CLEVELAND, April 28 /PRNewswire-FirstCall/ --
Three Months Ended March 31, 2009
-- Sales decreased 33.6% to $411.8 million
-- Excluding rationalization charges, operating income was $12.7 million;
including rationalization charges, operating income was $1.0 million
-- Rationalization charges totaling $11.7 million recorded in the quarter
-- Excluding rationalization charges, net income was $3.8 million, or
$0.09 per diluted share; including rationalization charges, net loss
was $3.6 million, or $0.08 per diluted share
-- Net cash provided by operating activities increased 6.1% to $71.7
million
Lincoln Electric Holdings, Inc. (the "Company") (Nasdaq: LECO) today
reported 2009 first quarter sales decreased 33.6% to $411.8 million from
$620.2 million in the comparable 2008 period. Operating income for the first
quarter decreased to $1.0 million from $78.5 million in 2008. Excluding
rationalization charges, operating income was $12.7 million.
Sales for the Company's North American operations were $246.7 million in
the quarter versus $371.1 million in the comparable quarter last year, a
decrease of 33.5%. U.S. export sales in the quarter decreased 39.9% to $37.0
million from $61.6 million in the year-ago quarter.
Sales at Lincoln subsidiaries outside North America decreased 33.7% to
$165.1 million in the first quarter, compared with $249.1 million in the
comparable quarter last year. Excluding acquisitions and the effect of
changes in foreign currency exchange rates, sales outside North America
decreased 24.4% in the quarter.
The net loss for the first quarter was $3.6 million, or $0.08 per diluted
share, compared with net income of $53.5 million in the first quarter of 2008.
Excluding rationalization charges, net income was $3.8 million, or $0.09 per
diluted share. The Company recorded tax expense of $1.6 million on a pretax
loss of $2.0 million for the first quarter of 2009 as several foreign entities
reported losses with no tax benefit.
"Our first quarter results reflect the difficult challenges and negative
impacts of the depressed global economy," said John M. Stropki, Chairman and
Chief Executive Officer. "The rapid and steep deterioration in overall global
demand, combined with the liquidation of our higher cost inventory, resulted
in a significant reduction in profitability during the quarter.
"We have been aggressively realigning our business to current market
conditions. These actions resulted in a first quarter 2009 pre-tax
rationalization charge of $11.7 million, the benefits of which, if annualized,
we estimate will generate savings of over $80 million. During the first
quarter, we began to see the positive impacts of these actions and expect to
see the full benefit in the 2009 second quarter of an approximate $20 million
per quarter cost savings. In addition, we are actively evaluating additional
actions which will further rationalize staffing, compensation levels and
manufacturing facilities around the world. We estimate these actions will
generate additional annualized savings of $20 million to $25 million and
result in pre-tax rationalization charges of $8 million to $10 million.
During the quarter, our focus on managing our balance sheet resulted in
reducing our working capital, helping us generate over $71.7 million in cash.
This enabled us to increase our cash balance to over $300 million, including
paying down $30 million in debt. Our strong financial position and our
ongoing rationalization efforts will allow us to make the necessary
investments to achieve our long-term strategic objectives. We are confident
we will emerge from the global recession with a more efficient and highly
competitive business model, one which will further strengthen our market
leadership position, accelerate our global growth and improve our overall
profitability."
Net cash provided by operating activities increased 6.1% to $71.7 million
in the first quarter compared with $67.5 million for the comparable period in
2008. During the first quarter 2009, the Company repaid $30 million of
outstanding debt on maturity under its Senior Unsecured Notes and paid $11.4
million in dividends. The Company's Board of Directors declared a quarterly
cash dividend of $0.27 per share, which was paid on April 15, 2009 to holders
of record as of March 31, 2009.
The Company announced on March 16, 2009, that its Asian subsidiary, The
Lincoln Electric Company (Asia Pacific) Pte., Ltd. ("Lincoln Asia Pacific"),
had signed definitive agreements to acquire 100% of Jinzhou Jin Tai Welding
and Metal Co., ("Jin Tai"), a welding wire business in Jinzhou, China. This
acquisition will greatly expand the Company's customer base and bring
significant cost-competitive MIG wire manufacturing capacity under the
Company's control. Lincoln Asia Pacific previously owned 48% of Jin Tai,
whose sales were approximately $200 million in 2008. The transaction is
subject to the approval of government regulatory agencies, with closing
expected in the third quarter of 2009, subject to the satisfaction or waiver
of customary conditions.
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 42
manufacturing locations, including operations and joint ventures in 21
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: 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 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.
A conference call to discuss the 2009 first quarter financial results is
scheduled for today, Tuesday, April 28, 2009, at 10:00 a.m., Eastern Time. An
audio webcast of the call is accessible through the investor tab on the
Company's website at http://www.lincolnelectric.com.
The 2009 Annual Meeting of Shareholders of Lincoln Electric Holdings, Inc.
will be held at 11:30 a.m. Eastern Time on Thursday, April 30, 2009, at the
Marriott Cleveland East, 26300 Harvard Road, Warrensville Heights, Ohio.
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share data)
(Unaudited)
Consolidated Statements of Income
Fav (Unfav)
Three Months Ended March 31, to Prior Year
--------------------------------- ------------------
% of % of
2009 Sales 2008 Sales $ %
---- ------ ---- ------ --------- ------
Net sales $411,751 100.0% $620,227 100.0% $(208,476) (33.6%)
Cost of goods
sold 321,503 78.1% 442,776 71.4% 121,273 27.4%
------- ------- -------
Gross profit 90,248 21.9% 177,451 28.6% (87,203) (49.1%)
Selling, general &
administrative
expenses 77,516 18.8% 98,961 16.0% 21,445 21.7%
Rationalization
charges 11,699 2.8% - 0.0% (11,699) N/A
------ ---- -------
Operating income 1,033 0.3% 78,490 12.7% (77,457) (98.7%)
Interest income 1,112 0.3% 2,434 0.4% (1,322) (54.3%)
Equity (loss)
earnings in
affiliates (1,986) (0.5%) 549 0.1% (2,535) (461.7%)
Other income 393 0.1% 499 0.1% (106) (21.2%)
Interest expense (2,562) (0.6%) (2,981) (0.5%) 419 14.1%
------ ------ ---
(Loss) income
before
income taxes (2,010) (0.5%) 78,991 12.7% (81,001) (102.5%)
Income taxes 1,584 0.4% 25,514 4.1% 23,930 93.8%
Effective tax rate (78.8%) 32.3% (111.1%)
----- ---- ------
Net (loss) income $(3,594) (0.9%) $53,477 8.6% $(57,071) (106.7%)
======= ======= ========
Reconciliation of Net (Loss) Income as
Reported to Adjusted Net Income:
Three Months Ended
March 31, Change
------------------ ------
2009 2008 $ %
---- ---- ------ ------
Net (loss) income as
reported (1) $(3,594) $53,477 $(57,071) (106.7%)
Adjustment:
Rationalization charges,
after-tax 7,428 - 7,428 N/A
----- ---- -----
Adjusted net income (2) $3,834 $53,477 $(49,643) (92.8%)
====== ======= ========
Basic (loss) earnings per
share $(0.08) $1.25 $(1.33) (106.4%)
Adjustment (1) 0.17 - 0.17 N/A
---- ---- ----
Adjusted basic earnings per
share (2) $0.09 $1.25 $(1.16) (92.8%)
===== ===== ======
Diluted (loss) earnings
per share $(0.08) $1.24 $(1.32) (106.5%)
Adjustment (1) 0.17 - 0.17 N/A
---- ---- ----
Adjusted diluted earnings per
share (2) $0.09 $1.24 $(1.15) (92.7%)
===== ===== ======
Weighted average shares
(basic) 42,372 42,675
Weighted average shares
(diluted) 42,568 43,090
(1) Net loss includes rationalization charges of $11,699 ($7,428 after-
tax) in the first quarter of 2009.
(2) Adjusted net income excluding rationalization charges and adjusted
basic and diluted earnings per share excluding rationalization charges
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.
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
Balance Sheet Highlights
Selected Consolidated
Balance Sheet Data March 31, December 31,
2009 2008
---- ----
Cash and cash equivalents $300,452 $284,332
Total current assets 951,708 1,024,726
Property, plant and
equipment, net 418,066 427,902
Total assets 1,628,649 1,718,805
Total current liabilities 310,409 356,642
Short-term debt 19,091 50,693
Long-term debt 89,964 91,537
Total equity 976,389 1,009,973
Net Operating
Working Capital March 31, December 31,
2009 2008
---- ----
Trade accounts receivable $260,531 $299,171
Inventory 300,645 346,932
Trade accounts payable 117,857 124,388
------- -------
Net operating working
capital $443,319 $521,715
======== ========
Net operating working
capital % to net sales (2) 28.0% 26.1%
==== ====
Invested Capital March 31, December 31,
2009 2008
---- ----
Short-term debt $19,091 $50,693
Long-term debt 89,964 91,537
------ ------
Total debt 109,055 142,230
Total equity 976,389 1,009,973
------- ---------
Invested capital $1,085,444 $1,152,203
========== ==========
Total debt / invested
capital 10.0% 12.3%
Return on invested
capital (1) 14.5% 18.6%
(1) Return on invested capital is defined as rolling 12 months of
earnings excluding tax-effected interest divided by invested capital.
(2) Net operating working capital % to net sales is defined as net
operating working capital divided by annualized rolling 3 months of
sales.
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands, except per share data)
(Unaudited)
Consolidated Statements
of Cash Flows
Three Months Ended March 31,
---------------------------
2009 2008
---- ----
OPERATING ACTIVITIES:
Net (loss) income $(3,594) $53,477
Adjustments to reconcile
net (loss) income to net
cash provided by operating
activities:
Depreciation and amortization 13,488 13,907
Equity loss of affiliates,
net 3,254 4
Other non-cash items, net (6,741) 3,816
Changes in operating assets
and liabilities, net of
effects from acquisitions:
Decrease (increase) in
accounts receivable 31,417 (37,174)
Decrease (increase) in
inventories 37,163 (26,970)
(Decrease) increase in
accounts payable (4,382) 31,172
Decrease in accrued
pensions (6,504) (6,640)
Net change in other current
assets and liabilities 4,618 31,998
Net change in other
long-term assets and
liabilities 2,944 3,933
----- -----
NET CASH PROVIDED BY OPERATING
ACTIVITIES 71,663 67,523
INVESTING ACTIVITIES:
Capital expenditures (13,565) (12,812)
Acquisition of businesses,
net of cash acquired - (8,675)
Proceeds from sale of property,
plant and equipment 192 272
--- ---
NET CASH USED BY INVESTING
ACTIVITIES (13,373) (21,215)
FINANCING ACTIVITIES:
Net change in borrowings (28,859) (1,095)
Proceeds from exercise of stock
options 16 1,591
Tax benefit from exercise of
stock options 2 819
Purchase of shares for
treasury (343) (18,033)
Cash dividends paid to
shareholders (11,444) (10,720)
------- -------
NET CASH USED BY FINANCING
ACTIVITIES (40,628) (27,438)
Effect of exchange rate changes
on cash and cash equivalents (1,542) 1,601
------ -----
INCREASE IN CASH AND CASH
EQUIVALENTS 16,120 20,471
Cash and cash equivalents at
beginning of period 284,332 217,382
------- -------
Cash and cash equivalents at
end of period $300,452 $237,853
======== ========
Cash dividends paid per share $0.27 $0.25
Lincoln Electric Holdings, Inc.
Financial Highlights
(In thousands)
(Unaudited)
Segment Highlights
North Other Elimin- Consol-
America Europe Countries ations idated
------- ------ --------- ------- ---------
Three months ended
March 31, 2009
Net sales to
unaffiliated
customers $246,656 $93,300 $71,795 $- $411,751
Inter-segment sales 17,608 2,502 1,963 (22,073) -
------ ----- ----- ------- -----
Total $264,264 $95,802 $73,758 $(22,073) $411,751
======== ======= ======= ======== ========
Income (loss)
before interest
and income taxes $8,233 $(6,604) $(1,623) $(566) $(560)
As a percent of
total sales 3.1% (6.9%) (2.2%) (0.1%)
Adjustments:
Rationalization
charges $10,526 $470 $703 $- $11,699
Adjusted income
(loss) before
interest and income
taxes excluding
rationalization
charges (1) $18,759 $(6,134) $(920) $(566) $11,139
As a percent of
total sales 7.1% (6.4%) (1.2%) 2.7%
Three months ended
March 31, 2008
Net sales to
unaffiliated
customers $371,113 $147,445 $101,669 $- $620,227
Inter-segment
sales 27,066 6,925 1,566 (35,557) -
------ ----- ----- ------- -----
Total $398,179 $154,370 $103,235 $(35,557) $620,227
======== ======== ======== ======== ========
Income (loss)
before interest
and income taxes $56,533 $18,219 $5,039 $(253) $79,538
As a percent
of total
sales 14.2% 11.8% 4.9% 12.8%
(1) Adjusted income (loss) before interest and income taxes excluding
rationalization charges is a non-GAAP financial measure that
management believes is 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.
SOURCE Lincoln Electric Holdings, Inc.
-0- 04/28/2009
/CONTACT: Media: Roy L. Morrow, +1-216-383-4893,
Roy_Morrow@lincolnelectric.com, Investors: Joseph P. Kelley, +1-216-383-8346,
Joe_Kelley@lincolnelectric.com, both of Lincoln Electric Holdings, Inc./
/Web Site: http://www.lincolnelectric.com /
(LECO)
CO: Lincoln Electric Holdings, Inc.
ST: Ohio
IN: MCT MAC CPR
SU: ERN CCA
PR
-- CL05957 --
1857 04/28/2009 08:28 EDT http://www.prnewswire.com
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