Mine Safety Appliances ( MSA - Get Report) said Thursday its third-quarter earnings dropped 26.1% from a year ago, owing to delay in the release of federal government funding for the U.S. Fire Service.

The Pittsburgh-based company earned $12.6 million, or 34 cents a share, in the quarter, compared with $17.1 million, or 46 cents a share, a year ago. Analysts surveyed by Thomson First Call were expecting earnings of 41 cents a share in the most recent quarter.

Third-quarter total revenue slid 3.3% to $211.5 million as against analysts' expectation of $222.3 million.

The third-quarter sales reflect strong growth in MSA's international and European business segments as well as in North American commercial markets, the company said. These sales gains were more than offset by a $18.4 million decrease in U.S. government sales.

North American segment sales fell 12.8% to $113.2 million as shipments of advanced combat helmets and related communication equipment were down $18.4 million due to the completion of certain government contracts. Sales of SCBA, thermal imaging cameras and other products to the U.S. fire service market continue to be depressed by ongoing delays in the release of fire department funding made available through the U.S. Assistance to Firefighters Grant program.

Sales in international segment rose 7.6% to $48.5 million, helped by the January acquisition of Select PPE, a supplier of safety equipment and solutions to the mining industry in South Africa.

Sales in Europe segment rose 11.7% to $48.1 million on strong shipments of breathing apparatus and favorable currency movements.

"One difficulty in 2006 has been the substantial delay in the release of Federal Government funding for the U.S. Fire Service. The AFG program has provided thousands of U.S. fire departments with significant support to upgrade fire fighting equipment. This program has been in place for a number of years and grants under it were generally awarded beginning in June. Last year the grants began in August and releases were made on an accelerated basis," the company said. "In 2006, the first release of funds was made on October 6, and the second only recently. It is now expected that the annual grants, which were in total somewhat below that of the previous year, will be fully released by Spring 2007; but, on a more even and less front-loaded basis than had been the case in recent years."

Shares were down 43 cents, or 1.2%, at $36.47 Thursday.

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