Skip to Content

Investor News

Lincoln Electric Reports First Quarter 2022 Results

Apr 28 2022
 
First Quarter 2022 Highlights
  • Net sales increase 22.2% to record $925.4 million on 22.1% higher organic sales
     
  • Record Operating income margin of 17.4%; Record Adjusted operating income margin of 17.6%
     
  • EPS increases 73.2% to record $2.13; Adjusted EPS increases 53.3% to record $2.10
     
  • ROIC increases 610 basis points to 25.0%
     
  • Returned $137.9 million to shareholders through dividends and share repurchases

CLEVELAND, April 28, 2022 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported first quarter 2022 net income of $126.0 million, or diluted earnings per share (EPS) of $2.13, which includes special item after-tax net gains of $1.3 million, or $0.03 EPS. This compares with prior year period net income of $74.2 million, or $1.23 EPS, which included special item after-tax charges of $8.6 million, or $0.14 EPS. Excluding these items, first quarter 2022 Adjusted net income was $124.7 million, or $2.10 Adjusted EPS. This compares with Adjusted net income of $82.8 million, or $1.37 Adjusted EPS, in the prior year period.

First quarter 2022 sales increased 22.2% to $925.4 million from a 22.1% increase in organic sales and a 4.6% benefit from acquisitions, partially offset by 4.4% unfavorable foreign exchange. Operating income for the first quarter 2022 was $161.2 million, or 17.4% of sales, including special item charges of $1.9 million. This compares with operating income of $103.9 million, or 13.7% of sales, in the prior year period. Excluding special items, Adjusted operating income was $163.1 million, or 17.6% of sales, as compared with $109.2 million, or 14.4% of sales, in the prior year period.

“We achieved record first quarter sales, adjusted operating income margin, and adjusted EPS performance despite challenging operating conditions; demonstrating the resilience of our business and the benefits of our strategic initiatives,” stated Christopher L. Mapes, Lincoln’s Chairman, President and Chief Executive Officer. “Solid demand trends, diligent execution and productivity offset market headwinds and a difficult prior year comparison. Given dynamic market and supply chain challenges, we continue to monitor conditions and are responding as necessary to ensure Lincoln Electric is well-positioned to advance and generate superior value through this portion of the cycle.”

Webcast Information

A conference call to discuss first quarter 2022 financial results will be webcast live today, April 28, 2022, at 10:00 a.m., Eastern Time. This webcast is accessible at https://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.

If investors would like to ask questions, please dial (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 6859906. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the first quarter 2022 can also be obtained at https://ir.lincolnelectric.com.

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 material 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 has 56 manufacturing locations in 19 countries and 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 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, financial 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 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, including the current coronavirus disease ("COVID-19") pandemic, 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, 2021.

Contact

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

 

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
  2022   % of Sales      2021   % of Sales      $   %
Net sales $ 925,448     100.0 %   $ 757,021     100.0 %   $ 168,427     22.2 %
Cost of goods sold 595,671     64.4 %   503,254     66.5 %   (92,417 )   (18.4 )%
Gross profit 329,777     35.6 %   253,767     33.5 %   76,010     30.0 %
Selling, general & administrative expenses 166,686     18.0 %   145,676     19.2 %   (21,010 )   (14.4 )%
Rationalization and asset impairment charges 1,885     0.2 %   4,163     0.5 %   2,278     54.7 %
Operating income 161,206     17.4 %   103,928     13.7 %   57,278     55.1 %
Interest expense, net 6,198     0.7 %   5,359     0.7 %   (839 )   (15.7 )%
Other income (expense) 4,634     0.5 %   (1,416 )   (0.2 )%   6,050     427.3 %
Income before income taxes 159,642     17.3 %   97,153     12.8 %   62,489     64.3 %
Income taxes 33,611     3.6 %   23,020     3.0 %   (10,591 )   (46.0 )%
Effective tax rate 21.1 %         23.7 %         2.6 %      
Net income including non-controlling interests 126,031     13.6 %   74,133     9.8 %   51,898     70.0 %
Non-controlling interests in subsidiaries’ income (loss) 1         (44 )       45     102.3 %
Net income $ 126,030     13.6 %   $ 74,177     9.8 %   $ 51,853     69.9 %
                                   
Basic earnings per share $ 2.15           $ 1.24                 73.4 %
Diluted earnings per share $ 2.13           $ 1.23           $ 0.90     73.2 %
Weighted average shares (basic) 58,606           59,642                    
Weighted average shares (diluted) 59,272           60,299                    
                                   

Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)

Balance Sheet Highlights

               
Selected Consolidated Balance Sheet Data March 31, 2022        December 31, 2021  
Cash and cash equivalents $ 154,373     $ 192,958  
Accounts receivable, net   516,231       429,074  
Inventories   599,781       539,919  
Total current assets   1,427,833       1,289,593  
Property, plant and equipment, net   511,873       511,744  
Total assets   2,736,344       2,592,307  
Trade accounts payable   369,415       330,230  
Total current liabilities   927,652       755,905  
Short-term debt (1)   150,560       52,730  
Long-term debt, less current portion   715,032       717,089  
Total equity   863,060       863,909  
               
Operating Working Capital March 31, 2022     December 31, 2021  
Average operating working capital to Net sales (2)   18.6 %     16.3 %
               
Invested Capital March 31, 2022     December 31, 2021  
Short-term debt (1) $ 150,560     $ 52,730  
Long-term debt, less current portion   715,032       717,089  
Total debt   865,592       769,819  
Total equity   863,060       863,909  
Invested capital $ 1,728,652     $ 1,633,728  
               
Total debt / invested capital   50.1 %     47.1 %

 

(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,
  2022     2021  
Operating income as reported $ 161,206     $ 103,928  
Special items (pre-tax):          
Rationalization and asset impairment charges (2) 1,885     4,163  
Acquisition transaction costs (3)     1,113  
Adjusted operating income (1) $ 163,091     $ 109,204  
As a percent of total sales 17.6 %   14.4 %
           
Net income as reported $ 126,030     $ 74,177  
Special items:          
Rationalization and asset impairment charges (2) 1,885     4,163  
Acquisition transaction costs (3)     1,113  
Pension charges and other net gains (4) (4,273 )   4,886  
Tax effect of Special items (5) 1,041     (1,561 )
Adjusted net income (1) 124,683     82,778  
Non-controlling interests in subsidiaries’ income (loss) 1     (44 )
Interest expense, net 6,198     5,359  
Income taxes as reported 33,611     23,020  
Tax effect of Special items (5) (1,041 )   1,561  
Adjusted EBIT (1) $ 163,452     $ 112,674  
           
Effective tax rate as reported 21.1 %   23.7 %
Net special item tax impact (0.4 )%   (0.8 )%
Adjusted effective tax rate (1) 20.7 %   22.9 %
           
Diluted earnings per share as reported $ 2.13     $ 1.23  
Special items per share (0.03 )   0.14  
Adjusted diluted earnings per share (1) $ 2.10     $ 1.37  
           
Weighted average shares (diluted) 59,272     60,299  

 

(1) Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate and Adjusted diluted earnings per share are non-GAAP financial measures. Refer to Non-GAAP Information section.
(2) Primarily related to severance and gains or losses on the disposal of assets.
(3) Related to acquisitions and are included in Selling, general & administrative expenses.
(4) Pension settlement charges due to lump sum pension payments and other net gains primarily due to the final settlement associated with the termination of a pension plan and are included in Other income (expense).
(5) 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 2022        2021  
Net income as reported $ 328,319     $ 224,730  
Rationalization and asset impairment charges 7,549     43,110  
Acquisition transaction costs 810     1,113  
Pension charges and other net gains 117,343     13,005  
Amortization of step up in value of acquired inventories 5,804      
Tax effect of Special items (2) (44,586 )   (10,179 )
Adjusted net income (1) $ 415,239     $ 271,779  
Plus: Interest expense, net of tax of $6,178 and $5,904 in 2022 and 2021, respectively 18,364     17,550  
Less: Interest income, net of tax of $376 and $396 in 2022 and 2021, respectively 1,113     1,184  
Adjusted net income before tax-effected interest $ 432,490     $ 288,145  
           
Invested Capital March 31, 2022   March 31, 2021
Short-term debt $ 150,560     $ 3,607  
Long-term debt, less current portion 715,032     715,328  
Total debt 865,592     718,935  
Total equity 863,060     803,408  
Invested capital $ 1,728,652     $ 1,522,343  
           
Return on invested capital (1) 25.0 %   18.9 %

 

(1) Adjusted net income and Return on invested capital 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, 
  2022   2021
OPERATING ACTIVITIES:          
Net income $ 126,030     $ 74,177  
Non-controlling interests in subsidiaries’ income (loss)   1       (44 )
Net income including non-controlling interests   126,031       74,133  
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:          
Rationalization and asset impairment net charges   1,188       60  
Depreciation and amortization   19,891       19,118  
Equity earnings in affiliates, net   (113 )     (177 )
Other non-cash items, net   (7,221 )     (697 )
Changes in operating assets and liabilities, net of effects from acquisitions:          
Increase in accounts receivable   (86,120 )     (65,795 )
Increase in inventories   (55,407 )     (42,568 )
Increase in trade accounts payable   39,284       42,325  
Net change in other current assets and liabilities   6,964       22,171  
Net change in other long-term assets and liabilities   (1,407 )     (3,308 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   43,090       45,262  
           
INVESTING ACTIVITIES:          
Capital expenditures   (18,672 )     (9,936 )
Acquisition of businesses, net of cash acquired   (22,013 )      
Proceeds from sale of property, plant and equipment   569       584  
Other investing activities         6,500  
NET CASH USED BY INVESTING ACTIVITIES   (40,116 )     (2,852 )
           
FINANCING ACTIVITIES:          
Net change in borrowings   96,308       1,307  
Proceeds from exercise of stock options   1,035       2,780  
Purchase of shares for treasury   (104,579 )     (28,459 )
Cash dividends paid to shareholders   (33,361 )     (30,999 )
NET CASH USED BY FINANCING ACTIVITIES   (40,597 )     (55,371 )
           
Effect of exchange rate changes on Cash and cash equivalents   (962 )     (2,192 )
DECREASE IN CASH AND CASH EQUIVALENTS   (38,585 )     (15,153 )
Cash and cash equivalents at beginning of period   192,958       257,279  
Cash and cash equivalents at end of period $ 154,373     $ 242,126  
           
Cash dividends paid per share $ 0.56     $ 0.51  
               

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, 2022                            
Net sales $ 534,055     $ 258,041     $ 133,352     $     $ 925,448  
Inter-segment sales 28,156     6,228     3,062     (37,446 )    
Total sales $ 562,211     $ 264,269     $ 136,414     $ (37,446 )   $ 925,448  
                             
Net income                         $ 126,030  
As a percent of total sales                         13.6 %
                             
EBIT (1) $ 115,303     $ 35,740     $ 19,598     $ (4,801 )   $ 165,840  
As a percent of total sales 20.5 %   13.5 %   14.4 %         17.9 %
Special items charges (gains) (3) (3,735 )   1,347             (2,388 )
Adjusted EBIT (2) $ 111,568     $ 37,087     $ 19,598     $ (4,801 )   $ 163,452  
As a percent of total sales 19.8 %   14.0 %   14.4 %         17.7 %
                             
Three months ended March 31, 2021                            
Net sales $ 425,242     $ 223,079     $ 108,700     $     $ 757,021  
Inter-segment sales 32,748     4,285     2,147     (39,180 )    
Total sales $ 457,990     $ 227,364     $ 110,847     $ (39,180 )   $ 757,021  
                             
Net income                         $ 74,177  
As a percent of total sales                         9.8 %
                             
EBIT (1) $ 72,177     $ 14,207     $ 18,697     $ (2,569 )   $ 102,512  
As a percent of total sales 15.8 %   6.2 %   16.9 %         13.5 %
Special items charges (gains) (4) 4,440     4,609         1,113     10,162  
Adjusted EBIT (2) $ 76,617     $ 18,816     $ 18,697     $ (1,456 )   $ 112,674  
As a percent of total sales 16.7 %   8.3 %   16.9 %         14.9 %

 

(1) EBIT is defined as Operating income plus Other income (expense).
(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 2022 primarily reflect Rationalization and asset impairment charges of $1,885 in International Welding and a $3,735 net gain related to final settlement associated with the termination of a pension plan in Americas Welding.
(4) Special items in 2021 reflect pension settlement charges of $4,440 and $446 in Americas Welding and International Welding, respectively, Rationalization and asset impairment charges of $4,163 in International Welding and acquisition transaction costs of $1,113 in Corporate/Eliminations related to an acquisition.
   

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  
  2021   Volume   Acquisitions   Price   Exchange   2022  
Operating Segments                                    
Americas Welding $ 425,242   $ 22,004     $ 1,745   $ 84,218   $ 846     $ 534,055  
International Welding   223,079     (1,024 )     17,632     52,190     (33,836 )     258,041  
The Harris Products Group   108,700     3,142       15,452     6,723     (665 )     133,352  
Consolidated $ 757,021   $ 24,122     $ 34,829   $ 143,131   $ (33,655 )   $ 925,448  
                                     
% Change                                    
Americas Welding         5.2   %   0.4 %   19.8 %   0.2   %   25.6 %
International Welding         (0.5 ) %   7.9 %   23.4 %   (15.2 ) %   15.7 %
The Harris Products Group         2.9   %   14.2 %   6.2 %   (0.6 ) %   22.7 %
Consolidated         3.2   %   4.6 %   18.9 %   (4.4 ) %   22.2 %