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Mine Safety Appliances Company (MSA)
Q2 2009 Earnings Call Transcript
July 28, 2009 10:00 am ET
Paul Uhler – VP, Global Human Resources
Bill Lambert – President and CEO
Dennis Zeitler – SVP and CFO
Rob Cañizares – EVP and President, MSA International
Joe Bigler – VP and President, MSA North America
Walt Liptak – Barrington Research
Brian Ruttenbur – Morgan Keegan
Richard Eastman – Robert W. Baird
Dick Ryan – Dougherty & Company
Jason Rogers [ph] – Great Lakes Review
Previous Statements by MSA
» Mine Safety Appliances Company Q1 2009 Earnings Call Transcript
» Mine Safety Appliances Company Q4 Earnings Call Transcript
» Mine Safety Appliances Co. Q3 2008 Earnings Call Transcript
Good morning, everyone, and welcome to our second quarter earnings conference call. As Hilda said, I’m Paul Uhler, Vice President of Human Resources and Corporate Communications, and I am filling in today for our Communications Director, Mark Deasy, who is on vacation. Joining me on the call today are Bill Lambert, President and Chief Executive Officer; Dennis Zeitler, Senior Vice President and Chief Financial Officer; Joe Bigler, President of MSA North America; and Rob Cañizares, Executive Vice President and President of MSA International.
Our second quarter earnings release was issued this morning at 8:30 and we hope everyone has had an opportunity to review it. The release is posted on the home page of our web site at www.msanet.com. This morning Bill will provide commentary on our second quarter. He will be followed by Dennis, who will review our financials. And after Dennis' comments, we will open up the call for questions and plan to adjourn by about 10:45.
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 Securities and Exchange Commission, including our most recent Form 10-Q, which was filed on April 30, 2009.
We strongly urge you 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 or www.msanet.com and a number of other commercial web sites. That concludes our forward-looking statements. At this point, I will turn the call over to Bill Lambert for his comments. Bill?
Thank you, Paul, and good morning, everyone. 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 second quarter earnings release and have our financial figures with all comparisons corresponding to the equivalent second quarter of 2008. Our second quarter results show the impact of the ongoing economic recession and its effect on MSA's businesses. As you saw in our press release, consolidated sales in the quarter were $227 million, decreasing 66 million or 22% compared to the same period a year ago. About one third of this decrease was due to weakening foreign currencies this quarter versus a year ago and another third due to decreased US military sales, which I will discuss in greater detail in just a minute.
MSA gross profit as reported decreased 26.3 million due to the significant decrease in sales as well as a decrease in sales of higher margin product lines. Reported net income decreased 38% to $7.5 million on a 22% sales decrease. Comparing quarters between years, we saw significant devaluations of major global currencies and regions where MSA conducts business. On a currency adjusted basis, our consolidated sales decreased $45 million compared to second quarter of a year ago or about 15%. Sales decreased most significantly in North America where sales were down 24% from a year ago. Europeans sales in local currency were down 7.5% and international when stated in local currencies were flat from a year ago.
Overall consolidated gross profit showed a moderate 60 basis points decrease. European and international segment gross margins are experiencing downward pressure caused by two major factors. The first relates to a product line that continues to be heavily weighted towards large government contracts that typically have lower gross margins. And the second factor relates to intensifying price competition. All of our regions, outside of North America, are reporting greater competitive pricing pressures.
In North America, the gross profit percentage actually improved slightly with the effect of the lower sales of high margin products like fire services SCBA being offset by a sharp decline in lower margin military helmet sales. Given the many and cumulative negative effects of the ongoing global recession, our cost containment initiatives, which were put into place in the fourth quarter of 2008 and the first quarter of 2009 continue to be directionally in sync with the reduced sales volumes that we are seeing. In particular, our SG&A expenses were 12.9 million below a year ago, showing a 19% reduction.