Lincoln Electric Reports Fourth Quarter and Full Year 2017 Results

Fourth Quarter and Full Year 2017 Highlights
  • Q4 sales increase 32.5% with 10.0% organic growth
  • Q4 EPS of $0.36, Adjusted EPS of $1.01
  • Average operating working capital performance at 15.9% of net sales 
  • Full year cash conversion of 108% (1)

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

 

CLEVELAND, Feb. 14, 2018 (GLOBE NEWSWIRE) — Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq:LECO) today reported fourth quarter 2017 net income of $24.2 million, or diluted earnings per share (EPS) of $0.36.  Reported EPS includes special item after-tax charges of $43.3 million or $0.65 EPS.  Excluding these items, fourth quarter adjusted net income was $67.5 million, or adjusted EPS of $1.01, as compared with $53.4 million or adjusted EPS of $0.81 in the comparable 2016 period.

Fourth quarter 2017 sales increased 32.5% to $747.2 million from a 20.3% benefit from acquisitions, 6.8% higher volumes, a 3.2% increase in price and a 2.2% favorable impact from foreign exchange.

Operating income for the fourth quarter 2017 was $75.5 million, or 10.1% of sales.  This compares with operating income of $83.1 million, or 14.7% of sales, in the comparable 2016 period. On an adjusted basis, operating income was $92.8 million, or 12.4% of sales as compared to fourth quarter 2016 operating income of $83.1 million or 14.7% of sales.  Acquisitions had an unfavorable 180 basis point impact to the 2017 adjusted operating income margin.

The U.S. Tax Cuts and Jobs Act (“U.S. Tax Act”) enacted in the fourth quarter resulted in a one-time net tax expense of $28.6 million, or $0.43 EPS, in the quarter.  The expense primarily relates to taxes on the Company’s unremitted foreign earnings and profits, partially offset by the re-measurement of deferred tax assets and liabilities.  The fourth quarter 2017 tax rate was 67.2%, which was unfavorably impacted by the U.S. Tax Act. The fourth quarter 2017 tax rate excluding special items was 25.8% as compared to 31.7% in the comparable 2016 period. The lower current year effective tax rate is attributable to the geographical mix of earnings and the favorable effect of discrete tax items.  The Company expects the effective tax rate for the full year 2018 to be in the low to mid-20% range.

“We generated solid organic growth across all business segments, key product areas, and geographies in the fourth quarter,” said Christopher L. Mapes, chairman, president and chief executive officer. “Our team capped off a successful year with focused operational and commercial initiatives and an aggressive integration plan that will drive long-term value for our customers and shareholders. These efforts resulted in double digit EPS growth, record working capital performance, strong cash flows and excellent return on invested capital.” Mapes continued, “We have strong momentum heading into 2018 and are positioned for accelerated growth and superior value creation from our ongoing strategic initiatives.”

Twelve Months 2017 Summary

Net income for the twelve months ended December 31, 2017 was $247.5 million, or EPS of $3.71, as compared with net income of $198.4 million, or EPS of $2.91, in the comparable 2016 period.  Current period reported EPS includes special item after-tax net charges of $5.2 million or EPS of $0.08.  Adjusted net income for the twelve months ended December 31, 2017 was $252.7 million, or adjusted EPS of $3.79, compared with adjusted net income of $224.5 million, or adjusted EPS of $3.29, in 2016.

Sales increased 15.4% to $2.6 billion in the twelve months ended December 31, 2017 from an 8.0% benefit from acquisitions, 4.2% higher volumes, a 2.4% increase in price and a 0.8% favorable impact foreign exchange. 

Operating income was $377.7 million, or 14.4% of sales, as compared with $288.3 million, or 12.7% of sales, in the comparable 2016 period.  On an adjusted basis, operating income was $362.4 million or 13.8% of sales, as compared with $322.6 million, or 14.2% of sales in 2016.  Acquisitions had an unfavorable 90 basis point impact to the 2017 adjusted operating income margin. 

Webcast Information

A conference call to discuss fourth quarter 2017 financial results will be webcast live today, February 14, 2018, at 10:00 a.m., Eastern Time.  This webcast is accessible at http://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 7491736.  Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.

Financial results for the fourth quarter 2017 can also be obtained at http://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 63 manufacturing locations, including operations and joint ventures in 23 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 http://www.lincolnelectric.com.

Non-GAAP Information

Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share 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 the Air Liquide Welding business acquisition; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; 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 additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
           
Contact

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

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

         
    Three months ended December 31,   Fav (Unfav) to Prior Year
    2017   % of Sales   2016   % of Sales   $   %
Net sales   $ 747,185     100.0 %   $ 563,828     100.0 %   $ 183,357     32.5 %
Cost of goods sold   507,719     68.0 %   366,371     65.0 %   (141,348 )   (38.6 %)
Gross profit   239,466     32.0 %   197,457     35.0 %   42,009     21.3 %
Selling, general & administrative expenses   152,561     20.4 %   114,386     20.3 %   (38,175 )   (33.4 %)
Rationalization and asset impairment charges   6,590     0.9 %           (6,590 )   (100.0 %)
Pension settlement charges   2,867     0.4 %           (2,867 )   (100.0 %)
Bargain purchase adjustment (gain)   1,935     0.3 %           (1,935 )   (100.0 %)
Operating income   75,513     10.1 %   83,071     14.7 %   (7,558 )   (9.1 %)
Interest income   1,439     0.2 %   867     0.2 %   572     66.0 %
Equity earnings in affiliates   741     0.1 %   844     0.1 %   (103 )   (12.2 %)
Other income   1,922     0.3 %   621     0.1 %   1,301     209.5 %
Interest expense   (5,887 )   0.8 %   (7,251 )   1.3 %   1,364     18.8 %
Income before income taxes   73,728     9.9 %   78,152     13.9 %   (4,424 )   (5.7 %)
Income taxes   49,543     6.6 %   24,751     4.4 %   (24,792 )   (100.2 %)
Effective tax rate   67.2 %       31.7 %       (35.5 %)    
Net income including non-controlling interests   24,185     3.2 %   53,401     9.5 %   (29,216 )   (54.7 %)
Non-controlling interests in subsidiaries’ income (loss)   4         6         (2 )   (33.3 %)
Net income   $ 24,181     3.2 %   $ 53,395     9.5 %   $ (29,214 )   (54.7 %)
Basic earnings per share   $ 0.37         $ 0.81         $ (0.44 )   (54.3 %)
Diluted earnings per share   $ 0.36         $ 0.81         $ (0.45 )   (55.6 %)
Weighted average shares (basic)   65,649         65,603              
Weighted average shares (diluted)   66,530         66,303              
    Twelve months ended December 31,   Fav (Unfav) to Prior Year
    2017   % of Sales   2016   % of Sales   $   %
Net sales   $ 2,624,431     100.0 %   $ 2,274,614     100.0 %   $ 349,817     15.4 %
Cost of goods sold   1,744,105     66.5 %   1,485,316     65.3 %   (258,789 )   (17.4 %)
Gross profit   880,326     33.5 %   789,298     34.7 %   91,028     11.5 %
Selling, general & administrative expenses   537,525     20.5 %   466,676     20.5 %   (70,849 )   (15.2 %)
Rationalization and asset impairment charges   6,590     0.3 %           (6,590 )   (100.0 %)
Pension settlement charges   8,150     0.3 %           (8,150 )   (100.0 %)
Loss on deconsolidation of Venezuelan subsidiary           34,348     1.5 %   34,348     100.0 %
Bargain purchase adjustment (gain)   (49,650 )   1.9 %           49,650     100.0 %
Operating income   377,711     14.4 %   288,274     12.7 %   89,437     31.0 %
Interest income   4,788     0.2 %   2,092     0.1 %   2,696     128.9 %
Equity earnings in affiliates   2,742     0.1 %   2,928     0.1 %   (186 )   (6.4 %)
Other income   5,215     0.2 %   3,173     0.1 %   2,042     64.4 %
Interest expense   (24,220 )   0.9 %   (19,079 )   0.8 %   (5,141 )   (26.9 %)
Income before income taxes   366,236     14.0 %   277,388     12.2 %   88,848     32.0 %
Income taxes   118,761     4.5 %   79,015     3.5 %   (39,746 )   (50.3 %)
Effective tax rate   32.4 %       28.5 %       (3.9 %)    
Net income including non-controlling interests   247,475     9.4 %   198,373     8.7 %   49,102     24.8 %
Non-controlling interests in subsidiaries’ income (loss)   (28 )       (26 )       (2 )   (7.7 %)
Net income   $ 247,503     9.4 %   $ 198,399     8.7 %   $ 49,104     24.8 %
Basic earnings per share   $ 3.76         $ 2.94         $ 0.82     27.9 %
Diluted earnings per share   $ 3.71         $ 2.91         $ 0.80     27.5 %
Weighted average shares (basic)   65,739         67,462              
Weighted average shares (diluted)   66,643         68,156              
                             

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

Balance Sheet Highlights

 
Selected Consolidated Balance Sheet Data   December 31, 2017   December 31, 2016
Cash and cash equivalents   $ 326,701     $ 379,179  
Marketable securities   179,125     38,922  
Total current assets   1,373,608     1,043,713  
Property, plant and equipment, net   477,031     372,377  
Total assets   2,406,547     1,943,437  
Total current liabilities   528,742     388,107  
Short-term debt (1)   2,131     1,889  
Long-term debt, less current portion   704,136     703,704  
Total equity   932,453     712,206  
         
Operating Working Capital   December 31, 2017   December 31, 2016
Accounts receivable   $ 395,279     $ 273,993  
Inventories   348,667     255,406  
Trade accounts payable   269,763     176,757  
Operating working capital   $ 474,183     $ 352,642  
         
Average operating working capital to net sales (2)   15.9 % (3 ) 15.6 %
         
Invested Capital   December 31, 2017   December 31, 2016
Short-term debt (1)   $ 2,131     $ 1,889  
Long-term debt, less current portion   704,136     703,704  
Total debt   706,267     705,593  
Total equity   932,453     712,206  
Invested capital   $ 1,638,720     $ 1,417,799  
         
Total debt / invested capital   43.1 %   49.8 %
  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.
  3. Includes only five months of Net sales related to the acquisition of Air Liquide Welding.  Average operating working capital to Net Sales excluding the acquisition was 14.2%.

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

         
    Three Months Ended December 31,   Twelve Months Ended December 31,
    2017   2016   2017   2016
Operating income as reported   $ 75,513     $ 83,071     $ 377,711     $ 288,274  
Special items (pre-tax):                
Rationalization and asset impairment
   charges(2)
  6,590         6,590      
Pension settlement charges (3)   2,867         8,150      
Loss on deconsolidation of Venezuelan
   subsidiary (4)
              34,348  
Acquisition transaction and integration
   costs (5)
  3,616         15,002      
Amortization of step up in value of acquired
   inventories (5)
  2,264         4,578      
Bargain purchase adjustment (gain) (5)   1,935         (49,650 )    
Adjusted operating income (1)   $ 92,785     $ 83,071     $ 362,381     $ 322,622  
As a percent of total sales   12.4 %   14.7 %   13.8 %   14.2 %
                 
Net income as reported   $ 24,181     $ 53,395     $ 247,503     $ 198,399  
Special items (after-tax):                
Rationalization and asset impairment
   charges (2)
  6,198         6,198      
Pension settlement charges (3)   1,770         5,030      
Loss on deconsolidation of Venezuelan
   subsidiary (4)
              33,251  
Income tax valuation reversals (6)               (7,196 )
Acquisition transaction and integration
   costs (5)
  3,102         11,559      
Amortization of step up in value of acquired
   inventories (5)
  1,708         3,453      
Bargain purchase adjustment (gain) (5)   1,935         (49,650 )    
Net impact of U.S. Tax Act (7)   28,616         28,616      
Adjusted net income (1)   $ 67,510     $ 53,395     $ 252,709     $ 224,454  
                 
Diluted earnings per share as reported   $ 0.36     $ 0.81     $ 3.71     $ 2.91  
Special items   0.65         0.08     0.38  
Adjusted diluted earnings per share (1)   $ 1.01     $ 0.81     $ 3.79     $ 3.29  
                 
Weighted average shares (diluted)   66,530     66,303     66,643     68,156  
  1. Adjusted operating income, Adjusted net income 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. Charges primarily related to severance and asset impairments.
  3. Related to lump sum pension payments.
  4. Related to the deconsolidation of the Company’s Venezuelan subsidiary in the second quarter 2016.
  5. Related to the acquisition of Air Liquide Welding.
  6. Related to the reversal of an income tax valuation allowance as a result of a legal entity change.
  7. These amounts, which are based on reasonable estimates, may require further adjustments as additional guidance from the U.S. Department of Treasury is provided, the Company’s assumptions change, or as further information and interpretations become available.

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

Non-GAAP Financial Measures

     
    Twelve Months Ended December 31,
Return on Invested Capital   2017   2016
Net income as reported   $ 247,503     $ 198,399  
Rationalization and asset impairment charges, net of tax of $392   6,198      
Pension settlement charges, net of tax of $3,120   5,030      
Loss on deconsolidation of Venezuelan subsidiary, net of tax of $1,097
in 2016
      33,251  
Income tax valuation reversals       (7,196 )
Acquisition transaction and integration costs, net of tax of $3,443   11,559      
Amortization of step up in value of acquired inventories, net of tax of
$1,125
  3,453      
Bargain purchase gain   (49,650 )    
Net impact of U.S. Tax Act   28,616      
Adjusted net income (1)   $ 252,709     $ 224,454  
Plus: Interest expense, net of tax of $9,273 and $7,304 in 2017 and
2016, respectively
  14,947     11,775  
Less: Interest income, net of tax of $1,833 and $801 in 2017 and
2016, respectively
  2,955     1,291  
Adjusted net income before tax effected interest   $ 264,701     $ 234,938  
         
Invested Capital   December 31, 2017   December 31, 2016
Short-term debt   $ 2,131     $ 1,889  
Long-term debt, less current portion   704,136     703,704  
Total debt   706,267     705,593  
Total equity   932,453     712,206  
Invested capital   $ 1,638,720     $ 1,417,799  
         
Return on invested capital (1)(2)   16.2 %   16.6 %
  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 excluding tax-effected interest income and expense divided by invested capital.

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

Condensed Consolidated Statements of Cash Flows

    Three months ended December 31,
    2017   2016
OPERATING ACTIVITIES:        
Net income   $ 24,181     $ 53,395  
Non-controlling interests in subsidiaries’ income   4     6  
Net income including non-controlling interests   24,185     53,401  
Adjustments to reconcile Net income including non-controlling interests to Net cash
provided by operating activities:
       
Rationalization and asset impairment charges   1,441      
Bargain purchase adjustment   1,935      
Net impact of U.S. Tax Act   28,616      
Depreciation and amortization   17,658     16,578  
Equity earnings in affiliates, net   (121 )   (197 )
Pension expense, settlements and curtailments   1,701     1,516  
Pension contributions and payments   (1,959 )   (325 )
Other non-cash items, net   7,352     3,588  
Changes in operating assets and liabilities, net of effects from acquisitions:        
  Decrease (increase) in accounts receivable   7,489     (358 )
  Decrease in inventories   41,974     22,274  
  Increase in trade accounts payable   26,803     15,705  
  Net change in other current assets and liabilities   (70,003 )   (41,592 )
  Net change in other long-term assets and liabilities   2,420     1,787  
NET CASH PROVIDED BY OPERATING ACTIVITIES   89,491     72,377  
         
INVESTING ACTIVITIES:        
Capital expenditures   (22,697 )   (10,500 )
Proceeds from sale of property, plant and equipment   307     191  
Purchase of marketable securities   (49,999 )   (38,920 )
Proceeds from marketable securities   50,158      
Other investing activities       (426 )
NET CASH USED BY INVESTING ACTIVITIES   (22,231 )   (49,655 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   109     168,060  
Proceeds from exercise of stock options   2,294     14,631  
Purchase of shares for treasury   (20,152 )   (53,409 )
Cash dividends paid to shareholders   (23,369 )   (21,150 )
Other financing activities   9     (799 )
NET CASH (USED BY) PROVIDED BY FINANCING ACTIVITIES   (41,109 )   107,333  
         
Effect of exchange rate changes on Cash and cash equivalents   1,097     (7,804 )
INCREASE IN CASH AND CASH EQUIVALENTS   27,248     122,251  
Cash and cash equivalents at beginning of period   299,453     256,928  
Cash and cash equivalents at end of period   $ 326,701     $ 379,179  
         
Cash dividends paid per share   $ 0.35     $ 0.32  
                 


Lincoln Electric Holdings, Inc.

Financial Highlights
(In thousands, except per share amounts)
(Unaudited)

     
Condensed Consolidated Statements of Cash Flows   Twelve months ended December 31,
    2017   2016
OPERATING ACTIVITIES:        
Net income   $ 247,503     $ 198,399  
Non-controlling interests in subsidiaries’ loss   (28 )   (26 )
Net income including non-controlling interests   247,475     198,373  
Adjustments to reconcile Net income including non-controlling interests to Net cash
provided by operating activities:
       
Rationalization and asset impairment charges   1,441      
Loss on deconsolidation of Venezuelan subsidiary       34,348  
Bargain purchase gain   (49,650 )    
Net impact of U.S. Tax Act   28,616      
Depreciation and amortization   68,115     65,073  
Equity earnings in affiliates, net   (337 )   (261 )
Pension expense, settlements and curtailments   2,517     13,988  
Pension contributions and payments   (4,683 )   (22,484 )
Other non-cash items, net   22,841     (3,549 )
Changes in operating assets and liabilities, net of effects from acquisitions:        
  Increase in accounts receivable   (16,811 )   (12,314 )
  Decrease in inventories   19,448     14,601  
  Increase in trade accounts payable   17,871     29,627  
  Net change in other current assets and liabilities   (8,156 )   (7,754 )
  Net change in other long-term assets and liabilities   6,158     2,909  
NET CASH PROVIDED BY OPERATING ACTIVITIES   334,845     312,557  
         
INVESTING ACTIVITIES:        
Capital expenditures   (61,656 )   (49,877 )
Acquisition of businesses, net of cash acquired   (72,468 )   (71,567 )
Proceeds from sale of property, plant and equipment   2,301     1,127  
Purchase of marketable securities   (195,552 )   (38,920 )
Proceeds from marketable securities   55,348      
Other investing activities       (709 )
NET CASH USED BY INVESTING ACTIVITIES   (272,027 )   (159,946 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   (496 )   351,319  
Proceeds from exercise of stock options   16,627     25,049  
Purchase of shares for treasury   (43,164 )   (342,003 )
Cash dividends paid to shareholders   (92,452 )   (87,330 )
Other financing activities   (15,552 )   (19,043 )
NET CASH USED BY FINANCING ACTIVITIES   (135,037 )   (72,008 )
         
Effect of exchange rate changes on Cash and cash equivalents   19,741     (5,607 )
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (52,478 )   74,996  
Cash and cash equivalents at beginning of period   379,179     304,183  
Cash and cash equivalents at end of period   $ 326,701     $ 379,179  
         
Cash dividends paid per share   $ 1.40     $ 1.28  
                 


Lincoln Electric Holdings, Inc.

Segment Highlights (1)
(In thousands)
(Unaudited)

 
    Americas
Welding
  International
Welding
  The Harris
Products
Group
  Corporate /
Eliminations
  Consolidated
Three months ended December 31, 2017                
Net sales   $ 423,019     $ 256,021     $ 68,145     $     $ 747,185  
Inter-segment sales   22,002     3,646     1,427     (27,075 )    
Total   $ 445,021     $ 259,667     $ 69,572     $ (27,075 )   $ 747,185  
                     
EBIT (1)   $ 70,590     $ 4,246     $ 8,951     $ (5,611 )   $ 78,176  
As a percent of total sales   15.9 %   1.6 %   12.9 %       10.5 %
Special items charges (gains) (3)   3,959     7,762         5,551     17,272  
Adjusted EBIT (2)   $ 74,549     $ 12,008     $ 8,951     $ (60 )   $ 95,448  
As a percent of total sales   16.8 %   4.6 %   12.9 %       12.8 %
Three months ended December 31, 2016                
Net sales   $ 370,082     $ 130,605     $ 63,141     $     $ 563,828  
Inter-segment sales   23,939     4,020     1,726     (29,685 )    
Total   $ 394,021     $ 134,625     $ 64,867     $ (29,685 )   $ 563,828  
                     
EBIT (1)   $ 71,709     $ 7,447     $ 6,628     $ (1,248 )   $ 84,536  
As a percent of total sales   18.2 %   5.5 %   10.2 %       15.0 %
Adjusted EBIT (2)   $ 71,709     $ 7,447     $ 6,628     $ (1,248 )   $ 84,536  
As a percent of total sales   18.2 %   5.5 %   10.2 %       15.0 %
Twelve months ended December 31, 2017                
Net sales   $ 1,609,779     $ 724,024     $ 290,628     $     $ 2,624,431  
Inter-segment sales   97,382     18,860     8,190     (124,432 )    
Total   $ 1,707,161     $ 742,884     $ 298,818     $ (124,432 )   $ 2,624,431  
                     
EBIT (1)   $ 282,624     $ 31,645     $ 36,442     $ 34,957     $ 385,668  
As a percent of total sales   16.6 %   4.3 %   12.2 %       14.7 %
Special items charges (gains) (3)   9,242     10,076         (34,648 )   (15,330 )
Adjusted EBIT (2)   $ 291,866     $ 41,721     $ 36,442     $ 309     $ 370,338  
As a percent of total sales   17.1 %   5.6 %   12.2 %       14.1 %
Twelve months ended December 31, 2016                
Net sales   $ 1,494,982     $ 507,289     $ 272,343     $     $ 2,274,614  
Inter-segment sales   93,612     15,975     8,709     (118,296 )    
Total   $ 1,588,594     $ 523,264     $ 281,052     $ (118,296 )   $ 2,274,614  
                     
EBIT (1)   $ 266,633     $ 29,146     $ 32,380     $ (33,784 )   $ 294,375  
As a percent of total sales   16.8 %   5.6 %   11.5 %       12.9 %
Special items charges (gains) (4)               34,348     34,348  
Adjusted EBIT (2)   $ 266,633     $ 29,146     $ 32,380     $ 564     $ 328,723  
As a percent of total sales   16.8 %   5.6 %   11.5 %       14.5 %
  1. EBIT is defined as Operating income plus Equity earnings in affiliates and Other income.
  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 reflect rationalization and asset impairment charges, pension settlement charges, the net impact of the U.S. Tax Act and charges (gains) related to the Air Liquide Welding acquisition.
  4. Special items reflect a charge related to the deconsolidation of the Company’s Venezuelan subsidiary in the second quarter 2016.

Lincoln Electric Holdings, Inc.
Change in Net Sales by Segment
(In thousands)
(Unaudited)

 
Three Months Ended December 31st Change in Net Sales by Segment
             
        Change in Net Sales due to:    
    Net Sales
2016
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2017
Operating Segments                        
Americas Welding   $ 370,082     $ 37,378     $ 2,638     $ 10,784     $ 2,137     $ 423,019  
International Welding   130,605     (3,209 )   111,910     7,259     9,456     256,021  
The Harris Products Group   63,141     4,380         (64 )   688     68,145  
Consolidated   $ 563,828     $ 38,549     $ 114,548     $ 17,979     $ 12,281     $ 747,185  
                         
% Change                        
Americas Welding       10.1 %   0.7 %   2.9 %   0.6 %   14.3 %
International Welding       (2.5 %)   85.7 %   5.6 %   7.2 %   96.0 %
The Harris Products Group       6.9 %       (0.1 %)   1.1 %   7.9 %
Consolidated       6.8 %   20.3 %   3.2 %   2.2 %   32.5 %
                         
                         
Twelve Months Ended December 31st Change in Net Sales by Segment
             
        Change in Net Sales due to:    
    Net Sales
2016
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2017
Operating Segments                        
Americas Welding   $ 1,494,982     $ 67,306     $ 8,470     $ 36,009     $ 3,012     $ 1,609,779  
International Welding   507,289     12,503     173,430     18,327     12,475     $ 724,024  
The Harris Products Group   272,343     15,362         742     2,181     $ 290,628  
Consolidated   $ 2,274,614     $ 95,171     $ 181,900     $ 55,078     $ 17,668     $ 2,624,431  
                         
Americas Welding (excluding Venezuela)   $ 1,484,168     $ 78,120     $ 8,470     $ 36,009     $ 3,012     $ 1,609,779  
Consolidated (excluding Venezuela)   $ 2,263,801     $ 105,984     $ 181,900     $ 55,078     $ 17,668     $ 2,624,431  
                         
% Change                        
Americas Welding       4.5 %   0.6 %   2.4 %   0.2 %   7.7 %
International Welding       2.5 %   34.2 %   3.6 %   2.5 %   42.7 %
The Harris Products Group       5.6 %       0.3 %   0.8 %   6.7 %
Consolidated       4.2 %   8.0 %   2.4 %   0.8 %   15.4 %
                         
Americas Welding (excluding Venezuela)       5.3 %   0.6 %   2.4 %   0.2 %   8.5 %
Consolidated (excluding Venezuela) (1)       4.7 %   8.0 %   2.4 %   0.8 %   15.9 %

(1) Venezuelan sales in the twelve months ended December 31, 2016 were $11 million. 

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