Jefferies Global Industrials Conference

Transcription

1 Because every life has a purpose Jefferies Global Industrials Conference MSA Safety Kenneth Krause, Executive Director of Global Finance and Assistant Treasurer

2 Safe Harbor Except for historical information, certain matters discussed in this document may be forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements, including without limitation all projections and anticipated levels of future performance, involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Actual results can be affected by any number of factors, many of which are outside of management s control. Among the factors that could cause such differences are economic conditions, spending patterns of government agencies, competitive pressures, product liability claims, the success of new product introductions, currency exchange rate fluctuations, the identification and successful integration of acquisitions and the risks of doing business in foreign countries. These risks, uncertainties and other factors are detailed from time to time in our filings with the United States Securities and Exchange Commission ("SEC"). 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 as well as on a number of other commercial web sites. 2 Non-GAAP Statements This presentation includes certain non-gaap financial measures. These financial measures include Free Cash Flow, Adjusted EBITDA and Debt/Adjusted EBITDA ratio. 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 Appendix section of this presentation.

3 A Global Safety Equipment Provider 100 Years of Protecting the Health and Safety of Workers and Facility Infrastructures Across the Globe Most trusted and only publicly-traded safety company in the world Well-balanced and diversified products, markets and geographies Ticker: MSA (NYSE) Headquarters: Cranberry Township, PA Manufacturing: 15 locations in 11 countries Employees: Approximately 5,300 Indices: Russell 2000, S+P MidCap Week Range: $46.50 $ Market Cap: $2 billion 3 Shares Outstanding: 37 million

4 Experienced Leadership Name Position Years with MSA William Lambert President and Chief Executive Officer 32 Stacy McMahan Chief Financial Officer 1 Nish Vartanian President MSA North America 28 4 Kerry Bove President MSA International 33 4 Ronald Herring President MSA Europe 30

5 Leading Positions in Faster Growing Core Product Markets Continued focus on gaining share across these profitable categories Peripheral markets not a focus for MSA Core Products $6B Core Products include: SCBA Industrial Head Protection Gas Detection Fall Protection Driven by Innovation and New Technology, Development and Enforcement of Standards Adjacent Products $6B 5 Other Products include: Safety Clothing Hand & Arm Protection Foot & Leg Protection Key Adjacent Products include: Respirators Eye & Face Protection Fire Helmets Thermal Imaging Cameras Gas Masks Complementary to Core Areas Gaining share in key products and end markets, while positioning for sustainable growth

6 MSA Core Product Lines Enforcement of existing standards, new and developing standards, and new products driving future growth Fixed Gas & Flame Detection Fall Protection Breathing Apparatus 6 6 Portable Gas Detection Industrial Head Protection Leading market position across many of our core product groups

7 Fixed Gas and Flame Detection Represents 22 percent of sales Strong growth demonstrated by 4-year CAGR of 26% Product leaders with strong position in global market Extensive use in energy markets Low total cost of ownership and high performance; diverse technologies Installed base/repeat business in North America, Western Europe, Middle East New business growth in China, Latin America, Russia, Caspian Sea Region, and many other regions 7 7

8 Portable Gas Detection Represents 14 percent of sales Strong position in global market Lowest total cost of ownership Extensive use in energy markets Continuing to invest in sensing technology as a key differentiator Continuing to focus and successfully grow in North America, China, Brazil, and Southeast Asia OGP markets Adding focus to drive growth in Russian Caspian Sea Region 8 8

9 Head Protection Represents 13 percent of sales Gaining Market Share; Strong position in North America and Latin America Further develop European channel partners with a focus on UK, France and Germany Best performing, most comfortable hard hats with strong brand loyalty Complimentary eye, face & hearing protection accessories 9 9

10 Breathing Apparatus Represents 21 percent of sales Global leader Replacement cycle and new NFPA standard expected to drive future growth in developed markets; well-positioned to capitalize on this opportunity Focus on growth in China, Latin America and South East Asia as regulations are becoming increasingly enforced 10 10

11 Fall Protection Represents 4 percent of sales with large opportunity for MSA growth One of the largest segments of the Safety Products Market Continuing to develop new products with higher margins and higher volumes relative to existing product families Taking advantage of existing distribution channels with already strong brand recognition and loyalty Production in Mexico and China

12 Global Growth of Core Products Driving sales of innovative core products throughout our geographic footprint 4-year CAGR* Consolidated Emerging Markets Developed Markets Fixed Gas & Flame Detection 26% 17% 28% Head Protection 18% 27% 13% Portable Gas Detection 15% 20% 13% Fall Protection 11% 30% 4% Breathing Apparatus 3% 12% Total Core Products 13% 19% 12% 12 Industrial based product groups reflecting strong growth throughout both Developed and Emerging Markets. *CAGR calculated in local currency terms to neutralize impact of fluctuating foreign currencies.

13 Shifting the Sales Mix Focus on core products delivers strong gross profit and operating margin improvements 24% 2013 Sales Mix 2% 73% Core Adjacent Peripheral 2009 Sales Mix 5% 37% 58% 13 Core products grow to represent 73% of total revenue compared to 58% in 2009, with gross profit and operating margin increasing 690 basis points and 420 basis points, respectively, over this time period.

14 Investing in Core Products R&D as a % of Sales 2013 Sales Vitality 4.1% 3.3% 3.6% 3.5% 3.7% 21% 24% Core 13% Adjacent Total Sales Increasing our investment in innovative core products. *Product Vitality is a measure of MSA s revenue from products introduced over the last five years as a percentage of total revenue.

15 Capital Management Debt to Adjusted EBITDA* 3.5 Dividends Per Share $1.38 $1.18 $0.96 $0.99 $ Strong cash flow driving a meaningful dividend. ** 2012 includes an additional one time special dividend. *Adjusted EBITDA is a non-gaap financial measure. Please see appendix for reconciliation.

16 Capital Management Debt capacity expanded to nearly $600 million Mix of variable and fixed rate debt Historically low rates Reviewing both organic and inorganic growth strategies across our core product lines. 16 Continue to employ a disciplined approach for acquisitions will not overpay for value

17 Key Focus Areas and Results Executing the Strategy Grow the Profitable Core of MSA Invest in Emerging Markets Improve operational efficiency Strong dividend growth for more than 50 years Double-digit earnings growth on strong core product performance Long-term presence in China, Latin America, Middle East, Eastern Europe, Africa and Southeast Asia 690 basis points improvement in gross margin since 2009 $0.31 per common share (September 2014) 17 Innovations in core products; 24 percent of sales from those products developed in last 5 years 28 percent of sales, with a four-year CAGR of 15 percent Europe 2.0, Value Engineering, Shared Services driving further improvements in operating margins History of strong cash conversion to support increasing dividend 17

18 Going Forward Innovation, Continuous Improvement and Profitable Growth Profitable Growth Operational Excellence New product development focused on the profitable core of MSA MSA operating system driving improved management of manufacturing costs New and emerging standards; enforcement of existing standards in emerging markets SAP implementations throughout Europe and the International segment enabling cost reductions 18 Replacement cycle in U.S. Fire Service SCBA and continued growth in OGP, Construction and Industrial markets Shared services; further streamlining

19 Because every life has a purpose Questions? 19

20 20 Appendix

21 Financial Highlights Income Statement (Millions) Net Sales $ 866 $ 923 $ 1,113 $ 1,110 $ 1,112 Gross Profit Gross Profit Margin 37.8% 38.8% 41.2% 44.1% 44.7% Operating Income Operating Margin 8.6% 7.6% 10.9% 12.2% 12.8% 21 Net Income $ 43 $ 38 $ 70 $ 91 $ 88 During the fourth quarter of 2013, MSA initiated steps to divest its South African distribution business and Zambian operations. The results of these businesses have been reclassified to discontinued operations. All comparisons in the chart above, with the exception of net income, reflect continuing operations results only.

22 Financial Highlights Cash Flow (Millions) Net Income $ 43 $ 38 $ 70 $ 91 $ 88 Cash From Operations Capital Expenditures (26) (25) (30) (32) (37) Free Cash Flow* $ 95 $ 7 $ 55 $ 118 $ 74 Dividends per Common Share $ 0.96 $ 0.99 $ 1.03 $ 1.38 $ Debt / Adjusted EBITDA** *Free cash flow is a non-gaap financial measure that MSA defines as cash from operations less capital expenditures, as reconciled above. It is important to note that free cash flow does not reflect the residual cash balance of the Company for discretionary spending since other items, including debt and dividend payments, are deducted from free cash flow before arriving at the Company s ending cash balance. **Debt to Adjusted EBITDA ratio is a non-gaap financial measure. See reconciliation provided on the following slide.

23 Reconciliation of Non-GAAP Financial Measures Debt / Adjusted EBITDA Ratio Net Income $ 43 $ 38 $ 70 $ 91 $ 88 Interest Expense Provision for Income Taxes Depreciation and Amortization Currency Exchange (Gains) Losses (1) Restructuring Charges Adjusted EBITDA $ 110 $ 109 $ 163 $ 182 $ 177 Total End-of-Period Debt Debt / Adjusted EBITDA Adjusted EBITDA is a non-gaap financial measure. MSA defines this measure as net income attributable to the Company excluding interest, taxes, depreciation and amortization, currency exchange gains and losses and restructuring charges. Management believes this information is useful for investors to analyze profitability trends of the Company. Adjusted EBITDA, as defined herein, may not be comparable to similarly titled measures reported by other companies. Furthermore, this performance measure does not take into account certain significant items that directly affect net income. Adjusted EBITDA should be considered in addition to GAAP measures such as net income and cash from operations. Debt to Adjusted EBITDA ratio is a non-gaap measure defined as total long term debt and debt maturing within one year divided by Adjusted EBITDA, as reconciled above. This ratio is frequently used by investors and credit agencies and management believes this measure provides relevant and useful information.

24 Long Term Global Presence 24

25 MSA Investment Summary Globally recognized and trusted brand Leading market position in Core products Experienced leadership and well developed channels of distribution Technology and innovation driven by global new product development team Strong position in fire service, OGP and other key industrial markets New and developing standards Enforcement of existing standards in emerging markets Increased level of safety awareness Strong growth in Core products throughout developed and emerging markets Improving margins and returns Strong cash flow and capacity for continued investment and inorganic growth 50+ years of dividend growth 25