Lincoln Electric Holdings, Inc.

Greetings and welcome to the Lincoln Electric 2021 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 my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you. You may begin.

Thank you, Stephanie, and good morning, everyone. Welcome to Lincoln Electric's First Quarter 2021 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, and Gabe Bruno, our Chief Financial Officer. Chris will begin the discussion with an overview of our results and business trends. and Gabe will cover our first quarter financial performance in more detail. And 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 discussed financial measures that do not conform to U.S. GAAP. 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 Maves. Chris?

Thank you, Amanda. Good morning, everyone. I'm pleased to report that the first quarter results exceeded our expectations as demand accelerated through the quarter, reinforcing solid recovery momentum. We globally operated as an essential business and remained focused on safety and servicing our customers, while still navigating a challenging COVID environment. Our team's execution yielded very strong results. Turn to slide four. We returned to growth in the first quarter. Sales increased 7.8%, led by a 6.4% growth in organic sales, exceeding our assumption of flat to slightly positive performance. Diligent price management and operational initiatives generated an approximate 24% increase in adjusted operating income. Our adjusted operating income margin improved 180 basis points to 14.4% with a 37.8% incremental margin. Very strong performance. Adjusted earnings per share increased 37% to $1.37, a record first quarter performance. Return on invested capital remained strong at 18.9% and cash flow from operations and free cash flow performed above prior year levels. We returned approximately $60 million to shareholders with $28 million in share repurchases and paid out $31 million in dividends. Looking at the first quarter demand on slide five, organic sales increased 6.4% with 2.7% volume growth. Demand improved through the quarter, with heightened acceleration in March in several areas of the business. In the quarter, all reportable segments, geographic regions, and main product families achieved improved performance sequentially. Equipment demand continued to outperform the other product categories on the strength of our solutions, and we're pleased to see automation sales return to prior year levels as customers increased capital spending. Eighty percent of our first quarter revenue was exposed to growing in markets, led by mid-teens percent organic sales growth in automotive and heavy industries, where mining, agriculture, and construction equipment demand increased above expectations. Energy remained slightly challenged. We're entering the second quarter with strong momentum and record order and backlog levels for equipment. Customer sentiment continues to be positive, yet cautious, as the economy rebounds faster than anticipated. This positions us well to capitalize on growth in this early part of the cycle. Given this strength and the incremental pricing actions we've taken to mitigate persistent raw material inflation, we're updating our full-year top-line organic sales assumptions to now be in the low to mid-teens percent range. This range does not include any future pricing actions which may be warranted. We're also assuming standard seasonality in the business with second quarter sales slightly higher than first quarter results. We're also increasing our incremental adjusted operating income margin assumption to now be in the high 20% range to reflect higher volume levels and operating leverage. This incremental range also factors in expected LIFO charges that we expect to be consistent with the first quarter rate through the balance of the year. Acquisitions are a key growth driver at Lincoln Electric, and we closed our acquisition of Zeman's structural steel automation business on April 1st. We're excited to have the Zeman team join our automated cutting portfolio as their solution is complementary and downstream to our PythonX automated 3D plasma cutting solution. The two products now provide customers with unparalleled productivity and quality in fabricating I-beams for structural steel and infrastructure projects. The Zeeman business expands our automation sales by approximately 10%, with margins at the Lincoln Consolidated Average. We expect the acquisition to be accretive to earnings on an adjusted basis by 3 to 5 cents this year. While it's still a dynamic market, we're very encouraged by the near-term momentum. We also remain confident with our long-term, higher standard 2025 strategy growth initiatives that capitalize on secular trends driving automation and related large capital investments, as well as other catalysts such as renewable energy and infrastructure investments. where we conservatively estimate 15% to 20% of our revenue is exposed to these two areas today. So we are excited to be back in growth mode and look forward to driving towards our 2025 higher standard strategy goals. And now I'll pass the call to Gabe to cover the first quarter financials in more detail.