This excerpt taken from the MSA 8-K filed Aug 3, 2005.
Global Safety Equipment Manufacturer Reports Best Second Quarter Ever
PITTSBURGH, August 3, 2005 MSA (NYSE) today announced that net sales for the second quarter of 2005 were $220.1 million, compared with $213.1 million for the second quarter of 2004, an increase of $7.0 million, or 3 percent. Net income for the second quarter of 2005 improved 6 percent to $19.2 million, or 52 cents per diluted share, compared with $18.1 million, or 48 cents per diluted share, for the same quarter last year. This performance represents the best second quarter sales and earnings in company history.
Net sales for the six months ended June 30, 2005 were $448.2 million, compared with $407.6 million for the same period in 2004, an increase of $40.6 million, or 10 percent. Net income for the six months ended June 30, 2005 improved 18 percent to $40.6 million, or $1.09 per diluted share, compared with $34.3 million, or 90 cents per diluted share, for the same period last year.
Strong second quarter sales growth in the companys International and European segments was partially offset by lower sales in North America. Local currency sales in MSAs International and European segments increased approximately $6.9 million and $3.5 million, respectively, in the second quarter of 2005. In the International segment, sales growth occurred primarily in South America, Asia, Australia and the Middle East, reflecting improved economic conditions; focused sales and marketing initiatives; as well as several large breathing apparatus orders for the fire service and
government markets. Much of the sales growth in Europe was attributable to MSA Sordin, a leading manufacturer of hearing protection, which the company acquired in June of last year. The favorable translation effects of stronger local currencies accounted for approximately $1.5 million and $0.6 million of the current quarter sales increases in International and European segments, respectively.
The $5.4 million decrease in North American segment sales during the current quarter was primarily related to lower shipments of gas masks and self-contained breathing apparatus, down approximately $9.0 million and $5.3 million, respectively; partially offset by a combined increase of approximately $6.5 million in shipments of Advanced Combat Helmets and related communication systems. Lower gas mask sales reflect the winding down of current military contracts. The decrease in self-contained breathing apparatus sales was primarily related to delays in the release of federal funding to local fire departments under the Assistance to Firefighters Grant Program. These annual grants, which in 2004 started to be released in the second quarter, have not yet begun this year. Furthermore, when two product introductions are made at the Fire Rescue International exhibition later this month, the company expects that some meaningful backlog of breathing apparatus can be shipped. The recently introduced Evolution 5200, an innovative new thermal imaging camera, has generated considerable customer interest. However, a shortfall in the supply of a key externally purchased component has restricted invoicing. The company believes that the supply issue is improving and expects that sales will rebound over the remainder of the year.
North American segment net income for the current quarter includes a one-time U.S. income tax benefit of approximately $2.0 million related primarily to the release of previously-established tax reserves on research and development credits claimed in earlier years. These reserves were released based on communication received from the Internal Revenue Service in June. Excluding this benefit,
net income in the North American segment was down approximately $1.0 million on lower sales. Improved net income in the European and International segments reflects the previously discussed sales growth.
Our generation of orders, sales and income has been very good and surpassed our goals in a broad majority of our business, said John T. Ryan III, MSA Chairman and CEO. Particularly distinctive has been our progress in International and Europe and in major parts of our U.S. business, particularly MSA Safety Works, head protectionfor industrial, fire service and military markets, and military communication systems. The challenges during the quarter have been the government funding and supply issues in a few fire service related product lines as noted above, Mr. Ryan continued. As previously noted, we expect that military gas mask sales will be lower than last year, reflecting the maturity of the militarys requirement. I am pleased that MSA Auer, along with a joint development partner, was recently awarded a new contract to begin production of the new German military gas mask. I would expect that we will see a rebound in shipments of breathing apparatus in the U.S., as Assistance to Firefighters Grant Program funding begins to flow to local departments. We are optimistic that the remainder of this year will continue our progress of increasing sales and net income, Mr. Ryan concluded.