PR Newswire | Apr 28, 2021 05:31PM EDT

04/28 16:30 CDT

MSA Safety Announces First Quarter Results PITTSBURGH, April 28, 2021

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

Quarterly Highlights

* Revenue was $308 million, decreasing 10 percent from a year ago on a reported basis and 11 percent on a constant currency basis. * GAAP operating income was $44 million or 14.3 percent of sales, compared to $59 million or 17.2 percent of sales in the same period a year ago. Adjusted operating income was $47 million or 15.4 percent of sales, compared to $64 million or 18.7 percent of sales in the same period a year ago. * GAAP earnings were $36 million or $0.92 per diluted share, compared to $44 million or $1.11 per diluted share in the same period a year ago. Adjusted earnings were $37 million or $0.95 per diluted share, compared to $46 million or $1.18 per diluted share in the same period a year ago. * Operating cash flow was $46 million, increasing 235% from a year ago. The company continues to execute a balanced capital allocation strategy focused on growing its business and returning value to shareholders. MSA deployed $63 million for the acquisition of UK turnout gear leader Bristol Uniforms, $10 million for strategic capital expenditures, and funded $17 million of dividends to shareholders.

Comments from Management

"While the pandemic and its effects on the economy impacted our quarterly results, we remained focused on executing our strategy, investing in growth programs, improving productivity and generating strong cash flow," said Nish Vartanian, MSA Chairman, President and CEO. "In the first quarter, we launched breakthrough technology for firefighters, completed the acquisition of Bristol Uniforms, and generated significant improvements in cash flow that position us well for continued investments in our business," he said. Mr. Vartanian added that MSA's incoming orders strengthened in March and April, and backlog levels are healthy to start the second quarter.

For the quarter, MSA invested four percent of revenue in its R&D portfolio and realized 35 percent of its total revenue from products developed in the past five years. "While we've taken steps to streamline our cost structure, we remain committed to investing in our product development pipeline," he said. Mr. Vartanian noted that the company's recent launch of its LUNAR technology for firefighters reflects the company's sustained commitment to product development. LUNAR is a handheld device that uses Cloud technology to deliver breakthrough fire-scene management capabilities for incident commanders.

MSA deployed $63 million for the acquisition of Bristol Uniforms in late January 2021, which expands its reach in the International fire service market. "Our integration plans at Bristol are well underway. We expect to continue to use our balance sheet to enhance our leadership positions in core markets, geographies, and technologies," Mr. Vartanian added.

"While economic recovery may not be a straight line, we're optimistic that the worst is behind us from a demand perspective. The uptick in our order book in March and April provides a sense of confidence in the near term, while our new product development pipeline and strong balance sheet position us well to increase shareholder value for many years to come," Mr. Vartanian concluded.

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



Three Months Ended March 31,

2021 2020



Net sales $308,428$341,145

Cost of products sold 173,688 183,786

Gross profit 134,740 157,359



Selling, general and administrative 75,463 80,237

Research and development 13,234 14,112

Restructuring charges 1,308 2,007

Currency exchange (gains) losses, net (2,099) 270

Product liability expense 2,796 1,951

Operating income 44,038 58,782



Interest expense 1,911 3,144

Other income, net (4,213) (1,259)

Total other (income) expense, net (2,302) 1,885



Income before income taxes 46,340 56,897

Provision for income taxes 9,740 13,095

Net income 36,600 43,802

Net income attributable to noncontrolling interests (186) (128)

Net income attributable to MSA Safety Incorporated $36,414 $43,674



Earnings per share attributable to MSA Safety Incorporated common shareholders:

Basic $0.93 $1.12

Diluted $0.92 $1.11



Basic shares outstanding 39,094 38,824

Diluted shares outstanding 39,420 39,352

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



March 31, 2021December 31, 2020

Assets

Cash and cash equivalents $184,728 $160,672

Trade receivables, net 224,954 252,283

Inventories 220,021 197,819

Notes receivable, insurance companies 3,825 3,796

Other current assets 131,050 139,708

Total current assets 764,578 754,278



Property, net 197,832 189,620

Prepaid pension cost 101,317 97,545

Operating lease assets, net 68,199 53,451

Goodwill 447,059 443,272

Notes receivable, insurance companies, 48,837 48,540 noncurrent

Insurance receivable, noncurrent 83,692 85,077

Other noncurrent assets 231,248 200,701

Total assets $1,942,762 $1,872,484



Liabilities and shareholders' equity

Notes payable and current portion of $20,000 $20,000 long-term debt, net

Accounts payable 90,706 86,854

Other current liabilities 196,021 203,691

Total current liabilities 306,727 310,545



Long-term debt, net 340,428 287,157

Pensions and other employee benefits 201,040 208,068

Noncurrent operating lease liabilities 59,211 44,639

Deferred tax liabilities 12,065 10,916

Product liability and other noncurrent 200,401 201,268 liabilities

Total shareholders' equity 822,890 809,891

Total liabilities and shareholders' $1,942,762 $1,872,484 equity

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



Three Months Ended March 31,

2021 2020



Net income $36,600$43,802

Depreciation and amortization 10,504 9,640

Change in working capital and other operating (1,488) (39,835)

Cash flow from operating activities 45,616 13,607



Capital expenditures (9,582) (6,562)

Acquisition, net of cash acquired (62,992)-

Change in short-term investments 20,030 (19,612)

Property disposals 35 92

Cash flow used in investing activities (52,509)(26,082)



Change in debt 52,017 28,000

Cash dividends paid (16,820)(16,331)

Other financing (3,558) (24,997)

Cash flow from (used in) financing activities 31,639 (13,328)



Effect of exchange rate changes on cash, (720) (3,756) cash equivalents and restricted cash



Increase (decrease) in cash, cash equivalents and $24,026$(29,559) restricted cash

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



Americas InternationalCorporateConsolidated

Three Months Ended March 31, 2021

Sales to external $208,340 $100,088 $ - $308,428 customers

Operating income 44,038

Operating margin % 14.3 %

Restructuring charges 1,308

Currency exchange gains, (2,099) net

Product liability expense 2,796

Acquisition related costs 1,373

Adjusted operating income45,152 8,790 (6,526) 47,416 (loss)

Adjusted operating margin21.7 %8.8 % 15.4 %%

Depreciation and 10,504 amortization

Adjusted EBITDA 52,186 12,163 (6,429) 57,920

Adjusted EBITDA % 25.0 %12.2 % 18.8 %



Three Months Ended March 31, 2020

Sales to external $231,253 $109,892 $ - $341,145 customers

Operating income 58,782

Operating margin % 17.2 %

Restructuring charges 2,007

Currency exchange losses, 270 net

Product liability expense 1,951

Acquisition related costs 97

COVID-19 related costs 757

Adjusted operating income59,807 12,671 (8,614) 63,864 (loss)

Adjusted operating margin25.9 %11.5 % 18.7 %%

Depreciation and 9,640 amortization

Adjusted EBITDA 66,257 15,765 (8,518) 73,504

Adjusted EBITDA % 28.7 %14.3 % 21.5 %

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 March 31, 2021

FirefighterIndustrialPortable Fixed Gas BreathingHelmets andHead Gas and FlameFall Core Non-CoreNet ApparatusProtective ProtectionDetectionDetectionProtectionSalesSales Sales Apparel

GAAP reported (8) % 8 %(7)% (9) % (14) %(5)% (7)%(26)% (10)%sales change

Plus: Currency (2) % (2) %- % (1) % (2) %(3)% (2)%(2) % (1) %translation effects

Constant currency (10)% 6 %(7)% (10)% (16) %(8)% (9)%(28)% (11)%sales change

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 March 31, 2021

FirefighterIndustrialPortable Fixed Gas BreathingHelmets andHead Gas and FlameFall Core Non-CoreNet ApparatusProtective ProtectionDetectionDetectionProtectionSalesSales Sales Apparel

GAAP reported (3)% - % (9)% (8)% (12) %(11)% (7)%(32)% (10)%sales change

Plus: Currency - % - % 3 % - % - %- % 1 %1 % 1 %translation effects

Constant currency (3)% - % (6)% (8)% (12) %(11)% (6)%(31)% (9) %sales change

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 March 31, 2021

FirefighterIndustrialPortable Fixed Gas BreathingHelmets andHead Gas and FlameFall Core Non-CoreNet ApparatusProtective ProtectionDetectionDetectionProtectionSales Sales Sales Apparel

GAAP reported (10)% 48 % (2)% (13)% (17) %7 % (5) %(26)% (9) %sales change

Plus: Currency (7) % (13) % (7)% (6) % (5) %(8)% (7) %(6) % (7) %translation effects

Constant currency (17)% 35 % (9)% (19)% (22) %(1)% (12)%(32)% (16)%sales change

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 March 31, 2021

ConsolidatedAmericasInternational

Firefighter Helmets and Protective 6 % - %35 % Apparel

Industrial Head Protection (7) % (6) %(9) %

Fall Protection (8) % (11) %(1) %

Breathing Apparatus (10) % (3) %(17) %

Portable Gas Detection (10) % (8) %(19) %

Fixed Gas and Flame Detection (16) % (12) %(22) %

Core Sales (9) % (6) %(12) %



Non-Core Sales (28) % (31) %(32) %



Net Sales (11) % (9) %(16) %

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,

% 2021 2020 Change



Net income attributable to MSA Safety $36,414$43,674(17)% Incorporated

Tax benefit associated with ASU 2016-09: Improvements to employee share-based payment (1,534) (1,271) accounting

Subtotal 34,880 42,403 (18)%



Product liability expense 2,796 1,951

Acquisition related costs 1,373 97

Restructuring charges 1,308 2,007

Asset related losses, net 19 122

COVID-19 related costs - 757

Currency exchange (gains) losses, net (2,099) 270

Income tax expense on adjustments (836) (1,301)

Adjusted earnings $37,441$46,306(19)%



Adjusted earnings per diluted share $0.95 $1.18 (19)%

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 5,000people 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.

View original content to download multimedia: http://www.prnewswire.com/news-releases/msa-safety-announces-first-quarter-results-301279616.html

SOURCE MSA Safety