MINE SAFETY APPLIANCES CO - 10-Q Quarterly Report

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, 2005		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, 2005, 36,433,825 shares of common stock without par value were outstanding, not including 3,056,429 shares held by the Mine Safety Appliances Company Stock Compensation Trust.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MINE SAFETY APPLIANCES COMPANY

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(In thousands, except per share amounts)


	Three Months Ended March 31 Unaudited
	2005		2004
Net sales	$	228,048	$	194,490
Other income		1,332		786

		229,380		195,276

Costs and expenses
Cost of products sold		134,680		112,687
Selling, general and administrative		53,558		50,194
Research and development		5,680		5,215
Interest		1,218		514
Currency exchange losses		615		667

		195,751		169,277

Income before income taxes		33,629		25,999
Provision for income taxes		12,276		9,861

Net income		21,353		16,138

Basic earnings per common share		$0.58		$0.44

Diluted earnings per common share		$0.57		$0.43

Dividends per common share		$0.10		$0.07

See notes to condensed consolidated financial statements.

MINE SAFETY APPLIANCES COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except share data)


	March 31 2005			December 31 2004
	Unaudited
ASSETS
Current assets
Cash and cash equivalents	$	59,446		$	76,545
Trade receivables, less allowance for doubtful accounts of $7,382 and $7,548, respectively		168,501			161,584
Inventories		126,090			124,846
Deferred tax assets		18,639			19,377
Prepaid expenses and other current assets		11,407			15,308

Total current assets		384,083			397,660

Property, less accumulated depreciation of $251,590 and $250,725, respectively		119,298			123,716
Prepaid pension cost		133,929			131,496
Deferred tax assets		20,138			21,513
Goodwill		48,796			49,495
Other noncurrent assets		10,443			10,230

TOTAL		716,687			734,110

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable and current portion of long-term debt	$	29,805		$	6,378
Accounts payable		42,906			40,705
Employees’ compensation		19,330			19,284
Insurance and product liability		16,082			14,926
Taxes on income		5,784			3,790
Other current liabilities		37,901			41,984

Total current liabilities		151,808			127,067

Long-term debt		54,283			54,463
Pensions and other employee benefits		80,912			83,628
Deferred tax liabilities		75,202			76,704
Other noncurrent liabilities		13,686			14,637

Shareholders’ equity
Preferred stock, 4¹/2% 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 61,839,525 and 61,740,327 shares (outstanding 36,411,415 and 37,341,386 shares)		42,129			39,248
Stock compensation trust — 3,061,667 and 3,146,222 shares		(15,994	)		(16,436	)
Treasury shares, at cost:
Preferred — 52,736 and 52,736 shares		(1,746	)		(1,746	)
Common — 22,366,443 and 21,252,719 shares		(192,928	)		(141,549	)
Deferred stock compensation		(2,674	)		(1,247	)
Accumulated other comprehensive (loss) income		(3,245	)		1,793
Retained earnings		511,685			493,979

Total shareholders’ equity		340,796			377,611

TOTAL		716,687			734,110

See notes to condensed consolidated financial statements.

MINE SAFETY APPLIANCES COMPANY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)


	Three Months Ended March 31 Unaudited
	2005			2004
OPERATING ACTIVITIES
Net income	$	21,353		$	16,138
Depreciation and amortization		6,486			5,820
Pensions		(1,569	)		(1,917	)
Net gain on sale of assets		(633	)		(38	)
Deferred income taxes		2,137			1,677
Changes in operating assets and liabilities		(9,661	)		(13,522	)
Other — including currency exchange adjustments		(484	)		177

Cash flow from continuing operations		17,629			8,335
Cash flow from discontinued operations		—			2,061

Cash flow from operating activities		17,629			10,396

INVESTING ACTIVITIES
Property additions		(3,997	)		(5,601	)
Property disposals		952			67
Other investing		(1,114	)		(1,570	)

Cash flow from investing activities		(4,159	)		(7,104	)

FINANCING ACTIVITIES
Additions to long-term debt		388			11
Reductions of long-term debt		(77	)		(80	)
Changes in notes payable and short-term debt		23,501			168
Cash dividends		(3,647	)		(2,596	)
Company stock purchases		(51,379	)		(443	)
Company stock sales		1,620			561

Cash flow from financing activities		(29,594	)		(2,379	)

Effect of exchange rate changes on cash		(975	)		(240	)

(Decrease) increase in cash and cash equivalents		(17,099	)		673
Beginning cash and cash equivalents		76,545			73,244

Ending cash and cash equivalents		59,446			73,917

See notes to condensed consolidated financial statements.

MINE SAFETY APPLIANCES COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

(1) Basis of Presentation

We have prepared the condensed consolidated 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 condensed consolidated 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.

The condensed consolidated financial statements include the accounts of the company and all subsidiaries. Intercompany accounts and transactions have been eliminated.

Certain prior year amounts have been reclassified to conform with the current year presentation. Depreciation and amortization expense that was previously reported as a separate line in the condensed consolidated statement of income is now reported in cost of products sold and operating expenses.

Management’s Discussion and Analysis of Financial Condition and Results of Operations that is included elsewhere in this report contains additional information about our results of operations and financial position and should be read in conjunction with these notes.

(2) Earnings per Share

Basic earnings per share is computed on the weighted average number of common 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)	2005		2004
Net income	$	21,353	$	16,138
Preferred stock dividends		10		11

Income available to common shareholders		21,343		16,127

Basic shares outstanding		36,486		36,964
Stock options		896		985

Diluted shares outstanding		37,382		37,949

Antidilutive stock options		187		4

(3) Comprehensive Income

Components of comprehensive income are as follows:


	Three Months Ended March 31
(In thousands)	2005			2004
Net income	$	21,353		$	16,138
Cumulative translation adjustments		(5,038	)		159

Comprehensive income		16,315			16,297

Components of accumulated other comprehensive (loss) income are as follows:


(In thousands)	March 31 2005			December 31 2004
Cumulative translation adjustments	$	(1,028	)	$	4,010
Minimum pension liability adjustments		(2,217	)		(2,217	)

Accumulated other comprehensive (loss) income		(3,245	)		1,793

(4) Segment Information

We are organized into three geographic operating segments: North America, Europe and International. Reportable segment information is presented in the following table:


	Three Months Ended March 31, 2005
(In thousands)	North America		Europe		International		Reconciling Items			Consolidated Totals
Sales to external customers	$	147,661	$	48,341	$	32,046	$	—		$	228,048
Intercompany sales		7,154		18,490		1,397		(27,041	)		—
Net income		15,942		4,196		1,791		(576	)		21,353


	Three Months Ended March 31, 2004
(In thousands)	North America		Europe		International		Reconciling Items			Consolidated Totals
Sales to external customers	$	129,630	$	39,386	$	25,474	$	—		$	194,490
Intercompany sales		6,225		14,466		635		(21,326	)		—
Net income		13,782		1,832		1,130		(606	)		16,138

Reconciling items consist primarily of intercompany eliminations and items reported at the corporate level.

(5) Pensions and Other Postretirement Benefits

Components of net periodic benefit (credit) cost for the three months ended March 31 consisted of the following: