• Lincoln Electric Reports First Quarter 2022 Results

    Source: Nasdaq GlobeNewswire / 28 Apr 2022 07:30:01   America/New_York

     
    First Quarter 2022 Highlights
    • Net sales increase 22.2% to record $925.4 million on 22.1% higher organic sales
       
    • Record Operating income margin of 17.4%; Record Adjusted operating income margin of 17.6%
       
    • EPS increases 73.2% to record $2.13; Adjusted EPS increases 53.3% to record $2.10
       
    • ROIC increases 610 basis points to 25.0%
       
    • Returned $137.9 million to shareholders through dividends and share repurchases

    CLEVELAND, April 28, 2022 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported first quarter 2022 net income of $126.0 million, or diluted earnings per share (EPS) of $2.13, which includes special item after-tax net gains of $1.3 million, or $0.03 EPS. This compares with prior year period net income of $74.2 million, or $1.23 EPS, which included special item after-tax charges of $8.6 million, or $0.14 EPS. Excluding these items, first quarter 2022 Adjusted net income was $124.7 million, or $2.10 Adjusted EPS. This compares with Adjusted net income of $82.8 million, or $1.37 Adjusted EPS, in the prior year period.

    First quarter 2022 sales increased 22.2% to $925.4 million from a 22.1% increase in organic sales and a 4.6% benefit from acquisitions, partially offset by 4.4% unfavorable foreign exchange. Operating income for the first quarter 2022 was $161.2 million, or 17.4% of sales, including special item charges of $1.9 million. This compares with operating income of $103.9 million, or 13.7% of sales, in the prior year period. Excluding special items, Adjusted operating income was $163.1 million, or 17.6% of sales, as compared with $109.2 million, or 14.4% of sales, in the prior year period.

    “We achieved record first quarter sales, adjusted operating income margin, and adjusted EPS performance despite challenging operating conditions; demonstrating the resilience of our business and the benefits of our strategic initiatives,” stated Christopher L. Mapes, Lincoln’s Chairman, President and Chief Executive Officer. “Solid demand trends, diligent execution and productivity offset market headwinds and a difficult prior year comparison. Given dynamic market and supply chain challenges, we continue to monitor conditions and are responding as necessary to ensure Lincoln Electric is well-positioned to advance and generate superior value through this portion of the cycle.”

    Webcast Information

    A conference call to discuss first quarter 2022 financial results will be webcast live today, April 28, 2022, at 10:00 a.m., Eastern Time. This webcast is accessible at https://ir.lincolnelectric.com. Listeners should go to the web site prior to the call to register, download and install any necessary audio software. A replay of the webcast will be available on the Company's web site.

    If investors would like to ask questions, please dial (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 6859906. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

    Financial results for the first quarter 2022 can also be obtained at https://ir.lincolnelectric.com.

    About Lincoln Electric

    Lincoln Electric is the world leader in the engineering, design, and manufacturing of advanced arc welding solutions, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment, and has a leading global position in brazing and soldering alloys. Lincoln is recognized as the Welding Expert™ for its leading material science, software development, automation engineering, and application expertise, which advance customers’ fabrication capabilities to help them build a better world. Headquartered in Cleveland, Ohio, Lincoln has 56 manufacturing locations in 19 countries and a worldwide network of distributors and sales offices serving customers in over 160 countries. For more information about Lincoln Electric and its products and services, visit the Company’s website at https://www.lincolnelectric.com.

    Non-GAAP Information

    Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share (“Adjusted EPS”), Organic sales, Cash conversion and Return on invested capital are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly. Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.

    Forward-Looking Statements

    The Company’s expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements reflect management’s current expectations and involve a number of risks and uncertainties.  Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “guidance” or words of similar meaning.  Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company’s operating results.  The factors include, but are not limited to: general economic, financial and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations; adverse outcome of pending or potential litigation; actual costs of the Company’s rationalization plans; possible acquisitions, including the Company’s ability to successfully integrate acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; the effects of changes in tax law; tariff rates in the countries where the Company conducts business; and the possible effects of events beyond our control, such as the impact of the Russia-Ukraine conflict, political unrest, acts of terror, natural disasters and pandemics, including the current coronavirus disease ("COVID-19") pandemic, 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, 2021.

    Contact

    Amanda Butler
    Vice President, Investor Relations & Communications
    Tel: 216.383.2534
    Email: Amanda_Butler@lincolnelectric.com


    Lincoln Electric Holdings, Inc.
    Financial Highlights
    (In thousands, except per share amounts)
    (Unaudited)

    Consolidated Statements of Income

                      
     Three Months Ended March 31,
    		 Fav (Unfav) to
    Prior Year
     2022 % of Sales    2021 % of Sales    $ %
    Net sales$925,448  100.0% $757,021  100.0% $168,427  22.2%
    Cost of goods sold595,671  64.4% 503,254  66.5% (92,417) (18.4)%
    Gross profit329,777  35.6% 253,767  33.5% 76,010  30.0%
    Selling, general & administrative expenses166,686  18.0% 145,676  19.2% (21,010) (14.4)%
    Rationalization and asset impairment charges1,885  0.2% 4,163  0.5% 2,278  54.7%
    Operating income161,206  17.4% 103,928  13.7% 57,278  55.1%
    Interest expense, net6,198  0.7% 5,359  0.7% (839) (15.7)%
    Other income (expense)4,634  0.5% (1,416) (0.2)% 6,050  427.3%
    Income before income taxes159,642  17.3% 97,153  12.8% 62,489  64.3%
    Income taxes33,611  3.6% 23,020  3.0% (10,591) (46.0)%
    Effective tax rate21.1%    23.7%    2.6%   
    Net income including non-controlling interests126,031  13.6% 74,133  9.8% 51,898  70.0%
    Non-controlling interests in subsidiaries’ income (loss)1  —  (44) —  45  102.3%
    Net income$126,030  13.6% $74,177  9.8% $51,853  69.9%
                      
    Basic earnings per share$2.15     $1.24        73.4%
    Diluted earnings per share$2.13     $1.23     $0.90  73.2%
    Weighted average shares (basic)58,606     59,642          
    Weighted average shares (diluted)59,272     60,299          
                      

    Lincoln Electric Holdings, Inc.
    Financial Highlights
    (In thousands)
    (Unaudited)

    Balance Sheet Highlights

            
    Selected Consolidated Balance Sheet DataMarch 31, 2022     December 31, 2021 
    Cash and cash equivalents$154,373  $192,958 
    Accounts receivable, net 516,231   429,074 
    Inventories 599,781   539,919 
    Total current assets 1,427,833   1,289,593 
    Property, plant and equipment, net 511,873   511,744 
    Total assets 2,736,344   2,592,307 
    Trade accounts payable 369,415   330,230 
    Total current liabilities 927,652   755,905 
    Short-term debt (1) 150,560   52,730 
    Long-term debt, less current portion 715,032   717,089 
    Total equity 863,060   863,909 
            
    Operating Working CapitalMarch 31, 2022  December 31, 2021 
    Average operating working capital to Net sales (2) 18.6%  16.3%
            
    Invested CapitalMarch 31, 2022  December 31, 2021 
    Short-term debt (1)$150,560  $52,730 
    Long-term debt, less current portion 715,032   717,089 
    Total debt 865,592   769,819 
    Total equity 863,060   863,909 
    Invested capital$1,728,652  $1,633,728 
            
    Total debt / invested capital 50.1%  47.1%


    (1)Includes current portion of long-term debt.
    (2)Average operating working capital to Net sales is defined as the sum of Accounts receivable, Inventories and contract assets less Trade accounts payable and contract liabilities 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 March 31,
     2022  2021 
    Operating income as reported$161,206  $103,928 
    Special items (pre-tax):     
    Rationalization and asset impairment charges (2)1,885  4,163 
    Acquisition transaction costs (3)—  1,113 
    Adjusted operating income (1)$163,091  $109,204 
    As a percent of total sales17.6% 14.4%
          
    Net income as reported$126,030  $74,177 
    Special items:     
    Rationalization and asset impairment charges (2)1,885  4,163 
    Acquisition transaction costs (3)—  1,113 
    Pension charges and other net gains (4)(4,273)  4,886 
    Tax effect of Special items (5)1,041  (1,561)
    Adjusted net income (1)124,683  82,778 
    Non-controlling interests in subsidiaries’ income (loss)1  (44)
    Interest expense, net6,198  5,359 
    Income taxes as reported33,611  23,020 
    Tax effect of Special items (5)(1,041)  1,561 
    Adjusted EBIT (1)$163,452  $112,674 
          
    Effective tax rate as reported21.1%  23.7%
    Net special item tax impact(0.4)%  (0.8)%
    Adjusted effective tax rate (1)20.7%  22.9%
          
    Diluted earnings per share as reported$2.13  $1.23 
    Special items per share(0.03)  0.14 
    Adjusted diluted earnings per share (1)$2.10  $1.37 
          
    Weighted average shares (diluted)59,272  60,299 


    (1)Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate and Adjusted diluted earnings per share are non-GAAP financial measures. Refer to Non-GAAP Information section.
    (2)Primarily related to severance and gains or losses on the disposal of assets.
    (3)Related to acquisitions and are included in Selling, general & administrative expenses.
    (4)Pension settlement charges due to lump sum pension payments and other net gains primarily due to the final settlement associated with the termination of a pension plan and are included in Other income (expense).
    (5)Includes the net tax impact of Special items recorded during the respective periods. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.
      

    Lincoln Electric Holdings, Inc.
    Financial Highlights
    (In thousands, except per share amounts)
    (Unaudited)

    Non-GAAP Financial Measures

          
     Twelve Months Ended March 31, 
    Return on Invested Capital2022     2021 
    Net income as reported$328,319  $224,730 
    Rationalization and asset impairment charges7,549  43,110 
    Acquisition transaction costs810  1,113 
    Pension charges and other net gains117,343  13,005 
    Amortization of step up in value of acquired inventories5,804  — 
    Tax effect of Special items (2)(44,586) (10,179)
    Adjusted net income (1)$415,239  $271,779 
    Plus: Interest expense, net of tax of $6,178 and $5,904 in 2022 and 2021, respectively18,364  17,550 
    Less: Interest income, net of tax of $376 and $396 in 2022 and 2021, respectively1,113  1,184 
    Adjusted net income before tax-effected interest$432,490  $288,145 
          
    Invested CapitalMarch 31, 2022 March 31, 2021
    Short-term debt$150,560  $3,607 
    Long-term debt, less current portion715,032  715,328 
    Total debt865,592  718,935 
    Total equity863,060  803,408 
    Invested capital$1,728,652  $1,522,343 
          
    Return on invested capital (1)25.0%  18.9%


    (1)Adjusted net income and Return on invested capital are non-GAAP financial measures. Refer to Non-GAAP Information section.
    (2)Includes the net tax impact of Special items recorded during the respective periods. The tax effect of Special items impacting pre-tax income was calculated as the pre-tax amount multiplied by the applicable tax rate. The applicable tax rates reflect the taxable jurisdiction and nature of each Special item.
      

    Lincoln Electric Holdings, Inc.
    Financial Highlights
    (In thousands, except per share amounts)
    (Unaudited)

    Condensed Consolidated Statements of Cash Flows

          
     Three Months Ended March 31, 
     2022 2021
    OPERATING ACTIVITIES:     
    Net income$126,030  $74,177 
    Non-controlling interests in subsidiaries’ income (loss) 1   (44)
    Net income including non-controlling interests 126,031   74,133 
    Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities:     
    Rationalization and asset impairment net charges 1,188   60 
    Depreciation and amortization 19,891   19,118 
    Equity earnings in affiliates, net (113)  (177)
    Other non-cash items, net (7,221)  (697)
    Changes in operating assets and liabilities, net of effects from acquisitions:     
    Increase in accounts receivable (86,120)  (65,795)
    Increase in inventories (55,407)  (42,568)
    Increase in trade accounts payable 39,284   42,325 
    Net change in other current assets and liabilities 6,964   22,171 
    Net change in other long-term assets and liabilities (1,407)  (3,308)
    NET CASH PROVIDED BY OPERATING ACTIVITIES 43,090   45,262 
          
    INVESTING ACTIVITIES:     
    Capital expenditures (18,672)  (9,936)
    Acquisition of businesses, net of cash acquired (22,013)  — 
    Proceeds from sale of property, plant and equipment 569   584 
    Other investing activities —   6,500 
    NET CASH USED BY INVESTING ACTIVITIES (40,116)  (2,852)
          
    FINANCING ACTIVITIES:     
    Net change in borrowings 96,308   1,307 
    Proceeds from exercise of stock options 1,035   2,780 
    Purchase of shares for treasury (104,579)  (28,459)
    Cash dividends paid to shareholders (33,361)  (30,999)
    NET CASH USED BY FINANCING ACTIVITIES (40,597)  (55,371)
          
    Effect of exchange rate changes on Cash and cash equivalents (962)  (2,192)
    DECREASE IN CASH AND CASH EQUIVALENTS (38,585)  (15,153)
    Cash and cash equivalents at beginning of period 192,958   257,279 
    Cash and cash equivalents at end of period$154,373  $242,126 
          
    Cash dividends paid per share$0.56  $0.51 
            

    Lincoln Electric Holdings, Inc.
    Segment Highlights (1)
    (In thousands)
    (Unaudited)

                   
     Americas    International    The Harris    Corporate /      
     Welding Welding Products Group Eliminations Consolidated
    Three months ended March 31, 2022              
    Net sales$534,055  $258,041  $133,352  $—  $925,448 
    Inter-segment sales28,156  6,228  3,062  (37,446) — 
    Total sales$562,211  $264,269  $136,414  $(37,446) $925,448 
                   
    Net income            $126,030 
    As a percent of total sales            13.6%
                   
    EBIT (1)$115,303  $35,740  $19,598  $(4,801) $165,840 
    As a percent of total sales20.5% 13.5% 14.4%    17.9%
    Special items charges (gains) (3)(3,735) 1,347  —  —  (2,388)
    Adjusted EBIT (2)$111,568  $37,087  $19,598  $(4,801) $163,452 
    As a percent of total sales19.8% 14.0% 14.4%    17.7%
                   
    Three months ended March 31, 2021              
    Net sales$425,242  $223,079  $108,700  $—  $757,021 
    Inter-segment sales32,748  4,285  2,147  (39,180) — 
    Total sales$457,990  $227,364  $110,847  $(39,180) $757,021 
                   
    Net income            $74,177 
    As a percent of total sales            9.8%
                   
    EBIT (1)$72,177  $14,207  $18,697  $(2,569) $102,512 
    As a percent of total sales15.8% 6.2% 16.9%    13.5%
    Special items charges (gains) (4)4,440  4,609  —  1,113  10,162 
    Adjusted EBIT (2)$76,617  $18,816  $18,697  $(1,456) $112,674 
    As a percent of total sales16.7% 8.3% 16.9%    14.9%


    (1)EBIT is defined as Operating income plus Other income (expense).
    (2)The primary profit measure used by management to assess segment performance is Adjusted EBIT.  EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT.
    (3)Special items in 2022 primarily reflect Rationalization and asset impairment charges of $1,885 in International Welding and a $3,735 net gain related to final settlement associated with the termination of a pension plan in Americas Welding.
    (4)Special items in 2021 reflect pension settlement charges of $4,440 and $446 in Americas Welding and International Welding, respectively, Rationalization and asset impairment charges of $4,163 in International Welding and acquisition transaction costs of $1,113 in Corporate/Eliminations related to an acquisition.
      

    Lincoln Electric Holdings, Inc.
    Change in Net Sales by Segment
    (In thousands)
    (Unaudited)

    Three Months Ended March 31st Change in Net Sales by Segment

                       
        Change in Net Sales due to:    
     Net Sales          Foreign Net Sales 
     2021 Volume Acquisitions Price Exchange 2022 
    Operating Segments                  
    Americas Welding$425,242 $22,004  $1,745 $84,218 $846  $534,055 
    International Welding 223,079  (1,024)  17,632  52,190  (33,836)  258,041 
    The Harris Products Group 108,700  3,142   15,452  6,723  (665)  133,352 
    Consolidated$ 757,021 $ 24,122  $ 34,829 $ 143,131 $ (33,655) $ 925,448 
                       
    % Change                  
    Americas Welding    5.2 % 0.4% 19.8% 0.2 % 25.6%
    International Welding    (0.5)% 7.9% 23.4% (15.2)% 15.7%
    The Harris Products Group    2.9 % 14.2% 6.2% (0.6)% 22.7%
    Consolidated     3.2 %  4.6%  18.9%  (4.4)%  22.2%


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