Global safety equipment manufacturer MSA Safety Incorporated (NYSE: MSA) reported financial results for the third quarter of 2022.
Quarterly Highlights
- Total sales were $382 million, increasing 12% organically from a year ago on a reported basis and 16% on a constant currency basis.
- GAAP operating income was $64 million or 16.8% of sales, compared to $32 million or 9.5% of sales in the same period a year ago. Adjusted operating income was $75 million or 19.7% of sales, compared to $54 million or 16.0% of sales in the same period a year ago.
- GAAP earnings were $45 million or $1.14 per diluted share, compared to $21 million or $0.54 per diluted share in the same period a year ago. Adjusted earnings were $57 million or $1.45 per diluted share, compared to $39 million or $1.00 per diluted share in the same period a year ago.
- Operating cash flow was $64 million, compared to $46 million in the same period a year ago.
- MSA funded $18 million of dividends on its common stock and deployed $2 million for share repurchases in the quarter.
Comments from Management
“MSA delivered an excellent quarter in a challenging environment,” said Nish Vartanian, MSA Safety Chairman, President and Chief Executive Officer. “Our team’s dedication and focus on our customers resulted in strong sales growth, margin expansion, and cash flow generation.” He added that the 16% constant currency increase in sales was broad-based across the product portfolio and consisted of both strategic pricing and volume expansion.
“We continued to see robust demand with double-digit order growth across the business. Overall, we ended the quarter with record backlog and a book-to-bill above 1x resulting from strong demand and ongoing supply chain challenges,” Mr. Vartanian said.
“Our third quarter results reflect the strength of our differentiated product portfolio, leading positions in attractive end markets, and focused commercial execution. We remain encouraged by this performance and, in looking ahead, we are continuing to invest in developing new safety technologies that advance the MSA mission, contribute to profitable growth, and drive stakeholder value – all while navigating through the current macroeconomic uncertainties,” Mr. Vartanian concluded.
| MSA Safety Incorporated
Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share amounts) |
|||||||
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||
| 2022 | 2021 | 2022 | 2021 | ||||
| Net sales | $ 381,694 | $ 340,197 | $ 1,084,699 | $ 989,915 | |||
| Cost of products sold | 212,299 | 190,758 | 608,120 | 552,693 | |||
| Gross profit | 169,395 | 149,439 | 476,579 | 437,222 | |||
| Selling, general and administrative | 82,753 | 87,450 | 247,378 | 246,339 | |||
| Research and development | 14,416 | 14,946 | 43,017 | 42,149 | |||
| Restructuring charges | 899 | 3,853 | 3,146 | 12,239 | |||
| Currency exchange losses (gains), net | 2,979 | 100 | 4,788 | (359) | |||
| Product liability expense | 4,035 | 10,688 | 9,733 | 25,235 | |||
| Operating income | 64,313 | 32,402 | 168,517 | 111,619 | |||
| Interest expense | 5,962 | 3,764 | 14,158 | 7,847 | |||
| Other income, net | (2,359) | (2,266) | (15,121) | (8,773) | |||
| Total other expense (income), net | 3,603 | 1,498 | (963) | (926) | |||
| Income before income taxes | 60,710 | 30,904 | 169,480 | 112,545 | |||
| Provision for income taxes | 15,804 | 9,724 | 41,339 | 29,281 | |||
| Net income | 44,906 | 21,180 | 128,141 | 83,264 | |||
| Net income attributable to noncontrolling interests | — | — | — | (448) | |||
| Net income attributable to MSA Safety Incorporated | $ 44,906 | $ 21,180 | $ 128,141 | $ 82,816 | |||
| Earnings per share attributable to MSA Safety Incorporated common shareholders: |
|||||||
| Basic | $ 1.15 | $ 0.54 | $ 3.26 | $ 2.11 | |||
| Diluted | $ 1.14 | $ 0.54 | $ 3.25 | $ 2.10 | |||
| Basic shares outstanding | 39,172 | 39,194 | 39,243 | 39,152 | |||
| Diluted shares outstanding | 39,299 | 39,430 | 39,414 | 39,424 | |||
*Prior periods have 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) |
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| September 30, 2022 |
December 31, 2021 |
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| Assets | |||||||
| Cash and cash equivalents | $ 159,613 | $ 140,895 | |||||
| Trade receivables, net | 249,298 | 254,187 | |||||
| Inventories | 349,664 | 280,617 | |||||
| Notes receivable, insurance companies | 5,901 | 3,914 | |||||
| Other current assets | 97,624 | 113,191 | |||||
| Total current assets | 862,100 | 792,804 | |||||
| Property, plant and equipment net | 199,530 | 207,793 | |||||
| Prepaid pension cost | 182,794 | 163,283 | |||||
| Goodwill | 607,161 | 636,858 | |||||
| Intangible assets, net | 281,461 | 306,948 | |||||
| Notes receivable, insurance companies, noncurrent | 38,428 | 44,626 | |||||
| Insurance receivable, noncurrent | 115,381 | 121,609 | |||||
| Other noncurrent assets | 100,434 | 122,475 | |||||
| Total assets | $ 2,387,289 | $ 2,396,396 | |||||
| Liabilities and shareholders’ equity | |||||||
| Notes payable and current portion of long-term debt, net | $ 6,820 | $ — | |||||
| Accounts payable | 104,972 | 106,780 | |||||
| Other current liabilities | 237,346 | 223,826 | |||||
| Total current liabilities | 349,138 | 330,606 | |||||
| Long-term debt, net | 597,844 | 597,651 | |||||
| Pensions and other employee benefits | 173,654 | 189,973 | |||||
| Deferred tax liabilities | 30,409 | 33,337 | |||||
| Product liability and other noncurrent liabilities | 393,829 | 410,441 | |||||
| Total shareholders’ equity | 842,415 | 834,388 | |||||
| Total liabilities and shareholders’ equity | $ 2,387,289 | $ 2,396,396 | |||||
| MSA Safety Incorporated
Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) |
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| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2022 | 2021 | 2022 | 2021 | ||||
| Net income | $ 44,906 | $ 21,180 | $ 128,141 | $ 83,264 | |||
| Depreciation and amortization | 13,796 | 14,182 | 41,883 | 36,270 | |||
| Change in working capital and other operating | 5,225 | 10,867 | (66,121) | 10,609 | |||
| Cash flow from operating activities | 63,927 | 46,229 | 103,903 | 130,143 | |||
| Capital expenditures | (8,948) | (10,675) | (28,753) | (30,963) | |||
| Acquisitions, net of cash acquired | — | (329,445) | — | (392,437) | |||
| Change in short-term investments | 10,113 | 1,017 | 24,320 | 26,062 | |||
| Property disposals and other investing | 38 | (5,309) | 38 | (5,249) | |||
| Cash flow from (used in) investing activities | 1,203 | (344,412) | (4,395) | (402,587) | |||
| Change in debt | (10,000) | 281,855 | 27,000 | 308,859 | |||
| Cash dividends paid | (18,046) | (17,255) | (53,447) | (51,322) | |||
| Other financing | 1,656 | (19,715) | (29,716) | (24,107) | |||
| Cash flow (used in) from financing activities | (26,390) | 244,885 | (56,163) | 233,430 | |||
| Effect of exchange rate changes on cash,
cash equivalents and restricted cash |
(13,024) | (3,270) | (23,498) | (4,177) | |||
| Increase (decrease) in cash, cash equivalents and restricted cash |
$ 25,716 | $ (56,568) | $ 19,847 | $ (43,191) | |||
*Prior periods have 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) |
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| Americas | International | Corporate | Consolidated | ||||
| Three Months Ended September 30, 2022 | |||||||
| Net sales to external customers | $ 276,082 | $ 105,612 | $ — | $ 381,694 | |||
| Operating income | 64,313 | ||||||
| Operating margin % | 16.8 % | ||||||
| Restructuring charges | 899 | ||||||
| Currency exchange losses, net | 2,979 | ||||||
| Product liability expense | 4,035 | ||||||
| Acquisition related costs (a) | 2,899 | ||||||
| Adjusted operating income (loss) | 75,088 | 8,448 | (8,411) | 75,125 | |||
| Adjusted operating margin % | 27.2 % | 8.0 % | 19.7 % | ||||
| Depreciation and amortization (b) | 11,518 | ||||||
| Adjusted EBITDA | 83,945 | 10,980 | (8,282) | 86,643 | |||
| Adjusted EBITDA margin % | 30.4 % | 10.4 % | 22.7 % | ||||
| Three Months Ended September 30, 2021 | |||||||
| Net sales to external customers | $ 229,076 | $ 111,121 | $ — | $ 340,197 | |||
| Operating income | 32,402 | ||||||
| Operating margin % | 9.5 % | ||||||
| Restructuring charges | 3,853 | ||||||
| Currency exchange losses, net | 100 | ||||||
| Product liability expense | 10,688 | ||||||
| Acquisition related costs (a) | 7,351 | ||||||
| Adjusted operating income (loss) | 47,624 | 12,780 | (6,010) | 54,394 | |||
| Adjusted operating margin % | 20.8 % | 11.5 % | 16.0 % | ||||
| Depreciation and amortization (b) | 11,823 | ||||||
| Adjusted EBITDA | 55,774 | 16,323 | (5,880) | 66,217 | |||
| Adjusted EBITDA margin % | 24.3 % | 14.7 % | 19.5 % | ||||
*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.
| MSA Safety Incorporated
Segment Information (Unaudited) (In thousands, except percentage amounts) |
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| Americas | International | Corporate | Consolidated | ||||
| Nine Months Ended September 30, 2022 | |||||||
| Net sales to external customers | $ 754,116 | $ 330,583 | $ — | $ 1,084,699 | |||
| Operating income | 168,517 | ||||||
| Operating margin % | 15.5 % | ||||||
| Restructuring charges | 3,146 | ||||||
| Currency exchange losses, net | 4,788 | ||||||
| Product liability expense | 9,733 | ||||||
| Acquisition related costs (a) | 8,398 | ||||||
| Adjusted operating income (loss) | 184,664 | 34,674 | (24,756) | 194,582 | |||
| Adjusted operating margin % | 24.5 % | 10.5 % | 17.9 % | ||||
| Depreciation and amortization (b) | 34,961 | ||||||
| Adjusted EBITDA | 210,201 | 43,708 | (24,366) | 229,543 | |||
| Adjusted EBITDA margin % | 27.9 % | 13.2 % | 21.2 % | ||||
| Nine Months Ended September 30, 2021 | |||||||
| Net sales to external customers | $ 655,123 | $ 334,792 | $ — | $ 989,915 | |||
| Operating income | 111,619 | ||||||
| Operating margin % | 11.3 % | ||||||
| Restructuring charges | 12,239 | ||||||
| Currency exchange gains, net | (359) | ||||||
| Product liability expense | 25,235 | ||||||
| Acquisition related costs (a) | 11,891 | ||||||
| Adjusted operating income (loss) | 142,160 | 41,982 | (23,517) | 160,625 | |||
| Adjusted operating margin % | 21.7 % | 12.5 % | 16.2 % | ||||
| Depreciation and amortization (b) | 33,716 | ||||||
| Adjusted EBITDA | 165,243 | 52,283 | (23,185) | 194,341 | |||
| Adjusted EBITDA margin % | 25.2 % | 15.6 % | 19.6 % | ||||
*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 net 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 net 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) |
||||||||||||
| Three Months Ended September 30, 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 |
30 % | 11 % | 19 % | (6) % | 10 % | (1) % | 13 % | 9 % | 12 % | |||
| Plus: Currency translation effects |
4 % | 4 % | 3 % | 4 % | 3 % | 5 % | 3 % | 7 % | 4 % | |||
| Constant currency sales change |
34 % | 15 % | 22 % | (2) % | 13 % | 4 % | 16 % | 16 % | 16 % | |||
| Less:
Acquisitions |
— % | — % | — % | — % | — % | — % | — % | — % | — % | |||
| Organic constant currency sales change |
34 % | 15 % | 22 % | (2) % | 13 % | 4 % | 16 % | 16 % | 16 % | |||
| Nine Months Ended September 30, 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 |
17 % | 2 % | 15 % | 3 % | 23 % | (7) % | 11 % | (5) % | 10 % | |||
| Plus: Currency translation effects |
4 % | 3 % | 2 % | 2 % | 2 % | 4 % | 3 % | 5 % | 3 % | |||
| Constant currency sales change |
21 % | 5 % | 17 % | 5 % | 25 % | (3) % | 14 % | — % | 13 % | |||
| Less:
Acquisitions |
— % | — % | — % | — % | 16 % | — % | 4 % | — % | 4 % | |||
| Organic constant currency sales change |
21 % | 5 % | 17 % | 5 % | 9 % | (3) % | 10 % | — % | 9 % | |||
*Fixed Gas and Flame Detection includes the impact of the Bacharach acquisition completed on July 1, 2021. Acquisition constant currency revenue growth represents six months of Bacharach net sales from January 1, 2022 through June 30, 2022.
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) |
||||||||||||
| Three Months Ended September 30, 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 |
53 % | 23 % | 19 % | (3) % | 16 % | — % | 22 % | 9 % | 21 % | |||
| Plus: Currency translation effects |
— % | — % | 1 % | 1 % | — % | 1 % | — % | 2 % | — % | |||
| Constant currency sales change |
53 % | 23 % | 20 % | (2) % | 16 % | 1 % | 22 % | 11 % | 21 % | |||
| Less:
Acquisitions |
— % | — % | — % | — % | — % | — % | — % | — % | — % | |||
| Organic constant currency sales change |
53 % | 23 % | 20 % | (2) % | 16 % | 1 % | 22 % | 11 % | 21 % | |||
| Nine Months Ended September 30, 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 |
27 % | 5 % | 17 % | 7 % | 32 % | — % | 17 % | (8) % | 15 % | |||
| Plus: Currency translation effects |
— % | — % | — % | 1 % | — % | 1 % | 1 % | 1 % | 1 % | |||
| Constant currency sales change |
27 % | 5 % | 17 % | 8 % | 32 % | 1 % | 18 % | (7) % | 16 % | |||
| Less:
Acquisitions |
— % | — % | — % | — % | 20 % | — % | 4 % | — % | 4 % | |||
| Organic constant currency sales change |
27 % | 5 % | 17 % | 8 % | 12 % | 1 % | 14 % | (7) % | 12 % | |||
*Fixed Gas and Flame Detection includes the impact of the Bacharach acquisition completed on July 1, 2021. Acquisition constant currency revenue growth represents six months of Bacharach net sales from January 1, 2022 through June 30, 2022.
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) |
||||||||||||
| Three Months Ended September 30, 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 |
(13) % | (16) % | 15 % | (12) % | (1) % | (3) % | (7) % | 8 % | (5) % | |||
| Plus: Currency translation effects |
12 % | 12 % | 11 % | 8 % | 8 % | 13 % | 11 % | 16 % | 11 % | |||
| Constant currency sales change |
(1) % | (4) % | 26 % | (4) % | 7 % | 10 % | 4 % | 24 % | 6 % | |||
| Less:
Acquisitions |
— % | — % | — % | — % | — % | — % | — % | — % | — % | |||
| Organic constant currency sales change |
(1) % | (4) % | 26 % | (4) % | 7 % | 10 % | 4 % | 24 % | 6 % | |||
| Nine Months Ended September 30, 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 |
(2) % | (5) % | 8 % | (7) % | 8 % | (17) % | (1) % | (1) % | (1) % | |||
| Plus: Currency translation effects |
9 % | 9 % | 7 % | 7 % | 7 % | 8 % | 8 % | 11 % | 8 % | |||
| Constant currency sales change |
7 % | 4 % | 15 % | — % | 15 % | (9) % | 7 % | 10 % | 7 % | |||
| Less:
Acquisitions |
— % | — % | — % | — % | 11 % | — % | 3 % | — % | 2 % | |||
| Organic constant currency sales change |
7 % | 4 % | 15 % | — % | 4 % | (9) % | 4 % | 10 % | 5 % | |||
*Fixed Gas and Flame Detection includes the impact of the Bacharach acquisition completed on July 1, 2021. Acquisition constant currency revenue growth represents six months of Bacharach net sales from January 1, 2022 through June 30, 2022.
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 September 30, 2022 | |||||
| Consolidated | Americas | International | |||
| Breathing Apparatus | 34 % | 53 % | (1) % | ||
| Industrial Head Protection | 22 % | 20 % | 26 % | ||
| Firefighter Helmets & Protective Apparel | 15 % | 23 % | (4) % | ||
| Fixed Gas and Flame Detection | 13 % | 16 % | 7 % | ||
| Fall Protection | 4 % | 1 % | 10 % | ||
| Portable Gas Detection | (2) % | (2) % | (4) % | ||
| Core Sales | 16 % | 22 % | 4 % | ||
| Non-Core Sales | 16 % | 11 % | 24 % | ||
| Net Sales | 16 % | 21 % | 6 % | ||
| Net Sales excluding Acquisitions | 16 % | 21 % | 6 % | ||
.
| Nine Months Ended September 30, 2022 | |||||
| Consolidated | Americas | International | |||
| Breathing Apparatus | 21 % | 27 % | 7 % | ||
| Industrial Head Protection | 17 % | 17 % | 15 % | ||
| Firefighter Helmets & Protective Apparel | 5 % | 5 % | 4 % | ||
| Fixed Gas and Flame Detection* | 25 % | 32 % | 15 % | ||
| Fall Protection | (3) % | 1 % | (9) % | ||
| Portable Gas Detection | 5 % | 8 % | — % | ||
| Core Sales | 14 % | 18 % | 7 % | ||
| Non-Core Sales | — % | (7) % | 10 % | ||
| Net Sales | 13 % | 16 % | 7 % | ||
| Net Sales excluding Acquisitions | 9 % | 12 % | 5 % | ||
*Fixed Gas and Flame Detection includes the impact of the Bacharach acquisition completed on July 1, 2021. Acquisition constant currency revenue growth represents six months of Bacharach net sales from January 1, 2022 through June 30, 2022.
| 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 September 30, |
Nine Months Ended September 30, |
||||||||||
| 2022 | 2021 | %
Change |
2022 | 2021 | %
Change |
||||||
| Net income attributable to MSA Safety Incorporated |
$ 44,906 | $ 21,180 | 112 % | $ 128,141 | $ 82,816 | 55 % | |||||
| Product liability expense | 4,035 | 10,688 | 9,733 | 25,235 | |||||||
| Acquisition related costs (a) | 2,899 | 7,351 | 8,398 | 11,891 | |||||||
| Restructuring charges | 899 | 3,853 | 3,146 | 12,239 | |||||||
| Asset related losses and other | 4,652 | 375 | 4,776 | 423 | |||||||
| Currency exchange losses (gains), net | 2,979 | 100 | 4,788 | (359) | |||||||
| Income tax expense on adjustments | (3,331) | (4,105) | (7,400) | (13,504) | |||||||
| Adjusted earnings | $ 57,039 | $ 39,442 | 45 % | $ 151,582 | $ 118,741 | 28 % | |||||
| Adjusted earnings per diluted share | $ 1.45 | $ 1.00 | 45 % | $ 3.85 | $ 3.01 | 28 % | |||||
(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.