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Last updated on April 19, 2014 at 13:20 EDT

Lincoln Electric Reports 1Q EPS of $0.80, $0.92 as adjusted; 1Q Sales of $718.6 million

April 23, 2013

CLEVELAND, April 23, 2013 /PRNewswire/ —

                       First Quarter 2013 Highlights

               Sales were $718.6 million in the First Quarter
                2013

               Operating income was $88.6 million, or 12.3% of
                sales, in the First Quarter 2013, a 3.3%
                decrease from the First Quarter 2012; Adjusted
                operating income increased 8.4% to $99.3
                million, or 13.8% of sales, from the First
                Quarter 2012

               Operating income includes charges of $10.7
                million, including a $0.12 per diluted share
                charge for the Venezuelan currency devaluation

               Net income increased 4.0% to $66.8 million, or
                $0.80 per diluted share, from $64.2 million,
                or $0.76 per diluted share, in the First
                Quarter 2012; Adjusted net income increased
                20.1% to $77.1 million, or $0.92 per diluted
                share
              -----------------------------------------------

Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported first quarter 2013 net income of $66.8 million, or $0.80 per diluted share. Adjusted net income was $77.1 million, or $0.92 per diluted share, compared to adjusted net income of $64.2 million, or $0.76 per diluted share, in the comparable 2012 period.

Sales were $718.6 million in the first quarter 2013 versus $727.1 million in the comparable 2012 period, a decrease of 1.2%. Operating income for the first quarter decreased $3.0 million to $88.6 million, or 12.3% of sales, from $91.7 million, or 12.6% of sales, in the comparable 2012 period. Special items that impacted operating income in the first quarter 2013 include pre-tax rationalization charges of $1.1 million, and pre-tax charges of $1.6 million and $8.1 million to Costs of goods sold and Selling, general and administrative expenses, respectively, related to the devaluation of the Venezuelan currency.

Net income for the three months ended March 31, 2013 was $66.8 million, or $0.80 per diluted share, compared with net income of $64.2 million, or $0.76 per diluted share, in 2012. Adjusted net income was $77.1 million, or $0.92 per diluted share, compared to adjusted net income of $64.2 million, or $0.76 per diluted share, in 2012. The effective tax rate for the three months ended March 31, 2013 was 26.3% compared with 31.0% in 2012. The lower effective tax rate is due to the effect of the renewed U.S. research and development credit and decreases in the valuation allowance.

“We are pleased to report excellent first quarter results that illustrate continued strength in our profitability measures despite softer market conditions,” said John M. Stropki, Executive Chairman. “Our strong operating performance is a result of our globally focused efforts on operational improvement, including optimizing product and customer mix.

“In the near term we remain cautious due to the softer macroeconomic environment. However, we continue to be very well positioned to capitalize when global market growth resumes.”

Christopher L. Mapes, President and Chief Executive Officer added, “Despite the uncertain economic environment, we are committed to continuing to enhance shareholder returns as we work towards the goals set in our ’2020 Vision’. Our solid balance sheet provides the flexibility required to execute our long-term strategic objectives and allows us to remain focused on global growth strategies, including attractive acquisitions to shape our product portfolio and global reach.”

The Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share, which was paid on April 15, 2013 to holders of record on March 28, 2013. The Company made voluntary contributions of $50.0 million to the Company’s U.S pension plans and returned $12.8 million to shareholders through the repurchase of 228,822 of the Company’s common shares for treasury.

Webcast Information

A conference call to discuss first quarter 2013 financial results will be webcast live today, Tuesday, April 23, 2013, at 11:00 a.m., Eastern Time. This webcast is accessible at http://www.lincolnelectric.com/InvestorWebcasts. Listeners should go to the web site prior to the call to register and download and install any necessary audio software. A replay of the webcast will be available on the Company’s web site.

Investors who are unable to access the webcast may listen to the conference call live by telephone by dialing (877) 407-9205 (domestic) or (201) 689-8054 (international). A telephonic replay will be available starting at 1:00 p.m. Eastern Time today and will end on Tuesday, April 30, 2013 at 11:59 p.m. Eastern Time. To listen to the replay, please dial (877) 660-6853 (domestic) or (201) 612-7415 (international) and use confirmation code 411951.

Financial results for the first quarter 2013 can also be obtained at http://www.lincolnelectric.com/InvestorNews.

About Lincoln Electric

Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel 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 19 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.

Non-GAAP Information

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.

Forward-Looking Statements

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; actual costs of the Company’s rationalization plans; 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
                                                          ----------------------------                      -------------------------

                                                      2013               % of Sales                   2012      % of Sales                  $   %
                                                      ----               ----------                   ----      ----------                ---  ---

    Net sales                                                  $718,573                     100.0%                $727,122              100.0%          $(8,549) (1.2%)

    Cost of goods sold                             492,001                      68.5%              511,857            70.4%            19,856      3.9%
                                                   -------                                         -------                             ------

    Gross profit                                   226,572                      31.5%              215,265            29.6%            11,307      5.3%

    Selling, general & administrative expenses     136,891                      19.1%              123,615            17.0%           (13,276)  (10.7%)

    Rationalization and asset impairment charges     1,051                       0.1%                    -               -             (1,051) (100.0%)

       (gains)

    Operating income                                88,630                      12.3%               91,650            12.6%            (3,020)   (3.3%)

    Interest income                                  1,026                       0.1%                  883             0.1%               143     16.2%

    Equity earnings in affiliates                    1,259                       0.2%                  692             0.1%               567     81.9%

    Other income                                       714                       0.1%                  866             0.1%              (152)  (17.6%)

    Interest expense                                  (950)                    (0.1%)               (1,172)          (0.2%)               222     18.9%
                                                      ----                                          ------                                ---

    Income before income taxes                      90,679                      12.6%               92,919            12.8%            (2,240)   (2.4%)

    Income taxes                                    23,836                       3.3%               28,770             4.0%             4,934     17.1%
                                                    ------                                          ------                              -----

    Effective tax rate                                26.3%                                           31.0%                               4.7%

    Net income including non-controlling interests  66,843                       9.3%               64,149             8.8%             2,694      4.2%

    Non-controlling interests in subsidiaries'          37                         -                   (94)              -                131    139.4%

       earnings (loss)

    Net income                                                  $66,806                       9.3%                 $64,243                8.8%           $2,563    4.0%
                                                                =======                                            =======                               ======

    Basic earnings per share                                      $0.81                                              $0.77                                $0.04    5.2%

    Diluted earnings per share                                    $0.80                                              $0.76                                $0.04    5.3%

    Weighted average shares (basic)                 82,719                                          83,452

    Weighted average shares (diluted)               83,786                                          84,608

                                        Lincoln Electric Holdings, Inc.

                                             Financial Highlights

                                   (In thousands, except per share amounts)

                                                  (Unaudited)

    Non-GAAP Financial Measures

                                 Three months ended March 31,
                                 ----------------------------

                                      2013                                    2012
                                      ----                                    ----

    Operating income as reported                         $88,630                   $91,650

    Special items (pre-tax):

    Rationalization charges
     (gains) (1)                     1,051                                       -

    Venezuelan currency
     devaluation (2)                 9,660                                       -

    Adjusted operating income
     (3)                                                 $99,341                   $91,650
                                                         =======                   =======

    Net income as reported                               $66,806                   $64,243

    Special items (after-tax):

    Rationalization charges
     (gains) (1)                       673                                       -

    Venezuelan currency
     devaluation (2)                 9,660                                       -

    Adjusted net income (3)                              $77,139                   $64,243
                                                         =======                   =======

    Diluted earnings per share
     as reported                                           $0.80                     $0.76

    Special items                     0.12                                       -

    Adjusted diluted earnings
     per share (3)                                         $0.92                     $0.76
                                                           =====                     =====

    Weighted average shares
     (diluted)                      83,786                                  84,608

    (1)            The three months ended March 31, 2013
                   include net charges associated with
                   severance and other costs from the
                   consolidation of manufacturing
                   operations initiated in 2012
                   partially offset by gains related to
                   the sale of assets at rationalized
                   operations.

    (2)            Represents the impact of the
                   devaluation of the Venezuelan
                   currency.

    (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.


                                                   Lincoln Electric Holdings, Inc.

                                                        Financial Highlights

                                                           (In thousands)

                                                             (Unaudited)

    Balance Sheet Highlights

    Selected Consolidated Balance Sheet Data            March 31, 2013                        December 31, 2012
                                                        --------------                        -----------------

    Cash and cash equivalents                                                        $248,455                                $286,464

    Total current assets                                     1,164,660                                          1,132,816

    Property, plant and equipment, net                         481,074                                            486,236

    Total assets                                             2,103,527                                          2,089,863

    Total current liabilities                                  458,981                                            440,267

    Short-term debt (1)                                         17,035                                             18,676

    Long-term debt                                               1,448                                              1,599

    Total equity                                             1,403,545                                          1,358,321

    Net Operating Working Capital                       March 31, 2013                        December 31, 2012
                                                        --------------                        -----------------

    Accounts receivable                                                              $423,767                                $360,662

    Inventory                                                  377,260                                            364,890

    Trade accounts payable                                     216,256                                            209,647
                                                               -------                                            -------

    Net operating working capital                                                    $584,771                                $515,905
                                                                                     ========                                ========

    Net operating working capital to net sales (2)                20.3%                                              18.8%

    Invested Capital                                    March 31, 2013                        December 31, 2012
                                                        --------------                        -----------------

    Short-term debt (1)                                                               $17,035                                 $18,676

    Long-term debt                                               1,448                                              1,599
                                                                 -----                                              -----

    Total debt                                                  18,483                                             20,275

    Total equity                                             1,403,545                                          1,358,321
                                                             ---------                                          ---------

    Invested capital                                                               $1,422,028                              $1,378,596
                                                                                   ==========                              ==========

    Total debt / invested capital                                  1.3%                                               1.5%

    Return on invested capital (3)                                18.3%                                              18.7%

    (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)

    Condensed Consolidated Statements of Cash Flows

                                                                                                                                  Three months ended March 31,
                                                                                                                                  ----------------------------

                                                                                                                                    2013                            2012
                                                                                                                                    ----                            ----

    OPERATING ACTIVITIES:

    Net income                                                                                                                                              $66,806                  $64,243

    Non-controlling interests in subsidiaries' earnings (loss)                                                                        37                                       (94)
                                                                                                                                     ---                                       ---

    Net income including non-controlling interests                                                                                66,843                                    64,149

    Adjustments to reconcile Net income including non-controlling interests to Net cash

       (used) provided by operating activities:

    Rationalization and asset impairment charges                                                                                     114                                         -

    Depreciation and amortization                                                                                                 17,397                                    15,579

    Equity (earnings) loss in affiliates, net                                                                                       (436)                                      443

    Other non-cash items, net                                                                                                     22,302                                    15,359

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

    Increase in accounts receivable                                                                                              (66,585)                                  (29,752)

    Increase in inventories                                                                                                      (16,334)                                  (14,462)

    Increase in trade accounts payable                                                                                             8,268                                    23,341

    Net change in other current assets and liabilities                                                                             4,182                                    19,075

    Decrease in accrued pensions                                                                                                 (55,663)                                  (18,970)

    Net change in other long-term assets and liabilities                                                                            (236)                                    4,402
                                                                                                                                    ----                                     -----

    NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES                                                                             (20,148)                                   79,164

    INVESTING ACTIVITIES:

    Capital expenditures                                                                                                         (15,138)                                  (12,567)

    Acquisition of businesses, net of cash acquired                                                                                 (549)                                  (21,896)

    Proceeds from sale of property, plant and equipment                                                                              105                                       210
                                                                                                                                     ---                                       ---

    NET CASH USED BY INVESTING ACTIVITIES                                                                                        (15,582)                                  (34,253)

    FINANCING ACTIVITIES:

    Net change in borrowings                                                                                                      (1,492)                                  (83,998)

    Proceeds from exercise of stock options                                                                                        9,658                                     7,440

    Excess tax benefits from stock based compensation                                                                              3,989                                     2,983

    Purchase of shares for treasury                                                                                              (12,780)                                  (20,098)

    Cash dividends paid to shareholders                                                                                                -                                   (14,186)

    NET CASH USED BY FINANCING ACTIVITIES                                                                                           (625)                                (107,859)

    Effect of exchange rate changes on Cash and cash equivalents                                                                  (1,654)                                    2,685
                                                                                                                                  ------                                     -----

    DECREASE IN CASH AND CASH EQUIVALENTS                                                                                        (38,009)                                  (60,263)

    Cash and cash equivalents at beginning of period                                                                             286,464                                   361,101

    Cash and cash equivalents at end of period                                                                                                             $248,455                 $300,838
                                                                                                                                                           ========                 ========

    Cash dividends paid per share                                                                                                      $                          -                    $0.17


                                                                                                              Lincoln Electric Holdings, Inc.

                                                                                                                     Segment Highlights

                                                                                                                       (In thousands)

                                                                                                                        (Unaudited)

                                     North               Europe       Asia Pacific   South              The Harris                 Corporate /   Consolidated

                                    America             Welding          Welding    America              Products                  Eliminations

                                    Welding                                         Welding                Group
                                    -------                                         -------                -----

    Three months ended

       March 31, 2013

    Net sales                                  $419,554                   $110,491              $70,039                                 $36,374                $82,115 $        -    $718,573

    Inter-segment sales                28,985                4,279           4,384          20                2,224                     (39,892)            -

    Total                                      $448,539                   $114,770              $74,423                                 $36,394                $84,339   $(39,892)   $718,573
                                               ========                   ========              =======                                 =======                =======   ========    ========

    EBIT (1)                                    $75,800                    $10,707               $2,096                                 $(4,548)                $7,151      $(603)    $90,603

    As a percent of total sales          16.9%                 9.3%            2.8%     (12.5%)                 8.5%                                     12.6%

    Special items charge (gain) (2)                $860                        $(6)                $197                                  $9,660             $        - $        -     $10,711

    EBIT, as adjusted (3)                       $76,660                    $10,701               $2,293                                  $5,112                 $7,151      $(603)   $101,314

    As a percent of total sales          17.1%                 9.3%            3.1%       14.0%                 8.5%                                     14.1%

    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)             $         -             $            -           $        -                         $             -             $        - $        -  $        -

    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%
    (1)            EBIT is defined as Operating income
                   plus Equity earnings in affiliates
                   and Other income.

    (2)            Special items in the three months
                   ended March 31, 2013 include
                   rationalization and asset
                   impairment charges (gains) and the
                   impact of the devaluation of the
                   Venezuelan currency.

    (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           Volume          Acquisitions                              Price      Foreign                              Net Sales

                                                                       2012                                                                              Exchange                                    2013
                                                                       ----                                                                              --------                                    ----

    Operating Segments

    North America Welding                                                   $381,329                                                  $(7,350)                                        $40,260                     $5,276              $39  $419,554

    Europe Welding                                                  125,803                  (9,007)                                                  -                                (3,976)            (2,329)        110,491

    Asia Pacific Welding                                             92,563                 (20,145)                                                  -                                (1,921)              (458)         70,039

    South America Welding                                            39,838                  (3,321)                                                  -                                 1,992             (2,135)         36,374

    The Harris Products Group                                        87,589                  (3,807)                                                  -                                  (459)            (1,208)         82,115

    Consolidated                                                            $727,122                                                 $(43,630)                                        $40,260                       $912          $(6,091) $718,573
                                                                            ========                                                 ========                                         =======                       ====          =======  ========

    % Change

    North America Welding                                                                     (1.9%)                                               10.6%                                  1.4%                 -            10.0%

    Europe Welding                                                                            (7.2%)                                                  -                                 (3.2%)             (1.9%)         (12.2%)

    Asia Pacific Welding                                                                     (21.8%)                                                  -                                 (2.1%)             (0.5%)         (24.3%)

    South America Welding                                                                     (8.3%)                                                  -                                   5.0%             (5.4%)          (8.7%)

    The Harris Products Group                                                                 (4.3%)                                                  -                                 (0.5%)             (1.4%)          (6.2%)

    Consolidated                                                                              (6.0%)                                                5.5%                                  0.1%             (0.8%)          (1.2%)

SOURCE Lincoln Electric Holdings, Inc.


Source: PR Newswire