
and all EMIP participants
Standard Vesting Provision
Accelerated Vesting Provisions
Stock Options
• Vest ratably over 3 years
• Full vesting upon death or
1/3
1/3
Restricted Stock
Units (RSUs)
1/3
1/3
1/3
1/3
Performance
1/3
Shares
1/3
1/3
disability
• Pro-rata vesting upon retirement
• In the event of a change in control,
if (i) replacement awards are not
provided or (ii) replacement awards
are provided and there is a subse-
quent qualifying termination, full
vesting
• Vest in full after 3 years
• Full vesting upon death or
disability
• Pro-rata vesting upon retirement
• In the event of a change in control,
if (i) replacement awards are not
provided or (ii) replacement awards
are provided and there is a subse-
quent qualifying termination, full
vesting
• Vest based on perfor-
• Full vesting at target upon death or
mance during the appli-
cable 3-year
performance period
disability
• Pro-rata vesting upon retirement,
based on actual performance for
the applicable 3-year performance
period
• In the event of a change in control,
if (i) replacement awards are not
provided or (ii) replacement awards
are provided and there is a subse-
quent qualifying termination, a pro-
rata portion of the award will vest
based on the length of employment
during the applicable performance
period, at the greater of target or
actual performance
Following an extensive review of market data, including our peer group, the Committee recommended certain changes to
the terms of our Performance Shares. Commencing with grants made in February 2020, in the event of a change in control,
the Performance Shares will vest at target if (i) replacement awards are not provided or (ii) replacement awards are
provided and there is a subsequent qualifying termination. This change was made to align with our peers and to streamline
the administration of such awards in the event of a change in control.
LONG-TERM INCENTIVE PLAN (LTIP) - PERFORMANCE SHARES
Our long-term incentive compensation program includes a long-term incentive plan (LTIP), in the form of grants of Performance
Shares, which is designed to offer award opportunities aligned with the long-term performance of Lincoln Electric. Target share
amounts for the plan are set each year at the beginning of a three-year performance cycle based on a 7-day historical average
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
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of the stock price, up to and including the grant date. Because awards are made each year and because each award
relates to a three-year performance cycle, three different cycles will be running at any point in time. The percentage
of the target shares actually paid at the end of the applicable three-year cycle will be based upon achievement of
three-year company performance as interpolated against pre-established performance thresholds. Each plan has
performance thresholds with percentage payouts attributable to those thresholds ranging from 0% to 200% of target.
The Committee retains discretion to modify payments to any participant, to modify targets and/or to modify the
performance thresholds (up or down).
PERFORMANCE SHARES FINANCIAL METRICS
Since its inception, the LTIP has used a performance measure of growth in Adjusted Net Income for
Compensation Purposes over the three-year cycle. Beginning in 2009, the Committee added a second metric of
ROIC for Compensation Purposes and gave these two financial metrics a 50/50 weighting.
The Adjusted Net Income for Compensation Purposes metric is an absolute metric. For the 2017 to 2019
performance cycle, the growth in Adjusted Net Income for Compensation Purposes over the three-year cycle is
based on growth above $217,984,000 (which was the Adjusted Net Income for Compensation Purposes for 2016
when the 2017 to 2019 performance cycle was set). As the 2017 to 2019 Performance Share LTIP table
demonstrates, to pay 100% of target, Adjusted Net Income for Compensation Purposes over the three-year cycle
must be at or above 140% of $217,984,000 (or $305,178,000).
From time to time, the Committee has considered and approved certain limited adjustments to reported net income
(both positive and negative) in determining Adjusted Net Income for Compensation Purposes to evaluate achievement
of performance against the thresholds. Each adjustment is reviewed in detail before it is made. The types of
adjustments the Committee has considered include: rationalization charges, certain asset impairment charges, the
gains and losses on certain transactions including the disposal of certain assets and other special items, which
generally align with the special items disclosed in the Adjusted Net Income table in Appendix A. To the extent an
adjustment relates to restructuring or rationalization charges that are intended to improve organizational efficiency, a
corresponding charge (equal to the adjustment) is amortized against future years’ adjusted net income until that
adjustment is fully offset against the intended savings (generally this amortization occurs over a three-year period).
The ROIC for Compensation Purposes metric for the 2017 to 2019 performance cycle is a relative value that is
derived based on our performance as compared to our proxy peer group (as opposed to an absolute value).
PERFORMANCE THRESHOLDS
In setting the performance thresholds for a new three-year period, the Committee considers various factors,
including historical performance against established thresholds, to try to achieve a 50% probability of the target
thresholds for any cycle. For the 2017 to 2019 Plan, the Committee did not make any modifications to the three-year
adjusted net income growth performance thresholds or the three-year average ROIC relative to peer thresholds.
TIMING FOR SETTING PERFORMANCE METRIC GOALS
Performance targets are set at the beginning of the first fiscal year in the cycle. This timing allows the Committee to
see our final financial results for the prior year and allows for more current macro-economic projections to be used.
Historical LTIPs. The following is a summary of the historical combined LTIP results for the last five completed
LTIP cycles, including the most recently completed cycle (2017 to 2019):
Historical LTIP to Budget (Results for the last five completed LTIP
cycles)
Average
Highest Level
Lowest Level
Results
98.5%
130.2%
74.3%
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2017 to 2019 Performance Share LTIP. For the 2017 to 2019 LTIP cycle, because the Adjusted Net Income for
Compensation Purposes performance threshold and the ROIC for Compensation Purposes performance target were
exceeded, payouts were made at 130.2% of target. The following is a summary of the performance metric goals and
results for the most recently completed LTIP cycle (2017 to 2019):
2017 to 2019 Performance Share LTIP
Payout Amount
3-Year Adjusted Net
Income for Compensation
Purposes Growth
3-Year Average ROIC
for Compensation Purposes
% of Target
Absolute LECO Net Income (’000s)
Relative to LECO Peer Group
Threshold
Target
Maximum
25%
50%
100%
150%
200%
10%
25%
40%
60%
80%
$239,782
40th %ile
$272,480
50th %ile
$305,178
65th %ile
$348,774
70th %ile
$392,371
80th %ile
9.6%
11.4%
13.5%
13.6%
19.4%
Actual Payout
130.2%
71.1%
@ 50%
Weighting
35.6%
189.3%
@ 50%
Weighting
94.6%
As shown above, the current plan cycle contains two metrics, each with a 50% weighting. The growth of Lincoln Electric’s
Adjusted Net Income for Compensation Purposes over the three-year period was 31.3%, which generated a 35.6% of target
payout for this metric. Lincoln Electric’s three-year average return on invested capital (ROIC) for Compensation Purposes,
as compared to its peer group, was at the 78th percentile, which generated a 94.6% of target payout for this metric. The
following chart shows the target and maximum number of shares of common stock that may be issued for the 2017 to 2019
Performance Share LTIP based on actual performance. Combining the payouts for both metrics, the resulting final payout
for the 2017 to 2019 Performance Share LTIP was 130.2% of the target award opportunity.
NEO
Target Award
Opportunity
(# of shares)
Maximum Award
Opportunity Based
on Thresholds
(# of shares)
Actual
Performance Share
Payout %
Actual Award
(# of shares)
Christopher L. Mapes
14,115
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
3,235
2,645
1,490
1,410
28,230
6,470
5,290
2,980
2,820
130.2%
130.2%
130.2%
130.2%
130.2%
18,377
4,211
3,443
1,939
1,835
2019 LONG-TERM INCENTIVE ARRANGEMENTS
In evaluating 2019 long-term incentive compensation (at the beginning of 2019), the Committee reviewed 2017 and 2018
compensation versus the competitive benchmarks. The Committee concluded that overall the long-term incentive
compensation program for the NEOs was below our 50th percentile target when compared to both survey and peer proxy
data. At the February 2019 meeting, the Committee increased 2019 long-term incentive compensation opportunities for the
NEOs on average 11%. All of these awards are subject to our Recovery of Funds Policy, which is discussed below.
2020 LONG-TERM INCENTIVE ARRANGEMENTS
In evaluating 2020 long-term incentive compensation (at the beginning of 2020), the Committee reviewed 2018 and 2019
compensation versus the competitive benchmarks. The Committee concluded that overall the long-term incentive
compensation program for the NEOs was below our 50th percentile target when compared to both survey and peer proxy
data. However, similar to base salary and target EMIP bonus, long-term incentive compensation opportunities remained flat
to 2019, which kept the long-term incentive compensation opportunities for the NEOs slightly below the 50th percentile.
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Valuation of Equity Awards. Beginning with the 2016 grants, for shares under our 2015 Equity and Incentive Compensation
Plan, the Committee established set valuation methods in order to convert the approved long-term incentive compensation
values to shares upon the grant date. These methods consider a 7-day historical average of the stock price, up to and including
the grant date, for RSUs and Performance Shares and the grant date Black-Scholes valuation for stock options.
Normal Cycle and Out-of-Cycle Equity Awards. The Committee has discretion in awarding grants to EMIP participants and
does not delegate its authority to management, nor does management select or influence the award dates. Occasionally,
the Committee may approve limited, out-of-cycle special awards for specific business purposes or in connection with
executive promotions or the hiring of new executive employees. However, the date used for awards to all EMIP participants,
including the NEOs, is the date of a regularly scheduled Committee meeting, which is fixed well in advance and generally
occurs at the same time each year.
The Committee has approved delegated authority to the CEO to designate awards through 2020 to certain employees
under the 2015 Equity and Incentive Compensation Plan, subject to specific limits established. The CEO can only grant
RSU awards and cannot grant awards to any executive officers, Section 16 officers or greater-than-10% beneficial owners
of the Company, and must be granted per the agreements and vesting terms already approved by the Committee.
OTHER ARRANGEMENTS, POLICIES AND PRACTICES
OVERVIEW OF BENEFITS
We intend to provide a competitive group of benefits for all of our employees targeted at the 50th percentile of the market.
Some aspects of our benefit programs are considered non-traditional due to their relationship with our pay for performance
and incentive-based philosophies. For example, the premiums for Lincoln Electric-provided medical coverage are 100%
paid by employees, including the NEOs, on a pre-tax basis. Premiums for dental coverage, which is a voluntary benefit, are
also 100% paid by employees. Life insurance coverage paid fully by Lincoln Electric is set at $50,000 per employee,
including the NEOs, although employees may purchase additional insurance at their own cost. The NEOs participate in this
same cost-sharing approach. We attempt to balance our various non-traditional programs (such as those with a significant
portion of the cost borne by the employee) with more traditional programs.
We also provide accidental death and dismemberment benefits to officers, due to the significant amount of travel required
in their jobs. Under this program, the premiums of which are paid by the Company, a participant’s beneficiary would receive
a payment of five times annual total cash compensation up to a maximum of $3,000,000 for executive officers and
$2,000,000 for other officers upon an officer’s accidental death. The policy also provides dismemberment benefits of up
to 100% of the death benefit in the event an officer is permanently and totally disabled as a result of an accident, and it
provides for medical evacuation coverage in the event of an accident.
PERQUISITES
Consistent with our pay for performance philosophy, we offer limited perquisites. We pay for an annual physical for officers
and other senior management to preserve our investment in them by encouraging them to maintain healthy lifestyles and be
proactive in preventative care. We also make available financial planning services to certain officers, enabling them to
concentrate on business matters rather than on personal financial planning. However, the cost of these financial planning
services is included in the income of the participants. We also pay the cost of certain club dues for some officers to
encourage social interaction with peers from other companies, local leadership in the community and to provide the ability
to hold business meetings at a convenient offsite location. All personal expenses are borne entirely by the executive and
the club dues are included in the income of the participants. Initiation fees for club memberships are paid by the executive.
Different perquisites are provided from time to time to non-U.S. based executives; however, they are customary and
reasonable in nature and amount relative to local market practices (for example, a car lease).
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RETIREMENT PROGRAMS
Retirement benefits are provided to our NEOs through the following programs:
• This defined benefit pension plan was frozen to new entrants effective January 1, 2006 (no new employees eligible to
join the RAP after January 1, 2006; eligible employees participate in The Lincoln Electric Company Employee Savings
The Lincoln Electric Company Retirement Annuity Program (RAP)
Plan described below)
• Benefit accruals frozen effective as of December 31, 2016 (participants will not earn any additional benefits under the
RAP after December 31, 2016)
• Estimated retirement benefits under the RAP for the NEOs that are shown in the Pension Benefits Table are based on
an NEO’s frozen benefit under the RAP as of December 31, 2019
The Lincoln Electric Company Employee Savings Plan (401(k) Plan)
• All of the NEOs deferred amounts under the 401(k) Plan in 2019
• Each eligible employee of The Lincoln Electric Company and certain affiliate companies is eligible to receive up to 6% of
annual compensation in Company Contributions through:
• matching employer contributions equal to 100% of before-tax contributions made to the 401(k) Plan, but not in excess
of 3% of annual compensation; and
• automatic employer contributions equal to 3% of annual compensation
• Matching and automatic contributions are 100% vested when made
• Certain employees affected by the RAP freeze (described above) are also eligible to receive employer contributions equal to
6% of annual compensation for a minimum period of five years, up to the end of the year in which they complete 30 years of
service
Supplemental Executive Retirement Plan (SERP)
• Frozen to new entrants since 2005
• Effective as of December 1, 2016, the value of the frozen accrued vested benefit of each SERP participant was converted
to a notional balance, calculated by projecting to December 31, 2016 the participant’s SERP benefit and calculating the
present value of that projected benefit
• Participants’ account balances are credited with earnings, gains and losses in accordance with each participant’s investment
elections which will be made in a manner similar to that undertaken by participants in the Amended and Restated 2005
Deferred Compensation Plan for Executives
Restoration Plan
• Created effective January 1, 2017, this unfunded plan is maintained primarily for the purpose of providing deferred
compensation for eligible employees whose annual compensation is expected to be in excess of the Internal Revenue Code
limit on compensation (Code Limit) applicable to the 401(k) Plan
• Each participant’s account is credited each year with deferred amounts generally as follows:
• matching employer contributions equal to 3% of annual compensation in excess of the Code Limit; and
• non-elective employer contributions equal to 3% of annual compensation in excess of the Code Limit
• All amounts deferred are fully vested at all times
• Certain employees affected by the RAP freeze are also eligible to receive employer contributions equal to 6% of annual
compensation in excess of the Code Limit for a minimum period of five years, up to the end of the year in which they
complete 30 years of service
• Upon a separation from service prior to age 55, distribution of the account will be made in a single lump sum on the first
business day of the seventh month immediately following the separation from service
• Upon a separation from service on or after age 55, distribution of the account will be made or commence on the first
business day of the seventh month immediately following the separation from service in the form of (1) a single lump sum
payment; or (2) substantially equal annual installments over a period of at least two but not more than 15 years, as elected
• All NEOs participated in the Restoration Plan in 2019
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• Participants can defer current income on a pre-tax basis, receiving tax-deferred returns on those deferrals
Amended and Restated 2005 Deferred Compensation Plan for Executives (Top Hat Plan)
• Up to 80% of base salary and/or annual bonus can be deferred
• Up to 100% of RSUs or Performance Shares can be deferred
• For cash deferrals, 27 total investment options available, 26 of which mirror the funds available under the 401(k) Plan,
plus the Moody’s Corporate Bond Average Index (which provides “above market” earnings as reported in the Summary
Compensation Table)
• RSUs and Performance Shares that are deferred are deemed invested in a Lincoln Electric Stock fund; these deferrals can
be reallocated to other investment options on the later of 6 months after the date on which the amounts are allocated to the
participant’s account or the date the participant has satisfied his or her stock ownership guidelines
• Plan includes a recovery of funds provision consistent with the requirements of Dodd Frank
• Distributions are permitted in the event of a separation from service, disability, death, change in control or unforeseeable
emergency
• Distributions can also be made at a specified time or under a fixed schedule
• Distributions may be made in a lump-sum, or by payment in five, ten or fifteen annual installments
• As of December 31, 2019, there were 12 active employee participants in the Top Hat Plan
More information on these programs can be found in the 2019 Pension Benefits section and 2019 Deferred Compensation
Benefits section.
CHANGE IN CONTROL ARRANGEMENTS
We have entered into change in control agreements with all of our NEOs. The agreements are designed generally to help
assure continued management in the event of a change in control of Lincoln Electric.
The change in control agreements are operative only if a change in control occurs and payments are made if the officer’s
employment is terminated (or if the officer terminates employment due to certain adverse employment changes). The
agreements provide our NEOs with the potential for continued employment following a change in control, which helps to
retain these executives and provide for management continuity in the event of an actual or threatened change in control of
Lincoln Electric. They also help ensure that our executives’ interests remain aligned with shareholders’ interests during a
time when their continued employment may be in jeopardy. For a more detailed discussion of our change in control
agreements, see Termination and Change in Control Arrangements below. Outside of these change in control agreements,
we do not maintain written employment or other severance agreements for U.S.-based employees.
RECOVERY OF FUNDS POLICY
We have adopted a Recovery of Funds Policy (clawback policy) consistent with the requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank). Our policy is more extensive than what Dodd-Frank requires
and is applicable to all of our officers, including our NEOs. The policy applies in the event that there is an accounting
restatement involving our financial statements due to material non-compliance with the financial reporting requirements
under the U.S. federal securities laws. The policy applies to both current and former officers and covers incentive
compensation received by the officers in the 3-year period prior to the restatement.
Awards of incentive compensation would include annual bonus payments, stock option awards, restricted stock awards,
RSUs, and Performance Shares, unless Dodd-Frank regulations provide otherwise. Under the policy, in the event of an
accounting restatement of our financial statements, the Committee would review all incentive compensation received during
the 3-year covered period and would seek recovery of the amount of incentive compensation paid in excess of what would
have been paid if the accounts had been properly stated. We believe that this policy is in the best interests of Lincoln
Electric and its shareholders.
ANTI-HEDGING/PLEDGING POLICY
Consistent with our philosophy to encourage long-term investment in our common stock, our Directors, executive officers
and certain other employees are prohibited from engaging in any speculative transactions involving our securities, including
buying or selling puts or calls, or engaging in any derivative or hedging transaction that has the effect of limiting or hedging
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 5 8
M E N U
economic exposure with respect to such person’s position in our securities, short sales and margin purchases. In addition,
our insider trading policy prohibits future pledging of Lincoln Electric securities by our Directors, executive officers and
certain other employees. There are no pledges of our common stock in place for any of our Directors or executive officers.
STOCK OWNERSHIP GUIDELINES
In keeping with our philosophy that officers should maintain an equity interest in Lincoln Electric, we have stock ownership
guidelines for officers. The guidelines were reviewed in 2019 and the executive group designations were updated based on
a review of our peer group. Under the current guidelines, our officers are required to own and hold a certain number of our
common shares, currently at the levels set forth in the table below:
Executive Group
Chief Executive Officer1
Executive Vice Presidents2
Senior Vice Presidents and all other
Executive Officers3
Ownership Guideline
5 times base salary
3 times base salary
2 times base salary
(1) Mr. Mapes.
(2) Includes Messrs. Petrella, Blankenship, Hedlund and Ms. Ansberry as well as 3 other officers.
(3) Includes other EMIP participants.
Each officer has five years to satisfy his or her applicable stock ownership guideline. An officer must satisfy the applicable
stock ownership guideline before he or she is permitted to sell shares, including shares issued as a result of RSUs vesting
or Performance Shares vesting (other than shares withheld to cover taxes) and shares obtained from the exercise of stock
options (other than shares withheld to cover exercise cost and taxes). Unless an officer is promoted into a higher guideline
level, the stock ownership guideline will reset every 5 years utilizing updated base pay and stock price information. RSU
awards count towards an officer’s stock ownership amount, however common shares underlying stock options,
Performance Shares and shares held in another person’s name (including a relative) do not. As of December 31, 2019, all
of our NEOs met the applicable stock ownership guideline, with the exception of Ms. Ansberry, who is on target to meet her
guidelines by the end of her respective five-year period.
DEDUCTIBILITY OF COMPENSATION
Our general philosophy has historically been to qualify future compensation for tax deductibility wherever applicable and
appropriate. Qualification is sought to the extent practicable and only to the extent that it is consistent with our overall
compensation objectives. Although a portion of the amount we recorded as compensation to Messrs. Mapes, Blankenship
and Hedlund in 2019 was non-deductible, this does not cause substantial impact to our income tax position. All of the
compensation paid to the other NEOs during 2019 was tax deductible by Lincoln Electric for federal income tax purposes.
As part of the 2017 Tax Cuts and Jobs Act (the “Tax Reform Act”), the ability to rely on the performance-based
compensation exception under Section 162(m) of the U.S. Internal Revenue Code (“Section 162(m)”) was generally
eliminated, and the limitation on deductibility generally was expanded to include all NEOs. As a result of the Tax Reform
Act, going forward and subject to certain grandfathered provisions, we will no longer be able to deduct any compensation
paid to our NEOs in excess of $1 million. The Committee continues to assess the impact of the amendments to Section
162(m) to determine what adjustments to our executive compensation practices, if any, it considers appropriate.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
5 9
COMPENSATION
COMMITTEE REPORT
The Compensation and Executive Development Committee has reviewed and discussed the Compensation Discussion and
Analysis contained in this Proxy Statement with our management and, based on this review and discussion, recommends
that it be included in our Annual Report on Form 10-K for the year ended December 31, 2019 and this Proxy Statement.
By the Compensation & Executive Development Committee:
William E. MacDonald, III, Chair
Michael F. Hilton
Kathryn Jo Lincoln
Phillip J. Mason
Hellene S. Runtagh
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 6 0
M E N U
EXECUTIVE COMPENSATION TABLES
Summary of 2019 Compensation Elements
Base Pay
Annual
Bonus
(EMIP)
Stock
Options
RSUs
m
r
e
T
-
t
r
o
h
S
m
r
e
T
-
g
n
o
L
Performance
Shares
Benefits
other than
Pension
h
t
o
B
Pension
Benefits3
Perquisites
Purpose
Rewards
responsibility,
experience and
individual
performance
Rewards strong
annual financial
results and
individual
performance
Rewards the
creation of
shareholder value
Rewards the
creation of
shareholder value
and strong
long-term
financial results
Rewards the
creation of
long-term growth
and the efficient
use of capital
Includes 401(k)
contributions,
Restoration Plan
contributions,
insurance and
standard expatri-
ate benefits
Includes RAP and
above-market
earnings in the
Top Hat Plan and
Restoration Plan
Meets specific
business needs—
includes financial
planning, annual
physical and cer-
tain club dues
Competitive
Target
Financial
Metrics Used
When the 2019
Amount Was Set
The Period
to Which the
Amount Relates
Where
Reported
in the SCT1
Below
Market
—
Beginning
of 2019
2019
Salary column
Above
Market (tar-
get total cash
compensation)
EBITB and
AOWC/Sales2
Beginning
of 2019
2019
Performance
Non-Equity
Incentive Plan
Compensation
column
Share Price
Appreciation
Beginning
of 2019
2019 Based
Award
Option Awards
column
Share Price
Appreciation
Beginning
of 2019
2019 Based
Award
Stock Awards
column
At
Market
Adjusted Net
Income2 Growth
and ROIC2
Beginning
of 2019
2019 through
2021
Performance
Stock Awards
column
At
Market
—
—
—
Various
2019
All Other
Compensation
column
Various
For RAP, shows
changes in
2019. For
above-market
earnings, shows
2019 amounts
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings column
Various
2019
All Other
Compensation
column
(1) Summary Compensation Table.
(2) Financial metrics used for compensation purposes are defined in Appendix A.
(3) The SERP, effective November 30, 2016, and the RAP, effective December 31, 2016, were amended to cease all future benefit accruals.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
M E N U
6 1
Change in
Pension Value
and Nonqual-
ified Deferred
Compensation
Earnings($)3
51,059
36,779
33,446
All Other
Compensation
($)4
Total($)
208,213
6,981,969
204,946
7,018,906
187,102
7,692,463
2019 Summary Compensation Table
This table details total compensation paid to our NEOs for 2019, 2018 and 2017.
Name and Principal
Position
Year
Salary
($)
Stock
Awards
($)1
Option
Awards
($)1
Non-Equity
Incentive
Plan Compen-
sation($)2
2019
1,000,0005
2,670,534
1,333,333
1,718,8305
965,000
2,504,772
1,250,009
2,057,400
935,000
2,408,020
1,199,989
2,928,906
Christopher L. Mapes
Chairman, President
and Chief Executive
Officer
Vincent K. Petrella
Executive Vice Presi-
dent, Chief Financial
Officer and Treasurer
George D. Blankenship
Executive Vice
President, President,
Americas Welding
Steven B. Hedlund
Executive Vice
President, President,
International Welding
Jennifer I. Ansberry
Executive Vice
President, General
Counsel and Secretary
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
553,3505
690,540
344,748
633,2505
268,848
176,430
2,667,166
500,000
584,470
291,664
729,600
33,485
173,595
2,312,814
485,000
1,053,455
275,030
952,004
169,120
195,137
3,129,746
515,000
530,816
265,008
538,798
228,095
150,569
2,228,286
500,000
480,892
240,008
677,835
30,101
155,650
2,084,486
500,000
451,238
225,009
869,759
147,410
142,285
2,335,701
425,000
410,538
204,998
399,825
395,000
403,978
176,668
518,796
370,381
356,226
227,608
516,011
—
—
—
426,711
1,867,072
393,691
1,888,133
267,134
1,737,360
411,730
355,882
177,656
375,602
67,829
112,493
1,501,192
2018
394,000
390,736
170,009
444,312
—
104,420
1,503,477
2017
325,000
322,041
119,981
386,111
38,803
67,419
1,259,355
(1) The amounts reported for 2019 reflect the grant date fair value under FASB ASC Topic 718 for the RSU, Performance Share and stock
option awards in 2019. The award date fair value disclosed for Performance Share awards is based on target performance. Assumptions
used in the calculation of these amounts are included in footnote 10 to our audited financial statements for the fiscal year ended
December 31, 2019 included in our Annual Report on Form 10-K filed with the SEC on February 27, 2020.
The amounts shown for stock awards for 2019 represent RSU awards as follows: Mr. Mapes $1,335,267, Mr. Petrella $345,270, Mr.
Blankenship $265,408, Mr. Hedlund $205,269, and Ms. Ansberry $177,941. The amounts shown also include performance shares as
follows: Mr. Mapes $1,335,267, Mr. Petrella $345,270, Mr. Blankenship $265,408, Mr. Hedlund $205,269, and Ms. Ansberry $177,941.
The maximum Performance Share award amount with respect to each of the named executive officers for 2019 is shown in the table
below. The amounts reported reflect the grant date fair value under FASB ASC Topic 718 for the Performance Share awards based on
maximum performance.
Name
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
Year
2019
2019
2019
2019
2019
Maximum Payout
(# of Performance Shares)
Maximum Grant Date
Fair Value Payout
30,196
7,808
6,002
4,642
4,024
$2,670,534
$ 690,540
$ 530,817
$ 410,538
$ 355,883
(2) The amounts shown for 2019 represent payments under our annual bonus (EMIP).
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
6 2
M E N U
(3) The amounts shown for 2019 represent the difference in earnings under the Moody’s Corporate Bond Index fund in our Top Hat Plan and
SERP and a hypothetical rate, and reflect the increase in actuarial value under the RAP.
2019 INCREASE IN PENSION VALUE & PREFERENTIAL EARNINGS (TOP HAT PLAN AND SERP)
Name
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
Difference in 2019
Earnings Credited
in the Top Hat
Plan and SERP($)
Moody’s Corporate
Bond Index Earn-
ings($)
Hypothetical
Market
Rate($)*
51,059
47,750
38,910
—
—
213,237
199,506
163,275
—
—
162,178
151,756
124,365
—
—
RAP($)
—
221,098
189,185
—
67,829
* This rate is specified by the SEC rules for proxy disclosure purposes and is based on 120% of the applicable federal long-term rate,
compounded monthly for 2019.
(4) The amounts shown for 2019 are comprised of the following:
2019 ALL OTHER COMPENSATION
Other Benefits and Perquisites*
Company
Retirement
Contribu-
tions ($)a
Travel
Insurance
Premiums
($)
Financial
Planning
($)
Physical
Examination
($)
Club
Dues
($)
Spousal
Travel
($)
Standard
Expatriate
Benefits
($)b
Total All
Other Com-
pensation
($)
Name
Christopher L.
Mapes
183,444
Vincent K. Petrella
153,954
George D. Blank-
enship
143,140
Steven B. Hedlund
56,628
Jennifer I. Ansberry
102,725
714
714
714
714
714
7,643
7,643
5,583
5,583
8,318
2,543
3,000
13,869
11,119
—
—
—
—
—
—
—
—
1,132
—
—
—
—
363,786
736
—
208,213
176,430
150,569
426,711
112,493
*The methodology for computing the aggregate incremental cost for the amounts is below:
(a) Includes amounts contributed to both the 401(k) Plan and the Restoration Plan.
(b) The expatriate benefits shown relate to Mr. Hedlund’s current international assignment and are provided to all U.S. employees who
take an international assignment. Amounts are converted to U.S. dollars on a monthly basis based on a month-end conversion price,
in local currency, as reported by Bloomberg. The conversion price for Pound Sterling was between £1.22 to £1.33 to $1.00 during the
period in 2019 that Mr. Hedlund was receiving expatriate benefits. Mr. Hedlund’s international assignment included housing,
education, taxes and standard allowances related to relocation and other assignment payments under our standard expatriate
package for all employees. The portion of such amount that relates to tax equalization payments is $142,728.
(5) Mr. Mapes deferred 25% of his 2019 base salary and 25% of his 2019 EMIP bonus under our Top Hat Plan. Mr. Petrella deferred 25% of
his 2019 base salary and 50% of his 2019 EMIP bonus under our Top Hat Plan.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 2019 Grants of Plan-Based Awards
The following table provides information relating to plan-based awards granted in 2019 to our NEOs.
M E N U
6 3
Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards1
Estimated Future Payouts
Under Equity Incentive
Plan Awards2
Name
Grant
Type
Grant Date
Threshold
($)
Target
($)
Max
($)
Threshold
(#)
Target
(#)
Max
(#)
EMIP
2/18/2019
0
1,450,000
2,610,000
Options 2/18/2019
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)3
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)4
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant Date
Fair Value
of Stock
and Option
Awards
($)5
76,365
$88.44
1,333,333
Christopher L.
Mapes
Vincent K.
Petrella
George D.
Blankenship
Steven B.
Hedlund
Jennifer I.
Ansberry
RSUs
PSUs
EMIP
2/18/2019
2/18/2019
0
15,098
30,196
15,098
2/18/2019
0
515,550
927,990
Options
2/18/2019
19,745
$88.44
RSUs
PSUs
EMIP
2/18/2019
2/18/2019
2/18/2019
0
460,000
828,000
Options
2/18/2019
RSUs
PSUs
EMIP
2/18/2019
2/18/2019
2/18/2019
0
375,000
675,000
Options
2/18/2019
RSUs
PSU
EMIP
2/18/2019
2/18/2019
2/18/2019
0
319,770
575,586
Options
2/18/2019
RSUs
PSUs
2/18/2019
2/18/2019
3,904
3,001
2,321
2,012
3,904
7,808
3,001
6,002
2,321
4,642
2,012
4,024
0
0
0
0
15,178
$88.44
11,741
$88.44
10,175
$88.44
1,335,267
1,335,267
344,748
345,270
345,270
265,008
265,408
265,408
204,998
205,269
205,269
177,656
177,941
177,941
(1) The performance-based amounts shown represent the range of cash payouts (from zero to the maximum amount listed) for 2019 under
the EMIP. Payments are based on the achievement of company financial performance and the NEO’s individual performance. Target
awards are set by the Compensation and Executive Development Committee in the first quarter each year. Actual payment amounts are
determined by the Committee in the first quarter of the following year. The targets shown above are pursuant to the EMIP matrix for 2019
(which allows for potential payouts of up to 180% of target), which is reflected in the CD&A.
(2) These columns show the potential number of shares of our common stock to be paid out to our NEOs under our Performance Shares
(PSUs) at threshold, target or maximum performance. The measures and potential payouts are described in more detail in the CD&A.
The grant date fair value, based on target performance for PSUs, is included in the "Stock Awards" column of the Summary Compensation
Table. The PSUs generally vest based on performance during the applicable performance period. Dividend equivalents are sequestered
by us until the shares underlying the PSUs are distributed, at which time the dividend equivalents are paid in cash. The dividend rate for
dividend equivalents paid on the PSUs to the NEOs is the same as for all other shareholders (in other words, it is not preferential).
Recipients of PSUs who participate in our EMIP bonus program (which includes all of the NEOs) are eligible to elect to defer all or a
portion of their PSUs under our Top Hat Plan–see the 2019 Nonqualified Deferred Compensation section for a description of this plan.
(3) The RSUs generally vest upon the recipient remaining in continuous employment for three years from the date of grant. Upon vesting, the
RSUs are paid out solely in our common stock (there is no cash option). Dividend equivalents are sequestered by us until the shares
underlying the RSUs are distributed, at which time the dividend equivalents are paid in cash. The dividend rate for dividend equivalents
paid on the RSUs to the NEOs is the same as for all other shareholders (in other words, it is not preferential). Recipients of RSUs who
participate in our EMIP bonus program (which includes all of the NEOs) are eligible to elect to defer all or a portion of their RSUs under
our Top Hat Plan–see the 2019 Nonqualified Deferred Compensation section for a description of this plan.
(4) The stock options were granted at the closing price of our common shares on the date of the grant. All stock options are non-qualified for
tax purposes. We value stock options using the Black-Scholes valuation method. The stock options generally vest over a three-year
period (in equal annual increments). All stock options have 10-year terms.
(5) The amounts shown represent the full value of the RSU awards, the stock option grants and the target value for the PSU awards
calculated in accordance with FASB ASC Topic 718 as of the date of the grant. The actual amount, if any, realized upon the exercise of
stock options will depend upon the market price of our common shares relative to the exercise price per share of the stock option at the
time of exercise. The actual amount realized upon vesting of RSUs will depend upon the market price of our common shares at the time
of vesting. The actual number and value of PSUs shares earned will be based upon our actual performance during the three-year long-
term incentive plan cycle and the market price at time of vesting. There is no assurance that the hypothetical full values of the awards
reflected in this table will actually be realized.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 6 4
M E N U
NARRATIVE DISCLOSURE REGARDING 2019 SUMMARY COMPENSATION TABLE AND 2019 GRANTS OF PLAN-BASED AWARD TABLE
For 2019, Mr. Mapes’ salary and annual bonus accounted for 38.9% of his compensation reported in the 2019 Summary
Compensation Table, based on the value of his 2019 base salary and 2019 actual EMIP (or annual bonus). For 2019, Mr.
Petrella’s salary and annual bonus accounted for 44.5% of his compensation reported in the 2019 Summary Compensation
Table, Mr. Blankenship’s salary and annual bonus accounted for 47.3% of his compensation reported in the 2019 Summary
Compensation Table, Mr. Hedlund’s salary and annual bonus accounted for 44.2% of his compensation reported in the
2019 Summary Compensation Table and Ms. Ansberry’s salary and annual bonus accounted for 52.4% of her
compensation reported in the 2019 Summary Compensation Table. The above percentages were based, in each case, on
the value of the executive’s 2019 base salary and 2019 actual EMIP (or annual bonus). For information regarding the
amount of salary and annual bonus compensation in proportion to total compensation, see the “Our Compensation
Philosophy” section of the CD&A contained in this Proxy Statement. Further, the grants made in 2019 to the NEOs are
described more fully in the CD&A contained in this Proxy Statement, and information about the change in control severance
agreements and the amounts payable to the NEOs pursuant to those arrangements is provided under the section titled
“Termination and Change in Control Arrangements” in this Proxy Statement.
HOLDINGS OF EQUITY-RELATED INTERESTS
The following provides information relating to exercisable and unexercisable stock options, RSUs and Performance Shares
at December 31, 2019.
Outstanding Equity Awards at 2019 Fiscal Year-End
Option Awards
Stock Awards
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)3
—
—
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable1
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable1
Option
Exercise
Price
($/sh)
Option
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested (#)2
Name
Grant Date
12/13/2012
12/16/2013
2/5/2015
2/17/2016
2/22/2017
2/21/2018
2/18/2019
12/13/2012
12/16/2013
2/5/2015
2/17/2016
2/22/2017
2/21/2018
2/18/2019
2/5/2015
2/22/2017
2/21/2018
2/18/2019
Christopher L.
Mapes
Vincent K.
Petrella
George D.
Blankenship
47,480
44,040
66,550
89,030
45,740
21,964
—
16,620
13,440
16,380
21,910
10,482
5,125
—
—
8,576
4,217
—
—
—
—
—
22,870
43,930
76,365
—
—
—
—
5,243
10,250
19,745
—
4,289
8,435
15,178
47.91
12/13/2022
71.30
12/16/2023
—
—
2/5/2025
16,340
1,580,568
69.67
58.14
85.30
90.70
88.44
2/17/2026
2/22/2027
2/21/2028
2/18/2029
47.91
12/13/2022
71.30
12/16/2023
69.67
58.14
85.30
90.70
88.44
—
85.30
90.70
88.44
2/5/2025
2/17/2026
2/22/2027
2/21/2028
2/18/2029
—
2/22/2027
2/21/2028
2/18/2029
—
14,115
13,808
15,098
—
—
4,020
—
9,115
3,222
3,904
3,240
2,645
2,651
3,001
—
1,365,344
1,335,648
1,460,430
—
—
388,855
—
881,694
311,664
377,634
313,405
255,851
256,431
290,287
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
(#)4
Equity
Incentive Plan
Awards: Market
or Payout
Value of
Unearned
Shares, Units,
or Other Rights
That Have Not
Vested ($)3
—
—
—
—
—
—
—
—
—
—
13,808
15,098
1,335,648
1,460,430
—
—
—
—
—
3,222
3,904
—
—
2,651
3,001
—
—
—
—
—
311,664
377,634
—
—
256,431
290,287
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
6 5
Outstanding Equity Awards at 2019 Fiscal Year-End (continued)
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable1
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable1
Option
Exercise
Price
($/sh)
Name
Grant Date
Steven B.
Hedlund
Jennifer I.
Ansberry
4/24/2013
12/16/2013
2/5/2015
2/17/2016
2/22/2017
5/24/2017
2/21/2018
2/18/2019
12/16/2013
7/24/2014
2/5/2015
2/17/2016
2/22/2017
2/21/2018
2/18/2019
—
5,860
6,155
8,235
4,002
4,582
3,104
—
2,440
442
3,720
3,984
4,572
2,987
—
—
—
—
—
2,003
2,293
6,209
11,741
—
—
—
—
2,288
5,975
10,175
—
71.30
69.67
58.14
85.30
88.74
90.70
88.44
71.30
67.18
69.67
58.14
85.30
90.70
88.44
Option
Expiration
Date
—
12/16/2023
2/5/2025
2/17/2026
2/22/2027
5/24/2027
2/21/2028
2/18/2029
12/16/2023
7/24/2024
2/5/2025
2/17/2026
2/22/2027
2/21/2028
2/18/2029
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)3
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
(#)4
Equity
Incentive Plan
Awards: Market
or Payout
Value of
Unearned
Shares, Units,
or Other Rights
That Have Not
Vested ($)3
Number of
Shares or
Units of
Stock That
Have Not
Vested (#)2
6,410
—
1,510
—
1,235
1,385
2,503
2,321
—
—
915
—
1,410
2,430
2,012
620,039
—
146,062
—
119,462
133,971
242,115
224,510
—
—
88,508
—
136,389
235,054
194,621
—
—
—
—
—
—
—
—
—
—
—
—
1,951
2,321
188,720
224,510
—
—
—
—
—
—
—
—
—
—
1,878
2,012
181,659
194,621
(1) Stock options vest in three equal annual installments, commencing on the first anniversary of the date of the grant.
(2) Amounts shown in this column represent RSU awards. 2017 RSU awards, 2018 RSU awards and 2019 RSU awards vest in full three
years from the date of grant. The RSU awards granted prior to 2016 generally vest in full five years from the date of grant, but are subject
to accelerated vesting in three years if the targets are met for the applicable long-term incentive plan cycle. The RSU award granted to
Mr. Hedlund in 2013 vests over seven years following his attainment of age 55.
(3) The amounts shown in these columns represent RSU and PSU awards pursuant to our 2006 and 2015 Equity and Performance Incentive
Plans. Value is calculated using the close price of our common stock on the last trading day of 2019.
(4) This column shows the target number of Performance Shares awarded in 2018 and 2019. The payout can range from 0 to 200% of the
target and is based upon performance during the three-year cycle ending on December 31, 2020 (with respect to Performance Shares
awarded in 2018), and December 31, 2021 (with respect to Performance Shares awarded in 2019), as determined by the Compensation
and Executive Development Committee. See the CD&A on how PSU payouts are determined.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 6 6
M E N U
2019 Option Exercises and Stock Vested Table
The following table provides information on stock options exercised, as well as RSUs and Performance Shares that vested
during 2019.
Option Awards1
Stock Awards2
Name
Acquired on Exercise(#)
Exercise($)
on Vesting(#)
Vesting($)
Number of Shares
Value Realized on
Number of Shares Acquired
Value Realized on
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
28,500
19,250
53,305
12,540
—
1,677,593
1,157,916
1,137,870
636,830
—
61,319
14,776
11,960
5,906
4,363
5,638,152
1,358,826
1,099,830
542,770
400,021
(1) The number of shares acquired on exercise reflects the gross number of shares acquired, without considering any shares that were
withheld to pay the option exercise price and/or to satisfy tax withholding requirements. The value realized on exercise represents the
gross number of shares acquired on exercise multiplied by the market price of our common stock on the exercise date, less the per share
exercise price.
(2) The number of shares acquired on vesting reflects the gross number of shares acquired, without considering any shares that were
withheld to satisfy tax withholding requirements. The value realized on vesting for RSUs represents the gross number of shares acquired,
multiplied by the closing price of our common stock on each applicable vesting date, plus the value of dividend equivalents. The value
realized on vesting for Performance Shares represents the gross number of shares acquired, relative to the 2016-2018 performance cycle
that paid out during 2019 and the 2017-2019 performance cycle that was considered earned as of December 31, 2019 but paid out in
March 2020, multiplied by the closing price of our common stock on each applicable vesting date, plus the value of dividend equivalents.
Amounts are not reduced to reflect any elections by our NEOs to defer receipt of RSUs or Performance Shares award payouts into our
Top Hat Plan: Mr. Mapes, 19,915 RSUs and $87,427 in dividend equivalents deferred in 2019; and Mr. Blankenship, 3,443 Performance
Shares and $17,146 in dividend equivalents deferred in 2020. For more information about this deferral program, see the CD&A in the
“Overview of Benefits” section.
2019 PENSION BENEFITS
RETIREMENT ANNUITY PROGRAM (RAP)
No new participants have been added to the RAP since 2006. Accordingly, neither Mr. Mapes nor Mr. Hedlund, who joined
Lincoln Electric after 2006, was eligible to participate in the RAP. Effective as of December 31, 2016, the RAP was
amended to cease all future benefit accruals for all participants, so that the participants will not earn any additional benefits
under the RAP after December 31, 2016.
2019 PENSION BENEFITS TABLE
The following provides information relating to potential payments and benefits under our RAP for the NEOs who participate
in that program. As noted above, Mr. Mapes and Mr. Hedlund are not participants in the RAP.
Name
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
Number of Years
Credited
Service(#)
Present Value
of Accumulated
Benefit($)
Payments During
Last Fiscal
Year($)
Plan Name
RAP
RAP
RAP
RAP
RAP
—
211
311
—
121
—
1,584,1952
1,242,5632
—
290,4162
—
—
—
—
—
(1) Under the RAP, credited years of service equals actual years of service from the date of hire with Lincoln Electric through December 31,
2016, the date that the RAP was amended to cease all future benefit accruals. All of the NEOs are currently under normal retirement age
under the terms of the plan.
(2) This represents the actuarial present value of accrued benefits in the RAP for the NEOs who participate at December 31, 2019. However,
this is an estimated full value number that is discounted to a current date. The above actuarial present values were determined using a
3.42% discount rate, RP-2014 Annuitant table, with blue collar adjustment, protected generationally with Scale MP-2019, age 60
commencement and no decrements for death or termination prior to age 60. All of the NEOs who participate are currently vested in their
RAP benefits because they each have at least five years of service with us.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
6 7
The following table provides additional information regarding the RAP benefit:
Name
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
When Eligible for a Full,
Unreduced Benefit under
the RAP
Accrued Annual Benefit Payable
under the RAP at Age 60
(as of December 31, 2019)($)1
–
2020
2022
–
2033
–
103,836
85,573
–
27,110
(1) Vested participants who are below the normal retirement age of 60 may receive an earlier reduced benefit after he or she reaches age 55.
2019 DEFERRED COMPENSATION BENEFITS
DEFERRED COMPENSATION PLAN (TOP HAT PLAN)
Our Amended and Restated 2005 Deferred Compensation Plan for Executives (Top Hat Plan) is designed to be a “top-hat”
plan that complies with Section 409A of the Internal Revenue Code. Participation is limited to management and highly
compensated employees as approved by the Committee.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP)
No new participants have been added to the SERP since 2005. Accordingly, neither Mr. Mapes nor Mr. Hedlund, who joined
Lincoln Electric after 2005, nor Ms. Ansberry, who was not eligible to participate in the SERP prior to 2005, participates in the
SERP. Effective November 30, 2016, the SERP was amended to cease all future benefit accruals and to fully vest those who
had a benefit under the SERP. Effective as of December 1, 2016, pursuant to the amendment of the SERP, the value of the
frozen accrued vested benefit of each SERP participant was converted to a notional account balance. The account balance
was determined by projecting to December 31, 2016 the participant’s SERP benefit and calculating the present value of that
projected benefit. Participants have the ability to make investment elections for their account in a manner similar to that
undertaken by participants in the Amended and Restated 2005 Deferred Compensation Plan for Executives.
RESTORATION PLAN
Our Restoration Plan is designed to provide deferred compensation for eligible employees whose annual compensation is
expected to be in excess of the Internal Revenue Code limit on compensation (Code Limit) applicable to the 401(k) Plan.
A summary of the Top Hat Plan and Restoration Plan is provided in the CD&A in the “Overview of Benefits” section.
2019 NONQUALIFIED DEFERRED COMPENSATION TABLES
The following three tables provide deferred compensation information for 2019 for the NEOs.
TOP HAT PLAN
Executive
Registrant
Aggregate
Aggregate
Contributions in
Contributions in
Aggregate Earnings in
Withdrawals/
Balance at Last
Name
Last Fiscal Year($)
Last Fiscal Year($)
Last Fiscal Year($)
Distributions($)
Fiscal Year-End($)
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
250,0001
503,1375
—
—
—
1,848,7092
—
—
—
—
2,248,2033
190,8676
139,198
8,946
—
—
—
—
—
—
16,759,1464
3,332,5564
753,5584
48,6004
—
(1) Included as compensation for 2019 in the “Salary” column of the Summary Compensation Table and is described in its footnotes.
(2) Represents 19,915 RSUs and $87,427 in cash attributable to dividend equivalents that vested during 2019 and were deferred into the Top
Hat Plan.
(3) Of the amount reported, $51,059 is included as compensation for 2019 in the “Change in Pension Value and Nonqualified Deferred
Compensation Earnings” column of the Summary Compensation Table and is described in its footnotes.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 6 8
M E N U
(4) The portions of the amount reported that relate to deferral contributions in prior years have all been reported in the Summary
Compensation Table in those years to the extent the individual was a NEO for those years.
(5) Of the amount reported, $138,337 is included as compensation for 2019 in the “Salary” column of the Summary Compensation Table and
the remainder was included as compensation for 2018 in the “Non-Equity Incentive Plan Compensation” column of the Summary
Compensation Table and is described in its footnotes.
(6) Of the amount reported, $25,222 is included as compensation for 2019 in the “Change in Pension Value and Nonqualified Deferred
Compensation Earnings” column of the Summary Compensation Table and is described in its footnotes.
SERP
The following table reflects the earnings during 2019 related to the SERP.
Executive Con-
Registrant Con-
Aggregate
Aggregate
tributions in Last
tributions in Last
Aggregate Earnings in
Withdrawals/
Balance at Last
Name
Fiscal Year($)
Fiscal Year($)
Last Fiscal Year($)
Distributions($)
Fiscal Year-End($)
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
—
—
—
—
—
—
—
—
—
—
—
94,5811
163,3373
—
—
—
—
—
—
—
—
2,467,7592
4,262,7732
—
—
(1) Of the amount reported, $22,528 is included as compensation for 2019 in the “Change in Pension Value and Nonqualified Deferred
Compensation Earnings” column of the Summary Compensation Table and is described in its footnotes.
(2) The portions of the amount reported that relate to deferral contributions in prior years have all been reported in the Summary
Compensation Table in those years to the extent the individual was a NEO for those years.
(3) Of the amount reported, $38,910 is included as compensation for 2019 in the “Change in Pension Value and Nonqualified Deferred
Compensation Earnings” column of the Summary Compensation Table and is described in its footnotes.
RESTORATION PLAN
Effective January 1, 2017, all NEOs were eligible to receive deferred compensation amounts credited to an account under
the Restoration Plan, providing benefits that could not be provided under the 401(k) Plan due to IRS limitations on covered
compensation. The following table reflects the contributions and earnings under the Restoration Plan attributable to such
amounts with respect to 2019.
Registrant
Aggregate
Executive
Contributions in
Aggregate
Balance at Last
Contributions in
Last Fiscal Year($)
Last Fiscal Year
($)1
Aggregate Earnings in
Withdrawals/
Last Fiscal Year($)
Distributions($)
Fiscal Year-End
($)2
—
—
—
—
—
166,644
120,354
109,540
39,828
69,125
88,807
77,371
55,911
19,653
27,121
—
—
—
—
—
539,695
429,064
364,240
115,325
177,593
Name
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
(1) Amounts reported are included in compensation for 2019 in the “All Other Compensation” column of the Summary Compensation Table
above and is described in its footnotes.
(2) The portions of the amount reported that relate to deferral contributions in prior years have all been reported in the Summary
Compensation Table in those years to the extent the individual was a NEO for those years.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
6 9
TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
The Key Compensation Programs table below highlights the benefits and payments available to NEOs in the event of a
termination of employment and/or a change in control. The Termination and Change in Control Table below reflects the
estimated additional amounts of compensation each NEO would receive in the event of a termination of employment and/or
a change in control. Termination events include: a voluntary termination by the executive; normal retirement of the executive
(defined as termination at age 60 or later with 5 years of service); an involuntary, not-for-cause termination by Lincoln
Electric; a for-cause termination by Lincoln Electric; a termination upon a change in control; and a termination due to death
or disability. In addition, estimated additional compensation amounts are shown in the event of a change in control without
termination of employment. The amounts shown assume that each event occurred on December 31, 2019, the last business
day of the calendar year.
TERMINATION OF EMPLOYMENT
No written agreements exist that provide additional payments to a NEO in the event of a voluntary termination of
employment with Lincoln Electric or a termination of employment initiated by Lincoln Electric (whether for cause or not). We
do not have employment agreements or severance agreements, except for our change in control severance agreements
described below.
Pursuant to our standard employment policies, upon termination of employment, a NEO would be entitled to receive the
same benefits and payments that are generally available to salaried employees:
• Earned but unpaid base pay, up to the date of
• Amounts held in the executive’s account under our Top Hat
termination;
Plan (based on the executive’s election);
• Earned and unused paid time off, up to the date of
• Deferred vested benefits under our RAP—payments for which
termination;
Vested amounts held in the executive’s account under
•
could begin at normal retirement age 60 or as early as age 55
(but at a reduced amount);
our 401(k) Plan;
• Amounts held in the executive’s account under our
Restoration Plan.
CHANGE IN CONTROL
We have entered into change in control severance agreements with our NEOs. Pursuant to our change in control severance
agreements, in the event of a “change in control,” if the NEO’s employment is terminated without “cause” (as defined in the
change in control severance agreement) or the NEO terminates employment for “good reason” (as defined in the change in
control severance agreement) during the severance period (as described below) (or for certain other employment
terminations prior to and related to the change in control, as described in the change in control severance agreement), we
will make severance payments and provide certain benefits as indicated in the Key Compensation Programs table below.
The severance period commences on the date of the first occurrence of a change in control and ends on the earlier of (a)
the second anniversary of the change in control, or (b) the executive’s death. Our NEOs are required to abide by certain
restrictive covenants and execute a release of claims in order to receive certain severance payments and benefits under the
change in control severance agreements.
The following events in general would constitute a change in control:
• any individual, entity or group is or becomes the
• certain reorganizations, mergers or consolidations, or the sale
beneficial owner of 30% or more of the combined voting
or other disposition of all or substantially all of the assets of
power of the then-outstanding voting stock of Lincoln
Lincoln Electric, or certain other corporate transactions are
Electric;
consummated; or
• a majority of the Board ceases to be comprised of
• approval by the shareholders of a complete liquidation or
incumbent Directors;
dissolution of Lincoln Electric.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
7 0
M E N U
Key Compensation Programs
Voluntary
Termination/
Termination
with
Cause
Involuntary
Termination/
Termination
without Cause
Normal
Retirement
(age 60 and 5
years of
service)1
Severance
None
Company has
discretion
None
Annual Bonus
(EMIP)
Forfeited
Forfeited
Pro-rata
portion of
EMIP.3
Long-Term
Incentive
Plan
(Performance
Shares)
Forfeited
Forfeited
Pro-rata
portion of
Performance
Shares, based
on actual
performance.4
Stock Options
Unvested
stock options
forfeited.
Unvested
stock options
forfeited.
Entitled to
exercise
vested stock
options for a
period of
three months
after
termination.5,6
Entitled to
exercise
vested stock
options for a
period of
three months
after
termination.5,6
Pro-rata
vesting of any
unvested stock
options with
right to
exercise such
vested options
for the
remaining
period of the
original
10-year term.5
RSUs
Forfeited
Forfeited
Pro-rata
vesting of RSU
awards
Outplacement
None
None
None
Change in Control
(with Termination)2
Change in Control
(No Termination)
Death or
Disability
Lump-sum payment
equal to the sum of
base pay and bonus
as described in the
severance
agreement times
three for the CEO
and times two for
other NEOs.
Pro-rata portion of
EMIP payment equal
to the greater of
the actual or target
amount.
Pro-rata portion of
Performance Shares
equal to the greater
of target or actual
performance, if
replacement award
provided and
subsequent
qualifying
termination.
Accelerated vesting
of unvested stock
options, if
replacement award
provided and
subsequent
qualifying
termination.
Entitled to exercise
vested stock options
for a period of three
months after
termination.5,6
Accelerated vesting
of RSU awards, if
replacement award
provided and
subsequent
qualifying
termination.
Maximum of
$100,000 for CEO
and $50,000 for the
Other NEOs.
None
None
Pro-rata EMIP payment
equal to the greater of
the actual or target
amount.
Pro-rata
portion of
EMIP.3
No accelerated vesting
if replacement award
provided and
continued employment.
Pro-rata portion of
Performance Shares
granted prior to the
change in control,
equal to the greater of
target or actual
performance, if no
replacement award
provided.
No accelerated vesting
if replacement award
provided and
continued employment.
Accelerated vesting of
unvested stock options
granted prior to
change in control, if no
replacement award
provided.
No accelerated vesting
if replacement award
provided and
continued employment.
Accelerated vesting of
RSU awards granted
prior to change in
control, if no
replacement award
provided.
Vesting of
Performance
Shares at
target.
Accelerated
vesting of
unvested
stock options.
Entitled to
exercise stock
options for a
period of one
year after
death or
three years
after
disability.5
Vesting of
RSU awards.
None
None
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
7 1
Key Compensation Programs (continued)
Voluntary
Termination/
Termination
with
Cause
Involuntary
Termination/
Termination
without
Cause
Normal
Retirement
(age 60 and 5
years of service)1
Change in Control
(with Termination)2
Change in Control
(No Termination)
Death or
Disability
280G
Treatment
Other
N/A
N/A
N/A
7
N/A
N/A
Continuing
medical and/
or dental
coverage
under COBRA,
for which the
executive
would pay
102% of the
applicable
premium.
Continuing
medical and/
or dental
coverage
under COBRA,
for which the
executive
would pay
102% of the
applicable
premium.
Continuing
medical and/or
dental coverage as
a retiree, with
102% of the
premium paid by
the executive.
Normal vesting of
benefits under the
SERP, provided the
executive is a
participant.8
Continuing medical
insurance (102% of
the premium paid by
the executive) and
life insurance for a
period of three years
following the NEO’s
termination date.9
9
Continuing
medical and/
or dental
coverage with
102% of the
premium paid
by the
executive (or
his or her
surviving
dependents).
(1) Subject to any 409A deferred payment requirements.
(2) Provision applicable in the event of a termination without Cause or termination for Good Reason in connection with a Change in Control.
With respect to Performance Shares, Stock Options and RSUs, such termination without Cause or termination for Good Reason must
occur within a period of two years after the Change in Control (or in certain employment terminations prior to and related to the change in
control) to receive the accelerated vesting treatment.
(3) Based on the executive’s period of employment during the calendar year, subject to achievement of the applicable personal and financial goals.
(4) Based on the executive’s periods of employment during each of the open three-year cycles and upon completion of each cycle, subject to
achievement of the applicable financial goals.
(5) After which time the vested stock options would expire.
(6) Vested stock options canceled if the executive is terminated for cause or the executive engaged in competitive conduct within six months
of termination.
(7) Severance payments reduced to the 280G (excess parachute payment) safe harbor limit, unless the executive would achieve a better after-tax
result paying the excise tax imposed on excess parachute payments. No payment, net of taxes, to compensate for any excise tax imposed.
(8) Financial planning services for the year of retirement and for one calendar year thereafter.
(9) Amounts and/or shares (from vested RSUs or Performance Shares) held in executives’ accounts under the Top Hat Plan automatically paid out.
Termination and Change in Control Table
The following table sets forth estimates of the potential incremental payments to each of our NEOs upon the specified
termination events and upon a change in control, both with and without a qualified termination, assuming that each such
event took place on the last business day of 2019.
The table does not quantify benefits under plans that are generally available to salaried employees that do not discriminate
in favor of NEOs, including the RAP, the 401(k) Plan, the health care plan and the life insurance plan.
The 2019 Annual Bonus (EMIP) amounts represent the difference between target EMIP and actual EMIP payments (as
disclosed in the Non-Equity Incentive Plan Compensation column of the 2019 Summary Compensation Table) if target
EMIP exceeds actual EMIP in connection with a hypothetical change in control as of the last business day of 2019.
Similarly, the amounts shown for LTIP (Performance Shares) for 2019 represent the difference between target performance
level and actual performance level if target performance level exceeds actual performance level assuming a change in
control occurred on the last business day of 2019. For 2019, the amounts shown for LTIP (Performance Shares) include the
pro-rata portion of the target amounts for the two cycles of the Performance Share LTIP (2018-2020 cycle and 2019-2021
cycle) that were open as of the last business day of 2019. The amounts shown for LTIP (Performance Shares) do not
include any value for the 2017-2019 cycle, since the cycle paid out above target.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 7 2
M E N U
The following table assumes, in the event of a change in control, replacement awards are provided pursuant to the 2015
Equity and Incentive Compensation Plan’s respective Stock Option Agreement, Restricted Stock Unit Agreement, and
Performance Share Agreement (“Agreements”). Pursuant to the Agreements, if the respective equity awards are not
replaced, all outstanding equity awards will accelerate as of the closing date of the change in control. In the event of a
change in control where no replacement awards are provided, the accelerated equity values are consistent with the
accelerated equity values under Change in Control (Replacement Awards; Qualified Termination).
In addition, the table includes all equity that is accelerated as a result of termination but does not include the value of
outstanding equity awards that have previously vested, such as stock options, which awards are set forth above in the
Outstanding Equity Awards at December 31, 2019 table. For descriptions of the compensation plans and agreements that
provide for the payments set forth in the following table, including our change in control agreements, see the “Elements of
Executive Compensation” discussion contained in the CD&A.
Involuntary Termination/Termination
without Cause before Normal Retirement
Normal Retirement (Age 60):
LTIP (Performance Shares)
Stock Options—Accelerated Vesting
RSUs—Accelerated Vesting
Change in Control (Replacement Awards; Qualified
Termination):
Severance
2019 Annual Bonus (EMIP)
LTIP (Performance Shares)
Christopher L.
Mapes
Vincent K.
Petrella
George D.
Blankenship
Steven B.
Hedlund
Jennifer I.
Ansberry
$ 0
$ 0
$ 0
$ 0
$ 0
Not Eligible
Not Eligible
Not Eligible
Not Eligible
Not Eligible
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$ 16,661,080
$ 5,281,152
$ 4 ,103,552
$ 3 ,808,979
$2,688,093
$ 9,014,653
$ 2,547,885
$2,383,510
$1,794,759
$1,618,913
$ 0
$ 0
$ 0
$ 0
$ 0
$ 1,419,387
$ 343,728
$ 275,872
$ 206,723
$ 191,686
Stock Options—Accelerated Vesting
$ 1,159,364
$ 285,406
$ 225,702
$ 175,961
$ 146,515
RSUs–Accelerated Vesting
Outplacement Estimate
280G Cutback
$ 6,012,156
$ 2,054,133
$1,168,468
$1,581,536
$ 680,979
$ 100,000
$ 50,000
$ 50,000
$ 50,000
$ 50,000
$ (1,044,480) $ 0
$ 0
$ 0
$ 0
Change in Control (Replacement Awards; No Termination):
$ 0
$ 0
$ 0
$ 0
$ 0
2019 Annual Bonus (EMIP)
LTIP (Performance Shares)
Stock Options—Accelerated Vesting
RSUs—Accelerated Vesting
Death or Disability:
$ 0
$ 0
$ 0
$ 0
$ 0
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$ 10,045,164
$ 3,047,660
$ 1 ,955,974
$ 2,182,044
$ 1 ,214,245
LTIP (Performance Shares)
$ 2,873,644
$ 708,121
$ 561,804
$ 424,547
$ 386,751
Stock Options—Accelerated Vesting
$ 1,159,364
$ 285,406
$ 225,702
$ 175,961
$ 146,515
RSUs—Accelerated Vesting
$ 6,012,156
$ 2,054,133
$1,168,468
$1,581,536
$ 680,979
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
7 3
PAY RATIO
For 2019, we estimate that the ratio of the annual total compensation of our CEO ($6,981,969, which is the same amount
reported for our CEO in the 2019 Summary Compensation Table) to the annual total compensation of our median employee
($45,062) is 155:1. We note that, due to our permitted use of reasonable estimates and assumptions in preparing this pay
ratio disclosure, the disclosure may involve a degree of imprecision, and thus this ratio disclosure is a reasonable estimate
calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions described below.
In accordance with Item 402(u) of Regulation S-K, in calculating our CEO pay ratio for 2019, we do not believe we
experienced a change in our employee population or employee compensation arrangements that would significantly impact
our pay ratio disclosure, therefore we looked to use the same median employee as we used to calculate the CEO pay ratio
for 2018. However, the particular employee we selected in 2018 as our median employee is no longer employed by the
Company. As such, and as allowed by SEC rules and regulations, we have used a substitute median employee in
calculating our 2019 pay ratio. This substitute employee’s compensation is substantially similar to that of the median
employee identified in 2018.
In accordance with the foregoing, in 2018 we determined our median employee based on total cash and equity
compensation paid to our active employees as of October 1, 2018 for the period beginning on January 1, 2018 and ending
on December 31, 2018. We included all full time, part time, seasonal and temporary employees, whether employed
domestically or overseas, and whether employed directly or by a consolidated subsidiary. Compensation for employees
hired during 2018 was annualized for all employees other than seasonal employees.
Once the median employee was identified, annual total compensation for the employee was calculated using the same
methodology used for our NEOs as set forth in the 2019 Summary Compensation Table. Of the employees that were
identified as potential median employees, we selected an employee based in the U.S. that was representative of our largest
portion of our workforce. Given the different methodologies that various public companies will use to determine an estimate
of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 7 4
M E N U
MANAGEMENT
OWNERSHIP OF SHARES
The following table sets forth certain information regarding ownership of shares of common stock of Lincoln Electric as of
December 31, 2019 (except as otherwise indicated) by each of our Directors and NEOs, as well as our Directors and
executive officers as a group. Except as otherwise indicated, voting and investment power with respect to shares reported
in this table are not shared with others.
RSUs and Performance Shares are generally not reflected in the table as there is no ability to vote or invest the shares
attributable to them until they vest. The table includes shares that would be received upon the vesting of RSUs within 60
days of December 31, 2019.
BENEFICIAL OWNERSHIP TABLE
Directors
NEOs
Curtis E. Espeland
Patrick P. Goris
Stephen G. Hanks
Michael F. Hilton
G. Russell Lincoln
Kathryn Jo Lincoln
William E. MacDonald, III
Phillip J. Mason
Ben P. Patel
Hellene S. Runtagh
Christopher L. Mapes
Vincent K. Petrella
George D. Blankenship
Steven B. Hedlund
Jennifer I. Ansberry
Number of Shares of
Lincoln Electric
Common Stock Beneficially
Owned1
12,085
552
22,042
5,313
272,2942
844,4713
16,849
14,470
1,113
24,878
418,8144
167,4005
79,4716
55,9477
31,6698
Percent of Class
*
*
*
*
*
1.39%
*
*
*
*
*
*
*
*
*
All Directors and Executive Officers as a group (23 persons)
2,210,1689
3.60%
* Indicates less than 1%
(1) Reported in compliance with the beneficial ownership rules of the SEC, under which a person is deemed to be the beneficial owner of a
security, for these purposes, if he or she has, or shares, voting power or investment power over the security or has the right to acquire
the security within 60 days of December 31, 2019. With respect to the NEOs and executive officers, the amounts reported do not include
any Performance Shares that vested and paid out in March 2020, as the number of Performance Shares to be received by each
executive officer was unknown within 60 days of December 31, 2019.
(2) Of the shares reported, Mr. Lincoln held of record 216,464 shares. 1,028 shares held of record by his spouse. The remaining shares were
held of record as follows: 35,154 shares by the Laura R. Heath Family Trust for which Mr. Lincoln serves as a trustee; 19,648 shares by
The G.R. Lincoln Family Foundation for which Mr. Lincoln serves as a trustee. Mr. Lincoln disclaims beneficial ownership of the shares
held by his spouse, the trusts and the Foundation.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
7 5
(3) Of the shares reported, 44,194 shares were held of record by a trust established by Ms. Lincoln, under which she has sole investment
and voting power. The remaining 800,277 shares were held of record by The Lincoln Institute of Land Policy, of which Ms. Lincoln is the
Chair, as to which shares Ms. Lincoln disclaims beneficial ownership. Ms. Lincoln has shared voting and shared investment power on
these 800,277 shares.
(4) Of the shares reported, Mr. Mapes held of record 33,721 shares. Mr. Mapes has or had the right to acquire 385,093 shares upon the
exercise of stock options within 60 days of December 31, 2019.
(5) Of the shares reported, Mr. Petrella held of record 53,359 shares, 39,837 shares of which are held jointly with spouse and 3,296 shares
of which are held in the 401(k) Plan. Mr. Petrella has or had the right to acquire 13,135 shares upon the vesting of RSUs within 60 days of
December 31, 2019. Mr. Petrella has or had the right to acquire 100,906 shares upon the exercise of stock options within 60 days of
December 31, 2019.
(6) Of the shares reported, Mr. Blankenship held 49,873 shares of record, 2,140 shares of which are held jointly by Mr. Blankenship and his
spouse and 6,136 shares of which are held in the 401(k) Plan. Mr. Blankenship has or had the right to acquire 3,240 shares upon the
vesting of RSUs within 60 days of December 31, 2019. Mr. Blankenship has or had the right to acquire 26,358 shares upon the exercise
of stock options within 60 days of December 31, 2019.
(7) Of the shares reported, Mr. Hedlund held 12,244 shares of record, 383 shares of which are held in the Stock Purchase Plan, and 2,241
shares of which are held in the 401(k) Plan. Mr. Hedlund has or had the right to acquire 2,745 shares upon the vesting of RSUs within 60
days of December 31, 2019. Mr. Hedlund has or had the right to acquire 40,958 shares upon the exercise of stock options within 60 days
of December 31, 2019.
(8) Of the shares reported, Ms. Ansberry held of record 2,533 shares, 20 shares of which are held jointly with her spouse. Ms. Ansberry has
the right to acquire 2,325 shares upon the vesting of RSUs within 60 days of December 31, 2019. Ms. Ansberry has or had the right to
acquire 26,811 shares upon the exercise of stock options within 60 days of December 31, 2019.
(9) Includes 34,020 shares that are RSUs held by all executive officers, as a group, that vest within 60 days of December 31, 2019 and
733,757 shares which all executive officers, as a group, have or had the right to acquire upon the exercise of stock options within 60 days
of December 31, 2019.
In addition to the above management holdings, as of December 31, 2019, the 401(k) Plan held 1,133,083 shares of our
common stock, or approximately 1.87% of the shares of our common stock outstanding.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information regarding outstanding options and restricted stock units and shares reserved for
issuance under our equity compensation plans as of December 31, 2019:
Number of Securities
to Be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights
(a)1
Weighted-Average
Exercise Price
of Outstanding
Options, Warrants
and Rights
(b)2
Number of Securities
Remaining Available For
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected In
Column (a))
(c)3
Plan category
Equity compensation plans approved by security holders
2,029,510
$71.25
2,699,660
Equity compensation plans not approved by security holders(4)
—
Total
2,029,510
—
—
—
2,699,660
(1) The amount shown in column (a) includes the following: nonqualified stock options of 1,318,290; deferred restricted stock units of
132,026; performance-based restricted stock units of 196,130 (assuming payout levels at maximum - as a result, this aggregate reported
number may overstate actual dilution); and time-based restricted stock units of 383,064.
(2) The weighted average exercise price in column (b) includes nonqualified stock options only.
(3) The amount shown in column (c) represents common shares remaining available under the 2015 Equity and Incentive Compensation
Plan (“Employee Plan”) and the 2015 Stock Plan for Non-Employee Directors (“2015 Director Plan”). The Employee Plan provides for the
granting of options, appreciation rights, restricted shares, restricted stock units and performance-based awards. The 2015 Director Plan
provides for the granting of options, restricted shares and restricted stock units. Under the Employee Plan, for any award that is not an
Option Right or Appreciation Right, 3.24 common shares are subtracted from the maximum number of common shares available under
the plan for every common share issued under the award. For awards of Option Rights or Appreciation Rights, however, only one
common share is subtracted from the maximum number of common shares available under the Employee Plan for every common share
granted. The amount in the table assumes payout levels at target for performance-based restricted stock units. Under the Director Plan
only one common share is subtracted from the maximum number of common shares available for every common share granted.
(4) The Company does not maintain equity compensation plans that have not been approved by its shareholders.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 7 6
M E N U
OTHER OWNERSHIP OF
SHARES
Set forth below is information about the number of shares held by any person (including any “group” as that term is used in
Section 13(d)(3) of the Exchange Act) known to us to be an owner of more than 5% of the shares of our common stock as of
December 31, 2019.
Name and Address of Beneficial Owner
Number of Shares and Nature of
Beneficial Ownership
The Vanguard Group
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
BlackRock, Inc.
55 East 52nd Street
New York, New York 10055
State Street Corporation
One Lincoln Street
Boston, Massachusetts 02111
JPMorgan Chase & Co.
383 Madison Avenue
New York, New York 10179
6,127,7901
5,856,8652
3,537,6213
3,226,2594
Percent of
Class
10.11%
9.67%
5.84%
5.32%
(1) According to its Schedule 13G/A filed on February 12, 2020, The Vanguard Group has sole voting power over 33,508 shares, shared
voting power over 8,436 shares, sole dispositive power over 6,093,167 shares and shared dispositive power over 34,623 shares. In its
Schedule 13G/A filing, The Vanguard Group states that the shares of our common stock reported in the filing were acquired and held in
the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing
the control of the issuer of the securities and were not acquired in connection with or as a participant in any transaction having such
purpose or effect, other than activities solely in connection with a nomination under §240.14a-11.
(2) According to its Schedule 13G/A filed on February 5, 2020, BlackRock, Inc. has sole voting power over 5,634,738 shares and sole
dispositive power over 5,856,865 shares. In its Schedule 13G/A filing, BlackRock states that the shares of our common stock reported in
the filing were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with
the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with
or as a participant in any transaction having that purpose or effect.
(3) According to its Schedule 13G filed on February 14, 2020, State Street Corporation has shared voting power over 3,408,001 shares and
shared dispositive power over 3,537,621 shares. In its Schedule 13G filing, State Street Corporation states that the shares of our
common stock reported in the filing were acquired and are held in the ordinary course of business and were not acquired and are not
held for the purpose or with the effect of changing or influencing the control of the issuer of such securities and were not acquired and
are not held in connection with or as a participant in any transaction having such purpose or effect.
(4) According to its Schedule 13G filed on January 24, 2020, JPMorgan Chase & Co. has sole voting power over 3,095,210 shares and sole
dispositive power over 3,226,259 shares. In its Schedule 13G filing, JPMorgan Chase & Co. states that the shares of our common stock
reported in the filing were acquired and are held in the ordinary course of business and were not acquired and are not held for the
purpose of or with the effect of changing or influencing the control of the issuer of such securities and were not acquired in connection
with or as a participant in any transaction having such purpose or effect, other than activities solely in connection with a nomination
under §240.14a-11.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
7 7
COMPENSATION
COMMITTEE INTERLOCKS
AND INSIDER
PARTICIPATION
During 2019, each of Messrs. MacDonald, Hilton, and Mason and Ms. Lincoln and Ms. Runtagh served on the
Compensation and Executive Development Committee. No Compensation and Executive Development Committee member
was an employee of Lincoln Electric or any of its subsidiaries, and there were no reportable business relationships between
Lincoln Electric and the Compensation and Executive Development Committee members. None of our executive officers
serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive
officers serving as a member of our Compensation and Executive Development Committee. In addition, none of our
executive officers serves as a member of the compensation committee of any entity that has one or more of its executive
officers serving as a member of our Board.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 7 8
M E N U
ANNUAL MEETING PROPOSALS
PROPOSAL 1
Election of 11 Directors
to Serve until 2021
Annual Meeting
PROPOSAL 2
Ratification of
Independent Registered
Public Accounting Firm
✔
➜
✔
The Board recommends a vote FOR all Director Nominees. Our Nominating
and Corporate Governance Committee and our Board of Directors have
determined that each of the Director nominees possesses the right skills,
qualifications and experience to effectively oversee Lincoln Electric’s long-term
business strategy.
See “Proposal 1 - Election of Directors” beginning on page 18 of this Proxy
Statement for additional information.
The Board recommends a vote FOR this proposal.
Our Board of Directors recommends that shareholders vote “FOR” the ratification
of the appointment Ernst & Young LLP as Lincoln Electric’s independent
registered public accounting firm for the year ending December 31, 2020.
Fees for professional services provided by Ernst & Young LLP as our independent auditors in each of the last two fiscal
years, in each of the following categories are:
2019
2018
Audit Fees
$ 3,034,000
$ 3,318,000
Audit-Related Fees
Tax Fees
All Other Fees
Total Fees
60,000
180,000
—
72,000
436,000
—
$ 3,274,000
$ 3,826,000
Audit Fees include fees associated with the annual integrated audit of the financial statements and internal control over
financial reporting in 2019 and 2018, the reviews of our quarterly reports on Form 10-Q, certain statutory audits required for
our international subsidiaries and services provided in connection with regulatory filings with the SEC. Audit-Related Fees
for 2019 and 2018 primarily relate to audit-related services associated with acquisitions, new accounting pronouncements
and other international statutory requirements. Tax Fees include tax compliance and tax advisory services. All Other Fees
include the fees billed for products and services provided other than the services reported under Audit Fees, Audit-Related
Fees and Tax Fees.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has established a policy regarding pre-approval of all audit and non-audit services performed by our
independent auditors, including the scope of and fees for such services. Generally, requests for audit, audit-related and tax
services, each as defined in the policy, must be presented for approval prior to the performance of such services, to the
extent known at that time. For 2019, the Audit Committee has resolved that four specific categories of services, namely
audit services, audit-related services, tax advisory services, and tax compliance services, are permissible without itemized
pre-approval in an amount not to exceed for each service:
Pre-Approval Amount
$200,000
Audit, and Audit-Related services for acquisitions, new accounting pronouncements and other
international statutory requirements
Services
$800,000
Tax Advisory and Tax Compliance services
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
M E N U
7 9
Itemized detail of all such services performed is subsequently provided to the Audit Committee. In addition, our independent
auditors are prohibited from providing certain services described in the policy as prohibited services. All of the fees included
in Audit Fees, Audit-Related Fees and Tax Fees shown above were pre-approved by the Audit Committee (or included in
the $200,000 or $800,000 limits, as applicable, for certain services as detailed above).
Generally, requests for independent auditor services are submitted to the Audit Committee by our Executive Vice President,
CFO and Treasurer (or other member of our senior financial management) and our independent auditors for consideration at
the Audit Committee’s regularly scheduled meetings. Requests for additional services in the categories mentioned above
may be approved at subsequent Audit Committee meetings to the extent that none of such services is performed prior to its
approval (unless such services are included in the categories of services that fall within the dollar limits detailed above). The
Chairman of the Audit Committee is also delegated the authority to approve independent auditor services requests under
certain dollar thresholds provided that the pre-approval is reported at the next meeting of the Audit Committee. All requests
for independent auditor services must include a description of the services to be provided and the fees for such services.
Representatives of Ernst & Young LLP are expected to be available at the Annual Meeting, will have an opportunity to make
a statement if they so desire and are expected to be available to respond to appropriate shareholder questions. Although
ratification of the appointment of the independent auditors is not required by law, the Audit Committee and the Board
believe that shareholders should be given the opportunity to express their views on the subject. While not binding on the
Audit Committee or the Board, the failure of the shareholders to ratify the appointment of Ernst & Young LLP as our
independent auditors would be considered by the Board in determining whether or not to continue the engagement of Ernst
& Young LLP. Ultimately, the Audit Committee retains full discretion and will make all determinations with respect to the
appointment of independent auditors, whether or not our shareholders ratify the appointment.
MAJORITY VOTE NEEDED
Ratification requires the affirmative vote of the majority of the shares of our common stock present or represented and
entitled to vote on the matter at the Annual Meeting. Unless otherwise directed, shares represented by proxy will be voted
FOR ratification of the appointment of Ernst & Young LLP. Abstentions will have the same effect as a vote “against” the
proposal.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 8 0
M E N U
PROPOSAL 3
Approval, on an Advisory
Basis, of Named
Executive Officer
Compensation
✔
The Board recommends a vote FOR this proposal.
Our Board recommends that shareholders vote “FOR” the approval, on an
advisory basis, of the compensation of our named executive officers (NEOs) for
2019.
Say-on-Pay Vote at 2019 Annual Meeting
98%
Approval
98%
of shareholders who voted on
the “say-on-pay” proposal voted
FOR the approval of the
compensation of our NEOs.
The Compensation and Executive Development Committee believes that the historically positive say-on-pay shareholder
vote reinforces the philosophy and objectives of our executive compensation program. Our next say-on-pay vote will be
held at the 2021 Annual Meeting.
Our compensation philosophy is to pay for performance, a philosophy that has been rooted in our history and tradition for
125 years. Our compensation program consists of elements designed to complement one another and focus on both short-
term and long-term performance. The Compensation and Executive Development Committee regularly reviews peer group
data and best practices and trends related to executive compensation to ensure that our programs are properly aligned with
our business strategy and philosophy, as well as promote shareholder value. The Committee receives advice from
independent consultants. In addition to the information provided earlier in the CD&A section, we believe shareholders
should consider the following in determining whether to approve this proposal:
OUR CULTURE AND PERFORMANCE
To maintain a performance-driven culture, we:
• expect our executives to deliver above-market financial
• take action when needed to address specific business
results;
challenges; and
• provide systems that tie executive compensation to
• maintain good governance practices in the design and
superior financial performance;
operation of our executive compensation programs.
We have a long track record of delivering increased value to our shareholders.
PAY FOR PERFORMANCE
In designing our executive compensation programs, a core philosophy is that our executives should be rewarded when they
deliver financial results that provide value to our shareholders. Therefore, we have established a program that ties executive
compensation to superior financial performance.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
M E N U
8 1
We have a balanced pay mix between short-term and long-term incentives:
• Base Salaries. Base salaries for our NEOs are generally
• Performance Share Payouts Were Above Target. For the
targeted at the 45th percentile of benchmark data (below
2017-2019 performance cycle, the Performance Shares paid
market median). For 2019, the average base salary
out above target, as a result of ROIC for Compensation
increase for the NEOs was 5.9%.
Purposes performance above target and Adjusted Net
• Annual Bonus Awards Are Aligned with Our Performance
Income for Compensation Purposes performance above
and Contain a Balanced Mix of Metrics. The total cash
threshold.
compensation for our NEOs, which includes base pay and
• Long-Term Incentives Are Aligned with the Interests of Our
the annual bonus (EMIP), is targeted at the 65th percentile
Shareholders. We believe that incentives should be based
of benchmark data (above market median). The EMIP is
on factors that deliver long-term sustainability for Lincoln
based on a balance of metrics—both financial and per-
Electric. Therefore, the NEOs receive three types of long-
sonal—with the financial components based on EBITB
term incentives. The three components are: (1) stock
and AOWC/Sales for Compensation Purposes and with a
options, (2) RSUs and (3) Performance Shares. Total
mix of consolidated and, if applicable, segment perfor-
awards are targeted at the 50th percentile of benchmark
mance. For 2019, annual bonus payments for the NEOs
data (at market median).
decreased 18%.
GOOD GOVERNANCE PRACTICES
In addition to our emphasis on pay for performance, we design our programs to be current with best practices and good
corporate governance. We also consider the risks associated with any particular program, design or compensation
decision. We believe these assessments result in sustained, long-term shareholder value. Some of the governance
practices include:
• Officers Are Subject to Stock Ownership Guidelines
• Broad Clawback Policy
• Compensation and Executive Development Committee
• Change in Control Agreements Require a Double-Trigger
Receives Regular Updates
• No Tax Gross-Ups
• Compensation and Executive Development Committee
• No Hedging or Pledging of Lincoln Electric stock by
Retains Independent Advisors
officers
• No Compensation Consultant Conflicts of Interest
• Limited Perquisites
• No Multi-Year Guarantees on Compensation
• No Dividends on Unvested RSUs or Performance Shares
As illustrated above, the Compensation and Executive Development Committee has and will continue to take action to
structure our executive compensation program in a manner that is performance-based, current with best practices and
good corporate governance and aimed at sustaining long-term shareholder value. The Board believes that the executive
compensation disclosed in the CD&A section, tabular disclosures (including the 2019 Summary Compensation Table) and
other narrative disclosures in this Proxy Statement aligns with our peer group pay practices and compensation philosophy.
As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities
Exchange Act of 1934, we are asking you to cast an advisory (non-binding) vote on the following resolution at the Annual
Meeting:
RESOLVED, that the compensation awarded to our NEOs, as disclosed pursuant to Item 402 of Regulation S-K in the
Compensation Discussion and Analysis and the tabular disclosure (together with the accompanying narrative disclosure)
in this Proxy Statement, as required by the rules of the Securities and Exchange Commission, is hereby approved on an
advisory basis.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 8 2
M E N U
YOUR VOTE MATTERS TO US
As an advisory vote, this proposal is not binding on us. However, the Compensation and Executive Development
Committee, which is responsible for designing and administering our executive compensation programs, values the
opinions expressed by shareholders in their vote on this proposal and expects to consider the outcome of the vote when
making future compensation decisions for NEOs.
MAJORITY VOTE NEEDED
A favorable vote of a majority of the shares of our common stock present or represented by proxy and entitled to vote on
the matter is necessary for approval of the proposal. Abstentions will have the same effect as a vote “against” the proposal
and broker non-votes will not be counted for determining whether the proposal is approved.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE, FOR APPROVAL, ON AN ADVISORY BASIS, OF
THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
8 3
AUDIT COMMITTEE
REPORT
The Audit Committee consists solely of independent Directors within the meaning of the Nasdaq listing standards. The Audit
Committee oversees our financial reporting process on behalf of the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process, including the systems of internal control over financial
reporting. In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management the audited
financial statements in the Annual Report, including a discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee discussed with the independent auditors, who are responsible for expressing an opinion on the
conformity of those audited financial statements with U.S. generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed
with the Audit Committee by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”)
and the SEC. In addition, the Audit Committee has received and discussed with the independent auditors written
disclosures regarding their independence as required by PCAOB Ethics and Independence Rule 3526, Communication with
Audit Committees Concerning Independence.
The Audit Committee discussed with our internal and independent auditors the overall scope and plan for their respective
audits. The Audit Committee met with the internal and independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial
reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors
(and the Board approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year
ended December 31, 2019 for filing with the SEC. The Audit Committee and the Board have also recommended the
selection of Ernst & Young LLP as our independent auditors for the year ending December 31, 2020 and the ratification
thereof by the shareholders.
By the Audit Committee:
Stephen G. Hanks, Chair
Curtis E. Espeland
Patrick P. Goris
G. Russell Lincoln
Ben P. Patel
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 8 4
FAQS
M E N U
Who is soliciting proxies and why? Who is paying for the cost of this proxy solicitation?
The Board solicits the proxy and the Company pays the solicitation cost. Certain officers and employees may also solicit
proxies, but do not receive compensation for these activities. We also reimburse custodians, nominees and fiduciaries for
reasonable expenses incurred to forward and obtain proxy materials from beneficial holders.
How do we distribute proxy materials to shareholders sharing the same address?
We use “householding” rules to deliver only one set of voting materials (Annual Report, Proxy Statement) to shareholders
who share the same address, unless we receive contrary instructions from one or more shareholders at that address. Each
shareholder receives a separate proxy card. We will promptly deliver upon request a separate set of proxy materials.
How do I obtain a separate set of proxy materials at no cost?
Send a written notice to the Corporate Secretary at Lincoln Electric Holdings, Inc., 22801 St. Clair Avenue, Cleveland, Ohio
44117-1199.
Who may vote?
Record holders as of the close of business on February 28, 2020 (the record date) are entitled to vote at the Annual
Meeting. As of the record date, 60,156,998 shares of our common stock were outstanding and each share is entitled to one
vote per proposal brought before the meeting.
What is required for there to be a quorum at the Annual Meeting?
Holders of at least a majority of the shares of our common stock issued and outstanding on the record date (February 28,
2020) must be present, in person or by proxy, to constitute a quorum.
How do I attend and participate in the Annual Meeting?
Any shareholder of record as of the record date (February 28, 2020) can attend the Annual Meeting online at
www.virtualshareholdermeeting.com/LECO2020. The webcast will start at 11:00 a.m. ET. Shareholders may submit
pre-meeting questions online by visiting www.proxyvote.com. Questions must be submitted by Monday, April 20, 2020 at
5:00 p.m. ET. You will need your 16-digit control number that is printed on your proxy card or on the instructions that
accompanied your proxy materials to access the meeting. Instructions on how to attend the Annual Meeting are posted at
www.virtualshareholdermeeting.com/LECO2020. We encourage you to access the meeting prior to the start time to
allow ample time to complete the online check-in process.
If you encounter any technical difficulties accessing the virtual meeting during check-in or meeting time, please call the
technical support number that will be posted on the Virtual Shareholder Meeting log in page.
Why is the Annual Meeting a virtual, online meeting?
As a part of our precautions regarding COVID-19 (coronavirus), we have decided to hold our Annual Meeting solely online.
We believe that hosting a virtual meeting under the current environment will facilitate shareholder attendance and
participation by enabling shareholders to participate from any location around the world and improves our ability to
communicate more effectively with our shareholders. We have designed the virtual meeting to provide substantially the
same opportunities to participate as you would have at an in-person meeting. We are providing opportunities to submit
questions prior to the meeting, to enable us to address appropriate questions at the Annual Meeting.
What is the difference between holding shares as a registered shareholder or as a beneficial holder?
• Registered Shareholders: If your shares are directly registered in your name with our transfer agent/registrar, you are
considered the registered shareholder, or shareholder of record. Proxy materials will be sent directly to you and you may
vote during the meeting at www.virtualshareholdermeeting.com/LECO2020, or by telephone, by Internet, or by mail in
the envelope provided.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
8 5
• Beneficial Holders: You are a beneficial holder if your shares are held indirectly in a brokerage account, by a trustee, or by
another nominee. These entities are considered the shareholder of record and the shares are considered held in “street
name.” Proxy materials are sent to the entity and they forward a voting instruction card to you, the beneficial holder. As a
beneficial holder, you have the right to direct the entity on how to vote your shares and you may also attend the Annual
Meeting. Since you are not the shareholder of record, you may not vote during the meeting unless you obtain a legal proxy
from the entity that holds your shares. Please refer to the information your broker, trustee or nominee provided to see what
voting options are available to you. If you have not heard from your broker, trustee or nominee, please contact them.
What shares are included on the proxy card?
Shareholder type:
Registered Shareholder &
participant in The Lincoln
Electric Company Employee
Savings Plan (401(k) Plan)
Shares included on
the proxy card:
All shares registered in your
name will be represented
(including 401(k) plan shares)
Note: If you do not have
identical names on your
accounts, we cannot
consolidate your share
information.
Beneficial Holder with
shares held by a broker,
trustee or nominee
Both a Registered Shareholder
and a Beneficial Holder of
shares
You will receive a voting
instruction form from your
broker, trustee or nominee
instructing you on how to
vote.
You will receive a proxy card
from us and a voting instruction
form from your nominee
instructing you on how to vote.
What is a broker non-vote and what effect does it have?
A broker non-vote occurs when a broker or other nominee does not receive voting instructions from the beneficial holder and
is then unable to vote the shares. If you hold your shares beneficially through a broker, trustee or nominee, you must
communicate your voting instructions to them to have your shares voted. Please note that your nominee cannot vote
on your behalf on the election of Directors (Proposal 1) and the approval, on an advisory basis, of NEO compensation
(Proposal 3) unless you provide specific voting instructions to them by following the instructions provided to you.
Broker non-votes, as well as abstentions, will be counted to determine whether a quorum is present at the Annual Meeting.
Broker non-votes will not be counted when determining votes for a particular proposal (i.e., it will not be considered a vote “cast”).
How do I vote?
Registered Shareholders
Vote during the meeting at www.virtualshareholdermeeting.com/LECO2020 or by proxy in any one of four ways
outlined in the Proxy Summary section of this Proxy Statement.
Participants in the 401(k) Plan
The 401(k) Plan’s independent Trustee, Fidelity Management Trust Company, will vote your 401(k) Plan shares according
to your voting directions, which you can provide by Internet, telephone or mail. As 401(k) Plan shares are held in a
qualified plan, you are not able to vote 401(k) Plan shares during the Annual Meeting. If you do not vote, the Trustee will
not vote your plan shares.
Beneficial Holders
If your shares are held by a bank, broker, trustee or some other nominee (in street name), that entity will give you
separate voting instructions.
What happens if I sign, date and return my proxy but do not specify how I want my shares voted on the proposals?
Registered Shareholders: Your shares will be voted FOR the election of all of the Director nominees, FOR the ratification of
the appointment of our independent registered public accounting firm, and FOR the approval, on an advisory basis, of
the compensation of our NEOs.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 8 6
M E N U
Beneficial Holders: Your nominee cannot vote your uninstructed shares on non-routine matters such as Proposal 1 (election
of Directors) and Proposal 3 (approval, on an advisory basis, of NEO compensation). Your nominee can vote your
uninstructed shares on routine matters such as Proposal 2 (ratification of the appointment of our independent registered
public accounting firm).
May I revoke my proxy or change my vote?
Registered Shareholders: Yes, you may change or revoke your proxy prior to the closing of the polls in any one of the
following FOUR ways:
1. Send a written notice to our Corporate Secretary stating that you want to revoke your proxy;
2. Mail a completed and signed proxy card with a later date (which will automatically revoke the earlier proxy);
3. Vote by telephone or Internet at a later date (which will automatically revoke the earlier proxy); or
4. Vote during the Annual Meeting at www.virtualshareholdermeeting.com/LECO2020. Because 401(k) plan shares
are held in a qualified plan, you are not able to revoke or change your vote on 401(k) plan shares at the Annual
Meeting.
Beneficial Holders: Check with your broker, trustee or nominee to determine how to change your vote.
Who counts the votes?
Broadridge Financial Solutions, Inc. is the independent agent who receives and tabulates the votes. They are also our
inspector of elections at the Annual Meeting.
May I receive future shareholder communications over the Internet?
Registered Shareholders: Yes. Please mark the appropriate box on your proxy card, or follow the prompts if voting by
telephone or Internet.
Beneficial Holders: Refer to the information provided by your nominee on how to select future shareholder communications
by Internet.
When are shareholder proposals due to be considered for inclusion in next year’s Annual Meeting in 2021?
In order to have a shareholder proposal included in Lincoln Electric’s proxy materials for the 2021 Annual Meeting, a
shareholder proposal must be received in writing by the Corporate Secretary at Lincoln Electric Holdings, Inc., 22801 St.
Clair Avenue, Cleveland, Ohio 44117-1199 on or before November 20, 2020.
If shareholders want to present proposals at our 2021 Annual Meeting that are not included in Lincoln Electric’s proxy
materials, they must comply with the requirements in our Amended and Restated Code of Regulations. These include
providing a written notice containing certain information, and such notice must be received no earlier than December 23,
2020 and no later than January 22, 2021. If the Board of Directors chooses to present any information submitted after the
applicable deadlines at the 2021 Annual Meeting, then the persons named in proxies solicited by the Board for the 2021
Annual Meeting may exercise discretionary voting power with respect to such information.
May I submit a nomination for Director?
Yes. A shareholder must send a written notice to the Corporate Secretary at Lincoln Electric Holdings, Inc., 22801 St. Clair
Avenue, Cleveland, Ohio 44117-1199. The notice must include information about the shareholder and the person he or she
intends to nominate, which is required by our Amended and Restated Code of Regulations. Nominations must be received in
the Corporate Secretary’s Office at least 80 days before the date of the annual meeting at which the nomination is to be made.
If we have not publicly announced the date of the annual meeting more than 90 days prior to the annual meeting date,
shareholder nominations would have needed to be received in the Corporate Secretary’s Office no later than the close of
business on the tenth day following the day on which we publicly announced the date of the annual meeting. For the 2020
Annual Meeting, we had to receive nominations no later than the close of business on February 2, 2020, as we publicly
announced the date of this year’s Annual Meeting on January 13, 2020, which is more than 90 days prior to this year’s
Annual Meeting date. Accordingly, no additional nominations can be made for this year’s Annual Meeting.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
8 7
HOW DO I CONTACT LINCOLN ELECTRIC?
FOR GENERAL INFORMATION:
TO CONTACT THE DIRECTORS:
Lincoln Electric Holdings, Inc.
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199
Attention: Amanda Butler,
Vice President, Investor
Relations & Communications
Lincoln Electric Holdings, Inc.
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199
Attention: Corporate Secretary
Please name any specific intended Board recipient(s) in the
communication. Prior to forwarding any correspondence, the
Corporate Secretary will review the correspondence and, at
his or her discretion, may not forward certain items if they
are deemed of a frivolous nature or otherwise inappropriate
for the Board’s consideration. In such cases, some of that
correspondence may be forwarded elsewhere within Lincoln
Electric for review and possible response.
Please visit our website at www.lincolnelectric.com for current developments at Lincoln
Electric. The information on our website is not incorporated by reference into this Proxy
Statement or any of our periodic reports.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 8 8
M E N U
APPENDIX A—DEFINITIONS
AND NON-GAAP FINANCIAL
MEASURES
The discussion of our results in the CD&A and other sections of this Proxy Statement includes reference to our EBIT,
EBITB, Adjusted net income, Adjusted diluted earnings per share, Adjusted EBIT, Adjusted operating income, Adjusted
operating income margin, Adjusted effective tax rate, Return on Invested Capital (ROIC), Average Operating Working
Capital to Sales (AOWC/Sales), 3-year and 5-year Total Shareholder Return (TSR), Organic Sales, Cash Conversion and
Free Cash Flow (FCF) performance. Some of these metrics are considered Non-GAAP financial measures, as
management uses various GAAP and non-GAAP financial measures in assessing and evaluating our underlying operating
performance. Non-GAAP financial measures exclude the impact of special items on our reported financial results. Non-
GAAP financial measures should be read in conjunction with the generally accepted accounting principles in the United
States (“GAAP”), as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. The
following defines the financial and non-GAAP financial measures discussed in the CD&A and other sections of this Proxy
Statement. Certain reclassifications have been made to prior year financial statements and financial measures to conform
to current year classifications.
ADJUSTED DILUTED EARNINGS PER SHARE
Adjusted Diluted Earnings Per Share is defined as reported Diluted Earnings Per Share excluding certain disclosed special
items.
ADJUSTED EBIT
Adjusted EBIT is defined as reported EBIT excluding certain disclosed special items.
ADJUSTED EFFECTIVE TAX RATE
Adjusted Effective Tax Rate is defined as reported Effective Tax Rate excluding the tax effect of certain disclosed special
items.
ADJUSTED NET INCOME
Adjusted Net Income is defined as reported Net Income excluding certain disclosed special items.
ADJUSTED NET INCOME FOR COMPENSATION PURPOSES
Adjusted Net Income for Compensation Purposes is defined as reported Net Income excluding certain disclosed special
items and other adjustments as approved by the Compensation and Executive Development Committee.
ADJUSTED OPERATING INCOME
Adjusted Operating Income is defined as reported Operating Income excluding certain disclosed special items.
ADJUSTED OPERATING INCOME MARGIN
Adjusted Operating Income Margin is defined as Adjusted Operating Income divided by Net sales.
AOWC/SALES
AOWC/Sales 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.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT M E N U
8 9
AOWC/SALES FOR COMPENSATION PURPOSES
AOWC/Sales for Compensation Purposes is defined as the three-month average operating working capital (gross accounts
receivable plus gross inventory less trade accounts payable) divided by the rolling twelve-months of sales calculated at
budgeted exchange rates and adjusted for the results of businesses acquired during the year.
CASH CONVERSION
Cash Conversion is defined as Free Cash Flow divided by Adjusted Net Income.
EBIT
EBIT is an amount equal to earnings before interest and tax defined as operating income plus Other income (expense).
EBITB
EBITB is an amount equal to earnings before interest, tax and bonus, calculated at budgeted exchange rates and adjusted
for special items as determined by management. The adjustments for special items include such items as rationalization
charges, certain asset impairment charges, the gains and losses on certain transactions including the disposal of assets
and the results of businesses acquired during the year. Adjusted Operating Income is a representative measure of EBITB.
FREE CASH FLOW (FCF)
Free Cash Flow is defined as Net cash provided by operating activities less Capital expenditures.
ORGANIC SALES
Organic Sales is defined as sales excluding the effects of foreign currency and acquisitions.
RETURN ON INVESTED CAPITAL (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 portion, plus Total equity.
RETURN ON INVESTED CAPITAL (ROIC) FOR COMPENSATION PURPOSES
ROIC for Compensation Purposes is calculated by an independent third-party and is adjusted for certain transactions as
approved by the Compensation and Executive Development Committee. In 2015, pension settlement charges primarily
related to the purchase of a group annuity contract were excluded. In 2016, the ROIC for Compensation Purposes was
adjusted to exclude the incremental balance in cash and marketable securities as of December 31, 2016 compared with the
December 31, 2013 balance, as well as interest expense, associated with the long-term notes drawn as a result of the
execution of our capital allocation strategy.
TOTAL SHAREHOLDER RETURN (TSR)
TSR is an amount equal to the net stock price change for our common stock plus the reinvestment of dividends paid over
the prescribed period of time.
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT 9 0
M E N U
ADJUSTED OPERATING INCOME
The following table presents a reconciliation of Operating income as reported to Adjusted operating income for the years
ended December 31, 2009 to 2019:
($ in thousand)
Year Ended December 31,
Operating income
(as reported)
Special items
(pre-tax):
Rationalization and
asset impairment
charges
Venezuela
deconsolidation
and remeasurement
losses
Bargain
purchase gain
Gains on
asset disposals
Acquisition
transaction
and integration costs
Amortization
of step
up in value of
acquired
inventories
Other
Adjusted operating
income
Adjusted operating
income margin
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
$370,910 $375,539 $376,942 $283,614 $324,582 $367,080
$413,705 $376,801 $305,719 $200,182
$115,252
15,188
25,285
6,590
—
19,958
30,053
8,463
9,354
282
(384)
29,897
—
—
34,348
27,214
21,133
12,198
—
—
— (49,650)
(3,045)
—
—
1,804
4,498
15,002
3,008
—
4,578
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
705
1,381
—
—
—
—
—
—
3,123
—
—
—
—
—
—
—
—
—
—
—
$387,865 $405,322 $353,462 $317,962 $371,754 $418,266
$435,071 $387,536 $306,001 $202,921
$145,149
12.9%
13.4%
13.5%
14.0%
14.7%
14.9%
15.3%
13.6%
11.4%
9.8%
8.4%
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
The following table presents reconciliations of Net income and Diluted earnings per share as reported to Adjusted net
income and Adjusted diluted earnings per share for the years ended December 31, 2009 to 2019:
M E N U
9 1
($ in thousands
except per share
amounts)
Net income
(as reported)
Special items:
Rationalization and
asset impairment
charges
Venezuela
deconsolidation
and remeasurement
losses
Pension settlement
charges
Bargain purchase gain
Gain on change in
control
Acquisition
transaction and
integration costs
Amortization of
step up in value
of acquired
inventories
Other
Tax effect of
Special items
Gains on asset disposals
(3,554)
Year Ended December 31,
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
$293,109 $287,066 $247,503 $198,399 $127,478 $254,686
$293,780 $257,411 $217,186 $130,244
$48,576
15,188
25,285
6,590
—
19,958
30,053
8,463
9,354
282
(384)
29,897
—
—
34,348
27,214
21,133
12,198
6,686
8,150
— 142,738
—
—
—
(7,601)
— (49,650)
—
—
—
—
1,804
4,498
15,002
3,008
—
—
—
4,578
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(805)
(363)
1,381
—
—
—
—
—
—
—
—
3,123
—
—
—
—
—
—
—
—
—
(2,144)
—
—
—
—
—
—
—
—
—
—
1,782
2,877
(7,386)
(6,896)
20,536
(8,293) (57,204)
861
(890)
(2,387)
(4,889)
(5,165)
(6,108)
Adjusted net income
$294,568 $ 316,639 $252,709 $ 224,454 $ 260,184 $ 305,928 $ 313,188 $ 265,759 $ 212,579 $ 129,600
$ 73,098
Diluted earnings per
share (as reported)
$ 4.68 $ 4.37 $ 3.71 $ 2.91 $ 1.70 $ 3.18
$ 3.54 $ 3.06 $ 2.56 $ 1.53
$ 0.57
Special items per share
$ 0.02 $ 0.45 $ 0.08 $ 0.38 $ 1.78 $ 0.64
$ 0.23 $ 0.10 $ (0.05) $ (0.01)
$ 0.29
Adjusted diluted
earnings per share
$ 4.70 $ 4.82 $ 3.79 $ 3.29 $ 3.48 $ 3.82
$ 3.77 $ 3.16 $ 2.51 $ 1.52
$ 0.86
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
9 2
M E N U
RETURN ON INVESTED CAPITAL (ROIC)
The following table presents calculations of ROIC for the years ended December 31, 2009 to 2019:
($ in thousands)
Year Ended December 31,
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
Adjusted net
income
Plus: Interest
expense
(after-tax)
Less: Interest
income
(after-tax)
Adjusted net
income
before tax
effected
interest
$ 294,568 $ 316,639 $ 252,709 $ 224,454 $ 260,184 $ 305,928 $ 313,188 $ 265,759 $ 212,579 $ 129,600 $ 73,098
19,465
18,386
14,947
11,775
13,469
6,439
1,767
2,597
4,164
4,156
5,293
1,896
5,206
2,955
1,291
1,675
1,909
2,049
2,471
1,938
1,479
2,150
$ 312,137 $ 329,819 $ 264,701 $ 234,938 $ 271,978 $ 310,458 $ 312,906 $ 265,885 $ 214,805 $ 132,277 $ 76,241
Invested capital
$1,566,348 $1,590,252 $1,638,720 $1,417,799 $1,287,073 $1,356,435 $1,549,775 $1,378,596 $1,296,620 $1,247,183 $1,209,392
19.9%
20.7%
16.2%
16.6%
21.1%
22.9%
20.2%
19.3%
16.6%
10.6%
6.3%
Return on
invested
capital
CASH CONVERSION
The following table presents calculations of Cash Conversion for the years ended December 31, 2017 to 2019:
($ in thousands)
Year Ended December 31,
2019
2018
2017
Cash flow from operations
$403,185
$329,152
$334,845
Less: Capital expenditures
69,615
71,246
61,656
Free Cash Flow
$333,570
$257,906
$273,189
Adjusted net income
$294,568
$316,639
$252,709
Cash Conversion
113%
81%
108%
| LINCOLN ELECTRIC : 2020 PROXY STATEMENT
9 3
| LINCOLN ELECTRIC : 2019 FORM 10-K This page is intentionally left blank
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, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 0-1402
LINCOLN ELECTRIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of
incorporation or organization)
34-1860551
(I.R.S. Employer Identification No.)
22801 St. Clair Avenue, Cleveland, Ohio
(Address of principal executive offices)
44117
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
(216) 481-8100
(Registrant's telephone number, including area code)
Title of each class
Common Shares, without par value
Trading Symbol
LECO
Name of each exchange on which registered
The NASDAQ Stock Market LLC
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
No
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
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an 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
No
The aggregate market value of the common shares held by non-affiliates as of June 28, 2019 was $5,236,546,343 (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, 2020 was 60,364,079.
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 2020 Annual Meeting of Shareholders.
TABLE OF CONTENTS
PART I
Page
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Information About Our Executive Officers
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 Stockholder 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
Item 16. Form 10-K Summary
Signatures
PART IV
1
3
8
9
11
12
12
13
15
16
31
31
32
32
32
33
33
33
33
33
34
38
38
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. The
Company is the world leader in the design, development and manufacture of arc welding products, automated joining,
assembly and cutting systems, plasma and oxy-fuel cutting equipment. The Company also has a leading global position in
brazing and soldering alloys.
The Company's 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.
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, manufacturing facilities located in the United States, Australia, Brazil,
Canada, China, Colombia, 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.
1
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, 2019 was approximately 11,000. See "Part I,
Item 1C" for information regarding the Company's executive officers, which is incorporated herein by reference.
2
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 Securities and Exchange Commission ("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, financial 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.
In July 2017, the United Kingdom Financial Conduct Authority, which regulates The London Interbank Offered Rate
(“LIBOR”), has announced that it intends to phase out LIBOR by the end of 2021. We may need to amend our revolving line
of credit and interest rate swap agreements that use LIBOR as a benchmark and we cannot predict what alternative index or
other amendments may be negotiated with our counterparties. As a result, the uncertainty regarding the future of LIBOR as
well as the transition from LIBOR could have adverse impacts on our financial condition.
3
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, 2019, we were a co-defendant in cases alleging asbestos induced illness involving claims by
approximately 3,233 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: 55,114 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 900 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 or failure
to meet contractual performance commitments.
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.
4
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.
We may incur losses if we do not achieve contractual commitments, including project performance requirements or project
schedules. Project performance can be affected by a number of factors, including but not limited to, availability of materials,
changes in the project scope of services, environmental conditions or labor disruptions. In addition, our backlog consists of the
expected revenue from projects for which we have an executed contract or commitment with a customer. Project cancellations,
scope adjustments, deferrals or changes in cost estimates may reduce the dollar amount of revenue and profits that we actually
earn.
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 and have an adverse
impact on our revenues and 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.
5
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, data protection and privacy requirements, 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.
6
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.
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. Like many
multinational companies, our systems are subject to regular cyber attacks and other malicious efforts to cause cyber security
incidents. To date, these attacks have not had a material impact on our business or operations. However, if as a result of future
attacks, our systems are significantly 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. The Company continues to invest in cyber security, including maintaining and
improving cyber security resilience, and the Company’s cyber security risks are monitored by the Audit Committee of our
Board of Directors. Nevertheless, due to the nature of cyber threats, there can be no assurance that our preventive efforts can
fully mitigate the risks of all cyber incidents, and a significant 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.
7
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.
8
ITEM 1C. INFORMATION ABOUT OUR EXECUTIVE OFFICERS
EXECUTIVE OFFICERS OF THE REGISTRANT
Name
Christopher L. Mapes
Position
Age
58 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
59 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
46 Executive Vice President, General Counsel and Secretary since April 20, 2017; Vice
George D. Blankenship
Gabriel Bruno
Steven B. Hedlund
President, Deputy General Counsel from August 1, 2014 to April 20, 2017; Deputy General
Counsel from 2004 to August 1, 2014.
57 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.
52 Executive Vice President, Finance since January 1, 2019; Executive Vice President, Chief
Human Resources Officer from July 1, 2016 to January 1, 2019; 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.
53 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
53 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.
David J. Nangle
63 Executive Vice President, President, Harris Products Group since July 27, 2018; Senior Vice
President, President, Harris Products Group from February 19, 2014 to July 27, 2018; Vice
President, Group President of Brazing, Cutting and Retail Subsidiaries from January 12, 2006
to February 19, 2014.
Geoffrey P. Allman
49 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
59 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 February 19, 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.
Douglas S. Lance
52 Senior Vice President, President, Cleveland Operations since September 1, 2016; Senior Vice
President, North American Operations from February 19, 2014 to September 1, 2016; Vice
President, Operations from January 1, 2012 to February 19, 2014.
Michael Mintun
57 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 19, 2014;
Vice President, Sales, North America from January 1, 2008 to January 1, 2013.
9
Michael J. Whitehead
46 Senior Vice President, President, Global Automation, Cutting and Additive Businesses since
January 1, 2019; Senior Vice President, Strategy and Business Development from August 1,
2016 to January 1, 2019; President, Lincoln Canada from January 1, 2015 to August 1, 2016;
Director, New Product Development, Consumables R&D from January 1, 2012 to January 1,
2015.
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.
10
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 59 manufacturing facilities, including operations and joint ventures in 18 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
France
Germany
India
Italy
Netherlands
Poland
Romania
Russia
Spain
Turkey
United Kingdom
Cleveland, Columbus, 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.
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.
11
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, 2019, the Company was a co-defendant in cases alleging asbestos induced illness involving claims by
approximately 3,233 plaintiffs, which is a net decrease of 50 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: 55,114 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 900 were decided in
favor of the Company following summary judgment motions.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
12
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, 2019 was 1,957.
Issuer purchases of equity securities for the fourth quarter 2019 were:
Period
October 1-31, 2019
November 1-30, 2019
December 1-31, 2019
Total
Total Number of
Shares Repurchased
Average Price
Paid Per Share
255 (1) $
298,353
457,429 (1)
756,037
86.83
91.93
94.66
93.58
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) (3)
—
298,353
457,389
755,742
3,563,635
3,265,282
2,807,893
(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 52.2 million shares at a cost of $2.2 billion for a weighted
average cost of $41.55 per share through December 31, 2019.
(3) On February 12, 2020, the Company's Board of Directors authorized a new share repurchase program for up to an
additional 10 million shares of the Company's common stock.
13
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, 2015 and ending December 31, 2019.
This graph assumes that $100 was invested on December 31, 2014 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.
14
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
2019 (1)
2018 (2)
Year Ended December 31,
2017 (3)
2016 (4)
2015 (5)
$
$
$
3,003,272
293,109
4.73
4.68
1.90
2,371,213
712,302
$
3,028,674
287,066
4.42
4.37
1.64
2,349,825
702,549
2,624,431
247,503
3.76
3.71
1.44
2,406,547
704,136
$
2,274,614
198,399
2.94
2.91
1.31
1,943,437
703,704
2,535,791
127,478
1.72
1.70
1.19
1,784,171
350,347
(1) Results for 2019 include $15,188 ($12,275 after-tax) in Rationalization and asset impairment charges, $1,804 ($1,565
after-tax) of acquisition transaction and integration costs related to the acquisition of Air Liquide Welding, $1,399
($1,049 after-tax) of amortization of step up in value of acquired inventories in Cost of goods sold related to the
acquisition of Baker Industries and $1,609 of amortization of step up in value of acquired inventories in Cost of goods
sold related to the acquisition of Askaynak. Results also include gains of $7,601 on change in control related to the
acquisition of Askaynak and $3,554 ($2,586 after-tax) on disposal of assets related to the sale of properties. Results
also include $4,852 in tax benefits in Income taxes for the settlement of a tax item as well as tax deductions associated
with an investment in a subsidiary.
(2) Results for 2018 include $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 acquisition 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).
(3) Results for 2017 include charges related to the acquisition of Air Liquide Welding, including $15,002 ($11,559 after-
tax) of acquisition 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.
(4) 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.
(5) Results for 2015 include $13,719 ($11,943 after-tax) of rationalizaton 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.
15
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. The
Company is the world leader in the design, development and manufacture of arc welding products, automated joining,
assembly and cutting systems, plasma and oxy-fuel cutting equipment. The Company also has a leading global position in
brazing and soldering alloys.
The Company's 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.
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 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 has, through wholly-owned subsidiaries, manufacturing facilities located in the United States, Australia, Brazil,
Canada, China, Colombia, France, Germany, India, Italy, Mexico, the Netherlands, Poland, Romania, Russia, Spain, Turkey
and the United Kingdom.
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.
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.
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
16
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.
17
The discussion that follows includes a comparison of our results of operations, liquidity and capital resources for fiscal years
ended December 31, 2019 and 2018. For a comparison of the Company's results of operations, liquidity and capital resources
for the fiscal years ended December 31, 2018 and 2017, see Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 2018,
which was filed with the SEC on February 27, 2019.
Results of Operations
The following table shows the Company's results of operations:
Year Ended December 31,
2019
2018
Favorable (Unfavorable)
2019 vs. 2018
Net sales
Cost of goods sold
Gross profit
Selling, general & administrative expenses
Rationalization and asset impairment charges
Operating income
Interest expense, net
Other income (expense)
Income before income taxes
Income taxes
Effective tax rate
Net income including non-controlling interests
293,083
Non-controlling interests in subsidiaries' loss
(26)
Net income
Diluted earnings per share
Net Sales:
$
$
293,109
4.68
Amount
% of Sales
Amount
% of Sales
$
$ 3,003,272
1,995,685
1,007,587
621,489
$ 3,028,674
2,000,153
$(25,402)
4,468
33.5%
20.7%
1,028,521
627,697
34.0% (20,934)
6,208
20.7%
15,188
370,910
23,415
20,998
368,493
75,410
20.5%
12.4%
12.3%
9.8% $
25,285
375,539
17,565
10,686
368,660
81,667
22.2%
286,993
(73)
287,066
$
4.37
12.4%
12.2%
10,097
(4,629)
(5,850)
10,312
(167)
6,257
1.7%
6,090
47
9.5% $ 6,043
$
0.31
%
(0.8%)
0.2%
(2.0%)
1.0%
39.9%
(1.2%)
(33.3%)
96.5%
—
7.7%
2.1%
64.4%
2.1%
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, 2019 on a consolidated basis:
Lincoln Electric Holdings, Inc.
$
3,028,674
$ (140,896)
$ 129,155
$
37,716
$ (51,377)
$ 3,003,272
Net Sales
2018
Volume
Acquisitions
Price
Foreign
Exchange
Net Sales
2019
Change in Net Sales due to:
% Change
Lincoln Electric Holdings, Inc.
(4.7%)
4.3%
1.2%
(1.7%)
(0.8%)
Net sales decreased primarily as a result of lower organic sales and unfavorable foreign exchange, offset by acquisitions. The
increase in Net sales from acquisitions was driven by the acquisitions of Coldwater, Pro Systems, Inovatech and Baker within
Americas Welding, Worthington within The Harris Products Group and Askaynak within International Welding. Refer to Note 4
to the consolidated financial statements for details.
Gross Profit:
Gross profit for 2019 decreased, as a percent of sales, compared to the prior year due to product mix, lower volumes and
acquisitions. The year ended December 31, 2019 includes a last-in, first-out ("LIFO") credit of $4,340, as compared with a
LIFO charge of $10,990 in the prior year.
Selling, General & Administrative ("SG&A") Expenses:
The decrease in SG&A expense in 2019 as compared to 2018 was due to lower compensation costs and favorable foreign
exchange, offset by higher expense from acquisitions.
18
Rationalization and Asset Impairment Charges:
In 2019, the Company recorded $15,188 ($12,275 after-tax) in charges primarily related to employee severance, asset
impairment charges and gains or losses on the disposal of assets.
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.
Refer to Note 7 to the consolidated financial statements for additional details.
Interest Expense, Net:
The increase in 2019 as compared to 2018 was due to lower interest income in 2019.
Other Income (Expense):
The increase in 2019 as compared to 2018 was primarily due to the gain on change in control of $7,601 related to the
acquisition of Askaynak and lower net periodic pension cost.
Income Taxes:
The 2019 effective tax rate was lower than 2018 primarily due to income tax benefits for the settlement of tax items as well as
tax deductions associated with excess tax benefits resulting from exercises of stock based compensation, offset by the
geographic mix of earnings and taxes at higher rates in foreign jurisdictions.
Net Income:
As compared to the prior year, reported Net income for 2019 increased primarily due to lower rationalization and asset
impairment charges and a gain on change in control related to the acquisition of Askaynak.
19
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, 2019:
Operating Segments
Americas Welding
International Welding
The Harris Products Group
% Change
Americas Welding
International Welding
The Harris Products Group
Net Sales
2018
Volume (1)
Acquisitions (2)
Price (3)
Foreign
Exchange (4)
Net Sales
2019
Change in Net Sales due to:
$
1,806,514
919,771
302,389
$ (79,285)
(71,509)
9,898
$
71,062
37,061
21,032
$
25,705
9,159
2,852
$
(8,250)
(40,106)
(3,021)
$1,815,746
854,376
333,150
(4.4%)
(7.8%)
3.3%
3.9%
4.0%
7.0%
1.4%
1.0%
0.9%
(0.5%)
(4.4%)
(1.0%)
0.5%
(7.1%)
10.2%
(1) Decrease for Americas Welding due to softer demand associated with the current economic environment. Decrease for
International Welding due to integration activities and softer demand in the European and Asian markets. Increase for
The Harris Products Group driven primarily by higher consumables volume.
(2) Increase due to the acquisition of Coldwater, Pro Systems, Inovatech and Baker within Americas Welding,
Worthington within The Harris Products Group and Askaynak within International Welding. Refer to Note 4 to the
consolidated financial statements for details.
(3) Increase for Americas Welding and International Welding segments due to increased product pricing as a result of
higher input costs.
(4) Decrease in the International Welding segment due to a stronger U.S. dollar.
20
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,
Favorable (Unfavorable)
2019 vs. 2018
2019
2018
$
%
Americas Welding:
Net sales
Inter-segment sales
Total Sales
Adjusted EBIT (4)
As a percent of total sales (1)
International Welding:
Net sales
Inter-segment sales
Total Sales
Adjusted EBIT (5)
As a percent of total sales (2)
The Harris Products Group:
Net sales
Inter-segment sales
Total Sales
Adjusted EBIT (6)
As a percent of total sales (3)
Corporate / Eliminations:
Inter-segment sales
Adjusted EBIT (7)
Consolidated:
Net sales
Net income
As a percent of total sales
Adjusted EBIT (8)
As a percent of total sales
0.5%
3.7%
0.7%
(7.3%)
(1.4%)
(7.1%)
(4.8%)
(7.1%)
$ 1,815,746
123,342
$ 1,939,088
$ 1,806,514
118,936
$ 1,925,450
$
9,232
4,406
$ 13,638
$
315,719
$
340,744
$ (25,025)
16.3%
17.7%
$
$
$
$
$
$
$
854,376
17,691
872,067
50,281
5.8%
333,150
7,487
340,637
45,701
13.4%
(148,520)
(10,948)
$
$
$
$
$
$
$
919,771
18,576
938,347
$ (65,395)
(885)
$ (66,280)
54,273
$ (3,992)
(7.4%)
5.8%
302,389
$ 30,761
6,969
518
309,358
$ 31,279
36,564
$
9,137
11.8%
—
10.2%
7.4%
10.1%
25.0%
1.6%
(144,481)
(8,887)
$
4,039
(2,061)
2.8%
(23.2%)
$ 3,003,272
$ 3,028,674
$
$
293,109
9.8%
400,753
$
$
287,066
9.5%
13.3%
14.0%
$ (25,402)
6,043
$
422,694
$ (21,941)
(0.8%)
2.1%
0.3%
(5.2%)
(0.7%)
(1) 2019 decrease as compared to 2018 driven by the dilutive impact of recent acquisitions and lower Net sales volumes.
(2) 2019 was flat as compared to 2018 driven by lower compensation costs, partially offset by lower Net sales volumes.
(3) 2019 increase as compared to 2018 driven by consumables volume increases.
(4) 2019 excludes Rationalization and asset impairment charges of $1,716, as discussed in Note 7 to the consolidated
financial statements and the amortization of step up in value of acquired inventories of $1,399 related to the Baker
acquisition.
2018 excludes pension settlement charges of $6,686 related to lump sum pension payments.
21
(5) 2019 excludes Rationalization and asset impairment charges of $11,702, respectively, related to severance, asset
impairments and gains or losses on the disposal of assets as discussed in Note 7 to the consolidated financial
statements, the amortization of step up in value of acquired inventories of $1,609, gains on disposals of assets of
$3,554 and a gain on change in control of $7,601 related to the Askaynak acquisition.
2018 excludes charges of $25,285 related to employee severance, asset impairments and other related costs.
(6) 2019 excludes Rationalization and asset impairment charges of $1,770, as discussed in Note 7 to the consolidated
financial statements.
(7) 2019 and 2018 exclude acquisition transaction and integration costs of $1,804 and $4,498, respectively, related to the
Air Liquide Welding acquisition as discussed in Note 4 to the consolidated financial statements.
(8) 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):
Rationalization and asset impairment charges (1)
Acquisition transaction and integration costs (2)
Amortization of step up in value of acquired inventories (3)
Gains on asset disposals (4)
Adjusted operating income
Year Ended December 31,
2019
2018
$
370,910
$
375,539
15,188
1,804
3,008
(3,045)
387,865
$
25,285
4,498
—
—
$
405,322
(1) Charges primarily consist of employee severance, gains or losses on the disposal of assets and non-cash asset
impairment charges.
(2) Acquisition-related costs included in Selling, general & administrative expenses related to the Air Liquide Welding
acquisition as discussed in Note 4 to the consolidated financial statements.
(3) Charges represent the step up in value of acquired inventories related to the acquisitions of Baker and Askaynak and
are included in Cost of goods sold.
(4) Gains related to the sale of properties and are primarily included in Cost of goods sold.
22
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:
Rationalization and asset impairment charges (1)
Acquisition transaction and integration costs (2)
Pension settlement charges (3)
Amortization of step up in value of acquired inventories (4)
Gains on asset disposals (5)
Gain on change in control (6)
Tax effect of Special items (7)
Adjusted net income
Non-controlling interests in subsidiaries’ earnings (loss)
Interest expense, net
Income taxes as reported
Tax effect of Special items (7)
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,
2019
2018
$
293,109
$
287,066
15,188
1,804
—
3,008
(3,554)
(7,601)
(7,386)
294,568
(26)
23,415
75,410
7,386
25,285
4,498
6,686
—
—
—
(6,896)
$
$
316,639
(73)
17,565
81,667
6,896
$
$
$
400,753
$
422,694
20.5%
1.4%
21.9%
4.68
0.02
4.70
$
$
22.2 %
(0.3%)
21.9 %
4.37
0.45
4.82
$
$
(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) Acquisition-related costs related to the Air Liquide Welding acquisition as discussed in Note 4 to the consolidated
financial statements.
(3) Charges related to lump sum pension payments.
(4) Charges represent the step up in value of acquired inventories related to the acquisitions of Baker and Askaynak and
are included in Cost of goods sold.
(5) Gains related to the sale of properties and are primarily included in Cost of goods sold.
(6) Gain on change in control related to the acquisition of Askaynak and is included in Other income (expense).
(7) Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852
for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the year
ended December 31, 2019. The prior year includes the net tax impact of Special items recorded during the period,
including the net impact of the U.S. Tax Act of $399.
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
23
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)
Purchase of shares for treasury
Cash dividends paid to shareholders
Increase (decrease) in Cash and cash equivalents (4)
$
Year Ended December 31,
$ Change
2019
2018
2019 vs. 2018
$
403,185
(192,823)
(69,615)
(134,717)
—
(371,944)
(292,693)
(117,920)
(159,286)
329,152
20,841
(71,246)
(101,792)
179,124
(302,130)
(201,650)
(102,058)
32,148
$
74,033
(213,664)
1,631
(32,925)
(179,124)
(69,814)
(91,043)
(15,862)
(1) Cash provided by operating activities increased for the twelve months ended December 31, 2019 compared with the
twelve months ended December 31, 2018 primarily due to favorable changes in working capital and cash flows from
tax payments and receipts.
(2) Cash used by investing activities increased predominantly due to cash used in the acquisition of businesses in 2019 and
net proceeds from marketable securities in 2018. The Company currently anticipates capital expenditures of $65,000
to $75,000 in 2020. 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, 2019 compared with the twelve
months ended December 31, 2018 due to higher purchases of common shares for treasury.
(4) Cash and cash equivalents decreased 44.4%, or $159,286, to $199,563 during the twelve months ended December 31,
2019, from $358,849 as of December 31, 2018. The decrease was predominantly due to cash used in the acquisition
of businesses, purchases of common shares for treasury and cash dividends paid to shareholders, partially offset by
cash provided by operating activities.
The Company paid $117,920 and $102,058 in cash dividends to its shareholders in the twelve months ended December 31,
2019 and 2018, respectively, reflecting a 15.5% increase in dividends paid. In January 2020, the Company paid a cash
dividend of $0.49 per share, or $29,690, to shareholders of record on December 31, 2019.
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
24
December 31,
2019
2018
16.8%
99.9
51.4
56.0
16.5%
95.1
52.7
55.5
(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, 2019 and 2018, the fair value of long-term debt, including the current portion, was approximately $721,494
and $649,714, 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, 2019, 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 14 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,
2019, the Company was in compliance with all of its covenants and had $23,000 of 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, 2019, 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 $34,969 at December 31, 2019. Amounts due
banks included borrowings on the Credit Agreement and borrowings of subsidiaries at weighted average interest rates of 4.9%
at December 31, 2019.
25
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 as of December 31, 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
2019
2018
$
294,568
$
316,639
19,465
1,896
312,137
1,566,348
18,386
5,206
329,819
1,590,252
19.9%
20.7%
(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, 2019 are as follows:
Payments Due By Period
Total
2020
2021 to
2022
2023 to
2024
2025 and
Beyond
Long-term debt, including current portion
$
710,916
$
101
$
208
$
10,607
$
Interest on long-term debt (Note 9)
Operating leases (Note 18)
Purchase commitments (1)
Transition Tax (2) (Note 14)
Total
_
351,432
59,446
194,553
20,532
23,293
15,235
191,446
3,024
46,580
20,275
2,996
3,024
46,347
13,007
111
5,032
700,000
235,212
10,929
—
9,452
$
1,336,879
$
233,099
$
73,083
$
75,104
$
955,593
(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, 2019, there were $14,263 of tax liabilities related to unrecognized tax benefits and a $29,170 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, 2019 of $470 for contingent consideration
arrangements. The amount of future cash flows associated with these liabilities will be contingent upon actual results of the
acquired entities.
Stock-Based Compensation
On April 23, 2015, the shareholders of the Company approved the 2015 Equity and Incentive Compensation Plan ("Employee
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"). 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, 2019, there were 3,017,391 common shares available for future grant under all
plans.
Under these plans, options, restricted shares and restricted stock units granted were 372,738 in 2019 and 322,338 in 2018. 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 2019 and 2018.
26
Total stock-based compensation expense recognized in the Consolidated Statements of Income for 2019 and 2018 was $16,624
and $18,554, respectively, with a related tax benefit of $4,151 and $4,632, respectively. As of December 31, 2019, total
unrecognized stock-based compensation expense related to non-vested stock options, restricted shares and restricted stock units
was $19,817, which is expected to be recognized over a weighted average period of approximately 2 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, 2019 was $34,138 and $30,960, respectively. The total intrinsic value of awards
exercised during 2019 and 2018 was $13,964 and $4,779, 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
2019. 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 maintains liabilities for unrecognized tax benefits related to uncertain income tax positions in various
jurisdictions. The Company uses judgment in determining whether the technical merits of tax positions are more-likely-than-
not to be sustained. Judgment is also used in measuring the related amount of tax benefit that qualifies for recognition,
including the interpretation of applicable tax law, regulation and tax ruling.
27
Liabilities are settled primarily through the completion of audits within each individual tax jurisdiction or the closing of a
statute of limitation. Liabilities can be affected by changes in applicable tax law, regulation, tax ruling or such 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. The Company determined that it would
repatriate earnings for certain non-U.S. subsidiaries, which are subject to foreign withholding taxes. 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, 2019, the Company had approximately $120,696 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, 2019, a valuation allowance of $71,546 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.
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% at December 31, 2019 and 2018, 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
2019, investment returns were a gain of 18.0% compared with a loss of 3.8% in 2018. A 25 basis point change in the expected
return on plan assets would increase or decrease pension expense by approximately $1,200.
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 3.0% at December 31, 2019 and 3.8% at December 31, 2018. 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 $261 and $3,068 in 2019 and 2018, respectively. Pension expense includes
$266 and $6,289 in settlement charges in 2019 and 2018, respectively. The Company's defined contribution plan expense was
$24,835 and $26,477 in 2019 and 2018, respectively. The Company expects total 2020 expense related to retirement plans to
decrease by a range of approximately $1,000 to $2,000. The decrease is the result of lower interest cost. 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 $96,080
as of December 31, 2019 and $111,771 as of December 31, 2018. The decrease is primarily the result of higher investment
returns and the amortization of net losses.
The Company does not expect to make significant contributions to the defined benefit plans in 2020.
28
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 36% and 37% of total inventories at
December 31, 2019 and 2018, 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 $75,292 at December 31, 2019 and $79,626 at December 31, 2018.
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
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.
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
29
the relief from royalty method or excess earnings method, forms of the income approach supported by observable market data
for peer companies. The significant assumptions used to estimate the value of the acquired intangible assets include discount
rates and certain assumptions that form the basis of future cash flows (such as revenue growth rates, customer attrition rates,
and royalty rates). 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 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.
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.
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. In addition, certain customized automation performance obligations 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.
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 added 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.
Refer to Note 2 to the consolidated financial statements for additional details.
30
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, 2019 and a 100 basis point increase in effective interest rates at
December 31, 2019. The derivative, borrowing and investment arrangements in effect at December 31, 2019 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, 2019, the Company hedged certain third-party and intercompany purchases and sales. The gross notional
dollar amount of these foreign exchange contracts at December 31, 2019 was $59,982. At December 31, 2019, a hypothetical
10% strengthening or weakening in the U.S. dollar would have changed Accumulated other comprehensive income (loss) by
$1,082.
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 dollar amount of these foreign exchange contracts at December 31, 2019 was $363,820. A hypothetical 10% change in
the year-end exchange rates would have resulted in an increase or decrease to Income before income taxes of $11,379 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.
In addition, the Company has cross currency swaps to hedge the Company's net investment in European subsidiaries against
adverse changes in exchange rates. The gross notional dollar value of these contracts is $50,000 as of December 31, 2019. At
December 31, 2019, a hypothetical 10% strengthening or weakening in the U.S. dollar would have changed Accumulated other
comprehensive income (loss) by $5,714.
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 2019.
Interest Rate Risk
At December 31, 2019, the Company had various floating interest rate swaps used to convert $50,000 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, 2019 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, 2019 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.
31
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, 2019 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, 2019.
. ("Askaynak"). The results of operations are included in the Company's consolidated financial statements from the
During 2019, the Company completed the acquisitions of Baker Industries Inc. ("Baker") and and Kaynak Tekni i Sanayi ve
Ticaret A.
dates of acquisition and constituted 8.8% of consolidated total assets as of December 31, 2019 and 2.2% of consolidated net
revenue for the year then ended. As permitted by guidance issued by the Securities and Exchange Commission, the Company
has elected to exclude Baker and Askaynak from our assessment of the effectiveness of our internal control over financial
reporting as of December 31, 2019.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2019 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
Beginning January 1, 2019, the Company implemented ASU 2016-02, Leases ("Topic 842"). The adoption of Topic 842
resulted in changes to processes and control activities related to lease accounting, including the implementation of a supporting
information technology application.
In April 2019 and July 2019, the Company acquired Baker and Askaynak, respectively. The acquired businesses operated under
their own set of systems and internal controls and the Company is currently maintaining those systems and much of that control
environment until it is able to incorporate its processes into the Company's own systems and control environment. The
Company expects to complete the incorporation of the acquired businesses operations into the Company's systems and control
environment in fiscal year 2020.
There have been no other changes in the Company's internal control over financial reporting that occurred during the fourth
quarter of 2019 that materially affected, or are reasonably likely to materially affect, the Company's internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
None.
32
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company is expected to file its 2020 proxy statement pursuant to Regulation 14A of the Exchange Act within 120 days
after December 31, 2019.
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 2020 proxy statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the 2020 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 2020 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 2020 proxy statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference from the 2020 proxy statement.
33
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, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income – Years ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets – December 31, 2019 and 2018
Consolidated Statements of Equity – Years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows – Years ended December 31, 2019, 2018 and 2017
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
3.2
3.3
4.1
10.1
10.2
10.3
10.4
Description
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 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).
Amended and Restated Code of Regulations 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).
Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, (filed herewith).
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).
Amendment No. 1 to 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,
dated July 30, 2019 (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings, Inc. for the quarter ended
September 30, 2019, 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).
34
Exhibit No.
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
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 January 1, 2019) (filed as
Exhibit 10.15 to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2018, SEC File
No. 0-1402 and incorporated herein by reference and made a part hereof)).
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).
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).
35
Exhibit No.
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
10.36*
Description
The Lincoln Electric Company Employee Savings Plan As Amended and Restated Effective January 1, 2019
(filed as Exhibit 10.20 to Form 10-K of Lincoln Electric Holdings, Inc. for the year ended December 31, 2018,
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, 2019, dated July 1, 2019 (filed as Exhibit 10.1 to Form 10-Q of Lincoln Electric Holdings,
Inc. for the quarter ended June 30, 2019, SEC File No. 0-1402 and incorporated herein by reference and made a
part hereof).
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).
Form of Restricted Stock Unit Agreement for Non-Employee Directors (filed as Exhibit 10.32 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2018, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).
Form of Restricted Stock Unit Agreement for Non-Employee Directors (filed herewith).
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).
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).
36
Exhibit No.
10.37*
10.38*
10.39*
10.40*
10.41*
10.42*
10.43*
10.44*
10.45*
10.46*
10.47*
10.48*
10.49*
21
23
24
31.1
31.2
32.1
101.INS
Description
Form of Stock Option Agreement for Executive Officers (filed as Exhibit 10.37 to Form 10-K of Lincoln
Electric Holdings, Inc. for the year ended December 31, 2018, SEC File No. 0-1402 and incorporated herein by
reference and made a part hereof)).
Form of Stock Option Agreement for Executive Officers (filed herewith).
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).
Form of Restricted Stock Unit Agreement for Executive Officers (filed as Exhibit 10.41 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2018, 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 herewith).
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).
Form of Performance Share Award Agreement for Executive Officers (filed as Exhibit 10.44 to Form 10-K of
Lincoln Electric Holdings, Inc. for the year ended December 31, 2018, 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 herewith).
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 (filed herewith).
Consent of Independent Registered Public Accounting Firm (filed herewith).
Powers of Attorney (filed herewith).
Certification by the Chairman, President and Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934 (filed herewith).
Certification by the Executive Vice President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a)
of the Securities Exchange Act of 1934 (filed herewith).
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
104
Cover page Interactive Data File (embedded within the Inline XBRL document)
*
Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 15(b) of this
report.
37
ITEM 16. FORM 10-K SUMMARY
None.
SIGNATURES
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.
LINCOLN ELECTRIC HOLDINGS, INC.
By:
/s/ Gabriel Bruno
Gabriel Bruno
Executive Vice President, Finance
(principal accounting officer)
February 27, 2020
38
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, 2020
/s/ Vincent K. Petrella
Vincent K. Petrella,
Executive Vice President, Chief Financial Officer and
Treasurer
(principal financial officer)
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno,
Executive Vice President, Finance
(principal accounting officer)
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
Patrick P. Goris, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
Michael F. Hilton, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
Kathryn Jo Lincoln, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
Phillip J. Mason, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
Hellene S. Runtagh, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
Curtis E. Espeland, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
Stephen G. Hanks, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
G. Russell Lincoln, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
William E. MacDonald, III, Director
February 27, 2020
/s/ Gabriel Bruno
Gabriel Bruno as
Attorney-in-Fact for
Ben Patel, Director
February 27, 2020
39
This page is intentionally left blank
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, 2019 and 2018, the related consolidated statements of income, comprehensive income, equity and cash flows for
each of the three years in the period ended December 31, 2019, and the related notes and the financial statement schedule listed
in the Index at 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, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2019, 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, 2019, 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, 2020 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 U.S. 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
F-1
Valuation of acquired intangible assets
Description of
the Matter
As described in Note 4 to the consolidated financial statements, the Company completed the
acquisitions of Baker Industries, Inc. (Baker) and the controlling stake of Kaynak Tekni i Sanayi ve
Ticaret A.
acquisitions included determining the fair value of the intangible assets acquired, which primarily
included trademarks and trade names, and customer relationships.
. (Askaynak) during the year ended December 31, 2019. The Company’s accounting for the
How We
Addressed the
Matter in Our
Audit
Auditing the Company's valuation of acquired intangible assets of Baker and Askaynak was complex
due to the significant estimation required by management to determine the fair value of intangible
assets. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair
values to the significant underlying assumptions utilized in the measurement of the fair value.
Management values acquired intangible assets using the relief from royalty method or excess earnings
method, forms of the income approach. The significant assumptions used to estimate the value of the
acquired intangible assets include discount rates and certain assumptions that form the basis of future
cash flows (such as revenue growth rates, customer attrition rates, and royalty rates). These
assumptions relate to the future performance of the acquired businesses, are forward-looking and could
be affected by future economic and market conditions.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls
over the Company’s process for accounting for acquired intangible assets. For example, we tested
controls over management’s review of the valuation of intangible assets, including the review of the
valuation model and significant assumptions used in the valuation.
To test the fair value of these acquired intangible assets, we performed audit procedures that included,
among others, assessing the methodologies, testing the significant assumptions described above, and
testing the completeness and accuracy of the underlying data. For example, we compared the
significant assumptions to current industry, market and economic trends, historical results of the
acquired businesses and to other relevant factors. We utilized internal valuation specialists in assessing
the fair value methodologies applied and evaluating the reasonableness of certain assumptions selected
by management. We also performed sensitivity analyses of the significant assumptions to evaluate the
change in the fair value resulting from changes in the assumptions. Furthermore, we assessed the
appropriateness of the disclosures in the consolidated financial statements regarding the acquisitions.
Uncertain tax positions
Description of
the Matter
As disclosed in Note 14 to the consolidated financial statements, the Company operates in a
multinational tax environment and is subject to laws and regulations in various jurisdictions, including
U.S. federal, various U.S. state and non-U.S. jurisdictions. Uncertain tax positions may arise from
interpretations and judgments made by the Company in the application of the relevant laws,
regulations and tax rulings. The Company uses judgment in (1) determining whether the technical
merits of tax positions in certain jurisdictions are more-likely-than-not to be sustained and (2)
measuring the related amount of tax benefit that qualifies for recognition.
How We
Addressed the
Matter in Our
Audit
Auditing the tax positions related to certain jurisdictions was complex because the recognition and
measurement of the tax positions is judgmental and is based on interpretations of laws, regulations and
tax rulings.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls
over the Company’s process to assess the technical merits of certain tax positions and controls over the
Company’s process for accounting for uncertain tax positions. For example, our procedures included
testing the Company’s controls to determine the application of the relevant laws, regulations and tax
rulings, including management’s process to recognize and measure the related tax positions.
In testing the recognition and measurement of income tax positions, we involved tax professionals to
assist in assessing the technical merits of the Company’s tax positions. In addition, we used our
knowledge of and experience with the application of domestic and international income tax laws by
the relevant tax authorities to evaluate the Company’s accounting for those tax positions. We also
assessed the Company’s assumptions and data used to support the measurement of the related tax
positions and tested the accuracy of the calculations. Lastly, we evaluated the Company’s income tax
disclosures related to the Company’s uncertain tax positions.
/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, 2020
F-2
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, 2019, 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, 2019, based on the
COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal
controls of the operations acquired from Baker Industries, Inc. (Baker) and Kaynak Tekni i Sanayi ve Ticaret A.
which are included in the 2019 consolidated financial statements of the Company and constituted 8.8% of consolidated total
assets as of December 31, 2019 and 2.2% of consolidated net revenue for the year then ended. Our audit of internal control over
financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the
operations acquired from Baker and Askaynak.
. (Askaynak),
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2019 consolidated financial statements of the Company and our report dated February 27, 2020 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, 2020
F-3
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)
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 (Note 3)
Diluted earnings per share (Note 3)
Cash dividends declared per share
Year Ended December 31,
2019
3,003,272
1,995,685
1,007,587
621,489
15,188
—
370,910
23,415
20,998
368,493
75,410
293,083
(26)
293,109
4.73
4.68
1.90
$
$
$
$
$
2018
3,028,674
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
$
$
$
$
$
2017
2,624,431
1,749,324
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
$
$
$
$
$
See notes to these consolidated financial statements.
F-4
LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year Ended December 31,
2019
2018
2017
$
293,083
$
286,993
$
247,475
(68)
819
288
11,503
6,735
18,170
311,253
255
3,228
(50,693)
(46,646)
240,347
(166)
240,513
$
10,662
71,016
81,966
329,441
87
329,354
Net income including non-controlling interests
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on derivatives designated and qualifying as cash
flow hedges, net of tax of $(58) in 2019; $346 in 2018; $17 in 2017
Defined pension plan activity, net of tax of $4,188 in 2019; $1,691 in
2018; $19,252 in 2017
Currency translation adjustment
Other comprehensive income (loss)
Comprehensive income
Comprehensive income (loss) attributable to non-controlling interests
Comprehensive income attributable to shareholders
$
310,998
$
See notes to these consolidated financial statements.
F-5
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 $16,002 in
2019; $12,827 in 2018)
Inventories, net (Note 17)
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
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 2019 and 2018;
outstanding – 60,592,096 shares in 2019 and 63,545,878 shares in 2018
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury shares, at cost – 37,989,338 shares in 2019 and 35,035,556 shares in 2018
Total Shareholders' Equity
Non-controlling interests
Total Equity
TOTAL LIABILITIES AND EQUITY
See notes to these consolidated financial statements.
F-6
December 31,
2019
2018
$
199,563
$
358,849
374,649
393,748
107,621
1,075,581
529,344
177,798
337,107
14,275
237,108
2,371,213
$
34,857
$
273,002
83,033
29,690
142,441
112
563,135
712,302
64,286
212,413
396,885
361,829
120,236
1,237,799
478,801
147,946
281,294
20,395
183,590
2,349,825
—
268,600
94,202
29,867
145,402
111
538,182
702,549
45,985
175,517
1,552,136
1,462,233
—
—
9,858
389,446
2,736,481
(275,850)
(2,041,763)
818,172
905
819,077
2,371,213
$
9,858
360,308
2,564,440
(293,739)
(1,753,925)
886,942
650
887,592
2,349,825
$
$
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O
LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2019
2018
2017
$
293,109
$
287,066
$
247,503
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 charges (gains) (Notes 5 and 7)
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)
Gain on change in control
Other, net
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease (increase) in accounts receivable
(Increase) decrease in inventories
Decrease (increase) in other current assets
(Decrease) 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 (USED BY) PROVIDED BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
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
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
(26)
293,083
3,500
—
—
81,487
(1,427)
13,019
16,624
261
(7,601)
(8,416)
50,394
(12,023)
14,269
(8,339)
(31,223)
(423)
403,185
(69,615)
(134,717)
9,509
—
—
2,000
(192,823)
24,429
—
(107)
14,347
(292,693)
(117,920)
—
(371,944)
2,296
(159,286)
358,849
(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
—
(272,027)
(491)
34
(39)
16,627
(43,164)
(92,452)
(15,552)
(135,037)
19,741
(52,478)
379,179
326,701
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
199,563
$
358,849
$
See notes to these consolidated financial statements.
F-8
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 the world leader in the design, development and manufacture of arc welding products, automated joining,
assembly and cutting systems, plasma and oxy-fuel cutting equipment. The Company also has a leading global position in
brazing and soldering alloys.
The Company's 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.
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
$5,291, $4,885 and $5,654 in 2019, 2018 and 2017, respectively.
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.
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, 2019 and 2018,
approximately 36% and 37% 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 $24,088 and $24,502 at December 31, 2019 and 2018, respectively.
F-9
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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 $17,437 and $17,078 at
December 31, 2019 and 2018, 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 at December 31, 2018. During July 2019,
the Company acquired the controlling stake of its equity investment in Kaynak Tekni i Sanayi ve Ticaret A.
. (“Askaynak”),
located in Turkey. The financial statements of Askaynak were consolidated into the Company at that time. The amount of
retained earnings that represents undistributed earnings of the Company's equity investments was $2,581 and $22,704 at
December 31, 2019 and 2018, respectively.
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 3 years 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,
2019
2018
$
$
71,676
$
427,165
856,272
1,355,113
825,769
529,344
$
61,784
414,698
781,136
1,257,618
778,817
478,801
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.
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. Refer to Note 5 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)
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.
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 3 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.
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.
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. In addition, certain customized automation performance obligations 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.
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 added 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
F-11
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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.
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.
Refer to Note 2 to the consolidated financial statements for additional details.
Distribution Costs
Distribution costs, including warehousing and freight related to product shipments, are included in Cost of goods sold.
Stock-Based Compensation
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 the recipients fail to meet vesting requirements.
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.
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 3 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
F-12
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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 $56,845,
$54,168 and $47,899 in 2019, 2018 and 2017, 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 $100,381, $123,799 and
$97,392 in 2019, 2018 and 2017, respectively.
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.
The Company maintains liabilities for unrecognized tax benefits related to uncertain income tax positions in various
jurisdictions. The Company uses judgment in determining whether the technical merits of tax positions are more-likely-than-
not to be sustained. Judgment is also used in measuring the related amount of tax benefit that qualifies for recognition,
including the interpretation of applicable tax law, regulation and tax ruling.
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 elects to treat any Global Intangible Low-Taxed Income (“GILTI”) inclusion as a period
expense in the year incurred. Refer to Note 14 to the consolidated financial statements for additional details.
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 or excess earnings method, forms of the income approach supported by observable market data for
peer companies. The significant assumptions used to estimate the value of the acquired intangible assets include discount rates
and certain assumptions that form the basis of future cash flows (such as revenue growth rates, customer attrition rates, and
royalty rates). 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.
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, 2019 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. 2018-02, Income Statement
- Reporting Comprehensive Income
(Topic 220), issued February 2018.
ASU No. 2016-02, Leases (Topic
842), issued February 2016
Description
ASU 2018-02 allows a reclassification from accumulated other comprehensive
income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts
and Jobs Act (the "U.S. Tax Act"). The ASU only applies to the income tax effects of
the U.S. Tax Act; all other existing guidance remains the same. The Company has
elected not to reclassify the income tax effects of the U.S. Tax Act from Accumulated
other comprehensive loss to Retained earnings.
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 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. Refer to Note 18 to the consolidated financial statements
for further details.
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. 2016-13, Financial
Instruments - Credit Losses (Topic
326), issued June 2016.
ASU No. 2019-12, Income Taxes
(Topic 740), issued December 2019.
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.
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.
ASU 2016-13 modifies disclosure and measurement requirements related to credit
losses. The ASU impacts various financial instruments, including but not limited to,
trade receivables. Topic 326 requires that an entity estimate impairment of trade
receivables based on expected losses rather than incurred losses. The ASU is
effective January 1, 2020.
ASU 2019-12 simplifies the accounting for income taxes by removing certain
exceptions to the general principles in Topic 740. The amendments also improve
consistent application of and simplify GAAP for other areas of Topic 740 by
clarifying and amending existing guidance. The ASU is effective January 1, 2021
and early adoption is permitted.
F-14
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,
2019
2018
$
$
1,715,002
1,288,270
3,003,272
$
$
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, automated
joining, assembly and cutting systems, fume extraction equipment, CNC plasma and oxy-fuel cutting systems and regulators
and torches used in oxy-fuel welding, cutting and brazing. Consumable and Equipment products are sold within each of the
Company’s operating segments.
Within the Equipment product line, there are certain customer contracts related to automation products that may include
multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based
on its relative standalone selling price. The Company generally determines the standalone selling price based on the prices
charged to customers or using expected cost plus margin.
At December 31, 2019, the Company recorded $16,040 related to advance customer payments and $16,274 related to billings in
excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Consolidated Balance
Sheets. At December 31, 2018, the balances related to advance customer payments and billings in excess of revenue
recognized were $17,023 and $17,013, 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, 2019 and 2018, $33,566 and $25,032,
respectively, related to these future customer receivables was included in Other current assets in the 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,
2019
2018
2017
$
293,109
$
287,066
$
247,503
61,960
698
62,658
64,886
796
65,682
$
$
4.73
4.68
$
$
4.42
4.37
$
$
65,739
904
66,643
3.76
3.71
For the years ended December 31, 2019, 2018 and 2017, common shares subject to equity-based awards of 524,110, 324,688 and
157,033, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would
be anti-dilutive.
F-15
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
NOTE 4 – ACQUISITIONS
During July 2019, the Company acquired the controlling stake in Askaynak. Askaynak, based in Turkey, is a supplier and
manufacturer of welding consumables, arc welding equipment, including plasma and oxy-fuel cutting equipment and robotic
welding systems. The acquisition advances the Company's regional growth strategy in Europe, the Middle East and Africa.
During April 2019, the Company acquired Baker Industries, Inc. ("Baker"). Baker, based in Detroit, Michigan, is a provider of
custom tooling, parts and fixtures primarily serving automotive and aerospace markets. The acquisition compliments the
Company's automation portfolio and its metal additive manufacturing service business.
During December 2018, the Company acquired the soldering business of Worthington Industries (“Worthington”). The
Worthington business, based in Winston Salem, North Carolina, broadened 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 accelerated growth and expanded 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 scaled the Company's 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. 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).
F-16
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
(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 2019, 2018 and 2017, the Company recognized $1,804, $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.
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.
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, 2019 and 2018 were
as follows:
Balance as of December 31, 2017
Additions and adjustments (1)
Foreign currency translation
Balance as of December 31, 2018
Additions and adjustments (2)
Foreign currency translation
Balance as of December 31, 2019
Americas
Welding
International
Welding
The Harris
Products
Group
Consolidated
$
197,259
$
25,667
$
11,656
$
234,582
44,408
(2,452)
239,215
37,346
1,935
$
278,496
$
1,224
(2,643)
24,248
17,254
(28)
41,474
$
6,525
(350)
17,831
(613)
(81)
17,137
52,157
(5,445)
281,294
53,987
1,826
$
337,107
(1) 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.
(2) Additions to Americas Welding reflect goodwill recognized in the acquisition of Baker in 2019. Additions to
International Welding reflect goodwill recognized in the acquisition of Askaynak in 2019.
F-17
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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, 2019
December 31, 2018
Gross
Amount
Accumulated
Amortization
Gross
Amount
Accumulated
Amortization
$
$
$
22,020
65,957
140,198
25,931
70,463
302,549
$
$
$
$
$
31,284
62,242
13,633
39,612
146,771
23,385
50,458
113,837
26,848
60,373
251,516
$
$
26,357
52,518
13,307
34,773
126,955
During 2019, 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, 2019
Purchase Price
Allocation
Weighted
Average Life
14,500
27,600
7,970
50,070
9
10
9
Aggregate amortization expense was $20,755, $15,744 and $15,671 for 2019, 2018 and 2017, respectively. Estimated annual
amortization expense for intangible assets for each of the next five years is $22,002 in 2020, $21,191 in 2021, $20,267 in 2022,
$18,247 in 2023 and $15,740 in 2024.
NOTE 6 – SEGMENT INFORMATION
The Company's primary business is the design, development and manufacture of arc welding products, automated joining,
assembly and cutting systems, plasma and oxy-fuel cutting equipment. The Company also has a leading global position in
brazing and soldering alloys.
The Company's 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.
The Company has aligned 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 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.
F-18
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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, 2019, 2018 and 2017 approximately
36%, 37% and 32%, 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, 2019
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, 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
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 (3)
Corporate /
Eliminations (4)
Consolidated
$
$
$
$
1,815,746
123,342
1,939,088
315,719
3,115
312,604
$
$
$
$
854,376
17,691
872,067
50,281
2,156
48,125
$
$
$
$
333,150
7,487
340,637
45,701
1,770
43,931
$
$
$
$
— $
3,003,272
(148,520) $
—
(148,520) $
3,003,272
(10,948) $
400,753
1,804
$
8,845
(12,752) $
391,908
2,527
(25,942)
$
368,493
$
1,490,395
$
831,759
$
203,602
$
(154,543) $
2,371,213
4,274
39,106
55,300
—
23,126
22,013
—
7,383
4,636
— $
— $
(462) $
4,274
69,615
81,487
$
$
$
$
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) 2019 special items reflect Rationalization and asset impairment charges of $1,716 and amortization of step up in value
of acquired inventories of $1,399 related to the acquisition of Baker.
2018 special items reflect pension settlement charges of $6,686 in Americas Welding related to lump sum pension
payments.
F-20
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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.
(2) 2019 special items reflect Rationalization and asset impairment charges of $11,702, amortization of step up in value of
acquired inventories of $1,609 related to the acquisition of Askaynak, gains on disposals of assets of $3,554 and a gain
on change in control of $7,601 related to the acquisition of Askaynak.
2018 special items reflect Rationalization and asset impairment 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 Rationalization and
asset impairment charges of $5,498 related to employee severance, asset impairments and other related costs.
(3) 2019 special items reflect Rationalization and asset impairment charges of $1,770.
(4) 2019 special items reflect acquisition transaction and integration costs of $1,804 related to the Air Liquide Welding
acquisition as discussed in Note 4 to the consolidated financial statements.
2018 special items reflect 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.
Export sales (excluding inter-company sales) from the United States were $147,145 in 2019, $160,064 in 2018 and $151,630 in
2017. No individual customer comprised more than 10% of the Company's total revenues for any of the three years ended
December 31, 2019.
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,
2019
2018
2017
1,615,483
1,387,789
3,003,272
$
$
1,554,688
1,473,986
3,028,674
$
$
1,388,816
1,235,615
2,624,431
December 31,
2019
2018
2017
250,923
$
214,943
$
278,566
(145)
529,344
$
264,110
(252)
478,801
$
194,491
282,931
(391)
477,031
$
$
$
$
NOTE 7 – RATIONALIZATION AND ASSET IMPAIRMENTS
The Company recorded rationalization and asset impairment net charges of $15,188, $25,285 and $6,590 for the years ended
December 31, 2019, 2018 and 2017, respectively. 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 2019, the Company initiated rationalization plans within International Welding. The plans primarily include headcount
restructuring to better align the cost structures with economic conditions and operating needs. At December 31, 2019, liabilities
relating to the International Welding plans of $7,905 were recognized in Other current liabilities. The Company does not
anticipate significant additional charges related to the completion of these plans.
F-21
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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. Liabilities related to these plans were substantially paid at December 31, 2019.
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, 2017
Payments and other adjustments
Charged to expense
Balance at December 31, 2018
Payments and other adjustments
Charged to expense
Balance at December 31, 2019
Consolidated
6,803
(26,874)
31,263
11,192
(14,678)
11,688
8,202
$
$
$
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, 2019
and 2018:
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, 2017
Other comprehensive income (loss) before
reclassification
Amounts reclassified from AOCI
Net current-period other comprehensive income
(loss)
Balance at December 31, 2018
Other comprehensive income (loss) before
reclassification
Amounts reclassified from AOCI
Net current-period other comprehensive income
(loss)
Balance at December 31, 2019
$
$
$
875
$
(85,277)
$
(162,784)
$
(247,186)
624
195 (1)
819
1,694
1,007
(1,075) (1)
(68)
1,626
$
$
(4,396) (2)
7,624 (2)
3,228
(82,049)
8,213 (2)
3,290 (2)
11,503
(70,546)
$
$
(50,600) (3)
—
(50,600)
(213,384)
6,454 (3)
—
6,454
(206,930)
$
$
(54,372)
7,819
(46,553)
(293,739)
15,674
2,215
17,889
(275,850)
(1) During 2019, this AOCI reclassification is a component of Net sales of $719 (net of tax of $256 and Cost of goods sold
of $(356) (net of tax of $(98)); during 2018, the 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)). 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 $4,188 and $1,691
during the years ended December 31, 2019 and 2018, respectively). Refer to Note 12 to the consolidated financial
statements for additional details.
(3) The Other comprehensive income before reclassifications excludes $281 and $(93) attributable to Non-controlling
interests in the years ended December 31, 2019 and 2018, 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, 2019 and 2018, debt consisted of the following:
Long-term debt
Senior Unsecured Notes due through 2045, interest at 2.8% to 4.0% (net of debt
issuance costs of $1,282 and $1,392 at December 31, 2019 and 2018, respectively),
swapped $50,000 to variable interest rates of 2.4% to 2.6%
Other borrowings due through 2023, interest up to 2.0%
$
Less current portion
Long-term debt, less current portion
Short-term debt
Amounts due banks, weighted average interest at 4.9% in 2019
Current portion long-term debt
Total short-term debt
Total debt
December 31,
2019
2018
$
701,681
10,733
712,414
112
712,302
34,857
112
34,969
691,877
10,783
702,660
111
702,549
—
111
111
$
747,271
$
702,660
At December 31, 2019 and 2018, the fair value of long-term debt, including the current portion, was approximately $721,494
and $649,714, 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, 2019, 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
100,000
100,000
100,000
50,000
August 20, 2025
August 20, 2030
April 1, 2035
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 14 years, respectively.
F-23
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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 term of 5 years 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,
2019, the Company was in compliance with all of its covenants and had $23,000 of 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 term of 5 years 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, 2019, the Company was in compliance with all of its covenants and had no
outstanding borrowings under the Shelf Agreements.
Other
Maturities of long-term debt, including payments for amounts due banks, for the five years succeeding December 31, 2019 are
$34,969 in 2020, $119 in 2021, $105 in 2022, $10,607 in 2023, $0 in 2024 and $700,000 thereafter. Total interest paid was
$24,950 in 2019, $23,790 in 2018 and $23,820 in 2017. 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
On April 23, 2015, the shareholders of the Company approved the 2015 Equity and Incentive Compensation Plan ("Employee
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"). 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, 2019, there were 3,017,391 common shares available for future grant under all
plans.
Stock Options
The following table summarizes stock option activity for the year ended December 31, 2019 under all Plans:
Balance at beginning of year
Options granted
Options exercised
Balance at end of year
Exercisable at end of year
Number of
Options
1,431,038
$
201,881
(314,629)
1,318,290
943,715
Weighted
Average
Exercise
Price
63.19
88.44
45.60
71.25
64.34
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 3 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 2019. In 2019, 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:
Expected volatility
Dividend yield
Risk-free interest rate
Expected option life (years)
Weighted average fair value per option granted during the year
2019
2018
2017
25.98%
2.42%
2.49%
4.6
17.46
$
25.36%
1.92%
2.69%
4.6
18.97
$
25.77%
1.62%
1.90%
4.5
17.50
$
The following table summarizes non-vested stock options for the year ended December 31, 2019:
Balance at beginning of year
Granted
Vested
Balance at end of year
Number of
Options
Weighted
Average
Fair Value at
Grant Date
$
360,444
201,881
(187,750)
374,575
17.21
17.46
16.04
17.93
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, 2019 was $34,138 and $30,960, respectively. The total intrinsic value of awards
exercised during 2019, 2018 and 2017 was $13,964, $4,779 and $19,328, respectively. The total fair value of options that
vested during 2019, 2018 and 2017 was $3,012, $3,511 and $3,040, respectively.
The following table summarizes information about awards outstanding as of December 31, 2019:
Outstanding
Weighted
Average
Exercise
Price
Number of
Stock
Options
219,050
$
192,609
906,631
1,318,290
42.31
58.11
81.04
Weighted
Average
Remaining
Life (years)
Number of
Stock
Options
Exercisable
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Life (years)
2.3
6.1
6.8
5.9
219,050
$
192,609
532,056
943,715
42.31
58.11
75.67
2.3
6.1
5.5
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, 2019 under all Plans:
Balance at beginning of year
Shares vested
Balance at end of year
Number of
Shares
Weighted
Average
Grant Date
Fair Value
$
12,438
(12,438)
—
80.98
94.71
—
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, 2019 under all Plans:
Balance at beginning of year
Units granted
Units vested
Units forfeited
Balance at end of year
Number of
Units
$
506,030
170,857
(186,224)
(9,534)
481,129
Weighted
Average
Grant Date
Fair Value
75.69
87.55
60.69
82.30
85.58
RSUs are valued at the quoted market price on the grant date. The majority of RSUs vest over a period of 3 years. The
Company issues shares of common stock from treasury upon the vesting of RSUs and any earned dividend equivalents.
Conversion of 30,955 RSUs to common shares in 2019 were deferred as part of the 2005 Deferred Compensation Plan for
Executives (the "2005 Plan"). As of December 31, 2019, 129,621 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 2019,
128,715 RSUs were issued under the Employee Plan and the 2015 Director Plan. The remaining weighted average vesting
period of all non-vested RSUs is 1.3 years as of December 31, 2019.
PSUs are valued at the quoted market price on the grant date. PSUs vest over a period of 3 years 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 2019, the Company issued 42,142 PSU's and has 98,065 PSUs
outstanding under the Employee Plan at a weighted average fair value of $88.19 per share. The remaining weighted average
vesting period of all non-vested PSUs is 1.2 years as of December 31, 2019.
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 2019, 2018 and 2017 was $16,624, $18,554 and $12,698, respectively. The related tax
benefit for 2019, 2018 and 2017 was $4,151, $4,632 and $4,861, respectively. As of December 31, 2019, total unrecognized
stock-based compensation expense related to non-vested stock options, RSAs, RSUs and PSUs was $19,817, 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 13,300 in 2019, 8,324 in 2018 and 10,458 in 2017.
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, 2019, the Company purchased a total of 3.4 million shares
for $288,134 at an average cost per share of $85.52. As of December 31, 2019, there remained 2.8 million shares remained
available for repurchase under the stock repurchase program. The treasury shares have not been retired.
On February 12, 2020, the Company's Board of Director's approved a new share repurchase program authorizing the Company
to repurchase, in the aggregate, up to $10 million shares of its outstanding common stock.
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
Actuarial (gain) loss
Benefits paid
Settlements/curtailments (1)
Currency translation
December 31,
2019
2018
U.S. pension
plans
Non-U.S.
pension plans
U.S. pension
plans
Non-U.S.
pension plans
$ 438,945
$ 168,811
$ 507,075
$ 193,523
140
18,610
—
—
58,842
(24,026)
—
—
2,908
3,739
153
(1,864)
10,653
(8,961)
(1,256)
2,675
139
18,084
—
—
(46,924)
(7,973)
(31,456)
—
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
Benefit obligations at end of year
492,511
176,858
438,945
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Plan participants' contributions
Acquisitions & other adjustments
Benefits paid
Settlements (1)
Currency translation
512,078
100,744
—
—
—
(23,271)
—
—
100,187
9,743
2,210
153
(2,651)
(6,120)
(920)
3,071
568,388
(23,012)
690
—
—
(7,047)
(26,941)
—
Fair value of plan assets at end of year
589,551
105,673
512,078
Funded status at end of year
Unrecognized actuarial net loss
Unrecognized prior service cost
Unrecognized transition assets, net
Net amount recognized
97,040
67,050
(71,185)
28,543
73,133
85,624
(68,624)
25,581
—
—
$ 164,090
457
30
—
—
$ (42,155) $ 158,757
534
32
$ (42,477)
(1) Settlements in 2018 resulting from lump sum pension payments.
The Company did not make significant contributions to the defined benefit plans in the United States in 2019 or 2018.
F-27
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
The after-tax amounts of unrecognized actuarial net loss, prior service costs and transition assets included in Accumulated other
comprehensive loss at December 31, 2019 were $70,205, $320 and $21, 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 2020 are $3,105, $60 and $3, respectively.
Amounts Recognized in Consolidated Balance Sheets
December 31,
2019
2018
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
$ 111,879
(739)
(14,100)
67,050
$ 164,090
(1) Included in Other assets.
(2) Included in Other current liabilities.
(3) Included in Other liabilities.
Components of Pension Cost for Defined Benefit Plans
$
— $
87,786
(786)
(13,867)
85,624
$ (42,155) $ 158,757
(2,847)
(68,338)
29,030
$
77
(2,996)
(65,705)
26,147
$ (42,477)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of net loss
Settlement/curtailment loss (gain) (1)
Pension cost for defined benefit plans
Year Ended December 31,
2019
2018
2017
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
$
140
$
2,908
$
139
$
3,252
$
608
$
2,678
18,610
(24,980)
—
1,654
—
3,739
(4,430)
58
2,296
266
$
(4,576) $
4,837
$
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
(1) Pension settlement charges resulting from lump sum pension payments.
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.
Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
December 31,
2019
2018
U.S. pension
plans
Non-U.S.
pension plans
U.S. pension
plans
Non-U.S.
pension plans
$
14,794
$ 169,455
$
14,653
$ 158,746
14,521
—
164,203
98,434
14,406
—
152,724
90,076
The total accumulated benefit obligation for all plans was $663,163 as of December 31, 2019 and $600,998 as of December 31,
2018.
F-28
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
Benefit Payments for Plans
Benefits expected to be paid for the plans are as follows:
Estimated Payments
2020
2021
2022
2023
2024
2025 through 2029
Assumptions
U.S. pension
plans
Non-U.S.
pension plans
$
$
36,785
31,465
32,045
34,763
33,550
140,878
8,282
8,348
7,793
7,589
8,550
39,551
Weighted average assumptions used to measure the benefit obligation for the Company's significant defined benefit plans as of
December 31, 2019 and 2018 were as follows:
Discount Rate
Rate of increase in compensation
December 31,
2019
2018
U.S. pension
plans
Non-U.S.
pension plans
U.S. pension
plans
Non-U.S.
pension plans
3.4%
2.5%
1.7%
2.6%
4.4%
2.5%
2.3%
2.6%
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:
2019
December 31,
2018
2017
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
4.4%
2.5%
5.0%
2.3%
2.8%
4.5%
3.7%
2.5%
5.0%
2.0%
2.7%
4.6%
4.2%
2.5%
6.0%
2.2%
2.5%
4.5%
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.
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 5% to 15% equity securities and 85% to 95% debt securities.
F-29
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
The following table sets forth, by level within the fair value hierarchy, the pension plans' assets as of December 31, 2019:
Cash and cash equivalents
Fixed income securities (1)
U.S. government bonds
Corporate debt and other obligations
Investments measured at NAV (2)
Common trusts and 103-12 investments (3)
Private equity funds (4)
Total investments at fair value
Pension Plans' Assets at Fair Value as of December 31, 2019
Quoted Prices
in Active Markets
for Identical
Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
11,263
$
— $
— $
11,263
46,048
—
—
482,203
—
—
$
57,311
$
482,203
$
— $
46,048
482,203
124,389
31,321
695,224
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 (5)
Fixed income securities (1)
U.S. government bonds
Corporate debt and other obligations
Investments measured at NAV (2)
Common trusts and 103-12 investments (3)
Private equity funds (4)
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
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
F-30
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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 $576, $1,268 and $772 in
2019, 2018 and 2017, respectively. The projected benefit obligation associated with this plan is also included in the pension
disclosure shown above and was $12,202, $12,183 and $17,047 at December 31, 2019, 2018 and 2017, respectively.
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 in 2016 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.
Effective January 1, 2017, the Company created The Lincoln Electric Company Restoration Plan (“Restoration Plan”). 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.
The annual costs recognized for defined contribution plans were $24,835, $26,477 and $25,285 in 2019, 2018 and 2017,
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 (2)
Total Other income (expense)
Year Ended December 31,
2019
2018
2017
$
$
3,163
2,787
15,048
20,998
5,481
502
4,703
10,686
$
$
2,742
769
5,215
8,726
(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.
(2) Includes a gain on change in control related to the acquisition of Askaynak in the year ended December 31, 2019.
Refer to Note 4 to the consolidated financial statements for details.
NOTE 14 – INCOME TAXES
The components of income before income taxes were as follows:
U.S.
Non-U.S.
Total
The components of income tax expense (benefit) were as follows:
Current:
Federal
Non-U.S.
State and local
Deferred:
Federal
Non-U.S.
State and local
Total
Year Ended December 31,
2019
2018
2017
237,296
131,197
368,493
$
$
255,088
113,572
368,660
$
$
213,171
153,065
366,236
Year Ended December 31,
2019
2018
2017
25,063
26,540
9,064
60,667
6,971
6,513
1,259
14,743
75,410
$
$
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
$
$
$
$
F-32
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, 2019 were as follows:
$
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
Resolution and settlements to uncertain tax positions
Foreign Derived Intangible Income Deduction
Foreign rate variance
Bargain purchase gain
Valuation allowances
Manufacturing deduction
Research and development credit
Other
Total
Effective tax rate
Year Ended December 31,
2019
2018
$
77,384
8,830
(3,451)
—
—
(9,432)
(4,315)
7,023
—
3,198
—
(4,786)
959
$
77,419
8,844
(1,094)
4,823
(4,424)
(457)
(2,647)
(4,560)
—
5,596
—
(3,859)
2,026
2017
128,182
5,671
(6,276)
21,949
6,667
2,216
—
(13,929)
(17,556)
102
(5,922)
(2,688)
345
$
75,410
$
81,667
$
118,761
20.5%
22.2%
32.4%
The 2019 effective tax rate is impacted by the reduced corporate income tax rate associated with the U.S. Tax Act beginning in
2018. The 2019 effective tax rate was lower than 2018 primarily due to income tax benefits for the settlement of tax items as
well as tax deductions associated with excess tax benefits resulting from exercises of stock based compensation, offset by the
geographic mix of earnings and taxes at higher rates in foreign jurisdictions.
Total income tax payments, net of refunds, were $42,880 in 2019, $85,805 in 2018 and $81,691 in 2017.
F-33
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
Deferred Taxes
Significant components of deferred tax assets and liabilities at December 31, 2019 and 2018, were as follows:
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
December 31,
2019
2018
$
$
64,712
3,442
13,048
24,532
11,561
3,401
120,696
(71,546)
49,150
39,583
16,695
6,427
25,171
11,285
99,161
(50,011) $
$
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)
At December 31, 2019, certain subsidiaries had net operating loss carry-forwards of approximately $51,129 that expire in
various years from 2020 through 2034, plus $213,724 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, 2019, a valuation
allowance of $71,546 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.
The Company determined it will repatriate earnings for certain non-U.S. subsidiaries, which are subject to foreign withholding
taxes. The Company has estimated the associated tax to be $1,697. The Company considers remaining earnings and outside
basis in all other non-U.S. subsidiaries to be indefinitely reinvested and has not recorded any deferred taxes as such estimate is
not practicable.
Unrecognized Tax Benefits
Liabilities for unrecognized tax benefits related to uncertain tax positions are classified as Other liabilities unless expected to be
paid in one year. Additionally, to the extent a position would not result in a cash tax liability, those amounts are generally
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 $1,957 for the year ended
December 31, 2019 and benefits of $1,277 for the year ended December 31, 2018 for interest and penalties. For those same
years, the Company's accrual for interest and penalties related to unrecognized tax benefits totaled $4,512 and $6,655,
respectively.
F-34
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
The following table summarizes the activity related to unrecognized tax benefits:
Balance at beginning of year
Increase related to current year tax provisions
Increase/(decrease) related to prior years' tax positions
Decrease related to settlements with taxing authorities
Resolution of and other decreases in prior years' tax liabilities
Other
Balance at end of year
2019
2018
$
$
28,804
1,204
(101)
(3,567)
(5,692)
(63)
20,585
$
$
28,449
1,431
4,917
(111)
(1,501)
(4,381)
28,804
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $17,552 at
December 31, 2019 and $25,069 at December 31, 2018.
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 2015. The Company is currently subject to 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 unrecognized tax benefits related to 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
management’s judgment in the interpretation of applicable tax law, regulation or tax ruling, the 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 $2,971 in prior years' unrecognized tax benefits in 2020.
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, 2019.
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, 2019. 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 $59,982 at December 31, 2019 and $45,909 at December 31, 2018.
Fair value hedges
Certain interest rate swap agreements are qualified and designated as fair value hedges. At December 31, 2019, the Company
had interest rate swap agreements outstanding that effectively convert notional amounts of $50,000 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 0.6%. The variable rates reset
every three months, at which time payment or receipt of interest will be settled.
Net investment hedges
The Company has cross currency swaps that are qualified and designated as net investment hedges. The dollar equivalent gross
notional amount of these contracts is $50,000 as of December 31, 2019.
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 $363,820 at
December 31, 2019 and $328,534 at December 31, 2018.
F-35
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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
Cross currency swap agreements
Not designated as hedging instruments:
December 31, 2019
December 31, 2018
Other
Current
Assets
Other
Current
Liabilities
Other
Assets
Other
Liabilities
Other
Current
Assets
Other
Current
Liabilities
Other
Assets
Other
Liabilities
$
$ 1,288
—
—
522
— 2,964
—
—
$ — $ — $ 647
—
—
—
653
$
404
—
—
$ — $ —
7,033
—
302
—
Foreign exchange contracts
Total derivatives
2,397
$ 3,685
973
$ 1,495
—
$ 2,964
$
— 6,375
$ 7,022
653
829
$ 1,233
—
$ 302
—
$ 7,033
The effects of undesignated derivative instruments on the Company's Consolidated Statements of Income consisted of the
following:
Derivatives by hedge designation
Not designated as hedges:
Classification of gains
Year Ended December 31,
2019
2018
Foreign exchange contracts
Selling, general & administrative expenses
$
13,154
$
7,452
The effects of designated cash flow hedges on AOCI and the Company's Consolidated Statements of Income consisted of the
following:
Total gain (loss) recognized in AOCI, net of tax
Foreign exchange contracts
Net investment hedges
December 31,
2019
2018
$
620
$
1,006
173
1,521
The Company expects a gain of $620 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.
Derivative type
Foreign exchange contracts
Gain (loss) reclassified from AOCI to:
Net sales
Cost of goods sold
Year Ended December 31,
2019
2018
$
$
975
454
(225)
(3)
F-36
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
NOTE 16 – FAIR VALUE
The following table provides a summary of fair value assets and liabilities as of December 31, 2019 measured at fair value on a
recurring basis:
Description
Assets:
Foreign exchange contracts
Interest rate swap agreements
Total assets
Liabilities:
Foreign exchange contracts
Cross currency swap agreements
Contingent considerations
Deferred compensation
Total liabilities
Balance as of
December 31, 2019
Quoted Prices in
Active Markets for
Identical Assets or
Liabilities
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
$
$
$
$
$
$
$
3,685
2,964
6,649
1,495
653
470
29,170
— $
—
— $
— $
—
—
—
$
$
$
3,685
2,964
6,649
1,495
653
—
29,170
31,788
$
— $
31,318
$
—
—
—
—
—
470
—
470
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 Company's derivative contracts are valued at fair value using the market approach. The Company measures the fair value
of foreign exchange contracts, interest rate swap agreements and cross currency swaps using Level 2 inputs based on
observable spot and forward rates in active markets. During the year ended December 31, 2019, there were no transfers
between Levels 1, 2 or 3.
In connection with an acquisition, the Company recorded contingent consideration liability, which will be paid based upon
actual financial results of the acquired entity for specified future periods. The fair value of the contingent consideration is a
Level 3 valuation and fair valued using an option pricing model.
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.
F-37
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
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, 2019 and December 31, 2018. 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,
2019
2018
$
$
$
116,716
63,744
213,288
393,748
$
103,820
53,950
204,059
361,829
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, 2019 and
2018, approximately 36% and 37% of total inventories, respectively, were valued using the LIFO method. The excess of
current cost over LIFO cost was $75,292 at December 31, 2019 and $79,626 at December 31, 2018.
NOTE 18 – LEASES
On January 1, 2019, the Company adopted Topic 842 using the modified retrospective transition option. The adoption of Topic
842 resulted in the recording of right-of-use assets and lease liabilities for the Company's operating leases. The table below
summarizes the right-of-use assets and lease liabilities in the Company's Consolidated Balance sheets:
Operating Leases
Balance Sheet Classification
Right-of-use assets
Other assets
Current liabilities
Other current liabilities
Noncurrent liabilities
Total lease liabilities
Other liabilities
December 31, 2019
$
$
$
51,533
13,572
39,076
52,648
Topic 842 did not materially impact the Company's consolidated net earnings, cash flows or debt covenants.
The Company determines if an agreement is a lease at inception. Right-of-use assets represent the Company’s right to use an
underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from
the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the
present value of lease payments over the lease term. As most of the Company’s operating leases do not provide an implicit rate,
the Company uses its incremental borrowing rate based on information available at commencement date to present value the
lease payments.
The Company has operating leases for sales offices, manufacturing facilities, warehouses and distribution centers,
transportation equipment, office equipment and information technology equipment. Some of these leases are noncancelable.
Variable or short-term lease costs contained within the Company’s operating leases are not material. Most leases include one or
more options to renew, which can extend the lease term from 1 to 11 years or more. The exercise of lease renewal options is at
the Company's sole discretion. Certain leases also include options to purchase the leased property. Leases with an initial term
of 12 months or less are not recorded on the Company's Consolidated Balance sheets. The Company recognizes lease expense
for these leases on a straight-line basis over the lease term.
F-38
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of
title or purchase option reasonably certain of exercise. The Company's lease agreements do not contain any material residual
value guarantees or material restrictive covenants.
Total lease expense, which is included in Cost of goods sold and Selling, general and administrative expenses in the Company's
Consolidated Statements of Income, was $25,389, $25,720 and $20,450 in the years ended December 31, 2019, 2018 and 2017,
respectively. Cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2019 was
$17,800 and is included in Net cash provided by operating activities in the Company's Consolidated Statements of Cash Flows.
Right-of-use assets obtained in exchange for operating lease liabilities during the year ended December 31, 2019 was $19,216,
respectively.
The total future minimum lease payments for noncancelable operating leases were as follows:
2020
2021
2022
2023
2024
After 2024
Total lease payments
Less: Imputed interest
Operating lease liabilities
December 31, 2019
15,235
$
11,509
8,766
7,220
5,787
10,929
59,446
(6,798)
52,648
$
$
As of December 31, 2019, the weighted average remaining lease term is 6.3 years and the weighted average discount rate used
to determine the operating lease liability is 3.6%.
F-39
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except share and per share amounts)
NOTE 19 – 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, regulatory
claims, employment-related claims and health, safety and environmental claims, some of which relate to cases alleging asbestos
induced illnesses. The claimants in the asbestos cases seek compensatory and punitive damages, in most cases for unspecified
amounts. The Company believes it has meritorious defenses to these claims and intends to contest such suits vigorously.
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 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,
2019
2018
2017
$
$
19,778
$
22,029
$
17,094
(16,211)
(11)
20,650
8,897
(11,403)
255
$
19,778
$
21,053
9,901
(11,500)
2,575
22,029
(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-40
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)
2019
Net sales
Gross profit
Income before income taxes
Net income
Basic earnings per share (5)
Diluted earnings per share (5)
2018
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)
$
$
$
$
$
$
759,174
258,421
92,918
71,480
1.13
1.12
757,696
256,554
84,198
60,824
0.93
0.92
$
$
$
$
$
$
777,008
269,881
103,484
85,452
1.37
1.36
790,052
270,116
94,263
68,864
1.05
1.04
$
$
$
$
$
$
730,783
238,351
91,797
72,461
1.18
1.17
737,099
251,552
95,744
70,539
1.09
1.07
$
$
$
$
$
$
736,307
240,934
80,294
63,716
1.04
1.03
743,827
250,299
94,455
86,839
1.36
1.35
(1) 2019 includes special item charges of $3,535 ($2,814 after-tax) for Rationalization and asset impairment charges and
$790 ($698 after-tax) for acquisition transaction and integration costs.
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.
(2) 2019 includes special item charges of $3,554 ($2,586 after-tax) for gains on the disposal of assets, $1,399 ($1,049
after-tax) for amortization of step up in value of acquired inventories, $1,014 ($867 after-tax) for acquisition
transaction and integration costs, $1,307 ($937 after-tax) for Rationalization and asset impairment charges and $4,852
for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary.
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.
(3) 2019 includes special item charges of $1,495 ($1,240 after-tax) for Rationalization and asset impairment charges,
$1,609 for amortization of step up in value of acquired inventories and $7,601 for a gain on change in control related
to the acquisition of Askaynak.
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.
(4) 2019 includes special item charges of $8,851 ($7,284 after-tax) for Rationalization and asset impairment charges.
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.
(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-41
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
LINCOLN ELECTRIC HOLDINGS, INC.
(In thousands)
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged
(Credited) to
Other Accounts (1)
Deductions (2)
Balance at End
of Period
$
$
12,827
15,943
7,768
$
1,227
1,743
1,172
$
3,792
(1,037)
9,501
$
1,844
3,822
2,498
16,002
12,827
15,943
Description
Allowance for doubtful accounts:
Year Ended December 31, 2019
Year Ended December 31, 2018
Year Ended December 31, 2017
Deferred tax asset valuation allowance:
Year Ended December 31, 2019
$
69,400
$
3,691
$
Year Ended December 31, 2018
Year Ended December 31, 2017
68,694
47,849
1,891
16,222
(481) $
2,437
4,854
1,064
$
3,622
231
71,546
69,400
68,694
(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-42
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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
BOARD OF DIRECTORS
Curtis E. Espeland
Executive Vice President,
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
Former 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,
Cooper Tire & Rubber Company
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
Chief Compliance Officer
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
CORPORATE INFORMATION
For additional corporate information and copies of
Lincoln Electric’s 2019 Annual Report, Form 10-K
and 2020 Proxy Statement, 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
William T. Matthews
Senior Vice President, Technology and
Research and Development
Ernst & Young LLP
ANNUAL MEETING
Wednesday, April 22, 2020
11:00 a.m. Eastern Time
Online at www.virtualshareholdermeeting.com/
LECO2020
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, 2019: 1,957
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
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Lincoln Electric Holdings, Inc.
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199 U.S.A.
www.lincolnelectric.com
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
M E N U
BOARD OF DIRECTORS
Curtis E. Espeland
Executive Vice President,
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
Former 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,
Cooper Tire & Rubber Company
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
Chief Compliance Officer
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
CORPORATE INFORMATION
For additional corporate information and copies of
Lincoln Electric’s 2019 Annual Report, Form 10-K
and 2020 Proxy Statement, 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
William T. Matthews
Senior Vice President, Technology and
Research and Development
Ernst & Young LLP
ANNUAL MEETING
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
Wednesday, April 22, 2020
11:00 a.m. Eastern Time
Lincoln Electric Welding Technology
& Training Center
22800 St. Clair Avenue, Cleveland, Ohio
44117Online at www.virtualshareholdermeeting.
com/LECO2020
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, 2019: 1,957
M E N U
Lincoln Electric Holdings, Inc.
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199 U.S.A.
www.lincolnelectric.com