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 fiscal year ended
December 31, 1993
Commission file number 0-2504
MINE SAFETY APPLIANCES COMPANY
A Pennsylvania Corporation
IRS Employer Identification No. 25-0668780
121 Gamma Drive
RIDC Industrial Park
O'Hara Township
Pittsburgh, Pennsylvania 15238
Telephone 412/967-3000
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(COVER PAGE)
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 fiscal year ended December 31, 1993 Commission File No. 0-2504
MINE SAFETY APPLIANCES COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0668780
- ------------------------------- ------------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
121 Gamma Drive
RIDC Industrial Park
O'Hara Township
Pittsburgh, Pennsylvania 15238
- ----------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 412/967-3000
- ---------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
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 the definitive proxy statement incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10K.
[ X ]
As of February 18, 1994, there were outstanding 6,009,653 shares of common
stock, no par value.
The aggregate market value of voting stock held by non-affiliates as of
February 18, 1994 was $163,047,000.
1
(COVER PAGE)
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been incorporated by reference:
FORM 10-K
DOCUMENT PART NUMBER
- -------- -----------
(1) Annual Report to Shareowners
for the year ended
December 31, 1993 I, II, IV
(2) Proxy Statement filed
pursuant to Regulation 14A
in connection with the registrant's
Annual Meeting of Shareholders to
be held on April 27, 1994 III
2
PART I
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, hospital
instruments and heart pacemaker power cells.
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.
3
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:
December 31
--------------------------
1993 1992 1991
------- ------- --------
(In thousands)
--------------------------
Department of Defense $54,900 $65,600 $117,000
International Governments 12,500 12,500 8,100
Approximately $2,400,000 under contracts with the Department of
Defense and $5,900,000 with international governments are expected to be
shipped after December 31, 1994.
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 Shareowners for the year ended December 31, 1993,
incorporated herein by reference.
4
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
$21,000,000 in 1993, $20,938,000 in 1992, and $19,575,000 in 1991.
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, 1993, the registrant and its affiliated
companies had approximately 4,600 employees, of which 2,100 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 salesmen,
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.
5
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 company's
safety products, has been a financial drain on the registrant. Operating
activities ceased during 1993; the registrant is in the process of disposing of
its assets and settling its liabilities, and estimates 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 1994. Sales of defense products, which continue to be
an important market segment, decreased significantly in 1993. Incoming orders
were significantly less than shipments in 1993, and significantly lower than
1992 incoming orders. U.S. military sales in 1994 are expected to be at near-
normal levels, below the peaks of 1992 but above 1993. Further information
about the registrant's business is included in Discussion and Analysis of
Financial Condition and Results of Operations at pages 7 to 9 of the Annual
Report to Shareowners, incorporated herein by reference.
(Item 1 continued at page 7)
6
Executive Officers and Significant Employees:
--------------------------------------------
All Positions and Offices
Name Age Presently Held
---- --- -------------------------
J. T. Ryan III 50 President, Chairman and
Chief Executive Officer
T. B. Hotopp 52 Senior Vice President
J. E. Herald 53 Vice President - Finance
(Chief Financial Officer)
D. E. Crean 59 Vice President
W. E. Christen 49 Vice President
J. W. Joy 61 Vice President
W. B. Miller, Jr. 60 Vice President
G. W. Steggles 59 Vice President
F. Tepper 59 Vice President
D. H. Cuozzo 60 Secretary
D. L. Zeitler 45 Treasurer
J. R. Heggestad 57 Director of Operations,
Safety Products
All the executive officers and significant employees have been
employed by the registrant since prior to January 1, 1989 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, 1989 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.
7
(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, 1989 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. Cuozzo, employed by the company on January 3, 1989 as Tax
Counsel, was elected Secretary on July 1, 1989.
8
The primary responsibilities of these officers follows:
Individual Responsibilities
- ---------- ----------------
Mr. Hotopp Product planning and engineering,
manufacturing development and sales of
safety products in the U.S.
Mr. Crean Personnel
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. Heggestad Manufacturing operations, safety products in
the U.S.
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 1,113,000 square feet. Other U.S. manufacturing and research
facilities of the registrant are located in Esmond, Rhode Island (208,000 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.).
9
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 410,000 sq. ft., excluding
147,000 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 $15,781,000 as of
December 31, 1993.
Sales Offices and Warehouses:
----------------------------
The registrant and its U.S. affiliates own eight warehouses and lease
20 other distribution warehouses with aggregate floor space of approximately
349,000 sq. ft. in or near principal cities in 19 states in the United States.
Leases expire at various dates through 1997. 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.
Other U.S. Properties:
---------------------
The registrant owns real estate at Owings Mills, Maryland, consisting
of an 88,000 sq. ft. building and 42 acres of land. The registrant also owns 90
acres of land in Westmoreland County, Pennsylvania, and 200 acres of land in
Lawrence, Kansas. No operations are currently conducted on these sites.
Item 3. Legal Proceedings
- --------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during fourth
quarter 1993.
10
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
- -------------------------------------------------------------------------------
Incorporated by reference herein pursuant to Rule 12b - 23 are
Item 5 - "Common Stock" appearing at page 9
Item 6 - "Five-Year Summary of Selected Financial Data" appearing at page
20
Item 7 - "Discussion and Analysis of Financial Condition and Results of
Operations" appearing at pages 7 to 9
Item 8 - "Financial Statements and Notes to Consolidated Financial
Statements appearing at pages 10 to 19
of the Annual Report to Shareowners for the year ended December 31, 1993. 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. Changes in and Disagreements with Accountants on Accounting and
- -------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
11
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
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 4, (2) "Other Information
Concerning Directors and Officers" appearing at pages 5 to 11 (except as
excluded below), and (3) "Security Ownership" appearing at pages 11 to 14 of the
Proxy Statement filed pursuant to Regulation 14A in connection with the
registrant's Annual Meeting of Shareholders to be held on April 27, 1994. 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.
12
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a) 1 and 2. Financial Statements
The following information appearing on pages 10 to 19 inclusive in the
Annual Report to Shareowners of the registrant for the year ended December 31,
1993, is incorporated herein by reference pursuant to Rule 12b-23.
Report of Independent Accountants
Consolidated Balance Sheet - December 31, 1993 and 1992
Consolidated Statement of Income - three years ended December 31, 1993
Consolidated Statement of Earnings Retained in the Business - three
years ended December 31, 1993
Consolidated Statement of Cash Flows - three years ended December 31,
1993
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, 1993 is filed with the report and should be read in
conjunction with the above financial statements:
Report of Independent Accountants on Financial Statement Schedules
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation and Amortization of Property,
Plant and Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule X - Supplementary Income Statement Information
All other schedules are omitted because they are not applicable, not material or
the required information is shown in the financial statements listed above.
13
(a) 3. Exhibits
(3)(a) Restated Articles of Incorporation as amended to April 27,
1989, filed in Form 10-Q on August 8, 1989, are incorporated
herein by reference.
(3)(b) 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.
(10)(b) * 1990 Non-Employee Directors' Stock Option Plan, incorporated
herein by reference to Exhibit A to registrant's Definitive
Proxy Statement filed March 20, 1991 for its 1991 Annual
Meeting.
(10)(c) * Executive Insurance Program, filed in Form 10-K on March 29,
1989, 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.
(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.
14
(a) 3. Exhibits (continued)
(13) Annual Report to Shareowners for year ended December 31, 1993
(21) Affiliates of the registrant
(23) Consent of Price Waterhouse, independent accountants
The registrant agrees to furnish to the Commission upon request copies
of all instruments with respect to long-term debt referred to in Note
11 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, 1993.
15
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 25, 1994 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 25, 1994
- -------------------- Chairman of the Board
John T. Ryan III and Chief Executive Officer
/S/James E. Herald Vice President - Finance; March 25, 1994
- -------------------- Principal Financial and
James E. Herald Accounting Officer
/S/John M. Arthur Director March 25, 1994
- --------------------
John M. Arthur
/S/Joseph L. Calihan Director March 25, 1994
- --------------------
Joseph L. Calihan
/S/G. Donald Gerlach Director March 25, 1994
- --------------------
G. Donald Gerlach
/S/Helen Lee Henderson Director March 25, 1994
- ----------------------
Helen Lee Henderson
/S/John P. Roche Director March 25, 1994
- ----------------------
John P. Roche
/S/John T. Ryan, Jr. Director March 25, 1994
- ----------------------
John T. Ryan, Jr.
/S/Leo N. Short, Jr. Director March 25, 1994
- ----------------------
Leo N. Short, Jr.
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Mine Safety Appliances Company
Our audits of the consolidated financial statements referred to in our report
dated February 16, 1994, appearing on page 10 of the 1993 Annual Report to
Shareowners 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 Schedules listed
in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE
Pittsburgh, Pennsylvania
February 16, 1994
F-1
SCHEDULE V
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES
PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(IN THOUSANDS)
Machinery Construction
and in
Land Buildings Equipment Progress Totals
------- -------- -------- ---------- --------
Balances, December 31, 1990 $7,345 $106,992 $164,082 $ 7,542 $285,961
Additions at cost 267 1,981 16,968 (2,262) 16,954
Sales and retirements (36) (44) (4,169) (4,249)
Currency translation
adjustments (238) (1,849) (4,110) (131) (6,328)
------- -------- -------- ---------- --------
Balances, December 31, 1991 7,338 107,080 172,771 5,149 292,338
Additions at cost 259 1,059 16,605 4,839 22,762
Sales and retirements (11) (65) (7,288) (7,364)
Currency translation
adjustments (20) (835) (1,026) 53 (1,828)
------- -------- -------- ---------- --------
Balances, December 31, 1992 7,566 107,239 181,062 10,041 305,908
Additions at cost 2,736 16,343 1,320 20,399
Sales and retirements (582) (3,578) (9,684) (13,844)
Currency translation
adjustments (218) (1,455) (3,945) (154) (5,772)
------- -------- -------- ---------- --------
Balances, December 31, 1993 $6,766 $104,942 $183,776 $ 11,207 $306,691
======= ======== ======== ========== ========
F-2
SCHEDULE VI
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(IN THOUSANDS)
Machinery
and
Buildings Equipment Totals
--------- --------- --------
Balances, December 31, 1990 $30,973 $ 99,070 $130,043
Adjustment for acquisition of new affiliate 106 398 504
Additions charged to costs and expenses 3,597 12,633 16,230
Sales and retirements (35) (3,457) (3,492)
Currency translation adjustments (756) (2,657) (3,413)
--------- --------- --------
Balances, December 31, 1991 33,885 105,987 139,872
Additions charged to costs and expenses 3,330 13,501 16,831
Sales and retirements (67) (6,108) (6,175)
Currency translation adjustments (163) (602) (765)
--------- --------- --------
Balances, December 31, 1992 36,985 112,778 149,763
Additions charged to costs and expenses 3,711 13,583 17,294
Sales and retirements (2,148) (8,276) (10,424)
Currency translation adjustments (736) (2,735) (3,471)
--------- --------- --------
Balances, December 31, 1993 $37,812 $115,350 $153,162
========= ========= ========
F-3
SCHEDULE VIII
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1993
(IN THOUSANDS)
1993 1992 1991
------ ------ ------
Allowance for doubtful accounts:
Balance at beginning of year $2,453 $1,601 $1,532
Additions -
Charged to costs and expenses 644 1,383 801
Deductions from reserves (1) 581 531 732
------ ------ ------
Balance at end of year $2,516 $2,453 $1,601
====== ====== ======
(1) Bad debts written off, net of recoveries.
F-4
SCHEDULE X
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED DECEMBER 31, 1993
(IN THOUSANDS)
Charged to Costs and Expenses
--------------------------------
1993 1992 1991
------ ------ ------
Maintenance and repairs $12,703 $16,947 $15,952
======= ======= =======
Payroll taxes $16,486 $18,960 $18,320
======= ======= =======
F-5
EXHIBIT 10(a)
-------------
MINE SAFETY APPLIANCES COMPANY
1987 MANAGEMENT SHARE INCENTIVE PLAN
The purposes of the 1987 Management Share Incentive Plan (the "Plan") are
to encourage eligible employees of Mine Safety Appliances Company (the
"Company") and its Subsidiaries, including Directors and officers of the Company
and each Subsidiary who are employees, to increase their efforts to make the
Company and each Subsidiary more successful, to provide an additional inducement
for such employees to remain with the Company or a Subsidiary, to reward such
employees by providing an opportunity to acquire shares of the Common Stock,
without par value, of the Company (the "Common Stock") on favorable terms and to
provide a means through which the Company may attract able persons to enter the
employ of the Company or one of its Subsidiaries. For the purposes of the Plan,
the term "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing at least fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in the chain.
SECTION 1
Administration
The Plan shall be administered by a Committee (the "Committee") appointed
by the Board of Directors of the Company (the "Board") and consisting of not
less than three members of the Board, none of whom is eligible or was within one
year prior to becoming a member of the Committee eligible for selection as a
person to whom stock may be allocated or to whom stock options, alternative
stock appreciation rights, cash payment rights, limited stock appreciation
rights or limited cash payment rights may be granted or restricted stock may be
awarded pursuant to the Plan or any other plan of the Company or any of its
affiliates (as "affiliates" is defined in regulations of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"1934 Act")) entitling the participants therein to acquire stock, stock options,
alternative stock appreciation rights, cash payment rights, limited stock
appreciation rights, limited cash payment rights or restricted stock of the
Company or any of its affiliates.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan.
The Committee shall keep records of action taken at its meetings. A
majority of the Committee shall constitute a quorum at any meeting and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the Committee, shall be
the acts of the Committee.
SECTION 2
Eligibility
Those employees of the Company or any Subsidiary who share responsibility
for the management, growth or protection of the business of the Company or any
Subsidiary shall be eligible to be granted stock options (with or without
alternative stock appreciation rights, cash payment rights, limited stock
appreciation rights and/or limited cash payment rights) and receive restricted
stock awards as described herein.
Subject to the provisions of the Plan, the Committee shall have full and
final authority, in its discretion, to grant stock options (with or without
alternative stock appreciation rights, cash payment rights, limited stock
appreciation rights and/or limited cash payment rights) and to award restricted
stock as described herein and to determine the employees to whom stock options
(with or without alternative stock appreciation rights, cash payment rights,
limited stock appreciation rights and/or limited cash payment rights) shall be
granted and restricted stock shall be awarded and the number of
shares to be covered by each stock option or restricted stock award. In
determining the eligibility of any employee, as well as in determining the
number of shares covered by each stock option or restricted stock award, and
whether alternative stock appreciation rights, cash payment rights, limited
stock appreciation rights and/or limited cash payment rights shall be granted in
conjunction with a stock option, the Committee shall consider the position and
the responsibilities of the employee being considered, the nature and value to
the Company or a Subsidiary of his or her services, his or her present and/or
potential contribution to the success of the Company or a Subsidiary and such
other factors as the Committee may deem relevant.
SECTION 3
Shares Available under the Plan
The aggregate number of shares of the Common Stock which may be issued or
delivered and as to which grants of stock options and restricted stock awards
may be made under the Plan is 400,000 shares, subject to adjustment and
substitution as set forth in Section 7. If any stock option granted under the
Plan is cancelled by mutual consent or terminates or expires for any reason
without having been exercised in full, the number of shares subject to such
stock option shall again be available for purposes of the Plan; however, solely
for the purpose of determining the number of shares of the Common Stock as to
which stock options may be granted under the Plan, to the extent that stock
appreciation rights, limited stock appreciation rights or limited cash payment
rights granted in conjunction with a stock option are exercised and the stock
option surrendered unexercised, such stock option shall be deemed to have been
exercised instead and the shares of the Common Stock which otherwise would have
been issued or delivered upon the exercise of such stock option shall not again
be available for the grant of any other stock option or the award of any
restricted stock under the Plan. If any shares of the Common Stock are forfeited
to the Company pursuant to the restrictions applicable to restricted stock
awarded under the Plan, the number of shares so forfeited shall again be
available for purposes of the Plan. The shares which may be issued or delivered
under the Plan may be either authorized but unissued shares or treasury shares
or partly each, as shall be determined from time to time by the Board.
SECTION 4
Grant of Stock Options, Alternative Stock Appreciation Rights, Cash Payment
Rights, Limited
Stock Appreciation Rights, and Limited Cash Payment Rights and Awards of
Restricted Stock
The Committee shall have authority, in its discretion, (a) to grant
"incentive stock options" pursuant to Section 422A of the Internal Revenue Code
of 1986 (the "Code"), to grant "nonstatutory stock options" (i.e., stock options
which do not qualify under such Section 422A of the Code) or to grant both types
of stock options (but not in tandem) and (b) to award restricted stock. The
Committee also shall have the authority, in its discretion, to grant alternative
stock appreciation rights in conjunction with incentive stock options or
nonstatutory stock options with the effect provided in Section 5(D), to grant
cash payment rights in conjunction with nonstatutory stock options with the
effect provided in Section 5(E), to grant limited stock appreciation rights in
conjunction with incentive stock options or nonstatutory stock options with the
effect provided in Section 8(D) and to grant limited cash payment rights in
conjunction with nonstatutory stock options with the effect provided in Section
8(E). Alternative stock appreciation rights and limited stock appreciation
rights granted in conjunction with an incentive stock option may only be granted
at the time the incentive stock option is granted. Cash payment rights and
limited cash payment rights may not be granted in conjunction with incentive
stock options. Alternative stock appreciation rights, cash payment rights,
limited stock appreciation rights and/or limited cash payment rights granted in
conjunction with a nonstatutory stock option may be granted either at the time
the stock option is granted or at any time thereafter during the term of the
stock option.
No employee shall be granted a stock option or stock options or awarded
restricted stock under the Plan (disregarding cancelled, terminated or expired
stock options or forfeited restricted stock) for an aggregate number of shares
in excess of ten percent (10%) of the total number of shares which may
be issued or delivered under the Plan. For the purposes of this limitation, any
adjustment or substitution made pursuant to Section 7 with respect to shares
which have not been issued or delivered under the Plan shall also be made with
respect to shares already issued or delivered under the Plan, upon the exercise
of stock options or an award of restricted stock and with respect to shares
which would have been issued or delivered under the Plan but for the exercise of
alternative stock appreciation rights, limited stock appreciation rights or
limited cash payment rights in lieu of the exercise of stock options prior to
such adjustment or substitution.
Notwithstanding any other provision contained in the Plan or in any stock
option agreement, but subject to the possible exercise of the Committee's
discretion contemplated in the last sentence of this Section 4, for incentive
stock options granted after December 31, 1986, as required by Section 422A(b)(7)
of the Code as enacted by the Tax Reform Act of 1986, the aggregate fair market
value, determined as provided in Section 5(I) on the date of grant of such
incentive stock options, of the shares with respect to which such incentive
stock options are exercisable for the first time by an employee during any
calendar year under all plans of the corporation employing such employee, any
parent or subsidiary corporation of such corporation and any predecessor
corporation of any such corporation shall not exceed $100,000. If the date on
which one or more of such incentive stock options could first be exercised would
be accelerated pursuant to any provision of the Plan or any stock option
agreement or an amendment thereto, and the acceleration of such exercise date
would result in a violation of the restriction required by Section 422A(b)(7) of
the Code set forth in the preceding sentence, then, notwithstanding any such
provision, but subject to the provisions of the next succeeding sentence, the
exercise date of such incentive stock options shall be accelerated only to the
extent, if any, that does not result in a violation of such restriction and, in
such event, the exercise date of the incentive stock options with the lowest
option price shall be accelerated first. If legislation is enacted modifying or
removing the $100,000 restriction required by Section 422A(b)(7) of the Code as
enacted by the Tax Reform Act of 1986, as of the effective date of such
legislation the Committee may in its discretion modify or waive the $100,000
restriction set forth above for incentive stock options granted (and to be
granted) after December 31, 1986 and authorize the acceleration, if any, of the
exercise date of incentive stock options up to the maximum extent permitted by
such legislation (even if such incentive stock options are converted in part to
nonstatutory stock options).
SECTION 5
Terms and Conditions of Stock Options, Alternative Stock
Appreciation Rights and Cash Payment Rights
Stock options, alternative stock appreciation rights and cash payment
rights granted under the Plan shall be subject to the following terms and
conditions:
(A) The purchase price at which each stock option may be exercised
(the "option price") shall be such price as the Committee, in its
discretion, shall determine but shall not be less than one hundred percent
(100%) of the fair market value per share of the Common Stock covered by
the stock option on the date of grant, except that in the case of an
incentive stock option granted to an employee who, immediately prior to
such grant, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any
Subsidiary (a "Ten Percent Employee"), the option price shall not be less
than one hundred ten percent (110%) of such fair market value on the date
of grant. For purposes of this Section 5(A), the fair market value of the
Common Stock shall be determined as provided in Section 5(I). For purposes
of this Section 5(A), an individual (i) shall be considered as owning not
only shares of stock owned individually but also all shares of stock that
are at the time owned, directly or indirectly, by or for the spouse,
ancestors, lineal descendants and brothers and sisters (whether by the
whole or half blood) of such individual and (ii) shall be considered as
owning proportionately any shares owned, directly or indirectly, by or for
any corporation, partnership, estate or trust in which such individual is a
shareholder, partner or beneficiary.
(B) The option price for each stock option shall be paid in full upon
exercise and shall be payable in cash in United States dollars (including
check, bank draft or money order); provided, however, that in lieu of such
cash the person exercising the stock option may (if authorized by the
Committee at the time of grant in the case of an incentive stock option, or
at any time in the case of a nonstatutory stock option) pay the option
price in whole or in part by delivering to the Company shares of the Common
Stock having a fair market value on the date of exercise of the stock
option, determined as provided in Section 5(I), equal to the option price
for the shares being purchased; except that (i) any portion of the option
price representing a fraction of a share shall in any event be paid in cash
and (ii) no shares of the Common Stock which have been held for less than
one year may be delivered in payment of the option price of a stock option.
The date of exercise of a stock option shall be determined under procedures
established by the Committee, and as of the date of exercise the person
exercising the stock option shall be considered for all purposes to be the
owner of the shares with respect to which the stock option has been
exercised. Payment of the option price with shares shall not increase the
number of shares of the Common Stock which may be issued or delivered under
the Plan as provided in Section 3.
(C) No stock option shall be exercisable by an optionee during
employment during the first six months of its term, except that this
limitation on exercise shall not apply if Section 8(B) becomes applicable.
No incentive stock option shall be exercisable after the expiration of ten
years (five years in the case of a Ten Percent Employee) from the date of
grant. No nonstatutory stock option shall be exercisable after the
expiration of ten years and six months from the date of grant. A stock
option to the extent exercisable at any time may be exercised in whole or
in part.
(D) Except as provided in the last sentence of the next to last
paragraph of Section 8(D), alternative stock appreciation rights granted in
conjunction with a stock option may only be exercised when and to the
extent the stock option may be exercised and only by the same person who is
entitled to exercise the stock option except that alternative stock
appreciation rights granted in conjunction with an incentive stock option
shall not be exercisable unless the fair market value of the Common Stock
on the date of exercise exceeds the option price of the shares subject to
the incentive stock option. Alternative stock appreciation rights entitle
such person to exercise the alternative stock appreciation rights by
surrendering the stock option, or any portion thereof, unexercised and to
receive from the Company in exchange therefor that number of shares of the
Common Stock having an aggregate fair market value on the date of exercise
of the alternative stock appreciation rights equal to the excess of the
fair market value of one share of the Common Stock on such date of exercise
over the option price per share times the number of shares covered by the
stock option, or portion thereof, which is surrendered, except that cash
shall be paid by the Company in lieu of a fraction of a share. To the
extent that alternative stock appreciation rights are exercised, the stock
option, or portion thereof, which is surrendered unexercised and any
limited stock appreciation rights or limited cash payment rights granted in
conjunction with such stock option, or portion thereof, shall automatically
terminate. The Committee shall have the authority, in its discretion, to
determine whether the obligation of the Company shall be paid in cash or
partly in cash and partly in shares, except that the Company shall not pay
to any person who is subject to the provisions of Section 16(b) of the 1934
Act at the time of exercise of alternative stock appreciation rights any
portion of the obligation of the Company in cash (except cash in lieu of a
fraction of a share) unless and until at least six months have elapsed from
the date of grant of the alternative stock appreciation rights and unless
such alternative stock appreciation rights are exercised during the period
beginning on the third and ending on the twelfth business day following the
date of release for publication of the quarterly or annual summary
statements of sales and earnings of the Company. The date of exercise of
alternative stock appreciation rights shall be determined under procedures
established by the Committee, and payment under this Section 5(D) shall be
made by the Company as soon as practicable after the date of exercise. As
of the date of exercise, the person exercising the alternative stock
appreciation rights shall be considered for all purposes to be the owner of
any shares which are to be issued or delivered upon the exercise of the
alternative stock appreciation rights. To the extent that the stock option
in conjunction with which alternative stock appreciation rights have been
granted is exercised, cancelled, terminates or expires, the alternative
stock appreciation rights shall be cancelled. For the purposes of this
Section 5(D), the fair market value of the Common Stock shall be determined
as provided in Section 5(I).
(E) Cash payment rights granted in conjunction with a nonstatutory
stock option shall entitle the person who is entitled to exercise the stock
option upon exercise of the stock option, or any portion thereof, to
receive cash from the Company (in addition to the shares to be received
upon exercise of the stock option) equal to such percentage as the
Committee, in its discretion, shall determine not greater than one hundred
percent (100%) of the excess of the fair market value of a share of the
Common Stock on the date of exercise of the stock option (or on the
alternative date provided for in the following sentence) over the option
price per share of the stock option times the number of shares covered by
the stock option, or portion thereof, which is exercised. If any such
person is subject to the provisions of Section 16(b) of the 1934 Act at the
time of exercise of the stock option, the amount of such cash payment shall
be determined as of an alternative date which shall be the day on which the
restrictions imposed by Section 16(b) of the 1934 Act no longer apply for
purposes of Section 83 of the Code. Payment of the cash provided for in
this Section 5(E) shall be made by the Company as soon as practicable after
the time the amount payable is determined. For purposes of this Section
5(E), the fair market value of the Common Stock shall be determined as
provided in Section 5(I).
(F) No stock option shall be transferable by an optionee otherwise
than by Will, or if an optionee dies intestate, by the laws of descent and
distribution of the state of domicile of the optionee at the time of death.
All stock options shall be exercisable during the lifetime of an optionee
only by the optionee.
(G) Subject to the provisions of Section 4 in the case of incentive
stock options, unless the Committee, in its discretion, shall otherwise
determine:
(i) If the employment of an optionee who is not disabled within the
meaning of Section 422A(c)(7) of the Code (a "Disabled Optionee") is
voluntarily terminated with the consent of the Company or a Subsidiary
or an optionee retires under any retirement plan of the Company or a
Subsidiary, any then outstanding incentive stock option held by such an
optionee shall be exercisable by the optionee (but only to the extent
exercisable by the optionee immediately prior to the termination of
employment) at any time prior to the expiration date of such incentive
stock option or within three months after the date of termination of
employment, whichever is the shorter period;
(ii) If the employment of an optionee who is not a Disabled
Optionee is voluntarily terminated with the consent of the Company or a
Subsidiary or an optionee retires under any retirement plan of the
Company or a Subsidiary, any then outstanding nonstatutory stock option
held by such an optionee shall be exercisable by the optionee (but only
to the extent exercisable by the optionee immediately prior to the
termination of employment) at any time prior to the expiration date of
such nonstatutory stock option or within one year after the date of
termination of employment, whichever is the shorter period;
(iii) If the employment of an optionee who is a Disabled Optionee
is voluntarily terminated with the consent of the Company or a
Subsidiary, any then outstanding stock option held by such an optionee
shall be exercisable by the optionee in full (whether or not so
exercisable by the optionee immediately prior to the termination of
employment) by the optionee at any time prior to the expiration date of
such stock option or within one year after the date of termination of
employment, whichever is the shorter period;
(iv) Following the death of an optionee during employment, any
outstanding stock option held by the optionee at the time of death shall
be exercisable in full (whether or not so exercisable by the optionee
immediately prior to the death of the optionee) by the person entitled
to do so under the Will of the optionee, or, if the optionee shall fail
to make testamentary disposition of the stock option or shall die
intestate, by the legal representative of the optionee at any time prior
to the expiration date of such stock option or within one year after the
date of death, whichever is the shorter period;
(v) Following the death of an optionee after termination of
employment during a period when a stock option is exercisable, any
outstanding stock option held by the optionee at the time of death shall
be exercisable by such person entitled to do so under the Will of the
optionee or by such legal representative (but only to the extent the
stock option was exercisable by the optionee immediately prior to the
death of the optionee) at any time prior to the expiration date of such
stock option or within one year after the date of death, whichever is
the shorter period; and
(vi) Unless the exercise period of a stock option following
termination of employment has been extended as provided in Section 8(C),
if the employment of an optionee terminates for any reason other than
voluntary termination with the consent of the Company or a Subsidiary,
retirement under any retirement plan of the Company or a Subsidiary or
death, all outstanding stock options held by the optionee at the time of
such termination of employment shall automatically terminate.
Whether termination of employment is a voluntary termination with the
consent of the Company or a Subsidiary and whether an optionee is a
Disabled Optionee shall be determined in each case, in its discretion, by
the Committee and any such determination by the Committee shall be final
and binding.
If an optionee engages in the operation or management of a business
(whether as owner, partner, officer, director, employee or otherwise and
whether during or after termination of employment) which is in competition
with the Company or any of its Subsidiaries, the Committee may immediately
terminate all outstanding stock options held by the optionee; provided,
however, that this sentence shall not apply if the exercise period of a
stock option following termination of employment has been extended as
provided in Section 8(C). Whether an optionee has engaged in the operation
or management of a business which is in competition with the Company or any
of its Subsidiaries shall also be determined, in its discretion, by the
Committee, and any such determination by the Committee shall be final and
binding.
(H) All stock options, alternative stock appreciation rights and cash
payment rights shall be confirmed by a stock option agreement, or an
amendment thereto, which shall be executed on behalf of the Company by the
Chief Executive Officer (if other than the President), the President or any
Vice President and by the optionee.
(I) Fair market value of the Common Stock shall be the mean between
the following prices, as applicable, for the date as of which fair market
value is to be determined as quoted in The Wall Street Journal (or in such
other reliable publication as the Committee, in its discretion, may
determine to rely upon): (a) if the Common Stock is listed on the New York
Stock Exchange, the highest and lowest sales prices per share of the Common
Stock as quoted in the NYSE-Composite Transactions listing for such date,
(b) if the Common Stock is not listed on such exchange, the highest and
lowest sales prices per share of Common Stock for such date on (or on any
composite index including) the principal United States securities exchange
registered under the 1934 Act on which the Common Stock is listed, or (c)
if the Common Stock is not listed on any such exchange, the highest and
lowest sales prices per share of the Common Stock for such date on the
National Association of Securities Dealers Automated Quotations System or
any successor system then in use ("NASDAQ"). If there are no such sale
price quotations for the date as of which fair market value is to be
determined but there are sale price quotations within a reasonable period
both before and after such date, then fair market value shall be determined
by taking a weighted average of the means between the highest and lowest
sales prices per share of the Common Stock as so quoted on the nearest date
before and the nearest date after the date as of which fair market value is
to be determined. The average should be weighted inversely by the
respective numbers of trading days between the selling dates and the date
as of which fair market value is to be determined. If there are no sale
price quotations on or within a reasonable period both before and after the
date as of which fair market value is to be determined, then fair market
value of the Common Stock shall be the mean between the bona fide bid and
asked prices per share of Common Stock as quoted for such date on NASDAQ,
or if none, the weighted average of the means between the bona fide bid and
asked prices on the nearest trading date before and the nearest trading
date after the date as of which fair market value is to be determined, if
both such dates are within a reasonable period. The average is to be
determined in the manner described above in this Section 5(I). If the fair
market value of the Common Stock cannot be determined on
the basis previously set forth in this Section 5(I) on the date as of which
fair market value is to be determined, the Committee shall in good faith
determine the fair market value of the Common Stock on such date. Fair
market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse.
(J) The obligation of the Company to issue or deliver shares of the
Common Stock under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for
the Company, (ii) the condition that the shares shall have been listed (or
authorized for listing upon official notice of issuance) upon each stock
exchange, if any, on which such shares may then be listed and (iii) all
other applicable laws, regulations, rules and orders which may then be in
effect.
Subject to the foregoing provisions of this Section and the other
provisions of the Plan, any stock option or alternative stock appreciation
rights granted under the Plan may be exercised at such times and in such amounts
and be subject to such restrictions and other terms and conditions, if any, as
shall be determined, in its discretion, by the Committee and set forth in the
stock option agreement referred to in Section 5(H), or an amendment thereto.
SECTION 6
Terms and Conditions of Restricted Stock Awards
Restricted stock awards shall be evidenced by a written restricted stock
agreement in the form prescribed by the Committee in its discretion, which shall
set forth the number of shares of the Common Stock awarded, the restrictions
imposed thereon (including, without limitation, restrictions on the right of the
grantee to sell, assign, transfer or encumber such shares while such shares are
subject to other restrictions imposed under this Section 6), the duration of
such restrictions, events the occurrence of which would cause a forfeiture of
the restricted stock and such other terms and conditions as the Committee in its
discretion deems appropriate. Restricted stock awards shall be effective only
upon execution of the applicable restricted stock agreement on behalf of the
Company by the Chief Executive Officer (if other than the President), the
President or any Vice President, and by the grantee.
Following a restricted stock award and prior to the lapse or termination of
the applicable restrictions, the Committee shall deposit share certificates for
such restricted stock in escrow. Upon the lapse or termination of the applicable
restrictions (and not before such time), the grantee shall be issued or
transferred share certificates for such restricted stock. From the date a
restricted stock award is effective, the grantee shall be a shareholder with
respect to all the shares represented by such certificates and shall have all
the rights of a shareholder with respect to all such shares, including the right
to vote such shares and to receive all dividends and other distributions paid
with respect to such shares, subject only to the restrictions imposed by the
Committee.
SECTION 7
Adjustment and Substitution of Shares
If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common Stock
then subject to any outstanding stock option or restricted stock award and the
number of shares of the Common Stock which may be issued or delivered under the
Plan but are not then subject to an outstanding stock option or restricted stock
award shall be adjusted by adding thereto the number of shares of the Common
Stock which would have been distributable thereon if such shares had been
outstanding on the date fixed for determining the shareholders entitled to
receive such stock dividend or distribution.
If the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock subject to any then outstanding stock option or
restricted stock award, and for each share of the
Common Stock which may be issued or delivered under the Plan but which is not
then subject to an outstanding stock option or restricted stock award, the
number and kind of shares of stock or other securities into which each
outstanding share of the Common Stock shall be so changed or for which each such
share shall be exchangeable.
In case of any adjustment or substitution as provided for in this Section
7, the aggregate option price for all shares subject to each then outstanding
stock option prior to such adjustment or substitution shall be the aggregate
option price for all shares of stock or other securities (including any
fraction) to which such shares shall have been adjusted or which shall have been
substituted for such shares. Any new option price per share shall be carried to
at least three decimal places with the last decimal place rounded upwards to the
nearest whole number.
No adjustment or substitution provided for in this Section 7 shall require
the Company to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution. Owners of restricted stock shall be
treated in the same manner as the Company treats owners of its Common Stock with
respect to fractional shares created by an adjustment or substitution of shares,
except that any property or cash paid in lieu of a fractional share shall be
subject to restrictions similar to those applicable to the restricted stock
exchanged therefor.
If any such adjustment or substitution provided for in this Section 7
requires the approval of shareholders in order to enable the Company to grant
incentive stock options, then no such adjustment or substitution shall be made
without the required shareholder approval. Notwithstanding the foregoing, in the
case of incentive stock options, if the effect of any such adjustment or
substitution would be to cause the stock option to fail to continue to qualify
as an incentive stock option or to cause a modification, extension or renewal of
such stock option within the meaning of Section 425 of the Code, the Committee
may elect that such adjustment or substitution not be made but rather shall use
reasonable efforts to effect such other adjustment of each then outstanding
stock option as the Committee, in its discretion, shall deem equitable and which
will not result in any disqualification, modification, extension or renewal
(within the meaning of Section 425 of the Code) of such incentive stock option.
SECTION 8
Additional Rights in Certain Events
(A) Definitions
For purposes of this Section 8, the following terms shall have the
following meanings:
(1) "Affiliate," "Associate" and "Parent" shall have the respective
meanings set forth in Rule 12b-2 under the 1934 Act as in effect on the
effective date of the Plan.
(2) The term "Person" shall be used as that term is used in Sections
13(d) and 14(d) of the 1934 Act.
(3) Beneficial Ownership shall be determined as provided in Rule 13d-3
under the 1934 Act as in effect on the effective date of the Plan.
(4) "Voting Shares" shall mean all securities of a company entitling
the holders thereof to vote in an annual election of Directors (without
consideration of the rights of any class of stock other than the Common
Stock to elect Directors by a separate class vote); and a specified
percentage of "Voting Power" of a company shall mean such number of the
Voting Shares as shall enable the holders thereof to cast such percentage
of all the votes which could be cast in an annual election of directors
(without consideration of the rights of any class of stock other than the
Common Stock to elect Directors by a separate class vote).
(5) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Company (other than such an offer made by the
Company or any Subsidiary), whether or not such offer is approved or
opposed by the Board.
(6) "Section 8 Event" shall mean the date upon which any of the
following events occurs:
(a) The Company acquires actual knowledge that any Person other
than the Company, a Subsidiary, any Director of the Company on the
effective date of the Plan, any Affiliate or Associate of any such
Director, any member of the family of any such Director, any trust
(including the Trustees thereof), established by or for the benefit of
any such persons, any charitable foundation, whether a trust or a
corporation (including the trustees and directors thereof), established
by any such persons or any employee benefit plan(s) sponsored by the
Company has acquired the Beneficial Ownership, directly or indirectly,
of securities of the Company entitling such Person to 25% or more of the
Voting Power of the Company [as used above, a member of the family of a
Director shall include such Director's spouse and such Director's and
such spouse's ancestors, lineal descendants, brothers and sisters
(whether by the whole or half blood or by adoption), the lineal
descendants of such brothers and sisters and the spouses of any of the
foregoing persons];
(b) (i) A Tender Offer is made to acquire securities of the Company
entitling the holders thereof to 50% or more of the Voting Power of the
Company; or (ii) Voting Shares are first purchased pursuant to any other
Tender Offer;
(c) At any time less than 51% of the members of the Board of
Directors shall be individuals who were either (i) Directors on the
effective date of the Plan or (ii) individuals whose election, or
nomination for election, was approved by a vote of at least two-thirds
of the Directors then still in office who were Directors on the
effective date of the Plan or who were so approved;
(d) The shareholders of the Company shall approve an agreement or
plan (a "Reorganization Agreement") providing for the Company to be
merged, consolidated or otherwise combined with, or for all or
substantially all its assets or stock to be acquired by, another
corporation, as a consequence of which the former shareholders of the
Company will own, immediately after such merger, consolidation,
combination or acquisition, less than a majority of the Voting Power of
such surviving or acquiring corporation or the Parent thereof; or
(e) The shareholders of the Company shall approve any liquidation
of all or substantially all of the assets of the Company or any
distribution to security holders of assets of the Company having a value
equal to 30% or more of the total value of all the assets of the
Company.
(B) Acceleration of the Exercise Date of Stock Options and Alternative Stock
Appreciation Rights
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the stock option agreement referred to in Section 5(H), or an
amendment thereto, shall otherwise provide, notwithstanding any other provision
contained in the Plan, in case any "Section 8 Event" occurs (i) all outstanding
stock options and alternative stock appreciation rights shall become immediately
and fully exercisable whether or not otherwise exercisable by their terms, (ii)
payment by the Company upon exercise of alternative stock appreciation rights
held by a person who is subject to the provisions of Section 16(b) of the 1934
Act (which alternative stock appreciation rights have been held less than six
months at the time of exercise following a Section 8 Event) shall be made by the
Company in shares of Common Stock (except that cash may be paid in lieu of a
fraction of a share) and (iii) payment by the Company upon exercise of
alternative stock appreciation rights held by such a person (which alternative
stock appreciation rights have been held at least six months on the date of
exercise following a Section 8 Event) shall be made in cash if the date of
exercise is within sixty (60) days following a Section 8 Event, whether or not
the date of exercise is within one of the ten (10) day periods provided for in
Section 5(D).
(C) Extension of the Expiration Date of Stock Options and Alternative Stock
Appreciation Rights
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the stock option agreement referred to in Section 5(H), or an
amendment thereto, shall otherwise provide, notwithstanding any other provision
contained in the Plan, all stock options and alternative stock appreciation
rights held by an optionee whose employment with the Company or a Subsidiary
terminates within one year of any Section 8 Event for any reason other than
voluntary termination with the consent of the Company or a Subsidiary,
retirement under any retirement plan of the Company or a
Subsidiary or death shall be exercisable for a period of three months from the
date of such termination of employment, but in no event after the expiration
date of the stock option.
(D) Limited Stock Appreciation Rights
Limited stock appreciation rights granted in conjunction with a stock
option shall be exercisable for a period of sixty (60) days following any
Section 8 Event by the same person who is entitled to exercise the stock option
and shall entitle such person to exercise the limited stock appreciation rights
by surrendering the stock option, or any portion thereof, unexercised and to
receive from the Company in exchange therefor cash in the amount provided for
below in this Section 8(D). To the extent that limited stock appreciation rights
are exercised, the stock option, or portion thereof, which is surrendered
unexercised and any alternative stock appreciation rights or limited cash
payment rights granted in conjunction with such stock option, or portion
thereof, shall automatically terminate.
Notwithstanding the foregoing, limited stock appreciation rights may not be
exercised by a person who is subject to the provisions of Section 16(b) of the
1934 Act at the time of exercise of the limited stock appreciation rights unless
and until at least six months have elapsed from the date of grant of the limited
stock appreciation rights; provided, however, that if limited stock appreciation
rights are granted in conjunction with a stock option as to which alternative
stock appreciation rights have previously been granted, the limited stock
appreciation rights shall be deemed to have been granted at the time of grant of
such alternative stock appreciation rights. Limited stock appreciation rights
granted in conjunction with an incentive stock option shall also not be
exercisable unless the then fair market value of the Common Stock, determined as
provided in Section 5(I), exceeds the option price of such incentive stock
option and unless such incentive stock option is exercisable. Cash is payable to
a person who is subject to the provisions of Section 16(b) of the 1934 Act at
the time of exercise of limited stock appreciation rights whether or not the
date of exercise is within one of the ten (10) day periods provided for in
Section 5(D).
The person exercising limited stock appreciation rights granted in
conjunction with a nonstatutory stock option shall receive cash in respect of
each share of the Common Stock subject to the stock option, or portion thereof,
which is surrendered unexercised in an amount equal to the excess of the fair
market value of such share on the date of exercise over the option price of such
stock option, and for this purpose fair market value shall mean the highest
closing sale price of the Common Stock quoted by such reliable source as the
Committee, in its discretion, may rely upon during the period beginning on the
9Oth day prior to the date on which the limited stock appreciation rights are
exercised and ending on such date (or if no such sale price quotation is
available, the highest mean between the bona fide bid and asked prices on any
date during such period), except that (i) in the event any Person acquires
Beneficial Ownership, directly or indirectly, of securities of the Company
entitling such Person to 25% or more of the Voting Power of the Company within
the meaning of Section 8(A)(6)(a), fair market value shall mean the greater of
such closing sale price or the highest price per share paid for the Common Stock
shown on the Statement on Schedule 13D, or any amendment thereto, filed by the
Person acquiring such beneficial ownership, (ii) in the event of a Tender Offer,
fair market value shall mean the greater of such closing sale price or the
highest price paid for the Common Stock pursuant to any Tender Offer in effect
at any time beginning on the 9Oth day prior to the date on which the limited
stock appreciation rights are exercised and ending on such date and (iii) in the
event of approval by the shareholders of the Company of a Reorganization
Agreement, fair market value shall mean the greater of such closing sale price
or the value of the consideration to be received by holders of the Common Stock
pursuant to the Reorganization Agreement. In the event such value cannot be
determined on the date of exercise of the limited stock appreciation rights,
such value shall be determined by the Committee as promptly as practicable after
such exercise and payment by the Company shall be made as promptly as
practicable after such determination. Any non-cash consideration received by the
holders of any shares of the Common Stock in one of the events referred to in
clause (ii) or (iii) above shall be valued at the higher of (i) the valuation
placed thereon by the Person making the Tender Offer or by the surviving or
acquiring corporation or the Parent thereof and (ii) the valuation placed
thereon by the Committee.
The person exercising limited stock appreciation rights granted in
conjunction with an incentive stock option shall receive cash in respect of each
share of the Common Stock subject to the stock
option, or portion thereof, which is surrendered unexercised in an amount equal
to the excess of the fair market value of such share on the date of exercise,
determined as provided in Section 5(I), over the option price of such stock
option.
The date of exercise of limited stock appreciation rights shall be
determined under procedures established by the Committee, and payment under this
Section 8(D) shall be made by the Company as soon as practicable after the date
of exercise. To the extent that the stock option in conjunction with which the
limited stock appreciation rights shall have been granted is exercised,
cancelled, terminates or expires, the limited stock appreciation rights shall be
cancelled. If limited stock appreciation rights are granted in conjunction with
a stock option as to which alternative stock appreciation rights also have been
granted, the alternative stock appreciation rights may not be exercised during
any period during which the limited stock appreciation rights may be exercised.
All limited stock appreciation rights shall be confirmed by a stock option
agreement, or an amendment thereto, which shall be executed on behalf of the
Company by the Chief Executive Officer (if other than the President), the
President or any Vice President and by the optionee. Subject to the foregoing
provisions of this Section 8(D) and the other provisions of the Plan, limited
stock appreciation rights granted under the Plan shall be subject to such other
terms and conditions as shall be determined, in its discretion, by the Committee
and set forth in the stock option agreement referred to in Section 5(H), or an
amendment thereto.
(E) Limited Cash Payment Rights
Limited cash payment rights granted in conjunction with a nonstatutory
stock option shall be exercisable for a period of sixty (60) days following any
Section 8 Event by the person who is entitled to exercise the nonstatutory stock
option and shall entitle such person to surrender the nonstatutory stock option,
or any portion thereof, unexercised and to receive from the Company in exchange
therefor cash in an amount equal to two (2) times the amount provided for in the
third paragraph of Section 8(D) multiplied by such percentage not greater than
100% as the Committee, in its discretion, shall determine. For purposes of the
third paragraph of Section 8(D), the words "limited cash payment rights" shall
be deemed to be substituted for "limited stock appreciation rights." To the
extent that limited cash payment rights are exercised, the nonstatutory stock
option, or portion thereof, which is surrendered unexercised and any alternative
stock appreciation rights or limited stock appreciation rights granted in
conjunction with such stock option, or portion thereof, shall automatically
terminate. Notwithstanding the foregoing, limited cash payment rights may not be
exercised by a person who is subject to the provisions of Section 16(b) of the
1934 Act at the time of exercise unless and until at least six months have
elapsed from the date of grant of the limited cash payment rights.
The date of exercise of limited cash payment rights shall be determined
under procedures established by the Committee, and payment of the cash provided
for in this Section 8(E) shall be made by the Company as soon as practicable
after the date of exercise. To the extent that the nonstatutory stock option in
respect of which limited cash payment rights shall have been granted is
exercised, cancelled, terminates or expires, the limited cash payment rights
shall be cancelled.
All limited cash payment rights shall be confirmed by a stock option
agreement, or an amendment thereto, which shall be executed on behalf of the
Company by the Chief Executive Officer (if other than the President), the
President or any Vice President and by the optionee. Subject to the foregoing
provisions of this Section 8(E) and the other provisions of the Plan, limited
cash payment rights granted under the Plan shall be subject to such other terms
and conditions as shall be determined, in its discretion, by the Committee and
set forth in the stock option agreement referred to in Section 5(H), or an
amendment thereto.
(F) Lapse of Restrictions on Restricted Stock Awards
If any "Section 8 Event" occurs prior to the scheduled lapse of all
restrictions applicable to restricted stock awards under the Plan, all such
restrictions shall lapse upon the occurrence of any such "Section 8 Event"
regardless of the scheduled lapse of such restrictions.
SECTION 9
Effect of the Plan on the Rights of Employees and Employer
Neither the adoption of the Plan nor any action of the Board or the
Committee pursuant to the Plan shall be deemed to give any employee any right to
be granted a stock option (with or without alternative stock appreciation
rights, cash payment rights, limited stock appreciation rights and/or limited
cash payment rights) or to be awarded restricted stock under the Plan and
nothing in the Plan, in any stock option, alternative stock appreciation rights,
cash payment rights, limited stock appreciation rights or limited cash payment
rights granted under the Plan, in any restricted stock award under the Plan or
in any stock option agreement or restricted stock agreement shall confer any
right to any employee to continue in the employ of the Company or any Subsidiary
or interfere in any way with the rights of the Company or any Subsidiary to
terminate the employment of any employee at any time.
SECTION 10
Amendment
The right to alter and amend the Plan at any time and from time to time and
the right to revoke or terminate the Plan are hereby specifically reserved to
the Board; provided always that no such revocation or termination shall
terminate any outstanding stock options, alternative stock appreciation rights,
cash payment rights, limited stock appreciation rights or limited cash payment
rights granted under the Plan or cause a revocation or a forfeiture of any
restricted stock award under the Plan; and provided further that no such
alteration or amendment of the Plan shall, without shareholder approval (a)
increase the total number of shares which may be issued or delivered under the
Plan, (b) increase the total number of shares which may be covered by any stock
option or stock options granted to any one optionee or any restricted stock
awards to any one person, (c) change the minimum option price, (d) make any
changes in the class of employees eligible to receive incentive stock options or
(e) extend any period set forth in the Plan during which stock options (with or
without alternative stock appreciation rights, cash payment rights, limited
stock appreciation rights and/or limited cash payment rights) may be granted or
restricted stock may be awarded. No alteration, amendment, revocation or
termination of the Plan shall, without the written consent of the holder of a
stock option, alternative stock appreciation rights, cash payment rights,
limited stock appreciation rights, limited cash payment rights or restricted
stock theretofore awarded under the Plan, adversely affect the rights of such
holder with respect to such stock option, alternative stock appreciation rights,
cash payment rights, limited stock appreciation rights, limited cash payment
rights or restricted stock.
SECTION 11
Effective Date and Duration of Plan
The effective date and date of adoption of the Plan shall be December 17,
1987, the date of adoption of the Plan by the Board, provided that such adoption
of the Plan by the Board is approved by the affirmative vote of the holders of
at least a majority of the outstanding shares of voting stock of the Company at
a meeting of such holders duly called, convened and held on or prior to December
16, 1988. No stock option, alternative stock appreciation rights, limited stock
appreciation rights or limited cash payment rights granted under the Plan may be
exercised and no restricted stock may be awarded until after such approval. No
stock option, alternative stock appreciation rights, cash payment rights,
limited stock appreciation rights or limited cash payment rights may be granted
and no restricted stock may be awarded under the Plan subsequent to December 16,
1997.
EXHIBIT 10(e)
-------------
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT, made and entered into this 29th day of December, 1993,
by and between MINE SAFETY APPLIANCES COMPANY ("MSA"), a Pennsylvania
corporation, and LEO N. SHORT, JR. ("Mr. Short").
WITNESSETH:
-----------
WHEREAS, Mr. Short has been employed by MSA since July 15, 1947 and
served as its President and Chief Executive Officer from January 17, 1986 to
April 25, 1990 and as its Chairman of the Board and Chief Executive Officer from
that date until September 30, 1991; and
WHEREAS, Mr. Short retired as an employee of the Company on February
1, 1992; and
WHEREAS, MSA does not wish to lose the benefit of Mr. Short's
experience with MSA and his familiarity of its operations and desires to be able
to call on his advice and expertise from time to time upon the terms and subject
to the conditions hereafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and intending to be legally bound hereby, MSA and Mr. Short promise and
agree as follows:
1. Terms of Agreement. This Agreement shall become effective
------------------
February 1, 1994 and shall continue thereafter to and including January 31,
1995. Notwithstanding the expiration of the foregoing initial term, this
Agreement shall automatically renew for successive one-year terms unless either
party shall give written notice of cessation of the Agreement not less than 30
days prior to the expiration of either the initial term or any successive one-
year term.
2. Nature of Mr. Short's services. Mr. Short shall provide such
------------------------------
advice and consulting services to MSA as shall from time to time be mutually
agreed between the parties. In connection therewith, Mr. Short shall make
himself reasonably available for general advice and consultation in connection
with aspects of the international operations and business of MSA and its
subsidiaries, including service as a member of the designated international
subsidiaries' Boards of Directors or any Committee thereof, and as Chairman of
MSA International, if and for so long as the Board may request.
3. Compensation of Mr. Short. As full compensation for services
-------------------------
rendered to MSA pursuant to the terms of this Agreement, excluding service as a
member of the Board of Directors or a member of any Committee thereof, MSA shall
pay Mr. Short an annual consulting fee of $30,000, in monthly or such other
convenient installments as may be mutually agreed by Mr. Short and MSA. It is
fully understood and agreed by Mr. Short that payment of the annual consulting
fee shall be in full payment for Mr. Short's services hereunder, and that MSA
shall be under no obligation to provide any employee benefits of any nature
whatsoever, except those employee benefits to which Mr. Short may be or
-2-
may become entitled as a result of his services as an officer, director or
employee of MSA.
In the performance of the work and services hereunder, Mr. Short
recognizes that due to being a retired former employee, he is considered a
temporary employee for tax purposes only and shall be considered as an
independent consultant and contractor for all other purposes. Mr. Short
understands that MSA will withhold from each payment of wages the appropriate
amounts for social security and withholding taxes, as well as state income and
local wage taxes, if applicable. Mr. Short will supply MSA with executed
exemption certificates.
4. Facilities and Expenses. During the term of this Agreement, MSA
-----------------------
will supply Mr. Short with office space, secretarial staff and such other
facilities and support services as he may reasonably request to carry out his
duties hereunder. Such office space, facilities and services may be located at
or provided by any one of the offices of MSA or such other reasonably convenient
location as may be designated by Mr. Short. MSA shall reimburse Mr. Short for
all reasonable out-of-pocket travel and other business expenses incurred by him
in connection with the services to be provided to MSA pursuant to this
Agreement.
5. Confidential Information; Noncompetition. Mr. Short acknowledges
----------------------------------------
that during the course of his employment with MSA he has acquired and may
subsequently acquire privileged and confidential information concerning MSA's
current and prospective
-3-
customers, its methods and ways of doing business, its plans and goals for
future activities and other confidential or proprietary information belonging to
MSA or relating to its affairs (collectively referred to herein as the
"Confidential Information"). Mr. Short further acknowledges and agrees that the
Confidential Information is the property of MSA and that any misappropriation or
unauthorized use or disclosure of the Confidential Information would cause
irreparable injury to MSA, and that it is essential to the protection of MSA and
its good will, and to the maintenance of its competitive position that the
Confidential Information be kept secret and not be disclosed to others.
Mr. Short further agrees that during the term of this Agreement and
thereafter, he shall hold and safeguard the Confidential Information in trust
for MSA, its successors and assigns, and that he shall not, without the prior
written consent of MSA, misappropriate or disclose or make available to anyone
for use outside the corporation at any time. Further, Mr. Short agrees that he
shall not, without first obtaining the written consent of MSA, directly or
indirectly engage in or assist any business which is in competition with MSA or
any of its subsidiaries.
6. Death Prior to Termination of Agreement. In the event of Mr.
---------------------------------------
Short's death during the term of this Agreement or extensions thereof, the
duties and obligations of both Mr. Short and MSA shall terminate effective on
such date, except that in the event that Mr. Short's death occurs prior to
January 31, 1995 or any extended date, MSA shall pay the balance of the
consulting fee otherwise due Mr. Short for the remainder of the term to his
surviving spouse or estate (whichever may apply) in a single sum.
-4-
7. Disability or Incapacity. In the event that Mr. Short shall, in
------------------------
the opinion of the Board of Directors of MSA, be unable, by reason of mental or
physical disability or incapacity, to perform the consulting services otherwise
required herein, MSA may, at its option, terminate this Agreement effective as
of any date not less than 60 days following the date of delivery of written
notice of termination to Mr. Short or his representative. Such declaration and
notice shall cause MSA to pay the balance of the consulting fee otherwise due
Mr. Short for the remainder of the initial term to his personal representative
in a single sum.
8. Assignment. Except with respect to the death or disability
----------
payments described in Paragraphs 6 and 7 hereof, the benefits of this Agreement
are and shall be personal to Mr. Short, shall inure to the benefit of Mr.
Short's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees or legatees. This Agreement shall be
binding upon and shall inure to the benefit of MSA, any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of MSA, or to any assignee thereof.
-5-
9. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
ATTEST: MINE SAFETY APPLIANCES COMPANY
/S/ Donald H. Cuozzo By /S/John T. Ryan III
- ------------------------------- ----------------------------------
Secretary John T. Ryan III, President,
Chairman and Chief Executive
Officer
WITNESS:
/S/ Elmira F. Potochnik /S/Leo N. Short, Jr.
- --------------------------------- ---------------------------------
Leo N. Short, Jr.
-6-
EXHIBIT 13
----------
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES AND EARNINGS
Sales were $429,220,000 in 1993, a 15% decline from the prior year's
$502,366,000. Sales in 1991 were $499,240,000. Income from continuing
operations declined 37% in 1993 to $10,555,000 from $16,703,000 in 1992, which
was 25% lower than 1991's income of $22,424,000. Income from continuing
operations, per share of common stock, was $1.73 in 1993, $2.67 in 1992, and
$3.52 in 1991.
The decrease in consolidated sales in 1993 is attributed primarily to a
significant drop in sales to the U.S. Defense Department and lower
international sales, particularly in Europe. U.S. commercial sales in 1993
were minimally higher than 1992. Defense product sales of gas masks and parts
were especially high in late 1991 and early 1992 due to orders relating to the
Middle East conflict. Shipments of defense products to U.S. government
agencies in 1993 were $43,234,000, a 57% decrease from 1992 shipments of
$99,991,000. Shipments in 1992 were 7 1/2% higher than 1991 shipments of
$93,034,000. These sales represent 10% of consolidated sales in 1993, as
compared to 20% in 1992 and 18 1/2% in 1991. New contracts received in 1993
were $32,558,000 as compared to $48,510,000 in 1992. The 1993 year-end backlog
was $54,889,000, a 16% decrease from the 1992 year-end backlog of $65,565,000.
Domestic sales of commercial products increased in shipments of
instrument products in 1993 and 1992, along with increased chemical products
sales in 1992. Sales of commercial safety products were about the same as in
1992 and 1991. Sales by international operations, stated in U.S. dollars,
decreased 10 1/2% in 1993, after having decreased 3 1/2% in 1992. These
decreases are due primarily to currency exchange rate shifts and the widespread
economic recession, particularly in Europe.
The 1993 gross profit rate was 36.3%, an increase over the 34.8% and
35.0% experienced in 1992 and 1991, respectively. Historically and currently,
commercial sales carry much greater margins than military sales; thus the
change of sales mix has contributed to higher profit margins. Furthermore,
military sales profit rates dropped significantly in 1992 and 1991, reflecting
the impacts of development and start-up costs for new model designs and the
results of competitive bidding pressures. Results in 1991 were also adversely
affected by operating losses at the Catalyst Research Division. Depreciation,
selling and administrative expenses approximated 30% of sales in each of the
years 1993, 1992 and 1991.
Income from continuing operations in 1993 was not materially affected
by relocation and restructuring activities, whereas in 1992 there was an
after-tax charge of $3,163,000 or $ .51 per share. In 1992 the company
consolidated certain U.S. manufacturing operations. The medical instruments,
specialty sensor and battery operations at the Catalyst Research Division in
Owings Mills, Maryland were transferred to the Instrument Division in
Cranberry, Pa., and the Owings Mills facility offered for sale. Safety
products manufacturing is now concentrated in three principal locations after a
reduction in the scope of operations at Evans City, Pa. In 1993, the German
affiliate closed one factory and a distribution center and now conducts all its
operations from Berlin. Major reductions in the work forces have been
instituted, particularly in Europe and Latin America. It is expected that
these changes will enable the company to serve its commercial and military
customers more efficiently and maintain ample capacity to meet future growth
potential.
Net income in 1993 was $10,555,000 or $1.73 per share of common stock,
compared to 1992 net income of $2,672,000 or $.42 per share (includes special
charges for accounting changes and discontinued operations) and $18,651,000 or
$2.92 per share in 1991. The accounting changes in 1992 resulted in an
after-tax cumulative effect charge, as of January 1, 1992, of $8,964,000 or
$1.44 per share of common stock. SFAS No. 106--"Employers' Accounting for
Postretirement Benefits Other Than Pensions" was implemented on an immediate
recognition basis rather than spreading the accumulated obligation over 20
years (see note 16). This one-time transition effect decreased net income
$8,672,000 ($1.39 per share). SFAS No. 112--"Employers' Accounting for
Postemployment Benefits," pertaining to benefits such as workers' compensation
and other disability expenses, reduced earnings $2,440,000 ($.39 per share).
SFAS No. 109--"Accounting for Income Taxes" increased earnings $2,148,000
($.34 per share). This Standard requires that deferred tax balances be stated
at tax rates expected to be in effect when taxes are actually paid or
recovered. This asset/liability method may have a more volatile effect on
future earnings than the previous method which provided deferred taxes at tax
rates prevailing during the periods that timing differences occurred. Although
these three new Standards significantly reduced 1992 net income, they did not
have any cash flow impact.
The company decided, as of the end of 1992, to discontinue the
operation of Transfer-Metallisierte Produkte GmbH (TMP), a joint venture in
Germany to produce metallized paper. This venture, unrelated to the company's
safety products, has been a financial drain on the company. Operating
activities ceased during 1993; the company is in the process of disposing of
its assets and settling its liabilities. TMP's cumulative losses since
inception in the company's consoli-
7
dated results, adjusted for the after-tax effects of intercompany transactions,
aggregate approximately $10.9 million. The company estimates that any losses
that may be incurred from the disposition of TMP, including provision for
operating losses during the phase-out period, will not affect 1993 and 1992 net
income or cash flows after deducting the aforementioned accumulated losses
already recognized and the tax benefits associated with any write-off.
The after-tax effects of foreign currency exchange losses charged to
income in 1993 reduced net income $3,204,000 or $.53 per share, as compared to
$5,022,000 or $.81 per share in 1992 and $2,408,000 or $.38 per share in 1991.
The more significant losses resulted from the currency valuation changes that
occurred in Brazil in each of the three years. The effective income tax rates,
for which further information is included at note 8, were 42.1% in 1993, 39.9%
in 1992, and 41.4% in 1991.
FINANCIAL CONDITION AND FUNDS FLOW
Cash and cash equivalents decreased $8,975,000 during 1993. Accounts
receivable of $81,897,000 at December 31, 1993 includes $10,129,000 from the
sale of fixed assets. Trade receivables expressed in number of days' sales
outstanding were 61 days, as compared to 55 days in 1992. Inventories
decreased $6,330,000 to $81,454,000 at December 31, 1993. Inventory measured
against sales turned 5.3 times in 1993 and 5.7 times in 1992. Inventories
decreased primarily in the international companies. The working capital ratio
was 3.7 and 4.2 to 1 at years-end 1993 and 1992, respectively.
All short-term debt was owed by international affiliates. These loans
are payable in local currencies, which is in keeping with the company's policy
of minimizing foreign currency exposures by offsetting foreign currency assets
with foreign currency debt. The average interest rate on these loans, which
includes the effects of borrowing in certain countries where local inflation
has resulted in high interest rates, was approximately 14%.
Long-term debt and the current portion thereof decreased $1,402,000 to
$30,982,000, a conservative 11% of total capital. Total capital is defined as
long-term debt plus current portion of long-term debt and shareholders' equity.
Capital expenditures of $20,399,000 in 1993 represent a decrease of
$2,363,000 from 1992 expenditures of $22,762,000. The company has continued
its program of plant and equipment modernization to increase efficiency of
existing manufacturing and distribution facilities. For the most part, capital
expenditures were financed internally through retained earnings. In the past
five years, approximately $ 111 million has been spent on new plants, equipment
and distribution facilities.
Dividends paid on the common stock during 1993 (the 76th consecutive
year of a dividend payment) were $.92 per share, up from the $.89 per share
paid during 1992 and $.88 per share paid in 1991. The current quarterly cash
dividend is $.23 per share on common stock. Cash dividends have been paid at a
conservative percentage of income which has permitted the company to finance
its growth almost exclusively
8
through retained earnings. Common shares are repurchased from time-to-time in
keeping with the company's policy of buying back a limited number of its shares.
As of December 31, 1993, an additional 129,120 shares may be repurchased under
current authorizations.
Credit available at year-end with banks was the U.S. dollar equivalent
of $8,858,000. The company's financial position remains strong and should
provide adequate capital resources for growth.
CUMULATIVE CURRENCY TRANSLATION ADJUSTMENT
The year-end position of the U.S. dollar relative to foreign currencies
resulted in a translation loss of $5,400,000 being charged to the cumulative
translation adjustments shareholders equity account in 1993, as compared to
losses of $4,736,000 in 1992 and $7,527,000 in 1991. Significant translation
losses occurred in Germany and Italy in 1993, in Britain, Canada, Italy and
Australia in 1992 and in Germany and Britain in 1991.
COMMON STOCK
At December 31, 1993, there were 6,011,628 shares of common stock outstanding.
There were approximately 480 identifiable common stockholders as of November
19, 1993, a recent date for dividends. The common stock last-sale price and
up-to-the-minute volume information (Symbol: MNES) is included in the National
Association of Security Dealers, Inc., (NASDAQ) National Market System. The
quarterly high and low price quotations for common shares follow:
1993 1992
-------------------- -------------------
Quarter High Low High Low
- ------- ---- --- ---- ---
First $46 $39 3/4 $51 $43 1/2
Second 49 44 46 42
Third 45 3/4 41 1/4 45 3/4 41 3/4
Fourth 45 41 3/4 44 1/2 38
Common stock quarterly cash dividend information is as follows:
Amount Record Payment
Quarter Per Share Date Date
- ------- --------- ---- ----
1993
------
First $ .23 Feb. 19, 1993 March 10, 1993
Second .23 May 14, 1993 June 10, 1993
Third .23 Aug. 13, 1993 Sept. 10, 1993
Fourth .23 Nov. 19, 1993 Dec. 10, 1993
-----
Total .92
-----
1992
------
First $ .22 Feb. 21, 1992 March 10, 1992
Second .22 May 15, 1992 June 10, 1992
Third .22 Aug. 14, 1992 Sept. 10, 1992
Fourth .23 Nov. 20, 1992 Dec. 10, 1992
-----
Total .89
-----
The company's stock transfer agent is Norwest Bank Minnesota, N.A., 161
North Concord Exchange, P. O. Box 738, South St. Paul, MN 55075-0738.
9
REPORT OF MANAGEMENT
Mine Safety Appliances Company's consolidated financial statements and related
notes that appear in this Annual Report to Shareowners were prepared by the
company in accordance with generally accepted accounting principles. In
fulfilling its responsibilities for the integrity and objectivity of the
consolidated financial statements, management maintains accounting procedures
designed to provide accurate books, records and accounts which reasonably and
fairly reflect the transactions of the company in a consistent manner on the
accrual basis of accounting.
Company personnel are trained and given responsibilities to ensure
adequate internal accounting controls at a cost commensurate with the risks
involved. Internal accounting controls, monitored by an internal audit staff,
provide reasonable assurances that transactions are executed in accordance with
proper authorization and that adequate accountability for the company's assets
is maintained.
The Board of Directors, through its Audit Committee, is responsible for
assuring that management fulfills its responsibilities in the preparation of
the financial statements. The Audit Committee meets at least twice a year with
the company's independent accountants to discuss the scope of their examination
and any significant findings resulting therefrom.
/s/ James E. Herald
- -------------------
James E. Herald
Vice President--Finance
Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners and Board of Directors
of Mine Safety Appliances Company:
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of earnings retained in the business,
and of cash flows present fairly, in all material respects, the financial
position of Mine Safety Appliances Company 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.
As discussed in Note 18 to these consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," SFAS
No. 109, "Accounting for Income Taxes," and SFAS No. 112, "Employers' Accounting
for Postemployment Benefits" in 1992.
/s/ Price Waterhouse
- --------------------
Price Waterhouse
Pittsburgh, Pennsylvania
February 16, 1994
10
Consolidated Statement of Income
- --------------------------------
(In thousands, except per share amounts)
Year Ended December 31 1993 1992 1991
Net sales.................................................................... $429,220 $502,366 $499,240
Other income................................................................. 5,885 9,755 8,886
-------- -------- --------
435,105 512,121 508,126
-------- -------- --------
Costs and expenses
Cost of products sold..................................................... 273,350 327,555 324,448
Selling, general and administrative....................................... 121,529 130,182 124,983
Depreciation.............................................................. 17,294 16,831 16,230
Interest.................................................................. (1,713) 1,536 1,739
Foreign currency losses................................................... 3,201 5,507 2,456
Facilities consolidation and restructuring charges........................ (223) 5,500
Contract costs recovery................................................... (2,800)
-------- -------- --------
416,864 484,311 469,856
-------- -------- --------
Income from continuing operations before income taxes........................ 18,241 27,810 38,270
Provision for income taxes................................................... 7,686 11,107 15,846
-------- -------- --------
Income from continuing operations............................................ 10,555 16,703 22,424
Losses from discontinued operations (Note 7)................................. (5,067) (3,773)
Cumulative effect to January 1, 1992
of changes in accounting principles (Note 18).............................. (8,964)
-------- -------- --------
Net income................................................................... $ 10,555 $ 2,672 $ 18,651
======== ======== ========
Earnings per common share
Continuing operations..................................................... $ 1.73 $ 2.67 $ 3.52
Discontinued operations................................................... (.81) (.60)
Cumulative effect to January 1, 1992 of changes in accounting principles.. (1.44)
-------- -------- --------
Net income................................................................ $ 1.73 $ .42 $ 2.92
======== ======== ========
Consolidated Statement of
Earnings Retained in the Business
- ---------------------------------
(In thousands, except per share amounts)
Year Ended December 31 1993 1992 1991
At beginning of year............................................. $282,371 $285,307 $272,315
Net income....................................................... 10,555 2,672 18,651
Dividends
Common--$.92, $.89 and $.88 per share......................... (5,584) (5,550) (5,600)
Preferred--$2.25 per share.................................... (56) (58) (59)
-------- -------- --------
At end of year................................................... $287,286 $282,371 $285,307
======== ======== ========
See notes to consolidated financial statements
11
Consolidated Balance Sheet
- --------------------------
(In thousands, except per share amounts)
December 31 1993 1992
ASSETS
Current Assets Cash............................................... $ 10,953 $ 13,117
Temporary investments, at cost which
approximates market............................... 35,481 42,292
Receivables, less allowance for doubtful
accounts $2,516 and $2,453........................ 81,897 75,779
Inventories........................................ 81,454 87,784
Prepaid expenses and other current assets.......... 14,824 13,440
--------- ---------
Total current assets............................... 224,609 232,412
--------- ---------
Property Land............................................... 6,766 7,566
Buildings.......................................... 104,942 107,239
Machinery and equipment............................ 183,776 181,062
Construction in progress........................... 11,207 10,041
--------- ---------
Total............................................. 306,691 305,908
Less accumulated depreciation...................... (153,162) (149,763)
--------- ---------
Net property....................................... 153,529 156,145
--------- ---------
Other Assets Assets of discontinued business.................... 7,175 6,092
Other assets....................................... 22,571 13,123
--------- ---------
Total other assets................................. 29,746 19,215
--------- ---------
Total.............................................. $ 407,884 $ 407,772
========= =========
LIABILITIES
Current
Liabilities Notes payable and current portion of
long-term debt.................................... $ 6,294 $ 6,451
Accounts payable................................... 20,925 25,215
Employees' compensation............................ 11,460 11,271
Insurance.......................................... 7,509 7,067
Taxes on income.................................... (3,474) (7,349)
Other current liabilities.......................... 17,696 12,470
--------- ---------
Total current liabilities.......................... 60,410 55,125
--------- ---------
Long-term Debt ................................................... 27,476 28,868
--------- ---------
Other
Liabilities Deferred income taxes.............................. 12,142 9,794
Pensions and other employee benefits............... 46,856 49,128
Other noncurrent liabilities....................... 1,256 1,663
--------- ---------
Total other liabilities............................ 60,254 60,585
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock, 4 1/2% cumulative, $50 par value
(callable at $52.50)............................. 3,569 3,569
Common stock, no par value (shares outstanding:
1993--6,011,628; 1992--6,078,786)................ 8,048 6,872
Cumulative translation adjustments................. (5,749) (349)
Earnings retained in the business.................. 287,286 282,371
Treasury shares, at cost........................... (33,410) (29,269)
--------- ---------
Total shareholders' equity......................... 259,744 263,194
--------- ---------
Total.............................................. $ 407,884 $ 407,772
========= =========
See notes to consolidated financial statements.
12
Consolidated Statement of Cash Flows
- ------------------------------------
(In thousands)
Year Ended December 31 1993 1992 1991
OPERATING ACTIVITIES
Income from continuing operations.................................... $ 10,555 $ 16,703 $ 22,424
Depreciation......................................................... 17,294 16,831 16,230
Pensions............................................................. 151 2,600 2,799
Deferred income taxes................................................ (82) 99 (2,019)
Receivables.......................................................... (6,118) 7,281 1,366
Inventories.......................................................... 6,330 11,937 (11,026)
Accounts payable and accrued liabilities............................. 5,442 (12,406) (1,766)
Other assets and liabilities......................................... (5,040) (2,470) (2,321)
Other--including currency exchange adjustments....................... (3,956) (3,682) (4,948)
-------- -------- --------
CASH FLOW FROM OPERATING ACTIVITIES.................................. 24,576 36,893 20,739
-------- -------- --------
INVESTING ACTIVITIES
Property additions................................................... (20,399) (22,762) (16,450)
Property disposals................................................... 3,420 1,189 757
Acquisitions and other investing..................................... (4,180) 443 (2,547)
-------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES.................................. (21,159) (21,130) (18,240)
-------- -------- --------
FINANCING ACTIVITIES
Additions to long-term debt.......................................... 1,472 6,883 11,082
Reductions of long-term debt......................................... (1,850) (1,227) (11,514)
Financing funds in escrow............................................ (2,922)
Cash dividends....................................................... (5,640) (5,608) (5,659)
Stock options and purchases of company's stock....................... (4,141) (8,310) (5,800)
Changes in notes payable and short-term debt......................... 399 (218) 1,168
-------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES.................................. (9,760) (11,402) (10,723)
-------- -------- --------
Effect of exchange rate changes on cash................................. (2,632) (3,311) (4,221)
-------- -------- --------
Increase (decrease) in cash and cash equivalents........................ (8,975) 1,050 (12,445)
Beginning cash and cash equivalents..................................... 55,409 54,359 66,804
-------- -------- --------
Ending cash and cash equivalents........................................ $ 46,434 $ 55,409 $ 54,359
======== ======== ========
Supplemental cash flow information:
Interest payments.................................................... $ 1,467 $ 1,504 $ 1,728
Income tax payments.................................................. 9,013 25,610 16,502
See notes to consolidated financial statements.
13
Note 1--Basis of Presentation
Significant accounting policies are stated in ITALICS at the applicable notes to
consolidated financial statements.
ALL SIGNIFICANT MAJORITY-OWNED COMPANIES ARE INCLUDED IN THE
CONSOLIDATED FINANCIAL STATEMENTS. INVESTMENTS IN WHICH THE COMPANY HAS AN
EQUITY INTEREST OF 20% TO 50% ARE CARRIED AT EQUITY IN NET ASSETS. INTERCOMPANY
TRANSACTIONS ARE ELIMINATED IN CONSOLIDATION.
SALES UNDER CONTRACTS ARE RECORDED AT FIXED OR ESTIMATED CONTRACT SALES
PRICES AS DELIVERIES ARE MADE. CONTRACTS REQUIRING PERFORMANCE OVER SEVERAL
PERIODS ARE ACCOUNTED FOR BY THE PERCENTAGE-OF-COMPLETION METHOD OF ACCOUNTING.
PROFITS EXPECTED TO BE REALIZED ARE BASED ON ESTIMATES OF TOTAL SALES AND COSTS
AT COMPLETION. THESE ESTIMATES ARE PERIODICALLY REVIEWED AND REVISED DURING THE
CONTRACT PERFORMANCE PERIOD. ADJUSTMENTS TO PROFITS ARE RECORDED IN THE PERIOD
IN WHICH ESTIMATES ARE REVISED; LOSSES ARE RECOGNIZED IN FULL AS THEY ARE
IDENTIFIED.
PROPERTY IS STATED AT COST. DEPRECIATION IS BASED ON ESTIMATED USEFUL
LIVES USING ACCELERATED AND STRAIGHT-LINE METHODS. MAINTENANCE AND REPAIRS ARE
CHARGED TO EXPENSE. RENEWALS AND BETTERMENTS WHICH SUBSTANTIALLY EXTEND THE
USEFUL LIFE OF PROPERTY ARE CAPITALIZED. ACCUMULATED ALLOWANCES FOR DEPRECIATION
OF BUILDINGS, MACHINERY AND EQUIPMENT RETIRED OR OTHERWISE DISPOSED OF ARE
ELIMINATED FROM THE ACCOUNTS UPON DISPOSITION. PROFITS OR LOSSES RESULTING FROM
SUCH DISPOSITIONS ARE INCLUDED IN INCOME.
CASH AND CASH EQUIVALENTS IN THE CONSOLIDATED STATEMENT OF CASH FLOWS
INCLUDES TEMPORARY INVESTMENTS THAT ARE READILY MARKETABLE AND HAVE MINIMAL RISK
AS TO CHANGE IN VALUE. CERTAIN SECURITIES HAVE MATURITIES IN EXCESS OF NINETY
DAYS; BUT, AS PART OF THE COMPANY'S CASH MANAGEMENT PROGRAM, MATURITIES ARE
SCHEDULED BASED ON EXPECTED CASH NEEDS FOR THE ENSUING TWELVE MONTHS.
EARNINGS PER SHARE ARE COMPUTED BASED UPON THE WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING DURING EACH YEAR. THE COMPUTATION RECOGNIZES
DIVIDENDS PAID ON PREFERRED STOCK BUT DOES NOT INCLUDE A NEGLIGIBLE DILUTIVE
EFFECT OF STOCK OPTIONS.
Note 2--Leases
The company leases warehouses, sales offices, manufacturing facilities and
equipment under agreements expiring at various dates through 2003, with renewal
options existing for varying periods. Rental expense for these leases charged to
income was $6,438,000 in 1993, $6,500,000 in 1992, and $5,998,000 in 1991.
Future minimum rental commitments under noncancelable leases are not
significant.
Note 3--Research and Development Expense
RESEARCH AND DEVELOPMENT COSTS, CHARGED AGAINST INCOME AS INCURRED, were
$21,000,000 in 1993, $20,938,000 in 1992, and $19,575,000 in 1991.
Note 4--Other Income
Other income is summarized as follows:
(In thousands)
----------------------
1993 1992 1991
------ ------ ------
Interest............................. $3,732 $6,857 $6,483
Commissions, royalties
and product services.............. 1,335 897 1,233
Dispositions of assets............... 127 435 308
Other................................ 691 1,566 862
------ ------ ------
Total................................ 5,885 9,755 8,886
------ ------ ------
Note 5--Stock Plans
The company's Management Share Incentive Plan permits the granting of restricted
stock awards or stock options to eligible key employees through December 1997.
The 1990 Non-Employee Directors' Stock Option Plan provides for annual grants of
stock options to eligible directors. As of December 31, 1993, 356,333 shares
were reserved for future grants pursuant to these Plans.
Shares of common stock, in the form of restricted stock bonus, have been
given to employees without payment to the company in consideration of services
to be performed in ensuing five-year periods. So long as certain restrictions
apply, these shares may not be sold and may be subject to forfeiture under
certain circumstances. THE EXPENSE TO THE COMPANY IS MEASURED BY THE MARKET
VALUE OF THE SHARES WHEN AWARDED AND IS AMORTIZED BY CHARGES TO OPERATIONS OVER
THE PERIOD THAT THE EMPLOYEE PROVIDES THE SERVICE. The expense charged to
operations was $371,000 in 1993, $318,000 in 1992, and $350,000 in 1991. A
summary of the restricted stock bonus awards is as follows:
Shares of
Common Stock
------------
As of December 31, 1993:
Awards............................. 113,103
Restrictions lapsed................ 77,531
Restrictions lapsing in:
1994 and 1995...................... 8,386
1996, 1997 and 1998................ 27,186
Stock options of 28,920 shares for key employees and 3,600 shares for
non-employee directors were outstanding at December 31, 1993. These options may
be exercised in whole or in part at various dates through December 18, 2001 at
option prices equivalent to or higher than the market values at date of grant.
Changes in stock options outstanding follow:
Shares Price Per Share
------- ---------------
December 31, 1990.............. 25,220 $27.00 to 61.33
Granted........................ 16,500 44.38 to 55.00
------
December 31, 1991.............. 41,720 27.00 to 61.33
Granted........................ 1,400 44.00
Exercised...................... (4,000) 29.70
Forfeited...................... (400) 44.00 to 55.00
------
December 31, 1992.............. 38,720 27.00 to 61.33
Granted........................ 1,400 47.13
Forfeited...................... (7,600) 55.75
------
December 31, 1993.............. 32,520 27.00 to 61.33
------
14
Note 6--Business Segments and International Operations
The company is primarily engaged in the manufacture and sale of safety and
health equipment. Principal products include respiratory protective equipment,
head protection, eye and face protection, hearing protectors, safety clothing,
industrial emergency care products, mining safety equipment, monitoring
instruments and heart pacemaker power cells. These safety and health products
account for more than 90% of revenues, operating profits and assets. Other
products which do not fall within the safety and health equipment segment of the
company's business include boron-based and other specialty chemicals.
Information about the company's continuing operations in different
geographic areas is summarized as follows:
(In thousands)
---------------------------------
1993 1992 1991
---- ---- ----
NET SALES AND REVENUES
U.S. operations........................................................ $254,823 $307,535 $297,286
European operations.................................................... 114,169 138,006 141,759
Other non-U.S. operations.............................................. 61,969 59,612 62,731
-------- -------- --------
NET SALES AND REVENUES................................................. 430,961 505,153 501,776
-------- -------- --------
INTERCOMPANY TRANSFERS
U.S. operations........................................................ 17,937 18,982 18,628
European operations.................................................... 12,886 16,556 15,653
Other non-U.S. operations.............................................. 550 330 288
-------- -------- --------
INTERCOMPANY TRANSFERS................................................. 31,373 35,868 34,569
-------- -------- --------
OPERATING PROFIT AND INCOME BEFORE INCOME TAXES
U.S. operations........................................................ 13,183 21,203 14,594
European operations.................................................... (1,345) 3,965 13,849
Other non-U.S. operations.............................................. 6,036 6,697 6,857
Eliminations........................................................... 922 (1,280) 816
-------- -------- --------
OPERATING PROFIT....................................................... 18,796 30,585 36,116
Interest expense....................................................... (1,713) (1,536) (1,739)
Foreign currency losses................................................ (3,201) 5,507) (2,456)
Corporate income/(expense)--net........................................ 4,359 4,268 6,349
-------- -------- --------
INCOME BEFORE INCOME TAXES............................................. 18,241 27,810 38,270
-------- -------- --------
IDENTIFIABLE ASSETS AND TOTAL ASSETS
U.S. operations........................................................ 234,650 220,441 226,143
European operations.................................................... 96,064 102,160 107,455
Other non-U.S. operations.............................................. 33,705 36,254 35,020
Eliminations........................................................... (12,657) (15,199) (13,010)
-------- -------- --------
IDENTIFIABLE ASSETS.................................................... 351,762 343,656 355,608
Corporate assets....................................................... 48,947 58,024 58,651
Discontinued operations................................................ 7,175 6,092 16,610
-------- -------- --------
TOTAL ASSETS........................................................... 407,884 407,772 430,869
-------- -------- --------
NET ASSETS OF NON-U.S. OPERATIONS (1).................................... 82,273 89,383 106,164
-------- -------- --------
NET INCOME OF NON-U.S. OPERATIONS........................................ 2,666 4,046 12,954
-------- -------- --------
(1) See Note 17 to consolidated financial statements for effects of currency
translation adjustments.
Transfers between geographic areas are stated at established
intercompany selling prices. Operating profit is total revenues less operating
expenses. Interest income and expense, equity in unconsolidated affiliates,
foreign currency gains and losses, and income taxes have not been included in
computing operating profit. Corporate assets not included in identifiable assets
are principally cash and investments.
Sales by U.S. operations to U.S. government agencies were $43,234,000 in
1993, $99,991,000 in 1992, and $93,034,000 in 1991.
Note 7--Discontinued Operations
In 1992 the company decided to discontinue the operations of Transfer-
Metallisierte Produkte GmbH (TMP), a joint venture in Germany to produce
metallized paper. Accordingly, the operating losses of TMP, adjusted for the
after-tax effects of intercompany transactions, have been reported separately in
the consolidated statement of income. Operating activities ceased during 1993.
The company is in the process of disposing of the assets and settling its
liabilities. After recognizing the accumulated operating losses of TMP included
in consolidation, the company estimates a loss on disposal, including provision
for operating losses during the phase-out period, of $11,550,000 which will be
fully offset by tax benefits.
15
Note 8--Income Taxes
EFFECTIVE AS OF JANUARY 1, 1992, THE COMPANY ADOPTED STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 109-ACCOUNTING FOR INCOME TAXES. AS A RESULT OF THIS
ACCOUNTING CHANGE, DEFERRED TAX BALANCES ARE STATED AT TAX RATES EXPECTED TO BE
IN EFFECT WHEN TAXES ARE ACTUALLY PAID OR RECOVERED. THE CUMULATIVE EFFECT OF
THIS CHANGE WAS A CREDIT TO INCOME OF $2,148,000 IN 1992. NO PROVISION IS MADE
FOR UNDISTRIBUTED EARNINGS OF INTERNATIONAL COMPANIES SINCE LITTLE OR NO TAX
WOULD RESULT UNDER APPLICABLE EXISTING STATUTES OR BECAUSE MANAGEMENT INTENDS
THAT THESE EARNINGS BE PERMANENTLY REINVESTED FOR WORKING CAPITAL AND CAPITAL
EXPENDITURE REQUIREMENTS.
The U.S. and non-U.S. components of income from continuing operations
before income taxes, and provisions for income taxes are summarized as follows:
(In thousands)
----------------------------
1993 1992 1991
-------- -------- --------
INCOME BEFORE INCOME TAXES
U.S. income.......................................................... $ 16,304 $ 32,256 $17,794
Non-U.S. income...................................................... 6,055 12,592 23,861
Currency translations (losses)....................................... (3,081) (4,478) (2,432)
Eliminations......................................................... (1,037) (12,560) (953)
-------- -------- -------
INCOME BEFORE INCOME TAXES........................................... 18,241 27,810 38,270
-------- -------- -------
PROVISIONS FOR INCOME TAXES
Current
Federal........................................................... 4,427 6,422 6,074
State............................................................. 1,122 1,237 1,867
Non-U.S........................................................... 2,219 3,349 9,924
-------- -------- -------
Total current provision........................................... 7,768 11,008 17,865
-------- -------- -------
Deferred
Federal........................................................... 351 1,187 (658)
State............................................................. (2) 378 (197)
Non-U.S........................................................... (431) (1,466) (1,164)
-------- -------- -------
Total deferred provision.......................................... (82) 99 (2,019)
-------- -------- -------
PROVISIONS FOR INCOME TAXES.......................................... 7,686 11,107 15,846
-------- -------- -------
The components of the net deferred tax liability are as follows:
1993 1992
-------- --------
Deferred tax assets:
Postretirement benefits........................................... 5,792 5,540
Inventory reserves and unrealized profits......................... 5,027 4,441
Vacation allowances............................................... 2,059 1,925
Postemployment benefits........................................... 1,630 1,560
Liability insurance............................................... 1,749 1,524
Loss carryforwards................................................ 6,370 8,437
Other............................................................. 1,248 985
-------- --------
Total deferred tax assets......................................... 23,875 24,412
-------- --------
Deferred tax (liability)--depreciation............................... (25,065) (25,662)
-------- --------
Net deferred tax (liability)......................................... (1,190) (1,250)
-------- --------
The following is a reconciliation of income taxes calculated at the U.S.
Federal income tax rate (35% in 1993, 34% in 1992 and 1991) to the provision for
income taxes for continuing operations:
1993 1992 1991
------ ------- -------
Provision for income taxes at statutory rate.............. 6,384 9,455 13,012
State income taxes........................................ 728 1,066 1,102
Currency translation...................................... 1,078 1,523 827
Research tax credits...................................... (50) (50) (150)
Non-U.S. taxes............................................ (817) (1,321) 994
Other--net................................................ 363 434 61
----- ------ ------
Provision for income taxes................................ 7,686 11,107 15,846
----- ------ ------
Undistributed earnings of international companies for which U.S. income
taxes have not been provided were $55,995,000 at December 31, 1993.
16
Note 9--Capital Stock
The authorized capital of the company consists of:
. Common stock, no par value--20,000,000 shares
. Second cumulative preferred voting stock, $10 par value--1,000,000 shares
. 4 1/2% cumulative preferred stock, $50 par value--100,000 shares
Common stock activity is summarized as follows:
(In thousands)
-----------------
Shares Shares In Common Treasury
Issued Treasury Stock Cost
--------- --------- ------ ---------
Balances January 1, 1991................ 6,682,317 284,862 $6,754 $(13,576)
Purchased for treasury.................. 121,482 (5,800)
--------- ------- ------ --------
Balances December 31, 1991.............. 6,682,317 406,344 6,754 (19,376)
Stock options exercised................. 4,000 118
Purchased for treasury.................. 201,187 (8,403)
--------- ------- ------ --------
Balances December 31, 1992.............. 6,686,317 607,531 6,872 (27,779)
Management Share Incentive Plan issues.. 27,186 1,176
Purchased for treasury.................. 94,344 (4,099)
--------- ------- ------ --------
Balances December 31, 1993.............. 6,713,503 701,875 8,048 (31,878)
--------- ------- ------ --------
Second cumulative preferred voting stock--none has been issued.
As to the 4 1/2% cumulative preferred stock, 71,373 shares have been issued
(none during the three years ended December 31, 1993), while the amounts held
in treasury are as follows:
December 31 Shares Cost (in thousands)
- ------------------------ ------ -------------------
1991 45,164 $(1,465)
1992 46,030 (1,490)
1993 47,268 (1,532)
Note 10--Inventories
THE U.S. INVENTORIES ARE VALUED ON THE LAST-IN, FIRST-OUT (LIFO) COST METHOD.
OTHER INVENTORIES ARE VALUED AT THE LOWER OF COST, USING AVERAGE OR CURRENT
STANDARD COSTS WHICH APPROXIMATE ACTUAL COSTS ON A FIRST-IN, FIRST-OUT (FIFO)
BASIS, OR MARKET, DETERMINED BY REPLACEMENT COST OR NET REALIZABLE VALUE.
Inventories are summarized as follows:
(In thousands)
-------------------------
1993 1992 1991
------- ------- -------
Finished products..................... $30,409 $33,643 $32,592
Work in process....................... 20,001 20,952 27,333
Raw materials and supplies............ 31,044 33,189 39,796
------- ------- -------
Total inventories..................... 81,454 87,784 99,721
------- ------- -------
Excess of FIFO costs
over LIFO costs..................... 63,033 62,564 65,003
------- ------- -------
Inventories stated on the LIFO basis represent 58%, 52%, and 56% of the
total inventories at December 31, 1993, 1992, and 1991, respectively.
Note 11--Long-Term Debt
(In thousands)
-----------------
1993 1992
------- -------
U.S.
Industrial development debt issues
payable through 2022, 3.5%........... $13,650 $13,650
Other, 4.8% to 5%...................... 950 557
International companies
Various notes payable through 1998,
3 1/2% to 12.4% ($15,781 secured
by pledge of assets located abroad).. 16,382 18,177
------- -------
Total..................................... 30,982 32,384
Amounts due within one year............... 3,506 3,516
------- -------
Long-term debt............................ 27,476 28,868
------- -------
Approximate maturities of these obligations over the next five years are
$3,506,000 in 1994, $8,915,000 in 1995, $4,092,000 in 1996, $1,455,000 in 1997,
and $995,000 in 1998. Some U.S. loan agreements contain covenants to maintain
specified levels of shareholders' equity.
Note 12--Short-Term Debt
Short-term bank lines of credit amounted to $11,476,000 of which $8,842,000 was
unused at December 31, 1993. Generally, these short-term lines of credit are
renewable annually and there are no significant commitment fees or compensating
balance requirements. Short-term borrowings with banks, which exclude the
current portion of long-term debt, were $2,722,000 and $2,935,000 at December
31, 1993 and 1992, respectively. The average month-end balance of total short-
term borrowings during 1993 was $2,820,000 while the maximum month-end
balance of $3,145,000 occurred at January 31, 1993. The average interest
rate during 1993 was approximately 14% based upon total short-term interest
expense divided by the average month-end balance outstanding, and 12% at
year-end. This average interest rate is affected by borrowings in certain
countries where local inflation has resulted in relatively high interest rates.
Note 13--Contingencies
A portion of the company's business is with departments and agencies of the
United States government. Contracts related to this business are subject to
profit limitations and terminations. The company also has certain contingent
liabilities with respect to commitments and litigation. In the opinion of
management, these contingencies will not result in any significant losses to the
company.
17
Note 14--Retirement Plans
Substantially all employees are covered by non-contributory pension plans.
Various U.S. employees also participate in a contributory retirement savings
plan wherein employees may contribute from 1% to 8% of their compensation to a
trust fund, to which the company contributes an amount equal to 50% of the
employees' contributions. The company's expense for these plans was $4,408,000
in 1993, $7,572,000 in 1992, and $6,433,000 in 1991.
THE NON-CONTRIBUTORY PENSION PLANS ARE ACCOUNTED FOR IN ACCORDANCE WITH
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 87 WHICH REQUIRES USE OF THE
PROJECTED UNIT CREDIT COST METHOD TO DETERMINE THE PROJECTED BENEFIT OBLIGATION
AND PLAN COST. THE PRINCIPAL U.S. PLAN IS FUNDED IN COMPLIANCE WITH THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT (ERISA). IT IS THE GENERAL POLICY TO FUND CURRENT
COSTS FOR THE INTERNATIONAL PLANS EXCEPT IN GERMANY, WHERE IT IS COMMON PRACTICE
AND PERMISSIBLE UNDER TAX LAWS TO ACCRUE BOOK RESERVES. Non-contributory plan
benefits are generally based on years of service and employees' compensation
during the last years of employment. Benefits are paid from funds previously
provided to trustees or are paid by the company and charged to the book
reserves.
Information pertaining to the non-contributory defined benefit plans is
provided in the following tables.
COST FOR DEFINED BENEFITS PLANS
(In thousands)
- -------------------------------------------------------
U.S. Plans International Plans
---------------------------- ---------------------------
1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
Service cost--benefits earned during the period..... $ 2,894 $ 2,646 $ 2,334 $ 1,361 $1,707 $ 1,383
Interest cost on projected benefit obligation....... 9,558 9,903 9,032 2,910 2,927 2,682
Actual (return)/loss on plan assets................ (22,879) (15,509) (37,599) (2,219) (898) (1,102)
Net amortization and deferral....................... 9,937 3,087 25,975 1,320 (55) 62
Special pension benefit adjustments associated
with early retirement programs and restructuring.. (728) (643) (1,655)
-------- -------- -------- ------- ------ -------
Pension expense (income)............................ (1,218) (516) (258) 1,717 3,681 3,025
-------- -------- -------- ------- ------ -------
FUNDING STATUS AND PROJECTED BENEFIT OBLIGATION RECONCILIATION
December 31 (In thousands)
- -------------------------------------------------------------------
U.S. Plans International Plans
---------------------------- ---------------------------
1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
Actuarial present value of benefit obligations:
Accumulated benefit obligation
Vested........................................... 108,439 97,767 90,618 22,157 21,993 19,982
Nonvested........................................ 1,917 300 275 980 762 1,112
------- ------- ------- ------- ------ -------
Total......................................... 110,356 98,067 90,893 23,137 22,755 21,094
------- ------- ------- ------- ------ -------
Plan assets at fair value, primarily listed
stocks and bonds................................... 179,832 164,832 161,857 16,071 13,591 14,705
Projected benefit obligation.......................... 136,034 118,084 111,939 35,621 35,881 34,851
------- ------- ------- ------- ------ -------
Plan assets in excess of (less than)
projected benefit obligation........................ 43,798 46,748 49,918 (19,550) (22,290) (20,146)
------- ------- ------- ------- ------ -------
The excess (less than) consists of:
Unamortized portion of transition gain (loss), being
recognized over future years....................... 9,231 10,173 11,546 (886) (1,361) (1,425)
Unrecognized net gain (loss) from past experience
different from that assumed....................... 37,331 41,066 44,124 1,836 136 (610)
Unrecognized prior service cost...................... (3,380) (3,925) (4,427) (579) (656) (840)
Minimum liability for unfunded plans................. 1,097 1,369 1,369
Accrued pension cost included in the
consolidated balance sheet........................ (481) (1,935) (2,694) (19,921) (20,409) (17,271)
------- ------- ------- ------- ------- -------
Total.......................................... 43,798 46,748 49,918 (19,550) (22,290) (20,146)
------- ------- ------- ------- ------- -------
Assumed long-term rates of return on assets............ 9% 9% 9% 7-9% 8-9 1/2% 8-11%
Assumed discount rates for future benefits............. 7 1/2 8 1/2 8 1/2 5 3/4-9 7 3/4-9 1/2 8-11
Assumed long-term rates for compensation increases..... 5 5 5 3-6 6-6 1/2 6-8
Note 15--Quarterly Financial Information (Unaudited)
(In thousands, except earnings per share)
1993 1992
---------------------------------------------- ----------------------------------------------------
Quarters Quarters
---------------------------------------------- ----------------------------------------------------
1st 2nd 3rd 4th Year 1st 2nd 3rd 4th Year
-------- -------- -------- -------- -------- --------- --------- --------- --------- ---------
Continuing operations:
Net sales............... $104,863 $107,840 $103,899 $112,618 $429,220 $127,788 $128,559 $125,663 $120,356 $502,366
Gross profit............ 37,773 40,269 35,823 42,005 155,870 43,452 44,949 41,900 44,510 174,811
Income.................. 2,516 2,963 1,411 3,665 10,555 4,441 6,182 3,595 2,485 16,703
Income per share........ .41 .48 .24 .60 1.73 .71 .98 .58 .40 2.67
Discontinued operations.... (883) (1,074) (1,278) (1,832) (5,067)
Cumulative effect,
accounting changes...... (8,964) (8,964)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net income................. 2,516 2,963 1,411 3,665 10,555 (5,406) 5,108 2,317 653 2,672
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings per share......... .41 .48 .24 .60 1.73 (.88) .82 .37 .11 .42
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
18
Note 16--Postretirement Benefits
The company provides certain health care benefits and limited life insurance for
retired employees and their eligible dependents. STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS (SFAS) NO. 106-"EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS" WAS IMPLEMENTED AS OF JANUARY 1, 1992, USING THE
IMMEDIATE RECOGNITION TRANSITION OPTION. SFAS NO. 106 REQUIRES RECOGNITION OF
RETIREE HEALTH AND LIFE INSURANCE BENEFITS DURING THE EMPLOYEES' SERVICE WITH
THE COMPANY.
The accumulated postretirement benefit of $14,212,000 as of January 1,
1992 was charged to 1992 earnings. Further information about these benefits is
provided in the following tables:
COST FOR BENEFITS
(In thousands)
- --------------------------------------------------------------------------------
1993 1992
---- ----
Service cost--benefits earned during the period............... $ 447 $ 385
Interest cost on projected benefit obligation................. 1,192 1,201
------ ------
1,639 1,586
------ ------
FUNDED STATUS AND ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION RECONCILIATION
December 31 (In thousands)
- --------------------------
1993 1992 1991
---- ---- ----
Accumulated postretirement benefit obligation:
Active employees........................................... 3,582 2,913 3,467
Other active participants.................................. 7,647 5,779 5,241
------ ------ ------
11,229 8,692 8,708
------ ------ ------
Retirees................................................... 5,615 5,895 5,504
Total................................................... 16,844 14,587 14,212
Unamortized (loss)............................................ (2,565) (275)
------ ------
Accrued postretirement benefit cost included
in consolidated balance sheet.............................. 14,279 14,312
------ ------
Assumed discount rates for future benefits.................... 7 1/2% 8 1/2% 8 1/2%
Annual rates of increase in the costs of covered health care benefits
assumed for 1993 were 10%, decreasing gradually to 5% for the year 1998 and
thereafter. The health care cost trend rate assumption has a significant effect
on the amounts reported; a one-percentage-point increase in each year would
increase the accumulated postretirement benefit obligation by $1,326,000 and
increase the current service and interest costs for the year by $270,000.
Note 17--Foreign Currency Translation
AN APPROPRIATE FUNCTIONAL CURRENCY IS DETERMINED FOR EACH ENTITY. THE FINANCIAL
STATEMENTS OF COMPANIES FOR WHICH THE UNITED STATES DOLLAR IS DETERMINED TO BE
THE FUNCTIONAL CURRENCY ARE TRANSLATED USING APPROPRIATE CURRENT AND HISTORIC
EXCHANGE RATES; ADJUSTMENTS RELATED THERETO ARE INCLUDED IN INCOME FOR THE
CURRENT PERIOD. THE FINANCIAL STATEMENTS OF ALL OTHER COMPANIES ARE TRANSLATED
FROM THEIR FUNCTIONAL CURRENCY INTO UNITED STATES DOLLARS USING CURRENT EXCHANGE
RATES; THE RESULTANT TRANSLATION ADJUSTMENTS ARE NOT INCLUDED IN INCOME BUT ARE
ACCUMULATED IN A SEPARATE EQUITY ACCOUNT. TRANSACTION GAINS AND LOSSES ARE
RECOGNIZED IN INCOME FOR THE CURRENT PERIOD.
Foreign currency effects are summarized as follows:
(In thousands)
----------------------
1993 1992 1991
---- ---- ----
Currency (gains)/losses charged
to income arising from:
Translation--Latin American
companies....................... $3,080 $4,478 $2,432
Transactions...................... 121 1,029 24
------ ------ ------
Total............................. 3,201 5,507 2,456
------ ------ ------
Currency translation (gains)/losses
charged directly to equity
adjustment account................ 5,400 4,736 7,527
------ ------ ------
Note 18--Accounting Changes
Effective January 1, 1992, the company adopted three new Statements of Financial
Accounting Standards (SFAS). The after tax effect of these changes was a charge
of $8,964,000 against 1992 net income. Aside from this cumulative effect as of
January 1, 1992, adoption of these Standards did not materially affect 1992
financial results. SFAS No. 106--"Employers' Accounting for Postretirement
Benefits Other Than Pensions" was implemented using the immediate recognition
transition option, resulting in a charge of $8,672,000, after recognizing
related deferred taxes. SFAS No. 112--"Employers' Accounting for Postemployment
Benefits" pertains to benefits, such as workers' compensation and other
disability expenses, for inactive employees before retirement. The after tax
costs recognized for implementing this Standard were $2,440,000 (pretax
$4,000,000). SFAS No. 109--"Accounting for Income Taxes" requires that deferred
tax balances are stated at tax rates expected to be in effect when taxes are
actually paid or recovered, whereas deferred taxes were previously provided at
tax rates prevailing during the periods when timing differences between
financial income and taxable income occurred. Adjustment of the previously
provided deferred taxes resulted in a net credit to income of $2,148,000.
19
Five-Year Summary of Selected Financial Data
- --------------------------------------------
SUMMARY OF OPERATIONS 1993 1992 1991 1990 1989
(In thousands, except as noted)
Net sales $429,220 $502,366 $499,240 $473,933 $414,963
Other income 5,885 9,755 8,886 8,807 11,675
Cost of products sold 273,350 327,555 324,448 287,345 250,155
Selling, general and administrative 121,529 130,182 124,983 121,137 110,110
Depreciation 17,294 16,831 16,230 14,904 13,755
Interest expense 1,713 1,536 1,739 1,926 2,316
Foreign currency losses 3,201 5,507 2,456 4,238 4,900
Unusual items (223) 2,700 700 110
Taxes on income 7,686 11,107 15,846 21,583 17,516
Income from continuing operations 10,555 16,703 22,424 30,907 27,776
Per common share (in dollars)/(1)/ 1.73 2.67 3.52 4.77 4.23
Discontinued operations (5,067) (3,773) (1,703) (269)
Cumulative effect to January 1, 1992 of
changes in accounting principles (8,964)
Net income 10,555 2,672 18,651 29,204 27,507
Per common share (in dollars)/(1)/ 1.73 .42 2.92 4.50 4.19
Cash dividends 5,640 5,608 5,659 5,372 4,837
Per common share (in dollars) .92 .89 .88 .82 .73
Weighted average number of common shares outstanding 6,069 6,225 6,353 6,471 6,545
YEAR-END POSITION
Working capital $164,199 $177,287 $184,378 $185,371 $161,839
Working capital ratio 3.7 4.2 3.7 3.7 3.9
Property, at cost 306,691 305,908 292,338 285,961 256,467
Total assets 407,884 407,772 430,869 436,118 384,156
Long-term debt 27,476 28,868 23,009 24,606 22,544
Common shareholders' equity 258,539 261,927 277,866 278,199 247,957
Equity per common share (in dollars) 43.00 43.09 44.27 43.49 38.10
(1) Earnings per common share are calculated after deducting dividends on
preferred stock and are based on the weighted average number of shares
outstanding during each year.
20
EXHIBIT 21
----------
MINE SAFETY APPLIANCES COMPANY
------------------------------
The registrant's present affiliates include the following:
State or Other
Jurisdiction of
Name Incorporation
---- ---------------
MSA (Aust.) Pty. Limited Australia
MSA Export Limited Barbados
MSA do Brasil Ltda. Brazil
MSA Canada Canada
MSA de Chile Ltda. Chile
Baseline Industries, Inc. Colorado
MSA International, Inc. Delaware
MSA de France France
Auergesellschaft GmbH Germany
MSA/Auer Safety Technology Hungary
MSA Italiana S.p.A. Italy
MSA Japan Ltd. Japan
MSA de Mexico, S.A. de C.V. Mexico
MSA Nederland, B.V. Netherlands
HAZCO Services, Inc. Ohio
MSA del Peru S.A. Peru
MSA (Britain) Limited Scotland
MSA S.E. Asia Pte. Ltd. Singapore
MSA Espanola S.A. Spain
AB Tegma Sweden
MSA (Switzerland) Ltd. Switzerland
Safety Supply Specialists, Inc. Wisconsin
MSA Zimbabwe (Pvt.) Limited Zimbabwe
- -------------------------------------------------------
The above-mentioned affiliated companies are included in the
consolidated financial statements of the registrant filed as part of this annual
report. The names of certain other affiliates, which considered in the
aggregate as a single affiliate would not constitute a significant affiliate,
have been omitted.
