Skip to Content

Investor News

Lincoln Electric Reports First Quarter 2016 Results

Apr 19 2016

Lincoln Electric Reports First Quarter 2016 Results


EPS of $0.76

First Quarter 2016 Key Metric Highlights

  • Sales declined 16.3% reflecting unfavorable foreign exchange translation and lower volumes
  • Operating margin held stable at 13.7% of sales
  • ROIC of 20.4%
  • Returned $125 million to shareholders through dividends and share repurchases

CLEVELAND, April 19, 2016 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq:LECO) today reported first quarter 2016 net income of $53.6 million, or diluted earnings per share (EPS) of $0.76.  This compares with net income of $68.4 million, or EPS of $0.89 in the comparable 2015 period.

First quarter 2016 sales decreased 16.3% to $550.7 million.  An 11.4% benefit from price and a 1.6% increase from acquisitions was offset by a 15.0% decline from unfavorable foreign exchange translation and 14.2% lower volumes.  Excluding Venezuela, pricing and foreign exchange had 1.0% and 2.2% unfavorable impacts, respectively, on sales in the quarter.  Operating income for the first quarter 2016 was $75.3 million, or 13.7% of sales reflecting operational and commercial initiatives focused on managing margins, as well as the benefit of cost reduction actions.  This compared with $90.5 million, or 13.8% of sales, in the comparable 2015 period. 

"We achieved solid margins and returns this quarter," stated Christopher L. Mapes, Chairman, President and Chief Executive Officer.  "While volumes continued to compress on weak industrial demand and challenging year-over-year comparisons, cost reduction actions and solid execution of our operational and commercial initiatives significantly mitigated the impact of year-over-year declines.  In this part of the cycle, we continue to invest in innovation, our long-term growth strategies and returning cash to shareholders.  We are diligently managing costs and margin performance and are looking for sustainable improvement in industrial sector conditions to drive increased customer demand."

Dividend and Share Repurchases

The Company's Board of Directors declared a quarterly cash dividend of $0.32 per share, which was paid on April 15, 2016 to shareholders of record as of March 31, 2016.   

During the quarter, the Company returned $125.1 million to shareholders through dividends and the repurchase of 1.9 million of the Company's common shares.  The Company is maintaining its 2016 share repurchase target of $400 million of the Company's common shares.

Webcast Information

A conference call to discuss first quarter 2016 financial results will be webcast live today, April 19, 2016, at 10:00 a.m., Eastern Time.  This webcast is accessible at http://ir.lincolnelectric.com.  Listeners should go to the web site prior to the call to register, download and install any necessary audio software.  A replay of the webcast will be available on the Company's web site.

Investors who are unable to access the webcast may listen to the conference call live by telephone by dialing (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 77332044.  Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.

Financial results for the first quarter 2016 can also be obtained at http://ir.lincolnelectric.com.

About Lincoln Electric

Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market.  Headquartered in Cleveland, Ohio, Lincoln has 48 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries.  For more information about Lincoln Electric and its products and services, visit the Company's website at www.lincolnelectric.com.

Non-GAAP Information

Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company's financial performance from period to period.  Management uses this information in assessing and evaluating the Company's underlying operating performance.  Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures.  Please refer to the attached schedule for a reconciliation of non-GAAP financial measures to the related GAAP financial measures.
 
Forward-Looking Statements

The Company's expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements reflect management's current expectations and involve a number of risks and uncertainties.  Forward-looking statements generally can be identified by the use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "forecast," "guidance" or words of similar meaning.  Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company's operating results.  The factors include, but are not limited to: general economic and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations, including in highly inflationary countries such as Venezuela; adverse outcome of pending or potential litigation; actual costs of the Company's rationalization plans; possible acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; and the possible effects of events beyond our control, such as political unrest, acts of terror and natural disasters, on the Company or its customers, suppliers and the economy in general.  For additional discussion, see "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Income
 
    Three Months Ended March 31,   Fav (Unfav) to Prior Year
    2016   % of Sales   2015   % of Sales   $   %
Net sales   $ 550,722     100.0 %   $ 657,900     100.0 %   $ (107,178 )   (16.3 %)
Cost of goods sold   361,620     65.7 %   437,510     66.5 %   75,890     17.3 %
Gross profit   189,102     34.3 %   220,390     33.5 %   (31,288 )   (14.2 %)
Selling, general & administrative expenses   113,810     20.7 %   129,891     19.7 %   16,081     12.4 %
Operating income   75,292     13.7 %   90,499     13.8 %   (15,207 )   (16.8 %)
Interest income   430     0.1 %   593     0.1 %   (163 )   (27.5 %)
Equity earnings in affiliates   626     0.1 %   849     0.1 %   (223 )   (26.3 %)
Other income   661     0.1 %   2,610     0.4 %   (1,949 )   (74.7 %)
Interest expense   (3,827 )   (0.7 %)   (1,844 )   (0.3 %)   (1,983 )   (107.5 %)
Income before income taxes   73,182     13.3 %   92,707     14.1 %   (19,525 )   (21.1 %)
Income taxes   19,558     3.6 %   24,389     3.7 %   4,831     19.8 %
Effective tax rate   26.7 %       26.3 %       (0.4 %)    
Net income including non-controlling interests   53,624     9.7 %   68,318     10.4 %   (14,694 )   (21.5 %)
Non-controlling interests in subsidiaries' loss   (14 )       (36 )       22     61.1 %
Net income   $ 53,638     9.7 %   $ 68,354     10.4 %   $ (14,716 )   (21.5 %)
                         
Basic earnings per share   $ 0.77         $ 0.90         $ (0.13 )   (14.4 %)
Diluted earnings per share   $ 0.76         $ 0.89         $ (0.13 )   (14.6 %)
Weighted average shares (basic)   69,585         76,242              
Weighted average shares (diluted)   70,246         77,059              


 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
Balance Sheet Highlights
 
Selected Consolidated Balance Sheet Data   March 31, 2016   December 31, 2015
Cash and cash equivalents   $ 220,996     $ 304,183  
Total current assets   902,347     935,995  
Property, plant and equipment, net   413,826     411,323  
Total assets   1,777,095     1,784,171  
Total current liabilities   401,455     370,122  
Short-term debt (1)   24,844     4,278  
Long-term debt   350,106     350,347  
Total equity   892,669     932,448  
         
Net Operating Working Capital   March 31, 2016   December 31, 2015
Accounts receivable   $ 286,120     $ 264,715  
Inventory   292,709     275,930  
Trade accounts payable   159,590     152,620  
Net operating working capital   $ 419,239     $ 388,025  
         
Net operating working capital to net sales (2)   19.0 %   17.1 %
         
Invested Capital   March 31, 2016   December 31, 2015
Short-term debt (1)   $ 24,844     $ 4,278  
Long-term debt   350,106     350,347  
Total debt   374,950     354,625  
Total equity   892,669     932,448  
Invested capital   $ 1,267,619     $ 1,287,073  
         
Total debt / invested capital   29.6 %   27.6 %
             

(1) Includes current portion of long-term debt.

(2) Net operating working capital to net sales is defined as net operating working capital divided by annualized rolling three months of sales.

 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Non-GAAP Financial Measures
 
    Three Months Ended March 31,
    2016   2015
Operating income as reported   $ 75,292     $ 90,499  
Special items (pre-tax):        
Adjusted operating income (1)   $ 75,292     $ 90,499  
As a percent of total sales   13.7 %   13.8 %
Net income as reported   $ 53,638     $ 68,354  
Special items (after-tax):        
Adjusted net income (1)   $ 53,638     $ 68,354  
         
Diluted earnings per share as reported   $ 0.76     $ 0.89  
Special items        
Adjusted diluted earnings per share (1)   $ 0.76     $ 0.89  
         
Weighted average shares (diluted)   70,246     77,059  
         
Return on Invested Capital   Twelve Months Ended March 31,
    2016   2015
Adjusted net income (1)(2)   $ 245,467     $ 300,170  
Plus: Interest expense (after-tax)   14,693     6,608  
Less: Interest income (after-tax)   1,574     1,711  
Adjusted net income before tax effected interest   $ 258,586     $ 305,067  
Invested capital   1,267,619     1,351,822  
Return on invested capital (1)(3)   20.4 %   22.6 %
             

(1) Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company's financial performance from period to period.  Management uses this information in assessing and evaluating the Company's underlying operating performance.  Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures.

(2) Adjusted net income for the twelve months ended March 31, 2016 excludes the after-tax impact of $132.7 million from special items including pension settlement charges, rationalization and asset impairment charges and Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms.  Adjusted net income for the twelve months ended March 31, 2015 excludes the after-tax impact of $33.6 million from special items including rationalization and asset impairment charges and Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms.

(3) Return on invested capital is defined as rolling 12 months of Adjusted net income excluding tax-effected interest income and expense divided by invested capital.

 
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Condensed Consolidated Statements of Cash Flows
 
    Three Months Ended March 31,
    2016   2015
OPERATING ACTIVITIES:        
Net income   $ 53,638     $ 68,354  
Non-controlling interests in subsidiaries' loss   (14 )   (36 )
Net income including non-controlling interests   53,624     68,318  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:            
Rationalization and asset impairment charges       30  
Depreciation and amortization   15,625     16,032  
Equity earnings in affiliates, net   (2 )   (216 )
Pension expense   4,144     5,679  
Pension contributions and payments   (20,865 )   (21,234 )
Other non-cash items, net   (2,079 )   (18,562 )
Changes in operating assets and liabilities, net of effects from acquisitions:            
Increase in accounts receivable   (16,592 )   (25,377 )
Increase in inventories   (10,780 )   (16,233 )
Increase (decrease) in trade accounts payable   4,657     (12,916 )
Net change in other current assets and liabilities (1)   (2,911 )   55,069  
Net change in other long-term assets and liabilities   (460 )   2,194  
NET CASH PROVIDED BY OPERATING ACTIVITIES   24,361     52,784  
         
INVESTING ACTIVITIES:        
Capital expenditures   (8,885 )   (12,456 )
Proceeds from sale of property, plant and equipment   458     1,187  
Other investing activities       2,024  
NET CASH USED BY INVESTING ACTIVITIES   (8,427 )   (9,245 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   21,756     101,510  
Proceeds from exercise of stock options   2,015     1,733  
Excess tax benefits from stock-based compensation   357     537  
Purchase of shares for treasury   (102,488 )   (102,853 )
Cash dividends paid to shareholders   (22,625 )   (22,329 )
Other financing activities   (3,806 )   (20 )
NET CASH USED BY FINANCING ACTIVITIES   (104,791 )   (21,422 )
         
Effect of exchange rate changes on Cash and cash equivalents   5,670     (11,479 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (83,187 )   10,638  
Cash and cash equivalents at beginning of period   304,183     278,379  
Cash and cash equivalents at end of period   $ 220,996     $ 289,017  
         
Cash dividends paid per share   $ 0.32     $ 0.29  
                 

(1) Net change in other current assets and liabilities in 2015 includes the receipt of a $25 million tax refund.

 
Lincoln Electric Holdings, Inc.
Segment Highlights (1)
(In thousands)
(Unaudited)
 
    Americas
Welding
  International
Welding
  The Harris
Products
Group
  Corporate /
Eliminations
  Consolidated
Three months ended March 31, 2016                        
Net sales   $ 359,008     $ 124,305     $ 67,409     $     $ 550,722  
Inter-segment sales   23,831     4,426     2,303     (30,560 )    
Total   $ 382,839     $ 128,731     $ 69,712     $ (30,560 )   $ 550,722  
                     
EBIT (2)   $ 61,438     $ 6,233     $ 7,711     $ 1,197     $ 76,579  
As a percent of total sales   16.0 %   4.8 %   11.1 %       13.9 %
Special items charge (gain)                    
EBIT, as adjusted (3)   $ 61,438     $ 6,233     $ 7,711     $ 1,197     $ 76,579  
As a percent of total sales   16.0 %   4.8 %   11.1 %       13.9 %
Three months ended March 31, 2015                        
Net sales   $ 448,837     $ 139,247     $ 69,816     $     $ 657,900  
Inter-segment sales   23,023     5,027     2,011     (30,061 )    
Total   $ 471,860     $ 144,274     $ 71,827     $ (30,061 )   $ 657,900  
                     
EBIT (2)   $ 75,415     $ 10,934     $ 7,549     $ 60     $ 93,958  
As a percent of total sales   16.0 %   7.6 %   10.5 %       14.3 %
Special items charge (gain)                    
EBIT, as adjusted (3)   $ 75,415     $ 10,934     $ 7,549     $ 60     $ 93,958  
As a percent of total sales   16.0 %   7.6 %   10.5 %       14.3 %
                             

(1) As previously announced on February 9, 2016, the Company realigned its organizational structure into three operating segments which was effective beginning in the first quarter of 2016.

(2) EBIT is defined as Operating income plus Equity earnings in affiliates and Other income.

(2) The primary profit measure used by management to assess segment performance is EBIT, as adjusted.  EBIT for each operating segment is adjusted for special items to derive EBIT, as adjusted.

 
Lincoln Electric Holdings, Inc.
Change in Net Sales by Segment
(In thousands)
(Unaudited)
 
Three Months Ended March 31st Change in Net Sales by Segment  
               
        Change in Net Sales due to:      
    Net Sales
2015
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2016
 
Operating Segments                          
Americas Welding   $ 448,837     $ (85,063 )   $ 6,977     $ 80,320     $ (92,063 )   $ 359,008    
International Welding   139,247     (9,822 )   3,465     (3,105 )   (5,480 )   124,305    
The Harris Products Group   69,816     1,390         (2,404 )   (1,393 )   67,409    
Consolidated   $ 657,900     $ (93,495 )   $ 10,442     $ 74,811     $ (98,936 )   $ 550,722    
                           
Consolidated (excluding Venezuela)   $ 635,021     $ (79,236 )   $ 10,442     $ (6,490 )   $ (13,995 )   $ 545,742    
                           
% Change                          
Americas Welding       (19.0 %)   1.6 %   17.9 %   (20.5 %)   (20.0 %)  
International Welding       (7.1 %)   2.5 %   (2.2 %)   (3.9 %)   (10.7 %)  
The Harris Products Group       2.0 %       (3.4 %)   (2.0 %)   (3.4 %)  
Consolidated       (14.2 %)   1.6 %   11.4 %   (15.0 %)   (16.3 %)  
                           
Consolidated (excluding Venezuela)       (12.5 %)   1.6 %   (1.0 %)   (2.2 %)   (14.1 %)
                                   
Contact

Amanda Butler
Director, Investor Relations
Tel: 216.383.2534
Email: Amanda_Butler@lincolnelectric.com 

Primary Logo

Lincoln Electric Co.