LECO Lincoln Electric Holdings Inc

- First Quarter sales increase 17% to $549.0 million CLEVELAND, April 26 /PRNewswire-FirstCall/ -- Lincoln Electric Holdings, Inc. (the "Company") (NASDAQ:LECO) today reported that 2007 first quarter net income increased 31% to $48.0 million, or $1.11 per diluted share, on sales of $549.0 million, an increase of 17%. Net income in the comparable period of 2006 was $36.7 million, or $0.86 per diluted share, on net sales of $468.4 million. Operating income for the 2007 first quarter increased 30% to $68.3 million from $52.3 million in the comparable 2006 period. Net income for the 2007 and 2006 first quarters include charges of $0.4 million ($0.4 million after-tax, or $0.01 per diluted share) and $1.0 million ($1.0 million after- tax, or $0.02 per diluted share), respectively, related to European rationalization actions. Excluding non-recurring items, adjusted net income increased 28% to $48.4 million, or $1.12 per diluted share in 2007 compared to $37.8 million or $0.88 per diluted share in 2006. The 2007 first quarter effective tax rate was 30.4% compared with 29.2% in the 2006 first quarter. "I am pleased to report excellent sales and profit results for the first quarter," said John M. Stropki, Chairman and Chief Executive Officer. "Our broad, global positioning and expanded product line have allowed us to weather some economic softening in certain markets while capitalizing on the strength and growth of others. We continue to stay very focused in executing our strategies across our regional businesses, which include market share growth, offering value-added products and services and operational excellence." Sales for the Company's North American operations were $345.7 million in the quarter versus $320.2 million in the comparable quarter last year, an increase of 8%. Export sales in the quarter increased 55% to $47.5 million from $30.7 million in 2006. Sales at Lincoln subsidiaries outside North America increased to $203.3 million in the first quarter, compared with $148.2 million in the year ago quarter. In local currencies, international subsidiaries' sales increased 22%. Net cash provided by operating activities was $42.3 million for the first three months of 2007, compared with $29.6 million for the first three months of 2006. During the first quarter 2007 the Company repaid $40.0 million of outstanding debt under its Senior Unsecured Notes and paid $9.4 million in dividends. The Company's Board of Directors declared a quarterly cash dividend of $0.22, which was paid on April 13, 2007 to holders of record as of March 30, 2007. 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 35 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 Website 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. For additional discussion, see "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2006. A conference call to discuss first quarter 2007 results is scheduled for today, Thursday, April 26, 2007 at 10:00 a.m. Eastern Time. An audio webcast of the call is accessible through the Investor page on the Company's Web site at http://www.lincolnelectric.com/. The Annual Meeting of Shareholders of Lincoln Electric Holdings, Inc. will be held at 11:30 a.m. on Friday, April 27, 2007 at the Marriot Cleveland East, Warrensville Heights, Ohio. Lincoln Electric Holdings, Inc. Financial Highlights (amounts in thousands, except per share data) (Unaudited) Fav (Unfav) to Consolidated Three Months Ended March 31, Prior Year Statements of % of % of Income 2007 Sales 2006 Sales $ % Net sales $549,043 100.0% $468,394 100.0% $80,649 17.2% Cost of goods sold 390,827 71.2% 338,328 72.2% (52,499) (15.5%) Gross profit 158,216 28.8% 130,066 27.8% 28,150 21.6% Selling, general & administrative expenses 89,520 16.3% 76,671 16.4% (12,849) (16.8%) Rationalization charges 396 0.1% 1,049 0.2% 653 62.2% Operating income 68,300 12.4% 52,346 11.2% 15,954 30.5% Interest income 1,450 0.3% 1,194 0.2% 256 21.4% Equity earnings in affiliates 1,478 0.3% 364 0.1% 1,114 306.0% Other income 464 0.1% 373 0.1% 91 24.4% Interest expense (2,727) (0.5%) (2,401) (0.5%) (326) (13.6%) Income before income taxes 68,965 12.6% 51,876 11.1% 17,089 32.9% Income taxes 20,965 3.8% 15,127 3.2% (5,838) (38.6%) Net income (1) $48,000 8.8% $36,749 7.9% $11,251 30.6% Reconciliation of Net Income as Reported to Adjusted Net Income Excluding Non-recurring Items: Three Months Ended March 31, Change 2007 2006 $ % Net income as reported (1) $48,000 $36,749 $11,251 30.6% Non-recurring items: European rationalization charges (after-tax) 396 1,049 (653) (62.2%) Adjusted net income excluding non-recurring items (2) $48,396 $37,798 $10,598 28.0% Basic earnings per share $1.12 $0.87 $0.25 28.7% Non-recurring items (1) 0.01 0.02 (0.01) (50.0%) Basic earnings per share excluding non-recurring items (2) $1.13 $0.89 $0.24 27.0% Diluted earnings per share $1.11 $0.86 $0.25 29.1% Non-recurring items (1) 0.01 0.02 (0.01) (50.0%) Diluted earnings per share excluding non- recurring items (2) $1.12 $0.88 $0.24 27.3% Weighted average shares (basic) 42,843 42,280 Weighted average shares (diluted) 43,349 42,718 (1) Net income includes charges related to European rationalization actions of $396 ($396 after-tax) and $1,049 ($1,049 after-tax) for the three months ended March 31, 2007 and 2006, respectively. (2) Adjusted net income excluding non-recurring items and basic and diluted earnings per share excluding non-recurring items, non-GAAP financial measures, are presented as management believes these financial measures are 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 thousands) (Unaudited) Balance Sheet Highlights Selected Consolidated Balance Sheet Data March 31, December 31, 2007 2006 Cash and cash equivalents $94,536 $120,212 Total current assets 864,383 829,410 Net property, plant and equipment 395,745 389,518 Total assets 1,451,958 1,394,579 Total current liabilities 320,840 338,288 Short-term debt 6,010 47,134 Long-term debt 114,368 113,965 Total shareholders' equity 899,046 852,976 Net Operating Working Capital March 31, December 31, 2007 2006 Trade accounts receivable $337,560 $298,993 Inventory 373,075 351,144 Trade accounts payable 159,090 142,264 Net operating working capital $551,545 $507,873 Net operating working capital % to net sales 26.9% 25.8% Total Debt March 31, December 31, 2007 2006 Short-term debt $6,010 $47,134 Long-term debt 114,368 113,965 Total debt 120,378 161,099 Equity 899,046 852,976 Total $1,019,424 $1,014,075 Total debt/capitalization 11.8% 15.9% Return on invested capital 20.2% 19.9% Lincoln Electric Holdings, Inc. Financial Highlights (amounts in thousands, except per share data) (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2007 2006 OPERATING ACTIVITIES: Net income $48,000 $36,749 Adjustments to reconcile net income to net cash provided by operating activities: Rationalization charges 396 1,049 Depreciation and amortization 12,511 11,447 Equity earnings of affiliates, net (1,134) 67 Other non-cash items, net (5,345) 698 Changes in operating assets and liabilities net of effects from acquisitions: Increase in accounts receivable (35,734) (36,277) Increase in inventories (18,116) (25,097) Increase in accounts payable 15,281 30,924 Contributions to pension plans (5,178) (8,165) Increase in accrued pensions 290 4,426 Net change in other current assets and liabilities 29,021 15,401 Net change in other long-term assets and liabilities 2,351 (1,596) NET CASH PROVIDED BY OPERATING ACTIVITIES 42,343 29,626 INVESTING ACTIVITIES: Capital expenditures (15,724) (17,526) Acquisition of businesses, net of cash acquired (4,362) - Proceeds from sale of property, plant and equipment 73 124 NET CASH USED BY INVESTING ACTIVITIES (20,013) (17,402) FINANCING ACTIVITIES: Net change in borrowings (41,720) (4,545) Proceeds from exercise of stock options 2,426 5,811 Tax benefit from the exercise of stock options 496 2,062 Cash dividends paid to shareholders (9,403) (8,014) NET CASH USED BY FINANCING ACTIVITIES (48,201) (4,686) Effect of exchange rate changes on cash and cash equivalents 195 511 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (25,676) 8,049 Cash and cash equivalents at beginning of year 120,212 108,007 Cash and cash equivalents at end of period $94,536 $116,056 Cash dividends paid per share $0.22 $0.19 DATASOURCE: Lincoln Electric Holdings, Inc. CONTACT: Roy L. Morrow of Lincoln Electric Holdings, Inc., +1-216-383-4893, Web site: http://www.lincolnelectric.com/

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