LECO Lincoln Electric Holdings Inc

CLEVELAND, Feb. 22 /PRNewswire-FirstCall/ -- Three Months Ended December 31, 2007 -- Sales increased 14.7% to $580.3 million -- Operating income increased 12.1% to $66.4 million -- Excluding non-recurring items, operating income increased 29.8% -- Net cash provided by operating activities was $45.7 million, an increase of 236% Twelve Months Ended December 31, 2007 -- Sales increased 15.7% to $2.28 billion -- Operating income increased 19.2% to $277.6 million -- Excluding non-recurring items, operating income increased 22.0% -- Net cash provided by operating activities was $249.8 million, an increase of 111% Lincoln Electric Holdings, Inc. (the "Company") (NASDAQ:LECO) today reported record 2007 fourth quarter operating income, increasing 12.1% to $66.4 million from $59.2 million in 2006, on a sales increase of 14.7%. Non- recurring items in the 2007 fourth quarter include a gain of $0.6 million ($0.5 million after-tax, or $0.01 per diluted share) related to European rationalization actions. The 2006 fourth quarter includes a non-recurring gain of $9.0 million ($7.2 million after-tax or $0.17 per diluted share) on the sale of the Company's facility in Ireland, offset by a charge of $0.5 million ($0.5 million after-tax, or $0.01 per diluted share) related to European rationalization actions. The 2006 gain is reported as a reduction in selling, general and administrative expenses. Excluding these non-recurring items, adjusted operating income increased 29.8% to $65.8 million from $50.7 million in 2006. Net income for the fourth quarter decreased 4.4% to $49.5 million, or $1.14 per diluted share from $51.8 million, or $1.20 per diluted share in 2006. This decrease is primarily due to the impact of non-recurring items and a much lower effective tax rate in the prior year comparable period. The 2007 fourth quarter effective tax rate was 28.8% compared with 16.0% in 2006. Excluding non-recurring items, adjusted net income increased 8.8% to $49.0 million, or $1.13 per diluted share in 2007 compared to $45.1 million or $1.04 per diluted share in 2006. "We had a solid fourth quarter and completed another record year for sales, profits and cash flow. Our global management team, including 8,992 associates worldwide, achieved these strong results despite challenging conditions in several key markets and geographies," said John M. Stropki, Chairman and Chief Executive Officer. "Although there is still considerable uncertainty in several sectors and markets, we believe we are especially well positioned to continue growing our sales and market share. We will continue to focus our efforts and investments in areas of higher growth potential and build on the momentum of our record 2007 performance." Sales for the fourth quarter increased 14.7% to $580.3 million from $505.9 million in the comparable period of 2006. Sales for the Company's North American operations were $345.1 million in the quarter versus $319.2 million in the comparable quarter last year, an increase of 8.1%. U.S. export sales in the quarter increased 11.2% to $46.3 million from $41.6 million in 2006. Sales at Lincoln subsidiaries outside North America increased to $235.2 million in the fourth quarter, compared with $186.7 million in the year ago quarter. In local currencies, international subsidiaries' sales increased 14.0%. Net income for 2007 increased 15.8% to $202.7 million, or $4.67 per diluted share. This compares with net income of $175.0 million in 2006, or $4.07 per diluted share. Net income includes a gain of $0.2 million ($0.1 million after-tax, no impact per diluted share) in 2007 and a charge in 2006 of $3.5 million ($3.5 million after-tax, or $0.08 per diluted share) related to European rationalization actions. Net income for 2006 also includes a non- recurring gain of $9.0 million ($7.2 million after-tax or $0.17 per diluted share) on the sale of the Company's facility in Ireland. Excluding non- recurring items, adjusted net income increased 18.3% to $202.6 million, or $4.67 per diluted share in 2007 compared to $171.3 million, or $3.98 per diluted share in 2006. Operating income for 2007 increased 19.2% to $277.6 million from $233.0 million in 2006. Excluding non-recurring items, adjusted operating income increased 22.0% to $277.4 million from $227.4 million in 2006. Sales in 2007 increased 15.7%, to $2.28 billion from $1.97 billion in 2006. The Company's North American operations had sales of $1.40 billion in 2007, compared with $1.31 billion in 2006, an increase of 7.3%. U.S. export sales increased 26.2% to $194.5 million, compared with $154.1 million in 2006. Lincoln operations outside of North America had sales of $879.4 million, an increase of 32.0% over 2006 sales of $666.4 million. In local currencies, sales for the Company's international operations increased 18.8%. Net cash provided by operating activities increased 236% to $45.7 million in the fourth quarter compared with $13.6 million for the comparable period in 2006. For the full year 2007, net cash provided by operating activities increased 111% to $249.8 million compared with $118.7 million for the prior year. During 2007, the Company repaid $40.0 million of outstanding debt under its Senior Unsecured Notes and paid $37.7 million in dividends. The Company's Board of Directors declared a quarterly cash dividend of $0.25, which was paid on January 15, 2008 to holders of record as of December 31, 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 38 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. A conference call to discuss fourth quarter 2007 results is scheduled for today, Friday, February 22, 2008 at 10:00 a.m. Eastern Time. An audio webcast of the call is accessible through the Investor page on the Company's Website at http://www.lincolnelectric.com/. Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share data) (Unaudited) Consolidated Statements of Fav (Unfav) to Income Three Months Ended December 31, Prior Year 2007 % of Sales 2006 % of Sales $ % Net sales $580,279 100.0% $505,874 100.0% $74,405 14.7% Cost of goods sold 419,338 72.3% 371,467 73.4% (47,871) (12.9%) Gross profit 160,941 27.7% 134,407 26.6% 26,534 19.7% Selling, general & administrative expenses 95,145 16.4% 74,703 14.8% (20,442) (27.4%) Rationalization (gain) charges (584) (0.1%) 472 0.1% 1,056 223.7% Operating income 66,380 11.4% 59,232 11.7% 7,148 12.1% Interest income 2,855 0.5% 1,675 0.3% 1,180 70.4% Equity earnings in affiliates 2,420 0.4% 2,666 0.5% (246) (9.2%) Other income 960 0.2% 854 0.2% 106 12.4% Interest expense (3,051) (0.5%) (2,810) (0.5%) (241) (8.6%) Income before income taxes 69,564 12.0% 61,617 12.2% 7,947 12.9% Income taxes 20,055 3.5% 9,832 2.0% (10,223) (104.0%) Effective tax rate 28.8% 16.0% (12.8%) Net income (1) $49,509 8.5% $51,785 10.2% $(2,276) (4.4%) Reconciliation of Net Income as Reported to Adjusted Net Income Excluding Non-Recurring Items: Three Months Ended December 31, Change 2007 2006 $ % Net income as reported (1) $49,509 $51,785 $(2,276) (4.4%) Non-recurring items: Gain on sale of Ireland facility (after-tax) - (7,204) 7,204 (100.0%) European rationalization charges (after-tax) (503) 472 (975) (206.6%) Adjusted net income excluding non-recurring items (2) $49,006 $45,053 $3,953 8.8% Basic earnings per share $1.15 $1.21 $(0.06) (5.0%) Non-recurring items (1) (0.01) (0.16) 0.15 (93.8%) Basic earnings per share excluding non-recurring items (2) $1.14 $1.05 $0.09 8.6% Diluted earnings per share $1.14 $1.20 $(0.06) (5.0%) Non-recurring items (1) (0.01) (0.16) 0.15 (93.8%) Diluted earnings per share excluding non-recurring items (2) $1.13 $1.04 $0.09 8.7% Weighted average shares (basic) 42,969 42,727 Weighted average shares (diluted) 43,447 43,239 (1) Net income includes a credit of $584 ($503 after-tax) in 2007 and a charge in 2006 of $472 ($472 after-tax) related to European rationalization actions, offset by a gain of $9,006 ($7,204 after-tax) on the sale of the Company's facility in Ireland for the three months ended December 31, 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 (In thousands, except per share data) (Unaudited) Consolidated Statements of Income Twelve Months Ended December 31, 2007 % of Sales 2006 % of Sales Net sales $2,280,784 100.0% $1,971,915 100.0% Cost of goods sold 1,633,218 71.6% 1,419,638 72.0% Gross profit 647,566 28.4% 552,277 28.0% Selling, general & administrative expenses 370,122 16.2% 315,829 16.0% Rationalization (gain) charges (188) 0.0% 3,478 0.2% Operating income 277,632 12.2% 232,970 11.8% Interest income 8,294 0.4% 5,876 0.3% Equity earnings in affiliates 9,838 0.4% 7,640 0.4% Other income 2,823 0.1% 1,839 0.1% Interest expense (11,430) (0.5%) (10,153) (0.5%) Income before income taxes 287,157 12.6% 238,172 12.1% Income taxes 84,421 3.7% 63,164 3.2% Effective tax rate 29.4% 26.5% Net income (1) $202,736 8.9% $175,008 8.9% Consolidated Statements of Income Fav (Unfav) to Prior Year $ % Net sales $308,869 15.7% Cost of goods sold (213,580) (15.0%) Gross profit 95,289 17.3% Selling, general & administrative expenses (54,293) (17.2%) Rationalization charges 3,666 105.4% Operating income 44,662 19.2% Interest income 2,418 41.2% Equity earnings in affiliates 2,198 28.8% Other income 984 53.5% Interest expense (1,277) (12.6%) Income before income taxes 48,985 20.6% Income taxes (21,257) (33.7%) Effective tax rate (2.9%) Net income (1) $27,728 15.8% Reconciliation of Net Income as Reported to Adjusted Net Income Excluding Non-Recurring Items: Twelve Months Ended December 31, Change 2007 2006 $ % Net income as reported (1) $202,736 $175,008 $27,728 15.8% Non-recurring items: Gain on sale of Ireland facility (after-tax) (7,204) 7,204 (100.0%) European rationalization charges (after-tax) (107) 3,478 (3,585) (103.1%) Adjusted net income excluding non-recurring items (2) $202,629 $171,282 $31,347 18.3% Basic earnings per share $4.73 $4.11 $0.62 15.1% Non-recurring items (1) - (0.09) 0.09 (100.0%) Basic earnings per share excluding non-recurring items (2) $4.73 $4.02 $0.71 17.7% Diluted earnings per share $4.67 $4.07 $0.60 14.7% Non-recurring items (1) - (0.09) 0.09 (100.0%) Diluted earnings per share excluding non-recurring items (2) $4.67 $3.98 $0.69 17.3% Weighted average shares (basic) 42,899 42,532 Weighted average shares (diluted) 43,392 43,032 (1) Net income includes a credit of $188 ($107 after-tax) in 2007 and a charge in 2006 of $3,478 ($3,478 after-tax) related to European rationalization actions, offset by a gain of $9,006 ($7,204 after-tax) on the sale of the Company's facility in Ireland for 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 (In thousands) (Unaudited) Balance Sheet Highlights Selected Consolidated Balance Sheet Data December 31, December 31, 2007 2006 Cash and cash equivalents $217,382 $120,212 Total current assets 969,648 829,410 Net property, plant and equipment 429,944 389,518 Total assets 1,645,296 1,394,579 Total current liabilities 311,921 338,288 Short-term debt 12,486 47,134 Long-term debt 117,329 113,965 Total shareholders' equity 1,087,220 852,976 Net Operating Working Capital December 31, December 31, 2007 2006 Trade accounts receivable $344,058 $298,993 Inventory 343,849 351,144 Trade accounts payable 152,301 142,264 Net operating working capital $535,606 $507,873 Net operating working capital % to net sales 23.5% 25.8% Invested Capital December 31, December 31, 2007 2006 Short-term debt $12,486 $47,134 Long-term debt 117,329 113,965 Total debt 129,815 161,099 Equity 1,087,220 852,976 Total $1,217,035 $1,014,075 Total debt/capitalization 10.7% 15.9% Return on invested capital 20.5% 19.9% Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share data) (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended December 31, 2007 2006 OPERATING ACTIVITIES: Net income $49,509 $51,785 Adjustments to reconcile net income to net cash provided by operating activities: Rationalization (gain) charges (584) 472 Depreciation and amortization 13,514 12,008 Equity earnings of affiliates, net (1,677) (2,187) Other non-cash items, net 9,667 (6,708) Changes in operating assets and liabilities net of effects from acquisitions: Decrease in accounts receivable 14,462 8,703 Decrease (increase) in inventories 18,170 (2,317) Increase in accounts payable 9,999 6,071 Contributions to pension plans (739) (847) Increase in accrued pensions 2,322 3,853 Net change in other current assets and liabilities (69,116) (59,949) Net change in other long-term assets and liabilities 198 2,705 NET CASH PROVIDED BY OPERATING ACTIVITIES 45,725 13,589 1 INVESTING ACTIVITIES: Capital expenditures (15,856) (22,684) Acquisition of businesses, net of cash acquired (12,671) (25,002) Proceeds from sale of property, plant and equipment 94 10,932 NET CASH USED BY INVESTING ACTIVITIES (28,433) (36,754) FINANCING ACTIVITIES: Net change in borrowings 123 894 Proceeds from exercise of stock options 1,055 3,336 Tax benefit from the exercise of stock options (712) 1,396 Purchase of shares for treasury (15,459) - Cash dividends paid to shareholders (9,473) (8,097) NET CASH USED BY FINANCING ACTIVITIES (24,466) (2,471) Effect of exchange rate changes on cash and cash equivalents 1,336 (63) INCREASE IN CASH AND CASH EQUIVALENTS (5,838) (25,699) Cash and cash equivalents at beginning of the period 223,220 145,911 Cash and cash equivalents at end of period $217,382 $120,212 Cash dividends paid per share $0.22 $0.19 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share data) (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS Twelve Months Ended December 31, 2007 2006 OPERATING ACTIVITIES: Net income $202,736 $175,008 Adjustments to reconcile net income to net cash provided by operating activities: Rationalization (gain) charges (188) 3,478 Depreciation and amortization 52,610 47,825 Equity earnings of affiliates, net (7,208) (5,728) Other non-cash items, net (609) (957) Changes in operating assets and liabilities net of effects from acquisitions: Increase in accounts receivable (20,723) (39,719) Decrease (increase) in inventories 36,011 (57,299) (Decrease) increase in accounts payable (3,333) 12,914 Contributions to pension plans (13,031) (20,503) Increase in accrued pensions 3,237 16,248 Net change in other current assets and liabilities 556 (11,593) Net change in other long-term assets and liabilities (226) (994) NET CASH PROVIDED BY OPERATING ACTIVITIES 249,832 118,680 1 INVESTING ACTIVITIES: Capital expenditures (61,633) (76,002) Acquisition of businesses, net of cash acquired (18,773) (25,504) Proceeds from sale of property, plant and equipment 701 11,791 NET CASH USED BY INVESTING ACTIVITIES (79,705) (89,715) FINANCING ACTIVITIES: Net change in borrowings (37,316) (4,189) Proceeds from exercise of stock options 8,644 13,618 Tax benefit from the exercise of stock options 4,289 5,243 Purchase of shares for treasury (15,459) (126) Cash dividends paid to shareholders (37,744) (32,275) NET CASH USED BY FINANCING ACTIVITIES (77,586) (17,729) Effect of exchange rate changes on cash and cash equivalents 4,629 969 INCREASE IN CASH AND CASH EQUIVALENTS 97,170 12,205 Cash and cash equivalents at beginning of year 120,212 108,007 Cash and cash equivalents at end of year $217,382 $120,212 Cash dividends paid per share $0.88 $0.76 DATASOURCE: Lincoln Electric Holdings, Inc. CONTACT: Media, Roy L. Morrow, +1-216-383-4893, , or Investors, Joseph P. Kelley, +1-216-383-8346, , both of Lincoln Electric Holdings, Inc. Web site: http://www.lincolnelectric.com/

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