First Quarter 2016 Key Metric
Highlights
Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq:LECO)
today reported first quarter 2016 net income of $53.6 million, or
diluted earnings per share (EPS) of $0.76. This compares with
net income of $68.4 million, or EPS of $0.89 in the comparable 2015
period.
First quarter 2016 sales decreased 16.3% to $550.7
million. An 11.4% benefit from price and a 1.6% increase from
acquisitions was offset by a 15.0% decline from unfavorable foreign
exchange translation and 14.2% lower volumes. Excluding
Venezuela, pricing and foreign exchange had 1.0% and 2.2%
unfavorable impacts, respectively, on sales in the quarter.
Operating income for the first quarter 2016 was $75.3 million, or
13.7% of sales reflecting operational and commercial initiatives
focused on managing margins, as well as the benefit of cost
reduction actions. This compared with $90.5 million, or 13.8%
of sales, in the comparable 2015 period.
“We achieved solid margins and returns this quarter,” stated
Christopher L. Mapes, Chairman, President and Chief Executive
Officer. “While volumes continued to compress on weak
industrial demand and challenging year-over-year comparisons, cost
reduction actions and solid execution of our operational and
commercial initiatives significantly mitigated the impact of
year-over-year declines. In this part of the cycle, we
continue to invest in innovation, our long-term growth strategies
and returning cash to shareholders. We are diligently
managing costs and margin performance and are looking for
sustainable improvement in industrial sector conditions to drive
increased customer demand.”
Dividend and Share Repurchases
The Company’s Board of Directors declared a quarterly cash
dividend of $0.32 per share, which was paid on April 15, 2016 to
shareholders of record as of March 31, 2016.
During the quarter, the Company returned $125.1 million to
shareholders through dividends and the repurchase of 1.9 million of
the Company’s common shares. The Company is maintaining its
2016 share repurchase target of $400 million of the Company’s
common shares.
Webcast Information
A conference call to discuss first quarter 2016 financial
results will be webcast live today, April 19, 2016, at
10:00 a.m., Eastern Time. This webcast is accessible at
http://ir.lincolnelectric.com. Listeners should go to the web
site prior to the call to register, download and install any
necessary audio software. A replay of the webcast will be
available on the Company's web site.
Investors who are unable to access the webcast may listen to the
conference call live by telephone by dialing (877) 344-3899
(domestic) or (315) 625-3087 (international) and use confirmation
code 77332044. Telephone participants are asked to dial in
10-15 minutes prior to the start of the conference call.
Financial results for the first quarter 2016 can also be
obtained at http://ir.lincolnelectric.com.
About Lincoln Electric
Lincoln Electric is the world leader in the design, development
and manufacture of arc welding products, robotic arc welding
systems, plasma and oxy-fuel cutting equipment and has a leading
global position in the brazing and soldering alloys market.
Headquartered in Cleveland, Ohio, Lincoln has 48 manufacturing
locations, including operations and joint ventures in 19 countries
and a worldwide network of distributors and sales offices covering
more than 160 countries. For more information about Lincoln
Electric and its products and services, visit the Company’s website
at www.lincolnelectric.com.
Non-GAAP Information
Adjusted operating income, Adjusted net income, Adjusted diluted
earnings per share and Return on invested capital are non-GAAP
financial measures that management believes are important to
investors to evaluate and compare the Company’s financial
performance from period to period. Management uses this
information in assessing and evaluating the Company’s underlying
operating performance. Non-GAAP financial measures should be
read in conjunction with the GAAP financial measures, as non-GAAP
measures are a supplement to, and not a replacement for, GAAP
financial measures. Please refer to the attached schedule for
a reconciliation of non-GAAP financial measures to the related GAAP
financial measures. Forward-Looking
Statements
The Company’s expectations and beliefs concerning the future
contained in this news release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements reflect management’s current
expectations and involve a number of risks and uncertainties.
Forward-looking statements generally can be identified by the use
of words such as “may,” “will,” “expect,” “intend,” “estimate,”
“anticipate,” “believe,” “forecast,” “guidance” or words of similar
meaning. Actual results may differ materially from such
statements due to a variety of factors that could adversely affect
the Company’s operating results. The factors include, but are
not limited to: general economic and market conditions; the
effectiveness of operating initiatives; completion of planned
divestitures; interest rates; disruptions, uncertainty or
volatility in the credit markets that may limit our access to
capital; currency exchange rates and devaluations, including in
highly inflationary countries such as Venezuela; adverse outcome of
pending or potential litigation; actual costs of the Company’s
rationalization plans; possible acquisitions; market risks and
price fluctuations related to the purchase of commodities and
energy; global regulatory complexity; and the possible effects of
events beyond our control, such as political unrest, acts of terror
and natural disasters, on the Company or its customers, suppliers
and the economy in general. For additional discussion, see
“Item 1A. Risk Factors” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2015.
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
Consolidated Statements of Income |
|
|
|
Three Months Ended March 31, |
|
Fav (Unfav) to Prior Year |
|
|
2016 |
|
% of Sales |
|
2015 |
|
% of Sales |
|
$ |
|
% |
Net sales |
|
$ |
550,722 |
|
|
100.0 |
% |
|
$ |
657,900 |
|
|
100.0 |
% |
|
$ |
(107,178 |
) |
|
(16.3 |
%) |
Cost of goods sold |
|
361,620 |
|
|
65.7 |
% |
|
437,510 |
|
|
66.5 |
% |
|
75,890 |
|
|
17.3 |
% |
Gross profit |
|
189,102 |
|
|
34.3 |
% |
|
220,390 |
|
|
33.5 |
% |
|
(31,288 |
) |
|
(14.2 |
%) |
Selling,
general & administrative expenses |
|
113,810 |
|
|
20.7 |
% |
|
129,891 |
|
|
19.7 |
% |
|
16,081 |
|
|
12.4 |
% |
Operating income |
|
75,292 |
|
|
13.7 |
% |
|
90,499 |
|
|
13.8 |
% |
|
(15,207 |
) |
|
(16.8 |
%) |
Interest income |
|
430 |
|
|
0.1 |
% |
|
593 |
|
|
0.1 |
% |
|
(163 |
) |
|
(27.5 |
%) |
Equity earnings in
affiliates |
|
626 |
|
|
0.1 |
% |
|
849 |
|
|
0.1 |
% |
|
(223 |
) |
|
(26.3 |
%) |
Other income |
|
661 |
|
|
0.1 |
% |
|
2,610 |
|
|
0.4 |
% |
|
(1,949 |
) |
|
(74.7 |
%) |
Interest expense |
|
(3,827 |
) |
|
(0.7 |
%) |
|
(1,844 |
) |
|
(0.3 |
%) |
|
(1,983 |
) |
|
(107.5 |
%) |
Income before income
taxes |
|
73,182 |
|
|
13.3 |
% |
|
92,707 |
|
|
14.1 |
% |
|
(19,525 |
) |
|
(21.1 |
%) |
Income taxes |
|
19,558 |
|
|
3.6 |
% |
|
24,389 |
|
|
3.7 |
% |
|
4,831 |
|
|
19.8 |
% |
Effective tax rate |
|
26.7 |
% |
|
|
|
26.3 |
% |
|
|
|
(0.4 |
%) |
|
|
Net income including
non-controlling interests |
|
53,624 |
|
|
9.7 |
% |
|
68,318 |
|
|
10.4 |
% |
|
(14,694 |
) |
|
(21.5 |
%) |
Non-controlling
interests in subsidiaries’ loss |
|
(14 |
) |
|
— |
|
|
(36 |
) |
|
— |
|
|
22 |
|
|
61.1 |
% |
Net income |
|
$ |
53,638 |
|
|
9.7 |
% |
|
$ |
68,354 |
|
|
10.4 |
% |
|
$ |
(14,716 |
) |
|
(21.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share |
|
$ |
0.77 |
|
|
|
|
$ |
0.90 |
|
|
|
|
$ |
(0.13 |
) |
|
(14.4 |
%) |
Diluted earnings per
share |
|
$ |
0.76 |
|
|
|
|
$ |
0.89 |
|
|
|
|
$ |
(0.13 |
) |
|
(14.6 |
%) |
Weighted average shares
(basic) |
|
69,585 |
|
|
|
|
76,242 |
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
70,246 |
|
|
|
|
77,059 |
|
|
|
|
|
|
|
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands) |
(Unaudited) |
Balance Sheet Highlights |
|
Selected Consolidated Balance Sheet Data |
|
March 31, 2016 |
|
December 31, 2015 |
Cash and cash
equivalents |
|
$ |
220,996 |
|
|
$ |
304,183 |
|
Total current
assets |
|
902,347 |
|
|
935,995 |
|
Property, plant and
equipment, net |
|
413,826 |
|
|
411,323 |
|
Total assets |
|
1,777,095 |
|
|
1,784,171 |
|
Total current
liabilities |
|
401,455 |
|
|
370,122 |
|
Short-term debt
(1) |
|
24,844 |
|
|
4,278 |
|
Long-term debt |
|
350,106 |
|
|
350,347 |
|
Total equity |
|
892,669 |
|
|
932,448 |
|
|
|
|
|
|
Net Operating
Working Capital |
|
March 31, 2016 |
|
December 31, 2015 |
Accounts
receivable |
|
$ |
286,120 |
|
|
$ |
264,715 |
|
Inventory |
|
292,709 |
|
|
275,930 |
|
Trade accounts
payable |
|
159,590 |
|
|
152,620 |
|
Net operating working
capital |
|
$ |
419,239 |
|
|
$ |
388,025 |
|
|
|
|
|
|
Net operating working
capital to net sales (2) |
|
19.0 |
% |
|
17.1 |
% |
|
|
|
|
|
Invested
Capital |
|
March 31, 2016 |
|
December 31, 2015 |
Short-term debt
(1) |
|
$ |
24,844 |
|
|
$ |
4,278 |
|
Long-term debt |
|
350,106 |
|
|
350,347 |
|
Total debt |
|
374,950 |
|
|
354,625 |
|
Total equity |
|
892,669 |
|
|
932,448 |
|
Invested capital |
|
$ |
1,267,619 |
|
|
$ |
1,287,073 |
|
|
|
|
|
|
Total debt / invested
capital |
|
29.6 |
% |
|
27.6 |
% |
|
|
|
|
|
|
|
(1) Includes current portion of long-term debt.
(2) Net operating working capital to net sales is defined as net
operating working capital divided by annualized rolling three
months of sales.
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
Non-GAAP Financial Measures |
|
|
|
Three Months Ended March 31, |
|
|
2016 |
|
2015 |
Operating income as
reported |
|
$ |
75,292 |
|
|
$ |
90,499 |
|
Special items (pre-tax): |
|
— |
|
|
— |
|
Adjusted operating
income (1) |
|
$ |
75,292 |
|
|
$ |
90,499 |
|
As a percent of total sales |
|
13.7 |
% |
|
13.8 |
% |
Net income as
reported |
|
$ |
53,638 |
|
|
$ |
68,354 |
|
Special items (after-tax): |
|
— |
|
|
— |
|
Adjusted net income
(1) |
|
$ |
53,638 |
|
|
$ |
68,354 |
|
|
|
|
|
|
Diluted earnings per
share as reported |
|
$ |
0.76 |
|
|
$ |
0.89 |
|
Special items |
|
— |
|
|
— |
|
Adjusted diluted
earnings per share (1) |
|
$ |
0.76 |
|
|
$ |
0.89 |
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
70,246 |
|
|
77,059 |
|
|
|
|
|
|
Return on
Invested Capital |
|
Twelve Months Ended March 31, |
|
|
2016 |
|
2015 |
Adjusted net income (1)(2) |
|
$ |
245,467 |
|
|
$ |
300,170 |
|
Plus: Interest expense
(after-tax) |
|
14,693 |
|
|
6,608 |
|
Less: Interest income
(after-tax) |
|
1,574 |
|
|
1,711 |
|
Adjusted net income before tax
effected interest |
|
$ |
258,586 |
|
|
$ |
305,067 |
|
Invested capital |
|
1,267,619 |
|
|
1,351,822 |
|
Return on invested
capital (1)(3) |
|
20.4 |
% |
|
22.6 |
% |
|
|
|
|
|
|
|
(1) Adjusted operating income, Adjusted net income, Adjusted
diluted earnings per share and Return on invested capital are
non-GAAP financial measures that management believes are important
to investors to evaluate and compare the Company’s financial
performance from period to period. Management uses this
information in assessing and evaluating the Company’s underlying
operating performance. Non-GAAP financial measures should be
read in conjunction with the GAAP financial measures, as non-GAAP
measures are a supplement to, and not a replacement for, GAAP
financial measures.(2) Adjusted net income for the twelve months
ended March 31, 2016 excludes the after-tax impact of $132.7
million from special items including pension settlement charges,
rationalization and asset impairment charges and Venezuelan
remeasurement losses related to the adoption of new foreign
exchange mechanisms. Adjusted net income for the twelve
months ended March 31, 2015 excludes the after-tax impact of
$33.6 million from special items including rationalization and
asset impairment charges and Venezuelan remeasurement losses
related to the adoption of new foreign exchange mechanisms.(3)
Return on invested capital is defined as rolling 12 months of
Adjusted net income excluding tax-effected interest income and
expense divided by invested capital.
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
Condensed Consolidated Statements of Cash
Flows |
|
|
|
Three Months Ended March 31, |
|
|
2016 |
|
2015 |
OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
53,638 |
|
|
$ |
68,354 |
|
Non-controlling
interests in subsidiaries’ loss |
|
(14 |
) |
|
(36 |
) |
Net income including
non-controlling interests |
|
53,624 |
|
|
68,318 |
|
Adjustments to reconcile Net income
including non-controlling interests to Net cash provided by
operating activities: |
|
|
|
|
|
|
Rationalization and asset
impairment charges |
|
— |
|
|
30 |
|
Depreciation and amortization |
|
15,625 |
|
|
16,032 |
|
Equity earnings in affiliates,
net |
|
(2 |
) |
|
(216 |
) |
Pension expense |
|
4,144 |
|
|
5,679 |
|
Pension contributions and
payments |
|
(20,865 |
) |
|
(21,234 |
) |
Other non-cash items, net |
|
(2,079 |
) |
|
(18,562 |
) |
Changes in operating assets and
liabilities, net of effects from acquisitions: |
|
|
|
|
|
|
Increase in accounts
receivable |
|
(16,592 |
) |
|
(25,377 |
) |
Increase in inventories |
|
(10,780 |
) |
|
(16,233 |
) |
Increase (decrease) in trade
accounts payable |
|
4,657 |
|
|
(12,916 |
) |
Net change in other current assets
and liabilities (1) |
|
(2,911 |
) |
|
55,069 |
|
Net change in other long-term
assets and liabilities |
|
(460 |
) |
|
2,194 |
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
24,361 |
|
|
52,784 |
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
Capital expenditures |
|
(8,885 |
) |
|
(12,456 |
) |
Proceeds from sale of property,
plant and equipment |
|
458 |
|
|
1,187 |
|
Other investing activities |
|
— |
|
|
2,024 |
|
NET CASH USED BY
INVESTING ACTIVITIES |
|
(8,427 |
) |
|
(9,245 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
Net change in borrowings |
|
21,756 |
|
|
101,510 |
|
Proceeds from exercise of stock
options |
|
2,015 |
|
|
1,733 |
|
Excess tax benefits from
stock-based compensation |
|
357 |
|
|
537 |
|
Purchase of shares for
treasury |
|
(102,488 |
) |
|
(102,853 |
) |
Cash dividends paid to
shareholders |
|
(22,625 |
) |
|
(22,329 |
) |
Other financing activities |
|
(3,806 |
) |
|
(20 |
) |
NET CASH USED BY
FINANCING ACTIVITIES |
|
(104,791 |
) |
|
(21,422 |
) |
|
|
|
|
|
Effect of exchange rate
changes on Cash and cash equivalents |
|
5,670 |
|
|
(11,479 |
) |
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS |
|
(83,187 |
) |
|
10,638 |
|
Cash and cash
equivalents at beginning of period |
|
304,183 |
|
|
278,379 |
|
Cash and cash
equivalents at end of period |
|
$ |
220,996 |
|
|
$ |
289,017 |
|
|
|
|
|
|
Cash dividends paid per
share |
|
$ |
0.32 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
(1) Net change in other current assets and liabilities in 2015
includes the receipt of a $25 million tax refund.
|
Lincoln Electric Holdings, Inc. |
Segment Highlights (1) |
(In thousands) |
(Unaudited) |
|
|
|
Americas Welding |
|
International Welding |
|
The HarrisProductsGroup |
|
Corporate /Eliminations |
|
Consolidated |
Three months
ended March 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
359,008 |
|
|
$ |
124,305 |
|
|
$ |
67,409 |
|
|
$ |
— |
|
|
$ |
550,722 |
|
Inter-segment
sales |
|
23,831 |
|
|
4,426 |
|
|
2,303 |
|
|
(30,560 |
) |
|
— |
|
Total |
|
$ |
382,839 |
|
|
$ |
128,731 |
|
|
$ |
69,712 |
|
|
$ |
(30,560 |
) |
|
$ |
550,722 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (2) |
|
$ |
61,438 |
|
|
$ |
6,233 |
|
|
$ |
7,711 |
|
|
$ |
1,197 |
|
|
$ |
76,579 |
|
As a percent of total sales |
|
16.0 |
% |
|
4.8 |
% |
|
11.1 |
% |
|
|
|
13.9 |
% |
Special items charge
(gain) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
EBIT, as adjusted
(3) |
|
$ |
61,438 |
|
|
$ |
6,233 |
|
|
$ |
7,711 |
|
|
$ |
1,197 |
|
|
$ |
76,579 |
|
As a percent of total sales |
|
16.0 |
% |
|
4.8 |
% |
|
11.1 |
% |
|
|
|
13.9 |
% |
Three months
ended March 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
448,837 |
|
|
$ |
139,247 |
|
|
$ |
69,816 |
|
|
$ |
— |
|
|
$ |
657,900 |
|
Inter-segment
sales |
|
23,023 |
|
|
5,027 |
|
|
2,011 |
|
|
(30,061 |
) |
|
— |
|
Total |
|
$ |
471,860 |
|
|
$ |
144,274 |
|
|
$ |
71,827 |
|
|
$ |
(30,061 |
) |
|
$ |
657,900 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (2) |
|
$ |
75,415 |
|
|
$ |
10,934 |
|
|
$ |
7,549 |
|
|
$ |
60 |
|
|
$ |
93,958 |
|
As a percent of total sales |
|
16.0 |
% |
|
7.6 |
% |
|
10.5 |
% |
|
|
|
14.3 |
% |
Special items charge
(gain) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
EBIT, as adjusted
(3) |
|
$ |
75,415 |
|
|
$ |
10,934 |
|
|
$ |
7,549 |
|
|
$ |
60 |
|
|
$ |
93,958 |
|
As a percent of total sales |
|
16.0 |
% |
|
7.6 |
% |
|
10.5 |
% |
|
|
|
14.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) As previously announced on February 9, 2016, the Company
realigned its organizational structure into three operating
segments which was effective beginning in the first quarter of
2016.
(2) EBIT is defined as Operating income plus Equity earnings in
affiliates and Other income.
(2) The primary profit measure used by management to assess
segment performance is EBIT, as adjusted. EBIT for each
operating segment is adjusted for special items to derive EBIT, as
adjusted.
|
Lincoln Electric
Holdings, Inc. |
Change in Net Sales by Segment |
(In thousands) |
(Unaudited) |
|
Three Months Ended March 31st Change in Net Sales by
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Sales due to: |
|
|
|
|
|
Net Sales2015 |
|
Volume |
|
Acquisitions |
|
Price |
|
ForeignExchange |
|
Net Sales2016 |
|
Operating
Segments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
$ |
448,837 |
|
|
$ |
(85,063 |
) |
|
$ |
6,977 |
|
|
$ |
80,320 |
|
|
$ |
(92,063 |
) |
|
$ |
359,008 |
|
|
International
Welding |
|
139,247 |
|
|
(9,822 |
) |
|
3,465 |
|
|
(3,105 |
) |
|
(5,480 |
) |
|
124,305 |
|
|
The Harris Products
Group |
|
69,816 |
|
|
1,390 |
|
|
— |
|
|
(2,404 |
) |
|
(1,393 |
) |
|
67,409 |
|
|
Consolidated |
|
$ |
657,900 |
|
|
$ |
(93,495 |
) |
|
$ |
10,442 |
|
|
$ |
74,811 |
|
|
$ |
(98,936 |
) |
|
$ |
550,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated (excluding
Venezuela) |
|
$ |
635,021 |
|
|
$ |
(79,236 |
) |
|
$ |
10,442 |
|
|
$ |
(6,490 |
) |
|
$ |
(13,995 |
) |
|
$ |
545,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
|
|
(19.0 |
%) |
|
1.6 |
% |
|
17.9 |
% |
|
(20.5 |
%) |
|
(20.0 |
%) |
|
International
Welding |
|
|
|
(7.1 |
%) |
|
2.5 |
% |
|
(2.2 |
%) |
|
(3.9 |
%) |
|
(10.7 |
%) |
|
The Harris Products
Group |
|
|
|
2.0 |
% |
|
— |
|
|
(3.4 |
%) |
|
(2.0 |
%) |
|
(3.4 |
%) |
|
Consolidated |
|
|
|
(14.2 |
%) |
|
1.6 |
% |
|
11.4 |
% |
|
(15.0 |
%) |
|
(16.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated (excluding
Venezuela) |
|
|
|
(12.5 |
%) |
|
1.6 |
% |
|
(1.0 |
%) |
|
(2.2 |
%) |
|
(14.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact
Amanda Butler
Director, Investor Relations
Tel: 216.383.2534
Email: Amanda_Butler@lincolnelectric.com
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