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false--12-31Q220190000059527LINCOLN ELECTRIC HOLDINGS INC7788170008002870001282700012678000Hedge ineffectiveness was immaterial in the six months ended June 30, 2019 and 2018.0.390.47350000000309000250001170006000021800064900090000137000This AOCI component is included in the computation of net periodic pension costs (net of tax of $(90) and $218 during the three months ended June 30, 2019 and 2018, respectively). See Note 13 to the consolidated financial statements for additional details.The Other comprehensive income (loss) before reclassifications excludes $(35) and $(90) attributable to Non-controlling interests in the three months ended June 30, 2019 and 2018, respectively.During the 2019 period, this AOCI reclassification is a component of Net sales of $286 (net of tax of $101) and Cost of goods sold of $(122) (net of tax of $(30)); during the 2018 period, the reclassification is a component of Net sales of $(23) (net of tax of $(14)) and Cost of goods sold of $(14) (net of tax of $(6)). 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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number:  0-1402
https://cdn.kscope.io/81007d8b2dfb911bebd5530d5bf0eed9-g198901ba01i001q32015a04.jpg 
LINCOLN ELECTRIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Ohio
 
34-1860551
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
22801 St. Clair Avenue, Cleveland, Ohio                 44117
(Address of principal executive offices)                 (Zip Code)

(216) 481-8100
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                           
Yes ý  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ý  No

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 a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “small reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
Emerging growth company
 
 
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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  No ý

The number of shares outstanding of the registrant’s common shares as of June 30, 2019 was 61,779,153.

1



TABLE OF CONTENTS
 
 
 
 
 
 
 
EX-101
Instance Document
 
EX-101
Schema Document
 
EX-101
Calculation Linkbase Document
 
EX-101
Label Linkbase Document
 
EX-101
Presentation Linkbase Document
 
EX-101
Definition Linkbase Document
 

2

Table of Contents

PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net sales (Note 2)
$
777,008

 
$
790,052

 
$
1,536,182

 
$
1,547,748

Cost of goods sold
507,127

 
519,936

 
1,007,880

 
1,021,078

Gross profit
269,881

 
270,116

 
528,302

 
526,670

Selling, general & administrative expenses
163,388

 
163,940

 
323,796

 
325,131

Rationalization and asset impairment charges (Note 6)
1,307

 
11,542

 
4,842

 
21,717

Operating income
105,186

 
94,634

 
199,664

 
179,822

Interest expense, net
5,898

 
4,812

 
11,221

 
9,253

Other income (expense) (Note 14)
4,196

 
4,441

 
7,959

 
7,892

Income before income taxes
103,484

 
94,263

 
196,402

 
178,461

Income taxes (Note 15)
18,040

 
25,404

 
39,492

 
48,782

Net income including non-controlling interests
85,444

 
68,859

 
156,910

 
129,679

Non-controlling interests in subsidiaries’ earnings (loss)
(8
)
 
(5
)
 
(22
)
 
(9
)
Net income
$
85,452

 
$
68,864

 
$
156,932

 
$
129,688

 
 
 
 
 
 
 
 
Basic earnings per share (Note 3)
$
1.37

 
$
1.05

 
$
2.50

 
$
1.98

Diluted earnings per share (Note 3)
$
1.36

 
$
1.04

 
$
2.47

 
$
1.96

Cash dividends declared per share
$
0.47

 
$
0.39

 
$
0.94

 
$
0.78

 
See notes to these consolidated financial statements.

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Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income including non-controlling interests
$
85,444

 
$
68,859

 
$
156,910

 
$
129,679

Other comprehensive income (loss), net of tax:
 
 
 

 
 
 
 

Unrealized gain (loss) on derivatives designated and qualifying as cash flow hedges, net of tax of $(117) and $(60) in the three and six months ended June 30, 2019; $(309) and $25 in the three and six months ended June 30, 2018.
(301
)
 
(1,232
)
 
28

 
(377
)
Defined benefit pension plan activity, net of tax of $(90) and $137 in the three and six months ended June 30, 2019; $218 and $649 in the three and six months ended June 30, 2018.
1,091

 
721

 
1,878

 
2,008

Currency translation adjustment
4,849

 
(50,342
)
 
9,985

 
(30,955
)
Other comprehensive income (loss):
5,639

 
(50,853
)
 
11,891

 
(29,324
)
Comprehensive income
91,083

 
18,006

 
168,801

 
100,355

Comprehensive income (loss) attributable to non-controlling interests
(43
)
 
(95
)
 
(20
)
 
(40
)
Comprehensive income attributable to shareholders
$
91,126

 
$
18,101

 
$
168,821

 
$
100,395

 
See notes to these consolidated financial statements.

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Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
June 30, 2019
 
December 31, 2018
 
(UNAUDITED)
 
(NOTE 1)
ASSETS
 

 
 

Current Assets
 

 
 

Cash and cash equivalents
$
189,861

 
$
358,849

Accounts receivable (less allowance for doubtful accounts of $12,678 in 2019; $12,827 in 2018)
428,353

 
396,885

Inventories (Note 9)
397,752

 
361,829

Other current assets
111,897

 
120,236

Total Current Assets
1,127,863

 
1,237,799

Property, plant and equipment (less accumulated depreciation of $800,287 in 2019; $778,817 in 2018)
512,364

 
478,801

Goodwill
323,016

 
281,294

Other assets
431,090

 
351,931

TOTAL ASSETS
$
2,394,333

 
$
2,349,825

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Current Liabilities
 

 
 

Short-term debt (Note 12)
$
30,110

 
$
111

Trade accounts payable
254,814

 
268,600

Accrued employee compensation and benefits
115,891

 
94,202

Other current liabilities
170,196

 
175,269

Total Current Liabilities
571,011

 
538,182

Long-term debt, less current portion (Note 12)
710,458

 
702,549

Other liabilities
266,806

 
221,502

Total Liabilities
1,548,275

 
1,462,233

Shareholders’ Equity
 

 
 

Common shares
9,858

 
9,858

Additional paid-in capital
368,919

 
360,308

Retained earnings
2,661,720

 
2,564,440

Accumulated other comprehensive loss
(281,850
)
 
(293,739
)
Treasury shares
(1,913,219
)
 
(1,753,925
)
Total Shareholders’ Equity
845,428

 
886,942

Non-controlling interests
630

 
650

Total Equity
846,058

 
887,592

TOTAL LIABILITIES AND TOTAL EQUITY
$
2,394,333

 
$
2,349,825


See notes to these consolidated financial statements.

5


LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
(In thousands, except per share amounts)
 
 
Common
Shares
Outstanding
 
Common
Shares
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Shares
 
Non-controlling
Interests
 
Total
Balance at December 31, 2018
 
63,546

 
$
9,858

 
$
360,308

 
$
2,564,440

 
$
(293,739
)
 
$
(1,753,925
)
 
$
650

 
$
887,592

Net income
 
 
 
 
 
 
 
71,480

 
 
 
 
 
(14
)
 
71,466

Unrecognized amounts from defined benefit pension plans, net of tax
 
 
 
 
 
 
 
 
 
787

 
 
 
 
 
787

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax
 
 
 
 
 
 
 
 
 
329

 
 
 
 
 
329

Currency translation adjustment
 
 
 
 
 
 
 
 
 
5,099

 
 
 
37

 
5,136

Cash dividends declared – $0.47 per share
 
 
 
 
 
 
 
(29,847
)
 
 
 
 
 
 
 
(29,847
)
Stock-based compensation activity
 
148

 
 
 
3,302

 
 
 
 
 
1,484

 
 
 
4,786

Purchase of shares for treasury
 
(894
)
 
 
 
 
 
 
 
 
 
(75,584
)
 
 
 
(75,584
)
Other
 
 
 
 
 
808

 
(808
)
 
 
 
 
 
 
 

Balance at March 31, 2019
 
62,800

 
$
9,858

 
$
364,418

 
$
2,605,265

 
$
(287,524
)
 
$
(1,828,025
)
 
$
673

 
$
864,665

Net income
 
 
 
 
 
 
 
85,452

 
 
 
 
 
(8
)
 
85,444

Unrecognized amounts from defined benefit pension plans, net of tax
 
 
 
 
 
 
 
 
 
1,091

 
 
 
 
 
1,091

Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax
 
 
 
 
 
 
 
 
 
(301
)
 
 
 
 
 
(301
)
Currency translation adjustment
 
 
 
 
 
 
 
 
 
4,884

 
 
 
(35
)
 
4,849

Cash dividends declared – $0.47 per share
 
 
 
 
 
 
 
(29,279
)
 
 
 
 
 
 
 
(29,279
)
Stock-based compensation activity
 
13

 
 
 
4,783

 


 
 
 
136

 
 
 
4,919

Purchase of shares for treasury
 
(1,034
)
 
 
 
 
 

 
 
 
(85,330
)
 
 
 
(85,330
)
Other
 
 
 
 
 
(282
)
 
282

 
 
 


 
 
 

Balance at June 30, 2019
 
61,779

 
$
9,858

 
$
368,919

 
$
2,661,720

 
$
(281,850
)
 
$
(1,913,219
)
 
$
630

 
$
846,058



6


LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
(In thousands, except per share amounts)
 
 
Common
Shares
Outstanding
 
Common
Shares
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Shares
 
Non-controlling
Interests
 
Total
Balance at December 31, 2017
 
65,663

 
$
9,858

 
$
334,309

 
$
2,388,219

 
$
(247,186
)
 
$
(1,553,563
)
 
$
816

 
$
932,453

Net income
 
 
 
 
 
 
 
60,824

 


 
 
 
(4
)
 
60,820

Unrecognized amounts from defined benefit pension plans, net of tax
 
 
 
 
 
 
 
 
 
1,287

 
 
 
 
 
1,287

Unrealized gain on derivatives designated and qualifying as cash flow hedges, net of tax
 
 
 
 
 
 
 
 
 
855

 
 
 
 
 
855

Currency translation adjustment
 
 
 
 
 
 
 
 
 
19,328

 
 
 
59

 
19,387

Cash dividends declared – $0.39 per share
 
 
 
 
 
 
 
(25,787
)
 
 
 
 
 
 
 
(25,787
)
Stock-based compensation activity
 
55

 
 
 
5,819

 
 
 
 
 
562

 
 
 
6,381

Purchase of shares for treasury
 
(159
)
 
 
 
 
 
 
 
 
 
(14,724
)
 
 
 
(14,724
)
Other
 
 
 
 
 
5,483

 
(5,483
)
 
 
 


 
 
 

Balance at March 31, 2018
 
65,559

 
$
9,858

 
$
345,611

 
$
2,417,773

 
$
(225,716
)
 
$
(1,567,725
)
 
$
871

 
$
980,672

Net income
 
 
 
 
 
 
 
68,864

 
 
 
 
 
(5
)
 
68,859

Unrecognized amounts from defined benefit pension plans, net of tax
 
 
 
 
 
 
 
 
 
721

 
 
 
 
 
721

Unrealized loss on derivatives designated and qualifying as cash flow hedges, net of tax
 
 
 
 
 
 
 
 
 
(1,232
)
 
 
 
 
 
(1,232
)
Currency translation adjustment
 
 
 
 
 
 
 
 
 
(50,252
)
 
 
 
(90
)
 
(50,342
)
Cash dividends declared – $0.39 per share
 
 
 
 
 
 
 
(25,701
)
 
 
 
 
 
 
 
(25,701
)
Stock-based compensation activity
 
15

 
 
 
6,215

 
 
 
 
 
(176
)
 
 
 
6,039

Purchase of shares for treasury
 
(402
)
 
 
 
 
 
 
 
 
 
(35,508
)
 
 
 
(35,508
)
Other
 
 
 
 
 
(194
)
 
194

 
 
 
 
 
 
 

Balance at June 30, 2018
 
65,172

 
$
9,858

 
$
351,632

 
$
2,461,130

 
$
(276,479
)
 
$
(1,603,409
)
 
$
776

 
$
943,508






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Table of Contents

LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
 
Six Months Ended June 30,
 
2019
 
2018
CASH FLOWS FROM 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 (Note 6)
1,069

 
626

Depreciation and amortization
39,252

 
36,323

Equity earnings in affiliates, net
(1,217
)
 
(1,377
)
Deferred income taxes
2,674

 
4,969

Stock-based compensation
8,745

 
9,821

Other, net
(5,700
)
 
(8,142
)
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 other current assets
11,135

 
(13,839
)
(Decrease) increase in trade accounts payable
(15,469
)
 
4,861

Increase in other current liabilities
2,812

 
26,223

Net change in other assets and liabilities
812

 
2,220

NET CASH PROVIDED BY OPERATING ACTIVITIES
151,985

 
123,558

 
 
 
 
CASH FLOWS FROM 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

 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

Amounts due banks, net
29,982

 
216

Payments on long-term borrowings
(5
)
 
(6
)
Proceeds from exercise of stock options
960

 
2,599

Purchase of shares for treasury (Note 8)
(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

See notes to these consolidated financial statements.

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Table of Contents
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except per share amounts


NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
As used in this report, the term “Company,” except as otherwise indicated by the context, means Lincoln Electric Holdings, Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest. 
The consolidated financial statements include the accounts of all legal entities in which the Company holds a controlling interest. The Company is also considered to have a controlling interest in a variable interest entity (“VIE”) if the Company determines it is the primary beneficiary of the VIE. Investments in legal entities in which the Company does not own a majority interest but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method.
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements.  However, in the opinion of management, these unaudited consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for the interim periods.  Operating results for the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019.
The accompanying Consolidated Balance Sheet at December 31, 2018 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements.  For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
New Accounting Pronouncements:
This section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company.
The following ASUs were adopted as of January 1, 2019:
Standard
Description
ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), issued February 2018.
ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act (the "U.S. Tax Act"). The ASU only applies to the income tax effects of the U.S. Tax Act; all other existing guidance remains the same. The Company has elected not to reclassify the income tax effects of the U.S. Tax Act from Accumulated other comprehensive loss to Retained earnings.
ASU No. 2016-02, Leases (Topic 842), issued February 2016

ASU 2016-02 ("Topic 842") aims to increase transparency and comparability among organizations by recognizing a right-of-use asset and lease liability on the balance sheet for all leases with a lease term greater than twelve months. Topic 842 also requires the disclosure of key information about leasing agreements. The Company adopted Topic 842 using the modified retrospective transition option of applying the new standard at the adoption date. The Company also elected the package of practical expedients, which among other things, allows it to not reassess the identification, classification and initial direct costs of leases commencing before the effective date of Topic 842. Refer to Note 10 to the consolidated financial statements for further details.


9

Table of Contents
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts


The Company is currently evaluating the impact on its financial statements of the following ASUs:
Standard
Description
ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), issued August 2018.
ASU 2018-14 modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU also requires an entity to disclose the weighted-average interest crediting rates for cash balance plans and to explain the reasons for significant gains and losses related to changes in the benefit obligation. The ASU is effective January 1, 2020 and early adoption is permitted.
ASU No. 2018-13, Fair Value Measurement (Topic 944), issued August 2018.
ASU 2018-13 eliminates, amends and adds disclosure requirements related to fair value measurements. The ASU impacts various elements of fair value disclosure, including but not limited to, changes in unrealized gains or losses, significant unobservable inputs and measurement uncertainty. The ASU is effective January 1, 2020 and early adoption is permitted.
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), issued June 2016.

ASU 2016-13 requires that an entity measure impairment of certain financial instruments, including trade receivables, based on expected losses rather than incurred losses. The ASU is effective January 1, 2020 and early adoption is permitted.


NOTE 2 — REVENUE RECOGNITION
The following table presents the Company's Net sales disaggregated by product line:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Consumables
 
$
444,850

 
$
461,040

 
$
887,808

 
$
902,931

Equipment
 
332,158

 
329,012

 
648,374

 
644,817

     Net sales
 
$
777,008

 
$
790,052

 
$
1,536,182

 
$
1,547,748


Consumable sales consist of electrodes, fluxes, specialty welding consumables and brazing and soldering alloys. Equipment sales consist of arc welding power sources, welding accessories, fabrication, plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, automation components, fume extraction equipment, CNC plasma and oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing. Consumable and Equipment products are sold within each of the Company’s operating segments.
Substantially all of the Company's sales arrangements are short-term in nature involving a single performance obligation. The Company recognizes revenue when the performance obligation is satisfied and control of the product is transferred to the customer based upon shipping terms.
Within the Equipment product line, there are certain customer contracts related to automation products that may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines the standalone selling price based on the prices charged to customers or using expected cost plus margin. In addition, certain customized automation performance obligations within the Equipment product line, are accounted for over time. Under this method, revenue recognition is primarily based upon the ratio of costs incurred to date compared with estimated total costs to complete. The cumulative impact of revisions to total estimated costs is reflected in the period of the change, including anticipated losses. Less than 10% of the Company's Net sales are recognized over time.
At June 30, 2019, the Company recorded $20,730 related to advance customer payments and $8,752 related to billings in excess of revenue recognized. These contract liabilities are included in Other current liabilities in the Condensed Consolidated Balance Sheets. At December 31, 2018, the balances related to advance customer payments and billings in excess of revenue recognized were $17,023 and $17,013, respectively. Substantially all of the Company’s contract liabilities are recognized within twelve months based on contract duration. The Company records an asset for contracts where it has recognized revenue, but has not yet invoiced the customer for goods or services. At June 30, 2019 and December 31, 2018, $32,705 and $25,032, respectively, related to these future customer receivables was included in Other current assets in the Condensed Consolidated Balance Sheets. Contract asset amounts are expected to be billed within the next twelve months.

10

Table of Contents
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts


NOTE 3 — EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Numerator:
 

 
 

 
 

 
 

Net income
$
85,452

 
$
68,864

 
$
156,932

 
$
129,688

Denominator (shares in 000's):
 

 
 

 
 

 
 

Basic weighted average shares outstanding
62,305

 
65,337

 
62,733

 
65,458

Effect of dilutive securities - Stock options and awards
665

 
784

 
686

 
799

Diluted weighted average shares outstanding
62,970

 
66,121

 
63,419

 
66,257

Basic earnings per share
$
1.37

 
$
1.05

 
$
2.50

 
$
1.98

Diluted earnings per share
$
1.36

 
$
1.04

 
$
2.47

 
$
1.96


For the three months ended June 30, 2019 and 2018, common shares subject to equity-based awards of 548,049 and 346,168, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. For the six months ended June 30, 2019 and 2018, common shares subject to equity-based awards of 346,168 and 303,207, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

NOTE 4 — ACQUISITIONS
During July 2019, the Company acquired the controlling stake of Kaynak Tekniği Sanayi ve Ticaret A.Ş. (“Askaynak”). Askaynak is a supplier and manufacturer of welding consumables, arc welding equipment, including plasma and oxy-fuel cutting equipment, and robotic welding systems located in Turkey. The acquisition advances the Company's regional growth strategy in Europe, the Middle East and Africa.
During April 2019, the Company acquired Baker Industries, Inc. ("Baker"). Baker, based in Detroit, Michigan, is a provider of custom tooling, parts and fixtures primarily serving automotive and aerospace markets. The acquisition compliments the Company's automation portfolio and its metal additive manufacturing service business.
During December 2018, the Company acquired the soldering business of Worthington Industries (“Worthington”). The Worthington business, based in Winston Salem, North Carolina, broadens The Harris Products Group’s portfolio of industry-leading consumables with the addition of premium solders and fluxes.
Also during December 2018, the Company acquired Coldwater Machine Company (“Coldwater”) and Pro Systems. Coldwater, based in Coldwater, Ohio, is a flexible automation integrator and precision machining and assembly manufacturer serving diverse end markets. Pro Systems, based in Churubusco, Indiana, is an automation systems designer and integrator serving automotive, industrial, electrical and medical applications. The acquisitions accelerate growth and expand the Company’s industry-leading portfolio of automated cutting and joining solutions.
Also during December 2018, the Company acquired Inovatech Engineering Corporation (“Inovatech”). Inovatech, based in Ontario, Canada, is a manufacturer of advanced robotic plasma cutting solutions for structural steel applications. The acquisition scales the Company's automated cutting solutions and application expertise and supports long-term growth in that market.
Pro forma information related to the acquisitions discussed above has not been presented because the impact on the Company’s Consolidated Statements of Income is not material. Acquired companies are included in the Company's consolidated financial statements as of the date of acquisition.


11

Table of Contents
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts


NOTE 5 — SEGMENT INFORMATION
The Company's business units are aligned into three operating segments. The operating segments consist of Americas Welding, International Welding and The Harris Products Group.  The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global cutting, soldering and brazing businesses as well as its retail business in the United States.
Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the adjusted earnings before interest and income taxes (“Adjusted EBIT”) profit measure.  EBIT is defined as Operating income plus Other income (expense). EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets.

12

Table of Contents
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts


The following table presents Adjusted EBIT by segment:
 
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

 
 
 
 
 
 
 
 
 
 
Adjusted EBIT
$
84,851

 
$
15,178

 
$
13,488

 
$
(3,969
)
 
$
109,548

Special items charge (gain) (1)
1,779

 
(2,627
)
 

 
1,014

 
166

EBIT
$
83,072

 
$
17,805

 
$
13,488

 
$
(4,983
)
 
$
109,382

Interest income
 

 
 

 
 

 
 

 
592

Interest expense
 

 
 

 
 

 
 

 
(6,490
)
Income before income taxes
 

 
 

 
 

 
 

 
$
103,484

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

 
 
 
 
 
 
 
 
 
 
Adjusted EBIT
$
88,158

 
$
16,276

 
$
10,157

 
$
(3,186
)
 
$
111,405

Special items charge (gain) (2)

 
11,542

 

 
788

 
12,330

EBIT
$
88,158

 
$
4,734

 
$
10,157

 
$
(3,974
)
 
$
99,075

Interest income
 

 
 

 
 

 
 

 
1,808

Interest expense
 

 
 

 
 

 
 

 
(6,620
)
Income before income taxes
 

 
 

 
 

 
 

 
$
94,263

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

 
 
 
 
 
 
 
 
 
 
Adjusted EBIT
$
166,603

 
$
28,515

 
$
24,007

 
$
(7,011
)
 
$
212,114

Special items charge (gain) (1)
3,115

 
(428
)
 

 
1,804

 
4,491

EBIT
$
163,488

 
$
28,943

 
$
24,007

 
$
(8,815
)
 
$
207,623

Interest income
 

 
 

 
 

 
 

 
1,556

Interest expense
 

 
 

 
 

 
 
 
(12,777
)
Income before income taxes
 

 
 

 
 

 
 

 
$
196,402

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

 
 
 
 
 
 
 
 
 
 
Adjusted EBIT
$
165,597

 
$
31,249

 
$
19,382

 
$
(3,344
)
 
$
212,884

Special items charge (gain) (2)
758

 
21,717

 

 
2,695

 
25,170

EBIT
$
164,839

 
$
9,532

 
$
19,382

 
$
(6,039
)
 
$
187,714

Interest income
 

 
 

 
 

 
 

 
3,280