<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, 1998
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 44117-1199
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: June 25, 1999
<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, 1998 and 1997
<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
(modified cash basis) of The Lincoln Electric Company Employee Savings Plan as
of December 31, 1998 and 1997, and the related statements of changes in net
assets available for benefits (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, 1998 and 1997, 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, 1998, and
reportable transactions for the year then ended, are presented for purpose of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules (modified cash basis) are the
responsibility of the Plan's management. 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.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 17, 1999
1
<PAGE> 4
The Lincoln Electric Company
Employee Savings Plan
Statement of Net Assets Available for Benefits,
with Fund Information (Modified Cash Basis)
December 31, 1998
<TABLE>
<CAPTION>
Victory Fidelity
U.S. Fidelity Advisors
Government The Bond Advisors Equity Victory
EB Obligations Fund of Balanced Growth Stock Index
MaGIC Fund Fund America Fund: Class T Fund: Class T Fund
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Shares of registered investment
companies, at fair value $1,103,198 $5,426,314 $1,123,767 $7,173,946 $17,317,920 $10,627,681
Money market investment fund 2,677
Lincoln Electric Holdings, Inc.
Common Shares
Participant loans
--------------------------------------------------------------------------------------------------
Total investments 1,103,198 5,428,991 1,123,767 7,173,946 17,317,920 10,627,681
Investment income receivable 3
Other receivables--net 10,902 916
--------------------------------------------------------------------------------------------------
Total assets 1,103,198 5,428,991 1,134,669 7,174,862 17,317,920 10,627,684
LIABILITIES
Accrued purchase of investments
Other payables--net 3,154 1,848 1,630
--------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $1,100,044 $5,428,991 $1,134,669 $7,174,862 $17,316,072 $10,626,054
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
American Neuberger
The Franklin Washington American & Berman
Templeton Small Cap The Income Mutual EuroPacific Partners
Foreign Growth Fund of Investors Growth Assets
Fund Fund America Fund Fund Fund
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Shares of registered investment
companies, at fair value $5,773,783 $1,367,735 $691,979 $ 543,224 $ 283,480 $ 257,096
Money market investment fund
Lincoln Electric Holdings, Inc.
Common Shares
Participant loans
--------------------------------------------------------------------------------------------------
Total investments 5,773,783 1,367,735 691,979 543,224 283,480 257,096
Investment income receivable 1,008
Other receivables--net
--------------------------------------------------------------------------------------------------
Total assets 5,773,783 1,367,735 691,979 543,224 283,480 258,104
LIABILITIES
Accrued purchase of investments
Other payables--net 122 7,537 1,008
--------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $5,773,661 $1,360,198 $691,979 $ 543,224 $ 283,480 $ 257,096
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Lincoln
Electric
Holdings, Inc.
Stock Loan
Fund Fund Total
-----------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments:
Shares of registered investment
companies, at fair value $51,844,411
Money market investment fund $ 203,267 205,944
Lincoln Electric Holdings, Inc.
Common Shares 36,994,696 36,994,696
Participant loans $ 2,317,981 2,317,981
-----------------------------------------------------
Total investments 37,197,963 2,317,981 91,363,032
Investment income receivable 200,028 201,403
Other receivables--net 11,818
-----------------------------------------------------
Total assets 37,397,991 2,317,981 91,576,253
LIABILITIES
Accrued purchase of investments 102,391 102,391
Other payables--net 15,663
-----------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $37,295,600 $ 2,317,981 $91,458,199
=====================================================
</TABLE>
See notes to financial statements.
2
<PAGE> 5
The Lincoln Electric Company
Employee Savings Plan
Statement of Net Assets Available for Benefits,
with Fund Information (Modified Cash Basis)
December 31, 1997
<TABLE>
<CAPTION>
Victory Fidelity
U.S. Fidelity Advisors
Government The Bond Advisors Equity Victory
EB Obligations Fund of Balanced Growth Stock Index
MaGIC Fund Fund America Fund: Class T Fund: Class T Fund
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Shares of registered investment
companies, at fair value $4,028,490 $666,735 $4,832,563 $10,240,110 $5,848,497
Money market investment fund $86,167 181
The Lincoln Electric Company
Common Shares
The Lincoln Electric Company
Class A Common Shares
Participant loans
-------------------------------------------------------------------------------------------------
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
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
The Lincoln Electric
Voting Stock
The Franklin Fund
Templeton Small Cap The Income -------------------------------
Foreign Growth Fund of Non-Participant Participant
Fund Fund America Directed Directed
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Shares of registered investment
companies, at fair value $6,398,788 $698,424 111,020
Money market investment 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
--------------------------------------------------------------------------------------
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 10,601,329 699,588
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
======================================================================================
</TABLE>
<TABLE>
<CAPTION>
The Lincoln Electric
Non-Voting Stock
Fund
---------------------------------
Non-Participant Participant Loan
Directed Directed Fund Total
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Shares of registered investment
companies, at fair value $32,824,627
Money market investment 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 $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
Accrued 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.
3
<PAGE> 6
The Lincoln Electric Company
Employee Savings Plan
Statement of Changes in Net Assets Available for Benefits,
with Fund Information (Modified Cash Basis)
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Victory Fidelity
U.S. Fidelity Advisors
Government The Bond Advisors Equity
EB Obligations Fund of Balanced Growth
MaGIC Fund Fund America Fund: Class T Fund: Class T
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $ 150,593 $1,176,687 $ 254,393 $1,409,504 $ 2,743,261
Contributions-employer 140,669 130,857 38,118 194,725 366,628
Investment income 143 55 70,454 712,820 1,761,762
Net appreciation (depreciation)
in fair value of investments 31,969 236,391 (27,443) 152,114 2,626,014
-------------------------------------------------------------------------------------
Total additions 323,374 1,543,990 335,522 2,469,163 7,497,665
DEDUCTIONS
Benefits paid to participants 7,284 393,829 20,522 160,649 412,077
Other cash distributions
-------------------------------------------------------------------------------------
Total deductions 7,284 393,829 20,522 160,649 412,077
Assets transferred--corporate
reorganization--(at market)
Interfund transfers--net 697,787 250,340 152,934 33,785 (9,626)
-------------------------------------------------------------------------------------
Net increase (decrease) 1,013,877 1,400,501 467,934 2,342,299 7,075,962
Net assets available for benefits
at beginning of the year 86,167 4,028,490 666,735 4,832,563 10,240,110
-------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF THE YEAR $1,100,044 $5,428,991 $1,134,669 $7,174,862 $ 17,316,072
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
American
The Franklin Washington
Victory Templeton Small Cap The Income Mutual
Stock Index Foreign Growth Fund of Investors
Fund Fund Fund America Fund
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $ 1,865,536 $ 1,487,151 $ 322,755 $ 130,954 $ 64,079
Contributions-employer 291,378 204,264 68,965 31,856 10,804
Investment income 990,449 595,739 20,038 69,079 38,928
Net appreciation (depreciation)
in fair value of investments 1,000,517 (833,619) 4,229 (27,805) (8,984)
------------------------------------------------------------------------------------
Total additions 4,147,880 1,453,535 415,987 204,084 104,827
DEDUCTIONS
Benefits paid to participants 208,107 209,258 8,715 4,612
Other cash distributions
------------------------------------------------------------------------------------
Total deductions 208,107 209,258 8,715 4,612
Assets transferred--corporate
reorganization--(at market)
Interfund transfers--net 837,784 (1,869,912) 254,502 381,487 438,397
------------------------------------------------------------------------------------
Net increase (decrease) 4,777,557 (625,635) 661,774 580,959 543,224
Net assets available for benefits
at beginning of the year 5,848,497 6,399,296 698,424 111,020
------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF THE YEAR $10,626,054 $ 5,773,661 $ 1,360,198 $ 691,979 $ 543,224
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Neuberger Neuberger Lincoln The Lincoln
American & Berman & Berman Electric Electric
EuroPacific Partners Genesis Holdings, Inc. Voting
Growth Assets Assets Stock Stock
Fund Fund Fund Fund Fund
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $ 27,285 $ 28,847 $ 21,496 $ 579,266 $ 127,656
Contributions-employer 4,383 4,506 4,081 1,092,870 31,799
Investment income 8,483 1,008 364 595,041 130,765
Net appreciation (depreciation)
in fair value of investments 4,261 7,877 (52) 578,932 1,322,069
--------------------------------------------------------------------------------------------------
Total additions 44,412 42,238 25,889 2,846,109 1,612,289
DEDUCTIONS
Benefits paid to participants 533,784 214,998
Other cash distributions
--------------------------------------------------------------------------------------------------
Total deductions 533,784 214,998
Assets transferred--corporate
reorganization--(at market) 36,906,392 (12,994,134)
Interfund transfers--net 239,068 214,858 128,399 (1,923,117) 295,926
--------------------------------------------------------------------------------------------------
Net increase (decrease) 283,480 257,096 154,288 37,295,600 (11,300,917)
Net assets available for benefits
at beginning of the year 11,300,917
--------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF THE YEAR $ 283,480 $ 257,096 $ 154,288 $ 37,295,600 $ -
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
The Lincoln
Electric
Non-Voting
Stock Loan
Fund Fund Total
------------------------------------------------
<S> <C> <C> <C>
ADDITIONS
Contributions-employee $ 115,476 $10,504,939
Contributions-employer 781,555 3,397,458
Investment income 216,319 $ 179,153 5,390,600
Net appreciation (depreciation)
in fair value of investments 4,065,177 9,131,647
------------------------------------------------
Total additions 5,178,527 179,153 28,424,644
DEDUCTIONS
Benefits paid to participants 404,412 2,578,247
Other cash distributions 21,593 21,593
------------------------------------------------
Total deductions 404,412 21,593 2,599,840
Assets transferred--corporate
reorganization--(at market) (23,912,258)
Interfund transfers--net (1,028,085) 905,473
------------------------------------------------
Net increase (decrease) (20,166,228) 1,063,033 25,824,804
Net assets available for benefits
at beginning of the year 20,166,228 1,254,948 65,633,395
------------------------------------------------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF THE YEAR $ - $2,317,981 $91,458,199
================================================
</TABLE>
See notes to financial statements
4
<PAGE> 7
The Lincoln Electric Company
Employee Savings Plan
Statement of Changes in Net Assets Available for Benefits,
with Fund Information (Modified Cash Basis)
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Victory Fidelity
U.S. Fidelity Advisors
Government The Bond Advisors Equity
EB Obligations Fund of Balanced Growth
MaGIC Fund Fund America Fund: Class T Fund: Class T
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $ 4,638 $1,219,391 $ 208,868 $1,331,497 $ 2,719,739
Contributions-employer
Investment income 502 32,584 395,240 1,120,694
ESOP assets transferred in
(at market)
Net appreciation (depreciation) in fair
value of investments 2,162 176,276 9,376 343,147 559,084
-----------------------------------------------------------------------------------
Total additions 6,800 1,396,169 250,828 2,069,884 4,399,517
DEDUCTIONS
Benefits paid to participants 233,195 12,220 100,863 242,879
Administrative expenses
Other cash distributions
Total deductions 233,195 12,220 100,863 242,879
Interfund transfers--net 79,367 (542,362) 100,504 (88,660) (656,493)
-----------------------------------------------------------------------------------
Net increase 86,167 620,612 339,112 1,880,361 3,500,145
Net assets available for benefits at
beginning of the year 3,407,878 327,623 2,952,202 6,739,965
-----------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT
END OF THE YEAR $ 86,167 $4,028,490 $ 666,735 $4,832,563 $10,240,110
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
The Franklin
Victory Templeton Small Cap The Income
Stock Index Foreign Growth Fund of
Fund Fund Fund America
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $1,457,846 $1,837,077 $189,598 $ 26,618
Contributions-employer
Investment income 391,694 630,017 20,560 7,430
ESOP assets transferred in
(at market)
Net appreciation (depreciation) in fair
value of investments 691,124 (286,519) (33,403) (3,428)
-------------------------------------------------------------------------
Total additions 2,540,664 2,180,575 176,755 30,620
DEDUCTIONS
Benefits paid to participants 135,440 139,411
Administrative expenses
Other cash distributions 869
Total deductions 135,440 140,280
Interfund transfers--net 633,166 (533,852) 521,669 80,400
-------------------------------------------------------------------------
Net increase 3,038,390 1,506,443 698,424 111,020
Net assets available for benefits at
beginning of the year 2,810,107 4,892,853
-------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT
END OF THE YEAR $5,848,497 $6,399,296 $698,424 $ 111,020
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
The Lincoln Electric The Lincoln Electric
Voting Stock Non-Voting Stock
Fund Fund
------------------------------ ------------------------------
Non-Participant Participant Non-Participant Participant Loan
Directed Directed Directed Directed Fund Total
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS
Contributions-employee $189,166 $182,088 $ 9,366,526
Contributions-employer $ 1,330,892 1,330,892
Investment income $ 44,716 4,358 88,753 4,461 $ 39,139 2,780,148
ESOP assets transferred in
(at market) 9,908,888 19,898,222 29,807,110
Net appreciation (depreciation) in fair
value of investments 830,149 372,839 (1,420,106) 410,264 1,650,965
------------------------------------------------------------------------------------------
Total additions 10,783,753 566,363 19,897,761 596,813 39,139 44,935,641
DEDUCTIONS
Benefits paid to participants 182,424 4,417 341,963 4,138 1,396,950
Administrative expenses 655 714 273 1,642
Other cash distributions 21,990 22,859
Total deductions 182,424 5,072 342,677 4,411 21,990 1,421,451
Interfund transfers--net (237,511) (309,274) 953,046 0
------------------------------------------------------------------------------------------
Net increase 10,601,329 323,780 19,555,084 283,128 970,195 43,514,190
Net assets available for benefits at
beginning of the year 375,808 328,016 284,753 22,119,205
------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT
END OF THE YEAR $10,601,329 $699,588 $19,555,084 $611,144 $1,254,948 $65,633,395
==========================================================================================
</TABLE>
See notes to financial statements
5
<PAGE> 8
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements (Modified Cash Basis)
December 31, 1998
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. A copy
of the Plan agreement is available from Lincoln Electric Holdings, Inc. (the
Company) upon request.
GENERAL
The Plan is a defined contribution plan covering certain employees of the
Company and its subsidiaries 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 and its subsidiaries.
Participants in The Lincoln Electric Company Employee Stock Ownership Plan
(ESOP) 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 ($10,000 in 1998 and $9,500 in 1997).
Employee contributions are fully vested when made. A participant for whose
account a contribution is made shall have the right to direct Key Trust Company
of Ohio, N.A. (the Trustee) to invest such contribution in any one fund or in a
combination of funds in 5% increments.
6
<PAGE> 9
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements (Modified Cash Basis)--Continued
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. 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.
On May 19, 1998, the shareholders of The Lincoln Electric Company approved a
reorganization of the capital and corporate structure of the Company. As a
result of the reorganization, a new holding company, Lincoln Electric Holdings,
Inc. was created. Each Common Share and Class A Common Share of The Lincoln
Electric Company was converted into two voting shares of the newly formed
Lincoln Electric Holdings, Inc., which also had the economic effect of a
two-for-one stock split.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions and
allocations of (a) the Company's contributions 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. Forfeited contributions from terminated participants'
nonvested accounts are used to reduce subsequent Company contributions to the
Plan.
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 Common
Stock Fund in the form of whole shares of Company stock with any fractional
shares of Company stock in cash.
7
<PAGE> 10
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements (Modified Cash Basis)--Continued
A. DESCRIPTION OF THE PLAN--CONTINUED
PARTICIPANT LOANS
Active participants may borrow from their fund accounts a minimum of $1,000 up
to a maximum equal to the lesser of $50,000 or 50% of their vested account
balance. Loan transactions are treated as a transfer from (to) the investment
fund to (from) the loan fund. Loan terms range from one to five years, other
than for the purchase of a principal residence. The loans are secured by the
participant's account and bear interest at a rate computed as the prime rate in
effect at the loan origination date plus 1%, as determined by the Trustee.
Rates on loans originated during the 1998 and 1997 plan years ranged from 8.75%
to 9.5%. Principal and interest is paid ratably through payroll deductions.
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.
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 the Trustee,
whereas investment income and plan liabilities are recorded when earned and
incurred.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. The units of registered
investment companies are valued at quoted market prices, which represent the net
asset values of units held by the Plan at year-end. The common shares of the
Company are valued at the last reported sales price on the last business day of
the plan year. The participant loans are valued at their outstanding balances,
which approximate fair value.
8
<PAGE> 11
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements (Modified Cash Basis)--Continued
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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 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 1998 and 1997.
C. INVESTMENTS
The Trustee of the Plan holds the Plan's investment assets and executes
transactions therein.
The fair value of investments that represent 5% or more of the Plan's net assets
available for benefits at December 31, 1998 and 1997, is as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------
<S> <C> <C>
Victory U.S. Government Obligations Fund $ 5,426,314 $ 4,028,490
Fidelity Advisors Balanced Fund 7,173,946 4,832,563
Fidelity Advisors Equity Growth Fund 17,317,920 10,240,110
Victory Stock Index Fund 10,627,681 5,848,497
Templeton Foreign Fund 5,773,783 6,398,788
Lincoln Electric Holdings, Inc. Common Shares 36,994,696
The Lincoln Electric Company Common Shares 10,936,146
The Lincoln Electric Company Class A
Common Shares 19,848,996
</TABLE>
9
<PAGE> 12
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements (Modified Cash Basis)--Continued
D. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated March 22, 1996, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (IRC) and, therefore, the related trust is exempt from
taxation. Once qualified, the Plan is required to operate in conformity with the
IRC to maintain its qualification. The Company believes the Plan is being
operated in compliance with the applicable requirements of the IRC and,
therefore, believes that the Plan is qualified and the related trust is tax
exempt. 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, 1998, the Plan held 1,662,683 Common Shares of Lincoln Electric
Holdings, Inc. with a market value of $36,994,696. For the year ended December
31, 1998, the Plan received dividends on Lincoln Electric Holdings, Inc. Common
Shares of $335,181 and dividends on The Lincoln Electric Company Common Shares
and Class A Common Shares of $112,254 and $215,796, respectively.
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. For the year ended December 31, 1997 the Plan
received dividends on Common Shares and on the Class A Common Shares of $49,377
and $91,544, respectively.
F. PLAN MERGER
Effective July 1, 1997, the assets of The Lincoln Electric Company Employee
Stock Ownership Plan 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.
10
<PAGE> 13
The Lincoln Electric Company Employee Savings Plan
Notes to Financial Statements (Modified Cash Basis)--Continued
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. The amount
of the FSP contribution was $1,277,052 and $169,807 for 1998 and 1997,
respectively. 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 determined that it will be necessary to take certain steps
in order to ensure that the Plan's information systems are prepared to handle
year 2000 dates. The Plan Sponsor is taking a two phase approach. The first
phase addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the year 2000 modifications. The Plan Sponsor anticipates substantially
completing this phase of the project by July 1999.
For the second phase of the project, Plan management established formal
communications with its third party service providers to determine that they
have developed plans to address their own year 2000 problems as they relate to
the Plan's operations. The majority of our third party service providers are in
the process of implementing their own year 2000 compliance programs. If
modification of data processing systems of either the Plan, the Plan Sponsor, or
its service providers are not completed timely, the year 2000 problem could have
a material impact on the operations of the Plan. Plan management has not
developed a contingency plan, because they are confident that all systems will
be year 2000 ready.
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, 1998
<TABLE>
<CAPTION>
Description of
Investment,
including
Maturity
Date, Rate of
Interest, Par or Current
Identity of Issue Maturity Value Cost Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Victory U.S. Government
Obligations Fund* 466,514.881 units $ 5,032,284 $ 5,426,314
The Bond Fund of America 82,569.224 units 1,139,080 1,123,767
Fidelity Advisors Balanced Fund 383,838.749 units 6,648,479 7,173,946
Fidelity Advisors Equity Growth Fund 303,344.194 units 13,845,515 17,317,920
Victory Stock Index Fund* 500,361.621 units 8,870,279 10,627,681
Templeton Foreign Fund 688,174.361 units 6,564,233 5,773,783
The Franklin Small Cap Growth Fund 60,599.686 units 1,366,966 1,367,735
The Income Fund of America 39,906.495 units 721,990 691,979
American Washington Mutual Investors Fund 16,506.337 units 552,198 543,224
American EuroPacific Growth Fund 9,981.682 units 279,220 283,480
Neuberger & Berman Partners Assets Fund 16,869.834 units 249,219 257,096
Neuberger & Berman Genesis Assets Fund 12,148.659 units 153,579 154,288
EB MaGIC Fund* 85,825.301 units 1,077,910 1,103,198
Victory U.S. Government
Obligations Money Market Fund* 2,676.840 units 2,677 2,677
Key Trust Company of Ohio
N.A.--Employee Benefits
Money Market Fund* 203,266.820 units 203,267 203,267
Lincoln Electric Holdings, Inc.* 1,662,683.000
common shares 17,661,314 36,994,696
Participant loans* 8.75% to 10% variable
maturities 2,317,981
---------------------------------
$ 64,368,210 $ 91,363,032
=================================
</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, 1998
<TABLE>
<CAPTION>
Purchases Sales
Description of Asset ------------------------------- ------------------------------
Including Interest Rate and Number of Dollar Value Number of Dollar Value
Identity of Party Involved Maturity in Case of a Loan Transactions of Purchase Transactions of Sale
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CATEGORY (I)--INDIVIDUAL TRANSACTION IN EXCESS OF 5% OF PLAN ASSETS
The Lincoln Electric Company Common Common Stock
Shares* 1 $ 12,944,134
The Lincoln Electric Company
Class A Common Shares* Common Stock 1 23,912,258
Lincoln Electric Holdings, Inc. Common
Shares* Common Stock 1 $ 36,906,392
CATEGORY (III)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS.
EB MaGIC Fund* Money Market Fund 244 $ 8,344,470 261 $ 8,786,910
Victory Stock Index Fund* S&P 500 Index Fund 142 4,935,944 81 1,165,506
Fidelity Advisors Balanced Fund Growth Stocks 120 2,850,319 87 659,494
Fidelity Advisors Equity Growth Fund Preferred & Common Stocks 119 5,978,449 102 1,506,602
Templeton Foreign Fund International Fund 82 2,072,521 124 1,864,780
Lincoln Electric Holdings, Inc. Common Common Stock 119 40,043,182 121 3,367,203
Shares*
The Lincoln Electric Company Common Common Stock 55 1,513,661 43 13,272,044
Shares*
The Lincoln Electric Company Class A Common Stock 69 1,828,620 51 25,960,316
Common Shares*
Loan Fund* Various interest rates and 90 2,199,493 213 1,119,629
maturities
</TABLE>
<TABLE>
<CAPTION>
Description of Asset
Including Interest Rate and Net
Identity of Party Involved Maturity in Case of a Loan Gain (Loss)
- -------------------------------------------------------------------------------------
<S> <C>
CATEGORY (I)--INDIVIDUAL TRANSACTION IN EXCESS OF 5% OF PLAN ASSETS
The Lincoln Electric Company Common Common Stock
Shares*
The Lincoln Electric Company
Class A Common Shares* Common Stock
Lincoln Electric Holdings, Inc. Common
Shares* Common Stock
CATEGORY (III)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS.
EB MaGIC Fund* Money Market Fund $ -
Victory Stock Index Fund* S&P 500 Index Fund 218,987
Fidelity Advisors Balanced Fund Growth Stocks 84,120
Fidelity Advisors Equity Growth Fund Preferred & Common Stocks 264,743
Templeton Foreign Fund International Fund (4,406)
Lincoln Electric Holdings, Inc. Common Common Stock 1,803,049
Shares*
The Lincoln Electric Company Common Common Stock 650,744
Shares*
The Lincoln Electric Company Class A Common Stock 1,044,783
Common Shares*
Loan Fund* Various interest rates and -
maturities
</TABLE>
* Indicates party-in-interest to the Plan.
There were no category (ii) or (iv) reportable transactions during the year
ended December 31, 1998.
<PAGE> 1
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Post-effective Amendment No.
1 to Form S-8, Registration Statement of Lincoln Electric Holdings, Inc. (as
successor to The Lincoln Electric Company) for The Lincoln Electric Company
Employee Savings Plan (Form S-8 No. 033-64187) of our report dated June 17,
1999, 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, 1998.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 25, 1999
