Lincoln Electric Holdings, Inc. (LECO)

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Lincoln Electric Holdings, Inc. (LECO)

Q4 2012 Earnings Call

February 15, 2013, 10:00 am ET


Vincent Petrella - SVP & CFO

John Stropki - Executive Chairman

Chris Mapes - President & CEO


Andy White - Longbow Research

Sean Williams - BB&T Capital Markets

Joe Mondillo - Sidoti

Liam Burke - Janney Capital Markets

Stanley Elliott - Stifel

Jason Rodgers - Great Lakes Review



Greetings and welcome to the Lincoln Electric 2012 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Vincent Petrella, CFO. Thank you, sir. You may begin.

Vincent Petrella

Thank you, Dan, and good morning to all of you and welcome to Lincoln Electric 2012 fourth quarter conference call. We released financial results for 2012 fourth quarter and full year this morning prior to the market's open. Copies are available on the Lincoln Electric website or by contacting our Investor Relations office at 216-383-4893.

Joining me on the call today are, John Stropki, Lincoln’s Executive Chairman and Chris Mapes, President and CEO. John will start the discussion this morning and provide an overview commentary while Chris will review results for the segments and markets and then I will cover the numbers in some more detail. Part of today's call and webcast includes the slide presentation which is available on the Lincoln website under the Company Investor tab. The presentation will also be posted along with a replay of call later today.

But before we start our discussion, please be reminded that certain statements made during this call and in our discussions may be forward-looking, and actual results may differ from our expectations. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the company's operating results. Risks and uncertainties that may affect our results are provided in our press release and in our SEC filings on Forms 10-K and 10-Q.

With that let me turn the call over to John Stropki.

John Stropki

Thank you, Vince, and good morning to everyone joining us on the call today. We finished the 2012 fourth quarter and the full year on a very positive note with annual sales and earnings per share at the highest level in Lincoln’s 118 year history. We also expanded margins, significantly increased return on invested capital and we generated record cash flow.

During 2012, we also continued to invest in both our innovation and long term growth objectives. Equally as important, we have completed a seamless and successful transition in the leadership at the company. Chris Mapes has moved from Chief Operating Officer to President and Chief Executive Officer effective 12/31, becoming only the eighth person in Lincoln’s long history to assume that position. Chris is highly qualified and well prepared to guide this great company for many years and to continue to deliver superior returns to our shareholders. As CEO, Chris has the full Board support and confidence and we feel that he will do a superb job in implementing our 2020 strategy to significantly increase sales while simultaneously improving profits and generating superior returns on invested capital.

In my role as Executive Chairman of the Board, I will stay actively involved in working with Chris and the senior management team on achieving these long term objectives. It’s been a great honor and a privilege to lead Lincoln for these past 10 years; working with an outstanding work force, serving our shareholders and providing our end-user customers with the most innovative welding solutions and best service in the welding industry.

During 2012, we continued our strong track record of improved profitability and consistent shareholder value creation. As you can see, the numbers for 2012 full year and the fourth quarter clearly air this out. For the full-year, sales were up 5.9% to $2.9 billion. Operating income increased $65.4 million to $362 million or 12.7% of sales. Net income increased 18.5% to $257 million or $3.06 per diluted share. Adjusted net income was up 25% to $265.8 million or $3.16 per diluted share.

Now Chris will give you some more color on the quarter and the reporting segments.

Chris Mapes

Thank you, John. And I look forward to continuing to work with you in your new role and continuing the excellent progress we have achieved through your leadership. As John said, we ended the year on positive with record sales and profits. These results reflect the hard work of our employees and workforce around the world and its part of our 2020 strategic program, the successful execution of our ongoing global growth and operational improvement strategies. We took a number of steps globally to reduce costs and sharpen our operations. The end results will help us become a stronger and more agile company as we implement our strategy around the world.

So let’s take a quick look at our operating segments. During the fourth quarter in North America business conditions remained stable, although industrial activity in United States is running slightly ahead of last year, and was essential flat for third quarter 2012, there continuous to be uneasiness about the macro economic landscape due to the international weakness.

Third party sales for North America improved 8.6% from the prior year to $393 million with a 7.3% favorable impact from acquisitions. The acquisition impact is significant as we continue to execute on our strategy of aggressively pursuing opportunities. As you are aware, earlier in 2012 we acquired Weartech a cobalt wielding consumables business and Wayne Trail a wielding automation company. During the 2012 fourth quarter, we acquired Kaliburn and Burny and CMC located in Ladson, South Carolina, designers and manufacturers of shape cutting, control systems and solutions.

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