1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Nine Months Ended Commission File September 30, 1995 No. 0-1402 THE LINCOLN ELECTRIC COMPANY (Exact name of registrant as specified in its charter) State of Incorporation: I.R.S. Employer Ohio Ident. No:34-0359955 Common Shares Outstanding: 10,520,820 Class A Common Shares Outstanding: 13,880,171 Class B Common Shares Outstanding: 499,840 Address of Principal Executive Offices: 22801 St. Clair Avenue Cleveland, Ohio 44117 Registrant's Telephone Number: (216) 481-8100 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------
2 STATEMENTS OF CONSOLIDATED OPERATIONS THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars except per share data) "UNAUDITED" <TABLE> <CAPTION> Quarter Ended Nine Months Ended September 30 September 30 -------------------- -------------------- 1995 1994 1995 1994 --------- --------- -------- --------- <S> <C> <C> <C> <C> Net sales $249,525 $230,752 $781,131 $675,450 Cost of goods sold 155,995 140,848 478,524 413,264 -------- -------- -------- -------- Gross profit 93,530 89,904 302,607 262,186 Distribution cost/selling, general & administrative expenses 68,533 66,470 216,914 193,312 -------- -------- -------- -------- Operating income 24,997 23,434 85,693 68,874 Other income/(expense): Interest income 472 414 1,184 1,006 Other income 522 1,455 1,468 2,712 Interest expense (2,518) (3,804) (10,054) (11,814) ------- -------- -------- -------- Total other income/(expense) (1,524) (1,935) (7,402) (8,096) ------- -------- -------- -------- Income before income taxes 23,473 21,499 78,291 60,778 Income taxes 8,763 9,830 30,142 26,395 -------- -------- -------- -------- Net income $ 14,710 $ 11,669 $ 48,149 $ 34,383 ======== ======== ======== ======== Net income per share $ 0.59 $ 0.53 $ 2.10 $ 1.57 Cash dividends paid per share $ 0.10 $ 0.09 $ 0.30 $ 0.27 Average number of Common Shares outstanding: (in thousands of shares) 24,879 22,028 22,886 21,914 </TABLE> NOTE: All shares and per share amounts have been adjusted to reflect the stock dividend on June 12, 1995 of one Class A Common Share for each outstanding Common Share and Class B Common Share held on the record date of June 5, 1995. See notes to consolidated financial statements.
3 STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars) "UNAUDITED" <TABLE> <CAPTION> September 30, 1995 December 31, 1994 ------------------ ----------------- <S> <C> <C> <C> <C> ASSETS Current Assets Cash and cash equivalents $ 14,415 $ 10,424 Accounts receivable (less allowances of $4,232 in 1995; $4,251 in 1994) 147,835 126,007 Inventories: (Note B) Raw materials and in-process 94,951 72,302 Finished goods 97,475 82,974 -------- -------- 192,426 155,276 Deferred income taxes 11,479 11,601 Prepaid expenses 6,505 2,899 Other current assets 6,854 7,220 -------- -------- TOTAL CURRENT ASSETS 379,514 313,427 OTHER ASSETS Notes receivable from employees 327 3,151 Goodwill, net 39,139 39,213 Other 17,227 16,855 -------- -------- 56,693 59,219 PROPERTY, PLANT AND EQUIPMENT Land 12,883 12,655 Buildings 123,106 118,903 Machinery, tools and equipment 348,273 312,957 -------- -------- 484,262 444,515 Less allowances for depreciation and amortization 280,343 260,304 -------- -------- 203,919 184,211 -------- -------- TOTAL ASSETS $640,126 $556,857 ======== ======== </TABLE> See notes to consolidated financial statements.
4 STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars) "UNAUDITED" <TABLE> <CAPTION> September 30, 1995 December 31, 1994 ------------------ ----------------- <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade accounts payable $ 54,841 $ 54,766 Notes payable to banks 17,593 15,843 Salaries, wages and amounts withheld 11,955 12,405 Taxes, including income taxes 35,704 21,783 Dividends payable 2,503 2,203 Current portion of long-term debt 1,423 2,272 Accrued restructuring charges 7,971 8,968 Other current liabilities (Note C) 73,270 25,877 -------- -------- TOTAL CURRENT LIABILITIES 205,260 144,117 Long-term debt, less current portion 84,989 194,831 Deferred income taxes 5,744 6,631 Other long-term liabilities 14,849 10,337 Minority interest in subsidiaries 6,693 6,808 Shareholders' equity (Notes D & E) Common Shares 2,104 2,103 Class A Common Shares 2,776 Class B Common Shares 100 100 Additional paid-in-capital 104,070 25,447 Retained earnings 218,217 176,965 Cumulative translation adjustments (4,676) (10,482) -------- -------- TOTAL SHAREHOLDERS' EQUITY 322,591 194,133 -------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $640,126 $556,857 </TABLE> ======== ======== See notes to consolidated financial statements.
5 STATEMENTS OF CONSOLIDATED CASH FLOWS THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars) "UNAUDITED" <TABLE> <CAPTION> Nine Months Ended September 30 ------------------------- 1995 1994 ---------- ---------- OPERATING ACTIVITIES <S> <C> <C> Net income $ 48,149 $ 34,383 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,307 19,903 Provision (Benefit) for deferred income taxes (766) 19,974 Minority interest 273 364 Change in operating assets and liabilities: (Increase) in accounts receivable (19,504) (19,962) (Increase) in inventories (34,593) (4,591) (Increase) in other current assets (1,975) (1,018) Increase (decrease) in accounts payable (674) 2,256 Increase in other current liabilities 57,141 26,462 Gross change in other noncurrent assets (623) (3,003) Gross change in other noncurrent liabilities 4,435 5,999 Other-net 1,274 2,836 -------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 73,444 83,603 INVESTING ACTIVITIES Purchases of property, plant and equipment (36,126) (23,223) Proceeds from sale of property, plant and equipment 1,508 2,614 ------- ------- NET CASH (USED) BY INVESTING ACTIVITIES (34,618) (20,609) FINANCING ACTIVITIES Proceeds, net of underwriting discount, from the sale of Common Class A Shares 81,180 Proceeds from the sale of Common Shares under the Employees' Stock Purchase Plan 1,438 Short-term borrowings-net 350 (6,130) Repayment on short-term borrowings, maturities greater than three months (30,897) (24,734) Proceeds on short-term borrowings, maturities greater than three months 31,542 22,476 Proceeds from long-term borrowings 246,476 232,286 Repayments on long-term borrowings (359,348) (282,378) Cash dividends (6,610) (5,903) Other 2,920 (429) --------- -------- NET CASH (USED) BY FINANCING ACTIVITIES (34,387) (63,374) Effect of exchange rate changes on cash and cash equivalents (448) 1,309 -------- ------- INCREASE IN CASH AND CASH EQUIVALENTS 3,991 929 Cash and cash equivalents at beginning of period 10,424 20,381 -------- ------- Cash and cash equivalents at end of period $ 14,415 $ 21,310 ======== ======= Cash paid during the period for: Interest $ 10,406 $ 12,484 Income taxes $ 16,703 $ 5,107 </TABLE> See notes to consolidated financial statements.
6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS "UNAUDITED" THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES September 30, 1995 NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and contain all the adjustments (consisting of only normal recurring accruals) necessary to fairly present the financial position, results of operations and changes in cash flows for the interim periods. Operating results for the quarter and nine months ended September 30, 1995 are not necessarily indicative of the results which may be expected for the remaining interim period or for the year ending December 31, 1995. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. NOTE B - INVENTORY VALUATION The actual valuation of inventory under the last-in first-out (LIFO) method is made at the end of each year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations by necessity are based on estimates of expected year-end inventory levels and costs. Accordingly, interim results are subject to the final year-end LIFO inventory calculation. NOTE C - OTHER CURRENT LIABILITIES Other current liabilities at September 30, 1995 include accruals for possible year-end bonuses and related payroll taxes of $49.9 million. The payment of bonuses is wholly discretionary and is determined each year by the Board of Directors. NOTE D - RECAPITALIZATION AND STOCK DISTRIBUTION At the Annual Meeting on May 23, 1995, the shareholders of the Company approved, among other things, an amendment to the Company's Articles of Incorporation to: (1) Change the existing class of Common Stock, without par value into Common Shares; (2) Change the existing class of Class A Common Stock, without par value, into Class B Common Shares; (3) Authorize a new class of non-voting shares to be designated Class A Common Shares; (4) Increase the total number of authorized common shares of all classes from seventeen million (17,000,000) to sixty-two million (62,000,000) shares consisting of thirty million (30,000,000) Common Shares, thirty million (30,000,000) Class A Common Shares and two million (2,000,000) Class B Common Shares.
7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS "UNAUDITED" THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES September 30, 1995 On May 24, 1995, the Board of Directors of the Company approved the filing of Restated Articles of Incorporation with the Secretary of the State of Ohio, and authorized a dividend payable on June 12, 1995 to shareholders of record on June 5, 1995 of one Class A Common Share for each outstanding Common Share (formerly known as Common Stock) and Class B Common Share (formerly known as Class A Common Stock). All per share amounts and the shares used in the computation of per share amounts have been adjusted to reflect the recapitalization and dividend distribution. NOTE E - SALE OF CLASS A COMMON SHARES On June 29, 1995, the Company sold in an underwritten public offering 2,796,914 Class A Common Shares for $28.35 per share, net of the underwriting discount. The closing date for the transaction was July 6, 1995 at which time the Company received the net proceeds of $79.3 million which were used to reduce debt of the Company. On August 2, 1995, the Company sold an additional 66,593 Class A Common Shares for $28.35 per share under an over allotment provision of the Underwriting Agreement and received additional net proceeds of $1.9 million which were also used to reduce debt of the Company. NOTE F - SUPPLEMENTAL EARNINGS PER SHARE INFORMATION As set forth in Note E to the consolidated financial statements, on July 6, 1995 and August 2, 1995, the Company received approximately $79.3 million and $1.9 million, respectively, from the sale of 2,796,914 and 66,593 shares of Class A Common Shares which was used to reduce the Company's outstanding indebtedness. Had these proceeds been received and applied to reduce indebtedness as of July 1, 1995 and July 1, 1994, net income per share for the three months ended September 30, 1995 would have been unchanged and for the three months ended September 30, 1994, $0.50 per share. Had the proceeds been received and applied to reduce indebtedness as of January 1, 1995 and 1994, net income per share for the nine months ended September 30, 1995 and 1994 would have been $2.00 and $1.48, respectively.
8 Part 1 - Item 2 Management's Discussion of Financial Condition and Results - - - - - ---------------------------------------------------------- of Operations - - - - - ------------- Quarterly and Nine-Month Results of Operations The following table shows the Company's results of operations for the three and nine month periods ended September 30, 1995 and 1994: <TABLE> <CAPTION> Three months ended September 30, 1995 1994 --------------- ------------- % of % of Amount Sales Amount Sales ------ ------ ------ ----- (in millions of dollars) <S> <C> <C> <C> <C> Net Sales $249.5 100.0 % $230.8 100.0 % Cost of Goods Sold 156.0 62.5 % 140.9 61.0 % ------ ------ ----- ----- Gross Profit 93.5 37.5 % 89.9 39.0 % Distribution Cost/Selling General & Adm. Expenses 68.5 27.5 % 66.5 28.8 % ------ ------ ------ ----- Operating Income 25.0 10.0 % 23.4 10.2 % Other Income 0.5 0.2 % 1.5 0.6 % Interest expense, Net (2.0) (0.8)% (3.4) (1.5)% ------ ------ ------ ------ Income before Income Taxes 23.5 9.4 % 21.5 9.3 % Income Taxes 8.8 3.5 % 9.8 4.2 % ------ ------ ------ ------ Net Income $ 14.7 5.9 % $ 11.7 5.1 % ====== ====== ====== ====== Nine months ended September 30, 1995 1994 -------------- -------------- % of % of Amount Sales Amount Sales ------ ------ ------ ------ (in millions of dollars) Net Sales $781.1 100.0 % $675.5 100.0 % Cost of Goods Sold 478.5 61.3 % 413.3 61.2 % ------ ------ ------ ------ Gross Profit 302.6 38.7 % 262.2 38.8 % Distribution Cost/Selling General & Adm. Expenses 216.9 27.8 % 193.3 28.6 % ------ ------ ------ ------ Operating Income 85.7 10.9 % 68.9 10.2 % Other Income 1.4 .2 % 2.7 0.4 % Interest expense, Net (8.8) (1.1)% (10.8) (1.6)% ------ ------ ------ ------ Income before Income Taxes 78.3 10.0 % 60.8 9.0 % Income Taxes 30.2 3.8 % 26.4 3.9 % ------ ------ ------ ------ Net Income $ 48.1 6.2 % $ 34.4 5.1 % ====== ====== ====== ====== </TABLE>
9 Management's Discussion of Financial Condition and Results - - - - - ---------------------------------------------------------- of Operations - - - - - ------------- THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE MONTHS ENDED - - - - - -------------------------------------------------------------------- SEPTEMBER 30, 1994. - - - - - ------------------ NET SALES. Net sales were $249.5 million for the quarter ended September 30, 1995, an increase of 8.1% over the $230.8 million reported for the third quarter of 1994. Net sales from the Company's U.S. operations were $172.7 million for the third quarter of 1995, an increase of 4.8% or $7.8 million over the comparable prior year period. Included in net sales from the Company's U.S. operations were third party export sales of $19.6 million, which represents a 26.7% increase over the same period in 1994. Non-U.S. sales were $76.8 million for the third quarter of 1995, an increase of 16.5% or $10.9 million over the same period last year. Although U.S. demand has softened in the 1995 third quarter, volume and price increases contributed to growth in net sales both in the U.S. and overseas with volume growth being the most important factor overseas and increased selling prices having the most significance domestically. GROSS PROFIT. Gross profit was $93.5 million (37.5% of net sales) for the third quarter of 1995 as compared with $89.9 million (39.0% of net sales) for the same period in 1994 as the U.S. operations experienced slightly diminished gross profit margins. Results were impacted by reduced overhead absorption from reduced production schedules caused by changes in inventory targets, as well as by increased training and associated costs of new employees added to support a growth in capacity over the prior year. Costs were also affected by start-up expenses of the new motor plant which amounted to at least $1.5 million in the quarter. These effects were offset partially by improvement in the gross profit margins on non-U.S. sales, mainly attributable to greater absorption of manufacturing expenses over higher sales volume and the effects of general price increases instituted in 1995. DISTRIBUTION COST/SELLING, GENERAL & ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses were $68.5 million (27.5% of net sales) for the third quarter of 1995 as compared with $66.5 million (28.8% of net sales) for the same period in 1994. The decrease in costs as a percentage of net sales reflects improved economies of scale achieved by higher worldwide sales volume. Additionally, the quarter includes reductions in certain discretionary employment costs related to prior interim periods less a one-time severance cost which net to a decrease in third quarter SG&A expenses of approximately $1.6 million ($1.0 million after tax or $0.04 per share). Subsequent to the accrual adjustments, total costs included in SG&A expense related to the Company's discretionary year-end bonus program were approximately $16.4 million ($18.7 million in 1994).
10 Management's Discussion of Financial Condition and Results - - - - - ---------------------------------------------------------- of Operations - - - - - ------------- INTEREST EXPENSE, NET. Interest expense, net was $2.0 million for the third quarter of 1995 as compared with $3.4 million for the third quarter of 1994 reflecting lower average debt levels principally as a result of a successful public offering of Class A Common Shares and the application of the proceeds to reduce indebtedness, offset partially by higher interest rates. INCOME TAXES. Income taxes for the third quarter of 1995 were $8.8 million on income before income taxes of $23.5 million (an effective rate of 37.3%) as compared with income taxes of $9.8 million on income before income taxes of $21.5 million (an effective rate of 45.7%) for the same period last year. The decrease in the effective tax rate is a consequence of a higher proportion of the Company's income being generated from entities (principally the Company's European subsidiaries) which are utilizing tax loss carryovers. In the 1995 third quarter, the estimated 1995 annual effective income tax rate was reduced to 38.5% from 39.0% as reported in the 1995 second quarter. NET INCOME. Net income increased 26.1% to $14.7 million, or $0.59 per share for the third quarter of 1995, as compared with $11.7 million or $0.53 per share for the prior year. Net income and net income per share for the third quarter of 1995 give effect to the sale of 2,863,507 Class A Common Shares for approximately $81.2 million, and the application of the proceeds to reduce indebtedness. Had these proceeds been received and applied to reduce indebtedness as of July 1, 1994, net income per share for the three months ended September 30, 1994 would have been $0.50 per share. NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED - - - - - ------------------------------------------------------------------ SEPTEMBER 30, 1994. - - - - - ------------------ NET SALES. For the first nine months of 1995, net sales were $781.1 million, or 15.6% higher than the $675.5 million reported for the first nine months of 1994. U.S. sales totaled $541.5 million, representing an increase of 12.7%, or $61.1 million over the same period last year. Included in net sales from the Company's U.S. operations were third party export sales of $60.7 million which represented a 27.7% increase over the same period in 1994. Non-U.S. sales totaled $239.6 million, representing an increase of 22.8%, or $44.5 million, over the prior year's nine-month period. Sales increases in the U.S. and abroad were attributable to a combination of volume and price increases. European sales benefited from the partial regaining of market share in Germany where in early 1994 market share had been lost due to the 1993 restructuring activities. Sales in the U.S. softened in the third quarter and non-U.S. sales also experienced a softening, but to a lesser extent. Currency translation had a positive effect of approximately $6.2 million on 1995 non-U.S. sales.
11 Management's Discussion of Financial Condition and Results - - - - - ---------------------------------------------------------- of Operations - - - - - ------------- GROSS PROFIT. Gross profit as a percentage of net sales from the Company's worldwide operations was substantially consistent with the comparable period in 1994. Margin decreases in the U.S., caused somewhat by higher raw material and manufacturing overhead costs plus start-up costs of the motor plant, were essentially offset by improvement in non-U.S. margins, mainly attributable to greater absorption of manufacturing expenses over higher sales volume and general price increases. DISTRIBUTION COST/SELLING, GENERAL & ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses as a percentage of net sales diminished slightly as compared with the prior year period. The improvement is due to improved economies of scale achieved by higher worldwide sales volume. Included in SG&A expenses are costs related to the Company's discretionary year-end bonus program amounting to approximately $56.9 million ($54.7 million in 1994). INTEREST EXPENSE, NET. For the first nine months of 1995, interest expense net was $8.8 million compared with $10.8 million for the first nine months of 1994. The decrease was attributable to lower average debt levels which were offset partially by higher interest rates in 1995. INCOME TAXES. For the nine months ended September 30, 1995, income taxes were $30.2 million on income before income taxes of $78.3 million (an effective tax rate of 38.5%) as compared with income taxes of $26.4 million on income before income taxes of $60.8 million (an effective tax rate of 43.4%) for the same period last year. The decrease in the effective tax rate is a consequence of a higher proportion of the Company's income being generated in entities (principally the Company's European subsidiaries) which are utilizing tax loss carryovers. NET INCOME. Net income for the first nine months of 1995 increased 40.0% to $48.1 million, or $2.10 per share, as compared with $34.4 million, or $1.57 per share for the prior year period. Net income and net income per share for the nine months ended September 30, 1995, give effect to the sale of the Class A Common Shares in early July and the application of the proceeds ($81.2 million) to reduce indebtedness. Had these proceeds been received as of January 1, 1995 and January 1, 1994, net income per share for the nine months ended September 30, 1995 would have been $2.00 per share and for the nine months ended September 30, 1994, $1.48 per share.
12 Management's Discussion of Financial Condition and Results - - - - - ---------------------------------------------------------- of Operations - - - - - ------------- LIQUIDITY AND CAPITAL RESOURCES. The Company's cash flows for the nine months ended September 30, 1995 and 1994 are presented in the consolidated statements of cash flows. Cash provided from operating activities for the nine months ended September 30, 1995 amounted to $73.4 million as compared with $83.6 million for the comparable period in 1994. Cash flows from operations for 1995, along with the proceeds from a successful public offering of Class A Common Shares of $81.2 million, were used primarily for net capital expenditures of $34.6 million, net debt repayments of $111.9 million, and the payment of dividends in the amount of $6.6 million. Cash flows from operations for 1994 were used primarily for net capital expenditures of $20.6 million, net debt repayments of $58.5 million, and the payment of dividends in the amount of $5.9 million. Net working capital was $174.3 million at September 30, 1995 compared to $169.3 million at December 31, 1994. The net increase in working capital for the first nine months of 1995 consisted of increases in current assets of $66.1 million which was primarily a combination of increases in accounts receivable of $21.8 million and inventories of $37.2 million. Offsetting these effects were increases in current liabilities of $61.1 million, principally from increases in accrued taxes, including income taxes of $13.9 million and accruals included in other current liabilities for possible year-end bonuses and related payroll taxes of $49.9 million. Total debt at September 30, 1995 was $104.0 million as compared with $212.9 million at December 31, 1994. At September 30, 1995, total debt was 24.4% of total capitalization (shareholders' equity plus total debt), as compared with 52.3% at the end of 1994. The improvement in the ratio of total debt to total capitalization was due principally to the application of cash proceeds received from the Company's underwritten public offering to reduce indebtedness. Other factors affecting the ratio include increased equity resulting from earnings for the period, net of dividend payments, favorable effects of currency translation of $5.8 million and the cyclical nature of the Company's cash requirements. The payment of bonuses at the end of 1995 will affect the ratio of total debt to total capitalization. Capital expenditures for property, plant and equipment totaled $36.1 million for the first nine months of 1995, compared to $23.2 million for the comparable period in 1994. Expenditures for property, plant and equipment represent the Company's continued commitment to support and develop advanced technologies and new products, to expand current capacity and reduce future manufacturing costs. The Company continues to closely monitor its capital expenditures and is adding to capacity to meet the demand for its products and modernizing facilities as necessary.
13 Management's Discussion of Financial Condition and Results - - - - - ---------------------------------------------------------- of Operations - - - - - ------------- The Company's Credit Agreement and 8.73% Senior Note Agreement contain various financial covenants which require the following: (i) a 1.35 to 1 consolidated current ratio, (ii) the maintenance of consolidated tangible net worth of $125 million plus 50% of net income subsequent to January 1, 1995 (iii) a minimum interest coverage ratio of 3 to 1 after June 30, 1995, and (iv) funded debt to capital ratios (.55 to 1 as of July 1, 1995 decreasing to .50 to 1 after December 31, 1995). The Company is in compliance with all of its financial covenants and is currently negotiating revisions to its Credit Agreement that will further increase flexibility. Part II - Other Information Item 1. Legal proceedings Claims pending against the Company alleging asbestos induced illness total 14,307, 12,731 of which have been reported previously; in each instance, the Company is one of a large number of defendants. Approximately 4,407 of these asbestos claims are in Orange County, Texas where a motion to certify a class action, which is being contested vigorously, is pending. The asbestos claimants seek compensatory and punitive damages, in most cases for unspecified sums. Twenty cases have been tried to ultimate liability, all to defense verdicts. Voluntary dismissals on such claims total over 15,000, and approximately 13,000 of such dismissals have been reported previously; summary judgments for the defense total 76, 74 of which have been reported previously. Included within the foregoing asbestos claims are approximately 930 claims pending in the Circuit Court of Kanawha County, West Virginia. On September 12, 1995, a jury returned a special interrogatory in that action finding that products manufactured and/or sold by the Company and three other welding companies were defective in certain respects at the time of manufacture and/or sale. Issues relating to whether or not claimants were exposed to Company products and, if so, whether Company products caused any injury, have not been addressed. Nor has there been any discovery relating to the plaintiffs and their potential compensatory damage claims. The Court has dismissed punitive damage claims in that action. Item 2. Changes in Securities -- None Item 3. Defaults Upon Senior Securities -- None Item 4. Submission of Matters to a Vote of Security Holders -- None
14 Part II - Other Information Item 5. Other Information -- None Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No. ----------- (27) Financial Data Schedule (b) Reports on Form 8-K -- None -------------------
15 SIGNATURES Pursuant to the requirements of the Securities and 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 /s/ H. Jay Elliott /s/ Graham A. Peters - - - - - ------------------------------- ------------------------------- H. Jay Elliott Graham A. Peters Vice President, Chief Financial Corporate Controller Officer and Treasurer November 6, 1995 November 6, 1995