EX-99.1 2 l30270aexv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1
Media Contact: Roy L. Morrow (216) 383-4893
Roy_Morrow@lincolnelectric.com
Investors Contact: Joseph P. Kelley (216) 383-8346
Joe_Kelley@lincolnelectric.com
LINCOLN ELECTRIC REPORTS RECORD
2007 FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS
Three Months Ended December 31, 2007
    Sales increased 14.7% to $580.3 million
 
    Operating income increased 12.1% to $66.4 million
 
    Excluding non-recurring items, operating income increased 29.8%
 
    Net cash provided by operating activities was $45.7 million, an increase of 236%
Twelve Months Ended December 31, 2007
    Sales increased 15.7% to $2.28 billion
 
    Operating income increased 19.2% to $277.6 million
 
    Excluding non-recurring items, operating income increased 22.0%
 
    Net cash provided by operating activities was $249.8 million, an increase of 111%
          CLEVELAND, Ohio, U.S.A., February 22, 2008 — Lincoln Electric Holdings, Inc. (the “Company”) (NASDAQ: LECO) today reported record 2007 fourth quarter operating income, increasing 12.1% to $66.4 million from $59.2 million in 2006, on a sales increase of 14.7%. Non-recurring items in the 2007 fourth quarter include a gain of $0.6 million ($0.5 million after-tax, or $0.01 per diluted share) related to European rationalization actions. The 2006 fourth quarter includes a non-recurring gain of $9.0 million ($7.2 million after-tax or $0.17 per diluted share) on the sale of the Company’s facility in Ireland, offset by a charge of $0.5 million ($0.5 million after-tax, or $0.01 per diluted share) related to European rationalization actions. The 2006 gain is reported as a reduction in selling, general and administrative expenses. Excluding these non-recurring items, adjusted operating income increased 29.8% to $65.8 million from $50.7 million in 2006.
          Net income for the fourth quarter decreased 4.4% to $49.5 million, or $1.14 per diluted share from $51.8 million, or $1.20 per diluted share in 2006. This decrease is primarily due to the impact of non-recurring items and a much lower effective tax rate in the prior year comparable period. The 2007 fourth quarter effective tax rate was 28.8% compared with 16.0% in 2006. Excluding non-recurring items, adjusted net income increased 8.8% to $49.0 million, or $1.13 per diluted share in 2007 compared to $45.1 million or $1.04 per diluted share in 2006.
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2

Lincoln Electric Reports Record 2007 Fourth Quarter Financial Results
          “We had a solid fourth quarter and completed another record year for sales, profits and cash flow. Our global management team, including 8,992 associates worldwide, achieved these strong results despite challenging conditions in several key markets and geographies”, said John M. Stropki, Chairman and Chief Executive Officer. “Although there is still considerable uncertainty in several sectors and markets, we believe we are especially well positioned to continue growing our sales and market share. We will continue to focus our efforts and investments in areas of higher growth potential and build on the momentum of our record 2007 performance.”
          Sales for the fourth quarter increased 14.7% to $580.3 million from $505.9 million in the comparable period of 2006. Sales for the Company’s North American operations were $345.1 million in the quarter versus $319.2 million in the comparable quarter last year, an increase of 8.1%. U.S. export sales in the quarter increased 11.2% to $46.3 million from $41.6 million in 2006.
          Sales at Lincoln subsidiaries outside North America increased to $235.2 million in the fourth quarter, compared with $186.7 million in the year ago quarter. In local currencies, international subsidiaries’ sales increased 14.0%.
          Net income for 2007 increased 15.8% to $202.7 million, or $4.67 per diluted share. This compares with net income of $175.0 million in 2006, or $4.07 per diluted share. Net income includes a gain of $0.2 million ($0.1 million after-tax, no impact per diluted share) in 2007 and a charge in 2006 of $3.5 million ($3.5 million after-tax, or $0.08 per diluted share) related to European rationalization actions. Net income for 2006 also includes a non-recurring gain of $9.0 million ($7.2 million after-tax or $0.17 per diluted share) on the sale of the Company’s facility in Ireland. Excluding non-recurring items, adjusted net income increased 18.3% to $202.6 million, or $4.67 per diluted share in 2007 compared to $171.3 million, or $3.98 per diluted share in 2006.
          Operating income for 2007 increased 19.2% to $277.6 million from $233.0 million in 2006. Excluding non-recurring items, adjusted operating income increased 22.0% to $277.4 million from $227.4 million in 2006.
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3

Lincoln Electric Reports Record 2007 Fourth Quarter Financial Results
          Sales in 2007 increased 15.7%, to $2.28 billion from $1.97 billion in 2006. The Company’s North American operations had sales of $1.40 billion in 2007, compared with $1.31 billion in 2006, an increase of 7.3%. U.S. export sales increased 26.2% to $194.5 million, compared with $154.1 million in 2006. Lincoln operations outside of North America had sales of $879.4 million, an increase of 32.0% over 2006 sales of $666.4 million. In local currencies, sales for the Company’s international operations increased 18.8%.
          Net cash provided by operating activities increased 236% to $45.7 million in the fourth quarter compared with $13.6 million for the comparable period in 2006. For the full year 2007, net cash provided by operating activities increased 111% to $249.8 million compared with $118.7 million for the prior year. During 2007, the Company repaid $40.0 million of outstanding debt under its Senior Unsecured Notes and paid $37.7 million in dividends. The Company’s Board of Directors declared a quarterly cash dividend of $0.25, which was paid on January 15, 2008 to holders of record as of December 31, 2007.
          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, manufacturing alliances and joint ventures in 19 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: 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.
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4

Lincoln Electric Reports Record 2007 Fourth Quarter Financial Results
          A conference call to discuss fourth quarter 2007 results is scheduled for today, Friday, February 22, 2008 at 10:00 a.m. Eastern Time. An audio webcast of the call is accessible through the Investor page on the Company’s Website at http://www.lincolnelectric.com.
#2008-222#

 


 

Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share data)
(Unaudited)
Consolidated Statements of Income
                                                 
    Three Months Ended December 31,     Fav (Unfav) to Prior Year  
    2007     % of Sales     2006     % of Sales     $     %  
Net sales
  $ 580,279       100.0 %   $ 505,874       100.0 %   $ 74,405       14.7 %
Cost of goods sold
    419,338       72.3 %     371,467       73.4 %     (47,871 )     (12.9 %)
 
                                         
Gross profit
    160,941       27.7 %     134,407       26.6 %     26,534       19.7 %
Selling, general & administrative expenses
    95,145       16.4 %     74,703       14.8 %     (20,442 )     (27.4 %)
Rationalization (gain) charges
    (584 )     (0.1 %)     472       0.1 %     1,056       223.7 %
 
                                         
Operating income
    66,380       11.4 %     59,232       11.7 %     7,148       12.1 %
Interest income
    2,855       0.5 %     1,675       0.3 %     1,180       70.4 %
Equity earnings in affiliates
    2,420       0.4 %     2,666       0.5 %     (246 )     (9.2 %)
Other income
    960       0.2 %     854       0.2 %     106       12.4 %
Interest expense
    (3,051 )     (0.5 %)     (2,810 )     (0.5 %)     (241 )     (8.6 %)
 
                                         
Income before income taxes
    69,564       12.0 %     61,617       12.2 %     7,947       12.9 %
Income taxes
    20,055       3.5 %     9,832       2.0 %     (10,223 )     (104.0 %)
 
                                         
Effective tax rate
    28.8 %             16.0 %             (12.8 %)        
 
                                         
Net income (1)
  $ 49,509       8.5 %   $ 51,785       10.2 %   $ (2,276 )     (4.4 %)
 
                                         
Reconciliation of Net Income as Reported to Adjusted Net
Income Excluding Non-Recurring Items:
                                 
    Three Months Ended December 31,     Change  
    2007     2006     $     %  
Net income as reported (1)
  $ 49,509     $ 51,785     $ (2,276 )     (4.4 %)
Non-recurring items:
                               
Gain on sale of Ireland facility (after-tax)
          (7,204 )     7,204       (100.0 %)
European rationalization charges (after-tax)
    (503 )     472       (975 )     (206.6 %)
 
                               
 
                         
Adjusted net income excluding non-recurring items (2)
  $ 49,006     $ 45,053     $ 3,953       8.8 %
 
                         
 
                               
Basic earnings per share
  $ 1.15     $ 1.21     $ (0.06 )     (5.0 %)
Non-recurring items (1)
    (0.01 )     (0.16 )     0.15       (93.8 %)
 
                         
Basic earnings per share excluding non-recurring items (2)
  $ 1.14     $ 1.05     $ 0.09       8.6 %
 
                         
 
                               
Diluted earnings per share
  $ 1.14     $ 1.20     $ (0.06 )     (5.0 %)
Non-recurring items (1)
    (0.01 )     (0.16 )     0.15       (93.8 %)
 
                         
Diluted earnings per share excluding non-recurring items (2)
  $ 1.13     $ 1.04     $ 0.09       8.7 %
 
                         
 
                               
Weighted average shares (basic)
    42,969       42,727                  
Weighted average shares (diluted)
    43,447       43,239                  
 
(1)   Net income includes a credit of $584 ($503 after-tax) in 2007 and a charge in 2006 of $472 ($472 after-tax) related to European rationalization actions, offset by a gain of $9,006 ($7,204 after-tax) on the sale of the Company’s facility in Ireland for the three months ended December 31, 2006.
 
(2)   Adjusted net income excluding non-recurring items and basic and diluted earnings per share excluding non-recurring items, non-GAAP financial measures, are presented as management believes these financial measures 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
                                                 
    Twelve Months Ended December 31,     Fav (Unfav) to Prior Year  
    2007     % of Sales     2006     % of Sales     $     %  
Net sales
  $ 2,280,784       100.0 %   $ 1,971,915       100.0 %   $ 308,869       15.7 %
Cost of goods sold
    1,633,218       71.6 %     1,419,638       72.0 %     (213,580 )     (15.0 %)
 
                                         
Gross profit
    647,566       28.4 %     552,277       28.0 %     95,289       17.3 %
Selling, general & administrative expenses
    370,122       16.2 %     315,829       16.0 %     (54,293 )     (17.2 %)
Rationalization (gain) charges
    (188 )     0.0 %     3,478       0.2 %     3,666       105.4 %
 
                                         
Operating income
    277,632       12.2 %     232,970       11.8 %     44,662       19.2 %
Interest income
    8,294       0.4 %     5,876       0.3 %     2,418       41.2 %
Equity earnings in affiliates
    9,838       0.4 %     7,640       0.4 %     2,198       28.8 %
Other income
    2,823       0.1 %     1,839       0.1 %     984       53.5 %
Interest expense
    (11,430 )     (0.5 %)     (10,153 )     (0.5 %)     (1,277 )     (12.6 %)
 
                                         
Income before income taxes
    287,157       12.6 %     238,172       12.1 %     48,985       20.6 %
Income taxes
    84,421       3.7 %     63,164       3.2 %     (21,257 )     (33.7 %)
 
                                         
Effective tax rate
    29.4 %             26.5 %             (2.9 %)        
 
                                         
Net income (1)
  $ 202,736       8.9 %   $ 175,008       8.9 %   $ 27,728       15.8 %
 
                                         
Reconciliation of Net Income as Reported to Adjusted
Net Income Excluding Non-Recurring Items:
                                 
    Twelve Months Ended December 31,     Change  
    2007     2006     $     %  
Net income as reported (1)
  $ 202,736     $ 175,008     $ 27,728       15.8 %
Non-recurring items:
                               
Gain on sale of Ireland facility (after-tax)
            (7,204 )     7,204       (100.0 %)
European rationalization charges (after-tax)
    (107 )     3,478       (3,585 )     (103.1 %)
 
                               
 
                         
Adjusted net income excluding non-recurring items (2)
  $ 202,629     $ 171,282     $ 31,347       18.3 %
 
                         
 
                               
Basic earnings per share
  $ 4.73     $ 4.11     $ 0.62       15.1 %
Non-recurring items (1)
          (0.09 )     0.09       (100.0 %)
 
                         
Basic earnings per share excluding non-recurring items (2)
  $ 4.73     $ 4.02     $ 0.71       17.7 %
 
                         
 
                               
Diluted earnings per share
  $ 4.67     $ 4.07     $ 0.60       14.7 %
Non-recurring items (1)
          (0.09 )     0.09       (100.0 %)
 
                         
Diluted earnings per share excluding non-recurring items (2)
  $ 4.67     $ 3.98     $ 0.69       17.3 %
 
                         
 
                               
Weighted average shares (basic)
    42,899       42,532                  
Weighted average shares (diluted)
    43,392       43,032                  
 
(1)   Net income includes a credit of $188 ($107 after-tax) in 2007 and a charge in 2006 of $3,478 ($3,478 after-tax) related to European rationalization actions, offset by a gain of $9,006 ($7,204 after-tax) on the sale of the Company’s facility in Ireland for 2006.
 
(2)   Adjusted net income excluding non-recurring items and basic and diluted earnings per share excluding non-recurring items, non-GAAP financial measures, are presented as management believes these financial measures 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,
    2007   2006
Cash and cash equivalents
  $ 217,382     $ 120,212  
Total current assets
    969,648       829,410  
Net property, plant and equipment
    429,944       389,518  
Total assets
    1,645,296       1,394,579  
 
               
Total current liabilities
    311,921       338,288  
Short-term debt
    12,486       47,134  
Long-term debt
    117,329       113,965  
Total shareholders’ equity
    1,087,220       852,976  
Net Operating Working Capital
                 
    December 31,     December 31,  
    2007     2006  
Trade accounts receivable
  $ 344,058     $ 298,993  
 
               
Inventory
    343,849       351,144  
 
               
Trade accounts payable
    152,301       142,264  
 
               
 
           
Net operating working capital
  $ 535,606     $ 507,873  
 
           
 
               
Net operating working capital % to net sales
    23.5 %     25.8 %
 
           
Invested Capital
                 
    December 31,     December 31,  
    2007     2006  
Short-term debt
  $ 12,486     $ 47,134  
Long-term debt
    117,329       113,965  
 
           
Total debt
    129,815       161,099  
Equity
    1,087,220       852,976  
 
           
Total
  $ 1,217,035     $ 1,014,075  
 
           
 
               
Total debt/capitalization
    10.7 %     15.9 %
Return on invested capital
    20.5 %     19.9 %


 

Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share data)
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Three Months Ended December 31,  
    2007     2006  
OPERATING ACTIVITIES:
               
Net income
  $ 49,509     $ 51,785  
 
               
Adjustments to reconcile net income to net cash provided by operating activities:
               
Rationalization (gain) charges
    (584 )     472  
Depreciation and amortization
    13,514       12,008  
Equity earnings of affiliates, net
    (1,677 )     (2,187 )
Other non-cash items, net
    9,667       (6,708 )
Changes in operating assets and liabilities net of effects from acquisitions:
               
Decrease in accounts receivable
    14,462       8,703  
Decrease (increase) in inventories
    18,170       (2,317 )
Increase in accounts payable
    9,999       6,071  
Contributions to pension plans
    (739 )     (847 )
Increase in accrued pensions
    2,322       3,853  
Net change in other current assets and liabilities
    (69,116 )     (59,949 )
Net change in other long-term assets and liabilities
    198       2,705  
 
           
NET CASH PROVIDED BY OPERATING ACTIVITIES
    45,725       13,589  
 
               
INVESTING ACTIVITIES:
               
Capital expenditures
    (15,856 )     (22,684 )
Acquisition of businesses, net of cash acquired
    (12,671 )     (25,002 )
Proceeds from sale of property, plant and equipment
    94       10,932  
 
           
NET CASH USED BY INVESTING ACTIVITIES
    (28,433 )     (36,754 )
 
               
FINANCING ACTIVITIES:
               
Net change in borrowings
    123       894  
Proceeds from exercise of stock options
    1,055       3,336  
Tax benefit from the exercise of stock options
    (712 )     1,396  
Purchase of shares for treasury
    (15,459 )      
Cash dividends paid to shareholders
    (9,473 )     (8,097 )
 
           
NET CASH USED BY FINANCING ACTIVITIES
    (24,466 )     (2,471 )
 
               
Effect of exchange rate changes on cash and cash equivalents
    1,336       (63 )
 
           
INCREASE IN CASH AND CASH EQUIVALENTS
    (5,838 )     (25,699 )
Cash and cash equivalents at beginning of the period
    223,220       145,911  
 
           
Cash and cash equivalents at end of period
  $ 217,382     $ 120,212  
 
           
 
               
Cash dividends paid per share
  $ 0.22     $ 0.19  

 


 

Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share data)
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Twelve Months Ended December 31,  
    2007     2006  
OPERATING ACTIVITIES:
               
Net income
  $ 202,736     $ 175,008  
 
               
Adjustments to reconcile net income to net cash provided by operating activities:
               
Rationalization (gain) charges
    (188 )     3,478  
Depreciation and amortization
    52,610       47,825  
Equity earnings of affiliates, net
    (7,208 )     (5,728 )
Other non-cash items, net
    (609 )     (957 )
Changes in operating assets and liabilities net of effects from acquisitions:
               
Increase in accounts receivable
    (20,723 )     (39,719 )
Decrease (increase) in inventories
    36,011       (57,299 )
(Decrease) increase in accounts payable
    (3,333 )     12,914  
Contributions to pension plans
    (13,031 )     (20,503 )
Increase in accrued pensions
    3,237       16,248  
Net change in other current assets and liabilities
    556       (11,593 )
Net change in other long-term assets and liabilities
    (226 )     (994 )
 
           
NET CASH PROVIDED BY OPERATING ACTIVITIES
    249,832       118,680  
 
               
INVESTING ACTIVITIES:
               
Capital expenditures
    (61,633 )     (76,002 )
Acquisition of businesses, net of cash acquired
    (18,773 )     (25,504 )
Proceeds from sale of property, plant and equipment
    701       11,791  
 
           
NET CASH USED BY INVESTING ACTIVITIES
    (79,705 )     (89,715 )
 
               
FINANCING ACTIVITIES:
               
Net change in borrowings
    (37,316 )     (4,189 )
Proceeds from exercise of stock options
    8,644       13,618  
Tax benefit from the exercise of stock options
    4,289       5,243  
Purchase of shares for treasury
    (15,459 )     (126 )
Cash dividends paid to shareholders
    (37,744 )     (32,275 )
 
           
NET CASH USED BY FINANCING ACTIVITIES
    (77,586 )     (17,729 )
 
               
Effect of exchange rate changes on cash and cash equivalents
    4,629       969  
 
           
INCREASE IN CASH AND CASH EQUIVALENTS
    97,170       12,205  
Cash and cash equivalents at beginning of year
    120,212       108,007  
 
           
Cash and cash equivalents at end of year
  $ 217,382     $ 120,212  
 
           
 
               
Cash dividends paid per share
  $ 0.88     $ 0.76