Lincoln Electric Holdings Inc. (LECO) filed Quarterly Report for the period ended 2009-09-30.
Lincoln Electric Holdings Inc. is a full-line manufacturer of welding and cutting products and integral horsepower industrial electric motors. Welding products include arc welding power sources wire feeding systems robotic welding packages fume extraction equipment consumable electrodes and fluxes. The company's welding product offering also includes regulators and torches used in oxy-fuel welding and cutting. The company's products are sold in both domestic and international markets. Lincoln Electric Holdings Inc. has a market cap of $2.12 billion; its shares were traded at around $49.85 with a P/E ratio of 25.6 and P/S ratio of 0.8. The dividend yield of Lincoln Electric Holdings Inc. stocks is 2.2%. Lincoln Electric Holdings Inc. had an annual average earning growth of 5.5% over the past 10 years.
Highlight of Business Operations:
Gross Profit: Gross profit decreased 36.4% to $125,131 for the third quarter of 2009 compared with $196,878 in the third quarter of 2008. As a percentage of Net sales, Gross profit decreased to 28.3% in the third quarter of 2009 from 31.1% in the third quarter of 2008. The decrease was primarily a result of lower volumes and higher retirement costs in the U.S. of $4,061. Foreign currency exchange rates had a $3,229 unfavorable translation impact in the third quarter of 2009. In addition, the Company has reduced the LIFO reserve by $7,650. The decrease in the LIFO reserve was principally a result of decreases in commodity prices in 2009, primarily steel, and a reduction in inventory levels. The reduction in inventory levels is estimated to have impacted the decrease in the LIFO reserve by $3,825.
Selling, General & Administrative (SG&A) Expenses: SG&A expenses decreased $22,319 (20.8%) in the third quarter of 2009 compared with the third quarter of 2008. The decrease was primarily due to lower bonus expense of $16,230, lower selling, administrative and research and development expense of $5,897, the favorable translation impact of foreign currency exchange rates of $2,601 and incremental foreign currency transaction gains of $4,106 partially offset by higher retirement costs in the U.S. of $3,007 and incremental SG&A from acquisitions of $2,737.
Gross Profit: Gross profit decreased 44.4% to $321,770 during the first nine months of 2009 compared with $579,043 in the first nine months of 2008. As a percentage of Net sales, Gross profit decreased to 25.4% in the first nine months of 2009 from 29.6% in the first nine months of 2008. This decrease was primarily a result of lower volumes, the liquidation of higher cost inventories and higher retirement costs in the U.S. of $10,415 offset by lower product liability costs of $4,432 primarily due to a gain on an insurance settlement. Foreign currency exchange rates had a $15,260 unfavorable translation impact in the first nine months of 2009. In addition, the Company has reduced the LIFO reserve by $13,595. The decrease in the LIFO reserve was principally a result of decreases in commodity prices in 2009, primarily steel, and a reduction in inventory levels. The reduction in inventory levels is estimated to have impacted the decrease in the LIFO reserve by $6,798.
Selling, General & Administrative (SG&A) Expenses: SG&A expenses decreased $76,761 (24.0%) in the first nine months of 2009 compared with the first nine months of 2008. The decrease was primarily due to lower bonus expense of $55,965, lower selling, administrative and research and development expenses of $11,059, favorable translation impact of foreign currency exchange rates of $15,813 and incremental foreign currency transaction gains of $6,273 partially offset by higher retirement costs in the U.S. of $9,085 and incremental SG&A from acquisitions of $3,904. The Company realized a gain of $1,543 on the settlement of a pension obligation during 2009 that was recorded as a reduction to SG&A expenses.
Cash used by investing activities for the first nine months of 2009 compared with 2008 decreased by $37,218. This reflects a decrease in cash used in the acquisition of businesses of $10,463 and a decrease in capital expenditures of $27,194 to $26,285 from $53,479 in 2008. The Company anticipates capital expenditures in 2009 in the range of $35,000 - $40,000. Anticipated capital expenditures reflect investments to improve operational effectiveness and the Company’s continuing international expansion. Management critically evaluates all proposed capital expenditures and requires each project to increase efficiency, reduce costs, promote business growth, or to improve the overall safety and environmental conditions of the Company’s facilities. Management does not currently anticipate any unusual future cash outlays relating to capital expenditures.
Cash used by financing activities increased $33,620 to $71,632 in the first nine months of 2009 compared with the first nine months of 2008. The increase was primarily due to the repayment of the Company’s $30,000 Series B Senior Unsecured Note on maturity, a reduction in short-term borrowings of $6,900 in the current period versus an increase of $6,098 in the comparable period of the prior year and a decrease in proceeds from the exercise of stock options and related tax benefits of $10,126 partially offset by lower purchases of shares for treasury of $22,778.
LECO is in the portfolios of NWQ Managers of NWQ Investment Management Co, David Dreman of Dreman Value Management.
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