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Lincoln Electric Reports Third Quarter 2016 Results

Oct 21 2016

Lincoln Electric Reports Third Quarter 2016 Results


EPS of $0.89
Third Quarter 2016 Highlights
   Operating income margin of 14.4%
   Solid cash flow from operations and cash conversion of net income (1)
   Returned $107 million to shareholders through dividends and share repurchases
 

CLEVELAND, Oct. 21, 2016 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq:LECO) today reported third quarter 2016 net income of $60.0 million, or diluted earnings per share (EPS) of $0.89 which includes a $4.0 million, or $0.06 EPS benefit from a discrete income tax item.  This compares with net losses of $60.5 million, or $(0.82) EPS, in the comparable 2015 period due to after-tax special item charges of $126.7 million, or $1.71 EPS.  On an adjusted basis, net income for third quarter 2015 was $66.2 million, or $0.89 EPS.

Third quarter 2016 sales decreased 12.0% to $567.6 million as a 2.1% benefit from acquisitions was offset by 12.8% lower volumes, a 0.7% decrease in price and a 0.6% unfavorable impact from foreign exchange translation.  Excluding Venezuela from prior year results due to the recent deconsolidation of the operation, sales decreased 7.0%, primarily from 7.8% lower volumes. 

Operating income for the third quarter 2016 was $81.8 million, or 14.4% of sales, reflecting favorable mix and lower costs.  This compares with operating losses of $84.0 million in the comparable 2015 period which included special items related to pension settlement charges, Venezuelan currency remeasurement losses and rationalization and impairment charges.  On an adjusted basis, third quarter 2015 operating income was $97.1 million or 15.1% of sales.

"We are pleased to report solid margin performance in the quarter," stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. "As we navigate through this challenging portion of the cycle, our year-over-year sales performance continues to improve on easier comparisons and successful commercial initiatives in the equipment product line. While market trends remain mixed, we are focused on cost controls, productivity, and positioning Lincoln Electric for long-term success."

(1) Cash conversion is defined as Net cash provided by operating activities less Capital expenditures divided by Net income.

Nine Months 2016 Summary

Net income for the nine months ended September 30, 2016 was $145.0 million, or EPS of $2.11, which includes an after-tax special item benefit of $7.2 million, or $0.10 EPS, due to the reversal of an income tax valuation allowance and a $33.3 million charge, or $0.48 EPS, from the deconsolidation of the Venezuelan subsidiary.  This compares with net income of $78.8 million, or EPS of $1.04, in the comparable 2015 period.  Adjusted net income for the nine months ended September 30, 2016 was $171.1 million, or adjusted EPS of $2.49, compared with adjusted net income of $206.4 million, or adjusted EPS of $2.72, in 2015.

Sales decreased 13.1% to $1.7 billion in the nine months ended September 30, 2016 primarily due to unfavorable foreign exchange translation and lower volumes.  This compares with $2.0 billion in sales in the comparable 2015 period.  Excluding Venezuela from prior year results, sales decreased 9.9%, primarily from lower volumes.  Operating income was $205.2 million, or 12.0% of sales, as compared with $103.3 million, or 5.2% of sales, in the comparable 2015 period.  Adjusted operating income was $239.6 million or 14.0% of sales, compared with $285.6 million, or 14.5% of sales in 2015.

Venezuela Deconsolidation

Effective June 30, 2016, the Company deconsolidated the financial results of its Venezuela subsidiary and began reporting its results using the cost method of accounting.  As a result, Venezuela is no longer included in the consolidated financial statements in the current period starting in the third quarter of 2016.  In the third quarter of 2015 Venezuela contributed $34.7 million of Net sales and incurred a $16.8 million loss in Gross profit due to a $22.2 million special item charge in Cost of goods sold related to the remeasurement of the Venezuela currency.  Excluding this charge, Venezuela contributed $5.3 million in Gross profit.

Dividend and Share Repurchases
           
The Company's Board of Directors declared a 9.4% increase in the quarterly cash dividend, from $0.32 per share to $0.35, or $1.40 per share on an annual basis.  The declared quarterly cash dividend of $0.35 per share is payable January 13, 2017 to shareholders of record as of December 31, 2016.

During the third quarter, the Company returned $107.2 million to shareholders through dividends and the repurchase of 1.4 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
           
On October 20, 2016, the Company issued Senior Unsecured Notes (the "2016 Notes") in the aggregate principal amount of $350 million through a private placement.  The 2016 Notes have maturities ranging from 12 to 25 years with a weighted average effective interest rate of 3.1% and a weighted average term of 18 years.  The proceeds will be used for general corporate purposes.

Webcast Information

A conference call to discuss third quarter 2016 financial results will be webcast live today, October 21, 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 90839034.  Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.

Financial results for the third 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 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 believes 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)
 
Consolidated Statements of Income   Three Months Ended September 30,   Fav (Unfav) to Prior Year
    2016   % of Sales   2015   % of Sales   $   %
Net sales   $ 567,646     100.0 %   $ 645,166     100.0 %   $ (77,520 )   (12.0 %)
Cost of goods sold   367,834     64.8 %   446,272     69.2 %   78,438     17.6 %
Gross profit   199,812     35.2 %   198,894     30.8 %   918     0.5 %
Selling, general & administrative expenses   117,983     20.8 %   128,299     19.9 %   10,316     8.0 %
Rationalization and asset impairment charges           18,285     2.8 %   18,285     100.0 %
Pension settlement charges           136,331     21.1 %   136,331     100.0 %
Operating income (loss)   81,829     14.4 %   (84,021 )   (13.0 %)   165,850     197.4 %
Interest income   360     0.1 %   692     0.1 %   (332 )   (48.0 %)
Equity earnings in affiliates   619     0.1 %   310         309     99.7 %
Other income   1,303     0.2 %   296         1,007     340.2 %
Interest expense   (3,815 )   (0.7 %)   (5,803 )   (0.9 %)   1,988     34.3 %
Income (loss) before income taxes   80,296     14.1 %   (88,526 )   (13.7 %)   168,822     190.7 %
Income taxes   20,257     3.6 %   (28,045 )   (4.3 %)   (48,302 )   (172.2 %)
Effective tax rate   25.2 %       31.7 %       6.5 %    
Net income (loss) including non-controlling interests   60,039     10.6 %   (60,481 )   (9.4 %)   120,520     199.3 %
Non-controlling interests in subsidiaries' loss   (10 )       (15 )       5     33.3 %
Net income (loss)   $ 60,049     10.6 %   $ (60,466 )   (9.4 %)   $ 120,515     199.3 %
                         
Basic earnings (loss) per share   $ 0.90         $ (0.82 )       $ 1.72     209.8 %
Diluted earnings (loss) per share   $ 0.89         $ (0.82 )       $ 1.71     208.5 %
Weighted average shares (basic)   66,477         73,754              
Weighted average shares (diluted)   67,182         73,754              
    Nine Months Ended September 30,   Fav (Unfav) to Prior Year
    2016   % of Sales   2015   % of Sales   $   %
Net sales   $ 1,710,786     100.0 %   $ 1,967,806     100.0 %   $ (257,020 )   (13.1 %)
Cost of goods sold   1,118,945     65.4 %   1,322,741     67.2 %   203,796     15.4 %
Gross profit   591,841     34.6 %   645,065     32.8 %   (53,224 )   (8.3 %)
Selling, general & administrative expenses   352,290     20.6 %   385,945     19.6 %   33,655     8.7 %
Rationalization and asset impairment charges           19,524     1.0 %   19,524     100.0 %
Pension settlement charges           136,331     6.9 %   136,331     100.0 %
Loss on deconsolidation of Venezuelan subsidiary   34,348     2.0 %           (34,348 )   (100.0 %)
Operating income (loss)   205,203     12.0 %   103,265     5.2 %   101,938     98.7 %
Interest income   1,225     0.1 %   2,023     0.1 %   (798 )   (39.4 %)
Equity earnings in affiliates   2,084     0.1 %   2,138     0.1 %   (54 )   (2.5 %)
Other income   2,552     0.1 %   3,223     0.2 %   (671 )   (20.8 %)
Interest expense   (11,828 )   (0.7 %)   (12,034 )   (0.6 %)   206     1.7 %
Income (loss) before income taxes   199,236     11.6 %   98,615     5.0 %   100,621     102.0 %
Income taxes   54,264     3.2 %   19,902     1.0 %   (34,362 )   (172.7 %)
Effective tax rate   27.2 %       20.2 %       (7.0 %)    
Net income (loss) including non-controlling interests   144,972     8.5 %   78,713     4.0 %   66,259     84.2 %
Non-controlling interests in subsidiaries' loss   (32 )       (73 )       41     56.2 %
Net income (loss)   $ 145,004     8.5 %   $ 78,786     4.0 %   $ 66,218     84.0 %
                         
Basic earnings (loss) per share   $ 2.13         $ 1.05         $ 1.08     102.9 %
Diluted earnings (loss) per share   $ 2.11         $ 1.04         $ 1.07     102.9 %
Weighted average shares (basic)   68,081         74,999              
Weighted average shares (diluted)   68,784         75,764              

 

Lincoln Electric Holdings, Inc.  
Financial Highlights  
(In thousands)  
(Unaudited)  
   
Balance Sheet Highlights  
   
Selected Consolidated Balance Sheet Data   September 30, 2016   December 31, 2015  
Cash and cash equivalents   $ 256,928     $ 304,183    
Total current assets   920,478     935,995    
Property, plant and equipment, net   384,817     411,323    
Total assets   1,833,821     1,784,171    
Total current liabilities   596,059     370,122    
Short-term debt (1)   183,827     4,278    
Long-term debt, less current portion   359,831     350,347    
Total equity   752,917     932,448    
         
Operating Working Capital   September 30, 2016   December 31, 2015  
Accounts receivable   $ 281,039     $ 264,715    
Inventory   285,199     275,930    
Trade accounts payable   164,783     152,620    
Operating working capital   $ 401,455     $ 388,025    
           
Operating working capital to net sales (2)   17.7 %   17.1 %  
         
Invested Capital   September 30, 2016   December 31, 2015  
Short-term debt (1)   $ 183,827     $ 4,278    
Long-term debt, less current portion   359,831     350,347    
Total debt   543,658     354,625    
Total equity   752,917     932,448    
Invested capital   $ 1,296,575     $ 1,287,073    
           
Total debt / invested capital   41.9 %   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 September 30,   Nine Months Ended September 30,
    2016   2015   2016   2015
Operating income (loss) as reported   $ 81,829     $ (84,021 )   $ 205,203     $ 103,265  
Special items (pre-tax):                
Rationalization and asset impairment charges (1)       18,285         19,524  
Loss on deconsolidation of Venezuelan subsidiary (2)           34,348      
Venezuela foreign exchange losses (3)       26,506         26,506  
Pension settlement charges (4)       136,331         136,331  
Adjusted operating income (loss) (6)   $ 81,829     $ 97,101     $ 239,551     $ 285,626  
As a percent of total sales   14.4 %   15.1 %   14.0 %   14.5 %
                 
Net income (loss) as reported   $ 60,049     $ (60,466 )   $ 145,004     $ 78,786  
Special items (after-tax):                
Rationalization and asset impairment charges (1)       16,832         17,732  
Loss on deconsolidation of Venezuelan subsidiary (2)           33,251      
Venezuela foreign exchange losses (3)       26,506         26,506  
Pension settlement charges (4)       83,341         83,341  
Income tax valuation reversals (5)           (7,196 )    
Adjusted net income (6)   $ 60,049     $ 66,213     $ 171,059     $ 206,365  
                 
Diluted earnings (loss) per share as reported   $ 0.89     $ (0.82 )   $ 2.11     $ 1.04  
Special items       1.71     0.38     1.68  
Adjusted diluted earnings per share (6)   $ 0.89     $ 0.89     $ 2.49     $ 2.72  
                 
Weighted average shares (diluted)   67,182     74,460     68,784     75,764  
                 


  (1  ) The three and nine months ended September 30, 2015 include net charges primarily related to severance and other related costs and charges related to the impairment of long-lived assets and goodwill.
  (2 ) The nine months ended September 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 nine months ended September 30, 2015 represent the impact of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms.
  (4 ) The three and nine months ended September 30, 2015 include pension settlement charges primarily related to the purchase of a group annuity contract.
  (5 ) The nine months ended September 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.
  (6 ) 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 September 30,
Return on Invested Capital   2016   2015
Net income as reported   $ 193,696     $ 153,998  
Rationalization and asset impairment charges (gains), net of tax of ($16) and $1,791 in 2016 and 2015, respectively   450     17,899  
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 $2,438 and $52,990 in 2016 and 2015, respectively   3,969     83,341  
Venezuela currency devaluation   708     26,506  
Adjusted net income (1)   $ 224,878     $ 281,744  
Plus: Interest expense, net of tax of $6,816 and $7,174 in 2016 and 2015, respectively   13,342     11,564  
Less: Interest income, net of tax of $596 and $1,015 in 2016 and 2015, respectively   1,182     1,636  
Adjusted net income before tax effected interest   $ 237,038     $ 291,672  
         
Invested Capital   September 30, 2016   September 30, 2015
Short-term debt   $ 183,827     $ 2,453  
Long-term debt, less current portion   359,831     350,899  
Total debt   543,658     353,352  
Total equity   752,917     1,011,969  
Invested capital   $ 1,296,575     $ 1,365,321  
         
Return on invested capital (1)(2)   18.3 %   21.4 %
         


  (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 September 30,
    2016   2015
OPERATING ACTIVITIES:        
Net income (loss)   $ 60,049     $ (60,466 )
Non-controlling interests in subsidiaries' loss   (10 )   (15 )
Net income (loss) including non-controlling interests   60,039     (60,481 )
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment charges       6,090  
Depreciation and amortization   16,263     16,179  
Equity (earnings) loss in affiliates, net   (6 )   236  
Pension expense and settlement charges   3,216     141,244  
Pension contributions and payments   (582 )   (4,416 )
Other non-cash items, net   (1,742 )   (46,517 )
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease in accounts receivable   10,437     28,343  
Decrease in inventories   7,819     26,284  
Decrease in trade accounts payable   (8,306 )   (3,412 )
Net change in other current assets and liabilities   22,417     3,197  
Net change in other long-term assets and liabilities   1,854     (1,381 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   111,409     105,366  
         
INVESTING ACTIVITIES:        
Capital expenditures   (14,598 )   (10,970 )
Acquisition of businesses, net of cash acquired       (33,882 )
Proceeds from sale of property, plant and equipment   257     752  
Other investing activities       (2,103 )
NET CASH USED BY INVESTING ACTIVITIES   (14,341 )   (46,203 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   23,989     170,371  
Proceeds from exercise of stock options   4,703     564  
Excess tax benefits from stock-based compensation   1,892     194  
Purchase of shares for treasury   (85,661 )   (139,337 )
Cash dividends paid to shareholders   (21,533 )   (21,694 )
Other financing activities       (44 )
NET CASH (USED BY) PROVIDED BY FINANCING ACTIVITIES   (76,610 )   10,054  
         
Effect of exchange rate changes on Cash and cash equivalents   (549 )   (17,609 )
INCREASE IN CASH AND CASH EQUIVALENTS   19,909     51,608  
Cash and cash equivalents at beginning of period   237,019     312,737  
Cash and cash equivalents at end of period   $ 256,928     $ 364,345  
         
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   Nine Months Ended September 30,
    2016   2015
OPERATING ACTIVITIES:        
Net income   $ 145,004     $ 78,786  
Non-controlling interests in subsidiaries' loss   (32 )   (73 )
Net income including non-controlling interests   144,972     78,713  
Adjustments to reconcile Net income including non-controlling interests to Net cash
  provided by operating activities:
       
Rationalization and asset impairment charges       6,120  
Loss on deconsolidation of Venezuelan subsidiary   34,348      
Depreciation and amortization   48,495     47,897  
Equity earnings in affiliates, net   (64 )   (252 )
Pension expense and settlement charges   12,472     151,848  
Pension contributions and payments   (22,159 )   (52,121 )
Other non-cash items, net   (7,137 )   (52,307 )
Changes in operating assets and liabilities, net of effects from acquisitions:        
(Increase) decrease in accounts receivable   (11,956 )   14,661  
(Increase) decrease in inventories   (7,673 )   27,824  
Increase (decrease) in trade accounts payable   13,922     (34,629 )
Net change in other current assets and liabilities   30,424     47,032  
Net change in other long-term assets and liabilities   1,122     650  
NET CASH PROVIDED BY OPERATING ACTIVITIES   236,766     235,436  
         
INVESTING ACTIVITIES:        
Capital expenditures   (39,377 )   (40,187 )
Acquisition of businesses, net of cash acquired   (71,567 )   (33,882 )
Proceeds from sale of property, plant and equipment   936     2,173  
Other investing activities   (283 )   (79 )
NET CASH USED BY INVESTING ACTIVITIES   (110,291 )   (71,975 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   183,259     314,420  
Proceeds from exercise of stock options   10,418     4,600  
Excess tax benefits from stock-based compensation   3,414     1,487  
Purchase of shares for treasury   (288,594 )   (297,804 )
Cash dividends paid to shareholders   (66,180 )   (65,942 )
Other financing activities   (18,244 )   (8,040 )
NET CASH USED BY FINANCING ACTIVITIES   (175,927 )   (51,279 )
         
Effect of exchange rate changes on Cash and cash equivalents   2,197     (26,216 )
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (47,255 )   85,966  
Cash and cash equivalents at beginning of period   304,183     278,379  
Cash and cash equivalents at end of period   $ 256,928     $ 364,345  
         
Cash dividends paid per share   $ 0.96     $ 0.87  

 

 

 

Lincoln Electric Holdings, Inc.
Segment Highlights (1)
(In thousands)
(Unaudited)
 
    Americas
Welding
  International
Welding
  The Harris
Products
Group
  Corporate /
Eliminations
  Consolidated
Three months ended September 30, 2016                
Net sales   $ 377,520     $ 119,564     $ 70,562     $     $ 567,646  
Inter-segment sales   22,386     3,688     1,856     (27,930 )    
Total   $ 399,906     $ 123,252     $ 72,418     $ (27,930 )   $ 567,646  
                     
EBIT (2)   $ 68,285     $ 5,796     $ 8,757     $ 913     $ 83,751  
As a percent of total sales   17.1 %   4.7 %   12.1 %       14.8 %
Special items charge (3)                    
Adjusted EBIT (4)   $ 68,285     $ 5,796     $ 8,757     $ 913     $ 83,751  
As a percent of total sales   17.1 %   4.7 %   12.1 %       14.8 %
Three months ended September 30, 2015                
Net sales   $ 454,172     $ 128,072     $ 62,922     $     $ 645,166  
Inter-segment sales   25,571     5,400     2,307     (33,278 )    
Total   $ 479,743     $ 133,472     $ 65,229     $ (33,278 )   $ 645,166  
                     
EBIT (2)   $ (83,413 )   $ (5,676 )   $ 6,422     $ (748 )   $ (83,415 )
As a percent of total sales   (17.4 %)   (4.3 %)   9.8 %       (12.9 %)
Special items charge (3)   166,178     14,944             181,122  
Adjusted EBIT (4)   $ 82,765     $ 9,268     $ 6,422     $ (748 )   $ 97,707  
As a percent of total sales   17.3 %   6.9 %   9.8 %       15.1 %
Nine months ended September 30, 2016                
Net sales   $ 1,124,900     $ 376,684     $ 209,202     $     $ 1,710,786  
Inter-segment sales   69,673     11,955     6,983     (88,611 )    
Total   $ 1,194,573     $ 388,639     $ 216,185     $ (88,611 )   $ 1,710,786  
                     
EBIT (2)   $ 194,924     $ 21,699     $ 25,752     $ (32,536 )   $ 209,839  
As a percent of total sales   16.3 %   5.6 %   11.9 %       12.3 %
Special items charge (3)               34,348     34,348  
Adjusted EBIT (4)   $ 194,924     $ 21,699     $ 25,752     $ 1,812     $ 244,187  
As a percent of total sales   16.3 %   5.6 %   11.9 %       14.3 %
Nine months ended September 30, 2015                
Net sales   $ 1,354,010     $ 409,246     $ 204,550     $     $ 1,967,806  
Inter-segment sales   72,496     15,738     7,034     (95,268 )    
Total   $ 1,426,506     $ 424,984     $ 211,584     $ (95,268 )   $ 1,967,806  
                     
EBIT (2)   $ 71,423     $ 15,036     $ 22,221     $ (54 )   $ 108,626  
As a percent of total sales   5.0 %   3.5 %   10.5 %       5.5 %
Special items charge (3)   166,178     16,183             182,361  
Adjusted EBIT (4)   $ 237,601     $ 31,219     $ 22,221     $ (54 )   $ 290,987  
As a percent of total sales   16.7 %   7.3 %   10.5 %       14.8 %


  (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 reflect a charge ($34.1 million non-cash) related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016.  Refer to 'Non-GAAP Financial Measures' for detail on excluded special items.
  (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 September 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   $ 454,172     $ (81,338 )   $ 12,300     $ (5,645 )   $ (1,969 )   $ 377,520    
International Welding   128,072     (6,322 )   1,454     (1,255 )   (2,385 )   119,564    
The Harris Products Group   62,922     5,235         2,226     179     70,562    
Consolidated   $ 645,166     $ (82,425 )   $ 13,754     $ (4,674 )   $ (4,175 )   $ 567,646    
                           
Americas Welding (excluding Venezuela)   $ 419,483     $ (46,648 )   $ 12,300     $ (5,646 )   $ (1,969 )   $ 377,520    
Consolidated (excluding Venezuela)   $ 610,476     $ (47,734 )   $ 13,754     $ (4,674 )   $ (4,176 )   $ 567,646    
                           
% Change                          
Americas Welding       (17.9 %)   2.7 %   (1.2 %)   (0.4 %)   (16.9 %)  
International Welding       (4.9 %)   1.1 %   (1.0 %)   (1.9 %)   (6.6 %)  
The Harris Products Group       8.3 %       3.5 %   0.3 %   12.1 %  
Consolidated       (12.8 %)   2.1 %   (0.7 %)   (0.6 %)   (12.0 %)  
                           
Americas Welding (excluding Venezuela)       (11.1 %)   2.9 %   (1.3 %)     (0.5 %)     (10.0 %)  
Consolidated (excluding Venezuela)       (7.8 %)   2.3 %   (0.8 %)     (0.7 %)     (7.0 %)  
                           
Nine Months Ended September 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   $ 1,354,010     $ (226,400 )   $ 35,600     $ 268,381     $ (306,691 )   $ 1,124,900  
International Welding   409,246     (21,256 )   8,622     (8,243 )   (11,685 )   $ 376,684  
The Harris Products Group   204,550     7,361         (987 )   (1,722 )   $ 209,202  
Consolidated   $ 1,967,806     $ (240,295 )   $ 44,222     $ 259,151     $ (320,098 )   $ 1,710,786  
                         
Americas Welding (excluding Venezuela)   $ 1,273,090     $ (172,465 )   $ 35,600     $ (7,698 )   $ (14,441 )   $ 1,114,086  
Consolidated (excluding Venezuela)   $ 1,886,886     $ (186,360 )   $ 44,222     $ (16,927 )   $ (27,848 )   $ 1,699,973  
                         
% Change                        
Americas Welding       (16.7 %)   2.6 %   19.8 %   (22.7 %)   (16.9 %)
International Welding       (5.2 %)   2.1 %   (2.0 %)   (2.9 %)   (8.0 %)
The Harris Products Group       3.6 %       (0.5 %)   (0.8 %)   2.3 %
Consolidated       (12.2 %)   2.2 %   13.2 %   (16.3 %)   (13.1 %)
                         
Americas Welding (excluding Venezuela)       (13.5 %)   2.8 %   (0.6 %)   (1.1 %)   (12.5 %)
Consolidated (excluding Venezuela)       (9.9 %)   2.3 %   (0.9 %)   (1.5 %)   (9.9 %)
Contact

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

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Lincoln Electric Holdings, Inc.