Annual Report 2012
OuR MiSSiON
That men and women may work in safety and
that they, their families and their communities
may live in health throughout the world.
Our Vision
To be the world’s leading provider of safety solutions that protect workers when life is on the line. We pursue this vision with
an unsurpassed commitment to integrity, customer service and product innovation that creates exceptional value for all
MSA stakeholders.
Business of MSA
MSA is in the business of developing, manufacturing and selling innovative products that enhance the safety and health of
workers and protect facility infrastructures 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 the company to develop a keen
understanding of customer safety requirements for a diverse range of markets, including the fire service, construction, public
utilities, mining, the oil, gas and petrochemical industry, HVAC, hazardous materials remediation, military, and retail. MSA’s principal
products, each designed to serve the needs of these target markets, include respiratory protective equipment, portable gas
detection instruments and sensors, fixed gas and flame detection systems, fall and head protection products, as well as products
for eye, face and hearing protection, and thermal imaging cameras.
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 at that time. Their knowledge of the mining industry provided the
foundation for the development of safety equipment to better protect underground miners. While the range of markets served
by MSA has expanded greatly over the years, the founding philosophy of understanding customer safety needs and designing
innovative safety equipment solutions that addresses those needs remains unchanged.
MSA is headquartered in Cranberry Township, Pennsylvania, with operations employing 5,300 associates throughout the world.
A publicly held company, MSA’s stock is traded on the New York Stock Exchange under the symbol MSA.
About the Cover
A key element of MSA’s Corporate Strategy focuses on investing and growing the “Core of MSA” – in other
words, concentrating on and investing in the “Core Products” of MSA that provide a distinct and sustainable
competitive advantage. Shown on the cover are our five Core Product groups: Portable Gas Detection
Instruments and Sensors; Industrial Head Protection; Fixed Gas and Flame Detection Systems; Supplied-Air
Respirators; and Fall Protection. In essence, these Core Products represent a set of products, capabilities,
channels and geographies that drive growth at MSA, provide economic value for our company and
shareholders, and best leverage our expertise to keep customers safe. Accordingly, they receive the highest
levels of investment and resources at MSA, because they promise the greatest return for all.
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FinanCiaL highLightS
With a 30 percent year-over-year improvement in profitability,
2012 marked the most profitable year in MSA’s history.
FOR thE yEaR (thousands, except per share)
2010
2011
2012
annual sales
by CORE pROduCt gROup
Net sales
Net income
$ 976,631
$ 1,173,227
$ 1,168,904
$
38,104
$
69,852
$
90,637
35%
19%
11%
Basic earnings per common share
$
1.06
$
1.91
$
2.45
at yEaR End (thousands)
Total assets
$ 1,197,188
$ 1,115,052
$ 1,111,746
Working capital
$ 295,648
$ 287,079
$ 274,748
Shareholders’ equity
$ 451,368
$ 433,666
$ 462,955
Common shares outstanding
36,520
36,693
$ 37,008
$1,173
$1,169
$90.6
nEt inCOME
SaLES
$977
4%
12%
19%
Supplied- Air Respirators
Industrial Head Protection
Fixed Gas & Flame Detection
Portable Gas Detection
Fall Protection
Other Products
annual sales
by REgiOn
5%
7%
7%
10%
11%
40%
$38.1
$69.9
20%
United States
Western Europe
Asia & Pacific Rim
South America
Africa
Mexico & Canada
Emerging Europe
M S A 2 0 1 2 A N N U A L R E P O R T 1
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William M. Lambert
President and Chief Executive Officer
tO OuR ShaREhOLdERS , CuStOMERS, ChannEL paRtnERS, and aSSOCiatES:
I am pleased to report that MSA delivered record net income of $91 million, or $2.45 per share, in 2012 as we successfully
executed our long-term growth strategy to drive the company’s profit and enhance shareholder value.
Our growth strategy is built around three key pillars:
• Focus on the Core Safety Products that are the strength of MSA;
• Penetrate Emerging Markets where demand is growing; and
• Achieve Operational Excellence to enhance performance, productivity and customer satisfaction.
Overall, 2012 was a year in which we gained solid traction from our strategy, as sales of MSA’s Core Products increased
year-over-year by 10 percent, and now account for two thirds of MSA’s total sales. Sales across these same Core Product
groups in Emerging Markets grew by 21 percent for the year, with particularly strong performance in Latin America.
For the year, MSA reported sales of $1.2 billion. Excluding the impact of currency translation and the divestiture of our
ballistic vest and North American ballistic helmet businesses, our sales grew seven percent in 2012 despite a challenging
global economic environment.
Importantly we delivered record net income that grew 30 percent from the prior year, making 2012 far and away the
most profitable year in MSA’s history.
Growing the Core
As The Safety Company, MSA is building a strong foundation for future growth by focusing on and investing in the “Core of
MSA” – in other words the “Core Products” that provide a distinct and sustainable competitive advantage. These product
groups include Portable Gas Detection instruments and sensors; Industrial Head Protection products; Fixed Gas and
Flame Detection (FGFD) systems; Supplied-Air Respirators; and Fall Protection products. In essence, these Core Products
represent a set of capabilities, channels and geographies that drive growth at MSA, provide economic value for our
company and shareholders, and best leverage our expertise to keep customers safe. Accordingly, they receive the highest
levels of investment and resources at MSA, because they promise the greatest return for all.
Across these lines, the MSA brand stands for four things: superior quality, superior reliability, superior durability, and an
exceptional customer experience. It’s no accident MSA is a leader in safety products and technology – it’s what we do best.
2 M S A 2 0 1 2 A N N U A L R E P O R T
WE DElIvERED RECORD nET InCOME THAT GREW
30 PERCEnT FROM THE PRIOR yEAR, MAkInG 2012
FAR AnD AWAy THE MOST PROFITAblE yEAR In
MSA’S HISTORy.
leading-edge products like the Gassonic® Observer, which actually “listens” for gas leaks as opposed
to “sniffing” for them, helped MSA achieve 11 percent local currency sales growth in its global Fixed
Gas and Flame Detection business in 2012.
With a keen eye on the future, MSA is focusing our investment behind
these proven product areas, with an emphasis on driving innovation
that meets the needs – and expectations – of our customers globally.
To sharpen this focus on our core portfolio, MSA exited product lines
that did not fit with our strategic plan. These included the divestitures
of our ballistic vest and North American ballistic helmet businesses in
2011 and 2012, respectively.
As another aspect of this “value realization” process, MSA and its
shareholders continued to benefit in 2012 from strategic acquisitions
focused on enhancing our core portfolio.
A great example is our acquisition of General Monitors (GM) in 2010, which significantly strengthened and expanded our
growing Fixed Gas and Flame Detection business. Overall, stronger sales of General Monitors’ branded products helped
MSA realize a solid 11 percent increase in local currency sales for our global FGFD portfolio in 2012. We are driving this
growth by leveraging the breadth of MSA’s global channels of distribution, establishing new distribution channels and
capitalizing on opportunities in the energy market as the oil, gas and petrochemical industries returned solidly to a
growth trajectory.
Growing in Emerging Markets
The second pillar of our long-term strategy is to drive MSA’s growth and penetration in Emerging Markets, especially
in highly populated regions with growing economies such as Asia, Mexico and Latin America. Our goal is simple and
straightforward: to be well-positioned in Emerging Markets with Core Products that meet the growing demand for safety
products and drive growth at MSA for years to come.
Reflecting the momentum of this focus, MSA’s 2012 sales to Emerging Markets grew by 13 percent in real terms, highlighted
by the previously mentioned 21 percent increase in Core Product sales to these same markets.
While I see these results as encouraging, I also believe we have only scratched the surface of our growth potential in
Emerging Markets. At a high level, we’ve seen sales and profitability expand in many regions, not always in a straight line,
but nonetheless demonstrating continued success in just a few years. For example, our business in Southeast Asia has
delivered a 19 percent compound annual growth rate over the last four years, while Latin America and China have delivered
28 percent and 11 percent growth rates, respectively, over the same period as well.
M S A 2 0 1 2 A N N U A L R E P O R T 3
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In 2012 MSA established an Engineering Center of Excellence in São Paulo, brazil, focused on the development of
innovative products to primarily meet the needs of customers in Latin and South America.
In addition, we have expanded our manufacturing operations and added depth to our engineering resources in places like
brazil and China. Also in brazil, we recently initiated “Projeto Real,” a multi-year investment and growth strategy that aims to
double our sales and operating income in the world’s fifth most populated country.
And in Russia and the former CIS countries, we are focused on becoming a major player in protecting the safety of workers
in the region’s expanding oil and gas production industry. Overall, we’re taking these actions to ensure our global growth
strategy in Emerging Markets is fully aligned with our long-range goal to drive the profitable growth of MSA and enhance
shareholder value.
Operational Excellence
Our third key strategic pillar is Operational Excellence, which I see as the foundation for sustainable growth and success.
Accordingly, this continues to be a major focus of ours and one that is having a clear and positive impact on our results.
As an example, we are implementing strategy-driven actions like consolidating our global spend, streamlining logistics and
leveraging our IT resources to be more efficient. you can read about these and other 2012 highlights in the year-in-Review
section that begins on page 6.
In particular, the operational effectiveness of our European business is a keen area of focus for us. Historically, MSA Europe
has functioned as a relatively independent network of affiliated companies. years ago, this structure served MSA well.
However, today’s environment demands that we manage Europe functionally, not geographically, to take full advantage of
the trade benefits associated with the European Union. This must then be enabled by a common, integrated IT platform to
improve transparency of information and service to our customers.
To address this need, in 2012, we launched Europe 2.0 – a multi-faceted initiative highlighted by, among other things, the
adoption of standardized pan-European business processes, enabled by the deployment of a new common IT platform
and the consolidation of distribution facilities from 10 sites to just two. When completed, Europe 2.0 will create a truly
Pan-European organization that is better connected, more agile and cost efficient, and more structurally and functionally
aligned – all in an effort to improve our responsiveness to customer needs.
These efforts are already bearing fruit. In 2012, we saw improvement in the profitability of our European operations, despite
the challenging economic conditions that continue throughout the region. We still have a long way to go, and we are
accelerating our efforts. However, through these and other changes, I believe MSA is well positioned to grow in Europe and
in a better position to react to any economic hurdles that lay ahead.
4 M S A 2 0 1 2 A N N U A L R E P O R T
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Overall, as we continue to look for ways to strengthen our global operations, we do so with the full understanding that
customers expect and deserve the highest quality products, delivered on time, and procured at the lowest possible cost.
At the same time, we know shareholders expect improved profitability and good cash flow. Taking into consideration the
progress we made in 2012 in the operations area, I believe we are making solid progress on each of these fronts. Further,
we are on track to achieve our goal of a 15 percent operating margin by 2015, after delivering 12 percent in 2012.
Enhancing Shareholder Value
Of course, the ultimate goal of our long-term growth strategy – which we first embarked upon in 2009 – is to enhance
shareholder value. I am pleased to report that MSA is doing that. The company has delivered a total shareholder return
(TSR) of 107 percent over the last four years compared with a TSR of 72 percent for the S&P 500 Index. In 2012, our TSR
was 34 percent and outperformed 83 percent of the 23 industrial companies in our selected peer group.
At the end of 2012, MSA’s common stock closed at $42.71, up nearly 30 percent from $33.12 at the end of 2011.
Finally, the company’s record profitability – driven in large part by our “Core Product” focus and our commitment to
achieving Operational Excellence – helped MSA achieve a record net cash flow of $138 million in 2012. This enabled us
to pay down debt while returning $51 million to shareholders via our common quarterly dividend – as well as a special
year-end dividend – that reached its highest level ever.
In summary, MSA continues to successfully execute a long-term growth strategy that is driving stronger operating margins
and operating income by focusing on our core portfolio and expanding our presence in Emerging Markets, all of which is
supported by our commitment to Operational Excellence in everything we do.
I believe the MSA brand is one of the most trusted brands in the industry. We are meeting the changing needs of
our customers by manufacturing safety products and developing technology second to none, and we’re doing it
more efficiently.
As we have demonstrated for decades, MSA is the leader in safety. In a world that is ever-changing, the need for safety
remains constant and MSA is well positioned to meet that need in key developed markets like North America and Europe,
and in emerging economies where industrial growth is expected to fuel demand.
In closing, I want to thank our shareholders for your investment in MSA and our distributors and customers around the
world for your continued trust and loyalty to our company.
I also want to thank our 5,300 associates, our company’s greatest asset, as well as our board of Directors and our Executive
leadership Team, for their outstanding efforts in making 2012 a most successful year.
With our great brand, great products, a great team and our proven long-term strategy, I am confident MSA’s best years are
still to come.
Sincerely,
William M. Lambert
President and Chief Executive Officer
M S A 2 0 1 2 A N N U A L R E P O R T 5
yEAR In REvIEW
An AT-A-GlAnCE RECORD
OF A RECORD yEAR
With a firm focus on executing its Corporate Strategy, MSA achieved one of its most successful years in its nearly
100-year history, with record earnings and near record revenues. This success is a testament to the confidence MSA
customers – throughout the world – continue to place in MSA products and services that help keep them safe and
secure on the job.
Financial results don’t tell the whole MSA story for 2012. It was a year in which the company, among other
achievements, unveiled more than 80 innovative new products, celebrated key milestones, established a Latin
American Engineering Center of Excellence, and shared its financial success with shareholders in the form of MSA’s
highest dividend payout ever.
Provided on the pages that follow is a chronological look back at the events and accomplishments that shaped
the year for MSA!
6 M S A 2 0 1 2 A N N U A L R E P O R T
2012....................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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An AT-A-GlAnCE RECORD
OF A RECORD yEAR
2012 YEAR IN REVIEW: AN AT-A-GLANCE RECORD Of A RECORD YEAR
J
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New Website
MSA went live with its newly
rebranded Website –
MSASafety.com – to better reflect
the company and its mission,
as well as add key information
upgrades and improvements to
better serve customers 24/7. Visit
the site, and you’ll readily see why
it’s the place “where safety clicks.”
M
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Consolidating
Logistics Services
As part of our strategic focus
on operational excellence,
MSA consolidated its air/ocean cargo shipping needs by leveraging its
relationship with third-party logistics provider Kuehne + Nagel –
a move that is delivering ongoing savings and improving product
delivery to customers.
V-Gard® Accessories Hit Europe
MSA successfully launched its V-Gard Accessory System in Europe, giving
customers the ability to custom-select fully integrated frames, visors
and chin protectors that offer the same high standard of protection as
our industry-leading V-Gard Hard Hat. These same accessory products,
which are helping drive preference for the V-Gard brand, were launched
in several other geographies throughout the year.
A
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Listen Closely: Ultrasonic™ Ex-5 Detector at Work
In early 2012, the UltraSonic Ex-5 Gas Leak Detector was launched
in Europe, increasing the availability of this remarkably innovative
device. Unlike conventional detection systems,
the UltraSonic Ex-5 actually responds to the
high frequency sound of a pressurized gas
leak, as opposed to detecting gas in the
air. The advantage of this technology?
A faster and potentially life-saving
warning in applications where such
technology is suited.
F
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SUPREMATouch® Launched in China
Expanding the reach of yet another Core MSA Product, the
SUPREMATouch Modular Fire and Gas Detection System was
introduced to the Chinese market in February. Extremely flexible
and designed to meet the needs of diverse industries, the system
also meets the demands of new Chinese standards for combustible
gas alarm control units.
M
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Providing “Comfortable” and
“Dependable” Safety at Heights
With a desire to expand and improve its line
of fall protection offerings, MSA released the
Workman® 30-foot Self Retracting Lanyard –
a product developed specifically to address
customer needs for comfort, durability and ease of
use. A 50-foot version, that offers even greater range
and versatility, was launched later in the year.
55 años for MSA Mexico
MSA celebrated its 55th year in Mexico, representing the company’s
longstanding commitment to this important and growing North
American market. The past year also marked the fifth anniversary
of the company’s
Querétaro, Mexico
manufacturing plant,
which today is one of
MSA’s largest facilities
and an operation that
has achieved strong
year-over-year growth.
Joyeux Anniversaire!
Acquired by MSA in 2002, MSA
Gallet, in Châtillon-sur-Chalaronne,
France celebrated its first decade
as part of the MSA family. Today,
this MSA affiliate remains the
leading manufacturer of helmets
for firefighters, soldiers and first
responders throughout Europe.
Recognizing Canada’s Safest Mines
In May, MSA representatives were on hand to
present the prestigious John T. Ryan award to
the mining company in Canada with the best
safety record. Created in 1942 by MSA and the
Canadian Institute of Mining, and coveted like
the Stanley Cup, the award is named after
MSA’s co-founder, who worked with
Thomas Edison to develop the first
“flameless” cap lamp that greatly
improved mine safety and saved
countless lives.
MSA Germany Opens Its Doors
MSA was a proud participant in Berlin’s Long Night of Industry,
hosting members of the Berlin community – including students,
teachers and parents – to familiarize
them with the business of MSA. The
informal “open house” environment
was effective in building ties with the
community and boosting awareness of
MSA as a local employer of choice and as
a valued corporate citizen.
M S A 2 0 1 2 A N N U A L R E P O R T 7
SAP Goes Live at General Monitors
A software implementation is no easy task – let alone one that
involves the migration of data from one existing system to another.
But that’s what occurred in July when General Monitors migrated
to MSA’s global SAP ECC 6.0 environment. The project was a key step
toward creating a global and more integrated General Monitors
organization. The cross-functional team managing this change
worked around the clock to minimize business disruptions and to
ensure all customer needs were met. For their outstanding efforts,
the team received MSA’s 2012 Process of the Year award.
®
William Lambert Honored by Ernst & Young
MSA CEO William M. Lambert was named the Ernst &
Young Entrepreneur Of The Year® in the manufacturing
category for Western Pennsylvania and West Virginia.
The award recognizes outstanding entrepreneurs who
demonstrate excellence and extraordinary success
in such areas as innovation, financial performance
and personal commitment to their businesses
and communities.
Online Career Center Launched
To more effectively connect the best and the brightest to the many
opportunities available at MSA, the company launched its online
career center at http://us.msasafety.com/careers. Seekers of jobs
and internships are offered the opportunity to “Build a Rewarding
Career and Help Make the World Safer, One Person at a Time.”
Adding Engineering Depth in Latin America
To help drive success in emerging markets, MSA established a
new Engineering Center of Excellence in São Paulo, Brazil. This
new resource for MSA focuses primarily on the development of
innovative products to meet the specific needs of customers in
Latin and South America. A recent prime example is the industry’s
first sustainable “green” hard hat. The V-Gard Green Cap was
developed in Brazil and introduced to the Latin America market in
the fourth quarter of 2012.
M
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J
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2012 YEAR IN REVIEW: AN AT-A-GLANCE RECORD Of A RECORD YEAR
Rewarding Shareholders
In May, MSA raised its quarterly dividend again, paying
shareholders 28 cents per share – an increase of more than
7 percent. This marked the 41st consecutive year in which MSA has
increased its dividend.
J
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Celebrating 50 Years Down Under
May also marked the 50th anniversary of MSA Australia – which
MSA associates and customers celebrated with local Beatles tribute
band, The Beatnix. Today, our Sydney-based affiliate plays a key role
in the implementation of MSA’s “Core Product” strategy, with a keen
focus on building the company’s brand and presence in the energy,
construction and fire service markets.
WOW!
Recognizing the value and importance of delivering
outstanding customer service – a Core Value at MSA
– the company launched its WOW employee
recognition program in late spring. The WOW
program recognizes MSA associates for their
efforts in demonstrating Exceptional Customer
Commitment. By the end of 2012, more than
450 WOW honors were awarded.
Europe 2.0 Gains Momentum
MSA continued its aggressive efforts to optimize the performance
of our diverse European businesses with the implementation of
Europe 2.0 – the next phase of MSA’s European Transformation.
Along with the standardization and adoption of best practices and
processes, this investment includes the deployment of a common
SAP platform that will ultimately connect all of MSA’s business
operations throughout the region. When completed, Europe 2.0 will
result in greater business efficiencies, reduced operating costs and
higher levels of customer satisfaction.
Recognizing Detroit firefighters
In early summer, MSA hosted a special sneak preview of the
emotional and award-winning documentary film “BURN: One Year
on the Front Lines of the Battle to Save Detroit.” MSA is a proud
sponsor of the film, which chronicles a year in the lives of Detroit
firefighters struggling to protect a city impacted by extreme
economic conditions. The film was honored with the 2012
Heineken Audience Award at the Tribeca Film Festival in
New York. In 2013, a multi-week tour will take the film to
more than 100 cities in the U.S. and Canada. For more
information, visit www.detroitfirefilm.org.
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8 M S A 2 0 1 2 A N N U A L R E P O R T
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The Booth
• 50m2 / 164ft²;
RIO Oil and Gas 2012
MSA was a major exhibitor at RIO Oil and Gas 2012 – one of
the largest oil/gas/petrochemical industry conferences in Latin
America. Held in Rio de Janeiro, Brazil, the conference provided
MSA with the optimum platform to unveil a new, highly-branded
exhibit, complete with demonstrations of all Core MSA products,
as well as information about MSA’s new regional service center in
nearby Macaé.
Improving North America Distribution Efficiency
As part of MSA’s continuous improvement commitment, two
North American distribution centers were relocated to provide
more centralized distribution for the U.S. and Canada. The
undertaking included the relocation of 2,300 material numbers,
160 truckloads of products and 6,400 pallets. Despite this daunting
task, the warehouse relocation was completed over a weekend –
allowing the printing of delivery notes by Monday evening. More
importantly, the new locations will result in improved delivery fill
rates for our customers while reducing costs for MSA.
Galaxy® GX2 Automated Test System
September marked the global launch of MSA’s new Instrument
Management System – the Galaxy
GX2. This automated instrument
calibration system allows full data
tracking and management of
an entire portable gas detection
device fleet. Designed with
extensive Voice-of-Customer input,
the system provides customers
with easy operation, advanced
safety management capabilities
and low cost of ownership.
fISP Trade Show
MSA made an impressive showing at the International Fair of
Safety and Security, the largest trade fair for the safety industry,
held in São Paulo, Brazil. Surrounded by more than 700 exhibitors,
MSA stood out and reached key contacts among the more than
40,000 visitors. With all Core Products on display and more than 20
new products featured, MSA generated a constant flow of traffic to
its 2,500 square feet of exhibit space.
MSA “Top Workplace”
MSA was again recognized as one of the “Top Workplaces” in
Western Pennsylvania by the Pittsburgh Post-Gazette. The list is
based on surveys conducted with employees at more than 700
Pittsburgh-area organizations. The publication reported comments
received from MSA associates, including “What MSA does truly
matters and makes a difference in the world,” and “I get to impact
people’s lives in a very meaningful and positive way.”
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Helping Sandy Victims
In the aftermath of Hurricane Sandy, which hit the East Coast of the
U.S. on October 29, MSA supported the efforts of first responders by
donating more than $150,000 in life-saving equipment, including
gas detection and head and eye protection products. In addition,
the MSA Charitable Foundation matched employee donations to
the American Red Cross.
MSA Pittsburgh Operations
Declared “fit friendly”
MSA’s Pittsburgh-area facilities were
recognized as Platinum Level “Fit-
Friendly Worksites” by the American
Heart Association, the highest honor
in the program. The recognition is
a result of MSA’s commitment to
promoting employee nutrition and
fitness via the company’s own
wellness program – MSA Fit.
Innovation in Kazakhstan
MSA’s investment in R&D, up 4.2
percent in 2012, is the fuel that drives
innovation at MSA. In 2012, nowhere
was this drive more evident than in
Kazakhstan, where MSA ingenuity led
to the development of an innovative
escape respirator to protect oil and gas
workers from the rigorous elements of the Caspian
Sea, including temperatures of minus 30 degrees
Celsius. The North Caspian Production Operations
Company (NCPOC), drilling for oil in Kazakhstan,
called upon MSA to develop a way to protect workers
from the possibility of an H2S leak even in extreme
temperatures. While other
companies fell by the wayside
in the challenging attempt, MSA
worked to successfully create
the customized new respiratory
protection product, leading to a
multi-million dollar order.
MSA Sets Manufacturing Safety Record
The year saw MSA achieve its best employee safety performance ever,
with a global Lost Time Injury (LTI) incidence rate of 0.37 lost time
accidents per 200,000 hours worked. To put that in perspective, the
U.S. Bureau of Labor Statistics places the
LTI average in the U.S. alone at 1.3. Our
International operations were a major
contributor to the year’s success, achieving
a 50 percent reduction in incidents from
2011 to 2012.
M S A 2 0 1 2 A N N U A L R E P O R T 9
2012
FInAnCIAl COnTEnTS
Business of MSA
Management’s Discussion and Analysis
financial Statements and Supplementary Data
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Retained Earnings and
Accumulated Other Comprehensive Loss
notes to Consolidated Financial Statements
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1 0 M S A 2 0 1 2 A N N U A L R E P O R T
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UNITED STATES
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, 2012
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)
1000 Cranberry Woods Drive
Cranberry Township, Pennsylvania
(Address of principal executive offices)
25-0668780
(IRS Employer Identification No.)
16066-5207
(Zip code)
Registrant’s telephone number, including area code: (724) 776-8600
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)
Common Stock, no par value
(Name of each exchange on which registered)
New York Stock Exchange
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)
of the Act. Yes ‘ No È
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 È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate
Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405
of this chapter) 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. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer È
Non-accelerated filer ‘
Accelerated filer ‘
Smaller reporting company ‘
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes ‘ No È
As of February 15, 2013, there were outstanding 37,010,504 shares of common stock, no par value, not
including 731,922 shares held by the Mine Safety Appliances Company Stock Compensation Trust. The
aggregate market value of voting stock held by non-affiliates as of June 30, 2012 was approximately $1.2 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the May 7, 2013 Annual Meeting of Shareholders are incorporated by
reference into Part III.
Table of Contents
Item No.
Part I
1.
1A.
1B.
2.
3.
4.
Executive Officers of the Registrant
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II
5.
6.
7.
7A.
8.
9.
9A.
9B.
Part III
10.
11.
12.
13.
14.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
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17
18
20
20
34
35
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67
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2
Forward-Looking Statements
This report may contain forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. 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 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,
but are not limited to, those listed in this report under “Risk Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” and elsewhere in this report. In some cases, you can identify
forward-looking statements by words such as “may,” “will,” “should,” “expects,” “intends,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential” or other comparable words. Actual results,
performance or outcomes may differ materially from those expressed or implied by 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.
3
Item 1. Business
PART I
Overview—Mine Safety Appliances Company was incorporated in Pennsylvania in 1914. We are a global
leader in the development, manufacture and supply of products that protect people’s health and safety. Our 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 oil and gas, fire service, mining, construction and other industries, as well as
the military. Our broad product offering includes self-contained breathing apparatus, or SCBAs, gas masks, gas
detection instruments, head protection, respirators, thermal imaging cameras and fall protection. We also provide
a broad offering of consumer and contractor safety products through retail channels.
We dedicate significant resources to research and development, which allows us to produce innovative
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 functional 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 to anticipate
their impact on our product lines.
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 eleven geographic operating segments that are aggregated into three reportable 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 and much of our business is conducted outside
the U.S., 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 safety products to protect workers
around the world in the oil and gas, fire service, mining, 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.
•
Self Contained Breathing Apparatus. 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. Our FireHawk®M7 SCBA meets the latest performance requirements adopted by the
NFPA. The FireHawk®M7 Air Mask was the first device of its kind to be certified by the Safety
Equipment Institute, or SEI, as NFPA compliant for both its breathing apparatus and Personal Alert
Safety System, or PASS. The PASS device is a SCBA component that sounds a loud, piercing alarm
when a firefighter becomes disabled or lies motionless for 30 seconds.
• Air-purifying respirators. Air-purifying respirators range from the simple filtering types to powered
full-facepiece versions for many hazardous applications, including:
•
full-face gas masks for industrial workers and first responders exposed to known and unknown
concentrations of hazardous gases, chemicals, vapors and particulates;
4
•
•
•
half-mask respirators for industrial workers, painters and construction workers exposed to known
concentrations of gases, vapors and particulates;
powered-air purifying respirators for industrial, hazmat and remediation workers who have longer
term exposures to hazards in their work environment; and
dust and pollen masks for maintenance workers, contractors and at-home consumers exposed to
nuisance dusts, allergens and other particulates.
• Escape respirators. Escape respirators are 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. Escape respirators give users
respiratory protection to help them escape from threatening situations quickly and easily.
Portable and fixed gas detection instruments. Our portable and fixed 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.
•
Single- and multi-gas hand-held detectors. Our single- and multi-gas detectors provide portable solutions
for detecting the presence of oxygen, combustible gases and various toxic gases, including hydrogen
sulfide, carbon monoxide, ammonia and chlorine, either singularly or up to six gases at once. Our hand-
held portable instruments are used by chemical workers, oil and gas workers, utility workers entering
confined spaces, or anywhere a user needs to continuously monitor the quality of the atmosphere they are
working in and around. Our ALTAIR® 4X Multigas Detector with XCell® sensor technology provides
faster response times and unsurpassed durability in a tough, easy to operate package.
• Multi-point permanently installed gas detection systems. Our comprehensive line of fixed gas detection
systems is used to monitor for combustible and toxic gases and oxygen deficiency in virtually any
application where continuous monitoring is required. Our systems are used for gas detection in pulp
and paper, refrigerant monitoring, petrochemical and general industrial applications. Our SafeSite®
Multi-Threat Wireless Detection System, designed and developed for homeland security applications,
detects and communicates the presence of toxic industrial chemicals and chemical warfare agents at
large public events, in subways or at other facilities.
• Flame detectors and open-path infrared gas detectors. Our flame and combustible gas detectors are
used for plant-wide monitoring of toxic gases and for detecting the presence of flames. These systems
use 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.
Thermal imaging cameras. Our hand-held infrared thermal imaging cameras, or TICs, are used in the global
fire service market. TICs detect sources of heat in order to locate downed firefighters and other people trapped
inside burning or smoke-filled structures. TICs can also be used to identify “hot spots.” Our Evolution® 5000
series TICs are unmatched for ease of use and durability. Our Evolution® 5800 TIC, the newest addition to our
5000 series of TICs, offers state-of-the-art imagery in a high resolution format. Our Evolution® 5600 TIC
provides high resolution and an extended high sensitivity operating range in a rugged, user-friendly and
affordable design.
Head, eye and face and hearing protection. Head, eye and face and hearing protection is used in work
environments where hazards present dangers such as dust, flying particles, metal fragments, chemicals, extreme
glare, optical radiation and items dropped from above.
•
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. Hard hats are used by oil, gas and petrochemical
workers, plant, steel and construction workers, and miners.
5
• Fire helmets. Our fire service products include leather, traditional, modern and specialty helmets
designed to satisfy the preferences of firefighters across geographic regions. We believe that our
CairnsHELMET is the number one helmet in the North American fire service market. Similarly, we
believe that our Gallet firefighting helmet has the number one market position in Europe.
• Ballistic helmets. These helmets provide ballistic head protection in combat and other high-risk
environments. We do not sell ballistic helmets in North America.
• Eye, face and hearing protection. Our broad line of hearing protection products, non-prescription
protective eyewear and face shields is used by workers in a wide variety of industries.
Fall protection. Our broad line of fall protection equipment includes confined space equipment, harnesses,
fall arrest equipment, lanyards and lifelines. Fall protection equipment is used by construction and plant workers
and anyone working at height.
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 European and International segments, we make our sales through both indirect and direct
sales channels. For the year ended December 31, 2012, no individual customer represented 10% of our sales.
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
Fall Protection
Primary 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
Construction Workers and Contractors; Oil, Gas, Petrochemical
and Chemical Workers; General Industry Workers
Sales and Distribution—Our sales and distribution team consists of distinct marketing, field sales and
customer service organizations. 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 and educate them about hazards, exposure limits, safety requirements and
product applications, as well as the specific performance requirements of our products. In our International
segment and Eastern Europe where distributors are not as well established, our sales associates often work with
and sell directly to end-users. We believe that the 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 customer 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.
6
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., Fastenal and Hagemeyer. 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 European 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 distributor locations
worldwide.
Our Safety Works, LLC joint venture provides a broad range of safety products and gloves to the
North American do-it-yourself and independent contractor market through various channels, including
distributors such as Orgill, hardware and equipment rental outlets such as United Rentals, and retail chains such
as The Home Depot, TrueValue and Do-it Best.
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 $20 billion. The industry
supplying this market is broad and highly fragmented with few participants offering a comprehensive line of
safety products. Over the long-term, we believe global demand for safety products will be stable or growing
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, safety products industry revenues reflect the need to consistently replace many safety products that
have limited life spans due to normal wear and tear or because they are one time use products by design.
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 that
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 offerings and strong brand trust and recognition.
Research and Development—To maintain our position at the forefront of safety equipment technology, we
operate several sophisticated research and development facilities. We believe our dedication and commitment to
innovation and research and development allow us to produce innovative safety products that are often first to
market and exceed industry standards. In 2012, 2011 and 2010, on a global basis, we spent $40.9 million, $39.2
million and $32.8 million, respectively, on research and development. Our primary engineering groups are
located in the United States, Germany, China and, to a lesser extent, France. 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. We believe our team-based, cross-geographic and
cross-functional approach to new product development is a source of 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 operating segments.
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
7
pipeline and devote time and attention to anticipating a new standard’s impact on our 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 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 or acquired a substantial body of
manufacturing know-how that we believe provides a significant competitive advantage over our competitors.
Raw Materials and Suppliers—Many of the 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, hard hats 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.
Associates—At December 31, 2012, we had approximately 5,300 associates, approximately 3,300 of whom
were employed by our European and International segments. None of our U.S. associates are subject to the
provisions of a collective bargaining agreement. Some of our associates 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 associates
are good.
Available Information—Our internet address is www.MSAsafety.com. We post the following filings on the
Investor Relations page on our website 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 website
is not part of this annual report on Form 10-K or our other filings with the Securities and Exchange Commission.
The annual report on Form 10-K is also available in print to any shareholder who requests it. Such requests
should be sent to The Chief Financial Officer, 1000 Cranberry Woods Drive, Cranberry Township, PA 16066.
Item 1A. Risk Factors
Unfavorable economic and market conditions could materially and adversely affect our business, results of
operations and financial condition.
We are subject to risks arising from adverse changes in global economic conditions. Although economic
conditions generally improved in 2012, the global economy remains unstable and we expect economic conditions
will continue to be challenging for the foreseeable future. Adverse changes in economic conditions could result
in declines in revenue, profitability and cash flow due to reduced orders, payment delays, supply chain
disruptions or other factors caused by the economic challenges faced by our customers and suppliers.
8
A reduction in the spending patterns of government agencies could materially and adversely affect our net
sales, earnings and cash flow.
The demand for our products sold to the fire service market, the homeland security market and other
government agencies is, in large part, driven by available government funding. Government budgets are set
annually and we cannot assure you that government funding will be sustained at the same level in the future. A
significant reduction in available government funding could materially and adversely affect our net sales,
earnings and cash flow.
The markets in which we compete are highly competitive, and some of our competitors have greater
financial and other resources than we do. The competitive pressures faced by us could materially and
adversely affect our business, results of operations and financial condition.
The safety products market is highly competitive, with participants ranging in size from small companies
focusing on single types of safety products, to large multinational corporations that manufacture and supply
many types of 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 trust and recognition and customer service. Some of our
competitors have greater financial and other resources than we do and our business could be adversely affected
by competitors’ new product innovations, technological advances made to competing products and pricing
changes made by us in response to competition from existing or new competitors. We may not be able to
compete successfully against current and future competitors and the competitive pressures faced by us could
materially and adversely affect our business, results of operations and financial condition.
If we fail to introduce successful new products or extend our existing product lines, we may lose our
market position and our financial performance may be materially and adversely affected.
In the safety products market, there are frequent introductions of new products and product line extensions.
If we are unable to identify emerging consumer and technological trends, maintain and improve the
competitiveness of our products and introduce new products, we may lose our market position, which could have
a materially adverse effect on our business, financial condition and results of operations. Although we continue
to invest significant resources in research and development and market research, continued product development
and marketing efforts are subject to the risks inherent in the development of new products and product line
extensions, including development delays, the failure of new products and product line extensions to achieve
anticipated levels of market acceptance and the cost of failed product introductions.
Product liability claims and our inability to collect related insurance receivables could have a materially
adverse effect on our business, operating results and financial condition.
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. Although
we have not experienced any material uninsured losses due to product liability claims, it is possible that we could
experience material losses in the future. In the event any of our products prove to be defective, we could be
required to recall or redesign such products. In addition, we may voluntarily recall or redesign certain products
that could potentially be harmful to end users. A successful claim brought against us in excess of available
insurance coverage, or any claim or product recall that results in significant expense or adverse publicity against
us, could have a materially adverse effect on our business, operating results and financial condition.
In the normal course of business, we make payments to settle product liability claims and for related legal
fees and record receivables for the amounts covered by insurance. Our insurance receivables totaled $130.0
million at December 31, 2012. Various factors could affect the timing and amount of recovery of insurance
receivables, including: the outcome of negotiations with insurers, legal proceedings with respect to product
liability insurance coverage and the extent to which insurers may become insolvent in the future. Failure to
recover amounts due from our insurance carriers could have a materially adverse effect on our business,
operating results and financial condition.
9
A failure of our information systems could materially and adversely affect our business, results of
operations and financial condition.
The proper functioning and security of our information systems is critical to the operation of our business.
Our information systems may be vulnerable to damage or disruption from natural or man-made disasters,
computer viruses, power losses, or other system or network failures. In addition, hackers and cybercriminals
could attempt to gain unauthorized access to our information systems with the intent of harming our company or
obtaining sensitive information such as intellectual property, trade secrets, financial and business development
information, and customer and vendor related information. If our information systems or security fail, our
business, results of operations and financial condition could be materially and adversely affected.
Our ability to market and sell our products is subject to existing regulations and standards. Changes in
such regulations and standards or our failure to comply with them could materially and adversely affect
our results of operations.
Most of our products are required to meet performance and test standards designed to protect the health and
safety of people around the world. Our inability to comply with these standards may materially and adversely
affect our results of operations. Changes in regulations could reduce the demand for our products or require us to
reengineer our products, thereby creating opportunities for our competitors. Regulatory approvals for our
products may be delayed or denied for a variety of reasons that are outside of our control. Additionally, market
anticipation of significant new standards can cause customers to accelerate or delay buying decisions.
We have significant international operations and are subject to the risks of doing business in foreign
countries.
We have business operations in over 40 foreign countries. In 2012, approximately half of our net sales were
made by operations located outside the United States. Our international operations are subject to various
political, economic and other risks and uncertainties, which could adversely affect our business. These risks
include the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
currency exchange rate fluctuations;
unexpected changes in regulatory requirements;
changes in trade policy or tariff regulations;
changes in tax laws and regulations;
intellectual property protection difficulties;
difficulty in collecting accounts receivable;
complications in complying with a variety of foreign laws and regulations, some of which may conflict
with U.S. laws;
trade protection measures and price controls;
trade sanctions and embargos;
nationalization and expropriation;
increased international instability or potential instability of foreign governments;
the need to take extra security precautions for our international operations; and
costs and difficulties in managing culturally and geographically diverse international operations.
Any one or more of these risks could have a negative impact on the success of our international operations
and, thereby, materially and adversely affect our business as a whole.
10
Our future results are subject to availability of, and fluctuations in the costs of, purchased components
and materials due to market demand, currency exchange risks, material shortages and other factors.
We depend on various components and materials to manufacture our products. Although we have not
experienced any difficulty in obtaining components and materials, it is possible that any of our supplier
relationships could be terminated. Any sustained interruption in our receipt of adequate supplies could have a
materially adverse effect on our business, results of operations and financial condition. We cannot assure you that
we will be able to successfully manage price fluctuations due to market demand, currency risks or material
shortages, or that future price fluctuations will not have a materially adverse effect on our business, results of
operations and financial condition.
If we lose any of our key personnel or are unable to attract, train and retain qualified personnel, our
ability to manage our business and continue our growth would be negatively impacted.
Our success depends in large part on the continued contributions of our key management, engineering and
sales and marketing personnel, many of whom are highly skilled and would be difficult to replace. Our success
also depends on the abilities of new personnel to function effectively, both individually and as a group. If we are
unable to attract, effectively integrate and retain management, engineering or sales and marketing personnel, then
the execution of our growth strategy and our ability to react to changing market requirements may be impeded,
and our business could suffer as a result. Competition for personnel is intense, and we cannot assure you that we
will be successful in attracting and retaining qualified personnel. In addition, we do not currently maintain key
person life insurance.
We are subject to various environmental laws and any violation of these laws could adversely affect our
results of operations.
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. These laws impose penalties for noncompliance and
liability for response costs and certain damages resulting from past and current spills, disposals, or other releases
of hazardous materials. We could incur substantial costs as a result of noncompliance with or liability for cleanup
pursuant to these environmental laws. Environmental laws have changed rapidly in recent years, and we may be
subject to more stringent environmental laws in the future. If more stringent environmental laws are enacted,
these future laws could have a materially adverse effect on our results of operations.
Our inability to successfully identify, consummate and integrate future acquisitions or to realize
anticipated cost savings and other benefits could adversely affect our business.
One of our operating strategies is to selectively pursue acquisitions. Any future acquisitions will depend on
our ability to identify suitable acquisition candidates and successfully consummate such acquisitions.
Acquisitions involve a number of risks including:
•
•
•
•
•
•
failure of the acquired businesses to achieve the results we expect;
diversion of our management’s attention from operational matters;
our inability to retain key personnel of the acquired businesses;
risks associated with unanticipated events or liabilities;
potential disruption of our existing business; and
customer dissatisfaction or performance problems at the acquired businesses.
If we are unable to integrate or successfully manage businesses that we have recently acquired or may
acquire in the future, we may not realize anticipated cost savings, improved manufacturing efficiencies and
increased revenue, which may result in materially adverse short- and long-term effects on our operating results,
financial condition and liquidity. Even if we are able to integrate the operations of our acquired businesses into
11
our operations, we may not realize the full benefits of the cost savings, revenue enhancements or other benefits
that we may have expected at the time of acquisition. In addition, even if we achieve the expected benefits, we
may not be able to achieve them within the anticipated time frame, and such benefits may be offset by costs
incurred in integrating the acquired companies and increases in other expenses.
Because we derive a significant portion of our sales from the operations of our foreign subsidiaries, future
currency exchange rate fluctuations may adversely affect our results of operations and financial condition,
and may affect the comparability of our results between financial periods.
For the year ended December 31, 2012, the operations in our European and International segments
accounted for approximately half of our net sales. The results of our foreign operations are reported in the local
currency and then translated into U.S. dollars at the applicable exchange rates for inclusion in our consolidated
financial statements. The exchange rates between some of these currencies and the U.S. dollar have fluctuated
significantly in recent years, and may continue to do so in the future. In addition, because our financial
statements are stated in U.S. dollars, such fluctuations may affect our results of operations and financial position,
and may affect the comparability of our results between financial periods. We cannot assure you that we will be
able to effectively manage our exchange rate risks or that any volatility in currency exchange rates will not have
a materially adverse effect on our results of operations and financial condition.
Our continued success depends on our ability to protect our intellectual property. If we are unable to
protect our intellectual property, our business could be materially and adversely affected.
Our success depends, in part, on our ability to obtain and enforce patents, maintain trade secret protection
and operate without infringing on the proprietary rights of third parties. We have been issued patents and have
registered trademarks with respect to many of our products, but our competitors could independently develop
similar or superior products or technologies, duplicate any of our designs, trademarks, processes or other
intellectual property or design around any processes or designs on which we have or may obtain patents or
trademark protection. In addition, it is possible that third parties may have, or will acquire, licenses for patents or
trademarks that we may use or desire to use, so that we may need to acquire licenses to, or to contest the validity
of, such patents or trademarks of third parties. Such licenses may not be made available to us on acceptable
terms, if at all, and we may not prevail in contesting the validity of third party rights.
We also protect trade secrets, know-how and other confidential information against unauthorized use by
others or disclosure by persons who have access to them, such as our employees, through contractual
arrangements. These agreements may not provide meaningful protection for our trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade
secrets, know-how or other proprietary information. If we are unable to maintain the proprietary nature of our
technologies, our results of operations and financial condition could be materially and adversely affected.
If we fail to meet our debt service requirements or the restrictive covenants in our debt agreements or if
interest rates increase, our results of operations and financial condition could be materially and adversely
affected.
We have a substantial amount of debt upon which we are required to make scheduled interest and principal
payments and we may incur additional debt in the future. A significant portion of our debt bears interest at
variable rates that may increase in the future. Our debt agreements require us to comply with certain restrictive
covenants. If we are unable to generate sufficient cash to service our debt or if interest rates increase, our results
of operations and financial condition could be materially and adversely affected. Additionally, a failure to
comply with the restrictive covenants contained in our debt agreements could result in a default, which if not
waived by our lenders, could substantially increase borrowing costs and require accelerated repayment of our
debt. We were in compliance with the restrictive covenants in our debt agreements as of December 31, 2012.
12
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our principal executive offices are located at 1000 Cranberry Woods Drive, Cranberry Township, PA 16066
in a 212,000 square-foot building owned by us. We own or lease our primary facilities in the United States and in
a number of other 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
New Galilee, PA
Jacksonville, NC
Queretaro, Mexico
Cranberry Twp., PA
Lake Forest, CA
Corona, CA
Torreon, Mexico
Lake Forest, CA
Toronto, Canada
Europe
Berlin, Germany
Function
Manufacturing
Office, Research and Development and
Manufacturing
Distribution
Manufacturing
Office, Manufacturing and Distribution
Research and Development
Office, Research and Development and
Manufacturing
Manufacturing
Office
Office
Office and Distribution
Square Feet
Owned
or Leased
295,000
Owned
212,000
120,000
107,000
77,000
68,000
62,000
19,000
15,000
6,000
5,000
Owned
Leased
Owned
Leased
Owned
Leased
Leased
Leased
Owned
Leased
Office, Research and Development, Manufacturing
and Distribution
340,000
Leased
Chatillon sur Chalaronne, France Office, Research and Development, Manufacturing
Glasgow, Scotland
Milan, Italy
Mohammedia, Morocco
Galway, Ireland
Varnamo, Sweden
Ballerup, Denmark
International
Suzhou, China
Johannesburg, South Africa
Sydney, Australia
Sao Paulo, Brazil
Lima, Peru
Santiago, Chile
Rajarhat, India
Buenos Aires, Argentina
and Distribution
Office
Office and Distribution
Manufacturing
Office and Manufacturing
Office, Manufacturing and Distribution
Office and Manufacturing
Office, Research and Development, Manufacturing
and Distribution
Office, Manufacturing and Distribution
Office, Manufacturing and Distribution
Office, Manufacturing and Distribution
Office and Distribution
Office and Distribution
Office and Distribution
Office and Distribution
94,000
25,000
25,000
24,000
20,000
18,000
10,000
193,000
74,000
84,000
74,000
34,000
32,000
10,000
9,000
Owned
Leased
Owned
Owned
Owned
Leased
Leased
Owned
Leased
Owned
Owned
Owned
Leased
Leased
Owned
13
Item 3. Legal Proceedings
We categorize the product liability losses that we experience into two main categories, single incident and
cumulative trauma. Single incident product liability claims are discrete incidents that are typically known to us
when they occur and involve observable injuries and, therefore, more quantifiable damages. Therefore, we
maintain a reserve for single incident product liability claims based on expected settlement costs for pending
claims and an estimate of costs for unreported claims derived from experience, sales volumes and other relevant
information. Our reserve for single incident product liability claims at December 31, 2012 and 2011 was $4.4
million and $4.7 million, respectively. Single incident product liability expense during the years ended
December 31, 2012, 2011 and 2010 was $0.7 million, $1.5 million and $0.2 million, respectively. We evaluate
our single incident product liability exposures on an ongoing basis and make adjustments to the reserve as new
information becomes available.
Cumulative trauma product liability claims involve exposures to harmful substances (e.g., silica, asbestos
and coal dust) that occurred many years ago and may have developed over long periods of time into diseases
such as silicosis, asbestosis or coal worker’s pneumoconiosis. We are presently named as a defendant in 2,609
lawsuits in which plaintiffs allege to have contracted certain cumulative trauma diseases related to exposure to
silica, asbestos, and/or coal dust. These lawsuits mainly involve respiratory protection products allegedly
manufactured and sold by us. We are unable to estimate total damages sought in these lawsuits as they generally
do not specify the injuries alleged or the amount of damages sought, and potentially involve multiple defendants.
Cumulative trauma product liability litigation is difficult to predict. In our experience, until late in a lawsuit,
we cannot reasonably determine whether it is probable that any given cumulative trauma lawsuit will ultimately
result in a liability. This uncertainty is caused by many factors, including the following: cumulative trauma
complaints generally do not provide information sufficient to determine if a loss is probable; cumulative trauma
litigation is inherently unpredictable and information is often insufficient to determine if a lawsuit will develop
into an actively litigated case; and even when a case is actively litigated, it is often difficult to determine if the
lawsuit will be dismissed or otherwise resolved until late in the lawsuit. Moreover, even once it is probable that
such a lawsuit will result in a loss, it is difficult to reasonably estimate the amount of actual loss that will be
incurred. These amounts are highly variable and turn on a case-by-case analysis of the relevant facts, which are
often not learned until late in the lawsuit.
Because of these factors, we cannot reliably determine our potential liability for such claims until late in the
lawsuit. We, therefore, do not record cumulative trauma product liability losses when a lawsuit is filed, but
rather, when we learn sufficient information to determine that it is probable that we will incur a loss and the
amount of loss can be reasonably estimated. We record expenses for defense costs associated with open
cumulative trauma product liability lawsuits as incurred.
We cannot estimate any amount or range of possible losses related to resolving pending and future
cumulative trauma product liability claims that we may face because of the factors described above. As new
information about cumulative trauma product liability cases and future developments becomes available, we
reassess our potential exposures.
A summary of cumulative trauma product liability claims activity follows:
Open claims, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settled and dismissed claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,321
750
(462)
1,900
479
(58)
2,480
260
(840)
Open claims, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,609
2,321
1,900
2012
2011
2010
14
With some common contract exclusions, we maintain insurance for cumulative trauma product liability
claims. We have purchased insurance policies from over 20 different insurance carriers that provide coverage for
cumulative trauma product liability losses and related defense costs. In the normal course of business, we make
payments to settle product liability claims and for related defense costs. We record receivables for the amounts
that are covered by insurance. The available limits of these policies are many times our recorded insurance
receivable balance.
Various factors could affect the timing and amount of recovery of our insurance receivables, including the
outcome of negotiations with insurers, legal proceedings with respect to product liability insurance coverage and
the extent to which insurers may become insolvent in the future.
Our insurance receivables at December 31, 2012 and 2011 totaled $130.0 million and $112.1 million,
respectively, all of which is reported in other non-current assets.
A summary of insurance receivable balances and activity related to cumulative trauma product liability
losses follows:
(In millions)
2012
2011
2010
Balance January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collections and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . .
$112.1
29.7
(11.8)
$ 89.0
35.6
(12.5)
$ 91.7
30.9
(33.6)
Balance December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130.0
112.1
89.0
Additions to insurance receivables in the above table represent insured cumulative trauma product liability
losses and related defense costs. Uninsured cumulative trauma product liability losses during the years ended
December 31, 2012, 2011, and 2010 were $2.1 million, $1.1 million and $0.2 million, respectively.
Our aggregate cumulative trauma product liability losses and administrative and defense costs for the three
years ended December 31, 2012, totaled approximately $99.7 million, substantially all of which was insured.
We believe that the increase in the insurance receivable balance that we have experienced since 2005 is
primarily due to disagreements among our insurance carriers, and consequently with us, as to when their
individual obligations to pay us are triggered and the amount of each insurer’s obligation, as compared to other
insurers. We believe that our insurers do not contest that they have issued policies to us or that these policies
cover cumulative trauma product liability claims. We believe that our ability to successfully resolve our
insurance litigation with various insurance carriers in recent years demonstrates that we have strong legal
positions concerning our rights to coverage.
We regularly evaluate the collectability of the insurance receivables and record the amounts that we
conclude are probable of collection. Our conclusions are based on our analysis of the terms of the underlying
insurance policies, our experience in successfully recovering cumulative trauma product liability claims from our
insurers under other policies, the financial ability of our insurance carriers to pay the claims, our understanding
and interpretation of the relevant facts and applicable law and the advice of legal counsel, who believe that our
insurers are required to provide coverage based on the terms of the policies.
Although the outcome of cumulative trauma product liability matters cannot be predicted with certainty and
unfavorable resolutions could materially affect our results of operations on a quarter-to-quarter basis, based on
information currently available and the amounts of insurance coverage available to us, we believe that the
disposition of cumulative trauma product liability lawsuits that are pending against us will not have a materially
adverse effect on our future results of operations, financial condition, or liquidity.
We are currently involved in insurance coverage litigations with various of our insurance carriers.
15
In 2009, we sued The North River Insurance Company (North River) in the United States District Court for
the Western District of Pennsylvania, alleging that North River breached one of its insurance policies by failing
to pay amounts owed to us and that it engaged in bad-faith claims handling. We believe that North River’s
refusal to indemnify us under the policy for product liability losses and legal fees paid by us is wholly contrary to
Pennsylvania law and we are vigorously pursuing the legal actions necessary to collect all due amounts.
Discovery is concluding and motions for summary judgment on certain issues will be submitted to the court in
the first quarter of 2013. A trial date has not yet been scheduled.
In 2010, North River sued us in the Court of Common Pleas of Allegheny County, Pennsylvania seeking a
declaratory judgment concerning their responsibilities under three additional policies shared with Allstate
Insurance Company (as successor in interest to policies issued by the Northbrook Excess and Surplus Insurance
Company). We asserted claims against North River and Allstate for breaches of contract for failures to pay
amounts owed to us. We also alleged that North River engaged in bad-faith claims handling. We believe that
North River’s and Allstate’s refusals to indemnify us under these policies for product liability losses and legal
fees paid by us is wholly contrary to Pennsylvania law and we are vigorously pursuing the legal actions
necessary to collect all due amounts. Discovery is concluding and motions for summary judgment on certain
issues will be submitted to the court in the first quarter of 2013. A trial date has not yet been scheduled.
In July 2010, we filed a lawsuit in the Superior Court of the State of Delaware seeking declaratory and other
relief from the majority of our excess insurance carriers concerning the future rights and obligations of MSA and
our excess insurance carriers under various insurance policies. The reason for this insurance coverage action is to
secure a comprehensive resolution of our rights under the insurance policies issued by our insurers. The case is
currently in discovery. We have resolved our claims against certain of our insurance carriers on some of their
policies through negotiated settlements. When settlement is reached, we dismiss the settling carrier from this
action in Delaware.
16
Item 4. Mine Safety Disclosures
Not applicable.
Executive Officers of the Registrant
The following sets forth the names and ages of our executive officers as of February 20, 2013, indicating all
positions held during the past five years:
Name
Age
Title
William M. Lambert(a)
. . . . .
54
President and Chief Executive Officer since May 2008.
Joseph A. Bigler . . . . . . . . . .
63 Vice President and President, MSA North America since May 2007.
Steven C. Blanco(b)
. . . . . . . .
46 Vice President, Global Operational Excellence since April 2012.
Kerry M. Bove(c) . . . . . . . . . .
54
President, MSA International, Asia-Pacific Zone and Africa/Latin America
Zone since November 2011.
Ronald N. Herring, Jr.(d)
. . . .
52
President, MSA International, Western Europe Zone and Middle Eurasia
Zone since November 2011.
Douglas K. McClaine . . . . . .
55 Vice President, Secretary and General Counsel.
Stacy McMahan(e) . . . . . . . . .
49
Senior Vice President of Finance since December 2012.
Thomas Muschter(f) . . . . . . . .
52 Vice President, Global Product Leadership since November 2011.
Paul R. Uhler . . . . . . . . . . . . .
54 Vice President, Global Human Resources since May 2007.
Nishan Vartanian(g) . . . . . . . .
52 Vice President, Fixed Gas and Flame Detection since December 2012.
Markus H. Weber(h) . . . . . . . .
48 Vice President and Chief Information Officer since April 2010.
Dennis L. Zeitler . . . . . . . . . .
64
Senior Vice President, Chief Financial Officer and Treasurer since June 2007.
(a) Prior to his present position, Mr. Lambert was President and Chief Operating Officer.
(b) Prior to joining MSA, Mr. Blanco served as Vice President of Manufacturing for the Electrical Sector of
Eaton Corporation, a diversified power management company.
(c) Prior to his present position, Mr. Bove was Vice President, Global Operational Excellence.
(d) Prior to his present position, Mr. Herring was Vice President, Global Product Leadership.
(e) Prior to joining MSA, Ms. McMahan served as Customer Channels Group Vice President, Finance, for
Thermo Fisher Scientific, Inc., a global provider of laboratory equipment and supplies, and as Vice
President, Finance, for Johnson & Johnson, a global manufacturer of pharmaceutical, biologic, consumer
health and medical device and diagnostic products.
(f) Prior to his present position, Mr. Muschter held the positions of Director, Research & Development,
International; and Director, Research & Development, Europe.
(g) Prior to his present position, Mr. Vartanian was Chief Operating Officer for General Monitors and Director
of North American Field Sales.
(h) Prior to joining MSA, Mr. Weber served as Chief Information Officer of Berlin-Chemie AG, an
international research-based pharmaceutical company.
17
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 were as follows:
Year ended December 31, 2011
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2012
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price Range of Our
Common Stock
High
Low
Dividends
$36.98
40.91
39.15
35.74
$42.47
44.34
40.81
42.87
$29.69
32.85
25.51
24.50
$32.65
37.38
32.93
35.37
$0.25
0.26
0.26
0.26
$0.26
0.28
0.28
0.56
On February 5, 2013, there were 324 registered holders of our shares of common stock.
Issuer Purchases of Equity Securities
Period
October 1—October 31, 2012 . . . . . . . . . . . . .
November 1—November 30, 2012 . . . . . . . . .
December 1—December 31, 2012 . . . . . . . . . .
Total
Number of
Shares
Purchased
—
7,183
7,170
Average
Price Paid
Per Share
$ —
39.17
38.90
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
—
—
—
Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
1,261,664
1,259,054
1,140,253
In November 2005, the Board of Directors authorized the purchase of up to $100 million of common stock
from time-to-time in private transactions and on the open market. The share purchase program has no expiration
date. The maximum shares that may yet be purchased is calculated based on the dollars remaining under the
program and the respective month-end closing share price.
We do not have any other share purchase programs.
Share purchases are related to stock compensation transactions.
18
Comparison of Five-Year Cumulative Total Return
Set forth below are a line graph and table comparing the cumulative total returns (assuming reinvestment of
dividends) for the five years ended December 31, 2012 of $100 invested on December 31, 2007 in each of Mine
Safety Appliances Company common stock, the Standard & Poor’s 500 Composite Index and the Russell 2000
Index. Because our competitors are principally privately held concerns or subsidiaries or divisions of
corporations engaged in multiple lines of business, we do not believe it feasible to construct a peer group
comparison on an industry or line-of-business basis. The Russell 2000 Index, while including corporations both
larger and smaller than MSA in terms of market capitalization, is composed of corporations with an average
market capitalization similar to us.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Mine Safety Appliance Company, the S&P 500 Index,
and the Russell 2000 Index
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2012
$160
$140
$120
$100
$80
$60
$40
$20
$0
2007
2008
2009
2010
2011
2012
Mine Safety Appliances Co.
S&P 500 Index
Russell 2000 Index
* $100 invested on 12/31/07 in stock or index, including reinvestment of dividends. Fiscal year ending
December 31.
Value at December 31,
2007
2008
2009
2010
2011
2012
Mine Safety Appliances Co . . . .
S&P 500 Index . . . . . . . . . . . . .
Russell 2000 Index . . . . . . . . . .
$100.00
100.00
100.00
$47.39
63.00
66.21
$54.83
79.68
84.20
$ 66.83
91.68
106.82
$ 73.23
93.61
102.36
$ 97.85
108.59
119.09
Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2013.
Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
Index Data: Copyright Russell Investments, Inc. Used with permission. All rights reserved.
19
Item 6. Selected Financial Data
(In thousands, except as noted)
2012
2011
2010(a)
2009
2008
Statement of Income Data:
Net sales(b)
Net income attributable to Mine Safety
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,168,904
$1,173,227
$ 976,631
$909,991
$1,134,282
Appliances Company(c)
. . . . . . . . . . . . . . . .
90,637
69,852
38,104
43,295
70,422
Earnings per Share Data:
Basic per common share (in dollars)(d) . . . . . . .
Diluted per common share (in dollars)(d)
. . . . .
Dividends paid per common share
(in dollars)
. . . . . . . . . . . . . . . . . . . . . . . . . .
$
Weighted average common shares
$
2.45
2.42
1.38
1.91
1.87
1.03
$
$
1.06
1.05
$
1.21
1.21
.99
.96
1.98
1.96
.94
outstanding—basic . . . . . . . . . . . . . . . . . . . .
36,564
36,221
35,880
35,668
35,593
Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Long-term debt(e)
Mine Safety Appliances Company
$1,111,746
272,333
$1,115,052
334,046
$1,197,188
367,094
$875,228
82,114
$ 875,810
94,082
shareholders’ equity . . . . . . . . . . . . . . . . . . .
462,955
433,666
451,368
436,616
393,766
(a)
Includes General Monitors from the date of acquisition on October 13, 2010.
(b) For discussion of changes between 2012 and 2011 and between 2011 and 2010 see Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations. The increase in sales from 2009
to 2010 was primarily due to higher demand in oil and gas, mining and other core industrial markets. The
decrease in sales from 2008 to 2009 was primarily due to the effects of the economic recession, lower
military sales and unfavorable currency translation effects.
(c) For discussion of changes between 2012 and 2011 and between 2011 and 2010 see Item 7. Management’s
Discussion and Analysis of Financial Conditions and Results of Operations. The decrease in net income
from 2009 to 2010 was primarily due to higher selling, general and administrative expenses required to
support growth as we recovered from the recession. The decrease in net income for 2008 to 2009 was
primarily related to lower sales.
(d) See Note 6 to the Financial Statements for the basis of calculating earnings per share.
(e) The increase in long-term debt in 2010 related to the acquisition of General Monitors in October 2010.
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 may
contain 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
sections of this annual report entitled “Forward-Looking Statements” and “Risk Factors.”
20
BUSINESS OVERVIEW
We are a global leader in the development, manufacture and supply of products that protect people’s health
and safety. Our safety products typically integrate any combination of electronics, mechanical systems and
advanced materials to protect users against hazardous or life threatening situations. Our comprehensive lines of
safety products are used by workers around the world in the oil and gas, fire service, mining, construction and
other industries, as well as the military. We are committed to providing our customers with service unmatched in
the safety industry and, in the process, enhancing our ability to provide a growing line of safety solutions for
customers in key global markets.
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 reportable geographic segments: North America, Europe and International. Each segment includes a
number of operating segments. In 2012, 47%, 25% and 28% of our net sales were made by our North American,
European 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 European segment includes companies in most Western European countries and a number of
Eastern European and Middle Eastern locations. Our largest European companies, based in Germany and France,
develop, manufacture and sell a wide variety of products. Operations in other European segment 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, the U.S. and China, or are purchased from third party vendors.
International. Our International segment includes companies in South America, Africa and the Asia Pacific
region, some of which are in developing regions of the world. Principal International segment manufacturing
operations are located in Australia, Brazil, China and South Africa. These companies 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 China, Germany, France and the U.S., or are purchased from third party vendors.
RESULTS OF OPERATIONS
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Net sales. Net sales for the year ended December 31, 2012 were $1,168.9 million, a decrease of
$4.3 million, from $1,173.2 million for the year ended December 31, 2011. Excluding the effects of weakening
currencies and the divestitures of our ballistic vest and North American ballistic helmet businesses, sales
increased $72.6 million, or 7%. Sales of ballistic vests and helmets were $36.0 million lower in 2012, reflecting
the divestiture of those businesses. The unfavorable translation effects of weaker foreign currencies decreased
sales, when stated in U.S. dollars, by $40.9 million.
(Dollars in millions)
2012
2011
Dollar
Increase
(Decrease)
Percent
Increase
(Decrease)
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$551.9
289.5
327.4
$561.1
286.8
325.3
$(9.2)
2.7
2.1
(2)%
1
1
Net sales by the North American segment were $551.9 million for the year ended December 31, 2012, a
decrease of $9.2 million, or 2%, compared to $561.1 million for the year ended December 31, 2011. During the
21
year ended December 31, 2012, we continued to see growth in the fire service and industrial markets. Shipments
of instruments, head, eye and face protection and self-contained breathing apparatus (SCBA) were up $25.1
million, $4.7 million and $2.2 million, respectively. These increases were offset by a $4.7 million decrease in
shipments of communication devices and a $36.0 million decrease in shipments of ballistic helmets and vests to
military markets. We divested our ballistic vest and North American ballistic helmet businesses during the fourth
quarter of 2011 and the second quarter of 2012, respectively.
Net sales for the European segment were $289.5 million for the year ended December 31, 2012, an increase
of $2.7 million, or 1%, from $286.8 million for the year ended December 31, 2011. Local currency sales
increased $22.4 million, reflecting higher shipments of instruments, SCBAs, ballistic helmets, and respirators, up
$10.8 million, $4.8 million, $4.2 million, and $3.3 million, respectively. The increase was partially offset by a
$2.1 million decrease in shipments of gas masks to military markets. Currency translation effects decreased
European segment sales, when stated in U.S. dollars, by $19.7 million, primarily related to a weaker euro.
Net sales of our International segment were $327.4 million for the year ended December 31, 2012, an increase of
$2.1 million, or 1%, compared to $325.3 million for the year ended December 31, 2011. Local currency sales in the
International segment increased $21.8 million during the year ended December 31, 2012. Growth in fire service
markets in China and Latin America led to increases in sales of SCBAs and fire helmets of $9.8 million and $3.8
million, respectively. In addition, sales of head, eye and face protection to industrial markets improved by $9.7 million.
Currency translation effects decreased International segment sales, when stated in U.S. dollars, by $19.7 million,
primarily related to a weaker South African rand and Brazilian real.
Other income. Other income for the year ended December 31, 2012 was $11.0 million, an increase of $5.6
million, from $5.4 million for the year ended December 31, 2011. During the year ended December 31, 2012, we
recognized gains on the sale of assets totaling $8.4 million compared to gains of $3.3 million in 2011. These
gains in both years were primarily related to property sales in our Cranberry Woods office park. In December
2012, we sold the last available parcel in Cranberry Woods. Other income for the year ended December 31, 2012
also includes a $4.8 million gain on an escrow settlement related to our October 2010 acquisition of the General
Monitors group of companies. These improvements were partially offset by impairment losses on intangible
assets and tooling related to our firefighter location project of $4.3 million and $0.5 million, respectively.
Cost of products sold. Cost of products sold was $666.2 million for the year ended December 31, 2012, a
decrease of $36.8 million, or 5%, from $703.0 million for the year ended December 31, 2011. Cost of products
sold as a percentage of sales was 57.0% in the year ended December 31, 2012 compared to 59.9% in 2011. The
decrease in cost of products sold in relation to sales was primarily due to lower manufacturing costs, a more
favorable product mix and improved pricing.
Gross profit. Gross profit for the year ended December 31, 2012 was $502.7 million, an increase of $32.5
million, or 7%, from $470.2 million for the year ended December 31, 2011. The ratio of gross profit to sales was
43.0% for 2012 compared to 40.1% in 2011. The higher gross profit ratio in 2012 was primarily related to lower
manufacturing costs, a more favorable product mix and improved pricing.
Selling, general and administrative expenses. Selling, general and administrative expenses for the year ended
December 31, 2012 were $321.2 million, an increase of $14.8 million, or 5%, from $306.4 million for the year
ended December 31, 2011. Selling, general and administrative expenses were 27.5% of sales in 2012 compared to
26.1% of sales in 2011. Local currency selling, general and administrative expenses increased $24.8 million across
all segments, reflecting higher selling costs, an increase in due diligence and consulting expense related to special
projects and an increase in product liability related legal and administrative expenses. Currency translation effects
decreased selling, general and administrative expenses for the year ended December 31, 2012, when stated in U.S.
dollars, by $10.0 million, primarily related to a weaker euro, Brazilian real and South African rand.
22
Research and development expenses. Research and development expenses were $40.9 million for the year
ended December 31, 2012, an increase of $1.7 million, or 4%, from $39.2 million for the year ended December
31, 2011. The increase reflects our ongoing focus on developing innovative new products.
Restructuring and other charges. For the year ended December 31, 2012, we recorded charges of $2.8
million ($1.9 million after tax). Charges for the year ended December 31, 2012 were related to severance costs
associated with staff reductions in our North American, European and International segments of $1.5 million,
$1.1 million and $0.2 million, respectively.
For the year ended December 31, 2011, we recorded charges of $8.6 million ($5.7 million after tax).
European segment charges of $5.8 million for the year ended December 31, 2011, related primarily to staff
reductions and the transfer of certain production activities to China. North American segment charges for the
year ended December 31, 2011 of $1.7 million included costs associated with the relocation of certain
administrative and production activities. International segment charges for the year ended December 31, 2011 of
$1.1 million were related primarily to severance costs associated with the relocation of our Wuxi, China
operations to Suzhou, China.
Interest expense. Interest expense for the year ended December 31, 2012 was $11.4 million, a decrease of
$2.7 million, or 20%, from $14.1 million for the year ended December 31, 2011. The decrease in interest expense
reflects lower borrowing on our revolving credit line and lower interest rates.
Income tax provision. Our effective tax rate for the year ended December 31, 2012 was 31.7% compared to
33.2% for the year ended December 31, 2011. The lower effective tax rate for the year was primarily related to a
tax benefit associated with a non cash charitable contribution of land at our Cranberry Woods office park and a
higher manufacturing deduction credit. These gains were partially offset by the expiration of the research and
development tax credit at the end of 2011. In January 2013, the research and development tax credit was
reinstated retroactively to the beginning of 2012. As a result, we will recognize the research and development tax
credit for 2012 in the first quarter of 2013. This credit is estimated to be approximately $1.0 million.
Net income attributable to Mine Safety Appliances Company. Net income for the year ended December 31,
2012 was $90.6 million, an increase of $20.7 million, or 30%, from net income for the year ended December 31,
2011 of $69.9 million. Basic earnings per share of common stock was $2.45 in 2012 compared to $1.91 in 2011,
an increase of 54 cents per share, or 28%.
North American segment net income for the year ended December 31, 2012 was $70.9 million, an
improvement of $13.0 million, or 22%, from $57.9 million for the year ended December 31, 2011. The increase
in North American segment net income reflects higher gross profits driven by controlled manufacturing costs, a
more favorable sales mix and improved pricing. These improvements were partially offset by the previously
discussed increase in selling, general and administrative expenses.
European segment net income for the year ended December 31, 2012 was $12.9 million, an improvement of $5.6
million, or 76%, from $7.3 million for the year ended December 31, 2011. Local currency net income increased by $6.3
million, reflecting improved gross profits and lower restructuring charges. Currency translation effects decreased
European segment net income, when stated in U.S. dollars, by $0.7 million, mainly due to a weaker euro.
International segment net income for the year ended December 31, 2012 was $22.3 million, a decrease of
$4.9 million, or 18%, from $27.2 million for the year ended December 31, 2011. Lower local currency net
income was primarily related to higher selling, general and administrative expenses. Currency translation effects
decreased International segment net income, when stated in U.S. dollars, by approximately $2.6 million,
primarily due to the weakening of the South African rand and Brazilian real.
The net loss reported in reconciling items for the year ended December 31, 2012 was $15.5 million,
compared to a net loss of $22.5 million for the year ended December 31, 2011. The improvement during the year
23
ended December 31, 2012 reflects lower interest expense and higher gains on the sale of land in our Cranberry
Woods office park.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Net sales. Net sales for the year ended December 31, 2011 were $1,173.2 million, an increase of $196.6
million, or 20%, from $976.6 million for the year ended December 31, 2010.
(Dollars in millions)
2011
2010
Dollar
Increase
Percent
Increase
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
$561.1
286.8
325.3
$464.0
251.1
261.5
$97.1
35.7
63.8
21%
14
24
Net sales by the North American segment were $561.1 million for the year ended December 31, 2011, an
increase of $97.1 million, or 21%, compared to $464.0 million for the year ended December 31, 2010.
North American sales for the year ended December 31, 2011 included $60.4 million of General Monitors sales
compared to $12.1 million in the year ended December 31, 2010. During the year ended December 31, 2011, we
saw growing demand in oil and gas and other core industrial markets, resulting in higher shipments of
instruments (excluding General Monitors), head protection and fall protection, up $11.8 million, $6.0 million and
$5.2 million, respectively. Sales of the Advanced Combat Helmet (ACH) were $27.2 million higher in 2011.
Net sales of our European segment were $286.8 million for the year ended December 31, 2011, an increase
of $35.7 million, or 14%, from $251.1 million for the year ended December 31, 2010. Net sales in the European
segment included $25.8 million of General Monitor sales for the year ended December 31, 2011, compared to
$4.2 million in the year ended December 31, 2010. Excluding General monitors, local currency sales in Europe
decreased $1.0 million for the year ended December 31, 2011. The decrease occurred primarily in Western
Europe where local currency sales were down $8.6 million reflecting lower shipments of gas masks, fire helmets
and ballistic helmets, partially offset by higher shipments of SCBAs and instruments. Lower local currency sales
in Western Europe were partially offset by a $7.6 million increase in sales in Eastern Europe and the Middle East
on higher shipments of SCBAs, instruments and ballistic helmets to the fire service, industrial and military
markets. Favorable translation effects of stronger European currencies, particularly the euro, increased 2011
European segment sales, when stated in U.S. dollars, by approximately $15.1 million.
Net sales of our International segment were $325.3 million for the year ended December 31, 2011, an
increase of $63.8 million, or 24%, compared to $261.5 million for the year ended December 31, 2010. Local
currency sales in the International segment increased $49.1 million during the year ended December 31, 2011.
The increase in sales was due to strong demand in the mining, fire service and core industrial markets. The sales
increase was most notably related to increased shipments of SCBA’s, head, eye and face protection and gas
detection products, which increased by $9.3 million, $13.4 million and $8.9 million, respectively. Sales growth
was fueled mainly by market growth in Latin America and China. Currency translation effects increased
International segment sales for the year ended December 31, 2011, when stated in U.S. dollars, by $14.7 million,
reflecting a strengthening of the Australian dollar, South African rand and Brazilian real.
Cost of products sold. Cost of products sold was $703.0 million for the year ended December 31, 2011, an
increase of $96.5 million, or 16%, from $606.5 million for the year ended December 31, 2010. The increase was
driven by higher sales. Cost of products sold as a percentage of sales was 59.9% in the year ended December 31,
2011 compared to 62.1% in 2010. Lower cost of products sold as a percentage of sales in 2011 was due to control
over manufacturing costs and the addition of General Monitors.
Gross profit. Gross profit for the year ended December 31, 2011 was $470.2 million, an increase of $100.1
million, or 27%, from $370.1 million for the year ended December 31, 2010. The ratio of gross profit to sales
24
was 40.1% in 2011 compared to 37.9% in 2010. The higher gross profit ratio in 2011 was primarily related to
improved pricing, control over manufacturing costs, and the addition of General Monitors.
Selling, general and administrative expenses. Selling, general and administrative expenses for the year
ended December 31, 2011 were $306.4 million, an increase of $43.5 million, or 17%, from $262.9 million for the
year ended December 31, 2010. Selling, general and administrative expenses were 26.1% of sales in 2011
compared to 26.9% of sales in 2010. North American segment selling general and administrative expenses were
up $25.0 million, including an increase of $14.4 million at General Monitors. The remainder of the increase in
North American segment selling, general and administrative expenses was primarily related to legal fees
associated with our insurance receivable, higher insurance expense due to increased coverage limits and higher
selling expenses to support sales growth. Local currency selling, general and administrative expenses in the
European segment were up $1.3 million, reflecting $2.6 million of additional General Monitors selling, general
and administrative expenses, partially offset by a $1.3 million decrease at other European companies. Local
currency selling, general and administrative expenses in the International segment increased $11.6 million,
primarily to support the increased sales volume. Currency exchange effects increased European and International
segment administrative expenses for the year ended December 31, 2011, when stated in U.S. dollars, by $8.2
million, primarily related to the strengthening of the euro, Australian dollar, South African rand and Brazilian
real.
Research and development expenses. Research and development expenses were $39.2 million for the year
ended December 31, 2011, an increase of $6.4 million, or 20%, from $32.8 million for the year ended
December 31, 2010. The increase includes $3.3 million of additional General Monitors research and development
expense. The remainder of the increase reflects our ongoing focus on developing innovative new products.
Restructuring and other charges. For the year ended December 31, 2011, we recorded charges of $8.6
million ($5.7 million after tax). European segment charges of $5.8 million for the year ended December 31,
2011, related primarily to staff reductions and the transfer of certain production activities to China.
North American segment charges for the year ended December 31, 2011 of $1.7 million included costs
associated with the relocation of certain administrative and production activities. International segment charges
for the year ended December 31, 2011 of $1.1 million were related primarily to severance costs associated with
the relocation of our Wuxi, China operations to Suzhou, China.
For the year ended December 31, 2010, we recorded charges of $14.1 million ($9.6 million after tax).
North American segment charges of $3.8 million included stay bonuses and other costs associated with the
transfer of certain production and administrative activities. European segment charges of $8.8 million related
primarily to a focused voluntary retirement incentive program in Germany and severance costs associated with
staff reductions. International segment charges of $1.5 million were primarily for severance costs related to staff
reductions.
Interest expense. Interest expense for the year ended December 31, 2011 was $14.1 million, an increase of
$5.4 million, or 62%, from $8.7 million for the year ended December 31, 2010. The increase was primarily due
to higher borrowings associated with the acquisition of General Monitors in October 2010.
Income tax provision. Our effective tax rate for the year ended December 31, 2011 was 33.2% compared to
31.9% for the year ended December 31, 2010. The higher effective tax rate for the year was primarily related to a
lower manufacturing deduction and research and development tax credit as a percentage of pretax income,
partially offset by the recognition of deferred tax assets on net operating loss carryforwards in Asia.
Net income attributable to Mine Safety Appliances Company. Net income for the year ended December 31,
2011 was $69.9 million, an increase of $31.8 million, or 83%, from net income for the year ended December 31,
2010 of $38.1 million. Basic earnings per share of common stock was $1.91 in 2011 compared to $1.06 in 2010,
an increase of 85 cents per share, or 80%.
25
North American segment net income for the year ended December 31, 2011 was $57.9 million, an
improvement of $13.3 million, or 30%, from $44.6 million for the year ended December 31, 2010.
North American segment net income includes $9.5 million of General Monitors net income for the year ended
December 31, 2011 compared to $0.2 million for the year ended December 31, 2010. The remainder of the
increase in North American segment net income was primarily related to improved sales and gross profits,
partially offset by the previously discussed increase in selling general and administrative expenses and research
and development expense.
European segment net income for the year ended December 31, 2011 was $7.3 million, an improvement of
$12.7 million, from a net loss of $5.4 million for the year ended December 31, 2010. The improvement in
European segment net income includes $6.6 million of General Monitors net income. The remainder of the
improvement in European segment results for 2011 was primarily due to lower operating costs and restructuring
expenses.
International segment net income for the year ended December 31, 2011 was $27.2 million, an increase of
$11.4 million, or 72%, from $15.8 million for the year ended December 31, 2010. Higher net income was
primarily related to improved sales and gross profits, partially offset by higher selling expenses. Currency
translation effects increased the 2011 International segment net income, when stated in U.S. dollars, by
approximately $1.0 million, primarily due to the strengthening of the Australian dollar, South African rand and
Brazilian real.
Reconciling items for the year ended December 31, 2011 reported a net loss of $22.5 million, an increase of
$5.6 million, or 33%, from a net loss of $16.9 million for the year ended December 31, 2010. The higher loss
reported in reconciling items in 2011 was primarily related to higher interest expense associated with the
acquisition of General Monitors and higher currency exchange losses.
LIQUIDITY AND CAPITAL RESOURCES
Our main source of liquidity is operating cash flows, supplemented by borrowings. Our principal liquidity
requirements are for working capital, capital expenditures, principal and interest payments on debt and
acquisitions. Approximately half of our long-term debt is at fixed interest rates with manageable repayment
schedules through 2021. The remainder of our long-term debt is at variable rates on an unsecured revolving
credit facility that is due in 2016. Substantially all of our borrowings originate in the U.S., which has limited our
exposure to non-U.S. credit markets and to currency exchange rate fluctuations.
Our unsecured senior revolving credit facility provides for borrowings up to $300.0 million through 2016
and is subject to certain commitment fees. Loans made under the senior revolving credit facility bear interest at a
variable rate. Loan proceeds may be used for general corporate purposes, including working capital, permitted
acquisitions, capital expenditures and repayment of existing indebtedness. The credit agreement also provides for
an uncommitted incremental facility that permits us, subject to certain conditions, to request an increase in the
senior credit facility of up to $50.0 million. At December 31, 2012, $185.0 million of the $300.0 million senior
revolving credit facility was unused.
During 2010, we issued $100.0 million in unsecured 4.00% Series A Senior Notes. These notes mature in
October 2021 and are payable in five annual installments of $20.0 million, commencing in October 2017. Interest
is payable quarterly.
During 2012, we reduced borrowings on the senior revolving credit facility by $55.0 million.
Cash and cash equivalents increased $22.8 million during the year ended December 31, 2012, compared to
an increase of $0.2 million during 2011 and a decrease of $2.2 million during 2010.
26
Operating activities. Operating activities provided cash of $150.5 million in 2012, compared to providing
cash of $85.3 million in 2011. Significantly higher cash from operating activities in 2012 was primarily related to
working capital improvements and higher net income. Trade receivables were $191.3 million at December 31,
2012, a decrease of $1.3 million, compared to $192.6 million at December 31, 2011. LIFO inventories were
$136.3 million at December 31, 2012, a decrease of $5.2 million, compared to $141.5 million at December 31,
2011. Accounts payable were $59.5 million at December 31, 2012, an increase of $9.3 million, compared to
$50.2 million at December 31, 2011. The $1.3 million decrease in trade receivables reflects a $2.3 million
decrease in local currency balances, partially offset by a $1.0 million increase due to currency translation effects.
The $5.2 million decrease in inventories reflects a $6.1 million decrease in local currency inventories, partially
offset by a $0.9 million increase due to currency translation effects. The decrease in local currency inventories
reflects the divestiture of the ACH business, as well as our ongoing initiative to manage inventory levels. The
$9.3 million increase in accounts payable reflects our focus on extending payments by negotiating favorable
terms with our vendors.
Cash provided by operations in 2011 increased $53.7 million compared to 2010. The increase was primarily
related to higher net income.
Investing activities. Investing activities used cash of $17.3 million for the year ended December 31, 2012,
compared to using $11.7 million in 2011.
Cash used for investing activities was $269.9 million lower in 2011 compared to 2010. In 2010, we used
cash of $262.3 million to acquire General Monitors.
Financing activities. Financing activities used cash of $110.5 million for the year ended December 31,
2012, compared to using cash of $71.3 million in 2011. During 2012, we paid down $63.0 million of long-term
debt compared to paying down $35.0 million in 2011. We made dividend payments of $51.0 million during 2012,
compared to $37.7 million during 2011. Dividends paid on our common stock during 2012 (our 96th consecutive
year of dividend payment) were $1.38 per share, including a special one-time dividend of $0.28 per share that
was paid on December 28, 2012. Dividends paid on our common stock in 2011 and 2010 were $1.03 and $0.99
per share, respectively.
Financing activities used cash of $71.3 million in 2011 compared to providing cash of $246.6 million in
2010. In 2010, net borrowings were $278.8 million, primarily to finance the acquisition of General Monitors.
CUMULATIVE TRANSLATION ADJUSTMENTS
The year-end position of the U.S. dollar relative to international currencies resulted in a translation gain of
$4.1 million being credited to the cumulative translation adjustments attributable to Mine Safety Appliances
Company shareholders’ equity account for the year ended December 31, 2012, compared to a translation loss of
$14.7 million in 2011 and a translation gain of $1.6 million in 2010. The translation gain in 2012 was primarily
related to the strengthening of the euro. The translation loss in 2011 was primarily related to the weakening of the
euro and South African rand. The translation gain in 2010 was primarily due to the strengthening of the
South African rand, the Australian dollar and the Brazilian real, partially offset by the weakening of the euro.
27
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, 2012 were as follows:
(In millions)
Total
2013
2014
2015
2016
2017
Thereafter
Long-term debt* . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . .
$279.0
32.3
$ 6.7
10.9
$ 6.7
8.3
$ 6.7
4.9
$121.7
3.1
$26.7
1.6
$110.5
3.5
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
311.3
17.6
15.0
11.6
124.8
28.3
114.0
* Future interest payments are not included in the table.
The significant obligations table does not include obligations to taxing authorities due to uncertainty
surrounding the ultimate settlement of amounts and timing of these obligations.
We expect to meet our 2013 through 2015 and 2017 debt service obligations through cash provided by
operations. Approximately $115.0 million of debt payable in 2016 relates to our unsecured senior revolving
credit facility. We expect to generate sufficient operating cash flow to make payments against this amount each
year. To the extent that a balance remains when the facility matures in 2016, we expect to refinance the
remaining balance through new borrowing facilities.
We expect to make net contributions of $7.2 million to our pension plans in 2013.
We have purchase commitments for materials, supplies, services and property, plant and equipment as part
of our ordinary conduct of business.
We categorize the product liability losses that we experience into two main categories, single incident and
cumulative trauma. Single incident product liability claims are discrete incidents that are typically known to us
when they occur and involve observable injuries and, therefore, more quantifiable damages. Therefore, we
maintain a reserve for single incident product liability claims based on expected settlement costs for pending
claims and an estimate of costs for unreported claims derived from experience, sales volumes and other relevant
information. Our reserve for single incident product liability claims at December 31, 2012 and 2011 was $4.4
million and $4.7 million, respectively. Single incident product liability expense during the years ended
December 31, 2012, 2011 and 2010 was $0.7 million, $1.5 million and $0.2 million, respectively. We evaluate
our single incident product liability exposures on an ongoing basis and make adjustments to the reserve as new
information becomes available.
Cumulative trauma product liability claims involve exposures to harmful substances (e.g., silica, asbestos
and coal dust) that occurred many years ago and may have developed over long periods of time into diseases
such as silicosis, asbestosis or coal worker’s pneumoconiosis. We are presently named as a defendant in 2,609
lawsuits in which plaintiffs allege to have contracted certain cumulative trauma diseases related to exposure to
silica, asbestos, and/or coal dust. These lawsuits mainly involve respiratory protection products allegedly
manufactured and sold by us. We are unable to estimate total damages sought in these lawsuits as they generally
do not specify the injuries alleged or the amount of damages sought, and potentially involve multiple defendants.
Cumulative trauma product liability litigation is difficult to predict. In our experience, until late in a lawsuit,
we cannot reasonably determine whether it is probable that any given cumulative trauma lawsuit will ultimately
result in a liability. This uncertainty is caused by many factors, including the following: cumulative trauma
complaints generally do not provide information sufficient to determine if a loss is probable; cumulative trauma
litigation is inherently unpredictable and information is often insufficient to determine if a lawsuit will develop
into an actively litigated case; and even when a case is actively litigated, it is often difficult to determine if the
lawsuit will be dismissed or otherwise resolved until late in the lawsuit. Moreover, even once it is probable that
28
such a lawsuit will result in a loss, it is difficult to reasonably estimate the amount of actual loss that will be
incurred. These amounts are highly variable and turn on a case-by-case analysis of the relevant facts, which are
often not learned until late in the lawsuit.
Because of these factors, we cannot reliably determine our potential liability for such claims until late in the
lawsuit. We, therefore, do not record cumulative trauma product liability losses when a lawsuit is filed, but
rather, when we learn sufficient information to determine that it is probable that we will incur a loss and the
amount of loss can be reasonably estimated. We record expenses for defense costs associated with open
cumulative trauma product liability lawsuits as incurred.
We cannot estimate any amount or range of possible losses related to resolving pending and future
cumulative trauma product liability claims that we may face because of the factors described above. As new
information about cumulative trauma product liability cases and future developments becomes available, we
reassess our potential exposures.
A summary of cumulative trauma product liability claims activity follows:
Open claims, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settled and dismissed claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,321
750
(462)
1,900
479
(58)
2,480
260
(840)
Open claims, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,609
2,321
1,900
2012
2011
2010
With some common contract exclusions, we maintain insurance for cumulative trauma product liability
claims. We have purchased insurance policies from over 20 different insurance carriers that provide coverage for
cumulative trauma product liability losses and related defense costs. In the normal course of business, we make
payments to settle product liability claims and for related defense costs. We record receivables for the amounts
that are covered by insurance. The available limits of these policies are many times our recorded insurance
receivable balance.
Various factors could affect the timing and amount of recovery of our insurance receivables, including the
outcome of negotiations with insurers, legal proceedings with respect to product liability insurance coverage and
the extent to which insurers may become insolvent in the future.
Our insurance receivables at December 31, 2012 and 2011 totaled $130.0 million and $112.1 million,
respectively, all of which is reported in other non-current assets.
A summary of insurance receivable balances and activity related to cumulative trauma product liability
losses follows:
(In millions)
2012
2011
2010
Balance January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collections and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . .
$112.1
29.7
(11.8)
$ 89.0
35.6
(12.5)
$ 91.7
30.9
(33.6)
Balance December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130.0
112.1
89.0
Additions to insurance receivables in the above table represent insured cumulative trauma product liability
losses and related defense costs. Uninsured cumulative trauma product liability losses during the years ended
December 31, 2012, 2011, and 2010 were $2.1 million, $1.1 million and $0.2 million, respectively.
Our aggregate cumulative trauma product liability losses and administrative and defense costs for the three
years ended December 31, 2012, totaled approximately $99.7 million, substantially all of which was insured.
29
We believe that the increase in the insurance receivable balance that we have experienced since 2005 is
primarily due to disagreements among our insurance carriers, and consequently with us, as to when their
individual obligations to pay us are triggered and the amount of each insurer’s obligation, as compared to other
insurers. We believe that our insurers do not contest that they have issued policies to us or that these policies
cover cumulative trauma product liability claims. We believe that our ability to successfully resolve our
insurance litigation with various insurance carriers in recent years demonstrates that we have strong legal
positions concerning our rights to coverage.
We regularly evaluate the collectability of the insurance receivables and record the amounts that we
conclude are probable of collection. Our conclusions are based on our analysis of the terms of the underlying
insurance policies, our experience in successfully recovering cumulative trauma product liability claims from our
insurers under other policies, the financial ability of our insurance carriers to pay the claims, our understanding
and interpretation of the relevant facts and applicable law and the advice of legal counsel, who believe that our
insurers are required to provide coverage based on the terms of the policies.
Although the outcome of cumulative trauma product liability matters cannot be predicted with certainty and
unfavorable resolutions could materially affect our results of operations on a quarter-to-quarter basis, based on
information currently available and the amounts of insurance coverage available to us, we believe that the
disposition of cumulative trauma product liability lawsuits that are pending against us will not have a materially
adverse effect on our future results of operations, financial condition, or liquidity.
We are currently involved in insurance coverage litigations with various of our insurance carriers.
In 2009, we sued The North River Insurance Company (North River) in the United States District Court for
the Western District of Pennsylvania, alleging that North River breached one of its insurance policies by failing
to pay amounts owed to us and that it engaged in bad-faith claims handling. We believe that North River’s
refusal to indemnify us under the policy for product liability losses and legal fees paid by us is wholly contrary to
Pennsylvania law and we are vigorously pursuing the legal actions necessary to collect all due amounts.
Discovery is concluding and motions for summary judgment on certain issues will be submitted to the court in
the first quarter of 2013. A trial date has not yet been scheduled.
In 2010, North River sued us in the Court of Common Pleas of Allegheny County, Pennsylvania seeking a
declaratory judgment concerning their responsibilities under three additional policies shared with Allstate
Insurance Company (as successor in interest to policies issued by the Northbrook Excess and Surplus Insurance
Company). We asserted claims against North River and Allstate for breaches of contract for failures to pay
amounts owed to us. We also alleged that North River engaged in bad-faith claims handling. We believe that
North River’s and Allstate’s refusals to indemnify us under these policies for product liability losses and legal
fees paid by us is wholly contrary to Pennsylvania law and we are vigorously pursuing the legal actions
necessary to collect all due amounts. Discovery is concluding and motions for summary judgment on certain
issues will be submitted to the court in the first quarter of 2013. A trial date has not yet been scheduled.
In July 2010, we filed a lawsuit in the Superior Court of the State of Delaware seeking declaratory and other
relief from the majority of our excess insurance carriers concerning the future rights and obligations of MSA and
our excess insurance carriers under various insurance policies. The reason for this insurance coverage action is to
secure a comprehensive resolution of our rights under the insurance policies issued by our insurers. The case is
currently in discovery. We have resolved our claims against certain of our insurance carriers on some of their
policies through negotiated settlements. When settlement is reached, we dismiss the settling carrier from this
action in Delaware.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting
principles (GAAP). The preparation of these financial statements requires us to make estimates and judgments
30
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 the preparation of our
financial statements.
Accounting for contingencies. We accrue 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 categorize the product liability losses that we experience into two main categories, single incident
and cumulative trauma. Single incident product liability claims are discrete incidents that are typically known to
us when they occur and involve observable injuries and, therefore, more quantifiable damages. We maintain a
reserve for single incident product liability claims, based on expected settlement costs for pending claims and an
estimate of costs for unreported claims derived from experience, sales volumes and other relevant information.
We evaluate our single incident product liability exposures on an ongoing basis and make adjustments to the
reserve as new information becomes available.
Cumulative trauma product liability claims involve exposures to harmful substances that occurred many
years ago and may have developed over long periods of time into diseases such as silicosis, asbestosis, or coal
worker’s pneumoconiosis. In our experience, until late in a lawsuit, we cannot reasonably determine whether it is
probable that any given cumulative trauma lawsuit will ultimately result in a liability. This uncertainty is caused
by many factors, including the following: cumulative trauma complaints generally do not provide information
sufficient to determine if a loss is probable; cumulative trauma litigation is inherently unpredictable and
information is often insufficient to determine if a lawsuit will develop into an actively litigated case; and even
when a case is actively litigated, it is often difficult to determine if the lawsuit will be dismissed or otherwise
resolved until late in the lawsuit. Moreover, even once it is probable that such a lawsuit will result in a loss, it is
difficult to reasonably estimate the amount of actual loss that will be incurred. These amounts are highly variable
and turn on a case-by-case analysis of the relevant facts, which are often not learned until late in the lawsuit. We,
therefore, do not record cumulative trauma product liability losses when a lawsuit is filed, but rather, when we
learn sufficient information to determine that it is probable that we will incur a loss and the amount of loss can be
reasonably estimated.
We cannot estimate any amount or range of possible losses related to resolving pending and future
cumulative trauma product liability claims that we may face because of the factors described above. As new
information about cumulative trauma product liability claims and future developments becomes available, we
reassess our potential exposures.
We record expenses for defense costs associated with open product liability lawsuits as incurred.
With some common contract exclusions, we maintain insurance for single incident and cumulative trauma
product liability claims and related defense costs. In the normal course of business, we make payments to settle
product liability claims and for related defense costs. We record receivables for the amounts that are covered by
insurance.
31
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, including our estimates of amounts receivable from insurance
carriers. Our product liability expense averaged less than 1% of net sales during the three years ended
December 31, 2012.
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 approximately
1% of net sales during the three years ended December 31, 2012.
Income taxes. We recognize deferred tax assets and liabilities using enacted tax rates for the effect of
temporary differences between the book and tax basis of recorded assets and liabilities. 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 adjust the related valuation allowances in the period that the
change in circumstances occurs. We had valuation allowances of $4.0 million and $2.8 million at December 31,
2012 and 2011, respectively.
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. We record tax benefits related to uncertain tax positions taken
or expected to be taken on a tax return when such benefits meet a more likely than not threshold. We recognize
interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. 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 sponsor certain pension and other postretirement benefit
plans. 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. The
discount rate assumptions used in determining projected benefit obligations are based on published long-term
bond indices or a company-specific yield curve model.
Goodwill. In the third quarter of each year, or more frequently if indicators of impairment exist or if a
decision is made to sell a business, we evaluate goodwill for impairment. A significant amount of judgment is
involved in determining if an indicator of impairment has occurred. Such indicators may include a decline in
expected cash flows, a significant adverse change in the business climate, unanticipated competition, or slower
growth rates, among others.
All goodwill is assigned to reporting units. For this purpose, we consider our operating segments to be our
reporting units. We test goodwill for impairment by either performing a qualitative evaluation or a two-step
32
quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than
not that the fair value of a reporting unit is less than its carrying value, including goodwill. Factors considered as
part of the qualitative assessment include entity-specific industry, market and general economic conditions. We
may elect to bypass this qualitative evaluation for some or all of our reporting units and perform a two-step
quantitative test. Quantitative testing involves comparing the estimated fair value of each reporting unit to its
carrying value. We estimate reporting unit fair value using discounted cash flow (DCF) methodologies, as we
believe forecasted cash flows are the best indicator of fair value. A number of significant assumptions and
estimates are involved in the application of the DCF model, including sales volumes and prices, costs to produce,
tax rates, capital spending, discount rates, and working capital changes. Cash flow forecasts are generally based
on approved business unit operating plans for the early years and historical relationships in later years. The betas
used in calculating the individual reporting units’ weighted average cost of capital (WACC) rate are estimated for
each reporting unit based on peer data.
In the event the estimated fair value of a reporting unit per the DCF model is less than the carrying value,
additional analysis would be required. The additional analysis would compare the carrying amount of the
reporting unit’s goodwill with the implied fair value of that goodwill, which may involve the use of valuation
experts. The implied fair value of goodwill is the excess of the fair value of the reporting unit over the fair value
amounts assigned to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a
business combination and the fair value of the reporting unit represented the purchase price. If the carrying value
of goodwill exceeds its implied fair value, an impairment loss equal to such excess would be recognized, which
could significantly and adversely impact reported results of operations and shareholders’ equity.
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement—Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This ASU updated
measurement guidance to improve the comparability of fair value measurements between U.S.GAAP and
International Financial Reporting Standards and enhanced disclosure requirements. The most significant change
in disclosures is an expansion of information related to fair value measurements categorized within Level 3 of the
fair value hierarchy. The adoption of this ASU on January 1, 2012 did not have a material effect on our
consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income—Presentation of Comprehensive
Income. This ASU requires net income and comprehensive income to be presented in either a single continuous
statement or in two separate, but consecutive, statements. In December 2011, the FASB issued ASU 2011-12,
which indefinitely deferred the ASU 2011-05 requirement related to the presentation of reclassification
adjustments from accumulated other comprehensive income. The adoption of ASU 2011-05 on January 1, 2012
did not have a material effect on our results of operations or financial position, but did change the format of the
presentation of comprehensive income.
In September 2011, the FASB issued ASU 2011-08, Intangibles-Goodwill and Other-Testing Goodwill for
Impairment. This ASU reduces the complexity of performing an annual goodwill impairment test by permitting
companies to perform an assessment of qualitative factors to determine whether additional goodwill impairment
testing is necessary. The adoption of this ASU, on January 1, 2012 did not have a material effect on our
consolidated financial statements.
In February 2013, the FASB issued ASU 2013-02, Comprehensive Income-Reporting of Amounts
Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires additional information about
the amounts reclassified out of accumulated other comprehensive income by component. The ASU will be
effective beginning in 2013. The adoption of this ASU will not have a material effect on our consolidated
financial statements, but will change disclosures related to comprehensive income.
33
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 rates. 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, 2012 by
approximately $61.7 million and $3.5 million, respectively.
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, 2012, we had open foreign currency forward contracts with a U.S. dollar notional
value of $30.9 million. A hypothetical 10% increase in December 31, 2012 forward exchange rates would result
in a $3.1 million increase in the fair value of these contracts.
Interest rates. 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 our revolving credit facility and industrial development
debt, these financial instruments are reported at carrying values which approximate fair values.
We have $160.0 million of fixed rate debt which matures at various dates through 2021. 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 $2.9 million. 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.
Actuarial assumptions. The most significant actuarial assumptions affecting our net periodic pension credit
and pension obligations are discount rates, expected returns on plan assets and plan asset valuations. Discount
rates and plan asset valuations are point-in-time measures. Expected returns on plan assets are based on our
historical returns by asset class. The following table summarizes the impact of changes in significant actuarial
assumptions on our December 31, 2012 actuarial valuations.
Impact of Changes in Actuarial Assumptions
Change in Discount
Rate
Change in Expected
Return
Change in Market Value of
Assets
(In thousands)
+1%
-1%
+1%
-1%
+5%
-5%
(Decrease) increase in net
benefit cost . . . . . . . . . . . . .
$ (5,592)
$ 6,050
$(3,800) $3,800
$ (811)
$
809
(Decrease) increase in
projected benefit
obligation . . . . . . . . . . . . . .
Increase (decrease) in funded
status . . . . . . . . . . . . . . . . . .
(60,417)
70,013
60,417
(70,013)
—
—
—
—
—
—
19,223
(19,223)
34
Item 8. Financial Statements and Supplementary Data
Management’s Reports
Management’s Report on Responsibility for Financial Reporting
Management of Mine Safety Appliances Company (the Company) is responsible for the preparation of the
financial statements included in this annual report. The financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America and include amounts that are based on
the best estimates and judgments of management. The other financial information contained in this annual report
is consistent with the financial statements.
Management’s Report on Internal Control Over Financial Reporting
Management 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, 2012. 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, 2012.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 has
been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in
their report, which is included herein.
/s/ WILLIAM M. LAMBERT
William M. Lambert
Chief Executive Officer
/s/ DENNIS L. ZEITLER
Dennis L. Zeitler
Senior Vice President and Treasurer
Chief Financial Officer
February 20, 2013
35
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Mine Safety Appliances Company:
In our opinion, the consolidated balance sheets and related consolidated statements of income, comprehensive
income, cash flows and changes in retained earnings and accumulated other comprehensive loss present fairly, in
all material respects, the financial position of Mine Safety Appliances Company and its subsidiaries (the
“Company”) at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2012 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 15 presents fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012,
based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these
financial statements and financial statement schedule, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Management’s Report on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is
to express opinions on these financial statements, on the financial statement schedule, and on the Company’s
internal control over financial reporting based on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included 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. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide 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
February 19, 2013
36
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
Year ended December 31,
2012
2011
2010
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,168,904
10,991
$1,173,227
5,381
$976,631
6,037
1,179,895
1,178,608
982,668
Costs and expenses
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency exchange losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
666,172
321,234
40,900
2,787
11,361
3,151
702,991
306,367
39,245
8,559
14,117
2,511
606,532
262,940
32,784
14,121
8,707
235
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . .
Net income attributable to Mine Safety Appliances Company . . . . . . . . . .
Earnings per share attributable to Mine Safety Appliances Company
common shareholders
1,045,605
1,073,790
925,319
134,290
42,529
91,761
(1,124)
90,637
104,818
34,773
70,045
(193)
57,349
18,290
39,059
(955)
69,852
38,104
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.45
2.42
$
$
1.91
1.87
$
$
1.06
1.05
See notes to consolidated financial statements.
37
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
Year ended December 31,
2012
2011
2010
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and post-retirement plan adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 91,761
3,846
(28,018)
$ 70,045
(15,980)
(44,218)
$39,059
2,511
(28)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive (income) loss attributable to noncontrolling interests . . . . . . . . .
67,589
(840)
9,847
1,137
41,542
(1,898)
Comprehensive income attributable to Mine Safety Appliances Company . . . . .
66,749
10,984
39,644
See notes to consolidated financial statements.
38
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
Assets
Current Assets
Property
Other Assets
Liabilities
Current Liabilities
Long-Term Debt
Other Liabilities
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade receivables, less allowance for doubtful accounts of $7,402 and
$7,043 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2012
2011
$
82,718
$
59,938
191,289
136,300
17,727
6,342
29,172
463,548
5,267
107,082
334,951
10,444
192,627
141,475
21,744
13,769
29,296
458,849
5,142
104,575
333,846
13,472
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
457,744
(310,279)
457,035
(311,272)
Net property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147,465
42,818
17,018
258,400
182,497
145,763
58,075
12,065
259,084
181,216
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,111,746
1,115,052
. . . . . . . . . . . . . . . . . . .
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 liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,823
59,519
41,602
15,025
4,389
61,442
188,800
272,333
151,536
17,249
11,124
641,042
$
8,263
50,208
38,400
15,738
3,051
56,110
171,770
334,046
124,310
30,458
15,057
675,641
Commitments and Contingencies (Note 19)
Shareholders’ Equity
Mine Safety Appliances Company shareholders’ equity:
Preferred stock, 4 1⁄ 2% cumulative, $50 par value (callable at $52.50) . . . . . .
Common stock, no par value (shares outstanding:
2012—37,007,799 and 2011—36,692,590) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares, at cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Mine Safety Appliances Company shareholders’ equity . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,569
3,569
112,135
(3,891)
(269,739)
(127,072)
747,953
462,955
7,749
470,704
97,276
(6,070)
(266,231)
(103,184)
708,306
433,666
5,745
439,411
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,111,746
1,115,052
See notes to consolidated financial statements.
39
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31,
2012
2011
2010
(In thousands)
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain from investing activities—disposal of assets . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency exchange losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit related to stock plans . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
$ 91,761
31,702
3,673
(8,396)
10,010
213
(14,104)
3,151
(2,799)
1,103
$ 70,045
32,866
(4,967)
(3,328)
7,732
8,800
(24,130)
2,511
(632)
(1,335)
$ 39,059
29,192
(6,391)
(5,135)
7,335
7,162
(32,493)
235
(3,462)
(1,693)
Operating cash flow before changes in certain working capital
items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,314
87,562
33,809
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable, prepaid expenses and other current assets . . .
Decrease (increase) in certain working capital items . . . . . . . . . . . .
2,346
2,677
17,776
11,363
34,162
(217)
(1,230)
(398)
(459)
(2,304)
(10,191)
(10,744)
11,145
7,587
(2,203)
Cash Flow From Operating Activities . . . . . . . . . . . . . . . . . . . . . . . .
150,476
85,258
31,606
Investing Activities
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash, acquired and other investing . . . . . . . . . . . . .
(32,209)
20,193
(5,269)
(30,390)
18,687
—
(25,024)
5,699
(262,250)
Cash Flow From Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . .
(17,285)
(11,703)
(281,575)
Financing Activities
(Payments on) proceeds from short-term debt, net
. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company stock purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit related to stock plans . . . . . . . . . . . . . . . . . . . . . . . .
(128)
183,500
(246,500)
(50,990)
(3,508)
4,306
2,799
137
164,000
(199,000)
(37,741)
(624)
1,316
632
(6,169)
325,000
(40,000)
(35,928)
(7,572)
7,809
3,462
Cash Flow From Financing Activities . . . . . . . . . . . . . . . . . . . . . . . .
(110,521)
(71,280)
246,602
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . .
110
(2,097)
1,144
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Beginning cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,780
59,938
82,718
178
59,760
59,938
(2,223)
61,983
59,760
Supplemental cash flow information:
Interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10,772
29,807
$ 13,969
21,739
$
8,379
25,383
See notes to consolidated financial statements.
40
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS AND
ACCUMULATED OTHER COMPREHENSIVE LOSS
(In thousands)
Balances January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and post-retirement plan adjustments, net of tax of $205 . . . . . . . . . . . . . . . .
Income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and post-retirement plan adjustments, net of tax of $28,636 . . . . . . . . . . . . . .
(Income) loss attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Common dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and post-retirement plan adjustments, net of tax of $11,364 . . . . . . . . . . . . . .
(Income) loss attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Common dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained
Earnings
$674,019
39,059
—
—
(955)
(35,886)
(42)
676,195
70,045
—
—
(193)
(37,699)
(42)
708,306
91,761
—
—
(1,124)
(50,948)
(42)
Accumulated
Other
Comprehensive
(Loss) Income
$ (45,856)
—
2,511
(28)
(943)
—
—
(44,316)
—
(15,980)
(44,218)
1,330
—
—
(103,184)
—
3,846
(28,018)
284
—
—
Balances December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
747,953
(127,072)
Components of accumulated other comprehensive loss are as follows:
(In thousands)
December 31
2012
2011
2010
Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and post-retirement plan adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
$
4,959
(132,031)
$
829
(104,013)
$ 15,479
(59,795)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(127,072)
(103,184)
(44,316)
See notes to consolidated financial statements.
41
MINE SAFETY APPLIANCES COMPANY
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.
Noncontrolling Interests—Noncontrolling interests reflect noncontrolling shareholders’ investments in
certain consolidated subsidiaries and their proportionate share of the income and accumulated other
comprehensive income of those subsidiaries.
Currency Translation—The functional currency of all significant non-U.S. subsidiaries is the local
currency. Assets and liabilities of these 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, generally as follows: buildings 20 to 40 years
and machinery and equipment 3 to 10 years. 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. Depreciation
expense for the years ended December 31, 2012, 2011 and 2010 was $27.5 million, $27.1 million and $25.5
million, respectively.
Goodwill and Other Intangible Assets—Intangible assets are amortized on a straight-line basis over their
useful lives. Intangible assets are reviewed for possible impairment whenever circumstances change such that the
recorded value of the asset may not be recoverable. Goodwill is not amortized, but is subject to impairment
write-down tests. We test the goodwill of each of our reporting units for impairment at least annually. The annual
goodwill impairment tests are performed as of September 30 each year. All goodwill is assigned to reporting
units. For this purpose, we consider our operating segments to be our reporting units. We test goodwill for
impairment by either performing a qualitative evaluation or a two-step quantitative test. The qualitative
evaluation is an assessment of various factors to determine whether it is more likely than not that the fair value
of a reporting unit is less than its carrying value, including goodwill. Factors considered as part of the qualitative
assessment include entity-specific industry, market and general economic conditions. We may elect to bypass the
qualitative assessment for some or all of our reporting units and perform a two-step quantitative test. Quantitative
testing involves estimating a reporting unit’s fair value. We estimate reporting unit fair value using discounted
cash flow methodologies. There has been no impairment of our goodwill as of December 31, 2012.
42
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. We record tax benefits
related to uncertain tax positions taken or expected to be taken on a tax return when such benefits meet a more
likely than not threshold. We recognize interest related to unrecognized tax benefits in interest expense and
penalties in operating expenses. No provision is made for possible U.S. taxes on the undistributed earnings of
foreign subsidiaries that are considered to be reinvested indefinitely.
Stock-Based Compensation—We account for stock-based compensation in accordance with the FASB
guidance on share-based payment, which requires that we recognize compensation expense for employee and
non-employee director stock-based compensation based on the grant date fair value. Except for retirement-
eligible participants, for whom there is no requisite service period, this expense is recognized ratably over the
requisite service periods following the date of grant. For retirement-eligible participants, this expense is
recognized at the grant date.
Derivative Instruments—We may use derivative instruments to minimize the effects of changes in currency
exchange rates. 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—Restructuring and Other Charges
During the years ended December 31, 2012, 2011 and 2010, we recorded charges of $2.8 million, $8.6
million and $14.1 million, respectively. These charges were primarily related to reorganization activities.
For the year ended December 31, 2012, North American, European and International segment charges of
$1.5 million, $1.1 million and $0.2 million, respectively, were primarily related to severance costs associated
with staff reductions.
43
For the year ended December 31, 2011, European segment charges of $5.8 million related primarily to staff
reductions and the transfer of certain production activities to China. North American segment charges for the
year ended December 31, 2011 of $1.7 million included costs associated with the relocation of certain
administrative and production activities. International segment charges for the year ended December 31, 2011 of
$1.1 million were primarily related to severance costs associated with the relocation of our Wuxi, China
operations to Suzhou, China.
For the year ended December 31, 2010, European segment charges of $8.8 million related primarily to a
focused voluntary retirement incentive program in Germany and severance costs associated with staff reductions.
North American segment charges for the year ended December 31, 2010 of $3.8 million included stay bonuses
and other costs associated with the transfer of certain production and administrative activities. International
segment charges for the year ended December 31, 2010 of $1.5 million were primarily related to severance costs
associated with staff reductions.
Note 3—Inventories
(In thousands)
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . .
Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of FIFO costs over LIFO costs . . . . . . . . . . . . . . .
Total FIFO inventories . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2012
2011
$ 72,658
13,473
50,169
136,300
46,519
182,819
$ 65,687
17,000
58,788
141,475
47,368
188,843
Inventories stated on the LIFO basis represent 16% and 18% of total inventories at December 31, 2012 and
2011, respectively.
Reductions in certain inventory quantities during the years ended December 31, 2012 and 2011 resulted in
liquidations of LIFO inventories carried at lower costs prevailing in prior years. The effect of LIFO liquidations
during 2012 reduced cost of sales by $0.8 million and increased net income by $0.5 million. The effect of LIFO
liquidations during 2011 reduced cost of sales by $0.5 million and increased net income by $0.3 million.
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.
4 1⁄ 2% cumulative preferred nonvoting stock, $50 par value—100,000 shares authorized; 71,373 shares
issued and 52,878 shares ($1.8 million) held in treasury. There were no treasury share purchases during
the three years ended December 31, 2012.
44
Common stock activity is summarized as follows:
(Dollars in thousands)
Issued
Balances January 1, 2010 . . . . . . 62,081,391
—
Restricted stock awards . . . . . . .
—
Restricted stock expense . . . . . .
—
Restricted stock forfeitures . . . . .
—
Stock options exercised . . . . . . .
—
Stock option expense . . . . . . . . .
Performance stock expense . . . .
—
Tax benefit related to stock
plans . . . . . . . . . . . . . . . . . . . .
Treasury shares purchased . . . . .
—
—
Balances December 31, 2010 . . . 62,081,391
Restricted stock awards . . . . . . .
Restricted stock expense . . . . . .
Restricted stock forfeitures . . . . .
Stock options exercised . . . . . . .
Stock option expense . . . . . . . . .
Performance stock expense . . . .
Tax benefit related to stock
—
—
—
—
—
—
plans . . . . . . . . . . . . . . . . . . . .
Treasury shares purchased . . . . .
—
—
Balances December 31, 2011 . . . 62,081,391
Restricted stock awards . . . . . . .
Restricted stock expense . . . . . .
Restricted stock forfeitures . . . . .
Stock options exercised . . . . . . .
Stock option expense . . . . . . . . .
Performance stock issued . . . . . .
Performance stock expense . . . .
Tax benefit related to stock
—
—
—
—
—
—
—
plans . . . . . . . . . . . . . . . . . . . .
Treasury shares purchased . . . . .
. . . . . . . . . . . . . . . . . .
Other, net
—
—
—
Shares
Stock
Compensation
Trust
(2,174,204)
162,925
—
—
650,565
—
—
—
—
(1,360,714)
103,815
—
—
94,115
—
—
—
—
(1,162,784)
136,295
—
—
223,022
—
58,037
—
—
—
—
Treasury
Common
Stock
(23,934,669) $ 74,269
(850)
4,103
(40)
4,413
2,748
524
—
—
(1,092)
—
—
—
Dollars
Stock
Compensation
Trust
$(11,349)
850
—
—
3,396
—
—
Treasury
Cost
$(256,283)
—
—
—
—
—
—
—
(265,190)
(24,200,951)
—
—
(7,469)
—
—
—
—
(17,597)
(24,226,017)
—
—
(10,815)
—
—
—
—
—
(91,330)
—
3,462
—
88,629
(542)
4,376
(6)
825
2,343
1,019
632
—
97,276
(711)
4,891
(147)
3,141
2,435
(303)
2,831
2,799
—
(77)
—
—
(7,103)
542
—
—
491
—
—
—
—
(6,070)
711
—
—
1,165
—
303
—
—
—
—
—
(7,572)
(263,855)
—
—
—
—
—
—
—
(624)
(264,479)
—
—
—
—
—
—
—
—
(3,508)
—
Balances December 31, 2012 . . . 62,081,391
(745,430)
(24,328,162) 112,135
(3,891)
(267,987)
The Mine Safety Appliances Company Stock Compensation Trust was established to provide shares for
certain benefit plans, including the management and non-employee directors’ equity incentive plans. 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 common stock issued.
45
Note 5—Segment Information
We are organized into eleven geographic operating segments based on management responsibilities. The
operating segments have been aggregated (based on economic similarities, the nature of their products, end-user
markets and methods of distribution) into three reportable segments: North America, Europe and International.
Reportable segment information is presented in the following table:
(In thousands)
2012
2011
2010
Sales to external customers . . . . . . . . . . . . . .
Intercompany sales . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mine Safety
Appliances Company . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . .
Noncash items:
Depreciation and amortization . . . . . . .
. . . . . . . . . .
Pension income (expense)
Income tax provision . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . .
Long-lived assets . . . . . . . . . . . . . . . . . . . . .
Sales to external customers . . . . . . . . . . . . . .
Intercompany sales . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mine Safety
Appliances Company . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . .
Noncash items:
Depreciation and amortization . . . . . . .
. . . . . . . . . .
Pension income (expense)
Income tax provision . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . .
Long-lived assets . . . . . . . . . . . . . . . . . . . . .
Sales to external customers . . . . . . . . . . . . . .
Intercompany sales . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mine Safety
Appliances Company . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . .
Noncash items:
Depreciation and amortization . . . . . . .
. . . . . . . . . .
Pension income (expense)
Income tax provision . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . .
Long-lived assets . . . . . . . . . . . . . . . . . . . . .
North
America
Europe
International
Reconciling
Items
Consolidated
Totals
$551,927
114,354
$289,549
98,096
$327,428
18,641
$
(231,091)
— $1,168,904
—
70,930
726,476
364
106
21,446
2,138
42,480
20,129
119,642
12,913
352,601
147
350
22,318
205,959
1,000
95
(15,524)
(173,290)
14
10,810
90,637
1,111,746
1,525
11,361
5,354
(4,700)
4,858
5,106
29,882
4,902
(1,111)
9,214
6,974
36,589
—
—
(14,023)
—
—
31,702
(3,673)
42,529
32,209
186,113
561,140
100,094
286,753
116,471
325,334
18,305
—
(234,870)
1,173,227
—
57,914
742,707
78
29
22,036
10,800
34,327
20,035
127,361
7,331
340,305
192
253
27,152
194,127
1,267
138
(22,545)
(162,087)
324
13,697
69,852
1,115,052
1,861
14,117
6,239
(5,638)
3,994
4,384
29,981
4,591
(195)
6,442
5,971
35,540
—
—
(9,990)
—
—
32,866
4,967
34,773
30,390
192,882
464,012
84,905
251,107
92,526
261,512
16,410
—
(193,841)
976,631
—
44,560
810,345
329
51
18,918
13,451
22,032
16,806
142,241
(5,371)
336,095
110
160
15,835
205,837
1,212
100
(16,920)
(155,089)
328
8,396
38,104
1,197,188
1,979
8,707
6,116
(6,590)
769
4,667
33,199
4,158
(470)
5,720
3,551
35,229
—
—
(10,231)
—
—
29,192
6,391
18,290
25,024
210,669
Reconciling items consist primarily of intercompany eliminations and items reported at the corporate level.
46
Geographic information on sales to external customers, based on country of origin:
(In thousands)
2012
2011
2010
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 527,550
74,557
566,797
$ 538,257
75,536
559,434
$447,029
77,858
451,744
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,168,904
1,173,227
976,631
Geographic information on long-lived assets, based on country of origin:
(In thousands)
2012
2011
2010
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$116,539
8,781
60,793
$124,035
9,425
59,422
$139,161
10,570
60,938
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
186,113
192,882
210,669
Note 6—Earnings per Share
Basic earnings per share is computed by dividing net income, after the deduction of preferred stock
dividends and undistributed earnings allocated to participating securities, by the weighted average number of
common shares outstanding during the period. Diluted earnings per share assumes the issuance of common stock
for all potentially dilutive share equivalents outstanding not classified as participating securities. Participating
securities are defined as unvested stock-based payment awards that contain nonforfeitable rights to dividends.
(In thousands, except per share amounts)
2012
2011
2010
Net income attributable to Mine Safety Appliances Company . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$90,637
(42)
$69,852
(42)
$38,104
(42)
Income available to common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends and undistributed earnings allocated to participating securities . . . . . . .
90,595
(865)
69,810
(755)
38,062
(365)
Income available to common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89,730
69,055
37,697
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.45
2.42
$
$
1.91
1.87
$
$
1.06
1.05
Basic shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options and other stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,564
478
36,221
610
35,880
542
Diluted shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,042
36,831
36,422
Antidilutive stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
744
894
760
47
Note 7—Income Taxes
(In thousands)
2012
2011
2010
Components of income before income taxes
U.S. income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 67,041
67,249
$ 58,817
46,001
$38,398
18,951
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134,290
104,818
57,349
Provision for income taxes
Current
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 18,774
2,556
20,986
$
6,829
872
18,272
$ 9,498
149
1,481
Total current provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,316
25,973
11,128
Deferred
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(518)
(125)
856
213
10,853
772
(2,825)
8,800
3,862
194
3,106
7,162
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,529
34,773
18,290
Reconciliation of the U.S. federal income tax rates to our effective tax rate:
U.S. federal income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes—U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes on non-U.S. income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing deduction credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
2011
2010
35.0%
1.2
(1.4)
—
(1.9)
(0.2)
(1.0)
31.7%
35.0%
1.0
(2.1)
(1.3)
(0.3)
0.1
0.8
33.2%
35.0%
0.4
(0.8)
(2.3)
(1.9)
2.0
(0.5)
31.9%
48
Components of deferred tax assets and liabilities:
(In thousands)
Deferred tax assets
Book expenses capitalized for tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vacation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating losses and tax credit carryforwards . . . . . . . . . . . . . . . . . . .
Post employment benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credit carryforwards (expiring in 2019) . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basis of capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2012
2011
$ 8,213
19,282
4,780
1,240
7,558
1,006
212
9,672
2,754
1,013
3,078
1,547
261
4,014
64,630
(3,961)
60,669
(10,547)
(10,915)
(21,492)
(322)
$ —
13,561
3,773
1,319
9,436
2,400
3,463
7,815
4,116
1,102
2,903
1,581
217
3,788
55,474
(2,777)
52,697
(13,565)
(18,609)
(16,209)
(973)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(43,276)
(49,356)
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,393
3,341
At December 31, 2012, we had net operating loss carryforwards of approximately $30.4 million, all of
which are in non-U.S. tax jurisdictions. Net operating loss carryforwards of $0.2 million, $0.9 million and
$0.1 million will expire in 2014, 2015 and 2016, respectively. The remainder may be carried forward
indefinitely.
No deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries,
which amounted to $258.0 million as of December 31, 2012. 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.
A reconciliation of the change in the tax liability for unrecognized tax benefits for the years ended
December 31, 2012 and 2011 is as follows:
(In thousands)
2012
2011
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments for tax positions related to the current year . . .
Adjustments for tax positions related to prior years . . . . . . .
Statute expiration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,827
(2,672)
(367)
(268)
$11,827
1,268
(9)
(259)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,520
12,827
49
The total amount of unrecognized tax benefits, if recognized, would reduce our future effective tax rate. We
have recognized tax benefits associated with these liabilities in the amount of $8.6 million and $11.4 million at
December 31, 2012 and 2011, respectively.
We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating
expenses. Our liability for accrued interest and penalties related to uncertain tax positions was $0.9 million at
December 31, 2011. During 2012, we reduced interest related to uncertain tax positions by $0.2 million. Our
liability for accrued interest and penalties related to uncertain tax positions was $0.7 million at December 31,
2012.
We file a U.S. federal income tax return along with various state and foreign income tax returns.
Examinations of our U.S. federal returns have been completed through 2006, and the 2007 and 2008 tax years
were closed by statute. Various state and foreign income tax returns may be subject to tax audits after 2006.
Note 8—Stock Plans
The 2008 Management Equity Incentive Plan provides for various forms of stock-based compensation for
eligible key employees through May 2018. Management stock-based compensation includes stock options,
restricted stock and performance stock units. The 2008 Non-Employee Directors’ Equity Incentive Plan provides
for grants of stock options and restricted stock to non-employee directors through May 2018. Stock options are
granted at market value option prices and expire after ten years. Stock options are exercisable beginning three
years after the grant date. Restricted stock is granted without payment to the company and generally vests three
years after the grant date. In general, unvested stock options, restricted stock and performance stock units are
forfeited if the participant’s employment with the company terminates for any reason other than retirement, death
or disability. Certain restricted stock for management retention vests in three equal tranches four, five and six
years after the grant date. Unvested restricted stock for management retention is forfeited if the participant’s
employment with the company terminates for any reason other than death or disability. Restricted stock is valued
at the market value of the stock on the grant date. The final number of shares to be issued for performance stock
units may range from zero to 200% of the target award based on achieving a targeted return on net assets, total
shareholder return or other specific performance or market conditions over the performance period. Performance
stock units with a performance condition are valued at the market value of the stock on the grant date.
Performance stock units with a market condition are valued at an estimated fair value using a Monte Carlo
model. We issue Stock Compensation Trust shares or new shares for stock option exercises and grants of
restricted stock and performance stock. As of December 31, 2012, there were 2,052,924 and 207,952 shares,
respectively, reserved for future grants under the management and non-employee directors’ equity incentive
plans.
Stock-based compensation expense was as follows:
(In thousands)
Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total compensation expense before income taxes . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit
Total compensation expense, net of income tax benefit
. . . .
2012
2011
2010
$ 4,744
2,435
2,831
10,010
3,700
6,310
$4,370
2,343
1,019
7,732
2,825
4,907
$4,063
2,748
524
7,335
2,653
4,682
We did not capitalize any stock-based compensation expense in 2012, 2011, or 2010.
50
Stock option expense is based on the fair value of stock option grants estimated on the grant dates using the
Black-Scholes option pricing model and the following weighted average assumptions for options granted in
2012, 2011 and 2010.
Fair value per option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
2011
2010
$10.77
$9.94
$7.21
1.2%
3.1%
41%
6.1
2.6%
3.6%
40%
6.1
3.0%
3.9%
40%
6.1
The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date
converted into an implied spot rate yield curve. Expected dividend yield is based on the most recent annualized
dividend divided by the one year average closing share price. Expected volatility is based on the ten year
historical volatility using daily stock prices. Expected life is based on historical stock option exercise data.
A summary of option activity follows:
Outstanding January 1, 2010 . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding December 31, 2010 . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding December 31, 2011 . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
2,085,075
323,978
(650,565)
(9,485)
1,749,003
166,247
(94,115)
(2,495)
1,818,640
196,469
(223,022)
(5,093)
(2,334)
Outstanding December 31, 2012 . . . . . . . . . . . .
1,784,660
Weighted
Average
Exercise Price
Exercisable at
Year-end
$25.01
25.06
12.00
46.73
29.74
34.09
13.99
44.08
30.94
37.33
18.93
43.33
36.69
33.05
791,759
907,598
1,100,300
For various exercise price ranges, characteristics of outstanding and exercisable stock options at
December 31, 2012 were as follows:
Range of Exercise Prices
Shares
Exercise Price
Remaining Life
$10.65 – $21.71 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$24.63 – $37.33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$40.08 – $50.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
357,569
683,185
743,906
$10.65 – $50.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,784,660
$18.03
30.21
42.88
33.05
6.0 Years
7.7
3.4
5.6
Stock Options Outstanding
Weighted-Average
Range of Exercise Prices
Shares
Exercise Price
Remaining Life
$10.65 – $13.57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25.07 – $28.06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$40.08 – $50.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.65 – $50.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
328,445
49,349
722,506
1,100,300
$17.70
23.27
42.89
34.49
6.0 Years
4.2
3.2
4.1
Stock Options Exercisable
Weighted-Average
51
Cash received from the exercise of stock options was $4.3 million, $1.3 million and $7.8 million for the
years ended December 31, 2012, 2011 and 2010, respectively. The tax benefit we realized from these exercises
was $1.6 million, $0.7 million and $4.3 million for the years ended December 31, 2012, 2011 and 2010,
respectively.
The aggregate intrinsic value of stock options exercisable at December 31, 2012 was $9.0 million. The
aggregate intrinsic value of all stock options outstanding at December 31, 2012 was $17.2 million.
A summary of restricted stock activity follows:
Unvested at January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested at December 31, 2010 . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
338,206
185,216
(46,125)
(3,660)
473,637
125,603
(76,505)
(10,481)
512,254
130,985
(209,897)
(15,499)
Unvested at December 31, 2012 . . . . . . . . . . . . . . . . . . . . .
417,843
A summary of performance stock unit activity follows:
Unvested at January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
61,974
41,984
(18,329)
85,629
48,820
(7,506)
(1,500)
125,443
54,928
(47,706)
5,679
(672)
Unvested at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . .
137,672
Weighted
Average
Grant
Date Fair
Value
$28.99
25.38
39.88
23.93
26.56
33.61
44.39
24.87
25.66
37.61
20.44
28.37
31.92
Weighted
Average
Grant
Date Fair
Value
$17.83
24.63
20.75
20.53
33.09
21.14
30.53
25.27
41.33
18.23
26.39
41.45
35.85
During the years ended December 31, 2012, 2011 and 2010, the total intrinsic value of stock options
exercised (the difference between the market price on the date of exercise and the option price paid to exercise
the option) was $4.4 million, $1.8 million and $10.9 million, respectively. The fair values of restricted stock
vested during the years ended December 31, 2012, 2011 and 2010 were $8.0 million, $2.6 million and
$1.2 million, respectively. The fair value of performance stock units vested during the year ended December 31,
2012 was $1.9 million.
52
On December 31, 2012, there was $5.5 million of unrecognized stock-based compensation expense. The
weighted average period over which this expense is expected to be recognized was approximately one year.
Note 9—Long-Term Debt
(In thousands)
Industrial development debt issues payable through
2022, 0.30% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Notes payable through 2012, 8.39% . . . . . . . . . . .
Senior Notes payable through 2021, 5.41% . . . . . . . . . . .
Senior Notes payable through 2021, 4.00% . . . . . . . . . . .
Senior revolving credit facility maturing in 2016 . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Amounts due within one year . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2012
2011
$
4,000
—
60,000
100,000
115,000
279,000
6,667
272,333
$
4,000
8,046
60,000
100,000
170,000
342,046
8,000
334,046
Our unsecured senior revolving credit facility provides for borrowings up to $300.0 million through
November 2016 and is subject to certain commitment fees. Loans made under the senior revolving credit facility
bear interest at a variable rate. Loan proceeds may be used for general corporate purposes, including working
capital, permitted acquisitions, capital expenditures and repayment of existing indebtedness. The credit
agreement also provides for an uncommitted incremental facility that permits us, subject to certain conditions, to
request an increase in the senior credit facility of up to $50.0 million. At December 31, 2012, $185.0 million of
the $300.0 million senior revolving credit facility was unused.
Approximate maturities on our long-term debt over the next five years are $6.7 million in 2013, $6.7 million
in 2014, $6.7 million in 2015, $121.7 million in 2016, $26.7 million in 2017, and $110.5 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 at December 31, 2012.
Note 10—Goodwill and Intangible Assets
Changes in goodwill during the years ended December 31, 2012 and 2011 were as follows:
(In thousands)
2012
2011
Net balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$259,084
(1,800)
1,116
$263,089
(1,800)
(2,205)
Net balance at December 31 . . . . . . . . . . . . . . . . . . . . . . .
258,400
259,084
At December 31, 2012, goodwill of $196.5 million, $59.2 million and $2.7 million related to the
North American, European and International reporting segments, respectively.
Changes in intangible assets, net of accumulated amortization, during the years ended December 31, 2012
and 2011 were as follows:
(In thousands)
Net balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
2011
$47,119
(4,181)
—
(4,272)
(18)
$53,880
(5,728)
(518)
—
(515)
Net balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . .
38,648
47,119
53
Intangible assets include patents and technology, license agreements, copyrights, trade names and
distribution agreements. Intangible assets are reported in other noncurrent assets. At December 31, 2012,
intangible assets totaled $38.6 million, net of impairment reserves and accumulated amortization of
$28.3 million. Intangible asset amortization expense over the next five years is expected to be approximately
$3.7 million in 2013, $3.7 million in 2014, $3.7 million in 2015, $3.5 million in 2016 and $3.1 million in 2017.
In December 2012, we discontinued our firefighter location development project and commenced an active
program to sell the related intangible assets. As a result of this decision, we recognized an impairment loss
$4.3 million to write-off the carrying value of these intangibles, consisting primarily of patents and trade secrets.
The impairment loss is reported in other income in the income statement and included in Reconciling Items in
segment information.
During 2012, we sold certain assets related to our North American ballistic helmet business, resulting in the
disposal of $1.8 million of goodwill. During 2011, we sold certain assets related to our ballistic vest business,
resulting in disposals of goodwill and intangible assets of $1.8 million and $0.5 million, respectively. The impact
of these transactions and the operating results of the North American ballistic helmet and ballistic vest businesses
were not material to net income or earnings per share for all periods presented and are not expected to be
significant to future results.
Note 11—Pensions and Other Postretirement Benefits
We maintain various defined benefit and defined contribution plans covering the majority of our employees.
Our 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.
We provide health care benefits and limited life insurance for certain retired employees who are covered by
our principal U.S. defined benefit pension plan until they become Medicare-eligible.
54
Information pertaining to defined benefit pension plans and other postretirement benefits plans is provided
in the following table:
(In thousands)
Change in Benefit Obligations
Pension Benefits
Other Benefits
2012
2011
2012
2011
Benefit obligations at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 394,269 $349,755 $ 30,425 $ 32,734
785
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
1,501
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
—
Participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,281)
Actuarial losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,314)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Termination benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,674
19,531
153
37,973
(18,931)
(54)
—
—
(2,832)
9,511
19,018
137
58,102
(17,804)
—
(2,542)
387
2,728
694
1,265
—
(191)
(1,642)
—
—
—
—
Benefit obligations at December 31 . . . . . . . . . . . . . . . . . . . . . . .
463,806
394,269
30,551
30,425
Change in Plan Assets
Fair value of plan assets at January 1 . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursement of German benefits . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
357,967
41,478
4,448
137
(2,542)
(15,198)
(2,606)
768
377,607
(4,428)
4,259
153
—
(16,308)
(2,622)
(694)
—
—
1,642
222
—
(1,864)
—
—
—
—
2,314
245
—
(2,559)
—
—
Fair value of plan assets at December 31 . . . . . . . . . . . . . . . . . . .
384,452
357,967
—
—
Funded Status
Funded status at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized transition losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized prior service cost
. . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . .
(79,354)
24
712
198,169
(36,302)
24
808
158,425
(30,551)
—
(2,618)
11,492
(30,425)
—
(3,072)
12,212
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
119,551
122,955
(21,677)
(21,285)
Amounts Recognized in the Balance Sheet
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,818
(5,021)
(117,151)
58,075
(4,722)
(89,655)
—
(1,882)
(28,669)
—
(2,096)
(28,329)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(79,354)
(36,302)
(30,551)
(30,425)
Amounts Recognized in Accumulated Other Comprehensive
Income
Net actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net initial obligation . . . . . . . . . . . . . . . . . . . . . . . .
198,169
712
24
158,425
808
24
11,492
(2,618)
—
12,212
(3,072)
—
Total (before tax effects) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
198,905
159,257
8,874
9,140
Accumulated Benefit Obligations for all Defined Benefit Plans . . .
414,957
347,636
—
—
55
(In thousands)
Components of Net Periodic Benefit (Credit) Cost
Pension Benefits
Other Benefits
2012
2011
2010
2012
2011
2010
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,511 $ 8,674 $ 7,702 $ 694 $ 785 $ 763
1,730
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Expected return on plan assets . . . . . . . . . . . . . . . . .
—
Amortization of transition amounts . . . . . . . . . . . . .
840
. . . . . . . . . . . . . .
Amortization of prior service cost
(555)
. . . . . . . . . .
Recognized net actuarial losses (gains)
—
Curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Termination benefits . . . . . . . . . . . . . . . . . . . . . . . . .
1,265
18,615
(34,565) —
4 —
529
(454)
19,531
(34,125)
4
104
793
52
—
19,018
(32,328)
2
101
6,235
747
387
1,501
—
—
710
(455)
—
—
103
537
287 —
926 —
Net periodic benefit cost (credit)
. . . . . . . . . . . . . . .
3,673
(4,967)
(6,391) 2,034
2,541
2,778
Amounts included in accumulated other comprehensive income expected to be recognized in 2013 net
periodic benefit costs.
(In thousands)
Pension Benefits
Other Benefits
Loss recognition . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost (credit) recognition . . . . . . . . . .
Transition obligation recognition . . . . . . . . . . . . .
$14,149
102
3
$ 676
(425)
—
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 . . . . . . . . . . . . . . . . . . . . . .
Pension Benefits
Other Benefits
2012
2011
2012
2011
4.0%
3.8%
5.0%
8.2%
3.9%
5.0%
3.9% —
3.8%
4.8%
5.6%
8.3% —
3.7% —
4.8%
—
5.3%
—
—
Discount rates were determined using various corporate bond indexes as indicators of interest rate levels and
movements and by matching our projected benefit obligation payment stream to current yields on high quality
bonds.
The expected return on assets for the 2012 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.
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pooled investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension Plan Assets at
December 31,
2012
2011
64%
25
6
3
2
60%
29
6
3
2
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
56
The overall objective of our pension investment strategy is to earn a rate of return over time to satisfy the
benefit obligations of the pension plans and to maintain sufficient liquidity to pay benefits and meet other cash
requirements of our pension funds. Investment policies for our primary U.S. pension plan 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 and encouraged, with shifts
of emphasis among equities, fixed income securities and cash equivalents at the discretion of each manager. No
target asset allocations are set forth in the investment policy. For our non-U.S. pension plans, our investment
objective is generally met through the use of pooled investment funds and insurance contracts.
The following table summarizes our pension plan assets measured at fair value on a recurring basis by fair
value hierarchy level (See Note 17):
(In thousands)
December 31, 2012
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pooled investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
$245,840
43,600
—
—
7,966
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
297,406
$ —
52,762
22,030
—
—
74,792
$ —
—
—
12,254
—
12,254
384,452
(In thousands)
December 31, 2011
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pooled investment funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
$216,198
34,636
—
—
7,719
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
258,553
$ —
68,087
19,765
—
—
87,852
$ —
—
—
11,562
—
11,562
357,967
Total
Fair
Value
$245,840
96,362
22,030
12,254
7,966
Total
Fair
Value
$216,198
102,723
19,765
11,562
7,719
Equity securities consist primarily of publicly traded U.S. and non-U.S. common stocks. Equities are valued
at closing prices reported on the listing stock exchange.
Fixed income securities consist primarily of U.S. government and agency bonds and U.S. corporate bonds.
Fixed income securities are valued at closing prices reported in active markets or based on yields currently
available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for
identical or similar bonds, the bond is valued under a discounted cash flow approach that maximizes observable
inputs, such as current yields of similar instruments, and may include adjustments, for certain risks that may not
be observable, such as credit and liquidity risks.
Pooled investment funds consist of mutual and collective investment funds that invest primarily in publicly
traded non-U.S. equity and fixed income securities. Pooled investment funds are valued at net asset values
calculated by the fund manager based on fair value of the underlying securities. The underlying securities are
57
generally valued at closing prices reported in active markets, quoted prices of similar securities, or discounted
cash flows approach that maximizes observable inputs such as current value measurement at the reporting date.
Insurance contracts are valued in accordance with the terms of the applicable collective pension contract.
Cash equivalents consist primarily of money market and similar temporary investment funds. Cash
equivalents are valued at closing prices reported in active markets.
The preceding methods may produce fair value measurements that are not indicative of net realizable value
or reflective of future fair values. Although we believe the valuation methods are appropriate and consistent with
other market participants, the use of different methodologies or assumptions to determine the fair value of certain
financial instruments could result in a different fair value measurement at the reporting date.
The following table presents a reconciliation of Level 3 assets:
(In thousands)
Balance January 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized losses included in earnings . . . . .
Net purchases, issuances and settlements . . . . . . . . . . . . . . . .
Balance December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gains included in earnings . . . . .
Net purchases, issuances and settlements . . . . . . . . . . . . . . . .
Insurance
Contracts
$10,725
(325)
1,162
11,562
1,933
(1,241)
Balance December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
12,254
We expect to make net contributions of $7.2 million to our pension plans in 2013.
For measurement purposes, 8.3% increase in the costs of covered health care benefits was assumed for the
year 2012, decreasing by 0.5% for each successive year to 4.5% in 2019 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 $1.8 million and $1.6 million, respectively.
Expense for defined contribution pension plans was $5.9 million in 2012, $5.7 million in 2011 and
$5.2 million in 2010.
Estimated pension benefits to be paid under our defined benefit pension plans during the next five years are
$20.2 million in 2013, $19.8 million in 2014, $20.5 million in 2015, $21.0 million in 2016, $22.2 million in
2017, and are expected to aggregate $127.8 million for the five years thereafter. Estimated other postretirement
benefits to be paid during the next five years are $1.9 million in 2013, $1.9 million in 2014, $1.9 million in 2015,
$2.0 million in 2016, $2.2 million in 2017, and are expected to aggregate $11.5 million for the five years
thereafter.
Note 12—Other Income, Net
(In thousands)
2012
2011
2010
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Gain on asset dispositions, net
Escrow settlement (See Note 16) . . . . . . . . . . . . . . . . . . . . .
Intangible asset impairment loss (See Note 10) . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,525
8,396
4,790
(4,272)
552
$1,861
3,328
—
—
192
$ 1,979
5,135
—
—
(1,077)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,991
5,381
6,037
58
Note 13—Leases
We lease office space, manufacturing and warehouse facilities, automobiles and other equipment under
operating lease arrangements. Rent expense was $12.5 million in 2012, $12.2 million in 2011 and $12.8 million
in 2010. Minimum rent commitments under noncancelable leases are $10.9 million in 2013, $8.3 million in 2014,
$4.9 million in 2015, $3.1 million in 2016, $1.6 million in 2017 and $3.5 million thereafter.
Note 14—Short-Term Debt
Short-term borrowings with banks, which excludes the current portion of long-term debt, was $0.2 million
and $0.2 million at December 31, 2012 and 2011, respectively. The average month-end balance of total short-
term borrowings during 2012 was $0.9 million. The maximum month-end balance of $2.2 million occurred at
January 31, 2012. The weighted average interest rates on short-term borrowings at December 31, 2012 and 2011
were 7% and 12%, respectively.
Note 15—Derivative Financial Instruments
As part of our currency exchange rate risk management strategy, we enter into certain derivative foreign
currency forward contracts that do not meet the GAAP criteria for hedge accounting, but which have the impact
of partially offsetting certain foreign currency exposures. We account for these forward contracts on a full mark-
to-market basis and report the related gains or losses in currency exchange losses (gains) in the consolidated
statement of income. At December 31, 2012, the notional amount of open forward contracts was $30.9 million
and the unrealized gain on these contracts was $0.8 million. All open forward contracts will mature during the
first quarter of 2013.
The following table presents the balance sheet location and fair value of assets and liabilities associated with
derivative financial instruments.
(In thousands)
Derivatives not designated as hedging instruments
Foreign exchange contracts:
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2012
2011
$801
—
$—
50
The following table presents the income statement location and impact of derivative financial instruments:
(In thousands)
Derivatives not designated as hedging instruments
Foreign exchange contracts
(Gain) Loss
Recognized in Income
Year ended
December 31,
2012
2011
Income Statement
Location
Currency exchange
losses, net
$(1,139) $1,282
Note 16—Acquisitions
In October 2010, we acquired General Monitors, Inc. (GMI) and its affiliated companies, General Monitors
Ireland Limited (GMIL) and General Monitors Transnational, LLC (GMT), collectively referred to as General
Monitors, for $278.2 million. There was no contingent consideration. At the same time, we entered into an
escrow agreement with the sellers, pursuant to which $38.0 million of the purchase price was placed into escrow.
GMI, GMIL and GMT became our wholly-owned subsidiaries on the acquisition date.
59
The acquisition price was funded through borrowings on our unsecured senior revolving credit facility and
the issuance of $100.0 million in 4.00% Series A Senior Notes. Borrowings made under the unsecured senior
revolving credit facility bear interest at a variable annual rate. The Senior notes, which are unsecured, will mature
in October 2021 and are payable in five annual installments of $20.0 million, commencing in October 2017.
Interest is payable quarterly.
General Monitors is a leading innovator and developer of advanced fixed gas and flame detection systems
that are used in a broad range of oil and gas exploration and refining applications and in diverse industrial plant
settings. In addition to providing us with greater access to the global oil and gas market, we believe that the
acquisition significantly enhances our long-term corporate strategy in fixed gas and flame detection by providing
us with world-class research and development talent and an industry-leading product line.
The following table summarizes the fair values of the General Monitors assets acquired and liabilities
assumed at the date of acquisition:
(In millions)
. . . . . . . . .
Current assets (including cash of $18.6 million)
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer-related intangibles . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 13,
2010
$ 46.8
14.0
6.0
11.0
27.0
179.9
3.5
288.2
10.0
278.2
We recorded the assets acquired and liabilities assumed in connection with the acquisition at their fair
values. Fair values were determined by management with assistance from a third party valuation specialist. The
assumptions used in determining fair values were developed by management. Identifiable intangible assets with
finite lives are subject to amortization over their estimated useful lives. The identifiable intangible assets
acquired in the General Monitors transaction are being amortized over an estimated weighted-average
amortization period of 16 years. Estimated future amortization expense related to these identifiable intangible
assets is approximately $3.3 million in each of the next five years. The step up to fair value of acquired inventory
as part of the purchase price allocation totaled $4.8 million.
Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired and
represents the future economic benefits arising from other assets acquired that could not be individually
identified and separately recognized. Among the factors that contributed to a purchase price in excess of the fair
value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the
expected synergies and other benefits that we believe will result from combining the operations of General
Monitors with our operations and the going concern element of General Monitors existing business. Goodwill
related to the General Monitors acquisition has been recorded in our reportable segments as follows: $136.7
million in North American segment and $43.2 million in the European segment. North American segment
goodwill is tax deductible.
Our results for the year ended December 31, 2010 included transaction and integration costs of $6.5 million
($4.0 million after tax). These costs are reported in selling, general and administrative expenses.
The operating results of General Monitors have been included in our consolidated financial statements since
the acquisition date. Our results for the year ended December 31, 2012 include General Monitors sales and net
60
income of $99.5 million and $24.7 million, respectively. Our results for the year ended December 31, 2011
include General Monitors sales and net income of $86.2 million and $16.1 million, respectively. General
Monitors net income for the year ended December 31, 2011 includes a one-time increase in cost of sales of $2.3
million ($1.5 million after tax) related to the fair value step-up of inventories acquired from General Monitors
and sold during 2011. Our results for the year ended December 31, 2010 include General Monitors sales and net
income of $16.3 million and $0.2 million, respectively. General Monitors net income for the year ended
December 31, 2010 includes a one-time increase in cost of sales of $2.5 million ($1.5 million after tax) related to
the fair value step-up of inventories acquired from General Monitors and sold during 2010.
No pro forma adjustments were required for the year ended December 31, 2012. The following unaudited
pro forma financial information presents our combined results as if the acquisition had occurred at the beginning
of 2010. The unaudited pro forma financial information was prepared to give effect to events that are directly
attributable to the acquisition, factually supportable and expected to have a continuing impact on the combined
company’s results. There were no transactions between us and GMI, GMIL or GMT prior to the acquisition that
were required to be eliminated. Transactions between GMI, GMIL and GMT during the periods presented have
been eliminated in the unaudited pro forma financial information. Pro forma adjustments have been made to
reflect the incremental impact on earnings of interest costs on the borrowings that we made to acquire the
General Monitors companies, amortization expense related to acquired intangible assets and income tax expense,
net of benefits, associated with these adjustments. Pro forma adjustments were also made to the 2010 information
to remove the effects of one-time transaction and integration costs and the related tax benefit. The unaudited pro
forma financial information does not reflect any cost savings, operating synergies or revenue enhancements that
the combined company may achieve as a result of the acquisitions or the costs to integrate the operations or the
costs necessary to achieve cost savings, operating synergies or revenue enhancements.
Pro forma financial information (Unaudited)
(In millions, except per share amounts)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31
2011
$1,173
71
1.95
1.92
2010
$1,032
50
1.39
1.37
The unaudited pro forma financial information is presented for information purposes only and is not
intended to represent or be indicative of the combined results of operations or financial position that we would
have reported had the acquisitions been completed as of the date and for the periods presented, and should not be
taken as representative of our consolidated results of operations or financial condition following the acquisitions.
In addition, the unaudited pro forma financial information is not intended to project the future financial position
or results of operations of the combined company.
The unaudited pro forma financial information was prepared using the acquisition method of accounting
under existing GAAP.
In December 2012, we settled an escrow claim for indemnification with the sellers of General Monitors.
Under the terms of the settlement, we received $4.8 million in December 2012. The settlement proceeds have
been recognized in other income because the settlement occurred after the business combination measurement
period ended. The escrow agreement has now expired and the remaining escrow account balance was released to
the sellers.
61
Note 17—Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value hierarchy consists of
three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair
value hierarchy are:
Level 1—Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active
markets.
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly.
Level 3—Unobservable inputs for the asset or liability.
The valuation methodologies we used to measure financial assets and liabilities were limited to the pension
plan assets described in Note 11 and the derivative financial instruments described in Note 15. See Note 11 for
the fair value hierarchy classification of pension plan assets. We estimate the fair value of the derivative financial
instruments, consisting of foreign currency forward contracts, based upon valuation models with inputs that
generally can be verified by observable market conditions and do not involve significant management judgment.
Accordingly, the fair values of the derivative financial instruments are classified within Level 2 of the fair value
hierarchy.
Note 18—Fair Value of Financial Instruments
With the exception of fixed rate long-term debt, we believe that the reported carrying amounts of our
financial assets and liabilities approximate their fair values. At December 31, 2012, the reported carrying amount
of our fixed rate long-term debt (including the current portion) was $160.0 million and the fair value was $172.0
million. The fair value of our long-term debt was determined using cash flow valuation models to estimate the
market value of similar transactions as of December 31, 2012.
Note 19—Contingencies
We categorize the product liability losses that we experience into two main categories, single incident and
cumulative trauma. Single incident product liability claims are discrete incidents that are typically known to us
when they occur and involve observable injuries and, therefore, more quantifiable damages. Therefore, we
maintain a reserve for single incident product liability claims based on expected settlement costs for pending
claims and an estimate of costs for unreported claims derived from experience, sales volumes and other relevant
information. Our reserve for single incident product liability claims at December 31, 2012 and 2011 was $4.4
million and $4.7 million, respectively. Single incident product liability expense during the years ended
December 31, 2012, 2011 and 2010 was $0.7 million, $1.5 million and $0.2 million, respectively. We evaluate
our single incident product liability exposures on an ongoing basis and make adjustments to the reserve as new
information becomes available.
Cumulative trauma product liability claims involve exposures to harmful substances (e.g., silica, asbestos
and coal dust) that occurred many years ago and may have developed over long periods of time into diseases
such as silicosis, asbestosis or coal worker’s pneumoconiosis. We are presently named as a defendant in 2,609
lawsuits in which plaintiffs allege to have contracted certain cumulative trauma diseases related to exposure to
silica, asbestos, and/or coal dust. These lawsuits mainly involve respiratory protection products allegedly
manufactured and sold by us. We are unable to estimate total damages sought in these lawsuits as they generally
do not specify the injuries alleged or the amount of damages sought, and potentially involve multiple defendants.
Cumulative trauma product liability litigation is difficult to predict. In our experience, until late in a lawsuit,
we cannot reasonably determine whether it is probable that any given cumulative trauma lawsuit will ultimately
62
result in a liability. This uncertainty is caused by many factors, including the following: cumulative trauma
complaints generally do not provide information sufficient to determine if a loss is probable; cumulative trauma
litigation is inherently unpredictable and information is often insufficient to determine if a lawsuit will develop
into an actively litigated case; and even when a case is actively litigated, it is often difficult to determine if the
lawsuit will be dismissed or otherwise resolved until late in the lawsuit. Moreover, even once it is probable that
such a lawsuit will result in a loss, it is difficult to reasonably estimate the amount of actual loss that will be
incurred. These amounts are highly variable and turn on a case-by-case analysis of the relevant facts, which are
often not learned until late in the lawsuit.
Because of these factors, we cannot reliably determine our potential liability for such claims until late in the
lawsuit. We, therefore, do not record cumulative trauma product liability losses when a lawsuit is filed, but
rather, when we learn sufficient information to determine that it is probable that we will incur a loss and the
amount of loss can be reasonably estimated. We record expenses for defense costs associated with open
cumulative trauma product liability lawsuits as incurred.
We cannot estimate any amount or range of possible losses related to resolving pending and future
cumulative trauma product liability claims that we may face because of the factors described above. As new
information about cumulative trauma product liability cases and future developments becomes available, we
reassess our potential exposures.
A summary of cumulative trauma product liability claims activity follows:
Open claims, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settled and dismissed claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,321
750
(462)
1,900
479
(58)
2,480
260
(840)
Open claims, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,609
2,321
1,900
2012
2011
2010
With some common contract exclusions, we maintain insurance for cumulative trauma product liability
claims. We have purchased insurance policies from over 20 different insurance carriers that provide coverage for
cumulative trauma product liability losses and related defense costs. In the normal course of business, we make
payments to settle product liability claims and for related defense costs. We record receivables for the amounts
that are covered by insurance. The available limits of these policies are many times our recorded insurance
receivable balance.
Various factors could affect the timing and amount of recovery of our insurance receivables, including the
outcome of negotiations with insurers, legal proceedings with respect to product liability insurance coverage and
the extent to which insurers may become insolvent in the future.
Our insurance receivables at December 31, 2012 and 2011 totaled $130.0 million and $112.1 million,
respectively, all of which is reported in other non-current assets.
A summary of insurance receivable balances and activity related to cumulative trauma product liability
losses follows:
(In millions)
2012
2011
2010
Balance January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collections and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . .
$112.1
29.7
(11.8)
$ 89.0
35.6
(12.5)
$ 91.7
30.9
(33.6)
Balance December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130.0
112.1
89.0
63
Additions to insurance receivables in the above table represent insured cumulative trauma product liability
losses and related defense costs. Uninsured cumulative trauma product liability losses during the years ended
December 31, 2012, 2011, and 2010 were $2.1 million, $1.1 million and $0.2 million, respectively.
Our aggregate cumulative trauma product liability losses and administrative and defense costs for the three
years ended December 31, 2012, totaled approximately $99.7 million, substantially all of which was insured.
We believe that the increase in the insurance receivable balance that we have experienced since 2005 is
primarily due to disagreements among our insurance carriers, and consequently with us, as to when their
individual obligations to pay us are triggered and the amount of each insurer’s obligation, as compared to other
insurers. We believe that our insurers do not contest that they have issued policies to us or that these policies
cover cumulative trauma product liability claims. We believe that our ability to successfully resolve our
insurance litigation with various insurance carriers in recent years demonstrates that we have strong legal
positions concerning our rights to coverage.
We regularly evaluate the collectability of the insurance receivables and record the amounts that we
conclude are probable of collection. Our conclusions are based on our analysis of the terms of the underlying
insurance policies, our experience in successfully recovering cumulative trauma product liability claims from our
insurers under other policies, the financial ability of our insurance carriers to pay the claims, our understanding
and interpretation of the relevant facts and applicable law and the advice of legal counsel, who believe that our
insurers are required to provide coverage based on the terms of the policies.
Although the outcome of cumulative trauma product liability matters cannot be predicted with certainty and
unfavorable resolutions could materially affect our results of operations on a quarter-to-quarter basis, based on
information currently available and the amounts of insurance coverage available to us, we believe that the
disposition of cumulative trauma product liability lawsuits that are pending against us will not have a materially
adverse effect on our future results of operations, financial condition, or liquidity.
We are currently involved in insurance coverage litigations with various of our insurance carriers.
In 2009, we sued The North River Insurance Company (North River) in the United States District Court for
the Western District of Pennsylvania, alleging that North River breached one of its insurance policies by failing
to pay amounts owed to us and that it engaged in bad-faith claims handling. We believe that North River’s
refusal to indemnify us under the policy for product liability losses and legal fees paid by us is wholly contrary to
Pennsylvania law and we are vigorously pursuing the legal actions necessary to collect all due amounts.
Discovery is concluding and motions for summary judgment on certain issues will be submitted to the court in
the first quarter of 2013. A trial date has not yet been scheduled.
In 2010, North River sued us in the Court of Common Pleas of Allegheny County, Pennsylvania seeking a
declaratory judgment concerning their responsibilities under three additional policies shared with Allstate
Insurance Company (as successor in interest to policies issued by the Northbrook Excess and Surplus Insurance
Company). We asserted claims against North River and Allstate for breaches of contract for failures to pay
amounts owed to us. We also alleged that North River engaged in bad-faith claims handling. We believe that
North River’s and Allstate’s refusals to indemnify us under these policies for product liability losses and legal
fees paid by us is wholly contrary to Pennsylvania law and we are vigorously pursuing the legal actions
necessary to collect all due amounts. Discovery is concluding and motions for summary judgment on certain
issues will be submitted to the court in the first quarter of 2013. A trial date has not yet been scheduled.
In July 2010, we filed a lawsuit in the Superior Court of the State of Delaware seeking declaratory and other
relief from the majority of our excess insurance carriers concerning the future rights and obligations of MSA and
our excess insurance carriers under various insurance policies. The reason for this insurance coverage action is to
secure a comprehensive resolution of our rights under the insurance policies issued by our insurers. The case is
64
currently in discovery. We have resolved our claims against certain of our insurance carriers on some of their
policies through negotiated settlements. When settlement is reached, we dismiss the settling carrier from this
action in Delaware.
Note 20—Assets Held for Sale
Certain assets related to detector tube manufacturing are classified as held for sale at December 31, 2012.
These assets are reported in the following balance sheet lines:
(In millions)
December 31, 2012
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, net of depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.0
0.3
2.3
The potential impact of the sale of detector tube assets is not expected to be material to net income or
earnings per share.
Our $3.5 million equity investment in a joint venture company is classified as held for sale at December 31,
2012 and reported in other current assets. The potential impact of the sale of this investment is not expected to be
material to net income or earnings per share.
Note 21—Recently Adopted and Recently Issued Accounting Standards
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement—Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This ASU updated
measurement guidance to improve the comparability of fair value measurements between U.S.GAAP and
International Financial Reporting Standards and enhanced disclosure requirements. The most significant change
in disclosures is an expansion of information related to fair value measurements categorized within Level 3 of the
fair value hierarchy. The adoption of this ASU on January 1, 2012 did not have a material effect on our
consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income—Presentation of Comprehensive
Income. This ASU requires net income and comprehensive income to be presented in either a single continuous
statement or in two separate, but consecutive, statements. In December 2011, the FASB issued ASU 2011-12,
which indefinitely deferred the ASU 2011-05 requirement related to the presentation of reclassification
adjustments from accumulated other comprehensive income. The adoption of ASU 2011-05 on January 1, 2012
did not have a material effect on our results of operations or financial position, but did change the format of the
presentation of comprehensive income.
In September 2011, the FASB issued ASU 2011-08, Intangibles-Goodwill and Other-Testing Goodwill for
Impairment. This ASU reduces the complexity of performing an annual goodwill impairment test by permitting
companies to perform an assessment of qualitative factors to determine whether additional goodwill impairment
testing is necessary. The adoption of this ASU, on January 1, 2012 did not have a material effect on our
consolidated financial statements.
In February 2013, the FASB issued ASU 2013-02, Comprehensive Income-Reporting of Amounts
Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires additional information about
the amounts reclassified out of accumulated other comprehensive income by component. The ASU will be
effective beginning in 2013. The adoption of this ASU will not have a material effect on our consolidated
financial statements, but will change disclosures related to comprehensive income.
65
Note 22—Quarterly Financial Information (Unaudited)
(In thousands, except earnings per share)
1st
2nd
3rd
4th
Year
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mine Safety Appliances
$293,485
126,991
$294,738
123,126
$286,567
122,254
$294,114
130,361
$1,168,904
502,732
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,922
27,995
19,233
19,487
90,637
2012
Quarters
Earnings per share attributable to Mine Safety
Appliances Company shareholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.65
.64
.76
.75
.53
.52
2.45
2.42
.52
.51
2011
(In thousands, except earnings per share)
1st
2nd
3rd
4th
Year
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Mine Safety Appliances
$276,499
110,397
$294,733
119,009
$298,241
120,888
$303,754
119,942
$1,173,227
470,236
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,309
19,592
19,972
16,979
69,852
Quarters
Earnings per share attributable to Mine Safety
Appliances Company shareholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.36
.36
.53
.53
.54
.54
.46
.46
1.91
1.87
66
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 (i) recorded,
processed, summarized and reported within the time periods specified in Securities and Exchange Commission
rules and forms and (ii) accumulated and communicated to our management, including the principal executive
officer and principle financial officer, as appropriate to allow timely decisions regarding required disclosure.
(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.
67
PART III
Item 10. Directors, Executive Officers and Corporate Governance
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, and Director Independence
Item 14. Principal Accountant Fees and Services
With respect to this Part III, incorporated by reference herein pursuant to Rule 12b—23 are (1) “Election of
Directors,” (2) “Executive Compensation,” (3) “Other Information Concerning the Board of Directors,”
(4) “Stock Ownership,” and (5) “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 7, 2013. The information appearing in such Proxy Statement under the caption
“Audit Committee Report” and the other information appearing in such Proxy Statement and not specifically
incorporated by reference herein is not incorporated herein. As to Item 10 above, also see the information
reported in Part I of this Form 10-K, under the caption “Executive Officers of the Registrant,” which is
incorporated herein by reference. As to Item 10 above, 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 website at www.MSAsafety.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.
As to Item 12 above, the following table sets forth information as of December 31, 2012 concerning
common stock issuable under the Company’s equity compensation plans.
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)
Plan Category
Equity compensation plans approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,784,660
$33.05
2,260,876
Equity compensation plans not approved by
security holders . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
None
1,784,660
—
33.05
None
2,260,876
* Includes 2,052,924 shares available for issuance under the 2008 Management Equity Incentive Plan and
207,952 shares available for issuance under the 2008 Non-Employee Directors’ Equity Incentive Plan.
68
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 Responsibility for Financial Reporting and 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, 2012 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Comprehensive Income—three years ended December 31, 2012 . . . . . . . . . . . .
Consolidated Balance Sheet—December 31, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows—three years ended December 31, 2012 . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Changes in Retained Earnings and Accumulated Other Comprehensive
Income—three years ended December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
35
36
37
38
39
40
41
42
(a) 2. The following additional financial information for the three years ended December 31, 2012 is filed
with the report and should be read in conjunction with the above financial statements:
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)
10(a)*
10(b)*
10(c)*
10(d)*
10(e)*
10(f)*
10(g)*
Restated Articles of Incorporation as amended and restated May 23, 1986 and as further amended
through May 2007, filed as Exhibit 3.1 to Form 8-K on May 15, 2007, is incorporated herein by
reference.
By-laws of the registrant, as amended to February 17, 2012, filed as Exhibit 3.1 to Form 8-K on
February 24, 2012, is incorporated herein by reference.
2008 Management Equity Incentive Plan, as amended and restated through February 25, 2011, filed
as Exhibit 10.1 to Form 10-Q on July 28, 2011, is incorporated herein by reference.
Retirement Plan for Directors, as amended effective April 1, 2001, filed as Exhibit 10(a) to
Form 10-Q on May 10, 2006, is incorporated herein by reference.
Supplemental Pension Plan as amended and restated effective January 1, 2005, filed as Exhibit 10.3
to Form 10-Q on April 30, 2009, is incorporated herein by reference.
2008 Non-Employee Directors’ Equity Incentive Plan, filed as Exhibit 10.2 to Form 10-Q on July 28,
2008, is incorporated herein by reference.
Executive Insurance Program as Amended and Restated as of January 1, 2006, filed as Exhibit 10(a)
to Form 10-Q on August 7, 2007, is incorporated herein by reference.
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.
Supplemental Executive Retirement Plan, effective January 1, 2008, filed as Exhibit 10.2 to
Form 10-Q on April 30, 2009, is incorporated herein by reference.
69
10(h)*
10(i)
10(j)*
10(k)*
10(l)
10(m)
10(n)
10(o)
10(p)
10(q)
Form of Change-in-Control Severance Agreement between the registrant and its executive officers,
filed as Exhibit 10.1 to Form 10-Q on April 30, 2009, is incorporated herein by reference.
Trust Agreement, effective June 1, 1996, as amended through May 15, 2010, between the registrant
and PNC Bank, N.A. re the Mine Safety Appliances Company Stock Compensation Trust filed as
Exhibit 10.1 to Form 10-Q on July 28, 2010, is incorporated herein by reference.
2005 Supplemental Savings Plan, effective January 1, 2005, filed as Exhibit 10.4 to Form 10-Q on
April 30, 2009, is incorporated herein by reference.
CEO Annual Incentive Award Plan filed as Appendix A to the registrant’s definitive proxy statement
dated March 29, 2005, is incorporated herein by reference.
Asset Purchase Agreement, dated as of September 7, 2010, by and among (i) General Monitors, Inc.; (ii)
Robert DePalma, Darin Brame, George Purvis, Joseph A. Sperske, as trustee for the 1995 Edwards
QSST Trust I, Joseph A. Sperske, as trustee for the 1995 Edwards QSST Trust II, Joseph A. Sperske, as
trustee for the 1995 Edwards QSST Trust III, Joseph A. Sperske, as trustee for the Joseph A. Sperske
Revocable Trust, and Phillip A. Robbibaro and Michelle Robbibaro, as trustees for the Robbibaro
Family Trust; (iii) Joseph A. Sperske, as agent for the seller parties; (iv) Mine Safety Appliances
Company; and (v) Fifty Acquisition Corp., filed as Exhibit 10.1 to Form 8-K on September 13, 2010, is
incorporated herein by reference.
Equity Purchase Agreement, dated as of September 7, 2010, by and among (i) Cecil Lenihan;
David Woods; Denis Connolly; Joseph A. Sperske, as Trustee of the Shelley Trust; Joseph A. Sperske,
as Trustee of the Stasia Trust; Joseph A. Sperske, as Trustee of the Shannon Trust; Darin Brame;
George Purvis; Joseph A. Sperske, as Trustee of the Joseph A. Sperske Revocable Trust; and
Phillip A. Robbibaro and Michelle Robbibaro, as Trustees of the Robbibaro Family Trust; (ii)
Joseph A. Sperske, as agent for the sellers; and (iii) Mine Safety Appliances Company, filed as Exhibit
10.2 to Form 8-K on September 13, 2010, is incorporated herein by reference.
Share Purchase Agreement, dated as of September 7, 2010, by and among (i) Raybeam Limited,
Joseph A. Sperske, as Trustee of the 1995 Edwards QSST Trust I, Joseph A. Sperske, as trustee for the
1995 Edwards QSST Trust II, Joseph A. Sperske, as trustee for the 1995 Edwards QSST Trust III,
Denis Connolly and Cecil Lenihan; (ii) Joseph A. Sperske, as agent for the sellers; (iii) Mine Safety
Appliances Company; and (iv) Mine Safety Fifty Ireland Limited, filed as Exhibit 10.3 to Form 8-K on
September 13, 2010, is incorporated herein by reference.
Amendment No. 1 dated October 13, 2010 to Asset Purchase Agreement, dated as of September 7,
2010, by and among (i) General Monitors, Inc.; (ii) Robert DePalma, Darin Brame, George Purvis,
Joseph A. Sperske, as trustee for the 1995 Edwards QSST Trust I, Joseph A. Sperske, as trustee for the
1995 Edwards QSST Trust II, Joseph A. Sperske, as trustee for the 1995 Edwards QSST Trust III,
Joseph A. Sperske, as trustee for the Joseph A. Sperske Revocable Trust, and Phillip A. Robbibaro and
Michelle Robbibaro, as trustees for the Robbibaro Family Trust; (iii) Joseph A. Sperske, as agent for the
seller parties; (iv) Mine Safety Appliances Company; and (v) Fifty Acquisition Corp., filed as Exhibit
10.1 to Form 8-K on October 19, 2010, is incorporated herein by reference.
Amendment No. 1 dated October 13, 2010 to Equity Purchase Agreement, dated as of September 7,
2010, by and among (i) Cecil Lenihan; David Woods; Denis Connolly; Joseph A. Sperske, as Trustee of
the Shelley Trust; Joseph A. Sperske, as Trustee of the Stasia Trust; Joseph A. Sperske, as Trustee of the
Shannon Trust; Darin Brame; George Purvis; Joseph A. Sperske, as Trustee of the Joseph A. Sperske
Revocable Trust; and Phillip A. Robbibaro and Michelle Robbibaro, as Trustees of the Robbibaro
Family Trust; (ii) Joseph A. Sperske, as agent for the sellers; and (iii) Mine Safety Appliances
Company, filed as Exhibit 10.2 to Form 8-K on October 19, 2010, is incorporated herein by reference.
Credit Agreement dated October 13, 2010 by and among Mine Safety Appliances Company, each of
the guarantors party thereto, each of the lenders party thereto, PNC Bank, National Association, as
administrative agent for the lenders, and J.P. Morgan Chase Bank, N.A., as syndication agent for the
Lenders, filed as Exhibit 10.1 to Form 8-K on October 19, 2010, is incorporated herein by reference.
70
10(r)
10(s)
10(t)
10(u)
10(v)
10(w)
10(x)
21
23
31.1
31.2
32
Guaranty and Suretyship Agreement dated October 13, 2010 from General Monitors Transnational,
LLC in favor of PNC Bank, National Association, and the other lenders party to the Credit
Agreement, filed as Exhibit 10.2 to Form 8-K on October 19, 2010, is incorporated herein by
reference.
Guaranty and Suretyship Agreement dated October 13, 2010 from Fifty Acquisition Corp. in favor
of PNC Bank, National Association, and the other lenders party to the Credit Agreement, filed as
Exhibit 10.3 to Form 8-K on October 19, 2010, is incorporated herein by reference.
Note Purchase Agreement and Private Shelf Agreement dated October 13, 2010 by and among
Mine Safety Appliances Company, Prudential Investment Management, Inc. and the Series A
Purchasers thereto, filed as Exhibit 10.4 to Form 8-K on October 19, 2010, is incorporated herein
by reference.
Guaranty Agreement dated as of October 13, 2010 made by General Monitors Transnational, LLC
in favor of the Note Purchasers, filed as Exhibit 10.5 to Form 8-K on October 19, 2010, is
incorporated herein by reference.
Guaranty Agreement dated as of October 13, 2010 made by Fifty Acquisition Corp. in favor of the
Note Purchasers, filed as Exhibit 10.6 to Form 8-K on October 19, 2010, is incorporated herein by
reference.
First Amendment to Credit Agreement dated November 16, 2011 by and among Mine Safety
Appliances Company, each of the guarantors party thereto, each of the lenders party thereto, PNC
Bank, National Association, as administrative agent for the lenders, and J. P. Morgan Chase Bank
N.A., as syndication agent for the Lenders, filed as Exhibit 10.1 to Form 8-K on November 21,
2011, is incorporated herein by reference.
Guaranty and Suretyship Agreement effective November 18, 2011 from MSA International, Inc. in
favor of PNC Bank, National Association, and other lenders party to the Credit Agreement, filed as
Exhibit 10.2 to Form 8-K on November 21, 2011, is incorporated herein by reference.
Affiliates of the registrant is filed herewith.
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm is filed
herewith.
Certification of W. M. Lambert pursuant to Rule 13a-14(a) is filed herewith.
Certification of D. L. Zeitler pursuant to Rule 13a-14(a) is filed herewith.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.(S)1350
is filed herewith.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
* 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 9 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.
71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MINE SAFETY APPLIANCES COMPANY
February 20, 2013
By
/S/ WILLIAM M. LAMBERT
(Date)
William M. Lambert
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/
JOHN T. RYAN III
John T. Ryan III
Director, Chairman of the Board
February 20, 2013
/S/ WILLIAM M. LAMBERT
Director; President and Chief Executive
February 20, 2013
William M. Lambert
Officer
/S/ DENNIS L. ZEITLER
Senior Vice President—Finance; Principal
February 20, 2013
Dennis L. Zeitler
Financial and Accounting Officer
/S/ ROBERT A. BRUGGEWORTH
Director
February 20, 2013
Robert A. Bruggeworth
James A. Cederna
Director
February 20, 2013
/S/ ALVARO GARCIA-TUNON
Director
February 20, 2013
Alvaro Garcia-Tunon
/S/ THOMAS B. HOTOPP
Director
February 20, 2013
Thomas B. Hotopp
/S/ DIANE M. PEARSE
Director
February 20, 2013
Diane M. Pearse
/S/ L. EDWARD SHAW, JR.
Director
February 20, 2013
L. Edward Shaw, Jr.
/S/
JOHN C. UNKOVIC
John C. Unkovic
Director
February 20, 2013
/S/ THOMAS H. WITMER
Director
February 20, 2013
Thomas H. Witmer
72
SCHEDULE II
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 2012
Allowance for doubtful accounts:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions—
2012
2011
2010
(In thousands)
$7,043
$9,391
$6,866
Charged to costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,289
1,148
3,294
Deductions—
Deductions from reserves, net (1)(2) . . . . . . . . . . . . . . . . . . . . . . . .
930
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,402
3,496
7,043
769
9,391
Income tax valuation allowance:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions—
$2,777
$4,323
$3,174
Charged to costs and expenses (3) . . . . . . . . . . . . . . . . . . . . . . . . . .
1,184
—
1,149
Deductions—
Deductions from reserves (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,961
1,546
2,777
—
4,323
(1) Bad debts written off, net of recoveries.
(2) Activity for 2012, 2011 and 2010 includes currency translation gains (losses) of $428, $(387) and $323,
respectively.
(3) Activity for 2012, 2011 and 2010 includes currency translation gains (losses) of $97, $(123) and $87,
respectively.
73
EXHIBIT 21
MINE SAFETY APPLIANCES COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 2012
Name
State or Other
Jurisdiction of
Incorporation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chile
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
. . . . . . . . . China
General Monitors, Inc.
General Monitors Transnational, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nevada
Compañia MSA de Argentina S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Argentina
MSA (Aust.) Pty. Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
MSA-Auer Sicherheitstechnik Vertriebs GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria
MSA Belgium NV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium
MSA do Brasil Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil
MSA Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
MSA de Chile Ltda.
MSA (China) Safety Equipment Co., Ltd.
MSA (Suzhou) Safety Equipment Research and Development Co., Ltd.
MSA International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Microsensor Systems, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kentucky
MSA Gallet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
MSA Auer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
MSA Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
MSA-Auer Hungaria Safety Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hungary
General Monitors Ireland Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MSA Italiana S.p.A.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MSA Japan Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MSA Safety Malaysia Snd Bhd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysia
MSA de Mexico, S.A. de C.V.
MSA Nederland, B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
MSA del Peru S.A.C.
MSA-Auer Polska Sp. z o.o. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poland
MSA (Britain) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scotland
MSA S.E. Asia Pte. Ltd.
Samsac Holding (Pty.) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . South Africa
MSA Española S.A.
MSA Nordic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sweden
Sordin AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sweden
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peru
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Ireland
Italy
Japan
The above-mentioned subsidiary companies are included in the consolidated financial statements of the
registrant filed as part of this annual report. The names of certain other subsidiaries, which considered in the
aggregate as a single affiliate would not constitute a significant subsidiary, have been omitted.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 33-
43696, 333-51983, 333-121196, 333-157681, 333-157682, 333-157683 and 333-174601) of Mine Safety
Appliances Company of our report dated February 19, 2013 relating to the financial statements, financial
statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form
10-K.
EXHIBIT 23
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 19, 2013
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)
I, William M. Lambert, 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 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 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 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.
February 20, 2013
/s/ WILLIAM M. LAMBERT
William M. Lambert
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 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 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 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.
February 20, 2013
/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, 2012 (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.
February 20, 2013
/s/ WILLIAM M. LAMBERT
William M. Lambert
Chief Executive Officer
/s/ DENNIS L. ZEITLER
Dennis L. Zeitler
Chief Financial Officer
Principal Operations
North America
Corporate Headquarters – Cranberry Township, Pa.
International
Compañia MSA de Argentina S.A., Buenos Aires
U.S. Manufacturing – Cranberry Township, Pa.;
MSA (Aust.) Pty. Ltd., Sydney
Jacksonville, N.C.; Murrysville, Pa.
Research – John T. Ryan Memorial Laboratory,
Cranberry Township, Pa.
MSA Canada Inc., Toronto; Edmonton
MSA de Mexico, S.A. de C.V., Querétaro
Safety Works, LLC, Wexford, Pa.
Europe
Mine Safety Romania S.R.L., Bucharest, Romania
Mine Safety Sp. z o.o., Raszyn, Poland
MSA Auer GmbH, Berlin, Germany
MSA Auer Schweiz GmbH, Oberglatt, Switzerland
MSA Auer Vertriebs GmbH, Absdorf, Austria
MSA Belgium, N.V., Lier
MSA (Britain) Limited, Glasgow
MSA Safety Czech, s.r.o., Ostrava
MSA Española S.A.U., Barcelona
MSA Gallet, Chatillon sur Chalaronne, France; Mohammedia, Morocco
MSA Italiana S.p.A., Milan
MSA Nederland B.V., Hoorn
MSA Nordic AB, Malmo, Sweden
MSA Safety, LLC, Moscow, Russia
MSA Safety Hungary Ltd., Budapest
MSA Sordin AB, Varnamo, Sweden
MSA (Australia), Auckland, New Zealand (Branch Office)
MSA do Brasil Ltda., São Paulo
MSA de Chile Ltda., Santiago
MSA de Colombia S.A.S., Bogota
MSA (China) Safety Equipment Co., Ltd., Suzhou
MSA Egypt LLC, Cairo
MSA Hong Kong Ltd., Hong Kong
MSA (India) Limited, Calcutta
MSA Japan Ltd., Tokyo
MSA Safety Malaysia Sdn. Bhd., Kuala Lumpur
MSA Middle East, Abu Dhabi, U.A.E. (Office)
MSA Middle East FZE, Dubai, U.A.E.
MSA del Peru S.A.C., Lima
MSA S.E. Asia Pte. Ltd., Singapore
MSA Select Ltd., Kitwe, Zambia
MSA (Suzhou) Safety Equipment Research and
Development Co., Ltd., Suzhou, China
MSA (Thailand) Limited, Bangkok
PT MSA Indonesia Ltd., Jakarta
Samsac Africa (Proprietary) Ltd., Johannesburg
Select Personal Protective Equipment (PTY) Ltd., Johannesburg
General Monitors
Electrasem, LLC, Corona, Calif.
Gassonic A/S, Ballerup, Denmark
General Monitors Inc., Lake Forest, Calif.
General Monitors Ireland Ltd., Galway, Ireland
General Monitors Systems, LLC, Lake Forest, Calif.
General Monitors Systems Asia, Pte., Ltd., Singapore
Directors and Corporate Officers
Board of Directors
John T. Ryan III (3) (4) (5)
Chairman of the Board; Retired (2008); formerly Chief Executive
Officer of the Company
Robert A. Bruggeworth (1) (2)
President and Chief Executive Officer, RF Micro Devices, Inc. (high-
performance RF components and compound semiconductors
manufacturer); Director, RF Micro Devices, Inc.
James A. Cederna (1) (4) (5)
Owner and President, Cederna International, Inc. (executive coaching)
Alvaro Garcia-Tunon (1) (4)
Executive Vice President and Chief Financial Officer, Wabtec
Corporation (supplier of technology-based products and services
for rail, transit and other global industries); Director and Chairman
of the Audit Committee of Matthews International Corp.
Thomas B. Hotopp (2) (5)
Retired (2003); formerly President of the Company
William M. Lambert (3)
President and Chief Executive Officer of the Company
Diane M. Pearse (1) (4)
Officers
William M. Lambert
President and Chief Executive Officer
Dennis L. Zeitler
Senior Vice President; Chief Financial Officer and Treasurer
Stacy P. McMahan
Senior Vice President, Finance
Joseph A. Bigler
Vice President; President, MSA North America
Steven C. Blanco
Vice President, Global Operational Excellence
Kerry M. Bove
Vice President; President, MSA Asia, Australia, Africa, and Latin America
Ronald N. Herring, Jr.
Vice President; President, MSA Europe, Russia, Middle East, and India
Douglas K. McClaine
Vice President; Secretary and General Counsel
Dr. Thomas Muschter
Vice President, Global Product Leadership
Senior Vice President, Operations and Merchandising, Redbox
Automated Retail, LLC (a fully automated DVD rental company)
Paul R. Uhler
Vice President, Global Human Resources
Nishan J. Vartanian
Vice President, Fixed Gas and Flame Detection
Markus H. Weber
Vice President; Chief Information Officer
L. Edward Shaw, Jr. (4)
Retired (2010); formerly Senior Managing Director, Breeden
Capital Management LLC (investment management and multi-
disciplinary professional services firm); Director and Chairman of the
Compensation Committee of HealthSouth Corporation
John C. Unkovic (2) (4)
Partner and General Counsel, Reed Smith LLP (full service law firm)
Thomas H. Witmer (1) (2) (3) (5)
Retired (1998); formerly President and Chief Executive Officer,
Medrad, Inc. (manufacturer of medical devices)
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Executive Committee
(4) Member of the Finance Committee
(5) Member of the Nominating and Corporate Governance Committee
ORGANizATiON
Continuing to add leadership expertise to its executive management team, as well as its Board of Directors,
MSA made a number of key organizational changes in 2012.
Steven C. Blanco was elected Vice President of Global Operational Excellence, responsible
for implementing leading-edge manufacturing processes and systems that advance
the effectiveness and efficiency of MSA’s global manufacturing operations. With nearly
25 years of operations experience, Mr. Blanco joined MSA from Eaton Corporation,
where he worked for the past five years and most recently served as Vice President
of Manufacturing for the company’s $7.2 billion Electrical Sector. Prior to this, he
spent nearly 20 years with Ford Motor Company and Visteon, serving in a variety of
engineering, plant management and operations roles. in this capacity, Mr. Blanco
succeeds Kerry M. Bove, who now serves as President of MSA Asia, Australia, Africa,
and Latin America.
As part of a planned management succession for the company’s Chief Financial Officer,
Stacy P. McMahan joined MSA in 2012 as Senior Vice President of Finance. in this newly
created role, Ms. McMahan is responsible for leading the company’s internal Audit,
Treasury and Global Decision Support functions. Ms. McMahan comes to MSA with more
Steven C. Blanco
Stacy P. McMahan
Nishan J. Vartanian
Alvaro Garcia-Tunon
than 23 years of finance leadership experience, most recently serving as Vice President of Finance, Customer Channels Group, for
Thermo Fisher Scientific, inc. Prior to this she spent six years with Johnson & Johnson as Vice President of Finance, and 16 years with
Eli Lilly, where she served in a treasury oriented position in Brussels, Belgium; as Finance Manager in Basingstoke Hampshire, uK; and in
a CFO role in Sydney, Australia.
in order to continue strengthening MSA’s core Fixed Gas and Flame Detection (FGFD) business around the world, Nishan J. Vartanian
was elected Vice President of Fixed Gas and Flame Detection, responsible for developing and implementing the strategic blueprint for
MSA’s FGFD business. A 27-year veteran of MSA, Mr. Vartanian served as the integration leader for MSA’s 2010 acquisition of California-
based General Monitors. Following the integration, Mr. Vartanian was named Chief Operating Officer of General Monitors in 2011.
in anticipation of future retirements among the Company’s Board of Directors, in 2012 MSA elected Alvaro Garcia-Tunon to its
Board of Directors. Mr. Garcia-Tunon is the Executive Vice President and Chief Financial Officer for Wabtec Corporation (NYSE: WAB), a
leading supplier of technology-based products and services for rail, transit and other global industries. in addition to his executive role
at Wabtec, Mr. Garcia-Tunon currently serves on the board of Matthews international Corp. (NASDAQ GSM: MATW), where he chairs
the Audit Committee. Mr. Garcia-Tunon also has served as Vice President of Acquisitions for AMF Bowling Centers, inc. and held various
leadership roles with PricewaterhouseCoopers and Arthur Andersen and Co.
Section 302 Certifications and
NYSE CEO Certification
in June 2012, the Company’s Chief Executive Officer submitted
to the New York Stock Exchange the annual certification as to
compliance with the Exchange’s Corporate Governance Listing
Standards required by Section 303A.12(a) of the Exchange’s Listed
Company Manual. The certification was unqualified.
The Company’s reports filed with the Securities and Exchange
Commission during the past year, including the Annual Report on
Form 10-K for the year ended December 31, 2012, have contained
the certifications of the Company’s Chief Executive Officer and Chief
Financial Officer regarding the quality of the Company’s public
disclosure required by Section 302 of the Sarbanes-Oxley Act.
Shareholders’ inquiries
Additional copies of the company’s 2012 Annual Report, including
Form 10-K, as filed with the Securities and Exchange Commission,
may be obtained by shareholders after April 2, 2013. Printed and
electronic versions are available. Requests should be directed to the
Chief Financial Officer, who can be reached at one of the following:
Phone:
Fax:
internet:
u.S. Mail:
724-741-8221
866-538-7488
www.MSAsafety.com
MSA
Chief Financial Officer
1000 Cranberry Woods Drive
Cranberry Township, PA 16066
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1000 Cranberry Woods Drive
Cranberry Township, PA 16066
724-776-8600
www.MSAsafety.com