MSA Announces Second Quarter Results

Local currency sales growth of 11 percent driven by a surge in G1 SCBA sales

Jul 22, 2015, 17:00 ET from MSA

PITTSBURGH, July 22, 2015 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the second quarter of 2015.

Quarterly Highlights

  • Reported revenue was $287 million, up 2 percent from the second quarter of 2014. Income from continuing operations was $24 million or $0.62 per diluted share. Adjusted earnings were $25 million or $0.67 per diluted share, increasing 12 percent from the second quarter of 2014.
  • Core sales grew 10 percent on a local currency basis in the quarter, with strong performance in fire service products and fixed gas and flame detection (FGFD) systems. This was offset by continued weakness in portable gas detection and industrial head protection, which are more exposed to employment levels within the energy market vertical.
  • Local currency sales of self-contained breathing apparatus (SCBA) increased 41 percent globally, driven by a 90 percent increase in North America, as the manufacturing ramp up of the company's groundbreaking G1 SCBA platform continues to gain traction. Global SCBA backlog at the end of the quarter was $77 million, compared to $82 million at the end of the first quarter of 2015 and almost $40 million at this same time a year ago.
  • Despite significant weakness in Brazil on recessionary conditions and a slower growth environment in Asia, local currency sales across emerging markets increased 9 percent. This improvement was supported by large order shipments in the Middle East and Mexico.
  • R&D investments made in new products are generating strong returns, as products developed and launched within the last five years represented 45 percent of quarterly core product revenue, compared to 32 percent a year ago.
  • In the quarter, MSA used $12 million of cash flow to fund dividend payments, $7 million to repurchase common stock to offset dilution as part of its newly authorized $100 million stock repurchase plan and $4 million to service debt obligations as it continues to reduce leverage.

Comments from Management

"Our quarterly results reflect our team's highly focused execution of our strategy, despite challenging conditions that continue to impact certain areas of our business," said William M. Lambert, MSA Chairman, President and CEO. "While certain MSA products that are more closely aligned with employment levels in the energy market continued an expected weak trajectory, we realized double-digit sales growth in SCBA, FGFD and fire helmets in the quarter. Incoming order pace for the G1 SCBA remains strong, the backlog pipeline is robust and we're hitting our stride from a production standpoint," Mr. Lambert continued, explaining that G1 SCBA manufacturing in June reflected the highest level of monthly production to date.  He also noted that overall sales growth is 7 percent year-to-date on a local currency basis, tracking at the high end of the company's targeted range of mid-single digit sales growth for 2015.

"Although we saw strong sales and earnings growth in the quarter, headwinds associated with lower commodity prices, economic conditions in certain emerging markets and weakness in foreign currencies weighed on our results," Mr. Lambert said. "Looking ahead, I expect these challenges to persist into the second half of 2015. However, the demand we're seeing for the G1 SCBA and our sizable backlog in this area provides momentum as we head into the third quarter, helping us navigate these headwinds," he 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,

2015

2014

2015

2014

Net sales

$

287,011

$

282,493

$

543,719

$

547,538

Other income, net

94

45

735

401

287,105

282,538

544,454

547,939

Cost of products sold

156,522

152,823

296,407

296,053

Selling, general and administrative

77,588

82,835

158,956

168,076

Research and development

12,984

11,943

23,898

23,184

Restructuring and other charges

227

857

958

2,757

Interest expense

2,502

2,594

4,975

5,124

Currency exchange losses (gains), net

1,557

(309)

(991)

43

251,380

250,743

484,203

495,237

Income from continuing operations before income taxes

35,725

31,795

60,251

52,702

Provision for income taxes

12,350

9,753

27,734

17,357

 

Income from continuing operations

23,375

22,042

32,517

35,345

Income from discontinued operations

470

453

778

1,067

Net income

23,845

22,495

33,295

36,412

Net loss (income) attributable to noncontrolling interests

453

(7)

685

102

Net income attributable to MSA Safety Incorporated

24,298

22,488

33,980

36,514

Income from continuing operations

23,722

22,132

33,038

35,654

Income from discontinued operations

576

356

942

860

Net income attributable to MSA Safety Incorporated

24,298

22,488

33,980

36,514

Earnings per share attributable to MSA Safety Incorporated common shareholders:

Basic

Income from continuing operations

$0.63

$0.59

$0.88

$0.96

Income from discontinued operations

$0.02

$0.01

$0.03

$0.02

  Net income

$0.65

$0.60

$0.91

$0.98

Diluted

Income from continuing operations

$0.62

$0.58

$0.87

$0.94

Income from discontinued operations

$0.01

$0.01

$0.03

$0.02

  Net income

$0.63

$0.59

$0.90

$0.96

Basic shares outstanding

37,351

37,128

37,323

37,072

Diluted shares outstanding

37,826

37,719

37,807

37,669

 

 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)

June 30, 2015

December 31, 2014

Assets

  Cash and cash equivalents

$

88,134

$

105,998

  Trade receivables, net

218,833

211,440

  Inventories

150,415

122,954

  Other current assets

75,226

57,477

    Total current assets

532,608

497,869

Property, net

144,955

151,352

Prepaid pension cost

79,330

75,017

Goodwill

248,416

252,520

Other noncurrent assets

281,270

288,034

   Total assets

1,286,579

1,264,792

Liabilities and shareholders' equity

  Notes payable and current portion of long-term debt

$

6,667

$

6,700

  Accounts payable

80,465

70,210

  Other current liabilities

194,223

157,147

   Total current liabilities

281,355

234,057

Long-term debt

263,000

245,000

Pensions and other employee benefits

165,272

174,598

Deferred tax liabilities

28,334

26,306

Other noncurrent liabilities

16,059

46,198

Total shareholders' equity

532,559

538,633

   Total liabilities and shareholders' equity

1,286,579

1,264,792

 

 

MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Net income

$

23,845

$

22,495

$

33,295

$

36,412

Depreciation and amortization

8,727

7,656

15,664

15,115

Change in working capital and other operating

(8,196)

(24,238)

(41,246)

(36,217)

  Cash from operations

24,376

5,913

7,713

15,310

Capital expenditures

(8,546)

(7,324)

(16,015)

(14,528)

Property disposals

7,969

7,969

  Cash from investing

(577)

(7,324)

(8,046)

(14,528)

Cash dividends paid

(11,969)

(11,320)

(23,522)

(22,501)

Change in debt

(3,549)

4,886

18,004

20,183

Share repurchase program

(7,104)

(7,104)

Other financing

480

1,621

(255)

2,075

  Cash from financing

(22,142)

(4,813)

(12,877)

(243)

Exchange rate changes

176

195

(4,654)

(621)

Increase (decrease) in cash

1,833

(6,029)

(17,864)

(82)

 

 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Net sales

  North America

$

156,193

$

138,782

$

289,757

$

268,303

  Europe

75,317

78,883

141,330

153,821

  International

55,501

64,828

112,632

125,414

    Total

287,011

282,493

543,719

547,538

Net income (loss)

  North America

$

22,253

$

19,407

$

36,684

$

33,667

  Europe

6,596

6,780

2,159

10,232

  International

2,989

3,172

6,651

7,763

  Corporate

(7,655)

(7,473)

(12,492)

(15,359)

  Reconciling Items

(461)

246

36

(649)

  Income from continuing operations

23,722

22,132

33,038

35,654

  Income from discontinued operations

576

356

942

860

     Total

24,298

22,488

33,980

36,514

 

The Corporate segment was established on January 1, 2015 to reflect the activities of centralized functions in our corporate headquarters and to capture results in a manner that the chief operating decision maker reviews.  The corporate segment primarily consists of administrative expenses and centrally-managed costs such as interest expense and foreign exchange gains or losses. Additionally, effective January 1, 2015, we changed the allocation methodology applied to Research and Development expense.  The 2014 segment results have been recast to conform with current period presentation.

 

MSA Safety Incorporated

Supplemental Segment Information (Unaudited)

Local Currency Revenue Growth

Three Months Ended June 30, 2015

Consolidated

North America

Europe

International

Breathing Apparatus

41

%

90

%

1

%

(8)

%

Fire and Rescue Helmets

11

%

(3)

%

(10)

%

146

%

Fixed Gas and Flame Detection

10

%

6

%

21

%

%

Fall Protection

%

8

%

(12)

%

(13)

%

Portable Gas Detection

(5)

%

(18)

%

12

%

17

%

Industrial Head Protection

(9)

%

(8)

%

20

%

(16)

%

  Core Sales

10

%

15

%

9

%

%

Non-Core Sales

12

%

10

%

35

%

(11)

%

Net Sales

11

%

14

%

16

%

(3)

%

Six Months Ended June 30, 2015

Consolidated

North America

Europe

International

Breathing Apparatus

34

%

77

%

2

%

(8)

%

Fire and Rescue Helmets

12

%

1

%

(2)

%

93

%

Fixed Gas and Flame Detection

9

%

8

%

4

%

23

%

Fall Protection

3

%

6

%

5

%

(2)

%

Portable Gas Detection

(4)

%

(18)

%

19

%

15

%

Industrial Head Protection

(8)

%

(8)

%

19

%

(14)

%

  Core Sales

9

%

12

%

6

%

5

%

Non-Core Sales

2

%

(4)

%

23

%

(12)

%

Net Sales

7

%

9

%

10

%

%

 

 

MSA Safety Incorporated

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

Adjusted Earnings / Earnings per Share (Unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

%

Change

2015

2014

% Change

Income from continuing operations attributable to MSA Safety Incorporated

23,722

22,132

7.2%

33,038

35,654

(7.3)%

Nonrecurring tax charges associated with European reorganization

7,605

 

Income from continuing operations excluding nonrecurring tax charges

23,722

22,132

7.2%

40,643

35,654

14.0%

Asset related loss, net

332

332

Foreign currency loss / (gain), net

1,557

(309)

(991)

43

Self insured legal settlements and defense costs

256

140

342

2,257

Restructuring charges

227

857

958

2,757

Income tax expense on adjustments

(820)

(211)

(214)

(1,665)

Adjusted earnings

25,274

22,609

11.8%

41,070

39,046

5.2%

Adjusted earnings per diluted share

$

0.67

$

0.60

11.7%

$

1.09

$

1.04

4.8%

 

Management believes that adjusted earnings and adjusted earnings per share are useful measures for investors when analyzing 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.  The company's core products include self-contained breathing apparatus, fixed gas and flame detection systems, portable gas detection instruments, industrial head protection, fire and rescue helmets, and fall protection devices. With 2014 revenues of $1.1 billion, MSA employs approximately 5,000 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 website 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, 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 25, 2015. 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 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.

SOURCE MSA



RELATED LINKS

http://www.MSAsafety.com