Greetings and welcome to the Lincoln Electric Q1 2012 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) It is now my pleasure to introduce your host, Mr. Vince Petrella, CFO for Lincoln Electric. Thank you Mr. Petrella. You may begin.

Thank you, Latania and good morning to all of you joining us today and welcome to the Lincoln Electric 2012 first quarter financial results and conference call. We released our earnings this morning prior to the market’s open. Additional copies can be obtained on the Lincoln Electric website or by contacting our Investor Relations office. Lincoln’s Chairman and Chief Executive Officer, John Stropki will start the discussion this morning and provide commentary on the quarter. I will follow up with some additional financial numbers after John’s comments. A PowerPoint presentation is part of today's discussion and is available on the Lincoln website under the Investor tab as part of today’s webcast. The presentation will also be posted along with a replay of today’s webcast on our site later today. But before we get started, let me remind you 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 Form 10-K and Form 10-Q. Now, let me turn the call over to John Stropki.

Thank you, Vice and good morning everyone. Our first quarter results were very positive setting the record for the highest sales quarter in our history. Overall profitability and cash flows also improved significantly. Strong performance in the quarter resulted from improved product mix and better pricing dynamics in all of our segments. We experienced very strong sales in North America, driven by demand in both the export and domestic markets for our high technology equipment. Recent acquisitions also played a role and had a very positive impact. Sales were up 21.4% to $727 million. Operating income rose 54% to $92 million or 12.6% of sales, and net income increased 37% to $64 million or $0.76 per diluted share. Excellent sales results for the first quarter of 2012 had a great start for the year. Looking at the segments, our North American operations had a very strong growth in the quarter. Sales rose 36% year over year to $381 million. Export sales increased 43% from the same period a year ago, and export sales to the BRIC countries, including intercompany sales, were up over 21% over the same period. Consumable sales were strong across the board, giving strong sales in the automotive and transportation segments. We also saw continuing strength in both the construction and ag equipment manufacturing segments. Welding equipment sales grew significantly in the quarter as our customers continued to embrace Lincoln’s waveform technology. The launch of our new energy efficient FlexTec inverter platform has been one of the best in our long company history. Automation sales continue to accelerate in North America as customers invest in tools that help them reduce their costs and improve quality. Our recent North American acquisitions Torchmate, Techalloy and Arc Products, all performed quite well in the quarter. Continuing to expand our specialty…

Thank you, John. As John pointed out, our first quarter 2012 financial results reflected a significant quarter-over-quarter improvement in revenue and operating earnings from the first quarter of 2011. Consolidated sales were up over 21% and operating income improved to $91.7 million. Incremental operating profit margins hit the 25% mark in the quarter. On a consolidated basis and compared with the first quarter of 2011, volume increased reported sales by 12.8%, pricing increased sales by 3.7% and acquisitions contributed an increase of 5.9%. During March, we closed our first transaction of the year acquiring Weartech International, a specialty alloy consumable producer with over $30 million of annual sales. Our first quarter gross profit margins increased to 29.6% compared with 26.9% in the comparable prior year period. The increase in gross margin resulted from leverage from increased volumes, better product mix and higher pricing around the world. The company recently announced various price increases during the latter part of the first quarter and the beginning of the second quarter of 2012. We expect these announced price increases to add approximately 3% to the sales line in the second quarter compared with the first quarter of 2012 on a sequential basis. SG&A expense for the quarter was $123.6 million or 17% of sales compared with approximately $102 million or 17% of sales in the prior year. The increase in SG&A expense was primarily driven by higher bonus accruals of $11 million as operating profit increased substantially on a year-over-year basis. Operating income for the quarter at $92 million was 12.6% of sales compared with about $60 million in the prior year or 9.9% of sales in the same period. The prior year’s quarter included charges of $357,000 related to rationalization actions in Europe that began in 2009. Excluding these special items in…

(Operator Instructions) Our first question comes from Thomas Hayes with Thompson Research Group. Please proceed with your question.

Hey congratulations on the quarter. My first question just kind of relates to the Asian operating or EBIT margin, nice job on that. Just it’s been a large area of focus for you guys for a while especially with investments for the last couple of years. Just wondering your thoughts on the sustainability of the margin performance we saw in the first quarter throughout this year and kind of what your targets are for a longer term margin performance in that segment?

Well, you’re exactly right, Tom that it has been and it will continue to be an area of very significant performance for us. We remain extremely bullish on the growth opportunities within Asia, in particular China and India but with other important segments there. And we think that there are some substantial opportunities for us to continue to improve our operating performance in China as well as to continue to grow our sales as the markets stabilize and continue to build. So we have more upside than we have downside. But as we have said from time to time that we’re going to go through cycles there depending on the market conditions. And some will be better cycles than others but over the long term it will be a very positive investment for our shareholders.

Then just secondly, it sounds like you are seeing good growth from the – I think you mentioned the equipment upgrade cycle. Is that kind of end market specific or are you seeing that across all your segments?

I would say it’s pretty broad, Tom, and we’re seeing pretty significant capital investments in most of the important segments. Clearly our high-technology equipment is driving productivity improvements in many of the key segments around the globe and we are attracting a tremendous amount of interest because of some of the advantageous our equipment has over any competitive offering. And then the follow-up to that is that our automation participation is increasing with global customers as they feel with either shortages of welders or the need to improve productivity. And we’re getting more and more attention in that area and again, pretty much around the globe even in low cost markets like China and India.

Just a last question, you mentioned pricing actions that you implemented late in the quarter, can you provide any more color whether it’s on machines or consumable price increases?

It’s across the board. We raised prices on both equipment and consumables.

On a global basis?

Yes.

Our next question comes from Walt Liptak with Barrington Research. Please proceed with your question.

On the pricing question, just a follow up, are you taking up prices the same globally? Is that what I just heard you say because you’ve got more or less price increase going on in different parts of the world right now?

Yeah, we have increases going on in all markets, Walt, there the timing is slightly different and the percentages are slightly different. But based on chemical or other raw material cost increases, including some instance of steel, we are increasing prices in all market segments.

Is this a later price increase, I mean, you normally put in place? Typically I think you’ve put in early part of January as part of the year?

Well, the U.S. is actually our second price increase this year. So we did have one early in the year primarily on equipment but now we’ve had a second round, it was a true-up based on cost increases in the various different segments. In the case of other global markets, we don’t have the kind of history that you would be familiar with of a first quarter kind of North American price increases.

Okay, got it. And then maybe it will help to segue to North America where the volume growth was really strong. And I know you made some commentary around there but is there anything that – I mean, there is so much worry out there about industrial production growth moderating and slowing in some end markets. What kind of sequential trends did you see, what sectors are contributing to that volume growth?

Well, we have pretty good performance across most of the sectors. Walt, I would say the heavy growth areas, automotive has been very strong. Our commercial trailer manufacturing has been up, railcar manufacturing, tech and construction equipment have been pretty strong. But I would tend to agree with you and tried to emphasize in my prepared remark is that we are seeing more volatility in the metrics of industrial production purchasing manager’s index. And while the year-over-year numbers have trended quite positively, the sequential kind of numbers again are showing some volatility and some softening. So we know the comps are going to get more difficult as we transition in the second half of the year, affect the part of our growth and we think our focus is continuing to focus on market share growth. And if we do see softening in the market, we will continue to use that as our primary weapon in improving our results.

Okay. You mentioned that sub-construction markets, you’re hopeful, might come back. Those are still about 20% of revenue.

I was talking specifically about construction equipment – I don’t recall having a conversation about specific construction. But the demand for construction equipment has been very robust and the same thing is true with the high commodity prices. The agricultural equipment is doing exceptionally well.

And then I’ve got to ask one about Europe. And the volume growth that you saw there and obviously with debt crisis and some economies going at recession, I thought that volumes would be negative this quarter and the volumes were up 3.5%. What do you attribute that to? Is it market share gains?

It’s a couple of things. It’s strong sales mix towards machines and equipment where we think that we are gaining some share. And also, as we talked about in the past couple of quarters calls, Europe has some weakness in the southern part of Europe and some stronger markets that we participate in, in Africa and Middle East. And so there are parts of Europe that are down, the southern part of Europe but it’s slightly offset by the stronger parts of that region, including product mix that is doing quite well on the machine and equipment side of the business.

Okay. How much is automotive in Europe?

That’s less than 10%.

But it is probably one of the areas where we have had the most success in capturing market share. Our consumable and equipment platforms are very much tailored towards high automation, high productivity, quality demands in the automotive market. And our consumable product lines, both our carbon steel and also aluminum are doing exceptionally well in those areas.

And then your profit, it’s nice to see that profit coming out. That’s the best first quarter profit I have seen in a while. Is it cost out or combination of that and pricing and what kind of a price increase are you taking in Europe?

It’s just a little bit of cost out, it’s pricing improvements and then lastly, it’s product mix. Again, the shift towards higher growth on the machine side of the business aids the overall margin of the business. And I’ll let John comment on any pricing changes in Europe.

Yeah, I think our price increase in the consumable is in the 4% to 5% and that’s in core Europe, it’d be a little bit more in Russia. And that is more than the Middle East and Africa that Vince talked about, those markets are generally serviced out of the North American manufacturing platform with the exception and I think a very positive exception that we are now penetrating some of the mid-market segments in Africa and the Middle East through our Chinese manufacturing platform that gives us a real cost advantage over either local manufacturers or people servicing that market out of Europe.

Okay. And if I could just switch to the acquisition, Weartech, maybe talk at all about accretion or what you expect out of the business over the next 12 months?

It will be very modest, just add a couple of cents a share.

Our next question comes from Steve Barger with KeyBanc Capital Markets. Please proceed with your question.

I want to go back to the mix question. I understand you’re benefitting from an equipment upgrade cycle, but what are you doing specifically to drive that shift to the higher value equipment and the chemistry based consumables? Is it new customers, is it sales force having more success selling the new features? Maybe just flush that out a little.

Well, I think you have to go back to the tremendous effort we put into R&D during the down cycle of 2009. We came out with this very strong portfolio of new equipment right after or even during that deep recession. But there was a lot of behind the scenes activity to substantially upgrade our equipment line that’s continued on and even beyond that. And talk specifically about this FlexTec product line that has been (ph) the most successful launch of new equipment that we’ve had in the history of the company. And that is very broad based equipment and it’s broad based in terms of the market segment that is applicable to because of the range of the product from 300 amp all the way up to 600 amp. And it’s also very broad based in terms of the market segment. Traditionally inverter machines have not been very well accepted in emerging markets and difficult environments but technology and the robustness of this platform has proven to be a very strong winner and it’s a good cost base with excellent margins associated with it. So we have really focused on these market segments that we thought were strong growth segments that we have designed products that we think fit that sweet spot. And we’ve left many of our competitors in the dust in terms of their product design.

So that was the follow-up, do you really have an advantage now over some of your sophisticated competitors? We’ll just forget about the little guys for a minute who maybe didn’t invest in the downturn as much as you did, is that what you are saying?

Yeah, I think that’s proving to be very much the case.

So I guess segueing into another European question, you’ve seen on acquisition and some organizational changes at one of your big competitors there. Can you talk about what you are seeing from a competitive standpoint? Are you able to take share there and would that be from the bigger players or is it from the smaller guys in the market over there?

Well, I think it’s sum of all of the above. Yeah we haven’t seen much from the specific competitor that you are talking about. I think that they are still digesting that, taking a look at the changes that they think are appropriate and the opportunities that they want to focus on. But in the meantime we’re very familiar with the market where the opportunities lie and we are ready to advance our game as others are kind of digesting the opportunities that they have. Clearly the little guys that we have said forever are a bit disadvantaged and with scale and the opportunity to invest heavily in R&D and to make the necessary changes in our product portfolio and to cover a wide range of both geographical and market segments. For the little guys who can’t do that and have relied primarily on personal relationships or specific market niches, I think that consolidation will continue to present a really good opportunity for us and we are looking at that on a regular basis.

Okay. Is there any precedent in recent history to a big competitor undergoing a management or ownership change and then seeing them really geared up or pushed towards new product R&D, how long does that typically take to have an effect in the market? Is that a multi-year kind of project?

I would say from our experience I can’t comment on anybody else that developing a core R&D team, getting a good grasp of the market and the technology needs is a multi-year process. I have no knowledge of the core competencies of what our competitors are on that area but if you were to start from scratch, it would be a multi-year investment and a fairly robust investment in terms of people, time and energy.

Got it. Okay, switching gears, there has been a lot of talk about pipelines recently. How long does a pipeline typically take from when you may see an announcement of a project to where you or whoever might start seeing equipment and consumables sales in North America?

Well, I would say in North America that’s pretty unpredictable based on the political climate and the volatility that exists and people making long term strategic kind of decisions. As we know from the Keystone XL pipeline that could go from months to years and maybe even decades depending on the election cycle. Fortunately that delay doesn’t exist in other parts of the world. I had some visitors in yesterday from India, and they were very bullish on the pipeline activity in India and the ability of governments in that part of the world to recognize the need and to move forward with the investments that are necessary. And clearly we see the same type of expediency in places like Russia and China. That being said, there is going to be a lot of pipeline activity in North America. Some of it’s lot less politically, less sensitive than the Keystone pipeline is. You are seeing alternatives surface to Keystone. There are going to be investments in Canada that are going to hedge their bets about the official or eventual approval of the Keystone pipeline. And most of the pipe mill people that we are talking to are becoming more bullish about the future in terms of both the manufacturing of pipe and then the installation of pipe around the world. Oil gas and shale gas are clearly driving that North America and we’re going to see a lot more of that.

I think you’ve put out a revenue per mile number from pipeline construction in the past. Can you remind us of what that is?

I could remind you when I go back and take a look at my notes on.

Vince, do you remember?

Yeah, I think it’s $4000.

That’s what I thought you said in the past, yeah. Okay.

So it’s probably little bit higher than that because we quoted that back in the 2008 cycle when things were very robust but as you know, fuel prices and consumable prices have gone up. And then again on the equipment side, we are seeing some really good opportunities in that with some of the very large global players.

One more and I will get back in line. What percentage of your revenue is from the automotive – I am sorry, automation segment right now?

It’s less than 10%.

And is the growth rate significantly higher than the consolidated growth rate, or are you really seeing that penetration?

It’s one of our highest identified growth rates of any product category.

And that’s just so I am clear, that is primarily the robotic arms, right?

Well, it includes the integration of those arms, the machinery and the equipment.

Yeah, the one thing it doesn’t include, Steve, that really kind of underestimates the opportunities there is we hold tax (ph) to consumable sales to the automation sales. But I will tell you that we don’t sell a robot or hard automation project. Very, very high percentage of those cases are redrawing the consumable business relationship with that. So the customer has a single source of contact for all of their needs there. But if we were to do that and capture it, it would be much higher percent than we have captured just on the equipment and robot side.

Our next question comes from Mark Douglass with Longbow Research. Please proceed with your question.

Lot of my questions have been answered. So what is the mix right now on consumables, equipment?

The mix is about two-thirds consumables, one-third equipment, 66:34.

Okay. So not much has changed. Any LIFO effects in the quarter, Vince?

Yeah, we took about $1.3 million of LIFO charges. It’s about half of last year’s first quarter.

Do you think there will be charges throughout the year?

Yeah based on our estimates of inflationary impact of inputs, primarily of raw materials, we are estimating that, that would be the charge on a quarterly basis for the remainder of the year.

Then tax rate, are we looking at closer to 31% now for ’12, is that due in large part to the mix towards more North America?

Yeah, that’s a 31%, that’s our best estimate today based on our mix of earnings geographically and a heavy emphasis on U.S. earnings growth.

And then finally, you talked a lot about market share shifts in equipment. Would that also be true in North America, do you think gaining share at least on the equipment side?

We’re doing particularly well in North America on the equipment side of our business.

Our next question comes from Holden Lewis with BB&T Capital Markets. Please proceed with your question. Holden Lewis - BB&T Capital Markets: Couple of things. First with a very strong revenue leads, on one side, you didn’t see the leverage that was kind of on the SG&A, I think it was closer to flat year over year as a percentage of revenue. Are they new investment programs or just what sort of do you find not getting leveraged on the SG&A line this quarter?

Well, we had a higher bonus mix this year versus last year. That was in my prepared comments, our bonus was up over -- about $11 million year over year. And we had some other items that are incremental spends on a year over year basis in the transaction support area and legal costs. Our pension costs were higher on a year over year basis by about $2.3 million. Now that’s split between cost of sales and SG&A. But there is a little bit of a lot of different things, Holden. We would expect that we gain a little bit more leverage as we move throughout the year but we did have a heavier accrual particularly on the bonus line in the first quarter. Holden Lewis - BB&T Capital Markets: Okay. Is there something like on the legal side, or anything like that with somewhat less volatile and predictable that was a negative in the quarter, anything like that?

Yeah, we did have higher legal expenses year over year that ran through SG&A. And we are hoping that, that will diminish as we work our way through the year. Holden Lewis - BB&T Capital Markets: Then sort of getting back on to the gross margin a little bit. Last quarter you obviously made, that was the first -- in Q4, with the first quarter you made substantial stride on kind of that incremental margin over the past few quarters. And I think then we kind of talked about mix which is kind of unpredictable and maybe you are producing a sort of higher than seasonally normal type of rate. But then obviously you sort of built on that in Q1, are we comfortable that when we talk about kind of close to 10% type margins in Europe, in other words, that’s solidly profitable in Asia. I mean, do we feel comfortable that these levels are, in fact, operating in nature and therefore sustainable going forward more closer than that you were in Q4 or is there still maybe some moving pieces that are very difficult to tag and then maybe these levels are, they may not be sustaining?

Well, there is certainly nothing in the quarter that were one-off items that aided our margins and our incrementals. So from that perspective, we won’t lose that margin capability. It is fair to say that our incrementals were aided by a weaker first quarter 2011 and we had a 9.9% or after adjustments of 10% operating profit, the margin in last year’s first quarter. And those margins did jump up to a higher level in the second and third quarters of 2011. So we did have some easier comps in this quarter. We fully expect, Holden, to continue to make improvements in our business. We made some nice improvements in our pricing disciplines around our world. We gained some leverage in volumes in most parts of our world. The mix did aid us with a higher mix towards equipment sales and a lesser growth on the consumable side of business. So all of those things certainly did aid our quarter but in the long term we expect to continue to work at improving our business in all parts of our world. And so our expectations are that we will continue to incrementally improve margins in all of our businesses. Holden Lewis - BB&T Capital Markets: But even in the short term, I mean, is there any reason to think that, that mix how long it’s going to shift at all, were you producing above or its production, looks like production was frankly in line with the growth levels. I mean, it doesn’t look like there is any that would drop off if you will.

Well, I think what might be worth mentioning is that as we came out of the significant downturn in 2009, our consumable sales rebounded much more quickly than our machine side of the business. And as a reminder, we lost about half of our volumes in machines and approximately 20, 25% of our volumes in consumables. Last year our consumable volumes in the base business largely restored themselves to pre-2009 levels whereas equipment machine sales had not. Those higher growth rates can be attributed to our continuing rebound in the equipment side of the business, and then we would estimate that in the course of 2012 that we will be fully restored to those volume levels that we had achieved in equipment in 2008. So with that we would expect that our growth rates on machine side of the business that are aiding our margin and incrementals will start to moderate as we work our way through the year. So unless we have a reenergizing of our markets, industrial markets around the world, we’ll have some slower growth on machine side as compared to the last few quarters of this year and last year. Holden Lewis - BB&T Capital Markets: Do you feel like your mix of equipment and consumables now is consistent with where you were in ’08?

We will probably cross that mark sometime this year, probably second and third quarter. We’re not quite there yet but we are getting close. Holden Lewis - BB&T Capital Markets: Now the combination of that plus what seems to be some incremental pricing coming through, back in ’08 before everything fell off a cliff you were running margins in sort of 29% to 31% range on the growth. If we sort of return to that mix, then the pricing is up but we’re already sort of starting at the 29.5% basically in Q1, is that kind of the type of numbers that you would think would be sustainable?

Yeah our margins on the equipment side of the business are as good as or better than where we were at our peak. So we have improved our business operations both from a cost and a pricing perspective on the equipment side of the business at the current volume levels. So we have had improvements between ’08 and 2012.

The follow up to that, Holden is, and particularly in Europe and Asia is that the consumable factories are not operating at anywhere near full capacity that they were back in 2007-2008. And quite frankly, we don’t expect that to turn around any time soon. But yeah, I don’t think there is anybody who I have heard or read that is very bullish on the turnaround of the European economy. I think most people are kind of surprised it isn’t worse than what it has demonstrated to be. So it’s going to be a continuous kind of effort there to improve margins but we have made a pretty dramatic shift that we’re not chasing volumes, we are looking at high value customers. And we’ve got a pricing discipline that’s improving our model, and we expect that to continue both there and in Asia. Holden Lewis - BB&T Capital Markets: Would certain pricing actually uptick the incremental margins going forward?

It’s dependent on the volume levels and if the volume levels contract which many people are predicting that we will see further contraction in Europe, then that will -- pricing level will have a positive impact but I doubt it can offset the volume loss that might happen from an economic slowdown there.

Our next question comes from Stanley Elliott with Stifel Nicolaus. Please proceed with your question.

Just curious really, could you help me or walk me through the thought process of prepaying the debt as opposed to rolling it I guess, you guys could pick up 300 basis points on the interest. And really just more curious and I certainly do appreciate the conservative nature of that capital structure?

Stanley, we didn’t prepay the debt, it was scheduled debt payment, repayment in March of 2012. And it was the final tranche of a private placement that we had put in place decade ago. So it wasn’t a prepayment, it was scheduled.

And then as far as the Russian acquisition, those will anniversary in the coming quarter.

Our second acquisition in Russia occurred in March of 2011. So those comps will be behind us in the second quarter of this year.

Our next question is a follow-up from Walter Liptak with Barrington Research.

I have some more questions on leverage I think Holden covered on, I have some big questions. The 25% operating leverage, you’ve been pretty consistent getting high teens or better leverage the last couple of years. You’d expect that should be sustainable throughout the year given the things we talked about already on the call.

I wouldn’t say that we have been consistent. So certainly when we first came out of the downturn, our incrementals are very high. And then as we worked our way through the recovery from the significant downturn, our incrementals have diminished a bit. They did troughed out a couple of quarters last year in the teens, high teens. But we did in the fourth quarter of 2011 have a 21% incremental. So there is a pattern there of very high incrementals coming out of the downturn, incrementals falling during the course of last year, and now we are working those incrementals back up with improvements in our cost base of better pricing discipline and certainly the mix did aid us in this most recent quarter. As far as sustainability is concerned, we have a sustainable model of improving our business. We want to drive costs out of our business on a continuous basis. We want to maximize our pricing capabilities. We want to take share or we want to introduce new products. And so we have a business strategy and model that should show long term improvement. It’s not to say that there won’t be a volatility from quarter to quarter but we have a full expectation that over the longer term we’ll continue to improve our margins, expand those margins and get good returns for our shareholders.

Do you have any margin targets or aspirations that you are looking at? I mean, your operating margins are the best I think that they have ever been.

We’re not quite – but we’re getting there Walt, and when we have said in the past that our target is to be 15% plus from an operating profit EBIT margin standpoint on a global basis.

And have you put a timeframe on that or revenue level?

I am not prepared to do that at this time.

Our next question is a follow-up from Mark Douglass with Longbow Research.

Just real quickly, last quarter you talked about initiatives in China. One being, it’s a big plan combining two Flex brands into one reducing the other costs. Are those still just to be had or do they come in this quarter?

They have more work to do. The stick electrode factory is scheduled to open production in July. So we are still in a transitional mode there. And then we do see that as being a very positive step not only to service the domestic market but to give us a higher volume capacity, low cost plant to service other export markets. If Flex consolidation continues, we should be complete with that again sometime third quarter of this year. And then the back office side, it is fully complete although transitional in terms of moving the customers and getting the full leverage of that but the work that was necessary to do is complete.

There are no further questions in queue at this time. I would like to turn the call back over to Mr. Petrella for closing comments.

And thank you, Latania and thank all of you for joining us on this call. We look very much forward to discussing our second quarter results towards the end of July. And one final announcement, we do have our shareholder meeting this week in Cleveland, Ohio and we’d very much welcome any shareholders that would like to come to our shareholders’ meeting. With that, talk to you in July.

This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.