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Lincoln Electric Reports Fourth Quarter and Full Year 2019 Results

Feb 13 2020

 

Fourth Quarter and Full Year 2019 Highlights
•  Q4 EPS decreases 23.7% to $1.03, Adjusted EPS decreases 10.9% to $1.15
•  Q4 Cash flow from operations increases 23.3% to $123 million and achieved 150% cash conversion (1)
•  Record full year cash flow from operations increases 22.5% to $403 million
•  $411 million returned to shareholders through dividends and share repurchases for full year

 

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

CLEVELAND, Ohio, Feb. 13, 2020 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported fourth quarter 2019 net income of $63.7 million, or diluted earnings per share (EPS) of $1.03, which includes special item after-tax net charges of $7.3 million, or $0.12 EPS. This compares with prior year net income of $86.8 million, or $1.35 EPS, which included special item after-tax benefits of $3.3 million, or $0.06 EPS. Excluding these items, fourth quarter 2019 adjusted net income was $71.0 million, or $1.15 EPS, as compared with $83.5 million, or $1.29 EPS in the prior year period. The effective tax rate was 20.6% in the fourth quarter 2019 as compared with 8.1% in the prior year period. Excluding special items, the adjusted effective tax rate was 20.4%, which compares to 14.7% in the comparable 2018 period.

Fourth quarter 2019 sales decreased 1.0% to $736.3 million from a 6.5% decrease in organic sales, offset by a 5.9% benefit from acquisitions. Operating income for the fourth quarter 2019 was $82.7 million, or 11.2% of sales. This compares with operating income of $94.9 million, or 12.8% of sales, in the prior year period. Excluding special items, adjusted operating income was $91.6 million, or 12.4% of sales, as compared with $96.7 million, or 13.0% of sales, in the prior year period.

“In 2019, we achieved solid returns, record cash flow generation and strong cash conversion as industrial demand decelerated through the year,” stated Christopher L. Mapes, Chairman, President & CEO. “Extensive product launches, new acquisitions and expansions across our network of global tech centers demonstrate our industry leadership and investments in innovative, value-added solutions. While we manage this challenging portion of the cycle, we are well-positioned to capture growth and generate long-term value for our stakeholders. We are proud to celebrate our Company’s 125th anniversary during 2020 and Lincoln Electric thanks our customers, employees, investors and suppliers for their support in helping us reach this momentous milestone.”

Twelve Months 2019 Summary

Net income for the twelve months ended December 31, 2019 was $293.1 million, or $4.68 EPS. This compares with $287.1 million, or $4.37 EPS, in the comparable 2018 period. Reported EPS includes special item after-tax net charges of $1.5 million or $0.02 EPS, as compared with special item after-tax charges of $29.6 million, or $0.45 EPS in the prior year period. Excluding these items, adjusted net income for the twelve months ended December 31, 2019 was $294.6 million, or $4.70 EPS, compared with $316.6 million, or $4.82 EPS, in the comparable 2018 period. The effective tax rate was 20.5% for the twelve months ended December 31, 2019 as compared with 22.2% in the prior year period. Excluding special items, the adjusted effective tax rate was 21.9% in the 2019 and 2018 periods.

Sales decreased 0.8% to $3.0 billion in the twelve months ended December 31, 2019 from a 3.5% decrease in organic sales and 1.7% unfavorable foreign exchange, partially offset by a 4.3% benefit from acquisitions. Operating income for the twelve months ended December 31, 2019 was $370.9 million, or 12.4% of sales. This compares with operating income of $375.5 million, or 12.4% of sales, in the comparable 2018 period. Excluding special items, adjusted operating income was $387.9 million, or 12.9% of sales, as compared with $405.3 million, or 13.4% of sales, in the comparable 2018 period.

Share Repurchase Program

The Company's Board of Director's approved a new share repurchase program authorizing the Company to repurchase, in the aggregate, up to 10 million of its outstanding common stock. This authorization, in addition to the 2.8 million shares remaining from the prior program, may be used by the Company to repurchase shares on the open market or through privately negotiated transactions from time to time, depending on market conditions and subject to other factors.

Webcast Information

A conference call to discuss fourth quarter 2019 financial results will be webcast live today, February 13, 2020, at 10:00 a.m., Eastern Time. This webcast is accessible at https://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 6955179. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the fourth quarter 2019 can also be obtained at https://ir.lincolnelectric.com.

About Lincoln Electric

Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment and has a leading global position in brazing and soldering alloys. Headquartered in Cleveland, Ohio, Lincoln has 59 manufacturing locations in 18 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 https://www.lincolnelectric.com.

Non-GAAP Information

Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share Organic sales, Cash conversion 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 acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as political unrest, acts of terror and natural disasters, on the Company or its customers, suppliers and the economy in general. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Contact

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

 

Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)

Consolidated Statements of Income

    Three Months Ended December 31,   Fav (Unfav) to
Prior Year
    2019   % of Sales   2018   % of Sales   $   %
Net sales   $ 736,307     100.0 %   $ 743,827     100.0 %   $ (7,520 )   (1.0 %)
Cost of goods sold   495,373     67.3 %   493,528     66.3 %   (1,845 )   (0.4 %)
Gross profit   240,934     32.7 %   250,299     33.7 %   (9,365 )   (3.7 %)
Selling, general & administrative expenses   149,381     20.3 %   154,437     20.8 %   5,056     3.3 %
Rationalization and asset impairment charges   8,851     1.2 %   932     0.1 %   (7,919 )   (849.7 %)
Operating income   82,702     11.2 %   94,930     12.8 %   (12,228 )   (12.9 %)
Interest expense, net   5,794     0.8 %   4,343     0.6 %   (1,451 )   (33.4 %)
Other income (expense)   3,386     0.5 %   3,868     0.5 %   (482 )   (12.5 %)
Income before income taxes   80,294     10.9 %   94,455     12.7 %   (14,161 )   (15.0 %)
Income taxes   16,578     2.3 %   7,676     1.0 %   (8,902 )   (116.0 %)
Effective tax rate   20.6 %       8.1 %       (12.5 %)    
Net income including non-controlling interests   63,716     8.7 %   86,779     11.7 %   (23,063 )   (26.6 %)
Non-controlling interests in subsidiaries’ loss           (60 )       60     100.0 %
Net income   $ 63,716     8.7 %   $ 86,839     11.7 %   $ (23,123 )   (26.6 %)
                         
Basic earnings per share   $ 1.04         $ 1.36         $ (0.32 )   (23.5 %)
Diluted earnings per share   $ 1.03         $ 1.35         $ (0.32 )   (23.7 %)
Weighted average shares (basic)   60,996         63,808              
Weighted average shares (diluted)   61,710         64,559              
                             
                             
    Twelve Months Ended December 31,   Fav (Unfav) to
Prior Year
    2019   % of Sales   2018   % of Sales   $   %
Net sales   $ 3,003,272     100.0 %   $ 3,028,674     100.0 %   $ (25,402 )   (0.8 %)
Cost of goods sold   1,995,685     66.5 %   2,000,153     66.0 %   4,468     0.2 %
Gross profit   1,007,587     33.5 %   1,028,521     34.0 %   (20,934 )   (2.0 %)
Selling, general & administrative expenses   621,489     20.7 %   627,697     20.7 %   6,208     1.0 %
Rationalization and asset impairment charges   15,188     0.5 %   25,285     0.8 %   10,097     39.9 %
Operating income   370,910     12.4 %   375,539     12.4 %   (4,629 )   (1.2 %)
Interest expense, net   23,415     0.8 %   17,565     0.6 %   (5,850 )   (33.3 %)
Other income (expense)   20,998     0.7 %   10,686     0.4 %   10,312     96.5 %
Income before income taxes   368,493     12.3 %   368,660     12.2 %   (167 )    
Income taxes   75,410     2.5 %   81,667     2.7 %   6,257     7.7 %
Effective tax rate   20.5 %       22.2 %       1.7 %    
Net income including non-controlling interests   293,083     9.8 %   286,993     9.5 %   6,090     2.1 %
Non-controlling interests in subsidiaries’ loss   (26 )       (73 )       47     64.4 %
Net income   $ 293,109     9.8 %   $ 287,066     9.5 %   $ 6,043     2.1 %
                         
Basic earnings per share   $ 4.73         $ 4.42         $ 0.31     7.0 %
Diluted earnings per share   $ 4.68         $ 4.37         $ 0.31     7.1 %
Weighted average shares (basic)   61,960         64,886              
Weighted average shares (diluted)   62,658         65,682              

 

Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)

Balance Sheet Highlights

Selected Consolidated Balance Sheet Data   December 31, 2019   December 31, 2018
Cash and cash equivalents   $ 199,563     $ 358,849  
Total current assets   1,075,581     1,237,799  
Property, plant and equipment, net   529,344     478,801  
Total assets   2,371,213     2,349,825  
Total current liabilities   563,135     538,182  
Short-term debt (1)   34,969     111  
Long-term debt, less current portion   712,302     702,549  
Total equity   819,077     887,592  
         
         
Operating Working Capital   December 31, 2019   December 31, 2018
Accounts receivable, net   $ 374,649     $ 396,885  
Inventories   393,748     361,829  
Trade accounts payable   273,002     268,600  
Operating working capital   $ 495,395     $ 490,114  
         
Average operating working capital to Net sales (2)   16.8 %   16.5 %
         
         
Invested Capital   December 31, 2019   December 31, 2018
Short-term debt (1)   $ 34,969     $ 111  
Long-term debt, less current portion   712,302     702,549  
Total debt   747,271     702,660  
Total equity   819,077     887,592  
Invested capital   $ 1,566,348     $ 1,590,252  
         
Total debt / invested capital   47.7 %   44.2 %

 

(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 December 31,   Twelve Months Ended December 31,
    2019   2018   2019   2018
Operating income as reported   $ 82,702     $ 94,930     $ 370,910     $ 375,539  
Special items (pre-tax):                
Rationalization and asset impairment charges (2)   8,851     932     15,188     25,285  
Acquisition transaction and integration costs (3)       833     1,804     4,498  
Amortization of step up in value of acquired inventories (4)           3,008      
Gains on asset disposals (5)           (3,045 )    
Adjusted operating income (1)   $ 91,553     $ 96,695     $ 387,865     $ 405,322  
As a percent of total sales   12.4 %   13.0 %   12.9 %   13.4 %
                 
Net income as reported   $ 63,716     $ 86,839     $ 293,109     $ 287,066  
Special items:                
Rationalization and asset impairment charges (2)   8,851     932     15,188     25,285  
Acquisition transaction and integration costs (3)       833     1,804     4,498  
Pension settlement charges (6)       1,696         6,686  
Amortization of step up in value of acquired inventories (4)           3,008      
Gains on asset disposals (5)           (3,554 )    
Gain on change in control (7)           (7,601 )    
Tax effect of Special items (8)   (1,567 )   (6,764 )   (7,386 )   (6,896 )
Adjusted net income (1)   71,000     83,536     294,568     316,639  
Non-controlling interests in subsidiaries’ loss       (60 )   (26 )   (73 )
Interest expense, net   5,794     4,343     23,415     17,565  
Income taxes as reported   16,578     7,676     75,410     81,667  
Tax effect of Special items (8)   1,567     6,764     7,386     6,896  
Adjusted EBIT (1)   $ 94,939     $ 102,259     $ 400,753     $ 422,694  
                 
Effective tax rate as reported   20.6 %   8.1 %   20.5 %   22.2 %
Net special item tax impact   (0.2 %)   6.6 %   1.4 %   (0.3 %)
Adjusted effective tax rate (1)   20.4 %   14.7 %   21.9 %   21.9 %
                 
Diluted earnings per share as reported   $ 1.03     $ 1.35     $ 4.68     $ 4.37  
Special items per share   0.12     (0.06 )   0.02     0.45  
Adjusted diluted earnings per share (1)   $ 1.15     $ 1.29     $ 4.70     $ 4.82  
                 
Weighted average shares (diluted)   61,710     64,559     62,658     65,682  

 

(1) Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate 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 and are included in Selling, general & administrative expenses.
(4) Related to the acquisitions of Baker Industries, Inc. and Kaynak Tekniği Sanayi ve Ticaret A.Ş. ("Askaynak") and are included in Cost of goods sold.
(5) Primarily included in Cost of goods sold.
(6) Related to lump sum pension payments and are included in Other income (expense).
(7) Related to the acquisition of Askaynak and is included in Other income (expense).
(8) Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended December 31, 2019. The prior year includes an adjustment to taxes on unremitted foreign earnings related to the U.S. Tax Act of $4,424 and $399 in the three and twelve months ended December 31, 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 December 31,
Return on Invested Capital   2019   2018
Net income as reported   $ 293,109     $ 287,066  
Rationalization and asset impairment charges   15,188     25,285  
Acquisition transaction and integration costs   1,804     4,498  
Pension settlement charges       6,686  
Amortization of step up in value of acquired inventories   3,008      
Gains on asset disposals   (3,554 )    
Gain on change in control   (7,601 )    
Tax effect of Special items (3)   (7,386 )   (6,896 )
Adjusted net income (1)   $ 294,568     $ 316,639  
Plus: Interest expense, net of tax of $6,477 and $6,117 in 2019 and 2018, respectively   19,465     18,386  
Less: Interest income, net of tax of $631 and $1,732 in 2019 and 2018, respectively   1,896     5,206  
Adjusted net income before tax-effected interest   $ 312,137     $ 329,819  
         
         
Invested Capital   December 31, 2019   December 31, 2018
Short-term debt   $ 34,969     $ 111  
Long-term debt, less current portion   712,302     702,549  
Total debt   747,271     702,660  
Total equity   819,077     887,592  
Invested capital   $ 1,566,348     $ 1,590,252  
         
Return on invested capital (1)(2)   19.9 %   20.7 %

 

(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 tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended December 31, 2019 and net charges of $399 related to the U.S. Tax Act in the twelve months ended December 31, 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 December 31,
    2019   2018
OPERATING ACTIVITIES:        
Net income   $ 63,716     $ 86,839  
Non-controlling interests in subsidiaries’ loss       (60 )
Net income including non-controlling interests   63,716     86,779  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net charges (gains)   2,431     (4,570 )
Depreciation and amortization   21,087     18,400  
Equity earnings in affiliates, net   (161 )   (1,607 )
Other non-cash items, net   12,203     427  
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease in accounts receivable   26,291     21,431  
Decrease in inventories   24,453     17,629  
Increase in trade accounts payable   25,863     21,159  
Net change in other current assets and liabilities   (51,294 )   (58,649 )
Net change in other long-term assets and liabilities   (2,070 )   (1,624 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   122,519     99,375  
         
INVESTING ACTIVITIES:        
Capital expenditures   (16,064 )   (22,500 )
Acquisition of businesses, net of cash acquired   2,018     (108,383 )
Proceeds from sale of property, plant and equipment   18     6,170  
Proceeds from marketable securities       99,281  
Other investing activities       (2,000 )
NET CASH USED BY INVESTING ACTIVITIES   (14,028 )   (27,432 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   21,889     (296 )
Proceeds from exercise of stock options   8,137     242  
Purchase of shares for treasury   (70,751 )   (80,173 )
Cash dividends paid to shareholders   (28,758 )   (25,384 )
NET CASH USED BY FINANCING ACTIVITIES   (69,483 )   (105,611 )
         
Effect of exchange rate changes on Cash and cash equivalents   3,943     (5,683 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   42,951     (39,351 )
Cash and cash equivalents at beginning of period   156,612     398,200  
Cash and cash equivalents at end of period   $ 199,563     $ 358,849  
         
Cash dividends paid per share   $ 0.47     $ 0.39  

 

Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)

Condensed Consolidated Statements of Cash Flows

    Twelve Months Ended December 31,
    2019   2018
OPERATING ACTIVITIES:        
Net income   $ 293,109     $ 287,066  
Non-controlling interests in subsidiaries’ loss   (26 )   (73 )
Net income including non-controlling interests   293,083     286,993  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net charges (gains)   3,500     (5,978 )
Depreciation and amortization   81,487     72,346  
Equity earnings in affiliates, net   (1,427 )   (3,034 )
Gain on change in control   (7,601 )    
Other non-cash items, net   21,488     12,509  
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease (increase) in accounts receivable   50,394     (4,061 )
Increase in inventories   (12,023 )   (23,904 )
(Decrease) increase in trade accounts payable   (8,339 )   3,636  
Net change in other current assets and liabilities   (16,954 )   (12,333 )
Net change in other long-term assets and liabilities   (423 )   2,978  
NET CASH PROVIDED BY OPERATING ACTIVITIES   403,185     329,152  
         
INVESTING ACTIVITIES:        
Capital expenditures   (69,615 )   (71,246 )
Acquisition of businesses, net of cash acquired   (134,717 )   (101,792 )
Proceeds from sale of property, plant and equipment   9,509     16,755  
Purchase of marketable securities       (268,335 )
Proceeds from marketable securities       447,459  
Other investing activities   2,000     (2,000 )
NET CASH (USED BY) PROVIDED BY INVESTING ACTIVITIES   (192,823 )   20,841  
         
FINANCING ACTIVITIES:        
Net change in borrowings   24,322     (942 )
Proceeds from exercise of stock options   14,347     4,690  
Purchase of shares for treasury   (292,693 )   (201,650 )
Cash dividends paid to shareholders   (117,920 )   (102,058 )
Other financing activities       (2,170 )
NET CASH USED BY FINANCING ACTIVITIES   (371,944 )   (302,130 )
         
Effect of exchange rate changes on Cash and cash equivalents   2,296     (15,715 )
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (159,286 )   32,148  
Cash and cash equivalents at beginning of period   358,849     326,701  
Cash and cash equivalents at end of period   $ 199,563     $ 358,849  
         
Cash dividends paid per share   $ 1.88     $ 1.56  

 

Lincoln Electric Holdings, Inc.
Segment Highlights (1)
(In thousands)
(Unaudited)

    Americas
Welding
  International
Welding
  The Harris
Products Group
  Corporate /
Eliminations
  Consolidated
Three months ended December 31, 2019                
Net sales   $ 437,899     $ 218,606     $ 79,802     $     $ 736,307  
Inter-segment sales   28,042     4,853     1,650     (34,545 )    
Total   $ 465,941     $ 223,459     $ 81,452     $ (34,545 )   $ 736,307  
                     
Net income                   $ 63,716  
As a percent of total sales                   8.7 %
                     
EBIT (1)   $ 75,006     $ 4,501     $ 8,886     $ (2,305 )   $ 86,088  
As a percent of total sales   16.1 %   2.0 %   10.9 %       11.7 %
Special items charges (gains) (3)       7,081     1,770         8,851  
Adjusted EBIT (2)   $ 75,006     $ 11,582     $ 10,656     $ (2,305 )   $ 94,939  
As a percent of total sales   16.1 %   5.2 %   13.1 %       12.9 %
                     
Three months ended December 31, 2018                
Net sales   $ 455,217     $ 219,456     $ 69,154     $     $ 743,827  
Inter-segment sales   29,265     4,907     1,522     (35,694 )    
Total   $ 484,482     $ 224,363     $ 70,676     $ (35,694 )   $ 743,827  
                     
Net income                   $ 86,839  
As a percent of total sales                   11.7 %
                     
EBIT (1)   $ 84,198     $ 11,371     $ 8,506     $ (5,277 )   $ 98,798  
As a percent of total sales   17.4 %   5.1 %   12.0 %       13.3 %
Special items charges (gains) (4)   1,696     932         833     3,461  
Adjusted EBIT (2)   $ 85,894     $ 12,303     $ 8,506     $ (4,444 )   $ 102,259  
As a percent of total sales   17.7 %   5.5 %   12.0 %       13.7 %

 

(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 2019 reflect Rationalization and asset impairment charges of $7,081 in International Welding and $1,770 in The Harris Products Group.
(4) Special items in 2018 reflect pension settlement charges of $1,696 in Americas Welding, Rationalization and asset impairment charges of $932 in International Welding and acquisition transaction and integration costs of $833 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
Twelve months ended December 31, 2019                
Net sales   $ 1,815,746     $ 854,376     $ 333,150     $     $ 3,003,272  
Inter-segment sales   123,342     17,691     7,487     (148,520 )    
Total   $ 1,939,088     $ 872,067     $ 340,637     $ (148,520 )   $ 3,003,272  
                     
Net income                   $ 293,109  
As a percent of total sales                   9.8 %
                     
EBIT (1)   $ 312,604     $ 48,125     $ 43,931     $ (12,752 )   $ 391,908  
As a percent of total sales   16.1 %   5.5 %   12.9 %       13.0 %
Special items charges (gains) (3)   3,115     2,156     1,770     1,804     8,845  
Adjusted EBIT (2)   $ 315,719     $ 50,281     $ 45,701     $ (10,948 )   $ 400,753  
As a percent of total sales   16.3 %   5.8 %   13.4 %       13.3 %
                     
Twelve months ended December 31, 2018                
Net sales   $ 1,806,514     $ 919,771     $ 302,389     $     $ 3,028,674  
Inter-segment sales   118,936     18,576     6,969     (144,481 )    
Total   $ 1,925,450     $ 938,347     $ 309,358     $ (144,481 )   $ 3,028,674  
                     
Net income                   $ 287,066  
As a percent of total sales                   9.5 %
                     
EBIT (1)   $ 334,058     $ 28,988     $ 36,564     $ (13,385 )   $ 386,225  
As a percent of total sales   17.3 %   3.1 %   11.8 %       12.8 %
Special items charges (gains) (4)   6,686     25,285         4,498     36,469  
Adjusted EBIT (2)   $ 340,744     $ 54,273     $ 36,564     $ (8,887 )   $ 422,694  
As a percent of total sales   17.7 %   5.8 %   11.8 %       14.0 %

 

(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 2019 reflect Rationalization and asset impairment charges of $1,716 in Americas Welding, $11,702 in International Welding and $1,770 in The Harris Products Group, amortization of step up in value of acquired inventories of $1,399 in Americas Welding and $1,609 in International Welding, gains on disposals of assets of $3,554 in International Welding, a gain on change in control of $7,601 related to the acquisition of Askaynak and acquisition transaction and integration costs of $1,804 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
(4) Special items in 2018 reflect pension settlement charges of $6,686 in Americas Welding, Rationalization and asset impairment charges of $25,285 in International Welding and acquisition transaction and integration costs of $4,498 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 December 31st Change in Net Sales by Segment
             
        Change in Net Sales due to:    
    Net Sales
2018
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2019
Operating Segments                        
Americas Welding   $ 455,217     $ (29,529 )   $ 19,450     $ (7,719 )   $ 480     $ 437,899  
International Welding   219,456     (17,076 )   19,648     (760 )   (2,662 )   218,606  
The Harris Products Group   69,154     3,925     4,836     2,276     (389 )   79,802  
Consolidated   $ 743,827     $ (42,680 )   $ 43,934     $ (6,203 )   $ (2,571 )   $ 736,307  
                         
% Change                        
Americas Welding       (6.5 %)   4.3 %   (1.7 %)   0.1 %   (3.8 %)
International Welding       (7.8 %)   9.0 %   (0.3 %)   (1.2 %)   (0.4 %)
The Harris Products Group       5.7 %   7.0 %   3.3 %   (0.6 %)   15.4 %
Consolidated       (5.7 %)   5.9 %   (0.8 %)   (0.3 %)   (1.0 %)
                         
                         
Twelve Months Ended December 31st Change in Net Sales by Segment
             
        Change in Net Sales due to:    
    Net Sales
2018
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2019
Operating Segments                        
Americas Welding   $ 1,806,514     $ (79,285 )   $ 71,062     $ 25,705     $ (8,250 )   $ 1,815,746  
International Welding   919,771     (71,509 )   37,061     9,159     (40,106 )   854,376  
The Harris Products Group   302,389     9,898     21,032     2,852     (3,021 )   333,150  
Consolidated   $ 3,028,674     $ (140,896 )   $ 129,155     $ 37,716     $ (51,377 )   $ 3,003,272  
                         
% Change                        
Americas Welding   %   (4.4 %)   3.9 %   1.4 %   (0.5 %)   0.5 %
International Welding       (7.8 %)   4.0 %   1.0 %   (4.4 %)   (7.1 %)
The Harris Products Group       3.3 %   7.0 %   0.9 %   (1.0 %)   10.2 %
Consolidated       (4.7 %)   4.3 %   1.2 %   (1.7 %)   (0.8 %)
                         

lincoln logo.jpg

 

Source: Lincoln Electric Holdings, Inc.