Greetings and welcome to the Lincoln Electric 2015 Second 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, Director of Investor Relations. Thank you, you may begin.

Thank you and good morning everyone. Welcome to Lincoln Electric's 2015 second quarter conference call. We released our financial results for the quarter earlier today and you can find our release and this call's slide presentation on Lincoln Electric website at lincolnelectric.com in the Investor Relations section. Joining me on the call today is Chris Mapes, Lincoln's Chairman, President, and Chief Executive Officer and our Chief Financial Officer, Vince Petrella. Chris will begin the discussion this morning with an overview of the quarter and Vince will cover the numbers in more detail as well as our uses of cash. Following our prepared remarks we will take your questions. Before we start the discussion, please note that certain statements made during this call maybe forward-looking and actual results may differ materially from our expectations due to a number of risk factors. A discussion of some of the risks and uncertainties that may affect our results are provided in our press release and in our SEC filings on Forms 10-K and 10-Q. In addition we discuss financial measures that do not conform to U.S. GAAP. A reconciliation of non-GAAP measures to the most comparable GAAP measures is found in the financial tables in our earnings release. With that, I will turn the call over to Chris Mapes. Chris?

Thank you, Amanda. Good morning everyone. The business navigated through challenging market conditions in the second quarter. The impact of a strong U.S. dollar on our U.S. exports, the contraction in oil and gas, and general slowing in industrials offset the benefits we achieved from our diversified end market exposure, broad portfolio of solutions, and operational excellence initiatives. We recognized these challenges early and deployed cost reduction initiatives mid quarter to start to align our cost structure with soft market conditions in an effort to sustain our profit margin, cash flow generation, and return performance. We did this while continuing to reinvest in innovation in our various commercial programs. We believe these efforts will allow Lincoln Electric to better capitalize on opportunities when demand trends improve and help us achieve our longer-term, 20-20 vision, and strategy goals. Looking at the quarter in a bit more detail, second quarter sales declined 8.8% to $665 million. Excluding foreign exchange, second quarter sales decreased 2.9%. Primarily from 6.5% lower volumes, which offset positive price and solid performance from our 2014 EASOM Automation acquisition. Our lower volume performance was primarily from a sharp 27% decline in our U.S. exports, a 20% decline in oil and gas sector demand and weakness in our Asia Pacific region specifically in Australia’s mining industry and in China where we continue to reposition the business. Lower volumes impacted both our reported and adjusted operating income and margin performance. Our second quarter adjusted operating income margin of 14.7% declined 130 basis points on a challenging year-over-year comparison against their record 16%, 2014 operating income margin. Earnings per share declined in the quarter with adjusted EPS down 5.9% to $0.95. While share repurchases contributed $0.06 to EPS, unfavorable foreign exchange reduced EPS by $0.04. Return on invested capital remained steady year-over-year…

Thank you, Chris. Turning to slide 6, you will see that our consolidated sales decreased 8.8% compared with the second quarter of 2014. We achieved 1.6% higher price, primarily reflecting the hyperinflationary environment in Venezuela, as well as a 2% increase from our EASOM Automation acquisition which we completed in October of last year. These increases were offset by a 6.5% reduction in volumes and a 5.9% unfavorable impact from foreign currency translation. Excluding foreign exchange, our sales decreased 2.9%. Our second quarter gross profit margins decreased 40 basis points to 34% compared with 34.4% in the comparable prior-year period. Lower volumes drove the margin decline. Our SG&A expense as a percentage of sales increased 40 basis points to 19.2% as cost reductions helped to partially offset the impact of lower sales volumes. Operating income for the quarter decreased 13.8% to $97 million. Our operating margin decreased 80 basis points to 14.6%. On an adjusted basis, we achieved 14.7% operating margin which was 130 basis points lower than 2014’s peak 16% margin. While the second quarter benefited from cost reductions, these benefits were offset by the unfavorable impact of lower volumes, a $2.3 million increase in pension expense, and a prior year $3.9 million gain from an insurance settlement. Excluding our Venezuelan operations from both years' second quarter results, our adjusted operating profit margin would have decreased 80 basis points to 15% in 2015 as compared with 15.8% in 2014. Our interest expense increased by $3.4 million in the quarter to $4.4 million primarily from an adjustment and the consideration we expect to pay to acquire an additional ownership interest in a majority owned subsidiary. Interest expense also reflects interest accrued on higher borrowings. The effective tax rate for the second quarter was 24.9%, compared with 32.7% in the prior…

[Operator Instructions]. Our first question comes from Matt McConnell of RBC Capital Markets. Your line is open.

Thanks, good morning.

Hey, good morning Matt.

Hi Matt.

Could you maybe give a little more insight into the oil and gas decline? Obviously, it got a little bit weaker here but customer conversations or anything else that suggest this will get worse in the back half of the year or just what are your expectations for this market over the next couple of quarters?

Matt, I would say first, our first quarter of 2015, we didn’t have the level of impact that we expected in the oil and gas, and we have mentioned at that time that we knew that we would begin to see compression in that demand model, and we certainly experienced that in Q2. I would tell you that we don’t have any conversations that we are engaging and that should lead us to believe that it is going to significantly differ as we move forward, but we are also not seeing anything in today's environment that leads us to believe that we are expecting any improvement in that business. And it is not just a U.S. phenomenon, it is also impacting oil and gas in a multitude of segments in our businesses around the world. So, our expectation is that we are beginning -- we have seen that in our Q2 results and are expecting to continue to see that type of activity as we exit through the rest of 2015.

Okay, got it. Thanks. And then separate question on the pace of the buyback, it slowed down a little bit in the second quarter and you are kind of below the pace for the 400, but were you blocked out of the market at any point around the preannouncement or can you decide to slow it down a little bit in 2Q or at what point would that accelerate to get up to the 400 million that you are talking about for the year?

Matt, it is a little bit of both of those things. We do have a blackout period that runs about two weeks before the end of the calendar quarter. So, we have been on a 10b5 plan, at a little bit more modest levels of repurchases since that time. So I would expect the acceleration to begin when the new window opens in about three or four days. So, we will need to buy more shares than what we have been doing the last 30 to 45 days, and we did slow down a little bit towards the middle end of this quarter in anticipation to open up the window for the last part of the year.

Okay, great, thank you very much.

Our next question comes from Schon Williams of BB&T Capital Markets. Your line is open.

Hi, good morning.

Good morning.

Wondered if we could just talk about maybe the restructuring and some of the cost controls that were put in place in Q2. From the comment, it sounded like it was more kind of across the board, but then the actual restructuring charges I guess were more isolated to Europe. Can you just help me understand kind of what actions did you put in place in Q2 and then maybe specifically for Europe maybe talk about was the restructuring there, mostly people costs or are you looking at closing any production, just maybe a little bit more detail on some of the restructuring cost control?

Yeah Schon, let me talk about Europe specifically, and then I will let Vince comment about some of the broader activities that we have across the portfolio. So, in Europe, we have been continuing to try to drive a higher performance organization in our European business. We have implemented some new CRM and sales management tools that have assisted us in evaluating the way we are going to market. Most of the restructuring charges that you saw there in the second quarter were the realignment of people relative to being able to achieve that longer-term. So, it was not any physical assets or physical asset closures. It was all around reorganization in our sales and marketing organization as we have been trying to drive a higher performance organization. They are a business that can drive more solutions for us where traditionally we had some markets there that were probably more channel oriented. And we are just trying to continue to execute on that strategy, and that is really the impact that you saw from Europe in Q2.

Then Schon from a broader perspective, the way that we look at our cost savings, we categorize them into two buckets, one being what we would refer to as temporary cost savings, cutting back on discretionary spending, adjusting and aligning our cost base with the volumes that were now afforded in the marketplace. And that would include eliminating overtime, taking hours down, taking all those variable type costs down to again better match our cost structure with our revenue line. Then the other category would be what we believe to be structural changes, and Chris highlighted what we believe to be a structural change in Europe, and structural changes are situations where we are taking out what we believe permanently fixed costs in our structure that will not come back when volumes improve, and our estimates today on both of those categories are that the temporary discretionary type of savings will range on an annualized basis between $10 million and $15 million today. And on the structural side, we have about 4 million to 6 million of annualized cost savings that we can expect going forward for the last half of this year and in the next year.

Alright, that’s helpful, and then maybe just a question on the markets. I wondered if you can just talk a little bit about the different dynamics that you are seeing at the pipe mills being strong versus pipeline being weaker, maybe just talk a little bit about that? And then also it looks like auto it kind of dropped out as kind of one of your stronger markets, just maybe if you could comment specifically on what you are seeing in Automotive right now?

Well Schon Automotive probably dropped out only and that it’s not strengthening, it’s coming off a very strong 2014. 2015 has stayed very strong for us also with strength in some new applications that we’re moving into that marketplace and strength in the aluminum portfolios that we continue to move into the automotive industry. So the pipe mill versus pipeline dynamic, it’s not a perfect equilibrium of demand between what we see in the installation activity in pipe versus what we see in the pipe mill activity. Pipe mills have started back up more strongly on a global basis with some activity in North America as well as some activity in a couple other regions around the world. So we have seen that dynamic before, it doesn’t surprise us. But we would expect that would hopefully be able to transition into some other activity in the line portion of the business longer term. Although Lincoln today is engaged in a couple of very large projects, a project in Latin America and another project globally where we’re working with contractors on that portion of the business. So we would hopefully want to see that some of the pipe mill activity would trend into some of the other areas, the market here over the next three to five quarters.

Alright, thanks guys. I’ll get back in the queue.

Thank you. Our next question comes from Mark Douglass of Longbow Research your line is open.

Hi, good morning everyone.

Hey Mark.

Chris, can you talk about North America trends, from what I remember things took a dip in May and then into June surge in oil and gas, but how are things, I mean how did the quarter end in June, how are you looking into July, at least on a volume perspective in North America?

Well Mark you are right, we held up. I think you have to take a little bit longer look at it. As you recall our Q1 in 2015 we were a little bit stronger relative to holding up in the North America marketplace. We were concerned about oil and gas and saw more that trend in our business as we move towards Q2 with certainly concerns over some of the things we saw in the marketplace in May. We saw some improvement in June from the May run rate. I would tell you that our July business it’s just awfully early especially in North American marketplace where some large industries might be having some summer shutdown. So we are not seeing anything significantly different in July from what we have seen in the June run rate for the business. But that’s why we got the cautious outlook as we look forward into Q3 and Q4. I have a difficult time seeing what catalyst is out there to give us confidence that we are going to see any material change in the demand model here in North America as we are looking at Q3 and early Q4.

But with exports down considerably still you were relatively flat, not a step down from first quarter but still that was a lot of that automation demand to help you stay flat in a market that appeared to be down for others.

Well I would just say automation this does with that but I would also say that our teams in U.S. business and the North American business continued to execute on their strategies and continue to try to drive solutions into the broad marketplace. Automotive, although we didn’t highlight it is strong and continues to stay strong. Transportation, very strong; ship building here and actually the U.S. North American marketplace we have had some very good opportunities that we have executed on. So, teams continue to work very hard to mitigate the impact although certainly we would love to see some broader demand trends in the North American marketplace to assist us.

Okay, then finally Vince can you quantify year-to-date how much the portfolio, the product repositioning in Asia-Pac is affecting the volumes, how much of the volume decline is from the repositioning?

Well, year-to-date the volume impact from Asia Pacific is about $24 million of a reduction in total sales. So, we have about 1.3 billion in total sales, 1322 and about 24 million of the decline from last year's 1.413 billion is related to Asia Pacific volume reductions.

Okay, thank you it is helpful.

Thank you. Our next question comes from Joe O'Dea of Vertical Research. Your line is open.

Hi, good morning. First question just on mining and what you are seeing in activity there with some of the pressure we have seen across mine commodities over the last six months or so and I think that we had seen some maybe stabilization along a bottom and now it seems like there is a little bit more weakness showing up. So if you could just kind of characterize kind of what you are seeing there and how you expect that to play out over the next couple of quarters?

Look, I think the demand compression we are seeing in mining is really driven from a further reduction in copper pricing that has occurred over the last six to nine months. So, a lot of the demand models in mining are driven by iron ore, coal, and copper and copper has had kind of an accelerated deterioration over the last six to nine months. We are recently seeing some order trends in the marketplace that show mining continuing to compress. So, mining has been challenged for several quarters. It looks like we are continuing to see that impact within the business certainly impacting us. Globally we continue to see challenges in our Australian business with it being very mining centric but, I believe that some of the more recent trends that have been negative in mining probably have been driven by further deterioration in the economics around copper.

Okay, and then one on non-res and just the extent to which the energy disruption has created any push outs that you have seen across non-res from your comments still seeing activity and recovery there. But any concerns around product push outs or just the indications you are getting on visibility and two, continued go forward for planned projects?

We don’t see anything. As a matter of fact, we look at our structural construction business as one that's actually been strengthening during the course of the year. The sales improvements on a year-over-year basis in North America are strengthened from the first quarter to the second quarter. So, we see good trending in that particular end market segment.

Okay, thanks very much.

Thank you. Our next question comes from Walter Liptak of Global Hunter. Your line is open.

Thanks guys. Wanted to ask about the oil and gas in a little bit more detail to see if you have got any more clarity now on how much of that sales that you are seeing decline is coming from products that is going into the upstream versus mid or downstream?

Yeah, I would tell you that overall our oil and gas exposure declined in the second quarter. Year-over-year it is about 20%. And by far the greatest proportion of the decline on a year-over-year basis is on the upstream segment. It is over 30% plus declines and certainly midstream and downstream are lot less than that kind of decline. So, most of it has been heavily impacted in that upstream subsector.

Okay, are you saying that both are capital equipment for machinery as well as the consumables declining at that same rate?

We are seeing a large declines on both sides of the business Walt.

Okay, got it. And then I wanted to ask a follow up on the cost savings Vince that you mentioned, the temporary cost savings of 10 million to 15 million annualized, I wonder how much of that shows up in the back half of 2015 and how much in 2016 and then with the structural changes the 4 million to 6 million seem large compared to the charge that you took in the quarter, I wonder if there is another charge coming or if that was from prior restructuring?

Well starting with the structural changes, we don’t always need to make -- take charges to achieve structural savings. Places like Europe, those are necessary. But we have structural cost savings across our portfolio of geographic and segment businesses, North America and other segments that did not have to take those kinds of charges to achieve the structural cost savings. As far as the pacing, those are annualized numbers. I would tell you that there will be a little bit more emphasis on those savings in the last half of 2015 versus the first half because much of these initiatives were accomplished during the latter part of the second quarter. So we see a little bit heavier mix in the second half certainly versus the first half.

Okay, great. Okay, thank you.

Thank you. Our next question comes from Stanley Elliott of Stifel. Your line is open.

Hey, good morning guys. Quick question, the SG&A was some of that savings on the reported line was that incentive comp that came out or was that all just cost savings.

Well certainly yes, incentive comp was down and that had a fairly significant impact on the quarter-over-quarter comparisons. We also had some compression from foreign exchange currency translations as well. But yes, the incentive compensation is down year-over-year because earnings are down.

And then switching gears to the automation piece, it's today 10% plus of the overall business and then it’s been very good, can you talk about the strength that you are seeing now, is that from orders say 6 months, 3 months ago before kind of the global slowdown if you will has kind of started to materialize or discussions around that? And then can you talk about your visibility within that business giving that it’s kind of more of a CAPEX sort of driven product.

Well my first comment would be that we don’t think about that business as having a host of demand because of orders or activities that were received or achieved prior to the impact in oil and gas. So we don’t think about the business that way. The business still today even though it’s certainly a more significant piece of the business than what it was a few years ago and we continue to build that business out which we feel strongly that business can be a much larger piece of the portfolio as we execute on our 2020 vision and strategy, I’d like to see that business maybe gravitate towards more of a $600 million or $800 million business within the portfolio. And as it becomes larger it will be less choppy in its performance on a quarterly basis. Some of the various areas within the automation portfolio today because of their size and because of the fact that they do have at times large orders that can be more of a choppy performance for the business. But we are very focused on executing on our automation strategy, we think that can be a long term significant catalyst for us. It’s growing at a much higher rate than the core welding business on a global basis and we see that as a real catalyst for our long-term growth and improved performance.

And I maybe wrong but the 600 to 800 numbers seems higher than what I would have remembered, is that taking your technologies and putting them in to newer applications, new end markets or what is kind of driving that differential?

Look I would probably say both. Look we have -- as we’ve been on this journey and building out the automation business we’ve just gotten more and more confidence in our ability to execute on this strategy. So we are out there actively around the world looking at acquisition opportunities to expand this portfolio whether that would be regional or whether that would be on a solutions basis. And just feel confident that we will be able to continue to make this a larger piece of global Lincoln Electric.

And lastly could you comment on the additional ownership in the subsidiary, maybe just a little more color about kind of the products there, the regions anything you can share?

Well it’s in the automation space Stanley and it’s a North America business that was acquired now over a year ago and we just had an agreement where we bought a majority ownership interest and we have a, its part of the agreement the earn out based on purchase of the remaining interest at an estimated forecasted future earnings level. So as the business continues to grow rapidly in that automation space and becoming more profitable, we need to bump up our expected liability that will be paid out when we buy the final interest in this majority owned subsidiary.

Great, thank you very much and good luck.

Thank you.

Thank you. Our next question comes from Liam Burke of Wunderlich. Your line is open.

Thank you, good morning Chris and good morning Vince.

Good morning.

Vince talked about adjusting cost on lower volumes, is there any need to readjust your budget on the R&D side of the business there?

We don’t think so. We are actually, our R&D spend in the quarter was up double-digits on a year-over-year basis. We are committed to the long-term strategy of driving better and better products into our marketplace. That’s not a place that we plan on cutting back at all. And I will remind you, even in the great recession we continue to increase our spending in R&D. We believe it’s an area that no matter what’s happening in the markets we can improve our long-term positioning and strategic advantages in our industry so that we are not going to touch our R&D spend based on temporary fluctuations in demand in our marketplace.

Great, thanks Vince. And Chris the highlighted weakness in Asia Pacific mining, heavy fab offset by some automation activity the EBIT margin year-over-year have stepped up nicely on lower volumes, is there any onetime event in there or is this the trend that you’d expect to continue.

No there are really no one time events in that P&L. This really comes from our continued work in restructuring and repositioning that business to more of a solutions based business focusing on automation and equipment in that marketplace and mitigating our participation in some of the higher volume, lower valued welding activities in the marketplace. So I do think that, that performance may not be as consistent as we’d like. What I mean by that as we may see a quarter where it steps down slightly but we are very confident that we are on the right path in repositioning that business in Asia Pacific. Our Southeast Asia businesses are performing very well and had a couple of regions that had record performance within that piece of the segment. Australia is still challenged although I can assure you performing at a very good level considering historically how that business has suffered through other mining cycles and we’ve done that through some restructuring and solution based products that we moved into that marketplace over the last few years.

Great, thank you very much.

You’re welcome.

Thank you. Our next question comes from Justin Bergner of Gabelli & Company. Your line is open.

Good morning Chris, good morning Vince.

Good morning.

I was wondering on the automation side if you could provide a little more perspective or numbers around sort of the growth rates that you’ve seen year-to-date organically in your automation business and sort of whether not the margins are below or above the North American or company average?

Right now our margins in that business are in line with our company average Justin. As far as growth rates we’ve seen on a constant dollar basis a good solid double-digit increase in revenues ex acquisitions and ex foreign exchange on a year-over-year basis. So we have some elements of the automation business that have some very attractive growth trajectories in this marketplace and its clearly performing at a better growth rate then what we are seeing in some of our more traditional core welding end markets.

Great, thank you. One more question if I may, with respect to mix how was mix affecting margins in your North American segment year-to-date?

Well, the export business and oil and gas and energy markets tend to be some of our stronger margin opportunities in the portfolio. So, to the extent that we have a greater contraction in those end markets and those product portfolios it is going to put a little bit more pressure on our margins. So, even though our domestic business held up fairly well as compared with a lot of our international markets, the mix is certainly hurting us as the -- as oil and gas declines by 20% and exports decline by almost 30%.

Thank you. Is that just with respect to the margins in North American and the mix, is that purely a function of the detrimental on export energy markets or the actual average sort of margins for those business also somewhat better than the North American average?

I would say it is both of those surely.

Okay, thank you for taking my questions.

You are welcome.

Thank you. Our next question comes from Walter Liptak of Global Hunter. Your line is open.

Hi guys, just wanted to see if I could ask kind of a broader question. The comments that you made this morning on currency and O&G and general industrial slowing, it doesn’t sound like there is any catalyst to start to turn things at all and you guys have been through these cycles before, are you thinking that the cycle bottoms and is it just oil and gas that we need to start picking up and how are you positioning for 2016, are you preparing for this to be kind of longer new shape or something that comes back quickly?

Well, we certainly don’t as we have expressed this morning, we haven’t been able to identify that catalyst that gives us any confidence that the demand model shifts any near-term. So, as we are exiting through the rest of 2015, we think we are going to continue to execute on our strategies, work on our cost models. Certainly believe that we can perform well during this window but a pretty challenged demand model. Expect our automation business to continue to perform well. Expect to have pockets of industries and regions that continue to perform well. I think much like you have seen in our Q2 results. I think it is going to be more difficult at this point to put much color on 2016. I mean obviously if we were to see a significant change in some of the commodity prices or in the oil and gas pricing then we would see some of those markets move back more quickly. I have also experienced, I think we have here at Lincoln where sometimes those markets overshoots some of the expectations and maybe compress a little more quickly and then we may see some opportunities next year at least relative to where their demand models have been in 2015. But, we certainly don’t see any catalyst towards the end of this year and we will be watching certainly those industry segments and the large customers that we have relationships with as we move into 2016.

Okay, alright, thank you. Appreciate your thoughts and the outlook.

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

I just want to thank everyone for joining us on the call today and for your continued interest in Lincoln Electric. Very much look forward to reporting on our third quarter results in October and our progression and executing on our strategies. Thank you very much.

This concludes today's teleconference. You may now disconnect your lines at this time and thank you for your participation.