Lincoln Electric (LECO) Q4 2012 earnings summary

Executive summary

• FY12 net sales rose 5.9% to $2.853B; net income increased to $257.4M from $217.2M, with diluted EPS of $3.06 vs. $2.56.

• Adjusted diluted EPS was $3.16 vs. $2.51; adjusted operating income was $372.8M, excluding special items.

Financial highlights

• Gross profit rose 17.6% to $866.7M; gross margin expanded to 30.4% from 27.3%, reflecting pricing and operating leverage.

• Operating income increased to $362.1M from $296.7M; reported operating margin rose to 12.7% from 11.0%.

• Operating cash flow grew to $327.5M from $193.5M; cash and equivalents ended FY12 at $286.5M, down $74.6M YoY.

• FY12 included $9.4M in rationalization and impairment charges and a $1.4M charge for Venezuelan statutory severance changes.

Outlook and guidance

• FY13 capital expenditures forecast at $60M for maintenance, operational effectiveness and international expansion.

• FY13 voluntary U.S. pension contributions expected at $103M; defined-benefit pension expense forecast to rise by $0.2M–$0.5M.

• Venezuelan currency devaluation is expected to cause an $8.5M transaction charge and reduce gross profit by $4M in 2013; Venezuelan subsidiary results expected to decline significantly.