Good day, ladies and gentlemen. And welcome to the MSA Fourth Quarter Earnings Conference Call. At this time, all phone lines have been placed in a listen-only mode and the floor will be open for questions following the presentation. It is now my pleasure to introduce your host, Mark Deasy. Please begin.

Thank you, Joe. And good morning everybody and I too would like to welcome you to our fourth quarter earnings conference call for 2015. I am the Director of Corporate Communications. Joining me on the call this morning are Bill Lambert, Chairman, President and Chief Executive Officer; Ken Krause, Vice President, Chief Financial Officer and Treasurer and Ron Herring, Senior Vice President and President, MSA International. Our fourth quarter press release was issued last night and it is available on our website at www.msasafety.com. Before we begin, I need to remind everybody 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 SEC 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. You find this information in our Quarterly Results section which is located under the Financial Information header. That concludes our forward-looking statements. So with that, let me introduce MSA’s Chairman, President and Chief Executive Officer, Bill Lambert. Bill?

Thank you, Mark, 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. I also want to thank the employees of MSA to continue to manage through challenging business conditions. I’m pleased to report that due to their efforts we had a strong finish to the year. Consolidated local currency sales increased 8% in the fourth quarter and increased 4% excluding Latchways, the UK-based fall protection company that we acquired October 21, of last year. This strong finish to the year helped us recognized 8% local currency growth for the full-year or 7% excluding Latchways. This 8% local currency growth was at the high-end of the mid single digit sales growth range that we’ve been discussing with you throughout the year. Much of this was due to great success in the fire service which I’ll detail in just a minute. Overall, I believe we execute well, despite the external headwinds that are impacting our business. Most notably, the strong U.S. dollar, the weak economic conditions in emerging markets like China and Brazil and of course depressed oil prices that continue to adversely impact employment levels and investment levels in the oil and gas industry which ultimately, adversely impacts demand for some of our core products like hardhats and portable gas detection instruments. While Ken is going to discuss our outlook on these areas during his commentary, I’d like to focus today on a few key themes of the quarter. First, I want to provide an update on our performance in the fire service. And in particular, the continued success we’re seeing with our new G1 Self-Contained Breathing Apparatus. Then I’d like to highlight progress made on key strategic initiatives in the fourth quarter. Programs…

Thanks, Bill and good morning everyone. Let me first start by saying that I’m honored to MSA’s executive leadership team as Chief Financial Officer. I look forward to working with the entire team at MSA to drive earnings and cash flow growth as we bring new and innovative products to the markets we serve around the world. Today I’d like to take some time to walk you through our fourth quarter financial results and to provide more insight into the drivers of performance. Additional information will be available when we file our Form 10-K with the Securities and Exchange Commission. We had a strong finish to a very challenging year. Despite some of the macro headwinds we faced throughout the year, we were able to generate strong topline local currency growth and took solid steps to position ourselves for long-term value creation. Let’s start today’s review by recapping a few of the highlights of our full-year 2015 performance. First, full-year revenue from the core area of our business increased to 11% in local currency or 10% excluding Latchways on strong performance in fire service markets. Our past R&D investments are yielding solid returns with sales from products developed and launched over the past five years comprising nearly 40% of our consolidated sales. We efficiently deployed capital to acquire Latchways, a strategic investment that immediately doubled our market share in fall protection while expanding our geographic footprint and broadening our end market coverage. We executed a cost reduction program in the second half of the year and maintained a close watch on discretionary spending driving 130 basis points of operating leverage on selling, general, and administrative expenses for the full-year excluding transaction costs related to the Latchways acquisition. I assure you, we will continue to keep a sharp focus on reducing…

Thank you Ken. As we close the book on 2015, I’m proud of how the MSA organization executed in this challenging environment. We achieved our mid single digit local currency sales growth goal, we took steps to invest in growth opportunities and deploy capital in a very strategic acquisition and we made restructuring investments to streamline our operations and reduce our operating expenses going forward. Moving into 2016, we continue to look at how we might further optimize our geographic footprint and our cost structure to drive a higher operating margins and what is shaping up to be a slower growth environment. Despite the headwinds that we face, we’re going to continue to use our strong capital structure to make focused investments that will drive progress against the pillars of our corporate strategy and position MSA strategically and financially for long term value creation. Thank you for your attention and your interest in MSA this morning. At this time, Ron Herring has joined Ken and me. And we will be happy to take any questions you may have. Please remember that MSA does not give 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.

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

Good morning, gentlemen.

Good morning, Ed.

So I wanted to ask a little bit about the guidance. And I just want to talk about the tax rate because I know there’s a lot of a movement there with the Swiss benefits probably kicking in 2016 and R&D tax credit and I’m assuming there is some changes in Latchways. So can you kind of give us an indication as to what you expect for the tax rate for 2016?

Yes, sure, Ed. When we look at the tax rate as you very well know our global footprint really has an impact on our tax rate really where we make money. And so when we look at, for example, 2015’s performance at 33% for a full-year excluding exit taxes, a big part of the profitability that we recognized in 2015 was driven by the strong North American and the U.S.-based results. So as we think about the next year and going forward, we certainly are planning for continued improvements in profitability in North America but also continued improvements in profitability across our European segment as well under our POC. However, when we think about our tax rate a lot of it’s going to be driven by the composition of those profits around the world. So I’m a little reluctant to give forward-looking guidance that shows that we would recognize a significant improvement year-over-year because there’s just so much uncertainty in our end markets that’s driving the profile profitability at this point.

Fair enough. When you look at kind of the fire services and I guess kind of I want to get your thoughts on the cycle because I guess when there’s a typical change at the NFPA standard, there’s a one year lag is kind of digested by you customer base. Then sales start to pick up. We’re seeing a little bit different cycle this time especially with the delays that you originally faced. I kind of want to get a sense as to what you think from the market how share gains are playing into it in this awkward ramp and more importantly how you think the ancillary add-ons that you’ve been working on like thermal imaging integration, how that plays into kind of the cycle as well?

Sure, Ed. I can take a stab at that. I think that you need to take a look back at that replacement cycle. And if we go back to 10 years to 15 years ago there was roughly three billion a firefighter grants that were pumped into the market from 2002 to 2006. And of that about 30% to 50% was used to purchase SCBA. And when you fast forward to the present day you know most of that, those units are reaching their end of useful life and are coming out of service. So I think it’s reasonable to assume, we take some of those big numbers, we take pricing impact and the changes of NFPA standards over the time period. And we make some certain assumptions on what the replacement cycle replacement rate might be. So if you factor that all down maybe it’s a $1.2 billion to $1.5 billion opportunity we think in purchases over past year, but really looking forward over this year and over the next two to three years perhaps. So $1.2 billion to $1.5 billion in total opportunity and so that’s why we think it’s so critical then to introduce these new technologies that are in the G1 SCBA and to advance those technologies even further into a system concept, as you indicate by integrating GIC, as we showed at last year’s FDIC show and will be further developing in 2016. And we think those are all great opportunities for us to take share, continue to take share this year and to excite the market with some of these new integrated technologies that that the G1 enables us to have.

I’m assuming your goal is a 100% share, I’m kidding. What is the goal for share gains and where do you think you sit right now after kind of one, almost one year of production?

Well I don’t think how [indiscernible] where our share gains are, but it’s certainly to improve our position and as I indicated in our comments, roughly, we’re seeing roughly 50% of all of our incoming orders for SCBA as competitive conversions. We’re really happy about that. And the data that is supplied by the ISCA shows that in fact we had in the fourth quarter over a 50% market share of units sold, as reported by ISCA. So we’re really happy with that, and let’s – we’re just trying to keep that going.

Could you remind me what your North American share was in 2014, for this product line?

I don’t have that, but. If I would to guess it would probably be just around 30%

30%

Yes the fairest.

Okay. Thanks guys appreciate it.

Okay. Thank you Ed

Thank you. Our next question comes from Rob Nason [ph].

Yes, good morning. Bill, you mentioned that your target is mid-single digit local currency growth this year. So Latchways obviously contributes maybe three and 3.5 points of that. so modest, very modestly positive expectations around organic growth. If you had to handicap how that waits out by geography, your three geographic buckets, how does that modest organic growth look between North America, Europe in the international piece? And I'm thinking does the G1 SCBA, I know we have still tough comps it we’ll be dealing with in the second half. But is that really what pushes – does North America lead here, compliments of the SCBA?

I think it does, Rob. The way we look at the market North America right now is our strongest market unquestionably. We are seeing nice growth in certain international markets like the Middle East, like Spanish-speaking Latin America. But those growth areas are being offset by areas like China and Brazil where the markets are much softer right now, Brazil actually in a very significant recession. So when you look at it in totality North America is really the area of business that has some growth opportunities right now certainly with G1 SCBA as we've talked about. But also as we expect and as my comments reflected we think that in the energy sector the turnaround activity will increase this year. It has been at historically low levels for the last couple of years. And we are getting indications that that should be an improvement. And that helps us in the hardhat area, in portable gas detection instruments area, those product lines that are related to employment levels

Okay. If you look at your fourth quarter North America product line growth, obviously SCBA did well but the other categories and degraded and no comparisons played into that. But did you sense that demand in some of these other maybe broader industrial categories eroded on you in fourth quarter? Or was this fourth quarter channel inventory adjustments and you haven't necessarily seen that carry into the first quarter but maybe just some more color on how the fourth quarter played out more broadly not to the extent, its oil and gas related. Sure, but broader industrial as well perspective.

Yes, I think that broadly industrials eroded a bit in the fourth quarter last year. I think there’s probably consensus on that among other industrial CEOs as well. But there are certain segments of the market that did improve or that did show some strength, aircraft, construction, those employment levels were improving in the fourth quarter and we saw some increased activity there, utilities seeing some increased activities there. But broadly, I would say and agree with you that the industrial segment decreased. The comps were a little bit tough so you have to kind of pull that away. North America had some very tough comps in fixed gas and flame detection orders and shipments in the fourth quarter of 2015 versus 2014. So pulling that aside, we saw it erode a little bit. I wouldn’t say that it eroded perhaps as dramatically as the as reported results might indicate because of the large order and large shipment effect.

Just to add on to that – just to add on to that Bill, I would agree, if we just starting the year and some of the order activity in some of our industrial base businesses is certainly challenging. But as I commented in my remarks Rob was the FGFD business continues to do quite well to start the year. So it’s really a mixed bag, so to speak we continue to see some challenges in the probable gas and the head protection side, FGFD is performing well though.

Okay. And Ken, just a clarification on the gross margin commentary. You mentioned gross margin without amortization, but just to be clear you did not pull amortization our in your adjusted EPS number, did you or is that excluded?

No, you right. No we did not, you’re exactly right. And so we kept the amortization in our adjusted number, but we put it out, just to show the impact on the gross profit figure I know, I think in your earlier report from this morning you had talked a bit about that. So we thought we would help the investment community with that.

Was there any inventory step up revaluation impact on the gross profit from Latchways?

Yes, that’s right. Yes Rob part of that 50 basis points or so is there is the step up in the inventory and the related amortization. It’s a small component of it, smaller component of it, but there is a piece of that.

And then the warranty impact, I’m sorry I just didn’t catch the number that you provided?

Yes our indirect, so in the quarter, I want to say we talked about 120 basis points of headwind from indirect charges, warranty, freight, those sort of things, just responding to the customers’ needs.

Would you consider those, one time items then, just unique to the fourth quarter is that something that carries forward to service those?

I don’t think that carries forward Rob. I think that there were some unique situations and I don't think it makes sense to parse it apart here on this call, but there are some unique situations I don't see that necessarily as it go forward to that rate. We are always striving to improve our quality to reduce our warranty costs and expenses. And we had some one-off costs there in the fourth quarter that I would not expect to see going forward.

Okay, very good. Thank you.

Thank you Rob.

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

Thank you, I've got a cold. Good morning. A couple of questions, one on Europe, I know, excuse me, you’re down to one warehouse but are there other things that are still being implemented in terms of the integration into the 2.0?

Well into 2.0 we have ongoing initiatives certainly, Rudy. But I would say that into the POC model, we have another affiliate that will come into the POC model in 2016. And we continue to realign our resources over there to fit under the POC model and to best serve that market – those markets.

Okay. If there anything that could delay adaption of the G1 in Europe in terms of any regulation or governmental issues as you had waiting for approval in the U.S. or could the G1 start telling just based on market demand in Europe?

Well a couple of thoughts on that. First, the G1 is approved for use and sale in Europe. So we’re very actively marketing that product to fire departments over there and showing them the advantages in the new technologies that we have been showing here to the North American market. But the big difference in Europe is you did not have after the 2001, 2002 time period you did not have in Europe this large influx of federal funding for replacement of SCBA or to outfit firefighters with new equipment. So there is no replacement cycle per se as there is here in North America. So what we’ve done is introduced the G1 SCBA with the European approvals necessary approvals we’ve put together configurations that we think serve that market exceptionally well and we’re going out there and trying to sell it against a leading competitor who also has a very – stronghold in Europe. So it’s a tougher battle, it doesn't have quite the same stimulus behind it from a replacement perspective that the North American market does, but it is getting some attention and we certainly hope to have success. Now having said all of that about Europe, we are seeing some opportunity and great success as I indicated in my comments for the G1, in the Middle East, in Australia and in Spanish – Spanish-speaking Latin America. And we have had success there with the G1 and we expect to continue have some good success.

Okay, thank you. And then on Latchways, you made the comment that the $10 million that you recognized in revenue after it was closed in October in the fourth quarter was up 10% year-over-year. Is there something happening on a macro basis? I mean you did mention that fall protection is probably the fastest growing market globally? Or is Latchways – does it have some new products, that you’re now getting the benefit from given the timing of your acquisition. Ken we look at 10% as perhaps a run rate for 2000, realizing you don’t give forecasts. But I mean if Latchways position could get that kind of growth in its first year with you?

Well as you said Rudy we don’t give guidance. I won’t comment on the question of whether or not we should expect to see 10% growth in 2016 from Latchways. Having said that, I will tell you that Latchways has a strong presence in the utilities market, in the wind energy market, in the aircraft – production, aircraft maintenance market segments. And those segments, is where Latchways showed some very strong growth in the two months that we owned them in 2015. We see some continued good strong opportunities, as we then layer in MSA’s distribution channels and channel partners. And additionally, Latchways does have a new product line that they have introduced and we would fully expect to see the benefit of that in 2016.

Okay, thank you. Those are my questions.

Okay Rudy.

Thank you. Our next question is from the Walt Liptak of Seaport Global.

Hi good morning Walt.

Hi thanks, good morning guys. I wanted to ask about the G1 SCBA and production levels, you didn’t make sure working down the backlog. You know is there a level that you’d like to get it to still? And was production in the fourth quarter higher than normal as you go through this catch up if we can just get some color on them? What do think the production levels will look like in 2016? And then I also want to ask about profitability, I think you said on other calls that the operating profits were lower for the SCBA, I wonder if you've got improvement programs to get those margins up and are you there yet in terms of where you want to see the margins?

Sure Walt, I think that as I indicated in my comments our backlog in SCBA is down to around $45 million which is not untypical for us in the SCBA product line. So we're down to about where we normally have a run rate, a backlog of orders on SCBA. The fourth quarter was strong for us. So that was an uncharacteristically strong fourth quarter performance for us. And I would expect to see, I mean, it all depends on incoming order rates and conversion successes in the market, but I would expect us to now be at kind of a stabilized rate in SCBA production going forward. And what was a part of your question?

Margin improvement [indiscernible] with SCBA.

Margin improvement [indiscernible] with SCBA…

Yes just on profitability margins.

Right, as we commented on earlier calls throughout the year we saw some increased expense as we brought the G1 up to speed ramped it up, we went to heroic efforts in some areas to work that backlog down and that caused us to have increased cost. In the fourth quarter, we started to see some benefit of getting to more normalized rates in production and we actually did see nice cost reduction programs have an impact in effect. And so I would expect to see those SCBA margins improving and getting closer to the overall corporate average for gross margins in 2016.

Okay. Thanks for that color. I want to ask too about working capital and you kind of called out the investment they had to make in 2015. What kind of cash inflow can you get from working capital accounts in 2016? Where would you like to see working capital as a percentage of net income or as a percentage of sales by the end of the year?

Yes, that’s a great question. When we look at working capital and we look at free cash flow, over the long-term we’ve been in that roughly 80% conversion. We’re not – I’d say we're not happy with that level of conversion. And what we're trying to target for is upwards of a 100% conversion. And so those are what we’re looking at, those are some of our targets and some of the goals that we’re executing towards as we enter 2016 and move forward.

Okay, great. And last one. On your oil and gas exposure, I’m hoping I can get a little more of a clear picture on how downstream turnarounds impact some of the personal protection devices, the helmets and the other personal devices. Do you need to see a pick up in turnarounds or is this a replacement cycle that’s the products are on?

Now Walt we really need to see a pickup in the turnaround activity, the number of planned and unplanned outages that take place in downstream energy markets. And how it impacts MSA's business is that it’s all related to employment levels. So as thousands of workers would descend upon a refinery, that’s more hardhats, that’s more portable instruments, that can utilize, that’s more fall protection, that will be utilized in that activity. And as I indicated in my comments earlier, 2015 we saw the lowest turnaround activity in at least the last eight or ten years. And we haven’t seen utilization rates within refineries at these levels in the past 30 years. So we expect that 2016 we’ll see increased turnaround activity and we’re watching that very, very closely.

Okay, and it sounds like your data points are pointing to perhaps a pickup in the spring, is that correct?

Well, I think that it’s not just our data but it’s some of the industry’s statistics that get reported would show that there would be an increase in spring and the fact that, you have to look at both planned outages and unplanned outages. And the unplanned outages are also at historically low levels. So you can – let’s presume that the unplanned outages stay about where they are, the planned outages are absolutely scheduled to be to be at higher levels this year than they were for last year or for 2014.

Okay, thank you.

Thank you, ladies and gentlemen, we have time for one more question. Our final question is from Brian Rafn of Morgan Dempsey.

Good morning, Bill.

Hi Good morning Brian.

Give me – it looks like you did a great job certainly with some your granular analysis on the G1 SCBA [ph]. Can you give a sense as to what kind of forward runway you have for that the new self-contained breathing FRS meaning, what is the next NFPA guidelines, is that about ten-year horizon or an eight-year horizon? How long will that product cycle go?

Well the NFPA performance standards for SCBA get revised every five years. And so the next revision, I think is set for 2018. So another couple of years before there’s another revision to the performance standards for SCBA. I don’t know, I’m not in the right position to say what kind of changes they’re looking at for the SCBA, but I can tell you, that we have certainly designed the G1 SCBA to be very flexible in what it can do and how it could be upgraded and how it could be integrated with other equipment like thermal imaging cameras, like radios and comp systems. And so I think the runway for the G1 is quite long. We see the G1 being around at least another 15 years, if not longer in the market in one shape or another.

Well, okay. Yes that’s good, and I appreciate the color there. Give me a sense of those add on thermal imaging, the radios in that, are those selective, those are mandatory, those are like modular that you add a part of [indiscernible] those or not given their cost constraints on budget?

That’s exactly right.

Okay, what relative – what are you seeing in adoption, you guys have had a fabulous certainly competitive conversion. May be between the urban larger budget departments versus some of the rural volunteer relative to these G1s?

We’ve always had a strong position in the rural volunteer fire departments, which far outnumber the number of firefighters that are paid firefighters. But what the G1 has enabled us to do is to really target municipal fire departments, paid fire departments where we have not had historically a stronghold. And so we’re going after both of them right now.

Okay. So you don’t see any sticker shock or whatever on a volunteer rural guys [indiscernible]?

I would say that, it’s our experience that the value created by the G1 is enabling lot of adoption by these municipal fire departments as well as the rural or volunteer fire departments. And I would also say that municipal budgets seem to be relatively healthy right now.

Okay, right. And then this has been fair towards job certainly on new introductions over the last three years to five years. When you look at areas of the business that are softer, certainly the oil and gas, the gas detectors, the flame detectors that kind of thing, how does that impact the new product launches in areas where you might get sales erosion, where you don’t have a lot of free flow being generated.

We try to look through the cycle Bryan and our decisions on new product developments are not really impacted by where we are in the business cycle or economic cycle right now. So we have a portfolio of NPD activity, that’s ongoing and you’ll continue MSA introducing new products. Even in some of those areas of the business that right now might be down on a comparative basis versus a year-ago. But you’ll continue to see us introducing new products that have an impact and in effect and look for when the cycle turns around.

Okay. And then finally on your Europe 2.0, how many total of build units, will inevitably be on any platform, I think you mentioned you had eight you are adding nine. How many total [indiscernible]?

Brian that’s a good question, I want to say close to 2014.

Okay, all right, all right. All right guys thanks so much, I appreciate it.

Thank you Brian

Thank you, Brian.

Thank you, ladies and gentlemen this concludes the question-and-answer session of today’s call. I’d like to turn it back to Mark Deasy for any closing or final remarks.

Well thank you Joe. I just would like to remind everybody that if you missed a portion of this morning’s conference an audio replay will be available on our website for the next 90 days as well the transcript of the call. So on behalf of our entire team here, I do want to thank everybody for joining us this morning and we look forward to talking with you again soon Have a great 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.