Lincoln Electric Reports Third Quarter 2015 Results
Adjusted EPS of $0.89
CLEVELAND, Oct. 30, 2015 /PRNewswire/ --
|
Third Quarter 2015 Key Metric Highlights |
|
· Adjusted operating income margin increased 40 basis points to 15.1% |
|
· Reported results include $181 million of pre-tax special charges, $127 million after-tax, or $1.71 per diluted share |
Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq: LECO) today reported third quarter 2015 net losses of $60.5 million, or $0.82 per diluted share, which includes the impact of $126.7 million of after-tax special item charges, or $1.71 per diluted share. This compares with net income of $45.7 million, or earnings per share (EPS) of $0.57 in the comparable 2014 period. Excluding these items, third quarter 2015 Adjusted net income was $66.2 million, or Adjusted EPS of $0.89. Third quarter 2014 Adjusted net income was $74.9 million, or Adjusted EPS of $0.94.
Sales decreased $70.6 million to $645.2 million in the third quarter 2015 as favorable price and acquisitions were offset by lower volumes and unfavorable foreign currency translation. Operating losses for the third quarter 2015 were $84.0 million compared with earnings of $76.1 million, or 10.6% of sales, in the comparable 2014 period. Adjusted operating income was $97.1 million, or 15.1% of sales. This compares with $105.2 million, or 14.7% of sales in 2014.
Third quarter 2015 Adjusted operating income excludes the following pre-tax charges: a $136.3 million non-cash charge primarily related to a previously announced pension annuity contract purchase, a $26.5 million non-cash charge related to a Venezuelan currency remeasurement loss and $18.3 million ($6.1 million non-cash) of rationalization and asset impairment charges primarily related to our ongoing efforts to align our business to current market conditions.
Christopher L. Mapes, Chairman, President and Chief Executive Officer stated, "We improved profit margin performance on an adjusted basis in weakening market conditions and against difficult year-over-year comparisons. Further to the cost reductions initiated in the second quarter, we implemented additional measures that in aggregate now provide approximately $20 million to $25 million in annualized temporary cost savings and $10 million to $12 million in annualized structural savings. Looking ahead, we will continue to execute on our '2020 Vision and Strategy' and manage margin performance through aggressive cost reduction actions in a slowing demand environment. We expect these actions will ensure the organization is well positioned to capitalize on profitable growth when conditions improve."
Dividend and Share Repurchases
The Company's Board of Directors declared a 10.3% increase in the quarterly cash dividend, from $0.29 per share to $0.32, or $1.28 per share on an annual basis. The declared quarterly cash dividend of $0.32 per share is payable January 15, 2016 to shareholders of record as of December 31, 2015.
During the quarter, the Company returned $161.0 million to shareholders through dividends and the repurchase of 2.4 million of the Company's common shares. Through the first nine months of 2015, the Company returned $363.7 million to shareholders through dividends and the repurchase of 4.7 million of the Company's common shares. The Company is maintaining its 2015 share repurchase target of $400 million of the Company's common shares.
Venezuela Update
The Company is now utilizing the SIMADI rate as of September 30, 2015 for remeasurement purposes, as it believes that this rate more appropriately approximates the rates used to transact business in its Venezuelan operations. Fourth quarter 2015 Venezuela results will be presented using the SIMADI rate. The SIMADI rate is an auction-based exchange rate, which was 199.4 bolivars to the U.S. dollar as of September 30, 2015, compared to the SICAD I rate exchange rate, which was 13.5 bolivars to the U.S. dollar on that date.
As a result of this change, the Company incurred a pre-tax and after-tax charge of $26.5 million in the third quarter of 2015. This represents a lower of cost or market inventory adjustment of $22.2 million recorded in costs of goods sold and a remeasurement loss of $4.3 million recorded in selling general and administrative expenses. Third quarter 2015 Venezuela financial performance included Net sales of $34.7 million and Adjusted net income of $0.2 million. Third quarter 2014 Venezuela financial performance included Net sales of $12.8 million and Adjusted net loss of $1.2 million.
The results of our Venezuelan operations could be negatively impacted by additional currency remeasurements or devaluations, increased costs due to changes in raw material sourcing, the potential inability to obtain required production materials resulting in interruptions to operations or other actions by the Venezuelan government that could limit or cause cessation of operations.
Nine Months 2015 Summary
Net income for the nine months ended September 30, 2015 was $78.8 million, or EPS of $1.04, which includes the impact of $127.6 million of after-tax charges, or $1.68 per diluted share. This compares with net income of $179.5 million, or EPS of $2.22, in 2014. Adjusted net income for the nine months ended September 30, 2015 was $206.4 million, or Adjusted EPS of $2.72, compared with Adjusted net income of $230.5 million, or Adjusted EPS of $2.86, in 2014.
Sales decreased 7.6% to $2.0 billion in the nine months ended September 30, 2015 as favorable price and acquisitions were offset by lower volumes and unfavorable foreign currency translation. Operating income for the nine months ended September 30, 2015 decreased to $103.3 million, or 5.2% of sales, compared with $268.8 million, or 12.6% of sales, in the comparable 2014 period. Adjusted operating income was $285.6 million or 14.5% of sales, compared with $319.9 million, or 15.0% of sales in 2014 which includes a $3.9 million gain, $2.5 million after-tax or $0.03 per diluted share, from an insurance settlement.
Webcast Information
A conference call to discuss third quarter 2015 financial results will be webcast live today, October 30, 2015, at 10:00 a.m., Eastern Time. This webcast is accessible at http://ir.lincolnelectric.com. Listeners should go to the web site prior to the call to register and download and install any necessary audio software. A replay of the webcast will be available on the Company's web site.
Investors who are unable to access the webcast may listen to the conference call live by telephone by dialing (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 53335548. Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.
Financial results for the third quarter 2015 can also be obtained at http://ir.lincolnelectric.com.
About Lincoln Electric
Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market. Headquartered in Cleveland, Ohio, Lincoln has 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 and Adjusted diluted earnings per share are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company's financial performance from period to period. Management uses this information in assessing and evaluating the Company's underlying operating performance. Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. Please refer to the attached schedule for a reconciliation of non-GAAP financial measures to the related GAAP financial measures.
Forward-Looking Statements
The Company's expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and involve a number of risks and uncertainties. Forward-looking statements generally can be identified by the use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "forecast," "guidance" or words of similar meaning. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company's operating results. The factors include, but are not limited to: general economic and market conditions; the effectiveness of operating initiatives; completion of planned divestitures; interest rates; disruptions, uncertainty or volatility in the credit markets that may limit our access to capital; currency exchange rates and devaluations, including in highly inflationary countries such as Venezuela; adverse outcome of pending or potential litigation; actual costs of the Company's rationalization plans; possible acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; and the possible effects of events beyond our control, such as political unrest, acts of terror and natural disasters, on the Company or its customers, suppliers and the economy in general. For additional discussion, see "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.
|
Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share amounts) (Unaudited)
| |||||||||||||||||||||
|
Consolidated Statements of Income | |||||||||||||||||||||
|
Three months ended September 30, |
Fav (Unfav) to Prior Year | ||||||||||||||||||||
|
2015 |
% of Sales |
2014 |
% of Sales |
$ |
% | ||||||||||||||||
|
Net sales |
$ |
645,166 |
100.0 |
% |
$ |
715,777 |
100.0 |
% |
$ |
(70,611) |
(9.9%) |
||||||||||
|
Cost of goods sold |
446,272 |
69.2 |
% |
474,168 |
66.2 |
% |
27,896 |
5.9 |
% | ||||||||||||
|
Gross profit |
198,894 |
30.8 |
% |
241,609 |
33.8 |
% |
(42,715) |
(17.7%) |
|||||||||||||
|
Selling, general & administrative expenses |
128,299 |
19.9 |
% |
136,424 |
19.1 |
% |
8,125 |
6.0 |
% | ||||||||||||
|
Rationalization and asset impairment charges |
18,285 |
2.8 |
% |
29,068 |
4.1 |
% |
10,783 |
37.1 |
% | ||||||||||||
|
Pension settlement charges |
136,331 |
21.1 |
% |
— |
— |
(136,331) |
(100.0%) |
||||||||||||||
|
Operating income (loss) |
(84,021) |
(13.0%) |
76,117 |
10.6 |
% |
(160,138) |
(210.4%) |
||||||||||||||
|
Interest income |
692 |
0.1 |
% |
627 |
0.1 |
% |
65 |
10.4 |
% | ||||||||||||
|
Equity earnings in affiliates |
310 |
— |
1,172 |
0.2 |
% |
(862) |
(73.5%) |
||||||||||||||
|
Other income |
296 |
— |
1,043 |
0.1 |
% |
(747) |
(71.6%) |
||||||||||||||
|
Interest expense |
(5,803) |
(0.9%) |
(1,174) |
(0.2%) |
(4,629) |
(394.3%) |
|||||||||||||||
|
Income (loss) before income taxes |
(88,526) |
(13.7%) |
77,785 |
10.9 |
% |
(166,311) |
(213.8%) |
||||||||||||||
|
Income taxes |
(28,045) |
(4.3%) |
32,953 |
4.6 |
% |
60,998 |
185.1 |
% | |||||||||||||
|
Effective tax rate |
31.7 |
% |
42.4 |
% |
10.7 |
% |
|||||||||||||||
|
Net income (loss) including non-controlling interests |
(60,481) |
(9.4%) |
44,832 |
6.3 |
% |
(105,313) |
(234.9%) |
||||||||||||||
|
Non-controlling interests in subsidiaries' loss |
(15) |
— |
(857) |
(0.1%) |
842 |
98.2 |
% | ||||||||||||||
|
Net income (loss) |
$ |
(60,466) |
(9.4%) |
$ |
45,689 |
6.4 |
% |
$ |
(106,155) |
(232.3%) |
|||||||||||
|
Basic earnings (loss) per share |
$ |
(0.82) |
$ |
0.58 |
$ |
(1.40) |
(241.4%) |
||||||||||||||
|
Diluted earnings (loss) per share |
$ |
(0.82) |
$ |
0.57 |
$ |
(1.39) |
(243.9%) |
||||||||||||||
|
Weighted average shares (basic) |
73,754 |
78,817 |
|||||||||||||||||||
|
Weighted average shares (diluted) |
73,754 |
79,725 |
|||||||||||||||||||
|
Nine months ended September 30, |
Fav (Unfav) to Prior Year | ||||||||||||||||||||
|
2015 |
% of Sales |
2014 |
% of Sales |
$ |
% | ||||||||||||||||
|
Net sales |
$ |
1,967,806 |
100.0 |
% |
$ |
2,129,370 |
100.0 |
% |
$ |
(161,564) |
(7.6%) |
||||||||||
|
Cost of goods sold |
1,322,741 |
67.2 |
% |
1,411,158 |
66.3 |
% |
88,417 |
6.3 |
% | ||||||||||||
|
Gross profit |
645,065 |
32.8 |
% |
718,212 |
33.7 |
% |
(73,147) |
(10.2%) |
|||||||||||||
|
Selling, general & administrative expenses |
385,945 |
19.6 |
% |
419,495 |
19.7 |
% |
33,550 |
8.0 |
% | ||||||||||||
|
Rationalization and asset impairment charges |
19,524 |
1.0 |
% |
29,887 |
1.4 |
% |
10,363 |
(34.7%) |
|||||||||||||
|
Pension Settlement Charges |
136,331 |
6.9 |
% |
— |
— |
(136,331) |
(100.0%) |
||||||||||||||
|
Operating income (loss) |
103,265 |
5.2 |
% |
268,830 |
12.6 |
% |
(165,565) |
(61.6%) |
|||||||||||||
|
Interest income |
2,023 |
0.1 |
% |
2,465 |
0.1 |
% |
(442) |
(17.9%) |
|||||||||||||
|
Equity earnings in affiliates |
2,138 |
0.1 |
% |
4,308 |
0.2 |
% |
(2,170) |
(50.4%) |
|||||||||||||
|
Other income |
3,223 |
0.2 |
% |
3,204 |
0.2 |
% |
19 |
0.6 |
% | ||||||||||||
|
Interest expense |
(12,034) |
(0.6%) |
(3,730) |
(0.2%) |
(8,304) |
(222.6%) |
|||||||||||||||
|
Income (loss) before income taxes |
98,615 |
5.0 |
% |
275,077 |
12.9 |
% |
(176,462) |
(64.2%) |
|||||||||||||
|
Income taxes |
19,902 |
1.0 |
% |
96,532 |
4.5 |
% |
76,630 |
79.4 |
% | ||||||||||||
|
Effective tax rate |
20.2 |
% |
35.1 |
% |
14.9 |
% |
|||||||||||||||
|
Net income (loss) including non-controlling interests |
78,713 |
4.0 |
% |
178,545 |
8.4 |
% |
(99,832) |
(55.9%) |
|||||||||||||
|
Non-controlling interests in subsidiaries' loss |
(73) |
— |
(929) |
— |
856 |
92.1 |
% | ||||||||||||||
|
Net income (loss) |
$ |
78,786 |
4.0 |
% |
$ |
179,474 |
8.4 |
% |
$ |
(100,688) |
(56.1%) |
||||||||||
|
Basic earnings (loss) per share |
$ |
1.05 |
$ |
2.25 |
$ |
(1.20) |
(53.3%) |
||||||||||||||
|
Diluted earnings (loss) per share |
$ |
1.04 |
$ |
2.22 |
$ |
(1.18) |
(53.2%) |
||||||||||||||
|
Weighted average shares (basic) |
74,999 |
79,779 |
|||||||||||||||||||
|
Weighted average shares (diluted) |
75,764 |
80,702 |
|||||||||||||||||||
|
Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share amounts) (Unaudited)
| ||||||||||||||||
|
Non-GAAP Financial Measures
| ||||||||||||||||
|
Three months ended September 30, |
Nine months ended September 30, | |||||||||||||||
|
2015 |
2014 |
2015 |
2014 | |||||||||||||
|
Operating income (loss) as reported |
(84,021) |
76,117 |
103,265 |
268,830 |
||||||||||||
|
Special items (pre-tax): |
||||||||||||||||
|
Rationalization and asset impairment charges (1) |
18,285 |
29,068 |
19,524 |
29,887 |
||||||||||||
|
Venezuela foreign exchange losses (2) |
26,506 |
— |
26,506 |
21,133 |
||||||||||||
|
Pension settlement charges (3) |
136,331 |
— |
136,331 |
— |
||||||||||||
|
Adjusted operating income (loss) (5) |
$ |
97,101 |
$ |
105,185 |
$ |
285,626 |
$ |
319,850 |
||||||||
|
Net income (loss) as reported |
$ |
(60,466) |
$ |
45,689 |
$ |
78,786 |
$ |
179,474 |
||||||||
|
Special items (after-tax): |
||||||||||||||||
|
Rationalization and asset impairment charges (1) |
16,832 |
30,056 |
17,732 |
30,747 |
||||||||||||
|
Venezuela foreign exchange losses (2) |
26,506 |
— |
26,506 |
21,133 |
||||||||||||
|
Pension settlement charges (3) |
83,341 |
— |
83,341 |
— |
||||||||||||
|
Special items attributable to non-controlling Interests |
— |
(805) |
— |
(805) |
||||||||||||
|
Adjusted net income (loss) (5) |
$ |
66,213 |
$ |
74,940 |
$ |
206,365 |
$ |
230,549 |
||||||||
|
Diluted earnings (loss) per share as reported |
$ |
(0.82) |
$ |
0.57 |
$ |
1.04 |
$ |
2.22 |
||||||||
|
Special items (4) |
1.71 |
0.37 |
1.68 |
0.64 |
||||||||||||
|
Adjusted diluted earnings per share (4)(5) |
$ |
0.89 |
$ |
0.94 |
$ |
2.72 |
$ |
2.86 |
||||||||
|
Weighted average shares (diluted) (4) |
74,460 |
79,725 |
75,764 |
80,702 |
||||||||||||
|
(1) |
The three and nine months ended September 30, 2015 and 2014 include net charges primarily related to severance and other related costs and long-lived asset impairments. The three and nine months ended September 30, 2015 also include a goodwill asset impairment charge. Rationalization charges in 2014 are partially offset by gains related to the sale of assets at rationalized operations. |
|
(2) |
The three and nine months ended September 30, 2015 and nine months ended September 2014 represent the impacts of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms. |
|
(3) |
The three and nine months ended September 30, 2015 include pension settlement charges primarily related to the purchase of a group annuity contract. |
|
(4) |
Adjusted diluted earnings per share for the three months ended September 30, 2015 include the dilutive effect of common share equivalents. Reported diluted loss per share excludes the effect of common stock equivalents because their inclusion would be anti-dilutive. |
|
(5) |
Adjusted operating income, Adjusted net income and Adjusted diluted earnings per share are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company's financial performance from period to period. Management uses this information in assessing and evaluating the Company's underlying operating performance. Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures. |
|
Lincoln Electric Holdings, Inc. Financial Highlights (In thousands) (Unaudited)
| ||||||||
|
Balance Sheet Highlights
| ||||||||
|
Selected Consolidated Balance Sheet Data |
September 30, 2015 |
December 31, 2014 | ||||||
|
Cash and cash equivalents |
$ |
364,345 |
$ |
278,379 |
||||
|
Total current assets |
1,068,858 |
1,096,202 |
||||||
|
Property, plant and equipment, net |
421,940 |
438,746 |
||||||
|
Total assets |
1,928,091 |
1,939,215 |
||||||
|
Total current liabilities |
437,429 |
492,395 |
||||||
|
Short-term debt (1) |
2,453 |
68,166 |
||||||
|
Long-term debt |
350,899 |
2,488 |
||||||
|
Total equity |
1,011,969 |
1,285,781 |
||||||
|
Net Operating Working Capital |
September 30, 2015 |
December 31, 2014 | ||||||
|
Accounts receivable |
$ |
310,824 |
$ |
337,664 |
||||
|
Inventory |
308,625 |
341,057 |
||||||
|
Trade accounts payable |
166,858 |
209,745 |
||||||
|
Net operating working capital |
$ |
452,591 |
$ |
468,976 |
||||
|
Net operating working capital to net sales (2) |
17.5 |
% |
17.1 |
% | ||||
|
Invested Capital |
September 30, 2015 |
December 31, 2014 | ||||||
|
Short-term debt (1) |
$ |
2,453 |
$ |
68,166 |
||||
|
Long-term debt |
350,899 |
2,488 |
||||||
|
Total debt |
353,352 |
70,654 |
||||||
|
Total equity |
1,011,969 |
1,285,781 |
||||||
|
Invested capital |
$ |
1,365,321 |
$ |
1,356,435 |
||||
|
Total debt / invested capital |
25.9 |
% |
5.2 |
% | ||||
|
Return on invested capital (3) |
12.0 |
% |
19.1 |
% | ||||
|
(1) |
Includes current portion of long-term debt. |
|
(2) |
Net operating working capital to net sales is defined as net operating working capital divided by annualized rolling three months of sales. |
|
(3) |
Return on invested capital is defined as rolling 12 months of earnings excluding tax-effected interest 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 September 30, | ||||||||
|
2015 |
2014 | |||||||
|
OPERATING ACTIVITIES: |
||||||||
|
Net income (loss) |
$ |
(60,466) |
$ |
45,689 |
||||
|
Non-controlling interests in subsidiaries' loss |
(15) |
(857) |
||||||
|
Net income (loss) including non-controlling interests |
(60,481) |
44,832 |
||||||
|
Adjustments to reconcile Net income (loss) including non-controlling interests to Net cash provided by operating activities: |
||||||||
|
Rationalization and asset impairment charges |
6,090 |
28,588 |
||||||
|
Depreciation and amortization |
16,179 |
17,117 |
||||||
|
Equity (earnings) loss in affiliates, net |
236 |
(404) |
||||||
|
Pension expense and settlement charges |
141,244 |
4,158 |
||||||
|
Pension contributions and payments |
(4,416) |
(10,479) |
||||||
|
Other non-cash items, net |
(46,517) |
9,382 |
||||||
|
Changes in operating assets and liabilities, net of effects from acquisitions: |
||||||||
|
Decrease in accounts receivable |
28,343 |
20,953 |
||||||
|
Decrease in inventories |
26,284 |
6,302 |
||||||
|
(Decrease) increase in trade accounts payable |
(3,412) |
3,915 |
||||||
|
Net change in other current assets and liabilities |
3,197 |
25,919 |
||||||
|
Net change in other long-term assets and liabilities |
(1,381) |
(835) |
||||||
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
105,366 |
149,448 |
||||||
|
INVESTING ACTIVITIES: |
||||||||
|
Capital expenditures |
(10,970) |
(15,483) |
||||||
|
Acquisition of businesses, net of cash acquired |
(33,882) |
— |
||||||
|
Proceeds from sale of property, plant and equipment |
752 |
11,537 |
||||||
|
Other investing activities |
(2,103) |
— |
||||||
|
NET CASH USED BY INVESTING ACTIVITIES |
(46,203) |
(3,946) |
||||||
|
FINANCING ACTIVITIES: |
||||||||
|
Net change in borrowings |
170,371 |
81,257 |
||||||
|
Proceeds from exercise of stock options |
564 |
1,935 |
||||||
|
Excess tax benefits from stock-based compensation |
194 |
883 |
||||||
|
Purchase of shares for treasury |
(139,337) |
(130,070) |
||||||
|
Cash dividends paid to shareholders |
(21,694) |
(18,276) |
||||||
|
Other financing activities |
(44) |
— |
||||||
|
NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES |
10,054 |
(64,271) |
||||||
|
Effect of exchange rate changes on Cash and cash equivalents |
(17,609) |
(5,993) |
||||||
|
INCREASE IN CASH AND CASH EQUIVALENTS |
51,608 |
75,238 |
||||||
|
Cash and cash equivalents at beginning of period |
312,737 |
204,285 |
||||||
|
Cash and cash equivalents at end of period |
$ |
364,345 |
$ |
279,523 |
||||
|
Cash dividends paid per share |
$ |
0.29 |
$ |
0.23 |
||||
|
Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share amounts) (Unaudited)
| ||||||||
|
Condensed Consolidated Statements of Cash Flows | ||||||||
|
Nine months ended September 30, | ||||||||
|
2015 |
2014 | |||||||
|
OPERATING ACTIVITIES: |
||||||||
|
Net income |
$ |
78,786 |
$ |
179,474 |
||||
|
Non-controlling interests in subsidiaries' loss |
(73) |
(929) |
||||||
|
Net income including non-controlling interests |
78,713 |
178,545 |
||||||
|
Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: |
||||||||
|
Rationalization and asset impairment charges |
6,120 |
29,447 |
||||||
|
Depreciation and amortization |
47,897 |
53,017 |
||||||
|
Equity earnings in affiliates, net |
(252) |
(1,901) |
||||||
|
Pension expense and settlement charges |
151,848 |
9,634 |
||||||
|
Pension contributions and payments |
(52,121) |
(34,643) |
||||||
|
Other non-cash items, net |
(52,307) |
30,041 |
||||||
|
Changes in operating assets and liabilities, net of effects from acquisitions: |
||||||||
|
Decrease (increase) in accounts receivable |
14,661 |
(22,388) |
||||||
|
Decrease (increase) in inventories |
27,824 |
(11,153) |
||||||
|
Decrease in trade accounts payable |
(34,629) |
(11,534) |
||||||
|
Net change in other current assets and liabilities |
47,032 |
53,299 |
||||||
|
Net change in other long-term assets and liabilities |
650 |
(4,311) |
||||||
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
235,436 |
268,053 |
||||||
|
INVESTING ACTIVITIES: |
||||||||
|
Capital expenditures |
(40,187) |
(55,430) |
||||||
|
Acquisition of businesses, net of cash acquired |
(33,882) |
(892) |
||||||
|
Proceeds from sale of property, plant and equipment |
2,173 |
17,046 |
||||||
|
Other investing activities |
(79) |
778 |
||||||
|
NET CASH USED BY INVESTING ACTIVITIES |
(71,975) |
(38,498) |
||||||
|
FINANCING ACTIVITIES: |
||||||||
|
Net change in borrowings |
314,420 |
71,114 |
||||||
|
Proceeds from exercise of stock options |
4,600 |
5,945 |
||||||
|
Excess tax benefits from stock-based compensation |
1,487 |
3,361 |
||||||
|
Purchase of shares for treasury |
(297,804) |
(249,403) |
||||||
|
Cash dividends paid to shareholders |
(65,942) |
(55,395) |
||||||
|
Other financing activities |
(8,040) |
(2,330) |
||||||
|
NET CASH USED BY FINANCING ACTIVITIES |
(51,279) |
(226,708) |
||||||
|
Effect of exchange rate changes on Cash and cash equivalents |
(26,216) |
(23,149) |
||||||
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
85,966 |
(20,302) |
||||||
|
Cash and cash equivalents at beginning of period |
278,379 |
299,825 |
||||||
|
Cash and cash equivalents at end of period |
$ |
364,345 |
$ |
279,523 |
||||
|
Cash dividends paid per share |
$ |
0.87 |
$ |
0.69 |
||||
|
Lincoln Electric Holdings, Inc. Segment Highlights (In thousands) (Unaudited) | ||||||||||||||||||||||||||||
|
North America Welding |
Europe Welding |
Asia Pacific Welding |
South America Welding |
The Harris Products Group |
Corporate / Eliminations |
Consolidated | ||||||||||||||||||||||
|
Three months ended September 30, 2015 |
||||||||||||||||||||||||||||
|
Net sales |
$ |
408,416 |
$ |
80,596 |
$ |
45,505 |
$ |
47,727 |
$ |
62,922 |
$ |
— |
$ |
645,166 |
||||||||||||||
|
Inter-segment sales |
28,055 |
4,631 |
2,794 |
36 |
2,307 |
(37,823) |
— |
|||||||||||||||||||||
|
Total |
$ |
436,471 |
$ |
85,227 |
$ |
48,299 |
$ |
47,763 |
$ |
65,229 |
$ |
(37,823) |
$ |
645,166 |
||||||||||||||
|
EBIT (1) |
$ |
(69,661) |
$ |
8,069 |
$ |
(2,938) |
$ |
(24,661) |
$ |
6,422 |
$ |
(646) |
$ |
(83,415) |
||||||||||||||
|
As a percent of total sales |
(16.0%) |
9.5 |
% |
(6.1%) |
(51.6%) |
9.8 |
% |
(12.9%) |
||||||||||||||||||||
|
Special items charge (gain) (2) |
$ |
149,404 |
$ |
268 |
$ |
4,944 |
$ |
26,506 |
$ |
— |
$ |
— |
$ |
181,122 |
||||||||||||||
|
EBIT, as adjusted (4) |
$ |
79,743 |
$ |
8,337 |
$ |
2,006 |
$ |
1,845 |
$ |
6,422 |
$ |
(646) |
$ |
97,707 |
||||||||||||||
|
As a percent of total sales |
18.3 |
% |
9.8 |
% |
4.2 |
% |
3.9 |
% |
9.8 |
% |
15.1 |
% | ||||||||||||||||
|
Three months ended September 30, 2014 |
||||||||||||||||||||||||||||
|
Net sales |
$ |
439,621 |
$ |
107,507 |
$ |
57,404 |
$ |
32,862 |
$ |
78,383 |
$ |
— |
$ |
715,777 |
||||||||||||||
|
Inter-segment sales |
30,365 |
4,533 |
3,595 |
9 |
2,009 |
(40,511) |
— |
|||||||||||||||||||||
|
Total |
$ |
469,986 |
$ |
112,040 |
$ |
60,999 |
$ |
32,871 |
$ |
80,392 |
$ |
(40,511) |
$ |
715,777 |
||||||||||||||
|
EBIT (1) |
$ |
84,450 |
$ |
15,302 |
$ |
(28,871) |
$ |
(1,172) |
$ |
8,947 |
$ |
(324) |
$ |
78,332 |
||||||||||||||
|
As a percent of total sales |
18.0 |
% |
13.7 |
% |
(47.3%) |
(3.6%) |
11.1 |
% |
10.9 |
% | ||||||||||||||||||
|
Special items charge (gain) (3) |
$ |
— |
$ |
(81) |
$ |
28,567 |
$ |
582 |
$ |
— |
$ |
— |
$ |
29,068 |
||||||||||||||
|
EBIT, as adjusted (4) |
$ |
84,450 |
$ |
15,221 |
$ |
(304) |
$ |
(590) |
$ |
8,947 |
$ |
(324) |
$ |
107,400 |
||||||||||||||
|
As a percent of total sales |
18.0 |
% |
13.6 |
% |
(0.5%) |
(1.8%) |
11.1 |
% |
15.0 |
% | ||||||||||||||||||
|
Nine months ended September 30, 2015 |
||||||||||||||||||||||||||||
|
Net sales |
$ |
1,236,479 |
$ |
259,915 |
$ |
143,798 |
$ |
123,064 |
$ |
204,550 |
$ |
— |
$ |
1,967,806 |
||||||||||||||
|
Inter-segment sales |
79,797 |
12,687 |
9,028 |
154 |
7,034 |
(108,700) |
— |
|||||||||||||||||||||
|
Total |
$ |
1,316,276 |
$ |
272,602 |
$ |
152,826 |
$ |
123,218 |
$ |
211,584 |
$ |
(108,700) |
$ |
1,967,806 |
||||||||||||||
|
EBIT (1) |
$ |
79,017 |
$ |
25,059 |
$ |
2,434 |
$ |
(20,133) |
$ |
22,221 |
$ |
28 |
$ |
108,626 |
||||||||||||||
|
As a percent of total sales |
6.0 |
% |
9.2 |
% |
1.6 |
% |
(16.3%) |
10.5 |
% |
5.5 |
% | |||||||||||||||||
|
Special items charge (gain) (2) |
$ |
149,404 |
$ |
1,507 |
$ |
4,944 |
$ |
26,506 |
$ |
— |
$ |
— |
$ |
182,361 |
||||||||||||||
|
EBIT, as adjusted (4) |
$ |
228,421 |
$ |
26,566 |
$ |
7,378 |
$ |
6,373 |
$ |
22,221 |
$ |
28 |
$ |
290,987 |
||||||||||||||
|
As a percent of total sales |
17.4 |
% |
9.7 |
% |
4.8 |
% |
5.2 |
% |
10.5 |
% |
14.8 |
% | ||||||||||||||||
|
Nine months ended September 30, 2014 |
||||||||||||||||||||||||||||
|
Net sales |
$ |
1,271,017 |
$ |
328,487 |
$ |
185,687 |
$ |
115,906 |
$ |
228,273 |
$ |
— |
$ |
2,129,370 |
||||||||||||||
|
Inter-segment sales |
96,668 |
15,887 |
11,644 |
73 |
6,389 |
(130,661) |
— |
|||||||||||||||||||||
|
Total |
$ |
1,367,685 |
$ |
344,374 |
$ |
197,331 |
$ |
115,979 |
$ |
234,662 |
$ |
(130,661) |
$ |
2,129,370 |
||||||||||||||
|
EBIT (1) |
$ |
247,077 |
$ |
38,489 |
$ |
(29,029) |
$ |
(5,545) |
$ |
22,183 |
$ |
3,167 |
$ |
276,342 |
||||||||||||||
|
As a percent of total sales |
18.1 |
% |
11.2 |
% |
(14.7%) |
(4.8%) |
9.5 |
% |
13.0 |
% | ||||||||||||||||||
|
Special items charge (gain) (3) |
$ |
(68) |
$ |
923 |
$ |
28,450 |
$ |
21,715 |
$ |
— |
$ |
— |
$ |
51,020 |
||||||||||||||
|
EBIT, as adjusted (4) |
$ |
247,009 |
$ |
39,412 |
$ |
(579) |
$ |
16,170 |
$ |
22,183 |
$ |
3,167 |
$ |
327,362 |
||||||||||||||
|
As a percent of total sales |
18.1 |
% |
11.4 |
% |
(0.3%) |
13.9 |
% |
9.5 |
% |
15.4 |
% | |||||||||||||||||
|
(1) |
EBIT is defined as Operating income plus Equity earnings in affiliates and Other income. |
|
(2) |
Special items in the three and nine months ended September 30, 2015 represent rationalization charges related to employee severance and other related costs, charges related to pension settlements, charges related to the impairment of long-lived assets and goodwill and charges relating to a Venezuelan remeasurement loss related to the adoption of a new foreign exchange mechanism. |
|
(3) |
Special items in the three and nine months ended September 30, 2014 include non-cash asset impairment charges partially offset by net rationalization gains including a gain on the sale of real estate. Special items in the nine months ended September 30, 2014 also include the impact of the Venezuelan remeasurement losses related to the adoption of a new foreign exchange mechanism in the first quarter. |
|
(4) |
The primary profit measure used by management to assess segment performance is EBIT, as adjusted. EBIT for each operating segment is adjusted for special items to derive EBIT, as adjusted. |
|
Lincoln Electric Holdings, Inc. Change in Net Sales by Segment (In thousands) (Unaudited) | ||||||||||||||||||||||||
|
Three Months Ended September 30th Change in Net Sales by Segment | ||||||||||||||||||||||||
|
Change in Net Sales due to: |
||||||||||||||||||||||||
|
Net Sales 2014 |
Volume |
Acquisitions |
Price |
Foreign Exchange |
Net Sales 2015 | |||||||||||||||||||
|
Operating Segments |
||||||||||||||||||||||||
|
North America Welding |
$ |
439,621 |
$ |
(44,838) |
$ |
19,637 |
$ |
4,157 |
$ |
(10,161) |
$ |
408,416 |
||||||||||||
|
Europe Welding |
107,507 |
(10,268) |
— |
(874) |
(15,769) |
80,596 |
||||||||||||||||||
|
Asia Pacific Welding |
57,404 |
(9,575) |
1,801 |
(570) |
(3,555) |
45,505 |
||||||||||||||||||
|
South America Welding |
32,862 |
(2,057) |
— |
26,140 |
(9,218) |
47,727 |
||||||||||||||||||
|
The Harris Products Group |
78,383 |
(6,563) |
— |
(5,418) |
(3,480) |
62,922 |
||||||||||||||||||
|
Consolidated |
$ |
715,777 |
$ |
(73,301) |
$ |
21,438 |
$ |
23,435 |
$ |
(42,183) |
$ |
645,166 |
||||||||||||
|
% Change |
||||||||||||||||||||||||
|
North America Welding |
(10.2%) |
4.5 |
% |
0.9 |
% |
(2.3%) |
(7.1%) |
|||||||||||||||||
|
Europe Welding |
(9.6%) |
— |
(0.8%) |
(14.7%) |
(25.0%) |
|||||||||||||||||||
|
Asia Pacific Welding |
(16.7%) |
3.1 |
% |
(1.0%) |
(6.2%) |
(20.7%) |
||||||||||||||||||
|
South America Welding |
(6.3%) |
— |
79.5 |
% |
(28.1%) |
45.2 |
% | |||||||||||||||||
|
The Harris Products Group |
(8.4%) |
— |
(6.9%) |
(4.4%) |
(19.7%) |
|||||||||||||||||||
|
Consolidated |
(10.2%) |
3.0 |
% |
3.3 |
% |
(5.9%) |
(9.9%) |
|||||||||||||||||
|
Nine Months Ended September 30th Change in Net Sales by Segment | ||||||||||||||||||||||||
|
Change in Net Sales due to: |
||||||||||||||||||||||||
|
Net Sales 2014 |
Volume |
Acquisitions |
Price |
Foreign Exchange |
Net Sales 2015 | |||||||||||||||||||
|
Operating Segments |
||||||||||||||||||||||||
|
North America Welding |
$ |
1,271,017 |
$ |
(65,764) |
$ |
46,358 |
$ |
9,637 |
$ |
(24,769) |
$ |
1,236,479 |
||||||||||||
|
Europe Welding |
328,487 |
(10,409) |
— |
(1,757) |
(56,406) |
259,915 |
||||||||||||||||||
|
Asia Pacific Welding |
185,687 |
(33,970) |
1,801 |
(1,856) |
(7,864) |
143,798 |
||||||||||||||||||
|
South America Welding |
115,906 |
(15,351) |
— |
63,310 |
(40,801) |
123,064 |
||||||||||||||||||
|
The Harris Products Group |
228,273 |
(346) |
— |
(13,988) |
(9,389) |
204,550 |
||||||||||||||||||
|
Consolidated |
$ |
2,129,370 |
$ |
(125,840) |
$ |
48,159 |
$ |
55,346 |
$ |
(139,229) |
$ |
1,967,806 |
||||||||||||
|
% Change |
||||||||||||||||||||||||
|
North America Welding |
(5.2%) |
3.6 |
% |
0.8 |
% |
(1.9%) |
(2.7%) |
|||||||||||||||||
|
Europe Welding |
(3.2%) |
— |
(0.5%) |
(17.2%) |
(20.9%) |
|||||||||||||||||||
|
Asia Pacific Welding |
(18.3%) |
1.0 |
% |
(1.0%) |
(4.2%) |
(22.6%) |
||||||||||||||||||
|
South America Welding |
(13.2%) |
— |
54.6 |
% |
(35.2%) |
6.2 |
% | |||||||||||||||||
|
The Harris Products Group |
(0.2%) |
— |
(6.1%) |
(4.1%) |
(10.4%) |
|||||||||||||||||||
|
Consolidated |
(5.9%) |
2.3 |
% |
2.6 |
% |
(6.5%) |
(7.6%) |
|||||||||||||||||
SOURCE Lincoln Electric Holdings, Inc.
Share this article