<PAGE> 1
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934
(Mark One)
X Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of
- ---- 1934 (Fee Required)
For the fiscal year ended December 31, 1997
OR
- ---- Transition Report Pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (Fee Required)
For the transition period from to
------------------------ -----------------------
Commission file number 0-1402
---------------------------------------------------------
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
The Lincoln Electric Company
Employee Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Lincoln Electric Holdings, Inc.
22801 St. Clair Avenue
Cleveland, Ohio 44117
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
The Lincoln Electric Company
Employee Savings Plan
By: /s/ H. JAY ELLIOTT
-------------------------------
H. Jay Elliott
Senior Vice President,
Chief Financial Officer
and Treasurer
Date:
<PAGE> 2
Annual Report
THE LINCOLN ELECTRIC COMPANY
EMPLOYEE SAVINGS PLAN
PLAN SPONSOR AND ADMINISTRATOR
The Lincoln Electric Company
Cleveland, Ohio 44117
(216) 481-8100
Employer Identification Number: 34-0359955
December 31, 1997 and 1996
<PAGE> 3
Report of Independent Auditors
Plan Administrator
The Lincoln Electric Company
Employee Savings Plan
We have audited the accompanying statements of net assets available for benefits
with fund information (modified cash basis) of The Lincoln Electric Company
Employee Savings Plan (the Plan) as of December 31, 1997 and 1996, and the
related statements of changes in net assets available for benefits with fund
information (modified cash basis) for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
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 provide a reasonable basis for our opinion.
As described in Note B, the financial statements and supplemental schedules were
prepared on a modified cash basis of accounting, which is a comprehensive basis
of accounting other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits (modified cash
basis) of the Plan at December 31, 1997 and 1996, and the changes in its net
assets available for benefits (modified cash basis) for the years then ended, on
the basis of accounting described in Note B.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules (modified
cash basis) of assets held for investment purposes as of December 31, 1997, and
reportable transactions for the year then ended, are presented for purposes of
complying with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the financial statements. The fund information in the
statements of net assets available for benefits (modified cash basis) and the
statements of changes in net assets available for benefits (modified cash basis)
is presented for purposes of additional analysis rather than to present the net
assets available for benefits and changes in net assets available for benefits
of each fund. The supplemental schedules and fund information (modified cash
basis) have been subjected to the auditing procedures applied in our audits of
the financial statements and, in our opinion, are fairly stated in all material
respects in relation to the financial statements taken as a whole.
ERNST & YOUNG LLP
Cleveland, Ohio
June 17, 1998
1
<PAGE> 4
THE LINCOLN ELECTRIC COMPANY
EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE
FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Victory Fidelity
U.S. Fidelity Advisors
Government The Bond Advisors Equity Victory
Key EB Obligations Fund of Balanced Growth Stock Index
MaGIC Fund Fund America Fund Fund Fund
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $4,028,490 $ 666,735 $4,832,563 $10,240,110 $5,848,497
Money market fund $86,167 181
The Lincoln Electric Company
Common Shares
The Lincoln Electric Company
Class A Common Shares
Participant loans receivable
---------------------------------------------------------------------------------
Total investments $86,167 $ 4,028,671 $ 666,735 $4,832,563 $10,240,110 $5,848,497
Investment income receivable 349 480 552
Other receivables-net 7,676
---------------------------------------------------------------------------------
Total assets $86,167 $ 4,029,020 $ 666,735 $4,832,563 $10,240,590 $5,856,725
LIABILITIES
Accrued purchase of investments 8,228
Other payables--net 530 480
---------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $86,167 $ 4,028,490 $ 666,735 $4,832,563 $10,240,110 $5,848,497
=================================================================================
<CAPTION>
The Lincoln Electric
Voting Stock
Fund
Templeton The Franklin The Income ---------------------------------
Foreign Small Cap Fund of Non-Participant Participant
Fund Fund America Directed Directed
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $6,398,788 $ 698,424 $111,020
Money market fund $257,927 $64,133
The Lincoln Electric Company
Common Shares 10,343,189 592,957
The Lincoln Electric Company
Class A Common Shares
Participant loans receivable
-------------------------------------------------------------------------------
Total investments $6,398,788 $698,424 $111,020 $10,601,116 $657,090
Investment income receivable 4,768 213 13
Other receivables-net 42,485
-------------------------------------------------------------------------------
Total assets $6,403,556 $698,424 $111,020 $10,601,329 $666,588
LIABILITIES
Accrued purchase of investments 366
Other payables--net 3,894
-------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $6,399,296 $698,424 $111,020 $10,601,329 $699,588
===============================================================================
<CAPTION>
The Lincoln Electric
Non-Voting Stock
Fund
------------------------------
Non-Participant Participant Loan
Directed Directed Fund Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $32,824,627
Money market fund $ 288,886 $ 34,760 732,054
The Lincoln Electric Company
Common Shares 10,936,146
The Lincoln Electric Company
Class A Common Shares 19,265,092 583,904 19,848,996
Participant loans receivable $1,259,710 1,259,710
------------------------------------------------------------
Total investments $19,553,978 $ 618,664 $1,259,710 65,601,533
Investment income receivable 1,106 34 7,515
Other receivables-net 50,161
------------------------------------------------------------
Total assets $19,555,084 $ 618,698 $1,259,710 65,659,209
LIABILITIES
Accrue purchase of investments 8,594
Other payables--net 7,554 4,762 17,220
------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $19,555,084 $ 611,144 $1,254,948 $65,633,395
============================================================
</TABLE>
See notes to financial statements.
<PAGE> 5
The Lincoln Electric Company
Employee Savings Plan
Statement of Net Assets Available
for Benefits, with Fund Information
December 31, 1996
<TABLE>
<CAPTION>
Fidelity
Victory U.S. Fidelity Advisors
Government The Bond Advisors Equity
Obligations Fund of Balanced Growth
Fund America Fund Fund
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $3,407,792 $327,615 $2,952,128 $6,739,793
Money market fund
The Lincoln Electric Company Common Shares
The Lincoln Electric Company Class A Common
Shares
Participant loans receivable
----------------------------------------------------------------------------
Total investments 3,407,792 327,615 2,952,128 6,739,793
Investment income receivable 86 2,407 74 13,646
Other receivables--net
----------------------------------------------------------------------------
Total assets 3,407,878 330,022 2,952,202 6,753,439
LIABILITIES
Accrued purchase of investments 2,399
Other payables--net 13,474
----------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 3,407,878 $ 327,623 $ 2,952,202 $ 6,739,965
============================================================================
<CAPTION>
The
The Lincoln
Lincoln Electric
Victory Templeton Electric Non-Voting
Stock Index Foreign Voting Stock Stock
Fund Fund Fund Fund
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Mutual funds $2,810,037 $4,892,733
Money market fund $ 2,480 $ 46,314
The Lincoln Electric Company Common Shares 373,855
The Lincoln Electric Company Class A Common
Shares 325,551
Participant loans receivable
--------------------------------------------------------------------------
Total investments 2,810,037 4,892,733 376,335 371,865
Investment income receivable 70 120 1,402 1,203
Other receivables--net 956 3,122 3,186
--------------------------------------------------------------------------
Total assets 2,811,063 4,892,853 380,859 376,254
LIABILITIES
Accrued purchase of investments 956 5,051 48,238
Other payables--net
--------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 2,810,107 $ 4,892,853 $375,808 $ 328,016
==========================================================================
<CAPTION>
Loan
Fund Total
--------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Mutual funds $ 21,130,098
Money market fund 48,794
The Lincoln Electric Company Common Shares
373,855
The Lincoln Electric Company Class A Common
Shares 325,551
Participant loans receivable $ 284,753 284,753
----------------------------------------
Total investments 284,753 22,163,051
Investment income receivable 19,008
Other receivables--net 7,264
-------------------------------------------------
Total assets 284,753 22,189,323
LIABILITIES
Accrued purchase of investments 56,644
Other payables--net 13,474
--------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 284,753 $ 22,119,205
==================================================
</TABLE>
See notes to financial statements.
<PAGE> 6
The Lincoln Electric Company
Employee Savings Plan
Statement of Changes in Net Assets Available
for Benefits, with Fund Information
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Victory
U.S. Fidelity
Government The Bond Advisors
Key EB Obligations Fund of Balanced
MaGIC Fund Fund America Fund
---------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $ 4,638 $ 1,219,391 $ 208,868 $ 1,331,497
Contributions-employer
Investment income 502 32,584 395,240
ESOP assets transferred in
(at market)
Net appreciation (depreciation)
in fair value of investments 2,162 176,276 9,376 343,147
---------------------------------------------------------------
Total additions 6,800 1,396,169 250,828 2,069,884
DEDUCTIONS
Benefits paid to participants 233,195 12,220 100,863
Administrative expenses
Other cash distributions
---------------------------------------------------------------
Total deductions 233,195 12,220 100,863
Interfund transfers--net 79,367 (542,362) 100,504 (88,660)
----------------------------------------------------------------
Net increase 86,167 620,612 339,112 1,880,361
Net assets available for benefits at beginning of the
year 3,407,878 327,623 2,952,202
------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF THE YEAR $ 86,167 $ 4,028,490 $ 666,735 $ 4,832,563
==================================================================
<CAPTION>
Fidelity
Advisors
Equity Victory Templeton The Franklin
Growth Stock Index Foreign Small Cap
Fund Fund Fund Fund
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $ 2,719,739 $ 1,457,846 $ 1,837,077 $ 189,598
Contributions-employer
Investment income 1,120,694 391,694 630,017 20,560
ESOP assets transferred in
(at market)
Net appreciation (depreciation)
in fair value of investments 559,084 691,124 (286,519) (33,403)
--------------------------------------------------------------------
Total additions 4,399,517 2,540,664 2,180,575 176,755
DEDUCTIONS
Benefits paid to participants 242,879 135,440 139,411
Administrative expenses
Other cash distributions 869
--------------------------------------------------------------------
Total deductions 242,879 135,440 140,280
Interfund transfers--net (656,493) 633,166 (533,852) 521,669
--------------------------------------------------------------------
Net increase 3,500,145 3,038,390 1,506,443 698,424
Net assets available for benefits at beginning of the
year 6,739,965 2,810,107 4,892,853
--------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF THE YEAR $ 10,240,110 $ 5,848,497 $ 6,399,296 $ 698,424
====================================================================
<CAPTION>
The Lincoln Electric The Lincoln Electric
Voting Stock Non-Voting Stock
Fund Fund
The Income --------------------------------- ----------------
Fund of Non-Participant Participant Non-Participant
America Directed Directed Directed
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $ 26,618 $ 189,166
Contributions-employer $ 1,330,892
Investment income 7,430 $ 44,716 4,358 88,753
ESOP assets transferred in
(at market) 9,908,888 19,898,222
Net appreciation (depreciation)
in fair value of investments (3,428) 830,149 372,839 (1,420,106)
---------------------------------------------------------------------
Total additions 30,620 10,783,753 566,363 19,897,761
DEDUCTIONS
Benefits paid to participants 182,424 4,417 341,963
Administrative expenses 655 714
Other cash distributions
---------------------------------------------------------------------
Total deductions 182,424 5,072 342,677
Interfund transfers--net 80,400 (237,511)
---------------------------------------------------------------------
Net increase 111,020 10,601,329 323,780 19,555,084
Net assets available for benefits at beginning of the
year 375,808
---------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF THE YEAR $ 111,020 $ 10,601,329 $ 699,588 $ 19,555,084
=====================================================================
<CAPTION>
The Lincoln Electric
Non-Voting Stock
Fund
------------------
Participant Loan
Directed Fund Total
----------------------------------------------
<S> <C> <C> <C>
ADDITIONS
Contributions-employee $ 182,088 $ 9,366,526
Contributions-employer 1,330,892
Investment income 4,461 $ 39,139 2,780,148
ESOP assets transferred in
(at market) 29,807,110
Net appreciation (depreciation)
in fair value of investments 410,264 1,650,965
------------------------------------------------
Total additions 596,813 39,139 44,935,641
DEDUCTIONS
Benefits paid to participants 4,138 1,396,950
Administrative expenses 273 1,642
Other cash distributions 21,990 22,859
------------------------------------------------
Total deductions 4,411 21,990 1,421,451
Interfund transfers--net (309,274) 953,046 0
------------------------------------------------
Net increase 283,128 970,195 43,514,190
Net assets available for benefits at beginning of the
year 328,016 284,753 22,119,205
------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF THE YEAR $ 611,144 $1,254,948 $465,633,395
================================================
</TABLE>
See notes to financial statements
<PAGE> 7
The Lincoln Electric Company
Employee Savings Plan
Statement of Changes in Net Assets Available
for Benefits, with Fund Information
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Victory Fidelity
U.S. Advisors
Government The Bond Income &
Key EB Obligations Fund of Growth
MaGIC Fund Fund America Fund
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Contributions-employees $ 1,400,288 $126,909 $ 1,107,187
Investment income $ 372 101 16,694 71,461
Net appreciation (depreciation)
in fair value of investments 125,318 (491) 124,581
---------------------------------------------------------------------------
Total additions 372 1,525,707 143,112 1,303,229
DEDUCTIONS
Benefits paid to participants 37,478 10,111 29,228
Administrative expenses
Other cash distributions 372
---------------------------------------------------------------------------
Total deductions 372 37,478 10,111 29,228
Interfund transfers--net (397,184) 58,717 (242,747)
---------------------------------------------------------------------------
Net increase 1,091,045 191,718 1,031,254
Net assets available for benefits at
beginning of the year 2,316,833 135,905 1,920,948
---------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF THE YEAR $ 0 $3,407,878 $327,623 $ 2,952,202
===========================================================================
<CAPTION>
Fidelity
Advisors Victory Templeton
Balanced Stock Index Foreign
Fund Fund Fund
------------------------------------------------------------------------
<S> <C> <C> <C>
ADDITIONS
Contributions-employees $ 2,365,832 $ 940,189 $ 1,571,798
Investment income 26,393 39,822 105,393
Net appreciation (depreciation)
in fair value of investments 690,278 335,998 495,167
------------------------------------------------------------------------
Total additions 3,082,503 1,316,009 2,172,358
DEDUCTIONS
Benefits paid to participants 76,134 20,525 41,092
Administrative expenses
Other cash distributions
------------------------------------------------------------------------
Total deductions 76,134 20,525 41,092
Interfund transfers--net (12,336) 134,344 (344)
------------------------------------------------------------------------
Net increase 2,994,033 1,429,828 2,130,922
Net assets available for benefits at
beginning of the year 3,745,932 1,380,279 2,761,931
------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF THE YEAR $ 6,739,965 $ 2,810,107 $ 4,892,853
========================================================================
<CAPTION>
The
The Lincoln
Lincoln Electric
Electric Non-Voting
Voting Stock Stock Loan
Fund Fund Fund Total
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Contributions-employees $133,980 $ 71,416 $ 7,717,599
Investment income 4,256 2,959 $ 16,673 284,124
Net appreciation (depreciation)
in fair value of investments 76,268 32,890 1,880,009
---------------------------------------------------------------------
Total additions 214,504 107,265 16,673 9,881,732
DEDUCTIONS
Benefits paid to participants 185 214,753
Administrative expenses 484 350 834
Other cash distributions 930 1,302
---------------------------------------------------------------------
Total deductions 669 350 930 216,889
Interfund transfers--net 84,597 171,870 203,083
---------------------------------------------------------------------
Net increase 298,432 278,785 218,826 9,664,843
Net assets available for benefits at
beginning of the year 77,376 49,231 65,927 12,454,362
---------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF THE YEAR $375,808 $328,016 $284,753 $ 22,119,205
=====================================================================
</TABLE>
See notes to financial statements.
<PAGE> 8
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements
December 31, 1997
A. DESCRIPTION OF THE PLAN
The following description of The Lincoln Electric Company Employee Savings Plan
(the Plan) provides only general information. Participants should refer to the
Plan agreement for a more complete description of the Plan's provisions.
Additional information about the Plan is contained in the Plan Document, which
is available from the Company upon request.
GENERAL
The Plan is a defined contribution plan covering certain employees of The
Lincoln Electric Company (the Company) as defined by the Plan, as amended. The
Plan provides that employees will be eligible for participation in the Plan
following one year of service with the Company. Participants in The Lincoln
Electric Company Employee Stock Ownership Plan and participants eligible for the
Financial Security Program who did not already participate in the Plan were
automatically enrolled and had account balances established in the Plan (see
Note F and Note G, respectively, for further explanation). The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974.
CONTRIBUTIONS
Eligible employees may make pre-tax contributions to the Plan of 1% or more (in
whole percentages) of their regular and/or bonus pay up to the maximum amount as
set by the Internal Revenue Service ($9,500 in 1997 and 1996). Employee
contributions are fully vested when made. A participant for whose account a
contribution is made shall have the right to direct the Trustee to invest such
contribution in any one fund or in a combination of funds in 5% increments.
<PAGE> 9
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements
December 31, 1997
A. DESCRIPTION OF THE PLAN--CONTINUED
The Company, at its discretion, may make a matching contribution, profit sharing
contribution or qualified nonelective contribution for any plan year to be made
in cash or Company stock. No Company contributions were made for 1996. The Plan
was amended effective as of January 1, 1997 to provide for a matching
contribution by the Company in the amount of 25% of the first 6% of compensation
contributed by the participant to the Plan. Matching contributions are made
monthly and vest after an employee has attained three years of service.
Effective January 1, 1998, the Plan was amended to allow participant direction
of employer matching contributions and ESOP contributions made by the company on
behalf of the participants to any or all of the authorized investment funds.
Prior to January 1, 1998, all matching contributions were invested in The
Lincoln Electric Non-Voting Stock Fund. Non-vested Company contributions
forfeited by participants incurring a severance in employment are used to
reduce subsequent Company contributions to the Plan.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions and
allocations of (a) the Company's contributions if any, and (b) Plan earnings,
and is charged with an allocation of certain administrative expenses.
Allocations are based on participant earnings or accounts balances, as defined.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's account.
INVESTMENT OPTIONS
The investment options are as follows:
<TABLE>
<CAPTION>
Fund Description Sponsor
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Key EB MaGIC Fund Money Market Key Corp.
Victory U.S. Government Money Market Victory Broker Dealer
Obligations Fund Services
The Bond Fund of America Bonds American Funds Group
Fidelity Advisors Balanced Fund Growth Stocks Fidelity Investment Co.
Fidelity Advisors Equity Preferred and Common Stocks Fidelity Investment Co.
Growth Fund
Victory Stock Index Fund S&P 500 Index Victory Broker Dealer
Services
Templeton Foreign Fund International Fund Templeton Investment Co.
The Franklin Small Cap Growth Stocks Franklin Templeton
Growth Fund
The Income Fund of America Bonds, Preferred and American Funds Group
Common Shares
The Lincoln Electric The Lincoln Electric Company The Lincoln Electric Company
Voting Stock Fund Common Shares
The Lincoln Electric The Lincoln Electric Company The Lincoln Electric Company
Non-voting Stock Fund Class A Common Shares
</TABLE>
7
<PAGE> 10
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements - Continued
A. DESCRIPTION OF THE PLAN--CONTINUED
PAYMENT OF BENEFITS
Participants may receive the value of their account in a single sum payment or
in ten or fewer annual installment payments following separation from the
Company, whether by retirement, disability or otherwise except that if the full
value of a participant's account is $3,500 or less, or if the participant dies
and his/her account is payable to his/her beneficiary, such account balance will
be paid in a single sum payment. Participants who leave the Company may withdraw
their money at any time. Withdrawal must begin when the participants attain the
age of 70 1/2. A participant or beneficiary may elect to receive that portion of
their distribution which is attributable to their interest in the Company Stock
Funds in the form of whole shares of Company stock with any fractional shares of
Company stock in cash.
PARTICIPANT LOANS RECEIVABLE
Active employees are eligible to borrow up to 50% of their vested account
balance with a minimum borrowing of $1,000 up to a maximum of $50,000. The loan
may be paid back over any number of months, up to five years. The interest rate
on participant loans is determined by the Trustee. The interest rate on
outstanding loans is computed as the prime rate in effect at the loan
origination date plus 1%. Rates on loans originated during the 1997 and 1996
plan years ranged from 9.25% to 10.0%.
PLAN TERMINATION
Although the Company has not expressed an intent to do so, it has the right to
amend, modify, suspend or terminate the Plan at any time. Upon termination of
the Plan, the rights to benefits accrued by participants or their beneficiaries,
to the extent that such benefits are funded or credited to participants'
accounts, shall be nonforfeitable. No amendment, modification, suspension or
termination of the Plan shall have the effect of providing that any amounts then
held under the Plan may be used or diverted to any purpose other than for the
exclusive benefit of the participants or their beneficiaries.
8
<PAGE> 11
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements - Continued
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounting records of the Plan are maintained on the modified cash basis of
accounting. Employee contributions are recorded when received by Key Trust
Company of Ohio, N.A. (the Trustee), whereas investment income and plan
liabilities are recorded when earned and incurred.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments held at year end are stated at fair value based on quoted
market prices. The participant loans receivable are valued at cost which
approximates fair value.
Proceeds from sales of securities, less fair value at the beginning of the year
or cost for purchases during the year, and net unrealized appreciation
(depreciation) based on market price fluctuations during the year or since date
of acquisition, are included as net appreciation (depreciation) in fair value of
investments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions in
certain circumstances that affect amounts reported in the accompanying financial
statements and notes. Actual results could differ from these estimates.
ADMINISTRATIVE EXPENSES
All costs and expenses incurred in connection with the administration of the
Plan and Trust are paid from the trust fund; unless the Company elects to pay
all or part of such expenses. The Company elected to pay certain administrative
costs of the Plan in 1997 and 1996.
C. INVESTMENTS
The Trustee of the Plan holds the Plan's investment assets and executes
transactions therein.
9
<PAGE> 12
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements - Continued
C. INVESTMENTS--CONTINUED
The fair value of investments that represent 5% or more of the Plan's net assets
available for plan benefits at December 31, 1997 and 1996, is as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------
<S> <C> <C>
Victory U.S. Government Obligations Fund $ 4,028,490 $ 3,407,792
Fidelity Advisors Balanced Fund 4,832,563 2,952,128
Fidelity Advisors Equity Growth Fund 10,240,110 6,739,793
Victory Stock Index Fund 5,848,497 2,810,037
Templeton Foreign Fund 6,398,788 4,892,733
The Lincoln Electric Company Common Shares 10,936,146 373,855
The Lincoln Electric Company Class A
Common Shares 19,848,996 325,551
</TABLE>
D. INCOME TAX STATUS
On March 22, 1996, the Internal Revenue Service issued a favorable determination
letter stating that the Plan qualifies under Section 401(a) of the Internal
Revenue Code (IRC) and, therefore, the related trust is not subject to tax under
present income tax law. Once qualified, the Plan is required to operate in
conformity with the IRC to maintain its qualification. The Company is not aware
of any course of action or series of events that have occurred that might
adversely affect the Plan's qualified status. The tax exempt status of the Plan
does not apply to the taxability of distributions to participants under the
Plan.
E. TRANSACTIONS WITH PARTIES-IN-INTEREST
Party-in-interest transactions included the investment in the special funds of
the Trustee and the payment of administrative expenses. Such transactions are
exempt from being prohibited transactions.
At December 31, 1997, the Plan held 280,414 common shares and 551,361 Class A
Common Shares of The Lincoln Electric Company with a market value of $10,936,146
and $19,848,996 respectively.
At December 31, 1996, the Plan held 11,372 Common Shares and 10,672 Class A
Common Shares of The Lincoln Electric Company with a market value of $373,855
and $325,551, respectively.
10
<PAGE> 13
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements - Continued
F. PLAN MERGER
Effective July 1, 1997, the assets of The Lincoln Electric Employee Stock
Ownership Plan ("ESOP") were merged with the Plan and the related Trusts of each
plan were merged into a single trust. As of July 1, 1997 the Plan and the ESOP
were considered a single plan. Individuals not participating in the Plan at the
time of the merger, but who maintained assets in the ESOP, automatically were
enrolled as participants and had account balances established in the Plan. In
conjunction with the merger, the net assets of the ESOP were transferred into
the Plan effective July 1, 1997 and were available to pay benefits to
participants and beneficiaries of the Plan as of that date. The actual transfer
of net assets to the Trustee occurred during July and August 1997. No material
adjustments were recorded as a result of the merger.
G. FINANCIAL SECURITY PROGRAM
Effective November 1, 1997, the Plan was amended to provide a Financial Security
Program ("FSP") feature to certain eligible participants who made an irrevocable
election to participate in the program and to all eligible participants who were
hired on or after November 1, 1997. In exchange for forfeiting the accelerated
benefit feature of The Lincoln Electric Retirement Annuity Program (on benefits
earned on or after November 1, 1997), participants in the FSP program receive
annually a Company contribution to the Plan of 2% of their base pay. Individuals
not participating in the Plan at the time of their FSP election were
automatically enrolled as participants for their FSP contributions. For 1997,
the contribution to the FSP program, which was made in January 1998, was
determined only on the participant's base pay earned after November 1, 1997. FSP
contributions are invested in the same manner as participant contributions.
H. YEAR 2000 ISSUE (UNAUDITED)
The Plan Sponsor has developed a plan to modify its internal information
technology to be ready for the year 2000 and has begun converting critical data
processing systems. The project also includes determining whether third party
service providers have reasonable plans in place to become year 2000 compliant.
The Plan Sponsor currently expects the project to be substantially complete by
early 1999. The Plan Sponsor does not expect this project to have a significant
effect on the Plan's operations.
I. SUBSEQUENT EVENT
In May 1998, the shareholders of the Company approved a reorganization plan
whereby all the outstanding Common Shares and Class A Common Shares of the
Company were converted into two voting shares of the newly formed Lincoln
Electric Holdings, Inc., creating one single class of stock.
11
<PAGE> 14
The Lincoln Electric Company Employee Savings Plan
EIN 34-0359955 Plan 005
Form 5500, Line 27(a)--Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Description of Historical Current
Identity of Issue Investment Cost Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Victory U.S. Government
Obligations Fund 363,785.656 shares $ 3,792,704 $ 4,028,490
The Bond Fund of America 47,623.934 shares 657,781 666,735
Fidelity Advisors Balanced Fund 265,525.457 shares 4,373,533 4,832,563
Fidelity Advisors Equity Growth Fund 221,455.640 shares 9,109,005 10,240,110
Victory Stock Index Fund 312,753.838 shares 4,880,853 5,848,497
Templeton Foreign Fund 643,094.299 shares 6,360,898 6,398,788
The Franklin Small Cap Growth Fund 30,458.976 shares 731,627 698,424
The Income Fund of America 6,247.612 shares 114,318 111,020
Key EB Magic Fund 7,102.190 shares 84,751 86,167
Victory U.S. Government Obligations
Money Market Fund 181 units 181 181
Key Trust Company of Ohio
N.A.--Employee Benefits
Money Market Fund* 645,706.10 units 645,706 645,706
The Lincoln Electric Company* 280,414 Common Shares
3,110,930 10,936,146
The Lincoln Electric Company* 551,361 Class A
Common Shares 10,752,169 19,848,996
Participant loans 9.25% to 10.0%;
variable maturities 0 1,259,710
---------------------------------------
$ 44,614,456 $ 65,601,533
=======================================
</TABLE>
* Indicates party-in-interest to the Plan
12
<PAGE> 15
The Lincoln Electric Company Employee Savings Plan
EIN 34-0359955 Plan 005
Form 5500, Line 27(d)--Schedule of Reportable Transactions
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Current
Value
of Asset on Net
Purchase Selling Cost of Transaction Gain
Description of Asset Price Price Asset Date (Loss)
- ------------------------------------------------------------------------------------------------------------
CATEGORY (III)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
<S> <C> <C> <C> <C> <C>
Key Trust Company of Ohio
N.A.--Employee Benefits Money
Market Fund* $4,804,293 $ 4,804,293 $ 4,804,293
$ 4,123,376 4,122,630 4,123,376 $ 746
Victory Stock Index Fund 2,902,933 2,902,933 2,902,933
555,598 437,855 555,598 117,743
Victory U.S. Government 1,712,494 1,712,494 1,712,494
Obligations Fund 1,267,892 1,206,647 1,267,892 61,245
Fidelity Advisors Balanced Fund 2,003,756 2,003,756 2,003,756
466,467 400,461 466,467 66,006
Fidelity Advisors Equity Growth Fund
4,242,581 4,242,581 4,245,581
1,301,349 1,070,689 1,301,349 230,660
Templeton Foreign Fund 2,824,815 2,824,815 2,824,815
1,032,241 915,411 1,032,241 116,830
Lincoln Electric Common Shares* 1,248,019 536,716 1,248,019 711,303
Lincoln Electric Class A
Shares* 1,787,913 1,787,913 1,787,913
1,152,848 703,661 1,152,848 449,187
</TABLE>
There were no category (i), (ii) or (iv) reportable transactions during the year
ended December 31, 1997.
* Indicates party-in-interest to the Plan.
13
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-64187) pertaining to The Lincoln Electric Company Employee Savings
Plan of our report dated June 17, 1998, with respect to the financial statements
and schedules of The Lincoln Electric Company Employee Savings Plan included in
this Annual Report (Form 11-K) for the year ended December 31, 1997.
Ernst & Young LLP
Cleveland, Ohio
June 29, 1998
