GlobeNewswire Inc | Apr 27, 2021 07:30AM EDT

April 27, 2021

First Quarter 2021 Highlights?Net sales increase 7.8% to $757.0 million on 6.4% higher organic sales?Operating income margin of 13.7%; Adjusted operating income margin of 14.4%?EPS increases 35.2% to $1.23; Adjusted EPS increases 37.0% to $1.37

CLEVELAND, April 27, 2021 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings,Inc. (the Company) (Nasdaq: LECO) today reported first quarter 2021 net income of $74.2 million, or diluted earnings per share (EPS) of $1.23, which includes special item after-tax charges of $8.6 million, or $0.14 EPS. This compares with prior year period net income of $55.6 million, or $0.91 EPS, which included special item after-tax charges of $5.4 million, or $0.09 EPS. Excluding these items, first quarter 2021 Adjusted net income was $82.8 million, or $1.37 Adjusted EPS. This compares with Adjusted net income of $60.9 million, or $1.00 Adjusted EPS in the prior year period.

First quarter 2021 sales increased 7.8% to $757.0 million from a 6.4% increase in organic sales and 1.4% favorable foreign exchange. Operating income for the first quarter 2021 was $103.9 million, or 13.7% of sales, including special item charges of $5.3 million. This compares with operating income of $81.1 million, or 11.5% of sales, in the prior year period. Excluding special items, Adjusted operating income was $109.2 million, or 14.4% of sales, as compared with $88.4 million, or 12.6% of sales, in the prior year period.

I am pleased to report record first quarter earnings, which reflect solid execution of our strategic initiatives, cost reduction actions and an accelerated recovery in our end markets, stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. Our team continued to do an outstanding job safely serving customers while also generating significant improvement in operating profit margin as well as strong ROIC performance in the quarter. Mapes continued, Lincoln Electric is well-positioned to continue to capitalize on growth through innovation, new products, acquisitions and our leading automation portfolio. We remain focused on driving growth, maintaining operational agility and diligent cost management as we navigate the recovery to deliver superior long-term value for our stakeholders.

Webcast Information

A conference call to discuss first quarter 2021 financial results will be webcast live today, April 27, 2021, at 10:00a.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 1341827. Telephone participants are asked to dial in 10 - 15 minutes prior to the start of the conference call.

Financial results for the first 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 Companys 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 Companys 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 managements 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 Companys 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 Companys rationalization plans; possible acquisitions, including the Companys 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") outbreak, on the Company or its customers, suppliers and the economy in general. For additional discussion, see Item 1A. Risk Factors in the Companys Annual Report on Form10-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 March31, PriorYear 2021 %ofSales 2020 %ofSales $ % Net sales $ 757,021 100.0 % $ 701,991 100.0 % $ 55,030 7.8 %Cost of goods 503,254 66.5 % 464,669 66.2 % (38,585 ) (8.3 ) %soldGross profit 253,767 33.5 % 237,322 33.8 % 16,445 6.9 %Selling,general & 145,676 19.2 % 149,727 21.3 % 4,051 2.7 %administrativeexpensesRationalizationand asset 4,163 0.5 % 6,521 0.9 % 2,358 36.2 %impairmentchargesOperating 103,928 13.7 % 81,074 11.5 % 22,854 28.2 %incomeInterest 5,359 0.7 % 5,458 0.8 % 99 1.8 %expense, netOther income (1,416 ) (0.2 ) % 309 ? (1,725 ) (558.3 ) %(expense)Income before 97,153 12.8 % 75,925 10.8 % 21,228 28.0 %income taxesIncome taxes 23,020 3.0 % 20,370 2.9 % (2,650 ) (13.0 ) %Effective tax 23.7 % 26.8 % 3.1 % rateNet incomeincluding 74,133 9.8 % 55,555 7.9 % 18,578 33.4 %non-controllinginterestsNon-controllinginterests in (44 ) ? (7 ) ? (37 ) (528.6 ) %subsidiaries?income (loss)Net income $ 74,177 9.8 % $ 55,562 7.9 % $ 18,615 33.5 % Basic earnings $ 1.24 $ 0.92 $ 0.32 34.8 %per shareDilutedearnings per $ 1.23 $ 0.91 $ 0.32 35.2 %shareWeightedaverage shares 59,642 60,184 (basic)Weightedaverage shares 60,299 60,799 (diluted)

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

Balance Sheet Highlights

Selected Consolidated March31,2021 December 31, Balance Sheet Data 2020Cash and cash equivalents $ 242,126 $ 257,279 Accounts receivable, net 431,350 373,487 Inventories 415,901 381,258 Total current assets 1,196,287 1,112,343 Property, plant and 500,449 522,092 equipment, netTotal assets 2,361,749 2,314,453 Trade accounts payable 294,062 256,530 Total current liabilities 614,461 549,449 Short-term debt ^(1) 3,607 2,734 Long-term debt, less current 715,328 715,456 portionTotal equity 803,408 790,250 Operating Working Capital March31,2021 December 31, 2020Average operating working 17.7 % 17.4 %capital to Net sales ^(2) Invested Capital March31,2021 December 31, 2020Short-term debt ^(1) $ 3,607 $ 2,734 Long-term debt, less current 715,328 715,456 portionTotal debt 718,935 718,190 Total equity 803,408 790,250 Invested capital $ 1,522,343 $ 1,508,440 Total debt / invested 47.2 % 47.6 %capital

(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 March31, 2021 2020 Operating income as reported $ 103,928 $ 81,074 Special items (pre-tax): Rationalization and asset impairment charges ^ 4,163 6,521 (2)Acquisition transaction costs ^(3) 1,113 ? Amortization of step up in value of acquired ? 806 inventories ^(4)Adjusted operating income ^(1) $ 109,204 $ 88,401 As a percent of total sales 14.4 % 12.6 % Net income as reported $ 74,177 $ 55,562 Special items: Rationalization and asset impairment charges ^ 4,163 6,521 (2)Acquisition transaction costs ^(3) 1,113 ? Pension settlement charges ^(5) 4,886 ? Amortization of step up in value of acquired ? 806 inventories ^(4)Tax effect of Special items ^(6) (1,561 ) (1,976 ) Adjusted net income ^(1) 82,778 60,913 Non-controlling interests in subsidiaries? (44 ) (7 ) income (loss)Interest expense, net 5,359 5,458 Income taxes as reported 23,020 20,370 Tax effect of Special items ^(6) 1,561 1,976 Adjusted EBIT ^(1) $ 112,674 $ 88,710 Effective tax rate as reported 23.7 % 26.8 %Net special item tax impact (0.8 ) % ? Adjusted effective tax rate ^(1) 22.9 % 26.8 % Diluted earnings per share as reported $ 1.23 $ 0.91 Special items per share 0.14 0.09 Adjusted diluted earnings per share ^(1) $ 1.37 $ 1.00 Weighted average shares (diluted) 60,299 60,799

(1) Adjusted operating income, Adjusted net income, Adjusted EBIT, Adjusted effective tax rate and Adjusted diluted earnings per share are non-GAAP financial measures. Refer to Non-GAAP Information section.

(2) Primarily related to severance and gains or losses on the disposal of assets.

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

(4) Related to an acquisition and are included in Cost of goods sold.

(5) Related to lump sum pension payments and are 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.

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

Non-GAAP Financial Measures

TwelveMonthsEndedMarch31, Return on Invested Capital 2021 2020 Net income as reported $ 224,730 $ 277,191 Rationalization and asset 43,110 18,174 impairment chargesAcquisition transaction and 1,113 1,014 integration costsPension settlement charges 13,005 ? Amortization of step up in value of ? 3,814 acquired inventoriesGains on asset disposals ? (3,554 ) Gain on change in control ? (7,601 ) Tax effect of Special items ^(2) (10,179 ) (8,549 ) Adjusted net income ^(1) $ 271,779 $ 280,489 Plus: Interest expense, net of taxof $5,904 and $6,484 in 2021 and 17,550 19,489 2020, respectivelyLess: Interest income, net of taxof $396 and $605 in 2021 and 2020, 1,184 1,818 respectivelyAdjusted net income before $ 288,145 $ 298,160 tax-effected interest Invested Capital March31,2021 March31,2020 Short-term debt $ 3,607 $ 132,378 Long-term debt, less current 715,328 715,950 portionTotal debt 718,935 848,328 Total equity 803,408 667,960 Invested capital $ 1,522,343 $ 1,516,288 Return on invested capital ^(1) 18.9 % 19.7 %

TwelveMonthsEndedMarch31,Total Debt / EBITDA 2021 2020Net income as reported $ 224,730 $ 277,191Income taxes 60,546 74,328Interest expense, net 21,874 23,550Depreciation and 78,582 83,614amortizationEBITDA ^(1) $ 385,732 $ 458,683 March31,2021 March31,2020Total debt $ 718,935 $ 848,328 Total debt / EBITDA 1.86 1.85

(1) Adjusted net income, Return on invested capital and EBITDA 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, including tax benefits of $4,852 for the settlement of a tax item as well as tax deductions associated with an investment in a subsidiary in the twelve months ended March 31, 2020.

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 March31, 2021 2020 OPERATING ACTIVITIES: Net income $ 74,177 $ 55,562 Non-controlling interests in subsidiaries? income (44 ) (7 )(loss)Net income including non-controlling interests 74,133 55,555 Adjustments to reconcile Net income includingnon-controlling interests to Net cash provided by operating activities:Rationalization and asset impairment charges (gains) 60 (236 )Depreciation and amortization 19,118 21,028 Equity earnings in affiliates, net (177 ) (162 )Other non-cash items, net (697 ) (4,182 )Changes in operating assets and liabilities, net of effects from acquisitions:Increase in accounts receivable (65,795 ) (25,698 )Increase in inventories (42,568 ) (17,401 )Increase (decrease) in trade accounts payable 42,325 (16,676 )Increase in other current liabilities 22,171 11,693 Net change in other long-term assets and liabilities (3,308 ) (1,949 )NET CASH PROVIDED BY OPERATING ACTIVITIES 45,262 21,972 INVESTING ACTIVITIES: Capital expenditures (9,936 ) (11,828 )Proceeds from sale of property, plant and equipment 584 6,100 Other investing activities 6,500 ? NET CASH USED BY INVESTING ACTIVITIES (2,852 ) (5,728 ) FINANCING ACTIVITIES: Net change in borrowings 1,307 97,777 Proceeds from exercise of stock options 2,780 1,047 Purchase of shares for treasury (28,459 ) (109,762 )Cash dividends paid to shareholders (30,999 ) (30,675 )NET CASH USED BY FINANCING ACTIVITIES (55,371 ) (41,613 ) Effect of exchange rate changes on Cash and cash (2,192 ) (10,819 )equivalentsDECREASE IN CASH AND CASH EQUIVALENTS (15,153 ) (36,188 )Cash and cash equivalents at beginning of period 257,279 199,563 Cash and cash equivalents at end of period $ 242,126 $ 163,375 Cash dividends paid per share $ 0.51 $ 0.49

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

Americas International TheHarris Corporate/ Welding Welding ProductsGroup Eliminations Consolidated Three monthsended March31,2021Net sales $ 425,242 $ 223,079 $ 108,700 $ ? $ 757,021 Inter-segment 32,748 4,285 2,147 (39,180 ) ? salesTotal $ 457,990 $ 227,364 $ 110,847 $ (39,180 ) $ 757,021 Net income $ 74,177 As a percent 9.8 %of total sales EBIT^ (1) $ 72,177 $ 14,207 $ 18,697 $ (2,569 ) $ 102,512 As a percent 15.8 % 6.2 % 16.9 % 13.5 %of total salesSpecial itemscharges 4,440 4,609 ? 1,113 10,162 (gains) ^(3)Adjusted EBIT $ 76,617 $ 18,816 $ 18,697 $ (1,456 ) $ 112,674 ^(2)As a percent 16.7 % 8.3 % 16.9 % 14.9 %of total sales Three monthsended March31,2020Net sales $ 418,535 $ 197,923 $ 85,533 $ ? $ 701,991 Inter-segment 24,783 4,483 1,725 (30,991 ) ? salesTotal $ 443,318 $ 202,406 $ 87,258 $ (30,991 ) $ 701,991 Net income $ 55,562 As a percent 7.9 %of total sales EBIT ^(1) $ 69,512 $ 478 $ 12,492 $ (1,099 ) $ 81,383 As a percent 15.7 % 0.2 % 14.3 % 11.6 %of total salesSpecial itemscharges 1,190 6,137 ? ? 7,327 (gains) ^(4)Adjusted EBIT $ 70,702 $ 6,615 $ 12,492 $ (1,099 ) $ 88,710 ^(2)As a percent 15.9 % 3.3 % 14.3 % 12.6 %of total sales

(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 2021 reflect pension settlement charges of $4,440 and $446 in Americas Welding and International Welding, respectively, Rationalization and asset impairment charges of $4,163 in International Welding and acquisition transaction costs of $1,113 in Corporate/Eliminations related to an acquisition.

(4) Special items in 2020 reflect Rationalization and asset impairment charges of $1,190 and $5,331 in Americas Welding and International Welding, respectively, and amortization of step up in value of acquired inventories of $806 in International Welding related to an acquisition.

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

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

ChangeinNetSalesdueto: NetSales Foreign NetSales 2020 Volume Acquisitions Price Exchange 2021 Operating SegmentsAmericas $ 418,535 $ (3,790 ) $ ? $ 9,065 $ 1,432 $ 425,242 WeldingInternational 197,923 11,250 ? 4,620 9,286 223,079 WeldingThe HarrisProducts 85,533 11,641 ? 12,443 (917 ) 108,700 GroupConsolidated $ 701,991 $ 19,101 $ ? $ 26,128 $ 9,801 $ 757,021 % Change Americas (0.9 ) % ? % 2.2 % 0.3 % 1.6 %WeldingInternational 5.7 % ? 2.3 % 4.7 % 12.7 %WeldingThe HarrisProducts 13.6 % ? % 14.5 % (1.1 ) % 27.1 %GroupConsolidated 2.7 % ? 3.7 % 1.4 % 7.8 %

Contact

Amanda ButlerVice President, Investor Relations & CommunicationsTel: 216.383.2534Email: Amanda_Butler@lincolnelectric.com