MSA Safety (MSA) 8-K MSA Announces Fourth Quarter and Full Year 2017 Results

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FOR IMMEDIATE RELEASE

FROM: MSA Safety Incorporated

Ticker: MSA (NYSE)

Media Relations Contact: Mark Deasy (724) 741 - 8570

Investor Relations Contact: Elyse Lorenzato (724) 741 - 8525

MSA Announces Fourth Quarter and Full Year 2017 Results

Quarterly GAAP loss of $0.87 per share includes a noncash increase in the reserve for unasserted product liability claims and a charge associated with U.S. Tax Reform; Quarterly adjusted earnings increased 69 percent to $1.31 per share on double-digit revenue growth and a streamlined cost structure

PITTSBURGH, February 20, 2018 - Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the fourth quarter and full year of 2017.

Quarterly Highlights

• Reported revenue was $346 million, increasing 17 percent from a year ago on a reported basis and 14 percent on a constant currency basis.

• Quarterly GAAP loss from continuing operations was $33 million or $0.87 per basic share, compared to earnings of $25 million or $0.67 per basic share in the same period a year ago. The decline in GAAP earnings is attributable to a $93 million non-cash pre-tax charge related primarily to increasing the cumulative trauma product liability reserve for estimated unasserted, or incurred but not reported ("IBNR"), claims, net of expected insurance collections, and a $20 million income tax charge associated with U.S. Tax Reform.

• Adjusted earnings increased 69 percent to $51 million or $1.31 per diluted share, compared to adjusted earnings of $30 million or $0.78 per diluted share in the same period a year ago, on strong revenue growth throughout MSA’s core product portfolio, the company’s 2017 acquisition of firefighter protective clothing manufacturer Globe Manufacturing, and a streamlined cost structure.

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Annual Highlights

• Reported revenue was $1.197 billion, increasing 4 percent from a year ago on a reported basis and 3 percent on a constant currency basis.

• Selling, general and administrative expenses declined $8 million on a reported basis and $16 million on an organic constant currency basis, exceeding the company's full year cost savings target of $10 million.

• GAAP earnings from continuing operations were $26 million, or $0.68 per basic share, compared to $93 million, or $2.47 per basic share, in the same period a year ago. The decline in GAAP earnings is attributable to a $126 million pre-tax charge associated with increasing the company’s cumulative trauma product liability reserve for asserted claims in the second quarter and IBNR claims in the fourth quarter, net of expected insurance collections, and a $20 million income tax charge associated with U.S. Tax Reform.

• Adjusted earnings increased 34 percent to $141 million, or $3.65 per diluted share, compared to adjusted earnings of $105 million, or $2.77 per diluted share, in the same period a year ago. The acquisition of Globe, a streamlined cost structure, and a lower effective tax rate were the key drivers of earnings growth in 2017.

• Cash flow from operating activities was $230 million compared to $135 million in the same period a year ago, reflecting higher collections of insurance receivables partially offset by higher levels of working capital to support elevated demand across the company’s core product portfolio. In 2017, the company invested $216 million in the acquisition of Globe and returned $70 million to shareholders through dividend payments and repurchases of common stock.

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Cumulative Trauma Product Liability Charge

• In the fourth quarter of 2017, the company in consultation with an outside valuation consultant and outside legal counsel, performed a review for IBNR cumulative trauma product liability claims. Based on that review process, it was determined that a reasonable estimate for the liability of its IBNR claims was $111 million through the year 2060. The reserve is not discounted to present value.

• The company's fourth quarter GAAP results include a $93 million non-cash pre-tax charge, or $63 million after tax ($1.65 per diluted share), which primarily reflects the increase to the cumulative trauma product liability reserve for IBNR claims, net of expected insurance collections.

• The ability to make a reasonable estimate of the potential liability for IBNR cumulative trauma product liability claims reflects stabilization of a number of factors which are important to the estimation process. This stabilization has enabled greater predictability of potential cumulative trauma product liability related to IBNR claims.

• The company's cumulative trauma product liability reserve balance was $181 million at the end of the quarter, which includes reserves for both asserted and IBNR claims. The company has insurance and notes receivable totaling $212 million.

Comments from Management

“Our fourth quarter results reflect improving macro conditions across many of our key end markets and geographies, as well as returns on investments made in strategic acquisitions and cost reduction programs,” said William M. Lambert, MSA Chairman and CEO. "Our quarterly revenue reflected record performance for MSA and increased 14 percent in constant currency from a year ago, or 6 percent excluding Globe. Additionally, our streamlined cost structure provided support to leverage our revenue growth into a 69 percent increase in adjusted earnings."

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Mr. Lambert noted that the company finished the year with a backlog pipeline that is trending approximately 10 percent higher than the end of the third quarter on strong demand for industrial products and self-contained breathing apparatus for the fire service market. “Typically, we see a seasonal decline in backlog during the fourth quarter. The solid quarterly revenue growth coupled with an elevated level of backlog at year end highlights the positive momentum we see occurring in many of our end markets," Mr. Lambert commented.

Regarding the increase to the company's product liability reserve, Mr. Lambert noted the reserve relates to products sold many years ago that are no longer part of the MSA portfolio. "For more than a decade, we have funded product liability settlements from operating cash flow," Mr. Lambert explained. "Through the ongoing successful resolution of insurance litigation, we continue to make good progress collecting insurance proceeds and establishing cash flow streams for the future, which I expect will allow us to fund these liabilities without a material impact on our capital allocation priorities."

"As we look ahead to 2018, we are highly focused on generating revenue growth and investing in the programs, people and technology that will help us reach our growth and profitability targets. With an expected tailwind from U.S. tax reform, combined with healthy conditions in our end markets and a strong balance sheet, we are well positioned to create value for our stakeholders in 2018 and beyond," he concluded.

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MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except per share amounts)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2017			2016			2017			2016
Net sales	$	346,140		$	296,031		$	1,196,809		$	1,149,530
Cost of products sold	191,569			157,710			656,411			625,887
Gross profit	154,571			138,321			540,398			523,643
Selling, general and administrative	75,467			78,288			297,801			306,144
Research and development	14,779			12,224			50,061			46,847
Restructuring charges	712			1,997			17,632			5,694
Currency exchange losses (gains), net	1,133			(1,732		)	5,127			766
Other operating expense (a)	93,476			—			126,432			—
Operating (loss) income	(30,996		)	47,544			43,345			164,192
Interest expense	4,794			3,896			15,360			16,411
Other expense (income), net	271			(426)			(1,790)			(4,130)
Total other expense, net	5,065			3,470			13,570			12,281
(Loss) income from continuing operations before income taxes	(36,061		)	44,074			29,775			151,911
(Benefit) provision for income taxes	(3,487		)	18,938			2,819			57,804
(Loss) income from continuing operations	(32,574		)	25,136			26,956			94,107
Loss from discontinued operations	—			(300		)	—			(245		)
Net (loss) income	(32,574		)	24,836			26,956			93,862
Net (income) loss attributable to noncontrolling interests	(410		)	80			(929		)	(1,926		)
Net (loss) income attributable to MSA Safety Incorporated	(32,984		)	24,916			26,027			91,936
Amounts attributable to MSA Safety Incorporated common shareholders:
(Loss) income from continuing operations	(32,984		)	25,216			26,027			92,691
Loss from discontinued operations	—			(300		)	—			(755		)
Net (loss) income	(32,984		)	24,916			26,027			91,936
Earnings per share attributable to MSA Safety Incorporated common shareholders:
Basic
(Loss) income from continuing operations	$	(0.87	)	$	0.67		$	0.68		$	2.47
Loss from discontinued operations	$	—		$	(0.01	)	$	—		$	(0.02	)
Net (loss) income	$	(0.87	)	$	0.66		$	0.68		$	2.45
Diluted
(Loss) Income from continuing operations	$	(0.87	)	$	0.66		$	0.67		$	2.44
Loss from discontinued operations	$	—		$	(0.01	)	$	—		$	(0.02	)
Net (loss) income	$	(0.87	)	$	0.65		$	0.67		$	2.42
Basic shares outstanding	38,079			37,602			37,997			37,456
Diluted shares outstanding	38,079			38,218			38,697			37,986

(a) Year to date amount is primarily associated with increasing the company's cumulative trauma product liability reserve for asserted and IBNR claims.

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MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)

	December 31, 2017		December 31, 2016
Assets
Cash and cash equivalents	$	134,244	$	113,759
Trade receivables, net	244,198		209,514
Inventories	153,739		103,066
Notes receivable, insurance companies	17,333		4,180
Other current assets	72,783		42,287
Total current assets	622,297		472,806
Property, net	157,014		148,678
Prepaid pension cost	83,060		62,916
Goodwill	422,185		333,276
Notes receivable, insurance companies, noncurrent	59,567		63,147
Insurance receivable, noncurrent	123,089		157,929
Other noncurrent assets	217,614		115,168
Total assets	$	1,684,826	$	1,353,920
Liabilities and shareholders' equity
Notes payable and current portion of long-term debt, net	$	26,680	$	26,666
Accounts payable	87,061		62,734
Other current liabilities	175,538		132,010
Total current liabilities	289,279		221,410
Long-term debt, net	447,832		363,836
Pensions and other employee benefits	170,773		157,927
Deferred tax liabilities	9,341		34,044
Other noncurrent liabilities	165,023		15,491
Total shareholders' equity	602,578		561,212
Total liabilities and shareholders' equity	$	1,684,826	$	1,353,920

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MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2017			2016			2017			2016
Net (loss) income	$	(32,574	)	$	24,836		$	26,956		$	93,862
Depreciation and amortization	10,212			8,622			37,877			35,273
Change in working capital and other operating	63,452			69,999			165,503			5,759
Cash flow from operating activities	41,090			103,457			230,336			134,894
Capital expenditures	(11,995		)	(9,377		)	(23,725		)	(25,523		)
Acquisition, net of cash acquired	(2,318		)	(188		)	(216,308		)	(18,449		)
Property disposals and other investing	103			282			832			18,214
Cash flow used in investing activities	(14,210)			(9,283)			(239,201		)	(25,758)
Change in debt	1,346			(76,991		)	77,246			(60,908		)
Cash dividends paid	(13,337		)	(12,399		)	(52,537		)	(49,074		)
Company stock purchases	(857		)	—			(17,513		)	(1,881		)
Other financing	3,313			7,803			15,869			14,022
Cash flow (used in) from financing activities	(9,535		)	(81,587		)	23,065			(97,841		)
Effect of exchange rate changes on cash and cash equivalents	4,714			(4,861		)	6,285			(3,461		)
Increase in cash and cash equivalents	22,059			7,726			20,485			7,834

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MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands)

	Americas			International			Corporate		Consolidated
Three Months Ended December 31, 2017
Sales to external customers	$	208,421		$	137,719		���		$	346,140
Operating loss									(30,996		)
Operating margin %									(9.0		)%
Restructuring and other charges									712
Currency exchange losses, net									1,133
Other operating expense									93,476
Adjusted operating income (loss)	53,400			18,770			(7,845	)	$	64,325
Adjusted operating margin %	25.6		%	13.6		%			18.6		%
Twelve Months Ended December 31, 2017
Sales to external customers	$	736,847		$	459,962		—		$	1,196,809
Operating income									43,345
Operating margin %									3.6		%
Restructuring and other charges									17,632
Currency exchange losses, net									5,127
Other operating expense									126,432
Adjusted operating income (loss)	184,287			45,461			(37,212	)	$	192,536
Adjusted operating margin %	25.0		%	9.9		%			16.1		%

	Americas			International			Corporate		Consolidated
Three Months Ended December 31, 2016
Sales to external customers	$	168,109		$	127,922		—		$	296,031
Operating income									47,544
Operating margin %									16.1		%
Restructuring charges									1,997
Currency exchange (gains), net									(1,732		)
Other operating expense									—
Adjusted operating income (loss)	45,313			14,832			(12,336	)	$	47,809
Adjusted operating margin %	27.0		%	11.6		%			16.2		%
Twelve Months Ended December 31, 2016
Sales to external customers	$	678,433		$	471,097		—		$	1,149,530
Operating income									164,192
Operating margin %									14.3		%
Restructuring charges									5,694
Currency exchange losses, net									766
Other operating expense									—
Adjusted operating income (loss)	162,788			46,491			(38,627	)	$	170,652
Adjusted operating margin %	24.0		%	9.9		%			14.8		%

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The Americas and International segments were established on January 1, 2016. The Americas segment is comprised of our operations in the U.S., Canada and Latin America. The International segment is comprised of our operations in all other parts of the world including Europe, Africa, the Middle East, India, China, South East Asia and Australia. Certain global expenses are allocated to each segment in a manner consistent with where the benefits from the expenses are derived.

Adjusted operating income (loss) and adjusted operating margin are the measures used by the chief operating decision maker to evaluate segment performance and allocate resources. As such, management believes that adjusted operating income (loss) and adjusted operating margin are useful metrics for investors. Adjusted operating income (loss) is defined as operating income excluding restructuring, currency exchange gains (losses) and other operating expense. Adjusted operating margin is defined as adjusted operating income (loss) divided by segment sales to external customers. Adjusted operating income (loss) and adjusted operating margin are not recognized terms under GAAP and therefore do not purport to be alternatives to operating income or operating margin as a measure of operating performance. The Company's definition of adjusted operating income (loss) and adjusted operating margin may not be comparable to similarly titled measures of other companies. As such, management believes that it is appropriate to consider operating income determined on a GAAP basis in addition to these non-GAAP measures.

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MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)

Consolidated

	Three Months Ended December 31, 2017
	Breathing Apparatus		Firefighter Helmets and Protective Apparel(b)		Industrial Head Protection		Portable Gas Detection		Fixed Gas and Flame Detection		Fall Protection		Core Sales		Non-Core Sales		Net Sales
GAAP reported sales change	9	%	236	%	9	%	14	%	11	%	8	%	22	%	(10	)%	17	%
Plus: Currency translation effects	(2	)%	(7	)%	(2	)%	(2	)%	(5	)%	(4	)%	(3	)%	(3	)%	(3	)%
Constant currency sales change	7	%	229	%	7	%	12	%	6	%	4	%	19	%	(13	)%	14	%
Less: Acquisitions	—	%	207	%	—	%	—	%	(4	)%	—	%	10	%	—	%	8	%
Organic constant currency change	7	%	22	%	7	%	12	%	10	%	4	%	9	%	(13	)%	6	%

	Twelve Months Ended December 31, 2017
	Breathing Apparatus		Firefighter Helmets and Protective Apparel(b)		Industrial Head Protection		Portable Gas Detection		Fixed Gas and Flame Detection		Fall Protection		Core Sales		Non-Core Sales		Net Sales
GAAP reported sales change	(4	)%	97	%	13	%	4	%	4	%	2	%	8	%	(12	)%	4	%
Plus: Currency translation effects	—	%	(1	)%	(2	)%	—	%	(2	)%	2	%	(1	)%	(2	)%	(1	)%
Constant currency sales change	(4	)%	96	%	11	%	4	%	2	%	4	%	7	%	(14	)%	3	%
Less: Acquisitions	—	%	89	%	—	%	—	%	—	%	—	%	5	%	—	%	4	%
Organic constant currency change	(4	)%	7	%	11	%	4	%	2	%	4	%	2	%	(14	)%	(1	)%

(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. Organic constant currency revenue growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

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MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)

Americas Segment

	Three Months Ended December 31, 2017
	Breathing Apparatus		Firefighter Helmets and Protective Apparel(b)		Industrial Head Protection		Portable Gas Detection		Fixed Gas and Flame Detection		Fall Protection		Core Sales		Non-Core Sales		Net Sales
GAAP reported sales change	10	%	581	%	10	%	11	%	4	%	19	%	29	%	(5	)%	24	%
Plus: Currency translation effects	—	%	2	%	(1	)%	—	%	—	%	(1	)%	(1	)%	(1	)%	—	%
Constant currency sales change	10	%	583	%	9	%	11	%	4	%	18	%	28	%	(6	)%	24	%
Less: Acquisitions	—	%	559	%	—	%	—	%	—	%	—	%	18	%	—	%	16	%
Organic constant currency change	10	%	24	%	9	%	11	%	4	%	18	%	10	%	(6	)%	8	%

	Twelve Months Ended December 31, 2017
	Breathing Apparatus		Firefighter Helmets and Protective Apparel(b)		Industrial Head Protection		Portable Gas Detection		Fixed Gas and Flame Detection		Fall Protection		Core Sales		Non-Core Sales		Net Sales
GAAP reported sales change	(4	)%	219	%	11	%	8	%	(2	)%	22	%	11	%	(7	)%	9	%
Plus: Currency translation effects	—	%	—	%	(1	)%	—	%	—	%	—	%	—	%	(1	)%	(1	)%
Constant currency sales change	(4	)%	219	%	10	%	8	%	(2	)%	22	%	11	%	(8	)%	8	%
Less: Acquisitions	—	%	213	%	—	%	—	%	—	%	—	%	8	%	—	%	7	%
Organic constant currency change	(4	)%	6	%	10	%	8	%	(2	)%	22	%	3	%	(8	)%	1	%

(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. Organic constant currency revenue growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

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MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Constant currency revenue growth (Unaudited)

Organic constant currency revenue growth (Unaudited)

International Segment

	Three Months Ended December 31, 2017
	Breathing Apparatus		Firefighter Helmets and Protective Apparel		Industrial Head Protection		Portable Gas Detection		Fixed Gas and Flame Detection		Fall Protection		Core Sales		Non-Core Sales		Net Sales
GAAP reported sales change	9	%	29	%	5	%	20	%	16	%	(3	)%	13	%	(15	)%	8	%
Plus: Currency translation effects	(7	)%	(9	)%	(3	)%	(7	)%	(7	)%	(7	)%	(7	)%	(5	)%	(7	)%
Constant currency sales change	2	%	20	%	2	%	13	%	9	%	(10	)%	6	%	(20	)%	1	%
Less: Acquisitions	—	%	—	%	—	%	—	%	(6	)%	—	%	(2	)%	—	%	(2	)%
Organic constant currency change	2	%	20	%	2	%	13	%	15	%	(10	)%	8	%	(20	)%	3	%

	Twelve Months Ended December 31, 2017
	Breathing Apparatus		Firefighter Helmets and Protective Apparel		Industrial Head Protection		Portable Gas Detection		Fixed Gas and Flame Detection		Fall Protection		Core Sales		Non-Core Sales		Net Sales
GAAP reported sales change	(3	)%	10	%	18	%	(2	)%	9	%	(15	)%	2	%	(18	)%	(2	)%
Plus: Currency translation effects	(2	)%	(2	)%	(1	)%	(2	)%	(2	)%	3	%	(2	)%	(2	)%	(2	)%
Constant currency sales change	(5	)%	8	%	17	%	(4	)%	7	%	(12	)%	—	%	(20	)%	(4	)%
Less: Acquisitions	—	%	—	%	—	%	—	%	1	%	—	%	—	%	—	%	—	%
Organic constant currency change	(5	)%	8	%	17	%	(4	)%	6	%	(12	)%	—	%	(20	)%	(4	)%

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. Organic constant currency revenue growth is defined as constant currency revenue growth excluding acquisitions. Management believes that organic constant currency revenue growth is a useful measure for investors to provide an understanding of MSA's standalone results. There can be no assurances that MSA's definition of constant currency revenue growth or organic constant currency revenue growth is consistent with that of other companies. As such, management believes that it is appropriate to consider revenue growth determined on a GAAP basis in addition to these non-GAAP financial measures.

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MSA Safety Incorporated

Supplemental Segment Information (Unaudited)

Summary of constant currency revenue growth by segment and product group

	Three Months Ended December 31, 2017
	Consolidated		Americas		International
Firefighter Helmets and Protective Apparel(b)	229	%	583	%	20	%
Portable Gas Detection	12	%	11	%	13	%
Industrial Head Protection	7	%	9	%	2	%
Breathing Apparatus	7	%	10	%	2	%
Fixed Gas and Flame Detection	6	%	4	%	9	%
Fall Protection	4	%	18	%	(10	)%
Core Sales	19	%	28	%	6	%
Core excluding Acquisitions	9	%	10	%	8	%
Non-Core Sales	(13	)%	(6	)%	(20	)%
Net Sales	14	%	24	%	1	%
Net Sales excluding Acquisitions	6	%	8	%	3	%

	Twelve Months Ended December 31, 2017
	Consolidated		Americas		International
Firefighter Helmets and Protective Apparel(b)	96	%	219	%	8	%
Portable Gas Detection	4	%	8	%	(4	)%
Industrial Head Protection	11	%	10	%	17	%
Breathing Apparatus	(4	)%	(4	)%	(5	)%
Fixed Gas and Flame Detection	2	%	(2	)%	7	%
Fall Protection	4	%	22	%	(12	)%
Core Sales	7	%	11	%	—	%
Core excluding Acquisitions	2	%	3	%	—	%
Non-Core Sales	(14	)%	(8	)%	(20	)%
Net Sales	3	%	8	%	(4	)%
Net Sales excluding Acquisitions	(1	)%	1	%	(4	)%

(b) Firefighter helmets and protective apparel includes the impact of the Globe acquisition, completed on July 31, 2017.

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MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Organic constant currency SG&A expense (Unaudited)

(In thousands)

	Three Months Ended December 31,					Twelve Months Ended December 31,
	2017		2016		% Change	2017		2016		% Change
GAAP reported SG&A expense	$	75,467	$	78,288	(4)%	$	297,801	$	306,144	(3)%
Plus: currency translation effects	—		2,334			—		2,279
Constant currency SG&A expense	75,467		80,622		(6)%	297,801		308,423		(3)%
Less: Acquisitions and strategic transaction costs	2,957		3,173			9,783		3,994
Organic constant currency SG&A expense	72,510		77,449		(6)%	288,018		304,429		(5)%

Management believes that organic constant currency SG&A expense is a useful metric for investors to measure the effectiveness of the company's cost reduction programs. Constant currency SG&A expense highlights spending patterns excluding fluctuating foreign currencies. Organic constant currency SG&A expense highlights the impact of acquisitions and strategic transaction costs. These metrics provide investors with a greater level of clarity into spending levels on a year-over-year basis. There can be no assurances that MSA's definition of organic constant currency SG&A expense is consistent with that of other companies. As such, management believes that it is appropriate to consider SG&A expense determined on a GAAP basis in addition to this non-GAAP financial measure.

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MSA Safety Incorporated

Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures

Adjusted earnings (Unaudited)

Adjusted earnings per diluted share (Unaudited)

(In thousands, except per share amounts)

	Three Months Ended December 31,							Twelve Months Ended December 31,
	2017			2016			% Change	2017			2016				% Change
(Loss) income from continuing operations attributable to MSA Safety Inc.	$	(32,984	)	$	25,216		(231)%	$	26,027		$	92,691			(72)%
Tax charges associated with U.S. Tax Reform	19,817			—				19,817
Tax (benefit) associated with ASU 2016-09: Improvements to employee share-based payment accounting	(1,413		)	—				(8,323		)	—
Tax (benefits) charges associated with European reorganization	(30		)	2,873				(2,504		)	6,473
Subtotal	(14,610		)	28,089			(152)%	35,017			99,164				(65)%
Self-insured legal settlements and defense costs (a)	93,476			26				126,432			341
Currency exchange losses (gains), net	1,133			(1,732		)		5,127			766
Strategic transaction costs	860			1,710				4,225			2,531
Restructuring charges	712			1,997				17,632			5,694
Asset related losses and other, net	492			847				678			32			��
Income tax expense on adjustments	(31,443		)	(1,038		)		(47,810		)	(3,161		)
Adjusted earnings	50,620			29,899			69%	141,301			105,367				34%
Adjusted earnings per diluted share	$	1.31		$	0.78		68%	$	3.65		$	2.77			32%

(a) Year to date amount is primarily associated with increasing the company's cumulative trauma product liability reserve for asserted and IBNR claims.

Management believes that adjusted earnings and adjusted earnings per diluted share are useful measures for investors, as management uses these measures to internally assess the company’s performance and ongoing operating trends. There can be no assurances that additional special items will not occur in future periods, nor that MSA's definition of adjusted earnings is consistent with that of other companies. As such, management believes that it is appropriate to consider both net income determined on a GAAP basis as well as adjusted earnings.

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About MSA:    

Established in 1914, MSA Safety Incorporated is the global leader in the development, manufacture and supply of safety products that protect people and facility infrastructures.  Many MSA products integrate a combination of electronics, mechanical systems and advanced materials to protect users against hazardous or life-threatening situations.  The company's comprehensive product line is used by workers around the world in a broad range of markets, including the oil, gas and petrochemical industry, the fire service, the construction industry, mining and the military.  MSA's core products include self-contained breathing apparatus, fixed gas and flame detection systems, portable gas detection instruments, industrial head protection products, firefighter helmets and protective apparel, and fall protection devices.  With 2017 revenues of $1.2 billion, MSA employs approximately 4,700 people worldwide.  The company is headquartered north of Pittsburgh in Cranberry Township, Pa., and has manufacturing operations in the United States, Europe, Asia and Latin America.  With more than 40 international locations, MSA realizes approximately half of its revenue from outside North America.  For more information visit MSA's web site at www.MSAsafety.com.

Cautionary Statement Regarding Forward-Looking Statements:

Except for historical information, certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward looking statements involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Any number of factors could cause actual results to differ materially from projections or forward looking statements, including without limitation global economic conditions, spending patterns of government agencies, competitive pressures, the impact of acquisitions and related integration activities, product liability claims, the success of new product introductions, currency exchange rate fluctuations and the risks of doing business in foreign countries. A full listing of these risks, uncertainties and other factors are detailed from time-to-time in our filings with the United States Securities and Exchange Commission ("SEC"), including our most recent Form 10-K filed on February 28, 2017. 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 www.sec.gov, as well as on its own investor relations website at http://investors.MSAsafety.com. MSA undertakes no duty to publicly update any forward looking statements contained herein, except as required by law.

Non-GAAP Financial Measures:This earnings release includes certain non-GAAP financial measures. These financial measures include constant currency revenue growth, organic constant currency growth, organic constant currency SG&A expense, adjusted operating income, adjusted operating margin, adjusted earnings and adjusted earnings per diluted share. 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 Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures in the financial tables section above.

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