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, 1998 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, 1998, there were outstanding 5,037,375 shares of common stock
without par value, including 598,480 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)
March 31 December 31
1998 1997
ASSETS
Current assets
Cash $ 5,514 $ 5,264
Temporary investments, at cost plus accrued interest 17,870 14,657
Accounts receivable, less allowance (1998 - $3,778;
1997 - $3,704) 91,212 91,388
Inventories:
Finished products 36,264 36,626
Work in process 13,319 13,772
Raw materials and supplies 28,591 30,668
--------- ---------
Total inventories 78,174 81,066
--------- ---------
Other current assets 27,998 27,238
--------- ---------
Total current assets 220,768 219,613
--------- ---------
Property, plant and equipment 358,571 354,649
Accumulated depreciation (201,755) (199,465)
--------- ---------
Net property 156,816 155,184
--------- ---------
Other assets 30,762 31,607
--------- ---------
TOTALS $ 408,346 $ 406,404
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and accounts payable $ 61,791 $ 55,990
Federal, foreign, state and local income taxes 5,067 4,089
Other current liabilities 42,792 43,161
--------- ---------
Total current liabilities 109,650 103,240
--------- ---------
Long-term debt 11,981 12,270
Noncurrent liabilities (principally employee/retiree
benefits) and deferred credits 44,569 49,445
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 6,779,231 and 6,779,231 (outstanding
4,447,812 and 4,455,915) 12,296 12,297
Cumulative translation adjustments (8,618) (5,744)
Minimum Pension Liability Adjustment (538) (538)
Retained earnings 347,629 343,534
Common Stock Compensation Trust (599,170 and 600,000
shares) (28,161) (28,200)
Less treasury shares, at cost:
Preferred - 49,313 and 49,313 shares (1,595) (1,595)
Common - 1,732,249 and 1,723,316 shares (82,436) (81,874)
--------- ---------
Total shareholders' equity 242,146 241,449
--------- ---------
TOTALS $ 408,346 $ 406,404
========= =========
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Thousands of dollars, except earnings per share and shares outstanding)
Three Months Ended
March 31
1998 1997
Net sales $ 122,145 $ 113,473
Other income 381 1,026
---------- ----------
122,526 114,499
---------- ----------
Costs and expenses
Cost of products sold 77,227 70,399
Selling, general and administrative 30,379 32,108
Depreciation 4,981 5,389
Interest 646 411
Currency exchange losses 147 71
---------- ----------
113,380 108,378
---------- ----------
Income from operations before income taxes 9,146 6,121
Income taxes 3,658 2,517
---------- ----------
Net income $ 5,488 $ 3,604
========== ==========
Basic earnings per common share $ 1.23 $ 0.78
========== ==========
Diluted earnings per common share $ 1.23 $ 0.78
========== ==========
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
Three Months Ended
March 31
1998 1997
OPERATING ACTIVITIES
Income from operations $ 5,488 $ 3,604
Depreciation 4,981 5,389
Deferred taxes,pensions, and other non-cash
charges/(credits) (5,967) (1,509)
Changes in operating assets and liabilities 579 8,140
Other - principally currency exchange adjustments (358) (4,123)
--------- ---------
Cash flow from operating activities 4,723 11,501
--------- ---------
INVESTING ACTIVITIES
Property additions (7,256) (7,857)
Property disposals 31 135
Other investing (589) (232)
--------- ---------
Cash flow from investing activities (7,814) (7,954)
--------- ---------
FINANCING ACTIVITIES
Additions to long-term debt 7 23
Reductions of long-term debt (344) (453)
Changes in notes payable and short term debt 11,117 12,896
Cash dividends (1,393) (1,623)
Company stock purchases and sales (524) (1,347)
--------- ---------
Cash flow from financing activities 8,863 9,496
--------- ---------
Effect of exchange rate changes on cash (2,309) (1,996)
--------- ---------
Increase in cash and cash equivalents 3,463 11,047
Beginning cash and cash equivalents 19,921 25,096
--------- ---------
Ending cash and cash equivalents $ 23,384 $ 36,143
========= =========
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,
1998 and 1997. 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
Basic earnings per share is computed on the weighted average number of
shares outstanding during the period. Diluted earnings per share includes the
effect of the weighted average stock options outstanding during the
period,using the treasury stock method. Antidilutive options are not considered
in computing earnings per share.
1998 1997
Net income $ 5,488 $ 3,604
Preferred stock dividends declared 12 0
------- -------
Income available to common shareholders 5,476 3,604
------- -------
Basic shares outstanding 4,452 4,598
Stock options 10 8
------- -------
Diluted shares outstanding 4,462 4,606
------- -------
Antidilutive stock options 2 2
------- -------
Note 3 - Comprehensive Income
Comprehensive income/(loss) was $2,614,000 and $(1,660,000) for the three
months ended March 31, 1998 and 1997, respectively. Comprehensive income
includes net income and changes in accumulated other comprehensive income,
primarily cumulative translation adjustments, for the period.
MINE SAFETY APPLIANCES COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Consolidated sales for the first quarter of 1998 were $122,145,000 compared
with $113,473,000 for the first quarter of 1997. Net income in the first
quarter of 1998 was $5,488,000, or $1.23 per share, compared with $3,604,000,
or 78 cents per share, for the same period last year.
Sales improvements occurred in U.S. operations, reflecting stronger sales in
domestic and export safety equipment markets and continued growth in the
specialty chemicals business. First quarter invoicing from U.S. operations
improved at double-digit percentage rates compared to the previous year.
Incoming orders in 1998 were also strong at dollar levels comparable to
invoicing. The 1998 improvement in invoicing was particularly meaningful
because the 1997 first quarter invoicing level lagged that of incoming orders.
As 1997 progressed, the two measures converged.
Invoicing by European operations declined in local currency and sales as
reported in U.S. dollars were reduced further by adverse exchange rate
effects. European incoming order levels, however, did show some encouraging
improvements on a local currency basis. Overall sales in other international
operations were similar to prior year levels.
Higher earnings for the quarter were largely due to sales improvements in U.S.
operations combined with cost discipline. Gross margins were somewhat lower,
particularly in specialty chemicals, due in part to changes in the product mix.
Earnings from European operations, particularly in Germany, remained weak and
disappointing. Several significant internal task forces are currently working
on initiatives to improve MSA's European performance. The balance of MSA's
international operations were adversely impacted on a direct and indirect basis
by the economic difficulties of East Asia.
The 1998 results include a $4 million pre-tax pension settlement gain. This
gain resulted from settling remaining pension liabilities to participants from
the Esmond, Rhode Island Plant, which was closed in 1997. Restructuring
charges in anticipation of this closing were taken by the company in the fourth
quarter of 1996. Costs of relocating production to other plants were recorded
in 1997 and were largely offset by related pension gains. Additionally, a
before-tax charge of $1.6 million was recorded in the current quarter to
complete the recall of self-contained self-rescuers by Auergesellschaft, MSA's
German operation. Pre-tax earnings before recognition of the pension settlement
gain and recall provision were higher than the prior year by over 10%.
The improvement of 1998 results over the first quarter of 1997 gives some
satisfaction, particularly the gains in operating income prior to the special
items. In many ways MSA is seeing the results of initiatives that the company
has taken over the last several years. Incoming order levels in the U.S. and
Europe were encouraging, although this has not gone on long enough to
constitute a true trend. Improved sales and earnings by U.S. operations have
more than offset weakness in international operations. The impact, direct and
indirect, of the Asian economic difficulties will continue to challenge MSA as
the year goes on, and last year's first quarter results were an easier target
for comparison than subsequent quarters. MSA is actively engaged in measures to
continue to improve overall performance. These efforts, particularly the
initiatives in Europe and at Auergesellschaft, are of prime importance in
reaching the company's goals. Fulfillment of these projects may entail expenses
which will be recognized when their extent can be established.
While effort and uncertainty lie ahead, MSA continues to pursue its goals and
its plan for the year, which includes improved sales and earnings from ongoing
operations in 1998.
Currency exchange adjustments charged directly to the equity cumulative
translation adjustments account are shown below. Significant first quarter 1998
translation losses relate primarily to Germany. Significant first quarter 1997
translation losses relate primarily to Germany and Italy.
Three Months Ended
March 31
1998 1997
(Thousands of dollars)
Translation gains/(losses)
(2,874) (5,264)
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 March 31, 1998 were 2.0 and 5.2%, respectively, as compared to
2.1 and 5.4% at December 31, 1997.
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
(10)(a)1998 Management Share Incentive Plan, incorporated herein by
reference to Annex A to registrant's Definitive Proxy Statement filed
March 25, 1998 for its 1998 Annual Meeting.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1998.
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 11, 1998 By S/James E. Herald
James E. Herald
Vice President - Finance;
Principal Financial and
Accounting Officer
5
3-MOS
DEC-31-1998
MAR-31-1998
5,514
17,870
94,990
(3,778)
78,174
27,998
358,571
(201,755)
408,346
109,650
11,981
0
3,569
12,296
226,281
408,346
122,145
122,526
77,227
82,208
147
0
646
9,146
3,658
5,488
0
0
0
5,488
1.23
1.23
