LECO Lincoln Electric Holdings Inc

CLEVELAND, July 26 /PRNewswire-FirstCall/ -- -- Second Quarter sales increased 16.7% to $586.6 million -- Second Quarter operating income increased 22.0% -- Excluding non-recurring items in 2006, Second Quarter operating income increased 19.5% -- Second Quarter net income increased 29.6% to $55.2 million -- Excluding non-recurring items in 2006, Second Quarter adjusted net income increased 25.8% to $55.2 million -- Diluted Earnings Per Share (EPS) for the quarter were $1.27 vs. $0.99, an increase of 28.3% -- Excluding non-recurring items in 2006, Diluted EPS for the quarter were $1.27 vs. $1.02, an increase of 24.5% -- First Half sales increased 17.0% to $1.14 billion -- First Half operating income increased 25.9% -- Excluding non-recurring items, First Half operating income increased 23.7% -- First Half net income increased 30.1% to $103.2 million -- Excluding non-recurring items, First Half adjusted net income increased 26.8% to $103.6 million -- Diluted EPS for the First Half were $2.38 vs. $1.85, an increase of 28.6% -- Excluding non-recurring items, Diluted EPS for the First Half were $2.39 vs. $1.91, an increase of 25.1% Lincoln Electric Holdings, Inc. (the "Company") (NASDAQ:LECO) today reported that 2007 second quarter net income increased 29.6% to $55.2 million, or $1.27 per diluted share, on sales of $586.6 million, an increase of 16.7%. Net income in the comparable period of 2006 was $42.6 million, or $0.99 per diluted share, on net sales of $502.5 million. Operating income for the 2007 second quarter increased 22.0% to $75.4 million from $61.7 million in the comparable 2006 period. Net income for the 2006 second quarter includes charges of $1.3 million ($1.3 million after-tax, or $0.03 per diluted share) related to European rationalization actions. Excluding non-recurring items, adjusted net income increased 25.8% to $55.2 million, or $1.27 per diluted share in 2007 compared to $43.9 million or $1.02 per diluted share in 2006. The 2007 second quarter effective tax rate was 29.6% compared with 32.4% in 2006. "Our results highlight another quarter of strong sales, profits and cash flow. We are encouraged by these results despite ongoing slowing in several key market segments," said John M. Stropki, Chairman and Chief Executive Officer. "We continue to benefit from our strategic investments in building a broad global manufacturing platform. I am also pleased with the initial impact of supply chain improvements recently enacted." Sales for the Company's North American operations were $363.8 million in the quarter versus $335.7 million in the comparable quarter last year, an increase of 8.4%. Export sales in the quarter increased 26.7% to $50.1 million from $39.6 million in 2006. Sales at Lincoln subsidiaries outside North America increased to $222.8 million in the second quarter, compared with $166.8 million in the year ago quarter. In local currencies, international subsidiaries' sales increased 20.4%. Net income for the first half of 2007 increased 30.1% to $103.2 million, or $2.38 per diluted share. This compares with net income of $79.4 million in the same period last year, or $1.85 per diluted share. Operating income for the first half increased 25.9% to $143.7 million from $114.1 million in the 2006 period. Net income for the first half of 2007 and 2006 includes non- recurring charges related to European rationalization actions of $0.4 million ($0.4 million after-tax, or $.01 per diluted share) and $2.3 million ($2.3 million after-tax, or $0.06 per diluted share), respectively. Excluding non- recurring items, adjusted net income increased 26.8% to $103.6 million, or $2.39 per diluted share in 2007 compared to $81.7 million, or $1.91 per diluted share in 2006. Sales in the first half of 2007 increased 17.0%, to $1,135.7 million from $970.9 million in the 2006 comparable period. The Company's North American operations had sales of $709.6 million in 2007, compared with $655.9 million for the same period in 2006, an increase of 8.2%. Export sales increased 39.0% to $97.6 million, compared with $70.2 million in the comparable 2006 period. Lincoln operations outside of North America had sales of $426.1 million, an increase of 35.3% over prior year sales of $315.0 million. In local currencies, sales for the Company's international operations increased 21.3%. Net cash provided by operating activities was $107.5 million for the first half of 2007, compared with $57.3 million for the first half of 2006. During the first half of 2007, the Company repaid $40.0 million of outstanding debt under its Senior Unsecured Notes and paid $18.8 million in dividends. The Company's Board of Directors declared a quarterly cash dividend of $0.22, which was paid on July 13, 2007 to holders of record as of June 29, 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 second quarter 2007 results is scheduled for today, Thursday, July 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/. Lincoln Electric Holdings, Inc. Financial Highlights (amounts in thousands, except per share data) (Unaudited) Consolidated Three Months Ended June 30, Fav (Unfav) to Statements of % of % of Prior Year Income 2007 Sales 2006 Sales $ % Net sales $586,638 100.0% $502,510 100.0% $84,128 16.7% Cost of goods sold 417,970 71.2% 356,043 70.9% (61,927) (17.4%) Gross profit 168,668 28.8% 146,467 29.1% 22,201 15.2% Selling, general & administrative expenses 93,317 16.0% 83,436 16.6% (9,881) (11.8%) Rationalization charges - 0.0% 1,292 0.2% 1,292 100.0% Operating income 75,351 12.8% 61,739 12.3% 13,612 22.0% Interest income 1,699 0.3% 1,400 0.3% 299 21.4% Equity earnings in affiliates 3,677 0.6% 2,160 0.4% 1,517 70.2% Other income 580 0.1% 176 0.0% 404 229.5% Interest expense (2,786) (0.4%) (2,438) (0.5%) (348) (14.3%) Income before income taxes 78,521 13.4% 63,037 12.5% 15,484 24.6% Income taxes 23,272 4.0% 20,418 4.0% (2,854) (14.0%) Net income (1) $55,249 9.4% $42,619 8.5% $12,630 29.6% Reconciliation of Net Income as Reported to Adjusted Net Income Excluding Non-recurring Items: Three Months Ended June 30, Change 2007 2006 $ % Net income as reported (1) $55,249 $42,619 $12,630 29.6% Non-recurring items: European rationalization charges (after-tax) - 1,292 (1,292) (100.0%) Adjusted net income excluding non-recurring items (2) $55,249 $43,911 $11,338 25.8% Basic earnings per share $1.29 $1.00 $0.29 29.0% Non-recurring items (1) - 0.03 (0.03) (100.0%) Basic earnings per share excluding non-recurring items (2) $1.29 $1.03 $0.26 25.2% Diluted earnings per share $1.27 $0.99 $0.28 28.3% 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) 42,947 42,514 Weighted average shares (diluted) 43,461 43,008 (1) Net income includes charges related to European rationalization actions of $1,292 ($1,292 after-tax) for the three months ended June 30, 2006. (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, except per share data) (Unaudited) Consolidated Six Months Ended June 30, Fav (Unfav) to Statements of % of % of Prior Year Income 2007 Sales 2006 Sales $ % Net sales $1,135,681 100.0% $970,904 100.0% $164,777 17.0% Cost of goods sold 808,797 71.2% 694,371 71.5% (114,426) (16.5%) Gross profit 326,884 28.8% 276,533 28.5% 50,351 18.2% Selling, general & administrative expenses 182,837 16.2% 160,107 16.5% (22,730) (14.2%) Rationalization charges 396 0.0% 2,341 0.2% 1,945 83.1% Operating income 143,651 12.6% 114,085 11.8% 29,566 25.9% Interest income 3,149 0.3% 2,594 0.2% 555 21.4% Equity earnings in affiliates 5,155 0.5% 2,524 0.2% 2,631 104.2% Other income 1,044 0.1% 549 0.1% 495 90.2% Interest expense (5,513) (0.5%) (4,839) (0.5%) (674) (13.9%) Income before income taxes 147,486 13.0% 114,913 11.8% 32,573 28.3% Income taxes 44,237 3.9% 35,545 3.6% (8,692) (24.5%) Net income (1) $103,249 9.1% $79,368 8.2% $23,881 30.1% Reconciliation of Net Income as Reported to Adjusted Net Income Excluding Non-recurring Items: Six Months Ended June 30, Change 2007 2006 $ % Net income as reported (1) $103,249 $79,368 $23,881 30.1% Non-recurring items: European rationalization charges (after-tax) 396 2,341 (1,945) (83.1%) Adjusted net income excluding non-recurring items (2) $103,645 $81,709 $21,936 26.8% Basic earnings per share $2.41 $1.87 $0.54 28.9% Non-recurring items (1) 0.01 0.06 (0.05) (83.3%) Basic earnings per share excluding non-recurring items (2) $2.42 $1.93 $0.49 25.4% Diluted earnings per share $2.38 $1.85 $0.53 28.6% Non-recurring items (1) 0.01 0.06 (0.05) (83.3%) Diluted earnings per share excluding non-recurring items (2) $2.39 $1.91 $0.48 25.1% Weighted average shares (basic) 42,895 42,397 Weighted average shares (diluted) 43,407 42,874 (1) Net income includes charges related to European rationalization actions of $396 ($396 after-tax) and $2,341 ($2,341 after-tax) for the six months ended June 30, 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 June 30, December 31, 2007 2006 Cash and cash equivalents $147,981 $120,212 Total current assets 945,260 829,410 Net property, plant and equipment 404,062 389,518 Total assets 1,550,424 1,394,579 Total current liabilities 352,412 338,288 Short-term debt 12,381 47,134 Long-term debt 112,422 113,965 Total shareholders' equity 964,245 852,976 Net Operating Working Capital June 30, December 31, 2007 2006 Trade accounts receivable $360,945 $298,993 Inventory 375,127 351,144 Trade accounts payable 160,722 142,264 Net operating working capital $575,350 $507,873 Net operating working capital % to net sales 26.9% 25.8% Total Debt June 30, December 31, 2007 2006 Short-term debt $12,381 $47,134 Long-term debt 112,422 113,965 Total debt 124,803 161,099 Equity 964,245 852,976 Total $1,089,048 $1,014,075 Total debt/capitalization 11.5% 15.9% Return on invested capital 21.4% 19.9% Lincoln Electric Holdings, Inc. Financial Highlights (amounts in thousands, except per share data) (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2007 2006 OPERATING ACTIVITIES: Net income $103,249 $79,368 Adjustments to reconcile net income to net cash provided by operating activities: Rationalization charges 396 2,341 Depreciation and amortization 25,833 22,985 Equity earnings of affiliates, net (3,987) (1,591) Other non-cash items, net (10,690) 2,478 Changes in operating assets and liabilities net of effects from acquisitions: Increase in accounts receivable (53,759) (55,800) Increase in inventories (12,236) (49,428) Increase in accounts payable 14,529 27,824 Contributions to pension plans (10,395) (16,397) Increase in accrued pensions 1,025 8,637 Net change in other current assets and liabilities 52,511 38,740 Net change in other long-term assets and liabilities 976 (1,827) NET CASH PROVIDED BY OPERATING ACTIVITIES 107,452 57,330 INVESTING ACTIVITIES: Capital expenditures (29,640) (32,261) Acquisition of businesses, net of cash acquired (4,414) (95) Proceeds from sale of property, plant and equipment 201 641 NET CASH USED BY INVESTING ACTIVITIES (33,853) (31,715) FINANCING ACTIVITIES: Net change in borrowings (35,972) (4,973) Proceeds from exercise of stock options 5,062 8,952 Tax benefit from the exercise of stock options 2,736 3,051 Cash dividends paid to shareholders (18,825) (16,077) NET CASH USED BY FINANCING ACTIVITIES (46,999) (9,047) Effect of exchange rate changes on cash and cash equivalents 1,169 852 INCREASE IN CASH AND CASH EQUIVALENTS 27,769 17,420 Cash and cash equivalents at beginning of year 120,212 108,007 Cash and cash equivalents at end of period $147,981 $125,427 Cash dividends paid per share $0.44 $0.38 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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