Exhibit 99.1
Investor Relations: Amanda Butler (216) 383-2534
Amanda_Butler@lincolnelectric.com
LINCOLN ELECTRIC REPORTS FOURTH QUARTER AND FULL YEAR 2016 RESULTS
|
|
| Fourth Quarter and Full Year 2016 Highlights |
§ Fourth quarter EPS of $0.81; Full year 2016 EPS of $2.91 and Adjusted EPS of $3.29 |
§ Fourth quarter operating income margin resilient at 14.7% |
§ Record average operating working capital to net sales ratio of 15.6% |
§ Solid cash flow from operations and over 100% cash conversion of net income(1) in fourth quarter and full year 2016 |
§ Returned $429 million to shareholders in 2016 through dividends and share repurchases |
CLEVELAND, Tuesday, February 14, 2017 -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported fourth quarter 2016 net income of $53.4 million, or diluted earnings per share (EPS) of $0.81. This compares with net income of $48.7 million or $0.68 EPS in the comparable 2015 period which included after-tax special item charges of $5.1 million, or $0.07 per diluted share. On an adjusted basis, net income for fourth quarter 2015 was $53.8 million, or $0.75 EPS.
Fourth quarter 2016 sales decreased 0.7% to $563.8 million as a 1.3% benefit from acquisitions and a 0.1% increase in price was offset by 1.3% lower volumes and a 0.8% unfavorable impact from foreign exchange translation. Excluding Venezuela from prior year results due to the deconsolidation of the operation, sales were flat as 0.6% lower volumes and a 0.8% unfavorable impact from foreign exchange were offset by a 1.3% benefit from acquisitions.
Operating income for the fourth quarter 2016 was $83.1 million, or 14.7% of sales, reflecting favorable mix and lower operating costs. This compares with operating income of $78.4 million, or 13.8% of sales, in the comparable 2015 period which included special items charges of $7.5 million related to pension settlement, Venezuelan currency remeasurement and rationalization. On an adjusted basis, fourth quarter 2015 operating income was $86.0 million or 15.1% of sales.
“We finished the year with steady demand trends, solid margin and cash flow performance, and record working capital efficiency in the business,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “Strong execution of our ‘2020 Strategy’ initiatives continues to improve Lincoln’s performance through the cycle and I am confident that our focus on innovation, operational excellence and investment returns will position us well to capitalize on growth as conditions improve in our global markets.”
Twelve Months 2016 Summary
Net income for the twelve months ended December 31, 2016 was $198.4 million, or EPS of $2.91, which includes an after-tax special item benefit of $7.2 million, or $0.11 EPS, due to the reversal of an income tax valuation allowance, offset by a $33.3 million after-tax charge, or $0.49 EPS, from the deconsolidation of the Venezuelan subsidiary. This compares with net income of $127.5 million, or EPS of $1.70, in the comparable 2015 period. Adjusted net income for the twelve months ended December 31, 2016 was $224.5 million, or adjusted EPS of $3.29, compared with adjusted net income of $260.2 million, or adjusted EPS of $3.48, in 2015.
Sales decreased 10.3% to $2.3 billion in the twelve months ended December 31, 2016 due to 12.8% unfavorable foreign exchange translation and 9.8% lower volumes, offset by 10.2% higher pricing and a 2.0% increase from acquisitions. This compares with $2.5 billion in sales in the comparable 2015 period. Excluding Venezuela from prior year results, sales decreased 7.6%, primarily from lower volumes. Operating income was $288.3 million, or 12.7% of sales, as compared with $181.7 million, or 7.2% of sales, in the comparable 2015 period. Adjusted operating income was $322.6 million or 14.2% of sales, compared with $371.6 million, or 14.7% of sales in 2015.
_______________________________________________________________________________
| |
| (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 2016 Financial Results
Venezuela Deconsolidation
Effective June 30, 2016, the Company deconsolidated the financial results of its Venezuela subsidiary and began reporting its results using the cost method of accounting. As a result, Venezuelan financial results are no longer included in the consolidated financial statements starting in the third quarter of 2016. Fourth quarter 2015 Venezuela financial performance included Net sales of $3.7 million, Net loss of $ 0.9 million and Adjusted net loss of $0.2 million. For 2015, Venezuela financial performance included Net sales of $84.7 million, Net loss of $24.0 million and Adjusted net income of $3.2 million.
Dividend and Share Repurchases
The Company’s Board of Directors declared a 9.4% increase in the quarterly cash dividend, from $0.32 per share to $0.35, or $1.40 per share on an annual basis, which was paid on January 13, 2017 to shareholders of record as of December 31, 2016.
During the fourth quarter, the Company returned $74.6 million to shareholders through dividends and the repurchase of 0.8 million of the Company’s common shares. During 2016, the Company returned $429.3 million to shareholders through dividends and the repurchase of 5.9 million of the Company’s common shares.
Financing Activities
On October 20, 2016, the Company issued Senior Unsecured Notes (the "2016 Notes") in the aggregate principal amount of $350 million through a private placement. The 2016 Notes have maturities ranging from 12 to 25 years with a weighted average effective interest rate of 3.1% and a weighted average term of 18 years. The proceeds are being used for general corporate purposes.
Webcast Information
A conference call to discuss fourth quarter 2016 financial results will be webcast live today, February 14, 2017, 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 50963897. Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.
Financial results for the fourth quarter 2016 can also be obtained at http://ir.lincolnelectric.com.
About Lincoln Electric
Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market. Headquartered in Cleveland, Ohio, Lincoln has 47 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries. For more information about Lincoln Electric and its products and services, visit the Company’s website at 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. 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.
Lincoln Electric Reports Fourth Quarter and Full Year 2016 Financial Results
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; 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 and on Form 10-Q for the quarter ended June 30, 2016.
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 |
| | | 2016 | | % of Sales | | 2015 | | % of Sales | | $ | | % |
| Net sales | | $ | 563,828 |
| | 100.0 | % | | $ | 567,985 |
| | 100.0 | % | | $ | (4,157 | ) | | (0.7 | %) |
| Cost of goods sold | | 366,371 |
| | 65.0 | % | | 371,906 |
| | 65.5 | % | | 5,535 |
| | 1.5 | % |
| Gross profit | | 197,457 |
| | 35.0 | % | | 196,079 |
| | 34.5 | % | | 1,378 |
| | 0.7 | % |
| Selling, general & administrative expenses | | 114,386 |
| | 20.3 | % | | 110,803 |
| | 19.5 | % | | (3,583 | ) | | (3.2 | %) |
| Rationalization and asset impairment charges | | — |
| | — |
| | 434 |
| | 0.1 | % | | 434 |
| | 100.0 | % |
| Pension settlement charges | | — |
| | — |
| | 6,407 |
| | 1.1 | % | | 6,407 |
| | 100.0 | % |
| Operating income | | 83,071 |
| | 14.7 | % | | 78,435 |
| | 13.8 | % | | 4,636 |
| | 5.9 | % |
| Interest income | | 867 |
| | 0.2 | % | | 691 |
| | 0.1 | % | | 176 |
| | 25.5 | % |
| Equity earnings in affiliates | | 844 |
| | 0.1 | % | | 877 |
| | 0.2 | % | | (33 | ) | | (3.8 | %) |
| Other income | | 621 |
| | 0.1 | % | | 959 |
| | 0.2 | % | | (338 | ) | | (35.2 | %) |
| Interest expense | | (7,251 | ) | | (1.3 | %) | | (9,790 | ) | | (1.7 | %) | | 2,539 |
| | 25.9 | % |
| Income before income taxes | | 78,152 |
| | 13.9 | % | | 71,172 |
| | 12.5 | % | | 6,980 |
| | 9.8 | % |
| Income taxes | | 24,751 |
| | 4.4 | % | | 22,473 |
| | 4.0 | % | | (2,278 | ) | | (10.1 | %) |
| Effective tax rate | | 31.7 | % | | |
| | 31.6 | % | | |
| | (0.1 | %) | | |
| Net income including non-controlling interests | | 53,401 |
| | 9.5 | % | | 48,699 |
| | 8.6 | % | | 4,702 |
| | 9.7 | % |
| Non-controlling interests in subsidiaries’ income (loss) | | 6 |
| | — |
| | 7 |
| | — |
| | (1 | ) | | (14.3 | %) |
| Net income | | $ | 53,395 |
| | 9.5 | % | | $ | 48,692 |
| | 8.6 | % | | $ | 4,703 |
| | 9.7 | % |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.81 |
| | |
| | $ | 0.68 |
| | |
| | $ | 0.13 |
| | 19.1 | % |
| Diluted earnings per share | | $ | 0.81 |
| | |
| | $ | 0.68 |
| | |
| | $ | 0.13 |
| | 19.1 | % |
| Weighted average shares (basic) | | 65,603 |
| | |
| | 71,446 |
| | |
| | |
| | |
|
| Weighted average shares (diluted) | | 66,303 |
| | |
| | 72,121 |
| | |
| | |
| | |
|
| | | Twelve months ended December 31, | | Fav (Unfav) to Prior Year |
| | | 2016 | | % of Sales | | 2015 | | % of Sales | | $ | | % |
| Net sales | | $ | 2,274,614 |
| | 100.0 | % | | $ | 2,535,791 |
| | 100.0 | % | | $ | (261,177 | ) | | (10.3 | %) |
| Cost of goods sold | | 1,485,316 |
| | 65.3 | % | | 1,694,647 |
| | 66.8 | % | | 209,331 |
| | 12.4 | % |
| Gross profit | | 789,298 |
| | 34.7 | % | | 841,144 |
| | 33.2 | % | | (51,846 | ) | | (6.2 | %) |
| Selling, general & administrative expenses | | 466,676 |
| | 20.5 | % | | 496,748 |
| | 19.6 | % | | 30,072 |
| | 6.1 | % |
| Rationalization and asset impairment charges | | — |
| | — |
| | 19,958 |
| | 0.8 | % | | 19,958 |
| | 100.0 | % |
| Pension settlement charges | | — |
| | — |
| | 142,738 |
| | 5.6 | % | | 142,738 |
| | 100.0 | % |
| Loss on deconsolidation of Venezuelan subsidiary | | 34,348 |
| | 1.5 | % | | — |
| | — |
| | (34,348 | ) | | (100.0 | %) |
| Operating income | | 288,274 |
| | 12.7 | % | | 181,700 |
| | 7.2 | % | | 106,574 |
| | 58.7 | % |
| Interest income | | 2,092 |
| | 0.1 | % | | 2,714 |
| | 0.1 | % | | (622 | ) | | (22.9 | %) |
| Equity earnings in affiliates | | 2,928 |
| | 0.1 | % | | 3,015 |
| | 0.1 | % | | (87 | ) | | (2.9 | %) |
| Other income | | 3,173 |
| | 0.1 | % | | 4,182 |
| | 0.2 | % | | (1,009 | ) | | (24.1 | %) |
| Interest expense | | (19,079 | ) | | (0.8 | %) | | (21,824 | ) | | (0.9 | %) | | 2,745 |
| | 12.6 | % |
| Income before income taxes | | 277,388 |
| | 12.2 | % | | 169,787 |
| | 6.7 | % | | 107,601 |
| | 63.4 | % |
| Income taxes | | 79,015 |
| | 3.5 | % | | 42,375 |
| | 1.7 | % | | (36,640 | ) | | (86.5 | %) |
| Effective tax rate | | 28.5 | % | | |
| | 25.0 | % | | |
| | (3.5 | %) | | |
| Net income including non-controlling interests | | 198,373 |
| | 8.7 | % | | 127,412 |
| | 5.0 | % | | 70,961 |
| | 55.7 | % |
| Non-controlling interests in subsidiaries’ income (loss) | | (26 | ) | | — |
| | (66 | ) | | — |
| | 40 |
| | 60.6 | % |
| Net income | | $ | 198,399 |
| | 8.7 | % | | $ | 127,478 |
| | 5.0 | % | | $ | 70,921 |
| | 55.6 | % |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 2.94 |
| | |
| | $ | 1.72 |
| | |
| | $ | 1.22 |
| | 70.9 | % |
| Diluted earnings per share | | $ | 2.91 |
| | |
| | $ | 1.70 |
| | |
| | $ | 1.21 |
| | 71.2 | % |
| Weighted average shares (basic) | | 67,462 |
| | |
| | 74,111 |
| | |
| | |
| | |
|
| Weighted average shares (diluted) | | 68,156 |
| | |
| | 74,854 |
| | |
| | |
| | |
|
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
Balance Sheet Highlights
|
| | | | | | | | |
| Selected Consolidated Balance Sheet Data | | December 31, 2016 | | December 31, 2015 |
| Cash and cash equivalents | | $ | 379,179 |
| | $ | 304,183 |
|
| Total current assets | | 1,043,713 |
| | 935,995 |
|
| Property, plant and equipment, net | | 372,377 |
| | 411,323 |
|
| Total assets | | 1,943,437 |
| | 1,784,171 |
|
| Total current liabilities | | 388,107 |
| | 370,122 |
|
Short-term debt (1) | | 1,889 |
| | 4,278 |
|
| Long-term debt, less current portion | | 703,704 |
| | 350,347 |
|
| Total equity | | 712,206 |
| | 932,448 |
|
| | | | | |
| Operating Working Capital | | December 31, 2016 | | December 31, 2015 |
| Accounts receivable | | $ | 273,993 |
| | $ | 264,715 |
|
| Inventories | | 255,406 |
| | 275,930 |
|
| Trade accounts payable | | 176,757 |
| | 152,620 |
|
| Operating working capital | | $ | 352,642 |
| | $ | 388,025 |
|
| | | | | |
Average operating working capital to net sales (2) | | 15.6 | % | | 17.1 | % |
| | | | | |
| Invested Capital | | December 31, 2016 | | December 31, 2015 |
Short-term debt (1) | | $ | 1,889 |
| | $ | 4,278 |
|
| Long-term debt, less current portion | | 703,704 |
| | 350,347 |
|
| Total debt | | 705,593 |
| | 354,625 |
|
| Total equity | | 712,206 |
| | 932,448 |
|
| Invested capital | | $ | 1,417,799 |
| | $ | 1,287,073 |
|
| | | | | |
| Total debt / invested capital | | 49.8 | % | | 27.6 | % |
| |
| (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, |
| | | 2016 | | 2015 | | 2016 | | 2015 |
| Operating income as reported | | $ | 83,071 |
| | $ | 78,435 |
| | $ | 288,274 |
| | $ | 181,700 |
|
| Special items (pre-tax): | | | | | | | | |
Rationalization and asset impairment charges (1) | | — |
| | 434 |
| | — |
| | 19,958 |
|
Loss on deconsolidation of Venezuelan subsidiary (2) | | — |
| | — |
| | 34,348 |
| | — |
|
Venezuela foreign exchange losses (3) | | — |
| | 708 |
| | — |
| | 27,214 |
|
Pension settlement charges (4) | | — |
| | 6,407 |
| | — |
| | 142,738 |
|
Adjusted operating income (6) | | $ | 83,071 |
| | $ | 85,984 |
| | $ | 322,622 |
| | $ | 371,610 |
|
| As a percent of total sales | | 14.7 | % | | 15.1 | % | | 14.2 | % | | 14.7 | % |
| | | | | | | | | |
| Net income as reported | | $ | 53,395 |
| | $ | 48,692 |
| | $ | 198,399 |
| | $ | 127,478 |
|
| Special items (after-tax): | | |
| | |
| | |
| | |
|
Rationalization and asset impairment charges (1) | | — |
| | 450 |
| | — |
| | 18,182 |
|
Loss on deconsolidation of Venezuelan subsidiary (2) | | — |
| | — |
| | 33,251 |
| | — |
|
Venezuela foreign exchange losses (3) | | — |
| | 708 |
| | — |
| | 27,214 |
|
Pension settlement charges (4) | | — |
| | 3,969 |
| | — |
| | 87,310 |
|
Income tax valuation reversals (5) | | — |
| | — |
| | (7,196 | ) | | — |
|
Adjusted net income (6) | | $ | 53,395 |
| | $ | 53,819 |
| | $ | 224,454 |
| | $ | 260,184 |
|
| | | | | | | | | |
| Diluted earnings per share as reported | | $ | 0.81 |
| | $ | 0.68 |
| | $ | 2.91 |
| | $ | 1.70 |
|
| Special items | | — |
| | 0.07 |
| | 0.38 |
| | 1.78 |
|
Adjusted diluted earnings per share (6) | | $ | 0.81 |
| | $ | 0.75 |
| | $ | 3.29 |
| | $ | 3.48 |
|
| | | | | | | | | |
| Weighted average shares (diluted) | | 66,303 |
| | 72,121 |
| | 68,156 |
| | 74,854 |
|
| | | | | | | | | |
| |
| (1) | The three and twelve months ended December 31, 2015 include net charges primarily related to severance and other related costs. The twelve months ended also includes charges related to the impairment of long-lived assets and goodwill. |
| |
| (2) | The twelve months ended December 31, 2016 reflect a charge (non-cash charge of $34.1 million pretax and $33.0 million after-tax) related to the deconsolidation of the Company's Venezuelan subsidiary. |
| |
| (3) | The three and twelve months ended December 31, 2015 represent the impact of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms. |
| |
| (4) | The three and twelve months ended December 31, 2015 include pension settlement charges primarily related to the purchase of a group annuity contract. |
| |
| (5) | The twelve months ended December 31, 2016 reflect reduced income tax expense related to the reversal of an income tax valuation allowance as a result of a legal entity change to realign the Company’s tax structure. |
| |
| (6) | Adjusted operating income, Adjusted net income 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 believe 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. |
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 | | 2016 | | 2015 |
| Net income as reported | | $ | 198,399 |
| | $ | 127,478 |
|
| Rationalization and asset impairment charges, net of tax of $1,776 | | — |
| | 18,182 |
|
| Loss on deconsolidation of Venezuelan subsidiary, net of tax of $1,097 | | 33,251 |
| | — |
|
| Income tax valuation reversals | | (7,196 | ) | | — |
|
| Pension settlement charges, net of tax of $55,428 | | — |
| | 87,310 |
|
| Venezuela foreign exchange losses | | — |
| | 27,214 |
|
Adjusted net income (1) | | $ | 224,454 |
| | $ | 260,184 |
|
| Plus: Interest expense, net of tax of $7,304 and $8,355 in 2016 and 2015, respectively | | 11,775 |
| | 13,469 |
|
| Less: Interest income, net of tax of $801 and $1,039 in 2016 and 2015, respectively | | 1,291 |
| | 1,675 |
|
| Adjusted net income before tax effected interest | | $ | 234,938 |
| | $ | 271,978 |
|
| | | | | |
| Invested Capital | | December 31, 2016 | | December 31, 2015 |
| Short-term debt | | $ | 1,889 |
| | $ | 4,278 |
|
| Long-term debt, less current portion | | 703,704 |
| | 350,347 |
|
| Total debt | | 705,593 |
| | 354,625 |
|
| Total equity | | 712,206 |
| | 932,448 |
|
| Invested capital | | $ | 1,417,799 |
| | $ | 1,287,073 |
|
| | | | | |
Return on invested capital (1)(2) | | 16.6 | % | | 21.1 | % |
| | | | | |
| |
| (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 believe 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 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, |
| | | 2016 | | 2015 |
| OPERATING ACTIVITIES: | | |
| | |
|
| Net income | | $ | 53,395 |
| | $ | 48,692 |
|
| Non-controlling interests in subsidiaries’ income | | 6 |
| | 7 |
|
| Net income including non-controlling interests | | 53,401 |
| | 48,699 |
|
| Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | | |
| | |
|
| Rationalization and asset impairment charges | | — |
| | 149 |
|
| Depreciation and amortization | | 16,578 |
| | 16,110 |
|
| Equity earnings in affiliates, net | | (197 | ) | | (278 | ) |
| Pension expense, settlements and curtailments | | 1,516 |
| | 10,967 |
|
| Pension contributions and payments | | (325 | ) | | (1,426 | ) |
| Other non-cash items, net | | 3,588 |
| | 5,469 |
|
| Changes in operating assets and liabilities, net of effects from acquisitions: | | |
| | |
|
| (Increase) decrease in accounts receivable | | (358 | ) | | 42,080 |
|
| Decrease in inventories | | 22,274 |
| | 28,243 |
|
| Increase (decrease) in trade accounts payable | | 15,705 |
| | (12,282 | ) |
| Net change in other current assets and liabilities | | (47,332 | ) | | (67,467 | ) |
| Net change in other long-term assets and liabilities | | 1,787 |
| | 5,158 |
|
| NET CASH PROVIDED BY OPERATING ACTIVITIES | | 66,637 |
| | 75,422 |
|
| | | | | |
| INVESTING ACTIVITIES: | | |
| | |
|
| Capital expenditures | | (10,500 | ) | | (10,320 | ) |
| Acquisition of businesses, net of cash acquired | | — |
| | (3,194 | ) |
| Proceeds from sale of property, plant and equipment | | 191 |
| | 137 |
|
| Purchase of marketable securities | | (38,920 | ) | | — |
|
| Other investing activities | | (426 | ) | | — |
|
| NET CASH USED BY INVESTING ACTIVITIES | | (49,655 | ) | | (13,377 | ) |
| | | | | |
| FINANCING ACTIVITIES: | | |
| | |
|
| Net change in borrowings | | 168,060 |
| | 2,186 |
|
| Proceeds from exercise of stock options | | 14,631 |
| | 1,396 |
|
| Excess tax benefits from stock-based compensation | | 5,740 |
| | 487 |
|
| Purchase of shares for treasury | | (53,409 | ) | | (101,690 | ) |
| Cash dividends paid to shareholders | | (21,150 | ) | | (21,026 | ) |
| Other financing activities | | (799 | ) | | 18 |
|
| NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES | | 113,073 |
| | (118,629 | ) |
| | | | | |
| Effect of exchange rate changes on Cash and cash equivalents | | (7,804 | ) | | (3,578 | ) |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | 122,251 |
| | (60,162 | ) |
| Cash and cash equivalents at beginning of period | | 256,928 |
| | 364,345 |
|
| Cash and cash equivalents at end of period | | $ | 379,179 |
| | $ | 304,183 |
|
| | | | | |
| Cash dividends paid per share | | $ | 0.32 |
| | $ | 0.29 |
|
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Condensed Consolidated Statements of Cash Flows
|
| | | | | | | | |
| | | Twelve months ended December 31, |
| | | 2016 | | 2015 |
| OPERATING ACTIVITIES: | | |
| | |
|
| Net income | | $ | 198,399 |
| | $ | 127,478 |
|
| Non-controlling interests in subsidiaries’ loss | | (26 | ) | | (66 | ) |
| Net income including non-controlling interests | | 198,373 |
| | 127,412 |
|
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | | |
| | |
|
| Rationalization and asset impairment charges | | — |
| | 6,269 |
|
| Loss on deconsolidation of Venezuelan subsidiary | | 34,348 |
| | — |
|
| Depreciation and amortization | | 65,073 |
| | 64,007 |
|
| Equity earnings in affiliates, net | | (261 | ) | | (530 | ) |
| Pension expense, settlements and curtailments | | 13,988 |
| | 162,815 |
|
| Pension contributions and payments | | (22,484 | ) | | (53,547 | ) |
| Other non-cash items, net | | (3,549 | ) | | (46,838 | ) |
| Changes in operating assets and liabilities, net of effects from acquisitions: | | |
| | |
|
| (Increase) decrease in accounts receivable | | (12,314 | ) | | 56,741 |
|
| Decrease in inventories | | 14,601 |
| | 56,067 |
|
| Increase (decrease) in trade accounts payable | | 29,627 |
| | (46,911 | ) |
| Net change in other current assets and liabilities | | (16,908 | ) | | (20,435 | ) |
| Net change in other long-term assets and liabilities | | 2,909 |
| | 5,808 |
|
| NET CASH PROVIDED BY OPERATING ACTIVITIES | | 303,403 |
| | 310,858 |
|
| | | | | |
| INVESTING ACTIVITIES: | | |
| | |
|
| Capital expenditures | | (49,877 | ) | | (50,507 | ) |
| Acquisition of businesses, net of cash acquired | | (71,567 | ) | | (37,076 | ) |
| Proceeds from sale of property, plant and equipment | | 1,127 |
| | 2,310 |
|
| Purchase of marketable securities | | (38,920 | ) | | — |
|
| Other investing activities | | (709 | ) | | (79 | ) |
| NET CASH USED BY INVESTING ACTIVITIES | | (159,946 | ) | | (85,352 | ) |
| | | | | |
| FINANCING ACTIVITIES: | | |
| | |
|
| Net change in borrowings | | 351,319 |
| | 316,606 |
|
| Proceeds from exercise of stock options | | 25,049 |
| | 5,996 |
|
| Excess tax benefits from stock-based compensation | | 9,154 |
| | 1,974 |
|
| Purchase of shares for treasury | | (342,003 | ) | | (399,494 | ) |
| Cash dividends paid to shareholders | | (87,330 | ) | | (86,968 | ) |
| Other financing activities | | (19,043 | ) | | (8,022 | ) |
| NET CASH USED BY FINANCING ACTIVITIES | | (62,854 | ) | | (169,908 | ) |
| | | | | |
| Effect of exchange rate changes on Cash and cash equivalents | | (5,607 | ) | | (29,794 | ) |
| INCREASE IN CASH AND CASH EQUIVALENTS | | 74,996 |
| | 25,804 |
|
| Cash and cash equivalents at beginning of period | | 304,183 |
| | 278,379 |
|
| Cash and cash equivalents at end of period | | $ | 379,179 |
| | $ | 304,183 |
|
| | | | | |
| Cash dividends paid per share | | $ | 1.28 |
| | $ | 1.16 |
|
Lincoln Electric Holdings, Inc.
Segment Highlights (1)
(In thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
| | | Americas Welding | | International Welding | | The Harris Products Group | | Corporate / Eliminations | | Consolidated |
Three months ended December 31, 2016 | | |
| | |
| | |
| | |
| | |
|
| Net sales | | $ | 370,082 |
| | $ | 130,605 |
| | $ | 63,141 |
| | $ | — |
| | $ | 563,828 |
|
| Inter-segment sales | | 23,939 |
| | 4,020 |
| | 1,726 |
| | (29,685 | ) | | — |
|
| Total | | $ | 394,021 |
| | $ | 134,625 |
| | $ | 64,867 |
| | $ | (29,685 | ) | | $ | 563,828 |
|
| | | | | | | | | | | |
EBIT (2) | | $ | 71,709 |
| | $ | 7,447 |
| | $ | 6,628 |
| | $ | (1,248 | ) | | $ | 84,536 |
|
| As a percent of total sales | | 18.2 | % | | 5.5 | % | | 10.2 | % | | |
| | 15.0 | % |
Special items charge (3) | | — |
| | — |
| | — |
| | — |
| | — |
|
Adjusted EBIT (4) | | $ | 71,709 |
| | $ | 7,447 |
| | $ | 6,628 |
| | $ | (1,248 | ) | | $ | 84,536 |
|
| As a percent of total sales | | 18.2 | % | | 5.5 | % | | 10.2 | % | | |
| | 15.0 | % |
Three months ended December 31, 2015 | | |
| | |
| | |
| | |
| | |
|
| Net sales | | $ | 387,340 |
| | $ | 121,214 |
| | $ | 59,431 |
| | $ | — |
| | $ | 567,985 |
|
| Inter-segment sales | | 20,042 |
| | 3,009 |
| | 2,278 |
| | (25,329 | ) | | — |
|
| Total | | $ | 407,382 |
| | $ | 124,223 |
| | $ | 61,709 |
| | $ | (25,329 | ) | | $ | 567,985 |
|
| | | | | | | | | | | |
EBIT (2) | | $ | 72,027 |
| | $ | 2,804 |
| | $ | 5,661 |
| | $ | (221 | ) | | $ | 80,271 |
|
| As a percent of total sales | | 17.7 | % | | 2.3 | % | | 9.2 | % | | |
| | 14.1 | % |
Special items charge (3) | | 7,061 |
| | 488 |
| | — |
| | — |
| | 7,549 |
|
Adjusted EBIT (4) | | $ | 79,088 |
| | $ | 3,292 |
| | $ | 5,661 |
| | $ | (221 | ) | | $ | 87,820 |
|
| As a percent of total sales | | 19.4 | % | | 2.7 | % | | 9.2 | % | | |
| | 15.5 | % |
Twelve months ended December 31, 2016 | | | | |
| | |
| | |
| | |
|
| Net sales | | $ | 1,494,982 |
| | $ | 507,289 |
| | $ | 272,343 |
| | $ | — |
| | $ | 2,274,614 |
|
| Inter-segment sales | | 93,612 |
| | 15,975 |
| | 8,709 |
| | (118,296 | ) | | — |
|
| Total | | $ | 1,588,594 |
| | $ | 523,264 |
| | $ | 281,052 |
| | $ | (118,296 | ) | | $ | 2,274,614 |
|
| | | | | | | | | | | |
EBIT (2) | | $ | 266,633 |
| | $ | 29,146 |
| | $ | 32,380 |
| | $ | (33,784 | ) | | $ | 294,375 |
|
| As a percent of total sales | | 16.8 | % | | 5.6 | % | | 11.5 | % | | |
| | 12.9 | % |
Special items charge (3) | | — |
| | — |
| | — |
| | 34,348 |
| | 34,348 |
|
Adjusted EBIT (4) | | $ | 266,633 |
| | $ | 29,146 |
| | $ | 32,380 |
| | $ | 564 |
| | $ | 328,723 |
|
| As a percent of total sales | | 16.8 | % | | 5.6 | % | | 11.5 | % | | |
| | 14.5 | % |
Twelve months ended December 31, 2015 | | |
| | |
| | |
| | |
| | |
|
| Net sales | | $ | 1,741,350 |
| | $ | 530,460 |
| | $ | 263,981 |
| | $ | — |
| | $ | 2,535,791 |
|
| Inter-segment sales | | 92,538 |
| | 18,747 |
| | 9,312 |
| | (120,597 | ) | | — |
|
| Total | | $ | 1,833,888 |
| | $ | 549,207 |
| | $ | 273,293 |
| | $ | (120,597 | ) | | $ | 2,535,791 |
|
| | | | | | | | | | | |
EBIT (2) | | $ | 143,450 |
| | $ | 17,840 |
| | $ | 27,882 |
| | $ | (275 | ) | | $ | 188,897 |
|
| As a percent of total sales | | 7.8 | % | | 3.2 | % | | 10.2 | % | | |
| | 7.4 | % |
Special items charge (3) | | 173,239 |
| | 16,671 |
| | — |
| | — |
| | 189,910 |
|
Adjusted EBIT (4) | | $ | 316,689 |
| | $ | 34,511 |
| | $ | 27,882 |
| | $ | (275 | ) | | $ | 378,807 |
|
| As a percent of total sales | | 17.3 | % | | 6.3 | % | | 10.2 | % | | |
| | 14.9 | % |
| |
| (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) | Special items within Corporate/Elimination reflect a charge ($34.1 million non-cash) related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016. Refer to 'Non-GAAP Financial Measures' for detail on excluded special items. |
| |
| (4) | 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. |
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
2015 | | Volume | | Acquisitions | | Price | | Foreign Exchange | | Net Sales
2016 |
| Operating Segments | | |
| | |
| | |
| | |
| | |
| | |
|
| Americas Welding | | $ | 387,340 |
| | $ | (22,315 | ) | | $ | 7,232 |
| | $ | (176 | ) | | $ | (1,999 | ) | | $ | 370,082 |
|
| International Welding | | 121,214 |
| | 12,627 |
| | — |
| | (185 | ) | | (3,051 | ) | | 130,605 |
|
| The Harris Products Group | | 59,431 |
| | 2,322 |
| | — |
| | 902 |
| | 486 |
| | 63,141 |
|
| Consolidated | | $ | 567,985 |
| | $ | (7,366 | ) | | $ | 7,232 |
| | $ | 541 |
| | $ | (4,564 | ) | | $ | 563,828 |
|
| | | | | | | | | | | | | |
| Americas Welding (excluding Venezuela) | | $ | 383,597 |
| | $ | (18,572 | ) | | $ | 7,232 |
| | $ | (176 | ) | | $ | (1,999 | ) | | $ | 370,082 |
|
| Consolidated (excluding Venezuela) | | $ | 564,242 |
| | $ | (3,623 | ) | | $ | 7,232 |
| | $ | 541 |
| | $ | (4,564 | ) | | $ | 563,828 |
|
| | | | | | | | | | | | | |
| % Change | | |
| | |
| | |
| | |
| | |
| | |
|
| Americas Welding | | |
| | (5.8 | %) | | 1.9 | % | | — |
| | (0.5 | %) | | (4.5 | %) |
| International Welding | | |
| | 10.4 | % | | — |
| | (0.2 | %) | | (2.5 | %) | | 7.7 | % |
| The Harris Products Group | | |
| | 3.9 | % | | — |
| | 1.5 | % | | 0.8 | % | | 6.2 | % |
| Consolidated | | |
| | (1.3 | %) | | 1.3 | % | | 0.1 | % | | (0.8 | %) | | (0.7 | %) |
| | | | | | | | | | | | | |
| Americas Welding (excluding Venezuela) | | | | (4.8 | %) | | 1.9 | % | | — |
| | (0.5 | %) | | (3.5 | %) |
| Consolidated (excluding Venezuela) | | | | (0.6 | %) | | 1.3 | % | | 0.1 | % | | (0.8 | %) | | (0.1 | %) |
| | | | | | | | | | | | | |
| Twelve Months Ended December 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 | | $ | 1,741,350 |
| | $ | (248,715 | ) | | $ | 42,832 |
| | $ | 268,205 |
| | $ | (308,690 | ) | | $ | 1,494,982 |
|
| International Welding | | 530,460 |
| | (8,629 | ) | | 8,622 |
| | (8,428 | ) | | (14,736 | ) | | $ | 507,289 |
|
| The Harris Products Group | | 263,981 |
| | 9,683 |
| | — |
| | (85 | ) | | (1,236 | ) | | $ | 272,343 |
|
| Consolidated | | $ | 2,535,791 |
| | $ | (247,661 | ) | | $ | 51,454 |
| | $ | 259,692 |
| | $ | (324,662 | ) | | $ | 2,274,614 |
|
| | | | | | | | | | | | | |
| Americas Welding (excluding Venezuela) | | $ | 1,656,687 |
| | $ | (191,037 | ) | | $ | 42,832 |
| | $ | (7,874 | ) | | $ | (16,440 | ) | | $ | 1,484,168 |
|
| Consolidated (excluding Venezuela) | | $ | 2,451,129 |
| | $ | (189,983 | ) | | $ | 51,454 |
| | $ | (16,386 | ) | | $ | (32,413 | ) | | $ | 2,263,801 |
|
| | | | | | | | | | | | | |
| % Change | | |
| | |
| | |
| | |
| | |
| | |
|
| Americas Welding | | |
| | (14.3 | %) | | 2.5 | % | | 15.4 | % | | (17.7 | %) | | (14.1 | %) |
| International Welding | | |
| | (1.6 | %) | | 1.6 | % | | (1.6 | %) | | (2.8 | %) | | (4.4 | %) |
| The Harris Products Group | | |
| | 3.7 | % | | — |
| | — |
| | (0.5 | %) | | 3.2 | % |
| Consolidated | | |
| | (9.8 | %) | | 2.0 | % | | 10.2 | % | | (12.8 | %) | | (10.3 | %) |
| | | | | | | | | | | | | |
| Americas Welding (excluding Venezuela) | | | | (11.5 | %) | | 2.6 | % | | (0.5 | %) | | (1.0 | %) | | (10.4 | %) |
| Consolidated (excluding Venezuela) | | | | (7.8 | %) | | 2.1 | % | | (0.7 | %) | | (1.3 | %) | | (7.6 | %) |
| | | | | | | | | | | | | |
