• 24 Dec, 2024

MSA Safety Announces Second Quarter 2024 Results

MSA Safety Announces Second Quarter 2024 Results

Strong execution drives healthy sales growth and margin improvement; Maintaining mid-single digit full-year sales growth outlook

PITTSBURGH, July 24, 2024 -- Global safety equipment and solutions provider MSA Safety Incorporated (NYSE: MSA) today reported financial results for the second quarter of 2024.

Quarterly Highlights

  • Achieved quarterly net sales of $462 million, a 3% reported and 4% organic constant currency increase year-over-year.
  • Generated GAAP operating income of $100 million, or 21.6% of sales, and adjusted operating income of $108 million, or 23.4% of sales.
  • Recorded GAAP net income of $72 million, or $1.83 per diluted share, and adjusted earnings of $80 million, or $2.01 per diluted share.
  • Invested $14 million for capital expenditures, repaid $8 million of debt, returned $20 million to shareholders through dividends, and repurchased $10 million of common stock.

"Our team executed very well in the second quarter, as evidenced by the continued solid  top-line growth and margin expansion, while our results continue to demonstrate the resiliency within our business," said Steve Blanco, MSA Safety President and Chief Executive Officer. "During the quarter, we held an investor day where we outlined our long-term strategy to drive profitable growth and create meaningful value for our stakeholders over the next five years. We provided an in-depth review of our innovative range of leading safety products and solutions, the diverse end markets we serve, the enterprise-wide adoption of the MSA Business System, and above all, the unwavering commitment of our associates to advance our mission."

Financial Highlights

Financial Highlights


Three Months Ended June 30,



($ millions, except per share data)


2024


2023


% Change(a)

Net Sales


$                 462


$                 447


3 %

Operating Income


100


95


5 %

Adjusted Operating Income


108


104


4 %

Net Income


72


67


8 %

Diluted EPS


1.83


1.70


7 %

Adjusted Earnings


80


72


10 %

Adjusted Diluted EPS


2.01


1.83


10 %

(a) Percentage change may not calculate exactly due to rounding.

Lee McChesney, MSA Safety Senior Vice President and Chief Financial Officer, commented, "Reflecting the disciplined execution of our team in the quarter, grounded in the MSA Business System, we delivered 4% organic constant currency sales growth with healthy margin expansion and double-digit adjusted EPS growth. Our balance sheet remains strong, with net leverage of 0.9 times. We returned cash to shareholders consistent with the disciplined and balanced capital allocation strategy we highlighted at our investor day. We remain encouraged by our results for the first half of the year. As we look forward, we are maintaining our mid-single-digit growth outlook for the year, while closely assessing global economic trends."

Conference Call

MSA Safety will host a conference call on Thursday, July 25, 2024, at 10:00 a.m. Eastern time to discuss its second quarter 2024 results and outlook. The call and an accompanying slide presentation will be webcast at http://investors.msasafety.com/ under the "News and Events" tab, subheading "Events & Presentations." Investors and interested parties can also dial into the call at 1-844-854-4415 (toll-free) or 1-412-902-6599 (international). When prompted, please instruct the operator to be joined into the MSA Safety Incorporated conference call. A replay of the conference call will be available at http://investors.msasafety.com/ shortly after the conclusion of the presentation and will be available for the next 90 days.

 

MSA Safety Incorporated

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share amounts)



Three Months Ended
June 30,


Six Months Ended
June 30,


2024


2023


2024


2023









Net sales

$    462,463


$    447,299


$    875,765


$    845,561

Cost of products sold

239,434


233,503


457,205


450,367

Gross profit

223,029


213,796


418,560


395,194









Selling, general and administrative

105,075


96,336


199,226


187,427

Research and development

17,070


15,992


32,988


31,224

Restructuring charges

1,543


3,350


4,560


5,097

Currency exchange (gains) losses, net

(603)


3,110


1,730


7,285

Loss on divestiture of MSA LLC




129,211

Product liability expense




3

Operating income

99,944


95,008


180,056


34,947









Interest expense

9,664


13,175


20,403


24,651

Other income, net

(4,148)


(5,650)


(10,382)


(9,450)

Total other expense, net

5,516


7,525


10,021


15,201









Income before income taxes

94,428


87,483


170,035


19,746

Provision for income taxes

22,194


20,393


39,662


102,829

Net income (loss)

$      72,234


$      67,090


$    130,373


$    (83,083)









Earnings (loss) per share attributable to common shareholders:








Basic

$          1.83


$          1.71


$          3.31


$        (2.12)

Diluted

$          1.83


$          1.70


$          3.30


$        (2.12)









Basic shares outstanding

39,389


39,274


39,375


39,249

Diluted shares outstanding

39,541


39,409


39,549


39,249

 

MSA Safety Incorporated

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)



June 30, 2024


December 31, 2023





Assets




Cash and cash equivalents

$                      146,830


$                          146,442

Trade receivables, net

299,053


294,678

Inventories

320,899


292,604

Other current assets

94,663


52,546

    Total current assets

861,445


786,270





Property, plant and equipment, net

213,159


211,877

Prepaid pension cost

180,182


172,161

Goodwill

624,637


627,534

Intangible assets, net

256,328


266,134

Other noncurrent assets

107,820


106,174

   Total assets

$                   2,243,571


$                       2,170,150





Liabilities and shareholders' equity




Notes payable and current portion of long-term debt, net

$                        26,472


$                            26,522

Accounts payable

131,774


111,872

Other current liabilities

193,505


194,424

   Total current liabilities

351,751


332,818





Long-term debt, net

561,771


575,170

Pensions and other employee benefits

141,262


143,967

Deferred tax liabilities

102,334


102,419

Other noncurrent liabilities

52,806


48,974

Total shareholders' equity

1,033,647


966,802

   Total liabilities and shareholders' equity

$                   2,243,571


$                       2,170,150

 

MSA Safety Incorporated

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)



Three Months Ended
June 30,


Six Months Ended

June 30,


2024


2023


2024


2023









Net income (loss)

$     72,234


$     67,090


$   130,373


$   (83,083)

Depreciation and amortization

16,047


14,889


31,605


29,461

Tax-effected loss on divestiture of MSA LLC




199,578

Contribution on divestiture of MSA LLC




(341,186)

Change in working capital and other operating

(34,979)


13,089


(57,790)


4,389

Cash flow from (used in) operating activities

53,302


95,068


104,188


(190,841)









Capital expenditures

(14,341)


(9,920)


(25,560)


(18,322)

Property disposals and other investing

74


2,639


74


2,674

Cash flow used in investing activities

(14,267)


(7,281)


(25,486)


(15,648)









Change in debt

(8,250)


(58,514)


(13,260)


236,898

Cash dividends paid

(20,099)


(18,469)


(38,589)


(36,514)

Company stock purchases under repurchase program

(10,000)



(10,000)


Other financing

(284)


801


(5,869)


(3,795)

Cash flow (used in) from financing activities

(38,633)


(76,182)


(67,718)


196,589









Effect of exchange rate changes on cash, cash

equivalents and restricted cash

(1,881)


(3,364)


(10,557)


(5,651)









(Decrease) increase in cash, cash equivalents and restricted cash

$     (1,479)


$       8,241


$          427


$   (15,551)

 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands, except percentages)



Americas


International


Corporate


Consolidated

Three Months Ended June 30, 2024








Net sales to external customers

$ 314,711


$ 147,752


$              —


$   462,463

Operating income







99,944

Operating margin %







21.6 %

Restructuring charges







1,543

Currency exchange gains, net







(603)

Net cost for product related legal matter







5,000

Amortization of acquisition-related intangible assets







2,306

Adjusted operating income (loss)

98,468


24,285


(14,563)


108,190

Adjusted operating margin %

31.3 %


16.4 %




23.4 %

Depreciation and amortization







13,741

Adjusted EBITDA

108,230


28,052


(14,351)


121,931

Adjusted EBITDA margin %

34.4 %


19.0 %




26.4 %









Three Months Ended June 30, 2023








Net sales to external customers

$ 308,378


$ 138,921


$              —


$   447,299

Operating income







95,008

Operating margin %







21.2 %

Restructuring charges







3,350

Currency exchange losses, net







3,110

Amortization of acquisition-related intangible assets







2,315

Adjusted operating income (loss)

94,816


21,743


(12,776)


103,783

Adjusted operating margin %

30.7 %


15.7 %




23.2 %

Depreciation and amortization







12,574

Adjusted EBITDA

103,977


24,949


(12,569)


116,357

Adjusted EBITDA margin %

33.7 %


18.0 %




26.0 %









 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands, except percentages)



Americas


International


Corporate


Consolidated

Six Months Ended June 30, 2024








Net sales to external customers

$ 610,249


$ 265,516


$              —


$   875,765

Operating income







180,056

Operating margin %







20.6 %

Restructuring charges







4,560

Currency exchange losses, net







1,730

Net cost for product related legal matter







5,000

Amortization of acquisition-related intangible assets







4,620

Transaction costs (a)







234

Adjusted operating income (loss)

184,688


37,770


(26,258)


196,200

Adjusted operating margin %

30.3 %


14.2 %




22.4 %

Depreciation and amortization







26,985

Adjusted EBITDA

203,923


45,097


(25,835)


223,185

Adjusted EBITDA margin %

33.4 %


17.0 %




25.5 %









Six Months Ended June 30, 2023








Net sales to external customers

$ 588,645


$ 256,916


$              —


$   845,561

Operating income







34,947

Operating margin %







4.1 %

Restructuring charges







5,097

Currency exchange losses, net







7,285

Loss on divestiture of MSA LLC







129,211

Product liability expense







3

Amortization of acquisition-related intangible assets







4,620

Adjusted operating income (loss)

166,510


37,522


(22,869)


181,163

Adjusted operating margin %

28.3 %


14.6 %




21.4 %

Depreciation and amortization







24,841

Adjusted EBITDA

184,471


44,007


(22,474)


206,004

Adjusted EBITDA margin %

31.3 %


17.1 %




24.4 %









(a) Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during acquisitions and divestitures. These costs are included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.

The Americas segment is comprised of our operations in Northern North American and Latin American geographies. The International segment is comprised of our operations in all geographies outside of the Americas. Certain global expenses are allocated to each segment in a manner consistent with where the benefits from the expenses are derived.

Adjusted operating income (loss), adjusted operating margin, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA margin are the measures used by the chief operating decision maker to evaluate segment performance and allocate resources. As such, management believes that adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin are useful metrics for investors. Adjusted operating income (loss) is defined as operating income excluding restructuring charges, currency exchange (gains) losses, loss on divestiture of MSA LLC, product liability expense, amortization of acquisition-related intangible assets, net cost for product related legal matter and transaction costs. Adjusted operating margin is defined as adjusted operating income (loss) divided by segment net sales to external customers. Adjusted EBITDA is defined as adjusted operating income (loss) plus depreciation and amortization, and adjusted EBITDA margin is defined as adjusted EBITDA divided by segment net sales to external customers. Adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin are not recognized terms under GAAP, and therefore do not purport to be alternatives to operating income or operating margin as a measure of operating performance. The company's definition of adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin may not be comparable to similarly titled measures of other companies. As such, management believes that it is appropriate to consider operating income determined on a GAAP basis in addition to these non-GAAP measures.

MSA Safety Incorporated

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

Organic constant currency revenue growth (Unaudited)



Consolidated




Three Months Ended June 30, 2024



Fire
Service(a)

Detection(b)

Industrial PPE
and Other(c)


Net Sales


GAAP reported sales change

3 %

8 %

(3) %


3 %


Plus: Currency translation effects

1 %

— %

1 %


1 %


Organic constant currency sales change

4 %

8 %

(2) %


4 %





Six Months Ended June 30, 2024



Fire
Service(a)

Detection(b)

Industrial PPE
and Other(c)


Net Sales

GAAP reported sales change

10 %

2 %

(2) %


4 %

Plus: Currency translation effects

— %

— %

— %


— %

Organic constant currency sales change

10 %

2 %

(2) %


4 %


 (a) Fire Service includes Breathing Apparatus and Firefighter Helmets and Protective Apparel.

 (b) Detection includes Fixed Gas and Flame Detection and Portable Gas Detection.

 (c) Industrial PPE and Other includes Industrial Head Protection, Fall Protection and Non-Core.

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

 

MSA Safety Incorporated

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

Organic constant currency revenue growth (Unaudited)


Americas Segment




Three Months Ended June 30, 2024



Fire
Service(a)

Detection(b)

Industrial PPE
and Other(c)


Net Sales


GAAP reported sales change

(2) %

7 %

2 %


2 %


Plus: Currency translation effects

— %

— %

2 %


— %


Organic constant currency sales change

(2) %

7 %

4 %


2 %





Six Months Ended June 30, 2024



Fire
Service(a)

Detection(b)

Industrial PPE
and Other(c)


Net Sales


GAAP reported sales change

8 %

2 %

— %


4 %


Plus: Currency translation effects

— %

— %

— %


— %


Organic constant currency sales change

8 %

2 %

— %


4 %



International Segment




Three Months Ended June 30, 2024



Fire
Service(a)

Detection(b)

Industrial PPE
and Other(c)


Net Sales


GAAP reported sales change

19 %

10 %

(13) %


6 %


Plus: Currency translation effects

1 %

1 %

1 %


1 %


Organic constant currency sales change

20 %

11 %

(12) %


7 %






Six Months Ended June 30, 2024



Fire
Service(a)

Detection(b)

Industrial PPE
and Other(c)


Net Sales


GAAP reported sales change

15 %

1 %

(7) %


3 %


Plus: Currency translation effects

— %

1 %

— %


— %


Organic constant currency sales change

15 %

2 %

(7) %


3 %


 (a) Fire Service includes Breathing Apparatus and Firefighter Helmets and Protective Apparel.

 (b) Detection includes Fixed Gas and Flame Detection and Portable Gas Detection.

 (c) Industrial PPE and Other includes Industrial Head Protection, Fall Protection and Non-Core.

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

MSA Safety Incorporated

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

Adjusted earnings (Unaudited)

Adjusted earnings per diluted share (Unaudited)

(In thousands, except per share amounts and percentages)



Three Months Ended
June 30,




Six Months Ended

June 30,




2024


2023


%

Change


2024


2023


%

Change













Net income (loss)

$     72,234


$     67,090


8 %


$   130,373


$   (83,083)


n/m*













Restructuring charges

1,543


3,350




4,560


5,097



Currency exchange (gains) losses, net

(603)


3,110




1,730


7,285



Net cost for product related legal matter

5,000





5,000




Amortization of acquisition-related intangible assets

2,306


2,315




4,620


4,620



Pension settlement

1,308





1,308




Asset related losses (gains)

701


(1,452)




752


(713)



Transaction costs (a)





234




Loss on divestiture of MSA LLC






129,211



Deferred tax asset write-off related to divestiture of MSA LLC






70,366



Product liability expense






3



Income tax expense on adjustments

(2,827)


(2,276)




(5,417)


(6,921)



Adjusted earnings

$     79,662


$     72,137


10 %


$   143,160


$   125,865


14 %













Adjusted earnings per diluted share

$         2.01


$         1.83


10 %


$         3.62


$         3.19


13 %













(a)Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during acquisitions and divestitures. These costs are included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Operations. 


* Not meaningful












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

MSA Safety Incorporated

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

Debt to adjusted EBITDA / Net debt to adjusted EBITDA (Unaudited)

(In thousands)




Twelve Months Ended
June 30, 2024

Operating income


$                         376,429

Depreciation and amortization


53,671

Restructuring charges


9,355

Currency exchange losses, net


11,524

Net cost for product related legal matter


5,000

Amortization of acquisition-related intangible assets


9,246

Transaction costs (a)


1,199

Adjusted EBITDA


$                         466,424




Total end-of-period debt


588,243




Debt to adjusted EBITDA


1.3




Total end-of-period debt


$                         588,243

Total end-of-period cash and cash equivalents


146,830

Net debt


$                         441,413




Net debt to adjusted EBITDA


0.9


(a) Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during acquisitions and divestitures. These costs are included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.

Management believes that Debt to adjusted EBITDA and Net debt to adjusted EBITDA are useful measures for investors, as management uses these measures to internally assess the company's liquidity and balance sheet strength. There can be no assurances that that MSA's definition of Debt to adjusted EBITDA and Net debt to adjusted EBITDA is consistent with that of other companies.

About MSA Safety:  

MSA Safety Incorporated (NYSE: MSA) is the global leader in advanced safety products, technologies and solutions. Driven by its singular mission of safety, the Company has been at the forefront of safety innovation since 1914, protecting workers and facility infrastructure around the world across a broad range of diverse end markets while creating sustainable value for shareholders. With 2023 revenues of $1.8 billion, MSA Safety is headquartered in Cranberry Township, Pennsylvania and employs a team of over 5,000 associates across its more than 40 international locations. For more information, please visit www.MSASafety.com.

Cautionary Statement Regarding Forward-Looking Statements:

Except for historical information, certain matters discussed in this press release may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance and involve various assumptions, known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or other comparable words. Actual results, performance or outcomes may differ materially from those expressed or implied by these forward-looking statements and may not align with historical performance and events due to a number of factors, including those discussed in the sections of our annual report on Form 10-K entitled "Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors," and those discussed in our Form 10-Q quarterly reports filed after such annual report. MSA's SEC filings are readily obtainable at no charge at www.sec.gov, as well as on its own investor relations website at http://investors.MSAsafety.com. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and caution should be exercised against placing undue reliance upon such statements, which are based only on information currently available to us and speak only as of the date hereof. We are under no duty to update publicly any of the forward-looking statements after the date of this earnings press release, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Financial Measures:
This press release includes certain non-GAAP financial measures. These financial measures include organic constant currency revenue growth, adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted earnings, adjusted earnings per diluted share, debt to adjusted EBITDA, and net debt to adjusted EBITDA. These metrics are consistent with how the Company's chief operating decision maker ("CODM") evaluates segment results and makes strategic decisions about the business.  Additionally, these non-GAAP financial measures provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management also uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use, and computational methods with respect thereto, may differ from the non-GAAP financial measures and key performance indicators, and computational methods, that our peers use to assess their performance and trends.

The presentation of these non-GAAP financial measures does not comply with U.S. GAAP. These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for, or superior to, our reported results prepared in accordance with GAAP. When non-GAAP financial measures are disclosed, the Securities and Exchange Commission's Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. The presentation of these financial measures does not comply with U.S. generally accepted accounting principles ("GAAP"). For an explanation of these measures, with a reconciliation to the most directly comparable GAAP financial measure, see the Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures in the financial tables section above.

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