What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-18 compared with 2021-02-19 · 67 added, 61 removed, 171 unchanged (43% of the section changed)

RISKS RELATED TO ECONOMIC, MARKET AND COMPETITIVE CONDITIONS

Unfavorable economic and market conditions could materially and adversely affect our business, results of operations and financial condition.

We are subject to risks arising from adverse changes in global economic conditions.

We have significant operations in a number of countries outside the U.S., including some in emerging markets.

Long-term economic uncertainty in some of the regions of the world in which we operate, such as Asia, Latin America, the Middle East and Europe, could result in declines in revenue, profitability and cash flow due to reduced orders, payment delays, supply chain disruptions or other factors caused by the economic challenges faced by our customers and suppliers.

A portion of MSA's sales are made to customers in the oil, gas and petrochemical market.

We estimate that between 25% - 30% of our global business is sold into the energy market vertical with the most significant exposure in industrial head protection, portable gas detection and FGFD.

Approximately 10% - 15% of consolidated revenue, primarily in industrial head protection and portable gas detection, is more exposed to a pullback in employment trends across the energy market.

Another 5% - 10% of consolidated revenue, primarily in FGFD is more exposed to a pullback in capital equipment spending within the energy market.

It is possible that the volatility in the oil, gas and petrochemical industry could negatively impact our business and could result in declines in our consolidated results of operations and cash flow.

Pandemics or disease outbreaks, such as COVID-19, may cause unfavorable economic or market conditions which could impact demand patterns and/or disrupt global supply chains and manufacturing operations.

Collectively, these outcomes could materially and adversely affect our business, results of operations and financial condition.

Pandemics or disease outbreaks such as the novel coronavirus (COVID-19) could result in a widespread health crisis that could adversely affect the economies of developed and emerging markets, potentially resulting in an economic downturn that could affect customers’ demand for our products in certain industrial-based end-markets.

The spread of pandemics or disease outbreaks may also disrupt the Company’s manufacturing operations, supply chain, or logistics necessary to import, export and deliver products to our customers.

During a pandemic or crisis, applicable laws and response directives could, in some circumstances, adversely affect our ability to operate our plants, or to deliver our products in a timely manner.

Some laws and directives may also hinder our ability to move certain products across borders.

Economic conditions can also influence order patterns.

These factors could negatively impact our consolidated results of operations and cash flow.

A reduction in the spending patterns of government agencies or delays in obtaining government approval for our products could materially and adversely affect our net sales, earnings and cash flow.

The demand for our products sold to the fire service market, the homeland security market and other government agencies is, in large part, driven by available government funding.

Government budgets are set annually and we cannot assure that government funding will be sustained at the same level in the future.

A significant reduction in available government funding could result in declines in our consolidated results of operations and cash flow.

The markets in which we compete are highly competitive, and some of our competitors have greater financial and other resources than we do.

The competitive pressures faced by us could materially and adversely affect our business, results of operations and financial condition.

The safety products market is highly competitive, with participants ranging in size from small companies focusing on single types of safety products, to large multinational corporations that manufacture and supply many types of safety products.

Our main competitors vary by region and product.

We believe that participants in this industry compete primarily on the basis of product characteristics (such as functional performance, technology, cost of ownership, comfort, design and style), price, service and delivery, customer support, the ability to meet the special requirements of customers, brand name trust and recognition, and e-business capabilities.

Some of our competitors have greater financial and other resources than we do and our business could be adversely affected by competitors’ new product innovations, technological advances made to competing products and pricing changes made by us in response to competition from existing or new competitors.

We may not be able to compete successfully against current and future competitors and the competitive pressures faced by us could have a material adverse effect our business, consolidated results of operations and financial condition.

In addition, e-business is a rapidly developing area, and the execution of a successful e-business strategy involves significant time, investment and resources.

If we are unable to successfully expand e-business capabilities in support of our customer needs, our brands may lose market share, which could negatively impact revenue and profitability.

RISKS RELATED TO LEGAL AND REGULATORY CHALLENGES

Claims of injuries from products, product defects or recalls of products against our various subsidiaries could have a material adverse effect on our business, operating results, financial condition and liquidity.

MSA and its subsidiaries face an inherent business risk of exposure to product liability claims.

In the event the parties using our products are injured or any of our products prove to be defective, we could be subject to claims with respect to such injuries.

In addition, we may be required to or may voluntarily recall or redesign certain products that could potentially be harmful to end users.

Any claim or product recall that results in significant expense or negative publicity against us could have a material adverse effect on our business, operating results, financial condition and liquidity, including any successful claim brought against us in excess or outside of available insurance coverage.

Claims of injuries or potential safety issues related to alleged product defects, or quality concerns against our various subsidiaries could have a material adverse effect on our business, operating results, financial condition and liquidity.

Our mission, reputation and business success rely on our ability to design and provide safe, high quality and reliable products that earn and maintain customer trust.

Our products are often used in high-risk and unpredictable environments, and MSA and its subsidiaries face an inherent business risk of exposure to product liability claims.

In the event the parties using our products are injured or any of our products are alleged to be defective, we could be subject to claims.

In addition, we may be required to or may voluntarily recall or redesign certain products or components due to concern about product safety, quality, or reliability.

Any significant claims, recalls or field actions that result in significant expense or negative publicity against us could have a material adverse effect on our business, operating results, financial condition and liquidity, including any successful claim brought against us in excess or outside of available insurance coverage.

Our subsidiaries, including Mine Safety Appliances Company, LLC, may experience losses from product liability claims.

Losses from product liability claims could have a material adverse effect on our business, operating results;

financial condition and liquidity, which could introduce volatility from period-to-period in our financial results.

From time to time, product liability claims are made against our various subsidiaries for current or historical products.

In most instances the products at issue were manufactured many years ago and are not currently offered for sale.

Losses from product liability claims could have a material adverse effect on our business, operating results, financial condition and liquidity, which could introduce volatility from period-to-period in our financial results.

From time to time, product liability claims are made against our various subsidiaries.

In most instances the products at issue were manufactured many years ago and are not currently offered for sale, but in some instances, product liability claims may relate to current products.

One subsidiary, Mine Safety Appliances Company, LLC (“MSA LLC”) was named as a defendant in 1,675 cumulative trauma lawsuits comprised of 4,554 claims at December 31, 2021.

Cumulative trauma product liability claims involve 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.

A reserve has been established with respect to estimated amounts for cumulative trauma product liability claims currently asserted and incurred but not reported (“IBNR”) cumulative trauma product liability claims.

A reserve has been established with respect to estimated amounts for cumulative trauma product liability claims currently asserted, as well as, incurred but not reported (“IBNR”) cumulative trauma product liability claims.

Because our cumulative trauma product liability risk is subject to inherent uncertainties, and since MSA LLC is largely self-insured, there can be no certainty that MSA LLC may not ultimately incur losses in excess of presently recorded liabilities.

These factors may develop over time or may be the result of sudden unfavorable events within a single reporting period.

Many factors affecting cumulative trauma product liability claims may change over time or as a result of sudden unfavorable events within a single reporting period.

Associated losses could have a material adverse effect on our business, operating results, financial condition and liquidity, or could result in volatility from period to period.

We will adjust the reserve from time to time based on developments in MSA LLC's actual claims experience, the claims environment or other significant changes in the factors underlying the assumptions used in establishing the reserve.

Each of these factors may increase or decrease significantly within an individual period depending on, among other things, the timing of claims filings or settlements, or litigation outcomes during a particular period that are especially favorable or unfavorable to MSA LLC.

We accordingly consider MSA LLC’s claims experience over multiple periods and/or whether there are changes in MSA LLC’s claims experience and trends that are likely to continue for a significant time into the future in determining whether to make an adjustment to the reserve, rather than evaluating such factors solely in the short term.

Each of these factors may increase or decrease significantly within an individual period depending on, among other things, the timing of claims filings, settlements, or litigation outcomes during a particular period that are especially favorable or unfavorable to MSA LLC.

We accordingly consider MSA LLC’s claims experience over multiple periods or whether there are changes in MSA LLC’s claims experience and trends that are likely to continue for a significant time into the future in determining whether to make an adjustment to the reserve, rather than evaluating such factors solely in the short term.

Any future adjustments to the reserve may be material and could materially impact future periods in which the reserve is adjusted.

21 unchanged sentences

Included in the extensive laws, regulations and ordinances to which we are subject, are those relating to the protection of the environment.

Examples include those governing discharges to air and water, handling and disposal practices for solid and hazardous wastes and the maintenance of a safe workplace.

These laws impose penalties for noncompliance and liability for response costs and certain damages resulting from past and current spills, disposals, or other releases of hazardous materials.

Examples include those governing discharges to water, discharges to air (including greenhouse gas emissions), handling and disposal practices for solid and hazardous wastes and the maintenance of a safe workplace.

These laws impose penalties for noncompliance and liability for response costs and certain damages resulting from past and current spills, disposals, other releases of hazardous materials and other noncompliance with such laws.

These environmental laws may continue to change in the future due to a variety of factors, such as government focus on climate change.

We could incur substantial costs as a result of noncompliance with or liability for cleanup pursuant to these environmental laws.

3 unchanged sentences

Congress, the Organization for Economic Co-operation and Development (or, OECD) and other government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies.

The OECD has changed numerous long-standing tax principles through its base erosion and profit shifting (“BEPS”) project which could adversely impact our effective tax rate.

The OECD has changed numerous long-standing tax principles through its base erosion and profit shifting project which could adversely impact our effective tax rate.

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

2 unchanged sentences

Our future results are subject to the risk that purchased components and materials are unavailable or available at excessive cost due to material shortages, excessive demand, currency fluctuation, inflationary pressure and other factors.

We depend on various components and materials to manufacture our products.

Although we have not experienced any substantial difficulty in obtaining components and materials, it is possible that any of our supplier relationships could be terminated or otherwise disrupted.

We depend on various components and materials from supply chain partners to manufacture our products.

It is possible that any of our supplier relationships could be terminated or otherwise disrupted.

Any sustained interruption in our receipt of adequate supplies could have a material adverse effect on our business, results of operations and financial condition.

6 unchanged sentences

It is also possible that other major productivity and streamlining programs may be required in the future.

RISKS RELATED TO ECONOMIC, MARKET AND COMPETITIVE CONDITIONS

Unfavorable economic and market conditions could materially and adversely affect our business, results of operations and financial condition.

We are subject to risks arising from adverse changes in global economic conditions.

We have significant operations in a number of countries outside the U.S., including some in emerging markets.

A portion of MSA's sales are made to customers in the oil, gas and petrochemical market.

We estimate that between approximately 25% - 30% of our global business is sold into the energy market vertical with the most significant exposure in industrial head protection, portable gas detection and FGFD.

Approximately 10% - 15% of consolidated revenue, primarily in industrial head protection and portable gas detection, is more exposed to a pullback in employment trends across the energy market.

Another 5% - 10% of consolidated revenue, primarily in FGFD is more exposed to a pullback in capital equipment spending within the energy market.

It is possible that the volatility in the oil, gas and petrochemical industry, whether related to economic, climate-related energy policy, or other conditions, could negatively impact our business and could result in declines in our consolidated results of operations and cash flow.

Collectively, these outcomes could materially and adversely affect our business, results of operations and financial condition.

Pandemics or disease outbreaks such as COVID-19 could result in a widespread health crisis that could adversely affect the economies of developed and emerging markets, potentially resulting in an economic downturn that could affect customers’ demand for our products in certain industrial-based end-markets.

The spread of pandemics or disease outbreaks may also disrupt the Company’s manufacturing operations, supply chain, or logistics necessary to import, export and deliver products to our customers.

During a pandemic or crisis, applicable laws and response directives such as U.S.

federal vaccine mandates for federal contractors or OSHA requirements, could, in some circumstances, result in skilled labor impacts including voluntary attrition or difficulty finding labor, or otherwise adversely affect our ability to operate our plants, obtain inputs from suppliers, or to deliver our products in a timely manner.

Additional vaccine mandates may be announced in other countries in which we operate or source inputs.

Some laws and directives may also hinder our ability to move certain products across borders.

Economic conditions can also influence order patterns.

These factors could negatively impact our consolidated results of operations and cash flow.

A reduction in the spending patterns of government agencies or delays in obtaining government approval for our products could materially and adversely affect our net sales, earnings and cash flow.

The demand for our products sold to the fire service market, the homeland security market and other government agencies is, in large part, driven by available government funding.

Government budgets are set annually and we cannot assure that government funding will be sustained at the same level in the future.

A significant reduction in available government funding could result in declines in our consolidated results of operations and cash flow.

The markets in which we compete are highly competitive, and some of our competitors have greater financial and other resources than we do.

The competitive pressures faced by us could materially and adversely affect our business, results of operations and financial condition.

Our main competitors vary by region and product.

In addition, e-business is a rapidly developing area, and the execution of a successful e-business strategy involves significant time, investment and resources.

If we are unable to successfully expand e-business capabilities in support of our customer needs, our brands may lose market share, which could negatively impact revenue and profitability.

RISKS RELATED TO NEW AND ADJACENT INITIATIVES

6 unchanged sentences

One of our operating strategies is to selectively pursue acquisitions.

For example, on January 25, 2021, we completed the acquisition of B T Q Limited, which is a leading innovator and provider of protective apparel to the fire and rescue services sector.

For example, on July 1, 2021, we completed the acquisition of Bacharach, Inc., which is a leader in gas detection technologies used in the HVAC-R markets.

Please refer to Note 14 of the consolidated financial statements in Part II Item 8 of this Form 10-K for further details.

7 unchanged sentences

• customer dissatisfaction or performance problems at the acquired businesses.

If we are unable to integrate or successfully manage businesses that we have recently acquired, including Bristol, or may acquire in the future, we may not realize anticipated cost savings, improved manufacturing efficiencies and increased revenue, which may result in material adverse short and long-term effects on our consolidated operating results, financial condition and liquidity.

If we are unable to integrate or successfully manage businesses that we have recently acquired, including Bacharach, or may acquire in the future, we may not realize anticipated cost savings, improved manufacturing efficiencies and increased revenue, which may result in material adverse short and long-term effects on our consolidated operating results, financial condition and liquidity.

Even if we are able to integrate the operations of our acquired businesses into our operations, we may not realize the full benefits of the cost savings, revenue enhancements or other benefits that we may have expected at the time of acquisition.

In addition, even if we achieve the expected benefits, we may not be able to achieve them within the anticipated time frame, and such benefits may be offset by costs incurred in integrating the acquired companies and increases in other expenses.

If we fail to introduce successful new products or extend our existing product lines, we could lose our market position and our financial performance could be materially and adversely affected.

If we fail to introduce successful new products or extend our existing product line, we could lose our market position and our financial performance could be materially and adversely affected.

In the safety products market, there are frequent introductions of new products and product line extensions.

5 unchanged sentences

A failure of our information systems or a cybersecurity breach could materially and adversely affect our business, results of operations and financial condition.

The proper functioning and security of our information systems is critical to the operation and reputation of our business.

The proper functioning and security of our information systems, including those that support and operate our Safety io and MSA+™ platforms, is critical to the operation and reputation of our business.

Our information systems may be vulnerable to damage or disruption from natural or man-made disasters, computer viruses, power losses or other system or network failures.

5 unchanged sentences

Any such system failure or loss of such information could harm our competitive position or cause us to incur significant costs to remedy the damages caused by the incident.

We routinely implement improvements to our network security safeguards as well as cybersecurity initiatives.

We also maintain a robust cyber response plan, including an assessment of triggers for internal and external reporting of cyber incidents, along with ongoing employee awareness and training activities.

We expect to continue devoting substantial resources to the security of our information technology systems.

We cannot assure that such system improvements will be sufficient to prevent or limit the damage from any future cyber-attack or disruption to our information systems.

We cannot assure that ongoing improvements to our infrastructure and cybersecurity programs will be sufficient to prevent or limit the damage from any future cyber-attack or disruption to our information systems.

Our continued success depends on our ability to protect our intellectual property.

19 unchanged sentences

While we strive to reduce the negative impact of such changes, the loss of any key employee could result in significant disruptions to our operations, including adversely affecting the timeliness of product releases, the successful implementation and completion of company initiatives, the effectiveness of our disclosure controls and procedures and our internal control over financial reporting, and the results of our operations.

We may be unable to hire or retain and develop a highly skilled and diverse global workforce or effectively manage changes in our workforce and respond to shifts in labor availability.

We must hire, retain and develop a highly skilled and diverse global workforce.

We compete to hire new personnel with a variety of capabilities in the many countries in which we manufacture and market our products and then to develop and retain their skills and competencies.

We could experience unplanned or increased turnover of employees with key capabilities, or fail to develop adequate succession plans for leadership positions or hire and retain a workforce with the skills and in the locations we need to operate and grow our business.

We could also fail to attract and develop personnel with key emerging capabilities that we need to continue to respond to changing consumer and customer needs and grow our business, including skills in the areas of manufacturing, engineering, sales, service, and various functional support areas.

Occurrence of any of these conditions could deplete our institutional knowledge base and erode our competitiveness.

We are experiencing an increasingly tight and competitive labor market and could face unforeseen challenges in the availability of labor, particularly due to consequences associated with the outbreak of COVID-19.

A sustained labor shortage or increased turnover rates within our employee base caused by COVID-19 or related issues such as vaccine mandates, or as a result of general macroeconomic factors, have led and could lead to increased costs, such as increased overtime to meet demand and increased wages to attract and retain employees.

We have also been negatively affected and could continue to be negatively affected by labor shortages or constraints experienced by our partners, including our external manufacturing partners and freight providers.

Failure to achieve and maintain a diverse workforce, compensate our employees competitively and fairly, maintain a safe and inclusive environment or promote the well-being of our employees could affect our reputation and also result in lower performance and an inability to retain valuable employees.

RISKS RELATED TO DOING BUSINESS INTERNATIONALLY

63 unchanged sentences

A significant portion of our debt bears interest at variable rates that may increase in the future.

The potential discontinuance of LIBOR is one such risk that could cause market volatility or disruption.

In July 2017, the chief executive of the United Kingdom Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

It is unknown whether any banks will continue to voluntarily submit rates for the calculation of LIBOR after 2021 or whether LIBOR will continue to be published by its administrator based on these submissions or on any other basis.

It is not possible to predict the effect of these changes, other reforms, or the establishment of alternative reference rates, but the potential discontinuance of LIBOR could adversely affect our access to the debt and its cost of funding.

Our debt agreements require us to comply with certain restrictive covenants.

4 unchanged sentences

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-K

Item 1A. Risk Factors