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%

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.



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