LECO Lincoln Electric Holdings Inc

-- Third quarter sales increase 20% to a record $412 million -- Diluted Earnings Per Share (EPS) of 90 cents vs. 55 cents, up 64% -- Diluted Earnings Per Share (EPS) of 71 cents vs. 55 cents, up 29%, excluding non-recurring items -- Net income increases 66% to a record $38.2 million -- Net income increases 31% to $30.1 million, excluding non-recurring items CLEVELAND, Oct. 31 /PRNewswire-FirstCall/ -- Lincoln Electric Holdings, Inc. (NASDAQ:LECO) today reported that 2005 third-quarter net income increased 66% to a record $38.2 million, or 90 cents per diluted share, on record sales of $412 million, an increase of 20%. This compares with 2004 same-quarter net income of $23 million, or 55 cents per diluted share, on net sales of $344 million. The 2005 third quarter includes non-recurring items of $8.1 million or 19 cents per diluted share relating to the resolution of prior years' tax liabilities and the settlement of legal disputes. Excluding the non-recurring items, net income was $30.1 million, or 71 cents per diluted share. "We are very pleased with the high sales levels, exceptional earnings growth and significant cash flows generated in the quarter," said John M. Stropki, Chairman and Chief Executive Officer. "We experienced significant revenue growth in North America on top of a difficult comparison to the prior year baseline. Consumable volumes trended favorably as we ended the third quarter and equipment sales in the United States were particularly strong in September where hurricane activity created demand for generator-welders, as well as a need for additional equipment to support reconstruction efforts." Sales for the Company's North American operations were $276.8 million in the quarter, an increase of 24%, compared with $223.7 million in the same quarter last year. Export sales in the quarter increased 18% to $23.8 million from $20.1 million last year. Sales outside North America increased 12% to $135.2 million in the quarter, compared with $120.6 million in the year-ago period. In local currencies, international subsidiaries' sales increased 10%. Net income for the nine-month period increased 42% to $92.5 million, or $2.20 per diluted share, including non-recurring items of $9.9 million related to favorable adjustments associated with changes in Ohio tax law, the resolution of prior years' tax liabilities and the settlement of legal disputes, partially offset by European rationalization charges of $.9 million. This compares with net income of $65 million in the same period last year, or $1.57 per diluted share. Excluding non-recurring items, 2005 net income increased 29% to $83.5 million and diluted earnings per share increased 26% to $1.98 compared to prior year. Sales in the 2005 nine-month period increased 20% to $1.18 billion from $982.7 million in the 2004 comparable period. The Company's North American operations had sales of $773.7 million in 2005, compared with $653.4 million for the same period in 2004, an increase of 18%. Export sales increased 23% to $70.5 million, compared with $57.3 million in the comparable 2004 period. Lincoln operations outside of North America had sales of $407.1 million, a 24% increase over prior year sales of $329.3 million. In local currencies, sales for the Company's non-U.S. operations increased 20%. During the 2005 third quarter, the Company paid $7.5 million in dividends. For the nine-month period dividends paid were $22.5 million compared with $20.5 million in the comparable 2004 period, an increase of 10%. The Board of Directors also declared a quarterly cash dividend of 18 cents, which was paid on October 14, 2005 to holders of record as of September 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 and has a leading global position in the brazing and soldering alloys market. Headquartered in Cleveland, Ohio, Lincoln has 33 manufacturing locations, including 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 third-quarter financial results is scheduled for today, Monday, October 31, 2005, at 11:00 a.m. ET. 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) Consolidated Three Months Ended September 30, Fav (Unfav) Statements of Income % of % of to Prior Year 2005 Sales 2004 Sales $ % Net Sales $412.0 100.0% $344.3 100.0% $67.7 19.7% Cost of Goods Sold 300.8 73.0% 251.6 73.1% (49.2) (19.6%) Gross Profit 111.2 27.0% 92.7 26.9% 18.5 19.9% SG&A Expenses 71.5 17.4% 61.4 17.8% (10.1) (16.4%) Operating Income 39.7 9.6% 31.3 9.1% 8.4 26.7% Interest Income 1.2 0.3% 0.8 0.2% 0.4 53.9% Equity Earnings in Affiliates 1.7 0.4% 1.2 0.3% 0.5 48.2% Other Income 2.4 0.6% 0.6 0.2% 1.8 301.2% Interest Expense (2.1) (0.5%) (1.4) (0.4%) (0.7) (55.7%) Income Before Income Taxes 42.9 10.4% 32.5 9.4% 10.4 32.0% Income Taxes 4.7 1.1% 9.5 2.7% 4.8 50.8% Net Income $38.2 9.3% $23.0 6.7% $15.2 66.1% Basic Earnings Per Share $0.91 $0.56 $0.35 62.5% Non-recurring items (1) (0.19) - (0.19) (100.0%) Basic Earnings Per Share excluding non- recurring items (2) $0.72 $0.56 $0.16 28.6% Diluted Earnings Per Share $0.90 $0.55 $0.35 63.6% Non-recurring items (1) (0.19) - (0.19) (100.0%) Diluted Earnings Per Share excluding non- recurring items (2) $0.71 $0.55 $0.16 29.1% Weighted Average Shares (Basic) 41.9 41.4 Weighted Average Shares (Diluted) 42.3 41.8 (1) Includes non-recurring items of $8.1 relating to the resolution of prior years' tax liabilities and the settlement of legal disputes. (2) Basic and diluted earnings per share excluding the non-recurring item, a non-GAAP financial measure, 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) Consolidated Nine Months Ended September 30, Fav (Unfav) Statements of Income % of % of to Prior Year 2005 Sales 2004 Sales $ % Net Sales $1,180.8 100.0% $982.7 100.0% $198.1 20.2% Cost of Goods Sold 857.4 72.6% 705.7 71.8% (151.7) (21.5%) Gross Profit 323.4 27.4% 277.0 28.2% 46.4 16.8% SG&A Expenses 210.2 17.8% 190.9 19.4% (19.3) (10.2%) Rationalization Charges 1.3 0.1% - 0.0% (1.3) (100.0%) Operating Income 111.9 9.5% 86.1 8.8% 25.8 29.9% Interest Income 2.8 0.2% 2.0 0.2% 0.8 41.4% Equity Earnings in Affiliates 3.2 0.3% 3.1 0.3% 0.1 6.1% Other Income 3.9 0.3% 2.2 0.2% 1.7 75.3% Interest Expense (6.0) (0.5%) (4.4) (0.4%) (1.6) (35.9%) Income Before Income Taxes 115.8 9.8% 89.0 9.1% 26.8 30.2% Income Taxes 23.3 2.0% 24.0 2.5% 0.7 3.1% Net Income $92.5 7.8% $65.0 6.6% $27.5 42.4% Basic Earnings Per Share $2.22 $1.58 $0.64 40.5% Non-recurring items (1) (0.22) - (0.22) (100.0%) Basic Earnings Per Share excluding non-recurring items (2) $2.00 $1.58 $0.42 26.6% Diluted Earnings Per Share $2.20 $1.57 $0.63 40.1% Non-recurring items (1) (0.22) - (0.22) (100.0%) Diluted Earnings Per Share excluding non-recurring items (2) $1.98 $1.57 $0.41 26.1% Weighted Average Shares (Basic) 41.7 41.1 Weighted Average Shares (Diluted) 42.1 41.3 (1) Includes non-recurring items of $9.9 million related to favorable adjustments associated with a change in Ohio tax law, the resolution of prior years' tax liabilities and the settlement of legal disputes, partially offset by European rationalization charges of $.9 million. (2) Basic and diluted earnings per share excluding non-recurring items, a non-GAAP financial measure, 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 September 30, December 31, 2005 2004 Cash and Cash Equivalents $106.2 $92.8 Marketable Securities - 50.5 Total Current Assets 674.1 637.6 Net Property, Plant and Equipment 339.2 316.1 Total Assets 1,152.5 1,059.2 Total Current Liabilities 283.7 263.0 Short-Term Debt 5.3 3.4 Long-Term Debt 159.7 163.9 Total Shareholders' Equity 643.0 577.3 Net Working Capital September 30, December 31, 2005 2004 Trade Accounts Receivable $255.9 $219.5 Inventory 269.1 236.3 Trade Accounts Payable 113.1 111.2 Net Working Capital $411.9 $344.6 Average Operating Working Capital % to Net Sales 32.7% 32.6% Total Debt September 30, December 31, 2005 2004 Short-Term Debt $5.3 $3.4 Long-Term Debt 159.7 163.9 Total Debt 165.0 167.3 Equity 643.0 577.3 Total $808.0 $744.6 Total Debt/Capitalization 20.4% 22.5% Return on Average Shareholders' Equity 18.3% 15.4% Lincoln Electric Holdings, Inc. Financial Highlights (amounts in millions, except per share data) (Unaudited) Consolidated Nine Months Ended September 30, Statements of Cash Flows 2005 2004 Operating Activities: Net Income $92.5 $65.0 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Rationalization Charges 1.3 - Depreciation and Amortization 32.1 29.4 Equity Earnings of Affiliates (3.2) (2.4) Other Non-Cash Items, net 4.6 (4.3) Changes in Operating Assets and Liabilities: Increase in Accounts Receivable (27.5) (49.1) Increase in Inventories (21.6) (51.0) Increase in Accounts Payable 2.5 22.5 Contributions to Pension Plans (31.5) (30.0) Net change in Other Current Assets and Liabilities 46.8 65.2 Net change in Other Long-Term Assets and Liabilities 3.5 9.1 Net Cash Provided by Operating Activities 99.5 54.4 Investing Activities: Capital Expenditures (36.1) (38.3) Proceeds from Sales of Fixed Assets 3.8 1.6 Acquisitions of Businesses, net of cash acquired (73.6) (12.5) Sales of Marketable Securities, net 50.5 6.0 Net Cash Used by Investing Activities (55.4) (43.2) Financing Activities: Net change in Borrowings (9.8) (4.0) Issuance of Shares from Treasury for Stock Options 18.2 17.7 Purchase of Shares for Treasury (12.8) (4.4) Cash Dividends Paid (22.5) (20.5) Net Cash Used by Financing Activities (26.9) (11.2) Effect of Exchange Rate Changes on Cash and Cash Equivalents (3.8) 2.3 Increase in Cash and Cash Equivalents 13.4 2.3 Cash and Cash Equivalents at Beginning of Period 92.8 113.9 Cash and Cash Equivalents at End of Period $106.2 $116.2 Cash Dividends Paid Per Share $0.54 $0.50 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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