April 23, 2018 - 4:45 PM EDT
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MSA Announces Record First Quarter Results

Growth in core product business, strategic acquisitions, and streamlined cost structure drive GAAP earnings growth of 125 percent and adjusted earnings growth of 76 percent

PITTSBURGH, April 23, 2018 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the first quarter of 2018.

MSA Safety Incorporated

Quarterly Highlights

  • Revenue was $326 million, increasing 23 percent from a year ago on a reported basis and 18 percent on a constant currency basis. Excluding the recent acquisition of Globe, organic revenue was up 7 percent on a constant currency basis.
  • GAAP operating income was $44 million or 13.6 percent of sales, compared to $19 million or 7.0 percent of sales in the same period a year ago. Adjusted operating income was $55 million or 16.8 percent of sales, compared to $33 million or 12.5 percent of sales in the same period a year ago. Adjusted operating margin expansion of 430 basis points was driven by improved gross profit and operating expense leverage.
  • GAAP earnings were $32 million or $0.83 per diluted share, compared to $14 million or $0.37 per diluted share in the same period a year ago. Adjusted earnings were $39 million or $1.01 per diluted share, compared to $22 million or $0.58 per diluted share in the same period a year ago.

Comments from Management

"Our first quarter results reflect continued strength in our key end markets and geographies, and strong execution of our focused growth strategy," said William M. Lambert, MSA Chairman and CEO.  "Double-digit revenue growth was supported by growth across all of our core product lines as well as returns on the acquisition of Globe.  After reducing our cost structure by more than $25 million in 2016 and 2017, we were able to drive quarterly earnings growth of 76 percent on revenue growth of 23 percent," he said. Mr. Lambert added that the company has seen a step-change in its profitability profile over the past several years.

"We are pleased with the strong start to 2018 and are encouraged by the favorable dynamics we're seeing across both our industrial and fire service end markets. Our quarterly revenue growth and improving order book reflect the traction we are gaining from efforts to strengthen our leadership positions in each of our core product areas and market segments," Mr. Lambert said.

"The ongoing strengthening of key industrial markets and recent successes in our global fire service business has provided the backdrop for a very solid start to 2018. Our focus now is on sustaining that level of performance while continuing to diligently manage our cost structure. Our improving order book - coupled with our streamlined cost structure and benefits of U.S. Tax Reform - positions us well to continue increasing shareholder value in 2018 and beyond," Mr. Lambert concluded.

 

MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except per share amounts)



Three Months Ended March 31,


2018


2017





Net sales

$

325,894



$

265,765


Cost of products sold

178,555



146,043


Gross profit

147,339



119,722






Selling, general and administrative

80,250



76,786


Research and development

12,548



10,998


Restructuring charges

5,274



12,739


Currency exchange losses, net

2,008



580


Other operating expense

2,824




Operating income

44,435



18,619






Interest expense

4,781



3,591


Other income, net

 

(2,340)



(1,458)


Total other expense, net

2,441



2,133






Income before income taxes

41,994



16,486


Provision for income taxes

9,505



1,796


Net income

32,489



14,690


Net income attributable to noncontrolling interests

(118)



(277)


Net income attributable to MSA Safety Incorporated

$

32,371



$

14,413






Earnings per share attributable to MSA Safety Incorporated common shareholders:




Basic

$

0.85



$

0.38


Diluted

$

0.83



$

0.37






Basic shares outstanding

38,216



37,766


Diluted shares outstanding

38,778



38,593


 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)



March 31, 2018


December 31, 2017

Assets




Cash and cash equivalents

$

124,883



$

134,244


Trade receivables, net

254,068



244,198


Inventories

171,203



153,739


Notes receivable, insurance companies

3,463



17,333


Other current assets

78,678



72,783


    Total current assets

632,295



622,297






Property, net

154,848



157,014


Prepaid pension cost

85,941



83,060


Goodwill

426,860



422,185


Notes receivable, insurance companies, noncurrent

59,954



59,567


Insurance receivable, noncurrent

118,349



123,089


Other noncurrent assets

217,521



217,614


   Total assets

$

1,695,768



$

1,684,826






Liabilities and shareholders' equity




Notes payable and current portion of long-term debt, net

$

26,780



$

26,680


Accounts payable

68,142



87,061


Other current liabilities

178,482



175,538


   Total current liabilities

273,404



289,279






Long-term debt, net

441,426



447,832


Pensions and other employee benefits

173,840



170,773


Deferred tax liabilities

10,249



9,341


Other noncurrent liabilities

155,663



165,023


Total shareholders' equity

641,186



602,578


   Total liabilities and shareholders' equity

$

1,695,768



$

1,684,826


 

MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)



Three Months Ended March 31,


2018


2017





Net income

$

32,489



$

14,690


Depreciation and amortization

9,671



8,752


Change in working capital and other operating

(24,807)



72,948


  Cash flow from operating activities

17,353



96,390






Capital expenditures

(3,241)



(1,442)


Property disposals and other investing

58



165


  Cash flow used in investing activities

(3,183)



(1,277)






Change in debt

(9,401)



(96,437)


Cash dividends paid

(13,390)



(12,455)


Company stock purchases

(2,673)



(3,811)


Other financing

848



6,267


  Cash flow used in financing activities

(24,616)



(106,436)






Effect of exchange rate changes on cash,

cash equivalents and restricted cash

1,363



1,625






Decrease in cash, cash equivalents and restricted cash

(9,083)



(9,698)


 

 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands)



Americas


International


Corporate


Consolidated

Three Months Ended March 31, 2018








Sales to external customers

$

209,129



$

116,765





$

325,894


Operating income







44,435


Operating margin %







13.6

%

Restructuring charges







5,274


Currency exchange losses, net







2,008


Other operating expense







2,824


Strategic transaction costs







$

94


Adjusted operating income (loss)

50,086



12,778



(8,229)



$

54,635


Adjusted operating margin %

23.9

%


10.9

%




16.8

%

 


Americas


International


Corporate


Consolidated

Three Months Ended March 31, 2017








Sales to external customers

$

166,568



$

99,197





$

265,765


Operating income







18,619


Operating margin %







7.0

%

Restructuring charges







12,739


Currency exchange losses, net







580


Other operating expense








Strategic transaction costs







1,337


Adjusted operating income (loss)

36,151



7,796



(10,672)



$

33,275


Adjusted operating margin %

21.7

%


7.9

%




12.5

%

The Americas segment is comprised of our operations in the U.S., Canada and Latin America.  The International segment is comprised of our operations in all other parts of the world including Europe, Africa, the Middle East, India, China, South East Asia and Australia.  Certain global expenses are allocated to each segment in a manner consistent with where the benefits from the expenses are derived.

Adjusted operating income (loss) and adjusted operating margin are the measures used by the chief operating decision maker to evaluate segment performance and allocate resources.  As such, management believes that adjusted operating income (loss) and adjusted operating margin are useful metrics for investors. Adjusted operating income (loss) is defined as operating income excluding restructuring charges, currency exchange gains / losses, other operating expense and strategic transaction costs.  Adjusted operating margin is defined as adjusted operating income (loss) divided by segment sales to external customers.  Adjusted operating income (loss) and adjusted operating margin are not recognized terms under GAAP and therefore do not purport to be alternatives to operating income or operating margin as a measure of operating performance.  The Company's definition of adjusted operating income (loss) and adjusted operating margin may not be comparable to similarly titled measures of other companies.  As such, management believes that it is appropriate to consider operating income determined on a GAAP basis in addition to these non-GAAP measures.

 

MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)


Consolidated



Three Months Ended March 31, 2018


Breathing Apparatus

Firefighter Helmets and Protective Apparel(a)

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

9

%

209

%

13

%

16

%

20

%

17

%

27

%


%


23

%

Plus: Currency translation effects

(4)

%

(12)

%

(2)

%

(4)

%

(6)

%

(6)

%

(4)

%


(5)

%


(5)

%

Constant currency sales change

5

%

197

%

11

%

12

%

14

%

11

%

23

%


(5)

%


18

%

Less: Acquisitions

%

198

%

%

%

%

%

13

%


%


11

%

Organic constant currency change

5

%

(1)

%

11

%

12

%

14

%

11

%

10

%


(5)

%


7

%

 

(a) 

Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. Organic constant currency revenue growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

 

MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)


Americas Segment



Three Months Ended March 31, 2018


Breathing Apparatus

Firefighter Helmets and Protective Apparel(a)

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

1

%

470

%

12

%

15

%

16

%

26

%

30

%


(4)

%


26

%

Plus: Currency translation effects

%

(1)

%

%

%

%

(2)

%

%


%


(1)

%

Constant currency sales change

1

%

469

%

12

%

15

%

16

%

24

%

30

%


(4)

%


25

%

Less: Acquisitions

%

476

%

%

%

%

%

20

%


%


17

%

Organic constant currency change

1

%

(7)

%

12

%

15

%

16

%

24

%

10

%


(4)

%


8

%

 

(a) 

Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. Organic constant currency revenue growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

 

MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)


International Segment



Three Months Ended March 31, 2018


Breathing Apparatus

Firefighter Helmets and Protective Apparel

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

29

%

17

%

16

%

17

%

25

%

8

%

21

%


5

%


18

%

Plus: Currency translation effects

(14)

 

%

(13)

 

%

(9)

 

%

(11)

 

%

(12)

 

%

(9)

 

%

(12)

 

%


(11)

 

%


(12)

 

%

Constant currency sales change

15

%

4

%

7

%

6

%

13

%

(1)

 

%

9

%


(6)

 

%


6

%

Less: Acquisitions

%

%

%

%

%

%

%


%


%

Organic constant currency change

15

%

4

%

7

%

6

%

13

%

(1)

 

%

9

%


(6)

 

%


6

%

 

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. Organic constant currency revenue growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

 

MSA Safety Incorporated

Supplemental Segment Information (Unaudited)

Summary of constant currency revenue growth by segment and product group



Three Months Ended March 31, 2018


Consolidated


Americas


International

Firefighter Helmets and Protective Apparel(a)

197

%


469

%


4

%

Fixed Gas and Flame Detection

14

%


16

%


13

%

Portable Gas Detection

12

%


15

%


6

%

Industrial Head Protection

11

%


12

%


7

%

Fall Protection

11

%


24

%


(1)%


Breathing Apparatus

5

%


1

%


15

%

Core Sales

23

%


30

%


9

%

Core excluding Acquisitions

10

%


10

%


9

%







Non-Core Sales

(5)%



(4)%



(6)%








Net Sales

18

%


25

%


6

%

Net Sales excluding Acquisitions

7

%


8

%


6

%

 

(a) 

Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.

 

MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Adjusted earnings (Unaudited)

Adjusted earnings per diluted share (Unaudited)

(In thousands, except per share amounts)



Three Months Ended March 31,




2018


2017


%
Change







Net income attributable to MSA Safety Incorporated

$

32,371



$

14,413



125%

Tax benefit associated with ASU 2016-09: Improvements to employee share-based payment accounting

(914)



(2,782)




Subtotal

31,457



11,631



170%







Restructuring charges

5,274



12,739




Currency exchange losses, net

2,008



580




Other operating expense

2,824






Strategic transaction costs

94



1,337




Asset related losses and other, net

17



64




Income tax expense on adjustments

(2,534)



(4,088)




Adjusted earnings

$

39,140



$

22,263



76%







Adjusted earnings per diluted share

$

1.01



$

0.58



74%

 

Management believes that adjusted earnings and adjusted earnings per diluted share are useful measures for investors, as management uses these measures to internally assess the company's performance and ongoing operating trends. There can be no assurances that additional special items will not occur in future periods, nor that MSA's definition of adjusted earnings is consistent with that of other companies. As such, management believes that it is appropriate to consider both net income determined on a GAAP basis as well as adjusted earnings.

About MSA:  
Established in 1914, MSA Safety Incorporated is the global leader in the development, manufacture and supply of safety products that protect people and facility infrastructures.  Many MSA products integrate a combination of electronics, mechanical systems and advanced materials to protect users against hazardous or life-threatening situations.  The company's comprehensive product line is used by workers around the world in a broad range of markets, including the oil, gas and petrochemical industry, the fire service, the construction industry, mining and the military.  MSA's core products include self-contained breathing apparatus, fixed gas and flame detection systems, portable gas detection instruments, industrial head protection products, firefighter helmets and protective apparel, and fall protection devices.  With 2017 revenues of $1.2 billion, MSA employs approximately 4,700 people worldwide.  The company is headquartered north of Pittsburgh in Cranberry Township, Pa., and has manufacturing operations in the United States, Europe, Asia and Latin America.  With more than 40 international locations, MSA realizes approximately half of its revenue from outside North America.  For more information visit MSA's web site at www.MSAsafety.com.

Cautionary Statement Regarding Forward-Looking Statements:
Except for historical information, certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward looking statements involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Any number of factors could cause actual results to differ materially from projections or forward looking statements, including without limitation global economic conditions, spending patterns of government agencies, competitive pressures, the impact of acquisitions and related integration activities, product liability claims, the success of new product introductions, currency exchange rate fluctuations and the risks of doing business in foreign countries. A full listing of these risks, uncertainties and other factors are detailed from time-to-time in our filings with the United States Securities and Exchange Commission ("SEC"), including our most recent Form 10-K filed on February 22, 2018. You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties.  MSA's SEC filings are readily obtainable at no charge at www.sec.gov, as well as on its own investor relations website at http://investors.MSAsafety.com. MSA undertakes no duty to publicly update any forward looking statements contained herein, except as required by law.

Non-GAAP Financial Measures: 
This earnings release includes certain non-GAAP financial measures. These financial measures include constant currency revenue growth, organic constant currency revenue growth, adjusted operating income, adjusted operating margin, adjusted earnings and adjusted earnings per diluted share. The presentation of these financial measures does not comply with U.S. generally accepted accounting principles ("GAAP"). For an explanation of these measures, together with a reconciliation to the most directly comparable GAAP financial measure, see the Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures in the financial tables section above.

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SOURCE MSA


Source: PR Newswire (April 23, 2018 - 4:45 PM EDT)

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