Lincoln Electric Holdings, Inc. · NASDAQ:LECO
Lincoln Electric — Morgan Stanley Virtual Laguna Conference 2020
30 slides from Lincoln Electric's conference presentation, Sep 16, 2020
Slide 1: Lincoln Electric Holdings, Inc. Update
Exhibit 99.1 Lincoln Electric Holdings, Inc. Update Morgan Stanley Virtual Laguna Conference September 16, 2020Exhibit 99.1 Lincoln Electric Holdings, Inc. Update Morgan Stanley Virtual Laguna Conference September 16, 2020
Slide 2: Safe Harbor and Regulation G Disclosures
Safe Harbor and Regulation G Disclosures Forward-Looking Statements: Statements made during this presentation which are not historical facts may be considered forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ ma
Slide 3: Operating Globally and Positioned to Respond to COVID-19 Challenges
Operating Globally and Positioned to Respond to COVID-19 Challenges » Remain focused on safety: Implemented CDC and WHO best practice measures to protect employee health – Heightened hygiene and sanitation practices – Social distancing and safety protocols – Maximizing flexible and remote work arran
Slide 4: Order Rates Continue to Improve in the Third Quarter (QTD)
Order Rates Continue to Improve in the Third Quarter (QTD) » Q3: July order rates trended down high-teens percent and August order rates continue to improve » All reportable segments recovering from the April trough » Energy and Heavy Industries sectors are the most challenged » Q2 order rates impro
Slide 5: Expanded Our 2020 Cost Reduction Initiatives and Estimated Benefits
Expanded Our 2020 Cost Reduction Initiatives and Estimated Benefits » Achieved $27 million in cost saving benefits in Q2 and $33 million in H1-2020, primarily from temporary cost reductions Expect $55 to $65 million of » Implemented cost reduction actions: realized cost savings in 2020 – Reduced wor
Slide 6: Solid Balance Sheet and Increased Liquidity in Q2
Solid Balance Sheet and Increased Liquidity in Q2 (Data as of June 30, 2020) » Investment grade profile balance » Ample Liquidity of $545M as we sheet reduced debt by $83M in Q2 ‒ Cash: $143M ‒ Total debt/EBITDA: 1.97x 1 ‒ Net debt /EBITDA: 1.46x ‒ Available lines of credit: $402M » Total debt: $765
Slide 7: A Pioneer with Market-Leading Technology
A Pioneer with Market-Leading Technology A global manufacturer and market leader with 125 years of expertise. Distinguished by an unwavering commitment to customers, employees and shareholders. » Founded in 1895 » HQ in Cleveland, Ohio, U.S.A. » $3.0B in revenue in 2019 » 59 manufacturing facilities
Slide 8: Lincoln Electric Investment Highlights
Lincoln Electric Investment Highlights Predictable Solid cash Disciplined Leader in Track record model enables conversion capital complete of defending higher dividend ratio deployment solutions and margins even payout delivers top application in a down cycle quartile returns expertise 13.7% 13.6% #
Slide 9: Diversified Products and Reach
Diversified Products and Reach 1 1 Net Sales by Product Area Net Sales by Segment International 28% Welding Equipment 43% Americas Welding Consumables 11% 61% The Harris (filler metals) Products Group 57% 9 1 Reflects FY2019 revenueDiversified Products and Reach 1 1 Net Sales by Product Area Net Sal
Slide 10: Leading Provider Across Diverse End Markets
Leading Provider Across Diverse End Markets $22B Global Arc Welding, Brazing & Cutting Lincoln Electric Revenue Mix by 1 2 Industry Market Share Estimates End Market Sector 10% Construction & LECO Infrastructure Others 33% 17% General Automotive & Colfax Fabrication Transportation 18% ITW Heavy 22%
Slide 11: Innovation Drivers
Innovation Drivers Automated Joining & Large-Scale Metal Equipment Efficiency & Industry-Driven Industry 4.0 & Data Cutting Systems and Additive Solutions Proprietary Waveforms Solutions Cell Components Standard weld start Weld start Uses robotic arc and laser Automated arc welding, using LECO’s hot
Slide 12: Innovation Investments Drive Growth
Innovation Investments Drive Growth R&D Spend 1 Solid Vitality Index 1.9% 2.0% 1.9% ($ millions) 1.8% $55 2.0% 1.8% 1.5% $45 1.5% 1.4% ~34% of 2019 1.5% 1.3% 1.2% $35 consolidated sales from new $57 $54 $25 1.0% $48 $47 $44 $42 $43 products $37 $33 $15 $29 0.5% $5 ~53% of 2019 equipment $(5) 0.0% 20
Slide 13: New "Higher Standard 2025" Strategy Builds on Prior Achievements
New “Higher Standard 2025” Strategy Builds on Prior Achievements Customer Focused Continued Focus on • Make it easier to do business with us Best-in-Class Financial • Invest in industry segment teams and global weld Performance tech centers to improve engagement Employee Development Sales Growth • I
Slide 14: Disciplined M&A is Expanding Growth Opportunities
Disciplined M&A is Expanding Growth Opportunities $22 Billion $45 Billion Expanding the Arc Welding, Brazing & market size Cutting potential for Automation & 1 future growth Additive/Surfacing 1 Based on company estimates $715 Million Cumulative M&A Investment 2010 - 2019 9.1% 8.0% Sales growth 5.8%
Slide 15: Focused on Higher Margin Opportunities and Operational Excellence
Focused on Higher Margin Opportunities and Operational Excellence While Mitigating Impact of Lower Demand 1,2 Adjusted Operating Income Margin vs. Net Sales 15.3% 14.9% 14.7% 3 14.3% 14.0% 15.0% 13.6% 13.4% 12.9% $3,000 11.7% 11.4% 13.5% 9.8% 10.0% 8.4% $2,000 $1,536 5.0% $1,000 $1,729 $2,070 $2,695
Slide 16: Cash Generation a Top Strategic Priority
Cash Generation a Top Strategic Priority Q2-2020 Strategic Inventory Build Initiated to Service a Recovery Operating Working Capital to Net Cash Flow From Operations 1 Sales Ratio 390 bps reduction ($ in millions) 2010-2019 402 403 23.2% 22.4% 21.0% 20.7% 339 335 329 327 18.8% 311 313 17.6% 17.1% 17
Slide 17: Predictable Model Enables a Growing Dividend Payout
Predictable Model Enables a Growing Dividend Payout Dividend History $1.96 $1.88 13.4% CAGR $1.56 $1.40 2011 - 2020 $1.28 $1.16 $0.92 $0.80 $0.68 $0.62 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 4.3% Increase in the 2020 Dividend Payout Rate th 24 Consecutive Annual Dividend Increase 17Predic
Slide 18: Capital Allocation and 2020 Priority Uses of Cash
Capital Allocation and 2020 Priority Uses of Cash Cash Flows From Operations Strong Through the Cycle ($ in millions) Capital Allocation » Cap-ex: Narrowing $616 spend to cost reduction Acquisitions, net of cash acquired $574 Cap Ex $551 projects, new products & Share Repurchase $37 $135 $477 $477 D
Slide 19: Disciplined Capital Deployment Delivers Top Quartile Returns
Disciplined Capital Deployment Delivers Top Quartile Returns 1 Return on Invested Capital 22.9% 21.1% 20.7% 20.2% 19.9% 19.3% 18.6% 2 16.6% 16.6% 16.2% 10.6% 6.3% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q2-2020 1 Please refer to the appendix for the definition and reconciliation of th
Slide 20: Positioned For Long Term Value Creation
Positioned For Long Term Value Creation Top Market Position in Arc Welding #1 Global Provider » Differentiated by comprehensive product portfolio & automation ® » Renowned Welding Experts with industry-leading engineers Innovative R&D and Pragmatic M&A Driving Growth Driving Growth and » Focused inv
Slide 21: Sustainability Overview
Sustainability Overview 21Sustainability Overview 21
Slide 22: Governance Highlights
Governance Highlights At Lincoln Electric, we are committed to effective corporate governance and high ethical standards. We adhere to our ethical commitments in every aspect of our business, including our commitments to each other, in the marketplace and in the global, governmental and political ar
Slide 23: Safety & Environmental Goals and Performance
Safety & Environmental Goals and Performance Energy GHG Recycling & Safety Water Use Intensity Emissions Landfill Avoidance 15% 30% 75% 2020 70% recycle/reuse rate reduction reduction reduction of (All waste materials) (metric tons (Gigajoules per Goal DART rate CO e) hour worked) 2 (vs. 2011) 74.3%
Slide 24: Contact: Amanda Butler, Investor Relations
Contact: Amanda Butler Vice President, Investor Relations & Communications * Amanda_Butler@lincolnelectric.com ) 216.383.2534 24Contact: Amanda Butler Vice President, Investor Relations & Communications * Amanda_Butler@lincolnelectric.com ) 216.383.2534 24
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share, Return on invested capital and EBITDA are non-GAAP financial measures that management believes are important to investors to evaluate and compare the Company’s financial performance from
Slide 26: Non-GAAP Financial Measures: Return on Invested Capital
1 Non-GAAP Financial Measures: Return on Invested Capital ($ in thousands) Period Ended December 31, TTM 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q2-2020 Net income: $48,576 $130,244 $217,186 $257,411 $293,780 $254,686 $127,478 $198,399 $247,503 $287,066 $293,109 $218,735 Special items
Slide 27: Non-GAAP Financial Measures: EBITDA
Non-GAAP Financial Measures: EBITDA ($ in thousands) Twelve Months Ended June 30, 2020 2019 Net income: $218,735 $314,310 Income taxes 62,955 72,377 Interest expense, net 23,533 19,533 Depreciation and amortization 83,313 75,275 EBITDA $388,536 $481,495 June 30, 2020 June 30, 2019 Total Debt $765,41
Slide 28: Non-GAAP Reconciliation of Diluted EPS to Adjusted EPS
Non-GAAP Financial Measures Reconciliation of Diluted Earnings Per Common Share (EPS) to Non-GAAP Diluted Adjusted Net Earnings Per Common Share (Adjusted EPS) 2009 2010 2011 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011
Slide 29: Non-GAAP Reconciliation of Diluted EPS to Adjusted EPS
Non-GAAP Financial Measures Reconciliation of Diluted Earnings Per Common Share (EPS) to Non-GAAP Diluted Adjusted Net Earnings Per Common Share (Adjusted EPS) 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 Diluted EPS: $0.92 $1.04 $1.07 $1.35 $1
Slide 30: Diluted Earnings Per Share Progression
Diluted Earnings Per Share Progression $800 1.59 $1.50 1.36 1.35 1.29 $700 1.22 1.28 1.17 1.21 1.17 1.15 1.10 1.09 1.09 1.01 1.01 1.12 1.00 1.07 1.07 0.97 0.940.96 1.01 0.92 1.04 $1.00 $600 0.91 0.91 0.88 1.03 0.89 0.89 0.86 0.96 0.89 0.94 0.81 0.92 0.79 0.83 0.92 0.77 0.76 0.80 0.87 0.75 0.84 0.76
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