Lincoln Electric Holdings Inc. (NASDAQ:LECO) Q4 2019 Earnings Conference Call - Final Transcript

Feb 13, 2020 • 10:00 am ET

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Lincoln Electric Holdings Inc. (NASDAQ:LECO) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Greetings and welcome to the Lincoln Electric Fourth Quarter and Full Year 2019 Financial Results Conference Call. [Operator Instructions]

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, Carmen, and good morning, everyone. 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 of full year results and Vince will cover the quarter performance in more detail. Following our prepared remarks, we're happy to take your questions.

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 risk 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 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. Chris?

Executive
Christopher L. Mapes

Thank you, Amanda. Good morning, everyone. Our full year results demonstrate the business resilience in a challenging portion of the cycle. We remain focused on serving customers, executing our strategic initiatives and investing in long-term growth to deliver value to our shareholders. As we celebrate our 125th anniversary in 2020, we are confident that this balanced approach continues to position the business for long-term growth and value generation for all of our stakeholders. In 2019, we generated record cash flows, 113% cash conversion, top quartile returns and returned $411 million to shareholders through $118 million in dividends and $293 million of share repurchases. We did this while working to mitigate the impact of decelerating global industrial production trends and weak capital spending.

Our net sales declined 80 basis points to $3 billion with 3.5% lower organic sales, largely driven by softer demand for consumables and automation systems. We successfully offset the impact of lower volumes in our core business by aligning operations to demand through reduced hours, lower incentive compensation and discretionary spending. Acquisitions unfavorably impacted our consolidated financial results.

We reported a 50 basis point decline in our full year adjusted operating income margin to 12.9% with a 69% decremental margin. If excluding acquisitions, our adjusted operating income margin would have held relatively steady with a 10 basis point decline to 13.3% in the remainder of our business, which represents an approximate 15% decremental