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Lincoln Electric Reports Second Quarter 2019 Results

Jul 23 2019
Second Quarter 2019 Highlights
  • Q2 EPS increases 30.8% to $1.36, Adjusted EPS increases 4.9% to $1.28
  • ROIC increases 300 basis points to 21.0%
  • Cash flow from operations increases 58% to $126 million
  • $115 million returned to shareholders through dividends and share repurchases

CLEVELAND, July 23, 2019 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported second quarter 2019 net income of $85.5 million, or diluted earnings per share (EPS) of $1.36, which includes special item after-tax net benefits of $4.6 million, or $0.08 EPS. This compares with prior year net income of $68.9 million, or $1.04 EPS, which included special item after-tax charges of $11.5 million, or $0.18 EPS. Excluding these items, second quarter 2019 adjusted net income was $80.9 million, or $1.28 EPS, as compared with $80.4 million, or $1.22 EPS in the prior year period. The effective tax rate was 17.4% in the second quarter 2019 as compared with 27.0% in the prior year period. Excluding special items, the adjusted effective tax rate was 22.0%, which compares to 24.6% in the comparable 2018 period.

Second quarter 2019 sales decreased 1.7% to $777.0 million from a 3.5% decrease in organic sales and 1.7% unfavorable foreign exchange, partially offset by a 3.4% benefit from acquisitions. Operating income for the second quarter 2019 was $105.2 million, or 13.5% of sales. This compares with operating income of $94.6 million, or 12.0% of sales, in the prior year period. On an adjusted basis, operating income was $105.9 million, or 13.6% of sales, as compared with $107.0 million, or 13.5% of sales, in the prior year period.

"We maintained strong margin performance and improved cash generation, cash conversion and returns in a slowing economic environment,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “As we navigate through the cycle, we are focused on the successful execution of our growth initiatives, achieving operational excellence and maintaining diligent cost controls to mitigate the impact of moderating growth."

Six Months 2019 Summary

Net income for the six months ended June 30, 2019 was $156.9 million, or $2.47 EPS. This compares with $129.7 million, or $1.96 EPS, in the comparable 2018 period. Reported EPS includes special item after-tax net benefits of $1.1 million or $0.01 EPS, as compared with special item after-tax charges of $24.0 million, or $0.36 EPS in the prior year period. Excluding these items, adjusted net income for the six months ended June 30, 2019 increased 1.4% to $155.9 million, or $2.46 EPS, compared with $153.7 million, or $2.32 EPS, in the comparable 2018 period. The effective tax rate was 20.1% for the six months ended June 30, 2019 as compared with 27.3% in the prior year period. Excluding special items, the adjusted effective tax rate was 22.4%, which compares to 24.5% in the comparable 2018 period.

Sales decreased 0.7% to $1.5 billion in the six months ended June 30, 2019 from a 1.3% decrease in organic sales, 2.4% unfavorable foreign exchange, partially offset by a 3.0% benefit from acquisitions. Operating income for the six months ended June 30, 2019 was $199.7 million, or 13.0% of sales. This compares with operating income of $179.8 million, or 11.6% of sales, in the comparable 2018 period. On an adjusted basis, operating income was $204.7 million, or 13.3% of sales, as compared with $204.2 million, or 13.2% of sales, in the comparable 2018 period.

Webcast Information

A conference call to discuss second quarter 2019 financial results will be webcast live today, July 23, 2019, 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 3041829. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the second 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, 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 60 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 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 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 June 30,    Fav (Unfav) to
Prior Year
    2019   % of Sales    2018   % of Sales  
$
    %
                                           
Net sales   $ 777,008     100.0 %   $ 790,052     100.0 %   $ (13,044 )   (1.7 %)
Cost of goods sold   507,127     65.3 %   519,936     65.8 %   12,809     2.5 %
Gross profit   269,881     34.7 %   270,116     34.2 %   (235 )   (0.1 %)
Selling, general & administrative expenses   163,388     21.0 %   163,940     20.8 %   552     0.3 %
Rationalization and asset impairment charges   1,307     0.2 %   11,542     1.5 %   10,235     88.7 %
Operating income   105,186     13.5 %   94,634     12.0 %   10,552     11.2 %
Interest expense, net   5,898     0.8 %   4,812     0.6 %   (1,086 )   (22.6 %)
Other income (expense)   4,196     0.5 %   4,441     0.6 %   (245 )   (5.5 %)
Income before income taxes   103,484     13.3 %   94,263     11.9 %   9,221     9.8 %
Income taxes   18,040     2.3 %   25,404     3.2 %   7,364     29.0 %
Effective tax rate   17.4 %       27.0 %       9.6 %    
Net income including non-controlling interests   85,444     11.0 %   68,859     8.7 %   16,585     24.1 %
Non-controlling interests in subsidiaries’ loss   (8 )       (5 )       (3 )   (60.0 %)
Net income   $ 85,452     11.0 %   $ 68,864     8.7 %   $ 16,588     24.1 %
                         
Basic earnings per share   $ 1.37         $ 1.05         $ 0.32     30.5 %
Diluted earnings per share   $ 1.36         $ 1.04         $ 0.32     30.8 %
Weighted average shares (basic)   62,305         65,337              
Weighted average shares (diluted)   62,970         66,121              
    Six Months Ended June 30,    Fav (Unfav) to
Prior Year 
    2019   % of Sales   2018   % of Sales    $    % 
                                           
Net sales   $ 1,536,182     100.0 %   $ 1,547,748     100.0 %   $ (11,566 )   (0.7 %)
Cost of goods sold     1,007,880     65.6 %     1,021,078     66.0 %     13,198     1.3 %
Gross profit   528,302     34.4 %   526,670     34.0 %   1,632     0.3 %
Selling, general & administrative expenses   323,796     21.1 %   325,131     21.0 %   1,335     0.4 %
Rationalization and asset impairment charges   4,842     0.3 %   21,717     1.4 %   16,875     77.7 %
Operating income   199,664     13.0 %   179,822     11.6 %   19,842     11.0 %
Interest expense, net   11,221     0.7 %   9,253     0.6 %   (1,968 )   (21.3 %)
Other income (expense)   7,959     0.5 %   7,892     0.5 %   67     0.8 %
Income before income taxes   196,402     12.8 %   178,461     11.5 %   17,941     10.1 %
Income taxes   39,492     2.6 %   48,782     3.2 %   9,290     19.0 %
Effective tax rate   20.1 %       27.3 %       7.2 %    
Net income including non-controlling interests   156,910     10.2 %   129,679     8.4 %   27,231     21.0 %
Non-controlling interests in subsidiaries’ loss   (22 )       (9 )       (13 )   (144.4 %)
Net income   $ 156,932     10.2 %   $ 129,688     8.4 %   $ 27,244     21.0 %
                         
Basic earnings per share   $ 2.50         $ 1.98         $ 0.52     26.3 %
Diluted earnings per share   $ 2.47         $ 1.96         $ 0.51     26.0 %
Weighted average shares (basic)   62,733         65,458              
Weighted average shares (diluted)   63,419         66,257              

 

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

Balance Sheet Highlights

Selected Consolidated Balance Sheet Data   June 30, 2019   December 31, 2018
Cash and cash equivalents   $ 189,861     $ 358,849  
Total current assets   1,127,863     1,237,799  
Property, plant and equipment, net   512,364     478,801  
Total assets   2,394,333     2,349,825  
Total current liabilities   571,011     538,182  
Short-term debt (1)   30,110     111  
Long-term debt, less current portion   710,458     702,549  
Total equity   846,058     887,592  
         
Operating Working Capital   June 30, 2019   December 31, 2018
Accounts receivable, net   $ 428,353     $ 396,885  
Inventories   397,752     361,829  
Trade accounts payable   254,814     268,600  
Operating working capital   $ 571,291     $ 490,114  
         
Average operating working capital to Net sales (2)   18.4 %   16.5 %
         
Invested Capital   June 30, 2019   December 31, 2018
Short-term debt (1)   $ 30,110     $ 111  
Long-term debt, less current portion   710,458     702,549  
Total debt   740,568     702,660  
Total equity   846,058     887,592  
Invested capital   $ 1,586,626     $ 1,590,252  
         
Total debt / invested capital   46.7 %   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 June 30,   Six Months Ended June 30,
    2019   2018   2019   2018
Operating income as reported   $ 105,186     $ 94,634     $ 199,664     $ 179,822  
Special items (pre-tax):                
Rationalization and asset impairment charges (2)   1,307     11,542     4,842     21,717  
Acquisition transaction and integration costs (3)   1,014     788     1,804     2,695  
Amortization of step up in value of acquired inventories (4)   1,399         1,399      
Gains on asset disposals (5)   (3,045 )       (3,045 )    
Adjusted operating income (1)   $ 105,861     $ 106,964     $ 204,664     $ 204,234  
As a percent of total sales   13.6 %   13.5 %   13.3 %   13.2 %
                 
Net income as reported   $ 85,452     $ 68,864     $ 156,932     $ 129,688  
Special items:                
Rationalization and asset impairment charges (2)   1,307     11,542     4,842     21,717  
Acquisition transaction and integration costs (3)   1,014     788     1,804     2,695  
Pension settlement charges (6)               758  
Amortization of step up in value of acquired inventories (4)   1,399         1,399      
Gains on asset disposals (5)   (3,554 )       (3,554 )    
Tax effect of Special items (7)   (4,751 )   (784 )   (5,564 )   (1,165 )
Adjusted net income (1)   80,867     80,410     155,859     153,693  
Non-controlling interests in subsidiaries’ loss   (8 )   (5 )   (22 )   (9 )
Interest expense, net   5,898     4,812     11,221     9,253  
Income taxes as reported   18,040     25,404     39,492     48,782  
Tax effect of Special items (7)   4,751     784     5,564     1,165  
Adjusted EBIT (1)   $ 109,548     $ 111,405     $ 212,114     $ 212,884  
                 
Effective tax rate as reported   17.4 %   27.0 %   20.1 %   27.3 %
Net special item tax impact   4.6 %   (2.4 %)   2.3 %   (2.8 )%
Adjusted effective tax rate (1)   22.0 %   24.6 %   22.4 %   24.5 %
                 
Diluted earnings per share as reported   $ 1.36     $ 1.04     $ 2.47     $ 1.96  
Special items per share   (0.08 )   0.18     (0.01 )   0.36  
Adjusted diluted earnings per share (1)   $ 1.28     $ 1.22     $ 2.46     $ 2.32  
                 
Weighted average shares (diluted)   62,970     66,121     63,419     66,257  
  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 acquisition of Baker Industries, Inc. 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. 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 three and six months ended June 30, 2019.
    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 June 30,
Return on Invested Capital   2019   2018
Net income as reported   $ 314,310     $ 259,995  
Rationalization and asset impairment charges   8,410     28,307  
Pension settlement charges   5,928     8,908  
Acquisition transaction and integration costs   3,607     9,584  
Amortization of step up in value of acquired inventories   1,399     4,578  
Gains on asset disposals   (3,554 )    
Bargain purchase gain       (49,650 )
Tax effect of Special items (3)   (11,295 )   21,256  
Adjusted net income (1)   $ 318,805     $ 282,978  
Plus: Interest expense, net of tax of $6,178 and $6,077 in 2019 and 2018, respectively   18,569     18,265  
Less: Interest income, net of tax of $1,302 and $1,509 in 2019 and 2018, respectively   3,912     4,537  
Adjusted net income before tax-effected interest   $ 333,462     $ 296,706  
         
Invested Capital   June 30, 2019   June 30, 2018
Short-term debt   $ 30,110     $ 1,889  
Long-term debt, less current portion   710,458     700,194  
Total debt   740,568     702,083  
Total equity   846,058     943,508  
Invested capital   $ 1,586,626     $ 1,645,591  
         
Return on invested capital (1)(2)   21.0 %   18.0 %
  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 June 30, 2019 and net charges of $31,116 related to the U.S. Tax Act 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.

 

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

Condensed Consolidated Statements of Cash Flows

    Three Months Ended June 30,
    2019   2018
OPERATING ACTIVITIES:        
Net income   $ 85,452     $ 68,864  
Non-controlling interests in subsidiaries’ loss   (8 )   (5 )
Net income including non-controlling interests   85,444     68,859  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net gains   (355 )   (50 )
Depreciation and amortization   20,351     18,189  
Equity earnings in affiliates, net   (769 )   (839 )
Other non-cash items, net   1,325     (654 )
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease in accounts receivable   5,629     561  
(Increase) decrease in inventories   (13,129 )   153  
(Decrease) increase in trade accounts payable   (362 )   1,670  
Net change in other current assets and liabilities   28,595     (9,124 )
Net change in other long-term assets and liabilities   (622 )   1,016  
NET CASH PROVIDED BY OPERATING ACTIVITIES   126,107     79,781  
         
INVESTING ACTIVITIES:        
Capital expenditures   (20,262 )   (16,726 )
Acquisition of businesses, net of cash acquired   (107,843 )   356  
Proceeds from sale of property, plant and equipment   8,410     109  
Purchase of marketable securities       (129,122 )
Proceeds from marketable securities       126,767  
NET CASH USED BY INVESTING ACTIVITIES   (119,695 )   (18,616 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   29,980     273  
Proceeds from exercise of stock options   323     637  
Purchase of shares for treasury   (85,330 )   (35,508 )
Cash dividends paid to shareholders   (29,541 )   (25,589 )
NET CASH USED BY FINANCING ACTIVITIES   (84,568 )   (60,187 )
         
Effect of exchange rate changes on Cash and cash equivalents   883     (12,940 )
DECREASE IN CASH AND CASH EQUIVALENTS   (77,273 )   (11,962 )
Cash and cash equivalents at beginning of period   267,134     369,056  
Cash and cash equivalents at end of period   $ 189,861     $ 357,094  
         
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

    Six Months Ended June 30,
    2019   2018
OPERATING ACTIVITIES:        
Net income   $ 156,932     $ 129,688  
Non-controlling interests in subsidiaries’ loss   (22 )   (9 )
Net income including non-controlling interests   156,910     129,679  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net charges   1,069     626  
Depreciation and amortization   39,252     36,323  
Equity earnings in affiliates, net   (1,217 )   (1,377 )
Other non-cash items, net   5,719     6,648  
Changes in operating assets and liabilities, net of effects from acquisitions:        
Increase in accounts receivable   (21,271 )   (39,907 )
Increase in inventories   (27,767 )   (27,899 )
(Decrease) increase in trade accounts payable   (15,469 )   4,861  
Net change in other current assets and liabilities   13,947     12,384  
Net change in other long-term assets and liabilities   812     2,220  
NET CASH PROVIDED BY OPERATING ACTIVITIES   151,985     123,558  
         
INVESTING ACTIVITIES:        
Capital expenditures   (36,513 )   (31,383 )
Acquisition of businesses, net of cash acquired   (107,843 )   6,591  
Proceeds from sale of property, plant and equipment   8,712     227  
Purchase of marketable securities       (218,667 )
Proceeds from marketable securities       258,733  
Other investing activities   2,000      
NET CASH (USED BY) PROVIDED BY INVESTING ACTIVITIES   (133,644 )   15,501  
         
FINANCING ACTIVITIES:        
Net change in borrowings   29,977     210  
Proceeds from exercise of stock options   960     2,599  
Purchase of shares for treasury   (160,914 )   (50,232 )
Cash dividends paid to shareholders   (60,101 )   (51,250 )
NET CASH USED BY FINANCING ACTIVITIES   (190,078 )   (98,673 )
         
Effect of exchange rate changes on Cash and cash equivalents   2,749     (9,993 )
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (168,988 )   30,393  
Cash and cash equivalents at beginning of period   358,849     326,701  
Cash and cash equivalents at end of period   $ 189,861     $ 357,094  
         
Cash dividends paid per share   $ 0.94     $ 0.78  

 

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

 

    Americas
Welding
  International
Welding
  The Harris
Products Group
  Corporate /
Eliminations
  Consolidated
Three months ended June 30, 2019                
Net sales   $ 476,607     $ 212,306     $ 88,095     $     $ 777,008  
Inter-segment sales   34,811     4,188     2,113     (41,112 )    
Total   $ 511,418     $ 216,494     $ 90,208     $ (41,112 )   $ 777,008  
                     
Net income                   $ 85,452  
As a percent of total sales                   11.0 %
                     
EBIT (1)   $ 83,072     $ 17,805     $ 13,488     $ (4,983 )   $ 109,382  
As a percent of total sales   16.2 %   8.2 %   15.0 %       14.1 %
Special items charges (gains) (3)   1,779     (2,627 )       1,014     166  
Adjusted EBIT (2)   $ 84,851     $ 15,178     $ 13,488     $ (3,969 )   $ 109,548  
As a percent of total sales   16.6 %   7.0 %   15.0 %       14.1 %
                     
Three months ended June 30, 2018                
Net sales   $ 462,515     $ 243,373     $ 84,164     $     $ 790,052  
Inter-segment sales   31,240     5,497     2,003     (38,740 )    
Total   $ 493,755     $ 248,870     $ 86,167     $ (38,740 )   $ 790,052  
                     
Net income                   $ 68,864  
As a percent of total sales                   8.7 %
                     
EBIT (1)   $ 88,158     $ 4,734     $ 10,157     $ (3,974 )   $ 99,075  
As a percent of total sales   17.9 %   1.9 %   11.8 %       12.5 %
Special items charges (gains) (4)       11,542         788     12,330  
Adjusted EBIT (2)   $ 88,158     $ 16,276     $ 10,157     $ (3,186 )   $ 111,405  
As a percent of total sales   17.9 %   6.5 %   11.8 %       14.1 %
  1. EBIT is defined as Operating income plus Other income (expense).
  2. The primary profit measure used by management to assess segment performance is Adjusted EBIT. EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
  3. Special items in 2019 reflect Rationalization and asset impairment charges of $380 in Americas Welding and $927 in International Welding, amortization of step up in value of acquired inventories of $1,399 in Americas Welding, gains on disposals of assets of $3,554 in International Welding and acquisition transaction and integration costs of $1,014 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
  4. Special items in 2018 reflect rationalization and asset impairment charges of $11,542 in International Welding. Special items in 2018 also reflect acquisition transaction and integration costs of $788 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
Six months ended June 30, 2019                
Net sales   $ 934,326     $ 430,392     $ 171,464     $     $ 1,536,182  
Inter-segment sales   64,199     8,397     3,980     (76,576 )    
Total   $ 998,525     $ 438,789     $ 175,444     $ (76,576 )   $ 1,536,182  
                     
Net income                   $ 156,932  
As a percent of total sales                   10.2 %
                     
EBIT (1)   $ 163,488     $ 28,943     $ 24,007     $ (8,815 )   $ 207,623  
As a percent of total sales   16.4 %   6.6 %   13.7 %       13.5 %
Special items charges (gains) (3)   3,115     (428 )       1,804     4,491  
Adjusted EBIT (2)   $ 166,603     $ 28,515     $ 24,007     $ (7,011 )   $ 212,114  
As a percent of total sales   16.7 %   6.5 %   13.7 %       13.8 %
                     
Six months ended June 30, 2018                
Net sales   $ 897,287     $ 490,693     $ 159,768     $     $ 1,547,748  
Inter-segment sales   57,826     10,006     3,910     (71,742 )    
Total   $ 955,113     $ 500,699     $ 163,678     $ (71,742 )   $ 1,547,748  
                     
Net income                   $ 129,688  
As a percent of total sales                   8.4 %
                     
EBIT (1)   $ 164,839     $ 9,532     $ 19,382     $ (6,039 )   $ 187,714  
As a percent of total sales   17.3 %   1.9 %   11.8 %       12.1 %
Special items charges (gains) (4)   758     21,717         2,695     25,170  
Adjusted EBIT (2)   $ 165,597     $ 31,249     $ 19,382     $ (3,344 )   $ 212,884  
As a percent of total sales   17.3 %   6.2 %   11.8 %       13.8 %
  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 and $3,126 in International Welding, amortization of step up in value of acquired inventories of $1,399 in Americas Welding, gains on disposals of assets of $3,554 in International Welding 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 $758 in Americas Welding, rationalization and asset impairment charges of $21,717 in International Welding and acquisition transaction and integration costs of $2,695 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 June 30th 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   $ 462,515     $ (16,756 )   $ 21,512     $ 11,599     $ (2,263 )   $ 476,607  
International Welding   243,373     (23,550 )       2,837     (10,354 )   212,306  
The Harris Products Group   84,164     (417 )   5,656     (635 )   (673 )   88,095  
Consolidated   $ 790,052     $ (40,723 )   $ 27,168     $ 13,801     $ (13,290 )   $ 777,008  
                         
% Change                        
Americas Welding       (3.6 %)   4.7 %   2.5 %   (0.5 %)   3.0 %
International Welding       (9.7 %)       1.2 %   (4.3 %)   (12.8 %)
The Harris Products Group       (0.5 %)   6.7 %   (0.8 %)   (0.8 %)   4.7 %
Consolidated       (5.2 %)   3.4 %   1.7 %   (1.7 %)   (1.7 %)
                         
Six Months Ended June 30th 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   $ 897,287     $ (29,151 )   $ 34,232     $ 39,027     $ (7,069 )   $ 934,326  
International Welding   490,693     (41,467 )       9,312     (28,146 )   430,392  
The Harris Products Group   159,768     2,544     11,430     (185 )   (2,093 )   171,464  
Consolidated   $ 1,547,748     $ (68,074 )   $ 45,662     $ 48,154     $ (37,308 )   $ 1,536,182  
                         
% Change                        
Americas Welding         (3.2 %)   3.8 %   4.3 %   (0.8 %)   4.1 %
International Welding       (8.5 %)       1.9 %   (5.7 %)   (12.3 %)
The Harris Products Group       1.6 %   7.2 %   (0.1 %)   (1.3 %)   7.3 %
Consolidated       (4.4 %)   3.0 %   3.1 %   (2.4 %)   (0.7 %)

lincoln logo.jpg

 

Source: Lincoln Electric Holdings, Inc.