EX-99.1 2 l18742aexv99w1.htm EX-99.1 PRESS RELEASE EX-99.1 PRESS RELEASE
 

Exhibit 99.1
Contact: Roy L. Morrow (216) 383-4893
Roy_Morrow@lincolnelectric.com
LINCOLN ELECTRIC REPORTS
RECORD 2005 FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS
  •   Fourth Quarter sales increase 20% to a record $420 million
 
  •   2005 Full-Year sales also increase 20% to a record $1.6 billion
 
  •   Diluted Earnings Per Share (EPS) for the quarter of 70 cents vs. 37 cents, up 89%
 
  •   Diluted Earnings Per Share (EPS) for the year of $2.90 vs. $1.94, up 50%
 
  •   Fourth Quarter net income increases 90% to $29.8 million
     CLEVELAND, Ohio, U.S.A., Feb. 21, 2006 — Lincoln Electric Holdings, Inc. (Nasdaq: LECO) today reported that 2005 fourth-quarter net income increased 90% to $29.8 million, or 70 cents per diluted share, on record sales of $420 million, an increase of 20%. This compares with 2004 same-quarter net income of $15.6 million, or 37 cents per diluted share, on net sales of $351 million. Net income for the 2005 fourth quarter includes a net favorable tax benefit of $2.7 million associated with the repatriation of foreign earnings and resolution of prior years’ tax liabilities, offset by charges of $2.1 million related to European rationalization actions and a loss on the sale of a business. The 2004 fourth quarter included charges of $4.9 million relating to European rationalization actions and the retirement of the Company’s former CEO.
     “I am very pleased to report our Company has translated healthy industrial economic fundamentals and market opportunities into record fourth-quarter and full-year results,” said John M. Stropki, Chairman and Chief Executive Officer. “These results reflect our ability to capitalize on our market position and leverage increased sales into significant increases in profitability and cash flows. We continue to focus on product and geographical market expansion, cost control, working capital management and the integration of new acquisitions.”
     Sales for the Company’s North American operations were $282.4 million in the quarter, an increase of 27%, 15% excluding increases associated with acquisitions, versus $222 million in the comparable quarter last year. Export sales in the quarter increased 42% to $28 million from $19.7 million last year.
     Sales at Lincoln subsidiaries outside North America increased to $138 million in the fourth quarter, compared with $129 million in the year-ago quarter. In local currencies, international subsidiaries’ sales increased 13%.
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Lincoln Electric Reports 2005 Fourth-Quarter and Full-Year Financial Results                                                               -2-
     Net income for the year increased 52% to $122.3 million, or $2.90 per diluted share, including net favorable tax benefits of $11.7 million related to a change in Ohio tax law, the resolution of prior years’ tax liabilities and the repatriation of foreign earnings, as well as, a $0.9 million gain related to the settlement of legal disputes. Net income for the year also reflects charges of $3.0 million relating to the sale of a business and European rationalization charges. This compares with 2004 net income of $80.6 million, or $1.94 per diluted share which included charges of $4.9 million associated with European rationalization actions and the retirement of the Company’s former CEO.
     Sales in 2005 increased 20% to $1.6 billion, a Company record, from $1.3 billion in 2004. The Company’s North American operations had sales of $1.1 billion in 2005, compared with $875.4 million in 2004, an increase of 21%, 12% excluding increases associated with acquisitions. Export sales increased 28% to $98.5 million, compared with $77 million in 2004. Lincoln operations outside of North America had sales of $545.1 million, a 19% increase over prior year sales of $458.3 million. In local currencies, sales for the Company’s non-U.S. operations increased 18%.
     Cash flow from operations increased 128% to $117 million in 2005, compared with $51.3 million in 2004. During 2005 the Company paid a total of $30 million in dividends. The Board of Directors also declared a quarterly cash dividend of 19 cents, which was paid on January 15, 2006 to holders of record as of December 31, 2005.
     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 18 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.
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Lincoln Electric Reports 2005 Fourth-Quarter and Full-Year Financial Results                                                               -3-
     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 2005 fourth quarter and year end financial results is scheduled for today, Tuesday, February 21, 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.
#2006-1030#

 

 

Lincoln Electric Holdings, Inc.
Financial Highlights
(amounts in thousands, except per share data)
(Unaudited)
                                                 
    Three Months Ended December 31,     Fav (Unfav) to Prior Year  
    2005     % of Sales     2004     % of Sales     $     %  
Consolidated Statements of Income
                                                
Net Sales
   $ 420,372       100.0 %   $ 350,994       100.0 %   $ 69,378       19.8 %
Cost of Goods Sold
     306,878       73.0 %     265,641       75.7 %     (41,237 )     (15.5 %)
 
                                          
Gross Profit
     113,494       27.0 %     85,353       24.3 %     28,141       33.0 %
SG&A Expenses
     75,017       17.9 %     65,751       18.7 %     (9,266 )     (14.1 %)
Rationalization Charges
     511       0.1 %     2,440       0.7 %     1,929       79.1 %
 
                                          
Operating Income
     37,966       9.0 %     17,162       4.9 %     20,804       121.2 %
Interest Income
     1,188       0.3 %     1,081       0.3 %     107       9.9 %
Equity Earnings in Affiliates
     73       0.0 %     953       0.3 %     (880 )     (92.3 %)
Other Income
     808       0.2 %     1,328       0.4 %     (520 )     (39.2 %)
Interest Expense
     (1,965 )     (0.4 %)     (1,742 )     (0.5 %)     (223 )     (12.8 %)
 
                                          
Income Before Income Taxes
     38,070       9.1 %     18,782       5.4 %     19,288       102.7 %
Income Taxes
     8,304       2.0 %     3,152       0.9 %     (5,152 )     (163.5 %)
 
                                          
Net Income (1)
   $ 29,766       7.1 %   $ 15,630       4.5 %   $ 14,136       90.4 %
 
                                          
 
                                                
Basic Earnings Per Share
   $ 0.71             $ 0.38             $ 0.33       86.8 %
 
                                          
 
                                                
Diluted Earnings Per Share
   $ 0.70             $ 0.37             $ 0.33       89.2 %
 
                                          
 
                                                
Weighted Average Shares (Basic)
     42,166               41,535                          
Weighted Average Shares (Diluted)
     42,539               42,052                          
 
(1)   2005 net income includes a net favorable tax benefit of $2.7 million associated with the repatriation of foreign earnings and resolution of prior years’ tax liabilities, offset by charges of $2.1 million related to European rationalization actions and a loss on the sale of a business. 2004 net income includes charges of $4.9 million relating to European rationalization actions and the retirement of the Company’s former CEO.

 

 

Lincoln Electric Holdings, Inc.
Financial Highlights
(amounts in thousands, except per share data)
(Unaudited)
                                                 
    Year Ended December 31,     Fav (Unfav) to Prior Year  
    2005     % of Sales     2004     % of Sales     $     %  
Consolidated Statements of Income
                                                
Net Sales
   $ 1,601,190       100.0 %   $ 1,333,675       100.0 %   $ 267,515       20.1 %
Cost of Goods Sold
     1,164,275       72.7 %     971,317       72.8 %     (192,958 )     (19.9 %)
 
                                          
Gross Profit
     436,915       27.3 %     362,358       27.2 %     74,557       20.6 %
SG&A Expenses
     285,309       17.8 %     256,616       19.2 %     (28,693 )     (11.2 %)
Rationalization Charges
     1,761       0.1 %     2,440       0.2 %     679       27.8 %
 
                                          
Operating Income
     149,845       9.4 %     103,302       7.8 %     46,543       45.1 %
Interest Income
     4,000       0.2 %     3,071       0.2 %     929       30.3 %
Equity Earnings in Affiliates
     3,312       0.2 %     4,005       0.3 %     (693 )     (17.3 %)
Other Income
     4,689       0.3 %     3,542       0.3 %     1,147       32.4 %
Interest Expense
     (7,947 )     (0.5 %)     (6,143 )     (0.5 %)     (1,804 )     (29.4 %)
 
                                          
Income Before Income Taxes
     153,899       9.6 %     107,777       8.1 %     46,122       42.8 %
Income Taxes
     31,593       2.0 %     27,181       2.1 %     (4,412 )     (16.2 %)
 
                                          
Net Income (1)
   $ 122,306       7.6 %   $ 80,596       6.0 %   $ 41,710       51.8 %
 
                                          
 
                                                
Basic Earnings Per Share
   $ 2.93             $ 1.96             $ 0.97       49.5 %
 
                                                
Diluted Earnings Per Share
   $ 2.90             $ 1.94             $ 0.96       49.5 %
 
                                                
Weighted Average Shares (Basic)
     41,813               41,189                          
Weighted Average Shares (Diluted)
     42,230               41,643                          
 
(1)   2005 net income includes net favorable tax benefits of $11.7 million related to a change in Ohio tax law, the resolution of prior years’ tax liabilities and the repatriation of foreign earnings, as well as, a $0.9 million gain related to the settlement of legal disputes. Net income for the year also reflects charges of $3.0 million relating to the sale of a business and European rationalization charges. 2004 net income includes charges of $4.9 million associated with European rationalization actions and the retirement of the Company’s former CEO.

 

 

Lincoln Electric Holdings, Inc.
Financial Highlights
(amounts in thousands, except per share data)
(Unaudited)
Balance Sheet Highlights
Selected Consolidated
     Balance Sheet Data
                 
    December 31,     December 31,  
    2005     2004  
Cash and Cash Equivalents
   $ 108,007     $ 92,819  
Marketable Securities
     —       50,500  
Total Current Assets
     676,634       637,600  
Net Property, Plant and Equipment
     340,533       316,116  
Total Assets
     1,161,161       1,059,164  
 
                
Total Current Liabilities
     293,642       263,028  
Short-Term Debt
     8,163       3,443  
Long-Term Debt
     157,853       163,931  
Total Shareholders’ Equity
     652,294       577,277  
Net Operating Working Capital
                 
    December 31,     December 31,  
    2005     2004  
Trade Accounts Receivable
   $ 242,093     $ 219,496  
 
                
Inventory
     275,745       236,275  
 
                
Trade Accounts Payable
     121,917       111,154  
 
                
 
            
Net Working Capital
   $ 395,921     $ 344,617  
 
            
 
                
Average Operating Working Capital % to Net Sales
     31.3 %     32.6 %
 
            
Total Debt
                 
    December 31,     December 31,  
    2005     2004  
Short-Term Debt
   $ 8,163     $ 3,443  
Long-Term Debt
     157,853       163,931  
 
            
Total Debt
     166,016       167,374  
Equity
     652,294       577,277  
 
            
Total
   $ 818,310     $ 744,651  
 
            
 
                
Total Debt/Capitalization
     20.3 %     22.5 %
Return on Invested Capital
     17.7 %     14.1 %

 

 

Lincoln Electric Holdings, Inc.
Financial Highlights
(amounts in thousands, except per share data)
(Unaudited)
                 
Consolidated   Twelve Months Ended December 31,  
Statements of Cash Flows   2005     2004  
Operating Activities:
                
Net Income
   $ 122,306     $ 80,596  
 
                    
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
                
Rationalization Charges
     1,761       2,440  
Depreciation and Amortization
     43,982       40,182  
Equity Earnings of Affiliates, net
     (3,312 )     (3,001 )
Other Non-Cash Items, net
     5,406       20,632  
Changes in Operating Assets and Liabilities:
                
Increase in Accounts Receivable
     (17,274 )     (35,258 )
Increase in Inventories
     (32,133 )     (47,779 )
Increase in Accounts Payable
     14,141       3,916  
Contributions to Pension Plans
     (31,500 )     (33,153 )
Net change in Other Current Assets and Liabilities
     19,392       20,589  
Net change in Other Long-Term Assets and Liabilities
     (5,745 )     2,096  
 
            
Net Cash Provided by Operating Activities
     117,024       51,260  
 
            
 
                    
Investing Activities:
                
Capital Expenditures
     (50,415 )     (56,441 )
Acquisitions of Businesses, net of cash acquired
     (78,174 )     (11,815 )
Proceeds from Sales of Fixed Assets
     3,675       3,588  
Sales of Marketable Securities, net
     55,441       6,178  
 
            
Net Cash Used by Investing Activities
     (69,473 )     (58,490 )
 
            
 
                    
Financing Activities:
                
Net change in Borrowings
     (6,517 )     (7,623 )
Proceeds from Exercise of Stock Options
     21,230       22,555  
Purchase of Shares for Treasury
     (12,803 )     (4,368 )
Cash Dividends Paid
     (30,037 )     (27,485 )
 
            
Net Cash Used by Financing Activities
     (28,127 )     (16,921 )
 
            
 
                    
Effect of Exchange Rate Changes on Cash and Cash Equivalents
     (4,236 )     3,085  
Increase (decrease) in Cash and Cash Equivalents
     15,188       (21,066 )
Cash and Cash Equivalents at Beginning of Period
     92,819       113,885  
 
            
Cash and Cash Equivalents at End of Period
   $ 108,007     $ 92,819  
 
            
 
                
Cash Dividends Paid Per Share
   $ 0.72     $ 0.67