MSA Safety Incorporated 2017 revenue up 4%

Global safety equipment manufacturer MSA Safety Incorporated reported results for the fourth quarter and full year of 2017.

Quarterly highlights

Reported revenue was $346 million, increasing 17 percent from a year ago on a reported basis and 14 percent on a constant currency basis.
Adjusted earnings increased 69 percent to $51 million or $1.31 per diluted share, compared to adjusted earnings of $30 million or $0.78 per diluted share in the same period a year ago, on strong revenue growth throughout MSA’s core product portfolio, the company’s 2017 acquisition of firefighter protective clothing manufacturer Globe Manufacturing, and a streamlined cost structure.

Annual highlights

Reported revenue was $1.197 billion, increasing 4 percent from a year ago on a reported basis and 3 percent on a constant currency basis.
Selling, general and administrative expenses declined $8 million on a reported basis and $16 million on an organic constant currency basis, exceeding the company’s full year cost savings target of $10 million.
Adjusted earnings increased 34 percent to $141 million, or $3.65 per diluted share, compared to adjusted earnings of $105 million, or $2.77 per diluted share, in the same period a year ago. The acquisition of Globe, a streamlined cost structure, and a lower effective tax rate were the key drivers of earnings growth in 2017.
Cash flow from operating activities was $230 million compared to $135 million in the same period a year ago, reflecting higher collections of insurance receivables partially offset by higher levels of working capital to support elevated demand across the company’s core product portfolio. In 2017, the company invested $216 million in the acquisition of Globe and returned $70 million to shareholders through dividend payments and repurchases of common stock.

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.”

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,” 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.