Lincoln Electric Holdings Inc.

04/25/2024 | Press release | Distributed by Public on 04/25/2024 06:50

LINCOLN ELECTRIC REPORTS FIRST QUARTER 2024 RESULTS - Form 8-K

LINCOLN ELECTRIC REPORTS FIRST QUARTER 2024 RESULTS

First Quarter 2024 Highlights

◾
Net sales of $981 million
◾
Operating income margin of 16.8%; Adjusted operating income margin of 17.5%
◾
Record EPS of $2.14; record Adjusted EPS of $2.23
◾
Cash flows from operations increase 8% to record $133 million
◾
Returned $152 million to shareholders through dividends and share repurchases

​

CLEVELAND, Thursday, April 25, 2024 - Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq: LECO) today reported first quarter 2024 net income of $123.4 million, or diluted earnings per share (EPS) of $2.14, which includes special item after-tax net charges of $5.2 million, or $0.09 EPS. This compares with prior year period net income of $121.9 million, or $2.09 EPS, which included special item after-tax net charges of $2.3 million, or $0.04 EPS. Excluding special items, first quarter 2024 adjusted net income was $128.7 million, or $2.23 adjusted EPS. This compares with adjusted net income of $124.2 million, or $2.13 adjusted EPS, in the prior year period.

First quarter 2024 sales decreased 5.6% to $981 million reflecting a 6.1% decrease in organic sales. Operating income for the first quarter 2024 was $165 million, or 16.8% of sales, as compared with operating income of $164.4 million, or 15.8% of sales, in the prior year period. Excluding special items, adjusted operating income was $171.4 million, or 17.5% of sales, as compared with $169.1 million, or 16.3% of sales, in the prior year period.

"We achieved record first quarter earnings and cash flow generation as strong execution and effective cost management mitigated slower sales performance as we start the year," commented Steven B. Hedlund, President and Chief Executive Officer. "We remain focused on our strategic growth initiatives as we navigate the cycle and are pleased to have reached our $1 billion automation sales run rate target with our recent RedViking® acquisition."

​

Webcast Information

A conference call to discuss first quarter 2024 financial results will be webcast live today, April 25, 2024, at 10:00 a.m., Eastern Time. Those interested in participating via webcast in listen-only mode can access the event here or on the Company's Investor Relations home page at https://ir.lincolnelectric.com. For participants who would like to participate via telephone, please dial (888) 440-4368 (domestic) or (646) 960-0856 (international) and use confirmation code 6709091. A replay of the earnings call will be available via webcast on the Company's website.

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 materials 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 operates 71 manufacturing and automation system integration locations across 21 countries and maintains 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.

LINCOLN ELECTRIC REPORTS FIRST QUARTER 2024 RESULTS

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, adjusted net operating profit after taxes and adjusted return on invested capital ("adjusted ROIC") 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 commercial and 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 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, 2023.

Lincoln Electric Holdings, Inc.

Financial Highlights

(In thousands, except per share amounts)

(Unaudited)

Consolidated Statements of Income

Fav (Unfav) to

Three Months Ended March 31,

Prior Year

2024

% of Sales

2023

% of Sales

$

%

Net sales

$

981,197

100.0

%

$

1,039,343

100.0

%

$

(58,146)

(5.6)

%

Cost of goods sold

612,798

62.5

%

683,986

65.8

%

71,188

10.4

%

Gross profit

368,399

37.5

%

355,357

34.2

%

13,042

3.7

%

Selling, general & administrative expenses

198,747

20.3

%

190,116

18.3

%

(8,631)

(4.5)

%

Rationalization and asset impairment charges

4,605

0.5

%

877

0.1

%

(3,728)

(425.1)

%

Operating income

165,047

16.8

%

164,364

15.8

%

683

0.4

%

Interest expense, net

8,779

0.9

%

13,201

1.3

%

4,422

33.5

%

Other income

2,262

0.2

%

4,181

0.4

%

(1,919)

(45.9)

%

Income before income taxes

158,530

16.2

%

155,344

14.9

%

3,186

2.1

%

Income taxes

35,115

3.6

%

33,413

3.2

%

(1,702)

(5.1)

%

Effective tax rate

22.2

%

21.5

%

(0.7)

%

Net income

$

123,415

12.6

%

$

121,931

11.7

%

$

1,484

1.2

%

Basic earnings per share

$

2.17

$

2.12

$

0.05

2.4

%

Diluted earnings per share

$

2.14

$

2.09

$

0.05

2.4

%

Weighted average shares (basic)

56,865

57,596

Weighted average shares (diluted)

57,641

58,417

Lincoln Electric Holdings, Inc.

Financial Highlights

(In thousands)

(Unaudited)

Balance Sheet Highlights

Selected Consolidated Balance Sheet Data

March 31, 2024

December 31, 2023

Cash and cash equivalents

$

374,978

$

393,787

Accounts receivable, net

544,514

538,830

Inventories

567,279

562,864

Total current assets

1,679,750

1,693,111

Property, plant and equipment, net

582,178

575,316

Total assets

3,379,717

3,377,297

Trade accounts payable

327,798

325,435

Total current liabilities

748,873

754,610

Short-term debt (1)

4,720

2,439

Long-term debt, less current portion

1,102,677

1,102,771

Total equity

1,307,828

1,308,852

Operating Working Capital

March 31, 2024

December 31, 2023

Average operating working capital to Net sales (2)

18.8

%

17.1

%

Invested Capital

March 31, 2024

December 31, 2023

Short-term debt (1)

$

4,720

$

2,439

Long-term debt, less current portion

1,102,677

1,102,771

Total debt

1,107,397

1,105,210

Total equity

1,307,828

1,308,852

Invested capital

$

2,415,225

$

2,414,062

Total debt / invested capital

45.9

%

45.8

%

(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,

2024

2023

Operating income as reported

$

165,047

$

164,364

Special items (pre-tax):

Rationalization and asset impairment charges (2)

4,605

877

Acquisition transaction costs (3)

1,762

-

Amortization of step up in value of acquired inventories (4)

-

3,856

Adjusted operating income (1)

$

171,414

$

169,097

As a percent of net sales

17.5

%

16.3

%

Net income as reported

$

123,415

$

121,931

Special items:

Rationalization and asset impairment charges (2)

4,605

877

Acquisition transaction costs (3)

1,762

-

Amortization of step up in value of acquired inventories (4)

-

3,856

Gain on asset disposal (5)

-

(1,646)

Tax effect of Special items (6)

(1,126)

(818)

Adjusted net income (1)

128,656

124,200

Interest expense, net

8,779

13,201

Income taxes as reported

35,115

33,413

Tax effect of Special items (6)

1,126

818

Adjusted EBIT (1)

$

173,676

$

171,632

Effective tax rate as reported

22.2

%

21.5

%

Net special item tax impact

(0.2)

%

0.1

%

Adjusted effective tax rate (1)

22.0

%

21.6

%

Diluted earnings per share as reported

$

2.14

$

2.09

Special items per share

0.09

0.04

Adjusted diluted earnings per share (1)

$

2.23

$

2.13

Weighted average shares (diluted)

57,641

58,417

(1)

Adjusted operating income, adjusted net income, adjusted EBIT, adjusted effective tax rate and adjusted diluted EPS are non-GAAP financial measures. Refer to Non-GAAP Information section.

(2)

Primarily related to rationalization plans initiated within International Welding and the Harris Products Group.

(3) Related to acquisitions and are included in Selling, general & administrative expenses.

(4)

Related to acquisitions and are included in Cost of goods sold.

(5)

Gain on asset disposal and included in Other income.

(6)

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 Capital

2024

2023

Net income as reported

$

546,733

$

468,125

Plus: Interest expense (after-tax)

36,519

28,875

Less: Interest income (after-tax)

6,793

1,560

Net operating profit after taxes

$

576,459

$

495,440

Special Items:

Rationalization and asset impairment charges

(7,586)

10,780

Acquisition transaction costs

1,762

6,003

Pension settlement charges

845

-

Amortization of step up in value of acquired inventories

8,397

4,962

Gain on asset disposal

-

(1,646)

Tax effect of Special items (2)

2,228

(3,051)

Adjusted net operating profit after taxes (1)

$

582,105

$

512,488

Invested Capital

March 31, 2024

March 31, 2023

Short-term debt

$

4,720

$

49,340

Long-term debt, less current portion

1,102,677

1,110,626

Total debt

1,107,397

1,159,966

Total equity

1,307,828

1,125,236

Invested capital

$

2,415,225

$

2,285,202

Return on invested capital as reported

23.9

%

21.7

%

Adjusted return on invested capital (1)

24.1

%

22.4

%

(1)

Adjusted net operating profit after taxes and adjusted ROIC 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,

2024

2023

OPERATING ACTIVITIES:

Net income

$

123,415

$

121,931

Adjustments to reconcile Net income to Net cash provided by operating activities:

Rationalization and asset impairment net charges

64

-

Depreciation and amortization

21,586

21,295

Other non-cash items, net

11,946

2,498

Changes in operating assets and liabilities, net of effects from acquisitions:

Increase in accounts receivable

(9,603)

(27,664)

(Increase) decrease in inventories

(9,416)

5,881

Increase in trade accounts payable

3,957

6,841

Net change in other current assets and liabilities

(4,790)

(6,082)

Net change in other long-term assets and liabilities

(3,865)

(769)

NET CASH PROVIDED BY OPERATING ACTIVITIES

133,294

123,931

INVESTING ACTIVITIES:

Capital expenditures

(26,256)

(18,787)

Proceeds from sale of property, plant and equipment

316

3,314

Other investing activities

-

(576)

NET CASH USED BY INVESTING ACTIVITIES

(25,940)

(16,049)

FINANCING ACTIVITIES:

Proceeds from (payments on) short-term borrowings

2,016

(43,940)

Payments on long-term borrowings

(169)

(111)

Proceeds from exercise of stock options

24,438

2,476

Purchase of shares for treasury

(110,405)

(32,158)

Cash dividends paid to shareholders

(41,280)

(37,583)

NET CASH USED BY FINANCING ACTIVITIES

(125,400)

(111,316)

Effect of exchange rate changes on Cash and cash equivalents

(763)

5,087

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(18,809)

1,653

Cash and cash equivalents at beginning of period

393,787

197,150

Cash and cash equivalents at end of period

$

374,978

$

198,803

Cash dividends paid per share

$

0.71

$

0.64

Lincoln Electric Holdings, Inc.

Segment Highlights

(In thousands)

(Unaudited)

Americas

International

The Harris

Corporate /

Welding

Welding

Products Group

Eliminations

Consolidated

Three months ended March 31, 2024

Net sales

$

624,099

$

235,761

$

121,337

$

-

$

981,197

Inter-segment sales

29,978

8,408

3,093

(41,479)

-

Total sales

$

654,077

$

244,169

$

124,430

$

(41,479)

$

981,197

Net income

$

123,415

As a percent of total sales

12.6

%

EBIT (1)

$

136,100

$

24,707

$

18,342

$

(11,840)

$

167,309

As a percent of total sales

20.8

%

10.1

%

14.7

%

17.1

%

Special items charges (3)

-

3,069

1,536

1,762

6,367

Adjusted EBIT (2)

$

136,100

$

27,776

$

19,878

$

(10,078)

$

173,676

As a percent of total sales

20.8

%

11.4

%

16.0

%

17.7

%

Three months ended March 31, 2023

Net sales

$

658,645

$

252,416

$

128,282

$

-

$

1,039,343

Inter-segment sales

32,318

6,753

2,897

(41,968)

-

Total sales

$

690,963

$

259,169

$

131,179

$

(41,968)

$

1,039,343

Net income

$

121,931

As a percent of total sales

11.7

%

EBIT (1)

$

129,668

$

29,296

$

18,983

$

(9,402)

$

168,545

As a percent of total sales

18.8

%

11.3

%

14.5

%

16.2

%

Special items charges (4)

2,785

302

-

-

3,087

Adjusted EBIT (2)

$

132,453

$

29,598

$

18,983

$

(9,402)

$

171,632

As a percent of total sales

19.2

%

11.4

%

14.5

%

16.5

%

(1)

EBIT is defined as Operating income plus Other income.

(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 2024 primarily reflect rationalization and asset impairment charges of $3,069 and $1,536 in International Welding and the Harris Products Group, respectively, and acquisition transaction costs of $1,762 in Corporate/Eliminations.

(4)

Special items in 2023 primarily reflect amortization of step up in value of acquired inventories of $2,785 and $1,071 in Americas and International Welding, respectively, Rationalization and asset impairment net charges of $877 in International Welding, and a gain on asset disposal of $1,646 in International Welding.

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

2023

Volume

Acquisitions

Price

Exchange

2024

Operating Segments

Americas Welding

$

658,645

$

(42,653)

$

4,164

$

2,284

$

1,659

$

624,099

International Welding

252,416

(12,272)

-

(4,010)

(373)

235,761

The Harris Products Group

128,282

(8,856)

-

1,443

468

121,337

Consolidated

$

1,039,343

$

(63,781)

$

4,164

$

(283)

$

1,754

$

981,197

% Change

Americas Welding

(6.5)

%

0.6

%

0.3

%

0.3

%

(5.2)

%

International Welding

(4.9)

%

-

(1.6)

%

(0.1)

%

(6.6)

%

The Harris Products Group

(6.9)

%

-

1.1

%

0.4

%

(5.4)

%

Consolidated

(6.1)

%

0.4

%

0.0

%

0.2

%

(5.6)

%