LECO Lincoln Electric Holdings Inc

CLEVELAND, July 23 /PRNewswire-FirstCall/ -- Three Months Ended June 30, 2008 - Sales increased 19.3% to $699.8 million - Operating income increased 21.6% to $91.6 million - Net income increased 26.9% to $70.1 million - Diluted earnings per share increased 27.6% to $1.62 Six Months Ended June 30, 2008 - Sales increased 16.2% to $1.32 billion - Operating income increased 18.4% to $170.1 million - Net income increased 19.7% to $123.6 million - Diluted earnings per share increased 20.6% to $2.87 Lincoln Electric Holdings, Inc. (the "Company") (NASDAQ:LECO) today reported record 2008 second quarter operating income, increasing 21.6% to $91.6 million from $75.4 million in 2007, on a sales increase of 19.3%. Net income for the second quarter increased 26.9% to $70.1 million, or $1.62 per diluted share from $55.2 million, or $1.27 per diluted share in 2007. The 2008 second quarter effective tax rate was 26.3% compared with 29.6% in 2007. Sales for the second quarter increased 19.3% to $699.8 million from $586.6 million in the comparable period of 2007. Sales for the Company's North American operations were $400.7 million in the quarter versus $363.8 million in the comparable quarter last year, an increase of 10.1%. U.S. export sales in the quarter increased 28.6% to $64.5 million from $50.1 million in 2007. Sales at Lincoln subsidiaries outside North America increased to $299.1 million in the second quarter, compared with $222.8 million in the year ago quarter, an increase of 34.2%. Excluding acquisitions and the effect of changes in foreign currency exchange rates, sales outside North America increased 12.3% in the quarter. "I am pleased to report excellent results for the second quarter," said John M. Stropki, Chairman and Chief Executive Officer. "We continue to realize strong sales results, profitability and cash flows despite a challenging North American industrial economic cycle, continued unprecedented volatility in the metals markets and significant challenges in ensuring supply availability. Our broad market position in key global growth segments allowed us to take advantage of expansion opportunities, and minimize the impact of softening in traditional markets. We continue to be focused in executing our global strategy, capitalizing on key infrastructure development opportunities, and leveraging our value-driven welding product and service offering." Operating income for the first six months of 2008 increased 18.4% to $170.1 million from $143.7 million in 2007, on a sales increase of 16.2%. Net income for the first half increased 19.7% to $123.6 million, or $2.87 per diluted share from $103.2 million, or $2.38 per diluted share in 2007. Sales for the first six months increased 16.2% to $1.32 billion from $1.14 billion in the comparable period of 2007. Sales for the Company's North American operations were $771.8 million in the first half versus $709.6 million in the comparable period last year, an increase of 8.8%. U.S. export sales in the first half increased 29.1% to $126.0 million from $97.6 million in 2007. Sales at Lincoln subsidiaries outside North America increased to $548.2 million in the first half, compared with $426.1 million for the comparable period in 2007, an increase of 28.7%. Excluding acquisitions and the effect of changes in foreign currency exchange rates, sales outside North America increased 9.6% in the first half. Net cash provided by operating activities was $53.2 million in the second quarter compared with $65.1 million for the comparable period in 2007. For the first half, net cash provided by operating activities was $120.7 million compared with $107.5 million for the comparable period in 2007. During the first half of 2008, the Company paid $21.4 million in dividends. The Company's Board of Directors declared a quarterly cash dividend of $0.25, which was paid on July 15, 2008 to holders of record as of June 30, 2008. 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 and joint ventures in 20 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 second quarter 2008 results is scheduled for today, Wednesday, July 23, 2008 at 10:00 a.m. Eastern Time. An audio webcast of the call is accessible through the investor tab 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 Income Fav (Unfav) to Three Months Ended June 30, Prior Year 2008 % of Sales 2007 % of Sales $ % Net sales $ 699,826 100.0% $ 586,638 100.0% $ 113,188 19.3% Cost of goods sold 495,112 70.7% 417,970 71.2% (77,142) (18.5%) Gross profit 204,714 29.3% 168,668 28.8% 36,046 21.4% Selling, general & administrative expenses 113,118 16.2% 93,317 15.9% (19,801) (21.2%) Operating income 91,596 13.1% 75,351 12.8% 16,245 21.6% Interest income 1,865 0.3% 1,699 0.3% 166 9.8% Equity earnings in affiliates 3,814 0.5% 3,677 0.6% 137 3.7% Other income 627 0.1% 580 0.1% 47 8.1% Interest expense (2,802) (0.4%) (2,786) (0.5%) (16) (0.6%) Income before income taxes 95,100 13.6% 78,521 13.4% 16,579 21.1% Income taxes 24,972 3.6% 23,272 4.0% (1,700) (7.3%) Effective tax rate 26.3% 29.6% 3.3% Net income $ 70,128 10.0% $ 55,249 9.4% $ 14,879 26.9% Basic earnings per share $ 1.64 $ 1.29 $ 0.35 27.1% Diluted earnings per share $ 1.62 $ 1.27 $ 0.35 27.6% Weighted average shares (basic) 42,709 42,947 Weighted average shares (diluted) 43,173 43,461 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share data) (Unaudited) Consolidated Statements of Income Fav (Unfav) to Three Months Ended June 30, Prior Year 2008 % of Sales 2007 % of Sales $ % Net sales $ 1,320,053 100.0% $ 1,135,681 100.0% $ 184,372 16.2% Cost of goods sold 937,888 71.0% 808,797 71.2% (129,091) (16.0%) Gross profit 382,165 29.0% 326,884 28.8% 55,281 16.9% Selling, general & administrative expenses 212,079 16.1% 182,837 16.1% (29,242) (16.0%) Rationalization charges - 0.0% 396 0.0% 396 100.0% Operating income 170,086 12.9% 143,651 12.6% 26,435 18.4% Interest income 4,299 0.3% 3,149 0.3% 1,150 36.5% Equity earnings in affiliates 4,363 0.3% 5,155 0.5% (792) (15.4%) Other income 1,126 0.1% 1,044 0.1% 82 7.9% Interest expense (5,783) (0.4%) (5,513) (0.5%) (270) (4.9%) Income before income taxes 174,091 13.2% 147,486 13.0% 26,605 18.0% Income taxes 50,486 3.8% 44,237 3.9% (6,249) (14.1%) Effective tax rate 29.0% 30.0% 1.0% Net income(1) $ 123,605 9.4% $ 103,249 9.1% $ 20,356 19.7% Reconciliation of Net Income as Reported to Adjusted Net Income Excluding Non-Recurring Item: Six Months Ended June 30, Change 2008 2007 $ % Net income as reported (1) $123,605 $103,249 $20,356 19.7% Non-recurring item: European rationalization charges (after-tax) - 396 (396) (100.0%) Adjusted net income excluding non-recurring item (2) $123,605 $103,645 $19,960 19.3% Basic earnings per share $2.90 $2.41 $0.49 20.3% Non-recurring item (1) - 0.01 (0.01) (100.0%) Basic earnings per share excluding non-recurring item (2) $2.90 $2.42 $0.48 19.8% Diluted earnings per share $2.87 $2.38 $0.49 20.6% Non-recurring item (1) - 0.01 (0.01) (100.0%) Diluted earnings per share excluding non-recurring item (2) $2.87 $2.39 $0.48 20.1% Weighted average shares (basic) 42,692 42,895 Weighted average shares (diluted) 43,132 43,407 (1) Net income includes a charge of $396 ($396 after-tax) in 2007 related to European rationalization actions. (2) Adjusted net income excluding the non-recurring item and basic and diluted earnings per share excluding the non-recurring item are non-GAAP financial measures that management believes 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 June 30, December 31, 2008 2007 Cash and cash equivalents $268,357 $217,382 Total current assets 1,194,861 969,648 Property, plant and equipment, net 462,835 429,944 Total assets 1,937,641 1,645,296 Total current liabilities 479,695 311,921 Short-term debt 63,274 12,486 Long-term debt 87,701 117,329 Total shareholders' equity 1,223,162 1,087,220 Net Operating Working Capital June 30, December 31, 2008 2007 Trade accounts receivable $432,455 $344,058 Inventory 403,833 343,849 Trade accounts payable 208,167 152,301 Net operating working capital $628,121 $535,606 Net operating working capital % to net sales 25.5% 23.5% Invested Capital June 30, December 31, 2008 2007 Short-term debt $63,274 $12,486 Long-term debt 87,701 117,329 Total debt 150,975 129,815 Equity 1,223,162 1,087,220 Total $1,374,137 $1,217,035 Total debt/capitalization 11.0% 10.7% Return on invested capital 20.3% 20.5% Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share data) (Unaudited) Consolidated Statements of Cash Flows Three Months Ended June 30, 2008 2007 OPERATING ACTIVITIES: Net income $ 70,128 $ 55,249 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,441 13,322 Equity earnings of affiliates, net (2,921) (2,853) Other non-cash items, net 1,206 (8,013) Changes in operating assets and liabilities net of effects from acquisitions: Increase in accounts receivable (24,529) (18,025) (Increase) decrease in inventories (9,954) 5,880 Increase (decrease) in accounts payable 6,385 (752) Net change in other current assets and liabilities (5,109) 23,490 Net change in other long-term assets and liabilities 3,515 (3,189) NET CASH PROVIDED BY OPERATING ACTIVITIES 53,162 65,109 INVESTING ACTIVITIES: Capital expenditures (18,286) (13,916) Acquisition of businesses, net of cash acquired (15,589) (52) Proceeds from sale of property, plant and equipment 42 128 NET CASH USED BY INVESTING ACTIVITIES (33,833) (13,840) FINANCING ACTIVITIES: Net change in borrowings 15,173 5,748 Proceeds from exercise of stock options 3,844 2,636 Tax benefit from exercise of stock options 1,889 2,240 Cash dividends paid to shareholders (10,660) (9,422) NET CASH USED BY FINANCING ACTIVITIES 10,246 1,202 Effect of exchange rate changes on cash and cash equivalents 929 974 INCREASE IN CASH AND CASH EQUIVALENTS 30,504 53,445 Cash and cash equivalents at beginning of period 237,853 94,536 Cash and cash equivalents at end of period $ 268,357 $ 147,981 Cash dividends paid per share $ 0.25 $ 0.22 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share data) (Unaudited) Consolidated Statements of Cash Flows Six Months Ended June 30, 2008 2007 OPERATING ACTIVITIES: Net income $ 123,605 $ 103,249 Adjustments to reconcile net income to net cash provided by operating activities: Rationalization charges - 396 Depreciation and amortization 28,348 25,833 Equity earnings of affiliates, net (2,917) (3,987) Other non-cash items, net 5,022 (10,690) Changes in operating assets and liabilities net of effects from acquisitions: Increase in accounts receivable (61,703) (53,759) Increase in inventories (36,924) (12,236) Increase in accounts payable 37,557 14,529 Net change in other current assets and liabilities 34,849 52,511 Net change in other long-term assets and liabilities (7,152) (8,394) NET CASH PROVIDED BY OPERATING ACTIVITIES 120,685 107,452 INVESTING ACTIVITIES: Capital expenditures (31,098) (29,640) Acquisition of businesses, net of cash acquired (24,264) (4,414) Proceeds from sale of property, plant and equipment 314 201 NET CASH USED BY INVESTING ACTIVITIES (55,048) (33,853) FINANCING ACTIVITIES: Net change in borrowings 14,078 (35,972) Proceeds from exercise of stock options 5,435 5,062 Tax benefit from exercise of stock options 2,708 2,736 Purchase of shares for treasury (18,033) - Cash dividends paid to shareholders (21,380) (18,825) NET CASH USED BY FINANCING ACTIVITIES (17,192) (46,999) Effect of exchange rate changes on cash and cash equivalents 2,530 1,169 INCREASE IN CASH AND CASH EQUIVALENTS 50,975 27,769 Cash and cash equivalents at beginning of period 217,382 120,212 Cash and cash equivalents at end of period $ 268,357 $ 147,981 Cash dividends paid per share $ 0.50 $ 0.44 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands) (Unaudited) Segment Highlights North Other America Europe Countries Eliminations Consolidated Three months ended June 30, 2008 Net sales to unaffiliated customers $400,735 $170,978 $128,113 $ - $699,826 Inter-segment sales 31,145 7,339 2,731 (41,215) - Total $431,880 $178,317 $130,844 $(41,215) $699,826 Income before interest and income taxes $62,049 $20,510 $12,385 $1,093 $96,037 As a percent of total sales 14.4% 11.5% 9.5% 13.7% Three months ended June 30, 2007 Net sales to unaffiliated customers $363,846 $132,219 $90,573 $ - $586,638 Inter-segment sales 25,644 4,525 2,853 (33,022) - Total $389,490 $136,744 $93,426 $(33,022) $586,638 Income before interest and income taxes $55,130 $18,507 $7,347 $(1,376) $79,608 As a percent of total sales 14.2% 13.5% 7.9% 13.6% North Other America Europe Countries Eliminations Consolidated Six months ended June 30, 2008 Net sales to unaffiliated customers $771,848 $318,423 $229,782 $ - $1,320,053 Inter-segment sales 58,211 14,264 4,297 (76,772) - Total $830,059 $332,687 $234,079 $(76,772) $1,320,053 Income before interest and income taxes $118,582 $38,729 $17,424 $840 $175,575 As a percent of total sales 14.3% 11.6% 7.4% 13.3% Six months ended June 30, 2007 Net sales to unaffiliated customers $709,566 $254,000 $172,115 $ - $1,135,681 Inter-segment sales 49,672 11,184 8,296 (69,152) - Total $759,238 $265,184 $180,411 $(69,152) $1,135,681 Income before interest and income taxes $104,233 $33,189 $13,735 $(1,307) $149,850 As a percent of total sales 13.7% 12.5% 7.6% 13.2% DATASOURCE: Lincoln Electric Holdings, Inc. CONTACT: Media: Roy L. Morrow, +1-216-383-4893, , Investors: Joseph P. Kelley, +1-216-383-8346, , both of Lincoln Electric Web site: http://www.lincolnelectric.com/

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