LINCOLN ELECTRIC HOLDINGS INC - FORM 8-K - EX-99.1 - EXHIBIT - April 23, 2013

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Exhibit 99.1
 
Investor Relations: Amanda Butler (216) 383-2534
Amanda_Butler@lincolnelectric.com

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

 
 
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
 
 
 
CLEVELAND, Ohio, U.S.A., April 23, 2013 -- 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.”


- more -



Lincoln Electric Reports First Quarter 2013 Financial Results


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
   (gains)
 
1,051

 
0.1
%
 
—

 
—

 
(1,051
)
 
(100.0
%)
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’
   earnings (loss)
 
37

 
—

 
(94
)
 
—

 
131

 
139.4
%
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
America
Welding
 
Europe
Welding
 
Asia Pacific
Welding
 
South
America
Welding
 
The Harris
Products
Group
 
Corporate /
Eliminations
 
Consolidated
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
2012
 
Volume
 
Acquisitions
 
Price
 
Foreign
Exchange
 
Net Sales
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
%)
 





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