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 March 31, 1996 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 April 30, 1996, there were outstanding 4,969,594 shares of common stock
without par value.
PART I FINANCIAL INFORMATION
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED BALANCE SHEET
(Thousands of dollars, except shares data)
March 31 December 31
1996 1995
ASSETS
Current assets
Cash $ 3,977 $ 4,807
Temporary investments, at cost plus accrued interest 28,358 27,143
Accounts receivable, less allowance (1996 - $2,799;
1995 - $2,640) 88,553 90,955
Inventories:
Finished products 34,334 34,970
Work in process 16,525 16,135
Raw materials and supplies 28,760 32,516
--------- ---------
Total inventories 79,619 83,621
--------- ---------
Other current assets 21,439 22,099
--------- ---------
Total current assets 221,946 228,625
--------- ---------
Property, plant and equipment 341,302 339,263
Accumulated depreciation (191,169) (188,157)
--------- ---------
Net property 150,133 151,106
--------- ---------
Other assets 25,883 26,869
--------- ---------
TOTALS $ 397,962 $ 406,600
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and accounts payable $ 31,893 $ 30,126
Federal, foreign, state and local income taxes 2,321 466
Other current liabilities 39,220 41,392
--------- ---------
Total current liabilities 73,434 71,984
--------- ---------
Long-term debt 14,197 14,746
Noncurrent liabilities (principally employee/retiree
benefits) and deferred credits 65,345 66,330
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 6,738,883 and 6,719,403 (outstanding
4,973,658 and 5,182,757) 9,178 8,300
Cumulative translation adjustments 1,694 2,177
Retained earnings 311,452 309,712
Less treasury shares, at cost:
Preferred - 47,935 and 47,935 shares (1,553) (1,553)
Common - 1,765,225 and 1,536,646 shares (79,354) (68,665)
--------- ---------
Total shareholders' equity 244,986 253,540
--------- ---------
TOTALS $ 397,962 $ 406,600
========= =========
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Thousands of dollars, except earnings per share and shares outstanding)
Three Months Ended
March 31
1996 1995
Net sales $ 115,371 $ 118,162
Other income 1,341 1,572
---------- ----------
116,712 119,734
---------- ----------
Costs and expenses
Cost of products sold 74,046 71,816
Selling, general and administrative 31,465 31,774
Depreciation 5,579 4,986
Interest 346 425
Currency exchange (gains)/losses 146 822
---------- ----------
111,582 109,823
---------- ----------
Income from operations before income taxes 5,130 9,911
Income taxes 1,991 4,193
---------- ----------
Net income $ 3,139 $ 5,718
========== ==========
Earnings per common share (1) $ 0.61 $ 0.98
========== ==========
Weighted average number of common
shares outstanding 5,093,704 5,814,801
========== ==========
Dividends paid on preferred stock $ 13 $ 13
========== ==========
(1) 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.
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
Three Months Ended
March 31
1996 1995
OPERATING ACTIVITIES
Income from operations $ 3,139 $ 5,718
Depreciation 5,579 4,986
Deferred taxes,pensions, and other non-cash
charges/(credits) (876) (784)
Changes in operating assets and liabilities 6,171 (6,033)
Other - principally currency exchange adjustments (107) 2,046
--------- ---------
Cash flow from operating activities 13,906 5,933
--------- ---------
INVESTING ACTIVITIES
Property additions (2,967) (4,318)
Property disposals 933 384
Acquisitions and other investing (147) (3,025)
--------- ---------
Cash flow from investing activities (2,181) (6,959)
--------- ---------
FINANCING ACTIVITIES
Reductions of long-term debt (491) (462)
Cash dividends (1,399) (1,467)
Stock options and purchases of company's stock (9,811) (84)
Changes in notes payable and short term debt 620 (2,753)
--------- ---------
Cash flow from financing activities (11,081) (4,766)
--------- ---------
Effect of exchange rate changes on cash (259) 1,238
--------- ---------
Increase/(decrease) in cash and cash equivalents 385 (4,554)
Beginning cash and cash equivalents 31,950 54,420
--------- ---------
Ending cash and cash equivalents $ 32,335 $ 49,866
========= =========
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-month periods ended March 31,
1996 and 1995. 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.
MINE SAFETY APPLIANCES COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
The decline in consolidated sales is primarily due to the effect of lower
U.S. government spending on defense and environmental matters. Shipments of
gas masks to the U.S. military were down 45 percent from first quarter 1995
levels, illustrating the severity of spending cutbacks in this area. The
company however, remains the largest supplier of these products. Some of this
decline was due to the government's lack of placing new contracts in 1995,
which could be related in part to the federal budget deadlock. U.S. military
sales were only 7 percent of consolidated sales for the year 1995, the lowest
level in 15 years, and are expected to be about the same in 1996.
Rentals of products for environmental remediation are also below year-ago
levels, resulting mainly from lack of federal "superfund" authorization.
Commercial sales of safety and instrument products in the U.S., Europe and
other international markets were generally even with prior year levels.
Worldwide sales of specialty chemicals continued robust growth.
The decline in net income is due to several factors. In addition to
lower sales to the U.S. military, the gross margins on government-related
contracts, as expected, were also significantly lower due to increasing
competitive bidding pressures in a shrinking market. In addition, U.S. safety
and instrument production levels were below those of a year ago, resulting in
adverse costs.
This time last year the company and its distributors were building
inventories with an optimistic market outlook. During the first quarter of
this year, however, inventories have been reduced with a more cautious outlook,
reflecting economic uncertainties. The company has also become more
conservative in reflecting in the first and second quarters costs which are
anticipated related to factory vacation shutdowns later in the year. Somewhat
offsetting these items are higher profits from higher chemical sales and lower
U.S. selling and administrative costs.
Profits for international operations were also down somewhat, primarily in
Latin America and Europe. During most of 1995, financial results of the
Brazilian operation were at all-time record high levels in an extraordinary
economic boom. However, as the local economy has slowed to more sustainable
levels, financial results have fallen off accordingly. In addition, the
company is incurring start-up costs in a newly formed affiliate in Argentina.
Overall profits of the European businesses have eroded in a generally stagnant
economic environment marked by sporadic labor unrest. Strikes were widespread
in France early in the first quarter and a transport strike in Sweden
restricted quarter-end invoicing there.
Also in the first quarter, the registrant's UK affiliate, MSA (Britain)
Limited, reached an agreement to sell its thermal battery operations to ASB
Aerospatiale Batteries (ASB). Thermal batteries are primarily used in military
missile applications. ASB has been a major producer of thermal batteries. The
sale of this business reflects the registrant's strategic focus on its core
safety and instrument products. (A similar battery operation in the United
States was sold in 1989.) This agreement is subject to normal reviews and
approvals, and the transaction, expected to be completed soon, will not have a
material impact on the registrant's financial results.
While concerned about the first quarter financial results, the
deterioration from 1995 was somewhat expected, given the factors previously
described. U.S. military sales were at their highest levels of the year during
the first quarter of 1995. During the remainder of 1996 shipments are expected
to meet or exceed prior year levels. The timing and form of resolution of the
federal government spending impasse on environmental matters is, of course,
uncertain.
The company does anticipate seasonal increases in environmental
remediation activity during the middle part of the year. International
business also is seasonally weak in the first quarter and stronger in
subsequent quarters. Future results should be further enhanced by significant
new innovative product introductions, and improved factory operating levels.
While the second quarter of 1996 may also lag the strong levels of 1995, the
company is optimistic that earnings will improve in the second half. There are
enough positive prospects that producing increased profits for the full year is
still possible in spite of a disappointing first quarter.
The lower effective tax rate in 1996 is due primarily to foreign tax
credits and the effects of currency translation losses, which are not
deductible for tax purposes.
Comparative foreign currency exchange (gains)/losses charged to income are
as follows:
Three Months Ended
March 31
1996 1995
(Thousands of dollars)
Transaction (gains)/losses (24) 337
Translation (gains)/losses 170 485
---------- ----------
146 822
========== ==========
Currency exchange adjustments charged directly to the equity cumulative
translation adjustments account are shown below. Significant first quarter
1996 translation losses relate primarily to Germany, Japan and Sweden.
Three Months Ended
March 31
1996 1995
(Thousands of dollars)
Translation (gains)/losses
483 (2,543)
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 March 31, 1996 were 3.0 and 6.4%,
respectively, as compared to 3.2 and 6.4% at December 31, 1995.
On April 23,1996,the Board of Directors authorized the company
to purchase up to 500,000 shares of its common stock from time to time
in private transactions and on the NASDAQ market. The timing and amount of
the company's purchases will depend upon price and availability of shares.
The share purchase program reflects the Board's desire to enhance shareholder
value. The company purchased 228,579 shares during first quarter 1996 and
637,092 shares during the year 1995 under previous authorizations. Some of
these shares will be used for employee stock options and awards. In
connection with this the Board has authorized the formation of a Stock
Compensation Trust, which will purchase 600,000 shares from the company.
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
March 31, 1996.
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: May 10, 1996 By S/James E. Herald
James E. Herald
Vice President - Finance;
Principal Financial and
Accounting Officer
5
3-MOS
DEC-31-1996
MAR-31-1996
3,977
28,358
91,352
(2,799)
79,619
21,439
341,302
(191,169)
397,962
73,434
14,197
0
3,569
9,178
232,239
397,962
115,371
116,712
74,046
79,625
146
0
346
5,130
1,991
3,139
0
0
0
3,139
.61
.61
