Lincoln Electric Holdings, Inc. Update KeyBanc Industrial, Automotive, and Transportation Conference - May 29, 2013
John M. Stropki
Executive Chairman
Vincent K. Petrella SVP and Chief Financial Officer
2
Safe Harbor & Reg-G
Forward-Looking Statements:
Statements made during this presentation which are not historical facts may be considered forward-looking statements.
Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially
from those expressed or implied. 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. For
further information concerning issues that could materially affect financial performance related to forward-looking
statements, please refer to Lincoln Electric’s quarterly earnings releases and periodic filings with the Securities and
Exchange Commission, which can be found on www.sec.gov or on www.lincolnelectric.com.
Non-GAAP Measures:
Our management uses non-GAAP financial measures in assessing and evaluating the Company’s performance, which
exclude items we consider unusual or special items. We believe the use of such financial measures and information may
be useful to investors. Non-GAAP financial measures should be read in conjunction with the GAAP financial measures,
as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. Please refer to the
attached schedule for a reconciliation of non-GAAP financial measures to the related GAAP financial measures.
3
A Proud History
4
World-Class Arc Welding and Cutting Products
Welding
Consumables
65% Welding
Equipment
35%
MIG & TIG consumables
Stainless, Nickel & High Alloy
consumables, Submerged Arc,
Stick Electrodes, Cobalt
Flux-Cored Wire Gas regulators, welding
guns and torches,
accessories Plasma cutter
Virtual and Automated welding
Welder/Generator –
Engine Drive
Power Wave
AC/DC 1000
Fume extractor
Power Wave®
AC/DC 1000® SD
Soldering
and
Brazing
alloys
CNC Cutting
System
Orbital TIG welding
5
Consumables
MEXICO CITY, MEXICO
Brazing Consumables
SAO PAULO, BRAZIL Consumables
JAKARTA, INDONESIA
Equipment
BIELAWA, POLAND
Consumables
LISBON, PORTUGAL
Consumables
ISTANBUL, TURKEY
Consumables
OREL, RUSSIA Consumables &
Gas Apparatus
DZIERZONIOW, POLAND
Consumables
LUAN COUNTY, CHINA
Consumables
JINZHOU, CHINA
Consumables
ZHENGZHOU, CHINA
Consumables
NANJING, CHINA
Equipment & Consumables
SHANGHAI, CHINA
REGIONAL HEADQUARTERS
Asia Pacific
SHANGHAI, CHINA
Consumables
CHENNAI, INDIA
Consumables
MISSISSAUGA, CANADA
REGIONAL HEADQUARTERS
North America
CLEVELAND, OHIO
Gas Apparatus
LOS ANGELES, CALIFORNIA
Pipe Cutting Equipment
SAN DIEGO, CALIFORNIA
Consumables & Accessories
TIJUANA, MEXICO
Equipment & Consumables
TORREON, MEXICO
Equipment, Consumables
& Automation
CLEVELAND, OHIO
Equipment & Consumables
TORONTO, CANADA
Consumables
MASON, OHIO
Gas Apparatus
GAINESVILLE, GEORGIA
Consumables
BOGOTA, COLOMBIA REGIONAL HEADQUARTERS
Europe, Middle East,
Africa & Russia
BARCELONA, SPAIN
Consumables
GUARULHOS, BRAZIL
Consumables
MTSENSK, RUSSIA
Consumables
SHEFFIELD, UNITED KINGDOM
Consumables
CHERTSEY, UNITED KINGDOM
Consumables
ROUEN, FRANCE
Equipment
GENOVA, ITALY
Consumables
AREZZO, ITALY
Automated Welding Systems
SAN DIEGO, CALIFORNIA
REGIONAL HEADQUARTERS
South America
SAO PAULO, BRAZIL
CNC Cutting Equipment
RENO, NEVADA
REGIONAL HEADQUARTERS
Harris Products Group
MASON, OHIO
Consumables
BALTIMORE, MARYLAND
Consumables
MARACAY, VENEZUELA
Consumables
MENTOR, OHIO
GLOBAL HEADQUARTERS
CLEVELAND, OHIO
Consumables
PORT TALBOT, WALES
Pipe Mill Welding Systems
ESSEN, GERMANY
Consumables
NIJMEGEN, NETHERLANDS
Accessories
ANAHEIM, CALIFORNIA
Automated solutions
FT. LORAMIE, OHIO
45 Manufacturing Facilities in 19 Countries
Lincoln Electric: Dynamic and Evolving Company
GLOBAL HEADQUARTERS
Lincoln Electric
Cleveland, Ohio USA
REGIONAL HEADQUARTERS
North America
Cleveland, Ohio USA
South America
Sao Paulo, Brazil
Europe, Middle East, Africa & Russia
Barcelona, Spain
Asia Pacific
Shanghai, China
Harris Products Group
Mason, Ohio USA
6
Global Sales Shift to BRICs
2012 2002
North
America
67%
North
America
55%
Rest of World 30%
Rest of World 30%
BRIC 15% BRIC 3%
BRIC= Brazil, Russia, India, China
North America = United States, Canada, Mexico
Sales by Destination
7
Lincoln Electric’s “2020 Vision”
“2020 Vision” Goals
• >$4B Net Sales
• >15% Operating Margin
• Average 15% ROIC
(through the cycle)
• 15% Operating Working Capital
8
Strategic Growth Drivers
PROFITABLE GROWTH
• Leverage breadth of product and process solutions
• Penetrate attractive, high-growth global end markets and regional segments
• Develop distribution channels
• Ongoing investment in new product development
• Grow and train our own technical sales force
IMPROVED PROFITABILITY & RETURNS
• Cost improvements
• Operational excellence
• Favorable mix and portfolio
management
• Improved working capital efficiency
9
Leveraging Products & Process Solutions Globally
Penetrate Critical
Global End Markets
= +
= + +
+ + = + +
= + + +
=
10
Developing Key Channels
Direct to
End User
Industrial
Distribution
Rental
Network
Retail
• 200 person technical sales force in North America
• Similar program launched globally
11
Innovation is a Major Driver
• Industry’s most comprehensive R&D
program
• Approximately 50% of 2012 equipment
sales were new products developed
and introduced over the last 5 years
• Industry-leading technology
$37
$33
$22$20$19
$24$26 $27 $28 $29
$0
$5
$10
$15
$20
$25
$30
$35
$40
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
R&D Expenditures
Lincoln leads the arc welding industry in
new product introductions
12
Active Across the Diversified $20B Global Arc Welding
Industry
$20B
13
Opportunity to Expand Our Presence in Targeted Areas Estimated Regional Market Share
0%
5%
10%
15%
20%
25%
30%
35%
40%
0% 2% 4% 6% 8% 10%
North America
$4.2B
Latin America
$1.6B EMEA
$5.2B
Asia Pacific
$9.0B
Regional Industry Growth Rate
Estim
ate
d M
ark
et
Share
14
Others
Hyundai
Fronius
Kemppi
OTCHypertherm
BohlerAir Liquide
Victor
Technologies
(Thermadyne)
MesserPanasonic
AtlanticBig Bridge
KobelcoGolden Bridge
ITW
ESAB
(Colfax)
Lincoln Electric
* Amounts based on the Company's estimate of the total market and include sales of equity affiliates
Global Market Share Estimates
The top 3
companies
compete in
Equipment and
Consumables
Fragmented Global Competitive Landscape
15
20
30
40
50
60
70
1/1
/20
09
4/1
/20
09
7/1
/20
09
10
/1/2
009
1/1
/20
10
4/1
/20
10
7/1
/20
10
10
/1/2
010
1/1
/20
11
4/1
/20
11
7/1
/20
11
10
/1/2
011
1/1
/20
12
4/1
/20
12
7/1
/20
12
10
/1/2
012
1/1
/20
13
4/1
/20
13
Economic Variables Impacting Our Industry
Share of World Crude Steel Production: 2012
Global Steel Production: 2012-March 2013 (WSA)
U.S. Purchasing Manager’s Index: 2009-April 2013
China, 46.3%
South Korea, 4.5%
India, 5.0%
Japan, 6.9%
USA, 5.7%
Brazil, 2.2%
EU-27, 10.9%
Ukraine, 2.1%
Russia, 4.6%
ROW, 11.7%
-10%
-5%
0%
5%
10%
15%
20%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Yo
Y G
row
th %
Pro
du
cti
on
(M
t)
Global China ROW
Global (%) China (%) ROW (%)
Industrial Production/Capacity Utilization (U.S.)
16
Electro-Arco
LEIM
SLE
JINZHOU JINTAI
WELDING METAL
CO LTD
Heli
4.9%
5.8%5.3%
3.0%3.0%
2.0%
3.4%
7.0%
2.3%
0%
2%
4%
6%
8%
2004 2005 2006 2007 2008 2009 2010 2011 2012
Acquisition Growth % of Sales
MGM
Global Acquisition Strategy Expands Footprint
Tennessee
Rand
Financial Review
Vincent K. Petrella SVP and Chief Financial Officer
18
Net Sales
$2,853$2,695
$2,070
$1,729
$2,479
$2,281
$1,972
$1,041
$1,333
$1,601
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
($ in Millions)
Net Sales: 2003-2012
North
America
$1.6B, 55%
Asia
Pacific
$324M,
11%
Europe
$452M,
16%
Harris
$334M,
12%
South
America
$161M, 6%
2012 Net Sales Mix By
Reportable Segment 2003-2012
CAGR %
10.6%
19
Q1 Sales -- 2013 vs. 2012
$719$727
Q1-2012 Q1-2013
($ in Millions)
(1.2%)
$ Δ % Δ
Volume $(44) (6%)
Price $1 -
Acq. $40 6%
F/X $(6) (1%)
Total $(9) (1%)
On an average sales per shipping day basis – constant dollar
sales were relatively steady YoY in Q1
20
LECO Historical Sales Mix Trends Pricing resilience through the cycle
13.2%
4.2%
15.5%
6.8%
14.8%
1.3%
9.5%
8.0%
2.9%
3.7%
6.9%
0.1%
2.3%
7.0%
3.4%
2.0%
5.8%
4.9%5.5%
3.2%
2.6%
(6.0%)
(29.8%)
14.1%
(3.9%)
1.7%
(0.5%)
0.4%
7.8%
3.0%
3.0%
5.3%
(2.0%)
(0.8%)
3.1%
1.9%
1.3%%0.9%%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Volume Price Acquisition FX
20.1% 23.1%
* 8.7% 15.7%
2011
(30.2%)
2009 2008 2007 2006 2005 Q1-13
30.1%
* 19.7%
2004
(2.9%)
28.1%
* Differences due to rounding
2010
5.9%
2012
(1.2%)
21
Operating Income Margin Track record of expansion on mix improvement, pricing, and internal initiatives
13.1%
11.0%
9.1%
7.0%
12.7%12.2%11.5%
9.6%
8.3%
6.7%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Please refer to the appendix for reconciliation of non-GAAP measures
Operating Profit Margin – Excluding Special Items: 2003-2012
22
Operational Excellence is a Key Focus
Committed to Continuous
Improvement
• Lean manufacturing and Six Sigma
– Implemented across the platform
– Hundreds of projects completed annually
• Cost savings programs
– Sourcing
– Productivity
– Waste reduction
• Deploying ISO 14001
Optimization Programs Aligning Platform
for Growth and Margin Expansion
• 8 facilities closed or consolidated since ‘09
• Realizing benefits from SAP deployments
• Reshaping regional portfolios to maximize
differentiation, value creation and margin
growth
• Leveraging global network to service growth
profitably
23
North
America
Welding
Europe*
Welding
Asia
Pacific
Welding
South
America
Welding
The
Harris
Products
Group
Total
Q1-13 Organic
Sales
Growth** (1%) (10%) (24%) (3%) (4%) (6%)
Q1-13 EBIT
Margin (excluding special
items)
17.1% 9.3% 3.1% 14.0% 8.5% 14.1%
YoY Margin
Performance (bps)
+30 (50) +40 +670 +50 +130
Driving Segment Margin Performance Despite a Weak
Topline
* “Europe” includes Middle East, Africa and Russia
** “Organic” refers to volume and price performance
Margin expansion driven by an improved mix, portfolio
management, price/cost variance, and internal initiatives
24
$64$77
$81
$55
$122
$175
$203$212
$49
$130
$217
$257
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1-13
Net Income Solid earnings performance through the cycle
($ in Millions)
YoY
Growth +47% +51% +43% +16% +4% (77%) +165% +67% +18%
+20%
2003-2012
CAGR %
16.7%
25
$0.62
$0.81
$0.44
$0.05
$0.17
$0.32$0.29
$0.39
$0.45
$0.50
$0.68 0.68
0.76
0.81 0.8 0.79
0.92
$0.32
$0.80
$0.66
$0.39
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
EP
S
$0
$100
$200
$300
$400
$500
$600
$700
$800
Sale
s
EPS Sales
Diluted Earnings Per Share Progression
Beginning of
Recession
Beginning of
Upturn
(EXCLUDING SPECIAL ITEMS)
2008 2009 2010 2011 2012 2013
Please refer to the appendix for reconciliation of non-GAAP measures
26
Operating Cash Flows: Consolidated Trending
North
America
26
($ in Millions)
27
$0.30 $0.32 $0.34$0.36 $0.38
$0.44
$0.50
$0.56
$0.80
$0.68
$0.54
$0.62
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 *2012 **2013
Dividend Paid Per Share Track record of increasing returns to shareholders
*2012 Excludes a $0.20 dividend paid in December 2012, which would normally be issued in January 2013.
**2013 Reflects the annualized rate of our current $0.20 per share dividend payment.
28
$38 $43 $45 $47 $52$73
$16$42 $40 $37
$81
$62
$72
$38
$61 $66
$53
$19
$44
$25
$19
$66
$135
0
30
60
90
120
150
180
210
240
270
300
330
360
390
2007 2008 2009 2010 2011 2012
Dividends Share Repo Cap Ex Acquisitions
Capital Allocation: Balanced Approach
• Dividends
• 17.6% dividend rate
increase in 2012
• Capital Expenditures
• Focused on cost
improvements
• Acquisitions
• Kaliburn
• Tennessee Rand
• Wayne Trail
• Weartech
• Return on Invested Capital
• 18.7% at Dec. 31, 2012
• Share Repurchases
• $81.0 million in 2012
Capital Allocation 2007-2012
($ in Millions)
29
Q1-2013 Capital Allocation
• Dividends
• $0 million (prepaid in 4Q/12)
• 17.6% increase in 4Q/12 to $0.20 per common share per quarter
• Capital Expenditures
• $15.1 million
• Focused on cost improvements
• Return on Invested Capital
• 18.3% at March 31, 2013
• Share Repurchases
- $12.8 million
$14
$20
$13
$13
$15
$22
$-
$25
$50
$75
1Q-12 1Q-13
Dividends Share Repo Cap Ex Acquisitions
Contributed $50 million to U.S. pension plan
30
Summary: Solid Track Record Throughout the Cycle
• Good earnings growth – with record 2012 sales, EPS and cash flow
• Successful execution of growth and operational initiatives
• Implementing initiatives to reduce costs and sharpen operations
• Targeted acquisitions and strategic capital expenditures improving
geographic and product line portfolio
• Strong cash flows with improving working capital management
• Active share repurchase program
31
32
Non-GAAP Financial Measures
Reconciliation of Operating Income and Operating Income Margin to Non-GAAP Adjusted Operating
Income and Adjusted Operating Income Margin
Reconciliation of Net Income to Non-GAAP Adjusted Net Income
Q1 Q1
($ 000) 2012 2013
64,243$ 66,806$
Special items:
- 673
- 9,660
64,243$ 77,139$
Venezuelan charges (gains)
Net Income:
Adjusted Net Income:
Rationalization charges (gains)
Q1
($ 000) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
68,219$ 103,302$ 149,845$ 232,970$ 277,632$ 295,404$ 92,976$ 186,430$ 296,680$ 362,081$ 88,630$
Special items:
1,743 2,440 1,761 3,478 (188) 2,447 29,018 (384) 282 9,354 1,051
- - - - 16,924 879 - - - -
4,525 - - - - (1,543) - - - -
Loss on sale of business - 1,942 - - - - - - - -
Gain on sale of Ireland facility - - (9,006) - - - - - - -
- - - - - - 3,123 - 1,381 9,660
69,962$ 110,267$ 153,548$ 227,442$ 277,444$ 314,775$ 121,330$ 189,169$ 296,962$ 372,816$ 99,341$
Net Sales 1,040,589$ 1,333,675$ 1,601,190$ 1,971,915$ 2,280,784$ 2,479,131$ 1,729,285$ 2,070,172$ 2,694,609$ 2,853,367$ 718,573$
Operating Income % 6.6% 7.7% 9.4% 11.8% 12.2% 11.9% 5.4% 9.0% 11.0% 12.7% 12.3%
Adjusted Operating Income % 6.7% 8.3% 9.6% 11.5% 12.2% 12.7% 7.0% 9.1% 11.0% 13.1% 13.8%
Rationalization charges / (gains)
Venezuelan charges (gains)
Full Year Ended December 31,
Adjusted Operating Income:
Operating Income:
Impairment charges
Pension settlement loss (gain)
33
Non-GAAP Financial Measures
Reconciliation of Diluted Earnings Per Common Share (EPS) to Non-GAAP Diluted Adjusted Net
Earnings Per Common Share (Adjusted EPS)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010
Diluted EPS: $0.62 $ 0.81 $ 0.80 $ 0.23 $ (0.04) $ 0.18 $ 0.15 $ 0.29 $ 0.28 $ 0.38 $ 0.38 $ 0.49
Special items:
Rationalization charges (gains) - - - 0.02 0.09 0.08 0.07 0.03 0.01 (0.04) - 0.02
Impairment charges - - - 0.19 - - - 0.01 - - - -
Pension settlement gain - - - - - (0.02) - - - - - -
Asia Pacific asset disposals - - - - - - - - - - - -
LEIM disposal of assets (noncontrolling) - - - - - - - - - 0.02 - -
Adjust. Tax contingencies (Asia Pac) - - - - - - - - - - - (0.06)
Tax audit settlements - - - - - - - - - - - -
Loss from Jin Tai acquisition - - - - - - 0.09 - - - - -
Gain on sale of property (Turkey) - - - - - (0.07) - - - - - -
Venezuela charges (gains) - - - - - - - - - 0.03 0.01 -
Adjusted Diluted EPS: $0.62 $ 0.81 $ 0.80 $ 0.44 $ 0.05 $ 0.17 $ 0.32 $ 0.32 $ 0.28 $ 0.39 $ 0.39 $ 0.45
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2011 2011 2011 2011 2012 2012 2012 2012 2013
Diluted EPS: $0.55 $ 0.68 $ 0.66 $ 0.68 $ 0.76 $ 0.79 $ 0.77 $ 0.74 $ 0.80
Special items:
Rationalization charges (gains) - - - - - 0.01 0.03 0.05 0.01
Impairment charges - - - - - - - - -
Pension settlement gain - - - - - - - - -
Asia Pacific asset disposals - - - - - - - - -
Adjust. Tax contingencies (Asia Pac) - - - - - - - - -
Tax audit settlements (0.06) - - - - - - - -
Loss from Jin Tai acquisition - - - - - - - - -
Gain on sale of property (Turkey) - - - - - - - - -
Venezuela charges (gains) - - - - - 0.01 - - 0.11
Adjusted Diluted EPS: $0.49 $ 0.68 $ 0.66 $ 0.68 $ 0.76 $ 0.81 $ 0.80 $ 0.79 $ 0.92