MSA Safety rporated(MSA) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents MSA Safety's unaudited condensed consolidated financial statements and related notes for Q2 2024 and FY2023 Condensed Consolidated Statements of Operations (unaudited) | Metric | Three Months Ended June 30, 2024 (In thousands) | Three Months Ended June 30, 2023 (In thousands) | Six Months Ended June 30, 2024 (In thousands) | Six Months Ended June 30, 2023 (In thousands) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $462,463 | $447,299 | $875,765 | $845,561 | | Gross profit | $223,029 | $213,796 | $418,560 | $395,194 | | Operating income | $99,944 | $95,008 | $180,056 | $34,947 | | Net income (loss) | $72,234 | $67,090 | $130,373 | $(83,083) | | Basic EPS | $1.83 | $1.71 | $3.31 | $(2.12) | | Diluted EPS | $1.83 | $1.70 | $3.30 | $(2.12) | | Dividends per common share | $0.51 | $0.47 | $0.98 | $0.93 | Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) | Metric | Three Months Ended June 30, 2024 (In thousands) | Three Months Ended June 30, 2023 (In thousands) | Six Months Ended June 30, 2024 (In thousands) | Six Months Ended June 30, 2023 (In thousands) | | :------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $72,234 | $67,090 | $130,373 | $(83,083) | | Foreign currency translation adjustments | $(8,822) | $5,039 | $(19,495) | $16,233 | | Pension and post-retirement plan adjustments, net of tax | $2,022 | $115 | $2,396 | $554 | | Reclassification of currency translation from accumulated other comprehensive loss into net income | $(1,200) | — | $(1,200) | — | | Total other comprehensive (loss) gain, net of tax | $(8,000) | $5,154 | $(18,299) | $16,789 | | Comprehensive income (loss) | $64,234 | $72,244 | $112,074 | $(66,294) | Condensed Consolidated Balance Sheets (unaudited) | Metric | June 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :------------- | :------------ | :---------------- | | Total current assets | $861,445 | $786,270 | | Total assets | $2,243,571 | $2,170,150 | | Total current liabilities | $351,751 | $332,818 | | Total liabilities | $1,209,924 | $1,203,348 | | Total shareholders' equity | $1,033,647 | $966,802 | Condensed Consolidated Statements of Cash Flows (unaudited) | Metric | Six Months Ended June 30, 2024 (In thousands) | Six Months Ended June 30, 2023 (In thousands) | | :------------- | :----------------------------- | :----------------------------- | | Cash Flow From (Used in) Operating Activities | $104,188 | $(190,841) | | Cash Flow Used in Investing Activities | $(25,486) | $(15,648) | | Cash Flow (Used in) From Financing Activities | $(67,718) | $196,589 | | Increase (decrease) in cash, cash equivalents and restricted cash | $427 | $(15,551) | | Ending cash, cash equivalents and restricted cash | $148,835 | $148,877 | Condensed Consolidated Statements of Changes in Retained Earnings and Accumulated Other Comprehensive Loss (unaudited) | Metric | Retained Earnings (June 30, 2024) (In thousands) | Accumulated Other Comprehensive Loss (June 30, 2024) (In thousands) | | :------------- | :-------------------------------- | :--------------------------------------------------- | | Balances December 31, 2023 | $1,143,442 | $(129,249) | | Net income | $130,373 | — | | Foreign currency translation adjustments | — | $(19,495) | | Pension and post-retirement plan adjustments, net of tax benefit | — | $2,396 | | Reclassification from accumulated other comprehensive loss into net income | — | $(1,200) | | Common dividends ($0.98 per share) | $(38,569) | — | | Preferred dividends ($1.125 per share) | $(20) | — | | Balances June 30, 2024 | $1,235,226 | $(147,548) | Notes to Condensed Consolidated Financial Statements (unaudited) Note 1—Basis of Presentation Unaudited financial statements require reading with the 2023 Form 10-K for complete U.S. GAAP disclosures - The condensed consolidated financial statements are unaudited and include normal recurring adjustments. They should be read in conjunction with MSA's Form 10-K for the year ended December 31, 2023, for full U.S. GAAP disclosures[22] Note 2—Cash and Cash Equivalents Describes the Company's notional cash pooling arrangement for global liquidity management, with net cash balances included in cash and cash equivalents | Metric | June 30, 2024 (In thousands) | | :------------- | :------------ | | Gross cash pool position | $96,109 | | Less: cash pool borrowings | $(91,690) | | Net cash pool position | $4,419 | Note 3—Restructuring Charges The Company recorded restructuring charges for Q2 and YTD June 2024, primarily for manufacturing optimization and management restructuring | Metric | Three Months Ended June 30, 2024 (In thousands) | Three Months Ended June 30, 2023 (In thousands) | Six Months Ended June 30, 2024 (In thousands) | Six Months Ended June 30, 2023 (In thousands) | | :------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Restructuring charges | $1,543 | $3,350 | $4,560 | $5,097 | | Metric | Reserve balances at December 31, 2023 (In millions) | Restructuring charges (YTD June 30, 2024) (In millions) | Cash payments (YTD June 30, 2024) (In millions) | Reserve balances at June 30, 2024 (In millions) | | :------------ | :------------------------------------ | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Americas | $0.8 | $0.8 | $(1.2) | $0.3 | | International | $9.0 | $2.9 | $(5.5) | $6.2 | | Corporate | $0.0 | $0.9 | $(0.9) | $0.0 | | Total | $9.8 | $4.6 | $(7.6) | $6.5 | Note 4—Inventories Provides a breakdown of inventory components, showing an increase in total inventories from December 2023 to June 2024 | Metric | June 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :------------- | :------------ | :---------------- | | Finished products | $104,057 | $88,687 | | Work in process | $18,704 | $15,378 | | Raw materials and supplies | $198,138 | $188,539 | | Total inventories | $320,899 | $292,604 | Note 5—Property, Plant and Equipment Details the components of net property, plant, and equipment, showing a slight increase from December 2023 to June 2024 | Metric | June 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :------------- | :------------ | :---------------- | | Land | $4,292 | $4,332 | | Buildings | $142,335 | $141,027 | | Machinery and equipment | $496,349 | $498,148 | | Construction in progress | $26,334 | $24,404 | | Total | $669,310 | $667,911 | | Less: accumulated depreciation | $(456,151) | $(456,034) | | Property, plant and equipment, net | $213,159 | $211,877 | Note 6—Reclassifications Out of Accumulated Other Comprehensive Loss Outlines changes in accumulated other comprehensive loss, driven by currency translation and pension adjustments, with reclassification into net income in 2024 | Metric | Three Months Ended June 30, 2024 (In thousands) | Three Months Ended June 30, 2023 (In thousands) | Six Months Ended June 30, 2024 (In thousands) | Six Months Ended June 30, 2023 (In thousands) | | :------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Pension and other post-retirement benefits (end of period) | $(40,256) | $(49,781) | $(40,256) | $(49,781) | | Foreign currency translation (end of period) | $(107,292) | $(92,147) | $(107,292) | $(92,147) | | Total amount reclassified from AOCI, net of tax, into net income (loss) (Pension) | $2,022 | $115 | $2,396 | $554 | | Reclassification from AOCI into net income (loss) (Foreign currency) | $(1,200) | — | $(1,200) | — | Note 7—Capital Stock Provides details on preferred and common stock, including shares outstanding and activity under the stock repurchase program and stock-based benefit plans - As of June 30, 2024, 39,349,528 common shares were outstanding, compared to 39,317,212 at December 31, 2023[35] - The Company has a stock repurchase program authorizing up to $200.0 million, with 52,561 shares repurchased during the six months ended June 30, 2024[36] | Metric | Common Stock (June 30, 2024) (In thousands) | Treasury Cost (June 30, 2024) (In thousands) | | :------------- | :--------------------------- | :---------------------------- | | Balance at beginning of period (Jan 1, 2024) | $312,324 | $(361,684) | | Stock compensation expense | $9,229 | — | | Restricted and performance stock awards | $(1,783) | $1,783 | | Stock options exercised | $212 | $114 | | Treasury shares purchased for stock compensation programs | — | $(6,829) | | Employee stock purchase program | $574 | $60 | | Share repurchase program | — | $(10,000) | | Balance at end of period (June 30, 2024) | $320,556 | $(376,556) | Note 8—Segment Information Details the Company's three reportable segments: Americas, International, and Corporate, with financial performance metrics and sales by product group - The Company is organized into three reportable segments: Americas, International, and Corporate, based on geographical operating segments[39][95] | Metric | Americas (Q2 2024) (In thousands) | International (Q2 2024) (In thousands) | Corporate (Q2 2024) (In thousands) | Consolidated (Q2 2024) (In thousands) | | :------------- | :----------------- | :---------------------- | :------------------ | :--------------------- | | Net sales to external customers | $314,711 | $147,752 | $0 | $462,463 | | Adjusted operating income (loss) | $98,468 | $24,285 | $(14,563) | $108,190 | | Adjusted operating margin % | 31.3% | 16.4% | | | | Adjusted EBITDA | $108,230 | $28,052 | $(14,351) | $121,931 | | Adjusted EBITDA margin % | 34.4% | 19.0% | | | | Metric | Americas (YTD June 30, 2024) (In thousands) | International (YTD June 30, 2024) (In thousands) | Corporate (YTD June 30, 2024) (In thousands) | Consolidated (YTD June 30, 2024) (In thousands) | | :------------- | :--------------------------- | :-------------------------------- | :---------------------------- | :------------------------------- | | Net sales to external customers | $610,249 | $265,516 | $0 | $875,765 | | Adjusted operating income (loss) | $184,688 | $37,770 | $(26,258) | $196,200 | | Adjusted operating margin % | 30.3% | 14.2% | | | | Adjusted EBITDA | $203,923 | $45,097 | $(25,835) | $223,185 | | Adjusted EBITDA margin % | 33.4% | 17.0% | | | | Metric | Consolidated (Q2 2024) (In thousands) | Americas (Q2 2024) (In thousands) | International (Q2 2024) (In thousands) | | :------------- | :--------------------- | :----------------- | :---------------------- | | Fire Service | $172,269 (37%) | $118,487 (38%) | $53,782 (37%) | | Detection | $170,848 (37%) | $111,405 (35%) | $59,443 (40%) | | Industrial PPE and Other | $119,346 (26%) | $84,819 (27%) | $34,527 (23%) | | Total | $462,463 (100%) | $314,711 (100%) | $147,752 (100%) | Note 9—Earnings (Loss) per Share Details the calculation of basic and diluted earnings (loss) per share, showing an increase for Q2 and YTD June 2024 | Metric | Three Months Ended June 30, 2024 (In thousands, except per share values) | Three Months Ended June 30, 2023 (In thousands, except per share values) | Six Months Ended June 30, 2024 (In thousands, except per share values) | Six Months Ended June 30, 2023 (In thousands, except per share values) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) attributable to common shareholders | $72,218 | $67,072 | $130,340 | $(83,111) | | Basic weighted-average shares outstanding | 39,389 | 39,274 | 39,375 | 39,249 | | Diluted weighted-average shares outstanding | 39,541 | 39,409 | 39,549 | 39,249 | | Basic EPS | $1.83 | $1.71 | $3.31 | $(2.12) | | Diluted EPS | $1.83 | $1.70 | $3.30 | $(2.12) | Note 10—Income Taxes Provides effective tax rates for Q2 and YTD June 2024 and 2023, explaining deviations from the U.S. federal statutory rate - The effective tax rate for Q2 2024 was 23.5% (vs 23.3% in Q2 2023), primarily due to state income taxes[49] - The effective tax rate for YTD June 30, 2024, was 23.3% (vs 520.8% in YTD June 30, 2023), with the significant variance in 2023 primarily due to the divestiture of MSA LLC and the non-deductible loss on derecognition of product liability reserves[50] - As of June 30, 2024, the Company had a gross liability for unrecognized tax benefits of $7.3 million[51] Note 11—Stock Plans Describes equity incentive plans, including stock options, restricted stock awards, and performance stock units, summarizing related compensation expense and activity | Metric | Three Months Ended June 30, 2024 (In thousands) | Three Months Ended June 30, 2023 (In thousands) | Six Months Ended June 30, 2024 (In thousands) | Six Months Ended June 30, 2023 (In thousands) | | :------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Stock compensation expense | $5,042 | $6,759 | $9,229 | $13,029 | | Stock Option Activity (Six Months Ended June 30, 2024) | Shares | Weighted Average Exercise Price | | :------------------------------------- | :----- | :------------------------------ | | Outstanding at January 1, 2024 | 26,536 | $45.95 | | Exercised | (7,070) | $46.13 | | Forfeited | (852) | $48.65 | | Outstanding and exercisable at June 30, 2024 | 18,614 | $45.76 | | Restricted Stock Activity (Six Months Ended June 30, 2024) | Shares | Weighted Average Grant Date Fair Value | | :----------------------------------------- | :----- | :------------------------------------- | | Unvested at January 1, 2024 | 173,851 | $142.73 | | Granted | 81,658 | $178.52 | | Vested | (43,946) | $165.12 | | Forfeited | (21,904) | $166.54 | | Unvested at June 30, 2024 | 189,659 | $150.08 | Note 12—Long-Term Debt Details the Company's long-term debt structure, including senior notes and credit facilities, confirming compliance with financial covenants | Metric | June 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :------------- | :------------ | :---------------- | | 2016 Senior Notes payable through 2031, 3.40% | $53,966 | $62,081 | | 2021 Senior Notes payable through 2036, 2.69% | $199,486 | $199,466 | | 2023 Term Loan credit agreement maturing in 2026 | $218,238 | $230,604 | | 2023 Senior Notes payable through 2028, 5.25% | $49,946 | $49,939 | | Senior revolving credit facility maturing in 2026 | $66,607 | $59,602 | | Total | $588,243 | $601,692 | | Long-term debt, net of debt issuance costs | $561,771 | $575,170 | - The Company's Revolving Credit Facility has a capacity of $900.0 million, with $831.4 million unused as of June 30, 2024[59] - As of June 30, 2024, the Company was in full compliance with all restrictive covenants under its various credit agreements[65] Note 13—Goodwill and Intangible Assets, Net Reports changes in goodwill and intangible assets, net, for the six months ended June 30, 2024, primarily due to currency translation and amortization | Metric | Goodwill (Six Months Ended June 30, 2024) (In thousands) | | :------------- | :---------------------------------------- | | Balance at January 1, 2024 | $627,534 | | Currency translation | $(2,897) | | Balance at June 30, 2024 | $624,637 | | Metric | Intangible Assets (Six Months Ended June 30, 2024) (In thousands) | | :------------- | :------------------------------------------------- | | Net balance at January 1, 2024 | $266,134 | | Amortization expense | $(8,967) | | Currency translation | $(839) | | Net balance at June 30, 2024 | $256,328 | Note 14—Pensions and Other Post-retirement Benefits Details net periodic benefit (income) cost for pension and other post-retirement benefits, showing net pension income and contributions | Metric | Pension Benefits (Q2 2024) (In thousands) | Other Benefits (Q2 2024) (In thousands) | Pension Benefits (YTD 2024) (In thousands) | Other Benefits (YTD 2024) (In thousands) | | :------------- | :------------------------- | :----------------------- | :-------------------------- | :------------------------ | | Net periodic benefit (income) cost | $(900) | $361 | $(3,108) | $722 | - The Company made contributions of $2.6 million to its pension plans during the six months ended June 30, 2024, and expects to make total net contributions of $5.3 million in 2024[69] Note 15—Derivative Financial Instruments Explains the Company's use of derivative foreign currency forward contracts to manage exchange rate risk, with gains/losses reported in net currency exchange - The notional amount of open foreign currency forward contracts was $113.6 million at June 30, 2024, up from $110.9 million at December 31, 2023[70] | Metric | Six Months Ended June 30, 2024 (In thousands) | Six Months Ended June 30, 2023 (In thousands) | | :------------- | :----------------------------- | :----------------------------- | | Foreign exchange contracts: currency exchange (gains) losses, net | $3,659 | $123 | Note 16—Fair Value Measurements Defines fair value and its hierarchy, classifying derivative financial instruments within Level 2, and provides carrying and fair values of fixed rate long-term debt - The fair value of derivative financial instruments (foreign currency forward contracts) is classified within Level 2 of the fair value hierarchy[73] | Metric | June 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :------------- | :------------ | :---------------- | | Carrying amount of fixed rate long-term debt | $304,100 | $312,200 | | Fair value of fixed rate long-term debt | $263,900 | $278,700 | Note 17—Commitments and Contingencies Addresses product liability claims, other litigation including PFAS lawsuits, and product warranty obligations, noting the impact of the MSA LLC divestiture - The reserve for single incident product liability claims was $1.4 million at June 30, 2024, an increase from $1.3 million at December 31, 2023[76] - During Q2 2024, the Company recorded $5.0 million of net cost for product related legal matter[77] - Following the divestiture of MSA LLC on January 5, 2023, the Company no longer has obligations for legacy cumulative trauma product liability claims, resulting in a tax-effected loss on divestiture of $199.6 million in 2023[79][81] - Globe, a subsidiary, is defending 659 lawsuits (12,137 claims) related to PFAS in firefighter turnout gear, with MSA LLC's PFAS claims assumed by the buyer in the 2023 divestiture[82][83][84] | Metric | Six Months Ended June 30, 2024 (In thousands) | Year Ended December 31, 2023 (In thousands) | | :------------- | :----------------------------- | :--------------------------- | | Beginning warranty reserve | $14,288 | $15,230 | | Warranty payments | $(5,387) | $(9,794) | | Warranty claims | $4,826 | $8,899 | | Provision for product warranties and other adjustments | $208 | $(47) | | Ending warranty reserve | $13,935 | $14,288 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes MSA Safety's financial condition and results, covering business overview, performance comparisons, liquidity, and critical accounting policies BUSINESS OVERVIEW MSA Safety is a global leader in advanced safety products, technology, and solutions, protecting workers across diverse end markets - MSA Safety Incorporated is the global leader in advanced safety products, technology, and solutions, driven by a mission of safety since 1914[93] - The Company's product portfolio includes fire service (SCBA, protective apparel, helmets), detection (FGFD systems, portable gas detection), and industrial personal protective equipment (industrial head protection, fall protection devices)[93] - The business is organized into three reportable segments: Americas, International, and Corporate, based on geographical operating segments[95] RESULTS OF OPERATIONS Analyzes the Company's financial performance, comparing Q2 and YTD June 2024 against prior periods, detailing changes in sales, profit, and expenses Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023 Q2 2024 saw increased net sales and gross profit, driven by productivity and price/cost management, leading to higher operating and net income despite increased SG&A | Net Sales | Q2 2024 (In millions) | Q2 2023 (In millions) | Dollar Increase (In millions) | Percent Increase | | :---------------------- | :------ | :------ | :-------------- | :--------------- | | Consolidated | $462.5 | $447.3 | $15.2 | 3.4% | | Americas | $314.7 | $308.4 | $6.3 | 2.0% | | International | $147.8 | $138.9 | $8.9 | 6.4% | - Consolidated organic constant currency sales increased by 3.9% in Q2 2024, with Americas up 2.4% (driven by detection and industrial PPE) and International up 7.2% (driven by fire service and detection)[101][102][103] - Gross profit increased by $9.2 million (4.3%) to $223.0 million in Q2 2024, with gross profit margin improving to 48.2% from 47.8% in Q2 2023, driven by improved productivity, price/cost management, and favorable mix[106] - SG&A expenses rose by $8.8 million (9.1%) to $105.1 million in Q2 2024, representing 22.7% of net sales (vs 21.5% in Q2 2023), due to higher sales, inflation, product-related legal costs, and professional service expenses, partially offset by lower variable compensation[107] - GAAP operating income for Q2 2024 was $99.9 million, up from $95.0 million in Q2 2023, primarily due to higher sales and gross profit, partially offset by increased SG&A[115] - Net income for Q2 2024 was $72.2 million, or $1.83 per diluted share, compared to $67.1 million, or $1.70 per diluted share, in Q2 2023[123] Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023 YTD June 2024 saw higher net sales and gross profit, with a significant increase in GAAP operating income and a return to net income, largely due to the absence of the MSA LLC divestiture loss | Net Sales | YTD June 30, 2024 (In millions) | YTD June 30, 2023 (In millions) | Dollar Increase (In millions) | Percent Increase | | :---------------------- | :---------------- | :---------------- | :-------------- | :--------------- | | Consolidated | $875.8 | $845.6 | $30.2 | 3.6% | | Americas | $610.2 | $588.6 | $21.6 | 3.7% | | International | $265.5 | $256.9 | $8.6 | 3.3% | - Consolidated organic constant currency sales increased by 3.5% for YTD June 30, 2024, with Americas up 3.6% (driven by fire service and FGFD) and International up 3.3% (driven by fire service and FGFD)[125][126][127] - Gross profit increased by $23.4 million (5.9%) to $418.6 million for YTD June 30, 2024, with gross profit margin improving to 47.8% from 46.7% in the prior year, due to volume leverage, price/cost management, and productivity efforts[129] - GAAP operating income for YTD June 30, 2024, was $180.1 million, a significant increase from $34.9 million in the prior year, primarily due to higher sales and gross profit and the absence of the MSA LLC divestiture loss[141] - Net income for YTD June 30, 2024, was $130.4 million, or $3.30 per diluted share, compared to a net loss of $83.1 million, or $(2.12) per diluted share, in the prior year[152] - The effective tax rate for YTD June 30, 2024, was 23.3%, a significant decrease from 520.8% in the prior year, primarily due to the divestiture of MSA LLC and the non-deductible loss recorded on the derecognition of product liability reserves in 2023[150] Non-GAAP Financial Measures Defines and explains non-GAAP financial measures used by the Company to understand underlying business performance and facilitate peer comparisons - The Company uses non-GAAP financial measures including organic constant currency revenue growth, organic constant currency SG&A change, adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA, and adjusted EBITDA margin %[153] - These non-GAAP measures are used to provide a better understanding of underlying business performance, highlight ongoing business performance excluding foreign currency impacts, and evaluate segment results[154][155] LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity sources are operating cash flows and borrowings, with a balanced capital allocation strategy and sufficient liquidity - Main sources of liquidity are operating cash flows, supplemented by borrowings, with principal requirements for working capital, capital expenditures, debt payments, dividends, and acquisitions[157] - As of June 30, 2024, cash and cash equivalents totaled $146.8 million, with approximately 52% of long-term debt at fixed interest rates and 84% denominated in U.S. dollars[157][158] - Operating activities provided $104.2 million in cash for YTD June 30, 2024, a significant improvement from using $190.8 million in the prior year, primarily due to the absence of the $341.2 million contribution for the MSA LLC divestiture[159] - Investing activities used $25.5 million in cash for YTD June 30, 2024, an increase from $15.6 million in the prior year, due to increased capital expenditures for manufacturing footprint optimization[160] - Financing activities used $67.7 million in cash for YTD June 30, 2024, compared to providing $196.6 million in the prior year, reflecting net debt payments of $13.3 million and $16.8 million in share repurchases[161] CUMULATIVE TRANSLATION ADJUSTMENTS Reports the impact of currency exchange rate fluctuations on the Company's cumulative translation adjustments within shareholders' equity - A translation loss of $19.5 million was recorded to cumulative translation adjustments during the six months ended June 30, 2024, compared to a $16.2 million gain in the same period of 2023, primarily due to the U.S. dollar's position relative to international currencies, especially the euro[163] COMMITMENTS AND CONTINGENCIES Outlines the Company's commitments related to pension plans, bank guarantees, and purchase obligations, referring to Note 17 for product liabilities - The Company made $2.6 million in pension plan contributions during YTD June 30, 2024, with expected total contributions of $5.3 million for 2024[164] - Outstanding bank guarantees and standby letters of credit totaled $10.2 million as of June 30, 2024, with $2.0 million in restricted cash supporting these arrangements[165] CRITICAL ACCOUNTING POLICIES AND ESTIMATES Acknowledges that financial statement preparation requires significant estimates and judgments, which are continuously evaluated and may differ from actual amounts - The preparation of financial statements requires management to make estimates and judgments that affect reported amounts, which are evaluated on an ongoing basis[167] RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS States that no recently adopted or issued accounting standards materially affected the Company's financial reporting - No new or revised financial accounting standards were recently adopted or issued that materially affected the Company[169] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses the Company's exposure to market risks, specifically currency exchange rates and interest rates, quantifying potential impacts - A hypothetical 10% strengthening or weakening of the U.S. dollar would decrease or increase reported sales by approximately $18.9 million (4.1%) and net income by $2.6 million (3.5%) for Q2 2024[172] - As of June 30, 2024, the Company had $113.6 million in notional value of open foreign currency forward contracts; a hypothetical 10% USD strengthening or weakening would result in an $11.4 million change in their fair value[173] - The Company had $304.1 million of fixed rate debt and $286.3 million of variable rate borrowings as of June 30, 2024[175][176] - A hypothetical 100 basis point increase or decrease in interest rates would have a $3.4 million impact on future annual earnings[176] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures as of June 30, 2024, with no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were effective as of June 30, 2024[178] - There were no material changes in the Company's internal control over financial reporting during the most recent fiscal quarter[178] PART II. OTHER INFORMATION Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the Company's common stock repurchase activities during Q2 2024, including shares purchased under its publicly announced program and stock-based compensation | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | | :--------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | April 2024 | 467 | $188.00 | — | 151,217 | | May 2024 | 52,581 | $190.23 | 52,561 | 96,004 | | June 2024 | 5,005 | $179.93 | — | 92,071 | - The Company's share repurchase program authorizes up to $200.0 million for common stock repurchases and has no expiration date[179] Item 5. Other Information Confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by the Company, its directors, or officers during Q2 2024 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by any director, officer, or the Company itself during the three months ended June 30, 2024[181] Item 6. Exhibits Lists the exhibits filed as part of the Form 10-Q, including certifications from the CEO and CFO, and various XBRL taxonomy documents - Exhibits include certifications from the Chief Executive Officer (31.1) and Chief Financial Officer (31.2), as well as XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE), and the Cover Page Interactive Data File (104)[182]