Exhibit 99.1
Investor Relations: Amanda Butler (216) 383-2534
Amanda_Butler@lincolnelectric.com
LINCOLN ELECTRIC REPORTS FOURTH QUARTER AND FULL YEAR 2015 RESULTS
|
|
| Fourth Quarter and Full Year 2015 Key Metric Highlights |
§ Q4 operating income margin: 13.8% of sales, 15.1% on an adjusted basis |
§ FY2015 operating income margin of 7.2% of sales, 14.7% on an adjusted basis |
§ Strong operational execution with a 21.1% ROIC and 17.1% average operating working capital ratio |
§ FY2015 cash flows from operations of $311 million with 100% cash conversion of adjusted net income (1) |
§ Returned a record $486 million to shareholders in FY2015 through share repurchases and dividends |
CLEVELAND, Ohio, Tuesday, February 23, 2016 -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported fourth quarter 2015 net income of $48.7 million, or earnings per share (EPS) of $0.68. This compares with net income of $75.2 million, or EPS of $0.96 in the comparable 2014 period. On an adjusted basis, fourth quarter 2015 Adjusted net income was $53.8 million, or Adjusted EPS of $0.75, which excludes the after-tax impact of $5.1 million, or $0.07 per diluted share, from special items as compared with $0.96 in the comparable 2014 period. Fourth quarter 2015 EPS was unfavorably impacted by $0.08 from foreign currency translation and $0.09 from a contingent consideration related to an acquisition.
Fourth quarter 2015 sales decreased 17.0% to $568.0 million, or 6.2% on an organic basis, as the benefits of price and acquisitions were offset by broad volume weakness and unfavorable foreign currency translation. Operating income for the fourth quarter 2015 was $78.4 million, or 13.8% of sales, compared with $104.9 million, or 15.3% of sales, in the comparable 2014 period. Fourth quarter 2015 operating income was impacted by special items totaling $7.5 million. Excluding these items, Adjusted operating income was $86.0 million, or 15.1% of sales on strong operational execution and the benefit of cost reduction actions. This compares with Adjusted operating income of $105.1 million, or 15.4% of sales in 2014.
“We finished a challenging year with solid margin performance, cash flows and returns,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “Our results highlight the team’s focused execution, the benefits of our ‘2020 Vision and Strategy,’ and the aggressive cost reduction actions we initiated throughout 2015. We are pleased to report that we returned a record $486 million to shareholders while maintaining a strong balance sheet, and are positioned to repurchase $400 million of shares in 2016. While we expect industrial demand to remain challenging through 2016, we will continue to focus on our continuous improvement initiatives, manage margin performance and invest in Lincoln’s long-term growth opportunities to drive shareholder returns through the cycle.”
Dividend and Share Repurchases
The Company’s Board of Directors increased the quarterly cash dividend 10.3%, from $0.29 per share to $0.32, or $1.28 per share on an annual basis, which was paid on January 15, 2016 to shareholders of record as of December 31, 2015.
During the quarter, the Company returned $122.7 million to shareholders through dividends and the repurchase of $101.7 million of the Company’s common shares. During 2015, the Company returned $486.5 million to shareholders through dividends and the repurchase of $399.5 million of the Company’s common shares.
The Company's 2016 share repurchase target is $400 million of the Company’s common shares.
_______________________________________________________________________________
| |
| (1) | Cash conversion is defined as Net cash provided by operating activities less Capital expenditures divided by Adjusted net income. |
Lincoln Electric Reports Fourth Quarter and Full Year 2015 Financial Results
Twelve Months 2015 Summary
Net income for the full year 2015 was $127.5 million, or EPS of $1.70, which includes the impact of $132.7 million of after-tax special item charges, or $1.78 per diluted share. This compares with net income of $254.7 million, or EPS of $3.18, in 2014. Adjusted net income was $260.2 million, or Adjusted EPS of $3.48 in 2015, compared with Adjusted net income of $305.9 million, or Adjusted EPS of $3.82, in 2014. 2015 EPS was unfavorably impacted by $0.15 from foreign currency translation and $0.16 from a contingent consideration related to an acquisition.
Sales decreased 9.9%, or 4.0% on an organic basis, to $2.5 billion in 2015 as favorable price and acquisitions were offset by lower volumes and unfavorable foreign currency translation. Operating income decreased to $181.7 million, or 7.2% of sales in 2015 due to $142.7 million in non-cash pension settlement charges primarily related to a previously announced pension annuity contract purchase, $27.2 million in non-cash charges related to a Venezuelan currency remeasurement loss and $20.0 million ($6.2 million non-cash) of rationalization and asset impairment charges. This compares with 2014 Operating income of $373.7 million, or 13.3% of sales. Excluding these items, 2015 Adjusted operating income was $371.6 million or 14.7% of sales on solid operational execution and cost reduction benefits. This compares with Adjusted operating income of $424.9 million, or 15.1% of sales, in 2014 which excludes $30.1 million of net rationalization charges and $21.1 million of non-cash charges related to a Venezuelan currency remeasurement loss.
Webcast Information
A conference call to discuss fourth quarter and full year 2015 financial results will be webcast live today, Tuesday, February 23, 2016, at 10:00 a.m., Eastern Time. This webcast is accessible at http://ir.lincolnelectric.com. Listeners should go to the web site prior to the call to register and download and install any necessary audio software. A replay of the webcast will be available on the Company's web site.
Investors who are unable to access the webcast may listen to the conference call live by telephone by dialing (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 20788418. Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.
Financial results for the fourth quarter and full year 2015 can also be obtained at http://ir.lincolnelectric.com.
About Lincoln Electric
Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market. Headquartered in Cleveland, Ohio, Lincoln has 48 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries. For more information about Lincoln Electric and its products and services, visit the Company’s website at http://www.lincolnelectric.com.
Non-GAAP Information
Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company’s financial performance from period to period. Management uses this information in assessing and evaluating the Company’s underlying operating performance. Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. Please refer to the attached schedule for a reconciliation of non-GAAP financial measures to the related GAAP financial measures.
Lincoln Electric Reports Fourth Quarter and Full Year 2015 Financial Results
Forward-Looking Statements
The Company’s expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current expectations and involve a number of risks and uncertainties. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results. The factors include, but are not limited to: general economic and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations, including in highly inflationary countries such as Venezuela; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; and the possible effects of events beyond our control, such as political unrest, acts of terror and natural disasters, on the Company or its customers, suppliers and the economy in general. For additional discussion, see “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Income
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Three months ended December 31, | | Fav (Unfav) to Prior Year |
| | | 2015 | | % of Sales | | 2014 | | % of Sales | | $ | | % |
| Net sales | | $ | 567,985 |
| | 100.0 | % | | $ | 683,954 |
| | 100.0 | % | | $ | (115,969 | ) | | (17.0 | %) |
Cost of goods sold (1) | | 371,906 |
| | 65.5 | % | | 452,869 |
| | 66.2 | % | | 80,963 |
| | 17.9 | % |
| Gross profit | | 196,079 |
| | 34.5 | % | | 231,085 |
| | 33.8 | % | | (35,006 | ) | | (15.1 | %) |
| Selling, general & administrative expenses | | 110,803 |
| | 19.5 | % | | 126,002 |
| | 18.4 | % | | 15,199 |
| | 12.1 | % |
| Rationalization and asset impairment charges | | 434 |
| | 0.1 | % | | 166 |
| | — |
| | (268 | ) | | (161.4 | %) |
| Pension settlement charges | | 6,407 |
| | 1.1 | % | | — |
| | — |
| | (6,407 | ) | | (100.0 | %) |
| Operating income | | 78,435 |
| | 13.8 | % | | 104,917 |
| | 15.3 | % | | (26,482 | ) | | (25.2 | %) |
| Interest income | | 691 |
| | 0.1 | % | | 628 |
| | 0.1 | % | | 63 |
| | 10.0 | % |
| Equity earnings in affiliates | | 877 |
| | 0.2 | % | | 1,104 |
| | 0.2 | % | | (227 | ) | | (20.6 | %) |
| Other income | | 959 |
| | 0.2 | % | | 791 |
| | 0.1 | % | | 168 |
| | 21.2 | % |
Interest expense (2) | | (9,790 | ) | | (1.7 | %) | | (6,704 | ) | | (1.0 | %) | | (3,086 | ) | | (46.0 | %) |
| Income before income taxes | | 71,172 |
| | 12.5 | % | | 100,736 |
| | 14.7 | % | | (29,564 | ) | | (29.3 | %) |
| Income taxes | | 22,473 |
| | 4.0 | % | | 25,401 |
| | 3.7 | % | | 2,928 |
| | 11.5 | % |
| Effective tax rate | | 31.6 | % | | |
| | 25.2 | % | | |
| | (6.4 | %) | | |
| Net income including non-controlling interests | | 48,699 |
| | 8.6 | % | | 75,335 |
| | 11.0 | % | | (26,636 | ) | | (35.4 | %) |
| Non-controlling interests in subsidiaries’ earnings (loss) | | 7 |
| | — |
| | 123 |
| | — |
| | (116 | ) | | (94.3 | %) |
| Net income | | $ | 48,692 |
| | 8.6 | % | | $ | 75,212 |
| | 11.0 | % | | $ | (26,520 | ) | | (35.3 | %) |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.68 |
| | |
| | $ | 0.97 |
| | |
| | $ | (0.29 | ) | | (29.9 | %) |
| Diluted earnings per share | | $ | 0.68 |
| | |
| | $ | 0.96 |
| | |
| | $ | (0.28 | ) | | (29.2 | %) |
| Weighted average shares (basic) | | 71,446 |
| | |
| | 77,403 |
| | |
| | |
| | |
|
| Weighted average shares (diluted) | | 72,121 |
| | |
| | 78,280 |
| | |
| | |
| | |
|
| | | | | | | | | | | | | |
| |
| (1) | Cost of goods sold during the three months ended December 31, 2015 includes a charge of $708 representing the impact of Venezuelan remeasurement losses related to the adoption of a new foreign exchange mechanism. |
| |
| (2) | Interest expense during the three months ended December 31, 2015 and December 31, 2014 includes adjustments to the consideration expected to be paid to acquire additional ownership interests of a majority-owned subsidiary of $6,436 and $5,952, respectively. |
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Income (Continued)
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Twelve months ended December 31, | | Fav (Unfav) to Prior Year |
| | | 2015 | | % of Sales | | 2014 | | % of Sales | | $ | | % |
| Net sales | | $ | 2,535,791 |
| | 100.0 | % | | $ | 2,813,324 |
| | 100.0 | % | | $ | (277,533 | ) | | (9.9 | %) |
Cost of goods sold (1) | | 1,694,647 |
| | 66.8 | % | | 1,864,027 |
| | 66.3 | % | | 169,380 |
| | 9.1 | % |
| Gross profit | | 841,144 |
| | 33.2 | % | | 949,297 |
| | 33.7 | % | | (108,153 | ) | | (11.4 | %) |
Selling, general & administrative expenses (2) | | 496,748 |
| | 19.6 | % | | 545,497 |
| | 19.4 | % | | 48,749 |
| | 8.9 | % |
| Rationalization and asset impairment charges | | 19,958 |
| | 0.8 | % | | 30,053 |
| | 1.1 | % | | 10,095 |
| | 33.6 | % |
| Pension settlement charges | | 142,738 |
| | 5.6 | % | | — |
| | — |
| | (142,738 | ) | | (100.0 | %) |
| Operating income | | 181,700 |
| | 7.2 | % | | 373,747 |
| | 13.3 | % | | (192,047 | ) | | (51.4 | %) |
| Interest income | | 2,714 |
| | 0.1 | % | | 3,093 |
| | 0.1 | % | | (379 | ) | | (12.3 | %) |
| Equity earnings in affiliates | | 3,015 |
| | 0.1 | % | �� | 5,412 |
| | 0.2 | % | | (2,397 | ) | | (44.3 | %) |
| Other income | | 4,182 |
| | 0.2 | % | | 3,995 |
| | 0.1 | % | | 187 |
| | 4.7 | % |
Interest expense (3) | | (21,824 | ) | | (0.9 | %) | | (10,434 | ) | | (0.4 | %) | | (11,390 | ) | | (109.2 | %) |
| Income before income taxes | | 169,787 |
| | 6.7 | % | | 375,813 |
| | 13.4 | % | | (206,026 | ) | | (54.8 | %) |
| Income taxes | | 42,375 |
| | 1.7 | % | | 121,933 |
| | 4.3 | % | | 79,558 |
| | 65.2 | % |
| Effective tax rate | | 25.0 | % | | |
| | 32.4 | % | | |
| | 7.4 | % | | |
| Net income including non-controlling interests | | 127,412 |
| | 5.0 | % | | 253,880 |
| | 9.0 | % | | (126,468 | ) | | (49.8 | %) |
| Non-controlling interests in subsidiaries’ earnings (loss) | | (66 | ) | | — |
| | (806 | ) | | — |
| | 740 |
| | 91.8 | % |
| Net income | | $ | 127,478 |
| | 5.0 | % | | $ | 254,686 |
| | 9.1 | % | | $ | (127,208 | ) | | (49.9 | %) |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 1.72 |
| | |
| | $ | 3.22 |
| | |
| | $ | (1.50 | ) | | (46.6 | %) |
| Diluted earnings per share | | $ | 1.70 |
| | |
| | $ | 3.18 |
| | |
| | $ | (1.48 | ) | | (46.5 | %) |
| Weighted average shares (basic) | | 74,111 |
| | |
| | 79,185 |
| | |
| | |
| | |
|
| Weighted average shares (diluted) | | 74,854 |
| | |
| | 80,096 |
| | |
| | |
| | |
|
| | | | | | | | | | | | | |
| |
| (1) | Cost of goods sold during 2015 and 2014 includes charges of $22,880 and $3,468, respectively, representing the impact of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms. |
| |
| (2) | Selling, general & administrative expenses during 2015 and 2014 include charges of $4,334 and $17,665, respectively, representing the impact of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms. |
| |
| (3) | Interest expense during the 2015 and 2014 includes adjustments to the consideration expected to be paid to acquire additional ownership interests of a majority-owned subsidiary of $12,142 and $8,244, respectively. |
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
Balance Sheet Highlights
|
| | | | | | | | |
| Selected Consolidated Balance Sheet Data | | December 31, 2015 | | December 31, 2014 |
| Cash and cash equivalents | | $ | 304,183 |
| | $ | 278,379 |
|
| Total current assets | | 935,995 |
| | 1,096,202 |
|
| Property, plant and equipment, net | | 411,323 |
| | 438,746 |
|
| Total assets | | 1,784,171 |
| | 1,939,215 |
|
| Total current liabilities | | 370,122 |
| | 492,395 |
|
Short-term debt (1) | | 4,278 |
| | 68,166 |
|
| Long-term debt | | 350,347 |
| | 2,488 |
|
| Total equity | | 932,448 |
| | 1,285,781 |
|
| | | | | |
| Net Operating Working Capital | | December 31, 2015 | | December 31, 2014 |
| Accounts receivable | | $ | 264,715 |
| | $ | 337,664 |
|
| Inventory | | 275,930 |
| | 341,057 |
|
| Trade accounts payable | | 152,620 |
| | 209,745 |
|
| Net operating working capital | | $ | 388,025 |
| | $ | 468,976 |
|
| | | | | |
Net operating working capital to net sales (2) | | 17.1 | % | | 17.1 | % |
| | | | | |
| Invested Capital | | December 31, 2015 | | December 31, 2014 |
Short-term debt (1) | | $ | 4,278 |
| | $ | 68,166 |
|
| Long-term debt | | 350,347 |
| | 2,488 |
|
| Total debt | | 354,625 |
| | 70,654 |
|
| Total equity | | 932,448 |
| | 1,285,781 |
|
| Invested capital | | $ | 1,287,073 |
| | $ | 1,356,435 |
|
| | | | | |
| Total debt / invested capital | | 27.6 | % | | 5.2 | % |
| |
| (1) | Includes current portion of long-term debt. |
| |
| (2) | Net operating working capital to net sales is defined as net operating working capital divided by annualized rolling three months of sales. |
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Non-GAAP Financial Measures
|
| | | | | | | | | | | | | | | | |
| | | Three months ended December 31, | | Twelve months ended December 31, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| Operating income as reported | | $ | 78,435 |
| | $ | 104,917 |
| | $ | 181,700 |
| | $ | 373,747 |
|
| Special items (pre-tax): | | | | | | | | |
Rationalization and asset impairment charges (1) | | 434 |
| | 166 |
| | 19,958 |
| | 30,053 |
|
Venezuela foreign exchange losses (2) | | 708 |
| | — |
| | 27,214 |
| | 21,133 |
|
Pension settlement charges (3) | | 6,407 |
| | — |
| | 142,738 |
| | — |
|
Adjusted operating income (4) | | $ | 85,984 |
| | $ | 105,083 |
|
| $ | 371,610 |
|
| $ | 424,933 |
|
| As a percent of total sales | | 15.1 | % | | 15.4 | % | | 14.7 | % | | 15.1 | % |
| | | | | | | | | |
| Net income as reported | | $ | 48,692 |
| | $ | 75,212 |
| | $ | 127,478 |
| | $ | 254,686 |
|
| Special items (after-tax): | | | | | | | | |
Rationalization and asset impairment charges (1) | | 450 |
| | 167 |
| | 18,182 |
| | 30,914 |
|
Venezuela foreign exchange losses (2) | | 708 |
| | — |
| | 27,214 |
| | 21,133 |
|
Pension settlement charges (3) | | 3,969 |
| | — |
| | 87,310 |
| | — |
|
Special items attributable to non-controlling interests | | — |
| | — |
| | — |
| | (805 | ) |
Adjusted net income (4) | | $ | 53,819 |
| | $ | 75,379 |
|
| $ | 260,184 |
|
| $ | 305,928 |
|
| | | | | | | | | |
| Diluted earnings per share as reported | | $ | 0.68 |
| | $ | 0.96 |
| | $ | 1.70 |
| | $ | 3.18 |
|
| Special items | | 0.07 |
| | — |
| | 1.78 |
| | 0.64 |
|
Adjusted diluted earnings per share (4) | | $ | 0.75 |
| | $ | 0.96 |
| | $ | 3.48 |
| | $ | 3.82 |
|
| | | | | | | | | |
| Weighted average shares (diluted) | | 72,121 |
| | 78,280 |
| | 74,854 |
| | 80,096 |
|
| | | | | | | | | |
| Return on Invested Capital | | | | | | 2015 | | 2014 |
| Adjusted net income | | | | | | $ | 260,184 |
| | $ | 305,928 |
|
| Plus: Interest expense (after-tax) | | | | | | 13,469 |
| | 6,439 |
|
| Less: Interest income (after-tax) | | | | | | 1,675 |
| | 1,909 |
|
| Net operating profit after taxes | | | | | | 271,978 |
| | 310,458 |
|
| Invested capital | | | | | | 1,287,073 |
| | 1,356,435 |
|
Return on invested capital (4)(5) | | | | | | 21.1 | % | | 22.9 | % |
| |
| (1) | The three and twelve months ended December 31, 2015 and 2014 include net charges primarily related to severance and other related costs. The twelve months ended December 31, 2015 also include long-lived asset and goodwill impairment charges. Rationalization charges in 2014 are partially offset by gains related to the sale of assets at rationalized operations. |
| |
| (2) | The three and twelve months ended December 31, 2015 and twelve months ended December 31, 2014 represent the impacts of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms. |
| |
| (3) | The three and twelve months ended December 31, 2015 include pension settlement charges primarily related to the purchase of a group annuity contract. |
| |
| (4) | Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company’s financial performance from period to period. Management uses this information in assessing and evaluating the Company’s underlying operating performance. Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. |
| |
| (5) | Return on invested capital is defined as rolling 12 months of Adjusted net income excluding tax-effected interest income and expense divided by invested capital. |
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Condensed Consolidated Statements of Cash Flows
|
| | | | | | | | |
| | | Three months ended December 31, |
| | | 2015 | | 2014 |
| OPERATING ACTIVITIES: | | |
| | |
|
| Net income | | $ | 48,692 |
| | $ | 75,212 |
|
| Non-controlling interests in subsidiaries’ income | | 7 |
| | 123 |
|
| Net income including non-controlling interests | | 48,699 |
|
| 75,335 |
|
| Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | | |
| | |
|
| Rationalization and asset impairment charges | | 149 |
| | 127 |
|
| Depreciation and amortization | | 16,110 |
| | 16,590 |
|
| Equity (earnings) loss in affiliates, net | | (278 | ) | | 53 |
|
| Pension expense and settlement charges | | 10,967 |
| | 2,761 |
|
| Pension contributions and payments | | (1,426 | ) | | (1,429 | ) |
| Other non-cash items, net | | 5,469 |
| | 14,357 |
|
| Changes in operating assets and liabilities, net of effects from acquisitions: | | |
| | |
|
| Decrease in accounts receivable | | 42,080 |
| | 28,264 |
|
| Decrease in inventories | | 28,243 |
| | 5,435 |
|
| (Decrease) increase in trade accounts payable | | (12,282 | ) | | 13,669 |
|
Net change in other current assets and liabilities 1 | | (67,467 | ) | | (24,954 | ) |
| Net change in other long-term assets and liabilities | | 5,158 |
| | 3,441 |
|
| NET CASH PROVIDED BY OPERATING ACTIVITIES | | 75,422 |
| | 133,649 |
|
| | | | | |
| INVESTING ACTIVITIES: | | |
| | |
|
| Capital expenditures | | (10,320 | ) | | (17,560 | ) |
| Acquisition of businesses, net of cash acquired | | (3,194 | ) | | (23,338 | ) |
| Proceeds from sale of property, plant and equipment | | 137 |
| | 411 |
|
| NET CASH USED BY INVESTING ACTIVITIES | | (13,377 | ) | | (40,487 | ) |
| | | | | |
| FINANCING ACTIVITIES: | | |
| | |
|
| Net change in borrowings | | 2,186 |
| | (17,783 | ) |
| Proceeds from exercise of stock options | | 1,396 |
| | 3,171 |
|
| Excess tax benefits from stock-based compensation | | 487 |
| | 2,606 |
|
| Purchase of shares for treasury | | (101,690 | ) | | (57,775 | ) |
| Cash dividends paid to shareholders | | (21,026 | ) | | (17,866 | ) |
| Other financing activities | | 18 |
| | — |
|
| NET CASH USED BY FINANCING ACTIVITIES | | (118,629 | ) | | (87,647 | ) |
| | | | | |
| Effect of exchange rate changes on Cash and cash equivalents | | (3,578 | ) | | (6,659 | ) |
| DECREASE IN CASH AND CASH EQUIVALENTS | | (60,162 | ) | | (1,144 | ) |
| Cash and cash equivalents at beginning of period | | 364,345 |
| | 279,523 |
|
| Cash and cash equivalents at end of period | | $ | 304,183 |
| | $ | 278,379 |
|
| | | | | |
| Cash dividends paid per share | | $ | 0.29 |
| | $ | 0.23 |
|
1 Net change in other current assets and liabilities increased in 2014 because of the receipt of a $50.3 million tax refund.
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Condensed Consolidated Statements of Cash Flows
|
| | | | | | | | |
| | | Twelve months ended December 31, |
| | | 2015 | | 2014 |
| OPERATING ACTIVITIES: | | |
| | |
|
| Net income | | $ | 127,478 |
| | $ | 254,686 |
|
| Non-controlling interests in subsidiaries’ loss | | (66 | ) | | (806 | ) |
| Net income including non-controlling interests | | 127,412 |
| | 253,880 |
|
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | | |
| | |
|
| Rationalization and asset impairment charges | | 6,269 |
| | 29,574 |
|
| Depreciation and amortization | | 64,007 |
| | 69,607 |
|
| Equity earnings in affiliates, net | | (530 | ) | | (1,848 | ) |
| Pension expense and settlement charges | | 162,815 |
| | 12,395 |
|
Pension contributions and payments 1 | | (53,547 | ) | | (36,072 | ) |
| Other non-cash items, net | | (46,838 | ) | | 44,398 |
|
| Changes in operating assets and liabilities, net of effects from acquisitions: | | |
| | |
|
| Decrease in accounts receivable | | 56,741 |
| | 5,876 |
|
| Decrease (increase) in inventories | | 56,067 |
| | (5,718 | ) |
| (Decrease) increase in trade accounts payable | | (46,911 | ) | | 2,135 |
|
Net change in other current assets and liabilities 2 | | (20,435 | ) | | 28,345 |
|
| Net change in other long-term assets and liabilities | | 5,808 |
| | (870 | ) |
| NET CASH PROVIDED BY OPERATING ACTIVITIES | | 310,858 |
| | 401,702 |
|
| | | | | |
| INVESTING ACTIVITIES: | | |
| | |
|
| Capital expenditures | | (50,507 | ) | | (72,990 | ) |
| Acquisition of businesses, net of cash acquired | | (37,076 | ) | | (24,230 | ) |
| Proceeds from sale of property, plant and equipment | | 2,310 |
| | 17,457 |
|
| Other investing activities | | (79 | ) | | 778 |
|
| NET CASH USED BY INVESTING ACTIVITIES | | (85,352 | ) | | (78,985 | ) |
| | | | | |
| FINANCING ACTIVITIES: | | |
| | |
|
| Net change in borrowings | | 316,606 |
| | 53,331 |
|
| Proceeds from exercise of stock options | | 5,996 |
| | 9,116 |
|
| Excess tax benefits from stock-based compensation | | 1,974 |
| | 5,967 |
|
| Purchase of shares for treasury | | (399,494 | ) | | (307,178 | ) |
| Cash dividends paid to shareholders | | (86,968 | ) | | (73,261 | ) |
| Transactions with non-controlling interests | | (8,022 | ) | | (2,330 | ) |
| NET CASH USED BY FINANCING ACTIVITIES | | (169,908 | ) | | (314,355 | ) |
| | | | | |
| Effect of exchange rate changes on Cash and cash equivalents | | (29,794 | ) | | (29,808 | ) |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | 25,804 |
| | (21,446 | ) |
| Cash and cash equivalents at beginning of period | | 278,379 |
| | 299,825 |
|
| Cash and cash equivalents at end of period | | $ | 304,183 |
| | $ | 278,379 |
|
| | | | | |
| Cash dividends paid per share | | $ | 1.16 |
| | $ | 0.92 |
|
1 Pension contributions and payments includes contributions to the U.S. pension plans of $47.1 million in 2015 and $21.2 million in 2014.
2 Net change in other current assets and liabilities includes tax refunds of $25.0 million in 2015 and $50.3 million in 2014.
Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | North
America
Welding | | Europe
Welding | | Asia Pacific
Welding | | South
America
Welding | | The Harris
Products
Group | | Corporate /
Eliminations | | Consolidated |
Three months ended
December 31, 2015 | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Net sales | | $ | 373,878 |
| | $ | 76,909 |
| | $ | 42,817 |
| | $ | 14,950 |
| | $ | 59,431 |
| | $ | — |
| | $ | 567,985 |
|
| Inter-segment sales | | 20,973 |
| | 3,235 |
| | 1,482 |
| | 20 |
| | 2,278 |
| | (27,988 | ) | | — |
|
| Total | | $ | 394,851 |
| | $ | 80,144 |
| | $ | 44,299 |
| | $ | 14,970 |
| | $ | 61,709 |
| | $ | (27,988 | ) | | $ | 567,985 |
|
| | | | | | | | | | | | | | | |
| EBIT (1) | | $ | 71,972 |
| | $ | 4,751 |
| | $ | (474 | ) | | $ | (1,512 | ) | | $ | 5,661 |
| | $ | (127 | ) | | $ | 80,271 |
|
| As a percent of total sales | | 18.2 | % | | 5.9 | % | | (1.1 | %) | | (10.1 | %) | | 9.2 | % | | |
| | 14.1 | % |
| Special items charge (gain) (2) | | $ | 6,353 |
| | $ | — |
| | $ | 488 |
| | $ | 708 |
| | $ | — |
| | $ | — |
| | $ | 7,549 |
|
| EBIT, as adjusted (4) | | $ | 78,325 |
| | $ | 4,751 |
| | $ | 14 |
| | $ | (804 | ) | | $ | 5,661 |
| | $ | (127 | ) | | $ | 87,820 |
|
| As a percent of total sales | | 19.8 | % | | 5.9 | % | | — |
| | (5.4 | %) | | 9.2 | % | | |
| | 15.5 | % |
Three months ended
December 31, 2014 | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Net sales | | $ | 429,907 |
| | $ | 97,288 |
| | $ | 58,113 |
| | $ | 32,689 |
| | $ | 65,957 |
| | $ | — |
| | $ | 683,954 |
|
| Inter-segment sales | | 28,064 |
| | 3,699 |
| | 3,176 |
| | 71 |
| | 1,821 |
| | (36,831 | ) | | — |
|
| Total | | $ | 457,971 |
| | $ | 100,987 |
| | $ | 61,289 |
| | $ | 32,760 |
| | $ | 67,778 |
| | $ | (36,831 | ) | | $ | 683,954 |
|
| | | | | | | | | | | | | | | |
| EBIT (1) | | $ | 88,456 |
| | $ | 9,429 |
| | $ | 1,715 |
| | $ | (217 | ) | | $ | 6,380 |
| | $ | 1,049 |
| | $ | 106,812 |
|
| As a percent of total sales | | 19.3 | % | | 9.3 | % | | 2.8 | % | | (0.7 | %) | | 9.4 | % | | |
| | 15.6 | % |
| Special items charge (gain) (3) | | $ | — |
| | $ | (19 | ) | | $ | 185 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 166 |
|
| EBIT, as adjusted (4) | | $ | 88,456 |
| | $ | 9,410 |
| | $ | 1,900 |
| | $ | (217 | ) | | $ | 6,380 |
| | $ | 1,049 |
| | $ | 106,978 |
|
| As a percent of total sales | | 19.3 | % | | 9.3 | % | | 3.1 | % | | (0.7 | %) | | 9.4 | % | | |
| | 15.6 | % |
Twelve months ended
December 31, 2015 | | | | |
| | |
| | |
| | |
| | |
| | |
|
| Net sales | | $ | 1,610,357 |
| | $ | 336,824 |
| | $ | 186,615 |
| | $ | 138,014 |
| | $ | 263,981 |
| | $ | — |
| | $ | 2,535,791 |
|
| Inter-segment sales | | 100,770 |
| | 15,922 |
| | 10,510 |
| | 174 |
| | 9,312 |
| | (136,688 | ) | | — |
|
| Total | | $ | 1,711,127 |
| | $ | 352,746 |
| | $ | 197,125 |
| | $ | 138,188 |
| | $ | 273,293 |
| | $ | (136,688 | ) | | $ | 2,535,791 |
|
| | | | | | | | | | | | | | | |
| EBIT (1) | | $ | 150,989 |
| | $ | 29,810 |
| | $ | 1,960 |
| | $ | (21,645 | ) | | $ | 27,882 |
| | $ | (99 | ) | | $ | 188,897 |
|
| As a percent of total sales | | 8.8 | % | | 8.5 | % | | 1.0 | % | | (15.7 | %) | | 10.2 | % | | |
| | 7.4 | % |
| Special items charge (gain) (2) | | $ | 155,757 |
| | $ | 1,507 |
| | $ | 5,432 |
| | $ | 27,214 |
| | $ | — |
| | $ | — |
| | $ | 189,910 |
|
| EBIT, as adjusted (4) | | $ | 306,746 |
| | $ | 31,317 |
| | $ | 7,392 |
| | $ | 5,569 |
| | $ | 27,882 |
| | $ | (99 | ) | | $ | 378,807 |
|
| As a percent of total sales | | 17.9 | % | | 8.9 | % | | 3.7 | % | | 4.0 | % | | 10.2 | % | | |
| | 14.9 | % |
Twelve months ended December 31, 2014 | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Net sales | | $ | 1,700,924 |
| | $ | 425,775 |
| | $ | 243,800 |
| | $ | 148,595 |
| | $ | 294,230 |
| | $ | — |
| | $ | 2,813,324 |
|
| Inter-segment sales | | 124,732 |
| | 19,586 |
| | 14,820 |
| | 144 |
| | 8,210 |
| | (167,492 | ) | | — |
|
| Total | | $ | 1,825,656 |
| | $ | 445,361 |
| | $ | 258,620 |
| | $ | 148,739 |
| | $ | 302,440 |
| | $ | (167,492 | ) | | $ | 2,813,324 |
|
| | | | | | | | | | | | | | | |
| EBIT (1) | | $ | 335,533 |
| | $ | 47,918 |
| | $ | (27,314 | ) | | $ | (5,762 | ) | | $ | 28,563 |
| | $ | 4,216 |
| | $ | 383,154 |
|
| As a percent of total sales | | 18.4 | % | | 10.8 | % | | (10.6 | %) | | (3.9 | %) | | 9.4 | % | | |
| | 13.6 | % |
| Special items charge (gain) (3) | | $ | (68 | ) | | $ | 904 |
| | $ | 28,635 |
| | $ | 21,715 |
| | $ | — |
| | $ | — |
| | $ | 51,186 |
|
| EBIT, as adjusted (4) | | $ | 335,465 |
| | $ | 48,822 |
| | $ | 1,321 |
| | $ | 15,953 |
| | $ | 28,563 |
| | $ | 4,216 |
| | $ | 434,340 |
|
| As a percent of total sales | | 18.4 | % | | 11.0 | % | | 0.5 | % | | 10.7 | % | | 9.4 | % | | |
| | 15.4 | % |
| |
| (1) | EBIT is defined as Operating income plus Equity earnings in affiliates and Other income. |
| |
| (2) | Special items in the three and twelve months ended December 31, 2015 represent rationalization charges primarily related to employee severance, pension settlement charges and charges relating to a Venezuelan remeasurement loss resulting from the adoption of a new foreign exchange mechanism. Special items in the year ended December 31, 2015 also include charges related to the impairment of long-lived assets and goodwill. |
| |
| (3) | Special items in the three and twelve months ended December 31, 2014 include non-cash asset impairment charges partially offset by net rationalization gains including a gain on the sale of real estate. Special items in the twelve months ended December 31, 2014 also include the impact of the Venezuelan remeasurement losses related to the adoption of a new foreign exchange mechanism in the first quarter. |
| |
| (4) | The primary profit measure used by management to assess segment performance is EBIT, as adjusted. EBIT for each operating segment is adjusted for special items to derive EBIT, as adjusted. |
Lincoln Electric Holdings, Inc.
Change in Net Sales by Segment
(In thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31st Change in Net Sales by Segment |
| | | | | | | |
| | | | | Change in Net Sales due to: | | |
| | | Net Sales 2014 | | Volume | | Acquisitions | | Price | | Foreign Exchange | | Net Sales 2015 |
| Operating Segments | | |
| | |
| | |
| | |
| | |
| | |
|
| North America Welding | | $ | 429,907 |
| | $ | (64,157 | ) | | $ | 10,975 |
| | $ | 5,307 |
| | $ | (8,154 | ) | | $ | 373,878 |
|
| Europe Welding | | 97,288 |
| | (7,770 | ) | | — |
| | (528 | ) | | (12,081 | ) | | 76,909 |
|
| Asia Pacific Welding | | 58,113 |
| | (15,531 | ) | | 3,494 |
| | (655 | ) | | (2,604 | ) | | 42,817 |
|
| South America Welding | | 32,689 |
| | (8,889 | ) | | — |
| | 53,455 |
| | (62,305 | ) | | 14,950 |
|
| The Harris Products Group | | 65,957 |
| | (1,822 | ) | | — |
| | (1,758 | ) | | (2,946 | ) | | 59,431 |
|
| Consolidated | | $ | 683,954 |
| | $ | (98,169 | ) | | $ | 14,469 |
| | $ | 55,821 |
| | $ | (88,090 | ) | | $ | 567,985 |
|
| | | | | | | | | | | | | |
| Consolidated (excluding Venezuela) | | $ | 668,130 |
| | $ | (91,693 | ) | | $ | 14,469 |
| | $ | 3,032 |
| | $ | (29,696 | ) | | $ | 564,242 |
|
| | | | | | | | | | | | | |
| % Change | | |
| | |
| | |
| | |
| | |
| | |
|
| North America Welding | | |
| | (14.9 | %) | | 2.6 | % | | 1.2 | % | | (1.9 | %) | | (13.0 | %) |
| Europe Welding | | |
| | (8.0 | %) | | — |
| | (0.5 | %) | | (12.4 | %) | | (20.9 | %) |
| Asia Pacific Welding | | |
| | (26.7 | %) | | 6.0 | % | | (1.1 | %) | | (4.5 | %) | | (26.3 | %) |
| South America Welding | | |
| | (27.2 | %) | | — |
| | 163.5 | % | | (190.6 | %) | | (54.3 | %) |
| The Harris Products Group | | |
| | (2.8 | %) | | — |
| | (2.7 | %) | | (4.5 | %) | | (9.9 | %) |
| Consolidated | | |
| | (14.4 | %) | | 2.1 | % | | 8.2 | % | | (12.9 | %) | | (17.0 | %) |
| | | | | | | | | | | | | |
| Consolidated (excluding Venezuela) | | | | (13.7 | %) | | 2.2 | % | | 0.5 | % | | (4.4 | %) | | (15.5 | %) |
| | | | | | | | | | | | | |
| Twelve Months Ended December 31st Change in Net Sales by Segment |
| | | | | | | |
| | | | | Change in Net Sales due to: | | |
| | | Net Sales 2014 | | Volume | | Acquisitions | | Price | | Foreign Exchange | | Net Sales 2015 |
| Operating Segments | | |
| | |
| | |
| | |
| | |
| | |
|
| North America Welding | | $ | 1,700,924 |
| | $ | (129,921 | ) | | $ | 57,333 |
| | $ | 14,944 |
| | $ | (32,923 | ) | | $ | 1,610,357 |
|
| Europe Welding | | 425,775 |
| | (18,179 | ) | | — |
| | (2,285 | ) | | (68,487 | ) | | 336,824 |
|
| Asia Pacific Welding | | 243,800 |
| | (49,501 | ) | | 5,295 |
| | (2,511 | ) | | (10,468 | ) | | 186,615 |
|
| South America Welding | | 148,595 |
| | (24,240 | ) | | — |
| | 116,765 |
| | (103,106 | ) | | 138,014 |
|
| The Harris Products Group | | 294,230 |
| | (2,168 | ) | | — |
| | (15,746 | ) | | (12,335 | ) | | 263,981 |
|
| Consolidated | | $ | 2,813,324 |
| | $ | (224,009 | ) | | $ | 62,628 |
| | $ | 111,167 |
| | $ | (227,319 | ) | | $ | 2,535,791 |
|
| | | | | | | | | | | | | |
| Consolidated (excluding Venezuela) | | $ | 2,741,531 |
| | $ | (211,098 | ) | | $ | 62,628 |
| | $ | (2,598 | ) | | $ | (139,334 | ) | | $ | 2,451,129 |
|
| | | | | | | | | | | | | |
| % Change | | |
| | |
| | |
| | |
| | |
| | |
|
| North America Welding | | |
| | (7.6 | %) | | 3.4 | % | | 0.9 | % | | (1.9 | %) | | (5.3 | %) |
| Europe Welding | | |
| | (4.3 | %) | | — |
| | (0.5 | %) | | (16.1 | %) | | (20.9 | %) |
| Asia Pacific Welding | | |
| | (20.3 | %) | | 2.2 | % | | (1.0 | %) | | (4.3 | %) | | (23.5 | %) |
| South America Welding | | |
| | (16.3 | %) | | — |
| | 78.6 | % | | (69.4 | %) | | (7.1 | %) |
| The Harris Products Group | | |
| | (0.7 | %) | | — |
| | (5.4 | %) | | (4.2 | %) | | (10.3 | %) |
| Consolidated | | |
| | (8.0 | %) | | 2.2 | % | | 4.0 | % | | (8.1 | %) | | (9.9 | %) |
| | | | | | | | | | | | | |
| Consolidated (excluding Venezuela) | | | | (7.7 | %) | | 2.3 | % | | (0.1 | %) | | (5.1 | %) | | (10.6 | %) |
