Cleveland, OH - Lincoln Electric Holdings, Inc. reported first quarter 2014 net income of $56.5 million, or $0.69 per diluted share. Net income was $66.8 million, or $0.80 per diluted share, in the comparable 2013 period. Adjusted net income was $74.1 million, or $0.91 per diluted share, compared to adjusted net income of $77.1 million, or $0.92 per diluted share, in the comparable 2013 period.
Sales decreased 4.7% to $685.1 million in the first quarter 2014 versus $718.6 million in the comparable 2013 period. This decrease reflects the benefit from acquisitions, which was offset by lower volumes and unfavorable foreign exchange translation. Operating income for the first quarter decreased 9.2% to $80.4 million, or 11.7% of sales, from $88.6 million, or 12.3% of sales, in the comparable 2013 period. The decrease in operating income primarily reflects a $17.7 million charge from a Venezuelan remeasurement loss applied on March 31, 2014. On an adjusted basis, operating income decreased 1.3% to $98.1 million or 14.3% of sales, compared with $99.3 million, or 13.8% of sales in 2013.
Christopher L. Mapes, Chairman, President and Chief Executive Officer stated, "We held profitability margins steady in the quarter, benefiting from mix, solid operating performance and steady management of expenses, which helped offset lower volumes. Additionally, we generated improved cash flow from operations and continued to accelerate returns to shareholders."
The Company's Board of Directors declared a quarterly cash dividend of $0.23 per share, which was paid on April 15, 2014 to holders of record on March 31, 2014. During the quarter, the Company returned $51.0 million to shareholders through the repurchase of 709,838 of the Company's common shares.
Venezuela Update
Based on recent changes to Venezuelan currency exchange mechanisms, the company is now utilizing the SICAD I rate as of March 31, 2014 for remeasurement purposes, as it believes that future dividend remittances will be transacted using this rate as compared with the previously used official rate. The SICAD I rate is an auction-based exchange rate, which was 10.7 bolivars to the U.S. dollar as of March 31, 2014, compared to the official rate of 6.3 bolivars to the U.S. dollar.
As a result of this change, the Company incurred an after-tax charge of $17.7 million to Selling, general and administrative expenses in the first quarter of 2014. The first quarter of 2013 included after-tax charges of $1.6 million and $8.1 million to Costs of goods sold and Selling, general and administrative expenses, respectively, due to the devaluation of the Venezuelan currency in February 2013. First quarter 2014 Venezuela financial performance included Sales of $24.2 million and Adjusted net income of $11.2 million, or $0.14 per diluted share.
The results of our Venezuelan operations could be negatively impacted by additional currency remeasurements or devaluations, increased costs due to changes in raw material sourcing and the potential inability to obtain required production materials resulting in interruptions in operations.
