Lincoln Electric(LECO) - 2022 Q4 - Annual Report

Financial Performance - Net sales for 2022 increased to $3,761,211, a 16.3% increase from$ 3,234,180 in 2021[109] - Gross profit for 2022 was $1,280,760, representing 34.1% of sales, up from 33.0% in 2021, with a$ 212,155 increase year-over-year[109] - Operating income rose to $612,336 in 2022, a 32.6% increase compared to$ 461,669 in 2021[109] - Net income for 2022 was $472,224, a significant increase of 70.7% from$ 276,580 in 2021[109] - Consolidated net income rose by 70.8% to $472,224 in 2022 compared to$ 276,466 in 2021[119] - Adjusted EBIT for the consolidated entity increased by 29.7% to $636,951 in 2022 from$ 491,268 in 2021[119] - Adjusted diluted earnings per share increased to $8.27 in 2022 from$ 6.22 in 2021[128] Tax and Debt - The effective tax rate for 2022 was 20.3%, up from 14.9% in 2021, primarily due to a change in the mix of earnings[115] - The effective tax rate as reported was 20.3% in 2022, compared to 14.9% in 2021[128] - The total amount of debt outstanding as of December 31, 2022, was $1,203,879, an increase from$ 769,819 in 2021[142] - The Company’s total weighted average effective interest rate is 3.3%, with a remaining weighted average term of 11.4 years[144] - The Company entered into a term loan of $400,000 on November 29, 2022, maturing on November 29, 2025[147] - As of December 31, 2022, the Company had$ 45,000 of outstanding borrowings under its revolving credit agreement[145] - The Company had $1,118,336 in long-term debt, including the current portion, as of December 31, 2022[153] - The Company was in compliance with all debt covenants as of December 31, 2022[145] Segment Performance - The Americas Welding segment reported net sales of$ 2,288,934, a 25.5% increase from the previous year, driven by higher demand and product pricing[116] - International Welding segment net sales were $954,281, reflecting a slight increase of 0.6% despite unfavorable foreign exchange impacts[116] - Americas Welding net sales increased by 25.5% to$ 2,288,934 in 2022 from $1,824,481 in 2021[119] Cash Flow and Investments - Cash provided by operating activities increased by$ 18,323 to $383,386 in 2022 from$ 365,063 in 2021[135] - Cash used by investing activities rose significantly by $299,335 to$ (504,691) in 2022 from $(205,356) in 2021, primarily due to acquisitions[135] - The company anticipates capital expenditures of$ 80,000 to $100,000 in 2023 to enhance capacity and operational effectiveness[137] Working Capital and Dividends - Average operating working capital to net sales increased to 20.9% in 2022 from 16.3% in 2021[139] - The company paid cash dividends of$ 130,724 in 2022, reflecting a 14.3% increase in the dividend payout rate[136] Investments and Expenses - The Company continues to invest in research and development to maintain its market-leading position in arc welding products[97] - The total stock-based compensation expense recognized in 2022 was $25,276, compared to$ 23,787 in 2021[158] - The Company's defined benefit plan expense was $(2,280) million in 2022, a significant decrease from$ 124,929 million in 2021, while defined contribution plan expense increased to $29,569 million in 2022 from$ 26,281 million in 2021[177] - The Company expects total 2023 expense related to retirement plans to increase by approximately $500 million to$ 1,500 million, excluding settlement charges[177] Financial Risk Management - The Company manages financial market risks, including currency exchange rates, commodity prices, and interest rates, using derivative financial instruments[194] - The gross notional dollar amount of foreign exchange contracts at December 31, 2022, was $66,296 million, with a hypothetical 10% change in the U.S. dollar potentially affecting accumulated other comprehensive income (loss) by$ 284 million[197] - The notional amount of commodity hedging contracts was 875,000 pounds at December 31, 2022, with a hypothetical 10% price change resulting in a value change of $319 million[200] - The gross notional dollar value of interest rate forward starting swap agreements was$ 100,000 million at December 31, 2022, with a hypothetical 100 basis point increase in effective interest rates potentially changing accumulated other comprehensive income (loss) by $7,584 million[201] Other Financial Metrics - The adjusted return on invested capital (ROIC) for 2022 was 22.7%, down from 23.9% in 2021[151] - The Company’s invested capital as of December 31, 2022, was$ 2,237,920, up from $1,633,728 in 2021[151] - The accumulated other comprehensive loss, excluding tax effects, decreased to$ 3,759 million as of December 31, 2022, down from $16,173 million as of December 31, 2021[178] - The excess of current cost over LIFO cost was$ 133,909 million at December 31, 2022, compared to $114,176 million at December 31, 2021[180] Revenue Recognition - The Company recognizes revenue primarily when control of the product is transferred to the customer, with less than 10% of net sales recognized over time[191]