MSA Safety Incorporated

and welcome to the MSA Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Elise Lorenzato. Please go ahead.

Thank you, Drew. Good morning, everyone, and welcome to MSA's third quarter earnings conference call for 2020. Joining me today are Nish Vartanian, Chairman, President, and CEO, and Ken Krause, Senior Vice President, CFO, and Treasurer. Before we begin, I'd like to remind everyone that the matters discussed on this call, excluding historical information, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward-looking statements involve risks, uncertainties, and other factors that may cause our actual results to differ materially from those discussed here. These risks, uncertainties, and other factors are detailed in our filings with the SEC and including our most recent Form 10-K filed in February of this year. MSA undertakes no duty to publicly update any forward-looking statements made on this call, except as required by law. We've included certain non-GAAP financial measures as part of the discussion this morning, and the non-GAAP reconciliations, as well as our Q3 press release, are available on our Investor Relations website at investors.msasafety.com. With that, I'll turn the call over to our Chairman, President, and CEO, Nish Bartanian.

Thanks, Elise, and good morning, everyone. This morning, I'll provide an overview of how we're executing in this environment and give more insight into the steps we're taking to position MSA for continued value creation in both the near-term and long-term. Ken will then provide a quarterly financial review and give more texture on various demand trends we're seeing across our portfolio. After that, we'll start the Q&A session. The COVID-19 pandemic and ripple effects on employment and the economy continue to impact our business in the third quarter, with revenue contraction of 13%. From an incoming order standpoint, we were disappointed with the overall order pace in the months of July and August, the greatest weakness coming from short cycle products related to the oil and gas and commercial construction markets. We did see significant order pace improvement in September and October. In fact, we were pleased with the last eight weeks of incoming business, which was up versus 2019. While we're hopeful the worst is behind us, it's difficult to say that definitively with reports of rising COVID cases and concerns that our customers might experience future job site shutdowns or a slowing of re-employment. While it was a challenging quarter, we continue to see a number of benefits from investments we're making. We also believe the steps we're taking during this pandemic will create an even stronger MSA as we emerge from this environment. I want to highlight five key areas that give me a great deal of confidence in our future. First, the importance of safety has never been more evident than it is today, and MSA's mission of protecting worker health and safety through innovative product solutions and services continues to grow in relevance and importance. Second, we remain very well positioned as the safety technology leader. We continue to invest in new product development to drive organic growth while providing our customers with innovative market-leading solutions to address their challenges of protecting their employees. We've often stated, that one of MSA's core competencies and differentiators is our global commitment to engineering excellence. With that in mind, we continue to invest heavily in product development across our core markets, from our G1 and M1 SCBAs to the X and S5000 transmitters, Altair IO360 gas detector, to new smart PPE technology and our groundbreaking lunar system for firefighter accountability, we're forging ahead with an R&D portfolio that brings to market the most advanced safety solutions available today. To provide just one example of this, with the launch of our innovative line of fall protection harnesses under the V-Series umbrella, we've now turned our attention to reimagining our line of self-retracting lanyards and redefining the role technology can play in enhancing worker safety at heights. More specifically, We recently launched a patent-pending personal fall limiter with a smart hook connector that, using RFID technology, alerts wearers when they're not secured to an anchorage point. Unfortunately, falls remain as the number one cause of death on construction sites, and many of those falls involve individuals who are wearing fall protection equipment but are not tied off to an anchor point. This technology helps customers to address this issue. And already, the VTechIO1 SmartHook PFL is being used by one large U.S. customer with significant upside potential. We foresee many applications for this type of smart compliance product all over the world. Today, our VTechIO1 falls squarely in the center of two important and evolving global megatrends, protecting the safety of worker at heights and the growing use of connected data to provide insights that will make workers safer. Over time, we expect to expand the use of the VTech I01 across industries and applications. Third, our balance sheet remains very strong. With leverage less than one time on a net basis, we're well positioned to use it to drive inorganic growth, both in our existing product lines as well as expanding our addressable market in areas that align with our safety mission. Inorganic growth remains an important part of our strategy, so it's great to see the M&A market opening back up. We've been very active in recent months with pipeline development and continue to engage with a number of attractive targets in our core markets. And as always, we'll stay disciplined. Fourth, the MSA team is executing well and driving improved productivity. Despite the revenue contraction of 13%, we were able to maintain very healthy margins. Strong SG&A leverage continues to reflect these programs, and notably, our international segment margins continue to see nice expansion, up 230 basis points year-to-date, despite the challenges we continue to see on the revenue line. As you know, our restructuring programs have been largely focused on the international segment. And we've accelerated our cost reduction roadmap in that segment as a result of COVID. Bob Lienen and the entire international team have made great progress against the European cost reduction roadmap that we laid out at our last Investor Day, which includes footprint rationalization, leveraging shared service centers, manufacturing optimization, and other areas of improvement. While we have additional programs that we will continue to execute in international, we're now taking a global approach to drive structural cost reduction during this downturn. The restructuring investments in the third quarter are expected to drive improvements in our business model for the long term across all of our reporting segments. And last, but certainly not least, we have a very strong team at MSA. You put a great deal of effort in employee engagement, talent development, and motivating our team to drive results. As many of you have seen on our website, MSA was recently named Western Pennsylvania's top workplace among large companies by the Pittsburgh Post-Gazette. The Post-Gazette program assesses employee perceptions on engagement, leadership effectiveness, connection to an organization's mission and values, and benefits programs. This marks the seventh time MSA Safety has achieved a Post-Gazette Top Workplace designation, but the first time we've risen to the number one spot. For us, what makes this recognition particularly meaningful is the fact that the results are based exclusively on feedback from employees. This kind of associate engagement is always important to us, but it's taken on an even greater level of significance this year, given the challenges we've all faced during this pandemic. It's a tribute to the culture at MSA. As an organization, we're executing on a number of strategic programs to position MSA for continued success, and none of that happens without attracting, developing, and retaining the brightest talent. With worker safety being more important than ever, we continue to invest in growth and productivity programs to enhance our market leadership positions, provide an exceptional customer experience, and expand our margin profile. To achieve those goals, we focused on the five areas I discussed today, which included leaning into the secular trend of safety, investing in R&D and organic growth, driving global productivity programs, and retaining and developing our talent. And I'm confident these programs will position MSA as an even stronger company as we navigate and emerge from the economic recession. With that, I'll now turn the call over to Ken to take you through our financial results. Ken?