Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq:LECO)
today reported fourth quarter 2017 net income of $24.2 million, or
diluted earnings per share (EPS) of $0.36. Reported EPS
includes special item after-tax charges of $43.3 million or $0.65
EPS. Excluding these items, fourth quarter adjusted net
income was $67.5 million, or adjusted EPS of $1.01, as compared
with $53.4 million or adjusted EPS of $0.81 in the comparable 2016
period.
Fourth quarter 2017 sales increased 32.5% to $747.2 million from
a 20.3% benefit from acquisitions, 6.8% higher volumes, a 3.2%
increase in price and a 2.2% favorable impact from foreign
exchange.
Operating income for the fourth quarter 2017 was $75.5 million,
or 10.1% of sales. This compares with operating income of
$83.1 million, or 14.7% of sales, in the comparable 2016 period. On
an adjusted basis, operating income was $92.8 million, or 12.4% of
sales as compared to fourth quarter 2016 operating income of $83.1
million or 14.7% of sales. Acquisitions had an unfavorable
180 basis point impact to the 2017 adjusted operating income
margin.
The U.S. Tax Cuts and Jobs Act (“U.S. Tax Act”) enacted in the
fourth quarter resulted in a one-time net tax expense of $28.6
million, or $0.43 EPS, in the quarter. The expense primarily
relates to taxes on the Company's unremitted foreign earnings and
profits, partially offset by the re-measurement of deferred tax
assets and liabilities. The fourth quarter 2017 tax rate was
67.2%, which was unfavorably impacted by the U.S. Tax Act. The
fourth quarter 2017 tax rate excluding special items was 25.8% as
compared to 31.7% in the comparable 2016 period. The lower current
year effective tax rate is attributable to the geographical mix of
earnings and the favorable effect of discrete tax items. The
Company expects the effective tax rate for the full year 2018 to be
in the low to mid-20% range.
"We generated solid organic growth across all business segments,
key product areas, and geographies in the fourth quarter,” said
Christopher L. Mapes, chairman, president and chief executive
officer. “Our team capped off a successful year with focused
operational and commercial initiatives and an aggressive
integration plan that will drive long-term value for our customers
and shareholders. These efforts resulted in double digit EPS
growth, record working capital performance, strong cash flows and
excellent return on invested capital.” Mapes continued, “We have
strong momentum heading into 2018 and are positioned for
accelerated growth and superior value creation from our ongoing
strategic initiatives."
Twelve Months 2017 Summary
Net income for the twelve months ended December 31, 2017 was
$247.5 million, or EPS of $3.71, as compared with net income of
$198.4 million, or EPS of $2.91, in the comparable 2016
period. Current period reported EPS includes special item
after-tax net charges of $5.2 million or EPS of $0.08.
Adjusted net income for the twelve months ended December 31, 2017
was $252.7 million, or adjusted EPS of $3.79, compared with
adjusted net income of $224.5 million, or adjusted EPS of $3.29, in
2016.
Sales increased 15.4% to $2.6 billion in the twelve months ended
December 31, 2017 from an 8.0% benefit from acquisitions, 4.2%
higher volumes, a 2.4% increase in price and a 0.8% favorable
impact foreign exchange.
Operating income was $377.7 million, or 14.4% of sales, as
compared with $288.3 million, or 12.7% of sales, in the comparable
2016 period. On an adjusted basis, operating income was
$362.4 million or 13.8% of sales, as compared with $322.6 million,
or 14.2% of sales in 2016. Acquisitions had an unfavorable 90
basis point impact to the 2017 adjusted operating income
margin.
Webcast Information
A conference call to discuss fourth quarter 2017 financial
results will be webcast live today, February 14, 2018, 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 7491736. Telephone participants are asked to dial in
10-15 minutes prior to the start of the conference call.
Financial results for the fourth 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; the effects of changes in
tax law; 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)
|
|
|
|
|
|
|
Three months ended December 31, |
|
Fav (Unfav) to Prior Year |
|
|
2017 |
|
% of Sales |
|
2016 |
|
% of Sales |
|
$ |
|
% |
Net sales |
|
$ |
747,185 |
|
|
100.0 |
% |
|
$ |
563,828 |
|
|
100.0 |
% |
|
$ |
183,357 |
|
|
32.5 |
% |
Cost of goods sold |
|
507,719 |
|
|
68.0 |
% |
|
366,371 |
|
|
65.0 |
% |
|
(141,348 |
) |
|
(38.6 |
%) |
Gross profit |
|
239,466 |
|
|
32.0 |
% |
|
197,457 |
|
|
35.0 |
% |
|
42,009 |
|
|
21.3 |
% |
Selling,
general & administrative expenses |
|
152,561 |
|
|
20.4 |
% |
|
114,386 |
|
|
20.3 |
% |
|
(38,175 |
) |
|
(33.4 |
%) |
Rationalization and asset impairment charges |
|
6,590 |
|
|
0.9 |
% |
|
— |
|
|
— |
|
|
(6,590 |
) |
|
(100.0 |
%) |
Pension settlement
charges |
|
2,867 |
|
|
0.4 |
% |
|
— |
|
|
— |
|
|
(2,867 |
) |
|
(100.0 |
%) |
Bargain purchase
adjustment (gain) |
|
1,935 |
|
|
0.3 |
% |
|
— |
|
|
— |
|
|
(1,935 |
) |
|
(100.0 |
%) |
Operating income |
|
75,513 |
|
|
10.1 |
% |
|
83,071 |
|
|
14.7 |
% |
|
(7,558 |
) |
|
(9.1 |
%) |
Interest income |
|
1,439 |
|
|
0.2 |
% |
|
867 |
|
|
0.2 |
% |
|
572 |
|
|
66.0 |
% |
Equity earnings in
affiliates |
|
741 |
|
|
0.1 |
% |
|
844 |
|
|
0.1 |
% |
|
(103 |
) |
|
(12.2 |
%) |
Other income |
|
1,922 |
|
|
0.3 |
% |
|
621 |
|
|
0.1 |
% |
|
1,301 |
|
|
209.5 |
% |
Interest expense |
|
(5,887 |
) |
|
0.8 |
% |
|
(7,251 |
) |
|
1.3 |
% |
|
1,364 |
|
|
18.8 |
% |
Income before income
taxes |
|
73,728 |
|
|
9.9 |
% |
|
78,152 |
|
|
13.9 |
% |
|
(4,424 |
) |
|
(5.7 |
%) |
Income taxes |
|
49,543 |
|
|
6.6 |
% |
|
24,751 |
|
|
4.4 |
% |
|
(24,792 |
) |
|
(100.2 |
%) |
Effective tax rate |
|
67.2 |
% |
|
|
|
31.7 |
% |
|
|
|
(35.5 |
%) |
|
|
Net income including
non-controlling interests |
|
24,185 |
|
|
3.2 |
% |
|
53,401 |
|
|
9.5 |
% |
|
(29,216 |
) |
|
(54.7 |
%) |
Non-controlling
interests in subsidiaries’ income (loss) |
|
4 |
|
|
— |
|
|
6 |
|
|
— |
|
|
(2 |
) |
|
(33.3 |
%) |
Net income |
|
$ |
24,181 |
|
|
3.2 |
% |
|
$ |
53,395 |
|
|
9.5 |
% |
|
$ |
(29,214 |
) |
|
(54.7 |
%) |
Basic earnings per
share |
|
$ |
0.37 |
|
|
|
|
$ |
0.81 |
|
|
|
|
$ |
(0.44 |
) |
|
(54.3 |
%) |
Diluted earnings per
share |
|
$ |
0.36 |
|
|
|
|
$ |
0.81 |
|
|
|
|
$ |
(0.45 |
) |
|
(55.6 |
%) |
Weighted average shares
(basic) |
|
65,649 |
|
|
|
|
65,603 |
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
66,530 |
|
|
|
|
66,303 |
|
|
|
|
|
|
|
|
|
Twelve months ended December 31, |
|
Fav (Unfav) to Prior Year |
|
|
2017 |
|
% of Sales |
|
2016 |
|
% of Sales |
|
$ |
|
% |
Net sales |
|
$ |
2,624,431 |
|
|
100.0 |
% |
|
$ |
2,274,614 |
|
|
100.0 |
% |
|
$ |
349,817 |
|
|
15.4 |
% |
Cost of goods sold |
|
1,744,105 |
|
|
66.5 |
% |
|
1,485,316 |
|
|
65.3 |
% |
|
(258,789 |
) |
|
(17.4 |
%) |
Gross profit |
|
880,326 |
|
|
33.5 |
% |
|
789,298 |
|
|
34.7 |
% |
|
91,028 |
|
|
11.5 |
% |
Selling,
general & administrative expenses |
|
537,525 |
|
|
20.5 |
% |
|
466,676 |
|
|
20.5 |
% |
|
(70,849 |
) |
|
(15.2 |
%) |
Rationalization and asset impairment charges |
|
6,590 |
|
|
0.3 |
% |
|
— |
|
|
— |
|
|
(6,590 |
) |
|
(100.0 |
%) |
Pension settlement
charges |
|
8,150 |
|
|
0.3 |
% |
|
— |
|
|
— |
|
|
(8,150 |
) |
|
(100.0 |
%) |
Loss on deconsolidation
of Venezuelan subsidiary |
|
— |
|
|
— |
|
|
34,348 |
|
|
1.5 |
% |
|
34,348 |
|
|
100.0 |
% |
Bargain purchase
adjustment (gain) |
|
(49,650 |
) |
|
1.9 |
% |
|
— |
|
|
— |
|
|
49,650 |
|
|
100.0 |
% |
Operating income |
|
377,711 |
|
|
14.4 |
% |
|
288,274 |
|
|
12.7 |
% |
|
89,437 |
|
|
31.0 |
% |
Interest income |
|
4,788 |
|
|
0.2 |
% |
|
2,092 |
|
|
0.1 |
% |
|
2,696 |
|
|
128.9 |
% |
Equity earnings in
affiliates |
|
2,742 |
|
|
0.1 |
% |
|
2,928 |
|
|
0.1 |
% |
|
(186 |
) |
|
(6.4 |
%) |
Other income |
|
5,215 |
|
|
0.2 |
% |
|
3,173 |
|
|
0.1 |
% |
|
2,042 |
|
|
64.4 |
% |
Interest expense |
|
(24,220 |
) |
|
0.9 |
% |
|
(19,079 |
) |
|
0.8 |
% |
|
(5,141 |
) |
|
(26.9 |
%) |
Income before income
taxes |
|
366,236 |
|
|
14.0 |
% |
|
277,388 |
|
|
12.2 |
% |
|
88,848 |
|
|
32.0 |
% |
Income taxes |
|
118,761 |
|
|
4.5 |
% |
|
79,015 |
|
|
3.5 |
% |
|
(39,746 |
) |
|
(50.3 |
%) |
Effective tax rate |
|
32.4 |
% |
|
|
|
28.5 |
% |
|
|
|
(3.9 |
%) |
|
|
Net income including
non-controlling interests |
|
247,475 |
|
|
9.4 |
% |
|
198,373 |
|
|
8.7 |
% |
|
49,102 |
|
|
24.8 |
% |
Non-controlling
interests in subsidiaries’ income (loss) |
|
(28 |
) |
|
— |
|
|
(26 |
) |
|
— |
|
|
(2 |
) |
|
(7.7 |
%) |
Net income |
|
$ |
247,503 |
|
|
9.4 |
% |
|
$ |
198,399 |
|
|
8.7 |
% |
|
$ |
49,104 |
|
|
24.8 |
% |
Basic earnings per
share |
|
$ |
3.76 |
|
|
|
|
$ |
2.94 |
|
|
|
|
$ |
0.82 |
|
|
27.9 |
% |
Diluted earnings per
share |
|
$ |
3.71 |
|
|
|
|
$ |
2.91 |
|
|
|
|
$ |
0.80 |
|
|
27.5 |
% |
Weighted average shares
(basic) |
|
65,739 |
|
|
|
|
67,462 |
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
66,643 |
|
|
|
|
68,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lincoln Electric
Holdings, Inc.Financial
Highlights(In
thousands)(Unaudited)
Balance Sheet Highlights
|
Selected Consolidated Balance Sheet Data |
|
December 31, 2017 |
|
December 31, 2016 |
Cash and cash
equivalents |
|
$ |
326,701 |
|
|
$ |
379,179 |
|
Marketable
securities |
|
179,125 |
|
|
38,922 |
|
Total current
assets |
|
1,373,608 |
|
|
1,043,713 |
|
Property, plant and
equipment, net |
|
477,031 |
|
|
372,377 |
|
Total assets |
|
2,406,547 |
|
|
1,943,437 |
|
Total current
liabilities |
|
528,742 |
|
|
388,107 |
|
Short-term debt
(1) |
|
2,131 |
|
|
1,889 |
|
Long-term debt, less
current portion |
|
704,136 |
|
|
703,704 |
|
Total equity |
|
932,453 |
|
|
712,206 |
|
|
|
|
|
|
Operating
Working Capital |
|
December 31, 2017 |
|
December 31, 2016 |
Accounts
receivable |
|
$ |
395,279 |
|
|
$ |
273,993 |
|
Inventories |
|
348,667 |
|
|
255,406 |
|
Trade accounts
payable |
|
269,763 |
|
|
176,757 |
|
Operating working
capital |
|
$ |
474,183 |
|
|
$ |
352,642 |
|
|
|
|
|
|
Average operating
working capital to net sales (2) |
|
15.9 |
% |
(3 |
) |
15.6 |
% |
|
|
|
|
|
Invested
Capital |
|
December 31, 2017 |
|
December 31, 2016 |
Short-term debt
(1) |
|
$ |
2,131 |
|
|
$ |
1,889 |
|
Long-term debt, less
current portion |
|
704,136 |
|
|
703,704 |
|
Total debt |
|
706,267 |
|
|
705,593 |
|
Total equity |
|
932,453 |
|
|
712,206 |
|
Invested capital |
|
$ |
1,638,720 |
|
|
$ |
1,417,799 |
|
|
|
|
|
|
Total debt / invested
capital |
|
43.1 |
% |
|
49.8 |
% |
- Includes current portion of long-term debt.
- 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.
- Includes only five months of Net sales related to the
acquisition of Air Liquide Welding. Average operating working
capital to Net Sales excluding the acquisition was 14.2%.
Lincoln Electric
Holdings, Inc.Financial
Highlights(In thousands, except per share
amounts)(Unaudited) Non-GAAP
Financial Measures
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Operating income as
reported |
|
$ |
75,513 |
|
|
$ |
83,071 |
|
|
$ |
377,711 |
|
|
$ |
288,274 |
|
Special
items (pre-tax): |
|
|
|
|
|
|
|
|
Rationalization and asset impairment charges(2) |
|
6,590 |
|
|
— |
|
|
6,590 |
|
|
— |
|
Pension
settlement charges (3) |
|
2,867 |
|
|
— |
|
|
8,150 |
|
|
— |
|
Loss on
deconsolidation of Venezuelan subsidiary (4) |
|
— |
|
|
— |
|
|
— |
|
|
34,348 |
|
Acquisition transaction and integration
costs (5) |
|
3,616 |
|
|
— |
|
|
15,002 |
|
|
— |
|
Amortization of step up in value of acquired
inventories (5) |
|
2,264 |
|
|
— |
|
|
4,578 |
|
|
— |
|
Bargain
purchase adjustment (gain) (5) |
|
1,935 |
|
|
— |
|
|
(49,650 |
) |
|
— |
|
Adjusted operating
income (1) |
|
$ |
92,785 |
|
|
$ |
83,071 |
|
|
$ |
362,381 |
|
|
$ |
322,622 |
|
As a
percent of total sales |
|
12.4 |
% |
|
14.7 |
% |
|
13.8 |
% |
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
Net income as
reported |
|
$ |
24,181 |
|
|
$ |
53,395 |
|
|
$ |
247,503 |
|
|
$ |
198,399 |
|
Special
items (after-tax): |
|
|
|
|
|
|
|
|
Rationalization and asset impairment charges (2) |
|
6,198 |
|
|
— |
|
|
6,198 |
|
|
— |
|
Pension
settlement charges (3) |
|
1,770 |
|
|
— |
|
|
5,030 |
|
|
— |
|
Loss on
deconsolidation of Venezuelan subsidiary (4) |
|
— |
|
|
— |
|
|
— |
|
|
33,251 |
|
Income
tax valuation reversals (6) |
|
— |
|
|
— |
|
|
— |
|
|
(7,196 |
) |
Acquisition transaction and integration
costs (5) |
|
3,102 |
|
|
— |
|
|
11,559 |
|
|
— |
|
Amortization of step up in value of acquired
inventories (5) |
|
1,708 |
|
|
— |
|
|
3,453 |
|
|
— |
|
Bargain
purchase adjustment (gain) (5) |
|
1,935 |
|
|
— |
|
|
(49,650 |
) |
|
— |
|
Net
impact of U.S. Tax Act (7) |
|
28,616 |
|
|
— |
|
|
28,616 |
|
|
— |
|
Adjusted net income
(1) |
|
$ |
67,510 |
|
|
$ |
53,395 |
|
|
$ |
252,709 |
|
|
$ |
224,454 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share as reported |
|
$ |
0.36 |
|
|
$ |
0.81 |
|
|
$ |
3.71 |
|
|
$ |
2.91 |
|
Special items |
|
0.65 |
|
|
— |
|
|
0.08 |
|
|
0.38 |
|
Adjusted diluted
earnings per share (1) |
|
$ |
1.01 |
|
|
$ |
0.81 |
|
|
$ |
3.79 |
|
|
$ |
3.29 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
(diluted) |
|
66,530 |
|
|
66,303 |
|
|
66,643 |
|
|
68,156 |
|
- 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.
- Charges primarily related to severance and asset
impairments.
- Related to lump sum pension payments.
- Related to the deconsolidation of the Company's Venezuelan
subsidiary in the second quarter 2016.
- Related to the acquisition of Air Liquide Welding.
- Related to the reversal of an income tax valuation allowance as
a result of a legal entity change.
- These amounts, which are based on reasonable estimates, may
require further adjustments as additional guidance from the U.S.
Department of Treasury is provided, the Company's assumptions
change, or as further information and interpretations become
available.
Lincoln Electric
Holdings, Inc.Financial
Highlights(In thousands, except per share
amounts)(Unaudited)
Non-GAAP Financial Measures
|
|
|
|
|
Twelve Months Ended December 31, |
Return on
Invested Capital |
|
2017 |
|
2016 |
Net income as
reported |
|
$ |
247,503 |
|
|
$ |
198,399 |
|
Rationalization and asset impairment charges, net of tax of
$392 |
|
6,198 |
|
|
— |
|
Pension
settlement charges, net of tax of $3,120 |
|
5,030 |
|
|
— |
|
Loss on
deconsolidation of Venezuelan subsidiary, net of tax of $1,097in
2016 |
|
— |
|
|
33,251 |
|
Income
tax valuation reversals |
|
— |
|
|
(7,196 |
) |
Acquisition transaction and integration costs, net of tax of
$3,443 |
|
11,559 |
|
|
— |
|
Amortization of step up in value of acquired inventories, net of
tax of$1,125 |
|
3,453 |
|
|
— |
|
Bargain
purchase gain |
|
(49,650 |
) |
|
— |
|
Net
impact of U.S. Tax Act |
|
28,616 |
|
|
— |
|
Adjusted
net income (1) |
|
$ |
252,709 |
|
|
$ |
224,454 |
|
Plus:
Interest expense, net of tax of $9,273 and $7,304 in 2017 and2016,
respectively |
|
14,947 |
|
|
11,775 |
|
Less:
Interest income, net of tax of $1,833 and $801 in 2017 and2016,
respectively |
|
2,955 |
|
|
1,291 |
|
Adjusted
net income before tax effected interest |
|
$ |
264,701 |
|
|
$ |
234,938 |
|
|
|
|
|
|
Invested
Capital |
|
December 31, 2017 |
|
December 31, 2016 |
Short-term debt |
|
$ |
2,131 |
|
|
$ |
1,889 |
|
Long-term
debt, less current portion |
|
704,136 |
|
|
703,704 |
|
Total
debt |
|
706,267 |
|
|
705,593 |
|
Total
equity |
|
932,453 |
|
|
712,206 |
|
Invested capital |
|
$ |
1,638,720 |
|
|
$ |
1,417,799 |
|
|
|
|
|
|
Return on invested
capital (1)(2) |
|
16.2 |
% |
|
16.6 |
% |
- 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.
- 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 December 31, |
|
|
2017 |
|
2016 |
OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
24,181 |
|
|
$ |
53,395 |
|
Non-controlling
interests in subsidiaries’ income |
|
4 |
|
|
6 |
|
Net income including
non-controlling interests |
|
24,185 |
|
|
53,401 |
|
Adjustments to reconcile Net income including non-controlling
interests to Net cashprovided by operating activities: |
|
|
|
|
Rationalization and asset impairment charges |
|
1,441 |
|
|
— |
|
Bargain
purchase adjustment |
|
1,935 |
|
|
— |
|
Net
impact of U.S. Tax Act |
|
28,616 |
|
|
— |
|
Depreciation and amortization |
|
17,658 |
|
|
16,578 |
|
Equity
earnings in affiliates, net |
|
(121 |
) |
|
(197 |
) |
Pension
expense, settlements and curtailments |
|
1,701 |
|
|
1,516 |
|
Pension
contributions and payments |
|
(1,959 |
) |
|
(325 |
) |
Other
non-cash items, net |
|
7,352 |
|
|
3,588 |
|
Changes
in operating assets and liabilities, net of effects from
acquisitions: |
|
|
|
|
Decrease (increase) in accounts receivable |
|
7,489 |
|
|
(358 |
) |
Decrease in inventories |
|
41,974 |
|
|
22,274 |
|
Increase in trade accounts payable |
|
26,803 |
|
|
15,705 |
|
Net change in other current assets and liabilities |
|
(70,003 |
) |
|
(41,592 |
) |
Net change in other long-term assets and liabilities |
|
2,420 |
|
|
1,787 |
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
89,491 |
|
|
72,377 |
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
Capital
expenditures |
|
(22,697 |
) |
|
(10,500 |
) |
Proceeds
from sale of property, plant and equipment |
|
307 |
|
|
191 |
|
Purchase
of marketable securities |
|
(49,999 |
) |
|
(38,920 |
) |
Proceeds
from marketable securities |
|
50,158 |
|
|
— |
|
Other
investing activities |
|
— |
|
|
(426 |
) |
NET CASH USED BY
INVESTING ACTIVITIES |
|
(22,231 |
) |
|
(49,655 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
Net
change in borrowings |
|
109 |
|
|
168,060 |
|
Proceeds
from exercise of stock options |
|
2,294 |
|
|
14,631 |
|
Purchase
of shares for treasury |
|
(20,152 |
) |
|
(53,409 |
) |
Cash
dividends paid to shareholders |
|
(23,369 |
) |
|
(21,150 |
) |
Other
financing activities |
|
9 |
|
|
(799 |
) |
NET CASH (USED BY)
PROVIDED BY FINANCING ACTIVITIES |
|
(41,109 |
) |
|
107,333 |
|
|
|
|
|
|
Effect of exchange rate
changes on Cash and cash equivalents |
|
1,097 |
|
|
(7,804 |
) |
INCREASE IN CASH AND
CASH EQUIVALENTS |
|
27,248 |
|
|
122,251 |
|
Cash and cash
equivalents at beginning of period |
|
299,453 |
|
|
256,928 |
|
Cash and cash
equivalents at end of period |
|
$ |
326,701 |
|
|
$ |
379,179 |
|
|
|
|
|
|
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 |
|
Twelve months ended December 31, |
|
|
2017 |
|
2016 |
OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
247,503 |
|
|
$ |
198,399 |
|
Non-controlling
interests in subsidiaries’ loss |
|
(28 |
) |
|
(26 |
) |
Net income including
non-controlling interests |
|
247,475 |
|
|
198,373 |
|
Adjustments to reconcile Net income including non-controlling
interests to Net cashprovided by operating activities: |
|
|
|
|
Rationalization and asset impairment charges |
|
1,441 |
|
|
— |
|
Loss on
deconsolidation of Venezuelan subsidiary |
|
— |
|
|
34,348 |
|
Bargain
purchase gain |
|
(49,650 |
) |
|
— |
|
Net
impact of U.S. Tax Act |
|
28,616 |
|
|
— |
|
Depreciation and amortization |
|
68,115 |
|
|
65,073 |
|
Equity
earnings in affiliates, net |
|
(337 |
) |
|
(261 |
) |
Pension
expense, settlements and curtailments |
|
2,517 |
|
|
13,988 |
|
Pension
contributions and payments |
|
(4,683 |
) |
|
(22,484 |
) |
Other
non-cash items, net |
|
22,841 |
|
|
(3,549 |
) |
Changes
in operating assets and liabilities, net of effects from
acquisitions: |
|
|
|
|
Increase in accounts receivable |
|
(16,811 |
) |
|
(12,314 |
) |
Decrease in inventories |
|
19,448 |
|
|
14,601 |
|
Increase in trade accounts payable |
|
17,871 |
|
|
29,627 |
|
Net change in other current assets and liabilities |
|
(8,156 |
) |
|
(7,754 |
) |
Net change in other long-term assets and liabilities |
|
6,158 |
|
|
2,909 |
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
334,845 |
|
|
312,557 |
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
Capital
expenditures |
|
(61,656 |
) |
|
(49,877 |
) |
Acquisition of businesses, net of cash acquired |
|
(72,468 |
) |
|
(71,567 |
) |
Proceeds
from sale of property, plant and equipment |
|
2,301 |
|
|
1,127 |
|
Purchase
of marketable securities |
|
(195,552 |
) |
|
(38,920 |
) |
Proceeds
from marketable securities |
|
55,348 |
|
|
— |
|
Other
investing activities |
|
— |
|
|
(709 |
) |
NET CASH USED BY
INVESTING ACTIVITIES |
|
(272,027 |
) |
|
(159,946 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
Net
change in borrowings |
|
(496 |
) |
|
351,319 |
|
Proceeds
from exercise of stock options |
|
16,627 |
|
|
25,049 |
|
Purchase
of shares for treasury |
|
(43,164 |
) |
|
(342,003 |
) |
Cash
dividends paid to shareholders |
|
(92,452 |
) |
|
(87,330 |
) |
Other
financing activities |
|
(15,552 |
) |
|
(19,043 |
) |
NET CASH USED BY
FINANCING ACTIVITIES |
|
(135,037 |
) |
|
(72,008 |
) |
|
|
|
|
|
Effect of exchange rate
changes on Cash and cash equivalents |
|
19,741 |
|
|
(5,607 |
) |
(DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS |
|
(52,478 |
) |
|
74,996 |
|
Cash and cash
equivalents at beginning of period |
|
379,179 |
|
|
304,183 |
|
Cash and cash
equivalents at end of period |
|
$ |
326,701 |
|
|
$ |
379,179 |
|
|
|
|
|
|
Cash dividends paid per
share |
|
$ |
1.40 |
|
|
$ |
1.28 |
|
|
|
|
|
|
|
|
|
|
Lincoln Electric Holdings,
Inc.Segment Highlights (1)(In
thousands)(Unaudited)
|
|
|
AmericasWelding |
|
InternationalWelding |
|
The HarrisProductsGroup |
|
Corporate /Eliminations |
|
Consolidated |
Three months ended December 31, 2017 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
423,019 |
|
|
$ |
256,021 |
|
|
$ |
68,145 |
|
|
$ |
— |
|
|
$ |
747,185 |
|
Inter-segment
sales |
|
22,002 |
|
|
3,646 |
|
|
1,427 |
|
|
(27,075 |
) |
|
— |
|
Total |
|
$ |
445,021 |
|
|
$ |
259,667 |
|
|
$ |
69,572 |
|
|
$ |
(27,075 |
) |
|
$ |
747,185 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1) |
|
$ |
70,590 |
|
|
$ |
4,246 |
|
|
$ |
8,951 |
|
|
$ |
(5,611 |
) |
|
$ |
78,176 |
|
As a
percent of total sales |
|
15.9 |
% |
|
1.6 |
% |
|
12.9 |
% |
|
|
|
10.5 |
% |
Special items charges
(gains) (3) |
|
3,959 |
|
|
7,762 |
|
|
— |
|
|
5,551 |
|
|
17,272 |
|
Adjusted EBIT (2) |
|
$ |
74,549 |
|
|
$ |
12,008 |
|
|
$ |
8,951 |
|
|
$ |
(60 |
) |
|
$ |
95,448 |
|
As a
percent of total sales |
|
16.8 |
% |
|
4.6 |
% |
|
12.9 |
% |
|
|
|
12.8 |
% |
Three months ended December 31, 2016 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
370,082 |
|
|
$ |
130,605 |
|
|
$ |
63,141 |
|
|
$ |
— |
|
|
$ |
563,828 |
|
Inter-segment
sales |
|
23,939 |
|
|
4,020 |
|
|
1,726 |
|
|
(29,685 |
) |
|
— |
|
Total |
|
$ |
394,021 |
|
|
$ |
134,625 |
|
|
$ |
64,867 |
|
|
$ |
(29,685 |
) |
|
$ |
563,828 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1) |
|
$ |
71,709 |
|
|
$ |
7,447 |
|
|
$ |
6,628 |
|
|
$ |
(1,248 |
) |
|
$ |
84,536 |
|
As a
percent of total sales |
|
18.2 |
% |
|
5.5 |
% |
|
10.2 |
% |
|
|
|
15.0 |
% |
Adjusted EBIT (2) |
|
$ |
71,709 |
|
|
$ |
7,447 |
|
|
$ |
6,628 |
|
|
$ |
(1,248 |
) |
|
$ |
84,536 |
|
As a
percent of total sales |
|
18.2 |
% |
|
5.5 |
% |
|
10.2 |
% |
|
|
|
15.0 |
% |
Twelve months ended December 31, 2017 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,609,779 |
|
|
$ |
724,024 |
|
|
$ |
290,628 |
|
|
$ |
— |
|
|
$ |
2,624,431 |
|
Inter-segment
sales |
|
97,382 |
|
|
18,860 |
|
|
8,190 |
|
|
(124,432 |
) |
|
— |
|
Total |
|
$ |
1,707,161 |
|
|
$ |
742,884 |
|
|
$ |
298,818 |
|
|
$ |
(124,432 |
) |
|
$ |
2,624,431 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1) |
|
$ |
282,624 |
|
|
$ |
31,645 |
|
|
$ |
36,442 |
|
|
$ |
34,957 |
|
|
$ |
385,668 |
|
As a
percent of total sales |
|
16.6 |
% |
|
4.3 |
% |
|
12.2 |
% |
|
|
|
14.7 |
% |
Special items charges
(gains) (3) |
|
9,242 |
|
|
10,076 |
|
|
— |
|
|
(34,648 |
) |
|
(15,330 |
) |
Adjusted EBIT (2) |
|
$ |
291,866 |
|
|
$ |
41,721 |
|
|
$ |
36,442 |
|
|
$ |
309 |
|
|
$ |
370,338 |
|
As a
percent of total sales |
|
17.1 |
% |
|
5.6 |
% |
|
12.2 |
% |
|
|
|
14.1 |
% |
Twelve months ended December 31, 2016 |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,494,982 |
|
|
$ |
507,289 |
|
|
$ |
272,343 |
|
|
$ |
— |
|
|
$ |
2,274,614 |
|
Inter-segment
sales |
|
93,612 |
|
|
15,975 |
|
|
8,709 |
|
|
(118,296 |
) |
|
— |
|
Total |
|
$ |
1,588,594 |
|
|
$ |
523,264 |
|
|
$ |
281,052 |
|
|
$ |
(118,296 |
) |
|
$ |
2,274,614 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1) |
|
$ |
266,633 |
|
|
$ |
29,146 |
|
|
$ |
32,380 |
|
|
$ |
(33,784 |
) |
|
$ |
294,375 |
|
As a
percent of total sales |
|
16.8 |
% |
|
5.6 |
% |
|
11.5 |
% |
|
|
|
12.9 |
% |
Special items charges
(gains) (4) |
|
— |
|
|
— |
|
|
— |
|
|
34,348 |
|
|
34,348 |
|
Adjusted EBIT (2) |
|
$ |
266,633 |
|
|
$ |
29,146 |
|
|
$ |
32,380 |
|
|
$ |
564 |
|
|
$ |
328,723 |
|
As a
percent of total sales |
|
16.8 |
% |
|
5.6 |
% |
|
11.5 |
% |
|
|
|
14.5 |
% |
- EBIT is defined as Operating income plus Equity earnings in
affiliates and Other income.
- 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.
- Special items reflect rationalization and asset impairment
charges, pension settlement charges, the net impact of the U.S. Tax
Act and charges (gains) related to the Air Liquide Welding
acquisition.
- 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 December 31st 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 |
|
$ |
370,082 |
|
|
$ |
37,378 |
|
|
$ |
2,638 |
|
|
$ |
10,784 |
|
|
$ |
2,137 |
|
|
$ |
423,019 |
|
International
Welding |
|
130,605 |
|
|
(3,209 |
) |
|
111,910 |
|
|
7,259 |
|
|
9,456 |
|
|
256,021 |
|
The Harris Products
Group |
|
63,141 |
|
|
4,380 |
|
|
— |
|
|
(64 |
) |
|
688 |
|
|
68,145 |
|
Consolidated |
|
$ |
563,828 |
|
|
$ |
38,549 |
|
|
$ |
114,548 |
|
|
$ |
17,979 |
|
|
$ |
12,281 |
|
|
$ |
747,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
|
|
10.1 |
% |
|
0.7 |
% |
|
2.9 |
% |
|
0.6 |
% |
|
14.3 |
% |
International
Welding |
|
|
|
(2.5 |
%) |
|
85.7 |
% |
|
5.6 |
% |
|
7.2 |
% |
|
96.0 |
% |
The Harris Products
Group |
|
|
|
6.9 |
% |
|
— |
|
|
(0.1 |
%) |
|
1.1 |
% |
|
7.9 |
% |
Consolidated |
|
|
|
6.8 |
% |
|
20.3 |
% |
|
3.2 |
% |
|
2.2 |
% |
|
32.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31st 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 |
|
$ |
1,494,982 |
|
|
$ |
67,306 |
|
|
$ |
8,470 |
|
|
$ |
36,009 |
|
|
$ |
3,012 |
|
|
$ |
1,609,779 |
|
International
Welding |
|
507,289 |
|
|
12,503 |
|
|
173,430 |
|
|
18,327 |
|
|
12,475 |
|
|
$ |
724,024 |
|
The Harris Products
Group |
|
272,343 |
|
|
15,362 |
|
|
— |
|
|
742 |
|
|
2,181 |
|
|
$ |
290,628 |
|
Consolidated |
|
$ |
2,274,614 |
|
|
$ |
95,171 |
|
|
$ |
181,900 |
|
|
$ |
55,078 |
|
|
$ |
17,668 |
|
|
$ |
2,624,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding
(excluding Venezuela) |
|
$ |
1,484,168 |
|
|
$ |
78,120 |
|
|
$ |
8,470 |
|
|
$ |
36,009 |
|
|
$ |
3,012 |
|
|
$ |
1,609,779 |
|
Consolidated (excluding
Venezuela) |
|
$ |
2,263,801 |
|
|
$ |
105,984 |
|
|
$ |
181,900 |
|
|
$ |
55,078 |
|
|
$ |
17,668 |
|
|
$ |
2,624,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding |
|
|
|
4.5 |
% |
|
0.6 |
% |
|
2.4 |
% |
|
0.2 |
% |
|
7.7 |
% |
International
Welding |
|
|
|
2.5 |
% |
|
34.2 |
% |
|
3.6 |
% |
|
2.5 |
% |
|
42.7 |
% |
The Harris Products
Group |
|
|
|
5.6 |
% |
|
— |
|
|
0.3 |
% |
|
0.8 |
% |
|
6.7 |
% |
Consolidated |
|
|
|
4.2 |
% |
|
8.0 |
% |
|
2.4 |
% |
|
0.8 |
% |
|
15.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Welding
(excluding Venezuela) |
|
|
|
5.3 |
% |
|
0.6 |
% |
|
2.4 |
% |
|
0.2 |
% |
|
8.5 |
% |
Consolidated (excluding
Venezuela) (1) |
|
|
|
4.7 |
% |
|
8.0 |
% |
|
2.4 |
% |
|
0.8 |
% |
|
15.9 |
% |
(1) Venezuelan sales in the twelve months ended December 31,
2016 were $11 million.
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