Lincoln Electric Reports Third Quarter 2019 Financial Results


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

LINCOLN ELECTRIC REPORTS THIRD QUARTER 2019 RESULTS
Third Quarter 2019 Highlights
§    Q3 EPS increases 9.3% to $1.17, Adjusted EPS decreases 9.9% to $1.09
§    ROIC increases 170 basis points to 21.0%
§    Cash flow from operations increases 21% to $129 million and achieved 165% cash conversion (1)
§    $90 million returned to shareholders through dividends and share repurchases
 
 
CLEVELAND, Wednesday, October 30, 2019 - Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported third quarter 2019 net income of $72.5 million, or diluted earnings per share (EPS) of $1.17, which includes special item after-tax net benefits of $4.8 million, or $0.08 EPS. This compares with prior year net income of $70.5 million, or $1.07 EPS, which included special item after-tax charges of $8.9 million, or $0.14 EPS. Excluding these items, third quarter 2019 adjusted net income was $67.7 million, or $1.09 EPS, as compared with $79.4 million, or $1.21 EPS in the prior year period. The effective tax rate was 21.1% in the third quarter 2019 as compared with 26.3% in the prior year period. Excluding special items, the adjusted effective tax rate was 22.4%, which compares to 23.3% in the comparable 2018 period.

Third quarter 2019 sales decreased 0.9% to $730.8 million from a 4.7% decrease in organic sales and 1.6% unfavorable foreign exchange, partially offset by a 5.4% benefit from acquisitions. Operating income for the third quarter 2019 was $88.5 million, or 12.1% of sales. This compares with operating income of $100.8 million, or 13.7% of sales, in the prior year period. On an adjusted basis, operating income was $91.6 million, or 12.5% of sales, as compared with $104.4 million, or 14.2% of sales, in the prior year period.

“We continued to achieve solid returns, cash flow generation and cash conversion despite slowing industrial sector demand and capital spending in the quarter,” stated Christopher L. Mapes, Chairman, President & CEO. “We are addressing this challenging portion of the cycle through additional cost management actions while continuing to invest for future growth.”

Nine Months 2019 Summary

Net income for the nine months ended September 30, 2019 was $229.4 million, or $3.64 EPS. This compares with $200.2 million, or $3.03 EPS, in the comparable 2018 period. Reported EPS includes special item after-tax net benefits of $5.8 million or $0.09 EPS, as compared with special item after-tax charges of $32.9 million, or $0.50 EPS in the prior year period. Excluding these items, adjusted net income for the nine months ended September 30, 2019 was $223.6 million, or $3.55 EPS, compared with $233.1 million, or $3.53 EPS, in the comparable 2018 period. The effective tax rate was 20.4% for the nine months ended September 30, 2019 as compared with 27.0% in the prior year period. Excluding special items, the adjusted effective tax rate was 22.4%, which compares to 24.1% in the comparable 2018 period.

Sales decreased 0.8% to $2.3 billion in the nine months ended September 30, 2019 from a 2.4% decrease in organic sales, 2.1% unfavorable foreign exchange, partially offset by a 3.7% benefit from acquisitions. Operating income for the nine months ended September 30, 2019 was $288.2 million, or 12.7% of sales. This compares with operating income of $280.6 million, or 12.3% of sales, in the comparable 2018 period. On an adjusted basis, operating income was $296.3 million, or 13.1% of sales, as compared with $308.6 million, or 13.5% of sales, in the comparable 2018 period.





______________________________________________________________________________
(1)
Cash conversion is defined as Net cash provided by operating activities less Capital expenditures divided by Adjusted net income.


Lincoln Electric Reports Third Quarter 2019 Financial Results


Dividend

The Company's Board of Directors declared a 4.3% increase in the quarterly cash dividend, from $0.47 per share to $0.49 per share, or $1.96 per share on an annual basis. The declared quarterly cash dividend of $0.49 per share is payable January 15, 2020 to shareholders of record as of December 31, 2019.

Webcast Information
 
A conference call to discuss third quarter 2019 financial results will be webcast live today, October 30, 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 5875799. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the third 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


Lincoln Electric Reports Third Quarter 2019 Financial Results


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 September 30,
 
Fav (Unfav) to
Prior Year
 
 
2019
 
% of Sales
 
2018
 
% of Sales
 
$
 
%
Net sales
 
$
730,783

 
100.0
%
 
$
737,099

 
100.0
%
 
$
(6,316
)
 
(0.9
%)
Cost of goods sold
 
492,432

 
67.4
%
 
485,547

 
65.9
%
 
(6,885
)
 
(1.4
%)
Gross profit
 
238,351

 
32.6
%
 
251,552

 
34.1
%
 
(13,201
)
 
(5.2
%)
Selling, general & administrative expenses
 
148,312

 
20.3
%
 
148,129

 
20.1
%
 
(183
)
 
(0.1
%)
Rationalization and asset impairment charges
 
1,495

 
0.2
%
 
2,636

 
0.4
%
 
1,141

 
43.3
%
Operating income
 
88,544

 
12.1
%
 
100,787

 
13.7
%
 
(12,243
)
 
(12.1
%)
Interest expense, net
 
6,400

 
0.9
%
 
3,969

 
0.5
%
 
(2,431
)
 
(61.2
%)
Other income (expense)
 
9,653

 
1.3
%
 
(1,074
)
 
0.1
%
 
10,727

 
998.8
%
Income before income taxes
 
91,797

 
12.6
%
 
95,744

 
13.0
%
 
(3,947
)
 
(4.1
%)
Income taxes
 
19,340

 
2.6
%
 
25,209

 
3.4
%
 
5,869

 
23.3
%
Effective tax rate
 
21.1
%
 
 

 
26.3
%
 
 

 
5.2
%
 
 
Net income including non-controlling interests
 
72,457

 
9.9
%
 
70,535

 
9.6
%
 
1,922

 
2.7
%
Non-controlling interests in subsidiaries’ loss
 
(4
)
 
—

 
(4
)
 
—

 
—

 
—

Net income
 
$
72,461

 
9.9
%
 
$
70,539

 
9.6
%
 
$
1,922

 
2.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.18

 
 

 
$
1.09

 
 

 
$
0.09

 
8.3
%
Diluted earnings per share
 
$
1.17

 
 

 
$
1.07

 
 

 
$
0.10

 
9.3
%
Weighted average shares (basic)
 
61,380

 
 

 
64,821

 
 

 
 

 
 

Weighted average shares (diluted)
 
62,061

 
 

 
65,652

 
 

 
 

 
 

 
 
Nine Months Ended September 30,
 
Fav (Unfav) to
Prior Year
 
 
2019
 
% of Sales
 
2018
 
% of Sales
 
$
 
%
Net sales
 
$
2,266,965

 
100.0
%
 
$
2,284,847

 
100.0
%
 
$
(17,882
)
 
(0.8
%)
Cost of goods sold
 
1,500,312

 
66.2
%
 
1,506,625

 
65.9
%
 
6,313

 
0.4
%
Gross profit
 
766,653

 
33.8
%
 
778,222

 
34.1
%
 
(11,569
)
 
(1.5
%)
Selling, general & administrative expenses
 
472,108

 
20.8
%
 
473,260

 
20.7
%
 
1,152

 
0.2
%
Rationalization and asset impairment charges
 
6,337

 
0.3
%
 
24,353

 
1.1
%
 
18,016

 
74.0
%
Operating income
 
288,208

 
12.7
%
 
280,609

 
12.3
%
 
7,599

 
2.7
%
Interest expense, net
 
17,621

 
0.8
%
 
13,222

 
0.6
%
 
(4,399
)
 
(33.3
%)
Other income (expense)
 
17,612

 
0.8
%
 
6,818

 
0.3
%
 
10,794

 
158.3
%
Income before income taxes
 
288,199

 
12.7
%
 
274,205

 
12.0
%
 
13,994

 
5.1
%
Income taxes
 
58,832

 
2.6
%
 
73,991

 
3.2
%
 
15,159

 
20.5
%
Effective tax rate
 
20.4
%
 
 

 
27.0
%
 
 

 
6.6
%
 


Net income including non-controlling interests
 
229,367

 
10.1
%
 
200,214

 
8.8
%
 
29,153

 
14.6
%
Non-controlling interests in subsidiaries’ loss
 
(26
)
 
—

 
(13
)
 
—

 
(13
)
 
(100.0
%)
Net income
 
$
229,393

 
10.1
%
 
$
200,227

 
8.8
%
 
$
29,166

 
14.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
3.68

 
 

 
$
3.07

 
 

 
$
0.61

 
19.9
%
Diluted earnings per share
 
$
3.64

 
 

 
$
3.03

 
 

 
$
0.61

 
20.1
%
Weighted average shares (basic)
 
62,282

 
 

 
65,245

 
 

 
 

 
 

Weighted average shares (diluted)
 
62,972

 
 

 
66,055

 
 

 
 

 
 




Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
 
Balance Sheet Highlights
 
Selected Consolidated Balance Sheet Data
 
September 30, 2019
 
December 31, 2018
Cash and cash equivalents
 
$
156,612

 
$
358,849

Total current assets
 
1,082,434

 
1,237,799

Property, plant and equipment, net
 
523,229

 
478,801

Total assets
 
2,361,160

 
2,349,825

Total current liabilities
 
572,437

 
538,182

Short-term debt (1)
 
13,293

 
111

Long-term debt, less current portion
 
713,884

 
702,549

Total equity
 
813,808

 
887,592

 
 
 
 
 
Operating Working Capital
 
September 30, 2019
 
December 31, 2018
Accounts receivable, net
 
$
395,355

 
$
396,885

Inventories
 
411,120

 
361,829

Trade accounts payable
 
243,837

 
268,600

Operating working capital
 
$
562,638

 
$
490,114

 
 
 
 
 
Average operating working capital to Net sales (2)
 
19.2
%
 
16.5
%
 
 
 
 
 
Invested Capital
 
September 30, 2019
 
December 31, 2018
Short-term debt (1)
 
$
13,293

 
$
111

Long-term debt, less current portion
 
713,884

 
702,549

Total debt
 
727,177

 
702,660

Total equity
 
813,808

 
887,592

Invested capital
 
$
1,540,985

 
$
1,590,252

 
 
 
 
 
Total debt / invested capital
 
47.2
%
 
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 September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Operating income as reported
 
$
88,544

 
$
100,787

 
$
288,208

 
$
280,609

Special items (pre-tax):
 
 
 
 
 
 
 
 
Rationalization and asset impairment charges (2)
 
1,495

 
2,636

 
6,337

 
24,353

Acquisition transaction and integration costs (3)
 
—

 
970

 
1,804

 
3,665

Amortization of step up in value of acquired inventories (4)
 
1,609

 
—

 
3,008

 
—

Gains on asset disposals (5)
 
—

 
—

 
(3,045
)
 
—

Adjusted operating income (1)
 
$
91,648

 
$
104,393

 
$
296,312

 
$
308,627

As a percent of total sales
 
12.5
%
 
14.2
 %
 
13.1
%
 
13.5
 %
 
 
 
 
 
 
 
 
 
Net income as reported
 
$
72,461

 
$
70,539

 
$
229,393

 
$
200,227

Special items:
 
 

 
 

 
 
 
 
Rationalization and asset impairment charges (2)
 
1,495

 
2,636

 
6,337

 
24,353

Acquisition transaction and integration costs (3)
 
—

 
970

 
1,804

 
3,665

Pension settlement charges (6)
 
—

 
4,232

 
—

 
4,990

Amortization of step up in value of acquired inventories (4)
 
1,609

 
—

 
3,008

 
—

Gains on asset disposals (5)
 
—

 
—

 
(3,554
)
 
—

Gain on change in control (7)
 
(7,601
)
 
—

 
(7,601
)
 
—

Tax effect of Special items (8)
 
(255
)
 
1,033

 
(5,819
)
 
(132
)
Adjusted net income (1)
 
67,709

 
79,410

 
223,568

 
233,103

Non-controlling interests in subsidiaries’ loss
 
(4
)
 
(4
)
 
(26
)
 
(13
)
Interest expense, net
 
6,400

 
3,969

 
17,621

 
13,222

Income taxes as reported
 
19,340

 
25,209

 
58,832

 
73,991

Tax effect of Special items (8)
 
255

 
(1,033
)
 
5,819

 
132

Adjusted EBIT (1)
 
$
93,700

 
$
107,551

 
$
305,814

 
$
320,435

 
 
 
 
 
 
 
 
 
Effective tax rate as reported
 
21.1
%
 
26.3
 %
 
20.4
%
 
27.0
 %
Net special item tax impact
 
1.3
%
 
(3.0
%)
 
2.0
%
 
(2.9
%)
Adjusted effective tax rate (1)
 
22.4
%
 
23.3
 %
 
22.4
%
 
24.1
 %
 
 
 
 
 
 
 
 
 
Diluted earnings per share as reported
 
$
1.17

 
$
1.07

 
$
3.64

 
$
3.03

Special items per share
 
(0.08
)
 
0.14

 
(0.09
)
 
0.50

Adjusted diluted earnings per share (1)
 
$
1.09

 
$
1.21

 
$
3.55

 
$
3.53

 
 
 
 
 
 
 
 
 
Weighted average shares (diluted)
 
62,061

 
65,652

 
62,972

 
66,055

(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 acquisitions of Baker Industries, Inc. and Kaynak Tekniği Sanayi ve Ticaret A.Ş. ("Askaynak") 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 prior year includes an adjustment to taxes on unremitted foreign earnings related to the U.S. Tax Act of $2,323 and $4,823 in the three and nine months ended September 30, 2018, respectively.
The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.



Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Non-GAAP Financial Measures
 
 
Twelve Months Ended September 30,
Return on Invested Capital
 
2019
 
2018
Net income as reported
 
$
316,232

 
$
224,408

Rationalization and asset impairment charges
 
7,269

 
30,943

Acquisition transaction and integration costs
 
2,637

 
7,281

Pension settlement charges
 
1,696

 
7,857

Amortization of step up in value of acquired inventories
 
3,008

 
2,264

Gains on asset disposals
 
(3,554
)
 
—

Bargain purchase adjustment
 
—

 
1,935

Gain on change in control
 
(7,601
)
 
—

Tax effect of Special items (3)
 
(12,583
)
 
25,925

Adjusted net income (1)
 
$
307,104

 
$
300,613

Plus: Interest expense, net of tax of $6,410 and $6,087 in 2019 and 2018, respectively
 
19,265

 
18,295

Less: Interest income, net of tax of $926 and $1,676 in 2019 and 2018, respectively
 
2,785

 
5,036

Adjusted net income before tax-effected interest
 
$
323,584

 
$
313,872

 
 
 
 
 
Invested Capital
 
September 30, 2019
 
September 30, 2018
Short-term debt
 
$
13,293

 
$
794

Long-term debt, less current portion
 
713,884

 
698,468

Total debt
 
727,177

 
699,262

Total equity
 
813,808

 
927,868

Invested capital
 
$
1,540,985

 
$
1,627,130

 
 
 
 
 
Return on invested capital (1)(2)
 
21.0
%
 
19.3
%

(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 September 30, 2019 and net charges of $33,439 related to the U.S. Tax Act in the twelve months ended September 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 September 30,
 
 
2019
 
2018
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
72,461

 
$
70,539

Non-controlling interests in subsidiaries’ loss
 
(4
)
 
(4
)
Net income including non-controlling interests
 
72,457

 
70,535

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

 
 

Rationalization and asset impairment net gains
 
—

 
(2,034
)
Depreciation and amortization
 
21,148

 
17,623

Equity earnings in affiliates, net
 
(49
)
 
(50
)
Gain on change in control
 
(7,601
)
 
—

Other non-cash items, net
 
3,566

 
5,434

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

Decrease in accounts receivable
 
45,374

 
14,415

Increase in inventories
 
(8,709
)
 
(13,634
)
Decrease in trade accounts payable
 
(18,733
)
 
(22,384
)
Net change in other current assets and liabilities
 
20,393

 
33,932

Net change in other long-term assets and liabilities
 
835

 
2,382

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
128,681

 
106,219

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(17,038
)
 
(17,363
)
Acquisition of businesses, net of cash acquired
 
(28,892
)
 
—

Proceeds from sale of property, plant and equipment
 
779

 
10,358

Purchase of marketable securities
 
—

 
(49,668
)
Proceeds from marketable securities
 
—

 
89,445

NET CASH (USED BY) PROVIDED BY INVESTING ACTIVITIES
 
(45,151
)

32,772

 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
(27,544
)
 
(856
)
Proceeds from exercise of stock options
 
5,250

 
1,849

Purchase of shares for treasury
 
(61,028
)
 
(71,245
)
Cash dividends paid to shareholders
 
(29,061
)
 
(25,424
)
Other financing activities
 
—

 
(2,170
)
NET CASH USED BY FINANCING ACTIVITIES
 
(112,383
)

(97,846
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
(4,396
)
 
(39
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 
(33,249
)
 
41,106

Cash and cash equivalents at beginning of period
 
189,861

 
357,094

Cash and cash equivalents at end of period
 
$
156,612

 
$
398,200

 
 
 
 
 
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 
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
229,393

 
$
200,227

Non-controlling interests in subsidiaries’ loss
 
(26
)
 
(13
)
Net income including non-controlling interests
 
229,367

 
200,214

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

 
 

Rationalization and asset impairment net charges (gains)
 
1,069

 
(1,408
)
Depreciation and amortization
 
60,400

 
53,946

Equity earnings in affiliates, net
 
(1,266
)
 
(1,427
)
Gain on change in control
 
(7,601
)
 
—

Other non-cash items, net
 
9,285

 
12,082

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

Decrease (increase) in accounts receivable
 
24,103

 
(25,492
)
Increase in inventories
 
(36,476
)
 
(41,533
)
Decrease in trade accounts payable
 
(34,202
)
 
(17,523
)
Net change in other current assets and liabilities
 
34,340

 
46,316

Net change in other long-term assets and liabilities
 
1,647

 
4,602

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
280,666

 
229,777

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(53,551
)
 
(48,746
)
Acquisition of businesses, net of cash acquired
 
(136,735
)
 
6,591

Proceeds from sale of property, plant and equipment
 
9,491

 
10,585

Purchase of marketable securities
 
—

 
(268,335
)
Proceeds from marketable securities
 
—

 
348,178

Other investing activities
 
2,000

 
—

NET CASH (USED BY) PROVIDED BY INVESTING ACTIVITIES
 
(178,795
)
 
48,273

 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
2,433

 
(646
)
Proceeds from exercise of stock options
 
6,210

 
4,448

Purchase of shares for treasury
 
(221,942
)
 
(121,477
)
Cash dividends paid to shareholders
 
(89,162
)
 
(76,674
)
Other financing activities
 
—

 
(2,170
)
NET CASH USED BY FINANCING ACTIVITIES
 
(302,461
)
 
(196,519
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
(1,647
)
 
(10,032
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 
(202,237
)
 
71,499

Cash and cash equivalents at beginning of period
 
358,849

 
326,701

Cash and cash equivalents at end of period
 
$
156,612

 
$
398,200

 
 
 
 
 
Cash dividends paid per share
 
$
1.41

 
$
1.17





Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
 
 
Americas Welding
 
International Welding
 
The Harris
Products Group
 
Corporate /
Eliminations
 
Consolidated
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) (3)
 
—

 
(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
%
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2018
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
454,010

 
$
209,622

 
$
73,467

 
$
—

 
$
737,099

Inter-segment sales
 
31,845

 
3,663

 
1,537

 
(37,045
)
 
—

Total
 
$
485,855

 
$
213,285

 
$
75,004

 
$
(37,045
)
 
$
737,099

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
70,539

As a percent of total sales
 
 
 
 
 
 
 
 
 
9.6
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
85,021

 
$
8,085

 
$
8,676

 
$
(2,069
)
 
$
99,713

As a percent of total sales
 
17.5
%
 
3.8
%
 
11.6
%
 



13.5
%
Special items charges (gains) (4)
 
4,232

 
2,636

 
—

 
970

 
7,838

Adjusted EBIT (2)
 
$
89,253

 
$
10,721

 
$
8,676

 
$
(1,099
)
 
$
107,551

As a percent of total sales
 
18.4
%

5.0
%

11.6
%




14.6
%
(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 $1,495, 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.
(4)
Special items in 2018 reflect pension settlement charges of $4,232 in Americas Welding, rationalization and asset impairment charges of $2,636 in International Welding and acquisition transaction and integration costs of $970 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
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) (3)
 
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
%
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2018
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
1,351,297

 
$
700,315

 
$
233,235

 
$
—

 
$
2,284,847

Inter-segment sales
 
89,671

 
13,669

 
5,447

 
(108,787
)
 
—

Total
 
$
1,440,968

 
$
713,984

 
$
238,682

 
$
(108,787
)
 
$
2,284,847

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
200,227

As a percent of total sales
 
 
 
 
 
 
 
 
 
8.8
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
249,860

 
$
17,617

 
$
28,058

 
$
(8,108
)
 
$
287,427

As a percent of total sales
 
17.3
%
 
2.5
%
 
11.8
%
 
 

 
12.6
%
Special items charges (gains) (4)
 
4,990

 
24,353

 
—

 
3,665

 
33,008

Adjusted EBIT (2)
 
$
254,850

 
$
41,970

 
$
28,058

 
$
(4,443
)
 
$
320,435

As a percent of total sales
 
17.7
%
 
5.9
%
 
11.8
%
 
 

 
14.0
%
(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 $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 in International Welding, a gain on change in control of $7,601 related to the acquisition of Askaynak 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 $4,990 in Americas Welding, rationalization and asset impairment charges of $24,353 in International Welding and acquisition transaction and integration costs of $3,665 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
2018
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2019
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
454,010

 
$
(20,605
)
 
$
17,380

 
$
(5,603
)
 
$
(1,661
)
 
$
443,521

International Welding
 
209,622

 
(12,966
)
 
17,413

 
607

 
(9,298
)
 
205,378

The Harris Products Group
 
73,467

 
3,429

 
4,766

 
761

 
(539
)
 
81,884

Consolidated
 
$
737,099

 
$
(30,142
)
 
$
39,559

 
$
(4,235
)
 
$
(11,498
)
 
$
730,783

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
 

 
(4.5
%)
 
3.8
%
 
(1.2
%)
 
(0.4
%)
 
(2.3
%)
International Welding
 
 

 
(6.2
%)
 
8.3
%
 
0.3
%
 
(4.4
%)
 
(2.0
%)
The Harris Products Group
 
 

 
4.7
%
 
6.5
%
 
1.0
%
 
(0.7
%)
 
11.5
%
Consolidated
 
 

 
(4.1
%)
 
5.4
%
 
(0.6
%)
 
(1.6
%)
 
(0.9
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 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
 
$
1,351,297

 
$
(49,756
)
 
$
51,612

 
$
33,424

 
$
(8,730
)
 
$
1,377,847

International Welding
 
700,315

 
(54,433
)
 
17,413

 
9,919

 
(37,444
)
 
635,770

The Harris Products Group
 
233,235

 
5,973

 
16,196

 
576

 
(2,632
)
 
253,348

Consolidated
 
$
2,284,847

 
$
(98,216
)
 
$
85,221

 
$
43,919

 
$
(48,806
)
 
$
2,266,965

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
—
%
 
(3.7
%)
 
3.8
%
 
2.5
%
 
(0.6
%)
 
2.0
%
International Welding
 
 

 
(7.8
%)
 
2.5
%
 
1.4
%
 
(5.3
%)
 
(9.2
%)
The Harris Products Group
 
 

 
2.6
%
 
6.9
%
 
0.2
%
 
(1.1
%)
 
8.6
%
Consolidated
 
 

 
(4.3
%)
 
3.7
%
 
1.9
%
 
(2.1
%)
 
(0.8
%)