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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 8-K

 

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 2, 2006

 

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MINE SAFETY APPLIANCES COMPANY

(Exact name of registrant as specified in its charter)

 

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Pennsylvania		1-15579		25-0668780
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(IRS Employer Identification No.)

 

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

 

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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Item 2.02 Results of Operations and Financial Condition.

On November 2, 2006 the Company issued a press release announcing its financial results for the quarter ended September 30, 2006. A copy of the press release is furnished herewith as Exhibit 99.1 to this report.

Item 9.01. Exhibits

 

Exhibit Number		Description
99.1		Mine Safety Appliances Company Press Release dated November 2, 2006, announcing financial results for the quarter ended September 30, 2006.

 

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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.

 

Date: November 2, 2006

 

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Mine Safety Appliances Company Press Release dated November 2, 2006, announcing financial results for the quarter ended September 30,2006.

 

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Exhibit 99.1

 

FROM:		MSA (Mine Safety Appliances Company)
		Ticker: MSA (NYSE)
		Contact: Mark Deasy – (412) 967-3357

FOR IMMEDIATE RELEASE

MSA Third Quarter Results Lower Due to Delays in Federal Firefighter Grants

Focus on Commercial Business and International Growth Help Minimize Impact

PITTSBURGH, November 2, 2006 – MSA (NYSE: MSA) today announced that net sales for the third quarter of 2006 were $209.8 million compared with $217.9 million for the third quarter of 2005, a decrease of $8.1 million, or 4 percent. Net income for the third quarter of 2006 was $12.6 million, or 35 cents per basic share, down $4.5 million, or 26 percent, compared with $17.1 million, or 47 cents per basic share, for the same quarter last year.

Net sales for the nine months ended September 30, 2006 were $656.8 million, compared with $666.1 million in 2005, a decrease of $9.3 million, or 1 percent. Net income for the nine months ended September 30, 2006 was down $13.2 million, or 23 percent, at $44.4 million, or $1.22 per basic share, compared with $57.6 million, or $1.58 per basic share, for the same period last year.

Current quarter sales continue to reflect growth in MSA’s International and European markets, as well as in North American commercial markets. These sales gains, however, were more than offset by an $18.4 million decrease in sales of Advanced Combat Helmets and related communications systems to the military.

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Sales in the European segment improved by $5.0 million in the current quarter on strong shipments of breathing apparatus in Western European markets. Currency exchange differences associated with a stronger euro accounted for approximately $2.0 million of the increase in European segment sales when stated in U.S. dollars.

Sales in the company’s International segment improved $3.4 million for the current quarter, driven primarily by strong performance in Latin America and South Africa, where sales were up $5.8 million, reflecting the January 2006 acquisition of Select PPE. These gains were partially offset by lower sales in the Middle East where third quarter 2005 sales benefited from large shipments on a one-time order for breathing apparatus. Currency exchange differences did not have a significant effect on International segment sales when stated in U.S. dollars.

Third quarter sales in North America were down $16.5 million. Shipments of Advanced Combat Helmets and related communication systems to the military were $18.4 million lower in the current quarter reflecting the completion of certain government contracts. Gas mask sales, primarily to Homeland Security markets, were $7.0 million lower than in the same quarter last year. Lower sales in these markets were partially offset by improved shipments of instruments, up $3.5 million, and head protection, up $1.7 million, to industrial and construction markets. Sales of SCBA, thermal imaging cameras and other products to the U.S. fire service market continue to be depressed by ongoing delays in the release of fire department funding made available through the U.S. Assistance to Firefighters Grant (AFG) program.

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Third quarter net income in the European and International segments improved $0.6 million and $1.1 million, respectively, reflecting the sales improvements, partially offset by higher selling expenses. Net income in the North American segment was down $5.9 million, on lower sales and higher research and development expenses.

The $13.2 million decrease in net income for the nine months ended September 30, 2006 includes restructuring and other charges of $4.2 million after-tax, primarily associated with the Project Outlook restructuring plan in North America, $1.9 million in higher taxes, and $1.4 million after-tax in incremental stock-based compensation expense. Project Outlook costs were primarily related to workforce reductions that were largely achieved through a voluntary retirement incentive program that was completed during the first quarter. The higher effective tax rate in 2006 compared to 2005 is mainly the result of certain one-time tax benefits recorded in 2005. Incremental stock-based compensation expense relates to the newly-required accounting for stock options.

“As we entered 2006 we knew we faced a challenge in overcoming a substantial reduction, on the order of $60 million, in our sales of military products to the U.S. Government,” said John T. Ryan III, MSA Chairman and CEO. “Our objective has been to offset the reduction in military business with growth in our commercial business and cost reduction, particularly through our recently-completed Project Outlook reorganization in North America. Our global military business in 2006 is proceeding overall as we had anticipated. For the year, our global commercial sales have increased 8 percent. With

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one very major exception — the U.S. Fire Service — I would say our 2006 performance has generally met our expectations. Growth has been encouraging in head protection and instruments in North America, overall in Europe, and in many parts of MSA International.”

“One difficulty in 2006 has been the substantial delay in the release of Federal Government funding for the U.S. Fire Service. The AFG program has provided thousands of U.S. fire departments with significant support to upgrade fire fighting equipment. This program has been in place for a number of years and grants under it were generally awarded beginning in June. Last year the grants began in August and releases were made on an accelerated basis. In 2006, the first release of funds was made on October 6, and the second only recently. It is now expected that the annual grants, which were in total somewhat below that of the previous year, will be fully released by Spring 2007; but, on a more even and less front-loaded basis than had been the case in recent years.”

“The impact of this delay is accentuated by the fact that U.S municipalities that are prepared to use their own funds to buy fire service equipment tend to wait to see if they will receive AFG grants before committing their own funds. As a result of these delays, purchases by the U.S. fire service have been low in recent months, impacting MSA and the entire U.S. fire equipment industry,” Mr. Ryan said.

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“From a broader perspective, I am pleased by our efforts to grow commercial sales in areas outside the U.S. fire service, in getting what business has been available in self-contained breathing apparatus and related products in the U.S., and in our productivity and cost discipline measures. However, the AFG funding cycle will likely have the effect of moving some U.S. fire service business from calendar year 2006 to 2007 and, in the process, make it difficult for us to reach our overall goals for this year,” concluded Mr. Ryan.

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About MSA:

Established in 1914, MSA is a global leader in the development, manufacture and supply of sophisticated safety products that protect people’s health and safety. Sophisticated safety products typically integrate any combination of electronics, mechanical systems and advanced materials to protect users against hazardous or life-threatening situations. The company’s comprehensive line of products is used by workers around the world in the fire service, homeland security, construction and other industries, as well as the military. Principal products include self-contained breathing apparatus, gas masks, gas detection instruments, head protection, respirators, ballistic protection products and thermal imaging cameras. The company also provides a broad range of consumer and contractor safety products through retail channels. These products are marketed and sold under the MSA Safety Works brand. MSA has more than 30 international locations. Additional information is available on the company’s Web site at www.msanet.com.

Cautionary Statement Regarding Forward-Looking Statements:

Except for historical information, certain matters discussed in this press release may be forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, including without limitation all projections and anticipated levels of future performance, involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Actual results can be affected by any number of factors, many of which are outside of management’s control. Among the factors that could cause such differences are spending patterns of government agencies, competitive pressures, product liability claims, the success of new product introductions, currency exchange rate fluctuations, the identification and successful integration of acquisitions and the risks of doing business in foreign countries. These risks, uncertainties and other factors are detailed from time to time in our filings with the United States Securities and Exchange Commission (“SEC”). You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties. MSA’s SEC filings are readily obtainable at no charge at www.sec.gov, as well as on a number of other commercial web sites.

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Mine Safety Appliances Company

Consolidated Condensed Statement of Income (Unaudited)

(In thousands, except earnings per share)

 

		Three Months Ended September 30							Nine Months Ended September 30
		2006			2005				2006			2005
Net sales		$	209,802		$	217,879			$	656,775		$	666,051
Other income			1,669			742				3,409			3,091
			211,471			218,621				660,184			669,142
Cost of products sold			131,652			138,270				398,762			408,868
Selling, general and administrative			52,378			48,442				159,791			151,864
Research and development			6,603			5,196				19,125			16,856
Restructuring and other charges			306			—				6,762			—
Interest			1,481			1,333				3,880			3,942
Currency exchange losses (gains)			532			(643	)			2,525			696
			192,952			192,598				590,845			582,226
Income before income taxes			18,519			26,023				69,339			86,916
Provision for income taxes			5,918			8,971				24,919			29,310
Net income			12,601			17,052				44,420			57,606
Basic earnings per share		$	.35		$	.47			$	1.22		$	1.58
Diluted earnings per share		$	.34		$	.46			$	1.20		$	1.54
Dividends per common share		$	.18		$	.14			$	.50		$	.38
Average number of common shares outstanding (basic)			36,288			36,618				36,443			36,540

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Mine Safety Appliances Company

Consolidated Condensed Balance Sheet (Unaudited)

(In thousands)

 

		September 30, 2006			December 31, 2005
Current assets
Cash and cash equivalents		$	39,672		$	44,797
Trade receivables, net			170,084			169,436
Inventories			154,299			119,731
Other current assets			59,204			43,262
Total current assets			423,259			377,226
Property, net			119,109			116,209
Prepaid pension cost			143,246			140,575
Goodwill			86,794			55,654
Other non-current assets			44,678			35,693
Total			817,086			725,357
Current liabilities
Notes payable and current portion of long-term debt		$	63,455		$	8,808
Accounts payable			52,119			40,935
Other current liabilities			75,910			81,116
Total current liabilities			191,484			130,859
Long-term debt			53,839			45,834
Pension and other employee benefits			87,754			80,656
Deferred tax liabilities			75,880			75,511
Other non-current liabilities			9,792			10,100
Shareholders’ equity			398,337			382,397
Total			817,086			725,357

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Mine Safety Appliances Company

Segment Information (Unaudited)

(In thousands)

 

		Three Months Ended September 30						Nine Months Ended September 30
		2006			2005			2006				2005
Net sales
North America		$	113,180		$	129,720		$	371,102			$	411,090
Europe			48,085			43,038			146,152				132,285
International			48,537			45,121			139,521				122,676
Total			209,802			217,879			656,775				666,051
Net income
North America		$	6,908		$	12,823		$	30,020			$	43,648
Europe			1,037			423			4,806				4,735
International			4,525			3,464			10,617				9,911
Reconciling			131			342			(1,023	)			(688	)
Total			12,601			17,052			44,420				57,606

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