Item 1. Business -----------------
Products and Markets: --------------------
The primary business of the registrant and its affiliated companies is the manufacture and sale of products designed to protect the safety and health of workers throughout the world.
Principal products include respiratory protective equipment that is air- purifying, air-supplied and self-contained in design. The registrant also produces instruments that monitor and analyze workplace environments and control industrial processes. Personal protective products include head, eye and face, body and hearing protectors. For the mining industry, the registrant provides mine lighting, rockdusting equipment, fire-fighting foam and foam application equipment. Health-related products include emergency care items and hospital instruments.
Many of these products are sold under the registered trademark "MSA", and have wide application for workers in industries that include manufacturing, fire service, public utilities, mining, chemicals, petroleum, construction, pulp and paper processing, transportation, government, automotive, aerospace, asbestos abatement, and hazardous materials clean-up.
Other products manufactured and sold, which do not fall within the category of safety and health equipment, include boron-based and other specialty chemicals.
The registrant and its affiliated companies are in competition with many large and small enterprises. In the opinion of management, the registrant is a leader in the manufacture of safety and health equipment.
Orders, except under contracts with the Department of Defense and with international governments, are generally filled promptly after receipt and the production period for special items is usually less than one year. The backlog of orders under contracts with the Department of Defense and certain international governments is summarized as follows:
Approximately $8,900,000 under contracts with the Department of Defense and $3,800,000 with international governments are expected to be shipped after December 31, 1995.
Further information with respect to the registrant's products, operations in different geographic areas, equity in earnings and assets of international affiliated companies, and significant customers is reported at Note 6 of Notes to Consolidated Financial Statements contained in the registrant's Annual Report to Shareholders for the year ended December 31, 1994, incorporated herein by reference.
Research: --------
The registrant and its affiliated companies engage in applied research with a view to developing new products and new applications for existing products. Most of its products are designed and manufactured to meet currently applicable performance and test standards published by groups such as ANSI (American National Standards Institute), MSHA (Mine Safety & Health Administration), NIOSH (National Institute for Occupational Safety and Health), UL (Underwriters' Laboratories), SEI (Safety Equipment Institute) and FM (Factory Mutual). The registrant also from time to time engages in research projects for others such as the Bureau of Mines and the Department of Defense or its prime contractors. Registrant-sponsored research and development costs were $20,575,000 in 1994, $21,000,000 in 1993, and $20,938,000 in 1992.
In the aggregate, patents have represented an important element in building up the business of the registrant and its affiliates, but in the opinion of management no one patent or group of patents is of material significance to the business as presently conducted.
General: -------
The company was founded in 1914 and is headquartered in Pittsburgh, Pennsylvania. As of December 31, 1994, the registrant and its affiliated companies had approximately 4,500 employees, of which 2,000 were employed by international affiliates. None of the U.S. employees are subject to the provisions of a collective bargaining agreement.
In the United States and in those countries in which the registrant has affiliates, its products are sold primarily by its own salespersons, supplemented in the case of certain markets by independent distributors and/or manufacturers' representatives. In international countries where the registrant has no affiliate, products are sold primarily through independent distributors located in those countries.
The registrant is cognizant of environmental responsibilities and has taken affirmative action regarding this responsibility. There are no current or expected legal proceedings or expenditures with respect to environmental matters which would materially affect the operations of the registrant and its affiliates. Generally speaking, the operations of the registrant and its affiliates are such that it is possible to maintain sufficient inventories of raw materials and component parts on the manufacturing premises. Equipment and machinery for processing chemicals and rubber, plastic injection molding equipment, molds, metal cutting, stamping and working equipment, assembly fixtures and similar items are regularly acquired, repaired or replaced in the ordinary course of business at prevailing market prices as necessary.
As of the end of 1992, the registrant decided to discontinue the operation of Transfer-Metallisierte Produkte GmbH (TMP), a joint venture in Germany to produce metallized paper. This venture, unrelated to the registrant's safety products, had been a financial drain on the registrant. Operating activities ceased during 1993; the registrant continues to dispose of its assets and settle its liabilities, and continues to believe that this action will not have a significant effect on the registrant's financial condition. In the third quarter of 1993, the registrant acquired HAZCO Services, a U.S. based distribution and rental supplier serving the hazardous materials/environmental market. No material changes in the registrant's commercial operations are expected to occur during 1995. Sales of defense products, which continue to be an important market segment, increased in 1994. Incoming orders were significantly less than shipments in 1994, and lower than 1993 incoming orders. In January 1995 the registrant was awarded an additional contract for gas masks totalling $15,200,000, for which deliveries are scheduled over a one year period from October 1995. Further information about the registrant's business is included in Discussion and Analysis of Financial Condition and Results of Operations at pages 10 to 12 of the Annual Report to Shareholders, incorporated herein by reference.
(Item 1 continued at page 7)
Executive Officers and Significant Employees: --------------------------------------------
All the executive officers and significant employees have been employed by the registrant since prior to January 1, 1990 and have held their present positions since prior to that date except as follows:
(a) Mr. Ryan III was elected Chief Executive Officer and Chairman of the Board on August 28, 1991, effective from October 1, 1991. On April 25, 1990 he was elected President. He previously was the Executive Vice President.
(b) Mr. Hotopp was employed by the registrant on July 29, 1991 and elected Senior Vice President and General Manager, Safety Products. From prior to January 1, 1990 until he joined the registrant, Mr. Hotopp was Senior Vice President, Sales and Marketing and later President of Kingston Warren Corporation, a manufacturer of rubber-metal composites for automotive, computer and material handling industries.
(c) Mr. Christen was elected a corporate Vice President on October 31, 1991. He was previously General Director, Auergesellschaft, an affiliate of the registrant, and Vice President and Managing Director of MSA Europe, a division of the registrant.
(d) Mr. Joy was elected Vice President on October 31, 1991. He was previously Director, Sales and Market Development.
(e) Mr. Steggles was employed by the registrant on May 4, 1992 and elected Vice President. From prior to January 1, 1990 until he joined the registrant, Mr. Steggles was Vice President of International Marketing and Sales with the BMY Division of Harsco Corp., a manufacturer of tracked and wheeled vehicles.
(f) Mr. DeMaria was appointed Director, Human Resources on September 1, 1994. He previously was Manager, Employee Benefits.
The primary responsibilities of these officers and significant employees follows:
Individual Responsibilities ---------- ---------------- Mr. Hotopp Product planning and engineering, manufacturing development and sales of safety products in the U.S.
Mr. Christen European operations
Mr. Joy Sales and marketing of safety products in the U.S.
Mr. Miller Product planning and engineering for safety products in the U.S.
Mr. Steggles International operations outside the U.S. and Europe.
Mr. Tepper Product planning and engineering, manufacturing development and sales of instrument and battery products in the U.S.
Mr. Cuozzo General Counsel and corporate taxes
Mr. Zeitler Cash and risk insurance management
Mr. DeMaria Personnel, benefits, training
Mr. Heggestad Manufacturing operations, safety products in the U.S.
Item 2.
Item 2. Properties ------------------ World Headquarters: ------------------
The registrant's executive offices are located at 121 Gamma Drive, RIDC Industrial Park, O'Hara Township, Pittsburgh, Pennsylvania 15238. This facility contains approximately 138,000 sq. ft.
Production and Research Facilities: ----------------------------------
The registrant's principal U.S. manufacturing and research facilities are located in the Greater Pittsburgh area in buildings containing approximately 1,104,000 square feet. Other U.S. manufacturing and research facilities of the registrant are located in Esmond, Rhode Island (186,000 sq. ft.), Jacksonville, North Carolina (107,000 sq. ft.), Lyons, Colorado (10,000 sq. ft.), Sparks, Maryland (37,000 sq. ft.), and Dayton, Ohio (23,000 sq. ft.).
Manufacturing facilities of international affiliates of the registrant are located in major cities in Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, Peru, Scotland, Spain, and Sweden. The most significant are located in Germany (approximately 430,000 sq. ft., excluding 127,000 sq. ft. leased to others), and in Glasgow, Scotland (approximately 141,000 sq. ft.); research activities are also conducted at these facilities.
Virtually all of these buildings are owned by the registrant and its affiliates and are constructed of granite, brick, concrete block, steel or other fire-resistant materials. The German facility is owned subject to encumbrances securing indebtedness in the aggregate amount of $5,587,000 as of December 31, 1994.
Sales Offices and Warehouses: ----------------------------
The registrant and its U.S. affiliates own seven warehouses and lease 13 other distribution warehouses with aggregate floor space of approximately 279,000 sq. ft. in or near principal cities in 13 states in the United States. Leases expire at various dates through 1998. Sales offices and distribution warehouses are owned or leased in or near principal cities in 22 other countries in which the registrant's affiliates are located.
Item 3.
Item 3. Legal Proceedings -------------------------- Not applicable.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders ------------------------------------------------------------ No matters were submitted to a vote of security holders during fourth quarter 1994.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Item 6.
Item 6 - "Five-Year Summary of Selected Financial Data" appearing at page
Item 7
Item 7 - "Discussion and Analysis of Financial Condition and Results of Operations" appearing at pages 10 to 12
Item 8
Item 8 - "Financial Statements and Notes to Consolidated Financial Statements" appearing at pages 13 to 22
of the Annual Report to Shareholders for the year ended December 31, 1994. Said pages of the Annual Report are submitted with this report and pursuant to Item 601(b)(13) of Regulation S-K shall be deemed filed with the Commission only to the extent that material contained therein is expressly incorporated by reference in Items 1, 5, 6, 7, 8 and 14 (a) hereof.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and ------------------------------------------------------------------------ Financial Disclosure -------------------- Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Item 11.
Item 11. Executive Compensation
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13.
Item 13. Certain Relationships and Related Transactions -------------------------------------------------------------------------------
Incorporated by reference herein pursuant to Rule 12b - 23 are (1) "Election of Directors" appearing at pages 1 to 3, (2) "Other Information Concerning Directors and Officers" appearing at pages 4 to 9 (except as excluded below), and (3) "Security Ownership" appearing at pages 10 to 12 (except as excluded below) of the Proxy Statement filed pursuant to Regulation 14A in connection with the registrant's Annual Meeting of Shareholders to be held on April 26, 1995. The information appearing in such Proxy Statement under the captions "Compensation Committee Report on Executive Compensation" and "Comparison of Five-Year Cumulative Total Return" is not incorporated herein.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K --------------------------------------------------------------------------
(a) 1 and 2. Financial Statements
The following information appearing on pages 13 to 22 inclusive in the Annual Report to Shareholders of the registrant for the year ended December 31, 1994, is incorporated herein by reference pursuant to Rule 12b-23.
Report of Independent Accountants
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Income - three years ended December 31, 1994
Consolidated Statement of Earnings Retained in the Business - three years ended December 31, 1994
Consolidated Statement of Cash Flows - three years ended December 31, 1994
Notes to Consolidated Financial Statements
Said pages of the Annual Report are submitted with this report and, pursuant to Item 601(b)(13) of Regulation S-K shall be deemed to be filed with the Commission only to the extent that material contained therein is expressly incorporated by reference in Items 1, 5, 6, 7, 8 and 14 (a)(1) and (2) hereof.
The following additional financial information for the three years ended December 31, 1994 is filed with the report and should be read in conjunction with the above financial statements:
Report of Independent Accountants on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements listed above.
(a) 3. Exhibits (3)(i) Restated Articles of Incorporation as amended to April 27, 1989, filed in Form 10-Q on August 5, 1994, are incorporated herein by reference.
(3)(ii) By-laws of the registrant, as amended to August 29, 1990, filed in Form 10-Q on November 9, 1990, are incorporated herein by reference.
(10)(a) * 1987 Management Share Incentive Plan, filed in Form 10-K on March 25, 1994, is incorporated herein by reference.
(10)(b) * 1990 Non-Employee Directors' Stock Option Plan, as amended to April 27, 1994, filed in Form 10-Q on August 5, 1994, is incorporated herein by reference.
(10)(c) * Executive Insurance Program, filed in Form 10-Q on August 5, 1994, is incorporated herein by reference.
(10)(d) * Extension of Consulting Agreement for the period January 1, 1992 through December 31, 1996, and June 30, 1977 Consulting Agreement with John T. Ryan, Jr. filed in Form 10-K on March 27, 1992, is incorporated herein by reference.
(10)(e) * December 29, 1993 Consulting agreement with Leo N. Short, Jr., filed in Form 10-K on March 25, 1994, is incorporated herein by reference.
(10)(f) * Board of Directors April 24, 1984 Resolution providing for payment by the Company to officers the difference between amounts payable under terms of the Company's Non-Contributory Pension Plan and the benefit limitations of Section 415 of the Internal Revenue Code, filed in Form 10-K on March 28, 1990 is incorporated herein by reference.
* The exhibits marked by an asterisk are management contracts or compensatory plans or arrangements.
(a) 3. Exhibits (continued)
(13) Annual Report to Shareholders for year ended December 31, 1994
(21) Affiliates of the registrant
(23) Consent of Price Waterhouse LLP, independent accountants
(27) Financial Data Schedule (filed in electronic format only)
The registrant agrees to furnish to the Commission upon request copies of all instruments with respect to long-term debt referred to in Note 12 of the Notes to Consolidated Financial Statements filed as part of Exhibit 13 to this annual report which have not been previously filed or are not filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1994.
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.
MINE SAFETY APPLIANCES COMPANY
March 27, 1995 By /s/ John T. Ryan III -------------------- -------------------------------- (Date) John T. Ryan III President, Chairman of the Board and Chief Executive Officer
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 and on the dates indicated.
Signature Title Date ----------------- --------- --------
/s/ John T. Ryan III Director; President, March 27, 1995 --------------------------- Chairman of the Board John T. Ryan III and Chief Executive Officer
/s/ James E. Herald Vice President--Finance; March 27, 1995 --------------------------- Principal Financial and James E. Herald Accounting Officer
/s/ Joseph L. Calihan Director March 27, 1995 --------------------------- Joseph L. Calihan
/s/ Calvin A. Campbell, Jr. Director March 27, 1995 --------------------------- Calvin A. Campbell, Jr.
/s/ G. Donald Gerlach Director March 27, 1995 --------------------------- G. Donald Gerlach
/s/ Helen Lee Henderson Director March 27, 1995 --------------------------- Helen Lee Henderson
/s/ John T. Ryan, Jr. Director March 27, 1995 --------------------------- John T. Ryan, Jr.
/s/ Leo N. Short, Jr. Director March 27, 1995 --------------------------- Leo N. Short, Jr.
Report of Independent Accountants on Financial Statement Schedule
To the Board of Directors of Mine Safety Appliances Company
Our audits of the consolidated financial statements referred to in our report dated February 17, 1995, appearing on page 13 of the 1994 Annual Report to Shareholders of Mine Safety Appliances Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K), also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Pittsburgh, Pennsylvania February 17, 1995
SCHEDULE II
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1994 (IN THOUSANDS)
(1) Bad debts written off, net of recoveries.