Third Quarter 2021 Highlights |
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CLEVELAND, Oct. 28, 2021 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported third quarter 2021 net income of $31.8 million, or diluted earnings per share (EPS) of $0.53, which includes special item after-tax charges of $62.0 million, or $1.03 EPS. Special item charges primarily relate to the termination of a pension plan. This compares with prior year period net income of $58.5 million, or $0.97 EPS, which included special item after-tax charges of $7.5 million, or $0.13 EPS. Excluding these items, third quarter 2021 adjusted net income was $93.8 million, or $1.56 Adjusted EPS. This compares with Adjusted net income of $66.0 million, or $1.10 Adjusted EPS in the prior year period.
Third quarter 2021 sales increased 20.6% to $806.5 million from an 18.3% increase in organic sales, 2.0% benefit from acquisitions and 0.3% favorable foreign exchange. Operating income for the third quarter 2021 was $115.6 million, or 14.3% of sales, including special item charges of $7.2 million. This compares with operating income of $77.8 million, or 11.6% of sales, in the prior year period. Excluding special items, adjusted operating income was $122.7 million, or 15.2% of sales, as compared with $84.1 million, or 12.6% of sales, in the prior year period.
“I am pleased to report that strong execution of our 2025 Higher Standard Strategy initiatives delivered record third quarter adjusted earnings performance,” said Christopher L. Mapes, Chairman, President and Chief Executive Officer. “We are serving strong demand and are effectively managing inflationary headwinds and supply chain constraints, which generated solid cash flows, cash conversion and superior returns.”
Pension Plan Termination
During the third quarter 2021, the Company recognized $73.6 million of non-cash pension settlement charges associated with lump sum distributions related to the termination of a pension plan. In October 2021, the Company entered into an agreement to purchase a group annuity contract with an insurance company to settle the remaining pension obligations of this plan. The Company estimates fourth quarter 2021 pre-tax settlement charges of approximately $35 - $45 million related to the annuity purchase. The Company anticipates using any surplus assets to fund future contributions into another retirement plan.
Nine Months 2021 Summary
Net income for the nine months ended September 30, 2021 was $202.0 million, or $3.36 EPS. This compares with $141.0 million, or $2.34 EPS, in the comparable 2020 period. Reported EPS includes special item after-tax charges of $75.1 million or $1.25 EPS, as compared with special item after-tax net charges of $33.9 million, or $0.57 EPS in the prior year period. Excluding these items, adjusted net income for the nine months ended September 30, 2021 increased 58.4% to $277.1 million, or $4.61 EPS, compared with $174.9 million, or $2.91 EPS, in the comparable 2020 period.
Sales increased 21.8% to $2.4 billion in the nine months ended September 30, 2021 from a 19.4% increase in organic sales, 1.6% favorable foreign exchange and a 0.9% benefit from acquisitions. Operating income for the nine months ended September 30, 2021 was $341.3 million, or 14.3% of sales. This compares with operating income of $198.6 million, or 10.1% of sales, in the comparable 2020 period. Excluding special items, adjusted operating income was $357.1 million, or 14.9% of sales, as compared with $235.5 million, or 12.0% of sales, in the comparable 2020 period.
Dividend
The Company's Board of Directors declared a 9.8% increase in the quarterly cash dividend, from $0.51 per share to $0.56 per share, or $2.24 per share on an annual basis. The declared quarterly cash dividend of $0.56 per share is payable January 14, 2022 to shareholders of record as of December 31, 2021.
Webcast Information
A conference call to discuss third quarter 2021 financial results will be webcast live today, October 28, 2021, 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 8735626. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.
Financial results for the third quarter 2021 can also be obtained at https://ir.lincolnelectric.com.
About Lincoln Electric
Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, automated joining, assembly and cutting systems, plasma and oxy-fuel cutting equipment and has a leading global position in brazing and soldering alloys. Headquartered in Cleveland, Ohio, Lincoln has 55 manufacturing locations in 18 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 https://www.lincolnelectric.com.
Non-GAAP Information
Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate, Adjusted diluted earnings per share, Organic sales, Cash conversion, Return on invested capital and Earnings before interest, taxes, depreciation and amortization ("EBITDA") 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 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, 2020.
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Income
| Fav (Unfav) to | |||||||||||||||||||||
| Three Months Ended September 30, | Prior Year | ||||||||||||||||||||
| 2021 | % of Sales | 2020 | % of Sales | $ | % | ||||||||||||||||
| Net sales | $ | 806,454 | 100.0 | % | $ | 668,888 | 100.0 | % | $ | 137,566 | 20.6 | % | |||||||||
| Cost of goods sold | 538,282 | 66.7 | % | 453,501 | 67.8 | % | (84,781 | ) | (18.7 | ) | % | ||||||||||
| Gross profit | 268,172 | 33.3 | % | 215,387 | 32.2 | % | 52,785 | 24.5 | % | ||||||||||||
| Selling, general & administrative expenses | 149,118 | 18.5 | % | 131,337 | 19.6 | % | (17,781 | ) | (13.5 | ) | % | ||||||||||
| Rationalization and asset impairment charges | 3,484 | 0.4 | % | 6,257 | 0.9 | % | 2,773 | 44.3 | % | ||||||||||||
| Operating income | 115,570 | 14.3 | % | 77,793 | 11.6 | % | 37,777 | 48.6 | % | ||||||||||||
| Interest expense, net | 5,714 | 0.7 | % | 5,552 | 0.8 | % | (162 | ) | (2.9 | ) | % | ||||||||||
| Other income (expense) | (71,441 | ) | (8.9 | ) | % | 1,062 | 0.2 | % | (72,503 | ) | (6,827.0 | ) | % | ||||||||
| Income before income taxes | 38,415 | 4.8 | % | 73,303 | 11.0 | % | (34,888 | ) | (47.6 | ) | % | ||||||||||
| Income taxes | 6,658 | 0.8 | % | 14,797 | 2.2 | % | 8,139 | 55.0 | % | ||||||||||||
| Effective tax rate | 17.3 | % | 20.2 | % | 2.9 | % | |||||||||||||||
| Net income including non-controlling interests | 31,757 | 3.9 | % | 58,506 | 8.7 | % | (26,749 | ) | (45.7 | ) | % | ||||||||||
| Non-controlling interests in subsidiaries’ income (loss) | — | — | 27 | — | (27 | ) | (100.0 | ) | % | ||||||||||||
| Net income | $ | 31,757 | 3.9 | % | $ | 58,479 | 8.7 | % | $ | (26,722 | ) | (45.7 | ) | % | |||||||
| Basic earnings per share | $ | 0.54 | $ | 0.98 | $ | (0.44 | ) | (44.9 | ) | % | |||||||||||
| Diluted earnings per share | $ | 0.53 | $ | 0.97 | $ | (0.44 | ) | (45.4 | ) | % | |||||||||||
| Weighted average shares (basic) | 59,289 | 59,426 | |||||||||||||||||||
| Weighted average shares (diluted) | 60,055 | 60,018 | |||||||||||||||||||
| Fav (Unfav) to | |||||||||||||||||||||
| Nine Months Ended September 30, | Prior Year | ||||||||||||||||||||
| 2021 | % of Sales | 2020 | % of Sales | $ | % | ||||||||||||||||
| Net sales | $ | 2,389,929 | 100.0 | % | $ | 1,961,606 | 100.0 | % | $ | 428,323 | 21.8 | % | |||||||||
| Cost of goods sold | 1,593,981 | 66.7 | % | 1,319,519 | 67.3 | % | (274,462 | ) | (20.8 | ) | % | ||||||||||
| Gross profit | 795,948 | 33.3 | % | 642,087 | 32.7 | % | 153,861 | 24.0 | % | ||||||||||||
| Selling, general & administrative expenses | 446,351 | 18.7 | % | 407,440 | 20.8 | % | (38,911 | ) | (9.6 | ) | % | ||||||||||
| Rationalization and asset impairment charges | 8,277 | 0.3 | % | 36,016 | 1.8 | % | 27,739 | 77.0 | % | ||||||||||||
| Operating income | 341,320 | 14.3 | % | 198,631 | 10.1 | % | 142,689 | 71.8 | % | ||||||||||||
| Interest expense, net | 16,736 | 0.7 | % | 16,891 | 0.9 | % | 155 | 0.9 | % | ||||||||||||
| Other income (expense) | (71,155 | ) | (3.0 | ) | % | 1,168 | 0.1 | % | (72,323 | ) | (6,192.0 | ) | % | ||||||||
| Income before income taxes | 253,429 | 10.6 | % | 182,908 | 9.3 | % | 70,521 | 38.6 | % | ||||||||||||
| Income taxes | 51,259 | 2.1 | % | 41,834 | 2.1 | % | (9,425 | ) | (22.5 | ) | % | ||||||||||
| Effective tax rate | 20.2 | % | 22.9 | % | 2.7 | % | |||||||||||||||
| Net income including non-controlling interests | 202,170 | 8.5 | % | 141,074 | 7.2 | % | 61,096 | 43.3 | % | ||||||||||||
| Non-controlling interests in subsidiaries’ income (loss) | 131 | — | 37 | — | 94 | 254.1 | % | ||||||||||||||
| Net income | $ | 202,039 | 8.5 | % | $ | 141,037 | 7.2 | % | $ | 61,002 | 43.3 | % | |||||||||
| Basic earnings per share | $ | 3.40 | $ | 2.36 | $ | 1.04 | 44.1 | % | |||||||||||||
| Diluted earnings per share | $ | 3.36 | $ | 2.34 | $ | 1.02 | 43.6 | % | |||||||||||||
| Weighted average shares (basic) | 59,465 | 59,655 | |||||||||||||||||||
| Weighted average shares (diluted) | 60,168 | 60,202 | |||||||||||||||||||
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
Balance Sheet Highlights
| Selected Consolidated Balance Sheet Data | September 30, 2021 | December 31, 2020 | |||||
| Cash and cash equivalents | $ | 160,559 | $ | 257,279 | |||
| Accounts receivable, net | 443,054 | 373,487 | |||||
| Inventories | 524,433 | 381,258 | |||||
| Total current assets | 1,235,958 | 1,112,343 | |||||
| Property, plant and equipment, net | 520,081 | 522,092 | |||||
| Total assets | 2,568,797 | 2,314,453 | |||||
| Trade accounts payable | 309,202 | 256,530 | |||||
| Total current liabilities | 745,420 | 549,449 | |||||
| Short-term debt (1) | 41,404 | 2,734 | |||||
| Long-term debt, less current portion | 717,787 | 715,456 | |||||
| Total equity | 857,893 | 790,250 | |||||
| Operating Working Capital | September 30, 2021 | December 31, 2020 | |||||
| Average operating working capital to Net sales (2) | 18.6 | % | 17.4 | % | |||
| Invested Capital | September 30, 2021 | December 31, 2020 | |||||
| Short-term debt (1) | $ | 41,404 | $ | 2,734 | |||
| Long-term debt, less current portion | 717,787 | 715,456 | |||||
| Total debt | 759,191 | 718,190 | |||||
| Total equity | 857,893 | 790,250 | |||||
| Invested capital | $ | 1,617,084 | $ | 1,508,440 | |||
| Total debt / invested capital | 46.9 | % | 47.6 | % | |||
- Includes current portion of long-term debt.
- 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 September 30, | Nine Months Ended September 30, | |||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| Operating income as reported | $ | 115,570 | $ | 77,793 | $ | 341,320 | $ | 198,631 | ||||||||||
| Special items (pre-tax): | ||||||||||||||||||
| Rationalization and asset impairment charges (2) | 3,484 | 6,257 | 8,277 | 36,016 | ||||||||||||||
| Acquisition transaction costs (3) | — | — | 1,923 | — | ||||||||||||||
| Amortization of step up in value of acquired inventories (4) | 3,690 | — | 5,531 | 806 | ||||||||||||||
| Adjusted operating income (1) | $ | 122,744 | $ | 84,050 | $ | 357,051 | $ | 235,453 | ||||||||||
| As a percent of total sales | 15.2 | % | 12.6 | % | 14.9 | % | 12.0 | % | ||||||||||
| Net income as reported | $ | 31,757 | $ | 58,479 | $ | 202,039 | $ | 141,037 | ||||||||||
| Special items: | ||||||||||||||||||
| Rationalization and asset impairment charges (2) | 3,484 | 6,257 | 8,277 | 36,016 | ||||||||||||||
| Acquisition transaction costs (3) | — | — | 1,923 | — | ||||||||||||||
| Pension settlement charges (5) | 73,562 | 3,188 | 80,098 | 6,522 | ||||||||||||||
| Amortization of step up in value of acquired inventories (4) | 3,690 | — | 5,531 | 806 | ||||||||||||||
| Tax effect of Special items (6) | (18,743 | ) | (1,911 | ) | (20,737 | ) | (9,463 | ) | ||||||||||
| Adjusted net income (1) | 93,750 | 66,013 | 277,131 | 174,918 | ||||||||||||||
| Non-controlling interests in subsidiaries’ income (loss) | — | 27 | 131 | 37 | ||||||||||||||
| Interest expense, net | 5,714 | 5,552 | 16,736 | 16,891 | ||||||||||||||
| Income taxes as reported | 6,658 | 14,797 | 51,259 | 41,834 | ||||||||||||||
| Tax effect of Special items (6) | 18,743 | 1,911 | 20,737 | 9,463 | ||||||||||||||
| Adjusted EBIT (1) | $ | 124,865 | $ | 88,300 | $ | 365,994 | $ | 243,143 | ||||||||||
| Effective tax rate as reported | 17.3 | % | 20.2 | % | 20.2 | % | 22.9 | % | ||||||||||
| Net special item tax impact | 4.0 | % | — | % | 0.4 | % | (0.2 | ) | % | |||||||||
| Adjusted effective tax rate (1) | 21.3 | % | 20.2 | % | 20.6 | % | 22.7 | % | ||||||||||
| Diluted earnings per share as reported | $ | 0.53 | $ | 0.97 | $ | 3.36 | $ | 2.34 | ||||||||||
| Special items per share | 1.03 | 0.13 | 1.25 | 0.57 | ||||||||||||||
| Adjusted diluted earnings per share (1) | $ | 1.56 | $ | 1.10 | $ | 4.61 | $ | 2.91 | ||||||||||
| Weighted average shares (diluted) | 60,055 | 60,018 | 60,168 | 60,202 | ||||||||||||||
- 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.
- Primarily related to severance, gains or losses on the disposal of assets and asset impairments of long-lived assets.
- Related to acquisitions and are included in Selling, general & administrative expenses.
- Related to acquisitions and are included in Cost of goods sold.
- Settlement charges related to lump sum pension payments associated with the termination of a pension plan and are included in Other income (expense).
- 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 September 30, | |||||||||
| Return on Invested Capital | 2021 | 2020 | |||||||
| Net income as reported | $ | 267,117 | $ | 204,753 | |||||
| Rationalization and asset impairment charges | 17,729 | 44,867 | |||||||
| Acquisition transaction costs | 1,923 | — | |||||||
| Pension settlement charges | 81,695 | 6,522 | |||||||
| Amortization of step up in value of acquired inventories | 5,531 | 806 | |||||||
| Tax effect of Special items (2) | (21,868 | ) | (11,030 | ) | |||||
| Adjusted net income (1) | $ | 352,127 | $ | 245,918 | |||||
| Plus: Interest expense, net of tax of $5,893 and $6,177 in 2021 and 2020, respectively | 17,520 | 18,564 | |||||||
| Less: Interest income, net of tax of $402 and $513 in 2021 and 2020, respectively | 1,193 | 1,543 | |||||||
| Adjusted net income before tax-effected interest | $ | 368,454 | $ | 262,939 | |||||
| Invested Capital | September 30, 2021 | September 30, 2020 | |||||||
| Short-term debt | $ | 41,404 | $ | 1,147 | |||||
| Long-term debt, less current portion | 717,787 | 715,687 | |||||||
| Total debt | 759,191 | 716,834 | |||||||
| Total equity | 857,893 | 710,744 | |||||||
| Invested capital | $ | 1,617,084 | $ | 1,427,578 | |||||
| Return on invested capital (1) | 22.8 | % | 18.4 | % | |||||
| Twelve Months Ended September 30, | |||||||||
| Total Debt / EBITDA | 2021 | 2020 | |||||||
| Net income as reported | $ | 267,117 | $ | 204,753 | |||||
| Income taxes | 67,321 | 58,412 | |||||||
| Interest expense, net | 21,818 | 22,685 | |||||||
| Depreciation and amortization | 80,484 | 81,653 | |||||||
| EBITDA (1) | $ | 436,740 | $ | 367,503 | |||||
| September 30, 2021 | September 30, 2020 | ||||||||
| Total debt | $ | 759,191 | $ | 716,834 | |||||
| Total debt / EBITDA | 1.74 | 1.95 | |||||||
- Adjusted net income, Return on invested capital and EBITDA are non-GAAP financial measures. Refer to Non-GAAP Information section.
- 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 September 30, | |||||||||
| 2021 | 2020 | ||||||||
| OPERATING ACTIVITIES: | |||||||||
| Net income | $ | 31,757 | $ | 58,479 | |||||
| Non-controlling interests in subsidiaries’ income (loss) | — | 27 | |||||||
| Net income including non-controlling interests | 31,757 | 58,506 | |||||||
| Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | |||||||||
| Rationalization and asset impairment net charges | 212 | 22 | |||||||
| Depreciation and amortization | 22,050 | 19,488 | |||||||
| Equity earnings in affiliates, net | (108 | ) | (80 | ) | |||||
| Pension settlement charges | 73,562 | 3,188 | |||||||
| Other non-cash items, net | 389 | (670 | ) | ||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | |||||||||
| Decrease (increase) in accounts receivable | 16,359 | (30,517 | ) | ||||||
| (Increase) decrease in inventories | (45,670 | ) | 26,948 | ||||||
| Decrease in trade accounts payable | (8,294 | ) | (2,218 | ) | |||||
| Net change in other current assets and liabilities | 31,838 | 14,232 | |||||||
| Net change in other long-term assets and liabilities | (12,204 | ) | 649 | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 109,891 | 89,548 | |||||||
| INVESTING ACTIVITIES: | |||||||||
| Capital expenditures | (18,672 | ) | (12,105 | ) | |||||
| Acquisition of businesses, net of cash acquired | (74,882 | ) | — | ||||||
| Proceeds from sale of property, plant and equipment | 1,290 | 739 | |||||||
| NET CASH USED BY INVESTING ACTIVITIES | (92,264 | ) | (11,366 | ) | |||||
| FINANCING ACTIVITIES: | |||||||||
| Net change in borrowings | 31,132 | (48,230 | ) | ||||||
| Proceeds from exercise of stock options | 2,249 | 5,959 | |||||||
| Purchase of shares for treasury | (50,160 | ) | (223 | ) | |||||
| Cash dividends paid to shareholders | (30,338 | ) | (29,131 | ) | |||||
| NET CASH USED BY FINANCING ACTIVITIES | (47,117 | ) | (71,625 | ) | |||||
| Effect of exchange rate changes on Cash and cash equivalents | (835 | ) | 2,867 | ||||||
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (30,325 | ) | 9,424 | ||||||
| Cash and cash equivalents at beginning of period | 190,884 | 143,055 | |||||||
| Cash and cash equivalents at end of period | $ | 160,559 | $ | 152,479 | |||||
| Cash dividends paid per share | $ | 0.51 | $ | 0.49 | |||||
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share amounts)
(Unaudited)
| Nine Months Ended September 30, | |||||||||
| 2021 | 2020 | ||||||||
| OPERATING ACTIVITIES: | |||||||||
| Net income | $ | 202,039 | $ | 141,037 | |||||
| Non-controlling interests in subsidiaries’ income (loss) | 131 | 37 | |||||||
| Net income including non-controlling interests | 202,170 | 141,074 | |||||||
| Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | |||||||||
| Rationalization and asset impairment net (gains) charges | (1,162 | ) | 21,927 | ||||||
| Depreciation and amortization | 60,558 | 60,566 | |||||||
| Equity earnings in affiliates, net | (399 | ) | (323 | ) | |||||
| Pension settlement charges | 80,098 | 6,522 | |||||||
| Other non-cash items, net | (10,967 | ) | (9,292 | ) | |||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | |||||||||
| Increase in accounts receivable | (71,212 | ) | (6,851 | ) | |||||
| Increase in inventories | (128,856 | ) | (3,430 | ) | |||||
| Increase (decrease) in trade accounts payable | 54,981 | (42,333 | ) | ||||||
| Net change in other current assets and liabilities | 78,959 | 46,642 | |||||||
| Net change in other long-term assets and liabilities | (9,045 | ) | 1,059 | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 255,125 | 215,561 | |||||||
| INVESTING ACTIVITIES: | |||||||||
| Capital expenditures | (46,440 | ) | (37,116 | ) | |||||
| Acquisition of businesses, net of cash acquired | (158,605 | ) | — | ||||||
| Proceeds from sale of property, plant and equipment | 3,847 | 6,957 | |||||||
| Other investing activities | 6,500 | — | |||||||
| NET CASH USED BY INVESTING ACTIVITIES | (194,698 | ) | (30,159 | ) | |||||
| FINANCING ACTIVITIES: | |||||||||
| Net change in borrowings | 32,295 | (33,135 | ) | ||||||
| Proceeds from exercise of stock options | 7,921 | 7,961 | |||||||
| Purchase of shares for treasury | (103,848 | ) | (113,198 | ) | |||||
| Cash dividends paid to shareholders | (91,717 | ) | (88,945 | ) | |||||
| Other financing activities | (763 | ) | — | ||||||
| NET CASH USED BY FINANCING ACTIVITIES | (156,112 | ) | (227,317 | ) | |||||
| Effect of exchange rate changes on Cash and cash equivalents | (1,035 | ) | (5,169 | ) | |||||
| DECREASE IN CASH AND CASH EQUIVALENTS | (96,720 | ) | (47,084 | ) | |||||
| Cash and cash equivalents at beginning of period | 257,279 | 199,563 | |||||||
| Cash and cash equivalents at end of period | $ | 160,559 | $ | 152,479 | |||||
| Cash dividends paid per share | $ | 1.53 | $ | 1.47 | |||||
Lincoln Electric Holdings, Inc.
Segment Highlights (1)
(In thousands)
(Unaudited)
| Americas | International | The Harris | Corporate / | |||||||||||||||
| Welding | Welding | Products Group | Eliminations | Consolidated | ||||||||||||||
| Three months ended September 30, 2021 | ||||||||||||||||||
| Net sales | $ | 461,508 | $ | 227,165 | $ | 117,781 | $ | — | $ | 806,454 | ||||||||
| Inter-segment sales | 37,480 | 7,078 | 1,945 | (46,503 | ) | — | ||||||||||||
| Total sales | $ | 498,988 | $ | 234,243 | $ | 119,726 | $ | (46,503 | ) | $ | 806,454 | |||||||
| Net income | $ | 31,757 | ||||||||||||||||
| As a percent of total sales | 3.9 | % | ||||||||||||||||
| EBIT (1) | $ | 10,983 | $ | 22,417 | $ | 15,433 | $ | (4,704 | ) | $ | 44,129 | |||||||
| As a percent of total sales | 2.2 | % | 9.6 | % | 12.9 | % | 5.5 | % | ||||||||||
| Special items charges (gains) (3) | 73,574 | 6,615 | 547 | — | 80,736 | |||||||||||||
| Adjusted EBIT (2) | $ | 84,557 | $ | 29,032 | $ | 15,980 | $ | (4,704 | ) | $ | 124,865 | |||||||
| As a percent of total sales | 16.9 | % | 12.4 | % | 13.3 | % | 15.5 | % | ||||||||||
| Three months ended September 30, 2020 | ||||||||||||||||||
| Net sales | $ | 371,535 | $ | 196,937 | $ | 100,416 | $ | — | $ | 668,888 | ||||||||
| Inter-segment sales | 29,368 | 4,898 | 1,898 | (36,164 | ) | — | ||||||||||||
| Total sales | $ | 400,903 | $ | 201,835 | $ | 102,314 | $ | (36,164 | ) | $ | 668,888 | |||||||
| Net income | $ | 58,479 | ||||||||||||||||
| As a percent of total sales | 8.7 | % | ||||||||||||||||
| EBIT (1) | $ | 52,076 | $ | 11,031 | $ | 17,587 | $ | (1,839 | ) | $ | 78,855 | |||||||
| As a percent of total sales | 13.0 | % | 5.5 | % | 17.2 | % | 11.8 | % | ||||||||||
| Special items charges (gains) (4) | 7,044 | 2,401 | — | — | 9,445 | |||||||||||||
| Adjusted EBIT (2) | $ | 59,120 | $ | 13,432 | $ | 17,587 | $ | (1,839 | ) | $ | 88,300 | |||||||
| As a percent of total sales | 14.7 | % | 6.7 | % | 17.2 | % | 13.2 | % | ||||||||||
- EBIT is defined as Operating income plus Other income (expense).
- 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.
- Special items in 2021 reflect Rationalization and asset impairment charges of $3,484 primarily in International Welding, pension settlement charges of $73,562 in Americas Welding and amortization of the step up in value of acquired inventories of $3,143 and $547 in International Welding and The Harris Products Group, respectively, related to acquisitions.
- Special items in 2020 reflect Rationalization and asset impairment charges of $3,856 and $2,401 in Americas Welding and International Welding, respectively, and pension settlement charges of $3,188 in Americas Welding.
Lincoln Electric Holdings, Inc.
Segment Highlights
(In thousands)
(Unaudited)
| Americas | International | The Harris | Corporate / | |||||||||||||||
| Welding | Welding | Products Group | Eliminations | Consolidated | ||||||||||||||
| Nine months ended September 30, 2021 | ||||||||||||||||||
| Net sales | $ | 1,344,218 | $ | 702,596 | $ | 343,115 | $ | — | $ | 2,389,929 | ||||||||
| Inter-segment sales | 109,993 | 18,260 | 6,376 | (134,629 | ) | — | ||||||||||||
| Total sales | $ | 1,454,211 | $ | 720,856 | $ | 349,491 | $ | (134,629 | ) | $ | 2,389,929 | |||||||
| Net income | $ | 202,039 | ||||||||||||||||
| As a percent of total sales | 8.5 | % | ||||||||||||||||
| EBIT (1) | $ | 165,644 | $ | 64,150 | $ | 52,342 | $ | (11,971 | ) | $ | 270,165 | |||||||
| As a percent of total sales | 11.4 | % | 8.9 | % | 15.0 | % | 11.3 | % | ||||||||||
| Special items charges (gains) (3) | 79,664 | 13,695 | 547 | 1,923 | 95,829 | |||||||||||||
| Adjusted EBIT (2) | $ | 245,308 | $ | 77,845 | $ | 52,889 | $ | (10,048 | ) | $ | 365,994 | |||||||
| As a percent of total sales | 16.9 | % | 10.8 | % | 15.1 | % | 15.3 | % | ||||||||||
| Nine months ended September 30, 2020 | ||||||||||||||||||
| Net sales | $ | 1,123,299 | $ | 572,027 | $ | 266,280 | $ | — | $ | 1,961,606 | ||||||||
| Inter-segment sales | 81,644 | 13,667 | 5,376 | (100,687 | ) | — | ||||||||||||
| Total sales | $ | 1,204,943 | $ | 585,694 | $ | 271,656 | $ | (100,687 | ) | $ | 1,961,606 | |||||||
| Net income | $ | 141,037 | ||||||||||||||||
| As a percent of total sales | 7.2 | % | ||||||||||||||||
| EBIT (1) | $ | 142,283 | $ | 20,626 | $ | 41,792 | $ | (4,902 | ) | $ | 199,799 | |||||||
| As a percent of total sales | 11.8 | % | 3.5 | % | 15.4 | % | 10.2 | % | ||||||||||
| Special items charges (gains) (4) | 34,241 | 9,103 | — | — | 43,344 | |||||||||||||
| Adjusted EBIT (2) | $ | 176,524 | $ | 29,729 | $ | 41,792 | $ | (4,902 | ) | $ | 243,143 | |||||||
| As a percent of total sales | 14.6 | % | 5.1 | % | 15.4 | % | 12.4 | % | ||||||||||
- EBIT is defined as Operating income plus Other income (expense).
- 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.
- Special items in 2021 reflect pension settlement charges of $79,652 and $446 in Americas Welding and International Welding, respectively, Rationalization and asset impairment charges of $8,277 primarily in International Welding, amortization of the step up in value of acquired inventories of $4,984 and $547 in International Welding and The Harris Products Group, respectively, and acquisition transaction costs of $1,923 in Corporate/Eliminations related to acquisitions.
- Special items in 2020 reflect Rationalization and asset impairment charges of $27,719 and $8,297 in Americas Welding and International Welding, respectively, amortization of the step up in value of acquired inventories of $806 in International Welding related to an acquisition, and pension settlement charges of $6,522 in Americas Welding.
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 | Foreign | Net Sales | ||||||||||||||||||
| 2020 | Volume | Acquisitions | Price | Exchange | 2021 | |||||||||||||||
| Operating Segments | ||||||||||||||||||||
| Americas Welding | $ | 371,535 | $ | 42,341 | $ | — | $ | 43,957 | $ | 3,675 | $ | 461,508 | ||||||||
| International Welding | 196,937 | 7,452 | 3,371 | 21,205 | (1,800 | ) | 227,165 | |||||||||||||
| The Harris Products Group | 100,416 | (1,287 | ) | 9,880 | 8,609 | 163 | 117,781 | |||||||||||||
| Consolidated | $ | 668,888 | $ | 48,506 | $ | 13,251 | $ | 73,771 | $ | 2,038 | $ | 806,454 | ||||||||
| % Change | ||||||||||||||||||||
| Americas Welding | 11.4 | % | — | 11.8 | % | 1.0 | % | 24.2 | % | |||||||||||
| International Welding | 3.8 | % | 1.7 | % | 10.8 | % | (0.9 | ) | % | 15.3 | % | |||||||||
| The Harris Products Group | (1.3 | ) | % | 9.8 | % | 8.6 | % | 0.2 | % | 17.3 | % | |||||||||
| Consolidated | 7.3 | % | 2.0 | % | 11.0 | % | 0.3 | % | 20.6 | % | ||||||||||
Nine Months Ended September 30th Change in Net Sales by Segment
| Change in Net Sales due to: | |||||||||||||||||||
| Net Sales | Foreign | Net Sales | |||||||||||||||||
| 2020 | Volume | Acquisitions | Price | Exchange | 2021 | ||||||||||||||
| Operating Segments | |||||||||||||||||||
| Americas Welding | $ | 1,123,299 | $ | 128,836 | $ | — | $ | 80,352 | $ | 11,731 | $ | 1,344,218 | |||||||
| International Welding | 572,027 | 63,797 | 6,956 | 40,537 | 19,279 | 702,596 | |||||||||||||
| The Harris Products Group | 266,280 | 28,775 | 9,880 | 38,031 | 149 | 343,115 | |||||||||||||
| Consolidated | $ | 1,961,606 | $ | 221,408 | $ | 16,836 | $ | 158,920 | $ | 31,159 | $ | 2,389,929 | |||||||
| % Change | |||||||||||||||||||
| Americas Welding | 11.5 | % | — | 7.2 | % | 1.0 | % | 19.7 | % | ||||||||||
| International Welding | 11.2 | % | 1.2 | % | 7.1 | % | 3.4 | % | 22.8 | % | |||||||||
| The Harris Products Group | 10.8 | % | 3.7 | % | 14.3 | % | 0.1 | % | 28.9 | % | |||||||||
| Consolidated | 11.3 | % | 0.9 | % | 8.1 | % | 1.6 | % | 21.8 | % | |||||||||
