Lincoln Electric (LECO) Q4 2004 earnings summary

Executive summary

• FY04 net sales rose 28.2% to $1,333.7M; net income increased to $80.6M from $54.5M, with diluted EPS of $1.94 versus $1.31.

• Sales gains reflected higher volume and pricing, Chinese acquisitions and favorable currency; gross margin improved slightly despite sharply higher material and product-liability costs.

Financial highlights

• Revenue was $1,333.7M, up 28.2% YoY; gross profit rose 29.1% to $362.3M, while operating income increased to $103.3M from $68.2M.

• Net income was $80.6M versus $54.5M; diluted EPS was $1.94 versus $1.31. FY04 included $2.4M pretax rationalization charges and $4.5M pretax costs related to the former CEO’s retirement.

• Q4 net sales were $351.0M, gross profit $85.4M, net income $15.6M and diluted EPS $0.37; the quarter included the FY04 rationalization and retirement-related charges.

Outlook and guidance

• FY05 capital expenditures were projected at $50M–$55M to expand manufacturing capacity in response to customer demand.

• Elevated commodity, energy, transportation and freight costs were expected to persist; margin performance depended on pricing, product mix, overhead absorption and restructuring efforts.

• Net product-liability expenditures were projected to increase $3M–$5M in 2005 versus 2004.