Document
false0000066570 0000066570 2019-10-23 2019-10-23



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): October 23, 2019

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MSA SAFETY INCORPORATED
(Exact name of registrant as specified in its charter)
Pennsylvania
1-15579
46-4914539
(State or other jurisdiction of incorporation or organization)
(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:

 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, no par value
MSA
New York Stock Exchange
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 neSew 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 October 23, 2019, the Company issued a press release announcing its financial results for the quarter ended September 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 October 23, 2019, announcing financial results for the quarter ended September 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
 
October 23, 2019







EXHIBIT INDEX

Exhibit No.     Description

99.1







Exhibit
1

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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 Safety Announces Third Quarter Results
Focus on innovation and productivity drives strong revenue growth, operating margin expansion and cash flow

PITTSBURGH, October 23, 2019 - Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the third quarter of 2019.

Quarterly Highlights

Revenue was $351 million, increasing 6 percent from a year ago on a reported basis and 8 percent on a constant currency basis.

GAAP operating income increased 49 percent to $60 million or 17.0 percent of sales, compared to $40 million or 12.1 percent of sales in the same period a year ago. Adjusted operating income increased 11 percent to $63 million or 18.0 percent of sales, compared to $57 million or 17.2 percent of sales in the same period a year ago, driven by gross margin expansion and operating expense leverage.

GAAP earnings increased 25 percent to $42 million or $1.08 per diluted share, compared to $34 million or $0.86 per diluted share in the same period a year ago. Adjusted earnings were $45 million or $1.15 per diluted share, relatively consistent with the same period a year ago. The company's higher effective tax rate detracted $0.07 from adjusted earnings in the current period.

Operating cash flow was $51 million. MSA paid down $24 million of debt, funded a $16 million dividend on common stock, and invested $10 million in capital expenditures in the quarter.

Comments from Management
“MSA delivered a strong quarter of revenue growth, margin expansion and cash flow,” commented Nish Vartanian, MSA President and CEO. “The pace of our top-line growth accelerated in the quarter to 8 percent, largely on continued market-share gains in fall protection and gas detection.”

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2

MSA’s latest innovations in these product areas include the company’s V-Series line of fall protection harnesses and the 5000 series of next generation fixed gas monitors. For the quarter, more than 35 percent of MSA’s total sales were from products introduced within the past five years. “This focus on innovation, combined with cost discipline and our continued efforts to enhance productivity, all contributed to our incremental margin profile of more than 30 percent,” he said.

Mr. Vartanian noted that the benefits of MSA's broad end market exposure and diversified portfolio were evident in the company's quarterly results. “We were able to realize high-single digit revenue growth despite product certification delays that we - and all manufacturers of firefighting breathing equipment - had to deal with in the U.S. Fire Service market during the third quarter," he commented. In particular, he noted that the certification and launch of the company's next generation G1 self-contained breathing apparatus (SCBA) occurred on September 30, 2019, approximately six weeks later than expected. Mr. Vartanian added that the impact of lower SCBA volumes in the quarter was mostly offset by revenue growth in firefighter helmets and protective apparel.

“Incoming order pace gained momentum in the quarter with a book-to-bill ratio exceeding 100 percent. With this healthy backlog and a strong balance sheet, we remain well positioned to deliver on our growth expectations for 2019 and make investments that strengthen our positions across key markets," 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  
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net sales
$
351,014

 
$
331,096

 
$
1,026,726

 
$
996,320

Cost of products sold
192,313

 
182,794

 
556,959

 
546,844

Gross profit
158,701

 
148,302

 
469,767

 
449,476

 
 
 
 
 
 
 
 
Selling, general and administrative
82,900

 
78,013

 
245,337

 
240,226

Research and development
13,520

 
13,296

 
41,482

 
39,752

Restructuring charges
1,850

 
2,615

 
11,203

 
10,223

Currency exchange (gains) losses, net (a)
(913
)
 
(252
)
 
17,338

 
2,571

Product liability expense
1,730

 
14,627

 
8,155

 
25,469

Operating income
59,614

 
40,003

 
146,252

 
131,235

 
 
 
 
 
 
 
 
Interest expense
4,259

 
4,492

 
11,089

 
14,454

Loss on extinguishment of debt

 
1,494

 

 
1,494

Other income, net
(2,929
)
 
(4,252
)
 
(8,850
)
 
(8,292
)
Total other expense, net
1,330

 
1,734

 
2,239

 
7,656

 
 
 
 
 
 
 
 
Income before income taxes
58,284

 
38,269

 
144,013

 
123,579

Provision for income taxes
15,673

 
4,206

 
37,913

 
23,606

Net income
42,611

 
34,063

 
106,100

 
99,973

Net income attributable to noncontrolling interests
(372
)
 
(346
)
 
(822
)
 
(706
)
Net income attributable to MSA Safety Incorporated
$
42,239

 
$
33,717

 
$
105,278

 
$
99,267

 
 
 
 
 
 
 
 
Earnings per share attributable to MSA Safety Incorporated common shareholders:
 
 
 
 
 
 
 
Basic
$
1.09

 
$
0.88

 
$
2.72

 
$
2.59

Diluted
$
1.08

 
$
0.86

 
$
2.69

 
$
2.55

 
 
 
 
 
 
 
 
Basic shares outstanding
38,649

 
38,417

 
38,617

 
38,328

Diluted shares outstanding
39,144

 
39,036

 
39,130

 
38,914

(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)
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
Cash and cash equivalents
$
108,481

 
$
140,095

Trade receivables, net
248,406

 
245,032

Inventories
192,199

 
156,602

Notes receivable, insurance companies
3,646

 
3,555

Other current assets
133,696

 
111,339

    Total current assets
686,428

 
656,623

 
 
 
 
Property, net
158,957

 
157,940

Operating lease assets, net
50,470

 

Prepaid pension cost
68,387

 
57,568

Goodwill
428,629

 
413,640

Notes receivable, insurance companies, noncurrent
51,980

 
56,012

Insurance receivable, noncurrent
48,029

 
56,866

Other noncurrent assets
206,263

 
209,363

   Total assets
$
1,699,143

 
$
1,608,012

 
 
 
 
Liabilities and shareholders' equity
 
 
 
Notes payable and current portion of long-term debt, net
$
20,000

 
$
20,063

Accounts payable
69,773

 
78,367

Other current liabilities
172,435

 
183,630

   Total current liabilities
262,208

 
282,060

 
 
 
 
Long-term debt, net
352,073

 
341,311

Pensions and other employee benefits
163,342

 
166,101

Noncurrent operating lease liabilities
40,836

 

Deferred tax liabilities
11,251

 
7,164

Product liability and other noncurrent liabilities
161,128

 
171,857

Total shareholders' equity
708,305

 
639,519

   Total liabilities and shareholders' equity
$
1,699,143

 
$
1,608,012









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5

MSA Safety Incorporated
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net income
$
42,611

 
$
34,063

 
$
106,100

 
$
99,973

Depreciation and amortization
9,547

 
9,378

 
28,339

 
28,585

Change in working capital and other operating
(1,453
)
 
77,374

 
(46,189
)
 
57,639

  Cash flow from operating activities
50,705

 
120,815

 
88,250

 
186,197

 
 
 
 
 
 
 
 
Capital expenditures
(9,998
)
 
(9,808
)
 
(23,523
)
 
(18,620
)
Acquisition, net of cash acquired

 

 
(33,196
)
 

Change in short-term investments
113

 
(57,090
)
 
(17,189
)
 
(57,090
)
Property disposals
42

 
942

 
123

 
4,001

  Cash flow used in investing activities
(9,843
)
 
(65,956
)
 
(73,785
)
 
(71,709
)
 
 
 
 
 
 
 
 
Change in debt
(24,127
)
 
(38,390
)
 
12,937

 
(80,675
)
Cash dividends paid
(16,281
)
 
(14,624
)
 
(47,215
)
 
(42,605
)
Other financing
836

 
(1,313
)
 
(6,555
)
 
(575
)
  Cash flow used in financing activities
(39,572
)
 
(54,327
)
 
(40,833
)
 
(123,855
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(4,393
)
 
(1,822
)
 
(5,378
)
 
(9,952
)
 
 
 
 
 
 
 
 
Decrease in cash, cash equivalents and restricted cash
$
(3,103
)
 
$
(1,290
)
 
$
(31,746
)
 
$
(19,319
)




(more)


6

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

 
Americas
 
International
 
Corporate
 
Consolidated
Three Months Ended September 30, 2019
 
 
 
 
 
 
 
Sales to external customers
$
234,624

 
$
116,390

 
$

 
$
351,014

Operating income
 
 
 
 
 
 
59,614

Operating margin %
 
 
 
 
 
 
17.0
%
Restructuring charges
 
 
 
 
 
 
1,850

Currency exchange (gains), net
 
 
 
 
 
 
(913
)
Product liability expense
 
 
 
 
 
 
1,730

Strategic transaction costs
 
 
 
 
 
 
952

Adjusted operating income (loss)
58,971

 
13,776

 
(9,514
)
 
63,233

Adjusted operating margin %
25.1
%
 
11.8
%
 
 
 
18.0
%
Depreciation and amortization
 
 
 
 
 
 
9,547

Adjusted EBITDA
65,342

 
16,854

 
(9,416
)
 
72,780

Adjusted EBITDA %
27.8
%
 
14.5
%
 
 
 
20.7
%
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
 
 
 
 
 
 
Sales to external customers
$
209,343

 
$
121,753

 
$

 
$
331,096

Operating income
 
 
 
 
 
 
40,003

Operating margin %
 
 
 
 
 
 
12.1
%
Restructuring charges
 
 
 
 
 
 
2,615

Currency exchange (gains), net
 
 
 
 
 
 
(252
)
Product liability expense
 
 
 
 
 
 
14,627

Strategic transaction costs
 
 
 
 
 
 
56

Adjusted operating income (loss)
51,532

 
13,329

 
(7,812
)
 
57,049

Adjusted operating margin %
24.6
%
 
10.9
%
 
 
 
17.2
%
Depreciation and amortization
 
 
 
 
 
 
9,378

Adjusted EBITDA
57,573

 
16,559

 
(7,705
)
 
66,427

Adjusted EBITDA %
27.5
%
 
13.6
%
 
 
 
20.1
%


(more)


7

 
Americas
 
International
 
Corporate
 
Consolidated
Nine Months Ended September 30, 2019
 
 
 
 
 
 
 
Sales to external customers
$
679,699

 
$
347,027

 
$

 
$
1,026,726

Operating income
 
 
 
 
 
 
146,252

Operating margin %
 
 
 
 
 
 
14.2
%
Restructuring charges
 
 
 
 
 
 
11,203

Currency exchange losses, net
 
 
 
 
 
 
17,338

Product liability expense
 
 
 
 
 
 
8,155

Strategic transaction costs
 
 
 
 
 
 
2,937

Adjusted operating income (loss)
171,463

 
39,888

 
(25,466
)
 
185,885

Adjusted operating margin %
25.2
%
 
11.5
%
 
 
 
18.1
%
Depreciation and amortization
 
 
 
 
 
 
28,339

Adjusted EBITDA
190,084

 
49,313

 
(25,173
)
 
214,224

Adjusted EBITDA %
28.0
%
 
14.2
%
 
 
 
20.9
%
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
Sales to external customers
$
633,812

 
$
362,508

 
$

 
$
996,320

Operating income
 
 
 
 
 
 
131,235

Operating margin %
 
 
 
 
 
 
13.2
%
Restructuring charges
 
 
 
 
 
 
10,223

Currency exchange losses, net
 
 
 
 
 
 
2,571

Product liability expense
 
 
 
 
 
 
25,469

Strategic transaction costs
 
 
 
 
 
 
208

Adjusted operating income (loss)
151,456

 
41,960

 
(23,710
)
 
169,706

Adjusted operating margin %
23.9
%
 
11.6
%
 
 
 
17.0
%
Depreciation and amortization
 
 
 
 
 
 
28,585

Adjusted EBITDA
169,691

 
52,001

 
(23,401
)
 
198,291

Adjusted EBITDA %
26.8
%
 
14.3
%
 
 
 
19.9
%
The Americas segment is comprised of our operations in North America and Latin America geographies. The International segment is comprised of our operations in all geographies outside of the Americas. 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.

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8

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


Consolidated
 
Three Months Ended September 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
(11
)%
19
%
2
%
12
%
17
%
24
%
7
%
 
(3
)%
 
6
%
Plus: Currency translation effects
1
 %
2
%
2
%
2
%
1
%
3
%
2
%

2
 %
 
2
%
Constant currency sales change
(10
)%
21
%
4
%
14
%
18
%
27
%
9
%
 
(1
)%
 
8
%



 
Nine Months Ended September 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
(4
)%
6
%
1
%
4
%
9
%
21
%
4
%
 
(6
)%
 
3
%
Plus: Currency translation effects
2
 %
2
%
2
%
2
%
3
%
4
%
3
%
 
3
 %
 
2
%
Constant currency sales change
(2
)%
8
%
3
%
6
%
12
%
25
%
7
%
 
(3
)%
 
5
%



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 September 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
)%
15
%
1
%
13
%
27
%
40
%
11
%
 
22
%
 
12
%
Plus: Currency translation effects
 %
1
%
1
%
1
%
%
1
%
%
 
1
%
 
1
%
Constant currency sales change
(8
)%
16
%
2
%
14
%
27
%
41
%
11
%
 
23
%
 
13
%



 
Nine Months Ended September 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
%
6
%
%
4
%
16
%
31
%
7
%
 
9
%
 
7
%
Plus: Currency translation effects
%
%
1
%
1
%
%
1
%
1
%
 
1
%
 
1
%
Constant currency sales change
1
%
6
%
1
%
5
%
16
%
32
%
8
%
 
10
%
 
8
%


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 September 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
(17
)%
43
%
6
%
10
%
6
%
2
%
1
%
 
(28
)%
 
(4
)%
Plus: Currency translation effects
3
 %
6
%
3
%
3
%
3
%
5
%
3
%
 
3
 %
 
3
 %
Constant currency sales change
(14
)%
49
%
9
%
13
%
9
%
7
%
4
%
 
(25
)%
 
(1
)%



 
Nine Months Ended September 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
(12
)%
8
%
5
%
3
%
2
%
8
%
%
 
(21
)%
 
(4
)%
Plus: Currency translation effects
5
 %
7
%
6
%
6
%
5
%
6
%
5
%
 
4
 %
 
5
 %
Constant currency sales change
(7
)%
15
%
11
%
9
%
7
%
14
%
5
%
 
(17
)%
 
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)


11

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

 
 
 
Three Months Ended September 30, 2019
 
Consolidated
 
Americas
 
International
Fall Protection
27
 %
 
41
 %
 
7
 %
Firefighter Helmets and Protective Apparel
21
 %
 
16
 %
 
49
 %
Fixed Gas and Flame Detection
18
 %
 
27
 %
 
9
 %
Portable Gas Detection
14
 %
 
14
 %
 
13
 %
Industrial Head Protection
4
 %
 
2
 %
 
9
 %
Breathing Apparatus
(10
)%
 
(8
)%
 
(14
)%
Core Sales
9
 %
 
11
 %
 
4
 %
 
 
 
 
 
 
Non-Core Sales
(1
)%
 
23
 %
 
(25
)%
 
 
 
 
 
 
Net Sales
8
 %
 
13
 %
 
(1
)%

 
 
 
Nine Months Ended September 30, 2019
 
Consolidated
 
Americas
 
International
Fall Protection
25
 %
 
32
%
 
14
 %
Firefighter Helmets and Protective Apparel
8
 %
 
6
%
 
15
 %
Fixed Gas and Flame Detection
12
 %
 
16
%
 
7
 %
Portable Gas Detection
6
 %
 
5
%
 
9
 %
Industrial Head Protection
3
 %
 
1
%
 
11
 %
Breathing Apparatus
(2
)%
 
1
%
 
(7
)%
Core Sales
7
 %
 
8
%
 
5
 %
 
 
 
 
 
 
Non-Core Sales
(3
)%
 
10
%
 
(17
)%
 
 
 
 
 
 
Net Sales
5
 %
 
8
%
 
1
 %








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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 September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
2019
 
2018
 
%
Change
 
2019
 
2018
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to MSA Safety Incorporated
$
42,239

 
$
33,717

 
25%
 
105,278

 
99,267

 
6%
Tax (benefit) associated with U.S. Tax Reform

 
(1,956
)
 
 
 

 
(1,956
)
 
 
Non-deductible non-cash charge related to the recognition of currency translation adjustments (a)

 

 
 
 
15,359

 

 
 
Tax benefit associated with ASU 2016-09: Improvements to employee share-based payment accounting
(187
)
 
(430
)
 
 
 
(2,180
)
 
(2,306
)
 
 
Subtotal
42,052

 
31,331

 
34%
 
118,457

 
95,005

 
25%
 
 
 
 
 
 
 
 
 
 
 
 
Product liability expense
1,730

 
14,627

 
 
 
8,155

 
25,469

 
 
Restructuring charges
1,850

 
2,615

 
 
 
11,203

 
10,223

 
 
Strategic transaction costs
952

 
56

 
 
 
2,937

 
208

 
 
Currency exchange (gains) losses, net
(913
)
 
(252
)
 
 
 
1,979

 
2,571

 
 
Loss on extinguishment of debt

 
1,494

 
 
 

 
1,494

 
 
Asset related losses (gains), net
38

 
(733
)
 
 
 
271

 
415

 
 
Income tax expense on adjustments
(878
)
 
(4,024
)
 
 
 
(5,912
)
 
(9,645
)
 
 
Adjusted earnings
$
44,831

 
$
45,114

 
(1)%
 
$
137,090

 
$
125,740

 
9%
 


 
 
 
 
 
 
 
 
 
 
Adjusted earnings per diluted share
$
1.15

 
$
1.16

 
(1)%
 
$
3.50

 
$
3.23

 
8%

(a) Included in Currency exchange (gains) 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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