MSA sets record third quarter sales
MSA announced net sales for the third quarter 2007 were $247.7 million compared with $209.8 million for the third quarter of 2006, an increase of $37.9 million, or 18 percent. Net income for the third quarter of 2007 was $16.7 million, an increase of $4.1 million, compared with $12.6 million for the same quarter last year.
Sales in North America grew $16.6 million, or 15 percent. Shipments of advanced combat helmets and related communications systems to the military were up $5.6 million and $2.3 million, respectively, and sales of ballistic protection products, including those made by Paraclete Armor and Equipment, were up $1.3 million in the current quarter.
Third quarter 2007 sales of self-contained breathing apparatus (SCBA) were flat against a low 2006 third quarter, primarily due to sluggish demand from the U.S. fire service market as customers waited for the implementation of new National Fire Protection Association (NFPA) standards that all manufacturers had to meet by August 31, 2007.
SCBA shipments delayed
MSA was the first SCBA manufacturer to have a product fully certified as meeting the new NFPA performance requirements, but this occurred after the August 31 deadline, meaning the company was unable to ship SCBA to the North American fire service in September. Shipments of the new breathing apparatus have subsequently begun. Sales of thermal imaging cameras to the fire service improved $1.6 million reflecting improved availability of funding under the Federal Assistance to Firefighters Grant (AFG) Program.
Global performance
Continued strength in North American construction and industrial markets was reflected in sales of fall protection and head protection products, which improved $2.5 million in the third quarter.
Sales in MSA’s European segment improved $10.7 million, or 22 percent, for the quarter. Currency translation effects increased European sales by $5.1 million, when stated in U.S. dollars. Local currency sales in Europe improved $5.6 million reflecting higher shipments in most markets, but particularly in Eastern Europe.
Sales in the company’s International segment improved $10.6 million, or 22 percent, in the quarter. Local currency sales increased $4.0 million in South Africa, primarily due to strong growth in the mining industry, and $2.7 million in Latin America. Currency translation effects increased International segment sales by $2.5 million, when stated in U.S. dollars.
Cranberry Woods sale
Third quarter net income in the North American segment was $6.9 million higher. The increase was primarily related to an after-tax gain of $6.5 million on the sale of Cranberry Woods property. Excluding this gain, North American segment net income improved slightly in the quarter, with higher gross margin dollars as a result of higher sales being largely offset by increased selling, general and administrative expenses.
MSA Europe reported a $0.4 million loss for the quarter compared to net income of $1.0 million in the prior year quarter. The entire loss and most of the decrease in income compared to 2006 was due to a one-time income tax charge of $1.6 million related to a write-down in net deferred tax assets, which resulted from a reduction of approximately nine percent in the German statutory tax rate that was enacted during the quarter. Net income in the International segment was down $0.6 million in the quarter, reflecting higher selling, general and administrative expenses associated with the expansion in activities in South Africa, China, and Southeast Asia, partially offset by higher sales and gross margin dollars.
View from the top
“I am pleased with the sales improvements that we continued to make in the third quarter from the comparable sales in 2006, particularly in our important industrial products of head protection and ballistic protection,” said John T. Ryan III, MSA chairman and CEO. “Aspects of our third quarter performance were somewhat to be expected due to the transition from the previous to the new NFPA standards in SCBA.”
“Progress has been made in our International and European segments. The improvement in operating results in Europe this year has been masked by the tax provision adjustments. But going forward, our European segment results should benefit from the lower German income tax rate. Continuing expansion of our sales and operational capabilities in our International segment has held down earnings performance. I look forward to more clear progress in these areas,” Ryan continued.
“With the recent introduction of our new NFPA-compliant FireHawk M7 Air Mask and continued success in our other markets, I continue to believe that we should achieve our 2007 goal of record sales. Reaching our goal of record earnings will require a very strong performance in the fourth quarter to make up for the time lost in the NFPA approval process,” Ryan concluded.
Established in 1914, MSA is a global leader in protective products used by workers around the world in the fire service, homeland security, construction and other industries, as well as the military. MSA also provides a broad range of consumer and contractor safety products through retail channels, marketed and sold under the MSA Safety Works brand. MSA has annual sales of approximately $950 million.
Sales in North America grew $16.6 million, or 15 percent. Shipments of advanced combat helmets and related communications systems to the military were up $5.6 million and $2.3 million, respectively, and sales of ballistic protection products, including those made by Paraclete Armor and Equipment, were up $1.3 million in the current quarter.
Third quarter 2007 sales of self-contained breathing apparatus (SCBA) were flat against a low 2006 third quarter, primarily due to sluggish demand from the U.S. fire service market as customers waited for the implementation of new National Fire Protection Association (NFPA) standards that all manufacturers had to meet by August 31, 2007.
SCBA shipments delayed
MSA was the first SCBA manufacturer to have a product fully certified as meeting the new NFPA performance requirements, but this occurred after the August 31 deadline, meaning the company was unable to ship SCBA to the North American fire service in September. Shipments of the new breathing apparatus have subsequently begun. Sales of thermal imaging cameras to the fire service improved $1.6 million reflecting improved availability of funding under the Federal Assistance to Firefighters Grant (AFG) Program.
Global performance
Continued strength in North American construction and industrial markets was reflected in sales of fall protection and head protection products, which improved $2.5 million in the third quarter.
Sales in MSA’s European segment improved $10.7 million, or 22 percent, for the quarter. Currency translation effects increased European sales by $5.1 million, when stated in U.S. dollars. Local currency sales in Europe improved $5.6 million reflecting higher shipments in most markets, but particularly in Eastern Europe.
Sales in the company’s International segment improved $10.6 million, or 22 percent, in the quarter. Local currency sales increased $4.0 million in South Africa, primarily due to strong growth in the mining industry, and $2.7 million in Latin America. Currency translation effects increased International segment sales by $2.5 million, when stated in U.S. dollars.
Cranberry Woods sale
Third quarter net income in the North American segment was $6.9 million higher. The increase was primarily related to an after-tax gain of $6.5 million on the sale of Cranberry Woods property. Excluding this gain, North American segment net income improved slightly in the quarter, with higher gross margin dollars as a result of higher sales being largely offset by increased selling, general and administrative expenses.
MSA Europe reported a $0.4 million loss for the quarter compared to net income of $1.0 million in the prior year quarter. The entire loss and most of the decrease in income compared to 2006 was due to a one-time income tax charge of $1.6 million related to a write-down in net deferred tax assets, which resulted from a reduction of approximately nine percent in the German statutory tax rate that was enacted during the quarter. Net income in the International segment was down $0.6 million in the quarter, reflecting higher selling, general and administrative expenses associated with the expansion in activities in South Africa, China, and Southeast Asia, partially offset by higher sales and gross margin dollars.
View from the top
“I am pleased with the sales improvements that we continued to make in the third quarter from the comparable sales in 2006, particularly in our important industrial products of head protection and ballistic protection,” said John T. Ryan III, MSA chairman and CEO. “Aspects of our third quarter performance were somewhat to be expected due to the transition from the previous to the new NFPA standards in SCBA.”
“Progress has been made in our International and European segments. The improvement in operating results in Europe this year has been masked by the tax provision adjustments. But going forward, our European segment results should benefit from the lower German income tax rate. Continuing expansion of our sales and operational capabilities in our International segment has held down earnings performance. I look forward to more clear progress in these areas,” Ryan continued.
“With the recent introduction of our new NFPA-compliant FireHawk M7 Air Mask and continued success in our other markets, I continue to believe that we should achieve our 2007 goal of record sales. Reaching our goal of record earnings will require a very strong performance in the fourth quarter to make up for the time lost in the NFPA approval process,” Ryan concluded.
Established in 1914, MSA is a global leader in protective products used by workers around the world in the fire service, homeland security, construction and other industries, as well as the military. MSA also provides a broad range of consumer and contractor safety products through retail channels, marketed and sold under the MSA Safety Works brand. MSA has annual sales of approximately $950 million.
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