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, 2002 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, 2002, there were outstanding 12,207,029 shares of common stock
without par value, not including 1,384,629 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 share data)
September 30 December 31
2002 2001
Unaudited
ASSETS
Current assets
Cash $ 24,523 $ 22,842
Temporary investments, at cost which approximates market 5,235 3,859
Trade receivables, less allowance for doubtful accounts
$3,362 and $2,956 64,057 50,704
Other receivables 24,871 38,325
Inventories:
Finished products 32,418 30,375
Work in process 15,009 12,099
Raw materials and supplies 38,926 35,400
----------- -----------
Total inventories 86,353 77,874
Deferred tax assets 13,419 12,944
Prepaid expenses and other current assets 13,514 10,449
----------- -----------
Total current assets 231,972 216,997
Property, plant and equipment 410,054 387,789
Accumulated depreciation (253,377) (236,128)
----------- -----------
Net property 156,677 151,661
Prepaid pension cost 104,936 92,437
Deferred tax assets 13,530 12,694
Goodwill 42,683 33,722
Other noncurrent assets 11,389 13,187
----------- -----------
TOTAL $ 561,187 $ 520,698
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable and current portion of long-term debt $ 5,345 $ 6,484
Accounts payable 26,518 24,751
Employees' compensation 19,066 14,368
Insurance 6,806 9,267
Taxes on income 2,835 4,812
Other current liabilities 30,118 22,818
----------- -----------
Total current liabilities 90,688 82,500
----------- -----------
Long-term debt 70,126 67,381
Pensions and other employee benefits 59,125 55,428
Deferred tax liabilities 61,128 56,053
Other noncurrent liabilities 4,748 5,832
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 60,000,000 shares of no par
value; issued 20,580,109 and 20,483,051 (outstanding
12,202,029 and 12,100,727) 28,060 25,386
Stock compensation trust - 1,389,629 and 1,415,373 shares (21,775) (22,179)
Less treasury shares, at cost:
Preferred - 50,313 and 50,313 shares (1,629) (1,629)
Common - 6,988,451 and 6,966,951 shares (133,198) (132,352)
Deferred stock compensation (1,016) (652)
Accumulated other comprehensive loss (23,604) (26,216)
Earnings retained in the business 424,965 407,577
----------- -----------
Total shareholders' equity 275,372 253,504
----------- -----------
TOTALS $ 561,187 $ 520,698
=========== ===========
See notes to consolidated condensed financial statements
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Thousands of dollars, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
Unaudited Unaudited
2002 2001 2002 2001
Net sales $ 149,424 $ 137,079 $ 434,228 $ 405,455
Other income (expense) (231) 930 1,944 1,423
----------- ----------- ----------- ---------
149,193 138,009 436,172 406,878
----------- ----------- ----------- ---------
Costs and expenses
Cost of products sold 94,091 83,939 270,222 247,384
Selling, general and administrative 36,054 32,811 104,181 97,817
Depreciation and amortization 6,477 6,256 18,790 19,123
Interest 1,452 1,526 4,177 4,556
Currency exchange losses 866 545 314 930
----------- ----------- ----------- ---------
138,940 125,077 397,684 369,810
----------- ----------- ----------- ---------
Income before income taxes 10,253 12,932 38,488 37,068
Provision for income taxes 4,460 5,139 15,227 14,454
----------- ----------- ----------- ---------
Net income $ 5,793 $ 7,793 $ 23,261 $ 22,614
=========== =========== =========== =========
Basic earnings per common share $ 0.47 $ 0.65 $ 1.91 $ 1.90
=========== =========== =========== =========
Diluted earnings per common share $ 0.47 $ 0.64 $ 1.89 $ 1.88
=========== =========== =========== =========
Dividends per common share $ 0.17 $ 0.14 $ 0.48 $ 0.40
=========== =========== =========== =========
See notes to consolidated condensed financial statements
MINE SAFETY APPLIANCES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Thousands of dollars)
Nine Months Ended
September 30
Unaudited
2002 2001
OPERATING ACTIVITIES
Net income $ 23,261 $ 22,614
Depreciation and amortization 18,790 19,123
Pensions (11,123) (13,116)
Net gain on sale of investments and assets (44) (1,984)
Deferred income taxes 4,425 6,390
Changes in operating assets and liabilities 5,854 (16,368)
Other 2,215 1,278
---------- ----------
Cash flow from operating activities 43,378 17,937
INVESTING ACTIVITIES
Property additions (18,418) (15,080)
Property disposals 214 6,475
Acquisitions, net of cash acquired, and other investing (14,070) (7,045)
---------- ----------
Cash flow from investing activities (32,274) (15,650)
FINANCING ACTIVITIES
Changes in notes payable and short-term debt (2,901) 719
Additions to long-term debt 44 6
Reductions of long-term debt (1,403) (484)
Cash dividends (5,873) (4,775)
Company stock purchases (846) (2,809)
Company stock sales 2,466 4,932
---------- ----------
Cash flow from financing activities (8,513) (2,411)
Effect of exchange rate changes on cash 466 (1,043)
---------- ----------
Increase/(Decrease) in cash and cash equivalents 3,057 (1,167)
Beginning cash and cash equivalents 26,701 26,541
---------- ----------
Ending cash and cash equivalents $ 29,758 $ 25,374
========== ==========
See notes to consolidated condensed financial statements
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, 2001 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 diluted earnings per share.
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
(In thousands) (In thousands)
Net income $ 5,793 $ 7,793 $23,261 $22,614
Preferred stock dividends declared 12 12 36 36
------- ------- ------- -------
Income available to common shareholders 5,781 7,781 23,225 22,578
------- ------- ------- -------
Basic shares outstanding 12,194 11,883 12,159 11,853
Stock options 112 246 137 167
------- ------- ------- -------
Diluted shares outstanding 12,306 12,129 12,296 12,020
------- ------- ------- -------
Antidilutive stock options 184 0 184 0
------- ------- ------- -------
(6) Comprehensive income was $3,912,000 and $25,873,000 for the three and
nine months ended September 30, 2002, respectively, and $9,956,000 and
$21,748,000 for the three and nine months ended September 30, 2001,
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 International), each of which includes a number of
operating companies.
Reportable segment information is presented in the following table:
(In Thousands)
North Consolidated
America Europe International Reconciling totals
Three Months Ended September 30, 2002
Sales to external customers $ 96,532 $34,948 $17,927 $ 17 $149,424
Intercompany sales 4,670 8,434 1,009 (14,113)
Net income 4,523 951 647 (328) 5,793
Nine Months Ended September 30, 2002
Sales to external customers 294,798 86,725 52,651 54 434,228
Intercompany sales 14,762 24,383 2,099 (41,244)
Net income 19,625 1,920 1,861 (145) 23,261
Three Months Ended September 30, 2001
Sales to external customers 96,378 22,036 18,624 41 137,079
Intercompany sales 5,169 4,716 543 (10,428)
Net income 6,290 860 955 (312) 7,793
Nine Months Ended September 30, 2001
Sales to external customers 280,679 69,453 55,226 97 405,455
Intercompany sales 14,494 15,249 1,504 (31,247)
Net income 18,778 1,379 2,722 (265) 22,614
Reconciling items consist primarily of intercompany eliminations and
items reported at the corporate level.
(8) At September 30, 2002, accounts receivable of $55.8 million were owned
by Mine Safety Funding Corporation, an unconsolidated wholly-owned
bankruptcy-remote subsidiary of the company. The company held a
subordinated interest in these receivables of $25.9 million, of which
$24.9 million is classified as other receivables. Net proceeds to the
company from the securitization arrangement were $29.0 million at
September 30, 2002.
At December 31, 2001, accounts receivable of $65.0 million were owned by
Mine Safety Funding Corporation. The company held a subordinated
interest in these receivables of $39.3 million, of which $38.3 million
is classified as other receivables. Net proceeds to the company from the
securitization arrangement were $25.0 million at December 31, 2001.
The key economic assumptions used to measure the retained interest at
September 30, 2002 were a discount rate of 4% and an estimated life of
2.1 months. At September 30, 2002, an adverse change in the discount
rate or estimated life of 10% and 20% would reduce the fair value of the
retained interest by $40,000 and $80,000, respectively. The effect of
hypothetical changes in fair value based on variations in assumptions
should be used with caution and generally cannot be extrapolated.
Additionally, the effect on the fair value of the retained interest of
changing a particular assumption has been calculated without changing
other assumptions. In reality, a change in one factor may result in
changes in others.
(9) During the second quarter, the company acquired CGF Gallet based in
Lyon, France for $15.0 million. The acquisition has been recorded in
accordance with FAS 141, Business Combinations, which requires the
purchase method of accounting and establishes specific criteria for
recognition of intangible assets other than goodwill. Preliminary
estimates indicate goodwill associated with the acquisition will be
approximately $8.7 million. The final allocation of the purchase price
is expected to be completed by December 31, 2002. Gallet is the leading
European manufacturer of protective helmets for the fire service, as
well as head protection for the police and military. This acquisition
complements MSA's strong existing line of fire service products and
provides the opportunity to capitalize on opportunities where Gallet is
strong - such as in the law enforcement, military and aviation markets.
Gallet is being integrated into the company's operations and its
products will be marketed under the MSA Gallet name. Gallet's results of
operations for May through September 2002 are included in the
consolidated financial statements.
The following unaudited pro forma summary presents information as if
Gallet had been acquired January 1, 2001:
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ------------------------
(In thousands, except EPS) 2002 2001 2002 2001
---- ---- ---- ----
Net sales $149,424 $144,182 $448,054 $423,933
Net income 5,793 7,987 24,237 23,128
Basic earnings per share 0.47 0.67 1.99 1.95
(10) Effective January 1, 2002, the company adopted the non-amortization
provisions of FAS No. 142, Goodwill and Other Intangible Assets. Under
this standard, goodwill and intangible assets with indefinite lives are
not amortized, but are subject to impairment tests that must be
performed at least annually. If goodwill amortization had been
discontinued January 1, 2001, net income for the year ended December 31,
2001, would have increased by $1.4 million, or eleven cents per share.
The transitional impairment tests on goodwill as of January 1, 2002 have
been completed and did not indicate that an impairment write-down should
be recorded.
The effects of adopting the non-amortization provisions on net income
and basic earnings per share for the three and nine months ended
September 30, 2002 and 2001 were as follows:
In thousands Three Months Ended September 30 Nine Months Ended September 30
----------------------------------- ------------------------------------
Net Income Basic EPS Net Income Basic EPS
----------------- --------------- ------------------ ---------------
2002 2001 2002 2001 2002 2001 2002 2001
------- ------- ------ ------ -------- -------- ------ ------
Reported net income $ 5,793 $ 7,793 $ 0.47 $ 0.65 $ 23,261 $ 22,614 $ 1.91 $ 1.90
Goodwill amortization 346 0.03 1,027 0.09
----------------- --------------- ------------------ ---------------
Adjusted net income $ 5,793 $ 8,139 $ 0.47 $ 0.68 $ 23,261 $ 23,641 $ 1.91 $ 1.99
================= =============== ================== ===============
Intangible assets include non-compete agreements that will be fully
amortized in 2003 and patents that will be fully amortized in 2005.
These items are included in other noncurrent assets. At September 30,
2002, intangible assets totaled $216,000, net of accumulated
amortization of $2.8 million. Intangible asset amortization expense is
expected to be approximately $355,000 in 2002, $115,000 in 2003, and
$55,000 in 2004.
Changes in goodwill and intangible assets, net of accumulated
amortization, during the nine months ended September 30, 2002 were as
follows:
(In thousands) Goodwill Intangibles
-------- -----------
Net balances at December 31, 2001 $ 33,722 $ 526
Additions to goodwill 8,694
Amortization expense (310)
Translation 267
-------- -----------
Net balances at September 30, 2002 $ 42,683 $ 216
======== ===========
(11) On November 5, 2002, the company announced that is exploring various
strategic options regarding the future operations of its Callery
Chemical Division. These options could include various forms of
strategic partnering, as well as the possible sale of the division. The
Callery Chemical Division develops, manufactures, and sells specialty
chemicals, including alkali metal strong bases and borane chemicals, for
use in pharmaceuticals, agricultural chemicals, plastics, and a number
of other applications.
(12) FAS No. 143, Accounting for Asset Retirement Obligations, addresses
accounting for obligations associated with the retirement of tangible
long-lived assets. The company will adopt FAS No. 143 effective January
1, 2003 and does not expect that the adoption of this statement will
have a significant effect on its results of operations or financial
position.
FAS 146, Accounting for Costs Associated with Exit or Disposal
Activities, requires that costs associated with exit or disposal
activities be recognized when the liability is incurred rather than at
the date of commitment to an exit or disposal plan. The provisions of
FAS 146 are effective for exit or disposal activities that are initiated
after December 31, 2002. Early adoption is encouraged. The company does
not expect that the adoption of this statement will have a significant
effect on its results of operations or financial position.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-looking statements
Certain statements contained in this report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements involve a number of risks, uncertainties
and other factors that could cause actual results to differ materially from
expectations contained in such statements.
Factors that may materially affect financial condition and future results
include: global economic conditions; the threat of terrorism and its potential
consequences; the timely introduction of new products; the successful
integration of acquisitions; the availability of funding in the fire service and
homeland security markets; the ability of third party suppliers to provide key
materials and components; market conditions affecting specialty chemical
customers; liquidity; and interest and currency exchange rates.
Corporate Initiatives
During the second quarter of 2002, MSA acquired CGF Gallet, the leading European
manufacturer of protective helmets for the fire service, as well as head
protection for the police and military. This acquisition complements MSA's
strong existing line of fire service products, and provides the opportunity to
capitalize on emerging opportunities where Gallet is strong - such as in the law
enforcement, military, and aviation markets. Gallet is being integrated into the
company's operations and its products are being marketed under the MSA Gallet
name.
Results of operations
Three months ended September 30, 2002 and 2001
Sales for the third quarter of 2002 were $149.4 million, an increase of $12.3
million, or 9%, from $137.1 million in the third quarter of 2001.
Third quarter 2002 sales for North American operations of $96.5 million were
$154,000 higher than in the third quarter of last year. Increased gas mask
shipments, primarily to the government, were largely offset by lower sales of
respirators, thermal imaging cameras and breathing apparatus. Respirator sales
were very high in third quarter 2001, due to large shipments to distributors
serving the September 11th disaster sites. Lower thermal imaging camera sales in
the current quarter reflect slower summer demand in the fire service market and
the anticipated November introduction of the new generation small, light-weight
Evolution 5000 camera. Third quarter 2001 sales also benefited from large
shipments of self-contained breathing apparatus to the Chicago Fire Department
and oxygen self-rescuers to the Navy. Specialty chemical sales improved during
the current quarter.
In Europe, third quarter 2002 sales of $34.9 million were $12.9 million, or 59%,
higher than in third quarter 2001. The increase reflects higher local currency
sales in existing operations and the addition of MSA Gallet sales of $9.0
million, following its acquisition
in the second quarter of 2002. European sales also benefited from strong
shipments of escape breathing devices to a Netherlands-based marine
distributor and large government orders for gas masks and helmets in Austria.
European sales, when stated in U.S. dollars, were favorably affected by currency
exchange rate movements.
International sales of $17.9 million were $697,000, or 4%, lower than third
quarter 2001. Lower sales in most of South America were partially offset by
sales growth in South Africa and Brazil.
Gross profit for the third quarter of 2002 was $55.3 million, an increase of
$2.2 million, or 4%, from $53.1 million in third quarter 2001. The ratio of
gross profit to sales was 37.0% in the third quarter of 2002 compared to 38.8%
in the corresponding quarter last year. The lower gross profit percentage was
primarily due to product mix changes.
Selling, general and administration expenses in the third quarter of 2002 were
$36.1 million, an increase of $3.3 million, or 10%, compared to $32.8 million in
third quarter 2001. The increase includes higher expenses in the U.S., the
inclusion of MSA Gallet, and the currency translation effect of the stronger
Euro.
Depreciation and amortization expense in third quarter 2002 was $6.5 million, an
increase of $221,000, or 4%, from $6.3 million in the corresponding quarter last
year. The increase in depreciation and amortization expense was related to the
addition of MSA Gallet assets, regular asset acquisitions, and the currency
translation effect of the stronger Euro. As prescribed by FAS No. 142, goodwill
amortization was discontinued at the beginning of 2002. Goodwill amortization
expense was $567,000 in the third quarter of 2001.
Interest expense was $1.5 million in third quarters of both 2002 and 2001.
Currency exchange losses were $866,000 in third quarter 2002 compared to losses
of $545,000 in the third quarter of last year. Current quarter losses relate
primarily to unfavorable rate effects of the Canadian dollar and the Chilean
Peso. Third quarter 2001 losses relate primarily to recognition of cumulative
translation losses upon the sale of a Swiss subsidiary.
Other income and expense was an expense of $231,000 in the third quarter of 2002
compared to income of $930,000 for third quarter 2001. Other income in third
quarter 2001 included a gain of $1.3 million on the sale of property in Britain.
Income before income taxes was $10.3 million for third quarter 2002 compared to
$12.9 million in third quarter 2001, a decrease of $2.6 million, or 21%.
The effective income tax rate for the third quarter of 2002 was 43.5% compared
to 39.7% in third quarter 2001. The higher rate in third quarter 2002 relates to
higher losses in lower tax rate countries and differences in permanent items in
non-U.S. taxing jurisdictions.
Net income in the third quarter of 2002 was $5.8 million, or 47 cents per basic
share, compared to $7.8 million, or 65 cents per basic share, in the third
quarter of last year.
2
Nine months ended September 30, 2002 and 2001
Sales for the nine months ended September 30, 2002 were $434.2 million, an
increase of $28.7 million, or 7%, from $405.5 million last year.
North American sales for the nine months ended September 30, 2002 of $294.8
million were $14.1 million, or 5%, higher than the same period last year. The
improvement was primarily related to higher shipments of gas masks to military
and homeland security markets. Instrument sales were lower than in the same
period last year, reflecting sluggishness in industrial markets. Sales of
specialty chemicals were also lower than in the first nine months of 2001.
Shipments of specialty chemicals to pharmaceutical customers were unusually
strong in early 2001.
Incoming orders for safety products exceeded sales during the first nine months
of 2002, particularly in government markets, resulting in a higher order
backlogs. Specialty chemical order backlog also increased during the same
period.
Sales in Europe for the nine months ended September 30, 2002 of $86.7 million
were $17.3 million, or 25%, higher than in the same period of 2001. The increase
reflects local currency sales growth in most established markets and the
addition of MSA Gallet sales of $16.0 million, following its acquisition during
the second quarter. When stated in U.S. dollars, European sales were favorably
affected by the currency exchange rate effect of the stronger Euro.
Local currency sales of International operations for the first nine months of
2002 were approximately 3% higher than in the same period last year, with
improvement primarily in South Africa, Australia, and Brazil being substantially
offset by lower sales in most other markets. When stated in U.S. dollars,
however, International sales for the nine months ended September 30, 2002 of
$52.7 million were $2.6 million, or 5%, lower than last year due to currency
exchange rate movements.
Gross profit for the nine months ended September 30, 2002 was $164.0 million, an
increase of $5.9 million, or 4%, from $158.1 million in the first nine months of
2001. The ratio of gross profit to sales was 37.8% in the nine months ended
September 30, 2002 compared to 39.0% in the corresponding period last year. The
lower gross profit percentage in the current year is primarily due to sales mix
changes.
Selling, general and administration costs in the nine months ended September 30,
2002 were $104.2 million, an increase of $6.4 million, or 7%, from $97.8 million
in the same period last year. The increase includes higher expenses in the U.S.,
the post-acquisition expenses of MSA Gallet, and the currency translation
effects of the stronger Euro.
Depreciation and amortization expense was $18.8 million in the nine months ended
September 30, 2002, a decrease of $333,000, or 2%, from $19.1 million in the
same period of 2001. As prescribed by FAS No. 142, goodwill amortization was
discontinued at the beginning of 2002. Goodwill amortization expense was $1.7
million for the nine
3
months ended September 30, 2001. This decrease was partially offset by an
increase in depreciation expense due to the acquisition of MSA Gallet and
regular asset additions.
Interest expense for the nine months ended September 30, 2002 was $4.2 million,
a decrease of $379,000, or 8%, from $4.6 million in the same period last year.
Lower interest expense in 2002 reflects a $5 million reduction in notes payable
during December 2001 and lower average short-term borrowings.
Currency exchange losses were $314,000 for the nine months ended September 30,
2002 compared to losses of $930,000 in the same period last year. The current
year loss was primarily due to significant devaluation of the Argentine Peso
during the first half of the year, partially offset by Euro currency exchange
gains. The loss during the first nine months of 2001 includes recognition of
cumulative translation losses upon the sale of a Swiss subsidiary and
unfavorable currency translation effects in Chile and Australia.
Other income and expense was income of $1.9 million for the nine months ended
September 30, 2002 compared to $1.4 million of income in the same period of
2001. Other income in the first nine months of 2002 included a gain of $2.1
million on the sale of real estate development property in Pittsburgh. The prior
year amount included a gain of $1.3 million on the sale of property in Britain.
Income before income taxes was $38.5 million for the nine months ended September
30, 2002 compared to $37.1 million in the first nine months of 2001, an increase
of $1.4 million, or 4%.
The effective income tax rate for the nine months ended September 30, 2002 was
39.6% compared to 39.0% in the same period last year. The higher effective rate
in 2002 relates to differences in permanent items in non-U.S. taxing
jurisdictions.
Net income in the nine months ended September 30, 2002 was $23.3 million, or
$1.91 per basic share, compared to $22.6 million, or $1.90 per basic share, in
the first nine months of 2001.
Liquidity and Financial Condition
Cash and cash equivalents increased $3.1 million during the nine months ended
September 30, 2002 compared with a decrease of $1.2 million in the same period
of 2001.
Operating activities provided $43.4 million of cash in the nine months ended
September 30, 2002 compared to providing $17.9 million in the same period last
year. The improvement reflects the cash effects of changes in operating assets
and liabilities and more favorable adjustments to operating income for non-cash
income and expenses. During the nine months ended September 30, 2002 changes in
operating assets and liabilities provided cash of $5.9 million, mainly due to
collection of trade receivables in the U.S. In the same period last year,
changes in operating assets and liabilities used $16.4 million primarily related
to increases in receivables and inventory.
4
Cash of $32.3 million was used for investing activities in the first nine months
of 2002 compared with the use of $15.7 million in the same period last year. The
increased use of cash for investing activities in 2002 was primarily related to
the Gallet acquisition. The 2001 amounts include cash used for the acquisition
of Surety Manufacturing and Testing, Ltd., partially offset by the cash proceeds
from the sale of a safety products distribution business in Sweden.
Financing activities used $8.5 million in the first nine months of 2002 and $2.4
million in the same period last year. The higher use of cash for financing
activities in 2002 related primarily to reductions in short-term borrowings,
increased dividends, and lower sales of common stock.
Available credit facilities and internal cash resources are considered adequate
to provide for future operations, capital requirements, and dividends to
shareholders.
Recently Issued Accounting Standards
FAS 143, Accounting for Asset Retirement Obligations, addresses accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets. The company will adopt FAS 143 effective January 1, 2003 and does not
expect that the adoption of this statement will have a significant effect on its
results or financial position.
FAS 146, Accounting for Costs Associated with Exit or Disposal Activities,
requires that costs associated with exit or disposal activities be recognized
when the liability is incurred rather than at the date of commitment to an exit
or disposal plan. The provisions of FAS 146 are effective for exit or disposal
activities that are initiated after December 31, 2002. Early adoption is
encouraged. The company does not expect that the adoption of this statement will
have a significant effect on its results of operations or financial position.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in the company's financial instrument market
risk during the first nine months of 2002. For additional information, refer to
page 19 of the company's Annual Report to Shareholders for the year ended
December 31, 2001.
Item 4. Controls and Procedures
An evaluation was performed under the supervision and with the participation of
the Company's management, including the Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), of the effectiveness of the design and operation of the
Company's disclosure controls and procedures within 90 days before the filing
date of this quarterly report. Based on that evaluation, the Company's
management, including the CEO and CFO, concluded that the Company's disclosure
controls and procedures were effective. There have been no significant changes
in the Company's internal controls or in other factors that could significantly
affect internal controls subsequent to their evaluation.
5
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
99.1 Certification of J. T. Ryan III pursuant to 18
U.S.C. (S) 1350
99.2 Certification of D. L. Zeitler pursuant to 18
U.S.C. (S) 1350
(b) Reports on Form 8-K
The Company filed a Form 8-K on August 13, 2002 under Item 9
- Regulation FD Disclosure.
The Company filed a Form 8-K on September 10, 2002 under Item
9 - Regulation FD Disclosure.
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 8, 2002 By /s/ Dennis L. Zeitler
Dennis L. Zeitler
Chief Financial Officer
Certifications
I, John T. Ryan III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mine Safety
Appliances Company
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 8, 2002
/s/ John T. Ryan III
Chief Executive Officer
I, Dennis L. Zeitler, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mine Safety
Appliances Company
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 8, 2002
/s/ Dennis L. Zeitler
Chief Financial Officer