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Lincoln Electric Reports Second Quarter 2016 Results

Jul 25 2016

Lincoln Electric Reports Second Quarter 2016 Results


EPS of $0.45, Adjusted EPS of $0.83
   
  Second Quarter 2016 Key Metric Highlights
Sales declined 10.9% primarily due to lower volumes
Operating income margin of 8.1%, Adjusted operating income margin of 13.9%
Returned $122 million to shareholders through dividends and share repurchases
Deconsolidated the Venezuelan subsidiary and recorded a $34.3 million pretax charge ($34.1 million non-cash)  
   
   

CLEVELAND, July 25, 2016 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq:LECO) today reported second quarter 2016 net income of $31.3 million, or diluted earnings per share (EPS) of $0.45 which includes a $7.2 million or $0.10 EPS benefit due to the reversal of an income tax valuation allowance and a $33.3 million, or $0.48 EPS charge from the deconsolidation of the Venezuelan subsidiary.  This compares with net income of $70.9 million, or EPS of $0.94 in the comparable 2015 period.  Adjusted net income for the three months ended June 30, 2016 was $57.4 million, or adjusted EPS of $0.83 reflecting the impact of lower volumes.  This compares with adjusted net income of $71.8 million, or adjusted EPS of $0.95, in 2015.

Second quarter 2016 sales decreased 10.9% to $592.4 million.  The decrease reflects a 32.6% decline from unfavorable foreign exchange translation and lower volumes of 9.7% being partially offset by a 28.4% benefit from price and a 3.0% increase from acquisitions.  Excluding Venezuela, price declined 0.9% and foreign exchange translation had a 1.5% unfavorable impact.  Operating income for the second quarter 2016 was $48.1 million, or 8.1% of sales, as compared with $96.8 million, or 14.6% of sales, in the comparable 2015 period.  The decline was primarily due to the loss associated with the Venezuelan deconsolidation.  On an adjusted basis, operating income was $82.4 million, or 13.9% of sales as compared with $98.0 million or 14.7% in the comparable 2015 period.  Margin performance, excluding the loss related to the deconsolidation, reflects the benefits of cost reduction actions implemented to mitigate lower volumes.

"We continued to execute well in the second quarter with solid margin and cash flow performance and returned $122 million to shareholders," stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. "While we have yet to see sustained improvement in industrial demand across all of our businesses, we continue to invest for long-term, profitable growth with a broad range of product launches, operational excellence initiatives and interim cost control measures to maximize shareholder value through the economic cycle."

Six Months 2016 Summary

Net income for the six months ended June 30, 2016 was $85.0 million, or EPS of $1.22 which includes the impact of the special items noted above.  This compares with net income of $139.3 million, or EPS of $1.82, in the comparable 2015 period.  Adjusted net income for the six months ended June 30, 2016 was $111.0 million, or adjusted EPS of $1.60, compared with adjusted net income of $140.2 million, or adjusted EPS of $1.83, in 2015.

Sales decreased 13.6% to $1.1 billion in the six months ended June 30, 2016 primarily due to unfavorable foreign exchange translation and lower volumes.  This compares with $1.3 billion in sales in the comparable 2015 period.  Operating income for the six months ended June 30, 2016 decreased to $123.4 million, or 10.8% of sales, as compared with $187.3 million, or 14.2% of sales, in the comparable 2015 period.  Adjusted operating income was $157.7 million or 13.8% of sales, compared with $188.5 million, or 14.3% of sales in 2015.

Venezuela Deconsolidation

Effective June 30, 2016, the Company deconsolidated the financial statements of its Venezuelan subsidiary and began reporting its results using the cost method of accounting.  As a result, the Company recorded a $34.3 million pretax charge ($34.1 million non-cash), or $33.3 million after-tax in the second quarter of 2016.  The Company maintains its commitment to ongoing operations in the country and future income from the Venezuelan subsidiary will be recorded if cash is received.

Dividend and Share Repurchases

The Company's Board of Directors declared a quarterly cash dividend of $0.32 per share, which was paid on July 15, 2016 to shareholders of record as of June 30, 2016.      

During the second quarter, the Company returned $122.5 million to shareholders through dividends and the repurchase of 1.7 million of the Company's common shares.  The Company is maintaining its 2016 share repurchase target of $400 million of the Company's common shares.

Financing Activities

During July 2016, the Company committed to pricing on private placement debt in the aggregate principal amount of $350.0 million.  The debt will have maturities ranging from 12 to 25 years and a weighted average effective interest rate of 3.1%, excluding accretion of original issuance costs.  The commitment is expected to be finalized and proceeds received during the fourth quarter of 2016.  The proceeds will be used for general corporate purposes.

Webcast Information

A conference call to discuss second quarter 2016 financial results will be webcast live today, July 25, 2016, at 10:00 a.m., Eastern Time.  This webcast is accessible at http://ir.lincolnelectric.com.  Listeners should go to the web site prior to the call to register, download and install any necessary audio software.  A replay of the webcast will be available on the Company's web site.

Investors who are unable to access the webcast may listen to the conference call live by telephone by dialing (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 41918263.  Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.

Financial results for the second quarter 2016 can also be obtained at http://ir.lincolnelectric.com.

About Lincoln Electric

Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market.  Headquartered in Cleveland, Ohio, Lincoln has 48 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries.  For more information about Lincoln Electric and its products and services, visit the Company's website at http://www.lincolnelectric.com.

Non-GAAP Information

Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures.  Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business.  Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully.  Furthermore, management believe that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly.  Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
 
Forward-Looking Statements

The Company's expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  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; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; and the possible effects of events beyond our control, such as political unrest, acts of terror and natural disasters, on the Company or its customers, suppliers and the economy in general.  For additional discussion, see "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts) (Unaudited)
 
Consolidated Statements of Income
 
    Three Months Ended June 30,   Fav (Unfav) to Prior Year
    2016   % of Sales   2015   % of Sales   $   %
Net sales   $ 592,418     100.0 %   $ 664,740     100.0 %   $ (72,322 )   (10.9 %)
Cost of goods sold   389,491     65.7 %   438,959     66.0 %   49,468     11.3 %
Gross profit   202,927     34.3 %   225,781     34.0 %   (22,854 )   (10.1 %)
Selling, general & administrative expenses   120,497     20.3 %   127,755     19.2 %   7,258     5.7 %
Rationalization and asset impairment charges           1,239     0.2 %   1,239     100.0 %
Loss on deconsolidation of Venezuelan subsidiary   34,348     5.8 %           (34,348 )   (100.0 %)
Operating income   48,082     8.1 %   96,787     14.6 %   (48,705 )   (50.3 %)
Interest income   435     0.1 %   738     0.1 %   (303 )   (41.1 %)
Equity earnings in affiliates   839     0.1 %   979     0.1 %   (140 )   (14.3 %)
Other income   588     0.1 %   317         271     85.5 %
Interest expense   (4,186 )   (0.7 %)   (4,387 )   (0.7 %)   201     4.6 %
Income before income taxes   45,758     7.7 %   94,434     14.2 %   (48,676 )   (51.5 %)
Income taxes   14,449     2.4 %   23,558     3.5 %   9,109     38.7 %
Effective tax rate   31.6 %       24.9 %       (6.7 %)    
Net income including non-controlling interests   31,309     5.3 %   70,876     10.7 %   (39,567 )   (55.8 %)
Non-controlling interests in subsidiaries' loss   (8 )       (22 )       14     63.6 %
Net income   $ 31,317     5.3 %   $ 70,898     10.7 %   $ (39,581 )   (55.8 %)
                         
Basic earnings per share   $ 0.46         $ 0.95         $ (0.49 )   (51.6 %)
Diluted earnings per share   $ 0.45         $ 0.94         $ (0.49 )   (52.1 %)
Weighted average shares (basic)   68,181         75,000              
Weighted average shares (diluted)   68,890         75,773              
    Six months ended June 30th,   Fav (Unfav) to Prior Year
    2016   % of Sales   2015   % of Sales   $   %
Net sales   $ 1,143,140     100.0 %   $ 1,322,640     100.0 %   $ (179,500 )   (13.6 %)
Cost of goods sold   751,111     65.7 %   876,469     66.3 %   125,358     14.3 %
Gross profit   392,029     34.3 %   446,171     33.7 %   (54,142 )   (12.1 %)
Selling, general & administrative expenses   234,307     20.5 %   257,646     19.5 %   23,339     9.1 %
Rationalization and asset impairment charges           1,239     0.1 %   1,239     100.0 %
Loss on deconsolidation of Venezuelan subsidiary   34,348     3.0 %           (34,348 )   (100.0 %)
Operating income   123,374     10.8 %   187,286     14.2 %   (63,912 )   (34.1 %)
Interest income   865     0.1 %   1,331     0.1 %   (466 )   (35.0 %)
Equity earnings in affiliates   1,465     0.1 %   1,828     0.1 %   (363 )   (19.9 %)
Other income   1,249     0.1 %   2,927     0.2 %   (1,678 )   (57.3 %)
Interest expense   (8,013 )   (0.7 %)   (6,231 )   (0.5 %)   (1,782 )   (28.6 %)
Income before income taxes   118,940     10.4 %   187,141     14.1 %   (68,201 )   (36.4 %)
Income taxes   34,007     3.0 %   47,947     3.6 %   13,940     29.1 %
Effective tax rate   28.6 %       25.6 %       (3.0 %)    
Net income including non-controlling interests   84,933     7.4 %   139,194     10.5 %   (54,261 )   (39.0 %)
Non-controlling interests in subsidiaries' loss   (22 )       (58 )       36     62.1 %
Net income   $ 84,955     7.4 %   $ 139,252     10.5 %   $ (54,297 )   (39.0 %)
                         
Basic earnings per share   $ 1.23         $ 1.84         $ (0.61 )   (33.2 %)
Diluted earnings per share   $ 1.22         $ 1.82         $ (0.60 )   (33.0 %)
Weighted average shares (basic)   68,883         75,621              
Weighted average shares (diluted)   69,569         76,416              
                             


 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
 
Balance Sheet Highlights        
         
Selected Consolidated Balance Sheet Data   June 30, 2016   December 31, 2015
Cash and cash equivalents   $ 237,019     $ 304,183  
Total current assets   921,618     935,995  
Property, plant and equipment, net   383,867     411,323  
Total assets   1,837,401     1,784,171  
Total current liabilities   559,790     370,122  
Short-term debt (1)   159,908     4,278  
Long-term debt   360,931     350,347  
Total equity   792,414     932,448  
         
Operating Working Capital   June 30, 2016   December 31, 2015
Accounts receivable   $ 291,645     $ 264,715  
Inventory   292,587     275,930  
Trade accounts payable   173,037     152,620  
Operating working capital   $ 411,195     $ 388,025  
         
Operating working capital to net sales (2)   17.4 %   17.1 %
         
Invested Capital   June 30, 2016   December 31, 2015
Short-term debt (1)   $ 159,908     $ 4,278  
Long-term debt   360,931     350,347  
Total debt   520,839     354,625  
Total equity   792,414     932,448  
Invested capital   $ 1,313,253     $ 1,287,073  
         
Total debt / invested capital   39.7 %   27.6 %


  (1 ) Includes current portion of long-term debt.
  (2 ) Operating working capital to net sales is defined as operating working capital divided by annualized rolling three months of net sales.
   


 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Non-GAAP Financial Measures        
         
    Three Months Ended June 30,   Six Months Ended June 30,
    2016   2015   2016   2015
Operating income as reported   $ 48,082     $ 96,787     123,374     187,286  
Special items (pre-tax):                
Rationalization and asset impairment charges (1)       1,239         1,239  
Loss on deconsolidation of Venezuelan subsidiary (2)   34,348         34,348      
Adjusted operating income (4)   $ 82,430     $ 98,026     $ 157,722     $ 188,525  
As a percent of total sales   13.9 %   14.7 %   13.8 %   14.3 %
                 
Net income as reported   $ 31,317     $ 70,898     $ 84,955     $ 139,252  
Special items (after-tax):                
Rationalization and asset impairment charges (1)       900         900  
Loss on deconsolidation of Venezuelan subsidiary (2)   33,251         33,251      
Income tax valuation reversals (3)   (7,196 )       (7,196 )    
Adjusted net income (4)   $ 57,372     $ 71,798     $ 111,010     $ 140,152  
                 
Diluted earnings per share as reported   $ 0.45     $ 0.94     $ 1.22     $ 1.82  
Special items   0.38     0.01     0.38     0.01  
Adjusted diluted earnings per share (4)   $ 0.83     $ 0.95     $ 1.60     $ 1.83  
                 
Weighted average shares (diluted)   68,890     75,773     69,569     76,416  


  (1 ) The three and six months ended June 30, 2015 include net charges primarily related to severance and other related costs.
  (2 ) The three and six months ended June 30, 2016 reflect a charge (non-cash charge of $34.1 million pretax and $33.0 million after-tax) related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016.
  (3 ) The three and six months ended June 30, 2016 reflect reduced income tax expense related to the reversal of an income tax valuation allowance as a result of a legal entity change to realign the Company's tax structure.
  (4 ) Adjusted operating income, Adjusted net income and Adjusted diluted earnings per share are non-GAAP financial measures.  Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business.  Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully.  Furthermore, management believe that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly.  Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
   


 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
     
Non-GAAP Financial Measures    
     
    Twelve Months Ended June 30,
Return on Invested Capital   2016   2015
Net income as reported   $ 73,181     $ 260,153  
Rationalization and asset impairment charges (gains), net of tax of $1,437 and ($651) in 2016 and 2015, respectively   17,281     31,122  
Loss on deconsolidation of Venezuelan subsidiary, net of tax of $1,097   33,251      
Income tax valuation reversals   (7,196 )    
Pension settlement charges, net of tax of $55,428   87,310      
Venezuela currency devaluation   27,214      
Noncontrolling interest       (805 )
Adjusted net income (1)   $ 231,041     $ 290,470  
Plus: Interest expense, net of tax of $9,038 and $5,402 in 2016 and 2015, respectively   14,568     8,707  
Less: Interest income, net of tax of $861 and $990 in 2016 and 2015, respectively   1,387     1,595  
Adjusted net income before tax effected interest   $ 244,222     $ 297,582  
         
Invested Capital   June 30, 2016   June 30, 2015
Short-term debt   $ 159,908     $ 62,595  
Long-term debt   360,931     151,563  
Total debt   520,839     214,158  
Total equity   792,414     1,196,658  
Invested capital   $ 1,313,253     $ 1,410,816  
         
Return on invested capital (1)(2)   18.6 %   21.1 %


  (1 ) Adjusted net income and Return on invested capital are non-GAAP financial measures.  Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business.  Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully.  Furthermore, management believe that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly.  Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
  (2 ) Return on invested capital is defined as rolling 12 months of Adjusted net income excluding tax-effected interest income and expense divided by invested capital.
   


 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Condensed Consolidated Statements of Cash Flows
     
    Three Months Ended June 30,
    2016   2015
OPERATING ACTIVITIES:        
Net income   $ 31,317     $ 70,898  
Non-controlling interests in subsidiaries' loss   (8 )   (22 )
Net income including non-controlling interests   31,309     70,876  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Loss on deconsolidation of Venezuelan subsidiary   34,348      
Depreciation and amortization   16,607     15,686  
Equity earnings in affiliates, net   (56 )   (272 )
Pension expense   5,112     4,925  
Pension contributions and payments   (712 )   (26,471 )
Other non-cash items, net   (3,316 )   12,772  
Changes in operating assets and liabilities, net of effects from acquisitions:        
(Increase) decrease in accounts receivable   (5,801 )   11,695  
(Increase) decrease in inventories   (4,712 )   17,773  
Increase (decrease) in trade accounts payable   17,571     (18,301 )
Net change in other current assets and liabilities   10,918     (11,234 )
Net change in other long-term assets and liabilities   (272 )   (163 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   100,996     77,286  
         
INVESTING ACTIVITIES:        
Capital expenditures   (15,894 )   (16,761 )
Acquisition of businesses, net of cash acquired   (71,567 )    
Proceeds from sale of property, plant and equipment   221     234  
Other investing activities   (283 )    
NET CASH USED BY INVESTING ACTIVITIES   (87,523 )   (16,527 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   137,514     42,540  
Proceeds from exercise of stock options   3,700     2,303  
Excess tax benefits from stock-based compensation   1,165     756  
Purchase of shares for treasury   (100,445 )   (55,615 )
Cash dividends paid to shareholders   (22,022 )   (21,919 )
Other financing activities   (14,438 )   (7,976 )
NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES   5,474     (39,911 )
         
Effect of exchange rate changes on Cash and cash equivalents   (2,924 )   2,872  
INCREASE IN CASH AND CASH EQUIVALENTS   16,023     23,720  
Cash and cash equivalents at beginning of period   220,996     289,017  
Cash and cash equivalents at end of period   $ 237,019     $ 312,737  
         
Cash dividends paid per share   $ 0.32     $ 0.29  
                 


 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Condensed Consolidated Statements of Cash Flows   Six Months Ended June 30,
    2016   2015
OPERATING ACTIVITIES:        
Net income   $ 84,955     $ 139,252  
Non-controlling interests in subsidiaries' loss   (22 )   (58 )
Net income including non-controlling interests   84,933     139,194  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment charges       30  
Loss on deconsolidation of Venezuelan subsidiary   34,348      
Depreciation and amortization   32,232     31,718  
Equity earnings in affiliates, net   (58 )   (488 )
Pension expense   9,256     10,604  
Pension contributions and payments   (21,577 )   (47,705 )
Other non-cash items, net   (5,395 )   (5,790 )
Changes in operating assets and liabilities, net of effects from acquisitions:        
Increase in accounts receivable   (22,393 )   (13,682 )
(Increase) decrease in inventories   (15,492 )   1,540  
Increase (decrease) in trade accounts payable   22,228     (31,217 )
Net change in other current assets and liabilities (1)   8,007     43,835  
Net change in other long-term assets and liabilities   (732 )   2,031  
NET CASH PROVIDED BY OPERATING ACTIVITIES   125,357     130,070  
         
INVESTING ACTIVITIES:        
Capital expenditures   (24,779 )   (29,217 )
Acquisition of businesses, net of cash acquired   (71,567 )    
Proceeds from sale of property, plant and equipment   679     1,421  
Other investing activities   (283 )   2,024  
NET CASH USED BY INVESTING ACTIVITIES   (95,950 )   (25,772 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   159,270     144,050  
Proceeds from exercise of stock options   5,715     4,036  
Excess tax benefits from stock-based compensation   1,522     1,293  
Purchase of shares for treasury   (202,933 )   (158,468 )
Cash dividends paid to shareholders   (44,647 )   (44,248 )
Other financing activities   (18,244 )   (7,996 )
NET CASH USED BY FINANCING ACTIVITIES   (99,317 )   (61,333 )
         
Effect of exchange rate changes on Cash and cash equivalents   2,746     (8,607 )
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (67,164 )   34,358  
Cash and cash equivalents at beginning of period   304,183     278,379  
Cash and cash equivalents at end of period   $ 237,019     $ 312,737  
         
Cash dividends paid per share   $ 0.64     $ 0.58  


  (1 ) Net change in other current assets and liabilities in 2015 includes the receipt of a $25 million tax refund.
   


 
Lincoln Electric Holdings, Inc.
Segment Highlights (1)
(In thousands)
(Unaudited)
 
    Americas
Welding
  International
Welding
  The Harris
Products
Group
  Corporate /
Eliminations
  Consolidated
Three months ended June 30, 2016                
Net sales   $ 388,372     $ 132,815     $ 71,231     $     $ 592,418  
Inter-segment sales   23,456     3,841     2,824     (30,121 )    
Total   $ 411,828     $ 136,656     $ 74,055     $ (30,121 )   $ 592,418  
                     
EBIT (2)   $ 65,201     $ 9,670     $ 9,284     $ (34,646 )   $ 49,509  
As a percent of total sales   15.8 %   7.1 %   12.5 %       8.4 %
Special items charge (3)               34,348     34,348  
Adjusted EBIT (4)   $ 65,201     $ 9,670     $ 9,284     $ (298 )   $ 83,857  
As a percent of total sales   15.8 %   7.1 %   12.5 %       14.2 %
Three months ended June 30, 2015                
Net sales   $ 451,001     $ 141,927     $ 71,812     $     $ 664,740  
Inter-segment sales   23,902     5,311     2,716     (31,929 )    
Total   $ 474,903     $ 147,238     $ 74,528     $ (31,929 )   $ 664,740  
                     
EBIT (2)   $ 79,421     $ 9,778     $ 8,250     $ 634     $ 98,083  
As a percent of total sales   16.7 %   6.6 %   11.1 %       14.8 %
Special items charge (3)       1,239             1,239  
Adjusted EBIT (4)   $ 79,421     $ 11,017     $ 8,250     $ 634     $ 99,322  
As a percent of total sales   16.7 %   7.5 %   11.1 %       14.9 %
Six months ended June 30, 2016                
Net sales   $ 747,380     $ 257,120     $ 138,640     $     $ 1,143,140  
Inter-segment sales   47,287     8,267     5,127     (60,681 )    
Total   $ 794,667     $ 265,387     $ 143,767     $ (60,681 )   $ 1,143,140  
                     
EBIT (2)   $ 126,639     $ 15,903     $ 16,995     $ (33,449 )   $ 126,088  
As a percent of total sales   15.9 %   6.0 %   11.8 %       11.0 %
Special items charge (3)   $     $     $     $ 34,348     $ 34,348  
Adjusted EBIT (4)   $ 126,639     $ 15,903     $ 16,995     $ 899     $ 160,436  
As a percent of total sales   15.9 %   6.0 %   11.8 %       14.0 %
Six months ended June 30, 2015                
Net sales   $ 899,838     $ 281,174     $ 141,628     $     $ 1,322,640  
Inter-segment sales   46,925     10,338     4,727     (61,990 )    
Total   $ 946,763     $ 291,512     $ 146,355     $ (61,990 )   $ 1,322,640  
                     
EBIT (2)   $ 154,836     $ 20,712     $ 15,799     $ 694     $ 192,041  
As a percent of total sales   16.4 %   7.1 %   10.8 %       14.5 %
Special items charge (3)   $     $ 1,239     $     $     $ 1,239  
Adjusted EBIT (4)   $ 154,836     $ 21,951     $ 15,799     $ 694     $ 193,280  
As a percent of total sales   16.4 %   7.5 %   10.8 %       14.6 %


  (1 ) As previously announced on February 9, 2016, the Company realigned its organizational structure into three operating segments which was effective beginning in the first quarter of 2016.
  (2 ) EBIT is defined as Operating income plus Equity earnings in affiliates and Other income.
  (3 ) Special items within Corporate/Elimination during the three and six months ended June 30, 2016 reflect a charge ($34.1 million non-cash) related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016.
  (4 ) The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
   
   


Lincoln Electric Holdings, Inc.
Change in Net Sales by Segment
(In thousands)
(Unaudited)
 
Three Months Ended June 30th Change in Net Sales by Segment  
               
        Change in Net Sales due to:      
    Net Sales
2015
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2016
 
Operating Segments                        
Americas Welding   $ 451,001     $ (59,999 )   $ 16,323     $ 193,706     $ (212,659 )   $ 388,372  
International Welding   141,927     (5,112 )   3,702     (3,883 )   (3,819 )   132,815  
The Harris Products Group   71,812     736         (809 )   (508 )   71,231  
Consolidated   $ 664,740     $ (64,375 )   $ 20,025     $ 189,014     $ (216,986 )   $ 592,418  
                         
Americas Welding (excluding Venezuela)   $ 427,649     $ (55,013 )   16,323     $ (1,071 )   $ (5,349 )   $ 382,539  
Consolidated (excluding Venezuela)   $ 641,389     $ (59,389 )   $ 20,025     $ (5,764 )   $ (9,676 )   $ 586,585  
                         
% Change                        
Americas Welding       (13.3 %)   3.6 %   43.0 %   (47.2 %)   (13.9 %)
International Welding       (3.6 %)   2.6 %   (2.7 %)   (2.7 %)   (6.4 %)
The Harris Products Group       1.0 %       (1.1 %)   (0.7 %)   (0.8 %)
Consolidated       (9.7 %)   3.0 %   28.4 %   (32.6 %)   (10.9 %)
                           
Americas Welding (excluding Venezuela)   (12.9 %)   3.8 %   (0.3 %)   (1.3 %)   (10.5 %)
Consolidated (excluding Venezuela)   (9.3 %)   3.1 %   (0.9 %)   (1.5 %)   (8.5 %)
                         
Six Months Ended June 30th Change in Net Sales by Segment  
               
        Change in Net Sales due to:      
    Net Sales
2015
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2016
 
Operating Segments                          
Americas Welding   $ 899,838     $ (145,062 )   $ 23,300     $ 274,026     $ (304,722 )   $ 747,380    
International Welding   281,174     (14,934 )   7,168     (6,988 )   (9,300 )   $ 257,120    
The Harris Products Group   141,628     2,126         (3,213 )   (1,901 )   $ 138,640    
Consolidated   $ 1,322,640     $ (157,870 )   $ 30,468     $ 263,825     $ (315,923 )   $ 1,143,140    
                           
Americas Welding (excluding Venezuela)   $ 853,607     $ (125,817 )   $ 23,300     $ (2,052 )   $ (12,472 )   $ 736,566    
Consolidated (excluding Venezuela)   $ 1,276,410     $ (138,626 )   $ 30,468     $ (12,253 )   $ (23,672 )   $ 1,132,327    
                           
% Change                          
Americas Welding       (16.1 %)   2.6 %   30.5 %   (33.9 %)   (16.9 %)  
International Welding       (5.3 %)   2.5 %   (2.5 %)   (3.3 %)   (8.6 %)  
The Harris Products Group       1.5 %       (2.3 %)   (1.3 %)   (2.1 %)  
Consolidated       (11.9 %)   2.3 %   19.9 %   (23.9 %)   (13.6 %)  
                           
Americas Welding (excluding Venezuela)   (14.7 %)   2.7 %   (0.2 %)   (1.5 %)   (13.7 %)  
Consolidated (excluding Venezuela)   (10.9 %)   2.4 %   (1.0 %)   (1.9 %)   (11.3 %)  
                                 
Contact

Amanda Butler
Director, Investor Relations
Tel: 216.383.2534
Email: Amanda_Butler@lincolnelectric.com

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Lincoln Electric Holdings, Inc.