LECO Lincoln Electric Holdings Inc

- Second Quarter sales increase 24% to a record $502.5 million CLEVELAND, July 25 /PRNewswire-FirstCall/ -- Lincoln Electric Holdings, Inc. (NASDAQ:LECO) today reported that 2006 second-quarter net income increased 33% to $42.6 million, or 99 cents per diluted share, on record sales of $502.5 million, an increase of 24%, 20% excluding the April 29, 2005 acquisition of J.W. Harris. This compares with 2005 same-quarter net income of $32.1 million, or 77 cents per diluted share, on net sales of $405.9 million. Net income for the 2006 second quarter includes charges of $1.3 million ($1.3 million after-tax, or 3 cents per diluted share) related to European rationalization actions. Net income for the 2005 second quarter includes a favorable tax benefit of $1.8 million (5 cents per diluted share) related to a change in Ohio tax law. "We had another excellent quarter," said John M. Stropki, Chairman and Chief Executive Officer. "Our solid performance reflects a strong global business environment and effective execution from our management team and employees which resulted in another record quarter for both sales and profitability. In addition, we are pleased with the improved operating leverage driven by significant increases in volume and ongoing cost control. "Our growth continues to be broad-based and we are focused on our core strategies of new product introductions and geographical market expansion, customer service excellence and cost control." Sales for the Company's North American operations were $335.7 million in the quarter versus $265.4 million in the comparable quarter last year, an increase of 27%, 22% excluding the 2005 acquisition of J.W. Harris. Export sales in the quarter increased 62% to $39.6 million from $24.4 million last year. Sales at Lincoln subsidiaries outside North America increased to $166.8 million in the second quarter, compared with $140.5 million in the year-ago quarter. In local currencies, international subsidiaries' sales increased 17%. Net income for the first half of 2006 increased 46% to $79.4 million, or $1.85 per diluted share. This compares with net income of $54.4 million in the same period last year, or $1.30 per diluted share. Net income for the first half of 2006 and 2005 includes charges of $2.3 million ($2.3 million after-tax, or 6 cents per diluted share) and $1.3 million ($0.8 million after- tax, or 2 cents per diluted share), respectively, related to European rationalization actions. In addition, net income for the 2005 comparable period includes a favorable tax benefit of $1.8 million (5 cents per diluted share) related to a change in Ohio tax law. Sales in the first half of 2006 increased 26%, 20% excluding the 2005 acquisition of J.W. Harris, to $970.9 million from $768.8 million in the 2005 comparable period. The Company's North American operations had sales of $655.9 million in 2006, compared with $496.9 million for the same period in 2005, an increase of 32%, 23% excluding the 2005 acquisition of J.W. Harris. Export sales increased 50% to $70.2 million, compared with $46.7 million in the comparable 2005 period. Lincoln operations outside of North America had sales of $315.0 million, a 16% increase over prior year sales of $271.9 million. In local currencies, sales for the Company's non-U.S. operations increased 17%. Cash flow from operations decreased 7% to $57.3 million for the first half of 2006, compared with $61.8 million in 2005. During 2006 the Company paid $16.1 million in dividends. The Board of Directors also declared a quarterly cash dividend of 19 cents, which was paid on July 15, 2006 to holders of record as of June 30, 2006. 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 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries. 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 2006 second quarter financial results is scheduled for today, Tuesday, July 25, 2006, 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 thousands, except per share data) (Unaudited) Consolidated Three Months Ended June 30, Change Statements of Income % of % of 2006 Sales 2005 Sales $ % Net Sales $502,510 100.0% $405,902 100.0% $96,608 23.8% Cost of Goods Sold 356,043 70.9% 291,951 71.9% 64,092 22.0% Gross Profit 146,467 29.1% 113,951 28.1% 32,516 28.5% SG&A Expenses 83,436 16.6% 71,919 17.7% 11,517 16.0% Rationalization Charges 1,292 0.2% - 0.0% 1,292 NA Operating Income 61,739 12.3% 42,032 10.4% 19,707 46.9% Interest Income 1,400 0.3% 891 0.2% 509 57.1% Equity Earnings in Affiliates 2,160 0.4% 1,030 0.2% 1,130 109.7% Other Income 176 0.0% 995 0.2% (819) (82.3%) Interest Expense (2,438) (0.5%) (2,186) (0.5%) (252) 11.5% Income Before Income Taxes 63,037 12.5% 42,762 10.5% 20,275 47.4% Income Taxes 20,418 4.0% 10,650 2.6% 9,768 91.7% Net Income (1) $42,619 8.5% $32,112 7.9% $10,507 32.7% Basic Earnings Per Share $1.00 $0.77 $0.23 29.9% Diluted Earnings Per Share $0.99 $0.77 $0.22 28.6% Weighted Average Shares (Basic) 42,514 41,477 Weighted Average Shares (Diluted) 43,008 41,845 (1) 2006 net income includes charges related to European rationalization actions of $1,292 ($1,292 after-tax). 2005 net income reflects a favorable tax benefit of $1,807 related to a change in Ohio tax law. Lincoln Electric Holdings, Inc. Financial Highlights (amounts in thousands, except per share data) (Unaudited) Consolidated Six Months Ended June 30, Change Statements of Income % of % of 2006 Sales 2005 Sales $ % Net Sales $970,904 100.0% $768,805 100.0% $202,099 26.3% Cost of Goods Sold 694,371 71.5% 556,576 72.4% 137,795 24.8% Gross Profit 276,533 28.5% 212,229 27.6% 64,304 30.3% SG&A Expenses 160,107 16.5% 138,821 18.0% 21,286 15.3% Rationalization Charges 2,341 0.2% 1,250 0.2% 1,091 87.3% Operating Income 114,085 11.8% 72,158 9.4% 41,927 58.1% Interest Income 2,594 0.2% 1,660 0.2% 934 56.3% Equity Earnings in Affiliates 2,524 0.2% 1,564 0.2% 960 61.4% Other Income 549 0.1% 1,466 0.2% (917) (62.6%) Interest Expense (4,839) (0.5%) (3,868) (0.5%) (971) 25.1% Income Before Income Taxes 114,913 11.8% 72,980 9.5% 41,933 57.5% Income Taxes 35,545 3.6% 18,628 2.4% 16,917 90.8% Net Income (1) $79,368 8.2% $54,352 7.1% $25,016 46.0% Basic Earnings Per Share $1.87 $1.31 $0.56 42.7% Diluted Earnings Per Share $1.85 $1.30 $0.55 42.3% Weighted Average Shares (Basic) 42,397 41,577 Weighted Average Shares (Diluted) 42,874 41,966 (1) 2006 net income includes charges related to European rationalization actions of $2,341 ($2,341 after-tax). 2005 net income includes charges related to European rationalization actions of $1,250 ($848 after-tax) and a favorable tax benefit of $1,807 related to a change in Ohio tax law. Lincoln Electric Holdings, Inc. Financial Highlights (amounts in thousands, except per share data) (Unaudited) Balance Sheet Highlights Selected Consolidated Balance Sheet Data June 30, December 31, 2006 2005 Cash and Cash Equivalents $125,427 $108,007 Total Current Assets 821,118 676,634 Net Property, Plant and Equipment 354,385 340,533 Total Assets 1,323,808 1,161,161 Total Current Liabilities 404,709 293,642 Short-Term Debt 45,115 8,163 Long-Term Debt 111,940 157,853 Total Shareholders' Equity 743,822 652,294 Net Operating Working Capital June 30, December 31, 2006 2005 Trade Accounts Receivable $304,161 $242,093 Inventory 331,043 275,745 Trade Accounts Payable 152,754 121,917 Net Working Capital $482,450 $395,921 Average Operating Working Capital % to Net Sales 31.3% 31.3% Invested Capital June 30, December 31, 2006 2005 Short-Term Debt $45,115 $8,163 Long-Term Debt 111,940 157,853 Total Debt 157,055 166,016 Equity 743,822 652,294 Total $900,877 $818,310 Total Debt/Capitalization 17.4% 20.3% Return on Invested Capital 19.3% 17.7% Lincoln Electric Holdings, Inc. Financial Highlights (amounts in thousands, except per share data) (Unaudited) Consolidated Six Months Ended June 30, Statements of Cash Flows 2006 2005 Operating Activities: Net Income $79,368 $54,352 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Rationalization Charges 2,341 1,250 Depreciation and Amortization 22,985 20,866 Equity Earnings of Affiliates, net (1,591) (1,564) Other Non-Cash Items, net 2,478 2,663 Changes in Operating Assets and Liabilities: Increase in Accounts Receivable (55,800) (22,539) Increase in Inventories (49,428) (25,055) Increase in Accounts Payable 27,824 15,575 Contributions to Pension Plans (16,397) (21,466) Increase in Accrued Pensions 8,637 7,319 Net change in Other Current Assets and Liabilities 38,740 32,606 Net change in Other Long-Term Assets and Liabilities (1,827) (2,166) Net Cash Provided by Operating Activities 57,330 61,841 1 Investing Activities: Capital Expenditures (32,261) (21,435) Acquisitions of businesses, net of cash acquired (95) (70,704) Proceeds from Sales of Fixed Assets 641 846 Sales of Marketable Securities, net - 50,500 Net Cash Used by Investing Activities (31,715) (40,793) Financing Activities: Net change in Borrowings (7,477) (11,009) Proceeds from Exercise of Stock Options 8,952 7,592 Tax Benefit from the Exercise of Stock Options 3,051 - Purchase of Shares for Treasury - (12,804) Cash Dividends Paid to Shareholders (16,077) (14,985) Net Cash Used by Financing Activities (11,551) (31,206) Effect of Exchange Rate Changes on Cash and Cash Equivalents 3,356 (2,277) Increase in Cash and Cash Equivalents 17,420 (12,435) Cash and Cash Equivalents at Beginning of Year 108,007 92,819 Cash and Cash Equivalents at End of Period $125,427 $80,384 Cash Dividends Paid Per Share $0.38 $0.36 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/

Copyright