SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997 Commission File No. 0-2504
MINE SAFETY APPLIANCES COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0668780
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
121 Gamma Drive
RIDC Industrial Park
O'Hara Township
Pittsburgh, Pennsylvania 15238
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412/967-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
As of July 31, 1997, there were outstanding 5,163,035 shares of common stock
without par value, including 600,000 shares held by the Mine Safety Appliances
Company Stock Compensation Trust.
PART I FINANCIAL INFORMATION
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED BALANCE SHEET
(Thousands of dollars, except shares data)
June 30 December 31
1997 1996
ASSETS
Current assets
Cash $ 8,808 $ 7,963
Temporary investments, at cost plus accrued interest 15,762 17,133
Accounts receivable, less allowance (1997 - $3,369;
1996 - $2,993) 85,567 101,740
Inventories:
Finished products 35,259 32,042
Work in process 14,865 15,311
Raw materials and supplies 30,895 29,687
-------- ---------
Total inventories 81,019 77,040
--------- ---------
Other current assets 25,682 24,531
--------- ---------
Total current assets 216,838 228,407
--------- ---------
Property, plant and equipment 349,015 347,432
Accumulated depreciation (200,480) (200,374)
--------- ---------
Net property 148,535 147,058
--------- ---------
Other assets 30,829 32,217
--------- ---------
TOTALS $ 396,202 $ 407,682
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and accounts payable $ 36,149 $ 35,823
Federal, foreign, state and local income taxes 4,781 9,156
Other current liabilities 46,899 46,835
--------- ---------
Total current liabilities 87,829 91,814
--------- ---------
Long-term debt 12,885 13,278
Noncurrent liabilities (principally employee/retiree
benefits) and deferred credits 55,259 61,158
Shareholders' equity
Preferred stock, 4-1/2% cumulative - authorized
100,000 shares of $50 par value; issued 71,373
shares, callable at $52.50 per share 3,569 3,569
Second cumulative preferred voting stock - authorized
1,000,000 shares of $10 par value; none issued
Common stock - authorized 20,000,000 shares of no par
value; issued 6,768,223 and 6,749,733 (outstanding
4,584,035 and 4,611,125) 11,740 10,866
Stock compensation trust (600,000 shares) (28,197) (28,200)
Cumulative translation adjustments (3,786) 1,430
Retained earnings 331,703 325,898
Less treasury shares, at cost:
Preferred - 49,313 and 49,313 shares (1,595) (1,595)
Common - 1,584,188 and 1,538,608 shares (73,205) (70,536)
--------- ---------
Total shareholders' equity 240,229 241,432
--------- ---------
TOTALS $ 396,202 $ 407,682
========= =========
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Thousands of dollars, except earnings per share and shares outstanding)
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
Net sales $ 129,245 $ 123,879 $ 242,718 $ 239,250
Other income 1,436 1,162 2,462 2,503
---------- ---------- ---------- ----------
130,681 125,041 245,180 241,753
---------- ---------- ---------- ----------
Costs and expenses
Cost of products sold 80,362 79,388 150,761 153,434
Selling, general and administrative 35,003 33,349 67,111 64,814
Depreciation 5,532 5,600 10,921 11,179
Interest 729 323 1,140 669
Currency exchange (gains)/losses 426 122 497 268
---------- ---------- ---------- ----------
122,052 118,782 230,430 230,364
---------- ---------- ---------- ----------
Income from operations
before income taxes 8,629 6,259 14,750 11,389
Income taxes 3,574 2,503 6,091 4,494
---------- ---------- ---------- ----------
Net income $ 5,055 $ 3,756 $ 8,659 $ 6,895
========== ========== ========== ==========
Earnings per common share $ 1.10 $ 0.76 $ 1.88 $ 1.37
========== ========== ========== ==========
Weighted average number of common
shares outstanding 4,590,480 4,994,805 4,590,480 4,994,805
========== ========== ========== ==========
Dividends paid on preferred stock $ 12 $ 13 $ 12 $ 26
========== ========== ========== ==========
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
Six Months Ended
June 30
1997 1996
OPERATING ACTIVITIES
Income from operations $ 8,659 $ 6,895
Depreciation 10,922 11,179
Deferred taxes,pensions, and other non-cash
charges/(credits) (2,986) (1,878)
Changes in operating assets and liabilities 7,235 15,535
Other - principally currency exchange adjustments (6,441) (666)
--------- ---------
Cash flow from operating activities 17,389 31,065
--------- ---------
INVESTING ACTIVITIES
Property additions (15,135) (7,177)
Property disposals 624 1,094
Acquisitions and other investing (495) (1,953)
--------- ---------
Cash flow from investing activities (15,006) (8,036)
--------- ---------
FINANCING ACTIVITIES
Additions to long-term debt 638 88
Reductions of long-term debt (855) (748)
Changes in notes payable and short term debt 4,158 (857)
Cash dividends (3,051) (2,754)
Company stock purchases and sales (1,792) (15,095)
--------- ---------
Cash flow from financing activities (902) (19,366)
--------- ---------
Effect of exchange rate changes on cash (2,007) (607)
--------- ---------
Increase/(decrease) in cash and cash equivalents (526) 3,056
Beginning cash and cash equivalents 25,096 31,950
--------- ---------
Ending cash and cash equivalents $ 24,570 $ 35,006
========= =========
Note 1 - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
include all adjustments,consisting of only normal recurring adjustments, which
are, in the opinion of management of the registrant, necessary for a fair
statement of the operating results for the three and six-month periods ended
June 30, 1997 and 1996. These financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations, and changes in cash flows in conformity with
generally accepted accounting principles.
Note 2 - Earnings per Share
Earnings per common share is computed after dividends paid on preferred
stock. Common shares reserved for outstanding options under the stock option
and incentive plans would have a negligible dilutive effect on earnings per
common share. The shares held by the Stock Compensation Trust are not included
for earnings per share calculations.
In February 1997, the Financial Accounting Standards Board issued FAS 128,
Earnings per Share. The company will adopt this statement for its December 31,
1997 financial statements and will restate prior period earnings per share
amounts, if necessary. Presentation of both "basic" and "dilutive" earnings per
share is required. The company does not expect any material impact on earnings
per common share.
MINE SAFETY APPLIANCES COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Consolidated sales for the second quarter of 1997 were $129,245,000
compared with $123,879,000 for the second quarter of 1996. Sales for the six
months ended June 30, 1997 were $242,718,000 compared with $239,250,000 for
1996.
Net income for the 1997 second quarter was $5,055,000, or $1.l0 per share,
compared with 1996 second quarter income of $3,756,000, or 76 cents per share.
Net income for the six months ended June 30, 1997 was $8,659,000, or $1.88 per
share, compared with $6,895,000, or $1.37 per share in 1996.
Sales improvements in the second quarter are largely attributable to the
acquisition in April 1997 of the majority interest in a South African
affiliate, MSA Africa (Pty.) Ltd., which is now wholly owned. The company
previously held a minority position in the ownership and management control of
this affiliate.
Generally flat sales for the six months reflect the continued absence of
U.S. military gas mask business, offset by improvements in U.S. commercial
safety equipment sales, particularly in the company's new fall protection
equipment product line (acquired in the second half of 1996), and also by
continued growth in specialty chemicals.
Modest local currency sales growth in the European operations has been more
than offset by adverse exchange rate movements related to the strong U.S.
dollar. Sales in other international markets, excluding MSA Africa, were flat
in the second quarter.
Despite generally modest sales growth, net income has improved,
particularly in U.S. operations, due to higher gross margins on a more
favorable product mix and improved manufacturing cost control.
Profits from international operations have improved marginally, with flat
income in Europe being slightly offset by modest improvement in other
international operations.
The improved financial results during the first half of 1997 compared to
1996 are the positive outcome of ongoing cost control initiatives and the
ability to improve gross margins by replacing lower margin U.S. military sales
with commercial safety product sales.
The second half of 1996 produced significantly higher profits than the
first half. Matching this performance in the second half of 1997 will be
challenging, especially in view of the anticipated moving and learning curve
costs related to the consolidation (announced at the end of last year) of U.S.
safety manufacturing facilities. The movements in some manufacturing
processes require temporary holdings of inventory to assure a high level of
customer service during the transition, which will affect ongoing performance
in inventory reduction throughout the balance of the year. However, there are
some related offsets to the factory consolidation costs, and earnings per share
for 1997 are expected to remain above the prior year. Earnings per share
continue to benefit from a reduction in shares outstanding due to the purchase
of shares by the company.
Cash outlays related to the planned U.S. restructuring efforts referred
to previously were modest in the first half; however, more significant outlays
are expected later in 1997.
Currency exchange adjustments charged directly to the equity cumulative
translation adjustments account are shown below. Significant 1997 year-to-
date losses relate primarily to Germany and Italy. Significant year-to-date
1996 losses related primarily to Germany.
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
(Thousands of dollars)(Thousands of dollars)
Translation (gains)/losses (48) 695 5,216 1,178
Available credit facilities along with internal cash resources are
adequate to provide for ensuing capital requirements. The company's financial
position and liquidity continue to be adequate. The current ratio and term
debt in relation to capital as of June 30, 1997 were 2.5 and 6.1%, respectively,
as compared to 2.5 and 6.2% at December 31, 1996.
PART II OTHER INFORMATION
MINE SAFETY APPLIANCES COMPANY
Item 1. Legal Proceedings
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
(a) April 23, 1997 - Annual Meeting
(b) Directors elected at Annual Meeting:
Calvin A. Campbell, Jr.
G. Donald Gerlach
Directors whose term of office continued after the meeting:
Helen Lee Henderson
John T. Ryan III
Joseph L. Calihan
Leo N. Short, Jr.
(c) Election of two Directors for a term of three years
Calvin A. Campbell, Jr. For 4,902,993
Withhold 58,620
Broker Nonvotes -0-
G. Donald Gerlach For 4,908,893
Withhold 52,720
Broker Nonvotes -0-
Selection of Price Waterhouse as Auditors for the year ending December
31, 1997
For 4,552,432
Against 1,755
Abstain 407,426
Broker Nonvotes -0-
(d) Not applicable
Item 5. Other Information
At the Board of Directors' Meeting held on June 25, 1997, Thomas H.
Witmer was appointed a Director of the Company to serve until the
Annual Meeting of Shareholders in 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1997.
SIGNATURES
Pursuant to the requirements 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
Date: August 13, 1997 By S/James E. Herald
James E. Herald
Vice President - Finance;
Principal Financial and
Accounting Officer
5
6-MOS
DEC-31-1997
JUN-30-1997
8,808
15,762
88,936
(3,369)
81,019
25,682
349,015
(200,480)
396,202
87,829
12,885
0
3,569
11,740
224,920
396,202
242,718
245,180
150,761
161,682
497
0
1,140
14,750
6,091
8,659
0
0
0
8,659
1.88
1.88
