Mine Safety Appliances Company ( MSA)

Q3 2010 Earnings Call Transcript

October 28, 2010 10:00 am ET


Mark Deasy – Director, Global Public Relations

Bill Lambert – President & CEO

Dennis Zeitler – SVP & CFO

Phil Robbibaro – President and CEO, General Monitors

Joe Bigler – VP & President, North America


Edward Marshall – Sidoti & Company

Richard Eastman – Robert W. Baird

Brian Rafn – Morgan Dempsey Capital

Dick Ryan – Dougherty & Company



Welcome to the MSA third quarter earnings conference call. My name is Kim, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mr. Mark Deasy. Mr. Deasy, you may begin.

Mark Deasy

Thank you, Kim, and good morning everybody and welcome to our third quarter earnings conference call for 2010. As is our normal practice, joining us on the call this morning are Bill Lambert, President and Chief Executive Officer, Dennis Zeitler, our Senior Vice President and Chief Financial Officer, Joe Bigler, President of MSA North America and Rob Canizares, Executive Vice President and President of MSA International.

I should also note that we have with us today, here in Pittsburgh, Phil Robbibaro, President and CEO of General Monitors. Phil is in Pittsburgh this week for meetings which included, co-hosting with Joe Bigler, a town hall meeting with our North American employees yesterday.

Earnings press release was issued this morning at 8:30, and we hope everybody's had an opportunity to review it. If you haven't seen it, a copy can be found on the home page of MSA's website at www.msanet.com.

This morning Bill will provide commentary on our third quarter. He will then be followed by Dennis who will review our financials and after Dennis's comments, we'll open up the call for your questions.

As always, before we begin, I need to remind everyone that the matters discussed on this call, with the exception of historical information, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

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 here. These risks, uncertainties and other factors are detailed from time to time in our filings with the SEC, including our most recent Form 10-Q which was filed on July 28, 2010.

You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties. Our SEC filings can be easily obtained at no charge at www.sec.gov, our own website and a number of other commercial sites.

With that, that concludes our forward-looking statement. So at this point, I'll turn the call over to Bill Lambert for his comments. Bill?

Bill Lambert

Thanks, Mark, and good morning, everyone. And let me begin by saying thank you for joining us today on this conference call and for your continued interest in MSA. Presumably, all of you have seen our third quarter earnings release and have our financial figures with all comparisons corresponding to the equivalent third quarter of 2009.

As you saw in our press release, we have seen a nice pickup in many parts of our business. Although the recovery continues to be tedious with a very slow reversal in unemployment levels in the US and Western Europe, I am pleased to report that we are seeing some nice growth in core industrial markets and in mining in North America, Africa and Latin America.

I am also pleased to report that our order book remains relatively strong and continues to provide us with a certain amount of optimism that the core industrial markets we serve, which makes up nearly two-thirds of our consolidated global sales, are slowly and steadily improving.

It is especially encouraging to see continued strength in order activity in our industrial markets in North America and in Latin America throughout the quarter. And I'm also encouraged by the recent uptick in order activity in China and emerging markets in Eastern Europe and the Middle East.

The emphasis we are placing on driving our core industrial business, that is the business outside of the fire service and the military, is without question generating results as, on a year-over-year comparison, North American industrial sales increased 12%.

In our international segment, our local currency industrial sales were up 16% when compared to the third quarter of 2009. A large portion of this was in Africa and Latin America, serving the mining and the broad manufacturing markets in those regions.

As you saw in our press release, our consolidated sales in the quarter were 242 million, representing an increase of 13.5 million, or 6% over the same period from a year-ago. In our North American segment, sales were up 5% from a year-ago. And our international segment sales increased a healthy 21% in the quarter as reported.

Conversely, as reported sales in our European segment declined 5% from a year-ago, eliminating the effects of a weaker euro, overall European sales actually increased 3% when compared to the third quarter of 2009.

MSA consolidated gross profit, as reported, increased 9%, or $7.5 million on the 6% consolidated sales increase I just noted. That's an improvement of 108 basis points when expressed as a percentage of sales. This improvement reflects both a change in product mix with an increased weighting towards industrial markets and the results of our continued and very focused efforts to improve gross margins under Project Magellan.

Dennis will talk more specifically about improving operating margins in his remarks, but I am pleased to see the progress we are making and pleased to see these initial results of our efforts. While reported net income is down quarter-over-quarter, I think it's important to note that we recognize the 2.1 million pretax charge for restructuring, or roughly $0.04 per basic share after tax. 1.5 million of that restructuring charge was in euro.

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