CLEVELAND, Feb. 23 /PRNewswire-FirstCall/ -- Three Months Ended
December 31, 2008 -- Sales decreased 9.3% to $526.2 million --
Rationalization and asset impairment charges totaling $19.4 million
were recorded in the quarter -- Net income decreased 60.7% to $19.5
million; excluding rationalization and asset impairment charges,
net income decreased 22.9% to $37.8 million or $0.88 per diluted
share Twelve Months Ended December 31, 2008 -- Sales increased 8.7%
to $2.5 billion -- Operating income increased 6.4% to $295.4
million -- Net income increased 4.7% to $212.3 million; excluding
rationalization and asset impairment charges, net income increased
13.8% to $230.6 million or $5.36 per diluted share -- Net cash
provided by operating activities was $257.4 million Lincoln
Electric Holdings, Inc. (the "Company") (NASDAQ:LECO) today
reported 2008 sales increased 8.7% to $2.5 billion from $2.3
billion in 2007. Operating income for 2008 increased 6.4% to $295.4
million from $277.6 million in 2007 or increased 13.5% excluding
rationalization and asset impairment charges. Sales for the
Company's North American operations were $1.45 billion in 2008
versus $1.40 billion in 2007, an increase of 3.6%. U.S. export
sales in 2008 increased 24.6% to $242.3 million from $194.5 million
in 2007. Sales at Lincoln subsidiaries outside North America
increased 16.9% to $1.03 billion in 2008, compared with $879.4
million in 2007. Excluding acquisitions and the effect of changes
in foreign currency exchange rates, sales outside North America
increased 5.4% in 2008 compared with 2007. Net income for 2008
increased 4.7% to $212.3 million, or $4.93 per diluted share, from
$202.7 million, or $4.67 per diluted share, in 2007. Included in
net income was a $19.4 million charge ($18.3 million after-tax), or
$0.43 per diluted share, associated with rationalization and
non-cash asset impairment charges. The rationalization charges
totaled $2.4 million ($1.7 million after-tax) related to fourth
quarter actions to align the business to current market conditions.
Asset impairment charges included $13.2 million of goodwill and
$2.4 million of long-lived assets related to Chinese businesses and
intangible assets totaling $1.3 million ($1.0 million after-tax)
related to North American and European businesses. "Financial
results for 2008 were the best in Lincoln's history," said John M.
Stropki, Chairman and Chief Executive Officer. "Sales of nearly
$2.5 billion and net income of $4.93 per diluted share were both
records. Results in the fourth quarter, however, started to reflect
the significant challenges in this very difficult economic
environment. "During the fourth quarter, our sales around the world
suffered from the weakened global economy, and we expect the lower
sales volumes experienced in the quarter to continue. The impact of
liquidating high cost inventory combined with declining volumes
will continue to pressure margins into 2009." Sales for the fourth
quarter decreased 9.3% to $526.2 million from $580.3 million in the
comparable 2007 period. Sales for the Company's North American
operations were $309.0 million in the quarter versus $345.1 million
in the comparable quarter last year, a decrease of 10.5%. U.S.
export sales in the quarter increased 16.4% to $53.8 million from
$46.3 million in 2007. Sales at Lincoln subsidiaries outside North
America decreased to $217.2 million in the fourth quarter compared
with $235.2 million in the year-ago quarter, a decrease of 7.7%.
Excluding acquisitions and the effect of changes in foreign
currency exchange rates, sales outside North America decreased 3.5%
in the quarter. Net income for the fourth quarter decreased 60.7%
to $19.5 million, or $0.46 per diluted share, from $49.5 million in
2007. Excluding rationalization and asset impairment charges, net
income decreased 22.9% to $37.8 million, or $0.88 per diluted
share. The 2008 fourth quarter effective tax rate increased to
40.7% compared with 28.8% in 2007, primarily as a result of asset
impairment charges with no tax benefit. "As announced on February
2, 2009, we have taken aggressive measures to align our business
with current market conditions. These actions plus additional cost
cutting measures will result in a first quarter 2009 pre-tax
rationalization charge between $10 million and $12 million and will
generate annualized savings of approximately $80 million. We are
monitoring these initiatives closely to ensure we achieve the
expected financial results. Our strong financial position will
allow us to continue making strategic investments to enhance our
global presence and develop new products and services for the
future," said Mr. Stropki. Net cash provided by operating
activities was $40.7 million in the fourth quarter and $257.4
million for the full year of 2008. During 2008, the Company paid
$42.8 million in dividends and spent $42.3 million on share
repurchases. The Company's Board of Directors declared a quarterly
cash dividend of $0.27 per share, which was paid on January 15,
2009 to holders of record as of December 31, 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 financial results for the 2008 fourth quarter and
full year is scheduled for today, Monday, February 23, 2009, 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
Fav (Unfav) to December 31, Prior Year ------------------
-------------- % of % of 2008 Sales 2007 Sales $ % ---- ----- ----
----- - - Net sales $526,186 100.0% $580,279 100.0% $(54,093)
(9.3%) Cost of goods sold 385,078 73.2% 419,338 72.3% 34,260 8.2%
------- ------- ------ Gross profit 141,108 26.8% 160,941 27.7%
(19,833) (12.3%) Selling, general & administrative expenses
86,200 16.4% 95,145 16.4% 8,945 9.4% Rationalization and asset
impairment charges (gain) 19,371 3.7% (584) (0.1%) (19,955) N/A
------ ---- ------- Operating income 35,537 6.8% 66,380 11.4%
(30,843) (46.5%) Interest income 2,229 0.4% 2,855 0.5% (626)
(21.9%) Equity (loss) earnings in affiliates (2,068) (0.4%) 2,420
0.4% (4,488)(185.5%) Other income 354 0.1% 960 0.2% (606) (63.1%)
Interest expense (3,216) (0.6%) (3,051) (0.5%) (165) (5.4%) ------
------ ---- Income before income taxes 32,836 6.2% 69,564 12.0%
(36,728) (52.8%) Income taxes 13,366 2.5% 20,055 3.5% 6,689 33.4%
------ ------ ----- Effective tax rate 40.7% 28.8% (11.9%) ----
---- ----- Net income $19,470 3.7% $49,509 8.5% $(30,039) (60.7%)
======= ======= ======== Reconciliation of Net Income as Reported
to Adjusted Net Income: Three Months Ended December 31, Change
---------------- ------ 2008 2007 $ % ---- ---- - - Net income as
reported (1) $19,470 $49,509 $(30,039) (60.7%) Adjustments:
Rationalization and asset impairment charges (gain) after-tax
18,313 (503) 18,816 N/A ------- ------- -------- Adjusted net
income (2) $37,783 $49,006 $(11,223) (22.9%) ======= =======
======== Basic earnings per share $0.46 $1.15 $(0.69) (60.0%)
Adjustments (1) 0.43 (0.01) 0.44 N/A ---- ----- ---- Adjusted basic
earnings per share (2) $0.89 $1.14 $(0.25) (21.9%) ===== =====
====== Diluted earnings per share $0.46 $1.14 $(0.68) (59.6%)
Adjustments (1) 0.42 (0.01) 0.43 N/A ---- ----- ---- Adjusted
diluted earnings per share (2) $0.88 $1.13 $(0.25) (22.1%) =====
===== ====== Weighted average shares (basic) 42,430 42,969 Weighted
average shares (diluted) 42,695 43,447 (1) Net income includes a
rationalization charge of $2,447 ($1,698 after- tax) and asset
impairment charges of $16,924 ($16,615 after-tax) in the fourth
quarter of 2008 and a gain of $584 ($503 after-tax) in the fourth
quarter of 2007 related to rationalization actions. (2) Adjusted
net income excluding rationalization and asset impairment charges
and adjusted basic and diluted earnings per share excluding
rationalization and asset impairment charges 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, except
per share data) (Unaudited) Consolidated Statements of Income Fav
(Unfav) to Twelve Months Ended December 31, Prior Year
-------------------------------- -------------- % of % of 2008
Sales 2007 Sales $ % ---- ----- ---- ----- - - Net sales $2,479,131
100.0% $2,280,784 100.0% $198,347 8.7% Cost of goods sold 1,758,980
71.0% 1,633,218 71.6% (125,762) (7.7%) --------- --------- --------
Gross profit 720,151 29.0% 647,566 28.4% 72,585 11.2% Selling,
general & administrative expenses 405,376 16.4% 370,122 16.2%
(35,254) (9.5%) Rationalization and asset impairment charges (gain)
19,371 0.8% (188) (0.0%) (19,559) N/A ------ ---- ------- Operating
income 295,404 11.9% 277,632 12.2% 17,772 6.4% Interest income
8,845 0.4% 8,294 0.4% 551 6.6% Equity earnings in affiliates 6,034
0.2% 9,838 0.4% (3,804) (38.7%) Other income 1,681 0.1% 2,823 0.1%
(1,142) (40.5%) Interest expense (12,155) (0.5%) (11,430) (0.5%)
(725) (6.3%) ------- ------- ---- Income before income taxes
299,809 12.1% 287,157 12.6% 12,652 4.4% Income taxes 87,523 3.5%
84,421 3.7% (3,102) (3.7%) ------ ------ ------ Effective tax rate
29.2% 29.4% 0.2% ---- ---- --- Net income $212,286 8.6% $202,736
8.9% $9,550 4.7% ======== ======== ====== Reconciliation of Net
Income as Reported to Adjusted Net Income: Twelve Months Ended
December 31, Change ----------------- ------ 2008 2007 $ % ----
---- - - Net income as reported (1) $212,286 $202,736 $9,550 4.7%
Adjustments: Rationalization and asset impairment charges (gain)
after-tax 18,313 (107) 18,420 N/A -------- -------- -------
Adjusted net income (2) $230,599 $202,629 $27,970 13.8% ========
======== ======= Basic earnings per share $4.98 $4.73 $0.25 5.3%
Adjustments (1) 0.43 - 0.43 N/A ---- ---- ---- Adjusted basic
earnings per share (2) $5.41 $4.73 $0.68 14.4% ===== ===== =====
Diluted earnings per share $4.93 $4.67 $0.26 5.6% Adjustments (1)
0.43 - 0.43 N/A ---- ---- ---- Adjusted diluted earnings per share
(2) $5.36 $4.67 $0.69 14.8% ===== ===== ===== Weighted average
shares (basic) 42,648 42,899 Weighted average shares (diluted)
43,054 43,392 (1) Net income includes a rationalization charge of
$2,447 ($1,698 after- tax) and asset impairment charges of $16,924
($16,615 after-tax) in 2008 and a gain of $188 ($107 after-tax) in
2007 related to rationalization actions. (2) Adjusted net income
excluding rationalization and asset impairment charges and adjusted
basic and diluted earnings per share excluding rationalization and
asset impairment charges 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
December 31, December 31, 2008 2007 ---- ---- Cash and cash
equivalents $284,332 $217,382 Total current assets 1,024,726
969,648 Property, plant and equipment, net 427,902 429,944 Total
assets 1,718,805 1,645,296 Total current liabilities 356,642
311,921 Short-term debt 50,693 12,486 Long-term debt 91,537 117,329
Total shareholders' equity 995,312 1,087,220 Net Operating Working
Capital December 31, December 31, 2008 2007 ---- ---- Trade
accounts receivable $299,171 $344,058 Inventory 346,932 343,849
Trade accounts payable 124,388 152,301 ------- ------- Net
operating working capital $521,715 $535,606 ======== ======== Net
operating working capital % to net sales 21.0% 23.5% ==== ====
Invested Capital December 31, December 31, 2008 2007 ---- ----
Short-term debt $50,693 $12,486 Long-term debt 91,537 117,329
------ ------- Total debt 142,230 129,815 Total shareholders'
equity 995,312 1,087,220 ------- --------- Invested capital
$1,137,542 $1,217,035 ========== ========== Total debt / invested
capital 12.5% 10.7% Return on invested capital (1) 18.8% 16.8% (1)
Return on invested capital is defined as rolling 12 months of
earnings excluding tax-effected interest divided by invested
capital. Lincoln Electric Holdings, Inc. Financial Highlights (In
thousands, except per share data) (Unaudited) Consolidated
Statements of Cash Flows Three Months Ended December 31,
------------------------------- 2008 2007 ---- ---- OPERATING
ACTIVITIES: Net income $19,470 $49,509 Adjustments to reconcile net
income to net cash provided by operating activities:
Rationalization and asset impairment charges (gain) 19,371 (584)
Depreciation and amortization 14,024 13,514 Equity loss (earnings)
of affiliates, net 2,595 (1,677) Other non-cash items, net 13,037
9,667 Changes in operating assets and liabilities net of effects
from acquisitions: Decrease in accounts receivable 63,084 14,462
Decrease in inventories 52,048 18,170 (Decrease) increase in
accounts payable (55,205) 9,999 (Decrease) increase in accrued
pensions (8,403) 1,583 Net change in other current assets and
liabilities (76,455) (69,116) Net change in other long-term assets
and liabilities (2,860) 198 ------ --- NET CASH PROVIDED BY
OPERATING ACTIVITIES 40,706 45,725 INVESTING ACTIVITIES: Capital
expenditures (18,947) (15,856) Acquisition of businesses, net of
cash acquired (16,015) (12,671) Proceeds from sale of property,
plant and equipment 73 94 -- -- NET CASH USED BY INVESTING
ACTIVITIES (34,889) (28,433) FINANCING ACTIVITIES: Net change in
borrowings (221) 123 Proceeds from exercise of stock options 81
1,055 Tax benefit from exercise of stock options 312 (712) Purchase
of shares for treasury (19,216) (15,459) Cash dividends paid to
shareholders (10,685) (9,473) ------- ------ NET CASH USED BY
FINANCING ACTIVITIES (29,729) (24,466) Effect of exchange rate
changes on cash and cash equivalents (4,346) 1,336 ------ -----
DECREASE IN CASH AND CASH EQUIVALENTS (28,258) (5,838) Cash and
cash equivalents at beginning of period 312,590 223,220 -------
------- Cash and cash equivalents at end of period $284,332
$217,382 ======== ======== 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 Twelve Months Ended December 31,
-------------------------------- 2008 2007 ---- ---- OPERATING
ACTIVITIES: Net income $212,286 $202,736 Adjustments to reconcile
net income to net cash provided by operating activities:
Rationalization and asset impairment charges (gain) 19,371 (188)
Depreciation and amortization 56,925 52,610 Equity earnings of
affiliates, net (3,235) (7,208) Other non-cash items, net 17,611
(609) Changes in operating assets and liabilities net of effects
from acquisitions: Decrease (increase) in accounts receivable
30,130 (20,723) (Increase) decrease in inventories (27,845) 36,011
Decrease in accounts payable (26,768) (3,333) Decrease in accrued
pensions (25,975) (9,794) Net change in other current assets and
liabilities 9,590 556 Net change in other long-term assets and
liabilities (4,641) (226) ------ ---- NET CASH PROVIDED BY
OPERATING ACTIVITIES 257,449 249,832 INVESTING ACTIVITIES: Capital
expenditures (72,426) (61,633) Acquisition of businesses, net of
cash acquired (44,036) (18,773) Proceeds from sale of property,
plant and equipment 662 701 --- --- NET CASH USED BY INVESTING
ACTIVITIES (115,800) (79,705) FINANCING ACTIVITIES: Net change in
borrowings 6,423 (37,316) Proceeds from exercise of stock options
7,201 8,644 Tax benefit from exercise of stock options 3,728 4,289
Purchase of shares for treasury (42,337) (15,459) Cash dividends
paid to shareholders (42,756) (37,744) ------- ------- NET CASH
USED BY FINANCING ACTIVITIES (67,741) (77,586) Effect of exchange
rate changes on cash and cash equivalents (6,958) 4,629 ------
----- INCREASE IN CASH AND CASH EQUIVALENTS 66,950 97,170 Cash and
cash equivalents at beginning of period 217,382 120,212 -------
------- Cash and cash equivalents at end of period $284,332
$217,382 ======== ======== Cash dividends paid per share $1.00
$0.88 Lincoln Electric Holdings, Inc. Financial Highlights (In
thousands) (Unaudited) Segment Highlights North Other Elimin-
Consoli- America Europe Countries ations dated ------- ------
--------- ------- -------- Three months ended December 31, 2008 Net
sales to unaffiliated customers $309,011 $116,829 $100,346 $ -
$526,186 Inter-segment sales 28,726 4,029 3,468 (36,223) - ------
----- ----- ------- -------- Total $337,737 $120,858 $103,814
$(36,223) $526,186 ======== ======== ======== ======== ========
Income before interest and income taxes $45,318 $(2,973) $(8,185)
$(337) $33,823 As a percent of total sales 13.4% (2.5%) (7.9%) 6.4%
Adjustments: Rationalization and asset impairment charges $1,319
$2,470 $15,582 $ - $19,371 Adjusted income before interest and
income taxes excluding rationalization and asset impairment charges
(1) $46,637 $(503) $7,397 $(337) $53,194 As a percent of total
sales 13.8% (0.4%) 7.1% 10.1% Three months ended December 31, 2007
Net sales to unaffiliated customers $345,104 $134,579 $100,596 $ -
$580,279 Inter-segment sales 25,483 7,470 1,272 (34,225) - ------
----- ----- ------- -------- Total $370,587 $142,049 $101,868
$(34,225) $580,279 ======== ======== ======== ======== ========
Income before interest and income taxes $54,809 $14,169 $1,458
$(676) $69,760 As a percent of total sales 14.8% 10.0% 1.4% 12.0%
North Other Elimin- Consoli- America Europe Countries ations dated
------- ------ --------- ------- -------- Twelve months ended
December 31, 2008 Net sales to unaffiliated customers $1,451,333
$576,945 $450,853 $ - $2,479,131 Inter-segment sales 114,686 25,612
10,590 (150,888) - ------- ------ ------ -------- ---------- Total
$1,566,019 $602,557 $461,443 $(150,888) $2,479,131 ==========
======== ======== ========= ========== Income before interest and
income taxes $224,706 $55,407 $22,591 $415 $303,119 As a percent of
total sales 14.3% 9.2% 4.9% 12.2% Adjustments: Rationalization and
asset impairment charges $1,319 $2,470 $15,582 $ - $19,371 Adjusted
income before interest and income taxes excluding rationalization
and asset impairment charges (1) $226,025 $57,877 $38,173 $415
$322,490 As a percent of total sales 14.4% 9.6% 8.3% 13.0% Twelve
months ended December 31, 2007 Net sales to unaffiliated customers
$1,401,393 $510,514 $368,877 $ - $2,280,784 Inter-segment sales
99,227 24,156 11,645 (135,028) - ------ ------ ------ --------
---------- Total $1,500,620 $534,670 $380,522 $(135,028) $2,280,784
========== ======== ======== ========= ========== Income before
interest and income taxes $211,092 $63,170 $18,578 $(2,547)
$290,293 As a percent of total sales 14.1% 11.8% 4.9% 12.7% (1)
Adjusted income before interest and income taxes excluding
rationalization and asset impairment charges is a non-GAAP
financial measure that management believes is 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. DATASOURCE: Lincoln Electric Holdings, Inc. CONTACT:
Media, Roy L. Morrow, +1-216-383-4893, , or Investors, Joseph P.
Kelley, +1-216-383-8346, Web Site: http://www.lincolnelectric.com/
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