1 SECURITIES and EXCHANGE COMMISSION Washington, D

1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 1993 Commission File Number 0-1402

THE LINCOLN ELECTRIC COMPANY (Exact name of registrant as specified in its charter)

OHIO 34-0359955 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

22801 St. Clair Ave., Cleveland, Ohio 44117 (Address of principal executive offices) (Zip Code)

(216) 481-8100 (Registrant's telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Shares, without par value

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 (or for such shorter period that registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

State the aggregate market value of the voting common stock held by non-affiliates of the registrant.

Aggregate market value of the voting common stock held by non-affiliates as of March 1, 1994--$57,272,274. (Affiliates, for this purpose, have been deemed to be Directors of the Company, certain significant shareholders and employees participating in the Employees' Stock Purchase Plan and Employee Stock Ownership Plan).

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the close of the period covered by this report.

Common Capital Stock, without par value 10,381,450 shares, as of March 1, 1994. Class A Common Stock, without par value--499,840 shares, as of March 1, 1994.

DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's proxy statement for the annual meeting of shareholders to be held on May 24, 1994 will be incorporated by reference into Part III.

2 PART I

Item 1. BUSINESS

As used in Item 1 of this report, the term "Company", except as otherwise indicated by the context, means The Lincoln Electric Company and its subsidiaries.

The Lincoln Electric Company was incorporated under the laws of the State of Ohio in 1906. The Company is engaged primarily in the design, manufacture and sale of arc welding products which constitutes 88% of the Company's business. The Company also designs, manufactures and sells integral horsepower industrial electric motors, and some subsidiaries also sell industrial gases, regulators, and torches.

The arc welding machines, power sources and automated wire feeding systems manufactured by the Company range in technology from basic units used for light manufacturing and maintenance to highly sophisticated machines for robotic applications, high production welding and fabrication. Three primary types of arc welding electrodes are produced: (1) coated manual or stick electrodes, (2) solid electrodes produced in coil form for continuous feeding in mechanized welding, and (3) cored electrodes produced in coil form for continuous feeding in mechanized welding. The integral horsepower electric motors manufactured by the Company range in size from 1/3 to 250 horsepower. See Note H to the consolidated financial statements with respect to acquisitions by the Company.

The Company's products are sold in both domestic and international markets. In the domestic market, they are sold directly by the Company's own sales organization as well as by distributors. In the international markets, the Company's products are sold principally by foreign subsidiary companies. The Company also has an international sales organization comprised of international direct sales distributors, agents and dealers that operate in more than eighty-seven countries. The Company has manufacturing facilities located in the United States, Australia, Canada, Japan, Mexico, England, France, Ireland, Italy, the Netherlands, Norway and Spain. See Note G to the consolidated financial statements with respect to information concerning the Company's geographic segments.

The Company is not dependent on a single customer or a few customers. The loss of any one customer would not have a material adverse effect on its business. The Company's business is not seasonal.

Conditions in the arc welding industry are highly competitive. The Company is one of the largest manufacturers of consumables and machinery in a field of three or four major domestic competitors and numerous smaller competitors covering the industry. The Company continues to pursue strategies to heighten its competitiveness in international markets. Competition in the electric arc welding industry is on the basis of price, brand preference, product quality and performance, warranty, delivery, service and technical support. All of these factors have contributed to the Company's position as one of the leaders in the industry.

Virtually all of the Company's products may be classified as standard commercial articles and are manufactured for stock. Normally, customer orders are filled directly from finished product stock and, therefore, the backlog of orders at any particular time is relatively negligible.

The principal raw materials essential to the Company's business are various chemicals, steel, copper and aluminum, all of which are normally available for purchase in the open market. 3 Item 1. BUSINESS (Continued)

The Company's operations are not materially dependent upon patents, licenses, franchises or concessions.

The Company's facilities are subject to federal, state and local environmental control regulations. To date, compliance with these environmental regulations has not had a material effect on the Company's earnings nor has it required the Company to make significant capital expenditures.

Research activities relating to the development of new products and the improvement of existing products in 1993 were all Company-sponsored. These activities were primarily related to the development of new products utilizing the latest electronic technology. The number of professional employees engaged full-time in these research activities was 142. Refer to Note A to the consolidated financial statements with respect to costs of research and development.

The number of persons employed by the Company worldwide, as an average for the year ended December 31, 1993, was 6,036. Effects of plant closures will reduce worldwide employment levels in 1994.

The table below sets forth consolidated net sales by product line for the most recent three years:

1993 1992 1991 ------(In thousands of dollars)

Arc Welding Products $743,633 $741,860 $719,446 88% 87% 86% All Other 102,366 111,147 114,446 12% 13% 14% ------

$845,999 $853,007 $833,892 ======

Geographic segment information is included in Note G to the consolidated financial statements.

Item 2. PROPERTIES

The Company's corporate headquarters and principal United States manufacturing facilities are located in the Cleveland, Ohio area. Total Cleveland area property consists of 230 acres, of which present manufacturing facilities comprise an area of approximately 2,698,000 square feet. Current utilization of existing facilities is estimated to be 91% of capacity.

In addition to the principal facilities in Ohio, the Company operates two other manufacturing locations in the United States plus 13 manufacturing locations in 11 foreign countries, the locations of which are as follows:

United States: Gainesville, Georgia; Monterey Park, California. Australia: Sydney. Canada: Toronto. England: Sheffield. France: Grand-Quevilly. Ireland: Rathnew. Italy: Pianoro; Milano. Mexico: Mexico City. Netherlands: Nijmegen. Norway: Skjelland; Stavern.

4 Item 2. PROPERTIES (Continued)

Spain: Barcelona. Japan: Naraha.

Manufacturing facilities located in Germany, Venezuela, and Brazil were closed under the Company's restructuring program.

All property relating to the Company's Cleveland, Ohio headquarters and manufacturing facilities is owned outright by the Company and is unencumbered. In addition, the Company maintains leases for its distribution centers. See Note K to the consolidated financial statements with respect to leases. Most of the Company's foreign subsidiaries own manufacturing facilities in the foreign country where they are located. Some of these subsidiaries' properties are encumbered by mortgage loans. See Note D to the consolidated financial statements with respect to long-term debt.

Item 3. LEGAL PROCEEDINGS

The Company is subject, from time to time, to a variety of civil and administrative proceedings arising out of its normal operations including, without limitation, intellectual property related actions, employment-related actions and health, safety and environmental claims and proceedings under the laws governing workers' compensation. The Company does not believe that the outcome of such legal proceedings, solely or in aggregate, will have a material adverse effect upon the financial condition of the Company.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the quarter ended December 31, 1993.

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON CAPITAL STOCK AND RELATED STOCKHOLDER MATTERS

The Company's Common Capital Stock is traded on the over-the-counter market. The number of record holders of Common Capital Stock at December 31, 1993 was 2,497.

There is a limited public trading market for Common Capital Stock purchased through the Company's Employees' Stock Purchase Plan and for Class A Common Stock distributed under the Company's Employee Stock Ownership Plan. Shares purchased are subject to a right of refusal and other restrictions as set forth in the Employees' Stock Purchase Plan. Refer to Note B to the consolidated financial statements with respect to the rights of Class A Common Stock.

High and low stock prices and dividends for the last two years were:

1993 1992* ------CASH CASH BID PRICE DIVIDENDS BID PRICE DIVIDENDS ------QUARTER ENDED HIGH LOW PAID HIGH LOW PAID ------

March 31 $21.00 $19.20 $ .18 $23.00 $22.00 $ .18 June 30 20.50 19.20 .18 23.50 22.00 .18 September 30 20.50 17.00 .18 24.00 23.00 .18 December 31 18.00 16.25 .18 24.00 20.50 .18

Source: Ohio Dealers' Data Service

*Bid prices and cash dividends have been adjusted to reflect the ten-for-one stock split in 1993.

5 Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (Continued)

Future dividends, which are subject to limitations under the Credit Agreement and the Senior Note Agreement, will be based on financial performance of the Company (see Note D to the consolidated financial statements for a further description of these limitations.)

Item 6. SELECTED FINANCIAL DATA

Year Ended December 31

1993 1992 1991 1990 1989 ------

(In thousands of dollars, except per share amounts)

Net sales $845,999 $853,007 $833,892 $796,671 $692,817 Income (loss) before cumulative effect of accounting change (40,536) (45,800) 14,365 11,052 27,555 Cumulative effect of accounting change 2,468 ------Net income (loss) (38,068) (45,800) 14,365 11,052 27,555 Total assets 559,543 603,347 640,261 572,230 455,769 Long-term debt 216,915 221,470 155,547 110,940 30,161 Per common share: Income (loss) before cumulative effect of accounting change $(3.74) $ (4.24) $ 1.33 $ 1.03 $ 2.64 Cumulative effect of accounting change .23 ------Net income (loss) $(3.51) $ (4.24) $ 1.33 $ 1.03 $ 2.64 Cash dividends declared $ .72 $ .72 $ .61 $ 1.26 1.26

See Note C to the consolidated financial statements with respect to restructuring charges in 1993 and 1992. All per share amounts have been adjusted for the ten-for-one stock split in 1993.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(all dollar amounts are in thousands of dollars)

RESULTS OF OPERATIONS

Net sales decreased by less than 1% to $846,000 in 1993 from $853,000 in 1992 and increased 1.4% from 1991 sales of $833,900. Sales in 1993 for domestic companies were up 9.7% while sales of foreign companies were down 18.3% from 1992. Excluding sales resulting from acquisitions, 1992 domestic and foreign sales increased 6.0% and decreased 10.2%, respectively, from 1991. Approximately 45% of the increase in domestic sales in 1993 (90% in 1992) was attributable to an increase in volume. The remaining 55% in 1993 (10% in 1992) was due to increases in selling prices.

Gross margin increased to $313,200 in 1993 (37.0% of sales) as compared to $299,900 in 1992 (35.2% of sales) and $312,100 in 1991 (37.4% of sales). The improvement of gross margin was attributable to price increases coupled with the effect of increased volume, which included the effect of domestic market share gains. These effects, however, were partially offset by diminishing gross margins of the non-U.S. operations.

Distribution cost/selling, general and administrative expenses were $277,000 in 1993 (32.7% of sales) as compared to $299,200 in 1992 (35.1% of sales) and 6 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)

$270,500 in 1991 (32.4% of sales). The reduction in distribution cost/selling, general and administrative expenses in 1993 was principally the result of management's response to the recessionary pressures existing throughout Europe. Additionally, comparable results were affected by the incurrence of certain nonrecurring and non-continuing operating costs. Such costs included asset write-downs, relocation costs, various other charges relating to cost reduction efforts totaling $3,700 and $18,900 in 1993 and 1992, respectively.

In 1992, the increase in distribution cost/selling, general and administrative expenses was principally caused by a full year of operations of the Company's German subsidiary versus nine months in 1991, increased pension expense, and various adjustments discussed above. In 1991, distribution costs/selling, general and administration expenses were offset partially by the reversal of $6,200 of prior year charges relating to The Lincoln Electric Company 1988 Incentive Equity Plan.

The Company's net loss was $38,100 in 1993 as compared with $45,800 in 1992 and net income of $14,400 in 1991. Results were affected adversely by restructuring charges relating principally to the European and South American operations. These charges totaled $40,900 net-of-tax ($3.77 per share) and $23,900 without tax benefit ($2.21 per share) for 1993 and 1992, respectively (see discussion below). The 1991 results of operations included no restructuring charges.

Results for 1993 have also benefited from the cumulative effect of a change in method of accounting for income taxes, which increased net income $2,468 or $.23 per share. See Note A, "Accounting Policies," for additional information regarding the effects of the change in method in accounting for income taxes. The provision for income taxes reflects a net benefit of $6,400 on a loss before income taxes of $46,900 for 1993 which principally reflects tax benefits attributable to the plant closure and liquidation of a German subsidiary (see discussion below). For 1992, the provision for income taxes was $11,400 on a loss before income taxes of $34,400 compared to a provision of $20,000 on income before income taxes of $34,400 in 1991. The higher effective rates experienced in 1992 and 1991 were due principally to losses of foreign subsidiaries that were in net operating loss carryover positions.

RESTRUCTURING CHARGES

In 1992, the Company's restructuring program was initiated to improve efficiency and future financial results for its non-U.S. operations, principally its European markets. This decision resulted in a restructuring charge to 1992 operations of $23,900, without tax benefit.

It became evident in 1993 that the 1992 restructuring charges were not sufficient to reverse operating results in Germany, as the Company's principal German subsidiary continued to incur significant losses, experiencing eroding sales levels within the context of depressed market conditions. Accordingly, the Board of Directors decided in early 1994 to terminate the manufacturing and sales operations of its Messer Lincoln subsidiary in Germany. The intent of the action was to eliminate substantial costs in manufacturing overhead and distribution expenses in Europe, and to enable the Company to redirect its resources toward more efficient and competitive facilities that will serve the European market. Similarly, the Board of Directors decided in early 1994 that overcapacity in the weak and turbulent economies of Brazil and Venezuela required the curtailment of production operations in such markets, even though sales, marketing and distribution activities in those countries will continue. 7 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)

The above-referenced decisions, which will result in the termination of approximately 800 employees, resulted in pretax restructuring charges of $70,100 for 1993 ($40,900 after tax). See Note C to the consolidated financial statements, "Restructuring Charges," for additional information.

As indicated earlier, operating results of the Company's highly efficient U.S. and Canadian operations showed increased levels of profitability and market share in 1993. Although consolidated results were affected adversely in 1992 and 1993 by restructuring charges, management believes the Company is well positioned now to maximize its opportunities in the worldwide markets it serves.

RESEARCH AND DEVELOPMENT

The Company decreased its expenditures for research activities during both 1993 and 1992. However, the Company believes the current level of research and development is adequate to maintain its product lines and introduce new products at an appropriate rate to sustain future growth. Excellence in research and development is a key success factor for the Company.

LIQUIDITY AND CAPITAL RESOURCES

In March 1993, the Company entered into a $230,000 three-year, unsecured, multi-currency Credit Agreement with ten banks. The funds were used to replace the Company's then existing revolving credit agreement, its long-term borrowing arrangements with foreign banks, and to refinance and consolidate certain other foreign short-term and long-term obligations. See Note D to the consolidated financial statements, "Short-Term and Long-Term Debt," for additional information regarding the borrowing arrangement. The Credit Agreement was amended in November 1993 in order to provide for more flexible terms to accommodate the Company's restructuring program.

Total debt at December 31, 1993 was $250,300 compared to $248,600 at December 31, 1992. At December 31, 1993, debt was 64% of total capitalization (shareholders' equity and debt) compared with 56% at year-end 1992. Interest expense incurred was $17,600 in 1993 compared with $18,700 in 1992, reflecting slightly lower interest rates as compared with the prior year. This compares to interest expense of $15,700 in 1991, reflecting an increase in the average debt level.

The Company's cash flows for the years 1991 through 1993 are presented in the consolidated statements of cash flows. Cash provided from operating activities during 1993 amounted to $28,700, an increase of $5,100 as compared with $23,600 for 1992. In addition to financing, certain operating losses in Europe, cash flows from operations and additional borrowings were used primarily for investments, capital expenditures and dividends to shareholders.

In 1992, expenditures by the Company for the purchase of a small Mexican company and the additional investment in its Lincoln Norweld subsidiary totaled $37,300, compared to $48,700 in 1991 for the purchase of a German business.

The ratio of current assets to current liabilities was 1.9 at the end of 1993, compared with 2.2 at the end of 1992 reflecting a satisfactory liquidity position. Net working capital was $149,900 at December 31, 1993, as compared with $172,700 at December 31, 1992. The reduction in working capital was primarily the result of the reduction of the carrying value of assets to their net realizable value and the increases in other current liabilities in connection with the restructuring expenses. Notes payable to banks increased to $23,200 at the end of 1993, from $12,600 at the end of 1992. 8 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)

Capital expenditures in 1993 for property, plant and equipment totaled $19,100 (1992 - $34,800). These expenditures for property, plant and equipment represent the Company's commitment to its long-range objectives to enhance product quality and development, advance technology, expand capacity and reduce manufacturing costs. The Company is closely monitoring its capital outlays and commitments with such expenditures restricted to include only those projects showing potential for high internal rate of return with accelerated cash payback.

In 1993, consistent with the prior year, the Company did not pay a special dividend, paying regular dividends of $7,800 for the full year. Future dividends, which are subject to limitations under the Credit Agreement and the Senior Note Agreement, will be based upon the financial performance of the Company (see Note D to the consolidated financial statements).

The Credit Agreement and 8.98% Senior Note Agreement contain various financial covenants that place limitations on the payments of dividends, the purchase of unrestricted stock, capital expenditures, and the incurrence of additional indebtedness. While the operating losses for 1993 and 1992 have placed constraints on the Company's financial flexibility, the Company was in compliance with the financial covenants of the agreements at the end of 1993 and management believes that the Company will continue to meet such covenants throughout 1994. Management believes that the current financing arrangement and cash flow generated from operations will provide adequate funds to support the operations of the Company and satisfy both its capital requirements and regular dividend practices throughout the term of the Credit Agreement.

ENVIRONMENTAL MATTERS

The Company's U.S. facilities are subject to Federal, state and local environmental control regulations. To date, compliance with these environmental regulations has not had a material effect on the Company's earnings nor has it required the Company to make significant capital expenditures. It is the opinion of management that the Company is in material compliance with all regulatory requirements.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This statement requires companies to present certain investments in marketable equity securities and many debt securities at fair value. SFAS No.115 is effective for fiscal years beginning after December 15, 1993. As the Company does not hold significant portfolios of debt and marketable equity securities nor is it the Company's principal business purpose to actively acquire and sell debt and equity securities to make a profit from short-term movements in market prices, adoption of SFAS No. 115 is not expected to have any substantial impact on the financial statements.

In December 1990, the FASB issued new rules in SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective in 1993 domestically and effective for non-U.S. plans in 1995. In November 1992, the FASB issued Statement No. 112, "Employers' Accounting for Postemployment Benefits." The Company is required to implement the Statement in the first quarter of 1994. These statements have no impact on the consolidated financial position or results of operations because the Company does not provide for any postretirement or postemployment benefits other than pensions. 9 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is submitted in a separate section of this report following the signature page.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

A definitive proxy statement will be filed pursuant to Regulation 14A of the Securities Exchange Act prior to April 29, 1994. Therefore, information required under this part will be incorporated herein by reference from such definitive proxy statement.

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) FINANCIAL STATEMENTS

The following consolidated financial statements of the Company are included in a separate section of this report following the signature page:

Statements of Consolidated Financial Condition--December 31, 1993 and 1992 Statements of Consolidated Operations--Years ended December 31, 1993, 1992 and 1991 Statements of Consolidated Shareholders' Equity--Years ended December 31, 1993, 1992 and 1991 Statements of Consolidated Cash Flows--Years ended December 31, 1993, 1992 and 1991 Notes to Consolidated Financial Statements--December 31, 1993 Reports of Independent Auditors

(a) (2) FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statement schedules of the Company are included in a separate section of this report following the signature page:

Schedule II--Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other than Related Parties Schedule V--Property, Plant and Equipment Schedule VI--Accumulated Depreciation, Depletion, and Amortization of Property, Plant and Equipment Schedule VIII--Valuation and Qualifying Accounts Schedule IX--Short-Term Borrowings Schedule X--Supplementary Income Statement Information

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted.

(a) (3) EXHIBITS

EXHIBIT NO. DESCRIPTION ------

3(a) Amended and Restated Articles of Incorporation of The Lincoln Electric Company filed herewith.

10 Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Continued)

(a) (3) EXHIBITS (Continued)

EXHIBIT NO. DESCRIPTION ------

3(b) Amended and Restated Code of Regulations of The Lincoln Electric Company (filed as Exhibit 3(b) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1987, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).

4(a) Note Agreement dated November 20, 1991 between The Prudential Insurance Company of America and the Company (filed as Exhibit 4 to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1991, SEC File No. 0-1402 and incorporated by reference and made a part hereof), as amended by letter dated March 18, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(b) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1992, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof); as further amended by letter dated as of November 19, 1993; 8.98% Senior Note Due November 26, 2003 (filed herewith).

4(b) Credit Agreement dated March 18, 1993 among the Company, the Banks listed on the signature page thereof, and Society National Bank, as Agent (filed as Exhibit 4 (b) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1992, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof), as amended by Amendment No.1 to Credit Agreement dated November 19, 1993; 8.98% Senior Note Due November 26, 2003 (filed herewith).

9 Voting Trust Agreement (filed as Exhibit 9 to the Form 10-K of The Lincoln Electric Company for the year ended December 31, 1988, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).

10(a) * The Lincoln Electric Company 1988 Incentive Equity Plan (filed as Exhibit 28 to the Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-25209 and incorporated herein by reference and made a part hereof).

10(b) Form of Indemnification Agreement (filed as Exhibit A to The Lincoln Electric Company 1987 Proxy Statement, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).

11 Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Continued)

(a) (3) EXHIBITS (Continued)

EXHIBIT NO. DESCRIPTION ------

11 Statement regarding computation of per share earnings.

21 Subsidiaries of the Registrant.

23 Consents of Independent Auditors.

* Reflects executive compensatory arrangement required to be filed as an Exhibit pursuant to Item 14(c) of this Report.

Upon request, The Lincoln Electric Company will furnish to security holders copies of any exhibit to the Form 10-K report upon payment of a reasonable fee. Any requests should be made in writing to: Mr. Ellis F. Smolik, Secretary-Treasurer, The Lincoln Electric Company, 22801 St. Clair Avenue, Cleveland, Ohio 44117, Phone: (216) 481-8100.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 ------(Registrant)

/s/ Ellis F. Smolik ------Ellis F. Smolik, Senior Vice President, Chief Financial Officer, Secretary-Treasurer and Director 12 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 30, 1994.

/s/ Donald F. Hastings /s/ Frederick W. Mackenbach ------Donald F. Hastings, Chairman of the Frederick W. Mackenbach, President, Board and Chief Executive Officer Chief Operating Officer and Director

/s/ Harry Carlson /s/John Gonzalez ------Harry Carlson, Vice Chairman and John Gonzalez, Vice Chairman and Director Director

/s/ Edward E. Hood, Jr. /s/ Roger F. Young ------Edward E. Hood, Jr., Director Roger F. Young, Senior Vice President and Director

/s/ Paul E. Lego /s/ David H. Gunning ------Paul E. Lego, Director David H. Gunning, Director

/s/ Hugh L. Libby /s/ David C. Lincoln ------Hugh L. Libby, Director David C. Lincoln, Director

/s/ Emma S. Lincoln /s/ G. Russell Lincoln ------Emma S. Lincoln, Director G. Russell Lincoln, Director

/s/ Lawrence O. Selhorst /s/ Craig R. Smith ------Lawrence O. Selhorst, Director Craig R. Smith, Director

/s/ Frank L. Steingass /s/ George E. Willis ------Frank L. Steingass, Director George E. Willis, Director

13 ANNUAL REPORT ON FORM 10-K

ITEM 8, ITEM 14(a)(1) AND (2) AND ITEM 14(d)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL STATEMENT SCHEDULES

YEAR ENDED DECEMBER 31, 1993

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES 14

REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors The Lincoln Electric Company

We have audited the consolidated financial statements of The Lincoln Electric Company and subsidiaries listed in the accompanying index to financial statements Item 14(a1). Our audits also included the financial statement schedules listed in the Index at Item 14 (a2). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We did not audit the consolidated financial statements of The Lincoln Electric Company (Australia) Proprietary Limited and subsidiaries and, for 1992 and 1991, the consolidated financial statements of Lincoln-Norweld B.V. and subsidiaries and the financial statements of Messer Lincoln GmbH and its subsidiary, all consolidated subsidiaries, which statements reflect total assets constituting 5% in 1993 and 41% in 1992 and total revenues constituting 5% in 1993 and 36% in 1992 and 1991 of the related consolidated totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to data included for The Lincoln Electric Company (Australia) Proprietary Limited and subsidiaries and, for 1992 and 1991, Lincoln-Norweld B.V. and subsidiaries and Messer Lincoln GmbH and its subsidiary, is based solely on the reports of the other auditors.

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 and the reports of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Lincoln Electric Company and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

As discussed in Note A to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for income taxes.

/s/ Ernst & Young ------ERNST & YOUNG

Cleveland, Ohio March 25, 1994

To the Board of Directors of The Lincoln Electric Company (Australia) Proprietary Limited

REPORT OF INDEPENDENT ACCOUNTANTS ------

In our opinion, the consolidated balance sheets and the related consolidated statements of income and retained earnings and of cash flows (none of which are presented separately herein) present fairly, in all material respects, the financial position of The Lincoln Electric Company (Australia) Proprietary Limited and its subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse

Parramatta, Australia March 9, 1994 16

STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

(In thousands of dollars)

December 31 1993 1992 ------

ASSETS

CURRENT ASSETS Cash and cash equivalents $ 20,381 $ 20,627 Accounts receivable (less allowances of $6,258 in 1993; $5,434 in 1992) 110,504 111,323 Inventories Raw materials and in-process 66,987 75,972 Finished goods 76,698 95,280 ------143,685 171,252

Deferred income taxes 42,960 7,715 Prepaid expenses 3,241 3,097 Other current assets 4,937 7,184 ------TOTAL CURRENT ASSETS 325,708 321,198

OTHER ASSETS Notes receivable from employees--Note J 4,747 6,657 Goodwill--Note C 39,732 50,319 Other 19,665 16,772 ------64,144 73,748 PROPERTY, PLANT AND EQUIPMENT Land 12,802 18,192 Buildings 113,927 123,817 Machinery, tools and equipment 279,933 293,238 ------406,662 435,247 Less allowances for depreciation and amortization 236,971 226,846 ------169,691 208,401 ------TOTAL ASSETS $559,543 $603,347 ======

STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

(In thousands of dollars)

December 31 1993 1992 ------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES Trade accounts payable $ 43,471 $ 44,211 Notes payable to banks--Note D 23,198 12,643 Salaries, wages and amounts withheld 12,779 13,882 Taxes, including income taxes--Note E 23,061 12,159 Dividends payable 1,959 1,942 Current portion of long-term debt--Note D 10,200 14,493 Accrued restructuring charges--Note C 29,618 18,356 Other current liabilities 31,569 30,861 ------TOTAL CURRENT LIABILITIES 175,855 148,547

LONG-TERM DEBT, less current portion--Note D 216,915 221,470

DEFERRED INCOME TAXES 6,128 8,526

OTHER LONG-TERM LIABILITIES 9,221 9,235

MINORITY INTEREST IN SUBSIDIARIES 7,929 16,846

SHAREHOLDERS' EQUITY Common Capital Stock, no par value--at stated capital amount--Note B: Authorized--15,000,000 shares in 1993; 1,500,000 shares in 1992 Outstanding--10,381,450 shares in 1993 and 1,033,346 shares in 1992, exclusive of 4,479,390 shares in 1993 and 452,738 shares in 1992 held in treasury 2,076 207 Common Class A Stock, no par value--at stated capital amount--Note B: Authorized--2,000,000 shares in 1993; 200,000 shares in 1992 Outstanding--499,840 shares in 1993 and 45,062 shares in 1992 100 9 Additional paid-in capital 22,926 23,067 Retained earnings 137,307 183,183 Cumulative translation adjustments (18,914) (7,743) ------143,495 198,723 ------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $559,543 $603,347 ======

See notes to consolidated financial statements. 18

STATEMENTS OF CONSOLIDATED OPERATIONS

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

(In thousands of dollars except per share data)

Year Ended December 31 1993 1992 1991 ------

Net sales $845,999 $853,007 $833,892

Cost of goods sold 532,795 553,103 521,829 ------

Gross Profit 313,204 299,904 312,063

Distribution cost/selling, general & administrative expenses 277,003 299,195 270,512 Restructuring charges--Note C 70,079 23,897 ------

Operating income (loss) (33,878) (23,188) 41,551

Other income/(expenses): Interest income 1,627 3,061 4,789 Other income 2,922 4,433 3,803 Interest expense (17,621) (18,736) (15,732) ------Total other income/(expenses) (13,072) (11,242) (7,140) ------

Income (loss) before income taxes and cumulative effect of accounting change (46,950) (34,430) 34,411 (Provision) Benefit for income taxes-- Note E 6,414 (11,370) (20,046) ------

Income (loss) before cumulative effect of accounting change (40,536) (45,800) 14,365

Cumulative effect to January 1, 1993 of change in method of accounting for income taxes--Note A 2,468 ------

Net income (loss) $(38,068) $(45,800) $ 14,365 ======

Net income (loss) per share: Income (loss) before cumulative effect of accounting change (3.74) (4.24) 1.33 Cumulative effect of accounting change .23 ------Net income (loss) per share $ (3.51) $ (4.24) $ 1.33 ======

Dividends declared $ 0.72 $ 0.72 $ .61 ======

See notes to consolidated financial statements. 19

STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

(In thousands of dollars)

Year Ended December 1993 1992 1991 ------SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS ------

COMMON CAPITAL STOCK Balance at beginning of year 1,033,346 $ 207 1,039,142 $ 208 1,047,737 $ 210 Purchases (16,841) (3) (26,570) (5) Sales to employees 3,648 1 9,979 2 17,975 3 Shares issued under Incentive Equity Plan 1,151 1,066 Ten-for-one stock split 9,343,305 1,868 ------Balance at end of year 10,381,450 $ 2,076 1,033,346 $ 207 1,039,142 $ 208 ======

COMMON CLASS A STOCK Balance at beginning of year 45,062 $ 9 35,794 $ 7 26,854 $ 5 Ten-for-one stock split 405,558 81 Shares issued to ESOP 49,220 10 9,268 2 8,940 2 ------Balance at end of year 499,840 $ 100 45,062 $ 9 35,794 $ 7 ======

ADDITIONAL PAID-IN CAPITAL Balance at beginning of year $ 23,067 $ 20,845 $ 16,816 Purchases of Common Capital Stock (2,473) (2,015) Sales of Common Capital Stock to employees 678 2,373 4,043 Shares issued to ESOP 906 2,058 2,001 Shares issued under Incentive Equity Plan 224 264 Ten-for-one stock split (1,949) ------Balance at end of year $ 22,926 $ 23,067 $ 20,845 ======

RETAINED EARNINGS Balance at beginning of year $183,183 $238,412 $234,789 Net income (loss) (38,068) (45,800) 14,365 Purchases of Common Capital Stock (1,667) (4,196) Cash dividends declared (7,808) (7,762) (6,546) ------Balance at end of year $137,307 $183,183 $238,412 ======

CUMULATIVE TRANSLATION ADJUSTMENTS Balance at beginning of year $ (7,743) $ 4,664 $ 2,470 Adjustments for the year (11,171) (12,407) 2,194 ------Balance at end of year $(18,914) $ (7,743) $ 4,664 ======

See notes to consolidated financial statements. 20

STATEMENTS OF CONSOLIDATED CASH FLOWS

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

Year Ended December 31 1993 1992 1991 ------

OPERATING ACTIVITIES Net income (loss) $(38,068) $(45,800) $ 14,365 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 30,545 31,511 30,456 Provision (Benefit) for deferred income taxes (32,501) 538 2,430 Cumulative effect of accounting changes (2,468) Foreign exchange loss (gain) (348) 957 1,205 Incentive equity plan reduction (6,219) Employee Stock Ownership Plan 916 2,060 2,003 Minority interest (358) (2,158) (4,953) Provision for restructuring 68,370 18,356 Changes in operating assets and liabilities net of effects from acquisitions: (Increase) decrease in accounts receivable (6,228) (739) 5,475 (Increase) decrease in inventories 10,654 22,939 (12,548) (Increase) decrease in other current assets (1,331) 695 10,687 Increase (decrease) in accounts payable 2,856 171 (3,981) Increase (decrease) in other current liabilities (2,928) (4,060) 13,549 Gross change in other noncurrent assets (3,112) (2,699) (1,465) Other--net 2,734 1,853 (3,128) ------NET CASH PROVIDED BY OPERATING ACTIVITES 28,733 23,624 47,876

INVESTING ACTIVITIES Purchases of property, plant and equipment (19,090) (34,847) (37,605) Sales of property, plant and equipment 2,599 4,448 7,219 Acquisitions, net of cash acquired (8,518) (37,288) (48,656) ------NET CASH USED IN INVESTING ACTIVITIES (25,009) (67,687) (79,042)

FINANCING ACTIVITIES Proceeds from the sale of Common Capital stock 679 2,375 4,046 Purchase of Common Capital stock (4,143) (6,215) Proceeds from short-term borrowings, maturities greater than three months 305 11,674 Payments on short-term borrowings, maturities greater than three months (12,736) Notes payable to banks--net (9,470) (33,416) 8,054 Proceeds from long-term borrowings 603,405 287,317 132,255 Payment on long-term borrowings (576,445) (212,111) (90,009) Dividends paid (7,791) (7,756) (12,348) Other (210) 321 (128) ------NET CASH PROVIDED (USED) BY FINANCING ACTIVITES (2,263) 44,261 35,655 Effect of exchange rate changes on cash and cash equivalents (1,707) 170 294 ------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (246) 368 4,783

Cash and cash equivalents at beginning of year 20,627 20,259 15,476 ------

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 20,381 $ 20,627 $ 20,259 ======

See notes to consolidated financial statements. 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars except per share data)

December 31, 1993

NOTE A--ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of The Lincoln Electric Company and its subsidiaries (the "Company") after elimination of all significant intercompany accounts and transactions.

CASH EQUIVALENTS: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

INVENTORIES: Inventories are valued at the lower of cost or market. The Company determines cost by the last-in, first-out (LIFO) method, and subsidiary companies determine cost by the first-in, first-out (FIFO) method. At December 31, 1993 and 1992, approximately 45% and 34%, respectively, of total inventories were valued using the LIFO method. The excess of current cost over LIFO cost amounted to $48,490 at December 31, 1993 and $48,555 at December 31, 1992. During 1992, certain LIFO inventories were reduced, resulting in liquidations of LIFO inventory quantities carried at the lower costs of prior years, as compared with their 1992 costs. The effect of these liquidations was to reduce the 1992 net loss after tax, by $1,018 ($.09 per share).

PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment, including facilities and equipment under capital leases, are stated at cost and include improvements which significantly extend the useful lives of existing plant and equipment. Depreciation and amortization are computed by both the accelerated and straight-line methods. In 1993, property, plant and equipment for manufacturing facilities that were closed were written down to their estimated net realizable value.

RESEARCH AND DEVELOPMENT: Research and development costs, which are expensed as incurred, were $17,762 in 1993, $20,540 in 1992 and $21,311 in 1991.

GOODWILL: The excess of the purchase price over the fair value of net assets acquired (goodwill) is amortized on a straight-line basis over periods not exceeding 40 years. Amounts are stated net of accumulated amortization of $2,363 and $2,170 in 1993 and 1992, respectively.

TRANSLATION OF FOREIGN CURRENCIES: For subsidiaries in countries which do not have highly inflationary economies, asset and liability accounts are translated to U.S. dollars using exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average exchange rates. Translation adjustments are reflected as a component of shareholders' equity.

For subsidiaries in countries with highly inflationary economies (Venezuela and Brazil) inventories, property, plant and equipment and related depreciation are translated to U.S. dollars at historical exchange rates. Other asset and liability accounts are translated at exchange rates in effect at the balance sheet date and revenues and expenses, excluding depreciation, are translated at average exchange rates. Translation adjustments for these subsidiaries, as well as transaction gains and losses of all other subsidiaries, are included in the statements of consolidated operations in distribution cost/selling, general and administrative expenses. The Company recorded transaction losses in 1993 of $228 and $859 in 1992. 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars except per share data)

December 31, 1993

NOTE A--ACCOUNTING POLICIES-(Continued)

ACCOUNTING CHANGE: Effective January 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." Under Statement No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement No. 109, income tax expense was determined using the deferred method under which deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. As permitted by Statement No. 109, the Company has elected not to restate the financial statements of any prior year. The cumulative effect of the change decreased the loss for 1993 by $2,468 or $.23 per share.

NET INCOME (LOSS) PER SHARE: Net income (loss) per share is based on the average number of shares outstanding during the year as adjusted for the ten-for-one stock split discussed in Note B.

RECLASSIFICATIONS: Certain reclassifications have been made to amounts previously presented to conform with the current reporting presentation.

NOTE B--SHAREHOLDERS' EQUITY

On May 25, 1993, the Company's shareholders approved an increase in the number of authorized shares to 17 million without par value in conjunction with a ten-for-one stock split of the Company's Common Capital and Class A Common Stock. This action became effective on June 1, 1993, for shareholders of record as of that date. A total of 9,343,305 shares of Common Capital Stock and 405,558 shares of Class A Common Capital Stock were issued in connection with the stock split. Additionally, 4,031,451 shares were issued for stock held in treasury. The stated value of the Common Capital and Class A Common Capital Stock remains unchanged at $.20 per share. As a result of the stock split, all per share and appropriate share amounts have been adjusted to reflect the stock split.

The Lincoln Electric Company Employees' Stock Purchase Plan ("Plan") provides that employees may purchase shares of the Company's Common Capital Stock, when offered, at its estimated fair value. The Company also has the option to repurchase shares issued under the Plan at their estimated fair value. In 1992, the Company instituted a temporary suspension on the repurchase of all shares of stock issued and outstanding. Future repurchase of stock by the Company will be contingent upon authorization and resolution of the Board of Directors. At December 31, 1993, all unissued shares (4,618,550) were available for sale under the Plan of which 774,656 shares were reserved or subscribed.

The Lincoln Electric Company 1988 Incentive Equity Plan ("Incentive Equity Plan") provided for the award or sale of Common Capital Stock to officers and other key employees of the Company and its subsidiaries. The first program, implemented under the Plan in 1988, which provided for deferred stock awards, was completed as of December 31, 1991. Shares remain available under the Incentive Equity Plan to officers and other key employees. Distribution of shares was based on certain specified performance and other conditions being satisfied. As a result of such conditions being fulfilled with respect to certain of the Company's subsidiaries, the Company awarded 32,000 shares; 10,660 distributed in each April of 1992 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars except per share data)

December 31, 1993

NOTE B--SHAREHOLDERS' EQUITY--(Continued) and 1993, and 10,680 shares in April of 1994. Based on criteria established under the Plan, $7,000 of compensation expense was accrued in 1990, of which $6,219 was reversed into income in 1991.

The Lincoln Electric Company Employee Stock Ownership Plan (the "ESOP") is a non-contributory profit-sharing plan established to provide deferred compensation benefits for all eligible employees. The cost of the plan is borne by the Company through contributions to an employee stock ownership trust. In May 1989, shareholders authorized 2,000,000 shares of new Class A Common Stock ("Class A Common Stock"), without par value. The Company's Common Capital Stock and Class A Common Stock are identical in all respects, except that holders of Class A Common Stock are subject to certain transfer restrictions and the Class A Common Stock is only issued to the ESOP. In 1993, the Company issued 49,220 shares (92,680 shares in 1992) of Class A Common Stock to the ESOP which were allocated to all eligible employees. The estimated fair value of the contributed shares, $916, was recorded as compensation expense ($2,060 in 1992 and $2,003 in 1991). The difference between the total stated capital amount of $.20 per share and the estimated fair value totaled $906 ($2,058 in 1992 and $2,001 in 1991) was recorded as additional paid-in-capital. At December 31, 1993, 1,500,160 authorized but unissued shares (1,549,380 shares at December 31, 1992) are available for issuance to the ESOP.

NOTE C--RESTRUCTURING CHARGES

The Company has substantially completed its plan to downsize and streamline certain foreign operations (principally in Europe) and close certain manufacturing facilities (principally in Europe and South America). Closings of the manufacturing facilities have been announced and the closings and redundancies will be completed in 1994. These decisions resulted in a restructuring charge of $70,100 ($40,900 after tax, or $3.77 per share) in 1993, which was comprised of (1) asset write-downs to net realizable value in the amount of $45,900 including goodwill of $8,900; (2) the recording of severance and other redundancy costs of $27,500; and (3) the recording of additional net settlement assets and liabilities of $3,300 including estimated losses through the final closing date. The cash outlays required to fund the restructuring will be substantially incurred in 1994, and will be funded by the liquidation of the affected companies' receivables, inventory and real estate and by the Company's other operations and outside sources of funding. Proceeds from the sale of certain of the property, plant and equipment with a net carrying value of approximately $11,000 is not expected to be realized until after 1994.

In 1992, the Company recorded a restructuring charge of $23,900 (without tax benefit, or $2.21 per share) as a result of decisions that were made at that time to downsize and streamline certain foreign operations (principally in Europe). The 1992 restructuring charge was principally for severance pay, redundancies and other liabilities relating to the reorganization of the sales and distribution operations. 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

NOTE D--SHORT-TERM AND LONG-TERM DEBT

1993 1992 ------

Short-term debt: Short-term borrowings of subsidiaries at interest rates from 4.125% to 23.25% (4.375% to 42.00% in 1992) $ 23,198 $ 12,643 ======

Long-term debt: Borrowings refinanced under new credit agreement: $ 111,458 Multi-currency credit agreement, due January 1, 1996 $ 126,457 8.98% Senior Note due 2003 (equal annual principal payments commencing in 1996) 75,000 75,000 Other borrowings due through 2001, interest at 3.00% to 13.74% (3.00% to 14.00% in 1992) 25,658 49,505 ------$ 227,115 $ 235,963 Less current portion 10,200 14,493 ------Total $ 216,915 $ 221,470 ======

In March 1993, the Company entered into a $230,000 three-year, unsecured, multi-currency Credit Agreement with ten banks. The Credit Agreement, which expires January 1, 1996, replaced the Company's previous $75,000 revolving line of credit, and amounts outstanding at December 31, 1992 under the previous revolving line of credit ($30,000), certain notes payable to foreign banks ($25,000), various short-term borrowings of subsidiaries ($39,100), and various other long-term borrowings ($17,300). Borrowings outstanding at December 31, 1992 that were repaid from the proceeds of the Credit Agreement were classified in the consolidated balance sheet to reflect the terms of the Credit Agreement. Under the terms of the Credit Agreement, several pricing options are available and the interest rate on outstanding borrowings is determined based upon defined leverage rates for the pricing option selected. The interest rate can range from the LIBOR plus 1% to LIBOR plus 2% depending upon the defined leverage rate. The agreement also provides for commitment fees ranging from .375% to .5% per annum on the unused credit lines.

Simultaneously, with the signing of the Credit Agreement, the interest rate on the $75,000 8.73% Senior Note due in 2003 was increased to 8.98% and the Senior Note Agreement was amended to change the financial covenants to conform to the covenants of the Credit Agreement, which requires a 1.6 to 1 consolidated current ratio at all times and the maintenance of consolidated tangible net worth of $125,000, plus 50% of net income, subsequent to January 1, 1993. In addition, there are requirements with respect to interest coverage and debt to tangible net worth ratios, and limitations on capital expenditures. Purchases of unrestricted stock and the payment of dividends are limited to 50% of cumulative net income from January 1, 1993, plus $25,000. At December 31, 1993, $17,200 was available for dividends and purchases of unrestricted stock, providing the Company complies with the other financial covenants of the agreements. 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

December 31, 1993

NOTE D--SHORT-TERM AND LONG-TERM DEBT--(Continued)

In November 1993, a number of the financial covenants contained in the Credit Agreement and in the Senior Note Agreement, were amended to allow for the costs of restructuring certain of the Company's foreign operations. The covenant related to consolidated tangible net worth was amended to require a minimum of $110,000 prior to June 30, 1994; $115,000 prior to September 30, 1994; $120,000 prior to December 31, 1994; and $125,000 plus 50% of net income subsequent to January 1, 1995, and the covenant related to the ratio of consolidated debt to consolidated tangible net worth was amended to require a ratio of 2.45 to 1 at December 31, 1993, reducing to 1.85 to 1 at July 1, 1994 and 1.35 to 1 at July 1, 1995 and thereafter.

Maturities of long-term debt for the five years succeeding December 31, 1993 are $10,200 in 1994, $128,200 in 1995, $10,700 in 1996, $11,400 in 1997; $9,600 in 1998 and $57,000 thereafter.

At December 31, 1993, certain foreign loans were collateralized by property and equipment which have a carrying value of approximately $21,400.

In 1992, the Company terminated its interest rate swap agreement with a notational borrowing amount of $75,000 and received $2,586 which is being amortized over the original swap term (December 1994) as a yield adjustment to interest expense of the underlying $75,000 debt.

Interest expense capitalized to property, plant and equipment was $71 in 1993 and $320 in 1992. Total interest paid was $19,000 in 1993, $17,500 in 1992, and $15,700 in 1991.

In connection with the Company's expansion of its motor plant, which is expected to cost $19,800, the Company has received low interest rate loan commitments from certain governmental entities in the amount of $6,000, of which, $2,000 was received in March 1994. The Company has also applied for and expects to receive, $2,300 in governmental grants for the same project.

NOTE E--INCOME TAXES

Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting For Income Taxes". As permitted under the new Statement, prior years' financial statements have not been restated. The cumulative effect of adopting this statement as of January 1, 1993 is reported separately in the Statement of Consolidated Operations.

The components of income (loss) before income taxes and cumulative effect of accounting change is as follows:

1993 1992 1991 ------

Domestic $ 43,345 $ 24,120 $ 49,310 Foreign (90,295) (58,550) (14,899) ------Total $(46,950) $(34,430) $ 34,411 ======

26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

December 31, 1993

NOTE E--INCOME TAXES--(Continued)

Significant components of income tax expense (benefit) are as follows:

Liability Method Deferred Method ------1993 1992 1991 ------

Current: Federal $ 21,032 $ 8,295 $ 12,565 Foreign 2,227 1,310 2,959 State and local 2,828 1,227 2,092 ------26,087 10,832 17,616

Deferred: Federal (32,980) 1,232 2,400 Foreign 479 (694) 30 ------(32,501) 538 2,430 ------

Total $ (6,414) $ 11,370 $ 20,046 ======

The components of the provision for deferred income taxes are as follows:

Deferred Method ------1992 1991 ------

Inventory adjustments $ 201 $ 188 Incentive equity plan 87 2,115 Depreciation 204 777 Other asset adjustments (88) (674) Pension adjustments (299) (842) Employee stock ownership plan (149) 748 Other 582 118 ------Total $ 538 $ 2,430 ======

The differences between total income tax expense (benefit) and the amount computed by applying the statutory Federal income tax rate to income (loss) before income taxes and cumulative effect of accounting change are as follows:

Liability Method Deferred Method 1993 1992 1991 ------

Statutory rate applied 35% 34% 34% to pre-tax income(loss) $(16,432) $(11,706) $ 11,700 Effect of state and local income taxes, net of Federal tax benefit 1,838 810 1,381 Differences in income taxes on foreign earnings and remittances 336 (502) (1,341) Foreign losses with no tax benefit 8,308 22,650 8,580 Foreign Sales Corporation (703) (630) (156) Other items 239 748 (118) ------

Total $ (6,414) $ 11,370 $ 20,046 ======

27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

December 31, 1993

NOTE E--INCOME TAXES--(Continued)

Total income tax payments, net of refunds, were $19,387 in 1993, $16,542 in 1992 and $12,668 in 1991.

At December 31, 1993, the Company's foreign subsidiaries had net operating loss carryforwards of approximately $44,875. The loss carryforwards expire in various years from 1994 through 2002, except for certain loss carryforwards of $571 for which there are no expiration dates.

Significant components of the Company's deferred tax assets and liabilities at December 31, 1993 are as follows:

1993 ------

Deferred tax assets: Restructuring activities $33,446 Net operating loss carryforwards 15,709 Inventory adjustments 2,772 Other asset adjustments 3,245 Pension adjustments 1,300 Other deferred tax assets 13,838 ------Total consolidated deferred tax assets 70,310 Valuation allowance (15,709) ------54,601

Deferred tax liabilities: Depreciation $(3,390) Other deferred tax liabilities (14,379) ------(17,769) ------Total $36,832 ======

Income taxes currently payable amounted to approximately $8,698 at December 31, 1993. Income taxes currently refundable amounted to $1,400 at December 31, 1992.

The Company does not provide deferred income taxes on unremitted earnings of foreign subsidiaries as such funds are deemed permanently reinvested to finance foreign expansion and meet operational needs on an ongoing basis. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes subject to an adjustment for foreign tax credits and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its calculation; however, unrecognized foreign tax credits and foreign withholding taxes paid upon distribution would be available to reduce some portion of the U.S. liability.

NOTE F--RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS

The Company and its subsidiaries maintain a number of defined benefit and defined contribution plans to provide retirement benefits for their employees in the United States as well as their employees in foreign countries. These plans are maintained and contributions are made in accordance with the Employee Retirement Income Security Act of 1974, local statutory law or as determined by the Board of Directors. The plans generally provide benefits based upon years of service and compensation. 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

December 31, 1993

NOTE F--RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS-- (Continued)

A summary of the various components of total pension expense for the plans is as follows:

1993 1992 1991 ------

Domestic Plans: Service cost--benefits earned during the year $ 6,115 $ 5,571 $ 5,802 Interest cost on projected benefit obligation 18,158 17,207 14,969 Actual return on plan assets (19,569) (16,812) (18,729) Net amortization and deferral 1,441 (1,404) (109) ------Net pension cost of defined benefit plans 6,145 4,562 1,933 Defined contribution plans 193 225 214 ------Total domestic plans 6,338 4,787 2,147

Foreign Plans: Service cost--benefits earned during the year 1,422 1,555 1,471 Interest cost on projected benefit obligation 2,253 2,472 2,462 Actual return on plan assets (4,506) (2,800) (3,155) Net amortization and deferral 2,000 289 766 ------Net pension cost of defined benefit plans 1,169 1,516 1,544 Defined contribution plans 1,326 905 399 ------Total foreign plans 2,495 $ 2,421 $ 1,943 ------

Total pension expense $ 8,833 $ 7,208 $ 4,090 ======

The funded status of the domestic and foreign plans at December 31, 1993 and 1992 is as follows:

Domestic Foreign 1993 1992 1993 1992 ------

Actuarial present value of accumulated benefit obligations: Vested $222,588 $196,986 $23,881 $ 21,107 Nonvested 8,463 7,806 1,136 1,255 ------

$231,051 $204,792 $25,017 $ 22,362 ======

29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

December 31, 1993

NOTE F--RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued)

Domestic Foreign 1993 1992 1993 1992 ------

Actuarial present value of projected benefit obligations $(254,295) $(223,925) $(28,396) $(26,581) Plan assets at fair value 228,014 210,143 28,191 23,873 ------Excess of projected benefit obligations over plan assets (26,281) (13,782) (205) (2,708)

Unrecognized net (gain) loss $ 13,788 $ (894) $(1,593) $ 709 Unrecognized prior service cost 10,835 11,640 540 791 Unrecognized net assets at January 1, 1993 and 1992, net of amortization (3,239) (3,569) (1,449) (1,666) Minimum liability (351) ------Accrued retirement annuity expense recognized in the balance sheet $ (4,897) $ (6,605) $(3,058) $ (2,874) ======

The increase in the actuarial present value of accumulated benefit obligations ("ABO") for the domestic plans is largely due to the change in the discount rate from 8.0% to 7.5% as well as the normal one year's accrual of benefits. In addition the increase in the ABO for the foreign plans is also primarily due to the change in the discount rate from 8.9% to 7.5%.

Assumptions used in accounting for the defined benefit plans as of December 31, 1993 and 1992 for both the domestic and foreign plans were as follows:

Domestic Foreign Plans Plans ------

1993 1992 1993 1992 ------

Weighted-average discount rates 7.5% 8.0% 7.5% 8.9% Projected rates of increase in compensation 4.1% 4.5% 4.2% 5.2% Expected rates of return on plan assets 9.0% 9.5% 9.1% 9.7%

Plan assets for the domestic plans consist principally of deposit administration contracts and an investment contract with an insurance company. Other assets held by the domestic plans not under insurance contracts are invested in equity and fixed income securities. Plan assets for the foreign plans are invested in foreign insurance contracts and foreign equity and fixed income securities.

The Cleveland, Ohio area operations have a Guaranteed Continuous Employment Plan covering substantially all employees, which, in general, provides that the Company will provide work for at least 75% of every standard work week (presently 40 hours). This plan does not guarantee employment when the Company's ability to continue normal operations is seriously restricted by events beyond the 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

December 31, 1993

NOTE F--RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS (Continued) control of the Company. The Company has reserved the right to terminate this plan effective at the end of a calendar year by giving notice of such termination not less than six months prior to the end of such year.

In December 1990, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", which was effective in 1993 domestically and will be effective for non-U.S. plans in 1995. In November 1992, the Financial Accounting Standards Board issued Statement No. 112, "Employers' Accounting for Postemployment Benefits." The Company is not required to implement this Statement until the first quarter of 1994. These Statements have no impact on the consolidated financial position or results of operations as the Company does not provide for any postretirement or postemployment benefits other than pensions.

NOTE G--INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION

The Company's primary business is the design, manufacture and sale, in the domestic and international markets, of arc welding products, which constitutes 88% of the Company's business. The Company also designs, manufactures and sells gases used in the acetylene welding process. Financial information by geographic areas follows:

United Other States Europe Countries Eliminations Total

1993: Net sales $583,043 $225,826 $ 96,209 $ (59,079) $845,999 Pre-tax profit (loss) 42,570 (68,865) (22,903) 2,248 (46,950) Identifiable assets 389,247 172,136 69,871 (71,711) 559,543

1992: Net sales $531,675 $299,654 $ 95,519 $ (73,841) $853,007 Pre-tax profit (loss) 24,860 (52,828) (7,183) 721 (34,430) Identifiable assets 294,730 246,457 86,839 (24,679) 603,347

1991: Net sales $502,825 $287,170 $ 96,005 $ (52,108) $833,892 Pre-tax profit (loss) 45,742 (10,128) (1,346) 143 34,411 Identifiable assets 289,682 284,341 84,965 (18,727) 640,261

Intercompany sales between geographic regions are accounted for at prices comparable to normal, customer sales and are eliminated in consolidation.

NOTE H--ACQUISITIONS

In June 1993, the Company acquired the outstanding minority interest in its subsidiary in Spain for approximately $8,500. In January and May of 1992, respectively, the Company purchased the remaining 29 percent interest in Lincoln Norweld and a small Mexican company for an aggregate of $37,000. In April 1991, the Company purchased the material assets of the German arc welding business (except orbital welding) of Messer Griesheim GmbH. All the above transactions 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

December 31, 1993

NOTE H--ACQUISITIONS (Continued) and increases in equity ownership were accounted for as purchases and their results of operations and the increased interest in their results of operations, were included in the consolidated statements of operations from their respective dates of acquisition.

NOTE I--FAIR VALUES OF FINANCIAL INSTRUMENTS

The Company has various financial instruments, including cash and cash equivalents, forward exchange contracts for currencies, and short and long-term debt. The Company has determined the estimated fair value of these financial instruments by using available market information and appropriate valuation methodologies which require judgment. Accordingly, the use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. The Company believes the carrying values of their financial instruments approximate their fair value.

NOTE J--NOTES RECEIVABLE FROM EMPLOYEES

Notes receivable from employees, which currently bear interest at 9%, include $294 ($532 in 1992) from officers of the Company. Loans are limited to 65% of the aggregate value of the pledged stock determined by the current offering price of the stock under the Employees' Stock Purchase Plan.

NOTE K--0PERATING LEASES

The Company leases sales offices, warehouses, office equipment and data processing equipment. Such leases, some of which are noncancellable, and in many cases, include renewals, expire at various dates. The Company pays most maintenance, insurance and tax expenses relating to leased assets. Rental expense was $9,864 in 1993, $9,840 in 1992 and $6,444 in 1991.

At December 31, 1993, total minimum lease payments for noncancellable operating leases amounted to the following:

1993 ------

1994 $ 6,541 1995 5,379 1996 4,167 1997 3,080 1998 2,284 Thereafter 4,898 ------

Total minimum lease payments $26,349 ======

SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

Year Ended December 31, 1993

(In thousands of dollars)

------

COL. A COL. B COL. C COL. D COL. E ------DEDUCTIONS BALANCE AT END OF PERIOD ------NAME OF DEBTOR Balance at Beginning Additions (1) (2) (1) (2) of Period Amounts Collected Amounts Written Off Current Not Current

------

Donald F. Hastings (1) $ 224 $ 224 Roger F. Young (1) 239 $239 -0- Graham Peters 225 225 Eugene Skerl 113 113 -0-

Note (1)--Officer and Director of the Company.

SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

Year Ended December 31, 1992

(In thousands of dollars)

------

Donald F. Hastings (1) $ 224 $ 224 Harry Carlson (1) 244 $ 212 $ 456 -0- Roger F. Young (1) 239 239 John Gonzalez (1) 252 252 -0- Graham Peters 225 225 Eugene Skerl 113 113 Michael O'Connor 100 100 -0- James Fuller 104 35 69

Note (1)--Officer and Director of the Company.

SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

Year Ended December 31, 1991

(In thousands of dollars)

------

George E. Willis (1) $ -0- $ 140 $ 140 $ -0- Donald F. Hastings (1) 224 224 Harry Carlson (1) 244 244 Roger F. Young (1) 239 239 John Gonzalez (1) 213 46 7 252 Ellis Smolik (1) 257 257 -0- Graham Peters 262 37 225 Eugene Skerl 113 113 Michael O'Connor 100 117 117 100 James Fuller 16 104 16 104

Note (1)--Officer and Director of the Company.

SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

------COL. A COL. B COL. C COL. D COL. E COL. F Other Changes-- Classification Balance at Additions at Retirements Add (Deduct)-- Balance at Beginning of Period Cost Describe End of Period ------

Year ended December 31, 1993: Land $ 18,192 $ 426 $ (815) $ (5,001) $ 12,802 Buildings 123,817 3,647 (964) (12,573) 113,927 Machinery, tools and equipment 293,238 17,743 (8,749) (22,299) 279,933 ------

TOTALS $435,247 $ 21,816 $(10,528) $ (39,873) (2) $406,662 ======

Year ended December 31, 1992: Land $ 16,930 $ $ (69) $ 1,331 $ 18,192 Buildings 113,747 15,692 (1,731) (3,891) 123,817 Machinery, tools and equipment 292,252 22,143 (15,115) (6,042) 293,238 ------

TOTALS $ 422,929 $ 37,835 $ (16,915) $ (8,602) (3) $435,247 ======

Year ended December 31, 1991: Land $ 13,886 $ 536 $ (473) $ 2,981 $ 16,930 Buildings 106,773 2,690 (3,793) 8,077 113,747 Machinery, tools and equipment 267,076 28,128 (8,078) 5,126 292,252 ------

TOTALS $ 387,735 $ 31,354 $ (12,344) $ 16,184 (4) $422,929 ======

(1) The general range of useful lives of the assets is Buildings--20 to 50 years Machinery, tools and equipment--3 to 20 years

(2) Includes FAS 52 adjustment to the current rate of ($11,492) and ($28,381) due to property, plant and equipment write-down relating to restructure.

(3) Includes FAS 52 adjustment to the current rate of ($15,998) and $7,396 of property, plant and equipment of subsidiaries consolidated beginning in 1992.

(4) Includes FAS 52 adjustment to the current rate of $802 and $15,382 of property, plant and equipment of subsidiaries consolidated beginning in 1991.

SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (In thousands of dollars)

------

COL. A COL. B COL. C COL. D COL. E COL. F Description Balance at Additions Charged to Retirements Other Changes--Add Balance at Beginning of Period Costs and Expenses (Deduct)--Describe End of Period ------

Year ended December 31, 1993: Buildings $ 51,935 $ 5,012 $ (444) $ (2,137) $ 54,366

Machinery, tools and equipment 174,911 22,923 (6,012) (9,217) 182,605 ------

TOTALS $226,846 $27,935 $ (6,456) $ (11,354) (1) $236,971 ======

Year ended December 31, 1992: Buildings $ 48,682 $ 5,146 $ (700) $ (1,193) $ 51,935 Machinery, tools and equipment 164,643 24,304 (11,466) (2,570) 174,911 ------

TOTALS $213,325 $29,450 $(12,166) $ (3,763) (2) $226,846 ======

Year ended December 31, 1991: Buildings $ 45,215 $ 4,022 $ (786) $ 231 $ 48,682 Machinery, tools and equipment 147,860 21,936 (5,667) 514 164,643 ------

TOTALS $193,075 $25,958 $ (6,453) $ 745 (3) $213,325 ======

(1) Includes FAS 52 adjustment to the current rate of ($5,500) and ($5,854) due to property, plant and equipment write-down relating to restructure.

(2) Includes FAS 52 adjustment to the current rate of ($6,270) and $2,507 related to property, plant and equipment of a subsidiary consolidated beginning in 1992.

(3) Includes FAS 52 adjustment to the current rate of ($332) and $1,077 related to property, plant and equipment of subsidiaries consolidated beginning in 1991.

SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

(In thousands of dollars)

------COL. A COL. B COL. C COL. D COL. E ------ADDITIONS Balance at (1) (2) NOTE A Balance Description beginning of Charged to costs Charged to other Deductions- at end period and expenses accounts-describe of period ------

Allowance for doubtful accounts: Year ended December 31, 1993 $ 5,434 $ 2,037 $ (723) (A) $ 490 $ 6,258

Year ended December 31, 1992 $ 4,720 $ 2,842 $(1,450) (A) $ 678 $ 5,434

Year ended December 31, 1991 $ 5,712 $ 852 $(1,068) (B) $ 776 $ 4,720

(A)--FAS #52 adjustment.

(B)--Includes FAS #52 adjustment of ($1,877) and $809 for subsidiaries consolidated beginning in 1991.

Note A--Uncollectible accounts written-off, net of recoveries.

SCHEDULE IX--SHORT-TERM BORROWINGS

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

(In thousands of dollars)

------

COL. A COL. B COL. C COL. D COL. E COL. F

Maximum Average Weighted Weighted Amount Amount Average CATEGORY OF AGGREGATE Balance Average Outstanding Outstanding Interest Rate SHORT-TERM BORROWINGS at End of Interest During the During the During the Period Rate Period Period Period ------

(1) (2) (3)

Notes payable to banks:

Year ended December 31, 1993: $23,198 9.05% $33,955 $28,110 11.67%

Year ended December 31, 1992: $12,643 10.43% $58,169 $47,506 12.41% (A)

Year ended December 31, 1991: $41,660 10.93% $50,004 $40,353 12.17%

(A)--Weighted average interest rate calculation is inclusive of short-term borrowings of $39,122 which were reclassified to long-term debt for financial statement purposes.

(1)--Amounts due banks from foreign subsidiaries represent borrowings under lines of credit borrowing arrangements which are reviewed annually for renewal.

(2)--The average amount outstanding during the period was computed by dividing the total of month-end outstanding principal balances by l2.

(3)--The weighted average interest rate during the period was computed by dividing the actual interest expense by the average amount outstanding during the period.

SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

(In thousands of dollars)

------

COL. A COL. B

ITEM Charged to Costs and Expenses ------

Year Ended December 31 1993 1992 1991 ------

Maintenance and repairs $14,818 $15,335 $13,971 Depreciation and amortization of intangible assets, pre-operating costs and similar deferrals (1) (1) (1) Taxes, other than payroll and income taxes: Real estate (1) (1) (1) Personal property (1) (1) (1) Other (1) (1) (1) Royalties (1) (1) (1) Advertising costs (1) (1) (1)

Note (1)--Information omitted since amount is less than 1% of total sales and revenues.

INDEX TO EXHIBITS

EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------

3(a) Amended and Restated Articles of Incorporation of The Lincoln Electric Company filed herewith.

9 Voting Trust Agreement of The Lincoln Electric Company (filed as Exhibit 9 to Form 10-K for the year ended December 31, 1988, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).

10(a) The Lincoln Electric Company 1988 Incentive Equity Plan (filed as Exhibit 28 to the Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-25209 and incorporated herein by reference and made a part hereof).

INDEX TO EXHIBITS -(Continued)

EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------

10(b) Form of Indemnification Agreement (filed as Exhibit A to The Lincoln Electric Company 1987 Proxy Statement, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).

11 Statement regarding computation of earnings per share.

21 Subsidiaries of the Registrant.

23 Consents of Independent Auditors

1 THE LINCOLN ELECTRIC COMPANY

AMENDED AND RESTATED ARTICLES OF INCORPORATION

ARTICLE FIRST: The name of the Corporation shall be THE LINCOLN ELECTRIC COMPANY.

ARTICLE SECOND: The place in the State of Ohio where its principal office is located is the City of Cleveland, Cuyahoga County.

ARTICLE THIRD: The Corporation is formed for the purpose of manufacturing, repairing, buying, selling and dealing in all varieties and kinds of electrical machinery, tools and appliances, and doing all things necessary and incident thereto.

ARTICLE FOURTH: Section 1. The maximum number of shares which the Corporation is authorized to have outstanding is Seventeen Million (17,000,000) common shares, without par value, consisting of Fifteen Million (15,000,000) shares of Common Stock, without par value ("Common Stock") and Two Million (2,000,000) shares of Class A Common Stock, without par value ("Class A Common Stock").

Section 2. No shareholder of the Corporation shall have any pre-emptive right as such shareholder to subscribe or purchase shares of the Corporation.

Section 3. Each shareholder of the Corporation shall be entitled to one vote for each share of Common Stock and Class A Common Stock standing in his name on the books of the Corporation. Except as otherwise required by statute, the holders of Common Stock and the holders of Class A Common Stock will vote together as one class on all matters.

Section 4. No dividends shall be paid on the outstanding shares of Common Stock or Class A Common Stock unless an equal dividend per share is paid on each of the outstanding shares of both the Common Stock and the Class A Common Stock.

Section 5. All shares of Common Stock and shares of Class A Common Stock shall be identical in all respects except that:

Section 5.1. No sale, assignment, transfer, pledge, encumbrance or any other disposition of any shares of Class A Common Stock may be made, except upon compliance with the provisions of Section 5.2 through 5.4 below (or the exception set forth in Section 5.2(b) below). Any purported or attempted disposition of the Class A Common Stock other than as permitted by this Article Fourth shall be void, and the last shareholder of record who acquired such shares in a manner not contrary to this Article Fourth shall be recognized as the holder of such shares for all purposes. 2 Page 2

Section 5.2. The Corporation shall have the sole, exclusive and unrestricted right, option and privilege to purchase, upon the occurrence of any of the events set forth below, any or all of the shares of Class A Common Stock in a manner and at a price per share current at the time of the purchase of said shares as determined pursuant to the terms and provisions of Sections 5.3 and 5.4 of this Article Fourth. The events are:

(a) The death of a holder of shares of Class A Common Stock; and

(b) The determination of a holder of shares of Class A Common Stock to sell, assign, transfer, pledge, give, encumber or in any other way dispose of all or any of said shares, except for any such disposition in the form of a distribution from The Lincoln Electric Company Employee Stock Ownership Plan ("Plan") pursuant to the terms and conditions of the Plan.

Section 5.3. Upon the occurrence of either of the events specified in Section 5.2 above, the holder of Class A Common Stock, or the personal representative of said holder's estate, as the case may be, shall notify the Corporation in writing of the occurrence of any such event. If the Corporation shall elect to exercise any such right, option or privilege, it shall, not later than ninety (90) days after it shall have received written notice from the holder of Class A Common Stock or the personal representative of said holder's estate, as the case may be, of the occurrence of any such event, send written notice thereof to said holder or the personal representative of said holder's estate, as the case may be, of such shares at his or her last address as shown on the stock transfer records of the Corporation, or, in the event of the death of said holder, to such other address as may be so specified in the notice. The Corporation shall pay the purchase price (as determined pursuant to the terms and provisions of Section 5.4 of this Article Fourth) to the holder of such shares, or in the event of the death of said holder, to the personal representative of said holder's estate, immediately upon the delivery to the Corporation of the certificate or certificates representing the shares of Class A Common Stock, duly endorsed for transfer and delivery to the Corporation, its successors, assigns or nominees. Upon delivery of the Corporation's written notice, all rights in and to the shares of Class A Common Stock shall be vested solely in the Corporation, its successors, assigns or nominees. If the Corporation does not exercise its right to purchase any or all of the shares of Class A Common Stock pursuant to the terms and provisions of this Article Fourth, such shares may be freely disposed of by the holder thereof or the personal representative of said holder's estate, as the case may be, not more than ninety (90) days after the expiration of the Corporation's repurchase 3 Page 3

period; PROVIDED, HOWEVER, that any such shares of Class A Common Stock so disposed of shall continue to be subject to the terms and provisions of this Article Fourth. Any shares of Class A Common Stock not so disposed of shall continue to be subject in all respects to the restrictions and provisions contained in this Article Fourth.

Section 5.4. The price, rounded to the nearest dollar, at which any share of Class A Common Stock shall be bought or sold pursuant to the terms and provisions of this Article Fourth shall be:

(a) The book value of such share in effect on the date of receipt by the Corporation of the above-described written notice, plus

(b) The accrued unpaid dividends with respect to such share which were considered liabilities in determining book value.

The book value used for this purpose shall be established each April 30 for the 12-month period, May 1-April 30, following that date and shall be the book value as of the immediately preceding December 31 as shown in the Corporation's Audited Consolidated Financial Statements.

Section 5.5. Any shares of Class A Common Stock purchased by the Corporation pursuant to this Article Fourth shall be retired and restored to the status of authorized and unissued shares.

Section 5.6. All stock certificates representing shares of Class A Common Stock shall contain a reference to the restrictions and provisions contained in this Article Fourth.

ARTICLE FIFTH: The Board of Directors of the Corporation is hereby authorized to fix at any time and from time to time the amount of consideration for which the Corporation may from time to time issue its shares without par value, whether now or hereafter authorized.

ARTICLE SIXTH: Without derogation from any other power to purchase shares of the Corporation as permitted by law, the Corporation, acting by its Board of Directors, may purchase shares of the Corporation to the extent of the surplus of the aggregate of its capital over the aggregate of its liabilities, plus stated capital, in the manner permitted by law.

ARTICLE SEVENTH: The holders of shares of the Corporation shall not be entitled to cumulative voting rights in elections of Directors. 4 Page 4

ARTICLE EIGHTH: Section 1. A higher than majority shareholder vote for certain Business Combinations (as defined below) shall be required as follows:

A. In addition to any affirmative vote required by law or these Articles or the terms of any series of Preferred Stock or any other securities of the Corporation and except as otherwise expressly provided in Section 2 of this Article Eighth:

(1) any merger or consolidation of the Corporation or any Subsidiary with (i) any Interested Shareholder or with (ii) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder;

(2) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions whether or not related) to an Interested Shareholder (or an Affiliate or Associate of an Interested Shareholder) of any assets of the Corporation or a Subsidiary having an aggregate Fair Market Value of $1,000,000 or more;

(3) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions whether or not related) to or with the Corporation or a Subsidiary of any assets of an Interested Shareholder (or an Affiliate or Associate of an Interested Shareholder) having an aggregate Fair Market Value of $1,000,000 or more;

(4) the issuance or sale by the Corporation or any Subsidiary (in one transaction or a series of transactions whether or not related) of any securities of the Corporation or of any Subsidiary to any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder in exchange for cash, securities or other consideration (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more except an issuance of securities upon conversion of convertible securities of the Corporation or of a Subsidiary which were not acquired by such Interested Shareholder (or such Affiliate or Associate) from the Corporation or a Subsidiary;

(5) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation 5 Page 5

proposed by or on behalf of any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or

(6) any reclassification of securities (including any reverse stock split) or recapitalization of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity securities or securities convertible into equity securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder;

shall require the affirmative vote of (i) the holders of at least two-thirds of the combined voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in an annual election of Directors (the "Voting Stock") and (ii) the holders of at least two-thirds of the combined voting power of the then outstanding Voting Stock held by Disinterested Shareholders, in each case voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law, by any other provisions of these Articles or by the terms of any series of Preferred Stock or any other securities of the Corporation.

B. The term "Business Combination" as used in this Article Eighth shall mean any transaction which is referred to in any one or more of clauses (1) through (6) of paragraph A of Section 1 of this Article Eighth.

Section 2. The provisions of Section 1 of this Article Eighth shall not be applicable to any Business Combination, and such Business Combination shall require only such affirmative vote (if any) as is required by law, any other provisions of these Articles or the terms of any class or series of capital stock of the Corporation entitled to a preference over the Common Stock as to dividends or upon liquidation, or the terms of any other securities of the Corporation, if all of the conditions specified in either of the following paragraphs A or B are met:

A. The Business Combination shall have been approved by a majority of the Disinterested Directors; or

B. All the following six conditions shall have been met: 6 Page 6

(1) The transaction constituting the Business Combination shall provide for a consideration to be received by holders of Common Stock in exchange for their Common Stock, and the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest of the following:

(a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Shareholder which were acquired (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or (y) in the transaction in which it became an Interested Shareholder, whichever is higher;

(b) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (the "Determination Date"), whichever is higher; and

(c) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to clause (b) immediately preceding, multiplied by the ratio of (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Shareholder which were acquired within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of Common Stock on the first day in such two-year period on which the Interested Shareholder beneficially owned any shares of Common Stock, whether or not such Shareholder was an Interested Shareholder on that day.

(2) If the transaction constituting the Business Combination shall provide for a consideration to be received by holders of any class of outstanding Voting Stock other than Common Stock, the 7 Page 7

aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of such Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this clause B(2) shall be required to be met with respect to every class of outstanding Voting Stock, whether or not the Interested Shareholder beneficially owns any shares of a particular class of Voting Stock):

(a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of such class of Voting Stock beneficially owned by the Interested Shareholder which were acquired (x) within the two-year period immediately prior to the Announcement Date or (y) in the transaction in which it became an Interested Shareholder, whichever is higher;

(b) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

(c) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and

(d) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant to clause (c) immediately preceding, multiplied by the ratio of (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of such class of Voting Stock beneficially owned by the Interested Shareholder which were acquired within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of such class of Voting Stock on the first day in such two-year period on which the Interested Shareholder beneficially owned any shares of such class of Voting Stock, whether or not 8 Page 8

such Shareholder was an Interested Shareholder on that day.

(3) The consideration to be received by holders of a particular class of Voting Stock (including Common Stock) shall be in cash or in the same form as was previously paid in order to acquire shares of such class of Voting Stock which are beneficially owned by the Interested Shareholder and, if the Interested Shareholder beneficially owns shares of any class of Voting Stock which were acquired with varying forms of consideration, the form of consideration to be received by the holders of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock beneficially owned by it. The prices determined in accordance with clauses (1) and (2) of paragraph B of this Section 2 shall be subject to an appropriate adjustment in the event of any stock dividend, stock split, subdivision, combination of shares or similar event.

(4) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination:

(a) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock or other capital stock entitled to a preference over the Common Stock as to dividends or upon liquidation;

(b) except as approved by a majority of the Disinterested Directors, there shall have been (x) no reduction in the annual amount of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock) and (y) no failure to increase the annual amount of dividends as necessary to prevent any such reduction in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock;

additional shares of Voting Stock except as part of the transaction in which it became an Interested Shareholder; and

(d) there shall have always been at least four (4) Disinterested Directors on the Board of Directors.

(5) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

(6) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to shareholders at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).

Section 3. For purposes of this Article Eighth:

A. A "person" shall mean any individual, a partnership, a corporation, an association, a trust or other entity.

B. "Interested Shareholder" at any particular time shall mean any person (other than the Corporation or any Subsidiary or any employee benefit plan or trust of the Corporation or any Subsidiary) who or which:

(1) is at such time the beneficial owner, directly or indirectly, of five percent (5%) or more of the voting power of the Voting Stock;

(2) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of five percent (5%) or more of the voting power of the Voting Stock; or 10 Page 10

(3) is at such time an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder (as defined in (1) and (2) above), if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.

C. "Disinterested Shareholder" shall mean a shareholder of the Corporation who is not the Interested Shareholder (or an Affiliate or an Associate of the Interested Shareholder) who is involved, directly or indirectly, in the proposed Business Combination in question, except that as used in Section 6 of this Article Eighth, the term "Disinterested Shareholder" shall mean a shareholder of the Company who is not an Interested Shareholder.

D. A person shall be a "beneficial owner" of any shares of Voting Stock:

(1) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly;

(2) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether or not such right is exercisable immediately) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options or otherwise or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or

(3) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.

E. For the purpose of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Section 3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by an Interested Shareholder through application of paragraph D of this Section 3 but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or 11 Page 11

understanding, or upon the exercise of conversion rights, exchange rights, warrants or options or otherwise.

F. "Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Associate", which is used to indicate a relationship with any person, means (1) any corporation or organization (other than the Corporation or a majority-owned subsidiary of the Corporation) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent or more of any class of equity securities, (2) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and (3) any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the Corporation or any of its parents or subsidiaries.

G. "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph B of this Section 3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation.

H. "Disinterested Director" means any member of the Board of Directors who is unaffiliated with, and not a representative or nominee of, the Interested Shareholder who is involved, directly or indirectly, in the proposed Business Combination in question, and was (a) a member of the Board prior to the time that such Interested Shareholder became an Interested Shareholder or (b) recommended to succeed a Disinterested Director by a majority of the Disinterested Directors then on the Board.

I. "Fair Market Value" means: (a) in the case of stock, the highest closing sale price (or closing bid price for any day on which a closing sale price is not available) during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the 12 Page 12

principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotation System or any other system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith.

J. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in paragraph B of Section 2 of this Article Eighth shall include the shares of Common Stock and the shares of any other class of outstanding Voting Stock retained by the holders of such shares.

K. The term "class" of Voting Stock shall be deemed to refer to a series of Voting Stock where more than one series of Voting Stock is outstanding within a class of Voting Stock.

Section 4. A majority of the Disinterested Directors of the Corporation shall have the power and duty to determine for the purpose of this Article Eighth, on the basis of information known to them after reasonable inquiry, (1) whether a person is an Interested Shareholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate or another, (4) whether the requirements of Section 2 of this Article Eighth have been met with respect to any Business Combination, and (5) whether the assets which are subject to any Business Combination have, or the consideration to be received for the issuance or transfer of securities by this Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $1,000,000 or more. Any such determination made in good faith shall be binding and conclusive on all parties.

Section 5. Nothing contained in this Article Eighth shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law.

Section 6. In addition to any requirements of law and any other provisions of these Articles or the terms of any class or series of capital stock of the Corporation entitled to a preference over the Common Stock as to dividends or upon 13 Page 13

liquidation, or the terms of any other securities of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles or any such terms), the affirmative vote of

A. the holders of two-thirds or more of the combined voting power of the Voting Stock, voting together as a single class, and

B. two-thirds of the combined voting power of the Voting Stock held by the Disinterested Shareholders, voting together as a single class, shall be required to amend, alter or repeal or adopt any provision inconsistent with, this Article Eighth.

ARTICLE NINTH: The foregoing Amended and Restated Articles of Incorporation hereby supersede existing Amended Articles of Incorporation as heretofore amended. 1 November 19, 1993

The Lincoln Electric Company 22801 St. Clair Avenue Cleveland, Ohio 44117

Attention: Chief Financial Officer

Ladies and Gentlemen:

Reference is made to that certain Note Agreement dated November 20, 1991 (as amended from time to time, the "Note Agreement") between The Lincoln Electric Company, an Ohio corporation (the "Company"), and The Prudential Insurance Company of America ("Prudential"), pursuant to which the Company issued and sold and Prudential purchased the Company's 8.73% senior note in the original principal amount of $75,000,000, due November 26, 2003. Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to such terms in the Note Agreement.

The Company has advised Prudential that it proposes to enter into an amendment, dated as of the date hereof (the "Bank Amendment"), to that certain Credit Agreement dated as of March 18, 1993 (the "Credit Agreement") among the Company, the banks listed therein (the "Banks") and Society National Bank, as agent (the "Agent"). In order to satisfy a condition to closing under the Bank Amendment and the requirements of the Note Agreement, the Company desires to modify the terms of the Note Agreement in accordance with this letter. A copy of the Bank Amendment is attached hereto as EXHIBIT E.

Pursuant to the request of the Company and in accordance with the provisions of paragraph 11C of the Note Agreement, Prudential and the Company hereby agree as follows:

SECTION 1. AMENDMENT. From and after the date this letter becomes effective in accordance with its terms, the Note Agreement is amended as follows:

1.1 REFERENCES TO BANK AGREEMENT AND CREDIT AGREEMENT. Paragraph 10B of the Note Agreement is amended to delete the defined term "Credit Agreement" appearing therein and to add thereto the following definition in alphabetical order: 2 The Lincoln Electric Company November 19, 1993 Page 2

"BANK AGREEMENT" and "CREDIT AGREEMENT" shall mean and refer to that certain Credit Agreement dated as of March 18, 1993 among the Company, the banks listed therein and Society National Bank, as agent, as modified by the amendment thereto dated as of November 19, 1993, a copy of which is attached hereto as EXHIBIT E."

1.2 NEW EXHIBIT E. The Note Agreement is hereby amended to attach thereto as EXHIBIT E, the Bank Amendment attached hereto as EXHIBIT E.

SECTION 2. LIMITED WAIVER. Prudential hereby waives any Default or Event of Default arising by reason of the "Restructuring" (as defined in the Bank Amendment) under (i) Section 5.15(b) of the Credit Agreement with respect to the Company, (ii) any of Sections 5.02, 5.03, 5.05, 5.14 and 5.15(c) of the Credit Agreement solely with respect to a "Restructuring Subsidiary" (as defined in the Bank Amendment) and (iii) any of clauses (vi), (vii), (viii), (ix) and (x) of paragraph 7A of the Note Agreement solely with respect to a Restructuring Subsidiary.

SECTION 3. EFFECT OF CHANGES TO CREDIT AGREEMENT. All references herein to sections of the Credit Agreement and the Company's compliance with the terms thereof as required hereunder shall be based upon the Credit Agreement as in effect on March 18, 1993, as modified by the Bank Amendment, without giving effect to any other amendment, waiver or other modification of the Credit Agreement unless the Company shall have obtained the written consent of the Required Holder(s) to any such amendment, waiver or modification. No termination of the Credit Agreement in whole or in part shall affect the continued applicability of the sections of the Credit Agreement referred to herein.

SECTION 4. REPRESENTATION AND WARRANTY. The Company hereby represents and warrants that this letter and the Substitute Note are legally valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors' rights generally or general principles of equity.

SECTION 5. CONDITIONS PRECEDENT. This letter shall become effective only on the first date on which all of the following conditions precedent shall have been satisfied:

(i) Prudential shall have received a duly executed counterpart of this letter signed by the Company; and 3 The Lincoln Electric Company November 19, 1993 Page 3

(ii) Prudential shall have received a fully executed copy of the Bank Amendment.

SECTION 6. GOVERNING LAW. This letter amendment shall be governed by the internal laws and decisions of the State of Ohio.

SECTION 7. MISCELLANEOUS. Except as specifically set forth in this letter, the Company's obligations under the Note Agreement are neither altered nor amended, and all terms and conditions of the Note Agreement remain in full force and effect. Upon the effectiveness of this letter, each reference to the Note Agreement shall mean and be a reference to the Note Agreement as amended by this letter. This letter may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

Sincerely,

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By: /s/ Leonard H. Lillard IV ------Vice President

Acknowledged and Agreed:

THE LINCOLN ELECTRIC COMPANY

By: /s/ Frederick W. Mackenbach ------Its: Frederick W. Mackenbach ------President and Chief Operating Officer

By: /s/ Ellis F. Smolik ------Its: Ellis F. Smolik ------Senior Vice President - CFO. Secretary - Tresurer 1 CONFORMED COPY

AMENDMENT NO. 1 TO CREDIT AGREEMENT

AMENDMENT dated as of November 19, 1993 among THE LINCOLN ELECTRIC COMPANY (the "Borrower"), the BANKS listed on the signature pages hereof (the "Banks") and SOCIETY NATIONAL BANK, as Agent (the "Agent").

W I T N E S S E T H :

WHEREAS, the parties hereto have heretofore entered into a Credit Agreement dated as of March 18, 1993 (the "Agreement"); and

WHEREAS, the parties hereto desire to amend the Agreement as set forth below.

NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined herein, each term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement as amended hereby.

SECTION 2. AMENDMENTS TO THE AGREEMENT. (a) Section 1.01 is amended by the addition of the following new defined terms in their appropriate alphabetical positions:

"Restructuring" means the restructuring of certain foreign operations of the Company and its Subsidiaries as outlined by the Company to the Banks in its November 1993 presentation in connection therewith. 2 "Restructuring Subsidiaries" has the meaning set forth in Section 5.04.

(b) The definition of "EBIT" in Section 1.01 is amended by the addition of the following subclause (D):

and (D) for any fiscal quarter ending on or before June 30, 1994, restructuring charges taken in connection with the Restructuring.

(c) The definition of "Minimum Consolidated Tangible Net Worth" in Section 1.01 is amended to read in its entirety as follows:

"Minimum Consolidated Tangible Net Worth" means (i) at any date prior to June 30, 1994, $110,000,000; (ii) at any date on or after June 30, 1994 and prior to September 30, 1994, $115,000,000; (iii) at any date on or after September 30, 1994 and prior to December 31, 1994, $120,000,000 and (iv) at any date on or after December 31, 1994, the sum of (x) $125,000,000 plus (y) for each fiscal quarter of the Company beginning after December 31, 1994 and ending on or prior to such date for which the consolidated net income of the Company and its Consolidated Subsidiaries is positive, an amount equal to 50% of such consolidated net income.

(d) The table in Section 5.10 is revised to read in its entirety as follows:

PERIOD RATIO ------

October 1, 1993 - December 31, 1993 2.45 to 1 January 1, 1994 - March 31, 1994 2.25 to 1 April 1, 1994 - June 30, 1994 2.00 to 1 July 1, 1994 - December 31, 1994 1.85 to 1 January 1, 1995 - March 31, 1995 1.75 to 1 April 1, 1995 - June 30, 1995 1.50 to 1 July 1, 1995 and thereafter 1.35 to 1

(e) Section 5.04 is amended by the addition of the following further PROVISO thereto:

and PROVIDED FURTHER that nothing in this Section 5.04 shall prohibit the liquidation of Subsidiaries in Germany, Brazil, Venezuela and Japan in connection with the Restructuring so long as none of such Subsidiaries is at the time an Eligible Subsidiary ("Restructuring Subsidiaries").

2 3 (f) Section 4.04(c) is amended by the addition of the following clause at the end thereof:

or as disclosed in writing to the Banks in the Company's November 1993 presentation in connection with the Restructuring.

(g) Section 4.09 is amended by the addition of the phrase "(other than Restructuring Subsidiaries)" immediately following the word "Subsidiaries" therein.

SECTION 3. LIMITED WAIVER. The Banks hereby waive any Default or Event of Default arising by reason of the Restructuring under Section 5.15(b) with respect to the Company or under any of Sections 5.02, 5.03, 5.05, 5.14, 5.15(c) and 6.01 (e), (f), (g), (h) or (j) solely with respect to a Restructuring Subsidiary. The foregoing waiver shall be limited precisely as written, and shall not extend to any other Default or Event of Default, whether arising by reason of the Restructuring or otherwise.

SECTION 4. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of New York.

SECTION 5. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective as of the date hereof when the Agent shall have received duly executed counterparts hereof signed by the Borrower and the Required Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party).

3 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.

THE LINCOLN ELECTRIC COMPANY

By /s/ Donald F. Hastings ------Title: Chairman and Chief Executive Officer

By /s/ Ellis F. Smolik ------Title: Sr. Vice President, CFO Secretary - Treasurer

SOCIETY NATIONAL BANK

By /s/ William J. Kysela ------Title: Vice President

ABN AMRO BANK N.V.

By /s/ Roy D. Hasbrook ------Title: Vice President

By /s/ Eelko Bronkhorst ------Title: Asst. Vice President

CIBC INC.

By /s/ John J. Mack ------Title: Vice President

4 5 COMMERZBANK AKTIENGESELLSCHAFT

By /s/ Mark D. Monson ------Title: Asst. Vice President

By /s/ Anthony L. Giraldi ------Title: Vice President

CREDIT LYONNAIS CAYMAN ISLAND BRANCH

By /s/ Sandra E. Horwitz ------Title: Authorized Signature

CREDIT LYONNAIS CHICAGO BRANCH

By /s/ Sandra E. Horwitz ------Title: Vice President

DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES

By /s/ Deborah Slusarczyk ------Title: Vice President

By /s/ Robert Grella ------Title: Vice President

MORGAN GUARANTY TRUST COMPANY OF NEW YORK

By /s/ Timothy S. Broadbent ------Title: Vice President

5 6 NBD BANK, N.A.

By /s/ Winifred S. Pinet ------Title: Vice President

NATIONAL CITY BANK

By /s/ W.J. Barlow McWilliams ------Title: Vice President

PNC BANK, NATIONAL ASSOCIATION

By /s/ Douglas K. Winget ------Title: Commercial Banking Officer

6 1

EXHIBIT (11)

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

COMPUTATION OF EARNINGS PER SHARE

(In thousands except per share data)

Year Ended December 31 1993 1992* 1991*

Primary: Average shares outstanding 10,852 10,790 10,790 ======

Income (loss) before cumulative effect of accounting change $(40,536) $(45,800) $ 14,365 Cumulative effect to January 1, 1993 of change in method of accounting for income taxes 2,468 ------Net income (loss) $(38,068) $(45,800) $ 14,365 ======

Per share amounts: Income (loss) before cumulative effect of accounting change $ (3.74) $ (4.24) $ 1.33 Cumulative effect to January 1, 1993 of change in method of accounting for income taxes .23 ------Net income (loss) $ (3.51) $ (4.24) $ 1.33 ======

Fully diluted: Average shares outstanding 10,852 10,790 10,790 Dilutive stock purchase contracts --based on the treasury stock method using the higher of average or year-end market price ------10,852 10,790 10,790 ======

Income (loss) before cumulative effect of accounting change $(40,536) $(45,800) $ 14,365 Cumulative effect to January 1, 1993 of chnage in method of accounting for income taxes 2,468 ------Net income (loss) $(38,068) $(45,800) $ 14,365 ======

*Share and per share amounts have been adjusted for the ten-for-one stock split in 1993.

EXHIBIT (21)

THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES

SUBSIDIARIES OF THE REGISTRANT

The Company's subsidiaries, all of which are included in its consolidated financial statements, are listed in the following table:

Consolidated Country of Percent Name Incorporation Ownership

Messer Lincoln GmbH Germany 100

Lincoln Electric Foreign Sales Corporation, Inc. Virgin Islands 100

Lincoln Norweld B.V. The Netherlands 100

Lincoln Electric (U.K.) Limited United Kingdom 100

Lincoln-Norweld Management A/S Norway 100

Lincoln-Norweld A/S Norway 100

Lincoln Svetshuset AB Sweden 100

Lincoln Electric France S.A. France 100

Lincoln Electric Company (Europe) GmbH Germany 100

Lincoln Electric Italia S.r.l. Italy 100

Lincoln Smitweld B.V. The Netherlands 100

Lincoln Smitweld Belgium S.A. Belgium 100

Lincoln Electric Company (Europe) B.V. The Netherlands 100

Lincoln K.D. S.A. Spain 100

Lincoln Electric Company (Espana) S.A. Spain 100

Lincoln Electric Holdings, Inc. United States 100

Lincoln Electric Europe, Inc. United States 100

Harris Calorific France S.A.R.L. France 100

Harris Calorific GmbH Germany 100

Harris Calorific Ltd. Ireland 100

EXHIBIT 21 -- SUBSIDIARIES OF THE REGISTRANT (Continued)

Consolidated Country of Percent Name Incorporation Ownership

Harris Calorific S.r.l. Italy 100

Sacit S.r.l. Italy 100

S.P.I. Italy 100

Lincoln Electric Far East, Inc. United States 100

Nippon Lincoln Electric K.K. Japan 100

Lincoln Electric International, Inc. United States 100

Lincoln Electric Company (Australia) Proprietary Limited Australia 100

Lincoln Electric North America, Inc. United States 100

Lincoln Electric Company of Canada Limited Canada 96

Lincoln Big Three, Inc. United States 51

Lincoln Electric Mexicana, S.A. de C.V. Mexico 100

Big Three Lincoln Alaska, Inc. United States 100

Lincoln Smitweld GmbH Germany 100

Lincoln Electric South America, Inc. United States 100

Lincoln Electric C.A. Venezuela 100

Lincoln Electric Do Brasil Ltda. Brazil 100

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 33-25210 and No. 33-55406) pertaining to The Lincoln Electric Company Employees' Stock Purchase Plan of our report dated March 25, 1994, with respect to the consolidated financial statements and schedules of The Lincoln Electric Company and subsidiaries included in the Annual Report (Form 10-K) for the year ended December 31, 1993.

/s/ Ernst & Young ------Ernst & Young

Cleveland, Ohio March 29, 1994 2

CONSENT OF INDEPENDENT ACCOUNTANTS ------

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No.'s 33-25219 and 33-55406) of The Lincoln Electric Company of our report dated March 9, 1994 relating to the consolidated financial statements of The Lincoln Electric Company (Australia) Proprietary Limited and subsidaries appearing on page of this Form 10-K.

/s/ Price Waterhouse

Price Waterhouse

Parramatta, Australia March 28, 1994