LECO Lincoln Electric Holdings Inc

Lincoln Electric Reports 2005 Second-Quarter Financial Results - Second quarter sales increase 22% to a record $405.9 million CLEVELAND, July 28 /PRNewswire-FirstCall/ -- Lincoln Electric Holdings, Inc. (NASDAQ:LECO) today reported that 2005 second quarter net income increased 35% to a record $32.1 million, or 77 cents per diluted share, on record sales of $405.9 million, an increase of 22%. This compares with 2004 same-quarter net income of $23.7 million, or 57 cents per diluted share, on sales of $331.8 million. The 2005 second quarter includes a favorable income tax adjustment of $1.8 million (5 cents per share) related to a change in Ohio tax law. Excluding the non-recurring item, net income was $30.3 million, or 72 cents per diluted share. "Our record results for the quarter reflect continued steady demand across all regions and key industry segments, particularly energy-related projects," said John M. Stropki, Chairman and Chief Executive Officer. "Projects in Asia and the Middle East continue to add to our export business, and newer acquisitions, including J.W. Harris, are contributing to the Company's overall sales and profitability." Lincoln's North American sales were up 19% to $265.4 million, compared with $223.9 million in the prior year. Export sales were $24.4 million, a 21% increase over $20.3 million in the 2004 quarter. Sales outside North America rose 30% to $140.5 million in the quarter, compared with $107.9 million in the prior year. In local currencies, international subsidiaries' sales increased 25%. In the 2005 first half, net income increased 30% to $54.4 million, or $1.30 per diluted share, including the favorable tax adjustment of $1.8 million related to the Ohio tax law change, partially offset by European rationalization charges of $1.25 million pre-tax ($848 thousand after-tax). This compares with 2004 half-year net income of $42 million, or $1.02 per diluted share, on sales of $638.3 million. Net income excluding non-recurring items was $53.4 million, or $1.27 per diluted share, a 25% increase over 2004. Net sales for the first six months of 2005 were $768.8 million, a 20% increase, compared with $638.3 million in the 2004 comparable period. Sales for the Company's North American operations were up 16% in the half to $496.9 million. Export sales rose 26% to $46.7 million. Lincoln's operations outside of North America had net sales of $271.9 million, a 30% increase over the prior-year period sales of $208.7 million. In local currencies, non-U.S. sales increased approximately 25%. "Our international sales continue to grow and contribute to the Company's profitability. We continue to build our position and market share in important fast-growth economies around the world, including Latin America, Eastern Europe and Asia," said Mr. Stropki. During the 2005 second quarter, the Company paid $7.5 million in dividends. The Board of Directors also declared a quarterly cash dividend of 18 cents, which was paid on July 15, 2005 to holders of record as of June 30, 2005. Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc-welding systems, plasma and oxyfuel cutting equipment. Headquartered in Cleveland, Ohio, Lincoln has operations, manufacturing alliances and joint ventures in 18 countries and a worldwide network of distributors and sales offices covering more than 160 countries. The Company is celebrating its 110th anniversary this year. For more information about Lincoln Electric, its products and services, visit the Company's Web site at http://www.lincolnelectric.com/. The Company's expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and involve a number of risks and uncertainties. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company's operating results. The factors include, but are not limited to: the effectiveness of operating initiatives; currency exchange and interest rates; adverse outcome of pending or potential litigation; possible acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; and the possible effects of international terrorism and hostilities on the Company or its customers, suppliers and the economy in general. A conference call to discuss 2005 second-quarter financial results is scheduled for today, Thursday, July 28, 2005, at 11:00 a.m. EDT. An audio webcast of the call is accessible through the Investor page on the Company's Web site at http://www.lincolnelectric.com/. Lincoln Electric Holdings, Inc. Financial Highlights (amounts in millions, except per share data) (Unaudited) Fav (Unfav) to Consolidated Three Months Ended June 30, Prior Year Statements of Income % of % of 2005 Sales 2004 Sales $ % Net Sales $405.9 100.0% $331.8 100.0% $74.1 22.3% Cost of Goods Sold 291.9 71.9% 231.5 69.8% (60.4) (26.1%) Gross Profit 114.0 28.1% 100.3 30.2% 13.7 13.7% SG&A Expenses 71.9 17.7% 68.9 20.8% (3.0) (4.4%) Operating Income 42.1 10.4% 31.4 9.4% 10.7 34.1% Interest Income 0.9 0.2% 0.6 0.2% 0.3 50.0% Equity Earnings in Affiliates 1.0 0.2% 1.0 0.3% - 0.0% Other Income 1.0 0.2% 1.2 0.4% (0.2) (16.7%) Interest Expense (2.2) (0.5%) (1.3) (0.4%) (0.9) (69.2%) Income Before Income Taxes 42.8 10.5% 32.9 9.9% 9.9 30.1% Income Taxes 10.7 2.6% 9.2 2.8% (1.5) (16.3%) Net Income $32.1 7.9% $23.7 7.1% $8.4 35.4% Basic Earnings Per Share $0.77 $0.58 $0.19 32.8% Non-recurring item (1) (0.05) - (0.05) (100.0%) Basic Earnings Per Share excluding non- recurring item (2) $0.72 $0.58 $0.14 24.1% Diluted Earnings Per Share $0.77 $0.57 $0.20 35.1% Non-recurring item (1) (0.05) - (0.05) (100.0%) Diluted Earnings Per Share excluding non- recurring item (2) $0.72 $0.57 $0.15 26.3% Weighted Average Shares (Basic) 41.5 41.1 Weighted Average Shares (Diluted) 41.8 41.5 (1) Represents favorable impact on provision for income taxes of $1,807 related to a change in Ohio tax law. (2) Basic and diluted earnings per share excluding the non-recurring item are presented as management believes this financial measure is important to investors to evaluate and compare the Company's financial performance from period to period. Management uses this information in assessing and evaluating the Company's underlying operating performance. Lincoln Electric Holdings, Inc. Financial Highlights (amounts in millions, except per share data) (Unaudited) Fav (Unfav) to Consolidated Six Months Ended June 30, Prior Year Statements of Income % of % of 2005 Sales 2004 Sales $ % Net Sales $768.8 100.0% $638.3 100.0% $130.5 20.4% Cost of Goods Sold 556.6 72.4% 454.1 71.1% (102.5) (22.6%) Gross Profit 212.2 27.6% 184.2 28.9% 28.0 15.2% SG&A Expenses 138.8 18.0% 129.4 20.3% (9.4) (7.3%) Rationalization Charges 1.3 0.2% - 0.0% (1.3) 100.0% Operating Income 72.1 9.4% 54.8 8.6% 17.3 31.6% Interest Income 1.7 0.2% 1.2 0.2% 0.5 41.7% Equity Earnings in Affiliates 1.6 0.2% 1.9 0.3% (0.3) (15.8%) Other Income 1.5 0.2% 1.6 0.3% (0.1) (6.3%) Interest Expense (3.9) (0.5%) (3.0) (0.5%) (0.9) (30.0%) Income Before Income Taxes 73.0 9.5% 56.5 8.9% 16.5 29.2% Income Taxes 18.6 2.4% 14.5 2.3% (4.1) (28.3%) Net Income $54.4 7.1% $42.0 6.6% $12.4 29.5% Basic Earnings Per Share $1.31 $1.03 $0.28 27.2% Non-recurring items (1) (0.03) - (0.03) 100.0% Basic Earnings Per Share excluding non- recurring items (2) $1.28 $1.03 $0.25 24.3% Diluted Earnings Per Share $1.30 $1.02 $0.28 27.5% Non-recurring items (1) (0.03) - (0.03) 100.0% Diluted Earnings Per Share excluding non- recurring items (2) $1.27 $1.02 $0.25 24.5% Weighted Average Shares (Basic) 41.6 40.9 Weighted Average Shares (Diluted) 42.0 41.1 (1) Represents European rationalization charges of $1,250 pre-tax, or $848 after tax and the favorable impact on provision for income taxes of $1,807 related to a change in Ohio tax law. (2) Basic and diluted earnings per share excluding non-recurring items are presented as management believes this financial measure is important to investors to evaluate and compare the Company's financial performance from period to period. Management uses this information in assessing and evaluating the Company's underlying operating performance. Lincoln Electric Holdings, Inc. Financial Highlights (amounts in millions, except per share data) (Unaudited) Balance Sheet Highlights Selected Consolidated Balance Sheet Data June 30, December 31, 2005 2004 Cash and Cash Equivalents $80.3 $92.8 Marketable Securities - 50.5 Total Current Assets 636.2 637.6 Net Property, Plant and Equipment 336.4 316.1 Total Assets 1,108.0 1,059.2 Total Current Liabilities 295.3 263.0 Short-Term Debt 3.9 3.4 Long-Term Debt 163.1 163.9 Total Shareholders' Equity 595.8 577.3 Net Working Capital June 30, December 31, 2005 2004 Trade Accounts Receivable $249.8 $219.5 Inventory 271.2 236.3 Trade Accounts Payable 125.5 111.2 Net Working Capital $395.5 $344.6 Average Operating Working Capital % to Net Sales 32.9% 32.6% Total Debt June 30, December 31, 2005 2004 Short-term debt $3.9 $3.4 Long-term debt 163.1 163.9 Total Debt 167.0 167.3 Equity 595.8 577.3 Total $762.8 $744.6 Total Debt/Capitalization 21.9% 22.5% Return on Average Shareholders' Equity 16.4% 15.4% Lincoln Electric Holdings, Inc. Financial Highlights (amounts in millions, except per share data) (Unaudited) Consolidated Six Months Ended June 30, Statements of Cash Flows 2005 2004 Operating Activities: Net Income $54.4 $42.0 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Rationalization Charges 1.3 - Depreciation and Amortization 20.9 19.1 Equity Earnings of Affiliates and Other Non-Cash Items, net 1.1 - Changes in Operating Assets and Liabilities: Increase in Accounts Receivable (22.5) (46.4) Increase in Inventories (25.1) (31.1) Increase in Accounts Payable 15.6 36.4 Contributions to Pension Plans (20.0) (20.0) Net change in Other Current Assets and Liabilities 38.0 36.9 Net change in Other Long-Term Assets and Liabilities (1.9) 6.6 Net Cash Provided by Operating Activities 61.8 43.5 Investing Activities: Capital Expenditures (21.4) (20.3) Proceeds from Sales of Fixed Assets 0.8 0.4 Acquisitions of Businesses, net of cash acquired (70.7) (6.1) Sales of marketable securities, net 50.5 6.0 Net Cash Used by Investing Activities (40.8) (20.0) Financing Activities: Net change in Borrowings (11.0) (4.2) Issuance of Shares from Treasury for Stock Options 7.6 13.0 Purchase of Shares for Treasury (12.8) (2.9) Cash Dividends Paid (15.0) (13.4) Net Cash Used by Financing Activities (31.2) (7.5) Effect of Exchange Rate Changes on Cash and Cash Equivalents (2.2) (0.7) (Decrease) Increase in Cash and Cash Equivalents (12.4) 15.3 Cash and Cash Equivalents at Beginning of Period 92.8 113.9 Cash and Cash Equivalents at End of Period $80.4 $129.2 Cash Dividends Paid Per Share $0.36 $0.33 DATASOURCE: Lincoln Electric Holdings, Inc. CONTACT: Roy L. Morrow of Lincoln Electric Holdings, Inc., +1-216-383-4893, or Web site: http://www.lincolnelectric.com/

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