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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, 1996
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
(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, 1996 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 21, 1997, there were outstanding 5,195,022 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 21, 1997 was $296,778,619. The aggregate market value of
voting stock held by non-affiliates as of February 21,1997 was $164,906,127.
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 Shareholders
for the year ended
December 31, 1996 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 23, 1997 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 the 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 the U.S. government agencies and certain
international governments is summarized as follows:
December 31
-------------------------
1996 1995 1994
------- ------- -------
(In thousands)
-------------------------
U.S. Government Agencies $14,400 $30,400 $36,200
International Governments 900 7,900 8,800
Approximately $900,000 under contracts with the U.S. government agencies
and $300,000 with international governments are expected to be shipped after
December 31, 1997.
3
Sales of products to U.S. government agencies continued to decrease in
1996. Incoming orders were significantly less than shipments in 1996, and
significantly lower than 1995 incoming orders. 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 5 of Notes to Consolidated Financial Statements
contained in the registrant's Annual Report to Shareholders for the year ended
December 31, 1996, 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 $19,122,000 in 1996,
$20,366,000 in 1995, and $20,575,000 in 1994.
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, 1996, the registrant and its affiliated
companies had approximately 4,200 employees, of which 1,900 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 by its own salespersons, 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.
4
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 the third quarter of 1996, the company acquired Rose Manufacturing
Company, a leading manufacturer in the growing fall protection portion of the
safety products business, and Better Breathing, Inc., a leading innovator of
disposable respiratory protection products. In 1992 the company decided to
discontinue the operations of Transfer-Metallisierte Produkte GmbH (TMP), a
joint venture in Germany to produce metallized paper. Operating activities
ceased during 1993. During 1996 the company completed the assets valuation
process and the settlement of its liabilities, the effects of which were not
significant to the consolidated financial position and results of operations.
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 53 Chairman and
Chief Executive Officer
T. B. Hotopp 55 President
J. E. Herald 55 Vice President - Finance
(Chief Financial Officer)
W. E. Christen 52 Vice President
G. W. Steggles 62 Vice President
G. R. McGee 56 Vice President
D. H. Cuozzo 63 Vice President and Secretary
D. L. Zeitler 48 Treasurer
All the executive officers have been employed by the registrant since prior
to January 1, 1992 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. Steggles was employed by the registrant on May 4, 1992 and elected
Vice President. From prior to January 1, 1992 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.
(c) 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, 1992 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.
(d) Mr. Cuozzo was elected Vice President on April 27, 1995. Prior to that
time, he was Secretary.
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.
6
The primary responsibilities of these officers follow:
Individual Responsibilities
- ---------- ----------------
Mr. Hotopp U.S. operations
Mr. Christen European operations
Mr. Steggles International operations outside the U.S. and
Europe
Mr. McGee Research, product development, manufacturing and
marketing of instrument and battery products in
the U.S.
Mr. Cuozzo General Counsel and corporate taxes
Mr. Zeitler Cash and risk insurance management
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
1,049,000 square feet. Other U.S. manufacturing and research facilities of the
registrant are located in Esmond, Rhode Island (184,000 sq. ft.), Jacksonville,
North Carolina (107,000 sq. ft.), Lyons, Colorado (10,000 sq. ft.), Sparks,
Maryland (37,000 sq. ft.), Dayton, Ohio (23,000 sq. ft.), Lawrence,
Massachusetts (42,000 sq. ft.), and Englewood, Colorado (41,000 sq. ft.).
7
Manufacturing facilities of international affiliates of the registrant are
located in Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico,
Peru, Scotland, Spain, and Sweden. The most significant are located in Germany
(approximately 431,000 sq. ft., excluding 127,000 sq. ft. leased to others), and
in Glasgow, Scotland (approximately 96,000 sq. ft., excluding 44,000 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 $3,348,000 as of December 31,
1996.
Sales Offices and Warehouses:
----------------------------
The registrant and its U.S. affiliates own two warehouses and lease 13
other distribution warehouses with aggregate floor space of approximately
201,000 sq. ft. in or near principal cities in 11 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 24 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 1996.
8
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, 1996. 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.
9
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 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 23, 1997. 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 "Shareholder Rights Plan," is not incorporated
herein.
10
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,
1996, is incorporated herein by reference pursuant to Rule 12b-23.
Report of Independent Accountants
Consolidated Balance Sheet - December 31, 1996 and 1995
Consolidated Statement of Income - three years ended December 31, 1996
Consolidated Statement of Earnings Retained in the Business - three years
ended December 31, 1996
Consolidated Statement of Cash Flows - three years ended December 31, 1996
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, 1996 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.
11
(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) * December 29, 1993 Consulting agreement with Leo N. Short,
Jr., filed in Form 10-K on March 25, 1994, is incorporated
herein by reference.
(10)(e) * 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)(f) 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 herewith.
* The exhibits marked by an asterisk are management contracts or compensatory
plans or arrangements.
12
(a) 3. Exhibits (continued)
(13) Annual Report to Shareholders for year ended December 31, 1996
(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, 1996.
13
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, 1997 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, 1997
- -------------------------- and Chief Executive Officer
John T. Ryan III
/S/James E. Herald Vice President - Finance; March 26, 1997
- -------------------------- Principal Financial and
James E. Herald Accounting Officer
/S/Joseph L. Calihan Director March 26, 1997
- --------------------------
Joseph L. Calihan
/S/Calvin A. Campbell, Jr. Director March 26, 1997
- --------------------------
Calvin A. Campbell
/S/G. Donald Gerlach Director March 26, 1997
- --------------------------
G. Donald Gerlach
/S/Helen Lee Henderson Director March 26, 1997
- --------------------------
Helen Lee Henderson
/S/Leo N. Short, Jr. Director March 26, 1997
- --------------------------
Leo N. Short, Jr.
Report of Independent Accountants
on Financial Statement Schedule
February 17, 1997
To the Board of Directors of
Mine Safety Appliances Company
Our audits of the consolidated financial statements referred to in our report
dated February 17, 1997, appearing on page 13 of the 1996 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, 1996
(IN THOUSANDS)
1996 1995 1994
------ ------ ------
Allowance for doubtful accounts:
Balance at beginning of year $2,640 $2,102 $2,516
Additions -
Charged to costs and expenses 812 949 741
Deductions from reserves (1) 459 411 1,155
------ ------ ------
Balance at end of year $2,993 $2,640 $2,102
====== ====== ======
(1) Bad debts written off, net of recoveries.
F-2