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Lincoln Electric Reports Second Quarter 2020 Results

Jul 27 2020

Second Quarter 2020 Highlights

  • Net sales decline 24.0% on lower organic sales
  • Operating income margin of 6.7%; Adjusted operating income margin of 10.7%
  • EPS of $0.45; Adjusted EPS of $0.80
  • Solid balance sheet profile and strong cash flow generation with 189% cash conversion
  • Cost reduction actions now estimated to provide $55 to $65 million of benefits in 2020

CLEVELAND, July 27, 2020 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported second quarter 2020 net income of $27.0 million, or diluted earnings per share (EPS) of $0.45, which includes special item after-tax net charges of $21.0 million, or $0.35 EPS.  This compares with prior year period net income of $85.5 million, or $1.36 EPS, which included special item after-tax net benefits of $4.6 million, or $0.08 EPS.  Excluding these items, second quarter 2020 adjusted net income was $48.0 million, or $0.80 EPS.  This compares with $80.9 million, or $1.28 EPS in the prior year period.  The effective tax rate was 19.8% in the second quarter 2020 as compared with 17.4% in the prior year period.  Excluding special items, the adjusted effective tax rate was 20.3%, or 22.0% in the comparable 2019 period.

Second quarter 2020 sales decreased 24.0% to $590.7 million from a 24.8% decrease in organic sales and 1.1% unfavorable foreign exchange, partially offset by a 2.0% benefit from acquisitions.  Operating income for the second quarter 2020 was $39.8 million, or 6.7% of sales, including $23.2 million in rationalization and asset impairment charges, which are primarily non-cash charges.  This compares with operating income of $105.2 million, or 13.5% of sales, in the prior year period.  Excluding special items, adjusted operating income was $63.0 million, or 10.7% of sales, as compared with $105.9 million, or 13.6% of sales, in the prior year period.

“As we navigate through the pandemic, I am proud of how effectively we are managing employee safety while serving our customers,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “We continued to generate strong cash flows and increased liquidity, while achieving solid second quarter profitability through aggressive cost management." Mapes commented, “As the pace of recovery remains uncertain, we have expanded our cost action initiatives and now expect to generate $55 to $65 million in realized cost savings in 2020. We remain confident in our disciplined management of the business, strong cash flow generation, returns, and balance sheet profile.”

Six Months 2020 Summary

Net income for the six months ended June 30, 2020 was $82.6 million, or $1.37 EPS.  This compares with $156.9 million, or $2.47 EPS, in the comparable 2019 period.  Reported EPS includes special item after-tax charges of $26.3 million or $0.44 EPS, as compared with special item after-tax net benefits of $1.1 million, or $0.01 EPS in the prior year period.  Excluding these items, adjusted net income for the six months ended June 30, 2020
decreased 30.1% to $108.9 million, or $1.81 EPS, compared with $155.9 million, or $2.46 EPS, in the comparable 2019 period.  The effective tax rate was 24.7% for the six months ended June 30, 2020 as compared with 20.1% in the prior year period.  Excluding special items, the adjusted effective tax rate was 24.1%, which compares to 22.4% in the comparable 2019 period.

Sales decreased 15.8% to $1.3 billion in the six months ended June 30, 2020 from a 17.3% decrease in organic sales, 1.2% unfavorable foreign exchange, partially offset by a 2.6% benefit from acquisitions.  Operating income for the six months ended June 30, 2020 was $120.8 million, or 9.3% of sales.  This compares with operating income of $199.7 million, or 13.0% of sales, in the comparable 2019 period.  Excluding special items, adjusted operating income was $151.4 million, or 11.7% of sales, as compared with $204.7 million, or 13.3% of sales, in the comparable 2019 period.

Webcast Information

A conference call to discuss second quarter 2020 financial results will be webcast live today, July 27, 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.

If investors would like to ask questions, please dial (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 9627497.  Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the second quarter 2020 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, Return on invested capital and Earnings before interest, taxes, depreciation and amortization ("EBITDA") 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, financial 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, natural disasters and pandemics, including the current coronavirus disease ("COVID-19") outbreak, on the Company or its customers, suppliers and the economy in general.  The Company has experienced the negative impacts of COVID-19 on its markets and operations; however, the ultimate duration and severity on the Company's business remains unknown.  New and changing government actions to address the COVID- 19 pandemic continue to occur on a regular basis.  As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions have had to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although many of the Company’s customers have begun to re-open or increase operating levels, such customers may be forced to close or limit operations as any new COVID-19 outbreaks occur.  Even as government restrictions are lifted and economies gradually reopen, the shape of the economic recovery is uncertain and may continue to negatively impact the Company's results of operations, cash flows and financial position in subsequent quarters.  Given this current level of economic and operational uncertainty over the impacts of COVID-19, the ultimate financial impact cannot be reasonably estimated at this time. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and on Form 10-Q for the quarter ended March 31, 2020.

 

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
    2020   % of Sales   2019   % of Sales   $   %
Net sales   $ 590,727     100.0 %   $ 777,008     100.0 %   $ (186,281 )   (24.0 %)
Cost of goods sold   401,349     67.9 %   507,127     65.3 %   105,778     20.9 %
Gross profit   189,378     32.1 %   269,881     34.7 %   (80,503 )   (29.8 %)
Selling, general & administrative expenses   126,376     21.4 %   163,388     21.0 %   37,012     22.7 %
Rationalization and asset impairment charges   23,238     3.9 %   1,307     0.2 %   (21,931 )   (1,678.0 %)
Operating income   39,764     6.7 %   105,186     13.5 %   (65,422 )   (62.2 %)
Interest expense, net   5,881     1.0 %   5,898     0.8 %   17     0.3 %
Other income (expense)   (203 )       4,196     0.5 %   (4,399 )   (104.8 %)
Income before income taxes   33,680     5.7 %   103,484     13.3 %   (69,804 )   (67.5 %)
Income taxes   6,667     1.1 %   18,040     2.3 %   11,373     63.0 %
Effective tax rate   19.8 %       17.4 %       (2.4 %)    
Net income including non-controlling interests   27,013     4.6 %   85,444     11.0 %   (58,431 )   (68.4 %)
Non-controlling interests in subsidiaries’ income (loss)   17         (8 )       25     312.5 %
Net income   $ 26,996     4.6 %   $ 85,452     11.0 %   $ (58,456 )   (68.4 %)
                         
Basic earnings per share   $ 0.45         $ 1.37         $ (0.92 )   (67.2 %)
Diluted earnings per share   $ 0.45         $ 1.36         $ (0.91 )   (66.9 %)
Weighted average shares (basic)   59,354         62,305              
Weighted average shares (diluted)   59,831         62,970              
    Six Months Ended June 30,   Fav (Unfav) to
Prior Year
    2020   % of Sales   2019   % of Sales   $   %
Net sales   $ 1,292,718     100.0 %   $ 1,536,182     100.0 %   $ (243,464 )   (15.8 %)
Cost of goods sold   866,018     67.0 %   1,007,880     65.6 %   141,862     14.1 %
Gross profit   426,700     33.0 %   528,302     34.4 %   (101,602 )   (19.2 %)
Selling, general & administrative expenses   276,103     21.4 %   323,796     21.1 %   47,693     14.7 %
Rationalization and asset impairment charges   29,759     2.3 %   4,842     0.3 %   (24,917 )   (514.6 %)
Operating income   120,838     9.3 %   199,664     13.0 %   (78,826 )   (39.5 %)
Interest expense, net   11,339     0.9 %   11,221     0.7 %   (118 )   (1.1 %)
Other income (expense)   106         7,959     0.5 %   (7,853 )   (98.7 %)
Income before income taxes   109,605     8.5 %   196,402     12.8 %   (86,797 )   (44.2 %)
Income taxes   27,037     2.1 %   39,492     2.6 %   12,455     31.5 %
Effective tax rate   24.7 %       20.1 %       (4.6 %)    
Net income including non-controlling interests   82,568     6.4 %   156,910     10.2 %   (74,342 )   (47.4 %)
Non-controlling interests in subsidiaries’ income (loss)   10         (22 )       32     145.5 %
Net income   $ 82,558     6.4 %   $ 156,932     10.2 %   $ (74,374 )   (47.4 %)
                         
Basic earnings per share   $ 1.38         $ 2.50         $ (1.12 )   (44.8 %)
Diluted earnings per share   $ 1.37         $ 2.47         $ (1.10 )   (44.5 %)
Weighted average shares (basic)   59,769         62,733              
Weighted average shares (diluted)   60,300         63,419              
                             

 

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

Balance Sheet Highlights

Selected Consolidated Balance Sheet Data   June 30, 2020   December 31, 2019
Cash and cash equivalents   $ 143,055     $ 199,563  
Total current assets   1,007,779     1,075,581  
Property, plant and equipment, net   502,249     529,344  
Total assets   2,199,039     2,371,213  
Total current liabilities   568,571     563,135  
Short-term debt (1)   49,597     34,969  
Long-term debt, less current portion   715,817     712,302  
Total equity   660,111     819,077  
         
Operating Working Capital   June 30, 2020   December 31, 2019
Accounts receivable, net   $ 339,102     $ 374,649  
Inventories   417,525     393,748  
Trade accounts payable   226,799     273,002  
Operating working capital   $ 529,828     $ 495,395  
         
Average operating working capital to Net sales (2)   22.4 %   16.8 %
         
Invested Capital   June 30, 2020   December 31, 2019
Short-term debt (1)   $ 49,597     $ 34,969  
Long-term debt, less current portion   715,817     712,302  
Total debt   765,414     747,271  
Total equity   660,111     819,077  
Invested capital   $ 1,425,525     $ 1,566,348  
         
Total debt / invested capital   53.7 %   47.7 %
  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,
    2020   2019   2020   2019
Operating income as reported   $ 39,764     $ 105,186     $ 120,838     $ 199,664  
Special items (pre-tax):                
Rationalization and asset impairment charges (2)   23,238     1,307     29,759     4,842  
Acquisition transaction and integration costs (3)       1,014         1,804  
Amortization of step up in value of acquired inventories (4)       1,399     806     1,399  
Gains on asset disposals (5)       (3,045 )       (3,045 )
Adjusted operating income (1)   $ 63,002     $ 105,861     $ 151,403     $ 204,664  
As a percent of total sales   10.7 %   13.6 %   11.7 %   13.3 %
                 
Net income as reported   $ 26,996     $ 85,452     $ 82,558     $ 156,932  
Special items:                
Rationalization and asset impairment charges (2)   23,238     1,307     29,759     4,842  
Acquisition transaction and integration costs (3)       1,014         1,804  
Pension settlement charges (6)   3,334         3,334      
Amortization of step up in value of acquired inventories (4)       1,399     806     1,399  
Gains on asset disposals (5)       (3,554 )       (3,554 )
Tax effect of Special items (7)   (5,576 )   (4,751 )   (7,552 )   (5,564 )
Adjusted net income (1)   47,992     80,867     108,905     155,859  
Non-controlling interests in subsidiaries’ loss   17     (8 )   10     (22 )
Interest expense, net   5,881     5,898     11,339     11,221  
Income taxes as reported   6,667     18,040     27,037     39,492  
Tax effect of Special items (7)   5,576     4,751     7,552     5,564  
Adjusted EBIT (1)   $ 66,133     $ 109,548     $ 154,843     $ 212,114  
                 
Effective tax rate as reported   19.8 %   17.4 %   24.7 %   20.1 %
Net special item tax impact   0.5 %   4.6 %   (0.6 %)   2.3 %
Adjusted effective tax rate (1)   20.3 %   22.0 %   24.1 %   22.4 %
                 
Diluted earnings per share as reported   $ 0.45     $ 1.36     $ 1.37     $ 2.47  
Special items per share   0.35     (0.08 )   0.44     (0.01 )
Adjusted diluted earnings per share (1)   $ 0.80     $ 1.28     $ 1.81     $ 2.46  
                 
Weighted average shares (diluted)   59,831     62,970     60,300     63,419  
  1. Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate and Adjusted diluted earnings per share are non-GAAP financial measures.  Refer to Non-GAAP Information section.
  2. Primarily related to severance, asset impairments of long-lived assets 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 an acquisition 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   2020   2019
Net income as reported   $ 218,735     $ 314,310  
Rationalization and asset impairment charges   40,105     8,410  
Acquisition transaction and integration costs       3,607  
Pension settlement charges   3,334     5,928  
Amortization of step up in value of acquired inventories   2,415     1,399  
Gains on asset disposals       (3,554 )
Gain on change in control   (7,601 )    
Tax effect of Special items (2)   (9,374 )   (11,295 )
Adjusted net income (1)   $ 247,614     $ 318,805  
Plus: Interest expense, net of tax of $6,439 and $6,178 in 2020 and 2019, respectively   19,348     18,569  
Less: Interest income, net of tax of $563 and $1,302 in 2020 and 2019, respectively   1,691     3,912  
Adjusted net income before tax-effected interest   $ 265,271     $ 333,462  
         
Invested Capital   June 30, 2020   June 30, 2019
Short-term debt   $ 49,597     $ 30,110  
Long-term debt, less current portion   715,817     710,458  
Total debt   765,414     740,568  
Total equity   660,111     846,058  
Invested capital   $ 1,425,525     $ 1,586,626  
         
Return on invested capital (1)   18.6 %   21.0 %
         
    Twelve Months Ended June 30,
Total Debt / EBITDA   2020   2019
Net income as reported   $ 218,735     $ 314,310  
Income taxes   62,955     72,377  
Interest expense, net   23,533     19,533  
Depreciation and amortization   83,313     75,275  
EBITDA (1)   $ 388,536     $ 481,495  
         
    June 30, 2020   June 30, 2019
Total debt   $ 765,414     $ 740,568  
         
Total debt / EBITDA   1.97     1.54  
  1. Adjusted net income, Return on invested capital and EBITDA are non-GAAP financial measures.  Refer to Non-GAAP Information section.
  2. 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.

    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,
    2020   2019
OPERATING ACTIVITIES:        
Net income   $ 26,996     $ 85,452  
Non-controlling interests in subsidiaries’ income (loss)   17     (8 )
Net income including non-controlling interests   27,013     85,444  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net charges (gains)   22,141     (355 )
Depreciation and amortization   20,050     20,351  
Equity earnings in affiliates, net   (81 )   (769 )
Other non-cash items, net   (1,106 )   1,325  
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease in accounts receivable   49,364     5,629  
Increase in inventories   (12,977 )   (13,129 )
Decrease in trade accounts payable   (23,439 )   (362 )
Net change in other current assets and liabilities   20,717     28,595  
Net change in other long-term assets and liabilities   2,359     (622 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   104,041     126,107  
         
INVESTING ACTIVITIES:        
Capital expenditures   (13,183 )   (20,262 )
Acquisition of businesses, net of cash acquired       (107,843 )
Proceeds from sale of property, plant and equipment   118     8,410  
NET CASH USED BY INVESTING ACTIVITIES   (13,065 )   (119,695 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   (82,682 )   29,980  
Proceeds from exercise of stock options   955     323  
Purchase of shares for treasury   (3,213 )   (85,330 )
Cash dividends paid to shareholders   (29,139 )   (29,541 )
NET CASH USED BY FINANCING ACTIVITIES   (114,079 )   (84,568 )
         
Effect of exchange rate changes on Cash and cash equivalents   2,783     883  
DECREASE IN CASH AND CASH EQUIVALENTS   (20,320 )   (77,273 )
Cash and cash equivalents at beginning of period   163,375     267,134  
Cash and cash equivalents at end of period   $ 143,055     $ 189,861  
         
Cash dividends paid per share   $ 0.49     $ 0.47  
                 

 

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

Condensed Consolidated Statements of Cash Flows

    Six Months Ended June 30,
    2020   2019
OPERATING ACTIVITIES:        
Net income   $ 82,558     $ 156,932  
Non-controlling interests in subsidiaries’ income (loss)   10     (22 )
Net income including non-controlling interests   82,568     156,910  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net charges   21,905     1,069  
Depreciation and amortization   41,078     39,252  
Equity earnings in affiliates, net   (243 )   (1,217 )
Other non-cash items, net   (5,288 )   5,719  
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease (increase) in accounts receivable   23,666     (21,271 )
Increase in inventories   (30,378 )   (27,767 )
Decrease in trade accounts payable   (40,115 )   (15,469 )
Net change in other current assets and liabilities   32,410     13,947  
Net change in other long-term assets and liabilities   410     812  
NET CASH PROVIDED BY OPERATING ACTIVITIES   126,013     151,985  
         
INVESTING ACTIVITIES:        
Capital expenditures   (25,011 )   (36,513 )
Acquisition of businesses, net of cash acquired       (107,843 )
Proceeds from sale of property, plant and equipment   6,218     8,712  
Other investing activities       2,000  
NET CASH USED BY INVESTING ACTIVITIES   (18,793 )   (133,644 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   15,095     29,977  
Proceeds from exercise of stock options   2,002     960  
Purchase of shares for treasury   (112,975 )   (160,914 )
Cash dividends paid to shareholders   (59,814 )   (60,101 )
NET CASH USED BY FINANCING ACTIVITIES   (155,692 )   (190,078 )
         
Effect of exchange rate changes on Cash and cash equivalents   (8,036 )   2,749  
DECREASE IN CASH AND CASH EQUIVALENTS   (56,508 )   (168,988 )
Cash and cash equivalents at beginning of period   199,563     358,849  
Cash and cash equivalents at end of period   $ 143,055     $ 189,861  
         
Cash dividends paid per share   $ 0.98     $ 0.94  
                 

 

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, 2020                    
Net sales   $ 333,229     $ 177,167     $ 80,331     $     $ 590,727  
Inter-segment sales   27,493     4,286     1,753     (33,532 )    
Total   $ 360,722     $ 181,453     $ 82,084     $ (33,532 )   $ 590,727  
                     
Net income                   $ 26,996  
As a percent of total sales                   4.6 %
                     
EBIT (1)   $ 20,695     $ 9,117     $ 11,713     $ (1,964 )   $ 39,561  
As a percent of total sales   5.7 %   5.0 %   14.3 %       6.7 %
Special items charges (gains) (3)   26,007     565             26,572  
Adjusted EBIT (2)   $ 46,702     $ 9,682     $ 11,713     $ (1,964 )   $ 66,133  
As a percent of total sales   12.9 %   5.3 %   14.3 %       11.2 %
                     
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) (4)   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 %
  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 2020 reflect Rationalization and asset impairment charges of $22,673 and $565 in Americas Welding and International Welding, respectively, and pension settlement charges of $3,334 in Americas Welding,
  4. 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.

 

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

    Americas Welding   International Welding   The Harris
Products Group
  Corporate /
Eliminations
  Consolidated
Six months ended June 30, 2020                    
Net sales   $ 751,764     $ 375,090     $ 165,864     $     $ 1,292,718  
Inter-segment sales   52,276     8,769     3,478     (64,523 )    
Total   $ 804,040     $ 383,859     $ 169,342     $ (64,523 )   $ 1,292,718  
                     
Net income                   $ 82,558  
As a percent of total sales                   6.4 %
                     
EBIT (1)   $ 90,207     $ 9,595     $ 24,205     $ (3,063 )   $ 120,944  
As a percent of total sales   11.2 %   2.5 %   14.3 %       9.4 %
Special items charges (gains) (3)   27,197     6,702             33,899  
Adjusted EBIT (2)   $ 117,404     $ 16,297     $ 24,205     $ (3,063 )   $ 154,843  
As a percent of total sales   14.6 %   4.2 %   14.3 %       12.0 %
                     
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) (4)   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 %
  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 2020 reflect Rationalization and asset impairment charges of $23,863 and $5,896 in Americas Welding and International Welding, respectively, amortization of step up in value of acquired inventories of $806 in International Welding related to an acquisition, and pension settlement charges of $3,334 in Americas Welding,
  4. 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.

 

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
2019
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2020
Operating Segments                        
Americas Welding   $ 476,607     $ (139,035 )   $     $ (1,405 )   $ (2,938 )   $ 333,229  
International Welding   212,306     (44,452 )   15,219     (1,280 )   (4,626 )   177,167  
The Harris Products Group   88,095     (6,891 )       278     (1,151 )   80,331  
Consolidated   $ 777,008     $ (190,378 )   $ 15,219     $ (2,407 )   $ (8,715 )   $ 590,727  
                         
% Change                        
Americas Welding       (29.2 %)       (0.3 %)   (0.6 %)   (30.1 %)
International Welding       (20.9 %)   7.2 %   (0.6 %)   (2.2 %)   (16.6 %)
The Harris Products Group       (7.8 %)       0.3 %   (1.3 %)   (8.8 %)
Consolidated       (24.5 %)   2.0 %   (0.3 %)   (1.1 %)   (24.0 %)
                         
Six Months Ended June 30th Change in Net Sales by Segment
             
        Change in Net Sales due to:    
    Net Sales
2019
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2020
Operating Segments                        
Americas Welding   $ 934,326     $ (176,727 )   $ 6,190     $ (6,797 )   $ (5,228 )   $ 751,764  
International Welding   430,392     (74,959 )   33,521     (2,971 )   (10,893 )   375,090  
The Harris Products Group   171,464     (4,091 )       601     (2,110 )   165,864  
Consolidated   $ 1,536,182     $ (255,777 )   $ 39,711     $ (9,167 )   $ (18,231 )   $ 1,292,718  
                         
% Change                        
Americas Welding         (18.9 %)   0.7 %   (0.7 %)   (0.6 %)   (19.5 %)
International Welding       (17.4 %)   7.8 %   (0.7 %)   (2.5 %)   (12.8 %)
The Harris Products Group       (2.4 %)       0.4 %   (1.2 %)   (3.3 %)
Consolidated       (16.7 %)   2.6 %   (0.6 %)   (1.2 %)   (15.8 %)
                         

 

 
Contact

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

lincoln logo.jpg

 

Source: Lincoln Electric Holdings, Inc.