november 29, 2006. safe harbor except for historical information, the material and comments included...
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Safe HarborSafe HarborExcept for historical information, the material and comments included with this presentation may be forward-looking statements within the meaning of the 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 herein. These risks, uncertainties and other factors are detailed from time to time in MSA filings with the United States Securities and Exchange Commission ("SEC"), including without limitation our most recent Form 10-Q, filed on May 10, 2006. You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties. Our SEC filings are readily obtainable at no charge at www.sec.gov, as well as on a number of other commercial web sites.
Except for historical information, the material and comments included with this presentation may be forward-looking statements within the meaning of the 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 herein. These risks, uncertainties and other factors are detailed from time to time in MSA filings with the United States Securities and Exchange Commission ("SEC"), including without limitation our most recent Form 10-Q, filed on May 10, 2006. You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties. Our SEC filings are readily obtainable at no charge at www.sec.gov, as well as on a number of other commercial web sites.
Senior ManagementSenior Management
Chairman and CEOChairman and CEO
PositionPosition
President – MSA North AmericaPresident – MSA North America 2525William M. LambertWilliam M. Lambert
3636John T. Ryan IIIJohn T. Ryan III
Yearswith MSA
Yearswith MSANameName
Chief Financial OfficerChief Financial Officer 2929Dennis L. ZeitlerDennis L. Zeitler
President – MSA InternationalPresident – MSA International 4 4Roberto CañizaresRoberto Cañizares
President – MSA EuropePresident – MSA Europe 7 7James H. BaillieJames H. Baillie
Overview Overview “That men and women may work in safety and that they, their families and their communities may live in health throughout the world.”
Founded ninety-two years ago as a supplier of safety equipment for miners
Expanded early into industrial, fire service and other markets
Early global presence established in the 1940s/1950s
“That men and women may work in safety and that they, their families and their communities may live in health throughout the world.”
Founded ninety-two years ago as a supplier of safety equipment for miners
Expanded early into industrial, fire service and other markets
Early global presence established in the 1940s/1950s
Edison Electric Cap LampEdison Electric Cap Lamp
Eye Protection6%
Hearing Protection4%
Industry Overview Industry Overview
Total Market: $13 billionCompany estimates
$13 billion market expected to grow at 4–6% per year
Largest markets include military, first responders, general industry, and “Do-It-Yourself” retail
Higher growth products include gas detection, respiratory protection, head protection and fall protection
$13 billion market expected to grow at 4–6% per year
Largest markets include military, first responders, general industry, and “Do-It-Yourself” retail
Higher growth products include gas detection, respiratory protection, head protection and fall protection
FootwearFootwear
14%14%
ClothingClothing
17%17%
GlovesGloves
15%15%
Ballistics ProtectionBallistics Protection
8%8%
Fall ProtectionFall Protection5.5%5.5%
Head ProtectionHead Protection5.5%5.5%
Gas DetectionGas Detection
10%10%
Respiratory Respiratory
ProtectionProtection
14%14%
Our Position TodayOur Position Today
Global Leader Focused on SSE:
The only broad-line, pure-play safety & personal protection company traded on U.S. markets
Known for durable/reliable products, easy to use, readily available at a fair price
Global coverage and market diversity
#1 or #2 in core product/market segments and continue in other product/market lines to the extent they are profitable and enable us to meet our channel coverage needs
Global Leader Focused on SSE:
The only broad-line, pure-play safety & personal protection company traded on U.S. markets
Known for durable/reliable products, easy to use, readily available at a fair price
Global coverage and market diversity
#1 or #2 in core product/market segments and continue in other product/market lines to the extent they are profitable and enable us to meet our channel coverage needs
Leader in Key Product Categories
Leader in Key Product Categories
Leading Market PositionsLeading Market PositionsEstimated Safety SalesEstimated Safety Sales
Source: Company estimates
Note: Green color indicates Sophisticated Safety sales
SCBAs
Fire Helmets
Hard Hats
Gas Detection
Ballistic Helmets
TICs
SCBAs
Fire Helmets
Hard Hats
Gas Detection
Ballistic Helmets
TICs
Sales $MM
0
100
200
300
400
500
600
700
800
900
1,000
MSA
Bac
ou-
Dal
loz
3M
Drä
ger
Saf
ety
Nor
cros
s
Aea
ro
Sco
tt H
ealth
& S
afet
y
Rik
en K
eiki
Shi
gem
atsu
0
100
200
300
400
500
600
700
800
900
1,000
MSA
Bac
ou-
Dal
loz
3M
Drä
ger
Saf
ety
Nor
cros
s
Aea
ro
Sco
tt H
ealth
& S
afet
y
Rik
en K
eiki
Shi
gem
atsu
Long-Term Global Presence Long-Term Global Presence
MSA North America
MSA Europe
MSA International
MSA Factories
Additional Sales Offices
•
•
•
Reasons MSA Can Grow Faster Than the Safety Market
Reasons MSA Can Grow Faster Than the Safety Market
Our product mix is more favorable Our market mix is more favorable
International Eastern Europe Retail
Global Capabilities Accounts, Manufacturing, R&D, Others
MSA Focus and Strong Reinvestment in our Business Deep interest in Key Technologies and Standards Strong relationships with Major Growing Distributors Selective Acquisitions
Our product mix is more favorable Our market mix is more favorable
International Eastern Europe Retail
Global Capabilities Accounts, Manufacturing, R&D, Others
MSA Focus and Strong Reinvestment in our Business Deep interest in Key Technologies and Standards Strong relationships with Major Growing Distributors Selective Acquisitions
Our Global GoalsOur Global GoalsSeek 10% growth from
commercial safety markets
Position MSA to win meaningful share in the volatile military market
Grow non-military revenue to beapproximately 85% of total sales
Seek 10% growth from commercial safety markets
Position MSA to win meaningful share in the volatile military market
Grow non-military revenue to beapproximately 85% of total sales
Our Global StrategyOur Global Strategy
Gain Sustainable Competitive Advantage by:Being a leading global supplier in all
products/markets in which we compete
Being a technological leader
Having the best market coverage
Being cost competitive
Gain Sustainable Competitive Advantage by:Being a leading global supplier in all
products/markets in which we compete
Being a technological leader
Having the best market coverage
Being cost competitive
Our Global StrategyOur Global Strategy
Engage global best practices
Expand our product and market coverage
Have a meaningful presence in every significant economy of the world
Prudently manage risks
Adhere to the highest ethical standards and treat employees fairly
Engage global best practices
Expand our product and market coverage
Have a meaningful presence in every significant economy of the world
Prudently manage risks
Adhere to the highest ethical standards and treat employees fairly
A Snapshot of ‘06A Snapshot of ‘062006 Has Been a Year of “Transition” Adjust for completion of special Military and
Homeland Security spending Manage through delays in Federal Funding to
U.S. Fire Departments 70% of MSA’s Business – sans U.S. Military &
U.S Fire Service – is Doing Well Our Focus:
Manage transition and re-establish consistent growth path in total sales
Play to MSA’s Strength: Product Leadership
2006 Has Been a Year of “Transition” Adjust for completion of special Military and
Homeland Security spending Manage through delays in Federal Funding to
U.S. Fire Departments 70% of MSA’s Business – sans U.S. Military &
U.S Fire Service – is Doing Well Our Focus:
Manage transition and re-establish consistent growth path in total sales
Play to MSA’s Strength: Product Leadership
Balance and DiversificationBalance and Diversification
25%
25%25%
15%
10%
Head Protection Air-Supplied Respirators
Instruments Air-Purifying Respirators
Other
25%
25%25%
15%
10%
Head Protection Air-Supplied Respirators
Instruments Air-Purifying Respirators
Other
Source: Company estimates
2006 Projected Sales by Product Group
2006 Projected Sales by Product Group
2006 Projected Sales by End-Markets
2006 Projected Sales by End-Markets
Corporate Sales, by Product and MarketCorporate Sales, by Product and Market
3%3%9%9%
54%54%34%34%
Core IndustrialCore Industrial
First ResponderFirst Responder
MilitaryMilitary
Consumer Home SafetyConsumer Home Safety
Core Industrial MarketCore Industrial MarketMarket Segments• Oil, Gas, Petrochemical
• Construction
• Utilities
• Automobile
• HVAC
• Mining
• Iron & Steel
Market Segments• Oil, Gas, Petrochemical
• Construction
• Utilities
• Automobile
• HVAC
• Mining
• Iron & Steel
Market Drivers• Safety regulations
(OSHA-Occupational Safety & Health Administration, EN-European Norms, NIOSH-National Institute for Occupational Safety & Health)
• Employment levels
• Economic development
Market Drivers• Safety regulations
(OSHA-Occupational Safety & Health Administration, EN-European Norms, NIOSH-National Institute for Occupational Safety & Health)
• Employment levels
• Economic development
© Time, 2001
First Responders MarketFirst Responders MarketFire Service Products
• SCBA• Fire Helmets• Portable Instruments• Thermal Imaging Cameras
Fire Service Products
• SCBA• Fire Helmets• Portable Instruments• Thermal Imaging Cameras
Law Enforcement Products
• Chem-Bio Gas Masks• CBRN Escape Hoods• Ballistic Helmets• Response PAPRs• Body Armor
Law Enforcement Products
• Chem-Bio Gas Masks• CBRN Escape Hoods• Ballistic Helmets• Response PAPRs• Body Armor
Market Drivers• Threat Levels
• Federal Funding
Market Drivers• Threat Levels
• Federal Funding
Military MarketMilitary MarketU.S. Military• Army (Ballistic Helmets & COMMs)
• Air Force (Gas Masks, SCBA)
• Navy (Breathing Apparatus)
• Marines (Gas Masks)
• Coast Guard
U.S. Military• Army (Ballistic Helmets & COMMs)
• Air Force (Gas Masks, SCBA)
• Navy (Breathing Apparatus)
• Marines (Gas Masks)
• Coast Guard
Growth Drivers• War on Terror• Operation Enduring Freedom• Operation Iraqi Freedom• “Future Force Warrior” Program
Growth Drivers• War on Terror• Operation Enduring Freedom• Operation Iraqi Freedom• “Future Force Warrior” Program
Global Military Presence• Germany• Canada• France• Australia• Japan
Global Military Presence• Germany• Canada• France• Australia• Japan
Positioned to Leverage Industry Growth Trends
Positioned to Leverage Industry Growth Trends
We are a proven product innovatorWe are a proven product innovator
Millennium® Gas MaskFirst NIOSH-Certified CBRN gas mask
for law enforcement
Millennium® Gas MaskFirst NIOSH-Certified CBRN gas mask
for law enforcement
Advance® Hard HatFirst ANSI-Certified vented
hard hat with cooling
Advance® Hard HatFirst ANSI-Certified vented
hard hat with cooling
Quick-Fill® SystemFirst NIOSH-Certified
emergency escape breathing system for fire fighters
Quick-Fill® SystemFirst NIOSH-Certified
emergency escape breathing system for fire fighters
FireHawk® CBRN SCBAFirst NIOSH-Certified CBRN breathing
apparatus to latest NFPA product standards
FireHawk® CBRN SCBAFirst NIOSH-Certified CBRN breathing
apparatus to latest NFPA product standards
SOLARIS® Multigas Detector
Concept-to-Customer in 10 months
SOLARIS® Multigas Detector
Concept-to-Customer in 10 months
AirElite 4h Closed-Circuit SCBAProvides oxygen for up to 4 hours
AirElite 4h Closed-Circuit SCBAProvides oxygen for up to 4 hours
Safe Escape® CBRN RespiratorFirst NIOSH-Certified CBRN escape hood
Safe Escape® CBRN RespiratorFirst NIOSH-Certified CBRN escape hood
We are an integrator of electronics with safety equipmentWe are an integrator of electronics with safety equipment
Integrated Computer Module
Detects motion, heat, remaining air timeand acts as a “black box” for maintenance
Integrated Computer Module
Detects motion, heat, remaining air timeand acts as a “black box” for maintenance
Evolution® 5200HD TIC
Thermal imaging camera detects heat and helps find downed victims or lost firefighters
Evolution® 5200HD TIC
Thermal imaging camera detects heat and helps find downed victims or lost firefighters
• Increased Safety & Effectiveness• Increased Reliability• Simplicity & Ease of Use
• Increased Safety & Effectiveness• Increased Reliability• Simplicity & Ease of Use
MICH Communication
Integrates with Advanced Combat Helmet
MICH Communication
Integrates with Advanced Combat Helmet
Positioned to Leverage Industry Growth Trends
Positioned to Leverage Industry Growth Trends
Sound Control™ Ear Muffs
Electronic hearing protection with radio interface
Sound Control™ Ear Muffs
Electronic hearing protection with radio interface
Clear Command® HCS Helmet Communication System
Clear Command® HCS Helmet Communication System
Positioned to Leverage Industry Growth Trends
Positioned to Leverage Industry Growth Trends
Critical Infrastructure ProtectionCritical Infrastructure Protection
Well-positioned for growing needs of Homeland SecurityWell-positioned for growing needs of Homeland Security
Industry Leading R&DIndustry Leading R&DPrimary Design Centers Cranberry, PA, USA Berlin, Germany France Sweden China (developing)
Satellite Engineering Africa Argentina Australia Brazil Italy Japan
Primary Design Centers Cranberry, PA, USA Berlin, Germany France Sweden China (developing)
Satellite Engineering Africa Argentina Australia Brazil Italy Japan
MSA’s Global R&D ResourcesMSA’s Global R&D Resources 130 engineers and scientists world-wide
- Expertise to the PhD levelMechanical SoftwareElectrical ManufacturingChemical Other Specialties
56 technicians, drafters, support specialists Comprehensive Facilities
130 engineers and scientists world-wide - Expertise to the PhD levelMechanical SoftwareElectrical ManufacturingChemical Other Specialties
56 technicians, drafters, support specialists Comprehensive Facilities
New Product Sales as Percentage of Total SalesNew Product Sales as Percentage of Total Sales
Note: New products defined as those introduced within past 3 years,
Source: Company estimates, data represents North American segment only
17.3%19.9%
25.5%
30.0%
39.0%40.7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2000 2001 2002 2003 2004 2005
Continue to Invest in New Product Development
Continue to Invest in New Product Development
Largest sales force in the industry
Well positioned multi-national industrial & retail distributors
*Hagemeyer *Airgas
*Grainger *Home Depot
*Fisher Safety
Largest sales force in the industry
Well positioned multi-national industrial & retail distributors
*Hagemeyer *Airgas
*Grainger *Home Depot
*Fisher Safety
Anvil Award
“Best Marketing Communication”
Anvil Award
“Best Marketing Communication”
“Outstanding Supplier Award”“Outstanding Supplier Award”
“Vendor of the Year”“Vendor of the Year”
“Customer Service Center of the Year” 2002
“Customer Service Center of the Year” 2002
2005 Top Growth Award2005 Top Growth Award
Recent Awards:
2005: Fisher “Award of Excellence”
2006: Airgas “Best Field Sales Support”
Recent Awards:
2005: Fisher “Award of Excellence”
2006: Airgas “Best Field Sales Support”
“NA Customer Service Mgt”“NA Customer Service Mgt”
Leverage Customer & Distributor Relationships
Leverage Customer & Distributor Relationships
ACCE Awards “Best Customer Call Center”
ACCE Awards “Best Customer Call Center”
Lean Mfg.Lean Mfg.
Six SigmaSix Sigma
SCMSCM
Global Sourcing
Global Sourcing
Industry Week Magazine, Oct-2000“Best Plants in America” Award
Industry Week Magazine, Oct-2000“Best Plants in America” Award
DRIVE for Operational ExcellenceDRIVE for Operational Excellence
OSHAOSHA
Well Positioned for Growth in International Markets
Well Positioned for Growth in International Markets
Growth Markets China Southeast Asia/India Eastern Europe Africa Middle East Latin America
International Growth Drivers Long-term MSA investment Heightened awareness of
worker safety needs Increased manufacturing in
low-cost regions Increased enforcement of
safety regulations
Growth Markets China Southeast Asia/India Eastern Europe Africa Middle East Latin America
International Growth Drivers Long-term MSA investment Heightened awareness of
worker safety needs Increased manufacturing in
low-cost regions Increased enforcement of
safety regulations
2005 Sales by Region
63%
21%
8%4% 4%
North America Europe
Asia & Pacific Rim Africa
South America
2005 Sales by Region
63%
21%
8%4% 4%
North America Europe
Asia & Pacific Rim Africa
South America
Selective AcquisitionsSelective Acquisitions Core Products
#1 or #2 in our core products
New Channels of DistributionExpand our market coverage
Geographic ExpansionHave a meaningful presence in significant economies
Advanced TechnologiesBe the technology leader
Core Products#1 or #2 in our core products
New Channels of DistributionExpand our market coverage
Geographic ExpansionHave a meaningful presence in significant economies
Advanced TechnologiesBe the technology leader
Acquisitions Since 2000Acquisitions Since 2000 Cairns - Firefighter Helmets - 2000
Gallet - Firefighter & Military Helmets – 2002
Sordin - Hearing Protection - 2004
Microsensor Systems - CWA Detection - 2005
Select PPE - South Africa - 2006
Paraclete - Body Armor - 2006
Cairns - Firefighter Helmets - 2000
Gallet - Firefighter & Military Helmets – 2002
Sordin - Hearing Protection - 2004
Microsensor Systems - CWA Detection - 2005
Select PPE - South Africa - 2006
Paraclete - Body Armor - 2006
Financial HighlightsFinancial Highlights
FINANCIAL HIGHLIGHTS 2003 2004 2005 SALES (in millions) NET INCOME (in millions) (Continuing operations) For The Year (thousands, except per share) Net sales $696,473 $852,509 $907,912 Net income from continuing operations 48,924 71,047 81,783 Discontinued operations – after tax 16,343 –– –– Net income 65,267 71,047 81,783 Basic earnings per common share: Continuing operations 1.33 1.91 2.24 Discontinued operations .45 –– –– Net income 1.78 1.91 2.24 At Year End (thousands) Total assets $643,885 $734,110 $725,357 Working capital 207,216 270,593 246,347 Common shareholders' equity 306,867 376,679 381,470 Common Stock (thousands) Shares outstanding 36,928 37,341 36,546 Market capitalization $978,715 $1,893,208 $1,323,330
FINANCIAL HIGHLIGHTS 2003 2004 2005 SALES (in millions) NET INCOME (in millions) (Continuing operations) For The Year (thousands, except per share) Net sales $696,473 $852,509 $907,912 Net income from continuing operations 48,924 71,047 81,783 Discontinued operations – after tax 16,343 –– –– Net income 65,267 71,047 81,783 Basic earnings per common share: Continuing operations 1.33 1.91 2.24 Discontinued operations .45 –– –– Net income 1.78 1.91 2.24 At Year End (thousands) Total assets $643,885 $734,110 $725,357 Working capital 207,216 270,593 246,347 Common shareholders' equity 306,867 376,679 381,470 Common Stock (thousands) Shares outstanding 36,928 37,341 36,546 Market capitalization $978,715 $1,893,208 $1,323,330
0303 0404 0505 0303 0404 0505
$696.5$696.5
$907.9$907.9$852.5$852.5
$48.9$48.9
$71.0$71.0
$81.8$81.8
Summary Income StatementSummary Income StatementContinuing OperationsContinuing Operations
696,473696,473
96,45196,451
13.813.8
73,24373,243
10.510.5
48,92448,924
1.311.31
55.155.1
852,509852,509
138,469138,469
16.216.2
112,973112,973
13.313.3
71,04771,047
1.861.86
42.042.0
907,912907,912
150,041150,041
16.516.5
125,696125,696
13.813.8
81,78381,783
2.192.19
17.717.7
($000s)($000s)
SalesSales
EBITDA*EBITDA*
Margin (%)Margin (%)
EBIT*EBIT*
Margin (%)Margin (%)
Net Income*Net Income*
EPS – Diluted*EPS – Diluted*
Growth (%)Growth (%)
20032003 20042004 20052005 3Q 20063Q 2006
656,775656,775
96,47296,472
14.714.7
80,66480,664
12.312.3
49,66749,667
1.341.34
YTDYTD
* Excludes option costs and restructuring charges * Excludes option costs and restructuring charges
Strong Balance SheetStrong Balance Sheet
($000s) 9/30/2006
Cash and Equivalents 39,672
Other Current Assets 383,587
Total Current Assets 423,259
PP&E, net 119,109
Prepaid Pension Cost 143,246
Goodwill 86,794
Other Noncurrent Assets 44,678
TOTAL ASSETS 817,086
Assets
($000s) 9/30/2006
Cash and Equivalents 39,672
Other Current Assets 383,587
Total Current Assets 423,259
PP&E, net 119,109
Prepaid Pension Cost 143,246
Goodwill 86,794
Other Noncurrent Assets 44,678
TOTAL ASSETS 817,086
Assets
($000s) 9/30/2006
Notes Payable/Current Portion 63,455
Other Current Liabilities 128,029
Total Current Liabilities 191,484
Long-term Debt 53,839
Pensions and Other Benefits 87,754
Other Noncurrent Liabilities 85,672
Total Noncurrent Liabilities 227,265
Total Shareholders' Equity 398,337
TOTAL LIABILITIES AND EQUITY 817,086
Liabilities and Equity
($000s) 9/30/2006
Notes Payable/Current Portion 63,455
Other Current Liabilities 128,029
Total Current Liabilities 191,484
Long-term Debt 53,839
Pensions and Other Benefits 87,754
Other Noncurrent Liabilities 85,672
Total Noncurrent Liabilities 227,265
Total Shareholders' Equity 398,337
TOTAL LIABILITIES AND EQUITY 817,086
Liabilities and Equity
Solid Cash FlowSolid Cash Flow
3Q 20063Q 2006
49,66749,667
(2,391)(2,391)
15,80815,808
(35,937)(35,937)
27,14727,147
(15,092)(15,092)
12,05512,055
YTDYTD
Priorities for Free Cash FlowPriorities for Free Cash FlowFund the development of new products/geographies
Make acquisitions to expand markets, products and technologies
Pay a dividend consistent with MSA’s business profile
Repurchase MSA common shares
Fund the development of new products/geographies
Make acquisitions to expand markets, products and technologies
Pay a dividend consistent with MSA’s business profile
Repurchase MSA common shares
ConclusionConclusion Market leader with trusted brand in sophisticated safety products
Long-term global presence
Excellent balance and diversification—products/markets/customers/geographies
Strong relationships with distributors and customers
Positioned to leverage industry growth trends We’re a proven product innovator
We’re an integrator of electronics with safety equipment
We’re on the leading edge of advancing safety standards
Homeland security products (from military + first responder + gas detection)
We’re established in international growth markets
We’re a successful acquirer/integrator
Market leader with trusted brand in sophisticated safety products
Long-term global presence
Excellent balance and diversification—products/markets/customers/geographies
Strong relationships with distributors and customers
Positioned to leverage industry growth trends We’re a proven product innovator
We’re an integrator of electronics with safety equipment
We’re on the leading edge of advancing safety standards
Homeland security products (from military + first responder + gas detection)
We’re established in international growth markets
We’re a successful acquirer/integrator
Unique Pure-Play Safety and Personal Protection CompanyUnique Pure-Play Safety and Personal Protection Company
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