Lincoln Electric (LECO) Q4 2010 earnings summary

Executive summary

• 2010 recovery lifted net sales 19.7% YoY to $2,070,172 (in thousands); gross profit rose 23.6% to $563,819 and net income to $130,244 from $48,576.

• Higher volumes across all segments, cost reductions and improved global demand supported the rebound; adjusted diluted EPS was $3.04 versus $1.71 in 2009.

Financial highlights

• Net sales were $2,070,172 in 2010 vs. $1,729,285 in 2009; reported operating income was $186,430 vs. $93,233.

• Gross profit increased to $563,819 from $456,268; reported net income was $130,244 vs. $48,576 and diluted EPS was $3.06 vs. $1.14.

• Adjusted net income was $129,600 and adjusted diluted EPS $3.04; 2009 adjusted net income was $73,098 and adjusted diluted EPS $1.71.

• Net cash from operations fell to $156,978 from $250,350, primarily due to higher working capital needs supporting increased sales.

Outlook and guidance

• 2011 capital expenditures are expected in the $50,000-$60,000 range, supporting maintenance, operating effectiveness and international expansion.

• 2011 U.S. pension contributions are expected at $30,000; defined-benefit pension expense is expected to decline by $4,000-$5,000.

• No material additional costs are expected in 2011 from the 2009 European and Asia Pacific manufacturing consolidations; most remaining liabilities were expected to be paid by year-end 2011.