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Q2 2015 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): July 22, 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 July 22, 2015, the Company issued a press release announcing its financial results for the quarter ended June 30, 2015. 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 July 22, 2015, announcing financial results for the quarter ended June 30, 2015.




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: July 23, 2015




EXHIBIT INDEX
 
 
 
 
Exhibit
No.
  
Description
 
 
99.1

  
MSA Safety Incorporated Press Release dated July 22, 2015, announcing financial results for the quarter ended June 30, 2015.




Q2 2015 EarningsPressRelease

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 Second Quarter Results
Local currency sales growth of 11 percent driven by a surge in G1 SCBA sales
PITTSBURGH, July 22, 2015 - Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the second quarter of 2015.


Quarterly Highlights

•
Reported revenue was $287 million, up 2 percent from the second quarter of 2014. Income from continuing operations was $24 million or $0.62 per diluted share. Adjusted earnings were $25 million or $0.67 per diluted share, increasing 12 percent from the second quarter of 2014.

•
Core sales grew 10 percent on a local currency basis in the quarter, with strong performance in fire service products and fixed gas and flame detection (FGFD) systems. This was offset by continued weakness in portable gas detection and industrial head protection, which are more exposed to employment levels within the energy market vertical.

•
Local currency sales of self-contained breathing apparatus (SCBA) increased 41 percent globally, driven by a 90 percent increase in North America, as the manufacturing ramp up of the company’s groundbreaking G1 SCBA platform continues to gain traction. Global SCBA backlog at the end of the quarter was $77 million, compared to $82 million at the end of the first quarter of 2015 and almost $40 million at this same time a year ago.

•
Despite significant weakness in Brazil on recessionary conditions and a slower growth environment in Asia, local currency sales across emerging markets increased 9 percent. This improvement was supported by large order shipments in the Middle East and Mexico.

•
R&D investments made in new products are generating strong returns, as products developed and launched within the last five years represented 45 percent of quarterly core product revenue, compared to 32 percent a year ago.

•
In the quarter, MSA used $12 million of cash flow to fund dividend payments, $7 million to repurchase common stock to offset dilution as part of its newly authorized $100 million stock repurchase plan and $4 million to service debt obligations as it continues to reduce leverage.




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Comments from Management
“Our quarterly results reflect our team's highly focused execution of our strategy, despite challenging conditions that continue to impact certain areas of our business," said William M. Lambert, MSA Chairman, President and CEO. "While certain MSA products that are more closely aligned with employment levels in the energy market continued an expected weak trajectory, we realized double-digit sales growth in SCBA, FGFD and fire helmets in the quarter. Incoming order pace for the G1 SCBA remains strong, the backlog pipeline is robust and we're hitting our stride from a production standpoint," Mr. Lambert continued, explaining that G1 SCBA manufacturing in June reflected the highest level of monthly production to date. He also noted that overall sales growth is 7 percent year-to-date on a local currency basis, tracking at the high end of the company's targeted range of mid-single digit sales growth for 2015.
“Although we saw strong sales and earnings growth in the quarter, headwinds associated with lower commodity prices, economic conditions in certain emerging markets and weakness in foreign currencies weighed on our results,” Mr. Lambert said. “Looking ahead, I expect these challenges to persist into the second half of 2015. However, the demand we're seeing for the G1 SCBA and our sizable backlog in this area provides momentum as we head into the third quarter, helping us navigate these headwinds," he concluded.

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MSA Safety Incorporated
Condensed Consolidated Statement of Income (Unaudited)
(In thousands, except per share amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Net sales
$
287,011

 
$
282,493

 
$
543,719

 
$
547,538

Other income, net
94

 
45

 
735

 
401

 
287,105

 
282,538

 
544,454

 
547,939

 
 
 
 
 
 
 
 
Cost of products sold
156,522

 
152,823

 
296,407

 
296,053

Selling, general and administrative
77,588

 
82,835

 
158,956

 
168,076

Research and development
12,984

 
11,943

 
23,898

 
23,184

Restructuring and other charges
227

 
857

 
958

 
2,757

Interest expense
2,502

 
2,594

 
4,975

 
5,124

Currency exchange losses (gains), net
1,557

 
(309
)
 
(991
)
 
43

 
251,380

 
250,743

 
484,203

 
495,237

 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
35,725

 
31,795

 
60,251

 
52,702

Provision for income taxes
12,350

 
9,753

 
27,734

 
17,357

Income from continuing operations
23,375

 
22,042

 
32,517

 
35,345

Income from discontinued operations
470

 
453

 
778

 
1,067

Net income
23,845

 
22,495

 
33,295

 
36,412

Net loss (income) attributable to noncontrolling interests
453

 
(7
)
 
685

 
102

Net income attributable to MSA Safety Incorporated
24,298

 
22,488

 
33,980

 
36,514

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
23,722

 
22,132

 
33,038

 
35,654

Income from discontinued operations
576

 
356

 
942

 
860

Net income attributable to MSA Safety Incorporated
24,298

 
22,488

 
33,980

 
36,514

 
 
 
 
 
 
 
 
Earnings per share attributable to MSA Safety Incorporated common shareholders:
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Income from continuing operations
$0.63
 
$0.59
 
$0.88
 
$0.96
Income from discontinued operations
$0.02
 
$0.01
 
$0.03
 
$0.02
  Net income
$0.65
 
$0.60
 
$0.91
 
$0.98
 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
Income from continuing operations
$0.62
 
$0.58
 
$0.87
 
$0.94
Income from discontinued operations
$0.01
 
$0.01
 
$0.03
 
$0.02
  Net income
$0.63
 
$0.59
 
$0.90
 
$0.96
 
 
 
 
 
 
 
 
Basic shares outstanding
37,351

 
37,128

 
37,323

 
37,072

Diluted shares outstanding
37,826

 
37,719

 
37,807

 
37,669


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MSA Safety Incorporated
Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)
 
June 30, 2015
 
December 31, 2014
Assets
 
 
 
  Cash and cash equivalents
$
88,134

 
$
105,998

  Trade receivables, net
218,833

 
211,440

  Inventories
150,415

 
122,954

  Other current assets
75,226

 
57,477

    Total current assets
532,608

 
497,869

 
 
 
 
Property, net
144,955

 
151,352

Prepaid pension cost
79,330

 
75,017

Goodwill
248,416

 
252,520

Other noncurrent assets
281,270

 
288,034

   Total assets
1,286,579

 
1,264,792

 
 
 
 
Liabilities and shareholders' equity
 
 
 
  Notes payable and current portion of long-term debt
$
6,667

 
$
6,700

  Accounts payable
80,465

 
70,210

  Other current liabilities
194,223

 
157,147

   Total current liabilities
281,355

 
234,057

 
 
 
 
Long-term debt
263,000

 
245,000

Pensions and other employee benefits
165,272

 
174,598

Deferred tax liabilities
28,334

 
26,306

Other noncurrent liabilities
16,059

 
46,198

Total shareholders' equity
532,559

 
538,633

   Total liabilities and shareholders' equity
1,286,579

 
1,264,792


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MSA Safety Incorporated
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Net income
$
23,845

 
$
22,495

 
$
33,295

 
$
36,412

Depreciation and amortization
8,727

 
7,656

 
15,664

 
15,115

Change in working capital and other operating
(8,196
)
 
(24,238
)
 
(41,246
)
 
(36,217
)
  Cash from operations
24,376

 
5,913

 
7,713

 
15,310

 
 
 
 
 
 
 
 
Capital expenditures
(8,546
)
 
(7,324
)
 
(16,015
)
 
(14,528
)
Property disposals
7,969

 
—

 
7,969

 
—

  Cash from investing
(577
)
 
(7,324
)
 
(8,046
)
 
(14,528
)
 
 
 
 
 
 
 
 
Cash dividends paid
(11,969
)
 
(11,320
)
 
(23,522
)
 
(22,501
)
Change in debt
(3,549
)
 
4,886

 
18,004

 
20,183

Share repurchase program
(7,104
)
 
—

 
(7,104)

 
—

Other financing
480

 
1,621

 
(255)

 
2,075

  Cash from financing
(22,142
)
 
(4,813
)
 
(12,877
)
 
(243
)
 
 
 
 
 
 
 
 
Exchange rate changes
176

 
195

 
(4,654
)
 
(621
)
 
 
 
 
 
 
 
 
Increase (decrease) in cash
1,833

 
(6,029
)
 
(17,864
)
 
(82
)

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MSA Safety Incorporated
Segment Information (Unaudited)
(In thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
  North America
$
156,193

 
$
138,782

 
$
289,757

 
$
268,303

  Europe
75,317

 
78,883

 
141,330

 
153,821

  International
55,501

 
64,828

 
112,632

 
125,414

    Total
287,011

 
282,493

 
543,719

 
547,538

 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
  North America
$
22,253

 
$
19,407

 
$
36,684

 
$
33,667

  Europe
6,596

 
6,780

 
2,159

 
10,232

  International
2,989

 
3,172

 
6,651

 
7,763

  Corporate
(7,655
)
 
(7,473
)
 
(12,492
)
 
(15,359
)
  Reconciling Items
(461
)
 
246

 
36

 
(649
)
  Income from continuing operations
23,722

 
22,132

 
33,038

 
35,654

  Income from discontinued operations
576

 
356

 
942

 
860

     Total
24,298

 
22,488

 
33,980

 
36,514


The Corporate segment was established on January 1, 2015 to reflect the activities of centralized functions in our corporate headquarters and to capture results in a manner that the chief operating decision maker reviews. The corporate segment primarily consists of administrative expenses and centrally-managed costs such as interest expense and foreign exchange gains or losses. Additionally, effective January 1, 2015, we changed the allocation methodology applied to Research and Development expense. The 2014 segment results have been recast to conform with current period presentation.


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MSA Safety Incorporated
Supplemental Segment Information (Unaudited)
Local Currency Revenue Growth
 
Three Months Ended June 30, 2015
 
Consolidated
 
North America
 
Europe
 
International
 
 
 
 
 
 
 
 
Breathing Apparatus
41
 %
 
90
 %
 
1
 %
 
(8
)%
Fire and Rescue Helmets
11
 %
 
(3
)%
 
(10
)%
 
146
 %
Fixed Gas and Flame Detection
10
 %
 
6
 %
 
21
 %
 
—
 %
Fall Protection
—
 %
 
8
 %
 
(12
)%
 
(13
)%
Portable Gas Detection
(5
)%
 
(18
)%
 
12
 %
 
17
 %
Industrial Head Protection
(9
)%
 
(8
)%
 
20
 %
 
(16
)%
  Core Sales
10
 %
 
15
 %
 
9
 %
 
—
 %
 
 
 
 
 
 
 
 
Non-Core Sales
12
 %
 
10
 %
 
35
 %
 
(11
)%
 
 
 
 
 
 
 
 
Net Sales
11
 %
 
14
 %
 
16
 %
 
(3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2015
 
Consolidated
 
North America
 
Europe
 
International
 
 
 
 
 
 
 
 
Breathing Apparatus
34
 %
 
77
 %
 
2
 %
 
(8
)%
Fire and Rescue Helmets
12
 %
 
1
 %
 
(2
)%
 
93
 %
Fixed Gas and Flame Detection
9
 %
 
8
 %
 
4
 %
 
23
 %
Fall Protection
3
 %
 
6
 %
 
5
 %
 
(2
)%
Portable Gas Detection
(4
)%
 
(18
)%
 
19
 %
 
15
 %
Industrial Head Protection
(8
)%
 
(8
)%
 
19
 %
 
(14
)%
  Core Sales
9
 %
 
12
 %
 
6
 %
 
5
 %
 
 
 
 
 
 
 
 
Non-Core Sales
2
 %
 
(4
)%
 
23
 %
 
(12
)%
 
 
 
 
 
 
 
 
Net Sales
7
 %
 
9
 %
 
10
 %
 
—
 %

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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 June 30,
 
 
 
Six Months Ended June 30,
 
 
 
2015


2014
 
%
Change
 
2015
 
2014
 
%
Change
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations attributable to MSA Safety Incorporated
23,722

 
22,132

 
7.2%
 
33,038

 
35,654

 
(7.3)%
Nonrecurring tax charges associated with European reorganization
—

 
—

 
 
 
7,605

 
—

 
 
Income from continuing operations excluding nonrecurring tax charges
23,722

 
22,132

 
7.2%
 
40,643

 
35,654

 
14.0%
 
 
 
 
 
 
 
 
 
 
 
 
Asset related loss, net
332

 
—

 
 
 
332

 
—

 
 
Foreign currency loss / (gain), net
1,557

 
(309
)
 
 
 
(991
)
 
43

 
 
Self insured legal settlements and defense costs
256

 
140

 
 
 
342

 
2,257

 
 
Restructuring charges
227

 
857

 
 
 
958

 
2,757

 
 
Income tax expense on adjustments
(820
)
 
(211
)
 
 
 
(214
)
 
(1,665
)
 
 
Adjusted earnings
25,274

 
22,609

 
11.8%
 
41,070

 
39,046

 
5.2%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted earnings per diluted share
$
0.67

 
$
0.60

 
11.7%
 
$
1.09

 
$
1.04

 
4.8%
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.

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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, industrial head protection, fire and rescue helmets 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, 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 25, 2015. 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 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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