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MSA Safety Announces First Quarter Results

PITTSBURGH, April 27, 2022 /PRNewswire/ -- Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) today reported financial results for the first quarter of 2022.

Quarterly Highlights

  • Total sales were $331 million, increasing 7% from a year ago on a reported basis and 9% on a constant currency basis. Acquisitions contributed 5% and organic activity drove 4% of the constant currency growth.
  • GAAP operating income was $42.7 million or 12.9% of sales, compared to $44.1 million or 14.3% of sales in the same period a year ago. Adjusted operating income was $53.8 million or 16.3% of sales, compared to $47.5 million or 15.4% of sales in the same period a year ago.
  • GAAP earnings were $35.5 million or $0.90 per diluted share, compared to $36.5 million or $0.92 per diluted share in the same period a year ago. Adjusted earnings were $43.6 million or $1.10 per diluted share, compared to $37.5 million or $0.95 per diluted share in the same period a year ago.
  • Operating cash flow was $24.5 million, compared to $45.6 million in the same period a year ago. The decrease was driven by an increased investment in working capital to respond to the strong growth environment and supply chain challenges.

Comments from Management

"The first quarter finished in line with our expectations as we continued to benefit from strong demand for our products," said Nish Vartanian, Chairman, President and Chief Executive Officer. "Despite a challenging supply chain and inflationary environment, the team executed well and drove 9% constant currency sales growth and incremental margins of approximately 30%. Orders were up double digits in the first quarter, resulting in a book-to-bill ratio of 1.2x and record backlog."

"We continue to deliver on our strategy and are excited by our recently-launched innovative technologies, including our fully-connected ALTAIR io™ 4 Gas Detection Wearable device that begins shipping at the beginning of May, and our V-Gard® C1 Hard Hat with ReflectIR™ Thermal Barrier technology.  Furthermore, we have made significant progress integrating Bacharach, and it contributed positively to our results in the quarter," Mr. Vartanian said. 

"While the operating environment remains dynamic, we saw demand strengthen through the quarter. We are seeing the effects of supply chain challenges and inflation throughout our regions. Looking forward, I am confident in our ability to execute our long-term vision to be the global leader of safety technologies that protect workers and facility infrastructures. Our balance sheet remains strong and we will continue our balanced approach to investing in growth and returning capital to shareholders," Mr. Vartanian concluded.

MSA Safety Incorporated
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share amounts)



Three Months Ended March 31,


2022


2021





Net sales

$    330,692


$    308,428

Cost of products sold

187,908


173,643

Gross profit

142,784


134,785





Selling, general and administrative

78,551


75,463

Research and development

13,333


13,234

Restructuring charges

2,189


1,308

Currency exchange losses (gains), net

3,271


(2,099)

Product liability expense

2,772


2,796

Operating income

42,668


44,083





Interest expense

3,618


1,911

Other income, net

(6,344)


(4,213)

Total other income, net

(2,726)


(2,302)





Income before income taxes

45,394


46,385

Provision for income taxes

9,852


9,749

Net income

35,542


36,636

Net income attributable to noncontrolling interests


(186)

Net income attributable to MSA Safety Incorporated

$      35,542


$      36,450





Earnings per share attributable to MSA Safety Incorporated common shareholders:




Basic

$          0.90


$          0.93

Diluted

$          0.90


$          0.92





Basic shares outstanding

39,291


39,094

Diluted shares outstanding

39,523


39,420

*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

 

MSA Safety Incorporated
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)



March 31,
2022


December 31,
2021

Assets




Cash and cash equivalents

$                  147,300


$                  140,895

Trade receivables, net

244,005


254,187

Inventories

321,602


280,617

Notes receivable, insurance companies

3,943


3,914

Other current assets

109,304


113,191

    Total current assets

826,154


792,804





Property, plant and equipment net

205,995


207,793

Prepaid pension cost

169,842


163,283

Goodwill

631,821


636,858

Intangible assets, net

299,725


306,948

Notes receivable, insurance companies, noncurrent

44,893


44,626

Insurance receivable, noncurrent

117,805


121,609

Other noncurrent assets

119,542


122,475

   Total assets

$               2,415,777


$               2,396,396





Liabilities and shareholders' equity




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

$                      8,021


$                           —

Accounts payable

108,407


106,780

Other current liabilities

217,509


223,826

   Total current liabilities

333,937


330,606





Long-term debt, net

591,393


597,651

Pensions and other employee benefits

187,818


189,973

Noncurrent operating lease liabilities

40,219


40,706

Deferred tax liabilities

33,049


33,337

Product liability and other noncurrent liabilities

368,454


369,735

Total shareholders' equity

860,907


834,388

   Total liabilities and shareholders' equity

$               2,415,777


$               2,396,396

 

MSA Safety Incorporated
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)



Three Months Ended March 31,


2022


2021





Net income

$     35,542


$     36,636

Depreciation and amortization

14,165


10,504

Change in working capital and other operating

(25,184)


(1,524)

  Cash flow from operating activities

24,523


45,616





Capital expenditures

(7,976)


(9,582)

Acquisition, net of cash acquired


(62,992)

Change in short-term investments

9,027


20,030

Property disposals and other investing


35

  Cash flow from (used in) investing activities

1,051


(52,509)





Change in debt

5,000


52,017

Cash dividends paid

(17,292)


(16,820)

Other financing

(3,608)


(3,558)

  Cash flow (used in) from financing activities

(15,900)


31,639





Effect of exchange rate changes on cash,

cash equivalents and restricted cash

(3,361)


(720)





Increase in cash, cash equivalents and restricted cash

$       6,313


$     24,026

*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

 

MSA Safety Incorporated
Segment Information (Unaudited)
(In thousands, except percentage amounts)



Americas


International


Corporate


Consolidated

Three Months Ended March 31, 2022








Sales to external customers

$   225,648


$   105,044


$               —


$   330,692

Operating income







42,668

Operating margin %







12.9 %

Restructuring charges







2,189

Currency exchange losses, net







3,271

Product liability expense







2,772

Acquisition related costs (a)







2,943

Adjusted operating income (loss)

52,435


9,024


(7,616)


53,843

Adjusted operating margin %

23.2 %


8.6 %




16.3 %

Depreciation and amortization (b)







11,829

Adjusted EBITDA

60,796


12,362


(7,486)


65,672

Adjusted EBITDA margin %

26.9 %


11.8 %




19.9 %









Three Months Ended March 31, 2021








Sales to external customers

$   208,340


$   100,088


$               —


$   308,428

Operating income







44,083

Operating margin %







14.3 %

Restructuring charges







1,308

Currency exchange gains, net







(2,099)

Product liability expense







2,796

Acquisition related costs (a)







1,373

Adjusted operating income (loss)

45,195


8,792


(6,526)


47,461

Adjusted operating margin %

21.7 %


8.8 %




15.4 %

Depreciation and amortization







10,504

Adjusted EBITDA

52,229


12,165


(6,429)


57,965

Adjusted EBITDA margin %

25.1 %


12.2 %




18.8 %

*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.  Adjustments were made to Americas and International.

(a) Acquisition related costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during due diligence and integration. These costs are included in selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Income. Acquisition related costs also include the acquisition related amortization, which is included in cost of products sold in the unaudited Condensed Consolidated Statements of Income.

(b) Excludes acquisition related amortization, which is included in acquisition related costs above.

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, product liability expense, acquisition related costs, including acquisition related amortization. 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 March 31, 2022


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%

5%

9%

(2)%

38%

(6)%

10%


(12)%


7%


Plus: Currency translation effects

2%

2%

1%

1%

2%

2%

1%


3%


2%


Constant currency sales change

3%

7%

10%

(1)%

40%

(4)%

11%


(9)%


9%


Less:

Acquisitions

—%

—%

—%

—%

28%

—%

6%


—%


5%


Organic constant currency sales change

3%

7%

10%

(1)%

12%

(4)%

5%


(9)%


4%


*Fixed Gas and Flame Detection includes the impact of the Bacharach acquisition completed on July 1, 2021.

Organic constant currency sales change is a non-GAAP financial measure provided by the Company to give a better understanding of the Company's underlying business performance. Organic constant currency sales change is calculated by deducting the percentage impact from acquisitions and currency translation effects from the overall percentage change in net sales.

MSA Safety Incorporated
Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures
Constant currency revenue growth (Unaudited)

Americas Segment


Three Months Ended March 31, 2022


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%

(4)%

11%

—%

47%

3%

11%


(19)%


8%

Plus: Currency translation effects

1%

—%

—%

—%

—%

1%

1%


—%


1%

Constant currency sales change

6%

(4)%

11%

—%

47%

4%

12%


(19)%


9%

Less:

Acquisitions

—%

—%

—%

—%

33%

—%

7%


—%


6%

Organic constant currency sales change

6%

(4)%

11%

—%

14%

4%

5%


(19)%


3%

*Fixed Gas and Flame Detection includes the impact of the Bacharach acquisition completed on July 1, 2021.

Organic constant currency sales change is a non-GAAP financial measure provided by the Company to give a better understanding of the Company's underlying business performance. Organic constant currency sales change is calculated by deducting the percentage impact from acquisitions and currency translation effects from the overall percentage change in net sales.

MSA Safety Incorporated
Reconciliation of As Reported Financial Measures to Non-GAAP Financial Measures
Constant currency revenue growth (Unaudited)

International Segment


Three Months Ended March 31, 2022


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

(8)%

35%

4%

(7)%

24%

(20)%

6%


—%


5%

Plus: Currency translation effects

5%

9%

4%

5%

3%

3%

5%


6%


5%

Constant currency sales change

(3)%

44%

8%

(2)%

27%

(17)%

11%


6%


10%

Less:

Acquisitions

—%

—%

—%

—%

19%

—%

6%


—%


5%

Organic constant currency sales change

(3)%

44%

8%

(2)%

8%

(17)%

5%


6%


5%

*Fixed Gas and Flame Detection includes the impact of the Bacharach acquisition completed on July 1, 2021.

Organic constant currency sales change is a non-GAAP financial measure provided by the Company to give a better understanding of the Company's underlying business performance. Organic constant currency sales change is calculated by deducting the percentage impact from acquisitions and currency translation effects from the overall percentage change in net sales.

MSA Safety Incorporated
Supplemental Segment Information (Unaudited)
Summary of constant currency revenue growth by segment and product group




Three Months Ended March 31, 2022


Consolidated


Americas


International

Fixed Gas and Flame Detection*

40%


47%


27%

Industrial Head Protection

10%


11%


8%

Firefighter Helmets and Protective Apparel

7%


(4)%


44%

Breathing Apparatus

3%


6%


(3)%

Portable Gas Detection

(1)%


—%


(2)%

Fall Protection

(4)%


4%


(17)%

Core Sales

11%


12%


11%







Non-Core Sales

(9)%


(19)%


6%







Net Sales

9%


9%


10%

Net Sales excluding Acquisitions

4%


3%


5%

*Fixed Gas and Flame Detection includes the impact of the Bacharach acquisition completed on July 1, 2021.  

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 March 31,





2022


2021


%

Change









Net income attributable to MSA Safety Incorporated

$     35,542


$     36,450


(2)%









Product liability expense

2,772


2,796




Acquisition related costs (a)

2,943


1,373




Restructuring charges

2,189


1,308




Asset related losses and other

4


19




Currency exchange losses (gains), net

3,271


(2,099)




Income tax expense on adjustments

(3,123)


(2,370)




Adjusted earnings

$     43,598


$     37,477


16%









Adjusted earnings per diluted share

$         1.10


$         0.95


16%


(a) Acquisition related costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during due diligence and integration. These costs are included in selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Income. Acquisition related costs also include the acquisition related amortization, which is included in cost of products sold in the unaudited Condensed Consolidated Statements of Income.

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 2021 revenues of $1.4 billion, MSA employs approximately 4,800 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 18, 2022. 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 organic 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.

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SOURCE MSA Safety