MSA Safety (MSA) 18 Feb 222021 Q4 Earnings call transcript

Good day. And welcome to the MSA Fourth Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Chris Hepler. ahead. go Please

Relations. Good President, and Jason. President is welcome MSA's President Ken and and to Hepler, Chairman, Americas; Nish Thank and of and President year morning, International. Treasurer; XXXX of quarter CEO; Investor Development Corporate full Director Senior This Leenen, here earnings fourth with Executive Vartanian, Vice you, Krause, of and I'm CFO conference Bob Chris Blanco, call. Steve

matters like of Before this remind Litigation to discussed we the statements meaning during may that the Reform I'd the forward-looking include begin, XXXX. call everyone Securities Act within of Private

but include, statements anticipated levels to, future are Forward-looking all projections and not limited performance. of

to Forward-looking number SEC discussed other this risks, those to call, except that and differ today. statements statements These and required any risks, results law. undertakes on factors MSA uncertainties publicly our materially of in a update are detailed forward-looking by uncertainties from may involve duty factors no other filings. actual cause as our made

included our investors.msasafety.com. have year this as as part reconciliations non-GAAP XXXX financial certain website Relations available as measures discussion our the and are on release quarter well and morning press fourth of full Investor at our non-GAAP We

performance. the open Moving we that, With call will fourth turn then year. financial call highlights He to conclude turn agenda, the Ken And will will with the Nish. remarks. will call of to Nish over today's quarter to discuss our I'll key discuss then Nish closing the and full up over to questions. to

weeks. the we're in After detailed and and will a fourth it's of Bob for President then will join International, about start morning, the with to us of Thanks, talk market. Leenen, Americas, Q&A that, Blanco, the call, more achieved overview inflation a seeing today's pleased team's a headwinds. Ken nice strong trends a also and we good I'll many quarter President We Steve fourth COVID-XX. delivered session, rising review. in very of fourth Chris. disciplined And chain couple impacts metrics. the quarter of a U.S. back both financial of time despite in and of the the everyone. ongoing evolving Bob On provide the an quarter, our records our have In execution of across all navigating these for constraints, key backdrop with financial I'm supply very challenging

record will margin revenue continues personal and in quarter by backlog discuss Ken to of driven quarterly chain growth Backlog Demand remain charge, GAAP basis products record, in X% million of is at for strong of in acquisitions And a LLC's progress the a the Our $XXX technologies aspirational order a protective margins. quarter, levels ended a operating and protecting year industrial, toward strong, up detail. was our which numbers the as was year up we're of our trend over ago. Impacting from than operating and year $XX result evidence supply challenges. XX%-plus up more our more MSA XX.X% and adjusted year. million the solid achieved in a XXX record the equipment. making non-cash a Life goal from we ago, pace This prior points

commitment their the we and solutions our thank end agile with our set the more through to of manage on to around I customer-focused. safety global to at margins very transformed people. progress delivering commitment fourth year Their provide efficient, and to progress were XX.X%. mission MSA want on entire pandemic, significant international. MSA, At goal performance. greatest operating strong business continue asset in we the tremendous improve to recognize is Back the evident As dedication customers recognize adjusted the world. for again strong context we've in a to be ongoing impacts performance. then, in our to To to the margin our our and the want our also our quarter, operating making Since XXXX, margin workforce In I we're was international.

an Our has international sales greatest not of productivity the over job X team of XXX on years, margin expansion points can focusing has nearly done. but they're geographies deliver managing value. in done markets efforts excellent where we and improvements driving costs, the of and basis level That past the resulted

focus year. continues as bring full to programs drive to to and greatest growth leading execute we now Shifting further Our team profitability, our international to customer’s challenges. solutions our

Our was increased an added organic and product $X.X Uniforms Bacharach normalized the Bristol X% and lower growth. constant basis currency levels. on offset X% was respiratory total which of to for billion. revenue Core by This of revenue products sales to pre-pandemic returned XXXX up X% acquisitions

continued out closed noted to as adjusted I case strengthening be XX.X%. the order January. for call Our operating our we margin our and the throughout year on book was was the third that that and year quarter

gas fourth As product impact year, largest and our some and in XXXX labor to we detection again orders both and the pre-pandemic quarter. levels. XXXX our and exceeded three mid-single quarters saw gear. the disruptions were in saw Supply in did revenue ability compared Incoming were SCBA, the constraints incoming solid against ship We across quarter. the demand but orders industrial, up portfolio, personal flame protective chain of first the drivers equipment, our digits turnout fixed when

COVID-XX expect look and to challenges related we inflation XXXX, forward in chain, As supply to continue. we

to related through why. in this enthusiastic deliver these and environment our challenges, positioned chain, company value is could with I'm term. term electronic near to long navigate creating supply which availability continue even ability Yet worsening, that here's products to well the the our the Specifically components of and is certain impact

is on and First, the bringing the safety development the exciting to market. work front technologies our team the new doing we're product

to third, improvements MSA very mission International improvement the We've all Second, our of pandemic, to lives. continuous the what been tested as protecting but profitability. evidenced commitment were meaningful relentless in And able focus on quarter, by unwavering throughout this team's in accomplish well-being the segment's including resilience that impact we in overall qualities and important part day our are people's each the health in and the played team what on lives an the of every other and MSA we for XXXX. make does of success our do all culture a our understanding of their and respect

Before us to call other fourth Ken, one quarter over in I particularly that want turn the the to mention I made achievement proud.

of of companies X,XXX spanning in Newsweek from selected citizens. XX companies top the headquartered excellent America's public revenue. the be was time, named They first based strive highlights that that were include United The by States one corporate organizations responsible list to the XXXX For Newsweek. most MSA candidates a on list industries

progress in area at improve on As of a protecting to lives around development, the the focused diversity our We and corporate and company governance proud build are to exclusively sustainability, each also greater evolve since XXXX. heart overall the that's to these talent resiliency year and of mission inclusion, founding responsibility environmental MSA the risk. programs adaptability of model. and business We're dedicated mission our in work has world and protect been into our workers, to of helping that

shareholders of Ken? take you this gaining Ken financial recognition I'll moment turn that, call our our results. of as now the our was So through quarterly well. hope all for to kind associates, for With proud over and I again, a to

combined and with highlights balance we strength good around on and profitability in the with And sheet morning, more start Nish. quarter. everyone. quarterly year, detail revenues to the before Thanks, financial centered fall finish. earlier record. growth, this fourth detection head discussion a protection, made acquisitions gas a had drove I'll PPE, notably strong providing our portable industrial protection We The

margins. growth incremental the XX% strong to Despite to to to fixed supply operating price on improving and invest performance we to quarterly on drive constraints business deliveries and return our detection, the in book-to-bill This market and good chain profitable We to nearly and drove an combined level was and improvement, above times levels. a million returned speaks ongoing XXXX. $XXX impact adjusted ongoing in of backlog year a to throughout shareholders flame $XX strategic had opportunity While the and enhance for over invested the focus productivity. in continue to margins, orders supply margins. to positions were took turnout we continue with expenditures strong acquisitions, a see strong dividends. in gear, ratio challenges, improvement It healthy one our realize labor gas million and margin through record inflationary the over ability long-term very and and and in chain capital our to see SCBA partnerships technology And our gross finish

strong with net remains of year-end. sheet at balance X.X Our times leverage

balanced our approach positioned are We to to allocation. well capital maintain

related that years the recoveries, for the million. charge, $XXX quarter, conducted liability to to non-cash many cumulative reserve. of our was same the product related continues pending. charges MSA product sale. details sold XXXX. quarter. ago claims insurance reflects by prior $XXX note trauma pretax which quarter, the claims offered in resolve the claims increased MSA Based the determine time, defend products non-cash of cumulative currently liability to we reserve years, annual million, to through reviewing MSA LLC longer want LLC's to Consistent LLC that fourth product I the are the the liability estimated summarize no and on that and charge in MSA It liability process with Net important At trauma review, is LLC's review took to subsidiary, the Before are

a the million, the lower the financial growth $XXX of PPE with achieved products. Acquisition-related on revenues strong industrial take let's and a year. start in I'll We respiratory weighed increase closer of by pandemic-related at look quarter. down were revenue Now X% revenue. in over quarterly of sales record prior an results focus

product revenue our basis. book-to-bill Americas currency down up continued fourth and XXXX. International chain down FGFD basis by throughout up saw activity an ongoing levels has the non-core or above was From organic pre-pandemic a in currency segment, an quarter an on the with quarter Order XXXX our organic Core constant organic revenue up ahead healthy supply quarter, remained in of was X% finishing lower the trends continued orders drove While X% SCBA X% down basis. a these of and The sales and geographic healthy overall up strong, were constant in overall the backlog in we first perspective, was well products. constant times. quarter start finished X% on of challenges quarter. In revenue healthy organically one on areas. to segment We currency the driven X% the demand was throughout and and

in to and products certain face the but electronic challenges impacting components teams ship Our intensifying challenging environment, ability the we in light executed are shortages continue to to well of our persist well don't to seeing this the year. From we're half improvement XXXX. in first in expect year meaningful we the and supply into of challenges what market, start the chain expect

sales to Bacharach to and the we $XXX Gross in Bristol compared negatively of related or totaled on purchase prior the was made XX or earnings. the $XXX for basis to year. in amortization XXXX. million profit profit million Gross by points impacted XX.X% Turning in margin profitability XX.X% price acquisitions sales quarter and

into X Excluding up note restated. this, the inflation. Americas to a went on have take XXX comparison to implemented healthy XXXX change offset ago. compared segment increase We increases basis several during to all been points our did an FIFO and January periods margin International price important It in as quarter, effect in segment. impact profit price the margin our in not had one gross in the was year a XX.X% quarter that the effect a is on We have to

or revenue, pricing on we focused and we varying the companies, regions to the by the continue costs, mitigate year. actions our from $X we in up to million taking see the from $XX inflation taking of we expense necessary expense than are of savings. offset the of about see I'm driven half This $X in $XX inflation quarter operate, million and was additional discretionary which on million September. margins. to to SG&A cost actions $X prior XX.X% remain in the While the costs in in at levels impact lower was in pleased million by come million compensation second increased primarily $X in SG&A were million acquired variable guided XX.X%

across margin We margin and our which leverage, to to enhance in productivity this operational programs business, come and through quarter. improved saw drive we performance invest continue incremental ultimately restructuring

XXX the Our basis was quarterly year adjusted margin of margins operating healthy ago. saw increase a incremental an XX%. XX.X%, in quarter over over quarter from - points of We in

has to the was accounting points compared similar from in the points basis I resulting up pleased segment increase commitments diluted operating improvements share the product On with year-over-year. loss year. items margin team share want periods, goals lower to back of that have an On earnings FIFO in an a that reduction. a late we XXXX price higher up productivity and I contributed operating realization, Looking margin from change delivered at over year. related improvements LIFO very to complexity not expansion in XXX and to earnings at International's our increase. basis, operating per made tax basis basis, adding segments. to margin pricing, both a impact profitability the the Americas and GAAP rate XX% liability a of reiterate see adjusted share XXX prior gross between revenues, productivity in strong was Investor at performance. both the Day $X.XX focus international, year-over-year, earnings was the year-over-year income on in up a the periods. change adjusted on per think per $X.XX was a Again, methods diluted to in When adjusted Higher $X.XX, on while the our did XX.X%, of expense I'm lesser also back prior we reported degree, XX.X%, reporting to restructuring

sheet. and Turning $XX flow to Quarterly balance liability, flow, excluding the product million. cash cash was

At to a or the in end invested million We million times of strategy. of of $XX continue cash of we to quarter, we shareholders balanced million debt and paid $XXX XX in the had and debt. allocation on the year, adjusted $XX execute last million million $XXX net repaid capital dividends CapEx, $XX In months EBITDA. X.X

and discontinued and fourth provides of organic for in sheet growth our to we as cash of method. the invest a balance against the because accounting is We peers. single discussed the capacity believe previously, forms I've quarter, inventory improves use accounting in FIFO method LIFO flow that preferable it method our inorganic opportunities. to strong ample accounting inventory Our and the entire Also comparability

Our all be accounting soon the XX-K that press in to published, financial this have been change. release in reflect results for and will our adjusted yesterday's Form periods presented

XXXX basis had have had of performing had to it points an of XX fourth by points LIFO basis been about the impact have for headwind and a year-end the time, business quarter. improvements across Overall, over If $X.XX, have is there to XXXX, back continued Looking report robust, EPS in XX year on margins $X.XX a would headwind of globe. of of EPS market and unfavorable and by to margins basis about on that for $X.XX. impact Demand was would are would we is end which the been well. in the signs an

very customers organic areas make spent We other has have feedback and our to evaluate the I've and continue solutions. been time of considerable with investments growth. and positive and recently products around

healthy. Our are market positions

chain we expect very our and making focused sustainable drive on We long-term XXXX, fixed for supply notably partners investments to components, impact relationships and value strong, and into this especially shareholders. near committed remain gas are in the inflation flame Our deliver our could customers creation detection to ability continue do in channel electronic are term. and products, and to with in and headwinds

the that, remarks. for to over to team unwavering With never ensure to is the Nish mission focus I'll of our our we that, for greater. very As our executing been back our pricing closing doing variable. commitment chain supply With on proud Nish? our am thank and material the work suppliers is team well our and is and said them with biggest before, I call availability turn customers. their has

Ken. Thanks,

XXXX. with inflation teams making our for will the we're continue we key pleased disruptions pleased the are ensure how rising and in I'm believe their for present with Despite meeting the very maintaining and technologies. solutions challenges strength the chain ongoing build world. what agility be with to the we I'm customers challenges, well products is MSA a costs. our to continue speed acquisitions we and supply needs, introduction our pricing last successful around also to and products discipline around progress work as two delivering Demand - of robust to I we're to be and face, while with products new positioned we're and year's brand While ensure offsetting

this interest Our up we'll continue open Having take we'll balance sheet our participation your healthy, in guidance. does in time, is your glad call we'll remember this and At be to that, for market any Please inorganic may both MSA to for give you strengthen company, positions now questions. your the through look you said to and questions Thank not investment. that morning. organic have. our

[Operator Stanley Stifel. Elliott from Instructions] Please Our first go question from comes ahead.

morning, taking Good Hey. the question. for all Thanks everybody. to

morning. Good

piece about You mid-single-digit-ish. within and of tailwind How kind all orders pricing the we I else was portfolio up, the of 'XX kind being kind talked the like should it period, think within expect equal? much pricing of

and we So fourth Ken increase then Latin I'll Stanley, the and have North up in in a quarter more northern will America then in price give color. open – little America. in a did

each think, one, November So those implement we segments. October was did in I it or of

from benefit in America some price get July in time that we'll mid-year increase obviously, frame. had XXXX. North a in We So

the see want that, we'll of net to to that then little year. little international, color a in And might from So a more price increase give for had Ken, that. effect increase And we January. first and of in the half you a

XXXX, to spoke about we in growth and back our outlook take about price it's order we value year, remain - just the Yeah. in the a higher when think business we that exceptional committed. we pace rates and of If Stanley, the us interesting. provides at to our previously think continuing acquisition-related When of the throughout job not confidence The I to sense it sort of We a level, did revenues to for product, another digit out rates the and grow the organically then continue our the about probably rate growth we X%, think think of business. about single-digit a growth additional in high ability question. is that to we year of mid-single X% of an

with the about are to XXXX, availability. with a going chain I respect think we when think Now a start to that I'll supply It's hedge tough about to material chain. dealing of other be challenges half and the When year. first bit components electronic to certainly the unprecedented supply we

that. to continue navigate we So

navigate we We But to this to we continue business well. to it grow positioned feel like are into continue XXXX.

Seasonally, the always is about half you issues bit just going supply help kind of to in a and little is Could you normal you within stronger. first thinking year deviate know, how second the the from everything of that? the given us, this are half chain

Stanley. Sure,

of So business upon really out the and first it the what in we year. throughout depends the door pace get can the half

So market and as is you improving. know, it's tight electronic components, not the for

taking we're and market created microprocessors components and the microprocessor in right. second us in on up action for really there. a platforms compatible a self-help. bit is critical doing force, to the So that some we're task all allocation. And We've open and secure two find What key looking half, we're actions will that are for

alternative some and bring So approval implement that it will we our on can in products. with get products

large orders we're second some Traditionally, back the the detection year. in and So driven make happening, fire out general, second of that course, self-help largely position that's then we have be the service firefighter fourth the hit flame ourselves by then, business, go We miss with strong there SCBA up any anticipate opportunity grants business, if in that we those go of really in the half, traditionally to those quarter. for for there's that gas And a actions. some of nice year, can forward half that the the and in half trying first fixed we the in to assistance half. there as are and will in

as point, very will this we be chain just don't supply at the So - it's know just that what stable. just is impact not

are these the trauma seeing were of you it for with and risk last of about like out sort that? memory pre-XXXX seems but standpoint, where piece, Can confidence to from been because last both thought cumulative in taking year XX. an kind around coverage there What by in the terms my the help loss products, me, would it us a thinking Just - is would any covered then of was And this I kind reserves we're you're how claims, have to that have of year. you acceleration, now.

Stanley, Well, of point clarification. a just

the But through somewhere That We 'XXs. we was so XXXXs, products. those longer selling frame. those, in the no So and not you 'XXs late from in sold time might stopped products those I 'XXs, that in believe, sold the the comment? Ken,

LLC, affected 'XX. is result claiming of for claims there's can future. spike really It's No, may we a pandemic to have are but MSA XXXX. of spike What it know way filed that is it certain the claims reserve after occurred referred just and filings where say new you in sure. continued for The It really area LLC's throughout Yeah, short into no The in the to level may area occurred definitely MSA were I not increased is have that the the of have, rates. increase going the volatile go telling. big pandemic, can't Stanley. onset, onset an of the the after

claims for claims over MSA filed decades through point. just this in It and this into activity XXXX you for models And in really new full background, year-end, was reserve For as are in account out, comprehensive point the filing the at the the several number taken that reserves the to during well those in uptick so quarters, year third filed LLC's increased number to second future. of in projected used to quarters, and incorporated was future account. estimate of claims at into was an be review is the background, the annual for

so of Okay, best luck. guys. Thanks much. And

Stanley. you, Thank

Rob from ahead. go Our from Baird. Please Mason next question comes

guys. morning, Good Yes.

fourth trying worse maybe your into things on seasonality where first well it, should you your again, put based when - looks like, gotten maybe - should off that ended backlog, in I we you we the were mean, supply up to would thought I our as as just is revenue? be fourth think, have touched both to what context of fourth thinking right quarter would with basing the constraints. work guess I'm but it outperformed going so we maybe quarter be quarter, also in the we chain in where on to we kind of again, the we or come And the what's I kind You've the baseline from say quarter? where asking at XXX in

kick off color that Ken to some I'll and it. will add

when products. first those So right. products quarter haven't affected by business. fast-turn the And our our standpoint. that really revenue chain it Rob, been comes about think the supply from quarter weakest tremendously And is traditionally stems, a fast-turn from Traditionally, really issues,

flame fixed we quarter, and with of breathing gear a will getting just one and really plants, detection, in COVID more then issue challenges our with some good delivery. been of a is Portable you're having turnout labor which we tracing some first apparatus. of contact fourth there the some think I we're had detection, quarter. the and good employees there did should difficulties gas Where and in go ball self-contained nice looks So detection. maintaining be pretty thinking even shape pretty with that. job portable hard gas protection with gas And for away. hopefully that has hats, We And

then quarter that we'll because probably a products add? should pattern of throughout expect we our fixed on first to that of fast-turn out to improve. normal lower flame products. in catch SCBA we gear, see can year occur as quantities, want So turnout you Ken, and larger the up that those detection start get the and And gas you'll

Yeah, the from just start order a year the been finer do so It's to point to business well on perspective. really an see that, Rob. good

last to we start it was solid quarter to show and with thing potentially growth were point year, of chain XX-plus for we're as that this growth levels. is want the tough year-over-year you we we're The all daily it certainly basis. out growth, quarter. that some be continue the If challenges first first percent. here But to single able pre-pandemic out and feel comparing I tough a remember dealing high We comparison are one digit point us some as year, fact changing seeing to like on a we just order a should in supply that was

we if so we have performance digit sort through, dealing the what question. high not - growth a continue uncertainties single in and right again, just so to is But out And just see with. many first now continue probably see we're it's coming rate the of we quarter to the of many there's so

see. I see. I

talked orders? sense channel able - Just those? your stocking on that those distribution about. you short-term channel comfortable is industrial products fill now stocking Any that Are we to do

really to gas a configurations. about There of order is when portable detection, portable is a So product. detection made gas you different lot think

a hats those item. And item. a stocking So have not not logos. that's again, half Well - traditionally that's stocking hard over are our

made are to again, those, So products. order type

a on but do the of pretty non-logo consistent, that's up do protection get levels get of March loading bit that. the see obviously, turnaround not part have here hard business. so significant typically and a don't been hats, some we And we and so some hard the inventory in and stocking we in, distributors a The stocking season, hats fall of April because lot

that's about that polyethylene. don't case might speak, have expect last been But any really the worried so-called today. are to so the we year hasn't not been inventory buying, we of when There people shortages a change panic where issue So channels. of an in lot bring into

and gas you're on fixed the Just know constrained question, last Nish, I that flame.

is for do terms line? And so backlog just think demand that the recovering of overall that is where level in higher. product business you the But

in business. question. a our That's really the We good traditional recovery saw

back we for hard as go at get back normally protection. And hard gas saw cetera. business just et typically of seeing work, fall a and a for flame a good, that basis, And and we're been with demand but come If And are We're CapEx right. detection behind in gas right to strong. do. see budgets natural on and first. get got in employees detection. that customers, kick that the for hat up. we do normally our pick nicely. earplugs, user the safety and we're you It's we When you flame that pretty turn now hats, then end to revenue glasses, on prices around, rebounded we over saw - US, spending the really the broad you not they products we up starting picks look back basis, seeing expect progression That's We the to gas portable global oil and $XX recovery. has fixed as a And fixed saw business back and those is barrel. The quite here in business. Demand that that a

outlook So be should through hopefully that the pretty 'XX good 'XX. for into and

you. Thank good. Very

you. Thank

Rob. Thanks,

are conference Chris remarks. [Operator like to Instructions] queue. Hepler questions any This to closing over session. for I'd no turn more There the the our in concludes back question-and-answer

And this Jason. thank morning. you Thanks, us joining all for

to XX our and an you portion days. Thank of transcript the missed audio soon. with on We If for forward available speaking today's call, you Relations website will look again the you. Investor next replay be conference

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