Lincoln Electric Holdings Inc. (NASDAQ:LECO) Q1 2018 Earnings Conference Call - Final Transcript

Apr 23, 2018 • 10:00 am ET

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Lincoln Electric Holdings Inc. (NASDAQ:LECO) Q1 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Greetings, and welcome to Lincoln Electric 2018 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode, and this call is being recorded.

It is now my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you. You may begin.

Executive
Amanda Butler

Thank you, Latoya, and good morning, everyone.

Welcome to Lincoln Electric's 2018 first quarter conference call. We released our financial results earlier today, and you can find our release as an attachment to this call's slide presentation, as well as on the Lincoln Electric website at lincolnelectric.com in the Investor Relations section.

Joining me on the call today is Chris Mapes, Lincoln's Chairman, President and Chief Executive Officer; as well as our Chief Financial Officer, Vince Petrella. Chris will begin the discussion with an overview our first quarter results, and Vince will cover the quarter performance in more detail.

Following our prepared remarks, we're happy to take your questions.

But before we start our discussion, please note that certain statements made during this call may be forward-looking, and actual results may differ materially from our expectations due to a number of risks factors. A discussion of some of the risks and uncertainties that may affect our results are provided in our press release, and in our SEC filings on Forms 10-K and 10-Q.

In addition, we may discuss financial measures that do not conform to US GAAP, and a reconciliation of non-GAAP measures to the most comparable GAAP measure is found in the financial tables in our earnings release, which again is available in the Investor Relations section of our website at lincolnelectric.com.

And with that, I'll turn the call over to Chris Mapes.

Executive
Chris Mapes

Thank you, Amanda. Good morning, everyone.

We are pleased to report good sales momentum in the first quarter. Sales increased 30.4% to $758 million. Organic sales increased 9.4% from 5.2% volume growth, and 4.2% higher price. These results reinforce the continued strengthening in our end markets, and the demand for our solutions. Our sales also benefited from 18.3% from the Air Liquide Welding acquisition.

We achieved a 17.2% increase in adjusted operating income. In our legacy business, we incurred a modest year-over-year decline in our adjusted operating income margin to 13.9%. Our performance reflected solid progress in mitigating sharp increases in raw material cost to operational initiatives, and pricing actions. We are confident that our global pricing actions, and productivity initiatives will allow us to offset inflationary pressures.

While there is lag to achieve the full benefit of our initiatives, we are confident that we have the right strategy. We will continue to aggressively manage the business against inflationary headwinds.

Moving to earnings.

Adjusted earnings per share increased 25% to $1.10. Working capital requirements increased this quarter with Air Liquide Welding, and increased sales levels. The legacy Lincoln Electric business continue to manage the cash cycle carefully with the 16.5% working capital ratio to sales, and ROIC improved 50 basis points to 16.7%.

Moving to