MSA Safety Inc

Previous wording

The operating environment continues to be dynamic with continued macroeconomic, tariff and geopolitical uncertainty, particularly surrounding the conflict in the Middle East. We expect to generate full-year mid-single digit organic sales growth in 2026. We anticipate ongoing momentum in portable gas detection and fall protection as key growth drivers, as well as SCBA, which should benefit, in part, from the timing delays in 2025 that shifted some business to 2026. Furthermore, pricing actions in 2025 and 2026, along with moderate volume growth, should also support our outlook. Overall backlog remains healthy, and we have a solid commercial pipeline.

Current wording

The operating environment continues to be dynamic with continued macroeconomic, tariff and geopolitical uncertainty, particularly surrounding the conflict in the Middle East, and continued delays in 2025 AFG related fire service orders. We are maintaining our mid-single-digit organic sales growth outlook for full-year 2026. Strategic pricing actions in 2025 and 2026, along with moderate volume growth, support our outlook. Overall backlog remains healthy, supported by a double-digit year-over-year order increase in the quarter, and we have strong order momentum and second half demand pipeline, particularly in U.S. fire service. We are also projecting a mid-single-digit contribution from acquisitions.

Previous wording

Net Sales. Net sales for the three months ended March 31, 2026, were $463.6 million, an increase of $42.3 million, or 10.0%, compared to $421.3 million in the same period of 2025. Please refer to the Net Sales table for a reconciliation of the period over period sales change.

Current wording

Net Sales. Net sales for the six months ended June 30, 2026, were $967.0 million, an increase of $71.5 million, or 8.0%, compared to $895.5 million in the same period of 2025. Please refer to the Net Sales table for a reconciliation of the period over period sales change.

Previous wording

Net sales for the Americas segment were $325.2 million in the three months ended March 31, 2026, an increase of $32.1 million, or 11.0%, compared to $293.1 million in the same period of 2025. Organic sales in the Americas segment increased 7.2% during the period, driven by growth in all three product groups with high single digit expansion in both detection and fire service. M&C added $5.3 million of sales to the Americas segment during the period.

Current wording

Net sales for the Americas segment were $666.7 million in the six months ended June 30, 2026, an increase of $53.4 million, or 8.7%, compared to $613.3 million in the same period of 2025. Organic sales in the Americas segment increased 5.8% during the period, driven by growth in all three product groups with high single digit expansion in both detection and industrial PPE. M&C added $7.3 million of sales to the Americas segment during the period as compared to prior year.

Previous wording

Net sales for the International segment were $138.4 million in the three months ended March 31, 2026, an increase of $10.2 million, or 8.0%, compared to $128.2 million in the same period of 2025. Organic sales in the International segment decreased 6.8% during the period, resulting from double-digit decline in fire service and detection largely driven by order timing, economic conditions in Europe, and the conflict in the Middle East partially offset by growth in industrial PPE. M&C added $9.6 million of sales to the International segment during the period.

Current wording

Net sales for the International segment were $300.3 million in the six months ended June 30, 2026, an increase of $18.1 million, or 6.4%, compared to $282.2 million in the same period of 2025. Organic sales in the International segment decreased 3.0% during the period, resulting from declines in detection and fire service largely driven by order timing, economic conditions in Europe, and the conflict in the Middle East, partially offset by growth in industrial PPE, primarily due to higher protective ballistic helmet sales in Europe. M&C added $13.3 million of sales to the International segment during the period as compared to prior year.

Previous wording

Gross profit. Gross profit for the three months ended March 31, 2026, was $219.6 million, an increase of $26.2 million or 13.5%, compared to $193.4 million in the same period of 2025. The ratio of gross profit to net sales was 47.4% during the three months ended March 31, 2026, compared to 45.9% in the same period of 2025. The increase in gross profit margin is primarily related to price realization, productivity, product mix, and favorable transactional foreign currency partially offset by inflation, tariffs and additional amortization related to the M&C acquisition.

Current wording

Gross profit. Gross profit for the six months ended June 30, 2026, was $468.9 million, an increase of $54.8 million or 13.2%, compared to $414.1 million in the same period of 2025. The ratio of gross profit to net sales was 48.5% during the six months ended June 30, 2026, compared to 46.2% in the same period of 2025. The increase in gross profit margin is primarily related to price realization, productivity, product mix, and favorable transactional foreign currency, partially offset by higher net tariffs and inflation and additional amortization related to the M&C acquisition.

Previous wording

Selling, general and administrative expenses. Selling, general and administrative (“SG&A”) expenses were $107.7 million during the three months ended March 31, 2026, an increase of $13.7 million or 14.6%, compared to $94.0 million in the same period of 2025. Overall, SG&A expenses were 23.2% of net sales during the three months ended March 31, 2026, compared to 22.3% of net sales in the same period of 2025. SG&A includes $5.5 million of expenses associated with M&C operations and $2.2 million of strategic transaction costs. Organic SG&A increased $4.3 million or 4.6%, driven primarily by higher variable compensation largely due to the cancellation of unvested equity awards in the prior period in accordance with plan terms, higher professional service costs and inflation.

Current wording

Selling, general and administrative expenses. Selling, general and administrative (“SG&A”) expenses were $221.8 million during the six months ended June 30, 2026, an increase of $15.8 million or 7.6%, compared to $206.0 million in the same period of 2025. Overall, SG&A expenses were 22.9% of net sales during the six months ended June 30, 2026, compared to 23.0% of net sales in the same period of 2025. SG&A for 2026 includes $8.0 million of additional expenses associated with M&C operations as compared to the prior year. SG&A also includes $3.9 million and $8.1 million of strategic transaction costs in the six months ended 2026 and 2025, respectively. Organic SG&A increased $7.7 million or 3.9%, driven primarily by higher variable compensation, higher professional service costs, and inflation, partially offset by discretionary expense management.

Previous wording

Research and development expense. Research and development expense was $16.4 million during the three months ended March 31, 2026, an increase of $0.7 million, compared to $15.7 million in the same period of 2025. Research and development expense was 3.5% of net sales in the three months ended March 31, 2026, and 3.7% of net sales in the same period of 2025.

Current wording

Research and development expense. Research and development expense was $35.5 million during the six months ended June 30, 2026, an increase of $2.8 million, compared to $32.7 million in the same period of 2025. Research and development expense was 3.7% of net sales in the six months ended June 30, 2026, and 3.6% of net sales in the same period of 2025.

Previous wording

During the three months ended March 31, 2026, and 2025, we capitalized $4.2 million and $3.3 million of software development costs, respectively. Amortization expense for capitalized software development costs of $3.3 million and $2.9 million during the three months ended March 31, 2026, and 2025, respectively, was recorded in costs of products sold on the unaudited Condensed Consolidated Statements of Income.

Current wording

During the six months ended June 30, 2026, and 2025, we capitalized $7.9 million and $6.7 million of software development costs, respectively. Amortization expense for capitalized software development costs of $6.6 million and $6.0 million during the six months ended June 30, 2026, and 2025, respectively, was recorded in costs of products sold on the unaudited Condensed Consolidated Statements of Income.

Previous wording

The Company's commitment to innovation is supported by a research and development pipeline focused on integrating advanced technology into core safety equipment. Approximately half of MSA’s R&D engineers are now focused on software development to support the expansion of its connected ecosystems and HeSaaS models. 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; 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 $20.6 million and $19.0 million during the three months ended March 31, 2026, and 2025, respectively.

Current wording

The Company's commitment to innovation is supported by a research and development pipeline focused on integrating advanced technology into core safety equipment. Approximately half of MSA’s R&D engineers are now focused on software development to support the expansion of its connected ecosystems and HeSaaS models. 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; 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 $43.4 million and $39.4 million during the six months ended June 30, 2026, and 2025, respectively.

Previous wording

Restructuring charges. Restructuring charges of $2.3 million during the three months ended March 31, 2026, were primarily related to management restructuring, footprint optimization and other ongoing initiatives to right-size the organization in response to macroeconomic conditions. Restructuring charges of $1.9 million in the same period of 2025 were primarily related to initiatives to right-size the organization in response to macroeconomic conditions, optimize our manufacturing footprint and improve productivity.

Current wording

Restructuring charges. Restructuring charges of $4.5 million during the six months ended June 30, 2026, were primarily related to management restructuring, footprint optimization, and other ongoing initiatives to right-size the organization in response to macroeconomic conditions. Restructuring charges of $2.4 million in the same period of 2025 were primarily related to initiatives to right-size the organization in response to macroeconomic conditions, optimize our manufacturing footprint, and improve productivity.

Previous wording

Currency exchange losses, net. Currency exchange losses were $0.2 million during the three months ended March 31, 2026, compared to $4.1 million in the same period of 2025. The currency exchange activity for both periods related primarily to foreign currency exposure on unsettled inter-company balances. Refer to Note 17—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.

Current wording

Currency exchange losses, net. Currency exchange losses were $2.1 million during the six months ended June 30, 2026, compared to $9.4 million in the same period of 2025. The currency exchange activity for both periods related primarily to foreign currency exposure on unsettled inter-company balances. Refer to Note 17—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.

Previous wording

GAAP operating income. Consolidated operating income for the three months ended March 31, 2026, was $93.0 million compared to $77.8 million in the same period of 2025. The increase in operating results was primarily driven by higher gross profit and lower currency exchange losses partially offset by higher SG&A and restructuring charges as discussed further above.

Current wording

GAAP operating income. Consolidated operating income for the six months ended June 30, 2026, was $205.0 million compared to $163.6 million in the same period of 2025. The increase in operating results was primarily driven by higher gross profit and lower currency exchange losses, partially offset by higher SG&A and restructuring charges as discussed further above.

Previous wording

Adjusted operating income. Americas adjusted operating income for the three months ended March 31, 2026, was $98.1 million, an increase of $19.4 million, or 24.7%, compared to $78.7 million in the same period of 2025. The increase in adjusted operating income is attributable to higher gross profit partially offset by higher SG&A expenses.

Current wording

Adjusted operating income. Americas adjusted operating income for the six months ended June 30, 2026, was $207.2 million, an increase of $35.2 million, or 20.5%, compared to $172.0 million in the same period of 2025. The increase in adjusted operating income is attributable to increased sales and higher gross profit driven by price realization, productivity, and favorable transactional foreign currency, partially offset by higher SG&A expenses.

Previous wording

International adjusted operating income was $14.5 million, a decrease of $4.2 million, or 22.3%, compared to $18.7 million in the same period of 2025. Lower gross profit and higher SG&A expense were partially offset by the contribution from M&C.

Current wording

International adjusted operating income was $39.6 million, an increase of $0.7 million, or 1.9%, compared to $38.9 million in the same period of 2025. The increase was driven by increased sales and the contribution from M&C.

Previous wording

Corporate expenses for the three months ended March 31, 2026, was $11.5 million, an increase of $1.6 million compared to $9.9 million in the same period of 2025, driven by increased variable compensation, increased professional service fees and inflation.

Current wording

Corporate expenses for the six months ended June 30, 2026, was $24.6 million, an increase of $2.7 million compared to $21.9 million in the same period of 2025, driven by increased variable compensation, increased professional service fees and inflation, partially offset by discretionary expense management.

Previous wording

Total other expense (income), net. Total other expense for the three months ended March 31, 2026, was nominal, compared to other income of $0.2 million in the same period of 2025. Higher interest expense was mostly offset by increased pension income driven by a higher expected rate of return.

Current wording

Total other expense, net. Total other expense for the six months ended June 30, 2026, was $0.6 million, compared to $2.9 million in the same period of 2025. The decrease was primarily related to increased pension income, a result of higher expected return on plan assets, which was partially offset by higher interest expense.

Previous wording

Income taxes. The reported effective tax rate for the three months ended March 31, 2026, was 23.4% compared to 23.5% in the same period of 2025. The slight decrease from the prior year was primarily driven by additional benefit related to export sales.

Current wording

Income taxes. The reported effective tax rate for the six months ended June 30, 2026, was 23.0% compared to 23.8% in the same period of 2025. The decrease from the prior year was primarily driven by additional benefits associated with the finalization of initial global minimum corporate tax return filings (referred to as Pillar 2).

Previous wording

Net income. Net income was $71.3 million for the three months ended March 31, 2026, or $1.83 per diluted share compared to net income of $59.6 million, or $1.51 per diluted share, in the same period of 2025.

Current wording

Net income. Net income was $157.5 million for the six months ended June 30, 2026, or $4.05 per diluted share, an increase of approximately 30%, compared to net income of $122.4 million, or $3.10 per diluted share, in the same period of 2025.

Previous wording

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, dividend payments and share repurchases. At March 31, 2026, approximately 47% 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 due in 2030. At March 31, 2026, approximately 71% of our borrowings are denominated in U.S. dollars, which limits our exposure to currency exchange rate fluctuations.

Current wording

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, dividend payments and share repurchases. At June 30, 2026, approximately 48% 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 due in 2030. At June 30, 2026, approximately 83% of our borrowings are denominated in U.S. dollars, which limits our exposure to currency exchange rate fluctuations.

Previous wording

At March 31, 2026, the Company had cash and cash equivalents totaling $180.2 million. Cash and cash equivalents increased $15.1 million during the three months ended March 31, 2026, compared to increasing $6.1 million during the same period in 2025. At March 31, 2026, $972.3 million of the existing $1.3 billion revolving credit facility was unused, including letters of credit issued under the facility. The facility also provides an accordion feature that allows the Company to access an additional $500.0 million of capacity pending approval by MSA’s board of directors and from the bank group. The Company also has access under the Prudential Note Agreement and NYL Note Facility, subject to the issuers' acceptance, to $195.0 million and $50.0 million aggregate principal amount, respectively, of senior unsecured notes.

Current wording

At June 30, 2026, the Company had cash and cash equivalents totaling $200.1 million. Cash and cash equivalents increased $35.0 million during the six months ended June 30, 2026, compared to decreasing $17.6 million during the same period in 2025. At June 30, 2026, $986.0 million of the existing $1.3 billion revolving credit facility was unused, including letters of credit issued under the facility. The facility also provides an accordion feature that allows the Company to access an additional $500.0 million of capacity pending approval by MSA’s board of directors and from the bank group. The Company also has access under the Prudential Note Agreement and NYL Note Facility, subject to the issuers' acceptance, to $195.0 million and $50.0 million aggregate principal amount, respectively, of senior unsecured notes.

Previous wording

Operating activities. Operating activities provided cash of $75.7 million during the three months ended March 31, 2026, compared to $61.8 million during the same period in 2025. The increased cash flow from operating activities was primarily related to higher operating results and lower cash used for variable compensation and other accruals as compared to the prior year, partially offset by higher cash usage for working capital needs.

Current wording

Operating activities. Operating activities provided cash of $171.1 million during the six months ended June 30, 2026, compared to $129.1 million during the same period in 2025. The increased cash flow from operating activities was primarily related to higher operating results and lower cash used for variable compensation and other accruals as compared to the prior year.

Previous wording

Investing activities. Investing activities used cash of $10.6 million during the three months ended March 31, 2026, compared to using $10.8 million during the same period in 2025. Capital expenditures drove the decrease in cash outflows from investing activities during the three months ended March 31, 2026. We remain committed to evaluating acquisition opportunities that will allow us to continue to grow in key end markets and geographies.

Current wording

Investing activities. Investing activities used cash of $23.2 million during the six months ended June 30, 2026, compared to using $227.9 million during the same period in 2025. Capital expenditures drove cash outflows from investing activities during the six months ended June 30, 2026. The acquisition of M&C for $187.7 million and capital expenditures, including a $19.6 million strategic footprint investment, drove the cash used in investing activities for the six months ended June 30, 2025. We remain committed to evaluating acquisition opportunities which would enable us to continue to grow in key end markets and geographies, and have a robust pipeline.

Previous wording

Financing activities. Financing activities used cash of $47.2 million during the three months ended March 31, 2026, compared to using cash of $45.6 million during the same period in 2025. During the three months ended March 31, 2026, we had net proceeds on long-term debt of $33.8 million as compared to net payments of $7.5 million during the same period in 2025. We paid cash dividends of $20.6 million during the three months ended March 31, 2026, compared to $20.0 million in the same period in 2025. We used cash of $60.4 million during the three months ended March 31, 2026, to repurchase shares, including $50.4 million related to our share repurchase program, compared to $18.3 million in the same period in 2025, including $10.0 million related to our share repurchase program. The remainder in both periods related to our employee stock compensation programs.

Current wording

Financing activities. Financing activities used cash of $105.9 million during the six months ended June 30, 2026, compared to providing cash of $74.0 million during the same period in 2025. During the six months ended June 30, 2026, we had net proceeds on long-term debt of $20.8 million as compared to net proceeds of $165.2 million during the same period in 2025, used primarily to fund the M&C acquisition. We paid cash dividends of $41.4 million during the six months ended June 30, 2026, compared to $40.9 million in the same period in 2025. We used cash of $86.4 million during the six months ended June 30, 2026, to repurchase shares, including $76.1 million related to our share repurchase program, compared to $48.9 million in the same period in 2025, including $40.0 million related to our share repurchase program. The remainder in both periods related to our employee stock compensation programs.

Previous wording

The position of the U.S. dollar relative to international currencies, primarily the euro and British pound, at March 31, 2026, resulted in a translation loss of $6.1 million being recorded to the cumulative translation adjustments shareholders' equity account during the three months ended March 31, 2026, compared to a $22.5 million translation gain being recorded to the cumulative translation adjustments shareholders' equity account during the same period in 2025.

Current wording

The position of the U.S. dollar relative to international currencies, primarily the euro, at June 30, 2026, resulted in a translation loss of $8.3 million being recorded to the cumulative translation adjustments shareholders' equity account during the six months ended June 30, 2026, compared to a $66.7 million translation gain being recorded to the cumulative translation adjustments shareholders' equity account during the same period in 2025.

Previous wording

We made contributions of $2.2 million to our pension plans during the three months ended March 31, 2026. We expect to make net contributions between $8.0 million and $10.0 million to our pension plans in 2026, which are primarily associated with statutorily required plans in the International reporting segment.

Current wording

We made contributions of $4.5 million to our pension plans during the six months ended June 30, 2026. We expect to make net contributions between $8.0 million and $10.0 million to our pension plans in 2026, which are primarily associated with statutorily required plans in the International reporting segment.

Previous wording

The Company had outstanding bank guarantees and standby letters of credit with banks as of March 31, 2026, totaling $7.7 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 March 31, 2026, the Company has $1.2 million of restricted cash in support of these arrangements.

Current wording

The Company had outstanding bank guarantees and standby letters of credit with banks as of June 30, 2026, totaling $10.0 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 June 30, 2026, the Company has $1.2 million of restricted cash in support of these arrangements.