Lincoln Electric Reports Fourth Quarter and Full Year 2013 Results Feb 14 2014 PDF Version Q4 EPS Increases 45% to $1.07, Adjusted EPS Increases 38% to $1.09 Full Year 2013 EPS Increases 16% to $3.54, Adjusted EPS Increases 19% to $3.77 CLEVELAND, Feb. 14, 2014 /PRNewswire/ -- Fourth Quarter and Full Year Highlights vs. Prior Year Q4 Operating income up 39% to $119 million, or 16.6% of sales on a 4% increase in sales Q4 Adjusted operating income up 32% to $120 million and up 350 bps to 16.8% of sales Q4 Net income up 42% to $88 million; Adjusted net income $89 million, including $18 million from Venezuela FY2013 Net income up 14% to $294 million; Adjusted net income $313 million, including $38 million from Venezuela Q4 Cash flow from operations up 15% to $97 million in the fourth quarter; up 4% to $339 million in 2013 Returned $71 million to shareholders through share repurchases and dividends in Q4; returned $217 million in 2013 Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq: LECO) today reported fourth quarter 2013 net income of $88.3 million, or $1.07 per diluted share. Net income was $62.1 million, or $0.74 per diluted share, in the comparable 2012 period. Adjusted net income was $89.2 million, or $1.09 per diluted share, compared to adjusted net income of $65.9 million, or $0.79 per diluted share, in the comparable 2012 period. Sales increased 4.4% to $714.8 million in the fourth quarter 2013 versus $684.6 million in the comparable 2012 period. This increase reflects higher volumes and acquisitions, which was partially offset by unfavorable foreign exchange translation. Operating income for the fourth quarter increased 38.7% to $118.9 million, or 16.6% of sales, from $85.7 million, or 12.5% of sales, in the comparable 2012 period. On an adjusted basis, operating income increased 32.1% to $119.9 million or 16.8% of sales, compared with $90.7 million, or 13.3% of sales in 2012. The Company's Board of Directors declared a quarterly cash dividend of $0.23 per share, which was paid on January 15, 2014 to holders of record on December 31, 2013. During the quarter, the Company returned $54.2 million to shareholders through the repurchase of 767,531 of the Company's common shares. Christopher L. Mapes, Chairman, President and Chief Executive Officer stated, "We are pleased to report solid fourth quarter and full year 2013 results that reflect strong execution of our initiatives, even in challenging and dynamic market conditions. Our focus on favorable mix, optimized processes, and a strong pipeline of new products resulted in margin expansion, solid cash flow generation and accelerated returns to shareholders. Most notably, we achieved a 120 basis point improvement in working capital efficiency to 17.6% of sales, record cash flows from operations, increased our return on invested capital to 18.9%, and returned over $217 million to shareholders through dividends and share repurchases. Looking ahead to 2014, we remain focused on serving our customers with innovative solutions, achieving margin improvements through the continued implementation of our commercial and operational initiatives and expect to benefit from modest end market improvements." Full Year 2013 Summary Sales for 2013 were steady at $2.9 billion versus the 2012 period, reflecting a 3.2% increase from acquisitions offset by reduced volumes and unfavorable foreign exchange. Operating income increased 12.4% to $407.0 million, or 14.3% of sales, from $362.1 million, or 12.7% of sales in 2012. Net income for 2013 was $293.8 million, or $3.54 per diluted share. Net income was $257.4 million, or $3.06 per diluted share, in 2012. Adjusted net income was $313.2 million, or $3.77 per diluted share, compared to adjusted net income of $265.8 million, or $3.16 per diluted share, in 2012. During the twelve months ended December 31, 2013, the Company made voluntary contributions of $75.2 million to its U.S. pension plans and returned $217.2 million to shareholders through the payment of $49.3 million in dividends and the repurchase of $167.9 million, or 2,721,903 of the Company's common shares. The Company also invested $53.2 million in acquisitions during the year. Venezuela Venezuela is a highly inflationary economy under U.S. generally accepted accounting principles ("GAAP"). This highly inflationary economy drove higher prices and earnings in our Venezuelan operation during 2013. In addition, financial results were impacted by an after-tax charge of $12.2 million related to the devaluation of the Venezuelan currency during the first half of 2013. Fourth quarter 2013 net sales included $40.9 million from Venezuela. Net income for the quarter included $17.7 million, or $0.22 per diluted share, from Venezuela. On a full year 2013 basis, net sales included $109.1 million from Venezuela. Net income for the full year included $25.6 million, or $0.31 per diluted share, from Venezuela. Adjusted net income for the full year included $37.8 million, or $0.46 per diluted share, from Venezuela. The impact to earnings of a further devaluation of the Venezuelan currency will be dependent upon movements in the applicable exchange rates and the amount of monetary assets and liabilities on the Venezuelan operation's balance sheet. The bolivar-denominated monetary net asset position was $38.6 million at December 31, 2013 which includes $50.6 million of cash and cash equivalents translated at the official exchange rate of 6.3 bolivars to the U.S. dollar. If in the future the Company were to convert bolivars at a rate other than the official exchange rate or the official exchange rate is revised, the Company may realize a loss to earnings. For example, a future devaluation in the Venezuelan currency to a rate of 12.6 would result in the Company realizing additional charges of approximately $3.0 million to Cost of goods sold based on current inventory levels and $20.0 million to Selling, general and administrative expenses based upon the bolivar-denominated monetary net asset position at December 31, 2013. The Company expects that the operating environment in Venezuela will continue to be a challenge due to continued economic uncertainty and the limited ability to convert bolivars to U.S. dollars. The various restrictions on the Company's ability to effectively manage the Venezuelan operations could affect the ability to pay obligations and maintain normal production levels. Webcast Information A conference call to discuss fourth quarter 2013 financial results will be webcast live today, Friday, February 14, 2014, 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 and 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 36445529. A telephonic replay will be available starting at 1:00 p.m. Eastern Time today and will end on Friday, February 28, 2014 at 11:59 p.m. Eastern Time. To listen to the replay, please dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and use confirmation code 36445529. Financial results for the fourth quarter 2013 can also be obtained at http://ir.lincolnelectric.com. About Lincoln Electric Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market. Headquartered in Cleveland, Ohio, Lincoln has 48 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries. For more information about Lincoln Electric and its products and services, visit the Company's website at http://www.lincolnelectric.com. Non-GAAP Information Adjusted operating income, Adjusted net income and Adjusted diluted earnings per share are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company's financial performance from period to period. Management uses this information in assessing and evaluating the Company's underlying operating performance. Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. Please refer to the attached schedule for a reconciliation of non-GAAP financial measures to the related GAAP financial measures. 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; interest rates; currency exchange rates and devaluations, including in highly inflationary countries such as Venezuela; adverse outcome of pending or potential litigation; actual costs of the Company's rationalization plans; possible acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; and the possible effects of events beyond our control, such as political unrest, acts of terror and natural disasters, on the Company or its customers, suppliers and the economy in general. For additional discussion, see "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K. Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share amounts) (Unaudited) Consolidated Statements of Income Three months ended December 31, Fav (Unfav) to Prior Year 2013 % of Sales 2012 % of Sales $ % Net sales $ 714,791 100.0 % $ 684,648 100.0 % $ 30,143 4.4 % Cost of goods sold 471,744 66.0 % 471,616 68.9 % (128) — Gross profit 243,047 34.0 % 213,032 31.1 % 30,015 14.1 % Selling, general & administrative expenses 123,883 17.3 % 122,290 17.9 % (1,593) (1.3%) Rationalization and asset impairment charges 259 — 5,037 0.7 % 4,778 94.9 % Operating income 118,905 16.6 % 85,705 12.5 % 33,200 38.7 % Interest income 868 0.1 % 1,340 0.2 % (472) (35.2%) Equity earnings in affiliates 1,119 0.2 % 743 0.1 % 376 50.6 % Other income 1,053 0.1 % 670 0.1 % 383 57.2 % Interest expense (557) (0.1%) (853) (0.1%) 296 34.7 % Income before income taxes 121,388 17.0 % 87,605 12.8 % 33,783 38.6 % Income taxes 33,323 4.7 % 25,639 3.7 % (7,684) (30.0%) Effective tax rate 27.5 % 29.3 % 1.8 % Net income including non-controlling interests 88,065 12.3 % 61,966 9.1 % 26,099 42.1 % Non-controlling interests in subsidiaries' loss (259) — (118) — (141) (119.5%) Net income $ 88,324 12.4 % $ 62,084 9.1 % $ 26,240 42.3 % Basic earnings per share $ 1.09 $ 0.75 $ 0.34 45.3 % Diluted earnings per share $ 1.07 $ 0.74 $ 0.33 44.6 % Weighted average shares (basic) 81,132 82,651 Weighted average shares (diluted) 82,184 83,677 Twelve months ended December 31, Fav (Unfav) to Prior Year 2013 % of Sales 2012 % of Sales $ % Net sales $ 2,852,671 100.0 % $ 2,853,367 100.0 % $ (696) — Cost of goods sold 1,910,017 67.0 % 1,986,711 69.6 % 76,694 3.9 % Gross profit 942,654 33.0 % 866,656 30.4 % 75,998 8.8 % Selling, general & administrative expenses 527,206 18.5 % 495,221 17.4 % (31,985) (6.5%) Rationalization and asset impairment charges 8,463 0.3 % 9,354 0.3 % 891 9.5 % Operating income 406,985 14.3 % 362,081 12.7 % 44,904 12.4 % Interest income 3,320 0.1 % 3,988 0.1 % (668) (16.8%) Equity earnings in affiliates 4,806 0.2 % 5,007 0.2 % (201) (4.0%) Other income 4,194 0.1 % 2,685 0.1 % 1,509 56.2 % Interest expense (2,864) (0.1%) (4,191) (0.1%) 1,327 31.7 % Income before income taxes 416,441 14.6 % 369,570 13.0 % 46,871 12.7 % Income taxes 124,754 4.4 % 112,354 3.9 % (12,400) (11.0%) Effective tax rate 30.0 % 30.4 % 0.4 % Net income including non-controlling interests 291,687 10.2 % 257,216 9.0 % 34,471 13.4 % Non-controlling interests in subsidiaries' loss (2,093) (0.1%) (195) — (1,898) (973.3%) Net income $ 293,780 10.3 % $ 257,411 9.0 % $ 36,369 14.1 % Basic earnings per share $ 3.58 $ 3.10 $ 0.48 15.5 % Diluted earnings per share $ 3.54 $ 3.06 $ 0.48 15.7 % Weighted average shares (basic) 81,978 83,087 Weighted average shares (diluted) 83,042 84,175 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share amounts) (Unaudited) Non-GAAP Financial Measures Three months ended December 31, Twelve months ended December 31, 2013 2012 2013 2012 Operating income as reported $ 118,905 $ 85,705 $ 406,985 $ 362,081 Special items (pre-tax): Rationalization and asset impairment charges (1) 259 5,037 8,463 9,354 Loss on the sale of land (2) 705 — 705 — Venezuelan currency devaluation (3) — — 12,198 — Venezuelan statutory severance obligation (4) — — — 1,381 Adjusted operating income (6) $ 119,869 $ 90,742 $ 428,351 $ 372,816 Net income as reported $ 88,324 $ 62,084 $ 293,780 $ 257,411 Special items (after-tax): Rationalization and asset impairment charges (1) 223 3,823 7,573 7,442 Loss on the sale of land (2) 705 — 705 — Venezuelan currency devaluation (3) — — 12,198 — Venezuelan statutory severance obligation (4) — — — 906 Special items attributable to non-controlling interests (5) (47) — (1,068) — Adjusted net income (6) $ 89,205 $ 65,907 $ 313,188 $ 265,759 Diluted earnings per share as reported $ 1.07 $ 0.74 $ 3.54 $ 3.06 Special items 0.02 0.05 0.23 0.10 Adjusted diluted earnings per share (6) $ 1.09 $ 0.79 $ 3.77 $ 3.16 Weighted average shares (diluted) 82,184 83,677 83,042 84,175 (1) The three and twelve months ended December 31, 2013 include net charges associated with long-lived asset impairments and severance and other related costs from the consolidation of manufacturing operations partially offset by gains related to the sale of assets at rationalized operations. (2) Represents the loss realized related to the sale of land. (3) Represents the impact of the devaluation of the Venezuelan currency. (4) Represents an unfavorable adjustment due to a change in Venezuelan labor law, which provides for increased employee severance obligations. (5) The three months ended December 31, 2013 represents the portion of land sale attributable to non-controlling interests. The three and twelve months ended December 31, 2013 include the portion of land sale and the long-lived asset impairments attributable to non-controlling interests. (6) Adjusted operating income, Adjusted net income and Adjusted diluted earnings per share are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company's financial performance from period to period. Management uses this information in assessing and evaluating the Company's underlying operating performance. Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. Lincoln Electric Holdings, Inc. Financial Highlights (In thousands) (Unaudited) Balance Sheet Highlights Selected Consolidated Balance Sheet Data December 31, 2013 December 31, 2012 Cash and cash equivalents $ 299,825 $ 286,464 Total current assets 1,130,775 1,132,816 Property, plant and equipment, net 484,005 486,236 Total assets 2,151,867 2,089,863 Total current liabilities 456,779 440,267 Short-term debt (1) 15,296 18,676 Long-term debt 3,791 1,599 Total equity 1,530,688 1,358,321 Net Operating Working Capital December 31, 2013 December 31, 2012 Accounts receivable $ 367,134 $ 360,662 Inventory 349,963 364,890 Trade accounts payable 212,799 209,647 Net operating working capital $ 504,298 $ 515,905 Net operating working capital to net sales (2) 17.6 % 18.8 % Invested Capital December 31, 2013 December 31, 2012 Short-term debt (1) $ 15,296 $ 18,676 Long-term debt 3,791 1,599 Total debt 19,087 20,275 Total equity 1,530,688 1,358,321 Invested capital $ 1,549,775 $ 1,378,596 Total debt / invested capital 1.2 % 1.5 % Return on invested capital (3) 18.9 % 18.7 % (1) Includes current portion of long-term debt. (2) Net operating working capital to net sales is defined as net operating working capital divided by annualized rolling three months of sales. (3) Return on invested capital is defined as rolling 12 months of earnings excluding tax-effected interest 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 December 31, 2013 2012 OPERATING ACTIVITIES: Net income $ 88,324 $ 62,084 Non-controlling interests in subsidiaries' loss (259) (118) Net income including non-controlling interests 88,065 61,966 Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: Rationalization and asset impairment charges 43 1,383 Depreciation and amortization 17,002 17,114 Equity (earnings) loss in affiliates, net (347) 1,609 Pension expense 7,513 8,849 Pension contributions and payments (2,939) (11,832) Other non-cash items, net (296) 3,677 Changes in operating assets and liabilities, net of effects from acquisitions: Decrease in accounts receivable 12,545 44,009 Decrease in inventories 23,199 35,118 Increase in trade accounts payable 33,497 17,292 Net change in other current assets and liabilities (80,601) (61,032) Net change in other long-term assets and liabilities (878) (34,010) NET CASH PROVIDED BY OPERATING ACTIVITIES 96,803 84,143 INVESTING ACTIVITIES: Capital expenditures (16,324) (13,408) Acquisition of businesses, net of cash acquired (48,225) (81,751) Proceeds from sale of property, plant and equipment 597 849 Other investing activities 2,500 — NET CASH USED BY INVESTING ACTIVITIES (61,452) (94,310) FINANCING ACTIVITIES: Net change in borrowings 511 (1,302) Proceeds from exercise of stock options 4,220 6,081 Excess tax benefits from stock-based compensation 3,629 2,225 Purchase of shares for treasury (54,238) (20,863) Cash dividends paid to shareholders (16,290) (30,602) Transactions with non-controlling interests (3,278) — NET CASH USED BY FINANCING ACTIVITIES (65,446) (44,461) Effect of exchange rate changes on Cash and cash equivalents (389) 417 DECREASE IN CASH AND CASH EQUIVALENTS (30,484) (54,211) Cash and cash equivalents at beginning of period 330,309 340,675 Cash and cash equivalents at end of period $ 299,825 $ 286,464 Cash dividends paid per share $ 0.20 $ 0.37 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share amounts) (Unaudited) Condensed Consolidated Statements of Cash Flows Twelve months ended December 31, 2013 2012 OPERATING ACTIVITIES: Net income $ 293,780 $ 257,411 Non-controlling interests in subsidiaries' loss (2,093) (195) Net income including non-controlling interests 291,687 257,216 Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: Rationalization and asset impairment charges 5,092 1,740 Depreciation and amortization 68,883 65,334 Equity (earnings) loss in affiliates, net (1,660) 160 Pension expense 29,774 35,439 Pension contributions and payments (87,356) (69,646) Other non-cash items, net 29,461 9,588 Changes in operating assets and liabilities, net of effects from acquisitions: (Increase) decrease in accounts receivable (5,437) 57,759 Decrease in inventories 13,310 28,286 Increase in trade accounts payable 794 16,110 Net change in other current assets and liabilities (4,974) 12,381 Net change in other long-term assets and liabilities (680) (86,883) NET CASH PROVIDED BY OPERATING ACTIVITIES 338,894 327,484 INVESTING ACTIVITIES: Capital expenditures (76,015) (52,715) Acquisition of businesses, net of cash acquired (53,161) (134,602) Proceeds from sale of property, plant and equipment 1,393 1,387 Other investing activities (1,717) (1,541) NET CASH USED BY INVESTING ACTIVITIES (129,500) (187,471) FINANCING ACTIVITIES: Net change in borrowings (1,840) (89,303) Proceeds from exercise of stock options 20,297 18,776 Excess tax benefits from stock-based compensation 10,602 7,819 Purchase of shares for treasury (167,879) (81,018) Cash dividends paid to shareholders (49,277) (73,112) Transactions with non-controlling interests (6,087) — NET CASH USED BY FINANCING ACTIVITIES (194,184) (216,838) Effect of exchange rate changes on Cash and cash equivalents (1,849) 2,188 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,361 (74,637) Cash and cash equivalents at beginning of period 286,464 361,101 Cash and cash equivalents at end of period $ 299,825 $ 286,464 Cash dividends paid per share $ 0.60 $ 0.88 Lincoln Electric Holdings, Inc. Segment Highlights (In thousands) (Unaudited) North America Welding Europe Welding Asia Pacific Welding South America Welding The Harris Products Group Corporate / Eliminations Consolidated Three months ended December 31, 2013 Net sales $ 410,033 $ 111,874 $ 63,170 $ 63,303 $ 66,411 $ — $ 714,791 Inter-segment sales 27,385 6,046 2,327 11 2,396 (38,165) — Total $ 437,418 $ 117,920 $ 65,497 $ 63,314 $ 68,807 $ (38,165) $ 714,791 EBIT (1) $ 83,902 $ 7,752 $ (792) $ 25,187 $ 6,415 $ (1,387) $ 121,077 As a percent of total sales 19.2 % 6.6 % (1.2%) 39.8 % 9.3 % 16.9 % Special items charge (2) $ (57) $ 381 $ 640 $ — $ — $ — $ 964 EBIT, as adjusted (4) $ 83,845 $ 8,133 $ (152) $ 25,187 $ 6,415 $ (1,387) $ 122,041 As a percent of total sales 19.2 % 6.9 % (0.2%) 39.8 % 9.3 % 17.1 % Three months ended December 31, 2012 Net sales $ 392,939 $ 107,507 $ 70,223 $ 39,931 $ 74,048 $ — $ 684,648 Inter-segment sales 29,676 3,870 3,188 — 1,944 (38,678) — Total $ 422,615 $ 111,377 $ 73,411 $ 39,931 $ 75,992 $ (38,678) $ 684,648 EBIT (1) $ 75,925 $ 3,914 $ (5,090) $ 4,829 $ 5,544 $ 1,996 $ 87,118 As a percent of total sales 18.0 % 3.5 % (6.9%) 12.1 % 7.3 % 12.7 % Special items charge (3) $ 273 $ 1,068 $ 3,696 $ — $ — $ — $ 5,037 EBIT, as adjusted (4) $ 76,198 $ 4,982 $ (1,394) $ 4,829 $ 5,544 $ 1,996 $ 92,155 As a percent of total sales 18.0 % 4.5 % (1.9%) 12.1 % 7.3 % 13.5 % Twelve months ended December 31, 2013 Net sales $ 1,652,769 $ 429,548 $ 266,282 $ 195,895 $ 308,177 $ — $ 2,852,671 Inter-segment sales 127,254 19,911 14,906 233 9,605 (171,909) — Total $ 1,780,023 $ 449,459 $ 281,188 $ 196,128 $ 317,782 $ (171,909) $ 2,852,671 EBIT (1) $ 317,455 $ 34,202 $ (4,256) $ 45,108 $ 27,826 $ (4,350) $ 415,985 As a percent of total sales 17.8 % 7.6 % (1.5%) 23.0 % 8.8 % 14.6 % Special items charge (2) $ 1,052 $ 2,045 $ 6,071 $ 12,198 $ — $ — $ 21,366 EBIT, as adjusted (4) $ 318,507 $ 36,247 $ 1,815 $ 57,306 $ 27,826 $ (4,350) $ 437,351 As a percent of total sales 17.9 % 8.1 % 0.6 % 29.2 % 8.8 % 15.3 % Twelve months ended December 31, 2012 Net sales $ 1,580,818 $ 452,227 $ 324,482 $ 161,483 $ 334,357 $ — $ 2,853,367 Inter-segment sales 131,062 16,048 14,829 38 8,549 (170,526) — Total $ 1,711,880 $ 468,275 $ 339,311 $ 161,521 $ 342,906 $ (170,526) $ 2,853,367 EBIT (1) $ 292,243 $ 33,765 $ 2,254 $ 16,920 $ 29,477 $ (4,886) $ 369,773 As a percent of total sales 17.1 % 7.2 % 0.7 % 10.5 % 8.6 % 13.0 % Special items charge (3) $ 827 $ 3,534 $ 4,993 $ 1,381 $ — $ — $ 10,735 EBIT, as adjusted (4) $ 293,070 $ 37,299 $ 7,247 $ 18,301 $ 29,477 $ (4,886) $ 380,508 As a percent of total sales 17.1 % 8.0 % 2.1 % 11.3 % 8.6 % 13.3 % (1) EBIT is defined as Operating income plus Equity earnings in affiliates and Other income. (2) Special items in the three and twelve months ended December 31, 2013 include net rationalization and asset impairment charges and a loss recognized on the sale of land. The twelve months ended December 31, 2013 special charges also include the impact of the devaluation of the Venezuelan currency. (3) Special items in the three and twelve months ended December 31, 2012 include net rationalization and asset impairment charges. The twelve months ended December 31, 2012 special charges also include an unfavorable adjustment due to a change in Venezuelan labor law, which provides for increased employee severance obligations. (4) The primary profit measure used by management to assess segment performance is EBIT, as adjusted. EBIT for each operating segment is adjusted for special items to derive EBIT, as adjusted. Lincoln Electric Holdings, Inc. Change in Net Sales by Segment (In thousands) (Unaudited) Three Months Ended December 31st Change in Net Sales by Segment Change in Net Sales due to: Net Sales 2012 Volume Acquisitions Price Foreign Exchange Net Sales 2013 Operating Segments North America Welding $ 392,939 $ 5,880 $ 12,970 $ 307 $ (2,063) $ 410,033 Europe Welding 107,507 4,726 — (2,774) 2,415 111,874 Asia Pacific Welding 70,223 (3,994) — (974) (2,085) 63,170 South America Welding 39,931 11,723 — 13,866 (2,217) 63,303 The Harris Products Group 74,048 3,106 — (10,327) (416) 66,411 Consolidated $ 684,648 $ 21,441 $ 12,970 $ 98 $ (4,366) $ 714,791 % Change North America Welding 1.5 % 3.3 % 0.1 % (0.5%) 4.4 % Europe Welding 4.4 % — (2.6%) 2.2 % 4.1 % Asia Pacific Welding (5.7%) — (1.4%) (3.0%) (10.0%) South America Welding 29.4 % — 34.7 % (5.6%) 58.5 % The Harris Products Group 4.2 % — (13.9%) (0.6%) (10.3%) Consolidated 3.1 % 1.9 % — (0.6%) 4.4 % Twelve Months Ended December 31st Change in Net Sales by Segment Change in Net Sales due to: Net Sales 2012 Volume Acquisitions Price Foreign Exchange Net Sales 2013 Operating Segments North America Welding $ 1,580,818 $ (22,962) $ 91,442 $ 7,785 $ (4,314) $ 1,652,769 Europe Welding 452,227 (18,518) — (5,696) 1,535 429,548 Asia Pacific Welding 324,482 (48,964) — (4,947) (4,289) 266,282 South America Welding 161,483 13,269 — 29,730 (8,587) 195,895 The Harris Products Group 334,357 1,276 — (24,748) (2,708) 308,177 Consolidated $ 2,853,367
