Lincoln Electric(US:LECO)2023-04-27 19:00PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for the quarterly period ended March 31, 2023, encompassing income, balance sheet, equity, and cash flow statements with accompanying notes Consolidated Statements of Income The company reported net sales of $1,039.3 million and net income of $121.9 million for Q1 2023, with diluted EPS at $2.09 Q1 2023 vs Q1 2022 Income Statement Highlights (In thousands, except per share amounts) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net sales | $1,039,343 | $925,448 | | Gross profit | $355,357 | $329,777 | | Operating income | $164,364 | $161,206 | | Net income | $121,931 | $126,030 | | Diluted earnings per share | $2.09 | $2.13 | | Cash dividends declared per share | $0.64 | $0.56 | Condensed Consolidated Balance Sheets As of March 31, 2023, total assets increased to $3.25 billion from $3.18 billion at year-end 2022, primarily driven by accounts receivable and goodwill growth Balance Sheet Highlights (In thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $198,803 | $197,150 | | Inventories | $664,599 | $665,451 | | Total Current Assets | $1,610,491 | $1,557,790 | | Goodwill | $679,385 | $665,257 | | TOTAL ASSETS | $3,253,201 | $3,180,546 | | Liabilities & Equity | | | | Total Current Liabilities | $835,939 | $852,897 | | Long-term debt | $1,110,626 | $1,110,396 | | Total Liabilities | $2,127,965 | $2,146,505 | | Total Equity | $1,125,236 | $1,034,041 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $123.9 million in Q1 2023, driven by improved working capital management Q1 2023 vs Q1 2022 Cash Flow Highlights (In thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $123,931 | $43,090 | | Net cash used by investing activities | ($16,049) | ($40,116) | | Net cash used by financing activities | ($111,316) | ($40,597) | | Increase (decrease) in cash | $1,653 | ($38,585) | Notes to Unaudited Consolidated Financial Statements The notes detail accounting policies, revenue recognition by product line, the Fori Automation acquisition, and segment performance for Americas Welding, International Welding, and The Harris Products Group Net Sales by Product Line (In thousands) | Product Line | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Consumables | $569,684 | $539,162 | | Equipment | $469,659 | $386,286 | | Total Net sales | $1,039,343 | $925,448 | - On December 1, 2022, the Company acquired Fori Automation, LLC for a total purchase price consideration of $468.7 million. Fori contributed $49.2 million in net sales in Q1 202333 - The company has rationalization plans within the International Welding segment to align its cost structure, with liabilities of $1.6 million recognized as of March 31, 202343 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2023 financial results, highlighting a 12.3% increase in net sales driven by acquisitions, volume, and pricing, alongside segment performance, liquidity, and non-GAAP reconciliations Components of Net Sales Change - Q1 2023 vs Q1 2022 | Component | % Change | | :--- | :--- | | Volume | 4.2% | | Acquisitions | 5.7% | | Price | 4.3% | | Foreign Exchange | (1.9)% | | Total Net Sales Change | 12.3% | Segment Performance - Q1 2023 vs Q1 2022 (In thousands) | Segment | Net Sales (Q1 2023) | Net Sales Change | Adjusted EBIT (Q1 2023) | Adjusted EBIT Change | | :--- | :--- | :--- | :--- | :--- | | Americas Welding | $658,645 | +23.3% | $132,453 | +18.7% | | International Welding | $252,416 | -2.2% | $29,598 | -20.2% | | The Harris Products Group | $128,282 | -3.8% | $18,983 | -3.1% | Non-GAAP Reconciliation Highlights - Q1 2023 | Metric | As Reported | Adjusted | | :--- | :--- | :--- | | Operating Income | $164,364 | $169,097 | | Net Income | $121,931 | $124,200 | | Diluted EPS | $2.09 | $2.13 | - Cash provided by operating activities increased to $123.9 million in Q1 2023 from $43.1 million in Q1 2022, primarily due to an improved working capital position105107 Quantitative and Qualitative Disclosures About Market Risk No material changes in the Company's exposure to market risk have occurred since December 31, 2022 - There have been no material changes in the Company's exposure to market risk since December 31, 2022125 Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2023, with integration of the acquired Fori business's internal control systems ongoing - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023126 - The company is currently integrating the systems and internal controls of the acquired Fori business, with completion expected in 2023127 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, including cases with approximately 1,467 plaintiffs alleging asbestos-induced illnesses as of March 31, 2023 - As of March 31, 2023, the Company was a co-defendant in cases alleging asbestos-induced illness involving claims by approximately 1,467 plaintiffs131 Risk Factors This section directs readers to the comprehensive discussion of risk factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 - Readers are directed to "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, for a comprehensive discussion of potential risks132 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 193,823 common shares at an average price of $165.91 per share during the first quarter of 2023 Issuer Purchases of Equity Securities - Q1 2023 | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2023 | 51,971 | $154.15 | | February 2023 | 66,257 | $172.23 | | March 2023 | 75,595 | $168.47 | | Total | 193,823 | $165.91 | - On February 12, 2020, the Board authorized a new share repurchase program for up to 10 million shares. Through March 31, 2023, 1.2 million shares have been purchased under this program135 Mine Safety Disclosures This section is not applicable to the company - Not applicable134 Other Information A typographical error in the 'Purchase commitments' section of the 2022 Form 10-K was corrected in this filing - A typographical error related to Purchase commitments in the 2022 Form 10-K was corrected in this filing137 Exhibits This section lists exhibits filed with the Form 10-Q, including an amendment to the credit agreement and required CEO and CFO certifications - Exhibits filed include an amendment to the credit agreement (10.1), forms of stock option and restricted stock unit agreements for executive officers (10.2, 10.3, 10.4), and CEO/CFO certifications (31.1, 31.2, 32.1)138