1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the six months ended June 30, 1997 Commission File No. 0-1402 THE LINCOLN ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Ohio 34-0359955 (State of incorporation) (I.R.S. Employer Identification No.) 22801 St. Clair Avenue, Cleveland, Ohio 44117 (Address of principal executive offices) (Zip Code) (216) 481-8100 (Registrant's telephone number, including area code) 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 --- --- The number of shares outstanding of the issuer's classes of common stock as of June 30, 1997 were as follows: <TABLE> <S> <C> Common Shares................................10,770,959 Class A Common Shares........................13,837,697 ---------- Total outstanding shares.....................24,608,656 ========== </TABLE> 1
2 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands of dollars, except share data) (UNAUDITED) <TABLE> <CAPTION> THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 --------- --------- --------- --------- <S> <C> <C> <C> <C> Net sales $299,635 $284,508 $580,356 $563,220 Cost of goods sold 185,632 174,751 358,590 346,909 -------- -------- -------- -------- Gross profit 114,003 109,757 221,766 216,311 Distribution cost/selling, general & administrative expenses 77,728 77,552 151,138 156,012 -------- -------- -------- -------- Operating income 36,275 32,205 70,628 60,299 Other income/(expense): Interest income 1,321 895 2,244 1,306 Other income 125 929 329 1,386 Interest expense (1,681) (1,908) (3,304) (4,119) -------- -------- -------- -------- Total other income/(expense) (235) (84) (731) (1,427) -------- -------- -------- -------- Income before income taxes 36,040 32,121 69,897 58,872 Income taxes 13,389 11,898 26,197 22,092 -------- -------- -------- -------- Net income $ 22,651 $ 20,223 $ 43,700 $ 36,780 ======== ======== ======== ======== Net income per share $ 0.92 $ 0.81 $ 1.76 $ 1.48 Cash dividends declared per share $ 0.15 $ 0.12 $ 0.30 $ 0.24 Average number of shares outstanding (in thousands) 24,736 24,870 24,774 24,882 </TABLE> See notes to these consolidated financial statements. 2
3 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands of dollars) (UNAUDITED) <TABLE> <CAPTION> JUNE 30, DECEMBER 31, 1997 1996 --------- --------- ASSETS <S> <C> <C> CURRENT ASSETS Cash and cash equivalents $ 57,894 $ 40,491 Marketable securities 47,320 109 Accounts receivable (less allowance for doubtful accounts of $2,878 in 1997 and 1996) 170,476 151,287 Inventories: Raw materials and in-process 69,050 79,100 Finished goods 93,005 91,555 --------- --------- 162,055 170,655 Deferred income taxes 11,026 10,579 Other current assets 14,595 10,088 --------- --------- TOTAL CURRENT ASSETS 463,366 383,209 OTHER ASSETS Goodwill - net 35,651 37,440 Other 25,767 25,311 --------- --------- 61,418 62,751 PROPERTY, PLANT AND EQUIPMENT Land 11,689 11,710 Buildings 112,097 114,640 Machinery, tools and equipment 337,178 335,738 --------- --------- 460,964 462,088 Less: accumulated depreciation (262,386) (260,849) --------- --------- 198,578 201,239 --------- --------- TOTAL ASSETS $ 723,362 $ 647,199 ========= ========= </TABLE> 3
4 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands of dollars, except share data) (UNAUDITED) <TABLE> <CAPTION> JUNE 30, DECEMBER 31, 1997 1996 --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY <S> <C> <C> CURRENT LIABILITIES Notes payable to banks $ 738 $ 2,607 Trade accounts payable 60,864 58,157 Salaries, wages and amounts withheld 50,642 18,983 Taxes, including income taxes 40,830 36,297 Dividend payable 3,691 2,977 Other current liabilities 56,250 39,976 Current portion of long-term debt 10,310 10,528 --------- --------- TOTAL CURRENT LIABILITIES 223,325 169,525 Long-term debt, less current portion 63,905 64,148 Deferred income taxes 3,479 3,643 Other long-term liabilities 19,114 18,107 SHAREHOLDERS' EQUITY Common Shares, without par value -- at stated capital amount: Authorized -- 60,000,000 shares in 1997 and 30,000,000 shares in 1996; Outstanding -- 10,770,959 shares in 1997 and 10,484,247 shares in 1996 2,154 2,097 Class A Common Shares (non-voting), without par value -- at stated capital amount: Authorized -- 60,000,000 shares in 1997 and 30,000,000 shares in 1996; Outstanding -- 13,837,697 shares in 1997 and 1996 2,768 2,768 Class B Common Shares, without par value -- at stated capital amount: Authorized -- none in 1997 and 2,000,000 shares in 1996; Outstanding -- none in 1997 and 486,772 shares in 1996 - 97 Additional paid-in capital 103,890 103,720 Retained earnings 326,539 290,252 Cumulative translation adjustments (21,812) (7,158) --------- --------- TOTAL SHAREHOLDERS' EQUITY 413,539 391,776 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 723,362 $ 647,199 ========= ========= </TABLE> See notes to these consolidated financial statements. 4
5 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands of dollars) (UNAUDITED) <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, ------------------------- 1997 1996 -------- -------- <S> <C> <C> OPERATING ACTIVITIES Net income $ 43,700 $ 36,780 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,965 15,967 Changes in operating assets and liabilities: (Increase) in accounts receivable (25,545) (16,570) Decrease (increase) in inventories 2,359 (9,110) (Increase) in other current assets (5,464) (8,893) Increase in accounts payable 5,031 1,529 Increase in other current liabilities 54,541 41,323 Gross change in other noncurrent assets and liabilities (514) (858) Other - net (98) 3,054 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 87,975 63,222 INVESTING ACTIVITIES Purchases of property, plant and equipment (15,739) (18,443) Purchase of marketable securities (47,222) - Proceeds from sale of property, plant and equipment 706 1,349 -------- -------- NET CASH (USED) BY INVESTING ACTIVITIES (62,255) (17,094) FINANCING ACTIVITIES Short-term borrowings - net (1,778) (26,499) Long-term borrowings - net (400) (10,676) Dividends paid (6,699) (5,975) Other 128 (550) -------- -------- NET CASH (USED) BY FINANCING ACTIVITIES (8,749) (43,700) Effect of exchange rate changes on cash and cash equivalents 432 1,726 -------- -------- INCREASE IN CASH AND CASH EQUIVALENTS 17,403 4,154 Cash and cash equivalents at beginning of period 40,491 10,087 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 57,894 $ 14,241 ======== ======== </TABLE> See notes to these consolidated financial statements. 5
6 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1997 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to the preparation of the quarterly report on Form 10-Q. Accordingly, these consolidated financial statements do not include all of the information and notes required for complete financial statements. These consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) necessary to fairly present the financial position, results of operations and changes in cash flows for the interim period. Operating results for the three and six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the year ending December 31, 1997. 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, 1996. NOTE B - INVENTORY VALUATION The 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 and are subject to the final year-end LIFO inventory calculation. NOTE C - SALARIES, WAGES AND AMOUNTS WITHHELD Salaries, wages and amounts withheld at June 30, 1997 include provisions for year-end bonuses and related payroll taxes of $35.6 million. The payment of bonuses is discretionary and is subject to approval by the Board of Directors. NOTE D - CHANGES IN CAPITAL STRUCTURE Effective May 28, 1997, certain changes in the Company's capital structure were implemented. Class B Common Shares were eliminated and the 486,772 outstanding Class B Common Shares were converted into 282,747 Common Shares. Additionally, the authorized capital was increased to 60 million Common Shares and 60 million Class A Common Shares. NOTE E - NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), which simplifies the computation of earnings per share (EPS), specifically focusing on the computation of weighted average shares outstanding. SFAS 128 is required to be adopted in the fourth quarter of 1997. The Company expects the adoption of SFAS 128 to result in immaterial changes in the amounts currently reported for weighted average shares outstanding. Accordingly, no impact on EPS is expected. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information. This statement requires disclosure of selected financial and descriptive information for each operating segment based on management's internal organizational decision-making structure. Additional information is required on a company-wide basis for revenues by product or service, revenues and identifiable assets by geographic location and information about significant customers. As required by the statement, the Company will begin presenting such information in its financial statements for the year-ending December 31, 1998. 6
7 Part 1 - Item 2 MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------ The following table sets forth the Company's results of operations for the three and six month periods ended June 30, 1997 and 1996: <TABLE> <CAPTION> Three months ended June 30, ----------------------------------------------- (amounts in millions of dollars) 1997 1996 ---------------------- --------------------- Amount % of Sales Amount % of Sales ------ ---------- ------ ---------- <S> <C> <C> <C> <C> Net sales $299.6 100.0% $284.5 100.0% Cost of goods sold 185.6 61.9% 174.7 61.4% ------ ------ ------ ------ Gross profit 114.0 38.1% 109.8 38.6% Distribution cost/selling, general and administrative expenses 77.7 26.0% 77.6 27.3% ------ ------ ------ ------ Operating income 36.3 12.1% 32.2 11.3% Other income 0.1 0.0% 0.9 0.3% Interest expense, net (0.4) (0.1%) (1.0) (0.3%) ------ ------ ------ ------ Income before income taxes 36.0 12.0% 32.1 11.3% Income taxes 13.3 4.4% 11.9 4.2% ------ ------ ------ ------ Net income $ 22.7 7.6% $ 20.2 7.1% ====== ====== ====== ====== </TABLE> <TABLE> <CAPTION> Six months ended June 30, ----------------------------------------------- (amounts in millions of dollars) 1997 1996 ---------------------- --------------------- Amount % of Sales Amount % of Sales ------ ---------- ------ ---------- <S> <C> <C> <C> <C> Net sales $580.4 100.0% $563.2 100.0% Cost of goods sold 358.6 61.8% 346.9 61.6% ------ ------ ------ ------ Gross profit 221.8 38.2% 216.3 38.4% Distribution cost/selling, general and administrative expenses 151.2 26.1% 156.0 27.7% ------ ------ ------ ------ Operating income 70.6 12.1% 60.3 10.7% Other income 0.3 0.1% 1.4 0.2% Interest expense, net (1.0) (0.2%) (2.8) (0.5%) ------ ------ ------ ------ Income before income taxes 69.9 12.0% 58.9 10.4% Income taxes 26.2 4.5% 22.1 3.9% ------ ------ ------ ------ Net income $ 43.7 7.5% $ 36.8 6.5% ====== ====== ====== ====== </TABLE> THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996 - ----------------------------------------------------------------------------- NET SALES. Net sales for the quarter ended June 30, 1997 increased $15.1 million or 5.3% to $299.6 million from $284.5 million for the same period last year. Net sales from the Company's U.S. operations totaled $203.1 million for the quarter ended June 30, 1997, an increase of 4.8% or $9.2 million over the prior year. 1996 U.S. sales included incremental sales of $5.3 million for the Company's gas distribution businesses, sold during the third quarter of 1996. Sales growth from U.S. operations was due to growth in both domestic and export sales. U.S. export sales increased $3.4 million or 14.6% to $27.0 million for the second quarter of 1997, from $23.6 million last year. Non-U.S. sales increased 6.5% to $96.5 million for the second quarter 1997, compared to $90.6 million last year, despite a decline in the relative strength of foreign currencies against the U.S. dollar. For the second quarter 1997 changes in exchange rates, primarily caused by weakening European currencies, had an overall negative impact on non-U.S. sales of $6.1 million. Company-wide, sales growth was achieved largely through increased volume. 7
8 GROSS PROFIT. Gross profit of $114.0 million for the second quarter 1997 increased 3.8% or $4.2 million from the prior year. Gross profit as a percentage of net sales declined to 38.1% compared with 38.6% for the second quarter last year. Margin percentages have been affected by increased product liability defense costs, increases in sales in non-U.S. markets with lower margins and by the incremental loss of higher margin gas distribution sales. DISTRIBUTION COST/SELLING, GENERAL & ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses increased $0.1 million to $77.7 million for the second quarter 1997 as compared with 1996. The Company's ongoing efforts at cost reduction and control have resulted in the lower SG&A expense as a percentage of sales. Included in SG&A expenses are costs related to the Company's discretionary year-end employee bonus program, net of hospitalization costs, of $18.4 million in the second quarter 1997 compared with $16.6 million in the 1996 period. The bonus payout is subject to approval by the Company's Board of Directors during the fourth quarter. INTEREST EXPENSE, NET. Interest expense, net was $0.4 million for the quarter ended June 30, 1997 compared to $1.0 million for the second quarter 1996, a decrease of 60.0%. This decrease is a result of lower interest expense on reduced debt levels and higher cash and marketable securities balances which have resulted in increased interest income. INCOME TAXES. Income taxes for the quarter ended June 30, 1997 were $13.3 million on income before income taxes of $36.0 million, an effective rate of 37.1%, as compared with income taxes of $11.9 million on income before income taxes of $32.1 million, or an effective rate of 37.0% for the same period in 1996. The effective tax rate for the year ended December 31, 1996 was 37.0%. NET INCOME. Net income increased 12.0% to $22.7 million or $0.92 per share from $20.2 million or $0.81 per share for the second quarter 1996. The effect of the strengthening U.S. dollar against foreign currencies on net income was not significant. SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 - ------------------------------------------------------------------------- NET SALES. Net sales for the six months ended June 30, 1997 increased $17.2 million or 3.0% to $580.4 million from $563.2 million for the same period last year. Net sales from the Company's U.S. operations totaled $396.4 million for the first six months of 1997, an increase of 3.0% or $11.5 million over the prior year. 1996 U.S. sales included incremental sales of $10.1 million for the Company's gas distribution businesses, sold during the third quarter of 1996. U.S. export sales increased 17.1% to $53.8 million for the first half of 1997, compared with $46.0 million in 1996. Non-U.S. sales were $184.0 million for the six months ended June 1997, compared to $178.3 million in 1996, an increase of 3.2%. The strengthening of the U.S. dollar, predominantly against European currencies, had an adverse impact on non-U.S. sales of $10.1 million on a year-over-year basis. Sales increases were primarily due to volume gains. GROSS PROFIT. Gross profit increased 2.5% or $5.5 million to $221.8 million for the first half of 1997 from $216.3 million in 1996. Margin percentages have been impacted by increased product liability defense costs, increases in sales in non-U.S. markets with lower margins and by the loss of higher margin gas distribution sales. DISTRIBUTION COST/SELLING, GENERAL & ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses decreased $4.8 million or 3.1% to $151.2 million for the first half of 1997 as compared with 1996. SG&A expenses for 1996 include a $3.4 million charge ($2.1 million after tax, or $0.08 per share) for costs related to a litigation settlement. The exclusion of the gas distribution businesses resulted in a reduction of reported SG&A costs of $4.5 million on a year-over-year basis. 8
9 The effect of exchange rate changes served to reduce SG&A expenses by $2.3 million. The decline in SG&A expenses as a percentage of sales reflects continuing cost control initiatives. Included in SG&A expenses are costs related to the Company's discretionary year-end employee bonus program, net of hospitalization costs, of $35.7 million in the first half 1997 compared with $33.7 million in the 1996 period. INTEREST EXPENSE, NET. Interest expense, net was $1.0 million for the six months ended June 30, 1997 compared to $2.8 million for the first half 1996, a decrease of 64.3%. This decrease is a result of lower interest expense on reduced debt levels and higher cash and marketable securities balances resulting in increased interest income. INCOME TAXES. Income taxes for the six months ended June 30, 1997 were $26.2 million on income before income taxes of $69.9 million, an effective rate of 37.5%, as compared with income taxes of $22.1 million on income before income taxes of $58.9 million, or an effective rate of 37.5% for the same period in 1996. The effective tax rate for the year ended December 31, 1996 was 37.0%. NET INCOME. Net income increased 18.8% to $43.7 million or $1.76 per share from $36.8 million or $1.48 per share for the first half of 1996. Net income for the six months ended June 30, 1996 reflects a charge for a legal settlement amounting to $2.1 million or $0.08 per share. The effect of the strengthening U.S. dollar against other currencies on net income was not significant. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash provided from operating activities for the six months ended June 30, 1997 increased 39.2% to $88.0 million from $63.2 million for the first six months of 1996. Working capital management and higher earnings has resulted in the improved cash flow. Capital expenditures for property, plant and equipment decreased $2.7 million as compared with the same period in 1996 due to the timing of joint venture investments being somewhat delayed. The Company continues to invest to maintain and improve capacity and infrastructure as supported by market requirements. The Company's ratio of total debt to total capitalization decreased to 15.3% at June 30, 1997 from 16.5% at December 31, 1996. The quarterly dividend, increased to $0.15 per share or $3.7 million, was paid on April 15, 1997. The Company paid a cash dividend of $3.0 million or $0.12 per share in January 1997. NEW ACCOUNTING PRONOUNCEMENTS - ----------------------------- In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), which simplifies the computation of earnings per share (EPS), including the computation of weighted average shares outstanding. SFAS 128 is required to be adopted in the fourth quarter of 1997. The Company expects the adoption of SFAS 128 to result in immaterial changes in the amounts currently reported for weighted average shares outstanding, and accordingly, no impact on EPS is expected. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information. This statement requires disclosure of selected financial and descriptive information for each operating segment based on management's internal organizational decision-making structure. Additional information is required on a company-wide basis for revenues by product or service, revenues and 9
10 identifiable assets by geographic location and information about significant customers. As required by the statement, the Company will begin presenting such information in its financial statements for the year-ending December 31, 1998. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS - ---------------------------------------------- From time to time, information provided by the Company, statements by its employees or information included in its filings with the Securities and Exchange Commission (including those portions of this Management's Discussion and Analysis that refer to the future) may contain forward-looking statements that are not historical facts. Those statements are "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, and the Company's future performance, operating results, financial position and liquidity, are subject to a variety of factors that could materially affect results, including: - - Competition. The Company operates in a highly competitive global environment, and is subject to a variety of competitive factors such as pricing, the actions and strength of its competitors, and the Company's ability to maintain its position as a recognized leader in welding technology. The intensity of foreign competition is substantially affected by fluctuations in the value of the United States dollar against other currencies. The Company's competitive position could also be adversely affected should new or emerging entrants become more active in the arc welding business. - - International Markets. The Company's long term strategy is to increase its share in growing international markets, particularly Asia, Latin America, Central Europe and other developing markets. However, there can be no certainty that the Company will be successful in its expansion efforts. The Company is subject to the currency risks of doing business abroad and expansion poses challenging demands within the Company's infrastructure. Further, many developing economies have a significant degree of political and economic instability, which may adversely affect the Company's international operations. - - Cyclicality and Maturity of the Welding Industry. The United States arc welding industry is both mature and cyclical. The growth of the domestic arc welding industry has been and continues to be constrained by numerous factors, including the substitution of plastics and other materials in place of fabricated metal parts in many products and structures. Increased offshore production of fabricated steel structures has also cut into the domestic demand for arc welding products. - - Litigation. The Company, like other manufacturers, is subject to a variety of lawsuits and potential lawsuits that arise in the ordinary course of business. See "Item 1. Legal Proceedings" within the Company's Annual Report on Form 10-K, as well as the update in this report. While historical litigation costs have not been material to the Company, there can be no assurance that this will remain the case, or that insurance coverage will be adequate. - - Operating Factors. The Company is highly dependent on its skilled workforce and efficient production facilities, which could be adversely affected by its labor relations, business interruptions at its domestic facilities and short-term or long-term interruptions in the availability of supplies or raw materials or in transportation of finished goods. - - Research and Development. The Company's continued success depends, in part, on its ability to continue to meet customer welding needs through the introduction of new products and the enhancement of existing product design and performance characteristics. There can be no assurances that new products or product improvements, once developed, will meet with customer acceptance and contribute positively to the operating results of the Company, or that product development will continue at a pace to sustain future growth. - - Motor Division. The Company has made substantial capital investments to modernize and expand its production of electric motors. While management believes that the profitability of this investment will improve, success is largely dependent on increased market penetration. The Company is in the process of revising its sales and marketing programs. 10
11 Part II - Other Information Item 1. Legal Proceedings As described in periodic reports previously filed with the Commission, the Company has been named, in filings made on or after May 1996 in the Superior Court of California, as a defendant or co-defendant in lawsuits filed by building owners in Los Angeles County arising from alleged property damage claimed to have been discovered after the Northridge earthquake of 1994, and seeking compensatory damages and in some instances punitive damages relating to the sale and use of the E70T-4 category of welding electrode. Substantial discovery has occurred in only one of the cases, SAINT JOHN'S MEDICAL PLAZA v. DILLINGHAM CONSTRUCTION ET. AL., and a trial date for that case has been set for October 7, 1997. Item 2. Changes in Securities On May 28, 1997, the Company amended its Restated Articles of Incorporation to (1) change each issued and outstanding Class B Common Share into .5809 Common Share and (2) increase the total number of authorized shares to 120,000,000, consisting of 60,000,000 Common Shares and 60,000,000 Class A Common Shares. The effect of the change in Class B Common Shares into Common Shares was to eliminate the Class B Common Shares and increase the number of Common Shares outstanding. Item 3. Defaults Upon Senior Securities -- None. Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting was held on May 27, 1997. (b) No response required. (c) The following matters were voted upon by security-holders: (i) ELECTION OF DIRECTORS: The shareholders voted in favor of electing the following persons as Directors of the Company whose terms end in 2000: <TABLE> <CAPTION> Votes for Votes Withheld --------- -------------- <S> <C> <C> David C. Lincoln 9,341,153 101,693 G. Russell Lincoln 9,340,392 102,454 Henry L. Meyer, III 9,299,049 143,797 Frank L. Steingass 9,339,695 103,151 </TABLE> (ii) RECAPITALIZATION AMENDMENT: The shareholders approved a proposal to amend the Company's Restated Articles of Incorporation to change the existing class of Class B Common Shares into Common Shares. 11
12 <TABLE> <CAPTION> (a) Common Shares and Class B Common Shares voting together as a single class: <S> <C> Votes For 8,609,202 Votes Against 330,251 Shares Abstain 63,094 Broker Non-Votes 440,299 </TABLE> <TABLE> <CAPTION> (b) Class B Common Shares voting as a single class: <S> <C> Votes For 462,175 Votes Against 16,116 Shares Abstain 4,522 Broker Non-Vote 0 </TABLE> (iii) INCREASE IN AUTHORIZED SHARES. The shareholders approved an amendment to the Company's Restated Articles of Incorporation to increase the number of authorized shares from 62,000,000 to 120,000,000, consisting of 60,000,000 Common Shares and 60,000,000 Class A Common Shares. <TABLE> <S> <C> Votes For 8,266,716 Votes Against 1,072,386 Shares Abstain 71,417 Broker Non-Votes 32,327 </TABLE> (iv) AMENDMENTS TO CODE OF REGULATIONS The shareholders approved a proposal to amend Article II and Article III of the Regulations of the Company. The Regulations Amendment provided greater flexibility in fixing the date, place and time of the Annual Meeting of shareholders; limited the persons able to call the meetings of the shareholders, and provided greater flexibility in the calling of special meetings of the Board of Directors. <TABLE> <S> <C> Votes For 8,842,686 Votes Against 344,732 Shares Abstain 180,447 Broker Non-Votes 74,981 </TABLE> (vi) APPOINTMENT OF INDEPENDENT AUDITORS: The shareholders ratified the appointment of the firm of Ernst & Young LLP as independent auditors to examine the books of account and other records of the Company for the fiscal year ending December 31, 1997. <TABLE> <S> <C> Votes For 9,357,446 Votes Against 53,772 Shares Abstain 31,628 Broker Non-Votes 0 </TABLE> Item 5. Other Information -- None. 12
13 Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No Description ---------- ----------- (3) (i) Second Restated Articles of Incorporation of The Lincoln Electric Company (3) (ii) Second Restated Code of Regulations of The Lincoln Electric Company (27) Financial Data Schedule. (b) Reports on Form 8-K -- None. 13
14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE LINCOLN ELECTRIC COMPANY /s/ H. JAY ELLIOTT - -------------------------- H. Jay Elliott Senior Vice President, Chief Financial Officer and Treasurer August 12, 1997 14