40313 MSA Cover w- spine 4/5/05 2:08 PM Page 1
MSA... THE SAFETY COMPANY
Mine Safety Appliances Company
121 Gamma Drive
RIDC Industrial Park
O’Hara Township
Pittsburgh, PA 15238
412-967-3000
www.MSAnet.com
2 0 0 4 A n n u a l R e p o r t
041218 2004 MSA Annual Covers 4/5/05 2:49 PM Page 3
OUR MISSION
T hat men and women may work in
safety and that they, their families
and their communities may live in health
throughout the world.
MSA... THE SAFETY COMPANY
2 0 0 4 A n n u a l R e p o r t
OUR VISION
T o be the leading innovator and provider
of quality safety and instrument products
and services that protect and improve
people's health, safety and the environment.
To provide satisfaction of customer needs
through the efforts of motivated, involved,
highly trained employees dedicated to
continuous improvement in quality, service,
cost, value, technology and delivery.
ABOUT THE COVER
CONTENTS
The Business of MSA 1
Chairman’s Letter 2
Fire Service 4
Military 6
Construction 8
Oil, Gas and Chemical 10
Commercial Government 12
Consumer Products 14
MSA Moves to NYSE
16
2004 Form 10-K
Principal Operations 56
Board of Directors 56
In 2004, MSA celebrated its 90th anniversary.This milestone
marked 90 years of focusing on just one mission: protecting
the health and safety of people in all kinds of settings, who
face all kinds of hazards.
Today, MSA is steadfastly carrying on this mission, fueled
by countless innovations, hundreds of patents and thousands
of products.With this singular focus, MSA is indeed...
The Safety Company.
• For millions of firefighters throughout the world, MSA is
The Safety Company they depend on when smoke and flames
threaten lives.
• For the military, we’re The Safety Company that helps protect
soldiers on the front lines.
• For construction workers, we’re The Safety Company that pro-
vides protection from falls, and from objects falling from above.
• For oil, gas and petrochemical workers, MSA is The Safety
Company that fuels a less hazardous work environment.
• For police officers and government agents, we’re The Safety
Company that helps shield them from danger.
• At home, MSA is The Safety Company that helps keep
Do-It-Yourselfers from doing harm to themselves.
• And for investors, MSA is The Safety Company because
we are the only broad-line, publicly-traded safety company
in the U.S.
Being The Safety Company means many things, but to all of
us at MSA, it very simply summarizes our mission, our legacy
and our future. Accordingly, it serves as our theme for this
year’s annual report.
40313 041218 MSA Annual Finalv2 4/5/05 2:05 PM Page 1
THE BUSINESS OF MSA
MSA is in the business of developing, manufacturing
and selling innovative products to enhance the
safety and health of workers throughout the world.
Critical to MSA’s mission is a clear understanding of customer
processes and safety needs. MSA dedicates significant
resources to research which allows it to develop an under-
standing of the safety equipment and instrumentation
requirements in a diverse range of industries such as the
fire service, homeland security, construction, public utilities,
mining, chemical, petroleum, transportation, the military and
hazardous materials remediation. MSA’s reach has expanded
into the home in an effort to better understand and protect
the “do-it-yourself” consumer. MSA’s principal products, each
designed to serve the needs of target markets, include
respiratory protective equipment, thermal imaging cameras,
portable and permanent gas detection instruments, as well as
head, eye, face, hearing and fall protection products.
MSA was founded in 1914 by John T. Ryan and George H.
Deike, two mining engineers who had firsthand knowledge
of the terrible human loss that was occurring in underground
coal mines.Their knowledge of the mining industry provided
the foundation for the development of safety equipment to
better protect underground miners.While the range of
industries served by MSA has expanded greatly over the
years, the founding philosophy of understanding customer
safety needs and designing innovative safety equipment
solutions remains unchanged.
MSA is headquartered in Pittsburgh, Pennsylvania,
with operations employing 4,600 associates throughout
the world. A publicly held company, MSA’s stock is traded on
the New York Stock Exchange under the symbol MSA.
8.7%
18.5%
25.6%
24.8%
22.4%
Annual Sales by Product Group
Air-Supplied Respirators
Head Protection
(Helmet, Eye, Face & Hearing)
Instruments
Air-Purifying Respirators
Other
3.1%
3.4%
7.0%
20.3%
66.2%
Annual Sales by Region
North America
Europe
Asia & Pacific Rim
Africa
South America
FINANCIAL HIGHLIGHTS
For The Year (thousands, except per share)
Net sales
Net income from continuing operations
Discontinued operations – after tax
Net income
Basic earnings per common share:
Continuing operations
Discontinued operations
Net income
At Year End (thousands)
Total assets
Working capital
Common shareholders’ equity
Common Stock (thousands)
Shares outstanding
Market capitalization
2002 2003 2004
SALES (in millions)
$852.5
$696.5
$564.4
$564,426
31,213
3,864
35,077
$696,473
48,924
16,343
65,267
$852,509
71,047
—
71,047
.85
.11
.96
1.33
.45
1.78
1.91
—
1.91
$579,765
138,182
288,009
$643,885
207,216
306,867
$734,110
270,593
376,679
36,621
$393,677
36,928
$978,715
37,341
$1,893,208
NET INCOME (in millions)
(Continuing Operations)
$71.0
$48.9
$31.2
02 03 04
02 03 04
1
40313 041218 MSA Annual Finalv2 4/5/05 2:05 PM Page 2
TO OUR SHAREHOLDERS...
We have all had those great games, those great seasons,
where everything comes together. Most of us, espe-
cially sports fans, can remember the years and remem-
ber the scores when our teams “put it all together” and we could
celebrate. I certainly do and those numbers can come to my mind
very quickly. 2004, MSA’s 90th year, was one of those years. For
the year as a whole, almost all of our goals were accomplished.
Yet, in the words of a late, well-remembered colleague of ours,
“All of this didn’t just fall off the turnip truck.” MSA has had a
focus on our mission, on the needs of our customers and on
what we had to do to fulfill them.The efforts made toward these
objectives over time particularly came through in results in 2004,
and we were able to surpass our goals and vindicate our strategy
and our focus that we pursued even through difficult times.
The products introduced in 2003 and 2004 have had good sales
performance against their goals, and we see more MSA innovation
coming through the pipeline.
A distinctive product success for the company in 2004
was in gas masks designed for the Homeland Security market.
Our Millennium® Chemical– Biological Mask received the first
gas mask approval under the U.S. NIOSH Chemical Biological
Radiological and Nuclear (CBRN) standard and significantly
enhanced MSA’s market leadership position.The Ultra Elite® Gas
Mask also received CBRN approval, and MSA now has two of the
only four masks so approved and currently active in the market.
In 2003, our North American Sales Organization developed
strategic initiatives as to where in North America we should
place our sales energy and how much and in what areas should
we increase our efforts to better fulfill the
needs of our actual and potential users.This
involved the further improvement and devel-
opment of MSA’s excellent relationships with
distribution partners and end users of our
products and enhanced our position of having
the best and largest dedicated global sales
force in the safety products industry. Actions
were taken on these initiatives in late 2003
and at the beginning of 2004, and the results
in 2004 were exceptionally good and played a
substantial role in the fine performance of
the company.When a part of the company
such as this, which represents 40% of our
sales, generates orders more than 10% over
our annual goal, you know you are going to
have a successful year.
John T. Ryan III (front, center) shown with members of MSA’s nine Global Steering Teams, including
leaders, sponsors and members of the Global Alignment Council, at their first annual joint meeting
held in Cranberry Township, Pa.
The Advanced Combat Helmet for the
U.S. Army was MSA’s Product of the Year in
2004. It had its origin in several years of
development by CGF Gallet, which MSA pur-
chased in 2002.To this effort was added the
know-how and skill of MSA materials, engi-
neering and manufacturing people to develop
a helmet with the optimal performance and
A major element of our initiatives is our global teams. Since
the late 1990s they have played a lead role in our new product
development.These teams are composed of members from
various company locations and functional areas, all focused on
MSA objectives.The earliest and most extensive ones are the
Global Strategy Teams that lead our efforts in six of our major
product areas. More recently, teams have been set up in the areas
of Global Manufacturing, Evolving Technologies and aligning our
product development efforts toward corporate objectives.
In the picture with me this year are the leaders of these teams,
taken during a recent meeting of all of our global teams. I quipped
that having all of these strategy teams together was the most
impressive gathering of people working towards the improvement
of MSA products ever…except perhaps when our two founders
sat with Thomas Edison in his office in 1914 convincing him to
design a battery for the flameless electric miners’ cap lamp —the
greatest innovation in the field of mining safety.These teams have
played a major role in the success of MSA in recent years. In 2004
the percentage of our commercial sales in North America derived
from products introduced over the last three years was 39%. If
we included products on military contracts, the value is 47%.
2
ability to fully meet the requirements of the U.S. military. After
performing well in the battlefields of Afghanistan, the product
became the U.S. Army’s standard unit of issue, and MSA received
major contracts to fulfill the needs of our soldiers in the current
conflicts.To ramp up production of a new product to high levels,
while at the same time meeting yield and cost objectives, is an
exceptionally difficult task. MSA factories in Newport,Vermont
and Murrysville, Pennsylvania were the main areas of operations
for the Advanced Combat Helmet, and MSA factories elsewhere
in the United States supported them. I am pleased with the
superb work our team did on this initiative, which enabled us to
reach the military’s requirements schedule by mid-year and stay
ahead through the end of 2004. MSA’s initiatives in Lean Sigma
projects freed up space to produce the helmet in Murrysville and
have continued to assist our productivity.
Our MSA Safety Works® consumer sales initiative was suc-
cessful in gaining a major position at True Value Hardware to go
with our existing business at The Home Depot and other major
retail customers.
MSA has had a major effort in Central and Eastern Europe
for some time and in 2004 reaped excellent benefits in orders
40313 041218 MSA Annual Finalv2 4/5/05 2:05 PM Page 3
and shipments in one of the higher growth areas of the world.
We are pleased to welcome the people of MSA Sordin in Sweden
who have developed a promising business in communications and
active electronic hearing protection. Despite the difficulties in the
German and European economies, MSA Auer made a fine strong
closing to the year to achieve its goals, joining MSA Gallet, MSA
Española, MSA Auer Austria, and MSA Nordic in fine performance.
We frequently note that the greatest percentage opportunity
for MSA sales growth is in MSA International—that is, the areas
outside of North America, Europe and Central Asia. In 2004, we
added sales operations in Indonesia and Hong Kong to go with
MSA Malaysia set up in late 2003. A major transformation was
made to MSA operations in China which is in a very promising
economy, and I was pleased by our fine sales growth in this region
during the second half of the year, once important initiatives were
in place. Major demands in China and the world economy for
minerals and agriculture produced in South America and Australia
have helped the latter economies, and I commend MSA opera-
tions in these areas for another particularly successful year. I say,
“Obrigado e ate logo,” (thank you and good-bye/keep in touch) to
our long-time colleague, Andre Magalhães, General Manager of
MSA do Brasil, who retired recently after building our business to
an excellent and enduring leadership position. MSA International
completed a major strategic initiative during the year and is taking
action on its plans.
The company will bid farewell to its oldest product, the MSA
Auer gas mantle for street lights, after 113 years, as the line was
sold to a company in India. Not often does a product continue
essentially unchanged for over a century.
I am pleased by the way we have made progress on a global
basis. In comparing earnings in our three geographic regions—
North America, Europe and International—over the last two
years, 2002-2004, each region has increased its earnings substan-
tially, even after correction for the impact of currency exchange
rates and acquisitions. MSA North America’s success was led by
substantial sales growth of greater than 20% compounded and by
improved production productivity which covered increased
efforts in new product development and sales coverage. MSA
Europe, operating in a difficult local economic environment, could
reach only modest sales growth after adjustment for currency
values and acquisitions, but made major gains in overall productivity
and cost control while increasing sales outside of their traditional
Western European markets. MSA International expanded market
coverage, grew sales in double-digit annual percentages and gained
cost improvements in a number of areas.
In 2004, the company received a number of awards. Particularly
noteworthy was the designation of our Chief Information Officer,
Steve Plut, as one of the business world’s Premier 100 Information
Technology Leaders from Computerworld magazine, based on the
performance of Steve and our IT team.The installation of an
enterprise computer system in 1998 was a difficult and demanding
experience for the business, but the 2004 upgrade of the
system went smoothly and without a hitch.
MSA’s success as The Safety Company has come from our
focus on our one mission: being the global leader in sophisticated
safety equipment—that is, those products that users call upon
to protect themselves and their health when “life is on the line.”
We take the tough jobs and tend to do best when the tasks are
the most demanding.We believe we are the leading producer
in the world in self-contained breathing apparatus, gas masks,
hazardous gas-detection equipment, protective helmets and fire
helmets; and we are closing in on the leadership in thermal
imaging cameras. MSA has excellent balance and diversification in
products, markets, customers and geographies with a long-term
global presence.
The company’s progress has been particularly assisted by the
fact that at this company all the money that we make goes to only
two places—to build this particularly well-focused business for
greater success in the future and to reward our shareholders.
Our strong balance sheet allows us to be aggressive in our
business strategies and allows us to pursue fully our short-term,
medium-term and long-term objectives.
On July 12, MSA was pleased to begin trading on the New
York Stock Exchange and to provide all the people at that famous
location on that day with V-Gard® protective helmets, the best one
around. On the sad side, our largest shareholder, Mary Irene Ryan,
my mother, passed away in the summer at age 91.There were
some limited sales of stock by our family for modest diversification
and to pay death taxes, but the strong relationship between my
family and the company goes forward.
As we look to the future, we keep in mind the words of a
great Pittsburgher, Chuck Noll, Coach of the Steelers in their
Glory Years,“It is a lot tougher to stay on top than it was to get
there.” We look forward to continuing to make further progress
on behalf of our shareholders by serving our customers well.
The Fire Service globally and Homeland Security in the United
States have been excellent markets for MSA, and we look to
enhance our position in them, including instruments for Homeland
Security. Our performance in the general industry sector, which
is a very large part of our business, has gone well recently as we
have worked hard to meet customer needs and as the global
manufacturing industry has improved.We look forward to further
progress here. International markets continue to grow and
present particular opportunities for MSA.
Our objectives in our business vary a bit between segments
due to the nature of each element. In our commercial business,
which is everything except for major government military contracts,
we seek to develop our business strongly and steadily year-to-year
as we enhance our customer reach and our product offerings.
We look forward to regularly growing here in this vast majority
of our business.
In our sales to the military in the U.S. and other allied countries,
our objective is to gain absolutely as much of such business as we
can in areas where MSA has distinctive capabilities and in which sales
can be profitable. In propitious periods, this business can grow very
rapidly. Yet, this tends to be a somewhat volatile part of the business
and we manage our operations to live with this volatility.The way to
continue well in such government business is to be on as many good
new projects as we can in order to offset the maturity in other
areas.We are competitive in a number of new government-oriented
projects in both the U.S. and worldwide, and recently we were
pleased to receive a large order for one of them. Conversely, the
MCU-2/P gas mask for the U.S.Air Force and Navy has been
required at high levels longer than we had expected due to recent
global conflicts. However, we anticipate a reduction in volume later in
2005, though the production capacity of gas masks, which has been
quite constrained, will then be used to better fulfill our delivery of
related Homeland Security gas masks for first responders in the U.S.
Overall, therefore, we expect the good growth in our
commercial business to continue this year as long as we fulfill
our tasks effectively.We would expect that our government military
contract business on a global basis would not have the growth of
recent years for reasons just mentioned, even though we feel posi-
tive about our competitiveness in this area. Overall, though, we look
forward to another very good year for the company with ongoing
progress on total sales and earnings as we fulfill our mission that
men and women may work in safety and that they, their families
and communities may live in health throughout the world.
John T. Ryan III
Chairman of the Board and Chief Executive Officer
3
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FIRE SERVICE
MSA is The Safety Company for Firefighters
and First Responders
The FireHawk™ Air Mask,
introduced in 2004, epitomizes
MSA innovation. Besides
being the first device to meet
both NIOSH CBRN and NFPA
1981-2002 edition SCBA
standards, it features a new
Rescue Belt designed into the
harness assembly that allows
firefighters to rappel to safer
ground, capitalizing on MSA
core competencies in fall
protection.
4
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 5
In 2004, millions of
dedicated firefighters
and first responders
in North America,
Europe and other
regions of the world
depended on MSA
products when lives
were on the line. Driven
by strong demand for
increasingly sophisticated
products with advanced
technology, MSA solidi-
fied its standing as the leading manufacturer of safety equipment
for the fire service market.
The Ultra Elite® Gas Mask is specially
designed for firefighters and is
approved for CBRN protection.
As MSA’s single largest market globally, the fire
service generated approximately 29 percent of total
revenue in 2004, led by higher shipments of self-
contained breathing apparatus and thermal imaging
cameras (TICs), which played a key role in the company’s
record sales and earnings.
For the year, MSA was the market leader in fire
helmets, gas detection instruments, gas masks and
thermal imaging cameras used by fire departments
and first responders.The company also maintained
its position as one of the top two manufacturers of
self-contained breathing apparatus. Several trends
helped boost MSA’s sales in this key market, particu-
larly the focus on protecting firefighters from homeland
security threats such as chemical warfare agents, toxic
chemicals and gases, and the demand for products that
integrate state-of-the-art electronics and technology.
In 2004, new products introduced over the past three
years generated about 40 percent of MSA’s North American
sales. One highlight was a 45 percent increase in sales of the
Evolution 5000 Thermal Imaging Camera, which enables fire-
fighters with poor or no visibility to locate victims and pinpoint
fires in smoke-filled buildings. Sales of the Evolution 5000 TIC
and other MSA thermal imaging cameras accelerated in
Europe last year after MSA secured a bulk
export license enabling volume shipments
to that region. MSA Europe, for instance,
secured a major order in Germany for 64
Evolution 5000 TICs. Equipped with
advanced electronics, the Evolution 5000
TIC is the benchmark for excellence in
thermal imaging cameras, offering maxi-
mum value with high performance, dura-
bility, portability, reliability and best-in-class
technology.
Evolution® 5000 TIC
delivers more safety and ergonomic features than any other air
mask available at the end of 2004.Two components distinguish
the FireHawk unit from conventional air masks: its all-new
Airframe™ carrier and harness assembly and an optional rescue
belt that provides an emergency egress system that is compliant
with National Fire Protection Association (NFPA) standards.
MSA engineering teams in Europe and the U.S. teamed up to
develop FireHawk components, while the optional rescue belt
integrates MSA core competencies in fall protection.
With the FireHawk Air Mask, MSA also became the first
manufacturer to offer a self-contained breathing apparatus that
complies with the latest NFPA performance standard – NFPA
1981-2002 Edition – and received approval from the National
Institute for Occupational Safety and Health (NIOSH) for use
against chemical, biological, radiological and nuclear (CBRN)
contaminants.The FireHawk Air Mask provides first
responders with an added level of protection if
they’re called to respond to a terrorist incident.
In 2004, MSA further demonstrated its fire
service leadership with the introduction of the Ultra
Elite Gas Mask, which also received NIOSH approval
for CBRN protection. Designed specifically for fire-
fighters, the Ultra Elite mask offers a feature that can
save fire departments time and money – a facepiece seal
design that duplicates MSA’s widely used Ultra Elite SCBA
facepiece.This feature means fire departments don’t have to
conduct costly new facepiece fit tests when incorporating
the Ultra Elite Gas Mask into their arsenal of equipment.
For decades, MSA has been a leader in head protection
for firefighters. In 2004, CAIRNSHELMETS® remained the leading
brand of fire fighting helmets in the U.S.
The company, however, is also positioned for market share
growth outside the U.S.
sold to fire departments in Austria, Germany, Switzerland, Slovakia,
the Czech Republic, Luxembourg, Poland and other nations.
In Europe, MSA Gallet helmets were
Additionally, MSA Netherlands won a recent order to
supply more than 200 AirMaXX eXXtreme Air Masks to the
Utrecht Fire Department. In Australia, MSA was the fire service
market leader, with products including SCBAs manufactured in
Europe and Cairns helmets made in
Clifton, N.J. And in South America and
Asia, particularly China, MSA is pursuing
strategies to expand its share of the fire
service market in those regions.
Indeed, MSA is The Safety Company
when it comes to protecting firefighters
around the world. Our customer service
professionals and field representatives work
closely with firefighters to understand their
needs, and MSA trains authorized distribu-
tors to ensure quality service. In 2004, the
fire service market truly demonstrated
MSA’s leadership in product engineering
and innovation, and its commitment to
protecting the heroes who protect us.
5
The company’s focus on innovation
led to several notable product introduc-
tions for firefighters and other customers
last year. As an example, MSA introduced
the FireHawk Air Mask, an entirely new
self-contained breathing apparatus that
In 2004, sales of CAIRNSHELMETS® protective
headgear, like the new Cairns 1044 fire helmet
shown here, helped reaffirm the brand’s leading
position in the North American market.
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 6
MILITARY
Protecting Soldiers on the Front Lines
The war in Iraq and Afghanistan has forced many
soldiers to walk the front lines.The Advanced
Combat Helmet provides superior ballistic protection
while allowing maximum sensory awareness.
Murrysville associate Monica Bell, left, ensures top
quality standards while adding trim to the Advanced
Combat Helmet.
6
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 7
As the United States and its allies aim to protect
democracy from hostile threats, MSA is providing
state-of-the-art safety equipment to protect soldiers
and other military personnel.
While MSA concentrated primarily on meeting U.S.
defense needs, the company also sold military products last
year to such allies as Australia and Taiwan.
MSA has proudly supported America’s defense mission
since 1918, when the company first provided oxygen-
breathing apparatus for the U.S. Army during
World War I. In 2004, customers including the
Army, Navy and Air Force turned to MSA for
sophisticated technology that enhances head and
respiratory protection.
Many achievements stood out in 2004; one
of the most notable was MSA’s production of the
Advanced Combat Helmet (ACH) for the U.S.
Army, a project that demonstrated the company’s
strengths in research, technology, innovation, lean manu-
facturing and teamwork. During the year, MSA won
three contracts totaling approximately $77 million
to manufacture this helmet for the Army. Overall,
MSA has been awarded contracts totaling more than
$104 million since November 2003 for the production of
more than 315,000 Advanced Combat Helmets.
Responding to the Army’s urgent demand for these helmets
required a major effort and significant process improvements
at our manufacturing plants in Newport,Vt., Clifton, N.J.,
Murrysville, Pa. and Jacksonville, N.C. MSA employees rose to
the challenge, working tirelessly as the company implemented
Lean Sigma manufacturing to ensure cost-effectiveness and a
quick ramp-up of the ACH program. Initially developed for the
U.S. Military Special Operations Command, the Advanced
Combat Helmet has met stringent requirements for perform-
ance and safety.The helmet features a lightweight design and
offers soldiers more protection with greater comfort and
stability than previous helmets.
Equally important, the ACH provides advanced ballistic
protection while allowing maximum sensory awareness for the
user, including unobstructed field of view and ambient hearing
capabilities. As a result, the Army began issuing the helmet to
troops deploying to Iraq and Afghanistan.
The U.S. Army Material Command recognized the ACH as
one of the top inventions of 2002, based on evaluations
reported by six active Army Divisions and the U.S. Army
Training and Doctrine Command.
The success of the Advanced Combat Helmet was just
one of MSA’s major achievements last year. MSA was
also awarded a $42 million multi-year contract to supply
U.S. Air Force and Navy personnel with the MCU-2/P
chemical/biological gas mask.
MSA is a leading manufacturer of protective
respiratory devices for defense, including CBRN gas
masks that protect users from chemical, biological,
radiological and nuclear contaminants. In 2004, MSA played a
strong supporting role as the manufacturer of rubber face-
masks for Army gas masks.
MSA is also pursuing growth opportunities
outside the U.S. in this key market. For a
Canadian defense customer, an MSA engi-
neering team developed a Bullet Resistant Plate
in 2004, and our new Defense Technologies Group is helping
ensure that tough performance requirements for this new
product are being met. In Europe, the acquisition of Sordin
last year expanded MSA’s line of passive and electronic hearing
protection equipment for military applications and other markets.
This acquisition proved especially
important in 2004 as MSA
utilized Sordin technology to
furnish the U.S. Army with
the Modular Integrated Com-
munications Headset (MICHTM)
System. Lightweight and easy
to use, the MICH System is a
hands-free radio unit specially
designed to integrate with the
Advanced Combat Helmet.
MICH TM Communications
System
While MSA has benefited
from military spending related
to Operation Iraqi Freedom, it’s
important to note that the com-
pany has maintained a strong and
diverse base of customers in
other key markets. In 2004, MSA’s
military business accounted for
approximately 20 percent of
MSA’s total sales.
Since the end of 2003, MSA has
secured more than $104 million
to produce 315,000 Advanced
Combat Helmets.
7
Pennsylvania U.S. Senator Arlen Specter (R-Pa.), left, and U.S.
Representative Melissa Hart (R-Pa.), shown above with Bill
Lambert, President of MSA North American Operations, expressed
tremendous support for the ACH during a 2004 visit to MSA’s
Murrysville, Pa. facility.
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 8
CONSTRUCTION
MSA Builds Market Share
MSA is the leading supplier of many quality products that help protect
construction workers every day on the job. The V-Gard ® protective helmet ,
shown above, is the number one hard hat used by construction and general
industry workers throughout the world.
In 2004, MSA’s Construction Safety Blitz in Florida, left, helped raise safety
awareness among construction workers at more than 40 active work sites.
8
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 9
In North America and around the world,
MSA is building a strong foundation of
growth in the construction market by deliver-
ing superior safety products, innovation and
process improvement.
In 2004, the company increased sales in this
key market as overall construction activity accel-
erated, reflecting improved economic vitality in
the U.S. and abroad. MSA is well positioned to
serve the construction market because of a
proven ability to develop new or improved
products that integrate the latest technologies
in two of our core product areas – head and
fall protection.
For example, MSA, the leading maker
of hard hats, last year introduced a breakthrough
solution to enhance helmet safety, use and com-
fort: the 1Touch Suspension. Getting a hard hat
to fit just right is a key to ensuring
superior head protection. The 1
Touch Suspension is a cost-effective
solution that makes it easier and
simpler to adjust a hard hat for
optimum fit.The first major innova-
tion in suspension technology in 20
years, the 1 Touch Suspension is
easily opened, adjusted and closed
with one hand.
1TouchTM Suspension
The introduction of the 1 Touch Suspension and other
suspension systems in 2004 helped MSA expand its number one
market position in hard hats. Sales of industrial helmets, including
the best-selling V-Gard helmet, increased approximately eight per-
cent, propelled by strong demand in North America. Additionally,
MSA’s hard hat team reached a major milestone in September
when it completed a V-Gard helmet order for the U.S.
Department of Energy.The order marked the 20,000th custom
logo MSA has produced under the company’s exclusive Logo
Express® program. Launched in 1985, the Logo Express service
provides customers with lightning fast turnaround on custom
logoed helmets, giving users yet one more reason to choose MSA.
The enduring success of the V-Gard helmet, combined
with MSA’s ability to provide multiple customization options
and fast turnaround, demonstrates the strength of MSA, and
our strength in continuous product improvement.
But MSA’s expertise in construction safety reaches far
beyond head protection, to fall protection systems, respirators,
communications systems, eye protection, gas detection
instruments and hearing protection.
Fall protection systems are a priority because falls are
the leading cause of construction-related deaths, according
to the U.S. Occupational Safety and Health Administration.
In this important segment, MSA introduced in 2004 the next
TechnaCurv® Full Body Harness
generation harness – the TechnaCurv Full Body
Harness.The TechnaCurv Harness is another
example of MSA innovation; its design offers a
higher level of comfort, easy adjustment and a
more secure fit. Complementing this innovation
was the launch of MSA’s Quick-Ship program.
As an example of MSA’s customer focus, the
program supports the seasonal buying patterns
of the construction market, ensuring product
delivery of selected fall protection products
within 24 hours.
With an eye on opportunities to grow
MSA’s presence in the construction market,
MSA expanded its product lines in North
America and worldwide by acquiring Sordin AB,
a leading manufacturer of passive and electronic
hearing protection equipment. Sordin, based in
Sweden, enhanced MSA’s capabilities in Europe,
and added hearing protection products that integrate with our
V-Gard helmets and face shields. In short, Sordin is a sound fit
with MSA’s strength in integrating electronics into sophisticated
safety products.
MSA Europe and MSA International offer strategically
located platforms to serve the global construction market,
which still offers untapped potential for the entire company.
In China, where MSA reorganized last year to enhance
manufacturing, distribution and sales capabilities, the company
is manufacturing V-Gard helmets at reduced costs and
applying process improvements at its factories to enhance
competitiveness in local markets.
In 2004, two major MSA fall protection innovations included the
TechnaCurv Full Body Harness, top of page, and the Stryder TM
Anchorage Connector, above, which provides enhanced worker mobility
for iron workers and building construction workers.
9
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 10
OIL, GAS & CHEMIC AL
MSA Expertise Runs Deep in Oil, Gas & Chemical Markets
10
The Solaris® Multigas Detector, worn on a pocket by this worker
at left, weighs less than eight ounces and is one of the smallest
and lightest four-gas monitors available today. Ideal for refinery
applications, it provides simultaneous detection of carbon
monoxide, oxygen, H2S and combustible gas.
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 11
MSA’s origins as The Safety Company are rooted in an
historic role as a provider of safety equipment for
industries involved in the extraction of raw materials
from the earth.Today, the company is applying its legacy of
expertise in this area to focus on achieving growth in the
global oil, gas and chemical (OGC) market, while continuing
to serve the mining industry.
Around the world, MSA is providing safety equipment
that protects workers in this key market, with personal protec-
tive equipment and advanced electronic systems that sense
and detect potentially deadly hazards. While pursuing interna-
tional opportunities in oil producing regions such as the Middle
East and South America, MSA, in 2004, also continued its
historic role as a provider of mine safety equipment, mainly in
such areas as Latin America, South Africa, Indonesia and
Australia, where extraction remains a major industry.
The opportunities for MSA in the OGC market are truly
global because there are inherent safety risks in exploration,
drilling and production, coupled with growing awareness out-
side of North America of the need to improve worker safety.
In 2004, sales of safety products to this market outside North
America and Europe generated 17 percent of total revenue for
MSA International, surpassed only by sales to mining customers.
In China, for instance, the demand for petrochemicals
reflects the nation’s rapid industrial expansion and growing econ-
omy, a trend that is expected to fuel greater demand for safety
equipment. Similar trends are also being seen in the Middle East,
Southeast Asia and South America, where MSA reported positive
sales trends in the oil, gas and chemical sectors, as well as solid
demand for mine safety
products in Australia
and South Africa. After
reorganizing in 2004,
the affiliates of MSA
International are better
positioned to compete
for increased market
share and untapped
opportunities in the
OGC market and
other segments.
For the oil, gas and
chemical market and
other industries, MSA
designs and manufac-
tures globally approved
flame- and gas-detection
permanent instruments,
and a complete series
of reliable, durable and
easy-to-use single- and
multi-gas portable
instruments.
The SafEye TM Open Path System is a
self-contained, optical, gas detection
system made possible by MSA’s
strategic alliance with SPECTRONIX.
The SafEye Detector can reliably
detect combustible gases and flames
over an open path up to 500 feet
long, ideal for the growing offshore
oil platform market.
The SUPREMA® Fire & Gas Control System enhanced MSA
global competitiveness in 2004. It is the first permanently
installed monitoring system to meet all recognized
standards for detecting fire and gas hazards.
In 2004, MSA introduced innovative instrument products
for the OGC market and other industries.These included:
• The Sirius® Multigas Detector, a portable instrument using photo-
ionization technology that can monitor hundreds of potentially
dangerous vapors and chemicals.
• The Solaris® Multigas Detector, an economical, small and light-
weight instrument that provides simultaneous detection of three
common gases and combustible gas.The Solaris Detector earned
approvals for use in Europe and Canada, to coincide with the
device’s existing U.S. approvals.
• The Ultima® X Series Gas Monitors, MSA’s market-leading
permanent instrument line.These globally approved gas monitors
were enhanced with the release of X3 TM Technology – which
brings multi-sensing, Modbus digital communication, and signal
boost capability to the Ultima X Series.
In Europe, MSA’s modular and flexible SUPREMA Fire &
Gas Control System exemplified the company’s global expertise
in this market. Designed primarily for the oil and gas industry,
the SUPREMA unit became the first control system certified
and tested to meet all relevant global performance standards
for the detection of fire and gas hazards.The unit’s certification
to Safety Integrity Level 3 provides MSA with a distinct com-
petitive edge.The SUPREMA System is pre-programmed for
fire and gas applications, which significantly reduces the effort
and costs typically associated with setup and changes during
operation. With its versatility, the SUPREMA System has appli-
cations in other industries as well. In 2004, MSA Europe
received its largest permanent instrument order to date for
the system from the Vienna, Austria subway system.
Last year, MSA offerings to the OGC market were further
bolstered by the company’s strategic alliance with SPECTRONIX
Ltd. Announced at the end of 2003, the alliance helped foster
the development of a next-generation SafEye Open Path
infrared system that detects, over long distances, the presence
of flame or combustible gas hazards. As a result, MSA set new
standards in fire and gas detection through a combination of
certified performance, flexibility and reduced cost of ownership.
MSA’s strategy for the OGC market is to offer, through
our growing international sales and distribution network,
complete one-stop solutions for our customers. Our numerous
products for OGC applications include fall protection equipment,
head and respiratory protection, smoke detectors, heat sensors,
manual alarm call points and more.
11
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 12
COMMERCIAL GOVERNMENT
MSA Meets the Growing Needs of the Commercial
Government Market, Fueled by Homeland Security Demand
In 2004, MSA core competencies in respiratory protection
and instrumentation helped protect law enforcement
officers around the world. Above, members of Allegheny
County’s (Pa.) Police SWAT Team wear MSA’s Millennium
Gas Mask.
Used at many high-profile public events in 2004, the
SAFESITE TM System, left, was deployed at the U.S. Olympic
training facility in Athens during the 2004 Summer Olympics.
12
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 13
MSA understands what it takes to protect police officers
and other customers in the commercial government
market from a multitude of potential dangers, includ-
ing chemical, biological, radiological and nuclear (CBRN) agents.
It takes a commitment to developing new technology and
manufacturing equipment that can save lives when terrorists
and violent criminals strike.
In 2004, MSA sales to this key market surged to continue
a growth trend that began after the terrorist attacks on
Sept. 11, 2001 sparked federal, state and local govern-
ment spending on homeland security initiatives.
Drawing on the company’s legacy of leadership in the
fire service and military markets, MSA has expanded
its product line for this global market to protect thou-
sands of men and women who protect cities and
communities in America and abroad.
As an example, MSA leveraged its core
competencies in respiratory protection to
develop the Millennium® CBRN Gas Mask for
police, first responders and other users. In 2004,
the Millennium mask became the first full-facepiece
air-purifying respirator certified by the National
Institute for Occupational Safety and Health
(NIOSH) for CBRN protection. Applying technology and
lessons learned from MSA’s military gas mask design, the
Millennium Gas Mask provides wearers with effective protection
from the types of deadly gases and chemical warfare agents
terrorists might use.
Fueled by the strong demand for gas masks from the
military and from commercial government customers, MSA’s
facility in Evans City, Pa. increased production of bonded style
masks in 2004 by 36 percent compared to the prior year.
This demand, and MSA’s ability to meet it, enhanced the com-
pany’s position as the number one manufacturer of gas masks.
Following the launch of the Millennium Gas Mask, MSA
introduced a gas mask specially designed for firefighters – the
Ultra Elite model – which also achieved NIOSH certification
for CBRN protection. By the end of 2004, MSA held two of
the only four certifications for such masks.
In 2004, MSA introduced other commercial government
products that adapted and integrated proven technology.
One highlight was MSA’s introduction of the SAFESITE™
Wireless Gas Detection System, expressly designed to monitor
air at large-scale public events.The SAFESITE System uses
multiple chemical sensing technologies and wireless communi-
cations to detect and communicate the presence of chemical
warfare agents, volatile organic compounds and many toxic
chemicals. A major advantage of the system is that it enables
users to get reliable readings and alerts while operating the
system from a remote site, out of harm’s way.To showcase
this product in 2004, law enforcement officials authorized
its use at the 2004 Olympics, the Kentucky Derby, the
Democratic National Convention and other major events.
Millennium® Gas Mask
Complementing the SAFESITE System, MSA introduced
a series of hand-held monitors that allow law enforcement
agencies to implement a systems approach for the detection of
chemical warfare agents and other airborne threats. The
HAZMATCAD™ and HAZMATCAD™ Plus detectors are
easy-to-use portable hand-held instruments that utilize surface
acoustic wave technology to detect and classify trace amounts
of chemical warfare agents.The HAZMATCAD Plus unit also
detects certain toxic industrial chemicals. In addition, the Sirius
Multigas Detector allows first responders to monitor for
select toxic chemicals, combustible gases and
volatile organic compounds using advanced
photoionization technology.
To be sure, U.S. spending on homeland
security helped propel MSA’s sales and earnings
to record levels in 2004, but the company also
reported major orders in the international
commercial government market.
In Europe, the German Border Police ordered
6,500 MSA Gallet MO 5006 police helmets, with an
option for another 6,000 over the next two years.
This new helmet offers improved comfort in a
lighter weight design, as well as a tilting chin and
mouth protector, simple handling and easy-to-remove padding
for cleaning. Also in Germany, the Federal state of Baden-
Wuerttemberg ordered 4,000 3S H-A full-face masks, with an
option for another 4,000.The 3S mask is a derivative of the stan-
dard helmet-mask combination, with an attachable head harness.
As demonstrated by these successes, MSA is indeed well
positioned as The Safety Company when it comes to protecting
law enforcement and other first responders around the world.
The HAZMATCADTM Detector provides law enforcement officials with a
new tool for fighting the war on terror. Utilizing surface acoustic wave
technology, it can quickly detect and classify trace amounts of chemical
warfare agents.
13
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 14
CONSUMER PRODUCTS
Keeping Safe and Sound at Home
As the fastest growing brand of consumer safety products,
MSA Safety Works® contributed to MSA’s overall growth
in 2004, while helping protect do-it-yourselfers. Shown at
right are MSA’s new Sport Series protective eyeglasses,
which combine the best of fashion and safety.
14
40313 041218 MSA Annual Finalv2 4/5/05 2:06 PM Page 15
In the growing market for consumer safety products, MSA is
applying its 90 years of safety leadership – and focus on
innovation and new product development – to offer home
safety solutions through leading home center retailers. In 2004,
the MSA Safety Works product line continued to be the fastest
growing brand of consumer safety products, with sharply higher
sales and 21 new products introduced during the year.
Through MSA Safety Works, the company is meeting a
critical need in the consumer safety market. Millions of people
are injured at home each year, often while working on projects
without protective equipment, and yet MSA researchers found
that as few as 1 in 10 shoppers consider buying safety products
when they purchase equipment for home improvement projects.
Through con-
sumer education and
products that offer
protection, comfort,
and ease-of-use,
MSA’s business strat-
egy is to increase the
use of protective gear
at home to reduce
injuries and fatalities.
It’s a strategy that is
working for MSA, and
for the retail chains
that carry our rapidly
expanding product
line. By the end of 2004, MSA Safety Works had achieved a
compounded average annual sales growth rate of more than
100 percent since its inception in 1998.
The MSA Safety Squad in action.
The Home Depot was the first major home improvement
retailer to carry MSA consumer products. In August 2004,
MSA added another major retailing brand by reaching an
agreement with True Value, a leader in the hardware industry
since 1948.True Value will offer the MSA Safety Works product
line through its network of 6,200 dealer locations in North
America.Through retailers like The Home Depot and True
Value, MSA Safety Works offers quality products for first aid,
eye protection, head protection, hearing protection, body
protection and respiratory protection.
In 2004, the Safety Squad traveled cross country in a customized
Dodge Durango to provide do-it-yourselfers with quick, on-site
lessons on home and personal safety.
Featuring many interactive displays, the Home-Safety Learning
Center helped raise safety awareness among kids and their parents.
When consumers need safety goggles, hard hats, ear plugs
or respirators, MSA Safety Works products integrate fashion
and ergonomic design while delivering superior performance
and functionality. In 2004, for instance, MSA rolled out its Sport
Series Safety Glasses, which meet the latest standards for high
impact protective eyewear while offering improved comfort
and fashion not found in conventional safety glasses.
While product distribution and innovation were two key
components of MSA’s consumer market success over the past
year, safety education continued to be a focus of the brand.
In 2004, MSA formed its “Safety Squad” – a team of safety
specialists that traveled across the United States during the
summer to distribute safety products, at no charge, to unpro-
tected people working in neighborhoods and at construction
sites.Traveling in a customized Dodge Durango sporting the
MSA Safety Works logo, the Safety Squad logged more than
10,000 miles and visited more than 100 communities to
spread MSA’s safety message to consumers.
Separately, another innovative education program scored a
“home” run for safety.The MSA Safety Works’ Home-Safety
Learning Center, an interactive four-room inflatable “house”
that teaches visitors about protective products for the eyes,
ears, head and lungs, opened its doors to thousands of
children and adults at retail stores, children’s festivals, and home
and garden shows.This colorful 37-foot by 25-foot exhibit
provided a hands-on experience in home safety. Other promo-
tions for MSA Safety Works included a new advertising
campaign that was credited with boosting brand awareness
and sales.
In 2004, MSA focused on the North American market
for consumer safety products, guided by MSA’s goal to be
the leader in establishing a new standard of excellence in
the category.
15
40313 041218 MSA Annual Finalv2 4/5/05 2:07 PM Page 16
MSA TAKES CENTER STAGE AT THE
NEW YORK STOCK EXCHANGE
When MSA Chairman and CEO John T. Ryan III rang
the Opening Bell at the New York Stock Exchange
on Monday, July 12, 2004, he said he wanted to ring
it loud and long so it could be heard in the many dozens of
countries where MSA has operations. Judging from the sound of
the applause from those gathered on the NYSE’s trading floor,
this was quite successful.The bell ringing marked MSA’s debut
on the NYSE, a mere 90 years after the safety company was
founded by Mr. Ryan’s grandfather – John T. Ryan – and his
partner, George H. Deike.
For MSA, the move to the NYSE is a major milestone that
is enhancing the visibility of the company and its common stock,
and its stature as the only broad-line safety company publicly-
traded in U.S. markets.
“The decision to move to the
NYSE provides MSA with an effective
opportunity to attract new investors,”
said Mr. Ryan who, along with other
officers of the company, wore to the
ceremony V-Gard helmets sporting
the “MSA/NYSE Listed” logo. “MSA is a
fundamentally strong company with a
great story to tell, and we believe the
NYSE offers an ideal platform to help
us achieve that goal.”
In the first day of trading on the
NYSE, nearly 200,000 MSA shares were
traded. In 2004, the volume of MSA
The MSA Safety Works
Volkswagen Safety Bug
symbolized MSA’s
arrival at the New York
Stock Exchange.
shares traded more than tripled. By year’s end, MSA had a mar-
ket capitalization of nearly $1.9 billion and 37 million common
shares outstanding. Prior to the move to the NYSE, only one
analyst covered the company; by the end of 2004, that number
had increased to five.
Although MSA moved from the American Stock Exchange
to the NYSE, the stock continues to trade under the same
symbol – MSA.
As Mr. Ryan opened trading, the MSA
Safety Bug was parked outside the NYSE to
promote the company’s safety mission, while
traders on the floor of the exchange received
MSA safety products.
The whirlwind day included meetings with
NYSE officials and numerous media interviews
for Mr. Ryan, who fielded live questions from
CNBC, Bloomberg, CNN, and other business
media outlets.
NYSE Certification of Listing.
16
Above Top: Ringing the NYSE Opening Bell on July
12, 2004 symbolized a significant milestone for
MSA. Shown above with Catherine Kinney, NYSE
President and Co-Chief Operating Officer, are
members of MSA’s executive team including, from
left to right, Douglas McClaine, William Lambert,
John T. Ryan III, Dennis Zeitler, Rob Cañizares, and
director L. Edward Shaw.
On the trading floor, John T. Ryan III above at left,
confers with representatives of Bear Wagner,
MSA’s newly selected specialist firm.
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, 2004
Commission File No. 1-15579
MINE SAFETY APPLIANCES COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of
incorporation or organization)
121 Gamma Drive
RIDC Industrial Park
O’Hara Township
Pittsburgh, Pennsylvania
(Address of principal executive offices)
25-0668780
(IRS Employer
Identification No.)
15238
(Zip Code)
Registrant’s telephone number, including area code: 412-967-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, no par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock Purchase Rights
(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 ⌧ No (cid:31)
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. (cid:31)
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes ⌧ No (cid:31)
As of February 18, 2005, there were outstanding 36,360,358 shares of common stock, no par value, not including
3,062,767 shares held by the Mine Safety Appliances Company Stock Compensation Trust. Total market value of outstanding
shares as of February 18, 2005 was approximately $1,712 million. The aggregate market value of voting stock held by non-
affiliates as of February 18, 2005 was approximately $1,486 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the May 10, 2005 Annual Meeting of Shareholders are incorporated by reference into
Part III.
Table of Contents
Item No.
Part I
1.
2.
3.
4.
Executive Officers of the Registrant
Business
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Part II
Selected Financial Data
5. Market for the Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
6.
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
8.
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
9B. Other Information
Financial Statements and Supplementary Data
Part III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
13. Certain Relationships and Related Transactions
14. Principal Accountant Fees and Services
Part IV
15. Exhibits and Financial Statement Schedules
Signatures
Forward-Looking Statements
Page
3
7
8
8
9
10
11
12
22
24
44
44
44
44
44
44
44
44
46
48
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our
future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our
industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels
of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other
factors include, among other things: the availability of government funding in the fire service, homeland security and military
markets; our ability to compete successfully against current and future competitors; the timely and successful introduction of
new products; risks inherent in litigation, including product liability claims; currency exchange rate fluctuations and various
political and economic risks associated with international operations; fluctuations in the cost and availability of purchased
materials and components; our ability to successfully identify and integrate future acquisitions; and the impact of unforeseen
economic and political changes, including the threat of terrorism and its potential consequences. In some cases, you can identify
forward-looking statements by words such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable words. These statements are
only predictions and are not guarantees of future performance. Therefore, actual events or results may differ materially from
those expressed or forecast in these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. We are under no duty to update publicly any of the forward-
looking statements after the date of this report whether as a result of new information, future events or otherwise.
2
PART I
Item 1. Business
Overview—Mine Safety Appliances Company was incorporated in Pennsylvania in 1914. We are a global leader in the
development, manufacture and supply of sophisticated products that protect people’s health and safety. Sophisticated safety
products typically integrate any combination of electronics, mechanical systems and advanced materials to protect users against
hazardous or life threatening situations. Our comprehensive line of safety products is used by workers around the world in the
fire service, homeland security, construction and other industries, as well as the military. This broad product offering includes
self-contained breathing apparatus, or SCBAs, gas masks, gas detection instruments, head protection, respirators and thermal
imaging devices. We also provide a broad offering of consumer and contractor safety products through retail channels. We
believe we hold the number one global market position with respect to 2004 net sales of SCBAs, gas masks, gas detection
instruments, hard hats and fire helmets.
We dedicate significant resources to research and development, which allows us to produce innovative, sophisticated safety
products that are often first to market and exceed industry standards. Our global product development teams include cross-
geographic and cross-functional members from various areas throughout the company, including research and development,
marketing, sales, operations and quality management. Our engineers and technical associates work closely with the safety
industry’s leading standards-setting groups and trade associations, such as the National Institute for Occupational Safety and
Health, or NIOSH, and the National Fire Protection Association, or NFPA, to develop industry product requirements and
standards and anticipate their impact on our product lines. Evidencing our commitment to innovation, in 2004, we generated
approximately one-third of our net sales from new products introduced over the prior three years.
Segments—We tailor our product offerings and distribution strategy to satisfy distinct customer preferences that vary
across geographic regions. We believe that we best serve these customer preferences by organizing our business into the
following three geographic segments: North America, Europe, and International. Segment information is presented in the note
entitled “Segment Information” in Item 8 – Financial Statements and Supplementary Data.
Because our financial statements are stated in U.S. dollars, currency fluctuations may affect our results of operations and
financial position and may affect the comparability of our results between financial periods.
Principal Products—We manufacture and sell a comprehensive line of sophisticated safety products to protect workers
around the world in the fire service, homeland security, construction and other industries, as well as the military. We also
provide a broad offering of consumer and contractor safety products through retail channels. Our products protect people
against a wide variety of hazardous or life-threatening situations. The following is a brief description of each of our principal
product categories:
Respiratory protection. Respiratory protection products are used to protect against the harmful effects of contamination
caused by dust, gases, fumes, volatile chemicals, sprays, micro-organisms, fibers and other contaminants. We offer a broad and
comprehensive line of respiratory protection products, including:
• Self Contained Breathing Apparatus, or SCBAs. SCBAs are used by first responders, petrochemical plant workers and anyone
entering an environment deemed immediately dangerous to life and health. SCBAs are also used by first responders to
protect against exposure to chemical, biological, radiological and nuclear, or CBRN, agents.
• Filtering respirators. Filtering respirators cover a broad class of respirators for many hazardous applications, including:
(cid:131) full face gas masks for the military and first responders exposed to known and unknown concentrations of
dangerous gases, chemicals, vapors and particulates;
(cid:131) half mask respirators for industrial workers, painters and construction workers exposed to known concentrations of
gases, vapors and particulates;
(cid:131) powered-air purifying respirators for industrial, haz-mat and remediation workers who have longer term exposures
to hazards in their work environment; and
(cid:131) dust and pollen masks for maintenance workers, contractors and at-home consumers exposed to nuisance dusts,
allergens and other particulates.
• Gas masks. We have supplied gas masks to the U.S. military for several decades. The latest versions of these masks are
currently in use by the U.S. military in Iraq, Afghanistan and other parts of the world. Our commercial version of this gas
mask, the Millennium, was developed based on the MCU-2/P, the gas mask currently used by the U.S. Air Force and
U.S Navy.
• Escape hoods. Our Response Escape Hood is used by law enforcement personnel, government workers, chemical and
pharmaceutical workers, and anyone needing to escape from unknown concentrations of a chemical, biological or
radiological release of toxic gases and vapors. The hood gives users head and upper neck coverage and respiratory
protection to help them escape from threatening situations quickly and easily.
3
Hand-held and permanent instruments. Our hand-held and permanent instruments include gas detection instruments and
thermal imaging cameras. Our gas detection instruments are used to detect the presence or absence of various gases in the air.
These instruments can be either hand-held or permanently installed. Typical applications of these instruments include the
detection of the lack of oxygen in confined spaces or the presence of combustible or toxic gases. Our hand-held thermal imaging
cameras are used by firefighters to see downed victims through dense smoke, or to detect the source of the fire.
• Single- and multi-gas hand-held detectors. Our line of single- and multi-gas detectors provide a portable solution for
detecting the presence of oxygen, hydrogen sulfide, carbon monoxide and combustible gases, either singularly or all four
gases at once. Our line of hand held portable instruments are used by chemical workers, oil and gas workers, utility
workers entering confined spaces, or anywhere a user needs protection to continuously monitor the quality of the
atmosphere they are working in and around.
• Thermal imaging cameras. Our infrared thermal imaging cameras, or TICs, are used in the global fire service market. TICs
detect sources of heat in order to locate firefighters and other people trapped inside burning or smoke-filled structures.
TICs can also be used to identify “hot spots.” Recently, we introduced the Evolution® 5000 and 5200 Thermal Imaging
Cameras, which combine the functionality and durability required by the fire service with features and performance
capability not found in other small format TICs.
• Multi-point permanently installed gas detection systems. Our comprehensive line of gas monitoring systems are used to
continuously monitor for combustible and toxic gases and oxygen deficiency in virtually any gas detection application
where continuous monitoring is required. Our systems are used for gas detection in the pulp and paper, refrigerant
monitoring, petrochemical and general industrial applications. Our newest line, the SafeSite Hazardous Gas Detection
System, designed and developed for homeland security applications, combines the technologies and features from our
line of permanent and portable gas detection offerings. The SafeSite System detects and communicates the presence of
toxic industrial chemicals and chemical warfare agents. With up to 16 monitoring stations, wirelessly connected to a base
station, the SafeSite System allows law enforcement officials to rapidly deploy and set up perimeter gas sensing sentinels
that continuously monitor the air for toxic gases at large public events, in subways or at federal facilities, and
continuously report their status to incident command.
• Flame detectors and open-path infrared gas detectors. Our line of flame and combustible gas detectors are used for plant-
wide monitoring of toxic gas concentrations and for detecting the presence of flames. These systems utilize infrared
optics to detect potentially hazardous conditions across distances as far as 120 meters, making them suitable for use in
such places as offshore oil rigs, storage vessels, refineries, pipelines, and ventilation ducts. First used in the oil and gas
industry, our systems currently have broad applications in petrochemical facilities, the transportation industry and in
pharmaceutical production.
Eye, face, hearing and head protection. Eye, face, hearing and head protection is used in work environments where hazards
present a danger to the eye, face, hearing and head, such as dust, flying particles, metal fragments, chemicals, extreme glare,
optical radiation and items dropped from above. Our basic categories of these products are:
•
Industrial hard hats. Our broad line of hard hats include full-brim hats and traditional hard hats, available in custom colors
and with custom logos. These hard hats are used by plant, steel and construction workers, miners and welders.
• Fire helmets. Our fire service products include leather, traditional, modern and specialty helmets designed to satisfy the
preferences of firefighters across geographic regions. Our CairnsHELMET is the number one helmet in the North
American fire service market based on 2003 sales. Similarly, our Gallet firefighting helmet has a number one market
position in Europe based on 2003 sales.
• Military helmets. Our Advanced Combat Helmet is used by the military for ballistic head protection. It was designed for
the Special Forces of the U.S. military and recently has been designated as the “basis of issue” by the U.S. Army and
earned distinction as being named one of the greatest inventions of 2002 by the Department of Army’s Material
Command.
• Eye, face and hearing protection. We manufacture and sell a broad line of hearing protection products, non-prescription
protective eyewear and face shields, used in a variety of industries.
Body protection.
• Fall protection. Our broad line of fall protection equipment includes the following: confined space equipment;
harnesses/fall arrest equipment; lanyards; and lifelines.
Customers—Our customers generally fall into three categories: industrial and military end-users, distributors and retail
consumers. In North America, we make nearly all of our non-military sales through our distributors. In our Europe and
International segments, we make our sales through both indirect and direct sales channels. Our U.S. military customers, which
are comprised of multiple U.S. government entities, including the Department of Defense, represented the largest group of
customers based on our 2004 net sales and accounted for approximately 16% of sales. The year-end backlog of orders under
contracts with U.S. government agencies was $80.8 million in 2004, $83.7 million in 2003, and $38.7 million in 2002.
4
Industrial and Military End-Users—Examples of the primary industrial and military end-users of our core products are
listed below:
Products
Respiratory Protection
Gas Detection
Head, Eye and Face, and
Hearing Protection
Thermal Imaging Cameras
Principal End-Users
First Responders; General Industry Workers; Military Personnel
Oil, Gas, Petrochemical and Chemical Workers; First Responders; Hazmat and
Confined Space Workers
Construction Workers and Contractors; First Responders; General
Industry Workers; Military Personnel
First Responders
Sales and Distribution—Our sales and distribution team consists of distinct marketing, field sales and customer service
organizations for our three geographic segments: North America, Europe, and International. We believe our sales and
distribution team, totaling over 400 dedicated associates, is the largest in our industry. In most geographic areas, our field sales
organizations work jointly with select distributors to call on end-users, educating them about hazards, exposure limits, safety
requirements and product applications, as well as specific performance requirements of our products. In our International
segment and Eastern Europe where distributors are not well established, our sales associates work with and sell directly to end-
users. Our development of relationships with end-users is critical to increasing the overall demand for our products.
The in-depth customer training and education provided by our sales associates to our customers are critical to ensure
proper use of many of our products, such as SCBAs and gas detection instruments. As a result of our sales associates working
closely with end-users, they gain valuable insight into customers’ preferences and needs. To better serve our customers and to
ensure that our sales associates are among the most knowledgeable and professional in the industry, we place significant
emphasis on training our sales associates with respect to product application, industry standards and regulations, sales skills and
sales force automation.
We believe our sales and distribution strategy allows us to deliver a customer value proposition that differentiates our
products and services from those of our competitors, resulting in increased customer loyalty and demand.
In areas where we use indirect selling, we promote, distribute, and service our products to general industry through select
authorized national, regional, and local distributors. Some of our key distributors include: Airgas; W.W. Grainger Inc.; Fisher
Safety, a division of Fisher Scientific International Inc.; Orr Safety Inc.; and Hagemeyer. For example, in North America, we
distribute fire service products primarily through specially trained local and regional distributors who provide advanced training
and service capabilities to volunteer and paid municipal fire departments. In our Europe and International segments, we primarily
sell to and service the fire service market directly. Because of our broad and diverse product line and our desire to reach as
many markets and market segments as possible, we have over 4,000 authorized distributors worldwide.
We market consumer products under the MSA Safety Works brand through a dedicated sales and marketing force. We
serve the retail consumer through various channels of distribution, including hardware and equipment rental outlets and The
Home Depot and TrueValue retail chains.
Competition—We believe the worldwide personal protection equipment market, including the sophisticated safety
products market in which we compete, generates annual sales in excess of $12 billion. The industry supplying this market is
broad and highly fragmented with few participants able to offer a comprehensive line of safety products. Generally, global
demand for safety products has been stable because purchases of these products are non-discretionary since they protect
workers in hazardous and life-threatening work environments and because their use is often mandated by government and
industry regulations. Moreover, the safety products industry generates stable revenues because of the need to consistently
replace many safety products that have limited life spans due to normal course wear-and-tear or because they are one-time use
products
design.
by
The safety products market is highly competitive, with participants ranging in size from small companies focusing on a single
type of personal protection equipment to a few large multinational corporations which manufacture and supply many types of
sophisticated safety products. Our main competitors vary by region and product. We believe that participants in this industry
compete primarily on the basis of product characteristics (such as functional performance, agency approvals, design and style),
price, brand name recognition and service.
We believe we compete favorably within each of our operating segments as a result of our high quality and cost-efficient
product offering and strong brand trust and recognition.
Research and Development—To maintain our position at the forefront of protective equipment technology, we operate
three sophisticated research and development facilities. We believe our dedication and commitment to innovation and research
and development allow us to produce innovative sophisticated safety products that are often first to market and exceed industry
standards. In 2004, 2003 and 2002, on a global basis, we spent approximately $22.6 million, $20.9 million and $19.5 million,
5
respectively, on research and development. Our engineering groups operate primarily in the United States and Germany, and to
a lesser extent in Australia, France, Brazil, China, Japan, Great Britain and Italy. Our global product development teams include
cross-geographic and cross-functional members from various areas throughout the company, including research and
development, marketing, sales, operations and quality management. These teams are responsible for setting product line strategy
based on their understanding of the markets and the technologies, opportunities and challenges they foresee in each product
area. These teams present their strategies, new product development portfolios and resource allocation recommendations to
our global research and development alignment council, made up of senior executives from our global operations. The council
refines the recommendations and presents them to our senior executive team, which consists of the chief executive officer, chief
financial officer, and presidents of our North America, Europe and International segments. The senior executive team then
establishes resource allocation, corporate alignment and strategic direction.
We believe our team-based, cross-geographic and cross-functional approach to new product development is unique in our
industry and a source of our competitive advantage. Our approach to the new product development process allows us to tailor
our product offerings and product line strategies to satisfy distinct customer preferences and industry regulations that vary
across our three geographic regions.
We believe another important aspect of our approach to new product development is that our engineers and technical
associates work closely with the safety industry’s leading standards-setting groups and trade associations, such as the National
Institute for Occupational Safety and Health, or NIOSH, and the National Fire Protection Association, or NFPA, to develop
industry product requirements and standards and anticipate their impact on our product lines. For example, nearly every
consensus standard-setting body around the world that impacts our product lines has one of our key managers as a voting
member. Key members of our management team understand the impact that these standard-setting organizations have on our
new product development pipeline and devote time and attention to anticipating a new standard’s impact on our net sales and
operating results. Because of our technological sophistication, commitment to and membership on global standard-setting bodies,
resource dedication to research and development and unique approach to the new product development process, we believe we
are well-positioned to anticipate and adapt to the needs of changing product standards and gain the approvals and certifications
necessary to meet new government and multinational product regulations.
Patents and Intellectual Property— We own and have obtained licenses to significant intellectual property, including a
number of domestic and foreign patents, patent applications and trademarks related to our products, processes and business.
Although our intellectual property plays an important role in maintaining our competitive position in a number of markets that
we serve, no single patent, or patent application, trademark or license is, in our opinion, of such value to us that our business
would be materially affected by the expiration or termination thereof, other than the “MSA” trademark. Our patents expire at
various times in the future not exceeding 20 years. Our general policy is to apply for patents on an ongoing basis in the United
States and other countries, as appropriate, to perfect our patent development. In addition to our patents, we have also
developed a substantial body of manufacturing know-how that we believe provides a significant competitive advantage over
our competitors.
Raw Materials and Suppliers—Nearly all components of our products are formulated, machined, tooled, or molded in-
house from raw materials. For example, we rely on integrated manufacturing capabilities for breathing apparatus, gas masks,
ballistic helmets, hardhats and circuit boards. The primary raw materials that we source from third parties include rubber,
chemical filter media, eye and face protective lenses, air cylinders, certain metals, electronic components and ballistic resistant
and non-ballistic fabrics. We purchase these materials both domestically and internationally, and we believe our supply sources
are both well established and reliable. We have close vendor relationship programs with the majority of our key raw material
suppliers. Although we generally do not have long-term supply contracts, we have not experienced any significant problems in
obtaining adequate raw materials.
Employees—As of December 31, 2004, we had approximately 4,600 employees, approximately 2,200 of whom were
employed by our Europe and International segments. None of our U.S. employees are subject to the provisions of a collective
bargaining agreement. Some of our employees outside the United States are members of unions. We have not experienced a
work stoppage in over 10 years and believe our relations with our employees are good.
Available Information—We post the following filings on the Investor Relations page on our Web site as soon as
reasonably practicable after they have been electronically filed with or furnished to the Securities and Exchange Commission: our
annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. All such filings on our
Investor Relations Web page are available to be viewed on this page free of charge. Information contained on our Web site is
not part of this annual report on Form 10-K or our other filings with the Securities and Exchange Commission.
6
Item 2. Properties
Our principal executive offices are located at 121 Gamma Drive, RIDC Industrial Park, O’Hara Township, Pittsburgh,
Pennsylvania 15238 in a 93,014 square-foot building owned by us. We own or lease our primary facilities located in six states in
the United States and in 16 countries. We believe that all of our facilities, including the manufacturing facilities, are in good repair
and in suitable condition for the purposes for which they are used.
The following table sets forth a list of our primary facilities:
Location
North America
Murrysville, PA
Cranberry Twp., PA
Evans City, PA
Jacksonville, NC
Pittsburgh, PA
Cranberry Twp., PA
Sparks, MD
Englewood, CO
Clifton, NJ
Englewood, CO
Newport, VT
Toronto, Canada
Mexico City, Mexico
Europe
Berlin, Germany
Chatillon sur Chalaronne, France
Glasgow, Scotland
Milan, Italy
Mohammedia, Morocco
Glasgow, Scotland
Varnamo, Sweden
International
Johannesburg, South Africa
Sydney, Australia
São Paulo, Brazil
Wuxi, China
Lima, Peru
Santiago, Chile
Tokyo, Japan
Function
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Office
Research and Development
Office, Research and Development,
and Manufacturing
Manufacturing
Manufacturing
Distribution
Manufacturing
Distribution
Distribution and Manufacturing
Office, Research and Development,
Manufacturing and Distribution
Office, Research and Development,
Manufacturing and Distribution
Office and Manufacturing
Office, Research and Development
and Distribution
Manufacturing
Distribution
Office, Research and Development,
Manufacturing and Distribution
Office, Manufacturing and
Distribution
Office, Research and Development,
Manufacturing and Distribution
Office, Research and Development,
Manufacturing and Distribution
Office, Research and Development,
Manufacturing and Distribution
Office and Distribution
Office, Manufacturing and
Distribution
Square Feet
Owned
or Leased
295,223
211,320
194,961
106,505
93,014
68,175
52,452
41,320
41,250
14,985
11,500
6,100
5,800
Owned
Owned
Leased
Owned
Owned
Owned
Leased
Leased
Owned
Leased
Leased
Leased
Leased
339,548
Leased
78,495
Leased
24,516
24,500
23,914
6,204
5,000
Leased
Owned
Owned
Leased
Leased
81,323
Leased
57,100
Owned
54,713
Owned
35,000
Owned
34,348
8,461
Owned
Owned
Office, Research and Development
1,184
Leased
and Distribution
7
Item 3. Legal Proceedings
We are subject to federal, state and local laws, regulations and ordinances relating to the protection of the environment,
including those governing discharges to air and water, handling and disposal practices for solid and hazardous wastes, and the
maintenance of a safe workplace. There are no current or expected legal proceedings or expenditures with respect to
environmental matters that would materially affect our operations.
Various lawsuits and claims arising in the normal course of business are pending against us. These lawsuits are primarily
product liability claims. We are presently named as a defendant in approximately 2,400 lawsuits primarily involving respiratory
protection products allegedly manufactured and sold by us. Collectively, these lawsuits represent a total of approximately 32,000
plaintiffs. Approximately 90% of these lawsuits involve plaintiffs alleging they suffer from silicosis, with the remainder alleging they
suffer from other or combined injuries, including asbestosis. These lawsuits typically allege that these conditions resulted in part
from respirators that were negligently designed or manufactured by us. Consistent with the experience of other companies
involved in silica and asbestos-related litigation, there has been an increase in the number of asserted claims that could potentially
involve us. We cannot determine our potential liability, if any, for such claims, in part because the defendants in these lawsuits
are often numerous, and the claims generally do not specify the amount of damages sought.
With some limited exceptions, we maintain insurance against product liability claims. We also maintain a reserve for
uninsured product liability based on expected settlement charges for pending claims and an estimate of unreported claims
derived from experience, sales volumes and other relevant information. We reevaluate our exposures on an ongoing basis and
make adjustments to reserves as appropriate. Based on information currently available, we believe that the disposition of matters
that are pending will not have a materially adverse effect on our financial condition.
In connection with our sale of the Callery Chemical facility in Evans City, Pennsylvania, we have retained responsibility for
certain environmental costs at this site, where relatively low levels of contamination are known to exist. Under the terms of the
asset purchase agreement with BASF, our maximum liability for these matters is capped at $50.0 million. Based on environmental
studies performed prior to the sale of the division, we do not believe that our potential exposure under the terms of this
agreement will materially affect our financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 2004, there were no matters submitted to a vote of security holders through the solicitation of
proxies or otherwise.
8
Executive Officers of the Registrant
The following sets forth the names and ages of our executive officers indicating all positions held during the past
five years:
Name
Age
Position
John T. Ryan III
James H. Baillie
Joseph A. Bigler
Kerry M. Bove
Rob Cañizares M.
Benedict V. DeMaria
Ronald N. Herring, Jr
William M. Lambert
Douglas K. McClaine
Dennis L. Zeitler
61
58
55
46
55
57
44
46
47
56
Chairman of the Board of Directors; Chief Executive Officer
Vice President; President, MSA Europe
Vice President
Vice President
Vice President; President, MSA International
Vice President
Vice President
Vice President; President, MSA North America
Secretary and General Counsel
Vice President; Chief Financial Officer and Treasurer
John T. Ryan III has served as chairman and chief executive officer since October 1, 1991.
James H. Baillie has served as vice president and president of MSA Europe since March 10, 1999. Prior to that time, he was
executive vice president of Sylvania Lighting International.
Joseph A. Bigler has served as vice president since January 9, 1998. He is primarily responsible for North American sales
and distribution.
Kerry M. Bove has served as vice president since August 16, 2000. He is primarily responsible for research, product development,
manufacturing and marketing of instrument products in North America. Beginning in November 1999, Mr. Bove served as
general manager of the instrument division. From November 1998 until November 1999, he was our marketing director.
Rob Cañizares M. has served as vice president and president of MSA International since January 20, 2003. Prior to working
with MSA, Mr. Cañizares served as senior vice president of global sales and service group of Trane Company, beginning on
February 1, 1997.
Benedict V. DeMaria has served as vice president since January 9, 1998. He is primarily responsible for human resources and
corporate communications.
Ronald N. Herring, Jr. has served as vice president since January 1, 2004. Mr. Herring is primarily responsible for research, product
development, manufacturing and marketing of safety products in North America. Prior to that time, he served as the general
manager of the safety products division, beginning on January 1, 2003, and as the director of marketing for the safety
products division.
William M. Lambert has served as vice president since January 1, 1998 and was also appointed president of MSA North America
on January 1, 2003. Prior to that time, he was general manager of the safety products division.
Douglas K. McClaine has served as secretary and general counsel since July 1, 2002. Prior to that, he served as associate general
counsel, beginning on May 16, 1994.
Dennis L. Zeitler has served as chief financial officer and treasurer since November 1, 2000. Prior to that time, he served as vice
president and treasurer, beginning on September 1, 1988.
9
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Our common stock is traded on the New York Stock Exchange under the symbol “MSA.” Stock price ranges and
dividends declared and paid were as follows:
Year ended December 31, 2003
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended December 31, 2004
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Price Range of Our
Common Stock
High
Low Dividends
$12.44
14.99
19.58
28.83
$10.17
11.76
14.21
17.71
$ .06
.06
.07
.07
$31.92
36.75
44.00
52.50
$21.37
25.10
31.50
35.00
$ .07
.10
.10
.10
On February 18, 2005, there were 361 registered holders of our shares of common stock.
Share price and dividend information has been adjusted to reflect the three-for-one split of our common stock in
January 2004.
The information appearing in Part III below regarding common stock issuable under our equity compensation plans is
incorporated herein by reference.
Issuer Purchases of Equity Securities
Total Number
of Shares
Purchased as
Part of
Publicly
Total
Number of Average
Announced
Shares
Purchased
Price Paid
per Share
Plans or
Programs
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
—
—
26,692 $ 44.02
—
—
—
26,692
—
214,882
188,190
188,190
Period
October 1 - October 31, 2004
November 1 – November 30, 2004
December 1 – December 31, 2004
On December 19, 1996, we announced that our Board of Directors had authorized management to purchase up to
4,500,000 split-adjusted shares of common stock from time to time in private transactions and on the open market. The share
purchase program has no expiration date.
On October 26, 2004, the Board of Directors authorized the purchase of up to 200,000 additional shares of common stock
from time to time in private transactions and on the open market. The share purchase program has no expiration date.
We do not have any other share repurchase programs.
10
Item 6. Selected Financial Data
The following selected financial data should be read in conjunction with our consolidated financial statements, including the
respective notes thereto, as well as the section entitled “Management’s discussion and analysis of financial condition and results
of operations,” included elsewhere in this annual report on Form 10-K.
(In thousands, except as noted)
Statement of Operations Data:
Net sales
Other income
Cost of products sold
Selling, general and administrative
Research and development
Interest expense
Currency exchange losses (gains)
Provision for income taxes
Net income from continuing operations
Net income from discontinued operations
Gain on sale of discontinued operations - after tax
Net income
2004
2003
2002
2001
2000
$ 852,509
5,004
512,089
204,799
22,648
3,845
264
42,821
71,047
–
–
71,047
$ 696,473
1,724
422,273
180,060
20,897
4,564
(3,356)
24,835
48,924
2,685
13,658
65,267
$ 564,426
2,271
344,847
149,730
19,459
4,769
(191)
16,870
31,213
3,864
–
35,077
$ 509,736
2,776
306,759
139,861
15,742
5,349
1,197
17,753
25,851
5,780
–
31,631
$ 468,307
2,444
289,302
135,210
15,224
4,040
(444)
8,531
18,888
4,351
–
23,239
Earnings per Share Data:
Basic per common share continuing operations (in dollars)
Diluted per common share continuing operations (in dollars)
Dividends paid per common share (in dollars)
Weighted average common shares outstanding—basic
$ 1.91
1.86
.37
37,111
$ 1.33
1.31
.26
36,730
$ .85
.85
.22
36,512
$ .72
.71
.18
35,729
$ .51
.51
.16
36,904
Balance Sheet Data:
Working capital
Working capital ratio
Net property
Total assets
Long-term debt
Common shareholders’ equity
Equity per common share (in dollars)
$ 270,593
3.1
123,716
734,110
54,463
376,679
10.09
$ 207,216
2.8
120,560
643,885
59,915
306,867
8.31
$ 138,182
2.4
130,407
579,765
64,350
288,009
7.86
$ 135,186
2.6
156,413
520,698
67,381
252,451
6.95
$ 114,175
2.3
159,586
489,683
71,806
225,382
6.35
Notes:
Cost of products sold, selling, general and administrative expenses, and
research and development expenses include noncash pension income.
Noncash pension income, pre-tax
$ 7,188
$ 8,845
$ 13,125
$ 14,962
$ 14,900
Working capital at December 31, 2003 and 2002 excludes assets held for sale.
11
Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with the historical financial statements and other financial
information included elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements that involve risks
and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates,
assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the
results contemplated by these forward-looking statements due to a number of factors, including those discussed in the section of this annual
report on Form 10-K entitled “Forward-Looking Statements.”
BUSINESS OVERVIEW
We are a global leader in the development, manufacture and supply of sophisticated products that protect people’s health
and safety. Sophisticated safety products typically integrate any combination of electronics, mechanical systems and advanced
materials to protect users against hazardous or life threatening situations. Our comprehensive line of safety products are used by
workers around the world in the fire service, homeland security, construction and other industries, as well as the military.
In recent years, we have concentrated on specific initiatives intended to help improve our competitive position and
profitability, including:
identification and development of promising new markets;
further strengthening relationships with major distributors;
•
• a focus on innovation and new product introductions;
•
• optimizing factory performance and driving operational excellence;
• positioning international business to capture significant growth opportunities; and
• pursuing strategic acquisitions.
We tailor our product offerings and distribution strategy to satisfy distinct customer preferences that vary across geographic
regions. We believe that we best serve these customer preferences by organizing our business into three geographic segments:
North America, Europe, and International. Each segment includes a number of operating companies. In 2004, approximately 66%,
20% and 14% of our net sales from continuing operations were made by our North America, Europe and International segments,
respectively.
North America. Our largest manufacturing and research and development facilities are located in the United States. We serve
our North American markets with sales and distribution functions in the U.S., Canada, and Mexico.
Europe. Our Europe segment includes well-established companies in most Western European countries, and more recently
established operations in a number of Eastern European locations. Our largest European companies, based in Germany and
France, develop, manufacture, and sell a wide variety of products. Operations in other European countries focus primarily on
sales and distribution in their respective home country markets. While some of these companies may perform limited
production, most of their sales are of products that are manufactured in our plants in Germany, France, and the U.S., or are
purchased from third party vendors.
International. Our International segment includes operating entities located in Abu Dhabi, Argentina, Australia, Brazil, Chile,
China, Hong Kong, India, Indonesia, Japan, Malaysia, Peru, Singapore, South Africa and Zimbabwe, some of which are in
developing regions of the world. Principal manufacturing operations are located in Australia, Brazil, South Africa, and China.
These companies develop and manufacture products that are sold primarily in each company’s home country and regional
markets. The other companies in the International segment focus primarily on sales and distribution in their respective home
country markets. While some of these companies may perform limited production, most of their sales are of products that are
manufactured in our plants in the U.S., Germany and France, or are purchased from third party vendors.
Because some of the countries that comprise our International segment are located in developing regions of the world,
several factors have the potential to adversely affect our international operations and our financial results, including:
• significant changes in economic, social, political, monetary or trade policies of the governments of countries that
comprise our International segment, as well as political or social unrest in those countries;
•
trade protection measures and price controls;
•
trade sanctions and embargos; and
• nationalization and expropriation.
These events are infrequent and unpredictable. However, it is highly unlikely that such events will occur simultaneously in
several or all of the countries that comprise our International segment. We believe that our exposure is not material since, with
12
the exception of Australia, which represents approximately 5% of our net sales, no individual International affiliate represents
more than 3% of our total assets, net sales or gross profits.
Because our financial statements are stated in U.S. dollars, currency fluctuations may affect our results of operations and
financial position and may affect the comparability of our results between financial periods. We manage our exchange rate risks
primarily by sourcing our products in the same currency as our customer pays us. In the few instances where product cost and
product payment are not in the same currency and such mismatch creates a material exchange rate risk, we may use foreign
currency forward contracts. On a global basis, we have a broad based balance sheet exposure to numerous currencies that
serves to minimize the impact of fluctuations in any one currency.
In 2004, we achieved record sales and net income from continuing operations for the fourth consecutive year. We believe
that this performance and our improving financial performance in recent years are the result of initiatives that have allowed us to
anticipate and respond quickly to market requirements, particularly in the fire service, homeland security, construction and
general industries, as well as the military. We believe that sales growth in the fire service market reflects our ability to quickly
bring to market products that comply with changing industry standards and to create new market demand with innovative
products. For example, we have successfully responded to increased homeland security and military market demand for products
such as the Millennium Chemical-Biological and the MCU-2/P gas masks and the Advanced Combat Helmet that has occurred
since the September 11th attacks and during the ongoing war on terrorism. In recent years, demand in the homeland security
and military markets has more than offset sluggishness in some North American industrial markets.
The level of demand for our products in the fire service, homeland security and military markets is strongly influenced by the
levels of government funding available to address the needs of first responders and to meet the requirements of military
operations. A reduction in available government funding in the future could adversely affect the demand for our products in
these markets.
Our results in Europe improved nicely in 2004, and have shown resiliency despite the poor economic climate in most of
Western Europe. Our acquisition of CGF Gallet in 2002, now MSA Gallet, added the leading line of European firefighter head
protection to our product line and has helped improve our overall performance in Europe. As discussed further under
“Acquisitions,” we recently improved our market position and expertise in hearing protection by acquiring Sordin AB, which is
headquartered in Varnamo, Sweden. In other international markets, 2004 results were generally higher in most markets,
particularly in Latin America and Australia. These improvements reflect focused efforts to effectively reach customers and,
particularly in Latin America, improvements in general economic conditions.
To sharpen our focus on our core safety products business, in November 2002, we announced our decision to explore the
potential sale of Callery Chemical, our only non-safety products business unit. As discussed further below under “Discontinued
Operations,” this division was sold in September 2003.
ACQUISITIONS
On June 30, 2004, we acquired Sordin AB of Varnamo, Sweden, a leading manufacturer of passive and electronic hearing
protection designed for the industrial, law enforcement and military markets. We believe the acquisition of Sordin enhances our
position as a provider of modern, leading-edge hearing protective devices. Many of Sordin’s products are compatible with our
other safety products, including our flagship V-Gard® Hard Hat. Sordin also developed the modular integrated communications
system currently being used with the Advanced Combat Helmet that we manufacture for the U.S. Army. The initial purchase
price was approximately $4.3 million. Additional consideration of up to $5.4 million could be paid based on Sordin’s earning
performance through June 30, 2009.
DISCONTINUED OPERATIONS
On September 12, 2003, we sold our Callery Chemical Division to BASF Corporation. In accordance with accounting
principles generally accepted in the United States of America, the operating results of the Callery Chemical Division for all
periods presented through the date of sale and the gain on the sale to BASF Corporation during the year ended December 31,
2003 have been reported as discontinued operations in the consolidated statements of income. The sale of the Callery Chemical
Division to BASF Corporation resulted in an after-tax gain of $13.7 million.
At December 31, 2003, approximately $2.3 million of trade receivables and other current assets related to the Callery
Chemical Division operation were reported as assets held for sale. These amounts were received during the first quarter
of 2004.
The after-tax proceeds of $53.8 million received from the sale of the Callery Chemical Division and the subsequent
liquidation of net assets retained by us were distributed to shareholders on November 24, 2003 and charged to retained earnings
as a capital distribution.
13
RESULTS OF CONTINUING OPERATIONS
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Net sales. Net sales for the year ended December 31, 2004 were $852.5 million, an increase of $156.0 million, or 22%,
from $696.5 million for the year ended December 31, 2003. Our net sales increased in all segments as follows:
Dollar
2004
2003
Increase
Percent
Increase
(In millions)
North America
Europe
International
$564.6
173.0
114.9
$452.6
146.2
97.7
$112.0
26.8
17.2
25%
18%
18%
Net sales of the North American segment were $564.6 million for the year ended December 31, 2004, an increase of
$112.0 million, or 25%, compared to $452.6 million for the year ended December 31, 2003. We believe that our 2004 sales
growth in North America was the direct result of our focus on key markets, including fire service, homeland security, and the
military. Our sales of Advanced Combat Helmets, and related communications systems, to the military increased approximately
$58.6 million during 2004, reflecting increased government funding to support the war on terrorism. During the current year,
our sales of self-contained breathing apparatus, or SCBAs, and thermal imaging cameras, or TICs, to the fire service market
increased approximately $33.0 million and $7.7 million, respectively. We continue to see strong demand for our latest
generation SCBAs, which, in 2003, were the first to be approved under the 2002 NFPA performance standards and the NIOSH
Chemical, Biological, Radiological and Nuclear, or CBRN, standard to protect first responders against possible terrorist attacks.
Higher thermal imaging camera sales reflect strong demand for our Evolution® 5000 TIC, which combines the functionality and
durability required by the fire service with features and performance not found on other small format cameras. Sales of
instrument products were approximately $10.6 million higher in the current year, on strong demand for our latest generation
portable instruments, such as the Solaris® Multigas Detector, one of the smallest and lightest four-gas monitors available today. In
recent months, we have also seen a modest improvement in the industrial sector demand for instrument products.
During 2003, we changed our standard shipping terms to U.S. distributors from FOB Shipping Point to FOB Destination. We
made this change to improve customer service by obtaining greater control and flexibility over carrier selection and delivery
schedules and by reducing customer exposure to in-transit loss and damage. The effect of this change, which delayed revenue
recognition on affected shipments until the goods reach their destination, reduced sales and gross margins in 2003 by
approximately $4.7 million and $2.7 million, respectively.
Net sales by European operations were $173.0 million for the year ended December 31, 2004, an increase of $26.8 million,
or 18%, from $146.2 million for the year ended December 31, 2003. Approximately half of the increase was due to the favorable
effect of the stronger euro on net sales when stated in U.S. dollars. Sales by Sordin, which we acquired on June 30, 2004,
accounted for approximately $4.5 million of the increase. The remainder of the improvement was primarily related to strong late
year shipments of breathing apparatus by our German company to customers in Eastern Europe. Local currency sales at our
other European affiliates were generally flat year-to-year, reflecting continued sluggishness in the Western European industrial
sector.
Net sales by International operations were $114.9 million for the year ended December 31, 2004 compared to $97.7 million
for the year ended December 31, 2003, an increase of $17.2 million, or 18%. Approximately half of the increase in International
segment sales, when stated in U.S. dollars, was related to the favorable effect of stronger international currencies, particularly the
Australian dollar and the South African rand. The remainder of the sales improvement was in Latin America, reflecting generally
improved economic conditions.
Cost of products sold. Cost of products sold was $512.1 million for the year ended December 31, 2004, an increase of
$89.8 million, or 21%, from $422.3 million for the year ended December 31, 2003. The increase relates primarily to higher sales.
Cost of products sold and selling, general and administrative expenses in 2003 were favorably affected by a change in the
vacation vesting policy for U.S. employees. Under the vacation vesting policy adopted in 2003, employees earn their vacation
entitlement during the current year. Previously, vacation was vested on the last day of the prior year. The policy change resulted
in favorable adjustments to cost of products sold and selling, general and administrative expenses during 2003 of approximately
$3.6 million and $1.8 million, respectively. The vacation policy was changed to align the year the benefit is earned with the year it
is received.
Cost of products sold and operating expenses include net periodic pension benefit costs and credits. Pension credits,
combined with pension costs, resulted in net pension credits for the year ended December 31, 2004 of $7.2 million, of which
approximately $4.4 million was included in cost of products sold, $2.5 million in selling general and administrative expenses, and
$0.3 million in research and development expenses. Net pension credits for the year ended December 31, 2003 were $8.8
million, of which approximately $5.4 million was included in cost of products sold, $3.1 million in selling, general and
14
administrative expenses, and $0.3 million in research and development expenses. In 2003, an additional pension credit of $2.0
million relating to a curtailment gain from the sale of the Callery Chemical Division was included in net income from
discontinued operations. The recognition of pension income in the years ended December 31, 2004 and 2003 is primarily the
result of the exceptional investment performance of the MSA Non-Contributory Pension Plan for the Employees, or the MSA
Pension Plan, over the past ten years. During that period, the investment performance of the MSA Pension Plan has ranked
among the top 1% of all U.S. pension funds according to a comparison of fund performance made by our investment consultant.
Future net pension credits can be volatile depending on the future performance of plan assets, changes in actuarial assumptions
regarding such factors as the selection of discount rates and rates of return on plan assets, changes in the amortization levels of
actuarial gains and losses, plan amendments affecting benefit pay-out levels, and profile changes in the participant populations
being valued. Changes in any of these factors could cause net pension credits to change. To the extent net pension credits
decline in the future, our net income would be adversely affected.
Gross profit. Gross profit for the year ended December 31, 2004 was $340.4 million, an increase of $66.2 million, or 24%,
from $274.2 million for the year ended December 31, 2003. The ratio of gross profit to sales increased to 39.9% in 2004
compared to 39.4% in 2003. The improved gross profit ratio in 2004 was primarily due to production efficiencies associated with
higher North American sales, partially offset by proportionately higher sales of Advanced Combat Helmets to the government at
gross margins that are generally lower than our margins on commercial sales. Our European operations also reported improved
gross profits primarily related to a product mix shift away from lower margin military helmets in 2003 to higher margin fire
helmets in 2004.
Selling, general and administrative expenses. Selling, general and administrative expenses for the year ended December
31, 2004 were $204.8 million, an increase of $24.7 million, or 14%, from $180.1 million for the year ended December 31, 2003.
Selling, general and administrative expenses were 24.0% of sales in 2004 compared to 25.9% of sales in 2003. Our selling, general
and administrative expenses in North America increased approximately $15.5 million, primarily related to additional marketing
and selling expenses associated with generating and supporting the higher sales volumes. Selling, general and administrative
expenses for the year ended December 31, 2003 included a favorable adjustment of approximately $1.8 million related to the
previously-discussed change in the vacation vesting policy for our U.S. employees. The strengthening of international currencies
(particularly the euro, the Australian dollar, and the South African rand) increased selling, general and administrative expenses
when stated in U.S. dollars by approximately $6.9 million for the year ended December 31, 2004. The remainder of the increase
was primarily due to the acquisition of Sordin and higher rent expense in Germany associated with the leaseback of property
that was sold in September 2003. Approximately $1.7 million of deferred gain related to the sale of the German property was
recognized in other income during the year ended December 31, 2004.
Research and development expenses. Research and development expenses were $22.6 million for the year ended
December 31, 2004, an increase of $1.7 million, or 8%, from $20.9 million for the year ended December 31, 2003. The increase
reflects our current focus on new product development, particularly in instruments and other electronic products.
Depreciation and amortization expense. Depreciation and amortization expense, which is reported in cost of sales,
selling, general and administrative expenses, and research and development expenses, was $25.5 million for the year ended
December 31, 2004, an increase of $2.3 million, or 10%, from $23.2 million for the year ended December 31, 2003. The increase
was primarily due to new asset additions in the United States to support higher Advanced Combat Helmet production volumes.
Interest expense. Interest expense for the year ended December 31, 2004 was $3.8 million, a decrease of $0.8 million, or
16%, from $4.6 million for the year ended December 31, 2003. The decrease was related to reductions in long term debt and
short term borrowings and the discontinuance of our accounts receivable securitization arrangement in August 2004.
Currency exchange adjustments. During the year ended December 31, 2004, we recorded currency exchange losses of
$0.3 million compared to gains of $3.4 million for the year ended December 31, 2003. Currency exchange gains in 2003 were
primarily related to euro and Canadian dollar denominated assets held by us, and reflect a significant strengthening of those
currencies during the year. Less favorable currency exchange adjustments during 2004 reflect a less significant strengthening of
the euro and the Canadian dollar, as well as the offsetting effect of forward exchange contracts that we entered into to hedge
our exposure to movements in euro exchange rates.
Other income. Other income for the year ended December 31, 2004 was $5.0 million, an increase of $3.3 million from
$1.7 million in the same period last year. During the current year, we recognized approximately $1.1 million of estimated
interest income with respect to settled issues in the federal income audits of tax years 1995 through 2001. The estimated
interest income is based on our current expectations regarding the final outcome of the IRS audits. As previously mentioned,
approximately $1.7 million of deferred gain related to the sale of our German property was recognized as a gain on disposition
of assets during 2004.
15
Income tax provision. Our effective income tax rate for the year ended December 31, 2004 was 37.6% compared to 33.7%
for the year ended December 31, 2003. The higher effective tax rate in 2004 was primarily related to less favorable adjustments
to previously-established valuation allowances on foreign tax credit carry forwards and adjustments to prior years’ taxes. In
2004, we released approximately $0.6 million of valuation allowances and made unfavorable adjustments to prior year’s taxes of
approximately $1.1 million. In 2003, we released approximately $1.2 million of valuation allowances and made favorable
adjustments to prior year’s taxes of approximately $0.8 million. The valuation allowances were released based on tax planning
strategies that we implemented and an improved outlook for foreign source income.
No deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries, which amounted to
$112.8 million as of December 31, 2004. These earnings are considered to be reinvested for an indefinite period of time. It is not
practicable to determine the deferred tax liability on these undistributed earnings. We are in the process of evaluating the impact
of the provisions of the American Jobs Creation Act of 2004 dealing with the limited opportunity in 2005 to repatriate some of
these undistributed earnings at a U.S. tax cost that may be lower than the normal tax cost on such distributions. We are awaiting
final guidance from the Internal Revenue Service (“IRS”) to complete that evaluation, which may result in our decision to remit a
portion of these undistributed earnings in 2005; however, we cannot currently estimate the amount of such distribution that may
be reasonably possible. The range of possible amounts that we are considering for repatriation under this provision is between
zero and approximately $50 million. The related potential range of income tax payable on amounts considered for repatriation is
between zero and approximately $3 million.
In October 2004, the President signed the American Jobs Creation Act of 2004, which provides a deduction for income
from qualified domestic production activities, which will be phased in from 2005 through 2010. The act also provides for a two-
year phase-out of the existing extra-territorial income exclusion for foreign sales that was viewed to be inconsistent with
international trade protocols by the European Union. Based on current earnings levels, we expect that the net effect of the
phase-out of the extra-territorial income exclusion and the phase-in of the new deduction will result in a decrease in our
effective tax rate for 2005 and 2006 of approximately 0.5 percentage points and approximately 1 percentage point thereafter.
The determination of annual income tax expense takes into consideration amounts which may be needed to cover
exposures for open tax years. Our federal income tax returns for the years 1995 through 2001 remain under audit with the only
open issue relating to the calculation of research and development tax credits. We believe that we have made adequate provision
for income taxes and interest which may become payable or receivable for the years not yet settled. We do not expect any
material adverse impact on earnings to result from the resolution of matters related to open tax years, and we are optimistic
that we can reach resolution with the IRS during 2005. To the extent that we are successful in sustaining our position that no
adjustment should be made to research and development credits claimed over the period covered by the examination, tax
reserves previously established based upon the examining agent's disallowance of the claimed credits would be released, reducing
tax expense in the period of settlement. Furthermore, such a final settlement would have a beneficial impact on interest costs.
Net income. Net income from continuing operations for the year ended December 31, 2004 was $71.0 million, an increase
of $22.1 million, or 45%, over net income from continuing operations for the year ended December 31, 2003 of $48.9 million.
Continuing operations earnings per basic share of common stock improved to $1.91 in 2004 compared to $1.33 in 2003.
North America segment net income from continuing operations for the year ended December 31, 2004 was $55.6 million,
an increase of $16.5 million, or 42%, from $39.1 million for the year ended December 31, 2003. The improvement in North
American net income was primarily due to the previously-discussed sales growth.
Europe segment net income from continuing operations for the year ended December 31, 2004 was $6.7 million, an
increase of $3.9 million, or 141%, from $2.8 million for the year ended December 31, 2003. Approximately $0.4 million of the
increase was due to the favorable currency translation effects of a stronger euro. Local currency net income improvement
occurred primarily in Germany, where income was up approximately $2.4 million on improved sales and lower operating costs.
Europe segment net income for 2004 also included approximately $0.6 million of income from the mid-year acquisition of
Sordin AB.
International segment net income from continuing operations for the year ended December 31, 2004 was $8.5 million, an
increase of $2.2 million, or 34%, from $6.3 million for the year ended December 31, 2003. Approximately $1.1 million of the
income improvement occurred in Latin America, reflecting improved economic conditions. Favorable currency translation
effects, primarily related to the strengthening of the Australian dollar and the South African rand, increased International segment
income when stated in U.S. dollars by approximately $0.7 million.
16
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
Net sales. Net sales for the year ended December 31, 2003 were $696.5 million, an increase of $132.1 million, or 23%,
from $564.4 million for the year ended December 31, 2002. Our net sales increased in all segments as follows:
Dollar
2003
2002
Increase
Percent
Increase
(In millions)
North America
Europe
International
$452.6
146.2
97.7
$369.7
122.4
72.2
$ 82.9
23.8
25.5
22%
19%
35%
Net sales by North American operations were $452.6 million for the year ended December 31, 2003, an increase of $82.9
million, or 22%, from $369.7 million for the year ended December 31, 2002. Approximately half of the sales growth was driven
by increased sales of SCBA and thermal imaging cameras to the fire service market. These improvements reflect a combination
of continued strong government funding and increased demand for our CBRN-compliant SCBA and Evolution 5000 thermal
imaging cameras. The remainder of the sales growth in North America was due to increased sales of gas masks and ballistic
helmets to military and homeland security markets, which reflects increased government spending on military and homeland
security needs. Sales of instruments and fall protection equipment were flat year-to-year, reflecting continued sluggishness in
industrial markets.
During 2003, we changed our standard shipping terms to U.S. distributors from FOB Shipping Point to FOB Destination. We
made this change to improve customer service by obtaining greater control and flexibility over carrier selection and delivery
schedules and by reducing customer exposure to in-transit loss and damage. The effect of this change, which delays revenue
recognition on affected shipments until the goods reach their destination, reduced sales and gross margins in 2003 by
approximately $4.7 million and $2.7 million, respectively.
Net sales by European operations were $146.2 million for the year ended December 31, 2003, an increase of $23.8 million,
or 19%, from $122.4 million for the year ended December 31, 2002. The sales increase was primarily due to favorable translation
effects of approximately $18.9 million due to a stronger euro and the inclusion of a full year of sales by MSA Gallet, which was
acquired during the second quarter of 2002. Local currency sales at our other European affiliates were somewhat lower year-to-
year, reflecting the general sluggishness in the Western European industrial sector.
Net sales by International operations were $97.7 million for the year ended December 31, 2003 compared to $72.2 million
for the year ended December 31, 2002, an increase of $25.5 million, or 35%. The sales improvement occurred primarily in
Australia where sales grew by approximately $7.1 million, including sales of approximately $4.3 million of breathing apparatuses
to the Australian Navy and as a result of higher sales of $3.6 million of various products in various locations in Latin America.
Approximately one-third of the increase in International sales, when stated in U.S. dollars, was due to the favorable currency
translation effects of a stronger Australian dollar and South African rand.
Cost of products sold. Cost of products sold was $422.3 million for the year ended December 31, 2003, an increase of
$77.5 million, or 22%, from $344.8 million for the year ended December 31, 2002. The increase relates primarily to higher sales.
Cost of products sold and selling, general and administrative expenses in 2003 were favorably affected by a change in the
vacation vesting policy for U.S. employees. Under the vacation vesting policy adopted in 2003, employees earn their vacation
entitlement during the current year. Previously, vacation was vested on the last day of the prior year. The policy change resulted
in favorable adjustments to cost of products sold and selling, general and administrative expenses during 2003 of $3.6 million and
$1.8 million, respectively. The vacation policy was changed to align the year the benefit is earned with the year it is received.
Cost of products sold and selling, general and administrative expenses include net periodic pension benefit costs and credits.
Pension credits, combined with pension costs, resulted in net pension credits of $10.8 million in 2003, of which approximately
$5.4 million was included in the cost of products sold, $3.1 million in the selling, general and administrative expenses, and $0.3
million in research and development expenses. The remaining $2.0 million, relating to a curtailment gain from the sale of the
Callery Chemical Division, was included in net income from discontinued operations. Net pension credits for the year ended
December 31, 2002 were $13.1 million, of which approximately $8.0 million was included in cost of products sold, $4.6 million in
selling, general and administrative expenses, and $0.5 million in research and development expenses.
Gross profit. Gross profit for the year ended December 31, 2003 was $274.2 million, an increase of $54.6 million, or 25%,
from $219.6 million for the year ended December 31, 2002. The ratio of gross profit to sales improved slightly to 39.4% in 2003
compared to 38.9% in 2002.
Selling, general and administrative expenses. Selling, general and administrative expenses for the year ended December
31, 2003 were $180.1 million, an increase of $30.4 million, or 20%, from $149.7 million for the year ended December 31, 2002.
Selling, general and administrative expenses were 25.9% of sales in 2003 compared to 26.5% of sales in 2002. Approximately half
of the increase was related to higher marketing and selling expenses required to support the significant sales growth in North
17
America. The remainder of the increase occurred in Europe, and reflects an increase from the inclusion of a full year’s expenses
of approximately $5.0 million for MSA Gallet, which was acquired in the second quarter of 2002, and the currency exchange
effect of $7.3 million due to a stronger euro.
Research and development expenses. Research and development expenses were $20.9 million for the year ended
December 31, 2003, an increase of $1.4 million, or 7%, from $19.5 million for the year ended December 31, 2002. Research and
development activities are performed primarily in the United States and Europe.
Depreciation and amortization expense. Depreciation and amortization expense, which is included in cost of products
sold, selling, general and administrative expenses, and research and development expenses, was $23.2 million for the year ended
December 31, 2003, an increase of $1.7 million, or 8%, from $21.5 million for the year ended December 31, 2002. The increase
was primarily due to new production equipment additions in the United States to support higher production volumes.
Interest expense. Interest expense for the year ended December 31, 2003 was $4.6 million compared to $4.8 million for
the year ended December 31, 2002. The decrease relates to reductions in long term debt and short term borrowings.
Currency exchange. Currency exchange gains of $3.4 million were recorded in the year ended December 31, 2003
compared to gains of $0.2 million for the year ended December 31, 2002. Currency exchange gains in 2003 were primarily
related to euro and Canadian dollar denominated assets held by us, and reflect a significant strengthening of those currencies
during the year.
Income tax provision. The effective income tax rate was 33.7% for the year ended December 31, 2003 and 35.1% for the
year ended December 31, 2002. The effective tax rate in 2003 was favorably affected by the one-time effect of releasing $1.2
million of previously-established valuation allowances on foreign tax credit carry forwards. These valuation allowances were
released in 2003 as a result of tax planning strategies that were implemented during the year and an improved outlook for
foreign source income.
Net income. Net income from continuing operations for the year ended December 31, 2003 was $48.9 million, an increase
of $17.7 million, or 57%, over net income from continuing operations for the year ended December 31, 2002 of $31.2 million.
Continuing operations earnings per basic share of common stock improved to $1.33 in 2003 compared to $0.85 in 2002.
North American net income from continuing operations for the year ended December 31, 2003 was $39.1 million, an
increase of $13.2 million, or 51%, from $25.9 million for the year ended December 31, 2002. The improvement in North
American net income was primarily due to the previously-discussed sales growth.
European net income from continuing operations for the year ended December 31, 2003 was $2.8 million, an increase of
$0.3 million, or 11%, from $2.5 million for the year ended December 31, 2002. The improvement reflects a full year of income
for MSA Gallet, partially offset by lower income in our German operation.
International net income from continuing operations for the year ended December 31, 2003 was $6.3 million, an increase of
$3.9 million, or 168%, from $2.4 million for the year ended December 31, 2002. Approximately two-thirds of the improvement
occurred in Australia and Latin America on higher sales. The remainder of the improvement occurred in our operations in Peru,
Chile and China, which all experienced losses in 2002, primarily as a result of one-time charges related to employee severance
costs and asset write-offs.
LIQUIDITY AND CAPITAL RESOURCES
Our main sources of liquidity are cash generated from operations and borrowing capacity. Our principal liquidity
requirements are for working capital, capital expenditures, and principal and interest payments on outstanding indebtedness.
Cash and cash equivalents increased $3.3 million during 2004 compared to an increase of $36.8 million during 2003.
Continuing operations provided cash of $51.8 million in 2004 compared to providing $32.5 million in 2003. Better cash flow
from operations during 2004 reflects improved net income from continuing operations and non-cash items, partially offset by
increases in working capital, particularly inventory. Trade receivables were $161.6 million at December 31, 2004 and $144.9
million, including $15.0 million of securitized receivables that were removed from the balance sheet, at December 31, 2003.
Trade receivables expressed in number of days sales outstanding were 69 days at December 31, 2004, compared to 76 days at
December 31, 2003. LIFO inventories were $124.8 million at December 31, 2004 and $90.1 million at December 31, 2003. On a
FIFO basis, inventories measured against cost of products sold turned 3.1 times in 2004 and 3.3 times in 2003. Increases in trade
receivables and inventories during 2004 were primarily related to higher sales levels. Cash flow from continuing operations in
2003 was $10.5 million lower than in 2002. Improved cash flow from net income and non-cash items in 2003 was more than
offset by increases in receivables and inventories.
Discontinued operations provided $2.1 million of cash in 2004, primarily through collection of trade receivables that were
reported as assets held for sale at December 31, 2003. In 2003, discontinued operations provided cash of $8.0 million, reflecting
operating results through the date of sale and the liquidation of trade receivables.
18
Our investing activities used cash of $32.8 million in 2004, compared with providing $66.7 million in 2003. During 2004, we
used $27.3 million of cash for property additions, primarily production equipment in the U.S. required to support our higher
sales volume. Also in 2004, we used cash of $4.3 million to acquire Sordin AB. In 2003, the sale of the Callery Chemical Division
and property in Germany provided cash of $63.0 million and $22.9 million, respectively. In 2002, investing activities used cash of
$34.1 million, including approximately $14.5 million to acquire MSA Gallet.
Financing activities used cash of $19.4 million in 2004 compared to using $76.3 million in 2003. Primary uses of cash for
financing activities in the current year were for dividend payments of $13.8 million and reductions in long-term debt of $5.0
million. During 2003, in addition to regular dividend payments of $9.5 million, we made a special distribution to common
shareholders of $53.8 million, representing the after-tax proceeds from the sale of the Callery Chemical Division and the
subsequent liquidation of net assets retained by us. Dividends paid on our common stock during 2004 (our 87th consecutive year
of dividend payment) were $0.37 per share. Dividends paid on our common stock in 2003 and 2002 were $0.26 and $0.22, per
share, respectively.
On April 6, 2004, we entered into an eight year interest rate swap agreement. Under the terms of the agreement, we
receive a fixed interest rate of 8.39% and pay a floating interest rate based on LIBOR. The notional amount of the swap is initially
$20.0 million and declines $4.0 million per year beginning in 2008. The interest rate swap has been designated as a fair value
hedge of a portion of our fixed rate 8.39% Senior Notes.
The fair value of the interest rate swap at December 31, 2004, has been recorded as a liability of $0.4 million that is included
in other noncurrent liabilities, with an offsetting reduction in the carrying value of the long-term debt.
As a result of entering into the interest rate swap, we have increased our exposure to interest rate fluctuations. Differences
between the fixed rate amounts received and the variable rate amount paid are recognized in interest expense on an ongoing
basis. This rate difference resulted in a reduction in interest expense of approximately $0.3 million during 2004.
Long-term debt, including the current portion at December 31, 2004 was $59.0 million, or 13.5% of total capital. For
purposes of this calculation, total capital is defined as long-term debt plus the current portion of long-term debt and
shareholders’ equity.
The following table sets forth our long-term debt obligations:
U.S.
Industrial development debt issues payable through 2022, 1.34%
Series B Senior Notes payable through 2006, 7.69%
Senior Notes payable through 2012, 8.39%
Other
International
Various notes payable through 2006, 9.63% to 19.0%
Total
Amounts due within one year
Long-term debt
(In thousands)
2004
2003
$10,750
8,000
39,585
100
$ 10,750
12,000
40,000
150
524
58,959
4,496
54,463
1,853
64,753
4,838
59,915
Approximate maturities of these obligations are $4.5 million in 2005, $8.1 million in 2006, $7.9 million in 2008, $9.7 million
in 2009, and $28.8 million thereafter. Some debt agreements require us to maintain certain financial ratios and minimum net
worth and contain restrictions on the total amount of debt. We were in compliance with our debt covenants as of December
31, 2004.
Short-term bank lines of credit amounted to $20.6 million of which $18.7 million was unused at December 31, 2004.
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 $1.9
million and $0.8 million at December 31, 2004 and 2003, respectively. The average month-end balance of total short-term
borrowings during 2004 was $0.9 million, while the maximum month-end balance of $1.9 million occurred at December 31,
2004. The weighted average interest rates of short-term borrowings at December 31, 2004 and 2003, were 7% and 3%,
respectively.
We believe our sources of liquidity currently available from our cash reserves on hand, cash flow from operations and
borrowing capacity are sufficient to meet our principal liquidity requirements for at least the next 12 months.
19
ACCOUNTS RECEIVABLE SECURITIZATION
In August 2004, we terminated our securitization arrangement with a financial institution under which Mine Safety Funding
Corporation, a consolidated wholly-owned bankruptcy remote subsidiary of the company, could sell up to $30.0 million of
eligible accounts receivable to a multi-seller asset-backed commercial paper issuer. We terminated this arrangement because we
no longer required the source of funding that the securitization provided.
At December 31, 2003, $15.0 million of securitized accounts receivable had been removed from our balance sheet under
the securitization arrangement and our retained interest in accounts receivable available for securitization was $40.0 million.
CUMULATIVE TRANSLATION ADJUSTMENTS
The year-end position of the U.S. dollar relative to international currencies resulted in a translation gain of $8.9 million being
credited to the cumulative translation adjustments shareholders’ equity account in 2004, compared to gains of $14.7 million in
2003 and $5.8 million in 2002. Translation gains in 2004 were primarily due to the strengthening of the euro, Australian dollar,
and South African rand. Translation gains in 2003 reflect the strengthening of most currencies against the U.S. dollar. The most
significant gains in 2003 related to our operations in Europe and Australia. Translation gains in 2002 occurred primarily in
Europe, partially offset by losses in South America.
COMMITMENTS AND CONTINGENCIES
We are obligated to make future payments under various contracts, including debt and lease agreements. Our significant
cash obligations as of December 31, 2004 were as follows:
Total
$ 59.0
28.6
(In millions)
Long-term debt*
Operating leases
Technology transfer agreement
Take or pay supply contract
Totals
*Future interest payments are not included in the table above.
2005
$ 4.5
6.4
0.8
1.5
13.2
5.5
93.9
0.8
2006
$ 8.1
4.8
–
1.5
14.4
2007
$ –
3.9
–
1.5
5.4
2008
$ 7.9
3.2
–
1.0
12.1
2009
$ 9.7
3.3
–
–
13.0
Thereafter
$ 28.8
7.0
–
–
35.8
We expect to make net contributions of $1.6 million to our pension plans in 2005.
We have purchase commitments for materials, supplies, services, and property, plant and equipment as part of our ordinary
conduct of business.
During the third quarter of 2003, we sold our real property in Berlin, Germany for approximately $25.7 million, resulting in
a gain of approximately $13.6 million. At the same time, we entered into an eight year agreement to lease back the portion of
the property that we occupy. Under sale-leaseback accounting, $12.1 million of gain was deferred and is being amortized over
the term of the lease.
In September 2003, we entered into a lease agreement with BASF pertaining to that portion of the Callery Chemical site
that is occupied by our Evans City, Pennsylvania manufacturing operations. The initial term of the lease was one year, with a
renewal option for five successive one year periods. In September 2004, we exercised our first one year renewal option.
Various lawsuits and claims arising in the normal course of business are pending against us. These lawsuits are primarily
product liability claims. We are presently named as a defendant in approximately 2,400 lawsuits primarily involving respiratory
protection products allegedly manufactured and sold by us. Collectively, these lawsuits represent a total of approximately 32,000
plaintiffs. Approximately 90% of these lawsuits involve plaintiffs alleging they suffer from silicosis, with the remainder alleging they
suffer from other or combined injuries, including asbestosis. These lawsuits typically allege that these conditions resulted in part
from respirators that were negligently designed or manufactured by us. Consistent with the experience of other companies
involved in silica and asbestos-related litigation, there has been an increase in the number of asserted claims that could potentially
involve us. We cannot determine our potential maximum liability for such claims, in part because the defendants in these lawsuits
are often numerous, and the claims generally do not specify the amount of damages sought.
With some limited exceptions, we maintain insurance against product liability claims. We also maintain a reserve for
uninsured product liability based on expected settlement charges for pending claims and an estimate of unreported claims
derived from experience, sales volumes and other relevant information. We reevaluate our exposures on an ongoing basis and
make adjustments to reserves as appropriate. Based on information currently available, we believe that the disposition of matters
that are pending will not have a materially adverse effect on our financial condition.
In connection with our sale of Callery Chemical facility in Evans City, Pennsylvania, we have retained responsibility for
certain environmental costs at this site, where relatively low levels of contamination are known to exist. Under the terms of the
asset purchase agreement with BASF, our maximum liability for these matters is capped at $50.0 million. Based on environmental
20
studies performed prior to the sale of the division, we do not believe that our potential exposure under the terms of this
agreement will materially affect our financial condition.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United
States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related disclosures. We evaluate these estimates and
judgments on an on-going basis based on historical experience and various assumptions that we believe to be reasonable under
the circumstances. However, different amounts could be reported if we had used different assumptions and in light of different
facts and circumstances. Actual amounts could differ from the estimates and judgments reflected in our financial statements.
We believe that the following are the more critical judgments and estimates used in preparation of our financial statements.
Accounting for contingencies. We accrue for contingencies in accordance with FAS No. 5, Accounting for Contingencies,
when we believe that it is probable that a liability or loss has been incurred and the amount can be reasonably estimated.
Contingencies relate to uncertainties that require our judgment both in assessing whether or not a liability or loss has been
incurred and in estimating the amount of the probable loss. Significant contingencies affecting our financial statements include
pending or threatened litigation, including product liability claims, and product warranties.
Product liability. We face an inherent business risk of exposure to product liability claims arising from the alleged failure of
our products to prevent the types of personal injury or death against which they are designed to protect. We accrue for our
estimates of the probable costs to be incurred in the resolution of product liability claims. These estimates are based on actuarial
valuations, past experience, and our judgments regarding the probable outcome of pending and threatened claims. Due
to uncertainty as to the ultimate outcome of pending and threatened claims, as well as the incidence of future claims, it is
possible that future results could be materially affected by changes in our assumptions and estimates related to product liability
matters. Our product liability expense averaged less than 1% of net sales from continuing operations during the three years
ended December 31, 2004.
Product warranties. We accrue for the estimated probable cost of product warranties at the time that sales are
recognized. Our estimates are principally based on historical experience. We also accrue for our estimates of the probable costs
of corrective action when significant product quality issues are identified. These estimates are principally based on our
assumptions regarding the cost of corrective action and the probable number of units to be repaired or replaced. Our product
warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product
failure. Due to the uncertainty and potential volatility of these factors, it is possible that future results could be materially
affected by changes in our assumptions or the effectiveness of our strategies related to these matters. Our product warranty
expense averaged less than 2% of net sales during the three years ended December 31, 2004.
Income taxes. We account for income taxes in accordance with FAS No. 109, Accounting for Income Taxes, which
requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences
between the book and tax basis of recorded assets and liabilities. FAS No. 109 also requires that deferred tax assets be reduced
by valuation allowances if it is more likely than not that some portion of the deferred tax asset will not be realized.
We record valuation allowances to reduce deferred tax assets to the amounts that we estimate are probable to be realized.
When assessing the need for valuation allowances, we consider projected future taxable income and prudent and feasible tax
planning strategies. Should a change in circumstances lead to a change in our judgments about the realizability of deferred tax
assets in future years, we would adjust the related valuation allowances in the period that the change in circumstances occurs,
along with a corresponding charge or credit to income. There were no valuation allowances as of December 31, 2004.
We record an estimated income tax liability based on our best judgment of the amounts likely to be paid in the various tax
jurisdictions in which we operate. The tax liabilities ultimately paid are dependent on a number of factors, including the
resolution of tax audits, and may differ from the amounts recorded. Tax liabilities are adjusted through income when it becomes
probable that the actual liability differs from the amount recorded.
Pensions and other postretirement benefits. We account for our pension and postretirement benefit plans as required
under FAS No. 87, Employers’ Accounting for Pensions, and FAS No. 106, Employers’ Accounting for Postretirement Benefits
Other than Pensions. Accounting for the net periodic benefit costs and credits for these plans requires us to estimate the cost of
benefits to be provided well into the future and to attribute these costs over the expected work life of the employees
participating in these plans. These estimates require our judgment about discount rates used to determine these obligations,
expected returns on plan assets, rates of future compensation increases, rates of increase in future health care costs, participant
withdrawal and mortality rates, and participant retirement ages. Differences between our estimates and actual results may
significantly affect the cost of our obligations under these plans and could cause net periodic benefit costs and credits to change
materially from year-to-year.
21
Goodwill. As required by FAS No. 142, Goodwill and Other Intangible Assets, each year we evaluate for goodwill
impairment by comparing the fair value of each of our reporting units with its carrying value. If carrying value exceeds fair value,
then a possible impairment of goodwill exists and requires further evaluation. We estimate the fair value of our reporting units
using a combination of discounted cash flow analysis and market capitalization based on historical and projected financial
information. We apply our best judgment in assessing the reasonableness of the financial projections and other estimates used to
determine the fair value of each reporting unit.
RECENTLY ISSUED ACCOUNTING STANDARDS
In November 2004, the Financial Accounting Standards Board (FASB) issued FAS No. 151, Inventory Costs, an Amendment
of ARB No. 43, Chapter 4. FAS No. 151 requires the exclusion of certain costs from inventories and the allocation of fixed
production overheads to inventories to be based on the normal capacity of the production facilities. The provisions of this
Statement are effective for costs incurred after December 31, 2005. We are currently evaluating the effect of the adoption of
this standard, however, we do not expect it will have a material effect on our consolidated results of operations or financial
condition.
In December 2004, the FASB issued FAS No. 123R, Share-Based Payment, which is a revision of FAS No. 123, Accounting
for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related
implementation guidance. FAS No. 123R establishes standards for accounting for transactions in which an entity exchanges its
equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods
or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those
equity instruments. FAS No. 123R requires an entity to recognize the cost of employee services received in share-based payment
transactions, thereby reflecting the economic consequences of those transactions in the financial statements. This Statement
applies to all awards granted on or after July 1, 2005, and to awards modified, repurchased, or cancelled after that date. We will
recognize compensation cost on a prospective basis beginning July 1, 2005, for the portion of outstanding awards for which the
requisite service has not yet been rendered, based on the grant-date fair value of these awards calculated under FAS No. 123 for
pro forma disclosures. We expect that adopting this Statement will not have a material effect on our 2005 results.
In December 2004, the FASB issued FASB Staff Position No. FAS 109-1, Application of FASB Statement No. 109, Accounting
for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004,
which states that the FASB staff believes that the qualified production activities deduction provided by the American Jobs
Creation Act of 2004 should be accounted for as a special deduction in accordance with FASB Statement No. 109. This
Statement was effective upon issuance.
In December 2004, the FASB issued FASB Staff Position No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004, which states that the FASB staff believes that the
lack of clarification of certain provisions within the Act and the timing of the enactment necessitate a practical exemption from
the FAS 109 requirement to reflect in the period of enactment the effect of a new tax law. Accordingly, an enterprise is allowed
time beyond the financial reporting period of enactment to evaluate the effect of the Act on its plan for reinvestment or
repatriation of foreign earnings for purposes of applying FAS 109.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of adverse changes in the value of a financial instrument caused by changes in currency
exchange rates, interest rates, and equity prices. We are exposed to market risks related to currency exchange rates and
interest rates.
Currency exchange rate sensitivity. We are subject to the effects of fluctuations in currency exchange rates on various
transactions and on the translation of the reported financial position and operating results of our non-U.S. companies from local
currencies to U.S. dollars. A hypothetical 10% strengthening or weakening of the U.S. dollar would increase or decrease our
reported sales and net income for the year ended December 31, 2004 by approximately $28.8 million and $1.5 million,
respectively. We manage our exchange risks primarily by sourcing our products in the same currency as our customer pays us.
When appropriate, we may attempt to limit our transactional exposure to changes in currency exchange rates through contracts
or other actions intended to reduce existing exposures by creating offsetting currency exposures. At December 31, 2004,
contracts for the purpose of hedging cash flows were not significant.
Interest Rate Sensitivity. We are exposed to changes in interest rates primarily as a result of borrowing and investing
activities used to maintain liquidity and fund business operations. Because of the relatively short maturities of temporary
investments and the variable rate nature of industrial development debt, these financial instruments are reported at carrying
values which approximate fair values.
22
We hold one interest rate swap agreement, which is used to hedge the fair market value on a portion of our 8.39% fixed
rate long-term debt. At December 31, 2004, the swap agreement had a notional amount of $20.0 million and a fair market value
in favor of the bank of $0.4 million. The swap will expire in 2012. The notional amount of the swap declines $4.0 million per year
beginning in 2008. A hypothetical increase of 10% in market interest rates would result in a decrease of approximately $0.5
million in the fair value of the interest rate swap.
We have $48.0 million of fixed rate debt which matures at various dates through 2012. The incremental increase in the fair
value of fixed rate long term debt resulting from a hypothetical 10% decrease in interest rates would be approximately $0.9
million, excluding the impact of outstanding hedge instruments. However, our sensitivity to interest rate declines and the
corresponding increase in the fair value of our debt portfolio would unfavorably affect earnings and cash flows only to the extent
that we elected to repurchase or retire all or a portion of our fixed rate debt portfolio at prices above carrying values.
23
Item 8. Financial Statements and Supplementary Data
Management’s Report on Internal Control Over Financial Reporting
Management of Mine Safety Appliances Company (the Company) is responsible for establishing and maintaining adequate
internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of
management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004.
In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria,
management has concluded that the Company maintained effective internal control over financial reporting as of
December 31, 2004.
Our management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which appears herein.
/s/ John T. Ryan III
John T. Ryan III
Chairman of the Board
Chief Executive Officer
/s/ Dennis L. Zeitler
Dennis L. Zeitler
Vice President and Treasurer
Chief Financial Officer
March 7, 2005
24
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Mine Safety Appliances Company:
We have completed an integrated audit of Mine Safety Appliances Company’s 2004 consolidated financial statements and of
its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions,
based on our audits, are presented below.
Consolidated financial statements
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, cash flows,
and changes in retained earnings and accumulated other comprehensive income present fairly, in all material respects, the
financial position of Mine Safety Appliances Company and its subsidiaries (the Company) at December 31, 2004 and 2003, and
the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in
conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit of financial statements 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 our opinion.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31,
2004 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2004, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s
assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of
internal control over financial reporting includes obtaining an understanding of internal control over financial reporting,
evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 7, 2005
25
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
Year Ended December 31
Net sales
Other income
Costs and expenses
Cost of products sold
Selling, general and administrative
Research and development
Interest
Currency exchange losses (gains)
Income from continuing operations before income taxes
Provision for income taxes
Net income from continuing operations
Net income from discontinued operations
Gain on sale of discontinued operations – after tax
2004
2003
2002
$ 852,509
5,004
$ 696,473
1,724
$ 564,426
2,271
857,513
698,197
566,697
512,089
204,799
22,648
3,845
264
743,645
113,868
42,821
71,047
–
–
422,273
180,060
20,897
4,564
(3,356)
624,438
73,759
24,835
48,924
2,685
13,658
344,847
149,730
19,459
4,769
(191)
518,614
48,083
16,870
31,213
3,864
–
Net income
$ 71,047
$ 65,267
$ 35,077
Basic earnings per common share:
Continuing operations
Discontinued operations
Net income
Diluted earnings per common share:
Continuing operations
Discontinued operations
Net income
See notes to consolidated financial statements.
$ 1.91
–
$ 1.33
.45
$ .85
.11
$ 1.91
$ 1.78
$ .96
$ 1.86
–
$ 1.31
.44
$ .85
.10
$ 1.86
$ 1.75
$ .95
26
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
December 31
Assets
Current Assets
Cash and cash equivalents
Trade receivables, less allowance for doubtful accounts
of $7,548 and $6,418
Inventories
Deferred tax assets
Prepaid expenses and other current assets
Assets held for sale
Total current assets
Property
Other Assets
Land
Buildings
Machinery and equipment
Construction in progress
Total
Less accumulated depreciation
Net property
Prepaid pension cost
Deferred tax assets
Goodwill
Other noncurrent assets
Total
Liabilities
Current Liabilities Notes payable and current portion of long-term debt
Accounts payable
Employees’ compensation
Insurance and product liability
Taxes on income
Other current liabilities
Total current liabilities
Pensions and other employee benefits
Deferred tax liabilities
Other noncurrent liabilities
Total other liabilities
Long-Term Debt
Other Liabilities
Shareholders’
Equity
Preferred stock, 4 1/2% cumulative, $50 par value
(callable at $52.50)
Common stock, no par value (shares outstanding:
2004—37,341,386 2003—36,927,984)
Stock compensation trust
Treasury shares, at cost
Deferred stock compensation
Accumulated other comprehensive income
Earnings retained in the business
Total shareholders’ equity
Total
See notes to consolidated financial statements.
27
2004
2003
$ 76,545
$ 73,244
161,584
124,846
19,377
15,308
–
397,660
5,122
83,530
279,607
6,182
374,441
(250,725)
123,716
131,496
21,513
49,495
10,230
$ 734,110
$ 6,378
40,705
19,284
14,926
3,790
41,984
127,067
54,463
83,628
76,704
14,637
174,969
129,900
90,103
17,890
10,794
2,311
324,242
4,642
80,044
269,739
5,521
359,946
(239,386)
120,560
121,290
23,047
44,810
9,936
$ 643,885
$ 5,666
40,029
15,486
13,518
4,976
35,040
114,715
59,915
74,808
70,845
15,744
161,397
3,569
3,569
39,248
(16,436)
(143,295)
(1,247)
1,793
493,979
377,611
$ 734,110
31,187
(19,385)
(137,173)
(993)
(6,037)
436,690
307,858
$ 643,885
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Year Ended December 31
Operating Activities
Net income
Net income from discontinued operations
Gain on the sale of discontinued operations
Net income from continuing operations
Depreciation and amortization
Pensions
Net gain on sale of investments and assets
Deferred income taxes
Receivables
Inventories
Accounts payable and accrued liabilities
Other assets and liabilities
Tax benefit related to stock plans
Other—including currency exchange adjustments
Cash flow from continuing operations
Cash flow from discontinued operations
2004
2003
2002
$ 71,047
–
–
$ 65,267
(2,685)
(13,658)
$ 35,077
(3,864)
–
71,047
25,496
(7,188)
63
7,106
(23,519)
(27,422)
5,070
(5,549)
4,946
1,731
51,781
2,061
48,924
23,208
(8,845)
(2,332)
4,922
(27,039)
(3,162)
1,253
(1,864)
893
(3,447)
32,511
8,029
31,213
21,525
(13,125)
(35)
4,765
(3,008)
5,518
(3,616)
(1,775)
539
1,043
43,044
6,412
Cash Flow From Operating Activities
53,842
40,540
49,456
Investing Activities
Property additions
Property disposals
Proceeds from sale of discontinued operations
Acquisitions, net of cash acquired, and other investing
(27,330)
883
–
(6,391)
(19,628)
23,521
63,042
(279)
(20,072)
649
–
(14,667)
Cash Flow From Investing Activities
(32,838)
66,656
(34,090)
Financing Activities
Additions to long-term debt
Reductions of long-term debt
Changes in notes payable and short-term debt
Cash dividends and special distributions
Company stock purchases
Company stock sales
18
(5,042)
566
(13,758)
(6,122)
4,911
245
(4,902)
(9,146)
(63,270)
(2,309)
3,036
677
(7,089)
5,578
(7,961)
(846)
2,508
Cash Flow From Financing Activities
(19,427)
(76,346)
(7,133)
Effect of exchange rate changes on cash
1,724
5,917
1,543
Increase in cash and cash equivalents
Beginning cash and cash equivalents
Ending cash and cash equivalents
Supplemental cash flow information:
Interest payments
Income tax payments
See notes to consolidated financial statements.
3,301
73,244
36,767
36,477
9,776
26,701
$ 76,545
$ 73,244
$ 36,477
$ 4,632
37,329
$ 5,025
35,743
$ 5,890
18,546
28
CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED OTHER
COMPREHENSIVE INCOME
(In thousands)
Balances January 1, 2002
Net income
Cumulative translation adjustments
Minimum pension liability adjustments (a)
Comprehensive income
Common dividends
Preferred dividends
Balances December 31, 2002
Net income
Cumulative translation adjustments
Minimum pension liability adjustments (a)
Comprehensive income
Special distribution to common shareholders
Common dividends
Preferred dividends
Balances December 31, 2003
Net income
Cumulative translation adjustments
Minimum pension liability adjustments (a)
Comprehensive income
Common dividends
Preferred dividends
Retained
Earnings
$ 407,577
35,077
–
–
–
(7,914)
(47)
434,693
65,267
–
–
–
(53,799)
(9,425)
(46)
436,690
71,047
–
–
–
(13,714)
(44)
Accumulated
Other
Comprehensive
Income
$ (26,216)
–
5,772
(57)
–
–
–
(20,501)
–
14,699
(235)
–
–
–
–
(6,037)
–
8,904
(1,074)
–
–
–
Comprehensive
Income
$ 35,077
5,772
(57)
$ 40,792
$ 65,267
14,699
(235)
$ 79,731
$ 71,047
8,904
(1,074)
$ 78,877
Balances December 31, 2004
$ 493,979
$ 1,793
(a)
-- Charges to minimum pension liability adjustments in 2004, 2003 and 2002 are net of tax benefits of $383, $157, and $38,
respectively.
Components of accumulated other comprehensive income are as follows:
(In thousands)
Cumulative translation adjustments
Minimum pension liability adjustments
Accumulated other comprehensive income
See notes to consolidated financial statements.
2004
$ 4,010
(2,217)
1,793
2003
$ (4,894)
(1,143)
2002
$ (19,593)
(908)
(6,037)
(20,501)
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Significant Accounting Policies
Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in
the United States of America 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.
Principles of Consolidation—The consolidated financial statements include the accounts of the company and all
subsidiaries. Intercompany accounts and transactions are eliminated. Certain prior year amounts have been reclassified to
conform with the current year presentation. Depreciation and amortization expense that was previously reported as a separate
line in the consolidated statement of income is now reported in cost of products sold and operating expenses.
Currency Translation—The functional currency of all significant non-U.S. subsidiaries is the local currency. Assets and
liabilities of those operations are translated at year-end exchange rates. Income statement accounts are translated using the
average exchange rates for the reporting period. Translation adjustments for these companies are reported as a component of
shareholders’ equity and are not included in income. Foreign currency transaction gains and losses are included in net income for
the reporting period.
Cash Equivalents—Cash equivalents include temporary deposits with financial institutions and highly liquid investments
with original maturities of 90 days or less.
Inventories—Inventories are stated at the lower of cost or market. Most U.S. inventories are valued on the last-in, first-
out (LIFO) cost method. Other inventories are valued on the average cost method or at standard costs which approximate
actual costs.
Property and Depreciation—Property is recorded at cost. Depreciation is computed using straight-line and accelerated
methods over the estimated useful lives of the assets. Expenditures for significant renewals and improvements are capitalized.
Ordinary repairs and maintenance are expensed as incurred. Gains or losses on property dispositions are included in income and
the cost and related depreciation are removed from the accounts.
Goodwill and Other Intangible Assets—Effective January 1, 2002, we adopted FAS No. 142, Goodwill and Other
Intangible Assets. Under this standard, goodwill and intangible assets with indefinite lives are not amortized, but are subject to
impairment write-down tests that must be performed at least annually. Other intangible assets are amortized on a straight-line
basis over their useful lives.
We tested the goodwill attributable to each of our reporting units for impairment as of January 1, 2002, and concluded that
none of our goodwill was impaired. For this purpose, we consider our reportable business segments to be our reporting units.
We test the goodwill of each of our reporting units for impairment at least annually. Fair value is estimated using discounted cash
flow methodologies and market comparable information.
Revenue Recognition—Revenue from the sale of products is recognized when title, ownership, and the risk of loss have
transferred to the customer, which generally occurs either when product is shipped to the customer or, in the case of most U.S.
distributor customers, when product is delivered to the customer’s delivery site. We establish our shipping terms according to
local practice and market characteristics. We do not ship product unless we have an order or other documentation authorizing
shipment to our customers. We make appropriate provisions for uncollectible accounts receivable and product returns, both of
which have historically been insignificant in relation to our net sales. Certain distributor customers receive price rebates based
on their level of purchases and other performance criteria that are documented in established distributor programs. These
rebates are accrued as a reduction of net sales as they are earned by the customer.
Shipping and Handling—Shipping and handling expenses for products sold to customers are charged to cost of products
sold as incurred. Amounts billed to customers for shipping and handling are included in net sales.
Product Warranties—Estimated expenses related to product warranties and additional service actions are charged to cost
of products sold in the period in which the related revenue is recognized or when significant product quality issues are identified.
Research and Development—Research and development costs are expensed as incurred.
Income Taxes—Deferred income taxes are provided for temporary differences between financial and tax reporting.
Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset
will not be realized, a valuation allowance is recognized. No provision is made for possible U.S. taxes on the undistributed
earnings of foreign subsidiaries that are considered to be reinvested indefinitely.
30
Stock-Based Compensation Plans—We apply the intrinsic value-based method in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation cost is recognized for stock
option grants. Compensation cost for restricted stock awards is measured at the market value of the shares when awarded.
Unearned stock compensation is reported in shareholders’ equity and is charged to income over the restriction period.
If we had elected to recognize compensation cost based on the fair value of the options at the grant date as prescribed by
FAS 123, Accounting for Stock-Based Compensation, net income and earnings per share would have been reduced to the pro
forma amounts shown below:
2004
Net income as reported
$ 71,047
Fair value of stock options granted, net of tax (1,781)
Pro forma net income
69,266
Basic earnings per share:
As reported
Pro forma
1.91
1.87
$
Diluted earnings per share:
As reported
Pro forma
$
1.86
1.82
(In thousands)
2003
$ 65,267
(1,374)
63,893
2002
$ 35,077
(1,717)
33,360
$
$
$
$
1.78
1.74
1.75
1.71
.96
.91
.95
.90
The fair value of the options granted was estimated at the grant dates using the Black-Scholes option pricing model and the
following weighted average assumptions for options granted in 2004, 2003, and 2002, respectively; risk-free interest rate of 4.1%,
4.0%, and 5.3%; dividend yield of 2.0%, 2.1%, and 2.0%; expected option life of 9.9 years, 9.9 years, and 9.9 years; and expected
volatility factor of 29%, 23%, and 23%.
Derivative Instruments—We use derivative instruments to dampen the effects of changes in currency exchange rates and
to achieve a targeted mix of fixed and floating interest rates on outstanding debt. We do not enter into derivative transactions
for speculative purposes and do not hold derivative instruments for trading purposes. Changes in the fair value of derivative
instruments designated as fair value hedges are recorded in the balance sheet as adjustments to the underlying hedged asset or
liability. Changes in the fair value of derivative instruments that do not qualify for hedge accounting treatment are recognized in
the income statement in the current period.
Note 2 – Subsequent Event
On January 11, 2005, we repurchased 1,042,000 shares of common stock from a major shareholder for treasury at a cost
of $48.3 million ($46.36 per share). This transaction represented approximately 2.8% of our shares outstanding on December 31,
2004, and reduced shares outstanding to approximately 36.3 million shares.
Note 3 – Inventories
Finished products
Work in process
Raw materials and supplies
Total LIFO inventories
Excess of FIFO costs over LIFO costs
Total FIFO inventories
(In thousands)
2004
$ 50,728
28,049
46,069
124,846
38,653
163,499
2003
$ 34,660
17,476
37,967
90,103
39,083
129,186
Inventories stated on the LIFO basis represent 44% and 40% of the total inventories at December 31, 2004 and 2003,
respectively.
Reductions in certain inventory quantities during 2004 resulted in liquidations of LIFO inventories carried at lower costs
prevailing in prior years. The effect of these liquidations reduced cost of sales by approximately $0.3 million in 2004, and
increased net income by approximately $0.2 million.
31
Note 4 – Capital Stock
• Common stock, no par value - 180,000,000 shares authorized
• Second cumulative preferred voting stock, $10 par value - 1,000,000 shares authorized; none issued
• 41/2% cumulative preferred nonvoting stock, $50 par value - 100,000 shares authorized; 71,373 shares issued and 52,736
shares ($1.7 million) held in treasury; treasury share purchases in 2004 and 2003 of 1,182 shares, $56, and 1,241 shares,
$61, respectively (share purchase dollars in thousands)
Common stock activity is summarized as follows:
Shares
Dollars (In thousands)
Stock
Compensation
Trust
(1,415,373)
–
30,744
–
–
(1,384,629)
27,235
–
120,317
–
–
(1,237,077)
(2,474,154)
(3,711,231)
45,098
519,911
–
–
(3,146,222)
Shares Issued
20,483,051
23,198
73,860
–
–
20,580,109
–
–
–
–
–
20,580,109
41,160,218
61,740,327
–
–
–
–
61,740,327
Shares in
Treasury
(6,966,951)
–
–
–
(21,500)
(6,988,451)
–
(1,000)
–
–
(44,253)
(7,033,704)
(14,067,408)
(21,101,112)
–
–
–
(151,607)
(21,252,719)
Stock
Compensation
Trust
$ (22,179)
–
482
–
–
(21,697)
427
–
1,885
–
–
(19,385)
–
Shares Issued
$25,386
915
1,786
539
–
28,626
517
–
1,151
893
–
31,187
–
31,187
918
2,197
4,946
–
39,248
(19,385)
236
2,713
–
–
(16,436)
Treasury
Cost
$(132,352)
–
–
–
(846)
(133,198)
–
(37)
–
–
(2,248)
(135,483)
–
(135,483)
–
–
–
(6,066)
(141,549)
Balances January 1, 2002
Restricted stock awards
Stock options exercised
Tax benefit related to stock plans
Treasury shares purchased
Balances December 31, 2002
Restricted stock awards
Restricted stock awards forfeited
Stock options exercised
Tax benefit related to stock plans
Treasury shares purchased
Balances December 31, 2003
3-for-1 stock split (January 2004)
Adjusted balances December 31,
2003
Restricted stock awards
Stock options exercised
Tax benefit related to stock plans
Treasury shares purchased
Balances December 31, 2004
The Mine Safety Appliances Company Stock Compensation Trust was established to fund certain benefit plans, including
employee and non-employee directors stock options and awards. Shares held by the Stock Compensation Trust, and the
corresponding cost of those shares, are reported as a reduction of common shares issued. Differences between the cost of the
shares held by the Stock Compensation Trust and the market value of shares released for stock-related benefits are reflected in
shares issued.
We have a Shareholder Rights Plan under which each outstanding share of common stock is granted one-ninth of a preferred
share purchase right. The rights are exercisable for a fraction of a share of preferred stock, only if a person or group acquires or
commences a tender offer for 15% or more of the company’s common stock. In the event a person or group acquires 15% or
more of the outstanding common stock, each right not owned by that person or group will entitle the holder to purchase that
number of shares of common stock having a value equal to twice the $225 exercise price. The Board of Directors may redeem
the rights for $.01 per right at any time until ten days after the announcement that a 15% position has been acquired. The rights
expire on February 21, 2007.
On January 28, 2004, a three-for-one stock split of both the issued and authorized common stock was distributed to
shareholders of record on January 16, 2004. Share and per share information in this report has been adjusted to reflect the split.
32
Note 5 – Segment Information
We are organized into three geographic operating segments: North America, Europe, and International. We are engaged in
the manufacture and sale of safety equipment, including respiratory protective equipment, head protection, eye and face
protection, hearing protectors, safety clothing, industrial emergency care products, mining safety equipment, thermal imaging
cameras, and monitoring instruments. Reportable segment information is presented in the following table:
(In thousands)
2004
Sales to external customers
Intercompany sales
Net income from continuing operations
Total assets
Interest income
Interest expense
Noncash items:
Depreciation and amortization
Pension income (expense)
Equity in earnings of affiliates
Income tax provision
Investments in affiliates
Property additions
Fixed assets
2003
Sales to external customers
Intercompany sales
Net income from continuing operations
Net income from discontinued
operations
Gain on sale of discontinued operations
Total assets continuing operations
Assets held for sale
Interest income
Interest expense
Noncash items:
Depreciation and amortization
Pension income (expense)
Equity in earnings of affiliates
Income tax provision
Investments in affiliates
Property additions
Fixed assets
2002
Sales to external customers
Intercompany sales
Net income from continuing operations
Net income from discontinued
operations
Total assets continuing operations
Assets held for sale
Interest income
Interest expense
Noncash items:
Depreciation and amortization
Pension income (expense)
Equity in earnings of affiliates
Income tax provision
Investments in affiliates
Property additions
Fixed assets
North
America
Europe
International
Reconciling
Items
Consolidated
Totals
$ 564,568
29,654
55,616
469,555
1,613
3,622
$ 173,012
57,453
6,747
221,447
187
61
$ 114,929
3,883
8,485
80,574
387
162
$ –
(90,990)
199
(37,466)
527
–
$ 852,509
–
71,047
734,110
2,714
3,845
18,682
11,687
–
33,910
366
16,238
90,121
452,567
24,215
39,131
2,685
13,658
419,472
2,311
576
4,357
17,071
14,999
–
18,930
366
13,221
93,296
369,728
21,472
25,933
3,864
363,999
45,062
424
4,501
16,012
16,360
–
13,884
1,374
15,538
100,213
5,212
(4,002)
–
4,937
–
6,440
23,505
146,162
49,499
2,795
–
–
190,179
–
115
123
4,972
(3,847)
–
2,069
–
3,976
19,918
122,377
35,733
2,519
–
145,663
–
142
67
4,446
(3,123)
–
1,056
–
3,698
25,329
1,602
(529)
56
3,689
209
4,652
10,090
97,744
3,061
6,349
–
–
68,611
–
278
84
1,144
(307)
(5)
2,985
153
2,423
7,319
72,206
3,116
2,372
–
50,364
–
281
201
1,047
(112)
23
1,647
158
831
4,824
–
32
–
285
–
–
–
–
(76,775)
649
–
–
(36,688)
–
102
–
21
–
–
851
–
8
27
115
(60,321)
389
–
(25,323)
–
106
–
20
–
–
283
–
5
41
25,496
7,188
56
42,821
575
27,330
123,716
696,473
–
48,924
2,685
13,658
641,574
2,311
1,071
4,564
23,208
10,845
(5)
24,835
519
19,628
120,560
564,426
–
31,213
3,864
534,703
45,062
953
4,769
21,525
13,125
23
16,870
1,532
20,072
130,407
Reconciling items consist primarily of intercompany eliminations and items reported at the corporate level.
33
Geographic information for sales to external customers, based on country of origin:
(In thousands)
External sales 2004 2003 2002
$356,434
50,925
157,067
$438,939
57,973
199,561
$536,486
70,281
245,742
United States
Germany
Other
Total external sales
852,509
696,473
564,426
Note 6 – 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)
Net income from continuing operations
Preferred stock dividends
Income available to common shareholders
Basic shares outstanding
Stock options
Diluted shares outstanding
Antidilutive stock options
Note 7 – Income Taxes
2004
2003 2002
$ 71,047 $ 48,924 $ 31,213
(47)
71,003 48,878 31,166
(44)
(46)
1,019
37,111 36,730 36,512
373
38,130 37,264 36,885
552
–
–
534
The U.S. and non-U.S. components of income before income taxes and provisions for income taxes are summarized
as follows:
Income From Continuing Operations Before Income Taxes
U.S. income
Non-U.S. income
Currency translation gains (losses)
Eliminations
Income Before Income Taxes
Provision For Income Taxes
Current
Federal
State
Non-U.S.
Total current provision
Deferred
Federal
State
Non-U.S.
Total deferred provision
Provision for Income Taxes
2004
(In thousands)
2003
2002
$ 84,896
28,229
647
96
113,868
$ 64,289
15,180
28
(5,738)
73,759
$ 47,850
10,190
(317)
(9,640)
48,083
24,016
4,566
7,133
35,715
3,403
1,025
2,678
7,106
42,821
9,608
2,526
7,779
19,913
5,251
937
(1,266)
4,922
24,835
8,115
610
3,380
12,105
4,101
936
(272)
4,765
16,870
34
The following is a reconciliation of the U.S. Federal income tax rates to the effective tax rate for continuing operations:
U.S. federal income tax rate
State income taxes—U.S.
Taxes on non-U.S. income
Research and development credits
Adjustment of prior years income taxes
Valuation allowances
Other
Effective income tax rate
2004
35.0%
3.3
(.1)
(.9)
1.0
(.5)
(.2)
37.6%
2003
35.0%
3.0
–
(1.1)
(1.1)
(1.6)
(.5)
33.7%
2002
35.0%
2.9
–
(.2)
(4.4)
3.2
(1.4)
35.1%
(In thousands)
2004
2003
Deferred tax assets
Postretirement benefits
Inventory reserves
Vacation allowances
Net operating losses
Post employment benefits
Foreign tax credit carryforwards (expiring between 2009 and 2014)
Liability insurance
Basis of capital assets
Intangibles
Warranties
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities
Property, plant and equipment
Pension
Other
Total deferred tax liabilities
Net deferred taxes
$ 5,871
5,814
986
5,568
2,246
1,321
3,579
5,745
1,248
2,637
5,925
40,940
–
40,940
(21,074)
(49,481)
(6,199)
(76,754)
(35,814)
$ 5,607
6,094
1,184
7,407
2,156
1,901
3,134
6,413
1,409
3,528
3,739
42,572
(587)
41,985
(20,046)
(44,761)
(7,086)
(71,893)
(29,908)
During 2004 and 2003, we released $0.6 million and $1.2 million, respectively, of foreign tax credit carry forward valuation
allowances based on the implementation of various tax planning strategies and an improved outlook for utilization of these
credits in future years.
Net operating loss carryforwards of approximately $13.5 million have no expiration date.
In October 2004, the President signed the American Jobs Creation Act of 2004, which provides a deduction for income
from qualified domestic production activities, which will be phased in from 2005 through 2010. The act also provides for a two-
year phase-out of the existing extra-territorial income exclusion for foreign sales that was viewed to be inconsistent with
international trade protocols by the European Union. Based on current earnings levels, we expect that the net effect of the
phase-out of the extra-territorial income exclusion and the phase-in of the new deduction will result in a decrease in our
effective tax rate for 2005 and 2006 of approximately 0.5 percentage points and approximately 1 percentage point thereafter.
Under the guidance in FASB Staff Position No. FAS 109-1, the new deduction will be treated as a “special deduction” as
described in FAS No. 109, Accounting for Income Taxes. Therefore, the special deduction has no effect on deferred tax assets
and liabilities existing as of the enactment date. The impact of this deduction will be reported in the period in which the
deduction is claimed on our tax return.
No deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries, which amounted to
$112.8 million as of December 31, 2004. These earnings are considered to be reinvested for an indefinite period of time. It is not
practicable to determine the deferred tax liability on these undistributed earnings. We are in the process of evaluating the impact
of the provisions of the American Jobs Creation Act of 2004 dealing with the limited opportunity in 2005 to repatriate some of
35
these undistributed earnings at a U.S. tax cost that may be lower than the normal tax cost on such distributions. We are awaiting
final guidance from the Internal Revenue Service (“IRS”) to complete that evaluation, which may result in our decision to remit a
portion of these undistributed earnings in 2005; however, we cannot currently estimate the amount of such distribution that may
be reasonably possible. The range of possible amounts that we are considering for repatriation under this provision is between
zero and approximately $50.0 million. The related potential range of income tax payable on amounts considered for repatriation
is between zero and approximately $3 million.
The determination of annual income tax expense takes into consideration amounts which may be needed to cover
exposures for open tax years. Our federal income tax returns for the years 1995 through 2001 remain under audit with the only
open issue relating to the calculation of research and development tax credits. We believe that we have made adequate provision
for income taxes and interest which may become payable or receivable for the years not yet settled. We do not expect any
material adverse impact on earnings to result from the resolution of matters related to open tax years and we are optimistic that
we can reach resolution with the IRS during 2005. To the extent that we are successful in sustaining our position that no
adjustment should be made to research and development credits claimed over the period covered by the examination, tax
reserves previously established based upon the examining agent's disallowance of the claimed credits would be released, reducing
tax expense in the period of settlement. Furthermore, such a final settlement would have a beneficial impact on interest costs.
Note 8 – Stock Plans
The 1998 Management Share Incentive Plan provides for grants of restricted stock awards and stock options to eligible key
employees through March 2008. The 1990 Non-Employee Directors’ Stock Option Plan, as amended April 1, 2001, provides for
annual grants of stock options and restricted stock awards to eligible directors. As of December 31, 2004, there were 1,361,153
shares and 143,520 shares, respectively, reserved for future grants under these plans.
Restricted stock awards are granted without payment to the company in consideration of services to be performed in the
ensuing three years (four years for employee awards prior to 2002). Restricted stock awards of 45,098 shares (fair value of $1.2
million), 81,705 shares (fair value of $0.9 million), and 69,594 shares (fair value of $0.9 million) were granted in 2004, 2003, and
2002, respectively. Restricted stock awards expense charged to operations was approximately $0.9 million in 2004, $0.7 million
in 2003, and $0.8 million in 2002.
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). Stock options granted in 2004 and 2003 are exercisable
beginning one year after the grant date. Options granted prior to 2003 were exercisable six months after the grant date.
The weighted average fair value of options granted was $8.63 per share in 2004, $3.33 per share in 2003, and $4.38 per
share in 2002.
During November 2003, we made a special distribution of $1.46 per common share to shareholders of record on
November 14, 2003. For options outstanding as of November 12, 2003, the ex-distribution date, option shares and exercise
prices were adjusted to reflect the change in intrinsic value that resulted from the special distribution. The adjustments were
based on the ratio of the change in the market price of common stock that occurred as a result of the special distribution.
The following table summarizes information about options outstanding and exercisable at December 31, 2004:
Range of Exercise Weighted-Average
Exercise Price Remaining Life
Outstanding
Price per Share
$5.88 - $9.03
$10.65 - $13.57
$25.07 - $28.06
$5.88 - $28.06
$5.88 - $13.57
Exercisable
Shares
478,828
1,016,811
297,065
1,792,704
1,495,639
$ 7.35
11.29
25.21
12.55
10.03
5.7 years
7.7
9.1
7.4
7.0
36
A summary of option activity under the two plans follows:
Outstanding January 1, 2002
Granted
Exercised
Outstanding December 31, 2002
Granted
Exercised before adjustment
Adjustment for special distribution
Exercised after adjustment
Outstanding December 31, 2003
Granted
Exercised
Outstanding December 31, 2004
Shares
1,240,461
552,165
(313,812)
1,478,814
744,630
(259,752)
153,057
(101,199)
2,015,550
297,065
(519,911)
1,792,704
Weighted
Average
Exercise Price
$ 7.52
13.17
7.23
9.69
11.58
8.16
(.77)
9.06
9.88
25.21
9.45
12.55
Exercisable
at Year-
end
1,478,814
1,270,920
1,495,639
Note 9 – Accounts Receivable Securitization
In August 2004, we terminated our securitization arrangement with a financial institution under which Mine Safety Funding
Corporation, a consolidated wholly-owned bankruptcy remote subsidiary of the company, could sell up to $30.0 million of
eligible accounts receivable to a multi-seller asset-backed commercial paper issuer. We terminated this arrangement because we
no longer required the source of funding that the securitization provided.
At December 31, 2003, $15.0 million of securitized accounts receivable had been removed from our balance sheet under
this program and our retained interest in accounts receivable available for securitization was $40.0 million.
Note 10 – Long-Term Debt
U.S.
Industrial development debt issues payable through 2022, 1.34%
Series B Senior Notes payable through 2006, 7.69%
Senior Notes payable through 2012, 8.39%
Other
International
Various notes payable through 2006, 9.63% to 19.0%
Total
Amounts due within one year
Long-term debt
(In thousands)
2004
2003
$10,750
8,000
39,585
100
$ 10,750
12,000
40,000
150
524
58,959
4,496
54,463
1,853
64,753
4,838
59,915
Approximate maturities of these obligations over the next five years are $4.5 million in 2005, $8.1 million in 2006, $7.9
million in 2008, and $9.7 million in 2009, and $28.8 million thereafter. Some debt agreements require the company to maintain
certain financial ratios and minimum net worth and contain restrictions on the total amount of debt. We were in compliance
with our debt covenants as of December 31, 2004.
Note 11 – Pensions and Other Postretirement Benefits
We maintain various defined benefit and defined contribution plans covering the majority of our employees. The principal
U.S. plan is funded in compliance with the Employee Retirement Income Security Act (ERISA). It is our general policy to fund
current costs for the international plans except in Germany and Mexico, 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.
We provide certain health care benefits and limited life insurance for retired employees and their eligible dependents.
37
We use a January 1 measurement date for our plans. Information pertaining to defined benefit pension plans and other
postretirement benefits plans is provided in the following table.
Change in Benefit Obligations
Benefit obligations at January 1
Service cost
Interest cost
Employee contributions
Plan amendments
Actuarial losses
Benefits paid
Curtailments
Currency translation effects
Benefit obligations at December 31
Change in Plan Assets
Fair value of plan assets at January 1
Actual return on plan assets
Employer contributions
Employee contributions
Benefits paid
Section 420 transfer to retiree medical plan
Reimbursement of German benefits
Currency translation effects
Fair value of plan assets at December 31
Funded Status
Funded status at December 31
Unrecognized transition gains
Unrecognized prior service cost
Unrecognized net actuarial (gains) losses
Prepaid (accrued) benefit cost
Amounts Recognized in the Balance Sheet
Prepaid benefit cost
Accrued benefit liability
Intangible asset
Minimum pension liability adjustments
Prepaid (accrued) benefit cost
Accumulated Benefit Obligation for all Defined
Benefit Plans
Components of Net Periodic Benefit Cost
(Credit)
Service cost
Interest cost
Expected return on plan assets
Amortization of transition amounts
Amortization of prior service cost
Recognized net actuarial (gains) losses
Settlement loss
Curtailment gain
Net periodic benefit (credit) cost
(In thousands)
Pension Benefits
Other Benefits
2004
2003
2004
2003
$ 244,340
7,383
14,661
698
68
11,675
(13,701)
(568)
5,489
270,045
$ 218,010
6,802
14,036
223
–
10,780
(13,178)
(2,143)
9,810
244,340
$ 22,873
513
1,505
–
–
3,589
(2,093)
–
–
$ 20,677
423
1,395
–
–
2,509
(2,131)
–
–
26,387
22,873
356,477
38,570
3,865
698
(13,701)
(1,950)
(1,881)
1,117
383,195
113,150
325
1,103
(44,093)
70,485
131,496
(64,659)
412
3,236
70,485
269,117
97,710
3,822
223
(13,178)
(1,900)
(1,759)
2,442
356,477
112,137
342
1,323
(46,909)
66,893
121,290
(56,785)
524
1,864
66,893
–
–
143
–
(2,093)
1,950
–
–
–
(26,387)
–
(1,682)
11,447
(16,622)
–
(16,622)
–
–
(16,622)
–
–
231
–
(2,131)
1,900
–
–
–
(22,873)
–
(1,910)
8,686
(16,097)
–
(16,097)
–
–
(16,097)
222,297
202,856
–
–
2004
Pension Benefits
2003
2002
2004
2003
2002
Other Benefits
(In thousands)
$ 7,383
14,661
(29,123)
28
299
(661)
225
–
(7,188)
$ 6,802
14,036
(27,785)
(509)
310
(1,677)
–
(2,022)
(10,845)
$ 5,378
12,917
(27,332)
(592)
298
(3,794)
–
–
(13,125)
$ 513
1,505
$ 423
1,395
$ 392
1,404
–
–
(228)
828
–
–
2,618
–
–
(228)
590
–
–
2,180
–
–
(138)
552
–
–
2,210
38
Pension Benefits Other Benefits
2003
2004
2003
2004
Assumptions used to determine benefit obligations
Discount rate
Rate of compensation increase
Assumptions used to determine net periodic
benefit cost
Discount rate
Expected return on plan assets
Rate of compensation increases
5.8%
3.4%
6.1%
3.5%
6.0%
–
6.3%
–
6.1%
8.5%
3.5%
6.3%
8.5%
3.5%
6.3%
–
–
6.5%
–
–
The expected return on assets for the 2004 net periodic pension cost was determined by multiplying the expected returns
of each asset class (based on historical returns) by the expected percentage of the total portfolio invested in that asset class.
A total return was determined by summing the expected returns over all asset classes.
Asset Category
Equity securities
Debt securities
Real estate
Cash/other
Total
Plan Assets at
December 31
2003
2004
75.5%
22.0%
0.2%
2.3%
100.0%
79.2%
15.3%
0.3%
5.2%
100.0%
Investment policies are determined by the Plan’s Investment Committee and set forth in the Plan’s Investment Policy. Asset
managers are granted discretion for determining sector mix, selecting securities and timing transactions, subject to the guidelines
of the Investment Policy. An aggressive, flexible management of the portfolio is permitted. No target asset allocations are set
forth in the Investment Policy.
We expect to make net contributions of $1.6 million to our pension plans in 2005.
For measurement purposes, a 7.5% increase in the costs of covered health care benefits was assumed for the year 2004,
decreasing by .5% for each successive year to 4% in 2011 and thereafter. A one-percentage-point change in assumed health care
cost trend rates would have increased or decreased the other postretirement benefit obligations and current year plan expense
by approximately $1.5 million and $0.2 million, respectively.
Expense for defined contribution pension plans was $3.8 million in 2004, $3.4 million in 2003, and $3.0 million in 2002.
On December 31, 2003, the U.S. defined benefit pension plan owned 2,533,500 shares (market value $67.1 million) of our
common stock. During 2004, the pension plan sold all shares of our common stock. During 2004 and 2003, the pension plan
received dividends of approximately $0.2 million and $4.5 million, respectively, on these shares.
The estimated pension benefits to be paid under our defined benefit pension plans during the next five years are $13.2
million in 2005, $13.1 million in 2006, $13.3 million in 2007, $13.7 million in 2008, $14.1 million in 2009, and are expected to
aggregate $83.2 million for the five years thereafter. The estimated other postretirement benefits to be paid during the next five
years are $1.7 million in 2005, $1.6 million in 2006, $1.6 million in 2007, $1.6 million in 2008, $1.6 million in 2009, and are
expected to aggregate $9.1 million for the five years thereafter.
In December 2003, Congress enacted the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The
act introduces a prescription drug benefit under Medicare that provides several options for Medicare eligible participants and
employers, including a federal subsidy payable to companies that elect to provide a retiree prescription drug benefit that is at
least actuarially equivalent to Medicare Part D. The act did not have any effect on our postretirement benefit costs because our
plans generally do not provide medical benefits to Medicare eligible retirees.
39
Note 12 – Other Income
Interest
Rent
Dividends
Dispositions of assets
Other, net
Total
Note 13 – Leases
2004
$ 2,714
-
610
1,008
672
5,004
(In thousands)
2003
$ 1,071
532
1,048
(826)
(101)
1,724
2002
$ 953
710
725
(864)
747
2,271
We lease office space, manufacturing and warehouse facilities, automobiles and other equipment under operating lease
arrangements. Rent expense was $9.9 million in 2004, $9.1 million in 2003, and $6.9 million in 2002. Minimum rental
commitments under noncancelable leases are $6.4 million in 2005, $4.8 million in 2006, $3.9 million in 2007, $3.2 million in 2008,
and $3.3 million in 2009, and $7.0 million thereafter.
Note 14 – Goodwill and Intangible Assets
During 2002, we adopted FAS No. 142, Goodwill and Other Intangible Assets. Under this standard, goodwill and other
intangible assets with indefinite lives are not amortized, but are subject to impairment tests that must be performed at least
annually. Transitional impairment tests performed as of January 1, 2002 indicated that no goodwill impairment existed and as a
result we did not recognize a transitional impairment loss. Annual goodwill impairment tests performed during the fourth
quarters of 2003 and 2004 also indicated that no goodwill impairment existed and as a result we have not recognized an
impairment loss.
Changes in goodwill and intangible assets, net of accumulated amortization, during the year ended December 31, 2004 were
as follows:
Net balances at January 1, 2004
Goodwill acquired
Intangibles acquired
Amortization expense
Currency translation and other
Net balances at December 31, 2004
(In thousands)
Goodwill
$ 44,810
3,504
–
–
1,181
49,495
Intangibles
$ 3,307
–
–
(702)
–
2,605
At December 31, 2004, goodwill of approximately $35.1 million and $14.4 million related to the North American and
European operating segments, respectively. Approximately $2.9 million of the goodwill acquired during 2004 related to the
Sordin acquisition, the remainder related primarily to additional consideration paid on previous acquisitions.
Intangible assets include patents and license agreements that will be fully amortized in 2005 and 2008, respectively. These
items are included in other noncurrent assets. At December 31, 2004, intangible assets totaled $2.6 million, net of accumulated
amortization of $3.6 million. Intangible asset amortization expense is expected to be approximately $0.7 million annually from
2005 through 2008.
Note 15 – Short-Term Debt
Short-term bank lines of credit amounted to $20.6 million of which $18.7 million was unused at December 31, 2004.
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 $1.9
million and $0.8 million at December 31, 2004 and 2003, respectively. The average month-end balance of total short-term
borrowings during 2004 was $0.9 million while the maximum month-end balance of $1.9 million occurred at December 31, 2004.
The weighted average interest rates on short-term borrowings at December 31, 2004 and 2003, were 7% and 3%, respectively.
40
Note 16 – Derivative Financial Instruments
On April 6, 2004, we entered into an eight year interest rate swap agreement. Under the terms of the agreement, we
receive a fixed interest rate of 8.39% and pay a floating interest rate based on LIBOR. The notional amount of the swap is initially
$20.0 million and declines $4.0 million per year beginning in 2008. The interest rate swap has been designated as a fair value
hedge of a portion of our fixed rate 8.39% Senior Notes.
In order to account for these derivatives as hedges, the interest rate swap must be highly effective at offsetting changes in
the fair value of the hedged debt. We have assumed that there is no ineffectiveness in the hedge, since all of the critical terms of
the hedge match the underlying terms of the hedged debt.
The fair value of the interest rate swap at December 31, 2004, has been recorded as a liability of $0.4 million that is
included in other noncurrent liabilities, with an offsetting reduction in the carrying value of the long-term debt.
As a result of entering into the interest rate swap, we have increased our exposure to interest rate fluctuations.
Differences between the fixed rate amounts received and the variable rate amount paid are recognized in interest expense on an
ongoing basis. This rate difference resulted in a reduction in interest expense of approximately $0.3 million during 2004.
On March 5, 2004, we terminated an interest rate swap agreement which we had entered into on December 2, 2003. The
termination of this agreement resulted in a realized gain of approximately $0.7 million, which was reported as a reduction of
interest expense during 2004.
Note 17 – Acquisitions
On June 30, 2004, we acquired Sordin AB of Varnamo, Sweden, a leading manufacturer of passive and electronic hearing
protection designed for the industrial, law enforcement and military markets. We believe the acquisition of Sordin enhances our
position as a provider of modern, leading-edge hearing protective devices. Many of Sordin’s products are compatible with our
other safety products, including our flagship V-Gard® Hard Hat. Sordin also developed the modular integrated communications
system currently being used with the Advanced Combat Helmet that we manufacture for the U.S. Army.
The initial purchase price was approximately $4.3 million of cash and includes amounts paid to the previous owners and
other direct external costs associated with the acquisition. The acquisition was recorded using the purchase method of
accounting and, accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated
fair values at the acquisition date.
The following table summarizes the estimated fair values of the Sordin assets acquired and the liabilities assumed at the date
of acquisition:
(In thousands)
Current assets
Property
Goodwill
Total assets acquired
Current liabilities
Other liabilities
Total liabilities assumed
Net assets acquired
June 30
2004
$ 3,890
845
2,855
7,590
2,320
957
3,277
4,313
Goodwill related to the Sordin acquisition, which is included in the European operating segment, is not expected to be
deductible for tax purposes.
The acquisition agreement provides for additional consideration, not to exceed approximately $5.4 million, to be paid to the
former owners annually based on Sordin’s earnings during the period from July 1, 2004 through June 30, 2009. Approximately 40
percent of the additional consideration, which will be paid to former owners who comprise the current Sordin management
team, will be recognized as compensation expense. The remainder will be charged to goodwill.
On April 30, 2002, we acquired CGF Gallet of Lyon, France, the leading European manufacturer of protective helmets for
the fire service, as well as head protection for the police and military. The acquisition was recorded using the purchase method
of accounting. The purchase price of $16.6 million was allocated to assets acquired and liabilities assumed based on estimated fair
values and included $7.9 million in goodwill, which is included in the European operating segment.
41
Sordin and Gallet operating results have been included in our consolidated financial statements from the acquisition dates.
The following pro forma summary presents our consolidated results as if the Sordin and Gallet acquisitions had occurred at the
beginning of 2002. The pro forma information does not necessarily reflect the actual results that would have occurred and is not
necessarily indicative of future results of operations for the combined companies.
Year ended December 31
2004
2003
2002
(In thousands, except per share amounts)
Net sales
Net income from continuing operations
Basic earnings per share – continuing operations
Diluted earnings per share – continuing operations
Note 18 – Discontinued Operations
$856,546
71,514
1.93
1.87
$705,273
49,728
1.35
1.33
$584,018
32,715
0.89
0.89
On September 12, 2003, we sold certain assets of the Callery Chemical Division to BASF Corporation for $64.6 million. The
operating results of the Callery Chemical Division and the gain on the sale of the division, as summarized below, have been
classified as discontinued operations for all periods presented.
Net sales
Income before income taxes
Provision for income taxes
Net income from discontinued operations
Gain on sale of discontinued operations
Provision for income taxes
Gain on sale of discontinued operations – after tax
(In thousands)
2003
$ 21,345
2002
$ 29,473
6,147
2,283
3,864
4,210
1,525
2,685
$ 22,390
8,732
13,658
At December 31, 2003, approximately $2.3 million of trade receivables and other current assets related to the Callery
Chemical Division operation were reported as assets held for sale. These amounts were received during the first quarter
of 2004.
Note 19 – Contingencies
Various lawsuits and claims arising in the normal course of business are pending against us. These lawsuits are primarily
product liability claims. We are presently named as a defendant in approximately 2,400 lawsuits primarily involving respiratory
protection products allegedly manufactured and sold by us. Collectively, these lawsuits represent a total of approximately 32,000
plaintiffs. Approximately 90% of these lawsuits involve plaintiffs alleging they suffer from silicosis, with the remainder alleging they
suffer from other or combined injuries, including asbestosis. These lawsuits typically allege that these conditions resulted in part
from respirators that were negligently designed or manufactured by us. Consistent with the experience of other companies
involved in silica and asbestos-related litigation, there has been an increase in the number of asserted claims that could potentially
involve us. We cannot determine our potential maximum liability for such claims, in part because the defendants in these lawsuits
are often numerous, and the claims generally do not specify the amount of damages sought.
With some limited exceptions, we maintain insurance against product liability claims. We also maintain a reserve for
uninsured product liability based on expected settlement charges for pending claims and an estimate of unreported claims
derived from experience, sales volumes, and other relevant information. We reevaluate our exposures on an ongoing basis and
make adjustments to reserves as appropriate. Based on information currently available, we believe that the disposition of matters
that are pending will not have a materially adverse effect on our financial condition.
In connection with our sale of the Callery Chemical facility in Evans City, Pennsylvania, we have retained responsibility for
certain environmental costs at this site, where relatively low levels of contamination are known to exist. Under the terms of the
asset purchase agreement with BASF, our maximum liability for these matters is capped at $50.0 million. Based on environmental
studies performed prior to the sale of the division, we do not believe that our potential exposure under the terms of this
agreement will materially affect our financial condition.
42
Note 20 – Recently Issued Accounting Standards
In November 2004, the Financial Accounting Standards Board (FASB) issued FAS No. 151, Inventory Costs, an Amendment
of ARB No. 43, Chapter 4. FAS No. 151 requires the exclusion of certain costs from inventories and the allocation of fixed
production overheads to inventories to be based on the normal capacity of the production facilities. The provisions of this
Statement are effective for costs incurred after December 31, 2005. We are currently evaluating the effect of the adoption of
this standard, however, we do not expect it will have a material effect on our consolidated results of operations or financial
condition.
In December 2004, the FASB issued FAS No. 123R, Share-Based Payment, which is a revision of FAS No. 123, Accounting
for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related
implementation guidance. FAS No. 123R establishes standards for accounting for transactions in which an entity exchanges its
equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods
or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those
equity instruments. FAS No. 123R requires an entity to recognize the cost of employee services received in share-based payment
transactions, thereby reflecting the economic consequences of those transactions in the financial statements. This Statement
applies to all awards granted on or after July 1, 2005, and to awards modified, repurchased, or cancelled after that date. We will
recognize compensation cost on a prospective basis beginning July 1, 2005, for the portion of outstanding awards for which the
requisite service has not yet been rendered, based on the grant-date fair value of these awards calculated under FAS No. 123 for
pro forma disclosures. We expect that adopting this Statement will not have a material effect on our 2005 results.
In December 2004, the FASB issued FASB Staff Position No. FAS 109-1, Application of FASB Statement No. 109, Accounting
for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004,
which states that the FASB staff believes that the qualified production activities deduction provided by the American Jobs
Creation Act of 2004 should be accounted for as a special deduction in accordance with FASB Statement No. 109. This
Statement was effective upon issuance.
In December 2004, the FASB issued FASB Staff Position No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004, which states that the FASB staff believes that the
lack of clarification of certain provisions within the Act and the timing of the enactment necessitate a practical exemption from
the FAS 109 requirement to reflect in the period of enactment the effect of a new tax law. Accordingly, an enterprise is allowed
time beyond the financial reporting period of enactment to evaluate the effect of the Act on its plan for reinvestment or
repatriation of foreign earnings for purposes of applying FAS 109.
Note 21 – Quarterly Financial Information (Unaudited)
2004
2003
(In thousands, except
earnings per share)
Net sales
Gross profit
Net income from continuing
operations
Net income from
discontinued operations
Gain on sale of discontinued
operations – after tax
Quarters
Quarters
1st
2nd
3rd
4th
Year
1st
2nd
3rd
4th
Year
$ 194,490
$ 213,114
$ 219,962 $ 224,943
$ 852,509
$ 160,391 $ 175,939
$ 171,927
$ 188,216
$ 696,473
81,803
84,931
88,374
85,312
340,420
63,091
68,998
66,246
75,865
274,200
16,138
18,118
19,111
17,680
71,047
10,499
12,192
10,984
15,249
48,924
–
–
–
–
–
1,514
1,273
(102)
–
2,685
–
–
–
–
–
–
–
13,658
–
13,658
Net income
16,138
18,118
19,111
17,680
71,047
12,013
13,465
24,540
15,249
65,267
Basic earnings per share:
Continuing operations
0.44
0.49
0.51
0.47
1.91
.29
.33
.30
.41
1.33
Discontinued operations
–
–
–
–
–
.04
.04
.37
–
.45
Total
0.44
0.49
0.51
0.47
1.91
Diluted earnings per share:
Continuing operations
0.43
0.48
0.50
0.46
1.86
.33
.29
.37
.33
.67
.29
.41
1.78
.40
1.31
Discontinued operations
–
–
–
–
–
.04
.04
.36
–
.44
Total
0.43
0.48
0.50
0.46
1.86
.33
.37
.65
.40
1.75
43
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Based on their evaluation as of the end of the period covered by this Form
10-K, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the
“Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.
(b) Changes in internal control. There were no changes in the Company’s internal control over financial reporting that occurred
during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
See Item 8. Financial Statements and Supplementary Data—“Management’s Report on Internal Control Over Financial
Reporting” and “Report of Independent Registered Public Accounting Firm.”
Item 9B. Other Information
None.
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 and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accountant Fees and Services
Incorporated by reference herein pursuant to Rule 12b - 23 are (1) “Election of Directors,” (2) “Other Information
Concerning Directors and Officers” (except as excluded below), (3) “Stock Ownership,” and (4) “Selection of Independent
Registered Public Accounting Firm,” appearing in the Proxy Statement filed pursuant to Regulation 14A in connection with the
registrant’s Annual Meeting of Shareholders to be held on May 10, 2005. The information appearing in such Proxy Statement
under the captions “Compensation Committee Report on Executive Compensation,” “Audit Committee Report” and the other
information appearing in such Proxy Statement and not specifically incorporated by reference herein is not incorporated herein.
The Company has adopted a Code of Ethics applicable to its principal executive officer, principal financial officer and principal
accounting officer and other Company officials. The text of the Code of Ethics is available on the Company’s Internet site at
www.MSANet.com. Any amendment to, or waiver of, a required provision of the Code of Ethics that applies to the Company’s
principal executive, financial or accounting officer will also be posted on the Company’s Internet site at that address.
44
The following table sets forth information as of December 31, 2004 concerning common stock issuable under the Company’s
equity compensation plans.
Plan Category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
Equity compensation plans approved by security holders
Equity compensation plans not approved by
security holders
Total
1,792,704
$ 12.55
1,504,673
None
1,792,704
–
$ 12.55
None
1,504,673
*
Includes 1,361,153 shares available for issuance under the Company’s 1998 Management Share Incentive Plan (MSIP) and
143,520 shares available for issuance under the Company’s 1990 Non-Employee Directors’ Stock Option Plan (DSOP). In
addition to stock options, the DSOP authorizes the issuance of restricted stock awards, and the MSIP authorizes the
issuance of stock appreciation rights, restricted stock, performance awards and other stock and stock-based awards.
45
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements and Report of Independent Registered Public Accounting Firm (see Part II, Item 8 of this
Form 10-K).
The following information is filed as part of this Form 10-K.
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Statement of Income - three years ended December 31, 2004
Consolidated Balance Sheet - December 31, 2004 and 2003
Consolidated Statement of Cash Flows - three years ended December 31, 2004
Consolidated Statement of Changes in Retained Earnings and Accumulated Other
Comprehensive Income - three years ended December 31, 2004
Notes to Consolidated Financial Statements
Page
24
25
26
27
28
29
30
(a) 2. The following additional financial information for the three years ended December 31, 2004 is filed with the report and
should be read in conjunction with the above financial statements:
Report of Independent Registered Public Accounting Firm 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
consolidated financial statements and consolidated notes to the financial statements listed above.
(a) 3. Exhibits
(3)(i)
(3)(ii)
(4)
(10)(a) *
(10)(b) *
(10)(c) *
Restated Articles of Incorporation as amended to January 16, 2004, filed as Exhibit 3(i) to Form 10-K on
March 15, 2004, is incorporated herein by reference.
By-laws of the registrant, as amended on October 26, 2004, filed as Exhibit 3.1 to Form 8-K on October
27, 2004, is incorporated herein by reference.
Rights Agreement dated as of February 10, 1997 between the registrant and Norwest Bank Minnesota,
N.A., as Rights Agent, filed as Exhibit (4) to Form 10-K on March 27, 2002, is incorporated herein by
reference.
1998 Management Share Incentive Plan, filed as Exhibit 10(b) to Form 10-K on March 28, 2003, is
incorporated herein by reference.
Retirement Plan for Directors, as amended effective April 1, 2001, filed as Exhibit 10(c) to Form 10-K on
March 27, 2001, is incorporated herein by reference.
Supplemental Pension Plan as of May 5, 1998, filed as Exhibit 10(d) to Form 10-Q on August 12, 2003, is
incorporated herein by reference.
(10)(d) * 1990 Non-Employee Directors’ Stock Option Plan as amended effective April 29, 2004, filed herewith.
(10)(e) *
Executive Insurance Program as Amended and Restated as of January 1, 2001, filed as Exhibit 10(g) to
Form 10-K on March 27, 2001, is incorporated herein by reference.
46
(10)(f) *
Annual Incentive Bonus Plan as of May 5, 1998, filed as Exhibit 10(g) to Form 10-Q on August 12, 2003, is
incorporated herein by reference.
(10)(g) *
Form of Severance Agreement as of May 20, 1998 between the registrant and John T. Ryan III, filed as
Exhibit 10(h) to Form 10-Q on August 12, 2003, is incorporated herein by reference.
(10)(h) *
Form of Severance Agreement between the registrant and the other executive officers filed as Exhibit
10(i) to Form 10-Q on August 12, 2003, is incorporated herein by reference.
(10)(i) *
(10)(j)
First Amendment to the 1998 Management Share Incentive Plan as of March 10, 1999, filed as Exhibit 10(i)
to Form 10-Q on August 6, 2004, is incorporated herein by reference.
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 as Exhibit 10(k) to Form 10-K on March 28, 2003, is
incorporated herein by reference.
(10)(k) *
MSA Supplemental Savings Plan, as amended and restated effective January 1, 2003, filed as Exhibit 10(l) to
Form 10-K on March 28, 2003, is incorporated herein by reference.
(21)
(23)
Affiliates of the registrant is filed herewith.
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm is filed herewith.
(31)(1)
Certification of J. T. Ryan III pursuant to Rule 13a-14(a) is filed herewith.
(31)(2)
Certification of D. L. Zeitler pursuant to Rule 13a-14(a) is filed herewith.
(32)
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.(S)1350 is filed
herewith.
*
The exhibits marked by an asterisk are management contracts or compensatory plans or arrangements.
The registrant agrees to furnish to the Commission upon request copies of all instruments with respect to long-term debt
referred to in Note 10 of the Notes to Consolidated Financial Statements filed as part of Item 8 of this annual report
which have not been previously filed or are not filed herewith.
47
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.
SIGNATURES
MINE SAFETY APPLIANCES COMPANY
March 14, 2005
(Date)
By
/s/ John T. Ryan III
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
/s/ John T. Ryan III
John T. Ryan III
/s/ Dennis L. Zeitler
Dennis L. Zeitler
/s/ Calvin A. Campbell, Jr.
Calvin A. Campbell, Jr.
/s/ James A. Cederna
James A. Cederna
/s/ Thomas B. Hotopp
Thomas B. Hotopp
/s/ Diane M. Pearse
Diane M. Pearse
/s/ L. Edward Shaw, Jr.
L. Edward Shaw, Jr.
/s/ John C. Unkovic
John C. Unkovic
/s/ Thomas H. Witmer
Thomas H. Witmer
Director; Chairman of the Board and Chief
Executive Officer
Date
March 14, 2005
Vice President - Finance; Principal Financial and
Accounting Officer
March 14, 2005
March 14, 2005
March 14, 2005
March 14, 2005
March 14, 2005
March 14, 2005
March 14, 2005
March 14, 2005
Director
Director
Director
Director
Director
Director
Director
48
MINE SAFETY APPLIANCES COMPANY
The registrant’s present affiliates include the following:
Name
Compañia MSA de Argentina S.A.
MSA (Aust.) Pty. Limited
MSA-Auer Sicherheitstechnik Vertriebs GmbH
MSA Export Limited
MSA Belgium NV
MSA do Brasil Ltda.
MSA Canada
MSA de Chile Ltda.
Wuxi-MSA Safety Equipment Co. Ltd.
MSA International, Inc.
MSA de France
MSA Gallet
MSA Auer
MSA Europe
MSA-Auer Hungaria Safety Technology
MSA Italiana S.p.A.
MSA Japan Ltd.
MSA Safety Malaysia Snd Bhd
MSA de Mexico, S.A. de C.V.
MSA Nederland, B.V.
MSA del Peru S.A.C.
MSA-Auer Polska Sp. z o.o.
MSA (Britain) Limited
MSA S.E. Asia Pte. Ltd.
MSA Africa (Pty.) Ltd.
MSA Española S.A.
MSA Nordic
Sordin AB
Aritron Instrument A.G.
MSA Zimbabwe (Pvt.) Limited
EXHIBIT 21
State or Other
Jurisdiction of
Incorporation
Argentina
Australia
Austria
Barbados
Belgium
Brazil
Canada
Chile
China
Delaware
France
France
Germany
Germany
Hungary
Italy
Japan
Malaysia
Mexico
Netherlands
Peru
Poland
Scotland
Singapore
South Africa
Spain
Sweden
Sweden
Switzerland
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.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-22284,
No. 33-43696, No. 333-51983 and No. 333-121196) of Mine Safety Appliances Company of our reports dated March 7, 2005
relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal
control over financial reporting and the effectiveness of internal control over financial reporting, which appear in this
Form 10-K.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 14, 2005
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)
I, John T. Ryan III, certify that:
1. I have reviewed this annual report on Form 10-K of Mine Safety Appliances Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual
report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 14, 2005
/s/ John T. Ryan III
John T. Ryan III
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a)
I, Dennis L. Zeitler, certify that:
1. I have reviewed this annual report on Form 10-K of Mine Safety Appliances Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual
report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 14, 2005
/s/ Dennis L. Zeitler
Dennis L. Zeitler
Chief Financial Officer
CERTIFICATION
EXHIBIT 32
Pursuant to 18 U.S.C. (S) 1350, the undersigned officers of Mine Safety Appliances Company (the “Company”), hereby
certify, to the best of their knowledge, that the Company’s Annual Report on Form 10-K for the year ended December 31,
2004 (the “Report”) fully complies with the requirements of Section 13 (a) or 15 (d), as applicable, of the Securities Exchange
Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: March 14, 2005
/s/ John T. Ryan III
Name: John T. Ryan III
Title: Chief Executive Officer
/s/ Dennis L. Zeitler
Name: Dennis L. Zeitler
Title: Chief Financial Officer
Report of Independent Registered Public Accounting Firm on
Financial Statement Schedule
To the Board of Directors
of Mine Safety Appliances Company:
Our audits of the consolidated financial statements, of management’s assessment of the effectiveness of internal control
over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated
March 7, 2005 appearing on page 25 of this Annual Report on Form 10-K also included an audit of the financial statement
schedule listed in Item 15(a)(2) 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.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 7, 2005
F-1
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 2004
(IN THOUSANDS)
SCHEDULE II
Allowance for doubtful accounts:
Balance at beginning of year
Additions—
Charged to costs and expenses
Deductions—
Deductions from reserves (1)
2004
2003
2002
$ 6,418
$ 4,134
$ 2,956
1,703
573
2,718
434
1,538
360
Balance at end of year
$ 7,548
$ 6,418
$ 4,134
(1) Bad debts written off, net of recoveries.
F-2
40313 041218 MSA Addition Page 4/5/05 2:10 PM Page 56
PRINCIPAL OPERATIONS
DIRECTORS AND CORPORATE OFFICERS
North America
Mine Safety Appliances Company,
Corporate Headquarters – Pittsburgh, Pa.
Manufacturing – Clifton, N.J.; Cranberry Twp., Pa.;
Englewood, Co.; Evans City, Pa.;
Jacksonville, N.C.; Murrysville, Pa.;
Newport,Vt.; Sparks, Md.
Research – John T. Ryan Memorial Laboratory,
Cranberry Twp., Pa.
MSA Canada, Toronto; MSA Gallet, Quebec
MSA de Mexico, S.A. de C.V., Mexico City
Europe
MSA Europe (Headquarters), Berlin, Germany
Aritron Instrument A.G., Forch, Switzerland
MSA-Auer Almay, Almaty, Kazakhstan (Service Center/Office)
MSA Auer, Berlin, Germany
MSA-Auer GmbH, Czech o.z., Praha, Czech (Service Center)
MSA-Auer Polska Sp. z o.o., Warsaw, Poland
MSA-Auer Poznan, Poznan, Poland (Service Center)
MSA-Auer Hungaria Safety Technology, Budapest, Hungary
MSA-Auer Kiev, Kyiv, Ukraine (Representative Office)
MSA-Auer Miskolc, Tiszaujvaros, Hungary (Service Center)
MSA-Auer GmbH Romania, o.z., Bucuresti, Romania (Branch)
MSA-Auer Petrosani, Petrosani, Romania (Service Center)
MSA-Auer Moscow, Moscow, Russia (Representative Office)
MSA-Auer Sicherheitstechnik Vertriebs GmbH,
Absdorf,Austria
MSA-Auer GmbH, Slovakia o.z., Pezinok, Slovakia
(Service Center)
MSA-Auer Szczecin, Szczecin, Poland (Service Center)
MSA Belgium, N.V., Lier
MSA (Britain) Limited, Glasgow
MSA Española, S.A., Barcelona
MSA de France, Paris
MSA Gallet, Chatillon sur Chalaronne, France;
Mohammedia, Morocco
MSA Italiana S.p.A., Milan
MSA Nederland, B.V., Hoorn
MSA Nordic, Malmo, Sweden
International
MSA Africa (Pty.) Ltd., Johannesburg
MSA de Argentina S.A., Buenos Aires
MSA (Aust.) Pty. Limited, Sydney
MSA (Australia),Auckland, New Zealand (Branch Office)
MSA do Brasil Ltda., São Paulo
MSA de Chile Ltda., Santiago
MSA Hong Kong Limited, Hong Kong
MSA (India) Limited, Calcutta
MSA Indonesia, Jakarta, Indonesia
MSA Japan Ltd., Tokyo
MSA Safety Malaysia Snd Bhd, Kuala Lumpur
MSA Middle East,Abu Dhabi, U.A.E.
MSA del Peru S.A.C., Lima
MSA S.E.Asia Pte. Ltd., Singapore
MSA Zimbabwe (Pvt.) Limited, Harare
Wuxi-MSA Safety Equipment Co., Ltd., Wuxi, China
Board of Directors
John T. Ryan III (1)
Chairman and Chief Executive Officer
of the Company
Calvin A. Campbell, Jr. (2) (3) (4)
Retired (2003); formerly Chairman, President and Chief
Executive Officer, Goodman Equipment Corporation
(manufactured underground mining and tunneling
locomotives and parts and services for plastics injection
molding machinery); Director of Eastman Chemical Company
James A. Cederna (2) (3) (4)
Founder and owner, Cederna International, Inc.
(executive coaching)
Thomas B. Hotopp (1)
Retired (2003); formerly President of the Company
Diane M. Pearse (2)
Chief Financial Officer, Crate and Barrel
(home furnishings retailer)
L. Edward Shaw, Jr.
Of Counsel, Gibson, Dunn & Crutcher LLP
(full service law firm)
John C. Unkovic (3) (4)
Partner and General Counsel, Reed Smith LLP
(full service law firm)
Thomas H.Witmer (1) (2) (3)
Retired (1998); formerly President and Chief Executive
Officer, Medrad, Inc. (manufacturer of medical devices);
Chairman of the Board, Granite State Log Homes
(log home construction)
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
(4) Member of Nominating and Corporate
Governance Committee
Director Emeritus
Eugene W. Merry
Officers
John T. Ryan III
Chairman of the Board and Chief Executive Officer
James H. Baillie
Vice President; President, MSA Europe
Joseph A. Bigler
Vice President
Kerry M. Bove
Vice President
Roberto Cañizares
Vice President; President, MSA International
Benedict DeMaria
Vice President
Ronald N. Herring, Jr.
Vice President
William M. Lambert
Vice President; President, MSA North America
Douglas K. McClaine
Secretary and General Counsel
Dennis L. Zeitler
Vice President; Chief Financial Officer and Treasurer
40313 MSA Cover w- spine 4/5/05 2:08 PM Page 2
OUR MISSION
T hat men and women may work in
safety and that they, their families
and their communities may live in health
throughout the world.
MSA... THE SAFETY COMPANY
2 0 0 4 A n n u a l R e p o r t
OUR VISION
T o be the leading innovator and provider
of quality safety and instrument products
and services that protect and improve
people's health, safety and the environment.
To provide satisfaction of customer needs
through the efforts of motivated, involved,
highly trained employees dedicated to
continuous improvement in quality, service,
cost, value, technology and delivery.
ABOUT THE COVER
CONTENTS
In 2004, MSA celebrated its 90th anniversary.This milestone
marked 90 years of focusing on just one mission: protecting
the health and safety of people in all kinds of settings, who
face all kinds of hazards.
Today, MSA is steadfastly carrying on this mission, fueled
by countless innovations, hundreds of patents and thousands
of products.With this singular focus, MSA is indeed...
The Safety Company.
• For millions of firefighters throughout the world, MSA is
The Safety Company they depend on when smoke and flames
threaten lives.
The Business of MSA 1
Chairman’s Letter 2
Fire Service 4
Military 6
Construction 8
Oil, Gas and Chemical 10
Commercial Government 12
Consumer Products 14
• For the military, we’re The Safety Company that helps protect
MSA Moves to NYSE
16
2004 Form 10-K
Principal Operations 56
Board of Directors 56
soldiers on the front lines.
• For construction workers, we’re The Safety Company that pro-
vides protection from falls, and from objects falling from above.
• For oil, gas and petrochemical workers, MSA is The Safety
Company that fuels a less hazardous work environment.
• For police officers and government agents, we’re The Safety
Company that helps shield them from danger.
• At home, MSA is The Safety Company that helps keep
Do-It-Yourselfers from doing harm to themselves.
• And for investors, MSA is The Safety Company because
we are the only broad-line, publicly-traded safety company
in the U.S.
Being The Safety Company means many things, but to all of
us at MSA, it very simply summarizes our mission, our legacy
and our future. Accordingly, it serves as our theme for this
year’s annual report.
Shareholders’ Inquiries
Additional copies of the company’s
2004 Annual Report on Form 10-K, as
filed with the Securities and Exchange
Commission, may be obtained by
shareholders after April 1, 2005.
Printed and electronic versions are
available. Requests should be directed
to the Vice President-Finance, who can
be reached at one of the following:
412-967-3046
Phone:
Fax:
412-967-3367
Internet: MSAnet.com
U.S. Mail: MSA
Vice President-Finance
P. O. Box 426
Pittsburgh, PA 15230
40313 MSA Cover w- spine 4/5/05 2:08 PM Page 1
MSA... THE SAFETY COMPANY
Mine Safety Appliances Company
121 Gamma Drive
RIDC Industrial Park
O’Hara Township
Pittsburgh, PA 15238
412-967-3000
www.MSAnet.com
2 0 0 4 A n n u a l R e p o r t