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, 2004 | Commission File No. 1-15579 |
MINE SAFETY APPLIANCES COMPANY
(Exact name of registrant as specified in its charter)
| Pennsylvania | 25-0668780 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of April 30, 2004, there were outstanding 37,052,542 shares of common stock without par value, not including 3,557,517 shares held by the Mine Safety Appliances Company Stock Compensation Trust.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Thousands of dollars, except per share amounts)
| Three Months Ended March 31 Unaudited |
|||||||
| 2004 |
2003 |
||||||
| Net sales |
$ | 194,490 | $ | 160,391 | |||
| Other income |
786 | 96 | |||||
| 195,276 | 160,487 | ||||||
| Costs and expenses |
|||||||
| Cost of products sold |
109,331 | 93,853 | |||||
| Selling, general and administrative |
47,730 | 39,096 | |||||
| Research and development |
5,215 | 5,042 | |||||
| Depreciation and amortization |
5,820 | 5,393 | |||||
| Interest |
514 | 1,119 | |||||
| Currency exchange loss (gain) |
667 | (1,150 | ) | ||||
| 169,277 | 143,353 | ||||||
| Income from continuing operations before income taxes |
25,999 | 17,134 | |||||
| Provision for income taxes |
9,861 | 6,635 | |||||
| Net income from continuing operations |
16,138 | 10,499 | |||||
| Net income from discontinued operations |
1,514 | ||||||
| Net income |
$ | 16,138 | $ | 12,013 | |||
| Basic earnings per common share: |
|||||||
| Continuing operations |
$ | 0.44 | $ | 0.29 | |||
| Discontinued operations |
0.04 | ||||||
| Net income |
$ | 0.44 | $ | 0.33 | |||
| Diluted earnings per common share: |
|||||||
| Continuing operations |
$ | 0.43 | $ | 0.29 | |||
| Discontinued operations |
0.04 | ||||||
| Net income |
$ | 0.43 | $ | 0.33 | |||
| Dividends per common share |
$ | 0.07 | $ | 0.06 | |||
See notes to consolidated condensed financial statements.
2
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED BALANCE SHEET
(Thousands of dollars, except share data)
| March 31 2004 |
December 31 2003 |
|||||||
| Unaudited | ||||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 73,917 | $ | 73,244 | ||||
| Trade receivables, less allowance for doubtful accounts of $6,597 and $6,418 |
82,101 | 89,919 | ||||||
| Other receivables |
55,388 | 38,981 | ||||||
| Inventories: |
||||||||
| Finished products |
39,305 | 34,660 | ||||||
| Work in process |
19,161 | 17,476 | ||||||
| Raw materials and supplies |
39,307 | 37,967 | ||||||
| Total inventories |
97,773 | 90,103 | ||||||
| Deferred tax assets |
18,571 | 17,890 | ||||||
| Prepaid expenses and other current assets |
13,438 | 10,794 | ||||||
| Assets held for sale |
2,311 | |||||||
| Total current assets |
341,188 | 323,242 | ||||||
| Property, plant and equipment |
355,839 | 359,946 | ||||||
| Less accumulated depreciation |
(235,770 | ) | (239,386 | ) | ||||
| Net property |
120,069 | 120,560 | ||||||
| Prepaid pension cost |
124,546 | 121,290 | ||||||
| Deferred tax assets |
22,780 | 23,047 | ||||||
| Goodwill |
44,535 | 44,810 | ||||||
| Other noncurrent assets |
10,310 | 10,936 | ||||||
| TOTAL |
$ | 663,428 | $ | 643,885 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities |
||||||||
| Notes payable and current portion of long-term debt |
$ | 5,822 | $ | 5,666 | ||||
| Accounts payable |
40,999 | 40,029 | ||||||
| Employees’ compensation |
15,728 | 15,486 | ||||||
| Insurance |
15,399 | 13,518 | ||||||
| Taxes on income |
5,519 | 4,976 | ||||||
| Other current liabilities |
36,200 | 35,040 | ||||||
| Total current liabilities |
119,667 | 114,715 | ||||||
| Long-term debt |
59,717 | 59,915 | ||||||
| Pensions and other employee benefits |
74,181 | 74,808 | ||||||
| Deferred tax liabilities |
73,245 | 70,845 | ||||||
| Other noncurrent liabilities |
14,740 | 15,744 | ||||||
| Shareholders’ equity |
||||||||
| Preferred stock, 4 1/2% cumulative - authorized 100,000 shares of $50 par value; issued 71,373 and 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 180,000,000 shares of no par value; issued 61,740,327 and 61,740,327 shares (outstanding 36,994,014 and 36,927,984 shares) |
32,245 | 31,187 | ||||||
| Stock compensation trust - 3,627,505 and 3,711,231 shares |
(18,948 | ) | (19,385 | ) | ||||
| Less treasury shares, at cost: |
||||||||
| Preferred - 51,554 and 51,554 shares |
(1,690 | ) | (1,690 | ) | ||||
| Common - 21,118,808 and 21,101,112 shares |
(135,926 | ) | (135,483 | ) | ||||
| Deferred stock compensation |
(1,726 | ) | (993 | ) | ||||
| Accumulated other comprehensive (loss) |
(5,878 | ) | (6,037 | ) | ||||
| Earnings retained in the business |
450,232 | 436,690 | ||||||
| Total shareholders’ equity |
321,878 | 307,858 | ||||||
| TOTAL |
$ | 663,428 | $ | 643,885 | ||||
See notes to consolidated condensed financial statements.
3
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
| Three Months Ended Unaudited |
||||||||
| 2004 |
2003 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net income |
$ | 16,138 | $ | 12,013 | ||||
| Net income from discontinued operations |
(1,514 | ) | ||||||
| Net income from continuing operations |
16,138 | 10,499 | ||||||
| Depreciation and amortization |
5,820 | 5,393 | ||||||
| Pensions |
(1,917 | ) | (2,367 | ) | ||||
| Gain on sale of investments and assets |
(38 | ) | (21 | ) | ||||
| Deferred income taxes |
1,677 | 1,638 | ||||||
| Changes in operating assets and liabilities |
(13,522 | ) | (18,034 | ) | ||||
| Other - including currency exchange adjustments |
177 | (312 | ) | |||||
| Cash flow from continuing operations |
8,335 | (3,204 | ) | |||||
| Cash flow from discontinued operations |
2,061 | 4,196 | ||||||
| Cash flow from operating activities |
10,396 | 992 | ||||||
| INVESTING ACTIVITIES |
||||||||
| Property additions |
(5,601 | ) | (3,722 | ) | ||||
| Property disposals |
67 | 24 | ||||||
| Other investing |
(1,570 | ) | (574 | ) | ||||
| Cash flow from investing activities |
(7,104 | ) | (4,272 | ) | ||||
| FINANCING ACTIVITIES |
||||||||
| Additions to long-term debt |
11 | 93 | ||||||
| Reductions of long-term debt |
(80 | ) | (424 | ) | ||||
| Changes in notes payable and short-term debt |
168 | (3,052 | ) | |||||
| Cash dividends |
(2,596 | ) | (2,087 | ) | ||||
| Company stock purchases |
(443 | ) | (264 | ) | ||||
| Company stock sales |
561 | |||||||
| Cash flow from financing activities |
(2,379 | ) | (5,734 | ) | ||||
| Effect of exchange rate changes on cash |
(240 | ) | 428 | |||||
| Increase/(decrease) in cash and cash equivalents |
673 | (8,586 | ) | |||||
| Beginning cash and cash equivalents |
73,244 | 36,477 | ||||||
| Ending cash and cash equivalents |
$ | 73,917 | $ | 27,891 | ||||
See notes to consolidated condensed financial statements.
4
MINE SAFETY APPLIANCES COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
| (1) | Basis of Presentation |
We have prepared the consolidated condensed financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements.
The interim consolidated condensed financial statements are unaudited; however, we believe that all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of these interim periods have been included. The results for interim periods are not necessarily indicative of the results to be expected for the full year. Certain prior year amounts have been reclassified to conform with the current year presentation.
The Management’s Discussion and Analysis of Financial Condition and Results of Operations which follows these notes contains additional information about our results of operations and financial position. Those comments should be read in conjunction with these notes. Our annual report on Form 10-K for the year ended December 31, 2003 includes additional information about the company, our operations, and our financial position, and should be read in conjunction with this quarterly report on Form 10-Q.
| (2) | Three-for-One Stock Split |
All share and per share information has been adjusted to reflect the three-for-one stock split of our common stock effected on January 28, 2004.
| (3) | 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 diluted earnings per share.
| Three Months Ended March 31 | ||||||
| (In Thousands) |
2004 |
2003 | ||||
| Net income from continuing operations |
$ | 16,138 | $ | 10,499 | ||
| Preferred stock dividends |
11 | 12 | ||||
| Income available to common shareholders |
16,127 | 10,487 | ||||
| Basic shares outstanding |
36,964 | 36,631 | ||||
| Stock options |
985 | 255 | ||||
| Diluted shares outstanding |
37,949 | 36,886 | ||||
| Antidilutive stock options |
4 | 1,263 | ||||
| (4) | Comprehensive Income |
Components of comprehensive income are as follows:
| Three Months Ended March 31 | ||||||
| (In Thousands) |
2004 |
2003 | ||||
| Net income from continuing operations |
$ | 16,138 | $ | 10,499 | ||
| Net income from discontinued operations |
1,514 | |||||
| Cumulative translation adjustments |
159 | 2,113 | ||||