Lincoln Electric (LECO) Q4 2002 earnings summary

Executive summary

• FY 2002 net sales rose 1.6% YoY to $994.1m, while reported net income fell to $29.3m from $83.6m, primarily reflecting a goodwill impairment and rationalization charges.

• Excluding rationalization charges and the accounting change, 2002 net income was $73.9m and diluted EPS was $1.73; Q4 sales were $238.5m and net income was $18.4m.

Financial highlights

• Gross profit was $300.0m, down from $307.3m; operating income was $91.5m versus $117.2m, and reported net income was $29.3m versus $83.6m.

• Cash from operations was $103.6m, down from $120.2m; year-end cash and cash equivalents increased to $176.1m from $23.5m.

• R&D expenditures were $19.1m, compared with $17.9m in 2001 and $16.6m in 2000.

Outlook and guidance

• The rationalization program is expected to generate annual cost savings of over $5m.

• 2003 capital expenditures are expected to approximate depreciation; additional spending may occur for acquisitions or projects with near-term financial benefits.

• Pension expense is estimated to rise by $15m in 2003; fair-value stock-option accounting is expected to reduce 2003 EPS by $0.01, rising to about $0.06 by 2006.