Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq:LECO)
today reported third quarter 2017 net income of $106.1 million, or
diluted earnings per share (EPS) of $1.59. Reported EPS
includes a bargain purchase gain related to the Air Liquide Welding
acquisition ($51.6 million, or $0.77 EPS) and other special item
after-tax charges ($7.2 million, or $0.11 EPS). Excluding
these items, third quarter adjusted net income was $61.8 million,
or $0.93 EPS, as compared with $60.0 million, or $0.89 EPS in the
prior year period.
Third quarter 2017 sales increased 17.9% to $669.5 million from
an 11.0% benefit from acquisitions, 3.8% higher volumes, a 1.8%
increase in price and 1.4% from favorable foreign exchange.
Operating income for the third quarter 2017 was $133.1 million,
or 19.9% of sales. This compares with operating income of
$81.8 million, or 14.4% of sales, in the comparable 2016
period. On an adjusted basis, operating income was $92.4
million, or 13.8% of sales, as compared with $81.8 million, or
14.4% of sales, in the prior year. The acquisition had an
unfavorable 140 basis point impact to the adjusted operating income
margin.
The third quarter 2017 tax rate was 18.8%. The tax rate
was favorably impacted by the bargain purchase gain, which had no
tax effect. The third quarter 2017 tax rate excluding special
items was 31.3% as compared to 25.2% in the comparable 2016
period. The higher current year effective tax rate is
attributable to the geographical mix of earnings and the
unfavorable effect of discrete tax items.
On July 31, 2017, the Company completed its acquisition of Air
Liquide Welding, a subsidiary of Air Liquide, for a purchase price
of $135.1 million adjusted for certain debt-like obligations.
The cash purchase price paid, net of cash acquired, was $72.5
million. The Company funded the transaction with available
cash on hand.
Christopher L. Mapes, chairman, president and chief executive
officer stated:
"We achieved solid performance from improving end market demand
and the successful close of the Air Liquide Welding
transaction. Integration is proceeding quickly and we remain
confident in the synergies we expect to realize from our
initiatives. As we move into 2018, we expect to benefit from
an ongoing global recovery in most end markets. Our team will
continue to focus on the global integration of the Air Liquide
Welding business, relentlessly support our customers and execute on
our 2020 Vision and Strategy."
Nine Months 2017 Summary
Net income for the nine months ended September 30, 2017 was
$223.3 million, or EPS of $3.35, as compared with $145.0 million,
or $2.11 EPS in the prior year period. Current period
reported EPS includes a bargain purchase gain related to the Air
Liquide Welding acquisition ($51.6 million, or $0.77 EPS) and other
special item after-tax charges ($13.5 million, or $0.20 EPS).
Adjusted net income for the nine months ended September 30, 2017
was $185.2 million, or $2.78 EPS, as compared with $171.1 million,
or $2.49 EPS in the prior period.
Sales increased 9.7% to $1.9 billion for the nine months ended
September 30, 2017 from a 3.9% benefit from acquisitions, 3.3%
higher volumes and a 2.2% increase in price.
Operating income for the nine months ended September 30, 2017
was $302.2 million, or 16.1% of sales. This compares with
operating income of $205.2 million, or 12.0% of sales, in the
comparable 2016 period. On an adjusted basis, operating
income was $269.6 million, or 14.4% of sales, as compared with
$239.6 million, or 14.0% of sales, in the prior year. The
acquisition had an unfavorable 50 basis point impact to the
adjusted operating income margin.
The tax rate was 23.7% for the nine months ended September 30,
2017. The tax rate was favorably impacted by the bargain
purchase gain, which had no tax effect. The current period
tax rate excluding special items was 28.8% as compared to 26.8% in
the comparable 2016 period. The higher current year effective
tax rate is attributable to the geographical mix of earnings and
the unfavorable effect of discrete tax items.
Dividend
The Company's Board of Directors declared an 11.4% increase in
the quarterly cash dividend, from $0.35 per share to $0.39, or
$1.56 per share on an annual basis. The declared quarterly
cash dividend of $0.39 per share is payable January 12, 2018 to
shareholders of record as of December 29, 2017.
Webcast Information
A conference call to discuss third quarter 2017 financial
results will be webcast live today, October 27, 2017, 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 94532360. Telephone participants are asked to dial in 10
- 15 minutes prior to the start of the conference call.
Financial results for the third quarter 2017 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 63 manufacturing
locations, including operations and joint ventures in 23 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 believes 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, including the
Company’s ability to successfully integrate the Air Liquide Welding
business acquisition; 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, 2016.
Contact
Amanda ButlerVice President, Investor Relations &
CommunicationsTel: 216.383.2534Email:
Amanda_Butler@lincolnelectric.com
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
|
Consolidated
Statements of Income |
|
Three Months Ended September 30, |
|
Fav (Unfav) to Prior Year |
|
|
2017 |
|
% of Sales |
|
2016 |
|
% of Sales |
|
$ |
|
% |
Net sales |
|
$ |
669,491 |
|
|
100.0 |
% |
|
$ |
567,646 |
|
|
100.0 |
% |
|
$ |
101,845 |
|
|
17.9 |
% |
Cost of goods sold |
|
449,975 |
|
|
67.2 |
% |
|
367,834 |
|
|
64.8 |
% |
|
(82,141 |
) |
|
(22.3 |
%) |
Gross profit |
|
219,516 |
|
|
32.8 |
% |
|
199,812 |
|
|
35.2 |
% |
|
19,704 |
|
|
9.9 |
% |
Selling,
general & administrative expenses |
|
132,748 |
|
|
19.8 |
% |
|
117,983 |
|
|
20.8 |
% |
|
(14,765 |
) |
|
(12.5 |
%) |
Pension settlement
charges |
|
5,283 |
|
|
0.8 |
% |
|
— |
|
|
— |
|
|
(5,283 |
) |
|
(100.0 |
%) |
Bargain purchase
gain |
|
(51,585 |
) |
|
7.7 |
% |
|
— |
|
|
— |
|
|
51,585 |
|
|
100.0 |
% |
Operating income |
|
133,070 |
|
|
19.9 |
% |
|
81,829 |
|
|
14.4 |
% |
|
51,241 |
|
|
62.6 |
% |
Interest income |
|
1,327 |
|
|
0.2 |
% |
|
360 |
|
|
0.1 |
% |
|
967 |
|
|
268.6 |
% |
Equity earnings in
affiliates |
|
766 |
|
|
0.1 |
% |
|
619 |
|
|
0.1 |
% |
|
147 |
|
|
23.7 |
% |
Other income |
|
1,401 |
|
|
0.2 |
% |
|
1,303 |
|
|
0.2 |
% |
|
98 |
|
|
7.5 |
% |
Interest expense |
|
(5,922 |
) |
|
0.9 |
% |
|
(3,815 |
) |
|
0.7 |
% |
|
(2,107 |
) |
|
(55.2 |
%) |
Income before income
taxes |
|
130,642 |
|
|
19.5 |
% |
|
80,296 |
|
|
14.1 |
% |
|
50,346 |
|
|
62.7 |
% |
Income taxes |
|
24,531 |
|
|
3.7 |
% |
|
20,257 |
|
|
3.6 |
% |
|
(4,274 |
) |
|
(21.1 |
%) |
Effective tax rate |
|
18.8 |
% |
|
|
|
25.2 |
% |
|
|
|
6.4 |
% |
|
|
Net income including
non-controlling interests |
|
106,111 |
|
|
15.8 |
% |
|
60,039 |
|
|
10.6 |
% |
|
46,072 |
|
|
76.7 |
% |
Non-controlling
interests in subsidiaries’ loss |
|
(15 |
) |
|
— |
|
|
(10 |
) |
|
— |
|
|
(5 |
) |
|
(50.0 |
%) |
Net income |
|
$ |
106,126 |
|
|
15.9 |
% |
|
$ |
60,049 |
|
|
10.6 |
% |
|
$ |
46,077 |
|
|
76.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share |
|
$ |
1.61 |
|
|
|
|
$ |
0.90 |
|
|
|
|
$ |
0.71 |
|
|
78.9 |
% |
Diluted earnings per
share |
|
$ |
1.59 |
|
|
|
|
$ |
0.89 |
|
|
|
|
$ |
0.70 |
|
|
78.7 |
% |
Weighted average shares
(basic) |
|
65,806 |
|
|
|
|
66,477 |
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
66,702 |
|
|
|
|
67,182 |
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
Fav (Unfav) toPrior
Year |
|
|
2017 |
|
% of Sales |
|
2016 |
|
% of Sales |
|
$ |
|
% |
Net sales |
|
$ |
1,877,246 |
|
|
100.0 |
% |
|
$ |
1,710,786 |
|
|
100.0 |
% |
|
$ |
166,460 |
|
|
9.7 |
% |
Cost of goods sold |
|
1,236,386 |
|
|
65.9 |
% |
|
1,118,945 |
|
|
65.4 |
% |
|
(117,441 |
) |
|
(10.5 |
%) |
Gross profit |
|
640,860 |
|
|
34.1 |
% |
|
591,841 |
|
|
34.6 |
% |
|
49,019 |
|
|
8.3 |
% |
Selling,
general & administrative expenses |
|
384,964 |
|
|
20.5 |
% |
|
352,290 |
|
|
20.6 |
% |
|
(32,674 |
) |
|
(9.3 |
%) |
Pension settlement
charges |
|
5,283 |
|
|
0.3 |
% |
|
— |
|
|
— |
|
|
(5,283 |
) |
|
(100.0 |
%) |
Loss on deconsolidation
of Venezuelan subsidiary |
|
— |
|
|
— |
|
|
34,348 |
|
|
2.0 |
% |
|
34,348 |
|
|
100.0 |
% |
Bargain purchase
gain |
|
(51,585 |
) |
|
2.7 |
% |
|
— |
|
|
— |
|
|
51,585 |
|
|
100.0 |
% |
Operating income |
|
302,198 |
|
|
16.1 |
% |
|
205,203 |
|
|
12.0 |
% |
|
96,995 |
|
|
47.3 |
% |
Interest income |
|
3,349 |
|
|
0.2 |
% |
|
1,225 |
|
|
0.1 |
% |
|
2,124 |
|
|
173.4 |
% |
Equity earnings in
affiliates |
|
2,001 |
|
|
0.1 |
% |
|
2,084 |
|
|
0.1 |
% |
|
(83 |
) |
|
(4.0 |
%) |
Other income |
|
3,293 |
|
|
0.2 |
% |
|
2,552 |
|
|
0.1 |
% |
|
741 |
|
|
29.0 |
% |
Interest expense |
|
(18,333 |
) |
|
1.0 |
% |
|
(11,828 |
) |
|
0.7 |
% |
|
(6,505 |
) |
|
(55.0 |
%) |
Income before income
taxes |
|
292,508 |
|
|
15.6 |
% |
|
199,236 |
|
|
11.6 |
% |
|
93,272 |
|
|
46.8 |
% |
Income taxes |
|
69,218 |
|
|
3.7 |
% |
|
54,264 |
|
|
3.2 |
% |
|
(14,954 |
) |
|
(27.6 |
%) |
Effective tax rate |
|
23.7 |
% |
|
|
|
27.2 |
% |
|
|
|
3.5 |
% |
|
|
Net income including
non-controlling interests |
|
223,290 |
|
|
11.9 |
% |
|
144,972 |
|
|
8.5 |
% |
|
78,318 |
|
|
54.0 |
% |
Non-controlling
interests in subsidiaries’ loss |
|
(32 |
) |
|
— |
|
|
(32 |
) |
|
— |
|
|
— |
|
|
— |
|
Net income |
|
$ |
223,322 |
|
|
11.9 |
% |
|
$ |
145,004 |
|
|
8.5 |
% |
|
$ |
78,318 |
|
|
54.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share |
|
$ |
3.40 |
|
|
|
|
$ |
2.13 |
|
|
|
|
$ |
1.27 |
|
|
59.6 |
% |
Diluted earnings per
share |
|
$ |
3.35 |
|
|
|
|
$ |
2.11 |
|
|
|
|
$ |
1.24 |
|
|
58.8 |
% |
Weighted average shares
(basic) |
|
65,769 |
|
|
|
|
68,081 |
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
66,679 |
|
|
|
|
68,784 |
|
|
|
|
|
|
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands) |
(Unaudited) |
|
Balance Sheet Highlights |
|
Selected Consolidated Balance Sheet Data |
|
September 30, 2017 |
|
December 31, 2016 |
Cash and cash
equivalents |
|
$ |
299,453 |
|
|
$ |
379,179 |
|
Marketable
securities |
|
179,284 |
|
|
38,922 |
|
Total current
assets |
|
1,378,681 |
|
|
1,043,713 |
|
Property, plant and
equipment, net |
|
475,071 |
|
|
372,377 |
|
Total assets |
|
2,411,103 |
|
|
1,943,437 |
|
Total current
liabilities |
|
539,856 |
|
|
388,107 |
|
Short-term debt
(1) |
|
2,135 |
|
|
1,889 |
|
Long-term debt, less
current portion |
|
704,804 |
|
|
703,704 |
|
Total equity |
|
945,928 |
|
|
712,206 |
|
|
|
|
|
|
Operating
Working Capital |
|
September 30, 2017 |
|
December 31, 2016 |
Accounts receivable,
net |
|
$ |
401,231 |
|
|
$ |
273,993 |
|
Inventories |
|
389,722 |
|
|
255,406 |
|
Trade accounts
payable |
|
242,253 |
|
|
176,757 |
|
Operating working
capital |
|
$ |
548,700 |
|
|
$ |
352,642 |
|
|
|
|
|
|
Average operating
working capital to Net sales (2) |
|
20.5 |
% |
(3 |
) |
15.6 |
% |
|
|
|
|
|
Invested
Capital |
|
September 30, 2017 |
|
December 31, 2016 |
Short-term debt
(1) |
|
$ |
2,135 |
|
|
$ |
1,889 |
|
Long-term debt, less
current portion |
|
704,804 |
|
|
703,704 |
|
Total debt |
|
706,939 |
|
|
705,593 |
|
Total equity |
|
945,928 |
|
|
712,206 |
|
Invested capital |
|
$ |
1,652,867 |
|
|
$ |
1,417,799 |
|
|
|
|
|
|
Total debt / invested
capital |
|
42.8 |
% |
|
49.8 |
% |
|
(1) Includes current portion of long-term debt. |
(2) Average operating working capital to Net sales is defined
as operating working capital as of period end divided by annualized
rolling three months of Net sales. |
(3) Includes only two months of Net sales related to the
acquisition of Air Liquide Welding. Average operating working
capital to Net Sales excluding the acquisition was 17.6%. |
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
Non-GAAP Financial Measures |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Operating income as
reported |
|
$ |
133,070 |
|
|
$ |
81,829 |
|
|
$ |
302,198 |
|
|
$ |
205,203 |
|
Special
items (pre-tax): |
|
|
|
|
|
|
|
|
Pension
settlement charges (2) |
|
5,283 |
|
|
— |
|
|
5,283 |
|
|
— |
|
Loss on
deconsolidation of Venezuelan subsidiary (3) |
|
— |
|
|
— |
|
|
— |
|
|
34,348 |
|
Acquisition transaction and integration costs (4) |
|
3,273 |
|
|
— |
|
|
11,386 |
|
|
— |
|
Amortization of step up in value of acquired inventories
(4) |
|
2,314 |
|
|
— |
|
|
2,314 |
|
|
— |
|
Bargain
purchase gain (4) |
|
(51,585 |
) |
|
— |
|
|
(51,585 |
) |
|
— |
|
Adjusted operating
income (1) |
|
$ |
92,355 |
|
|
$ |
81,829 |
|
|
$ |
269,596 |
|
|
$ |
239,551 |
|
As a
percent of total sales |
|
13.8 |
% |
|
14.4 |
% |
|
14.4 |
% |
|
14.0 |
% |
|
|
|
|
|
|
|
|
|
Net income as
reported |
|
$ |
106,126 |
|
|
$ |
60,049 |
|
|
$ |
223,322 |
|
|
$ |
145,004 |
|
Special
items (after-tax): |
|
|
|
|
|
|
|
|
Pension
settlement charges (2) |
|
3,260 |
|
|
— |
|
|
3,260 |
|
|
— |
|
Loss on
deconsolidation of Venezuelan subsidiary (3) |
|
— |
|
|
— |
|
|
— |
|
|
33,251 |
|
Income
tax valuation reversals (5) |
|
— |
|
|
— |
|
|
— |
|
|
(7,196 |
) |
Acquisition transaction and integration costs (4) |
|
2,229 |
|
|
— |
|
|
8,457 |
|
|
— |
|
Amortization of step up in value of acquired inventories
(4) |
|
1,745 |
|
|
— |
|
|
1,745 |
|
|
— |
|
Bargain
purchase gain (4) |
|
(51,585 |
) |
|
— |
|
|
(51,585 |
) |
|
— |
|
Adjusted net income
(1) |
|
$ |
61,775 |
|
|
$ |
60,049 |
|
|
$ |
185,199 |
|
|
$ |
171,059 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share as reported |
|
$ |
1.59 |
|
|
$ |
0.89 |
|
|
$ |
3.35 |
|
|
$ |
2.11 |
|
Special items |
|
(0.66 |
) |
|
— |
|
|
(0.57 |
) |
|
0.38 |
|
Adjusted diluted
earnings per share (1) |
|
$ |
0.93 |
|
|
$ |
0.89 |
|
|
$ |
2.78 |
|
|
$ |
2.49 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
66,702 |
|
|
67,182 |
|
|
66,679 |
|
|
68,784 |
|
(1) 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 believes 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) Related to lump sum pension payments. |
(3) Related to the deconsolidation of the Company's Venezuelan
subsidiary in the second quarter 2016. |
(4) Related to the acquisition of Air Liquide Welding. |
(5) Related to the reversal of an income tax valuation
allowance as a result of a legal entity change. |
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
|
Non-GAAP Financial Measures |
|
|
Twelve Months Ended September 30, |
Return on
Invested Capital |
|
2017 |
|
2016 |
Net income as
reported |
|
$ |
276,717 |
|
|
$ |
193,696 |
|
Rationalization and asset impairment charges, net of tax of
($16) |
|
— |
|
|
450 |
|
Pension
settlement charges, net of tax of $2,023 and $2,438 in 2017 and
2016, respectively |
|
3,260 |
|
|
3,969 |
|
Loss on
deconsolidation of Venezuelan subsidiary, net of tax of $1,097 |
|
— |
|
|
33,251 |
|
Income
tax valuation reversals |
|
— |
|
|
(7,196 |
) |
Venezuela
currency devaluation |
|
— |
|
|
708 |
|
Acquisition transaction and integration costs, net of tax of
$2,929 |
|
8,457 |
|
|
— |
|
Amortization of step up in value of acquired inventories, net of
tax of $569 |
|
1,745 |
|
|
— |
|
Bargain
purchase gain |
|
(51,585 |
) |
|
— |
|
Adjusted
net income (1) |
|
$ |
238,594 |
|
|
$ |
224,878 |
|
Plus:
Interest expense, net of tax of $9,795 and $6,816 in 2017 and 2016,
respectively |
|
15,789 |
|
|
13,342 |
|
Less:
Interest income, net of tax of $1,614 and $596 in 2017 and 2016,
respectively |
|
2,602 |
|
|
1,182 |
|
Adjusted
net income before tax effected interest |
|
$ |
251,781 |
|
|
$ |
237,038 |
|
|
|
|
|
|
Invested
Capital |
|
September 30, 2017 |
|
September 30, 2016 |
Short-term debt |
|
$ |
2,135 |
|
|
$ |
183,827 |
|
Long-term
debt, less current portion |
|
704,804 |
|
|
359,831 |
|
Total
debt |
|
706,939 |
|
|
543,658 |
|
Total
equity |
|
945,928 |
|
|
752,917 |
|
Invested capital |
|
$ |
1,652,867 |
|
|
$ |
1,296,575 |
|
|
|
|
|
|
Return on invested
capital (1)(2) |
|
15.2 |
% |
|
18.3 |
% |
|
(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 believes 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 September 30, |
|
|
2017 |
|
2016 |
OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
106,126 |
|
|
$ |
60,049 |
|
Non-controlling
interests in subsidiaries’ loss |
|
(15 |
) |
|
(10 |
) |
Net income including
non-controlling interests |
|
106,111 |
|
|
60,039 |
|
Adjustments to reconcile Net income including non-controlling
interests to Net cash provided by operating activities: |
|
|
|
|
Bargain
purchase gain |
|
(51,585 |
) |
|
— |
|
Depreciation and amortization |
|
18,451 |
|
|
16,263 |
|
Equity
earnings in affiliates, net |
|
(141 |
) |
|
(6 |
) |
Pension
expense and settlement charges |
|
3,495 |
|
|
3,216 |
|
Pension
contributions and payments |
|
(1,556 |
) |
|
(582 |
) |
Other
non-cash items, net |
|
(143 |
) |
|
(1,742 |
) |
Changes
in operating assets and liabilities, net of effects from
acquisitions: |
|
|
|
|
Decrease
in accounts receivable |
|
15,706 |
|
|
10,437 |
|
Decrease
in inventories |
|
2,231 |
|
|
7,819 |
|
Decrease
in trade accounts payable |
|
(21,551 |
) |
|
(8,306 |
) |
Net
change in other current assets and liabilities |
|
22,978 |
|
|
24,309 |
|
Net
change in other long-term assets and liabilities |
|
(329 |
) |
|
1,854 |
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
93,667 |
|
|
113,301 |
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
Capital
expenditures |
|
(10,828 |
) |
|
(14,598 |
) |
Acquisition of businesses, net of cash acquired |
|
(72,468 |
) |
|
— |
|
Proceeds
from sale of property, plant and equipment |
|
892 |
|
|
257 |
|
Purchase
of marketable securities |
|
(75,619 |
) |
|
— |
|
Proceeds
from marketable securities |
|
200 |
|
|
— |
|
NET CASH USED BY
INVESTING ACTIVITIES |
|
(157,823 |
) |
|
(14,341 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
Net
change in borrowings |
|
(394 |
) |
|
23,989 |
|
Proceeds
from exercise of stock options |
|
936 |
|
|
4,703 |
|
Purchase
of shares for treasury |
|
(15,264 |
) |
|
(85,661 |
) |
Cash
dividends paid to shareholders |
|
(23,067 |
) |
|
(21,533 |
) |
Other
financing activities |
|
(372 |
) |
|
— |
|
NET CASH USED BY
FINANCING ACTIVITIES |
|
(38,161 |
) |
|
(78,502 |
) |
|
|
|
|
|
Effect of exchange rate
changes on Cash and cash equivalents |
|
6,035 |
|
|
(549 |
) |
(DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS |
|
(96,282 |
) |
|
19,909 |
|
Cash and cash
equivalents at beginning of period |
|
395,735 |
|
|
237,019 |
|
Cash and cash
equivalents at end of period |
|
$ |
299,453 |
|
|
$ |
256,928 |
|
|
|
|
|
|
Cash dividends paid per
share |
|
$ |
0.35 |
|
|
$ |
0.32 |
|
Lincoln Electric
Holdings, Inc. |
Financial Highlights |
(In thousands, except per share
amounts) |
(Unaudited) |
|
Condensed Consolidated Statements of Cash
Flows |
|
|
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
223,322 |
|
|
$ |
145,004 |
|
Non-controlling
interests in subsidiaries’ loss |
|
(32 |
) |
|
(32 |
) |
Net income including
non-controlling interests |
|
223,290 |
|
|
144,972 |
|
Adjustments to reconcile Net income including non-controlling
interests to Net cash provided by operating activities: |
|
|
|
|
Loss on
deconsolidation of Venezuelan subsidiary |
|
— |
|
|
34,348 |
|
Bargain
purchase gain |
|
(51,585 |
) |
|
— |
|
Depreciation and amortization |
|
50,457 |
|
|
48,495 |
|
Equity
earnings in affiliates, net |
|
(216 |
) |
|
(64 |
) |
Pension
expense and settlement charges |
|
816 |
|
|
12,472 |
|
Pension
contributions and payments |
|
(2,724 |
) |
|
(22,159 |
) |
Other
non-cash items, net |
|
15,489 |
|
|
(7,137 |
) |
Changes
in operating assets and liabilities, net of effects from
acquisitions: |
|
|
|
|
Increase
in accounts receivable |
|
(24,300 |
) |
|
(11,956 |
) |
Increase
in inventories |
|
(22,526 |
) |
|
(7,673 |
) |
(Decrease) increase in trade accounts payable |
|
(8,932 |
) |
|
13,922 |
|
Net
change in other current assets and liabilities |
|
61,847 |
|
|
33,838 |
|
Net
change in other long-term assets and liabilities |
|
3,738 |
|
|
1,122 |
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
245,354 |
|
|
240,180 |
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
Capital
expenditures |
|
(38,959 |
) |
|
(39,377 |
) |
Acquisition of businesses, net of cash acquired |
|
(72,468 |
) |
|
(71,567 |
) |
Proceeds
from sale of property, plant and equipment |
|
1,994 |
|
|
936 |
|
Purchase
of marketable securities |
|
(145,553 |
) |
|
— |
|
Proceeds
from marketable securities |
|
5,190 |
|
|
— |
|
Other
investing activities |
|
— |
|
|
(283 |
) |
NET CASH USED BY
INVESTING ACTIVITIES |
|
(249,796 |
) |
|
(110,291 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
Net
change in borrowings |
|
(605 |
) |
|
183,259 |
|
Proceeds
from exercise of stock options |
|
14,333 |
|
|
10,418 |
|
Purchase
of shares for treasury |
|
(23,012 |
) |
|
(288,594 |
) |
Cash
dividends paid to shareholders |
|
(69,083 |
) |
|
(66,180 |
) |
Other
financing activities |
|
(15,561 |
) |
|
(18,244 |
) |
NET CASH USED BY
FINANCING ACTIVITIES |
|
(93,928 |
) |
|
(179,341 |
) |
|
|
|
|
|
Effect of exchange rate
changes on Cash and cash equivalents |
|
18,644 |
|
|
2,197 |
|
DECREASE IN CASH AND
CASH EQUIVALENTS |
|
(79,726 |
) |
|
(47,255 |
) |
Cash and cash
equivalents at beginning of period |
|
379,179 |
|
|
304,183 |
|
Cash and cash
equivalents at end of period |
|
$ |
299,453 |
|
|
$ |
256,928 |
|
|
|
|
|
|
Cash dividends paid per
share |
|
$ |
1.05 |
|
|
$ |
0.96 |
|
Lincoln Electric Holdings, Inc. |
Segment Highlights |
(In thousands) |
(Unaudited) |
|
|
|
Americas Welding |
|
International Welding |
|
The HarrisProductsGroup |
|
Corporate /Eliminations |
|
Consolidated |
Three months ended September 30, 2017 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
398,289 |
|
|
$ |
197,617 |
|
|
$ |
73,585 |
|
|
$ |
— |
|
|
$ |
669,491 |
|
Inter-segment
sales |
|
25,546 |
|
|
5,451 |
|
|
2,064 |
|
|
(33,061 |
) |
|
— |
|
Total |
|
$ |
423,835 |
|
|
$ |
203,068 |
|
|
$ |
75,649 |
|
|
$ |
(33,061 |
) |
|
$ |
669,491 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1) |
|
$ |
68,813 |
|
|
$ |
8,298 |
|
|
$ |
9,244 |
|
|
$ |
48,882 |
|
|
$ |
135,237 |
|
As a
percent of total sales |
|
16.2 |
% |
|
4.1 |
% |
|
12.2 |
% |
|
|
|
20.2 |
% |
Special items charges
(gains) (3) |
|
5,283 |
|
|
2,314 |
|
|
— |
|
|
(48,312 |
) |
|
(40,715 |
) |
Adjusted EBIT (2) |
|
$ |
74,096 |
|
|
$ |
10,612 |
|
|
$ |
9,244 |
|
|
$ |
570 |
|
|
$ |
94,522 |
|
As a
percent of total sales |
|
17.5 |
% |
|
5.2 |
% |
|
12.2 |
% |
|
|
|
14.1 |
% |
Three months ended September 30, 2016 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
377,520 |
|
|
$ |
119,564 |
|
|
$ |
70,562 |
|
|
$ |
— |
|
|
$ |
567,646 |
|
Inter-segment
sales |
|
22,386 |
|
|
3,688 |
|
|
1,856 |
|
|
(27,930 |
) |
|
— |
|
Total |
|
$ |
399,906 |
|
|
$ |
123,252 |
|
|
$ |
72,418 |
|
|
$ |
(27,930 |
) |
|
$ |
567,646 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1) |
|
$ |
68,285 |
|
|
$ |
5,796 |
|
|
$ |
8,757 |
|
|
$ |
913 |
|
|
$ |
83,751 |
|
As a
percent of total sales |
|
17.1 |
% |
|
4.7 |
% |
|
12.1 |
% |
|
|
|
14.8 |
% |
Special items charges
(gains) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Adjusted EBIT (2) |
|
$ |
68,285 |
|
|
$ |
5,796 |
|
|
$ |
8,757 |
|
|
$ |
913 |
|
|
$ |
83,751 |
|
As a
percent of total sales |
|
17.1 |
% |
|
4.7 |
% |
|
12.1 |
% |
|
|
|
14.8 |
% |
Nine months ended September 30, 2017 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,186,760 |
|
|
$ |
468,003 |
|
|
$ |
222,483 |
|
|
$ |
— |
|
|
$ |
1,877,246 |
|
Inter-segment
sales |
|
75,380 |
|
|
15,214 |
|
|
6,763 |
|
|
(97,357 |
) |
|
— |
|
Total |
|
$ |
1,262,140 |
|
|
$ |
483,217 |
|
|
$ |
229,246 |
|
|
$ |
(97,357 |
) |
|
$ |
1,877,246 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1) |
|
$ |
212,034 |
|
|
$ |
27,399 |
|
|
$ |
27,491 |
|
|
$ |
40,568 |
|
|
$ |
307,492 |
|
As a
percent of total sales |
|
16.8 |
% |
|
5.7 |
% |
|
12.0 |
% |
|
|
|
16.4 |
% |
Special items charges
(gains) (3) |
|
5,283 |
|
|
2,314 |
|
|
— |
|
|
(40,199 |
) |
|
(32,602 |
) |
Adjusted EBIT (2) |
|
$ |
217,317 |
|
|
$ |
29,713 |
|
|
$ |
27,491 |
|
|
$ |
369 |
|
|
$ |
274,890 |
|
As a
percent of total sales |
|
17.2 |
% |
|
6.1 |
% |
|
12.0 |
% |
|
|
|
14.6 |
% |
Nine months ended September 30, 2016 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,124,900 |
|
|
$ |
376,684 |
|
|
$ |
209,202 |
|
|
$ |
— |
|
|
$ |
1,710,786 |
|
Inter-segment
sales |
|
69,673 |
|
|
11,955 |
|
|
6,983 |
|
|
(88,611 |
) |
|
— |
|
Total |
|
$ |
1,194,573 |
|
|
$ |
388,639 |
|
|
$ |
216,185 |
|
|
$ |
(88,611 |
) |
|
$ |
1,710,786 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1) |
|
$ |
194,924 |
|
|
$ |
21,699 |
|
|
$ |
25,752 |
|
|
$ |
(32,536 |
) |
|
$ |
209,839 |
|
As a
percent of total sales |
|
16.3 |
% |
|
5.6 |
% |
|
11.9 |
% |
|
|
|
12.3 |
% |
Special items charges
(gains) (4) |
|
— |
|
|
— |
|
|
— |
|
|
34,348 |
|
|
34,348 |
|
Adjusted EBIT (2) |
|
$ |
194,924 |
|
|
$ |
21,699 |
|
|
$ |
25,752 |
|
|
$ |
1,812 |
|
|
$ |
244,187 |
|
As a
percent of total sales |
|
16.3 |
% |
|
5.6 |
% |
|
11.9 |
% |
|
|
|
14.3 |
% |
|
(1) 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 Adjusted EBIT. EBIT for each operating
segment is adjusted for special items to derive Adjusted EBIT. |
(3) Special items reflect pension settlement charges and
acquisition transaction and integration costs, amortization of step
up in value of acquired inventories and a bargain purchase gain
related to the acquisition of Air Liquide Welding. |
(4) Special items reflect a charge related to the
deconsolidation of the Company's Venezuelan subsidiary in the
second quarter 2016. |
Lincoln Electric
Holdings, Inc. |
Change in Net Sales by Segment |
(In thousands) |
(Unaudited) |
|
Three Months Ended September 30th Change in Net Sales by
Segment |
|
|
|
|
|
|
|
|
|
|
|
Change in Net Sales due to: |
|
|
|
|
Net Sales 2016 |
|
Volume |
|
Acquisitions |
|
Price |
|
ForeignExchange |
|
Net Sales 2017 |
Operating
Segments |
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
$ |
377,520 |
|
|
$ |
8,401 |
|
|
$ |
1,140 |
|
|
$ |
9,197 |
|
|
$ |
2,031 |
|
|
$ |
398,289 |
|
International
Welding |
|
119,564 |
|
|
7,988 |
|
|
61,520 |
|
|
3,446 |
|
|
5,099 |
|
|
197,617 |
|
The Harris Products
Group |
|
70,562 |
|
|
5,050 |
|
|
— |
|
|
(2,604 |
) |
|
577 |
|
|
73,585 |
|
Consolidated |
|
$ |
567,646 |
|
|
$ |
21,439 |
|
|
$ |
62,660 |
|
|
$ |
10,039 |
|
|
$ |
7,707 |
|
|
$ |
669,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
|
|
2.2 |
% |
|
0.3 |
% |
|
2.4 |
% |
|
0.5 |
% |
|
5.5 |
% |
International
Welding |
|
|
|
6.7 |
% |
|
51.5 |
% |
|
2.9 |
% |
|
4.3 |
% |
|
65.3 |
% |
The Harris Products
Group |
|
|
|
7.2 |
% |
|
— |
|
|
(3.7 |
%) |
|
0.8 |
% |
|
4.3 |
% |
Consolidated |
|
|
|
3.8 |
% |
|
11.0 |
% |
|
1.8 |
% |
|
1.4 |
% |
|
17.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30th Change in Net Sales by
Segment |
|
|
|
|
|
|
|
|
|
|
|
Change in Net Sales due to: |
|
|
|
|
Net Sales 2016 |
|
Volume |
|
Acquisitions |
|
Price |
|
Foreign Exchange |
|
Net Sales 2017 |
Operating
Segments |
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
$ |
1,124,900 |
|
|
$ |
29,928 |
|
|
$ |
5,832 |
|
|
$ |
25,225 |
|
|
$ |
875 |
|
|
$ |
1,186,760 |
|
International
Welding |
|
376,684 |
|
|
15,712 |
|
|
61,520 |
|
|
11,068 |
|
|
3,019 |
|
|
$ |
468,003 |
|
The Harris Products
Group |
|
209,202 |
|
|
10,982 |
|
|
— |
|
|
806 |
|
|
1,493 |
|
|
$ |
222,483 |
|
Consolidated |
|
$ |
1,710,786 |
|
|
$ |
56,622 |
|
|
$ |
67,352 |
|
|
$ |
37,099 |
|
|
$ |
5,387 |
|
|
$ |
1,877,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
Welding(excluding Venezuela) |
|
$ |
1,114,086 |
|
|
$ |
40,742 |
|
|
$ |
5,832 |
|
|
$ |
25,225 |
|
|
$ |
875 |
|
|
$ |
1,186,760 |
|
Consolidated(excluding
Venezuela) |
|
$ |
1,699,973 |
|
|
$ |
67,435 |
|
|
$ |
67,352 |
|
|
$ |
37,099 |
|
|
$ |
5,387 |
|
|
$ |
1,877,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
|
|
2.7 |
% |
|
0.5 |
% |
|
2.2 |
% |
|
0.1 |
% |
|
5.5 |
% |
International
Welding |
|
|
|
4.2 |
% |
|
16.3 |
% |
|
2.9 |
% |
|
0.8 |
% |
|
24.2 |
% |
The Harris Products
Group |
|
|
|
5.2 |
% |
|
— |
|
|
0.4 |
% |
|
0.7 |
% |
|
6.3 |
% |
Consolidated |
|
|
|
3.3 |
% |
|
3.9 |
% |
|
2.2 |
% |
|
0.3 |
% |
|
9.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
Welding(excluding Venezuela) |
|
|
|
3.7 |
% |
|
0.5 |
% |
|
2.3 |
% |
|
0.1 |
% |
|
6.5 |
% |
Consolidated(excluding
Venezuela) (1) |
|
|
|
4.0 |
% |
|
4.0 |
% |
|
2.2 |
% |
|
0.3 |
% |
|
10.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Venezuelan sales in the nine months ended September 30,
2016 were $11 million. |
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