Lincoln Electric Reports Second Quarter 2020 Results

Monday, 27. July 2020 13:30

Second Quarter 2020 Highlights

  • Net sales decline 24.0% on lower organic sales
  • Operating income margin of 6.7%; Adjusted operating income margin of 10.7%
  • EPS of $0.45; Adjusted EPS of $0.80
  • Solid balance sheet profile and strong cash flow generation with 189% cash conversion
  • Cost reduction actions now estimated to provide $55 to $65 million of benefits in 2020

CLEVELAND, July 27, 2020 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported second quarter 2020 net income of $27.0 million, or diluted earnings per share (EPS) of $0.45, which includes special item after-tax net charges of $21.0 million, or $0.35 EPS.  This compares with prior year period net income of $85.5 million, or $1.36 EPS, which included special item after-tax net benefits of $4.6 million, or $0.08 EPS.  Excluding these items, second quarter 2020 adjusted net income was $48.0 million, or $0.80 EPS.  This compares with $80.9 million, or $1.28 EPS in the prior year period.  The effective tax rate was 19.8% in the second quarter 2020 as compared with 17.4% in the prior year period.  Excluding special items, the adjusted effective tax rate was 20.3%, or 22.0% in the comparable 2019 period.

Second quarter 2020 sales decreased 24.0% to $590.7 million from a 24.8% decrease in organic sales and 1.1% unfavorable foreign exchange, partially offset by a 2.0% benefit from acquisitions.  Operating income for the second quarter 2020 was $39.8 million, or 6.7% of sales, including $23.2 million in rationalization and asset impairment charges, which are primarily non-cash charges.  This compares with operating income of $105.2 million, or 13.5% of sales, in the prior year period.  Excluding special items, adjusted operating income was $63.0 million, or 10.7% of sales, as compared with $105.9 million, or 13.6% of sales, in the prior year period.

“As we navigate through the pandemic, I am proud of how effectively we are managing employee safety while serving our customers,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “We continued to generate strong cash flows and increased liquidity, while achieving solid second quarter profitability through aggressive cost management." Mapes commented, “As the pace of recovery remains uncertain, we have expanded our cost action initiatives and now expect to generate $55 to $65 million in realized cost savings in 2020. We remain confident in our disciplined management of the business, strong cash flow generation, returns, and balance sheet profile.”

Six Months 2020 Summary

Net income for the six months ended June 30, 2020 was $82.6 million, or $1.37 EPS.  This compares with $156.9 million, or $2.47 EPS, in the comparable 2019 period.  Reported EPS includes special item after-tax charges of $26.3 million or $0.44 EPS, as compared with special item after-tax net benefits of $1.1 million, or $0.01 EPS in the prior year period.  Excluding these items, adjusted net income for the six months ended June 30, 2020
decreased 30.1% to $108.9 million, or $1.81 EPS, compared with $155.9 million, or $2.46 EPS, in the comparable 2019 period.  The effective tax rate was 24.7% for the six months ended June 30, 2020 as compared with 20.1% in the prior year period.  Excluding special items, the adjusted effective tax rate was 24.1%, which compares to 22.4% in the comparable 2019 period.

Sales decreased 15.8% to $1.3 billion in the six months ended June 30, 2020 from a 17.3% decrease in organic sales, 1.2% unfavorable foreign exchange, partially offset by a 2.6% benefit from acquisitions.  Operating income for the six months ended June 30, 2020 was $120.8 million, or 9.3% of sales.  This compares with operating income of $199.7 million, or 13.0% of sales, in the comparable 2019 period.  Excluding special items, adjusted operating income was $151.4 million, or 11.7% of sales, as compared with $204.7 million, or 13.3% of sales, in the comparable 2019 period.

Webcast Information

A conference call to discuss second quarter 2020 financial results will be webcast live today, July 27, 2020, at 10:00 a.m., Eastern Time.  This webcast is accessible at https://ir.lincolnelectric.com.  Listeners should go to the web site prior to the call to register, download and install any necessary audio software.  A replay of the webcast will be available on the Company's web site.

If investors would like to ask questions, please dial (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 9627497.  Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the second quarter 2020 can also be obtained at https://ir.lincolnelectric.com.

About Lincoln Electric

Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment and has a leading global position in brazing and soldering alloys.  Headquartered in Cleveland, Ohio, Lincoln has 59 manufacturing locations in 18 countries and a worldwide network of distributors and sales offices covering more than 160 countries.  For more information about Lincoln Electric and its products and services, visit the Company’s website at https://www.lincolnelectric.com.

Non-GAAP Information

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

Forward-Looking Statements

The Company’s expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements reflect management’s current expectations and involve a number of risks and uncertainties.  Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning.  Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results.  The factors include, but are not limited to: general economic, financial and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of
pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as political unrest, acts of terror, natural disasters and pandemics, including the current coronavirus disease ("COVID-19") outbreak, on the Company or its customers, suppliers and the economy in general.  The Company has experienced the negative impacts of COVID-19 on its markets and operations; however, the ultimate duration and severity on the Company's business remains unknown.  New and changing government actions to address the COVID- 19 pandemic continue to occur on a regular basis.  As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions have had to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although many of the Company’s customers have begun to re-open or increase operating levels, such customers may be forced to close or limit operations as any new COVID-19 outbreaks occur.  Even as government restrictions are lifted and economies gradually reopen, the shape of the economic recovery is uncertain and may continue to negatively impact the Company's results of operations, cash flows and financial position in subsequent quarters.  Given this current level of economic and operational uncertainty over the impacts of COVID-19, the ultimate financial impact cannot be reasonably estimated at this time. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and on Form 10-Q for the quarter ended March 31, 2020.


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
  2020 % of Sales 2019 % of Sales $ %
Net sales $590,727  100.0% $777,008  100.0% $(186,281) (24.0%)
Cost of goods sold 401,349  67.9% 507,127  65.3% 105,778  20.9%
Gross profit 189,378  32.1% 269,881  34.7% (80,503) (29.8%)
Selling, general & administrative expenses 126,376  21.4% 163,388  21.0% 37,012  22.7%
Rationalization and asset impairment charges 23,238  3.9% 1,307  0.2% (21,931) (1,678.0%)
Operating income 39,764  6.7% 105,186  13.5% (65,422) (62.2%)
Interest expense, net 5,881  1.0% 5,898  0.8% 17  0.3%
Other income (expense) (203)   4,196  0.5% (4,399) (104.8%)
Income before income taxes 33,680  5.7% 103,484  13.3% (69,804) (67.5%)
Income taxes 6,667  1.1% 18,040  2.3% 11,373  63.0%
Effective tax rate 19.8%   17.4%   (2.4%)  
Net income including non-controlling interests 27,013  4.6% 85,444  11.0% (58,431) (68.4%)
Non-controlling interests in subsidiaries’ income (loss) 17    (8)   25  312.5%
Net income $26,996  4.6% $85,452  11.0% $(58,456) (68.4%)
             
Basic earnings per share $0.45    $1.37    $(0.92) (67.2%)
Diluted earnings per share $0.45    $1.36    $(0.91) (66.9%)
Weighted average shares (basic) 59,354    62,305       
Weighted average shares (diluted) 59,831    62,970       
  Six Months Ended June 30, Fav (Unfav) to
Prior Year
  2020 % of Sales 2019 % of Sales $ %
Net sales $1,292,718  100.0% $1,536,182  100.0% $(243,464) (15.8%)
Cost of goods sold 866,018  67.0% 1,007,880  65.6% 141,862  14.1%
Gross profit 426,700  33.0% 528,302  34.4% (101,602) (19.2%)
Selling, general & administrative expenses 276,103  21.4% 323,796  21.1% 47,693  14.7%
Rationalization and asset impairment charges 29,759  2.3% 4,842  0.3% (24,917) (514.6%)
Operating income 120,838  9.3% 199,664  13.0% (78,826) (39.5%)
Interest expense, net 11,339  0.9% 11,221  0.7% (118) (1.1%)
Other income (expense) 106    7,959  0.5% (7,853) (98.7%)
Income before income taxes 109,605  8.5% 196,402  12.8% (86,797) (44.2%)
Income taxes 27,037  2.1% 39,492  2.6% 12,455  31.5%
Effective tax rate 24.7%   20.1%   (4.6%)  
Net income including non-controlling interests 82,568  6.4% 156,910  10.2% (74,342) (47.4%)
Non-controlling interests in subsidiaries’ income (loss) 10    (22)   32  145.5%
Net income $82,558  6.4% $156,932  10.2% $(74,374) (47.4%)
             
Basic earnings per share $1.38    $2.50    $(1.12) (44.8%)
Diluted earnings per share $1.37    $2.47    $(1.10) (44.5%)
Weighted average shares (basic) 59,769    62,733       
Weighted average shares (diluted) 60,300    63,419       
               


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

Balance Sheet Highlights

Selected Consolidated Balance Sheet Data June 30, 2020 December 31, 2019
Cash and cash equivalents $143,055  $199,563 
Total current assets 1,007,779  1,075,581 
Property, plant and equipment, net 502,249  529,344 
Total assets 2,199,039  2,371,213 
Total current liabilities 568,571  563,135 
Short-term debt (1) 49,597  34,969 
Long-term debt, less current portion 715,817  712,302 
Total equity 660,111  819,077 
     
Operating Working Capital June 30, 2020 December 31, 2019
Accounts receivable, net $339,102  $374,649 
Inventories 417,525  393,748 
Trade accounts payable 226,799  273,002 
Operating working capital $529,828  $495,395 
     
Average operating working capital to Net sales (2) 22.4% 16.8%
     
Invested Capital June 30, 2020 December 31, 2019
Short-term debt (1) $49,597  $34,969 
Long-term debt, less current portion 715,817  712,302 
Total debt 765,414  747,271 
Total equity 660,111  819,077 
Invested capital $1,425,525  $1,566,348 
     
Total debt / invested capital 53.7% 47.7%
  1. Includes current portion of long-term debt.
  2. Average operating working capital to Net sales is defined as operating working capital as of period end divided by annualized rolling three months of Net sales.


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

  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Operating income as reported $39,764  $105,186  $120,838  $199,664 
Special items (pre-tax):        
Rationalization and asset impairment charges (2) 23,238  1,307  29,759  4,842 
Acquisition transaction and integration costs (3)   1,014    1,804 
Amortization of step up in value of acquired inventories (4)   1,399  806  1,399 
Gains on asset disposals (5)   (3,045)   (3,045)
Adjusted operating income (1) $63,002  $105,861  $151,403  $204,664 
As a percent of total sales 10.7% 13.6% 11.7% 13.3%
         
Net income as reported $26,996  $85,452  $82,558  $156,932 
Special items:        
Rationalization and asset impairment charges (2) 23,238  1,307  29,759  4,842 
Acquisition transaction and integration costs (3)   1,014    1,804 
Pension settlement charges (6) 3,334    3,334   
Amortization of step up in value of acquired inventories (4)   1,399  806  1,399 
Gains on asset disposals (5)   (3,554)   (3,554)
Tax effect of Special items (7) (5,576) (4,751) (7,552) (5,564)
Adjusted net income (1) 47,992  80,867  108,905  155,859 
Non-controlling interests in subsidiaries’ loss 17  (8) 10  (22)
Interest expense, net 5,881  5,898  11,339  11,221 
Income taxes as reported 6,667  18,040  27,037  39,492 
Tax effect of Special items (7) 5,576  4,751  7,552  5,564 
Adjusted EBIT (1) $66,133  $109,548  $154,843  $212,114 
         
Effective tax rate as reported 19.8% 17.4% 24.7% 20.1%
Net special item tax impact 0.5% 4.6% (0.6%) 2.3%
Adjusted effective tax rate (1) 20.3% 22.0% 24.1% 22.4%
         
Diluted earnings per share as reported $0.45  $1.36  $1.37  $2.47 
Special items per share 0.35  (0.08) 0.44  (0.01)
Adjusted diluted earnings per share (1) $0.80  $1.28  $1.81  $2.46 
         
Weighted average shares (diluted) 59,831  62,970  60,300  63,419 
  1. Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate and Adjusted diluted earnings per share are non-GAAP financial measures.  Refer to Non-GAAP Information section.
  2. Primarily related to severance, asset impairments of long-lived assets and gains or losses on the disposal of assets.
  3. Related to the acquisition of Air Liquide Welding and are included in Selling, general & administrative expenses.
  4. Related to an acquisition and are included in Cost of goods sold.
  5. Primarily included in Cost of goods sold.
  6. Related to lump sum pension payments and are included in Other income (expense).
  7. 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 2020 2019
Net income as reported $218,735  $314,310 
Rationalization and asset impairment charges 40,105  8,410 
Acquisition transaction and integration costs   3,607 
Pension settlement charges 3,334  5,928 
Amortization of step up in value of acquired inventories 2,415  1,399 
Gains on asset disposals   (3,554)
Gain on change in control (7,601)  
Tax effect of Special items (2) (9,374) (11,295)
Adjusted net income (1) $247,614  $318,805 
Plus: Interest expense, net of tax of $6,439 and $6,178 in 2020 and 2019, respectively 19,348  18,569 
Less: Interest income, net of tax of $563 and $1,302 in 2020 and 2019, respectively 1,691  3,912 
Adjusted net income before tax-effected interest $265,271  $333,462 
     
Invested Capital June 30, 2020 June 30, 2019
Short-term debt $49,597  $30,110 
Long-term debt, less current portion 715,817  710,458 
Total debt 765,414  740,568 
Total equity 660,111  846,058 
Invested capital $1,425,525  $1,586,626 
     
Return on invested capital (1) 18.6% 21.0%
     
  Twelve Months Ended June 30,
Total Debt / EBITDA 2020 2019
Net income as reported $218,735  $314,310 
Income taxes 62,955  72,377 
Interest expense, net 23,533  19,533 
Depreciation and amortization 83,313  75,275 
EBITDA (1) $388,536  $481,495 
     
  June 30, 2020 June 30, 2019
Total debt $765,414  $740,568 
     
Total debt / EBITDA 1.97  1.54 
  1. Adjusted net income, Return on invested capital and EBITDA are non-GAAP financial measures.  Refer to Non-GAAP Information section.
  2. Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended 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)

Condensed Consolidated Statements of Cash Flows

  Three Months Ended June 30,
  2020 2019
OPERATING ACTIVITIES:    
Net income $26,996  $85,452 
Non-controlling interests in subsidiaries’ income (loss) 17  (8)
Net income including non-controlling interests 27,013  85,444 
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:    
Rationalization and asset impairment net charges (gains) 22,141  (355)
Depreciation and amortization 20,050  20,351 
Equity earnings in affiliates, net (81) (769)
Other non-cash items, net (1,106) 1,325 
Changes in operating assets and liabilities, net of effects from acquisitions:    
Decrease in accounts receivable 49,364  5,629 
Increase in inventories (12,977) (13,129)
Decrease in trade accounts payable (23,439) (362)
Net change in other current assets and liabilities 20,717  28,595 
Net change in other long-term assets and liabilities 2,359  (622)
NET CASH PROVIDED BY OPERATING ACTIVITIES 104,041  126,107 
     
INVESTING ACTIVITIES:    
Capital expenditures (13,183) (20,262)
Acquisition of businesses, net of cash acquired   (107,843)
Proceeds from sale of property, plant and equipment 118  8,410 
NET CASH USED BY INVESTING ACTIVITIES (13,065) (119,695)
     
FINANCING ACTIVITIES:    
Net change in borrowings (82,682) 29,980 
Proceeds from exercise of stock options 955  323 
Purchase of shares for treasury (3,213) (85,330)
Cash dividends paid to shareholders (29,139) (29,541)
NET CASH USED BY FINANCING ACTIVITIES (114,079) (84,568)
     
Effect of exchange rate changes on Cash and cash equivalents 2,783  883 
DECREASE IN CASH AND CASH EQUIVALENTS (20,320) (77,273)
Cash and cash equivalents at beginning of period 163,375  267,134 
Cash and cash equivalents at end of period $143,055  $189,861 
     
Cash dividends paid per share $0.49  $0.47 
         


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

Condensed Consolidated Statements of Cash Flows

  Six Months Ended June 30,
  2020 2019
OPERATING ACTIVITIES:    
Net income $82,558  $156,932 
Non-controlling interests in subsidiaries’ income (loss) 10  (22)
Net income including non-controlling interests 82,568  156,910 
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:    
Rationalization and asset impairment net charges 21,905  1,069 
Depreciation and amortization 41,078  39,252 
Equity earnings in affiliates, net (243) (1,217)
Other non-cash items, net (5,288) 5,719 
Changes in operating assets and liabilities, net of effects from acquisitions:    
Decrease (increase) in accounts receivable 23,666  (21,271)
Increase in inventories (30,378) (27,767)
Decrease in trade accounts payable (40,115) (15,469)
Net change in other current assets and liabilities 32,410  13,947 
Net change in other long-term assets and liabilities 410  812 
NET CASH PROVIDED BY OPERATING ACTIVITIES 126,013  151,985 
     
INVESTING ACTIVITIES:    
Capital expenditures (25,011) (36,513)
Acquisition of businesses, net of cash acquired   (107,843)
Proceeds from sale of property, plant and equipment 6,218  8,712 
Other investing activities   2,000 
NET CASH USED BY INVESTING ACTIVITIES (18,793) (133,644)
     
FINANCING ACTIVITIES:    
Net change in borrowings 15,095  29,977 
Proceeds from exercise of stock options 2,002  960 
Purchase of shares for treasury (112,975) (160,914)
Cash dividends paid to shareholders (59,814) (60,101)
NET CASH USED BY FINANCING ACTIVITIES (155,692) (190,078)
     
Effect of exchange rate changes on Cash and cash equivalents (8,036) 2,749 
DECREASE IN CASH AND CASH EQUIVALENTS (56,508) (168,988)
Cash and cash equivalents at beginning of period 199,563  358,849 
Cash and cash equivalents at end of period $143,055  $189,861 
     
Cash dividends paid per share $0.98  $0.94 
         


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

  Americas Welding International Welding The Harris
Products Group
 Corporate /
Eliminations
 Consolidated
Three months ended June 30, 2020          
Net sales $333,229  $177,167  $80,331  $  $590,727 
Inter-segment sales 27,493  4,286  1,753  (33,532)  
Total $360,722  $181,453  $82,084  $(33,532) $590,727 
           
Net income         $26,996 
As a percent of total sales         4.6%
           
EBIT (1) $20,695  $9,117  $11,713  $(1,964) $39,561 
As a percent of total sales 5.7% 5.0% 14.3%   6.7%
Special items charges (gains) (3) 26,007  565      26,572 
Adjusted EBIT (2) $46,702  $9,682  $11,713  $(1,964) $66,133 
As a percent of total sales 12.9% 5.3% 14.3%   11.2%
           
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) (4) 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%
  1. EBIT is defined as Operating income plus Other income (expense).
  2. The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
  3. Special items in 2020 reflect Rationalization and asset impairment charges of $22,673 and $565 in Americas Welding and International Welding, respectively, and pension settlement charges of $3,334 in Americas Welding,
  4. 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.


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

  Americas Welding International Welding The Harris
Products Group
 Corporate /
Eliminations
 Consolidated
Six months ended June 30, 2020          
Net sales $751,764  $375,090  $165,864  $  $1,292,718 
Inter-segment sales 52,276  8,769  3,478  (64,523)  
Total $804,040  $383,859  $169,342  $(64,523) $1,292,718 
           
Net income         $82,558 
As a percent of total sales         6.4%
           
EBIT (1) $90,207  $9,595  $24,205  $(3,063) $120,944 
As a percent of total sales 11.2% 2.5% 14.3%   9.4%
Special items charges (gains) (3) 27,197  6,702      33,899 
Adjusted EBIT (2) $117,404  $16,297  $24,205  $(3,063) $154,843 
As a percent of total sales 14.6% 4.2% 14.3%   12.0%
           
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) (4) 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%
  1. EBIT is defined as Operating income plus Other income (expense).
  2. The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
  3. Special items in 2020 reflect Rationalization and asset impairment charges of $23,863 and $5,896 in Americas Welding and International Welding, respectively, amortization of step up in value of acquired inventories of $806 in International Welding related to an acquisition, and pension settlement charges of $3,334 in Americas Welding,
  4. 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.


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
2019
 Volume Acquisitions Price Foreign
Exchange
 Net Sales
2020
Operating Segments            
Americas Welding $476,607  $(139,035) $  $(1,405) $(2,938) $333,229 
International Welding 212,306  (44,452) 15,219  (1,280) (4,626) 177,167 
The Harris Products Group 88,095  (6,891)   278  (1,151) 80,331 
Consolidated $777,008  $(190,378) $15,219  $(2,407) $(8,715) $590,727 
             
% Change            
Americas Welding   (29.2%)   (0.3%) (0.6%) (30.1%)
International Welding   (20.9%) 7.2% (0.6%) (2.2%) (16.6%)
The Harris Products Group   (7.8%)   0.3% (1.3%) (8.8%)
Consolidated   (24.5%) 2.0% (0.3%) (1.1%) (24.0%)
             
Six Months Ended June 30th Change in Net Sales by Segment
       
    Change in Net Sales due to:  
  Net Sales
2019
 Volume Acquisitions Price Foreign
Exchange
 Net Sales
2020
Operating Segments            
Americas Welding $934,326  $(176,727) $6,190  $(6,797) $(5,228) $751,764 
International Welding 430,392  (74,959) 33,521  (2,971) (10,893) 375,090 
The Harris Products Group 171,464  (4,091)   601  (2,110) 165,864 
Consolidated $1,536,182  $(255,777) $39,711  $(9,167) $(18,231) $1,292,718 
             
% Change            
Americas Welding    (18.9%) 0.7% (0.7%) (0.6%) (19.5%)
International Welding   (17.4%) 7.8% (0.7%) (2.5%) (12.8%)
The Harris Products Group   (2.4%)   0.4% (1.2%) (3.3%)
Consolidated   (16.7%) 2.6% (0.6%) (1.2%) (15.8%)
             

Contact

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

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