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MSA Announces First Quarter Results

PITTSBURGH, April 22, 2014 /PRNewswire/ -- Global safety equipment manufacturer MSA (NYSE: MSA) today reported results for the first quarter of 2014.

Quarterly Summary

  • Order activity and backlog are at healthy levels heading into the second quarter.
  • Revenue from continuing operations was $265 million, down 2 percent from the first quarter of 2013.  Income from continuing operations was $14 million.  Quarterly continuing earnings per basic share was $0.37.
  • Excluding foreign exchange losses and restructuring charges, adjusted earnings were $15 million, or $0.40 per basic share.

"Our first quarter results reflect the overall impact of generally challenging business conditions, especially outside of the U.S.  And inside the U.S., the temporary obstacles caused by product approval delays has adversely effected our sales of SCBA to the fire service market," said William M. Lambert, MSA President and CEO.  "Despite these obstacles, however, we continue to see solid results in nearly all of our core product areas, which now represent almost three fourths of MSA's global business," he added.

Excluding a 22 percent decline in North American sales of self-contained breathing apparatus (SCBA) resulting from ongoing delays in securing regulatory product approvals, sales of MSA core products were up 3 percent for the quarter in local currency while margins in these product groups increased 130 basis points when compared to the equivalent period of a year ago.

In addition, Mr. Lambert reported the company's recent launch of several high impact new core products in SCBA, hard hats and portable instruments is receiving highly favorable customer feedback.

Quarterly Reporting Segment Analysis:

First quarter sales in MSA's North American segment increased by $1 million compared to the same period of 2013. A $6 million decline in SCBA revenue associated with the aforementioned product certification delays was offset by improvements of $5 million and $2 million in portable gas detection and head protection product sales, respectively.  Net income was flat when compared to a year ago, as improved product margins were offset by higher levels of selling, general and administrative expense and a higher effective tax rate.

Sales in MSA's European segment increased by $2 million, or 2 percent, compared to the same period last year. Excluding favorable currency effects from a strengthening euro, sales declined by $1 million as strength from ballistic helmet shipments and fixed gas and flame detection sales were offset by a lower level of SCBA and portable gas detection sales. Local currency net income decreased by $2 million primarily related to higher selling, general and administrative expense and an increase in restructuring charges.

Continuing sales in MSA's International segment decreased $7 million, or 11 percent, compared to prior year on the impact of weakening foreign currencies.  Local currency sales were relatively flat in the quarter as higher portable gas detection sales were offset by a lower level of fixed gas and flame detection revenue.  Excluding a $1 million unfavorable currency effect, local currency net income decreased by $3 million on higher research and development costs and increased restructuring charges resulting from ongoing cost reduction efforts in Australia.

"While challenges in certain markets persist, order activity and backlog are at healthy levels as we head into the second quarter.  This, combined with our recent introduction of exciting new products, is a positive indicator for cautious optimism moving forward," Mr. Lambert noted. "Even with the regulatory-related setbacks in the U.S. fire service over the past several quarters, which I continue to see as temporary, our product development efforts are keeping MSA very well positioned for the longer term.  Temporary setbacks notwithstanding, I remain convinced in our ability to execute our strategy to enhance our brand, the most trusted name in safety, and continue to grow the value of our company," Mr. Lambert concluded.

MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except earnings per share)



Three Months Ended March 31,



2014


2013





Net sales

265,045



269,886


Other income (loss), net

356



(137)



265,401



269,749






Cost of products sold

143,230



148,182


Selling, general and administrative

85,241



81,608


Research and development

11,241



10,584


Restructuring and other charges

1,900




Interest expense

2,530



2,660


Currency exchange losses, net

352



1,252



244,494



244,286






Income before income taxes

20,907



25,463


Provision for income taxes

7,604



6,920


Income from continuing operations

13,303



18,543


Income from discontinued operations

614



852


Net income

13,917



19,395


Net loss (income) attributable to noncontrolling interests

109



(109)


Net income attributable to MSA Safety Incorporated

14,026



19,286










Income from continuing operations

13,522



18,627


Income from discontinued operations

504



659


Net income attributable to MSA Safety Incorporated

14,026



19,286






Earnings Per Share Attributable to MSA Safety Incorporated

Basic




Income from continuing operations

$0.37



$0.50


Income from discontinued operations

$0.01



$0.02


Net income

$0.38



$0.52






Diluted




Income from continuing operations

$0.36



$0.49


Income from discontinued operations

$0.01



$0.02


Net income

$0.37



$0.51






Basic shares outstanding

37,015



36,734


Diluted shares outstanding

37,617



37,369


 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)



March 31,

2014


December 31,

2013

Current assets




Cash and cash equivalents

102,212



96,265


Trade receivables, net

204,730



200,364


Inventories

146,995



136,837


Other current assets

62,612



67,500


Total current assets

516,549



500,966






Property, net

153,204



152,755


Prepaid pension cost

123,179



121,054


Goodwill

260,188



260,134


Other noncurrent assets

221,365



199,361


Total

1,274,485



1,234,270






Current liabilities




Notes payable and current portion of long-term debt

6,796



7,500


Accounts payable

72,433



66,902


Other current liabilities

127,203



117,162


Total current liabilities

206,432



191,564






Long-term debt

276,667



260,667


Pensions and other employee benefits

153,202



152,084


Deferred tax liabilities

49,614



49,621


Other noncurrent liabilities

7,682



7,987


Equity

580,888



572,347


Total

1,274,485



1,234,270


 

MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)



Three Months Ended

March 31,



2014


2013





Net income

13,917



19,395


Depreciation and amortization

7,459



7,845


Change in working capital

4,588



(7,853)


Other operating

(16,567)



(13,331)


Cash from operations

9,397



6,056






Capital expenditures

(7,204)



(7,452)


Property disposals



47


Cash from investing

(7,204)



(7,405)






Change in debt

15,297



7,182


Cash dividends paid

(11,181)



(10,372)


Other financing

454



(742)


Cash from financing

4,570



(3,932)






Exchange rate changes

(816)



(644)








Increase (decrease) in cash

5,947



(5,925)









 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands)




Three Months Ended

March 31,




2014


2013





Net sales




 

North America

$

129,521



$

128,936


Europe

74,938



73,123


International

60,586



67,827


Total

265,045



269,886






Net income (loss)




 

North America

$

12,480



$

12,605


Europe

4,117



5,383


International

3,859



7,796


Reconciling Items

(6,934)



(7,157)


Income from Continuing Operations

13,522



18,627


Discontinued Operations

504



659


Total

14,026



19,286


 

MSA's sales are allocated to each country based primarily on the destination of the end-customer.  Effective January 1, 2014, the General Monitors business has been fully integrated into MSA.  As such, sales made by General Monitors companies now follow a similar allocation methodology by which sales are allocated to each country based on the destination of the end-customer and the value added to that order.  In prior years, sales made by General Monitors companies were reported as domestic sales based on the country from which the product was shipped.  The 2013 results presented above have been restated to reflect this change in allocation methodology. 

 

MSA Safety Incorporated

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

Adjusted Continuing Operations Revenue (Unaudited)

(In thousands)



Three Months Ended

March 31,




2014


2013


%

Change

Total Revenue

$

275,105



$

283,239



(2.9)%

Less: Discontinued Operations

10,060



13,353










Continuing Operations Revenue

265,045



269,886



(1.8)%







Less: FX Impact



(5,031)




Adjusted Continuing Operations Revenue

$

265,045



$

264,855



0.1%

 

Adjusted continuing operations revenue is a non-GAAP measure. Management believes that it is important for investors to analyze continuing revenue trends excluding the impact of fluctuating foreign currencies, consistent with the methodology that management uses to perform trend analysis. However, weakening or strengthening foreign currencies may have a material impact on the company's reported results. As such, it is appropriate to consider both continuing operations revenue on a GAAP basis as well as adjusted continuing operations revenue. Management does not use this non-GAAP financial measure for any purpose other than the reasons stated above.

 

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

March 31,




2014


2013


%

Change







Net Income Attributable to MSA Safety Incorporated

$

14,026



$

19,286



(27.3)%

Less: Income from Discontinued Operations

504



659










Income from Continuing Operations

13,522



18,627



(27.4)%

Foreign Currency Loss

352



1,252




Restructuring Charges

1,900






Income Tax Expense

(820)



(341)










Adjusted Earnings

14,954



19,538



(23.5)%







Adjusted Earnings per Basic Share

$

0.40



$

0.53



(24.5)%













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. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

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 industries, including the fire service, the oil, gas and petrochemical industry, construction, mining and utilities, as well as the military.  Principal products include self-contained breathing apparatus, fixed gas and flame detection systems, handheld gas detection instruments, head protection products, fall protection devices and thermal imaging cameras. The company also provides a broad range of consumer and contractor safety products through a joint venture with MCR Safety.  These products are marketed and sold under the Safety Works® brand.  MSA, based north of Pittsburgh in Cranberry Township, Pa., has annual sales of approximately $1.1 billion, manufacturing operations in the United States, Europe, Asia and Latin America, and 42 international locations.  Additional information is available on the company's Web site at www.MSAsafety.com. Information on Safety Works products can be found at www.SafetyWorks.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, including without limitation all projections and anticipated levels of future performance, involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Actual results can be affected by any number of factors, many of which are outside of management's control.  Among the factors that could cause such differences are global economic conditions, spending patterns of government agencies, competitive pressures, product liability claims, the success of new product introductions, currency exchange rate fluctuations, the identification and successful integration of acquisitions and the risks of doing business in foreign countries. These risks, uncertainties and other factors are detailed from time-to-time in our filings with the United States Securities and Exchange Commission ("SEC"). 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 sec.gov, as well as on a number of other commercial websites.

Non-GAAP Financial Measures
This earnings release includes certain non-GAAP financial measures.  These financial measures include adjusted earnings, adjusted earnings per basic share and adjusted continuing operations revenue.  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

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