Lincoln Electric Reports Record Sales Quarter of $727.1 Million; 1Q'12 Sales increase of 21.4%; 1Q Operating income increase of 54.1%; 1Q EPS of $0.76, an increase of 38.2%

Apr 24, 2012, 07:52 ET from Lincoln Electric Holdings, Inc.

CLEVELAND, April 24, 2012 /PRNewswire/ -- 

First Quarter 2012 Highlights

  • Sales were $727.1 million, an increase of 21.4% from the First Quarter 2011
  • Operating income increased 54.1% to $91.7 million, or 12.6% of sales, from $59.5 million, or 9.9% of sales, in the First Quarter 2011
  • Net income increased 36.9% to $64.2 million, or $0.76 per diluted share, from $46.9 million, or $0.55 per diluted share, in the First Quarter 2011
  • Adjusted net income for 2012 increased 51.7% to $64.2 million, or $0.76 per diluted share, from $42.3 million, or $0.50 per diluted share, in 2011
  • Net cash provided by operating activities in 2012 increased $62.5 million, or 373.0%, to $79.2 million

Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq: LECO) today reported first quarter 2012 net income of $64.2 million, or $0.76 per diluted share.  Sales were $727.1 million in the first quarter 2012 versus $599.2 million in the comparable 2011 period, an increase of 21.4%.  Operating income for the first quarter increased $32.2 million to $91.7 million, or 12.6% of sales, from $59.5 million, or 9.9% of sales, in the comparable 2011 period.  

Net income for the first quarter 2012 was $64.2 million, or $0.76 per diluted share, compared with net income of $46.9 million, or $0.55 per diluted share, in the first quarter 2011.  The effective tax rate for the first quarter 2012 was 31.0% compared with 22.5% in 2011.  The first quarter 2011 included a favorable $4.8 million tax adjustment for tax audit settlements.  

"We are pleased to report excellent results for the first quarter of 2012," said John M. Stropki, Chairman and Chief Executive Officer.  "Sales levels for the quarter were a record and overall profitability and operating cash flows improved significantly.  Our strong operating performance in the quarter was the result of improved product mix, better pricing dynamics in all of our business segments and the positive impact from recent acquisitions.  The continued strength in both sales and profitability during the quarter were particularly positive considering the ongoing economic challenges in many of our key markets. 

"The excellent start to 2012 and improved results from all of our operating segments provides the Company with good momentum to capture available market opportunities in an uncertain economic and political environment.  We are seeing robust year over year sales growth with particular strength in equipment and automation.  We remain focused on our global growth strategies, which include acquisitions, new product introductions and increasing our commercial presence worldwide.  In addition, our ongoing attention to continuous improvements in our operations will provide the increased operating leverage and flexibility required to execute our long-term strategic objectives."

Net cash provided by operating activities increased $62.5 million to $79.2 million in the first quarter from $16.7 million for the comparable period in 2011.  During the quarter, the Company repaid its $80.0 million senior unsecured note.  The Company also returned $34.3 million to shareholders through the payment of $14.2 million in dividends and the repurchase of $20.1 million, or 432,384 of the Company's shares, for treasury during the three months ended March 31, 2012.   

The Company's Board of Directors declared a quarterly cash dividend of $0.17 per share, which was paid on April 13, 2012 to holders of record as of March 31, 2012.

Financial results for the first quarter 2012 can also be obtained at http://www.lincolnelectric.com/InvestorNews.

A conference call to discuss the first quarter 2012 financial results is scheduled for today, Tuesday, April 24, 2012, at 11:00 a.m., Eastern Time.  An audio webcast of the call is accessible through the Company's website at http://www.lincolnelectric.com/InvestorWebcasts/.

Adjusted operating income, adjusted net income and adjusted diluted earnings per share 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.  Non-GAAP financial measures should be read in conjunction with the GAAP financial measures, as non-GAAP measures are a supplement to, and not a replacement for, GAAP financial measures.  Please refer to the attached schedule for a reconciliation of non-GAAP financial measures to the related GAAP financial measures. 

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 44 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 and 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.  Forward-looking statements generally can be identified by the use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "forecast," "guidance" or words of similar meaning.  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 events beyond our control, such as political unrest, acts of terror and natural disasters, 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.

Lincoln Electric Holdings, Inc.

Financial Highlights 

(In thousands, except per share amounts)

(Unaudited)

Consolidated Statements of Income

Three Months Ended March 31,

Fav (Unfav) to Prior Year

2012

 % of Sales 

2011

 % of Sales 

$

%

Net sales

$    727,122

100.0%

$    599,179

100.0%

$     127,943

21.4%

Cost of goods sold

511,857

70.4%

437,741

73.1%

(74,116)

(16.9%)

Gross profit

215,265

29.6%

161,438

26.9%

53,827

33.3%

Selling, general & administrative expenses

123,615

17.0%

101,619

17.0%

(21,996)

(21.6%)

Rationalization and asset impairment charges (gains)

-

-

357

0.1%

357

100.0%

Operating income

91,650

12.6%

59,462

9.9%

32,188

54.1%

Interest income

883

0.1%

608

0.1%

275

45.2%

Equity earnings in affiliates

692

0.1%

830

0.1%

(138)

(16.6%)

Other income 

866

0.1%

1,295

0.2%

(429)

(33.1%)

Interest expense

(1,172)

(0.2%)

(1,658)

(0.3%)

486

29.3%

Income before income taxes

92,919

12.8%

60,537

10.1%

32,382

53.5%

Income taxes

28,770

4.0%

13,595

2.3%

(15,175)

(111.6%)

Effective tax rate

31.0%

22.5%

(8.5%)

Net income including noncontrolling interests

64,149

8.8%

46,942

7.8%

17,207

36.7%

Noncontrolling interests in subsidiaries' (loss) earnings

(94)

-

32

-

(126)

(393.8%)

Net income

$      64,243

8.8%

$      46,910

7.8%

$       17,333

36.9%

Basic earnings per share 

$          0.77

$          0.56

$           0.21

37.5%

Diluted earnings per share 

$          0.76

$          0.55

$           0.21

38.2%

Weighted average shares (basic)

83,452

83,791

Weighted average shares (diluted)

84,608

84,878

Per share amounts and the weighted average number of common shares outstanding have been retroactively adjusted to give effect to the two-for- one stock split on May 31, 2011.

 

Lincoln Electric Holdings, Inc.

Financial Highlights 

(In thousands, except per share amounts)

(Unaudited)

Non-GAAP Financial Measures

Three Months Ended March 31,

2012

2011

Operating income as reported

$             91,650

$             59,462

   Special items (pre-tax):

      Rationalization and asset impairment charges (gains) (1)

-

357

Adjusted operating income (3)

$             91,650

$             59,819

Net income as reported

$             64,243

$             46,910

   Special items (after-tax):

      Rationalization and asset impairment charges (gains) (1)

-

281

      Adjustment for tax audit settlements (2)

-

(4,844)

Adjusted net income (3)

$             64,243

$             42,347

Diluted earnings per share as reported

$                 0.76

$                 0.55

Special items

-

(0.05)

Adjusted diluted earnings per share (3)

$                 0.76

$                 0.50

Weighted average shares (diluted)

84,608

84,878

(1)

The three month period ended March 31, 2011 includes gains related to the sale of assets at rationalized operations offset by charges associated with severance and other costs from the consolidation of manufacturing operations initiated in 2009.

(2)

Represents a favorable adjustment for tax audit settlements.

(3)

Adjusted operating income, Adjusted net income and Adjusted diluted earnings per share 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.  Non- GAAP financial measures should be read in conjunction with the GAAP financial measures, as non- GAAP measures are a supplement to, and not a replacement for, GAAP financial measures.

Per share amounts and the weighted average number of common shares outstanding have been retroactively adjusted to give effect to the two-for-one stock split on May 31, 2011.

 

Lincoln Electric Holdings, Inc.

Financial Highlights 

(In thousands)

(Unaudited)

Balance Sheet Highlights

March 31,

December 31,

Selected Consolidated Balance Sheet Data

2012

2011

Cash and cash equivalents

$       300,838

$       361,101

Total current assets

1,236,002

1,219,270

Property, plant and equipment, net

486,872

470,451

Total assets

2,022,311

1,976,776

Total current liabilities

453,922

471,042

Short-term debt (1)

22,547

101,418

Long-term debt

2,494

1,960

Total equity

1,265,629

1,193,242

March 31,

December 31,

Net Operating Working Capital

2012

2011

Accounts receivable

$       430,448

$       386,197

Inventory

401,374

373,238

Trade accounts payable

208,004

176,312

Net operating working capital

$       623,818

$       583,123

Net operating working capital to net sales (2)

21.4%

21.0%

March 31,

December 31,

Invested Capital

2012

2011

Short-term debt (1)

$         22,547

$       101,418

Long-term debt

2,494

1,960

Total debt

25,041

103,378

Total equity

1,265,629

1,193,242

Invested capital

$    1,290,670

$    1,296,620

Total debt / invested capital

1.9%

8.0%

Return on invested capital (3)

18.3%

16.9%

(1) Includes current portion of long-term debt.

(2) Net operating working capital to net sales is defined as net operating working capital divided by       annualized rolling three months of sales.

(3) 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 amounts)

(Unaudited)

Consolidated Statements of Cash Flows

Three Months Ended March 31,

2012

2011

OPERATING ACTIVITIES:

Net income

$              64,243

$              46,910

Noncontrolling interests in subsidiaries' (loss) earnings 

(94)

32

Net income including noncontrolling interests

64,149

46,942

Adjustments to reconcile Net income including noncontrolling interests to Net

  cash provided by operating activities:

Rationalization and asset impairment charges

-

227

Depreciation and amortization

15,579

15,206

Equity loss (earnings) in affiliates, net 

443

(362)

Other non-cash items, net

15,359

18,840

Changes in operating assets and liabilities, net of effects from acquisitions:

Increase in accounts receivable

(29,752)

(43,324)

Increase in inventories

(14,462)

(62,064)

Increase in trade accounts payable

23,341

55,553

Decrease in accrued pensions

(18,970)

(7,404)

Net change in other current assets and liabilities

19,075

(4,430)

Net change in other long-term assets and liabilities

4,402

(2,446)

NET CASH PROVIDED BY OPERATING ACTIVITIES

79,164

16,738

INVESTING ACTIVITIES:

Capital expenditures

(12,567)

(15,503)

Acquisition of businesses, net of cash acquired

(21,896)

(17,881)

Proceeds from sale of property, plant and equipment

210

142

NET CASH USED BY INVESTING ACTIVITIES

(34,253)

(33,242)

FINANCING ACTIVITIES:

Net change in borrowings

(83,998)

(1,319)

Proceeds from exercise of stock options

7,440

2,864

Tax benefit from exercise of stock options

2,983

715

Purchase of shares for treasury

(20,098)

(905)

Cash dividends paid to shareholders

(14,186)

(12,987)

NET CASH USED BY FINANCING ACTIVITIES

(107,859)

(11,632)

Effect of exchange rate changes on Cash and cash equivalents

2,685

3,358

DECREASE IN CASH AND CASH EQUIVALENTS

(60,263)

(24,778)

Cash and cash equivalents at beginning of period

361,101

366,193

Cash and cash equivalents at end of period

$            300,838

$            341,415

Cash dividends paid per share

$                  0.17

$                0.155

 

Lincoln Electric Holdings, Inc.

Segment Highlights 

(In thousands)

(Unaudited)

North

South

The Harris

America

Europe 

Asia Pacific

America

Products

Corporate /

Welding

Welding

Welding

Welding

Group

Eliminations

Consolidated

Three months ended

     March 31, 2012

Net sales

$ 381,329

$ 125,803

$ 92,563

$ 39,838

$ 87,589

$  -

$ 727,122

Inter-segment sales 

33,542

4,451

3,817

-

2,383

(44,193)

-

     Total

$ 414,871

$ 130,254

$  96,380

$ 39,838

$ 89,972

$ (44,193)

$ 727,122

EBIT(1)

$ 69,519

$ 12,811

$   2,573

$  2,905

$  7,153

$  (1,753)

$ 93,208

     As a percent of total sales

16.8%

9.8%

2.7%

7.3%

8.0%

12.8%

Special items charge (gain)(2)

$     -

$  -

$  -

$  -

$    -

$   -

$  -

EBIT, as adjusted(3)

$ 69,519

$  12,811

$  2,573

$  2,905

$  7,153

$ (1,753)

$ 93,208

     As a percent of total sales

16.8%

9.8%

2.7%

7.3%

8.0%

12.8%

Three months ended

     March 31, 2011

Net sales

$ 280,757

$ 114,208

$ 87,560

$ 34,073

$ 82,581

$ -

$   599,179

Inter-segment sales 

35,127

3,835

3,213

-

2,233

(44,408)

-

     Total

$ 315,884

$ 118,043

$ 90,773

$ 34,073

$ 84,814

$ (44,408)

$   599,179

EBIT(1)

$ 46,636

$   5,554

$  127

$ 2,048

$ 6,543

$ 679

$ 61,587

     As a percent of total sales

14.8%

4.7%

0.1%

6.0%

7.7%

10.3%

Special items charge (gain)(2)

$     -

$  358

$ (1)

$ -

$ -

$  -

$ 357

EBIT, as adjusted(3)

$ 46,636

$  5,912

$ 126

$ 2,048

$ 6,543

$ 679

$ 61,944

     As a percent of total sales

14.8%

5.0%

0.1%

6.0%

7.7%

10.3%

(1)

 

(2)

EBIT is defined as Operating income plus Equity earnings in affiliates and Other income.

 

Special items include rationalization and asset impairment charges (gains).

(3)

The primary profit measure used by management to assess segment performance is EBIT, as adjusted. EBIT for each operating segment is adjusted for special items to derive EBIT, as adjusted.

 

Lincoln Electric Holdings, Inc.

Change in Net Sales by Segment

(In thousands)

(Unaudited)

Three Months Ended March 31st Change in Net Sales by Segment

Change in Net Sales due to:

Net Sales

Foreign

Net Sales

2011

Volume

Acquisitions

Price

Exchange

2012

Operating Segments

North America Welding

$    280,757

$      63,279

$      27,318

$      10,840

$         (865)

$    381,329

Europe Welding

114,208

3,800

8,322

5,362

(5,889)

125,803

Asia Pacific Welding

87,560

382

-

1,891

2,730

92,563

South America Welding

34,073

3,593

-

3,058

(886)

39,838

The Harris Products Group

82,581

5,378

-

770

(1,140)

87,589

Consolidated

$    599,179

$      76,432

$      35,640

$      21,921

$      (6,050)

$    727,122

% Change

North America Welding

22.5%

9.7%

3.9%

(0.3%)

35.8%

Europe Welding

3.3%

7.3%

4.7%

(5.2%)

10.2%

Asia Pacific Welding

0.4%

-

2.2%

3.1%

5.7%

South America Welding

10.5%

-

9.0%

(2.6%)

16.9%

The Harris Products Group

6.5%

-

0.9%

(1.4%)

6.1%

Consolidated

12.8%

5.9%

3.7%

(1.0%)

21.4%

 

SOURCE Lincoln Electric Holdings, Inc.



RELATED LINKS

http://www.lincolnelectric.com