msa-20240331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-15579

MSA SAFETY INCORPORATED

(Exact name of registrant as specified in its charter)


Pennsylvania		46-4914539
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1000 Cranberry Woods Drive
Cranberry Township,	Pennsylvania	16066-5207
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (724) 776-8600

Former name or former address, if changed since last report: N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which is registered
Common Stock, no par value	MSA	New York Stock Exchange

As of April 26, 2024, 39,382,242 shares of common stock, of the registrant were outstanding.

Table of Contents


Item No.		Page
Part I
1.	Financial Statements	3
	Condensed Consolidated Statements of Operations (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)	4
	Condensed Consolidated Balance Sheets (unaudited)	5
	Condensed Consolidated Statements of Cash Flows (unaudited)	6
	Condensed Consolidated Statements of Changes in Retained Earnings and Accumulated Other Comprehensive Loss (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
3.	Quantitative and Qualitative Disclosures About Market Risk	28
4.	Controls and Procedures	28
Part II
2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
6.	Exhibits	29
	Signatures	30

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited


	Three Months Ended March 31,
(In thousands, except per share values)		2024		2023
Net sales		$	413,302	$	398,262
Cost of products sold		217,771		216,864
Gross profit		195,531		181,398

Selling, general and administrative		94,150		91,091
Research and development		15,919		15,232
Restructuring charges (Note 3)		3,017		1,747
Currency exchange losses, net		2,333		4,175
Loss on divestiture of MSA LLC (Note 17)		—		129,211
Product liability expense (Note 17)		—		3
Operating income (loss)		80,112		(60,061)

Interest expense		10,740		11,476

Other income, net		(6,235)		(3,800)
Total other expense, net		4,505		7,676

Income (loss) before income taxes		75,607		(67,737)
Provision for income taxes (Note 10)		17,468		82,436
Net income (loss)		$	58,139	$	(150,173)





Earnings (loss) per share attributable to common shareholders (Note 9):
Basic		$	1.48	$	(3.83)
Diluted		$	1.47	$	(3.83)
Dividends per common share		$	0.47	$	0.46

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Unaudited


	Three Months Ended March 31,
(In thousands)		2024		2023
Net income (loss)		$	58,139	$	(150,173)
Other comprehensive gains (losses), net of tax:
Foreign currency translation adjustments (Note 6)		(10,673)		11,194
Pension and post-retirement plan actuarial gains, net of tax (Note 6)		374		439
Unrealized gain on available-for-sale securities (Note 6)		—		2

Total other comprehensive (loss) gain, net of tax		(10,299)		11,635
Comprehensive income (loss)		$	47,840	$	(138,538)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited


(In thousands)	March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	148,329	$	146,442
Trade receivables, less allowance for credit loss of $7,597 and $7,065	279,084		294,678
Inventories (Note 4)	305,556		292,604

Prepaid income taxes	13,497		12,912

Prepaid expenses and other current assets	46,479		39,634
Total current assets	792,945		786,270

Property, plant and equipment, net (Note 5)	210,955		211,877
Operating lease right-of-use assets, net	54,458		53,298
Prepaid pension cost (Note 14)	175,891		172,161
Deferred tax assets (Note 10)	34,443		33,065
Goodwill (Note 13)	625,049		627,534
Intangible assets, net (Note 13)	260,925		266,134


Other noncurrent assets	19,664		19,811
Total assets	$	2,174,330	$	2,170,150

Liabilities
Notes payable and current portion of long-term debt (Note 12)	$	26,462	$	26,522
Accounts payable	117,125		111,872
Employees’ compensation	38,360		73,386

Income taxes payable (Note 10)	34,231		19,972
Other current liabilities	100,348		101,066
Total current liabilities	316,526		332,818

Long-term debt, net (Note 12)	569,692		575,170
Pensions and other employee benefits (Note 14)	142,016		143,967
Noncurrent operating lease liabilities	45,126		44,495
Deferred tax liabilities (Note 10)	102,228		102,419
Other noncurrent liabilities	3,988		4,479
Total liabilities	$	1,179,576	$	1,203,348

Equity
Preferred stock, 4.5% cumulative, $50 par value (Note 7)	$	3,569	$	3,569
Common stock, no par value (Note 7)	315,241		312,324
Treasury shares, at cost (Note 7)	(367,599)		(363,284)
Accumulated other comprehensive loss (Note 6)	(139,548)		(129,249)
Retained earnings	1,183,091		1,143,442


Total shareholders’ equity	994,754		966,802
Total liabilities and shareholders’ equity	$	2,174,330	$	2,170,150

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited


	Three Months Ended March 31,
(In thousands)	2024		2023
Operating Activities
Net income (loss)	$	58,139	$	(150,173)
Depreciation and amortization	15,559		14,572

Tax-effected loss on divestiture of MSA LLC (Note 17)	—		199,578
Stock-based compensation (Note 11)	4,187		6,270
Pension income (Note 14)	(2,208)		(2,020)
Deferred income tax benefit (Note 10)	(2,190)		(237)
Loss on asset dispositions, net	51		739
Pension contributions (Note 14)	(1,316)		(2,046)
Currency exchange losses, net	2,333		4,175
Product liability expense (Note 17)	—		3

Product liability payments (Note 17)	—		(5,250)
Contribution on divestiture of MSA LLC (Note 17)	—		(341,186)

Changes in:
Trade receivables	12,132		21,662
Inventories (Note 4)	(14,946)		(7,404)
Accounts payable	6,175		(7,320)
Other current assets and liabilities	(26,328)		(18,041)
Other noncurrent assets and liabilities	(702)		769
Cash Flow From (Used in) Operating Activities	50,886		(285,909)
Investing Activities
Capital expenditures	(11,219)		(8,402)


Property disposals and other investing	—		35

Cash Flow Used in Investing Activities	(11,219)		(8,367)
Financing Activities

Proceeds from long-term debt (Note 12)	326,000		801,000
Payments on long-term debt (Note 12)	(331,010)		(505,588)
Debt issuance costs	—		(913)
Cash dividends paid	(18,490)		(18,045)
Company stock purchases (Note 7)	(5,838)		(3,687)
Exercise of stock options (Note 7)	253		4




Cash Flow (Used in) From Financing Activities	(29,085)		272,771
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(8,676)		(2,287)
Increase (decrease) in cash, cash equivalents and restricted cash	1,906		(23,792)
Beginning cash, cash equivalents and restricted cash	148,408		164,428
Ending cash, cash equivalents and restricted cash	$	150,314	$	140,636

Supplemental cash flow information:
Cash and cash equivalents	$	148,329	$	138,906
Restricted cash included in prepaid expenses and other current assets	1,985		1,730
Total cash, cash equivalents and restricted cash	$	150,314	$	140,636

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS

AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Unaudited


(In thousands, except per share values)	Retained Earnings		Accumulated Other Comprehensive (Loss)

























Balances December 31, 2022	$	1,158,347	$	(158,717)
Net loss	(150,173)		—
Foreign currency translation adjustments	—		11,194
Pension and post-retirement plan adjustments, net of tax expense of $278	—		439
Unrecognized net gains on available-for-sale securities (Note 16)	—		2




Common dividends ($0.46 per share)	(18,035)		—
Preferred dividends ($0.5625 per share)	(10)		—

Balances March 31, 2023	$	990,129	$	(147,082)

Balances December 31, 2023	$	1,143,442	$	(129,249)
Net income	58,139		—
Foreign currency translation adjustments	—		(10,673)
Pension and post-retirement plan adjustments, net of tax benefit of $14	—		374





Common dividends ($0.47 per share)	(18,480)		—
Preferred dividends ($0.5625 per share)	(10)		—

Balances March 31, 2024	$	1,183,091	$	(139,548)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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MSA SAFETY INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

Note 1—Basis of Presentation

The condensed consolidated financial statements of MSA Safety Incorporated and its subsidiaries ("MSA" or "the Company") are unaudited. These unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company's results. Intercompany accounts and transactions have been eliminated. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. The December 31, 2023, Balance Sheet data was derived from the audited Consolidated Balance Sheets, but does not include all disclosures required by accounting principles generally accepted in the United States of America ("U.S. GAAP"). This Form 10-Q report should be read in conjunction with MSA's Form 10-K for the year ended December 31, 2023, which includes all disclosures required by U.S. GAAP.

Note 2—Cash and Cash Equivalents

Several of the Company's subsidiaries participate in a notional cash pooling arrangement to manage global liquidity requirements. As part of a master netting arrangement, the participants combine their cash balances in pooling accounts at the same financial institution with the ability to offset bank overdrafts of one participant against positive cash account balances held by another participant. Under the terms of the master netting arrangement, the financial institution has the right, ability and intent to offset a positive balance in one account against an overdrawn amount in another account. Amounts in each of the accounts are unencumbered and unrestricted with respect to use. As such, the net cash balance related to this pooling arrangement is included in Cash and cash equivalents in the unaudited Condensed Consolidated Balance Sheets.

The Company's net cash pool position consisted of the following:


(In thousands)	March 31, 2024
Gross cash pool position	$	95,488
Less: cash pool borrowings	(94,644)
Net cash pool position	$	844

Note 3—Restructuring Charges

During the three months ended March 31, 2024, we recorded restructuring charges of $3.0 million. Americas segment restructuring charges of $0.3 million during the three months ended March 31, 2024, were related to manufacturing footprint optimization activities. International segment restructuring charges of $1.9 million during the three months ended March 31, 2024, were related to management restructuring and ongoing initiatives to drive profitable growth and improve productivity. Corporate segment restructuring charges of $0.8 million during the three months ended March 31, 2024, were related to footprint optimization activities and management restructuring.

During the three months ended March 31, 2023, we recorded restructuring charges of $1.7 million. Americas segment restructuring charges of $1.4 million during the three months ended March 31, 2023, were related to manufacturing footprint optimization activities. Corporate segment restructuring charges of $0.6 million during the three months ended March 31, 2023, were primarily related to various optimization activities.

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Restructuring reserves are included in Other current liabilities in the accompanying unaudited Condensed Consolidated Balance Sheets. Activity and reserve balances for restructuring by segment were as follows:


(In millions)	Americas		International		Corporate		Total
Reserve balances at December 31, 2022	$	1.7	$	12.8	$	0.5	$	15.0
Restructuring charges	3.1		4.7		2.1		9.9
Currency translation	(0.1)		0.1		—		—
Cash payments / utilization	(3.9)		(8.6)		(2.6)		(15.1)
Reserve balances at December 31, 2023	$	0.8	$	9.0	$	—	$	9.8
Restructuring charges	0.3		1.9		0.8		3.0
Currency translation	—		(0.2)		—		(0.2)
Cash payments	(0.6)		(2.9)		(0.3)		(3.8)
Reserve balances at March 31, 2024	$	0.5	$	7.8	$	0.5	$	8.8

Note 4—Inventories

The following table sets forth the components of inventory:


(In thousands)	March 31, 2024		December 31, 2023
Finished products	$	89,899	$	88,687
Work in process	19,136		15,378
Raw materials and supplies	196,521		188,539
Total inventories	$	305,556	$	292,604

Note 5—Property, Plant and Equipment

The following table sets forth the components of property, plant and equipment, net:


(In thousands)	March 31, 2024		December 31, 2023
Land	$	4,303	$	4,332

Buildings	140,918		141,027
Machinery and equipment	488,301		498,148
Construction in progress	24,851		24,404
Total	658,373		667,911
Less: accumulated depreciation	(447,418)		(456,034)
Property, plant and equipment, net	$	210,955	$	211,877

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Note 6—Reclassifications Out of Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss were as follows:


	Three Months Ended March 31,
(In thousands)		2024		2023
Pension and other post-retirement benefits (a)
Balance at beginning of period		$	(42,652)	$	(50,335)
Amounts reclassified from accumulated other comprehensive loss into net income (loss):
Amortization of prior service credit (Note 14)		(9)		(24)
Recognized net actuarial losses (Note 14)		397		185
Tax (benefit) expense		(14)		278
Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income (loss)		374		439

Balance at end of period		$	(42,278)	$	(49,896)
Available-for-sale securities
Balance at beginning of period		$	—	$	(2)
Unrealized net gains on available-for-sale securities (Note 16)		—		2
Balance at end of period		$	—	$	—
Foreign currency translation
Balance at beginning of period		$	(86,597)	$	(108,380)


Foreign currency translation adjustments		(10,673)		11,194
Balance at end of period		$	(97,270)	$	(97,186)
(a) Reclassifications out of accumulated other comprehensive loss and into net income (loss) are included in the computation of net periodic pension and other post-retirement benefit costs (refer to Note 14—Pensions and Other Post-retirement Benefits).

Note 7—Capital Stock

Preferred Stock - The Company has authorized 100,000 shares of $50 par value 4.5% cumulative preferred nonvoting stock which is callable at $52.50. There were 71,340 shares issued and 52,998 shares held in treasury at both March 31, 2024 and December 31, 2023. The Treasury shares at cost line in the unaudited Condensed Consolidated Balance Sheets includes $1.8 million related to preferred stock. There were no shares of preferred stock purchased and subsequently held in treasury during the three months ended March 31, 2024 or 2023. The Company has also authorized 1,000,000 shares of $10 par value second cumulative preferred voting stock. No shares have been issued as of March 31, 2024, or December 31, 2023.

Common Stock - The Company has authorized 180,000,000 shares of no par value common stock. There were 62,081,391 shares issued as of March 31, 2024 and December 31, 2023. No new shares were issued during the three months ended March 31, 2024 or 2023. There were 39,381,219 and 39,317,212 shares outstanding at March 31, 2024 and December 31, 2023, respectively.

Treasury Shares - The Company's stock repurchase program authorizes up to $100.0 million to repurchase MSA common stock in the open market and in private transactions. The stock repurchase program has no expiration date. The maximum number of shares that may be repurchased is calculated based on the dollars remaining under the program and the respective month-end closing share price. During the three months ended March 31, 2024, and 2023, no shares were repurchased under this program. There were 22,700,172 and 22,764,179 treasury shares at March 31, 2024 and December 31, 2023, respectively.

The Company issues treasury shares for all stock-based benefit plans. Shares are issued from treasury at the average treasury share cost on the date of the transaction. There were 95,428 and 26,774 Treasury shares issued for these purposes during the three months ended March 31, 2024 and 2023, respectively.

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Common stock activity is summarized as follows:


	Three Months Ended March 31, 2024				Three Months Ended March 31, 2023
(In thousands)	Common Stock		Treasury Cost(a)		Common Stock		Treasury Cost(a)
Balance at beginning of period	$	312,324	$	(361,684)	$	281,980	$	(359,838)
Stock compensation expense	4,187		—		6,270		—
Restricted and performance stock awards	(1,436)		1,436		(1,244)		1,244
Stock options exercised	166		87		3		1
Treasury shares purchased for stock compensation programs	—		(5,838)		—		(3,687)




Balance at end of period	$	315,241	$	(365,999)	$	287,009	$	(362,280)
(a)Excludes treasury cost related to preferred stock.

Note 8—Segment Information

The Company is organized into four geographical operating segments that are based on management responsibilities: Northern North America; Latin America; Europe, Middle East & Africa; and Asia Pacific. The operating segments have been aggregated (based on economic similarities, the nature of their products, end-user markets and methods of distribution) into three reportable segments: Americas, International, and Corporate.

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.

The Company's sales are allocated to each segment based primarily on the country destination of the end-customer.

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. Adjusted operating income (loss) is defined as operating income (loss) excluding restructuring charges, currency exchange (gains) losses, product liability expense, loss on divestiture of Mine Safety Appliances Company, LLC ("MSA LLC"), transaction costs and acquisition-related amortization. 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. Adjusted EBITDA margin is defined as adjusted EBITDA divided by segment net sales to external customers.

The accounting principles applied at the operating segment level in determining operating income (loss) are generally the same as those applied at the unaudited condensed consolidated financial statement level. Sales and transfers between operating segments are accounted for at market-based transaction prices and are eliminated in consolidation.

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Reportable segment information is presented in the following table:


(In thousands, except percentages)	Americas			International			Corporate		Consolidated Totals
Three Months Ended March 31, 2024
Net sales to external customers	$	295,539		$	117,763		$	—	$	413,302

Operating income									80,112
Restructuring charges (Note 3)									3,017
Currency exchange losses, net									2,333


Amortization of acquisition-related intangible assets									2,314
Transaction costs(a)									233

Adjusted operating income (loss)	86,218			13,486			(11,695)		88,009
Adjusted operating margin %	29.2		%	11.5		%
Depreciation and amortization									13,245
Adjusted EBITDA	95,693			17,045			(11,484)		101,254
Adjusted EBITDA margin %	32.4		%	14.5		%

Three Months Ended March 31, 2023
Net sales to external customers	$	280,267		$	117,995		$	—	$	398,262

Operating loss									(60,061)
Restructuring charges (Note 3)									1,747
Currency exchange losses, net									4,175
Loss on divestiture of MSA LLC (Note 17)									129,211
Product liability expense (Note 17)									3
Amortization of acquisition-related intangible assets									2,305


Adjusted operating income (loss)	71,694			15,779			(10,093)		77,380
Adjusted operating margin %	25.6		%	13.4		%
Depreciation and amortization									12,267
Adjusted EBITDA	80,494			19,058			(9,905)		89,647
Adjusted EBITDA margin %	28.7		%	16.2		%
(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.

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Total sales by product group was as follows:

Three Months Ended March 31, 2024

SEC Form 10-Q filed by MSA Safety Incorporated