SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2021

SEGMENT INFORMATION

SEGMENT INFORMATION

NOTE 6 – SEGMENT INFORMATION

The Company’s primary business is the design, development and manufacture of arc welding products, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment. The Company also has a leading global position in brazing and soldering alloys.

The Company’s products include arc welding power sources, plasma cutters, wire feeding systems, robotic welding packages, integrated automation systems, fume extraction equipment, consumable electrodes, fluxes and welding accessories and specialty welding consumables and fabrication. The Company’s product offering also includes CNC plasma and oxy-fuel cutting systems and regulators and torches used in oxy-fuel welding, cutting and brazing.

The Company has aligned its organizational and leadership structure into three operating segments to support growth strategies and enhance the utilization of the Company’s worldwide resources and global sourcing initiatives. The operating segments consist of Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment includes welding operations in Europe, Africa, Asia and Australia. The Harris Products Group includes the Company’s global cutting, soldering and brazing businesses as well as its retail business in the United States.

Segment performance is measured and resources are allocated based on a number of factors, the primary measure being the adjusted earnings before interest and income taxes ("Adjusted EBIT") profit measure. EBIT is defined as Operating income plus Equity earnings in affiliates and Other income. Segment EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets. The accounting principles applied at the operating segment level are generally the same as those applied at the consolidated financial statement level with the exception of LIFO. Segment assets include inventories measured on a FIFO basis while consolidated inventories include inventories reported on a LIFO basis. Segment and consolidated income before interest and income taxes include the effect of inventories reported on a LIFO basis. At December 31, 2021, 2020 and 2019 approximately 36%, 35% and 36%, respectively, of total inventories were valued using the LIFO method. LIFO is used for a substantial portion of U.S. inventories included in Americas Welding. Inter-segment sales are recorded at agreed upon prices that approximate arm’s length prices and are eliminated in consolidation. Corporate-level expenses are allocated to the operating segments.

Financial information for the reportable segments follows:

					The Harris
	Americas		International		Products		Corporate /
	Welding (1)		Welding (2)		Group (3)		Eliminations (4)		Consolidated
For the Year Ended December 31, 2021
Net sales	$	1,824,481	$	948,125	$	461,574	$	—	$	3,234,180
Inter-segment sales		140,650		26,331		8,096		(175,077)		—
Total	$	1,965,131	$	974,456	$	469,670	$	(175,077)	$	3,234,180
Adjusted EBIT	$	329,016	$	106,208	$	68,447	$	(12,403)	$	491,268
Special items charge (gain)		123,114		15,234		3,785		1,923		144,056
EBIT	$	205,902	$	90,974	$	64,662	$	(14,326)	$	347,212
Interest income										1,567
Interest expense										(23,781)
Income before income taxes									$	324,998
Total assets	$	1,521,083	$	938,061	$	330,678	$	(197,515)	$	2,592,307
Equity investments in affiliates		5,181		—		—		—		5,181
Capital expenditures		37,717		16,916		7,898		—		62,531
Depreciation and amortization		49,510		24,998		6,795		(157)		81,146
For the Year Ended December 31, 2020
Net sales	$	1,509,870	$	786,809	$	358,721	$	—	$	2,655,400
Inter-segment sales		109,378		18,494		7,034		(134,906)		—
Total	$	1,619,248	$	805,303	$	365,755	$	(134,906)	$	2,655,400
Adjusted EBIT	$	245,728	$	44,979	$	55,154	$	(5,455)	$	340,406
Special items charge (gain)		34,989		19,404		—		—		54,393
EBIT	$	210,739	$	25,575	$	55,154	$	(5,455)	$	286,013
Interest income										1,986
Interest expense										(23,959)
Income before income taxes									$	264,040
Total assets	$	1,423,393	$	807,407	$	225,959	$	(142,306)	$	2,314,453
Equity investments in affiliates		4,682		—		—		—		4,682
Capital expenditures		30,811		21,819		6,571		—		59,201
Depreciation and amortization		51,744		23,859		4,982		(93)		80,492
For the Year Ended December 31, 2019
Net sales	$	1,815,746	$	854,376	$	333,150	$	—	$	3,003,272
Inter-segment sales		123,342		17,691		7,487		(148,520)		—
Total	$	1,939,088	$	872,067	$	340,637	$	(148,520)	$	3,003,272
Adjusted EBIT	$	315,719	$	50,281	$	45,701	$	(10,948)	$	400,753
Special items charge		3,115		2,156		1,770		1,804		8,845
EBIT	$	312,604	$	48,125	$	43,931	$	(12,752)	$	391,908
Interest income										2,527
Interest expense										(25,942)
Income before income taxes									$	368,493
Total assets	$	1,490,395	$	831,759	$	203,602	$	(154,543)	$	2,371,213
Equity investments in affiliates		4,274		—		—		—		4,274
Capital expenditures		39,106		23,126		7,383		—		69,615
Depreciation and amortization		55,300		22,013		4,636		(462)		81,487

(1) 2021 special items reflect pension settlement charges of $123,091.

2020 special items reflect Rationalization and asset impairment charges of $26,870 and pension settlement charges of $8,119.

2019 special items reflect Rationalization and asset impairment charges of $1,716 and amortization of step up in value of acquired inventories of $1,399 related to an acquisition.

(2) 2021 special items reflect Rationalization and asset impairment charges of $9,804, pension settlement charges of $446, and amortization of step up in value of acquired inventories of $4,984 related to an acquisition.

2020 special items reflect Rationalization and asset impairment charges of $18,598 and amortization of step up in value of acquired inventories of $806 related to an acquisition.

2019 special items reflect Rationalization and asset impairment charges of $11,702, amortization of step up in value of acquired inventories of $1,609 related to an acquisition, gains on disposals of assets of $3,554 and a gain on change in control of $7,601 related to an acquisition.

(3) 2021 special items reflect pension settlement charges of $2,965 and amortization of step up in value of acquired inventories of $820 related to an acquisition.

2019 special items reflect Rationalization and asset impairment charges of $1,770.

(4) 2021 special items reflect acquisition transaction and integration costs of $1,923 related acquisitions as discussed in Note 4 to the consolidated financial statements

2019 special items reflect acquisition transaction and integration costs of $1,804 related to an acquisition as discussed in Note 4 to the consolidated financial statements.

Export sales (excluding inter-company sales) from the United States were $149,110 in 2021, $132,637 in 2020 and $147,145 in 2019. No individual customer comprised more than 10% of the Company’s total revenues for any of the three years ended December 31, 2021.

The geographic split of the Company’s Net sales, based on the location of the customer, and property, plant and equipment were as follows:

	Year Ended December 31,
	2021		2020		2019
Net sales:
United States	$	1,726,498	$	1,431,859	$	1,615,483
Foreign countries		1,507,682		1,223,541		1,387,789
Total	$	3,234,180	$	2,655,400	$	3,003,272

	December 31,
	2021		2020		2019
Property, plant and equipment, net:
United States	$	262,247	$	247,931	$	250,923
Foreign countries		249,497		274,214		278,566
Eliminations		—		(53)		(145)
Total	$	511,744	$	522,092	$	529,344