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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): July 24, 2019

https://cdn.kscope.io/95fd5993a11b3da718db8953f37859c6-q12018_imagea04.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 July 24, 2019, the Company issued a press release announcing its financial results for the quarter ended June 30, 2019. 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 July 24, 2019, announcing financial results for the quarter ended June 30, 2019.






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
 
July 24, 2019




EXHIBIT INDEX

Exhibit No.     Description

99.1



Exhibit
1

https://cdn.kscope.io/95fd5993a11b3da718db8953f37859c6-msaa25.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 Second Quarter Results
Broad-based growth and continued focus on productivity drives quarterly earnings increase of 20 percent

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

Quarterly Highlights

•
Revenue was $350 million, increasing 3 percent from a year ago on a reported basis and 5 percent on a constant currency basis.

•
GAAP operating income increased 16 percent to $54 million or 15.6 percent of sales, compared to $47 million or 13.8 percent of sales in the same period a year ago. Adjusted operating income increased 11 percent to $64 million or 18.4 percent of sales, compared to $58 million or 17.1 percent of sales in the same period a year ago, driven by gross margin expansion and operating expense leverage.

•
GAAP earnings increased 20 percent to $40 million or $1.01 per diluted share, compared to $33 million or $0.85 per diluted share in the same period a year ago. Adjusted earnings increased 15 percent to $48 million or $1.22 per diluted share, compared to $41 million or $1.07 per diluted share in the same period a year ago.

•
MSA deployed $33 million of capital for the acquisition of California-based Sierra Monitor Corporation and funded a $16 million dividend on common stock. The dividend reflects an 11 percent increase per share from the previous quarterly dividend, continuing the company’s long history of raising its dividend annually for more than 50 consecutive years.



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2


Comments from Management

“The growth across substantially all of our core product areas and incremental margins that continue to exceed 40 percent were clear highlights in the quarter. This performance reflects both the favorable returns being generated by our new product development investments as well as our ongoing focus on improving productivity,” said Nish Vartanian, MSA President and CEO. “Revenue increased five percent in the quarter, and our team was able to convert that increase into 15 percent adjusted earnings growth,” he added. Mr. Vartanian noted that MSA's profitability improvements continue to be driven by an ongoing focus on delivering customer-driven innovation and efficiency improvement programs across MSA’s global footprint.

MSA's sales vitality index - which measures the percentage of revenue from products introduced within the past five years - is approximately 35 percent. “Our fastest growing core products in the quarter were gas detection and fall protection. These are also the areas where we've seen the most meaningful improvements in sales vitality," Mr. Vartanian commented. In particular, he cited the company's new X5000 and S5000 Gas Monitors and the recently launched V-Series line of fall protection harnesses, all of which were key contributors to the company’s second quarter performance.

“With a strong balance sheet and healthy backlog headed into the second half of 2019, we remain well positioned and committed to investing in the products, technology and talent we know are key to long-term value creation for all of the many stakeholders of MSA," Mr. Vartanian concluded.




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3

MSA Safety Incorporated
Condensed Consolidated Statement of Income (Unaudited)
(In thousands, except per share amounts)
 
Three Months Ended  
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net sales
$
349,675

 
$
339,331

 
$
675,713

 
$
665,225

Cost of products sold
188,591

 
185,495

 
364,647

 
364,050

Gross profit
161,084

 
153,836

 
311,066

 
301,175

 
 
 
 
 
 
 
 
Selling, general and administrative
84,009

 
81,962

 
162,437

 
162,213

Research and development
14,256

 
13,909

 
27,962

 
26,456

Restructuring charges
3,522

 
2,335

 
9,353

 
7,609

Currency exchange losses, net (a)
1,290

 
815

 
18,251

 
2,823

Product liability expense
3,529

 
8,018

 
6,425

 
10,842

Operating income
54,478

 
46,797

 
86,638

 
91,232

 
 
 
 
 
 
 
 
Interest expense
4,470

 
5,181

 
6,830

 
9,962

Other income, net
(3,342
)
 
(1,701
)
 
(5,921
)
 
(4,041
)
Total other expense, net
1,128

 
3,480

 
909

 
5,921

 
 
 
 
 
 
 
 
Income before income taxes
53,350

 
43,317

 
85,729

 
85,311

Provision for income taxes
13,238

 
9,896

 
22,241

 
19,401

Net income
40,112

 
33,421

 
63,488

 
65,910

Net income attributable to noncontrolling interests
(306
)
 
(242
)
 
(450
)
 
(360
)
Net income attributable to MSA Safety Incorporated
$
39,806

 
$
33,179

 
$
63,038

 
$
65,550

 
 
 
 
 
 
 
 
Earnings per share attributable to MSA Safety Incorporated common shareholders:
 
 
 
 
 
 
 
Basic
$
1.03

 
$
0.86

 
$
1.63

 
$
1.71

Diluted
$
1.01

 
$
0.85

 
$
1.61

 
$
1.69

 
 
 
 
 
 
 
 
Basic shares outstanding
38,663

 
38,327

 
38,602

 
38,272

Diluted shares outstanding
39,160

 
38,903

 
39,124

 
38,841


(a) Year-to-date 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.


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4

MSA Safety Incorporated
Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)
 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
Cash and cash equivalents
$
111,511

 
$
140,095

Trade receivables, net
256,666

 
245,032

Inventories
187,779

 
156,602

Notes receivable, insurance companies
3,616

 
3,555

Other current assets
128,062

 
111,339

    Total current assets
687,634

 
656,623

 
 
 
 
Property, net
158,047

 
157,940

Operating lease assets, net
50,935

 
—

Prepaid pension cost
64,987

 
57,568

Goodwill
433,156

 
413,640

Notes receivable, insurance companies, noncurrent
56,724

 
56,012

Insurance receivable, noncurrent
49,933

 
56,866

Other noncurrent assets
212,440

 
209,363

   Total assets
$
1,713,856

 
$
1,608,012

 
 
 
 
Liabilities and shareholders' equity
 
 
 
Notes payable and current portion of long-term debt, net
$
20,127

 
$
20,063

Accounts payable
73,264

 
78,367

Other current liabilities
164,126

 
183,630

   Total current liabilities
257,517

 
282,060

 
 
 
 
Long-term debt, net
378,380

 
341,311

Pensions and other employee benefits
168,340

 
166,101

Noncurrent operating lease liabilities
40,710

 
—

Deferred tax liabilities
10,986

 
7,164

Product liability and other noncurrent liabilities
166,776

 
171,857

Total shareholders' equity
691,147

 
639,519

   Total liabilities and shareholders' equity
$
1,713,856

 
$
1,608,012









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5

MSA Safety Incorporated
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net income
$
40,112

 
$
33,421

 
$
63,488

 
$
65,910

Depreciation and amortization
9,466

 
9,536

 
18,792

 
19,207

Change in working capital and other operating
(13,250
)
 
5,072

 
(44,735
)
 
(19,735
)
  Cash flow from operating activities
36,328

 
48,029

 
37,545

 
65,382

 
 
 
 
 
 
 
 
Capital expenditures
(8,628
)
 
(5,571
)
 
(13,525
)
 
(8,812
)
Acquisition, net of cash acquired
(33,196
)
 
—

 
(33,196
)
 
—

Change in short-term investments
1,639

 
—

 
(17,302
)
 
—

Property disposals
69

 
3,001

 
81

 
3,059

  Cash flow used in investing activities
(40,116
)
 
(2,570
)
 
(63,942
)
 
(5,753
)
 
 
 
 
 
 
 
 
Change in debt
22,973

 
(32,884
)
 
37,064

 
(42,285
)
Cash dividends paid
(16,282
)
 
(14,591
)
 
(30,934
)
 
(27,981
)
Other financing
(1,410
)
 
2,563

 
(7,391
)
 
738

  Cash flow from (used in) financing activities
5,281

 
(44,912
)
 
(1,261
)
 
(69,528
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
2,236

 
(9,493
)
 
(985
)
 
(8,130
)
 
 
 
 
 
 
 
 
Increase (decrease) in cash, cash equivalents and restricted cash
$
3,729

 
$
(8,946
)
 
$
(28,643
)
 
$
(18,029
)




(more)

6

MSA Safety Incorporated
Segment Information (Unaudited)
(In thousands, except percentage amounts)

 
Americas
 
International
 
Corporate
 
Consolidated
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
Sales to external customers
$
231,389

 
$
118,286

 
$
—

 
$
349,675

Operating income
 
 
 
 
 
 
54,478

Operating margin %
 
 
 
 
 
 
15.6
%
Restructuring charges
 
 
 
 
 
 
3,522

Currency exchange losses, net
 
 
 
 
 
 
1,290

Product liability expense
 
 
 
 
 
 
3,529

Strategic transaction costs
 
 
 
 
 
 
1,529

Adjusted operating income (loss)
57,689

 
15,072

 
(8,413
)
 
64,348

Adjusted operating margin %
24.9
%
 
12.7
%
 
 
 
18.4
%
Depreciation and amortization
 
 
 
 
 
 
9,466

Adjusted EBITDA
63,842

 
18,288

 
(8,316
)
 
73,814

Adjusted EBITDA %
27.6
%
 
15.5
%
 
 
 
21.1
%
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
Sales to external customers
$
215,339

 
$
123,992

 
$
—

 
$
339,331

Operating income
 
 
 
 
 
 
46,797

Operating margin %
 
 
 
 
 
 
13.8
%
Restructuring charges
 
 
 
 
 
 
2,335

Currency exchange losses, net
 
 
 
 
 
 
815

Product liability expense
 
 
 
 
 
 
8,018

Strategic transaction costs
 
 
 
 
 
 
58

Adjusted operating income (loss)
49,838

 
15,853

 
(7,668
)
 
58,023

Adjusted operating margin %
23.1
%
 
12.8
%
 
 
 
17.1
%
Depreciation and amortization
 
 
 
 
 
 
9,536

Adjusted EBITDA
55,894

 
19,233

 
(7,568
)
 
67,559

Adjusted EBITDA %
26.0
%
 
15.5
%
 
 
 
19.9
%


(more)

7

 
Americas
 
International
 
Corporate
 
Consolidated
Six Months Ended June 30, 2019
 
 
 
 
 
 
 
Sales to external customers
$
445,076

 
$
230,637

 
$
—

 
$
675,713

Operating income
 
 
 
 
 
 
86,638

Operating margin %
 
 
 
 
 
 
12.8
%
Restructuring charges
 
 
 
 
 
 
9,353

Currency exchange losses, net
 
 
 
 
 
 
18,251

Product liability expense
 
 
 
 
 
 
6,425

Strategic transaction costs
 
 
 
 
 
 
1,985

Adjusted operating income (loss)
112,492

 
26,112

 
(15,952
)
 
122,652

Adjusted operating margin %
25.3
%
 
11.3
%
 
 
 
18.2
%
Depreciation and amortization
 
 
 
 
 
 
18,792

Adjusted EBITDA
124,742

 
32,459

 
(15,757
)
 
141,444

Adjusted EBITDA %
28.0
%
 
14.1
%
 
 
 
20.9
%
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
Sales to external customers
$
424,468

 
$
240,757

 
$
—

 
$
665,225

Operating income
 
 
 
 
 
 
91,232

Operating margin %
 
 
 
 
 
 
13.7
%
Restructuring charges
 
 
 
 
 
 
7,609

Currency exchange losses, net
 
 
 
 
 
 
2,823

Product liability expense
 
 
 
 
 
 
10,842

Strategic transaction costs
 
 
 
 
 
 
152

Adjusted operating income (loss)
99,924

 
28,631

 
(15,897
)
 
112,658

Adjusted operating margin %
23.5
%
 
11.9
%
 
 
 
16.9
%
Depreciation and amortization
 
 
 
 
 
 
19,207

Adjusted EBITDA
112,119

 
35,441

 
(15,695
)
 
131,865

Adjusted EBITDA %
26.4
%
 
14.7
%
 
 
 
19.8
%
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.

(more)

8

MSA Safety Incorporated
Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures
Constant currency revenue growth (Unaudited)


Consolidated
 
Three Months Ended June 30, 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
—
%
5
%
(2
)%
3
%
11
%
21
%
5
%
 
(9
)%
 
3
%
Plus: Currency translation effects
2
%
1
%
2
 %
2
%
2
%
4
%
2
%

3
 %
 
2
%
Constant currency sales change
2
%
6
%
—
 %
5
%
13
%
25
%
7
%
 
(6
)%
 
5
%



 
Six Months Ended June 30, 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
%
—
%
(1
)%
5
%
19
%
3
%
 
(8
)%
 
2
%
Plus: Currency translation effects
3
%
2
%
3
%
3
 %
3
%
5
%
3
%
 
4
 %
 
2
%
Constant currency sales change
3
%
3
%
3
%
2
 %
8
%
24
%
6
%
 
(4
)%
 
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)

9

MSA Safety Incorporated
Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures
Constant currency revenue growth (Unaudited)


Americas Segment
 
Three Months Ended June 30, 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
8
%
3
%
(2
)%
5
%
18
%
24
%
8
%
 
3
%
 
7
%
Plus: Currency translation effects
1
%
1
%
1
 %
1
%
—
%
1
%
1
%
 
1
%
 
1
%
Constant currency sales change
9
%
4
%
(1
)%
6
%
18
%
25
%
9
%
 
4
%
 
8
%



 
Six Months Ended June 30, 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
6
%
2
%
(1
)%
(1
)%
10
%
26
%
5
%
 
2
%
 
5
%
Plus: Currency translation effects
—
%
—
%
2
 %
1
 %
—
%
1
%
1
%
 
2
%
 
1
%
Constant currency sales change
6
%
2
%
1
 %
—
 %
10
%
27
%
6
%
 
4
%
 
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. 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
Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures
Constant currency revenue growth (Unaudited)


International Segment
 
Three Months Ended June 30, 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
(15
)%
9
%
—
%
(2
)%
2
%
18
%
(1
)%
 
(21
)%
 
(5
)%
Plus: Currency translation effects
5
 %
6
%
6
%
6
 %
6
%
7
%
5
 %
 
4
 %
 
6
 %
Constant currency sales change
(10
)%
15
%
6
%
4
 %
8
%
25
%
4
 %
 
(17
)%
 
1
 %



 
Six Months Ended June 30, 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
(9
)%
(2
)%
5
%
—
%
—
%
11
%
(1
)%
 
(18
)%
 
(4
)%
Plus: Currency translation effects
6
 %
6
 %
7
%
7
%
6
%
7
%
6
 %
 
5
 %
 
6
 %
Constant currency sales change
(3
)%
4
 %
12
%
7
%
6
%
18
%
5
 %
 
(13
)%
 
2
 %



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)

11

MSA Safety Incorporated
Supplemental Segment Information (Unaudited)
Summary of constant currency revenue growth by segment and product group

 
 
 
Three Months Ended June 30, 2019
 
Consolidated
 
Americas
 
International
Fall Protection
25
 %
 
25
 %
 
25
 %
Fixed Gas and Flame Detection
13
 %
 
18
 %
 
8
 %
Firefighter Helmets and Protective Apparel
6
 %
 
4
 %
 
15
 %
Portable Gas Detection
5
 %
 
6
 %
 
4
 %
Breathing Apparatus
2
 %
 
9
 %
 
(10
)%
Industrial Head Protection
—
 %
 
(1
)%
 
6
 %
Core Sales
7
 %
 
9
 %
 
4
 %
 
 
 
 
 
 
Non-Core Sales
(6
)%
 
4
 %
 
(17
)%
 
 
 
 
 
 
Net Sales
5
 %
 
8
 %
 
1
 %

 
 
 
Six Months Ended June 30, 2019
 
Consolidated
 
Americas
 
International
Fall Protection
24
 %
 
27
%
 
18
 %
Fixed Gas and Flame Detection
8
 %
 
10
%
 
6
 %
Firefighter Helmets and Protective Apparel
3
 %
 
2
%
 
4
 %
Portable Gas Detection
2
 %
 
—
%
 
7
 %
Breathing Apparatus
3
 %
 
6
%
 
(3
)%
Industrial Head Protection
3
 %
 
1
%
 
12
 %
Core Sales
6
 %
 
6
%
 
5
 %
 
 
 
 
 
 
Non-Core Sales
(4
)%
 
4
%
 
(13
)%
 
 
 
 
 
 
Net Sales
4
 %
 
6
%
 
2
 %








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12

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 June 30,
 
 
 
Six Months Ended June 30,
 
 
 
2019
 
2018
 
%
Change
 
2019
 
2018
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to MSA Safety Incorporated
$
39,806

 
$
33,179

 
20%
 
63,038

 
65,550

 
(4)%
Non-deductible non-cash charge related to the recognition of currency translation adjustments (a)
—

 
—

 
 
 
15,359

 
—

 
 
Tax expense (benefit) associated with ASU 2016-09: Improvements to employee share-based payment accounting
429

 
(962
)
 
 
 
(1,993
)
 
(1,875
)
 
 
Subtotal
40,235

 
32,217

 
25%
 
76,404

 
63,675

 
20%
 
 
 
 
 
 
 
 
 
 
 
 
Product liability expense
3,529

 
8,018

 
 
 
6,425

 
10,842

 
 
Restructuring charges
3,522

 
2,335

 
 
 
9,353

 
7,609

 
 
Strategic transaction costs
1,529

 
58

 
 
 
1,985

 
152

 
 
Currency exchange losses, net
1,290

 
815

 
 
 
2,892

 
2,823

 
 
Asset related losses, net
208

 
1,131

 
 
 
233

 
1,148

 
 
Income tax expense on adjustments
(2,439
)
 
(3,102
)
 
 
 
(5,034
)
 
(5,621
)
 
 
Adjusted earnings
$
47,874

 
$
41,472

 
15%
 
$
92,258

 
$
80,628

 
14%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted earnings per diluted share
$
1.22

 
$
1.07

 
14%
 
$
2.36

 
$
2.08

 
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.



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13

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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