Press Release

Apr 24,2019

MSA Announces First Quarter Results

Quarterly GAAP earnings were $23 million; Adjusted earnings were $44 million, growing 13 percent from a year ago

PITTSBURGH, April 24, 2019 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the first quarter of 2019.

MSA Safety Incorporated

Quarterly Highlights

  • Revenue was $326 million, consistent with a year ago on a reported basis and increasing  3 percent on a constant currency basis.
  • GAAP operating income was $32 million or 9.9 percent of sales, compared to $44 million or 13.6 percent of sales in the same period a year ago. Adjusted operating income was $58 million or 17.9 percent of sales, compared to $55 million or 16.8 percent of sales in the same period a year ago. Adjusted operating margin increased 110 basis points from a year ago on product margin expansion and operating expense leverage.
  • GAAP earnings were $23 million or $0.59 per diluted share, compared to $32 million or $0.83 per diluted share in the same period a year ago.  Adjusted earnings increased 13 percent to $44 million or $1.14 per diluted share, compared to $39 million or $1.01 per diluted share in the same period a year ago.
  • Current quarter GAAP earnings include $21 million of expense related to the company's International footprint rationalization program, which is designed to improve profitability in MSA's International segment. $15 million of this charge reflects the recognition of currency translation adjustments associated with the closure of MSA's locations in South Africa. This non-cash charge is recorded within Currency Exchange Losses, while the remaining $6 million of expense is recorded within Restructuring Charges.
  • Recently announced a definitive agreement to acquire California-based Sierra Monitor Corporation (OTCQB: SRMC) in an all-cash transaction valued at approximately $33 million. Sierra Monitor is a leading provider of fixed gas and flame detection instruments and Industrial Internet of Things solutions that connect and help protect high-value infrastructure assets. The transaction is expected to close in the second quarter of 2019, subject to customary closing conditions.

Comments from Management

"MSA delivered another quarter of profitable growth. Through new product introductions and continuous improvement in our cost structure, we were able to drive adjusted earnings growth of 13 percent on revenue growth of 3 percent," said Nish Vartanian, MSA President and CEO.  He noted that the company's incoming orders and backlog levels reflect continued strength in its key end markets and geographies, highlighted by its book-to-bill ratio of 107 percent in the quarter.

Mr. Vartanian commented that the company's revenue growth, increase in earnings and margin expansion in the quarter demonstrate the returns MSA is seeing on its R&D investments and its focus on improving productivity.  "Overall, our market leading innovations like the G1 SCBA for firefighters and new industrial market products in gas detection and fall protection are supporting improvements in our sales vitality index and contributing nicely to our ability to drive profitable growth," he said. The company's sales vitality index - which measures the percentage of revenue from products introduced within the past five years - trended above 35 percent for the quarter.

"The momentum in our order book, coupled with our strong profitability profile and balance sheet, positions us well to continue investing in our business and creating value for all MSA stakeholders. In 2019 - our 105th year in business - we remain focused on executing our corporate strategy and fulfilling our collective mission to advance workplace safety throughout the world," Mr. Vartanian concluded.

 

 

MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except per share amounts)



Three Months Ended


March 31,


2019


2018





Net sales

$

326,038



$

325,894


Cost of products sold

176,056



178,555


Gross profit

149,982



147,339






Selling, general and administrative

78,429



80,250


Research and development

13,705



12,548


Restructuring charges

5,831



5,274


Currency exchange losses, net (a)

16,961



2,008


Product liability expense

2,896



2,824


Operating income

32,160



44,435






Interest expense

2,360



4,781


Other income, net

(2,579)



(2,340)


Total other (income) expense, net

(219)



2,441






Income before income taxes

32,379



41,994


Provision for income taxes

9,003



9,505


Net income

23,376



32,489



Net income attributable to noncontrolling interests

(144)



(118)



Net income attributable to MSA Safety Incorporated

$

23,232



$

32,371






Earnings per share attributable to MSA Safety Incorporated
common shareholders:




Basic

$

0.60



$

0.85


Diluted

$

0.59



$

0.83






Basic shares outstanding

38,536



38,216


Diluted shares outstanding

39,084



38,778


 

(a) Currency exchange losses includes a $15.4 million non-cash charge related to the recognition of currency translation adjustments associated with the closure of MSA's South Africa affiliates.

 

 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)



March 31, 2019


December 31, 2018

Assets




Cash and cash equivalents

$

107,668



$

140,095


Trade receivables, net

253,351



245,032


Inventories

172,663



156,602


Notes receivable, insurance companies

3,586



3,555


Other current assets

135,523



111,339


    Total current assets

672,791



656,623






Property, net

156,099



157,940


Operating lease assets, net

52,020




Prepaid pension cost

61,500



57,568


Goodwill

415,254



413,640


Notes receivable, insurance companies, noncurrent

56,368



56,012


Insurance receivable, noncurrent

52,640



56,866


Other noncurrent assets

204,696



209,363


   Total assets

$

1,671,368



$

1,608,012






Liabilities and shareholders' equity




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

$

20,155



$

20,063


Accounts payable

75,524



78,367


Other current liabilities

170,591



183,630


   Total current liabilities

266,270



282,060






Long-term debt, net

357,304



341,311


Pensions and other employee benefits

166,294



166,101


Noncurrent operating lease liabilities

41,962




Deferred tax liabilities

7,613



7,164


Product liability and other noncurrent liabilities

168,640



171,857


Total shareholders' equity

663,285



639,519


   Total liabilities and shareholders' equity

$

1,671,368



$

1,608,012


 

 

MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)



Three Months Ended


March 31,


2019


2018





Net income

$

23,376



$

32,489


Depreciation and amortization

9,326



9,671


Change in working capital and other operating

(31,485)



(24,807)


  Cash flow from operating activities

1,217



17,353






Capital expenditures

(4,897)



(3,241)


Change in short-term investments

(18,941)




Property disposals

12



58


  Cash flow used in investing activities

(23,826)



(3,183)






Change in debt

14,091



(9,401)


Cash dividends paid

(14,652)



(13,390)


Other financing

(5,981)



(1,825)


  Cash flow used in financing activities

(6,542)



(24,616)






Effect of exchange rate changes on cash,

cash equivalents and restricted cash

(3,221)



1,363






Decrease in cash, cash equivalents and restricted cash

$

(32,372)



$

(9,083)


 

 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands, except percentage amounts)



Americas


International


Corporate


Consolidated

Three Months Ended March 31, 2019








Sales to external customers

$

213,687



$

112,351



$



$

326,038


Operating income







32,160


Operating margin %







9.9

%

Restructuring charges







5,831


Currency exchange losses, net







16,961


Product liability expense







2,896


Strategic transaction costs







456


Adjusted operating income (loss)

54,803



11,040



(7,539)



58,304


Adjusted operating margin %

25.6

%


9.8

%




17.9

%

Depreciation and amortization







9,326


Adjusted EBITDA

60,900



14,171



(7,441)



67,630


Adjusted EBITDA %

28.5

%


12.6

%




20.7

%









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


Product liability 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

%

Depreciation and amortization







9,671


Adjusted EBITDA

56,225



16,209



(8,128)



64,306


Adjusted EBITDA %

26.9

%


13.9

%




19.7

%

 

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), adjusted operating margin, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA 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), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin are useful metrics for investors. Adjusted operating income (loss) is defined as operating income excluding restructuring charges, currency exchange gains / losses, product liability expense and strategic transaction costs and adjusted operating margin is defined as adjusted operating income (loss) divided by segment sales to external customers.  Adjusted EBITDA is defined as adjusted operating income (loss) plus depreciation and amortization and adjusted EBITDA margin is defined as adjusted EBITDA divided by segment sales to external customers.   Adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA 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), adjusted operating margin, adjusted EBITDA and adjusted EBITDA 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)


Consolidated



Three Months Ended March 31, 2019


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

1

%

(2)

%

2

%

(4)

%

(1)

%

17

%

1

%


(7)

%


%


Plus: Currency
translation effects

3

%

2

%

4

%

4

%

3

%

5

%

3

%


5

%


3

%


Constant
currency sales
change

4

%

%

6

%

%

2

%

22

%

4

%


(2)

%


3

%

 

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. There can be no assurances that MSA's definition of 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 this non-GAAP financial measure.

 

 

MSA Safety Incorporated

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

Constant currency revenue growth (Unaudited)


Americas Segment



Three Months Ended March 31, 2019


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

3

%

1

%

%

(6)

%

1

%

27

%

2

%


1

%


2

%


Plus: Currency
translation effects

%

%

3

%

1

%

1

%

3

%

1

%


3

%


1

%


Constant
currency sales
change

3

%

1

%

3

%

(5)

%

2

%

30

%

3

%


4

%


3

%

 

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. There can be no assurances that MSA's definition of 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 this non-GAAP financial measure.

 

 

MSA Safety Incorporated

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

Constant currency revenue growth (Unaudited)


International Segment



Three Months Ended March 31, 2019


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

(3)

%

(13)

%

11

%

2

%

(3)

%

5

%

(1)

%


(15)

%


(4)

%


Plus: Currency
translation effects

8

%

7

%

8

%

8

%

7

%

7

%

7

%


7

%


8

%


Constant
currency sales
change

5

%

(6)

%

19

%

10

%

4

%

12

%

6

%


(8)

%


4

%

 

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. There can be no assurances that MSA's definition of 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 this non-GAAP financial measure.

 

 

MSA Safety Incorporated

Supplemental Segment Information (Unaudited)

Summary of constant currency revenue growth by segment and product group



Three Months Ended March 31, 2019


Consolidated


Americas


International

Fall Protection

22

%


30

%


12

%

Industrial Head Protection

6

%


3

%


19

%

Breathing Apparatus

4

%


3

%


5

%

Fixed Gas and Flame Detection

2

%


2

%


4

%

Portable Gas Detection

%


(5)

%


10

%

Firefighter Helmets & Protective Apparel

%


1

%


(6)

%

Core Sales

4

%


3

%


6

%







Non-Core Sales

(2)

%


4

%


(8)

%







Net Sales

3

%


3

%


4

%

 

 

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,




2019


2018


%
Change







Net income attributable to MSA Safety Incorporated

23,232



32,371



(28)%

Non-deductible non-cash charge related to the recognition of
currency translation adjustments (a)

15,359






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

(2,422)



(914)




Subtotal

36,169



31,457



15%







Restructuring charges

5,831



5,274




Currency exchange losses, net

1,602



2,008




Product liability expense

2,896



2,824




Strategic transaction costs

456



94




Asset related losses and other, net

25



17




Income tax expense on adjustments

(2,594)



(2,534)




Adjusted earnings

$

44,385



$

39,140



13%







Adjusted earnings per diluted share

$

1.14



$

1.01



13%

 

(a) Included in Currency exchange losses, net on the Statement of Income.

 

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 2018 revenues of $1.4 billion, MSA employs approximately 4,800 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, 2019. 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 press release includes certain non-GAAP financial measures. These financial measures include constant currency revenue growth, adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA 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 Safety

Media Relations Contact: Mark Deasy (724) 741 - 8570; Investor Relations Contact: Elyse Lorenzato (724) 741 - 8525

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 lifethreatening 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

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