Lincoln Electric Reports Third Quarter 2020 Results

Tuesday, 27. October 2020 12:31
Third Quarter 2020 Highlights
• Net sales decline narrows to 8.5% on 8.3% lower organic sales
• Operating income margin of 11.6%; Adjusted operating income margin of 12.6%
• EPS of $0.97; Adjusted EPS of $1.10
• Solid balance sheet profile and strong cash flow generation with 117% cash conversion
• Cost reduction actions now estimated to provide $80 to $85 million of benefits in 2020
 

CLEVELAND, Oct. 27, 2020 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported third quarter 2020 net income of $58.5 million, or diluted earnings per share (EPS) of $0.97, which includes special item after-tax charges of $7.5 million, or $0.13 EPS. This compares with prior year period net income of $72.5 million, or $1.17 EPS, which included special item after-tax net benefits of $4.8 million, or $0.08 EPS. Excluding these items, third quarter 2020 Adjusted net income was $66.0 million, or $1.10 Adjusted EPS. This compares with Adjusted net income of $67.7 million, or $1.09 Adjusted EPS in the prior year period.

Third quarter 2020 sales decreased 8.5% to $668.9 million from an 8.3% decrease in organic sales and 0.2% unfavorable foreign exchange. Operating income for the third quarter 2020 was $77.8 million, or 11.6% of sales, including $6.3 million in rationalization and asset impairment charges. This compares with operating income of $88.5 million, or 12.1% of sales, in the prior year period. Excluding special items, Adjusted operating income was $84.1 million, or 12.6% of sales, as compared with $91.6 million, or 12.5% of sales, in the prior year period.

“We operated safely while supporting a rebound in demand across all of our regions and reportable segments in the third quarter," stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “Improved demand and diligent cost management generated solid profitability and earnings performance in the quarter.” Mapes continued, “Looking ahead, we are well-positioned to maximize growth and are focused on increasing profitability and returns to generate long-term value for our shareholders.”

Nine Months 2020 Summary

Net income for the nine months ended September 30, 2020 was $141.0 million, or $2.34 EPS, which includes special item after-tax charges of $33.9 million, or $0.57 EPS. This compares with prior year period net income of $229.4 million, or $3.64 EPS, which included special item after-tax net benefits of $5.8 million, or $0.09 EPS. Excluding these items, Adjusted net income for the nine months ended September 30, 2020 was $174.9 million, or $2.91 Adjusted EPS, compared with Adjusted net income of $223.6 million, or $3.55 Adjusted EPS, in the comparable 2019 period.

Sales decreased 13.5% to $2.0 billion in the nine months ended September 30, 2020 from a 14.3% decrease in organic sales and 0.9% unfavorable foreign exchange, partially offset by a 1.8% benefit from acquisitions. Operating income for the nine months ended September 30, 2020 was $198.6 million, or 10.1% of sales. This compares with operating income of $288.2 million, or 12.7% of sales, in the comparable 2019 period. Excluding special items, Adjusted operating income was $235.5 million, or 12.0% of sales, as compared with $296.3 million, or 13.1% of sales, in the comparable 2019 period.

Dividend

The Company's Board of Directors declared a 4.1% increase in the quarterly cash dividend, from $0.49 per share to $0.51 per share, or $2.04 per share on an annual basis. The declared quarterly cash dividend of $0.51 per share is payable January 15, 2021 to shareholders of record as of December 31, 2020.

Webcast Information

A conference call to discuss third quarter 2020 financial results will be webcast live today, October 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 3879509. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the third 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 Electric 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. As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions may have to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although most of the Company’s customers have re-opened and increased 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 reopen, the ultimate 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 quarters ended March 31, 2020 and June 30, 2020.


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

Consolidated Statements of Income

  Three Months Ended September 30, Fav (Unfav) to
Prior Year
  2020 % of Sales 2019 % of Sales $ %
Net sales $668,888  100.0% $730,783  100.0% $(61,895) (8.5%)
Cost of goods sold 453,501  67.8% 492,432  67.4% 38,931  7.9%
Gross profit 215,387  32.2% 238,351  32.6% (22,964) (9.6%)
Selling, general & administrative expenses 131,337  19.6% 148,312  20.3% 16,975  11.4%
Rationalization and asset impairment charges 6,257  0.9% 1,495  0.2% (4,762) (318.5%)
Operating income 77,793  11.6% 88,544  12.1% (10,751) (12.1%)
Interest expense, net 5,552  0.8% 6,400  0.9% 848  13.3%
Other income (expense) 1,062  0.2% 9,653  1.3% (8,591) (89.0%)
Income before income taxes 73,303  11.0% 91,797  12.6% (18,494) (20.1%)
Income taxes 14,797  2.2% 19,340  2.6% 4,543  23.5%
Effective tax rate 20.2%   21.1%   0.9%  
Net income including non-controlling interests 58,506  8.7% 72,457  9.9% (13,951) (19.3%)
Non-controlling interests in subsidiaries’ income (loss) 27    (4)   31  775.0%
Net income $58,479  8.7% $72,461  9.9% $(13,982) (19.3%)
             
Basic earnings per share $0.98    $1.18    $(0.20) (16.9%)
Diluted earnings per share $0.97    $1.17    $(0.20) (17.1%)
Weighted average shares (basic) 59,426    61,380       
Weighted average shares (diluted) 60,018    62,061       
  Nine Months Ended September 30, Fav (Unfav) to
Prior Year
  2020 % of Sales 2019 % of Sales $ %
Net sales $1,961,606  100.0% $2,266,965  100.0% $(305,359) (13.5%)
Cost of goods sold 1,319,519  67.3% 1,500,312  66.2% 180,793  12.1%
Gross profit 642,087  32.7% 766,653  33.8% (124,566) (16.2%)
Selling, general & administrative expenses 407,440  20.8% 472,108  20.8% 64,668  13.7%
Rationalization and asset impairment charges 36,016  1.8% 6,337  0.3% (29,679) (468.3%)
Operating income 198,631  10.1% 288,208  12.7% (89,577) (31.1%)
Interest expense, net 16,891  0.9% 17,621  0.8% 730  4.1%
Other income (expense) 1,168  0.1% 17,612  0.8% (16,444) (93.4%)
Income before income taxes 182,908  9.3% 288,199  12.7% (105,291) (36.5%)
Income taxes 41,834  2.1% 58,832  2.6% 16,998  28.9%
Effective tax rate 22.9%   20.4%   (2.5%)  
Net income including non-controlling interests 141,074  7.2% 229,367  10.1% (88,293) (38.5%)
Non-controlling interests in subsidiaries’ income (loss) 37    (26)   63  242.3%
Net income $141,037  7.2% $229,393  10.1% $(88,356) (38.5%)
             
Basic earnings per share $2.36    $3.68    $(1.32) (35.9%)
Diluted earnings per share $2.34    $3.64    $(1.30) (35.7%)
Weighted average shares (basic) 59,655    62,282       
Weighted average shares (diluted) 60,202    62,972       


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

Balance Sheet Highlights

Selected Consolidated Balance Sheet Data September 30, 2020 December 31, 2019
Cash and cash equivalents $152,479  $199,563 
Total current assets 1,026,211  1,075,581 
Property, plant and equipment, net 504,520  529,344 
Total assets 2,217,499  2,371,213 
Total current liabilities 533,161  563,135 
Short-term debt (1) 1,147  34,969 
Long-term debt, less current portion 715,687  712,302 
Total equity 710,744  819,077 
     
Operating Working Capital September 30, 2020 December 31, 2019
Accounts receivable, net $373,044  $374,649 
Inventories 396,214  393,748 
Trade accounts payable 226,494  273,002 
Operating working capital $542,764  $495,395 
     
Average operating working capital to Net sales (2) 20.3% 16.8%
     
Invested Capital September 30, 2020 December 31, 2019
Short-term debt (1) $1,147  $34,969 
Long-term debt, less current portion 715,687  712,302 
Total debt 716,834  747,271 
Total equity 710,744  819,077 
Invested capital $1,427,578  $1,566,348 
     
Total debt / invested capital 50.2% 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 September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
Operating income as reported $77,793  $88,544  $198,631  $288,208 
Special items (pre-tax):        
Rationalization and asset impairment charges (2) 6,257  1,495  36,016  6,337 
Acquisition transaction and integration costs (3)       1,804 
Amortization of step up in value of acquired inventories (4)   1,609  806  3,008 
Gains on asset disposals (5)       (3,045)
Adjusted operating income (1) $84,050  $91,648  $235,453  $296,312 
As a percent of total sales 12.6% 12.5% 12.0% 13.1%
         
Net income as reported $58,479  $72,461  $141,037  $229,393 
Special items:        
Rationalization and asset impairment charges (2) 6,257  1,495  36,016  6,337 
Acquisition transaction and integration costs (3)       1,804 
Pension settlement charges (5) 3,188    6,522   
Amortization of step up in value of acquired inventories (4)   1,609  806  3,008 
Gains on asset disposals (6)       (3,554)
Gain on change in control (7)   (7,601    (7,601)
Tax effect of Special items (8) (1,911) (255  (9,463) (5,819)
Adjusted net income (1) 66,013  67,709  174,918  223,568 
Non-controlling interests in subsidiaries’ income (loss) 27  (4) 37  (26)
Interest expense, net 5,552  6,400  16,891  17,621 
Income taxes as reported 14,797  19,340  41,834  58,832 
Tax effect of Special items (8) 1,911  255  9,463  5,819 
Adjusted EBIT (1) $88,300  $93,700  $243,143  $305,814 
         
Effective tax rate as reported 20.2% 21.1% 22.9% 20.4%
Net special item tax impact   1.3% (0.2%) 2.0%
Adjusted effective tax rate (1) 20.2% 22.4% 22.7% 22.4%
         
Diluted earnings per share as reported $0.97  $1.17  $2.34  $3.64 
Special items per share 0.13  (0.08) 0.57  (0.09)
Adjusted diluted earnings per share (1) $1.10  $1.09  $2.91  $3.55 
         
Weighted average shares (diluted) 60,018  62,061  60,202  62,972 
  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. Related to the acquisition of Askaynak and is included in Other income (expense).
  8. 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 nine months ended September 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 September 30,
Return on Invested Capital 2020 2019
Net income as reported $204,753  $316,232 
Rationalization and asset impairment charges 44,867  7,269 
Acquisition transaction and integration costs   2,637 
Pension settlement charges 6,522  1,696 
Amortization of step up in value of acquired inventories 806  3,008 
Gains on asset disposals   (3,554)
Gain on change in control   (7,601)
Tax effect of Special items (2) (11,030) (12,583)
Adjusted net income (1) $245,918  $307,104 
Plus: Interest expense, net of tax of $6,177 and $6,410 in 2020 and 2019, respectively 18,564  19,265 
Less: Interest income, net of tax of $513 and $926 in 2020 and 2019, respectively 1,543  2,785 
Adjusted net income before tax-effected interest $262,939  $323,584 
     
Invested Capital September 30, 2020 September 30, 2019
Short-term debt $1,147  $13,293 
Long-term debt, less current portion 715,687  713,884 
Total debt 716,834  727,177 
Total equity 710,744  813,808 
Invested capital $1,427,578  $1,540,985 
     
Return on invested capital (1) 18.4% 21.0%
     
  Twelve Months Ended September 30,
Total Debt / EBITDA 2020 2019
Net income as reported $204,753  $316,232 
Income taxes 58,412  66,508 
Interest expense, net 22,685  21,964 
Depreciation and amortization 81,653  78,800 
EBITDA (1) $367,503  $483,504 
     
  September 30, 2020 September 30, 2019
Total debt $716,834  $727,177 
     
Total debt / EBITDA 1.95  1.50 
  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 September 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 September 30,
  2020 2019
OPERATING ACTIVITIES:    
Net income $58,479  $72,461 
Non-controlling interests in subsidiaries’ income (loss) 27  (4)
Net income including non-controlling interests 58,506  72,457 
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:    
Rationalization and asset impairment charges 22   
Depreciation and amortization 19,488  21,148 
Equity earnings in affiliates, net (80) (49)
Gain on change in control   (7,601)
Other non-cash items, net 2,518  3,566 
Changes in operating assets and liabilities, net of effects from acquisitions:    
(Increase) decrease in accounts receivable (30,517) 45,374 
Decrease (increase) in inventories 26,948  (8,709)
Decrease in trade accounts payable (2,218) (18,733)
Net change in other current assets and liabilities 14,232  20,393 
Net change in other long-term assets and liabilities 649  835 
NET CASH PROVIDED BY OPERATING ACTIVITIES 89,548  128,681 
     
INVESTING ACTIVITIES:    
Capital expenditures (12,105) (17,038)
Acquisition of businesses, net of cash acquired   (28,892)
Proceeds from sale of property, plant and equipment 739  779 
NET CASH USED BY INVESTING ACTIVITIES (11,366) (45,151)
     
FINANCING ACTIVITIES:    
Net change in borrowings (48,230) (27,544)
Proceeds from exercise of stock options 5,959  5,250 
Purchase of shares for treasury (223) (61,028)
Cash dividends paid to shareholders (29,131) (29,061)
NET CASH USED BY FINANCING ACTIVITIES (71,625) (112,383)
     
Effect of exchange rate changes on Cash and cash equivalents 2,867  (4,396)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,424  (33,249)
Cash and cash equivalents at beginning of period 143,055  189,861 
Cash and cash equivalents at end of period $152,479  $156,612 
     
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

  Nine Months Ended September 30,
  2020 2019
OPERATING ACTIVITIES:    
Net income $141,037  $229,393 
Non-controlling interests in subsidiaries’ income (loss) 37  (26)
Net income including non-controlling interests 141,074  229,367 
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:    
Rationalization and asset impairment net charges 21,927  1,069 
Depreciation and amortization 60,566  60,400 
Equity earnings in affiliates, net (323) (1,266)
Gain on change in control   (7,601)
Other non-cash items, net (2,770) 9,285 
Changes in operating assets and liabilities, net of effects from acquisitions:    
(Increase) decrease in accounts receivable (6,851) 24,103 
Increase in inventories (3,430) (36,476)
Decrease in trade accounts payable (42,333) (34,202)
Net change in other current assets and liabilities 46,642  34,340 
Net change in other long-term assets and liabilities 1,059  1,647 
NET CASH PROVIDED BY OPERATING ACTIVITIES 215,561  280,666 
     
INVESTING ACTIVITIES:    
Capital expenditures (37,116) (53,551)
Acquisition of businesses, net of cash acquired   (136,735)
Proceeds from sale of property, plant and equipment 6,957  9,491 
Other investing activities   2,000 
NET CASH USED BY INVESTING ACTIVITIES (30,159) (178,795)
     
FINANCING ACTIVITIES:    
Net change in borrowings (33,135) 2,433 
Proceeds from exercise of stock options 7,961  6,210 
Purchase of shares for treasury (113,198) (221,942)
Cash dividends paid to shareholders (88,945) (89,162)
NET CASH USED BY FINANCING ACTIVITIES (227,317) (302,461)
     
Effect of exchange rate changes on Cash and cash equivalents (5,169) (1,647)
DECREASE IN CASH AND CASH EQUIVALENTS (47,084) (202,237)
Cash and cash equivalents at beginning of period 199,563  358,849 
Cash and cash equivalents at end of period $152,479  $156,612 
     
Cash dividends paid per share $1.47  $1.41 


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

  Americas Welding International Welding The Harris
Products Group
 Corporate /
Eliminations
 Consolidated
Three months ended September 30, 2020
        
Net sales $371,535  $196,937  $100,416  $  $668,888 
Inter-segment sales 29,368  4,898  1,898  (36,164)  
Total $400,903  $201,835  $102,314  $(36,164) $668,888 
           
Net income         $58,479 
As a percent of total sales         8.7%
           
EBIT (1) $52,076  $11,031  $17,587  $(1,839) $78,855 
As a percent of total sales 13.0% 5.5% 17.2%   11.8%
Special items charges (gains) (3) 7,044  2,401      9,445 
Adjusted EBIT (2) $59,120  $13,432  $17,587  $(1,839) $88,300 
As a percent of total sales 14.7% 6.7% 17.2%   13.2%
           
Three months ended September 30, 2019
        
Net sales $443,521  $205,378  $81,884  $  $730,783 
Inter-segment sales 31,101  4,441  1,857  (37,399)  
Total $474,622  $209,819  $83,741  $(37,399) $730,783 
           
Net income         $72,461 
As a percent of total sales         9.9%
           
EBIT (1) $74,110  $14,681  $11,038  $(1,632) $98,197 
As a percent of total sales 15.6% 7.0% 13.2%   13.4%
Special items charges (gains) (4)   (4,497)     (4,497)
Adjusted EBIT (2) $74,110  $10,184  $11,038  $(1,632) $93,700 
As a percent of total sales 15.6% 4.9% 13.2%   12.8%
  1. EBIT is defined as Operating income plus Other income (expense).
  2. The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
  3. Special items in 2020 reflect Rationalization and asset impairment charges of $3,856 and $2,401 in Americas Welding and International Welding, respectively, and pension settlement charges of $3,188 in Americas Welding.
  4. Special items in 2019 reflect Rationalization and asset impairment charges of $1,495, amortization of step up in value of acquired inventories of $1,609 and a gain on change in control of $7,601 related to the acquisition of Askaynak in International Welding.


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

  Americas Welding International Welding The Harris
Products Group
 Corporate /
Eliminations
 Consolidated
Nine months ended September 30, 2020        
Net sales $1,123,299  $572,027  $266,280  $  $1,961,606 
Inter-segment sales 81,644  13,667  5,376  (100,687)   
Total $1,204,943  $585,694  $271,656  $(100,687)  $1,961,606 
           
Net income         $141,037 
As a percent of total sales         7.2%
           
EBIT (1) $142,283  $20,626  $41,792  $(4,902)  $199,799 
As a percent of total sales 11.8% 3.5% 15.4%   10.2%
Special items charges (gains) (3) 34,241  9,103      43,344 
Adjusted EBIT (2) $176,524  $29,729  $41,792  $(4,902)  $243,143 
As a percent of total sales 14.6% 5.1% 15.4%   12.4%
           
Nine months ended September 30, 2019
        
Net sales $1,377,847  $635,770  $253,348  $  $2,266,965 
Inter-segment sales 95,300  12,838  5,837  (113,975)   
Total $1,473,147  $648,608  $259,185  $(113,975)  $2,266,965 
           
Net income         $229,393 
As a percent of total sales         10.1%
           
EBIT (1) $237,598  $43,624  $35,045  $(10,447)  $305,820 
As a percent of total sales 16.1% 6.7% 13.5%   13.5%
Special items charges (gains) (4) 3,115  (4,925)    1,804  (6) 
Adjusted EBIT (2) $240,713  $38,699  $35,045  $(8,643)  $305,814 
As a percent of total sales 16.3% 6.0% 13.5%   13.5%
  1. EBIT is defined as Operating income plus Other income (expense).
  2. The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
  3. Special items in 2020 reflect Rationalization and asset impairment charges of $27,719 and $8,297 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 $6,522 in Americas Welding,
  4. Special items in 2019 reflect Rationalization and asset impairment charges of $1,716 in Americas Welding and $4,621 in International Welding, amortization of step up in value of acquired inventories of $1,399 in Americas Welding and $1,609 in International Welding, gains on disposals of assets of $3,554 and a gain on change in control of $7,601 related to the acquisition of Askaynak 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 September 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 $443,521  $(69,028) $  $(682) $(2,276) $371,535 
International Welding 205,378  (10,964)   70  2,453  196,937 
The Harris Products Group 81,884  10,461    9,472  (1,401) 100,416 
Consolidated $730,783   $(69,531) $—   $8,860   $(1,224 $668,888  
             
% Change            
Americas Welding   (15.6%)   (0.2%) (0.5%) (16.2%)
International Welding   (5.3%)     1.2% (4.1%)
The Harris Products Group   12.8%   11.6% (1.7%) 22.6%
Consolidated   (9.5 %) —   1.2 % (0.2 %) (8.5 %)
             
Nine Months Ended September 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 $1,377,847  $(245,755) $6,190  $(7,479) $(7,504) $1,123,299 
International Welding 635,770  (85,923) 33,521  (2,901) (8,440) 572,027 
The Harris Products Group 253,348  6,370    10,073  (3,511) 266,280 
Consolidated $2,266,965   $(325,308 $39,711   $(307 $(19,455 $1,961,606  
             
% Change            
Americas Welding % (17.8%) 0.4% (0.5%) (0.5%) (18.5%)
International Welding   (13.5%) 5.3% (0.5%) (1.3%) (10.0%)
The Harris Products Group   2.5%   4.0% (1.4%) 5.1%
Consolidated   (14.3 %) 1.8 % —   (0.9 %) (13.5 %)
             
Contact

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

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Related Links: Lincoln Electric Holdings Inc.
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