View:
Download DOC
Download PDF
Download XLS
Document


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 25, 2017
 
https://cdn.kscope.io/f06e0e13f68efcce8e07fd9fa40a479e-image0a02a08.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))




Item 2.02
Results of Operations and Financial Condition
On April 25, 2017, the Company issued a press release announcing its financial results for the quarter ended March 31, 2017. 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 25, 2017, announcing financial results for the quarter ended March 31, 2017.




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
 
 
Vice President, Chief Financial Officer and Treasurer

April 25, 2017




EXHIBIT INDEX
 
 
 
 
Exhibit No.
  
Description
 
 
99.1
  
MSA Safety Incorporated Press Release dated April 25, 2017, announcing financial results for the quarter ended March 31, 2017.



Exhibit
1

Exhibit 99.1
https://cdn.kscope.io/f06e0e13f68efcce8e07fd9fa40a479e-msaa05.jpg
FOR IMMEDIATE RELEASE
FROM: MSA Safety Incorporated
Ticker: MSA (NYSE)
Media Relations Contact: Mark Deasy (724) 741 - 8570
Investor Relations Contact: Kenneth Krause (724) 741 - 8534

MSA Announces First Quarter Results
Higher product margins and lower cost structure drive 14 percent growth in quarterly net income
PITTSBURGH, April 25, 2017 - 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.


(more)

2

•
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.

(more)

3

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


(more)

4

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






(more)

5

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





(more)

6

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.

(more)

7

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.












(more)

8

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.











(more)

9

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.

(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, 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
)%


 
 


(more)

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,
 
 
 
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.

(more)

12

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.
# # #