Document
false0000059527LINCOLN ELECTRIC HOLDINGS INC 0000059527 2020-07-27 2020-07-27


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): July 27, 2020
 
LINCOLN ELECTRIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
0-1402
(Commission File Number)
 
Ohio
 
34-1860551
(State or other jurisdiction of
incorporation)
 
(I.R.S. Employer Identification No.)
 
22801 St. Clair Avenue, Cleveland, Ohio 44117
(Address of principal executive offices, with zip code)
 
(216) 481-8100
(Registrant’s telephone number, including area code)
 
Not applicable
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
☐            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐           Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of exchange on which registered
Common Shares, without par value
LECO
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 




Item 2.02
 
Results of Operations and Financial Condition.
 
 
On July 27, 2020, Lincoln Electric Holdings, Inc. (the “Company”) issued a press release reporting its financial results for the quarter ended June 30, 2020.  A copy of the Company’s press release issued on July 27, 2020 is attached hereto as Exhibit 99.1 and incorporated herein by reference.  The press release is also available through the Company’s website at www.lincolnelectric.com.  The information in this Current Report on Form 8-K, including the Exhibit, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
 
 
 
Item 9.01
 
Financial Statements and Exhibits.
 
 
 
 
 
(d) Exhibits
 
 
 
 
 
99.1  The Company’s press release dated July 27, 2020.
 
 
104 Cover page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)





SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
LINCOLN ELECTRIC HOLDINGS, INC.
 
 
 
 
 
/s/ Gabriel Bruno
 
 
Gabriel Bruno
 
 
Executive Vice President
 
 
July 27, 2020















































LINCOLN ELECTRIC HOLDINGS, INC.
 
INDEX TO EXHIBITS
 
 
 
 
Exhibit No.
 
Exhibit
 
 
 
 
The Company’s press release dated July 27, 2020.
 104
 
 Cover page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments)




Lincoln Electric Reports Second Quarter 2020 Financial Results


Exhibit 99.1
 
Investor Relations: Amanda Butler (216) 383-2534
[email protected]

LINCOLN ELECTRIC REPORTS SECOND QUARTER 2020 RESULTS
Second Quarter 2020 Highlights
§    Net sales decline 24.0% on lower organic sales
§    Operating income margin of 6.7%; Adjusted operating income margin of 10.7%
§    EPS of $0.45; Adjusted EPS of $0.80
§    Solid balance sheet profile and strong cash flow generation with 189% cash conversion
§    Cost reduction actions now estimated to provide $55 to $65 million of benefits in 2020
 
 
CLEVELAND, Monday, July 27, 2020 - Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported second quarter 2020 net income of $27.0 million, or diluted earnings per share (EPS) of $0.45, which includes special item after-tax net charges of $21.0 million, or $0.35 EPS. This compares with prior year period net income of $85.5 million, or $1.36 EPS, which included special item after-tax net benefits of $4.6 million, or $0.08 EPS. Excluding these items, second quarter 2020 adjusted net income was $48.0 million, or $0.80 EPS. This compares with $80.9 million, or $1.28 EPS in the prior year period. The effective tax rate was 19.8% in the second quarter 2020 as compared with 17.4% in the prior year period. Excluding special items, the adjusted effective tax rate was 20.3%, or 22.0% in the comparable 2019 period.

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

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

Six Months 2020 Summary

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

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




Lincoln Electric Reports Second Quarter 2020 Financial Results


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

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

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

About Lincoln Electric

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

Non-GAAP Information

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

Forward-Looking Statements

The Company’s expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements reflect management’s current expectations and involve a number of risks and uncertainties.  Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning.  Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results.  The factors include, but are not limited to: general economic, financial and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as political unrest, acts of terror, natural disasters and pandemics, including the current coronavirus disease ("COVID-19") outbreak, on the Company or its customers, suppliers and the economy in general.  The Company has experienced the negative impacts of COVID-19 on its markets and operations; however, the ultimate duration and severity on the Company's business remains unknown. New and changing government actions to address the COVID- 19 pandemic continue to occur on a regular basis. As a result, the countries in which the Company’s products are manufactured and distributed are in varying stages of restrictions. Certain jurisdictions have had to re-establish restrictions due to a resurgence in COVID-19 cases. Additionally, although many of the Company’s


Lincoln Electric Reports Second Quarter 2020 Financial Results


customers have begun to re-open or increase operating levels, such customers may be forced to close or limit operations as any new COVID-19 outbreaks occur. Even as government restrictions are lifted and economies gradually reopen, the shape of the economic recovery is uncertain and may continue to negatively impact the Company's results of operations, cash flows and financial position in subsequent quarters. Given this current level of economic and operational uncertainty over the impacts of COVID-19, the ultimate financial impact cannot be reasonably estimated at this time. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and on Form 10-Q for the quarter ended March 31, 2020.



Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Income
 
 
Three Months Ended June 30,
 
Fav (Unfav) to
Prior Year
 
 
2020
 
% of Sales
 
2019
 
% of Sales
 
$
 
%
Net sales
 
$
590,727

 
100.0
%
 
$
777,008

 
100.0
%
 
$
(186,281
)
 
(24.0
%)
Cost of goods sold
 
401,349

 
67.9
%
 
507,127

 
65.3
%
 
105,778

 
20.9
%
Gross profit
 
189,378

 
32.1
%
 
269,881

 
34.7
%
 
(80,503
)
 
(29.8
%)
Selling, general & administrative expenses
 
126,376

 
21.4
%
 
163,388

 
21.0
%
 
37,012

 
22.7
%
Rationalization and asset impairment charges
 
23,238

 
3.9
%
 
1,307

 
0.2
%
 
(21,931
)
 
(1,678.0
%)
Operating income
 
39,764

 
6.7
%
 
105,186

 
13.5
%
 
(65,422
)
 
(62.2
%)
Interest expense, net
 
5,881

 
1.0
%
 
5,898

 
0.8
%
 
17

 
0.3
%
Other income (expense)
 
(203
)
 
—

 
4,196

 
0.5
%
 
(4,399
)
 
(104.8
%)
Income before income taxes
 
33,680

 
5.7
%
 
103,484

 
13.3
%
 
(69,804
)
 
(67.5
%)
Income taxes
 
6,667

 
1.1
%
 
18,040

 
2.3
%
 
11,373

 
63.0
%
Effective tax rate
 
19.8
%
 
 

 
17.4
%
 
 

 
(2.4
%)
 
 
Net income including non-controlling interests
 
27,013

 
4.6
%
 
85,444

 
11.0
%
 
(58,431
)
 
(68.4
%)
Non-controlling interests in subsidiaries’ income (loss)
 
17

 
—

 
(8
)
 
—

 
25

 
312.5
%
Net income
 
$
26,996

 
4.6
%
 
$
85,452

 
11.0
%
 
$
(58,456
)
 
(68.4
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.45

 
 

 
$
1.37

 
 

 
$
(0.92
)
 
(67.2
%)
Diluted earnings per share
 
$
0.45

 
 

 
$
1.36

 
 

 
$
(0.91
)
 
(66.9
%)
Weighted average shares (basic)
 
59,354

 
 

 
62,305

 
 

 
 

 
 

Weighted average shares (diluted)
 
59,831

 
 

 
62,970

 
 

 
 

 
 

 
 
Six Months Ended June 30,
 
Fav (Unfav) to
Prior Year
 
 
2020
 
% of Sales
 
2019
 
% of Sales
 
$
 
%
Net sales
 
$
1,292,718

 
100.0
%
 
$
1,536,182

 
100.0
%
 
$
(243,464
)
 
(15.8
%)
Cost of goods sold
 
866,018

 
67.0
%
 
1,007,880

 
65.6
%
 
141,862

 
14.1
%
Gross profit
 
426,700

 
33.0
%
 
528,302

 
34.4
%
 
(101,602
)
 
(19.2
%)
Selling, general & administrative expenses
 
276,103

 
21.4
%
 
323,796

 
21.1
%
 
47,693

 
14.7
%
Rationalization and asset impairment charges
 
29,759

 
2.3
%
 
4,842

 
0.3
%
 
(24,917
)
 
(514.6
%)
Operating income
 
120,838

 
9.3
%
 
199,664

 
13.0
%
 
(78,826
)
 
(39.5
%)
Interest expense, net
 
11,339

 
0.9
%
 
11,221

 
0.7
%
 
(118
)
 
(1.1
%)
Other income (expense)
 
106

 
—

 
7,959

 
0.5
%
 
(7,853
)
 
(98.7
%)
Income before income taxes
 
109,605

 
8.5
%
 
196,402

 
12.8
%
 
(86,797
)
 
(44.2
%)
Income taxes
 
27,037

 
2.1
%
 
39,492

 
2.6
%
 
12,455

 
31.5
%
Effective tax rate
 
24.7
%
 
 

 
20.1
%
 
 

 
(4.6
%)
 


Net income including non-controlling interests
 
82,568

 
6.4
%
 
156,910

 
10.2
%
 
(74,342
)
 
(47.4
%)
Non-controlling interests in subsidiaries’ income (loss)
 
10

 
—

 
(22
)
 
—

 
32

 
145.5
%
Net income
 
$
82,558

 
6.4
%
 
$
156,932

 
10.2
%
 
$
(74,374
)
 
(47.4
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.38

 
 

 
$
2.50

 
 

 
$
(1.12
)
 
(44.8
%)
Diluted earnings per share
 
$
1.37

 
 

 
$
2.47

 
 

 
$
(1.10
)
 
(44.5
%)
Weighted average shares (basic)
 
59,769

 
 

 
62,733

 
 

 
 

 
 

Weighted average shares (diluted)
 
60,300

 
 

 
63,419

 
 

 
 

 
 




Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
 
Balance Sheet Highlights 
Selected Consolidated Balance Sheet Data
 
June 30, 2020
 
December 31, 2019
Cash and cash equivalents
 
$
143,055

 
$
199,563

Total current assets
 
1,007,779

 
1,075,581

Property, plant and equipment, net
 
502,249

 
529,344

Total assets
 
2,199,039

 
2,371,213

Total current liabilities
 
568,571

 
563,135

Short-term debt (1)
 
49,597

 
34,969

Long-term debt, less current portion
 
715,817

 
712,302

Total equity
 
660,111

 
819,077

 
 
 
 
 
Operating Working Capital
 
June 30, 2020
 
December 31, 2019
Accounts receivable, net
 
$
339,102

 
$
374,649

Inventories
 
417,525

 
393,748

Trade accounts payable
 
226,799

 
273,002

Operating working capital
 
$
529,828

 
$
495,395

 
 
 
 
 
Average operating working capital to Net sales (2)
 
22.4
%
 
16.8
%
 
 
 
 
 
Invested Capital
 
June 30, 2020
 
December 31, 2019
Short-term debt (1)
 
$
49,597

 
$
34,969

Long-term debt, less current portion
 
715,817

 
712,302

Total debt
 
765,414

 
747,271

Total equity
 
660,111

 
819,077

Invested capital
 
$
1,425,525

 
$
1,566,348

 
 
 
 
 
Total debt / invested capital
 
53.7
%
 
47.7
%

(1)
Includes current portion of long-term debt.
(2)
Average operating working capital to Net sales is defined as operating working capital as of period end divided by annualized rolling three months of Net sales.




Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 Non-GAAP Financial Measures
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Operating income as reported
 
$
39,764

 
$
105,186

 
$
120,838

 
$
199,664

Special items (pre-tax):
 
 
 
 
 
 
 
 
Rationalization and asset impairment charges (2)
 
23,238

 
1,307

 
29,759

 
4,842

Acquisition transaction and integration costs (3)
 
—

 
1,014

 
—

 
1,804

Amortization of step up in value of acquired inventories (4)
 
—

 
1,399

 
806

 
1,399

Gains on asset disposals (5)
 
—

 
(3,045
)
 
—

 
(3,045
)
Adjusted operating income (1)
 
$
63,002

 
$
105,861

 
$
151,403

 
$
204,664

As a percent of total sales
 
10.7
%
 
13.6
%
 
11.7
%
 
13.3
%
 
 
 
 
 
 
 
 
 
Net income as reported
 
$
26,996

 
$
85,452

 
$
82,558

 
$
156,932

Special items:
 
 

 
 

 
 
 
 
Rationalization and asset impairment charges (2)
 
23,238

 
1,307

 
29,759

 
4,842

Acquisition transaction and integration costs (3)
 
—

 
1,014

 
—

 
1,804

Pension settlement charges (6)
 
3,334

 
—

 
3,334

 
—

Amortization of step up in value of acquired inventories (4)
 
—

 
1,399

 
806

 
1,399

Gains on asset disposals (5)
 
—

 
(3,554
)
 
—

 
(3,554
)
Tax effect of Special items (7)
 
(5,576
)
 
(4,751
)
 
(7,552
)
 
(5,564
)
Adjusted net income (1)
 
47,992

 
80,867

 
108,905

 
155,859

Non-controlling interests in subsidiaries’ loss
 
17

 
(8
)
 
10

 
(22
)
Interest expense, net
 
5,881

 
5,898

 
11,339

 
11,221

Income taxes as reported
 
6,667

 
18,040

 
27,037

 
39,492

Tax effect of Special items (7)
 
5,576

 
4,751

 
7,552

 
5,564

Adjusted EBIT (1)
 
$
66,133

 
$
109,548

 
$
154,843

 
$
212,114

 
 
 
 
 
 
 
 
 
Effective tax rate as reported
 
19.8
%
 
17.4
%
 
24.7
%
 
20.1
%
Net special item tax impact
 
0.5
%
 
4.6
%
 
(0.6
%)
 
2.3
%
Adjusted effective tax rate (1)
 
20.3
%
 
22.0
%
 
24.1
%
 
22.4
%
 
 
 
 
 
 
 
 
 
Diluted earnings per share as reported
 
$
0.45

 
$
1.36

 
$
1.37

 
$
2.47

Special items per share
 
0.35

 
(0.08
)
 
0.44

 
(0.01
)
Adjusted diluted earnings per share (1)
 
$
0.80

 
$
1.28

 
$
1.81

 
$
2.46

 
 
 
 
 
 
 
 
 
Weighted average shares (diluted)
 
59,831

 
62,970

 
60,300

 
63,419

(1)
Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate and Adjusted diluted earnings per share are non-GAAP financial measures. Refer to Non-GAAP Information section.
(2)
Primarily related to severance, asset impairments of long-lived assets and gains or losses on the disposal of assets.
(3)
Related to the acquisition of Air Liquide Welding and are included in Selling, general & administrative expenses.
(4)
Related to an acquisition and are included in Cost of goods sold.
(5)
Primarily included in Cost of goods sold.
(6)
Related to lump sum pension payments and are included in Other income (expense).
(7)
Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the three and six months ended June 30, 2019.
The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.



Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Non-GAAP Financial Measures
 
 
Twelve Months Ended June 30,
Return on Invested Capital
 
2020
 
2019
Net income as reported
 
$
218,735

 
$
314,310

Rationalization and asset impairment charges
 
40,105

 
8,410

Acquisition transaction and integration costs
 
—

 
3,607

Pension settlement charges
 
3,334

 
5,928

Amortization of step up in value of acquired inventories
 
2,415

 
1,399

Gains on asset disposals
 
—

 
(3,554
)
Gain on change in control
 
(7,601
)
 
—

Tax effect of Special items (2)
 
(9,374
)
 
(11,295
)
Adjusted net income (1)
 
$
247,614

 
$
318,805

Plus: Interest expense, net of tax of $6,439 and $6,178 in 2020 and 2019, respectively
 
19,348

 
18,569

Less: Interest income, net of tax of $563 and $1,302 in 2020 and 2019, respectively
 
1,691

 
3,912

Adjusted net income before tax-effected interest
 
$
265,271

 
$
333,462

 
 
 
 
 
Invested Capital
 
June 30, 2020

June 30, 2019
Short-term debt
 
$
49,597

 
$
30,110

Long-term debt, less current portion
 
715,817

 
710,458

Total debt
 
765,414

 
740,568

Total equity
 
660,111

 
846,058

Invested capital
 
$
1,425,525

 
$
1,586,626

 
 
 
 
 
Return on invested capital (1)
 
18.6
%
 
21.0
%
 
 
 
 
 
 
 
Twelve Months Ended June 30,
Total Debt / EBITDA
 
2020
 
2019
Net income as reported
 
$
218,735

 
$
314,310

Income taxes
 
62,955

 
72,377

Interest expense, net
 
23,533

 
19,533

Depreciation and amortization
 
83,313

 
75,275

EBITDA (1)
 
$
388,536

 
$
481,495

 
 
 
 
 
 
 
June 30, 2020
 
June 30, 2019
Total debt
 
$
765,414

 
$
740,568

 
 
 
 
 
Total debt / EBITDA
 
1.97

 
1.54


(1)
Adjusted net income, Return on invested capital and EBITDA are non-GAAP financial measures. Refer to Non-GAAP Information section.
(2)
Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended June 30, 2019.
The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.




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

Condensed Consolidated Statements of Cash Flows 
 
 
Three Months Ended June 30,
 
 
2020
 
2019
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
26,996

 
$
85,452

Non-controlling interests in subsidiaries’ income (loss)
 
17

 
(8
)
Net income including non-controlling interests
 
27,013

 
85,444

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

 
 

Rationalization and asset impairment net charges (gains)
 
22,141

 
(355
)
Depreciation and amortization
 
20,050

 
20,351

Equity earnings in affiliates, net
 
(81
)
 
(769
)
Other non-cash items, net
 
(1,106
)
 
1,325

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

Decrease in accounts receivable
 
49,364

 
5,629

Increase in inventories
 
(12,977
)
 
(13,129
)
Decrease in trade accounts payable
 
(23,439
)
 
(362
)
Net change in other current assets and liabilities
 
20,717

 
28,595

Net change in other long-term assets and liabilities
 
2,359

 
(622
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
 
104,041

 
126,107

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(13,183
)
 
(20,262
)
Acquisition of businesses, net of cash acquired
 
—

 
(107,843
)
Proceeds from sale of property, plant and equipment
 
118

 
8,410

NET CASH USED BY INVESTING ACTIVITIES
 
(13,065
)

(119,695
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
(82,682
)
 
29,980

Proceeds from exercise of stock options
 
955

 
323

Purchase of shares for treasury
 
(3,213
)
 
(85,330
)
Cash dividends paid to shareholders
 
(29,139
)
 
(29,541
)
NET CASH USED BY FINANCING ACTIVITIES
 
(114,079
)

(84,568
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
2,783

 
883

DECREASE IN CASH AND CASH EQUIVALENTS
 
(20,320
)
 
(77,273
)
Cash and cash equivalents at beginning of period
 
163,375

 
267,134

Cash and cash equivalents at end of period
 
$
143,055

 
$
189,861

 
 
 
 
 
Cash dividends paid per share
 
$
0.49

 
$
0.47




Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Condensed Consolidated Statements of Cash Flows
 
 
Six Months Ended June 30,
 
 
2020
 
2019
OPERATING ACTIVITIES:
 
 

 
 

Net income
 
$
82,558

 
$
156,932

Non-controlling interests in subsidiaries’ income (loss)
 
10

 
(22
)
Net income including non-controlling interests
 
82,568

 
156,910

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

 
 

Rationalization and asset impairment net charges
 
21,905

 
1,069

Depreciation and amortization
 
41,078

 
39,252

Equity earnings in affiliates, net
 
(243
)
 
(1,217
)
Other non-cash items, net
 
(5,288
)
 
5,719

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

Decrease (increase) in accounts receivable
 
23,666

 
(21,271
)
Increase in inventories
 
(30,378
)
 
(27,767
)
Decrease in trade accounts payable
 
(40,115
)
 
(15,469
)
Net change in other current assets and liabilities
 
32,410

 
13,947

Net change in other long-term assets and liabilities
 
410

 
812

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
126,013

 
151,985

 
 
 
 
 
INVESTING ACTIVITIES:
 
 

 
 

Capital expenditures
 
(25,011
)
 
(36,513
)
Acquisition of businesses, net of cash acquired
 
—

 
(107,843
)
Proceeds from sale of property, plant and equipment
 
6,218

 
8,712

Other investing activities
 
—

 
2,000

NET CASH USED BY INVESTING ACTIVITIES
 
(18,793
)
 
(133,644
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 

 
 

Net change in borrowings
 
15,095

 
29,977

Proceeds from exercise of stock options
 
2,002

 
960

Purchase of shares for treasury
 
(112,975
)
 
(160,914
)
Cash dividends paid to shareholders
 
(59,814
)
 
(60,101
)
NET CASH USED BY FINANCING ACTIVITIES
 
(155,692
)
 
(190,078
)
 
 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents
 
(8,036
)
 
2,749

DECREASE IN CASH AND CASH EQUIVALENTS
 
(56,508
)
 
(168,988
)
Cash and cash equivalents at beginning of period
 
199,563

 
358,849

Cash and cash equivalents at end of period
 
$
143,055

 
$
189,861

 
 
 
 
 
Cash dividends paid per share
 
$
0.98

 
$
0.94





Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
 
 
Americas Welding
 
International Welding
 
The Harris
Products Group
 
Corporate /
Eliminations
 
Consolidated
Three months ended June 30, 2020
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
333,229

 
$
177,167

 
$
80,331

 
$
—

 
$
590,727

Inter-segment sales
 
27,493

 
4,286

 
1,753

 
(33,532
)
 
—

Total
 
$
360,722

 
$
181,453

 
$
82,084

 
$
(33,532
)
 
$
590,727

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
26,996

As a percent of total sales
 
 
 
 
 
 
 
 
 
4.6
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
20,695

 
$
9,117

 
$
11,713

 
$
(1,964
)
 
$
39,561

As a percent of total sales
 
5.7
%
 
5.0
%
 
14.3
%
 
 

 
6.7
%
Special items charges (gains) (3)
 
26,007

 
565

 
—

 
—

 
26,572

Adjusted EBIT (2)
 
$
46,702

 
$
9,682

 
$
11,713

 
$
(1,964
)
 
$
66,133

As a percent of total sales
 
12.9
%
 
5.3
%
 
14.3
%
 
 

 
11.2
%
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2019
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
476,607

 
$
212,306

 
$
88,095

 
$
—

 
$
777,008

Inter-segment sales
 
34,811

 
4,188

 
2,113

 
(41,112
)
 
—

Total
 
$
511,418

 
$
216,494

 
$
90,208

 
$
(41,112
)
 
$
777,008

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
85,452

As a percent of total sales
 
 
 
 
 
 
 
 
 
11.0
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
83,072

 
$
17,805

 
$
13,488

 
$
(4,983
)
 
$
109,382

As a percent of total sales
 
16.2
%
 
8.2
%
 
15.0
%
 



14.1
%
Special items charges (gains) (4)
 
1,779

 
(2,627
)
 
—

 
1,014

 
166

Adjusted EBIT (2)
 
$
84,851

 
$
15,178

 
$
13,488

 
$
(3,969
)
 
$
109,548

As a percent of total sales
 
16.6
%

7.0
%

15.0
%




14.1
%
(1)
EBIT is defined as Operating income plus Other income (expense).
(2)
The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
(3)
Special items in 2020 reflect Rationalization and asset impairment charges of $22,673 and $565 in Americas Welding and International Welding, respectively, and pension settlement charges of $3,334 in Americas Welding,
(4)
Special items in 2019 reflect Rationalization and asset impairment charges of $380 in Americas Welding and $927 in International Welding, amortization of step up in value of acquired inventories of $1,399 in Americas Welding, gains on disposals of assets of $3,554 in International Welding and acquisition transaction and integration costs of $1,014 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.




Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
 
 
Americas Welding
 
International Welding
 
The Harris
Products Group
 
Corporate /
Eliminations
 
Consolidated
Six months ended June 30, 2020
 
 
 
 

 
 

 
 

 
 

Net sales
 
$
751,764

 
$
375,090

 
$
165,864

 
$
—

 
$
1,292,718

Inter-segment sales
 
52,276

 
8,769

 
3,478

 
(64,523
)
 
—

Total
 
$
804,040

 
$
383,859

 
$
169,342

 
$
(64,523
)
 
$
1,292,718

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
82,558

As a percent of total sales
 
 
 
 
 
 
 
 
 
6.4
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
90,207

 
$
9,595

 
$
24,205

 
$
(3,063
)
 
$
120,944

As a percent of total sales
 
11.2
%
 
2.5
%
 
14.3
%
 
 

 
9.4
%
Special items charges (gains) (3)
 
27,197

 
6,702

 
—

 
—

 
33,899

Adjusted EBIT (2)
 
$
117,404

 
$
16,297

 
$
24,205

 
$
(3,063
)
 
$
154,843

As a percent of total sales
 
14.6
%
 
4.2
%
 
14.3
%
 
 

 
12.0
%
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2019
 
 

 
 

 
 

 
 

 
 

Net sales
 
$
934,326

 
$
430,392

 
$
171,464

 
$
—

 
$
1,536,182

Inter-segment sales
 
64,199

 
8,397

 
3,980

 
(76,576
)
 
—

Total
 
$
998,525

 
$
438,789

 
$
175,444

 
$
(76,576
)
 
$
1,536,182

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
$
156,932

As a percent of total sales
 
 
 
 
 
 
 
 
 
10.2
%
 
 
 
 
 
 
 
 
 
 
 
EBIT (1)
 
$
163,488

 
$
28,943

 
$
24,007

 
$
(8,815
)
 
$
207,623

As a percent of total sales
 
16.4
%
 
6.6
%
 
13.7
%
 
 

 
13.5
%
Special items charges (gains) (4)
 
3,115

 
(428
)
 
—

 
1,804

 
4,491

Adjusted EBIT (2)
 
$
166,603

 
$
28,515

 
$
24,007

 
$
(7,011
)
 
$
212,114

As a percent of total sales
 
16.7
%
 
6.5
%
 
13.7
%
 
 

 
13.8
%
(1)
EBIT is defined as Operating income plus Other income (expense).
(2)
The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
(3)
Special items in 2020 reflect Rationalization and asset impairment charges of $23,863 and $5,896 in Americas Welding and International Welding, respectively, amortization of step up in value of acquired inventories of $806 in International Welding related to an acquisition, and pension settlement charges of $3,334 in Americas Welding,
(4)
Special items in 2019 reflect Rationalization and asset impairment charges of $1,716 in Americas Welding and $3,126 in International Welding, amortization of step up in value of acquired inventories of $1,399 in Americas Welding, gains on disposals of assets of $3,554 in International Welding and acquisition transaction and integration costs of $1,804 in Corporate/Eliminations related to the acquisition of Air Liquide Welding.



Lincoln Electric Holdings, Inc.
Change in Net Sales by Segment
(In thousands)
(Unaudited)
Three Months Ended June 30th Change in Net Sales by Segment
 
 
 
 
 
 
 
 
 
 
 
Change in Net Sales due to:
 
 
 
 
Net Sales
2019
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2020
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
476,607

 
$
(139,035
)
 
$
—

 
$
(1,405
)
 
$
(2,938
)
 
$
333,229

International Welding
 
212,306

 
(44,452
)
 
15,219

 
(1,280
)
 
(4,626
)
 
177,167

The Harris Products Group
 
88,095

 
(6,891
)
 
—

 
278

 
(1,151
)
 
80,331

Consolidated
 
$
777,008

 
$
(190,378
)
 
$
15,219

 
$
(2,407
)
 
$
(8,715
)
 
$
590,727

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
 

 
(29.2
%)
 
—

 
(0.3
%)
 
(0.6
%)
 
(30.1
%)
International Welding
 
 

 
(20.9
%)
 
7.2
%
 
(0.6
%)
 
(2.2
%)
 
(16.6
%)
The Harris Products Group
 
 

 
(7.8
%)
 
—

 
0.3
%
 
(1.3
%)
 
(8.8
%)
Consolidated
 
 

 
(24.5
%)
 
2.0
%
 
(0.3
%)
 
(1.1
%)
 
(24.0
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30th Change in Net Sales by Segment
 
 
 
 
 
 
 
 
 
 
 
Change in Net Sales due to:
 
 
 
 
Net Sales
2019
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
2020
Operating Segments
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
$
934,326

 
$
(176,727
)
 
$
6,190

 
$
(6,797
)
 
$
(5,228
)
 
$
751,764

International Welding
 
430,392

 
(74,959
)
 
33,521

 
(2,971
)
 
(10,893
)
 
375,090

The Harris Products Group
 
171,464

 
(4,091
)
 
—

 
601

 
(2,110
)
 
165,864

Consolidated
 
$
1,536,182

 
$
(255,777
)
 
$
39,711

 
$
(9,167
)
 
$
(18,231
)
 
$
1,292,718

 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
 
 

 
 

 
 

 
 

 
 

 
 

Americas Welding
 
—
%
 
(18.9
%)
 
0.7
%
 
(0.7
%)
 
(0.6
%)
 
(19.5
%)
International Welding
 
 

 
(17.4
%)
 
7.8
%
 
(0.7
%)
 
(2.5
%)
 
(12.8
%)
The Harris Products Group
 
 

 
(2.4
%)
 
—

 
0.4
%
 
(1.2
%)
 
(3.3
%)
Consolidated
 
 

 
(16.7
%)
 
2.6
%
 
(0.6
%)
 
(1.2
%)
 
(15.8
%)