EX-99.1 2 exhibit991q12016.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1
 
Investor Relations: Amanda Butler (216) 383-2534
Amanda_Butler@lincolnelectric.com

 
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, Ohio, Tuesday, April 19, 2016 -- 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.




Lincoln Electric Reports First Quarter 2016 Financial Results


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, 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.
(3)
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
%)