MSA Announces Fourth Quarter and Full Year 2017 Results
PITTSBURGH, Feb. 20, 2018 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the fourth quarter and full year of 2017.
Quarterly Highlights
-- Reported revenue was $346 million, increasing 17 percent from a year ago on a reported basis and 14 percent on a constant currency basis. -- Quarterly GAAP loss from continuing operations was $33 million or $0.87 per basic share, compared to earnings of $25 million or $0.67 per basic share in the same period a year ago. The decline in GAAP earnings is attributable to a $93 million non-cash pre-tax charge related primarily to increasing the cumulative trauma product liability reserve for estimated unasserted, or incurred but not reported ("IBNR"), claims, net of expected insurance collections, and a $20 million income tax charge associated with U.S. Tax Reform. -- Adjusted earnings increased 69 percent to $51 million or $1.31 per diluted share, compared to adjusted earnings of $30 million or $0.78 per diluted share in the same period a year ago, on strong revenue growth throughout MSA's core product portfolio, the company's 2017 acquisition of firefighter protective clothing manufacturer Globe Manufacturing, and a streamlined cost structure.
Annual Highlights
-- Reported revenue was $1.197 billion, increasing 4 percent from a year ago on a reported basis and 3 percent on a constant currency basis. -- Selling, general and administrative expenses declined $8 million on a reported basis and $16 million on an organic constant currency basis, exceeding the company's full year cost savings target of $10 million. -- GAAP earnings from continuing operations were $26 million, or $0.68 per basic share, compared to $93 million, or $2.47 per basic share, in the same period a year ago. The decline in GAAP earnings is attributable to a $126 million pre-tax charge associated with increasing the company's cumulative trauma product liability reserve for asserted claims in the second quarter and IBNR claims in the fourth quarter, net of expected insurance collections, and a $20 million income tax charge associated with U.S. Tax Reform. -- Adjusted earnings increased 34 percent to $141 million, or $3.65 per diluted share, compared to adjusted earnings of $105 million, or $2.77 per diluted share, in the same period a year ago. The acquisition of Globe, a streamlined cost structure, and a lower effective tax rate were the key drivers of earnings growth in 2017. -- Cash flow from operating activities was $230 million compared to $135 million in the same period a year ago, reflecting higher collections of insurance receivables partially offset by higher levels of working capital to support elevated demand across the company's core product portfolio. In 2017, the company invested $216 million in the acquisition of Globe and returned $70 million to shareholders through dividend payments and repurchases of common stock.
Cumulative Trauma Product Liability Charge
-- In the fourth quarter of 2017, the company in consultation with an outside valuation consultant and outside legal counsel, performed a review for IBNR cumulative trauma product liability claims. Based on that review process, it was determined that a reasonable estimate for the liability of its IBNR claims was $111 million through the year 2060. The reserve is not discounted to present value. -- The company's fourth quarter GAAP results include a $93 million non-cash pre-tax charge, or $63 million after tax ($1.65 per diluted share), which primarily reflects the increase to the cumulative trauma product liability reserve for IBNR claims, net of expected insurance collections. -- The ability to make a reasonable estimate of the potential liability for IBNR cumulative trauma product liability claims reflects stabilization of a number of factors which are important to the estimation process. This stabilization has enabled greater predictability of potential cumulative trauma product liability related to IBNR claims. -- The company's cumulative trauma product liability reserve balance was $181 million at the end of the quarter, which includes reserves for both asserted and IBNR claims. The company has insurance and notes receivable totaling $212 million.
Comments from Management
"Our fourth quarter results reflect improving macro conditions across many of our key end markets and geographies, as well as returns on investments made in strategic acquisitions and cost reduction programs," said William M. Lambert, MSA Chairman and CEO. "Our quarterly revenue reflected record performance for MSA and increased 14 percent in constant currency from a year ago, or 6 percent excluding Globe. Additionally, our streamlined cost structure provided support to leverage our revenue growth into a 69 percent increase in adjusted earnings."
Mr. Lambert noted that the company finished the year with a backlog pipeline that is trending approximately 10 percent higher than the end of the third quarter on strong demand for industrial products and self-contained breathing apparatus for the fire service market. "Typically, we see a seasonal decline in backlog during the fourth quarter. The solid quarterly revenue growth coupled with an elevated level of backlog at year end highlights the positive momentum we see occurring in many of our end markets," Mr. Lambert commented.
Regarding the increase to the company's product liability reserve, Mr. Lambert noted the reserve relates to products sold many years ago that are no longer part of the MSA portfolio. "For more than a decade, we have funded product liability settlements from operating cash flow," Mr. Lambert explained. "Through the ongoing successful resolution of insurance litigation, we continue to make good progress collecting insurance proceeds and establishing cash flow streams for the future, which I expect will allow us to fund these liabilities without a material impact on our capital allocation priorities."
"As we look ahead to 2018, we are highly focused on generating revenue growth and investing in the programs, people and technology that will help us reach our growth and profitability targets. With an expected tailwind from U.S. tax reform, combined with healthy conditions in our end markets and a strong balance sheet, we are well positioned to create value for our stakeholders in 2018 and beyond," he concluded.
MSA Safety Incorporated Condensed Consolidated Statement of Income (Unaudited) (In thousands, except per share amounts) Three Months Ended Twelve Months Ended December 31, December 31, 2017 2016 2017 2016 ---- ---- ---- ---- Net sales $346,140 $296,031 $1,196,809 $1,149,530 Cost of products sold 191,569 157,710 656,411 625,887 ------- ------- ------- ------- Gross profit 154,571 138,321 540,398 523,643 Selling, general and administrative 75,467 78,288 297,801 306,144 Research and development 14,779 12,224 50,061 46,847 Restructuring charges 712 1,997 17,632 5,694 Currency exchange losses (gains), net 1,133 (1,732) 5,127 766 Other operating expense (a) 93,476 - 126,432 - Operating (loss) income (30,996) 47,544 43,345 164,192 Interest expense 4,794 3,896 15,360 16,411 Other expense (income), net 271 (426) (1,790) (4,130) --- ---- ------ ------ Total other expense, net 5,065 3,470 13,570 12,281 (Loss) income from continuing operations before income taxes (36,061) 44,074 29,775 151,911 (Benefit) provision for income taxes (3,487) 18,938 2,819 57,804 ------ ------ ----- ------ (Loss) income from continuing operations (32,574) 25,136 26,956 94,107 Loss from discontinued operations - (300) - (245) --- ---- --- ---- Net (loss) income (32,574) 24,836 26,956 93,862 Net (income) loss attributable to noncontrolling interests (410) 80 (929) (1,926) ---- --- ---- ------ Net (loss) income attributable to MSA Safety Incorporated (32,984) 24,916 26,027 91,936 ======= ====== ====== ====== Amounts attributable to MSA Safety Incorporated common shareholders: (Loss) income from continuing operations (32,984) 25,216 26,027 92,691 Loss from discontinued operations - (300) - (755) --- ---- --- ---- Net (loss) income (32,984) 24,916 26,027 91,936 ======= ====== ====== ====== Earnings per share attributable to MSA Safety Incorporated common shareholders: Basic (Loss) income from continuing operations $(0.87) $0.67 $0.68 $2.47 Loss from discontinued operations $ - $(0.01) $ - $(0.02) --- --- ------ --- --- ------ Net (loss) income $(0.87) $0.66 $0.68 $2.45 ====== ===== ===== ===== Diluted (Loss) Income from continuing operations $(0.87) $0.66 $0.67 $2.44 Loss from discontinued operations $ - $(0.01) $ - $(0.02) --- --- ------ --- --- ------ Net (loss) income $(0.87) $0.65 $0.67 $2.42 ====== ===== ===== ===== Basic shares outstanding 38,079 37,602 37,997 37,456 Diluted shares outstanding 38,079 38,218 38,697 37,986
(a) Year to date amount is primarily associated with increasing the company's cumulative trauma product liability reserve for asserted and IBNR claims.
MSA Safety Incorporated Condensed Consolidated Balance Sheet (Unaudited) (In thousands) December 31, 2017 December 31, 2016 ----------------- ----------------- Assets Cash and cash equivalents $134,244 $113,759 Trade receivables, net 244,198 209,514 Inventories 153,739 103,066 Notes receivable, insurance companies 17,333 4,180 Other current assets 72,783 42,287 ------ ------ Total current assets 622,297 472,806 Property, net 157,014 148,678 Prepaid pension cost 83,060 62,916 Goodwill 422,185 333,276 Notes receivable, insurance companies, noncurrent 59,567 63,147 Insurance receivable, noncurrent 123,089 157,929 Other noncurrent assets 217,614 115,168 ------- ------- Total assets $1,684,826 $1,353,920 ========== ========== Liabilities and shareholders' equity Notes payable and current portion of long-term debt, net $26,680 $26,666 Accounts payable 87,061 62,734 Other current liabilities 175,538 132,010 ------- ------- Total current liabilities 289,279 221,410 Long-term debt, net 447,832 363,836 Pensions and other employee benefits 170,773 157,927 Deferred tax liabilities 9,341 34,044 Other noncurrent liabilities 165,023 15,491 Total shareholders' equity 602,578 561,212 ------- ------- Total liabilities and shareholders' equity $1,684,826 $1,353,920 ========== ==========
MSA Safety Incorporated Condensed Consolidated Statement of Cash Flows (Unaudited) (In thousands) Three Months Ended Twelve Months Ended December 31, December 31, 2017 2016 2017 2016 ---- ---- ---- ---- Net (loss) income $(32,574) $24,836 $26,956 $93,862 Depreciation and amortization 10,212 8,622 37,877 35,273 Change in working capital and other operating 63,452 69,999 165,503 5,759 Cash flow from operating activities 41,090 103,457 230,336 134,894 ------ ------- ------- ------- Capital expenditures (11,995) (9,377) (23,725) (25,523) Acquisition, net of cash acquired (2,318) (188) (216,308) (18,449) Property disposals and other investing 103 282 832 18,214 Cash flow used in investing activities (14,210) (9,283) (239,201) (25,758) ------- ------ -------- ------- Change in debt 1,346 (76,991) 77,246 (60,908) Cash dividends paid (13,337) (12,399) (52,537) (49,074) Company stock purchases (857) - (17,513) (1,881) Other financing 3,313 7,803 15,869 14,022 Cash flow (used in) from financing activities (9,535) (81,587) 23,065 (97,841) ------ ------- ------ ------- Effect of exchange rate changes on cash and cash equivalents 4,714 (4,861) 6,285 (3,461) Increase in cash and cash equivalents 22,059 7,726 20,485 7,834 ====== ===== ====== =====
MSA Safety Incorporated Segment Information (Unaudited) (In thousands) Americas International Corporate Consolidated -------- ------------- --------- ------------ Three Months Ended December 31, 2017 Sales to external customers $208,421 $137,719 - $346,140 Operating loss (30,996) Operating margin % (9.0)% Restructuring and other charges 712 Currency exchange losses, net 1,133 Other operating expense 93,476 Adjusted operating income (loss) 53,400 18,770 (7,845) $64,325 Adjusted operating margin % 25.6% 13.6% 18.6% Twelve Months Ended December 31, 2017 Sales to external customers $736,847 $459,962 - $1,196,809 Operating income 43,345 Operating margin % 3.6% Restructuring and other charges 17,632 Currency exchange losses, net 5,127 Other operating expense 126,432 Adjusted operating income (loss) 184,287 45,461 (37,212) $192,536 Adjusted operating margin % 25.0% 9.9% 16.1% Americas International Corporate Consolidated -------- ------------- --------- ------------ Three Months Ended December 31, 2016 Sales to external customers $168,109 $127,922 - $296,031 Operating income 47,544 Operating margin % 16.1% Restructuring charges 1,997 Currency exchange (gains), net (1,732) Other operating expense - Adjusted operating income (loss) 45,313 14,832 (12,336) $47,809 Adjusted operating margin % 27.0% 11.6% 16.2% Twelve Months Ended December 31, 2016 Sales to external customers $678,433 $471,097 - $1,149,530 Operating income 164,192 Operating margin % 14.3% Restructuring charges 5,694 Currency exchange losses, net 766 Other operating expense - Adjusted operating income (loss) 162,788 46,491 (38,627) $170,652 Adjusted operating margin % 24.0% 9.9% 14.8%
The Americas and International segments were established on January 1, 2016. The Americas segment is comprised of our operations in the U.S., Canada and Latin America. The International segment is comprised of our operations in all other parts of the world including Europe, Africa, the Middle East, India, China, South East Asia and Australia. Certain global expenses are allocated to each segment in a manner consistent with where the benefits from the expenses are derived.
Adjusted operating income (loss) and adjusted operating margin are the measures used by the chief operating decision maker to evaluate segment performance and allocate resources. As such, management believes that adjusted operating income (loss) and adjusted operating margin are useful metrics for investors. Adjusted operating income (loss) is defined as operating income excluding restructuring, currency exchange gains (losses) and other operating expense. Adjusted operating margin is defined as adjusted operating income (loss) divided by segment sales to external customers. Adjusted operating income (loss) and adjusted operating 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) and adjusted operating margin may not be comparable to similarly titled measures of other companies. As such, management believes that it is appropriate to consider operating income determined on a GAAP basis in addition to these non-GAAP measures.
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 December 31, 2017 Breathing Firefighter Industrial Portable Fixed Gas Fall Core Non- Net Sales Apparatus Helmets Head Gas and Flame Protection Sales Core and Protection Detection Detection Sales Protective Apparel(b) GAAP reported sales change 9% 236% 9% 14% 11% 8% 22% (10)% 17% Plus: Currency translation effects (2)% (7)% (2)% (2)% (5)% (4)% (3)% (3)% (3)% --- --- --- --- --- --- --- --- Constant currency sales change 7% 229% 7% 12% 6% 4% 19% (13)% 14% --- --- --- --- --- --- --- ---- --- Less: Acquisitions - % 207% - % - % (4)% - % 10% - % 8% --- --- --- --- --- --- --- --- --- --- --- --- --- --- Organic constant currency change 7% 22% 7% 12% 10% 4% 9% (13)% 6% === === === === === === === ==== === Twelve Months Ended December 31, 2017 Breathing Firefighter Industrial Portable Fixed Gas Fall Core Non- Net Sales Apparatus Helmets Head Gas and Flame Protection Sales Core and Protection Detection Detection Sales Protective Apparel(b) GAAP reported sales change (4)% 97% 13% 4% 4% 2% 8% (12)% 4% Plus: Currency translation effects - % (1)% (2)% - % (2)% 2% (1)% (2)% (1)% --- --- --- --- --- --- --- --- --- --- Constant currency sales change (4)% 96% 11% 4% 2% 4% 7% (14)% 3% --- --- --- --- --- --- --- ---- --- Less: Acquisitions - % 89% - % - % - % - % 5% - % 4% --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- Organic constant currency change (4)% 7% 11% 4% 2% 4% 2% (14)% (1)% === === === === === === === ==== ===
(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.
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 growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. 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 December 31, 2017 Breathing Firefighter Industrial Portable Fixed Gas Fall Core Non- Net Sales Apparatus Helmets Head Gas and Flame Protection Sales Core and Protection Detection Detection Sales Protective Apparel(b) GAAP reported sales change 10% 581% 10% 11% 4% 19% 29% (5)% 24% Plus: Currency translation effects - % 2% (1)% - % - % (1)% (1)% (1)% - % --- --- --- --- --- --- --- --- --- --- --- Constant currency sales change 10% 583% 9% 11% 4% 18% 28% (6)% 24% --- --- --- --- --- --- --- --- --- Less: Acquisitions - % 559% - % - % - % - % 18% - % 16% --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- Organic constant currency change 10% 24% 9% 11% 4% 18% 10% (6)% 8% === === === === === === === === === Twelve Months Ended December 31, 2017 Breathing Firefighter Industrial Portable Fixed Gas Fall Core Non- Net Sales Apparatus Helmets Head Gas and Flame Protection Sales Core and Protection Detection Detection Sales Protective Apparel(b) GAAP reported sales change (4)% 219% 11% 8% (2)% 22% 11% (7)% 9% Plus: Currency translation effects - % - % (1)% - % - % - % - % (1)% (1)% --- --- --- --- --- --- --- --- --- --- --- --- --- Constant currency sales change (4)% 219% 10% 8% (2)% 22% 11% (8)% 8% --- --- --- --- --- --- --- --- --- Less: Acquisitions - % 213% - % - % - % - % 8% - % 7% --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- Organic constant currency change (4)% 6% 10% 8% (2)% 22% 3% (8)% 1% === === === === === === === === ===
(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.
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 growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. 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 December 31, 2017 Breathing Firefighter Industrial Portable Fixed Gas Fall Core Non- Net Sales Apparatus Helmets Head Gas and Flame Protection Sales Core and Protection Detection Detection Sales Protective Apparel GAAP reported sales change 9% 29% 5% 20% 16% (3)% 13% (15)% 8% Plus: Currency translation effects (7)% (9)% (3)% (7)% (7)% (7)% (7)% (5)% (7)% --- --- --- --- --- --- --- --- Constant currency sales change 2% 20% 2% 13% 9% (10)% 6% (20)% 1% --- --- --- --- --- ---- --- ---- --- Less: Acquisitions - % - % - % - % (6)% - % (2)% - % (2)% --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- Organic constant currency change 2% 20% 2% 13% 15% (10)% 8% (20)% 3% === === === === === ==== === ==== === Twelve Months Ended December 31, 2017 Breathing Firefighter Industrial Portable Fixed Gas Fall Core Non- Net Sales Apparatus Helmets Head Gas and Flame Protection Sales Core and Protection Detection Detection Sales Protective Apparel GAAP reported sales change (3)% 10% 18% (2)% 9% (15)% 2% (18)% (2)% Plus: Currency translation effects (2)% (2)% (1)% (2)% (2)% 3% (2)% (2)% (2)% --- --- --- --- --- --- --- --- Constant currency sales change (5)% 8% 17% (4)% 7% (12)% - % (20)% (4)% --- --- --- --- --- ---- --- --- ---- --- Less: Acquisitions - % - % - % - % 1% - % - % - % - % --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- Organic constant currency change (5)% 8% 17% (4)% 6% (12)% - % (20)% (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 growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. 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 December 31, 2017 Consolidated Americas International ------------ -------- ------------ Firefighter Helmets and Protective Apparel(b) 229% 583% 20% Portable Gas Detection 12% 11% 13% Industrial Head Protection 7% 9% 2% Breathing Apparatus 7% 10% 2% Fixed Gas and Flame Detection 6% 4% 9% Fall Protection 4% 18% (10)% Core Sales 19% 28% 6% --- --- --- Core excluding Acquisitions 9% 10% 8% Non-Core Sales (13)% (6)% (20)% Net Sales 14% 24% 1% === === === Net Sales excluding Acquisitions 6% 8% 3% Twelve Months Ended December 31, 2017 Consolidated Americas International ------------ -------- ------------ Firefighter Helmets and Protective Apparel(b) 96% 219% 8% Portable Gas Detection 4% 8% (4)% Industrial Head Protection 11% 10% 17% Breathing Apparatus (4)% (4)% (5)% Fixed Gas and Flame Detection 2% (2)% 7% Fall Protection 4% 22% (12)% Core Sales 7% 11% - % --- --- --- --- Core excluding Acquisitions 2% 3% - % Non-Core Sales (14)% (8)% (20)% Net Sales 3% 8% (4)% === === === Net Sales excluding Acquisitions (1)% 1% (4)%
(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.
MSA Safety Incorporated Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures Organic constant currency SG&A expense (Unaudited) (In thousands) Three Months Ended Twelve Months Ended December 31, December 31, 2017 2016 % 2017 2016 % Change Change ------ GAAP reported SG&A expense $75,467 $78,288 (4)% $297,801 $306,144 (3)% Plus: currency translation effects - 2,334 - 2,279 --- --- Constant currency SG&A expense 75,467 80,622 (6)% 297,801 308,423 (3)% Less: Acquisitions and strategic transaction costs 2,957 3,173 9,783 3,994 Organic constant currency SG&A expense 72,510 77,449 (6)% 288,018 304,429 (5)% ====== ====== ======= =======
Management believes that organic constant currency SG&A expense is a useful metric for investors to measure the effectiveness of the company's cost reduction programs. Constant currency SG&A expense highlights spending patterns excluding fluctuating foreign currencies. Organic constant currency SG&A expense highlights the impact of acquisitions and strategic transaction costs. These metrics provide investors with a greater level of clarity into spending levels on a year-over-year basis. There can be no assurances that MSA's definition of organic constant currency SG&A expense is consistent with that of other companies. As such, management believes that it is appropriate to consider SG&A expense determined on a GAAP basis in addition to this non-GAAP financial measure.
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 Twelve Months Ended December 31, December 31, 2017 2016 % 2017 2016 % Change Change (Loss) income from continuing operations attributable to MSA Safety Inc. $(32,984) $25,216 (231)% $26,027 $92,691 (72)% Tax charges associated with U.S. Tax Reform 19,817 - 19,817 Tax (benefit) associated with ASU 2016-09: Improvements to employee (1,413) - (8,323) - share-based payment accounting Tax (benefits) charges associated with European reorganization (30) 2,873 (2,504) 6,473 Subtotal (14,610) 28,089 (152)% 35,017 99,164 (65)% ------- ------ ------ ------ Self-insured legal settlements and defense costs (a) 93,476 26 126,432 341 Currency exchange losses (gains), net 1,133 (1,732) 5,127 766 Strategic transaction costs 860 1,710 4,225 2,531 Restructuring charges 712 1,997 17,632 5,694 Asset related losses and other, net 492 847 678 32 Income tax expense on adjustments (31,443) (1,038) (47,810) (3,161) Adjusted earnings 50,620 29,899 69% 141,301 105,367 34% ------ ------ ------- ------- Adjusted earnings per diluted share $1.31 $0.78 68% $3.65 $2.77 32% ===== ===== ===== =====
(a) Year to date amount is primarily associated with increasing the company's cumulative trauma product liability reserve for asserted and IBNR claims.
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 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 2017 revenues of $1.2 billion, MSA employs approximately 4,700 people worldwide. The company is headquartered north of Pittsburgh in Cranberry Township, Pa., and has manufacturing operations in the United States, Europe, Asia and Latin America. With more than 40 international locations, MSA realizes approximately half of its revenue from outside North America. For more information visit MSA's web site at www.MSAsafety.com.
Cautionary Statement Regarding Forward-Looking Statements:
Except for historical information, certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward looking statements involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Any number of factors could cause actual results to differ materially from projections or forward looking statements, including without limitation global economic conditions, spending patterns of government agencies, competitive pressures, the impact of acquisitions and related integration activities, product liability claims, the success of new product introductions, currency exchange rate fluctuations and the risks of doing business in foreign countries. A full listing of these risks, uncertainties and other factors are detailed from time-to-time in our filings with the United States Securities and Exchange Commission ("SEC"), including our most recent Form 10-K filed on February 28, 2017. You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties. MSA's SEC filings are readily obtainable at no charge at www.sec.gov, as well as on its own investor relations website at http://investors.MSAsafety.com. MSA undertakes no duty to publicly update any forward looking statements contained herein, except as required by law.
Non-GAAP Financial Measures:
This earnings release includes certain non-GAAP financial measures. These financial measures include constant currency revenue growth, organic constant currency growth, organic constant currency SG&A expense, adjusted operating income, adjusted operating margin, adjusted earnings and adjusted earnings per diluted share. The presentation of these financial measures does not comply with U.S. generally accepted accounting principles ("GAAP"). For an explanation of these measures, together with a reconciliation to the most directly comparable GAAP financial measure, see the Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures in the financial tables section above.
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