Lincoln Electric Reports Second Quarter 2023 Results

CLEVELAND, July 27, 2023 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported second quarter 2023 net income of $137.3 million, or diluted earnings per share (EPS) of $2.36, which includes special item after-tax net charges of $4.9 million, or $0.08 EPS. This compares with prior year period net income of $127.8 million, or $2.18 EPS, which included special item after-tax net charges of $0.4 million. Excluding special items, second quarter 2023 adjusted net income was $142.2 million, or $2.44 adjusted EPS. This compares with adjusted net income of $128.2 million, or $2.18 adjusted EPS, in the prior year period.

Second quarter 2023 sales increased 9.4% to $1,060.6 million reflecting a 4.5% increase in organic sales and a 5.2% benefit from acquisitions, partially offset by 0.2% unfavorable foreign exchange. Operating income for the second quarter 2023 was $178.0 million, or 16.8% of sales. This compares with operating income of $167.5 million, or 17.3% of sales, in the prior year period. Excluding special items, adjusted operating income was $184.2 million, or 17.4% of sales, as compared with $168.1 million, or 17.3% of sales, in the prior year period.

“Our record second quarter performance, including adjusted operating income margin and earnings, demonstrates continued strong momentum in the business and excellent execution of our Higher Standard 2025 Strategy,” commented Christopher L. Mapes, Chairman, President and Chief Executive Officer. “Our strong profit performance across all segments reflects how we are winning in the market with an industry-leading portfolio of differentiated solutions and application experts, disciplined cost management and improved operational efficiency from our Lincoln Business System initiatives.” Mapes continued, “As announced earlier today, I am confident that our year-end leadership transition with Steve Hedlund serving as President and CEO, will continue the Company’s momentum and success in the years ahead.”

Six Months 2023 Summary

Net income for the six months ended June 30, 2023 was $259.3 million, or $4.44 EPS, which includes special item after-tax net charges of $7.2 million, or $0.13 EPS. This compares with prior period net income of $253.9 million, or $4.30 EPS, which included special item after-tax net gains of $1.0 million, or $0.01 EPS. Excluding these items, adjusted net income for the six months ended June 30, 2023 increased 5.4% to $266.5 million, or $4.57 EPS, compared with $252.9 million, or $4.29 EPS, in the comparable 2022 period.

Sales increased 10.8% to $2,099.9 million in the six months ended June 30, 2023 reflecting a 6.5% increase in organic sales and a 5.4% benefit from acquisitions, partially offset by 1.0% unfavorable foreign exchange. Operating income for the six months ended June 30, 2023 was $342.4 million, or 16.3% of sales. This compares with operating income of $328.7 million, or 17.3% of sales, in the comparable 2022 period. Excluding special items, adjusted operating income was $353.3 million, or 16.8% of sales, as compared with $331.2 million, or 17.5% of sales, in the comparable 2022 period.

Webcast Information

A conference call to discuss second quarter 2023 financial results will be webcast live today, July 27, 2023, 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 register here to receive the dial-in number along with a unique PIN number that is required to access the call. 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 has 71 manufacturing locations in 20 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, 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, 2022.

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.

(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) 2023 charges are primarily related to restructuring activities and impairments within International Welding. 2022 charges are primarily related to severance, gains or losses on the disposal of assets.
(3) Related to acquisitions and are included in Cost of goods sold.
(4) Pension net gains primarily due to the final settlement associated with the termination of a pension plan and are included in Other income (expense).
(5) Gain on asset disposal and included in Other income (expense).
(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.

(1) Adjusted net operating profit after taxes and adjusted ROIC are non-GAAP financial measures. Refer to Non-GAAP Information section.
(2) Related to acquisitions and are included in Selling, general & administrative expenses.
(3) Related to lump sum pension payments due to the final settlement associated with the termination of a pension plan.
(4) 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.

(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 2023 primarily reflect amortization of step up in value of acquired inventories of $2,957 and $588 in Americas and International Welding, respectively, Rationalization and asset impairment net charges of $2,667 in International Welding.
(4) Special items in 2022 primarily reflect the amortization of step up in value of acquired inventories of $1,459 in Americas Welding related to an acquisition and Rationalization and asset impairment net gains of $998 in Americas Welding and net charges of $154 in International Welding.

(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 2023 primarily reflect amortization of step up in value of acquired inventories of $5,742 and $1,659 in Americas and International Welding, respectively, Rationalization and asset impairment net charges of $3,544 in International Welding, and a gain on asset disposal of $1,646 in International Welding.
(4) Special items in 2022 primarily reflect Rationalization and asset impairment charges of $2,039 in International Welding and net gains of $998 in Americas Welding, amortization of step up in value of acquired inventories of $1,459 in Americas Welding and a $3,735 net gain related to final settlement associated with the termination of a pension plan in Americas Welding.