Global safety equipment manufacturer MSA Safety Incorporated has reported their results for the second quarter of 2020.

Quarterly Highlights

• Revenue was $314 million, decreasing 10 percent from a year ago on a reported basis and 8 percent on a constant currency basis.
• GAAP operating income was $48 million or 15.4 percent of sales, compared to $54 million or 15.6 percent of sales in the same period a year ago. Adjusted operating income was $59 million or 18.7 percent of sales, compared to $64 million or 18.4 percent of sales in the same period a year ago.
• GAAP earnings were $36 million or $0.92 per diluted share, compared to $40 million or $1.01 per diluted share in the same period a year ago. Adjusted earnings were $44 million or $1.11 per diluted share, compared to $48 million or $1.22 per diluted share in the same period a year ago. Adjusted earnings include $0.03 per share of headwind from higher non cash pension expense, in line with the company’s expectations.
• Operating cash flow was $69 million, nearly doubling from a year ago on strong working capital management and lower product liability payments. MSA paid down $37 million of debt, funded $17 million of dividends, and invested $13 million in capital expenditures in the quarter.
• MSA’s debt balance was $335 million at quarter end, reflecting 1.2x adjusted EBITDA on a gross basis or 0.7x adjusted EBITDA on a net basis. With more than $136 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.

Comments from Management

“Our second quarter results reflect strong execution and a resilient business model in a challenging environment,” said Nish Vartanian, MSA Chairman, President and CEO.  “Our diversified portfolio and continued focus on productivity yielded adjusted operating margin expansion of 30 basis points. It’s particularly noteworthy that we achieved this level of margin performance on lighter sales volume,” he said. Mr. Vartanian added that in addition to lower discretionary costs, strategic growth and profitability improvement programs supported the strong performance. “The returns from our investments in our respirator manufacturing capabilities, combined with solid execution of our International segment margin improvement programs, were clear highlights of the quarter.”

The company’s quarterly results include 63 percent revenue growth in air-purifying respirators. “In response to the global shortage of personal protective equipment, we have started to make investments to ramp up and modernize our manufacturing operations associated with the air-purifying respirator side of our business,” Mr. Vartanian explained.  “These investments will help us improve lead times for our existing industrial and first responder customers, while positioning MSA to respond to potential growth opportunities.”  He added that the company’s unwavering mission of protecting people at work, in an ongoing pandemic environment, is more relevant than ever before.

In MSA’s International segment, profitability improvement programs helped drive adjusted operating margin expansion of 310 basis points in the quarter and 240 basis points for the year to date. “Our focus on price realization across MSA International is supporting gross profit improvements, and previously executed restructuring programs are enabling operating expense leverage,” said Mr. Vartanian.

Mr. Vartanian noted that business conditions remain challenging and a number of external factors could impact how the second half of 2020 unfolds for the company.  “While we expect a tough environment in the near term, we continue to focus on leveraging our diversified portfolio, controlling discretionary costs, and investing in long-term growth and productivity programs that will position MSA to emerge from this downturn as an even stronger organisation,” he concluded.