Lincoln Electric Holdings, Inc. Update BB&T Commercial and Industrial Conference March 21, 2013 Vincent K. Petrella SVP and Chief Financial Officer
Safe Harbor -- Forward-Looking Statements Statements made during this presentation which are not historical facts may be considered forward-looking statements. Forwardlooking 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. 2
3 A Proud History
World-Class Arc Welding and Cutting Products Virtual and Automated welding MIG & TIG consumables Power Wave AC/DC 1000 SD Welding 65% Welding Equipment 35% Soldering and Brazing alloys Welder/Generator Engine Drive Stainless, Nickel & High Alloy consumables, Submerged Arc, Stick Electrodes, Cobalt Fume extractor Plasma cutter CNC Cutting System Gas regulators, welding guns and torches, accessories Flux-Cored Wire 4 Orbital TIG welding
Lincoln Electric: Dynamic and Evolving Company 45 Manufacturing Facilities in 19 Countries CLEVELAND, OHIO REGIONAL HEADQUARTERS North America LOS ANGELES, CALIFORNIA Gas Apparatus SAN DIEGO, CALIFORNIA Automated Welding Systems SAN DIEGO, CALIFORNIA Pipe Cutting Equipment ANAHEIM, CALIFORNIA Accessories TIJUANA, MEXICO & Accessories TORREON, MEXICO Equipment & Harris Products Group Mason, Ohio USA 5 CLEVELAND, OHIO GLOBAL HEADQUARTERS Lincoln Electric Cleveland, Ohio USA GLOBAL HEADQUARTERS MEXICO CITY, MEXICO BOGOTA, COLOMBIA REGIONAL HEADQUARTERS North America Cleveland, Ohio USA South America Sao Paulo, Brazil RENO, NEVADA CNC Cutting Equipment Europe, Middle East, Africa & Russia Barcelona, Spain Asia Pacific Shanghai, China MENTOR, OHIO FT. LORAMIE, OHIO Automated solutions MISSISSAUGA, CANADA MARACAY, VENEZUELA TORONTO, CANADA Equipment & Equipment, & Automation MASON, OHIO CLEVELAND, OHIO GAINESVILLE, GEORGIA Gas Apparatus BALTIMORE, MARYLAND MASON, OHIO REGIONAL HEADQUARTERS Harris Products Group SHEFFIELD, UNITED KINGDOM CHERTSEY, UNITED KINGDOM SAO PAULO, BRAZIL Brazing BARCELONA, SPAIN REGIONAL HEADQUARTERS Europe, Middle East, Africa & Russia GUARULHOS, BRAZIL SAO PAULO, BRAZIL REGIONAL HEADQUARTERS South America PORT TALBOT, WALES ESSEN, GERMANY Pipe Mill Welding Systems NIJMEGEN, NETHERLANDS ROUEN, FRANCE DZIERZONIOW, POLAND & Gas Apparatus BIELAWA, POLAND GENOVA, ITALY Equipment Equipment AREZZO, ITALY LISBON, PORTUGAL MTSENSK, RUSSIA ISTANBUL, TURKEY CHENNAI, INDIA JAKARTA, INDONESIA OREL, RUSSIA LUAN COUNTY, CHINA JINZHOU, CHINA ZHENGZHOU, CHINA NANJING, CHINA SHANGHAI, CHINA Equipment & SHANGHAI, CHINA REGIONAL HEADQUARTERS Asia Pacific
Global Sales Shift Sales by Destination 2002 2012 Total BRIC 3% Total BRIC 15% International 30% North America 67% North America 55% International 30% BRIC= Brazil, Russia, India, China North America = United States, Canada, Mexico 6
7 Lincoln Electric 2020 Vision
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 8 Focus on continued cost improvement and operational excellence
Leverage Products & Process Solutions Across the Globe Penetrate Critical Global End Markets + = + + = + + + = + + + = + = 9
Develop Key Channels 200 person technical sales force in North America Direct to End User Similar program launched globally Industrial Distribution Rental Network Retail 10
$ in Millions Innovation is a Major Driver Lincoln Electric has the industry s most comprehensive R&D program. $40 $35 $30 R&D Expenditures Approximately 50% of equipment sales in 2012 were new products developed and introduced over the last 5 years. Industry leading technology $25 $20 $15 $10 $5 $0 $33 $37 $19 $20 $22 $24 $26 $27 $28 $29 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Lincoln leads the arc welding industry in new product introductions 11
Operational Excellence Lean manufacturing Six Sigma ISO 14001 Cost savings programs 12
Market Share $20 Billion Global Arc Welding Market Global & Regional Market Share 13 40% 35% 30% 25% 20% 15% 10% 5% 0% North America $4.2 Billion Europe & RAM $5.2 Billion Latin America $1.6 Billion Asia Pacific $9.0 Billion 0% 2% 4% 6% 8% 10% Growth Rate
Global Competitive Landscape Global Market Share Lincoln Electric Others Kemppi Fronius Hyundai OTC Hypertherm Atlantic Panasonic Messer Victor Technologies (Thermadyne) Air Liquide Bohler ESAB (Colfax) ITW Golden Bridge Kobelco Big Bridge The top 3 companies compete in Equipment and 14 * Amounts based on the Company's estimate of the total market and include sales of equity affiliates
$20 Billion Welding Market Segments Power Gen / Process 14% Pipeline 3% Offshore 4% Pipe Mill 3% Maintenance & Repair 6% Structural 14% General Fabrication 31% Automotive 8% Shipbuilding 8% Heavy Fabrication 9% 15
Economic Variables Impacting Industry Industrial Production/Capacity Utilization (U.S.) WSA Global Steel Production Source: WSA Purchasing Manager s Index Share of World Crude Steel Production 16
Global Acquisition Strategy Expands Footprint MGM LEIM Tennessee Rand Electro-Arco Heli JINZHOU JINTAI WELDING METAL CO LTD SLE 8% 7.0% Acquisition Growth % of Sales 6% 5.3% 5.8% 4.9% 4% 2% 2.3% 3.4% 2.0% 3.0% 3.0% 17 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012
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 18
Net Sales Dollars in Millions $3,000 $2,500 $2,000 $1,500 $1,000 $1,041 $1,333 $1,601 $1,972 $2,479 $2,281 $1,729 $2,070 $2,853 $2,695 $500 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 19
Q4 Sales -- 2011 vs. 2012 Dollars in Millions $800 $694.5 (1.4%) $684.6 $600 $400 $200 $0 Q4 2011 Q4 2012 20
LECO Historical Sales Mix Trends 50% 40% 30% 20% 10% 0% 28.1% 3.1% 2.3% 9.5% 13.2% 20.1% 23.1% 0.9% 1.3% 3.4% 7.0% 2.9% 8.0% 15.5% 4.2% 15.7% 3.2% 2.0% 3.7% 6.8% * 8.7% 1.9% 3.0% 7.8% -3.9% (30.2%) 3.0% * 19.7% 5.3% 14.1% 0.4% 30.2% 2.6% 5.8% 6.9% 14.8% 5.9% 4.9% 1.7% 1.3% -2.0% -10% -20% -29.80% -30% -2.9% -0.5% -40% 2004 2005 2006 2007 2008 2009 2010 2011 2012 Volume Price Acquisition FX * Differences due to rounding 21
Operating Income Percentage 15% 12% 11.9% 13.3% Q4 2011 vs. Q4 2012 9% 6% 3% 0% Q4 2011 Q4 2012 Excluding Special Items 15% 12% 12.2% 12.7% 11.5% 11.0% 13.1% Historical Trend 9% 6% 6.7% 8.3% 9.6% 7.0% 9.1% 3% 22 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Excluding Special Items
Improving Segment Margin Performance North America Welding Europe* Welding Asia Pacific Welding South America Welding The Harris Products Group Total FY2012 Organic Sales Growth** +11% (6)% (14)% +9% flat +3% FY2012 EBIT Margin (excluding special items) YoY Margin Performance (bps) 17.1% 8.0% 2.1% 11.3% 8.6% 13.3% +130 +110 +140 +310 +150 +200 * Europe includes Middle East, Africa and Russia ** Organic refers to volume and price performance 23
($ in millions) Net Income $300 $250 $200 $175 $203 $212 $217 $257 $150 $122 $130 $100 $50 $55 $81 $49 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 24
($ in millions) Q4 Adjusted Net Income 2011 vs. 2012 Excluding Special Items $80 $70 $60 $50 $40 $30 $20 $10 $0 $65.9 14.2% $57.7 Q4 2011 Q4 2012 25
EPS Sales Diluted Earnings Per Share Progression Beginning of Recession $0.90 $800 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.62 $0.81 $0.80 $0.44 Beginning of Upturn $0.39 $0.39 $0.32$0.32 $0.29 $0.50 $0.45 $0.68 0.68 $0.66 0.81 0.80 0.79 0.76 $700 $600 $500 $400 $300 $0.20 $0.17 $200 $0.10 $0.00 $0.05 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2011 2012 EPS Sales $100 $0 (EXCLUDING SPECIAL ITEMS) 26
Operating Cash Flows: Consolidated Trending $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $0.0 ($50.0) ($100.0) ($150.0) $257.4 ($24.5) Operating Cash Flows $250.4 $158.3 $157.0 Change in Working Capital $327.5 ($29.5) $193.5 ($110.5) North America 2008 2009 2010 2011 2012 $102.2 27 27
Cash Flow/Net Cash Operating Cash Flows Dollars in Millions 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 28
Capital Allocation Capital Allocation 2007-2012 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 29
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 30
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