LECO Lincoln Electric Holdings Inc

First Quarter 2024 Highlights

• Net sales of $981 million

• Operating income margin of 16.8%; Adjusted operating income margin of 17.5%

• Record EPS of $2.14; record Adjusted EPS of $2.23

• Cash flows from operations increase 8% to record $133 million

• Returned $152 million to shareholders through dividends and share repurchases

Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported first quarter 2024 net income of $123.4 million, or diluted earnings per share (EPS) of $2.14, which includes special item after-tax net charges of $5.2 million, or $0.09 EPS. This compares with prior year period net income of $121.9 million, or $2.09 EPS, which included special item after-tax net charges of $2.3 million, or $0.04 EPS. Excluding special items, first quarter 2024 adjusted net income was $128.7 million, or $2.23 adjusted EPS. This compares with adjusted net income of $124.2 million, or $2.13 adjusted EPS, in the prior year period.

First quarter 2024 sales decreased 5.6% to $981 million reflecting a 6.1% decrease in organic sales. Operating income for the first quarter 2024 was $165 million, or 16.8% of sales, as compared with operating income of $164.4 million, or 15.8% of sales, in the prior year period. Excluding special items, adjusted operating income was $171.4 million, or 17.5% of sales, as compared with $169.1 million, or 16.3% of sales, in the prior year period.

“We achieved record first quarter earnings and cash flow generation as strong execution and effective cost management mitigated slower sales performance as we start the year,” commented Steven B. Hedlund, President and Chief Executive Officer. “We remain focused on our strategic growth initiatives as we navigate the cycle and are pleased to have reached our $1 billion automation sales run rate target with our recent RedViking® acquisition.”

Webcast Information

A conference call to discuss first quarter 2024 financial results will be webcast live today, April 25, 2024, at 10:00 a.m., Eastern Time. Those interested in participating via webcast in listen-only mode can access the event here or on the Company's Investor Relations home page at https://ir.lincolnelectric.com. For participants who would like to participate via telephone, please dial (888) 440-4368 (domestic) or (646) 960-0856 (international) and use confirmation code 6709091. A replay of the earnings call will be available via webcast on the Company's website.

About Lincoln Electric

Lincoln Electric is the world leader in the engineering, design, and manufacturing of advanced arc welding solutions, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment, and has a leading global position in brazing and soldering alloys. Lincoln is recognized as the Welding Expert™ for its leading materials science, software development, automation engineering, and application expertise, which advance customers’ fabrication capabilities to help them build a better world. Headquartered in Cleveland, Ohio, Lincoln operates 71 manufacturing and automation system integration locations across 21 countries and maintains a worldwide network of distributors and sales offices serving customers in over 160 countries. For more information about Lincoln Electric and its products and services, visit the Company’s website at https://www.lincolnelectric.com.

Non-GAAP Information

Adjusted operating income, adjusted net income, adjusted EBIT, adjusted effective tax rate, adjusted diluted earnings per share (“adjusted EPS”), Organic sales, Cash conversion, adjusted net operating profit after taxes and adjusted return on invested capital (“adjusted ROIC”) 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, financial and market conditions; the effectiveness of commercial and 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 acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as the impact of the Russia-Ukraine conflict, political unrest, acts of terror, natural disasters and pandemics 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, 2023.

Lincoln Electric Holdings, Inc.

Financial Highlights

(In thousands, except per share amounts)

(Unaudited)

Consolidated Statements of Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Fav (Unfav) to

 

 

 

Three Months Ended March 31,

 

Prior Year

 

 

 

2024

 

% of Sales

 

2023

 

% of Sales

 

$

 

%

 

Net sales

 

$

981,197

 

 

100.0

%

$

1,039,343

 

100.0

%

$

(58,146

)

 

(5.6

)

%

Cost of goods sold

 

 

612,798

 

 

62.5

%

 

683,986

 

65.8

%

 

71,188

 

 

10.4

 

%

Gross profit

 

 

368,399

 

 

37.5

%

 

355,357

 

34.2

%

 

13,042

 

 

3.7

 

%

Selling, general & administrative expenses

 

 

198,747

 

 

20.3

%

 

190,116

 

18.3

%

 

(8,631

)

 

(4.5

)

%

Rationalization and asset impairment charges

 

 

4,605

 

 

0.5

%

 

877

 

0.1

%

 

(3,728

)

 

(425.1

)

%

Operating income

 

 

165,047

 

 

16.8

%

 

164,364

 

15.8

%

 

683

 

 

0.4

 

%

Interest expense, net

 

 

8,779

 

 

0.9

%

 

13,201

 

1.3

%

 

4,422

 

 

33.5

 

%

Other income

 

 

2,262

 

 

0.2

%

 

4,181

 

0.4

%

 

(1,919

)

 

(45.9

)

%

Income before income taxes

 

 

158,530

 

 

16.2

%

 

155,344

 

14.9

%

 

3,186

 

 

2.1

 

%

Income taxes

 

 

35,115

 

 

3.6

%

 

33,413

 

3.2

%

 

(1,702

)

 

(5.1

)

%

Effective tax rate

 

 

22.2

%

 

 

 

 

21.5

%

 

 

 

(0.7

)

%

 

 

Net income

 

$

123,415

 

 

12.6

%

$

121,931

 

11.7

%

$

1,484

 

 

1.2

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

2.17

 

 

 

 

$

2.12

 

 

 

$

0.05

 

 

2.4

 

%

Diluted earnings per share

 

$

2.14

 

 

 

 

$

2.09

 

 

 

$

0.05

 

 

2.4

 

%

Weighted average shares (basic)

 

 

56,865

 

 

 

 

 

57,596

 

 

 

 

 

 

 

 

Weighted average shares (diluted)

 

 

57,641

 

 

 

 

 

58,417

 

 

 

 

 

 

 

 

Lincoln Electric Holdings, Inc.

Financial Highlights

(In thousands)

(Unaudited)

 

Balance Sheet Highlights

 

 

 

 

 

 

 

 

Selected Consolidated Balance Sheet Data

 

March 31, 2024

 

December 31, 2023

 

Cash and cash equivalents

 

$

374,978

 

$

393,787

 

Accounts receivable, net

 

 

544,514

 

 

538,830

 

Inventories

 

 

567,279

 

 

562,864

 

Total current assets

 

 

1,679,750

 

 

1,693,111

 

Property, plant and equipment, net

 

 

582,178

 

 

575,316

 

Total assets

 

 

3,379,717

 

 

3,377,297

 

Trade accounts payable

 

 

327,798

 

 

325,435

 

Total current liabilities

 

 

748,873

 

 

754,610

 

Short-term debt (1)

 

 

4,720

 

 

2,439

 

Long-term debt, less current portion

 

 

1,102,677

 

 

1,102,771

 

Total equity

 

 

1,307,828

 

 

1,308,852

 

 

 

 

 

 

 

 

 

Operating Working Capital

 

March 31, 2024

 

December 31, 2023

 

Average operating working capital to Net sales (2)

 

 

18.8

%

 

17.1

%

 

 

 

 

 

 

 

 

Invested Capital

 

March 31, 2024

 

December 31, 2023

 

Short-term debt (1)

 

$

4,720

 

$

2,439

 

Long-term debt, less current portion

 

 

1,102,677

 

 

1,102,771

 

Total debt

 

 

1,107,397

 

 

1,105,210

 

Total equity

 

 

1,307,828

 

 

1,308,852

 

Invested capital

 

$

2,415,225

 

$

2,414,062

 

 

 

 

 

 

 

 

 

Total debt / invested capital

 

 

45.9

%

 

45.8

%

(1)

Includes current portion of long-term debt.

(2)

Average operating working capital to Net sales is defined as the sum of Accounts receivable, Inventories and contract assets less Trade accounts payable and contract liabilities as of period end 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 March 31,

 

 

 

2024

 

2023

 

Operating income as reported

 

$

165,047

 

 

$

164,364

 

 

Special items (pre-tax):

 

 

 

 

 

 

 

Rationalization and asset impairment charges (2)

 

 

4,605

 

 

 

877

 

 

Acquisition transaction costs (3)

 

 

1,762

 

 

 

—

 

 

Amortization of step up in value of acquired inventories (4)

 

 

—

 

 

 

3,856

 

 

Adjusted operating income (1)

 

$

171,414

 

 

$

169,097

 

 

As a percent of net sales

 

 

17.5

 

%

 

16.3

 

%

 

 

 

 

 

 

 

 

Net income as reported

 

$

123,415

 

 

$

121,931

 

 

Special items:

 

 

 

 

 

 

 

Rationalization and asset impairment charges (2)

 

 

4,605

 

 

 

877

 

 

Acquisition transaction costs (3)

 

 

1,762

 

 

 

—

 

 

Amortization of step up in value of acquired inventories (4)

 

 

—

 

 

 

3,856

 

 

Gain on asset disposal (5)

 

 

—

 

 

 

(1,646

)

 

Tax effect of Special items (6)

 

 

(1,126

)

 

 

(818

)

 

Adjusted net income (1)

 

 

128,656

 

 

 

124,200

 

 

Interest expense, net

 

 

8,779

 

 

 

13,201

 

 

Income taxes as reported

 

 

35,115

 

 

 

33,413

 

 

Tax effect of Special items (6)

 

 

1,126

 

 

 

818

 

 

Adjusted EBIT (1)

 

$

173,676

 

 

$

171,632

 

 

 

 

 

 

 

 

 

 

Effective tax rate as reported

 

 

22.2

 

%

 

21.5

 

%

Net special item tax impact

 

 

(0.2

)

%

 

0.1

 

%

Adjusted effective tax rate (1)

 

 

22.0

 

%

 

21.6

 

%

 

 

 

 

 

 

 

 

Diluted earnings per share as reported

 

$

2.14

 

 

$

2.09

 

 

Special items per share

 

 

0.09

 

 

 

0.04

 

 

Adjusted diluted earnings per share (1)

 

$

2.23

 

 

$

2.13

 

 

 

 

 

 

 

 

 

 

Weighted average shares (diluted)

 

 

57,641

 

 

 

58,417

 

 

(1)

Adjusted operating income, adjusted net income, adjusted EBIT, adjusted effective tax rate and adjusted diluted EPS are non-GAAP financial measures. Refer to Non-GAAP Information section.

(2)

Primarily related to rationalization plans initiated within International Welding and the Harris Products Group.

(3)

Related to acquisitions and are included in Selling, general & administrative expenses.

(4)

Related to acquisitions and are included in Cost of goods sold.

(5)

Gain on asset disposal and included in Other income.

(6)

Includes the net tax impact of Special items recorded during the respective periods. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.

Lincoln Electric Holdings, Inc.

Financial Highlights

(In thousands, except per share amounts)

(Unaudited)

 

Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended March 31,

 

Return on Invested Capital

 

2024

 

2023

 

Net income as reported

 

$

546,733

 

 

$

468,125

 

 

Plus: Interest expense (after-tax)

 

 

36,519

 

 

 

28,875

 

 

Less: Interest income (after-tax)

 

 

6,793

 

 

 

1,560

 

 

Net operating profit after taxes

 

$

576,459

 

 

$

495,440

 

 

Special Items:

 

 

 

 

 

 

 

Rationalization and asset impairment charges

 

 

(7,586

)

 

 

10,780

 

 

Acquisition transaction costs

 

 

1,762

 

 

 

6,003

 

 

Pension settlement charges

 

 

845

 

 

 

—

 

 

Amortization of step up in value of acquired inventories

 

 

8,397

 

 

 

4,962

 

 

Gain on asset disposal

 

 

—

 

 

 

(1,646

)

 

Tax effect of Special items (2)

 

 

2,228

 

 

 

(3,051

)

 

Adjusted net operating profit after taxes (1)

 

$

582,105

 

 

$

512,488

 

 

 

 

 

 

 

 

 

 

Invested Capital

 

March 31, 2024

 

March 31, 2023

 

Short-term debt

 

$

4,720

 

 

$

49,340

 

 

Long-term debt, less current portion

 

 

1,102,677

 

 

 

1,110,626

 

 

Total debt

 

 

1,107,397

 

 

 

1,159,966

 

 

Total equity

 

 

1,307,828

 

 

 

1,125,236

 

 

Invested capital

 

$

2,415,225

 

 

$

2,285,202

 

 

 

 

 

 

 

 

 

 

Return on invested capital as reported

 

 

23.9

 

%

 

21.7

 

%

Adjusted return on invested capital (1)

 

 

24.1

 

%

 

22.4

 

%

(1)

Adjusted net operating profit after taxes and adjusted ROIC are non-GAAP financial measures. Refer to Non-GAAP Information section.

(2)

Includes the net tax impact of Special items recorded during the respective periods. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.

Lincoln Electric Holdings, Inc.

Financial Highlights

(In thousands, except per share amounts)

(Unaudited)

 

Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2024

 

2023

OPERATING ACTIVITIES:

 

 

 

 

 

Net income

$

123,415

 

 

$

121,931

 

Adjustments to reconcile Net income to Net cash provided by operating activities:

 

 

 

 

 

Rationalization and asset impairment net charges

 

64

 

 

 

—

 

Depreciation and amortization

 

21,586

 

 

 

21,295

 

Other non-cash items, net

 

11,946

 

 

 

2,498

 

Changes in operating assets and liabilities, net of effects from acquisitions:

 

 

 

 

 

Increase in accounts receivable

 

(9,603

)

 

 

(27,664

)

(Increase) decrease in inventories

 

(9,416

)

 

 

5,881

 

Increase in trade accounts payable

 

3,957

 

 

 

6,841

 

Net change in other current assets and liabilities

 

(4,790

)

 

 

(6,082

)

Net change in other long-term assets and liabilities

 

(3,865

)

 

 

(769

)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

133,294

 

 

 

123,931

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(26,256

)

 

 

(18,787

)

Proceeds from sale of property, plant and equipment

 

316

 

 

 

3,314

 

Other investing activities

 

—

 

 

 

(576

)

NET CASH USED BY INVESTING ACTIVITIES

 

(25,940

)

 

 

(16,049

)

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from (payments on) short-term borrowings

 

2,016

 

 

 

(43,940

)

Payments on long-term borrowings

 

(169

)

 

 

(111

)

Proceeds from exercise of stock options

 

24,438

 

 

 

2,476

 

Purchase of shares for treasury

 

(110,405

)

 

 

(32,158

)

Cash dividends paid to shareholders

 

(41,280

)

 

 

(37,583

)

NET CASH USED BY FINANCING ACTIVITIES

 

(125,400

)

 

 

(111,316

)

 

 

 

 

 

 

Effect of exchange rate changes on Cash and cash equivalents

 

(763

)

 

 

5,087

 

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(18,809

)

 

 

1,653

 

Cash and cash equivalents at beginning of period

 

393,787

 

 

 

197,150

 

Cash and cash equivalents at end of period

$

374,978

 

 

$

198,803

 

 

 

 

 

 

 

Cash dividends paid per share

$

0.71

 

 

$

0.64

 

Lincoln Electric Holdings, Inc.

Segment Highlights (1)

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

International

 

The Harris

 

Corporate /

 

 

 

 

 

 

Welding

 

Welding

 

Products Group

 

Eliminations

 

Consolidated

 

Three months ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

624,099

 

$

235,761

 

$

121,337

 

$

—

 

 

$

981,197

 

Inter-segment sales

 

 

29,978

 

 

8,408

 

 

3,093

 

 

(41,479

)

 

 

—

 

Total sales

 

$

654,077

 

$

244,169

 

$

124,430

 

$

(41,479

)

 

$

981,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

123,415

 

As a percent of total sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT (1)

 

$

136,100

 

$

24,707

 

$

18,342

 

$

(11,840

)

 

$

167,309

 

As a percent of total sales

 

 

20.8

%

 

10.1

%

 

14.7

%

 

 

 

 

17.1

%

Special items charges (3)

 

 

—

 

 

3,069

 

 

1,536

 

 

1,762

 

 

 

6,367

 

Adjusted EBIT (2)

 

$

136,100

 

$

27,776

 

$

19,878

 

$

(10,078

)

 

$

173,676

 

As a percent of total sales

 

 

20.8

%

 

11.4

%

 

16.0

%

 

 

 

 

17.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

658,645

 

$

252,416

 

$

128,282

 

$

—

 

 

$

1,039,343

 

Inter-segment sales

 

 

32,318

 

 

6,753

 

 

2,897

 

 

(41,968

)

 

 

—

 

Total sales

 

$

690,963

 

$

259,169

 

$

131,179

 

$

(41,968

)

 

$

1,039,343

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

121,931

 

As a percent of total sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT (1)

 

$

129,668

 

$

29,296

 

$

18,983

 

$

(9,402

)

 

$

168,545

 

As a percent of total sales

 

 

18.8

%

 

11.3

%

 

14.5

%

 

 

 

 

16.2

%

Special items charges (4)

 

 

2,785

 

 

302

 

 

—

 

 

—

 

 

 

3,087

 

Adjusted EBIT (2)

 

$

132,453

 

$

29,598

 

$

18,983

 

$

(9,402

)

 

$

171,632

 

As a percent of total sales

 

 

19.2

%

 

11.4

%

 

14.5

%

 

 

 

 

16.5

%

(1)

EBIT is defined as Operating income plus 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 in 2024 primarily reflect rationalization and asset impairment charges of $3,069 and $1,536 in International Welding and the Harris Products Group, respectively, and acquisition transaction costs of $1,762 in Corporate/Eliminations.

(4)

Special items in 2023 primarily reflect amortization of step up in value of acquired inventories of $2,785 and $1,071 in Americas and International Welding, respectively, Rationalization and asset impairment net charges of $877 in International Welding, and a gain on asset disposal of $1,646 in International Welding.

Lincoln Electric Holdings, Inc.

Change in Net Sales by Segment

(In thousands)

(Unaudited)

 

Three Months Ended March 31st Change in Net Sales by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Net Sales due to:

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

Foreign

 

Net Sales

 

 

2023

 

Volume

 

Acquisitions

 

Price

 

Exchange

 

2024

 

Operating Segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas Welding

$

658,645

 

$

(42,653

)

 

$

4,164

 

$

2,284

 

 

$

1,659

 

 

$

624,099

 

 

International Welding

 

252,416

 

 

(12,272

)

 

 

—

 

 

(4,010

)

 

 

(373

)

 

 

235,761

 

 

The Harris Products Group

 

128,282

 

 

(8,856

)

 

 

—

 

 

1,443

 

 

 

468

 

 

 

121,337

 

 

Consolidated

$

1,039,343

 

$

(63,781

)

 

$

4,164

 

$

(283

)

 

$

1,754

 

 

$

981,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas Welding

 

 

 

 

(6.5

)

%

 

0.6

%

 

0.3

 

%

 

0.3

 

%

 

(5.2

)

%

International Welding

 

 

 

 

(4.9

)

%

 

—

 

 

(1.6

)

%

 

(0.1

)

%

 

(6.6

)

%

The Harris Products Group

 

 

 

 

(6.9

)

%

 

—

 

 

1.1

 

%

 

0.4

 

%

 

(5.4

)

%

Consolidated

 

 

 

 

(6.1

)

%

 

0.4

%

 

0.0

 

%

 

0.2

 

%

 

(5.6

)

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240425689029/en/

Amanda Butler Vice President, Investor Relations & Communications Tel: 216.383.2534 Email: Amanda_Butler@lincolnelectric.com