What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-16 compared with 2022-02-18 · 204 added, 325 removed, 1242 unchanged (30% of the section changed)

16 unchanged sentences

Based on our assessment and those criteria, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2022.

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

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

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

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

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

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Chairman, President and Chief Executive Officer

/s/ KENNETH D.

Vice President, Chief Financial Officer and Treasurer

Senior Vice President and Chief Financial Officer

February 16, 2023

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In our opinion, MSA Safety Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

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

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

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows, and changes in retained earnings, accumulated other comprehensive loss and noncontrolling interests for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) 2 and our report dated February 16, 2023 expressed an unqualified opinion thereon.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2023 expressed an unqualified opinion thereon.

Change in Accounting Principle

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

Basis for Opinion

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

Critical Audit Matters

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

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

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

Critical Audit Matter

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

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

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

Valuation of cumulative trauma product liability claims

Description of the Matter As more fully described in Notes 1 and 20 to the consolidated financial statements, the Company's subsidiary MSA LLC is named as a defendant in lawsuits comprised of cumulative trauma product liability claims involving alleged exposures to potentially harmful substances (e.g., silica, asbestos, and coal dust) that occurred years ago and may have developed over long periods of time into diseases such as silicosis, asbestosis, mesothelioma, or coal worker’s pneumoconiosis.

In recent periods, this has included asbestos, silica and coal dust claims.

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

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In particular, the estimate was sensitive to significant assumptions that included, among others, the number of claims asserted against MSA LLC and the counsel asserting those claims, the percentage of claims resolved through settlement and the values of settlements paid to claimants.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of relevant internal controls over the Company’s assessment and measurement of its estimate of probable loss for cumulative trauma product liability claims.

Our audit procedures included testing controls over the Company’s assessment and measurement of the best estimate of the expected losses related to cumulative trauma product liability claims.

To test the Company’s assessment of cumulative trauma product liability claims, we performed audit procedures which included, among others:

To test the Company’s assessment of its subsidiary's cumulative trauma product liability claims, we performed audit procedures which included, among others:

reading the minutes of the meetings of the committees of the board of directors, requesting and receiving internal and external legal counsel letters, meeting with internal and external counsel to discuss the claims, meeting with management’s valuation consultant, testing the completeness and accuracy of data from underlying systems that are used in the Company’s assessment, performing a historical lookback analysis on claims data, performing a search for new or contrary evidence affecting the assessment, and obtaining a representation letter from the Company.

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

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

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

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

The acquisition was accounted for as a business combination.

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

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

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

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

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

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

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

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

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

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

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

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

/s/ Ernst & Young LLP

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Currency exchange losses, net 10,255 216 8,578

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

Product liability expense (Note 20) 20,590 185,264 39,036

Operating income 239,137 22,780 171,895

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Other income, net (Note 16) ( 21,056 ) ( 11,582 ) ( 5,684 )

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

Total other expense (income), net 604 ( 824 ) 3,748

Income before income taxes 238,533 23,604 168,147

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Dividends per common share $ 1.82 $ 1.75 $ 1.71

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

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

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Net income $ 179,630 $ 21,788 $ 125,138

Other comprehensive income, net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments (Note 6) ( 19,453 ) ( 25,354 ) 22,260

Pension and post-retirement plan actuarial gains (losses), net of tax (Note 6) 58,256 9,296 ( 5,559 )

Unrealized (losses) gains on available-for-sale securities (Note 6) ( 4 ) ( 7 ) 578

Pension and post-retirement plan actuarial gains, net of tax (Note 6) 6,961 58,256 9,296

Unrealized gains (losses) on available-for-sale securities (Note 6) 3 ( 4 ) ( 7 )

Reclassifications from accumulated other comprehensive loss into net income (Note 6) 2,912 267 216

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

Total other comprehensive (loss) income, net of tax ( 9,577 ) 33,165 31,765

Comprehensive income 170,053 54,953 156,903

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Comprehensive income attributable to MSA Safety Incorporated $ 170,053 $ 54,597 $ 155,683

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

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

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Retained earnings 1,158,347 1,050,214

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

Noncontrolling interests (Note 14) — 7,993

Total shareholders’ equity 923,741 834,388

Total liabilities and shareholders’ equity $ 2,376,976 $ 2,396,396

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

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

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Stock-based compensation (Note 11) 19,650 18,908 6,920

Pension expense (Note 15) and other charges 2,448 10,082 3,382

Deferred income tax (benefit) provision (Note 10) ( 38,850 ) ( 2,254 ) 1,731

Losses on asset dispositions, net 788 236 371

Pension (income) expense (Note 15) and other charges ( 11,499 ) 2,448 10,082

Deferred income tax benefit (Note 10) 5,171 ( 38,850 ) ( 2,254 )

Loss on asset write-down and dispositions, net 6,290 788 236

Pension contributions (Note 15) ( 5,032 ) ( 5,543 ) ( 5,596 )

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Financing Activities

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

Payments on long-term debt (Note 12) ( 1,023,000 ) ( 1,346,557 ) ( 1,031,000 )

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Cash dividends paid ( 71,497 ) ( 68,586 ) ( 66,578 )

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

Distribution to noncontrolling interests ( 5,632 ) — —

Acquisition of noncontrolling interests in consolidated subsidiaries (Note 14) — ( 13,381 ) —

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

Company stock purchases (Note 7) ( 34,394 ) ( 6,171 ) ( 29,144 )

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Employee stock purchase plan (Note 7) 891 855 747

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

Cash Flow (Used In) Provided by Financing Activities ( 113,350 ) 203,925 ( 126,529 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 16,631 ) ( 7,193 ) 1,234

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

Increase (decrease) in cash, cash equivalents and restricted cash 22,990 ( 19,596 ) 8,491

Beginning cash, cash equivalents and restricted cash 141,438 161,034 152,543

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Income tax paid in cash $ 60,491 $ 45,556 $ 61,072

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

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

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ACCUMULATED OTHER COMPREHENSIVE LOSS AND NONCONTROLLING INTERESTS

(In thousands) Retained

(In thousands, except per share amounts) Retained

Earnings Accumulated

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Loss Noncontrolling Interests

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

Inventory accounting method change 31,769 — —

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

Balances at January 1, 2020 $ 1,045,593 $ ( 214,003 ) $ 6,773

Net income 125,138 — —

Foreign currency translation adjustments — 22,260 —

Pension and post-retirement plan adjustments, net of tax of $ 3,072

— ( 5,559 ) —

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

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

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

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

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

Common dividends ( 63,481 ) — —

Common dividends ($ 1.71 per share)

( 66,537 ) — —

Preferred dividends ($ 0.5625 per share)

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

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

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Foreign currency translation adjustments — ( 25,354 ) —

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

Pension and post-retirement plan adjustments, net of $ 18,564 tax benefit

Unrecognized net losses on available-for-sale securities (Note 19) — ( 4 ) —

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

Common dividends ( 66,537 ) — —

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

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

Common dividends ($ 1.75 per share)

( 68,545 ) — —

Preferred dividends ($ 0.5625 per share)

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Foreign currency translation adjustments — ( 19,453 ) —

Pension and post-retirement plan adjustments, net of tax of ($ 18,564 )

Unrecognized net losses on available-for-sale securities (Note 19) — ( 4 ) —

Pension and post-retirement plan adjustments, net of $ 2,570 tax benefit

Unrecognized net gains on available-for-sale securities (Note 19) — 3 —

Reclassification of currency translation from accumulated other comprehensive loss into net income (Note 6) — 2,912 —

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

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

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

Common dividends ( 68,545 ) — —

Common dividends ($ 1.82 per share)

( 71,456 ) — —

Preferred dividends ($ 0.5625 per share)

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

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

Balances at December 31, 2022 $ 1,158,347 $ ( 158,717 ) $ —

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

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

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

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

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

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

Intercompany accounts and transactions are eliminated.

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

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

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

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These balances were used to support letter of credit balances.

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

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

Cost is determined using the FIFO method.

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

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

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

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

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Additionally, costs of upgrades and enhancements are capitalized when it is probable that the upgrades and enhancements will result in added functionality.

During 2022, 2021 and 2020, respectively, there was approximately $ 8.7 million, $ 8.1 million and $ 8.2 million of software development costs capitalized.

The Company has unamortized computer software development costs of $ 16.5 million and $ 15.7 million as of December 31, 2022 and 2021, respectively, included in property, plant and equipment, net.

Capitalized costs are amortized through cost of products sold using the straight-line method over the estimated useful life, which is normally three years , beginning in the period in which the software is ready for its intended use or when the upgrade or enhancement is deployed.

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

Software development cost depreciation expense was $ 7.9 million, $ 4.9 million and $ 1.5 million during the years ended December 31, 2022, 2021 and 2020, respectively.

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

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

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

sales-type leases.

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

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

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Net investment in sales-type leases of $ 5.7 million and $ 19.4 million were included in Prepaid expenses and other current assets and Insurance receivable and other noncurrent assets, respectively, in the Consolidated Balance Sheets as of December 31, 2022.

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

The portion in Insurance receivable and other noncurrent assets at December 31, 2022 is expected to be collected over the next seven years .

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

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

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

separate performance obligations.

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

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

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For retirement-eligible participants, this expense is recognized over an accelerated period of at least one year .

Derivative Instruments— We may use derivative instruments to minimize the effects of changes in currency exchange rates.

Derivative Instruments— We may use derivative instruments from time to time to minimize the effects of changes in currency exchange rates.

We do not enter into derivative transactions for speculative purposes and do not hold derivative instruments for trading purposes.

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Legal matters are reviewed on a continuous basis to determine if there has been a change in management’s judgment regarding the likelihood and/or estimate of a potential loss.

Please refer to Note 20 for further details on product liability related matters.

Please refer to Note 20 — Contingencies for further details on product liability related matters.

Concentration of credit and business risks - We are exposed to credit risk in the event of nonpayment by customers, principally in the oil, gas and petrochemical, fire service, construction, utilities, and mining industries.

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We mitigate our exposure to credit risk by performing ongoing credit evaluations and, when deemed necessary, requiring letters of credit, credit insurance, prepayments, guarantees or other collateral.

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

No individual customer represented more than 10% of our sales or receivables as of December 31, 2022 or 2021 or for any of the three years ended December 31, 2022.

Note 2— Cash and Cash Equivalents

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

Americas segment restructuring charges of $ 2.3 million during the year ended December 31, 2022, were related to various optimization activities.

International segment restructuring charges of $ 5.1 million during the year ended December 31, 2022, were primarily related to the implementation of our new European Shared Service Center in Warsaw, Poland.

Corporate segment restructuring charges of $ 0.6 million during the year ended December 31, 2022, were primarily related to programs to realign the organization and adjust our operations in response to current business conditions.

A total of 151 positions were eliminated in 2022.

There were 24 positions eliminated in the Americas segment, 123 in the International segment and 4 in the Corporate segment.

Americas segment restructuring charges of $ 4.6 million during the year ended December 31, 2021, were primarily related to integration related activities and costs associated with our global Fixed Gas & Flame Detection manufacturing footprint optimization as well as programs to adjust our operations in response to current business conditions.

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

Americas segment restructuring charges of $ 4.7 million during the year ended December 31, 2020, were primarily related to costs associated with our global Fixed Gas & Flame Detection manufacturing footprint optimization as well as programs to adjust our operations in response to current business conditions.

Americas segment restructuring charges of $ 4.7 million during the year ended December 31, 2020, were 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.

International segment restructuring charges of $ 21.9 million during the year ended December 31, 2020, were primarily related to severance costs for staff reductions and footprint optimization associated with our ongoing initiatives to drive profitable growth.

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A total of 121 positions were eliminated in 2020.

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

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

International segment restructuring charges of $ 12.7 million during the year ended December 31, 2019, were primarily related to severance costs for staff reductions associated with our ongoing initiatives to drive profitable growth and a non-cash settlement charge for the termination of our pension plan in the United Kingdom.

Corporate segment restructuring charges of $ 0.6 million during the year ended December 31, 2019, related primarily to the legal and operational realignment of our U.S.

and Canadian operations.

A total of 99 positions were eliminated in 2019.

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

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

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

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Note 4— Inventories

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

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

The following table sets forth the components of inventory:

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Total inventories $ 338,316 $ 280,617

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

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

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

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

Consolidated Statements of Income

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

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

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

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

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

Earnings per share

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

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

Consolidated Statements of Comprehensive Income

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

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

Consolidated Balance Sheets

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

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

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

Consolidated Statements of Cash Flows

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

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

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

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

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

(unaudited) Three months ended

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

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

Consolidated Statements of Income

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

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

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

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

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

Earnings per share

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

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

(unaudited) Three months ended

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

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

Consolidated Statements of Income

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

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

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

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

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

Earnings per share

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

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

Note 5— Property, Plant, and Equipment

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Property, plant and equipment, net $ 207,552 $ 207,793

The Company has unamortized computer software costs of $ 15.7 million and $ 12.6 million as of December 31, 2021 and 2020, respectively, included in property, plant and equipment, net.

Note 6— Reclassifications Out of Accumulated Other Comprehensive Loss

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Balance at beginning of period $ ( 57,296 ) $ ( 115,552 ) $ ( 124,848 ) $ — $ — $ —

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

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

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

Unrecognized net actuarial (losses) gains ( 2,862 ) 54,384 ( 6,322 ) — — —

Tax benefit (expense) 703 ( 12,804 ) 1,997 — — —

Total other comprehensive (loss) gain before reclassifications, net of tax ( 2,159 ) 41,580 ( 4,325 ) — — —

Amounts reclassified from accumulated other comprehensive loss into net income:

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Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income 9,120 16,676 13,621 — — —

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

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

Total other comprehensive income $ 6,961 $ 58,256 $ 9,296 $ — $ — $ —

Balance at end of period $ ( 50,335 ) $ ( 57,296 ) $ ( 115,552 ) $ — $ — $ —

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Balance at beginning of period $ ( 5 ) $ ( 1 ) $ 6 $ — $ — $ —

Unrealized (loss) gain on available-for-sale securities (Note 19) ( 4 ) ( 7 ) 578 — — —

Unrealized gain (loss) on available-for-sale securities (Note 19) 3 ( 4 ) ( 7 ) — — —

Balance at end of period $ ( 2 ) $ ( 5 ) $ ( 1 ) $ — $ — $ —

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

267 216 15,261 (c)

267 216 — — —

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

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Balance at end of period $ ( 108,380 ) $ ( 91,839 ) $ ( 66,844 ) $ — $ — $ 372

(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).

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

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

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

plan to close our South Africa affiliates.

(c) Reclassifications out of accumulated other comprehensive loss and into net income relate primarily to the approval of our plan to close a foreign subsidiary.

Note 7— Capital Stock

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

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

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

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

There were 71,340 shares issued and 52,998 shares held in treasury at both December 31, 2022 and 2021.

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

There were no shares of preferred stock purchased and subsequently held in treasury during the years ended December 31, 2022, or 2021.

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

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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 both December 31, 2021 and December 31, 2020.

There were 62,081,391 shares issued as of December 31, 2022 and December 31, 2021.

There were 39,213,064 and 39,276,518 shares outstanding at December 31, 2022 and 2021, respectively.

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

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

Under the program, there were 251,408 shares repurchased during 2022, no shares repurchased during 2021 and 175,000 shares repurchased during 2020.

We do not have any other share repurchase programs.

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Performance stock forfeitures — — ( 755 ) —

Stock consideration in acquisition — — 921 —

Employee stock purchase plan — 6,494 654 93

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Performance stock expense — — 13,227 —

Performance stock forfeitures — — ( 755 ) —

Employee stock purchase plan — 5,730 772 83

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

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

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

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

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Stock option expense — — 49 —

Stock option forfeitures — — ( 9 ) —

Performance stock issued — 55,447 ( 880 ) 880

Performance stock expense — — 15,843 —

Performance stock forfeitures — — ( 2,730 ) —

Employee stock purchase plan — 7,412 779 112

Treasury shares purchased — ( 31,260 ) — ( 4,021 )

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

Share repurchase program — ( 251,408 ) — ( 30,373 )

Balances December 31, 2022 62,081,391 ( 22,868,327 ) $ 281,980 $ ( 359,838 )

Note 8— Segment Information

The Company has four geographical operating segments that are based on management responsibilities:

Northern North America, Latin America, Europe, Middle East & Africa ("EMEA"), and Asia Pacific ("APAC").

We are organized into four geographical operating segments that are based on management responsibilities:

Northern North America, Latin America, Europe, Middle East & Africa, and Asia Pacific.

The operating segments have been aggregated (based on economic similarities, the nature of their products, end-user markets and methods of distribution) into three reportable segments:

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

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

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

Adjusted EBITDA is defined as adjusted operating income (loss) plus depreciation and amortization and adjusted EBITDA margin is defined as adjusted EBITDA divided by segment sales to external customers.

Adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin are not recognized terms under U.S.

GAAP, and therefore, do not purport to be alternatives to operating income or operating margin as a measure of operating performance.

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

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

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 margin is defined as adjusted operating income (loss) divided by segment net sales to external customers.

Adjusted EBITDA is defined as adjusted operating income (loss) plus depreciation and amortization.

Adjusted EBITDA margin is defined as adjusted EBITDA divided by segment net sales to external customers.

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.

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Restructuring charges (Note 3) 7,965

Currency exchange losses, net 216

Currency exchange losses, net (Note 6) 10,255

Product liability expense (Note 20) 20,590

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Acquisition related costs (a) (Note 14)

COVID-19 related costs 757

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

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Noncash items:

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

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

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

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Acquisition related costs (a) (Note 14)

COVID-19 related costs 757

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

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Noncash items:

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

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

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

Capital expenditures 43,181 5,724 — — 48,905

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

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

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

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

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

Fixed Gas & Flame Detection (a)

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

Firefighter Helmets & Protective Apparel (b)

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

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

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Note 9— Earnings per Share

Basic earnings per share is computed by dividing net income, after the deduction of preferred stock dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period.

Diluted earnings per share assumes the issuance of common stock for all potentially dilutive share equivalents outstanding not classified as participating securities.

Basic earnings per share attributable to MSA Safety Incorporated common shareholders is computed by dividing net income, after the deduction of preferred stock dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period.

Diluted earnings per share attributable to MSA Safety Incorporated common shareholders assumes the issuance of common stock for all potentially dilutive share equivalents outstanding not classified as participating securities.

Participating securities are defined as unvested stock-based payment awards that contain nonforfeitable rights to dividends.

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Diluted $ 4.56 $ 0.54 $ 3.15

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

Note 10— Income Taxes

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Components of income before income taxes

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

income (loss) $ 170,426 $ ( 59,746 ) $ 109,726

income 68,107 83,350 58,421

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( 3,041 ) ( 2,015 ) ( 1,102 )

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

Total deferred provision (benefit) 5,171 ( 38,850 ) ( 2,254 )

Provision for income taxes $ 58,903 $ 1,816 $ 43,009

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

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

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federal income tax rate 21.0 % 21.0 % 21.0 %

State income taxes-U.S.

2.9 % ( 7.0 ) % 2.0 %

Nondeductible compensation 1.2 % 15.3 % 3.4 %

Valuation allowances 0.8 % 7.0 % 0.8 %

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

Foreign exchange on entity closures 0.3 % ( 0.4 ) % — %

Taxes on non-U.S.

income 0.1 % ( 10.9 ) % 2.6 %

State income taxes-U.S.

( 7.0 ) % 2.0 % 2.9 %

Employee share-based payments ( 0.8 ) % ( 18.3 ) % ( 3.9 ) %

Research and development credit ( 0.4 ) % ( 5.3 ) % ( 1.2 ) %

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

Taxes on non-U.S.

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Effective income tax rate 24.7 % 7.7 % 25.6 %

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

Components of deferred tax assets and liabilities:

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Capitalized research and development 26,988 25,644

Employee benefits — 10,539

Net operating losses and tax credit carryforwards 10,696 9,404

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Net deferred taxes $ ( 6,391 ) $ 1,920

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

At December 31, 2022, we had net operating loss carryforwards of approximately $ 49.0 million.

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

On August 16, 2022, President Biden signed the Inflation Reduction Act which includes a new minimum tax on certain large corporations and an excise tax on stock buybacks.

We do not anticipate this legislation will have a material impact for the company.

Note 11— Stock Plans

The 2016 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible key employees through May 2026.

Management stock-based compensation includes stock options, restricted stock, restricted stock units and performance stock units.

Additionally, 2019 amounts granted include outstanding Sierra Monitor Corporation awards converted into MSA awards after the acquisition.

See Note 14—Acquisitions for more information.

The 2016 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible employees through May 2026 including stock options, restricted stock awards, restricted stock units and performance stock units.

The 2017 Non-Employee Directors’ Equity Incentive Plan provides for grants of stock options and restricted stock to non-employee directors through May 2027.

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Total stock-compensation expense, net of income tax benefit $ 14,836 $ 14,275 $ 5,252

We did not capitalize any stock-based compensation expense, and all expense is recorded in selling, general and administrative expense in 2021, 2020, and 2019.

The Company utilized the Black-Scholes valuation model for estimating the fair value of stock option expense with the following weighted average assumptions.

There were no stock options granted in 2021 or 2020.

Fair value per option $ 59.07

Risk-free interest rate 2.3 %

Expected dividend yield 1.7 %

Expected volatility 31 %

Expected life (years) 6.4

The risk-free interest rate is based on the U.S.

Treasury yield curve.

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

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

Expected life is based on historical stock option exercise data.

We did not capitalize any stock-based compensation expense, and all expense is included in Selling, general and administrative expense in the Consolidated Statements of Income.

A summary of option activity follows:

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Outstanding January 1, 2020 559,656 $ 45.78

Granted 23,285 43.54

Exercised ( 274,704 ) 45.31

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Exercised ( 103,545 ) 44.91

Forfeited ( 210 ) 43.75

Outstanding December 31, 2022 58,156 $ 46.48 58,156

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Stock options become exercisable when they are vested.

The aggregate intrinsic value of stock options exercisable at December 31, 2021 was $ 17.0 million.

The aggregate intrinsic value of all stock options outstanding at December 31, 2021 was $ 17.1 million.

The aggregate intrinsic value of stock options exercisable and outstanding at December 31, 2022 was $ 5.7 million.

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 unit activity follows:

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Performance adjustments 5,357 88.45

Forfeited ( 6,765 ) 111.60

Unvested at December 31, 2021 193,335 129.86

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Performance adjustments ( 22,147 ) 99.84

Forfeited ( 18,485 ) 147.66

Unvested at December 31, 2022 178,760 $ 146.28

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

The 2022 performance adjustments above relate primarily to 2019 performance unit awards that were below the performance targets when vested during 2022, including the final number of shares issued, which were 64.2 % of the target award based on actual results during the three year performance period.

During the years ended December 31, 2022, 2021 and 2020, the total intrinsic value of stock options exercised (the difference between the market price on the date of exercise and the option price paid to exercise the option) was $ 8.6 million, $ 13.0 million and $ 24.6 million, respectively.

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

$ 66,379 $ 74,203

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

99,711 99,694

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

99,711 99,694

Senior revolving credit facility maturing in 2026, net of debt issuance costs 307,031 324,060

Total 572,832 597,651

Short-term debt — 20,000

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

Amounts due within one year 7,387 —

Long-term debt, net of debt issuance costs $ 565,445 $ 597,651

On May 24, 2021, the Company entered into a Fourth Amended and Restated Credit Agreement (the “Revolving Credit Facility" or "Facility”) that extended its term through May 24, 2026 and increased the capacity to $ 900.0 million.

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As of December 31, 2022, the Company had issued £ 54.9 million (approximately $ 66.5 million at December 31, 2022) of 3.4 % Series B Senior Notes due January 22, 2031.

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

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

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

On July 1, 2021, the Company acquired Bacharach for $ 329.4 million, net of cash acquired.

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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As of December 31, 2022, MSA was in full compliance with the restrictive covenants under its various credit agreements.

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

Approximate maturities on our long-term debt over the next five years are $ 7.4 million in 2023, $ 7.4 million in 2024, $ 7.4 million in 2025, $ 316.0 million in 2026, $ 7.4 million in 2027 and $ 229.6 million thereafter.

The Company had outstanding bank guarantees and standby letters of credit with banks as of December 31, 2022, totaling $ 9.3 million, of which $ 1.5 million relate to the senior revolving credit facility.

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At December 31, 2022, the Company has $ 1.5 million of restricted cash in support of these arrangements.

In January 2023, we entered into a new $ 250 million term loan and $ 65 million was drawn down from our revolving credit facility to fund the divestiture of MSA LLC, a wholly owned subsidiary that holds legacy product liability claims relating to coal dust, asbestos, silica, and other exposures.

Please refer to Note 20—Contingencies for additional information.

Note 13— Goodwill and Intangible Assets

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(In thousands) 2022 2021

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

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

Balance at January 1, 2022 $ 636,858 $ 443,272

Additions — 199,454

Measurement period adjustment ( 1,041 ) —

Currency translation ( 15,195 ) ( 5,868 )

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

Balance at December 31.

2022 $ 620,622 $ 636,858

At December 31, 2022, goodwill of $ 447.6 million and $ 173.0 million related to the Americas and International reportable segments, respectively.

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Net balance at January 1, 2022 $ 306,948 $ 161,051

Additions (Note 14) 164,426 121

Additions — 164,426

Amortization expense ( 19,137 ) ( 16,814 )

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

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

Intangible asset amortization expense over the next five years is expected to be approximately $ 18.0 million in both 2023 and 2024 and $ 17.1 million annually from 2025 to 2027.

Note 14— Acquisitions

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

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

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

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

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

(In millions) July 1, 2021

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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.

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

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

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

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

and the cost method for assembled workforce was 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.

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

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.

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

The amortization of the inventory step up was included in Cost of products sold in the Consolidated Statements of Income.

The amortization of the inventory step up was included in Cost of products sold in the Consolidated Statements of Income for the year ended December 31, 2021.

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

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

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

Goodwill of $ 193.5 million related to the Bacharach acquisition was recorded, with $ 154.6 million and $ 38.9 million allocated to the Americas reportable segment and International reportable segment, respectively.

This Goodwill is non-deductible for tax purposes.

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and key European markets.

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

protecting the health and safety of firefighters.

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

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

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

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

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

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

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Net assets acquired $ 76.3

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

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

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

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

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

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

Estimated future amortization expense related to the identifiable intangible assets is approximately $ 0.5 million annually in 2022 and 2023, $ 0.4 million annually during 2024 through 2026, and $ 3.5 million thereafter.

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

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

The amortization of the inventory step up was included in Cost of products sold in the Consolidated Statements of Income for the year ended December 31, 2021.

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

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

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

The operating results of the Bristol and Bacharach acquisitions have been included in our consolidated financial statements from their respective acquisition dates.

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

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

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

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

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

Pro forma combined financial information (Unaudited)

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Diluted earnings per share 0.26 2.91

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

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

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

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

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

MSA has been treated as the acquirer.

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

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

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

Total acquisition related costs were $ 12.4 million, $ 15.9 million and $ 0.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Transactional costs are included in Selling, general and administrative expenses and acquisition-related amortization is included in Cost of products sold in the Consolidated Statements of Income.

Acquisition of Noncontrolling Interest

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

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

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

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Plan amendments 154 ( 243 ) — —

Actuarial (gains) losses (a)

Actuarial gains (a)

( 156,214 ) ( 10,277 ) ( 5,884 ) ( 1,518 )

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Funded status at December 31 $ 23,853 $ ( 2,376 ) $ ( 22,538 ) $ ( 29,831 )

Unrecognized transition losses — 4 — —

Unrecognized prior service credit (cost) 1,224 1,186 ( 429 ) ( 767 )

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Prior service cost (credit) 1,224 1,186 ( 429 ) ( 767 )

Unrecognized net initial obligation — 4 — —

Total (before tax effects) $ 91,436 $ 96,860 $ 6,016 $ 12,803

Accumulated Benefit Obligations for all Defined Benefit Plans $ 459,630 $ 608,436 $ — $ —

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

(a) Actuarial gains for both periods relate primarily to the increase/decrease in discount rates used in measuring plan obligations as of December 31, 2022 and 2021, respectively.

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

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(In thousands) 2022 2021 2020 2022 2021 2020

Components of Net Periodic Benefit Cost

Components of Net Periodic Benefit (Income) Cost

Service cost $ 12,281 $ 12,910 $ 12,094 $ 327 $ 398 $ 396

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Expected return on plan assets ( 49,646 ) ( 37,368 ) ( 34,029 ) — — —

Amortization of transition amounts — — 2 — — —

Amortization of prior service cost (credit) 139 164 178 ( 338 ) ( 358 ) ( 394 )

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Settlement/curtailment (gain) loss ( 354 ) ( 2,234 ) (b)

Net periodic benefit cost (a)

Net periodic benefit (income) cost (a)

$ ( 11,499 ) $ 2,448 $ 10,082 $ 1,821 $ 2,113 $ 1,863

(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 Consolidated Statements of Income.

(b) Relates primarily to the conversion of our Netherlands pension plan into a defined contribution plan and is included in "Restructuring charges" on the Consolidated Statements of Income.

and is included in Restructuring charges on the Consolidated Statements of Income.

(a) Components of net periodic benefit (income) 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 Consolidated Statements of Income.

(b) Relates primarily to the conversion of our Netherlands pension plan into a defined contribution plan and is included in "Restructuring charges" in the Consolidated Statements of Income.

The Company utilizes a spot rate approach, which discounts the individual plan specific expected cash flows underlying the service and interest cost using the applicable spot rates derived from a yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

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Pooled investment funds 15 22

Insurance contracts 1 4

Cash and cash equivalents 2 1

Insurance contracts 1 1

Total 100 % 100 %

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(In thousands) Total NAV Quoted Prices

Identical Assets

(Level 1) Significant

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Pooled investment funds 79,853 79,853 — — —

Insurance contracts 4,211 — — — 4,211

Cash and cash equivalents 9,246 7,954 1,292 — —

Insurance contracts 4,454 — — — 4,454

Total $ 514,218 $ 132,390 $ 308,237 $ 69,137 $ 4,454

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(In thousands) Total NAV Quoted Prices

Identical Assets

(Level 1) Significant

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Pooled investment funds 146,081 146,081 — — —

Insurance contracts 24,396 — — — 24,396

Cash and cash equivalents 9,934 8,637 1,297 — —

Insurance contracts 4,211 — — — 4,211

Total $ 651,986 $ 221,615 $ 350,738 $ 75,422 $ 4,211

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Balance January 1, 2021 $ 24,396

Net realized and unrealized losses 2,564

Net realized and unrealized gains ( 881 )

Net purchases, issuances and settlements ( 19,304 )

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(In thousands) 2022 2021 2020

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

Components of net periodic benefit (income) cost other than service cost (Note 15) $ 22,286 $ 8,321 $ 1,680

Interest income 4,155 3,256 3,498

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

Loss on asset write-down and dispositions, net ( 6,290 ) ( 788 ) ( 236 )

Other, net 905 793 742

Total other income, net $ 21,056 $ 11,582 $ 5,684

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

During the years ended December 31, 2022, 2021 and 2020, we recognized $ 4.2 million, $ 3.3 million and $ 3.5 million of other income, respectively, related to interest earned on cash balances, short-term investments and notes receivable from insurance companies.

The short-term investments and notes receivables from insurance companies were divested as of January 5, 2023.

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

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Noncurrent operating lease liabilities $ 35,345

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

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

Note 18— Derivative Financial Instruments

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Foreign exchange contracts:

other current liabilities $ 128 $ 157

prepaid expenses and other current assets $ 724 $ 619

Foreign exchange contracts:

other current assets $ 619 $ 160

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

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

Recognized in Income

accrued restructuring and other current liabilities $ 85 $ 128

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

Derivatives not designated as hedging instruments:

Foreign exchange contracts Currency exchange losses, net $ 5,107 $ ( 7,457 )

Foreign exchange contracts:

currency exchange losses, net $ 6,656 $ 5,107

Note 19— Fair Value Measurements

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Level 3—Unobservable inputs for the asset or liability.

The valuation methodologies we used to measure financial assets and liabilities were limited to the pension plan assets described in Note 15—Pensions and Other Post-retirement Benefits and the derivative financial instruments described in Note 18—Derivative Financial Instruments.

The valuation methodologies we used to measure financial assets and liabilities were limited to the pension plan assets and the derivative financial instruments described in Note 15—Pensions and Other Post-retirement Benefits and Note 18—Derivative Financial Instruments, respectively.

See Note 15 for the fair value hierarchy classification of pension plan assets.

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

The Company does not intend to sell, nor is it more likely than not that we will be required to sell, these securities prior to recovery of their cost, as such, management believes that any unrealized gains or losses are temporary;

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

The Company does not intend to sell, nor is it more likely than not that we will be required to sell, these securities prior to recovery of their cost.

As such, management believes that any unrealized gains or losses are temporary and to the extent that unrealized losses are present, management has not identified such losses to be other than temporary in nature.

Accordingly, 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 December 31, 2022.

The reported carrying amount of fixed rate long-term debt (including the current portion) was $ 274.3 million and $ 95.0 million at December 31, 2021, and 2020, respectively.

The reported carrying amount of fixed rate long-term debt, including the current portion of long-term debt, was $ 266.5 million and $ 274.3 million at December 31, 2022, and 2021, respectively.

The fair value of this debt was $ 218.3 million and $ 279.8 million at December 31, 2022, and 2021, respectively.

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

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.

Note 20— Contingencies

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The reserve for single incident product liability claims was $ 1.4 million at both December 31, 2022 and December 31, 2021.

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

Single incident product liability expense was nominal for the years ended December 31, 2022 and 2021, compared to a benefit of $ 1.7 million for the year ended December 31, 2020.

Single incident product liability exposures are evaluated on an annual basis, or more frequently if changing circumstances warrant.

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Cumulative trauma product liability claims.

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

One of the Company's affiliates, Mine Safety Appliances Company, LLC ("MSA LLC"), was named as a defendant in 1,675 lawsuits comprised of 4,554 claims as of December 31, 2021.

Cumulative trauma product liability claims involve potential exposures to substances that are alleged to have occurred over a number of years.

In recent periods, this has included the asbestos, silica, and coal dust claims of one of the Company's affiliates, Mine Safety Appliances Company, LLC ("MSA LLC").

As of December 31, 2022, MSA LLC was named as a defendant in 1,500 lawsuits comprised of 4,054 claims.

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

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

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

While pending as of December 31, 2022, all of the asserted claims listed in the summary table below are the sole responsibility of MSA LLC.

MSA LLC was divested on January 5, 2023 and following that divestiture, neither the Company nor any of its subsidiaries have any responsibility for these claims, or the types of claims, listed in the following.

See "Subsequent Event," below.

2022 2021 2020

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Asserted claims, end of period 4,054 4,554 2,878

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

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

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

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

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

As of December 31, 2022, MSA LLC is defending an action filed in 2003 by the State of West Virginia, through its Attorney General, in the Circuit Court of Lincoln County, West Virginia, against MSA LLC and two other manufacturers of respiratory protection products.

The State asserts several causes of action and seeks substantial compensatory damages—primarily for reimbursement of costs the State allegedly has incurred for worker’s compensation and healthcare benefits provided to individuals with occupational pneumoconiosis—as well as unspecified punitive damages.

The State also asserts a claim under the West Virginia Consumer Credit and Protection Act (“CCPA”), alleging that the defendants made willful misrepresentations regarding product performance in connection with sales and advertisement of respirators in West Virginia and seeks substantial civil penalties.

The claims against MSA LLC were severed from the claims against the other defendants and the trial date against MSA LLC was continued indefinitely in November 2022.

No reserve has been recorded for this matter because the Company believes that liability is unsupportable under West Virginia law, and therefore, has concluded that the loss is not probable.

In addition, the Company is not able to estimate a reasonably possible loss or range of reasonably possible losses given significant unresolved legal and factual matters.

MSA LLC is the named defendant in this matter and responsibility for the matter passed along with the divestiture of MSA LLC on January 5, 2023.

See "Subsequent Event," below.

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

Prior to divestiture of the subsidiary, as of December 31, 2022, MSA LLC's total cumulative trauma product liability reserve was $ 395.1 million, including $ 13.4 million for claims settled but not yet paid and related defense costs and $ 409.8 million, including $ 2.5 million for claims settled but not yet paid and related defense costs, as of December 31, 2021.

The reserve included estimated amounts related to asserted and IBNR asbestos, silica, and coal dust claims expected to be resolved through the year 2075.

The reserve was not discounted to present value and did not include estimated future amounts relating to defense of the claims.

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

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At December 31, 2021, $ 46.7 million of the total reserve for cumulative trauma product liability claims is recorded in the Insurance and product liability line within other current liabilities in the Consolidated Balance Sheet and the remainder, $ 363.1 million, is recorded in the Product liability and other noncurrent liabilities line.

Total cumulative trauma liability losses were $ 228.2 million, $ 77.8 million, and $ 36.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, and related to updates to our cumulative trauma product liability reserve in each year as well as the defense of cumulative trauma product liability claims.

During the quarter ended June 30, 2022, MSA LLC finalized a process that will result in settlements to resolve and dismiss several hundred claims for up to $ 26.3 million.

Amounts to resolve the unpaid portion of these claims have been accrued as part of the product liability reserve and as of December 31, 2022, $ 10.5 million remained unpaid with the final payments made during the first quarter of 2023.

Total cumulative trauma liability losses were $ 22.2 million, $ 228.2 million, and $ 77.8 million for the years ended December 31, 2022, 2021 and 2020, respectively, and related to updates to our cumulative trauma product liability reserve as well as the defense of cumulative trauma product liability claims for all periods.

Uninsured cumulative trauma product liability losses, which were included in Product liability and other operating expense on the Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020, were $ 20.6 million, $ 185.3 million and $ 39.0 million, respectively, and represent the total cumulative trauma product liability losses net of any estimated insurance receivables as discussed below.

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

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

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

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

Adjustments to the reserve for the year ended December 31, 2022 totaled $ 8.4 million, resulting from our annual comprehensive review of MSA LLC’s claims exposure, including review of activity experienced during the year.

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.

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

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

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

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

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

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

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

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

Many years ago, MSA LLC purchased insurance policies from various insurance carriers that, subject to common contract exclusions, provided coverage for cumulative trauma product liability losses (the "Occurrence-Based Policies").

While we continue to pursue reimbursement under certain remaining Occurrence-Based Policies, the vast majority of these policies have been exhausted, settled or converted into either (1) negotiated settlement agreements with scheduled payment streams (recorded as notes receivables) or (2) negotiated Coverage-in-Place Agreements (recorded as insurance receivables).

While we have continued to pursue reimbursement under certain remaining Occurrence-Based Policies, the vast majority of these policies have been exhausted, settled or converted into either (1) negotiated settlement agreements with scheduled payment streams (recorded as notes receivables) or (2) negotiated Coverage-in-Place Agreements (recorded as insurance receivables).

As a result, MSA LLC is largely self-insured for cumulative trauma product liability claims, and additional amounts recorded as insurance receivables or notes receivables will be limited.

These policies, as well as the negotiated settlement agreements and Coverage-in-Place Agreements, together with all associated receivables are property of MSA LLC, which was divested on January 5, 2023.

See "Subsequent Event," below.

When adjustments are made to amounts recorded in the cumulative trauma product liability reserve, we calculate amounts due to be reimbursed pursuant to the terms of the negotiated Coverage-In-Place Agreements, including cumulative trauma product liability losses and related defense costs, and we record the amounts probable of reimbursement as insurance receivables.

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

Subsequent Event

On January 5, 2023, the Company divested MSA LLC, a wholly-owned subsidiary that holds legacy product liability claims relating to coal dust, asbestos, silica, and other exposures, to a joint venture between R&Q Insurance Holdings Ltd.

and Obra Capital, Inc.

In connection with the closing, the Company contributed $ 341 million in cash and cash equivalents, while R&Q and Obra contributed an additional $ 35 million.

As a result of the transaction in the first quarter of 2023, we will derecognize all legacy cumulative trauma product liability reserves, related insurance assets, and associated deferred tax assets of the divested subsidiary from our balance sheet and will recognize a loss of approximately $ 200 million.

R&Q and Obra's joint venture has assumed management of the divested subsidiary, including the management of its claims and associated assets.

Other Litigation

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

Two subsidiaries of the Company, Globe Manufacturing Company, LLC ("Globe") and MSA LLC, are defending a 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.

No manufacturer of firefighter protective clothing is currently able to meet 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.

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

The PFAS claims against MSA LLC were included in the divestiture of MSA LLC on January 5, 2023 as discussed above under the Subsequent Event header.

In total, Globe was named as a defendant in 34 lawsuits comprised of approximately 1,865 claims as of February 16, 2023.

Product Warranty

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Gross profit 142,784 164,400 169,395 197,252 673,831

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

Earnings (loss) per share (1)

Net income attributable to MSA Safety Incorporated 35,542 47,693 44,906 51,489 179,630

Earnings per share (1)

Basic $ 0.90 $ 1.21 $ 1.15 $ 1.31 $ 4.58

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

Net income attributable to MSA Safety Incorporated 43,742 36,176 29,381 14,778 124,077

Earnings per share (1)

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

Earnings (loss) per share (1)

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

Diluted 0.92 0.64 0.54 ( 1.57 ) 0.54

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

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data