Good day and welcome to the MSA Third Quarter Earnings Conference Call. At this time, all lines have been placed in a listen-only mode and the floor will be open for questions following the presentation. [Operator Instructions] It is now my pleasure to introduce your host, Ken Krause, Vice President of Strategic Finance and Treasurer. Please go ahead.

Thank you, Joe. Good morning, everyone, and welcome to our third quarter earnings conference call for 2015. I am Ken Krause, Vice President of Strategic Finance and Treasurer for MSA. Joining me on the call this morning are Bill Lambert, Chairman, President and Chief Executive Officer; Kerry Bove, Senior Vice President, Chief Strategy Officer and Interim CFO; Nish Vartanian, Senior Vice President and President, MSA Americas; Ron Herring, Senior Vice President and President, MSA International. As you might have noticed, Kerry, Nish and Ron have new titles since the last time we spoke and Bill will provide more detail on those changes during his commentary. Our third quarter press release was issued last night and is available on our website at www.msasafety.com. Before I 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 25, 2015. 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 Results section, under the Financial Information header. And with that, let me introduce MSA’s Chairman, President and Chief Executive Officer, Bill Lambert.

Thank you, Ken, and good morning, everyone. As always, I want to begin by saying thank you for joining us this morning and for your continued interest in MSA. Overall when I look at our third quarter results, I see a few key themes emerging. First MSA like so many other global industrials is fighting the strong headwind produced by a strong U.S. dollar. Second the energy related markets continued to contract due to the low price of oil and employment levels in this space show deceleration year-over-year. And lastly, we continue to feel the effects of a persistent recession in Brazil and slowing growth in China. However, offsetting these headwinds, we saw the results of our past investments in R&D paying off and in executing our strategy of advancing the core of MSA. The innovative G1 SCBA is producing expectational results. Additionally, just yesterday we closed on the Latchways acquisition, which will double our fall protection sales. And we’ve made substantial progress on our Europe 2.0 initiative. To offset the economic challenges that I mentioned early on, we begun executing a restructuring plan aimed at reducing our cost structure by more than $10 million. Today, I’ll share more detail with you regarding each of these areas, highlighting the most strategic points of the quarter and then I’ll turn the call over to Kerry Bove and Ken Krause for a more detailed financial review. Clearly, a positive headline for us in the third quarter was continued strong performance for our new innovative SCBA platform to G1. Overall I’m pleased to report that our strategic and organic investments over the past five years in developing the G1 SCBA is yielding strong returns. For the quarter, our sales of breathing apparatus were up 83% in local currency terms, driven by an increase…

Thanks, Bill and good morning everyone. As you just heard, I’m currently transitioning into the newly created role of Chief Strategy Officer. And I’m looking forward to leading our team as we continue to execute around our strategic pillars and to drive value for our stakeholders. Given the Board of Directors are conducting a robust search for the next CFO of MSA. And during this transitional period, I’m serving as a Interim CFO. While I’ll oversee the finance organization and provide the necessary leadership for the team over the next several months, I’m relying on the experienced leaders that we already have in place throughout the finance group to continue guiding the financial health of the organization. And to ensure, we continue to provide fair and accurate financial reporting. In that spirit, I will look to Ken Krause whom you’re mostly likely familiar with to take you through the financial results, this morning. Ken?

Thanks, Kerry. As Kerry indicated, I would like to walk you through our third quarter financial results and to provide more insight into the drivers of the financial performance. Additional information will be available when we file our Form 10-Q, with the Securities and Exchange Commission, later today. Sales from continuing operations in the third quarter were $274 million down $1 million or 1% from the prior year on an as reported basis and up 8% on a local currency basis. The headwinds that we saw in the quarter related to weaker foreign currencies were 9% on revenue. Earlier this year, we indicated to you that FX headwind on revenue would be about 5% to 6% for the full year. Since that time we’ve seen significant weakening in many our key currencies including the Brazilian Real, Australian Dollar and Mexican Peso. Just in this past quarter, we saw the Real depreciate by 22% versus the dollar, the Australian dollar we can buy 9% and the Peso dropped 7%. We have estimate that the FX headwind on revenue for the full year will be closer to 7% to 8% on some of the more recent weakness, we are seeing in emerging markets. This recent weakness will present a challenge to our as reported results comparison in the fourth quarter. In the quarter, core product sales increased by 13% on a local currency basis. Results continue to be driven by strong sales into fire service markets. SCBA sales were up 83% and fire helmet sales were up 32%, growth driven by investments we have made and continue to make in R&D. These improvements were partially offset by portable gas detection down 13%, and industrial head protection down 8%. As lower employment levels in the energy market continue to impact demand for these…

Thank you, Ken. While the G1 backlog remains strong and I’m pleased with our exceptional performance in the fire service market. We are undoubtedly up against the slower growth environment that affects the significant portion of our portfolio. As we continue to plan for 2016 and face the headwinds including lower commodity prices, strong dollar and weak emerging markets in Brazil and China. We are taking the decisive action to structure our business and reduce our cost structure, while positioning MSA for profitable growth for the future, as we continue to make organic investments and new product development and use our strong capital structure for inorganic growth to execute on acquisitions like Latchways. Thank you, for your attention and interest in MSA this morning. At this time, Nish Vartanian and Ron Herring have joined us and will be happy to take any questions that you may have. Please remember that MSA does not give guidance and that precludes most discussions related to our expectations for future sales and earnings. Having said that, we will now open the call to your questions.

Thank you. The floor is now open for questions. [Operator Instructions] Our first question is coming from Edward Marshall of Sidoti & Company.

Hey, guys good morning.

Hi, good morning, Ed.

Good morning, Ed.

So, I just wanted to kind of talk about the costs – the cost take out the $4 million to $6 million, you mentioned headcount, you mentioned structural, how is – how of that is going to headcount, how much of that is going to structural. And I guess may be if you can put in the context of the $10 million you expect. This $10 million savings did you expect?

Ken, look to you maybe, you can provide some context around that, Ed maybe you can better to find structural, what do you mean by structural.

You’re taking out your closing facilities, closing warehouses, how I look at that number if you could – you could kind of break that down?

So you know Bill had spoke, go ahead. Ed I’m sorry.

No, it’s okay. Go ahead.

Yes, Bill had spoke about in his comments about the European program with closing warehouses and so forth, this additional restructuring program that we are talking about now within estimated cost savings of $10 million in 2016. It’s predominately related to optimizing our headcount we are also looking at our geographic footprint, but its significant part of the savings that we are targeting is headcount and discretionary spending levels.

Got it, okay, so pretty much over headcount then. And nothing in Europe I mean this is –this is emerging markets I mean I understand lot of the energy assets are in Europe. Are you putting them, cutting them I know it’s kind of hard to take cost out so.

Yes, the cost reduction programs that we talked about herein this call is globally across all entities within MSA. So not just in the Americas, but also in Europe and then in international emerging markets as well. So we are looking at all of those areas and removing the costs where we don’t see strengthening future here, but protecting those assets people on otherwise that are part our future and our strategic growth plan going forward. But it’s all areas that it’s not just one particular or two particular areas.

Okay. So if I look at the 9% headwind in currency and I know that’s the impact to sales. I’m wondering if you kind of help us quantify from – maybe in EPS or earnings perspective, what currency did to the model? And secondly, I’m wondering if you’re facing increased competition from the dollar or is this more of just the translation FX that’s going through the P&L?

Ken, I will let you answer that.

So the currency headwind is certainly presenting us challenges throughout our P&L. We do have – we do have natural hedges in place as we’ve talked about from time to time where we manufacture in Europe, and we manufacture in Brazil, we manufacture in many of these locations. But we certainly are seeing some cross currency exposure with some souring that we do across the footprint. So it’s hard to quickly identify the total amount of headwind that we are seeing, but we are certainly seeing, we’re seeing considerable headwind in the – on the FX line throughout the entire P&L, Ed.

Okay. Can you quantify in EPS or in earnings impact from…

I’d be reluctant at this point to quantify that, that earnings impact for you Ed, I can tell you, you know, like we’ve said a number of times, we do have, strategy in place, a manufacturing strategy that helps mitigate the exposure. But we also are realistic, and knowing that there is some cross currency exposure there and we do – we do see it from time to time.

Okay, and is the $0.05 to $0.10 on the GAAP basis, do you expect to see from Latchways, I’m curious, when you say GAAP; I’m assuming you are talking about the inventory write-offs and such?

Yes, that’s right, on a GAAP basis when we look at our – and include a lot of the things we have to do from an accounting perspective, that’s right.

Are there additional, due diligence expense or legal expenses with this acquisition or that half-hit during 3Q and maybe trickle in 4Q?

I think, what we said in my comments Ed was, that we expect something like $5 million to $6 million of acquisition related cost in the fourth quarter. And so we certainly did see some due diligence cost in the third quarter, and some legal related costs, but we still expect integration related and acquisition related cost of somewhere between $5 million and $6 million in the fourth quarter.

Did you breakout those due diligence expense; I don’t – in the reconciliation table?

Yes, in the adjusted earnings reconciliation we broke out what we incurred in the quarter, we did do that Ed.

Okay, and you’ll continue to see – and you’ll continue to do that on a go-forward basis, I assume?

Yes, that’s right, Ed. That’s our plan.

Perfect, thanks guys.

Thank you.

Thank you. Our next question is coming from Walter Liptak of Seaport Global.

Hi. Good morning.

Good morning, Walt.

So a nice quarter, I want to ask, first follow-on to the first question. Just in China and Brazil, I wonder if, especially in China, we’re hearing a lot of mixed things, mostly mixed negative. Where you saw sequentially, may be on a monthly basis from last quarter and I don’t typically think your products has been real capital goods oriented, that seems where mostly slowing in China, it’s happening, or if you can get some color there?

Sure. I mean I can provide some color if I understand your question appropriately well. You know year-to-date, local currency growth in China has been low single-digits, but during the third quarter I think as Ken mentioned our sales were off 7% I believe it was, is that right Ken?

Yes, that’s right.

And I think that, we and other industrials expect slower growth environment, the slower growth environment in China to persist into 2016, our incoming order pace has been a little bit choppy there. But I think that the published growth rates for China’s economy still exceeds that of most economies. But our outlook based on what we saw in the third quarter, based on what we’re seeing currently is little cautious for China. So we are very carefully monitoring the additional investments we’re making there, the discretionary spending and we have, part of our cost reduction and headcount reduction program is in China.

Okay, I understand. Thank you. So the question I have is on the run rate for SCBA. It sounds like you ramped it and it’s a nice production line that’s, hopefully getting more efficient. So I wonder if we can get a little bit more detail about the units per day that are getting produced now versus what they were maybe last quarter and/or maybe a metric like on the lead times, how long is it taking at this point from an order to a shipment and has that improved?

Well, I won’t give you the specifics on what our output is on a per daily basis Walt. But I will tell you that our order lead time has come down, has not extended out at all. And in fact orders placed today would be shipped likely by the end of the year. So we’re meaningfully cutting into that backlog, with the production rates that we have achieved and our incoming order pace is strong and I would expect that – we would expect that the G1 will for the coming quarters continue to be a source of strength for MSA.

Okay, how are you thinking about the profitability our U.S kind of corporate margins yet with the SCBA line in the G1 was there still cost take out but you have to do efficiencies to get on the line?

And I think, that as we’ve talked about on the past calls, the SCBA line out of our six core product areas the SCBA line is at the lower end of some of those gross margins that we look to. The G1 has had certain production efficiency issues as we have ramped up production. But we see ourselves working our way through that and we see the gross margins returning to that more normalized corporate average, and so I don’t have any great concern there, but year-to-date, certainly as we have ramped up, then we needed to add overtime and we’ve needed to take certain measures and steps to work down that backlog and meet demand. It’s a little bit on the low side of our gross margin profitability, but I have no concerns going forward.

Okay, all right, sounds good. And then switching to the Latchways acquisition, I wonder about the growth, you mentioned about the market was expected to grow, I wonder if we can get the data points and the last months and are you experiencing that high single-digit growth that you’re expecting the market to growth at?

We certainly are expecting that high single-digit growth at the market in fact we expect, bit more than that as we think there is opportunity for us to take share on a global basis. And as far as the details, of how they performed over the last six months, we just closed on the acquisition yesterday, so I think it’s a little bit early for us to be disclosing that. But overtime will certainly be releasing that information of how they performed, what we see happening from the Latchways acquisition and how we do for the full year this year.

Okay, okay. Again it’s a revenue number on Latchways and obviously those public documents out there. But you’re looking at the EBITDA are you expecting for 2016?

What kind of EBITDA, you’re referring to.

Yes, the question is, what EBITDA are you forecasting for Latchways over the next 12 months or in 2016?

Yes, Walt I appreciate your attempt here at guidance, but we are pretty good about not doing that, not providing that. Let me just say this to you. You’re right, the Latchways financial data is public information and you can track its performance over the past few years. The past couple of years have been a tough time for Latchways, we believe they’re in trough, we believe we fully understand why they entered to trough, and we also believe based on everything that we had seen through our due diligence that they’re coming out of that trough and that performance was going to be strong, stronger than it was last fiscal year. That’s all good, but during that trough their operating margins were running around 14% to 14.5%. So even with the headwinds that they experienced, and even with them being in a trough, their operating margins would have been accretive to MSA’s operating margins. If you look at where Latchways was going their peak, they had 24%, roughly operating margins. So it’s a highly profitable segment within fall protection. We’re excited to have it as part of our family and we think it will certainly be accretive to our margins going forward.

Okay, okay, it sounds good. Again, a few more questions regarding Latchways, we can take those offline, I guess the last question I’ve got is on the foreign currency gain was a little bit larger than we expected at the $4.3 million? And I wonder if there were something transactional, if there was a transactional event that occurred during the quarter and what we should expect from foreign currency, that line item in your income statement in the fourth quarter?

Yes, so Ed – I’m sorry, Walt, the FX loss you’re right, is about $4 million, there is a couple of components there that drove that, one was related to some – they’re all intercompany predominantly non-cash expenses first and foremost. Secondly, the non-cash expense that was driven in the quarter was related to intercompany activity in Brazil where the currency weakened still considerably – intercompany activity in emerging parts of Europe, and then also a little bit of exposure as we were managing and optimizing the capital structure for the Latchways acquisition. We would hope to obviously that would come down going into the future, we’ve done a pretty good job over the last one to two years at managing that down. It’s just in the quarter we had such a considerable weakening in certain geographies that drove that to a higher number.

Okay, okay. Thank you very much.

Thank you. Our next question is from Richard Eastman of Robert W. Baird. Please go ahead.

Yes, good morning, can you hear me?

Hi, good morning, Rick.

Good morning, Rick.

Yes, okay, I remind that, okay. Hey, just can I ask on the energy side of the business, Bill, you kind of gave some color there and expectations, but I’m curious the head protection and portable gas, in this quarter, head protection was down 8% and I will see in portable gas down 13%. But again the understanding there is that, only half of those businesses in terms of revenue is actually energy related. So I’m curious is, the order of magnitude here, two times what you’re reflecting in the energy side the other half of those two businesses, they goes to more general industrial, where they up in the quarter, or you seeing softness there as well?

Yes, I think…

Yes, I’m sorry….

Rick, I’m not sure I fully understood your question. But let me…

Yes.

Let me try to answer it the way I heard it. In the energy sector, the turnaround activity and plans in the Gulf Coast region and the rig count here in North America, we understand and can clearly see how employment levels have dropped quite considerably there. And that effects those turnarounds, the fact that there aren’t the turnarounds happening, with refineries having low feedstock, they are running their refineries all out, probably the lowest number of turnarounds in the last seven to eight years, this fall which is dramatic, which has been dramatic. And so with those employment levels off we see that directly impacting, then how many hard hats we sell, and how portable instruments we sell into that market segment. Quite honestly the employment levels have gone down there much further, than what our sales have decreased. And where have we made up in sales is in other industries, like utilities that and commercial construction that have offset some of that steep, steep decline in the energy sector. So we’re seeing some benefits in some areas. But to say as general industry, really picked up or been strong, our general partners that relying on general industry would say no it hasn’t, that it still a pretty tough environment out there, from an employment perspective in general industry, every sector being hurt the most.

We tend to – we tend to look at the Graingers, MSC industrial to a lesser extent Fastenal kind of those short-term distributors and they have obviously seen their growth rates slow. So I would presume that the other half of head protection and the portable gas protection business is the industrial side of that is up, but again maybe slowing as well. Is that a fair representation maybe?

Well, I think it’s a fair representation I mean we’re obviously very close to those distributors and general partners that you mentioned and they react very, very quickly on items like hard hats and portable instruments to pull back their inventories and to slow down their orders as they keep pace with what they see happening to end markets.

I see, okay. All right, that’s good color. And then the fixed gas and flame piece of energy. I understand the tough comp here in the third quarter, you have an equally tough comp in the fourth quarter. But it sounds like the backlog is flattening out or maybe the revenue line is flattening out. But how do you perceive that business, trending towards the end of the year and into 2016. Because obviously we’ll have tough comps in the first half of 2016 and but is – your general sense to that fixed gas and flame business, as it’s more midstream and downstream is more flattening out or is there some downside in the revenue contribution from that business as we go forward over the next four quarters?

Well, I certainly think there is some risk there that needs to be considered. But just as we characterized it, we’ve been surprised to a certain extent on the strength in FGFD, especially in the international markets. The FGFD business internationally, not looking at in North America, but rather looking at in outside of North America, has actually been a bit stronger this year than what we had expected it to be. So we’re running just about where we were last year. What we have seen which gives us little bit of caution, is some of those orders that are in the pipeline, some of that backlog that Ken referred to in his comments. The shipment of the backlog is being pushed out into 2016, projects are slowing down a bit and so the release of the FGFD instruments that we have are getting pushed out into 2016. The comp in Q3 was difficult and the comp in Q4 will be difficult as well. Last year fourth quarter, as you know it was a record quarter for MSA and we had very, very strong sales in the fourth quarter last year and a lot of that was driven by FGFD shipments. We’re not seeing that same ability in this fourth quarter for this year.

Okay. All right, and then I want to just switch over to the G1 here in the SCBA business. Again nice order quarter, it sounds like sequentially. So that’s being maintained, there is two – may be two dynamics I just want to explore for a second. First of all when we see the growth rates here and we see the success we’ve had to-date with the G1 in North America, is it your sense and can you tightly or closely track how much of share gain versus kind of replacing your own installed base there? Do you have some color on that?

We do Rick. Now that color is a little bit lagged in the sense of the official statistics because the International Safety Equipment Association of which, we are a member and our competitors were members of, they report what their sales are, now we’ll see that a quarter after, a quarter closes, but we could clearly see that we had gained share in the second quarter with SCBA. And then we have our own statistics that we track competitive conversions internally and we believe that in fact we are converting and gaining market share with the G1. So we feel pretty confident about that, the statistics that we would decide to quote are going to be lagged somewhat because of we rely on the ISCA data. But there is every indication that we’ve got a good handle on what we are getting and how we are converting and what our conversion rates are.

Would you expect as we push into the late fourth quarter and into the first quarter, I think back to, when we got EU approval for the G1? And I know, there is a different situation there, there is no replacement cycle going on, but would you expect to see a bump in the business, a noticeable bump in the business and are you taking any orders now for the EU?

.:

Sure, the price points in the EU tend to be a little bit difference in the U.S. but there surely is a higher end opportunity here with the G1 and that’s where we are targeting at. So, we will see it gives us another line in the product here for G1 or for our supplied air respirators into fire service. We’ve had some success in the Middle East, with some large conversions there. And there are other areas that respect an NFPA compliant device that we can actually sell this product to in other areas of the international organization, and so through the manufacturing that we have in Europe.

So, it’s still little bit early in Europe and international markets primarily the G1 activity that we’re seeing is really being driven by the U.S. market, North American market, but we have had success in Chile and selling the unit now done and winning accounts done in Chile.

Okay, all right. And then just two quick questions, sorry. First, so I guess from Ken’s comments, we’ve got a fourth quarter charge in the $4 million to $6 million range for the restructuring, we got another $5 million to $6 million from Latchways and cost associated with that, and I presume that’s like purchase accounting cost? But all of that will basically be adjusted out in the EPS number, correct? Or at least be shown?

Yes, that’s right Rick. We’ll certainly put that into our reconciliation of earnings.

Yes. And then just a final question here. When I look at this legal settlement and I know we agree to all that, back at the end of December of last year. But I just have a question around the strategy there, I mean we know that’s – or we’ve been assured I guess that’s covered by insurance. But in the insurance receivable I think is at the end of the second quarter was up to about $220 million. And I’m curious, what conversations, did you have in the insurance companies that we can start to see some reimbursement at a better rate and is one thing to settle them, and I understand why. But is it or anything we can do here to accelerate the cash flow on the insurance receivable, if everybody is in agreement here that we should be selling this?

Well, I think you just said the magic words, not everybody is in agreement. So it’s a pretty complex matter, but fully disclosed in our K and our Q, as we discussed the litigation, the ongoing litigation activities between our insurance carriers and MSA. We feel…

Yes.

And our auditors agree with us that receivable is fully collectible and but the insurance companies are being quite resistant and paying that. And we are – we continue to litigate with them, we’ve got a trial date set for early next year. But it’s a fight, so Rick as nothing I would like more than to see some of that $220 million being recovered and flowing back into MSA. But…

No, I understand. I just thought it’s a little bit curious in terms of the strategy that there is – obviously it’s perceived internally at MSA that settling these and accelerating the settlements and reducing the number of claims is preferred over the insurance company managing the cash flow and settling them themselves. But I guess – I guess this more of your point.

Okay, thank you. And congrats to Kerry, Nish and to Ron.

Thanks, Rick.

Thank you.

Thank you. Our next question is coming from Rudy Hokanson of Barrington Research.

Thank you. A couple of questions, one could you give a little more color on what you’re seeing in terms of your paying activity. I know that you’re getting pretty clear outline of what’s happening with Europe 2.0 in terms of the warehouses et cetera. But what about the actual sales or demand on products right now that you’re seeing?

Yes, let me provide some color there and then I’ll turn it over to Ron to add anything to that. During the quarter, we saw sales volumes decline and that was primarily related to lower shipments of ballistic helmets against that contract that we have for the French military, we have talked about that before and as that contract begins to wind down or seeing less shipments of ballistic helmets, which as you know is a non-core product line for us. Secondly, the strong dollar created unfavorable variances on the products that Europe imports from the U.S. So we saw that in the gross profit line, causing a significant swing in margins from a year ago for Europe. And lastly, we also saw some higher levels of SG&A related to pension expense on the German plan, can talk about that in his call and his comments. But we saw some increased payroll cost compared to a year ago related to the Swiss operating model and increased projects spending as we ready for the October SAP implementations under Europe 2.0. So all told a number of factors tended to collide to cause that net loss in the quarter, but our sales in Europe remain healthy and had expectations and I don’t see a great concern developing in Western Europe for us especially in our core areas of the business.

Yes, the only thing I’d add there to Bill is on, if you look at the nine months period, Rudy our core business excluding some of the non-core ballistic helmet business, is in that low single-digit 3% local currency growth. So that’s about what we’ve talked about in the past and as we all know Europe’s economies are just not growing as fast as would like. And so low single-digit growth is pretty good growth for us coming out of Europe.

Okay, thank you. And again under Europe what regions are included in that?

Under Europe, you mean the asset for the earnings…

Yes, geographically when you look at Europe, outside of Western Europe, Eastern Europe, I was trying to remember a fair any parts as the Middle East are not under there?

There is, we do include the Middle East, Middle East in India into and Russia in our definition as reported earnings for Europe.

Okay, thank you. And then the other question going back to the energy side and then realizing, what you’re saying or recognizing what you are saying earlier Bill about, refining turnarounds and while they are not dependent upon, drilling activity, layoffs have been soft, in terms of the employment numbers et cetera. But as you look at energy as a whole, historically are there any thoughts as to the strategic, your placement of those products or what to consider in terms of the future growth of what has been called energy, I mean, I’m being rather general here, but I’m thinking you’ve got a lot invested in the energy sector and depending on your outlook for that sector, even in third short-term, the question is how do you position that. I mean, how do you look at that going forward? Could you maybe talk a little bit more about that, right now?

Sure, well I think that we take a long view in the energy sector and the energy market and so we’ve positioned ourselves for that longer view. Certainly the energy sector and certainly the oil and gas market has gone through cycles in the past where there are peaks in their valleys. Employment rises rapidly, and employment decreases rapidly based on the price of oil. But over time, consumption of oil continues to go up on a global basis which means production of oil needs to go up. And we believe in that, and while this is a short-term and short maybe one to two years, but it’s a short-term, downturn, we believe longer term in the energy sector and we believe that safety awareness and improved safety on those offshore rigs, or on those onshore rigs and within the refining downstream activities. That safety awareness and concern will only increase and we are positioning ourselves for that future growth.

Is there anything you would be doing geographically right now, given what’s been happening in North America and what is currently is being planned in the Middle East, in terms of growth?

What we are investing in the Middle East, the Middle East does not have the same outlook currently that the U.S. does; the North America does, as far as activity in employment levels go. And so, we are investing in our sales and marketing resources within the Middle East to strengthen our position further in oil and gas there. But in other markets of the world, Brazil for instance, with all that we’ve read about regarding Petrobras and some of the concerns that have been aired there this year, we’re slowing down our investment, or we’re actually pulling back a little bit there because that seems like it’s going to be on a longer, a longer trajectory before it really gets to where it needs to get to. So it’s very dependent, our investments and our restructuring activities are very dependent on what we are seeing, happening in those particular markets.

Okay. Those are my questions for now. Thank you.

Thanks, Rudy.

Thank you. Our last question is coming from Stanley Elliot of Stifel.

Hi, guys, good morning. Thank you for fit me in. Quick question on Europe, business in the margins you talked about kind of the onetime sort of items or issues in the quarter. Is it still realistic to think of that business can hit a double-digit EBIT, sometime into next year given kind of the exposure to the Middle East and things of that nature?

Yes. I think that certainly is a little bit more challenging, I’m not sure of what we have said in the past in that regard on what our targets are for Europe in particular. The Middle East is not really the issue, Stanley it’s really the other parts, the slower growth elements of Europe that would probably might cause us to pause for thought and as the rest of the world slows down, as China slows down and how that impacts those exporting countries within the European market. It’s not really the Middle East, the Middle East we continue to have a very favorable outlook for and see great growth potential.

Let me think about kind of moving to the single warehouse. Could you help us what that does from an inventory level, cash flows, days inventory, how do you guys want to think about it as we are trying to model out for next year?

Well, it’s certainly improves and each of those areas cannot look for you, for any specifics may be able to provide.

Yes. I don’t know that we’re going to provide specifics on the European segment necessarily and their improvement in terms of working capital. What I would like to do is maybe step back and look at MSA overall. If you look at MSA in the quarter and for the first nine months we certainly have kind of challenging environment as we’ve seen a significant part of our business grow at a very rapid pace. But as we think about the next two, three, four quarters we certainly think that we will continue to see improvements in cash flow, just as we have over the long-term. Over the long-term with our free cash flow conversion being well over 70%, 80% we certainly expect to continue to cash flow and continue to drive improvements in cash flow, helping us maintain this very balanced approach to capital allocation.

That was my point, my expectations would be the cash flow would actually accelerate for your guys. Given the behind the scene changes that you’re making. So that’s all I had. So thank you very much.

Thank you, Stanley.

Thanks guys.

There are no further questions in the queue at this time.

Seeing that we have no more questions that concludes this mornings’ call. If you missed the portion of the conference, an audio replay will be available in our website for the next 90 days as well the 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 good day. Good bye.

Ladies and gentlemen, on behalf of MSA, we’d like to thank you for your participation. You may now disconnect. And have a wonderful day.