Lincoln Electric Reports Fourth Quarter and Full Year 2019 Results
| Fourth Quarter and Full Year 2019 Highlights |
| • Q4 EPS decreases 23.7% to $1.03, Adjusted EPS decreases 10.9% to $1.15 |
| • Q4 Cash flow from operations increases 23.3% to $123 million and achieved 150% cash conversion (1) |
| • Record full year cash flow from operations increases 22.5% to $403 million |
| • $411 million returned to shareholders through dividends and share repurchases for full year |
| (1) | Cash conversion is defined as Net cash provided by operating activities less Capital expenditures divided by Adjusted net income. |
CLEVELAND, Ohio, Feb. 13, 2020 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported fourth quarter 2019 net income of $63.7 million, or diluted earnings per share (EPS) of $1.03, which includes special item after-tax net charges of $7.3 million, or $0.12 EPS. This compares with prior year net income of $86.8 million, or $1.35 EPS, which included special item after-tax benefits of $3.3 million, or $0.06 EPS. Excluding these items, fourth quarter 2019 adjusted net income was $71.0 million, or $1.15 EPS, as compared with $83.5 million, or $1.29 EPS in the prior year period. The effective tax rate was 20.6% in the fourth quarter 2019 as compared with 8.1% in the prior year period. Excluding special items, the adjusted effective tax rate was 20.4%, which compares to 14.7% in the comparable 2018 period.
Fourth quarter 2019 sales decreased 1.0% to $736.3 million from a 6.5% decrease in organic sales, offset by a 5.9% benefit from acquisitions. Operating income for the fourth quarter 2019 was $82.7 million, or 11.2% of sales. This compares with operating income of $94.9 million, or 12.8% of sales, in the prior year period. Excluding special items, adjusted operating income was $91.6 million, or 12.4% of sales, as compared with $96.7 million, or 13.0% of sales, in the prior year period.
“In 2019, we achieved solid returns, record cash flow generation and strong cash conversion as industrial demand decelerated through the year,” stated Christopher L. Mapes, Chairman, President & CEO. “Extensive product launches, new acquisitions and expansions across our network of global tech centers demonstrate our industry leadership and investments in innovative, value-added solutions. While we manage this challenging portion of the cycle, we are well-positioned to capture growth and generate long-term value for our stakeholders. We are proud to celebrate our Company’s 125th anniversary during 2020 and Lincoln Electric thanks our customers, employees, investors and suppliers for their support in helping us reach this momentous milestone.”
Twelve Months 2019 Summary
Net income for the twelve months ended December 31, 2019 was $293.1 million, or $4.68 EPS. This compares with $287.1 million, or $4.37 EPS, in the comparable 2018 period. Reported EPS includes special item after-tax net charges of $1.5 million or $0.02 EPS, as compared with special item after-tax charges of $29.6 million, or $0.45 EPS in the prior year period. Excluding these items, adjusted net income for the twelve months ended December 31, 2019 was $294.6 million, or $4.70 EPS, compared with $316.6 million, or $4.82 EPS, in the comparable 2018 period. The effective tax rate was 20.5% for the twelve months ended December 31, 2019 as compared with 22.2% in the prior year period. Excluding special items, the adjusted effective tax rate was 21.9% in the 2019 and 2018 periods.
Sales decreased 0.8% to $3.0 billion in the twelve months ended December 31, 2019 from a 3.5% decrease in organic sales and 1.7% unfavorable foreign exchange, partially offset by a 4.3% benefit from acquisitions. Operating income for the twelve months ended December 31, 2019 was $370.9 million, or 12.4% of sales. This compares with operating income of $375.5 million, or 12.4% of sales, in the comparable 2018 period. Excluding special items, adjusted operating income was $387.9 million, or 12.9% of sales, as compared with $405.3 million, or 13.4% of sales, in the comparable 2018 period.
Share Repurchase Program
The Company's Board of Director's approved a new share repurchase program authorizing the Company to repurchase, in the aggregate, up to 10 million of its outstanding common stock. This authorization, in addition to the 2.8 million shares remaining from the prior program, may be used by the Company to repurchase shares on the open market or through privately negotiated transactions from time to time, depending on market conditions and subject to other factors.
Webcast Information
A conference call to discuss fourth quarter 2019 financial results will be webcast live today, February 13, 2020, 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.
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 6955179. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.
Financial results for the fourth quarter 2019 can also be obtained at https://ir.lincolnelectric.com.
About Lincoln Electric
Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment and has a leading global position in brazing and soldering alloys. Headquartered in Cleveland, Ohio, Lincoln has 59 manufacturing locations in 18 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 https://www.lincolnelectric.com.
Non-GAAP Information
Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share 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 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 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, 2018.
Contact
Amanda ButlerVice President, Investor Relations & CommunicationsTel: 216.383.2534Email: [email protected]
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 | ||||||||||||||||||||
| 2019 | % of Sales | 2018 | % of Sales | $ | % | ||||||||||||||||
| Net sales | $ | 736,307 | 100.0 | % | $ | 743,827 | 100.0 | % | $ | (7,520 | ) | (1.0 | %) | ||||||||
| Cost of goods sold | 495,373 | 67.3 | % | 493,528 | 66.3 | % | (1,845 | ) | (0.4 | %) | |||||||||||
| Gross profit | 240,934 | 32.7 | % | 250,299 | 33.7 | % | (9,365 | ) | (3.7 | %) | |||||||||||
| Selling, general & administrative expenses | 149,381 | 20.3 | % | 154,437 | 20.8 | % | 5,056 | 3.3 | % | ||||||||||||
| Rationalization and asset impairment charges | 8,851 | 1.2 | % | 932 | 0.1 | % | (7,919 | ) | (849.7 | %) | |||||||||||
| Operating income | 82,702 | 11.2 | % | 94,930 | 12.8 | % | (12,228 | ) | (12.9 | %) | |||||||||||
| Interest expense, net | 5,794 | 0.8 | % | 4,343 | 0.6 | % | (1,451 | ) | (33.4 | %) | |||||||||||
| Other income (expense) | 3,386 | 0.5 | % | 3,868 | 0.5 | % | (482 | ) | (12.5 | %) | |||||||||||
| Income before income taxes | 80,294 | 10.9 | % | 94,455 | 12.7 | % | (14,161 | ) | (15.0 | %) | |||||||||||
| Income taxes | 16,578 | 2.3 | % | 7,676 | 1.0 | % | (8,902 | ) | (116.0 | %) | |||||||||||
| Effective tax rate | 20.6 | % | 8.1 | % | (12.5 | %) | |||||||||||||||
| Net income including non-controlling interests | 63,716 | 8.7 | % | 86,779 | 11.7 | % | (23,063 | ) | (26.6 | %) | |||||||||||
| Non-controlling interests in subsidiaries’ loss | — | — | (60 | ) | — | 60 | 100.0 | % | |||||||||||||
| Net income | $ | 63,716 | 8.7 | % | $ | 86,839 | 11.7 | % | $ | (23,123 | ) | (26.6 | %) | ||||||||
| Basic earnings per share | $ | 1.04 | $ | 1.36 | $ | (0.32 | ) | (23.5 | %) | ||||||||||||
| Diluted earnings per share | $ | 1.03 | $ | 1.35 | $ | (0.32 | ) | (23.7 | %) | ||||||||||||
| Weighted average shares (basic) | 60,996 | 63,808 | |||||||||||||||||||
| Weighted average shares (diluted) | 61,710 | 64,559 | |||||||||||||||||||
| Twelve Months Ended December 31, | Fav (Unfav) toPrior Year | ||||||||||||||||||||
| 2019 | % of Sales | 2018 | % of Sales | $ | % | ||||||||||||||||
| Net sales | $ | 3,003,272 | 100.0 | % | $ | 3,028,674 | 100.0 | % | $ | (25,402 | ) | (0.8 | %) | ||||||||
| Cost of goods sold | 1,995,685 | 66.5 | % | 2,000,153 | 66.0 | % | 4,468 | 0.2 | % | ||||||||||||
| Gross profit | 1,007,587 | 33.5 | % | 1,028,521 | 34.0 | % | (20,934 | ) | (2.0 | %) | |||||||||||
| Selling, general & administrative expenses | 621,489 | 20.7 | % | 627,697 | 20.7 | % | 6,208 | 1.0 | % | ||||||||||||
| Rationalization and asset impairment charges | 15,188 | 0.5 | % | 25,285 | 0.8 | % | 10,097 | 39.9 | % | ||||||||||||
| Operating income | 370,910 | 12.4 | % | 375,539 | 12.4 | % | (4,629 | ) | (1.2 | %) | |||||||||||
| Interest expense, net | 23,415 | 0.8 | % | 17,565 | 0.6 | % | (5,850 | ) | (33.3 | %) | |||||||||||
| Other income (expense) | 20,998 | 0.7 | % | 10,686 | 0.4 | % | 10,312 | 96.5 | % | ||||||||||||
| Income before income taxes | 368,493 | 12.3 | % | 368,660 | 12.2 | % | (167 | ) | — | ||||||||||||
| Income taxes | 75,410 | 2.5 | % | 81,667 | 2.7 | % | 6,257 | 7.7 | % | ||||||||||||
| Effective tax rate | 20.5 | % | 22.2 | % | 1.7 | % | |||||||||||||||
| Net income including non-controlling interests | 293,083 | 9.8 | % | 286,993 | 9.5 | % | 6,090 | 2.1 | % | ||||||||||||
| Non-controlling interests in subsidiaries’ loss | (26 | ) | — | (73 | ) | — | 47 | 64.4 | % | ||||||||||||
| Net income | $ | 293,109 | 9.8 | % | $ | 287,066 | 9.5 | % | $ | 6,043 | 2.1 | % | |||||||||
| Basic earnings per share | $ | 4.73 | $ | 4.42 | $ | 0.31 | 7.0 | % | |||||||||||||
| Diluted earnings per share | $ | 4.68 | $ | 4.37 | $ | 0.31 | 7.1 | % | |||||||||||||
| Weighted average shares (basic) | 61,960 | 64,886 | |||||||||||||||||||
| Weighted average shares (diluted) | 62,658 | 65,682 | |||||||||||||||||||
Lincoln Electric Holdings, Inc.Financial Highlights(In thousands)(Unaudited)
Balance Sheet Highlights
| Selected Consolidated Balance Sheet Data | December 31, 2019 | December 31, 2018 | ||||||
| Cash and cash equivalents | $ | 199,563 | $ | 358,849 | ||||
| Total current assets | 1,075,581 | 1,237,799 | ||||||
| Property, plant and equipment, net | 529,344 | 478,801 | ||||||
| Total assets | 2,371,213 | 2,349,825 | ||||||
| Total current liabilities | 563,135 | 538,182 | ||||||
| Short-term debt (1) | 34,969 | 111 | ||||||
| Long-term debt, less current portion | 712,302 | 702,549 | ||||||
| Total equity | 819,077 | 887,592 | ||||||
| Operating Working Capital | December 31, 2019 | December 31, 2018 | ||||||
| Accounts receivable, net | $ | 374,649 | $ | 396,885 | ||||
| Inventories | 393,748 | 361,829 | ||||||
| Trade accounts payable | 273,002 | 268,600 | ||||||
| Operating working capital | $ | 495,395 | $ | 490,114 | ||||
| Average operating working capital to Net sales (2) | 16.8 | % | 16.5 | % | ||||
| Invested Capital | December 31, 2019 | December 31, 2018 | ||||||
| Short-term debt (1) | $ | 34,969 | $ | 111 | ||||
| Long-term debt, less current portion | 712,302 | 702,549 | ||||||
| Total debt | 747,271 | 702,660 | ||||||
| Total equity | 819,077 | 887,592 | ||||||
| Invested capital | $ | 1,566,348 | $ | 1,590,252 | ||||
| Total debt / invested capital | 47.7 | % | 44.2 | % | ||||
| (1) | Includes current portion of long-term debt. |
| (2) | Average operating working capital to Net sales is defined as operating working capital 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 December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Operating income as reported | $ | 82,702 | $ | 94,930 | $ | 370,910 | $ | 375,539 | ||||||||
| Special items (pre-tax): | ||||||||||||||||
| Rationalization and asset impairment charges (2) | 8,851 | 932 | 15,188 | 25,285 | ||||||||||||
| Acquisition transaction and integration costs (3) | — | 833 | 1,804 | 4,498 | ||||||||||||
| Amortization of step up in value of acquired inventories (4) | — | — | 3,008 | — | ||||||||||||
| Gains on asset disposals (5) | — | — | (3,045 | ) | — | |||||||||||
| Adjusted operating income (1) | $ | 91,553 | $ | 96,695 | $ | 387,865 | $ | 405,322 | ||||||||
| As a percent of total sales | 12.4 | % | 13.0 | % | 12.9 | % | 13.4 | % | ||||||||
| Net income as reported | $ | 63,716 | $ | 86,839 | $ | 293,109 | $ | 287,066 | ||||||||
| Special items: | ||||||||||||||||
| Rationalization and asset impairment charges (2) | 8,851 | 932 | 15,188 | 25,285 | ||||||||||||
| Acquisition transaction and integration costs (3) | — | 833 | 1,804 | 4,498 | ||||||||||||
| Pension settlement charges (6) | — | 1,696 | — | 6,686 | ||||||||||||
| Amortization of step up in value of acquired inventories (4) | — | — | 3,008 | — | ||||||||||||
| Gains on asset disposals (5) | — | — | (3,554 | ) | — | |||||||||||
| Gain on change in control (7) | — | — | (7,601 | ) | — | |||||||||||
| Tax effect of Special items (8) | (1,567 | ) | (6,764 | ) | (7,386 | ) | (6,896 | ) | ||||||||
| Adjusted net income (1) | 71,000 | 83,536 | 294,568 | 316,639 | ||||||||||||
| Non-controlling interests in subsidiaries’ loss | — | (60 | ) | (26 | ) | (73 | ) | |||||||||
| Interest expense, net | 5,794 | 4,343 | 23,415 | 17,565 | ||||||||||||
| Income taxes as reported | 16,578 | 7,676 | 75,410 | 81,667 | ||||||||||||
| Tax effect of Special items (8) | 1,567 | 6,764 | 7,386 | 6,896 | ||||||||||||
| Adjusted EBIT (1) | $ | 94,939 | $ | 102,259 | $ | 400,753 | $ | 422,694 | ||||||||
| Effective tax rate as reported | 20.6 | % | 8.1 | % | 20.5 | % | 22.2 | % | ||||||||
| Net special item tax impact | (0.2 | %) | 6.6 | % | 1.4 | % | (0.3 | %) | ||||||||
| Adjusted effective tax rate (1) | 20.4 | % | 14.7 | % | 21.9 | % | 21.9 | % | ||||||||
| Diluted earnings per share as reported | $ | 1.03 | $ | 1.35 | $ | 4.68 | $ | 4.37 | ||||||||
| Special items per share | 0.12 | (0.06 | ) | 0.02 | 0.45 | |||||||||||
| Adjusted diluted earnings per share (1) | $ | 1.15 | $ | 1.29 | $ | 4.70 | $ | 4.82 | ||||||||
| Weighted average shares (diluted) | 61,710 | 64,559 | 62,658 | 65,682 | ||||||||||||
| (1) | Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate and Adjusted diluted earnings per share 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. |
| (2) | Primarily related to severance, asset impairments and gains or losses on the disposal of assets. |
| (3) | Related to the acquisition of Air Liquide Welding and are included in Selling, general & administrative expenses. |
| (4) | Related to the acquisitions of Baker Industries, Inc. and Kaynak Tekniği Sanayi ve Ticaret A.Ş. ("Askaynak") and are included in Cost of goods sold. |
| (5) | Primarily included in Cost of goods sold. |
| (6) | Related to lump sum pension payments and are included in Other income (expense). |
| (7) | Related to the acquisition of Askaynak and is included in Other income (expense). |
| (8) | Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended December 31, 2019. The prior year includes an adjustment to taxes on unremitted foreign earnings related to the U.S. Tax Act of $4,424 and $399 in the three and twelve months ended December 31, 2018, respectively. |
| 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 December 31, | ||||||||
| Return on Invested Capital | 2019 | 2018 | ||||||
| Net income as reported | $ | 293,109 | $ | 287,066 | ||||
| Rationalization and asset impairment charges | 15,188 | 25,285 | ||||||
| Acquisition transaction and integration costs | 1,804 | 4,498 | ||||||
| Pension settlement charges | — | 6,686 | ||||||
| Amortization of step up in value of acquired inventories | 3,008 | — | ||||||
| Gains on asset disposals | (3,554 | ) | — | |||||
| Gain on change in control | (7,601 | ) | — | |||||
| Tax effect of Special items (3) | (7,386 | ) | (6,896 | ) | ||||
| Adjusted net income (1) | $ | 294,568 | $ | 316,639 | ||||
| Plus: Interest expense, net of tax of $6,477 and $6,117 in 2019 and 2018, respectively | 19,465 | 18,386 | ||||||
| Less: Interest income, net of tax of $631 and $1,732 in 2019 and 2018, respectively | 1,896 | 5,206 | ||||||
| Adjusted net income before tax-effected interest | $ | 312,137 | $ | 329,819 | ||||
| Invested Capital | December 31, 2019 | December 31, 2018 | ||||||
| Short-term debt | $ | 34,969 | $ | 111 | ||||
| Long-term debt, less current portion | 712,302 | 702,549 | ||||||
| Total debt | 747,271 | 702,660 | ||||||
| Total equity | 819,077 | 887,592 | ||||||
| Invested capital | $ | 1,566,348 | $ | 1,590,252 | ||||
| Return on invested capital (1)(2) | 19.9 | % | 20.7 | % | ||||
| (1) | Adjusted net income 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. |
| (2) | Return on invested capital is defined as rolling 12 months of Adjusted net income before tax-effected interest income and expense divided by Invested capital. |
| (3) | Includes the net tax impact of Special items recorded during the respective periods, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended December 31, 2019 and net charges of $399 related to the U.S. Tax Act in the twelve months ended December 31, 2018. |
| 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 December 31, | ||||||||
| 2019 | 2018 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 63,716 | $ | 86,839 | ||||
| Non-controlling interests in subsidiaries’ loss | — | (60 | ) | |||||
| Net income including non-controlling interests | 63,716 | 86,779 | ||||||
| Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | ||||||||
| Rationalization and asset impairment net charges (gains) | 2,431 | (4,570 | ) | |||||
| Depreciation and amortization | 21,087 | 18,400 | ||||||
| Equity earnings in affiliates, net | (161 | ) | (1,607 | ) | ||||
| Other non-cash items, net | 12,203 | 427 | ||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | ||||||||
| Decrease in accounts receivable | 26,291 | 21,431 | ||||||
| Decrease in inventories | 24,453 | 17,629 | ||||||
| Increase in trade accounts payable | 25,863 | 21,159 | ||||||
| Net change in other current assets and liabilities | (51,294 | ) | (58,649 | ) | ||||
| Net change in other long-term assets and liabilities | (2,070 | ) | (1,624 | ) | ||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 122,519 | 99,375 | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Capital expenditures | (16,064 | ) | (22,500 | ) | ||||
| Acquisition of businesses, net of cash acquired | 2,018 | (108,383 | ) | |||||
| Proceeds from sale of property, plant and equipment | 18 | 6,170 | ||||||
| Proceeds from marketable securities | — | 99,281 | ||||||
| Other investing activities | — | (2,000 | ) | |||||
| NET CASH USED BY INVESTING ACTIVITIES | (14,028 | ) | (27,432 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Net change in borrowings | 21,889 | (296 | ) | |||||
| Proceeds from exercise of stock options | 8,137 | 242 | ||||||
| Purchase of shares for treasury | (70,751 | ) | (80,173 | ) | ||||
| Cash dividends paid to shareholders | (28,758 | ) | (25,384 | ) | ||||
| NET CASH USED BY FINANCING ACTIVITIES | (69,483 | ) | (105,611 | ) | ||||
| Effect of exchange rate changes on Cash and cash equivalents | 3,943 | (5,683 | ) | |||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 42,951 | (39,351 | ) | |||||
| Cash and cash equivalents at beginning of period | 156,612 | 398,200 | ||||||
| Cash and cash equivalents at end of period | $ | 199,563 | $ | 358,849 | ||||
| Cash dividends paid per share | $ | 0.47 | $ | 0.39 | ||||
Lincoln Electric Holdings, Inc.Financial Highlights(In thousands, except per share amounts)(Unaudited)
Condensed Consolidated Statements of Cash Flows
| Twelve Months Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 293,109 | $ | 287,066 | ||||
| Non-controlling interests in subsidiaries’ loss | (26 | ) | (73 | ) | ||||
| Net income including non-controlling interests | 293,083 | 286,993 | ||||||
| Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | ||||||||
| Rationalization and asset impairment net charges (gains) | 3,500 | (5,978 | ) | |||||
| Depreciation and amortization | 81,487 | 72,346 | ||||||
| Equity earnings in affiliates, net | (1,427 | ) | (3,034 | ) | ||||
| Gain on change in control | (7,601 | ) | — | |||||
| Other non-cash items, net | 21,488 | 12,509 | ||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | ||||||||
| Decrease (increase) in accounts receivable | 50,394 | (4,061 | ) | |||||
| Increase in inventories | (12,023 | ) | (23,904 | ) | ||||
| (Decrease) increase in trade accounts payable | (8,339 | ) | 3,636 | |||||
| Net change in other current assets and liabilities | (16,954 | ) | (12,333 | ) | ||||
| Net change in other long-term assets and liabilities | (423 | ) | 2,978 | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 403,185 | 329,152 | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Capital expenditures | (69,615 | ) | (71,246 | ) | ||||
| Acquisition of businesses, net of cash acquired | (134,717 | ) | (101,792 | ) | ||||
| Proceeds from sale of property, plant and equipment | 9,509 | 16,755 | ||||||
| Purchase of marketable securities | — | (268,335 | ) | |||||
| Proceeds from marketable securities | — | 447,459 | ||||||
| Other investing activities | 2,000 | (2,000 | ) | |||||
| NET CASH (USED BY) PROVIDED BY INVESTING ACTIVITIES | (192,823 | ) | 20,841 | |||||
| FINANCING ACTIVITIES: | ||||||||
| Net change in borrowings | 24,322 | (942 | ) | |||||
| Proceeds from exercise of stock options | 14,347 | 4,690 | ||||||
| Purchase of shares for treasury | (292,693 | ) | (201,650 | ) | ||||
| Cash dividends paid to shareholders | (117,920 | ) | (102,058 | ) | ||||
| Other financing activities | — | (2,170 | ) | |||||
| NET CASH USED BY FINANCING ACTIVITIES | (371,944 | ) | (302,130 | ) | ||||
| Effect of exchange rate changes on Cash and cash equivalents | 2,296 | (15,715 | ) | |||||
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (159,286 | ) | 32,148 | |||||
| Cash and cash equivalents at beginning of period | 358,849 | 326,701 | ||||||
| Cash and cash equivalents at end of period | $ | 199,563 | $ | 358,849 | ||||
| Cash dividends paid per share | $ | 1.88 | $ | 1.56 | ||||
Lincoln Electric Holdings, Inc.Segment Highlights (1)(In thousands)(Unaudited)
| AmericasWelding | InternationalWelding | The HarrisProducts Group | Corporate /Eliminations | Consolidated | ||||||||||||||||
| Three months ended December 31, 2019 | ||||||||||||||||||||
| Net sales | $ | 437,899 | $ | 218,606 | $ | 79,802 | $ | — | $ | 736,307 | ||||||||||
| Inter-segment sales | 28,042 | 4,853 | 1,650 | (34,545 | ) | — | ||||||||||||||
| Total | $ | 465,941 | $ | 223,459 | $ | 81,452 | $ | (34,545 | ) | $ | 736,307 | |||||||||
| Net income | $ | 63,716 | ||||||||||||||||||
| As a percent of total sales | 8.7 | % | ||||||||||||||||||
| EBIT (1) | $ | 75,006 | $ | 4,501 | $ | 8,886 | $ | (2,305 | ) | $ | 86,088 | |||||||||
| As a percent of total sales | 16.1 | % | 2.0 | % | 10.9 | % | 11.7 | % | ||||||||||||
| Special items charges (gains) (3) | — | 7,081 | 1,770 | — | 8,851 | |||||||||||||||
| Adjusted EBIT (2) | $ | 75,006 | $ | 11,582 | $ | 10,656 | $ | (2,305 | ) | $ | 94,939 | |||||||||
| As a percent of total sales | 16.1 | % | 5.2 | % | 13.1 | % | 12.9 | % | ||||||||||||
| Three months ended December 31, 2018 | ||||||||||||||||||||
| Net sales | $ | 455,217 | $ | 219,456 | $ | 69,154 | $ | — | $ | 743,827 | ||||||||||
| Inter-segment sales | 29,265 | 4,907 | 1,522 | (35,694 | ) | — | ||||||||||||||
| Total | $ | 484,482 | $ | 224,363 | $ | 70,676 | $ | (35,694 | ) | $ | 743,827 | |||||||||
| Net income | $ | 86,839 | ||||||||||||||||||
| As a percent of total sales | 11.7 | % | ||||||||||||||||||
| EBIT (1) | $ | 84,198 | $ | 11,371 | $ | 8,506 | $ | (5,277 | ) | $ | 98,798 | |||||||||
| As a percent of total sales | 17.4 | % | 5.1 | % | 12.0 | % | 13.3 | % | ||||||||||||
| Special items charges (gains) (4) | 1,696 | 932 | — | 833 | 3,461 | |||||||||||||||
| Adjusted EBIT (2) | $ | 85,894 | $ | 12,303 | $ | 8,506 | $ | (4,444 | ) | $ | 102,259 | |||||||||
| As a percent of total sales | 17.7 | % | 5.5 | % | 12.0 | % | 13.7 | % | ||||||||||||
| (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 2019 reflect Rationalization and asset impairment charges of $7,081 in International Welding and $1,770 in The Harris Products Group. |
| (4) | Special items in 2018 reflect pension settlement charges of $1,696 in Americas Welding, Rationalization and asset impairment charges of $932 in International Welding and acquisition transaction and integration costs of $833 in Corporate/Eliminations related to the acquisition of Air Liquide Welding. |
Lincoln Electric Holdings, Inc.Segment Highlights(In thousands)(Unaudited)
| AmericasWelding | InternationalWelding | The HarrisProducts Group | Corporate /Eliminations | Consolidated | ||||||||||||||||
| Twelve months ended December 31, 2019 | ||||||||||||||||||||
| Net sales | $ | 1,815,746 | $ | 854,376 | $ | 333,150 | $ | — | $ | 3,003,272 | ||||||||||
| Inter-segment sales | 123,342 | 17,691 | 7,487 | (148,520 | ) | — | ||||||||||||||
| Total | $ | 1,939,088 | $ | 872,067 | $ | 340,637 | $ | (148,520 | ) | $ | 3,003,272 | |||||||||
| Net income | $ | 293,109 | ||||||||||||||||||
| As a percent of total sales | 9.8 | % | ||||||||||||||||||
| EBIT (1) | $ | 312,604 | $ | 48,125 | $ | 43,931 | $ | (12,752 | ) | $ | 391,908 | |||||||||
| As a percent of total sales | 16.1 | % | 5.5 | % | 12.9 | % | 13.0 | % | ||||||||||||
| Special items charges (gains) (3) | 3,115 | 2,156 | 1,770 | 1,804 | 8,845 | |||||||||||||||
| Adjusted EBIT (2) | $ | 315,719 | $ | 50,281 | $ | 45,701 | $ | (10,948 | ) | $ | 400,753 | |||||||||
| As a percent of total sales | 16.3 | % | 5.8 | % | 13.4 | % | 13.3 | % | ||||||||||||
| Twelve months ended December 31, 2018 | ||||||||||||||||||||
| Net sales | $ | 1,806,514 | $ | 919,771 | $ | 302,389 | $ | — | $ | 3,028,674 | ||||||||||
| Inter-segment sales | 118,936 | 18,576 | 6,969 | (144,481 | ) | — | ||||||||||||||
| Total | $ | 1,925,450 | $ | 938,347 | $ | 309,358 | $ | (144,481 | ) | $ | 3,028,674 | |||||||||
| Net income | $ | 287,066 | ||||||||||||||||||
| As a percent of total sales | 9.5 | % | ||||||||||||||||||
| EBIT (1) | $ | 334,058 | $ | 28,988 | $ | 36,564 | $ | (13,385 | ) | $ | 386,225 | |||||||||
| As a percent of total sales | 17.3 | % | 3.1 | % | 11.8 | % | 12.8 | % | ||||||||||||
| Special items charges (gains) (4) | 6,686 | 25,285 | — | 4,498 | 36,469 | |||||||||||||||
| Adjusted EBIT (2) | $ | 340,744 | $ | 54,273 | $ | 36,564 | $ | (8,887 | ) | $ | 422,694 | |||||||||
| As a percent of total sales | 17.7 | % | 5.8 | % | 11.8 | % | 14.0 | % | ||||||||||||
| (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 2019 reflect Rationalization and asset impairment charges of $1,716 in Americas Welding, $11,702 in International Welding and $1,770 in The Harris Products Group, amortization of step up in value of acquired inventories of $1,399 in Americas Welding and $1,609 in International Welding, gains on disposals of assets of $3,554 in International Welding, a gain on change in control of $7,601 related to the acquisition of Askaynak and acquisition transaction and integration costs of $1,804 in Corporate/Eliminations related to the acquisition of Air Liquide Welding. |
| (4) | Special items in 2018 reflect pension settlement charges of $6,686 in Americas Welding, Rationalization and asset impairment charges of $25,285 in International Welding and acquisition transaction and integration costs of $4,498 in Corporate/Eliminations related to the acquisition of Air Liquide Welding. |
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 2018 | Volume | Acquisitions | Price | ForeignExchange | Net Sales 2019 | |||||||||||||||||||
| Operating Segments | ||||||||||||||||||||||||
| Americas Welding | $ | 455,217 | $ | (29,529 | ) | $ | 19,450 | $ | (7,719 | ) | $ | 480 | $ | 437,899 | ||||||||||
| International Welding | 219,456 | (17,076 | ) | 19,648 | (760 | ) | (2,662 | ) | 218,606 | |||||||||||||||
| The Harris Products Group | 69,154 | 3,925 | 4,836 | 2,276 | (389 | ) | 79,802 | |||||||||||||||||
| Consolidated | $ | 743,827 | $ | (42,680 | ) | $ | 43,934 | $ | (6,203 | ) | $ | (2,571 | ) | $ | 736,307 | |||||||||
| % Change | ||||||||||||||||||||||||
| Americas Welding | (6.5 | %) | 4.3 | % | (1.7 | %) | 0.1 | % | (3.8 | %) | ||||||||||||||
| International Welding | (7.8 | %) | 9.0 | % | (0.3 | %) | (1.2 | %) | (0.4 | %) | ||||||||||||||
| The Harris Products Group | 5.7 | % | 7.0 | % | 3.3 | % | (0.6 | %) | 15.4 | % | ||||||||||||||
| Consolidated | (5.7 | %) | 5.9 | % | (0.8 | %) | (0.3 | %) | (1.0 | %) | ||||||||||||||
| Twelve Months Ended December 31st Change in Net Sales by Segment | ||||||||||||||||||||||||
| Change in Net Sales due to: | ||||||||||||||||||||||||
| Net Sales 2018 | Volume | Acquisitions | Price | Foreign Exchange | Net Sales 2019 | |||||||||||||||||||
| Operating Segments | ||||||||||||||||||||||||
| Americas Welding | $ | 1,806,514 | $ | (79,285 | ) | $ | 71,062 | $ | 25,705 | $ | (8,250 | ) | $ | 1,815,746 | ||||||||||
| International Welding | 919,771 | (71,509 | ) | 37,061 | 9,159 | (40,106 | ) | 854,376 | ||||||||||||||||
| The Harris Products Group | 302,389 | 9,898 | 21,032 | 2,852 | (3,021 | ) | 333,150 | |||||||||||||||||
| Consolidated | $ | 3,028,674 | $ | (140,896 | ) | $ | 129,155 | $ | 37,716 | $ | (51,377 | ) | $ | 3,003,272 | ||||||||||
| % Change | ||||||||||||||||||||||||
| Americas Welding | — | % | (4.4 | %) | 3.9 | % | 1.4 | % | (0.5 | %) | 0.5 | % | ||||||||||||
| International Welding | (7.8 | %) | 4.0 | % | 1.0 | % | (4.4 | %) | (7.1 | %) | ||||||||||||||
| The Harris Products Group | 3.3 | % | 7.0 | % | 0.9 | % | (1.0 | %) | 10.2 | % | ||||||||||||||
| Consolidated | (4.7 | %) | 4.3 | % | 1.2 | % | (1.7 | %) | (0.8 | %) | ||||||||||||||
