Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): October 25, 2018
 
LINCOLN ELECTRIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
0-1402
(Commission File Number)
 
Ohio
 
34-1860551
(State or other jurisdiction of
incorporation)
 
(I.R.S. Employer Identification No.)
 
22801 St. Clair Avenue, Cleveland, Ohio 44117
(Address of principal executive offices, with zip code)
 
(216) 481-8100
(Registrant’s telephone number, including area code)
 
Not applicable
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 






Item 2.02
 
Results of Operations and Financial Condition.
 
 
On October 25, 2018, Lincoln Electric Holdings, Inc. (the “Company”) issued a press release reporting its financial results for the quarter ended September 30, 2018.  A copy of the Company’s press release issued on October 25, 2018 is attached hereto as Exhibit 99.1 and incorporated herein by reference.  The press release is also available through the Company’s website at www.lincolnelectric.com.  The information in this Current Report on Form 8-K, including the Exhibit, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
 
 
 
 
Item 9.01
 
Financial Statements and Exhibits.
 
 
 
 
 
(d) Exhibits
 
 
 
 
 
99.1  The Company’s press release dated October 25, 2018.






SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
LINCOLN ELECTRIC HOLDINGS, INC.
 
 
 
 
 
/s/ Vincent K. Petrella
 
 
Vincent K. Petrella
 
 
Executive Vice President, Chief Financial Officer and Treasurer
 
 
(principal financial officer)
 
 
October 25, 2018

















































LINCOLN ELECTRIC HOLDINGS, INC.
 
INDEX TO EXHIBITS
 
 
 
 
Exhibit No.
 
Exhibit
 
 
 
 
The Company’s press release dated October 25, 2018.
 
 
 




Exhibit
Lincoln Electric Reports Third Quarter 2018 Financial Results


Exhibit 99.1
 
Investor Relations: Amanda Butler (216) 383-2534
Amanda_Butler@lincolnelectric.com

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, Thursday, October 25, 2018 -- 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.




Lincoln Electric Reports Third Quarter 2018 Financial Results



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 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



Lincoln Electric Reports Third Quarter 2018 Financial Results


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.




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
(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
%