SEC Filings

8-K
LINCOLN ELECTRIC HOLDINGS INC filed this Form 8-K on 10/27/2017
Entire Document
 
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 27, 2017
 
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 27, 2017, Lincoln Electric Holdings, Inc. (the “Company”) issued a press release reporting its financial results for the quarter ended September 30, 2017.  A copy of the Company’s press release issued on October 27, 2017 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 27, 2017.






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 27, 2017

















































LINCOLN ELECTRIC HOLDINGS, INC.
 
INDEX TO EXHIBITS
 
 
 
 
Exhibit No.
 
Exhibit
 
 
 
 
The Company’s press release dated October 27, 2017.
 
 
 




Exhibit
Lincoln Electric Reports Third Quarter 2017 Financial Results


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

LINCOLN ELECTRIC REPORTS THIRD QUARTER 2017 RESULTS
Third Quarter 2017 Highlights
§    Sales increase of 17.9% with 5.6% higher organic sales as industrial demand improves
§    EPS of $1.59, Adjusted EPS of $0.93
§    Solid cash conversion of 134% (1)

 
 
CLEVELAND, Friday, October 27, 2017 -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported third quarter 2017 net income of $106.1 million, or diluted earnings per share (EPS) of $1.59. Reported EPS includes a bargain purchase gain related to the Air Liquide Welding acquisition ($51.6 million, or $0.77 EPS) and other special item after-tax charges ($7.2 million, or $0.11 EPS). Excluding these items, third quarter adjusted net income was $61.8 million, or $0.93 EPS, as compared with $60.0 million, or $0.89 EPS in the prior year period.

Third quarter 2017 sales increased 17.9% to $669.5 million from an 11.0% benefit from acquisitions, 3.8% higher volumes, a 1.8% increase in price and 1.4% from favorable foreign exchange.

Operating income for the third quarter 2017 was $133.1 million, or 19.9% of sales. This compares with operating income of $81.8 million, or 14.4% of sales, in the comparable 2016 period. On an adjusted basis, operating income was $92.4 million, or 13.8% of sales, as compared with $81.8 million, or 14.4% of sales, in the prior year. The acquisition had an unfavorable 140 basis point impact to the adjusted operating income margin.

The third quarter 2017 tax rate was 18.8%. The tax rate was favorably impacted by the bargain purchase gain which had no tax effect. The third quarter 2017 tax rate excluding special items was 31.3% as compared to 25.2% in the comparable 2016 period. The higher current year effective tax rate is attributable to the geographical mix of earnings and the unfavorable effect of discrete tax items.

On July 31, 2017, the Company completed its acquisition of Air Liquide Welding, a subsidiary of Air Liquide, for a purchase price of $135.1 million adjusted for certain debt-like obligations. The cash purchase price paid, net of cash acquired, was $72.5 million. The Company funded the transaction with available cash on hand.

Christopher L. Mapes, chairman, president and chief executive officer stated:

"We achieved solid performance from improving end market demand and the successful close of the Air Liquide Welding transaction. Integration is proceeding quickly and we remain confident in the synergies we expect to realize from our initiatives. As we move into 2018, we expect to benefit from an ongoing global recovery in most end markets. Our team will continue to focus on the global integration of the Air Liquide Welding business, relentlessly support our customers and execute on our 2020 Vision and Strategy."

Nine Months 2017 Summary

Net income for the nine months ended September 30, 2017 was $223.3 million, or EPS of $3.35, as compared with $145.0 million, or $2.11 EPS in the prior year period. Current period reported EPS includes a bargain purchase gain related to the Air Liquide Welding acquisition ($51.6 million, or $0.77 EPS) and other special item after-tax charges ($13.5 million, or $0.20 EPS). Adjusted net income for the nine months ended September 30, 2017 was $185.2 million, or $2.78 EPS, as compared with $171.1 million, or $2.49 EPS in the prior period.


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



Lincoln Electric Reports Third Quarter 2017 Financial Results


Sales increased 9.7% to $1.9 billion for the nine months ended September 30, 2017 from a 3.9% benefit from acquisitions, 3.3% higher volumes and a 2.2% increase in price.

Operating income for the nine months ended September 30, 2017 was $302.2 million, or 16.1% of sales. This compares with operating income of $205.2 million, or 12.0% of sales, in the comparable 2016 period. On an adjusted basis, operating income was $269.6 million, or 14.4% of sales, as compared with $239.6 million, or 14.0% of sales, in the prior year. The acquisition had an unfavorable 50 basis point impact to the adjusted operating income margin.

The tax rate was 23.7% for the nine months ended September 30, 2017. The tax rate was favorably impacted by the bargain purchase gain which had no tax effect. The current period tax rate excluding special items was 28.8% as compared to 26.8% in the comparable 2016 period. The higher current year effective tax rate is attributable to the geographical mix of earnings and the unfavorable effect of discrete tax items.

Dividend

The Company's Board of Directors declared an 11.4% increase in the quarterly cash dividend, from $0.35 per share to $0.39, or $1.56 per share on an annual basis.  The declared quarterly cash dividend of $0.39 per share is payable January 12, 2018 to shareholders of record as of December 29, 2017.

Webcast Information
 
A conference call to discuss third quarter 2017 financial results will be webcast live today, October 27, 2017, 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 94532360. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the third quarter 2017 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 63 manufacturing locations, including operations and joint ventures in 23 countries and a worldwide network of distributors and sales offices covering more than 160 countries.  For more information about Lincoln Electric and its products and services, visit the Company’s website at http://www.lincolnelectric.com.

Non-GAAP Information

Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management 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 Reports Third Quarter 2017 Financial Results


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; 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, 2016.




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
 
 
2017
 
% of Sales
 
2016
 
% of Sales
 
$
 
%
Net sales
 
$
669,491

 
100.0
%
 
$
567,646

 
100.0
%
 
$
101,845

 
17.9
%
Cost of goods sold
 
449,975

 
67.2
%
 
367,834

 
64.8
%
 
(82,141
)
 
(22.3
%)
Gross profit
 
219,516

 
32.8
%
 
199,812

 
35.2
%
 
19,704

 
9.9
%
Selling, general & administrative expenses
 
132,748

 
19.8
%
 
117,983

 
20.8
%
 
(14,765
)
 
(12.5
%)
Pension settlement charges
 
5,283

 
0.8
%
 

 

 
(5,283
)
 
(100.0
%)
Bargain purchase gain
 
(51,585
)
 
7.7
%
 

 

 
51,585

 
100.0
%
Operating income
 
133,070

 
19.9
%
 
81,829

 
14.4
%
 
51,241

 
62.6
%
Interest income
 
1,327

 
0.2
%
 
360

 
0.1
%
 
967

 
268.6
%
Equity earnings in affiliates
 
766

 
0.1
%
 
619

 
0.1
%
 
147

 
23.7
%
Other income
 
1,401

 
0.2
%
 
1,303

 
0.2
%
 
98

 
7.5
%
Interest expense
 
(5,922
)
 
0.9
%
 
(3,815
)
 
0.7
%
 
(2,107
)
 
(55.2
%)
Income before income taxes
 
130,642

 
19.5
%
 
80,296

 
14.1
%
 
50,346

 
62.7
%
Income taxes
 
24,531

 
3.7
%
 
20,257

 
3.6
%
 
(4,274
)
 
(21.1
%)
Effective tax rate
 
18.8
%
 
 

 
25.2
%
 
 

 
6.4
%
 
 
Net income including non-controlling interests
 
106,111

 
15.8
%
 
60,039

 
10.6
%
 
46,072

 
76.7
%
Non-controlling interests in subsidiaries’ loss
 
(15
)
 

 
(10
)
 

 
(5
)
 
(50.0
%)
Net income
 
$
106,126

 
15.9
%
 
$
60,049

 
10.6
%
 
$
46,077

 
76.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.61

 
 

 
$
0.90

 
 

 
$
0.71

 
78.9
%
Diluted earnings per share
 
$
1.59

 
 

 
$
0.89

 
 

 
$
0.70

 
78.7
%
Weighted average shares (basic)
 
65,806

 
 

 
66,477

 
 

 
 

 
 

Weighted average shares (diluted)
 
66,702

 
 

 
67,182

 
 

 
 

 
 

 
 
Nine Months Ended September 30,
 
Fav (Unfav) to
Prior Year
 
 
2017
 
% of Sales
 
2016
 
% of Sales
 
$
 
%
Net sales
 
$
1,877,246

 
100.0
%
 
$
1,710,786

 
100.0
%
 
$
166,460

 
9.7
%
Cost of goods sold
 
1,236,386

 
65.9
%
 
1,118,945

 
65.4
%
 
(117,441
)
 
(10.5
%)
Gross profit
 
640,860

 
34.1
%
 
591,841

 
34.6
%
 
49,019

 
8.3
%
Selling, general & administrative expenses
 
384,964

 
20.5
%
 
352,290

 
20.6
%
 
(32,674
)
 
(9.3
%)
Pension settlement charges
 
5,283

 
0.3
%
 

 

 
(5,283
)
 
(100.0
%)
Loss on deconsolidation of Venezuelan subsidiary
 

 

 
34,348

 
2.0
%
 
34,348

 
100.0
%
Bargain purchase gain
 
(51,585
)
 
2.7
%
 

 

 
51,585

 
100.0
%
Operating income
 
302,198

 
16.1
%
 
205,203

 
12.0
%
 
96,995

 
47.3
%
Interest income
 
3,349

 
0.2
%
 
1,225

 
0.1
%
 
2,124

 
173.4
%
Equity earnings in affiliates
 
2,001

 
0.1
%
 
2,084

 
0.1
%
 
(83
)
 
(4.0
%)
Other income
 
3,293

 
0.2
%
 
2,552

 
0.1
%
 
741

 
29.0
%
Interest expense
 
(18,333
)
 
1.0
%
 
(11,828
)
 
0.7
%
 
(6,505
)
 
(55.0
%)
Income before income taxes
 
292,508

 
15.6
%
 
199,236

 
11.6
%
 
93,272

 
46.8
%
Income taxes
 
69,218

 
3.7
%
 
54,264

 
3.2
%
 
(14,954
)
 
(27.6
%)
Effective tax rate
 
23.7
%
 
 

 
27.2
%
 
 

 
3.5
%
 
 
Net income including non-controlling interests
 
223,290

 
11.9
%
 
144,972

 
8.5
%
 
78,318

 
54.0
%
Non-controlling interests in subsidiaries’ loss
 
(32
)
 

 
(32
)
 

 

 

Net income
 
$
223,322

 
11.9
%
 
$
145,004

 
8.5
%
 
$
78,318

 
54.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
3.40

 
 

 
$
2.13

 
 

 
$
1.27

 
59.6
%
Diluted earnings per share
 
$
3.35

 
 

 
$
2.11

 
 

 
$
1.24

 
58.8
%
Weighted average shares (basic)
 
65,769

 
 

 
68,081

 
 

 
 

 
 

Weighted average shares (diluted)
 
66,679

 
 

 
68,784

 
 

 
 

 
 





Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
 
Balance Sheet Highlights
 
Selected Consolidated Balance Sheet Data
 
September 30, 2017
 
December 31, 2016
Cash and cash equivalents
 
$
299,453

 
$
379,179

Marketable securities
 
179,284

 
38,922

Total current assets
 
1,378,681

 
1,043,713

Property, plant and equipment, net
 
475,071

 
372,377

Total assets
 
2,411,103

 
1,943,437

Total current liabilities
 
539,856

 
388,107

Short-term debt (1)
 
2,135

 
1,889

Long-term debt, less current portion
 
704,804

 
703,704

Total equity
 
945,928

 
712,206

 
 
 
 
 
Operating Working Capital
 
September 30, 2017
 
December 31, 2016
Accounts receivable, net
 
$
401,231

 
$
273,993

Inventories
 
389,722

 
255,406

Trade accounts payable
 
242,253

 
176,757

Operating working capital
 
$
548,700

 
$
352,642

 
 
 
 
 
Average operating working capital to Net sales (2)
 
20.5
%
(3) 
15.6
%
 
 
 
 
 
Invested Capital
 
September 30, 2017
 
December 31, 2016
Short-term debt (1)
 
$
2,135

 
$
1,889

Long-term debt, less current portion
 
704,804

 
703,704

Total debt
 
706,939

 
705,593

Total equity
 
945,928

 
712,206

Invested capital
 
$
1,652,867

 
$
1,417,799

 
 
 
 
 
Total debt / invested capital
 
42.8
%
 
49.8
%

(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.
(3)
Includes only two months of Net sales related to the acquisition of Air Liquide Welding. Average operating working capital to Net Sales excluding the acquisition was 17.6%.




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,
 
 
2017
 
2016
 
2017
 
2016
Operating income as reported
 
$
133,070

 
$
81,829

 
$
302,198

 
$
205,203

Special items (pre-tax):
 
 
 
 
 
 
 
 
Pension settlement charges (2)
 
5,283

 

 
5,283

 

Loss on deconsolidation of Venezuelan subsidiary (3)
 

 

 

 
34,348

Acquisition transaction and integration costs (4)
 
3,273

 

 
11,386

 

Amortization of step up in value of acquired inventories (4)
 
2,314

 

 
2,314

 

Bargain purchase gain (4)
 
(51,585
)
 

 
(51,585
)
 

Adjusted operating income (1)
 
$
92,355

 
$
81,829

 
$
269,596

 
$
239,551

As a percent of total sales
 
13.8
%
 
14.4
%
 
14.4
%
 
14.0
%
 
 
 
 
 
 
 
 
 
Net income as reported
 
$
106,126

 
$
60,049

 
$
223,322

 
$
145,004

Special items (after-tax):
 
 

 
 

 
 
 
 
Pension settlement charges (2)
 
3,260

 

 
3,260

 

Loss on deconsolidation of Venezuelan subsidiary (3)
 

 

 

 
33,251

Income tax valuation reversals (5)
 

 

 

 
(7,196
)
Acquisition transaction and integration costs (4)
 
2,229

 

 
8,457

 

Amortization of step up in value of acquired inventories (4)
 
1,745

 

 
1,745

 

Bargain purchase gain (4)
 
(51,585
)
 

 
(51,585
)
 

Adjusted net income (1)
 
$
61,775

 
$
60,049

 
$
185,199

 
$
171,059

 
 
 
 
 
 
 
 
 
Diluted earnings per share as reported
 
$
1.59

 
$
0.89

 
$
3.35

 
$
2.11

Special items
 
(0.66
)
 

 
(0.57
)
 
0.38

Adjusted diluted earnings per share (1)
 
$
0.93

 
$
0.89

 
$
2.78

 
$
2.49

 
 
 
 
 
 
 
 
 
Weighted average shares (diluted)
 
66,702

 
67,182

 
66,679

 
68,784


(1)
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 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)
Related to lump sum pension payments.
(3)
Related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016.
(4)
Related to the acquisition of Air Liquide Welding.
(5)
Related to the reversal of an income tax valuation allowance as a result of a legal entity change.





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
 
2017
 
2016
Net income as reported
 
$
276,717

 
$
193,696

Rationalization and asset impairment charges, net of tax of ($16)
 

 
450

Pension settlement charges, net of tax of $2,023 and $2,438 in 2017 and 2016, respectively
 
3,260

 
3,969

Loss on deconsolidation of Venezuelan subsidiary, net of tax of $1,097
 

 
33,251

Income tax valuation reversals
 

 
(7,196
)
Venezuela currency devaluation
 

 
708

Acquisition transaction and integration costs, net of tax of $2,929
 
8,457

 

Amortization of step up in value of acquired inventories, net of tax of $569
 
1,745

 

Bargain purchase gain
 
(51,585
)
 

Adjusted net income (1)
 
$
238,594

 
$
224,878

Plus: Interest expense, net of tax of $9,795 and $6,816 in 2017 and 2016, respectively
 
15,789

 
13,342

Less: Interest income, net of tax of $1,614 and $596 in 2017 and 2016, respectively
 
2,602

 
1,182

Adjusted net income before tax effected interest
 
$
251,781

 
$
237,038

 
 
 
 
 
Invested Capital
 
September 30, 2017
 
September 30, 2016
Short-term debt
 
$
2,135

 
$
183,827

Long-term debt, less current portion
 
704,804

 
359,831

Total debt
 
706,939

 
543,658

Total equity
 
945,928

 
752,917

Invested capital
 
$
1,652,867

 
$
1,296,575

 
 
 
 
 
Return on invested capital (1)(2)
 
15.2
%
 
18.3
%

(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 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,
 
 
2017
 
2016
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
106,126

 
$
60,049

Non-controlling interests in subsidiaries’ loss
 
(15
)
 
(10
)
Net income including non-controlling interests
 
106,111

 
60,039

Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
 
 

 
 

Bargain purchase gain
 
(51,585
)
 

Depreciation and amortization
 
18,451

 
16,263

Equity earnings in affiliates, net
 
(141
)
 
(6
)
Pension expense and settlement charges
 
3,495

 
3,216

Pension contributions and payments
 
(1,556
)
 
(582
)
Other non-cash items, net
 
(143
)
 
(1,742
)
Changes in operating assets and liabilities, net of effects from acquisitions:
 
 

 
 

Decrease in accounts receivable
 
15,706

 
10,437

Decrease in inventories
 
2,231

 
7,819

Decrease in trade accounts payable
 
(21,551
)
 
(8,306
)
Net change in other current assets and liabilities
 
22,978

 
24,309

Net change in other long-term assets and liabilities
 
(329
)
 
1,854

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
93,667

 
113,301

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(10,828
)
 
(14,598
)
Acquisition of businesses, net of cash acquired
 
(72,468
)
 

Proceeds from sale of property, plant and equipment
 
892

 
257

Purchase of marketable securities
 
(75,619
)
 

Proceeds from marketable securities
 
200

 

NET CASH USED BY INVESTING ACTIVITIES
 
(157,823
)
 
(14,341
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
(394
)
 
23,989

Proceeds from exercise of stock options
 
936

 
4,703

Purchase of shares for treasury
 
(15,264
)
 
(85,661
)
Cash dividends paid to shareholders
 
(23,067
)
 
(21,533
)
Other financing activities
 
(372
)
 

NET CASH USED BY FINANCING ACTIVITIES
 
(38,161
)
 
(78,502
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
6,035

 
(549
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 
(96,282
)
 
19,909

Cash and cash equivalents at beginning of period
 
395,735

 
237,019

Cash and cash equivalents at end of period
 
$
299,453

 
$
256,928

 
 
 
 
 
Cash dividends paid per share
 
$
0.35

 
$
0.32





Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Condensed Consolidated Statements of Cash Flows 
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
223,322

 
$
145,004

Non-controlling interests in subsidiaries’ loss
 
(32
)
 
(32
)
Net income including non-controlling interests
 
223,290

 
144,972

Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
 
 

 
 

Loss on deconsolidation of Venezuelan subsidiary
 

 
34,348

Bargain purchase gain
 
(51,585
)
 

Depreciation and amortization
 
50,457

 
48,495

Equity earnings in affiliates, net
 
(216
)
 
(64
)
Pension expense and settlement charges
 
816

 
12,472

Pension contributions and payments
 
(2,724
)
 
(22,159
)
Other non-cash items, net
 
15,489

 
(7,137
)
Changes in operating assets and liabilities, net of effects from acquisitions:
 
 

 
 

Increase in accounts receivable
 
(24,300
)
 
(11,956
)
Increase in inventories
 
(22,526
)
 
(7,673
)
(Decrease) increase in trade accounts payable
 
(8,932
)
 
13,922

Net change in other current assets and liabilities
 
61,847

 
33,838

Net change in other long-term assets and liabilities
 
3,738

 
1,122

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
245,354

 
240,180

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(38,959
)
 
(39,377
)
Acquisition of businesses, net of cash acquired
 
(72,468
)
 
(71,567
)
Proceeds from sale of property, plant and equipment
 
1,994

 
936

Purchase of marketable securities
 
(145,553
)
 

Proceeds from marketable securities
 
5,190

 

Other investing activities
 

 
(283
)
NET CASH USED BY INVESTING ACTIVITIES
 
(249,796
)
 
(110,291
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
(605
)
 
183,259

Proceeds from exercise of stock options
 
14,333

 
10,418

Purchase of shares for treasury
 
(23,012
)
 
(288,594
)
Cash dividends paid to shareholders
 
(69,083
)
 
(66,180
)
Other financing activities
 
(15,561
)
 
(18,244
)
NET CASH USED BY FINANCING ACTIVITIES
 
(93,928
)
 
(179,341
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
18,644

 
2,197

DECREASE IN CASH AND CASH EQUIVALENTS
 
(79,726
)
 
(47,255
)
Cash and cash equivalents at beginning of period
 
379,179

 
304,183

Cash and cash equivalents at end of period
 
$
299,453

 
$
256,928

 
 
 
 
 
Cash dividends paid per share
 
$
1.05

 
$
0.96





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, 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

 
 
 
 
 
 
 
 
 
 
 
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) (3)
 
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
%
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 (1)
 
$
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 charges (gains)
 

 

 

 

 

Adjusted 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
%
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

 
 
 
 
 
 
 
 
 
 
 
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) (3)
 
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
%
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 (1)
 
$
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 charges (gains) (4)
 

 

 

 
34,348

 
34,348

Adjusted EBIT (2)
 
$
194,924

 
$
21,699

 
$
25,752

 
$
1,812

 
$
244,187

As a percent of total sales
 
16.3
%
 
5.6
%
 
11.9
%
 
 

 
14.3
%

(1)
EBIT is defined as Operating income plus Equity earnings in affiliates and Other income.
(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 reflect pension settlement charges and acquisition transaction and integration costs, amortization of step up in value of acquired inventories and a bargain purchase gain related to the acquisition of Air Liquide Welding.
(4)
Special items reflect a charge related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016.




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
2016
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2017
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
377,520

 
$
8,401

 
$
1,140

 
$
9,197

 
$
2,031

 
$
398,289

International Welding
 
119,564

 
7,988

 
61,520

 
3,446

 
5,099

 
197,617

The Harris Products Group
 
70,562

 
5,050

 

 
(2,604
)
 
577

 
73,585

Consolidated
 
$
567,646

 
$
21,439

 
$
62,660

 
$
10,039

 
$
7,707

 
$
669,491

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
 

 
2.2
%
 
0.3
%
 
2.4
%
 
0.5
%
 
5.5
%
International Welding
 
 

 
6.7
%
 
51.5
%
 
2.9
%
 
4.3
%
 
65.3
%
The Harris Products Group
 
 

 
7.2
%
 

 
(3.7
%)
 
0.8
%
 
4.3
%
Consolidated
 
 

 
3.8
%
 
11.0
%
 
1.8
%
 
1.4
%
 
17.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30th Change in Net Sales by Segment
 
 
 
 
 
 
 
 
 
 
 
Change in Net Sales due to:
 
 
 
 
Net Sales
2016
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2017
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
1,124,900

 
$
29,928

 
$
5,832

 
$
25,225

 
$
875

 
$
1,186,760

International Welding
 
376,684

 
15,712

 
61,520

 
11,068

 
3,019

 
$
468,003

The Harris Products Group
 
209,202

 
10,982

 

 
806

 
1,493

 
$
222,483

Consolidated
 
$
1,710,786

 
$
56,622

 
$
67,352

 
$
37,099

 
$
5,387

 
$
1,877,246

 
 
 
 
 
 
 
 
 
 
 
 
 
Americas Welding
(excluding Venezuela)
 
$
1,114,086

 
$
40,742

 
$
5,832

 
$
25,225

 
$
875

 
$
1,186,760

Consolidated
(excluding Venezuela)
 
$
1,699,973

 
$
67,435

 
$
67,352

 
$
37,099

 
$
5,387

 
$
1,877,246

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
 

 
2.7
%
 
0.5
%
 
2.2
%
 
0.1
%
 
5.5
%
International Welding
 
 

 
4.2
%
 
16.3
%
 
2.9
%
 
0.8
%
 
24.2
%
The Harris Products Group
 
 

 
5.2
%
 

 
0.4
%
 
0.7
%
 
6.3
%
Consolidated
 
 

 
3.3
%
 
3.9
%
 
2.2
%
 
0.3
%
 
9.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas Welding
(excluding Venezuela)
 
 
 
3.7
%
 
0.5
%
 
2.3
%
 
0.1
%
 
6.5
%
Consolidated
(excluding Venezuela) (1)
 
 
 
4.0
%
 
4.0
%
 
2.2
%
 
0.3
%
 
10.4
%

(1)
Venezuelan sales in the nine months ended September 30, 2016 were $11 million.