MSA Safety Inc 10-Q

Item 1. Financial Statements MSA SAFETY INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except per share amounts) 2021 2020 2021 2020 Net sales $ 340,197 $ 304,392 $ 989,915 $ 959,975 Cost of products sold 194,199 172,160 556,263 528,799 Gross profit 145,998 132,232 433,652 431,176 Selling, general and administrative 87,450 64,793 246,339 214,066 Research and development 14,946 13,851 42,149 41,723 Restructuring charges (Note 4) 3,853 7,603 12,239 18,475 Currency exchange losses (gains), net (Note 6) 100 2,759 ( 359 ) 3,821 Product liability expense (Note 18) 10,688 2,077 25,235 4,878 Operating income 28,961 41,149 108,049 148,213 Interest expense 3,764 2,305 7,847 7,907 Other income, net ( 2,266 ) ( 1,117 ) ( 8,773 ) ( 4,376 ) Total other expense (income), net 1,498 1,188 ( 926 ) 3,531 Income before income taxes 27,463 39,961 108,975 144,682 Provision for income taxes (Note 10) 8,640 11,727 28,165 36,251 Net income 18,823 28,234 80,810 108,431 Net income attributable to noncontrolling interests — ( 200 ) ( 448 ) ( 668 ) Net income attributable to MSA Safety Incorporated $ 18,823 $ 28,034 $ 80,362 $ 107,763 Earnings per share attributable to MSA Safety Incorporated common shareholders (Note 9): Basic $ 0.48 $ 0.72 $ 2.05 $ 2.77 Diluted $ 0.48 $ 0.71 $ 2.04 $ 2.74 Dividends per common share $ 0.44 $ 0.43 $ 1.31 $ 1.28 The accompanying notes are an integral part of the condensed consolidated financial statements. -2- MSA SAFETY INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Unaudited Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Net income $ 18,823 $ 28,234 $ 80,810 $ 108,431 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (Note 6) ( 13,868 ) 15,520 ( 18,073 ) ( 2,758 ) Pension and post-retirement plan actuarial gains, net of tax (Note 6) 3,701 3,058 11,070 9,250 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 (loss) income, net of tax ( 10,178 ) 18,504 ( 7,018 ) 7,200 Comprehensive income 8,645 46,738 73,792 115,631 Less: Comprehensive income attributable to noncontrolling interests — ( 494 ) ( 356 ) ( 865 ) Comprehensive income attributable to MSA Safety Incorporated $ 8,645 $ 46,244 $ 73,436 $ 114,766 The accompanying notes are an integral part of the condensed consolidated financial statements. -3- MSA SAFETY INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (In thousands) September 30, 2021 December 31, 2020 Assets Cash and cash equivalents (Note 2) $ 117,302 $ 160,672 Trade receivables, less allowance for credit loss of $ 4,930 and $ 5,344 219,481 252,283 Inventories (Note 3) 249,449 197,819 Investments, short-term (Note 17) 48,972 74,982 Prepaid income taxes 41,098 26,185 Notes receivable, insurance companies (Note 18) 3,884 3,796 Prepaid expenses and other current assets 45,193 38,541 Total current assets 725,379 754,278 Property, plant and equipment, net (Note 5) 204,410 189,620 Operating lease assets, net 50,731 53,451 Prepaid pension cost (Note 15) 108,842 97,545 Deferred tax assets (Note 10) 44,587 35,665 Goodwill (Note 13) 636,113 443,272 Intangible assets, net (Note 13) 312,606 161,051 Notes receivable, insurance companies, noncurrent (Note 18) 44,330 48,540 Net investment in sales-type leases, noncurrent (Note 14) 27,202 — Insurance receivable (Note 18) and other noncurrent assets 105,252 89,062 Total assets $ 2,259,452 $ 1,872,484 Liabilities Notes payable and current portion of long-term debt (Note 12) $ 20,000 $ 20,000 Accounts payable 92,634 86,854 Employees’ compensation 48,307 40,277 Insurance and product liability (Note 18) 40,188 43,706 Income taxes payable (Note 10) 22,608 3,580 Other current liabilities 113,084 116,128 Total current liabilities 336,821 310,545 Long-term debt, net (Note 12) 592,742 287,157 Pensions and other employee benefits 199,486 208,068 Noncurrent operating lease liabilities 40,854 44,639 Deferred tax liabilities (Note 10) 49,898 10,916 Product liability (Note 18) and other noncurrent liabilities 215,474 201,268 Total liabilities $ 1,435,275 $ 1,062,593 Equity Preferred stock, 4.5 % cumulative, $ 50 par value (Note 7) $ 3,569 $ 3,569 Common stock, no par value (Note 7) 252,084 242,693 Treasury shares, at cost (Note 7) ( 331,350 ) ( 327,756 ) Accumulated other comprehensive loss (Note 6) ( 189,323 ) ( 182,397 ) Retained earnings 1,089,197 1,065,789 Total MSA Safety Incorporated shareholders' equity 824,177 801,898 Noncontrolling interests (Note 19) — 7,993 Total shareholders’ equity 824,177 809,891 Total liabilities and shareholders’ equity $ 2,259,452 $ 1,872,484 The accompanying notes are an integral part of the condensed consolidated financial statements. -4- MSA SAFETY INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited Nine Months Ended September 30, (In thousands) 2021 2020 Operating Activities Net income $ 80,810 $ 108,431 Depreciation and amortization 36,270 29,284 Stock-based compensation (Note 11) 13,562 3,042 Pension expense (Note 15) 2,079 6,647 Deferred income tax benefit (Note 10) ( 6,665 ) ( 1,312 ) Loss on asset dispositions, net 423 189 Pension contributions (Note 15) ( 5,768 ) ( 5,672 ) Currency exchange (gains) losses, net ( 359 ) 3,821 Product liability expense (Note 18) 25,235 4,878 Collections on insurance receivables and notes receivable, insurance companies (Note 18) 15,437 10,844 Product liability payments (Note 18) ( 32,499 ) ( 6,648 ) Changes in: Trade receivables 40,167 23,744 Inventories (Note 3) ( 32,765 ) ( 70,148 ) Accounts payable ( 855 ) ( 8,956 ) Other current assets and liabilities ( 2,410 ) 12,065 Other noncurrent assets and liabilities ( 2,519 ) ( 54 ) Cash Flow From Operating Activities 130,143 110,155 Investing Activities Capital expenditures ( 30,963 ) ( 32,698 ) Acquisition, net of cash acquired (Note 19) ( 392,437 ) — Purchase of short-term investments (Note 17) ( 108,938 ) ( 174,337 ) Proceeds from maturities of short-term investments (Note 17) 135,000 155,000 Property disposals and other investing ( 5,249 ) 334 Cash Flow Used in Investing Activities ( 402,587 ) ( 51,701 ) Financing Activities Proceeds from long-term debt (Note 12) 1,341,734 779,000 Payments on long-term debt (Note 12) ( 1,032,875 ) ( 784,000 ) Debt issuance costs ( 2,080 ) — Cash dividends paid ( 51,322 ) ( 49,811 ) Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19) ( 13,381 ) — Distributions to noncontrolling interests (Note 19) ( 5,632 ) — Company stock purchases (Note 7) ( 6,137 ) ( 28,691 ) Exercise of stock options (Note 7) 2,671 6,969 Employee stock purchase plan (Note 7) 452 390 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 ) Decrease in cash, cash equivalents and restricted cash ( 43,191 ) ( 19,357 ) Beginning cash, cash equivalents and restricted cash 161,034 152,543 Ending cash, cash equivalents and restricted cash $ 117,843 $ 133,186 Supplemental cash flow information: Cash and cash equivalents (Note 2) $ 117,302 $ 132,830 Restricted cash included in prepaid expenses and other current assets 541 356 Total cash, cash equivalents and restricted cash $ 117,843 $ 133,186 The accompanying notes are an integral part of the condensed consolidated financial statements. -5- MSA SAFETY INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS, ACCUMULATED OTHER COMPREHENSIVE LOSS AND NONCONTROLLING INTERESTS Unaudited (In thousands) Retained Earnings Accumulated Other Comprehensive (Loss) Noncontrolling Interests Balances June 30, 2020 $ 1,058,955 $ ( 225,210 ) $ 7,144 Net income 28,234 — — Foreign currency translation adjustments — 15,520 — Pension and post-retirement plan adjustments, net of tax of $ 1,111 — 3,058 — Unrealized net gains on available-for-sale securities (Note 17) — ( 74 ) — Income attributable to noncontrolling interests ( 200 ) ( 294 ) 494 Common dividends ($ 0.43 per share) ( 16,761 ) — — Preferred dividends ($ 0.5625 per share) ( 10 ) — — Balances September 30, 2020 $ 1,070,218 $ ( 207,000 ) $ 7,638 Balances June 30, 2021 $ 1,093,261 $ ( 179,145 ) $ 8,349 Net income 18,823 — — Foreign currency translation adjustments — ( 13,868 ) — Pension and post-retirement plan adjustments, net of tax of $ 1,095 — 3,701 — Unrealized net gains on available-for-sale securities (Note 17) — ( 11 ) — 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) ( 10 ) — — Balances September 30, 2021 $ 1,089,197 $ ( 189,323 ) $ — Balances December 31, 2019 $ 1,012,266 $ ( 214,003 ) $ 6,773 Net income 108,431 — — Foreign currency translation adjustments — ( 2,758 ) — Pension and post-retirement plan adjustments, net of tax of $ 3,257 — 9,250 — Unrealized net gains on available-for-sale securities (Note 17) — ( 12 ) — Reclassification from accumulated other comprehensive (loss) into net income (Note 6) — 720 — Income attributable to noncontrolling interests ( 668 ) ( 197 ) 865 Common dividends ($ 1.28 per share) ( 49,781 ) — — Preferred dividends ($ 1.6875 per share) ( 30 ) — — Balances September 30, 2020 $ 1,070,218 $ ( 207,000 ) $ 7,638 Balances December 31, 2020 $ 1,065,789 $ ( 182,397 ) $ 7,993 Net income 80,810 — — Foreign currency translation adjustments — ( 18,073 ) — Pension and post-retirement plan adjustments, net of tax of $ 3,318 — 11,070 — Unrealized net losses on available-for-sale securities (Note 17) — ( 15 ) — Income attributable to noncontrolling interests ( 448 ) 92 356 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) ( 30 ) — — Balances September 30, 2021 $ 1,089,197 $ ( 189,323 ) $ — The accompanying notes are an integral part of the condensed consolidated financial statements. -6- MSA SAFETY INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Unaudited Note 1— Basis of Presentation The condensed consolidated financial statements of MSA Safety Incorporated and its subsidiaries ("MSA" or the "Company") are unaudited. These condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company's results. Intercompany accounts and transactions have been eliminated. The results reported in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. The December 31, 2020, Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Balance Sheet, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP). This Form 10-Q report should be read in conjunction with MSA's Form 10-K for the year ended December 31, 2020, which includes all disclosures required by U.S. GAAP. 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 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 Less: cash pool borrowings ( 22,000 ) Net cash pool position 508 Note 3— Inventories The following table sets forth the components of inventory: (In thousands) September 30, 2021 December 31, 2020 Finished products $ 102,426 $ 81,048 Work in process 9,863 2,618 Raw materials and supplies 187,878 161,300 Inventories at current cost 300,167 244,966 Less: LIFO valuation ( 50,718 ) ( 47,147 ) Total inventories $ 249,449 $ 197,819 -7- Note 4— Restructuring Charges 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: (In millions) Americas International Corporate Total Reserve balances at December 31, 2019 $ 0.3 $ 5.9 $ — $ 6.2 Restructuring charges 4.7 21.9 0.8 27.4 Currency translation and other adjustments ( 0.1 ) 0.1 — — Cash payments / utilization ( 2.1 ) ( 8.6 ) ( 0.4 ) ( 11.1 ) Reserve balances at December 31, 2020 $ 2.8 $ 19.3 $ 0.4 $ 22.5 Restructuring charges 2.1 10.0 0.1 12.2 Currency translation and other adjustments ( 0.1 ) ( 0.7 ) — ( 0.8 ) 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. Note 5— Property, Plant and Equipment The following table sets forth the components of property, plant and equipment, net: (In thousands) September 30, 2021 December 31, 2020 Land $ 5,139 $ 4,275 Finance lease assets 1,057 — Buildings 134,509 128,887 Machinery and equipment 449,185 422,333 Construction in progress 31,702 38,753 Total 621,592 594,249 Less: accumulated depreciation ( 417,182 ) ( 404,629 ) Property, plant and equipment, net $ 204,410 $ 189,620 -8- Note 6— Reclassifications Out of Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive loss were as follows: MSA Safety Incorporated Noncontrolling Interests Three Months Ended September 30, Three Months Ended September 30, (In thousands) 2021 2020 2021 2020 Pension and other post-retirement benefits (a) Balance at beginning of period $ ( 108,183 ) $ ( 118,656 ) $ — $ — Amounts reclassified from accumulated other comprehensive loss into net income: Amortization of prior service credit (Note 15) ( 24 ) ( 52 ) — — Recognized net actuarial losses (Note 15) 4,820 4,221 — — Tax benefit ( 1,095 ) ( 1,111 ) — — Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income 3,701 3,058 — — Balance at end of period $ ( 104,482 ) $ ( 115,598 ) $ — $ — Available-for-sale securities Balance at beginning of period $ ( 5 ) $ 68 $ — $ — Unrealized loss on available-for-sale securities (Note 17) ( 11 ) ( 74 ) — — Balance at end of period $ ( 16 ) $ ( 6 ) $ — $ — Foreign currency translation 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 Balance at end of period $ ( 84,825 ) $ ( 91,396 ) $ — $ 620 (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 15—Pensions and Other Post-retirement Benefits). -9- MSA Safety Incorporated Noncontrolling Interests Nine Months Ended September 30, Nine Months Ended September 30, (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 15) ( 72 ) ( 156 ) — — Recognized net actuarial losses (Note 15) 14,460 12,663 — — Tax benefit ( 3,318 ) ( 3,257 ) — — Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income 11,070 9,250 — — Balance at end of period $ ( 104,482 ) $ ( 115,598 ) $ — $ — Available-for-sale securities Balance at beginning of period $ ( 1 ) $ 6 $ — $ — Unrealized loss on available-for-sale securities (Note 17) ( 15 ) ( 12 ) — — Balance at end of period $ ( 16 ) $ ( 6 ) $ — $ — Foreign currency translation Balance at beginning of period $ ( 66,844 ) $ ( 89,161 ) $ 372 $ 423 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 Balance at end of period $ ( 84,825 ) $ ( 91,396 ) $ — $ 620 (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 15—Pensions and Other Post-retirement Benefits). (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 7— 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 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 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 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 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. The share repurchase program has no expiration date. 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 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. -10- 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 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 September 30, 2021 Three Months Ended September 30, 2020 (In thousands) Common Stock Treasury Cost Common Stock Treasury Cost Balance at beginning of period $ 253,773 $ ( 329,439 ) $ 233,786 $ ( 327,997 ) Stock compensation expense 2,867 — ( 1,309 ) — Restricted and performance stock awards ( 159 ) 159 ( 50 ) 50 Stock options exercised 354 155 2,276 954 Treasury shares purchased — ( 625 ) — ( 439 ) Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19) ( 4,751 ) — — — Balance at end of period $ 252,084 $ ( 329,750 ) $ 234,703 $ ( 327,432 ) Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 (In thousands) Common Stock Treasury Cost Common Stock Treasury Cost Balance at beginning of period $ 242,693 $ ( 326,156 ) $ 229,127 $ ( 303,566 ) Stock compensation expense 13,562 — 3,042 — Restricted and performance stock awards ( 1,662 ) 1,662 ( 2,513 ) 2,513 Stock options exercised 1,833 838 4,709 2,260 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 Share repurchase program — — — ( 20,113 ) Balance at end of period $ 252,084 $ ( 329,750 ) 234,703 ( 327,432 ) Note 8— Segment Information We are organized into four geographical operating segments that are based on management responsibilities: Northern North America, Latin America, Europe, Middle East & Africa ("EMEA"), and Asia Pacific ("APAC"). The operating segments have been aggregated (based on economic similarities, the nature of their products, end-user markets and methods of distribution) into three reportable segments: Americas, International, and Corporate. The Americas segment is comprised of our operations in North American and Latin American geographies. The International segment is comprised of our operations of all geographies outside of the Americas. Certain global expenses are allocated to each segment in a manner consistent with where the benefits from the expenses are derived. The Company's sales are allocated to each country based primarily on the destination of the end-customer. -11- Adjusted operating income (loss), adjusted operating margin, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA margin are the measures used by the chief operating decision maker to evaluate segment performance and allocate resources. Adjusted operating income (loss) is defined as operating income excluding restructuring charges, currency exchange gains (losses), product liability expense, acquisition related costs, including acquisition related amortization, and COVID-19 related costs, consisting of a one-time bonus for essential manufacturing employees and adjusted operating margin is defined as adjusted operating income (loss) divided by segment sales to external customers. Adjusted EBITDA is defined as adjusted operating income (loss) plus depreciation and amortization and adjusted EBITDA margin is defined as adjusted EBITDA divided by segment sales to external customers. Adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin are not recognized terms under U.S. GAAP, and therefore, do not purport to be alternatives to operating income or operating margin as a measure of operating performance. Further, the Company's measure of adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin may not be comparable to similarly titled measures of other companies. Adjusted operating income (loss) and adjusted EBITDA on a consolidated basis is presented in the following table to reconcile the segment operating performance measure to operating income as presented on the Consolidated Statement of Income. The accounting principles applied at the operating segment level in determining operating income (loss) are generally the same as those applied at the consolidated financial statement level. Sales and transfers between operating segments are accounted for at market-based transaction prices and are eliminated in consolidation. Reportable segment information is presented in the following table: (In thousands, except percentage amounts) Americas International Corporate Consolidated Totals Three Months Ended September 30, 2021 Sales to external customers $ 229,076 $ 111,121 $ — $ 340,197 Operating income 28,961 Restructuring charges (Note 4) 3,853 Currency exchange losses, net (Note 6) 100 Product liability expense (Note 18) 10,688 Acquisition related costs (a) (Note 19) 7,351 Adjusted operating income (loss) 44,364 12,599 ( 6,010 ) 50,953 Adjusted operating margin % 19.4 % 11.3 % Depreciation and amortization (a) 11,823 Adjusted EBITDA 52,514 16,142 ( 5,880 ) 62,776 Adjusted EBITDA margin % 22.9 % 14.5 % Nine Months Ended September 30, 2021 Sales to external customers $ 655,123 $ 334,792 $ — $ 989,915 Operating income 108,049 Restructuring charges (Note 4) 12,239 Currency exchange gains, net (Note 6) ( 359 ) Product liability expense (Note 18) 25,235 Acquisition related costs (a) (Note 19) 11,891 Adjusted operating income (loss) 138,778 41,794 ( 23,517 ) 157,055 Adjusted operating margin % 21.2 % 12.5 % Depreciation and amortization (a) 33,716 Adjusted EBITDA 161,861 52,095 ( 23,185 ) 190,771 Adjusted EBITDA margin % 24.7 % 15.6 % -12- (In thousands, except percentage amounts) Americas International Corporate Consolidated Totals Three Months Ended September 30, 2020 Sales to external customers $ 194,303 $ 110,089 $ — $ 304,392 Operating income 41,149 Restructuring charges (Note 4) 7,603 Currency exchange losses, net (Note 6) 2,759 Product liability expense (Note 18) 2,077 Acquisition related costs (a) (Note 19) 41 Adjusted operating income (loss) 40,898 15,658 ( 2,927 ) 53,629 Adjusted operating margin % 21.0 % 14.2 % Depreciation and amortization (a) 9,856 Adjusted EBITDA 47,465 18,848 ( 2,828 ) 63,485 Adjusted EBITDA margin % 24.4 % 17.1 % Nine Months Ended September 30, 2020 Sales to external customers $ 629,787 $ 330,188 $ — $ 959,975 Operating income 148,213 Restructuring charges (Note 4) 18,475 Currency exchange losses, net (Note 6) 3,821 Product liability expense (Note 18) 4,878 Acquisition related costs (a) (Note 19) 202 COVID-19 related costs 757 Adjusted operating income (loss) 149,708 45,719 ( 19,081 ) 176,346 Adjusted operating margin % 23.8 % 13.8 % Depreciation and amortization (a) 29,284 Adjusted EBITDA 169,343 55,075 ( 18,788 ) 205,630 Adjusted EBITDA margin % 26.9 % 16.7 % (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. -13- Total sales by product group was as follows: 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 (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 % Industrial Head Protection 36,764 11 % 28,982 13 % 7,782 7 % Fall Protection 28,223 8 % 17,743 8 % 10,480 9 % Other (c) 33,415 10 % 19,182 8 % 14,233 14 % Total $ 340,197 100 % $ 229,076 100 % $ 111,121 100 % 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 (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 % Industrial Head Protection 107,615 11 % 82,913 13 % 24,702 7 % Fall Protection 85,098 9 % 51,093 8 % 34,005 10 % Other (c) 108,684 10 % 61,980 10 % 46,704 15 % Total $ 989,915 100 % $ 655,123 100 % $ 334,792 100 % Three Months Ended September 30, 2020 Consolidated Americas International (In thousands, except percentages) Dollars Percent Dollars Percent Dollars Percent Breathing Apparatus $ 62,454 20 % $ 38,889 20 % $ 23,565 21 % Fixed Gas & Flame Detection 70,038 23 % 39,411 20 % 30,627 28 % Firefighter Helmets & Protective Apparel 38,785 13 % 33,000 17 % 5,785 5 % Portable Gas Detection 32,701 11 % 20,972 11 % 11,729 11 % Industrial Head Protection 29,328 10 % 21,489 11 % 7,839 7 % Fall Protection 24,620 8 % 13,109 7 % 11,511 11 % Other (c) 46,466 15 % 27,433 14 % 19,033 17 % Total $ 304,392 100 % $ 194,303 100 % $ 110,089 100 % Nine Months Ended September 30, 2020 Consolidated Americas International (In thousands, except percentages) Dollars Percent Dollars Percent Dollars Percent Breathing Apparatus $ 214,162 22 % $ 141,850 23 % $ 72,312 22 % Fixed Gas & Flame Detection 205,334 21 % 117,399 19 % 87,935 27 % Firefighter Helmets & Protective Apparel 121,669 13 % 101,857 16 % 19,812 6 % Portable Gas Detection 102,138 11 % 65,822 10 % 36,316 11 % Industrial Head Protection 95,260 10 % 69,549 11 % 25,711 8 % Fall Protection 73,707 8 % 42,185 7 % 31,522 9 % Other (c) 147,705 15 % 91,125 14 % 56,580 17 % Total $ 959,975 100 % $ 629,787 100 % $ 330,188 100 % (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). (c) Other products include sales of Air Purifying Respirators ("APR"). -14- Note 9— Earnings per Share Basic earnings per share attributable to MSA Safety Incorporated common shareholders is computed by dividing net income, after the deduction of preferred stock dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to MSA Safety Incorporated common shareholders assumes the issuance of common stock for all potentially dilutive share equivalents outstanding not classified as participating securities. Participating securities are defined as unvested stock-based compensation awards that contain nonforfeitable rights to dividends. Amounts attributable to MSA Safety Incorporated common shareholders: Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except per share amounts) 2021 2020 2021 2020 Net income $ 18,823 $ 28,034 $ 80,362 $ 107,763 Preferred stock dividends ( 10 ) ( 10 ) ( 30 ) ( 30 ) Net income available to common equity 18,813 28,024 80,332 107,733 Dividends and undistributed earnings allocated to participating securities ( 3 ) ( 12 ) ( 25 ) ( 79 ) Net income available to common shareholders 18,810 28,012 80,307 107,654 Basic weighted-average shares outstanding 39,194 38,906 39,152 38,853 Stock-based compensation awards 236 354 272 416 Diluted weighted-average shares outstanding 39,430 39,260 39,424 39,269 Antidilutive stock options — — — — Earnings per share: Basic $ 0.48 $ 0.72 $ 2.05 $ 2.77 Diluted $ 0.48 $ 0.71 $ 2.04 $ 2.74 Note 10— Income Taxes 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. 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 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 $ 1.3 million at September 30, 2021. -15- We are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ materially from the tax amounts recorded in our unaudited condensed consolidated financial statements. Note 11— Stock Plans The 2016 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible key employees through May 2026. Management stock-based compensation includes stock options, restricted stock awards, restricted stock units and performance stock units. The 2017 Non-Employee Directors’ Equity Incentive Plan provides for grants of stock options and restricted stock to non-employee directors through May 2027. We issue treasury shares for stock option exercises and grants of restricted stock and performance stock. Please refer to Note 7—Capital Stock for further information regarding stock compensation share issuance. Stock compensation expense is as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 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 Exercise Price Outstanding at January 1, 2021 283,998 $ 46.23 Exercised ( 58,234 ) 45.84 Forfeited ( 210 ) 43.75 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 nine months ended September 30, 2021, follows: Shares Weighted Average Grant Date Fair Value Unvested at January 1, 2021 146,191 $ 105.83 Granted 40,066 152.91 Vested ( 62,155 ) 94.88 Forfeited ( 3,502 ) 133.92 Unvested at September 30, 2021 120,600 $ 126.30 -16- 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. The following weighted average assumptions were used in estimating the fair value of the performance stock units granted in the first quarter of 2021. Fair value per unit $ 177.50 Risk-free interest rate 0.2 % Expected dividend yield 1.33 % Expected volatility 35.6 % MSA stock beta 0.932 The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date converted into an implied spot rate yield curve. Expected dividend yield is based on the most recent annualized dividend divided by the one year average closing share price. Expected volatility is based on the ten year historical volatility using daily stock prices. Expected life is based on historical stock option exercise data. A summary of performance stock unit activity for the nine months ended September 30, 2021, follows: Shares Weighted Average Grant Date Fair Value Unvested at January 1, 2021 200,212 $ 104.69 Granted 52,309 175.59 Performance adjustments 5,357 88.45 Vested ( 64,543 ) 85.41 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) September 30, 2021 December 31, 2020 2010 Senior Notes payable through 2021, 4.00 % $ 20,000 $ 20,000 2016 Senior Notes payable through 2031, 3.40 %, net of debt issuance costs 73,906 74,926 2021 Senior Notes payable through 2036, 2.69 %, net of debt issuance costs 99,706 — 2021 Senior Notes payable through 2036, 2.69 %, net of debt issuance costs 99,706 — Senior revolving credit facility maturing in 2026, net of debt issuance costs 319,424 212,231 Total 612,742 307,157 Amounts due within one year 20,000 20,000 Long-term debt, net of debt issuance costs $ 592,742 $ 287,157 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, (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 ( 0.5 %), 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 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. -17- 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 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. 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, 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 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 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 $ 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. 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 nine months ended September 30, 2021 are as follows: (In thousands) Goodwill Balance at January 1, 2021 $ 443,272 Additions (Note 19) 197,446 Currency translation ( 4,605 ) 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. -18- Changes in intangible assets, net during the nine months ended September 30, 2021, are as follows: (In thousands) Intangible Assets Net balance at January 1, 2021 $ 161,051 Additions (Note 19) 164,440 Amortization expense ( 11,507 ) Currency translation ( 1,378 ) 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 Lessor Arrangements The Company derives a portion of its revenue from various leasing arrangements. Such arrangements provide for monthly payments covering the equipment provided and interest. These arrangements meet the criteria to be accounted for as sales-type leases under ASC Topic 842, Leases . Accordingly, revenue from the provision of the equipment is recognized upon lease commencement. Upon the recognition of such revenue, an asset is established for the investment in sales-type leases. Interest income is recognized monthly over the lease term. 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. -19- Note 15— Pensions and Other Post-retirement Benefits Components of net periodic benefit cost consisted of the following: Pension Benefits Other Benefits (In thousands) 2021 2020 2021 2020 Three Months Ended September 30, Service cost $ 3,264 $ 3,012 $ 99 $ 99 Interest cost 2,941 3,726 121 179 Expected return on plan assets ( 9,532 ) ( 8,503 ) — — Amortization of prior service cost (credit) 66 46 ( 90 ) ( 98 ) Recognized net actuarial losses 4,421 3,935 399 286 Net periodic benefit cost (a) $ 1,160 $ 2,216 $ 529 $ 466 Nine Months Ended September 30, Service cost $ 9,748 $ 9,035 $ 297 $ 297 Interest cost 8,575 11,178 353 537 Expected return on plan assets ( 27,826 ) ( 25,509 ) — — Amortization of prior service cost (credit) 198 138 ( 270 ) ( 294 ) Recognized net actuarial losses 13,263 11,805 1,197 858 Settlements ( 1,879 ) — — — Net periodic benefit cost (a) $ 2,079 $ 6,647 $ 1,577 $ 1,398 (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 $ 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. -20- Note 16— Derivative Financial Instruments As part of our currency exchange rate risk management strategy, we may enter into certain derivative foreign currency forward contracts that do not meet the U.S. GAAP criteria for hedge accounting, but which have the impact of partially offsetting certain foreign currency exposures. 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 $ 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) September 30, 2021 December 31, 2020 Derivatives not designated as hedging instruments: Foreign exchange contracts: Other current liabilities $ 1,758 $ 157 Foreign exchange contracts: Prepaid expenses and other current assets — 160 The following table presents the unaudited Condensed Consolidated Statement of Income location and impact of derivative financial instruments: Loss (Gain) Recognized in Income Nine Months Ended September 30, (In thousands) Statement of Income Location 2021 2020 Derivatives not designated as hedging instruments: Foreign exchange contracts Currency exchange losses (gains), net $ 3,275 $ ( 4,226 ) Note 17— Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are: • Level 1—Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets. • Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. • Level 3—Unobservable inputs for the asset or liability. The valuation methodologies we used to measure financial assets and liabilities include the derivative financial instruments described in Note 16—Derivative Financial Instruments. We estimate the fair value of the derivative financial instruments, consisting of foreign currency forward contracts, based upon valuation models with inputs that generally can be verified by observable market conditions and do not involve significant management judgment. Accordingly, the fair values of the derivative financial instruments are classified within Level 2 of the fair value hierarchy. With the exception of our investments in marketable securities and fixed rate long-term debt, we believe that the reported carrying amounts of our financial assets and liabilities approximate their fair values. We value our investments in marketable securities, primarily fixed income, at fair value using quoted market prices for similar securities or pricing models. 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 $ 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. The Company does not intend to sell, nor is it more likely than not that we will be required to sell, these securities prior to recovery of their cost, as such, management believes that any unrealized gains or losses are temporary; 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 September 30, 2021. -21- 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. Acquisitions are measured at fair value, refer to Note 19—Acquisitions for a description of the methodologies and fair value measurements utilized in the business combination. Note 18— Contingencies Product liability We face an inherent business risk of exposure to product liability claims arising from the alleged failure of our products to prevent the types of personal injury or death against which they are designed to protect. Product liability claims are categorized as either single incident or cumulative trauma. Single incident product liability claims. 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 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. 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. Adjustments are made to the reserve as appropriate. Cumulative trauma product liability claims. 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 1,672 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. 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: Nine Months Ended September 30, 2021 Year Ended December 31, 2020 Open lawsuits, beginning of period 1,622 1,605 New lawsuits 317 402 Settled and dismissed lawsuits ( 267 ) ( 385 ) Open lawsuits, end of period 1,672 1,622 Nine Months Ended September 30, 2021 Year Ended December 31, 2020 Asserted claims, beginning of period 2,878 2,456 New claims 1,579 917 Settled and dismissed claims ( 312 ) ( 495 ) Asserted claims, end of period 4,145 2,878 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. -22- 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 $ 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. Those estimated amounts reflect asbestos, silica and coal dust claims expected to be resolved through the year 2069 and are not discounted to present value. 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 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. 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. 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 $ 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. 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 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: • The types and severity of illnesses alleged by claimants to give rise to their claims; • The venues in which claims are asserted; • The number of claims that may be asserted in the future against MSA LLC and the counsel asserting those claims; and • The percentage of claims resolved through settlement and the values of settlements paid to claimants. Additional assumptions include the following: • MSA LLC will continue to evaluate and handle cumulative trauma product liability claims in accordance with its existing defense strategy; • The number and effect of co-defendant bankruptcies will not materially change in the future; • No material changes in medical science occur with respect to cumulative trauma product liability claims; and • No material changes in law occur with respect to cumulative trauma product liability claims including no material state or federal tort reform actions. -23- 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. 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. 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, 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. Because cumulative trauma product liability litigation is subject to the significant modeling assumptions and inherent uncertainties described above, and unfavorable developments or rulings could occur, there can be no certainty that MSA LLC may not ultimately incur charges in excess of presently recorded liabilities. The reserve for cumulative trauma product liability claims may be adjusted from time to time based on changes to the factors and assumptions described above. If future estimates of cumulative trauma product liability claims are materially different than the accrued liability, we will record an appropriate adjustment to the unaudited Condensed Consolidated Statement of Income. These adjustments could materially impact our consolidated financial statements in future periods. Insurance Receivable and Notes Receivable, Insurance Companies Many years ago, MSA LLC purchased insurance policies from various insurance carriers that, subject to common contract exclusions, provided coverage for cumulative trauma product liability losses (the "Occurrence-Based Policies"). While we continue to pursue reimbursement under certain remaining Occurrence-Based Policies, the vast majority of these policies have been exhausted, settled or converted into either (1) negotiated settlement agreements with scheduled payment streams (recorded as notes receivables), or (2) negotiated Coverage-in-Place Agreements (recorded as insurance receivables). As a result, MSA LLC is largely self-insured for cumulative trauma product liability claims, and additional amounts recorded as insurance receivables or notes receivables will be limited. When adjustments are made to amounts recorded in the cumulative trauma product liability reserve, we calculate amounts due to be reimbursed pursuant to the terms of the negotiated Coverage-In-Place Agreements, including cumulative trauma product liability losses and related defense costs, and we record the amounts probable of reimbursement as insurance receivables. These amounts are not subject to current coverage litigation. 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 $ 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. -24- A summary of insurance receivables balance and activity related to cumulative trauma product liability losses is as follows: (In millions) Nine Months Ended September 30, 2021 Year Ended December 31, 2020 Balance beginning of period $ 97.0 $ 63.8 Additions 19.2 39.0 Collections and other adjustments ( 10.3 ) ( 5.8 ) Balance end of period $ 105.9 $ 97.0 We record formal notes receivable due from scheduled payment streams according to negotiated settlement agreements with insurers. These amounts are not subject to current coverage litigation. 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) Nine Months Ended September 30, 2021 Year Ended December 31, 2020 Balance beginning of period $ 52.3 $ 56.0 Additions 1.0 1.4 Collections ( 5.1 ) ( 5.1 ) Balance end of period $ 48.2 $ 52.3 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. The determination that the recorded insurance receivables are probable of collection is based on the terms of the settlement agreements reached with the insurers, our history of collection, and the advice of MSA LLC's outside legal counsel and consultants. 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. -25- Product Warranty The Company provides warranties on certain product sales. Product warranty reserves are established in the same period that revenue from the sale of the related products is recognized, or in the period that a specific issue arises as to the functionality of the Company's product. The determination of such reserves requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. The amounts of the reserves are based on established terms and the Company's best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. If actual return rates and/or repair and replacement costs differ significantly from estimates, adjustments to recognize additional cost of sales may be required in future periods. The following table reconciles the changes in the Company's accrued warranty reserve: (In thousands) Nine Months Ended September 30, 2021 Year Ended December 31, 2020 Beginning warranty reserve $ 11,428 $ 12,715 Warranty payments ( 6,650 ) ( 10,861 ) Warranty claims 6,573 10,233 Provision for product warranties and other adjustments 77 ( 659 ) Ending warranty reserve $ 11,428 $ 11,428 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) $ 32.1 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. -26- 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 On January 25, 2021, we acquired 100 % of the common stock of B T Q Limited, including Bristol Uniforms and Bell Apparel ("Bristol") in an all-cash transaction valued at $ 63.0 million, net of cash acquired. Bristol, which is headquartered in the United Kingdom (U.K.), is a leading innovator and provider of protective apparel to the fire, rescue services, and utility sectors. The acquisition strengthens MSA's position as a global market leader in fire service personal protective equipment (PPE) products, which include breathing apparatus, firefighter helmets, thermal imaging cameras, and firefighter protective apparel, while providing an avenue to expand its business in the U.K. and key European markets. The fire service equipment brands of MSA, which include Gallet Firefighter Helmets, the M1 and G1 Self-Contained Breathing Apparatus range, Cairns Helmets, Globe Manufacturing, and now Bristol Uniforms, represent more than 460 combined years of innovation in the fire service industry, with a common mission: protecting the health and safety of firefighters. Bristol is also a leading manufacturer of flame-retardant, waterproof, and other protective work wear for the utility industry. Marketed under the Bell Apparel brand, this line complements MSA's existing and broad range of offerings for the global utilities market. Bristol's operating results are included in our unaudited condensed consolidated financial statements from the acquisition date as part of the International reportable segment. The acquisition qualifies as a business combination and will be accounted for using the acquisition method of accounting. -27- 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 Current assets (including cash of $ 13.3 million) $ 37.1 Net investment in sales-type leases, noncurrent 29.0 Property, plant and equipment and other noncurrent assets 12.0 Customer relationships 4.5 Trade name and other intangible assets 1.4 Goodwill 4.1 Total assets acquired 88.1 Total liabilities assumed ( 11.8 ) Net assets acquired $ 76.3 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 first 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 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 Bristol 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 Bristol transaction will be amortized over a period of 15 years. 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 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. 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 Bristol with our operations. 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 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 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. -28- 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; (2) factually supportable; and (3) expected to have a continuing impact on the combined company's results. 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 September 30, Nine Months Ended September 30, (In millions, except per share amounts) 2020 2021 2020 Net sales $ 328.9 $ 1,027.6 $ 1,056.9 Net income $ 24.8 $ 69.2 $ 102.9 Basic earnings per share $ 0.64 $ 1.77 $ 2.65 Diluted earnings per share $ 0.63 $ 1.75 $ 2.62 The unaudited pro forma condensed combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operations or financial position that we would have reported had the acquisition been completed as of the date and for the periods presented, and should not be taken as representative of our condensed consolidated results of operations or financial condition following the acquisition. In addition, the unaudited pro forma condensed combined financial information is not intended to project the future financial position or result of operations of the combined company. The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting under existing U.S. GAAP. MSA has been treated as the acquirer. 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. -29-