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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): October 27, 2016
 
https://cdn.kscope.io/6be478db399f3a0827c415d9e3312159-image0a02a05.jpg 
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 October 27, 2016, the Company issued a press release announcing its financial results for the quarter ended September 30, 2016. The results from discontinued operations have been modified from amounts contained in such press release. A copy of the revised 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 October 27, 2016, announcing financial results for the quarter ended September 30, 2016.




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/ Kenneth D. Krause
 
 
Kenneth D. Krause
 
 
Vice President of Finance and Chief Financial Officer
Date: October 27, 2016




EXHIBIT INDEX
 
 
 
 
Exhibit
No.
  
Description
 
 
99.1
  
MSA Safety Incorporated Press Release dated October 27, 2016, announcing financial results for the quarter ended September 30, 2016.




Exhibit
1

https://cdn.kscope.io/6be478db399f3a0827c415d9e3312159-msaa01a01a04.jpg
FOR IMMEDIATE RELEASE

FROM: MSA Safety Incorporated
Ticker: MSA (NYSE)
Media Relations Contact: Mark Deasy (724) 741 - 8570
Investor Relations Contact: Kenneth Krause (724) 741 - 8534

MSA Announces Third Quarter Results
Investments in restructuring and strategic growth programs drive growth in earnings and margin improvement

PITTSBURGH, October 27, 2016 - Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the third quarter of 2016.


Quarterly Highlights
•
Reported revenue was $278 million, increasing 2 percent from a year ago on a reported and constant currency basis.

•
Operating income was $40 million or 14.4 percent of net sales, increasing 470 basis points from a year ago. Adjusted operating income, excluding foreign currency losses and restructuring, was $43 million or 15.3 percent of net sales, increasing 270 basis points from a year ago.

•
Net income from continuing operations was $25 million or $0.67 per diluted share, compared to $16 million or $0.41 per diluted share in the third quarter a year ago, increasing 63 percent. Adjusted earnings were $0.72 per diluted share, compared to $0.59 per diluted share a year ago, increasing 22 percent.

•
UK-based fall protection company Latchways, acquired by MSA in 2015, generated net income of $0.03 per diluted share in the third quarter.










(more)
2

Comments from Management

"While challenging macro conditions persist in certain areas of our business, our results continue to reflect the steps we've taken to drive improved profitability in a slow growth environment," said William M. Lambert, MSA Chairman, President and CEO. "The cost reduction program that we began in late 2015 and the key strategic investments we’ve made over the past year were designed to mitigate the expected market headwinds of 2016, and that's exactly what we're seeing," he continued. Mr. Lambert noted that operating income increased 28 percent in the first nine months of 2016, while net income from continuing operations was up 38 percent in the same period on revenue growth of 4 percent.
    
"While many of the challenges that we’ve faced in 2016 will likely continue into 2017, that will not diminish our focus on making smart investments that drive earnings growth and market leadership positions in our core product areas. Through these targeted investments, I am confident we will position MSA strategically and financially to drive enhanced shareholder value for many years to come," Mr. Lambert concluded.






(more)
3

MSA Safety Incorporated
Condensed Consolidated Statement of Income (Unaudited)
(In thousands, except per share amounts)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net sales
$
278,233

 
$
273,746

 
$
853,499

 
$
817,465

Cost of products sold
149,471

 
153,965

 
468,177

 
450,372

Gross profit
128,762

 
119,781

 
385,322

 
367,093

 
 
 
 
 
 
 
 
Selling, general and administrative
72,945

 
72,727

 
227,856

 
231,683

Research and development
13,116

 
12,532

 
34,623

 
36,430

Restructuring and other charges
1,889

 
3,740

 
3,697

 
4,698

Currency exchange losses, net
790

 
4,327

 
2,498

 
3,336

Operating income
40,022

 
26,455

 
116,648

 
90,946

 
 
 
 
 
 
 
 
Interest expense
4,412

 
2,827

 
12,515

 
7,802

Other (income), net

(2,041)

 
(431)

 
(3,704)

 
(1,166)

Total other expense, net
2,371

 
2,396

 
8,811

 
6,636

 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
37,651

 
24,059

 
107,837

 
84,310

Provision for income taxes
11,329

 
8,935

 
38,866

 
36,669

Income from continuing operations
26,322

 
15,124

 
68,971

 
47,641

(Loss) income from discontinued operations
(1,300
)
 
462

 
55

 
1,240

Net income
25,022

 
15,586

 
69,026

 
48,881

Net (income) loss attributable to noncontrolling interests
(836
)
 
390

 
(2,006
)
 
1,075

Net income attributable to MSA Safety Incorporated
24,186

 
15,976

 
67,020

 
49,956

 
 
 
 
 
 
 
 
Amounts attributable to MSA Safety Incorporated common shareholders:
 
 
 
 
 
 
 
Income from continuing operations
25,486

 
15,712

 
67,475

 
48,750

(Loss) income from discontinued operations
(1,300
)
 
264

 
(455
)
 
1,206

  Net income
24,186

 
15,976

 
67,020

 
49,956

 
 
 
 
 
 
 
 
Earnings per share attributable to MSA Safety Incorporated common shareholders:
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Income from continuing operations
$
0.68

 
$
0.42

 
$
1.80

 
$
1.30

(Loss) income from discontinued operations
$
(0.04
)
 
$
0.01

 
$
(0.01
)
 
$
0.03

  Net income
$
0.64

 
$
0.43

 
$
1.79

 
$
1.33

 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
Income from continuing operations
$
0.67

 
$
0.41

 
$
1.77

 
$
1.29

(Loss) income from discontinued operations
$
(0.04
)
 
$
0.01

 
$
(0.01
)
 
$
0.03

  Net income
$
0.63

 
$
0.42

 
$
1.76

 
$
1.32

 
 
 
 
 
 
 
 
Basic shares outstanding
37,487

 
37,252

 
37,407

 
37,301

Diluted shares outstanding
38,112

 
37,709

 
37,908

 
37,776


(more)
4

MSA Safety Incorporated
Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)
 
September 30, 2016
 
December 31, 2015
Assets
 
 
 
Cash and cash equivalents
$
106,033

 
$
105,925

Trade receivables, net
211,987

 
232,862

Inventories
132,542

 
125,849

Notes receivable, insurance companies
40,482

 
6,746

Other current assets
39,870

 
33,230

    Total current assets
530,914

 
504,612

 
 
 
 
Property, net
149,939

 
155,839

Prepaid pension cost
69,300

 
62,072

Goodwill
340,533

 
340,338

Notes receivable, insurance companies, noncurrent
63,072

 
1,944

Insurance receivable, noncurrent
152,542

 
227,483

Other noncurrent assets
121,646

 
130,575

   Total assets
$
1,427,946

 
$
1,422,863

 
 
 
 
Liabilities and shareholders' equity
 
 
 
Notes payable and current portion of long-term debt
$
6,738

 
$
6,650

Accounts payable
56,367

 
68,206

Other current liabilities
130,183

 
177,031

   Total current liabilities
193,288

 
251,887

 
 
 
 
Long-term debt, net
464,600

 
458,022

Pensions and other employee benefits
162,362

 
156,160

Deferred tax liabilities
26,255

 
24,872

Other noncurrent liabilities
14,508

 
14,794

Total shareholders' equity
566,933

 
517,128

   Total liabilities and shareholders' equity
$
1,427,946

 
$
1,422,863







(more)
5


MSA Safety Incorporated
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
 
Three Months Ended
September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net income
$
25,022

 
$
15,586

 
$
69,026

 
$
48,881

Depreciation and amortization
8,919

 
6,982

 
26,651

 
22,646

Change in working capital and other operating
(15,026
)
 
(20,451
)
 
(64,240
)
 
(61,697)

  Cash flow from operating activities
18,915

 
2,117

 
31,437

 
9,830

 
 
 
 
 
 
 
 
Capital expenditures
(5,551
)
 
(9,133
)
 
(16,146
)
 
(25,148
)
Acquisition, net of cash acquired
(18,261
)
 
—

 
(18,261
)
 
—

Property disposals and other investing
967

 
—

 
17,932

 
7,969

  Cash flow (used in) investing activities
(22,845
)
 
(9,133
)
 
(16,475
)
 
(17,179
)
 
 
 
 
 
 
 
 
Change in debt
19,459

 
125,138

 
16,083

 
143,142

Cash dividends paid
(12,391
)
 
(11,926
)
 
(36,675
)
 
(35,448
)
Other financing
1,177

 
(136
)
 
4,338

 
(7,495
)
  Cash flow from (used in) financing activities
8,245

 
113,076

 
(16,254
)
 
100,199

 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(1,431
)
 
(4,851
)
 
1,400

 
(9,505
)
 
 
 
 
 
 
 
 
Increase in cash and cash equivalents
2,884

 
101,209

 
108

 
83,345


(more)
6

MSA Safety Incorporated
Segment Information (Unaudited)
(In thousands)
 
 
Americas
 
International
 
Corporate
 
Consolidated
Three Months Ended September 30, 2016
 
 
 
 
 
 
 
 
Net sales
 
$
165,359

 
$
112,874

 
—

 
$
278,233

Adjusted operating income (loss)
 
41,458

 
10,511

 
(9,268
)
 
42,701

Adjusted operating margin %
 
25.1
%
 
9.3
%
 
 
 
15.3
%
Restructuring and other charges
 
 
 
 
 
 
 
(1,889
)
Currency exchange (losses), net
 
 
 
 
 
 
 
(790
)
Operating income
 
 
 
 
 
 
 
$
40,022

Operating margin %
 
 
 
 
 
 
 
14.4
%
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
Net sales
 
$
510,324

 
$
343,175

 
—

 
$
853,499

Adjusted operating income (loss)
 
117,475

 
31,659

 
(26,291
)
 
122,843

Adjusted operating margin %
 
23.0
%
 
9.2
%
 
 
 
14.4
%
Restructuring and other charges
 
 
 
 
 
 
 
(3,697
)
Currency exchange (losses), net
 
 
 
 
 
 
 
(2,498
)
Operating income
 
 
 
 
 
 
 
$
116,648

Operating margin %
 
 
 
 
 
 
 
13.7
%
 
 
Americas
 
International
 
Corporate
 
 
Consolidated
Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
Net sales
 
$
181,283

 
$
92,463

 
—

 
 
$
273,746

Adjusted operating income (loss)
 
40,470

 
1,408

 
(7,356
)
 
 
34,522

Adjusted operating margin %
 
22.3
%
 
1.5
%
 
 
 
 
12.6
%
Restructuring and other charges
 
 
 
 
 
 
 
 
(3,740
)
Currency exchange (losses), net
 
 
 
 
 
 
 
 
(4,327
)
Operating income
 
 
 
 
 
 
 
 
$
26,455

Operating margin %
 
 
 
 
 
 
 
 
9.7
%
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
Net sales
 
$
519,350

 
$
298,115

 
—

 
 
$
817,465

Adjusted operating income (loss)
 
101,833

 
19,869

 
(22,722
)
 
 
98,980

Adjusted operating margin %
 
19.6
%
 
6.7
%
 
 
 
 
12.1
%
Restructuring and other charges
 
 
 
 
 
 
 
 
(4,698
)
Currency exchange (losses), net
 
 
 
 
 
 
 
 
(3,336
)
Operating income
 
 
 
 
 
 
 
 
$
90,946

Operating margin %
 
 
 
 
 
 
 
 
11.1
%
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 now allocated to each segment in a manner consistent with where the benefits from the expenses are derived. The 2015 segment results have been recast to conform with current period presentation.

(more)
7


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 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.

(more)
8

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 September 30, 2016
 
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
(21
)%
(10
)%
2
%
8
%
9
%
114
 %
1
 %

5
%

2
 %
Plus: Currency translation effects
—
 %
—
 %
1
%
2
%
—
%
2
 %
1
 %

1
%

—
 %
Constant currency sales change
(21
)%
(10
)%
3
%
10
%
9
%
116
 %
2
 %

6
%

2
 %
Less: Acquisitions
—
 %
—
 %
—
%
—
%
—
%
124
 %
6
 %

—
%

5
 %
Organic constant currency change
(21
)%
(10
)%
3
%
10
%
9
%
(8
)%
(4
)%

6
%

(3
)%

 
Nine Months Ended September 30, 2016
 
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
8
%
(1
)%
(7
)%
1
%
(2
)%
116
 %
7
%

(6
)%

4
%
Plus: Currency translation effects
1
%
1
 %
4
 %
4
%
1
 %
4
 %
2
%

3
 %

3
%
Constant currency sales change
9
%
—
 %
(3
)%
5
%
(1
)%
120
 %
9
%

(3
)%

7
%
Less: Acquisitions
—
%
—
 %
—
 %
—
%
—
 %
129
 %
7
%

—
 %

6
%
Organic constant currency change
9
%
—
 %
(3
)%
5
%
(1
)%
(9
)%
2
%

(3
)%

1
%

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 Latchways' revenue results. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results excluding the acquisition.
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.


(more)
9


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 September 30, 2016
 
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
(33
)%
(2
)%
3
%
11
%
2
%
11
 %
(10
)%

(2
)%

(9
)%
Plus: Currency translation effects
—
 %
—
 %
1
%
2
%
—
%
2
 %
1
 %

1
 %

1
 %
Constant currency sales change
(33
)%
(2
)%
4
%
13
%
2
%
13
 %
(9
)%

(1
)%

(8
)%
Less: Acquisitions
—
 %
—
 %
—
%
—
%
—
%
20
 %
1
 %

—
 %

1
 %
Organic constant currency change
(33
)%
(2
)%
4
%
13
%
2
%
(7
)%
(10
)%

(1
)%

(9
)%
 
Nine Months Ended September 30, 2016
 
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
5
%
12
%
(8
)%
—
%
(7
)%
7
 %
—
%

(8
)%

(2
)%
Plus: Currency translation effects
1
%
1
%
4
 %
4
%
2
 %
4
 %
2
%

3
 %

3
 %
Constant currency sales change
6
%
13
%
(4
)%
4
%
(5
)%
11
 %
2
%

(5
)%

1
 %
Less: Acquisitions
—
%
—
%
—
 %
—
%
—
 %
20
 %
2
%

—
 %

1
 %
Organic constant currency change
6
%
13
%
(4
)%
4
%
(5
)%
(9
)%
—
%

(5
)%

—
 %

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 Latchways' revenue results. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results excluding the acquisition.
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.

(more)
10



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 September 30, 2016
 
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
%
(15
)%
(5
)%
3
%
19
%
810
 %
25
%

13
%

22
%
Plus: Currency translation effects
—
%
1
 %
3
 %
2
%
1
%
1
 %
1
%

—
%

1
%
Constant currency sales change
12
%
(14
)%
(2
)%
5
%
20
%
811
 %
26
%

13
%

23
%
Less: Acquisitions
—
%
—
 %
—
 %
—
%
—
%
822
 %
17
%

—
%

13
%
Organic constant currency change
12
%
(14
)%
(2
)%
5
%
20
%
(11
)%
9
%

13
%

10
%
 
Nine Months Ended September 30, 2016
 
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
15
%
(9
)%
(6
)%
4
%
3
%
993
 %
21
%

(3
)%

15
%
Plus: Currency translation effects
2
%
2
 %
5
 %
2
%
2
%
4
 %
2
%

2
 %

2
%
Constant currency sales change
17
%
(7
)%
(1
)%
6
%
5
%
997
 %
23
%

(1
)%

17
%
Less: Acquisitions
—
%
—
 %
—
 %
—
%
—
%
998
 %
16
%

—
 %

12
%
Organic constant currency change
17
%
(7
)%
(1
)%
6
%
5
%
(1
)%
7
%

(1
)%

5
%


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 Latchways' revenue results. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results excluding the acquisition.
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.

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MSA Safety Incorporated
Supplemental Segment Information (Unaudited)
Summary of constant currency revenue growth by segment and product group

 
Three Months Ended September 30, 2016
 
Consolidated
 
Americas
 
International
Fall Protection*
116
 %
 
13
 %
 
811
 %
Portable Gas Detection
10
 %
 
13
 %
 
5
 %
Fixed Gas and Flame Detection
9
 %
 
2
 %
 
20
 %
Industrial Head Protection
3
 %
 
4
 %
 
(2
)%
Fire and Rescue Helmets
(10
)%
 
(2
)%
 
(14
)%
Breathing Apparatus
(21
)%
 
(33
)%
 
12
 %
Core Sales
2
 %
 
(9
)%
 
26
 %
  Core excluding Latchways
(4
)%
 
(10
)%
 
9
 %
 
 
 
 
 
 
Non-Core Sales
6
 %
 
(1
)%
 
13
 %
 
 
 
 
 
 
Net Sales
2
 %
 
(8
)%
 
23
 %
  Net Sales excluding Latchways
(3
)%
 
(9
)%
 
10
 %

 
Nine Months Ended September 30, 2016
 
Consolidated
 
Americas
 
International
Fall Protection*
120
 %
 
11
 %
 
997
 %
Portable Gas Detection
5
 %
 
4
 %
 
6
 %
Fixed Gas and Flame Detection
(1
)%
 
(5
)%
 
5
 %
Industrial Head Protection
(3
)%
 
(4
)%
 
(1
)%
Fire and Rescue Helmets
—
 %
 
13
 %
 
(7
)%
Breathing Apparatus
9
 %
 
6
 %
 
17
 %
Core Sales
9
 %
 
2
 %
 
23
 %
  Core excluding Latchways
2
 %
 
—
 %
 
7
 %
 
 
 
 
 
 
Non-Core Sales
(3
)%
 
(5
)%
 
(1
)%
 
 
 
 
 
 
Net Sales
7
 %
 
1
 %
 
17
 %
  Net Sales excluding Latchways
1
 %
 
—
 %
 
5
 %

        
     *Fall protection growth rates include the impact from Latchways sales.


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12

MSA Safety Incorporated
Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures
Constant currency selling, general and administrative (SG&A) expense (Unaudited)
Organic constant currency SG&A expense (Unaudited)
(In thousands)

 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
 
2016


2015
 
% Change
 
2016


2015
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
GAAP reported SG&A expense
$
72,945

 
$
72,727

 
—
 %
 
$
227,856

 
$
231,683

 
(2
)%
Plus: Currency translation effects
—

 
(1,049
)
 
 
 
—

 
(5,522
)
 
 
Constant currency SG&A expense
$
72,945

 
$
71,678

 
2
 %
 
$
227,856

 
$
226,161

 
1
 %
Less: Acquisitions
3,089

 
707

 
 
 
11,218

 
707

 
 
Organic constant currency SG&A expense
$
69,856

 
$
70,971

 
(2
)%
 
$
216,638

 
$
225,454

 
(4
)%

Management believes that constant currency SG&A expense and organic constant currency SG&A expense are useful metrics for investors to measure the effectiveness of the company's cost reduction program announced in 2015. Constant currency SG&A expense highlights spending patterns excluding fluctuating foreign currencies. Organic constant currency SG&A expense highlights the impact of the Latchways acquisition. These metrics provide investors with a greater level of clarity into spending levels on a year-over-year basis. MSA's definition of this metric may not be comparable to metrics used by other companies. As such, management believes that it is appropriate to consider SG&A expense determined on a GAAP basis in addition to these non-GAAP measures.


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13

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 September 30,



Nine Months Ended September 30,



2016

2015

%
Change

2016

2015

%
Change












Income from continuing operations attributable to MSA Safety Incorporated
$
25,486


$
15,712


62%

$
67,475


$
48,750


38%
Tax charges associated with European reorganization
—


—




3,600


7,605



Non-deductible transaction costs
—

 
707

 
 
 
—

 
707

 
 
Subtotal
25,486


16,419


55%

71,075


57,062


25%












Restructuring and other charges
1,889

 
3,740

 
 
 
3,697

 
4,698

 
 
Self-insured legal settlements and defense costs
20

 
708

 
 
 
315

 
1,050

 
 
Transaction and integration costs
310

 
—

 
 
 
821

 
—

 
 
Asset related (gains) losses, net
(256
)
 
206

 

 
(815
)
 
538

 
 
Currency exchange losses, net
790

 
4,327

 
 
 
2,498

 
3,336

 
 
Income tax expense on adjustments
(829
)

(3,287
)



(2,123
)

(3,300
)


Adjusted earnings
27,410


22,113


24%

75,468


63,384


19%
















Adjusted earnings per diluted share
$
0.72


$
0.59


22%

$
1.99


$
1.68


18%
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.

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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 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, fire and rescue helmets, and fall protection devices.  With 2015 revenues of $1.1 billion, MSA employs approximately 4,600 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 29, 2016. 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, constant currency selling, general and administrative expense, organic constant currency selling, general and administrative expense, adjusted operating income, adjusted operating margin 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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