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): July 23, 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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of exchange on which registered
Common Shares, without par value
LECO
The NASDAQ Stock Market LLC
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 July 23, 2019, Lincoln Electric Holdings, Inc. (the “Company”) issued a press release reporting its financial results for the quarter ended June 30, 2019.  A copy of the Company’s press release issued on July 23, 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 July 23, 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)
 
 
July 23, 2019
















































LINCOLN ELECTRIC HOLDINGS, INC.
 
INDEX TO EXHIBITS
 
 
 
 
Exhibit No.
 
Exhibit
 
 
 
 
The Company’s press release dated July 23, 2019.
 
 
 




Exhibit
Lincoln Electric Reports Second Quarter 2019 Financial Results


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

LINCOLN ELECTRIC REPORTS SECOND QUARTER 2019 RESULTS
Second Quarter 2019 Highlights
§    Q2 EPS increases 30.8% to $1.36, Adjusted EPS increases 4.9% to $1.28
§    ROIC increases 300 basis points to 21.0%
§    Cash flow from operations increases 58% to $126 million
§    $115 million returned to shareholders through dividends and share repurchases
 
 
CLEVELAND, Tuesday, July 23, 2019 - Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported second quarter 2019 net income of $85.5 million, or diluted earnings per share (EPS) of $1.36, which includes special item after-tax net benefits of $4.6 million, or $0.08 EPS. This compares with prior year net income of $68.9 million, or $1.04 EPS, which included special item after-tax charges of $11.5 million, or $0.18 EPS. Excluding these items, second quarter 2019 adjusted net income was $80.9 million, or $1.28 EPS, as compared with $80.4 million, or $1.22 EPS in the prior year period. The effective tax rate was 17.4% in the second quarter 2019 as compared with 27.0% in the prior year period. Excluding special items, the adjusted effective tax rate was 22.0%, which compares to 24.6% in the comparable 2018 period.

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

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

Six Months 2019 Summary

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

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



Lincoln Electric Reports Second Quarter 2019 Financial Results


Webcast Information
 
A conference call to discuss second quarter 2019 financial results will be webcast live today, July 23, 2019, at 10:00 a.m., Eastern Time.  This webcast is accessible at https://ir.lincolnelectric.com. Listeners should go to the web site prior to the call to register, download and install any necessary audio software. A replay of the webcast will be available on the Company's web site.

Investors who are unable to access the webcast may listen to the conference call live by telephone by dialing (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 3041829. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the second quarter 2019 can also be obtained at https://ir.lincolnelectric.com.

About Lincoln Electric

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

Non-GAAP Information

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

Forward-Looking Statements

The Company’s expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements reflect management’s current expectations and involve a number of risks and uncertainties.  Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning.  Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results.  The factors include, but are not limited to: general economic and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as political unrest, acts of terror and natural disasters, on the Company or its customers, suppliers and the economy in general.  For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.




Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Income
 
 
Three Months Ended June 30,
 
Fav (Unfav) to
Prior Year
 
 
2019
 
% of Sales
 
2018
 
% of Sales
 
$
 
%
Net sales
 
$
777,008

 
100.0
%
 
$
790,052

 
100.0
%
 
$
(13,044
)
 
(1.7
%)
Cost of goods sold
 
507,127

 
65.3
%
 
519,936

 
65.8
%
 
12,809

 
2.5
%
Gross profit
 
269,881

 
34.7
%
 
270,116

 
34.2
%
 
(235
)
 
(0.1
%)
Selling, general & administrative expenses
 
163,388

 
21.0
%
 
163,940

 
20.8
%
 
552

 
0.3
%
Rationalization and asset impairment charges
 
1,307

 
0.2
%
 
11,542

 
1.5
%
 
10,235

 
88.7
%
Operating income
 
105,186

 
13.5
%
 
94,634

 
12.0
%
 
10,552

 
11.2
%
Interest expense, net
 
5,898

 
0.8
%
 
4,812

 
0.6
%
 
(1,086
)
 
(22.6
%)
Other income (expense)
 
4,196

 
0.5
%
 
4,441

 
0.6
%
 
(245
)
 
(5.5
%)
Income before income taxes
 
103,484

 
13.3
%
 
94,263

 
11.9
%
 
9,221

 
9.8
%
Income taxes
 
18,040

 
2.3
%
 
25,404

 
3.2
%
 
7,364

 
29.0
%
Effective tax rate
 
17.4
%
 
 

 
27.0
%
 
 

 
9.6
%
 
 
Net income including non-controlling interests
 
85,444

 
11.0
%
 
68,859

 
8.7
%
 
16,585

 
24.1
%
Non-controlling interests in subsidiaries’ loss
 
(8
)
 

 
(5
)
 

 
(3
)
 
(60.0
%)
Net income
 
$
85,452

 
11.0
%
 
$
68,864

 
8.7
%
 
$
16,588

 
24.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.37

 
 

 
$
1.05

 
 

 
$
0.32

 
30.5
%
Diluted earnings per share
 
$
1.36

 
 

 
$
1.04

 
 

 
$
0.32

 
30.8
%
Weighted average shares (basic)
 
62,305

 
 

 
65,337

 
 

 
 

 
 

Weighted average shares (diluted)
 
62,970

 
 

 
66,121

 
 

 
 

 
 

 
 
Six Months Ended June 30,
 
Fav (Unfav) to
Prior Year
 
 
2019
 
% of Sales
 
2018
 
% of Sales
 
$
 
%
Net sales
 
$
1,536,182

 
100.0
%
 
$
1,547,748

 
100.0
%
 
$
(11,566
)
 
(0.7
%)
Cost of goods sold
 
1,007,880

 
65.6
%
 
1,021,078

 
66.0
%
 
13,198

 
1.3
%
Gross profit
 
528,302

 
34.4
%
 
526,670

 
34.0
%
 
1,632

 
0.3
%
Selling, general & administrative expenses
 
323,796

 
21.1
%
 
325,131

 
21.0
%
 
1,335

 
0.4
%
Rationalization and asset impairment charges
 
4,842

 
0.3
%
 
21,717

 
1.4
%
 
16,875

 
77.7
%
Operating income
 
199,664

 
13.0
%
 
179,822

 
11.6
%
 
19,842

 
11.0
%
Interest expense, net
 
11,221

 
0.7
%
 
9,253

 
0.6
%
 
(1,968
)
 
(21.3
%)
Other income (expense)
 
7,959

 
0.5
%
 
7,892

 
0.5
%
 
67

 
0.8
%
Income before income taxes
 
196,402

 
12.8
%
 
178,461

 
11.5
%
 
17,941

 
10.1
%
Income taxes
 
39,492

 
2.6
%
 
48,782

 
3.2
%
 
9,290

 
19.0
%
Effective tax rate
 
20.1
%
 
 

 
27.3
%
 
 

 
7.2
%
 


Net income including non-controlling interests
 
156,910

 
10.2
%
 
129,679

 
8.4
%
 
27,231

 
21.0
%
Non-controlling interests in subsidiaries’ loss
 
(22
)
 

 
(9
)
 

 
(13
)
 
(144.4
%)
Net income
 
$
156,932

 
10.2
%
 
$
129,688

 
8.4
%
 
$
27,244

 
21.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
2.50

 
 

 
$
1.98

 
 

 
$
0.52

 
26.3
%
Diluted earnings per share
 
$
2.47

 
 

 
$
1.96

 
 

 
$
0.51

 
26.0
%
Weighted average shares (basic)
 
62,733

 
 

 
65,458

 
 

 
 

 
 

Weighted average shares (diluted)
 
63,419

 
 

 
66,257

 
 

 
 

 
 





Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
 
Balance Sheet Highlights
 
Selected Consolidated Balance Sheet Data
 
June 30, 2019
 
December 31, 2018
Cash and cash equivalents
 
$
189,861

 
$
358,849

Total current assets
 
1,127,863

 
1,237,799

Property, plant and equipment, net
 
512,364

 
478,801

Total assets
 
2,394,333

 
2,349,825

Total current liabilities
 
571,011

 
538,182

Short-term debt (1)
 
30,110

 
111

Long-term debt, less current portion
 
710,458

 
702,549

Total equity
 
846,058

 
887,592

 
 
 
 
 
Operating Working Capital
 
June 30, 2019
 
December 31, 2018
Accounts receivable, net
 
$
428,353

 
$
396,885

Inventories
 
397,752

 
361,829

Trade accounts payable
 
254,814

 
268,600

Operating working capital
 
$
571,291

 
$
490,114

 
 
 
 
 
Average operating working capital to Net sales (2)
 
18.4
%
 
16.5
%
 
 
 
 
 
Invested Capital
 
June 30, 2019
 
December 31, 2018
Short-term debt (1)
 
$
30,110

 
$
111

Long-term debt, less current portion
 
710,458

 
702,549

Total debt
 
740,568

 
702,660

Total equity
 
846,058

 
887,592

Invested capital
 
$
1,586,626

 
$
1,590,252

 
 
 
 
 
Total debt / invested capital
 
46.7
%
 
44.2
%

(1)
Includes current portion of long-term debt.
(2)
Average operating working capital to Net sales is defined as operating working capital as of period end divided by annualized rolling three months of Net sales.





Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 Non-GAAP Financial Measures
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Operating income as reported
 
$
105,186

 
$
94,634

 
$
199,664

 
$
179,822

Special items (pre-tax):
 
 
 
 
 
 
 
 
Rationalization and asset impairment charges (2)
 
1,307

 
11,542

 
4,842

 
21,717

Acquisition transaction and integration costs (3)
 
1,014

 
788

 
1,804

 
2,695

Amortization of step up in value of acquired inventories (4)
 
1,399

 

 
1,399

 

Gains on asset disposals (5)
 
(3,045
)
 

 
(3,045
)
 

Adjusted operating income (1)
 
$
105,861

 
$
106,964

 
$
204,664

 
$
204,234

As a percent of total sales
 
13.6
%
 
13.5
 %
 
13.3
%
 
13.2
 %
 
 
 
 
 
 
 
 
 
Net income as reported
 
$
85,452

 
$
68,864

 
$
156,932

 
$
129,688

Special items:
 
 

 
 

 
 
 
 
Rationalization and asset impairment charges (2)
 
1,307

 
11,542

 
4,842

 
21,717

Acquisition transaction and integration costs (3)
 
1,014

 
788

 
1,804

 
2,695

Pension settlement charges (6)
 

 

 

 
758

Amortization of step up in value of acquired inventories (4)
 
1,399

 

 
1,399

 

Gains on asset disposals (5)
 
(3,554
)
 

 
(3,554
)
 

Tax effect of Special items (7)
 
(4,751
)
 
(784
)
 
(5,564
)
 
(1,165
)
Adjusted net income (1)
 
80,867

 
80,410

 
155,859

 
153,693

Non-controlling interests in subsidiaries’ loss
 
(8
)
 
(5
)
 
(22
)
 
(9
)
Interest expense, net
 
5,898

 
4,812

 
11,221

 
9,253

Income taxes as reported
 
18,040

 
25,404

 
39,492

 
48,782

Tax effect of Special items (7)
 
4,751

 
784

 
5,564

 
1,165

Adjusted EBIT (1)
 
$
109,548

 
$
111,405

 
$
212,114

 
$
212,884

 
 
 
 
 
 
 
 
 
Effective tax rate as reported
 
17.4
%
 
27.0
 %
 
20.1
%
 
27.3
 %
Net special item tax impact
 
4.6
%
 
(2.4
%)
 
2.3
%
 
(2.8
%)
Adjusted effective tax rate (1)
 
22.0
%
 
24.6
 %
 
22.4
%
 
24.5
 %
 
 
 
 
 
 
 
 
 
Diluted earnings per share as reported
 
$
1.36

 
$
1.04

 
$
2.47

 
$
1.96

Special items per share
 
(0.08
)
 
0.18

 
(0.01
)
 
0.36

Adjusted diluted earnings per share (1)
 
$
1.28

 
$
1.22

 
$
2.46

 
$
2.32

 
 
 
 
 
 
 
 
 
Weighted average shares (diluted)
 
62,970

 
66,121

 
63,419

 
66,257

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




(3)
Related to the acquisition of Air Liquide Welding and are included in Selling, general & administrative expenses.
(4)
Related to the acquisition of Baker Industries, Inc. and are included in Cost of goods sold.
(5)
Primarily included in Cost of goods sold.
(6)
Related to lump sum pension payments and are included in Other income (expense).
(7)
Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the three and six months ended June 30, 2019.
The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.




Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Non-GAAP Financial Measures
 
 
Twelve Months Ended June 30,
Return on Invested Capital
 
2019
 
2018
Net income as reported
 
$
314,310

 
$
259,995

Rationalization and asset impairment charges
 
8,410

 
28,307

Pension settlement charges
 
5,928

 
8,908

Acquisition transaction and integration costs
 
3,607

 
9,584

Amortization of step up in value of acquired inventories
 
1,399

 
4,578

Gains on asset disposals
 
(3,554
)
 

Bargain purchase gain
 

 
(49,650
)
Tax effect of Special items (3)
 
(11,295
)
 
21,256

Adjusted net income (1)
 
$
318,805

 
$
282,978

Plus: Interest expense, net of tax of $6,178 and $6,077 in 2019 and 2018, respectively
 
18,569

 
18,265

Less: Interest income, net of tax of $1,302 and $1,509 in 2019 and 2018, respectively
 
3,912

 
4,537

Adjusted net income before tax-effected interest
 
$
333,462

 
$
296,706

 
 
 
 
 
Invested Capital
 
June 30, 2019
 
June 30, 2018
Short-term debt
 
$
30,110

 
$
1,889

Long-term debt, less current portion
 
710,458

 
700,194

Total debt
 
740,568

 
702,083

Total equity
 
846,058

 
943,508

Invested capital
 
$
1,586,626

 
$
1,645,591

 
 
 
 
 
Return on invested capital (1)(2)
 
21.0
%
 
18.0
%

(1)
Adjusted net income and Return on invested capital are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly. Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
(2)
Return on invested capital is defined as rolling 12 months of Adjusted net income before tax-effected interest income and expense divided by Invested capital.
(3)
Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended June 30, 2019 and net charges of $31,116 related to the U.S. Tax Act in the twelve months ended June 30, 2018.
The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.





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

Condensed Consolidated Statements of Cash Flows 
 
 
Three Months Ended June 30,
 
 
2019
 
2018
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
85,452

 
$
68,864

Non-controlling interests in subsidiaries’ loss
 
(8
)
 
(5
)
Net income including non-controlling interests
 
85,444

 
68,859

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

 
 

Rationalization and asset impairment net gains
 
(355
)
 
(50
)
Depreciation and amortization
 
20,351

 
18,189

Equity earnings in affiliates, net
 
(769
)
 
(839
)
Other non-cash items, net
 
1,325

 
(654
)
Changes in operating assets and liabilities, net of effects from acquisitions:
 
 
 
 

Decrease in accounts receivable
 
5,629

 
561

(Increase) decrease in inventories
 
(13,129
)
 
153

(Decrease) increase in trade accounts payable
 
(362
)
 
1,670

Net change in other current assets and liabilities
 
28,595

 
(9,124
)
Net change in other long-term assets and liabilities
 
(622
)
 
1,016

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
126,107

 
79,781

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(20,262
)
 
(16,726
)
Acquisition of businesses, net of cash acquired
 
(107,843
)
 
356

Proceeds from sale of property, plant and equipment
 
8,410

 
109

Purchase of marketable securities
 

 
(129,122
)
Proceeds from marketable securities
 

 
126,767

NET CASH USED BY INVESTING ACTIVITIES
 
(119,695
)

(18,616
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
29,980

 
273

Proceeds from exercise of stock options
 
323

 
637

Purchase of shares for treasury
 
(85,330
)
 
(35,508
)
Cash dividends paid to shareholders
 
(29,541
)
 
(25,589
)
NET CASH USED BY FINANCING ACTIVITIES
 
(84,568
)

(60,187
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
883

 
(12,940
)
DECREASE IN CASH AND CASH EQUIVALENTS
 
(77,273
)
 
(11,962
)
Cash and cash equivalents at beginning of period
 
267,134

 
369,056

Cash and cash equivalents at end of period
 
$
189,861

 
$
357,094

 
 
 
 
 
Cash dividends paid per share
 
$
0.47

 
$
0.39





Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Condensed Consolidated Statements of Cash Flows 
 
 
Six Months Ended June 30,
 
 
2019
 
2018
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
156,932

 
$
129,688

Non-controlling interests in subsidiaries’ loss
 
(22
)
 
(9
)
Net income including non-controlling interests
 
156,910

 
129,679

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

 
 

Rationalization and asset impairment net charges
 
1,069

 
626

Depreciation and amortization
 
39,252

 
36,323

Equity earnings in affiliates, net
 
(1,217
)
 
(1,377
)
Other non-cash items, net
 
5,719

 
6,648

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

Increase in accounts receivable
 
(21,271
)
 
(39,907
)
Increase in inventories
 
(27,767
)
 
(27,899
)
(Decrease) increase in trade accounts payable
 
(15,469
)
 
4,861

Net change in other current assets and liabilities
 
13,947

 
12,384

Net change in other long-term assets and liabilities
 
812

 
2,220

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
151,985

 
123,558

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(36,513
)
 
(31,383
)
Acquisition of businesses, net of cash acquired
 
(107,843
)
 
6,591

Proceeds from sale of property, plant and equipment
 
8,712

 
227

Purchase of marketable securities
 

 
(218,667
)
Proceeds from marketable securities
 

 
258,733

Other investing activities
 
2,000

 

NET CASH (USED BY) PROVIDED BY INVESTING ACTIVITIES
 
(133,644
)
 
15,501

 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
29,977

 
210

Proceeds from exercise of stock options
 
960

 
2,599

Purchase of shares for treasury
 
(160,914
)
 
(50,232
)
Cash dividends paid to shareholders
 
(60,101
)
 
(51,250
)
NET CASH USED BY FINANCING ACTIVITIES
 
(190,078
)
 
(98,673
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
2,749

 
(9,993
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 
(168,988
)
 
30,393

Cash and cash equivalents at beginning of period
 
358,849

 
326,701

Cash and cash equivalents at end of period
 
$
189,861

 
$
357,094

 
 
 
 
 
Cash dividends paid per share
 
$
0.94

 
$
0.78






Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
 
 
Americas Welding
 
International Welding
 
The Harris
Products Group
 
Corporate /
Eliminations
 
Consolidated
Three months ended
  June 30, 2019
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
476,607

 
$
212,306

 
$
88,095

 
$

 
$
777,008

Inter-segment sales
 
34,811

 
4,188

 
2,113

 
(41,112
)
 

Total
 
$
511,418

 
$
216,494

 
$
90,208

 
$
(41,112
)
 
$
777,008

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
85,452

As a percent of total sales
 
 
 
 
 
 
 
 
 
11.0
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
83,072

 
$
17,805

 
$
13,488

 
$
(4,983
)
 
$
109,382

As a percent of total sales
 
16.2
%
 
8.2
%
 
15.0
%
 
 

 
14.1
%
Special items charges (gains) (3)
 
1,779

 
(2,627
)
 

 
1,014

 
166

Adjusted EBIT (2)
 
$
84,851

 
$
15,178

 
$
13,488

 
$
(3,969
)
 
$
109,548

As a percent of total sales
 
16.6
%
 
7.0
%
 
15.0
%
 
 

 
14.1
%
 
 
 
 
 
 
 
 
 
 
 
Three months ended
  June 30, 2018
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
462,515

 
$
243,373

 
$
84,164

 
$

 
$
790,052

Inter-segment sales
 
31,240

 
5,497

 
2,003

 
(38,740
)
 

Total
 
$
493,755

 
$
248,870

 
$
86,167

 
$
(38,740
)
 
$
790,052

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
68,864

As a percent of total sales
 
 
 
 
 
 
 
 
 
8.7
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
88,158

 
$
4,734

 
$
10,157

 
$
(3,974
)
 
$
99,075

As a percent of total sales
 
17.9
%
 
1.9
%
 
11.8
%
 



12.5
%
Special items charges (gains) (4)
 

 
11,542

 

 
788

 
12,330

Adjusted EBIT (2)
 
$
88,158

 
$
16,276

 
$
10,157

 
$
(3,186
)
 
$
111,405

As a percent of total sales
 
17.9
%

6.5
%

11.8
%




14.1
%
(1)
EBIT is defined as Operating income plus Other income (expense).
(2)
The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
(3)
Special items in 2019 reflect Rationalization and asset impairment charges of $380 in Americas Welding and $927 in International Welding, amortization of step up in value of acquired inventories of $1,399 in Americas Welding, gains on disposals of assets of $3,554 in International Welding and acquisition transaction and integration costs of $1,014 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
(4)
Special items in 2018 reflect rationalization and asset impairment charges of $11,542 in International Welding. Special items in 2018 also reflect acquisition transaction and integration costs of $788 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.





Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
 
 
Americas Welding
 
International Welding
 
The Harris
Products Group
 
Corporate /
Eliminations
 
Consolidated
Six months ended
  June 30, 2019
 
 
 
 

 
 

 
 

 
 

Net sales
 
$
934,326

 
$
430,392

 
$
171,464

 
$

 
$
1,536,182

Inter-segment sales
 
64,199

 
8,397

 
3,980

 
(76,576
)
 

Total
 
$
998,525

 
$
438,789

 
$
175,444

 
$
(76,576
)
 
$
1,536,182

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
156,932

As a percent of total sales
 
 
 
 
 
 
 
 
 
10.2
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
163,488

 
$
28,943

 
$
24,007

 
$
(8,815
)
 
$
207,623

As a percent of total sales
 
16.4
%
 
6.6
%
 
13.7
%
 
 

 
13.5
%
Special items charges (gains) (3)
 
3,115

 
(428
)
 

 
1,804

 
4,491

Adjusted EBIT (2)
 
$
166,603

 
$
28,515

 
$
24,007

 
$
(7,011
)
 
$
212,114

As a percent of total sales
 
16.7
%
 
6.5
%
 
13.7
%
 
 

 
13.8
%
 
 
 
 
 
 
 
 
 
 
 
Six months ended
  June 30, 2018
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
897,287

 
$
490,693

 
$
159,768

 
$

 
$
1,547,748

Inter-segment sales
 
57,826

 
10,006

 
3,910

 
(71,742
)
 

Total
 
$
955,113

 
$
500,699

 
$
163,678

 
$
(71,742
)
 
$
1,547,748

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
129,688

As a percent of total sales
 
 
 
 
 
 
 
 
 
8.4
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
164,839

 
$
9,532

 
$
19,382

 
$
(6,039
)
 
$
187,714

As a percent of total sales
 
17.3
%
 
1.9
%
 
11.8
%
 
 

 
12.1
%
Special items charges (gains) (4)
 
758

 
21,717

 

 
2,695

 
25,170

Adjusted EBIT (2)
 
$
165,597

 
$
31,249

 
$
19,382

 
$
(3,344
)
 
$
212,884

As a percent of total sales
 
17.3
%
 
6.2
%
 
11.8
%
 
 

 
13.8
%
(1)
EBIT is defined as Operating income plus Other income (expense).
(2)
The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
(3)
Special items in 2019 reflect Rationalization and asset impairment charges of $1,716 in Americas Welding and $3,126 in International Welding, amortization of step up in value of acquired inventories of $1,399 in Americas Welding, gains on disposals of assets of $3,554 in International Welding and acquisition transaction and integration costs of $1,804 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.
(4)
Special items in 2018 reflect pension settlement charges of $758 in Americas Welding, rationalization and asset impairment charges of $21,717 in International Welding and acquisition transaction and integration costs of $2,695 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.




Lincoln Electric Holdings, Inc.
Change in Net Sales by Segment
(In thousands)
(Unaudited)
Three Months Ended June 30th Change in Net Sales by Segment
 
 
 
 
 
 
 
 
 
 
 
Change in Net Sales due to:
 
 
 
 
Net Sales
2018
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2019
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
462,515

 
$
(16,756
)
 
$
21,512

 
$
11,599

 
$
(2,263
)
 
$
476,607

International Welding
 
243,373

 
(23,550
)
 

 
2,837

 
(10,354
)
 
212,306

The Harris Products Group
 
84,164

 
(417
)
 
5,656

 
(635
)
 
(673
)
 
88,095

Consolidated
 
$
790,052

 
$
(40,723
)
 
$
27,168

 
$
13,801

 
$
(13,290
)
 
$
777,008

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
 

 
(3.6
%)
 
4.7
%
 
2.5
%
 
(0.5
%)
 
3.0
%
International Welding
 
 

 
(9.7
%)
 

 
1.2
%
 
(4.3
%)
 
(12.8
%)
The Harris Products Group
 
 

 
(0.5
%)
 
6.7
%
 
(0.8
%)
 
(0.8
%)
 
4.7
%
Consolidated
 
 

 
(5.2
%)
 
3.4
%
 
1.7
%
 
(1.7
%)
 
(1.7
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30th Change in Net Sales by Segment
 
 
 
 
 
 
 
 
 
 
 
Change in Net Sales due to:
 
 
 
 
Net Sales
2018
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2019
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
897,287

 
$
(29,151
)
 
$
34,232

 
$
39,027

 
$
(7,069
)
 
$
934,326

International Welding
 
490,693

 
(41,467
)
 

 
9,312

 
(28,146
)
 
430,392

The Harris Products Group
 
159,768

 
2,544

 
11,430

 
(185
)
 
(2,093
)
 
171,464

Consolidated
 
$
1,547,748

 
$
(68,074
)
 
$
45,662

 
$
48,154

 
$
(37,308
)
 
$
1,536,182

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
%
 
(3.2
%)
 
3.8
%
 
4.3
%
 
(0.8
%)
 
4.1
%
International Welding
 
 

 
(8.5
%)
 

 
1.9
%
 
(5.7
%)
 
(12.3
%)
The Harris Products Group
 
 

 
1.6
%
 
7.2
%
 
(0.1
%)
 
(1.3
%)
 
7.3
%
Consolidated
 
 

 
(4.4
%)
 
3.0
%
 
3.1
%
 
(2.4
%)
 
(0.7
%)