<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1993 Commission File Number 0-1402
THE LINCOLN ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
OHIO 34-0359955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22801 St. Clair Ave., Cleveland, Ohio 44117
(Address of principal executive offices) (Zip Code)
(216) 481-8100 (Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, without par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
State the aggregate market value of the voting common stock held by
non-affiliates of the registrant.
Aggregate market value of the voting common stock held by non-affiliates as of
March 1, 1994--$57,272,274. (Affiliates, for this purpose, have been
deemed to be Directors of the Company, certain significant shareholders and
employees participating in the Employees' Stock Purchase Plan and Employee
Stock Ownership Plan).
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the close of the period covered by this report.
Common Capital Stock, without par value 10,381,450 shares, as of March 1,
1994. Class A Common Stock, without par value--499,840 shares, as of March
1, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the annual meeting of
shareholders to be held on May 24, 1994 will be incorporated by reference into
Part III.
<PAGE> 2
PART I
Item 1. BUSINESS
As used in Item 1 of this report, the term "Company", except as otherwise
indicated by the context, means The Lincoln Electric Company and its
subsidiaries.
The Lincoln Electric Company was incorporated under the laws of the State of
Ohio in 1906. The Company is engaged primarily in the design, manufacture and
sale of arc welding products which constitutes 88% of the Company's business.
The Company also designs, manufactures and sells integral horsepower industrial
electric motors, and some subsidiaries also sell industrial gases, regulators,
and torches.
The arc welding machines, power sources and automated wire feeding systems
manufactured by the Company range in technology from basic units used for light
manufacturing and maintenance to highly sophisticated machines for robotic
applications, high production welding and fabrication. Three primary types of
arc welding electrodes are produced: (1) coated manual or stick electrodes,
(2) solid electrodes produced in coil form for continuous feeding in mechanized
welding, and (3) cored electrodes produced in coil form for continuous feeding
in mechanized welding. The integral horsepower electric motors manufactured by
the Company range in size from 1/3 to 250 horsepower. See Note H to the
consolidated financial statements with respect to acquisitions by the Company.
The Company's products are sold in both domestic and international markets. In
the domestic market, they are sold directly by the Company's own sales
organization as well as by distributors. In the international markets, the
Company's products are sold principally by foreign subsidiary companies. The
Company also has an international sales organization comprised of international
direct sales distributors, agents and dealers that operate in more than
eighty-seven countries. The Company has manufacturing facilities located in
the United States, Australia, Canada, Japan, Mexico, England, France, Ireland,
Italy, the Netherlands, Norway and Spain. See Note G to the consolidated
financial statements with respect to information concerning the Company's
geographic segments.
The Company is not dependent on a single customer or a few customers. The loss
of any one customer would not have a material adverse effect on its business.
The Company's business is not seasonal.
Conditions in the arc welding industry are highly competitive. The Company is
one of the largest manufacturers of consumables and machinery in a field of
three or four major domestic competitors and numerous smaller competitors
covering the industry. The Company continues to pursue strategies to heighten
its competitiveness in international markets. Competition in the electric arc
welding industry is on the basis of price, brand preference, product quality
and performance, warranty, delivery, service and technical support. All of
these factors have contributed to the Company's position as one of the leaders
in the industry.
Virtually all of the Company's products may be classified as standard
commercial articles and are manufactured for stock. Normally, customer orders
are filled directly from finished product stock and, therefore, the backlog of
orders at any particular time is relatively negligible.
The principal raw materials essential to the Company's business are various
chemicals, steel, copper and aluminum, all of which are normally available for
purchase in the open market.
<PAGE> 3
Item 1. BUSINESS (Continued)
The Company's operations are not materially dependent upon patents, licenses,
franchises or concessions.
The Company's facilities are subject to federal, state and local environmental
control regulations. To date, compliance with these environmental regulations
has not had a material effect on the Company's earnings nor has it required the
Company to make significant capital expenditures.
Research activities relating to the development of new products and the
improvement of existing products in 1993 were all Company-sponsored. These
activities were primarily related to the development of new products utilizing
the latest electronic technology. The number of professional employees engaged
full-time in these research activities was 142. Refer to Note A to the
consolidated financial statements with respect to costs of research and
development.
The number of persons employed by the Company worldwide, as an average for the
year ended December 31, 1993, was 6,036. Effects of plant closures will reduce
worldwide employment levels in 1994.
<TABLE>
The table below sets forth consolidated net sales by product line for the most
recent three years:
<CAPTION>
1993 1992 1991
-------------------------------------
(In thousands of dollars)
<S> <C> <C> <C>
Arc Welding Products $743,633 $741,860 $719,446
88% 87% 86%
All Other 102,366 111,147 114,446
12% 13% 14%
-------- -------- --------
$845,999 $853,007 $833,892
======== ======== ========
</TABLE>
Geographic segment information is included in Note G to the consolidated
financial statements.
Item 2. PROPERTIES
The Company's corporate headquarters and principal United States manufacturing
facilities are located in the Cleveland, Ohio area. Total Cleveland area
property consists of 230 acres, of which present manufacturing facilities
comprise an area of approximately 2,698,000 square feet. Current utilization
of existing facilities is estimated to be 91% of capacity.
<TABLE>
In addition to the principal facilities in Ohio, the Company operates two other
manufacturing locations in the United States plus 13 manufacturing locations in
11 foreign countries, the locations of which are as follows:
<S> <C>
United States: Gainesville, Georgia; Monterey Park, California.
Australia: Sydney.
Canada: Toronto.
England: Sheffield.
France: Grand-Quevilly.
Ireland: Rathnew.
Italy: Pianoro; Milano.
Mexico: Mexico City.
Netherlands: Nijmegen.
Norway: Skjelland; Stavern.
</TABLE>
<PAGE> 4
Item 2. PROPERTIES (Continued)
<TABLE>
<S> <C>
Spain: Barcelona.
Japan: Naraha.
</TABLE>
Manufacturing facilities located in Germany, Venezuela, and Brazil were closed
under the Company's restructuring program.
All property relating to the Company's Cleveland, Ohio headquarters and
manufacturing facilities is owned outright by the Company and is unencumbered.
In addition, the Company maintains leases for its distribution centers. See
Note K to the consolidated financial statements with respect to leases. Most
of the Company's foreign subsidiaries own manufacturing facilities in the
foreign country where they are located. Some of these subsidiaries' properties
are encumbered by mortgage loans. See Note D to the consolidated financial
statements with respect to long-term debt.
Item 3. LEGAL PROCEEDINGS
The Company is subject, from time to time, to a variety of civil and
administrative proceedings arising out of its normal operations including,
without limitation, intellectual property related actions, employment-related
actions and health, safety and environmental claims and proceedings under the
laws governing workers' compensation. The Company does not believe that the
outcome of such legal proceedings, solely or in aggregate, will have a material
adverse effect upon the financial condition of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1993.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON CAPITAL STOCK
AND RELATED STOCKHOLDER MATTERS
The Company's Common Capital Stock is traded on the over-the-counter market.
The number of record holders of Common Capital Stock at December 31, 1993 was
2,497.
There is a limited public trading market for Common Capital Stock purchased
through the Company's Employees' Stock Purchase Plan and for Class A Common
Stock distributed under the Company's Employee Stock Ownership Plan. Shares
purchased are subject to a right of refusal and other restrictions as set forth
in the Employees' Stock Purchase Plan. Refer to Note B to the consolidated
financial statements with respect to the rights of Class A Common Stock.
<TABLE>
High and low stock prices and dividends for the last two years were:
<CAPTION>
1993 1992*
---------------------- ------------------------
CASH CASH
BID PRICE DIVIDENDS BID PRICE DIVIDENDS
--------- --------- --------- ---------
QUARTER ENDED HIGH LOW PAID HIGH LOW PAID
- ------------- ------ ------ --------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
March 31 $21.00 $19.20 $ .18 $23.00 $22.00 $ .18
June 30 20.50 19.20 .18 23.50 22.00 .18
September 30 20.50 17.00 .18 24.00 23.00 .18
December 31 18.00 16.25 .18 24.00 20.50 .18
<FN>
Source: Ohio Dealers' Data Service
*Bid prices and cash dividends have been adjusted to reflect the ten-for-one
stock split in 1993.
</TABLE>
<PAGE> 5
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS (Continued)
Future dividends, which are subject to limitations under the Credit Agreement
and the Senior Note Agreement, will be based on financial performance of the
Company (see Note D to the consolidated financial statements for a further
description of these limitations.)
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991 1990 1989
-------------------------------------------------
(In thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $845,999 $853,007 $833,892 $796,671 $692,817
Income (loss) before
cumulative effect of
accounting change (40,536) (45,800) 14,365 11,052 27,555
Cumulative effect of
accounting change 2,468
-------- -------- -------- -------- --------
Net income (loss) (38,068) (45,800) 14,365 11,052 27,555
Total assets 559,543 603,347 640,261 572,230 455,769
Long-term debt 216,915 221,470 155,547 110,940 30,161
Per common share:
Income (loss) before
cumulative effect of
accounting change $(3.74) $ (4.24) $ 1.33 $ 1.03 $ 2.64
Cumulative effect of
accounting change .23
------ ------- ------- ------- -------
Net income (loss) $(3.51) $ (4.24) $ 1.33 $ 1.03 $ 2.64
Cash dividends declared $ .72 $ .72 $ .61 $ 1.26 1.26
</TABLE>
See Note C to the consolidated financial statements with respect to
restructuring charges in 1993 and 1992. All per share amounts have been
adjusted for the ten-for-one stock split in 1993.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(all dollar amounts
are in thousands of dollars)
RESULTS OF OPERATIONS
Net sales decreased by less than 1% to $846,000 in 1993 from $853,000 in 1992
and increased 1.4% from 1991 sales of $833,900. Sales in 1993 for domestic
companies were up 9.7% while sales of foreign companies were down 18.3% from
1992. Excluding sales resulting from acquisitions, 1992 domestic and foreign
sales increased 6.0% and decreased 10.2%, respectively, from 1991.
Approximately 45% of the increase in domestic sales in 1993 (90% in 1992) was
attributable to an increase in volume. The remaining 55% in 1993 (10% in
1992) was due to increases in selling prices.
Gross margin increased to $313,200 in 1993 (37.0% of sales) as compared to
$299,900 in 1992 (35.2% of sales) and $312,100 in 1991 (37.4% of sales). The
improvement of gross margin was attributable to price increases coupled with
the effect of increased volume, which included the effect of domestic market
share gains. These effects, however, were partially offset by diminishing
gross margins of the non-U.S. operations.
Distribution cost/selling, general and administrative expenses were $277,000 in
1993 (32.7% of sales) as compared to $299,200 in 1992 (35.1% of sales) and
<PAGE> 6
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
$270,500 in 1991 (32.4% of sales). The reduction in distribution cost/selling,
general and administrative expenses in 1993 was principally the result of
management's response to the recessionary pressures existing throughout Europe.
Additionally, comparable results were affected by the incurrence of certain
nonrecurring and non-continuing operating costs. Such costs included asset
write-downs, relocation costs, various other charges relating to cost reduction
efforts totaling $3,700 and $18,900 in 1993 and 1992, respectively.
In 1992, the increase in distribution cost/selling, general and administrative
expenses was principally caused by a full year of operations of the Company's
German subsidiary versus nine months in 1991, increased pension expense, and
various adjustments discussed above. In 1991, distribution costs/selling,
general and administration expenses were offset partially by the reversal of
$6,200 of prior year charges relating to The Lincoln Electric Company 1988
Incentive Equity Plan.
The Company's net loss was $38,100 in 1993 as compared with $45,800 in 1992 and
net income of $14,400 in 1991. Results were affected adversely by
restructuring charges relating principally to the European and South American
operations. These charges totaled $40,900 net-of-tax ($3.77 per share) and
$23,900 without tax benefit ($2.21 per share) for 1993 and 1992, respectively
(see discussion below). The 1991 results of operations included no
restructuring charges.
Results for 1993 have also benefited from the cumulative effect of a change in
method of accounting for income taxes, which increased net income $2,468 or
$.23 per share. See Note A, "Accounting Policies," for additional information
regarding the effects of the change in method in accounting for income taxes.
The provision for income taxes reflects a net benefit of $6,400 on a loss
before income taxes of $46,900 for 1993 which principally reflects tax benefits
attributable to the plant closure and liquidation of a German subsidiary (see
discussion below). For 1992, the provision for income taxes was $11,400 on a
loss before income taxes of $34,400 compared to a provision of $20,000 on
income before income taxes of $34,400 in 1991. The higher effective rates
experienced in 1992 and 1991 were due principally to losses of foreign
subsidiaries that were in net operating loss carryover positions.
RESTRUCTURING CHARGES
In 1992, the Company's restructuring program was initiated to improve
efficiency and future financial results for its non-U.S. operations,
principally its European markets. This decision resulted in a restructuring
charge to 1992 operations of $23,900, without tax benefit.
It became evident in 1993 that the 1992 restructuring charges were not
sufficient to reverse operating results in Germany, as the Company's principal
German subsidiary continued to incur significant losses, experiencing eroding
sales levels within the context of depressed market conditions. Accordingly,
the Board of Directors decided in early 1994 to terminate the manufacturing and
sales operations of its Messer Lincoln subsidiary in Germany. The intent of
the action was to eliminate substantial costs in manufacturing overhead and
distribution expenses in Europe, and to enable the Company to redirect its
resources toward more efficient and competitive facilities that will serve the
European market. Similarly, the Board of Directors decided in early 1994 that
overcapacity in the weak and turbulent economies of Brazil and Venezuela
required the curtailment of production operations in such markets, even though
sales, marketing and distribution activities in those countries will continue.
<PAGE> 7
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
The above-referenced decisions, which will result in the termination of
approximately 800 employees, resulted in pretax restructuring charges of
$70,100 for 1993 ($40,900 after tax). See Note C to the consolidated financial
statements, "Restructuring Charges," for additional information.
As indicated earlier, operating results of the Company's highly efficient U.S.
and Canadian operations showed increased levels of profitability and market
share in 1993. Although consolidated results were affected adversely in 1992
and 1993 by restructuring charges, management believes the Company is well
positioned now to maximize its opportunities in the worldwide markets it
serves.
RESEARCH AND DEVELOPMENT
The Company decreased its expenditures for research activities during both 1993
and 1992. However, the Company believes the current level of research and
development is adequate to maintain its product lines and introduce new
products at an appropriate rate to sustain future growth. Excellence in
research and development is a key success factor for the Company.
LIQUIDITY AND CAPITAL RESOURCES
In March 1993, the Company entered into a $230,000 three-year, unsecured,
multi-currency Credit Agreement with ten banks. The funds were used to replace
the Company's then existing revolving credit agreement, its long-term borrowing
arrangements with foreign banks, and to refinance and consolidate certain other
foreign short-term and long-term obligations. See Note D to the consolidated
financial statements, "Short-Term and Long-Term Debt," for additional
information regarding the borrowing arrangement. The Credit Agreement was
amended in November 1993 in order to provide for more flexible terms to
accommodate the Company's restructuring program.
Total debt at December 31, 1993 was $250,300 compared to $248,600 at December
31, 1992. At December 31, 1993, debt was 64% of total capitalization
(shareholders' equity and debt) compared with 56% at year-end 1992. Interest
expense incurred was $17,600 in 1993 compared with $18,700 in 1992, reflecting
slightly lower interest rates as compared with the prior year. This
compares to interest expense of $15,700 in 1991, reflecting an increase in the
average debt level.
The Company's cash flows for the years 1991 through 1993 are presented in the
consolidated statements of cash flows. Cash provided from operating activities
during 1993 amounted to $28,700, an increase of $5,100 as compared with $23,600
for 1992. In addition to financing, certain operating losses in
Europe, cash flows from operations and additional borrowings were used
primarily for investments, capital expenditures and dividends to shareholders.
In 1992, expenditures by the Company for the purchase of a small Mexican
company and the additional investment in its Lincoln Norweld subsidiary totaled
$37,300, compared to $48,700 in 1991 for the purchase of a German business.
The ratio of current assets to current liabilities was 1.9 at the end of 1993,
compared with 2.2 at the end of 1992 reflecting a satisfactory liquidity
position. Net working capital was $149,900 at December 31, 1993, as compared
with $172,700 at December 31, 1992. The reduction in working capital was
primarily the result of the reduction of the carrying value of assets to their
net realizable value and the increases in other current liabilities in
connection with the restructuring expenses. Notes payable to banks increased
to $23,200 at the end of 1993, from $12,600 at the end of 1992.
<PAGE> 8
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
Capital expenditures in 1993 for property, plant and equipment totaled $19,100
(1992 - $34,800). These expenditures for property, plant and equipment
represent the Company's commitment to its long-range objectives to enhance
product quality and development, advance technology, expand capacity and reduce
manufacturing costs. The Company is closely monitoring its capital outlays and
commitments with such expenditures restricted to include only those projects
showing potential for high internal rate of return with accelerated cash
payback.
In 1993, consistent with the prior year, the Company did not pay a special
dividend, paying regular dividends of $7,800 for the full year. Future
dividends, which are subject to limitations under the Credit Agreement and the
Senior Note Agreement, will be based upon the financial performance of the
Company (see Note D to the consolidated financial statements).
The Credit Agreement and 8.98% Senior Note Agreement contain various financial
covenants that place limitations on the payments of dividends, the purchase of
unrestricted stock, capital expenditures, and the incurrence of additional
indebtedness. While the operating losses for 1993 and 1992 have placed
constraints on the Company's financial flexibility, the Company was in
compliance with the financial covenants of the agreements at the end of 1993
and management believes that the Company will continue to meet such covenants
throughout 1994. Management believes that the current financing arrangement
and cash flow generated from operations will provide adequate funds to support
the operations of the Company and satisfy both its capital requirements and
regular dividend practices throughout the term of the Credit Agreement.
ENVIRONMENTAL MATTERS
The Company's U.S. facilities are subject to Federal, state and local
environmental control regulations. To date, compliance with these
environmental regulations has not had a material effect on the Company's
earnings nor has it required the Company to make significant capital
expenditures. It is the opinion of management that the Company is in material
compliance with all regulatory requirements.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This statement requires companies
to present certain investments in marketable equity securities and many debt
securities at fair value. SFAS No.115 is effective for fiscal years beginning
after December 15, 1993. As the Company does not hold significant portfolios
of debt and marketable equity securities nor is it the Company's principal
business purpose to actively acquire and sell debt and equity securities to
make a profit from short-term movements in market prices, adoption of SFAS No.
115 is not expected to have any substantial impact on the financial statements.
In December 1990, the FASB issued new rules in SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," effective in 1993
domestically and effective for non-U.S. plans in 1995. In November 1992, the
FASB issued Statement No. 112, "Employers' Accounting for Postemployment
Benefits." The Company is required to implement the Statement in the first
quarter of 1994. These statements have no impact on the consolidated financial
position or results of operations because the Company does not provide for any
postretirement or postemployment benefits other than pensions.
<PAGE> 9
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this report
following the signature page.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
A definitive proxy statement will be filed pursuant to Regulation 14A of the
Securities Exchange Act prior to April 29, 1994. Therefore, information
required under this part will be incorporated herein by reference from such
definitive proxy statement.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included in
a separate section of this report following the signature page:
Statements of Consolidated Financial Condition--December 31, 1993
and 1992
Statements of Consolidated Operations--Years ended December 31, 1993,
1992 and 1991
Statements of Consolidated Shareholders' Equity--Years ended
December 31, 1993, 1992 and 1991
Statements of Consolidated Cash Flows--Years ended December 31,
1993, 1992 and 1991
Notes to Consolidated Financial Statements--December 31, 1993
Reports of Independent Auditors
(a) (2) FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of the Company are
included in a separate section of this report following the signature page:
Schedule II--Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees Other than Related Parties
Schedule V--Property, Plant and Equipment
Schedule VI--Accumulated Depreciation, Depletion, and
Amortization of Property, Plant and Equipment
Schedule VIII--Valuation and Qualifying Accounts
Schedule IX--Short-Term Borrowings
Schedule X--Supplementary Income Statement Information
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore, have been omitted.
<TABLE>
(a) (3) EXHIBITS
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- --------------------------------
<S> <C>
3(a) Amended and Restated Articles of
Incorporation of The Lincoln
Electric Company filed herewith.
</TABLE>
<PAGE> 10
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Continued)
<TABLE>
(a) (3) EXHIBITS (Continued)
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- --------------------------------
<S> <C>
3(b) Amended and Restated Code of
Regulations of The Lincoln Electric
Company (filed as Exhibit 3(b) to
Form 10-K of The Lincoln Electric
Company for the year ended December 31,
1987, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).
4(a) Note Agreement dated November 20, 1991
between The Prudential Insurance Company
of America and the Company (filed as
Exhibit 4 to Form 10-K of The Lincoln
Electric Company for the year ended
December 31, 1991, SEC File No. 0-1402
and incorporated by reference and made a
part hereof), as amended by letter dated
March 18, 1993; 8.98% Senior Note Due
November 26, 2003 (filed as Exhibit 4(b) to
Form 10-K of The Lincoln Electric Company
for the year ended December 31, 1992,
SEC File No. 0-1402 and incorporated herein
by reference and made a part hereof); as further
amended by letter dated as of November 19, 1993;
8.98% Senior Note Due November 26, 2003 (filed
herewith).
4(b) Credit Agreement dated March 18, 1993 among the
Company, the Banks listed on the signature page
thereof, and Society National Bank, as Agent
(filed as Exhibit 4 (b) to Form 10-K of The
Lincoln Electric Company for the year ended
December 31, 1992, SEC File No. 0-1402 and
incorporated herein by reference and made a
part hereof), as amended by Amendment No.1 to
Credit Agreement dated November 19, 1993; 8.98%
Senior Note Due November 26, 2003 (filed herewith).
9 Voting Trust Agreement (filed as Exhibit
9 to the Form 10-K of The Lincoln Electric
Company for the year ended December 31, 1988,
SEC File No. 0-1402 and incorporated herein
by reference and made a part hereof).
10(a) * The Lincoln Electric Company 1988 Incentive
Equity Plan (filed as Exhibit 28 to the
Form S-8 Registration Statement of The
Lincoln Electric Company, SEC File No.
33-25209 and incorporated herein by reference
and made a part hereof).
10(b) Form of Indemnification Agreement
(filed as Exhibit A to The Lincoln
Electric Company 1987 Proxy Statement,
SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).
</TABLE>
<PAGE> 11
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Continued)
<TABLE>
(a) (3) EXHIBITS (Continued)
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- --------------------------------
<S> <C>
11 Statement regarding computation of
per share earnings.
21 Subsidiaries of the Registrant.
23 Consents of Independent Auditors.
<FN>
* Reflects executive compensatory arrangement required to be filed as an
Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
Upon request, The Lincoln Electric Company will furnish to security holders
copies of any exhibit to the Form 10-K report upon payment of a reasonable fee.
Any requests should be made in writing to: Mr. Ellis F. Smolik,
Secretary-Treasurer, The Lincoln Electric Company, 22801 St. Clair Avenue,
Cleveland, Ohio 44117, Phone: (216) 481-8100.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE LINCOLN ELECTRIC COMPANY
----------------------------
(Registrant)
/s/ Ellis F. Smolik
--------------------------
Ellis F. Smolik,
Senior Vice President,
Chief Financial Officer,
Secretary-Treasurer and
Director
<PAGE> 12
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 30, 1994.
<TABLE>
<S> <C>
/s/ Donald F. Hastings /s/ Frederick W. Mackenbach
- ------------------------------------- --------------------------------------
Donald F. Hastings, Chairman of the Frederick W. Mackenbach, President,
Board and Chief Executive Officer Chief Operating Officer and Director
/s/ Harry Carlson /s/John Gonzalez
- ------------------------------------- --------------------------------------
Harry Carlson, Vice Chairman and John Gonzalez, Vice Chairman and
Director Director
/s/ Edward E. Hood, Jr. /s/ Roger F. Young
- ------------------------------------- --------------------------------------
Edward E. Hood, Jr., Director Roger F. Young, Senior Vice
President and Director
/s/ Paul E. Lego /s/ David H. Gunning
- ------------------------------------- --------------------------------------
Paul E. Lego, Director David H. Gunning, Director
/s/ Hugh L. Libby /s/ David C. Lincoln
- ------------------------------------- --------------------------------------
Hugh L. Libby, Director David C. Lincoln, Director
/s/ Emma S. Lincoln /s/ G. Russell Lincoln
- ------------------------------------- --------------------------------------
Emma S. Lincoln, Director G. Russell Lincoln, Director
/s/ Lawrence O. Selhorst /s/ Craig R. Smith
- ------------------------------------- --------------------------------------
Lawrence O. Selhorst, Director Craig R. Smith, Director
/s/ Frank L. Steingass /s/ George E. Willis
- ------------------------------------- --------------------------------------
Frank L. Steingass, Director George E. Willis, Director
</TABLE>
<PAGE> 13
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND ITEM 14(d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1993
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<PAGE> 14
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Lincoln Electric Company
We have audited the consolidated financial statements of The Lincoln Electric
Company and subsidiaries listed in the accompanying index to financial
statements Item 14(a1). Our audits also included the financial statement
schedules listed in the Index at Item 14 (a2). These financial statements and
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits. We did not audit the consolidated financial
statements of The Lincoln Electric Company (Australia) Proprietary Limited and
subsidiaries and, for 1992 and 1991, the consolidated financial statements of
Lincoln-Norweld B.V. and subsidiaries and the financial statements of Messer
Lincoln GmbH and its subsidiary, all consolidated subsidiaries, which
statements reflect total assets constituting 5% in 1993 and 41% in 1992 and
total revenues constituting 5% in 1993 and 36% in 1992 and 1991 of the related
consolidated totals. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to
data included for The Lincoln Electric Company (Australia) Proprietary Limited
and subsidiaries and, for 1992 and 1991, Lincoln-Norweld B.V. and subsidiaries
and Messer Lincoln GmbH and its subsidiary, is based solely on the reports of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The Lincoln Electric
Company and subsidiaries at December 31, 1993 and 1992, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
As discussed in Note A to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
/s/ Ernst & Young
------------------------------
ERNST & YOUNG
Cleveland, Ohio
March 25, 1994
<PAGE> 15
To the Board of Directors of
The Lincoln Electric Company
(Australia) Proprietary Limited
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
In our opinion, the consolidated balance sheets and the related consolidated
statements of income and retained earnings and of cash flows (none of which are
presented separately herein) present fairly, in all material respects, the
financial position of The Lincoln Electric Company (Australia) Proprietary
Limited and its subsidiaries at December 31, 1993 and 1992, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse
Parramatta, Australia
March 9, 1994
<PAGE> 16
<TABLE>
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
December 31
1993 1992
----------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 20,381 $ 20,627
Accounts receivable (less allowances of
$6,258 in 1993; $5,434 in 1992) 110,504 111,323
Inventories
Raw materials and in-process 66,987 75,972
Finished goods 76,698 95,280
-------- --------
143,685 171,252
Deferred income taxes 42,960 7,715
Prepaid expenses 3,241 3,097
Other current assets 4,937 7,184
-------- --------
TOTAL CURRENT ASSETS 325,708 321,198
OTHER ASSETS
Notes receivable from employees--Note J 4,747 6,657
Goodwill--Note C 39,732 50,319
Other 19,665 16,772
-------- --------
64,144 73,748
PROPERTY, PLANT AND EQUIPMENT
Land 12,802 18,192
Buildings 113,927 123,817
Machinery, tools and equipment 279,933 293,238
-------- --------
406,662 435,247
Less allowances for depreciation
and amortization 236,971 226,846
-------- --------
169,691 208,401
-------- --------
TOTAL ASSETS $559,543 $603,347
======== ========
</TABLE>
<PAGE> 17
<TABLE>
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
December 31
1993 1992
------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 43,471 $ 44,211
Notes payable to banks--Note D 23,198 12,643
Salaries, wages and amounts withheld 12,779 13,882
Taxes, including income taxes--Note E 23,061 12,159
Dividends payable 1,959 1,942
Current portion of long-term debt--Note D 10,200 14,493
Accrued restructuring charges--Note C 29,618 18,356
Other current liabilities 31,569 30,861
------- -------
TOTAL CURRENT LIABILITIES 175,855 148,547
LONG-TERM DEBT, less current portion--Note D 216,915 221,470
DEFERRED INCOME TAXES 6,128 8,526
OTHER LONG-TERM LIABILITIES 9,221 9,235
MINORITY INTEREST IN SUBSIDIARIES 7,929 16,846
SHAREHOLDERS' EQUITY
Common Capital Stock, no par value--at
stated capital amount--Note B:
Authorized--15,000,000 shares in 1993;
1,500,000 shares in 1992
Outstanding--10,381,450 shares in 1993
and 1,033,346 shares in 1992,
exclusive of 4,479,390 shares in
1993 and 452,738 shares in 1992
held in treasury 2,076 207
Common Class A Stock, no par value--at
stated capital amount--Note B:
Authorized--2,000,000 shares in 1993;
200,000 shares in 1992
Outstanding--499,840 shares in 1993
and 45,062 shares in 1992 100 9
Additional paid-in capital 22,926 23,067
Retained earnings 137,307 183,183
Cumulative translation adjustments (18,914) (7,743)
-------- --------
143,495 198,723
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $559,543 $603,347
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 18
<TABLE>
STATEMENTS OF CONSOLIDATED OPERATIONS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars except per share data)
<CAPTION>
Year Ended December 31
1993 1992 1991
--------------------------------
<S> <C> <C> <C>
Net sales $845,999 $853,007 $833,892
Cost of goods sold 532,795 553,103 521,829
-------- -------- --------
Gross Profit 313,204 299,904 312,063
Distribution cost/selling,
general & administrative
expenses 277,003 299,195 270,512
Restructuring charges--Note C 70,079 23,897
-------- -------- --------
Operating income (loss) (33,878) (23,188) 41,551
Other income/(expenses):
Interest income 1,627 3,061 4,789
Other income 2,922 4,433 3,803
Interest expense (17,621) (18,736) (15,732)
-------- -------- --------
Total other income/(expenses) (13,072) (11,242) (7,140)
-------- -------- --------
Income (loss) before income
taxes and cumulative effect
of accounting change (46,950) (34,430) 34,411
(Provision) Benefit for income taxes--
Note E 6,414 (11,370) (20,046)
-------- -------- --------
Income (loss) before cumulative
effect of accounting change (40,536) (45,800) 14,365
Cumulative effect to January 1, 1993
of change in method of
accounting for income
taxes--Note A 2,468
-------- -------- --------
Net income (loss) $(38,068) $(45,800) $ 14,365
======== ======== ========
Net income (loss) per share:
Income (loss) before cumulative
effect of accounting change (3.74) (4.24) 1.33
Cumulative effect of accounting change .23
-------- -------- --------
Net income (loss) per share $ (3.51) $ (4.24) $ 1.33
======== ======== ========
Dividends declared $ 0.72 $ 0.72 $ .61
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 19
<TABLE>
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
Year Ended December
1993 1992 1991
-------------------- -------------------- --------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
COMMON CAPITAL STOCK
Balance at beginning of year 1,033,346 $ 207 1,039,142 $ 208 1,047,737 $ 210
Purchases (16,841) (3) (26,570) (5)
Sales to employees 3,648 1 9,979 2 17,975 3
Shares issued under
Incentive Equity Plan 1,151 1,066
Ten-for-one stock split 9,343,305 1,868
---------- -------- --------- -------- --------- --------
Balance at end of year 10,381,450 $ 2,076 1,033,346 $ 207 1,039,142 $ 208
========== ======== ========= ======== ========= ========
COMMON CLASS A STOCK
Balance at beginning of year 45,062 $ 9 35,794 $ 7 26,854 $ 5
Ten-for-one stock split 405,558 81
Shares issued to ESOP 49,220 10 9,268 2 8,940 2
---------- -------- --------- -------- --------- --------
Balance at end of year 499,840 $ 100 45,062 $ 9 35,794 $ 7
========== ======== ========= ======== ========= ========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year $ 23,067 $ 20,845 $ 16,816
Purchases of Common Capital Stock (2,473) (2,015)
Sales of Common Capital Stock
to employees 678 2,373 4,043
Shares issued to ESOP 906 2,058 2,001
Shares issued under
Incentive Equity Plan 224 264
Ten-for-one stock split (1,949)
-------- -------- --------
Balance at end of year $ 22,926 $ 23,067 $ 20,845
======== ======== ========
RETAINED EARNINGS
Balance at beginning of year $183,183 $238,412 $234,789
Net income (loss) (38,068) (45,800) 14,365
Purchases of Common Capital Stock (1,667) (4,196)
Cash dividends declared (7,808) (7,762) (6,546)
-------- -------- --------
Balance at end of year $137,307 $183,183 $238,412
======== ======== ========
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance at beginning of year $ (7,743) $ 4,664 $ 2,470
Adjustments for the year (11,171) (12,407) 2,194
-------- -------- --------
Balance at end of year $(18,914) $ (7,743) $ 4,664
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 20
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
Year Ended December 31
1993 1992 1991
----------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(38,068) $(45,800) $ 14,365
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 30,545 31,511 30,456
Provision (Benefit) for deferred income taxes (32,501) 538 2,430
Cumulative effect of accounting changes (2,468)
Foreign exchange loss (gain) (348) 957 1,205
Incentive equity plan reduction (6,219)
Employee Stock Ownership Plan 916 2,060 2,003
Minority interest (358) (2,158) (4,953)
Provision for restructuring 68,370 18,356
Changes in operating assets and liabilities
net of effects from acquisitions:
(Increase) decrease in accounts receivable (6,228) (739) 5,475
(Increase) decrease in inventories 10,654 22,939 (12,548)
(Increase) decrease in other current assets (1,331) 695 10,687
Increase (decrease) in accounts payable 2,856 171 (3,981)
Increase (decrease) in other current
liabilities (2,928) (4,060) 13,549
Gross change in other noncurrent assets (3,112) (2,699) (1,465)
Other--net 2,734 1,853 (3,128)
--------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITES 28,733 23,624 47,876
INVESTING ACTIVITIES
Purchases of property, plant and equipment (19,090) (34,847) (37,605)
Sales of property, plant and equipment 2,599 4,448 7,219
Acquisitions, net of cash acquired (8,518) (37,288) (48,656)
--------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (25,009) (67,687) (79,042)
FINANCING ACTIVITIES
Proceeds from the sale of Common Capital stock 679 2,375 4,046
Purchase of Common Capital stock (4,143) (6,215)
Proceeds from short-term borrowings,
maturities greater than three months 305 11,674
Payments on short-term borrowings,
maturities greater than three months (12,736)
Notes payable to banks--net (9,470) (33,416) 8,054
Proceeds from long-term borrowings 603,405 287,317 132,255
Payment on long-term borrowings (576,445) (212,111) (90,009)
Dividends paid (7,791) (7,756) (12,348)
Other (210) 321 (128)
--------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITES (2,263) 44,261 35,655
Effect of exchange rate changes on cash and
cash equivalents (1,707) 170 294
--------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (246) 368 4,783
Cash and cash equivalents at beginning of year 20,627 20,259 15,476
--------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 20,381 $ 20,627 $ 20,259
========= ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars except per share data)
December 31, 1993
NOTE A--ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of The Lincoln Electric Company and its subsidiaries (the "Company")
after elimination of all significant intercompany accounts and transactions.
CASH EQUIVALENTS: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
INVENTORIES: Inventories are valued at the lower of cost or market. The
Company determines cost by the last-in, first-out (LIFO) method, and subsidiary
companies determine cost by the first-in, first-out (FIFO) method. At December
31, 1993 and 1992, approximately 45% and 34%, respectively, of total
inventories were valued using the LIFO method. The excess of current cost over
LIFO cost amounted to $48,490 at December 31, 1993 and $48,555 at December 31,
1992. During 1992, certain LIFO inventories were reduced, resulting in
liquidations of LIFO inventory quantities carried at the lower costs of prior
years, as compared with their 1992 costs. The effect of these liquidations was
to reduce the 1992 net loss after tax, by $1,018 ($.09 per share).
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment, including
facilities and equipment under capital leases, are stated at cost and include
improvements which significantly extend the useful lives of existing plant and
equipment. Depreciation and amortization are computed by both the accelerated
and straight-line methods. In 1993, property, plant and equipment for
manufacturing facilities that were closed were written down to their estimated
net realizable value.
RESEARCH AND DEVELOPMENT: Research and development costs, which are expensed
as incurred, were $17,762 in 1993, $20,540 in 1992 and $21,311 in 1991.
GOODWILL: The excess of the purchase price over the fair value of net assets
acquired (goodwill) is amortized on a straight-line basis over periods not
exceeding 40 years. Amounts are stated net of accumulated amortization of
$2,363 and $2,170 in 1993 and 1992, respectively.
TRANSLATION OF FOREIGN CURRENCIES: For subsidiaries in countries which do not
have highly inflationary economies, asset and liability accounts are translated
to U.S. dollars using exchange rates in effect at the balance sheet date and
revenue and expense accounts are translated at average exchange rates.
Translation adjustments are reflected as a component of shareholders' equity.
For subsidiaries in countries with highly inflationary economies (Venezuela and
Brazil) inventories, property, plant and equipment and related depreciation are
translated to U.S. dollars at historical exchange rates. Other asset and
liability accounts are translated at exchange rates in effect at the balance
sheet date and revenues and expenses, excluding depreciation, are translated at
average exchange rates. Translation adjustments for these subsidiaries, as
well as transaction gains and losses of all other subsidiaries, are included in
the statements of consolidated operations in distribution cost/selling, general
and administrative expenses. The Company recorded transaction losses in 1993 of
$228 and $859 in 1992.
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars except per share data)
December 31, 1993
NOTE A--ACCOUNTING POLICIES-(Continued)
ACCOUNTING CHANGE: Effective January 1, 1993, the Company adopted FASB
Statement No. 109, "Accounting for Income Taxes." Under Statement No. 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of Statement No.
109, income tax expense was determined using the deferred method under which
deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and
were measured at the tax rate in effect in the year the difference originated.
As permitted by Statement No. 109, the Company has elected not to restate the
financial statements of any prior year. The cumulative effect of the change
decreased the loss for 1993 by $2,468 or $.23 per share.
NET INCOME (LOSS) PER SHARE: Net income (loss) per share is based on the
average number of shares outstanding during the year as adjusted for the
ten-for-one stock split discussed in Note B.
RECLASSIFICATIONS: Certain reclassifications have been made to amounts
previously presented to conform with the current reporting presentation.
NOTE B--SHAREHOLDERS' EQUITY
On May 25, 1993, the Company's shareholders approved an increase in the number
of authorized shares to 17 million without par value in conjunction with a
ten-for-one stock split of the Company's Common Capital and Class A Common
Stock. This action became effective on June 1, 1993, for shareholders of
record as of that date. A total of 9,343,305 shares of Common Capital Stock
and 405,558 shares of Class A Common Capital Stock were issued in connection
with the stock split. Additionally, 4,031,451 shares were issued for stock
held in treasury. The stated value of the Common Capital and Class A Common
Capital Stock remains unchanged at $.20 per share. As a result of the stock
split, all per share and appropriate share amounts have been adjusted to
reflect the stock split.
The Lincoln Electric Company Employees' Stock Purchase Plan ("Plan") provides
that employees may purchase shares of the Company's Common Capital Stock, when
offered, at its estimated fair value. The Company also has the option to
repurchase shares issued under the Plan at their estimated fair value. In
1992, the Company instituted a temporary suspension on the repurchase of all
shares of stock issued and outstanding. Future repurchase of stock by the
Company will be contingent upon authorization and resolution of the Board of
Directors. At December 31, 1993, all unissued shares (4,618,550) were
available for sale under the Plan of which 774,656 shares were reserved or
subscribed.
The Lincoln Electric Company 1988 Incentive Equity Plan ("Incentive Equity
Plan") provided for the award or sale of Common Capital Stock to officers and
other key employees of the Company and its subsidiaries. The first program,
implemented under the Plan in 1988, which provided for deferred stock awards,
was completed as of December 31, 1991. Shares remain available under the
Incentive Equity Plan to officers and other key employees. Distribution of
shares was based on certain specified performance and other conditions being
satisfied. As a result of such conditions being fulfilled with respect to
certain of the Company's subsidiaries, the Company awarded 32,000 shares;
10,660 distributed in each April of 1992
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars except per share data)
December 31, 1993
NOTE B--SHAREHOLDERS' EQUITY--(Continued)
and 1993, and 10,680 shares in April of 1994. Based on criteria
established under the Plan, $7,000 of compensation expense was
accrued in 1990, of which $6,219 was reversed into income in 1991.
The Lincoln Electric Company Employee Stock Ownership Plan (the "ESOP") is a
non-contributory profit-sharing plan established to provide deferred
compensation benefits for all eligible employees. The cost of the plan is
borne by the Company through contributions to an employee stock ownership
trust. In May 1989, shareholders authorized 2,000,000 shares of new Class A
Common Stock ("Class A Common Stock"), without par value. The Company's Common
Capital Stock and Class A Common Stock are identical in all respects, except
that holders of Class A Common Stock are subject to certain transfer
restrictions and the Class A Common Stock is only issued to the ESOP. In 1993,
the Company issued 49,220 shares (92,680 shares in 1992) of Class A Common
Stock to the ESOP which were allocated to all eligible employees. The
estimated fair value of the contributed shares, $916, was recorded as
compensation expense ($2,060 in 1992 and $2,003 in 1991). The difference
between the total stated capital amount of $.20 per share and the estimated
fair value totaled $906 ($2,058 in 1992 and $2,001 in 1991) was recorded as
additional paid-in-capital. At December 31, 1993, 1,500,160 authorized but
unissued shares (1,549,380 shares at December 31, 1992) are available for
issuance to the ESOP.
NOTE C--RESTRUCTURING CHARGES
The Company has substantially completed its plan to downsize and streamline
certain foreign operations (principally in Europe) and close certain
manufacturing facilities (principally in Europe and South America). Closings
of the manufacturing facilities have been announced and the closings and
redundancies will be completed in 1994. These decisions resulted in a
restructuring charge of $70,100 ($40,900 after tax, or $3.77 per share) in
1993, which was comprised of (1) asset write-downs to net realizable value in
the amount of $45,900 including goodwill of $8,900; (2) the recording of
severance and other redundancy costs of $27,500; and (3) the recording of
additional net settlement assets and liabilities of $3,300 including estimated
losses through the final closing date. The cash outlays required to fund the
restructuring will be substantially incurred in 1994, and will be funded by
the liquidation of the affected companies' receivables, inventory and real
estate and by the Company's other operations and outside sources of funding.
Proceeds from the sale of certain of the property, plant and equipment with a
net carrying value of approximately $11,000 is not expected to be realized
until after 1994.
In 1992, the Company recorded a restructuring charge of $23,900 (without tax
benefit, or $2.21 per share) as a result of decisions that were made at that
time to downsize and streamline certain foreign operations (principally in
Europe). The 1992 restructuring charge was principally for severance pay,
redundancies and other liabilities relating to the reorganization of the sales
and distribution operations.
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<TABLE>
NOTE D--SHORT-TERM AND LONG-TERM DEBT
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Short-term debt:
Short-term borrowings of
subsidiaries at interest
rates from 4.125% to 23.25%
(4.375% to 42.00% in 1992) $ 23,198 $ 12,643
========= =========
Long-term debt:
Borrowings refinanced under new
credit agreement: $ 111,458
Multi-currency credit agreement,
due January 1, 1996 $ 126,457
8.98% Senior Note due 2003 (equal
annual principal payments
commencing in 1996) 75,000 75,000
Other borrowings due through
2001, interest at 3.00%
to 13.74% (3.00% to 14.00%
in 1992) 25,658 49,505
--------- ---------
$ 227,115 $ 235,963
Less current portion 10,200 14,493
--------- ---------
Total $ 216,915 $ 221,470
========= =========
</TABLE>
In March 1993, the Company entered into a $230,000 three-year, unsecured,
multi-currency Credit Agreement with ten banks. The Credit Agreement, which
expires January 1, 1996, replaced the Company's previous $75,000 revolving line
of credit, and amounts outstanding at December 31, 1992 under the previous
revolving line of credit ($30,000), certain notes payable to foreign banks
($25,000), various short-term borrowings of subsidiaries ($39,100), and various
other long-term borrowings ($17,300). Borrowings outstanding at December 31,
1992 that were repaid from the proceeds of the Credit Agreement were classified
in the consolidated balance sheet to reflect the terms of the Credit Agreement.
Under the terms of the Credit Agreement, several pricing options are available
and the interest rate on outstanding borrowings is determined based upon
defined leverage rates for the pricing option selected. The interest rate can
range from the LIBOR plus 1% to LIBOR plus 2% depending upon the defined
leverage rate. The agreement also provides for commitment fees ranging from
.375% to .5% per annum on the unused credit lines.
Simultaneously, with the signing of the Credit Agreement, the interest rate on
the $75,000 8.73% Senior Note due in 2003 was increased to 8.98% and the Senior
Note Agreement was amended to change the financial covenants to conform to the
covenants of the Credit Agreement, which requires a 1.6 to 1 consolidated
current ratio at all times and the maintenance of consolidated tangible net
worth of $125,000, plus 50% of net income, subsequent to January 1, 1993. In
addition, there are requirements with respect to interest coverage and debt to
tangible net worth ratios, and limitations on capital expenditures. Purchases
of unrestricted stock and the payment of dividends are limited to 50% of
cumulative net income from January 1, 1993, plus $25,000. At December 31,
1993, $17,200 was available for dividends and purchases of unrestricted stock,
providing the Company complies with the other financial covenants of the
agreements.
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
December 31, 1993
NOTE D--SHORT-TERM AND LONG-TERM DEBT--(Continued)
In November 1993, a number of the financial covenants contained in the Credit
Agreement and in the Senior Note Agreement, were amended to allow for the costs
of restructuring certain of the Company's foreign operations. The covenant
related to consolidated tangible net worth was amended to require a minimum of
$110,000 prior to June 30, 1994; $115,000 prior to September 30, 1994; $120,000
prior to December 31, 1994; and $125,000 plus 50% of net income subsequent to
January 1, 1995, and the covenant related to the ratio of consolidated debt to
consolidated tangible net worth was amended to require a ratio of 2.45 to 1 at
December 31, 1993, reducing to 1.85 to 1 at July 1, 1994 and 1.35 to 1 at July
1, 1995 and thereafter.
Maturities of long-term debt for the five years succeeding December 31, 1993
are $10,200 in 1994, $128,200 in 1995, $10,700 in 1996, $11,400 in 1997; $9,600
in 1998 and $57,000 thereafter.
At December 31, 1993, certain foreign loans were collateralized by property and
equipment which have a carrying value of approximately $21,400.
In 1992, the Company terminated its interest rate swap agreement with a
notational borrowing amount of $75,000 and received $2,586 which is being
amortized over the original swap term (December 1994) as a yield adjustment to
interest expense of the underlying $75,000 debt.
Interest expense capitalized to property, plant and equipment was $71 in 1993
and $320 in 1992. Total interest paid was $19,000 in 1993, $17,500 in 1992,
and $15,700 in 1991.
In connection with the Company's expansion of its motor plant, which is
expected to cost $19,800, the Company has received low interest rate loan
commitments from certain governmental entities in the amount of $6,000, of
which, $2,000 was received in March 1994. The Company has also applied for
and expects to receive, $2,300 in governmental grants for the same project.
NOTE E--INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting For
Income Taxes". As permitted under the new Statement, prior years' financial
statements have not been restated. The cumulative effect of adopting this
statement as of January 1, 1993 is reported separately in the Statement of
Consolidated Operations.
<TABLE>
The components of income (loss) before income taxes and cumulative effect of
accounting change is as follows:
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Domestic $ 43,345 $ 24,120 $ 49,310
Foreign (90,295) (58,550) (14,899)
-------- -------- --------
Total $(46,950) $(34,430) $ 34,411
======== ======== ========
</TABLE>
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
December 31, 1993
<TABLE>
NOTE E--INCOME TAXES--(Continued)
Significant components of income tax expense (benefit) are as follows:
<CAPTION>
Liability Method Deferred Method
---------------- ----------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 21,032 $ 8,295 $ 12,565
Foreign 2,227 1,310 2,959
State and local 2,828 1,227 2,092
-------- -------- --------
26,087 10,832 17,616
Deferred:
Federal (32,980) 1,232 2,400
Foreign 479 (694) 30
-------- -------- --------
(32,501) 538 2,430
-------- -------- --------
Total $ (6,414) $ 11,370 $ 20,046
======== ======== ========
</TABLE>
<TABLE>
The components of the provision for deferred income taxes are as follows:
<CAPTION>
Deferred Method
-----------------------
1992 1991
------- -------
<S> <C> <C>
Inventory adjustments $ 201 $ 188
Incentive equity plan 87 2,115
Depreciation 204 777
Other asset adjustments (88) (674)
Pension adjustments (299) (842)
Employee stock ownership plan (149) 748
Other 582 118
------- -------
Total $ 538 $ 2,430
======= =======
</TABLE>
<TABLE>
The differences between total income tax expense (benefit) and the amount
computed by applying the statutory Federal income tax rate to income (loss)
before income taxes and cumulative effect of accounting change are as follows:
<CAPTION>
Liability Method Deferred Method
1993 1992 1991
---------------- ----------------------
<S> <C> <C> <C>
Statutory rate applied 35% 34% 34%
to pre-tax income(loss) $(16,432) $(11,706) $ 11,700
Effect of state and local
income taxes, net of
Federal tax benefit 1,838 810 1,381
Differences in income taxes
on foreign earnings
and remittances 336 (502) (1,341)
Foreign losses with
no tax benefit 8,308 22,650 8,580
Foreign Sales Corporation (703) (630) (156)
Other items 239 748 (118)
-------- -------- --------
Total $ (6,414) $ 11,370 $ 20,046
======== ======== ========
</TABLE>
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
December 31, 1993
NOTE E--INCOME TAXES--(Continued)
Total income tax payments, net of refunds, were $19,387 in 1993, $16,542 in
1992 and $12,668 in 1991.
At December 31, 1993, the Company's foreign subsidiaries had net operating loss
carryforwards of approximately $44,875. The loss carryforwards expire in
various years from 1994 through 2002, except for certain loss carryforwards of
$571 for which there are no expiration dates.
<TABLE>
Significant components of the Company's deferred tax assets and liabilities at
December 31, 1993 are as follows:
<CAPTION>
1993
-------
<S> <C>
Deferred tax assets:
Restructuring activities $33,446
Net operating loss carryforwards 15,709
Inventory adjustments 2,772
Other asset adjustments 3,245
Pension adjustments 1,300
Other deferred tax assets 13,838
-------
Total consolidated deferred
tax assets 70,310
Valuation allowance (15,709)
-------
54,601
Deferred tax liabilities:
Depreciation $(3,390)
Other deferred tax liabilities (14,379)
-------
(17,769)
-------
Total $36,832
=======
</TABLE>
Income taxes currently payable amounted to approximately $8,698 at December 31,
1993. Income taxes currently refundable amounted to $1,400 at December 31,
1992.
The Company does not provide deferred income taxes on unremitted earnings of
foreign subsidiaries as such funds are deemed permanently reinvested to finance
foreign expansion and meet operational needs on an ongoing basis. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes subject to an adjustment for
foreign tax credits and withholding taxes payable to the various foreign
countries. Determination of the amount of unrecognized deferred U.S. income
tax liability is not practicable because of the complexities associated with
its calculation; however, unrecognized foreign tax credits and foreign
withholding taxes paid upon distribution would be available to reduce some
portion of the U.S. liability.
NOTE F--RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS
The Company and its subsidiaries maintain a number of defined benefit and
defined contribution plans to provide retirement benefits for their employees
in the United States as well as their employees in foreign countries. These
plans are maintained and contributions are made in accordance with the Employee
Retirement Income Security Act of 1974, local statutory law or as determined by
the Board of Directors. The plans generally provide benefits based upon years
of service and compensation.
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
December 31, 1993
<TABLE>
NOTE F--RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS--
(Continued)
A summary of the various components of total pension expense for the plans is
as follows:
<CAPTION>
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
Domestic Plans:
Service cost--benefits earned
during the year $ 6,115 $ 5,571 $ 5,802
Interest cost on projected
benefit obligation 18,158 17,207 14,969
Actual return on plan assets (19,569) (16,812) (18,729)
Net amortization and deferral 1,441 (1,404) (109)
------- -------- --------
Net pension cost of defined
benefit plans 6,145 4,562 1,933
Defined contribution plans 193 225 214
------- -------- --------
Total domestic plans 6,338 4,787 2,147
Foreign Plans:
Service cost--benefits earned
during the year 1,422 1,555 1,471
Interest cost on projected
benefit obligation 2,253 2,472 2,462
Actual return on plan assets (4,506) (2,800) (3,155)
Net amortization and deferral 2,000 289 766
------- -------- --------
Net pension cost of defined
benefit plans 1,169 1,516 1,544
Defined contribution plans 1,326 905 399
------- -------- --------
Total foreign plans 2,495 $ 2,421 $ 1,943
------- -------- --------
Total pension expense $ 8,833 $ 7,208 $ 4,090
======= ======== ========
</TABLE>
<TABLE>
The funded status of the domestic and foreign plans at December 31, 1993 and
1992 is as follows:
<CAPTION>
Domestic Foreign
1993 1992 1993 1992
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Actuarial present value of
accumulated benefit
obligations:
Vested $222,588 $196,986 $23,881 $ 21,107
Nonvested 8,463 7,806 1,136 1,255
--------- -------- ------- --------
$231,051 $204,792 $25,017 $ 22,362
========= ======== ======= ========
</TABLE>
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
December 31, 1993
<TABLE>
NOTE F--RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS
(Continued)
<CAPTION>
Domestic Foreign
1993 1992 1993 1992
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Actuarial present value of
projected benefit
obligations $(254,295) $(223,925) $(28,396) $(26,581)
Plan assets at fair value 228,014 210,143 28,191 23,873
--------- --------- -------- --------
Excess of projected
benefit obligations
over plan assets (26,281) (13,782) (205) (2,708)
Unrecognized net
(gain) loss $ 13,788 $ (894) $(1,593) $ 709
Unrecognized prior
service cost 10,835 11,640 540 791
Unrecognized net assets at
January 1, 1993 and 1992,
net of amortization (3,239) (3,569) (1,449) (1,666)
Minimum liability (351)
-------- -------- ------- --------
Accrued retirement
annuity expense
recognized in the
balance sheet $ (4,897) $ (6,605) $(3,058) $ (2,874)
======== ======== ======= ========
</TABLE>
The increase in the actuarial present value of accumulated benefit obligations
("ABO") for the domestic plans is largely due to the change in the discount
rate from 8.0% to 7.5% as well as the normal one year's accrual of benefits.
In addition the increase in the ABO for the foreign plans is also primarily due
to the change in the discount rate from 8.9% to 7.5%.
<TABLE>
Assumptions used in accounting for the defined benefit plans as of December 31,
1993 and 1992 for both the domestic and foreign plans were as follows:
<CAPTION>
Domestic Foreign
Plans Plans
------------- ------------
1993 1992 1993 1992
----- ----- ----- -----
<S> <C> <C> <C> <C>
Weighted-average discount rates 7.5% 8.0% 7.5% 8.9%
Projected rates of increase in compensation 4.1% 4.5% 4.2% 5.2%
Expected rates of return on plan assets 9.0% 9.5% 9.1% 9.7%
</TABLE>
Plan assets for the domestic plans consist principally of deposit
administration contracts and an investment contract with an insurance company.
Other assets held by the domestic plans not under insurance contracts are
invested in equity and fixed income securities. Plan assets for the foreign
plans are invested in foreign insurance contracts and foreign equity and fixed
income securities.
The Cleveland, Ohio area operations have a Guaranteed Continuous Employment
Plan covering substantially all employees, which, in general, provides that the
Company will provide work for at least 75% of every standard work week
(presently 40 hours). This plan does not guarantee employment when the
Company's ability to continue normal operations is seriously restricted by
events beyond the
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
December 31, 1993
NOTE F--RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS
(Continued)
control of the Company. The Company has reserved the right to terminate this
plan effective at the end of a calendar year by giving notice of such
termination not less than six months prior to the end of such year.
In December 1990, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which was effective in 1993
domestically and will be effective for non-U.S. plans in 1995. In November
1992, the Financial Accounting Standards Board issued Statement No. 112,
"Employers' Accounting for Postemployment Benefits." The Company is not
required to implement this Statement until the first quarter of 1994. These
Statements have no impact on the consolidated financial position or results of
operations as the Company does not provide for any postretirement or
postemployment benefits other than pensions.
NOTE G--INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION
<TABLE>
The Company's primary business is the design, manufacture and sale, in the
domestic and international markets, of arc welding products, which constitutes
88% of the Company's business. The Company also designs, manufactures and
sells gases used in the acetylene welding process. Financial information by
geographic areas follows:
<CAPTION>
United Other
States Europe Countries Eliminations Total
<S> <C> <C> <C> <C> <C>
1993:
Net sales $583,043 $225,826 $ 96,209 $ (59,079) $845,999
Pre-tax profit (loss) 42,570 (68,865) (22,903) 2,248 (46,950)
Identifiable assets 389,247 172,136 69,871 (71,711) 559,543
1992:
Net sales $531,675 $299,654 $ 95,519 $ (73,841) $853,007
Pre-tax profit (loss) 24,860 (52,828) (7,183) 721 (34,430)
Identifiable assets 294,730 246,457 86,839 (24,679) 603,347
1991:
Net sales $502,825 $287,170 $ 96,005 $ (52,108) $833,892
Pre-tax profit (loss) 45,742 (10,128) (1,346) 143 34,411
Identifiable assets 289,682 284,341 84,965 (18,727) 640,261
</TABLE>
Intercompany sales between geographic regions are accounted for at prices
comparable to normal, customer sales and are eliminated in consolidation.
NOTE H--ACQUISITIONS
In June 1993, the Company acquired the outstanding minority interest in its
subsidiary in Spain for approximately $8,500. In January and May of 1992,
respectively, the Company purchased the remaining 29 percent interest in
Lincoln Norweld and a small Mexican company for an aggregate of $37,000. In
April 1991, the Company purchased the material assets of the German arc welding
business (except orbital welding) of Messer Griesheim GmbH. All the above
transactions
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
December 31, 1993
NOTE H--ACQUISITIONS (Continued)
and increases in equity ownership were accounted for as purchases and their
results of operations and the increased interest in their results of
operations, were included in the consolidated statements of operations from
their respective dates of acquisition.
NOTE I--FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has various financial instruments, including cash and cash
equivalents, forward exchange contracts for currencies, and short and long-term
debt. The Company has determined the estimated fair value of these financial
instruments by using available market information and appropriate valuation
methodologies which require judgment. Accordingly, the use of different market
assumptions or estimation methodologies could have a material effect on the
estimated fair value amounts. The Company believes the carrying values of
their financial instruments approximate their fair value.
NOTE J--NOTES RECEIVABLE FROM EMPLOYEES
Notes receivable from employees, which currently bear interest at 9%, include
$294 ($532 in 1992) from officers of the Company. Loans are limited to 65% of
the aggregate value of the pledged stock determined by the current offering
price of the stock under the Employees' Stock Purchase Plan.
NOTE K--0PERATING LEASES
The Company leases sales offices, warehouses, office equipment and data
processing equipment. Such leases, some of which are noncancellable, and in
many cases, include renewals, expire at various dates. The Company pays most
maintenance, insurance and tax expenses relating to leased assets. Rental
expense was $9,864 in 1993, $9,840 in 1992 and $6,444 in 1991.
<TABLE>
At December 31, 1993, total minimum lease payments for noncancellable operating
leases amounted to the following:
<CAPTION>
1993
----------
<S> <C>
1994 $ 6,541
1995 5,379
1996 4,167
1997 3,080
1998 2,284
Thereafter 4,898
-------
Total minimum lease payments $26,349
=======
</TABLE>
<PAGE> 32
<TABLE>
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
Year Ended December 31, 1993
(In thousands of dollars)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS BALANCE AT END OF PERIOD
---------------------------------------------------------------
NAME OF DEBTOR Balance at Beginning Additions (1) (2) (1) (2)
of Period Amounts Collected Amounts Written Off Current Not Current
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donald F. Hastings (1) $ 224 $ 224
Roger F. Young (1) 239 $239 -0-
Graham Peters 225 225
Eugene Skerl 113 113 -0-
<FN>
Note (1)--Officer and Director of the Company.
</TABLE>
<PAGE> 33
<TABLE>
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
Year Ended December 31, 1992
(In thousands of dollars)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS BALANCE AT END OF PERIOD
---------------------------------------------------------------
NAME OF DEBTOR Balance at Beginning Additions (1) (2) (1) (2)
of Period Amounts Collected Amounts Written Off Current Not Current
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald F. Hastings (1) $ 224 $ 224
Harry Carlson (1) 244 $ 212 $ 456 -0-
Roger F. Young (1) 239 239
John Gonzalez (1) 252 252 -0-
Graham Peters 225 225
Eugene Skerl 113 113
Michael O'Connor 100 100 -0-
James Fuller 104 35 69
<FN>
Note (1)--Officer and Director of the Company.
</TABLE>
<PAGE> 34
<TABLE>
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
Year Ended December 31, 1991
(In thousands of dollars)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS BALANCE AT END OF PERIOD
------------------------------------- -------------------------
NAME OF DEBTOR Balance at Beginning Additions (1) (2) (1) (2)
of Period Amounts Collected Amounts Written Off Current Not Current
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George E. Willis (1) $ -0- $ 140 $ 140 $ -0-
Donald F. Hastings (1) 224 224
Harry Carlson (1) 244 244
Roger F. Young (1) 239 239
John Gonzalez (1) 213 46 7 252
Ellis Smolik (1) 257 257 -0-
Graham Peters 262 37 225
Eugene Skerl 113 113
Michael O'Connor 100 117 117 100
James Fuller 16 104 16 104
<FN>
Note (1)--Officer and Director of the Company.
</TABLE>
<PAGE> 35
<TABLE>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
Other Changes--
Classification Balance at Additions at Retirements Add (Deduct)-- Balance at
Beginning of Period Cost Describe End of Period
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Land $ 18,192 $ 426 $ (815) $ (5,001) $ 12,802
Buildings 123,817 3,647 (964) (12,573) 113,927
Machinery, tools and
equipment 293,238 17,743 (8,749) (22,299) 279,933
--------- -------- -------- ---------- --------
TOTALS $435,247 $ 21,816 $(10,528) $ (39,873) (2) $406,662
========= ======== ======== ========== ========
Year ended December 31, 1992:
Land $ 16,930 $ $ (69) $ 1,331 $ 18,192
Buildings 113,747 15,692 (1,731) (3,891) 123,817
Machinery, tools and
equipment 292,252 22,143 (15,115) (6,042) 293,238
--------- --------- --------- ----------- --------
TOTALS $ 422,929 $ 37,835 $ (16,915) $ (8,602) (3) $435,247
========= ========= ========= =========== ========
Year ended December 31, 1991:
Land $ 13,886 $ 536 $ (473) $ 2,981 $ 16,930
Buildings 106,773 2,690 (3,793) 8,077 113,747
Machinery, tools and
equipment 267,076 28,128 (8,078) 5,126 292,252
--------- --------- --------- ---------- --------
TOTALS $ 387,735 $ 31,354 $ (12,344) $ 16,184 (4) $422,929
========= ========= ========= ========== ========
<FN>
(1) The general range of useful lives of the assets is
Buildings--20 to 50 years
Machinery, tools and equipment--3 to 20 years
(2) Includes FAS 52 adjustment to the current rate of ($11,492) and ($28,381) due to property, plant and equipment write-down
relating to restructure.
(3) Includes FAS 52 adjustment to the current rate of ($15,998) and $7,396 of property, plant and equipment of subsidiaries
consolidated beginning in 1992.
(4) Includes FAS 52 adjustment to the current rate of $802 and $15,382 of property, plant and equipment of subsidiaries
consolidated beginning in 1991.
</TABLE>
<PAGE> 36
<TABLE>
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
Description Balance at Additions Charged to Retirements Other Changes--Add Balance at
Beginning of Period Costs and Expenses (Deduct)--Describe End of Period
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Buildings $ 51,935 $ 5,012 $ (444) $ (2,137) $ 54,366
Machinery, tools and
equipment 174,911 22,923 (6,012) (9,217) 182,605
-------- ------- -------- --------- --------
TOTALS $226,846 $27,935 $ (6,456) $ (11,354) (1) $236,971
======== ======= ======== ========= ========
Year ended December 31, 1992:
Buildings $ 48,682 $ 5,146 $ (700) $ (1,193) $ 51,935
Machinery, tools and
equipment 164,643 24,304 (11,466) (2,570) 174,911
-------- ------- -------- --------- --------
TOTALS $213,325 $29,450 $(12,166) $ (3,763) (2) $226,846
======== ======= ======== ========= ========
Year ended December 31, 1991:
Buildings $ 45,215 $ 4,022 $ (786) $ 231 $ 48,682
Machinery, tools and
equipment 147,860 21,936 (5,667) 514 164,643
-------- ------- -------- --------- --------
TOTALS $193,075 $25,958 $ (6,453) $ 745 (3) $213,325
======== ======= ======== ========= ========
<FN>
(1) Includes FAS 52 adjustment to the current rate of ($5,500) and ($5,854) due to property, plant and equipment write-down
relating to restructure.
(2) Includes FAS 52 adjustment to the current rate of ($6,270) and $2,507 related to property, plant and equipment of a subsidiary
consolidated beginning in 1992.
(3) Includes FAS 52 adjustment to the current rate of ($332) and $1,077 related to property, plant and equipment of subsidiaries
consolidated beginning in 1991.
</TABLE>
<PAGE> 37
<TABLE>
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------------------------------------------
ADDITIONS
Balance at (1) (2) NOTE A Balance
Description beginning of Charged to costs Charged to other Deductions- at end
period and expenses accounts-describe of period
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended December 31, 1993 $ 5,434 $ 2,037 $ (723) (A) $ 490 $ 6,258
Year ended December 31, 1992 $ 4,720 $ 2,842 $(1,450) (A) $ 678 $ 5,434
Year ended December 31, 1991 $ 5,712 $ 852 $(1,068) (B) $ 776 $ 4,720
<FN>
(A)--FAS #52 adjustment.
(B)--Includes FAS #52 adjustment of ($1,877) and $809 for subsidiaries consolidated beginning in 1991.
Note A--Uncollectible accounts written-off, net of recoveries.
</TABLE>
<PAGE> 38
<TABLE>
SCHEDULE IX--SHORT-TERM BORROWINGS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
Maximum Average Weighted
Weighted Amount Amount Average
CATEGORY OF AGGREGATE Balance Average Outstanding Outstanding Interest Rate
SHORT-TERM BORROWINGS at End of Interest During the During the During the
Period Rate Period Period Period
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
(1) (2) (3)
Notes payable to banks:
Year ended December 31, 1993: $23,198 9.05% $33,955 $28,110 11.67%
Year ended December 31, 1992: $12,643 10.43% $58,169 $47,506 12.41% (A)
Year ended December 31, 1991: $41,660 10.93% $50,004 $40,353 12.17%
<FN>
(A)--Weighted average interest rate calculation is inclusive of short-term borrowings of $39,122 which were reclassified to
long-term debt for financial statement purposes.
(1)--Amounts due banks from foreign subsidiaries represent borrowings under lines of credit borrowing arrangements which are
reviewed annually for renewal.
(2)--The average amount outstanding during the period was computed by dividing the total of month-end outstanding principal
balances by l2.
(3)--The weighted average interest rate during the period was computed by dividing the actual interest expense by the average
amount outstanding during the period.
</TABLE>
<PAGE> 39
<TABLE>
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(In thousands of dollars)
<CAPTION>
- ----------------------------------------------------------------------------
COL. A COL. B
ITEM Charged to Costs and Expenses
- ---------------------------------------------------------------------------
Year Ended December 31
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs $14,818 $15,335 $13,971
Depreciation and amortization of
intangible assets, pre-operating
costs and similar deferrals (1) (1) (1)
Taxes, other than payroll and
income taxes:
Real estate (1) (1) (1)
Personal property (1) (1) (1)
Other (1) (1) (1)
Royalties (1) (1) (1)
Advertising costs (1) (1) (1)
<FN>
Note (1)--Information omitted since amount is less than 1% of total sales and revenues.
</TABLE>
<PAGE> 40
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------
<S> <C>
3(a) Amended and Restated Articles of
Incorporation of The Lincoln Electric
Company filed herewith.
3(b) Amended and Restated Code of Regulations
of The Lincoln Electric Company (filed
as Exhibit 3(b) to Form 10-K of The
Lincoln Electric Company for the year
ended December 31, 1987, SEC File No.
0-1402 and incorporated herein by
reference and made a part hereof).
4(a) Note Agreement dated November 20, 1991
between The Prudential Insurance Company
of America and the Company (filed as
Exhibit 4 to Form 10-K of The Lincoln
Electric Company for the year ended
December 31, 1991, SEC File No. 0-1402
and incorporated by reference and made a
part hereof), as amended by letter dated
March 18, 1993; 8.98% Senior Note Due
November 26, 2003 (filed as Exhibit 4(b) to
Form 10-K of The Lincoln Electric Company
for the year ended December 31, 1992,
SEC File No. 0-1402 and incorporated herein
by reference and made a part hereof); as further
amended by letter dated as of November 19, 1993;
8.98% Senior Note Due November 26, 2003 (filed
herewith).
4(b) Credit Agreement dated March 18, 1993 among the
Company, the Banks listed on the signature page
thereof, and Society National Bank, as Agent
(filed as Exhibit 4 (b) to Form 10-K of The
Lincoln Electric Company for the year ended
December 31, 1992, SEC File No. 0-1402 and
incorporated herein by reference and made a
part hereof), as amended by Amendment No.1 to
Credit Agreement dated November 19, 1993; 8.98%
Senior Note Due November 26, 2003 (filed herewith).
9 Voting Trust Agreement of The Lincoln
Electric Company (filed as Exhibit 9 to
Form 10-K for the year ended December 31,
1988, SEC File No. 0-1402 and incorporated
herein by reference and made a part hereof).
10(a) The Lincoln Electric Company 1988 Incentive
Equity Plan (filed as Exhibit 28 to the
Form S-8 Registration Statement of The
Lincoln Electric Company, SEC File No.
33-25209 and incorporated herein by reference
and made a part hereof).
</TABLE>
<PAGE> 41
<TABLE>
INDEX TO EXHIBITS -(Continued)
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------
<S> <C>
10(b) Form of Indemnification Agreement (filed
as Exhibit A to The Lincoln Electric
Company 1987 Proxy Statement, SEC File
No. 0-1402 and incorporated herein by
reference and made a part hereof).
11 Statement regarding computation of earnings
per share.
21 Subsidiaries of the Registrant.
23 Consents of Independent Auditors
</TABLE>
<PAGE> 1
THE LINCOLN ELECTRIC COMPANY
AMENDED AND RESTATED ARTICLES OF INCORPORATION
ARTICLE FIRST: The name of the Corporation shall be THE LINCOLN
ELECTRIC COMPANY.
ARTICLE SECOND: The place in the State of Ohio where its principal
office is located is the City of Cleveland, Cuyahoga County.
ARTICLE THIRD: The Corporation is formed for the purpose of
manufacturing, repairing, buying, selling and dealing in all varieties and
kinds of electrical machinery, tools and appliances, and doing all things
necessary and incident thereto.
ARTICLE FOURTH: Section 1. The maximum number of shares which the
Corporation is authorized to have outstanding is Seventeen Million (17,000,000)
common shares, without par value, consisting of Fifteen Million (15,000,000)
shares of Common Stock, without par value ("Common Stock") and Two Million
(2,000,000) shares of Class A Common Stock, without par value ("Class A Common
Stock").
Section 2. No shareholder of the Corporation shall have any
pre-emptive right as such shareholder to subscribe or purchase shares of the
Corporation.
Section 3. Each shareholder of the Corporation shall be entitled to
one vote for each share of Common Stock and Class A Common Stock standing in
his name on the books of the Corporation. Except as otherwise required by
statute, the holders of Common Stock and the holders of Class A Common Stock
will vote together as one class on all matters.
Section 4. No dividends shall be paid on the outstanding shares of
Common Stock or Class A Common Stock unless an equal dividend per share is paid
on each of the outstanding shares of both the Common Stock and the Class A
Common Stock.
Section 5. All shares of Common Stock and shares of Class A Common
Stock shall be identical in all respects except that:
Section 5.1. No sale, assignment, transfer, pledge, encumbrance or
any other disposition of any shares of Class A Common Stock may be made, except
upon compliance with the provisions of Section 5.2 through 5.4 below (or the
exception set forth in Section 5.2(b) below). Any purported or attempted
disposition of the Class A Common Stock other than as permitted by this Article
Fourth shall be void, and the last shareholder of record who acquired such
shares in a manner not contrary to this Article Fourth shall be recognized as
the holder of such shares for all purposes.
<PAGE> 2
Page 2
Section 5.2. The Corporation shall have the sole, exclusive and
unrestricted right, option and privilege to purchase, upon the occurrence of
any of the events set forth below, any or all of the shares of Class A Common
Stock in a manner and at a price per share current at the time of the purchase
of said shares as determined pursuant to the terms and provisions of Sections
5.3 and 5.4 of this Article Fourth. The events are:
(a) The death of a holder of shares of Class A Common Stock; and
(b) The determination of a holder of shares of Class A Common Stock
to sell, assign, transfer, pledge, give, encumber or in any
other way dispose of all or any of said shares, except for any
such disposition in the form of a distribution from The Lincoln
Electric Company Employee Stock Ownership Plan ("Plan")
pursuant to the terms and conditions of the Plan.
Section 5.3. Upon the occurrence of either of the events specified
in Section 5.2 above, the holder of Class A Common Stock, or the personal
representative of said holder's estate, as the case may be, shall notify the
Corporation in writing of the occurrence of any such event. If the Corporation
shall elect to exercise any such right, option or privilege, it shall, not
later than ninety (90) days after it shall have received written notice from
the holder of Class A Common Stock or the personal representative of said
holder's estate, as the case may be, of the occurrence of any such event, send
written notice thereof to said holder or the personal representative of said
holder's estate, as the case may be, of such shares at his or her last address
as shown on the stock transfer records of the Corporation, or, in the event of
the death of said holder, to such other address as may be so specified in the
notice. The Corporation shall pay the purchase price (as determined pursuant
to the terms and provisions of Section 5.4 of this Article Fourth) to the
holder of such shares, or in the event of the death of said holder, to the
personal representative of said holder's estate, immediately upon the delivery
to the Corporation of the certificate or certificates representing the shares
of Class A Common Stock, duly endorsed for transfer and delivery to the
Corporation, its successors, assigns or nominees. Upon delivery of the
Corporation's written notice, all rights in and to the shares of Class A Common
Stock shall be vested solely in the Corporation, its successors, assigns or
nominees. If the Corporation does not exercise its right to purchase any or
all of the shares of Class A Common Stock pursuant to the terms and provisions
of this Article Fourth, such shares may be freely disposed of by the holder
thereof or the personal representative of said holder's estate, as the case may
be, not more than ninety (90) days after the expiration of the Corporation's
repurchase
<PAGE> 3
Page 3
period; PROVIDED, HOWEVER, that any such shares of Class A Common Stock so
disposed of shall continue to be subject to the terms and provisions of this
Article Fourth. Any shares of Class A Common Stock not so disposed of shall
continue to be subject in all respects to the restrictions and provisions
contained in this Article Fourth.
Section 5.4. The price, rounded to the nearest dollar, at which any
share of Class A Common Stock shall be bought or sold pursuant to the terms and
provisions of this Article Fourth shall be:
(a) The book value of such share in effect on the date of receipt
by the Corporation of the above-described written notice, plus
(b) The accrued unpaid dividends with respect to such share which
were considered liabilities in determining book value.
The book value used for this purpose shall be established each April 30 for the
12-month period, May 1-April 30, following that date and shall be the book
value as of the immediately preceding December 31 as shown in the Corporation's
Audited Consolidated Financial Statements.
Section 5.5. Any shares of Class A Common Stock purchased by the
Corporation pursuant to this Article Fourth shall be retired and restored to
the status of authorized and unissued shares.
Section 5.6. All stock certificates representing shares of Class A
Common Stock shall contain a reference to the restrictions and provisions
contained in this Article Fourth.
ARTICLE FIFTH: The Board of Directors of the Corporation is hereby
authorized to fix at any time and from time to time the amount of consideration
for which the Corporation may from time to time issue its shares without par
value, whether now or hereafter authorized.
ARTICLE SIXTH: Without derogation from any other power to purchase
shares of the Corporation as permitted by law, the Corporation, acting by its
Board of Directors, may purchase shares of the Corporation to the extent of the
surplus of the aggregate of its capital over the aggregate of its liabilities,
plus stated capital, in the manner permitted by law.
ARTICLE SEVENTH: The holders of shares of the Corporation shall not
be entitled to cumulative voting rights in elections of Directors.
<PAGE> 4
Page 4
ARTICLE EIGHTH: Section 1. A higher than majority shareholder vote
for certain Business Combinations (as defined below) shall be required as
follows:
A. In addition to any affirmative vote required by law or these
Articles or the terms of any series of Preferred Stock or any other
securities of the Corporation and except as otherwise expressly
provided in Section 2 of this Article Eighth:
(1) any merger or consolidation of the Corporation or any
Subsidiary with (i) any Interested Shareholder or with (ii) any
other corporation (whether or not itself an Interested
Shareholder) which is, or after such merger or consolidation
would be, an Affiliate or Associate of an Interested
Shareholder;
(2) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions whether or not related) to an Interested
Shareholder (or an Affiliate or Associate of an Interested
Shareholder) of any assets of the Corporation or a Subsidiary
having an aggregate Fair Market Value of $1,000,000 or more;
(3) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions whether or not related) to or with the Corporation
or a Subsidiary of any assets of an Interested Shareholder (or
an Affiliate or Associate of an Interested Shareholder) having
an aggregate Fair Market Value of $1,000,000 or more;
(4) the issuance or sale by the Corporation or any Subsidiary
(in one transaction or a series of transactions whether or not
related) of any securities of the Corporation or of any
Subsidiary to any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder in exchange for cash,
securities or other consideration (or a combination thereof)
having an aggregate Fair Market Value of $1,000,000 or more
except an issuance of securities upon conversion of convertible
securities of the Corporation or of a Subsidiary which were not
acquired by such Interested Shareholder (or such Affiliate or
Associate) from the Corporation or a Subsidiary;
(5) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation
<PAGE> 5
Page 5
proposed by or on behalf of any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder; or
(6) any reclassification of securities (including any reverse
stock split) or recapitalization of the Corporation with any of
its Subsidiaries or any other transaction (whether or not with
or into or otherwise involving an Interested Shareholder) which
has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity securities or securities convertible into equity
securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Interested Shareholder or
any Affiliate or Associate of any Interested Shareholder;
shall require the affirmative vote of (i) the holders of at least
two-thirds of the combined voting power of the then outstanding
shares of capital stock of the Corporation entitled to vote generally
in an annual election of Directors (the "Voting Stock") and (ii) the
holders of at least two-thirds of the combined voting power of the
then outstanding Voting Stock held by Disinterested Shareholders, in
each case voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law, by
any other provisions of these Articles or by the terms of any series
of Preferred Stock or any other securities of the Corporation.
B. The term "Business Combination" as used in this Article Eighth
shall mean any transaction which is referred to in any one or more of
clauses (1) through (6) of paragraph A of Section 1 of this Article
Eighth.
Section 2. The provisions of Section 1 of this Article Eighth shall
not be applicable to any Business Combination, and such Business Combination
shall require only such affirmative vote (if any) as is required by law, any
other provisions of these Articles or the terms of any class or series of
capital stock of the Corporation entitled to a preference over the Common Stock
as to dividends or upon liquidation, or the terms of any other securities of
the Corporation, if all of the conditions specified in either of the following
paragraphs A or B are met:
A. The Business Combination shall have been approved by a majority
of the Disinterested Directors; or
B. All the following six conditions shall have been met:
<PAGE> 6
Page 6
(1) The transaction constituting the Business Combination shall
provide for a consideration to be received by holders of Common
Stock in exchange for their Common Stock, and the aggregate
amount of the cash and the Fair Market Value as of the date of
the consummation of the Business Combination of consideration
other than cash to be received per share by holders of Common
Stock in such Business Combination shall be at least equal to
the highest of the following:
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any shares of Common
Stock beneficially owned by the Interested Shareholder which
were acquired (x) within the two-year period immediately
prior to the first public announcement of the proposed
Business Combination (the "Announcement Date") or (y) in the
transaction in which it became an Interested Shareholder,
whichever is higher;
(b) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (the
"Determination Date"), whichever is higher; and
(c) (if applicable) the price per share equal to the Fair
Market Value per share of Common Stock determined pursuant
to clause (b) immediately preceding, multiplied by the ratio
of (x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of Common Stock
beneficially owned by the Interested Shareholder which were
acquired within the two-year period immediately prior to the
Announcement Date to (y) the Fair Market Value per share of
Common Stock on the first day in such two-year period on
which the Interested Shareholder beneficially owned any
shares of Common Stock, whether or not such Shareholder was
an Interested Shareholder on that day.
(2) If the transaction constituting the Business Combination
shall provide for a consideration to be received by holders of
any class of outstanding Voting Stock other than Common Stock,
the
<PAGE> 7
Page 7
aggregate amount of the cash and the Fair Market Value as of the
date of the consummation of the Business Combination of
consideration other than cash to be received per share by
holders of shares of such Voting Stock shall be at least equal
to the highest of the following (it being intended that the
requirements of this clause B(2) shall be required to be met
with respect to every class of outstanding Voting Stock, whether
or not the Interested Shareholder beneficially owns any shares
of a particular class of Voting Stock):
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any shares of such
class of Voting Stock beneficially owned by the Interested
Shareholder which were acquired (x) within the two-year
period immediately prior to the Announcement Date or (y) in
the transaction in which it became an Interested
Shareholder, whichever is higher;
(b) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of Voting
Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation;
(c) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(d) (if applicable) the price per share equal to the Fair
Market Value per share of such class of Voting Stock
determined pursuant to clause (c) immediately preceding,
multiplied by the ratio of (x) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid in order to acquire any
shares of such class of Voting Stock beneficially owned by
the Interested Shareholder which were acquired within the
two-year period immediately prior to the Announcement Date
to (y) the Fair Market Value per share of such class of
Voting Stock on the first day in such two-year period on
which the Interested Shareholder beneficially owned any
shares of such class of Voting Stock, whether or not
<PAGE> 8
Page 8
such Shareholder was an Interested Shareholder on that day.
(3) The consideration to be received by holders of a particular
class of Voting Stock (including Common Stock) shall be in cash
or in the same form as was previously paid in order to acquire
shares of such class of Voting Stock which are beneficially
owned by the Interested Shareholder and, if the Interested
Shareholder beneficially owns shares of any class of Voting
Stock which were acquired with varying forms of consideration,
the form of consideration to be received by the holders of such
class of Voting Stock shall be either cash or the form used to
acquire the largest number of shares of such class of Voting
Stock beneficially owned by it. The prices determined in
accordance with clauses (1) and (2) of paragraph B of this
Section 2 shall be subject to an appropriate adjustment in the
event of any stock dividend, stock split, subdivision,
combination of shares or similar event.
(4) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business
Combination:
(a) except as approved by a majority of the Disinterested
Directors, there shall have been no failure to declare and
pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on any outstanding
Preferred Stock or other capital stock entitled to a
preference over the Common Stock as to dividends or upon
liquidation;
(b) except as approved by a majority of the Disinterested
Directors, there shall have been (x) no reduction in the
annual amount of dividends paid on the Common Stock (except
as necessary to reflect any subdivision of the Common Stock)
and (y) no failure to increase the annual amount of
dividends as necessary to prevent any such reduction in the
event of any reclassification (including any reverse stock
split), recapitalization, reorganization or similar
transaction which has the effect of reducing the number of
outstanding shares of the Common Stock;
(c) such Interested Shareholder shall not have become the
beneficial owner of any
<PAGE> 9
Page 9
additional shares of Voting Stock except as part of the
transaction in which it became an Interested Shareholder;
and
(d) there shall have always been at least four (4)
Disinterested Directors on the Board of Directors.
(5) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received
the benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or otherwise.
(6) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act,
rules or regulations) shall be mailed to shareholders at least
thirty (30) days prior to the consummation of such Business
Combination (whether or not such proxy or information statement
is required to be mailed pursuant to such Act or subsequent
provisions).
Section 3. For purposes of this Article Eighth:
A. A "person" shall mean any individual, a partnership, a
corporation, an association, a trust or other entity.
B. "Interested Shareholder" at any particular time shall mean any
person (other than the Corporation or any Subsidiary or any employee
benefit plan or trust of the Corporation or any Subsidiary) who or
which:
(1) is at such time the beneficial owner, directly or
indirectly, of five percent (5%) or more of the voting power of
the Voting Stock;
(2) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of five
percent (5%) or more of the voting power of the Voting Stock; or
<PAGE> 10
Page 10
(3) is at such time an assignee of or has otherwise succeeded
to the beneficial ownership of any shares of Voting Stock which
were at any time within the two-year period immediately prior to
the date in question beneficially owned by any Interested
Shareholder (as defined in (1) and (2) above), if such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
C. "Disinterested Shareholder" shall mean a shareholder of the
Corporation who is not the Interested Shareholder (or an Affiliate or
an Associate of the Interested Shareholder) who is involved, directly
or indirectly, in the proposed Business Combination in question,
except that as used in Section 6 of this Article Eighth, the term
"Disinterested Shareholder" shall mean a shareholder of the Company
who is not an Interested Shareholder.
D. A person shall be a "beneficial owner" of any shares of Voting
Stock:
(1) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly;
(2) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether or not such right is
exercisable immediately) pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options or otherwise or (ii) the
right to vote pursuant to any agreement, arrangement or
understanding; or
(3) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of
any shares of Voting Stock.
E. For the purpose of determining whether a person is an Interested
Shareholder pursuant to paragraph B of this Section 3, the number of
shares of Voting Stock deemed to be outstanding shall include shares
deemed owned by an Interested Shareholder through application of
paragraph D of this Section 3 but shall not include any other shares
of Voting Stock which may be issuable pursuant to any agreement,
arrangement or
<PAGE> 11
Page 11
understanding, or upon the exercise of conversion rights, exchange
rights, warrants or options or otherwise.
F. "Affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is
under common control with, the person specified. "Associate", which
is used to indicate a relationship with any person, means (1) any
corporation or organization (other than the Corporation or a
majority-owned subsidiary of the Corporation) of which such person is
an officer or partner or is, directly or indirectly, the beneficial
owner of ten percent or more of any class of equity securities, (2)
any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, and (3) any relative or spouse of
such person, or any relative of such spouse, who has the same home as
such person or who is a director or officer of the Corporation or any
of its parents or subsidiaries.
G. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Interested Shareholder set forth in paragraph B of this
Section 3, the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is owned, directly
or indirectly, by the Corporation.
H. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with, and not a representative or
nominee of, the Interested Shareholder who is involved, directly or
indirectly, in the proposed Business Combination in question, and was
(a) a member of the Board prior to the time that such Interested
Shareholder became an Interested Shareholder or (b) recommended to
succeed a Disinterested Director by a majority of the Disinterested
Directors then on the Board.
I. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price (or closing bid price for any day on which a
closing sale price is not available) during the 30-day period
immediately preceding the date in question of a share of such stock
on the Composite Tape for New York Stock Exchange Listed Stocks, or,
if such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or if such stock is not listed on such Exchange, on
the
<PAGE> 12
Page 12
principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or if
such stock is not listed on any such exchange, the highest closing
bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotation System or any other
system then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock as
determined by a majority of the Disinterested Directors in good
faith; and (b) in the case of property other than cash or stock, the
fair market value of such property on the date in question as
determined by a majority of the Disinterested Directors in good
faith.
J. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received"
as used in paragraph B of Section 2 of this Article Eighth shall
include the shares of Common Stock and the shares of any other class
of outstanding Voting Stock retained by the holders of such shares.
K. The term "class" of Voting Stock shall be deemed to refer to a
series of Voting Stock where more than one series of Voting Stock is
outstanding within a class of Voting Stock.
Section 4. A majority of the Disinterested Directors of the
Corporation shall have the power and duty to determine for the purpose of this
Article Eighth, on the basis of information known to them after reasonable
inquiry, (1) whether a person is an Interested Shareholder, (2) the number of
shares of Voting Stock beneficially owned by any person, (3) whether a person
is an Affiliate or Associate or another, (4) whether the requirements of
Section 2 of this Article Eighth have been met with respect to any Business
Combination, and (5) whether the assets which are subject to any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by this Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $1,000,000 or more. Any
such determination made in good faith shall be binding and conclusive on all
parties.
Section 5. Nothing contained in this Article Eighth shall be
construed to relieve any Interested Shareholder from any fiduciary obligation
imposed by law.
Section 6. In addition to any requirements of law and any other
provisions of these Articles or the terms of any class or series of capital
stock of the Corporation entitled to a preference over the Common Stock as to
dividends or upon
<PAGE> 13
Page 13
liquidation, or the terms of any other securities of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law,
these Articles or any such terms), the affirmative vote of
A. the holders of two-thirds or more of the combined voting power of
the Voting Stock, voting together as a single class, and
B. two-thirds of the combined voting power of the Voting Stock held
by the Disinterested Shareholders, voting together as a single class,
shall be required to amend, alter or repeal or adopt any provision inconsistent
with, this Article Eighth.
ARTICLE NINTH: The foregoing Amended and Restated Articles of
Incorporation hereby supersede existing Amended Articles of Incorporation as
heretofore amended.
<PAGE> 1
November 19, 1993
The Lincoln Electric Company
22801 St. Clair Avenue
Cleveland, Ohio 44117
Attention: Chief Financial Officer
Ladies and Gentlemen:
Reference is made to that certain Note Agreement dated November 20, 1991 (as
amended from time to time, the "Note Agreement") between The Lincoln Electric
Company, an Ohio corporation (the "Company"), and The Prudential Insurance
Company of America ("Prudential"), pursuant to which the Company issued and
sold and Prudential purchased the Company's 8.73% senior note in the original
principal amount of $75,000,000, due November 26, 2003. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings assigned
to such terms in the Note Agreement.
The Company has advised Prudential that it proposes to enter into an amendment,
dated as of the date hereof (the "Bank Amendment"), to that certain Credit
Agreement dated as of March 18, 1993 (the "Credit Agreement") among the
Company, the banks listed therein (the "Banks") and Society National Bank, as
agent (the "Agent"). In order to satisfy a condition to closing under the Bank
Amendment and the requirements of the Note Agreement, the Company desires to
modify the terms of the Note Agreement in accordance with this letter. A copy
of the Bank Amendment is attached hereto as EXHIBIT E.
Pursuant to the request of the Company and in accordance with the provisions of
paragraph 11C of the Note Agreement, Prudential and the Company hereby agree as
follows:
SECTION 1. AMENDMENT. From and after the date this letter becomes
effective in accordance with its terms, the Note Agreement is amended as
follows:
1.1 REFERENCES TO BANK AGREEMENT AND CREDIT AGREEMENT. Paragraph 10B of
the Note Agreement is amended to delete the defined term "Credit Agreement"
appearing therein and to add thereto the following definition in alphabetical
order:
<PAGE> 2
The Lincoln Electric Company
November 19, 1993
Page 2
"BANK AGREEMENT" and "CREDIT AGREEMENT" shall mean and refer to that
certain Credit Agreement dated as of March 18, 1993 among the Company, the
banks listed therein and Society National Bank, as agent, as modified by the
amendment thereto dated as of November 19, 1993, a copy of which is attached
hereto as EXHIBIT E."
1.2 NEW EXHIBIT E. The Note Agreement is hereby amended to attach
thereto as EXHIBIT E, the Bank Amendment attached hereto as EXHIBIT E.
SECTION 2. LIMITED WAIVER. Prudential hereby waives any Default or Event
of Default arising by reason of the "Restructuring" (as defined in the Bank
Amendment) under (i) Section 5.15(b) of the Credit Agreement with respect to
the Company, (ii) any of Sections 5.02, 5.03, 5.05, 5.14 and 5.15(c) of the
Credit Agreement solely with respect to a "Restructuring Subsidiary" (as
defined in the Bank Amendment) and (iii) any of clauses (vi), (vii), (viii),
(ix) and (x) of paragraph 7A of the Note Agreement solely with respect to a
Restructuring Subsidiary.
SECTION 3. EFFECT OF CHANGES TO CREDIT AGREEMENT. All references herein
to sections of the Credit Agreement and the Company's compliance with the terms
thereof as required hereunder shall be based upon the Credit Agreement as in
effect on March 18, 1993, as modified by the Bank Amendment, without giving
effect to any other amendment, waiver or other modification of the Credit
Agreement unless the Company shall have obtained the written consent of the
Required Holder(s) to any such amendment, waiver or modification. No
termination of the Credit Agreement in whole or in part shall affect the
continued applicability of the sections of the Credit Agreement referred to
herein.
SECTION 4. REPRESENTATION AND WARRANTY. The Company hereby represents
and warrants that this letter and the Substitute Note are legally valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or general
principles of equity.
SECTION 5. CONDITIONS PRECEDENT. This letter shall become effective only
on the first date on which all of the following conditions precedent shall have
been satisfied:
(i) Prudential shall have received a duly executed counterpart of this
letter signed by the Company; and
<PAGE> 3
The Lincoln Electric Company
November 19, 1993
Page 3
(ii) Prudential shall have received a fully executed copy of the Bank
Amendment.
SECTION 6. GOVERNING LAW. This letter amendment shall be governed by the
internal laws and decisions of the State of Ohio.
SECTION 7. MISCELLANEOUS. Except as specifically set forth in this
letter, the Company's obligations under the Note Agreement are neither altered
nor amended, and all terms and conditions of the Note Agreement remain in full
force and effect. Upon the effectiveness of this letter, each reference to the
Note Agreement shall mean and be a reference to the Note Agreement as amended
by this letter. This letter may be executed in any number of counterparts and
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
Sincerely,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Leonard H. Lillard IV
----------------------------
Vice President
Acknowledged and Agreed:
THE LINCOLN ELECTRIC COMPANY
By: /s/ Frederick W. Mackenbach
---------------------------
Its: Frederick W. Mackenbach
--------------------------
President and Chief Operating Officer
By: /s/ Ellis F. Smolik
------------------------
Its: Ellis F. Smolik
-----------------------
Senior Vice President - CFO.
Secretary - Tresurer
<PAGE> 1
CONFORMED COPY
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of November 19, 1993 among THE LINCOLN ELECTRIC
COMPANY (the "Borrower"), the BANKS listed on the signature pages hereof (the
"Banks") and SOCIETY NATIONAL BANK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of March 18, 1993 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as set
forth below.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to the
Agreement as amended hereby.
SECTION 2. AMENDMENTS TO THE AGREEMENT. (a) Section 1.01 is
amended by the addition of the following new defined terms in their appropriate
alphabetical positions:
"Restructuring" means the restructuring of certain foreign operations
of the Company and its Subsidiaries as outlined by the Company to the
Banks in its November 1993 presentation in connection therewith.
<PAGE> 2
"Restructuring Subsidiaries" has the meaning set forth in Section
5.04.
(b) The definition of "EBIT" in Section 1.01 is amended by the
addition of the following subclause (D):
and (D) for any fiscal quarter ending on or before June 30, 1994,
restructuring charges taken in connection with the Restructuring.
(c) The definition of "Minimum Consolidated Tangible Net Worth" in
Section 1.01 is amended to read in its entirety as follows:
"Minimum Consolidated Tangible Net Worth" means (i) at any date prior
to June 30, 1994, $110,000,000; (ii) at any date on or after June 30, 1994
and prior to September 30, 1994, $115,000,000; (iii) at any date on or
after September 30, 1994 and prior to December 31, 1994, $120,000,000 and
(iv) at any date on or after December 31, 1994, the sum of (x)
$125,000,000 plus (y) for each fiscal quarter of the Company beginning
after December 31, 1994 and ending on or prior to such date for which the
consolidated net income of the Company and its Consolidated Subsidiaries
is positive, an amount equal to 50% of such consolidated net income.
<TABLE>
(d) The table in Section 5.10 is revised to read in its entirety as
follows:
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
October 1, 1993 - December 31, 1993 2.45 to 1
January 1, 1994 - March 31, 1994 2.25 to 1
April 1, 1994 - June 30, 1994 2.00 to 1
July 1, 1994 - December 31, 1994 1.85 to 1
January 1, 1995 - March 31, 1995 1.75 to 1
April 1, 1995 - June 30, 1995 1.50 to 1
July 1, 1995 and thereafter 1.35 to 1
</TABLE>
(e) Section 5.04 is amended by the addition of the following further
PROVISO thereto:
and PROVIDED FURTHER that nothing in this Section 5.04 shall prohibit the
liquidation of Subsidiaries in Germany, Brazil, Venezuela and Japan in
connection with the Restructuring so long as none of such Subsidiaries is
at the time an Eligible Subsidiary ("Restructuring Subsidiaries").
2
<PAGE> 3
(f) Section 4.04(c) is amended by the addition of the following
clause at the end thereof:
or as disclosed in writing to the Banks in the Company's November 1993
presentation in connection with the Restructuring.
(g) Section 4.09 is amended by the addition of the phrase "(other
than Restructuring Subsidiaries)" immediately following the word "Subsidiaries"
therein.
SECTION 3. LIMITED WAIVER. The Banks hereby waive any Default or
Event of Default arising by reason of the Restructuring under Section 5.15(b)
with respect to the Company or under any of Sections 5.02, 5.03, 5.05, 5.14,
5.15(c) and 6.01 (e), (f), (g), (h) or (j) solely with respect to a
Restructuring Subsidiary. The foregoing waiver shall be limited precisely as
written, and shall not extend to any other Default or Event of Default, whether
arising by reason of the Restructuring or otherwise.
SECTION 4. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective as of the date hereof when
the Agent shall have received duly executed counterparts hereof signed by the
Borrower and the Required Banks (or, in the case of any party as to which an
executed counterpart shall not have been received, the Agent shall have
received telegraphic, telex or other written confirmation from such party of
execution of a counterpart hereof by such party).
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
THE LINCOLN ELECTRIC COMPANY
By /s/ Donald F. Hastings
---------------------------
Title: Chairman and Chief
Executive Officer
By /s/ Ellis F. Smolik
---------------------------
Title: Sr. Vice President, CFO
Secretary - Treasurer
SOCIETY NATIONAL BANK
By /s/ William J. Kysela
----------------------------
Title: Vice President
ABN AMRO BANK N.V.
By /s/ Roy D. Hasbrook
----------------------------
Title: Vice President
By /s/ Eelko Bronkhorst
----------------------------
Title: Asst. Vice President
CIBC INC.
By /s/ John J. Mack
----------------------------
Title: Vice President
4
<PAGE> 5
COMMERZBANK AKTIENGESELLSCHAFT
By /s/ Mark D. Monson
----------------------------
Title: Asst. Vice President
By /s/ Anthony L. Giraldi
----------------------------
Title: Vice President
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By /s/ Sandra E. Horwitz
----------------------------
Title: Authorized Signature
CREDIT LYONNAIS CHICAGO BRANCH
By /s/ Sandra E. Horwitz
----------------------------
Title: Vice President
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By /s/ Deborah Slusarczyk
-----------------------------
Title: Vice President
By /s/ Robert Grella
-----------------------------
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Timothy S. Broadbent
----------------------------
Title: Vice President
5
<PAGE> 6
NBD BANK, N.A.
By /s/ Winifred S. Pinet
----------------------------
Title: Vice President
NATIONAL CITY BANK
By /s/ W.J. Barlow McWilliams
----------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Douglas K. Winget
----------------------------
Title: Commercial Banking Officer
6
<PAGE> 1
<TABLE>
EXHIBIT (11)
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share data)
<CAPTION>
Year Ended December 31
1993 1992* 1991*
<S> <C> <C> <C>
Primary:
Average shares outstanding 10,852 10,790 10,790
======== ======== ========
Income (loss) before cumulative
effect of accounting change $(40,536) $(45,800) $ 14,365
Cumulative effect to January 1, 1993
of change in method of accounting
for income taxes 2,468
-------- -------- --------
Net income (loss) $(38,068) $(45,800) $ 14,365
======== ======== ========
Per share amounts:
Income (loss) before cumulative
effect of accounting change $ (3.74) $ (4.24) $ 1.33
Cumulative effect to January 1, 1993
of change in method of accounting
for income taxes .23
-------- -------- --------
Net income (loss) $ (3.51) $ (4.24) $ 1.33
======== ======== ========
Fully diluted:
Average shares outstanding 10,852 10,790 10,790
Dilutive stock purchase contracts
--based on the treasury stock
method using the higher of
average or year-end market price
-------- -------- --------
10,852 10,790 10,790
======== ======== ========
Income (loss) before cumulative
effect of accounting change $(40,536) $(45,800) $ 14,365
Cumulative effect to January 1, 1993
of chnage in method of accounting
for income taxes 2,468
-------- -------- --------
Net income (loss) $(38,068) $(45,800) $ 14,365
======== ======== ========
Per share amounts:
Income (loss) before cumulative
effect of accounting change $ (3.74) $ (4.24) $ 1.33
Cumulative effect to January 1, 1993
of change in method of accounting
for income taxes .23
-------- -------- --------
Net income (loss) $ (3.51) $ (4.24) $ 1.33
======== ======== ========
<FN>
*Share and per share amounts have been adjusted for the ten-for-one stock split in 1993.
</TABLE>
<PAGE> 1
<TABLE>
EXHIBIT (21)
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The Company's subsidiaries, all of which are included in its consolidated
financial statements, are listed in the following table:
<CAPTION>
Consolidated
Country of Percent
Name Incorporation Ownership
<S> <C> <C>
Messer Lincoln GmbH Germany 100
Lincoln Electric Foreign
Sales Corporation, Inc. Virgin Islands 100
Lincoln Norweld B.V. The Netherlands 100
Lincoln Electric (U.K.) Limited United Kingdom 100
Lincoln-Norweld Management A/S Norway 100
Lincoln-Norweld A/S Norway 100
Lincoln Svetshuset AB Sweden 100
Lincoln Electric France S.A. France 100
Lincoln Electric Company
(Europe) GmbH Germany 100
Lincoln Electric Italia S.r.l. Italy 100
Lincoln Smitweld B.V. The Netherlands 100
Lincoln Smitweld Belgium S.A. Belgium 100
Lincoln Electric Company
(Europe) B.V. The Netherlands 100
Lincoln K.D. S.A. Spain 100
Lincoln Electric Company
(Espana) S.A. Spain 100
Lincoln Electric Holdings, Inc. United States 100
Lincoln Electric Europe, Inc. United States 100
Harris Calorific France S.A.R.L. France 100
Harris Calorific GmbH Germany 100
Harris Calorific Ltd. Ireland 100
</TABLE>
<PAGE> 2
<TABLE>
EXHIBIT 21 -- SUBSIDIARIES OF THE REGISTRANT (Continued)
<CAPTION>
Consolidated
Country of Percent
Name Incorporation Ownership
<S> <C> <C>
Harris Calorific S.r.l. Italy 100
Sacit S.r.l. Italy 100
S.P.I. Italy 100
Lincoln Electric Far East, Inc. United States 100
Nippon Lincoln Electric K.K. Japan 100
Lincoln Electric International, Inc. United States 100
Lincoln Electric Company
(Australia) Proprietary Limited Australia 100
Lincoln Electric North America, Inc. United States 100
Lincoln Electric Company of
Canada Limited Canada 96
Lincoln Big Three, Inc. United States 51
Lincoln Electric Mexicana,
S.A. de C.V. Mexico 100
Big Three Lincoln Alaska, Inc. United States 100
Lincoln Smitweld GmbH Germany 100
Lincoln Electric South
America, Inc. United States 100
Lincoln Electric C.A. Venezuela 100
Lincoln Electric Do Brasil Ltda. Brazil 100
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-25210 and No. 33-55406) pertaining to The Lincoln Electric
Company Employees' Stock Purchase Plan of our report dated March 25, 1994, with
respect to the consolidated financial statements and schedules of The Lincoln
Electric Company and subsidiaries included in the Annual Report (Form 10-K)
for the year ended December 31, 1993.
/s/ Ernst & Young
-------------------------
Ernst & Young
Cleveland, Ohio
March 29, 1994
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No.'s 33-25219 and 33-55406) of The Lincoln Electric
Company of our report dated March 9, 1994 relating to the consolidated
financial statements of The Lincoln Electric Company (Australia) Proprietary
Limited and subsidaries appearing on page of this Form 10-K.
/s/ Price Waterhouse
Price Waterhouse
Parramatta, Australia
March 28, 1994
