Company Announcements

MSA Safety Announces Second Quarter Results

PITTSBURGH, July 28, 2021 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported results for the second quarter of 2021.

Quarterly Highlights

  • Revenue was $341 million, increasing 9 percent from a year ago on a reported basis and 5 percent on a constant currency basis.
  • GAAP operating income was $35 million or 10.3 percent of sales, compared to $48 million or 15.4 percent of sales in the same period a year ago. Adjusted operating income was $59 million or 17.2 percent of sales, compared to $59 million or 18.7 percent of sales in the same period a year ago.
  • GAAP earnings were $25 million or $0.64 per diluted share, compared to $36 million or $0.92 per diluted share in the same period a year ago. Adjusted earnings were $42 million or $1.06 per diluted share, compared to $44 million or $1.11 per diluted share in the same period a year ago. GAAP and adjusted operating income and earnings reflect $4 million of incremental stock compensation expense driven by the acquisition of Bacharach, Inc. and its expected revenue and profitability contributions in the coming years.
  • On July 1, 2021, MSA completed the acquisition of Bacharach, Inc. in a transaction valued at $337 million. Based in New Kensington, Pa., Bacharach is a leader in gas detection technologies used in the heating, ventilation, air conditioning and refrigeration (HVAC-R) markets, with annual revenue of approximately $70 million. The transaction was financed through a combination of fixed and variable incremental borrowings with an after-tax cost of less than 2 percent.

Comments from Management

"MSA delivered strong quarterly revenue growth and reached exciting milestones on key strategic programs, including completing the acquisition of Bacharach," said Nish Vartanian, MSA Chairman, President and CEO. Mr. Vartanian added that MSA's second quarter incoming order activity exceeded both 2020 and 2019 comparable periods. "The uptick in incoming orders against the backdrop of ongoing supply chain constraints drove a significant increase in backlog."

MSA completed the acquisition of Bacharach on July 1, 2021.  "Many industries today are placing significant focus on monitoring and managing the usage of refrigerants for safety, environmental and efficiency purposes. That's one of many reasons we're thrilled to have Bacharach under the MSA umbrella," Mr. Vartanian said. "The acquisition also provides us with access to attractive end markets, and it's a natural fit with our product and manufacturing expertise."

"Throughout the pandemic and recession, we've been laser focused on improving our business model, building further resilience in our portfolio, and investing in new product development to fuel our growth engine for years to come," Mr. Vartanian commented. MSA has deployed approximately $400 million of capital in 2021 for the acquisitions of Bacharach and U.K. firefighter turnout gear manufacturer Bristol Uniforms. "We've added more elements of defensiveness to the portfolio through these acquisitions in strategic end markets. At the same time, we continue to invest heavily in our R&D programs to bring the most advanced safety technologies to our customers."

"The recent acquisitions, ongoing new product development investments, and the uptick in our order book position us well for the second half of 2021. I remain very confident in our ability to strengthen our market positions as business conditions continue to improve," Mr. Vartanian concluded.

MSA Safety Incorporated

Condensed Consolidated Statement of Income (Unaudited)

(In thousands, except per share amounts)



Three Months Ended June 30,


Six Months Ended June 30,


2021


2020


2021


2020









Net sales

$

341,289



$

314,438



$

649,717



$

655,583


Cost of products sold

188,374



172,841



362,063



356,627


Gross profit

152,915



141,597



287,654



298,956










Selling, general and administrative

83,426



69,034



158,889



149,271


Research and development

13,970



13,760



27,204



27,872


Restructuring charges

7,078



8,865



8,385



10,872


Currency exchange losses (gains), net

1,640



793



(459)



1,063


Product liability expense

11,751



851



14,547



2,802


Operating income

35,050



48,294



79,088



107,076










Interest expense

2,172



2,459



4,082



5,602


Other income, net

(2,293)



(2,000)



(6,506)



(3,258)


Total other (income) expense, net

(121)



459



(2,424)



2,344










Income before income taxes

35,171



47,835



81,512



104,732


Provision for income taxes

9,784



11,429



19,525



24,523


Net income

25,387



36,406



61,987



80,209


Net income attributable to noncontrolling interests

(262)



(340)



(448)



(468)


Net income attributable to MSA Safety Incorporated

$

25,125



$

36,066



$

61,539



$

79,741










Earnings per share attributable to MSA Safety

Incorporated common shareholders:








Basic

$

0.64



$

0.93



$

1.57



$

2.05


Diluted

$

0.64



$

0.92



$

1.56



$

2.03










Basic shares outstanding

39,167



38,830



39,131



38,826


Diluted shares outstanding

39,420



39,195



39,421



39,273


 

MSA Safety Incorporated

Condensed Consolidated Balance Sheet (Unaudited)

(In thousands)



June 30, 2021


December 31, 2020

Assets




Cash and cash equivalents

$

174,078



$

160,672


Trade receivables, net

226,575



252,283


Inventories

232,658



197,819


Notes receivable, insurance companies

3,855



3,796


Other current assets

132,816



139,708


    Total current assets

769,982



754,278






Property, net

201,163



189,620


Prepaid pension cost

105,078



97,545


Operating lease assets, net

67,383



53,451


Goodwill

447,267



443,272


Notes receivable, insurance companies, noncurrent

49,133



48,540


Insurance receivable, noncurrent

91,185



85,077


Other noncurrent assets

232,042



200,701


   Total assets

$

1,963,233



$

1,872,484






Liabilities and shareholders' equity




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

$

20,000



$

20,000


Accounts payable

89,086



86,854


Other current liabilities

208,755



203,691


   Total current liabilities

317,841



310,545






Long-term debt, net

314,587



287,157


Pensions and other employee benefits

201,311



208,068


Noncurrent operating lease liabilities

58,877



44,639


Deferred tax liabilities

13,017



10,916


Product liability and other noncurrent liabilities

208,832



201,268


Total shareholders' equity

848,768



809,891


   Total liabilities and shareholders' equity

$

1,963,233



$

1,872,484


 

MSA Safety Incorporated

Condensed Consolidated Statement of Cash Flows (Unaudited)

(In thousands)



Three Months Ended June 30,


Six Months Ended June 30,


2021


2020


2021


2020









Net income

$

25,387



$

36,406



$

61,987



$

80,209


Depreciation and amortization

11,584



9,786



22,088



19,428


Change in working capital and other operating

1,327



23,232



(161)



(16,606)


  Cash flow from operating activities

38,298



69,424



83,914



83,031










Capital expenditures

(10,706)



(13,272)



(20,288)



(19,834)


Acquisition, net of cash acquired





(62,992)




Change in short-term investments

5,015



10,210



25,045



(9,402)


Property disposals

25



(9)



60



83


  Cash flow used in investing activities

(5,666)



(3,071)



(58,175)



(29,153)










Change in debt

(25,013)



(37,000)



27,004



(9,000)


Cash dividends paid

(17,247)



(16,721)



(34,067)



(33,052)


Other financing

(834)



873



(4,392)



(24,124)


  Cash flow used in financing activities

(43,094)



(52,848)



(11,455)



(66,176)










Effect of exchange rate changes on cash,

cash equivalents and restricted cash

(187)



102



(907)



(3,654)










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

$

(10,649)



$

13,607



$

13,377



$

(15,952)


 

MSA Safety Incorporated

Segment Information (Unaudited)

(In thousands, except percentage amounts)



Americas


International


Corporate


Consolidated

Three Months Ended June 30, 2021








Sales to external customers

$

217,707



$

123,582



$



$

341,289


Operating income







35,050


Operating margin %







10.3

%

Restructuring charges







7,078


Currency exchange losses, net







1,640


Product liability expense







11,751


Acquisition related costs







3,168


Adjusted operating income (loss)

49,238



20,440



(10,991)



58,687


Adjusted operating margin %

22.6

%


16.5

%




17.2

%

Depreciation and amortization







11,584


Adjusted EBITDA

57,137



24,020



(10,886)



70,271


Adjusted EBITDA %

26.2

%


19.4

%




20.6

%









Three Months Ended June 30, 2020








Sales to external customers

$

204,231



$

110,207



$



$

314,438


Operating income







48,294


Operating margin %







15.4

%

Restructuring charges







8,865


Currency exchange losses, net







793


Product liability expense







851


Acquisition related costs







64


Adjusted operating income (loss)

49,003



17,402



(7,538)



58,867


Adjusted operating margin %

24.0

%


15.8

%




18.7

%

Depreciation and amortization







9,786


Adjusted EBITDA

55,620



20,474



(7,441)



68,653


Adjusted EBITDA %

27.2

%


18.6

%




21.8

%

The Americas segment is comprised of our operations in North America and Latin America 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, product liability expense, acquisition related costs, including acquisition related amortization, and COVID-19 related costs. Adjusted operating margin is defined as adjusted operating income (loss) divided by segment 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 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.


Americas


International


Corporate


Consolidated

Six Months Ended June 30, 2021








Sales to external customers

$

426,046



$

223,671



$



$

649,717


Operating income







79,088


Operating margin %







12.2

%

Restructuring charges







8,385


Currency exchange gains, net







(459)


Product liability expense







14,547


Acquisition related costs







4,541


Adjusted operating income (loss)

94,390



29,194



(17,482)



106,102


Adjusted operating margin %

22.2

%


13.1

%




16.3

%

Depreciation and amortization







22,088


Adjusted EBITDA

109,322



36,147



(17,279)



128,190


Adjusted EBITDA %

25.7

%


16.2

%




19.7

%









Six Months Ended June 30, 2020








Sales to external customers

$

435,484



$

220,099



$



$

655,583


Operating income







107,076


Operating margin %







16.3

%

Restructuring charges







10,872


Currency exchange losses, net







1,063


Product liability expense







2,802


Acquisition related costs







161


COVID-19 related costs







757


Adjusted operating income (loss)

108,811



30,073



(16,153)



122,731


Adjusted operating margin %

25.0

%


13.7

%




18.7

%

Depreciation and amortization







19,428


Adjusted EBITDA

121,878



36,239



(15,958)



142,159


Adjusted EBITDA %

28.0

%


16.5

%




21.7

%

The Americas segment is comprised of our operations in North America and Latin America 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, product liability expense, acquisition related costs, including acquisition related amortization, and COVID-19 related costs. Adjusted operating margin is defined as adjusted operating income (loss) divided by segment 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 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

Constant currency revenue growth (Unaudited)


Consolidated



Three Months Ended June 30, 2021


Breathing Apparatus

Firefighter Helmets and Protective Apparel

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

1

%

32

%

25

%

37

%

(1)

%

42

%

15

%


(26)

%


9

%

Plus: Currency translation effects

(3)

%

(4)

%

(5)

%

(5)

%

(3)

%

(8)

%

(3)

%


(4)

%


(4)

%

Constant currency sales change

(2)

%

28

%

20

%

32

%

(4)

%

34

%

12

%


(30)

%


5

%

 


Six Months Ended June 30, 2021


Breathing Apparatus

Firefighter Helmets and Protective Apparel

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

(4)

%

20

%

7

%

10

%

(8)

%

16

%

4

%


(26)

%


(1)

%

Plus: Currency translation effects

(2)

%

(3)

%

(1)

%

(3)

%

(2)

%

(5)

%

(3)

%


(3)

%


(3)

%

Constant currency sales change

(6)

%

17

%

6

%

7

%

(10)

%

11

%

1

%


(29)

%


(4)

%

 

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. There can be no assurances that MSA's definition of 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

Constant currency revenue growth (Unaudited)


Americas Segment



Three Months Ended June 30, 2021


Breathing Apparatus

Firefighter Helmets and Protective Apparel

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

2

%

8

%

41

%

48

%

1

%

55

%

16

%


(39)

%


7

%

Plus: Currency translation effects

%

%

(3)

%

(2)

%

(1)

%

(3)

%

(1)

%


(1)

%


(1)

%

Constant currency sales change

2

%

8

%

38

%

46

%

%

52

%

15

%


(40)

%


6

%

 


Six Months Ended June 30, 2021


Breathing Apparatus

Firefighter Helmets and Protective Apparel

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

(3)

%

4

%

12

%

14

%

(6)

%

15

%

3

%


(33)

%


(2)

%

Plus: Currency translation effects

%

%

1

%

%

%

(1)

%

%


%


%

Constant currency sales change

(3)

%

4

%

13

%

14

%

(6)

%

14

%

3

%


(33)

%


(2)

%

 

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. There can be no assurances that MSA's definition of 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

Constant currency revenue growth (Unaudited)


International Segment



Three Months Ended June 30, 2021


Breathing Apparatus

Firefighter Helmets and Protective Apparel

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

(1)

%

153

%

(8)

%

20

%

(2)

%

28

%

14

%


%


12

%

Plus: Currency translation effects

(8)

%

(24)

%

(7)

%

(9)

%

(7)

%

(13)

%

(9)

%


(9)

%


(9)

%

Constant currency sales change

(9)

%

129

%

(15)

%

11

%

(9)

%

15

%

5

%


(9)

%


3

%

 


Six Months Ended June 30, 2021


Breathing Apparatus

Firefighter Helmets and Protective Apparel

Industrial Head Protection

Portable Gas Detection

Fixed Gas and Flame Detection

Fall Protection

Core Sales


Non-Core Sales


Net Sales

GAAP reported sales change

(5)

%

98

%

(5)

%

2

%

(10)

%

18

%

5

%


(14)

%


2

%

Plus: Currency translation effects

(8)

%

(19)

%

(8)

%

(7)

%

(5)

%

(11)

%

(8)

%


(7)

%


(8)

%

Constant currency sales change

(13)

%

79

%

(13)

%

(5)

%

(15)

%

7

%

(3)

%


(21)

%


(6)

%

Management believes that constant currency revenue growth is a useful metric for investors, as foreign currency translation can have a material impact on revenue growth trends. Constant currency revenue growth highlights ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of management's control. There can be no assurances that MSA's definition of 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

Supplemental Segment Information (Unaudited)

Summary of constant currency revenue growth by segment and product group



Three Months Ended June 30, 2021


Consolidated


Americas


International

Fall Protection

34

%


52

%


15

%

Portable Gas Detection

32

%


46

%


11

%

Firefighter Helmets and Protective Apparel

28

%


8

%


129

%

Industrial Head Protection

20

%


38

%


(15)

%

Breathing Apparatus

(2)

%


2

%


(9)

%

Fixed Gas and Flame Detection

(4)

%


%


(9)

%

Core Sales

12

%


15

%


5

%







Non-Core Sales

(30)

%


(40)

%


(9)

%







Net Sales

5

%


6

%


3

%

 




Six Months Ended June 30, 2021


Consolidated


Americas


International

Firefighter Helmets and Protective Apparel

17

%


4

%


79

%

Fall Protection

11

%


14

%


7

%

Portable Gas Detection

7

%


14

%


(5)

%

Industrial Head Protection

6

%


13

%


(13)

%

Breathing Apparatus

(6)

%


(3)

%


(13)

%

Fixed Gas and Flame Detection

(10)

%


(6)

%


(15)

%

Core Sales

1

%


3

%


(3)

%







Non-Core Sales

(29)

%


(33)

%


(21)

%







Net Sales

(4)

%


(2)

%


(6)

%

 

MSA Safety Incorporated

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

Adjusted earnings (Unaudited)

Adjusted earnings per diluted share (Unaudited)

(In thousands, except per share amounts)



Three Months Ended June 30,




Six Months Ended June 30,





2021


2020


%
Change


2021


2020


%
Change















Net income attributable to MSA Safety Incorporated

$

25,125



$

36,066



(30)%


$

61,539



$

79,741



(23)%


Tax benefit associated with ASU 2016-
09: Improvements to employee share-

based payment accounting

(545)



(348)





(2,079)



(1,619)





Subtotal

24,580



35,718



(31)%


59,460



78,122



(24)%















Product liability expense

11,751



851





14,547



2,802





Acquisition related costs

3,168



64





4,541



161





Restructuring charges

7,078



8,865





8,385



10,872





Asset related losses, net

29



5





48



127





COVID-19 related costs









757





Currency exchange losses (gains), net

1,640



793






(459)



1,063





Income tax expense on adjustments

(6,484)



(2,613)





(7,320)



(3,914)





Adjusted earnings

$

41,762



$

43,683



(4)%


$

79,202



$

89,990



(12)%















Adjusted earnings per diluted share

$

1.06



$

1.11



(5)%


$

2.01



$

2.29



(12)%


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

About MSA:  
Established in 1914, MSA Safety Incorporated is the global leader in the development, manufacture and supply of safety products that protect people and facility infrastructures.  Many MSA products integrate a combination of electronics, mechanical systems and advanced materials to protect users against hazardous or life-threatening situations.  The company's comprehensive product line is used by workers around the world in a broad range of markets, including the oil, gas and petrochemical industry, the fire service, the construction industry, mining and the military.  MSA's core products include self-contained breathing apparatus, fixed gas and flame detection systems, portable gas detection instruments, industrial head protection products, firefighter helmets and protective apparel, and fall protection devices.  With 2020 revenues of $1.35 billion, MSA employs approximately 5,200 people worldwide.  The company is headquartered north of Pittsburgh in Cranberry Township, Pa., and has manufacturing operations in the United States, Europe, Asia and Latin America.  With more than 40 international locations, MSA realizes approximately half of its revenue from outside North America.  For more information visit MSA's web site at www.MSAsafety.com.

Cautionary Statement Regarding Forward-Looking Statements:
Except for historical information, certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward-looking statements involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Any number of factors could cause actual results to differ materially from projections or forward-looking statements, including without limitation global economic conditions, spending patterns of government agencies, competitive pressures, the impact of acquisitions and related integration activities, product liability claims, the success of new product introductions, currency exchange rate fluctuations and the risks of doing business in foreign countries. A full listing of these risks, uncertainties and other factors are detailed from time-to-time in our filings with the United States Securities and Exchange Commission ("SEC"), including our most recent Form 10-K filed on February 19, 2021. You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties.  MSA's SEC filings are readily obtainable at no charge at www.sec.gov, as well as on its own investor relations website at http://investors.MSAsafety.com. MSA undertakes no duty to publicly update any forward-looking statements contained herein, except as required by law.

Non-GAAP Financial Measures:
This press release includes certain non-GAAP financial measures. These financial measures include constant currency revenue growth, adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted earnings, and adjusted earnings per diluted share. The presentation of these financial measures does not comply with U.S. generally accepted accounting principles ("GAAP"). For an explanation of these measures, together with a reconciliation to the most directly comparable GAAP financial measure, see the Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures in the financial tables section above.

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/msa-safety-announces-second-quarter-results-301343699.html

SOURCE MSA Safety

image