On Monday, Lincoln Electric Holdings, Inc. (NASDAQ:LECO) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Thomas Hayes – Thompson Research Group: (indiscernible) wanted to talk a little bit first on Europe, traditionally going into the third quarter, a slower quarter, just kind of due to the vacations, so I was just wondering how you guys are thinking about Europe now with the mix of general slowing and the seasonal slowing?
John M. Stropki – Chairman, President and CEO: Well, you’re exactly right, Tom, I mean, the third quarter in Europe is always the slowest quarter because of the August shutdowns in the Western, particularly the Southern Western countries in Europe. I would expect the slowing that we’ve seen seems to have stabilized, but I think that there’s still a tremendous amount of uncertainty relative to the economic in the fiscal stature of the EU and what changes that might present, so the forecast of a short-cycle business like we’re in under these volatile political and economic times becomes quite challenging and problematic. I believe that we think we’re doing the right things. We’re focused on the right segments within Europe, and in those areas that we believe have the long term future for the Company, we’re strengthening and growing our position.
Thomas Hayes – Thompson Research Group: You guys have done a really good job this year of maintaining price and actually growing pricing, just wondering what are your thoughts about the being able to maintain that momentum, like you said John it’s going into a period of a little bit more pronounced slowing?
John M. Stropki – Chairman, President and CEO: Well, we’ve said for many, many years that our focus is on the value-added side of our business and our target is the customer that really appreciates the value that Lincoln brings to the equation. Vince commented and Chris commented that we made significant progress in improving the margins in the quarter, and that was a direct result of shedding low margin business that we don’t put into that category that will be our focus on a go forward basis. And if you go back to the comments that I made about the individual market segments, where we see very positive not only current, but long-term type of views, those are all value-added segments and that’s where we’re going to continue to put our energy and muscle behind.
Christopher L. Mapes – COO: Tom, I would just add to that certainly with our growth rates moderating and some volume declines in international markets, coupled with the softening that we’re all seeing in commodity prices that the rate of price increases will be certainly more difficult moving forward in the short-term.
Thomas Hayes – Thompson Research Group: Just one last one, Vince, you had mentioned that you expected benefits from the restructuring of $4 million to $5 million. We saw $1.3 million in costs associated with that this quarter, I was just wondering what your thoughts were as far as the cost side of that for the next few quarters?
Vincent K. Petrella – SVP, CFO and Treasurer: Yeah, we have another somewhere between $3 million to $6 million of additional costs before we fully rationalize those three locations.
Russia to Ramp Up
Walter Liptak – Barrington Research: Let me ask about Europe too and on your comments on the last question you said that Europe you thought was now stabilizing, but I wonder if you could talk a little bit more detail about what happened during the quarter, kind of on a month to month, did Russia or Spain get substantially worse? What kind of colors can you give us on the trend that’s been occurring there?
John M. Stropki – Chairman, President and CEO: I would just comment that from the first quarter to the second quarter, we saw a significant deterioration in Spain, and Portugal in particular and as Vince mentioned, those are markets where we have a very significant market share. So, obviously we’re more directly impacted by that than we would be in markets where we’re not as strong. The Russian circumstance is one of us having to move a fairly significant plant and relocate it into an existing facility that requires significant change in the layout of that facility and the Severstal business and I think we commented on this when we bought it at a very important market share but that it was not hugely profitable and it’s been our focus to shed the unprofitable side of that business as we make the move and when we complete the move, we will reconfigure our marketing strategy to be sure that we get high utilization and maximize profitability of the newly configured Russian consumable business and we’re quite optimistic, not only on our capabilities to do that but also in the important growth that we’ve forecast for that market long-term.
Walter Liptak – Barrington Research: Thank you for that. That’s an important thing to point out, because the euro profits look good, even though the revenue was a lot lower than I was expecting. Can you quantify how much of a headwind that Russian relo was during the quarter in terms of like millions of dollars of revenue?
John M. Stropki – Chairman, President and CEO: I would just say that Spain and Russia represented the predominant part of the decline on a sequential basis, and year-over-year in our Europe segment.
Christopher L. Mapes – COO: Well, if we look at our core European business and we break that down to the one the markets, two the kind of equipment and consumables that we consider to be normal regular flow of products, year-over-year, for the full year and in for the quarter, those businesses are relatively flat. We got a few markets that are up a little, we got a few that are down, we have a few product categories that are up a little, and a few that are down. And again if you take Spain and Russia out of that, that would have been the scenario that we see. It’s hard to predict that Spain could get any worse than what it is, unless there is total collapse of the euro, and again, while we’ll have another six months or so in reorganizing this Russian business, I think, the prospects for growth in steel and in welding consumables in Russia is very positive because of the high demand in the energy sectors there.
Walter Liptak – Barrington Research: Okay. Got it. So Russia should – you should see some kind of a sequential improvement out of Russia?
John M. Stropki – Chairman, President and CEO: Yeah. But I would emphasize just on the Europe sequentials that the third quarter is almost always weaker in terms of volumes and sales levels in the second quarter, and it would only – it would take – because of the shutdowns in August that almost the whole month of sales are lost in the third quarter on our European segment. So, I wouldn’t expect the third quarter of 2012 to be any better than the second quarter, it’s likely to be a lower quarter because of that seasonality.
Walter Liptak – Barrington Research: And just looking at sequentials in Europe, the Spain and Russia might have crossed $12 million in revenue during the quarter, is that the number that you’re thinking of?
John M. Stropki – Chairman, President and CEO: It was more than that.
Walter Liptak – Barrington Research: That answers the question. Your competitors had better revenue numbers, organic growth numbers in the 7% to 9% range coming out of Europe during the quarter, in that it sounds like you would attribute the difference to this Russia situation, as well as Spain, Portugal?
John M. Stropki – Chairman, President and CEO: Yeah. I would say that we have a different situation in Russia, Walt, and that our exposure in the rest of the continent may be a little different than others in the industry. Spain is one of our biggest markets in the continent.