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Lincoln Electric Reports Third Quarter 2020 Results

Oct 27 2020
Third Quarter 2020 Highlights
• Net sales decline narrows to 8.5% on 8.3% lower organic sales
• Operating income margin of 11.6%; Adjusted operating income margin of 12.6%
• EPS of $0.97; Adjusted EPS of $1.10
• Solid balance sheet profile and strong cash flow generation with 117% cash conversion
• Cost reduction actions now estimated to provide $80 to $85 million of benefits in 2020
 

CLEVELAND, Oct. 27, 2020 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported third quarter 2020 net income of $58.5 million, or diluted earnings per share (EPS) of $0.97, which includes special item after-tax charges of $7.5 million, or $0.13 EPS. This compares with prior year period net income of $72.5 million, or $1.17 EPS, which included special item after-tax net benefits of $4.8 million, or $0.08 EPS. Excluding these items, third quarter 2020 Adjusted net income was $66.0 million, or $1.10 Adjusted EPS. This compares with Adjusted net income of $67.7 million, or $1.09 Adjusted EPS in the prior year period.

Third quarter 2020 sales decreased 8.5% to $668.9 million from an 8.3% decrease in organic sales and 0.2% unfavorable foreign exchange. Operating income for the third quarter 2020 was $77.8 million, or 11.6% of sales, including $6.3 million in rationalization and asset impairment charges. This compares with operating income of $88.5 million, or 12.1% of sales, in the prior year period. Excluding special items, Adjusted operating income was $84.1 million, or 12.6% of sales, as compared with $91.6 million, or 12.5% of sales, in the prior year period.

“We operated safely while supporting a rebound in demand across all of our regions and reportable segments in the third quarter," stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “Improved demand and diligent cost management generated solid profitability and earnings performance in the quarter.” Mapes continued, “Looking ahead, we are well-positioned to maximize growth and are focused on increasing profitability and returns to generate long-term value for our shareholders.”

Nine Months 2020 Summary

Net income for the nine months ended September 30, 2020 was $141.0 million, or $2.34 EPS, which includes special item after-tax charges of $33.9 million, or $0.57 EPS. This compares with prior year period net income of $229.4 million, or $3.64 EPS, which included special item after-tax net benefits of $5.8 million, or $0.09 EPS. Excluding these items, Adjusted net income for the nine months ended September 30, 2020 was $174.9 million, or $2.91 Adjusted EPS, compared with Adjusted net income of $223.6 million, or $3.55 Adjusted EPS, in the comparable 2019 period.

Sales decreased 13.5% to $2.0 billion in the nine months ended September 30, 2020 from a 14.3% decrease in organic sales and 0.9% unfavorable foreign exchange, partially offset by a 1.8% benefit from acquisitions. Operating income for the nine months ended September 30, 2020 was $198.6 million, or 10.1% of sales. This compares with operating income of $288.2 million, or 12.7% of sales, in the comparable 2019 period. Excluding special items, Adjusted operating income was $235.5 million, or 12.0% of sales, as compared with $296.3 million, or 13.1% of sales, in the comparable 2019 period.

Dividend

The Company's Board of Directors declared a 4.1% increase in the quarterly cash dividend, from $0.49 per share to $0.51 per share, or $2.04 per share on an annual basis. The declared quarterly cash dividend of $0.51 per share is payable January 15, 2021 to shareholders of record as of December 31, 2020.

Webcast Information

A conference call to discuss third quarter 2020 financial results will be webcast live today, October 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 3879509. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the third 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 Electric 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. As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions may have to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although most of the Company’s customers have re-opened and increased 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 reopen, the ultimate 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 quarters ended March 31, 2020 and June 30, 2020.

 

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

Consolidated Statements of Income

    Three Months Ended September 30,   Fav (Unfav) to
Prior Year
    2020   % of Sales   2019   % of Sales   $   %
Net sales   $ 668,888     100.0 %   $ 730,783     100.0 %   $ (61,895 )   (8.5 %)
Cost of goods sold   453,501     67.8 %   492,432     67.4 %   38,931     7.9 %
Gross profit   215,387     32.2 %   238,351     32.6 %   (22,964 )   (9.6 %)
Selling, general & administrative expenses   131,337     19.6 %   148,312     20.3 %   16,975     11.4 %
Rationalization and asset impairment charges   6,257     0.9 %   1,495     0.2 %   (4,762 )   (318.5 %)
Operating income   77,793     11.6 %   88,544     12.1 %   (10,751 )   (12.1 %)
Interest expense, net   5,552     0.8 %   6,400     0.9 %   848     13.3 %
Other income (expense)   1,062     0.2 %   9,653     1.3 %   (8,591 )   (89.0 %)
Income before income taxes   73,303     11.0 %   91,797     12.6 %   (18,494 )   (20.1 %)
Income taxes   14,797     2.2 %   19,340     2.6 %   4,543     23.5 %
Effective tax rate   20.2 %       21.1 %       0.9 %    
Net income including non-controlling interests   58,506     8.7 %   72,457     9.9 %   (13,951 )   (19.3 %)
Non-controlling interests in subsidiaries’ income (loss)   27         (4 )       31     775.0 %
Net income   $ 58,479     8.7 %   $ 72,461     9.9 %   $ (13,982 )   (19.3 %)
                         
Basic earnings per share   $ 0.98         $ 1.18         $ (0.20 )   (16.9 %)
Diluted earnings per share   $ 0.97         $ 1.17         $ (0.20 )   (17.1 %)
Weighted average shares (basic)   59,426         61,380              
Weighted average shares (diluted)   60,018         62,061              
    Nine Months Ended September 30,   Fav (Unfav) to
Prior Year
    2020   % of Sales   2019   % of Sales   $   %
Net sales   $ 1,961,606     100.0 %   $ 2,266,965     100.0 %   $ (305,359 )   (13.5 %)
Cost of goods sold   1,319,519     67.3 %   1,500,312     66.2 %   180,793     12.1 %
Gross profit   642,087     32.7 %   766,653     33.8 %   (124,566 )   (16.2 %)
Selling, general & administrative expenses   407,440     20.8 %   472,108     20.8 %   64,668     13.7 %
Rationalization and asset impairment charges   36,016     1.8 %   6,337     0.3 %   (29,679 )   (468.3 %)
Operating income   198,631     10.1 %   288,208     12.7 %   (89,577 )   (31.1 %)
Interest expense, net   16,891     0.9 %   17,621     0.8 %   730     4.1 %
Other income (expense)   1,168     0.1 %   17,612     0.8 %   (16,444 )   (93.4 %)
Income before income taxes   182,908     9.3 %   288,199     12.7 %   (105,291 )   (36.5 %)
Income taxes   41,834     2.1 %   58,832     2.6 %   16,998     28.9 %
Effective tax rate   22.9 %       20.4 %       (2.5 %)    
Net income including non-controlling interests   141,074     7.2 %   229,367     10.1 %   (88,293 )   (38.5 %)
Non-controlling interests in subsidiaries’ income (loss)   37         (26 )       63     242.3 %
Net income   $ 141,037     7.2 %   $ 229,393     10.1 %   $ (88,356 )   (38.5 %)
                         
Basic earnings per share   $ 2.36         $ 3.68         $ (1.32 )   (35.9 %)
Diluted earnings per share   $ 2.34         $ 3.64         $ (1.30 )   (35.7 %)
Weighted average shares (basic)   59,655         62,282              
Weighted average shares (diluted)   60,202         62,972              

 

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

Balance Sheet Highlights

Selected Consolidated Balance Sheet Data   September 30, 2020   December 31, 2019
Cash and cash equivalents   $ 152,479     $ 199,563  
Total current assets   1,026,211     1,075,581  
Property, plant and equipment, net   504,520     529,344  
Total assets   2,217,499     2,371,213  
Total current liabilities   533,161     563,135  
Short-term debt (1)   1,147     34,969  
Long-term debt, less current portion   715,687     712,302  
Total equity   710,744     819,077  
         
Operating Working Capital   September 30, 2020   December 31, 2019
Accounts receivable, net   $ 373,044     $ 374,649  
Inventories   396,214     393,748  
Trade accounts payable   226,494     273,002  
Operating working capital   $ 542,764     $ 495,395  
         
Average operating working capital to Net sales (2)   20.3 %   16.8 %
         
Invested Capital   September 30, 2020   December 31, 2019
Short-term debt (1)   $ 1,147     $ 34,969  
Long-term debt, less current portion   715,687     712,302  
Total debt   716,834     747,271  
Total equity   710,744     819,077  
Invested capital   $ 1,427,578     $ 1,566,348  
         
Total debt / invested capital   50.2 %   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 September 30,   Nine Months Ended September 30,
    2020   2019   2020   2019
Operating income as reported   $ 77,793     $ 88,544     $ 198,631     $ 288,208  
Special items (pre-tax):                
Rationalization and asset impairment charges (2)   6,257     1,495     36,016     6,337  
Acquisition transaction and integration costs (3)               1,804  
Amortization of step up in value of acquired inventories (4)       1,609     806     3,008  
Gains on asset disposals (5)               (3,045 )
Adjusted operating income (1)   $ 84,050     $ 91,648     $ 235,453     $ 296,312  
As a percent of total sales   12.6 %   12.5 %   12.0 %   13.1 %
                 
Net income as reported   $ 58,479     $ 72,461     $ 141,037     $ 229,393  
Special items:                
Rationalization and asset impairment charges (2)   6,257     1,495     36,016     6,337  
Acquisition transaction and integration costs (3)               1,804  
Pension settlement charges (5)   3,188         6,522      
Amortization of step up in value of acquired inventories (4)       1,609     806     3,008  
Gains on asset disposals (6)               (3,554 )
Gain on change in control (7)       (7,601         (7,601 )
Tax effect of Special items (8)   (1,911 )   (255     (9,463 )   (5,819 )
Adjusted net income (1)   66,013     67,709     174,918     223,568  
Non-controlling interests in subsidiaries’ income (loss)   27     (4 )   37     (26 )
Interest expense, net   5,552     6,400     16,891     17,621  
Income taxes as reported   14,797     19,340     41,834     58,832  
Tax effect of Special items (8)   1,911     255     9,463     5,819  
Adjusted EBIT (1)   $ 88,300     $ 93,700     $ 243,143     $ 305,814  
                 
Effective tax rate as reported   20.2 %   21.1 %   22.9 %   20.4 %
Net special item tax impact       1.3 %   (0.2 %)   2.0 %
Adjusted effective tax rate (1)   20.2 %   22.4 %   22.7 %   22.4 %
                 
Diluted earnings per share as reported   $ 0.97     $ 1.17     $ 2.34     $ 3.64  
Special items per share   0.13     (0.08 )   0.57     (0.09 )
Adjusted diluted earnings per share (1)   $ 1.10     $ 1.09     $ 2.91     $ 3.55  
                 
Weighted average shares (diluted)   60,018     62,061     60,202     62,972  
  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. 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 nine months ended September 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 September 30,
Return on Invested Capital   2020   2019
Net income as reported   $ 204,753     $ 316,232  
Rationalization and asset impairment charges   44,867     7,269  
Acquisition transaction and integration costs       2,637  
Pension settlement charges   6,522     1,696  
Amortization of step up in value of acquired inventories   806     3,008  
Gains on asset disposals       (3,554 )
Gain on change in control       (7,601 )
Tax effect of Special items (2)   (11,030 )   (12,583 )
Adjusted net income (1)   $ 245,918     $ 307,104  
Plus: Interest expense, net of tax of $6,177 and $6,410 in 2020 and 2019, respectively   18,564     19,265  
Less: Interest income, net of tax of $513 and $926 in 2020 and 2019, respectively   1,543     2,785  
Adjusted net income before tax-effected interest   $ 262,939     $ 323,584  
         
Invested Capital   September 30, 2020   September 30, 2019
Short-term debt   $ 1,147     $ 13,293  
Long-term debt, less current portion   715,687     713,884  
Total debt   716,834     727,177  
Total equity   710,744     813,808  
Invested capital   $ 1,427,578     $ 1,540,985  
         
Return on invested capital (1)   18.4 %   21.0 %
         
    Twelve Months Ended September 30,
Total Debt / EBITDA   2020   2019
Net income as reported   $ 204,753     $ 316,232  
Income taxes   58,412     66,508  
Interest expense, net   22,685     21,964  
Depreciation and amortization   81,653     78,800  
EBITDA (1)   $ 367,503     $ 483,504  
         
    September 30, 2020   September 30, 2019
Total debt   $ 716,834     $ 727,177  
         
Total debt / EBITDA   1.95     1.50  
  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 September 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 September 30,
    2020   2019
OPERATING ACTIVITIES:        
Net income   $ 58,479     $ 72,461  
Non-controlling interests in subsidiaries’ income (loss)   27     (4 )
Net income including non-controlling interests   58,506     72,457  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment charges   22      
Depreciation and amortization   19,488     21,148  
Equity earnings in affiliates, net   (80 )   (49 )
Gain on change in control       (7,601 )
Other non-cash items, net   2,518     3,566  
Changes in operating assets and liabilities, net of effects from acquisitions:        
(Increase) decrease in accounts receivable   (30,517 )   45,374  
Decrease (increase) in inventories   26,948     (8,709 )
Decrease in trade accounts payable   (2,218 )   (18,733 )
Net change in other current assets and liabilities   14,232     20,393  
Net change in other long-term assets and liabilities   649     835  
NET CASH PROVIDED BY OPERATING ACTIVITIES   89,548     128,681  
         
INVESTING ACTIVITIES:        
Capital expenditures   (12,105 )   (17,038 )
Acquisition of businesses, net of cash acquired       (28,892 )
Proceeds from sale of property, plant and equipment   739     779  
NET CASH USED BY INVESTING ACTIVITIES   (11,366 )   (45,151 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   (48,230 )   (27,544 )
Proceeds from exercise of stock options   5,959     5,250  
Purchase of shares for treasury   (223 )   (61,028 )
Cash dividends paid to shareholders   (29,131 )   (29,061 )
NET CASH USED BY FINANCING ACTIVITIES   (71,625 )   (112,383 )
         
Effect of exchange rate changes on Cash and cash equivalents   2,867     (4,396 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   9,424     (33,249 )
Cash and cash equivalents at beginning of period   143,055     189,861  
Cash and cash equivalents at end of period   $ 152,479     $ 156,612  
         
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

    Nine Months Ended September 30,
    2020   2019
OPERATING ACTIVITIES:        
Net income   $ 141,037     $ 229,393  
Non-controlling interests in subsidiaries’ income (loss)   37     (26 )
Net income including non-controlling interests   141,074     229,367  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment net charges   21,927     1,069  
Depreciation and amortization   60,566     60,400  
Equity earnings in affiliates, net   (323 )   (1,266 )
Gain on change in control       (7,601 )
Other non-cash items, net   (2,770 )   9,285  
Changes in operating assets and liabilities, net of effects from acquisitions:        
(Increase) decrease in accounts receivable   (6,851 )   24,103  
Increase in inventories   (3,430 )   (36,476 )
Decrease in trade accounts payable   (42,333 )   (34,202 )
Net change in other current assets and liabilities   46,642     34,340  
Net change in other long-term assets and liabilities   1,059     1,647  
NET CASH PROVIDED BY OPERATING ACTIVITIES   215,561     280,666  
         
INVESTING ACTIVITIES:        
Capital expenditures   (37,116 )   (53,551 )
Acquisition of businesses, net of cash acquired       (136,735 )
Proceeds from sale of property, plant and equipment   6,957     9,491  
Other investing activities       2,000  
NET CASH USED BY INVESTING ACTIVITIES   (30,159 )   (178,795 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   (33,135 )   2,433  
Proceeds from exercise of stock options   7,961     6,210  
Purchase of shares for treasury   (113,198 )   (221,942 )
Cash dividends paid to shareholders   (88,945 )   (89,162 )
NET CASH USED BY FINANCING ACTIVITIES   (227,317 )   (302,461 )
         
Effect of exchange rate changes on Cash and cash equivalents   (5,169 )   (1,647 )
DECREASE IN CASH AND CASH EQUIVALENTS   (47,084 )   (202,237 )
Cash and cash equivalents at beginning of period   199,563     358,849  
Cash and cash equivalents at end of period   $ 152,479     $ 156,612  
         
Cash dividends paid per share   $ 1.47     $ 1.41  

 

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

    Americas Welding   International Welding   The Harris
Products Group
  Corporate /
Eliminations
  Consolidated
Three months ended September 30, 2020                
Net sales   $ 371,535     $ 196,937     $ 100,416     $     $ 668,888  
Inter-segment sales   29,368     4,898     1,898     (36,164 )    
Total   $ 400,903     $ 201,835     $ 102,314     $ (36,164 )   $ 668,888  
                     
Net income                   $ 58,479  
As a percent of total sales                   8.7 %
                     
EBIT (1)   $ 52,076     $ 11,031     $ 17,587     $ (1,839 )   $ 78,855  
As a percent of total sales   13.0 %   5.5 %   17.2 %       11.8 %
Special items charges (gains) (3)   7,044     2,401             9,445  
Adjusted EBIT (2)   $ 59,120     $ 13,432     $ 17,587     $ (1,839 )   $ 88,300  
As a percent of total sales   14.7 %   6.7 %   17.2 %       13.2 %
                     
Three months ended September 30, 2019                
Net sales   $ 443,521     $ 205,378     $ 81,884     $     $ 730,783  
Inter-segment sales   31,101     4,441     1,857     (37,399 )    
Total   $ 474,622     $ 209,819     $ 83,741     $ (37,399 )   $ 730,783  
                     
Net income                   $ 72,461  
As a percent of total sales                   9.9 %
                     
EBIT (1)   $ 74,110     $ 14,681     $ 11,038     $ (1,632 )   $ 98,197  
As a percent of total sales   15.6 %   7.0 %   13.2 %       13.4 %
Special items charges (gains) (4)       (4,497 )           (4,497 )
Adjusted EBIT (2)   $ 74,110     $ 10,184     $ 11,038     $ (1,632 )   $ 93,700  
As a percent of total sales   15.6 %   4.9 %   13.2 %       12.8 %
  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 $3,856 and $2,401 in Americas Welding and International Welding, respectively, and pension settlement charges of $3,188 in Americas Welding.
  4. Special items in 2019 reflect Rationalization and asset impairment charges of $1,495, amortization of step up in value of acquired inventories of $1,609 and a gain on change in control of $7,601 related to the acquisition of Askaynak in International Welding.

 

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

    Americas Welding   International Welding   The Harris
Products Group
  Corporate /
Eliminations
  Consolidated
Nine months ended September 30, 2020                
Net sales   $ 1,123,299     $ 572,027     $ 266,280     $     $ 1,961,606  
Inter-segment sales   81,644     13,667     5,376     (100,687)      
Total   $ 1,204,943     $ 585,694     $ 271,656     $ (100,687)     $ 1,961,606  
                     
Net income                   $ 141,037  
As a percent of total sales                   7.2 %
                     
EBIT (1)   $ 142,283     $ 20,626     $ 41,792     $ (4,902)     $ 199,799  
As a percent of total sales   11.8 %   3.5 %   15.4 %       10.2 %
Special items charges (gains) (3)   34,241     9,103             43,344  
Adjusted EBIT (2)   $ 176,524     $ 29,729     $ 41,792     $ (4,902)     $ 243,143  
As a percent of total sales   14.6 %   5.1 %   15.4 %       12.4 %
                     
Nine months ended September 30, 2019                
Net sales   $ 1,377,847     $ 635,770     $ 253,348     $     $ 2,266,965  
Inter-segment sales   95,300     12,838     5,837     (113,975)      
Total   $ 1,473,147     $ 648,608     $ 259,185     $ (113,975)     $ 2,266,965  
                     
Net income                   $ 229,393  
As a percent of total sales                   10.1 %
                     
EBIT (1)   $ 237,598     $ 43,624     $ 35,045     $ (10,447)     $ 305,820  
As a percent of total sales   16.1 %   6.7 %   13.5 %       13.5 %
Special items charges (gains) (4)   3,115     (4,925)         1,804     (6)  
Adjusted EBIT (2)   $ 240,713     $ 38,699     $ 35,045     $ (8,643)     $ 305,814  
As a percent of total sales   16.3 %   6.0 %   13.5 %       13.5 %
  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 $27,719 and $8,297 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 $6,522 in Americas Welding,
  4. Special items in 2019 reflect Rationalization and asset impairment charges of $1,716 in Americas Welding and $4,621 in International Welding, 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 and a gain on change in control of $7,601 related to the acquisition of Askaynak 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 September 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   $ 443,521     $ (69,028 )   $     $ (682 )   $ (2,276 )   $ 371,535  
International Welding   205,378     (10,964 )       70     2,453     196,937  
The Harris Products Group   81,884     10,461         9,472     (1,401 )   100,416  
Consolidated   $ 730,783      $ (69,531 )   $ —      $ 8,860      $ (1,224   $ 668,888   
                         
% Change                        
Americas Welding       (15.6 %)       (0.2 %)   (0.5 %)   (16.2 %)
International Welding       (5.3 %)           1.2 %   (4.1 %)
The Harris Products Group       12.8 %       11.6 %   (1.7 %)   22.6 %
Consolidated       (9.5  %)   —      1.2  %   (0.2  %)   (8.5  %)
                         
Nine Months Ended September 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   $ 1,377,847     $ (245,755 )   $ 6,190     $ (7,479 )   $ (7,504 )   $ 1,123,299  
International Welding   635,770     (85,923 )   33,521     (2,901 )   (8,440 )   572,027  
The Harris Products Group   253,348     6,370         10,073     (3,511 )   266,280  
Consolidated   $ 2,266,965      $ (325,308   $ 39,711      $ (307   $ (19,455   $ 1,961,606   
                         
% Change                        
Americas Welding   %   (17.8 %)   0.4 %   (0.5 %)   (0.5 %)   (18.5 %)
International Welding       (13.5 %)   5.3 %   (0.5 %)   (1.3 %)   (10.0 %)
The Harris Products Group       2.5 %       4.0 %   (1.4 %)   5.1 %
Consolidated       (14.3  %)   1.8  %   —      (0.9  %)   (13.5  %)
                         
 
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.