Second Quarter 2018 Highlights

• Sales increase 26.0% with 9.3% higher organic sales
• EPS increases 13.0% to $1.04, Adjusted EPS increases 25.8% to $1.22
• ROIC increases 200 basis points to 18.0%

CLEVELAND, July 23, 2018 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq:LECO) today reported second quarter 2018 net income of $68.9 million, or diluted earnings per share (EPS) of $1.04.  This compares with $61.4 million, or $0.92 EPS in the prior year period.  Reported EPS includes special item after-tax charges of $11.5 million, or $0.18 EPS.  Excluding these items, second quarter 2018 adjusted net income increased 24.0% to $80.4 million, or $1.22 EPS, as compared with $64.8 million, or $0.97 EPS in the prior year period.  The second quarter 2018 effective tax rate was 27.0% due to special items.  Excluding special items, the effective tax rate was 24.6%, which compares to 26.7% in the comparable 2017 period.

Second quarter 2018 sales increased 26.0% to $790.1 million from a 16.0% benefit from acquisitions, a 4.9% increase in price, 4.4% higher volumes and 0.7% from favorable foreign exchange.

Operating income for the second quarter 2018 was $94.6 million, or 12.0% of sales.  This compares with operating income of $85.6 million, or 13.7% of sales, in the comparable 2017 period.  On an adjusted basis, operating income increased 18.8% to $107.0 million, or 13.5% of sales, as compared with $90.1 million, or 14.4% of sales, in the prior year period.  The Air Liquide Welding acquisition had an unfavorable impact of approximately 120 basis points to the adjusted operating income margin.

"Our second quarter results demonstrate solid execution of our core initiatives focused on organic growth and rapid integration of our European welding business,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “We are well-positioned in this portion of the cycle and we will continue to focus on mitigating inflation, richening our portfolio of solutions and generating exceptional value for our customers and shareholders.”

Six Months 2018 Summary

Net income for the six months ended June 30, 2018 was $129.7 million, or $1.96 EPS.  This compares with $117.2 million, or $1.76 EPS, in the comparable 2017 period.  Reported EPS includes special item after-tax net charges of $24.0 million or $0.36 EPS.  Excluding these items, adjusted net income for the six months ended June 30, 2018 increased 24.5% to $153.7 million, or $2.32 EPS, compared with $123.4 million, or $1.85 EPS, in the comparable 2017 period.  The effective tax rate for the six months ended June 30, 2018 was 27.3% due to special items.  Excluding special items, the effective tax rate was 24.5%, which compares to 27.4% in the comparable 2017 period.

Sales increased 28.2% to $1.5 billion in the six months ended June 30, 2018 from a 17.1% benefit from acquisitions, 4.8% higher volumes, a 4.6% increase in price and 1.7% from favorable foreign exchange.

Operating income for the six months ended June 30, 2018 was $179.8 million, or 11.6% of sales.  This compares with operating income of $165.0 million, or 13.7% of sales, in the comparable 2017 period.  On an adjusted basis, operating income increased 18.0% to $204.2 million, or 13.2% of sales, as compared with $173.1 million, or 14.3% of sales, in the comparable 2017 period.  For the first half of 2018, the Air Liquide Welding acquisition had an unfavorable impact of approximately 120 basis points to the adjusted operating income margin.

Webcast Information

A conference call to discuss second quarter 2018 financial results will be webcast live today, July 23, 2018, at 11:00 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 2576158.  Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the second quarter 2018 can also be obtained at http://ir.lincolnelectric.com.

About Lincoln Electric

Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market.  Headquartered in Cleveland, Ohio, Lincoln has 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 EBIT, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures.  Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business.  Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully.  Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly.  Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.

Forward-Looking Statements

The Company’s expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements reflect management’s current expectations and involve a number of risks and uncertainties.  Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning.  Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results.  The factors include, but are not limited to: general economic and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate the Air Liquide Welding business acquisition; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as political unrest, acts of terror and natural disasters, on the Company or its customers, suppliers and the economy in general.  For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Contact

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

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. Average operating working capital to Net sales excluding the acquisition of Air Liquide Welding was 15.2% and 14.2% in the 2018 and 2017 periods, respectively.

1. Adjusted operating income, Adjusted EBIT, Adjusted net income and Adjusted diluted earnings per share are non-GAAP financial measures.  Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business.  Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully.  Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly.  Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
2. Primarily related to severance and asset impairments.
3. Related to the acquisition of Air Liquide Welding.
4. Related to a lump sum pension payment.
5. Includes the net tax impact of Special items recorded during the respective periods, including an adjustment to taxes on unremitted foreign earnings related to the U.S. Tax Act of $2,500 in the six months ended June 30, 2018. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate.  The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.

1. Adjusted net income and Return on invested capital are non-GAAP financial measures.  Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business.  Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully.  Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly.  Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
2. Return on invested capital is defined as rolling 12 months of Adjusted net income before tax-effected interest income and expense divided by invested capital.
3. Includes the net tax impact of Special items recorded during the respective periods, including the net impact of the U.S. Tax Act  of $31,116 in the twelve months ended June 30, 2018. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate.  The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.

1. EBIT is defined as Operating income plus Other income (expense).
2. The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
3. Special items in 2018 reflect rationalization and asset impairment charges of $11,542 in International Welding.  Special items in 2018 and 2017 also reflect acquisition transaction and integration costs of $788 and $4,498, respectively, in Corporate / Eliminations related to the acquisition of Air Liquide Welding.

1. EBIT is defined as Operating income plus Other income (expense).
2. The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
3. Special items in 2018 reflect rationalization and asset impairment charges of $21,717 in International Welding and pension settlement charges of $758 in Americas Welding.  Special items in 2018 and 2017 also reflect acquisition transaction and integration costs of $2,695 and $8,113, respectively, in Corporate / Eliminations related to the acquisition of Air Liquide Welding.

Source: Lincoln Electric Holdings, Inc.