EXHIBIT 13 Discussion and Analysis of Financial Condition and Results of Operations -------------------------------------------------------------------------------- Sales and Earnings Sales were $459,607,000 in 1994, a 7% increase over the prior year's $429,220,000. Sales in 1992 were $502,366,000. Income from continuing operations increased 45% in 1994 to $15,329,000 from $10,555,000 in 1993, which was 37% lower than 1992's income of $16,703,000. Income from continuing operations, per share of common stock, was $2.58 in 1994, $1.73 in 1993, and $2.67 in 1992. The increased sales in 1994 has occurred primarily in domestic commercial product sales, with the main factor being the inclusion of HAZCO Services, Inc., acquired in the last half of 1993. Equipment rentals to the hazardous materials/environmental market by HAZCO have grown significantly since the acquisition. Domestic commercial sales of instruments and specialty chemicals have continued to grow, while the U.S. market for safety products continued to be flat in 1994. U.S. commercial sales in 1994 were about 9% higher than in 1993, which was minimally higher than 1992. Sales by international operations, stated in U.S. dollars, increased 4 1/2% in 1994, after having decreased 10 1/2% in 1993 and 3 1/2% in 1992. Notable market growth occurred in Australia, Brazil, Chile and Japan, and economic conditions stabilized in Europe. The prior years' decreases were due primarily to currency exchange rate changes and the widespread economic recession, particularly in Europe. Shipments of defense products to U.S. government agencies in 1994 were $46,478,000, a 7 1/2% increase over 1993 shipments of $43,234,000. Shipments in 1993 were 57% lower than 1992 shipments of $99,991,000. Defense product sales of gas masks and parts were especially high in early 1992 and late 1991 due to orders relating to the Middle East conflict. These sales represent 10% of consolidated sales in 1994 and 1993, as compared to 20% in 1992. New contracts received in 1994 were $27,832,000 as compared to $32,558,000 in 1993. The 1994 year-end backlog was $36,243,000, a 34% decrease from the 1993 year-end backlog of $54,889,000. In January 1995 the company was awarded a new contract for masks totalling $15,200,000. Deliveries are scheduled over a one year period from October 1995. The 1994 gross profit rate was 37.6%, as compared to 36.3% in 1993 and 34.8% in 1992. Historically and currently, commercial sales carry much greater margins than military sales; thus the change of sales mix has contributed to higher profit margins. Furthermore, military sales profit rates dropped significantly in 1992, reflecting the impacts of development and start-up costs for new model designs and the results of competitive bidding pressures. The 1994 gross profit has also been favorably affected by a LIFO credit of $6,923,000 arising from liquidations of LIFO inventory values calculated at lower costs incurred in prior years, and adversely affected by charges of $1,940,000 arising from inventory costing adjustments. The completion of some government contracts and ongoing process reengineering has resulted in significant reductions in U.S. manufacturing inventories. Depreciation, selling and administrative expenses were 31% of sales in 1994, as compared to 32% in 1993 and 29% in 1992. Charges in 1994 included $1,650,000 10 -------------------------------------------------------------------------------- applicable to the implementation of new cost and manufacturing control systems and the creation of a customer service center. Additionally, 1994 operations has absorbed charges of $3,086,000 for facilities consolidations and restructuring, as compared to credits of $223,000 in 1993 and charges of $5,500,000 in 1992. The 1994 charges relate primarily to completing the disposition of assets of the former Catalyst Research Division, which was closed in 1992. The company also consolidated certain other U.S. manufacturing operations in 1992. Net income in 1994 was $15,329,000 or $2.58 per share of common stock, compared to 1993 net income of $10,555,000 or $1.73 per share and $2,672,000 or $.42 per share in 1992 (includes special charges for accounting changes and discontinued operations). The above-mentioned LIFO credit, inventory cost adjustments, systems and restructuring costs in aggregate have had minimal effect on net income and earnings per share in 1994 and 1993. Restructuring costs in 1992 were an after-tax charge of $3,163,000 or $.51 per share. The accounting changes in 1992 resulted in an after-tax cumulative effect charge, as of January 1, 1992, of $8,964,000 or $1.44 per share of common stock. SFAS No. 106-"Employers' Accounting for Postretirement Benefits Other Than Pensions" was implemented on an immediate recognition basis rather than spreading the accumulated obligation over 20 years. This one-time transition effect decreased net income $8,672,000 ($1.39 per share). SFAS No. 112-"Employers' Accounting for Postemployment Benefits," pertaining to benefits such as workers' compensation and other disability expenses, reduced earnings $2,440,000 ($.39 per share). SFAS No. 109-"Accounting for Income Taxes" increased earnings $2,148,000 ($.34 per share). This Standard requires that deferred tax balances be stated at tax rates expected to be in effect when taxes are actually paid or recovered, and may have a more volatile effect on future earnings than the previous method which provided deferred taxes at tax rates prevailing during the periods that timing differences occurred. Although these three new Standards significantly reduced 1992 net income, they did not have any cash flow impact. The company decided, as of the end of 1992, to discontinue the operation of Transfer-Metallisierte Produkte GmbH (TMP), a joint venture in Germany to produce metallized paper. This venture, unrelated to the company's safety products, had been a financial drain on the company. Operating activities ceased during 1993; the company continues to dispose of its assets and settle its liabilities. TMP's cumulative losses since inception in the company's consolidated results, adjusted for the after-tax effects of intercompany transactions, aggregate approximately $10.9 million. The company continues to believe that any losses that may be incurred from the disposition of TMP will not affect net income or cash flows after deducting the aforementioned accumulated losses already recognized and the tax benefits associated with any write-off. The after-tax effects of foreign currency exchange losses charged to income in 1994 reduced net income $3,840,000 or $.65 per share, as compared to $3,204,000 or $.53 per share in 1993 and $5,022,000 or $.81 per 11 Discussion and Analysis of Financial Condition and Results of Operations continued -------------------------------------------------------------------------------- share in 1992. The more significant losses resulted from the currency valuation changes that occurred in Brazil in each of the three years, and the devaluation of the Mexican peso in 1994. The effective income tax rates, for which further information is included at note 8, were 40.6% in 1994, 42.1% in 1993, and 39.9% in 1992. Financial Condition and Funds Flow Cash and cash equivalents increased $7,986,000 during 1994. Accounts receivable of $88,698,000 at December 31, 1994 includes $8,158,000 from the sale of fixed assets. Trade receivables expressed in number of days' sales outstanding were 64 days, as compared to 61 days in 1993. Inventories decreased $4,488,000 to $76,966,000 at December 31, 1994. Inventory measured against sales turned 6.0 times in 1994 and 5.3 times in 1993. Inventories decreased in the domestic companies but increased in the international companies, primarily because of currency exchange rate changes. The working capital ratio was 3.4 and 3.7 to 1 at years-end 1994 and 1993, respectively. Short-term debts of international affiliates are payable in local currencies, which is in keeping with the company's policy of minimizing foreign currency exposures by offsetting foreign currency assets with foreign currency debt. The average interest rate on these loans, which includes the effects of borrowing in certain countries where local inflation has resulted in high interest rates, was approximately 19%. Long-term debt and the current portion thereof decreased $9,399,000 to $21,583,000, a conservative 8% of total capital. Total capital is defined as long-term debt plus current portion of long-term debt and shareholders' equity. Capital expenditures of $22,614,000 in 1994 represent an increase of $972,000 from 1993 expenditures of $21,642,000. The company has continued its program of plant and equipment modernization to increase efficiency of existing manufacturing and distribution facilities. For the most part, capital expenditures were financed internally through retained earnings. In the past five years, approximately $111 million has been spent on new plants, equipment and distribution facilities. Dividends paid on the common stock during 1994 (the 77th consecutive year of a dividend payment) were $.94 per share, up from the $.92 per share paid during 1993 and $.89 per share paid in 1992. The current quarterly cash dividend is $.25 per share on common stock. Cash dividends have been paid at a conservative percentage of income which has permitted the company to finance its growth almost exclusively through retained earnings. Common shares are repurchased from time-to-time in keeping with the company's policy of buying back a limited number of its shares. As of December 31, 1994, an additional 180,071 shares may be repurchased under current authorizations. Credit available at year-end with banks was the U.S. dollar equivalent of $10,686,000. The company's financial position remains strong and should provide adequate capital resources for growth. Cumulative Currency Translation Adjustment The year-end position of the U.S. dollar relative to foreign currencies resulted in a translation gain of $5,050,000 being credited to the cumulative translation adjustments shareholders equity account in 1994, as compared to losses of $5,400,000 in 1993 and $4,736,000 in 1992. Significant translation gains occurred in Australia, Britain, and Germany in 1994, while significant losses occurred in Germany and Italy in 1993, and in Australia, Britain, Canada, and Italy in 1992. Common Stock At December 31, 1994, there were 5,815,672 shares of common stock outstanding. There were approximately 450 identifiable common stockholders as of November 18, 1994, a recent date for dividends. The common stock last-sale price and up-to- the-minute volume information (Symbol: MNES) is included in the National Association of Security Dealers, Inc., (NASDAQ) National Market System. The quarterly high and low price quotations for common shares follow: 1994 1993 ----------------- -------------- Quarter High Low High Low ------- ------ ------ ----- ----- First $44 1/2 $41 1/2 $46 $39 3/4 Second 42 1/2 39 1/2 49 44 Third 46 1/2 40 3/4 45 3/4 41 1/4 Fourth 45 3/4 42 3/4 45 41 3/4 Common stock quarterly cash dividend information is as follows: Amount Record Payment Quarter Per Share Date Date ------- ---------- -------- --------- 1994 ----- First $ .23 Feb. 18, 1994 March 10, 1994 Second .23 May 13, 1994 June 10, 1994 Third .23 Aug. 12, 1994 Sept. 10, 1994 Fourth .25 Nov. 18, 1994 Dec. 10, 1994 ----- Total .94 ----- 1993 ----- First $ .23 Feb. 19, 1993 March 10, 1993 Second .23 May 14, 1993 June 10, 1993 Third .23 Aug. 13, 1993 Sept. 10, 1993 Fourth .23 Nov. 19, 1993 Dec. 10, 1993 ----- Total .92 ----- The company's stock transfer agent is Norwest Bank Minnesota, N.A., 161 North Concord Exchange, P.O. Box 738, South St. Paul, MN 55075-0738. 12 Report of Management Mine Safety Appliances Company's consolidated financial statements and related notes that appear in this Annual Report to Shareholders were prepared by the company in accordance with generally accepted accounting principles. In fulfilling its responsibilities for the integrity and objectivity of the consolidated financial statements, management maintains accounting procedures designed to provide accurate books, records and accounts which reasonably and fairly reflect the transactions of the company in a consistent manner on the accrual basis of accounting. Company personnel are trained and given responsibilities to ensure adequate internal accounting controls at a cost commensurate with the risks involved. Internal accounting controls, monitored by an internal audit staff, provide reasonable assurances that transactions are executed in accordance with proper authorization and that adequate accountability for the company's assets is maintained. The Board of Directors, through its Audit Committee, is responsible for assuring that management fulfills its responsibilities in the preparation of the financial statements. The Audit Committee meets at least twice a year with the company's independent accountants to discuss the scope of their examination and any significant findings resulting therefrom. /s/ James E. Herald James E. Herald Vice President-Finance Chief Financial Officer Report of Independent Accountants To the Shareholders and Board of Directors of Mine Safety Appliances Company: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of earnings retained in the business, and of cash flows present fairly, in all material respects, the financial position of Mine Safety Appliances Company and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 18 to these consolidated financial statements, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," SFAS No. 109, "Accounting for Income Taxes," and SFAS No. 112, "Employers' Accounting for Postemployment Benefits" in 1992. /s/ Price Waterhouse LLP Price Waterhouse LLP Pittsburgh, Pennsylvania February 17, 1995 13 Consolidated Statement of Income -------------------------------------------------------------------------------- (In thousands, except per share amounts) Year Ended December 31 1994 1993 1992 Net sales....................................................... $459,607 $429,220 $502,366 Other income.................................................... 5,463 5,885 9,755 -------- -------- --------- 465,070 435,105 512,121 -------- -------- --------- Costs and expenses Cost of products sold........................................ 286,725 273,350 327,555 Selling, general and administrative.......................... 124,714 121,529 130,182 Depreciation................................................. 18,527 17,294 16,831 Interest..................................................... 2,224 1,713 1,536 Foreign currency losses...................................... 3,968 3,201 5,507 Facilities consolidation and restructuring charges........... 3,086 (223) 5,500 Contract costs recovery...................................... (2,800) -------- -------- --------- 439,244 416,864 484,311 -------- -------- --------- Income from continuing operations before income taxes........... 25,826 18,241 27,810 Provision for income taxes...................................... 10,497 7,686 11,107 -------- -------- --------- Income from continuing operations............................... 15,329 10,555 16,703 Losses from discontinued operations (Note 7).................... (5,067) Cumulative effect to January 1, 1992 of changes in accounting principles (Note 18)................. (8,964) -------- -------- --------- Net income...................................................... $ 15,329 $ 10,555 $ 2,672 ======== ======== ========= Earnings per common share Continuing operations........................................ $2.58 $1.73 $2.67 Discontinued operations...................................... (.81) Cumulative effect to January 1, 1992 of changes in accounting principles....................................... (1.44) -------- -------- --------- Net income................................................... $2.58 $1.73 $.42 ======== ======== ========= Consolidated Statement of Earnings Retained in the Business -------------------------------------------------------------------------------- (In thousands, except per share amounts) Year Ended December 31 1994 1993 1992 At beginning of year............................................ $287,286 $282,371 $285,307 Net income...................................................... 15,329 10,555 2,672 Dividends Common-$.94, $.92 and $.89 per share......................... (5,569) (5,584) (5,550) Preferred-$2.25 per share.................................... (53) (56) (58) -------- -------- --------- At end of year.................................................. $296,993 $287,286 $282,371 ======== ======== ========= See notes to consolidated financial statements 14 Consolidated Balance Sheet -------------------------------------------------------------------------------- (In thousands, except per share amounts) December 31 1994 1993 Assets Current Assets Cash.................................................................. $ 10,108 $ 10,953 Temporary investments, at cost which approximates market.............. 44,312 35,481 Receivables, less allowance for doubtful accounts $2,102 and $2,516... 88,698 81,897 Inventories........................................................... 76,966 81,454 Prepaid expenses and other current assets............................. 17,232 14,824 --------- --------- Total current assets.................................................. 237,316 224,609 --------- --------- Property Land.................................................................. 6,502 6,766 Buildings............................................................. 104,487 104,942 Machinery and equipment............................................... 206,001 183,776 Construction in progress.............................................. 5,119 11,207 --------- --------- Total................................................................. 322,109 306,691 Less accumulated depreciation......................................... (170,153) (153,162) --------- --------- Net property.......................................................... 151,956 153,529 --------- --------- Other Assets Assets of discontinued business....................................... 1,208 7,175 Other assets.......................................................... 26,571 22,571 --------- --------- Total other assets.................................................... 27,779 29,746 --------- --------- Total................................................................. $ 417,051 $ 407,884 ========= ========= Liabilities Current Liabilities Notes payable and current portion of long-term debt................... $ 9,743 $ 6,294 Accounts payable...................................................... 25,864 20,925 Employees' compensation............................................... 12,180 11,460 Insurance............................................................. 8,675 7,509 Taxes on income....................................................... (1,090) (3,474) Other current liabilities............................................. 15,450 17,696 --------- --------- Total current liabilities............................................. 70,822 60,410 --------- --------- Long-term Debt ...................................................................... 16,564 27,476 --------- --------- Other Liabilities Deferred income taxes................................................. 14,424 12,142 Pensions and other employee benefits.................................. 48,191 46,856 Other noncurrent liabilities.......................................... 1,075 1,256 --------- --------- Total other liabilities............................................... 63,690 60,254 --------- --------- Shareholders' Equity Preferred stock, 4 1/2% cumulative, $50 par value (callable at $52.50) 3,569 3,569 Common stock, no par value (shares outstanding: 1994-5,815,672; 1993-6,011,628)................................... 8,048 8,048 Cumulative translation adjustments.................................... (699) (5,749) Earnings retained in the business..................................... 296,993 287,286 Treasury shares, at cost.............................................. (41,936) (33,410) --------- --------- Total shareholders' equity............................................ 265,975 259,744 --------- --------- Total................................................................. $ 417,051 $ 407,884 ========= ========= See notes to consolidated financial statements. 15 Consolidated Statement of Cash Flows -------------------------------------------------------------------------------- (In thousands) Year Ended December 31 1994 1993 1992 Operating Activities Income from continuing operations............... $ 15,329 $ 10,555 $ 16,703 Depreciation.................................... 18,527 17,294 16,831 Pensions........................................ (1,305) 151 2,600 Deferred income taxes........................... 61 (82) 99 Receivables..................................... (6,801) (6,118) 7,281 Inventories..................................... 4,488 6,330 11,937 Accounts payable and accrued liabilities........ 6,963 5,442 (12,406) Other assets and liabilities.................... (754) (3,797) (2,470) Other-including currency exchange adjustments... 4,163 (3,956) (3,682) -------- -------- -------- Cash Flow From Operating Activities............. 40,671 25,819 36,893 -------- -------- -------- Investing Activities Property additions.............................. (22,614) (21,642) (22,762) Property disposals.............................. 4,983 3,420 1,189 Acquisitions and other investing................ 6,130 (4,180) 443 -------- -------- -------- Cash Flow From Investing Activities............. (11,501) (22,402) (21,130) -------- -------- -------- Financing Activities Additions to long-term debt..................... 2,167 1,472 6,883 Reductions of long-term debt.................... (13,949) (1,850) (1,227) Financing funds in escrow....................... (2,922) Cash dividends.................................. (5,622) (5,640) (5,608) Stock options and purchases of company's stock.. (8,526) (4,141) (8,310) Changes in notes payable and short-term debt.... 2,978 399 (218) -------- -------- -------- Cash Flow From Financing Activities............. (22,952) (9,760) (11,402) -------- -------- -------- Effect of exchange rate changes on cash............ 1,768 (2,632) (3,311) -------- -------- -------- Increase (decrease) in cash and cash equivalents... 7,986 (8,975) 1,050 Beginning cash and cash equivalents................ 46,434 55,409 54,359 -------- -------- -------- Ending cash and cash equivalents................... $ 54,420 $ 46,434 $ 55,409 ======== ======== ======== Supplemental cash flow information: Interest payments............................... $ 1,983 $ 1,467 $ 1,504 Income tax payments............................. 13,947 9,013 25,610 See notes to consolidated financial statements. 16 Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- Note 1-Basis of Presentation Significant accounting policies are stated in italics at the applicable notes to consolidated financial statements. ALL SIGNIFICANT MAJORITY-OWNED COMPANIES ARE INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS. INVESTMENTS IN WHICH THE COMPANY HAS AN EQUITY INTEREST OF 20% TO 50% ARE CARRIED AT EQUITY IN NET ASSETS. INTERCOMPANY TRANSACTIONS ARE ELIMINATED IN CONSOLIDATION. SALES UNDER CONTRACTS ARE RECORDED AT FIXED OR ESTIMATED CONTRACT SALES PRICES AS DELIVERIES ARE MADE. CONTRACTS REQUIRING PERFORMANCE OVER SEVERAL PERIODS ARE ACCOUNTED FOR BY THE PERCENTAGE-OF-COMPLETION METHOD OF ACCOUNTING. PROFITS EXPECTED TO BE REALIZED ARE BASED ON ESTIMATES OF TOTAL SALES AND COSTS AT COMPLETION. THESE ESTIMATES ARE PERIODICALLY REVIEWED AND REVISED DURING THE CONTRACT PERFORMANCE PERIOD. ADJUSTMENTS TO PROFITS ARE RECORDED IN THE PERIOD IN WHICH ESTIMATES ARE REVISED; LOSSES ARE RECOGNIZED IN FULL AS THEY ARE IDENTIFIED. PROPERTY IS STATED AT COST. DEPRECIATION IS BASED ON ESTIMATED USEFUL LIVES USING ACCELERATED AND STRAIGHT-LINE METHODS. MAINTENANCE AND REPAIRS ARE CHARGED TO EXPENSE. RENEWALS AND BETTERMENTS WHICH SUBSTANTIALLY EXTEND THE USEFUL LIFE OF PROPERTY ARE CAPITALIZED. ACCUMULATED ALLOWANCES FOR DEPRECIATION OF BUILDINGS, MACHINERY AND EQUIPMENT RETIRED OR OTHERWISE DISPOSED OF ARE ELIMINATED FROM THE ACCOUNTS UPON DISPOSITION. PROFITS OR LOSSES RESULTING FROM SUCH DISPOSITIONS ARE INCLUDED IN INCOME. CASH AND CASH EQUIVALENTS IN THE CONSOLIDATED STATEMENT OF CASH FLOWS INCLUDES TEMPORARY INVESTMENTS THAT ARE READILY MARKETABLE AND HAVE MINIMAL RISK AS TO CHANGE IN VALUE. CERTAIN SECURITIES HAVE MATURITIES IN EXCESS OF NINETY DAYS; BUT, AS PART OF THE COMPANY'S CASH MANAGEMENT PROGRAM, MATURITIES ARE SCHEDULED BASED ON EXPECTED CASH NEEDS FOR THE ENSUING TWELVE MONTHS. EARNINGS PER SHARE ARE COMPUTED BASED UPON THE WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING EACH YEAR. THE COMPUTATION RECOGNIZES DIVIDENDS PAID ON PREFERRED STOCK BUT DOES NOT INCLUDE A NEGLIGIBLE DILUTIVE EFFECT OF STOCK OPTIONS. Note 2-Leases The company leases warehouses, sales offices, manufacturing facilities and equipment under agreements expiring at various dates through 2004, with renewal options existing for varying periods. Rental expense for these leases charged to income was $6,452,000 in 1994, $6,438,000 in 1993, and $6,500,000 in 1992. Future minimum rental commitments under noncancelable leases are not significant. Note 3-Research and Development Expense RESEARCH AND DEVELOPMENT COSTS, CHARGED AGAINST INCOME AS INCURRED, were $20,575,000 in 1994, $21,000,000 in 1993, and $20,938,000 in 1992. Note 4-Other Income Other income is summarized as follows: (In thousands) ---------------------- 1994 1993 1992 ------ ------ ------ Interest................. $3,043 $3,732 $6,857 Commissions, royalties and product services.. 1,940 1,335 897 Dispositions of assets... 103 127 435 Other.................... 377 691 1,566 ------ ------ ------ Total.................... 5,463 5,885 9,755 ------ ------ ------ Note 5-Stock Plans The company's Management Share Incentive Plan permits the granting of restricted stock awards and stock options to eligible key employees through December 1997. The 1990 Non-Employee Directors' Stock Option Plan provides for annual grants of stock options to eligible directors. Pursuant to these Plans, 340,225 shares were reserved for future grants as of December 31, 1994. Shares of common stock, in the form of restricted stock bonus, have been given to employees without payment to the company in consideration of services to be performed in ensuing five-year periods. So long as certain restrictions apply, these shares may not be sold and may be subject to forfeiture under certain circumstances. THE EXPENSE TO THE COMPANY IS MEASURED BY THE MARKET VALUE OF THE SHARES WHEN AWARDED AND IS AMORTIZED BY CHARGES TO OPERATIONS OVER THE PERIOD THAT THE EMPLOYEE PROVIDES THE SERVICE. The expense charged to operations was $413,000 in 1994, $371,000 in 1993, and $318,000 in 1992. A summary of the restricted stock bonus awards is as follows: Shares of common stock ------------ As of December 31, 1994: Awards................. 112,471 Restrictions lapsed.... 84,865 Restrictions lapsing in: 1995................... 3,475 1996, 1997 and 1998.... 24,131 Stock options of 42,160 shares for key employees and 7,100 shares for non- employee directors were outstanding at December 31, 1994. These options may be exercised in whole or in part at various dates through December 18, 2001 at option prices equivalent to or higher than the market values at date of grant. Changes in stock options outstanding follow: Shares Price Per Share ------ --------------- December 31, 1991.. 41,720 $27.00 to 61.33 Granted......... 1,400 44.00 Exercised....... (4,000) 29.70 Forfeited....... (400) 44.00 to 55.00 ------ December 31, 1992.. 38,720 27.00 to 61.33 Granted......... 1,400 47.13 Forfeited....... (7,600) 55.75 ------ December 31, 1993.. 32,520 27.00 to 61.33 Granted......... 20,140 40.43 to 48.40 Forfeited....... (3,400) 61.33 ------ December 31, 1994.. 49,260 27.00 to 55.75 ------ 17 Notes to Consolidated Financial Statements ------------------------------------------------------------------------------ Note 6-Business Segments and International Operations The company is primarily engaged in the manufacture and sale of safety and health equipment. Principal products include respiratory protective equipment, head protection, eye and face protection, hearing protectors, safety clothing, industrial emergency care products, mining safety equipment and monitoring instruments. These safety and health products account for more than 90% of revenues, operating profits and assets. Other products which do not fall within the safety and health equipment segment of the company's business include boron- based and other specialty chemicals. Information about the company's continuing operations in different geographic areas is summarized as follows: (In thousands) ------------------------------ 1994 1993 1992 -------- -------- -------- Net Sales and Revenues U.S. operations................................................................................. $277,591 $254,823 $307,535 European operations............................................................................. 114,030 114,169 138,006 Other non-U.S. operations....................................................................... 70,091 61,969 59,612 -------- -------- -------- Net Sales and Revenues.......................................................................... 461,712 430,961 505,153 -------- -------- -------- Intercompany Transfers U.S. operations................................................................................. 19,067 17,937 18,982 European operations............................................................................. 13,601 12,886 16,556 Other non-U.S. operations....................................................................... 625 550 330 -------- -------- -------- Intercompany Transfers.......................................................................... 33,293 31,373 35,868 -------- -------- -------- Operating Profit and Income Before Income Taxes U.S. operations................................................................................. 20,332 13,183 21,203 European operations............................................................................. 3,716 (1,345) 3,965 Other non-U.S. operations....................................................................... 8,671 6,036 6,697 Eliminations.................................................................................... (971) 922 (1,280) -------- -------- -------- Operating Profit................................................................................ 31,748 18,796 30,585 Interest expense................................................................................ (2,224) (1,713) (1,536) Foreign currency losses......................................................................... (3,968) (3,201) (5,507) Corporate income/(expense)--net................................................................. 270 4,359 4,268 -------- -------- -------- Income Before Income Taxes...................................................................... 25,826 18,241 27,810 -------- -------- -------- Identifiable Assets and Total Assets U.S. operations................................................................................. 236,286 234,650 220,441 European operations............................................................................. 96,963 96,064 102,160 Other non-U.S. operations....................................................................... 38,615 33,705 36,254 Eliminations.................................................................................... (14,476) (12,657) (15,199) -------- -------- -------- Identifiable Assets............................................................................. 357,388 351,762 343,656 Corporate assets................................................................................ 58,455 48,947 58,024 Discontinued operations......................................................................... 1,208 7,175 6,092 -------- -------- -------- Total Assets.................................................................................... 417,051 407,884 407,772 -------- -------- -------- Net Assets of Non-U.S. Operations/(1)/............................................................ 92,285 82,273 89,383 -------- -------- -------- Net Income of Non-U.S. Operations................................................................. 4,675 2,666 4,046 -------- -------- -------- (1) See Note 17 to consolidated financial statements for effects of currency translation adjustments. Transfers between geographic areas are stated at established intercompany selling prices. Operating profit is total revenues less operating expenses. Interest income and expense, equity in unconsolidated affiliates, foreign currency gains and losses, facilities consolidation and restructuring charges, and income taxes have not been included in computing operating profit. Corporate assets not included in identifiable assets are principally cash and investments. Sales by U.S. operations to U.S. government agencies were $46,478,000 in 1994, $43,234,000 in 1993, and $99,991,000 in 1992. Note 7-Discontinued Operations In 1992 the company decided to discontinue the operations of Transfer- Metallisierte Produkte GmbH (TMP), a joint venture in Germany to produce metallized paper. Accordingly, the operating losses of TMP, adjusted for the after-tax effects of intercompany transactions, have been reported separately in the consolidated statement of income. Operating activities ceased during 1993. The company is in the process of disposing of the assets and settling its liabilities. After recognizing the accumulated operating losses of TMP included in consolidation, the company estimates a loss on disposal, including provision for operating losses during the phase-out period, of $11,550,000 which will be fully offset by tax benefits. 18 -------------------------------------------------------------------------------- Note 8-Income Taxes EFFECTIVE AS OF JANUARY 1, 1992, THE COMPANY ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109-ACCOUNTING FOR INCOME TAXES. AS A RESULT OF THIS ACCOUNTING CHANGE, DEFERRED TAX BALANCES ARE STATED AT TAX RATES EXPECTED TO BE IN EFFECT WHEN TAXES ARE ACTUALLY PAID OR RECOVERED. THE CUMULATIVE EFFECT OF THIS CHANGE WAS A CREDIT TO INCOME OF $2,148,000 IN 1992. NO PROVISION IS MADE FOR UNDISTRIBUTED EARNINGS OF INTERNATIONAL COMPANIES SINCE LITTLE OR NO TAX WOULD RESULT UNDER APPLICABLE EXISTING STATUTES OR BECAUSE MANAGEMENT INTENDS THAT THESE EARNINGS BE PERMANENTLY REINVESTED FOR WORKING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS. The U.S. and non-U.S. components of income from continuing operations before income taxes, and provisions for income taxes are summarized as follows: (In thousands) ------------------------------ 1994 1993 1992 -------- -------- -------- Income Before Income Taxes U.S. income.......................................................... $ 19,933 $ 16,304 $ 32,256 Non-U.S. income....................................................... 11,177 6,055 12,592 Currency translations (losses)........................................ (3,024) (3,080) (4,478) Eliminations.......................................................... (2,260) (1,038) (12,560) -------- -------- -------- Income Before Income Taxes............................................ 25,826 18,241 27,810 -------- -------- -------- Provisions For Income Taxes Current Federal............................................................. 6,220 4,427 6,422 State............................................................... 1,537 1,122 1,237 Non-U.S............................................................. 2,679 2,219 3,349 -------- -------- -------- Total current provision............................................. 10,436 7,768 11,008 -------- -------- -------- Deferred Federal............................................................. (801) 351 1,187 State............................................................... (43) (2) 378 Non-U.S............................................................. 905 (431) (1,466) -------- -------- -------- Total deferred provision............................................ 61 (82) 99 -------- -------- -------- Provisions for Income Taxes 10,497 7,686 11,107 -------- -------- -------- The components of the net deferred tax liability are as follows: 1994 1993 1992 -------- -------- -------- Deferred tax assets: Postretirement benefits............................................. 5,903 5,792 5,540 Inventory reserves and unrealized profits........................... 5,344 5,027 4,441 Vacation allowances................................................. 2,054 2,059 1,925 Postemployment benefits............................................. 1,580 1,630 1,560 Liability insurance................................................. 2,319 1,749 1,524 Loss carryforwards.................................................. 2,502 5,360 8,437 Other............................................................... 3,583 2,258 985 -------- -------- -------- Total deferred tax assets........................................... 23,285 23,875 24,412 -------- -------- -------- Deferred tax (liability)-depreciation................................. (24,588) (25,065) (25,662) -------- -------- -------- Net deferred tax (liability).......................................... (1,303) (1,190) (1,250) -------- -------- -------- The following is a reconciliation of income taxes calculated at the U.S. Federal income tax rate (35% in 1994 and 1993, and 34% in 1992) to the provision for income taxes for continuing operations: 1994 1993 1992 ------ ----- ------ Provision for income taxes at statutory rate.. 9,039 6,384 9,455 State income taxes............................ 971 728 1,066 Currency translation.......................... 1,058 1,078 1,523 Research tax credits.......................... (150) (50) (50) Non-U.S. taxes................................ (293) (817) (1,321) Other-net..................................... (128) 363 434 ------ ----- ------ Provision for income taxes.................... 10,497 7,686 11,107 ------ ----- ------ Undistributed earnings of international companies for which U.S. income taxes have not been provided were $57,756,000 at December 31, 1994. 19 Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- Note 9-Capital Stock The authorized capital of the company consists of: . Common stock, no par value-20,000,000 shares . Second cumulative preferred voting stock, $10 par value-1,000,000 shares . 4 1/2% cumulative preferred stock, $50 par value-100,000 shares Common stock activity is summarized as follows: (In thousands) -------------------- Shares Shares In Common Treasury Issued Treasury Stock Cost --------- --------- ------ -------- Balances January 1, 1992.... 6,682,317 406,344 $6,754 $(19,376) Stock options exercised..... 4,000 118 Purchased for treasury...... 201,187 (8,403) --------- ------- ------ -------- Balances December 31, 1992.. 6,686,317 607,531 6,872 (27,779) Management Share Incentive Plan issues................ 27,186 1,176 Purchased for treasury...... 94,344 (4,099) --------- ------- ------ -------- Balances December 31, 1993.. 6,713,503 701,875 8,048 (31,878) Management Share Incentive Plan forfeitures........... 632 (27) Purchased for treasury...... 195,324 (8,483) --------- ------- ------ -------- Balances December 31, 1994.. 6,713,503 897,831 8,048 (40,388) --------- ------- ------ -------- Second cumulative preferred voting stock-none has been issued. As to the 4 1/2% cumulative preferred stock, 71,373 shares have been issued (none during the three years ended December 31, 1994), while the amounts held in treasury are as follows: December 31 Shares Cost (in thousands) ----------- ------ ------------------- 1992 46,030 $(1,490) 1993 47,268 (1,532) 1994 47,775 (1,548) Note 10-Quarterly Financial Information (Unaudited) (In thousands, except earnings per share) 1994 1993 ------------------------------------------------- ------------------------------------------------ Quarters Quarters ----------------------------------------- --------------------------------------- 1st 2nd 3rd 4th Year 1st 2nd 3rd 4th Year ----------------------------------------- -------- ------------------------------------------------ Net sales.................. $109,522 $115,133 $114,889 $120,063 $459,607 $104,863 $107,840 $103,899 $112,618 $429,220 Gross profit............... 39,009 43,854 42,749 47,270 172,882 37,773 40,269 35,823 42,005 155,870 Net income................. 2,560 3,468 4,593 4,708 15,329 2,516 2,963 1,411 3,665 10,555 -------- -------- -------- -------- -------- -------- ------- -------- -------- -------- Earnings per share......... .43 .57 .78 .80 2.58 .41 .48 .24 .60 1.73 -------- -------- -------- -------- -------- -------- ------- -------- -------- -------- Note 11-Inventories THE U.S. INVENTORIES ARE VALUED ON THE LAST-IN, FIRST-OUT (LIFO) COST METHOD. OTHER INVENTORIES ARE VALUED AT THE LOWER OF COST, USING AVERAGE OR CURRENT STANDARD COSTS WHICH APPROXIMATE ACTUAL COSTS ON A FIRST-IN, FIRST-OUT (FIFO) BASIS, OR MARKET, DETERMINED BY REPLACEMENT COST OR NET REALIZABLE VALUE. Significant reductions of domestic inventories during 1994 caused liquidations of LIFO inventory values calculated at lower costs incurred in prior years. The effect of these liquidations has been to reduce cost of sales by $6,923,000 and to increase net income by $4,189,000, or $.71 per share of common stock. Inventories are summarized as follows: (In thousands) ------------------------------- 1994 1993 1992 ------- ------- ------- Finished products........... $33,576 $30,409 $33,643 Work in process............. 14,013 20,001 20,952 Raw materials and supplies.. 29,377 31,044 33,189 ------- ------- ------- Total inventories........... 76,966 81,454 87,784 ------- ------- ------- Excess of FIFO costs over LIFO costs........ 59,178 63,033 62,564 ------- ------- ------- Inventories stated on the LIFO basis represent 43%, 58%, and 52% of the total inventories at December 31, 1994, 1993, and 1992, respectively. Note 12-Long-Term Debt (In thousands) ---------------- 1994 1993 ------- ------- U.S. Industrial development debt issues payable through 2022, 5.9%........... $13,650 $13,650 Other, 4.2% to 16.9%.................... 952 950 International companies Various notes payable through 1998, 5.25% to 9.6% ($5,587 secured by pledge of assets located abroad).. 6,981 16,382 ------- ------- Total..................................... 21,583 30,982 Amounts due within one year............... 5,019 3,506 ------- ------- Long-term debt............................ 16,564 27,476 ------- ------- Approximate maturities of these obligations over the next five years are $5,019,000 in 1995, $1,582,000 in 1996, $1,360,000 in 1997, $970,000 in 1998, and $384,000 in 1999. Some U.S. loan agreements contain covenants to maintain specified levels of shareholders' equity. Note 13-Contingencies A portion of the company's business is with departments and agencies of the United States government. Contracts related to this business are subject to profit limitations and terminations. The company also has certain contingent liabilities with respect to commitments and litigation. In the opinion of management, these contingencies will not result in any significant losses to the company. 20 ------------------------------------------------------------------------------ Note 14-Retirement Plans Substantially all employees are covered by non-contributory pension plans. Various U.S. employees also participate in a contributory retirement savings plan wherein employees may contribute from 1% to 8% of their compensation to a trust fund, to which the company contributes an amount equal to 50% of the employees' contributions. The company's expense for these plans was $4,647,000 in 1994, $4,408,000 in 1993, and $7,572,000 in 1992. THE NON-CONTRIBUTORY PENSION PLANS ARE ACCOUNTED FOR IN ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 87 WHICH REQUIRES USE OF THE PROJECTED UNIT CREDIT COST METHOD TO DETERMINE THE PROJECTED BENEFIT OBLIGATION AND PLAN COST. THE PRINCIPAL U.S. PLAN IS FUNDED IN COMPLIANCE WITH THE EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA). IT IS THE GENERAL POLICY TO FUND CURRENT COSTS FOR THE INTERNATIONAL PLANS EXCEPT IN GERMANY, WHERE IT IS COMMON PRACTICE AND PERMISSIBLE UNDER TAX LAWS TO ACCRUE BOOK RESERVES. Non-contributory plan benefits are generally based on years of service and employees' compensation during the last years of employment. Benefits are paid from funds previously provided to trustees or are paid by the company and charged to the book reserves. Information pertaining to the non-contributory defined benefit plans is provided in the following tables. Cost for Defined Benefits Plans (In thousands) U.S. Plans International Plans -------------- -------------------------------------- -------------------------------------- 1994 1993 1992 1994 1993 1992 -------- -------- -------- -------- -------- -------- Service cost-benefits earned during the period.. $ 3,458 $ 2,894 $ 2,646 $ 1,686 $ 1,361 $ 1,707 Interest cost on projected benefit obligation........ 9,834 9,558 9,903 3,170 2,910 2,927 Actual (return)/loss on plan assets............... (971) (22,879) (15,509) (704) (2,219) (898) Net amortization and deferral.................. (13,137) 9,937 3,087 (267) 1,320 (55) Special pension benefit adjustments associated with early retirement programs and restructuring............ (728) (643) (1,655) -------- -------- -------- -------- -------- -------- Pension expense (income)... (816) (1,218) (516) 3,885 1,717 3,681 -------- -------- -------- -------- -------- -------- Funding Status and Projected Benefit Obligation Reconciliation December 31 (In thousands) U.S. Plans International Plans -------------------------- -------------------------------------- -------------------------------------- 1994 1993 1992 1994 1993 1992 -------- -------- -------- -------- -------- -------- Actuarial present value of benefit obligations: Accumulated benefit obligation Vested................... 108,697 108,439 97,767 41,058 22,157 21,993 Nonvested................ 2,043 1,917 300 2,422 980 762 -------- -------- -------- -------- -------- -------- Total.................... 110,740 110,356 98,067 43,480 23,137 22,755 -------- -------- -------- -------- -------- -------- Plan assets at fair value, primarily listed stocks and bonds................. 173,171 179,832 164,832 16,922 16,071 13,591 Projected benefit obligation................ 128,389 136,034 118,084 48,112 35,621 35,881 -------- -------- -------- -------- -------- -------- Plan assets in excess of (less than) projected benefit obligation........ 44,782 43,798 46,748 (31,190) (19,550) (22,290) -------- -------- -------- -------- -------- -------- The excess (less than) consists of: Unamortized portion of transition gain (loss), being recognized over future years............. 7,931 9,231 10,173 (1,325) (886) (1,361) Unrecognized net gain (loss) from past experience different from that assumed................. 38,144 37,331 41,066 (1,719) 1,836 136 Unrecognized prior service cost............. (3,074) (3,380) (3,925) (544) (579) (656) Minimum liability for unfunded plans........... 1,042 1,097 1,369 Accrued pension cost included in the consolidated balance sheet................... 739 (481) (1,935) (27,602) (19,921) (20,409) -------- -------- -------- -------- -------- -------- Total..................... 44,782 43,798 46,748 (31,190) (19,550) (22,290) -------- -------- -------- -------- -------- -------- Assumed long-term rates of return on assets.......... 9% 9% 9% 8-9% 7-9% 8-9 1/2% Assumed discount rates for future benefits........... 8 1/4 7 1/2 8 1/2 7-8.9 5 3/4-9 7 3/4-9 1/2 Assumed long-term rates for compensation increases 5 5 5 4-6 3-6 6-6 1/2 Note 15-Short-Term Debt Short-term bank lines of credit amounted to $15,365,000 of which $10,686,000 was unused at December 31, 1994. Generally, these short-term lines of credit are renewable annually and there are no significant commitment fees or compensating balance requirements. Short-term borrowings with banks, which exclude the current portion of long-term debt, were $4,679,000 and $2,722,000 at December 31, 1994 and 1993, respectively. The average month-end balance of total short- term borrowings during 1994 was $4,220,000 while the maximum month-end balance of $5,499,000 occurred at August 31, 1994. The average interest rate during 1994 was approximately 19% based upon total short-term interest expense divided by the average month-end balance outstanding, and 10% at year-end. This average interest rate is affected by borrowings in certain countries where local inflation has resulted in relatively high interest rates. 21 Notes to Consolidated Financial Statements ------------------------------------------------------------------------------ Note 16-Postretirement Benefits The company provides certain health care benefits and limited life insurance for retired employees and their eligible dependents. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 106-"EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS" WAS IMPLEMENTED AS OF JANUARY 1, 1992, USING THE IMMEDIATE RECOGNITION TRANSITION OPTION. SFAS NO. 106 REQUIRES RECOGNITION OF RETIREE HEALTH AND LIFE INSURANCE BENEFITS DURING THE EMPLOYEES' SERVICE WITH THE COMPANY. The accumulated postretirement benefit of $14,212,000 as of January 1, 1992 was charged to 1992 earnings. Further information about these benefits is provided in the following tables: Cost for Benefits (In thousands) 1994 1993 1992 ----------------- ------- ------- ------- Service cost-benefits earned during the period.................................. $ 471 $ 447 $ 385 Interest cost on projected benefit obligation................................... 1,198 1,192 1,201 Amortization of (gain)/loss..................................................... 40 ------- ------- ------- Retirement benefits expense..................................................... 1,709 1,639 1,586 ------- ------- ------- Funded Status and Accumulated Postretirement Benefit Obligation Reconciliation December 31 (In thousands) 1994 1993 1992 -------------------------- ------- ------- ------- Accumulated postretirement benefit obligation: Active employees........................................................... 3,188 3,582 2,913 Other active participants.................................................. 6,098 7,647 5,779 ------- ------- ------- 9,286 11,229 8,692 Retirees................................................................... 5,389 5,615 5,895 ------- ------- ------- Total...................................................................... 14,675 16,844 14,587 Unamortized (loss).............................................................. (222) (2,565) (275) ------- ------- ------- Accrued postretirement benefit cost included in consolidated balance sheet................................................ 14,453 14,279 14,312 ------- ------- ------- Assumed discount rates for future benefits...................................... 8 1/4% 7 1/2% 8 1/2% Annual rates of increase in the costs of covered health care benefits assumed for 1994 were 10%, decreasing gradually to 5% for the year 1998 and thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported; a one-percentage-point increase in each year would increase the accumulated postretirement benefit obligation by $918,000 and increase the current service and interest costs for the year by $127,000. Note 17-Foreign Currency AN APPROPRIATE FUNCTIONAL CURRENCY IS DETERMINED FOR EACH ENTITY. THE FINANCIAL STATEMENTS OF COMPANIES FOR WHICH THE UNITED STATES DOLLAR IS DETERMINED TO BE THE FUNCTIONAL CURRENCY ARE TRANSLATED USING APPROPRIATE CURRENT AND HISTORIC EXCHANGE RATES; ADJUSTMENTS RELATED THERETO ARE INCLUDED IN INCOME FOR THE CURRENT PERIOD. THE FINANCIAL STATEMENTS OF ALL OTHER COMPANIES ARE TRANSLATED FROM THEIR FUNCTIONAL CURRENCY INTO UNITED STATES DOLLARS USING CURRENT EXCHANGE RATES; THE RESULTANT TRANSLATION ADJUSTMENTS ARE NOT INCLUDED IN INCOME BUT ARE ACCUMULATED IN A SEPARATE EQUITY ACCOUNT. TRANSACTION GAINS AND LOSSES ARE RECOGNIZED IN INCOME FOR THE CURRENT PERIOD. Foreign currency effects are summarized as follows: (In thousands) ------------------------ 1994 1993 1992 ------- ------ ------ Currency (gains)/losses charged to income arising from: Translation-Latin American companies................. $ 3,024 $3,080 $4,478 Transactions................. 944 121 1,029 ------- ------ ------ Total........................ 3,968 3,201 5,507 ------- ------ ------ Currency translation (gains)/losses charged directly to equity adjustment account.............. (5,050) 5,400 4,736 ------- ------ ------ Note 18-Accounting Changes Effective January 1, 1992, the company adopted three new Statements of Financial Accounting Standards (SFAS). The after tax effect of these changes was a charge of $8,964,000 against 1992 net income. Aside from this cumulative effect as of January 1, 1992, adoption of these Standards did not materially affect 1992 financial results. SFAS No. 106-"Employers' Accounting for Postretirement Benefits Other Than Pensions" was implemented using the immediate recognition transition option, resulting in a charge of $8,672,000, after recognizing related deferred taxes. SFAS No. 112-"Employers' Accounting for Postemployment Benefits" pertains to benefits, such as workers' compensation and other disability expenses, for inactive employees before retirement. The after tax costs recognized for implementing this Standard were $2,440,000 (pretax $4,000,000). SFAS No. 109-"Accounting for Income Taxes" requires that deferred tax balances are stated at tax rates expected to be in effect when taxes are actually paid or recovered, whereas deferred taxes were previously provided at tax rates prevailing during the periods when timing differences between financial income and taxable income occurred. Adjustment of the previously provided deferred taxes resulted in a net credit to income of $2,148,000. 22 Five-Year Summary of Selected Financial Data -------------------------------------------------------------------------------- SUMMARY OF OPERATIONS 1994 1993 1992 1991 1990 ----------------------------------------------------------------------------------------------------------- (In thousands, except as noted) Net sales $459,607 $429,220 $502,366 $499,240 $473,933 ----------------------------------------------------------------------------------------------------------- Other income 5,463 5,885 9,755 8,886 8,807 ----------------------------------------------------------------------------------------------------------- Cost of products sold 286,725 273,350 327,555 324,448 287,345 ----------------------------------------------------------------------------------------------------------- Selling, general and administrative 124,714 121,529 130,182 124,983 121,137 ----------------------------------------------------------------------------------------------------------- Depreciation 18,527 17,294 16,831 16,230 14,904 ----------------------------------------------------------------------------------------------------------- Interest expense 2,224 1,713 1,536 1,739 1,926 ----------------------------------------------------------------------------------------------------------- Foreign currency losses 3,968 3,201 5,507 2,456 4,238 ----------------------------------------------------------------------------------------------------------- Unusual items 3,086 (223) 2,700 700 ----------------------------------------------------------------------------------------------------------- Taxes on income 10,497 7,686 11,107 15,846 21,583 ----------------------------------------------------------------------------------------------------------- Income from continuing operations 15,329 10,555 16,703 22,424 30,907 ----------------------------------------------------------------------------------------------------------- Per common share (in dollars)/(1)/ 2.58 1.73 2.67 3.52 4.77 ----------------------------------------------------------------------------------------------------------- Discontinued operations (5,067) (3,773) (1,703) ----------------------------------------------------------------------------------------------------------- Cumulative effect to January 1, 1992 of changes in accounting principles (8,964) ----------------------------------------------------------------------------------------------------------- Net income 15,329 10,555 2,672 18,651 29,204 ----------------------------------------------------------------------------------------------------------- Per common share (in dollars)/(1)/ 2.58 1.73 .42 2.92 4.50 ----------------------------------------------------------------------------------------------------------- Cash dividends 5,622 5,640 5,608 5,659 5,372 ----------------------------------------------------------------------------------------------------------- Per common share (in dollars) .94 .92 .89 .88 .82 ----------------------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 5,921 6,069 6,225 6,353 6,471 ----------------------------------------------------------------------------------------------------------- YEAR-END POSITION ----------------------------------------------------------------------------------------------------------- Working capital $166,494 $164,199 $177,287 $184,378 $185,371 ----------------------------------------------------------------------------------------------------------- Working capital ratio 3.4 3.7 4.2 3.7 3.7 ----------------------------------------------------------------------------------------------------------- Property, at cost 322,109 306,691 305,908 292,338 285,961 ----------------------------------------------------------------------------------------------------------- Total assets 417,051 407,884 407,772 430,869 436,118 ----------------------------------------------------------------------------------------------------------- Long-term debt 16,564 27,476 28,868 23,009 24,606 ----------------------------------------------------------------------------------------------------------- Common shareholders' equity 264,795 258,539 261,927 277,866 278,199 ----------------------------------------------------------------------------------------------------------- Equity per common share (in dollars) 45.53 43.00 43.09 44.27 43.49 ----------------------------------------------------------------------------------------------------------- (1) Earnings per common share are calculated after deducting dividends on preferred stock and are based on the weighted average number of shares outstanding during each year. 23