TMCnet News

MSA Announces Second Quarter Results
[July 20, 2016]

MSA Announces Second Quarter Results


PITTSBURGH, July 20, 2016 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the second quarter of 2016.

Quarterly Highlights

  • Reported revenue was $296 million, increasing 3 percent from a year ago. The recent acquisition of UK-based fall protection company Latchways increased constant currency and reported revenue by 5 percent, while organic constant currency revenue remained flat.
  • Net income was $29 million or $0.77 per diluted share, compared to $24 million or $0.63 per diluted share in the second quarter a year ago. Adjusted earnings were $0.79 per diluted share, compared to $0.67 per diluted share a year ago.

Comments from Management

"Our quarterly results reflect strong returns on several strategic investments we've made to drive profitable growth," said William M. Lambert, MSA Chairman, President and CEO. "While we continued to see weak conditions in sales of certain products associated with energy and industrial related end-markets, our investments in new product development, strategic acquisitions and restructuring programs allowed us to recognize earnings growth of 21 percent on 3 percent revenue growth," he continued.      

As examples, Mr. Lambert pointed to the continued success of the company's breakthrough G1 self-contained breathing apparatus (SCBA), the recent acquisition of Latchways, and the company's restructuring program that was executed in late 2015.

"Overall, we continue to gain market share in the U.S. fire service with the G1 SCBA, and we are realizing success in a number of international markets as well.  On a year-over-year basis, our breathing apparatus sales increased 20 percent for the quarter and 28 percent for the first six months of 2016," Mr. Lambert said.  He also noted that Latchways continues to perform well, providing earnings accretion of $0.01 per diluted share for the quarter and $0.04 per diluted share for the first six months of 2016.  Mr. Lambert added that MSA's 2015 restructuring program has been successful in helping drive reductions in selling, general and administrative expense, down $2 million in the quarter and $4 million year-to-date on a reported basis, and down $4 million in the quarter and $8 million year-to-date in constant currency, excluding Latchways.

"In addition to making investments that drive profitable core product revenue growth, managing our cost structure continues to be a top priority in light of the headwinds we are seeing in key end markets and geographies.  Despite these challenges, we remain committed to making strategic investments that help us capture market share, expand operating margins, and enhance the value we deliver to shareholders," Mr. Lambert concluded.

 



MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except per share amounts)






Three Months Ended
June 30,


Six Months Ended
June 30,


2016


2015


2016


2015









Net sales

$

295,998



$

287,011



$

575,266



$

543,719


Cost of products sold

160,143



156,522



318,706



296,407


Gross profit

135,855



130,489



256,560



247,312










Selling, general and administrative

75,716



77,588



154,911



158,956


Research and development

11,144



12,984



21,507



23,898


Restructuring and other charges

1,338



227



1,808



958


Currency exchange (gains) losses, net

(242)



1,557



1,708



(991)


Operating income

47,899



38,133



76,626



64,491










Interest expense

4,201



2,502



8,103



4,975


Other (income), net

 

(775)



(94)



(1,663)



(735)


Total other expense, net

3,426



2,408



6,440



4,240










Income from continuing operations before income taxes

44,473



35,725



70,186



60,251


Provision for income taxes

15,026



12,350



27,537



27,734


Income from continuing operations

29,447



23,375



42,649



32,517


Income (loss) from discontinued operations



470



(1,129)



778


Net income

29,447



23,845



41,520



33,295


Net (income) loss attributable to noncontrolling interests

(141)



453



(463)



685


Net income attributable to MSA Safety Incorporated

29,306



24,298



41,057



33,980










Amounts attributable to MSA Safety Incorporated common shareholders:








Income from continuing operations

29,306



23,722



41,989



33,038


Income (loss) from discontinued operations



576



(932)



942


  Net income

29,306



24,298



41,057



33,980










Earnings per share attributable to MSA Safety Incorporated common shareholders:








Basic








Income from continuing operations

$

0.78



$

0.63



$

1.13



$

0.88


Income (loss) from discontinued operations

$



$

0.02



$

(0.03)



$

0.03


  Net income

$

0.78



$

0.65



$

1.10



$

0.91










Diluted








Income from continuing operations

$

0.77



$

0.62



$

1.11



$

0.87


Income (loss) from discontinued operations

$



$

0.01



$

(0.03)



$

0.03


  Net income

$

0.77



$

0.63



$

1.08



$

0.90










Basic shares outstanding

37,411



37,351



37,368



37,323


Diluted shares outstanding

37,860



37,826



37,807



37,807


 

 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)






June 30, 2016


December 31, 2015

Assets




Cash and cash equivalents

$

103,149



$

105,925


Trade receivables, net

218,221



232,862


Inventories

130,482



125,849


Other current assets

45,367



39,976


    Total current assets

497,219



504,612






Property, net

151,919



155,839


Prepaid pension cost

66,715



62,072


Goodwill

332,139



340,338


Other noncurrent assets

368,257



360,002


   Total assets

$

1,416,249



$

1,422,863






Liabilities and shareholders' equity




Notes payable and current portion of long-term debt

$

6,822



$

6,650


Accounts payable

66,119



68,206


Other current liabilities

142,293



177,031


   Total current liabilities

215,234



251,887






Long-term debt, net

447,087



458,022


Pensions and other employee benefits

160,795



156,160


Deferred tax liabilities

25,964



24,872


Other noncurrent liabilities

14,835



14,794


Total shareholders' equity

552,334



517,128


   Total liabilities and shareholders' equity

$

1,416,249



$

1,422,863


 

 

MSA Safety Incorporated



Condensed Consolidated Statement of Cash Flows (Unaudited)



(In thousands)








Three Months Ended
June 30,


Six Months Ended
June 30,


2016


2015


2016


2015









Net income

$

29,447



$

23,845



$

41,520



$

33,295


Depreciation and amortization

8,576



8,727



17,732



15,664


Change in working capital and other operating

(11,962)



(8,196)



(44,197)



(41,246)


  Cash from operations

26,061



24,376



15,055



7,713










Capital expenditures

(4,776)



(8,546)



(10,595)



(16,015)


Property disposals

535



7,969



16,243



7,969


  Cash from investing

(4,241)



(577)



5,648



(8,046)










Cash dividends paid

(12,348)



(11,969)



(24,284)



(23,522)


Change in debt

(19,359)



(3,549)



(5,726)



18,004


Other financing

2,621



(6,624)



4,177



(7,359)


  Cash from financing

(29,086)



(22,142)



(25,833)



(12,877)










Exchange rate changes

(1,486)



176



2,354



(4,654)










(Decrease) increase in cash

$

(8,752)



$

1,833



$

(2,776)



$

(17,864)


 

 

MSA Safety Incorporated








Segment Information (Unaudited)








(In thousands)






















Americas


International


Corporate



Consolidated

Three Months Ended June 30, 2016










Net sales


$

177,623



$

118,375






$

295,998


Adjusted operating income (loss)


44,671



12,741



(8,417)




48,995


Adjusted operating margin %


25.1

%


10.8

%





16.6

%

Restructuring and other charges









(1,338)


Currency exchange gains, net









242


Operating income









$

47,899


Operating margin %









16.2

%











Six Months Ended June 30, 2016










Net sales


$

344,965



$

230,301






$

575,266


Adjusted operating income (loss)


76,016



21,148



(17,022)




80,142


Adjusted operating margin %


22.0

%


9.2

%





13.9

%

Restructuring and other charges









(1,808)


Currency exchange (losses), net









(1,708)


Operating income









$

76,626


Operating margin %









13.3

%

























Americas


International


Corporate



Consolidated

Three Months Ended June 30, 2015










Net sales


$

179,565



$

107,446






$

287,011


Adjusted operating income (loss)


37,454



10,892



(8,429)




39,917


Adjusted operating margin %


20.9

%


10.1

%





13.9

%

Restructuring and other charges









(227)


Currency exchange (losses), net









(1,557)


Operating income









$

38,133


Operating margin %









13.3

%











Six Months Ended June 30, 2015










Net sales


$

338,067



$

205,652






$

543,719


Adjusted operating income (loss)


61,363



18,461



(15,366)




64,458


Adjusted operating margin %


18.2

%


9.0

%





11.9

%

Restructuring and other charges









(958)


Currency exchange gains, net









991


Operating income









$

64,491


Operating margin %









11.9

%

 

The Americas and International segments were established on January 1, 2016.  The Americas segment is comprised of our operations in the U.S., Canada, Mexico 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 now allocated to each segment in a manner consistent with where the benefits from the expenses are derived.  The 2015 segment results have been recast to conform with current period presentation.

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 income from continuing operations before taxes excluding restructuring charges, interest expense, currency exchange gains (losses), and other income (expense). Adjusted operating margin is defined as adjusted operating income divided by segment 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 financial measures.

 

MSA Safety Incorporated

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

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)

Consolidated



Three Months Ended June 30, 2016


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

20

%

6

%

(8)

%

11

%

(11)

%

96

%

9

%


(17)

%


3

%

Plus: Currency
translation effects

1

%

%

3

%

3

%

%

3

%

1

%


2

%


2

%

Constant currency
sales change

21

%

6

%

(5)

%

14

%

(11)

%

99

%

10

%


(15)

%


5

%

Less: Acquisitions

%

%

%

%

%

112

%

6

%


%


5

%

Organic constant currency change

21

%

6

%

(5)

%

14

%

(11)

%

(13)

%

4

%


(15)

%


%






Six Months Ended June 30, 2016


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

28

%

3

%

(11)

%

(1)

%

(8)

%

118

%

10

%


(11)

%


6

%

Plus: Currency translation effects

2

%

2

%

5

%

3

%

2

%

4

%

3

%


4

%


3

%

Constant currency sales change

30

%

5

%

(6)

%

2

%

(6)

%

122

%

13

%


(7)

%


9

%

Less: Acquisitions

%

%

%

%

%

131

%

7

%


%


6

%

Organic constant currency change

30

%

5

%

(6)

%

2

%

(6)

%

(9)

%

6

%


(7)

%


3

%

 

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control.

Organic constant currency revenue is defined as constant currency revenue excluding Latchways revenue results. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results excluding the acquisition.

There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

 

MSA Safety Incorporated

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

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)

Americas Segment



Three Months Ended June 30, 2016


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

17

%

18

%

(9)

%

2

%

(13)

%

3

%

2

%


(13)

%


(1)

%

Plus: Currency translation effects

1

%

1

%

3

%

3

%

%

3

%

2

%


4

%


2

%

Constant currency sales change

18

%

19

%

(6)

%

5

%

(13)

%

6

%

4

%


(9)

%


1

%

Less: Acquisitions

%

%

%

%

%

22

%

2

%


%


1

%

Organic constant currency change

18

%

19

%

(6)

%

5

%

(13)

%

(16)

%

2

%


(9)

%


%






Six Months Ended June 30, 2016


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

33

%

18

%

(13)

%

(5)

%

(11)

%

5

%

5

%


(11)

%


2

%

Plus: Currency translation effects

2

%

2

%

6

%

4

%

2

%

4

%

3

%


4

%


3

%

Constant currency sales change

35

%

20

%

(7)

%

(1)

%

(9)

%

9

%

8

%


(7)

%


5

%

Less: Acquisitions

%

%

%

%

%

20

%

2

%


%


1

%

Organic constant currency change

35

%

20

%

(7)

%

(1)

%

(9)

%

(11)

%

6

%


(7)

%


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.

Organic constant currency revenue is defined as constant currency revenue excluding Latchways revenue results. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results excluding the acquisition.

There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

 

MSA Safety Incorporated

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

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)

International Segment




Three Months Ended June 30, 2016


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

25

%

(1)

%

(5)

%

29

%

(8)

%

885

%

22

%


(22)

%


10

%

Plus: Currency
translation effects

1

%

%

4

%

2

%

%

4

%

1

%


1

%


1

%

Constant
currency sales
change

26

%

(1)

%

(1)

%

31

%

(8)

%

889

%

23

%


(21)

%


11

%

Less: Acquisitions

%

%

%

%

%

880

%

14

%


%


10

%

Organic constant
currency change

26

%

(1)

%

(1)

%

31

%

(8)

%

9

%

9

%


(21)

%


1

%






Six Months Ended June 30, 2016


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

17

%

(6)

%

(6)

%

4

%

(4)

%

1,113

%

20

%


(10)

%


12

%

Plus: Currency translation effects

3

%

2

%

5

%

3

%

2

%

5

%

2

%


3

%


2

%

Constant currency sales change

20

%

(4)

%

(1)

%

7

%

(2)

%

1,118

%

22

%


(7)

%


14

%

Less: Acquisitions

%

%

%

%

%

1,112

%

16

%


%


12

%

Organic constant currency change

20

%

(4)

%

(1)

%

7

%

(2)

%

6

%

6

%


(7)

%


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.

Organic constant currency revenue is defined as constant currency revenue excluding Latchways revenue results. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results excluding the acquisition.

There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

 

MSA Safety Incorporated

Supplemental Segment Information (Unaudited)

Summary of constant currency revenue growth by segment and product group




Three Months Ended June 30, 2016


Consolidated


Americas


International

Fall Protection*

99

%


6

%


889

%

Breathing Apparatus

21

%


18

%


26

%

Portable Gas Detection

14

%


5

%


31

%

Fire and Rescue Helmets

6

%


19

%


(1)

%

Industrial Head Protection

(5)

%


(6)

%


(1)

%

Fixed Gas and Flame Detection

(11)

%


(13)

%


(8)

%

Core Sales

10

%


4

%


23

%

  Core excluding Latchways

4

%


2

%


9

%







Non-Core Sales

(15)

%


(9)

%


(21)

%







Net Sales

5

%


1

%


11

%

  Net Sales excluding Latchways

%


%


1

%






Six Months Ended June 30, 2016


Consolidated


Americas


International

Fall Protection*

122

%


9

%


1,118

%

Breathing Apparatus

30

%


35

%


20

%

Portable Gas Detection

2

%


(1)

%


7

%

Fire and Rescue Helmets

5

%


20

%


(4)

%

Industrial Head Protection

(6)

%


(7)

%


(1)

%

Fixed Gas and Flame Detection

(6)

%


(9)

%


(2)

%

Core Sales

13

%


8

%


22

%

  Core excluding Latchways

6

%


6

%


6

%







Non-Core Sales

(7)

%


(7)

%


(7)

%







Net Sales

9

%


5

%


14

%

  Net Sales excluding Latchways

3

%


4

%


2

%










*Fall protection growth rates include the impact from Latchways sales.




       

 

MSA Safety Incorporated



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



Constant currency selling, general and administrative (SG&A) expense  (Unaudited)



Organic constant currency SG&A expense (Unaudited)






(In thousands)
















Three Months Ended
June 30,




Six Months Ended
June 30,




2016


2015


% Change


2016


2015


% Change













GAAP reported SG&A
expense

$

75,716



$

77,588



(2)

%


$

154,911



$

158,956



(3)

%

Plus: Currency translation
effects



(1,481)







(4,471)




Constant currency SG&A
expense

$

75,716



$

76,107



(1)

%


$

154,911



$

154,485



%

Less: Acquisitions

3,523







8,127






Organic constant currency
SG&A expense

$

72,193



$

76,107



(5)

%


$

146,784



$

154,485



(5)

%

 

Management believes that constant currency SG&A expense and organic constant currency SG&A expense are useful metrics for investors to measure the effectiveness of the company's cost reduction program announced in 2015.  Constant currency SG&A expense highlights spending patterns excluding fluctuating foreign currencies. Organic constant currency SG&A expense highlights the impact of the Latchways acquisition. These metrics provide investors with a greater level of clarity into spending levels on a year-over-year basis. MSA's definition of this metric may not be comparable to metrics used by other companies. As such, management believes that it is appropriate to consider SG&A expense 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





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,




2016


2015


%
Change


2016


2015


%
Change













Income from continuing operations
attributable to MSA Safety
Incorporated

$

29,306



$

23,722



24%


$

41,989



$

33,038



27%

Nonrecurring tax charges associated with European reorganization







3,600



7,605




Subtotal

29,306



23,722



24%


45,589



40,643



12%













Restructuring and other charges

1,338



227





1,808



958




Self-insured legal settlements and defense costs

275



256





295



342




Latchways integration costs







511






Asset related (gains) losses, net

(216)



332





(559)



332




Currency exchange (gains) losses, net

(242)



1,557





1,708



(991)




Income tax expense on adjustments

(390)



(820)





(1,295)



(214)




Adjusted earnings

30,071



25,274



19%


48,057



41,070



17%













Adjusted earnings per diluted share

$

0.79



$

0.67



18%


$

1.27



$

1.09



17%

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 line of products 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 2015 revenues of $1.1 billion, MSA employs approximately 4,600 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 29, 2016. You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties.  MSA's SEC filings are readily obtainable at no charge at www.sec.gov, as well as on its own investor relations website at http://investors.MSAsafety.com. MSA undertakes no duty to publicly update any forward looking statements contained herein, except as required by law.

Non-GAAP Financial Measures: 
This earnings release includes certain non-GAAP financial measures. These financial measures include constant currency revenue growth, organic constant currency revenue growth, constant currency selling, general and administrative expense, organic constant currency selling, general and administrative expense, adjusted operating income, adjusted operating margin 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-second-quarter-results-300301771.html

SOURCE MSA


[ Back To TMCnet.com's Homepage ]