Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq:LECO)
today reported second quarter 2016 net income of $31.3 million, or
diluted earnings per share (EPS) of $0.45 which includes a $7.2
million or $0.10 EPS benefit due to the reversal of an income tax
valuation allowance and a $33.3 million, or $0.48 EPS charge from
the deconsolidation of the Venezuelan subsidiary. This
compares with net income of $70.9 million, or EPS of $0.94 in the
comparable 2015 period. Adjusted net income for the three
months ended June 30, 2016 was $57.4 million, or adjusted EPS of
$0.83 reflecting the impact of lower volumes. This compares
with adjusted net income of $71.8 million, or adjusted EPS of
$0.95, in 2015.
Second quarter 2016 sales decreased 10.9% to $592.4 million.
The decrease reflects a 32.6% decline from unfavorable
foreign exchange translation and lower volumes of 9.7% being
partially offset by a 28.4% benefit from price and a 3.0% increase
from acquisitions. Excluding Venezuela, price declined 0.9%
and foreign exchange translation had a 1.5% unfavorable
impact. Operating income for the second quarter 2016 was
$48.1 million, or 8.1% of sales, as compared with $96.8 million, or
14.6% of sales, in the comparable 2015 period. The decline
was primarily due to the loss associated with the Venezuelan
deconsolidation. On an adjusted basis, operating income was
$82.4 million, or 13.9% of sales as compared with $98.0 million or
14.7% in the comparable 2015 period. Margin performance,
excluding the loss related to the deconsolidation, reflects the
benefits of cost reduction actions implemented to mitigate lower
volumes.
“We continued to execute well in the second quarter with solid
margin and cash flow performance and returned $122 million to
shareholders,” stated Christopher L. Mapes, Chairman, President and
Chief Executive Officer. “While we have yet to see sustained
improvement in industrial demand across all of our businesses, we
continue to invest for long-term, profitable growth with a broad
range of product launches, operational excellence initiatives and
interim cost control measures to maximize shareholder value through
the economic cycle.”
Six Months 2016 Summary
Net income for the six months ended June 30, 2016 was $85.0
million, or EPS of $1.22 which includes the impact of the special
items noted above. This compares with net income of $139.3
million, or EPS of $1.82, in the comparable 2015 period.
Adjusted net income for the six months ended June 30, 2016 was
$111.0 million, or adjusted EPS of $1.60, compared with adjusted
net income of $140.2 million, or adjusted EPS of $1.83, in
2015.
Sales decreased 13.6% to $1.1 billion in the six months ended
June 30, 2016 primarily due to unfavorable foreign exchange
translation and lower volumes. This compares with $1.3
billion in sales in the comparable 2015 period. Operating
income for the six months ended June 30, 2016 decreased to $123.4
million, or 10.8% of sales, as compared with $187.3 million, or
14.2% of sales, in the comparable 2015 period. Adjusted
operating income was $157.7 million or 13.8% of sales, compared
with $188.5 million, or 14.3% of sales in 2015.
Venezuela Deconsolidation
Effective June 30, 2016, the Company deconsolidated the
financial statements of its Venezuelan subsidiary and began
reporting its results using the cost method of accounting. As
a result, the Company recorded a $34.3 million pretax charge ($34.1
million non-cash), or $33.3 million after-tax in the second quarter
of 2016. The Company maintains its commitment to ongoing
operations in the country and future income from the Venezuelan
subsidiary will be recorded if cash is received.
Dividend and Share Repurchases
The Company’s Board of Directors declared a quarterly cash
dividend of $0.32 per share, which was paid on July 15, 2016 to
shareholders of record as of June 30, 2016.
During the second quarter, the Company returned $122.5 million
to shareholders through dividends and the repurchase of 1.7 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.
Financing Activities
During July 2016, the Company committed to pricing on private
placement debt in the aggregate principal amount of $350.0
million. The debt will have maturities ranging from 12 to 25
years and a weighted average effective interest rate of 3.1%,
excluding accretion of original issuance costs. The
commitment is expected to be finalized and proceeds received during
the fourth quarter of 2016. The proceeds will be used for
general corporate purposes.
Webcast Information
A conference call to discuss second quarter 2016 financial
results will be webcast live today, July 25, 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 41918263. Telephone participants are asked to dial in
10-15 minutes prior to the start of the conference call.
Financial results for the second 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 http://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. Management uses non-GAAP measures to
assess the Company's operating performance by excluding certain
disclosed special items that management believes are not
representative of the Company's core business. Management
believes that excluding these special items enables them to make
better period-over-period comparisons and benchmark the Company's
operational performance against other companies in its industry
more meaningfully. Furthermore, management believe that
non-GAAP financial measures provide investors with meaningful
information that provides a more complete understanding of Company
operating results and enables investors to analyze financial and
business trends more thoroughly. Non-GAAP financial measures
should not be viewed in isolation, are not a substitute for GAAP
measures and have limitations including, but not limited to, their
usefulness as comparative measures as other companies may define
their non-GAAP measures differently. 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; 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 June 30, |
|
Fav (Unfav) to Prior Year |
|
|
2016 |
|
% of Sales |
|
2015 |
|
% of Sales |
|
$ |
|
% |
Net sales |
|
$ |
592,418 |
|
|
100.0 |
% |
|
$ |
664,740 |
|
|
100.0 |
% |
|
$ |
(72,322 |
) |
|
(10.9 |
%) |
Cost of goods sold |
|
389,491 |
|
|
65.7 |
% |
|
438,959 |
|
|
66.0 |
% |
|
49,468 |
|
|
11.3 |
% |
Gross profit |
|
202,927 |
|
|
34.3 |
% |
|
225,781 |
|
|
34.0 |
% |
|
(22,854 |
) |
|
(10.1 |
%) |
Selling,
general & administrative expenses |
|
120,497 |
|
|
20.3 |
% |
|
127,755 |
|
|
19.2 |
% |
|
7,258 |
|
|
5.7 |
% |
Rationalization and asset impairment charges |
|
— |
|
|
— |
|
|
1,239 |
|
|
0.2 |
% |
|
1,239 |
|
|
100.0 |
% |
Loss on deconsolidation
of Venezuelan subsidiary |
|
34,348 |
|
|
5.8 |
% |
|
— |
|
|
— |
|
|
(34,348 |
) |
|
(100.0 |
%) |
Operating income |
|
48,082 |
|
|
8.1 |
% |
|
96,787 |
|
|
14.6 |
% |
|
(48,705 |
) |
|
(50.3 |
%) |
Interest income |
|
435 |
|
|
0.1 |
% |
|
738 |
|
|
0.1 |
% |
|
(303 |
) |
|
(41.1 |
%) |
Equity earnings in
affiliates |
|
839 |
|
|
0.1 |
% |
|
979 |
|
|
0.1 |
% |
|
(140 |
) |
|
(14.3 |
%) |
Other income |
|
588 |
|
|
0.1 |
% |
|
317 |
|
|
— |
|
|
271 |
|
|
85.5 |
% |
Interest expense |
|
(4,186 |
) |
|
(0.7 |
%) |
|
(4,387 |
) |
|
(0.7 |
%) |
|
201 |
|
|
4.6 |
% |
Income before income
taxes |
|
45,758 |
|
|
7.7 |
% |
|
94,434 |
|
|
14.2 |
% |
|
(48,676 |
) |
|
(51.5 |
%) |
Income taxes |
|
14,449 |
|
|
2.4 |
% |
|
23,558 |
|
|
3.5 |
% |
|
9,109 |
|
|
38.7 |
% |
Effective tax rate |
|
31.6 |
% |
|
|
|
24.9 |
% |
|
|
|
(6.7 |
%) |
|
|
Net income including
non-controlling interests |
|
31,309 |
|
|
5.3 |
% |
|
70,876 |
|
|
10.7 |
% |
|
(39,567 |
) |
|
(55.8 |
%) |
Non-controlling
interests in subsidiaries’ loss |
|
(8 |
) |
|
— |
|
|
(22 |
) |
|
— |
|
|
14 |
|
|
63.6 |
% |
Net income |
|
$ |
31,317 |
|
|
5.3 |
% |
|
$ |
70,898 |
|
|
10.7 |
% |
|
$ |
(39,581 |
) |
|
(55.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share |
|
$ |
0.46 |
|
|
|
|
$ |
0.95 |
|
|
|
|
$ |
(0.49 |
) |
|
(51.6 |
%) |
Diluted earnings per
share |
|
$ |
0.45 |
|
|
|
|
$ |
0.94 |
|
|
|
|
$ |
(0.49 |
) |
|
(52.1 |
%) |
Weighted average shares
(basic) |
|
68,181 |
|
|
|
|
75,000 |
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
68,890 |
|
|
|
|
75,773 |
|
|
|
|
|
|
|
|
|
Six months ended June 30th, |
|
Fav (Unfav) to Prior Year |
|
|
2016 |
|
% of Sales |
|
2015 |
|
% of Sales |
|
$ |
|
% |
Net sales |
|
$ |
1,143,140 |
|
|
100.0 |
% |
|
$ |
1,322,640 |
|
|
100.0 |
% |
|
$ |
(179,500 |
) |
|
(13.6 |
%) |
Cost of goods sold |
|
751,111 |
|
|
65.7 |
% |
|
876,469 |
|
|
66.3 |
% |
|
125,358 |
|
|
14.3 |
% |
Gross profit |
|
392,029 |
|
|
34.3 |
% |
|
446,171 |
|
|
33.7 |
% |
|
(54,142 |
) |
|
(12.1 |
%) |
Selling,
general & administrative expenses |
|
234,307 |
|
|
20.5 |
% |
|
257,646 |
|
|
19.5 |
% |
|
23,339 |
|
|
9.1 |
% |
Rationalization and asset impairment charges |
|
— |
|
|
— |
|
|
1,239 |
|
|
0.1 |
% |
|
1,239 |
|
|
100.0 |
% |
Loss on deconsolidation
of Venezuelan subsidiary |
|
34,348 |
|
|
3.0 |
% |
|
— |
|
|
— |
|
|
(34,348 |
) |
|
(100.0 |
%) |
Operating income |
|
123,374 |
|
|
10.8 |
% |
|
187,286 |
|
|
14.2 |
% |
|
(63,912 |
) |
|
(34.1 |
%) |
Interest income |
|
865 |
|
|
0.1 |
% |
|
1,331 |
|
|
0.1 |
% |
|
(466 |
) |
|
(35.0 |
%) |
Equity earnings in
affiliates |
|
1,465 |
|
|
0.1 |
% |
|
1,828 |
|
|
0.1 |
% |
|
(363 |
) |
|
(19.9 |
%) |
Other income |
|
1,249 |
|
|
0.1 |
% |
|
2,927 |
|
|
0.2 |
% |
|
(1,678 |
) |
|
(57.3 |
%) |
Interest expense |
|
(8,013 |
) |
|
(0.7 |
%) |
|
(6,231 |
) |
|
(0.5 |
%) |
|
(1,782 |
) |
|
(28.6 |
%) |
Income before income
taxes |
|
118,940 |
|
|
10.4 |
% |
|
187,141 |
|
|
14.1 |
% |
|
(68,201 |
) |
|
(36.4 |
%) |
Income taxes |
|
34,007 |
|
|
3.0 |
% |
|
47,947 |
|
|
3.6 |
% |
|
13,940 |
|
|
29.1 |
% |
Effective tax rate |
|
28.6 |
% |
|
|
|
25.6 |
% |
|
|
|
(3.0 |
%) |
|
|
Net income including
non-controlling interests |
|
84,933 |
|
|
7.4 |
% |
|
139,194 |
|
|
10.5 |
% |
|
(54,261 |
) |
|
(39.0 |
%) |
Non-controlling
interests in subsidiaries’ loss |
|
(22 |
) |
|
— |
|
|
(58 |
) |
|
— |
|
|
36 |
|
|
62.1 |
% |
Net income |
|
$ |
84,955 |
|
|
7.4 |
% |
|
$ |
139,252 |
|
|
10.5 |
% |
|
$ |
(54,297 |
) |
|
(39.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share |
|
$ |
1.23 |
|
|
|
|
$ |
1.84 |
|
|
|
|
$ |
(0.61 |
) |
|
(33.2 |
%) |
Diluted earnings per
share |
|
$ |
1.22 |
|
|
|
|
$ |
1.82 |
|
|
|
|
$ |
(0.60 |
) |
|
(33.0 |
%) |
Weighted average shares
(basic) |
|
68,883 |
|
|
|
|
75,621 |
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
69,569 |
|
|
|
|
76,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands) |
(Unaudited) |
|
Balance Sheet
Highlights |
|
|
|
|
|
|
|
|
|
Selected Consolidated Balance Sheet Data |
|
June 30, 2016 |
|
December 31, 2015 |
Cash and cash
equivalents |
|
$ |
237,019 |
|
|
$ |
304,183 |
|
Total current
assets |
|
921,618 |
|
|
935,995 |
|
Property, plant and
equipment, net |
|
383,867 |
|
|
411,323 |
|
Total assets |
|
1,837,401 |
|
|
1,784,171 |
|
Total current
liabilities |
|
559,790 |
|
|
370,122 |
|
Short-term debt
(1) |
|
159,908 |
|
|
4,278 |
|
Long-term debt |
|
360,931 |
|
|
350,347 |
|
Total equity |
|
792,414 |
|
|
932,448 |
|
|
|
|
|
|
Operating
Working Capital |
|
June 30, 2016 |
|
December 31, 2015 |
Accounts
receivable |
|
$ |
291,645 |
|
|
$ |
264,715 |
|
Inventory |
|
292,587 |
|
|
275,930 |
|
Trade accounts
payable |
|
173,037 |
|
|
152,620 |
|
Operating working
capital |
|
$ |
411,195 |
|
|
$ |
388,025 |
|
|
|
|
|
|
Operating working
capital to net sales (2) |
|
17.4 |
% |
|
17.1 |
% |
|
|
|
|
|
Invested
Capital |
|
June 30, 2016 |
|
December 31, 2015 |
Short-term debt
(1) |
|
$ |
159,908 |
|
|
$ |
4,278 |
|
Long-term debt |
|
360,931 |
|
|
350,347 |
|
Total debt |
|
520,839 |
|
|
354,625 |
|
Total equity |
|
792,414 |
|
|
932,448 |
|
Invested capital |
|
$ |
1,313,253 |
|
|
$ |
1,287,073 |
|
|
|
|
|
|
Total debt / invested
capital |
|
39.7 |
% |
|
27.6 |
% |
|
(1 |
) |
Includes current portion of long-term debt. |
|
(2 |
) |
Operating working capital to net sales is defined
as operating working capital divided by annualized rolling three
months of net sales. |
|
|
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
|
Non-GAAP
Financial Measures |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Operating income as
reported |
|
$ |
48,082 |
|
|
$ |
96,787 |
|
|
123,374 |
|
|
187,286 |
|
Special items (pre-tax): |
|
|
|
|
|
|
|
|
Rationalization and asset
impairment charges (1) |
|
— |
|
|
1,239 |
|
|
— |
|
|
1,239 |
|
Loss on deconsolidation of
Venezuelan subsidiary (2) |
|
34,348 |
|
|
— |
|
|
34,348 |
|
|
— |
|
Adjusted operating
income (4) |
|
$ |
82,430 |
|
|
$ |
98,026 |
|
|
$ |
157,722 |
|
|
$ |
188,525 |
|
As a percent of total sales |
|
13.9 |
% |
|
14.7 |
% |
|
13.8 |
% |
|
14.3 |
% |
|
|
|
|
|
|
|
|
|
Net income as
reported |
|
$ |
31,317 |
|
|
$ |
70,898 |
|
|
$ |
84,955 |
|
|
$ |
139,252 |
|
Special items (after-tax): |
|
|
|
|
|
|
|
|
Rationalization and asset
impairment charges (1) |
|
— |
|
|
900 |
|
|
— |
|
|
900 |
|
Loss on deconsolidation of
Venezuelan subsidiary (2) |
|
33,251 |
|
|
— |
|
|
33,251 |
|
|
— |
|
Income tax valuation reversals
(3) |
|
(7,196 |
) |
|
— |
|
|
(7,196 |
) |
|
— |
|
Adjusted net income
(4) |
|
$ |
57,372 |
|
|
$ |
71,798 |
|
|
$ |
111,010 |
|
|
$ |
140,152 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share as reported |
|
$ |
0.45 |
|
|
$ |
0.94 |
|
|
$ |
1.22 |
|
|
$ |
1.82 |
|
Special items |
|
0.38 |
|
|
0.01 |
|
|
0.38 |
|
|
0.01 |
|
Adjusted diluted
earnings per share (4) |
|
$ |
0.83 |
|
|
$ |
0.95 |
|
|
$ |
1.60 |
|
|
$ |
1.83 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
68,890 |
|
|
75,773 |
|
|
69,569 |
|
|
76,416 |
|
|
(1 |
) |
The three and six months ended June 30, 2015
include net charges primarily related to severance and other
related costs. |
|
(2 |
) |
The three and six months ended June 30, 2016
reflect a charge (non-cash charge of $34.1 million pretax and $33.0
million after-tax) related to the deconsolidation of the Company's
Venezuelan subsidiary in the second quarter 2016. |
|
(3 |
) |
The three and six months ended June 30, 2016
reflect reduced income tax expense related to the reversal of an
income tax valuation allowance as a result of a legal entity change
to realign the Company’s tax structure. |
|
(4 |
) |
Adjusted operating income, Adjusted net income
and Adjusted diluted earnings per share are non-GAAP financial
measures. Management uses non-GAAP measures to assess the
Company's operating performance by excluding certain disclosed
special items that management believes are not representative of
the Company's core business. Management believes that
excluding these special items enables them to make better
period-over-period comparisons and benchmark the Company's
operational performance against other companies in its industry
more meaningfully. Furthermore, management believe that
non-GAAP financial measures provide investors with meaningful
information that provides a more complete understanding of Company
operating results and enables investors to analyze financial and
business trends more thoroughly. Non-GAAP financial measures
should not be viewed in isolation, are not a substitute for GAAP
measures and have limitations including, but not limited to, their
usefulness as comparative measures as other companies may define
their non-GAAP measures differently. |
|
|
|
Lincoln
Electric Holdings, Inc. |
Financial
Highlights |
(In
thousands, except per share amounts) |
(Unaudited) |
|
|
|
Non-GAAP Financial Measures |
|
|
|
|
|
|
|
Twelve Months Ended June 30, |
Return on
Invested Capital |
|
2016 |
|
2015 |
Net income as
reported |
|
$ |
73,181 |
|
|
$ |
260,153 |
|
Rationalization and asset
impairment charges (gains), net of tax of $1,437 and ($651) in 2016
and 2015, respectively |
|
17,281 |
|
|
31,122 |
|
Loss on deconsolidation of
Venezuelan subsidiary, net of tax of $1,097 |
|
33,251 |
|
|
— |
|
Income tax valuation reversals |
|
(7,196 |
) |
|
— |
|
Pension settlement charges, net of
tax of $55,428 |
|
87,310 |
|
|
— |
|
Venezuela currency devaluation |
|
27,214 |
|
|
— |
|
Noncontrolling interest |
|
— |
|
|
(805 |
) |
Adjusted net income (1) |
|
$ |
231,041 |
|
|
$ |
290,470 |
|
Plus: Interest expense, net of tax
of $9,038 and $5,402 in 2016 and 2015, respectively |
|
14,568 |
|
|
8,707 |
|
Less: Interest income, net of tax
of $861 and $990 in 2016 and 2015, respectively |
|
1,387 |
|
|
1,595 |
|
Adjusted net income before tax
effected interest |
|
$ |
244,222 |
|
|
$ |
297,582 |
|
|
|
|
|
|
Invested
Capital |
|
June 30, 2016 |
|
June 30, 2015 |
Short-term debt |
|
$ |
159,908 |
|
|
$ |
62,595 |
|
Long-term debt |
|
360,931 |
|
|
151,563 |
|
Total debt |
|
520,839 |
|
|
214,158 |
|
Total equity |
|
792,414 |
|
|
1,196,658 |
|
Invested capital |
|
$ |
1,313,253 |
|
|
$ |
1,410,816 |
|
|
|
|
|
|
Return on invested
capital (1)(2) |
|
18.6 |
% |
|
21.1 |
% |
|
(1 |
) |
Adjusted net income and Return on invested
capital are non-GAAP financial measures. Management uses
non-GAAP measures to assess the Company's operating performance by
excluding certain disclosed special items that management believes
are not representative of the Company's core business.
Management believes that excluding these special items enables them
to make better period-over-period comparisons and benchmark the
Company's operational performance against other companies in its
industry more meaningfully. Furthermore, management believe
that non-GAAP financial measures provide investors with meaningful
information that provides a more complete understanding of Company
operating results and enables investors to analyze financial and
business trends more thoroughly. Non-GAAP financial measures
should not be viewed in isolation, are not a substitute for GAAP
measures and have limitations including, but not limited to, their
usefulness as comparative measures as other companies may define
their non-GAAP measures differently. |
|
(2 |
) |
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 June 30, |
|
|
2016 |
|
2015 |
OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
31,317 |
|
|
$ |
70,898 |
|
Non-controlling
interests in subsidiaries’ loss |
|
(8 |
) |
|
(22 |
) |
Net income including
non-controlling interests |
|
31,309 |
|
|
70,876 |
|
Adjustments to reconcile Net income
including non-controlling interests to Net cash provided by
operating activities: |
|
|
|
|
Loss on deconsolidation of
Venezuelan subsidiary |
|
34,348 |
|
|
— |
|
Depreciation and amortization |
|
16,607 |
|
|
15,686 |
|
Equity earnings in affiliates,
net |
|
(56 |
) |
|
(272 |
) |
Pension expense |
|
5,112 |
|
|
4,925 |
|
Pension contributions and
payments |
|
(712 |
) |
|
(26,471 |
) |
Other non-cash items, net |
|
(3,316 |
) |
|
12,772 |
|
Changes in operating assets and
liabilities, net of effects from acquisitions: |
|
|
|
|
(Increase) decrease in accounts
receivable |
|
(5,801 |
) |
|
11,695 |
|
(Increase) decrease in
inventories |
|
(4,712 |
) |
|
17,773 |
|
Increase (decrease) in trade
accounts payable |
|
17,571 |
|
|
(18,301 |
) |
Net change in other current assets
and liabilities |
|
10,918 |
|
|
(11,234 |
) |
Net change in other long-term
assets and liabilities |
|
(272 |
) |
|
(163 |
) |
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
100,996 |
|
|
77,286 |
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
Capital expenditures |
|
(15,894 |
) |
|
(16,761 |
) |
Acquisition of businesses, net of
cash acquired |
|
(71,567 |
) |
|
— |
|
Proceeds from sale of property,
plant and equipment |
|
221 |
|
|
234 |
|
Other investing activities |
|
(283 |
) |
|
— |
|
NET CASH USED BY
INVESTING ACTIVITIES |
|
(87,523 |
) |
|
(16,527 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
Net change in borrowings |
|
137,514 |
|
|
42,540 |
|
Proceeds from exercise of stock
options |
|
3,700 |
|
|
2,303 |
|
Excess tax benefits from
stock-based compensation |
|
1,165 |
|
|
756 |
|
Purchase of shares for
treasury |
|
(100,445 |
) |
|
(55,615 |
) |
Cash dividends paid to
shareholders |
|
(22,022 |
) |
|
(21,919 |
) |
Other financing activities |
|
(14,438 |
) |
|
(7,976 |
) |
NET CASH PROVIDED BY
(USED BY) FINANCING ACTIVITIES |
|
5,474 |
|
|
(39,911 |
) |
|
|
|
|
|
Effect of exchange rate
changes on Cash and cash equivalents |
|
(2,924 |
) |
|
2,872 |
|
INCREASE IN CASH AND
CASH EQUIVALENTS |
|
16,023 |
|
|
23,720 |
|
Cash and cash
equivalents at beginning of period |
|
220,996 |
|
|
289,017 |
|
Cash and cash
equivalents at end of period |
|
$ |
237,019 |
|
|
$ |
312,737 |
|
|
|
|
|
|
Cash dividends paid per
share |
|
$ |
0.32 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
|
Condensed
Consolidated Statements of Cash Flows |
|
Six Months Ended June 30, |
|
|
2016 |
|
2015 |
OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
84,955 |
|
|
$ |
139,252 |
|
Non-controlling
interests in subsidiaries’ loss |
|
(22 |
) |
|
(58 |
) |
Net income including
non-controlling interests |
|
84,933 |
|
|
139,194 |
|
Adjustments to reconcile Net income
including non-controlling interests to Net cash provided by
operating activities: |
|
|
|
|
Rationalization and asset
impairment charges |
|
— |
|
|
30 |
|
Loss on deconsolidation of
Venezuelan subsidiary |
|
34,348 |
|
|
— |
|
Depreciation and amortization |
|
32,232 |
|
|
31,718 |
|
Equity earnings in affiliates,
net |
|
(58 |
) |
|
(488 |
) |
Pension expense |
|
9,256 |
|
|
10,604 |
|
Pension contributions and
payments |
|
(21,577 |
) |
|
(47,705 |
) |
Other non-cash items, net |
|
(5,395 |
) |
|
(5,790 |
) |
Changes in operating assets and
liabilities, net of effects from acquisitions: |
|
|
|
|
Increase in accounts
receivable |
|
(22,393 |
) |
|
(13,682 |
) |
(Increase) decrease in
inventories |
|
(15,492 |
) |
|
1,540 |
|
Increase (decrease) in trade
accounts payable |
|
22,228 |
|
|
(31,217 |
) |
Net change in other current assets
and liabilities (1) |
|
8,007 |
|
|
43,835 |
|
Net change in other long-term
assets and liabilities |
|
(732 |
) |
|
2,031 |
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
125,357 |
|
|
130,070 |
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
Capital expenditures |
|
(24,779 |
) |
|
(29,217 |
) |
Acquisition of businesses, net of
cash acquired |
|
(71,567 |
) |
|
— |
|
Proceeds from sale of property,
plant and equipment |
|
679 |
|
|
1,421 |
|
Other investing activities |
|
(283 |
) |
|
2,024 |
|
NET CASH USED BY
INVESTING ACTIVITIES |
|
(95,950 |
) |
|
(25,772 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
Net change in borrowings |
|
159,270 |
|
|
144,050 |
|
Proceeds from exercise of stock
options |
|
5,715 |
|
|
4,036 |
|
Excess tax benefits from
stock-based compensation |
|
1,522 |
|
|
1,293 |
|
Purchase of shares for
treasury |
|
(202,933 |
) |
|
(158,468 |
) |
Cash dividends paid to
shareholders |
|
(44,647 |
) |
|
(44,248 |
) |
Other financing activities |
|
(18,244 |
) |
|
(7,996 |
) |
NET CASH USED BY
FINANCING ACTIVITIES |
|
(99,317 |
) |
|
(61,333 |
) |
|
|
|
|
|
Effect of exchange rate
changes on Cash and cash equivalents |
|
2,746 |
|
|
(8,607 |
) |
(DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS |
|
(67,164 |
) |
|
34,358 |
|
Cash and cash
equivalents at beginning of period |
|
304,183 |
|
|
278,379 |
|
Cash and cash
equivalents at end of period |
|
$ |
237,019 |
|
|
$ |
312,737 |
|
|
|
|
|
|
Cash dividends paid per
share |
|
$ |
0.64 |
|
|
$ |
0.58 |
|
|
(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) |
|
|
|
AmericasWelding |
|
InternationalWelding |
|
The HarrisProductsGroup |
|
Corporate /Eliminations |
|
Consolidated |
Three months ended June 30, 2016 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
388,372 |
|
|
$ |
132,815 |
|
|
$ |
71,231 |
|
|
$ |
— |
|
|
$ |
592,418 |
|
Inter-segment
sales |
|
23,456 |
|
|
3,841 |
|
|
2,824 |
|
|
(30,121 |
) |
|
— |
|
Total |
|
$ |
411,828 |
|
|
$ |
136,656 |
|
|
$ |
74,055 |
|
|
$ |
(30,121 |
) |
|
$ |
592,418 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (2) |
|
$ |
65,201 |
|
|
$ |
9,670 |
|
|
$ |
9,284 |
|
|
$ |
(34,646 |
) |
|
$ |
49,509 |
|
As a percent of total sales |
|
15.8 |
% |
|
7.1 |
% |
|
12.5 |
% |
|
|
|
8.4 |
% |
Special items charge
(3) |
|
— |
|
|
— |
|
|
— |
|
|
34,348 |
|
|
34,348 |
|
Adjusted EBIT (4) |
|
$ |
65,201 |
|
|
$ |
9,670 |
|
|
$ |
9,284 |
|
|
$ |
(298 |
) |
|
$ |
83,857 |
|
As a percent of total sales |
|
15.8 |
% |
|
7.1 |
% |
|
12.5 |
% |
|
|
|
14.2 |
% |
Three months ended June 30, 2015 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
451,001 |
|
|
$ |
141,927 |
|
|
$ |
71,812 |
|
|
$ |
— |
|
|
$ |
664,740 |
|
Inter-segment
sales |
|
23,902 |
|
|
5,311 |
|
|
2,716 |
|
|
(31,929 |
) |
|
— |
|
Total |
|
$ |
474,903 |
|
|
$ |
147,238 |
|
|
$ |
74,528 |
|
|
$ |
(31,929 |
) |
|
$ |
664,740 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (2) |
|
$ |
79,421 |
|
|
$ |
9,778 |
|
|
$ |
8,250 |
|
|
$ |
634 |
|
|
$ |
98,083 |
|
As a percent of total sales |
|
16.7 |
% |
|
6.6 |
% |
|
11.1 |
% |
|
|
|
14.8 |
% |
Special items charge
(3) |
|
— |
|
|
1,239 |
|
|
— |
|
|
— |
|
|
1,239 |
|
Adjusted EBIT (4) |
|
$ |
79,421 |
|
|
$ |
11,017 |
|
|
$ |
8,250 |
|
|
$ |
634 |
|
|
$ |
99,322 |
|
As a percent of total sales |
|
16.7 |
% |
|
7.5 |
% |
|
11.1 |
% |
|
|
|
14.9 |
% |
Six
months ended June 30, 2016 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
747,380 |
|
|
$ |
257,120 |
|
|
$ |
138,640 |
|
|
$ |
— |
|
|
$ |
1,143,140 |
|
Inter-segment
sales |
|
47,287 |
|
|
8,267 |
|
|
5,127 |
|
|
(60,681 |
) |
|
— |
|
Total |
|
$ |
794,667 |
|
|
$ |
265,387 |
|
|
$ |
143,767 |
|
|
$ |
(60,681 |
) |
|
$ |
1,143,140 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (2) |
|
$ |
126,639 |
|
|
$ |
15,903 |
|
|
$ |
16,995 |
|
|
$ |
(33,449 |
) |
|
$ |
126,088 |
|
As a percent of total sales |
|
15.9 |
% |
|
6.0 |
% |
|
11.8 |
% |
|
|
|
11.0 |
% |
Special items charge
(3) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
34,348 |
|
|
$ |
34,348 |
|
Adjusted EBIT (4) |
|
$ |
126,639 |
|
|
$ |
15,903 |
|
|
$ |
16,995 |
|
|
$ |
899 |
|
|
$ |
160,436 |
|
As a percent of total sales |
|
15.9 |
% |
|
6.0 |
% |
|
11.8 |
% |
|
|
|
14.0 |
% |
Six
months ended June 30, 2015 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
899,838 |
|
|
$ |
281,174 |
|
|
$ |
141,628 |
|
|
$ |
— |
|
|
$ |
1,322,640 |
|
Inter-segment
sales |
|
46,925 |
|
|
10,338 |
|
|
4,727 |
|
|
(61,990 |
) |
|
— |
|
Total |
|
$ |
946,763 |
|
|
$ |
291,512 |
|
|
$ |
146,355 |
|
|
$ |
(61,990 |
) |
|
$ |
1,322,640 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (2) |
|
$ |
154,836 |
|
|
$ |
20,712 |
|
|
$ |
15,799 |
|
|
$ |
694 |
|
|
$ |
192,041 |
|
As a percent of total sales |
|
16.4 |
% |
|
7.1 |
% |
|
10.8 |
% |
|
|
|
14.5 |
% |
Special items charge
(3) |
|
$ |
— |
|
|
$ |
1,239 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,239 |
|
Adjusted EBIT (4) |
|
$ |
154,836 |
|
|
$ |
21,951 |
|
|
$ |
15,799 |
|
|
$ |
694 |
|
|
$ |
193,280 |
|
As a percent of total
sales |
|
16.4 |
% |
|
7.5 |
% |
|
10.8 |
% |
|
|
|
14.6 |
% |
|
(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. |
|
(3 |
) |
Special items within Corporate/Elimination during
the three and six months ended June 30, 2016 reflect a charge
($34.1 million non-cash) related to the deconsolidation of the
Company's Venezuelan subsidiary in the second quarter 2016. |
|
(4 |
) |
The primary profit measure used by management to
assess segment performance is Adjusted EBIT. EBIT for each
operating segment is adjusted for special items to derive Adjusted
EBIT. |
|
|
|
|
Lincoln Electric
Holdings, Inc. |
Change in Net Sales by Segment |
(In thousands) |
(Unaudited) |
|
Three Months Ended June 30th Change in Net Sales by
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Sales due to: |
|
|
|
|
|
Net Sales2015 |
|
Volume |
|
Acquisitions |
|
Price |
|
ForeignExchange |
|
Net Sales 2016 |
|
Operating
Segments |
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
$ |
451,001 |
|
|
$ |
(59,999 |
) |
|
$ |
16,323 |
|
|
$ |
193,706 |
|
|
$ |
(212,659 |
) |
|
$ |
388,372 |
|
International
Welding |
|
141,927 |
|
|
(5,112 |
) |
|
3,702 |
|
|
(3,883 |
) |
|
(3,819 |
) |
|
132,815 |
|
The Harris Products
Group |
|
71,812 |
|
|
736 |
|
|
— |
|
|
(809 |
) |
|
(508 |
) |
|
71,231 |
|
Consolidated |
|
$ |
664,740 |
|
|
$ |
(64,375 |
) |
|
$ |
20,025 |
|
|
$ |
189,014 |
|
|
$ |
(216,986 |
) |
|
$ |
592,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding
(excluding Venezuela) |
|
$ |
427,649 |
|
|
$ |
(55,013 |
) |
|
16,323 |
|
|
$ |
(1,071 |
) |
|
$ |
(5,349 |
) |
|
$ |
382,539 |
|
Consolidated (excluding
Venezuela) |
|
$ |
641,389 |
|
|
$ |
(59,389 |
) |
|
$ |
20,025 |
|
|
$ |
(5,764 |
) |
|
$ |
(9,676 |
) |
|
$ |
586,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
|
|
(13.3 |
%) |
|
3.6 |
% |
|
43.0 |
% |
|
(47.2 |
%) |
|
(13.9 |
%) |
International
Welding |
|
|
|
(3.6 |
%) |
|
2.6 |
% |
|
(2.7 |
%) |
|
(2.7 |
%) |
|
(6.4 |
%) |
The Harris Products
Group |
|
|
|
1.0 |
% |
|
— |
|
|
(1.1 |
%) |
|
(0.7 |
%) |
|
(0.8 |
%) |
Consolidated |
|
|
|
(9.7 |
%) |
|
3.0 |
% |
|
28.4 |
% |
|
(32.6 |
%) |
|
(10.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
Welding (excluding Venezuela) |
|
(12.9 |
%) |
|
3.8 |
% |
|
(0.3 |
%) |
|
(1.3 |
%) |
|
(10.5 |
%) |
Consolidated (excluding Venezuela) |
|
(9.3 |
%) |
|
3.1 |
% |
|
(0.9 |
%) |
|
(1.5 |
%) |
|
(8.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30th Change in Net Sales by
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Net Sales due to: |
|
|
|
|
|
Net Sales2015 |
|
Volume |
|
Acquisitions |
|
Price |
|
ForeignExchange |
|
Net Sales 2016 |
|
Operating
Segments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
$ |
899,838 |
|
|
$ |
(145,062 |
) |
|
$ |
23,300 |
|
|
$ |
274,026 |
|
|
$ |
(304,722 |
) |
|
$ |
747,380 |
|
|
International
Welding |
|
281,174 |
|
|
(14,934 |
) |
|
7,168 |
|
|
(6,988 |
) |
|
(9,300 |
) |
|
$ |
257,120 |
|
|
The Harris Products
Group |
|
141,628 |
|
|
2,126 |
|
|
— |
|
|
(3,213 |
) |
|
(1,901 |
) |
|
$ |
138,640 |
|
|
Consolidated |
|
$ |
1,322,640 |
|
|
$ |
(157,870 |
) |
|
$ |
30,468 |
|
|
$ |
263,825 |
|
|
$ |
(315,923 |
) |
|
$ |
1,143,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding
(excluding Venezuela) |
|
$ |
853,607 |
|
|
$ |
(125,817 |
) |
|
$ |
23,300 |
|
|
$ |
(2,052 |
) |
|
$ |
(12,472 |
) |
|
$ |
736,566 |
|
|
Consolidated (excluding
Venezuela) |
|
$ |
1,276,410 |
|
|
$ |
(138,626 |
) |
|
$ |
30,468 |
|
|
$ |
(12,253 |
) |
|
$ |
(23,672 |
) |
|
$ |
1,132,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
|
|
(16.1 |
%) |
|
2.6 |
% |
|
30.5 |
% |
|
(33.9 |
%) |
|
(16.9 |
%) |
|
International
Welding |
|
|
|
(5.3 |
%) |
|
2.5 |
% |
|
(2.5 |
%) |
|
(3.3 |
%) |
|
(8.6 |
%) |
|
The Harris Products
Group |
|
|
|
1.5 |
% |
|
— |
|
|
(2.3 |
%) |
|
(1.3 |
%) |
|
(2.1 |
%) |
|
Consolidated |
|
|
|
(11.9 |
%) |
|
2.3 |
% |
|
19.9 |
% |
|
(23.9 |
%) |
|
(13.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
Welding (excluding Venezuela) |
|
(14.7 |
%) |
|
2.7 |
% |
|
(0.2 |
%) |
|
(1.5 |
%) |
|
(13.7 |
%) |
|
Consolidated (excluding Venezuela) |
|
(10.9 |
%) |
|
2.4 |
% |
|
(1.0 |
%) |
|
(1.9 |
%) |
|
(11.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact
Amanda Butler
Director, Investor Relations
Tel: 216.383.2534
Email: Amanda_Butler@lincolnelectric.com
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