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, 1995 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, 1995, there were outstanding 5,783,126 shares of common stock without par value.
<TABLE> PART I FINANCIAL INFORMATION MINE SAFETY APPLIANCES COMPANY CONSOLIDATED CONDENSED BALANCE SHEET (Thousands of dollars, except shares data) <CAPTION> September30 December 31 1995 1994 <S> <C> <C> ASSETS Current assets Cash $ 6,486 $ 10,108 Temporary investments, at cost plus accrued interest 47,686 44,312 Accounts receivable, less allowance (1995 - $2,560; 1994 - $2,102) 86,162 88,698 Inventories: Finished products 36,862 33,576 Work in process 17,947 14,013 Raw materials and supplies 31,093 29,377 --------- --------- Total inventories 85,902 76,966 --------- --------- Other current assets 21,950 17,232 --------- --------- Total current assets 248,186 237,316 --------- --------- Property, plant and equipment 335,567 322,109 Accumulated depreciation (185,200) (170,153) --------- --------- Net property 150,367 151,956 --------- --------- Other assets 28,739 27,779 --------- --------- TOTALS $ 427,292 $ 417,051 ========= ========= </TABLE>
<TABLE> <S> LIABILITIES AND SHAREHOLDERS' EQUITY <S> <C> <C> Current liabilities Notes and accounts payable $ 27,849 $ 35,607 Federal, foreign, state and local income taxes (170) (1,090) Other current liabilities 41,335 36,305 --------- --------- Total current liabilities 69,014 70,822 --------- --------- Long-term debt 15,362 16,564 Noncurrent liabilities (principally employee/retiree benefits) and deferred credits 65,667 63,690 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 6,718,543 and 6,713,503 (outstanding 5,783,126 and 5,815,672) 8,264 8,048 Cumulative translation adjustments 1,712 (699) Retained earnings 307,533 296,993 Less treasury shares, at cost: Preferred - 47,935 and 47,775 shares (1,553) (1,548) Common - 935,417 and 897,831 shares (42,276) (40,388) --------- --------- Total shareholders' equity 277,249 265,975 --------- --------- TOTALS $ 427,292 $ 417,051 ========= ========= </TABLE>
<TABLE> MINE SAFETY APPLIANCES COMPANY CONSOLIDATED CONDENSED STATEMENT OF INCOME (Thousands of dollars, except earnings per share and shares outstanding) <CAPTION> Three Months Ended Nine Months Ended September 30 September 30 1995 1994 1995 1994 <S> <C> <C> <C> <C> Net sales $ 119,995 $ 114,889 $ 363,364 $ 339,544 Other income 1,057 997 4,141 4,239 ---------- ---------- ---------- ---------- 121,052 115,886 367,505 343,783 ---------- ---------- ---------- ---------- Costs and expenses Cost of products sold 74,885 72,140 223,385 214,212 Selling, general and administrative 35,035 30,421 101,459 91,875 Depreciation 4,843 4,382 15,017 14,213 Interest 294 274 1,298 1,668 Currency exchange (gains)/losses (304) 918 832 3,271 ---------- ---------- ---------- ---------- 114,753 108,135 341,991 325,239 ---------- ---------- ---------- ---------- Income from operations before income taxes 6,299 7,751 25,514 18,544 Income taxes 2,463 3,158 10,349 7,923 ---------- ---------- ---------- ---------- Net income $ 3,836 $ 4,593 $ 15,165 $ 10,621 ========== ========== ========== ========== Earnings per common share (1) $ 0.67 $ 0.78 $ 2.61 $ 1.78 ========== ========== ========== ========== Weighted average number of common shares outstanding 5,803,554 5,944,120 5,803,554 5,944,120 ========== ========== ========== ========== Dividends paid on preferred stock $ 13 $ 13 $ 40 $ 40 ========== ========== ========== ========== <FN> (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. </TABLE>
<TABLE> MINE SAFETY APPLIANCES COMPANY CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Thousands of dollars) <CAPTION> Nine Months Ended September 30 1995 1994 <S> <C> <C> OPERATING ACTIVITIES Income from operations $ 15,165 $ 10,621 Depreciation 15,017 14,213 Deferred taxes,pensions, and other non-cash charges/(credits) (2,641) (1,235) Changes in operating assets and liabilities (6,071) (1,052) Other - principally currency exchange adjustments 3,245 4,813 --------- --------- Cash flow from operating activities 24,715 27,360 --------- --------- INVESTING ACTIVITIES Property additions (12,772) (13,154) Property disposals 908 1,036 Acquisitions and other investing (2,839) 5,545 --------- --------- Cash flow from investing activities (14,703) (6,573) --------- --------- FINANCING ACTIVITIES Additions to long-term debt 134 2,319 Reductions of long-term debt (1,661) (11,546) Cash dividends (4,625) (4,144) Stock options and purchases of company's stock (1,677) (5,394) Changes in notes payable and short term debt (3,209) 1,467 --------- --------- Cash flow from financing activities (11,038) (17,298) --------- --------- Effect of exchange rate changes on cash 778 1,408 --------- --------- Increase/(decrease) in cash and cash equivalents (248) 4,897 Beginning cash and cash equivalents 54,420 46,434 --------- --------- Ending cash and cash equivalents $ 54,172 $ 51,331 ========= =========
<FN> Note 1 - Basis of Presentation The accompanying unaudited consolidated condensed financial statements include all adjustments,consisiting 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, 1995 and 1994. 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. </TABLE>
MINE SAFETY APPLIANCES COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS Sales have grown in most markets, although at a lesser pace in recent months. Commercial sales from U.S. operations have increased this year compared to 1994, but less so in the third quarter. Shipments of gas masks to the U.S. military have continued below prior-year levels as expected. Instruments (particularly permanently installed equipment), chemical specialty products and exports of most products have shown robust growth. International sales also have continued to grow worldwide. U.S. commercial safety products sales have shown mixed results. Business to nuclear power plants has been seriously affected by the reduced usage of respirators following interpretations of studies concerning worker productivity. This has particularly impacted the registrant due to a very high historic market share in this industry. A more recent scientific study has cast new light on worker productivity and respirator use, which may eventually reverse the sales trend. Sales to government and civilian environmental remediation projects have been affected by delays in government funding of such activities, although the need continues to be significant. Sales of self-contained breathing apparatus, particularly to the fire service, and of protective helmets have been strong. The decline in net income in the third quarter compared to the same period of the prior year is due to two factors. The third quarter of 1994 included the LIFO accounting effect of U.S. manufacturing inventory reductions which increased net income by $1,200,000 or 20 cents per share. The third quarter of 1995 includes charges to net income of $575,000 or 10 cents per share, stemming from the restructuring of a South African affiliate, Boart-MSA. The registrant has a minority position in the ownership and management control of this venture. Boart-MSA had a joint venture, Natfire, which was unsuccessful and was reorganized in 1995. The third-quarter charges relate to prior-period losses and the reorganization of Natfire. The profitability of U.S. operations has improved due to somewhat higher sales and increased productivity. Brazilian operations have also made a significant contribution to the corporate earnings improvement as a result of local economic reforms. Other areas of strength were Chile, France, China, Southeast Asia and the Middle East. Improvements were also noted in Italy, Spain and Sweden. Efforts continue in the important task of increasing profitability in Europe. Earnings per share have also benefitted from an ongoing share repurchase program. The decrease in quarterly earnings was disappointing as the abovementioned unusual items could not be overcome by general improvement. The current environment presents a varied mixture of opportunities and challenges. In product innovation, availability of delivery and cost competitiveness, the registrant has made considerable progress. General improvements in the world economy that may come after a recent sluggish period in the U.S. could be of help to the registrant. The registrant has seen a number of areas of vigorous growth this year, which probably represent an increase in market share. Operating costs in most areas have been well managed. One challenge is that a significant part of this growth has come in product and market areas that have been historically volatile. These areas might not be such overachievers in future months. A more significant challenge is dealing with negative movements in nuclear power and environmental remediation markets, which can only be overcome by generating increased business elsewhere and improving productivity. The national needs for environmental work and a settling of the Federal budget conflict, hopefully, should generate recovery in funding for customers in the military and civilian remediation markets. Turning around the nuclear power plant sales situation will be a longer-term project. Comparative foreign currency exchange losses charged to income are as follows: <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30 September 30 1995 1994 1995 1994 (Thousands of dollars)(Thousands of dollars) <S> <C> <C> <C> <C> Transaction (gains)/losses (321) 180 164 728 Translation (gains)/losses 17 738 668 2,543 --------- --------- --------- --------- (304) 918 832 3,271 ========= ========= ========= ========= </TABLE> Brazilian governmental economic reforms in 1994 have had significant impact on the comparative third quarter and year to date currency exchange gains and losses. Currency exchange adjustments charged directly to the equity cumulative translation adjustments account are shown below. Significant third quarter 1995 losses relate to Germany and Japan; year to date translation gains relate to Germany and Netherlands. Significant third quarter 1994 gains relate to Germany and Britain; year to date translation gains relate to Germany and Australia. <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30 September 30 1995 1994 1995 1994 (Thousands of dollars)(Thousands of dollars) <S> <C> <C> <C> <C> Translation (gains)/losses 2,039 (2,093) (2,411) (4,428) </TABLE> 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, 1995 were 3.6 and 6.0%, respectively, as compared to 3.4 and 7.5% at December 31, 1994.
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 (3) (ii) By-laws of the registrant, as amended to August 29,1990. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1995. 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 13, 1995 By S/James E. Herald James E. Herald Vice President - Finance; Principal Financial and Accounting Officer