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, 1997
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:
Preferred Stock Purchase Rights
Common Stock, no par value
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, 1997 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 No.)
incorporation or organization)
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:
Preferred Stock Purchase Rights
- -------------------------------------------------------------------------------
(Title of Class)
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 10-K.
[ X ]
As of February 27, 1998, there were outstanding 5,053,510 shares of common
stock, no par value including 600,000 shares held by the Mine Safety Appliances
Company Stock Compensation Trust. Total market value of outstanding voting
stock as of February 27, 1998 was $313,317,620. The aggregate market value of
voting stock held by non-affiliates as of February 27,1998 was $171,667,770.
1
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been incorporated by reference:
FORM 10-K
DOCUMENT PART NUMBER
- -------- -----------
(1) Annual Report to Shareholders
for the year ended
December 31, 1997 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 May 5, 1998 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. Many of these products are sold under the
registered trademark "MSA", and have wide application for workers in industries
that include manufacturing, fire service, power generation, telecommunications,
mining, chemicals, petroleum, construction, pulp and paper processing,
transportation, government, automotive, aerospace, asbestos abatement, and
hazardous materials clean-up.
Other products manufactured and sold, which do not fall within the category
of safety and health equipment, include boron-based and other specialty
chemicals.
The registrant and its affiliated companies are in competition with many
large and small enterprises. In the opinion of management, the registrant is a
leader in the manufacture of safety and health equipment.
Orders, except under contracts with U.S. government agencies 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 U.S. government agencies and certain
international governments is summarized as follows:
December 31
---------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
---------------------------------
U.S. Government Agencies $19,600 $14,400 $30,400
International Governments 0 900 7,900
Approximately $300,000 under contracts with U.S. government agencies is expected
to be shipped after December 31, 1998.
3
Sales of products to U.S. government agencies continued to decrease in
1997; however, incoming orders were slightly higher than shipments in 1997, and
about the same as 1996 incoming orders. The company's business is not dependent
upon a single customer or group of related customers, the loss of which would
have a material adverse effect on the registrant's results. Further information
with respect to the registrant's products, operations in different geographic
areas, equity in earnings and assets of international affiliated companies is
reported at Note 5 of Notes to Consolidated Financial Statements contained in
the registrant's Annual Report to Shareholders for the year ended December 31,
1997, incorporated herein by reference.
Research:
--------
The registrant and its affiliated companies engage in applied research with
a view to developing new products and new applications for existing products.
Most of its products are designed and manufactured to meet currently applicable
performance and test standards published by groups such as ANSI (American
National Standards Institute), MSHA (Mine Safety & Health Administration), NIOSH
(National Institute for Occupational Safety and Health), UL (Underwriters'
Laboratories), SEI (Safety Equipment Institute) and FM (Factory Mutual). The
registrant also from time to time engages in research projects for others such
as the Bureau of Mines and the Department of Defense or its prime contractors.
Registrant-sponsored research and development costs were $16,668,000 in 1997,
$19,122,000 in 1996, and $20,366,000 in 1995.
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, 1997, the registrant and its affiliated
companies had approximately 4,200 employees, of which 2,100 were employed by
international affiliates. None of the U.S. employees is 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 by its own salespersons, independent
distributors
4
and/or manufacturers' representatives. In international countries
where the registrant has no affiliate, products are sold primarily through
independent distributors located in those countries.
The registrant is cognizant of environmental responsibilities and has taken
affirmative action regarding this responsibility. There are no current or
expected legal proceedings or expenditures with respect to environmental matters
which would materially affect the operations of the registrant and its
affiliates.
Generally speaking, the operations of the registrant and its affiliates are
such that it is possible to maintain sufficient inventories of raw materials and
component parts on the manufacturing premises.
Equipment and machinery for processing chemicals and rubber, plastic
injection molding equipment, molds, metal cutting, stamping and working
equipment, assembly fixtures and similar items are regularly acquired, repaired
or replaced in the ordinary course of business at prevailing market prices as
necessary.
In January 1998, the company announced that it had initiated action to sell
its domestic affiliate, HAZCO Services, Inc. (due to its incompatibility with
MSA's newly-established network of distributors). Further information about the
registrant's business is included in Management's Discussion and Analysis at
pages 10 to 12 of the Annual Report to Shareholders, incorporated herein by
reference.
5
Executive Officers:
------------------
All Positions and Offices
Name Age Presently Held
---- --- -------------------------
J. T. Ryan III 54 Chairman and
Chief Executive Officer
T. B. Hotopp 56 President
J. E. Herald 56 Vice President - Finance
(Chief Financial Officer)
D. H. Cuozzo 64 Vice President and Secretary
D. L. Zeitler 49 Vice President and Treasurer
J. M. Barendt 38 Vice President
J. A. Bigler 48 Vice President
W. E. Christen 53 Vice President
B. V. DeMaria 50 Vice President
W. M. Lambert 39 Vice President
G. R. McGee 57 Vice President
G. W. Steggles 63 Vice President
All the executive officers have been employed by the registrant since prior
to January 1, 1993 and have held their present positions since prior to that
date except as follows:
(a) Mr. Hotopp was elected President on December 18, 1996. Prior to that
time, he was Senior Vice President and General Manager, Safety
Products.
(b) Mr. Cuozzo was elected Vice President on April 27, 1995. Prior to
that time, he was Secretary.
(c) Mr. Zeitler was elected Vice President on January 9, 1998. Prior to
that time, he was Treasurer.
(d) Mr. Barendt was elected Vice President on January 9, 1998. From prior
to January 1, 1993 until April 1996, he was Manager, Research and
Development at the company's Callery Chemical Division. From
April 1996 until December 1996, he was Acting General Manager of
Callery Chemical Division. From December 1996, he was General Manager
of the Callery Chemical Division.
6
(e) Mr. Bigler was elected Vice President on January 9, 1998. From prior
to January 1, 1993 until April 1995, he was National Sales Manager.
From April 1995 he was Director of Sales.
(f) Mr. DeMaria was elected Vice President on January 9, 1998. From prior
to January 1, 1993 until September 1994, he was Manager, Employee
Benefits. From September 1994 he was Director, Human Resources.
(g) Mr. Lambert was elected Vice President on January 9, 1998. From prior
to January 1, 1993 until August 1993, he was a Product Line
Manager. From August 1993 until March 1995, he was a Senior Product
Line Manager. From March 1995 until August 1996, he was Marketing
Manager. From August 1996 until December 1996, he was Director of
Marketing. From December 1996 he was General Manager of the Safety
Products Division.
(h) Mr. McGee was employed by the registrant on January 2, 1997 and was
elected Vice President and General Manager, Instrument Division. From
prior to January 1, 1993 until July 1996, Mr. McGee was President and
Chief Executive Officer of Balzer High Vacuum Products. From July
1996 until he joined the registrant, he was President and Chief
Executive Officer of Pfeiffer Vacuum Technology, Inc., which is a
spinoff of Balzer High Vacuum Products.
The executive officers of the registrant serve at the pleasure of the Board
of Directors and are not elected to any specified term of office.
7
The primary responsibilities of these officers follow:
Individual Responsibilities
- ---------- ----------------
Mr. Hotopp U. S. operations
Mr. Cuozzo General Counsel and corporate taxes
Mr. Zeitler Cash and risk insurance management
Mr. Barendt Research, product development, manufacturing and
marketing of specialty chemical products
Mr. Bigler U.S. sales and distribution
Mr. Christen European operations
Mr. DeMaria Human resources and corporate communications
Mr. Lambert Research, product development, manufacturing and
marketing of safety products in the U.S.
Mr. McGee Research, product development, manufacturing and
marketing of instrument and battery products in
the U.S.
Mr. Steggles International operations outside the U.S. and
Europe
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
968,000 square feet. Other U.S. manufacturing and research facilities of the
registrant are located in Jacksonville, North Carolina (107,000 sq. ft.), Lyons,
Colorado (10,000 sq. ft.), Sparks, Maryland (41,000 sq. ft.), Dayton, Ohio
(33,000 sq. ft.), Lawrence, Massachusetts (42,000 sq. ft.), and Englewood,
Colorado (41,000 sq. ft.).
Manufacturing facilities of international affiliates of the registrant are
located in Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico,
Peru, Scotland, South Africa, Spain, and Sweden. The most significant are
located in Germany (approximately 431,000 sq. ft., excluding 127,000 sq. ft.
leased to others),
8
and in Glasgow, Scotland (approximately 130,000 sq. ft., excluding 10,000 sq.
ft. leased to others); 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 $1,931,000 as of
December 31, 1997.
Sales Offices and Warehouses:
----------------------------
The registrant and its U.S. affiliates own one warehouse and lease 9 other
distribution warehouses with aggregate floor space of approximately 55,000 sq.
ft. in or near principal cities in 9 states in the United States. Leases expire
at various dates through 1999. Sales offices and distribution warehouses are
owned or leased in or near principal cities in 26 other countries in which the
registrant's affiliates are located.
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 1997.
9
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 12
Item 6 - "Five-Year Summary of Selected Financial Data" appearing at page
23
Item 7 - "Management's Discussion and Analysis" appearing at pages 10 to 12
Item 8 - "Financial Statements and Notes to Consolidated Financial
Statements" appearing at pages 13 to 22
of the Annual Report to Shareholders for the year ended December 31, 1997. 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 7a. Quantitative and qualitative disclosures about market risk
- -------------------------------------------------------------------
Not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
10
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 3, (2) "Other Information
Concerning Directors and Officers" appearing at pages 4 to 10 (except as
excluded below), and (3) "Stock Ownership" appearing at pages 11 to 13 of the
Proxy Statement filed pursuant to Regulation 14A in connection with the
registrant's Annual Meeting of Shareholders to be held on May 5, 1998. The
information appearing in such Proxy Statement under the caption "Compensation
Committee Report on Executive Compensation," and the other information appearing
in such Proxy Statement and not specifically incorporated by reference herein,
including without limitation the information under the captions "Comparison of
Five-Year Cumulative Total Return" and "1998 Management Share Incentive Plan" is
not incorporated herein.
11
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 13 to 22 inclusive in the
Annual Report to Shareholders of the registrant for the year ended December 31,
1997, is incorporated herein by reference pursuant to Rule 12b-23.
Report of Independent Accountants
Consolidated Balance Sheet - December 31, 1997 and 1996
Consolidated Statement of Income - three years ended December 31, 1997
Consolidated Statement of Earnings Retained in the Business - three years
ended December 31, 1997
Consolidated Statement of Cash Flows - three years ended December 31, 1997
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, 1997 is filed with the report and should be read in conjunction
with the above financial statements:
Report of Independent Accountants on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not material or
the required information is shown in the financial statements and notes to the
financial statements listed above.
12
(a) 3. Exhibits
(3)(i) Restated Articles of Incorporation as amended to April 27,
1989, filed in Form 10-Q on August 5, 1994, are incorporated
herein by reference.
(3)(ii) By-laws of the registrant, as amended to August 29, 1990,
filed in Form 10-Q on November 13, 1995, are incorporated
herein by reference.
(4) Rights Agreement dated as of February 10, 1997 between the
registrant and Norwest Bank Minnesota, N.A., as Rights
Agent, filed as Exhibit 1 to the registrant's Form 8-A on
February 25, 1997, is incorporated herein by reference.
(10)(a) * 1987 Management Share Incentive Plan, filed in Form 10-K on
March 25, 1994, is incorporated herein by reference.
(10)(b) * 1990 Non-Employee Directors' Stock Option Plan, as amended
to April 27, 1994, filed in Form 10-Q on August 5, 1994, is
incorporated herein by reference.
(10)(c) * Executive Insurance Program, filed in Form 10-Q on August 5,
1994, is incorporated herein by reference.
(10)(d) * 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-Q
on May 11, 1995 is incorporated herein by reference.
(10)(e) Trust Agreement as of June 1, 1996 between the registrant
and PNC Bank, N.A. re the Mine Safety Appliances Company
Stock Compensation Trust, filed in Form 10-K on March 26,
1997, is incorporated herein by reference.
* The exhibits marked by an asterisk are management contracts or compensatory
plans or arrangements.
13
(a) 3. Exhibits (continued)
(13) Annual Report to Shareholders for year ended December 31,
1997
(21) Affiliates of the registrant
(23) Consent of Price Waterhouse LLP, independent accountants
(27) Financial Data Schedule (filed in electronic format only)
The registrant agrees to furnish to the Commission upon request copies
of all instruments with respect to long-term debt referred to in Note
4 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, 1997.
14
Report of Independent Accountants
on Financial Statement Schedule
February 18, 1998
To the Board of Directors of
Mine Safety Appliances Company
Our audits of the consolidated financial statements referred to in our report
dated February 18, 1998, appearing on page 13 of the 1997 Annual Report to
Shareholders of Mine Safety Appliances Company (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K), also included an audit of the Financial Statement Schedule listed in Item
14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
F-1
SCHEDULE II
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)
1997 1996 1995
---------- ---------- ---------
Allowance for doubtful accounts:
Balance at beginning of year $2,993 $2,640 $2,102
Additions -
Charged to costs and expenses 1,229 812 949
Balance from acquisitions 288
Deductions from reserves (1) 806 459 411
------ ------ ------
Balance at end of year $3,704 $2,993 $2,640
====== ====== ======
(1) Bad debts written off, net of recoveries.
F-2
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 26, 1998 By /s/ John T. Ryan III
---------------------- ---------------------------------
(Date) John T. Ryan III
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; Chairman of the Board March 26, 1998
John T. Ryan III and Chief Executive Officer
/s/ James E. Herald
- --------------------------- Vice President - Finance; March 26, 1998
James E. Herald Principal Financial and
Accounting Officer
/s/ Joseph L. Calihan
- --------------------------- Director March 26, 1998
Joseph L. Calihan
/s/ Calvin A. Campbell, Jr.
- --------------------------- Director March 26, 1998
Calvin A. Campbell, Jr.
/s/ G. Donald Gerlach
- --------------------------- Director March 26, 1998
G. Donald Gerlach
/s/ Helen Lee Henderson
- --------------------------- Director March 26, 1998
Helen Lee Henderson
/s/ Thomas H. Witmer
- --------------------------- Director March 26, 1998
Thomas H. Witmer
/s/ Thomas B. Hotopp
- --------------------------- Director March 26, 1998
Thomas B. Hotopp
Exhibit 13
Management's Discussion and Analysis
Results of Operations
1997 versus 1996 -- Sales for 1997 were $494.3 million, a decrease of $6.7
million, or 1%, from $501.0 million in 1996. The slight decline in sales
reflects the absence of U.S. military gas mask business and the negative
currency translation effect of the strong U.S. dollar, particularly in relation
to continental European currencies. These decreases were offset by improved
sales in U.S. commercial markets and modest growth in local currency sales in
international markets.
Sales by U.S. operations decreased 3% in 1997. Sales for 1996 included some
military gas mask business on contracts which were expiring and several large
special instrument orders. Sales of specialty chemicals continued to grow in
1997, although at a more modest pace than in recent years. Personal protective
equipment sales in commercial markets improved during 1997 and also benefited
from the inclusion of a full year's sales from the fall protection and
disposable respirator acquisitions which were made in 1996.
Sales by European operations, stated in U.S. dollars, decreased 11% in
1997. Although local currency sales in Europe improved slightly in 1997,
negative currency translation effects, particularly in Germany, resulted in the
decrease when stated in U.S. dollars. Sales by MSA's operations outside the U.S.
and Europe increased 22% in 1997. The inclusion of MSA Africa, which became
wholly owned at the beginning of 1997, was a major factor in this improvement.
Latin American and Asian operations reported strong sales growth.
Gross profit for 1997 was $192.1 million, a decrease of $1.8 million, or
1%, from $193.9 million in 1996. The 1997 ratio of gross profit to sales
improved slightly to 38.9% from 38.7%. While the gross profit percentage has
been relatively stable over the past three years, the current levels represent
an overall improvement from the roughly 36% gross profit level in 1992 through
1994. The improved gross profit percentage in 1997 is the result of cost
reductions from improved manufacturing processes and the continuing sales mix
shift away from lower-margin military sales to higher-margin commercial sales.
Gross profit in 1996 also benefited from liquidations of lower-cost LIFO
inventories which were not repeated in 1997. Excluding this effect, gross margin
percentages improved in 1997 in the U.S., while those in Europe slipped.
Research and development expenses in 1997 were $16.7 million, compared to
$19.1 million in 1996. The decrease reflects an emphasis on core-product
research, more limited external research purchases, and higher reimbursements
for research performed under contracts with customers in 1997. Research expenses
incurred in Germany were also lower, when stated in U.S. dollars, due to
currency translation effects.
Depreciation, selling and administrative expenses increased $516,000 to
$156.0 million in 1997, and increased as a percent of sales to 31.6% from 31.0%
in 1996. The modest increase reflects expenses incurred in conjunction with the
Enterprise Wide System and Global New Product Development initiatives, partially
offset by favorable currency translation effects associated with the strong U.S.
dollar. Ongoing depreciation, and selling and administrative expenses were
generally lower than in 1996.
Currency exchange losses charged to income in 1997 were $40,000, compared
to $735,000 in 1996. The most significant losses from currency valuation changes
in both years occurred in Brazil.
The effective income tax rate, for which further information is included in
note 8, was 39.7% in 1997 and 37.1% in 1996. The higher effective rate in 1997
reflects additional tax expenses at international companies.
Net income in 1997 decreased $1.2 million to $21.9 million from $23.1
million in 1996. Basic earnings per share of common stock improved in 1997 to
$4.81, compared to $4.74 in 1996. Earnings per share benefited from share
repurchases that reduced average shares outstanding by 7% in 1997.
1996 versus 1995 -- Sales for 1996 were $501.0 million, an increase of
$13.3 million, or 3%, from $487.7 million in 1995. The increase occurred
primarily in U.S. commercial markets. Sales by international operations improved
modestly in 1996, mainly in Europe.
Sales by U.S. operations increased 4% in 1996. The 1996 U.S. sales increase
occurred primarily in commercial markets, while sales to U.S. government
agencies decreased significantly, continuing the trend of declining military gas
mask business. Commercial sales of instrument and specialty chemicals sustained
the growth pattern shown in 1995 and 1994. Conversely, lower government funding
and changing customer preferences continued to reduce commercial sales of
respiratory protection equipment.
Sales by European operations, stated in U.S. dollars, increased 3% in 1996.
The modest growth reflected a stagnant European economic environment in 1996,
after noticeable growth in 1995. Other international markets were about the same
in 1996, after significant growth in 1995 occurred in Australia, Brazil, and
Chile.
Gross profit for 1996 was $193.9 million, a $3.1 million, or 2% increase
over $190.8 million in 1995. The 1996 ratio of gross profit to sales declined
slightly to 38.7% from 39.1% in 1995. Gross margin percentages in both 1996 and
1995 improved as a result of manufacturing process improvements, the shift in
product mix away from military sales to commercial sales, and significant
credits resulting from liquidations of lower-cost LIFO inventories.
Depreciation, selling and administrative expenses in 1996 decreased $2.8
million, or 2%, to $155.4 million, and decreased as a percent of sales to 31.0%
from 32.4% in 1995. The decrease reflects lower field sales and marketing
expenses, resulting from the rationalization of distribution channels in the
U.S.
Currency exchange losses charged to income in 1996 were $735,000, compared
to $1.2 million in 1995. The most significant losses from currency valuation
changes in both years occurred in Brazil and Mexico.
Results for 1996 also included a $2.5 million settlement with the U.S.
government regarding the partial termination of earlier gas mask contracts,
which resulted in the recovery of costs incurred in prior years.
10
The effective income tax rate, for which further information is included in
note 8, was 37.1% in 1996 and 42.9% in 1995. The lower effective rate in 1996
reflects additional tax benefits from international operations.
Net income in 1996 increased $4.2 million to $23.1 million from $18.9
million in 1995. Basic earnings per share of common stock improved in 1996 to
$4.74, compared to $3.32 in 1995. Earnings per share benefited from share
repurchases that reduced average shares outstanding 14% in 1996.
Restructuring
During 1997 the company substantially completed the U.S. restructuring
activities which were initiated in late 1996 to reduce costs and better align
production capacities with demand. The most significant of these activities was
the closing of the Esmond, Rhode Island, plant, which was required primarily
because of low levels of U.S. military gas mask business. In 1997, Esmond's
commercial product activities were relocated to other manufacturing facilities,
all Esmond employees were relocated, released, or retired and the facility was
vacated. Provisions for separation pay and asset impairments that were
established in 1996 were adequate to complete these activities without
significant adjustment. The net effect of U.S. restructuring activities on 1997
results was minimal, considering both expenses incurred and related asset sale
and pension curtailment gains.
The most significant costs included in the $2.2 million restructuring
charge in 1997 relate to workforce reductions at European operations, including
$1.7 million in accrued severance and phased retirement pay in Germany.
Restructuring charges of $7.8 million in 1996 related primarily to
separation pay and asset impairment write-downs connected with the Esmond plant
closing. Charges of $730,000 in 1995 were for workforce reductions at
international locations.
Liquidity and Financial Condition
Cash and cash equivalents decreased $5.2 million during 1997, compared to a
$6.9 million decrease in 1996. The company's principal source of financing
capital expenditures and internal growth is cash flow from operations.
Operations provided cash of $30.9 million in 1997, compared to $56.5 million in
1996. The decrease primarily reflects increased working capital needs in 1997
associated with the U.S. restructuring activities and the currency translation
effects of the strong U.S. dollar on the net current assets of international
affiliates. Cash provided by operations in 1996 benefited from significant
inventory reductions.
The company has an ongoing program of plant and equipment modernization to
improve the efficiency of existing manufacturing facilities. Capital
expenditures were $35.3 million in 1997, compared to $21.6 million in 1996.
Increased capital expenditures in 1997 include costs for new enterprise wide
information systems, manufacturing facility improvements associated with the
U.S. restructuring activities, and a new headquarters building at HAZCO
Services, Inc. In the past five years, approximately $120 million has been spent
on new plants, equipment and distribution facilities, and information systems.
11
Dividends paid on the common stock during 1997 (the 80th consecutive year
of dividend payment) were $1.24 per share, up from the $1.10 per share in 1996
and $1.06 per share in 1995. Cash dividends are paid at a conservative
percentage of income, which is consistent with the company's practice of
financing growth internally. During 1997, the company repurchased 184,708 common
shares for $11.3 million. As of December 31, 1997, an additional 325,666 shares
may be repurchased under current authorizations.
The average amount of short-term debt outstanding during 1997 and 1996 was
$21.6 million and $2.9 million, respectively. Borrowings during 1997 were
increased primarily to finance capital expenditures. Credit available at year-
end with banks was the U.S. dollar equivalent of $48.6 million, of which $25.8
million was unused. Short-term debt of international affiliates is payable in
local currencies, which is in keeping with the company's policy of reducing
currency exchange exposures by offsetting local currency assets with local
currency debt.
Long-term debt and the current portion thereof decreased $2.2 million to
$13.7 million, a conservative 5.4% of total capital. Total capital is defined as
long-term debt plus the current portion of long-term debt and shareholders'
equity.
Accounts receivable decreased $10.4 million to $91.4 million at December
31, 1997. Trade receivables expressed in number of days' sales outstanding were
65 days, compared to 71 days in 1996. Inventories increased $4.0 million to
$81.1 million at December 31, 1997. Inventory measured against sales turned 6.1
times in 1997 and 6.5 times in 1996. The working capital ratio was 2.1 and 2.5
to 1 at year's end 1997 and 1996, respectively.
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 international
currencies resulted in translation losses of $7.2 million being charged to the
cumulative translation adjustments shareholders' equity account in 1997,
compared to a $747,000 loss in 1996 and a $2.9 million gain in 1995. Significant
1997 translation losses occurred in Europe, particularly Germany, and in
Australia. Losses in 1996 in Germany and Japan were partially offset by gains in
Australia and Britain.
Recent Developments and Outlook
The company is currently replacing its existing information systems with an
Enterprise Wide System (EWS) of business software to integrate and better serve
global operating and information requirements. This software, which is already
in use at MSA Britain, is compatible with year 2000 processing requirements. The
planned implementation schedule for EWS at MSA companies throughout the world is
expected to avoid potential year 2000 problems with existing computer systems.
As part of the ongoing initiatives to rationalize distribution channels and
improve operating performance, the company has initiated action to sell HAZCO
Services, Inc. (due to its incompatability with MSA's newly-established network
of distributors). This action, which is expected to be completed during 1998, is
not estimated to have a material impact on 1998 results. The 1997 operating
results of HAZCO Services, Inc. are not material to the consolidated financial
statements.
Common Stock
At December 31, 1997, there were 4,455,915 shares of common stock
outstanding. There were approximately 400 identifiable common stockholders on
November 14, 1997, 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:
1997 1996
- ---------------------------------------------------------------------
Quarter High Low High Low
- ---------------------------------------------------------------------
First $63 3/4 $53 1/2 $52 1/4 $45 1/4
Second 63 3/4 56 1/2 48 41
Third 73 59 3/4 51 5/8 41 1/4
Fourth 73 1/2 65 1/2 55 1/2 50 1/4
Common stock quarterly cash dividend information is as follows:
Amount
Per Record Payment
Quarter Share Date Date
- ----------------------------------------------------------------------
1997
------------------------------------------
First $ .31 Feb. 21, 1997 Mar. 10, 1997
Second .31 May 16, 1997 Jun. 10, 1997
Third .31 Aug. 15, 1997 Sep. 10, 1997
Fourth .31 Nov. 14, 1997 Dec. 10, 1997
---------
Total 1.24
---------
1996
------------------------------------------
First $ .27 Feb. 16, 1996 Mar. 10, 1996
Second .27 May 17, 1996 Jun. 10, 1996
Third .28 Aug. 16, 1996 Sep. 10, 1996
Fourth .28 Nov. 15, 1996 Dec. 10, 1996
---------
Total 1.10
---------
The company's stock transfer agent is Norwest Bank Minnesota, N.A., 161 North
Concord Exchange, South St. Paul, MN 55075-1139.
12
MSA 1997 Financial Review
Report of Management
Mine Safety Appliances Company's consolidated financial statements and
related notes that appear in this Annual Report to Shareholders 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 Shareholders 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,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
February 18, 1998
13
Consolidated Statement
of Income
(In thousands, except per share amounts)
Year Ended December 31 1997 1996 1995
Net sales........................................................... $494,324 $ 500,985 $ 487,668
Other income........................................................ 5,085 5,870 4,191
-------------------------------
499,409 506,855 491,859
-------------------------------
Costs and expenses
Cost of products sold.............................................. 302,225 307,112 296,845
Selling, general and administrative................................ 134,444 133,071 138,187
Depreciation....................................................... 21,516 22,373 20,002
Interest........................................................... 2,781 1,595 1,730
Currency exchange losses........................................... 40 735 1,233
Facilities consolidation and restructuring charges................. 2,164 7,786 730
Contract costs recovery............................................ (2,484)
-------------------------------
463,170 470,188 458,727
-------------------------------
Income before income taxes.......................................... 36,239 36,667 33,132
Provision for income taxes.......................................... 14,385 13,606 14,220
-------------------------------
Net income.......................................................... $21,854 $ 23,061 $ 18,912
===============================
Basic earnings per common share..................................... $ 4.81 $ 4.74 $ 3.32
===============================
Diluted earnings per common share................................... $ 4.80 $ 4.74 $ 3.32
===============================
Consolidated Statement of
Earnings Retained in the Business
(In thousands)
Year Ended December 31 1997 1996 1995
At beginning of year.............................................. $325,898 $ 309,712 $ 296,993
Net income........................................................ 21,854 23,061 18,912
Dividends declared
Common........................................................... (4,181) (6,811) (6,140)
Preferred........................................................ (37) (64) (53)
--------------------------------
At end of year.................................................... $343,534 $ 325,898 $ 309,712
================================
See notes to consolidated financial statements.
14
Consolidated Balance Sheet
(In thousands, except per share amounts)
December 31 1997 1996
Assets
Current Assets Cash........................................................................ $ 5,264 $ 7,963
Temporary investments, at cost which approximates market.................... 14,657 17,133
Receivables, less allowance for doubtful accounts $3,704 and $2,993......... 91,388 101,740
Inventories................................................................. 81,066 77,040
Deferred tax assets--net.................................................... 16,827 18,659
Prepaid expenses and other current assets................................... 10,411 5,872
---------------------
Total current assets........................................................ 219,613 228,407
---------------------
Property Land........................................................................ 6,256 6,196
Buildings................................................................... 107,632 106,767
Machinery and equipment..................................................... 221,812 224,390
Construction in progress.................................................... 18,949 10,079
---------------------
Total....................................................................... 354,649 347,432
Less accumulated depreciation............................................... (199,465) (200,374)
---------------------
Net property................................................................ 155,184 147,058
---------------------
Other Assets ............................................................................ 31,607 32,217
---------------------
Total....................................................................... $406,404 $407,682
=====================
Liabilities
Current
Liabilities Notes payable and current portion of long-term debt......................... $ 25,181 $ 8,239
Accounts payable............................................................ 30,809 27,584
Employees' compensation..................................................... 12,088 13,666
Insurance................................................................... 8,919 9,965
Taxes on income............................................................. 4,089 9,156
Other current liabilities................................................... 22,154 23,204
---------------------
Total current liabilities................................................... 103,240 91,814
---------------------
Long-term Debt ............................................................................ 12,270 13,278
---------------------
Other
Liabilities Deferred tax liabilities--net............................................... 22,780 16,781
Pensions and other employee benefits........................................ 25,736 43,504
Other noncurrent liabilities................................................ 929 873
---------------------
Total other liabilities..................................................... 49,445 61,158
---------------------
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:
1997--4,455,915; 1996--4,611,125)........................................ 12,297 10,866
Cumulative translation adjustments.......................................... (5,744) 1,430
Minimum pension liability adjustment........................................ (538)
Earnings retained in the business........................................... 343,534 325,898
Stock compensation trust.................................................... (28,200) (28,200)
Treasury shares, at cost.................................................... (83,469) (72,131)
---------------------
Total shareholders' equity.................................................. 241,449 241,432
---------------------
Total....................................................................... $406,404 $407,682
=====================
See notes to consolidated financial statements.
15
Consolidated Statement
of Cash Flows
(In thousands)
Year Ended December 31 1997 1996 1995
Operating Activities
Net income................................................................. $ 21,854 $ 23,061 $ 18,912
Depreciation............................................................... 21,516 22,373 20,002
Pensions................................................................... (13,027) (2,716) (2,510)
Deferred income taxes...................................................... 7,445 (2,525) (601)
Receivables................................................................ 10,352 (10,785) (2,257)
Inventories................................................................ (4,026) 6,581 (6,655)
Accounts payable and accrued liabilities................................... (4,079) 16,157 4,902
Other assets and liabilities............................................... (2,745) 961 210
Other--including currency exchange adjustments............................. (6,385) 3,348 3,607
--------------------------------
Cash Flow From Operating Activities........................................ 30,905 56,455 35,610
--------------------------------
Investing Activities
Property additions......................................................... (35,304) (21,583) (19,136)
Property disposals......................................................... 3,225 1,889 1,811
Acquisitions and other investing........................................... (2,411) (10,276) (2,170)
--------------------------------
Cash Flow From Investing Activities........................................ (34,490) (29,970) (19,495)
--------------------------------
Financing Activities
Additions to long-term debt................................................ 295 146 218
Reductions of long-term debt............................................... (1,037) (1,445) (2,078)
Cash dividends............................................................. (5,655) (5,438) (6,193)
Company stock purchases and sales.......................................... (9,907) (27,547) (28,030)
Changes in notes payable and short-term debt............................... 17,438 2,247 (3,973)
--------------------------------
Cash Flow From Financing Activities........................................ 1,134 (32,037) (40,056)
--------------------------------
Effect of exchange rate changes on cash..................................... (2,724) (1,302) 1,471
--------------------------------
Decrease in cash and cash equivalents....................................... (5,175) (6,854) (22,470)
Beginning cash and cash equivalents......................................... 25,096 31,950 54,420
--------------------------------
Ending cash and cash equivalents............................................ $ 19,921 $ 25,096 $ 31,950
================================
Supplemental cash flow information:
Interest payments.......................................................... $ 3,668 $ 1,419 $ 1,922
Income tax payments........................................................ 15,762 9,893 13,638
See notes to consolidated financial statements.
16
Notes to Consolidated
Financial Statements
Note 1--Basis of Presentation
SIGNIFICANT ACCOUNTING POLICIES ARE STATED IN ITALICS AT THE APPLICABLE NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES REQUIRES MANAGEMENT TO MAKE ESTIMATES AND ASSUMPTIONS THAT
AFFECT THE REPORTED AMOUNTS OF ASSETS AND LIABILITIES AND DISCLOSURE OF
CONTINGENT ASSETS AND LIABILITIES AT THE DATE OF THE FINANCIAL STATEMENTS AND
THE REPORTED AMOUNTS OF REVENUES AND EXPENSES DURING THE REPORTING PERIOD.
ACTUAL RESULTS COULD DIFFER FROM THOSE ESTIMATES.
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. PROFITS OR LOSSES RESULTING FROM DISPOSITIONS ARE
INCLUDED IN INCOME.
THE FINANCIAL STATEMENTS OF COMPANIES FOR WHICH THE UNITED STATES DOLLAR IS
DETERMINED TO BE THE FUNCTIONAL CURRENCY ARE TRANSLATED USING 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.
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.
Note 2--Other Income
(In thousands)
-------------------------
1997 1996 1995
-------------------------
Interest........................... $2,068 $ 2,628 $3,585
Commissions, royalties
and product services............. 1,551 1,944 1,959
Dispositions of assets............. 1,164 1,725 (320)
Equity in earnings of affiliates... 516 656 (451)
Other.............................. (214) (1,083) (582)
-------------------------
Total.............................. 5,085 5,870 4,191
-------------------------
Note 3--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.
Reductions in inventory quantities during 1997, 1996, and 1995 resulted in
liquidations of LIFO inventory quantities carried at lower costs prevailing in
prior years. The effect of these liquidations reduced cost of sales by $572,000
in 1997, $10,361,000 in 1996 and $5,455,000 in 1995, and increased net income by
$349,000 ($.08 per share), $6,217,000 ($1.28 per share) and $3,200,000 ($.56 per
share), respectively.
(In thousands)
-------------------------
1997 1996 1995
-------------------------
Finished products...................... $36,626 $32,042 $34,970
Work in process........................ 13,772 15,311 16,135
Raw materials and supplies............. 30,668 29,687 32,516
-------------------------
Total inventories...................... 81,066 77,040 83,621
-------------------------
Excess of FIFO costs over LIFO costs... 45,053 45,740 55,185
-------------------------
Inventories stated on the LIFO basis represent 45%, 39%, and 39% of the total
inventories at December 31, 1997, 1996, and 1995, respectively.
Note 4--Long-Term Debt
(In thousands)
----------------
U.S. 1997 1996
----------------
Industrial development debt issues
payable through 2022, 4.6%........... $10,950 $10,950
Other, 2.2% to 18.9%.................... 76 218
International companies
Various notes payable through 2002,
4.0% to 9.2% ($1,931 secured
by pledge of assets located abroad).. 2,636 4,703
----------------
Total..................................... 13,662 15,871
Amounts due within one year............... 1,392 2,593
----------------
Long-term debt............................ 12,270 13,278
----------------
Approximate maturities of these obligations over the next five years are
$1,392,000 in 1998, $427,000 in 1999, $311,000 in 2000, $290,000 in 2001, and
$284,000 in 2002. Some U.S. loan agreements contain covenants to maintain
specified levels of shareholders' equity.
17
Note 5--Business Segments and International Operations
The company is primarily engaged in the manufacture and sale of safety and
health equipment. Principal products include respiratory and hearing protective
equipment and head, eye and face protectors, safety clothing, industrial
emergency care products, mining safety equipment and monitoring instruments.
These safety and health products have historically accounted 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 operations in different geographic areas is
summarized as follows:
(In thousands)
-------------------------------
1997 1996 1995
-------------------------------
Net Sales and Revenues
U.S. operations................................. $275,075 $283,805 $274,148
European operations............................. 125,678 139,083 135,367
Other non-U.S. operations....................... 95,889 79,371 79,164
-------------------------------
Net Sales and Revenues.......................... 496,642 502,259 488,679
-------------------------------
Intercompany Transfers
U.S. operations................................. 34,204 24,364 22,779
European operations............................. 17,389 17,588 18,014
Other non-U.S. operations....................... 1,501 769 795
-------------------------------
Intercompany Transfers.......................... 53,094 42,721 41,588
-------------------------------
Operating Profit and Income Before Income Taxes
U.S. operations................................. 37,179 30,048 22,870
European operations............................. 2,127 4,810 4,984
Other non-U.S. operations....................... 6,431 4,980 6,475
Eliminations.................................... (7,319) (897) (1,970)
-------------------------------
Operating Profit................................ 38,418 38,941 32,359
Interest expense................................ (2,781) (1,595) (1,730)
Corporate income/(expense)--net................. 602 (679) 2,503
-------------------------------
Income Before Income Taxes...................... 36,239 36,667 33,132
-------------------------------
Identifiable Assets and Total Assets
U.S. operations................................. 252,009 246,329 234,237
European operations............................. 91,082 104,676 106,854
Other non-U.S. operations....................... 52,998 45,799 44,050
Eliminations.................................... (17,194) (19,211) (14,684)
-------------------------------
Identifiable Assets............................. 378,895 377,593 370,457
Corporate assets................................ 27,509 30,089 35,820
Discontinued operations......................... 323
-------------------------------
Total Assets.................................... 406,404 407,682 406,600
-------------------------------
Net Assets of Non-U.S. Operations................. 95,421 103,018 99,163
-------------------------------
Net Income of Non-U.S. Operations................. 5,104 8,882 6,364
-------------------------------
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, facilities
consolidation and restructuring charges, contract costs recovery, and income
taxes have not been included in computing operating profit. Corporate assets not
included in identifiable assets are principally cash and investments.
Note 6--Restructuring
Restructuring charges of $2,164,000 in 1997, most of which relate to planned
workforce reductions, include $1,743,000 for severance and phased retirement pay
in Germany. Relocation and start-up costs of $1,190,000 related to the closing
of the Esmond, Rhode Island, safety products manufacturing facility were largely
offset by pension curtailment gains of $1,185,000. Charges of $7,786,000 in 1996
were principally for separation pay and asset impairments associated with the
Esmond plant closing. Charges of $730,000 in 1995 related to workforce
reductions at international locations.
Note 7--Research and Development Expense
RESEARCH AND DEVELOPMENT COSTS, CHARGED AGAINST INCOME AS INCURRED, were
$16,668,000 in 1997, $19,122,000 in 1996, and $20,366,000 in 1995.
18
Note 8--Income Taxes
INCOME TAXES ARE ACCOUNTED FOR IN ACCORDANCE WITH STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 109. DEFERRED TAX BALANCES ARE STATED AT TAX RATES
EXPECTED TO BE IN EFFECT WHEN TAXES ARE ACTUALLY PAID OR RECOVERED. 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 before income taxes, and provisions
for income taxes are summarized as follows:
(In thousands)
------------------------------------------
1997 1996 1995
------------------------------------------
Income Before Income Taxes
U.S. income........................................... $ 43,735 $ 31,087 $ 28,501
Non-U.S. income....................................... 7,510 12,267 11,700
Currency translation (losses)......................... (437) (641) (887)
Eliminations.......................................... (14,569) (6,046) (6,182)
------------------------------------------
Income Before Income Taxes............................ 36,239 36,667 33,132
------------------------------------------
Provisions For Income Taxes
Current
Federal.............................................. 2,686 9,549 8,451
State................................................ 479 1,634 1,642
Non-U.S.............................................. 3,775 4,948 4,728
------------------------------------------
Total current provision.............................. 6,940 16,131 14,821
------------------------------------------
Deferred
Federal.............................................. 6,595 (900) (584)
State................................................ 1,256 (146) (13)
Non-U.S.............................................. (406) (1,479) (4)
------------------------------------------
Total deferred provision............................. 7,445 (2,525) (601)
------------------------------------------
Provisions for Income Taxes........................... 14,385 13,606 14,220
------------------------------------------
The components of deferred taxes are as follows:
Deferred tax assets
Postretirement benefits.............................. 5,926 5,905 5,666
Inventory reserves and unrealized profits............ 4,379 5,463 5,975
Vacation allowances.................................. 1,960 2,023 2,048
Postemployment benefits.............................. 643 1,251 1,251
Liability insurance.................................. 3,003 3,124 3,153
Loss carryforwards................................... 533 350 1,785
Restructuring........................................ 290 1,089
Warranties........................................... 2,220 1,239 695
Other................................................ 2,598 4,641 3,804
------------------------------------------
Total deferred tax assets............................ 21,552 25,085 24,377
------------------------------------------
Deferred tax liabilities
Depreciation......................................... (20,728) (22,227) (24,159)
Pension.............................................. (6,777) (980) (1,010)
------------------------------------------
Total deferred tax liabilities....................... (27,505) (23,207) (25,169)
------------------------------------------
Net deferred taxes.................................... (5,953) 1,878 (792)
------------------------------------------
The following is a reconciliation of income taxes
calculated at the U.S. Federal income tax rate of
35% to the provision for income taxes:
Provision for income taxes at statutory rate.......... 12,684 12,833 11,596
State income taxes.................................... 1,128 967 1,059
Currency translation.................................. 153 313 310
Non-U.S. taxes........................................ 418 (995) 694
Other--net............................................ 2 488 561
------------------------------------------
Provision for income taxes............................ 14,385 13,606 14,220
------------------------------------------
Undistributed earnings of international companies for which U.S. income taxes
have not been provided were $68,407,000 at December 31, 1997.
19
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)
--------------------------------------
Stock Stock
Shares Compensation Shares In Shares Compensation Treasury
Issued Trust Treasury Issued Trust Cost
---------------------------------------- ---------------------------------------
Balances January 1, 1995..................... 6,713,503 897,831 $ 8,048 $(40,388)
Stock options exercised...................... 5,900 252
Purchased for treasury....................... 638,815 (28,277)
---------------------------------------- ---------------------------------------
Balances December 31, 1995................... 6,719,403 1,536,646 8,300 (68,665)
Management Share Incentive Plan issues....... 17,050 771
Management Share Incentive Plan forfeitures.. (560) (25)
Stock options exercised...................... 13,840 602
Sale to Stock Compensation Trust............. 600,000 (600,000) 1,218 $(28,200) 26,982
Purchased for treasury....................... 601,962 (28,853)
---------------------------------------- ---------------------------------------
Balances December 31, 1996................... 6,749,733 600,000 1,538,608 10,866 (28,200) (70,536)
Management Share Incentive Plan forfeitures.. (147) (7)
Stock options exercised...................... 29,645 1,438
Purchased for treasury....................... 184,708 (11,338)
---------------------------------------- ---------------------------------------
Balances December 31, 1997................... 6,779,231 600,000 1,723,316 12,297 (28,200) (81,874)
---------------------------------------- ---------------------------------------
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, 1997), while the amounts held in
treasury at each year end are 1997 - 49,313 shares, $1,595,000; 1996 - 49,313
shares, $1,595,000; and 1995 - 47,935 shares, $1,553,000.
The company has established the Mine Safety Appliances Company Stock
Compensation Trust, the purpose of which is to fund certain benefit plans,
including employee stock options and awards. In 1996, the company sold 600,000
treasury shares, at market value, to the Trust, in exchange for a $28,200,000
promissory note, 8% interest, payable to the company.
The company has adopted a Shareholder Rights Plan which includes distribution of
rights as a dividend at the rate of one right for each share of the company's
common stock owned on February 21, 1997. Each right entitles the holder to buy a
fraction of a share of participating preferred stock for $225 in the event
certain persons or groups acquire 15% or more of the company's outstanding
common stock. Each right entitles its holder to purchase common stock having a
value twice the exercise price. The rights will expire on February 21, 2007.
Note 10--Leases
The company leases office space, manufacturing and warehouse facilities,
automobiles and other equipment under operating leases expiring at various dates
through 2001. Rent expense was $6,751,000 in 1997, $6,956,000 in 1996, and
$6,970,000 in 1995. Future minimum rental payments under noncancelable leases
are not significant.
Note 11--Earnings per Share
BASIC EARNINGS PER SHARE IS COMPUTED ON THE WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE PERIOD. DILUTED EARNINGS PER SHARE INCLUDES THE
EFFECT OF THE WEIGHTED AVERAGE STOCK OPTIONS OUTSTANDING DURING THE PERIOD,
USING THE TREASURY STOCK METHOD. ANTIDILUTIVE OPTIONS ARE NOT CONSIDERED IN
COMPUTING DILUTED EARNINGS PER SHARE.
(In thousands)
----------------------------
1997 1996 1995
----------------------------
Net income................................. $21,854 $23,061 $18,912
Preferred stock dividends.................. (37) (64) (53)
----------------------------
Income available to common shareholders.... 21,817 22,997 18,859
----------------------------
Basic shares outstanding................... 4,536 4,852 5,681
Stock options.............................. 13 3 3
----------------------------
Diluted shares outstanding................. 4,549 4,855 5,684
----------------------------
Antidilutive stock options................. 19 18
----------------------------
20
Note 12--Short-Term Debt
Short-term bank lines of credit amounted to $48,610,000 of which $25,814,000 was
unused at December 31, 1997. 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 $23,762,000 and $5,491,000 at December
31, 1997 and 1996, respectively. The average month-end balance of total short-
term borrowings during 1997 was $21,649,000 while the maximum month-end balance
of $32,749,000 occurred at November 30, 1997. The average interest rate during
1997 was approximately 8% based upon total short-term interest expense divided
by the average month-end balance outstanding, and 8% at year-end.
Note 13--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 10% of their compensation
to a trust fund, to which the company contributes an amount equal to 50% of the
employees' contributions not in excess of 8%. The company's (income)/expense for
all plans was ($7,737,000) in 1997, $2,798,000 in 1996, and $3,069,000 in 1995.
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. A minimum liability is
recognized for unfunded defined benefit plans for which the accumulated benefit
obligation exceeds accrued pension costs. The amount of the minimum liability in
excess of unrecognized prior service cost, net of tax benefit, is recorded as a
reduction in shareholders' equity. 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.
U.S. Plans International Plans
Cost for Defined Benefits Plans ----------------------------------- -------------------------------
(In thousands) 1997 1996 1995 1997 1996 1995
- -------------- ----------------------------------- -------------------------------
Service cost--benefits earned during the period.......... $ 3,014 $ 3,205 $ 2,826 $ 1,641 $ 2,036 $ 1,939
Interest cost on projected benefit obligation............ 10,170 9,892 10,023 3,308 4,003 4,055
Actual (return)/loss on plan assets...................... (52,403) (33,411) (45,817) (2,162) (1,861) (1,964)
Net amortization and deferral............................ 30,239 15,667 29,169 709 601 896
Settlement and curtailment adjustments................... (5,726) (508)
----------------------------------- -------------------------------
Pension expense (income)................................. (14,706) (4,647) (4,307) 3,496 4,779 4,926
----------------------------------- -------------------------------
Funding Status and Projected Benefit Obligation
Reconciliation
December 31 (In thousands)
- --------------------------
Actuarial present value of benefit obligations
Accumulated benefit obligation
Vested........................................... 125,398 119,131 119,959 43,048 38,088 47,125
Nonvested........................................ 1,851 1,904 1,962 1,102 9,874 1,230
----------------------------------- -------------------------------
Total............................................ 127,249 121,035 121,921 44,150 47,962 48,355
----------------------------------- -------------------------------
Plan assets at fair value, primarily listed stocks and
bonds................................................... 272,927 234,591 209,902 21,982 20,744 18,211
Projected benefit obligation............................. 148,611 141,702 146,097 46,396 50,565 54,101
----------------------------------- -------------------------------
Plan assets in excess of (less than) projected benefit
obligation.............................................. 124,316 92,889 63,805 (24,414) (29,821) (35,890)
----------------------------------- -------------------------------
The excess (less than) consists of
Unamortized portion of transition gain (loss),
being recognized over future years................. 4,987 6,104 7,017 (840) (1,111) (1,422)
Unrecognized net gain (loss) from past experience
different from that assumed...................... 94,606 77,562 52,979 7,799 5,131 (331)
Unrecognized prior service cost..................... (1,863) (2,326) (2,693) (586) (675) (815)
Minimum liability for unfunded plans................ 1,824 963 1,301
(Accrued)/prepaid pension cost included in the
consolidated balance sheet....................... 24,762 10,586 5,201 (30,787) (33,166) (33,322)
----------------------------------- -------------------------------
Total............................................... 124,316 92,889 63,805 (24,414) (29,821) (35,890)
----------------------------------- -------------------------------
Assumed long-term rates of return on assets.............. 9.0% 9.0% 9.0% 7.5-8.0% 8.0-9.0% 8.0-9.0%
Assumed discount rates for future benefits............... 7.0 7.5 7.3 5.3-8.0 6.1-8.0 7.0-8.5
Assumed long-term rates for compensation increases....... 4.5 4.5 5.0 2.5-8.5 3.0-6.0 4.0-6.5
21
Note 14--Postretirement Benefits
The company provides certain health care benefits and limited life insurance for
retired employees and their eligible dependents, THE COSTS FOR WHICH ARE
ACCOUNTED FOR IN ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
(SFAS) NO. 106. SFAS NO. 106 REQUIRES RECOGNITION OF RETIREE HEALTH AND LIFE
INSURANCE BENEFITS DURING THE EMPLOYEES' SERVICE WITH THE COMPANY. Further
information about these benefits is provided in the following tables.
Cost for Benefits
(In thousands) 1997 1996 1995
- -------------- ----------------------------
Service cost--benefits earned during the period.................................. $ 303 $ 408 $ 349
Interest cost on accumulated postretirement benefit obligation................... 1,030 1,152 1,168
Special benefit adjustments associated with early retirement and restructuring... 36 (247)
----------------------------
Postretirement benefits expense.................................................. 1,333 1,596 1,270
----------------------------
Funded Status and Accumulated Postretirement Benefit Obligation Reconciliation
December 31 (In thousands)
- --------------------------
Accumulated postretirement benefit obligation
Active employees............................................................ 2,886 3,214 3,352
Other active participants................................................... 5,997 6,955 7,224
----------------------------
8,883 10,169 10,576
Retirees.................................................................... 6,400 6,268 6,031
----------------------------
Total....................................................................... 15,283 16,437 16,607
Unamortized loss................................................................. (202) (1,431) (2,241)
----------------------------
Accrued postretirement benefit cost included in consolidated balance sheet....... 15,081 15,006 14,366
----------------------------
Assumed discount rates for future benefits....................................... 7.0% 7.5% 7.3%
----------------------------
Annual rates of increase in the costs of covered health care benefits assumed
for 1997 were 6%, decreasing gradually to 4% for the year 1999 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 $967,000 and increase the
current service and interest costs for the year by $112,000.
Note 15--Stock Plans
The company's Management Share Incentive Plan permitted the granting of
restricted stock awards and 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, 1997,
there were 35,800 shares reserved for future grants pursuant to this Plan.
Stock options are generally granted at market value option prices and expire
after ten years (limited instances of option prices in excess of market value
and expiration after five years). Restricted stock awards are granted (17,050
shares in 1996) to employees without payment to the company in consideration of
services to be performed in ensuing five-year periods. THE COMPANY APPLIES
ACCOUNTING PRINCIPLES BOARD OPINION 25 AND RELATED INTERPRETATIONS IN ACCOUNTING
FOR THE PLANS. ACCORDINGLY, NO COMPENSATION COST HAS BEEN RECOGNIZED FOR THE
STOCK OPTION GRANTS. COMPENSATION COST FOR THE RESTRICTED STOCK AWARDS 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 $436,000 in 1997, $350,000 in 1996, and
$238,000 in 1995. The company's net income and earnings per share would not be
significantly affected if compensation cost for these Plans was determined based
on fair value at grant dates consistent with the method provided in Statement of
Financial Accounting Standards No. 123.
A summary of the two stock option plans follows:
1997 1996 1995
------------------------------------------------------------------------------
Weighted-Average Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------------------------------------------------------------------------------
Outstanding at beginning of year.................. 58,365 $46.77 46,360 $46.18 49,260 $45.89
Granted........................................... 27,451 56.80 31,455 46.37 3,000 44.00
Exercised......................................... (29,645) 48.51 (13,840) 43.49 (5,900) 42.62
Forfeited......................................... (1,170) 56.64 (5,610) 47.50
------------------------------------------------------------------------------
Outstanding at end of year........................ 55,001 50.63 58,365 46.77 46,360 46.18
------------------------------------------------------------------------------
Options exercisable at year-end................... 55,001 58,365 44,473
------------------------------------------------------------------------------
The options outstanding at December 31, 1997, have a weighted-average remaining
contractual life of approximately 8 years and an exercise price range of $40.43
to $62.01.
22
Summary of Selected
Financial Data
SUMMARY OF OPERATIONS 1997 1996 1995 1994 1993
(In thousands, except as noted)
Net sales $494,324 $500,985 $487,668 $459,607 $429,220
- -----------------------------------------------------------------------------------------------------------------------------------
Other income 5,085 5,870 4,191 5,463 5,885
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of products sold 302,225 307,112 296,845 286,725 273,350
- -----------------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative 134,444 133,071 138,187 124,714 121,529
- -----------------------------------------------------------------------------------------------------------------------------------
Depreciation 21,516 22,373 20,002 18,527 17,294
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense 2,781 1,595 1,730 2,224 1,713
- -----------------------------------------------------------------------------------------------------------------------------------
Currency exchange losses 40 735 1,233 3,968 3,201
- -----------------------------------------------------------------------------------------------------------------------------------
Unusual items 2,164 5,302 730 3,086 (223)
- -----------------------------------------------------------------------------------------------------------------------------------
Taxes on income 14,385 13,606 14,220 10,497 7,686
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 21,854 23,061 18,912 15,329 10,555
- -----------------------------------------------------------------------------------------------------------------------------------
Basic per common share (in dollars) 4.81 4.74 3.32 2.58 1.73
- -----------------------------------------------------------------------------------------------------------------------------------
Diluted per common share (in dollars) 4.80 4.74 3.32 2.58 1.73
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends paid per common share (in dollars) 1.24 1.10 1.06 .94 .92
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding--basic 4,536 4,852 5,681 5,921 6,069
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR-END POSITION
- -----------------------------------------------------------------------------------------------------------------------------------
Working capital $116,373 $136,593 $156,641 $166,494 $164,199
- -----------------------------------------------------------------------------------------------------------------------------------
Working capital ratio 2.1 2.5 3.2 3.4 3.7
- -----------------------------------------------------------------------------------------------------------------------------------
Property, at cost 354,649 347,432 339,263 322,109 306,691
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 406,404 407,682 406,600 417,051 407,884
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt 12,270 13,278 14,746 16,564 27,476
- -----------------------------------------------------------------------------------------------------------------------------------
Common shareholders' equity 240,346 240,329 252,368 264,795 258,539
- -----------------------------------------------------------------------------------------------------------------------------------
Equity per common share (in dollars) 53.94 52.12 48.69 45.53 43.00
- -----------------------------------------------------------------------------------------------------------------------------------
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(In thousands, except earnings per share)
1997 1996
------------------------------------------------ -----------------------------------------------
Quarters Quarters
-------------------------------------- --------------------------------------
1st 2nd 3rd 4th Year 1st 2nd 3rd 4th Year
------------------------------------------------ ------------------------------------------------
Net sales.................... $113,473 $129,245 $120,602 $131,004 $494,324 $115,371 $123,879 $121,744 $139,991 $500,985
Gross profit................. 43,074 48,883 48,042 52,100 192,099 41,325 44,491 47,465 60,592 193,873
Net income................... 3,604 5,055 5,832 7,363 21,854 3,139 3,756 6,116 10,050 23,061
------------------------------------------------ ------------------------------------------------
Basic earnings per share..... .78 1.10 1.29 1.65 4.81 .61 .76 1.27 2.17 4.74
------------------------------------------------ ------------------------------------------------
Diluted earnings per share... .78 1.10 1.29 1.64 4.80 .61 .76 1.27 2.17 4.74
------------------------------------------------ ------------------------------------------------
23
EXHIBIT 21
----------
MINE SAFETY APPLIANCES COMPANY
------------------------------
The registrant's present affiliates include the following:
State or Other
Jurisdiction of
Name Incorporation
---- ---------------
Compania MSA de Argentina S.A. Argentina
MSA (Aust.) Pty. Limited Australia
MSA Export Limited Barbados
MSA Belgium NV Belgium
MSA do Brasil Ltda. Brazil
MSA Canada Canada
MSA de Chile Ltda. Chile
Baseline Industries, Inc. Colorado
Rose Manufacturing Company 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
Better Breathing, Inc. Massachusetts
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-Auer Polska Sp. z o.o. Poland
MSA (Britain) Limited Scotland
MSA S.E. Asia Pte. Ltd. Singapore
MSA Africa (Pty.) Ltd. South Africa
MSA Espanola S.A. Spain
AB Tegma Sweden
MSA (Switzerland) Ltd. Switzerland
Aritron Instrument A.G. Switzerland
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.
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-22284) of the 1987 Management Share Incentive Plan
and the Registration Statement on Form S-8 (no 33-43696) of the 1990 Non-
Employee Directors' Stock Option Plan of Mine Safety Appliances Company of our
report dated February 18, 1998, appearing on page 13 of the 1997 Annual Report
to Shareholders of Mine Safety Appliances Company, which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report on the Financial Statement Schedule, which appears on page F-1 of
this Form 10-K.
PRICE WATERHOUSE LLP
600 Grant Street
Pittsburgh, PA 15219
March 26, 1998
5
12-MOS
DEC-31-1997
DEC-31-1997
5,264
14,657
95,092
(3,704)
81,066
27,238
354,649
(199,465)
406,404
103,240
12,270
0
3,569
12,297
225,583
406,404
494,324
499,409
302,225
323,741
2,204
0
2,781
36,239
14,385
21,854
0
0
0
21,854
4.81
4.80
