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, 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 July 31, 1996, there were outstanding 4,835,870 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)
June 30 December 31
1996 1995
ASSETS
Current assets
Cash $ 8,957 $ 4,807
Temporary investments, at cost plus accrued interest 26,049 27,143
Accounts receivable, less allowance (1996 - $2,907;
1995 - $2,640) 82,783 90,955
Inventories:
Finished products 30,963 34,970
Work in process 15,519 16,135
Raw materials and supplies 27,848 32,516
-------- ---------
Total inventories 74,330 83,621
--------- ---------
Other current assets 23,493 22,099
--------- ---------
Total current assets 215,612 228,625
--------- ---------
Property, plant and equipment 338,016 339,263
Accumulated depreciation (190,020) (188,157)
--------- ---------
Net property 147,996 151,106
--------- ---------
Other assets 26,020 26,869
--------- ---------
TOTALS $ 389,628 $ 406,600
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and accounts payable $ 24,935 $ 30,126
Federal, foreign, state and local income taxes 2,183 466
Other current liabilities 44,413 41,392
--------- ---------
Total current liabilities 71,531 71,984
--------- ---------
Long-term debt 13,936 14,746
Noncurrent liabilities (principally employee/retiree
benefits) and deferred credits 63,979 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 6,740,223 and 6,719,403 (outstanding
4,857,612 and 5,182,757) 10,422 8,300
Stock compensation trust (600,000 shares) (28,200)
Cumulative translation adjustments 999 2,177
Retained earnings 312,627 309,712
Less treasury shares, at cost:
Preferred - 48,135 and 47,935 shares (1,559) (1,553)
Common - 1,282,611 and 1,536,646 shares (57,676) (68,665)
--------- ---------
Total shareholders' equity 240,182 253,540
--------- ---------
TOTALS $ 389,628 $ 406,600
========= =========
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
1996 1995 1996 1995
Net sales $ 123,879 $ 125,207 $ 239,250 $ 243,369
Other income 1,162 1,512 2,503 3,084
---------- ---------- ---------- ----------
125,041 126,719 241,753 246,453
---------- ---------- ---------- ----------
Costs and expenses
Cost of products sold 79,388 76,684 153,434 148,500
Selling, general and administrative 33,349 34,650 64,814 66,424
Depreciation 5,600 5,188 11,179 10,174
Interest 323 579 669 1,004
Currency exchange (gains)/losses 122 314 268 1,136
---------- ---------- ---------- ----------
118,782 117,415 230,364 227,238
---------- ---------- ---------- ----------
Income from operations
before income taxes 6,259 9,304 11,389 19,215
Income taxes 2,503 3,693 4,494 7,886
---------- ---------- ---------- ----------
Net income $ 3,756 $ 5,611 $ 6,895 $ 11,329
========== ========== ========== ==========
Earnings per common share $ 0.76 $ 0.96 $ 1.37 $ 1.94
========== ========== ========== ==========
Weighted average number of common
shares outstanding 4,994,805 5,814,042 4,994,805 5,814,042
========== ========== ========== ==========
Dividends paid on preferred stock $ 13 $ 14 $ 26 $ 27
========== ========== ========== ==========
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
Six Months Ended
June 30
1996 1995
OPERATING ACTIVITIES
Income from operations $ 6,895 $ 11,329
Depreciation 11,179 10,174
Deferred taxes,pensions, and other non-cash
charges/(credits) (1,878) (1,173)
Changes in operating assets and liabilities 15,535 (8,797)
Other - principally currency exchange adjustments (666) 3,321
--------- ---------
Cash flow from operating activities 31,065 14,854
--------- ---------
INVESTING ACTIVITIES
Property additions (7,177) (9,455)
Property disposals 1,094 403
Acquisitions and other investing (1,953) (3,895)
--------- ---------
Cash flow from investing activities (8,036) (12,947)
--------- ---------
FINANCING ACTIVITIES
Additions to long-term debt 88 851
Reductions of long-term debt (748) (702)
Changes in notes payable and short term debt (857) (2,198)
Cash dividends (2,754) (3,052)
Company stock sold and purchased (15,095) (176)
--------- ---------
Cash flow from financing activities (19,366) (5,277)
--------- ---------
Effect of exchange rate changes on cash (607) 2,044
--------- ---------
Increase/(decrease) in cash and cash equivalents 3,056 (1,326)
Beginning cash and cash equivalents 31,950 54,420
--------- ---------
Ending cash and cash equivalents $ 35,006 $ 53,094
========= =========
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, 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
Sales were below prior year levels primarily because of reduced U.S.
government military and environmental spending. While the company is the
largest supplier of gas masks to the U.S. military, shipments of these products
are at the lowest level in 15 years. This reflects spending cutbacks and
delays in placing new contracts stemming from the federal budget impasse.
Sales and rentals of products for environmental remediation also continued
below prior year levels with a continuing lack of federal "superfund"
authorization. Worldwide commercial sales of safety and instrument products
have generally kept pace with prior year levels, while sales of specialty
chemicals have continued to grow.
Lower sales have contributed to the decline in net income. In addition,
the gross margins on U.S. military contracts have been reduced significantly by
increasingly competitive bidding pressures in a shrinking market.
Manufacturing operations in the U.S. for commercial products have also had an
adverse cost impact.
This time last year the company and its commercial distributors were
building inventories with an optimistic market outlook. In the first half of
this year, however, inventories are being reduced, reflecting a more cautious
economic outlook and a general desire to operate with lower stocks.
Additionally, the company continues to move more toward "assemble-to-order"
production. In particular, U.S. safety products production levels have run
well below last year.
The company also has become more conservative in reflecting in the first
and second quarters anticipated costs related to factory vacation shutdowns
later in the year. Somewhat offsetting these items are higher profits from
increased chemical sales and lower selling and administrative costs. During
the second quarter, the company completed the sale of its corporate aircraft
and hangar, and its thermal battery business in Britain, while implementing
selective employment reductions. The net effect of these actions was not
material to the results of the quarter but will result in lower costs in the
future.
Profits from international operations were also somewhat below prior year
levels. Profitability of the company's European operations has remained low in
a stagnant economic environment. Financial results in the company's Latin
American operations are below last year, which benefitted from an
extraordinarily robust economic period in Brazil. In addition, a newly formed
affiliate in Argentina is incurring meaningful start-up costs.
The decline in financial results during the first half of 1996 compared to
1995 was in line with expectations due to factors previously described.
Incoming orders in the company's commercial businesses showed some meaningful
improvement in the first half of 1996 over 1995 in the U.S. and international
markets. Furthermore, incoming orders were above invoicing in the first half
and exceeded the company's seasonal forecasts.
Orders already on the books for second-half shipment gives the company the
potential of generating higher profits for the full year despite the earnings
lag in the first half. If this is accomplished, earnings per share would
improve significantly. As always, company results depend on the economic
environment, customer buying patterns and the level of incoming orders in the
months to come.
Comparative foreign currency exchange losses charged to income are as
follows:
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
(Thousands of dollars)(Thousands of dollars)
Transaction (gains)/losses (54) 148 (78) 485
Translation (gains)/losses 176 166 346 651
--------- --------- --------- ---------
122 314 268 1,136
========= ========= ========= =========
1996 transaction gains relate primarily to Australia .
Currency exchange adjustments charged directly to the equity cumulative
translation adjustments account are shown below. Significant second quarter and
year to date 1996 losses relate primarily to Germany. Significant second
quarter and year to date 1995 gains relate to Germany and Japan.
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
(Thousands of dollars)(Thousands of dollars)
Translation (gains)/losses 695 (1,907) 1,178 (4,450)
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, 1996 were 3.0 and 6.5%, respectively,
as compared to 3.2 and 6.4% at December 31, 1995.
During second quarter 1996, the Mine Safety Appliances Company Stock
Compensation Trust purchased 600,000 shares of the company's common treasury
shares. Such shares will be used to fund employee stock options and awards.
Until such time as these shares are committed by the Trust, they are not
considered outstanding shares as reported herein nor in calculating earnings per
common share.
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, 1996 - Annual Meeting
(b) Directors elected at Annual Meeting:
Joseph L. Calihan
Leo N. Short, Jr.
Directors whose term of office continued after the meeting:
Calvin A. Campbell, Jr.
G. Donald Gerlach
Helen Lee Henderson
John T. Ryan III
(c) Election of two Directors for a term of three years
Joseph L. Calihan For 4,634,652
Withhold 31,390
Broker Nonvotes -0-
Leo N. Short, Jr. For 4,640,366
Withhold 25,676
Broker Nonvotes -0-
Selection of Price Waterhouse as Auditors for the year ending
December 31, 1996
For 4,289,118
Against 5,310
Abstain 371,614
Broker Nonvotes -0-
(d) 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
June 30, 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: AUGUST 12, 1996 By S/James E. Herald
James E. Herald
Vice President - Finance;
Principal Financial and
Accounting Officer
5
6-MOS
DEC-31-1996
JUN-30-1996
8,957
26,049
85,690
(2,907)
74,330
23,493
338,016
(190,020)
389,628
71,531
13,936
0
3,569
10,422
226,191
389,628
239,250
241,753
153,434
164,613
268
0
669
11,389
4,494
6,895
0
0
0
6,895
1.37
1.37
