Full Press Release Details
FROM: MSA Safety Incorporated
Media Relations Contact: Mark Deasy (724) 741 - 8570
Investor Relations Contact: Elyse Lorenzato (724) 741 - 8525
MSA Announces Fourth Quarter and Full Year 2017 Results
Quarterly GAAP loss of $0.87 per share includes a noncash increase in the reserve for unasserted product liability claims and a charge associated with U.S. Tax Reform; Quarterly adjusted earnings increased 69 percent to $1.31 per share on double-digit revenue growth and a streamlined cost structure
PITTSBURGH, February 20, 2018 - Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the fourth quarter and full year of 2017.
Quarterly Highlights
Cumulative Trauma Product Liability Charge
Comments from Management
"Our fourth quarter results reflect improving macro conditions across many of our key end markets and geographies, as well as returns on investments made in strategic acquisitions and cost reduction programs," said William M. Lambert, MSA Chairman and CEO. "Our quarterly revenue reflected record performance for MSA and increased 14 percent in constant currency from a year ago, or 6 percent excluding Globe. Additionally, our streamlined cost structure provided support to leverage our revenue growth into a 69 percent increase in adjusted earnings."
Mr. Lambert noted that the company finished the year with a backlog pipeline that is trending approximately 10 percent higher than the end of the third quarter on strong demand for industrial products and self-contained breathing apparatus for the fire service market. "Typically, we see a seasonal decline in backlog during the fourth quarter. The solid quarterly revenue growth coupled with an elevated level of backlog at year end highlights the positive momentum we see occurring in many of our end markets," Mr. Lambert commented.
Regarding the increase to the company's product liability reserve, Mr. Lambert noted the reserve relates to products sold many years ago that are no longer part of the MSA portfolio. "For more than a decade, we have funded product liability settlements from operating cash flow," Mr. Lambert explained. "Through the ongoing successful resolution of insurance litigation, we continue to make good progress collecting insurance proceeds and establishing cash flow streams for the future, which I expect will allow us to fund these liabilities without a material impact on our capital allocation priorities."
"As we look ahead to 2018, we are highly focused on generating revenue growth and investing in the programs, people and technology that will help us reach our growth and profitability targets. With an expected tailwind from U.S. tax reform, combined with healthy conditions in our end markets and a strong balance sheet, we are well positioned to create value for our stakeholders in 2018 and beyond," he concluded.
MSA Safety Incorporated
Condensed Consolidated Statement of Income (Unaudited)
(In thousands, except per share amounts)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net sales | $ | 346,140 | $ | 296,031 | $ | 1,196,809 | $ | 1,149,530 | |||||||
| Cost of products sold | 191,569 | 157,710 | 656,411 | 625,887 | |||||||||||
| Gross profit | 154,571 | 138,321 | 540,398 | 523,643 | |||||||||||
| Selling, general and administrative | 75,467 | 78,288 | 297,801 | 306,144 | |||||||||||
| Research and development | 14,779 | 12,224 | 50,061 | 46,847 | |||||||||||
| Restructuring charges | 712 | 1,997 | 17,632 | 5,694 | |||||||||||
| Currency exchange losses (gains), net | 1,133 | (1,732 | ) | 5,127 | 766 | ||||||||||
| Other operating expense (a) | 93,476 | - | 126,432 | - | |||||||||||
| Operating (loss) income | (30,996 | ) | 47,544 | 43,345 | 164,192 | ||||||||||
| Interest expense | 4,794 | 3,896 | 15,360 | 16,411 | |||||||||||
| Other expense (income), net | 271 | (426) | (1,790) | (4,130) | |||||||||||
| Total other expense, net | 5,065 | 3,470 | 13,570 | 12,281 | |||||||||||
| (Loss) income from continuing operations before income taxes | (36,061 | ) | 44,074 | 29,775 | 151,911 | ||||||||||
| (Benefit) provision for income taxes | (3,487 | ) | 18,938 | 2,819 | 57,804 | ||||||||||
| (Loss) income from continuing operations | (32,574 | ) | 25,136 | 26,956 | 94,107 | ||||||||||
| Loss from discontinued operations | - | (300 | ) | - | (245 | ) | |||||||||
| Net (loss) income | (32,574 | ) | 24,836 | 26,956 | 93,862 | ||||||||||
| Net (income) loss attributable to noncontrolling interests | (410 | ) | 80 | (929 | ) | (1,926 | ) | ||||||||
| Net (loss) income attributable to MSA Safety Incorporated | (32,984 | ) | 24,916 | 26,027 | 91,936 | ||||||||||
| Amounts attributable to MSA Safety Incorporated common shareholders: | |||||||||||||||
| (Loss) income from continuing operations | (32,984 | ) | 25,216 | 26,027 | 92,691 | ||||||||||
| Loss from discontinued operations | - | (300 | ) | - | (755 | ) | |||||||||
| Net (loss) income | (32,984 | ) | 24,916 | 26,027 | 91,936 | ||||||||||
| Earnings per share attributable to MSA Safety Incorporated common shareholders: | |||||||||||||||
| Basic | |||||||||||||||
| (Loss) income from continuing operations | $ | (0.87 | ) | $ | 0.67 | $ | 0.68 | $ | 2.47 | ||||||
| Loss from discontinued operations | $ | - | $ | (0.01 | ) | $ | - | $ | (0.02 | ) | |||||
| Net (loss) income | $ | (0.87 | ) | $ | 0.66 | $ | 0.68 | $ | 2.45 | ||||||
| Diluted | |||||||||||||||
| (Loss) Income from continuing operations | $ | (0.87 | ) | $ | 0.66 | $ | 0.67 | $ | 2.44 | ||||||
| Loss from discontinued operations | $ | - | $ | (0.01 | ) | $ | - | $ | (0.02 | ) | |||||
| Net (loss) income | $ | (0.87 | ) | $ | 0.65 | $ | 0.67 | $ | 2.42 | ||||||
| Basic shares outstanding | 38,079 | 37,602 | 37,997 | 37,456 | |||||||||||
| Diluted shares outstanding | 38,079 | 38,218 | 38,697 | 37,986 |
(a) Year to date amount is primarily associated with increasing the company's cumulative trauma product liability reserve for asserted and IBNR claims.
MSA Safety Incorporated
Condensed Consolidated Balance Sheet (Unaudited)
| December 31, 2017 | December 31, 2016 | ||||||
| Assets | |||||||
| Cash and cash equivalents | $ | 134,244 | $ | 113,759 | |||
| Trade receivables, net | 244,198 | 209,514 | |||||
| Inventories | 153,739 | 103,066 | |||||
| Notes receivable, insurance companies | 17,333 | 4,180 | |||||
| Other current assets | 72,783 | 42,287 | |||||
| Total current assets | 622,297 | 472,806 | |||||
| Property, net | 157,014 | 148,678 | |||||
| Prepaid pension cost | 83,060 | 62,916 | |||||
| Goodwill | 422,185 | 333,276 | |||||
| Notes receivable, insurance companies, noncurrent | 59,567 | 63,147 | |||||
| Insurance receivable, noncurrent | 123,089 | 157,929 | |||||
| Other noncurrent assets | 217,614 | 115,168 | |||||
| Total assets | $ | 1,684,826 | $ | 1,353,920 | |||
| Liabilities and shareholders' equity | |||||||
| Notes payable and current portion of long-term debt, net | $ | 26,680 | $ | 26,666 | |||
| Accounts payable | 87,061 | 62,734 | |||||
| Other current liabilities | 175,538 | 132,010 | |||||
| Total current liabilities | 289,279 | 221,410 | |||||
| Long-term debt, net | 447,832 | 363,836 | |||||
| Pensions and other employee benefits | 170,773 | 157,927 | |||||
| Deferred tax liabilities | 9,341 | 34,044 | |||||
| Other noncurrent liabilities | 165,023 | 15,491 | |||||
| Total shareholders' equity | 602,578 | 561,212 | |||||
| Total liabilities and shareholders' equity | $ | 1,684,826 | $ | 1,353,920 |
MSA Safety Incorporated
Condensed Consolidated Statement of Cash Flows (Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net (loss) income | $ | (32,574 | ) | $ | 24,836 | $ | 26,956 | $ | 93,862 | ||||||
| Depreciation and amortization | 10,212 | 8,622 | 37,877 | 35,273 | |||||||||||
| Change in working capital and other operating | 63,452 | 69,999 | 165,503 | 5,759 | |||||||||||
| Cash flow from operating activities | 41,090 | 103,457 | 230,336 | 134,894 | |||||||||||
| Capital expenditures | (11,995 | ) | (9,377 | ) | (23,725 | ) | (25,523 | ) | |||||||
| Acquisition, net of cash acquired | (2,318 | ) | (188 | ) | (216,308 | ) | (18,449 | ) | |||||||
| Property disposals and other investing | 103 | 282 | 832 | 18,214 | |||||||||||
| Cash flow used in investing activities | (14,210) | (9,283) | (239,201 | ) | (25,758) | ||||||||||
| Change in debt | 1,346 | (76,991 | ) | 77,246 | (60,908 | ) | |||||||||
| Cash dividends paid | (13,337 | ) | (12,399 | ) | (52,537 | ) | (49,074 | ) | |||||||
| Company stock purchases | (857 | ) | - | (17,513 | ) | (1,881 | ) | ||||||||
| Other financing | 3,313 | 7,803 | 15,869 | 14,022 | |||||||||||
| Cash flow (used in) from financing activities | (9,535 | ) | (81,587 | ) | 23,065 | (97,841 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | 4,714 | (4,861 | ) | 6,285 | (3,461 | ) | |||||||||
| Increase in cash and cash equivalents | 22,059 | 7,726 | 20,485 | 7,834 |
MSA Safety Incorporated
Segment Information (Unaudited)
| Americas | International | Corporate | Consolidated | |||||||||||
| Three Months Ended December 31, 2017 | ||||||||||||||
| Sales to external customers | $ | 208,421 | $ | 137,719 | - | $ | 346,140 | |||||||
| Operating loss | (30,996 | ) | ||||||||||||
| Operating margin % | (9.0 | )% | ||||||||||||
| Restructuring and other charges | 712 | |||||||||||||
| Currency exchange losses, net | 1,133 | |||||||||||||
| Other operating expense | 93,476 | |||||||||||||
| Adjusted operating income (loss) | 53,400 | 18,770 | (7,845 | ) | $ | 64,325 | ||||||||
| Adjusted operating margin % | 25.6 | % | 13.6 | % | 18.6 | % | ||||||||
| Twelve Months Ended December 31, 2017 | ||||||||||||||
| Sales to external customers | $ | 736,847 | $ | 459,962 | - | $ | 1,196,809 | |||||||
| Operating income | 43,345 | |||||||||||||
| Operating margin % | 3.6 | % | ||||||||||||
| Restructuring and other charges | 17,632 | |||||||||||||
| Currency exchange losses, net | 5,127 | |||||||||||||
| Other operating expense | 126,432 | |||||||||||||
| Adjusted operating income (loss) | 184,287 | 45,461 | (37,212 | ) | $ | 192,536 | ||||||||
| Adjusted operating margin % | 25.0 | % | 9.9 | % | 16.1 | % |
| Americas | International | Corporate | Consolidated | |||||||||||
| Three Months Ended December 31, 2016 | ||||||||||||||
| Sales to external customers | $ | 168,109 | $ | 127,922 | - | $ | 296,031 | |||||||
| Operating income | 47,544 | |||||||||||||
| Operating margin % | 16.1 | % | ||||||||||||
| Restructuring charges | 1,997 | |||||||||||||
| Currency exchange (gains), net | (1,732 | ) | ||||||||||||
| Other operating expense | - | |||||||||||||
| Adjusted operating income (loss) | 45,313 | 14,832 | (12,336 | ) | $ | 47,809 | ||||||||
| Adjusted operating margin % | 27.0 | % | 11.6 | % | 16.2 | % | ||||||||
| Twelve Months Ended December 31, 2016 | ||||||||||||||
| Sales to external customers | $ | 678,433 | $ | 471,097 | - | $ | 1,149,530 | |||||||
| Operating income | 164,192 | |||||||||||||
| Operating margin % | 14.3 | % | ||||||||||||
| Restructuring charges | 5,694 | |||||||||||||
| Currency exchange losses, net | 766 | |||||||||||||
| Other operating expense | - | |||||||||||||
| Adjusted operating income (loss) | 162,788 | 46,491 | (38,627 | ) | $ | 170,652 | ||||||||
| Adjusted operating margin % | 24.0 | % | 9.9 | % | 14.8 | % |
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, currency exchange gains (losses) and other operating expense. Adjusted operating margin is defined as adjusted operating income (loss) divided by segment sales to external customers. Adjusted operating income (loss) and adjusted operating margin are not recognized terms under GAAP and therefore do not purport to be alternatives to operating income or operating margin as a measure of operating performance. 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)
Organic constant currency revenue growth (Unaudited)
| Three Months Ended December 31, 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 | % | 236 | % | 9 | % | 14 | % | 11 | % | 8 | % | 22 | % | (10 | )% | 17 | % | ||
| Plus: Currency translation effects | (2 | )% | (7 | )% | (2 | )% | (2 | )% | (5 | )% | (4 | )% | (3 | )% | (3 | )% | (3 | )% | ||
| Constant currency sales change | 7 | % | 229 | % | 7 | % | 12 | % | 6 | % | 4 | % | 19 | % | (13 | )% | 14 | % | ||
| Less: Acquisitions | - | % | 207 | % | - | % | - | % | (4 | )% | - | % | 10 | % | - | % | 8 | % | ||
| Organic constant currency change | 7 | % | 22 | % | 7 | % | 12 | % | 10 | % | 4 | % | 9 | % | (13 | )% | 6 | % |
| Twelve Months Ended December 31, 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 | (4 | )% | 97 | % | 13 | % | 4 | % | 4 | % | 2 | % | 8 | % | (12 | )% | 4 | % | ||
| Plus: Currency translation effects | - | % | (1 | )% | (2 | )% | - | % | (2 | )% | 2 | % | (1 | )% | (2 | )% | (1 | )% | ||
| Constant currency sales change | (4 | )% | 96 | % | 11 | % | 4 | % | 2 | % | 4 | % | 7 | % | (14 | )% | 3 | % | ||
| Less: Acquisitions | - | % | 89 | % | - | % | - | % | - | % | - | % | 5 | % | - | % | 4 | % | ||
| Organic constant currency change | (4 | )% | 7 | % | 11 | % | 4 | % | 2 | % | 4 | % | 2 | % | (14 | )% | (1 | )% |
(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.
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 acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. 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.
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)
| Three Months Ended December 31, 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 | 10 | % | 581 | % | 10 | % | 11 | % | 4 | % | 19 | % | 29 | % | (5 | )% | 24 | % | ||
| Plus: Currency translation effects | - | % | 2 | % | (1 | )% | - | % | - | % | (1 | )% | (1 | )% | (1 | )% | - | % | ||
| Constant currency sales change | 10 | % | 583 | % | 9 | % | 11 | % | 4 | % | 18 | % | 28 | % | (6 | )% | 24 | % | ||
| Less: Acquisitions | - | % | 559 | % | - | % | - | % | - | % | - | % | 18 | % | - | % | 16 | % | ||
| Organic constant currency change | 10 | % | 24 | % | 9 | % | 11 | % | 4 | % | 18 | % | 10 | % | (6 | )% | 8 | % |
| Twelve Months Ended December 31, 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 | (4 | )% | 219 | % | 11 | % | 8 | % | (2 | )% | 22 | % | 11 | % | (7 | )% | 9 | % | ||
| Plus: Currency translation effects | - | % | - | % | (1 | )% | - | % | - | % | - | % | - | % | (1 | )% | (1 | )% | ||
| Constant currency sales change | (4 | )% | 219 | % | 10 | % | 8 | % | (2 | )% | 22 | % | 11 | % | (8 | )% | 8 | % | ||
| Less: Acquisitions | - | % | 213 | % | - | % | - | % | - | % | - | % | 8 | % | - | % | 7 | % | ||
| Organic constant currency change | (4 | )% | 6 | % | 10 | % | 8 | % | (2 | )% | 22 | % | 3 | % | (8 | )% | 1 | % |
(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.
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 acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. 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.
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 December 31, 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 | 9 | % | 29 | % | 5 | % | 20 | % | 16 | % | (3 | )% | 13 | % | (15 | )% | 8 | % | ||
| Plus: Currency translation effects | (7 | )% | (9 | )% | (3 | )% | (7 | )% | (7 | )% | (7 | )% | (7 | )% | (5 | )% | (7 | )% | ||
| Constant currency sales change | 2 | % | 20 | % | 2 | % | 13 | % | 9 | % | (10 | )% | 6 | % | (20 | )% | 1 | % | ||
| Less: Acquisitions | - | % | - | % | - | % | - | % | (6 | )% | - | % | (2 | )% | - | % | (2 | )% | ||
| Organic constant currency change | 2 | % | 20 | % | 2 | % | 13 | % | 15 | % | (10 | )% | 8 | % | (20 | )% | 3 | % |
| Twelve Months Ended December 31, 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 | (3 | )% | 10 | % | 18 | % | (2 | )% | 9 | % | (15 | )% | 2 | % | (18 | )% | (2 | )% | ||
| Plus: Currency translation effects | (2 | )% | (2 | )% | (1 | )% | (2 | )% | (2 | )% | 3 | % | (2 | )% | (2 | )% | (2 | )% | ||
| Constant currency sales change | (5 | )% | 8 | % | 17 | % | (4 | )% | 7 | % | (12 | )% | - | % | (20 | )% | (4 | )% | ||
| Less: Acquisitions | - | % | - | % | - | % | - | % | 1 | % | - | % | - | % | - | % | - | % | ||
| Organic constant currency change | (5 | )% | 8 | % | 17 | % | (4 | )% | 6 | % | (12 | )% | - | % | (20 | )% | (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. Organic constant currency revenue growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. 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.
MSA Safety Incorporated
Supplemental Segment Information (Unaudited)
Summary of constant currency revenue growth by segment and product group
| Three Months Ended December 31, 2017 | ||||||||
| Consolidated | Americas | International | ||||||
| Firefighter Helmets and Protective Apparel (b) | 229 | % | 583 | % | 20 | % | ||
| Portable Gas Detection | 12 | % | 11 | % | 13 | % | ||
| Industrial Head Protection | 7 | % | 9 | % | 2 | % | ||
| Breathing Apparatus | 7 | % | 10 | % | 2 | % | ||
| Fixed Gas and Flame Detection | 6 | % | 4 | % | 9 | % | ||
| Fall Protection | 4 | % | 18 | % | (10 | )% | ||
| Core Sales | 19 | % | 28 | % | 6 | % | ||
| Core excluding Acquisitions | 9 | % | 10 | % | 8 | % | ||
| Non-Core Sales | (13 | )% | (6 | )% | (20 | )% | ||
| Net Sales | 14 | % | 24 | % | 1 | % | ||
| Net Sales excluding Acquisitions | 6 | % | 8 | % | 3 | % |
| Twelve Months Ended December 31, 2017 | ||||||||
| Consolidated | Americas | International | ||||||
| Firefighter Helmets and Protective Apparel (b) | 96 | % | 219 | % | 8 | % | ||
| Portable Gas Detection | 4 | % | 8 | % | (4 | )% | ||
| Industrial Head Protection | 11 | % | 10 | % | 17 | % | ||
| Breathing Apparatus | (4 | )% | (4 | )% | (5 | )% | ||
| Fixed Gas and Flame Detection | 2 | % | (2 | )% | 7 | % | ||
| Fall Protection | 4 | % | 22 | % | (12 | )% | ||
| Core Sales | 7 | % | 11 | % | - | % | ||
| Core excluding Acquisitions | 2 | % | 3 | % | - | % | ||
| Non-Core Sales | (14 | )% | (8 | )% | (20 | )% | ||
| Net Sales | 3 | % | 8 | % | (4 | )% | ||
| Net Sales excluding Acquisitions | (1 | )% | 1 | % | (4 | )% |
(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.
MSA Safety Incorporated
Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures
Organic constant currency SG&A expense (Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||
| 2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||
| GAAP reported SG&A expense | $ | 75,467 | $ | 78,288 | (4)% | $ | 297,801 | $ | 306,144 | (3)% | |||||||||
| Plus: currency translation effects | - | 2,334 | - | 2,279 | |||||||||||||||
| Constant currency SG&A expense | 75,467 | 80,622 | (6)% | 297,801 | 308,423 | (3)% | |||||||||||||
| Less: Acquisitions and strategic transaction costs | 2,957 | 3,173 | 9,783 | 3,994 | |||||||||||||||
| Organic constant currency SG&A expense | 72,510 | 77,449 | (6)% | 288,018 | 304,429 | (5)% |
Management believes that organic constant currency SG&A expense is a useful metric for investors to measure the effectiveness of the company's cost reduction programs. Constant currency SG&A expense highlights spending patterns excluding fluctuating foreign currencies. Organic constant currency SG&A expense highlights the impact of acquisitions and strategic transaction costs. These metrics provide investors with a greater level of clarity into spending levels on a year-over-year basis. There can be no assurances that MSA's definition of organic constant currency SG&A expense is consistent with that of other companies. As such, management believes that it is appropriate to consider SG&A expense 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
Adjusted earnings (Unaudited)
Adjusted earnings per diluted share (Unaudited)
(In thousands, except per share amounts)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||
| 2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||
| (Loss) income from continuing operations attributable to MSA Safety Inc. | $ | (32,984 | ) | $ | 25,216 | (231)% | $ | 26,027 | $ | 92,691 | (72)% | ||||||||
| Tax charges associated with U.S. Tax Reform | 19,817 | - | 19,817 | ||||||||||||||||
| Tax (benefit) associated with ASU 2016-09: Improvements to employee share-based payment accounting | (1,413 | ) | - | (8,323 | ) | - | |||||||||||||
| Tax (benefits) charges associated with European reorganization | (30 | ) | 2,873 | (2,504 | ) | 6,473 | |||||||||||||
| Subtotal | (14,610 | ) | 28,089 | (152)% | 35,017 | 99,164 | (65)% | ||||||||||||
| Self-insured legal settlements and defense costs (a) | 93,476 | 26 | 126,432 | 341 | |||||||||||||||
| Currency exchange losses (gains), net | 1,133 | (1,732 | ) | 5,127 | 766 | ||||||||||||||
| Strategic transaction costs | 860 | 1,710 | 4,225 | 2,531 | |||||||||||||||
| Restructuring charges | 712 | 1,997 | 17,632 | 5,694 | |||||||||||||||
| Asset related losses and other, net | 492 | 847 | 678 | 32 | |||||||||||||||
| Income tax expense on adjustments | (31,443 | ) | (1,038 | ) | (47,810 | ) | (3,161 | ) | |||||||||||
| Adjusted earnings | 50,620 | 29,899 | 69% | 141,301 | 105,367 | 34% | |||||||||||||
| Adjusted earnings per diluted share | $ | 1.31 | $ | 0.78 | 68% | $ | 3.65 | $ | 2.77 | 32% |
(a) Year to date amount is primarily associated with increasing the company's cumulative trauma product liability reserve for asserted and IBNR claims.
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.
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, firefighter helmets and protective apparel, and fall protection devices. With 2017 revenues of $1.2 billion, MSA employs approximately 4,700 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 28, 2017. 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 growth, organic constant currency SG&A expense, adjusted operating income, adjusted operating margin, 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.