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Lincoln Electric Reports Fourth Quarter and Full Year 2015 Results

Feb 23 2016

Lincoln Electric Reports Fourth Quarter 2015 Results


Fourth Quarter and Full Year 2015 Key Metric Highlights

  • Q4 operating income margin: 13.8% of sales, 15.1% on an adjusted basis
  • FY2015 operating income margin of 7.2% of sales, 14.7% on an adjusted basis
  • Strong operational execution with a 21.1% ROIC and 17.1% average operating working capital ratio
  • FY2015 cash flows from operations of $311 million with 100% cash conversion of adjusted net income1
  • Returned a record $486 million to shareholders in FY2015 through share repurchases and dividends

CLEVELAND, Feb. 23, 2016 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq:LECO) today reported fourth quarter 2015 net income of $48.7 million, or earnings per share (EPS) of $0.68.  This compares with net income of $75.2 million, or EPS of $0.96 in the comparable 2014 period.  On an adjusted basis, fourth quarter 2015 Adjusted net income was $53.8 million, or Adjusted EPS of $0.75, which excludes the after-tax impact of $5.1 million, or $0.07 per diluted share, from special items as compared with $0.96 in the comparable 2014 period.  Fourth quarter 2015 EPS was unfavorably impacted by $0.08 from foreign currency translation and $0.09 from a contingent consideration related to an acquisition.

Fourth quarter 2015 sales decreased 17.0% to $568.0 million, or 6.2% on an organic basis, as the benefits of price and acquisitions were offset by broad volume weakness and unfavorable foreign currency translation.  Operating income for the fourth quarter 2015 was $78.4 million, or 13.8% of sales, compared with $104.9 million, or 15.3% of sales, in the comparable 2014 period.  Fourth quarter 2015 operating income was impacted by special items totaling $7.5 million.  Excluding these items, Adjusted operating income was $86.0 million, or 15.1% of sales on strong operational execution and the benefit of cost reduction actions.  This compares with Adjusted operating income of $105.1 million, or 15.4% of sales in 2014.

“We finished a challenging year with solid margin performance, cash flows and returns,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer.  “Our results highlight the team’s focused execution, the benefits of our ‘2020 Vision and Strategy,’ and the aggressive cost reduction actions we initiated throughout 2015.  We are pleased to report that we returned a record $486 million to shareholders while maintaining a strong balance sheet, and are positioned to repurchase $400 million of shares in 2016.  While we expect industrial demand to remain challenging through 2016, we will continue to focus on our continuous improvement initiatives, manage margin performance and invest in Lincoln’s long-term growth opportunities to drive shareholder returns through the cycle.”

1Cash conversion is defined as Net cash provided by operating activities less Capital expenditures divided by Adjusted net income.

Dividend and Share Repurchases

The Company’s Board of Directors increased the quarterly cash dividend 10.3%, from $0.29 per share to $0.32, or $1.28 per share on an annual basis, which was paid on January 15, 2016 to shareholders of record as of December 31, 2015.

During the quarter, the Company returned $122.7 million to shareholders through dividends and the repurchase of $101.7 million of the Company’s common shares.  During 2015, the Company returned $486.5 million to shareholders through dividends and the repurchase of $399.5 million of the Company’s common shares. 

The Company's 2016 share repurchase target is $400 million of the Company’s common shares.

Twelve Months 2015 Summary

Net income for the full year 2015 was $127.5 million, or EPS of $1.70, which includes the impact of $132.7 million of after-tax special item charges, or $1.78 per diluted share.  This compares with net income of $254.7 million, or EPS of $3.18, in 2014.  Adjusted net income was $260.2 million, or Adjusted EPS of $3.48 in 2015, compared with Adjusted net income of $305.9 million, or Adjusted EPS of $3.82, in 2014.  2015 EPS was unfavorably impacted by $0.15 from foreign currency translation and $0.16 from a contingent consideration related to an acquisition. 

Sales decreased 9.9%, or 4.0% on an organic basis, to $2.5 billion in 2015 as favorable price and acquisitions were offset by lower volumes and unfavorable foreign currency translation.  Operating income decreased to $181.7 million, or 7.2% of sales in 2015 due to $142.7 million in non-cash pension settlement charges primarily related to a previously announced pension annuity contract purchase, $27.2 million in non-cash charges related to a Venezuelan currency remeasurement loss and $20.0 million ($6.2 million non-cash) of rationalization and asset impairment charges.  This compares with 2014 Operating income of $373.7 million, or 13.3% of sales.  Excluding these items, 2015 Adjusted operating income was $371.6 million or 14.7% of sales on solid operational execution and cost reduction benefits.  This compares with Adjusted operating income of $424.9 million, or 15.1% of sales, in 2014 which excludes $30.1 million of net rationalization charges and $21.1 million of non-cash charges related to a Venezuelan currency remeasurement loss.

Webcast Information

A conference call to discuss fourth quarter and full year 2015 financial results will be webcast live today, Tuesday, February 23, 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 and 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 20788418.  Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.

Financial results for the fourth quarter and full year 2015 can also be obtained at http://ir.lincolnelectric.com.

About Lincoln Electric

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

Non-GAAP Information

Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures 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, 2014.


Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Consolidated Statements of Income                        
                         
    Three months ended December 31,   Fav (Unfav) to Prior Year
    2015   % of Sales   2014   % of Sales   $   %
Net sales   $ 567,985     100.0 %   $ 683,954     100.0 %   $ (115,969 )   (17.0 %)
Cost of goods sold (1)   371,906     65.5 %   452,869     66.2 %   80,963     17.9 %
Gross profit   196,079     34.5 %   231,085     33.8 %   (35,006 )   (15.1 %)
Selling, general & administrative expenses   110,803     19.5 %   126,002     18.4 %   15,199     12.1 %
Rationalization and asset impairment charges   434     0.1 %   166         (268 )   (161.4 %)
Pension settlement charges   6,407     1.1 %           (6,407 )   (100.0 %)
Operating income   78,435     13.8 %   104,917     15.3 %   (26,482 )   (25.2 %)
Interest income   691     0.1 %   628     0.1 %   63     10.0 %
Equity earnings in affiliates   877     0.2 %   1,104     0.2 %   (227 )   (20.6 %)
Other income   959     0.2 %   791     0.1 %   168     21.2 %
Interest expense (2)   (9,790 )   (1.7 %)   (6,704 )   (1.0 %)   (3,086 )   (46.0 %)
Income before income taxes   71,172     12.5 %   100,736     14.7 %   (29,564 )   (29.3 %)
Income taxes   22,473     4.0 %   25,401     3.7 %   2,928     11.5 %
Effective tax rate   31.6 %       25.2 %       (6.4 %)    
Net income including non-controlling interests   48,699     8.6 %   75,335     11.0 %   (26,636 )   (35.4 %)
Non-controlling interests in subsidiaries’ earnings (loss)   7         123         (116 )   (94.3 %)
Net income   $ 48,692     8.6 %   $ 75,212     11.0 %   $ (26,520 )   (35.3 %)
                         
Basic earnings per share   $ 0.68         $ 0.97         $ (0.29 )   (29.9 %)
Diluted earnings per share   $ 0.68         $ 0.96         $ (0.28 )   (29.2 %)
Weighted average shares (basic)   71,446         77,403              
Weighted average shares (diluted)   72,121         78,280              
                         

(1)  Cost of goods sold during the three months ended December 31, 2015 includes a charge of $708 representing the impact of Venezuelan remeasurement losses related to the adoption of a new foreign exchange mechanism.

(2)  Interest expense during the three months ended December 31, 2015 and December 31, 2014 includes adjustments to the consideration expected to be paid to acquire additional ownership interests of a majority-owned subsidiary of $6,436 and $5,952, respectively.


Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
 
Consolidated Statements of Income (Continued)                        
                         
    Twelve months ended December 31,   Fav (Unfav) to Prior Year
    2015   % of Sales   2014   % of Sales   $   %
Net sales   $ 2,535,791     100.0 %   $ 2,813,324     100.0 %   $ (277,533 )   (9.9 %)
Cost of goods sold (1)   1,694,647     66.8 %   1,864,027     66.3 %   169,380     9.1 %
Gross profit   841,144     33.2 %   949,297     33.7 %   (108,153 )   (11.4 %)
Selling, general & administrative expenses (2)   496,748     19.6 %   545,497     19.4 %   48,749     8.9 %
Rationalization and asset impairment charges   19,958     0.8 %   30,053     1.1 %   10,095     33.6 %
Pension settlement charges   142,738     5.6 %           (142,738 )   (100.0 %)
Operating income   181,700     7.2 %   373,747     13.3 %   (192,047 )   (51.4 %)
Interest income   2,714     0.1 %   3,093     0.1 %   (379 )   (12.3 %)
Equity earnings in affiliates   3,015     0.1 %   5,412     0.2 %   (2,397 )   (44.3 %)
Other income   4,182     0.2 %   3,995     0.1 %   187     4.7 %
Interest expense (3)   (21,824 )   (0.9 %)   (10,434 )   (0.4 %)   (11,390 )   (109.2 %)
Income  before income taxes   169,787     6.7 %   375,813     13.4 %   (206,026 )   (54.8 %)
Income taxes   42,375     1.7 %   121,933     4.3 %   79,558     65.2 %
Effective tax rate   25.0 %       32.4 %       7.4 %    
Net income including non-controlling interests   127,412     5.0 %   253,880     9.0 %   (126,468 )   (49.8 %)
Non-controlling interests in subsidiaries’ earnings (loss)   (66 )       (806 )       740     91.8 %
Net income   $ 127,478     5.0 %   $ 254,686     9.1 %   $ (127,208 )   (49.9 %)
                         
Basic earnings per share   $ 1.72         $ 3.22         $ (1.50 )   (46.6 %)
Diluted earnings per share   $ 1.70         $ 3.18         $ (1.48 )   (46.5 %)
Weighted average shares (basic)   74,111         79,185              
Weighted average shares (diluted)   74,854         80,096              
                         

(1)  Cost of goods sold during 2015 and 2014 includes charges of $22,880 and $3,468, respectively, representing the impact of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms.

(2)  Selling, general & administrative expenses during 2015 and 2014 include charges of $4,334 and $17,665, respectively, representing the impact of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms.

(3)  Interest expense during the 2015 and 2014 includes adjustments to the consideration expected to be paid to acquire additional ownership interests of a majority-owned subsidiary of $12,142 and $8,244, respectively.



Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
         
Balance Sheet Highlights        
         
Selected Consolidated Balance Sheet Data   December 31, 2015   December 31, 2014
Cash and cash equivalents   $ 304,183     $ 278,379  
Total current assets   935,995     1,096,202  
Property, plant and equipment, net   411,323     438,746  
Total assets   1,784,171     1,939,215  
Total current liabilities   370,122     492,395  
Short-term debt (1)   4,278     68,166  
Long-term debt   350,347     2,488  
Total equity   932,448     1,285,781  
         
Net Operating Working Capital   December 31, 2015   December 31, 2014
Accounts receivable   $ 264,715     $ 337,664  
Inventory   275,930     341,057  
Trade accounts payable   152,620     209,745  
Net operating working capital   $ 388,025     $ 468,976  
         
Net operating working capital to net sales (2)   17.1 %   17.1 %
         
Invested Capital   December 31, 2015   December 31, 2014
Short-term debt (1)   $ 4,278     $ 68,166  
Long-term debt   350,347     2,488  
Total debt   354,625     70,654  
Total equity   932,448     1,285,781  
Invested capital   $ 1,287,073     $ 1,356,435  
         
Total debt / invested capital   27.6 %   5.2 %
             

(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 December 31,   Twelve months ended December 31,
    2015   2014   2015   2014
Operating income as reported   $ 78,435     $ 104,917     $ 181,700     $ 373,747  
Special items (pre-tax):                
Rationalization and asset impairment charges (1)   434     166     19,958     30,053  
Venezuela foreign exchange losses (2)   708         27,214     21,133  
Pension settlement charges (3)   6,407         142,738      
Adjusted operating income (4)   $ 85,984     $ 105,083     $ 371,610     $ 424,933  
As a percent of total sales   15.1 %   15.4 %   14.7 %   15.1 %
                 
Net income as reported   $ 48,692     $ 75,212     $ 127,478     $ 254,686  
Special items (after-tax):                
Rationalization and asset impairment charges (1)   450     167     18,182     30,914  
Venezuela foreign exchange losses (2)   708         27,214     21,133  
Pension settlement charges (3)   3,969         87,310      
Special items attributable to non-controlling
Interests
              (805 )
Adjusted net income (4)   $ 53,819     $ 75,379     $ 260,184     $ 305,928  
                 
Diluted earnings per share as reported   $ 0.68     $ 0.96     $ 1.70     $ 3.18  
Special items   0.07         1.78     0.64  
Adjusted diluted earnings per share (4)   $ 0.75     $ 0.96     $ 3.48     $ 3.82  
                 
Weighted average shares (diluted)   72,121     78,280     74,854     80,096  
                 
Return on Invested Capital           2015   2014
Adjusted net income           $ 260,184     $ 305,928  
Plus: Interest expense (after-tax)           13,469     6,439  
Less: Interest income (after-tax)           1,675     1,909  
Net operating profit after taxes           271,978     310,458  
Invested capital           1,287,073     1,356,435  
Return on invested capital (4)(5)           21.1 %   22.9 %
 

(1)  The three and twelve months ended December 31, 2015 and 2014 include net charges primarily related to severance and other related costs.  The twelve months ended December 31, 2015 also include long-lived asset and goodwill impairment charges.  Rationalization charges in 2014 are partially offset by gains related to the sale of assets at rationalized operations.

(2)  The three and twelve months ended December 31, 2015 and twelve months ended December 31, 2014 represent the impacts of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms.

(3)  The three and twelve months ended December 31, 2015 include pension settlement charges primarily related to the purchase of a group annuity contract.

(4)  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.

(5)  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,
    2015   2014
OPERATING ACTIVITIES:        
Net income   $ 48,692     $ 75,212  
Non-controlling interests in subsidiaries’ income   7     123  
Net income including non-controlling interests   48,699     75,335  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment charges   149     127  
Depreciation and amortization   16,110     16,590  
Equity (earnings) loss in affiliates, net   (278 )   53  
Pension expense and settlement charges   10,967     2,761  
Pension contributions and payments   (1,426 )   (1,429 )
Other non-cash items, net   5,469     14,357  
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease in accounts receivable   42,080     28,264  
Decrease in inventories   28,243     5,435  
(Decrease) increase in trade accounts payable   (12,282 )   13,669  
Net change in other current assets and liabilities 1   (67,467 )   (24,954 )
Net change in other long-term assets and liabilities   5,158     3,441  
NET CASH PROVIDED BY OPERATING ACTIVITIES   75,422     133,649  
         
INVESTING ACTIVITIES:        
Capital expenditures   (10,320 )   (17,560 )
Acquisition of businesses, net of cash acquired   (3,194 )   (23,338 )
Proceeds from sale of property, plant and equipment   137     411  
NET CASH USED BY INVESTING ACTIVITIES   (13,377 )   (40,487 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   2,186     (17,783 )
Proceeds from exercise of stock options   1,396     3,171  
Excess tax benefits from stock-based compensation   487     2,606  
Purchase of shares for treasury   (101,690 )   (57,775 )
Cash dividends paid to shareholders   (21,026 )   (17,866 )
Other financing activities   18      
NET CASH USED BY FINANCING ACTIVITIES   (118,629 )   (87,647 )
         
Effect of exchange rate changes on Cash and cash equivalents   (3,578 )   (6,659 )
DECREASE IN CASH AND CASH EQUIVALENTS   (60,162 )   (1,144 )
Cash and cash equivalents at beginning of period   364,345     279,523  
Cash and cash equivalents at end of period   $ 304,183     $ 278,379  
         
Cash dividends paid per share   $ 0.29     $ 0.23  

1 Net change in other current assets and liabilities increased in 2014 because of the receipt of a $50.3 million tax refund.


Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts) (Unaudited)
 
Condensed Consolidated Statements of Cash Flows    
    Twelve months ended December 31,
    2015   2014
OPERATING ACTIVITIES:        
Net income   $ 127,478     $ 254,686  
Non-controlling interests in subsidiaries’ loss   (66 )   (806 )
Net income including non-controlling interests   127,412     253,880  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:        
Rationalization and asset impairment charges   6,269     29,574  
Depreciation and amortization   64,007     69,607  
Equity earnings in affiliates, net   (530 )   (1,848 )
Pension expense and settlement charges   162,815     12,395  
Pension contributions and payments 1   (53,547 )   (36,072 )
Other non-cash items, net   (46,838 )   44,398  
Changes in operating assets and liabilities, net of effects from acquisitions:        
Decrease in accounts receivable   56,741     5,876  
Decrease (increase) in inventories   56,067     (5,718 )
(Decrease) increase in trade accounts payable   (46,911 )   2,135  
Net change in other current assets and liabilities 2   (20,435 )   28,345  
Net change in other long-term assets and liabilities   5,808     (870 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   310,858     401,702  
         
INVESTING ACTIVITIES:        
Capital expenditures   (50,507 )   (72,990 )
Acquisition of businesses, net of cash acquired   (37,076 )   (24,230 )
Proceeds from sale of property, plant and equipment   2,310     17,457  
Other investing activities   (79 )   778  
NET CASH USED BY INVESTING ACTIVITIES   (85,352 )   (78,985 )
         
FINANCING ACTIVITIES:        
Net change in borrowings   316,606     53,331  
Proceeds from exercise of stock options   5,996     9,116  
Excess tax benefits from stock-based compensation   1,974     5,967  
Purchase of shares for treasury   (399,494 )   (307,178 )
Cash dividends paid to shareholders   (86,968 )   (73,261 )
Transactions with non-controlling interests   (8,022 )   (2,330 )
NET CASH USED BY FINANCING ACTIVITIES   (169,908 )   (314,355 )
         
Effect of exchange rate changes on Cash and cash equivalents   (29,794 )   (29,808 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   25,804     (21,446 )
Cash and cash equivalents at beginning of period   278,379     299,825  
Cash and cash equivalents at end of period   $ 304,183     $ 278,379  
         
Cash dividends paid per share   $ 1.16     $ 0.92  
                 

1 Pension contributions and payments includes contributions to the U.S. pension plans of $47.1 million in 2015 and $21.2 million in 2014.
2 Net change in other current assets and liabilities includes tax refunds of $25.0 million in 2015 and $50.3 million in 2014.


Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands) (Unaudited)
 
    North
America
Welding
  Europe
Welding
  Asia Pacific
Welding
  South
America
Welding
  The Harris
Products
Group
  Corporate /
Eliminations
  Consolidated
Three months ended December 31, 2015                        
Net sales   $ 373,878     $ 76,909     $ 42,817     $ 14,950     $ 59,431     $     $ 567,985  
Inter-segment sales   20,973     3,235     1,482     20     2,278     (27,988 )    
Total   $ 394,851     $ 80,144     $ 44,299     $ 14,970     $ 61,709     $ (27,988 )   $ 567,985  
                             
EBIT (1)   $ 71,972     $ 4,751     $ (474 )   $ (1,512 )   $ 5,661     $ (127 )   $ 80,271  
As a percent of total sales   18.2 %   5.9 %   (1.1 %)   (10.1 %)   9.2 %       14.1 %
Special items charge (gain) (2)   $ 6,353     $     $ 488     $ 708     $     $     $ 7,549  
EBIT, as adjusted (4)   $ 78,325     $ 4,751     $ 14     $ (804 )   $ 5,661     $ (127 )   $ 87,820  
As a percent of total sales   19.8 %   5.9 %       (5.4 %)   9.2 %       15.5 %
Three months ended December 31, 2014                        
Net sales   $ 429,907     $ 97,288     $ 58,113     $ 32,689     $ 65,957     $     $ 683,954  
Inter-segment sales   28,064     3,699     3,176     71     1,821     (36,831 )    
Total   $ 457,971     $ 100,987     $ 61,289     $ 32,760     $ 67,778     $ (36,831 )   $ 683,954  
                             
EBIT (1)   $ 88,456     $ 9,429     $ 1,715     $ (217 )   $ 6,380     $ 1,049     $ 106,812  
As a percent of total sales   19.3 %   9.3 %   2.8 %   (0.7 %)   9.4 %       15.6 %
Special items charge (gain) (3)   $     $ (19 )   $ 185     $     $     $     $ 166  
EBIT, as adjusted (4)   $ 88,456     $ 9,410     $ 1,900     $ (217 )   $ 6,380     $ 1,049     $ 106,978  
As a percent of total sales   19.3 %   9.3 %   3.1 %   (0.7 %)   9.4 %       15.6 %
Twelve months ended December 31, 2015                        
Net sales   $ 1,610,357     $ 336,824     $ 186,615     $ 138,014     $ 263,981     $     $ 2,535,791  
Inter-segment sales   100,770     15,922     10,510     174     9,312     (136,688 )    
Total   $ 1,711,127     $ 352,746     $ 197,125     $ 138,188     $ 273,293     $ (136,688 )   $ 2,535,791  
                             
EBIT (1)   $ 150,989     $ 29,810     $ 1,960     $ (21,645 )   $ 27,882     $ (99 )   $ 188,897  
As a percent of total sales   8.8 %   8.5 %   1.0 %   (15.7 %)   10.2 %       7.4 %
Special items charge (gain) (2)   $ 155,757     $ 1,507     $ 5,432     $ 27,214     $     $     $ 189,910  
EBIT, as adjusted (4)   $ 306,746     $ 31,317     $ 7,392     $ 5,569     $ 27,882     $ (99 )   $ 378,807  
As a percent of total sales   17.9 %   8.9 %   3.7 %   4.0 %   10.2 %       14.9 %
Twelve months ended December 31, 2014                        
Net sales   $ 1,700,924     $ 425,775     $ 243,800     $ 148,595     $ 294,230     $     $ 2,813,324  
Inter-segment sales   124,732     19,586     14,820     144     8,210     (167,492 )    
Total   $ 1,825,656     $ 445,361     $ 258,620     $ 148,739     $ 302,440     $ (167,492 )   $ 2,813,324  
                             
EBIT (1)   $ 335,533     $ 47,918     $ (27,314 )   $ (5,762 )   $ 28,563     $ 4,216     $ 383,154  
As a percent of total sales   18.4 %   10.8 %   (10.6 %)   (3.9 %)   9.4 %       13.6 %
Special items charge (gain) (3)   $ (68 )   $ 904     $ 28,635     $ 21,715     $     $     $ 51,186  
EBIT, as adjusted (4)   $ 335,465     $ 48,822     $ 1,321     $ 15,953     $ 28,563     $ 4,216     $ 434,340  
As a percent of total sales   18.4 %   11.0 %   0.5 %   10.7 %   9.4 %       15.4 %
                                         

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

(2)  Special items in the three and twelve months ended December 31, 2015 represent rationalization charges primarily related to employee severance, pension settlement charges and charges relating to a Venezuelan remeasurement loss resulting from the adoption of a new foreign exchange mechanism.  Special items in the year ended December 31, 2015 also include charges related to the impairment of long-lived assets and goodwill.

(3)  Special items in the three and twelve months ended December 31, 2014 include non-cash asset impairment charges partially offset by net rationalization gains including a gain on the sale of real estate.  Special items in the twelve months ended December 31, 2014 also include the impact of the Venezuelan remeasurement losses related to the adoption of a new foreign exchange mechanism in the first quarter. 

(4)  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 December 31st Change in Net Sales by Segment
             
        Change in Net Sales due to:    
    Net Sales
2014
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2015
Operating Segments                        
North America Welding   $ 429,907     $ (64,157 )   $ 10,975     $ 5,307     $ (8,154 )   $ 373,878  
Europe Welding   97,288     (7,770 )       (528 )   (12,081 )   76,909  
Asia Pacific Welding   58,113     (15,531 )   3,494     (655 )   (2,604 )   42,817  
South America Welding   32,689     (8,889 )       53,455     (62,305 )   14,950  
The Harris Products Group   65,957     (1,822 )       (1,758 )   (2,946 )   59,431  
Consolidated   $ 683,954     $ (98,169 )   $ 14,469     $ 55,821     $ (88,090 )   $ 567,985  
                         
Consolidated (excluding Venezuela)   $ 668,130     $ (91,693 )   $ 14,469     $ 3,032     $ (29,696 )   $ 564,242  
                         
% Change                        
North America Welding       (14.9 %)   2.6 %   1.2 %   (1.9 %)   (13.0 %)
Europe Welding       (8.0 %)       (0.5 %)   (12.4 %)   (20.9 %)
Asia Pacific Welding       (26.7 %)   6.0 %   (1.1 %)   (4.5 %)   (26.3 %)
South America Welding       (27.2 %)       163.5 %   (190.6 %)   (54.3 %)
The Harris Products Group       (2.8 %)       (2.7 %)   (4.5 %)   (9.9 %)
Consolidated       (14.4 %)   2.1 %   8.2 %   (12.9 %)   (17.0 %)
                         
Consolidated (excluding Venezuela)       (13.7 %)   2.2 %   0.5 %   (4.4 %)   (15.5 %)
                         
Twelve Months Ended December 31st Change in Net Sales by Segment
             
        Change in Net Sales due to:    
    Net Sales
2014
  Volume   Acquisitions   Price   Foreign
Exchange
  Net Sales
2015
Operating Segments                        
North America Welding   $ 1,700,924     $ (129,921 )   $ 57,333     $ 14,944     $ (32,923 )   $ 1,610,357  
Europe Welding   425,775     (18,179 )       (2,285 )   (68,487 )   336,824  
Asia Pacific Welding   243,800     (49,501 )   5,295     (2,511 )   (10,468 )   186,615  
South America Welding   148,595     (24,240 )       116,765     (103,106 )   138,014  
The Harris Products Group   294,230     (2,168 )       (15,746 )   (12,335 )   263,981  
Consolidated   $ 2,813,324     $ (224,009 )   $ 62,628     $ 111,167     $ (227,319 )   $ 2,535,791  
                         
Consolidated (excluding Venezuela)   $ 2,741,531     $ (211,098 )   $ 62,628     $ (2,598 )   $ (139,334 )   $ 2,451,129  
                         
% Change                        
North America Welding       (7.6 %)   3.4 %   0.9 %   (1.9 %)   (5.3 %)
Europe Welding       (4.3 %)       (0.5 %)   (16.1 %)   (20.9 %)
Asia Pacific Welding       (20.3 %)   2.2 %   (1.0 %)   (4.3 %)   (23.5 %)
South America Welding       (16.3 %)       78.6 %   (69.4 %)   (7.1 %)
The Harris Products Group       (0.7 %)       (5.4 %)   (4.2 %)   (10.3 %)
Consolidated       (8.0 %)   2.2 %   4.0 %   (8.1 %)   (9.9 %)
                         
Consolidated (excluding Venezuela)       (7.7 %)   2.3 %   (0.1 %)   (5.1 %)   (10.6 %)

 

Contact

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

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Lincoln Electric Co.