Lincoln Electric Reports Second Consecutive Record Sales Quarter of $744.0 Million; 2Q '12 Sales Increase of 6.4%; 2Q Operating Income Increase of 20.0%; 2Q EPS of $0.79, $0.81 as Adjusted, an Increase of 16.2%, 19.1% as Adjusted

CLEVELAND, July 30, 2012 /PRNewswire/ -- 

Second Quarter and First Half 2012 Highlights

  • Sales were $744.0 million, an increase of 6.4% from the Second Quarter 2011; First Half 2012 Sales were $1.5 billion, an increase of 13.3% from 2011
  • Operating income increased 20.0% to $96.0 million, or 12.9% of sales, from $80.0 million, or 11.4% of sales, in the Second Quarter 2011; Adjusted operating income increased 23.4% to $98.7 million or 13.3% of sales
  • Net income increased 16.3% to $66.3 million, or $0.79 per diluted share, from $57.0 million, or $0.68 per diluted share, in the Second Quarter 2011; Adjusted net income increased 19.6% to $68.1 million, or $0.81 per diluted share, from $57.0 million, or $0.68 per diluted share, in the Second Quarter 2011
  • Net cash provided by operating activities in the Second Quarter 2012 increased $52.9 million, or 183.4%, to $81.7 million; Net cash provided by operating activities in the First Half 2012 increased $115.3 million, or 253.0%, to $160.9 million

Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq: LECO) today reported second quarter 2012 net income of $66.3 million, or $0.79 per diluted share.  Adjusted net income was $68.1 million, or $0.81 per diluted share, compared to adjusted net income of $57.0 million, or $0.68 per diluted share, in the comparable 2011 period. 

Sales were $744.0 million in the second quarter 2012 versus $699.3 million in the comparable 2011 period, an increase of 6.4%.  Operating income for the second quarter increased $16.0 million to $96.0 million, or 12.9% of sales, from $80.0 million, or 11.4% of sales, in the comparable 2011 period.  The effective tax rate for the second quarter 2012 was 32.4% compared with 30.0% in the same period of 2011. 

Sales for the six months ended June 30, 2012 were $1.5 billion versus $1.3 billion in the comparable 2011 period, an increase of 13.3%.  Operating income for the six months ended June 30, 2012 increased $48.2 million to $187.7 million, or 12.8% of sales, from $139.5 million, or 10.7% of sales, in the comparable 2011 period. 

Net income for the six months ended June 30, 2012 was $130.6 million, or $1.54 per diluted share, compared with net income of $103.9 million, or $1.23 per diluted share, in the comparable 2011 period.  Adjusted net income was $132.4 million, or $1.57 per diluted share, compared to adjusted net income of $99.3 million, or $1.18 per diluted share, in the comparable 2011 period.  The effective tax rate for the six months ended June 30, 2012 was 31.7% compared with 26.8% in 2011.  The six months ended June 30, 2011 included a favorable $4.8 million tax adjustment for tax audit settlements.

"We are pleased to report our second consecutive quarter of record sales," said John M. Stropki, Chairman and Chief Executive Officer.  "Sales levels, overall profitability and operating cash flows all improved during the quarter despite the ongoing economic challenges in many of our key markets.  The continued strength in operating performance was driven by the strong performance in North America, improved product mix and better pricing dynamics in many of our business segments. 

"We are cautious entering the second half of 2012 as we face increased uncertainty in both the political and economic environments around the world.  Although our North American markets remain strong, we have seen demand softening in most of our international markets and global economic growth forecasts continue to weaken.  Our global growth strategies, which include acquisitions, new product introductions and increasing our commercial presence worldwide, will help us offset the weak economic conditions.  Our solid liquidity and 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 $52.9 million to $81.7 million in the second quarter from $28.8 million for the comparable period in 2011.  During the quarter, the Company returned $34.2 million to shareholders through the payment of $14.2 million in dividends and the repurchase of $20.0 million, or 428,300 of the Company's common shares, for treasury.  The Company also invested $27.4 million in acquisitions and voluntarily contributed $18.0 million to its U.S. pension plans during the quarter.

Net cash provided by operating activities increased $115.3 million to $160.9 million in the six months ended June 30, 2012 from $45.6 million for the comparable period in 2011.  During the period, the Company repaid its $80.0 million senior unsecured note.  The Company also returned $68.5 million to shareholders through the payment of $28.4 million in dividends and the repurchase of $40.1 million, or 860,684 of the Company's common shares, for treasury during the period.  The Company also invested $49.3 million in acquisitions and voluntarily contributed $36.0 million to its U.S. pension plans.

The Company's Board of Directors declared a quarterly cash dividend of $0.17 per share, which was paid on July 13, 2012 to holders of record as of June 29, 2012.

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

A conference call to discuss the second quarter 2012 financial results is scheduled for today, Monday, July 30, 2012, at 10:00 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 45 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 June 30,


Fav (Unfav) to Prior Year




2012


 % of Sales 


2011


 % of Sales 


$


%



Net sales

$     744,045


100.0%


$     699,293


100.0%


$       44,752


6.4%



Cost of goods sold

519,048


69.8%


503,789


72.0%


(15,259)


(3.0%)



Gross profit

224,997


30.2%


195,504


28.0%


29,493


15.1%



Selling, general & administrative expenses

127,714


17.2%


115,546


16.5%


(12,168)


(10.5%)



Rationalization and asset impairment charges (gains)

1,258


0.2%


(75)


-


(1,333)


(1777.3%)



Operating income

96,025


12.9%


80,033


11.4%


15,992


20.0%



Interest income

849


0.1%


661


0.1%


188


28.4%



Equity earnings in affiliates

2,006


0.3%


1,715


0.2%


291


17.0%



Other income 

403


0.1%


712


0.1%


(309)


(43.4%)



Interest expense

(1,126)


(0.2%)


(1,627)


(0.2%)


501


30.8%



Income before income taxes

98,157


13.2%


81,494


11.7%


16,663


20.4%



Income taxes

31,792


4.3%


24,472


3.5%


(7,320)


(29.9%)



Effective tax rate

32.4%




30.0%




(2.4%)





Net income including noncontrolling interests

66,365


8.9%


57,022


8.2%


9,343


16.4%



Noncontrolling interests in subsidiaries' earnings

46


-


9


-


37


411.1%



Net income

$       66,319


8.9%


$       57,013


8.2%


$         9,306


16.3%

















Basic earnings per share 

$           0.80




$           0.69




$           0.11


15.9%



Diluted earnings per share 

$           0.79




$           0.68




$           0.11


16.2%

















Weighted average shares (basic)

83,328




83,037









Weighted average shares (diluted)

84,448




84,105
























Six Months Ended June 30,


Fav (Unfav) to Prior Year




2012


 % of Sales 


2011


 % of Sales 


$


%



Net sales

$  1,471,167


100.0%


$  1,298,472


100.0%


$     172,695


13.3%



Cost of goods sold

1,030,905


70.1%


941,530


72.5%


(89,375)


(9.5%)



Gross profit

440,262


29.9%


356,942


27.5%


83,320


23.3%



Selling, general & administrative expenses

251,329


17.1%


217,165


16.7%


(34,164)


(15.7%)



Rationalization and asset impairment charges (gains)

1,258


0.1%


282


-


(976)


(346.1%)



Operating income

187,675


12.8%


139,495


10.7%


48,180


34.5%



Interest income

1,732


0.1%


1,269


0.1%


463


36.5%



Equity earnings in affiliates

2,698


0.2%


2,545


0.2%


153


6.0%



Other income 

1,269


0.1%


2,007


0.2%


(738)


(36.8%)



Interest expense

(2,298)


(0.2%)


(3,285)


(0.3%)


987


30.0%



Income before income taxes

191,076


13.0%


142,031


10.9%


49,045


34.5%



Income taxes

60,562


4.1%


38,067


2.9%


(22,495)


(59.1%)



Effective tax rate

31.7%




26.8%




(4.9%)





Net income including noncontrolling interests

130,514


8.9%


103,964


8.0%


26,550


25.5%



Noncontrolling interests in subsidiaries' (loss) earnings

(48)


-


41


-


(89)


(217.1%)



Net income

$     130,562


8.9%


$     103,923


8.0%


$       26,639


25.6%

















Basic earnings per share 

$           1.57




$           1.25




$           0.32


25.6%



Diluted earnings per share 

$           1.54




$           1.23




$           0.31


25.2%

















Weighted average shares (basic)

83,390




83,414









Weighted average shares (diluted)

84,527




84,493














































Lincoln Electric Holdings, Inc.




Financial Highlights 




(In thousands, except per share amounts)




(Unaudited)














Non-GAAP Financial Measures












Three Months Ended June 30,


Six Months Ended June 30,





2012


2011


2012


2011



Operating income as reported

$             96,025


$             80,033


$           187,675


$           139,495



   Special items (pre-tax):










      Rationalization and asset impairment charges (gains) (1)

1,258


(75)


1,258


282



      Venezuelan statutory severance obligation  (2)

1,381


-


1,381


-



Adjusted operating income (4)

$             98,664


$             79,958


$           190,314


$           139,777














Net income as reported

$             66,319


$             57,013


$           130,562


$           103,923



   Special items (after-tax):










      Rationalization and asset impairment charges (gains) (1)

915


(44)


915


237



      Venezuelan statutory severance obligation  (2)

906


-


906


-



      Adjustment for tax audit settlements (3)

-


-


-


(4,844)



Adjusted net income (4)

$             68,140


$             56,969


$           132,383


$             99,316














Diluted earnings per share as reported

$                 0.79


$                 0.68


$                 1.54


$                 1.23



Special items

0.02


-


0.03


(0.05)



Adjusted diluted earnings per share (4)

$                 0.81


$                 0.68


$                 1.57


$                 1.18














Weighted average shares (diluted)

84,448


84,105


84,527


84,493















(1)

The three and six month periods ended June 30, 2012 include charges associated with severance and other costs from the consolidation of manufacturing operations initiated in 2012.  The three and six month periods ended June 30, 2011 include charges associated with severance and other costs from the consolidation of manufacturing operations initiated in 2009 offset by gains related to the sale of assets at rationalized operations.

 



(2)

Represents an unfavorable adjustment due to a change in Venezuelan labor law which provides for increased employee severance obligations.

 



(3)

Represents a favorable adjustment for tax audit settlements.

 



(4)

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.
























Lincoln Electric Holdings, Inc.



Financial Highlights 



(In thousands)



(Unaudited)













Balance Sheet Highlights













June 30,


December 31,



Selected Consolidated Balance Sheet Data

2012


2011



Cash and cash equivalents



$       307,963


$       361,101



Total current assets




1,236,340


1,219,270



Property, plant and equipment, net


476,478


470,451



Total assets




2,021,988


1,976,776













Total current liabilities



459,420


471,042



Short-term debt (1)




20,733


101,418



Long-term debt




2,396


1,960



Total equity




1,281,008


1,193,242


















June 30,


December 31,



Net Operating Working Capital


2012


2011



Accounts receivable




$       422,532


$       386,197



Inventory





400,562


373,238



Trade accounts payable



202,413


176,312



Net operating working capital



$       620,681


$       583,123













Net operating working capital to net sales(2)

20.9%


21.0%


















June 30,


December 31,



Invested Capital




2012


2011



Short-term debt (1)




$         20,733


$       101,418



Long-term debt




2,396


1,960



Total debt




23,129


103,378



Total equity




1,281,008


1,193,242



Invested capital




$    1,304,137


$    1,296,620













Total debt / invested capital



1.8%


8.0%



Return on invested capital (3)



18.8%


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.