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MSA Announces Second Quarter Results
Local currency sales growth of 11 percent driven by a surge in G1 SCBA sales

PITTSBURGH, July 22, 2015 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the second quarter of 2015.

Quarterly Highlights

  • Reported revenue was $287 million, up 2 percent from the second quarter of 2014. Income from continuing operations was $24 million or $0.62 per diluted share. Adjusted earnings were $25 million or $0.67 per diluted share, increasing 12 percent from the second quarter of 2014.

  • Core sales grew 10 percent on a local currency basis in the quarter, with strong performance in fire service products and fixed gas and flame detection (FGFD) systems. This was offset by continued weakness in portable gas detection and industrial head protection, which are more exposed to employment levels within the energy market vertical.

  • Local currency sales of self-contained breathing apparatus (SCBA) increased 41 percent globally, driven by a 90 percent increase in North America, as the manufacturing ramp up of the company's groundbreaking G1 SCBA platform continues to gain traction. Global SCBA backlog at the end of the quarter was $77 million, compared to $82 million at the end of the first quarter of 2015 and almost $40 million at this same time a year ago.

  • Despite significant weakness in Brazil on recessionary conditions and a slower growth environment in Asia, local currency sales across emerging markets increased 9 percent. This improvement was supported by large order shipments in the Middle East and Mexico.

  • R&D investments made in new products are generating strong returns, as products developed and launched within the last five years represented 45 percent of quarterly core product revenue, compared to 32 percent a year ago.

  • In the quarter, MSA used $12 million of cash flow to fund dividend payments, $7 million to repurchase common stock to offset dilution as part of its newly authorized $100 million stock repurchase plan and $4 million to service debt obligations as it continues to reduce leverage.

Comments from Management

"Our quarterly results reflect our team's highly focused execution of our strategy, despite challenging conditions that continue to impact certain areas of our business," said William M. Lambert, MSA Chairman, President and CEO. "While certain MSA products that are more closely aligned with employment levels in the energy market continued an expected weak trajectory, we realized double-digit sales growth in SCBA, FGFD and fire helmets in the quarter. Incoming order pace for the G1 SCBA remains strong, the backlog pipeline is robust and we're hitting our stride from a production standpoint," Mr. Lambert continued, explaining that G1 SCBA manufacturing in June reflected the highest level of monthly production to date.  He also noted that overall sales growth is 7 percent year-to-date on a local currency basis, tracking at the high end of the company's targeted range of mid-single digit sales growth for 2015.

"Although we saw strong sales and earnings growth in the quarter, headwinds associated with lower commodity prices, economic conditions in certain emerging markets and weakness in foreign currencies weighed on our results," Mr. Lambert said. "Looking ahead, I expect these challenges to persist into the second half of 2015. However, the demand we're seeing for the G1 SCBA and our sizable backlog in this area provides momentum as we head into the third quarter, helping us navigate these headwinds," he concluded.

 

MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except per share amounts)



Three Months Ended
June 30,


Six Months Ended
June 30,


2015


2014


2015


2014









Net sales

$

287,011



$

282,493



$

543,719



$

547,538


Other income, net

94



45



735



401



287,105



282,538



544,454



547,939










Cost of products sold

156,522



152,823



296,407



296,053


Selling, general and administrative

77,588



82,835



158,956



168,076


Research and development

12,984



11,943



23,898



23,184


Restructuring and other charges

227



857



958



2,757


Interest expense

2,502



2,594



4,975



5,124


Currency exchange losses (gains), net

1,557



(309)



(991)



43



251,380



250,743



484,203



495,237










Income from continuing operations before income taxes

35,725



31,795



60,251



52,702


Provision for income taxes

12,350



9,753



27,734



17,357


 

Income from continuing operations

23,375



22,042



32,517



35,345


Income from discontinued operations

470



453



778



1,067


Net income

23,845



22,495



33,295



36,412


Net loss (income) attributable to noncontrolling interests

453



(7)



685



102


Net income attributable to MSA Safety Incorporated

24,298



22,488



33,980



36,514


















Income from continuing operations

23,722



22,132



33,038



35,654


Income from discontinued operations

576



356



942



860


Net income attributable to MSA Safety Incorporated

24,298



22,488



33,980



36,514










Earnings per share attributable to MSA Safety Incorporated common shareholders:








Basic








Income from continuing operations

$0.63



$0.59



$0.88



$0.96


Income from discontinued operations

$0.02



$0.01



$0.03



$0.02


  Net income

$0.65



$0.60



$0.91



$0.98










Diluted








Income from continuing operations

$0.62



$0.58



$0.87



$0.94


Income from discontinued operations

$0.01



$0.01



$0.03



$0.02


  Net income

$0.63



$0.59



$0.90



$0.96











Basic shares outstanding

37,351



37,128



37,323



37,072


Diluted shares outstanding

37,826



37,719



37,807



37,669


 

 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)



June 30, 2015


December 31, 2014

Assets




  Cash and cash equivalents

$

88,134



$

105,998


  Trade receivables, net

218,833



211,440


  Inventories

150,415



122,954


  Other current assets

75,226



57,477


    Total current assets

532,608



497,869






Property, net

144,955



151,352


Prepaid pension cost

79,330



75,017


Goodwill

248,416



252,520


Other noncurrent assets

281,270



288,034


   Total assets

1,286,579



1,264,792






Liabilities and shareholders' equity




  Notes payable and current portion of long-term debt

$

6,667



$

6,700


  Accounts payable

80,465



70,210


  Other current liabilities

194,223



157,147


   Total current liabilities

281,355



234,057






Long-term debt

263,000



245,000


Pensions and other employee benefits

165,272



174,598


Deferred tax liabilities

28,334



26,306


Other noncurrent liabilities

16,059



46,198


Total shareholders' equity

532,559



538,633


   Total liabilities and shareholders' equity

1,286,579



1,264,792


 

 

MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)



Three Months Ended
June 30,


Six Months Ended
June 30,


2015


2014


2015


2014









Net income

$

23,845



$

22,495



$

33,295



$

36,412


Depreciation and amortization

8,727



7,656



15,664



15,115


Change in working capital and other operating

(8,196)



(24,238)



(41,246)



(36,217)


  Cash from operations

24,376



5,913



7,713



15,310










Capital expenditures

(8,546)



(7,324)



(16,015)



(14,528)


Property disposals

7,969





7,969




  Cash from investing

(577)



(7,324)



(8,046)



(14,528)










Cash dividends paid

(11,969)



(11,320)



(23,522)



(22,501)


Change in debt

(3,549)



4,886



18,004



20,183


Share repurchase program

(7,104)





(7,104)




Other financing

480



1,621



(255)



2,075


  Cash from financing

(22,142)



(4,813)



(12,877)



(243)










Exchange rate changes

176



195



(4,654)



(621)










Increase (decrease) in cash

1,833



(6,029)



(17,864)



(82)


 

 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands)



Three Months Ended
June 30,


Six Months Ended
June 30,


2015


2014


2015


2014









Net sales








  North America

$

156,193



$

138,782



$

289,757



$

268,303


  Europe

75,317



78,883



141,330



153,821


  International

55,501



64,828



112,632



125,414


    Total

287,011



282,493



543,719



547,538










Net income (loss)








  North America

$

22,253



$

19,407



$

36,684



$

33,667


  Europe

6,596



6,780



2,159



10,232


  International

2,989



3,172



6,651



7,763


  Corporate

(7,655)



(7,473)



(12,492)



(15,359)


  Reconciling Items

(461)



246



36



(649)


  Income from continuing operations

23,722



22,132



33,038



35,654


  Income from discontinued operations

576



356



942



860


     Total

24,298



22,488



33,980



36,514


 

The Corporate segment was established on January 1, 2015 to reflect the activities of centralized functions in our corporate headquarters and to capture results in a manner that the chief operating decision maker reviews.  The corporate segment primarily consists of administrative expenses and centrally-managed costs such as interest expense and foreign exchange gains or losses. Additionally, effective January 1, 2015, we changed the allocation methodology applied to Research and Development expense.  The 2014 segment results have been recast to conform with current period presentation.

 

MSA Safety Incorporated

Supplemental Segment Information (Unaudited)

Local Currency Revenue Growth



Three Months Ended June 30, 2015


Consolidated


North America


Europe


International









Breathing Apparatus

41

%


90

%


1

%


(8)

%

Fire and Rescue Helmets

11

%


(3)

%


(10)

%


146

%

Fixed Gas and Flame Detection

10

%


6

%


21

%


%

Fall Protection

%


8

%


(12)

%


(13)

%

Portable Gas Detection

(5)

%


(18)

%


12

%


17

%

Industrial Head Protection

(9)

%


(8)

%


20

%


(16)

%

  Core Sales

10

%


15

%


9

%


%









Non-Core Sales

12

%


10

%


35

%


(11)

%









Net Sales

11

%


14

%


16

%


(3)

%


















Six Months Ended June 30, 2015


Consolidated


North America


Europe


International









Breathing Apparatus

34

%


77

%


2

%


(8)

%

Fire and Rescue Helmets

12

%


1

%


(2)

%


93

%

Fixed Gas and Flame Detection

9

%


8

%


4

%


23

%

Fall Protection

3

%


6

%


5

%


(2)

%

Portable Gas Detection

(4)

%


(18)

%


19

%


15

%

Industrial Head Protection

(8)

%


(8)

%


19

%


(14)

%

  Core Sales

9

%


12

%


6

%


5

%









Non-Core Sales

2

%


(4)

%


23

%


(12)

%









Net Sales

7

%


9

%


10

%


%

 

 

MSA Safety Incorporated

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

Adjusted Earnings / Earnings per Share (Unaudited)

(In thousands, except per share amounts)



Three Months Ended
June 30,




Six Months Ended
June 30,




2015


2014


%

Change


2015


2014


%
Change













Income from continuing operations attributable to MSA Safety Incorporated

23,722



22,132



7.2%


33,038



35,654



(7.3)%

Nonrecurring tax charges associated with European reorganization







7,605






 

Income from continuing operations excluding nonrecurring tax charges

23,722



22,132



7.2%


40,643



35,654



14.0%













Asset related loss, net

332







332






Foreign currency loss / (gain), net

1,557



(309)





(991)



43




Self insured legal settlements and defense costs

256



140





342



2,257




Restructuring charges

227



857





958



2,757




Income tax expense on adjustments

(820)



(211)





(214)



(1,665)




Adjusted earnings

25,274



22,609



11.8%


41,070



39,046



5.2%













Adjusted earnings per diluted
share

$

0.67



$

0.60



11.7%


$

1.09



$

1.04



4.8%

 

Management believes that adjusted earnings and adjusted earnings per share are useful measures for investors when analyzing 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 line of products 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.  The company's core products include self-contained breathing apparatus, fixed gas and flame detection systems, portable gas detection instruments, industrial head protection, fire and rescue helmets, and fall protection devices. With 2014 revenues of $1.1 billion, MSA employs approximately 5,000 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 website 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, 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 25, 2015. 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 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.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/msa-announces-second-quarter-results-300117326.html

SOURCE MSA

For further information: Media Relations Contact: Mark Deasy (724) 741 - 8570; Investor Relations Contact: Ken Krause (724) 741 - 8534