Press Release

Printer Friendly Version View printer-friendly version
<< Back
MSA Announces First Quarter Results
Higher product margins and lower cost structure drive 14 percent growth in quarterly net income

PITTSBURGH, April 25, 2017 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the first quarter of 2017.

Quarterly Highlights

  • Reported revenue was $266 million, decreasing 5 percent from a year ago on a reported basis, and 4 percent on a constant currency basis.
  • Net income from continuing operations was $14 million or $0.37 per diluted share, compared to $13 million or $0.34 per diluted share in the same period a year ago. Adjusted earnings were $22 million or $0.58 per diluted share, compared to $18 million or $0.48 per diluted share a year ago.
  • Cash flow from operating activities was $96 million, compared to a use of cash of $11 million in the same period a year ago. Working capital as a percentage of sales decreased by 300 basis points compared to the first quarter of 2016.
  • The company continues to make progress collecting its insurance receivable, and received $81 million during the quarter from one of its insurance carriers. At the end of the quarter, the insurance receivable balance was $59 million, down from $230 million at the end of the first quarter of 2016.

Comments from Management

"Our first quarter performance reflects the leverage we are gaining from our streamlined cost structure and continued focus on improving profitability," said William M. Lambert, MSA Chairman, President and CEO. "Despite a difficult revenue comparison in self-contained breathing apparatus (SCBA) resulting from several large orders shipped in the first quarter of 2016, we realized adjusted earnings growth of 24 percent," he continued.

"After seeing solid order improvement late last year in short-cycle industrial products, like hard hats and portable gas detectors, we continued to gain traction in these areas in the first quarter," Mr. Lambert commented.  He noted that quarterly revenue from portable gas detection and industrial head protection increased by 13 percent and 16 percent, respectively.  Mr. Lambert added that the company continues to drive higher product margins across substantially all of its core product groups, the most significant of which occurred in its SCBA line, driven by a combination of new product offerings and reductions in product costs associated with value engineering.

"While we've made solid progress in expanding product margins and lowering operating costs through enhanced productivity, we remain keenly focused on investing in programs that drive profitable growth. Through these investments we will continue to deliver innovative solutions for our customers, gain market share in our core product areas, and increase value for all of our stakeholders," Mr. Lambert concluded.

 

MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except per share amounts)



Three Months Ended March 31,


2017


2016





Net sales

$

265,765



$

279,268


Cost of products sold

146,043



158,563


Gross profit

119,722



120,705






Selling, general and administrative

75,983



79,195


Research and development

10,998



10,363


Restructuring charges

12,739



470


Currency exchange losses, net

580



1,950


Operating income

19,422



28,727






Interest expense

3,591



3,902


Other income, net

 

(655)



(888)


Total other expense, net

2,936



3,014






Income from continuing operations before income taxes

16,486



25,713


Provision for income taxes

1,796



12,511


Income from continuing operations

14,690



13,202


Loss from discontinued operations



(1,129)


Net income

14,690



12,073


Net income attributable to noncontrolling interests

(277)



(322)


Net income attributable to MSA Safety Incorporated

14,413



11,751






Amounts attributable to MSA Safety Incorporated common shareholders:




Income from continuing operations

14,413



12,683


Loss from discontinued operations



(932)


  Net income

14,413



11,751






Earnings per share attributable to MSA Safety Incorporated common shareholders:




Basic




Income from continuing operations

$

0.38



$

0.34


Loss from discontinued operations

$



$

(0.03)


  Net income

$

0.38



$

0.31






Diluted




Income from continuing operations

$

0.37



$

0.34


Loss from discontinued operations

$



$

(0.03)


  Net income

$

0.37



$

0.31






Basic shares outstanding

37,766



37,330


Diluted shares outstanding

38,593



37,759


 

 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)



March 31, 2017


December 31, 2016

Assets




Cash and cash equivalents

$

104,427



$

113,759


Trade receivables, net

208,392



209,514


Inventories

117,621



103,066


Notes receivable, insurance companies

19,723



4,180


Other current assets

44,638



42,287


    Total current assets

494,801



472,806






Property, net

144,445



148,678


Prepaid pension cost

54,016



62,916


Goodwill

335,297



333,276


Notes receivable, insurance companies, noncurrent

63,416



63,147


Insurance receivable, noncurrent

56,502



157,929


Other noncurrent assets

109,677



115,168


   Total assets

$

1,258,154



$

1,353,920






Liabilities and shareholders' equity




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

$

26,848



$

26,666


Accounts payable

65,682



62,734


Other current liabilities

109,485



132,010


   Total current liabilities

202,015



221,410






Long-term debt, net

268,568



363,836


Pensions and other employee benefits

158,908



157,927


Deferred tax liabilities

34,867



34,044


Other noncurrent liabilities

15,518



15,491


Total shareholders' equity

578,278



561,212


   Total liabilities and shareholders' equity

$

1,258,154



$

1,353,920


 

 

MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)



Three Months Ended March 31,


2017


2016





Net income

$

14,690



$

12,073


Depreciation and amortization

8,752



9,156


Change in working capital and other operating

72,948



(32,235)


  Cash flow from (used in) operating activities

96,390



(11,006)






Capital expenditures

(1,442)



(5,819)


Property disposals and other investing

165



15,708


  Cash flow (used in) from investing activities

(1,277)



9,889






Change in debt

(96,437)



13,633


Cash dividends paid

(12,455)



(11,936)


Other financing

2,846



1,556


  Cash flow (used in) from financing activities

(106,046)



3,253






Effect of exchange rate changes on cash and cash equivalents

1,601



3,840






(Decrease) increase in cash and cash equivalents

(9,332)



5,976


 

 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands)



Americas


International


Corporate


Consolidated

Three Months Ended March 31, 2017








Sales to external customers

$

166,568



$

99,197





$

265,765


Operating income







19,422


Operating margin %







7.3

%

Restructuring charges







12,739


Currency exchange losses, net







580


Adjusted operating income (loss)

38,106



6,644



(12,009)



$

32,741


Adjusted operating margin %

22.9

%


6.7

%




12.3

%




Americas


International


Corporate


Consolidated

Three Months Ended March 31, 2016








Sales to external customers

$

167,342



$

111,926





$

279,268


Operating income







28,727


Operating margin %







10.3

%

Restructuring charges







470


Currency exchange losses, net







1,950


Adjusted operating income (loss)

31,345



8,408



(8,606)



$

31,147


Adjusted operating margin %

18.7

%


7.5

%




11.2

%

 

The Americas and International segments were established on January 1, 2016.  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 and currency exchange gains / losses. Adjusted operating margin is defined as adjusted operating income (loss) divided by net sales. Adjusted operating income (loss) and adjusted operating margin are not recognized terms under GAAP, and 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)


Consolidated



Three Months Ended March 31, 2017


Breathing Apparatus

Fire and Rescue Helmets

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported
sales change

(12)%


3

%

18

%

13

%

(9)%


(12)%


(4)%



(10)%



(5)%


Plus: Currency
translation effects

%

2

%

(2)%


%

1

%

5

%

1

%


(1)%



1

%

Constant currency
sales change

(12)%


5

%

16

%

13

%

(8)%


(7)%


(3)%



(11)%



(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

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

Constant currency revenue growth (Unaudited)


Americas Segment



Three Months Ended March 31, 2017


Breathing Apparatus

Fire and Rescue Helmets

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)%


(5)%


17

%

18

%

(11)%


12

%

%


(3)%



%

Plus: Currency
translation effects

%

%

(3)%


%

1

%

1

%

%


(2)%



(1)%


Constant
currency sales
change

(9)%


(5)%


14

%

18

%

(10)%


13

%

%


(5)%



(1)%


 

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, 2017


Breathing Apparatus

Fire and Rescue Helmets

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported
sales change

(19)%


10

%

24

%

3

%

(7)%


(28)%


(10)%



(18)%



(11)%


Plus: Currency
translation effects

1

%

3

%

2

%

%

2

%

7

%

3

%


1

%


2

%

Constant
currency sales
change

(18)%


13

%

26

%

3

%

(5)%


(21)%


(7)%



(17)%



(9)%


 

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, 2017


Consolidated


Americas


International

Industrial Head Protection

16

%


14

%


26

%

Portable Gas Detection

13

%


18

%


3

%

Fire and Rescue Helmets

5

%


(5)%



13

%

Fall Protection

(7)%



13

%


(21)%


Fixed Gas and Flame Detection

(8)%



(10)%



(5)%


Breathing Apparatus

(12)%



(9)%



(18)%


Total Core Products

(3)%



%


(7)%








Non-Core Products

(11)%



(5)%



(17)%








Net Sales

(4)%



(1)%



(9)%


 

 

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,




2017


2016


%
Change







Income from continuing operations attributable to MSA Safety Incorporated

$

14,413



$

12,683



14%

Tax (benefit) associated with ASU 2016-09: Improvements to

employee share-based payment accounting

(2,782)






Tax charges associated with European reorganization



3,600




Subtotal

11,631



16,283



(29)%







Restructuring charges

12,739



470




Strategic transaction costs

1,337



511




Currency exchange losses, net

580



1,950




Asset related losses (gains), net

32



(343)




Self-insured legal settlements and defense costs

32



20




Income tax expense on adjustments

(4,088)



(905)




Adjusted earnings

22,263



17,986



24%







Adjusted earnings per diluted share

$

0.58



$

0.48



21%

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, fire and rescue helmets, and fall protection devices.  With 2016 revenues of $1.15 billion, MSA employs approximately 4,300 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 28, 2017. 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, 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.

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/msa-announces-first-quarter-results-300445612.html

SOURCE MSA

Media Relations Contact: Mark Deasy (724) 741 - 8570; Investor Relations Contact: Kenneth Krause (724) 741 - 8534