CLEVELAND, April 28 /PRNewswire-FirstCall/ -- Three Months Ended
March 31, 2009 -- Sales decreased 33.6% to $411.8 million --
Excluding rationalization charges, operating income was $12.7
million; including rationalization charges, operating income was
$1.0 million -- Rationalization charges totaling $11.7 million
recorded in the quarter -- Excluding rationalization charges, net
income was $3.8 million, or $0.09 per diluted share; including
rationalization charges, net loss was $3.6 million, or $0.08 per
diluted share -- Net cash provided by operating activities
increased 6.1% to $71.7 million Lincoln Electric Holdings, Inc.
(the "Company") (NASDAQ:LECO) today reported 2009 first quarter
sales decreased 33.6% to $411.8 million from $620.2 million in the
comparable 2008 period. Operating income for the first quarter
decreased to $1.0 million from $78.5 million in 2008. Excluding
rationalization charges, operating income was $12.7 million. Sales
for the Company's North American operations were $246.7 million in
the quarter versus $371.1 million in the comparable quarter last
year, a decrease of 33.5%. U.S. export sales in the quarter
decreased 39.9% to $37.0 million from $61.6 million in the year-ago
quarter. Sales at Lincoln subsidiaries outside North America
decreased 33.7% to $165.1 million in the first quarter, compared
with $249.1 million in the comparable quarter last year. Excluding
acquisitions and the effect of changes in foreign currency exchange
rates, sales outside North America decreased 24.4% in the quarter.
The net loss for the first quarter was $3.6 million, or $0.08 per
diluted share, compared with net income of $53.5 million in the
first quarter of 2008. Excluding rationalization charges, net
income was $3.8 million, or $0.09 per diluted share. The Company
recorded tax expense of $1.6 million on a pretax loss of $2.0
million for the first quarter of 2009 as several foreign entities
reported losses with no tax benefit. "Our first quarter results
reflect the difficult challenges and negative impacts of the
depressed global economy," said John M. Stropki, Chairman and Chief
Executive Officer. "The rapid and steep deterioration in overall
global demand, combined with the liquidation of our higher cost
inventory, resulted in a significant reduction in profitability
during the quarter. "We have been aggressively realigning our
business to current market conditions. These actions resulted in a
first quarter 2009 pre-tax rationalization charge of $11.7 million,
the benefits of which, if annualized, we estimate will generate
savings of over $80 million. During the first quarter, we began to
see the positive impacts of these actions and expect to see the
full benefit in the 2009 second quarter of an approximate $20
million per quarter cost savings. In addition, we are actively
evaluating additional actions which will further rationalize
staffing, compensation levels and manufacturing facilities around
the world. We estimate these actions will generate additional
annualized savings of $20 million to $25 million and result in
pre-tax rationalization charges of $8 million to $10 million.
During the quarter, our focus on managing our balance sheet
resulted in reducing our working capital, helping us generate over
$71.7 million in cash. This enabled us to increase our cash balance
to over $300 million, including paying down $30 million in debt.
Our strong financial position and our ongoing rationalization
efforts will allow us to make the necessary investments to achieve
our long-term strategic objectives. We are confident we will emerge
from the global recession with a more efficient and highly
competitive business model, one which will further strengthen our
market leadership position, accelerate our global growth and
improve our overall profitability." Net cash provided by operating
activities increased 6.1% to $71.7 million in the first quarter
compared with $67.5 million for the comparable period in 2008.
During the first quarter 2009, the Company repaid $30 million of
outstanding debt on maturity under its Senior Unsecured Notes and
paid $11.4 million in dividends. The Company's Board of Directors
declared a quarterly cash dividend of $0.27 per share, which was
paid on April 15, 2009 to holders of record as of March 31, 2009.
The Company announced on March 16, 2009, that its Asian subsidiary,
The Lincoln Electric Company (Asia Pacific) Pte., Ltd. ("Lincoln
Asia Pacific"), had signed definitive agreements to acquire 100% of
Jinzhou Jin Tai Welding and Metal Co., ("Jin Tai"), a welding wire
business in Jinzhou, China. This acquisition will greatly expand
the Company's customer base and bring significant cost-competitive
MIG wire manufacturing capacity under the Company's control.
Lincoln Asia Pacific previously owned 48% of Jin Tai, whose sales
were approximately $200 million in 2008. The transaction is subject
to the approval of government regulatory agencies, with closing
expected in the third quarter of 2009, subject to the satisfaction
or waiver of customary conditions. 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 42 manufacturing locations, including operations and joint
ventures in 21 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 the 2009 first
quarter financial results is scheduled for today, Tuesday, April
28, 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/. The 2009 Annual Meeting of
Shareholders of Lincoln Electric Holdings, Inc. will be held at
11:30 a.m. Eastern Time on Thursday, April 30, 2009, at the
Marriott Cleveland East, 26300 Harvard Road, Warrensville Heights,
Ohio. Lincoln Electric Holdings, Inc. Financial Highlights (In
thousands, except per share data) (Unaudited) Consolidated
Statements of Income Fav (Unfav) Three Months Ended March 31, to
Prior Year --------------------------------- ------------------ %
of % of 2009 Sales 2008 Sales $ % ---- ------ ---- ------ ---------
------ Net sales $411,751 100.0% $620,227 100.0% $(208,476) (33.6%)
Cost of goods sold 321,503 78.1% 442,776 71.4% 121,273 27.4%
------- ------- ------- Gross profit 90,248 21.9% 177,451 28.6%
(87,203) (49.1%) Selling, general & administrative expenses
77,516 18.8% 98,961 16.0% 21,445 21.7% Rationalization charges
11,699 2.8% - 0.0% (11,699) N/A ------ ---- ------- Operating
income 1,033 0.3% 78,490 12.7% (77,457) (98.7%) Interest income
1,112 0.3% 2,434 0.4% (1,322) (54.3%) Equity (loss) earnings in
affiliates (1,986) (0.5%) 549 0.1% (2,535) (461.7%) Other income
393 0.1% 499 0.1% (106) (21.2%) Interest expense (2,562) (0.6%)
(2,981) (0.5%) 419 14.1% ------ ------ --- (Loss) income before
income taxes (2,010) (0.5%) 78,991 12.7% (81,001) (102.5%) Income
taxes 1,584 0.4% 25,514 4.1% 23,930 93.8% Effective tax rate
(78.8%) 32.3% (111.1%) ----- ---- ------ Net (loss) income $(3,594)
(0.9%) $53,477 8.6% $(57,071) (106.7%) ======= ======= ========
Reconciliation of Net (Loss) Income as Reported to Adjusted Net
Income: Three Months Ended March 31, Change ------------------
------ 2009 2008 $ % ---- ---- ------ ------ Net (loss) income as
reported (1) $(3,594) $53,477 $(57,071) (106.7%) Adjustment:
Rationalization charges, after-tax 7,428 - 7,428 N/A ----- ----
----- Adjusted net income (2) $3,834 $53,477 $(49,643) (92.8%)
====== ======= ======== Basic (loss) earnings per share $(0.08)
$1.25 $(1.33) (106.4%) Adjustment (1) 0.17 - 0.17 N/A ---- ----
---- Adjusted basic earnings per share (2) $0.09 $1.25 $(1.16)
(92.8%) ===== ===== ====== Diluted (loss) earnings per share
$(0.08) $1.24 $(1.32) (106.5%) Adjustment (1) 0.17 - 0.17 N/A ----
---- ---- Adjusted diluted earnings per share (2) $0.09 $1.24
$(1.15) (92.7%) ===== ===== ====== Weighted average shares (basic)
42,372 42,675 Weighted average shares (diluted) 42,568 43,090 (1)
Net loss includes rationalization charges of $11,699 ($7,428 after-
tax) in the first quarter of 2009. (2) Adjusted net income
excluding rationalization charges and adjusted basic and diluted
earnings per share excluding rationalization 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 March 31, December 31, 2009 2008
---- ---- Cash and cash equivalents $300,452 $284,332 Total current
assets 951,708 1,024,726 Property, plant and equipment, net 418,066
427,902 Total assets 1,628,649 1,718,805 Total current liabilities
310,409 356,642 Short-term debt 19,091 50,693 Long-term debt 89,964
91,537 Total equity 976,389 1,009,973 Net Operating Working Capital
March 31, December 31, 2009 2008 ---- ---- Trade accounts
receivable $260,531 $299,171 Inventory 300,645 346,932 Trade
accounts payable 117,857 124,388 ------- ------- Net operating
working capital $443,319 $521,715 ======== ======== Net operating
working capital % to net sales (2) 28.0% 26.1% ==== ==== Invested
Capital March 31, December 31, 2009 2008 ---- ---- Short-term debt
$19,091 $50,693 Long-term debt 89,964 91,537 ------ ------ Total
debt 109,055 142,230 Total equity 976,389 1,009,973 -------
--------- Invested capital $1,085,444 $1,152,203 ==========
========== Total debt / invested capital 10.0% 12.3% Return on
invested capital (1) 14.5% 18.6% (1) Return on invested capital is
defined as rolling 12 months of earnings excluding tax-effected
interest divided by invested capital. (2) Net operating working
capital % to net sales is defined as net operating working capital
divided by annualized rolling 3 months of sales. Lincoln Electric
Holdings, Inc. Financial Highlights (In thousands, except per share
data) (Unaudited) Consolidated Statements of Cash Flows Three
Months Ended March 31, --------------------------- 2009 2008 ----
---- OPERATING ACTIVITIES: Net (loss) income $(3,594) $53,477
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Depreciation and amortization 13,488 13,907
Equity loss of affiliates, net 3,254 4 Other non-cash items, net
(6,741) 3,816 Changes in operating assets and liabilities, net of
effects from acquisitions: Decrease (increase) in accounts
receivable 31,417 (37,174) Decrease (increase) in inventories
37,163 (26,970) (Decrease) increase in accounts payable (4,382)
31,172 Decrease in accrued pensions (6,504) (6,640) Net change in
other current assets and liabilities 4,618 31,998 Net change in
other long-term assets and liabilities 2,944 3,933 ----- ----- NET
CASH PROVIDED BY OPERATING ACTIVITIES 71,663 67,523 INVESTING
ACTIVITIES: Capital expenditures (13,565) (12,812) Acquisition of
businesses, net of cash acquired - (8,675) Proceeds from sale of
property, plant and equipment 192 272 --- --- NET CASH USED BY
INVESTING ACTIVITIES (13,373) (21,215) FINANCING ACTIVITIES: Net
change in borrowings (28,859) (1,095) Proceeds from exercise of
stock options 16 1,591 Tax benefit from exercise of stock options 2
819 Purchase of shares for treasury (343) (18,033) Cash dividends
paid to shareholders (11,444) (10,720) ------- ------- NET CASH
USED BY FINANCING ACTIVITIES (40,628) (27,438) Effect of exchange
rate changes on cash and cash equivalents (1,542) 1,601 ------
----- INCREASE IN CASH AND CASH EQUIVALENTS 16,120 20,471 Cash and
cash equivalents at beginning of period 284,332 217,382 -------
------- Cash and cash equivalents at end of period $300,452
$237,853 ======== ======== Cash dividends paid per share $0.27
$0.25 Lincoln Electric Holdings, Inc. Financial Highlights (In
thousands) (Unaudited) Segment Highlights North Other Elimin-
Consol- America Europe Countries ations idated ------- ------
--------- ------- --------- Three months ended March 31, 2009 Net
sales to unaffiliated customers $246,656 $93,300 $71,795 $-
$411,751 Inter-segment sales 17,608 2,502 1,963 (22,073) - ------
----- ----- ------- ----- Total $264,264 $95,802 $73,758 $(22,073)
$411,751 ======== ======= ======= ======== ======== Income (loss)
before interest and income taxes $8,233 $(6,604) $(1,623) $(566)
$(560) As a percent of total sales 3.1% (6.9%) (2.2%) (0.1%)
Adjustments: Rationalization charges $10,526 $470 $703 $- $11,699
Adjusted income (loss) before interest and income taxes excluding
rationalization charges (1) $18,759 $(6,134) $(920) $(566) $11,139
As a percent of total sales 7.1% (6.4%) (1.2%) 2.7% Three months
ended March 31, 2008 Net sales to unaffiliated customers $371,113
$147,445 $101,669 $- $620,227 Inter-segment sales 27,066 6,925
1,566 (35,557) - ------ ----- ----- ------- ----- Total $398,179
$154,370 $103,235 $(35,557) $620,227 ======== ======== ========
======== ======== Income (loss) before interest and income taxes
$56,533 $18,219 $5,039 $(253) $79,538 As a percent of total sales
14.2% 11.8% 4.9% 12.8% (1) Adjusted income (loss) before interest
and income taxes excluding rationalization 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, , Investors: Joseph P.
Kelley, +1-216-383-8346, , both of Lincoln Electric Holdings, Inc.
Web Site: http://www.lincolnelectric.com/
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