What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-19 · 465 added, 351 removed, 1102 unchanged (43% of the section changed)

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Based on our assessment and those criteria, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2021.

The Company acquired B T Q Limited ("Bristol") and Bacharach, Inc.

("Bacharach") on January 25, 2021, and July 1, 2021, respectively, which collectively represented approximately 19% and 48% of the Company's total assets and net assets as of December 31, 2021 and 5% and (29%) of total sales and net income for the year ended December 31, 2021.

As the Bristol and Bacharach acquisitions were completed during the first and third quarters of 2021, respectively, the scope of the Company's 2021 assessment of the effectiveness of its internal control over financial reporting does not include the Bristol and Bacharach acquisitions.

This exclusion is pursuant to the SEC's general guidance that an assessment of a recently acquired business' internal control over financial reporting may be omitted from the scope of the Company's assessment of its internal control over financial reporting for twelve months following the date of acquisition.

The Company's independent registered public accounting firm that audited the consolidated financial statements included in this annual report issued an attestation report on the Company's internal control over financial reporting.

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In our opinion, MSA Safety Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, cash flows, and changes in retained earnings, accumulated other comprehensive loss and noncontrolling interests for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) 2.

and our report dated February 19, 2021 expressed an unqualified opinion thereon.

As indicated in the accompanying Management's Report on Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of B T Q Limited ("Bristol") and Bacharach, Inc.

("Bacharach"), which are included in the 2021 consolidated financial statements of the Company and collectively constituted 19% and 48% of total and net assets, respectively, as of December 31, 2021 and 5% and (29)% of revenues and net income, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Bristol and Bacharach.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, cash flows, and changes in retained earnings, accumulated other comprehensive loss and noncontrolling interests for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) 2 and our report dated February 18, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MSA Safety Incorporated (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, cash flows, and changes in retained earnings, accumulated other comprehensive loss and noncontrolling interests for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) 2.

(collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of MSA Safety Incorporated (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, cash flows, and changes in retained earnings, accumulated other comprehensive loss and noncontrolling interests for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) 2 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2022 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Notes 1 and 4 to the consolidated financial statements, in 2021 the Company elected to change its method of accounting for certain inventories in the United States from the last-in, first-out (“LIFO”) method to the first-in, first-out (“FIFO”) method for all years presented.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of cumulative trauma product liability claims

Description of the Matter As more fully described in Note 19 to the consolidated financial statements, MSA LLC is named as a defendant in lawsuits comprised of cumulative trauma product liability claims involving 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.

The Company believes it is probable that it will incur losses related to asserted and incurred but not reported (IBNR) claims and that the amount of loss can be reasonably estimated.

At December 31, 2020, the Company’s accrual for asserted and IBNR claims was $221.5 million, representing its best estimate of the expected losses related to these claims.

Description of the Matter As more fully described in Notes 1 and 20 to the consolidated financial statements, the Company's subsidiary MSA LLC is named as a defendant in lawsuits comprised of cumulative trauma product liability claims involving alleged exposures to potentially 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.

It is probable that MSA LLC will incur losses related to asserted and incurred but not reported (IBNR) claims and that the amount of losses can be reasonably estimated.

At December 31, 2021, the Company’s reserve for cumulative trauma product liability claims was $409.8 million, representing its best estimate of the expected losses related to these claims.

Auditing management’s accounting for and disclosure of loss contingencies arising from cumulative trauma product liability claims was especially challenging, as the estimate of probable loss is highly subjective.

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Additional audit procedures to test the Company’s valuation of the expected losses related to cumulative trauma product liability claims included:

evaluating significant assumptions underlying the estimate, including the number of claims asserted 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.

evaluating significant assumptions underlying the estimate, including the number of claims asserted against MSA LLC and the counsel asserting those claims, the percentage of claims resolved through settlement and the values of settlements paid to claimants.

We engaged our actuarial specialists to assist in the analysis of the significant assumptions and methodology used by management.

Our procedures also included evaluating the sufficiency of the Company’s disclosures with respect to cumulative trauma product liability claims described in Note 20 to the consolidated financial statements.

Valuation of customer relationship intangible assets in the acquisition of Bacharach, Inc.

Description of the Matter As discussed in Note 14 to the consolidated financial statements, during the year ended December 31, 2021, the Company completed the acquisition of Bacharach, Inc.

("Bacharach") for a total purchase price of approximately $341.1 million.

The acquisition was accounted for as a business combination.

The consideration paid in the acquisition must be allocated to the acquired assets and liabilities assumed generally based on their fair value with the excess of the purchase price over those fair values allocated to goodwill.

Auditing the Company’s accounting for its acquisition of Bacharach was complex due to the significant estimation uncertainty involved in estimating the fair value of customer relationship intangible assets.

The total fair value ascribed to customer relationship intangible assets amounted to $123.0 million.

The Company used the excess earnings approach to value the customer relationship intangible assets.

The significant assumptions used to estimate the fair value of customer relationships included the forecasted sales and operating expenses inclusive of synergies expected to be achieved by combining the Company and Bacharach.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its accounting for the acquisition of Bacharach.

For example, we tested controls that address the risks of material misstatement relating to the valuation of the customer relationship intangible assets, including management’s review of the methods and significant assumptions used to develop such estimates.

To test the estimated fair value of the acquired customer relationship intangible assets, our audit procedures included, among others, assessing the appropriateness of the valuation methodologies used, evaluating the significant assumptions discussed above, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

For the forecasted sales and operating expenses inclusive of synergies expected to be achieved by combining the Company and Bacharach, we compared the financial projections to current industry and economic trends and the historic financial performance of the acquired business.

We also performed sensitivity analyses to evaluate the changes in the fair value of the intangible assets that would result from changes in the significant assumptions.

We involved our valuation specialist to assist in evaluating the methodologies and testing certain significant assumptions used to estimate the fair value of the customer relationship intangible assets.

/s/ Ernst & Young LLP

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Restructuring charges (Note 3) 16,433 27,381 13,846

Currency exchange losses, net (Note 5) 8,578 19,814 2,330

Currency exchange losses, net 216 8,578 19,814

Product liability (Note 20) and other operating expense 185,264 39,036 28,372

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Interest expense 10,758 9,432 13,589

Loss on extinguishment of debt (Note 11) — — 1,494

Other income, net (Note 16) ( 11,582 ) ( 5,684 ) ( 11,094 )

Total other expense, net 3,748 2,495 11,144

Total other (income) expense, net ( 824 ) 3,748 2,495

Income before income taxes 23,604 168,147 185,752

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Dividends per common share $ 1.75 $ 1.71 $ 1.64

*Year ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

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

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Net income $ 21,788 $ 125,138 $ 139,207

Other comprehensive (loss) income, net of tax:

Other comprehensive income, net of tax:

Foreign currency translation adjustments (Note 6) ( 25,354 ) 22,260 ( 1,657 )

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Reclassifications from accumulated other comprehensive (loss) into net income (Note 6) 267 216 15,261

Total other comprehensive income (loss), net of tax 31,765 8,623 ( 47,470 )

Total other comprehensive income, net of tax 33,165 31,765 8,623

Comprehensive income 54,953 156,903 147,830

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Comprehensive income attributable to MSA Safety Incorporated $ 54,597 $ 155,683 $ 146,694

*Year ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

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

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Property, plant and equipment, net (Note 5) 207,793 189,620

Operating lease assets, net (Note 16) 53,451 51,675

Operating lease right-of-use assets, net (Note 17) 50,178 53,451

Prepaid pension cost (Note 15) 163,283 97,545

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Total MSA Safety Incorporated shareholders’ equity 834,388 839,201

Noncontrolling interests 7,993 6,773

Noncontrolling interests (Note 14) — 7,993

Total shareholders’ equity 834,388 847,194

Total liabilities and shareholders’ equity $ 2,396,396 $ 1,919,631

*December 31, 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

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

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Product liability payments (Note 20) ( 39,548 ) ( 23,727 ) ( 54,504 )

Loss on extinguishment of debt (Note 11) — — 1,494

Trade receivables

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Inventories (Note 4) ( 17,827 ) ( 13,645 ) ( 25,263 )

( 8,601 ) ( 23,246 ) ( 11,122 )

Prepaid expenses and other current assets

( 8,861 ) ( 822 ) 10,866

Accounts payable and accrued liabilities

13,541 5,801 17,985

Accounts payable 13,299 ( 3,069 ) 9,775

Other current assets and liabilities 823 7,749 ( 4,796 )

Other noncurrent assets and liabilities

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Proceeds from maturities of short-term investments (Note 19) 160,000 175,000 174,670

Acquisition, net of cash acquired (Note 13) — ( 33,196 ) —

Acquisitions, net of cash acquired (Note 14) ( 392,437 ) — ( 33,196 )

Property disposals and other investing ( 5,286 ) 454 218

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Financing Activities

(Payments on) proceeds from short-term debt, net (Note 11) — ( 65 ) 51

Payments on short-term debt, net (Note 12) — — ( 65 )

Payments on long-term debt (Note 12) ( 1,346,557 ) ( 1,031,000 ) ( 880,500 )

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Cash dividends paid ( 68,586 ) ( 66,578 ) ( 63,523 )

Acquisition of noncontrolling interests in consolidated subsidiaries ( 13,381 ) — —

Distribution to noncontrolling interests ( 5,632 ) — —

Company stock purchases (Note 7) ( 6,171 ) ( 29,144 ) ( 12,648 )

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Employee stock purchase plan (Note 7) 855 747 641

Other, net — — ( 1,494 )

Cash Flow Used In Financing Activities ( 126,529 ) ( 84,624 ) ( 163,269 )

Cash Flow Provided by (Used In) Financing Activities 203,925 ( 126,529 ) ( 84,624 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 7,193 ) 1,234 ( 4,242 )

Increase in cash, cash equivalents and restricted cash 8,491 11,939 2,715

(Decrease) increase in cash, cash equivalents and restricted cash ( 19,596 ) 8,491 11,939

Beginning cash, cash equivalents and restricted cash 161,034 152,543 140,604

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Income tax paid in cash $ 45,556 $ 61,072 $ 48,673

*Year ended December 31, 2020 and 2019 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4.

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

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Loss Noncontrolling Interests

Balances January 1, 2018 $ 868,675 $ ( 171,762 ) $ 4,977

Balances at January 1, 2019 (Originally reported) $ 935,577 $ ( 218,927 ) $ 5,637

Inventory accounting method change 31,769 — —

Balances at January 1, 2019 (As adjusted) 967,346 ( 218,927 ) 5,637

Net income 139,207 — —

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— ( 5,559 ) —

Unrecognized net losses on available-for-sale securities (Note 18) — ( 572 ) —

Unrecognized net gains on available-for-sale securities (Note 19) — 578 —

Reclassification of currency translation from accumulated other comprehensive loss into net income (Note 6) — 15,261 —

(Income) loss attributable to noncontrolling interests ( 1,209 ) 73 1,136

Acquisition of noncontrolling interests — —

Common dividends ( 63,481 ) — —

Preferred dividends ($ 0.5625 per share)

Balances December 31, 2018 935,577 ( 218,927 ) 5,637

Cumulative effect of the adoption of ASU 2016-16 3,772 ( 3,772 ) —

Balances at December 31, 2019 1,045,593 ( 214,003 ) 6,773

Net income 125,138 — —

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Pension and post-retirement plan adjustments, net of tax of ($ 2,245 )

— ( 5,559 ) —

Unrecognized net gains on available-for-sale securities (Note 18) — 578 —

Unrecognized net losses on available-for-sale securities (Note 19) — ( 7 ) —

Reclassification of currency translation from accumulated other comprehensive loss into net income (Note 6) — 216 —

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Preferred dividends ($ 0.5625 per share)

Cumulative effect of the adoption of ASU 2016-16 (Note 1) 3,772 ( 3,772 ) —

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

Balances at December 31, 2020 1,103,092 ( 182,397 ) 7,993

Net income 21,788 — —

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Reclassification of currency translation from accumulated other comprehensive loss into net income (Note 6) — 267 —

Income attributable to noncontrolling interests ( 1,061 ) ( 159 ) 1,220

(Income) loss attributable to noncontrolling interests ( 448 ) 92 356

Acquisition of noncontrolling interests in consolidated subsidiaries — — ( 8,349 )

Distributions to noncontrolling interests (Note 14) ( 5,632 ) — —

Common dividends ( 68,545 ) — —

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Balances December 31, 2021 $ 1,050,214 $ ( 149,140 ) $ —

*The balances at January 1, 2019 and the year ended December 31, 2020 and 2019 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

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

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Note 1— Significant Accounting Policies

Basis of Presentation— The consolidated financial statements of MSA Safety Incorporated ("MSA" or "the Company") are prepared in conformity with accounting principles generally accepted in the United States of America (U.S.

General Information and Basis of Presentation— The consolidated financial statements of MSA Safety Incorporated ("MSA" or "the Company") are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S.

GAAP") and require management to make certain judgments, estimates, and assumptions.

These may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements.

They also may affect the reported amounts of revenues and expenses during the period.

They also may affect the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates upon subsequent resolution of identified matters.

During the fourth quarter of 2021, the Company changed its method of accounting for certain inventory in the United States from the last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO") method.

All prior periods presented have been retrospectively adjusted to apply the new method of accounting.

See Note 4—Inventories for more information on the change in inventory accounting method.

Principles of Consolidation— The consolidated financial statements include the accounts of the Company and all subsidiaries.

Intercompany accounts and transactions are eliminated.

Noncontrolling Interests— Noncontrolling interests reflect noncontrolling shareholders’ investments in certain consolidated subsidiaries and their proportionate share of the income and accumulated other comprehensive income (loss) of those subsidiaries.

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 activities section of the Consolidated Statements of Cash Flows, but do not change the overall cash flow from operating activities for the prior years as previously reported.

During July 2021, the Company purchased the remaining noncontrolling interests in MSA (China) Safety Equipment Co., Ltd.

See Note 14—Acquisitions for further detail.

Currency Translation— The functional currency of all significant non-U.S.

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Income statement accounts are translated using the average exchange rates for the reporting period.

Translation adjustments for these companies are reported as a component of shareholders’ equity and are not included in income.

Translation adjustments for these subsidiaries are reported as a component of shareholders’ equity and are not included in net income.

Foreign currency transaction gains and losses are included in net income for the reporting period.

Cash Equivalents— Cash equivalents include temporary deposits with financial institutions and highly liquid investments with original maturities of 90 days or less.

Other highly liquid investments consist of money market funds and balances were $ 0.6 million and $ 17.9 million at December 31, 2020 and 2019, respectively.

Highly liquid investments consist of money market funds which were $ 8.7 million and $ 0.6 million at December 31, 2021 and 2020, respectively.

These funds are valued at net asset value (“NAV”).

The money market funds are required to price and transact at a NAV per share that fluctuates based upon the pricing of the underlying portfolio of securities and this requirement may impact the value of those fund shares.

These funds are required to price and transact at a NAV per share that fluctuates based upon the pricing of the underlying portfolio of securities.

This requirement may impact the value of these fund shares.

Restricted Cash— Restricted cash, which is designated for use other than current operations, is included in prepaid expenses and other current assets in the Consolidated Balance Sheets.

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These balances were used to support letter of credit balances.

Inventories— Inventories are stated at the lower of cost or net realizable value.

The majority of U.S.

inventories are valued on the last-in, first-out (LIFO) cost method which is used since this method provides better matching of costs and revenues.

Other inventories are valued at standard costs which approximate actual costs.

It is the Company's general policy to write-down any inventory identified as obsolete.

Additionally, it will write-down any inventory balance in excess of the last twenty-four months of consumption.

Investment securities — The Company’s investment securities, primarily fixed income, are classified as available-for-sale.

The securities are recorded at fair market value and reported in “Investments, short-term” in the accompanying Consolidated Balance Sheets with changes in fair market value recorded in other comprehensive income, net of tax.

Inventories— Inventories are stated at the lower of cost or net realizable value, which approximates current replacement cost.

Cost is determined using the FIFO method.

It is the Company's general policy to write-down any inventory balance in excess of the last 24 months of consumption and any inventory identified as obsolete.

Investment securities — The Company’s investment securities, primarily consisting of fixed income securities, are classified as available-for-sale.

The securities are recorded at fair market value and included in “Investments, short-term” in the accompanying Consolidated Balance Sheets with changes in fair market value recorded in other comprehensive income, net of tax.

The purchases and sales of these investments are classified as investing activities in the Consolidated Statements of Cash Flows.

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Ordinary repairs and maintenance are expensed as incurred.

Gains or losses on property dispositions are included in other income, net and the cost and related depreciation are removed from the accounts.

Gains or losses on property dispositions are included in other (income) expense, net and the cost and related accumulated depreciation are removed from the accounts.

Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was $ 33.0 million, $ 27.7 million and $ 26.5 million, respectively.

Properties, plants, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or asset groups may not be recoverable.

Software Development Costs— Software development costs consist primarily of costs incurred in software development and related personnel compensation to create, enhance and deploy the Company’s broad range of wireless technology and cloud-based computing safety services.

Properties, plant, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or asset groups may not be recoverable.

Software Development Costs— Software development costs consist of costs incurred to create, enhance and deploy the Company’s broad range of wireless technology and cloud-based computing safety services.

Software development costs, other than software development costs qualifying for capitalization, are expensed as incurred.

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During 2021, 2020 and 2019 there was approximately $ 8.1 million, $ 8.2 million and $ 5.0 million, respectively, of software development costs capitalized.

Lessee Arrangements — At the inception of our contracts, we determine if the contract is or contains a lease.

A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement.

We use our incremental borrowing rate ("IBR") at the recognition date in determining the present value of future payments for leases that do not have a readily determinable implicit rate.

Our IBR reflects a fully secured rate based on our credit rating, taking into consideration the repayment timing of the lease and any impacts due to the economic environment in which the lease operates.

Our lease payments are largely fixed.

Variable lease payments that depend on an index or a rate are included in the lease payments and are measured using the prevailing index or rate at the measurement date, with differences between the calculated lease payment and the actual lease payment being expensed in the period of the change.

Other variable lease payments, including utilities, consumption and common area maintenance as well as repairs, maintenance and mileage overages on vehicles, are expensed during the period incurred.

A majority of our real estate leases include options to extend the lease and options to early terminate the lease.

Leases with an early termination option generally involve a termination payment.

If we are reasonably certain to exercise an option to extend a lease, the extension period is included as part of the right-of-use asset and the lease liability.

Some of our leases contain residual value guarantees.

These are guarantees made to the lessor that the value of an underlying asset returned to the lessor at the end of a lease will be at least a specified amount.

Our leases do not contain restrictions or covenants that restrict us from incurring other financial obligations.

For our leases, we have elected to not apply the recognition requirements to leases of less than twelve months.

These leases are expensed on a straight-line basis and are not included within the Company's operating lease asset or liability.

Lease right-of-use assets and liabilities are recognized based on the present value of the fixed future lease payments over the lease term.

Operating leases are included in Operating lease right-of-use assets, net, Accrued restructuring and other current liabilities, and Noncurrent operating lease liabilities in our Consolidated Balance Sheets.

Finance leases are included in Property, plant and equipment, net, Accrued restructuring and other current liabilities, and Product liability and other noncurrent liabilities in our Consolidated Balance Sheets.

Lease expense for all operating leases is classified in Cost of products sold or Selling, general and administrative expense in the Consolidated Statements of Income.

For finance leases, the amortization of the right-of-use asset is included in depreciation and amortization, and the interest is included in interest expense.

Lessor Arrangements — The Company derives a portion of its revenue from various leasing arrangements where the Company is the lessor, primarily fire service contracts entered into by Bristol which was acquired in January 2021 (Note 14).

Such arrangements provide for monthly payments covering equipment provided, maintenance and interest.

These arrangements meet the criteria to be accounted for as sales-type leases under Accounting Standards Codification ("ASC") 842 and contain both lease and non-lease components.

For a component to be separate, the customer would be able to benefit from the right of use of the component separately or with other resources readily available to the customer and the right of the use is not highly dependent or highly interrelated with the other rights to use the other underlying assets or components.

Revenue from equipment provided is considered a lease component and recognized with point in time revenue recognition upon lease commencement.

Upon the recognition of such revenue, an asset is established for the investment in

sales-type leases.

Maintenance revenue, which is considered a non-lease component, and interest are recognized monthly over the lease term.

Lease revenues and interest earned by the Company, included in the Consolidated Statements of Income, were not material to any of the years ended December 31, 2021, 2020 and 2019.

Net investment in sales-type leases of $ 6.1 million and $ 27.2 million were included in Prepaid expenses and other current assets and Insurance receivable and other noncurrent assets, respectively, in the Consolidated Balance Sheets as of December 31, 2021.

The portion in Insurance receivable and other noncurrent assets at December 31, 2021 is expected to be collected over the next eight years .

Goodwill and Other Intangible Assets— Intangible assets with a finite useful life are amortized on a straight-line basis over their useful lives.

Indefinite lived intangible assets are assessed for possible impairment annually on October 1st or whenever circumstances change such that the recorded value of the asset may not be recoverable.

We performed a quantitative assessment of the indefinite lived trade name intangible asset as outlined in Accounting Standards Codification ("ASC") 350 by comparing the estimated fair value of the trade name intangible asset to its carrying value.

We performed a quantitative assessment of the indefinite lived trade name intangible asset as outlined in ASC 350 by comparing the estimated fair value of the trade name intangible asset to its carrying value.

We estimate the fair value using the relief from royalty income approach.

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The market approach methodology measures value through an analysis of peer companies.

The analysis entails measuring the multiples of EBITDA at which peer companies are trading.

The analysis entails measuring the multiples of earnings before interest, taxes, depreciation and amortization (" EBITDA") at which peer companies are trading.

There has been no impairment of our goodwill during the years ended December 31, 2021, 2020 or 2019.

Revenue Recognition— We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers , which we adopted on January 1, 2018, using the modified retrospective method.

Revenue Recognition— We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers .

Revenue from the sale of products is recognized when there is persuasive evidence of an arrangement and control passes to the customer, which generally occurs either when product is shipped to the customer or, in the case of most U.S.

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Sales, value add and other taxes collected with revenue-producing activities and remitted to governmental authorities are excluded from revenue.

Depending on the terms of the arrangement, we may defer revenue for which we have a future obligation, including training and extended warranty and technical services, until such time that the obligation has been satisfied.

We use an observable price, or a cost plus margin approach when one is not available, to determine the stand-alone selling price for separate performance obligations.

Depending on the terms of the arrangement, we may defer revenue for which we have a future obligation, including training, extended warranty, maintenance and technical services, until such time that the obligation has been satisfied.

We use an observable price, or a cost plus margin approach when one is not available, to determine the stand-alone selling price for

separate performance obligations.

We have elected to recognize the cost for shipping and handling as an expense when control of the product has passed to the customer.

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With respect to unasserted claims or assessments, management first determines whether it is probable that a claim or assessment may be asserted and then, if so, the degree of probability of an unfavorable outcome.

If an unfavorable outcome is probable, management assesses whether the amount of potential loss can be reasonably estimated and, if so, accrues the most reasonable estimate of the loss (or, if the estimate of the loss is a range, and not amount within the range is considered to be a better estimate than any other amount, the minimum amount in the range is recorded).

If an unfavorable outcome is probable, management assesses whether the amount of potential loss can be reasonably estimated and, if so, accrues the most reasonable estimate of the loss (or, if the estimate of the loss is a range, and no amount within the range is considered to be a better estimate than any other amount, the minimum amount in the range is recorded).

If an unfavorable outcome is reasonably possible but less than probable, or the amount of loss cannot be reasonably estimated, then the matter is disclosed and no liability is recorded.

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No individual customer represented more than 10% of our sales or receivables.

Recently Adopted and Recently Issued Accounting Standards— In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses.

This ASU introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including loans, held-to-maturity debt securities, loan commitments, financial guarantees and net investments in leases, as well as reinsurance and trade receivables.

This ASU was adopted on January 1, 2020, which did not have an impact on the consolidated financial statements.

In January 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("AOCI"), which gives entities the option to reclassify to retained earnings the tax effects resulting from the new tax reform legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the "Act") related to items in AOCI that the FASB refers to as having been stranded in AOCI.

The new guidance may be applied retrospectively to each period in which the effect of the Act is recognized in the period of adoption.

ASU2018-02 requires new disclosures regarding the Company’s accounting policy for releasing the tax effects in accumulated other comprehensive loss and allows the Company to reclassify the effect of remeasuring deferred tax liabilities and assets related to items within accumulated other comprehensive loss using the then newly enacted 21% federal corporate income tax rate.

The Company adopted ASU 2018-02 on January 1, 2019, and this adoption resulted in a reclassification that increased retained earnings by $ 3.8 million, with an offsetting increase to accumulated other comprehensive loss for the same amount.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which improves fair value disclosure requirements by removing disclosures that are not cost beneficial, clarifying disclosures’ specific requirements and adding relevant disclosure requirements.

This ASU was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and was adopted in 2020.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

The Company's adoption of ASU 2018-13 did not have an impact on the consolidated financial statements, but did change our disclosures.

In August 2018, the FASB issued ASU 2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans , which improves defined benefit disclosure requirements by removing disclosures that are not cost beneficial, clarifying disclosures’ specific requirements and adding relevant disclosure requirements.

This ASU is effective for fiscal years ending after December 15, 2020, and early adoption is permitted.

The amendments in this ASU are required to be applied on a retrospective basis to all periods presented.

The Company adopted ASU 2018-14 on December 31, 2020, which did not have an impact on the consolidated financial statements, but did change our disclosures.

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 Consolidated Balance Sheets.

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

(In thousands) December 31, 2021

Gross cash pool position $ 63,970

cash pool borrowings ( 58,008 )

Net cash pool position 5,962

Note 3— Restructuring Charges

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These charges were primarily related to our ongoing initiatives to drive profitable growth and right size our operations.

Americas segment restructuring charges of $ 4.6 million during the year ended December 31, 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.

International segment restructuring charges of $ 11.2 million during the year ended December 31, 2021, were primarily related to our initiatives to drive profitable growth and right size our operations.

Corporate segment restructuring charges of $ 0.6 million during the year ended December 31, 2021, were primarily related to programs to adjust our operations in response to current business conditions.

A total of 143 positions were eliminated in 2021.

There were 66 positions eliminated in the Americas segment, 71 in the International segment and 6 in the Corporate segment.

Americas segment restructuring charges of $ 4.7 million during the year ended December 31, 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.

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A total of 121 positions were eliminated in 2020.

There were 42 positions eliminated in the Americas segment, 76 in the International segment and 3 in the Corporate segment.

There were 42 positions eliminated in the Americas segment and 76 in the International segment 3 in the Corporate segment.

Americas segment restructuring charges of $ 0.5 million during the year ended December 31, 2019, were related to severance costs for staff reductions in our Latin America Region.

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A total of 99 positions were eliminated in 2019.

There were 12 positions eliminated in the Americas segment and 87 in the International segment.

Americas segment restructuring charges of $ 2.3 million during the year ended December 31, 2018, were related to severance costs for staff reductions in our Northern North America and Latin America Regions.

International segment restructuring charges of $ 5.6 million during the year ended December 31, 2018, were primarily related to severance costs for staff reductions associated with our ongoing initiatives to drive profitable growth in Europe.

Corporate segment restructuring charges of $ 5.3 million during the year ended December 31, 2018, related primarily to the legal and operational realignment of our U.S.

and Canadian operations.

A total of 45 positions were eliminated in 2018.

There were 8 positions were eliminated in the Americas segment, 34 in the International segment and 3 in the Corporate segment.

There were 12 positions were eliminated in the Americas segment and 87 in the International segment.

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

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Currency translation and other adjustments ( 0.1 ) ( 0.6 ) — ( 0.7 )

Cash payments ( 2.0 ) ( 4.9 ) ( 5.3 ) ( 12.2 )

Cash payments / utilization ( 0.6 ) ( 10.2 ) ( 0.6 ) ( 11.4 )

Reserve balances at December 31, 2019 $ 0.3 $ 5.9 $ — $ 6.2

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Reserve balances at December 31, 2021 $ 3.3 $ 17.4 $ 0.3 $ 21.0

Restructuring reserves at December 31, 2021 and 2020 are included in Accrued restructuring and other current liabilities in our Consolidated Balance Sheets.

Note 4— Inventories

During the fourth quarter of 2021, the Company changed its method of accounting for certain inventory in the United States from the LIFO method to the FIFO method.

The FIFO method of accounting for inventory is preferable because it conforms the Company's entire inventory to a single method of accounting and improves comparability with the Company's peers.

The following table sets forth the components of inventory:

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Raw materials and supplies 186,426 161,300

Inventories at current cost 244,966 227,130

LIFO valuation ( 47,147 ) ( 42,103 )

Total inventories 280,617 244,966

Inventories stated on the LIFO basis represent 48 % and 43 % of total inventories at December 31, 2020 and 2019, respectively.

We did not have any LIFO liquidations during the years ended December 31, 2020 and 2019.

As a result of the retrospective application of the change in accounting method, the following financial statement line items within the accompanying consolidated financial statements were adjusted, as follows:

December 31, 2021 December 31, 2020 December 31, 2019

(In thousands, except per share amounts) As computed under LIFO 1

As reported under FIFO Effect of Change As originally reported As Adjusted Effect of Change As originally reported As Adjusted Effect of Change

Consolidated Statements of Income

Cost of products sold $ 792,410 $ 784,834 $ ( 7,576 ) $ 757,775 $ 752,731 $ ( 5,044 ) $ 765,369 $ 763,352 $ ( 2,017 )

Income before income taxes $ 16,028 $ 23,604 $ 7,576 $ 163,103 $ 168,147 $ 5,044 $ 183,735 $ 185,752 $ 2,017

(Benefit) Provision for income taxes $ ( 40 ) $ 1,816 $ 1,856 $ 41,941 $ 43,009 $ 1,068 $ 46,086 $ 46,545 $ 459

Net income $ 16,068 $ 21,788 $ 5,720 $ 121,162 $ 125,138 $ 3,976 $ 137,649 $ 139,207 $ 1,558

Net income attributable to MSA Safety Incorporated $ 15,620 $ 21,340 $ 5,720 $ 120,101 $ 124,077 $ 3,976 $ 136,440 $ 137,998 $ 1,558

Earnings per share

Basic $ 0.39 $ 0.54 $ 0.15 $ 3.09 $ 3.19 $ 0.10 $ 3.52 $ 3.56 $ 0.04

Diluted $ 0.39 $ 0.54 $ 0.15 $ 3.05 $ 3.15 $ 0.10 $ 3.48 $ 3.52 $ 0.04

Consolidated Statements of Comprehensive Income

Net income $ 16,068 $ 21,788 $ 5,720 $ 121,162 $ 125,138 $ 3,976 $ 137,649 $ 139,207 $ 1,558

Total comprehensive income attributable to MSA Safety Incorporated $ 48,877 $ 54,597 $ 5,720 $ 151,707 $ 155,683 $ 3,976 $ 145,136 $ 146,694 $ 1,558

Consolidated Balance Sheets

Inventories $ 225,894 $ 280,617 $ 54,723 $ 197,819 $ 244,966 $ 47,147

Deferred tax liabilities $ 21,637 $ 33,337 $ 11,700 $ 10,916 $ 20,760 $ 9,844

Retained earnings $ 1,007,191 $ 1,050,214 $ 43,023 $ 1,065,789 $ 1,103,092 $ 37,303

Consolidated Statements of Cash Flows

Net income $ 16,068 $ 21,788 $ 5,720 $ 121,162 $ 125,138 $ 3,976 $ 137,649 $ 139,207 $ 1,558

Deferred income tax (benefit) provision $ ( 40,706 ) $ ( 38,850 ) $ 1,856 $ ( 3,322 ) $ ( 2,254 ) $ 1,068 $ 1,272 $ 1,731 $ 459

Inventories $ ( 10,251 ) $ ( 17,827 ) $ ( 7,576 ) $ ( 8,601 ) $ ( 13,645 ) $ ( 5,044 ) $ ( 23,246 ) $ ( 25,263 ) $ ( 2,017 )

1 Information presented as of and for the year ended December 31, 2021 reflect financial statement data had the LIFO inventory accounting method been applied for the year ended December 31, 2021.

As a result of the retrospective application of the change in accounting principle, the following financial statement line items within the unaudited interim 2021 and 2020 quarterly condensed consolidated financial statements were adjusted, as follows:

(unaudited) Three months ended

March 31, 2021 June 30, 2021 September 30, 2021

(In thousands, except per share amounts) As originally reported As adjusted Effect of Change As originally reported As adjusted Effect of Change As originally reported As adjusted Effect of Change

Consolidated Statements of Income

Cost of products sold $ 173,688 $ 173,643 $( 45 ) $ 188,374 $ 188,289 $( 85 ) $ 194,199 $ 190,758 $( 3,441 )

Income before income taxes $ 46,340 $ 46,385 $ 45 $ 35,171 $ 35,256 $ 85 $ 27,463 $ 30,904 $ 3,441

Provision for income taxes $ 9,740 $ 9,749 $ 9 $ 9,784 $ 9,808 $ 24 $ 8,640 $ 9,724 $ 1,084

Net income $ 36,600 $ 36,636 $ 36 $ 25,387 $ 25,448 $ 61 $ 18,823 $ 21,180 $ 2,357

Net income attributable to MSA Safety Incorporated $ 36,414 $ 36,450 $ 36 $ 25,125 $ 25,186 $ 61 $ 18,823 $ 21,180 $ 2,357

Earnings per share

Basic $ 0.93 $ 0.93 $ — $ 0.64 $ 0.64 $ — $ 0.48 $ 0.54 $ 0.06

Diluted $ 0.92 $ 0.92 $ — $ 0.64 $ 0.64 $ — $ 0.48 $ 0.54 $ 0.06

(unaudited) Three months ended

March 31, 2020 June 30, 2020 September 30, 2020

(In thousands, except per share amounts) As originally reported As adjusted Effect of Change As originally reported As adjusted Effect of Change As originally reported As adjusted Effect of Change

Consolidated Statements of Income

Cost of products sold $ 183,786 $ 183,697 $( 89 ) $ 172,853 $ 172,693 $( 160 ) $ 172,160 $ 170,254 $( 1,906 )

Income before income taxes $ 56,897 $ 56,986 $ 89 $ 47,824 $ 47,984 $ 160 $ 39,961 $ 41,867 $ 1,906

Provision for income taxes $ 13,095 $ 13,116 $ 21 $ 11,429 $ 11,468 $ 39 $ 11,727 $ 12,286 $ 559

Net income $ 43,802 $ 43,870 $ 68 $ 36,395 $ 36,516 $ 121 $ 28,234 $ 29,581 $ 1,347

Net income attributable to MSA Safety Incorporated $ 43,674 $ 43,742 $ 68 $ 36,055 $ 36,176 $ 121 $ 28,034 $ 29,381 $ 1,347

Earnings per share

Basic $ 1.12 $ 1.12 $ — $ 0.93 $ 0.93 $ — $ 0.72 $ 0.75 $ 0.03

Diluted $ 1.11 $ 1.11 $ — $ 0.92 $ 0.92 $ — $ 0.71 $ 0.74 $ 0.03

Note 5— Property, Plant, and Equipment

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Balance at beginning of period $ ( 115,552 ) $ ( 124,848 ) $ ( 115,517 ) $ — $ — $ —

Unrecognized net actuarial losses ( 6,322 ) ( 19,479 ) ( 37,977 ) — — —

Tax benefit 1,997 5,847 9,936 — — —

Total other comprehensive loss before reclassifications, net of tax ( 4,325 ) ( 13,632 ) ( 28,041 ) — — —

Unrecognized net actuarial gains (losses) 54,384 ( 6,322 ) ( 19,479 ) — — —

Tax (expense) benefit ( 12,804 ) 1,997 5,847 — — —

Total other comprehensive gain (loss) before reclassifications, net of tax 41,580 ( 4,325 ) ( 13,632 ) — — —

Amounts reclassified from accumulated other comprehensive loss into net income:

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Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income 16,676 13,621 8,073 — — —

Reclassification to retained earnings due to the adoption of ASU 2018-02 (Note 1) — ( 3,772 ) — — — —

Reclassification to retained earnings due to the adoption of ASU 2018-02 — — ( 3,772 ) — — —

Total other comprehensive income (loss) $ 58,256 $ 9,296 $ ( 9,331 ) $ — $ — $ —

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Balance at beginning of period $ ( 66,844 ) $ ( 89,161 ) $ ( 102,838 ) $ 372 $ 213 $ 286

Reclassification from accumulated other comprehensive loss into net income 216 (c)

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

267 216 15,261 (c)

Acquisition of noncontrolling interests in consolidated subsidiaries — — — ( 280 ) — —

Foreign currency translation adjustments ( 25,262 ) 22,101 ( 1,584 ) ( 92 ) 159 ( 73 )

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periodic pension and other post-retirement benefit costs (refer to Note 15—Pensions and Other Post-retirement Benefits).

(b) Reclassifications out of accumulated other comprehensive loss and into net income relate primarily to the approval of our

plan to close our South Africa affiliates and are included in Currency exchange losses, net, within the Consolidated Statements of Income.

(b) Included in Currency exchange losses, net, within the Consolidated Statements of Income.

(c) Reclassifications out of accumulated other comprehensive loss and into net income relate primarily to the approval of our

plan to close our South Africa affiliates.

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 at both December 31, 2020 and 2019 and 52,998 and 52,878 shares held in treasury at December 31, 2020 and 2019, respectively.

There are 71,340 shares issued at both December 31, 2021 and 2020 and 52,998 shares held in treasury at both December 31, 2021 and 2020.

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

There were 120 shares of preferred stock purchased and subsequently held in treasury during the year ended December 31, 2020, and no treasury purchases of preferred stock during the year ended December 31, 2019.

There were no shares of preferred stock purchased and subsequently held in treasury during the year ended December 31, 2021, and 120 shares of preferred stock purchased and subsequently held in treasury during the year ended December 31, 2020.

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

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

There were 175,000 shares repurchased during 2020 and 33,465 shares repurchased during 2019.

No shares were repurchased during 2018.

Under the program, there were no shares repurchased during 2021, 175,000 shares repurchased during 2020 and 33,465 shares were repurchased during 2019.

We do not have any other share repurchase programs.

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Stock Treasury

Balances January 1, 2018 62,081,391 ( 23,858,463 ) $ 194,953 $ ( 296,081 )

Balance at January 1, 2019 62,081,391 ( 23,554,868 ) $ 211,806 $ ( 296,390 )

Restricted stock awards — 96,893 ( 1,253 ) 1,253

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Performance stock forfeitures — — ( 215 ) —

Stock consideration in acquisition — — 921 —

Employee stock purchase plan — 5,895 564 77

Treasury shares purchased for stock compensation programs — ( 53,915 ) — ( 4,824 )

Treasury shares purchased — ( 87,811 ) — ( 9,301 )

Share repurchase program — ( 33,465 ) — ( 3,347 )

Balances December 31, 2019 62,081,391 ( 23,240,197 ) $ 229,127 $ ( 303,566 )

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Performance stock forfeitures — — ( 755 ) —

Stock consideration in acquisition — — 921 —

Employee stock purchase plan — 6,494 654 93

Treasury shares purchased for stock compensation programs — ( 87,811 ) — ( 9,301 )

Treasury shares purchased — ( 69,973 ) — ( 9,025 )

Share repurchase program — ( 175,000 ) — ( 20,113 )

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Performance stock expense — — 13,227 —

Performance stock forfeitures — — ( 755 ) —

Employee stock purchase plan — 5,730 772 83

Treasury shares purchased for stock compensation programs — ( 69,973 ) — ( 9,025 )

Share repurchase program — ( 175,000 ) — ( 20,113 )

Treasury shares purchased — ( 37,710 ) — ( 6,171 )

Acquisition of noncontrolling interests in consolidated subsidiaries — — ( 4,751 ) —

Balances December 31, 2021 62,081,391 ( 22,804,873 ) $ 260,121 $ ( 328,776 )

Note 8— Segment Information

On January 1, 2020, we restructured our business from six geographical operating segments 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") to better serve customer needs.

The Company has 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 operating segment change did not impact reportable segments as all changes were within the International reportable segment.

The Americas segment is comprised of our operations in North America and Latin America geographies.

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The Company's sales are allocated to each segment based primarily on the country destination of the end-customer.

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, strategic transaction costs 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 operating income (loss), adjusted operating margin, adjusted 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 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.

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Restructuring charges (Note 3) 16,433

Currency exchange losses, net (Note 5) 8,578

Currency exchange losses, net 216

Product liability expense (Note 20) 185,264

Strategic transaction costs (Note 13) 717

COVID-19 related costs 757

Acquisition related costs (a) (Note 14)

Adjusted operating income (loss) 202,496 73,279 ( 35,198 ) 240,577

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Adjusted EBITDA 233,732 86,997 ( 34,735 ) 285,994

Adjusted EBITDA % 26.0 % 17.6 %

Adjusted EBITDA margin % 25.7 % 17.7 %

Noncash items:

Pension expense 910 8,113 — — 9,023

Pension (income) expense $ ( 2,916 ) $ 5,790 $ — $ — 2,874

Total Assets 1,661,619 720,257 13,034 1,486 2,396,396

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Product liability expense (Note 20) 39,036

Strategic transaction costs (Note 13) 4,400

Acquisition related costs (a) (Note 14)

COVID-19 related costs 757

Adjusted operating income (loss) 205,304 71,140 ( 28,080 ) — 248,364

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Adjusted EBITDA 232,066 83,661 ( 27,689 ) — 288,038

Adjusted EBITDA % 27.5 % 15.0 %

Adjusted EBITDA margin % 26.5 % 17.7 %

Noncash items:

Pension (income) expense ( 6,111 ) 7,044 — — 933

Pension expense $ 910 $ 8,113 $ — $ — $ 9,023

Total Assets 1,273,302 617,698 29,761 ( 1,130 ) 1,919,631

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Product liability expense (Note 20) 26,619

Strategic transaction costs (Note 13) 421

Acquisition related costs (a) (Note 14)

Adjusted operating income (loss) 228,512 60,011 ( 35,597 ) — 252,926

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Adjusted EBITDA 253,203 72,949 ( 35,206 ) — 290,946

Adjusted EBITDA % 27.0 % 14.5 %

Adjusted EBITDA margin % 27.7 % 15.0 %

Noncash items:

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Capital expenditures 26,823 9,781 — — 36,604

*Americas & International operating income, adjusted operating income (loss), adjusted operating margin %, adjusted EBITDA, adjusted EBITDA margin % and segment assets in 2020 and 2019 were adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4.

(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 Consolidated Statements of Income.

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

(1) Reconciling items consist primarily of intercompany eliminations and items not directly attributable to operating segments.

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Breathing Apparatus $ 322,412 23 % $ 217,340 24 % $ 105,072 21 %

Fixed Gas & Flame Detection 287,414 21 % 158,924 18 % 128,490 27 %

Firefighter Helmets & Protective Apparel 162,207 12 % 133,653 15 % 28,554 6 %

Fixed Gas & Flame Detection (a)

299,018 21 % 182,515 20 % 116,503 24 %

Firefighter Helmets & Protective Apparel (b)

203,914 15 % 137,086 15 % 66,828 14 %

Portable Gas Detection 162,761 12 % 109,543 12 % 53,218 11 %

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Total $ 1,401,981 100 % $ 915,118 100 % $ 486,863 100 %

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

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

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

Note 9— Earnings per Share

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Basic weighted-average shares outstanding 39,173 38,885 38,653

Stock options and other stock compensation 401 536 599

Stock options and other stock-based awards 276 401 536

Diluted weighted-average shares outstanding 39,449 39,286 39,189

Antidilutive stock options — — —

Earnings per share:

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Diluted $ 0.54 $ 3.15 $ 3.52

* Year ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

Note 10— Income Taxes

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Components of income before income taxes

income $ 104,682 $ 126,552 $ 85,234

(loss) income $ ( 59,746 ) $ 109,726 $ 128,569

income 83,350 58,421 57,183

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( 2,015 ) ( 1,102 ) ( 5,818 )

Total deferred provision (benefit) ( 3,322 ) 1,272 ( 4,065 )

Total deferred (benefit) provision ( 38,850 ) ( 2,254 ) 1,731

Provision for income taxes $ 1,816 $ 43,009 $ 46,545

The Company elected to treat Global Intangible Low Taxed Income, which was effective in 2018 for the Company, as a period cost.

The Tax Cuts and Jobs Act of 2017 ("the Act"), which was signed into law on December 22, 2017, has resulted in significant changes to the U.S.

corporate income tax system including reducing the U.S.

corporate rate to 21 % starting in 2018.

The Act also creates a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S.

subsidiaries.

On December 22, 2017, SAB 118 was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Act.

In accordance with SAB 118, the Company calculated its best estimate of the impact of the Act and recorded income tax expense of $ 19.8 million during the fourth quarter of 2017, the period in which the legislation was enacted.

Of this amount, $ 18.0 million related to the one-time transition tax and the remaining $ 1.8 million was related to the revaluation of U.S.

deferred tax assets and liabilities.

The Company previously considered the earnings in non-U.S.

subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes.

As as result of the Act, among other things, the Company determined it will repatriate earnings for all non-U.S.

subsidiaries with cash in excess of working capital needs.

The Company has estimated the associated tax to be $ 1.9 million, offset partially by $ 0.7 million of foreign tax credits.

As of December 31, 2018, the Company had completed its accounting for all of the enactment-date income tax effects of the Act.

Accordingly, we reduced our estimate for the one-time transition tax by $ 2.0 million and increased our estimate for the revaluation of U.S.

deferred tax assets and liabilities by $ 2.5 million and a $ 2.0 million increase associated with prepaid taxes for updated regulations related to the Act.

During 2018, the Company recorded $ 1.8 million of foreign income tax reserves related to the legal and operational realignment of our U.S., Canadian and European operations.

During 2020, an additional reserve of $ 1.1 million was recorded related to the operating realignment of our European operations.

*Year ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

On June 10, 2021 the United Kingdom ("U.K.") 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.

Reconciliation of the U.S.

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Nondeductible compensation 15.3 % 3.4 % 1.9 %

Valuation allowances 7.0 % 0.8 % 0.4 %

Employee share-based payments ( 18.3 ) % ( 3.9 ) % ( 2.6 ) %

Taxes on non-U.S.

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( 7.0 ) % 2.0 % 2.9 %

Valuation allowances 0.8 % 0.4 % 0.5 %

Research and development credit ( 5.3 ) % ( 1.2 ) % ( 0.6 ) %

Foreign exchange on entity closures ( 0.4 ) % — % 1.8 %

Taxes on non-U.S.

income - U.S., Canadian & European reorganization — % 0.7 % 0.3 %

Foreign exchange on entity closures — % 1.8 % — %

tax reform — % — % 1.6 %

Manufacturing deduction credit — % — % ( 1.0 ) %

Employee share-based payments ( 3.9 ) % ( 2.6 ) % ( 1.6 ) %

Research and development credit ( 1.2 ) % ( 0.6 ) % ( 0.9 ) %

Other 6.3 % 0.2 % 0.5 %

Effective income tax rate 7.7 % 25.6 % 25.1 %

*Year ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

Components of deferred tax assets and liabilities:

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Property, plant and equipment ( 17,088 ) ( 14,649 )

Employee benefits ( 8,985 ) —

Inventory ( 1,264 ) ( 10,591 )

Other ( 2,434 ) ( 1,897 )

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Net deferred taxes $ 1,920 $ 14,905

At December 31, 2020, we had net operating loss carryforwards of approximately $ 31.0 million, all of which are in non-U.S.

tax jurisdictions.

*December 31, 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

At December 31, 2021, we had net operating loss carryforwards of approximately $ 39.8 million.

All net operating loss carryforwards without a valuation allowance may be carried forward for a period of at least six years .

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Adjustments for tax positions related to prior years 733 2,950

Settlements ( 3,211 ) —

Statute expiration ( 859 ) ( 402 )

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Examinations of our U.S.

federal returns have been completed through 2013, with the 2014, 2015 and 2016 tax years closed by statute.

federal returns have been completed through 2018.

Various state and foreign income tax returns may be subject to tax audits for periods after 2015.

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We issue Treasury shares for stock option exercises and grants of restricted stock and performance stock.

Please refer to Note 6 for further information regarding stock compensation share issuance.

Please refer to Note 7—Capital Stock for further information regarding stock compensation share issuance.

As of December 31, 2021, there were 714,999 and 87,051 shares, respectively, reserved for future grants under the management and non-employee directors’ equity incentive plans.

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Outstanding January 1, 2019 735,001 $ 43.79

Granted 23,285 43.54

Exercised ( 198,535 ) 38.16

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Outstanding December 31, 2019 559,656 45.78 552,682

Granted 23,285 43.54

Exercised ( 274,704 ) 45.31

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Performance adjustments 5,357 88.45

Forfeited ( 6,765 ) 111.60

Unvested at December 31, 2021 193,335 $ 129.86

The 2020 performance adjustments relate to to awards that exceeded the performance targets when vested during 2020, including the final number of shares issued, which were 135.7 % of the target award based on actual results during the three year performance period.

The 2021 performance adjustments above relate primarily to 2018 performance unit awards that exceeded the performance targets when vested during 2021, including the final number of shares issued, which were 105.4 % of the target award based on actual results during the three year performance period.

During the years ended December 31, 2021, 2020 and 2019, the total intrinsic value of stock options exercised (the difference between the market price on the date of exercise and the option price paid to exercise the option) was $ 13.0 million, $ 24.6 million and $ 14.6 million, respectively.

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

$ 20,000 $ 40,000

2016 Senior Notes payable through 2031, 3.40 %, net of debt issuance costs

74,203 74,926

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

Senior revolving credit facility maturing in 2026, net of debt issuance costs 324,060 212,231

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Long-term debt $ 597,651 $ 287,157

On September 7, 2018, the Company entered into a Third Amended and Restated Credit Agreement associated with our senior revolving credit facility which extended the term of the revolving credit facility through September 2023 and increased the capacity to $ 600.0 million.

Under this 2018 Amended and Restated Credit 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) 0.0%, (ii) the Prime Rate, (ii) the Federal Funds Open Rate plus one half of one percent ( 0.5 %), (iii) the Overnight Bank Funding Rate, plus one half of one percent ( 0.5 %), or (iv) 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 the elected rate (BASE or LIBOR).

The facility contemplates the discontinuance of LIBOR and includes an option to replace LIBOR with a comparable rate, or if a comparable rate cannot be found, the base rate would be utilized.

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 1.22 % as of December 31, 2021.

At December 31, 2020, $ 385.5 million of the existing $ 600.0 million senior revolving credit facility was unused, including letters of credit.

On January 22, 2016, the Company entered into a Second Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement (the "Notes"), pursuant to which MSA issued notes in an aggregate original principal amount of £ 54.9 million (approximately $ 75.1 million at December 31, 2020).

The Notes are repayable in annual installments of £ 6.1 million (approximately $ 8.3 million at December 31, 2020), commencing January 22, 2023, with a final payment of any remaining amount outstanding on January 22, 2031.

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

On September 7, 2018, the Company entered into a first amendment of such amended and restated agreement associated with these Notes.

Under the Second Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement, as amended ("Amended Note Purchase Agreement"), the Company may request from time to time during a three-year period ending September 7, 2021, the issuance of up to $ 150 million of additional senior notes.

On January 4, 2019, the Company entered into an amended and restated agreement associated with the New York Life master note facility dated June 2, 2014.

Under this Amended and Restated Master Note Facility ("Amended Note Facility"), the Company may request from time to time during a three-year period ending January 4, 2022, the issuance of up to $ 150 million of additional senior promissory notes.

As of the Form 10-K filing date, there are no promissory notes outstanding.

Both the Amended Note Purchase Agreement and Amended Note Facility require MSA 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 net leverage ratio not to exceed 3.50 to 1.00, except during an acquisition period in which case the consolidated net leverage ratio shall not exceed 4.00 to 1.00;

At December 31, 2021, $ 572.4 million of the existing $ 900.0 million senior revolving credit facility was unused, including letters of credit issued under the facility.

The facility also provides an accordion feature that allows the Company to access an additional $ 400.0 million of capacity pending approval by MSA’s board of directors and from the bank group.

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

(“Prudential”).

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

As of December 31, 2021, the Company had issued £ 54.9 million (approximately $ 74.3 million at December 31, 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 Amended Note Purchase Agreement and Amended Note Facility both contain negative covenants limiting the ability of MSA 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 MSA's or its subsidiaries' business.

However, the covenants contained in the Amended Note Facility do not apply until promissory notes are issued.

The revolving credit facilities require the Company to comply with specified financial covenants.

In addition, the revolving credit facilities contain negative covenants limiting the ability of the Company and its subsidiaries to enter into specified transactions.

The Company was in compliance with all covenants at December 31, 2020.

Approximate maturities on our long-term debt over the next five years are $ 20.0 million in 2021, none in 2022, $ 221.6 million in 2023, $ 8.3 million in 2024, $ 8.3 million in 2025 and $ 50.1 million thereafter.

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.

All credit facilities exclude the subsidiary, Mine Safety Appliances Company, LLC.

On July 1, 2021, the Company acquired Bacharach 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 consolidated financial statements.

Management continues to evaluate the Company’s other outstanding U.S.

LIBOR based contracts to determine whether reference rate modifications are necessary.

As of December 31, 2021, MSA was in full compliance with the restrictive covenants under its various credit agreements.

Approximate maturities on our long-term debt over the next five years are none in 2022, $ 8.3 million in 2023, $ 8.3 million in 2024, $ 8.3 million in 2025, $ 334.4 million in 2026 and $ 241.1 million thereafter.

The Company had outstanding bank guarantees and standby letters of credit with banks as of December 31, 2021, totaling $ 10.9 million, of which $ 1.5 million relate to the senior revolving credit facility.

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Net balance at January 1 $ 443,272 $ 436,679

Additions (Note 13) — 19,917

Additions and measurement period adjustments (Note 14) 199,454 —

Currency translation ( 5,868 ) 6,593

Net balance at December 31 $ 636,858 $ 443,272

At December 31, 2020, goodwill of $ 293.2 million and $ 150.1 million related to the Americas and International reporting segments, respectively.

At December 31, 2021, goodwill of $ 448.7 million and $ 188.2 million related to the Americas and International reportable segments, respectively.

Changes in intangible assets, net of accumulated amortization, during the years ended December 31, 2021 and 2020, were as follows:

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Net balance at January 1 $ 161,051 $ 171,326

Additions and measurement period adjustments (Note 13) 121 11,100

Additions (Note 14) 164,426 121

Amortization expense ( 16,814 ) ( 11,570 )

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

Intangible asset amortization expense over the next five years is expected to be approximately $ 12 million in 2021, $ 10 million in 2022 and $ 9 million in 2023, 2024 and 2025.

Intangible asset amortization expense over the next five years is expected to be approximately $ 20 million in 2022, $ 18 million in 2023 - 2025 and $ 17 million in 2026.

Note 14— Acquisitions

Acquisition of Sierra Monitor Corporation

On May 20, 2019, we acquired 100 % of the common stock in Sierra Monitor Corporation ("SMC") in an all-cash transaction valued at $ 33.2 million, net of cash acquired.

Additionally, we converted outstanding stock options and restricted stock units into MSA stock options and restricted stock units which resulted in additional goodwill of approximately $ 0.9 million based on the fair value of the awards identified as transaction consideration.

Based in Milpitas, California, in the heart of Silicon Valley, SMC is a leading provider of fixed gas and flame detection instruments and Industrial Internet of Things solutions that connect and help protect high-value infrastructure assets.

The acquisition enables MSA to accelerate its strategy to enhance worker safety and accountability through the use of cloud technology and wireless connectivity.

This acquisition enhances a key focus of the Company's recently established Safety io subsidiary, launched in 2018 primarily to leverage the capabilities of its portable gas detection portfolio as it relates to cloud connectivity.

The transaction was funded through borrowings on our unsecured senior revolving credit facility.

SMC operating results are included in our consolidated financial statements from the acquisition date as part of the Americas reportable segment.

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

We finalized the purchase price allocation as of December 31, 2019.

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

(In millions) May 20, 2019

Acquisition of Bacharach

On July 1, 2021, we acquired 100 % of the common stock of 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.

This acquisition expanded MSA’s gas detection portfolio and leverages MSA’s product and manufacturing expertise into new markets.

Bacharach's operating results are included in our 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)

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Customer relationships 123.0

Acquired technology 1.4

Developed technology 20.5

Trade name 15.0

Goodwill 194.5

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Net assets acquired $ 341.1

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

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

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

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

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

The valuation methods used to determine the fair value of intangible assets included the relief from royalty method for technology related intangible assets;

the excess earnings approach for customer relationships using customer inputs and contributory charges;

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 sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, and working capital changes.

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

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 acquired in the SMC transaction will be amortized over a period of 10 years and the technology will be amortized over 5 years.

Estimated future amortization expense related to the identifiable intangible assets is approximately $ 1.0 million in each of the next five years.

The step up to fair value of acquired inventory as part of the purchase price allocation totaled $ 1.6 million which was fully recognized as amortization expense during the year ended December 31, 2019.

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 $ 9.0 million annually for 2022 through 2026, and $ 109.0 million thereafter.

The step up to fair value of acquired inventory as part of the purchase price allocation totaled $ 2.3 million.

The amortization of the inventory step up was included in Cost of products sold in the Consolidated Statements 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 SMC with our operations.

Goodwill of $ 19.9 million related to the SMC acquisition has been recorded in the Americas reportable segment and is non-deductible for tax purposes.

Our results for the year ended December 31, 2020, include SMC sales and net income of $ 21.2 million and $ 2.8 million, respectively.

Excluding purchase accounting amortization for intangible assets of $ 1.2 million, adjusted earnings for SMC for the year ended December 31, 2020 was $ 3.8 million.

Our operating results for the year ended December 31, 2019 include SMC sales and net loss of $ 13.5 million and $ 3.3 million, respectively.

Excluding purchase accounting amortization for intangible assets and inventory step up of $ 2.6 million, transaction costs of $ 2.2 million, and stock compensation cost related to converted options and excess performance on PSUs related to the acquisition of $ 1.5 million, adjusted earnings for SMC for the year ended December 31, 2019 was $ 1.5 million.

The following unaudited pro forma information presents our combined results as if the SMC acquisition had occurred at the beginning of 2018.

Goodwill of $ 194.5 million related to the Bacharach acquisition has been recorded, with $ 155.6 million and $ 38.9 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 in an all-cash transaction valued at $ 63.0 million, net of cash acquired.

Bristol, which is headquartered in the 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 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, 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 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.

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)

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

Total assets acquired 88.9

Total liabilities assumed ( 12.6 )

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 in the 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.

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 $ 0.5 million annually in 2022 and 2023, $ 0.4 million annually during 2024 through 2026, and $ 3.5 million thereafter.

The step up to fair value of acquired inventory as part of the purchase price allocation totaled $ 1.5 million.

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

Goodwill of $ 4.9 million related to the Bristol acquisition has been recorded in the International reportable segment and is non-deductible for tax purposes.

The operating results of the Bristol and Bacharach acquisitions have been included in our consolidated financial statements from their acquisition dates through December 31, 2021.

Our results for the year ended December 31, 2021, include net sales and net loss of $ 67.2 million and $ 6.3 million, respectively.

The following unaudited pro forma information presents our combined results as if the Bristol and Bacharach acquisitions had occurred at the beginning of 2020.

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

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

There were no material transactions between MSA and SMC during the periods presented that are required to be eliminated.

Intercompany transactions between SMC companies during the periods presented have been eliminated in the unaudited pro forma combined financial information.

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

Pro forma financial information (Unaudited)

There were no material transactions between MSA and Bristol or Bacharach during the periods presented that are required to be eliminated.

The unaudited pro forma 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 combined financial information (Unaudited)

Year Ended December 31,

(In millions, except per share amounts) 2021 2020

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Diluted earnings per share 0.26 2.91

The unaudited pro forma 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 acquisitions been completed as of the date and for the periods presented, and should not be taken as representative of our consolidated results of operations or financial condition following the acquisitions.

In addition, the unaudited pro forma combined financial information is not intended to project the future financial position or results of operations of the combined company.

The unaudited pro forma financial information was prepared using the acquisition method of accounting for both acquisitions under existing U.S.

*Year ended December 31, 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

The unaudited pro forma 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 consolidated results of operations or financial condition following the acquisition.

In addition, the unaudited pro forma combined financial information is not intended to project the future financial position or result of operations of the combined company.

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting under existing U.S.

MSA has been treated as the acquirer.

Our results include strategic transaction costs of $ 0.7 million, $ 4.4 million, and $ 0.4 million for the years ended December 31, 2020, 2019, and 2018.

Our results include $ 7.1 million of Bristol and Bacharach transaction costs.

Including transaction costs, total acquisition related costs were $ 15.9 million, $ 0.7 million, and $ 4.4 million for the years ended December 31, 2021, 2020, and 2019.

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

Acquisition of Noncontrolling Interest

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

from our partner in China for $ 19.0 million, inclusive of a $ 5.6 million distribution.

Note 15— Pensions and Other Post-retirement Benefits

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defined benefit pension plan until they become Medicare-eligible.

Information pertaining to defined benefit pension plans and other post-retirement benefits plans is provided in the following tables:

Defined benefit pension plan and other post-retirement benefits plan information is provided in the following tables:

Pension Benefits Other Benefits

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Plan amendments ( 243 ) ( 430 ) — —

Actuarial losses (a)

Actuarial (gains) losses (a)

( 10,277 ) 54,606 ( 1,518 ) 5,284

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Settlements ( 3,190 ) ( 506 ) — —

Transfers (b)

( 19,312 ) — — —

Acquisitions 26,231 — 926 —

Currency translation ( 8,863 ) 12,296 — —

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Participant contributions 287 396 345 370

Acquisitions 25,476 — — —

Settlements ( 1,365 ) ( 506 ) — —

Benefits paid ( 25,117 ) ( 24,496 ) ( 3,021 ) ( 2,692 )

Transfers (b)

( 19,312 ) — — —

Administrative expenses paid ( 67 ) ( 172 ) — —

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Unrecognized transition losses — 4 — —

Unrecognized prior service credit 1,717 1,572 ( 1,125 ) ( 1,519 )

Unrecognized prior service credit (cost) 1,186 1,717 ( 767 ) ( 1,125 )

Unrecognized net actuarial losses 95,674 169,028 13,570 16,686

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Accumulated Benefit Obligations for all Defined Benefit Plans $ 608,436 $ 619,167 $ — $ —

(a) Actuarial losses for both periods relate primarily to the decrease in discount rates used in measuring plan obligations as of December 31, 2020 and 2019, respectively.

(a) Actuarial (gains) losses for both periods relate primarily to the increase/decrease in discount rates used in measuring plan obligations as of December 31, 2021 and 2020, respectively.

(b) Transfers consist of Netherlands defined benefit plan conversion to a defined contribution plan.

Pension Benefits Other Benefits

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Recognized net actuarial losses 17,458 15,799 10,159 1,597 1,145 869

Settlement/curtailment loss 1,135 (b)

Settlement/curtailment (gain) loss ( 2,234 ) 1,135 (b)

Net periodic benefit cost (a)

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Information for pension plans with an accumulated benefit obligation in excess of plan assets:

Pension Benefits Other Benefits

Pension Benefits

(In thousands) 2021 2020

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pension plans, our investment objective is generally met through the use of pooled investment funds and insurance contracts.

The fair values of the Company's pension plan assets are determined using net asset value (NAV) as a practical expedient, or by information categorized in the fair value hierarchy level based on the inputs used to determine fair value, as further discussed in Note 18—Fair Value Measurements.

The fair values of the Company's pension plan assets are determined using NAV as a practical expedient, or by information categorized in the fair value hierarchy level based on the inputs used to determine fair value, as further discussed in Note 19—Fair Value Measurements.

The fair values at December 31, 2021, were as follows:

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Pooled investment funds consist of mutual and collective investment funds that invest primarily in publicly traded equity and fixed income securities.

Pooled investment funds are valued using the net asset value (NAV) provided by the administrator of the fund.

Pooled investment funds are valued using the NAV provided by the administrator of the fund.

The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, divided by the number of shares outstanding.

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Total (before tax effects) $ 1,280

We expect to make net contributions of $ 7.7 million to our pension plans in 2021, which are primarily associated with statutorily required plans in the International segment.

We expect to make net contributions of $ 7.7 million to our pension plans in 2022, which are primarily associated with statutorily required plans in the International reporting segment.

For the 2021 beginning of the year measurement purposes (net periodic benefit expense), a 5.9 % increase in the costs of covered health care benefits was assumed, decreasing by 0.2 % for each successive year to 4.5 % in 2029 and thereafter.

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Note 16— Other Income, Net

Year ended December 31,

(In thousands) 2021 2020 2019

Interest income $ 3,498 $ 4,411 $ 4,588

Components of net periodic benefit cost other than service cost (Note 15) $ 8,321 $ 1,680 $ 7,997

(Loss) Gain on asset dispositions, net ( 236 ) ( 371 ) 646

Interest income 3,256 3,498 4,411

Loss on asset dispositions, net ( 788 ) ( 236 ) ( 371 )

Other, net 793 742 ( 943 )

Total other income, net $ 11,582 $ 5,684 $ 11,094

During the years ended December 31, 2020, 2019 and 2018, we recognized $ 3.5 million, $ 4.4 million and $ 4.6 million of income, respectively, related to interest earned on cash balances, short-term investments and notes receivables from insurance companies.

During the years ended December 31, 2021, 2020 and 2019, we recognized $ 3.3 million, $ 3.5 million and $ 4.4 million of other income, respectively, related to interest earned on cash balances, short-term investments and notes receivables from insurance companies.

Please refer to Note 20—Contingencies for further discussion on the Company's notes receivables from insurance companies.

Note 17— Leases

Effective January 1, 2019, we implemented ASU 2016-02, Leases , which amended authoritative guidance on leases and is codified in ASC Topic 842.

The amended guidance requires lessees to recognize most leases on their balance sheets as right-of-use assets along with corresponding lease liabilities.

The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

The FASB's authoritative guidance provides companies with the option to apply this ASU to new and existing leases within the scope of the guidance as of the beginning of the period of adoption.

We elected this transition method of applying the new standard and have recognized right-of-use assets and lease liabilities as of January 1, 2019.

Prior period amounts were not adjusted and will continue to be reported under the accounting standards in effect for those periods.

The adoption of this standard had a material impact on our Consolidated Balance Sheet as of December 31, 2020 due to the capitalization of right-of-use assets and lease liabilities associated with our current operating leases in which we are the lessee.

Adoption of the new standard resulted in the recording of additional right-of-use assets and lease liabilities of approximately $ 54 million, respectively, as of January 1, 2019.

Upon adoption of the new standard on January 1, 2019, we elected the package of practical expedients provided under the guidance.

The practical expedient package applies to leases that commenced prior to adoption of the new standard and permits companies not to reassess whether existing or expired contracts are or contain a lease, the lease classification and any initial direct costs for existing leases.

We have elected to not separate the lease and non-lease components within our lease contracts.

Therefore, all fixed costs associated with the lease are included in the right-of-use asset and the lease liability.

These costs often relate to the payments for a proportionate share of real estate taxes, insurance, common area maintenance and other operating costs in addition to base rent.

We did not elect the hindsight practical expedient.

At the inception of our contracts we determine if the contract is or contains a lease.

A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement.

We use our incremental borrowing rate ("IBR") at the recognition date in determining the present value of future payments for leases that do not have a readily determinable implicit rate.

Lease right-of-use assets and liabilities are recognized based on the present value of the fixed future lease payments over the lease term.

Lease expense for all operating leases is classified in Cost of products sold or Selling, general and administrative expense in the Consolidated Statements of Income.

For finance leases, the amortization of the right-of-use asset is included in depreciation and amortization, and the interest is included in interest expense.

As a lessee, we have various operating lease agreements primarily related to real estate, vehicles and office and plant equipment.

Our lease payments are largely fixed.

Other variable lease payments, including utilities, consumption and common area maintenance as well as repairs, maintenance and mileage overages on vehicles, are expensed during the period incurred.

Variable lease costs were immaterial for the twelve months ended December 31, 2020.

A majority of our real estate leases include options to extend the lease and options to early terminate the lease.

Leases with an early termination option generally involve a termination payment.

If we are reasonably certain to exercise an option to extend a lease, the extension period is included as part of the right-of-use asset and the lease liability.

Some of our leases contain residual value guarantees.

These are guarantees made to the lessor that the value of an underlying asset returned to the lessor at the end of a lease will be at least a specified amount.

Our leases do not contain restrictions or covenants that restrict us from incurring other financial obligations.

We do not have any significant leases not yet commenced.

For our leases, we have elected to not apply the recognition requirements to leases of less than twelve months.

These leases are expensed on a straight-line basis and are not included within the Company's operating lease asset or liability.

Lease costs associated with leases of less than twelve months were immaterial for the three and twelve months ended December 31, 2020.

We did not have any lease transactions with related parties.

Other Information

Twelve Months Ended December 31,

(In thousands, except percentage amounts) 2020 2019

The components of lease expense were as follows:

Year Ended December 31,

(In thousands, except percentage and year amounts) 2021 2020

Operating lease cost recognized as rent expense $ 14,230 $ 12,997

Total lease cost $ 14,230 $ 12,997

Other Information

Cash paid for amounts included in the measurement of lease liabilities:

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 21,857 $ 10,737

December 31, 2020 December 31, 2019

Right-of-use assets obtained in acquisitions $ 4,795 $ —

Weighted-average remaining lease term (in years):

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Operating leases 2.49 % 3.89 %

Rent expense was approximately $ 13.0 million in 2020, $ 13.4 million in 2019 and $ 12.5 million in 2018.

Rent expense was $ 14.2 million, $ 13.0 million and $ 13.4 million in 2021, 2020 and 2019, respectively.

We did not have any lease transactions with related parties.

We did not have any significant leases not yet commenced.

At December 31, 2021, future lease payments under operating leases were as follows:

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After 2026 25,801

Total future minimum operating lease payments $ 66,485

Imputed interest 8,920

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Noncurrent operating lease liabilities $ 40,706

(a) Included in "Warranty reserve and other current liabilities" on the Consolidated Balance Sheet.

(a) Included in Accrued restructuring and other current liabilities on the Consolidated Balance Sheet.

Note 18— Derivative Financial Instruments

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

At December 31, 2020, the notional amount of open forward contracts was $ 96.0 million and there was no unrealized gain/loss on these contracts.

At December 31, 2021, the notional amount of open forward contracts was $ 99.0 million and there were no unrealized gains/losses on these contracts.

All open forward contracts will mature during the first quarter of 2022.

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The following table presents the Consolidated Statements of Income location and impact of derivative financial instruments:

(In thousands) Income Statement Location (Gain) Loss Recognized in Income

(In thousands) Consolidated Statements of Income Location Loss (Gain)

Recognized in Income

Derivatives not designated as hedging instruments:

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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.

The Company and its subsidiaries 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.

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

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

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

The reserve for single incident product liability claims, which includes asserted single incident product liability claims and IBNR single incident product liability claims, was $ 1.4 million at December 31, 2020 and $ 3.1 million at December 31, 2019.

Single incident product liability expense was a benefit of $ 1.7 million for the year ended December 31, 2020 compared to a benefit of $ 0.5 million and expense of $ 2.0 million for the years ended December 31, 2019 and 2018, respectively.

Management has established reserves for the single incident product liability claims of its various subsidiaries, including, asserted single incident product liability claims and incurred but not reported ("IBNR") single incident claims.

To determine the reserves, Management makes reasonable estimates of losses for single incident claims based on the number and characteristics of asserted claims, historical experience, sales volumes, expected settlement costs, and other relevant information.

The reserve for single incident product liability claims was $ 1.4 million at both December 31, 2021 and December 31, 2020.

Single incident product liability expense was nominal for the year ended December 31, 2021 compared to a benefit of $ 1.7 million and $ 0.5 million for the years ended December 31, 2020 and 2019, 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.

The reserve has not been discounted to present value and does not include future amounts which will be spent to defend the claims.

Cumulative trauma product liability claims.

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.

Cumulative trauma product liability claims involve alleged exposures to potentially 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 1,675 lawsuits comprised of 4,554 claims as of December 31, 2021.

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

The products at issue were manufactured many years ago and are not currently offered by MSA LLC.

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

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

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

2021 2020 2019

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Asserted claims, end of period 4,554 2,878 2,456

The increase in the number of claims in 2020 is largely attributable to an increase in claims alleging injuries from exposure to coal mine dust.

More than half of the total open lawsuits at December 31, 2020 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 $ 221.5 million, including $ 7.8 million for claims settled but not yet paid and related defense costs, as of December 31, 2020 and $ 167.5 million, including $ 3.0 million for claims settled but not yet paid and related defense costs, as of December 31, 2019.

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

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

Management has established a reserve for MSA LLC's potential exposure to cumulative trauma product liability claims.

MSA LLC's total cumulative trauma product liability reserve was $ 409.8 million, including $ 2.5 million for claims settled but not yet paid and related defense costs, as of December 31, 2021 and $ 221.5 million, including $ 7.8 million for claims settled but not yet paid and related defense costs, as of December 31, 2020.

The reserve includes estimated amounts related to asserted and IBNR asbestos, silica, and coal dust claims expected to be resolved through the year 2074.

The reserve has not been discounted to present value and does not include future amounts which will be spent to defend the claims.

Defense costs are recognized in the Consolidated Statements of Income as incurred.

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 Consolidated Balance Sheets and the remainder, $ 186.2 million, is recorded in the Product liability and other noncurrent liabilities line.

At December 31, 2019, $ 17.4 million of the total reserve for cumulative trauma product liability claims was recorded in the Insurance and product liability line within other current liabilities in the Consolidated Balance Sheet and the remainder, $ 150.1 million, was recorded in the Product liability and other noncurrent liabilities line.

Total cumulative trauma liability losses were $ 77.8 million, $ 36.1 million, and $ 63.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Uninsured cumulative trauma product liability losses which were included in Product liability and other operating expense on the Consolidated Statements of Income during the years ended December 31, 2020, 2019 and 2018, were $ 39.0 million, $ 27.1 million and $ 43.8 million, 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.

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;

• 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;

• No material changes in law occur with respect to cumulative trauma product liability claims including no material state or federal tort reform actions.

At December 31, 2021, $ 46.7 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 Consolidated Balance Sheet and the remainder, $ 363.1 million, is recorded in the Product liability and other noncurrent liabilities line.

At December 31, 2020, $ 35.3 million of the total reserve for cumulative trauma product liability claims is recorded in the Insurance and product liability line within other current liabilities in the 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 $ 228.2 million, $ 77.8 million, and $ 36.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, and related to updates to our cumulative trauma product liability reserve in each year as well as the defense of cumulative trauma product liability claims.

Uninsured cumulative trauma product liability losses, which were included in Product liability and other operating expense on the Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019, were $ 185.3 million, $ 39.0 million and $ 27.1 million, respectively, and represent the total cumulative trauma product liability losses net of any estimated insurance receivables as discussed below.

MSA LLC's cumulative trauma product liability reserve is based upon a reasonable estimate of MSA LLC’s current and potential future liability for cumulative trauma product liability claims, in accordance with applicable accounting principles.

To develop a reasonable estimate of MSA LLC’s potential exposure to cumulative trauma product liability claims, management performs an annual comprehensive 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 MSA LLC’s historical claims experience, 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, and if warranted, management reviews changes with an outside valuation consultant.

Adjustments to the reserve for the year ended December 31, 2021 totaled $ 219.0 million.

These adjustments were largely a result of newly filed claims experienced during the year and in particular, the number of newly filed coal claims, which were well in excess of historical experience.

Numerous additional factors, data points, and developments were analyzed during the annual review process.

The estimate of MSA LLC’s potential liability for cumulative trauma product liability claims, and the corresponding reserve, are based upon numerous assumptions derived from MSA LLC’s historical experience.

Those assumptions include the incidence of applicable diseases in the general population, the number of claims that may be asserted against MSA LLC in the future, the years in which such claims may be asserted, the counsel asserting those claims, the percentage of claims resolved through settlement, the types and severity of illnesses alleged by claimants to give rise to their claims, the venues in which the claims are asserted, and numerous other factors, which influence how many claims may be brought against MSA LLC, whether those claims ultimately are resolved for payment, and at what values.

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

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

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

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

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

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

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

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

As a result of all of these factors, it is typically unclear until late into litigation the extent of loss that will be experienced on account of any particular claim, or inventories of claims.

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

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

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

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

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

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 Consolidated Statement of Income.

These adjustments could materially impact our consolidated financial statements in future periods.

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

As a result of such uncertainties, MSA LLC’s actual claims experience may differ in one or more respects from the assumptions used in establishing the reserve, and there can be no assurance that the actuarial models employed will accurately predict future experience.

MSA LLC’s experience in future periods may vary from the reserve currently established, and MSA LLC may ultimately incur losses in excess of presently recorded liabilities.

Any adjustments as a result of this experience could materially impact our consolidated financial statements in future periods.

Insurance Receivable and Notes Receivable, Insurance Companies

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Insurance receivables at December 31, 2021 totaled $ 130.2 million, of which $ 8.6 million is reported in Prepaid expenses and other current assets in the Consolidated Balance Sheet and $ 121.6 million is reported in Insurance receivable and other noncurrent assets.

Insurance receivables at December 31, 2019, totaled $ 63.8 million, of which $ 7.6 million was reported

in Prepaid expenses and other current assets in the Consolidated Balance Sheet and $ 56.2 million was 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 Consolidated Balance Sheet and $ 85.0 million was reported in Insurance receivable and other noncurrent assets.

The vast majority of the $ 130.2 million insurance receivables balance at December 31, 2021, is attributable to reimbursement believed to be due under the terms of signed Coverage-In-Place Agreements and a portion of this amount represents the estimated recovery of IBNR amounts not yet incurred.

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Additions 43.5 39.0

Collections and other adjustments ( 5.8 ) ( 17.0 )

Collections ( 10.3 ) ( 5.8 )

Balance end of period $ 130.2 $ 97.0

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Balance end of period $ 48.5 $ 52.3

The vast majority of the insurance receivables balances at December 31, 2020, is attributable to reimbursement under the terms of signed agreements with insurers and are 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 vast majority of the insurance receivables balances at both December 31, 2021 and 2020, is attributable to reimbursement under the terms of signed agreements with insurers and is not currently subject to litigation.

The collectability of MSA LLC's insurance receivables and notes receivables is regularly evaluated and the Company believes 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 ("Globe") and MSA 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.

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

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

Product Warranty

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Note 21— Quarterly Financial Information (Unaudited)

(In thousands, except earnings per share) 1st 2nd 3rd 4th Year

(In thousands, except per share amounts) 1st 2nd 3rd 4th Year

Net sales $ 308,428 $ 341,289 $ 340,197 $ 410,268 $ 1,400,182

Gross profit 134,785 153,000 149,439 178,124 615,348

Net income attributable to MSA Safety Incorporated 43,674 36,055 28,034 12,338 120,101

Earnings per share (1)

Net income (loss) attributable to MSA Safety Incorporated 36,450 25,186 21,180 ( 61,476 ) 21,340

Earnings (loss) per share (1)

Basic $ 0.93 $ 0.64 $ 0.54 $ ( 1.57 ) $ 0.54

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Diluted 1.11 0.92 0.74 0.38 3.15

*Certain amounts have been adjusted to reflect the retrospective application of the Company's change in inventory accounting method, as described in Notes 1 and 4 to the consolidated financial statements.

(1) Per share amounts are calculated independently for each period presented;

therefore, the sum of the quarterly per share amounts may not equal the per share amounts for the year.

Note 21 - Subsequent Event

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 $ 62.4 million, net of cash acquired.

There is no contingent consideration.

Bristol, which is headquartered in the 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 leader in fire service PPE products while providing an avenue to expand its business in the U.K.

and key European markets.

Our results for the year ended December 31, 2020 include transaction and integration costs of $ 0.5 million related to the acquisition.

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

Bristol operating results will be included in our financial statements from the acquisition date.

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

At the date of issuance of these financial statements, the initial purchase accounting was not complete.

We are also unable to provide pro forma revenues and earnings of the combined entity due to the limited time since the acquisition.

This information will be included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data