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 September 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 October 31, 1997, there were outstanding 5,058,026 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)
September December 31
1997 1996
ASSETS
Current assets
Cash $ 6,812 $ 7,963
Temporary investments, at cost plus accrued interest 19,062 17,133
Accounts receivable, less allowance (1997 - $3,278;
1996 - $2,993) 84,122 101,740
Inventories:
Finished products 36,001 32,042
Work in process 14,609 15,311
Raw materials and supplies 31,479 29,687
-------- ---------
Total inventories 82,089 77,040
--------- ---------
Other current assets 26,773 24,531
--------- ---------
Total current assets 218,858 228,407
--------- ---------
Property, plant and equipment 348,416 347,432
Accumulated depreciation (198,827) (200,374)
--------- ---------
Net property 149,589 147,058
--------- ---------
Other assets 29,316 32,217
--------- ---------
TOTALS $ 397,763 $ 407,682
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and accounts payable $ 48,443 $ 35,823
Federal, foreign, state and local income taxes 6,217 9,156
Other current liabilities 47,129 46,835
--------- ---------
Total current liabilities 101,789 91,814
--------- ---------
Long-term debt 12,393 13,278
Noncurrent liabilities (principally employee/retiree
benefits) and deferred credits 47,079 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 6,769,273 and 6,749,733 (outstanding
4,461,386 and 4,611,125) 11,802 10,866
Stock compensation trust (600,000 shares) (28,196) (28,200)
Cumulative translation adjustments (5,863) 1,430
Retained earnings 337,564 325,898
Less treasury shares, at cost:
Preferred - 49,313 and 49,313 shares (1,595) (1,595)
Common - 1,707,887 and 1,538,608 shares (80,779) (70,536)
--------- ---------
Total shareholders' equity 236,502 241,432
--------- ---------
TOTALS $ 397,763 $ 407,682
========= =========
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Thousands of dollars, except earnings per share and shares outstanding)
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
Net sales $ 120,602 $ 121,744 $ 363,320 $ 360,994
Other income 389 1,103 2,558 4,122
---------- ---------- ---------- ----------
120,991 122,847 365,878 365,116
---------- ---------- ---------- ----------
Costs and expenses
Cost of products sold 72,560 74,279 223,321 227,713
Selling, general and administrative 30,863 32,788 97,974 97,602
Depreciation 5,106 4,780 16,027 15,959
Interest 728 324 1,868 993
Currency exchange (gains)/losses 105 88 602 356
Facilities consolidation - net 2,418 414 2,125 930
---------- ---------- ---------- ----------
111,780 112,673 341,917 343,553
---------- ---------- ---------- ----------
Income from operations
before income taxes 9,211 10,174 23,961 21,563
Income taxes 3,379 4,058 9,470 8,552
---------- ---------- ---------- ----------
Net income $ 5,832 $ 6,116 $ 14,491 $ 13,011
========== ========== ========== ==========
Earnings per common share $ 1.29 $ 1.26 $ 3.17 $ 2.63
========== ========== ========== ==========
Weighted average number of common
shares outstanding 4,559,370 4,932,145 4,559,370 4,932,145
========== ========== ========== ==========
Dividends paid on preferred stock $ 12 $ 13 $ 37 $ 39
========== ========== ========== ==========
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
Nine Months Ended
September 30
1997 1996
OPERATING ACTIVITIES
Income from operations $ 14,491 $ 13,011
Depreciation 16,027 15,959
Deferred taxes,pensions, and other non-cash
charges/(credits) (10,244) (2,890)
Changes in operating assets and liabilities 5,256 24,807
Other - principally currency exchange adjustments (5,176) 478
--------- ---------
Cash flow from operating activities 20,354 51,365
--------- ---------
INVESTING ACTIVITIES
Property additions (23,352) (12,191)
Property disposals 1,383 1,702
Acquisitions and other investing (511) (16,480)
--------- ---------
Cash flow from investing activities (22,480) (26,969)
--------- ---------
FINANCING ACTIVITIES
Additions to long-term debt 514 88
Reductions of long-term debt (1,187) (1,379)
Changes in notes payable and short term debt 20,146 (1,660)
Cash dividends (4,448) (4,134)
Company stock purchases and sales (9,303) (20,510)
--------- ---------
Cash flow from financing activities 5,722 (27,595)
--------- ---------
Effect of exchange rate changes on cash (2,818) (310)
--------- ---------
Increase/(decrease) in cash and cash equivalents 778 (3,509)
Beginning cash and cash equivalents 25,096 31,950
--------- ---------
Ending cash and cash equivalents $ 25,874 $ 28,441
========= =========
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 nine-month periods ended
September 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 third quarter of 1997 were $120,602,000
compared with $121,744,000 for the third quarter of 1996. Sales for the nine
months ended September 30, 1997 were $363,320,000 compared with $360,994,000 for
the same period last year.
Net income for the 1997 third quarter was $5,832,000, or $1.29 per share,
compared with 1996 third quarter income of $6,116,000, or $1.26 per share.
Net income for the nine months ended September 30, 1997 was $14,491,000, or
$3.17 per share, compared with $13,011,000, or $2.63 per share in 1996.
Sales results have been affected by various trends and events. In the
U.S., the absence of significant military gas mask business has been offset by
sales from 1996 fall protection and respirator acquisitions, which were not
included until the end of the year. Commercial safety product sales in U.S.
markets have been essentially flat with some continued growth in exports.
Recent sales of instrument products are lower than 1996 levels, which included
large special orders. Sales of specialty chemicals have continued to grow.
Sales in Europe have been lower than the prior year with a moderate
decline in local currency revenues compounded by adverse currency exchange
rates. Sales in other international markets have increased, mostly in Latin
America. International sales have also benefit by the inclusion of MSA
Africa, which became a wholly owned affiliate of MSA earlier this year.
The decline in net income for the third quarter occurred mainly in MSA
European operations, principally Germany, as a result of lower sales and high
operating costs. Income improved, however, in Latin America and other inter-
national operations.
Income from U.S. operations for the third quarter was about the same as the
corresponding period of last year. Last year's results benefited by $1.7
million before-tax LIFO credit from inventory reductions which have not
continued this year, due partly to a temporary need to keep back-up inventory
during the facilities consolidation announced at the end of 1996. Furthermore,
1997 results include $2.4 million of pre-tax charges related to the consolida-
tion activities. However, 1997 results include $4.5 million before tax pension
settlement gains also stemming from the facilities consolidation. Facilities
consolidation efforts are proceeding as anticipated.
Results for the quarter were about as expected. MSA has been reasonably
successful in adjusting to the end of some major U.S. military business by
acquiring or increasing other businesses and by consolidating U.S. manufacturing
facilities. While the consolidation activities have significant implementation
costs, future years' operating performance will benefit.
The profitability of European operations is a continuing concern. MSA is
evaluating appropriate plans for improvement which should be finalized during
the fourth quarter. Several new members of the MSA Europe management team have
been hired over the last year.
The results for the fourth quarter of 1996 included several significant
income items which improved net income despite substantial restructuring
charges. It may be challenging to expect similar results for the final quarter
of this year. However, MSA continues to strive to attain its goal of higher
earnings per share for the year. Earnings per share have been enhanced by
reduced shares outstanding as a result of shares purchased by the company.
Currency exchange adjustments charged directly to the equity cumulative
translation adjustments account are shown below. Significant third quarter
1997 year-to-date losses relate primarily to Germany and Australia. Significant
third quarter 1996 gains relate primarily to Germany and Italy.
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
(Thousands of dollars)(Thousands of dollars)
Translation (gains)/losses 2,077 (914) 7,293 264
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 September 30, 1997 were 2.2 and 5.8%,
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 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
September 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: November 12, 1997 By S/James E. Herald
James E. Herald
Vice President - Finance;
Principal Financial and
Accounting Officer
5
9-MOS
DEC-31-1997
SEP-30-1997
6,812
19,062
87,400
(3,278)
82,089
26,773
348,416
(198,827)
397,763
101,789
12,393
0
3,569
11,802
221,131
397,763
363,320
365,878
223,321
239,348
2,727
0
1,868
23,961
9,470
14,491
0
0
0
14,491
3.17
3.17
