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Lincoln Electric Holdings, Inc. Update BB&T Commercial and Industrial Conference – March 21, 2013
Vincent K. Petrella SVP and Chief Financial Officer
2
Safe Harbor -- 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. 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.
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
2012 2002
North
America
67%
North
America
55%
International 30%
International 30%
Total BRIC 15% Total BRIC 3%
BRIC= Brazil, Russia, India, China
North America = United States, Canada, Mexico
Sales by Destination
7
Lincoln Electric – 2020 Vision
8
Strategic Growth Drivers
Leverage breadth of product and process solutions
Penetrate critical global end markets and regional segments
Develop distribution channels
Invest in new product development
Grow and train our own technical sales force
Focus on continued cost improvement and operational excellence
9
Leverage Products & Process Solutions
Across the Globe
Penetrate Critical
Global End Markets
= +
= + +
+ + = + +
= + + +
=
10
Develop 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
• Lincoln Electric has the
industry’s most
comprehensive R&D
program.
• Approximately 50% of
equipment sales in 2012
were new products
developed and introduced
over the last 5 years.
• Industry leading technology
Lincoln leads the arc welding industry in new product introductions
$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
$ in M
illio
ns
12
Operational Excellence
• Lean manufacturing
• Six Sigma
• ISO 14001
• Cost savings programs
13
$20 Billion Global Arc Welding Market
Global & Regional Market Share
0%
5%
10%
15%
20%
25%
30%
35%
40%
0% 2% 4% 6% 8% 10%
North America
$4.2 Billion
Latin America
$1.6 Billion Europe & RAM
$5.2 Billion
Asia Pacific
$9.0 Billion
Growth Rate
Ma
rke
t S
ha
re
14
Others
HyundaiFronius
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
The top 3
companies
compete in
Equipment and
Consumables
Global Competitive Landscape
15
Heavy Fabrication
9%Shipbuilding
8%Automotive
8%
General
Fabrication
31%
Power Gen /
Process
14%Pipe Mill
3%Maintenance &
Repair
6%
Structural
14%
Offshore
4%
Pipeline
3%
$20 Billion Welding Market Segments
16
Economic Variables Impacting Industry
Share of World Crude Steel Production
Industrial Production/Capacity Utilization (U.S.) WSA Global Steel Production
Purchasing Manager’s Index
Source:
WSA
17
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
18
2012 Highlights
• 2012 sales and EPS highest level in Lincoln’s
history
• Expanded margins; increased return on
invested capital; and generated record cash
flows
• Successful execution of ongoing global growth
and operational improvement strategies
• Initiatives to reduce costs, sharpen operations
19
Net Sales
$2,853$2,695
$2,070
$1,729
$2,479
$2,281
$1,972
$1,041
$1,333
$1,601
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Dollars in Millions
20
Q4 Sales -- 2011 vs. 2012
$684.6$694.5
$0
$200
$400
$600
$800
Q4 2011 Q4 2012
Dollars in Millions
(1.4%)
21
LECO Historical Sales Mix Trends
13.2%
4.2%
15.5%
6.8%
-29.80%
14.8%
1.3%
9.5%
8.0%
2.9%
3.7%
6.9%
1.7%
2.3%
7.0%
3.4%
2.0%3.0%
5.8%
4.9%
3.2%
2.6%
-2.0%
14.1%
-3.9%
-0.5%
0.4%
7.8% 3.0%
5.3%
3.1%
1.9%
1.3%0.9%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Volume Price Acquisition FX
20.1% 23.1%
* 8.7%
15.7%
2011
(30.2%)
2009 2008 2007 2006 2005 2012
30.2%
* 19.7%
2004
-2.9%
28.1%
* Differences due to rounding
2010
5.9%
22
Operating Income Percentage
11.9%
13.3%
0%
3%
6%
9%
12%
15%
Q4 2011 Q4 2012
11.0%
13.1%
9.1%
7.0%
12.7%12.2%11.5%
9.6%
8.3%
6.7%
0%
3%
6%
9%
12%
15%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Historical Trend
Q4 2011 vs. Q4 2012
Excluding Special Items
Excluding Special Items
23
North
America
Welding
Europe*
Welding
Asia
Pacific
Welding
South
America
Welding
The
Harris
Products
Group
Total
FY2012
Organic Sales
Growth** +11% (6)% (14)% +9% flat +3%
FY2012 EBIT
Margin (excluding special
items)
17.1% 8.0% 2.1% 11.3% 8.6% 13.3%
YoY Margin
Performance (bps)
+130 +110 +140 +310 +150 +200
Improving Segment Margin Performance
* “Europe” includes Middle East, Africa and Russia
** “Organic” refers to volume and price performance
24
$257
$81$55
$122
$175
$203 $212
$49
$130
$217
$0
$50
$100
$150
$200
$250
$300
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
($ in
millio
ns
)Net Income
25
Q4 Adjusted Net Income – 2011 vs. 2012
$65.9
$57.7
$0
$10
$20
$30
$40
$50
$60
$70
$80
Q4 2011 Q4 2012
($ in
millio
ns
)
Excluding Special Items
14.2%
26
$0.62
$0.81$0.80
$0.44
$0.05
$0.17
$0.32$0.32$0.29
$0.39
$0.45
$0.50
$0.68 0.68
0.76
0.81 0.80 0.79
$0.66
$0.39
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
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
27
Operating Cash Flows: Consolidated Trending
North
America $257.4 $250.4
$157.0 $193.5
$327.5
($24.5)
$158.3
($29.5)
($110.5)
$102.2
($150.0)
($100.0)
($50.0)
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
2008 2009 2010 2011 2012
Operating Cash Flows Change in Working Capital
27
28
Cash Flow
• Strong operating cash flows
• Improvement in working capital
management
• Net cash balance $266.2 million
Debt
• Debt/invested capital ratio 1.5%
• Net cash to total capital 19.3%
Pension Contributions
• $10.1 million for the quarter and
$63.4 million YTD
Cash Flow/Net Cash
Operating Cash Flows Dollars in Millions
29
Capital Allocation
Dollars in Millions
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
30
Summary
Good earnings growth
Strong cash flows, improving working capital
management
Active share repurchase program
Consistently reinvest in the business through strategic
capital expenditures
Targeted acquisitions improved geographic and product
line portfolio
31