Lincoln Electric (LECO) Q4 2008 earnings summary

Executive summary

• 2008 net sales rose 8.7% to $2,479,131 thousand, while volume declined $88,436 thousand; pricing, acquisitions and currency gains more than offset the volume shortfall.

• Net income reached $212,286 thousand and diluted EPS was $4.93; results included rationalization and asset impairment charges totaling $19,371 thousand pre-tax.

Financial highlights

• Gross profit increased 11.2% to $720,151 thousand; gross margin expanded to 29.0% from 28.4%, reflecting pricing and operational improvements, partly offset by lower volumes and mix.

• Operating income was $295,404 thousand versus $277,632 thousand; operating margin was 11.9% versus 12.2%.

• Net income was $212,286 thousand versus $202,736 thousand; diluted EPS was $4.93 versus $4.67.

• Excluding no items from reported results, the fourth-quarter charges included $2,447 thousand rationalization and $16,924 thousand asset impairments; after-tax impact was $18,313 thousand.

Outlook and guidance

• Sales volumes declined from Q3 and accelerated downward in Q4; lower volumes were expected to pressure margins in 2009.

• 2009 capital expenditure guidance was $45 million-$55 million, for operational effectiveness and international expansion.

• Additional global cost cuts, including a U.S. voluntary separation program, were expected to generate $10 million-$12 million in pre-tax rationalization charges in Q1 2009.

• 2009 pension expense was expected to increase by $38.5 million; planned voluntary U.S. pension contribution was $30 million.