ITEM 1. BUSINESS
GENERAL
Poe & Brown, Inc. (the Company) is a general insurance agency headquartered in Daytona Beach and Tampa, Florida that resulted from an April 28, 1993 merger involving Poe & Associates, Inc. (Poe) and Brown & Brown, Inc. (Brown). Poe was incorporated in 1958 and Brown commenced business in 1939. Industry segment information is not presented because the Company realizes substantially all of its revenues from the general insurance agency business.
The Company's insurance agency business is comprised of (i) general retail operations, which provide all types of insurance products to a broad range of commercial, professional, and personal clients; (ii) national program operations, which market professional liability, property and casualty insurance to members of various professional and trade associations through independent agents; (iii) brokerage operations, which distribute excess and surplus commercial insurance through independent agents; and (iv) service operations, which provide insurance-related services such as third-party administration and consultation for workers' compensation and employee benefit self-insurance markets.
The Company's activities are conducted by 21 offices located throughout Florida, and in offices located in Arizona, California, Colorado, Connecticut, Georgia, New Jersey, North Carolina and Texas. Because the Company's business is concentrated in Florida, the occurrence of adverse economic conditions or an adverse regulatory climate in Florida could have a materially adverse effect on its business, although the Company has not encountered such conditions in the past.
The following table sets forth a summary of the commission and fee revenues realized from each of the Company's operating divisions for each of the five years in the period ended December 31, 1994 (in thousands of dollars):
---------------
(1) Certain 1993 Retail Operations revenues (totaling approximately $1.6 million) have been reclassified to National Programs to conform with the 1994 classification. Prior to 1993, the program revenues being reclassified were included in the individual retail branch results. Accordingly, 1992, 1991 and 1990 revenues have not been reclassified.
The amount of the Company's income from commissions and fees is a function of, among other factors, continued new business production, retention of existing customers, acquisitions, and fluctuations in insurance premium rates and insurable exposure units.
The Company is compensated for its services primarily by commissions paid by insurance companies. The commission is usually a percentage of the premium paid by an insured. Commission rates generally depend upon the type of insurance, the particular insurance company and the nature of the services provided by the Company. In some cases, a commission is shared with other agents or brokers who have acted jointly with the Company in the transaction. The Company may also receive from an insurance company a contingent
commission that is generally based on the profitability and volume of business placed with it by the Company over a given period of time. Fees of the Company are principally generated by the service operations division, which offers administration and benefit consulting services primarily in the workers' compensation and employee benefit self-insurance markets.
Insurance premium rates are cyclical in nature and can vary widely based on insurance market conditions. Significant reductions in premium rates occurred during the years 1987 through 1989 and continued, although to a lesser degree, during 1990 through 1994. Because the insurance companies control the pricing of the products the Company sells, the Company is unable to predict the effect of this cyclical pattern on its future operating results.
RETAIL OPERATIONS
The Company's retail insurance agency business consists primarily of the selling and marketing of property and casualty insurance coverages to commercial, professional, and to a limited extent, individual customers. The categories of insurance principally sold by the Company are: Casualty -- insurance relating to legal liabilities, workers' compensation, commercial and private passenger automobile coverages, and fidelity and surety insurance; and Property -- insurance against physical damage to property and resultant interruption of business or extra expense caused by fire, windstorm or other perils. The Company also sells and services all forms of group and individual life, accident, health, hospitalization, medical and dental insurance programs. Each category of insurance is serviced by insurance specialists employed by the Company.
No material part of the Company's retail business depends upon a single customer or a few customers. During 1994, the Company received approximately $1,107,000 of fees and commissions from Rock-Tenn Company, the Company's largest single retail customer, of which approximately $742,000 was attributed to the service operations division. Such aggregate amount represented less than 2% of the Company's total commission and fee revenues for 1994.
In connection with the selling and marketing of insurance coverages, the Company provides a broad range of related services to its customers, such as risk management surveys and analysis, consultation in connection with placing insurance coverages and claims processing. The Company believes these services are important factors in securing and retaining customers.
NATIONAL PROGRAMS
The Company engages extensively in the mass marketing and placement of professional liability insurance and property and casualty insurance for members of various professional and trade associations, including dentists, attorneys, physicians, optometrists, and opticians, and to members of the wholesale distribution industry, towing operators and automobile dealerships. Typically, the Company tailors an insurance product to the needs of a particular professional or trade association, negotiates policy forms, coverages, and premium and commission rates with an insurance company, and in certain cases, secures the formal or informal endorsement of the product by an association. Under agency agreements with the insurance companies that underwrite these programs, the Company usually has authority to bind coverages, subject to established guidelines, to bill and collect premiums and, in some cases, to process claims. Insurance products are marketed nationally to association members primarily through independent agents who solicit customers through advertisements in association publications, direct mailings and personal contact.
The largest program marketed by the Company is a package insurance policy known as the Professional Protector Plan(R), which provides comprehensive coverages for dentists, including practice protection and professional liability. This program is endorsed by more than 25 state dental societies and is presently marketed in 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Since 1984, substantially all dental policies under this program have been underwritten through CNA Insurance Companies (CNA), with the Company serving as an agent for CNA.
The Company markets the Professional Protector Plan(R) through a network of independent agents who solicit customers through advertisements in professional publications, direct mail and personal contact. This
program presently insures approximately 37,600 dentists, representing approximately 27% of the practicing dentists within the Company's marketing territories.
The Company began marketing lawyers' professional liability insurance in 1973. The national Lawyer's Protector Plan(R) was introduced in 1983 and is presently marketed in 45 states, the District of Columbia and the U.S. Virgin Islands. Since 1983, the Lawyer's Protector Plan has been underwritten through CNA. The Company markets the program through a network of independent agents who solicit customers through advertisements in professional publications, direct mailings and personal contact. The program presently insures approximately 37,500 attorneys.
The Company markets professional liability insurance for physicians, surgeons, and other health care providers through a program known as the Physicians Protector Plan(R). This program is served by the Company's offices in Tampa, Florida and Glastonbury, Connecticut. The program is underwritten by CNA and is sold and marketed by, or through, independent insurance agents in Florida, Georgia, Delaware, Connecticut, New Hampshire, Rhode Island and Vermont.
The Optometric Protector Plan(R) was created in 1973 to provide optometrists and opticians with a package of practice and professional liability coverage. This program, which insures approximately 7,100 optometrists and opticians in 50 states, is predominantly underwritten by CNA. In addition to these professional liability programs, National Programs also includes a number of commercial programs as follows:
Insurance Administration Center, Inc., a wholly-owned subsidiary of the Company, operates as insurance advisor and consultant to the National Association of Wholesaler-Distributors, which represents some 40,000 wholesaler-distributors across the nation.
The Company's Professional Services Program, which originated in 1993, serves as a retail outlet within the National Programs Division and provides direct insurance sales to dentists, physicians, lawyers and optometrists in Florida.
The Towing Operator Protector Plan(R) was introduced in 1993 and currently provides specialized insurance products to tow-truck operators in 12 states. The Automobile Dealers Protector Plan(R) insures used car dealers in Florida through a program endorsed by the Florida Independent Auto Dealers Association. In 1994, this Plan expanded into five additional states, and currently insures approximately 2,200 dealers in six states.
SERVICE OPERATIONS
The Company's service operations division consists of two separate components: (i) insurance and related services as a third-party administrator (TPA) for employee health and welfare benefit plans, and (ii) insurance and related services providing comprehensive risk management and third-party administration to self-funded workers' compensation plans.
In connection with its employee benefit plan administrative services, the Company provides TPA services, including benefit consulting, benefit plan design and costing, arrangement for the placement of stop-loss insurance and other employee benefit coverages, and settlement of claims. The Company provides access to effective utilization management strategies such as pre-admission review, concurrent/retrospective review, pre-treatment review of certain non-hospital treatment plans, and medical and psychiatric case management. In addition to the administration of self-funded health care plans, the Company offers administration of flexible benefit plans, including plan design, employee communication, enrollment and reporting. The Company's workers' compensation TPA services include risk management services such as loss control, claim administration, access to major reinsurance markets, cost containment consulting, and services for secondary disability and subrogation recoveries.
The Company provides workers' compensation TPA services for approximately 2,000 employers representing more than $1.7 billion of employee payroll. The Company's largest workers' compensation contract represents approximately 76% of the Company's workers' compensation TPA revenues, or 5% of the Company's total commission and fee revenues.
BROKERAGE OPERATIONS
The Company markets excess and surplus lines, and specialty insurance products, to both the Company's retail division and other retail agencies throughout Florida and the Southeast. The Company represents various U.S. and U.K. surplus lines companies and is also a Lloyd's of London correspondent. In addition to surplus lines carriers, the Company represents admitted carriers for smaller agencies that do not have access to large insurance carrier representation. Excess and surplus products include commercial automobile, garage, restaurant, builder's risk and inland marine lines. Difficult-to-insure general liability and products liability coverages are a specialty, as is excess workers' compensation. Retail agency business is solicited through mailings and direct contact with retail agency representatives.
EMPLOYEES
As of December 31, 1994, the Company had 971 full-time equivalent employees, compared to 980 at the beginning of the year. The Company has contracts with its sales employees that include provisions restricting their right to solicit the Company's customers after termination of employment with the Company. The enforceability of such contracts varies from state to state depending upon state statutes, judicial decisions, and factual circumstances. The majority of these contracts are terminable by either party; however, the agreement not to solicit the Company's customers continues generally for a period of at least three years after employment termination.
None of the Company's employees are represented by a labor union, and the Company considers its relations with its employees to be satisfactory.
COMPETITION
The insurance agency business is highly competitive, and numerous firms actively compete with the Company in every area in which it does business. There are several hundred insurance companies and insurance agencies that conduct business in Florida and with which the Company, either directly or indirectly, competes.
Although the Company is the largest insurance agency headquartered in Florida, a number of national firms with greater resources have offices in Florida and actively compete with the Company. Because competition in the insurance business is largely based on innovation, quality of service and price, the Company believes it is well positioned to successfully compete in the markets it serves. The Company's business outside the state of Florida consists principally of the marketing and placement of association programs and localized general retail agency activities.
Several large stock and mutual insurance companies are engaged in the direct sale of insurance and do not pay commissions to agents and brokers. To date, such direct writing has had relatively little effect on the Company's operations, primarily because the Company's retail operations are commercially oriented.
REGULATION, LICENSING, AND AGENCY CONTRACTS
The Company or its designated employees must be licensed to act as agents by the Florida Department of Insurance or comparable state regulatory authorities in the other states in which the Company conducts business. Regulations and licensing laws vary in individual states and are often complex.
The applicable licensing laws and regulations in all states are subject to amendment or reinterpretation by state regulatory authorities, and such authorities are vested in most cases with relatively broad discretion as to the granting, revocation, suspension and renewal of licenses. The possibility exists that the Company could be excluded or temporarily suspended from carrying on some or all of its activities in, or otherwise subjected to penalties by, a particular state.
ITEM 2.

ITEM 2. PROPERTIES
The Company occupies office premises under noncancellable operating leases expiring at various dates. These leases generally contain renewal options and escalation clauses based on increases in the lessors' operating expenses and other charges. The Company expects that most leases will be renewed or replaced upon expiration. See Note 8 of the "Notes to Consolidated Financial Statements" in the 1994 Annual Report to Shareholders for additional information on the Company's lease commitments. Information on the Company's office locations is included on pages 4 and 5 and the inside back cover of the Company's 1994 Annual Report to Shareholders, which information is incorporated herein by reference.
At December 31, 1994 the Company owned three buildings located in downtown Daytona Beach, Florida having an aggregate book value of approximately $350,000, including improvements. There are no outstanding mortgages on these buildings. These buildings generated lease revenue during 1994 of approximately $13,000. In March 1995, one of these buildings having an aggregate book value approximating $57,000 was sold for a minimal gain. The Company also owns an office condominium in Venice, Florida which has a net book value of $201,000, with no outstanding mortgage. This building is currently vacant.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
On February 21, 1995, an Amended Complaint was filed in an action pending in the Superior Court of Puerto Rico, Bayamon Division, and captioned Cadillac Uniform & Linen Supply Company, et al. v. General Accident Insurance Company, Puerto Rico, Limited, et al. The case was originally filed on November 23, 1994, and named General Accident Insurance Company, Puerto Rico Limited, and Benj. Acosta, Inc. as defendants. The Amended Complaint added several defendants, including the Company and Poe & Brown of California, Inc. ("P&B/Cal."), a subsidiary of the Company, as parties to the case. As of March 23, 1995, neither the Company nor P&B/Cal. had been served. The Plaintiffs allege that P&B/Cal. failed to procure sufficient coverage for a commercial laundry facility which was rendered inoperable for a period of time as the result of a fire, and further allege that the Company is vicariously liable for the actions of P&B/Cal. The Amended Complaint seeks damages of $11.2 million against P&B/Cal., the Company, the Producer who handled the account and LBI Corp., a/k/a Levinson Bros., Inc. The Company and P&B/Cal. believe that P&B/Cal. has meritorious defenses to each of the claims asserted against it, and that the Company likewise has meritorious defenses to allegations premised upon theories of vicarious liability. Both the Company and P&B/Cal. intend to contest this action vigorously. In the event that damages are awarded against P&B/Cal. or the Company, P&B/Cal. and the Company believe that insurance would be available to cover such loss.
On September 9, 1994, the Company was named as a third-party defendant in a case pending in the United States District Court, Eastern District of New York, captioned Alec Sharp, an Underwriter at Lloyds on behalf of himself and other Lloyd's Underwriters and Colin Trevor Dingley, on behalf of himself and other Lloyd's Underwriters v. Best Security Corp., d/b/a Independent Armored, et al. The action has been pending since March 9, 1994, and names a number of companies (but not the Company) as defendants. The third-party complaint was filed against the Company by some of the defendants in the underlying action. The case arises from the theft of jewelry claimed to be worth approximately $7 million from an armored car owned and operated by Best Security Corp. Plaintiffs in the underlying action seek a declaratory judgment that the policy was void from inception because the insured made misrepresentations on the application. In the third-party complaint, the third-party plaintiffs allege that the Company issued certificates of insurance naming additional insureds without authorization, and claim the Company failed to communicate information given to the Company by the insured to the Underwriters at Lloyd's of London. In the event that the Underwriters prevail in the underlying action, the third-party plaintiffs seek damages in an unspecified amount from the Company. The Company intends to contest this action vigorously, and believes it has meritorious defenses to all claims alleged against it. In the event that damages are assessed against the Company, the Company believes that insurance would be available to cover such loss.
In 1992, the Internal Revenue Service (the Service) completed its examinations of the Company's federal income tax returns for the years 1988, 1989, and 1990. As a result of its examinations, the Service
issued Reports of Proposed Adjustments asserting income tax deficiencies which, by including interest and state income taxes for the periods examined and the Company's estimates of similar tax adjustments for subsequent periods through December 31, 1994, would total $6,100,000. The disputed issues related primarily to the deductibility of amortization of purchased customer accounts of approximately $5,107,000 and non-compete agreements of approximately $993,000. In addition, the Service's report included a dispute regarding the time at which the Company's payments made pursuant to certain indemnity agreements would be deductible for tax reporting purposes. During 1994, the Company was able to reach a settlement agreement with the Service with respect to certain of the disputed amortization items and the indemnity agreement payment issue. This settlement has reduced the total remaining asserted income tax deficiencies to approximately $2,800,000. Based on this settlement and review of the remaining unsettled items, the Company believes that its general income tax reserves of $800,000 are sufficient to cover its ultimate liability resulting from the settlement of the remaining items. In March 1995, the Company reached an agreement with the Service on the remaining unsettled items which will result in final assessed deficiencies of approximately $600,000. The Company's general income tax reserves are adequate to cover this amount plus any penalties and interest that may be assessed.
The Company is involved in various other pending or threatened proceedings by or against the Company or one or more of its subsidiaries that involve routine litigation relating to insurance risks placed by the Company and other contractual matters. Management of the Company does not believe that any of such pending or threatened proceedings (including the proceedings described above) will have a materially adverse effect on the consolidated financial position or future operations of the Company.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the Company's fourth fiscal quarter ended December 31, 1994.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information under the captions "Stock Price Range" and "Cash Dividends Per Share" as included in Note 15 of the Notes to Consolidated Financial Statements included in the Company's 1994 Annual Report to Shareholders and information under the caption "Stock Listing" on the inside back cover page of the Company's 1994 Annual Report to Shareholders is incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Information under the caption "Selected Financial Data" on page 1 of the Company's 1994 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 20 through 25 of the Company's 1994 Annual Report to Shareholders is incorporated herein by reference.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Poe & Brown, Inc. and its subsidiaries, together with the report thereon of Ernst & Young LLP, appearing on pages 26 through 43 of the Company's 1994 Annual Report to Shareholders are incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the caption "Management" on pages 4-6 of the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders is incorporated herein by reference.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
Information contained under the caption "Executive Compensation" on pages 7-10 of the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders is incorporated herein by reference; provided, however, the report of the Compensation Committee on executive compensation, which begins on page 10 thereof, and the stock performance graph shall not be deemed to be incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained under the caption "Security Ownership of Management and Certain Beneficial Owners" on pages 2-3 of the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained under the caption "Executive Compensation -- Compensation Committee Interlocks and Insider Participation" on pages 9-10 of the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders is incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements of Poe & Brown, Inc. (incorporated herein by reference from pages 26 through 43 of the Company's 1994 Annual Report to Shareholders for the year ended December 31, 1994) consisting of:
(a) Consolidated Statements of Income for each of the three years in the period ended December 31, 1994.
(b) Consolidated Balance Sheets as of December 31, 1994 and 1993.
(c) Consolidated Statements of Shareholders' Equity for each of the three years in the period ended December 31, 1994.
(d) Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1994.
(e) Notes to Consolidated Financial Statements.
(f) Report of Independent Certified Public Accountants.
2. Consolidated Financial Statement Schedule included on page 10 of this report, consisting of:
(a) Schedule II -- Valuation and Qualifying Accounts.
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements or the Notes thereto.
3. EXHIBITS
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* The registrant has Indemnification Agreements with certain of its other directors and former directors (Joseph E. Brown, Bruce G. Geer, V.C. Jordan, Jr., Byrne Litschgi, Charles W. Poe, William F. Poe, Jr., and Bernard H. Mizel) that are identical in all material respects to Exhibit 10g except for the parties involved and the dates executed.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of 1994.
SCHEDULE II
POE & BROWN, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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(A) Uncollectible accounts written off, net of recoveries.
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.
POE & BROWN, INC. Registrant
By: /s/ J. HYATT BROWN ------------------------------------ J. Hyatt Brown Chief Executive Officer Date: March 29, 1995
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated.


Item 1. Business -----------------
Products and Markets: --------------------
The primary business of the registrant and its affiliated companies is the manufacture and sale of products designed to protect the safety and health of workers throughout the world.
Principal products include respiratory protective equipment that is air- purifying, air-supplied and self-contained in design. The registrant also produces instruments that monitor and analyze workplace environments and control industrial processes. Personal protective products include head, eye and face, body and hearing protectors. For the mining industry, the registrant provides mine lighting, rockdusting equipment, fire-fighting foam and foam application equipment. Health-related products include emergency care items and hospital instruments.
Many of these products are sold under the registered trademark "MSA", and have wide application for workers in industries that include manufacturing, fire service, public utilities, mining, chemicals, petroleum, construction, pulp and paper processing, transportation, government, automotive, aerospace, asbestos abatement, and hazardous materials clean-up.
Other products manufactured and sold, which do not fall within the category of safety and health equipment, include boron-based and other specialty chemicals.
The registrant and its affiliated companies are in competition with many large and small enterprises. In the opinion of management, the registrant is a leader in the manufacture of safety and health equipment.
Orders, except under contracts with the Department of Defense and with international governments, are generally filled promptly after receipt and the production period for special items is usually less than one year. The backlog of orders under contracts with the Department of Defense and certain international governments is summarized as follows:
Approximately $8,900,000 under contracts with the Department of Defense and $3,800,000 with international governments are expected to be shipped after December 31, 1995.
Further information with respect to the registrant's products, operations in different geographic areas, equity in earnings and assets of international affiliated companies, and significant customers is reported at Note 6 of Notes to Consolidated Financial Statements contained in the registrant's Annual Report to Shareholders for the year ended December 31, 1994, incorporated herein by reference.
Research: --------
The registrant and its affiliated companies engage in applied research with a view to developing new products and new applications for existing products. Most of its products are designed and manufactured to meet currently applicable performance and test standards published by groups such as ANSI (American National Standards Institute), MSHA (Mine Safety & Health Administration), NIOSH (National Institute for Occupational Safety and Health), UL (Underwriters' Laboratories), SEI (Safety Equipment Institute) and FM (Factory Mutual). The registrant also from time to time engages in research projects for others such as the Bureau of Mines and the Department of Defense or its prime contractors. Registrant-sponsored research and development costs were $20,575,000 in 1994, $21,000,000 in 1993, and $20,938,000 in 1992.
In the aggregate, patents have represented an important element in building up the business of the registrant and its affiliates, but in the opinion of management no one patent or group of patents is of material significance to the business as presently conducted.
General: -------
The company was founded in 1914 and is headquartered in Pittsburgh, Pennsylvania. As of December 31, 1994, the registrant and its affiliated companies had approximately 4,500 employees, of which 2,000 were employed by international affiliates. None of the U.S. employees are subject to the provisions of a collective bargaining agreement.
In the United States and in those countries in which the registrant has affiliates, its products are sold primarily by its own salespersons, supplemented in the case of certain markets by independent distributors and/or manufacturers' representatives. In international countries where the registrant has no affiliate, products are sold primarily through independent distributors located in those countries.
The registrant is cognizant of environmental responsibilities and has taken affirmative action regarding this responsibility. There are no current or expected legal proceedings or expenditures with respect to environmental matters which would materially affect the operations of the registrant and its affiliates. Generally speaking, the operations of the registrant and its affiliates are such that it is possible to maintain sufficient inventories of raw materials and component parts on the manufacturing premises. Equipment and machinery for processing chemicals and rubber, plastic injection molding equipment, molds, metal cutting, stamping and working equipment, assembly fixtures and similar items are regularly acquired, repaired or replaced in the ordinary course of business at prevailing market prices as necessary.
As of the end of 1992, the registrant decided to discontinue the operation of Transfer-Metallisierte Produkte GmbH (TMP), a joint venture in Germany to produce metallized paper. This venture, unrelated to the registrant's safety products, had been a financial drain on the registrant. Operating activities ceased during 1993; the registrant continues to dispose of its assets and settle its liabilities, and continues to believe that this action will not have a significant effect on the registrant's financial condition. In the third quarter of 1993, the registrant acquired HAZCO Services, a U.S. based distribution and rental supplier serving the hazardous materials/environmental market. No material changes in the registrant's commercial operations are expected to occur during 1995. Sales of defense products, which continue to be an important market segment, increased in 1994. Incoming orders were significantly less than shipments in 1994, and lower than 1993 incoming orders. In January 1995 the registrant was awarded an additional contract for gas masks totalling $15,200,000, for which deliveries are scheduled over a one year period from October 1995. Further information about the registrant's business is included in Discussion and Analysis of Financial Condition and Results of Operations at pages 10 to 12 of the Annual Report to Shareholders, incorporated herein by reference.
(Item 1 continued at page 7)
Executive Officers and Significant Employees: --------------------------------------------
All the executive officers and significant employees have been employed by the registrant since prior to January 1, 1990 and have held their present positions since prior to that date except as follows:
(a) Mr. Ryan III was elected Chief Executive Officer and Chairman of the Board on August 28, 1991, effective from October 1, 1991. On April 25, 1990 he was elected President. He previously was the Executive Vice President.
(b) Mr. Hotopp was employed by the registrant on July 29, 1991 and elected Senior Vice President and General Manager, Safety Products. From prior to January 1, 1990 until he joined the registrant, Mr. Hotopp was Senior Vice President, Sales and Marketing and later President of Kingston Warren Corporation, a manufacturer of rubber-metal composites for automotive, computer and material handling industries.
(c) Mr. Christen was elected a corporate Vice President on October 31, 1991. He was previously General Director, Auergesellschaft, an affiliate of the registrant, and Vice President and Managing Director of MSA Europe, a division of the registrant.
(d) Mr. Joy was elected Vice President on October 31, 1991. He was previously Director, Sales and Market Development.
(e) Mr. Steggles was employed by the registrant on May 4, 1992 and elected Vice President. From prior to January 1, 1990 until he joined the registrant, Mr. Steggles was Vice President of International Marketing and Sales with the BMY Division of Harsco Corp., a manufacturer of tracked and wheeled vehicles.
(f) Mr. DeMaria was appointed Director, Human Resources on September 1, 1994. He previously was Manager, Employee Benefits.
The primary responsibilities of these officers and significant employees follows:
Individual Responsibilities ---------- ---------------- Mr. Hotopp Product planning and engineering, manufacturing development and sales of safety products in the U.S.
Mr. Christen European operations
Mr. Joy Sales and marketing of safety products in the U.S.
Mr. Miller Product planning and engineering for safety products in the U.S.
Mr. Steggles International operations outside the U.S. and Europe.
Mr. Tepper Product planning and engineering, manufacturing development and sales of instrument and battery products in the U.S.
Mr. Cuozzo General Counsel and corporate taxes
Mr. Zeitler Cash and risk insurance management
Mr. DeMaria Personnel, benefits, training
Mr. Heggestad Manufacturing operations, safety products in the U.S.
Item 2.

Item 2. Properties ------------------ World Headquarters: ------------------
The registrant's executive offices are located at 121 Gamma Drive, RIDC Industrial Park, O'Hara Township, Pittsburgh, Pennsylvania 15238. This facility contains approximately 138,000 sq. ft.
Production and Research Facilities: ----------------------------------
The registrant's principal U.S. manufacturing and research facilities are located in the Greater Pittsburgh area in buildings containing approximately 1,104,000 square feet. Other U.S. manufacturing and research facilities of the registrant are located in Esmond, Rhode Island (186,000 sq. ft.), Jacksonville, North Carolina (107,000 sq. ft.), Lyons, Colorado (10,000 sq. ft.), Sparks, Maryland (37,000 sq. ft.), and Dayton, Ohio (23,000 sq. ft.).
Manufacturing facilities of international affiliates of the registrant are located in major cities in Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, Peru, Scotland, Spain, and Sweden. The most significant are located in Germany (approximately 430,000 sq. ft., excluding 127,000 sq. ft. leased to others), and in Glasgow, Scotland (approximately 141,000 sq. ft.); research activities are also conducted at these facilities.
Virtually all of these buildings are owned by the registrant and its affiliates and are constructed of granite, brick, concrete block, steel or other fire-resistant materials. The German facility is owned subject to encumbrances securing indebtedness in the aggregate amount of $5,587,000 as of December 31, 1994.
Sales Offices and Warehouses: ----------------------------
The registrant and its U.S. affiliates own seven warehouses and lease 13 other distribution warehouses with aggregate floor space of approximately 279,000 sq. ft. in or near principal cities in 13 states in the United States. Leases expire at various dates through 1998. Sales offices and distribution warehouses are owned or leased in or near principal cities in 22 other countries in which the registrant's affiliates are located.
Item 3.

Item 3. Legal Proceedings -------------------------- Not applicable.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders ------------------------------------------------------------ No matters were submitted to a vote of security holders during fourth quarter 1994.
PART II
Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Item 6.

Item 6 - "Five-Year Summary of Selected Financial Data" appearing at page
Item 7

Item 7 - "Discussion and Analysis of Financial Condition and Results of Operations" appearing at pages 10 to 12
Item 8

Item 8 - "Financial Statements and Notes to Consolidated Financial Statements" appearing at pages 13 to 22
of the Annual Report to Shareholders for the year ended December 31, 1994. Said pages of the Annual Report are submitted with this report and pursuant to Item 601(b)(13) of Regulation S-K shall be deemed filed with the Commission only to the extent that material contained therein is expressly incorporated by reference in Items 1, 5, 6, 7, 8 and 14 (a) hereof.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and ------------------------------------------------------------------------ Financial Disclosure -------------------- Not applicable.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
Item 11.

Item 11. Executive Compensation
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13.

Item 13. Certain Relationships and Related Transactions -------------------------------------------------------------------------------
Incorporated by reference herein pursuant to Rule 12b - 23 are (1) "Election of Directors" appearing at pages 1 to 3, (2) "Other Information Concerning Directors and Officers" appearing at pages 4 to 9 (except as excluded below), and (3) "Security Ownership" appearing at pages 10 to 12 (except as excluded below) of the Proxy Statement filed pursuant to Regulation 14A in connection with the registrant's Annual Meeting of Shareholders to be held on April 26, 1995. The information appearing in such Proxy Statement under the captions "Compensation Committee Report on Executive Compensation" and "Comparison of Five-Year Cumulative Total Return" is not incorporated herein.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K --------------------------------------------------------------------------
(a) 1 and 2. Financial Statements
The following information appearing on pages 13 to 22 inclusive in the Annual Report to Shareholders of the registrant for the year ended December 31, 1994, is incorporated herein by reference pursuant to Rule 12b-23.
Report of Independent Accountants
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Income - three years ended December 31, 1994
Consolidated Statement of Earnings Retained in the Business - three years ended December 31, 1994
Consolidated Statement of Cash Flows - three years ended December 31, 1994
Notes to Consolidated Financial Statements
Said pages of the Annual Report are submitted with this report and, pursuant to Item 601(b)(13) of Regulation S-K shall be deemed to be filed with the Commission only to the extent that material contained therein is expressly incorporated by reference in Items 1, 5, 6, 7, 8 and 14 (a)(1) and (2) hereof.
The following additional financial information for the three years ended December 31, 1994 is filed with the report and should be read in conjunction with the above financial statements:
Report of Independent Accountants on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements listed above.
(a) 3. Exhibits (3)(i) Restated Articles of Incorporation as amended to April 27, 1989, filed in Form 10-Q on August 5, 1994, are incorporated herein by reference.
(3)(ii) By-laws of the registrant, as amended to August 29, 1990, filed in Form 10-Q on November 9, 1990, are incorporated herein by reference.
(10)(a) * 1987 Management Share Incentive Plan, filed in Form 10-K on March 25, 1994, is incorporated herein by reference.
(10)(b) * 1990 Non-Employee Directors' Stock Option Plan, as amended to April 27, 1994, filed in Form 10-Q on August 5, 1994, is incorporated herein by reference.
(10)(c) * Executive Insurance Program, filed in Form 10-Q on August 5, 1994, is incorporated herein by reference.
(10)(d) * Extension of Consulting Agreement for the period January 1, 1992 through December 31, 1996, and June 30, 1977 Consulting Agreement with John T. Ryan, Jr. filed in Form 10-K on March 27, 1992, is incorporated herein by reference.
(10)(e) * December 29, 1993 Consulting agreement with Leo N. Short, Jr., filed in Form 10-K on March 25, 1994, is incorporated herein by reference.
(10)(f) * Board of Directors April 24, 1984 Resolution providing for payment by the Company to officers the difference between amounts payable under terms of the Company's Non-Contributory Pension Plan and the benefit limitations of Section 415 of the Internal Revenue Code, filed in Form 10-K on March 28, 1990 is incorporated herein by reference.
* The exhibits marked by an asterisk are management contracts or compensatory plans or arrangements.
(a) 3. Exhibits (continued)
(13) Annual Report to Shareholders for year ended December 31, 1994
(21) Affiliates of the registrant
(23) Consent of Price Waterhouse LLP, independent accountants
(27) Financial Data Schedule (filed in electronic format only)
The registrant agrees to furnish to the Commission upon request copies of all instruments with respect to long-term debt referred to in Note 12 of the Notes to Consolidated Financial Statements filed as part of Exhibit 13 to this annual report which have not been previously filed or are not filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1994.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MINE SAFETY APPLIANCES COMPANY
March 27, 1995 By /s/ John T. Ryan III -------------------- -------------------------------- (Date) John T. Ryan III President, Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date ----------------- --------- --------
/s/ John T. Ryan III Director; President, March 27, 1995 --------------------------- Chairman of the Board John T. Ryan III and Chief Executive Officer
/s/ James E. Herald Vice President--Finance; March 27, 1995 --------------------------- Principal Financial and James E. Herald Accounting Officer
/s/ Joseph L. Calihan Director March 27, 1995 --------------------------- Joseph L. Calihan
/s/ Calvin A. Campbell, Jr. Director March 27, 1995 --------------------------- Calvin A. Campbell, Jr.
/s/ G. Donald Gerlach Director March 27, 1995 --------------------------- G. Donald Gerlach
/s/ Helen Lee Henderson Director March 27, 1995 --------------------------- Helen Lee Henderson
/s/ John T. Ryan, Jr. Director March 27, 1995 --------------------------- John T. Ryan, Jr.
/s/ Leo N. Short, Jr. Director March 27, 1995 --------------------------- Leo N. Short, Jr.
Report of Independent Accountants on Financial Statement Schedule
To the Board of Directors of Mine Safety Appliances Company
Our audits of the consolidated financial statements referred to in our report dated February 17, 1995, appearing on page 13 of the 1994 Annual Report to Shareholders of Mine Safety Appliances Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K), also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Pittsburgh, Pennsylvania February 17, 1995
SCHEDULE II
MINE SAFETY APPLIANCES COMPANY AND AFFILIATES VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1994 (IN THOUSANDS)
(1) Bad debts written off, net of recoveries.