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) |
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 |
Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits | ||
99.1 | MSA Safety Incorporated Press Release dated October 19, 2017, announcing financial results for the quarter ended September 30, 2017. |
MSA SAFETY INCORPORATED | ||
(Registrant) | ||
By | /s/ Kenneth D. Krause | |
Kenneth D. Krause | ||
Vice President, Chief Financial Officer and Treasurer |
99.1 |
• | Revenue was $296 million, increasing 6 percent from a year ago on a reported basis and 5 percent on a constant currency basis. |
• | GAAP earnings from continuing operations increased 26 percent to $32 million, or $0.83 per diluted share, from $25 million, or $0.67 per diluted share in the same period a year ago. |
• | Adjusted earnings increased 29 percent to $35 million, or $0.92 per diluted share, from $27 million, or $0.72 per diluted share a year ago. |
• | The recent acquisition of firefighter turnout gear manufacturer Globe was accretive to GAAP earnings by $0.05 per share, or $0.07 per share excluding transaction costs and purchase accounting amortization. |
• | Cash flow from operating activities was $43 million, compared to $19 million in the same period a year ago. In the quarter, the company deployed $215 million to complete the Globe acquisition, paid $13 million of dividends to shareholders, and repurchased $12 million of common stock. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 296,129 | $ | 278,233 | $ | 850,669 | $ | 853,499 | |||||||
Cost of products sold | 163,630 | 149,471 | 464,842 | 468,177 | |||||||||||
Gross profit | 132,499 | 128,762 | 385,827 | 385,322 | |||||||||||
Selling, general and administrative | 72,409 | 72,945 | 222,334 | 227,856 | |||||||||||
Research and development | 12,351 | 13,116 | 35,282 | 34,623 | |||||||||||
Restructuring charges | 3,214 | 1,889 | 16,920 | 3,697 | |||||||||||
Currency exchange losses, net | 562 | 790 | 3,994 | 2,498 | |||||||||||
Other operating expense (a) | 3,346 | — | 32,956 | — | |||||||||||
Operating income | 40,617 | 40,022 | 74,341 | 116,648 | |||||||||||
Interest expense | 3,961 | 4,412 | 10,566 | 12,515 | |||||||||||
Other income, net | (981) | (2,041) | (2,061) | (3,704) | |||||||||||
Total other expense, net | 2,980 | 2,371 | 8,505 | 8,811 | |||||||||||
Income from continuing operations before income taxes | 37,637 | 37,651 | 65,836 | 107,837 | |||||||||||
Provision for income taxes | 5,411 | 11,329 | 6,306 | 38,866 | |||||||||||
Income from continuing operations | 32,226 | 26,322 | 59,530 | 68,971 | |||||||||||
(Loss) income from discontinued operations | — | (1,300 | ) | — | 55 | ||||||||||
Net income | 32,226 | 25,022 | 59,530 | 69,026 | |||||||||||
Net income attributable to noncontrolling interests | (160 | ) | (836 | ) | (519 | ) | (2,006 | ) | |||||||
Net income attributable to MSA Safety Incorporated | 32,066 | 24,186 | 59,011 | 67,020 | |||||||||||
Amounts attributable to MSA Safety Incorporated common shareholders: | |||||||||||||||
Income from continuing operations | 32,066 | 25,486 | 59,011 | 67,475 | |||||||||||
Loss from discontinued operations | — | (1,300 | ) | — | (455 | ) | |||||||||
Net income | 32,066 | 24,186 | 59,011 | 67,020 | |||||||||||
Earnings per share attributable to MSA Safety Incorporated common shareholders: | |||||||||||||||
Basic | |||||||||||||||
Income from continuing operations | $ | 0.84 | $ | 0.68 | $ | 1.55 | $ | 1.80 | |||||||
Loss from discontinued operations | $ | — | $ | (0.04 | ) | $ | — | $ | (0.01 | ) | |||||
Net income | $ | 0.84 | $ | 0.64 | $ | 1.55 | $ | 1.79 | |||||||
Diluted | |||||||||||||||
Income from continuing operations | $ | 0.83 | $ | 0.67 | $ | 1.52 | $ | 1.77 | |||||||
Loss from discontinued operations | $ | — | $ | (0.04 | ) | $ | — | $ | (0.01 | ) | |||||
Net income | $ | 0.83 | $ | 0.63 | $ | 1.52 | $ | 1.76 | |||||||
Basic shares outstanding | 38,074 | 37,487 | 37,970 | 37,407 | |||||||||||
Diluted shares outstanding | 38,702 | 38,112 | 38,692 | 37,908 |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 112,185 | $ | 113,759 | |||
Trade receivables, net | 226,780 | 209,514 | |||||
Inventories | 160,280 | 103,066 | |||||
Notes receivable, insurance companies | 19,295 | 4,180 | |||||
Other current assets | 57,999 | 42,287 | |||||
Total current assets | 576,539 | 472,806 | |||||
Property, net | 152,475 | 148,678 | |||||
Prepaid pension cost | 58,954 | 62,916 | |||||
Goodwill | 417,949 | 333,276 | |||||
Notes receivable, insurance companies, noncurrent | 59,151 | 63,147 | |||||
Insurance receivable, noncurrent | 98,219 | 157,929 | |||||
Other noncurrent assets | 231,930 | 115,168 | |||||
Total assets | $ | 1,595,217 | $ | 1,353,920 | |||
Liabilities and shareholders' equity | |||||||
Notes payable and current portion of long-term debt, net | $ | 26,667 | $ | 26,666 | |||
Accounts payable | 65,589 | 62,734 | |||||
Other current liabilities | 180,832 | 132,010 | |||||
Total current liabilities | 273,088 | 221,410 | |||||
Long-term debt, net | 445,717 | 363,836 | |||||
Pensions and other employee benefits | 172,851 | 157,927 | |||||
Deferred tax liabilities | 37,347 | 34,044 | |||||
Other noncurrent liabilities | 45,007 | 15,491 | |||||
Total shareholders' equity | 621,207 | 561,212 | |||||
Total liabilities and shareholders' equity | $ | 1,595,217 | $ | 1,353,920 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 32,226 | $ | 25,022 | $ | 59,530 | $ | 69,026 | |||||||
Depreciation and amortization | 9,929 | 8,919 | 27,665 | 26,651 | |||||||||||
Change in working capital and other operating | 809 | (15,026 | ) | 102,051 | (64,240 | ) | |||||||||
Cash flow from operating activities | 42,964 | 18,915 | 189,246 | 31,437 | |||||||||||
Capital expenditures | (5,603 | ) | (5,551 | ) | (11,730 | ) | (16,146 | ) | |||||||
Acquisition, net of cash acquired | (213,990 | ) | (18,261 | ) | (213,990 | ) | (18,261 | ) | |||||||
Property disposals and other investing | 52 | 967 | 729 | 17,932 | |||||||||||
Cash flow used in investing activities | (219,541) | (22,845) | (224,991) | (16,475) | |||||||||||
Change in debt | 200,540 | 19,459 | 75,900 | 16,083 | |||||||||||
Cash dividends paid | (13,376 | ) | (12,391 | ) | (39,200 | ) | (36,675 | ) | |||||||
Company stock purchases under repurchase program | (11,781 | ) | — | (11,781 | ) | — | |||||||||
Other financing | (263 | ) | 1,177 | 7,681 | 4,338 | ||||||||||
Cash flow from (used in) financing activities | 175,120 | 8,245 | 32,600 | (16,254 | ) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (1,719 | ) | (1,431 | ) | 1,571 | 1,400 | |||||||||
(Decrease) increase in cash and cash equivalents | (3,176 | ) | 2,884 | (1,574 | ) | 108 |
Americas | International | Corporate | Consolidated | |||||||||||
Three months ended September 30, 2017 | ||||||||||||||
Sales to external customers | $ | 186,898 | $ | 109,231 | — | $ | 296,129 | |||||||
Operating income | 40,617 | |||||||||||||
Operating margin % | 13.7 | % | ||||||||||||
Restructuring charges | 3,214 | |||||||||||||
Currency exchange losses, net | 562 | |||||||||||||
Other operating expense | 3,346 | |||||||||||||
Adjusted operating income (loss) | 47,256 | 9,077 | (8,594 | ) | $ | 47,739 | ||||||||
Adjusted operating margin % | 25.3 | % | 8.3 | % | 16.1 | % | ||||||||
Nine Months Ended September 30, 2017 | ||||||||||||||
Sales to external customers | $ | 528,426 | $ | 322,243 | — | $ | 850,669 | |||||||
Operating income | 74,341 | |||||||||||||
Operating margin % | 8.7 | % | ||||||||||||
Restructuring charges | 16,920 | |||||||||||||
Currency exchange losses, net | 3,994 | |||||||||||||
Other operating expense | 32,956 | |||||||||||||
Adjusted operating income (loss) | 130,887 | 26,691 | (29,367 | ) | $ | 128,211 | ||||||||
Adjusted operating margin % | 24.8 | % | 8.3 | % | 15.1 | % |
Americas | International | Corporate | Consolidated | |||||||||||
Three months ended September 30, 2016 | ||||||||||||||
Sales to external customers | $ | 165,359 | $ | 112,874 | — | $ | 278,233 | |||||||
Operating income | 40,022 | |||||||||||||
Operating margin % | 14.4 | % | ||||||||||||
Restructuring charges | 1,889 | |||||||||||||
Currency exchange losses, net | 790 | |||||||||||||
Other operating expense | — | |||||||||||||
Adjusted operating income (loss) | 41,458 | 10,511 | (9,268 | ) | $ | 42,701 | ||||||||
Adjusted operating margin % | 25.1 | % | 9.3 | % | 15.3 | % | ||||||||
Nine Months Ended September 30, 2016 | ||||||||||||||
Sales to external customers | $ | 510,324 | $ | 343,175 | — | $ | 853,499 | |||||||
Operating income | 116,648 | |||||||||||||
Operating margin % | 13.7 | % | ||||||||||||
Restructuring charges | 3,697 | |||||||||||||
Currency exchange losses, net | 2,498 | |||||||||||||
Other operating expense | — | |||||||||||||
Adjusted operating income (loss) | 117,475 | 31,659 | (26,291 | ) | $ | 122,843 | ||||||||
Adjusted operating margin % | 23.0 | % | 9.2 | % | 14.4 | % |
Three Months Ended September 30, 2017 | ||||||||||||||||||||
Breathing Apparatus | Firefighter Helmets and Protective Apparel(b) | Industrial Head Protection | Portable Gas Detection | Fixed Gas and Flame Detection | Fall Protection | Core Sales | Non-Core Sales | Net Sales | ||||||||||||
GAAP reported sales change | 1 | % | 187 | % | 9 | % | 1 | % | 1 | % | 2 | % | 12 | % | (17 | )% | 6 | % | ||
Plus: Currency translation effects | (1 | )% | — | % | (1 | )% | (1 | )% | (1 | )% | — | % | (2 | )% | (2 | )% | (1 | )% | ||
Constant currency sales change | — | % | 187 | % | 8 | % | — | % | — | % | 2 | % | 10 | % | (19 | )% | 5 | % | ||
Less: Acquisitions | — | % | 181 | % | — | % | — | % | 2 | % | — | % | 9 | % | — | % | 8 | % | ||
Organic constant currency change | — | % | 6 | % | 8 | % | — | % | (2 | )% | 2 | % | 1 | % | (19 | )% | (3 | )% |
Nine Months Ended September 30, 2017 | ||||||||||||||||||||
Breathing Apparatus | Firefighter Helmets and Protective Apparel(b) | 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 | )% | 52 | % | 14 | % | 1 | % | 1 | % | — | % | 2 | % | (13 | )% | — | % | ||
Plus: Currency translation effects | — | % | 1 | % | (1 | )% | — | % | — | % | 3 | % | 1 | % | (1 | )% | — | % | ||
Constant currency sales change | (8 | )% | 53 | % | 13 | % | 1 | % | 1 | % | 3 | % | 3 | % | (14 | )% | — | % | ||
Less: Acquisitions | — | % | 51 | % | — | % | — | % | 2 | % | — | % | 4 | % | — | % | 3 | % | ||
Organic constant currency change | (8 | )% | 2 | % | 13 | % | 1 | % | (1 | )% | 3 | % | (1 | )% | (14 | )% | (3 | )% |
Three Months Ended September 30, 2017 | ||||||||||||||||||||
Breathing Apparatus | Firefighter Helmets and Protective Apparel(b) | Industrial Head Protection | Portable Gas Detection | Fixed Gas and Flame Detection | Fall Protection | Core Sales | Non-Core Sales | Net Sales | ||||||||||||
GAAP reported sales change | 1 | % | 437 | % | 5 | % | — | % | (2 | )% | 26 | % | 18 | % | (12 | )% | 13 | % | ||
Plus: Currency translation effects | — | % | (1 | )% | (1 | )% | — | % | — | % | (1 | )% | (1 | )% | (1 | )% | — | % | ||
Constant currency sales change | 1 | % | 436 | % | 4 | % | — | % | (2 | )% | 25 | % | 17 | % | (13 | )% | 13 | % | ||
Less: Acquisitions | — | % | 421 | % | — | % | — | % | — | % | — | % | 14 | % | — | % | 12 | % | ||
Organic constant currency change | 1 | % | 15 | % | 4 | % | — | % | (2 | )% | 25 | % | 3 | % | (13 | )% | 1 | % |
Nine Months Ended September 30, 2017 | ||||||||||||||||||||
Breathing Apparatus | Firefighter Helmets and Protective Apparel(b) | Industrial Head Protection | Portable Gas Detection | Fixed Gas and Flame Detection | Fall Protection | Core Sales | Non-Core Sales | Net Sales | ||||||||||||
GAAP reported sales change | (9 | )% | 117 | % | 12 | % | 7 | % | (4 | )% | 23 | % | 6 | % | (8 | )% | 4 | % | ||
Plus: Currency translation effects | — | % | — | % | (1 | )% | — | % | 1 | % | — | % | (1 | )% | (1 | )% | (1 | )% | ||
Constant currency sales change | (9 | )% | 117 | % | 11 | % | 7 | % | (3 | )% | 23 | % | 5 | % | (9 | )% | 3 | % | ||
Less: Acquisitions | — | % | 116 | % | — | % | — | % | — | % | — | % | 4 | % | — | % | 4 | % | ||
Organic constant currency change | (9 | )% | 1 | % | 11 | % | 7 | % | (3 | )% | 23 | % | 1 | % | (9 | )% | (1 | )% |
Three Months Ended September 30, 2017 | ||||||||||||||||||||
Breathing Apparatus | Firefighter Helmets and Protective Apparel | Industrial Head Protection | Portable Gas Detection | Fixed Gas and Flame Detection | Fall Protection | Core Sales | Non-Core Sales | Net Sales | ||||||||||||
GAAP reported sales change | 2 | % | 3 | % | 31 | % | 2 | % | 5 | % | (17 | )% | 2 | % | (22 | )% | (3 | )% | ||
Plus: Currency translation effects | (5 | )% | (3 | )% | (5 | )% | (3 | )% | (3 | )% | — | % | (3 | )% | (4 | )% | (4 | )% | ||
Constant currency sales change | (3 | )% | — | % | 26 | % | (1 | )% | 2 | % | (17 | )% | (1 | )% | (26 | )% | (7 | )% | ||
Less: Acquisitions | — | % | — | % | — | % | — | % | 4 | % | — | % | 1 | % | — | % | — | % | ||
Organic constant currency change | (3 | )% | — | % | 26 | % | (1 | )% | (2 | )% | (17 | )% | (2 | )% | (26 | )% | (7 | )% |
Nine Months Ended September 30, 2017 | ||||||||||||||||||||
Breathing Apparatus | Firefighter Helmets and Protective Apparel | Industrial Head Protection | Portable Gas Detection | Fixed Gas and Flame Detection | Fall Protection | Core Sales | Non-Core Sales | Net Sales | ||||||||||||
GAAP reported sales change | (7 | )% | 3 | % | 23 | % | (9 | )% | 6 | % | (19 | )% | (3 | )% | (19 | )% | (6 | )% | ||
Plus: Currency translation effects | (1 | )% | 1 | % | — | % | (1 | )% | — | % | 6 | % | 1 | % | — | % | — | % | ||
Constant currency sales change | (8 | )% | 4 | % | 23 | % | (10 | )% | 6 | % | (13 | )% | (2 | )% | (19 | )% | (6 | )% | ||
Less: Acquisitions | — | % | — | % | — | % | — | % | 4 | % | — | % | 1 | % | — | % | 1 | % | ||
Organic constant currency change | (8 | )% | 4 | % | 23 | % | (10 | )% | 2 | % | (13 | )% | (3 | )% | (19 | )% | (7 | )% |
Three Months Ended September 30, 2017 | ||||||||
Consolidated | Americas | International | ||||||
Firefighter Helmets and Protective Apparel(b) | 187 | % | 436 | % | — | % | ||
Industrial Head Protection | 8 | % | 4 | % | 26 | % | ||
Fall Protection | 2 | % | 25 | % | (17 | )% | ||
Fixed Gas and Flame Detection | — | % | (2 | )% | 2 | % | ||
Portable Gas Detection | — | % | — | % | (1 | )% | ||
Breathing Apparatus | — | % | 1 | % | (3 | )% | ||
Core Sales | 10 | % | 17 | % | (1 | )% | ||
Core sales excluding acquisitions | 1 | % | 3 | % | (2 | )% | ||
Non-Core Sales | (19 | )% | (13 | )% | (26 | )% | ||
Net Sales | 5 | % | 13 | % | (7 | )% | ||
Net sales excluding acquisitions | (3 | )% | 1 | % | (7 | )% |
Nine Months Ended September 30, 2017 | ||||||||
Consolidated | Americas | International | ||||||
Firefighter Helmets and Protective Apparel(b) | 53 | % | 117 | % | 4 | % | ||
Industrial Head Protection | 13 | % | 11 | % | 23 | % | ||
Fall Protection | 3 | % | 23 | % | (13 | )% | ||
Fixed Gas and Flame Detection | 1 | % | (3 | )% | 6 | % | ||
Portable Gas Detection | 1 | % | 7 | % | (10 | )% | ||
Breathing Apparatus | (8 | )% | (9 | )% | (8 | )% | ||
Core Sales | 3 | % | 5 | % | (2 | )% | ||
Core sales excluding acquisitions | (1 | )% | 1 | % | (3 | )% | ||
Non-Core Sales | (14 | )% | (9 | )% | (19 | )% | ||
Net Sales | — | % | 3 | % | (6 | )% | ||
Net sales excluding acquisitions | (3 | )% | (1 | )% | (7 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||
GAAP reported SG&A expense | $ | 72,409 | $ | 72,945 | (1)% | $ | 222,334 | $ | 227,856 | (2)% | |||||||||
Plus: currency translation effects | 1,140 | (55 | ) | ||||||||||||||||
Constant currency SG&A expense | 72,409 | 74,085 | (2)% | 222,334 | 227,801 | (2)% | |||||||||||||
Less: Acquisitions and strategic transaction costs | 2,801 | 310 | 6,826 | 821 | |||||||||||||||
Organic constant currency SG&A expense | 69,608 | 73,775 | (6)% | 215,508 | 226,980 | (5)% | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||
Income from continuing operations attributable to MSA Safety Inc. | $ | 32,066 | $ | 25,486 | 26% | $ | 59,011 | $ | 67,475 | (13)% | |||||||||
Tax (benefit) associated with ASU 2016-09: Improvements to employee share-based payment accounting | (98 | ) | — | (6,910 | ) | — | |||||||||||||
Tax (benefits) charges associated with European reorganization | (2,474 | ) | — | (2,474 | ) | 3,600 | |||||||||||||
Subtotal | 29,494 | 25,486 | 16% | 49,627 | 71,075 | (30)% | |||||||||||||
Self-insured legal settlements and defense costs(a) | 3,359 | 20 | 33,044 | 315 | |||||||||||||||
Restructuring charges | 3,214 | 1,889 | 16,920 | 3,697 | |||||||||||||||
Currency exchange losses, net | 562 | 790 | 3,994 | 2,498 | |||||||||||||||
Strategic transaction costs | 386 | 310 | 3,365 | 821 | |||||||||||||||
Asset related losses (gains), net | 17 | (256 | ) | 186 | (815 | ) | |||||||||||||
Income tax expense on adjustments | (1,598 | ) | (829 | ) | (16,367 | ) | (2,123 | ) | |||||||||||
Adjusted earnings | 35,434 | 27,410 | 29% | 90,769 | 75,468 | 20% | |||||||||||||
Adjusted earnings per diluted share | $ | 0.92 | $ | 0.72 | 28% | $ | 2.35 | $ | 1.99 | 18% |
Three Months Ended September 30, 2017 | |||||||
Reconciliation of Earnings | Reconciliation of Earnings Per Diluted Share | ||||||
Globe GAAP earnings | $ | 2,072 | $ | 0.05 | |||
Transaction costs | 496 | $ | 0.01 | ||||
Purchase accounting amortization | 684 | $ | 0.02 | ||||
Income tax expense on adjustments | (413 | ) | $ | (0.01 | ) | ||
Globe earnings excluding transaction costs and purchase accounting amortization | $ | 2,839 | $ | 0.07 | |||
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