Welcome to the MSA Fourth Quarter and Year-End Earnings Conference Call. My name is John and I will be your operator for today's call. [Operator Instructions]. I will now turn the call over to Mr. Ken Krause. Ken, you may begin.

Thank you, John. Good morning everyone and welcome to our fourth quarter earnings conference call for 2014. I am Ken Krause, Executive Director of Global Finance and Assistant Treasurer for MSA. And joining me on the call this morning are Bill Lambert, President and Chief Executive Officer; Stacy McMahan, Senior Vice President and Chief Financial Officer; Ron Herring, President of MSA Europe; Nish Vartanian, President of MSA North America; Kerry Bove, President of MSA International. Our fourth quarter press release was issued last night and is available on our website at www.msasafety.com. This morning, Bill Lambert will provide his commentary on our quarter. Stacy will then review our financials and then Bill will conclude with his closing comments. After that, we will open up the call for your questions. Before we begin, I need to remind everyone that the matters discussed on this call excluding historical information, are 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 here. These risks, uncertainties and other factors are detailed in our filings with the Securities and Exchange Commission including our most recent Form 10-K which was filed on February 24, 2014. You are strongly urged to review all such filings for a more detailed discussion of such risks. Our SEC filings can be obtained at no charge at www.sec.gov and on our Investor Relations website. MSA undertakes no duty to publicly update any forward-looking statements made on this call except as required by law. In addition, we have included certain non-GAAP financial measures as part of our discussion today. These non-GAAP financial measures should not be considered replacements for GAAP results. Reconciliations to the most directly comparable GAAP measures are available on our Investor Relations website at investors.msasafety.com within the quarterly result section under the financial information header. And with that, let me introduce MSA’s President and Chief Executive Officer, Bill Lambert.

Thank you, Ken. Good morning everyone. As always I want to begin by saying thank you for joining us this morning on this conference call and for your continued interest in MSA. I want you to know that we never take that for granted. Presumably all of you have seen our fourth quarter press release issued last night and have our financial figures with all comparisons corresponding to the equivalent period in 2013. I will begin this morning by reviewing the highlights of our fourth quarter, I also will share with you further details about our recent launch of the G1 SCBA and give you more detail on our Europe 2.0 initiative which reached a significant milestone since our last call. After that I will turn the call over to Stacy for a review of our financial results and then we will open up the call for your questions. I'm pleased to report that we had a very solid finish to 2014 which was our centennial year in business. The team demonstrated many of our core values in delivering a very strong quarter. As you saw in our press release sales in the fourth quarter from continuing operations were $311 million which was a record quarter for MSA reflecting an 11% increase in currency neutral terms. Operating margin was 16.4%, 220 basis points ahead of the same period a year ago while earnings per continuing operations increased 38% on a currency neutral basis. For the full year our sales results were also a record high from continuing operations totaling $1.13 billion reflecting local currency growth of 4%. Our performance was clearly driven by our continued focus on core product revenue growth. In the fourth quarter sales from our core product lines comprised 74% of total revenue reflecting local currency growth…

Thank you, Bill and good morning. I will now share some further insight into our fourth quarter financial performance, additional information will be available when we file our Form 10-K with the Securities and Exchange Commission later this month. As Bill, mentioned sales from continuing operations in the third quarter were $311 million up $20 million or 7% from the prior year on a reported basis and up 11% on a local currency basis. Excluding the increase in large orders local currency revenues were up 6% as Bill commented, we saw a robust 13% local currency growth across our core products during the quarter. Looking at these sequential quarter comparison, local currency sales have increased by 16% compared to the third quarter on improvements across all reporting segments. We shipped more large orders in the fourth quarter especially in fixed gas and flame detection. Excluding large orders local currency sequential quarter revenue was up 9%. I would like to provide more insight into our exposure to oil and gas markets, before I do that however I would like to emphasize that although we do have exposure to these markets we have a very broad and diversified business. MSA has a strong position across an array of end markets, notably our position in fire service and the introduction of and market response to our G1 SCBA continues to provide a sense of optimism for 2015. In addition about 2/3rds of our FGFD business in the energy sector is related to day to day operations, and the maintenance, repair, replacement of sensors and instruments. Finally our geographic footprint allows us to participate in a wide variety of growth opportunities as safety grows an importance around the globe. These factors offset challenges to our energy related business and allow us to navigate economic…

Thank you, Stacy. I'm extremely proud of the MSA team for executing the strong results we posted in the fourth quarter. We saw double digit revenue growth, exceeded our operating margin target, set a new earnings record, drove higher levels of cash flow and we launched our most innovative product to-date that is generating a solid book of business. Our associates exciting and differentiated products and execution to our corporate strategy continued to be instrumental in creating shareholder value even as we face various headwinds in our end markets and geographies. As Stacy indicated 2015 unquestionably poses challenges, while I fully expect lower commodity prices to have an impact on head protection and portable gas detection sales in the first half of 2015 as our energy related customers in North America reduce employment and pair back expenses. We’re not seeing a significant impact on fixed gas and flame detection orders. While we could expect headwinds associated with oil and gas to persist in 2015 I'm confident that our success in launching the G1 as evidenced by our significant backlog along with the strength and the continued interest we’re seeing in all of our new products will most definitely help us offset and weather these conditions. As we close the book on our 100th year in business, our mission of protecting the health and safety of people around the world continues to be driving force in all that we do and we look forward to writing the next chapter in our companies successful history. Thank you for your attention and interest in MSA this morning. At this time Nish Vartanian, Kerry Bove and Ron Herring have joined Stacy, Ken and me and we will be happy to take any questions that you might have. Please remember that MSA does not give what is referred to as guidance and that precludes most discussion related to our expectations for future sales and earnings. Having said that, we will now open the call to your questions.

[Operator Instructions]. And our first question is from Edward Marshall from Sidoti & Company.

So I want to ask about the European business if I could because the sales number there was pretty strong and I think what I’ve noticed over the last three years is there has been some seasonal strength developing in the fourth quarter. I wanted to know if you could kind of parse that out by telling us what's causing that and was it also related to the large shipments in FGFD.

Sure, I will provide initial commentary Ed, and then I will look to Stacy and Ken to maybe put a finer point on it. But we did have a stronger order performance and shipments in the fourth quarter out of Europe, as Stacy indicated some of that was related to the large ballistic helmet order that we have with the French defense forces under [indiscernible]. We also had strong performance out of the Middle-East and we saw nice fixed gas and flame detection orders and shipments there but when you look at the business overall, when you look at how we did in Central Europe and Southern Europe, overall we still had good solid strong performance and grew the business in those parts of Europe as well but the big drivers was really were Middle-East where we saw 38% growth year-over-year for the full year in the Middle-East and India region and then we had the large ballistic helmet order that Stacy talked about in her comments. So I look to Ken or Stacy for any additional input there.

Yes, it's essentially core products group for Europe at a really nice double-digit rate at just 10% and it was a really strong mix of growth across the core product areas and then on top of that we had the non-core product growth of the helmet sales. So it really provided a very nice result for Europe.

Can we talk about maybe if we could the stronger growth in the fall equipment and especially in Europe and the emerging markets and I know this has been an area of focus for you so maybe it's the first signs of achievement but I'm also curious if it was anything up maybe just a small base that’s kind of skewing the overall percentage change.

Well that’s a small base when you compare it to the other core product areas that we have, Ed. But it continues to show good growth from our affiliate companies around the world, that’s all organic growth, none of that was inorganic and so I think it reinforces the belief that we have that this is a growing market it's an opportunity for MSA and it's an area that continues to receive our focus and attention.

The growth was also lifted at because last year's final quarter of the year was impacted because we had a product recall and that lowered the base comparison.

And on the product liability claims, I wanted to ask there is no insurance coverage now for product liability claims correct? You’ve incurred all of those liabilities yourself?

No, that’s incorrect. Let me restate. We have quite a bit of insurance that is over and above product liability that we have registered that is inforce for claims before that - that occurred before - where injury occurred before --

So from a product liability perspective Ed, we have got - we definitely have sufficient product liability insurance coverage still in place that’s in excess of our claims that have been incurred to-date and that have been recorded in our insurance receivable. Those claims are prior to 1986, so there was a change in insurance law and so those items after 86 were effectively self-insured on and so in our adjusted earnings table you could see that we had right about $3 million to $4 million incurred for those post-86 claims in the year that directly hit the P&L. But for those things that are prior to 1986 we record those as part of our insurance receivables as we have talked about in a number of times and it's fully disclosed in our 10-K and we have got sufficiently level of coverage in place for this. The only thing I would want to double click on in that European growth rate, should give you guys a little bit more clarity in that European growth rate is Bill and Stacy had talked a lot about the growth in FGFD and ballistic helmets and so if you step back and you look at the full year and you think about the year we grew about 10%, if you exclude some of that large order activity and you exclude some of those ballistic helmet orders we’re more in the mid-single digit range in terms of growth in Europe which is probably more in-line with what you might expect to see come out of those markets.

Okay and have you noticed any change as we kind of moved into the first quarter here and kind of order patterns, has that slowed down at all, I mean some of the weaker economic figures that are coming out of Europe, have you seen any change there as of yet? Or is it the same [ph] dollar?

I think it's still too early to tell, the incoming order book that we’re looking at the results are actually slightly above the plan numbers that we put in place for ourselves and the targets that we have set. So we’re not seeing a dramatic change or shift in that regard.

Our next question is from Rudy Hokanson from Barrington Research.

Both of my questions are related to the energy sector and I was just wondering, did I hear correctly Bill, that you said that right now you haven't seen any real slowdown on the fixed gas and flame detection sales into the energy sector thus far but you were cautious about what might evolve over the second half of the year?

Yes, I think that’s well stated Rudy. Our fixed gas and flame detection business we’re not seeing yet that effect - that ripple effect from capital spending cuts that may occur. You know a lot of projects that are in place or that far of along in that end market has not yet affected yes but it's obviously a very uncertain environment and so we’re not completely sure how the back half of the year or into the third and fourth quarter how that will go. Where we’re seeing an immediate pull back and as Stacy mentioned, is really on those elements of energy that relate to employment levels. So we have seen a pull back from our distributors that provide product to the energy industry and head protection and portable gas detection that was pretty immediate. When you saw some of the announcements by those who provide services to the oil and gas industry and the cut backs there then that really had to do with the employment levels which directly effects head protection, it directly effects portable instruments but not on FGFD site. We’re not seeing it just yet.

And along those lines looking at the financials or expectations on the financials, the FGFD is among your higher margin product and I was just wondering if you can account for or if there is a way to understand the contribution to the margin improvement in 2014 related to FGFD that may be vulnerable if there is a slowing. I'm being sort of very large picture and a bit vague because you don’t break it out on each product line. But I was just wondering if we could understand as we’re looking for margin improvements going forward what kind of improvements there may be and how much of that improvement in 2014 was really related more to the sale of FGFD?

Let me jump in and then I will ask for some specifics from Stacy on that margin improvement there. But I think it's important to keep in mind that roughly 2/3rds of our FGFD business is really recurring sales. So it's not the sales of the new installations but rather the replacement of sensors and product that’s already installed in the field and we don’t see that decreasing really, it's the new project business, it's the new greenfield sites that could be subject to some of that decline or some of those delays in the projects and get pushed out into 2016 or 2017. So I just want to keep it in that context that roughly 2/3rds of that business is really strong recurring business and we have got a meaningful part of that business that is not oil and gas but rather is chemical and waste water treatment and other facilities that rely on fixed gas and flame detection as well for protection. But having said all that we did have a really strong year in FGFD and I look to Stacy and Ken to maybe comment on how that impacted our operating margins for last year.

From a profitability standpoint really the recurring revenue stream in FGFD is the most profitable element of that and with such a large portion of the revenue coming from that profitability element it gives us a bit of a buffer on profitability for the project business that can be at a lower margin and it's that project business going forward that potentially we haven't seen it yet, but we could see a slowdown in the back half of the year.

I mean just to repeat what you just said, but to make sure I got it clear is that if there is a slowdown with new projects those are usually at a lower margin than the repeat business?

Yes, absolutely correct.

Our next question is from Walter Liptak from Global Hunter.

So Stacy, thanks, at the beginning of your presentation you talked about the O&G exposure. So just a follow-on and really a question, the thing that you’re presenting that the businesses that could flow or that are slowing look like they represent 20% - 25% of revenue, is that right? They have production and then some CapEx?

10% to 15% of revenue which is the head protection and the portable gas detection.

And then 5% to 10% of FGFD that could slow, you’re not slowing but could slow?

Yes that’s the part of our FGFD project oriented business that’s more capital equipment spending sensitive.

Okay, got it. Have you ever looked at the business based on upstream mid-stream or downstream and I guess I'm wondering how much of your O&G exposure is upstream?

Yes, we have looked at the business and basically estimates are that our FGFD products particularly those that we acquired through general monitors are more in the upstream and mid-stream categories. Roughly it's evenly split between upstream - the total business, upstream, midstream and downstream. So we have exposure sort of evenly throughout the value chain in energy production.

I wanted to ask the tax rate, so excluding the exit tax in the first quarter are we looking at 29% - 30% tax rate for 2015?

I think you consider a basis at roughly what we realized for the year in 2014.

There is a headwind you have there Walt, is the R&D tax credit is only renewed on - was only renewed for 2014 and so we’re going to be at the mercy of that again and the other thing that kind of plays into 2014 a bit is the mix, when you think about the business globally so there will be probably be the two biggest items but this rate of around 32 is probably a reasonable expectation.

And then realizing that will have the extra bump in the first quarter from the exit taxes for Europe.

And then I expect you have got the SCBA and the G1, wondered about when you’re expecting shipments to go out. Is that 80 million go out in the first half and what is the throughput look like on product lines and profitability expectations for that?

Well as I indicated to you the $80 million in total SCBA backlog that we have currently has about doubled what we normally see. So our efforts are to reduce that back down to more normalized level so we’re increasing production, increasing throughput, but we continue to see a very book of business and the G1 is converting competitive accounts which is just what we had hoped that it would do and we’re starting to realize some real in-roads if you will into that replacement cycle market that we have talked about in the past. From a profitability perspective the G1 as any new product that you might experience, it comes online and the efficiency has continually improve as we come up with the learning curve, as our suppliers develop improved techniques. So we would only expect to see that profitability improve, but we’re very pleased that profitability is right where we targeted it so far, with the new orders and with the competitive conversions that we’re making.

Okay, but point in the year you think you will be back to a normal SCBA backlog?

Well obviously that depends on just how strong the income and order book continues to build. So I think in my commentary I said that for the first half of the year, we expect to make meaningful progress against that backlog and that I would think that by the third quarter we will get back down into that normalized range assuming everything goes according plan and I would expect the third quarter would be back there.

Our next question is from Richard Eastman from Robert W. Baird.

Just a quick question, on the portable gas business, it looks like maybe you’re attributing about half of that business to the energy sector. Is that about - is that close?

I think that’s close Rick. Yes, I think that’s very close.

Bill, when you look at - when you think about '15 and you think about the core products segments is there enough puts and takes to deliver mid-single digit out of the core products? I mean you had the SCBA up, it looks like the fall protection business now, you’re at least back to recording revenue there and obviously we have the O&G offsets but is that the way you’re kind of budgeting for the core products for '15?

Yes that’s right, Rick. I do think there are enough puts and takes that right now we can still see that mid-single digit growth overall for the core product areas. I mean while we have talked about the upstream side of oil and gas, the exploration, the drilling, the development and the impacts there and the industry and service support groups in that sector. You still have though the chemical processing industry that’s taking great advantage of low feed stocks, you’ve got the minerals area, the industrial manufacturing industries, the U.S. automobile and truck industry, and even industrial construction is up and then so we see - we continue to see some strength in those other types of markets in the channels that support those markets for us and then you layer on top of that what we’re seeing in the fire service and just the great strength that we’re seeing there with our product portfolio, I think the answer to your question is, yes, I think there are enough puts and takes that we can continue to see the mid-single digit growth from our core product areas when we have this call this time next year.

And then Bill, curious, the G1, we talked a little bit about SCBA backlog. But it strikes me that you have to be somewhat pleased with the uptake on the M7XT in the orders that you’ve seen there, is the G1 available outside the U.S. or is the rest of world growth in the SCBA backlog really coming out of M7XT and is that still driver for '15?

Well keep in mind Rick that in addition to the G1 SCBA and the M7XT we also have line of SBA that are produced in Germany for the European market segment as well as line of SCBA produced in China for the Asian market. So we have a nice portfolio of SCBA products depending on the particular markets that we’re going after. The G1 does have applicability and interest outside of North America. We had a very good strong sale in the Middle-East late last year in December we shipped that order into the Middle-East and in Latin America, where NFPA compliant SCBA are required in parts of Latin America. We also have strong opportunity for the G1 down there. But if I were to go back to the original part of your question, I'm very pleased by the M7XT, that product is a very solid product. We thought that the transition might be faster than it has been from customers who are using the M7 product and that they would move to the G1 but nicely the M7XT continues to sell and the G1 is really advancing our initiatives on that competitive front and it's enabling us to take competitive market share.

Okay. Bill, can I just address or maybe you could just speak for a minute to the out profit in Europe in the quarter I mean it was very nice, very solid, very good out profit and so as we move through '15 I'm not sure how much of this fourth quarter benefit we will be able to hold and sustain but how do you view the out margin progression here with such a substantially strong fourth quarter profitability in Europe. Can we sustain that over the next four quarters before we pick up the tax benefit?

Well I think that the fourth quarter of 2014 was certainly a really strong quarter for us driven a lot by volume. We had a lot of volume that went through MSA Europe, with regard to fixed gas and flame detection into the Middle-East into Central Europe and also with regard to the non-core product area of ballistic helmets. Some of that continues into the first and second quarter as Stacy indicated in her commentary where we continue to ship ballistic helmets in Europe against that contract for the first and second quarter and as I indicated in fixed gas and flame detection market and into the Middle-East has been very strong. Interestingly the North American market for energy has really seen a pull back and expense reduction but we’re not seeing that out of the Middle-East and Middle-East continues to be an area for strength for us and so we have some solid expectations for continued growth in the Middle-East. So whether or not we may be able to maintain the operating margins that we saw in 2014's fourth quarter, can we maintain that into 2015. I think it's a little uncertain but it's absolutely better than it has been in previous years.

So overall for '15 we should see our up margin, and as you defined it net margin improve without the tax benefit and then in '16 we pick up the tax benefit in Switzerland.

Yes, I think that’s accurate.

Rick, the only thing that I would add to that would be just when you say watch [indiscernible] for the dollar and its impact on the profitability of the segment, right now we did pretty well and at the end of the quarter with the strengthening dollar we continue to watch that because it certainly has an impact on [indiscernible].

Next question is from Stanley Elliot from Stifel. Please go ahead.

Quick question on, can you help us square up the momentum that you’re seeing on the G1 and then also I believe you talked about kind of slowdown in some of the helmets and some of the thermal imaging cameras. Is that more product specific or is there a reason the health of the municipal budgets out there are they are still little reluctant to spend, anything you could help with that?

I think the helmets that Stacy was referring to in her commentary primarily related to the North America segment where we just don’t see the replacement cycle that we have described on the past SCBA and we know that the number of fire fighters every year gets more and more challenged as to the actual number of fire fighters in the North American markets, so I think that’s where Stacy was referring to that helmet, those revenues declining. When we look at overall fire helmet sales though which include the European styled helmet, the F1XF helmet that Stacy mentioned. I mean we’re seeing some very, very nice growth in that product line on a global basis, so into the Asian market, into European markets and most recently into the Australia market. Nish, do you want to add something to that?

Yes, Stanley, you had mentioned municipal budgets and we’re finding the municipal budgets are quite healthy but dollars are there for SCBA purchases, they are coming up on the end of lifecycle on SCBA and the fire chiefs, the departments are certainly finding within the budgets to replace the SCBA. So we’re not seeing a lot of problem there. So the market is quite healthy from a funding standpoint.

Perfect. And then from the settlement that you all reach, what does that do the [indiscernible] loss that you guys had on your balance sheet, does that make a move to more like a 142 to a 210 type number and then I guess the other piece of that is does that make reaching a settlement with those insurance companies eventually much easier?

Well it certainly adds pressure to the insurance companies in settling with our legal challenges to them. You’re correct, your numbers are roughly correct in terms of what happens to their insurance receivable and you can see that reflected on the balance sheet in the asset section. We’re very pleased because we actually have a definitive more transparent way of looking at this for the next basically two full years, we actually are able to recognize some of that liability going forward and have a ceiling on it so we know that we have settled in a very favorable terms a host of losses that it's meaningful.

And what are the plans to the balance sheet and as far as kind of debt levels that you guys feel comfortable, ball parking kind of below one times on an EBITDA basis right now. Is that where you want to stay or just how you’re thinking about the capital structure right now?

I will Ken to make further comment, but we’re pretty comfortable at the 1 to 1.5 times EBITDA level on debt, we target you - be considered even though we’re not rated but be considered a very highly rated debt offering should we ever do that and that sort of the ratios that we compare against.

And we have a question from Richard Eastman from Robert W. Baird.

Just one bit of detail, Stacy or Ken, could you just provide for the full year either the percent or dollar amount of the revenue from the core product lines? Is that possible to quickly--

Yes I think Bill, had disclosed in his script that we have 74% of our business in the core product offering and so I think that - I think in his prepared comments we had disclosed that ratio. In the press release I think on the --

I understand that, but the specific product lines. In another words head protection was 15% was year-end sales, just kind of get a sense of how to [indiscernible] growth rates there?

Yes that’s a good point. So when we look at the business and actually in our 10-K which will be published later this month, we have actually included the breakdown of the core offering throughout our business. So I could probably give that to you. So when we look at the full year from a consolidated perspective Rick, and we think about the business, we did roughly $832 million in core for the full year of which 210 million is breeding apparatus. Roughly a 150 million is in head protection, roughly 160 million is in portable gas detection. Our fixed gas and flame detection was $260 million or so and then fall protection was just under 50 million and so that gives you a sense of sort of breakdown and like I say it's fully disclosed in our 10-K which we will be issuing later this month.

And Bill, just a quick question for you. I think in December if not November or December, one of your big competitors TECO in fact acquired this gas and flame detection business, industrial safety technologies, I'm sure you saw that. They now claim to be the biggest in the world which is amusing but I'm a little bit curious if that hit your radar screen may be if you’ve any opinion on that acquisition, if those obviously put TECO now in the game with Honeywell and yourselves. Was that something that you looked at or I'm just curious about your opinion on that acquisition?

We did take a look at that obviously and you know we felt that our shareholders will be better served by us continuing to develop the technologies that we have. We did not see them as being accretive to our growth potential and what we need to do for our business here. So, we looked at them and we didn’t take it any further.

I'm showing no question. I will turn it back over to Ken for closing remarks.

Thank you, John. And with that seeing that we have no more questions that concludes this morning's call. If you’ve missed the portion of the conference an audio replay will be available on our website for the next 90 days as well a as will a transcript of the call. On behalf of our entire team here, I want to thank you again for joining us. And we look forward to talking with you again soon. Have a great day. Goodbye.

Thank you, ladies and gentlemen. That concludes today's conference. Thank you for participating. You may now disconnect.