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Item 1. Financial Statements

2021-07-29 compared with 2021-04-29 · 286 added, 145 removed, 571 unchanged (43% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share amounts) 2021 2020 2021 2020

5 unchanged sentences

Restructuring charges (Note 3) 7,078 8,865 8,385 10,872

Currency exchange (gains) losses, net (Note 5) ( 2,099 ) 270

Currency exchange losses (gains), net (Note 5) 1,640 793 ( 459 ) 1,063

Product liability expense (Note 17) 11,751 851 14,547 2,802

15 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2021 2020 2021 2020

Net income $ 25,387 $ 36,406 $ 61,987 $ 80,209

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments (Note 5) 6,018 4,669 ( 4,205 ) ( 18,278 )

Pension and post-retirement plan actuarial gains, net of tax (Note 5) 3,712 3,102

Unrealized loss on available-for-sale securities (Note 5) ( 5 ) ( 62 )

Pension and post-retirement plan actuarial gains, net of tax

(Note 5) 3,657 3,090 7,369 6,192

Unrealized gain (loss) on available-for-sale securities (Note 5) 1 124 ( 4 ) 62

Reclassification of currency translation from accumulated other comprehensive loss into net income (Note 5) — — — 720

Total other comprehensive (loss) income, net of tax ( 6,516 ) ( 19,187 )

Total other comprehensive income (loss), net of tax 9,676 7,883 3,160 ( 11,304 )

Comprehensive income 35,063 44,289 65,147 68,905

4 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands) March 31, 2021 December 31, 2020

(In thousands) June 30, 2021 December 31, 2020

Cash and cash equivalents $ 174,078 $ 160,672

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2021 2020

3 unchanged sentences

Stock-based compensation (Note 10) 10,695 4,352

Pension (income) expense (Note 14) ( 480 ) 2,216

Pension expense (Note 14) 919 4,430

Deferred income tax benefit (Note 9) ( 3,448 ) ( 711 )

22 unchanged sentences

Payments on long-term debt (Note 11) ( 578,729 ) ( 590,000 )

Debt issuance costs ( 1,494 ) —

Cash dividends paid ( 34,067 ) ( 33,052 )

1 unchanged sentence

Exercise of stock options (Note 6) 2,161 3,740

Cash Flow From (Used in) Financing Activities 31,639 ( 13,328 )

Employee stock purchase plan (Note 6) 452 390

Cash Flow Used in Financing Activities ( 11,455 ) ( 66,176 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 907 ) ( 3,654 )

14 unchanged sentences

(Loss) Noncontrolling Interests

Balances March 31, 2020 $ 1,039,609 $ ( 233,075 ) $ 6,786

Net income 36,406 — —

Foreign currency translation adjustments — 4,669 —

Pension and post-retirement plan adjustments, net of tax of $ 1,079

Unrealized net gains on available-for-sale securities (Note 16) — 124 —

Income attributable to noncontrolling interests ( 340 ) ( 18 ) 358

Common dividends ( 16,710 ) — —

Preferred dividends ($ 0.5625 per share)

Balances June 30, 2020 $ 1,058,955 $ ( 225,210 ) $ 7,144

Balances March 31, 2021 $ 1,085,383 $ ( 188,948 ) $ 8,214

Net income 25,387 — —

Foreign currency translation adjustments — 6,018 —

Pension and post-retirement plan adjustments, net of tax of $ 1,139

Unrealized net gains on available-for-sale securities (Note 16) — 1 —

Income attributable to noncontrolling interests ( 262 ) 127 135

Common dividends ( 17,237 ) — —

Preferred dividends ($ 0.5625 per share)

Balances June 30, 2021 $ 1,093,261 $ ( 179,145 ) $ 8,349

Balances December 31, 2019 $ 1,012,266 $ ( 214,003 ) $ 6,773

2 unchanged sentences

Pension and post-retirement plan adjustments, net of tax of $ 2,146

Unrealized net losses on available-for-sale securities (Note 16) — ( 62 ) —

Unrealized net gains on available-for-sale securities (Note 16) — 62 —

Reclassification from accumulated other comprehensive (loss) into net income (Note 5) — 720 —

2 unchanged sentences

Preferred dividends ($ 0.5625 per share)

Balances March 31, 2020 $ 1,039,609 $ ( 233,075 ) $ 6,786

Balances June 30, 2020 $ 1,058,955 $ ( 225,210 ) $ 7,144

Balances December 31, 2020 $ 1,065,789 $ ( 182,397 ) $ 7,993

3 unchanged sentences

Unrealized net losses on available-for-sale securities (Note 16) — ( 4 ) —

Reclassification of currency translation from accumulated other comprehensive (loss) into net income (Note 5) — — —

Income attributable to noncontrolling interests ( 448 ) 92 356

1 unchanged sentence

Preferred dividends ($ 0.5625 per share)

Balances March 31, 2021 $ 1,085,383 $ ( 188,948 ) $ 8,214

Balances June 30, 2021 $ 1,093,261 $ ( 179,145 ) $ 8,349

The accompanying notes are an integral part of the condensed consolidated financial statements.

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The following table sets forth the components of inventory:

(In thousands) March 31, 2021 December 31, 2020

(In thousands) June 30, 2021 December 31, 2020

Finished products $ 100,181 $ 81,048

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Note 3— Restructuring Charges

During the three months ended March 31, 2021, we recorded restructuring charges of $ 1.3 million.

International segment restructuring charges of $ 1.0 million during th e three months ended March 31, 2021, were primarily related to our ongoing initiatives to drive profitable growth and right size our operations.

A mericas segment restructuring charges of $ 0.2 million during the three months ended March 31, 2021, were primarily related to costs associated with our global Fixed Gas & Flame Detection manufacturing footprint optimization as well as programs to adjust our operations in response to current business conditions.

During the three months ended March 31, 2020, we recorded restructuring charges of $ 2.0 million.

International segment restructuring charges of $ 1.9 million during the three months ended March 31, 2020, were primarily related to severance costs for staff reductions associated with our ongoing initiatives to drive profitable growth.

During the three and six months ended June 30, 2021, we recorded restructuring charges of $ 7.1 million and $ 8.4 million, respectively.

International segment restructuring charges of $ 7.6 million during th e six months ended June 30, 2021, were primarily related to our ongoing initiatives to drive profitable growth and right size our operations.

A mericas segment restructuring charges of $ 0.8 million during the six months ended June 30, 2021, were primarily related to costs associated with our global Fixed Gas & Flame Detection manufacturing footprint optimization as well as programs to adjust our operations in response to current business conditions.

During the three and six months ended June 30, 2020, we recorded restructuring charges of $ 8.9 million and $ 10.9 million, respectively.

International segment restructuring charges of $ 8.5 million during the six months ended June 30, 2020, were primarily related to severance costs for staff reductions and footprint optimization associated with our ongoing initiatives to drive profitable growth.

Americas segment restructuring charges of $ 2.2 million during the six months ended June 30, 2020, were primarily related to costs associated with our global Fixed Gas & Flame Detection manufacturing footprint optimization.

Activity and reserve balances for restructuring charges by segment were as follows:

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Cash payments ( 0.8 ) ( 6.5 ) ( 0.1 ) ( 7.4 )

Reserve balances at March 31, 2021 $ 2.7 $ 16.6 $ 0.4 $ 19.7

Reserve balances at June 30, 2021 $ 2.7 $ 19.7 $ 0.3 $ 22.7

Restructuring reserves are included in Other current liabilities in the accompanying unaudited Condensed Consolidated Balance Sheets.

1 unchanged sentence

The following table sets forth the components of property, plant and equipment, net:

(In thousands) March 31, 2021 December 31, 2020

(In thousands) June 30, 2021 December 31, 2020

Land $ 5,215 $ 4,275

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Three Months Ended

March 31, Three Months Ended

June 30, Three Months Ended

(In thousands) 2021 2020 2021 2020

9 unchanged sentences

Balance at beginning of period $ ( 6 ) $ ( 56 ) $ — $ —

Unrealized loss on available-for-sale securities (Note 16) ( 5 ) ( 62 ) — —

Unrealized gain on available-for-sale securities (Note 16) 1 124 — —

Balance at end of period $ ( 5 ) $ 68 $ — $ —

1 unchanged sentence

Balance at beginning of period $ ( 77,102 ) $ ( 111,273 ) $ 617 $ 308

Foreign currency translation adjustments 6,145 4,651 ( 127 ) 18

Balance at end of period $ ( 70,957 ) $ ( 106,622 ) $ 490 $ 326

(a) Reclassifications out of accumulated other comprehensive loss and into net income are included in the computation of net periodic pension and other post-retirement benefit costs (refer to Note 14—Pensions and Other Post-retirement Benefits).

MSA Safety Incorporated Noncontrolling Interests

Six Months Ended

June 30, Six Months Ended

(In thousands) 2021 2020 2021 2020

Pension and other post-retirement benefits (a)

Balance at beginning of period $ ( 115,552 ) $ ( 124,848 ) $ — $ —

Amounts reclassified from accumulated other comprehensive loss into net income:

Amortization of prior service credit (Note 14) ( 48 ) ( 104 ) — —

Recognized net actuarial losses (Note 14) 9,640 8,442 — —

Tax benefit ( 2,223 ) ( 2,146 ) — —

Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income 7,369 6,192 — —

Balance at end of period $ ( 108,183 ) $ ( 118,656 ) $ — $ —

Available-for-sale securities

Balance at beginning of period $ ( 1 ) $ 6 $ — $ —

Unrealized (loss) gain on available-for-sale securities (Note 16) ( 4 ) 62 — —

Balance at end of period $ ( 5 ) $ 68 $ — $ —

Foreign currency translation

Balance at beginning of period $ ( 66,844 ) $ ( 89,161 ) $ 582 $ 423

Reclassification from accumulated other comprehensive loss into net income — 720 (b)

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(b) Reclassifications into net income relate primarily to the closure of several subsidiaries in our Europe, Middle East & Africa ("EMEA") operating segment and are included in Currency exchange (gains) losses, net, within the unaudited Condensed Consolidated Statement of Income.

(b) Reclassifications into net income relate primarily to the approval of our plan to close several subsidiaries in our Europe, Middle East & Africa ("EMEA") operating segment and are included in Currency exchange losses (gains), net, within the unaudited Condensed Consolidated Statement of Income.

Note 6— Capital Stock

Preferred Stock - The Company has authorized 100,000 shares of $ 50 par value 4.5 % cumulative preferred nonvoting stock which is callable at $ 52.50 .

There are 71,340 shares issued and 52,998 shares held in treasury at March 31, 2021.

The Treasury shares at cost line on the unaudited Condensed Consolidated Balance Sheet includes $ 1.8 million related to preferred stock.

There were no treasury purchases of preferred stock shares during the three months ended March 31, 2021.

There were treasury purchases of 120 preferred stock shares during the three months ended March 31, 2020.

There are 71,340 shares issued and 52,998 shares held in treasury at June 30, 2021.

The Treasury shares at cost line on the unaudited Condensed Consolidated Balance Sheets includes $ 1.8 million related to preferred stock.

There were no treasury purchases of preferred stock shares during the six months ended June 30, 2021.

There were treasury purchases of 120 preferred stock shares during the six months ended June 30, 2020.

The Company has also authorized 1,000,000 shares of $ 10 par value second cumulative preferred voting stock.

No shares have been issued as of March 31, 2021.

No shares have been issued as of June 30, 2021.

Common Stock - The Company has authorized 180,000,000 shares of no par value common stock.

There were 62,081,391 shares issued as of December 31, 2020.

No new shares were issued during the three months ended March 31, 2021, or 2020.

There were 39,167,207 and 39,067,902 shares outstanding at March 31, 2021, and December 31, 2020, respectively.

No new shares were issued during the six months ended June 30, 2021, or 2020.

There were 39,189,632 and 39,067,902 shares outstanding at June 30, 2021, and December 31, 2020, respectively.

Treasury Shares - The Company's share repurchase program authorizes up to $ 100.0 million to repurchase MSA common stock in the open market and in private transactions.

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The maximum number of shares that may be repurchased is calculated based on the dollars remaining under the program and the respective month-end closing share price.

During the three months ended March 31, 2021, no shares were repurchased under this program.

During the three months ended March 31, 2020, 175,000 shares were repurchased under the program.

There were 22,914,184 and 23,013,489 Treasury Shares at March 31, 2021, and December 31, 2020, respectively.

During the six months ended June 30, 2021, no shares were repurchased under this program.

During the six months ended June 30, 2020, 175,000 shares were repurchased under the program.

There were 22,891,759 and 23,013,489 Treasury Shares at June 30, 2021, and December 31, 2020, respectively.

The Company issues Treasury Shares for all stock-based compensation plans.

Shares are issued from Treasury at the average Treasury Share cost on the date of the transaction.

There were 32,650 and 58,840 Treasury Shares issued for these purposes during the three months ended March 31, 2021 and 2020, respectively.

There were 33,625 and 63,405 Treasury Shares issued for these purposes during the six months ended June 30, 2021 and 2020, respectively.

Common stock activity is summarized as follows:

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

(In thousands) Common

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Treasury shares purchased — ( 163 ) — ( 524 )

Employee stock purchase program 409 43 338 52

Balance at end of period $ 253,773 $ ( 329,439 ) $ 233,786 $ ( 327,997 )

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

(In thousands) Common

Stock Treasury

Balance at beginning of period $ 242,693 $ ( 326,156 ) $ 229,127 $ ( 303,566 )

Stock compensation expense 10,695 — 4,352 —

Restricted and performance stock awards ( 1,502 ) 1,502 ( 2,464 ) 2,464

Stock options exercised 1,478 683 2,433 1,307

Treasury shares purchased — ( 5,511 ) — ( 8,141 )

Employee stock purchase program 409 43 338 52

Share repurchase program — — — ( 20,113 )

20 unchanged sentences

(In thousands, except percentage amounts) Americas International Corporate Consolidated

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Sales to external customers $ 217,707 $ 123,582 $ — $ 341,289

1 unchanged sentence

Restructuring charges (Note 3) 7,078

Currency exchange losses, net (Note 5) 1,640

Product liability expense (Note 17) 11,751

Acquisition related costs (a) (Note 18)

Adjusted operating income (loss) 49,238 20,440 ( 10,991 ) 58,687

Adjusted operating margin % 22.6 % 16.5 %

Depreciation and amortization 11,584

Adjusted EBITDA 57,137 24,020 ( 10,886 ) 70,271

Adjusted EBITDA margin % 26.2 % 19.4 %

Six Months Ended June 30, 2021

Sales to external customers $ 426,046 $ 223,671 $ — $ 649,717

Operating income 79,088

Restructuring charges (Note 3) 8,385

Currency exchange gains, net (Note 5) ( 459 )

Product liability expense (Note 17) 14,547

Acquisition related costs (Note 18) 1,373

Acquisition related costs (a) (Note 18)

Adjusted operating income (loss) 94,390 29,194 ( 17,482 ) 106,102

4 unchanged sentences

(In thousands, except percentage amounts) Americas International Corporate Consolidated

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Sales to external customers $ 204,231 $ 110,207 $ — $ 314,438

3 unchanged sentences

Product liability expense (Note 17) 851

Acquisition related costs (Note 18) 97

Acquisition related costs (a) (Note 18)

Adjusted operating income (loss) 49,003 17,402 ( 7,538 ) 58,867

Adjusted operating margin % 24.0 % 15.8 %

Depreciation and amortization 9,786

Adjusted EBITDA 55,620 20,474 ( 7,441 ) 68,653

Adjusted EBITDA margin % 27.2 % 18.6 %

Six Months Ended June 30, 2020

Sales to external customers $ 435,484 $ 220,099 $ — $ 655,583

Operating income 107,076

Restructuring charges (Note 4) 10,872

Currency exchange losses, net (Note 6) 1,063

Product liability expense (Note 17) 2,802

Acquisition related costs (a) (Note 18)

COVID-19 related costs 757

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Adjusted EBITDA margin % 28.0 % 16.5 %

(a) Acquisition related costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during due diligence and integration.

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

Acquisition-related costs also include the acquisition related amortization, which is included in Cost of products sold in the Condensed Consolidated Statements of Income.

Total sales by product group was as follows:

Three Months Ended March 31, 2021 Consolidated Americas International

Three Months Ended June 30, 2021 Consolidated Americas International

(In thousands, except percentages) Dollars Percent Dollars Percent Dollars Percent

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Total $ 341,289 100 % $ 217,707 100 % $ 123,582 100 %

Three Months Ended March 31, 2020 Consolidated Americas International

Six Months Ended June 30, 2021 Consolidated Americas International

(In thousands, except percentages) Dollars Percent Dollars Percent Dollars Percent

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Total $ 649,717 100 % $ 426,046 100 % $ 223,671 100 %

( a) Other products include sales of Air Purifying Respirators ("APR") .

Three Months Ended June 30, 2020 Consolidated Americas International

(In thousands, except percentages) Dollars Percent Dollars Percent Dollars Percent

Breathing Apparatus $ 75,864 24 % $ 50,269 25 % $ 25,595 23 %

Fixed Gas & Flame Detection 65,385 21 % 36,742 18 % 28,643 26 %

Firefighter Helmets & Protective Apparel 40,337 13 % 33,744 16 % 6,593 6 %

Portable Gas Detection 28,385 9 % 17,201 8 % 11,184 10 %

Industrial Head Protection 30,601 10 % 20,506 10 % 10,095 9 %

Fall Protection 21,660 7 % 11,381 6 % 10,279 9 %

52,206 16 % 34,388 17 % 17,818 17 %

Total $ 314,438 100 % $ 204,231 100 % $ 110,207 100 %

Six Months Ended June 30, 2020 Consolidated Americas International

(In thousands, except percentages) Dollars Percent Dollars Percent Dollars Percent

Breathing Apparatus $ 151,708 23 % $ 102,962 24 % $ 48,746 22 %

Fixed Gas & Flame Detection 135,296 21 % 77,989 18 % 57,307 26 %

Firefighter Helmets & Protective Apparel 82,884 13 % 68,857 16 % 14,027 7 %

Portable Gas Detection 69,437 11 % 44,850 10 % 24,587 11 %

Industrial Head Protection 65,933 10 % 48,061 11 % 17,872 8 %

Fall Protection 49,087 7 % 29,076 7 % 20,011 9 %

101,238 15 % 63,689 14 % 37,549 17 %

Total $ 655,583 100 % $ 435,484 100 % $ 220,099 100 %

(b) Other products include sales of Air Purifying Respirators ("APR").

Note 8— Earnings per Share

3 unchanged sentences

Amounts attributable to MSA Safety Incorporated common shareholders:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share amounts) 2021 2020 2021 2020

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Note 9— Income Taxes

The Company's effective tax rate for the first quarter of 2021 was 21.0 % and is consistent with the U.S.

federal statutory rate of 21% as state income taxes and a one time foreign expense associated with pension are offset by tax benefits on certain share-based payments.

The Company's effective tax rate for the first quarter of 2020 was 23.0 %, which differs from the U.S.

statutory rate of 21% primarily due to state income taxes, higher foreign entity losses in jurisdictions where we cannot take tax benefits, partially offset by tax benefits on certain share-based payments.

At March 31, 2021, the Company had a gross liability for unrecognized tax benefits of $ 9.1 million.

The Company has recognized tax benefits associated with these liabilities of $ 2.7 million at March 31, 2021.

The Company's effective tax rate for the second quarter of 2021 was 27.8 % which differs from the U.S.

federal statutory rate of 21% primarily due to statutory rate increases in foreign jurisdictions and nondeductible executive compensation, partially offset by tax benefits on certain share-based payments.

The Company's effective tax rate for the second quarter of 2020 was 23.9 %, which differs from the U.S.

statutory rate of 21% primarily due to state income taxes, increased profitability in less favorable tax jurisdictions, non-deductible executive compensation and higher foreign entity losses in jurisdictions where we cannot take tax benefits, partially offset by tax benefits on certain share-based payments and benefits related to research and development tax credits.

On June 10, 2021 the United Kingdom Parliament announced royal assent for Bill No.

12, on the Finance Act of 2021.

This bill will increase the statutory rate from 19% to 25% in April 2023.

The Company recorded this impact on its deferred tax balances in the second quarter of 2021.

The Company's effective tax rate for the six months ended June 30, 2021 was 24.0 % which differs from the U.S.

The Company's effective tax rate for the six months ended June 30, 2020 was 23.4 % which differs from the U.S.

statutory rate of 21% due to state income taxes, increased profitability in less favorable tax jurisdictions and higher foreign entity losses in jurisdictions where we cannot take tax benefits, partially offset by tax benefits on certain share-based payments.

At June 30, 2021, the Company had a gross liability for unrecognized tax benefits of $ 9.1 million.

The Company has recognized tax benefits associated with these liabilities of $ 2.8 million at June 30, 2021.

The gross liability includes amounts associated with foreign tax exposure in prior periods.

The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.

The Company's liability for accrued interest related to uncertain tax positions was $ 1.1 million at March 31, 2021.

The Company's liability for accrued interest related to uncertain tax positions was $ 1.2 million at June 30, 2021.

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

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Stock compensation expense is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2021 2020 2021 2020

2 unchanged sentences

Stock compensation expense, net of tax $ 5,619 $ 628 $ 8,118 $ 3,290

A summary of stock option activity for the three months ended March 31, 2021, follows:

A summary of stock option activity for the six months ended June 30, 2021, follows:

Shares Weighted Average

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Forfeited ( 81 ) 49.66

Outstanding at March 31, 2021 245,111 46.26

Exercisable at March 31, 2021 243,563 $ 46.25

Outstanding at June 30, 2021 236,379 46.40

Exercisable at June 30, 2021 235,399 $ 46.39

Restricted stock awards and restricted stock units are valued at the market value of the stock on the grant date.

A summary of restricted stock activity for the three months ended March 31, 2021, follows:

A summary of restricted stock activity for the six months ended June 30, 2021, follows:

Shares Weighted Average

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Forfeited ( 1,035 ) 139.08

Unvested at March 31, 2021 144,182 $ 122.62

Performance stock units have a market condition modifier and are valued at an estimated fair value using a Monte Carlo model.

Unvested at June 30, 2021 129,089 $ 128.39

Performance stock units that have a market condition modifier and are valued at an estimated fair value using a Monte Carlo model.

The final number of shares to be issued for performance stock units granted in the first quarter of 2021 may range from 0 % to 200 % of the target award based on achieving the specified performance targets over the performance period plus an additional modifier based on total shareholder return (TSR) over the performance period.

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Expected life is based on historical stock option exercise data.

A summary of performance stock unit activity for the three months ended March 31, 2021, follows:

A summary of performance stock unit activity for the six months ended June 30, 2021, follows:

Shares Weighted Average

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Vested ( 63,286 ) 84.97

Unvested at March 31, 2021 187,937 $ 128.72

Unvested at June 30, 2021 187,937 $ 128.72

The performance adjustments above relate primarily to the final number of shares issued for the 2018 performance unit awards which vested in the first quarter of 2021 at 105.4 % of the target award based on both cumulative performance against the operating margin and revenue growth targets and MSA's TSR during the three-year performance period.

Note 11— Long-Term Debt

(In thousands) March 31, 2021 December 31, 2020

2010 Senior Notes payable through 2021, 4.00 %, net of debt issuance costs

(In thousands) June 30, 2021 December 31, 2020

2010 Senior Notes payable through 2021, 4.00 %

$ 20,000 $ 20,000

3 unchanged sentences

Total 334,587 307,157

Amounts due within one year, net of debt issuance costs 20,000 20,000

Amounts due within one year 20,000 20,000

Long-term debt, net of debt issuance costs $ 314,587 $ 287,157

On September 7, 2018, the Company entered into an amended agreement covering its senior revolving credit facility that extended its term through September 2023 and increased the capacity to $ 600.0 million.

On May 24, 2021, the Company entered into a Fourth Amended and Restated Credit Agreement (the “Revolving Credit Facility" or "Facility”) that extended its term through May 24, 2026 and increased the capacity to $ 900.0 million.

Under the amended agreement, the Company may elect either a Base rate of interest (“BASE”) or an interest rate based on the London Interbank Offered Rate (“LIBOR”).

The BASE is a daily fluctuating per annum rate equal to the highest of (i) 0.00 %, (ii) the Prime Rate, (ii) the Federal Funds Open Rate plus one half of one percent ( 0.5 %), (iii) the Overnight Bank Funding Rate, plus one half of one percent ( 0.50 %), or (iv) the Daily Libor Rate plus one percent ( 1.00 %).

The BASE is a daily fluctuating per annum rate equal to the highest of (i) 0.00 %, (ii) the Prime Rate, (iii) the Federal Funds Open Rate plus one half of one percent ( 0.5 %), (iv) the Overnight Bank Funding Rate, plus one half of one percent ( 0.50 %), or (v) the Daily Libor Rate plus one percent ( 1.00 %).

The Company pays a credit spread of 0 to 175 basis points based on the Company’s net EBITDA leverage ratio and elected rate (BASE or LIBOR).

The Company has a weighted average revolver interest rate of 1.09 % as of March 31, 2021.

At March 31, 2021, $ 333.1 million of the existing $ 600.0 million senior 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 $ 400.0 million of capacity pending approval from the bank group.

On January 22, 2016, the Company entered into an amended multi-currency note purchase and private shelf agreement, pursuant to which the Company issued notes in an aggregate original principal amount of £ 54.9 million (approximately $ 75.7 million at March 31, 2021).

The Notes are repayable in annual installments of £ 6.1 million (approximately $ 8.4 million at March 31, 2021), commencing January 22, 2023, with a final payment of any remaining amount outstanding on January 22, 2031.

The interest rate on these Notes is fixed at 3.4 %.

On September 7, 2018, the Company further amended the multi-currency note purchase and private shelf agreement to, among other things, allow the Company to request from time to time during a three-year period ending September 7, 2021, the issuance of up to $ 150 million of additional senior notes.

No additional notes have been issued under the amended agreement as of March 31, 2021.

On January 4, 2019, the Company entered into an amended and restated master note facility with New York Life.

Under the amended facility, the Company may request from time to time during a three-year period ending January 4, 2022, the issuance of up to $ 150 million of additional senior promissory notes.

As of March 31, 2021, no notes have been issued under the amended facility.

The senior revolving credit facility and the multi-currency note purchase and private shelf agreement require the Company to comply with specified financial covenants, including a requirement to maintain a minimum fixed charges coverage ratio of not less than 1.50 to 1.00 and a consolidated leverage ratio not to exceed 3.50 to 1.00;

The Company has a weighted average revolver interest rate of 1.10 % as of June 30, 2021.

At June 30, 2021, $ 657.5 million of the existing $ 900.0 million senior 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 $ 400.0 million of capacity pending approval by MSA’s board of directors and from the bank group.

On July 1, 2021 the Company entered into a Third Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement (the “Prudential Note Agreement”) with PGIM, Inc.

(“Prudential”).

The Prudential Note Agreement provided for (i) the issuance of $ 100.0 million of 2.69 % Series C Senior Notes due July 1, 2036 and (ii) the establishment of an uncommitted note issuance facility whereby the Company may request, subject to Prudential’s acceptance in its sole discretion, the issuance of up to $ 335.0 million aggregate principal amount of senior unsecured notes.

As of June 30, 2021, the Company issued £ 54.9 million (approximately $ 76.0 million at June 30, 2021) of 3.4 % Series B Senior Notes due January 22, 2031.

The Company also issued $ 100.0 million of 4.00 % Series A Senior Notes, of which the final $ 20.0 million is due October 13, 2021.

On July 1, 2021, the Company entered into a Second Amended and Restated Master Note Facility (the “NYL Note Facility”) with NYL Investors.

The NYL Note Facility provided for (i) the issuance of $ 100.0 million of 2.69 % Series A Senior Notes due July 1, 2036 and (ii) the establishment of an uncommitted note issuance facility whereby the Company may request, subject to NYL Investors’ acceptance in its sole discretion, the issuance of up to $ 200.0 million aggregate principal amount of senior unsecured notes.

As of June 30, 2021 no notes were issued under the NYL Note Facility.

The Revolving Credit Facility, Prudential Note Agreement and NYL Note Facility require the Company to comply with specified financial covenants, including a requirement to maintain a minimum fixed charges coverage ratio of not less than 1.50 to 1.00 and a consolidated leverage ratio not to exceed 3.50 to 1.00;

except during an acquisition period, defined as four consecutive fiscal quarters beginning with the quarter of acquisition, in which case the consolidated net leverage ratio shall not exceed 4.00 to 1.00;

in each case calculated on the basis of the trailing four fiscal quarters.

In addition, both agreements contain negative covenants limiting the ability of the Company and its subsidiaries to incur additional indebtedness or issue guarantees, create or incur liens, make loans and investments, make acquisitions, transfer or sell assets, enter into transactions with affiliated parties, make changes in its organizational documents that are materially adverse to lenders or modify the nature of the Company's or its subsidiaries' business.

However, the covenants contained in the New York Life amended facility do not apply until promissory notes are issued.

The Company was in compliance with all debt covenants at March 31, 2021.

The Company had outstanding bank guarantees and standby letters of credit with banks as of March 31, 2021, totaling $ 11.4 million, of which $ 1.3 million relat e to the senior revolving credit facility.

In addition, the agreements contain negative covenants limiting the ability of the Company and its subsidiaries to incur additional indebtedness or issue guarantees, create or incur liens, make loans and investments, make acquisitions, transfer or sell assets, enter into transactions with affiliated parties, make changes in its organizational documents that are materially adverse to lenders or modify the nature of the Company's or its subsidiaries' business.

The Company was in compliance with all debt covenants at June 30, 2021.

The Company had outstanding bank guarantees and standby letters of credit with banks as of June 30, 2021, totaling $ 11.3 million, of which $ 1.7 million relate to the Revolving Credit Facility.

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

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

At March 31, 2021, the Company has $ 0.3 million of restricted cash in support of these arrangements.

At June 30, 2021, the Company has $ 0.3 million of restricted cash in support of these arrangements.

On July 1, 2021, the Company acquired Bacharach, Inc.

for $ 337.0 million.

The acquisition was partially financed by $ 200.0 million of 2.69 % Senior Notes from the Prudential Note Agreement and NYL Note Facility.

The remaining purchase price was financed under the Revolving Credit Facility as further discussed in Note 19, Subsequent Events.

Note 12— Goodwill and Intangible Assets

Changes in goodwill during the three months ended March 31, 2021 are as follows:

Changes in goodwill during the six months ended June 30, 2021 are as follows:

(In thousands) Goodwill

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Currency translation ( 61 )

Balance at March 31, 2021 $ 447,059

At March 31, 2021, the Company had goodwill of $ 293.2 million and $ 153.9 million related to the Americas and International reportable segments, respectively.

Changes in intangible assets, net during the three months ended March 31, 2021, are as follows:

Balance at June 30, 2021 $ 447,267

At June 30, 2021, the Company had goodwill of $ 293.2 million and $ 154.1 million related to the Americas and International reportable segments, respectively.

Changes in intangible assets, net during the six months ended June 30, 2021, are as follows:

(In thousands) Intangible Assets

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Currency translation 579

Net balance at March 31, 2021 $ 164,234

At March 31, 2021, the above intangible assets balance includes a trade name related to the Globe acquisition with an indefinite life totaling $ 60.0 million.

Net balance at June 30, 2021 $ 161,402

At June 30, 2021, the above intangible assets balance includes a trade name related to the Globe acquisition with an indefinite life totaling $ 60.0 million.

Note 13— Leases

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Interest income is recognized monthly over the lease term.

Revenue from sales-type leases recognized by the Company, included in Net sales in the unaudited Condensed Consolidated Statements of Income, was $ 1.0 million during the three months ended March 31, 2021.

Gross profit recognized at commencement from our various leasing arrangements was $ 0.6 million during the three months ended March 31, 2021.

There were no new sales-type lease transactions commencing and no lease revenue recognized during the three months ended March 31, 2020.

Revenue from sales-type leases recognized by the Company, included in Net sales in the unaudited Condensed Consolidated Statements of Income, was $ 2.1 million and $ 3.2 million during the three and six months ended June 30, 2021, respectively.

Gross profit recognized at commencement from our various leasing arrangements was $ 0.6 million and $ 1.3 million during the three and six months ended June 30, 2021, respectively.

There were no new sales-type lease transactions commencing and no lease revenue recognized during the three and six months ended June 30, 2020, respectively.

Note 14— Pensions and Other Post-retirement Benefits

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(In thousands) 2021 2020 2021 2020

Three Months Ended March 31,

Three Months Ended June 30,

Service cost $ 3,242 $ 3,011 $ 99 $ 99

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Recognized net actuarial losses 4,421 3,935 399 286

Net periodic benefit cost (a)

$ 1,399 $ 2,215 $ 524 $ 466

Six Months Ended June 30,

Service cost $ 6,484 $ 6,022 $ 198 $ 198

Interest cost 5,634 7,452 232 358

Expected return on plan assets ( 18,294 ) ( 17,006 ) — —

Amortization of prior service cost (credit) 132 92 ( 180 ) ( 196 )

Recognized net actuarial losses 8,842 7,870 798 572

Settlements ( 1,879 ) —

Net periodic benefit (income) cost (a)

Net periodic benefit cost (a)

$ 919 $ 4,430 $ 1,048 $ 932

(a) Components of net periodic benefit (income) cost other than service cost are included in the line item "Other income, net" in the unaudited Condensed Consolidated Statements of Income.

We made contributions of $ 1.9 million to our pension plans during both the three months ended March 31, 2021 and 2020, respectively.

(a) Components of net periodic benefit cost other than service cost are included in the line item Other income, net in the unaudited Condensed Consolidated Statements of Income.

We made contributions of $ 3.8 million to our pension plans during both the six months ended June 30, 2021 and 2020.

We expect to make total contributions of approximately $ 7.7 million to our pension plans in 2021 primarily associated with statutorily required plans in the International segment.

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We account for these forward contracts at fair value and report the related gains or losses in currency exchange (gains) losses, net, in the unaudited Condensed Consolidated Statement of Income.

The notional amount of open forward contracts was $ 94.3 million and $ 96.0 million at March 31, 2021, and December 31, 2020, respectively.

The notional amount of open forward contracts was $ 99.2 million and $ 96.0 million at June 30, 2021, and December 31, 2020, respectively.

The following table presents the unaudited Condensed Consolidated Balance Sheet location and fair value of assets and liabilities associated with derivative financial instruments:

(In thousands) March 31, 2021 December 31, 2020

(In thousands) June 30, 2021 December 31, 2020

Derivatives not designated as hedging instruments:

Foreign exchange contracts:

Warranty reserve and other current liabilities $ 1,039 $ 157

Other current liabilities $ 541 $ 157

Foreign exchange contracts:

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The following table presents the unaudited Condensed Consolidated Statement of Income location and impact of derivative financial instruments:

Loss Recognized in Income

Three Months Ended March 31,

Loss (Gain) Recognized in Income

Six Months Ended June 30,

(In thousands) Statement of Income Location 2021 2020

Derivatives not designated as hedging instruments:

Foreign exchange contracts Currency exchange (gains) losses, net $ 3,388 $ 376

Foreign exchange contracts Currency exchange losses (gains), net $ 1,474 $ ( 864 )

Note 16— Fair Value Measurements

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Accordingly, the fair values of the investments are classified within Level 2 of the fair value hierarchy.

The amortized cost basis of our investments was $ 55 million and $ 75 million as of March 31, 2021 and December 31, 2020, respectively.

The fair value was $ 55 million and $ 75 million as of March 31, 2021 and December 31, 2020, respectively, which was reported in "Investments, short-term" in the accompanying unaudited Condensed Consolidated Balance Sheet.

The amortized cost basis of our investments was $ 50.0 million and $ 74.9 million as of June 30, 2021 and December 31, 2020, respectively.

The fair value was $ 50.0 million and $ 75.0 million as of June 30, 2021 and December 31, 2020, respectively, which was reported in Investments, short-term in the accompanying unaudited Condensed Consolidated Balance Sheet.

The change in fair value is recorded in Other comprehensive income, net of tax.

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therefore, no impairment gains or losses relating to these securities have been recognized.

All investments in marketable securities have maturities of one year or less and are currently in an unrealized loss position as of March 31, 2021.

The reported carrying amount of our fixed rate long-term debt (including the current portion) was $ 96 million and $ 95 million at March 31, 2021, and December 31, 2020, respectively.

The fair value of this debt was $ 112 million and $ 113 million at March 31, 2021, and December 31, 2020, respectively.

All investments in marketable securities have maturities of one year or less and are currently in an unrealized loss position as of June 30, 2021.

The reported carrying amount of our fixed rate long-term debt (including the current portion) was $ 96 million and $ 95 million at June 30, 2021, and December 31, 2020, respectively.

The fair value of this debt was $ 113 million and $ 113 million at June 30, 2021, and December 31, 2020, respectively.

The fair value of this debt was determined using Level 2 inputs by evaluating similarly rated companies with publicly traded bonds where available or current borrowing rates available for financings with similar terms and maturities.

Acquisitions are measured at fair value, refer to Note 18— Acquisitions for a description of the mehodologies and fair vlue measurements utilized in the business combination.

Acquisitions are measured at fair value, refer to Note 18— Acquisitions for a description of the methodologies and fair value measurements utilized in the business combination.

Note 17— Contingencies

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Single incident product liability claims involve incidents of short duration that are typically known when they occur and involve observable injuries, which provide an objective basis for quantifying damages.

The Company estimates its liability for single incident product liability claims based on expected settlement costs for asserted single incident product liability claims and an estimate of costs for single incident product liability claims incurred but not reported ("IBNR").

The estimate for IBNR claims is based on experience, sales volumes, and other relevant information.

The reserve for single incident product liability claims, which includes asserted single incident product liability claims and IBNR single incident product liability claims, was $ 1.5 million and $ 1.4 million at March 31, 2021 and December 31, 2020, respectively.

Single incident product liability expense was $ 0.1 million during the three months ended March 31, 2021 and $ 0.2 million during the three months ended March 31, 2020.

The Company estimates its liability for asserted single incident product liability claims based on expected settlement costs for asserted single incident product liability claims.

The estimate for incurred but not reported ("IBNR") single incident product liability claims is based on experience, sales volumes, and other relevant information.

Single incident product liability expense was $ 0.1 million during the six months ended June 30, 2021 and $ 0.3 million during the six months ended June 30, 2020.

Single incident product liability exposures are evaluated on an annual basis, or more frequently if changing circumstances warrant.

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Cumulative trauma product liability claims involve alleged exposures to harmful substances (e.g., silica, asbestos and coal dust) that occurred years ago and may have developed over long periods of time into diseases such as silicosis, asbestosis, mesothelioma, or coal worker’s pneumoconiosis.

One of the Company's affiliates, Mine Safety Appliances Company, LLC ("MSA LLC"), was named as a defendant in 1,632 lawsuits comprised of 3,043 claims as of March 31, 2021.

One of the Company's affiliates, Mine Safety Appliances Company, LLC ("MSA LLC"), was named as a defendant in 1,610 lawsuits comprised of 3,942 claims as of June 30, 2021.

These lawsuits mainly involve respiratory protection products allegedly manufactured and sold by MSA LLC or its predecessors.

The products at issue were manufactured many years ago by MSA LLC and are no longer sold.

The product models alleged were manufactured many years ago by MSA LLC and are no longer sold.

A summary of cumulative trauma product liability lawsuits and asserted cumulative trauma product liability claims activity is as follows:

Three Months Ended March 31, 2021 Year Ended December 31, 2020

Six Months Ended June 30, 2021 Year Ended December 31, 2020

Open lawsuits, beginning of period 1,622 1,605

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Open lawsuits, end of period 1,610 1,622

Three Months Ended March 31, 2021 Year Ended December 31, 2020

Six Months Ended June 30, 2021 Year Ended December 31, 2020

Asserted claims, beginning of period 2,878 2,456

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Asserted claims, end of period 3,942 2,878

The increases in the number of claims in 2020 and in the first quarter of 2021, are largely attributable to an increase in claims alleging injuries from exposure to coal mine dust, involving products that were manufactured many years ago by MSA LLC and are no longer sold.

More than half of the total open lawsuits at March 31, 2021, have had a de minimis level of activity over the last 5 years.

The increases in the number of claims in 2020 and in 2021, are largely attributable to an increase in claims alleging injuries from exposure to coal mine dust including plaintiffs' counsels with which MSA LLC does not have substantial prior experience, alleging product models that were manufactured many years ago by MSA LLC and are no longer sold.

More than half of the total open lawsuits at June 30, 2021, have had a de minimis level of activity over the last 5 years.

It is possible that these cases could become active again at any time due to changes in circumstances.

Total cumulative trauma product liability reserve was $ 216.8 million at March 31, 2021, including $ 3.6 million for claims settled but not yet paid and related defense costs, and $ 221.5 million at December 31, 2020, including $ 7.8 million for claims settled but not yet paid and related defense costs.

Total cumulative trauma product liability reserve was $ 226.1 million at June 30, 2021, including $ 11.0 million for claims settled but not yet paid and related defense costs, and $ 221.5 million at December 31, 2020, including $ 7.8 million for claims settled but not yet paid and related defense costs.

This reserve includes estimated amounts for asserted claims and IBNR claims.

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The Company revised its estimates of MSA LLC's potential liability for cumulative trauma product liability claims for the year ended December 31, 2020 as a result of its annual review process described below.

The reserve was also increased during the second quarter of 2021 to reflect an increase in the number of asserted claims pending against MSA LLC.

The Company is monitoring developments in filing rates to determine the potential for impact on long-term filing trends.

The reserve does not include amounts which will be spent to defend the claims covered by the reserve.

Defense costs are recognized in the unaudited Condensed Consolidated Statement of Income as incurred.

There was no change in trends or other activity during the quarter that required an interim remeasurement of the cumulative trauma product liability reserve as of March 31, 2021.

At March 31, 2021, $ 30.9 million of the total reserve for cumulative trauma product liability claims is recorded in the Insurance and product liability line within other current liabilities in the unaudited Condensed Consolidated Balance Sheet and the remainder, $ 185.9 million, is recorded in the Product liability and other noncurrent liabilities line.

At June 30, 2021, $ 35.0 million of the total reserve for cumulative trauma product liability claims is recorded in the Insurance and product liability line within other current liabilities in the unaudited Condensed Consolidated Balance Sheet and the remainder, $ 191.1 million, is recorded in the Product liability and other noncurrent liabilities line.

At December 31, 2020, $ 35.3 million of the total reserve for cumulative trauma product liability claims is recorded in the Insurance and product liability line within other current liabilities in the unaudited Condensed Consolidated Balance Sheet and the remainder, $ 186.2 million, is recorded in the Product liability and other noncurrent liabilities line.

Total cumulative trauma liability losses were $ 3.0 million for the three months ended March 31, 2021, and $ 2.1 million for the three months ended March 31, 2020, both primarily related to the defense of cumulative trauma product liability claims.

Uninsured cumulative trauma product liability losses, which were included in Product liability and other operating expense on the unaudited Condensed Consolidated Statements of Income, were $ 2.8 million and $ 1.8 million for the three months ended March 31, 2021 and March 31, 2020, respectively, and represent the total cumulative trauma liability losses net of any estimated insurance receivables as discussed below.

Total cumulative trauma liability losses were $ 24.5 million and $ 27.5 million for the three and six months ended June 30, 2021 and related to an update to our asserted cumulative trauma product liability reserve as well as the defense of cumulative trauma product liability claims.

Total cumulative trauma liability losses were $ 1.2 million and $ 3.3 million for the three and six months ended June 30, 2020 primarily related to the defense of cumulative trauma product liability claims.

Uninsured cumulative trauma product liability losses, which were included in Product liability expense on the unaudited Condensed Consolidated Statements of Income, were $ 11.8 million and $ 14.5 million for the three and six months ended June 30, 2021 and $ 0.9 million and $ 2.8 million for the three and six months ended June 30, 2020, respectively, and represent the total cumulative trauma liability losses net of any estimated insurance receivables as discussed below.

To develop a reasonable estimate of MSA LLC’s potential exposure to cumulative trauma product liability claims, Management performs an annual review of MSA LLC’s cumulative trauma product liability claims in consultation with an outside valuation consultant and outside legal counsel.

The review process takes into account developments in MSA LLC’s claims experience over the past year, developments in the tort system generally, and any other relevant information.

Quarterly, management and outside legal counsel review whether significant new developments have occurred which could materially impact recorded amounts.

Quarterly, management and outside legal counsel review whether significant new developments have occurred which could materially impact recorded amounts for asserted claims, and if warranted management reviews changes with an outside valuation consultant.

Certain significant assumptions underlying the material components of the reserve for cumulative trauma product liability claims have been made based on MSA LLC's experience related to the following:

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Cumulative trauma product liability litigation is inherently unpredictable and MSA LLC's expense with respect to cumulative trauma product liability claims could vary significantly in future periods.

With respect to asserted claims, this is because it is unclear at the time of filing whether a claim will be actively litigated.

It is difficult to reasonably estimate how many claims will be newly asserted against MSA LLC in any given period or over the lifetime of MSA LLC's claims experience.

Case solicitation and filing activity, in our experience, is unique to each plaintiffs’ counsel and also influenced by external factors.

Once asserted it is unclear at the time of filing whether a claim will be actively litigated, or the extent of ultimate loss, if any, in the absence of discovery at initial case stages.

Even when a case is actively litigated, it is often difficult to determine if the lawsuit will be dismissed without payment or settled, because of sufficiency of product identification, statute of limitations challenges, or other defenses.

As a result, it is typically unclear until late into a lawsuit whether any particular claim will result in a loss and, if so, to what extent.

This difficulty is increased when claims are asserted by plaintiffs’ counsel with which MSA LLC does not have substantial prior experience, as claims experience can vary significantly among different plaintiffs' counsel.

As a result of all of these factors, it is typically unclear until late into litigation whether any particular claim, or inventories of claims, will result in losses and, if so, to what extent.

Actual loss amounts for settled claims are highly variable and turn on a case-by-case analysis of the relevant facts.

As more information is learned about asserted claims, adjustments may be made to the cumulative trauma product liability reserve as appropriate.

With respect to asserted or IBNR claims, MSA LLC’s expense in future periods may vary from the reserve currently established for several reasons.

In particular, MSA LLC’s actual claims experience may differ in one or more respects from the significant assumptions listed above that were used by in establishing the reserve.

Factors that make MSA LLC's asserted and IBNR claims difficult to reasonably estimate include uncertainty as to the number of claims that may be asserted in the future (and over what time periods), the wide variability in the alleged severity of claims asserted, and the number of claims that ultimately will be resolved with payment.

This difficulty is increased when claims are asserted by plaintiff's counsel, with which MSA LLC does not have substantial prior experience (as claims experience can vary significantly among different counsel), the absence of discovery into many pending claims, the historically low volume of claims asserted and resolved, and numerous other factors.

Factors that make MSA LLC's asserted and IBNR claims difficult to reasonably estimate include uncertainty as to the number of claims that may be asserted in the future (and over what time periods), the wide variability in the alleged severity of claims asserted, changes in the severity of claims over time, and the number of claims that ultimately will be resolved with payment.

This difficulty is increased when claims are asserted by plaintiffs' counsel, with which MSA LLC does not have substantial prior experience (as claims experience can vary significantly among different plaintiffs' counsel), the historically low volume of claims asserted and resolved, and numerous other factors.

Numerous uncertainties also exist with respect to factors not specific to MSA LLC, including potential legislative or judicial changes at the federal level or in key states concerning claims adjudication, future bankruptcy proceedings involving key co-defendants, payments from trusts established to compensate claimants, and/or changes in medical science relating to the diagnosis and treatment of claims.

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These amounts are not subject to current coverage litigation.

Insurance receivables at March 31, 2021, totaled $ 95.6 million, of which, $ 12.0 million is reported in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheet and $ 83.6 million is reported in Insurance receivable and other noncurrent assets.

Insurance receivables at June 30, 2021 totaled $ 104.1 million of which, $ 12.9 million is reported in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheet and $ 91.2 million is reported in Insurance receivable and other noncurrent assets.

Insurance receivables at December 31, 2020 totaled $ 97.0 million, of which $ 12.0 million was reported in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheet and $ 85.0 million was reported in Insurance receivable and other noncurrent assets.

The vast majority of the $ 95.6 million insurance receivables balance at March 31, 2021 is attributable to reimbursement believed to be due under the terms of signed Coverage-In-Place Agreements and a portion of this amount represents the estimated recovery of IBNR amounts not yet incurred.

The vast majority of the $ 104.1 million insurance receivables balance at June 30, 2021 is attributable to reimbursement believed to be due under the terms of signed Coverage-In-Place Agreements and a portion of this amount represents the estimated recovery of IBNR amounts not yet incurred.

A summary of insurance receivables balance and activity related to cumulative trauma product liability losses is as follows:

(In millions) Three Months Ended March 31, 2021 Year Ended December 31, 2020

(In millions) Six Months Ended June 30, 2021 Year Ended December 31, 2020

Balance beginning of period $ 97.0 $ 63.8

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These amounts are not subject to current coverage litigation.

Notes receivable from insurance companies at March 31, 2021, totaled $ 52.7 million, of which $ 3.9 million is reported in Notes receivable, insurance companies, current on the unaudited Condensed Consolidated Balance Sheet and $ 48.8 million is reported in Notes receivable, insurance companies, noncurrent.

Notes receivable from insurance companies at June 30, 2021, totaled $ 53.0 million, of which $ 3.9 million is reported in Notes receivable, insurance companies, current on the unaudited Condensed Consolidated Balance Sheet and $ 49.1 million is reported in Notes receivable, insurance companies, noncurrent.

Notes receivable from insurance companies at December 31, 2020 totaled $ 52.3 million of which $ 3.8 million was reported in Notes receivable, insurance companies, current on the unaudited Condensed Consolidated Balance Sheet and $ 48.5 million was reported in Notes receivable, insurance companies, noncurrent.

A summary of notes receivables from insurance companies balance is as follows:

(In millions) Three Months Ended March 31, 2021 Year Ended December 31, 2020

(In millions) Six Months Ended June 30, 2021 Year Ended December 31, 2020

Balance beginning of period $ 52.3 $ 56.0

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Balance end of period $ 53.0 $ 52.3

The vast majority of the insurance receivables balance at March 31, 2021, is attributable to reimbursement under the terms of signed agreements with insurers and are not currently subject to litigation.

The vast majority of the insurance receivables balance at June 30, 2021, is attributable to reimbursement under the terms of signed agreements with insurers and is not currently subject to litigation.

The collectibility of MSA LLC's insurance receivables and notes receivables is regularly evaluated and we believe that the amounts recorded are probable of collection.

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The following table reconciles the changes in the Company's accrued warranty reserve:

(In thousands) Three Months Ended March 31, 2021 Year Ended December 31, 2020

(In thousands) Six Months Ended June 30, 2021 Year Ended December 31, 2020

Beginning warranty reserve $ 11,428 $ 12,715

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Ending warranty reserve $ 10,993 $ 11,428

Warranty expense was $ 2.3 million and $ 2.9 million for the three months ended March 31, 2021 and 2020, respectively, and is included in "Costs of products sold" on the unaudited Condensed Consolidated Statements of Income.

Warranty expense was $ 4.1 million and $ 4.5 million for the six months ended June 30, 2021 and 2020, respectively, and is included in Costs of products sold on the unaudited Condensed Consolidated Statements of Income.

Note 18— Acquisitions

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The acquisition qualifies as a business combination and will be accounted for using the acquisition method of accounting.

The following table summarizes the fair values of the Bristol assets acquired and liabilities assumed at the date of the acquisition:

The following table summarizes the preliminary fair values of the Bristol assets acquired and liabilities assumed at the date of the acquisition:

(In millions) January 25, 2021

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This valuation is expected to be completed by first quarter of 2022.

Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values.

Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their preliminary fair values.

Fair values were determined by management, based in part on an independent valuation performed by a third party valuation specialist.

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Estimated future amortization expense related to the identifiable intangible assets is approximately $ 0.2 million for the remainder of 2021, $ 0.5 million in 2022 and 2023, $ 0.4 million in 2024 and 2025, and $ 3.8 million thereafter.

The step up to fair value of acquired inventory as part of the purchase price allocation totaled $ 1.5 million which will be amortized over four months , which is included in Cost of products sold in the unaudited condensed consolidated statement of income.

The step up to fair value of acquired inventory as part of the purchase price allocation totaled $ 1.5 million which was amortized over four months ending with May 2021.

The amortization of the inventory step up was included in Cost of products sold in the unaudited condensed consolidated statement of income.

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

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Goodwill of $ 4.1 million related to the Bristol acquisition has been recorded in the International reportable segment and is non-deductible for tax purposes.

Our results for the three months ended March 31, 2021, include acquisition related costs of approximately $ 1.4 million, including costs related to the acquisition of Bristol.

Our results for the three months ended March 31, 2020, include an immaterial amount of acquisition related costs.

Our results for the three and six months ended June 30, 2021, include acquisition related costs of approximately $ 3.2 million and $ 4.5 million, respectively, including costs related to the acquisition of Bristol.

Our results for the three and six months ended June 30, 2020, include an immaterial amount of acquisition related costs.

These costs are reported in selling, general, and administrative expenses and costs of products sold.

The operating results of the Bristol acquisition have been included in our unaudited condensed consolidated financial statements from the acquisition date through March 31, 2021.

Our results for the three months ended March 31, 2021, include Bristol sales and net loss of $ 4.2 million and $ 1.4 million, respectively.

The operating results of the Bristol acquisition have been included in our unaudited condensed consolidated financial statements from the acquisition date through June 30, 2021.

Our results for the six months ended June 30, 2021, include Bristol sales and net loss of $ 12.5 million and $ 2.2 million, respectively.

The following unaudited pro forma information presents our combined results as if the Bristol acquisition had occurred on January 1, 2020.

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Pro forma condensed combined financial information (Unaudited)

Three months ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions, except per share amounts) 2020 2021 2020

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MSA has been treated as the acquirer.

Note 19— Subsequent Events

Acquisition of Bacharach, Inc.

On July 1, 2021, we acquired Bacharach, Inc.

and its affiliated companies (Bacharach) in an all cash transaction valued at $ 337 million, net of cash acquired.

Headquartered near Pittsburgh in New Kensington, PA, Bacharach is a leader in gas detection technologies used in the heating, ventilation, air conditioning, and refrigeration (HVAC-R) markets.

Our results for the three months ended June 30, 2021 include transaction costs of $ 1.9 million related to the acquisition.

These costs are reporting in selling, general and administrative expenses.

Bacharach operating results will be included in our financial statements from the acquisition date with results impacting both the Americas and International segments.

The acquisition qualifies as a business combination and will be accounted for using the acquisition method of accounting.

Acquisition of Noncontrolling Interest

During July 2021, we purchased the remaining 10 % noncontrolling interest in MSA (China) Safety Equipment Co., Ltd.

from our China partner for $ 19 million, inclusive of a $ 6 million dividend.

China has been a key market in our International segment and is an important part of our strategic plan going forward.

We have seen good growth in China and continue to make additional investments in this region.

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 1. Financial Statements