Lincoln Electric Reports First Quarter 2015 Results Apr 21 2015 Q1 2015 Release 881.5 KB CLEVELAND, April 21, 2015 /PRNewswire/ -- First Quarter 2015 Key Metric Highlights Sales decreased 4% to $658 million, up 4% excluding unfavorable foreign exchange Operating income margin of 13.8% of net sales Diluted EPS of $0.89 Cash flows from operations increased to $53 million ROIC increased 100 bps to 20.1% Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq: LECO) today reported first quarter 2015 net income of $68.4 million, or $0.89 diluted earnings per share (EPS). This compares with net income of $56.5 million, or EPS of $0.69 and adjusted net income of $74.1 million, or EPS of $0.91, in the comparable 2014 period. The 2014 adjusted EPS includes $0.14 of earnings from our Venezuelan operations, which operates in a hyper-inflationary environment. This compares with earnings of $0.03 per share from our Venezuelan operations in the first quarter 2015. Sales decreased 4.0% to $657.9 million in the first quarter 2015 versus $685.1 million in the comparable 2014 period primarily due to unfavorable foreign currency translation and lower volumes in the Asia Pacific segment. Operating income for the first quarter increased 12.5% to $90.5 million, or 13.8% of sales, from $80.4 million, or 11.7% of sales, in the comparable 2014 period. Adjusted operating income decreased 7.7% to $90.5 million or 13.8% of sales, compared with $98.1 million, or 14.3% of sales in 2014. Excluding Venezuelan operations, our adjusted operating margin would have increased 60 basis points from the comparable 2014 period. Christopher L. Mapes, Chairman, President and Chief Executive Officer stated, "Our business demonstrated resilience in a challenging first quarter. We achieved volume growth in Europe Welding and The Harris Products Group on solid execution of their commercial initiatives, and maintained steady volume performance in North America. As anticipated, we experienced weakness in South American end-markets and continued to strategically reposition our business in Asia Pacific for long-term profitable growth. Our first quarter profitability margins remained strong on operational initiatives and favorable mix, helping offset unfavorable foreign exchange translation. Cash flows from operations improved, supporting an accelerated return of cash to shareholders through share repurchases and dividends in the quarter." Dividend and Share Repurchases The Company's Board of Directors declared a quarterly cash dividend of $0.29 per share, which was paid on April 15, 2015 to shareholders of record as of March 31, 2015. During the quarter, the Company returned $102.9 million to shareholders through the repurchase of the Company's common shares. Other Matters The Company issued Senior Unsecured Notes (the "Notes") totaling $350 million through a private placement, of which $150 million in proceeds were received during April 2015. The Notes have maturities ranging from 10 to 30 years with a weighted average effective interest rate of 3.5% and an average tenure of 19 years. The proceeds will be used for general corporate purposes. Webcast Information A conference call to discuss first quarter 2015 financial results will be webcast live today, April 21, 2015, at 9:00 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 11243771. Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call. Financial results for the first quarter 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 47 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 and Adjusted diluted earnings per share 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 March 31, Fav (Unfav) to Prior Year 2015 % of Sales 2014 % of Sales $ % Net sales $ 657,900 100.0 % $ 685,062 100.0 % $ (27,162) (4.0%) Cost of goods sold 437,510 66.5 % 458,726 67.0 % 21,216 4.6 % Gross profit 220,390 33.5 % 226,336 33.0 % (5,946) (2.6%) Selling, general & administrative expenses 129,891 19.7 % 145,915 21.3 % 16,024 11.0 % Rationalization and asset impairment charges (gains) — — (17) — (17) (100.0%) Operating income 90,499 13.8 % 80,438 11.7 % 10,061 12.5 % Interest income 593 0.1 % 914 0.1 % (321) (35.1%) Equity earnings in affiliates 849 0.1 % 1,561 0.2 % (712) (45.6%) Other income 2,610 0.4 % 1,083 0.2 % 1,527 141.0 % Interest expense (1,844) (0.3%) (1,570) (0.2%) (274) (17.5%) Income before income taxes 92,707 14.1 % 82,426 12.0 % 10,281 12.5 % Income taxes 24,389 3.7 % 26,002 3.8 % 1,613 6.2 % Effective tax rate 26.3 % 31.5 % 5.2 % Net income including non-controlling interests 68,318 10.4 % 56,424 8.2 % 11,894 21.1 % Non-controlling interests in subsidiaries' loss (36) — (29) — (7) (24.1%) Net income $ 68,354 10.4 % $ 56,453 8.2 % $ 11,901 21.1 % Basic earnings per share $ 0.90 $ 0.70 $ 0.20 28.6 % Diluted earnings per share $ 0.89 $ 0.69 $ 0.20 29.0 % Weighted average shares (basic) 76,242 80,648 Weighted average shares (diluted) 77,059 81,616 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share amounts) (Unaudited) Non-GAAP Financial Measures Three months ended March 31, 2015 2014 Operating income as reported $ 90,499 $ 80,438 Special items (pre-tax): Rationalization and asset impairment charges (gains) (1) — (17) Venezuela foreign exchange losses (2) — 17,665 Adjusted operating income (3) $ 90,499 $ 98,086 Net income as reported $ 68,354 $ 56,453 Special items (after-tax): Rationalization and asset impairment charges (gains) (1) — (7) Venezuela foreign exchange losses (2) — 17,665 Adjusted net income (3) $ 68,354 $ 74,111 Diluted earnings per share as reported $ 0.89 $ 0.69 Special items — 0.22 Adjusted diluted earnings per share (3) $ 0.89 $ 0.91 Weighted average shares (diluted) 77,059 81,616 (1) The three months ended March 31, 2014 include net credits primarily related to the sale of assets at rationalized operations. (2) The three months ended March 31, 2014 include the impact of the Venezuelan remeasurement loss related to the adoption of a new foreign exchange mechanism. This remeasurement loss was classified in Selling, general and administrative expenses. (3) Adjusted operating income, Adjusted net income and Adjusted diluted earnings per share 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. Lincoln Electric Holdings, Inc. Financial Highlights (In thousands) (Unaudited) Balance Sheet Highlights Selected Consolidated Balance Sheet Data March 31, 2015 December 31, 2014 Cash and cash equivalents $ 289,017 $ 278,379 Total current assets 1,095,002 1,098,677 Property, plant and equipment, net 423,020 437,209 Total assets 1,921,508 1,939,215 Total current liabilities 608,425 492,419 Short-term debt (1) 167,985 68,166 Long-term debt 3,882 2,488 Total equity 1,179,955 1,285,781 Net Operating Working Capital March 31, 2015 December 31, 2014 Accounts receivable $ 334,928 $ 321,862 Inventory 332,892 330,840 Trade accounts payable 185,944 202,482 Net operating working capital $ 481,876 $ 450,220 Net operating working capital to net sales (2) 18.3 % 16.5 % Invested Capital March 31, 2015 December 31, 2014 Short-term debt (1) $ 167,985 $ 68,166 Long-term debt 3,882 2,488 Total debt 171,867 70,654 Total equity 1,179,955 1,285,781 Invested capital $ 1,351,822 $ 1,356,435 Total debt / invested capital 12.7 % 5.2 % Return on invested capital (3) 20.1 % 19.1 % (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. (3) Return on invested capital is defined as rolling 12 months of earnings excluding tax-effected interest 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, 2015 2014 OPERATING ACTIVITIES: Net income $ 68,354 $ 56,453 Non-controlling interests in subsidiaries' loss (36) (29) Net income including non-controlling interests 68,318 56,424 Adjustments to reconcile Net income including non- controlling interests to Net cash provided by operating activities: Rationalization and asset impairment charges (gains) 30 (35) Depreciation and amortization 16,032 17,931 Equity earnings in affiliates, net (216) (796) Pension expense 5,679 2,800 Pension contributions and payments (21,234) (22,081) Other non-cash items, net (18,562) 23,984 Changes in operating assets and liabilities, net of effects from acquisitions: Increase in accounts receivable (25,377) (43,885) Increase in inventories (16,233) (15,157) Decrease in trade accounts payable (12,916) (12,108) Net change in other current assets and liabilities 55,069 5,547 Net change in other long-term assets and liabilities 2,194 1,007 NET CASH PROVIDED BY OPERATING ACTIVITIES 52,784 13,631 INVESTING ACTIVITIES: Capital expenditures (12,456) (14,506) Acquisition of businesses, net of cash acquired — (892) Proceeds from sale of property, plant and equipment 1,187 1,066 Other investing activities 2,024 573 NET CASH USED BY INVESTING ACTIVITIES (9,245) (13,759) FINANCING ACTIVITIES: Net change in borrowings 101,510 (8,056) Proceeds from exercise of stock options 1,733 2,956 Excess tax benefits from stock-based compensation 537 1,652 Purchase of shares for treasury (102,853) (51,021) Cash dividends paid to shareholders (22,329) (18,623) Other financing activities (20) (2,330) NET CASH USED BY FINANCING ACTIVITIES (21,422) (75,422) Effect of exchange rate changes on Cash and cash equivalents (11,479) (18,888) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,638 (94,438) Cash and cash equivalents at beginning of period 278,379 299,825 Cash and cash equivalents at end of period $ 289,017 $ 205,387 Cash dividends paid per share $ 0.29 $ 0.23 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 March 31, 2015 Net sales $ 412,988 $ 88,416 $ 49,250 $ 37,430 $ 69,816 $ — $ 657,900 Inter-segment sales 26,129 3,593 3,270 — 2,011 (35,003) — Total $ 439,117 $ 92,009 $ 52,520 $ 37,430 $ 71,827 $ (35,003) $ 657,900 EBIT (1) $ 71,184 $ 8,748 $ 3,128 $ 3,150 $ 7,549 $ 199 $ 93,958 As a percent of total sales 16.2 % 9.5 % 6.0 % 8.4 % 10.5 % 14.3 % Special items charge (gain) $ — $ — $ — $ — $ — $ — $ — EBIT, as adjusted (2)(3) $ 71,184 $ 8,748 $ 3,128 $ 3,150 $ 7,549 $ 199 $ 93,958 As a percent of total sales 16.2 % 9.5 % 6.0 % 8.4 % 10.5 % 14.3 % Three months ended March 31, 2014 Net sales $ 401,906 $ 105,406 $ 61,286 $ 43,993 $ 72,471 $ — $ 685,062 Inter-segment sales 32,943 5,860 4,449 29 2,118 (45,399) — Total $ 434,849 $ 111,266 $ 65,735 $ 44,022 $ 74,589 $ (45,399) $ 685,062 EBIT (1) $ 71,411 $ 9,253 $ (631) $ (5,900) $ 6,058 $ 2,891 $ 83,082 As a percent of total sales 16.4 % 8.3 % (1.0%) (13.4%) 8.1 % 12.1 % Special items charge (gain) (4) $ (47) $ 39 $ (9) $ 17,665 $ — $ — $ 17,648 EBIT, as adjusted (2) $ 71,364 $ 9,292 $ (640) $ 11,765 $ 6,058 $ 2,891 $ 100,730 As a percent of total sales 16.4 % 8.4 % (1.0%) 26.7 % 8.1 % 14.7 % (1) EBIT is defined as Operating income plus Equity earnings in affiliates and Other income. (2) The primary profit measure used by management to assess segment performance is EBIT, as adjusted. EBIT for each operating segment is adjusted for special items to derive EBIT, as adjusted. (3) Asia Pacific Welding EBIT, as adjusted includes a $1,769 gain associated with the liquidation of a foreign subsidiary and the related non-controlling interest. (4) Special items in the three months ended March 31, 2014 include net credits primarily related to the sale of assets at rationalized operations and the impact of the Venezuelan remeasurement loss related to the adoption of a new foreign exchange mechanism. 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 2014 Volume Acquisitions Price Foreign Exchange Net Sales 2015 Operating Segments North America Welding $ 401,906 $ 927 $ 12,471 $ 4,023 $ (6,339) $ 412,988 Europe Welding 105,406 3,202 — (301) (19,891) 88,416 Asia Pacific Welding 61,286 (9,103) — (669) (2,264) 49,250 South America Welding 43,993 (4,693) — 21,474 (23,344) 37,430 The Harris Products Group 72,471 4,474 — (4,589) (2,540) 69,816 Consolidated $ 685,062 $ (5,193) $ 12,471 $ 19,938 $ (54,378) $ 657,900 % Change North America Welding 0.2 % 3.1 % 1.0 % (1.6%) 2.8 % Europe Welding 3.0 % — (0.3%) (18.9%) (16.1%) Asia Pacific Welding (14.9%) — (1.1%) (3.7%) (19.6%) South America Welding (10.7%) — 48.8 % (53.1%) (14.9%) The Harris Products Group 6.2 % — (6.3%) (3.5%) (3.7%) Consolidated (0.8%) 1.8 % 2.9 % (7.9%) (4.0%) To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/lincoln-electric-reports-first-quarter-2015-results-300068988.html SOURCE Lincoln Electric Holdings, Inc. Amanda Butler, Director, Investor Relations, Tel: 216.383.2534, Email: Amanda_Butler@lincolnelectric.com
