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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:
Common Shares................................10,770,959
Class A Common Shares........................13,837,697
----------
Total outstanding shares.....................24,608,656
==========
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THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands of dollars, except share data)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
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
See notes to these consolidated financial statements.
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THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
--------- ---------
ASSETS
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
========= =========
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THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars, except share data)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
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
========= =========
See notes to these consolidated financial statements.
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THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of dollars)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
-------- --------
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
======== ========
See notes to these consolidated financial statements.
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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.
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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:
Three months ended June 30,
-----------------------------------------------
(amounts in millions of dollars) 1997 1996
---------------------- ---------------------
Amount % of Sales Amount % of Sales
------ ---------- ------ ----------
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%
====== ====== ====== ======
Six months ended June 30,
-----------------------------------------------
(amounts in millions of dollars) 1997 1996
---------------------- ---------------------
Amount % of Sales Amount % of Sales
------ ---------- ------ ----------
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%
====== ====== ====== ======
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.
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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.
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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
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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.
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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:
Votes for Votes Withheld
--------- --------------
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
(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.
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(a) Common Shares and Class B Common Shares
voting together as a single class:
Votes For 8,609,202
Votes Against 330,251
Shares Abstain 63,094
Broker Non-Votes 440,299
(b) Class B Common Shares voting as a single
class:
Votes For 462,175
Votes Against 16,116
Shares Abstain 4,522
Broker Non-Vote 0
(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.
Votes For 8,266,716
Votes Against 1,072,386
Shares Abstain 71,417
Broker Non-Votes 32,327
(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.
Votes For 8,842,686
Votes Against 344,732
Shares Abstain 180,447
Broker Non-Votes 74,981
(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.
Votes For 9,357,446
Votes Against 53,772
Shares Abstain 31,628
Broker Non-Votes 0
Item 5. Other Information -- None.
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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.
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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
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H. Jay Elliott
Senior Vice President,
Chief Financial Officer and Treasurer
August 12, 1997
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