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Item 1. Financial Statements

2021-10-29 compared with 2021-07-29 · 250 added, 165 removed, 692 unchanged (37% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

Three Months Ended September 30, Nine Months Ended September 30,

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

10 unchanged sentences

Other income, net ( 2,266 ) ( 1,117 ) ( 8,773 ) ( 4,376 )

Total other (income) expense, net ( 121 ) 459 ( 2,424 ) 2,344

Total other expense (income), net 1,498 1,188 ( 926 ) 3,531

Income before income taxes 27,463 39,961 108,975 144,682

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

4 unchanged sentences

(Note 6) 3,701 3,058 11,070 9,250

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

Unrealized loss on available-for-sale securities (Note 6) ( 11 ) ( 74 ) ( 15 ) ( 12 )

Reclassification of currency translation from accumulated other comprehensive loss into net income (Note 6) — — — 720

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

Total other comprehensive (loss) income, net of tax ( 10,178 ) 18,504 ( 7,018 ) 7,200

Comprehensive income 8,645 46,738 73,792 115,631

4 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

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

Cash and cash equivalents (Note 2) $ 117,302 $ 160,672

Trade receivables, less allowance for credit loss of $ 4,930 and $ 5,344

41 unchanged sentences

824,177 801,898

Noncontrolling interests 8,349 7,993

Noncontrolling interests (Note 19) — 7,993

Total shareholders’ equity

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2021 2020

23 unchanged sentences

Proceeds from maturities of short-term investments (Note 17) 135,000 155,000

Property disposals 60 83

Property disposals and other investing ( 5,249 ) 334

Cash Flow Used in Investing Activities ( 402,587 ) ( 51,701 )

4 unchanged sentences

Cash dividends paid ( 51,322 ) ( 49,811 )

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

Distributions to noncontrolling interests (Note 19) ( 5,632 ) —

Company stock purchases (Note 7) ( 6,137 ) ( 28,691 )

1 unchanged sentence

Employee stock purchase plan (Note 7) 452 390

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

Cash Flow From (Used in) Financing Activities 233,430 ( 76,143 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 4,177 ) ( 1,668 )

Increase (decrease) in cash, cash equivalents and restricted cash 13,377 ( 15,952 )

Decrease in cash, cash equivalents and restricted cash ( 43,191 ) ( 19,357 )

Beginning cash, cash equivalents and restricted cash 161,034 152,543

1 unchanged sentence

Supplemental cash flow information:

Cash and cash equivalents $ 174,078 $ 136,238

Cash and cash equivalents (Note 2) $ 117,302 $ 132,830

Restricted cash included in prepaid expenses and other current assets 541 356

8 unchanged sentences

(Loss) Noncontrolling Interests

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

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

Net income 28,234 — —

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Income attributable to noncontrolling interests ( 200 ) ( 294 ) 494

Common dividends ( 16,710 ) — —

Common dividends ($ 0.43 per share)

( 16,761 ) — —

Preferred dividends ($ 0.5625 per share)

Balances September 30, 2020 $ 1,070,218 $ ( 207,000 ) $ 7,638

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

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

Net income 18,823 — —

2 unchanged sentences

Unrealized net gains on available-for-sale securities (Note 17) — ( 11 ) —

Income attributable to noncontrolling interests ( 262 ) 127 135

Common dividends ( 17,237 ) — —

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

— — ( 8,349 )

Distributions to noncontrolling interests (Note 19) ( 5,632 ) — —

Common dividends ($ 0.44 per share)

( 17,245 ) — —

Preferred dividends ($ 0.5625 per share)

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

Balances September 30, 2021 $ 1,089,197 $ ( 189,323 ) $ —

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

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Income attributable to noncontrolling interests ( 668 ) ( 197 ) 865

Common dividends ( 33,032 ) — —

Common dividends ($ 1.28 per share)

( 49,781 ) — —

Preferred dividends ($ 1.6875 per share)

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

Balances September 30, 2020 $ 1,070,218 $ ( 207,000 ) $ 7,638

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

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Income attributable to noncontrolling interests ( 448 ) 92 356

Common dividends ( 34,047 ) — —

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

— — ( 8,349 )

Distributions to noncontrolling interests (Note 19) ( 5,632 ) — —

Common dividends ($ 1.31 per share)

( 51,292 ) — —

Preferred dividends ($ 1.6875 per share)

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

Balances September 30, 2021 $ 1,089,197 $ ( 189,323 ) $ —

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

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Reclassifications - Certain reclassifications of prior years' data have been made to conform to the current year presentation.

These reclassifications relate to additional captions disclosed within the operating section of the unaudited Condensed Consolidated Statement of Cash Flows, but do not change the overall cash flow from operating activities for the prior years as previously reported.

These reclassifications relate to additional captions disclosed within the operating section of the unaudited Condensed Consolidated Statements of Cash Flows, but do not change the overall cash flow from operating activities for the prior years as previously reported.

Note 2— Cash and Cash Equivalents

Several of the Company's affiliates participate in a notional cash pooling arrangement to manage global liquidity requirements.

As part of a master netting arrangement, the participants combine their cash balances in pooling accounts at the same financial institution with the ability to offset bank overdrafts of one participant against positive cash account balances held by another participant.

Under the terms of the master netting arrangement, the financial institution has the right, ability and intent to offset a positive balance in one account against an overdrawn amount in another account.

Amounts in each of the accounts are unencumbered and unrestricted with respect to use.

As such, the net cash balance related to this pooling arrangement is included in Cash and cash equivalents in the unaudited Condensed Consolidated Balance Sheets.

The Company's net cash pool position consisted of the following:

(In thousands) September 30, 2021

Gross cash pool position $ 22,508

cash pool borrowings ( 22,000 )

Net cash pool position 508

Note 3— Inventories

The following table sets forth the components of inventory:

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

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

Finished products $ 102,426 $ 81,048

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Note 4— Restructuring Charges

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.

During the three and nine months ended September 30, 2021, we recorded restructuring charges of $ 3.9 million and $ 12.2 million, respectively.

International segment restructuring charges of $ 10.0 million during th e nine months ended September 30, 2021, were primarily related to our initiatives to drive profitable growth and right size our operations.

A mericas segment restructuring charges of $ 2.1 million during the nine months ended September 30, 2021, were primarily related to integration related activities and 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 nine months ended September 30, 2020, we recorded restructuring charges of $ 7.6 million and $ 18.5 million, respectively.

International segment restructuring charges of $ 13.7 million during the nine months ended September 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 $ 3.7 million during the nine months ended September 30, 2020, 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.

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

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Currency translation and other adjustments ( 0.1 ) ( 0.7 ) — ( 0.8 )

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

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

Cash payments / utilization ( 2.7 ) ( 8.4 ) ( 0.2 ) ( 11.3 )

Reserve balances at September 30, 2021 $ 2.1 $ 20.2 $ 0.3 $ 22.6

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

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

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

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

Land $ 5,139 $ 4,275

Finance lease assets 1,057 —

Buildings 134,509 128,887

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Three Months Ended

June 30, Three Months Ended

September 30, Three Months Ended

September 30,

(In thousands) 2021 2020 2021 2020

9 unchanged sentences

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

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

Unrealized loss on available-for-sale securities (Note 17) ( 11 ) ( 74 ) — —

Balance at end of period $ ( 16 ) $ ( 6 ) $ — $ —

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Balance at beginning of period $ ( 70,957 ) $ ( 106,622 ) $ 280 $ 326

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

— — ( 280 ) —

Foreign currency translation adjustments ( 13,868 ) 15,226 — 294

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MSA Safety Incorporated Noncontrolling Interests

Six Months Ended

June 30, Six Months Ended

Nine Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

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

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

Unrealized loss on available-for-sale securities (Note 17) ( 15 ) ( 12 ) — —

Balance at end of period $ ( 16 ) $ ( 6 ) $ — $ —

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

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

— — ( 280 ) —

Foreign currency translation adjustments ( 17,981 ) ( 2,955 ) ( 92 ) 197

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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 June 30, 2021.

There are 71,340 shares issued and 52,998 shares held in treasury at September 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.

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

There were treasury purchases of 120 preferred stock shares during the nine months ended September 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 June 30, 2021.

No shares have been issued as of September 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 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.

No new shares were issued during the nine months ended September 30, 2021, or 2020.

There were 39,207,440 and 39,067,902 shares outstanding at September 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 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.

During the nine months ended September 30, 2021, no shares were repurchased under this program.

During the nine months ended September 30, 2020, 175,000 shares were repurchased under the program.

There were 22,873,951 and 23,013,489 Treasury Shares at September 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 33,625 and 63,405 Treasury Shares issued for these purposes during the six months ended June 30, 2021 and 2020, respectively.

There were 37,478 and 66,893 Treasury Shares issued for these purposes during the nine months ended September 30, 2021 and 2020, respectively.

Common stock activity is summarized as follows:

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

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

(In thousands) Common

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Treasury shares purchased — ( 625 ) — ( 439 )

Employee stock purchase program 409 43 338 52

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

( 4,751 ) — — —

Balance at end of period $ 252,084 $ ( 329,750 ) $ 234,703 $ ( 327,432 )

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

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

(In thousands) Common

6 unchanged sentences

Treasury shares purchased — ( 6,137 ) — ( 8,578 )

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

( 4,751 ) — — —

Employee stock purchase program 409 43 338 52

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Sales to external customers $ 229,076 $ 111,121 $ — $ 340,197

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Adjusted operating margin % 19.4 % 11.3 %

Depreciation and amortization 11,584

Depreciation and amortization (a)

Adjusted EBITDA 52,514 16,142 ( 5,880 ) 62,776

Adjusted EBITDA margin % 22.9 % 14.5 %

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Sales to external customers $ 655,123 $ 334,792 $ — $ 989,915

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Adjusted operating margin % 21.2 % 12.5 %

Depreciation and amortization 22,088

Depreciation and amortization (a)

Adjusted EBITDA 161,861 52,095 ( 23,185 ) 190,771

1 unchanged sentence

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

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Sales to external customers $ 194,303 $ 110,089 $ — $ 304,392

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Adjusted operating margin % 21.0 % 14.2 %

Depreciation and amortization 9,786

Depreciation and amortization (a)

Adjusted EBITDA 47,465 18,848 ( 2,828 ) 63,485

Adjusted EBITDA margin % 24.4 % 17.1 %

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Sales to external customers $ 629,787 $ 330,188 $ — $ 959,975

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Adjusted operating margin % 23.8 % 13.8 %

Depreciation and amortization 19,428

Depreciation and amortization (a)

Adjusted EBITDA 169,343 55,075 ( 18,788 ) 205,630

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Total sales by product group was as follows:

Three Months Ended June 30, 2021 Consolidated Americas International

Three Months Ended September 30, 2021 Consolidated Americas International

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

Breathing Apparatus $ 70,790 21 % $ 46,095 20 % $ 24,695 22 %

Fixed Gas & Flame Detection 64,920 19 % 36,950 17 % 27,970 23 %

Firefighter Helmets & Protective Apparel 53,121 16 % 36,424 17 % 16,697 14 %

Fixed Gas & Flame Detection (a)

79,786 23 % 53,787 23 % 25,999 23 %

Firefighter Helmets & Protective Apparel (b)

49,366 15 % 34,101 15 % 15,265 14 %

Portable Gas Detection 41,853 12 % 29,186 13 % 12,667 11 %

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Total $ 340,197 100 % $ 229,076 100 % $ 111,121 100 %

Six Months Ended June 30, 2021 Consolidated Americas International

Nine Months Ended September 30, 2021 Consolidated Americas International

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

Breathing Apparatus $ 217,094 22 % $ 146,329 22 % $ 70,765 21 %

Fixed Gas & Flame Detection 125,039 19 % 73,227 17 % 51,811 23 %

Firefighter Helmets & Protective Apparel 99,131 15 % 71,413 17 % 27,719 12 %

Fixed Gas & Flame Detection (a)

204,825 21 % 127,014 19 % 77,811 23 %

Firefighter Helmets & Protective Apparel (b)

148,497 15 % 105,513 16 % 42,984 13 %

Portable Gas Detection 118,102 12 % 80,281 12 % 37,821 11 %

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Total $ 989,915 100 % $ 655,123 100 % $ 334,792 100 %

Three Months Ended June 30, 2020 Consolidated Americas International

Three Months Ended September 30, 2020 Consolidated Americas International

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

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Total $ 304,392 100 % $ 194,303 100 % $ 110,089 100 %

Six Months Ended June 30, 2020 Consolidated Americas International

Nine Months Ended September 30, 2020 Consolidated Americas International

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

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Total $ 959,975 100 % $ 629,787 100 % $ 330,188 100 %

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

(a) Fixed Gas & Flame Detection include sales from the Bacharach acquisition from July 1, 2021 onward (Americas and International).

(b) Firefighter Helmets & Protective Apparel include sales from the Bristol Uniforms acquisition from January 25, 2021 onward (International).

Note 9— Earnings per Share

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Amounts attributable to MSA Safety Incorporated common shareholders:

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

Three Months Ended September 30, Nine Months Ended September 30,

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

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Note 10— Income Taxes

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.

The Company's effective tax rate for the third quarter of 2021 was 31.5 % which differs from the U.S.

federal statutory rate of 21% primarily due to state income taxes, U.S.

tax on foreign dividends, nondeductible transaction costs associated with the Bacharach acquisition and nondeductible executive compensation, partially offset by tax benefits on certain share-based payments.

The Company's effective tax rate for the third quarter of 2020 was 29.3 %, which differs from the U.S.

statutory rate of 21% primarily due to state income taxes, increased profitability in less favorable tax jurisdictions, higher foreign entity losses in jurisdictions where we cannot take tax benefits, increased statutory rates in foreign jurisdictions, nondeductible executive compensation, and U.S.

tax on foreign dividends.

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

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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 Company's effective tax rate for the nine months ended September 30, 2021 was 25.8 % which differs from the U.S.

federal statutory rate of 21% primarily due to state income taxes, statutory rate increases in foreign jurisdictions, U.S.

tax on foreign dividends and nondeductible executive compensation, partially offset by tax benefits on certain share-based payments.

The Company's effective tax rate for the nine months ended September 30, 2020 was 25.1 % 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, increased statutory rates in foreign jurisdictions, partially offset by tax benefits on certain share-based payments.

At September 30, 2021, the Company had a gross liability for unrecognized tax benefits of $ 8.8 million.

The Company has recognized tax benefits associated with these liabilities of $ 2.7 million at September 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 $ 1.2 million at June 30, 2021.

The Company's liability for accrued interest related to uncertain tax positions was $ 1.3 million at September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

Stock compensation expense $ 7,403 $ 830 $ 10,695 $ 4,352

Income tax expense 1,784 202 2,577 1,062

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

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

Stock compensation expense (benefit) $ 2,867 $ ( 1,309 ) (a)

$ 13,562 $ 3,042

Income tax expense (benefit) 691 ( 319 ) 3,269 742

Stock compensation expense (benefit), net of tax $ 2,176 $ ( 990 ) $ 10,293 $ 2,300

(a) The Company adjusted cumulative stock compensation expense for changes in expected performance against target metrics for unvested performance stock units.

This resulted in a benefit during the three months ended September 30, 2020.

A summary of stock option activity for the nine months ended September 30, 2021, follows:

Shares Weighted Average

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Forfeited ( 210 ) 43.75

Outstanding at June 30, 2021 236,379 46.40

Exercisable at June 30, 2021 235,399 $ 46.39

Outstanding at September 30, 2021 225,554 46.34

Exercisable at September 30, 2021 224,980 $ 46.33

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 six months ended June 30, 2021, follows:

A summary of restricted stock activity for the nine months ended September 30, 2021, follows:

Shares Weighted Average

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Forfeited ( 3,502 ) 133.92

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.

Unvested at September 30, 2021 120,600 $ 126.30

Performance stock units 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 six months ended June 30, 2021, follows:

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

Shares Weighted Average

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Vested ( 64,543 ) 85.41

Unvested at June 30, 2021 187,937 $ 128.72

Unvested at September 30, 2021 193,335 $ 129.86

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 12— Long-Term Debt

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

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

2010 Senior Notes payable through 2021, 4.00 %

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73,906 74,926

2021 Senior Notes payable through 2036, 2.69 %, net of debt issuance costs

Senior revolving credit facility maturing in 2026, net of debt issuance costs 319,424 212,231

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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 1.10 % 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 Company has a weighted average revolver interest rate of 0.96 % as of September 30, 2021.

At September 30, 2021, $ 576.9 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.

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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.

As of September 30, 2021, the Company had issued £ 54.9 million (approximately $ 74.0 million at September 30, 2021) of 3.4 % Series B Senior Notes due January 22, 2031.

The Company also had issued $ 100.0 million of 4.00 % Series A Senior Notes, of which the final $ 20.0 million was repaid on 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;

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

The Company had outstanding bank guarantees and standby letters of credit with banks as of September 30, 2021, totaling $ 10.5 million, of which $ 1.5 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 June 30, 2021, the Company has $ 0.3 million of restricted cash in support of these arrangements.

At September 30, 2021, the Company has $ 0.5 million of restricted cash in support of these arrangements.

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

for $ 337.0 million.

for $ 329.4 million, net of cash acquired.

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.

The remaining purchase price was financed under the Revolving Credit Facility.

During August 2021, the Company amended its Revolving Credit Facility to transition from Sterling LIBOR reference rates to Sterling Overnight Interbank Average Rate ("SONIA") reference rates.

The Company will apply the optional expedients in ASC 848, Reference Rate Reform, to this modification and potential future modifications driven by reference rate reform, accounting for the modifications as a continuation of the existing contracts.

Therefore, these modifications will not require remeasurement at the modification date or a reassessment of previous accounting determinations.

As such, the Company does not anticipate the change in reference rates will have an impact on the Company’s condensed consolidated financial statements.

Management continues to evaluate the Company’s other outstanding US LIBOR based contracts to determine whether reference rate modifications are necessary.

Note 13— Goodwill and Intangible Assets

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

Changes in goodwill during the nine months ended September 30, 2021 are as follows:

(In thousands) Goodwill

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Currency translation ( 4,605 )

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:

Balance at September 30, 2021 $ 636,113

At September 30, 2021, the Company had goodwill of $ 447.8 million and $ 188.3 million related to the Americas and International reportable segments, respectively.

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

(In thousands) Intangible Assets

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Currency translation ( 1,378 )

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.

Net balance at September 30, 2021 $ 312,606

At September 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 14— 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 $ 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.

There were no new sales-type lease transactions commencing and no lease revenue or gross profit recognized during the three months ended September 30, 2021.

Revenue from sales-type leases recognized by the Company, included in Net sales in the unaudited Condensed Consolidated Statements of Income, was $ 3.2 million during the nine months ended September 30, 2021.

Gross profit recognized at commencement from our various leasing arrangements was $ 1.3 million during the nine months ended September 30, 2021.

There were no new sales-type lease transactions commencing and no lease revenue or gross profit recognized during the three and nine months ended September 30, 2020.

Note 15— Pensions and Other Post-retirement Benefits

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(In thousands) 2021 2020 2021 2020

Three Months Ended June 30,

Three Months Ended September 30,

Service cost $ 3,264 $ 3,012 $ 99 $ 99

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$ 1,160 $ 2,216 $ 529 $ 466

Six Months Ended June 30,

Nine Months Ended September 30,

Service cost $ 9,748 $ 9,035 $ 297 $ 297

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(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 made contributions of $ 5.8 million and $ 5.7 million to our pension plans during the nine months ended September 30, 2021 and 2020, respectively.

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 $ 99.2 million and $ 96.0 million at June 30, 2021, and December 31, 2020, respectively.

The notional amount of open forward contracts was $ 96.4 million and $ 96.0 million at September 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) June 30, 2021 December 31, 2020

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

Derivatives not designated as hedging instruments:

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Loss (Gain) Recognized in Income

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) Statement of Income Location 2021 2020

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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 $ 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 amortized cost basis of our investments was $ 49.0 million and $ 74.9 million as of September 30, 2021 and December 31, 2020, respectively.

The fair value was $ 49.0 million and $ 75.0 million as of September 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 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.

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

The reported carrying amount of our fixed rate long-term debt (including the current portion) was $ 294 million and $ 95 million at September 30, 2021, and December 31, 2020, respectively.

The fair value of this debt was $ 302 million and $ 113 million at September 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.

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The estimate for incurred but not reported ("IBNR") single incident product liability 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 June 30, 2021 and December 31, 2020, respectively.

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.

The reserve for single incident product liability claims, which includes asserted single incident product liability claims and IBNR single incident product liability claims, was $ 1.3 million and $ 1.4 million at September 30, 2021 and December 31, 2020, respectively.

Single incident product liability expense was a benefit of $ 0.1 million and $ 1.7 million during the nine months ended September 30, 2021 and September 30, 2020, respectively.

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 1,610 lawsuits comprised of 3,942 claims as of June 30, 2021.

One of the Company's affiliates, Mine Safety Appliances Company, LLC ("MSA LLC"), was named as a defendant in 1,672 lawsuits comprised of 4,145 claims as of September 30, 2021.

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

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

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

Nine Months Ended September 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 1,672 1,622

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

Nine Months Ended September 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 4,145 2,878

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.

The increases in the number of claims in 2020 and in 2021 are largely driven by an increase in claims alleging injuries from exposure to coal mine dust, including claims brought by plaintiffs' counsel with which MSA LLC does not have substantial prior experience.

The claims allege use of 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 September 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 $ 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.

Total cumulative trauma product liability reserve was $ 232.6 million at September 30, 2021, including $ 6.9 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 reserve was also increased during the nine months ended September 30, 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.

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

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 September 30, 2021, $ 31.1 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, $ 201.5 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 $ 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.

Total cumulative trauma liability losses were $ 16.4 million and $ 43.9 million for the three and nine months ended September 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 $ 2.4 million and $ 5.7 million for the three and nine months ended September 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 $ 10.7 million and $ 25.2 million for the three and nine months ended September 30, 2021 and $ 2.1 million and $ 4.9 million for the three and nine months ended September 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.

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These amounts are not subject to current coverage litigation.

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 September 30, 2021 totaled $ 105.9 million of which, $ 10.9 million is reported in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheet and $ 95.0 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 $ 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.

The vast majority of the $ 105.9 million insurance receivables balance at September 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) Six Months Ended June 30, 2021 Year Ended December 31, 2020

(In millions) Nine Months Ended September 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 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 September 30, 2021, totaled $ 48.2 million, of which $ 3.9 million is reported in Notes receivable, insurance companies, current on the unaudited Condensed Consolidated Balance Sheet and $ 44.3 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) Six Months Ended June 30, 2021 Year Ended December 31, 2020

(In millions) Nine Months Ended September 30, 2021 Year Ended December 31, 2020

Balance beginning of period $ 52.3 $ 56.0

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Balance end of period $ 48.2 $ 52.3

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 vast majority of the insurance receivables balance at September 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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Various factors could affect the timing and amount of recovery of the insurance and notes receivables, including assumptions regarding various aspects of the composition and characteristics of future claims (which are relevant to calculating reimbursement under the terms of certain Coverage-In-Place Agreements) and the extent to which the issuing insurers may become insolvent in the future.

Other Litigation

Two subsidiaries of the Company, Globe Manufacturing Company, LLC and Mine Safety Appliances Company, LLC, are defending a small number of lawsuits in which plaintiffs assert that certain of those entities’ products allegedly containing per- and polyfluoroalkyl substances (“PFAS”) have caused injury, health issues, or environmental issues.

PFAS are a large class of substances that are widely used in everyday products.

Specifically, Globe builds turnout gear from technical fabrics sourced from a small pool of specialty textile manufacturers.

These protective fabrics have been tested and certified to meet industry standards, and some of them contain PFAS to achieve water, oil, or chemical resistance.

No manufacturer of firefighter protective clothing is able to meet current National Fire Protection Association safety standards while offering coats or pants that are completely PFAS free.

Globe and MSA LLC believe they have valid defenses to these lawsuits.

These matters are at a very early stage with numerous factual and legal issues to be resolved.

Accordingly, no loss on account of such claims is probable.

Defense costs relating to these lawsuits are recognized in the unaudited Condensed Consolidated Statement of Income as incurred.

Globe and MSA LLC are also pursuing insurance coverage and indemnification related to the lawsuits.

Product Warranty

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

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

(In thousands) Nine Months Ended September 30, 2021 Year Ended December 31, 2020

Beginning warranty reserve $ 11,428 $ 12,715

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Ending warranty reserve $ 11,428 $ 11,428

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.

Warranty expense was $ 6.7 million and $ 6.8 million for the nine months ended September 30, 2021 and 2020, respectively, and is included in Costs of products sold on the unaudited Condensed Consolidated Statements of Income.

Note 19— Acquisitions

Acquisition of Bacharach

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

and its affiliated companies (Bacharach) in an all cash transaction valued at $ 329.4 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.

Bacharach's operating results are included in our unaudited condensed consolidated financial statements from the acquisition date within the Americas, International and Corporate reportable segments.

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

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

(In millions) July 1, 2021

Current assets (including cash of $ 11.7 million)

Property, plant and equipment and other noncurrent assets 4.7

Customer relationships 123.0

Developed technology 20.5

Trade name 15.0

Goodwill 193.4

Total assets acquired 388.7

Total liabilities assumed ( 47.6 )

Net assets acquired $ 341.1

The amounts in the table above are subject to change upon completion of the valuation of the assets acquired and liabilities assumed.

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

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.

The valuation methods used to determine the fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges;

the relief from royalty method for trade name and developed technologies;

and the cost method for assembled workforce which is included in goodwill.

A number of significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes.

Cash flow forecasts were generally based on Bacharach pre-acquisition forecasts, coupled with estimated MSA sales synergies.

Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives.

The customer relationships and trade name acquired in the Bacharach transaction will be amortized over a period of 21 years.

Estimated future amortization expense related to the identifiable intangible assets is approximately $ 2.2 million for the remainder of 2021, $ 9.0 million for 2022 through 2025, and $ 118.0 million thereafter.

The step up to fair value of acquired inventory as part of the purchase price allocation totaled $ 2.3 million which will be amortized over four months ending in October 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.

Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Bacharach with our operations.

Goodwill of $ 193.4 million related to the Bacharach acquisition has been recorded, with $ 154.7 million and $ 38.7 million allocated to the Americas reportable segment and International reportable segment, respectively.

This Goodwill is non-deductible for tax purposes.

Acquisition of Bristol Uniforms and Bell Apparel

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and the cost method for assembled workforce which is included in goodwill.

A number of significant assumptions and estimates were involved in the application of these valuation methods, including sales volume and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes.

Cash flow forecasts were generally based on Bristol pre-acquisition forecasts, coupled with estimated MSA sales synergies.

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Estimated future amortization expense related to the identifiable intangible assets is approximately $ 0.1 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 was amortized over four months ending with May 2021.

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 that ended in May 2021.

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

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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 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.

Our results for the three and nine months ended September 30, 2021, include acquisition related costs of approximately $ 7.4 million and $ 11.9 million, respectively, including costs related to the acquisition of Bristol and Bacharach.

Our results for the three and nine months ended September 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 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.

The operating results of these acquisitions have been included in our unaudited condensed consolidated financial statements from the acquisition dates through September 30, 2021.

Our results for the nine months ended September 30, 2021, include sales and net loss of $ 36.7 million and $ 6.8 million, respectively attributable to these acquisitions.

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

The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition;

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and (3) expected to have a continuing impact on the combined company's results.

There were no material transactions between MSA and Bristol during the periods presented that are required to be eliminated in the unaudited pro forma condensed combined financial information.

There were no material transactions between MSA and Bristol or Bacharach during the periods presented that are required to be eliminated in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies, or revenue enhancements that the combined companies may achieve as a result of the acquisition or the costs to integrate the operations or the costs necessary to achieve cost savings, operating synergies, or revenue enhancements.

Pro forma condensed combined financial information (Unaudited)

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

Three Months Ended September 30, Nine Months Ended September 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

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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