MSA Announces Record First Quarter Results
MSA Announces Record First Quarter Results
Growth in core product business, strategic acquisitions, and streamlined cost structure drive GAAP earnings growth of 125 percent and adjusted earnings growth of 76 percent
PITTSBURGH, April 23, 2018 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the first quarter of 2018.
Quarterly Highlights
-- Revenue was $326 million, increasing 23 percent from a year ago on a
reported basis and 18 percent on a constant currency basis. Excluding
the recent acquisition of Globe, organic revenue was up 7 percent on a
constant currency basis.
-- GAAP operating income was $44 million or 13.6 percent of sales, compared
to $19 million or 7.0 percent of sales in the same period a year ago.
Adjusted operating income was $55 million or 16.8 percent of sales,
compared to $33 million or 12.5 percent of sales in the same period a
year ago. Adjusted operating margin expansion of 430 basis points was
driven by improved gross profit and operating expense leverage.
-- GAAP earnings were $32 million or $0.83 per diluted share, compared to
$14 million or $0.37 per diluted share in the same period a year ago.
Adjusted earnings were $39 million or $1.01 per diluted share, compared
to $22 million or $0.58 per diluted share in the same period a year ago.
Comments from Management
"Our first quarter results reflect continued strength in our key end markets and geographies, and strong execution of our focused growth strategy," said William M. Lambert, MSA Chairman and CEO. "Double-digit revenue growth was supported by growth across all of our core product lines as well as returns on the acquisition of Globe. After reducing our cost structure by more than $25 million in 2016 and 2017, we were able to drive quarterly earnings growth of 76 percent on revenue growth of 23 percent," he said. Mr. Lambert added that the company has seen a step-change in its profitability profile over the past several years.
"We are pleased with the strong start to 2018 and are encouraged by the favorable dynamics we're seeing across both our industrial and fire service end markets. Our quarterly revenue growth and improving order book reflect the traction we are gaining from efforts to strengthen our leadership positions in each of our core product areas and market segments," Mr. Lambert said.
"The ongoing strengthening of key industrial markets and recent successes in our global fire service business has provided the backdrop for a very solid start to 2018. Our focus now is on sustaining that level of performance while continuing to diligently manage our cost structure. Our improving order book - coupled with our streamlined cost structure and benefits of U.S. Tax Reform - positions us well to continue increasing shareholder value in 2018 and beyond," Mr. Lambert concluded.
MSA Safety Incorporated
Condensed Consolidated Statement of Income (Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31,
2018 2017
---- ----
Net sales $325,894 $265,765
Cost of
products
sold 178,555 146,043
------- -------
Gross
profit 147,339 119,722
Selling,
general
and
administrative 80,250 76,786
Research
and
development 12,548 10,998
Restructuring
charges 5,274 12,739
Currency
exchange
losses,
net 2,008 580
Other
operating
expense 2,824 -
Operating
income 44,435 18,619
Interest
expense 4,781 3,591
Other
income,
net (2,340) (1,458)
Total
other
expense,
net 2,441 2,133
Income
before
income
taxes 41,994 16,486
Provision
for
income
taxes 9,505 1,796
----- -----
Net income 32,489 14,690
Net income
attributable
to
noncontrolling
interests (118) (277)
---- ----
Net income
attributable
to MSA
Safety
Incorporated $32,371 $14,413
======= =======
Earnings per share
attributable to MSA Safety
Incorporated common
shareholders:
Basic $0.85 $0.38
Diluted $0.83 $0.37
Basic
shares
outstanding 38,216 37,766
Diluted
shares
outstanding 38,778 38,593
MSA Safety Incorporated
Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)
March 31, 2018 December 31, 2017
-------------- -----------------
Assets
Cash and
cash
equivalents $124,883 $134,244
Trade
receivables,
net 254,068 244,198
Inventories 171,203 153,739
Notes
receivable,
insurance
companies 3,463 17,333
Other
current
assets 78,678 72,783
------ ------
Total
current
assets 632,295 622,297
Property,
net 154,848 157,014
Prepaid
pension
cost 85,941 83,060
Goodwill 426,860 422,185
Notes
receivable,
insurance
companies,
noncurrent 59,954 59,567
Insurance
receivable,
noncurrent 118,349 123,089
Other
noncurrent
assets 217,521 217,614
------- -------
Total
assets $1,695,768 $1,684,826
========== ==========
Liabilities and
shareholders' equity
Notes
payable
and
current
portion
of long-
term
debt, net $26,780 $26,680
Accounts
payable 68,142 87,061
Other
current
liabilities 178,482 175,538
------- -------
Total
current
liabilities 273,404 289,279
Long-term
debt, net 441,426 447,832
Pensions
and other
employee
benefits 173,840 170,773
Deferred
tax
liabilities 10,249 9,341
Other
noncurrent
liabilities 155,663 165,023
Total
shareholders'
equity 641,186 602,578
------- -------
Total
liabilities
and
shareholders'
equity $1,695,768 $1,684,826
========== ==========
MSA Safety Incorporated
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
Three Months Ended March 31,
2018 2017
---- ----
Net income $32,489 $14,690
Depreciation
and
amortization 9,671 8,752
Change in
working
capital and
other
operating (24,807) 72,948
Cash flow
from
operating
activities 17,353 96,390
------ ------
Capital
expenditures (3,241) (1,442)
Property
disposals
and other
investing 58 165
Cash flow
used in
investing
activities (3,183) (1,277)
------
Change in
debt (9,401) (96,437)
Cash
dividends
paid (13,390) (12,455)
Company
stock
purchases (2,673) (3,811)
Other
financing 848 6,267
Cash flow
used in
financing
activities (24,616) (106,436)
------- --------
Effect of
exchange
rate
changes on
cash, 1,363 1,625
cash equivalents and
restricted cash
Decrease in
cash, cash
equivalents
and
restricted
cash (9,083) (9,698)
====== ======
MSA Safety Incorporated
Segment Information (Unaudited)
(In thousands)
Americas International Corporate Consolidated
-------- ------------- --------- ------------
Three Months Ended March 31, 2018
Sales to external
customers $209,129 $116,765 - $325,894
Operating income 44,435
Operating margin % 13.6%
Restructuring charges 5,274
Currency exchange losses, net 2,008
Other operating expense 2,824
Strategic transaction costs $94
Adjusted operating
income (loss) 50,086 12,778 (8,229) $54,635
Adjusted operating
margin % 23.9% 10.9% 16.8%
Americas International Corporate Consolidated
-------- ------------- --------- ------------
Three Months Ended
March 31, 2017
Sales to external
customers $166,568 $99,197 - $265,765
Operating income 18,619
Operating margin % 7.0%
Restructuring
charges 12,739
Currency exchange
losses, net 580
Other operating
expense -
Strategic
transaction costs 1,337
Adjusted operating
income (loss) 36,151 7,796 (10,672) $33,275
Adjusted operating
margin % 21.7% 7.9% 12.5%
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 charges, currency exchange gains / losses, other operating expense and strategic transaction costs. 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 March 31, 2018
Breathing Firefighter Industrial Portable Fixed Gas Fall Core Non-Core
Apparatus Helmets Head Gas and Flame Protection Sales Sales
and Protection Detection Detection
Protective
Apparel(a) Net Sales
GAAP reported
sales change 9% 209% 13% 16% 20% 17% 27% - % 23%
Plus: Currency
translation
effects (4)% (12)% (2)% (4)% (6)% (6)% (4)% (5)% (5)%
--- --- --- --- --- --- --- ---
Constant
currency sales
change 5% 197% 11% 12% 14% 11% 23% (5)% 18%
--- --- --- --- --- --- --- --- ---
Less:
Acquisitions - % 198% - % - % - % - % 13% - % 11%
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Organic constant
currency change 5% (1)% 11% 12% 14% 11% 10% (5)% 7%
=== === === === === === === === ===
(a) 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 March 31, 2018
Breathing Firefighter Industrial Portable Fixed Gas Fall Core Non-Core
Apparatus Helmets and Head Gas and Flame Protection Sales Sales
Protective Protection Detection Detection
Apparel(a) Net Sales
GAAP reported
sales change 1% 470% 12% 15% 16% 26% 30% (4)% 26%
Plus: Currency
translation
effects - % (1)% - % - % - % (2)% - % - % (1)%
--- --- --- --- --- --- --- --- --- --- --- ---
Constant
currency sales
change 1% 469% 12% 15% 16% 24% 30% (4)% 25%
--- --- --- --- --- --- --- --- ---
Less:
Acquisitions - % 476% - % - % - % - % 20% - % 17%
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Organic constant
currency change 1% (7)% 12% 15% 16% 24% 10% (4)% 8%
=== === === === === === === === ===
(a) 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 March 31, 2018
Breathing Firefighter Industrial Portable Fixed Gas Fall Non-Core
Apparatus Helmets and Head Gas and Flame Protection Sales
Protective Protection Detection Detection
Apparel Core Sales Net Sales
GAAP reported
sales change 29% 17% 16% 17% 25% 8% 21% 5% 18%
Plus: Currency
translation
effects (14) (13) (9) (11) (12) (9) (12) (11) (12)
% % % % % % % % %
--- --- --- --- --- --- --- ---
Constant
currency sales
change 15% 4% 7% 6% 13% (1) 9% (6) 6%
% %
--- --- ---
Less:
Acquisitions - % - % - % - % - % - % - % - % - %
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Organic constant
currency change 15% 4% 7% 6% 13% (1) 9% (6) 6%
% %
=== === ===
Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. 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 March 31, 2018
Consolidated Americas International
------------ -------- ------------
Firefighter
Helmets and
Protective
Apparel(a) 197% 469% 4%
Fixed Gas and
Flame Detection 14% 16% 13%
Portable Gas
Detection 12% 15% 6%
Industrial Head
Protection 11% 12% 7%
Fall Protection 11% 24% (1)%
Breathing
Apparatus 5% 1% 15%
---
Core Sales 23% 30% 9%
--- --- ---
Core excluding
Acquisitions 10% 10% 9%
Non-Core Sales (5)% (4)% (6)%
Net Sales 18% 25% 6%
=== === ===
Net Sales
excluding
Acquisitions 7% 8% 6%
(a) 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
Adjusted earnings (Unaudited)
Adjusted earnings per diluted share (Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31,
2018 2017 %
Change
Net income
attributable to MSA
Safety Incorporated $32,371 $14,413 125%
Tax benefit
associated with ASU
2016-09:
Improvements to
employee share-
based payment
accounting (914) (2,782)
Subtotal 31,457 11,631 170%
------ ------
Restructuring charges 5,274 12,739
Currency exchange
losses, net 2,008 580
Other operating
expense 2,824 -
Strategic transaction
costs 94 1,337
Asset related losses
and other, net 17 64
Income tax expense on
adjustments (2,534) (4,088)
Adjusted earnings $39,140 $22,263 76%
------- -------
Adjusted earnings per
diluted share $1.01 $0.58 74%
===== =====
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 22, 2018. 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, 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.
CONTACT: Media Relations Contact: Mark Deasy (724) 741 - 8570; Investor Relations Contact: Elyse Lorenzato (724) 741 - 8525
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