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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2024-10-24 · 120 added, 229 removed, 95 unchanged (79% of the section changed)

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The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results.

Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the sections of our annual report entitled “Forward-Looking Statements” and “Risk Factors,” and those discussed in our Form 10-Q quarterly reports filed after such annual report (such as in Part II, Item 1A, “Risk Factors.”)

Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including but not limited to the effects of changes in U.S.

trade policy and trade agreements, along with increased tariffs as well as those discussed in the sections of our annual report entitled “Forward-Looking Statements” and “Risk Factors,” and those discussed in our Form 10-Q quarterly reports filed after such annual report (such as in Part II, Item 1A, “Risk Factors.”)

BUSINESS OVERVIEW

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The Company's comprehensive product line, which is governed by rigorous safety standards across highly regulated industries, is used to protect workers and facility infrastructures around the world in a broad range of markets, including fire service, energy, utility, construction and industrial manufacturing applications as well as heating, ventilation, air conditioning and refrigeration ("HVAC-R").

The Company's product portfolio includes fire service where core products include self-contained breathing apparatus ("SCBA"), protective apparel and helmets;

detection where core products include fixed gas and flame detection ("FGFD") systems and portable gas detection instruments;

and industrial personal protective equipment ("PPE") where core products include industrial head protection and fall protection devices.

The Company's principal product categories are fire service, detection and industrial personal protective equipment ("PPE").

Core products for fire service include self-contained breathing apparatus ("SCBA"), protective apparel and helmets;

core products for detection include fixed gas and flame detection ("FGFD") systems and portable gas detection instruments;

and core products for industrial PPE include industrial head protection and fall protection devices.

In addition to its principal product categories, MSA continues to deploy and grow its MSA+™ solution, a business approach that combines MSA hardware, software, and services to simplify safety operations for customers and deliver recurring revenue.

A detailed listing of our significant product offerings in the aforementioned product groups above is included in MSA's Annual Report on Form 10-K for the year ended December 31, 2024.

We tailor our product offerings and distribution strategy to satisfy distinct customer preferences that vary across geographic regions.

We tailor our product and solution offerings and distribution strategy to satisfy distinct customer preferences that vary across geographic regions.

To best serve these customer preferences, we have organized our business into four geographical operating segments that are aggregated into three reportable segments:

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023

Net sales for the three months ended September 30, 2024, were $432.7 million, a decrease of $14.0 million, or 3.1%, compared to $446.7 million in the same period last year.

Please refer to the Net Sales table for a reconciliation of the quarter over quarter sales change.

Net Sales Three Months Ended September 30, Dollar

Increase Percent

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

Net Sales Three Months Ended March 31, Dollar

(Decrease) Percent

(In millions, except percentage change) 2025 2024

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International 128.2 117.8 10.4 8.8%

Net sales for the three months ended March 31, 2025, were $421.3 million, an increase of $8.0 million, or 1.9%, compared to $413.3 million in the same period last year and included approximately $10.0 million of sales pulled forward into the quarter in consideration of tariffs.

Please refer to the Net Sales table below for a reconciliation of the quarter over quarter sales change.

Net Sales Three Months Ended

September 30, 2024 versus September 30, 2023

March 31, 2025 versus March 31, 2024

(Percent Change) Americas International Consolidated

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Currency translation effects 1.8% 2.1% 1.9%

Organic constant currency sales change (3.4)% (0.8)% (2.6)%

Organic constant currency sales change is a non-GAAP financial measure.

Organic sales change 1.0% 10.9% 3.8%

Organic sales change is a non-GAAP financial measure.

See the "Non-GAAP Financial Measures" section below.

Net sales for the Americas segment were $299.5 million in the third quarter of 2024, a decrease of $14.8 million, or 4.7%, compared to $314.3 million in the third quarter of 2023.

Organic constant currency sales in the Americas segment decreased 3.4% during the period.

This decrease was driven by a decline in fire service, primarily SCBA where delayed timing of large order delivery was a factor, partially offset by an increase in detection, primarily portables.

Net sales for the International segment were $133.2 million in the third quarter of 2024, an increase of $0.8 million, or 0.6%, compared to $132.4 million for the third quarter of 2023.

Organic constant currency sales in the International segment decreased 0.8% during the period.

Growth in fire service and detection was mostly offset by a decline in industrial PPE.

The operating environment remains dynamic.

Looking forward, we expect to finish 2024 with mid-single-digit sales growth in the fourth quarter, resulting in low-single-digit top-line growth for the full year.

Net sales for the Americas segment were $293.1 million in the first quarter of 2025, a decrease of $2.4 million, or 0.8%, compared to $295.5 million in the first quarter of 2024.

Organic sales in the Americas segment increased 1.0% during the period, driven by growth in detection and industrial PPE partially offset by a decrease in fire service.

Net sales for the International segment were $128.2 million in the first quarter of 2025, an increase of $10.4 million, or 8.8%, compared to $117.8 million for the first quarter of 2024.

Organic sales in the International segment increased 10.9% during the period, driven by growth in detection and fire service partially offset by a modest decline in industrial PPE.

We maintain our low single-digit full-year organic sales growth outlook.

The business remains healthy, supported by stable order trends into April.

Our broad diversification across products, geographies, and markets, along with favorable underlying market trends in the safety industry, and a strong commercial pipeline, provides confidence as we move forward.

There has been increased macroeconomic uncertainty driven by global tariff policies which could present risk to our growth outlook.

Refer to Note 9—Segment Information to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q, for information regarding sales by product group.

Gross profit .

Gross profit for the third quarter of 2024 was $207.5 million, a decrease of $11.3 million or 5.2%, compared to $218.8 million for the third quarter of 2023.

The ratio of gross profit to net sales was 47.9% in the third quarter of 2024 compared to 49.0% in the same quarter last year.

The decrease in gross profit margin is primarily related to lower sales volume.

Effective price/cost management and productivity improvements offset inflationary pressures.

Gross profit for the first quarter of 2025 was $193.4 million, a decrease of $2.1 million or 1.1%, compared to $195.5 million for the first quarter of 2024.

The ratio of gross profit to net sales was 45.9% in the first quarter of 2025 compared to 47.3% in the same quarter last year.

The decrease in gross profit margin is related to transactional foreign currency headwinds and inflation partially offset by higher sales volume, price realization and favorable product mix.

While we are taking actions to mitigate tariffs and foreign exchange pressures, we may not be able to offset all the headwinds in the near term.

We will remain agile in this dynamic environment if the operating landscape significantly diverges from our expectations.

Selling, general and administrative expenses.

Selling, general and administrative ("SG&A") expenses were $95.1 million during the third quarter of 2024, a decrease of $7.1 million or 6.9%, compared to $102.2 million for the same period a year ago.

Overall, SG&A expenses were 22.0% of net sales during the third quarter of 2024, compared to 22.9% of net sales during the same period in 2023.

Organic constant currency SG&A decreased by approximately $6.9 million or 6.7%.

The decrease in SG&A was driven by lower variable compensation and discretionary expense management, partially offset by inflation and professional service expense related to strategic initiatives.

Please refer to the SG&A expenses table for a reconciliation of the quarter over quarter expense change.

Selling, general and administrative ("SG&A") expenses were $94.0 million during the first quarter of 2025, a decrease of $0.2 million or 0.2%, compared to $94.2 million for the first quarter of 2024.

SG&A expenses were 22.3% of net sales during the first quarter of 2025, compared to 22.8% of net sales during the same period in 2024.

Organic SG&A increased by approximately $1.2 million or 1.3%.

The increase in SG&A was driven by inflation, higher commission expense on double-digit detection growth and corporate development-related costs, partially offset by discretionary expense management and $3 million of favorable discrete adjustments in the current quarter primarily related to variable compensation.

Please refer to the SG&A expenses table below for a reconciliation of the quarter over quarter expense change.

Selling, general, and administrative expenses Three Months Ended

September 30, 2024 versus September 30, 2023

March 31, 2025 versus March 31, 2024

(Percent Change) Consolidated

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Currency translation effects 1.5%

Organic Constant currency change (6.7)%

Organic constant currency SG&A change is a non-GAAP financial measure.

Organic change 1.3%

Organic SG&A change is a non-GAAP financial measure.

See the "Non-GAAP Financial Measures" section below.

Research and development expense .

Research and development expense was $16.7 million during the third quarter of 2024, a decrease of $1.0 million, compared to $17.7 million during the third quarter of 2023.

Research and development expense was 3.9% of net sales in the third quarter of 2024 and 4.0% in the third quarter of 2023.

During the third quarter of 2024 and 2023, we capitalized $3.2 million and $3.3 million of software development costs, respectively.

Depreciation expense for capitalized software development costs of $2.7 million for both the third quarter of 2024 and 2023, was recorded in costs of products sold on the unaudited Condensed Consolidated Statements of Operations.

MSA remains committed to dedicating significant resources to research and development activities, including the development of technology-based safety solutions.

As we continue to invest a significant portion of our new product development into technology-based safety solutions, we anticipate that the historical relationship of research and development expense to net sales will continue to evolve;

Research and development expense was $15.7 million during the first quarter of 2025, a decrease of $0.2 million, compared to $15.9 million during the first quarter of 2024.

Research and development expense was 3.7% of net sales in the first quarter of 2025 and 3.9% in the first quarter of 2024.

During the first quarter of 2025 and 2024, we capitalized $3.3 million and $3.4 million of software development costs, respectively.

Depreciation expense for capitalized software development costs of $2.9 million and $2.7 million for the first quarter of 2025 and 2024, respectively, was recorded in Costs of products sold on the unaudited Condensed Consolidated Statements of Income.

MSA remains committed to dedicating significant resources to research and development activities, including the recently announced MSA ® G1 ™ SCBA XR Edition and all-new Globe ® G-XTREME ® PRO Jacket.

however, we do not anticipate reductions in the relative level of total spend on research and development activities on an annual basis.

Total spend on both software development and research and development activities was $19.9 million and $21.0 million during the third quarter of September 30, 2024, and 2023, respectively.

Total spend on both software development and research and development activities was $19.0 million and $19.3 million during the first quarter of March 31, 2025, and 2024, respectively.

Restructuring charges .

Restructuring charges of $1.2 million during the third quarter of 2024 were primarily related to initiatives to optimize our manufacturing footprint and improve productivity.

Restructuring charges of $3.3 million during the third quarter of 2023 were primarily related to initiatives to optimize our manufacturing footprint and drive profitable growth.

Restructuring charges of $1.9 million during the first quarter of 2025 were primarily related to initiatives to right-size the organization in response to macroeconomic conditions and ongoing initiatives to optimize our manufacturing footprint and improve productivity.

Restructuring charges of $3.0 million during the first quarter of 2024 were primarily related to management restructuring and initiatives to adjust our cost structure and optimize our manufacturing footprint.

Currency exchange .

Currency exchange losses were $3.0 million in the third quarter of 2024 compared to $1.5 million in the third quarter of 2023.

Currency exchange losses were $4.1 million in the first quarter of 2025 compared to $2.3 million in the first quarter of 2024.

The currency exchange activity for both periods related primarily to foreign currency exposure on unsettled inter-company balances and recognized exchange loss for our Argentina affiliate operating in a hyper-inflationary environment.

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GAAP operating income.

Consolidated operating income for the third quarter of 2024 was $91.5 million compared to $94.1 million in the same period last year.

The decrease in operating income was primarily driven by lower sales and gross profit partially offset by productivity improvements and lower SG&A as discussed further above.

Consolidated operating income for the first quarter of 2025 was $77.8 million compared to $80.1 million in the same period last year.

The decrease in operating income was primarily driven by lower gross profit and increased currency exchange losses, partially offset by lower restructuring charges as discussed further above.

Adjusted operating income.

Americas adjusted operating income for the third quarter of 2024 was $91.8 million, a decrease of $2.1 million or 2.2% compared to $93.9 million in the prior year third quarter.

The decrease in adjusted operating income is attributable to lower sales volumes partially offset by a decline in SG&A expenses.

Effective price/cost management and productivity improvements offset inflationary pressures.

International adjusted operating income for the third quarter of 2024 was $18.2 million, a decrease of $4.4 million, or 19.5%, compared to $22.6 million in the prior year third quarter.

The decrease in adjusted operating income is attributable to lower sales volumes partially offset by productivity improvements and pricing.

Corporate segment adjusted operating loss for the third quarter of 2024 was $12.1 million, a decrease of $3.1 million, compared to an adjusted operating loss of $15.2 million in the third quarter of 2023, driven by lower variable compensation partially offset by inflation and increased professional service fees associated with various strategic initiatives.

The following tables represent a reconciliation from GAAP operating income to adjusted operating income (loss) and adjusted EBITDA.

Americas adjusted operating income for the first quarter of 2025 was $78.7 million, a decrease of $7.5 million or 8.7% compared to $86.2 million in the prior year first quarter.

The decrease in adjusted operating income is attributable to lower sales and gross profit partially offset by a decline in SG&A expenses.

International adjusted operating income for the first quarter of 2025 was $18.7 million, an increase of $5.2 million, or 38.7%, compared to $13.5 million in the prior year first quarter.

The increase in adjusted operating income is attributable to higher sales volumes and higher gross profit driven by productivity improvements and pricing partially offset by higher SG&A expense.

Corporate segment adjusted operating loss for the first quarter of 2025 was $9.9 million, a decrease of $1.8 million, compared to an adjusted operating loss of $11.7 million in the first quarter of 2024, driven by lower variable compensation partially offset by inflation.

The following tables present a summary of adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA and adjusted EBITDA % by reportable segment.

Adjusted operating margin % is calculated as adjusted operating income (loss) divided by net sales and adjusted EBITDA margin % is calculated as adjusted EBITDA divided by net sales.

Adjusted operating income (loss) Three Months Ended September 30, 2024

(In thousands) Americas International Corporate Consolidated

Net sales to external customers $ 299,497 $ 133,182 $ — $ 432,679

Operating income 91,477

Restructuring charges (Note 3) 1,184

Currency exchange losses, net 2,985

Amortization of acquisition-related intangible assets 2,269

Three months ended March 31, 2025

Net sales $ 293,160 $ 128,180 $ — $ 421,340

GAAP operating income 77,761

Adjusted operating income (loss) 78,693 18,708 (9,899) 87,502

Adjusted operating margin % 26.8 % 14.6 %

Depreciation and amortization 13,690

Adjusted EBITDA 88,412 22,725 (9,670) 101,467

Adjusted EBITDA margin % 33.8 % 16.6 %

Adjusted operating income (loss) Three Months Ended September 30, 2023

(In thousands) Americas International Corporate Consolidated

Net sales to external customers $ 314,273 $ 132,455 $ — $ 446,728

Operating income 94,123

Restructuring charges (Note 3) 3,285

Currency exchange losses, net 1,496

Amortization of acquisition-related intangible assets 2,315

Transaction costs (a)

Adjusted operating income (loss) 93,918 22,577 (15,198) 101,297

Adjusted operating margin % 29.9 % 17.0 %

Depreciation and amortization 13,189

Adjusted EBITDA % 30.2 % 17.7 %

Adjusted EBITDA margin % 32.8 % 19.8 %

(a) Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during our evaluation of acquisitions and divestitures.

These costs are included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.

Adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA and adjusted EBITDA margin % are non-GAAP financial measures.

See the "Non-GAAP Financial Measures" section below.

Total other expense, net.

Total other expense, net, for the third quarter of 2024 was $3.3 million, compared to $6.5 million for the same period in 2023, driven primarily by decreased interest expense related to reduced debt balances related to prior year borrowings associated with the MSA LLC divestiture as well as increased pension income driven by a higher expected rate of return.

Income taxes.

The reported effective tax rate for the third quarter of 2024 was 24.4% compared to 25.6% for the third quarter of 2023.

The decrease from the prior year was primarily driven by discrete benefits booked in the third quarter of 2024 related to the filing of prior period tax returns and a decrease in nondeductible compensation.

We are subject to regular review and audit by both foreign and domestic tax authorities.

While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ materially from the tax amounts recorded in our unaudited condensed consolidated financial statements.

Net income was $66.6 million for the third quarter of 2024, or $1.69 per diluted share compared to $65.3 million, or $1.65 per diluted share, for the same period last year.

Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023

Net sales for the nine months ended September 30, 2024, were $1.31 billion, an increase of $16.1 million, or 1.2%, compared to $1.29 billion in the same period last year.

Please refer to the Net Sales table for a reconciliation of the period over period sales change.

Net Sales Nine Months Ended September 30, Dollar

Increase Percent

(In millions, except percentage change) 2024 2023

Consolidated $1,308.4 $1,292.3 $16.1 1.2%

Americas 909.7 902.9 6.8 0.8%

International 398.7 389.4 9.3 2.4%

Net Sales Nine Months Ended

September 30, 2024 versus September 30, 2023

(Percent Change) Americas International Consolidated

GAAP reported sales change 0.8% 2.4% 1.2%

Currency translation effects 0.3% (0.5)% 0.2%

Organic constant currency sales change 1.1% 1.9% 1.4%

Organic constant currency sales change is a non-GAAP financial measure.

See the "Non-GAAP Financial Measures" section below.

Net sales for the Americas segment were $909.7 million in the nine months ended September 30, 2024, an increase of $6.8 million, or 0.8%, compared to $902.9 million in the same period last year.

Organic constant currency sales in the Americas segment increased 1.1% during the period.

This growth was driven by an increase in detection.

Net sales for the International segment were $398.7 million in the nine months ended September 30, 2024, an increase of $9.3 million, or 2.4%, compared to $389.4 million in the same period last year.

Organic constant currency sales in the International segment increased 1.9% during the period.

This growth was driven by strength across fire service and detection, partially offset by a decline in industrial PPE.

Refer to Note 8—Segment Information to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q, for information regarding sales by product group.

Gross profit .

Gross profit for the nine months ended September 30, 2024, was $626.0 million, an increase of $12.0 million or 2.0%, compared to $614.0 million during the same period last year.

The ratio of gross profit to net sales was 47.8% during the nine months ended September 30, 2024 compared to 47.5% during the same period last year.

Volume leverage, price/cost management and productivity efforts offset inflationary pressures and contributed to the gross profit margin improvement.

Selling, general and administrative expenses.

SG&A expenses were $294.3 million during the nine months ended September 30, 2024, an increase of $4.7 million or 1.6%, compared to $289.6 million during the same period last year.

Overall, SG&A expenses were 22.5% of net sales during the nine months ended September 30, 2024, compared to 22.4% of net sales during the same period in 2023.

Organic constant currency SG&A increased $5.1 million or 1.8%.

The increase in SG&A was driven by higher commercial costs associated with volume growth, inflation, net cost for product related legal matter and higher professional service expense partially offset by lower variable compensation and discretionary cost management.

Please refer to the selling, general, and administrative expenses table for a reconciliation of the period over period expense change.

Selling, general, and administrative expenses Nine Months Ended

September 30, 2024 versus September 30, 2023

(Percent Change) Consolidated

GAAP reported change 1.6%

Currency translation effects 0.2%

Organic constant currency change 1.8%

Organic constant currency SG&A change is a non-GAAP financial measure.

See the "Non-GAAP Financial Measures" section below.

Research and development expense .

Research and development expense was $49.7 million during the nine months ended September 30, 2024, an increase of $0.8 million, compared to $48.9 million during the same period last year.

Research and development expense was 3.8% of net sales in both the nine months ended September 30, 2024 and 2023.

During the nine months ended September 30, 2024 and 2023, we capitalized $10.0 million and $9.4 million of software development costs, respectively.

Depreciation expense for capitalized software development costs of $8.2 million and $7.5 million during the nine months ended September 30, 2024 and 2023, respectively, was recorded in costs of products sold on the unaudited Condensed Consolidated Statements of Operations.

MSA remains committed to dedicating significant resources to research and development activities, including the development of technology-based safety solutions.

however, we do not anticipate reductions in the relative level of total spend on research and development activities on an annual basis.

Total spend on both software development and research and development activities was $59.7 million and $58.3 million during the nine months ended September 30, 2024, and 2023, respectively.

Restructuring charges .

Restructuring charges of $5.7 million during the nine months ended September 30, 2024 were primarily related to ongoing initiatives to optimize our manufacturing footprint and improve productivity as well as management restructuring.

Restructuring charges of $8.4 million during nine months ended September 30, 2023 related to our ongoing initiatives to adjust our cost structure and improve productivity.

We remain focused on executing programs to optimize our cost structure.

Currency exchange .

Currency exchange losses were $4.7 million during the nine months ended September 30, 2024, compared to $8.8 million in the same period of 2023.

During 2024, we recognized non-cash net cumulative translation gains of $1.2 million associated with certain foreign subsidiaries.

The remaining currency exchange activity for both periods related primarily due to foreign currency exposure on unsettled inter-company balances and recognized exchange loss for our Argentina affiliate operating in a hyper-inflationary environment.

Refer to Note 15—Derivative Financial Instruments to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q, for information regarding our currency exchange rate risk management strategy.

Product liability expense.

Product liability expense for the nine months ended September 30, 2024, and 2023, was minimal due to our divestiture of MSA LLC in January 2023, as discussed further in Note 17—Commitments and Contingencies to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q.

Loss on divestiture of MSA LLC.

The $129.2 million pre-tax loss on divestiture of MSA LLC for the nine months ended September 30, 2023, relates to the derecognition of all legacy cumulative trauma product liability reserves and related insurance assets of the divested subsidiary during the first quarter of 2023.

The loss also includes a $341.2 million contribution of cash and cash equivalents, as well as transaction related costs of $5.6 million.

Refer to Note 17—Commitments and Contingencies to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q for further information.

GAAP operating income.

Consolidated operating income for the nine months ended September 30, 2024, was $271.5 million compared to $129.1 million in the same period last year.

The increase in operating results was driven by the higher sales and gross profit margin as well as the absence of loss on divestiture of MSA LLC that was recognized in 2023, partially offset by increased SG&A expense.

Adjusted operating income.

Americas adjusted operating income for the nine months ended September 30, 2024 was $276.5 million, an increase of $16.1 million, or 6.2%, compared to $260.4 million in the prior year.

The increase in adjusted operating income is primarily attributable to higher sales and gross profit margin due to effective price/cost management partially offset by higher SG&A expense to support business growth.

International adjusted operating income for the nine months ended September 30, 2024, was $55.9 million, a decrease of $4.2 million, or 6.9%, compared to $60.1 million in the prior year.

The decrease in adjusted operating income is primarily attributable to lower sales volumes and unfavorable mix.

Corporate segment adjusted operating loss for the nine months ended September 30, 2024, was $38.4 million, an increase of $0.3 million compared to an adjusted operating loss of $38.1 million in the same period of 2023 driven by inflation and increased professional service fees associated with various strategic initiatives partially offset by lower variable compensation.

The following tables represent a reconciliation from GAAP operating income to adjusted operating income (loss) and adjusted EBITDA.

Adjusted operating margin % is calculated as adjusted operating income (loss) divided by net sales and adjusted EBITDA margin % is calculated as adjusted EBITDA divided by net sales.

Adjusted operating income (loss) Nine Months Ended September 30, 2024

(In thousands) Americas International Corporate Consolidated

Net sales to external customers $ 909,745 $ 398,698 $ — $ 1,308,443

Three months ended March 31, 2024

Net sales $ 295,539 $ 117,763 $ — $ 413,302

GAAP operating income 80,112

Restructuring charges (Note 3) 5,744

Currency exchange losses, net 4,715

Net cost for product related legal matter 5,000

Amortization of acquisition-related intangible assets 6,888

Transaction costs (a)

Adjusted operating income (loss) 86,218 13,486 (11,695) 88,009

Adjusted operating margin % 29.2 % 11.5 %

Depreciation and amortization 40,675

Adjusted EBITDA 95,693 17,045 (11,484) 101,254

Adjusted EBITDA margin % 33.6 % 16.9 %

(a) Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during our evaluation of acquisitions and divestitures.

These costs are included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.

Adjusted operating income (loss) Nine Months Ended September 30, 2023

(In thousands) Americas International Corporate Consolidated

Net sales to external customers $ 902,918 $ 389,372 $ — $ 1,292,290

GAAP operating income 129,070

Adjusted EBITDA % 32.4 % 14.5 %

Adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures and operating ratios derived from non-GAAP financial measures.

Refer to Note 9—Segment Information to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q for reconciliation of total adjusted operating income from reportable segments to income before income taxes and table below for reconciliation of adjusted EBITDA to net income.

See also the "Non-GAAP Financial Information" section below.

A reconciliation of total adjusted EBITDA and total adjusted operating income from reportable segments to net income is presented in the following table:

Three Months Ended March 31,

(In thousands) 2025 2024

Adjusted EBITDA $ 101,467 $ 101,254

Depreciation and amortization 13,965 13,245

Adjusted operating income 87,502 $ 88,009

Restructuring charges (Note 4) 1,924 3,017

Currency exchange losses, net 4,076 2,333

Loss on divestiture of MSA LLC (Note 17) 129,211

Product liability expense (Note 17) 3

Amortization of acquisition-related intangible assets 2,286 2,314

Transaction costs (a)

Adjusted operating income (loss) 260,428 60,099 (38,066) 282,461

Adjusted operating margin % 28.8 % 15.4 %

Depreciation and amortization 38,029

Adjusted EBITDA 287,628 70,296 (37,434) 320,490

Adjusted EBITDA margin % 31.9 % 18.1 %

(a) Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during our evaluation of acquisitions and divestitures.

These costs are included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.

Adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA and adjusted EBITDA margin % are non-GAAP financial measures.

See the "Non-GAAP Financial Measures" section below.

Total other expense, net.

Total other expense, net, for the nine months ended September 30, 2024 was $13.3 million, compared to $21.7 million for the same period in 2023.

The decrease in total other expense, net is primarily due to decreased interest expense related to reduced debt balances related to prior year borrowings associated with the MSA LLC divestiture as well as increased pension income driven by a higher expected rate of return partially offset by pension settlement expense recognized in the current year.

GAAP operating income $ 77,761 $ 80,112

Interest expense 6,835 10,740

Other income, net (7,023) (6,235)

Income before income taxes 77,949 75,607

Provision for income taxes 18,344 17,468

Net income $ 59,605 $ 58,139

(a) Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred in connection with acquisitions and divestitures.

These costs are included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Income.

Total other (income) expense, net.

Total other income, net, for the first quarter of 2025 was $0.2 million, compared to other expense, net, of $4.5 million for the same period in 2024, driven primarily by decreased interest expense related to lower debt balances and interest rates as well as increased pension income driven by a higher expected rate of return.

Income taxes.

The reported effective tax rate for the nine months ended September 30, 2024 was 23.7% compared to 116.6% for the same period in 2023.

This significant variance is primarily due to the divestiture of MSA LLC and the non-deductible loss recorded on the derecognition of the product liability reserves and related assets in the prior year.

Refer to Note 17—Commitments and Contingencies to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q for further information on this transaction.

The reported effective tax rate for the first quarter of 2025 was 23.5% compared to 23.1% for the first quarter of 2024.

The increase from the prior year was primarily driven by an increase in state income taxes.

We are subject to regular review and audit by both foreign and domestic tax authorities.

Net income (loss) attributable to MSA Safety Incorporated .

Net income was $197.0 million for the nine months ended September 30, 2024, or $4.98 per diluted share compared to net loss of $17.8 million, or $(0.46) per diluted share, for the same period last year.

Net income was $59.6 million for the first quarter of 2025, or $1.51 per diluted share, compared to $58.1 million, or $1.47 per diluted share, for the same period last year.

Non-GAAP Financial Measures

This report includes certain non-GAAP financial measures and operating ratios derived from non-GAAP financial measures.

These financial measures and ratios include organic constant currency revenue growth, organic constant currency SG&A change, adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA and adjusted EBITDA margin %.

Organic constant currency sales and SG&A change are non-GAAP financial measures provided by the Company to give a better understanding of the Company's underlying business performance.

Organic constant currency sales and SG&A change are calculated by deducting the percentage impact from currency translation effects from the overall percentage change in net sales and SG&A.

The Company believes that organic constant currency revenue growth and SG&A change are useful metrics for investors, as foreign currency translation can have a material impact on revenue and SG&A trends.

Organic constant currency revenue growth and SG&A change highlight ongoing business performance excluding the impact of fluctuating foreign currencies, which is outside of the Company's control.

These financial measures and ratios include organic (referred to in our historical filings as constant currency) sales change, organic SG&A change, adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA and adjusted EBITDA margin %.

Organic sales and SG&A change are non-GAAP financial measures provided by the Company to give a better understanding of the Company's underlying business performance.

Organic sales and SG&A change are calculated by deducting the percentage impact from currency translation effects as well as the impact from acquisitions and divestitures completed in the preceding 12 months from the overall percentage change in net sales and SG&A.

The Company believes that organic sales and SG&A change are useful metrics for investors, as foreign currency translation can have a material impact on revenue and SG&A trends.

Organic sales and SG&A change highlight ongoing business performance excluding the impact of fluctuating foreign currencies, acquisitions and divestitures.

Adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA and adjusted EBITDA margin % are non-GAAP financial measures and operating ratios derived from non-GAAP measures.

Adjusted operating income (loss) is reconciled above to the nearest GAAP financial measure, Operating income (loss), and excludes restructuring, currency exchange, product liability expense, loss on divestiture of MSA LLC, net cost for product related legal matter, transaction costs and acquisition-related amortization.

Adjusted EBITDA is reconciled above to the nearest GAAP financial measure, Operating income (loss) and excludes depreciation and amortization expense.

Adjusted operating margin % is defined as adjusted operating income (loss) divided by segment net sales to external customers and adjusted EBITDA margin % is defined as adjusted EBITDA divided by segment net sales to external customers.

These metrics are consistent with how the Company's chief operating decision maker ("CODM") evaluates segment results and makes strategic decisions about the business.

Total reportable segment adjusted operating income is reconciled above to the nearest GAAP financial measure, operating income, and excludes restructuring, currency exchange, transaction costs and acquisition-related amortization.

Total reportable segment adjusted EBITDA is reconciled above to the nearest GAAP financial measure, net income and, in addition to the items summarized above that are excluded from adjusted operating income (loss), excludes depreciation and amortization expense;

interest expense;

other income, net;

and provision for income taxes.

Adjusted operating margin % is defined as adjusted operating income (loss) divided by net sales to external customers and adjusted EBITDA margin % is defined as adjusted EBITDA divided by net sales to external customers.

Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities as well as to makes strategic decisions about the business and allocate resources.

Additionally, these non-GAAP financial measures provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers.

Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities as well as to allocate resources.

The non-GAAP financial measures and key performance indicators we use, and computational methods with respect thereto, may differ from the non-GAAP financial measures and key performance indicators, and computational methods, that our peers use to assess their performance and trends.

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Our main source of liquidity is operating cash flows, supplemented by borrowings.

Our principal liquidity requirements are for working capital, capital expenditures, principal and interest payments on debt, declared dividend payments and acquisitions.

At September 30, 2024, approximately 55% of our long-term debt is at fixed interest rates with repayment schedules through 2036.

Our principal liquidity requirements are for working capital, capital expenditures, principal and interest payments on debt, dividend payments and share repurchases.

At March 31, 2025, approximately 60% of our long-term debt is at fixed interest rates with repayment schedules through 2036.

The remainder of our long-term debt is at variable rates on an unsecured revolving credit facility and a term loan, both due in 2026.

At September 30, 2024, approximately 90% of our borrowings are denominated in U.S.

At March 31, 2025, approximately 90% of our borrowings are denominated in U.S.

dollars, which limits our exposure to currency exchange rate fluctuations.

At September 30, 2024, the Company had cash and cash equivalents totaling $154.4 million and access to sufficient capital, providing ample liquidity and flexibility to continue to maintain our balanced capital allocation strategy that prioritizes growth investments, funding our dividends and servicing debt obligations.

Cash, cash equivalents and restricted cash increased $6.6 million during the nine months ended September 30, 2024 compared to increasing $2.0 million during the same period in 2023.

We believe MSA's healthy balance sheet and access to significant capital at September 30, 2024, positions us well to navigate through challenging business conditions, supply chain constraints and other unexpected events.

At March 31, 2025, the Company had cash and cash equivalents totaling $170.6 million and access to sufficient capital, providing ample liquidity and flexibility to continue to maintain our balanced capital allocation strategy that prioritizes growth investments, funding our dividends and servicing debt obligations.

Cash, cash equivalents and restricted cash increased $6.2 million during the three months ended March 31, 2025, compared to increasing $1.9 million during the same period in 2024.

At March 31, 2025, we had no borrowings outstanding under our $900.0 million senior revolving credit facility.

The facility also provides an accordion feature that allows the Company to access an additional $400.0 million of capacity pending approval by MSA’s board of directors and from the bank group.

We believe MSA's healthy balance sheet and access to significant capital at March 31, 2025, positions us well to navigate through a dynamic operating environment and other unexpected events.

We maintain a balanced capital deployment strategy that focuses on investing for organic growth and pursuing inorganic growth opportunities, as well as, returning cash to shareholders in the form of dividends and share buybacks.

Additionally, as disclosed in Note 13—Long-Term Debt to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q, on April 1, 2025, we entered into a Fifth Amended and Restated Credit Agreement that extended its term through April 1, 2030, and increased the capacity to $1.3 billion.

Operating activities.

Operating activities provided cash of $188.5 million during the nine months ended September 30, 2024, compared to using cash of $66.1 million during the same period in 2023.

The improved cash flow from operating activities as compared to the same period in 2023 was primarily related to the prior year contribution of $341.2 million in the divestiture of MSA LLC.

Refer to Note 17—Commitments and Contingencies to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q for further information.

Excluding the cash flow impact of the MSA LLC divestiture for 2023, cash flow provided by operating activities decreased by $91.9 million, as improved operating results were completely offset by higher cash usage for working capital needs as well as increased cash usage for variable compensation payouts and tax prepayments both driven by prior year performance.

The working capital cash usage increase related primarily to inventory purchases to support customer demand which were partially offset by improved accounts payable and accounts receivable management.

Operating activities provided cash of $61.8 million during the three months ended March 31, 2025, compared to $50.9 million during the same period in 2024.

The increased cash flow from operating activities was primarily related to lower cash used for variable compensation as compared to the prior year, partially offset by higher cash usage for working capital needs.

The working capital cash usage increase related primarily to accounts receivable, partially offset by lower cash usage for inventory and accounts payable.

Investing activities.

Investing activities used cash of $39.7 million during the nine months ended September 30, 2024, compared to using $28.3 million during the same period in 2023.

The increase in cash used in investing activities as compared to the same period in 2023 was related to increased capital expenditures to support our manufacturing footprint optimization activities and IT systems implementation.

We remain committed to evaluating additional acquisition opportunities that will allow us to continue to grow in key end markets and geographies.

Investing activities used cash of $10.8 million during the three months ended March 31, 2025, compared to using $11.2 million during the same period in 2024.

We remain committed to evaluating acquisition opportunities that will allow us to continue to grow in key end markets and geographies.

Financing activities.

Financing activities used cash of $136.2 million during the nine months ended September 30, 2024, compared to providing cash of $110.5 million during the same period in 2023.

During the nine months ended September 30, 2024, we had net payments on long-term debt of $51.0 million as compared to net proceeds from long-term debt of $168.6 million during the same period in 2023 to fund the MSA LLC divestiture.

We paid cash dividends of $58.7 million during the nine months ended September 30, 2024, compared to $55.0 million in the same period in 2023.

We used cash of $27.4 million during the nine months ended September 30, 2024, to repurchase shares, including $20.0 million related to our share repurchase program and the remainder related to our employee stock compensation transactions compared to $3.9 million in the same period in 2023, all of which related to our employee stock compensation transactions.

Financing activities used cash of $45.6 million during the three months ended March 31, 2025, compared to $29.1 million during the same period in 2024.

During the three months ended March 31, 2025, we had net payments on long-term debt of $7.5 million as compared to $5.0 million during the same period in 2024.

We paid cash dividends of $20.0 million during the three months ended March 31, 2025, compared to $18.5 million in the same period in 2024.

We used cash of $18.3 million during the three months ended March 31, 2025, to repurchase shares, including $10.0 million related to our share repurchase program and the remainder related to our employee stock compensation transactions compared to $5.8 million in the same period in 2024, all of which related to our employee stock compensation programs.

CUMULATIVE TRANSLATION ADJUSTMENTS

The position of the U.S.

dollar relative to international currencies, primarily the euro, at September 30, 2024, resulted in a translation gain of $1.8 million being recorded to the cumulative translation adjustments shareholders' equity account during the nine months ended September 30, 2024, compared to a $2.5 million translation loss being recorded to the cumulative translation adjustments shareholders' equity account during the same period in 2023.

dollar relative to international currencies, primarily the euro and British pound, at March 31, 2025, resulted in a translation gain of $22.5 million being recorded to the cumulative translation adjustments shareholders' equity account during the three months ended March 31, 2025, compared to a $10.7 million translation loss being recorded to the cumulative translation adjustments shareholders' equity account during the same period in 2024.

COMMITMENTS AND CONTINGENCIES

We made contributions of $3.9 million to our pension plans during the nine months ended September 30, 2024.

We expect to make total contributions of approximately $5.3 million to our pension plans in 2024 primarily associated with statutorily required plans in the International segment.

The Company had outstanding bank guarantees and standby letters of credit with banks as of September 30, 2024, totaling $10 million, of which $1.5 million relate to the senior revolving credit facility.

We made contributions of $1.8 million to our pension plans during the three months ended March 31, 2025.

We expect to make net contributions between $6 million and $8 million to our pension plans in 2025, which are primarily associated with statutorily required plans in the International reporting segment.

The Company had outstanding bank guarantees and standby letters of credit with banks as of March 31, 2025, totaling $9.5 million, of which $1.5 million relate to the senior revolving credit facility.

These letters of credit serve to cover customer requirements in connection with certain sales orders and insurance companies.

The Company is also required to provide cash collateral in connection with certain arrangements.

At September 30, 2024, the Company has $0.6 million of restricted cash in support of these arrangements.

At March 31, 2025, the Company has $0.7 million of restricted cash in support of these arrangements.

We have purchase commitments for materials, supplies, services, and property, plant and equipment as part of our ordinary conduct of business.

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RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to Note 1—Basis of Presentation to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q for further information regarding recently adopted and recently issued accounting standards.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis