<PAGE>
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, 2000 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, 2000, there were outstanding 4,839,685 shares of common stock
without par value, including 547,870 shares held by the Mine Safety Appliances
Company Stock Compensation Trust.
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<TABLE>
PART I FINANCIAL INFORMATION
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED BALANCE SHEET
(Thousands of dollars, except share data)
<CAPTION>
March 31 December 3
2000 1999
<S> <C> <C>
ASSETS
Current assets
Cash $ 8,960 $ 8,898
Temporary investments, at cost which approximates market 8,013 8,210
Trade receivables, less allowance for doubtful accounts
$2,173 and $2,322 58,947 58,911
Other Receivables 26,616 22,716
Inventories:
Finished products 38,644 37,551
Work in process 12,226 11,739
Raw materials and supplies 31,166 32,807
------- -------
Total inventories 82,036 82,097
------- -------
Deferred tax assets 14,295 13,348
Prepaid expenses and other current assets 9,435 8,910
------- -------
Total current assets 208,302 203,090
------- -------
Property, plant and equipment 375,812 378,495
Less accumulated depreciation (213,960) (214,986)
------- -------
Net property 161,852 163,509
------- -------
Prepaid pension cost 65,264 61,357
Deferred tax assets 3,985 4,152
Other noncurrent assets 23,380 19,633
------- -------
TOTAL $ 462,783 $ 451,741
======= =======
</TABLE>
<TABLE>
<S>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Notes payable and current portion of long-term debt $ 5,224 $ 4,477
Accounts payable 28,733 29,056
Employees' compensation 12,119 11,048
Insurance 11,005 10,402
Taxes on income 7,966 3,878
Other current liabilities 23,842 21,144
------- -------
Total current liabilities 88,889 80,005
------- -------
Long-term debt 36,506 36,550
Pensions and other employee benefits 53,024 54,111
Deferred tax liabilities 36,281 35,961
Other noncurrent liabilities 2,504 2,657
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 6,778,599 and 6,778,599 (outstanding
4,291,815 and 4,291,671) 12,914 12,596
Stock compensation trust - 547,870 and 567,630 shares (25,750) (26,679)
Less treasury shares, at cost:
Preferred - 49,713 and 49,713 shares (1,608) (1,608)
Common - 1,938,914 and 1,919,298 shares (96,394) (95,154)
Deferred stock compensation (1,644) (504)
Accumulated other comprehensive loss (16,564) (14,831)
Earnings retained in the business 371,056 365,068
------- -------
Total shareholders' equity 245,579 242,457
------- -------
TOTAL $ 462,783 $ 451,741
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
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<TABLE>
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Thousands of dollars, except earnings per share)
<CAPTION>
Three Months Ended
March 31
2000 1999
<S> <C> <C>
Net sales $ 128,218 $ 115,967
Other income 1,088 827
---------- ----------
129,306 116,794
---------- ----------
Costs and expenses
Cost of products sold 77,831 73,933
Selling, general and administrative 32,546 32,633
Depreciation and amortization 6,002 5,553
Interest 784 743
Currency exchange gains (188) (277)
---------- ----------
116,975 112,585
---------- ----------
Income before income taxes 12,331 4,209
Provision for income taxes 4,872 1,639
---------- ----------
Net income $ 7,459 $ 2,570
========== ==========
Basic earnings per common share $ 1.74 $ 0.59
========== ==========
Diluted earnings per common share $ 1.73 $ 0.59
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
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<TABLE>
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
<CAPTION>
Three Months Ended
March 31
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,459 $ 2,570
Depreciation and amortization 6,002 5,553
Pensions (3,410) (2,088)
Deferred income taxes (655) (507)
Changes in operating assets and liabilities 3,338 (1,325)
Other - including currency exchange adjustments (3,291) (2,950)
--------- ---------
Cash flow from operating activities 9,443 1,253
--------- ---------
INVESTING ACTIVITIES
Property additions (5,159) (5,459)
Dispositions of property and businesses 1,307 109
Acquistions and other investing (4,218) (460)
--------- ---------
Cash flow from investing activities (8,070) (5,810)
--------- ---------
FINANCING ACTIVITIES
Additions to long-term debt 0 375
Reductions of long-term debt (7) 0
Changes in notes payable and short-term debt 444 8,272
Cash dividends (1,471) (1,493)
Company stock purchases and sales 7 (3,136)
--------- ---------
Cash flow from financing activities (1,027) 4,018
Effect of exchange rate changes on cash (481) (594)
--------- ---------
Decrease in cash and cash equivalents (135) (1,133)
Beginning cash and cash equivalents 17,108 24,020
--------- ---------
Ending cash and cash equivalents $ 16,973 $ 22,887
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
MINE SAFETY APPLIANCES COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) The Management's Discussion and Analysis of Financial Condition and Results
of Operations which follows these notes contains additional information on
the results of operations and the financial position of the company. Those
comments should be read in conjunction with these notes. The company's
annual report on Form 10-K for the year ended December 31, 1999 includes
additional information about the company, its operations, and its
financial position, and should be read in conjunction with this quarterly
report on Form 10-Q.
(2) The results for the interim periods are not necessarily indicative of the
results to be expected for the full year.
(3) Certain prior year amounts have been reclassified to conform with the
current year presentation.
(4) In the opinion of management, all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of these interim
periods have been included.
(5) 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.
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999
(In Thousands)
<S> <C> <C>
Net income $ 7,459 $ 2,570
Preferred stock dividends 12 12
------- -------
Income available to common shareholders 7,447 2,558
------- -------
Basic shares outstanding 4,292 4,361
Stock options 9 11
------- -------
Diluted shares outstanding 4,301 4,372
------- -------
Antidilutive stock options 123 4
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</TABLE>
(6) Comprehensive income (loss) was $5,726,000 and ($1,356,000) for the three
months ended March 31, 2000 and 1999, respectively. Comprehensive income
includes net income and changes in accumulated other comprehensive income,
primarily cumulative translation adjustments, for the period.
(7) The company is organized into three geographic operating segments (North
America, Europe and Other Non-North America), each of which includes a
number of operating companies. North America (formerly U.S.) includes the
United States, Canada and Mexico. Canada and Mexico were formerly part of
Other Non-U.S. Comparative amounts for 1999 have been restated.
Reportable segment information is presented in the following table:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended March 31, 2000
Other
North Non-North Recon- Consol.
America Europe America ciling totals
<S> <C> <C> <C> <C> <C>
Sales to external customers $83,787 $27,257 $17,164 $10 $128,218
Intercompany sales 7,291 3,723 566 (11,580)
Net income (loss) 6,812 (146) 700 93 7,459
Three Months Ended March 31, 1999
Other
North Non-North Recon- Consol.
America Europe America ciling totals
Sales to external customers 76,813 28,063 11,156 (65) 115,967
Intercompany sales 7,781 4,236 436 (12,453)
Net income (loss) 3,038 (552) 50 34 2,570
Reconciling items consist primarily of intercompany eliminations and items
reported at the corporate level.
</TABLE>
<PAGE>
MINE SAFETY APPLIANCES COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Forward-looking statements
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements may include, without limitation, statements regarding expectations
for future product introductions, specialty chemicals market conditions, sales
and earnings outlook, liquidity, and market risk. Actual results may differ
from expectations contained in such forward-looking statements and can be
affected by any number of factors, many of which are outside of management's
direct control. Among the factors that could cause such differences are the
effects of new product introductions, issues affecting major specialty chemical
customers, market and operating conditions, the economic environment, and
interest and currency exchange rates.
Results of operations - Three months ended March 31, 2000 and 1999
Sales for the first quarter of 2000 were $128.2 million, an increase of $12.2
million, or 11%, from $116.0 million in the first quarter of last year.
First quarter 2000 sales for North American operations were 8% higher than the
first quarter of last year. Improvements in sales of safety products were
partially offset by lower specialty chemical sales. Shipments of
self-contained breathing apparatus for firefighters, gas masks for defense
preparedness, and helmets for industrial head protection all improved
significantly. Portable instrument sales also grew significantly, reflecting
the late-1999 introduction of the improved Passport FiveStar Alarm multigas
detector. Sales of specialty chemicals were significantly lower than the same
period last year. Specialty chemical products are sold to a limited number of
large pharmaceutical and chemical companies and are largely dependent on the
performance of these customers' products in their respective markets.
Overall, sales of safety products in the U.S. exceeded incoming commercial
orders in the first quarter, particularly for breathing apparatus, as backlog
orders were shipped. The specialty chemical order backlog increased during
the quarter.
Local currency sales in Europe for the quarter were over 10% higher than first
quarter 1999. Current year sales were strong in Germany, Italy and Eastern
Europe. When stated in U.S. dollars, however, sales in Europe were slightly
lower due to adverse currency exchange rate movements. Sales in the company's
other international operations were substantially higher than the prior year.
Sales in Africa continued to be boosted by the second quarter 1999 acquisition
of Campbell Gardwel. Currency exchange effects on sales of other international
operations were minor.
Gross profit for the first quarter of 2000 was $50.4 million, an increase of
$8.4 million, or 20%, from $42.0 million in 1999. The ratio of gross profit
to sales was 39.3% in the first quarter of 2000 compared to 36.2% in the
corresponding quarter last year. The higher gross profit percentage reflects
changes in sales mix and price structure, and improved manufacturing volumes
and cost controls.
Selling, general and administration costs in the first quarter of 2000 were
slightly lower than the prior year first quarter.
Higher depreciation and amortization expense of $449,000 in the quarter was
primarily due to mid-1999 production equipment and information technology
additions in Europe.
Income before income taxes was $12.3 million for first quarter 2000 compared to
$4.2 million last year. The increase is primarily due to higher sales of
safety and instrument products and the improved gross profit percentage.
The effective income tax rate for the first quarter of 2000 was 39.5% compared
to 38.9% in 1999. The higher effective rate is due to lower losses in higher
tax rate European countries.
Net income in the first quarter of 2000 was $7.5 million, or $1.74 per basic
share, compared to $2.6 million, or 59 cents per basic share, last year.
Outlook
First quarter results reflect strong sales of breathing apparatus to the North
American fire service market, a recovery in core portable instrument product
sales in the U.S., and a good start to the year by international operations
outside Europe and North America. However, the ongoing transformation of
European operations and weakness in the specialty chemicals market, which is
expected to continue for some time, could dampen overall results for the year.
In addition, sales potential for North America in the remaining three
quarters is expected to be five to eight percent lower than the first quarter.
While the pace of the first quarter probably cannot be sustained, the company
remains optimistic that it will show solid earnings progress for the year.
Liquidity and Financial Condition
Cash and cash equivalents decreased $135,000 during the first quarter of 2000
compared with a decrease of $1.1 million last year.
Cash provided by operating activities totaled $9.4 million for first quarter
2000 compared to $1.3 million last year. The improvement reflects higher
income and favorable changes in operating assets and liabilities.
Investing activities used $8.1 million in the first quarter of 2000 compared
with using $5.8 million in 1999. The increase includes cash used for the
acquisition of ISI Group in the first quarter of 2000.
Financing activities used $1.0 million in 2000 and provided $4.0 million in
1999. The decrease reflects lower short-term borrowings and treasury stock
purchases in 2000.
Available credit facilities and internal cash resources are considered adequate
to provide for ensuing capital requirements.
Financial Instrument Market Risk
There have been no material changes in the company's financial instrument
market risk during the first quarter of 2000. For additional information,
refer to page 15 of the company's Annual Report to Shareholders for the year
ended December 31, 1999.
<PAGE>
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, 2000.
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 8, 2000 By S/James E. Herald
James E. Herald
Vice President - Finance;
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 2000
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,960
<SECURITIES> 8,013
<RECEIVABLES> 87,736
<ALLOWANCES> (2,173)
<INVENTORY> 82,036
<CURRENT-ASSETS> 23,730
<PP&E> 375,812
<DEPRECIATION> (213,960)
<TOTAL-ASSETS> 462,783
<CURRENT-LIABILITIES> 89,291
<BONDS> 36,506
0
3,569
<COMMON> 12,914
<OTHER-SE> 229,096
<TOTAL-LIABILITY-AND-EQUITY> 462,783
<SALES> 128,218
<TOTAL-REVENUES> 129,306
<CGS> 77,831
<TOTAL-COSTS> 83,833
<OTHER-EXPENSES> (188)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 784
<INCOME-PRETAX> 12,331
<INCOME-TAX> 4,872
<INCOME-CONTINUING> 7,459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,459
<EPS-BASIC> 1.74
<EPS-DILUTED> 1.73
</TABLE>