Global safety equipment manufacturer MSA Safety Incorporated reported results for the first quarter of 2020.
Quarterly Highlights
- Revenue was $341 million, increasing 5 percent from a year ago on a reported basis and 7 percent on a constant currency basis.
- GAAP operating income was $59 million or 17.2 percent of sales, compared to $32 million or 9.9 percent of sales in the same period a year ago. Adjusted operating income was $64 million or 18.7 percent of sales, compared to $58 million or 17.9 percent of sales in the same period a year ago, driven by gross margin expansion and operating expense leverage.
- GAAP earnings were $44 million or $1.11 per diluted share, compared to $23 million or $0.59 per diluted share in the same period a year ago. Adjusted earnings were $46 million or $1.18 per diluted share, compared to $44 million or $1.14 per diluted share in the same period a year ago. Adjusted earnings include $0.04 per share of headwind from higher noncash pension expense, in line with the company's expectations.
Debt balance and respirator masks donation
- MSA's debt balance was $372 million at quarter end, reflecting 1.3x adjusted EBITDA on a gross basis or 0.8x adjusted EBITDA on a net basis. With more than $120 million in cash and significant room available under its current debt covenants, the company has ample liquidity and flexibility to maintain its balanced capital allocation strategy.
- In response to the COVID-19 outbreak, MSA has donated more than 140,000 disposable respirator masks - sourced from third parties - to various medical institutions around the world. In addition to supporting the communities where MSA operates, the company‘s pandemic response plan includes four key priorities: protecting the health and safety of MSA associates, enabling business continuity, expanding manufacturing capacity of MSA’s existing air-purifying respirator portfolio, and managing its operating expenses and capital structure.
Revenue increase even under COVID-19 pandemic
“Our first quarter results reflected strong execution and our global associates’ dedication to MSA’s mission as a safety leader,” commented Nish Vartanian, MSA President and CEO. “Against the backdrop of the COVID-19 outbreak, the MSA team was able to deliver a record first quarter which included 7 percent revenue growth and incremental margins over 35 percent. I'm particularly proud of our team's ability to deliver that level of performance while also enacting a comprehensive response plan that positions MSA to navigate this challenging time and the uncertainties associated with the COVID-19 landscape.”
Returns from restructuring programs continued to drive MSA’s profitability improvements
Diversified product portfolio
Mr. Vartanian commented that the company’s quarterly revenue growth reflects strong returns on its research and development projects as well as a diversified product portfolio. “Our market leading innovations supported growth across our core products, while higher levels of demand for air-purifying respirators demonstrated the defensive nature of our product offering," he said. "In response to the global shortage of personal protective equipment, we are making investments to significantly ramp up manufacturing capacity associated with the air-purifying respirator side of our business.”
Returns from restructuring programs continued to drive MSA’s profitability improvements, particularly in its International segment where adjusted operating margin increased by 170 basis points in the quarter. “Our previous restructuring investments were designed to enable a streamlined cost structure in our International business. It’s encouraging to see the momentum as we continue to improve our segment profitability profile,” he said.
Increased Demand for fire-safety products
For the month of April, MSA’s total order pace remained healthy as strong demand for respirators and firefighter safety products more than offset a downturn in short cycle industrial-based products. "While we expect a challenging environment in the near term for certain key end markets, we continue to manage through this crisis alongside our customers, supply chain partners and communities."
"Our ongoing focus on managing our cost structure, maintaining a strong balance sheet, and leveraging our diversified portfolio positions us well to continue to fulfill our mission of protecting worker health and safety. Through these unprecedented times, the MSA mission is more relevant than ever. My thanks and appreciation go out to each of our 5,000 associates around the world, who are living that mission every day and doing all they can to help us create a safer world for all," Mr. Vartanian concluded.
