PITTSBURGH, April 25, 2017 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the first quarter of 2017.

Quarterly Highlights

  • Reported revenue was $266 million, decreasing 5 percent from a year ago on a reported basis, and 4 percent on a constant currency basis.
  • Net income from continuing operations was $14 million or $0.37 per diluted share, compared to $13 million or $0.34 per diluted share in the same period a year ago. Adjusted earnings were $22 million or $0.58 per diluted share, compared to $18 million or $0.48 per diluted share a year ago.
  • Cash flow from operating activities was $96 million, compared to a use of cash of $11 million in the same period a year ago. Working capital as a percentage of sales decreased by 300 basis points compared to the first quarter of 2016.
  • The company continues to make progress collecting its insurance receivable, and received $81 million during the quarter from one of its insurance carriers. At the end of the quarter, the insurance receivable balance was $59 million, down from $230 million at the end of the first quarter of 2016.

Comments from Management

"Our first quarter performance reflects the leverage we are gaining from our streamlined cost structure and continued focus on improving profitability," said William M. Lambert, MSA Chairman, President and CEO. "Despite a difficult revenue comparison in self-contained breathing apparatus (SCBA) resulting from several large orders shipped in the first quarter of 2016, we realized adjusted earnings growth of 24 percent," he continued.

"After seeing solid order improvement late last year in short-cycle industrial products, like hard hats and portable gas detectors, we continued to gain traction in these areas in the first quarter," Mr. Lambert commented.  He noted that quarterly revenue from portable gas detection and industrial head protection increased by 13 percent and 16 percent, respectively.  Mr. Lambert added that the company continues to drive higher product margins across substantially all of its core product groups, the most significant of which occurred in its SCBA line, driven by a combination of new product offerings and reductions in product costs associated with value engineering.

"While we've made solid progress in expanding product margins and lowering operating costs through enhanced productivity, we remain keenly focused on investing in programs that drive profitable growth. Through these investments we will continue to deliver innovative solutions for our customers, gain market share in our core product areas, and increase value for all of our stakeholders," Mr. Lambert concluded.

 

MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31,

2017

2016


Net sales

$

265,765

$

279,268

Cost of products sold

146,043

158,563

Gross profit

119,722

120,705




Selling, general and administrative

75,983

79,195

Research and development

10,998

10,363

Restructuring charges

12,739

470

Currency exchange losses, net

580

1,950

Operating income

19,422

28,727




Interest expense

3,591

3,902

Other income, net

 

(655)

(888)

Total other expense, net

2,936

3,014




Income from continuing operations before income taxes

16,486

25,713

Provision for income taxes

1,796

12,511

Income from continuing operations

14,690

13,202

Loss from discontinued operations

—

(1,129)

Net income

14,690

12,073

Net income attributable to noncontrolling interests

(277)

(322)

Net income attributable to MSA Safety Incorporated

14,413

11,751




Amounts attributable to MSA Safety Incorporated common shareholders:


Income from continuing operations

14,413

12,683

Loss from discontinued operations

—

(932)

  Net income

14,413

11,751




Earnings per share attributable to MSA Safety Incorporated common shareholders:


Basic


Income from continuing operations

$

0.38

$

0.34

Loss from discontinued operations

$

—

$

(0.03)

  Net income

$

0.38

$

0.31




Diluted


Income from continuing operations

$

0.37

$

0.34

Loss from discontinued operations

$

—

$

(0.03)

  Net income

$

0.37

$

0.31




Basic shares outstanding

37,766

37,330

Diluted shares outstanding

38,593

37,759

 

 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)

March 31, 2017

December 31, 2016

Assets


Cash and cash equivalents

$

104,427

$

113,759

Trade receivables, net

208,392

209,514

Inventories

117,621

103,066

Notes receivable, insurance companies

19,723

4,180

Other current assets

44,638

42,287

    Total current assets

494,801

472,806




Property, net

144,445

148,678

Prepaid pension cost

54,016

62,916

Goodwill

335,297

333,276

Notes receivable, insurance companies, noncurrent

63,416

63,147

Insurance receivable, noncurrent

56,502

157,929

Other noncurrent assets

109,677

115,168

   Total assets

$

1,258,154

$

1,353,920




Liabilities and shareholders' equity


Notes payable and current portion of long-term debt, net

$

26,848

$

26,666

Accounts payable

65,682

62,734

Other current liabilities

109,485

132,010

   Total current liabilities

202,015

221,410




Long-term debt, net

268,568

363,836

Pensions and other employee benefits

158,908

157,927

Deferred tax liabilities

34,867

34,044

Other noncurrent liabilities

15,518

15,491

Total shareholders' equity

578,278

561,212

   Total liabilities and shareholders' equity

$

1,258,154

$

1,353,920

 

 

MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)

Three Months Ended March 31,

2017

2016


Net income

$

14,690

$

12,073

Depreciation and amortization

8,752

9,156

Change in working capital and other operating

72,948

(32,235)

  Cash flow from (used in) operating activities

96,390

(11,006)




Capital expenditures

(1,442)

(5,819)

Property disposals and other investing

165

15,708

  Cash flow (used in) from investing activities

(1,277)

9,889




Change in debt

(96,437)

13,633

Cash dividends paid

(12,455)

(11,936)

Other financing

2,846

1,556

  Cash flow (used in) from financing activities

(106,046)

3,253




Effect of exchange rate changes on cash and cash equivalents

1,601

3,840




(Decrease) increase in cash and cash equivalents

(9,332)

5,976

 

 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands)

Americas

International

Corporate

Consolidated

Three Months Ended March 31, 2017






Sales to external customers

$

166,568

$

99,197

—

$

265,765

Operating income





19,422

Operating margin %





7.3

%

Restructuring charges





12,739

Currency exchange losses, net





580

Adjusted operating income (loss)

38,106

6,644

(12,009)

$

32,741

Adjusted operating margin %

22.9

%

6.7

%


12.3

%

Americas

International

Corporate

Consolidated

Three Months Ended March 31, 2016






Sales to external customers

$

167,342

$

111,926

—

$

279,268

Operating income





28,727

Operating margin %





10.3

%

Restructuring charges





470

Currency exchange losses, net





1,950

Adjusted operating income (loss)

31,345

8,408

(8,606)

$

31,147

Adjusted operating margin %

18.7

%

7.5

%


11.2

%

 

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 and currency exchange gains / losses. Adjusted operating margin is defined as adjusted operating income (loss) divided by 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 measures.

 

MSA Safety Incorporated

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

Constant currency revenue growth (Unaudited)


Consolidated

Three Months Ended March 31, 2017

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

(12)%

3

%

18

%

13

%

(9)%

(12)%

(4)%

(10)%

(5)%

Plus: Currency
translation effects

—

%

2

%

(2)%

—

%

1

%

5

%

1

%

(1)%

1

%

Constant currency
sales change

(12)%

5

%

16

%

13

%

(8)%

(7)%

(3)%

(11)%

(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.

There can be no assurances that MSA's definition of 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 this non-GAAP financial measure.

 

MSA Safety Incorporated

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

Constant currency revenue growth (Unaudited)


Americas Segment

Three Months Ended March 31, 2017

Breathing Apparatus

Fire and Rescue Helmets

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales
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