Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): February 14, 2019
 
LINCOLN ELECTRIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
0-1402
(Commission File Number)
 
Ohio
 
34-1860551
(State or other jurisdiction of
incorporation)
 
(I.R.S. Employer Identification No.)
 
22801 St. Clair Avenue, Cleveland, Ohio 44117
(Address of principal executive offices, with zip code)
 
(216) 481-8100
(Registrant’s telephone number, including area code)
 
Not applicable
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 






Item 2.02
 
Results of Operations and Financial Condition.
 
 
On February 14, 2019, Lincoln Electric Holdings, Inc. (the “Company”) issued a press release reporting its financial results for the quarter ended December 31, 2018.  A copy of the Company’s press release issued on February 14, 2019 is attached hereto as Exhibit 99.1 and incorporated herein by reference.  The press release is also available through the Company’s website at www.lincolnelectric.com.  The information in this Current Report on Form 8-K, including the Exhibit, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
 
 
 
 
Item 9.01
 
Financial Statements and Exhibits.
 
 
 
 
 
(d) Exhibits
 
 
 
 
 
99.1  The Company’s press release dated February 14, 2019.






SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
LINCOLN ELECTRIC HOLDINGS, INC.
 
 
 
 
 
/s/ Vincent K. Petrella
 
 
Vincent K. Petrella
 
 
Executive Vice President, Chief Financial Officer and Treasurer
 
 
(principal financial officer)
 
 
February 14, 2019

















































LINCOLN ELECTRIC HOLDINGS, INC.
 
INDEX TO EXHIBITS
 
 
 
 
Exhibit No.
 
Exhibit
 
 
 
 
The Company’s press release dated February 14, 2019.
 
 
 




Exhibit
Lincoln Electric Reports Fourth Quarter and Full Year 2018 Financial Results


Exhibit 99.1
 
Investor Relations: Amanda Butler (216) 383-2534
Amanda_Butler@lincolnelectric.com

LINCOLN ELECTRIC REPORTS FOURTH QUARTER AND FULL YEAR 2018 RESULTS
Fourth Quarter and Full Year 2018 Highlights
§    Q4 EPS increases 275.0% to $1.35, Adjusted EPS increases 27.7% to $1.29
§    Strong cash flow generation
§    ROIC increases 450 basis points to 20.7%
§    $304 million returned to shareholders in 2018 through dividends and share repurchases
 
 
CLEVELAND, Thursday, February 14, 2019 - Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported fourth quarter 2018 net income of $86.8 million, or diluted earnings per share (EPS) of $1.35, which includes special item after-tax income of $3.3 million, or $0.06 EPS. This compares with prior year net income of $24.2 million, or $0.36 EPS, which included special item after-tax charges of $43.3 million, or $0.65 EPS. Excluding these items, fourth quarter 2018 adjusted net income increased 23.7% to $83.5 million, or $1.29 EPS, as compared with $67.5 million, or $1.01 EPS in the prior year period. The effective tax rate for the fourth quarter 2018 was 8.1% due to special items and discrete items. Excluding special items, the adjusted effective tax rate was 14.7%, which compares to 25.8% in the comparable 2017 period.

Fourth quarter 2018 sales decreased 0.4% to $743.8 million with a 1.6% increase in organic sales. Operating income for the fourth quarter 2018 was $94.9 million, or 12.8% of sales. This compares with operating income of $76.3 million, or 10.2% of sales, in the comparable 2017 period. On an adjusted basis, operating income increased 6.6% to $96.7 million and 90 basis points to 13.0% of sales, as compared with $90.7 million, or 12.1% of sales, in the prior year period.

“We achieved good profit improvement and solid cash flow generation in the fourth quarter, as we continued to successfully manage price/cost while investing in growth,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “We capitalized on strong industrial growth in 2018, yielding record sales and earnings, and I remain confident in the long-term, sustainable value we are creating through our new technologies and solutions. We are well positioned to drive margin growth and higher returns for our shareholders in 2019 as we continue to execute on our strategic initiatives.”

Twelve Months 2018 Summary

Net income for the twelve months ended December 31, 2018 was $287.1 million, or $4.37 EPS, which includes special item after-tax net charges of $29.6 million or $0.45 EPS. This compares with $247.5 million, or $3.71 EPS, in the comparable 2017 period. The prior year included special item after-tax net charges of $5.2 million, or $0.08 EPS. Excluding these items, adjusted net income for the twelve months ended December 31, 2018 increased 25.3% to $316.6 million, or $4.82 EPS, compared with $252.7 million, or $3.79 EPS, in the comparable 2017 period. The effective tax rate for the twelve months ended December 31, 2018 was 22.2% due to special items. Excluding special items, the adjusted effective tax rate was 21.9%, which compares to 28.0% in the comparable 2017 period.

Sales increased 15.4% to $3.0 billion in the twelve months ended December 31, 2018 from a 9.1% benefit from acquisitions and 6.7% higher organic sales. Operating income for the twelve months ended December 31, 2018 was $375.5 million, or 12.4% of sales. This compares with operating income of $376.9 million, or 14.4% of sales, in the comparable 2017 period. On an adjusted basis, 2018 operating income increased 14.7% to $405.3 million, or 13.4% of sales, as compared with $353.5 million, or 13.5% of sales, in the comparable 2017 period.








Lincoln Electric Reports Fourth Quarter and Full Year 2018 Financial Results


Webcast Information
 
A conference call to discuss fourth quarter 2018 financial results will be webcast live today, February 14, 2019, at 10:00 a.m., Eastern Time.  This webcast is accessible at http://ir.lincolnelectric.com. Listeners should go to the web site prior to the call to register, download and install any necessary audio software. A replay of the webcast will be available on the Company's web site.

Investors who are unable to access the webcast may listen to the conference call live by telephone by dialing (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 5292068. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

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

About Lincoln Electric

Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market.  Headquartered in Cleveland, Ohio, Lincoln has 60 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries.  For more information about Lincoln Electric and its products and services, visit the Company’s website at http://www.lincolnelectric.com.

Non-GAAP Information

Adjusted operating income, Adjusted EBIT, Adjusted net income, Adjusted effective tax rate, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly. Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.

Forward-Looking Statements

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




Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Income
 
 
Three Months Ended December 31,
 
Fav (Unfav) to
Prior Year
 
 
2018
 
% of Sales
 
2017
 
% of Sales
 
$
 
%
Net sales
 
$
743,827

 
100.0
%
 
$
747,185

 
100.0
%
 
$
(3,358
)
 
(0.4
%)
Cost of goods sold
 
493,528

 
66.3
%
 
508,933

 
68.1
%
 
15,405

 
3.0
%
Gross profit
 
250,299

 
33.7
%
 
238,252

 
31.9
%
 
12,047

 
5.1
%
Selling, general & administrative expenses
 
154,437

 
20.8
%
 
153,405

 
20.5
%
 
(1,032
)
 
(0.7
%)
Rationalization and asset impairment charges
 
932

 
0.1
%
 
6,590

 
0.9
%
 
5,658

 
85.9
%
Bargain purchase adjustment (gain)
 

 

 
1,935

 
0.3
%
 
1,935

 
100.0
%
Operating income
 
94,930

 
12.8
%
 
76,322

 
10.2
%
 
18,608

 
24.4
%
Interest expense, net
 
4,343

 
0.6
%
 
4,448

 
0.6
%
 
105

 
2.4
%
Other income (expense)
 
3,868

 
0.5
%
 
1,854

 
0.2
%
 
2,014

 
108.6
%
Income before income taxes
 
94,455

 
12.7
%
 
73,728

 
9.9
%
 
20,727

 
28.1
%
Income taxes
 
7,676

 
1.0
%
 
49,543

 
6.6
%
 
41,867

 
84.5
%
Effective tax rate
 
8.1
%
 
 

 
67.2
%
 
 

 
59.1
%
 
 
Net income including non-controlling interests
 
86,779

 
11.7
%
 
24,185

 
3.2
%
 
62,594

 
258.8
%
Non-controlling interests in subsidiaries’ earnings (loss)
 
(60
)
 

 
4

 

 
(64
)
 
(1,600.0
%)
Net income
 
$
86,839

 
11.7
%
 
$
24,181

 
3.2
%
 
$
62,658

 
259.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.36

 
 

 
$
0.37

 
 

 
$
0.99

 
267.6
%
Diluted earnings per share
 
$
1.35

 
 

 
$
0.36

 
 

 
$
0.99

 
275.0
%
Weighted average shares (basic)
 
63,808

 
 

 
65,649

 
 

 
 

 
 

Weighted average shares (diluted)
 
64,559

 
 

 
66,530

 
 

 
 

 
 

 
 
Twelve Months Ended December 31,
 
Fav (Unfav) to
Prior Year
 
 
2018
 
% of Sales
 
2017
 
% of Sales
 
$
 
%
Net sales
 
$
3,028,674

 
100.0
%
 
$
2,624,431

 
100.0
%
 
$
404,243

 
15.4
%
Cost of goods sold
 
2,000,153

 
66.0
%
 
1,749,324

 
66.7
%
 
(250,829
)
 
(14.3
%)
Gross profit
 
1,028,521

 
34.0
%
 
875,107

 
33.3
%
 
153,414

 
17.5
%
Selling, general & administrative expenses
 
627,697

 
20.7
%
 
541,225

 
20.6
%
 
(86,472
)
 
(16.0
%)
Rationalization and asset impairment charges
 
25,285

 
0.8
%
 
6,590

 
0.3
%
 
(18,695
)
 
(283.7
%)
Bargain purchase adjustment (gain)
 

 

 
(49,650
)
 
(1.9
%)
 
(49,650
)
 
(100.0
%)
Operating income
 
375,539

 
12.4
%
 
376,942

 
14.4
%
 
(1,403
)
 
(0.4
%)
Interest expense, net
 
17,565

 
0.6
%
 
19,432

 
0.7
%
 
1,867

 
9.6
%
Other income (expense)
 
10,686

 
0.4
%
 
8,726

 
0.3
%
 
1,960

 
22.5
%
Income before income taxes
 
368,660

 
12.2
%
 
366,236

 
14.0
%
 
2,424

 
0.7
%
Income taxes
 
81,667

 
2.7
%
 
118,761

 
4.5
%
 
37,094

 
31.2
%
Effective tax rate
 
22.2
%
 
 

 
32.4
%
 
 

 
10.2
%
 


Net income including non-controlling interests
 
286,993

 
9.5
%
 
247,475

 
9.4
%
 
39,518

 
16.0
%
Non-controlling interests in subsidiaries’ earnings (loss)
 
(73
)
 

 
(28
)
 

 
(45
)
 
(160.7
%)
Net income
 
$
287,066

 
9.5
%
 
$
247,503

 
9.4
%
 
$
39,563

 
16.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
4.42

 
 

 
$
3.76

 
 

 
$
0.66

 
17.6
%
Diluted earnings per share
 
$
4.37

 
 

 
$
3.71

 
 

 
$
0.66

 
17.8
%
Weighted average shares (basic)
 
64,886

 
 

 
65,739

 
 

 
 

 
 

Weighted average shares (diluted)
 
65,682

 
 

 
66,643

 
 

 
 

 
 





Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
 
Balance Sheet Highlights
 
Selected Consolidated Balance Sheet Data
 
December 31, 2018
 
December 31, 2017
Cash and cash equivalents
 
$
358,849

 
$
326,701

Marketable securities
 

 
179,125

Total current assets
 
1,237,799

 
1,373,608

Property, plant and equipment, net
 
478,801

 
477,031

Total assets
 
2,349,825

 
2,406,547

Total current liabilities
 
538,182

 
528,742

Short-term debt (1)
 
111

 
2,131

Long-term debt, less current portion
 
702,549

 
704,136

Total equity
 
887,592

 
932,453

 
 
 
 
 
Operating Working Capital
 
December 31, 2018
 
December 31, 2017
Accounts receivable, net
 
$
396,885

 
$
395,279

Inventories
 
361,829

 
348,667

Trade accounts payable
 
268,600

 
269,763

Operating working capital
 
$
490,114

 
$
474,183

 
 
 
 
 
Average operating working capital to Net sales (2)
 
16.5
%
 
15.9
%
 
 
 
 
 
Invested Capital
 
December 31, 2018
 
December 31, 2017
Short-term debt (1)
 
$
111

 
$
2,131

Long-term debt, less current portion
 
702,549

 
704,136

Total debt
 
702,660

 
706,267

Total equity
 
887,592

 
932,453

Invested capital
 
$
1,590,252

 
$
1,638,720

 
 
 
 
 
Total debt / invested capital
 
44.2
%
 
43.1
%

(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 December 31,
 
Twelve Months Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
Operating income as reported
 
$
94,930

 
$
76,322

 
$
375,539

 
$
376,942

Special items (pre-tax):
 
 
 
 
 
 
 
 
Rationalization and asset impairment charges (2)
 
932

 
6,590

 
25,285

 
6,590

Acquisition transaction and integration costs (3)
 
833

 
3,616

 
4,498

 
15,002

Amortization of step up in value of acquired inventories (3)
 

 
2,264

 

 
4,578

Bargain purchase adjustment (gain) (3)
 

 
1,935

 

 
(49,650
)
Adjusted operating income (1)
 
$
96,695

 
$
90,727

 
$
405,322

 
$
353,462

As a percent of total sales
 
13.0
%
 
12.1
 %
 
13.4
 %
 
13.5
 %
 
 
 
 
 
 
 
 
 
Net income as reported
 
$
86,839

 
$
24,181

 
$
287,066

 
$
247,503

Special items:
 
 

 
 

 
 
 
 
Rationalization and asset impairment charges (2)
 
932

 
6,590

 
25,285

 
6,590

Acquisition transaction and integration costs (3)
 
833

 
3,616

 
4,498

 
15,002

Pension settlement charges (4)
 
1,696

 
2,867

 
6,686

 
8,150

Amortization of step up in value of acquired inventories (3)
 

 
2,264

 

 
4,578

Bargain purchase adjustment (gain) (3)
 

 
1,935

 

 
(49,650
)
Tax effect of Special items (5)
 
(6,764
)
 
26,057

 
(6,896
)
 
20,536

Adjusted net income (1)
 
83,536

 
67,510

 
316,639

 
252,709

Non-controlling interests in subsidiaries’ earnings (loss)
 
(60
)
 
4

 
(73
)
 
(28
)
Interest expense, net
 
4,343

 
4,448

 
17,565

 
19,432

Income taxes as reported
 
7,676

 
49,543

 
81,667

 
118,761

Tax effect of Special items (5)
 
6,764

 
(26,057
)
 
6,896

 
(20,536
)
Adjusted EBIT (1)
 
$
102,259

 
$
95,448

 
$
422,694

 
$
370,338

 
 
 
 
 
 
 
 
 
Effective tax rate as reported
 
8.1
%
 
67.2
 %
 
22.2
 %
 
32.4
 %
Net special item tax impact
 
6.6
%
 
(41.4
)%
 
(0.3
)%
 
(4.4
)%
Adjusted effective tax rate (1)
 
14.7
%
 
25.8
 %
 
21.9
 %
 
28.0
 %
 
 
 
 
 
 
 
 
 
Diluted earnings per share as reported
 
$
1.35

 
$
0.36

 
$
4.37

 
$
3.71

Special items per share
 
(0.06
)
 
0.65

 
0.45

 
0.08

Adjusted diluted earnings per share (1)
 
$
1.29

 
$
1.01

 
$
4.82

 
$
3.79

 
 
 
 
 
 
 
 
 
Weighted average shares (diluted)
 
64,559

 
66,530

 
65,682

 
66,643

(1)
Adjusted operating income, Adjusted EBIT, Adjusted net income, Adjusted effective tax rate and Adjusted diluted earnings per share are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly. Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
(2)
Primarily related to severance, asset impairments and gains or losses on the disposal of assets.




(3)
Related to the acquisition of Air Liquide Welding.
(4)
Related to lump sum pension payments.
(5)
Includes the net tax impact of Special items recorded during the respective periods, including a credit of $4,424 and a net charge of $399 related to the U.S. Tax Act in the three and twelve months ended December 31, 2018, respectively, as well as a charge of $28,616 in the three and twelve month period ended December 31, 2017.
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 December 31,
Return on Invested Capital
 
2018
 
2017
Net income as reported
 
$
287,066

 
$
247,503

Rationalization and asset impairment charges
 
25,285

 
6,590

Pension settlement charges
 
6,686

 
8,150

Acquisition transaction and integration costs
 
4,498

 
15,002

Amortization of step up in value of acquired inventories
 

 
4,578

Bargain purchase adjustment (gain)
 

 
(49,650
)
Tax effect of Special items (3)
 
(6,896
)
 
20,536

Adjusted net income (1)
 
$
316,639

 
$
252,709

Plus: Interest expense, net of tax of $6,117 and $9,273 in 2018 and 2017, respectively
 
18,386

 
14,947

Less: Interest income, net of tax of $1,732 and $1,833 in 2018 and 2017, respectively
 
5,206

 
2,955

Adjusted net income before tax effected interest
 
$
329,819

 
$
264,701

 
 
 
 
 
Invested Capital
 
December 31, 2018
 
December 31, 2017
Short-term debt
 
111

 
2,131

Long-term debt, less current portion
 
702,549

 
704,136

Total debt
 
702,660

 
706,267

Total equity
 
887,592

 
932,453

Invested capital
 
$
1,590,252

 
$
1,638,720

 
 
 
 
 
Return on invested capital (1)(2)
 
20.7
%
 
16.2
%

(1)
Adjusted net income and Return on invested capital are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly. Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
(2)
Return on invested capital is defined as rolling 12 months of Adjusted net income before tax-effected interest income and expense divided by invested capital.
(3)
Includes the net tax impact of Special items recorded during the respective periods, including the net impact of the U.S. Tax Act of $399 and $28,616 in the twelve months ended December 31, 2018 and 2017, respectively.
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 December 31,
 
 
2018
 
2017
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
86,839

 
$
24,181

Non-controlling interests in subsidiaries’ (loss) earnings
 
(60
)
 
4

Net income including non-controlling interests
 
86,779

 
24,185

Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
 
 

 
 

Rationalization and asset impairment net (gains) charges
 
(4,570
)
 
1,441

Bargain purchase adjustment
 

 
1,935

Net impact of U.S. Tax Act
 
(4,424
)
 
28,616

Depreciation and amortization
 
18,400

 
17,658

Equity earnings in affiliates, net
 
(1,607
)
 
(121
)
Pension expense and settlement charges
 
354

 
1,701

Other non-cash items, net
 
4,497

 
5,393

Changes in operating assets and liabilities, net of effects from acquisitions:
 
 
 
 

Decrease in accounts receivable
 
21,431

 
7,489

Decrease in inventories
 
17,629

 
41,974

Increase in trade accounts payable
 
21,159

 
26,803

Net change in other current assets and liabilities
 
(58,649
)
 
(70,003
)
Net change in other long-term assets and liabilities
 
(1,624
)
 
2,420

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
99,375

 
89,491

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(22,500
)
 
(22,697
)
Acquisition of businesses, net of cash acquired
 
(108,383
)
 

Proceeds from sale of property, plant and equipment
 
6,170

 
307

Purchase of marketable securities
 

 
(60,031
)
Proceeds from marketable securities
 
99,281

 
60,190

Other investing activities
 
(2,000
)
 

NET CASH USED BY INVESTING ACTIVITIES
 
(27,432
)

(22,231
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
(296
)
 
109

Proceeds from exercise of stock options
 
242

 
2,294

Purchase of shares for treasury
 
(80,173
)
 
(20,152
)
Cash dividends paid to shareholders
 
(25,384
)
 
(23,369
)
Other financing activities
 

 
9

NET CASH USED BY FINANCING ACTIVITIES
 
(105,611
)

(41,109
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
(5,683
)
 
1,097

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 
(39,351
)
 
27,248

Cash and cash equivalents at beginning of period
 
398,200

 
299,453

Cash and cash equivalents at end of period
 
$
358,849

 
$
326,701

 
 
 
 
 
Cash dividends paid per share
 
$
0.39

 
$
0.35





Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Condensed Consolidated Statements of Cash Flows 
 
 
Twelve Months Ended December 31,
 
 
2018
 
2017
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
287,066

 
$
247,503

Non-controlling interests in subsidiaries’ loss
 
(73
)
 
(28
)
Net income including non-controlling interests
 
286,993

 
247,475

Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
 
 

 
 

Rationalization and asset impairment net (gains) charges
 
(5,978
)
 
1,441

Bargain purchase gain
 

 
(49,650
)
Net impact of U.S. Tax Act
 
399

 
28,616

Depreciation and amortization
 
72,346

 
68,115

Equity earnings in affiliates, net
 
(3,034
)
 
(337
)
Pension expense and settlement charges
 
3,068

 
2,517

Other non-cash items, net
 
9,042

 
18,158

Changes in operating assets and liabilities, net of effects from acquisitions:
 
 

 
 

Increase in accounts receivable
 
(4,061
)
 
(16,811
)
(Increase) decrease in inventories
 
(23,904
)
 
19,448

Increase in trade accounts payable
 
3,636

 
17,871

Net change in other current assets and liabilities
 
(12,333
)
 
(8,156
)
Net change in other long-term assets and liabilities
 
2,978

 
6,158

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
329,152

 
334,845

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(71,246
)
 
(61,656
)
Acquisition of businesses, net of cash acquired
 
(101,792
)
 
(72,468
)
Proceeds from sale of property, plant and equipment
 
16,755

 
2,301

Purchase of marketable securities
 
(268,335
)
 
(205,584
)
Proceeds from marketable securities
 
447,459

 
65,380

Other investing activities
 
(2,000
)
 

NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES
 
20,841

 
(272,027
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
(942
)
 
(496
)
Proceeds from exercise of stock options
 
4,690

 
16,627

Purchase of shares for treasury
 
(201,650
)
 
(43,164
)
Cash dividends paid to shareholders
 
(102,058
)
 
(92,452
)
Other financing activities
 
(2,170
)
 
(15,552
)
NET CASH USED BY FINANCING ACTIVITIES
 
(302,130
)
 
(135,037
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
(15,715
)
 
19,741

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
32,148

 
(52,478
)
Cash and cash equivalents at beginning of period
 
326,701

 
379,179

Cash and cash equivalents at end of period
 
$
358,849

 
$
326,701

 
 
 
 
 
Cash dividends paid per share
 
$
1.56

 
$
1.40





Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
 
 
Americas Welding
 
International Welding
 
The Harris
Products Group
 
Corporate /
Eliminations
 
Consolidated
Three months ended
   December 31, 2018
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
455,217

 
$
219,456

 
$
69,154

 
$

 
$
743,827

Inter-segment sales
 
29,265

 
4,907

 
1,522

 
(35,694
)
 

Total
 
$
484,482

 
$
224,363

 
$
70,676

 
$
(35,694
)
 
$
743,827

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
86,839

As a percent of total sales
 
 
 
 
 
 
 
 
 
11.7
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
84,198

 
$
11,371

 
$
8,506

 
$
(5,277
)
 
$
98,798

As a percent of total sales
 
17.4
%
 
5.1
%
 
12.0
%
 
 

 
13.3
%
Special items charges (gains) (3)
 
1,696

 
932

 

 
833

 
3,461

Adjusted EBIT (2)
 
$
85,894

 
$
12,303

 
$
8,506

 
$
(4,444
)
 
$
102,259

As a percent of total sales
 
17.7
%
 
5.5
%
 
12.0
%
 
 

 
13.7
%
 
 
 
 
 
 
 
 
 
 
 
Three months ended
   December 31, 2017
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
423,019

 
$
256,021

 
$
68,145

 
$

 
$
747,185

Inter-segment sales
 
22,002

 
3,646

 
1,427

 
(27,075
)
 

Total
 
$
445,021

 
$
259,667

 
$
69,572

 
$
(27,075
)
 
$
747,185

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
24,181

As a percent of total sales
 
 
 
 
 
 
 
 
 
3.2
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
70,590

 
$
4,246

 
$
8,951

 
$
(5,611
)
 
$
78,176

As a percent of total sales
 
15.9
%

1.6
%

12.9
%




10.5
%
Special items charges (gains) (4)
 
3,959

 
7,762

 

 
5,551

 
17,272

Adjusted EBIT (2)
 
$
74,549

 
$
12,008

 
$
8,951

 
$
(60
)
 
$
95,448

As a percent of total sales
 
16.8
%

4.6
%

12.9
%




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 2018 reflect pension settlement charges of $1,696 in Americas Welding, rationalization and asset impairment charges of $932 in International Welding and acquisition transaction and integration costs of $833 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
(4)
Special items in 2017 reflect pension settlement charges of $2,867 in Americas Welding, rationalization and asset impairment charges of $6,590 in Americas Welding and International Welding, amortization of step up in value of acquired inventories of $2,264 in International Welding and acquisition transaction and integration costs of $3,616 and an adjustment to the bargain purchase gain of $1,935 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.





Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
 
 
Americas Welding
 
International Welding
 
The Harris
Products Group
 
Corporate /
Eliminations
 
Consolidated
Twelve months ended
   December 31, 2018
 
 
 
 

 
 

 
 

 
 

Net sales
 
$
1,806,514


$
919,771

 
$
302,389


$

 
$
3,028,674

Inter-segment sales
 
118,936

 
18,576

 
6,969


(144,481
)
 

Total
 
$
1,925,450

 
$
938,347

 
$
309,358

 
$
(144,481
)
 
$
3,028,674

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
287,066

As a percent of total sales
 
 
 
 
 
 
 
 
 
9.5
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
334,058

 
$
28,988

 
$
36,564

 
$
(13,385
)
 
$
386,225

As a percent of total sales
 
17.3
%
 
3.1
%
 
11.8
%
 
 

 
12.8
%
Special items charges (gains) (3)
 
6,686


25,285

 


4,498

 
36,469

Adjusted EBIT (2)
 
$
340,744

 
$
54,273

 
$
36,564

 
$
(8,887
)
 
$
422,694

As a percent of total sales
 
17.7
%
 
5.8
%
 
11.8
%
 
 

 
14.0
%
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended
   December 31, 2017
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
1,609,779


$
724,024

 
$
290,628


$

 
$
2,624,431

Inter-segment sales
 
97,382


18,860

 
8,190


(124,432
)
 

Total
 
$
1,707,161

 
$
742,884

 
$
298,818

 
$
(124,432
)
 
$
2,624,431

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
247,503

As a percent of total sales
 
 
 
 
 
 
 
 
 
9.4
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
282,624


$
31,645

 
$
36,442


$
34,957

 
$
385,668

As a percent of total sales
 
16.6
%
 
4.3
%
 
12.2
%
 
 

 
14.7
%
Special items charges (gains) (4)
 
9,242


10,076

 


(34,648
)
 
(15,330
)
Adjusted EBIT (2)
 
$
291,866

 
$
41,721

 
$
36,442

 
$
309

 
$
370,338

As a percent of total sales
 
17.1
%
 
5.6
%
 
12.2
%
 
 

 
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 2018 reflect pension settlement charges of $6,686 in Americas Welding, rationalization and asset impairment charges of $25,285 in International Welding and acquisition transaction and integration costs of $4,498 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
(4)
Special items in 2017 reflect pension settlement charges of $8,150 in Americas Welding, rationalization and asset impairment charges of $6,590 in Americas Welding and International Welding, amortization of step up in value of acquired inventories of $4,578 in International Welding and acquisition transaction and integration costs of $15,002 and a bargain purchase gain of $49,650 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 December 31st Change in Net Sales by Segment
 
 
 
 
 
 
 
 
 
 
 
Change in Net Sales due to:
 
 
 
 
Net Sales
2017
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2018
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
423,019

 
$
(411
)
 
$
2,831

 
$
35,270

 
$
(5,492
)
 
$
455,217

International Welding
 
256,021

 
(35,198
)
 

 
9,626

 
(10,993
)
 
219,456

The Harris Products Group
 
68,145

 
3,120

 

 
(1,053
)
 
(1,058
)
 
69,154

Consolidated
 
$
747,185

 
$
(32,489
)
 
$
2,831

 
$
43,843

 
$
(17,543
)
 
$
743,827

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
 

 
(0.1
%)
 
0.7
%
 
8.3
%
 
(1.3
%)
 
7.6
%
International Welding
 
 

 
(13.7
%)
 

 
3.8
%
 
(4.3
%)
 
(14.3
%)
The Harris Products Group
 
 

 
4.6
%
 

 
(1.5
%)
 
(1.6
%)
 
1.5
%
Consolidated
 
 

 
(4.3
%)
 
0.4
%
 
5.9
%
 
(2.3
%)
 
(0.4
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended December 31st Change in Net Sales by Segment
 
 
 
 
 
 
 
 
 
 
 
Change in Net Sales due to:
 
 
 
 
Net Sales
2017
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2018
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
1,609,779

 
$
82,258

 
$
11,644

 
$
111,038

 
$
(8,205
)
 
$
1,806,514

International Welding
 
724,024

 
(66,963
)
 
227,598

 
34,777

 
335

 
919,771

The Harris Products Group
 
$
290,628

 
12,497

 

 
378

 
(1,114
)
 
302,389

Consolidated
 
$
2,624,431

 
$
27,792

 
$
239,242

 
$
146,193

 
$
(8,984
)
 
$
3,028,674

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
%
 
5.1
%
 
0.7
%
 
6.9
%
 
(0.5
%)
 
12.2
%
International Welding
 
 

 
(9.2
%)
 
31.4
%
 
4.8
%
 

 
27.0
%
The Harris Products Group
 
 

 
4.3
%
 

 
0.1
%
 
(0.4
%)
 
4.0
%
Consolidated
 
 

 
1.1
%
 
9.1
%
 
5.6
%
 
(0.3
%)
 
15.4
%