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Lincoln Electric Reports Third Quarter 2018 Results

Oct 25 2018

Lincoln Electric Reports Third Quarter 2018 Results
 

Third Quarter 2018 Highlights

  • Sales increase 10.1%
  • EPS decreases 32.7% to $1.07, Adjusted EPS increases 30.1% to $1.21
  • ROIC increases 410 basis points to 19.3%
  • $97 million returned to shareholders and announced a 21% increase in the dividend payout rate

CLEVELAND, Oct. 25, 2018 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported third quarter 2018 net income of $70.5 million, or diluted earnings per share (EPS) of $1.07.  This compares with $106.1 million, or $1.59 EPS in the prior year period. Reported EPS includes special item after-tax charges of $8.9 million, or $0.14 EPS. The prior year included special item after-tax income of $44.4 million, including a bargain purchase gain of $51.6 million. Excluding these items, third quarter 2018 adjusted net income increased 28.5% to $79.4 million, or $1.21 EPS, as compared with $61.8 million, or $0.93 EPS in the prior year period.

Third quarter 2018 sales increased 10.1% to $737.1 million from a 14.9% improvement in organic sales in the Americas Welding segment. Organic sales in the International Welding segment declined 5.3% in the quarter.

Operating income for the third quarter 2018 was $100.8 million, or 13.7% of sales. This compares with operating income of $135.6 million, or 20.3% of sales, in the comparable 2017 period. On an adjusted basis, operating income increased 16.5% to $104.4 million, or 14.2% of sales, as compared with $89.6 million, or 13.4% of sales, in the prior year period.

“We achieved solid third quarter organic sales growth from strong demand in Americas Welding and price management worldwide,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer.  “We are realizing synergies in our International Welding business from our Air Liquide Welding acquisition despite incurring lower volumes from our integration activities. We remain very confident in the long-term value we are generating from this acquisition. Our regional initiatives, price measures and productivity improvements delivered higher margin performance, solid cash flows and cash conversion in the quarter. We continue to execute well on our strategic goals and are positioned to deliver superior value for our stakeholders.”

Nine Months 2018 Summary

Net income for the nine months ended September 30, 2018 was $200.2 million, or $3.03 EPS.  This compares with $223.3 million, or $3.35 EPS, in the comparable 2017 period. Reported EPS includes special item after-tax net charges of $32.9 million or $0.50 EPS. The prior year included special item after-tax income of $38.1 million, including a bargain purchase gain of $51.6 million. Excluding these items, adjusted net income for the nine months ended September 30, 2018 increased 25.9% to $233.1 million, or $3.53 EPS, compared with $185.2 million, or $2.78 EPS, in the comparable 2017 period. The effective tax rate for the nine months ended September 30, 2018 was 27.0% due to special items. Excluding special items, the effective tax rate was 24.1%, which compares to 28.8% in the comparable 2017 period.

Sales increased 21.7% to $2.3 billion in the nine months ended September 30, 2018 from a 12.6% benefit from acquisitions, an 8.7% improvement in organic sales and 0.5% from favorable foreign exchange.

Operating income for the nine months ended September 30, 2018 was $280.6 million, or 12.3% of sales.  This compares with operating income of $300.6 million, or 16.0% of sales, in the comparable 2017 period. On an adjusted basis, operating income increased 17.5% to $308.6 million, or 13.5% of sales, as compared with $262.7 million, or 14.0% of sales, in the comparable 2017 period.

Dividend

The Company's Board of Directors declared a 21% increase in the quarterly cash dividend, from $0.39 per share to $0.47 per share, or $1.88 per share on an annual basis. The declared quarterly cash dividend of $0.47 per share is payable January 15, 2019 to shareholders of record as of December 31, 2018.

Webcast Information

A conference call to discuss third quarter 2018 financial results will be webcast live today, October 25, 2018, 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 1636717.  Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the third quarter 2018 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 Electric has 56 manufacturing locations, including operations and joint ventures in 20 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 EBIT, 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.

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, including the Company’s ability to successfully integrate the Air Liquide Welding business acquisition; 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 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, 2017.

Contact

Amanda Butler
Vice President, Investor Relations & Communications
Tel: 216.383.2534
Email: Amanda_Butler@lincolnelectric.com

 
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
    2018   % of Sales   2017   % of Sales   $   %
Net sales   $ 737,099     100.0 %   $ 669,491     100.0 %   $ 67,608     10.1 %
Cost of goods sold   485,547     65.9 %   451,610     67.5 %   (33,937 )   (7.5 %)
Gross profit   251,552     34.1 %   217,881     32.5 %   33,671     15.5 %
Selling, general & administrative expenses   148,129     20.1 %   133,826     20.0 %   (14,303 )   (10.7 %)
Rationalization and asset impairment charges   2,636     0.4 %           (2,636 )   (100.0 %)
Bargain purchase gain           (51,585 )   7.7 %   (51,585 )   (100.0 %)
Operating income   100,787     13.7 %   135,640     20.3 %   (34,853 )   (25.7 %)
Interest expense, net   3,969     0.5 %   4,595     0.7 %   626     13.6 %
Other income (expense)   (1,074 )   0.1 %   (403 )   0.1 %   (671 )   (166.5 %)
Income before income taxes   95,744     13.0 %   130,642     19.5 %   (34,898 )   (26.7 %)
Income taxes   25,209     3.4 %   24,531     3.7 %   (678 )   (2.8 %)
Effective tax rate   26.3 %       18.8 %       (7.5 %)    
Net income including non-controlling interests   70,535     9.6 %   106,111     15.8 %   (35,576 )   (33.5 %)
Non-controlling interests in subsidiaries’ earnings (loss)   (4 )       (15 )       11     73.3 %
Net income   $ 70,539     9.6 %   $ 106,126     15.9 %   $ (35,587 )   (33.5 %)
                         
Basic earnings per share   $ 1.09         $ 1.61         $ (0.52 )   (32.3 %)
Diluted earnings per share   $ 1.07         $ 1.59         $ (0.52 )   (32.7 %)
Weighted average shares (basic)   64,821         65,806              
Weighted average shares (diluted)   65,652         66,702              
    Nine Months Ended September 30,   Fav (Unfav) to
Prior Year
    2018   % of Sales   2017   % of Sales   $   %
Net sales   $ 2,284,847     100.0 %   $ 1,877,246     100.0 %   $ 407,601     21.7 %
Cost of goods sold   1,506,625     65.9 %   1,240,391     66.1 %   (266,234 )   (21.5 %)
Gross profit   778,222     34.1 %   636,855     33.9 %   141,367     22.2 %
Selling, general & administrative expenses   473,260     20.7 %   387,820     20.7 %   (85,440 )   (22.0 %)
Rationalization and asset impairment charges   24,353     1.1 %           (24,353 )   (100.0 %)
Bargain purchase gain           (51,585 )   2.7 %   (51,585 )   (100.0 %)
Operating income   280,609     12.3 %   300,620     16.0 %   (20,011 )   (6.7 %)
Interest expense, net   13,222     0.6 %   14,984     0.8 %   1,762     11.8 %
Other income (expense)   6,818     0.3 %   6,872     0.4 %   (54 )   (0.8 %)
Income before income taxes   274,205     12.0 %   292,508     15.6 %   (18,303 )   (6.3 %)
Income taxes   73,991     3.2 %   69,218     3.7 %   (4,773 )   (6.9 %)
Effective tax rate   27.0 %       23.7 %       (3.3 %)    
Net income including non-controlling interests   200,214     8.8 %   223,290     11.9 %   (23,076 )   (10.3 %)
Non-controlling interests in subsidiaries’ earnings (loss)   (13 )       (32 )       19     59.4 %
Net income   $ 200,227     8.8 %   $ 223,322     11.9 %   $ (23,095 )   (10.3 %)
                         
Basic earnings per share   $ 3.07         $ 3.40         $ (0.33 )   (9.7 %)
Diluted earnings per share   $ 3.03         $ 3.35         $ (0.32 )   (9.6 %)
Weighted average shares (basic)   65,245         65,769              
Weighted average shares (diluted)   66,055         66,679              
                             

 

 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
 
Balance Sheet Highlights
         
Selected Consolidated Balance Sheet Data   September 30, 2018   December 31, 2017
Cash and cash equivalents   $ 398,200     $ 326,701  
Marketable securities   99,282     179,125  
Total current assets   1,405,572     1,373,608  
Property, plant and equipment, net   461,828     477,031  
Total assets   2,419,645     2,406,547  
Total current liabilities   545,551     528,742  
Short-term debt (1)   794     2,131  
Long-term debt, less current portion   698,468     704,136  
Total equity   927,868     932,453  
         
Operating Working Capital   September 30, 2018   December 31, 2017
Accounts receivable, net   $ 409,594     $ 395,279  
Inventories   377,431     348,667  
Trade accounts payable   246,783     269,763  
Operating working capital   $ 540,242     $ 474,183  
         
Average operating working capital to Net sales (2)   18.3 %   15.9 %
         
Invested Capital   September 30, 2018   December 31, 2017
Short-term debt (1)   $ 794     $ 2,131  
Long-term debt, less current portion   698,468     704,136  
Total debt   699,262     706,267  
Total equity   927,868     932,453  
Invested capital   $ 1,627,130     $ 1,638,720  
         
Total debt / invested capital   43.0 %   43.1 %
             
  1. Includes current portion of long-term debt.
  2. Average operating working capital to Net sales is defined as operating working capital as of period end 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,
    2018   2017   2018   2017
Operating income as reported   $ 100,787     $ 135,640     $ 280,609     $ 300,620  
Special items (pre-tax):                
Rationalization and asset impairment charges (2)   2,636         24,353      
Acquisition transaction and integration costs (3)   970     3,273     3,665     11,386  
Amortization of step up in value of acquired inventories (3)       2,314         2,314  
Bargain purchase gain (3)       (51,585 )       (51,585 )
Adjusted operating income (1)   $ 104,393     $ 89,642     $ 308,627     $ 262,735  
As a percent of total sales   14.2 %   13.4 %   13.5 %   14.0 %
                 
Net income as reported   $ 70,539     $ 106,126     $ 200,227     $ 223,322  
Special items:                
Rationalization and asset impairment charges (2)   2,636         24,353      
Acquisition transaction and integration costs (3)   970     3,273     3,665     11,386  
Pension settlement charges (4)   4,232     5,283     4,990     5,283  
Amortization of step up in value of acquired inventories (3)       2,314         2,314  
Bargain purchase gain (3)       (51,585 )       (51,585 )
Tax effect of Special items (5)   1,033     (3,636 )   (132 )   (5,521 )
Adjusted net income (1)   79,410     61,775     233,103     185,199  
Non-controlling interests in subsidiaries’ loss   (4 )   (15 )   (13 )   (32 )
Interest expense, net   3,969     4,595     13,222     14,984  
Income taxes as reported   25,209     24,531     73,991     69,218  
Tax effect of Special items (5)   (1,033 )   3,636     132     5,521  
Adjusted EBIT (1)   $ 107,551     $ 94,522     $ 320,435     $ 274,890  
                 
Diluted earnings per share as reported   $ 1.07     $ 1.59     $ 3.03     $ 3.35  
Special items per share   0.14     (0.66 )   0.50     (0.57 )
Adjusted diluted earnings per share (1)   $ 1.21     $ 0.93     $ 3.53     $ 2.78  
                 
Weighted average shares (diluted)   65,652     66,702     66,055     66,679  
                         
  1. Adjusted operating income, Adjusted EBIT, 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 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.
  2. Primarily related to severance, asset impairments and gains or losses on the disposal of assets.
  3. Related to the acquisition of Air Liquide Welding.
  4. Related to lump sum pension payments.
  5. Includes the net tax impact of Special items recorded during the respective periods, including an adjustment to taxes on unremitted foreign earnings related to the U.S. Tax Act of $2,323 and $4,823 in the three and nine months ended September 30, 2018, respectively.

    The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate.  The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.
 
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   2018   2017
Net income as reported   $ 224,408     $ 276,717  
Rationalization and asset impairment charges   30,943      
Pension settlement charges   7,857     5,283  
Acquisition transaction and integration costs   7,281     11,386  
Amortization of step up in value of acquired inventories   2,264     2,314  
Bargain purchase adjustment (gain)   1,935     (51,585 )
Tax effect of Special items (3)   25,925     (5,521 )
Adjusted net income (1)   $ 300,613     $ 238,594  
Plus: Interest expense, net of tax of $6,087 and $9,795 in 2018 and 2017, respectively   18,295     15,789  
Less: Interest income, net of tax of $1,676 and $1,614 in 2018 and 2017, respectively   5,036     2,602  
Adjusted net income before tax effected interest   $ 313,872     $ 251,781  
         
Invested Capital   September 30, 2018   September 30, 2017
Short-term debt   $ 794     $ 2,135  
Long-term debt, less current portion   698,468     704,804  
Total debt   699,262     706,939  
Total equity   927,868     945,928  
Invested capital   $ 1,627,130     $ 1,652,867  
         
Return on invested capital (1)(2)   19.3 %   15.2 %
             
  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 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.
  2. Return on invested capital is defined as rolling 12 months of Adjusted net income before tax-effected interest income and expense divided by invested capital.
  3. Includes the net tax impact of Special items recorded during the respective periods, including the net impact of the U.S. Tax Act of $33,439 in the twelve months ended September 30, 2018.

    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.
 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Condensed Consolidated Statements of Cash Flows
 
    Three Months Ended September 30,
    2018   2017
OPERATING ACTIVITIES:        
Net income   $ 70,539     $ 106,126  
Non-controlling interests in subsidiaries’ loss   (4 )   (15 )
Net income including non-controlling interests   70,535     106,111  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net gains   (2,034 )    
Bargain purchase gain       (51,585 )
Depreciation and amortization   17,623     18,451  
Equity earnings in affiliates, net   (50 )   (141 )
Pension expense and settlement charges   3,781     3,495  
Other non-cash items, net   1,653     (1,699 )
         
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease in accounts receivable   14,415     15,706  
(Increase) decrease in inventories   (13,634 )   2,231  
Decrease in trade accounts payable   (22,384 )   (21,551 )
Net change in other current assets and liabilities   33,932     22,978  
Net change in other long-term assets and liabilities   2,382     (329 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   106,219     93,667  
         
INVESTING ACTIVITIES:        
Capital expenditures   (17,363 )   (10,828 )
Acquisition of businesses, net of cash acquired       (72,468 )
Proceeds from sale of property, plant and equipment   10,358     892  
Purchase of marketable securities   (49,668 )   (75,619 )
Proceeds from marketable securities   89,445     200  
NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES   32,772     (157,823 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   (856 )   (394 )
Proceeds from exercise of stock options   1,849     936  
Purchase of shares for treasury   (71,245 )   (15,264 )
Cash dividends paid to shareholders   (25,424 )   (23,067 )
Other financing activities   (2,170 )   (372 )
NET CASH USED BY FINANCING ACTIVITIES   (97,846 )   (38,161 )
         
Effect of exchange rate changes on Cash and cash equivalents   (39 )   6,035  
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   41,106     (96,282 )
Cash and cash equivalents at beginning of period   357,094     395,735  
Cash and cash equivalents at end of period   $ 398,200     $ 299,453  
         
Cash dividends paid per share   $ 0.39     $ 0.35  
                 

 

 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
     
Condensed Consolidated Statements of Cash Flows   Nine Months Ended September 30,
    2018   2017
OPERATING ACTIVITIES:        
Net income   $ 200,227     $ 223,322  
Non-controlling interests in subsidiaries’ loss   (13 )   (32 )
Net income including non-controlling interests   200,214     223,290  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net gains   (1,408 )    
Bargain purchase gain       (51,585 )
Depreciation and amortization   53,946     50,457  
Equity earnings in affiliates, net   (1,427 )   (216 )
Pension expense and settlement charges   2,714     816  
Other non-cash items, net   9,368     12,765  
         
Changes in operating assets and liabilities, net of effects from acquisitions:        
Increase in accounts receivable   (25,492 )   (24,300 )
Increase in inventories   (41,533 )   (22,526 )
Decrease in trade accounts payable   (17,523 )   (8,932 )
Net change in other current assets and liabilities   46,316     61,847  
Net change in other long-term assets and liabilities   4,602     3,738  
NET CASH PROVIDED BY OPERATING ACTIVITIES   229,777     245,354  
         
INVESTING ACTIVITIES:        
Capital expenditures   (48,746 )   (38,959 )
Acquisition of businesses, net of cash acquired   6,591     (72,468 )
Proceeds from sale of property, plant and equipment   10,585     1,994  
Purchase of marketable securities   (268,335 )   (145,553 )
Proceeds from marketable securities   348,178     5,190  
NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES   48,273     (249,796 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   (646 )   (605 )
Proceeds from exercise of stock options   4,448     14,333  
Purchase of shares for treasury   (121,477 )   (23,012 )
Cash dividends paid to shareholders   (76,674 )   (69,083 )
Other financing activities   (2,170 )   (15,561 )
NET CASH USED BY FINANCING ACTIVITIES   (196,519 )   (93,928 )
         
Effect of exchange rate changes on Cash and cash equivalents   (10,032 )   18,644  
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   71,499     (79,726 )
Cash and cash equivalents at beginning of period   326,701     379,179  
Cash and cash equivalents at end of period   $ 398,200     $ 299,453  
         
Cash dividends paid per share   $ 1.17     $ 1.05  
                 

 

 
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, 2018                
Net sales   $ 454,010     $ 209,622     $ 73,467     $     $ 737,099  
Inter-segment sales   31,845     3,663     1,537     (37,045 )    
Total   $ 485,855     $ 213,285     $ 75,004     $ (37,045 )   $ 737,099  
                     
Net income                   $ 70,539  
As a percent of total sales                   9.6 %
                     
EBIT (1)   $ 85,021     $ 8,085     $ 8,676     $ (2,069 )   $ 99,713  
As a percent of total sales   17.5 %   3.8 %   11.6 %       13.5 %
Special items charges (gains) (3)   4,232     2,636         970     7,838  
Adjusted EBIT (2)   $ 89,253     $ 10,721     $ 8,676     $ (1,099 )   $ 107,551  
As a percent of total sales   18.4 %   5.0 %   11.6 %       14.6 %
                     
Three months ended September 30, 2017                
Net sales   $ 398,289     $ 197,617     $ 73,585     $     $ 669,491  
Inter-segment sales   25,546     5,451     2,064     (33,061 )    
Total   $ 423,835     $ 203,068     $ 75,649     $ (33,061 )   $ 669,491  
                     
Net income                   $ 106,126  
As a percent of total sales                   15.9 %
                     
EBIT (1)   $ 68,813     $ 8,298     $ 9,244     $ 48,882     $ 135,237  
As a percent of total sales   16.2 %   4.1 %   12.2 %       20.2 %
Special items charges (gains) (4)   5,283     2,314         (48,312 )   (40,715 )
Adjusted EBIT (2)   $ 74,096     $ 10,612     $ 9,244     $ 570     $ 94,522  
As a percent of total sales   17.5 %   5.2 %   12.2 %       14.1 %
                             
  1. EBIT is defined as Operating income plus Other income (expense).
  2. 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.
  3. Special items in 2018 reflect pension settlement charges of $4,232 in Americas Welding, rationalization and asset impairment charges of $2,636 in International Welding and acquisition transaction and integration costs of $970 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
  4. Special items in 2017 reflect pension settlement charges of $5,283 in Americas Welding, amortization of step up in value of acquired inventories of $2,314 in International Welding and acquisition transaction and integration costs of $3,273 and a bargain purchase gain of $51,585 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
 
Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
 
    Americas Welding   International Welding   The Harris
Products Group
  Corporate /
Eliminations
  Consolidated
Nine months ended September 30, 2018                
Net sales   $ 1,351,297     $ 700,315     $ 233,235     $     $ 2,284,847  
Inter-segment sales   89,671     13,669     5,447     (108,787 )    
Total   $ 1,440,968     $ 713,984     $ 238,682     $ (108,787 )   $ 2,284,847  
                     
Net income                   $ 200,227  
As a percent of total sales                   8.8 %
                     
EBIT (1)   $ 249,860     $ 17,617     $ 28,058     $ (8,108 )   $ 287,427  
As a percent of total sales   17.3 %   2.5 %   11.8 %       12.6 %
Special items charges (gains) (3)   4,990     24,353         3,665     33,008  
Adjusted EBIT (2)   $ 254,850     $ 41,970     $ 28,058     $ (4,443 )   $ 320,435  
As a percent of total sales   17.7 %   5.9 %   11.8 %       14.0 %
                     
Nine months ended September 30, 2017                
Net sales   $ 1,186,760     $ 468,003     $ 222,483     $     $ 1,877,246  
Inter-segment sales   75,380     15,214     6,763     (97,357 )    
Total   $ 1,262,140     $ 483,217     $ 229,246     $ (97,357 )   $ 1,877,246  
                     
Net income                   $ 223,322  
As a percent of total sales                   11.9 %
                     
EBIT (1)   $ 212,034     $ 27,399     $ 27,491     $ 40,568     $ 307,492  
As a percent of total sales   16.8 %   5.7 %   12.0 %       16.4 %
Special items charges (gains) (4)   5,283     2,314         (40,199 )   (32,602 )
Adjusted EBIT (2)   $ 217,317     $ 29,713     $ 27,491     $ 369     $ 274,890  
As a percent of total sales   17.2 %   6.1 %   12.0 %       14.6 %
                             
  1. EBIT is defined as Operating income plus Other income (expense).
  2. 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.
  3. Special items in 2018 reflect pension settlement charges of $4,990 in Americas Welding, rationalization and asset impairment charges of $24,353 in International Welding and acquisition transaction and integration costs of $3,665 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
  4. Special items in 2017 reflect pension settlement charges of $5,283 in Americas Welding, amortization of step up in value of acquired inventories of $2,314 in International Welding and acquisition transaction and integration costs of $11,386 and a bargain purchase gain of $51,585 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
 
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
2017
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2018
Operating Segments                        
Americas Welding   $ 398,289     $ 23,084     $ 1,148     $ 36,128     $ (4,639 )   $ 454,010  
International Welding   197,617     (20,659 )   28,334     10,360     (6,030 )   209,622  
The Harris Products Group   73,585     174         753     (1,045 )   73,467  
Consolidated   $ 669,491     $ 2,599     $ 29,482     $ 47,241     $ (11,714 )   $ 737,099  
                         
% Change                        
Americas Welding       5.8 %   0.3 %   9.1 %   (1.2 %)   14.0 %
International Welding       (10.5 %)   14.3 %   5.2 %   (3.1 %)   6.1 %
The Harris Products Group       0.2 %       1.0 %   (1.4 %)   (0.2 %)
Consolidated       0.4 %   4.4 %   7.1 %   (1.7 %)   10.1 %
                         
Nine Months Ended September 30th Change in Net Sales by Segment
             
        Change in Net Sales due to:    
    Net Sales
2017
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2018
Operating Segments                        
Americas Welding   $ 1,186,760     $ 82,669     $ 8,813     $ 75,768     $ (2,713 )   $ 1,351,297  
International Welding   468,003     (31,765 )   227,598     25,151     11,328     700,315  
The Harris Products Group   222,483     9,377         1,431     (56 )   233,235  
Consolidated   $ 1,877,246     $ 60,281     $ 236,411     $ 102,350     $ 8,559     $ 2,284,847  
                         
% Change                        
Americas Welding         7.0 %   0.7 %   6.4 %   (0.2 %)   13.9 %
International Welding       (6.8 %)   48.6 %   5.4 %   2.4 %   49.6 %
The Harris Products Group       4.2 %       0.6 %       4.8 %
Consolidated       3.2 %   12.6 %   5.5 %   0.5 %   21.7 %
                                   

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Source: Lincoln Electric Holdings, Inc.