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Q4 2014 Press Release 8-K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 16, 2015
 
 
MSA SAFETY INCORPORATED
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
Pennsylvania
 
1-15579
 
46-4914539
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification Number)
 
 
 
 
1000 Cranberry Woods Drive
Cranberry Township, Pennsylvania
 
16066-5207
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 724-776-8600
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02
Results of Operations and Financial Condition
On February 16, 2015, the Company issued a press release announcing its financial results for the quarter ended December 31, 2014. A copy of the press release is furnished herewith as Exhibit 99.1 to this report.
 
Item 9.01
Financial Statements and Exhibits

(d) Exhibits
 
 
99.1
  
MSA Safety Incorporated Press Release dated February 16, 2015, announcing financial results for the quarter ended December 31, 2014.




SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
MSA SAFETY INCORPORATED
(Registrant)
 
 
By
 
/s/ Stacy P. McMahan
 
 
Stacy P. McMahan
 
 
Senior Vice President of Finance and Chief Financial Officer
Date: February 17, 2015




EXHIBIT INDEX
 
 
 
 
Exhibit No.
  
Description
 
 
99.1
  
MSA Safety Incorporated Press Release dated February 16, 2015, announcing financial results for the quarter ended December 31, 2014.



Q4 2014 Earnings Press Release

FOR IMMEDIATE RELEASE
FROM: MSA Safety Incorporated
Ticker: MSA (NYSE)
Media Relations Contact: Mark Deasy (724) 741 - 8570
Investor Relations Contact: Ken Krause (724) 741 - 8534
MSA Announces Record Fourth Quarter Results
Strength in core products drives record quarterly sales and earnings
PITTSBURGH, February 16, 2015 - Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the fourth quarter and full year of 2014.
Quarterly Highlights
•
Revenue was a record $311 million, up 7 percent from the fourth quarter of 2013. Income from continuing operations was a record $33 million or $0.88 per basic share. Adjusted earnings were a record $35 million, or $0.94 per basic share, increasing 24 percent.
•
Quarterly local currency revenue from core product lines increased 13 percent, driven by strong shipping activity across all core product categories.
•
Operating margin of 16.4 percent of sales reflects a 220 basis point increase from a year ago.
•
Free cash flow was $47 million or 143 percent of net income, increasing 31 percent compared to the same quarter a year ago.
Annual Highlights
•
Revenue was $1.1 billion, up 2 percent from 2013. Income from continuing operations was $87 million or $2.34 per basic share. Adjusted earnings were $95 million, or $2.55 per basic share, decreasing 1 percent compared to a year ago.
•
Local currency revenue from core product lines increased 8 percent excluding sales of self-contained breathing apparatus (SCBA), which were hampered for most of the year by regulatory delays in the U.S.
•
Free cash flow of $73 million, or 83 percent of net income, helped to fund further reductions in long-term debt and dividend payments to shareholders.
    

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Comments from Management
“Our fourth quarter reflected a very strong finish to what turned out to be a most challenging year," said William M. Lambert, MSA President and CEO. "In addition to clearing certification hurdles and beginning shipments of our new and revolutionary G1 SCBA to the fire service market, we recognized solid growth in our core products and drove record earnings in the quarter."
Sales of core products represented 74 percent of total revenue in the quarter and increased 13 percent compared to the same period a year ago. "While a higher level of large fixed gas and flame detection orders was a leader of growth in the quarter, we saw strong shipment activity across each of our core product categories," Mr. Lambert said. He also commented on MSA's continued success in introducing innovative new core products, explaining that 36 percent of quarterly core sales were from products developed within the last five years.
“While our fourth quarter results and a robust SCBA backlog certainly provide momentum as we transition into 2015, headwinds associated with weakness in commodity- based end markets, a stronger U.S. dollar and challenging conditions across key emerging markets somewhat temper my optimism moving forward," Mr. Lambert said. "As we conclude our centennial year in business and turn our attention to the next chapter of MSA's story, we will maintain our long-standing commitment to driving profitable growth and increasing shareholder value, even as we navigate through inevitable periods of uncertainty," Mr. Lambert concluded.

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MSA Safety Incorporated
Condensed Consolidated Statement of Income (Unaudited)
(In thousands, except earnings per share)
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Net sales
$
311,188

 
$
291,429

 
$
1,133,885

 
$
1,112,058

Other income (loss), net
1,779

 
(1,190
)
 
2,765

 
(175
)
 
312,967

 
290,239

 
1,136,650

 
1,111,883

 
 
 
 
 
 
 
 
Cost of products sold
171,047

 
161,378

 
618,536

 
615,213

Selling, general and administrative
77,420

 
77,109

 
322,797

 
309,206

Research and development
11,643

 
11,578

 
48,247

 
45,858

Restructuring and other charges
2,118

 
1,402

 
8,515

 
5,344

Interest expense
2,234

 
2,526

 
9,851

 
10,677

Currency exchange losses, net
1,151

 
1,304

 
1,509

 
5,452

 
265,613

 
255,297

 
1,009,455

 
991,750

 
 
 
 
 
 
 
 
Income before income taxes
47,354

 
34,942

 
127,195

 
120,133

Provision for income taxes
14,988

 
10,470

 
41,044

 
35,145

Income from continuing operations
32,366

 
24,472

 
86,151

 
84,988

(Loss) income from discontinued operations
(56
)
 
614

 
1,776

 
3,061

Net income
32,310

 
25,086

 
87,927

 
88,049

Net loss attributable to noncontrolling interests
377

 
325

 
579

 
198

Net income attributable to MSA Safety Incorporated
32,687

 
25,411

 
88,506

 
88,247

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
33,119

 
24,929

 
87,447

 
85,858

(Loss) income from discontinued operations
(432
)
 
482

 
1,059

 
2,389

Net income attributable to MSA Safety Incorporated
32,687

 
25,411

 
88,506

 
88,247

 
 
 
 
 
 
 
 
Earnings Per Share Attributable to MSA Safety Incorporated
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Income from continuing operations
$
0.88

 
$
0.67

 
$
2.34

 
$
2.31

(Loss) income from discontinued operations
$
(0.01
)
 
$
0.01

 
$
0.03

 
$
0.06

  Net income
$
0.87

 
$
0.68

 
$
2.37

 
$
2.37

 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
Income from continuing operations
$
0.87

 
$
0.66

 
$
2.30

 
$
2.28

(Loss) income from discontinued operations
$
(0.01
)
 
$
0.01

 
$
0.03

 
$
0.06

  Net income
$
0.86

 
$
0.67

 
$
2.33

 
$
2.34

 
 
 
 
 
 
 
 
Basic shares outstanding
37,216

 
36,939

 
37,138

 
36,868

Diluted shares outstanding
37,786

 
37,487

 
37,728

 
37,450


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MSA Safety Incorporated
Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)
 
December 31, 2014
 
December 31, 2013
Current assets
 
 
 
  Cash and cash equivalents
$
105,998

 
$
96,265

  Trade receivables, net
211,440

 
200,364

  Inventories
122,954

 
136,837

  Other current assets
57,477

 
67,500

   Total current assets
497,869

 
500,966

 
 
 
 
Property, net
151,352

 
152,755

Prepaid pension cost
75,017

 
121,054

Goodwill
252,520

 
260,134

Other noncurrent assets
288,034

 
199,361

   Total
1,264,792

 
1,234,270

 
 
 
 
Current liabilities
 
 
 
  Notes payable and current portion of long-term debt
$
6,700

 
$
7,500

  Accounts payable
70,210

 
66,902

  Other current liabilities
157,147

 
117,162

   Total current liabilities
234,057

 
191,564

 
 
 
 
Long-term debt
245,000

 
260,667

Pensions and other employee benefits
174,598

 
152,084

Deferred tax liabilities
26,306

 
49,621

Other noncurrent liabilities
46,198

 
7,987

Equity
538,633

 
572,347

   Total
1,264,792

 
1,234,270


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MSA Safety Incorporated
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Net income
$
32,310

 
$
25,086

 
$
87,927

 
$
88,049

Depreciation and amortization
7,610

 
7,372

 
29,921

 
30,764

Change in working capital and other operating
16,309

 
13,617

 
(10,817
)
 
(8,032)

  Cash from operations
56,229

 
46,075

 
107,031

 
110,781

 
 
 
 
 
 
 
 
Capital expenditures
(9,350
)
 
(10,303
)
 
(33,583
)
 
(36,517
)
Property disposals
3,385

 
27

 
3,385

 
1,360

Other investing
(500)

 
—

 
(500)

 
—

  Cash from investing
(6,465
)
 
(10,276
)
 
(30,698
)
 
(35,157
)
 
 
 
 
 
 
 
 
Change in debt
(25,634
)
 
(21,288
)
 
(16,463
)
 
(11,004
)
Cash dividends paid
(11,543
)
 
(11,300
)
 
(45,586
)
 
(43,994
)
Other financing
(82)

 
(2,061
)
 
3,931

 
(3,242
)
  Cash from financing
(37,259
)
 
(34,649)

 
(58,118
)
 
(58,240
)
 
 
 
 
 
 
 
 
Exchange rate changes
(3,862
)
 
(895
)
 
(8,482
)
 
(3,837
)
 
 
 
 
 
 
 
 
Increase in cash
8,643

 
255

 
9,733

 
13,547



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MSA Safety Incorporated
Segment Information (Unaudited)
(In thousands)
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
  Net sales
 
 
 
 
 
 
 
  North America
$
147,592

 
$
130,360

 
$
547,739

 
$
533,161

  Europe
92,012

 
86,579

 
321,618

 
293,092

  International
71,584

 
74,490

 
264,528

 
285,805

   Total
311,188

 
291,429

 
1,133,885

 
1,112,058

 
 
 
 
 
 
 
 
  Net income (loss)
 
 
 
 
 
 
 
  North America
$
24,215

 
$
17,373

 
$
73,874

 
$
62,835

  Europe
9,159

 
8,832

 
22,187

 
20,204

  International
6,194

 
6,371

 
15,234

 
27,206

  Reconciling Items
(6,449
)
 
(7,647
)
 
(23,848
)
 
(24,387
)
Income from continuing operations
33,119

 
24,929

 
87,447

 
85,858

  (Loss) income from discontinued operations
(432
)
 
482

 
1,059

 
2,389

   Total
32,687

 
25,411

 
88,506

 
88,247

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.


(more)

MSA Safety Incorporated
Supplemental Segment Information (Unaudited)
Local Currency Revenue Growth
 
Three Months Ended December 31, 2014
 
Consolidated
 
North America
 
Europe
 
International
 
 
 
 
 
 
 
 
Fixed Gas and Flame Detection
24
 %
 
35
 %
 
9
%
 
18
 %
Fall Protection
19
 %
 
19
 %
 
27
%
 
20
 %
Breathing Apparatus
8
 %
 
28
 %
 
9
%
 
(22
)%
Portable Gas Detection
8
 %
 
(1
)%
 
8
%
 
32
 %
Head Protection
5
 %
 
8
 %
 
25
%
 
(5
)%
Core Sales
13
 %
 
20
 %
 
10
%
 
2
 %
 
 
 
 
 
 
 
 
Non-Core Sales
8
 %
 
(7
)%
 
28
%
 
4
 %
 
 
 
 
 
 
 
 
Net Sales
11
 %
 
14
 %
 
15
%
 
3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended December 31, 2014
 
Consolidated
 
North America
 
Europe
 
International
 
 
 
 
 
 
 
 
Fixed Gas and Flame Detection
10
 %
 
11
 %
 
16
%
 
(7
)%
Fall Protection
5
 %
 
1
 %
 
29
%
 
14
 %
Breathing Apparatus
(7
)%
 
(11
)%
 
5
%
 
(17
)%
Portable Gas Detection
9
 %
 
7
 %
 
3
%
 
21
 %
Head Protection
5
 %
 
10
 %
 
6
%
 
(4
)%
Core Sales
4
 %
 
4
 %
 
9
%
 
(3
)%
 
 
 
 
 
 
 
 
Non-Core Sales
5
 %
 
(1
)%
 
13
%
 
2
 %
 
 
 
 
 
 
 
 
Net Sales
4
 %
 
3
 %
 
10
%
 
(1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(more)

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 December 31,
 
 
 
Twelve Months Ended December 31,
 
 
 
2014


2013
 
%
Change
 
2014
 
2013
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to MSA Safety Incorporated
$
32,687

 
$
25,411

 
28.6%
 
$
88,506

 
$
88,247

 
0.3%
Less: (Loss) income from discontinued operations
(432
)
 
482

 
 
 
1,059

 
2,389

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
33,119

 
24,929

 
32.9%
 
87,447

 
85,858

 
1.9%
Restructuring charges
2,118

 
1,402

 
 
 
8,515

 
5,344

 
 
Self-insured legal settlements and defense costs
1,607

 
317

 
 
 
3,893

 
1,697

 
 
Currency exchange losses, net
1,151

 
1,304

 
 
 
1,509

 
5,452

 
 
Asset related (gains) / losses
(1,731
)
 
1,557

 
 
 
(2,116
)
 
957

 
 
Income tax (expense)
(997
)
 
(1,374
)
 
 
 
(3,812
)
 
(3,941
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted earnings
35,267

 
28,135

 
25.3%
 
95,436

 
95,367

 
0.1%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted earnings per
basic share
$
0.94

 
$
0.76

 
23.7%
 
$
2.55

 
$
2.57

 
(0.8)%
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.


(more)

MSA Safety Incorporated
Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures
Free Cash Flow (Unaudited)
(In thousands)
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
2014


2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Cash from operations
$
56,229

 
$
46,075

 
$
107,031

 
$
110,781

Capital expenditures
(9,350
)
 
(10,303
)
 
(33,583
)
 
(36,517
)
 
 
 
 
 
 
 
 
Free cash flow
46,879

 
35,772

 
73,448

 
74,264


Management believes that free cash flow is a meaningful measure for investors, as management reviews cash from operations after deducting capital expenditures because these expenditures are necessary to promote growth of MSA’s business and are likely to produce cash from operations in future periods. It is important to note that free cash flow does not reflect the residual cash balance of the company for discretionary spending since other items, including debt and dividend payments, are deducted from free cash flow before arriving at the company’s ending cash balance.




(more)



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, head protection products 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, foreign 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 24, 2014. 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, adjusted earnings per basic share and free cash flow. 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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