Lincoln Electric Reports Third Quarter 2017 Results

Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq:LECO) today reported third quarter 2017 net income of $106.1 million, or diluted earnings per share (EPS) of $1.59.  Reported EPS includes a bargain purchase gain related to the Air Liquide Welding acquisition ($51.6 million, or $0.77 EPS) and other special item after-tax charges ($7.2 million, or $0.11 EPS).  Excluding these items, third quarter adjusted net income was $61.8 million, or $0.93 EPS, as compared with $60.0 million, or $0.89 EPS in the prior year period.

Third quarter 2017 sales increased 17.9% to $669.5 million from an 11.0% benefit from acquisitions, 3.8% higher volumes, a 1.8% increase in price and 1.4% from favorable foreign exchange.

Operating income for the third quarter 2017 was $133.1 million, or 19.9% of sales.  This compares with operating income of $81.8 million, or 14.4% of sales, in the comparable 2016 period.  On an adjusted basis, operating income was $92.4 million, or 13.8% of sales, as compared with $81.8 million, or 14.4% of sales, in the prior year.  The acquisition had an unfavorable 140 basis point impact to the adjusted operating income margin.

The third quarter 2017 tax rate was 18.8%.  The tax rate was favorably impacted by the bargain purchase gain, which had no tax effect.  The third quarter 2017 tax rate excluding special items was 31.3% as compared to 25.2% in the comparable 2016 period.  The higher current year effective tax rate is attributable to the geographical mix of earnings and the unfavorable effect of discrete tax items.

On July 31, 2017, the Company completed its acquisition of Air Liquide Welding, a subsidiary of Air Liquide, for a purchase price of $135.1 million adjusted for certain debt-like obligations.  The cash purchase price paid, net of cash acquired, was $72.5 million.  The Company funded the transaction with available cash on hand.

Christopher L. Mapes, chairman, president and chief executive officer stated:

"We achieved solid performance from improving end market demand and the successful close of the Air Liquide Welding transaction.  Integration is proceeding quickly and we remain confident in the synergies we expect to realize from our initiatives.  As we move into 2018, we expect to benefit from an ongoing global recovery in most end markets.  Our team will continue to focus on the global integration of the Air Liquide Welding business, relentlessly support our customers and execute on our 2020 Vision and Strategy."

Nine Months 2017 Summary

Net income for the nine months ended September 30, 2017 was $223.3 million, or EPS of $3.35, as compared with $145.0 million, or $2.11 EPS in the prior year period.  Current period reported EPS includes a bargain purchase gain related to the Air Liquide Welding acquisition ($51.6 million, or $0.77 EPS) and other special item after-tax charges ($13.5 million, or $0.20 EPS).  Adjusted net income for the nine months ended September 30, 2017 was $185.2 million, or $2.78 EPS, as compared with $171.1 million, or $2.49 EPS in the prior period.

Sales increased 9.7% to $1.9 billion for the nine months ended September 30, 2017 from a 3.9% benefit from acquisitions, 3.3% higher volumes and a 2.2% increase in price.

Operating income for the nine months ended September 30, 2017 was $302.2 million, or 16.1% of sales.  This compares with operating income of $205.2 million, or 12.0% of sales, in the comparable 2016 period.  On an adjusted basis, operating income was $269.6 million, or 14.4% of sales, as compared with $239.6 million, or 14.0% of sales, in the prior year.  The acquisition had an unfavorable 50 basis point impact to the adjusted operating income margin.

The tax rate was 23.7% for the nine months ended September 30, 2017.  The tax rate was favorably impacted by the bargain purchase gain, which had no tax effect.  The current period tax rate excluding special items was 28.8% as compared to 26.8% in the comparable 2016 period.  The higher current year effective tax rate is attributable to the geographical mix of earnings and the unfavorable effect of discrete tax items.

Dividend

The Company's Board of Directors declared an 11.4% increase in the quarterly cash dividend, from $0.35 per share to $0.39, or $1.56 per share on an annual basis.  The declared quarterly cash dividend of $0.39 per share is payable January 12, 2018 to shareholders of record as of December 29, 2017.

Webcast Information

A conference call to discuss third quarter 2017 financial results will be webcast live today, October 27, 2017, 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 [phone] (domestic) or [phone] (international) and use confirmation code 94532360.  Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the third 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; 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 ButlerVice President, Investor Relations & CommunicationsTel: 216.383.2534Email: [e-mail]

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
		2017				% of Sales			2016				% of Sales			$				%
Net sales		$	669,491			100.0	%		$	567,646			100.0	%		$	101,845			17.9	%
Cost of goods sold		449,975				67.2	%		367,834				64.8	%		(82,141		)		(22.3	%)
Gross profit		219,516				32.8	%		199,812				35.2	%		19,704				9.9	%
Selling, general & administrative expenses		132,748				19.8	%		117,983				20.8	%		(14,765		)		(12.5	%)
Pension settlement charges		5,283				0.8	%		—				—			(5,283		)		(100.0	%)
Bargain purchase gain		(51,585		)		7.7	%		—				—			51,585				100.0	%
Operating income		133,070				19.9	%		81,829				14.4	%		51,241				62.6	%
Interest income		1,327				0.2	%		360				0.1	%		967				268.6	%
Equity earnings in affiliates		766				0.1	%		619				0.1	%		147				23.7	%
Other income		1,401				0.2	%		1,303				0.2	%		98				7.5	%
Interest expense		(5,922		)		0.9	%		(3,815		)		0.7	%		(2,107		)		(55.2	%)
Income before income taxes		130,642				19.5	%		80,296				14.1	%		50,346				62.7	%
Income taxes		24,531				3.7	%		20,257				3.6	%		(4,274		)		(21.1	%)
Effective tax rate		18.8		%					25.2		%					6.4		%
Net income including non-controlling interests		106,111				15.8	%		60,039				10.6	%		46,072				76.7	%
Non-controlling interests in subsidiaries’ loss		(15		)		—			(10		)		—			(5		)		(50.0	%)
Net income		$	106,126			15.9	%		$	60,049			10.6	%		$	46,077			76.7	%
Basic earnings per share		$	1.61						$	0.90						$	0.71			78.9	%
Diluted earnings per share		$	1.59						$	0.89						$	0.70			78.7	%
Weighted average shares (basic)		65,806							66,477
Weighted average shares (diluted)		66,702							67,182
		Nine Months Ended September 30,														Fav (Unfav) toPrior Year
		2017				% of Sales			2016				% of Sales			$				%
Net sales		$	1,877,246			100.0	%		$	1,710,786			100.0	%		$	166,460			9.7	%
Cost of goods sold		1,236,386				65.9	%		1,118,945				65.4	%		(117,441		)		(10.5	%)
Gross profit		640,860				34.1	%		591,841				34.6	%		49,019				8.3	%
Selling, general & administrative expenses		384,964				20.5	%		352,290				20.6	%		(32,674		)		(9.3	%)
Pension settlement charges		5,283				0.3	%		—				—			(5,283		)		(100.0	%)
Loss on deconsolidation of Venezuelan subsidiary		—				—			34,348				2.0	%		34,348				100.0	%
Bargain purchase gain		(51,585		)		2.7	%		—				—			51,585				100.0	%
Operating income		302,198				16.1	%		205,203				12.0	%		96,995				47.3	%
Interest income		3,349				0.2	%		1,225				0.1	%		2,124				173.4	%
Equity earnings in affiliates		2,001				0.1	%		2,084				0.1	%		(83		)		(4.0	%)
Other income		3,293				0.2	%		2,552				0.1	%		741				29.0	%
Interest expense		(18,333		)		1.0	%		(11,828		)		0.7	%		(6,505		)		(55.0	%)
Income before income taxes		292,508				15.6	%		199,236				11.6	%		93,272				46.8	%
Income taxes		69,218				3.7	%		54,264				3.2	%		(14,954		)		(27.6	%)
Effective tax rate		23.7		%					27.2		%					3.5		%
Net income including non-controlling interests		223,290				11.9	%		144,972				8.5	%		78,318				54.0	%
Non-controlling interests in subsidiaries’ loss		(32		)		—			(32		)		—			—				—
Net income		$	223,322			11.9	%		$	145,004			8.5	%		$	78,318			54.0	%
Basic earnings per share		$	3.40						$	2.13						$	1.27			59.6	%
Diluted earnings per share		$	3.35						$	2.11						$	1.24			58.8	%
Weighted average shares (basic)		65,769							68,081
Weighted average shares (diluted)		66,679							68,784

Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
Balance Sheet Highlights
Selected Consolidated Balance Sheet Data		September 30, 2017					December 31, 2016
Cash and cash equivalents		$	299,453				$	379,179
Marketable securities		179,284					38,922
Total current assets		1,378,681					1,043,713
Property, plant and equipment, net		475,071					372,377
Total assets		2,411,103					1,943,437
Total current liabilities		539,856					388,107
Short-term debt (1)		2,135					1,889
Long-term debt, less current portion		704,804					703,704
Total equity		945,928					712,206
Operating Working Capital		September 30, 2017					December 31, 2016
Accounts receivable, net		$	401,231				$	273,993
Inventories		389,722					255,406
Trade accounts payable		242,253					176,757
Operating working capital		$	548,700				$	352,642
Average operating working capital to Net sales (2)		20.5		%	(3	)	15.6		%
Invested Capital		September 30, 2017					December 31, 2016
Short-term debt (1)		$	2,135				$	1,889
Long-term debt, less current portion		704,804					703,704
Total debt		706,939					705,593
Total equity		945,928					712,206
Invested capital		$	1,652,867				$	1,417,799
Total debt / invested capital		42.8		%			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 two months of Net sales related to the acquisition of Air Liquide Welding.  Average operating working capital to Net Sales excluding the acquisition was 17.6%.

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,
		2017				2016				2017				2016
Operating income as reported		$	133,070			$	81,829			$	302,198			$	205,203
Special items (pre-tax):
Pension settlement charges (2)		5,283				—				5,283				—
Loss on deconsolidation of Venezuelan subsidiary (3)		—				—				—				34,348
Acquisition transaction and integration costs (4)		3,273				—				11,386				—
Amortization of step up in value of  acquired inventories (4)		2,314				—				2,314				—
Bargain purchase gain (4)		(51,585		)		—				(51,585		)		—
Adjusted operating income (1)		$	92,355			$	81,829			$	269,596			$	239,551
As a percent of total sales		13.8		%		14.4		%		14.4		%		14.0		%
Net income as reported		$	106,126			$	60,049			$	223,322			$	145,004
Special items (after-tax):
Pension settlement charges (2)		3,260				—				3,260				—
Loss on deconsolidation of Venezuelan subsidiary (3)		—				—				—				33,251
Income tax valuation reversals (5)		—				—				—				(7,196		)
Acquisition transaction and integration costs (4)		2,229				—				8,457				—
Amortization of step up in value of  acquired inventories (4)		1,745				—				1,745				—
Bargain purchase gain (4)		(51,585		)		—				(51,585		)		—
Adjusted net income (1)		$	61,775			$	60,049			$	185,199			$	171,059
Diluted earnings per share as reported		$	1.59			$	0.89			$	3.35			$	2.11
Special items		(0.66		)		—				(0.57		)		0.38
Adjusted diluted earnings per share (1)		$	0.93			$	0.89			$	2.78			$	2.49
Weighted average shares (diluted)		66,702				67,182				66,679				68,784
(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) Related to lump sum pension payments.
(3) Related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016.
(4) Related to the acquisition of Air Liquide Welding.
(5) Related to the reversal of an income tax valuation allowance as a result of a legal entity change.

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		2017				2016
Net income as reported		$	276,717			$	193,696
Rationalization and asset impairment charges, net of tax of ($16)		—				450
Pension settlement charges, net of tax of $2,023 and $2,438 in 2017 and 2016, respectively		3,260				3,969
Loss on deconsolidation of Venezuelan subsidiary, net of tax of $1,097		—				33,251
Income tax valuation reversals		—				(7,196		)
Venezuela currency devaluation		—				708
Acquisition transaction and integration costs, net of tax of $2,929		8,457				—
Amortization of step up in value of acquired inventories, net of tax of $569		1,745				—
Bargain purchase gain		(51,585		)		—
Adjusted net income (1)		$	238,594			$	224,878
Plus: Interest expense, net of tax of $9,795 and $6,816 in 2017 and 2016, respectively		15,789				13,342
Less: Interest income, net of tax of $1,614 and $596 in 2017 and 2016, respectively		2,602				1,182
Adjusted net income before tax effected interest		$	251,781			$	237,038
Invested Capital		September 30, 2017				September 30, 2016
Short-term debt		$	2,135			$	183,827
Long-term debt, less current portion		704,804				359,831
Total debt		706,939				543,658
Total equity		945,928				752,917
Invested capital		$	1,652,867			$	1,296,575
Return on invested capital (1)(2)		15.2		%		18.3		%
(1) Adjusted net income and Return on invested capital are non-GAAP financial measures.  Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business.  Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully.  Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly.  Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
(2) Return on invested capital is defined as rolling 12 months of Adjusted net income 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 September 30,
		2017				2016
OPERATING ACTIVITIES:
Net income		$	106,126			$	60,049
Non-controlling interests in subsidiaries’ loss		(15		)		(10		)
Net income including non-controlling interests		106,111				60,039
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
Bargain purchase gain		(51,585		)		—
Depreciation and amortization		18,451				16,263
Equity earnings in affiliates, net		(141		)		(6		)
Pension expense and settlement charges		3,495				3,216
Pension contributions and payments		(1,556		)		(582		)
Other non-cash items, net		(143		)		(1,742		)
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in accounts receivable		15,706				10,437
Decrease in inventories		2,231				7,819
Decrease in trade accounts payable		(21,551		)		(8,306		)
Net change in other current assets and liabilities		22,978				24,309
Net change in other long-term assets and liabilities		(329		)		1,854
NET CASH PROVIDED BY OPERATING ACTIVITIES		93,667				113,301
INVESTING ACTIVITIES:
Capital expenditures		(10,828		)		(14,598		)
Acquisition of businesses, net of cash acquired		(72,468		)		—
Proceeds from sale of property, plant and equipment		892			257
Purchase of marketable securities		(75,619		)		—
Proceeds from marketable securities		200				—
NET CASH USED BY INVESTING ACTIVITIES		(157,823		)		(14,341		)
FINANCING ACTIVITIES:
Net change in borrowings		(394		)		23,989
Proceeds from exercise of stock options		936				4,703
Purchase of shares for treasury		(15,264		)		(85,661		)
Cash dividends paid to shareholders		(23,067		)		(21,533		)
Other financing activities		(372		)		—
NET CASH USED BY FINANCING ACTIVITIES		(38,161		)		(78,502		)
Effect of exchange rate changes on Cash and cash equivalents		6,035				(549		)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(96,282		)		19,909
Cash and cash equivalents at beginning of period		395,735				237,019
Cash and cash equivalents at end of period		$	299,453			$	256,928
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
		Nine Months Ended September 30,
		2017				2016
OPERATING ACTIVITIES:
Net income		$	223,322			$	145,004
Non-controlling interests in subsidiaries’ loss		(32		)		(32		)
Net income including non-controlling interests		223,290				144,972
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:
Loss on deconsolidation of Venezuelan subsidiary		—				34,348
Bargain purchase gain		(51,585		)		—
Depreciation and amortization		50,457				48,495
Equity earnings in affiliates, net		(216		)		(64		)
Pension expense and settlement charges		816				12,472
Pension contributions and payments		(2,724		)		(22,159		)
Other non-cash items, net		15,489				(7,137		)
Changes in operating assets and liabilities, net of effects from acquisitions:
Increase in accounts receivable		(24,300		)		(11,956		)
Increase in inventories		(22,526		)		(7,673		)
(Decrease) increase in trade accounts payable		(8,932		)		13,922
Net change in other current assets and liabilities		61,847				33,838
Net change in other long-term assets and liabilities		3,738				1,122
NET CASH PROVIDED BY OPERATING ACTIVITIES		245,354				240,180
INVESTING ACTIVITIES:
Capital expenditures		(38,959		)		(39,377		)
Acquisition of businesses, net of cash acquired		(72,468		)		(71,567		)
Proceeds from sale of property, plant and equipment		1,994				936
Purchase of marketable securities		(145,553		)		—
Proceeds from marketable securities		5,190				—
Other investing activities		—				(283		)
NET CASH USED BY INVESTING ACTIVITIES		(249,796		)		(110,291		)
FINANCING ACTIVITIES:
Net change in borrowings		(605		)		183,259
Proceeds from exercise of stock options		14,333				10,418
Purchase of shares for treasury		(23,012		)		(288,594		)
Cash dividends paid to shareholders		(69,083		)		(66,180		)
Other financing activities		(15,561		)		(18,244		)
NET CASH USED BY FINANCING ACTIVITIES		(93,928		)		(179,341		)
Effect of exchange rate changes on Cash and cash equivalents		18,644				2,197
DECREASE IN CASH AND CASH EQUIVALENTS		(79,726		)		(47,255		)
Cash and cash equivalents at beginning of period		379,179				304,183
Cash and cash equivalents at end of period		$	299,453			$	256,928
Cash dividends paid per share		$	1.05			$	0.96

Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
		Americas Welding				International Welding				The HarrisProductsGroup				Corporate /Eliminations				Consolidated
Three months ended September 30, 2017
Net sales		$	398,289			$	197,617			$	73,585			$	—			$	669,491
Inter-segment sales		25,546				5,451				2,064				(33,061		)		—
Total		$	423,835			$	203,068			$	75,649			$	(33,061	)		$	669,491
EBIT (1)		$	68,813			$	8,298			$	9,244			$	48,882			$	135,237
As a percent of total sales		16.2		%		4.1		%		12.2		%						20.2		%
Special items charges (gains) (3)		5,283				2,314				—				(48,312		)		(40,715		)
Adjusted EBIT (2)		$	74,096			$	10,612			$	9,244			$	570			$	94,522
As a percent of total sales		17.5		%		5.2		%		12.2		%						14.1		%
Three months ended September 30, 2016
Net sales		$	377,520			$	119,564			$	70,562			$	—			$	567,646
Inter-segment sales		22,386				3,688				1,856				(27,930		)		—
Total		$	399,906			$	123,252			$	72,418			$	(27,930	)		$	567,646
EBIT (1)		$	68,285			$	5,796			$	8,757			$	913			$	83,751
As a percent of total sales		17.1		%		4.7		%		12.1		%						14.8		%
Special items charges (gains)		—				—				—				—				—
Adjusted EBIT (2)		$	68,285			$	5,796			$	8,757			$	913			$	83,751
As a percent of total sales		17.1		%		4.7		%		12.1		%						14.8		%
Nine months ended September 30, 2017
Net sales		$	1,186,760			$	468,003			$	222,483			$	—			$	1,877,246
Inter-segment sales		75,380				15,214				6,763				(97,357		)		—
Total		$	1,262,140			$	483,217			$	229,246			$	(97,357	)		$	1,877,246
EBIT (1)		$	212,034			$	27,399			$	27,491			$	40,568			$	307,492
As a percent of total sales		16.8		%		5.7		%		12.0		%						16.4		%
Special items charges (gains) (3)		5,283				2,314				—				(40,199		)		(32,602		)
Adjusted EBIT (2)		$	217,317			$	29,713			$	27,491			$	369			$	274,890
As a percent of total sales		17.2		%		6.1		%		12.0		%						14.6		%
Nine months ended September 30, 2016
Net sales		$	1,124,900			$	376,684			$	209,202			$	—			$	1,710,786
Inter-segment sales		69,673				11,955				6,983				(88,611		)		—
Total		$	1,194,573			$	388,639			$	216,185			$	(88,611	)		$	1,710,786
EBIT (1)		$	194,924			$	21,699			$	25,752			$	(32,536	)		$	209,839
As a percent of total sales		16.3		%		5.6		%		11.9		%						12.3		%
Special items charges (gains) (4)		—				—				—				34,348				34,348
Adjusted EBIT (2)		$	194,924			$	21,699			$	25,752			$	1,812			$	244,187
As a percent of total sales		16.3		%		5.6		%		11.9		%						14.3		%
(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 pension settlement charges and acquisition transaction and integration costs, amortization of step up in value of acquired inventories and a bargain purchase gain related to the acquisition of Air Liquide Welding.
(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 September 30th Change in Net Sales by Segment
						Change in Net Sales due to:
		Net Sales 2016				Volume				Acquisitions				Price				ForeignExchange				Net Sales 2017
Operating Segments
Americas Welding		$	377,520			$	8,401			$	1,140			$	9,197			$	2,031			$	398,289
International Welding		119,564				7,988				61,520				3,446				5,099				197,617
The Harris Products Group		70,562				5,050				—				(2,604		)		577				73,585
Consolidated		$	567,646			$	21,439			$	62,660			$	10,039			$	7,707			$	669,491
% Change
Americas Welding						2.2		%		0.3		%		2.4		%		0.5		%		5.5		%
International Welding						6.7		%		51.5		%		2.9		%		4.3		%		65.3		%
The Harris Products Group						7.2		%		—				(3.7		%)		0.8		%		4.3		%
Consolidated						3.8		%		11.0		%		1.8		%		1.4		%		17.9		%
Nine Months Ended September 30th 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		$	1,124,900			$	29,928			$	5,832			$	25,225			$	875			$	1,186,760
International Welding		376,684				15,712				61,520				11,068				3,019				$	468,003
The Harris Products Group		209,202				10,982				—				806				1,493				$	222,483
Consolidated		$	1,710,786			$	56,622			$	67,352			$	37,099			$	5,387			$	1,877,246
Americas Welding(excluding Venezuela)		$	1,114,086			$	40,742			$	5,832			$	25,225			$	875			$	1,186,760
Consolidated(excluding Venezuela)		$	1,699,973			$	67,435			$	67,352			$	37,099			$	5,387			$	1,877,246
% Change
Americas Welding						2.7		%		0.5		%		2.2		%		0.1		%		5.5		%
International Welding						4.2		%		16.3		%		2.9		%		0.8		%		24.2		%
The Harris Products Group						5.2		%		—				0.4		%		0.7		%		6.3		%
Consolidated						3.3		%		3.9		%		2.2		%		0.3		%		9.7		%
Americas Welding(excluding Venezuela)						3.7		%		0.5		%		2.3		%		0.1		%		6.5		%
Consolidated(excluding Venezuela) (1)						4.0		%		4.0		%		2.2		%		0.3		%		10.4		%
(1) Venezuelan sales in the nine months ended September 30, 2016 were $11 million.