LECO - Earnings call transcript Q4 2017 | Lincoln Electric Holdings, Inc.

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Operator

Greetings, and welcome to Lincoln Electric's 2017 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode and this call is being recorded. It is now my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you.

You may begin.

Amanda Butler

and everyone. [Ph], Takia you, good morning, Thank Welcome Electric's XXXX conference call. fourth quarter to Lincoln financial today, call's results find our the Lincoln released We earlier lincolnelectric.com at as well on in attachment Electric as website our Relations and an to presentation this section. slide Investor as the release can you

the Executive overview Vince call as your our well following questions. our the on Mapes, happy Petrella. me we're results, will as will is Chris and to an detail. prepared our our cover performance Financial Officer; Officer, discussion Chairman, full year Joining the take remarks, today And President of in Chris begin and with Chief Vince Chief more quarter's

call from uncertainties may XX-Q. SEC differ affect discussion forward-looking, results Forms are start may expectations factors. of the actual our our risks be we and on that and release discussion, that our certain this Before and and materially to note some XX-K in of filings A risks provided press may please a due of in number our results statements during our made

over we of addition, the And available measures financial that, In tables financial comparable conform Chris lincolnelectric.com. with do earnings in the Chris? which to in call in most Relations Mapes. I'll found measure the non-GAAP GAAP is to our Investor at A website GAAP. our measures to U.S. is turn of not release, discuss reconciliation that again the section

Chris Mapes

Lincoln to achievements value towards environmental vision metrics creation strategy superior record we Thank financial, and many near our goals across off and accelerated positioned XXXX with capitalize legacy record key well Amanda. XXXX solid topline you, morning growth or our Electric momentum advance XXXX. in everyone. are in Good and capped These on We operational and us business. in performance

our global discuss and and in time environmental all our in I for record work. for record safety performance I thank would to XXXX. congratulate Great financial like achieving achievement our results, Before employees an metrics

from looking and Now acquisition Venezuela excluding billion growth. X% organic results. to $X.X XXXX our X% at Sales increased XX%

income per focus report on that adjusted recover Margin XX.X%. been points commercial cost excluding to to compressed helped business. pricing XX frequent pleased management implement incremental and the $X.XX. expanded actions we increases to to the raw am raw strategic continuing while yielded the our Our diligent XX.X% that teams material incurring globally. acquisitions impact mix for by share continued material pricing of a the our and our to was XX% inflation. operating as margin mitigate I invest we rose income in diluted earnings This margin year Reported operating basis have

legacy XX% our driven EPS flows, XXX% payout XX.X% item we special adjusted free our ROIC in increased by XXXX our operating in record $XXX flow an dividend continued working businesses. Lincoln to million conversion increases average cash yielded net XX% This to capital Electric and XX of charges, income. remains of increase with rates. solid track dividend consecutive at year Excluding ratio operating a We generated adjusted XX.X% record cash $X.XX.

Moving industrial four, to quarter. fourth and the firmed slide demand in accelerated

XX% solutions comparisons. XXXX year industrial end Early growing. exports. single that U.S. and are exposed revenue a demand. mid and organic increased By consumables of markets automation digit double trending sales product geographic despite suggest is both we Approximately organic our by good XX% our regions at at reportable to Our across increased of equipment segments, and growth rate digit rate a area, accelerating and challenging all achieved prior sales global now increased

in expecting from and growth, raw year. in XXXX later are persist percent new we digit this XXXX. as markets mid With continue we benefit expect to to launches organic We to exciting also growth accelerate single product material high inflation sales

to Our implementing choppiness some the the and environment actions pricing results margin offset continues commercial impact, as are these inflationary will but teams in result progress. unfavourable to actions

in five, the have into Lincoln Liquide Moving few I progress teams slide months, company, last cross one one to am to Air the European team pleased functional Electric report and that shaping under strategy. Welding tremendous made our businesses one integration

we a enjoying million. deliver this program track expected. is of While $XX targeted remain multiyear strong start faster confident to initially are We implementation our we and a synergies than on that are

pleased operational Our was progress brands success commercial consolidation and weeks already and with and to providing capitalize system advantage with two wide commercial to to announcements $X.X the that Lincoln competitive we us like with The we’ve technologies on Electric procurement from in I We is platform charges continue secured quarter quarter minimal a build commercial fourth from our and products. February upon million XXXX. fourth a Oerlikon will rationalization key cost. covers Europe in ago, incurred the initiatives integrations alignment. of in leveraging mid by range savings, returning After by combination cash

has EPS recognize While expect fully the half of first teams the accretion actions in XXXX per we second the quarter accelerated of our EPS the to benefit increased pace of to $X.XX integration half in to XXXX. $X.XX of

Before best continuing In I our our to vision strategy. continue And XXXX the first. Vince, integration demonstrated our supporting and Air truly to we of to XX,XXX employees, will we day Electric. our I’ll strength who Lincoln are execute now committed work to pass call acquisition And initiative, and to the each for I’d and on XXXX, Liquide prioritize diligently pass activities the customers doing Vince to the their organization of their like strategic for successful Welding to call thank the execution

Vince Petrella

Chris. you, Thank

consolidated highlights and quarter benefit Welding our on XX.X% price, Slide volume fourth statement increased XX.X% the X.X% translations. a our foreign fourth growth, exchange X.X% income Air higher favourable quarter X, X.X% Liquide sales from from on Looking at acquisition

Welding from the of value of a acquired step declined Our quarter points in amortization the XXX and this Liquide up The margin transaction. million reflected as XX% inventories with in Air XX% year. charge of fourth the to basis the primarily compared profit from gross $X.X prior decline addition the

Excluding year cost gross on material prior $X.X or decline XX.X% including Americas the our and price versus in due LIFO profit items raw Welding mix. the special sales acquisition to margins unfavourable inflation the unfavourable a segment million XXX and point were product charge basis

$XXX.X XX.X% increased Our to due of expenses. XX% million to sales of and SG&A related or Welding acquisition expense the Liquide addition Air

rationalization we the items, improved XX.X% incentive sales settlement percentage million and slide as a as related listed for $X.X payments costs. integration Excluding declined increased expense to included impairment items $X.X to are U.S. pension wage of million. leverage. X% continue purchase that higher acquisition from Liquide due a acquisition quarter, sales and several from and special items a the transaction In to increase excluding lumpsum million price was million charge items finalize charge on allocation, primarily of non-cash SG&A points on charitable bargain Welding special million our benefit of primarily $X.X integration adjustment contributions These SG&A charges to The our purchase defined asset to Air activities, we compensation, these costs. European net pension basis XX our incurred X. $X.X a $XXX.X plan, fourth and

or X, reported operating to XX.X% slide to income million back turning of $XX.X X.X% sales. Now declined

million XX.X% XX.X% income to Excluding sales. to $XX.X special of charges, item increased or adjusted operating

or unfavourable acquisition the versus basis XX.X% cost to charitable increased point of higher $XX.X and operating a items income cost, decline period Excluding contributions. sales, incentive the would and adjusted special price due XX prior year have million compensation been

Cuts the U.S. fourth compared associated Tax quarter $XX.X remitted the XX.X% tax foreign This with primarily period charge the effective prior un Our was company’s year in the on rate earnings charge relates Act. and profits. taxes million XX.X% and with of to because Jobs

range related the tax been rate geographical The our quarter tax stock mix In to approximately is to earnings charges extent XX% XXXX, On discreet sales. our the adjusted adjusted earnings subject decreased with earnings the per to be quarter mix stock $X.XX exercises. low effective to tax including option effective future items effect the Tax timing U.S. per Excluding approximately fourth of exercises. items the higher $X.XX Fourth due diluted prior to to share basis, and diluted on earnings share the to XX% compared mid the is per in related year. would organic lower including tax to share option of and rate have in discreet of expected increased and favourable $X.XX XX.X%. of rate tax an Act, the XX% deductions

and margin consumables Welding declined to Now portfolio. and end markets, industries, America’s XXX lets’ automation compensation move to EBIT markets prior a points year. equipment. number to the million. adjusted Demand cost, the against three quarter cost geographical X% increased segments of segments top contributions $XX.X fourth mid-teens growth basis on strengthened higher the dollars segments double raw adjusted as charitable The rising industries through rate material in difficult rose in the incentive automotive, digit at on XX.X% generated EBIT slide the eight. both did volume and most comparison a America’s heavy general end end across quarter

Moving because for sales basis due to in to declined X.X% million margin to Liquide the of EBIT XX.X% Air $XX slide acquisition. International leverage addition the Adjusted and segment exchange. X, to Pacific EBIT XX adjusted points increase the Welding Welding, of favourable Asia foreign

and decline sales was energy X.X% the Excluding versus higher in in to challenging due prior a price markets XX with related year. increased X.X%, acquisition margin Organic X.X% basis a lower comparison. adjusted X.X% improvement sales a the EBIT end prior point and year volumes

basis to Harris broadening Moving on margin grew XX.X% approximately Products markets. to X% quarter, and in Group All segment. geographies higher the quarter EBIT in improved end reinforcing points The improvement segments Fourth XXX volumes.

flows generated a cash $XX or with adjusted ratio. the we cash in XX, On a we year basis, full cash strong million XX% net cash solid XXX operations flows of conversion XXX% of fourth achieved slide to Moving conversion a of quarter million from income.

working This exceeds We legacy of a capital with goal the also XX%. Lincoln in average working businesses. XXXX record capital our ratio achieved operating XX.X% efficiency performance

$XX invested technology new XX, training in slide to the acquisitions support spent Moving our and $XX as such million year projects center. towards in to million expenditures key welding and capital the we

the to full $XX Looking million we ahead XXXX, range to to estimate be capital of year million. $XX spending in

the fourth return for XX.X% million of to the dividend the the In rate additional reflecting we an in increase December, cash continued During shareholders, payout paying approved board X% dividend $XX dividends to XXXX. quarter rate. cash increase

the approximately quarter. We also open during market the shares on million repurchasing spent $XX in XXX,XXX

expect repurchases. XXXX million we shareholders growth turn full the returning to and extent repurchases share and to now the investments balanced XXXX, remarks, in Our allocation were capital our Takia? like program our maintain a questions. prepared through said, strategy to dividend over I’d cash year call That prioritizing and to $XX.X of

Operator

conducting we gentlemen, session. a with from Joe is question this first Vertical question-and-answer and Our time, Ladies will Instructions] at O'Dea be [Operator Research.

Your line is open.

Joe O'Dea

morning. good Hi,

Chris Mapes

Morning, Joe.

Joe O'Dea

with how think course I just bit margins inflation at. timing whether on little the clarification, clarification out playing that related you plans year some first pricing question First the sensitivity a choppiness margins And to is half of over second looking are and versus you margins end details the of material commented any with you the some additional on of raw of some there? that’s foresee half or

Chris Mapes

Right.

to raw So think I of then and increases. difficult predict material continued the inflationary timing it’s

to based customers volume expectations inflation and unfolds. what are businesses think the perspective I continue confident as progress we’ve we seeing our our from see what are to on what businesses will months nine XXXX our we over a we year are seen six but including for the that and across past

represented more that have cautious some result pretty business the incremental to will are we basis from Joe these investors rapidly, I a rapid in increases of in be that deliver are incremental analyst from a that We lags XXXX be consistent inflationary confident volatility term basis we a still that could business can cautioning that are and and perspective inflationary intermediate increases we a longer quarter. that on price some choppy just say choppiness increases following but Lincoln would our XX% are response but quarter with to model to could and quarter and our a from XX% more to understand and coming that there just by quarter

Joe O'Dea

flexibility it. little about a talk channels, we appreciate as the into know strengthening customer you on do you distribution you in terms and little versus pricing end pricing end see could in then in side that kind have the And you anticipate pricing users, I bit? the of leverage of markets you that whether and side, the into into pricing how strengthening a user seeing are pricing bit end

Chris Mapes

Well increases market easier the with certainly for particular to move forward strengthening environment that we’d us into raw expect an creates space. that material

inflationary global still to the obviously to customers a in in this working channel with of that we’ll of with and there I they segments, increases that segments as global we multitude is great partner we move so strength easier it in various that to seeing a market channel and material move the creates of because think message all partners impact channel points markets. the need through we our the that term. and value that for work be that creating we for And continue the with move that’s in our understand but this customers able multitude inflation longer to those XXXX a are is couple partner in conversation work to a with is obviously see confidence conversation, Lincoln’s impact, are of them to joint cost place those for we of when over ability market. are to you a customer our business the that When our with participate see us our to to that key so the to into dealing consolidation expect know base have are times being throughout again is able to one a in inflation different multitude with we move continue the us and obviously

Joe O'Dea

it. Got much. very Thanks

Chris Mapes

You’re welcome.

Operator

you. Thank

question Great with next Lakes Rodgers Jason Our Review. from comes

now line Your open. is

Jason Rodgers

you follow material quarter? seeing – price impact just from the accelerating was net up that first here the increases if the are and what wanted material in and raw raw higher what was raw I the to of quarter wondering and cost. price cost Yes, on cost material increases net in I

Chris Mapes

basis Jason our quarter price margin fourth from impact on cost so points of cost. a detrimental Yes, estimate XX a price of the in the was about impact

see to the XXXX. through continue rise into quarter raw and We input the cost end of

our during the first are quarter We results. the we first additional quarter, that and price but expectations still XX in that the detrimental of the the indication points will know on have into some quarter impact market will moving gives some you be increases basis course you impact of fourth

Jason Rodgers

what And of is percent debt right. All your fixed currently?

Chris Mapes

now Right about XX% to fixed. XX% it’s

Jason Rodgers

faster first you or and estimates attrition function your synergies here for know in synergy Okay, the additional you of execution just you is a opportunities? are Liquide half, it Air raised on the finding cost

Chris Mapes

You meeting making. couple know excited review our Vince we teams say of progress from I just Europe on a and I the weeks ago, have and integration very would about both. returned are with back the we are

pushed finding opportunities those prioritize on are plan some we that actions But as forward. moving opportunities with and are will we some we earlier, our initially with and of merger opportunity about We the of the those those didn’t the as some progress of we teams. making be still see teams can execute excited on the businesses are the out opportunities that we extremely

Jason Rodgers

you. Thank

Chris Mapes

welcome. You’re

Operator

Thank you.

question next Our Jones from Stifel. comes of Nathan

now is line Your open.

Chris Mapes

Good morning, Nathan.

Operator

from Nathan, your line Our Deutsche question button? comes next Saree please check mute Bank. Boroditsky with of the

now open. is line Your

Saree Boroditsky

the than the benefit guys bit a little Thank you that line versus top higher from FX you. much was quarter expecting. came about perspective Air a of How volume? – you in talk from Can were Liquide in

Chris Mapes

quarter, line of the in million about Liquide Well top Air contributed $XXX revenue.

no really they translation there’s prior so effect in that right. weren’t to And the year, because

million, the $XX there wasn’t translation revenues, the in million or have a from impact exchange a improvement did $XX about International the dollar So we of a million segment. business $X weaker acquisition overall on but in foreign

Saree Boroditsky

you the that’s development recently. provide business And color helpful. some are positive seeing could you Okay, markets and energy then in [Indiscernible] what

on just quarter I you any the if to was improvement side? seen international So date wondering have

Chris Mapes

anything Southeast returned specifically. reviews Asia that international say being I offshore recently with more And activity was the in quarter in there share market from I optimism around and the necessarily business to offshore wouldn’t I Asia there side. Well you on date will construction. and

we we that difficult is but prior and comp comp it’s Portion I positive you project activity a show the that activity about offshore very to of a international not in in probably talk energy. I energy from some enough So total yet work, a or segment although believe tell especially is that that’s of challenging offshore to when with was will segment I year beginning probably had trending our energy portion say think of energy. behind

Saree Boroditsky

That was Great, very you. thank helpful.

Chris Mapes

You’re welcome.

Operator

next comes Stifel. of Our Jones Thank question Nathan from

now is line open. Your

Nathan Stifel

you hear can now? me Hi,

Chris Mapes

can I hear now. you

Nathan Stifel

about incrementals, year you I in for long-term Vince, do may if out? choppiness to you in full know a but XX% Awesome. able talked quarter-to-quarter XXXX be some the little choppiness expecting to medium to incrementals. you that to some bit Do XX% the of expect over would expect the

Vince Petrella

I think XX% so. a XXXX. I for did of would Look all believe margin incremental We

inflationary the did of we fairly have rapid know some during course increases You year. the

I see more of in XXXX. that think we’d

see I have should we an give quarters, looking are in we some are four there be to rolling Welding, the drivers on us you Air if of that upside inflationary downside our you other including we based Liquide put going range. challenges to in environment. what I’m together think think quarters more positive confident some ought that But, so I if integration pretty kind at think a are We incremental. a that four on

Nathan Stifel

Okay. And to Do is maybe you little produce then on How place you the think the Lincoln same are? Liquide a out capital. of that actually of just Where terms you relative Air working do business? is? with that much get can cash in where more bit with

Vince Petrella

great a That’s question.

we So Nathan. average legacy ended in working we stated XX.X% our we the prepared – up at business operating in remarks, as capital

point XX.X% you Liquide total. so consolidated deterioration If it’s basis Air were XXX a blend a them on

we XXXX working capital can in and the $XX already an owned freed We think XXXX. improvement course in greater inventory inventory month of management. five period replicate business we’ve even the that the that achieve million and during up We have in that

hanging Air that think on, to would Be we business expectations exceeded perhaps more it replicated Liquide’s optimistic areas mindful there’s of with will become in acquired the and business lots XXXX. own there low of be are fruit is Lincoln’s $XX with the line the and we be focussed So good opportunity we Welding them are million can as that align that Lincoln’s to in bring the course during but opportunities I first difficult think of regard.

Nathan Stifel

side businesses? everybody of know could businesses, some about between synergy then And you focused cost the synergy the the on two the on but I two would you talk revenue maybe see opportunities between the be

Vince Petrella

Yes.

I think you example would be of the that. best an way to give it

Asia to continue as is were execution had complement multitude incident Welding that them be I that of opportunity is distributors been were and that with with Air consumables channel globally. to Lincoln an they And we’re perspective expectation the recently larger visit chance able to trip that of teams technologies, that about of but and an customers Liquide about and And XXXX. the the the particular particular buying. we’ll to replicate to Electric in of drive And throughout the our doing the Southeast them got opportunity move going Air in see that did that a providing equipment was to excited of distributors have the a working I they've very a world. although market their I with my how business. and also around business partner we channels to to for most multitude to core of bring We’re that now Europe, was of driven from handful one the brand the And talk that visit, products during excellent to their the Liquide

Nathan Stifel

this provide point? Those could that numbers you at

Vince Petrella

be than equipment an $X but material a order. You be probably particular less know on is to annual will million, going for a basis it customer that

the I’ve it ready will on point to be So, leverage able from be we’re that but to moving we’ll forward. in aren’t confidence this to try of identify got and more at that, provide as great our amount achieving guidance teams

Nathan Stifel

Okay. Fair enough.

Chris Mapes

desire opportunity for be to I a reshape improvement more by in the combined towards only that revenues business will Nathan, add any and to our would just that margin offset attractive richen mix improvement. likely

top offset is around and the So line, that attractive synergies have and platform that we as and that that expect we businesses. at consolidate will little the the as a well. that extent platforms view on I we or do fully have manufacturing our there the move will to the Its less businesses end declining do integrate likely the wins impact sales we low of improvements

Nathan Stifel

Thanks. Okay.

Chris Mapes

welcome. You’re

Operator

you. Thank

Our next with Jim comes from Oppenheimer. question Giannakouros

open. is Your now line

Jim Giannakouros

Hi. Good questions. Thanks everyone. morning for taking my

Vince Petrella

morning. Hi, Good Jim.

Jim Giannakouros

you’re of you comps, strategic Sticking on integration, cited tough sales, your making from recall, sales to on sales was disruption changes international any effort AOW there if there? just some I go-to-market

Vince Petrella

of identify that alignment those don't of some relative business. mean, happy type you had large this We there’s associated we with any product believe customers or your merger whenever business or certainly just we've results was can’t within teams. a but to supplying I risks that some with challenges had completed that, reviews portfolio. I with negative the I and any impacts our our very the of have

Jim Giannakouros

an again, cited sales What that XQ Okay. far comps automation, XXXX have do the for bucket but outlook grow And you as you globally? FY as Thanks. were mid-singles. you in XXXX and did and tough both

Vince Petrella

run from fourth was in You roughly -- expect million, a I the single we quarter to XXXX’s and going that. think mid-high rates know, digits we’re XXXX growth XXX in rate so

Jim Giannakouros

equipment? And I anticipated just can appreciate the that the ones received price comment taking all can any also concentrated with impression if increases? one consumables they you And you on if your in get The Okay. you in my this a steel you if I Price yes, color offset stays is price year sometime do that when? only fully it or Thanks. November is and did price choppiness. if where actions, there may. more [Indiscernible] anticipates on and action Or

Chris Mapes

their be them continue we and marketplace to customers important add be the long at able and solutions with material teams ensure business expect what we to and that to working comment a are of That's for increases to that. period that Electric work to we to time to effectively. in assure Lincoln accomplish our and able to increases our diligently value raw been take think those here are the I our them that going Well, would and move go

we’re One recover As messages really make this I because have as important one in about comment with is might timing work a we’re but of granularity, we markets think one able the and to with region I mentioned be executing we increases that talk that those type in accepting any the phenomenon may around our And that really around seeing. that to materials increase. I the acceleration might global throughout choppiness don't like are global the earlier it's as particular and cost about importantly customers that being difficult confidence work some pricing not on to the we’re any seeing dealing raw XXXX. with to that representative that we’re with. talk of of impacts

Vince Petrella

consumables and in commodities. with split costs increases the then steel the of associated are input of, terms clearly because consumable And the and other equipment, much between Jim, price the raw on side greater

our the bulk you welding And focused increases international the so pricing on product are welding see for really that lines. and our of Americas lines the on consumables segments

Jim Giannakouros

Thank you.

Vince Petrella

welcome. You’re

Operator

you. Thank

Liptak comes from Global. Seaport Our next question with Walt

open. Your line now is

Walt Liptak

to in Do XXXX. Hi, you see as XXXX related growth then, could expect thanks. was have to strong. international about you you XXXX? you it volume comps spikes in any about memories look quarter it like that just doesn't the in guess was and comps And of last I refresh what those think year. our Good on, so volume big energy ask morning guys. to the fourth about if I want in tough

Vince Petrella

Right.

were did as a down really on that a end have down we year we international energy-related quarter XXXXth well had Asia-Pacific and in in well were in we as So, quarter last year. in volumes markets the well XXXX for change. a we’re we stronger significantly where markets. two saw a the basis, was year-over-year Offshore, nice fourth quarter, the which as as our that’s the pipe down it was so much prior mills of bulk Also

Walt Liptak

pipes. you up down or The mill fourth ramping timing and the it Okay. issue welding it sounds for like think gas quarter? Why it, was is of Was pipe it oil just shutdowns? during part

Vince Petrella

so the Walt, can of oriented, during year. quarters project projects course the very between hit quarter flip the that the Its of timing

offshore about Americas that not a international too up what in maybe types excited see quarter So so discrete individual we pipe was mills saw the region, down offshore do in for want of we and example, XXXX and that, a project-oriented industries. on we’re see better in We result we one these to think quarter. in

Walt Liptak

Got it. ask Okay. price too. then if And on just I can cost the

looking that pricing numbers at is Americas X.X, X.X, out, up Just the pricing. pretty international guys put this good you

ever I probably that’s the seen. I’ve almost best think

you’re So cost faster is dealing just to that largely issue a what is be we’re clear seeing up pricing, coming than and timing this with?

Vince Petrella

that we’re to we've think channel and partners through the but That’s customer with of the that some these time some sizable do put correct. in increases And bigger market are behind those increases I our some and pricing price seen following take are time, the increases into user. fairly and rapid

are inflationary So fairly and items. other raw that we’re sizable increases inputs experiencing cost they in

Walt Liptak

can two about wonder materials talk is And lag. what is lag come the is, right. just talking All volatility it month, months? typically that you if up I there’s a that as you’re raw

Chris Mapes

It relationships. varies. really It depends the on

is where longer You contracts customers. term there have with could situations

You need could have to you situations individual that have negotiation.

And customer, change you on to months that would so trying varies accomplish a complete it's the the global the into move upon depending I basis. four But the channel. three, can you're take region, when marketplace to it price the tell pricing

Walt Liptak

on fruit about low you’ve the great hanging the faster is to you’re these And hanging I’m that? wonder switching in could you gears fruit details made Air what just I – low along wonder that And comment but great. if provide that Okay, seeing? if moving can what’s on Liquide Welding. to the talk some synergies. see, Its you where about

Vince Petrella

Yes.

we purchasing being We’re synergies where areas area to quality highest as can relationships. probably able vendor lowest achieve -- ahead and cost on in the our identify

I ability manufacturing consolidations. think our work some to were ahead distribution on and and to start announce on

integrated business think run to on trying ahead we’re in I the an way. certainly

bit knew we to that And synergistic forward are we bring moved that all what back little So March. the rather been identified from of the opportunities we be time think we've faster I more announce effective things, we'd half. these the these transaction into some we've anticipated and than just in to back front than last on working Walt half we’ve try of XXXX and this that the

work we’re and are be tremendous track a done, our think streams forward work still had the outset. than point even that to optimistic but I areas of identified little in we So for successful we savings going time. anticipated had had bring all on we’re all to teams what at originally amount be this and optimistic earlier I more from and Chris that are perhaps bit and There's the

Walt Liptak

Okay.

Chris Mapes

an ability as for working I'm the strategy underneath developed very happy we commercial the drive us and million further leadership capital organizations improve earlier forward. already there one in have first as that, working to as piece. teams, the team commercial and to our for we five efficiency $XX the opportunities to business out capital are of move with we’ve Vince Walt, that of months believe already completed merge that And a mentioned example

Walt Liptak

It Congratulations that. sounds yes. Okay, great. with

move as more programs there chance is XXXX said, these a what that faster? -- Given you accretion you get in things

Vince Petrella

laid the I revised. whether of $X.XX XX book think until year need and execution see how can I wait up there, or certainly be out of see the ahead we’ll for Walt, the opportunity, whether continues we maybe think at to not that is that this million first to quarter. half of that be schedule the half the quarter again and the second to wait first on have forms there within look first that or that the not per that we’re at the to to need we but and end And

Walt Liptak

Okay.

Sounds great. Thank you.

Operator

Thank you.

comes with Our from next question Capital RBC Seth Markets. Weber

line open. Your is now

Seth Weber

morning. Hey, good

Chris Mapes

Good morning.

Seth Weber

Good whether of morning. type I strength you automotive transport little that wanted Thanks. in to double growth sales coming platforms? one-off you’re new seeing that some segment. quarter? the to digit – of this that or Is in there’s dig Is from a and could kind bit sustainable

Chris Mapes

its by driven Well, one-off. not really any

can where had had market were we benefiting that presence six, months, the XXXX OEMs in brought segment in I throughout couple XX dynamics is We’ve global I also found us. performing take were support broad look that think providing if regions other that some previously. quarters certainly better providing the new a last where we you particular expand the into them of We’ve where some opportunities our technologies that were. what with maybe at a we a than of so performance we maybe think segment by XX, couple our over we

some of through success one-offs just quarter, that any we've in it see we and XXXX. as continuation don't I is to think I So segment the of as relates trended that had this a the

Seth Weber

Okay.

So would you [ph] -- to build the expect levels? period continued segment growth build auto outpace

Chris Mapes

Yes.

Vince Petrella

course Yes. and expanding XXXX. of of the XXXX the all during That's just case been in

a So this this case particular this out is performance. in is not discrete not -- quarter

have suggest. several a We track record would builds quarters a us now the outperforming in of row what

Seth Weber

Sure.

Americas the the we out quantify Okay. And just start go then you fourth tailwind a when year-over-year quarter in and for comp you XXXX that I look Thanks. call Thank clarification, is comparables? a become Vince, And think and at does guess to you. that in is can margin. that that? – I incentive I heard

Chris Mapes

Yes.

So for on basis. globally year-over-year the and in took actually million Americas been above business a profitability over we the might $X additional and charge for have a normal what I estimate the compensation incentive that of provision

probably prior was So was Current year light. year heavy. the little little

delta And to as prior year's million so burden a we quarter had the $X fourth that fourth the compared quarter.

on a bit of a basis So in it quarterly little be a XXXX. should tailwind

Seth Weber

very Okay, great. Thanks much.

Operator

The Mig in Baird. question of the you. Thank from Dobre comes final line queue with

now is line Your open.

Mig Dobre

Thanks in. fitting for me you. Thank Yes.

much at to go Vince, Then picked volumes than America I of our I thinking the conversation think tougher quarter were in they what there than want were to things better just were maybe back back well last great, you guess. in as were spite which thinking since So comp. sequentially better

maybe I’m volume from guess than a a I in you wondering what So what quarter better out perspective? initially worked envisioned

Vince Petrella

consumables, so really we categories. and Actually double-digit a improvement the had both a both in increase across equipment was

We on the automation outperformed the side also business. of

as stated stronger of in a the Chris you we of up comments And little third and also quarter at trends in than XXXX. had me and in the what since what that drag in and concerned recollect might less third picked automation you’re automation actually was the that became about quarter. end quarter, carried the recollect anticipated over has his I business, You reminding might said strength third we’re

our So levels will trend very optimistic be order that we’re line segment now in positive product that in XXXX.

a So the heavy very just course equipment. end and just the of to those nice summarize, end broadening markets markets Americas equipment picked of automotive, during we of up manufacturers, both board had was the consumables across strong quarter. across More

Mig Dobre

of I in And transportation. and tried great. automotive sounds terms think get to That Seth this

when to excess think high You you in guidance that you single-digit said of you at in growth when comment versus market your grow you how growth for this organic but mid of Chris’s to kind about XXXX would look builds, specifically? in expect

Vince Petrella

a and replicate. it basis but to up in will Well, digits on that the have stronger year and that's We in the challenging do internationally, think quarter fourth the global around come going half second this Americas the was double that experience, number by to the make Chris some penetration I compared up quarter of on comparisons automotive the in we’re going transport of see his our at the products a historical just mentioned optimistic that the But least build based and outpaced product in our growth in we’re comments. good kind automation that that to in new line, difficult. to be

the with mid were high in comfortable think we’re to I digits So I’m area. that guidance that in single Chris's –

Mig Dobre

reported. steel to And pricing if something based your your you’re than And more XXXX? materials trying don't was I are Okay. this on think about sales, the comments other and related bps raw I aware cost else be know to thinking And right. math that on that of then there broadly this have you run about from like quick anything I’m guessing when two cost that is some lastly, as we need I of XX your XX% just price headwind we

Chris Mapes

increases be than Well, dollars are of other We across of very inflationary biggest Chemicals and because electronics view of. cost, steel and our things the buy we you big we’re our aware of spend, engines commodities is a seeing lot a board. on of our Mig, and so of in but should represents My different input that, we’re component. buy millions there’s lots if it will. of purchase you hundreds that COGS steel focused is that

And years. and frankly seen the so than I XXXX I XX% think think your that higher last inflationary for at inputs, compensation what number comment rise. believe will a wages extends we of XX% pace costs our and assumption to salaries across raw rather continue But several a it's all in than faster We low, is including of inputs. much is

Mig Dobre

is. It

provide any I’m and the one Anything them When your done. there? there Americas, international And more reporting pricing pricing to looking maybe more got in you've why international. terms of versus I’m Okay. in stat color at be is a to gained it little

Vince Petrella

aggressive little margins global attractive a so more been more manage a just our that perhaps that business international feel being a products aggressive bit our prices We as is that the in have we’re view that than perspective, business portfolio. sold less at being some because being less to and we attractive there there, from are we or of more objectives we

margin from of So portfolio perspective. an international management it's a matter and

Mig Dobre

good Very helpful. luck. you Thank and

Chris Mapes

Thank you much, Mig. very

Operator

Thank you.

line the of Bank. from comes Boroditsky question Saree last Our with Deutsche

Your line open. now is

Saree Boroditsky

my by follow-up. net XXXX. marketable taking at you up the end With million end, could cash it XXX over within cash position that of and for like securities year of end Thanks seems

leverage that you using just could do thinking then And you on touch cash? excess about your target? So how

Chris Mapes

So target to a somewhere we debt short debt-to-EBITDA. and three quarters debt-to-EBITDA allocation capital in have to perspective. think number one between and the We’d times two our from that at intermediate term and like about gross debt

to that from to return perspective. capital strategic a and to fully sense those expect follow find continue investments make a plan we both So our capital allocation

will are high now in XXXX a dividend our the the single our to and We raise maintain use that the our in vision. strategic will arena we source account in strong sheet very frankly able foreseeable balance advancing cash M&A what balance on initiatives buy digit sheet future share and continue wildcard the at for is to growth double-digit our that we pace to can than that continue pace, to double-digit shares so

Saree Boroditsky

Okay. Thank you.

Chris Mapes

You’re welcome.

Operator

you. the our FBR. from with of Thank And line in comes final Burke the question queue Liam

Your line is now open.

Liam Burke

you. morning Thank Chris, morning, Vince. Good good

Vince Petrella

Liam. morning, Good

Liam Burke

on on automation Chris, there’s been Have in have making the competitive market. been change the side nice you’ve any that penetrating seen the progress response?

Chris Mapes

change real towards No. point response. competitive any I really the in can't

to Greenfield's to invest for whether to business it's the training business. other build trend M&A the our as the expand we’re and to that and global that’s before manners. – in to We’re train and our those long-run towards that our to expand automation. automation, and marketplace. attack at multiyear providing here automation within trends long-term still welder that that mentioned very focused very identify believe out and executing Lincoln and long-term and trend, for I on strategy technology trend center it at solutions And education investment for two to continues in longer-term a continue we’ve laid we’ve campus that to as our through behind going ways the automated new or confident Cleveland. want model the want in welding strongly we us trends also And new the in we us and We develop other I opportunities

Liam Burke

past Europe were looking a Okay. environment in you And of years. one, stronger an dollar much few the in over

You had there. pricing tougher environment

dollar weaker-to-stable pricing a market at terms share of gain? As over all help in there

Chris Mapes

going and our challenges would really the aggressive teams to profile the be portfolio we marketplace want moving recover our in we’re to has that day do have to No. dollar driving over think the challenge earlier continue comments at upon business are market that that has at forward. and expand and teams margin into that to its we’re don't managing that and see We input raw challenges I weaker end I the of augment all. that there. Vince’s the played the

Liam Burke

Chris. you, Thank

Operator

you. call back question like This Petrella remarks. turn to for Vincent and our would Thank the concludes over I to session. answer closing

Vince Petrella

call Thank joining and for us for everyone Lincoln continued the you, today, Takia, in interesting thank and Electric. on your

really the We’re at our discussing progression programs our end and of quarter. first look and excited to forward our the of strategic results

good a very day. So, much and you have thank

Operator

conference. today’s concludes program. in participation your This for you thank today’s gentlemen, and Ladies

a disconnect. day. You great Everyone may now have

Lincoln Electric (LECO) 14 Feb 182017 Q4 Earnings call transcript