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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_______________________
FORM 8-K
_______________________

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 23, 2018

https://cdn.kscope.io/7b578123c906552b30444d5c86eea919-q12018_image.jpg

MSA SAFETY INCORPORATED
(Exact name of registrant as specified in its charter)
Pennsylvania
 
1-15579
 
46-4914539
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification Number)

1000 Cranberry Woods Drive
Cranberry Township, Pennsylvania
 
16066-5207
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: 724-776-8600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐




Item 2.02
Results of Operations and Financial Condition
On April 23, 2018, the Company issued a press release announcing its financial results for the quarter ended March 31, 2018. A copy of the press release is furnished herewith as Exhibit 99.1 to this report.

Item 9.01
Financial Statements and Exhibits
(d) Exhibits

99.1
MSA Safety Incorporated Press Release dated April 23, 2018, announcing financial results for the quarter ended March 31, 2018.






SIGNATURE
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 hereunto duly authorized.

 
 
 
MSA SAFETY INCORPORATED
(Registrant)
 
 
By
 
/s/ Kenneth D. Krause
 
 
Kenneth D. Krause
 
 
Sr. Vice President, Chief Financial Officer and Treasurer
April 23, 2018




EXHIBIT INDEX

Exhibit No.     Description

99.1



Exhibit
1


https://cdn.kscope.io/7b578123c906552b30444d5c86eea919-msaa12.jpg
FOR IMMEDIATE RELEASE

FROM: MSA Safety Incorporated
Ticker: MSA (NYSE)
Media Relations Contact: Mark Deasy (724) 741 - 8570
Investor Relations Contact: Elyse Lorenzato (724) 741 - 8525

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 - Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the first quarter of 2018.

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.





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2


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.












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3

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



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4

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







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5

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
)




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6

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.

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7

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.

(more)

8

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.

(more)

9

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.

(more)

10

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.




























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11

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.


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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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