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Lincoln Electric Reports Third Quarter 2020 Results

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·25 min read
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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: Contact Amanda Butler Vice President, Investor Relations & Communications Tel: 216.383.2534 Email: Amanda_Butler@lincolnelectric.com