CLEVELAND -- Lincoln Electric Holdings,
Inc. (Nasdaq: LECO - News) today reported that 2006 second-quarter net income
increased 33% to $42.6 million, or 99 cents per diluted share, on record sales
of $502.5 million, an increase of 24%, 20% excluding the April 29, 2005
acquisition of J.W. Harris. This compares with 2005 same-quarter net income
of $32.1 million, or 77 cents per diluted share, on net sales of $405.9
million. Net income for the 2006 second quarter includes charges of $1.3
million ($1.3 million after-tax, or 3 cents per diluted share) related to
European rationalization actions. Net income for the 2005 second quarter
includes a favorable tax benefit of $1.8 million (5 cents per diluted share)
related to a change in Ohio tax law.
"We had another excellent quarter," said John M. Stropki, Chairman and
Chief Executive Officer. "Our solid performance reflects a strong global
business environment and effective execution from our management team and
employees which resulted in another record quarter for both sales and
profitability. In addition, we are pleased with the improved operating
leverage driven by significant increases in volume and ongoing cost control.
"Our growth continues to be broad-based and we are focused on our core
strategies of new product introductions and geographical market expansion,
customer service excellence and cost control."
Sales for the Company's North American operations were $335.7 million in
the quarter versus $265.4 million in the comparable quarter last year, an
increase of 27%, 22% excluding the 2005 acquisition of J.W. Harris. Export
sales in the quarter increased 62% to $39.6 million from $24.4 million last
year.
Sales at Lincoln subsidiaries outside North America increased to $166.8
million in the second quarter, compared with $140.5 million in the year-ago
quarter. In local currencies, international subsidiaries' sales increased
17%.
Net income for the first half of 2006 increased 46% to $79.4 million, or
$1.85 per diluted share. This compares with net income of $54.4 million in
the same period last year, or $1.30 per diluted share. Net income for the
first half of 2006 and 2005 includes charges of $2.3 million ($2.3 million
after-tax, or 6 cents per diluted share) and $1.3 million ($0.8 million after-
tax, or 2 cents per diluted share), respectively, related to European
rationalization actions. In addition, net income for the 2005 comparable
period includes a favorable tax benefit of $1.8 million (5 cents per diluted
share) related to a change in Ohio tax law.
Sales in the first half of 2006 increased 26%, 20% excluding the 2005
acquisition of J.W. Harris, to $970.9 million from $768.8 million in the 2005
comparable period. The Company's North American operations had sales of
$655.9 million in 2006, compared with $496.9 million for the same period in
2005, an increase of 32%, 23% excluding the 2005 acquisition of J.W. Harris.
Export sales increased 50% to $70.2 million, compared with $46.7 million in
the comparable 2005 period. Lincoln operations outside of North America had
sales of $315.0 million, a 16% increase over prior year sales of $271.9
million. In local currencies, sales for the Company's non-U.S. operations
increased 17%.
Cash flow from operations decreased 7% to $57.3 million for the first half
of 2006, compared with $61.8 million in 2005. During 2006 the Company paid
$16.1 million in dividends. The Board of Directors also declared a quarterly
cash dividend of 19 cents, which was paid on July 15, 2006 to holders of
record as of June 30, 2006.
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 33
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 Web site 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.
A conference call to discuss 2006 second quarter financial results is
scheduled for today, Tuesday, July 25, 2006, at 11:00 a.m. ET. An audio
webcast of the call is accessible through the Investor page on the Company's
Web site at http://www.lincolnelectric.com.
Lincoln Electric Holdings, Inc.
Financial Highlights
(amounts in thousands, except per share data)
(Unaudited)
Consolidated Three Months Ended June 30, Change
Statements
of Income % of % of
2006 Sales 2005 Sales $ %
Net Sales $502,510 100.0% $405,902 100.0% $96,608 23.8%
Cost of Goods
Sold 356,043 70.9% 291,951 71.9% 64,092 22.0%
Gross Profit 146,467 29.1% 113,951 28.1% 32,516 28.5%
SG&A Expenses 83,436 16.6% 71,919 17.7% 11,517 16.0%
Rationalization
Charges 1,292 0.2% - 0.0% 1,292 NA
Operating Income 61,739 12.3% 42,032 10.4% 19,707 46.9%
Interest Income 1,400 0.3% 891 0.2% 509 57.1%
Equity Earnings
in Affiliates 2,160 0.4% 1,030 0.2% 1,130 109.7%
Other Income 176 0.0% 995 0.2% (819) (82.3%)
Interest Expense (2,438) (0.5%) (2,186) (0.5%) (252) 11.5%
Income Before
Income Taxes 63,037 12.5% 42,762 10.5% 20,275 47.4%
Income Taxes 20,418 4.0% 10,650 2.6% 9,768 91.7%
Net Income (1) $42,619 8.5% $32,112 7.9% $10,507 32.7%
Basic Earnings
Per Share $1.00 $0.77 $0.23 29.9%
Diluted Earnings
Per Share $0.99 $0.77 $0.22 28.6%
Weighted Average
Shares (Basic) 42,514 41,477
Weighted Average
Shares (Diluted) 43,008 41,845
(1) 2006 net income includes charges related to European rationalization
actions of $1,292 ($1,292 after-tax). 2005 net income reflects a
favorable tax benefit of $1,807 related to a change in Ohio tax law.
Lincoln Electric Holdings, Inc.
Financial Highlights
(amounts in thousands, except per share data)
(Unaudited)
Consolidated Six Months Ended June 30, Change
Statements
of Income % of % of
2006 Sales 2005 Sales $ %
Net Sales $970,904 100.0% $768,805 100.0% $202,099 26.3%
Cost of Goods
Sold 694,371 71.5% 556,576 72.4% 137,795 24.8%
Gross Profit 276,533 28.5% 212,229 27.6% 64,304 30.3%
SG&A Expenses 160,107 16.5% 138,821 18.0% 21,286 15.3%
Rationalization
Charges 2,341 0.2% 1,250 0.2% 1,091 87.3%
Operating Income 114,085 11.8% 72,158 9.4% 41,927 58.1%
Interest Income 2,594 0.2% 1,660 0.2% 934 56.3%
Equity Earnings
in Affiliates 2,524 0.2% 1,564 0.2% 960 61.4%
Other Income 549 0.1% 1,466 0.2% (917) (62.6%)
Interest Expense (4,839) (0.5%) (3,868) (0.5%) (971) 25.1%
Income Before
Income Taxes 114,913 11.8% 72,980 9.5% 41,933 57.5%
Income Taxes 35,545 3.6% 18,628 2.4% 16,917 90.8%
Net Income (1) $79,368 8.2% $54,352 7.1% $25,016 46.0%
Basic Earnings
Per Share $1.87 $1.31 $0.56 42.7%
Diluted Earnings
Per Share $1.85 $1.30 $0.55 42.3%
Weighted Average
Shares (Basic) 42,397 41,577
Weighted Average
Shares (Diluted) 42,874 41,966
(1) 2006 net income includes charges related to European rationalization
actions of $2,341 ($2,341 after-tax). 2005 net income includes
charges related to European rationalization actions of $1,250
($848 after-tax) and a favorable tax benefit of $1,807 related to a
change in Ohio tax law.
Lincoln Electric Holdings, Inc.
Financial Highlights
(amounts in thousands, except per share data)
(Unaudited)
Balance Sheet Highlights
Selected Consolidated
Balance Sheet Data
June 30, December 31,
2006 2005
Cash and Cash Equivalents $125,427 $108,007
Total Current Assets 821,118 676,634
Net Property, Plant and
Equipment 354,385 340,533
Total Assets 1,323,808 1,161,161
Total Current Liabilities 404,709 293,642
Short-Term Debt 45,115 8,163
Long-Term Debt 111,940 157,853
Total Shareholders' Equity 743,822 652,294
Net Operating Working Capital
June 30, December 31,
2006 2005
Trade Accounts Receivable $304,161 $242,093
Inventory 331,043 275,745
Trade Accounts Payable 152,754 121,917
Net Working Capital $482,450 $395,921
Average Operating Working
Capital
% to Net Sales 31.3% 31.3%
Invested Capital
June 30, December 31,
2006 2005
Short-Term Debt $45,115 $8,163
Long-Term Debt 111,940 157,853
Total Debt 157,055 166,016
Equity 743,822 652,294
Total $900,877 $818,310
Total Debt/Capitalization 17.4% 20.3%
Return on Invested Capital 19.3% 17.7%
Lincoln Electric Holdings, Inc.
Financial Highlights
(amounts in thousands, except per share data)
(Unaudited)
Consolidated Six Months Ended June 30,
Statements of Cash Flows 2006 2005
Operating Activities:
Net Income $79,368 $54,352
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Rationalization Charges 2,341 1,250
Depreciation and Amortization 22,985 20,866
Equity Earnings of Affiliates, net (1,591) (1,564)
Other Non-Cash Items, net 2,478 2,663
Changes in Operating Assets and
Liabilities:
Increase in Accounts Receivable (55,800) (22,539)
Increase in Inventories (49,428) (25,055)
Increase in Accounts Payable 27,824 15,575
Contributions to Pension Plans (16,397) (21,466)
Increase in Accrued Pensions 8,637 7,319
Net change in Other Current
Assets and Liabilities 38,740 32,606
Net change in Other Long-Term
Assets and Liabilities (1,827) (2,166)
Net Cash Provided by Operating
Activities 57,330 61,841
1
Investing Activities:
Capital Expenditures (32,261) (21,435)
Acquisitions of businesses,
net of cash acquired (95) (70,704)
Proceeds from Sales of Fixed
Assets 641 846
Sales of Marketable
Securities, net - 50,500
Net Cash Used by Investing
Activities (31,715) (40,793)
Financing Activities:
Net change in Borrowings (7,477) (11,009)
Proceeds from Exercise of
Stock Options 8,952 7,592
Tax Benefit from the Exercise
of Stock Options 3,051 -
Purchase of Shares for
Treasury - (12,804)
Cash Dividends Paid to
Shareholders (16,077) (14,985)
Net Cash Used by Financing
Activities (11,551) (31,206)
Effect of Exchange Rate Changes
on Cash and Cash Equivalents 3,356 (2,277)
Increase in Cash and Cash
Equivalents 17,420 (12,435)
Cash and Cash Equivalents at
Beginning of Year 108,007 92,819
Cash and Cash Equivalents at End
of Period $125,427 $80,384
Cash Dividends Paid Per Share $0.38 $0.36
