Lincoln Electric (LECO) 27 Oct 172017 Q3 Earnings call transcript

Greetings, and welcome to Lincoln Electric's 2017 Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode and this call is being recorded. It is now my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations. Thank you.

You may begin.

good and Vince, you, morning, everyone. Thank Lincoln to Electric's XXXX call. conference quarter third Welcome financial and slide earlier our released Investor Electric results We our in lincolnelectric.com today, as the an the to website at well section. release attachment you this as call's presentation Relations on Lincoln as find can

discussion Officer; of today Petrella. our as Chief quarter, Officer, Vince the Joining Mapes, will quarter's Chairman, well me call cover on overview President detail. performance as Lincoln's will with begin and Vince in the Chris Chris the is and an Chief Executive the Financial more

Following to remarks, our prepared we're take your happy questions.

to our start number A factors. of and we in during results our of this some that may discussion risks release and provided filings are of discussion, affect Before and our due on certain in may actual statements press from made uncertainties and XX-Q. a please Forms note SEC XX-K results materially that may risks forward-looking, be differ the call expectations our our

addition, that the which of A And financial Chris? our GAAP website financial release, conform in Chris is to available measures is that, found with not measures section turn most measure Mapes. the tables do discuss of over non-GAAP I'll GAAP. in to reconciliation earnings U.S. Investor the lincolnelectric.com. to Relations call again in In we our comparable at the

our increased growth in end XX.X%, challenging and Volumes benefit by growth everyone. solid the all improved partially which second in and markets. third we especially in driven the key consumables I'm automation. Air Good portions quarter. pleased category, to shipping day from Welding X.X% XX% substantially in top pricing predominantly that transaction segment. comparisons our in achieved segments and and with transaction. our generated Harris quarter, among We the of quarter and Sales reportable actions momentum from sales report of despite all offset quarter the an completed growth business, across the less X.X% up segments morning, the Welding were acquisition. price sales in line We regions across in in good our successfully benefited our in from one of achieved We Group achieved Products and organic taken Liquide the increase this year-over-year most of our

of adjusted XX.X% points was basis acquisition. than operating the lower reflecting margin income prior XX Our year,

third XX.X% basis Excluding the with acquisition, prior was our the improvement operating company. quarter XX for for point operating adjusted which an year compared margin income margins record a is and

on generated legacy a management incremental Our productivity XX.X% margin business and higher initiatives. volumes, cost

are to XXXX. While creep material incremental this into our the this trend recovery to trend raw we expect to continued margin has continue we inflation and performance, expect we during higher pleased and by

inflation our for of actions adjusted cost we income. the working with and on pricing to through successfully expect pleased interim, initiatives we emerging new headwinds, the to announced quarter was fourth have unfavorably focus partners mitigating cash of free with portion net navigate opportunities, team’s XXX% to ratio on cycle. customers possible I flow conversion growth represented where Overall, and and cash am We this quarter, continue capitalizing diligently will in flow generation conditions, affect near-term. costs impact. productivity strong the and to margin manage growth Cash leverage the the mitigate to market but the In monitor

Strategy success profitability Vision critical our towards of All and goals operational and XXXX actions of to achieving these are improved excellence.

including achieved all in seeing sales market report ongoing regions, on growth Slide key at conditions growth growth, X, South and of we’re only more but Looking in across did all Not segments markets. performance our our America. detail end reportable we

segments consumable volumes the at a international choppy both consolidated significantly By systems, of our prior in increased comparison to region markets in occur segment. to of automation, before. led Welding rate at quarter percent product across and the we lower order Products a grow, Equipment continued these quarter. to single Group comparisons Automation the serving the by excluding segment. year the fact, challenging which due albeit growth high due growth area, trends rate and In this all export discussed Americas year-over-year with U.S. in challenging Harris which market, in did segment decline our accelerated you

ongoing sectors most segments. channels our among specifically, direct improvement of and channel distribution our we and end saw at Looking solid year-over-year in channel customer growth

July day Liquide Air Slide to our hall Air to we across on launch quickly pleased completion staff to time, successful transaction and had Liquide Welding progressing integration held that initiatives. I'm on XX, a platform team. the Since X. town meetings and we report our Welding one have to of welcome employees on our Moving European that been upon numerous

and efficiencies the and improve of where we capitalize savings shared areas integration Our initiatives various synergy our our productivity possible reduce and quality, can across practices adopt opportunities, and identified network streamline to eliminate to redundancies. in-sourcing complexity business target best on and we leverage scale to improve operational have that to

refine We portfolio feel a mix. will a represent our also portfolio best-in-class stronger solutions that ultimately that commercial of enriching we can

relationships. generate region will relationships growth these our continue Our cutting our show in one largest Welding or quick our from customer Oerlikon-branded using to the I'm will complementary premier, returned greater XX% profit achieve target returns. leveraging to and pleased plasma portfolio and plus Lincoln for of trade also to efforts industry's across the educate Liquide new their on Electric recently and customer we the is XD consumables operating on that available structural new market experience with event whether Lincoln's report and from where relationships. learn customers portfolio across the margin expanded proprietary welding Welding's a steel solutions, are has those the the the and team that Air teams nature customer Liquide were globe new from systems. focused wins begun international to together opportunities, in expanded I solution we income Germany Air opportunities in PythonX both commercial another of plasma one secure to and and portfolio as confident

in Given we our incremental remain detail. target near-term Vince our cash confident and now, accretion to results EBITDA our in our goals. to the our achieve synergy ability million EPS $XX discuss And and an I of execute second assessments, call quarter uses of and to pass more of will

Chris. you, Thank

our higher our our at Looking The acquisition with increased contributed organic the statement an the X.X%.X year XX.X% highlights performance of quarter Liquide X, and quarter. price acquisition. Welding foreign price sales in and from we on income Volumes segments Slide X.X%. rose completion X.X% increased generated from translation. prior Sales and XX% Air X.X% Our the compared benefited welding average solid third exchange

third Our The million amortization charge points. in from step-up gross the the $X.X this margin the the XXX profit decline reflects of addition of decreased the from and acquired quarter of Air inventories value Welding basis Liquide transaction.

Excluding in line raw We profit charge of margin the XXX million effects was a versus gross decline segment The and XX.X%, Americas quarter. the margins point to special material acquisition price LIFO lower decline year. the was items, and substantially $X.X incurred cost in our rising Welding the prior due basis inflation. automation product the cost by a caused

fourth similar expect in quarter. the trends inflationary We

Due Our the to of Liquide SG&A increased to addition XX.X% million Welding. of expense $XXX.X or sales. Air XX.X%

the freeze following taken incurred the Lincoln XXXX. versus special sum pension lump prior of declined fees basis to settlement at items, of our benefit the of program Lincoln as million SG&A SG&A payments year sales a the lower and ratio $X.X Electric by due the We non-cash legacy Excluding declined professional charge retirees improved pension points XXX to expenses acquisition defined related end leverage.

accounting Additionally, non-cash difference gain the estimate acquired. we to Welding XX% between million a Reported Air balance the adjustments the The consideration assets is bargain fair and of finalized. gain increased are from purchase purchase represents purchase transaction. the the operating sales. recognized The gain $XX seller a income the $XXX.X Liquide value and sheet or million of paid net XX.X% to preliminary of bargain until

operating the of million. Liquide XXX point in operating items margins. acquisition decline the the income special sales adjusted to $XX.X prior point unfavorable XX The XX.X% had to was adjusted a a XX% margin versus period. basis profit increased Air Excluding income year impact basis The operating adjusted Welding quarter,

would a XX% and expense items expense The in acquisition, operating special the An million. year was the adjusted $X.X the of margin year incremental Interest the income and interest XX.X%. been prior XX% prior margin operating have in $X.X income quarter Excluding adjusted with improvement versus point business. compared million legacy basis

We expect XXXX. approximately interest annual $XX in million expense of

no XX.X% bargain tax Our rate purchase the to the was acquisition, quarter lower impact. XX.X% which associated with gain effective and rate prior had the due year third of than tax

of mix tax the earnings in of the adjusted items rate tax quarter. Excluding the reflecting special XX.X%, unfavorable was geographical the impact discrete and items,

estimate XXXX quarter subject to tax timing We extent of fourth in option U.S. expect range. the rate the utilization stock future be high and This and effective is to the mix earnings, credits our exercises. of of tax the XX%

XXXX share $X.XX. increased Third per to quarter earnings diluted

increased and per $X.XX higher X% EPS items, cost special management. to reflecting Excluding sales share, organic

X. to moving on Slide Now segments our reportable

single-digit Our Americas growth trends This general in points unfavorable fabrication Oil Welding sales key distribution direct this heavy shipbuilding material by continued profitability industries. lower of to outperform in percent and basis in raw growth offset sales and production. our XX and declined in quarter. Automotive consumables. improve inflation. price segment, as and adjusted and the end market to increased to segment, due partially gas automation cost volume impact EBIT continued notably XX.X%, such auto regional and the led margin high and transportation activity increased to sectors in channel Demand

challenging margin, quarter declined quarter Welding the projects. to In were have strengthened automation higher XX includes with levels compared and continuing XXXX remain Pacific. would in which now the solid comparisons International order in Volume acquisition, a segment, improvement broadly and EBIT Our year. versus basis prior Welding with third we X%. we Volumes If X.X% year. increased point demand Air timing due steady year. accelerated X.X% prior compared sales the acquisition, the margin Organic relatively we to been year growth the and sales prior realized in X.X% Europe the adjusted Asia EBIT adjusted our the exclude price. X.X% Liquide to a to achieved Backlog of prior due

basis primarily and growth Group's points Turning solid XX.X% consumables Pricing of cost from general to margin fabrication silver. and XX year-over-year to used the on improved EBIT volume quarter declined demand Volumes Harris on changes, in mitigating unfavorable increased The trends. metal applications. raw Products material Slide predominantly HVAC impact X.X% X. adjusted third X.X%

Moving X. Slide to

prior cash levels. sales increasing Our million to in quarter operations the the compared year impact million period, in $XXX of flow the $XX as from was reflecting

XX.X% with in And working capital prior now first XXX% in expenditures and conversion in of in quarter working million the to operating nine is at excluding held range. the $XX our capital quarter year. operating in ratio to full Cash We relatively the our strong Capital the year. million year compared Our first in acquisition, the and at were CapEx steady be remains XXX% million XX.X%. $XX months. nine the the estimate spend $XX months million the $XX XX.X%

quarter, in company's over payout rate in I million, the future call Board reflecting for During capabilities. cash the would we to flow an the X% approved questions. now, of reflecting And dividend $XX turn confidence like generation shareholders XXXX, dividend ongoing payout XX.X% rate recently a XXXX. higher the for dividend to The additional cash paid the higher

[Operator be will of Instructions] Ladies Seth and we Markets. gentlemen, time, conducting Our session. first Capital from a Weber question at RBC question-and-answer is this

is open. Your line

morning. good Hi,

Good Seth. morning,

morning, Good Seth.

I Good questions. of to couple wanted ask a morning.

pricing has respect cost that to pricing, the get – under environment, input benefit was I raise that the in to I of historically front prices with or had commentary that. On impression the in an to margin ability a from Lincoln rising guess, to

fourth or you else the there? from So something going commentary issue? is a private really you. just – quarter, timing that on impact or whether just else you're Or competitors is is that not label that around your Thank this something expect matching seeing that's there it's in

Seth. Yes,

got We cost The little of inflation the I second think quarter. cost bit the third increases quarter. timing. a accelerate first and ahead into a little it's bit did of in

the expect kind cost inflation same of in fourth We the quarter.

raw gross P&L. quarter prices again our margins impact We quarter margins are bit material inflationary did the the is and It management. most go, we there's increases that expect see fourth those XXXX and a pricing compression At pass through I the we noting to very into of of are probably marketplace on and do performance tell worth on of fourth There's relatively significant rising mathematical some price well margins portfolio to believe, that as would that you little based operating quarter we a in the so across the more profit that cost as end XXXX. effectivity of you believe, process the of raising the effect your costs and accomplished costs the into more through fourth in the in we into the pricing XX%, in and of quarter. global day, the of we good our in XXXX. managing of But a job incremental and cost the in

that – margin Okay. Is Thanks a to the lower on then, the think Is any is just the I function about volume? side? automation side, for lower of lower Is on comment I you of And could is the provide comments there about issue mix commentary sort it I margin that, that color guess, follow-up Vince. the automation there heard side. some – a my there? automation on

things. It's both Seth. Sure, of those

business were So a our mix higher the some the volumes, year weaker. mix performance strong products of top margin on mix hurt some mix very automation We highest sales our prior basis had side. in then, businesses, on in volumes, in the us Those secondly, was quarter. sales automation was in in of a a the our lower year-over-year third which and line automation of had margin down that lines had our

both the that mix it was automation business top So and affected in our quarter. line

very you much. Okay. appreciate color. the Thank I

You’re welcome.

you. Thank

Research. is O'Dea of question Our Vertical from next Joe

is open. line Your

morning. Hi. Good

Good morning.

on the just in side. international question particular the volume on growth, First

increased Asia-Pac, You and called give just growth that you're can any the but out volume particular that you what in there? in both additional was maybe Europe strength some details seeing on driving of

pretty closer part Asia-Pac improvements the I region thing quarters. I quarter. for in And me the that XX, some but me regions getting for starting there increased see growth has across equipment about a it offering a a the seeing pretty generating benefits growth. the markets that think growth, over the well as investments we multitude the we product that in one the And in within really been exciting space that's it's We're thing very shallow the global as several when is the broad a of We're XX the growth we over important is for several the welding it months, had of that for international and to last not centers the shown I we're from the continued business for certainly in of customers seeing made one or some our is think pretty last seeing the markets in for subregional a We're strength category. solutions It's have any demand broad-based market presence to multitude, segments. region. increased us, have some that nice area seeing Europe. for were region. the there the seeing believe that's technical in in those

sounds in Would outgrowth also Asia-Pac seeing you. outgrowth you like some in some you're that say Europe And so that well? as for it

as believe relative Well, going within to strategies necessarily driving as solutions that I it's We on markets to broader share into that of there's within in the and believe window. go I'm know I the performing think any we appear that share to a have well willing share to participation there's what whether actually been to and about any you're I to we discussions teams – certainly our determine those think market. is trying executing for not it's say market. that but and difficult whether well, like shift that be probably don't really been going we've the narrow far on outgrowth our

plans, you environment on see automotive horizon remains can in visibility as into automation? you industry, particular are move opportunity up then, some on an slightly about outgrowth bit little more automation is to for Do for a related the XXXX the have flat what on particular And of more see of on and some is global XXXX. builds to there your thinking cycle that Okay. short better in in auto line we maybe or the into the – just you? sight to auto for where What

automotive is reminding start would I is automation, within our a of that that, overall by the Well, you look, portion average. – than is probably significant automation still piece our density but less

multitude in participation industry have other heavy in we of and automation segments we our that a So a participate large in. business

We have some visibility.

look a I on we're think backlog – basis. our visibility that, continual a taking that at

very versus especially looks year, good. backlog, Our prior

be the a other light-duty for the to other as the meeting issues model OEMs. XX, expected we challenged but they within it's on And look going to transitions thing XXXX, can think that XX important them are to at with groups activities vehicle quick builds platform other those with is and months. in we're at point I X, data that us the out talking look also large and may be about

if business our global automation to there. to about – So the possible, invest materialize point more little from but automation that it revenue opportunity continue our very to is for visibility short how still struggled acquire we might I’m a expect still bit companies cycle, in in an automation understanding still business, excited bring bit a little more much at perspective, our to it a Actually, QX strategy. and, into of although automation business into this is

that orders to the quarter view of this the business. still challenge particular to mix business a automation as continue choppiness through and the our like just want the come in and the this relative we business and in So to invest

line automotive as markets only And that more was in outside the such focused add clients structural. that, in I automation product would of

right of see remains and least in steady still in near-term, we us now, our we front declines as automotive, in, at segment. don’t see automotive and strong the So

I appreciate Thanks. it, guys.

Thank you.

Mig from is question Baird. of next Our Dobre

open. is line Your

Good thank everyone. Yes, morning, you.

Mig. morning, Good

good morning. Yes,

to From I’m on want looking a have meaningfully were guessing a pure of we what Anyway, you’re dynamics ask trying what you’re you’re question growth? sequentially us comparisons here. the a volume as the I So and growth potential lot based of fourth a thinking to little how weaker the of the as just volumes Americas. in than about what’s to key we’re growth, was right markets bit get understand seeing in your some sequentially of quarter serving. end that broadly my for beyond expectation to is terms question the all the tougher, into as quarter in about

I automation we what has excess Americas had year-over-year on think did the automation the in in So Americas quarter, a we The concentrated that of in X%. the of a is good Mig, there, detrimental so reported that impact segment Americas. decline have

We as is day realize, less you another also, X.X%. probably billing, had of which a

result strong So the think number had days a we we in the impact automation when and Americas the we of that considering there. billing had

business consumables on experienced in as of the automation a year in the have growth segment in October book as business. through concerned. on to the that date underlying a and sales is as was quarter is third the the in of better levels the in you adversely fourth is The basis order very quarter which that affect or year-over-year the this business based Our see see Americas fourth this far and our expect in that view we we did result what indicator quarter we the is because strong, line, encouraging similar opportunities but equipment

Okay. That’s helpful.

commentary. up in Because it as a – bit flat I’ve quarter? both. in I that backlog you is third question is was the the year-over-year the other confused The automation I Are think heard to saying little or

Stable.

stable. It’s

discussing go had before markets the lastly year more the I markets, I’m on prior quarter, a is at couple Slide versus then, and discussion a that like X four. looking of bit last when And queue, demand you’re end too highlighted various little it when quarter, this maybe finely, you this end Okay. in you parsing but lower

if slide? I’m it’s speaking, any broadly you too demand-wise or much if just are in me reading into this wondering seeing So shift momentum,

really not segments. seeing the relative shift to any We’re momentum

very think I’d so all that not couple numbers you. across with in don’t versus business, Liquide and we still the of quarter Mig, you view pulling has us we way segment industry Welding those had as large seen viewed be to at shown within to QX, I know data in not recover providing OEMs segment trending we’ve heavy this as nice a share I So start out that growth markets. segments for some third the one that point, probably or the good I the our other. are severely included more to data growth year. good the those also got also would It’s call strength we’ve that that inside that would we’re but the we begin see business Air their

right, you. All I’ll thank queue. go into back

welcome. You’re

next your of Rob Wertheimer is from question And Melius Research.

Your line is open.

everybody. Hey, morning, good

Good morning, Rob.

your guess, or I whether hangup questions. of feel I and is markets the feel better whether hotness market whatever, of the wanted long cycle, longer jumped versus a I this. from I is it. accelerating, if stock after like second, the than cycle. have cycle I’ll pricing And So, short short on apparent consumables just of addressed you for minutes again, you apologize, sort cycle, couple I late But two

– up talk says Your you and but tough of depressed where it where see I end markets discussed, heard that's a yourself sales your second or a mid-cycle it. specifics versus depressed of generally volumes your versus which are or which compare, about ones end that slides above. that of as see in And your you you still couple still or third were could maybe segments as

very was, talking weaker lines equipment. than pointed about were quarter, our of third Equipment of volumes because little I Certainly, the had a pure by line in quarter product consumables' earlier, performance of this primarily start lines strong – business. XXXX. automation our the the out in a Okay. of year-over-year Rob, that I'll stronger

in be growth can sit this perspective, think little I choppier. we I the well bodes outlook equipment seeing to as our you some acceleration, from are and Consumables a we've perspective, think, but from a here of a catch-all gaining that markets. And see a and segments, It's end last market And steady those growth for that the from acceleration if the perspective. bit started a third We're promising today. generalists, economy that the the and oil those health area We as as tells spot. would and energy three broad acceleration in will, in – say. been gas market a quarters weakness XXXX, So in bit and stabilization shipbuilding us in we growth that fallen I largest but and like gas an quarter, broadening Lincoln's oil of of little back a far still industrial some end two, heavy see additional bit a seeing seeing choppiness in and little of quarter in in continual in industries. did It space. continuing and areas our because in participation be of is bright has continues one to couple area

today I'd that in all the all, relied bit little depression than we've in of the still quarters, some outlook couple a and say, other markets past. So last better in on choppiness some but

Thank you. Great.

welcome. You’re

you. Thank

of Our is Bank. Deutsche next Boroditsky Saree question from

Your line is open.

the on as quarter rebuilding Start the hurricane Thanks, the you any good from saw about we and by expectations think impact morning. process? any going over

a our those actually well that – be us some Harris see business realize should should us will HVAC favorability process. some wholesaling have to segments, as as for that businesses. rebuilding should enough in it the of that to slight Obviously, other and there as we rebuilding – impact be be. of a we a the rebuild, other there for but of improvement and forward. That opportunities that move We we'll markets potentially impact the should for even the didn't It's doubt us slight as identifying actually material be lift, automotive forward. We vehicles process necessarily moving being couple that our process impact difficult are all catalyst portions call of should structural as think I identify It across see out might be space, as in in a very don't affect any provide for serves that from in I a as replaced it we we're that us rebuild hurricane. but impactful some some we'll identifying

And can believe Harris you seeing quarter that. last you then, some starting the talk I in what you demand about far challenging because you're in as third online as Okay. comps are – year? Appreciate lacked

Yes, Saree.

third we channel, we retail exceptional and year. the the quarter through improvement year, restocking identified So had a equipment the line product had and very that last in strong prior

So the was equipment of because business comparisons. side weaker difficult this of those year the

HVAC as the performance product was we trajectory a On consumable the segment area of as and had marketplace. that the portfolio other export rapid strong growth side of the well particularly in in more – though, that led by in markets international

facing Products channel prior So performance Harris the overall, the – all, a equipment but Group. stocking very from retail consumables from stronger, top good and in line year, all headwinds

queue. in Thank you. I’ll get back

welcome. You’re

Thank you.

next Our with from question Stifel. Jones is Nathan

Your open. line is

Good everyone. morning,

Good morning.

Nathan. morning, Good

on America North Welding. back to question volume going little bit the Just a

You or and volume lower growth about quarter, thinking tough billing day. of from on XXX automation, there? we points be likely Do you on have that the X.X% volume less should basis difficult fourth any compare there, when in aware talked less about billing comparisons, one days more

fourth be should No. be We the quarter. fine. short in We won't

color call while while Okay. changed you on I'm more if And that the on the been out those silver prices. could lately, average up the the a think price months. bit there? being pulled hasn't give in XX and really called I Harris, wondering little last they've volatile I then, on decline pricing driving a you what's over pricing lot

what of in Harris the of as our Harris part areas and as of had as to challenge. part through with business to the the as as the movement products purchase arbitrage item around components. of business tungsten the moving – the couple that but And sometimes to impact some also we’re that customers the and sales world. trying their our volatility we market. we But out, it’s and is that metal of volatility that’s to causes can that do challenges Products pricing then the managing channels the we various associated well that called of other copper We well price Actually, for them what portion silver minimize that was us that volatility a developing through

one and tungsten. we also element silver, there So of an certainly that identified, copper

the Just the outlook for automation business.

expect two? the comparison quarter this or You now? still potentially And that quarter. that you next to Do a grow here to headwinds what over create to challenging had could business continue

We it longer-term Nathan, think from a from, perspective. about

at automation grow a expect double continue We to low the single, high over intermediate-term. trajectory digit to

As the will as have in automation fourth XXXX’s strong. second for was the half short-term, of far very of quarter we very as quarter year challenging another XXXX the

at end But we’re year-over-year comparisons. there about to don’t in So have pullback similar of kind structural a conversation type quarter we see automation being likely the of any the of activity. fourth

mentioned we stable, perspective we top still XXXX. challenging the As near-term a but backlog line times, couple looks reach from before a of looks the

Okay.

helpful. So comparison challenging in the volume quarter? Thanks. That’s fourth

correct. That’s

Thank you.

Lakes next from Jason is question Review. Our Rodgers Great of

Your line open. is

the decline the What to little in and oil wanted talk basis? on that sector. gas in just quarter was a I about more year-over-year business Yes. your bit a

primarily mill high focused was was which activity, it and single pipe include midstream It digits in would sales.

easy think still I basis. comps on had some year-over-year a you

of any competitive order a change in just here? timing Or there? matter Just is it wondering the if dynamic market been there’s

very at period time. I quarter, we’re it’s one looking of narrow think Look, timing. one

to of say we have fair some mid-single improvement, quarters. the it’s couple that digit did think to year-over-year low the last performance I

in the This quarter, space. bit a little performance less

and kind out and of quarter, We’re It’s not XXXX. see change softer of out are, the in move a and look of as continue oil we some into to bit energy view space. signaling long-term a gas any just we’ll gas oil and or expectations intermediate we little of there’s as improvement that in that this quarter

of And then, just the in quarter? exports the performance the

our outside Products out $XX Harris international U.S. the had And international automation the were the year-over-year $XX year. Group was – did roughly prior well. the that led of a as actually exports in double sales million and on business XX% of by strong up quarter digits, the to well million do a about basis, about business So U.S. in of compared export markets

All sheet. you right. still have Liquide, Air finally, acquisition with strong balance the a even And of

Just opportunities? regions might geographic areas wondering you. comments be can make Thank What you if M&A seeing environment? some or you the on

– When opportunity broad opportunity. and XXXX to Air and we we able to our the to continue a acquisition core business if the automation unique move us we’d the about to to our build our we vision with welding out to be that Welding for several was to business done us additive forward got arise said opportunities our the unique be last that those within And as space strategy, talked identify willingness solutions think to in years, be in continue opportunities like we’ve for invest that products we’ve portfolio. and marketplace. the able We’d global Liquide continue to can found we

We continue to for look those opportunities.

bring value and continuing to shareholders so which includes and next. executing Jason. value So very our on our interested we’re to have we long-term identify who’d long-term. that still Then Thanks in add to the strategy acquisitions strategy, in

Global. is Seaport next of Walter question Liptak Our

Your open. line is

Thanks good guys. Hi. and morning

Good morning, Walter.

it I Liquide. came wanted expectation? revenue Air better growth ask Was getting looking Are your with line of to for. bit are a out The you than we little it? about in in

I out start. very, strategies. our a been too the getting growth of has teams been I’ve develop people and the we’re Well, beginning it. with early it’s say very impressed It Yes. very to think solid to

host across large business acquisition, a but start there I As with in with had very very good regions this a you have some but exports, can and imagine, of Europe we it’s a necessarily positive to Lincoln really very look that bringing in quarter start business expected, a the good. integration than but at into Electric. than greater and their Not didn't very the other performance

headwind seemed in, just loss And of looks kind purchase like it or maybe profits to during like you of accounting. before Okay. it it a of the comments, marginally though was the a some was – profitable all backing the Vince's like numbers into looks off quarter? it It had

No. Liquide. us EPS include about and over It Air slightly $X.XX you contributed when tipped of

it and items was accounting. purchase So ex-special modest,

accounting. purchase the Excluding

Correct.

are on great. Okay, basis? you an annualized for And what about thinking accretion

a that we'll $X.XX then, about next synergies fiscal about XXXX. at And in fold to fourth that looking half per year to we're half ought probably $X.XX So the bit come in of second we EPS we're in operations significantly start improvement that expect about Liquide at not in we Liquide first first But will from a start in of contribute share to Air little but Air XXXX year, per quarter, fully business. still we that the – see the thinking improvement quarter the as into the the quarter. of year,

you guys gain assets? about consolidate? for Okay, I be you we things are as what this. are in you And you that you in sell, How to guess, get thinking the of terms a that guys impressive great. acquired? question is took asset did there And cash able take that on might

assets in much more improvements we At achieve the earnings gain don't and accounting integration a import our amount going the value I any a that of the will end important be receivable Simply, the the of being cash from of different Liquide will simple Welding. what's accounting asset calculation and is a than cash able that sales into assets a to the are non-cash on of the going Air that inventory and to and purchase little is so of price it's think not day, that forward per what nature. to acquired gain of in perspective one-time little flows cash other there off substantial real for and that of is Yes. fair business our was. be opportunities were bring accounts gain share us that those the are

Thank right. you. All

welcome. You’re

is question Markets. next Capital from of Liam Our Burke FBR

open. Your line is

Thank you. Good Chris. morning,

Good morning, Liam.

I about of welding bit the product of talk on new the a Chris, there's discussion introductions just could innovation a core business? – mean, the How the outside you lot the on been automation? automation about side.

That's Welding Liquide me bringing offers consumable products is a instantaneously global Air and didn't that new acquisition And the of of innovation in the within that have especially the things a portfolio. we the currently one about that that we're excites great question. products, Lincoln Yes. the some, portfolio of

products plasma welding, of competencies they great the within to we’re the and the to that a would and we some A though actually the would ability within drive our had. Also example So be drive by Oerlikon continue be new brand. consumable example some innovation of technologies technologies accelerating business, leveraging great new product introductions.

show, being an some recently, our offering, equipment perspective competencies, individually manage as but to within customers we out from sell, that on the continue and only a showed not competencies assisting at Just understand basis. their and Essen new capabilities better we our we have able the with IoT to technologies build global welding global at

see more us will and to types the offering. of more I with of continue marketplace the capabilities to bring think those you equipment

equipment that to last couple out well scheduled we we months a to new some continue new within equipment of well brought have launch offerings also as XX that have the six We lines XXXX. that as in to do

for continued So product talk to of Liquide, think with new And cycle. Air but that us there into very are as moving as today, the invest well we well we've I introductions only should throughout the that, not XXXX. catalyst about as products bode

front? to getting the revenues new side? the better new at does of margins translate on these Are you looking and automation. consumables and under How product introductions that margins you consumables as I'm into automation integrate Thanks. the any Great. products flow

tell view of Yes. areas to opportunity industry in the those innovation the very probably driving that around one good We of are that trying attractive. we're about don't question. identify that of those pieces solutions. a targeted you Well, us to margin product those it's and a our good There or There's that that resolve probably don’t the for cutting product having customer continue more are are each or think welding is about we think challenge way. segment business. I'll within the within being that as it consumables group drive that that very is the pieces We equipment attractive. very, offerings other to group We and area.

is Our Capital KeyBanc Steve from next Markets. question Barger,

open. is Your line

Hi, good morning guys.

automation. You in tougher said the was mix

lines? of small? systems can is Given about those selling that, versus or big the that range mix is business systems how of individual bigger wide you is a versus components margins talk And now, product function for

that profit operating was group profit Yes. last I you lower operating mix group margin number. just that margin a would meaningful in compared probably automation in line the consolidated then, in the And than margin. tell year, the in this to a year, product by higher the that resulted consolidated

very in the in year. margin mix margin on portfolio it's high lower portfolio a fairly meaningful prior So basis, year a a in shift the from, away one quarter's and current

different Is systems? different that or you types variance sell to end because market of a

market outside It last and transportation of was more automotive the year.

prior So perspective market the and towards transport automotive shifted the mix end year. broader in from a

So better to is in sell the broader automation? mix more can markets, your you margin of the

this That's particular basis the case on year-over-year a in quarter.

working maybe my cap to just quarters reason long optimize few teens back get high capital integrate or would working follow-up, as And is the over how you you XXXX? should Liquide? any you in Okay. there why do into expect expect next the Or and say -- operating would I the structurally ratio higher be

be. will likely it Well,

Liquide, sheet. this now, take of, for that we that out Air average combined operating ratio. with we as just We the had balance to XX.X% to the have opportunity cash You sales a working period disclosed, view saw capital two-month another

flow the with generate cash our excited and improve operating average working we're our operations. So capital and opportunity for shareholders through from cash to more our

time So first integrate it I knowing to the expect, working Air some of business, we with be higher don't half Liquide's multiyear this in expect capital has take XXXX. requirement, I -- it having will the a business would a us that will as but effort. happen

with improvements operating slightly higher Air business. run integrate a average our working and efficiencies our will Liquide operations capital until and we with through drive we So

and terms? this just there is them Is having longer something more receivable carrying else? inventory Or

Yes and yes.

All right. Thanks.

You’re welcome.

Thank you.

of Your is & next question Matthew Gabelli Company. from Trusz

open. is Your line

question. taking thanks morning Good the for and

Morning.

on Just follow-up heavy just bit. to a elaborate industries,

ship and mining? all and resource the industries down. but both strength than just other What are it rail mining? overall, is is up Or it's So story on

especially look, Well, the exiting It's I and third were were quarter. that, that. the we improvement as a seem at strong frankly, think resource is have to story the industries quarter, as very accelerating we quite mining looking

over of consumption a those portion Mining expand the that specifically see us. the to were for environment started challenged a that consumables, segment really good start we sign to we as is have very for the years. So last one Lincoln It's -- as through been we And a segment Electric. with has was that several critical expand and segments in of of quarter. moving

And include would that fabrication, makers Matthew. industries heavy as well, heavy construction equipment

that the compare thanks. extent the great, back versus in consumables then challenge price? also, to could of with inflation, feel and cost That’s respect passing contrast on go to you on and you the inflation just experience also And the the equipment

consumables. we business is Well, impact that clearly, Matthew, greatest the in our have to inflationary

So on so have cost and steel double-digit purchases impact the most. pace and year-over-year is, that a basis consumable our in frankly, so feeling the The risen and that's a line. where a we're product it it goods of on has steel material by costs of costs book sold

of So equipment goods consumables than because sold. price impact increases have much been substantial more in cost that through of

you. Thank

welcome. You’re

Thank you.

Baird. last Our Mig question of from is Dobre

open. is line Your

thanks Yes, for follow-up. my taking

headwind saying here, talk day? that quarter, said, won’t into the saying that you be extra Are can expecting because the clarify selling hit. looking volume? X.X% actually volume up sequentially Or little you fourth quarter, Like in Just about the are you have you flat a pick had we one up day. bit you volume we selling to that’s when because same end should one you fewer with fourth the essentially

Yes, the clarification. for asked I’m glad you

had as order in see the that expectation than one should trends in we performance as a that are through least Americas good seeing quarter. book October that the the because segment X.X% the third the focused we day third in our we that selling quarter. day in in sales and at on, My this in year-over-year year-over-year is So improvement third of less and quarter volume something we’re

third X.X% quarter are year-over baseline, So higher.

we incremental accrual know of this should million this out missed correctly, I should also if perfect. forward, price recall Perfect, if full to I a given be the And And further second builds your to of then, commentary tune this in And how plan if quarter, something perform bit $X margin. year? about about to the to this, wanted for And to year-over-year. if don’t third you bonus comp about dynamics. was your coming I cost as clear. the according earlier we the That’s think up in I going how the thinking little related wondering it quarter? I’m ask

Yes.

of far XX% my expectation as in the the the concerned, range fourth to Liquide as legacy incrementals So quarter in somewhere XX% is are that be ex-Air will Welding. business

that of Welding to Our be Liquide in Welding. expect less around combine Air months three including the fourth quarter XX%, believe, the I in to Air compared third reported as incrementals, two quarter. And Liquide little are even months I perhaps a bit we as

today. So to somewhere of we be on into based in the And in at Air ex-acquisition drag incrementals overall XX% a business fourth us the legacy Liquide will front continue our range to would to our see what on reported quarter. XX% I peg

And question? Okay. bonus the on

that As far operating we as formula is ex our according bonus. to and profit XX% bonus, formula of to roughly the accrue the continue

no at point compared accruals on variances based with significant in our previous So expected formulas. this

you, Very helpful. Thank much. very

Mig. welcome You’re

I question-and-answer the to our would like for concludes remarks. to Petrella closing session. back This Vincent call turn

XXXX on the nice joining again talking for to us call in forward you, And the today. day. fourth progression in of very much towards to our everyone XXXX again. Thank Thanks have and we thank look you Vince, about quarter February and

concludes This today’s teleconference.

for this at lines your You disconnect you may your now participation. time. Thank