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Lincoln Electric Reports Third Quarter 2022 Results

Oct 27 2022
 
Third Quarter 2022 Highlights
  • Net sales increase 16% to record $935.2 million on 21% higher organic sales
  • Operating income margin of 15.2% and Adjusted operating income margin of 16.4%
  • EPS increases 253% to record $1.87; Adjusted EPS increases 31% to record $2.04
  • ROIC increases 930 basis points to 26.8%; Adjusted ROIC increases 590 basis points to 28.7%
  • Returned $59 million in the quarter and $255 million year-to-date to shareholders through dividends and share repurchases

CLEVELAND, Oct. 27, 2022 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported third quarter 2022 net income of $109.2 million, or diluted earnings per share (EPS) of $1.87 which includes special item after-tax net charges of $10.3 million or $0.17 EPS. This compares with prior year period net income of $31.8 million, or $0.53 EPS, which included special item after-tax charges of $62.0 million, or $1.03 EPS. Excluding these items, third quarter 2022 Adjusted net income was $119.6 million, or $2.04 Adjusted EPS. This compares with Adjusted net income of $93.8 million, or $1.56 Adjusted EPS, in the prior year period.

Third quarter 2022 sales increased 16.0% to $935.2 million from a 21.3% increase in organic sales and a 1.3% benefit from acquisitions, partially offset by 6.6% unfavorable foreign exchange. Operating income for the third quarter 2022 was $142.1 million, or 15.2% of sales. This compares with operating income of $115.6 million, or 14.3% of sales, in the prior year period. Excluding special items, Adjusted operating income was $153.2 million, or 16.4% of sales, as compared with $122.7 million, or 15.2% of sales, in the prior year period.

“We achieved record third quarter sales, profitability, earnings and returns with outperformance led by Americas Welding and automation, stated Christopher L. Mapes, Lincoln’s Chairman, President and Chief Executive Officer. “In the third quarter we returned to 2019 volume levels with considerably superior returns, which demonstrates the strong execution of our Higher Standard 2025 Strategy initiatives under challenging operating conditions.  We generated solid cash flows and cash conversion in the quarter, which further strengthens our balance sheet profile as we invest in growth and increase returns to shareholders through the cycle.” Mapes continued, “We are also excited about our recently announced definitive agreement to acquire Fori Automation, Inc., which would accelerate our automation growth strategy with a combined annual revenue run rate of over $850 million and adds complementary automation engineering capabilities and an expanded geographic footprint to further service customers’ capital investment needs.”     

Nine Months 2022 Summary

Net income for the nine months ended September 30, 2022 was $363.1 million, or $6.17 EPS. This compares with $202.0 million, or $3.36 EPS, in the comparable 2021 period. Reported EPS includes special item after-tax net charges of $9.4 million or $0.16 EPS, as compared with special item after-tax net charges of $75.1 million, or $1.25 EPS in the prior year period. Excluding these items, adjusted net income for the nine months ended September 30, 2022 increased 34.4% to $372.4 million, or $6.33 EPS, compared with $277.1 million, or $4.61 EPS, in the comparable 2021 period.

Sales increased 18.4% to $2.8 billion in the nine months ended September 30, 2022 from a 21.3% increase in organic sales and a 2.9% benefit from acquisitions, partially offset by 5.7% unfavorable foreign exchange. Operating income for the nine months ended September 30, 2022 was $470.8 million, or 16.6% of sales. This compares with operating income of $341.3 million, or 14.3% of sales, in the comparable 2021 period. Excluding special items, adjusted operating income was $484.4 million, or 17.1% of sales, as compared with $357.1 million, or 14.9% of sales, in the comparable 2021 period.

Dividend

The Company’s Board of Directors declared a 14.3% increase in the quarterly cash dividend, from $0.56 per share to $0.64 per share, or $2.56 per share on an annual basis. The declared quarterly cash dividend of $0.64 per share is payable January 14, 2023 to shareholders of record as of December 31, 2022.

Other Matters

On October 14, 2022, the Company entered into a definitive agreement to acquire Fori Automation, Inc. (the “contemplated acquisition”), a privately held, leading automation engineering firm specializing in the design and manufacture of complex, multi-armed automated welding systems, assembly systems, material handling solutions, large-scale, industrial guidance vehicles (AGVs) and end of line testing systems.  The definitive agreement provides for a cash purchase price of $427 million, subject to a customary working capital adjustment. The Company intends to fund the transaction with cash on hand and arranged credit. The contemplated acquisition is subject to regulatory approval and other customary closing conditions and is expected to close in the fourth quarter of 2022.

Webcast Information

A conference call to discuss third quarter 2022 financial results will be webcast live today, October 27, 2022, at 10:00 a.m., Eastern Time. Those interested in participating via webcast in listen-only mode can access the event here or on the Company's Investor Relations home page at https://ir.lincolnelectric.com. For participants who would like to participate via telephone, please register here to receive the dial-in number along with a unique PIN number that is required to access the call. A replay of the earnings call will be available via webcast on the Company's website.

About Lincoln Electric

Lincoln Electric is the world leader in the engineering, design, and manufacturing of advanced arc welding solutions, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment, and has a leading global position in brazing and soldering alloys. Lincoln is recognized as the Welding Expert™ for its leading materials science, software development, automation engineering, and application expertise, which advance customers’ fabrication capabilities to help them build a better world. Headquartered in Cleveland, Ohio, Lincoln has 56 manufacturing locations in 19 countries and a worldwide network of distributors and sales offices serving customers in over 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 (“Adjusted EPS”), Organic sales, Cash conversion, Adjusted net operating profit after taxes and Adjusted return on invested capital (“Adjusted ROIC”) 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 the impact of the Russia-Ukraine conflict, political unrest, acts of terror, natural disasters and pandemics, including the current coronavirus disease ("COVID-19") pandemic, 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, 2021 and on Form 10-Q for the quarter ended March 31, 2022.

 

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

Consolidated Statements of Income

                                   
                             Fav (Unfav) to  
    Three Months Ended September 30,    Prior Year  
    2022   % of Sales      2021        % of Sales   $   %  
Net sales   $ 935,240     100.0 % $ 806,454     100.0   % $ 128,786     16.0   %
Cost of goods sold     625,722     66.9 %   538,282     66.7   %   (87,440 )   (16.2 ) %
Gross profit     309,518     33.1 %   268,172     33.3   %   41,346     15.4   %
Selling, general & administrative expenses     159,045     17.0 %   149,118     18.5   %   (9,927 )   (6.7 ) %
Rationalization and asset impairment charges     8,364     0.9 %   3,484     0.4   %   (4,880 )   (140.1 ) %
Operating income     142,109     15.2 %   115,570     14.3   %   26,539     23.0   %
Interest expense, net     8,210     0.9 %   5,714     0.7   %   (2,496 )   (43.7 ) %
Other income (expense)     3,588     0.4 %   (71,441 )   (8.9 ) %   75,029     105.0   %
Income before income taxes     137,487     14.7 %   38,415     4.8   %   99,072     257.9   %
Income taxes     28,262     3.0 %   6,658     0.8   %   (21,604 )   (324.5 ) %
Effective tax rate     20.6 %         17.3   %       (3.3 ) %    
Net income   $ 109,225     11.7 % $ 31,757     3.9   % $ 77,468     243.9   %
                                   
Basic earnings per share   $ 1.89         $ 0.54         $ 1.35     250.0   %
Diluted earnings per share   $ 1.87         $ 0.53         $ 1.34     252.8   %
Weighted average shares (basic)     57,823           59,289                  
Weighted average shares (diluted)     58,526           60,055                  

 

                                   
                             Fav (Unfav) to  
    Nine Months Ended September 30,    Prior Year  
    2022   % of Sales      2021     % of Sales      $   %  
Net sales   $ 2,830,277     100.0 % $ 2,389,929     100.0   % $ 440,348     18.4   %
Cost of goods sold     1,857,501     65.6 %   1,593,981     66.7   %   (263,520 )   (16.5 ) %
Gross profit     972,776     34.4 %   795,948     33.3   %   176,828     22.2   %
Selling, general & administrative expenses     492,523     17.4 %   446,351     18.7   %   (46,172 )   (10.3 ) %
Rationalization and asset impairment charges     9,405     0.3 %   8,277     0.3   %   (1,128 )   (13.6 ) %
Operating income     470,848     16.6 %   341,320     14.3   %   129,528     37.9   %
Interest expense, net     20,867     0.7 %   16,736     0.7   %   (4,131 )   (24.7 ) %
Other income (expense)     7,088     0.3 %   (71,155 )   (3.0 ) %   78,243     110.0   %
Income before income taxes     457,069     16.1 %   253,429     10.6   %   203,640     80.4   %
Income taxes     93,991     3.3 %   51,259     2.1   %   (42,732 )   (83.4 ) %
Effective tax rate     20.6 %         20.2   %       (0.4 ) %    
Net income including non-controlling interests     363,078     12.8 %   202,170     8.5   %   160,908     79.6   %
Non-controlling interests in subsidiaries’ income (loss)             131           (131 )   (100.0 ) %
Net income   $ 363,078     12.8 % $ 202,039     8.5   % $ 161,039     79.7   %
                                   
Basic earnings per share   $ 6.24         $ 3.40         $ 2.84     83.5   %
Diluted earnings per share   $ 6.17         $ 3.36         $ 2.81     83.6   %
Weighted average shares (basic)     58,148           59,465                  
Weighted average shares (diluted)     58,815           60,168                  


 

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

Balance Sheet Highlights

               
Selected Consolidated Balance Sheet Data      September 30, 2022      December 31, 2021  
Cash and cash equivalents   $ 141,307   $ 192,958  
Accounts receivable, net     463,106     429,074  
Inventories     632,376     539,919  
Total current assets     1,395,398     1,289,593  
Property, plant and equipment, net     489,961     511,744  
Total assets     2,651,965     2,592,307  
Trade accounts payable     329,890     330,230  
Total current liabilities     820,328     755,905  
Short-term debt (1)     68,375     52,730  
Long-term debt, less current portion     711,250     717,089  
Total equity     924,228     863,909  
               
Operating Working Capital   September 30, 2022   December 31, 2021  
Average operating working capital to Net sales (2)     19.5 %   16.3 %
               
Invested Capital   September 30, 2022   December 31, 2021  
Short-term debt (1)   $ 68,375   $ 52,730  
Long-term debt, less current portion     711,250     717,089  
Total debt     779,625     769,819  
Total equity     924,228     863,909  
Invested capital   $ 1,703,853   $ 1,633,728  
               
Total debt / invested capital     45.8 %   47.1 %

(1) Includes current portion of long-term debt.

(2) Average operating working capital to Net sales is defined as the sum of Accounts receivable, Inventories and contract assets less Trade accounts payable and contract liabilities 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,   
    2022     2021       2022     2021    
Operating income as reported   $ 142,109     $ 115,570       $ 470,848     $ 341,320    
Special items (pre-tax):                            
Rationalization and asset impairment charges (2)     8,364       3,484         9,405       8,277    
Acquisition transaction costs (3)     3,068               3,068       1,923    
Amortization of step up in value of acquired inventories (4)     (353 )     3,690         1,106       5,531    
Adjusted operating income (1)   $ 153,188     $ 122,744       $ 484,427     $ 357,051    
As a percent of total sales     16.4   %   15.2   %     17.1   %   14.9   %
                             
Net income as reported   $ 109,225     $ 31,757       $ 363,078     $ 202,039    
Special items:                            
Rationalization and asset impairment charges (2)     8,364       3,484         9,405       8,277    
Acquisition transaction costs (3)     3,068               3,068       1,923    
Pension charges and other net gains (5)           73,562         (4,273 )     80,098    
Amortization of step up in value of acquired inventories (4)     (353 )     3,690         1,106       5,531    
Tax effect of Special items (6)     (731 )     (18,743 )       58       (20,737 )  
Adjusted net income (1)     119,573       93,750         372,442       277,131    
Non-controlling interests in subsidiaries’ income (loss)                         131    
Interest expense, net     8,210       5,714         20,867       16,736    
Income taxes as reported     28,262       6,658         93,991       51,259    
Tax effect of Special items (6)     731       18,743         (58 )     20,737    
Adjusted EBIT (1)   $ 156,776     $ 124,865       $ 487,242     $ 365,994    
                             
Effective tax rate as reported     20.6   %   17.3   %     20.6   %   20.2   %
Net special item tax impact     (1.1 ) %   4.0   %     (0.5 ) %   0.4   %
Adjusted effective tax rate (1)     19.5   %   21.3   %     20.1   %   20.6   %
                             
Diluted earnings per share as reported   $ 1.87     $ 0.53       $ 6.17     $ 3.36    
Special items per share     0.17       1.03         0.16       1.25    
Adjusted diluted earnings per share (1)   $ 2.04     $ 1.56       $ 6.33     $ 4.61    
                             
Weighted average shares (diluted)     58,526       60,055         58,815       60,168    

(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) 2022 charges are primarily related to non-cash asset impairment charges. 2021 charges are primarily related to severance, gains or losses on the disposal of assets.

(3) Related to the contemplated acquisition and are included in Selling, general & administrative expenses.

(4) Related to acquisitions and are included in Cost of goods sold.

(5) Pension settlement charges due to lump sum pension payments and other net gains primarily due to the final settlement associated with the termination of a pension plan and are included in Other income (expense).

(6) Includes the net tax impact of Special items recorded during the respective periods. 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      2022        2021    
Net income as reported   $ 437,505     $ 267,117    
Plus: Interest expense (after-tax)     20,732       17,520    
Less: Interest income (after-tax)     1,019       1,193    
Net operating profit after taxes   $ 457,218     $ 283,444    
Special Items:              
Rationalization and asset impairment charges     10,955       17,729    
Acquisition transaction costs     3,068       1,923    
Pension settlement charges     42,131       81,695    
Amortization of step up in value of acquired inventories     1,379       5,531    
Tax effect of Special items (2)     (26,393 )     (21,868 )  
Adjusted net operating profit after taxes (1)   $ 488,358     $ 368,454    
               
Invested Capital   September 30, 2022   September 30, 2021  
Short-term debt   $ 68,375     $ 41,404    
Long-term debt, less current portion     711,250       717,787    
Total debt     779,625       759,191    
Total equity     924,228       857,893    
Invested capital   $ 1,703,853     $ 1,617,084    
               
Return on invested capital as reported     26.8   %   17.5   %
Adjusted return on invested capital (1)     28.7   %   22.8   %

(1) Adjusted net operating profit after taxes and Adjusted ROIC 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. 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, 
  2022     2021  
OPERATING ACTIVITIES:          
Net income $ 109,225     $ 31,757  
Non-controlling interests in subsidiaries’ income (loss)          
Net income including non-controlling interests   109,225       31,757  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:          
Rationalization and asset impairment net charges   7,889       212  
Depreciation and amortization   19,250       22,050  
Equity earnings in affiliates, net   434       (108 )
Pension settlement charges         73,562  
Other non-cash items, net   (1,409 )     389  
Changes in operating assets and liabilities, net of effects from acquisitions:          
Decrease in accounts receivable   39,390       16,359  
Increase in inventories   (22,984 )     (45,670 )
Decrease in trade accounts payable   (24,680 )     (8,294 )
Net change in other current assets and liabilities   11,296       31,838  
Net change in other long-term assets and liabilities   (8,128 )     (12,204 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   130,283       109,891  
           
INVESTING ACTIVITIES:          
Capital expenditures   (17,699 )     (18,672 )
Acquisition of businesses, net of cash acquired   (199 )     (74,882 )
Proceeds from sale of property, plant and equipment   646       1,290  
NET CASH USED BY INVESTING ACTIVITIES   (17,252 )     (92,264 )
           
FINANCING ACTIVITIES:          
Net change in borrowings   (56,830 )     31,132  
Proceeds from exercise of stock options   751       2,249  
Purchase of shares for treasury   (26,518 )     (50,160 )
Cash dividends paid to shareholders   (32,463 )     (30,338 )
NET CASH USED BY FINANCING ACTIVITIES   (115,060 )     (47,117 )
           
Effect of exchange rate changes on Cash and cash equivalents   (9,460 )     (835 )
DECREASE IN CASH AND CASH EQUIVALENTS   (11,489 )     (30,325 )
Cash and cash equivalents at beginning of period   152,796       190,884  
Cash and cash equivalents at end of period $ 141,307     $ 160,559  
           
Cash dividends paid per share $ 0.56     $ 0.51  

 

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

Condensed Consolidated Statements of Cash Flows

             
       Nine Months Ended September 30, 
    2022     2021  
OPERATING ACTIVITIES:            
Net income   $ 363,078     $ 202,039  
Non-controlling interests in subsidiaries’ income (loss)           131  
Net income including non-controlling interests     363,078       202,170  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:            
Rationalization and asset impairment net charges (gains)     7,776       (1,162 )
Depreciation and amortization     59,009       60,558  
Equity earnings in affiliates, net     254       (399 )
Pension settlement charges           80,098  
Other non-cash items, net     2,413       (10,967 )
Changes in operating assets and liabilities, net of effects from acquisitions:            
Increase in accounts receivable     (64,569 )     (71,212 )
Increase in inventories     (135,578 )     (128,856 )
Increase in trade accounts payable     19,572       54,981  
Net change in other current assets and liabilities     32,470       78,959  
Net change in other long-term assets and liabilities     (12,841 )     (9,045 )
NET CASH PROVIDED BY OPERATING ACTIVITIES     271,584       255,125  
             
INVESTING ACTIVITIES:            
Capital expenditures     (52,301 )     (46,440 )
Acquisition of businesses, net of cash acquired     (22,294 )     (158,605 )
Proceeds from sale of property, plant and equipment     2,338       3,847  
Other investing activities           6,500  
NET CASH USED BY INVESTING ACTIVITIES     (72,257 )     (194,698 )
             
FINANCING ACTIVITIES:            
Net change in borrowings     14,999       32,295  
Proceeds from exercise of stock options     2,168       7,921  
Purchase of shares for treasury     (156,216 )     (103,848 )
Cash dividends paid to shareholders     (98,377 )     (91,717 )
Other financing activities           (763 )
NET CASH USED BY FINANCING ACTIVITIES     (237,426 )     (156,112 )
             
Effect of exchange rate changes on Cash and cash equivalents     (13,552 )     (1,035 )
DECREASE IN CASH AND CASH EQUIVALENTS     (51,651 )     (96,720 )
Cash and cash equivalents at beginning of period     192,958       257,279  
Cash and cash equivalents at end of period   $ 141,307     $ 160,559  
             
Cash dividends paid per share   $ 1.68     $ 1.53  


 

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

                                 
       Americas      International       The Harris      Corporate /           
    Welding   Welding   Products Group   Eliminations   Consolidated  
Three months ended September 30, 2022                                
Net sales   $ 585,628     $ 216,497   $ 133,115   $     $ 935,240  
Inter-segment sales     35,353       9,994     2,642     (47,989 )      
Total sales   $ 620,981     $ 226,491   $ 135,757   $ (47,989 )   $ 935,240  
                                 
Net income                           $ 109,225  
As a percent of total sales                             11.7 %
                                 
EBIT (1)   $ 119,157     $ 16,861   $ 14,432   $ (4,753 )   $ 145,697  
As a percent of total sales     19.2   %   7.4 %   10.6 %         15.6 %
Special items charges (gains) (3)     (353 )     8,364         3,068       11,079  
Adjusted EBIT (2)   $ 118,804     $ 25,225   $ 14,432   $ (1,685 )   $ 156,776  
As a percent of total sales     19.1   %   11.1 %   10.6 %         16.8 %
                                 
Three months ended September 30, 2021                                
Net sales   $ 461,508     $ 227,165   $ 117,781   $     $ 806,454  
Inter-segment sales     37,480       7,078     1,945     (46,503 )      
Total sales   $ 498,988     $ 234,243   $ 119,726   $ (46,503 )   $ 806,454  
                                 
Net income                           $ 31,757  
As a percent of total sales                             3.9 %
                                 
EBIT (1)   $ 10,983     $ 22,417   $ 15,433   $ (4,704 )   $ 44,129  
As a percent of total sales     2.2   %   9.6 %   12.9 %         5.5 %
Special items charges (gains) (4)     73,574       6,615     547           80,736  
Adjusted EBIT (2)   $ 84,557     $ 29,032   $ 15,980   $ (4,704 )   $ 124,865  
As a percent of total sales     16.9   %   12.4 %   13.3 %         15.5 %

(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 2022 primarily reflect an adjustment to the amortization of step up in value of acquired inventories of $353 in Americas Welding related to an acquisition, Rationalization and asset impairment charges of $8,364 in International Welding and acquisition transaction costs of $3,068 in Corporate/Eliminations related to the contemplated acquisition.

(4) Special items in 2021 reflect Rationalization and asset impairment charges of $3,484 primarily in International Welding, pension settlement charges of $73,562 in Americas Welding and amortization of step up in value of acquired inventories of $3,143 and $547 in International Welding and The Harris Products Group, respectively, related to acquisitions.

 

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

                                 
       Americas      International      The Harris      Corporate /           
    Welding   Welding   Products Group   Eliminations   Consolidated  
Nine months ended September 30, 2022                                
Net sales   $ 1,715,342     $ 711,167   $ 403,768   $     $ 2,830,277  
Inter-segment sales     92,540       25,749     8,570     (126,859 )      
Total sales   $ 1,807,882     $ 736,916   $ 412,338   $ (126,859 )   $ 2,830,277  
                                 
Net income                           $ 363,078  
As a percent of total sales                             12.8 %
                                 
EBIT (1)   $ 352,066     $ 87,456   $ 51,952   $ (13,538 )   $ 477,936  
As a percent of total sales     19.5   %   11.9 %   12.6 %         16.9 %
Special items charges (gains) (3)     (3,627 )     9,865         3,068       9,306  
Adjusted EBIT (2)   $ 348,439     $ 97,321   $ 51,952   $ (10,470 )   $ 487,242  
As a percent of total sales     19.3   %   13.2 %   12.6 %         17.2 %
                                 
Nine months ended September 30, 2021                                
Net sales   $ 1,344,218     $ 702,596   $ 343,115   $     $ 2,389,929  
Inter-segment sales     109,993       18,260     6,376     (134,629 )      
Total sales   $ 1,454,211     $ 720,856   $ 349,491   $ (134,629 )   $ 2,389,929  
                                 
Net income                           $ 202,039  
As a percent of total sales                             8.5 %
                                 
EBIT (1)   $ 165,644     $ 64,150   $ 52,342   $ (11,971 )   $ 270,165  
As a percent of total sales     11.4   %   8.9 %   15.0 %         11.3 %
Special items charges (gains) (4)     79,664       13,695     547     1,923       95,829  
Adjusted EBIT (2)   $ 245,308     $ 77,845   $ 52,889   $ (10,048 )   $ 365,994  
As a percent of total sales     16.9   %   10.8 %   15.1 %         15.3 %

(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 2022 primarily reflect amortization of step up in value of acquired inventories of $1,106 in Americas Welding related to an acquisition, acquisition transaction costs of $3,068 in Corporate/Eliminations related to the contemplated acquisition and a $3,735 net gain related to the final settlement associated with the termination of a pension plan in Americas Welding. Special items in 2022 also include Rationalization and asset impairment charges of $10,403 in International Welding and net gains of $998 in Americas Welding.

(4) Special items in 2021 reflect pension settlement charges of $79,652 and $446 in Americas Welding and International Welding, respectively, Rationalization and asset impairment charges of $8,277 primarily in International Welding, amortization of step up in value of acquired inventories of $4,984 and $547 in International Welding and The Harris Products Group, respectively, and acquisition transaction costs of $1,923 in Corporate/Eliminations related to acquisitions.

 

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                     Foreign   Net Sales  
  2021   Volume   Acquisitions   Price   Exchange   2022    
Operating Segments                                    
Americas Welding $ 461,508   $ 52,521   $ 4,724   $ 69,888     $ (3,013 )   $ 585,628    
International Welding   227,165     5,538         31,430       (47,636 )     216,497    
The Harris Products Group   117,781     13,089     5,552     (579 )     (2,728 )     133,115    
Consolidated $ 806,454   $ 71,148   $ 10,276   $ 100,739     $ (53,377 )   $ 935,240    
                                     
% Change                                    
Americas Welding         11.4 %   1.0 %   15.1   %   (0.7 ) %   26.9   %
International Welding         2.4 %       13.8   %   (21.0 ) %   (4.7 ) %
The Harris Products Group         11.1 %   4.7 %   (0.5 ) %   (2.3 ) %   13.0   %
Consolidated         8.8 %   1.3 %   12.5   %   (6.6 ) %   16.0   %

Nine Months Ended September 30th Change in Net Sales by Segment

                                       
             Change in Net Sales due to:        
    Net Sales                     Foreign   Net Sales  
    2021   Volume   Acquisitions   Price   Exchange   2022  
Operating Segments                                      
Americas Welding   $ 1,344,218   $ 119,809     $ 11,906   $ 243,960   $ (4,551 )   $ 1,715,342  
International Welding     702,596     (12,348 )     17,632     130,433     (127,146 )     711,167  
The Harris Products Group     343,115     15,657       39,411     10,964     (5,379 )     403,768  
Consolidated   $ 2,389,929   $ 123,118     $ 68,949   $ 385,357   $ (137,076 )   $ 2,830,277  
                                       
% Change                                      
Americas Welding           8.9   %   0.9 %   18.1 %   (0.3 ) %   27.6 %
International Welding           (1.8 ) %   2.5 %   18.6 %   (18.1 ) %   1.2 %
The Harris Products Group           4.6   %   11.5 %   3.2 %   (1.6 ) %   17.7 %
Consolidated           5.2   %   2.9 %   16.1 %   (5.7 ) %   18.4 %

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