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Item 1. Financial Statements

2022-04-29 compared with 2021-10-29 · 258 added, 482 removed, 460 unchanged (62% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

Three Months Ended March 31,

(In thousands, except per share amounts) 2022 2021

5 unchanged sentences

Restructuring charges (Note 3) 2,189 1,308

Currency exchange losses (gains), net (Note 6) 100 2,759 ( 359 ) 3,821

Currency exchange losses (gains), net 3,271 ( 2,099 )

Product liability expense (Note 18) 2,772 2,796

2 unchanged sentences

Other income, net ( 6,344 ) ( 4,213 )

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

Total other income, net ( 2,726 ) ( 2,302 )

Income before income taxes 45,394 46,385

7 unchanged sentences

Dividends per common share $ 0.44 $ 0.43

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

*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

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

MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

Three Months Ended March 31,

(In thousands) 2022 2021

2 unchanged sentences

Foreign currency translation adjustments (Note 6) 5,892 ( 10,223 )

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

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

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

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

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

Pension and post-retirement plan actuarial gains, net of tax (Note 6) 2,264 3,712

Unrealized losses on available-for-sale securities (Note 6) ( 9 ) ( 5 )

Total other comprehensive income (loss), net of tax 8,147 ( 6,516 )

Comprehensive income 43,689 30,120

1 unchanged sentence

Comprehensive income attributable to MSA Safety Incorporated $ 43,689 $ 29,899

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

*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

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

MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

(In thousands) March 31, 2022 December 31, 2021

Cash and cash equivalents $ 147,300 $ 140,895

Trade receivables, less allowance for credit loss of $ 6,171 and $ 5,789

8 unchanged sentences

Property, plant and equipment, net (Note 5) 205,995 207,793

Operating lease assets, net 50,731 53,451

Operating lease right-of-use assets, net 49,887 50,178

Prepaid pension cost (Note 15) 169,842 163,283

3 unchanged sentences

Notes receivable, insurance companies, noncurrent (Note 18) 44,893 44,626

Net investment in sales-type leases, noncurrent (Note 14) 27,202 —

Insurance receivable (Note 18) and other noncurrent assets 105,252 89,062

Insurance receivables (Note 18) and other noncurrent assets 152,664 158,649

$ 2,415,777 $ 2,396,396

4 unchanged sentences

Income taxes payable (Note 10) 14,361 5,366

Other current liabilities 113,084 116,128

Accrued restructuring and other current liabilities 112,031 113,451

Total current liabilities

1 unchanged sentence

Long-term debt, net (Note 12) 591,393 597,651

Pensions and other employee benefits 199,486 208,068

Pensions (Note 15) and other employee benefits 187,818 189,973

Noncurrent operating lease liabilities 40,219 40,706

10 unchanged sentences

Retained earnings 1,068,464 1,050,214

Total MSA Safety Incorporated shareholders' equity

824,177 801,898

Noncontrolling interests (Note 19) — 7,993

Total shareholders’ equity

2 unchanged sentences

$ 2,415,777 $ 2,396,396

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

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

MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2022 2021

7 unchanged sentences

Pension contributions (Note 15) ( 1,914 ) ( 1,923 )

Currency exchange (gains) losses, net ( 359 ) 3,821

Currency exchange losses (gains), net 3,271 ( 2,099 )

Product liability expense (Note 18) 2,772 2,796

14 unchanged sentences

Property disposals and other investing — 35

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

Cash Flow From (Used in) Investing Activities 1,051 ( 52,509 )

Financing Activities

1 unchanged sentence

Payments on long-term debt (Note 12) ( 258,000 ) ( 318,000 )

Debt issuance costs ( 2,080 ) —

Cash dividends paid ( 17,292 ) ( 16,820 )

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

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

Company stock purchases (Note 7) ( 3,659 ) ( 5,348 )

Exercise of stock options (Note 7) 51 1,790

Employee stock purchase plan (Note 7) 452 390

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

Cash Flow (Used In) From Financing Activities ( 15,900 ) 31,639

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 3,361 ) ( 720 )

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

Increase in cash, cash equivalents and restricted cash 6,313 24,026

Beginning cash, cash equivalents and restricted cash 141,438 161,034

1 unchanged sentence

Supplemental cash flow information:

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

Cash and cash equivalents $ 147,300 $ 184,728

Restricted cash included in prepaid expenses and other current assets 451 332

Total cash, cash equivalents and restricted cash $ 147,751 $ 185,060

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

*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

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

MSA SAFETY INCORPORATED

5 unchanged sentences

(Loss) Noncontrolling Interests

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

Net income 28,234 — —

Foreign currency translation adjustments — 15,520 —

Pension and post-retirement plan adjustments, net of tax of $ 1,111

Unrealized net gains on available-for-sale securities (Note 17) — ( 74 ) —

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

Common dividends ($ 0.43 per share)

( 16,761 ) — —

Preferred dividends ($ 0.5625 per share)

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

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

Net income 18,823 — —

Foreign currency translation adjustments — ( 13,868 ) —

Pension and post-retirement plan adjustments, net of tax of $ 1,095

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

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

— — ( 8,349 )

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

Common dividends ($ 0.44 per share)

( 17,245 ) — —

Preferred dividends ($ 0.5625 per share)

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

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

2 unchanged sentences

Pension and post-retirement plan adjustments, net of tax of $ 1,084

Unrealized net gains on available-for-sale securities (Note 17) — ( 12 ) —

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

Unrecognized net losses on available-for-sale securities (Note 17) — ( 5 ) —

Income attributable to noncontrolling interests ( 186 ) ( 35 ) 221

Common dividends ($ 1.28 per share)

( 49,781 ) — —

Common dividends ( 16,810 ) — —

Preferred dividends ($ 0.5625 per share)

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

Balances March 31, 2021 $ 1,122,722 $ ( 188,948 ) $ 8,214

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

2 unchanged sentences

Pension and post-retirement plan adjustments, net of tax of $ 1,016

Unrealized net losses on available-for-sale securities (Note 17) — ( 15 ) —

Income attributable to noncontrolling interests ( 448 ) 92 356

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

— — ( 8,349 )

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

Common dividends ($ 1.31 per share)

( 51,292 ) — —

Unrecognized net losses on available-for-sale securities (Note 17) — ( 9 ) —

Common dividends ( 17,282 ) — —

Preferred dividends ($ 0.5625 per share)

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

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

Balances March 31, 2022 $ 1,068,464 $ ( 140,993 ) $ —

*Prior periods have been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

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

MSA SAFETY INCORPORATED

2 unchanged sentences

The condensed consolidated financial statements of MSA Safety Incorporated and its subsidiaries ("MSA" or "the Company") are unaudited.

These condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company's results.

These unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company's results.

Intercompany accounts and transactions have been eliminated.

The results reported in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year.

The December 31, 2020, Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Balance Sheet, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S.

The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year.

The December 31, 2021, Balance Sheets data was derived from the audited Consolidated Balance Sheets, but does not include all disclosures required by accounting principles generally accepted in the United States of America ("U.S.

This Form 10-Q report should be read in conjunction with MSA's Form 10-K for the year ended December 31, 2021, which includes all disclosures required by U.S.

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

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

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.

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 effects of the change in accounting method from LIFO to FIFO have been retrospectively applied to all periods presented in all sections of this Quarterly Report.

Refer to Note 4—Inventory of the consolidated financial statements in Part II Item 8 of our 2021 Form 10-K for further information related to the change in accounting principle.

Note 2— Cash and Cash Equivalents

5 unchanged sentences

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

(In thousands) September 30, 2021

(In thousands) March 31, 2022

Gross cash pool position $ 64,304

1 unchanged sentence

Net cash pool position 2,265

Note 3— Inventories

The following table sets forth the components of inventory:

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

Finished products $ 102,426 $ 81,048

Work in process 9,863 2,618

Raw materials and supplies 187,878 161,300

Inventories at current cost 300,167 244,966

LIFO valuation ( 50,718 ) ( 47,147 )

Total inventories $ 249,449 $ 197,819

Note 3— Restructuring Charges

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

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

A mericas segment restructuring charges of $ 2.1 million during the nine months ended September 30, 2021, were primarily related to integration related activities and costs associated with our global Fixed Gas & Flame Detection manufacturing footprint optimization as well as programs to adjust our operations in response to current business conditions.

During the three and nine months ended September 30, 2020, we recorded restructuring charges of $ 7.6 million and $ 18.5 million, respectively.

International segment restructuring charges of $ 13.7 million during the nine months ended September 30, 2020, were primarily related to severance costs for staff reductions and footprint optimization associated with our ongoing initiatives to drive profitable growth.

Americas segment restructuring charges of $ 3.7 million during the nine months ended September 30, 2020, were primarily related to costs associated with our global Fixed Gas & Flame Detection manufacturing footprint optimization as well as programs to adjust our operations in response to current business conditions.

During the three months ended March 31, 2022, we recorded restructuring charges of $ 2.2 million.

International segment restructuring charges of $ 2.0 million during the three months ended March 31, 2022, were primarily related to the expansion of our European Shared Service Center in Warsaw, Poland.

Americas segment restructuring charges of $ 0.4 million during the three months ended March 31, 2022, were primarily related to programs to adjust our operations in response to current business conditions.

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

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

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

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

2 unchanged sentences

Restructuring charges 4.6 11.2 0.6 16.4

Currency translation and other adjustments ( 0.1 ) 0.1 — —

Currency translation ( 0.1 ) ( 0.2 ) — ( 0.3 )

Cash payments / utilization ( 4.0 ) ( 12.9 ) ( 0.7 ) ( 17.6 )

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

Restructuring charges 2.1 10.0 0.1 12.2

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

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

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

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

Restructuring charges (releases) 0.4 2.0 ( 0.2 ) 2.2

Currency translation — ( 0.2 ) — ( 0.2 )

Cash payments ( 1.1 ) ( 2.1 ) — ( 3.2 )

Reserve balances at March 31, 2022 $ 2.6 $ 17.1 $ 0.1 $ 19.8

Restructuring reserves are included in Accrued restructuring and other current liabilities in the accompanying unaudited Condensed Consolidated Balance Sheets.

Note 4— Inventories

The following table sets forth the components of inventory:

(In thousands) March 31, 2022 December 31, 2021

Finished products $ 97,004 $ 87,657

Work in process 15,562 6,534

Raw materials and supplies 209,036 186,426

Total inventories $ 321,602 $ 280,617

Note 5— Property, Plant and Equipment

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

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

(In thousands) March 31, 2022 December 31, 2021

Land $ 5,070 $ 5,131

Finance lease assets 1,057 —

Buildings 138,610 136,272

8 unchanged sentences

Three Months Ended

September 30, Three Months Ended

September 30,

(In thousands) 2021 2020 2021 2020

Pension and other post-retirement benefits (a)

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

Amounts reclassified from accumulated other comprehensive loss into net income:

Amortization of prior service credit (Note 15) ( 24 ) ( 52 ) — —

Recognized net actuarial losses (Note 15) 4,820 4,221 — —

Tax benefit ( 1,095 ) ( 1,111 ) — —

Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income 3,701 3,058 — —

Balance at end of period $ ( 104,482 ) $ ( 115,598 ) $ — $ —

Available-for-sale securities

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

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

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

Foreign currency translation

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

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

— — ( 280 ) —

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

Balance at end of period $ ( 84,825 ) $ ( 91,396 ) $ — $ 620

(a) Reclassifications out of accumulated other comprehensive loss and into net income are included in the computation of net periodic pension and other post-retirement benefit costs (refer to Note 15—Pensions and Other Post-retirement Benefits).

MSA Safety Incorporated Noncontrolling Interests

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

March 31, Three Months Ended

(In thousands) 2022 2021 2022 2021

13 unchanged sentences

Balance at beginning of period $ ( 91,839 ) $ ( 66,844 ) $ — $ 582

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

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

— — ( 280 ) —

Foreign currency translation adjustments 5,892 ( 10,258 ) — 35

1 unchanged sentence

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

Note 7— Capital Stock

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

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

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

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

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

There are 71,340 shares issued and 52,998 shares held in treasury at March 31, 2022.

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

There were no treasury purchases of preferred stock shares during both the three months ended March 31, 2022 and 2021.

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

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

No shares have been issued as of March 31, 2022.

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

There were 62,081,391 shares issued as of December 31, 2021.

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

There were 39,207,440 and 39,067,902 shares outstanding at September 30, 2021, and December 31, 2020, respectively.

No new shares were issued during the three months ended March 31, 2022, or 2021.

There were 39,335,816 and 39,276,518 shares outstanding at March 31, 2022 and December 31, 2021, respectively.

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

1 unchanged sentence

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

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

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

There were 22,873,951 and 23,013,489 Treasury Shares at September 30, 2021, and December 31, 2020, respectively.

During the three months ended March 31, 2022 and 2021, no shares were repurchased under this program.

There were 22,745,575 and 22,804,873 Treasury Shares at March 31, 2022 and December 31, 2021, respectively.

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

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

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

There were 28,366 and 32,650 Treasury Shares issued for these purposes during the three months ended March 31, 2022 and 2021, respectively.

Common stock activity is summarized as follows:

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

(In thousands) Common

Stock Treasury

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

Stock compensation expense 2,867 — ( 1,309 ) —

Restricted and performance stock awards ( 159 ) 159 ( 50 ) 50

Stock options exercised 354 155 2,276 954

Treasury shares purchased — ( 625 ) — ( 439 )

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

( 4,751 ) — — —

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

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

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

(In thousands) Common

6 unchanged sentences

Treasury shares purchased — ( 3,659 ) — ( 5,348 )

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 19)

( 4,751 ) — — —

Employee stock purchase program 409 43 338 52

Share repurchase program — — — ( 20,113 )

Balance at end of period $ 262,627 $ ( 331,160 ) $ 245,887 $ ( 329,615 )

4 unchanged sentences

Americas, International, and Corporate.

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

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

The International segment is comprised of our operations of all geographies outside of the Americas.

2 unchanged sentences

Adjusted operating income (loss), adjusted operating margin, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA margin are the measures used by the chief operating decision maker to evaluate segment performance and allocate resources.

Adjusted operating income (loss) is defined as operating income excluding restructuring charges, currency exchange gains (losses), product liability expense, acquisition related costs, including acquisition related amortization, and COVID-19 related costs, consisting of a one-time bonus for essential manufacturing employees and adjusted operating margin is defined as adjusted operating income (loss) divided by segment sales to external customers.

Adjusted operating income (loss) is defined as operating income excluding restructuring charges, currency exchange gains (losses), product liability expense, acquisition related costs, including acquisition related amortization and 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.

2 unchanged sentences

Further, the Company's measure of adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin may not be comparable to similarly titled measures of other companies.

Adjusted operating income (loss) and adjusted EBITDA on a consolidated basis is presented in the following table to reconcile the segment operating performance measure to operating income as presented on the Consolidated Statement of Income.

The accounting principles applied at the operating segment level in determining operating income (loss) are generally the same as those applied at the consolidated financial statement level.

Adjusted operating income (loss) and adjusted EBITDA on a consolidated basis is presented in the following table to reconcile the segment operating performance measures to the most directly comparable GAAP measure, operating income, as presented on the unaudited Condensed Consolidated Statements of Income.

The accounting principles applied at the operating segment level in determining operating income (loss) are generally the same as those applied at the unaudited condensed consolidated financial statements level.

Sales and transfers between operating segments are accounted for at market-based transaction prices and are eliminated in consolidation.

1 unchanged sentence

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

Three Months Ended September 30, 2021

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

Operating income 28,961

Restructuring charges (Note 4) 3,853

Currency exchange losses, net (Note 6) 100

Product liability expense (Note 18) 10,688

Acquisition related costs (a) (Note 19)

Adjusted operating income (loss) 44,364 12,599 ( 6,010 ) 50,953

Adjusted operating margin % 19.4 % 11.3 %

Depreciation and amortization (a)

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

Adjusted EBITDA margin % 22.9 % 14.5 %

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Sales to external customers $ 225,648 $ 105,044 $ — $ 330,692

1 unchanged sentence

Restructuring charges (Note 3) 2,189

Currency exchange gains, net (Note 6) ( 359 )

Currency exchange losses, net 3,271

Product liability expense (Note 18) 2,772

2 unchanged sentences

Adjusted operating margin % 23.2 % 8.6 %

Depreciation and amortization (a)

Depreciation and amortization 11,829

Adjusted EBITDA 60,796 12,362 ( 7,486 ) 65,672

1 unchanged sentence

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

Three Months Ended September 30, 2020

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

Operating income 41,149

Restructuring charges (Note 4) 7,603

Currency exchange losses, net (Note 6) 2,759

Product liability expense (Note 18) 2,077

Acquisition related costs (a) (Note 19)

Adjusted operating income (loss) 40,898 15,658 ( 2,927 ) 53,629

Adjusted operating margin % 21.0 % 14.2 %

Depreciation and amortization (a)

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

Adjusted EBITDA margin % 24.4 % 17.1 %

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Sales to external customers $ 208,340 $ 100,088 $ — $ 308,428

1 unchanged sentence

Restructuring charges (Note 3) 1,308

Currency exchange losses, net (Note 6) 3,821

Currency exchange gains, net ( 2,099 )

Product liability expense (Note 18) 2,796

Acquisition related costs (a) (Note 19)

COVID-19 related costs 757

Acquisition related costs (a)

Adjusted operating income (loss) 45,195 8,792 ( 6,526 ) 47,461

Adjusted operating margin % 21.7 % 8.8 %

Depreciation and amortization (a)

Depreciation and amortization 10,504

Adjusted EBITDA 52,229 12,165 ( 6,429 ) 57,965

Adjusted EBITDA margin % 25.1 % 12.2 %

*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

Adjustments were made to Americas and International.

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

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

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

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

Total sales by product group was as follows:

Three Months Ended September 30, 2021 Consolidated Americas International

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

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

Fixed Gas & Flame Detection (a)

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

Firefighter Helmets & Protective Apparel (b)

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

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

Industrial Head Protection 36,764 11 % 28,982 13 % 7,782 7 %

Fall Protection 28,223 8 % 17,743 8 % 10,480 9 %

33,415 10 % 19,182 8 % 14,233 14 %

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

Nine Months Ended September 30, 2021 Consolidated Americas International

Three Months Ended March 31, 2022 Consolidated Americas International

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

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

Fixed Gas & Flame Detection (a)

$ 83,077 25 % $ 54,621 24 % $ 28,456 27 %

Firefighter Helmets & Protective Apparel (b)

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

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

Industrial Head Protection 107,615 11 % 82,913 13 % 24,702 7 %

Fall Protection 85,098 9 % 51,093 8 % 34,005 10 %

108,684 10 % 61,980 10 % 46,704 15 %

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

Three Months Ended September 30, 2020 Consolidated Americas International

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

Breathing Apparatus 70,951 22 % 50,398 22 % 20,553 20 %

Fixed Gas & Flame Detection 70,038 23 % 39,411 20 % 30,627 28 %

Firefighter Helmets & Protective Apparel 48,461 15 % 33,476 15 % 14,985 14 %

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Total $ 330,692 100 % $ 225,648 100 % $ 105,044 100 %

Nine Months Ended September 30, 2020 Consolidated Americas International

Three Months Ended March 31, 2021 Consolidated Americas International

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

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Total $ 308,428 100 % $ 208,340 100 % $ 100,088 100 %

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

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

(a) Fixed Gas & Flame Detection includes sales from the Bacharach, Inc.

and its affiliated companies ("Bacharach") acquisition for periods following July 1, 2021 (Americas and International).

Please refer to Note 14 - Acquisitions.

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

Note 9— Earnings per Share

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Amounts attributable to MSA Safety Incorporated common shareholders:

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

Three Months Ended March 31,

(In thousands, except per share amounts) 2022 2021

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Diluted $ 0.90 $ 0.92

*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

Note 10— Income Taxes

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

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

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

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

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

tax on foreign dividends.

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

The Company's effective tax rate for the first quarter of 2022 was 21.7 % which differs from the United States of America ("U.S.") federal statutory rate of 21% primarily due to state income taxes, partially offset by tax benefits on certain share-based payments.

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

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

On June 10, 2021 the United Kingdom ("U.K.") Parliament announced royal assent for Bill No.

12, on the Finance Act of 2021.

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

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

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

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

The Company's effective tax rate for the nine months ended September 30, 2020 was 25.1 % which differs from the U.S.

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

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

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

At March 31, 2022, the Company had a gross liability for unrecognized tax benefits of $ 5.0 million.

The Company has recognized tax benefits associated with these liabilities of $ 2.5 million at March 31, 2022.

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

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

The Company's liability for accrued interest related to uncertain tax positions was $ 1.3 million at September 30, 2021.

The Company's liability for accrued interest related to uncertain tax positions was $ 0.9 million at March 31, 2022.

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

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Stock compensation expense is as follows:

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

Three Months Ended March 31,

(In thousands) 2022 2021

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

$ 13,562 $ 3,042

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

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

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

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

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

Stock compensation expense $ 3,730 $ 3,293

Income tax expense 914 794

Stock compensation expense, net of tax $ 2,816 $ 2,499

A summary of stock option activity for the three months ended March 31, 2022, follows:

Shares Weighted Average

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Exercised ( 1,056 ) 48.95

Forfeited ( 210 ) 43.75

Outstanding at September 30, 2021 225,554 46.34

Exercisable at September 30, 2021 224,980 $ 46.33

Outstanding at March 31, 2022 160,645 45.45

Exercisable at March 31, 2022 160,461 $ 45.44

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

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

A summary of restricted stock activity for the three months ended March 31, 2022, follows:

Shares Weighted Average

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Forfeited ( 2,341 ) 133.70

Unvested at September 30, 2021 120,600 $ 126.30

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

Unvested at March 31, 2022 129,044 $ 141.23

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

The final number of shares to be issued for performance stock units granted in the first quarter of 2022 may range from 0 % to 200 % of the target award based on achieving the specified performance targets over the performance period plus an additional modifier based on total shareholder return ("TSR") over the performance period.

The following weighted average assumptions were used in estimating the fair value of the performance stock units granted in the first quarter of 2021.

The following weighted average assumptions were used in estimating the fair value of the performance stock units granted for the three months ended March 31, 2022.

Fair value per unit $ 143.60

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Expected dividend yield is based on the most recent annualized dividend divided by the one year average closing share price.

Expected volatility is based on the ten year historical volatility using daily stock prices.

Expected volatility is based on the three year historical volatility preceding the grant date using daily stock prices.

Expected life is based on historical stock option exercise data.

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

A summary of performance stock unit activity for the three months ended March 31, 2022, follows:

Shares Weighted Average

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Vested ( 55,447 ) 101.38

Unvested at September 30, 2021 193,335 $ 129.86

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

Forfeited ( 1,233 ) 71.72

Unvested at March 31, 2022 195,670 $ 146.50

The performance adjustments above relate primarily to the final number of shares issued for the 2019 performance unit awards which vested in the first quarter of 2022 at 64.2 % of the target award based on both cumulative performance against the EBITDA margin and revenue growth targets and MSA's TSR during the three-year performance period.

Note 12— Long-Term Debt

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

2010 Senior Notes payable through 2021, 4.00 %

$ 20,000 $ 20,000

(In thousands) March 31, 2022 December 31, 2021

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

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

99,695 99,694

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

99,695 99,694

Senior revolving credit facility maturing in 2026, net of debt issuance costs 327,951 324,060

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

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

At September 30, 2021, $ 576.9 million of the existing $ 900.0 million senior revolving credit facility was unused, including letters of credit issued under the facility.

The Company has a weighted average revolver interest rate of 1.40 % as of March 31, 2022.

At March 31, 2022, $ 568.6 million of the existing $ 900.0 million senior revolving credit facility was unused, including letters of credit issued under the facility.

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

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

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

The Company also had issued $ 100.0 million of 4.00 % Series A Senior Notes, of which the final $ 20.0 million was repaid on October 13, 2021.

As of March 31, 2022, the Company had issued £ 54.9 million (approximately $ 72.2 million at March 31, 2022) of 3.4 % Series B Senior Notes due January 22, 2031.

Maturities of this note are £ 6.1 million (approximately $ 8.0 million) due January 22, 2023 with annual maturities of £ 6.1 million through January 2031.

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

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

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

The Company had outstanding bank guarantees and standby letters of credit with banks as of September 30, 2021, totaling $ 10.5 million, of which $ 1.5 million relate to the Revolving Credit Facility.

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

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

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

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

for $ 329.4 million, net of cash acquired.

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

On July 1, 2021, the Company acquired Bacharach in a transaction valued at $ 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.

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

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

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

As such, the Company does not anticipate the change in reference rates will have an impact on the Company’s unaudited condensed 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 March 31, 2022, the Company was in full compliance with the restrictive covenants under its various credit agreements.

The Company had outstanding bank guarantees and standby letters of credit with banks as of March 31, 2022, totaling $ 8.9 million, of which $ 1.5 million relate to the senior revolving credit facility.

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

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

At March 31, 2022, the Company has $ 0.5 million of restricted cash in support of these arrangements.

Note 13— Goodwill and Intangible Assets

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

Changes in goodwill during the three months ended March 31, 2022 were as follows:

(In thousands) Goodwill

Balance at January 1, 2022 $ 636,858

Additions (Note 19) 197,446

Currency translation ( 5,037 )

Balance at September 30, 2021 $ 636,113

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

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

Balance at March 31, 2022 $ 631,821

At March 31, 2022, goodwill of $ 448.6 million and $ 183.2 million related to the Americas and International reportable segments, respectively.

Changes in intangible assets, net of accumulated amortization, during the three months ended March 31, 2022, were as follows:

(In thousands) Intangible Assets

Net balance at January 1, 2022 $ 306,948

Additions (Note 19) 164,440

Amortization expense ( 5,288 )

Currency translation ( 1,935 )

Net balance at September 30, 2021 $ 312,606

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

Note 14— Leases

Lessor Arrangements

The Company derives a portion of its revenue from various leasing arrangements.

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

These arrangements meet the criteria to be accounted for as sales-type leases under ASC Topic 842, Leases .

Accordingly, revenue from the provision of the equipment is recognized upon lease commencement.

Upon the recognition of such revenue, an asset is established for the investment in sales-type leases.

Interest income is recognized monthly over the lease term.

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

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

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

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

Net balance at March 31, 2022 $ 299,725

At March 31, 2022, the above intangible assets balance includes a trade name related to the Globe acquisition with an indefinite life totaling $ 60.0 million.

Note 14— Acquisitions

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 unaudited condensed consolidated financial statements from the acquisition date within the Americas, International and Corporate reportable segments.

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

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

(In millions) July 1, 2021

Current assets (including cash of $ 11.7 million)

Property, plant and equipment and other noncurrent assets 4.7

Customer relationships 123.0

Developed technology 20.5

Trade name 15.0

Goodwill 194.5

Total assets acquired 389.8

Total liabilities assumed ( 48.7 )

Net assets acquired $ 341.1

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

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

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

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

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

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

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

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

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

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

The customer relationships, developed technology and trade name acquired in the Bacharach transaction are being amortized over periods of 21 years, 7 to 9 years and 20 years, respectively.

Estimated future amortization expense related to the identifiable intangible assets is approximately $ 6.7 million for the remainder of 2022, $ 9.0 million annually for 2023 through 2026, and $ 109.0 million thereafter.

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

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

Goodwill of $ 194.5 million related to the Bacharach acquisition was recorded, with $ 155.6 million and $ 38.9 million allocated to the Americas and International reportable segments, respectively.

This Goodwill is non-deductible for tax purposes.

Acquisition of Bristol Uniforms and Bell Apparel ("Bristol")

On January 25, 2021, we acquired 100 % of the common stock of B T Q Limited, including Bristol.

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 Company finalized the purchase price allocation during the first quarter of 2022.

The following table summarizes the 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

Note 15— Pensions and Other Post-retirement Benefits

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(In thousands) 2022 2021 2022 2021

Three Months Ended September 30,

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

Interest cost 2,941 3,726 121 179

Expected return on plan assets ( 9,532 ) ( 8,503 ) — —

Amortization of prior service cost (credit) 66 46 ( 90 ) ( 98 )

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

Net periodic benefit cost (a)

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

Nine Months Ended September 30,

Three Months Ended March 31,

Service cost $ 3,099 $ 3,242 $ 82 $ 99

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$ ( 2,652 ) $ ( 480 ) $ 456 $ 524

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

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

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

(a) Components of net periodic benefit cost other than service cost are included in the line item Other income, net, and service costs are included in the line items Cost of products sold and Selling, general and administrative in the unaudited Condensed Consolidated Statements of Income.

We made contributions of $ 1.9 million to our pension plans during both the three months ended March 31, 2022 and 2021, respectively.

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.

Note 16— Derivative Financial Instruments

As part of our currency exchange rate risk management strategy, we may enter into certain derivative foreign currency forward contracts that do not meet the U.S.

GAAP criteria for hedge accounting, but which have the impact of partially offsetting certain foreign currency exposures.

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

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

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

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

As part of our currency exchange rate risk management strategy, we enter into certain derivative foreign currency forward contracts that do not meet the U.S.

GAAP criteria for hedge accounting but have the impact of partially offsetting certain foreign currency exposures.

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

The notional amount of open forward contracts was $ 99.9 million and $ 99.0 million at March 31, 2022, and December 31, 2021, respectively.

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

(In thousands) March 31, 2022 December 31, 2021

Derivatives not designated as hedging instruments:

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prepaid expenses and other current assets 419 619

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

Loss (Gain) Recognized in Income

Nine Months Ended September 30,

(In thousands) Statement of Income Location 2021 2020

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

Loss Recognized in Income

Three Months Ended March 31,

(In thousands) 2022 2021

Derivatives not designated as hedging instruments:

Foreign exchange contracts Currency exchange losses (gains), net $ 3,275 $ ( 4,226 )

Foreign exchange contracts $ 2,765 $ 3,388

Note 17— Fair Value Measurements

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With the exception of our investments in marketable securities and fixed rate long-term debt, we believe that the reported carrying amounts of our financial assets and liabilities approximate their fair values.

We value our investments in marketable securities, primarily fixed income, at fair value using quoted market prices for similar securities or pricing models.

We value our investments in available-for-sale marketable securities, primarily fixed income, at fair value using quoted market prices for similar securities or pricing models.

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

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

The fair value was $ 49.0 million and $ 75.0 million as of September 30, 2021 and December 31, 2020, respectively, which was reported in Investments, short-term in the accompanying unaudited Condensed Consolidated Balance Sheet.

The amortized cost basis of our investments was $ 40.0 million and $ 49.0 million as of March 31, 2022 and December 31, 2021, respectively.

The fair value was $ 40.0 million and $ 49.0 million as of March 31, 2022 and December 31, 2021, respectively, which was reported in Investments, short-term in the accompanying unaudited Condensed Consolidated Balance Sheets.

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

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

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

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

The fair value of this debt was $ 302 million and $ 113 million at September 30, 2021, and December 31, 2020, respectively.

All investments in marketable securities have maturities of one year or less and are currently in an unrealized gain position as of March 31, 2022.

The reported carrying amount of our fixed rate long-term debt was $ 272 million and $ 274 million at March 31, 2022, and December 31, 2021, respectively.

The fair value of this debt was $ 256 million and $ 280 million at March 31, 2022, and December 31, 2021, respectively.

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

Acquisitions are measured at fair value, refer to Note 19—Acquisitions for a description of the methodologies and fair value measurements utilized in the business combination.

Note 18— Contingencies

Product liability

We face an inherent business risk of exposure to product liability claims arising from the alleged failure of our products to prevent the types of personal injury or death against which they are designed to protect.

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 asserted single incident product liability claims based on expected settlement costs for asserted single incident product liability claims.

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

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

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

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 $ 1.5 million and $ 1.4 million at March 31, 2022 and December 31, 2021, respectively.

Single incident product liability expense was $ 0.1 million during both the three months ended March 31, 2022 and 2021.

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

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

One of the Company's affiliates, Mine Safety Appliances Company, LLC ("MSA LLC"), was named as a defendant in 1,691 lawsuits comprised of 4,595 claims as of March 31, 2022.

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

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

Nine Months Ended September 30, 2021 Year Ended December 31, 2020

Three Months Ended March 31, 2022 Year Ended December 31, 2021

Open lawsuits, beginning of period 1,675 1,622

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Open lawsuits, end of period 1,691 1,675

Nine Months Ended September 30, 2021 Year Ended December 31, 2020

Three Months Ended March 31, 2022 Year Ended December 31, 2021

Asserted claims, beginning of period 4,554 2,878

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Asserted claims, end of period 4,595 4,554

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

The claims allege use of product models that were manufactured many years ago by MSA LLC and are no longer sold.

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

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

Total cumulative trauma product liability reserve was $ 232.6 million at September 30, 2021, including $ 6.9 million for claims settled but not yet paid and related defense costs, and $ 221.5 million at December 31, 2020, including $ 7.8 million for claims settled but not yet paid and related defense costs.

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

Those estimated amounts reflect asbestos, silica and coal dust claims expected to be resolved through the year 2069 and are not discounted to present value.

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

The reserve was also increased during the nine months ended September 30, 2021 to reflect an increase in the number of asserted claims pending against MSA LLC.

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

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

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

At September 30, 2021, $ 31.1 million of the total reserve for cumulative trauma product liability claims is recorded in the Insurance and product liability line within other current liabilities in the unaudited Condensed Consolidated Balance Sheet and the remainder, $ 201.5 million, is recorded in the Product liability and other noncurrent liabilities line.

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

Total cumulative trauma liability losses were $ 16.4 million and $ 43.9 million for the three and nine months ended September 30, 2021 and related to an update to our asserted cumulative trauma product liability reserve as well as the defense of cumulative trauma product liability claims.

Total cumulative trauma liability losses were $ 2.4 million and $ 5.7 million for the three and nine months ended September 30, 2020 primarily related to the defense of cumulative trauma product liability claims.

Uninsured cumulative trauma product liability losses, which were included in Product liability expense on the unaudited Condensed Consolidated Statements of Income, were $ 10.7 million and $ 25.2 million for the three and nine months ended September 30, 2021 and $ 2.1 million and $ 4.9 million for the three and nine months ended September 30, 2020, respectively, and represent the total cumulative trauma liability losses net of any estimated insurance receivables as discussed below.

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

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

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

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

• The types and severity of illnesses alleged by claimants to give rise to their claims;

• The venues in which claims are asserted;

• The number of claims that may be asserted in the future against MSA LLC and the counsel asserting those claims;

• 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.

The increases in the number of claims in 2021 were largely driven by 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.

Subsequent to March 31, 2022, MSA LLC agreed to enter into a process to negotiate, resolve, and dismiss several hundreds of claims over the next several months.

Amounts to resolve these claims have already been accrued as par of the product liability reserve.

If resolutions are reached, expected cash outlays of up to $ 26.3 million associated with these claims are expected to be paid over the next four quarters.

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 $ 410.8 million, including $ 3.5 million for claims settled but not yet paid and related defense costs, as of March 31, 2022 and $ 409.8 million, including $ 2.5 million for claims settled but not yet paid and related defense costs, December 31, 2021.

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 unaudited Condensed Consolidated Statements of Income as incurred.

At March 31, 2022, $ 47.9 million of the total reserve for cumulative trauma product liability claims is recorded in the Insurance and product liability line within other current liabilities in the unaudited Condensed Consolidated Balance Sheets and the remainder, $ 362.9 million, is recorded in the Product liability and other noncurrent liabilities line.

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 unaudited Condensed Consolidated Balance Sheets and the remainder, $ 363.1 million, is recorded in the Product liability and other noncurrent liabilities line.

Total cumulative trauma liability losses were $ 2.8 million and $ 3.0 million for the three months ended March 31, 2022 and 2021, respectively, primarily related to the defense of cumulative trauma product liability claims.

Uninsured cumulative trauma product liability losses, which were included in Product liability expense on the unaudited Condensed Consolidated Statements of Income, were $ 2.8 million and $ 2.8 million for the three months ended March 31, 2022 and 2021, respectively, and represent the total cumulative trauma 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.

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.

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

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

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.

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

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

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

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

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

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

Because cumulative trauma product liability litigation is subject to the significant modeling assumptions and inherent uncertainties described above, and unfavorable developments or rulings could occur, there can be no certainty that MSA LLC may not ultimately incur charges in excess of presently recorded liabilities.

The reserve for cumulative trauma product liability claims may be adjusted from time to time based on changes to the factors and assumptions described above.

If future estimates of cumulative trauma product liability claims are materially different than the accrued liability, we will record an appropriate adjustment to the unaudited Condensed Consolidated Statement of Income.

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

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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These amounts are not subject to current coverage litigation.

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

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

The vast majority of the $ 105.9 million insurance receivables balance at September 30, 2021 is attributable to reimbursement believed to be due under the terms of signed Coverage-In-Place Agreements and a portion of this amount represents the estimated recovery of IBNR amounts not yet incurred.

Insurance receivables at March 31, 2022 totaled $ 126.4 million of which, $ 8.6 million is reported in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheets and $ 117.8 million is reported in Insurance receivable and other noncurrent assets.

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

The vast majority of the $ 126.4 million insurance receivables balance at March 31, 2022 is attributable to reimbursement believed to be due under the terms of signed Coverage-In-Place Agreements and a portion of this amount represents the estimated recovery of IBNR amounts not yet incurred.

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

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

(In millions) Three Months Ended March 31, 2022 Year Ended December 31, 2021

Balance beginning of period $ 130.2 $ 97.0

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These amounts are not subject to current coverage litigation.

Notes receivable from insurance companies at September 30, 2021, totaled $ 48.2 million, of which $ 3.9 million is reported in Notes receivable, insurance companies, current on the unaudited Condensed Consolidated Balance Sheet and $ 44.3 million is reported in Notes receivable, insurance companies, noncurrent.

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

Notes receivable from insurance companies at March 31, 2022, totaled $ 48.8 million, of which $ 3.9 million is reported in Notes receivable, insurance companies, current in the unaudited Condensed Consolidated Balance Sheets and $ 44.9 million is reported in Notes receivable, insurance companies, noncurrent.

Notes receivable from insurance companies at December 31, 2021 totaled $ 48.5 million of which $ 3.9 million was reported in Notes receivable, insurance companies, current in the unaudited Condensed Consolidated Balance Sheets and $ 44.6 million was reported in Notes receivable, insurance companies, noncurrent.

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

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

(In millions) Three Months Ended March 31, 2022 Year Ended December 31, 2021

Balance beginning of period $ 48.5 $ 52.3

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Balance end of period $ 48.8 $ 48.5

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

The vast majority of the insurance receivables balance at March 31, 2022, is attributable to reimbursement under the terms of signed agreements with insurers and is not currently subject to litigation.

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

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Other Litigation

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

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.

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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.

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

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

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

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

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

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

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

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

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

(In thousands) Three Months Ended March 31, 2022 Year Ended December 31, 2021

Beginning warranty reserve $ 12,423 $ 11,428

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Ending warranty reserve $ 12,240 $ 12,423

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

Note 19— Acquisitions

Acquisition of Bacharach

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

and its affiliated companies (Bacharach) in an all cash transaction valued at $ 329.4 million, net of cash acquired.

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

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

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

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

(In millions) July 1, 2021

Current assets (including cash of $ 11.7 million)

Property, plant and equipment and other noncurrent assets 4.7

Customer relationships 123.0

Developed technology 20.5

Trade name 15.0

Goodwill 193.4

Total assets acquired 388.7

Total liabilities assumed ( 47.6 )

Net assets acquired $ 341.1

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

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

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

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

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

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

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

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

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

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

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

The step up to fair value of acquired inventory as part of the purchase price allocation totaled $ 2.3 million which will be amortized over four months ending in October 2021.

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

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

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

This Goodwill is non-deductible for tax purposes.

Acquisition of Bristol Uniforms and Bell Apparel

On January 25, 2021, we acquired 100 % of the common stock of B T Q Limited, including Bristol Uniforms and Bell Apparel ("Bristol") in an all-cash transaction valued at $ 63.0 million, net of cash acquired.

Bristol, which is headquartered in the United Kingdom (U.K.), is a leading innovator and provider of protective apparel to the fire, rescue services, and utility sectors.

The acquisition strengthens MSA's position as a global market leader in fire service personal protective equipment (PPE) products, which include breathing apparatus, firefighter helmets, thermal imaging cameras, and firefighter protective apparel, while providing an avenue to expand its business in the U.K.

and key European markets.

The fire service equipment brands of MSA, which include Gallet Firefighter Helmets, the M1 and G1 Self-Contained Breathing Apparatus range, Cairns Helmets, Globe Manufacturing, and now Bristol Uniforms, represent more than 460 combined years of innovation in the fire service industry, with a common mission:

protecting the health and safety of firefighters.

Bristol is also a leading manufacturer of flame-retardant, waterproof, and other protective work wear for the utility industry.

Marketed under the Bell Apparel brand, this line complements MSA's existing and broad range of offerings for the global utilities market.

Bristol's operating results are included in our unaudited condensed consolidated financial statements from the acquisition date as part of the International reportable segment.

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

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 88.1

Total liabilities assumed ( 11.8 )

Net assets acquired $ 76.3

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

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

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

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

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

the relief from royalty method for trade name;

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

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

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

The customer relationships and trade name acquired in the Bristol transaction will be amortized over a period of 15 years.

Estimated future amortization expense related to the identifiable intangible assets is approximately $ 0.1 million for the remainder of 2021, $ 0.5 million in 2022 and 2023, $ 0.4 million in 2024 and 2025, and $ 3.8 million thereafter.

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

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

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

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

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

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

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

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

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

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

(2) factually supportable;

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

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

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

Pro forma condensed combined financial information (Unaudited)

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

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

Net sales $ 328.9 $ 1,027.6 $ 1,056.9

Net income $ 24.8 $ 69.2 $ 102.9

Basic earnings per share $ 0.64 $ 1.77 $ 2.65

Diluted earnings per share $ 0.63 $ 1.75 $ 2.62

The unaudited pro forma condensed combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operations or financial position that we would have reported had the acquisition been completed as of the date and for the periods presented, and should not be taken as representative of our condensed consolidated results of operations or financial condition following the acquisition.

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

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

MSA has been treated as the acquirer.

Acquisition of Noncontrolling Interest

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

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

Warranty expense was $ 1.9 million and $ 2.3 million for the three months ended March 31, 2022 and 2021, respectively, and is included in Costs of products sold on the unaudited Condensed Consolidated Statements of Income.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements