LECO Lincoln Electric Holdings Inc

CLEVELAND, Oct. 22 /PRNewswire-FirstCall/ -- Three Months Ended September 30, 2008 -- Sales increased 12.1% to $632.9 million -- Operating income increased 32.8% to $89.8 million -- Net income increased 38.5% to $69.2 million -- Diluted earnings per share increased 39.1% to $1.60 -- Net cash provided by operating activities was $96.1 million Nine Months Ended September 30, 2008 -- Sales increased 14.8% to $1.95 billion -- Operating income increased 23.0% to $259.9 million -- Net income increased 25.8% to $192.8 million -- Diluted earnings per share increased 26.6% to $4.47 -- Net cash provided by operating activities was $216.7 million Lincoln Electric Holdings, Inc. (the "Company") (NASDAQ:LECO) today reported a 39.1% increase in third quarter 2008 diluted earnings per share to $1.60 from $1.15 per diluted share in 2007. Operating income increased 32.8% to $89.8 million from $67.6 million in 2007 on a sales increase of 12.1%. Net income for the third quarter increased 38.5% to $69.2 million from $50.0 million in 2007. The 2008 third quarter effective tax rate was 25.5% compared with 28.7% in 2007. Sales for the third quarter increased 12.1% to $632.9 million from $564.8 million in the comparable period of 2007. Sales for the Company's North American operations were $370.5 million in the quarter versus $346.7 million in the comparable quarter last year, an increase of 6.9%. U.S. export sales in the quarter increased 23.5% to $62.5 million from $50.6 million in 2007. Sales at Lincoln subsidiaries outside North America increased to $262.4 million in the third quarter, compared with $218.1 million in the year ago quarter, an increase of 20.3%. Excluding acquisitions and the effect of changes in foreign currency exchange rates, sales outside North America increased 6.9% in the quarter. "I am pleased to report excellent results in the third quarter," said John M. Stropki, Chairman and Chief Executive Officer. "We continued to realize strong sales increases, good improvements in profitability and strong cash flow despite the ongoing negative impact of the global financial crisis on several key geographic and market segments. Given that economic growth is slowing worldwide, we enter the fourth quarter with uncertainty regarding the full implications of the global crisis on commodity prices, customer purchasing patterns, and specific geographic and market segment ramifications. We expect declining sales volumes and the impact of lower commodity costs to pressure margins in the fourth quarter and into 2009. However, against this backdrop we will continue to execute our long-term strategy of global expansion and capitalize on key infrastructure and energy projects. We plan to utilize our strong balance sheet to gain market share through continued R&D investments and acquisition opportunities which leverage our value driven welding product and service offerings." Operating income for the first nine months of 2008 increased 23.0% to $259.9 million from $211.3 million in 2007, on a sales increase of 14.8%. Net income for the first nine months increased 25.8% to $192.8 million, or $4.47 per diluted share from $153.2 million, or $3.53 per diluted share in 2007. Sales for the first nine months increased 14.8% to $1.95 billion from $1.70 billion in the comparable period of 2007. Sales for the Company's North American operations were $1.14 billion in the first nine months versus $1.06 billion in the comparable period last year, an increase of 8.1%. U.S. export sales in the first nine months increased 27.2% to $188.5 million from $148.2 million in 2007. Sales at Lincoln subsidiaries outside North America increased to $810.6 million in the first nine months, compared with $644.2 million for the comparable period in 2007, an increase of 25.8%. Excluding acquisitions and the effect of changes in foreign currency exchange rates, sales outside North America increased 8.7% in the first nine months. Net cash provided by operating activities was $96.1 million in the third quarter compared with $96.7 million for the comparable period in 2007. For the first nine months, net cash provided by operating activities was $216.7 million compared with $204.1 million for the comparable period in 2007. During the first nine months of 2008, the Company paid $32.1 million in dividends. The Company's Board of Directors declared a quarterly cash dividend of $0.25, which was paid on October 15, 2008 to holders of record as of September 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: general economic and market conditions; 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 third quarter 2008 results is scheduled for today, Wednesday, October 22, 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 Three Months Ended September 30, Fav (Unfav) to % of % of Prior Year 2008 Sales 2007 Sales $ % Net sales $632,892 100.0% $564,824 100.0% $68,068 12.1% Cost of goods sold 436,014 68.9% 405,083 71.7% (30,931) (7.6%) Gross profit 196,878 31.1% 159,741 28.3% 37,137 23.2% Selling, general & administrative expenses 107,097 16.9% 92,140 16.3% (14,957) (16.2%) Operating income 89,781 14.2% 67,601 12.0% 22,180 32.8% Interest income 2,317 0.4% 2,290 0.4% 27 1.2% Equity earnings in affiliates 3,739 0.6% 2,263 0.4% 1,476 65.2% Other income 201 0.0% 819 0.1% (618) (75.5%) Interest expense (3,156) (0.5%) (2,866) (0.5%) (290) (10.1%) Income before income taxes 92,882 14.7% 70,107 12.4% 22,775 32.5% Income taxes 23,671 3.7% 20,129 3.6% (3,542) (17.6%) Effective tax rate 25.5% 28.7% 3.2% Net income $69,211 10.9% $49,978 8.8% $19,233 38.5% Basic earnings per share $1.62 $1.16 $0.46 39.7% Diluted earnings per share $1.60 $1.15 $0.45 39.1% Weighted average shares (basic) 42,779 42,969 Weighted average shares (diluted) 43,209 43,467 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share data) (Unaudited) Consolidated Statements of Income Nine Months Ended September 30, Fav (Unfav) to % of % of Prior Year 2008 Sales 2007 Sales $ % Net sales $1,952,945 100.0% $1,700,505 100.0% $252,440 14.8% Cost of goods sold 1,373,902 70.4% 1,213,880 71.4% (160,022) (13.2%) Gross profit 579,043 29.6% 486,625 28.6% 92,418 19.0% Selling, general & administrative expenses 319,176 16.3% 274,977 16.2% (44,199) (16.1%) Rationalization charges 0 0.0% 396 0.0% 396 100.0% Operating income 259,867 13.3% 211,252 12.4% 48,615 23.0% Interest income 6,616 0.3% 5,439 0.3% 1,177 21.6% Equity earnings in affiliates 8,102 0.4% 7,418 0.4% 684 9.2% Other income 1,327 0.1% 1,863 0.1% (536) (28.8%) Interest expense (8,939) (0.5%) (8,379) (0.5%) (560) (6.7%) Income before income taxes 266,973 13.7% 217,593 12.8% 49,380 22.7% Income taxes 74,157 3.8% 64,366 3.8% (9,791) (15.2%) Effective tax rate 27.8% 29.6% 1.8% Net income (1) $192,816 9.9% $153,227 9.0% $39,589 25.8% Reconciliation of Net Income as Reported to Adjusted Net Income Excluding Non-Recurring Item: Nine Months Ended September 30, Change 2008 2007 $ % Net income as reported (1) $192,816 $153,227 $39,589 25.8% Non-recurring item: European rationalization charges (after-tax) 0 396 (396) (100.0%) Adjusted net income excluding non-recurring item (2) $192,816 $153,623 $39,193 25.5% Basic earnings per share $4.51 $3.57 $0.94 26.3% Non-recurring item (1) - 0.01 (0.01) (100.0%) Basic earnings per share excluding non-recurring item (2) $4.51 $3.58 $0.93 26.0% Diluted earnings per share $4.47 $3.53 $0.94 26.6% Non-recurring item (1) - 0.01 (0.01) (100.0%) Diluted earnings per share excluding non-recurring item (2) $4.47 $3.54 $0.93 26.3% Weighted average shares (basic) 42,721 42,875 Weighted average shares (diluted) 43,170 43,373 (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 September 30, December 31, 2008 2007 Cash and cash equivalents $312,590 $217,382 Total current assets 1,201,684 969,648 Property, plant and equipment, net 446,390 429,944 Total assets 1,927,127 1,645,296 Total current liabilities 480,604 311,921 Short-term debt 52,931 12,486 Long-term debt 87,525 117,329 Total shareholders' equity 1,215,669 1,087,220 Net Operating Working Capital September 30, December 31, 2008 2007 Trade accounts receivable $378,672 $344,058 Inventory 419,646 343,849 Trade accounts payable 187,764 152,301 Net operating working capital $610,554 $535,606 Net operating working capital % to net sales 24.1% 23.5% Invested Capital September 30, December 31, 2008 2007 Short-term debt $52,931 $12,486 Long-term debt 87,525 117,329 Total debt 140,456 129,815 Equity 1,215,669 1,087,220 Total $1,356,125 $1,217,035 Total debt/capitalization 10.4% 10.7% Return on invested capital 23.4% 20.5% Lincoln Electric Holdings, Inc. Financial Highlights (In thousands, except per share data) (Unaudited) Consolidated Statements of Cash Flows Three Months Ended September 30, 2008 2007 OPERATING ACTIVITIES: Net income $69,211 $49,978 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,553 13,263 Equity earnings of affiliates, net (2,913) (1,544) Other non-cash items, net (448) 414 Changes in operating assets and liabilities net of effects from acquisitions: Decrease in accounts receivable 28,749 18,574 (Increase) decrease in inventories (42,969) 30,077 Decrease in accounts payable (9,120) (27,861) Net change in other current assets and liabilities 49,118 17,161 Net change in other long-term assets and liabilities (10,123) (3,407) NET CASH PROVIDED BY OPERATING ACTIVITIES 96,058 96,655 INVESTING ACTIVITIES: Capital expenditures (22,381) (16,137) Acquisition of businesses, net of cash acquired (3,757) (1,688) Proceeds from sale of property, plant and equipment 275 406 NET CASH USED BY INVESTING ACTIVITIES (25,863) (17,419) FINANCING ACTIVITIES: Net change in borrowings (7,434) (1,467) Proceeds from exercise of stock options 1,685 2,527 Tax benefit from exercise of stock options 708 2,265 Purchase of shares for treasury (5,088) - Cash dividends paid to shareholders (10,691) (9,446) NET CASH USED BY FINANCING ACTIVITIES (20,820) (6,121) Effect of exchange rate changes on cash and cash equivalents (5,142) 2,124 INCREASE IN CASH AND CASH EQUIVALENTS 44,233 75,239 Cash and cash equivalents at beginning of period 268,357 147,981 Cash and cash equivalents at end of period $312,590 $223,220 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 Nine Months Ended September 30, 2008 2007 OPERATING ACTIVITIES: Net income $192,816 $153,227 Adjustments to reconcile net income to net cash provided by operating activities: Rationalization charges - 396 Depreciation and amortization 42,901 39,096 Equity earnings of affiliates, net (5,830) (5,531) Other non-cash items, net 4,574 (10,276) Changes in operating assets and liabilities net of effects from acquisitions: Increase in accounts receivable (32,954) (35,185) (Increase) decrease in inventories (79,893) 17,841 Increase (decrease) in accounts payable 28,437 (13,332) Net change in other current assets and liabilities 83,967 69,672 Net change in other long-term assets and liabilities (17,275) (11,801) NET CASH PROVIDED BY OPERATING ACTIVITIES 216,743 204,107 INVESTING ACTIVITIES: Capital expenditures (53,479) (45,777) Acquisition of businesses, net of cash acquired (28,021) (6,102) Proceeds from sale of property, plant and equipment 589 607 NET CASH USED BY INVESTING ACTIVITIES (80,911) (51,272) FINANCING ACTIVITIES: Net change in borrowings 6,644 (37,439) Proceeds from exercise of stock options 7,120 7,589 Tax benefit from exercise of stock options 3,416 5,001 Purchase of shares for treasury (23,121) - Cash dividends paid to shareholders (32,071) (28,271) NET CASH USED BY FINANCING ACTIVITIES (38,012) (53,120) Effect of exchange rate changes on cash and cash equivalents (2,612) 3,293 INCREASE IN CASH AND CASH EQUIVALENTS 95,208 103,008 Cash and cash equivalents at beginning of period 217,382 120,212 Cash and cash equivalents at end of period $312,590 $223,220 Cash dividends paid per share $0.75 $0.66 Lincoln Electric Holdings, Inc. Financial Highlights (In thousands) (Unaudited) Segment Highlights North Other Eliminat- Consolid- America Europe Countries ions ated Three months ended September 30, 2008 Net sales to unaffiliated customers $370,474 $141,693 $120,725 $- $632,892 Inter-segment sales 27,749 7,319 2,825 (37,893) - Total $398,223 $149,012 $123,550 $(37,893) $632,892 Income before interest and income taxes $60,806 $19,651 $13,352 $(88) $93,721 As a percent of total sales 15.3% 13.2% 10.8% 14.8% Three months ended September 30, 2007 Net sales to unaffiliated customers $346,723 $121,935 $96,166 $- $564,824 Inter-segment sales 24,072 5,502 2,077 (31,651) - Total $370,795 $127,437 $98,243 $(31,651) $564,824 Income before interest and income taxes $52,050 $15,812 $3,385 $(564) $70,683 As a percent of total sales 14.0% 12.4% 3.4% 12.5% North Other Eliminat- Consolid- America Europe Countries ions ated Nine months ended September 30, 2008 Net sales to unaffiliated customers $1,142,322 $460,116 $350,507 $- $1,952,945 Inter-segment sales 85,960 21,583 7,122 (114,665) - Total $1,228,282 $481,699 $357,629 $(114,665) $1,952,945 Income before interest and income taxes $179,388 $58,380 $30,776 $752 $269,296 As a percent of total sales 14.6% 12.1% 8.6% 13.8% Nine months ended September 30, 2007 Net sales to unaffiliated customers $1,056,289 $375,935 $268,281 $- $1,700,505 Inter-segment sales 73,744 16,686 10,373 (100,803) - Total $1,130,033 $392,621 $278,654 $(100,803) $1,700,505 Income before interest and income taxes $156,283 $49,001 $17,120 $(1,871) $220,533 As a percent of total sales 13.8% 12.5% 6.1% 13.0% 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 Holdings, Inc. Web site: http://www.lincolnelectric.com/

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