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Item 1. Financial Statements

2023-05-02 compared with 2022-10-27 · 214 added, 433 removed, 415 unchanged (61% of the section changed)

1 unchanged sentence

MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(In thousands, except per share amounts) 2022 2021 2022 2021

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

(In thousands, except per share values) 2023 2022

Net sales $ 398,262 $ 330,692

4 unchanged sentences

Restructuring charges (Note 3) 1,747 2,189

Currency exchange losses (gains), net 2,979 100 4,788 ( 359 )

Currency exchange losses, net 4,175 3,271

Loss on divestiture of MSA LLC (Note 17) 129,211 —

Product liability expense (Note 17) 3 2,772

Operating income 64,313 32,402 168,517 111,619

Operating (loss) income ( 60,061 ) 42,668

Interest expense 11,476 3,618

1 unchanged sentence

Total other expense (income), net 7,676 ( 2,726 )

Income before income taxes 60,710 30,904 169,480 112,545

(Loss) income before income taxes ( 67,737 ) 45,394

Provision for income taxes (Note 10) 82,436 9,852

Net income 44,906 21,180 128,141 83,264

Net income attributable to noncontrolling interests — — — ( 448 )

Net income attributable to MSA Safety Incorporated $ 44,906 $ 21,180 $ 128,141 $ 82,816

Earnings per share attributable to MSA Safety Incorporated common shareholders (Note 9):

Net (loss) income $ ( 150,173 ) $ 35,542

(Loss) earnings per share attributable to common shareholders (Note 9):

Basic $ ( 3.83 ) $ 0.90

1 unchanged sentence

Dividends per common share $ 0.46 $ 0.44

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

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

MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three Months Ended March 31,

(In thousands) 2023 2022

Net income $ 44,906 $ 21,180 $ 128,141 $ 83,264

Other comprehensive loss, net of tax:

Net (loss) income $ ( 150,173 ) $ 35,542

Other comprehensive gains, net of tax:

Foreign currency translation adjustments (Note 6) 11,194 5,892

1 unchanged sentence

Unrealized gains (losses) on available-for-sale securities (Note 6) 2 ( 9 )

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

Total other comprehensive loss, net of tax ( 27,137 ) ( 10,178 ) ( 48,275 ) ( 7,018 )

Comprehensive income 17,769 11,002 79,866 76,246

Comprehensive income attributable to noncontrolling interests — — — ( 356 )

Comprehensive income attributable to MSA Safety Incorporated $ 17,769 $ 11,002 $ 79,866 $ 75,890

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

Total other comprehensive gains, net of tax 11,635 8,147

Comprehensive (loss) income $ ( 138,538 ) $ 43,689

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

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands) September 30, 2022 December 31, 2021

(In thousands) March 31, 2023 December 31, 2022

Cash and cash equivalents $ 138,906 $ 162,902

22 unchanged sentences

Income taxes payable (Note 10) 17,692 6,149

Accrued restructuring and other current liabilities 99,576 113,451

Accrued restructuring (Note 3) and other current liabilities 93,065 100,822

Total current liabilities

1 unchanged sentence

Long-term debt, net (Note 12) 837,114 565,445

Pensions (Note 15) and other employee benefits 173,654 189,973

Pensions and other employee benefits (Note 14) 139,065 137,810

Noncurrent operating lease liabilities 34,583 35,345

17 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2023 2022

Operating Activities

Net income $ 128,141 $ 83,264

Net (loss) income $ ( 150,173 ) $ 35,542

Depreciation and amortization 14,572 14,165

Tax-effected loss on divestiture of MSA LLC (Note 17) 199,578 —

Stock-based compensation (Note 11) 6,270 3,730

Pension (income) expense (Note 15) ( 7,956 ) 2,079

Pension income (Note 14) ( 2,020 ) ( 2,652 )

Deferred income tax benefit (Note 10) ( 237 ) ( 572 )

Loss on asset write-down and dispositions, net 4,776 423

Loss on asset dispositions, net 739 4

Pension contributions (Note 14) ( 2,046 ) ( 1,914 )

Currency exchange losses (gains), net 4,788 ( 359 )

Currency exchange losses, net 4,175 3,271

Product liability expense (Note 17) 3 2,772

2 unchanged sentences

Product liability payments (Note 17) ( 5,250 ) ( 1,758 )

Contribution on divestiture of MSA LLC (Note 17) ( 341,186 ) —

Trade receivables 21,662 13,365

3 unchanged sentences

Other noncurrent assets and liabilities 769 971

Cash Flow From Operating Activities 103,903 130,143

Cash Flow (Used in) From Operating Activities ( 285,909 ) 24,523

Investing Activities

3 unchanged sentences

Property disposals and other investing 35 —

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

Cash Flow Used in Investing Activities ( 4,395 ) ( 402,587 )

Cash Flow (Used in) From Investing Activities ( 8,367 ) 1,051

Financing Activities

1 unchanged sentence

Payments on long-term debt (Note 12) ( 505,588 ) ( 258,000 )

Debt issuance costs ( 913 ) —

Cash dividends paid ( 18,045 ) ( 17,292 )

1 unchanged sentence

Exercise of stock options (Note 7) 4 51

Employee stock purchase plan (Note 7) 486 452

Acquisition of noncontrolling interest in consolidated subsidiaries

Distributions to noncontrolling interests — ( 5,632 )

Debt issuance costs — ( 2,080 )

Cash Flow (Used In) From Financing Activities ( 56,163 ) 233,430

Cash Flow From (Used in) Financing Activities 272,771 ( 15,900 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 2,287 ) ( 3,361 )

Increase (Decrease) in cash, cash equivalents and restricted cash 19,847 ( 43,191 )

(Decrease) increase in cash, cash equivalents and restricted cash ( 23,792 ) 6,313

Beginning cash, cash equivalents and restricted cash 164,428 141,438

4 unchanged sentences

Total cash, cash equivalents and restricted cash $ 140,636 $ 147,751

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

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS

ACCUMULATED OTHER COMPREHENSIVE LOSS AND NONCONTROLLING INTERESTS

(In thousands, except per share amounts) Retained

AND ACCUMULATED OTHER COMPREHENSIVE LOSS

(In thousands, except per share values) Retained

Earnings Accumulated

Comprehensive

(Loss) Noncontrolling Interests

Balances June 30, 2021 $ 1,130,661 $ ( 179,145 ) $ 8,349

Net income 21,180 — —

Foreign currency translation adjustments — ( 13,868 ) —

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

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

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

Distributions to noncontrolling interests ( 5,632 ) — —

Common dividends ($ 0.44 per share)

( 17,245 ) — —

Preferred dividends ($ 0.5625 per share)

Balances September 30, 2021 $ 1,128,954 $ ( 189,323 ) $ —

Balances June 30, 2022 $ 1,098,048 $ ( 170,278 ) $ —

Net income 44,906 — —

Foreign currency translation adjustments — ( 32,361 ) —

Pension and post-retirement plan adjustments, net of tax of $ 981

Unrealized net gains on available-for-sale securities (Note 17) — 13 —

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

Common dividends ($ 0.46 per share)

( 18,036 ) — —

Preferred dividends ($ 0.5625 per share)

Balances September 30, 2022 $ 1,124,908 $ ( 197,415 ) $ —

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

3 unchanged sentences

Unrecognized net losses on available-for-sale securities (Note 16) — ( 9 )

Income attributable to noncontrolling interests ( 448 ) 92 356

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

Distributions to noncontrolling interests ( 5,632 ) — —

Common dividends ($ 0.44 per share)

( 51,292 ) — —

Preferred dividends ($ 0.5625 per share)

Balances September 30, 2021 $ 1,128,954 $ ( 189,323 ) $ —

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

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

Net income 128,141 — —

Net loss ( 150,173 ) —

Foreign currency translation adjustments — 11,194

Pension and post-retirement plan adjustments, net of tax of $ 278

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

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

Unrecognized net gains on available-for-sale securities (Note 16) — 2

Common dividends ($ 0.46 per share)

( 53,417 ) — —

Preferred dividends ($ 0.5625 per share)

Balances September 30, 2022 $ 1,124,908 $ ( 197,415 ) $ —

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

Balances March 31, 2023 $ 990,129 $ ( 147,082 )

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

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This Form 10-Q report should be read in conjunction with MSA's Form 10-K for the year ended December 31, 2022, which includes all disclosures required by U.S.

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

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

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

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

Note 2— Cash and Cash Equivalents

5 unchanged sentences

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

(In thousands) September 30, 2022

(In thousands) March 31, 2023

Gross cash pool position $ 71,897

2 unchanged sentences

Note 3— Restructuring Charges

During the three and nine months ended September 30, 2022, we recorded restructuring charges of $ 0.9 million and $ 3.1 million, respectively.

International segment restructuring charges of $ 2.2 million during the nine months ended September 30, 2022, were primarily related to the implementation of our new European Shared Service Center in Warsaw, Poland.

Americas segment restructuring charges of $ 1.0 million during the nine months ended September 30, 2022, were related to various optimization activities.

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

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

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

During the three months ended March 31, 2023, we recorded restructuring charges of $ 1.7 million.

Americas segment restructuring charges of $ 1.4 million during the three months ended March 31, 2023, were related to manufacturing footprint optimization activities.

Corporate segment restructuring charges of $ 0.6 million during the three months ended March 31, 2023 were primarily related to various optimization activities.

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

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

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

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

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

5 unchanged sentences

Reserve balances at December 31, 2022 $ 1.7 $ 12.8 $ 0.5 $ 15.0

Restructuring charges (releases) 1.0 2.2 ( 0.1 ) 3.1

Currency translation and other adjustments 0.1 ( 2.2 ) — ( 2.1 )

Restructuring charges (adjustments) 1.4 ( 0.3 ) 0.6 1.7

Currency translation — 0.2 — 0.2

Cash payments ( 2.0 ) ( 2.7 ) ( 0.7 ) ( 5.4 )

Reserve balances at September 30, 2022 $ 1.2 $ 11.2 $ — $ 12.4

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

Reserve balances at March 31, 2023 $ 1.1 $ 10.0 $ 0.4 $ 11.5

Note 4— Inventories

The following table sets forth the components of inventory:

(In thousands) September 30, 2022 December 31, 2021

(In thousands) March 31, 2023 December 31, 2022

Finished products $ 97,360 $ 97,142

4 unchanged sentences

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

(In thousands) September 30, 2022 December 31, 2021

(In thousands) March 31, 2023 December 31, 2022

Land $ 4,932 $ 4,884

7 unchanged sentences

Changes in accumulated other comprehensive loss were as follows:

MSA Safety Incorporated Noncontrolling Interests

Three Months Ended

September 30, Three Months Ended

September 30,

(In thousands) 2023 2022

1 unchanged sentence

Balance at beginning of period $ ( 50,335 ) $ ( 57,296 )

Amounts reclassified from accumulated other comprehensive loss into net income:

Amounts reclassified from accumulated other comprehensive loss into net (loss) income:

Amortization of prior service credit (Note 14) ( 24 ) ( 48 )

Recognized net actuarial losses (Note 14) 185 3,328

Tax benefit ( 981 ) ( 1,095 ) — —

Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income 2,299 3,701 — —

Tax expense (benefit) 278 ( 1,016 )

Total amount reclassified from accumulated other comprehensive loss, net of tax, into net (loss) income 439 2,264

Balance at end of period $ ( 49,896 ) $ ( 55,032 )

5 unchanged sentences

Balance at beginning of period $ ( 108,380 ) $ ( 91,839 )

Reclassification from accumulated other comprehensive loss into net income 2,912 (b)

Acquisition of noncontrolling interest in consolidated subsidiaries

— — — ( 280 )

Foreign currency translation adjustments 11,194 5,892

Balance at end of period $ ( 97,186 ) $ ( 85,947 )

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

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

MSA Safety Incorporated Noncontrolling Interests

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

(In thousands) 2022 2021 2022 2021

Pension and other post-retirement benefits (a)

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

Amounts reclassified from accumulated other comprehensive loss into net income:

Amortization of prior service credit (Note 15) ( 144 ) ( 72 ) — —

Recognized net actuarial losses (Note 15) 9,984 14,460 — —

Tax benefit ( 2,947 ) ( 3,318 ) — —

Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income 6,893 11,070 — —

Balance at end of period $ ( 50,403 ) $ ( 104,482 ) $ — $ —

Available-for-sale securities

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

Unrealized net losses on available-for-sale securities (Note 17) ( 5 ) ( 15 ) — —

Balance at end of period $ ( 10 ) $ ( 16 ) $ — $ —

Foreign currency translation

Balance at beginning of period $ ( 91,839 ) $ ( 66,844 ) $ — $ 372

Reclassification from accumulated other comprehensive loss into net income 2,912 (b)

Acquisition of noncontrolling interest in consolidated subsidiaries (Note 14)

Foreign currency translation adjustments $ ( 58,075 ) $ ( 17,981 ) $ — $ ( 92 )

Balance at end of period $ ( 147,002 ) $ ( 84,825 ) $ — $ —

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

(a) Reclassifications out of accumulated other comprehensive loss and into net (loss) income are included in the computation of net periodic pension and other post-retirement benefit costs (refer to Note 14—Pensions and Other Post-retirement Benefits).

Note 7— Capital Stock

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

There are 71,340 shares issued and 52,998 shares held in treasury at September 30, 2022.

There are 71,340 shares issued and 52,998 shares held in treasury at both March 31, 2023 and December 31, 2022.

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

There were no treasury purchases of preferred stock shares during both the nine months ended September 30, 2022 and 2021.

There were no shares of preferred stock purchased and subsequently held in treasury during the three months ended March 31, 2023, or 2022.

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

No shares have been issued as of September 30, 2022.

No shares have been issued as of March 31, 2023, or December 31, 2022.

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

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

No new shares were issued during the nine months ended September 30, 2022 or 2021.

There were 39,197,700 and 39,276,518 shares outstanding at September 30, 2022 and December 31, 2021, respectively.

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

The share repurchase program has no expiration date.

There were 62,081,391 shares issued as of March 31, 2023, and December 31, 2022.

No new shares were issued during the three months ended March 31, 2023, or 2022.

There were 39,264,779 and 39,213,064 shares outstanding at March 31, 2023, and December 31, 2022, respectively.

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

The stock repurchase program has no expiration date.

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

During the nine months ended September 30, 2022, 251,408 shares were repurchased under this program.

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

There were 22,883,691 and 22,804,873 Treasury Shares at September 30, 2022 and December 31, 2021, respectively.

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

During the three months ended March 31, 2023, and 2022, no shares were repurchased under this program.

There were 22,816,612 and 22,868,327 Treasury shares at March 31, 2023, and December 31, 2022, respectively.

The Company issues Treasury shares for all stock-based benefit plans.

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

There were 203,619 and 37,478 Treasury Shares issued for these purposes during the nine months ended September 30, 2022 and 2021, respectively.

There were 26,774 and 28,366 Treasury shares issued for these purposes during the three months ended March 31, 2023, and 2022, respectively.

Common stock activity is summarized as follows:

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

(In thousands) Common

Stock Treasury

Balance at beginning of period $ 267,645 $ ( 359,314 ) $ 253,773 $ ( 329,439 )

Stock compensation expense 2,967 — 2,867 —

Restricted and performance stock awards ( 103 ) 103 ( 159 ) 159

Stock options exercised 2,501 1,364 354 155

Treasury shares purchased for stock compensation programs — ( 59 ) — ( 625 )

Acquisition of noncontrolling interest in consolidated subsidiaries

— — ( 4,751 ) —

Share repurchase program — ( 2,150 ) — —

Balance at end of period $ 273,010 $ ( 360,056 ) $ 252,084 $ ( 329,750 )

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(In thousands) Common

6 unchanged sentences

Treasury shares purchased for stock compensation programs — ( 3,687 ) — ( 3,659 )

Acquisition of noncontrolling interest in consolidated subsidiaries

— — ( 4,751 ) —

Employee stock purchase program 424 62 409 43

Share repurchase program — ( 30,375 ) — —

Balance at end of period $ 287,009 $ ( 362,280 ) $ 262,627 $ ( 331,160 )

5 unchanged sentences

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

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

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

Certain global expenses are allocated to each segment in a manner consistent with where the benefits from the expenses are derived.

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

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

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

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

Adjusted operating income (loss) is defined as operating income (loss) excluding restructuring charges, currency exchange (gains) losses, product liability expense, loss on divestiture of MSA LLC, transaction costs and acquisition-related amortization.

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

1 unchanged sentence

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 unaudited condensed consolidated financial statements level.

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

Reportable segment information is presented in the following table:

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

Three Months Ended September 30, 2022

Net sales to external customers $ 276,082 $ 105,612 $ — $ 381,694

Operating income 64,313

Restructuring charges (Note 3) 899

Currency exchange losses, net 2,979

Product liability expense (Note 18) 4,035

Acquisition related costs (a)

Adjusted operating income (loss) 75,088 8,448 ( 8,411 ) 75,125

Adjusted operating margin % 27.2 % 8.0 %

Depreciation and amortization (a)

Adjusted EBITDA 83,945 10,980 ( 8,282 ) 86,643

Adjusted EBITDA margin % 30.4 % 10.4 %

Nine Months Ended September 30, 2022

(In thousands, except percentages) Americas International Corporate Consolidated

Three Months Ended March 31, 2023

Net sales to external customers $ 280,267 $ 117,995 $ — $ 398,262

Operating income 168,517

Operating loss ( 60,061 )

Restructuring charges (Note 3) 1,747

Currency exchange losses, net 4,175

Loss on divestiture of MSA LLC (Note 17) 129,211

Product liability expense (Note 17) 3

Acquisition related costs (a)

Amortization of acquisition-related intangible assets 2,305

Adjusted operating income (loss) 71,694 15,779 ( 10,093 ) 77,380

Adjusted operating margin % 25.6 % 13.4 %

Depreciation and amortization (a)

Depreciation and amortization 12,267

Adjusted EBITDA 80,494 19,058 ( 9,905 ) 89,647

Adjusted EBITDA margin % 28.7 % 16.2 %

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

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

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

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

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

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

3 unchanged sentences

Product liability expense (Note 17) 2,772

Acquisition related costs (a)

Adjusted operating income (loss) 47,624 12,780 ( 6,010 ) 54,394

Adjusted operating margin % 20.8 % 11.5 %

Depreciation and amortization (a)

Adjusted EBITDA 55,774 16,323 ( 5,880 ) 66,217

Adjusted EBITDA margin % 24.3 % 14.7 %

Nine Months Ended September 30, 2021

Net sales to external customers $ 655,123 $ 334,792 $ — $ 989,915

Operating income 111,619

Restructuring charges (Note 3) 12,239

Currency exchange gains, net ( 359 )

Product liability expense (Note 18) 25,235

Acquisition related costs (a)

Amortization of acquisition-related intangible assets 2,336

Transaction costs (a)

Adjusted operating income (loss) 52,435 9,024 ( 7,616 ) 53,843

Adjusted operating margin % 23.2 % 8.6 %

Depreciation and amortization (a)

Depreciation and amortization 11,829

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

Adjusted EBITDA margin % 26.9 % 11.8 %

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

Adjustments were made to Americas and International.

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

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

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

(a) Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during acquisitions and divestitures.

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

Total sales by product group was as follows:

Three Months Ended September 30, 2022 Consolidated Americas International

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

Breathing Apparatus $ 91,977 24 % $ 70,482 26 % $ 21,495 20 %

Fixed Gas & Flame Detection (a)

87,746 23 % 62,134 23 % 25,612 24 %

Firefighter Helmets & Protective Apparel 54,738 14 % 41,958 15 % 12,780 12 %

Portable Gas Detection 39,481 10 % 28,358 10 % 11,123 11 %

Industrial Head Protection 43,608 11 % 34,620 13 % 8,988 9 %

Fall Protection 27,839 7 % 17,658 6 % 10,181 10 %

36,305 11 % 20,872 7 % 15,433 14 %

Total $ 381,694 100 % $ 276,082 100 % $ 105,612 100 %

Nine Months Ended September 30, 2022 Consolidated Americas International

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

Breathing Apparatus $ 254,878 23 % $ 185,490 25 % $ 69,388 21 %

Fixed Gas & Flame Detection (a)

251,321 23 % 167,269 22 % 84,052 25 %

Firefighter Helmets & Protective Apparel 151,097 14 % 110,471 15 % 40,626 12 %

Portable Gas Detection 121,116 11 % 85,815 11 % 35,301 11 %

Industrial Head Protection 123,489 11 % 96,808 13 % 26,681 8 %

Fall Protection 79,114 7 % 50,940 7 % 28,174 9 %

103,684 11 % 57,323 7 % 46,361 14 %

Total $ 1,084,699 100 % $ 754,116 100 % $ 330,583 100 %

Three Months Ended September 30, 2021 Consolidated Americas International

Three Months Ended March 31, 2023 Consolidated Americas International

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

Fixed Gas & Flame Detection $ 93,635 24 % $ 61,143 22 % $ 32,492 28 %

Breathing Apparatus 76,721 19 % 52,769 19 % 23,952 20 %

Fixed Gas & Flame Detection (a)

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

Firefighter Helmets & Protective Apparel 62,667 16 % 49,287 18 % 13,380 11 %

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Fall Protection 31,157 8 % 20,458 7 % 10,699 9 %

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

Other 38,209 9 % 24,817 8 % 13,392 11 %

Total $ 398,262 100 % $ 280,267 100 % $ 117,995 100 %

Nine Months Ended September 30, 2021 Consolidated Americas International

Three Months Ended March 31, 2022 Consolidated Americas International

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

Fixed Gas & Flame Detection $ 83,077 25 % $ 54,621 24 % $ 28,456 27 %

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

Fixed Gas & Flame Detection (a)

204,825 21 % 127,014 19 % 77,811 23 %

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

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Fall Protection 24,662 7 % 16,277 7 % 8,385 8 %

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

Other 30,640 9 % 16,920 8 % 13,720 13 %

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

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

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

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

Note 9— Earnings per Share

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

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

Note 9—(Loss) E arnings per Share

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

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

Amounts attributable to MSA Safety Incorporated common shareholders:

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

(In thousands, except per share amounts) 2022 2021 2022 2021

Net income $ 44,906 $ 21,180 $ 128,141 $ 82,816

Three Months Ended March 31,

(In thousands, except per share values) 2023 2022

Net (loss) income $ ( 150,173 ) $ 35,542

Preferred stock dividends ( 10 ) ( 10 )

Net income available to common equity 44,896 21,170 128,111 82,786

Net (loss) income available to common equity ( 150,183 ) 35,532

Dividends and undistributed earnings allocated to participating securities — ( 4 )

Net income available to common shareholders 44,888 21,167 128,090 82,761

Net (loss) income available to common shareholders ( 150,183 ) 35,528

Basic weighted-average shares outstanding 39,224 39,291

Stock-based compensation awards 127 236 171 272

Stock-based compensation awards (a)

Diluted weighted-average shares outstanding 39,224 39,523

Earnings per share:

Antidilutive shares 180 —

(Loss) earnings per share:

Basic $ ( 3.83 ) $ 0.90

Diluted $ ( 3.83 ) $ 0.90

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

(a) During periods in which the Company incurs a net loss, stock-based compensation awards are excluded from the computation of diluted earnings per share because their effect would be anti-dilutive.

As such, during periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equivalent to basic weighted average shares outstanding.

Note 10— Income Taxes

The Company's effective tax rate for the third quarter of 2022 was 26.0 %, which differs from the United States of America ("U.S.") federal statutory rate of 21% primarily due to state income taxes and nondeductible foreign exchange on entity closures.

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

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

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

The Company's effective tax rate for the nine months ended September 30, 2022, was 24.4 % which differs from the U.S.

federal statutory rate of 21% primarily due to state income taxes and nondeductible foreign exchange on entity closures.

The Company's effective tax rate for the nine months ended September 30, 2021, was 26.0 %, which differs from the U.S.

federal statutory rate of 21% primarily due to statutory rate increases in foreign jurisdictions and nondeductible executive compensation, partially offset by tax benefits on certain share-based payments.

At September 30, 2022, the Company had a gross liability for unrecognized tax benefits of $ 4.6 million.

The Company has recognized tax benefits associated with these liabilities of $ 2.2 million at September 30, 2022.

The Company's effective tax rate for the three months ended March 31, 2023, was ( 121.7 )%, which differs from the United States of America ("U.S.") federal statutory rate of 21% primarily due to the divestiture of MSA LLC and the non-deductible loss recorded on the derecognition of the product liability reserves and related assets.

Refer to Note 17—Contingencies to the unaudited condensed consolidated financial statements in Part I Item 1 of this Form 10-Q for further information on this transaction.

The Company's effective tax rate for the three months ended March 31, 2022, was 21.7 %, which differs from the U.S.

federal statutory rate of 21% primarily due to state income taxes partially offset by tax benefits on certain share-based payments.

At March 31, 2023, the Company had a gross liability for unrecognized tax benefits of $ 3.4 million.

The Company has recognized tax benefits associated with these liabilities of $ 1.8 million at March 31, 2023.

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

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

The Company's liability for accrued interest related to uncertain tax positions was $ 1.0 million at September 30, 2022.

The Company's liability for accrued interest related to uncertain tax positions was $ 0.3 million at March 31, 2023.

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

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

Stock compensation expense is as follows:

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

Stock compensation expense, included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Operations, is as follows:

Three Months Ended March 31,

(In thousands) 2023 2022

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Stock compensation expense, net of tax $ 4,734 $ 2,816

A summary of stock option activity for the nine months ended September 30, 2022, is as follows:

We have not capitalized any stock-based compensation expense.

A summary of stock option activity for the three months ended March 31, 2023, is as follows:

Shares Weighted Average

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Exercised ( 76 ) 48.41

Outstanding at September 30, 2022 68,868 46.32

Exercisable at September 30, 2022 68,861 $ 46.32

Outstanding and exercisable at March 31, 2023 58,080 $ 46.47

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

A summary of restricted stock activity for the nine months ended September 30, 2022, is as follows:

A summary of restricted stock activity for the three months ended March 31, 2023, is as follows:

Shares Weighted Average

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Forfeited ( 1,744 ) 136.41

Unvested at September 30, 2022 138,664 $ 138.07

Unvested at March 31, 2023 170,262 $ 138.20

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

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

The following weighted average assumptions were used in estimating the fair value of the performance stock units granted in the first quarter of 2022.

The final number of shares to be issued for performance stock units granted in the first quarter of 2023 may range from 0 % to 200 % of the target award based on achieving the specified performance targets over the performance period plus an additional modifier based on total shareholder return ("TSR") over the performance period.

The following weighted average assumptions were used in estimating the fair value of the performance stock units granted for the three months ended March 31, 2023.

Fair value per unit $ 131.46

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Expected life is based on historical stock option exercise data.

A summary of performance stock unit activity for the nine months ended September 30, 2022, is as follows:

A summary of performance stock unit activity for the three months ended March 31, 2023, is as follows:

Shares Weighted Average

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Granted 75,425 131.46

Performance adjustments ( 22,147 ) 99.84

Performance adjustments (a)

( 3,009 ) 127.40

Vested ( 53,407 ) 127.36

Forfeited ( 796 ) 139.27

Unvested at September 30, 2022 179,065 $ 146.27

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

Unvested at March 31, 2023 196,973 $ 146.05

(a) Performance adjustments relate primarily to the final number of shares issued for the 2020 performance unit awards which vested in the first quarter of 2023 at 94.9 % of the target award based on both cumulative performance against EBITDA margin and revenue growth targets and MSA's TSR during the three -year performance period.

Note 12— Long-Term Debt

(In thousands) September 30, 2022 December 31, 2021

(In thousands) March 31, 2023 December 31, 2022

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

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99,717 99,711

2023 Term Loan credit agreement maturing in 2026, net of debt issuance costs 249,145 —

Senior revolving credit facility maturing in 2026, net of debt issuance costs 360,902 307,031

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

The Company has a weighted average revolver interest rate of 3.69 % as of September 30, 2022.

At September 30, 2022, $ 552.8 million of the existing $ 900.0 million Revolving Credit Facility was unused, including letters of credit issued under the Facility.

The Company has a weighted average revolver interest rate of 5.74 % as of March 31, 2023.

At March 31, 2023, $ 536.1 million of the existing $ 900.0 million Revolving Credit Facility was unused, including letters of credit issued under the Facility.

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

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

As of September 30, 2022, the Company had issued £ 54.9 million (approximately $ 61.4 million at September 30, 2022) of 3.4 % Series B Senior Notes due January 22, 2031.

Maturities of this note are £ 6.1 million (approximately $ 6.8 million at September 30, 2022) due January 22, 2023 with annual maturities of £ 6.1 million through January 2031.

As of March 31, 2023, the Company has outstanding £ 48.8 million (approximately $ 60.3 million at March 31, 2023) of 3.4 % Series B Senior Notes due January 22, 2031.

Remaining maturities of this note are £ 6.1 million (approximately $ 7.5 million at March 31, 2023) due January 22, 2024, with annual maturities of £ 6.1 million through January 2031.

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

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

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

On July 1, 2021, the Company acquired Bacharach in a transaction valued at $ 329.4 million, net of cash acquired.

The acquisition was partially financed by $ 200.0 million of 2.69 % Senior Notes from the Prudential Note Agreement and NYL Note Facility.

The remaining purchase price was financed under the Revolving Credit Facility.

All credit facilities exclude Mine Safety Appliances Company, LLC prior to the divestiture of this subsidiary on January 5, 2023, as discussed further in Note 17.

During August 2021, the Company amended its Revolving Credit Facility to transition from Sterling LIBOR reference rates to Sterling Overnight Interbank Average Rate ("SONIA") reference rates.

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

As of September 30, 2022, the Company was in full compliance with the restrictive covenants under its various credit agreements.

The Company had outstanding bank guarantees and standby letters of credit with banks as of September 30, 2022, totaling $ 9.2 million, of which $ 1.5 million relate to the Revolving Credit Facility.

On January 5, 2023, the Company entered into a new $ 250 million term loan facility to fund the divestiture of MSA LLC, a wholly owned subsidiary.

Under the agreement, the Company may elect either BASE or an interest rate based on the Secured Overnight Financing Rate.

The Company pays a credit spread of 0 to 200 basis points based on the Company's net EBITDA leverage ratio and elected rate.

The Company had a Term Loan interest rate of 6.22 % as of March 31, 2023.

As of March 31, 2023, the Company was in full compliance with the restrictive covenants under its various credit agreements.

The Company had outstanding bank guarantees and standby letters of credit with banks as of March 31, 2023, totaling $ 9.7 million, of which $ 1.5 million relate to the Revolving Credit Facility.

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

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

At September 30, 2022, the Company has $ 1.7 million of restricted cash in support of these arrangements.

At March 31, 2023, the Company has $ 1.7 million of restricted cash in support of these arrangements.

Note 13— Goodwill and Intangible Assets, Net

Changes in goodwill during the nine months ended September 30, 2022 were as follows:

Changes in goodwill during the three months ended March 31, 2023, were as follows:

(In thousands) Goodwill

Balance at January 1, 2023 $ 620,622

Measurement Period Adjustment ( 1,041 )

Currency translation 2,821

Balance at September 30, 2022 $ 607,161

At September 30, 2022, goodwill of $ 447.6 million and $ 159.6 million related to the Americas and International reportable segments, respectively.

Changes in intangible assets, net, during the nine months ended September 30, 2022, were as follows:

Balance at March 31, 2023 $ 623,443

At March 31, 2023, goodwill of $ 447.6 million and $ 175.8 million related to the Americas and International reportable segments, respectively.

Changes in intangible assets, net, during the three months ended March 31, 2023, were as follows:

(In thousands) Intangible Assets

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Currency translation 996

Net balance at September 30, 2022 $ 281,461

At September 30, 2022, intangible assets, net, includes a trade name related to the Globe acquisition with an indefinite life totaling $ 60.0 million.

Note 14— Acquisitions

Acquisition of Bacharach

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

Bacharach, which is headquartered in New Kensington, PA, is a leader in gas detection technologies used in the heating, ventilation, air conditioning, and refrigeration markets.

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

The Company finalized the purchase price allocation during the second quarter of 2022.

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

Current assets (including cash of $ 11.7 million)

Property, plant and equipment and other noncurrent assets 4.3

Customer relationships 123.0

Developed technology 20.5

Trade name 15.0

Goodwill 193.5

Total assets acquired 388.4

Total liabilities assumed ( 47.3 )

Net assets acquired $ 341.1

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

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

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

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

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

(In millions) January 25, 2021

Current assets (including cash of $ 13.3 million)

Net investment in sales-type leases, noncurrent 29.0

Property, plant and equipment and other noncurrent assets 12.0

Customer relationships 4.5

Trade name and other intangible assets 1.4

Total assets acquired 88.9

Total liabilities assumed ( 12.6 )

Net assets acquired $ 76.3

Acquisition of Noncontrolling Interest

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

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

Net balance at March 31, 2023 $ 278,359

At March 31, 2023, intangible assets, net, includes a trade name related to Globe Manufacturing Company, LLC ("Globe") with an indefinite life totaling $ 60.0 million.

Note 14— Pensions and Other Post-retirement Benefits

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(In thousands) 2023 2022 2023 2022

Three Months Ended September 30,

Service cost $ 3,099 $ 3,264 $ 82 $ 99

Interest cost 3,613 2,941 148 121

Expected return on plan assets ( 12,418 ) ( 9,532 ) — —

Amortization of prior service cost (credit) 36 66 ( 84 ) ( 90 )

Recognized net actuarial losses 3,018 4,421 310 399

Net periodic benefit (income) cost (a)

$ ( 2,652 ) $ 1,160 $ 456 $ 529

Nine Months Ended September 30,

Three Months Ended March 31,

Service cost $ 1,884 $ 3,099 $ 53 $ 82

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Recognized net actuarial losses 47 3,018 138 310

Settlements — ( 1,879 )

Net periodic benefit (income) cost (a)

$ ( 2,020 ) $ ( 2,652 ) $ 403 $ 456

(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 unaudited Condensed Consolidated Statements of Income.

We made contributions of $ 5.7 million and $ 5.8 million to our pension plans during the nine months ended September 30, 2022 and 2021, respectively.

We made contributions of $ 2.0 million and $ 1.9 million to our pension plans during the three months ended March 31, 2023, and 2022, respectively.

We expect to make total contributions of $ 8.2 million to our pension plans in 2023, which are primarily associated with statutorily required plans in the International reporting segment.

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

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

The notional amount of open forward contracts was $ 96.3 million and $ 99.0 million at September 30, 2022, and December 31, 2021, respectively.

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

The notional amount of open forward contracts was $ 104.1 million and $ 103.0 million at March 31, 2023, and December 31, 2022, respectively.

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

(In thousands) September 30, 2022 December 31, 2021

(In thousands) March 31, 2023 December 31, 2022

Derivatives not designated as hedging instruments:

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accrued restructuring and other current liabilities 206 85

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

Loss Recognized in Income

Nine Months Ended September 30,

The following table presents the unaudited Condensed Consolidated Statements of Operations and unaudited Condensed Consolidated Statements of Cash Flows location and the (gain) loss impact of derivative financial instruments:

Three Months Ended March 31,

(In thousands) 2023 2022

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Foreign exchange contracts:

currency exchange losses (gains), net $ 13,586 $ 3,275

currency exchange losses, net $ ( 502 ) $ 2,765

Note 16— Fair Value Measurements

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

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

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

The amortized cost basis of our investments was $ 24.9 million and $ 49.0 million as of September 30, 2022 and December 31, 2021, respectively.

The fair value was $ 24.9 million and $ 49.0 million as of September 30, 2022 and December 31, 2021, respectively, which was reported in Investments, short-term in the accompanying unaudited Condensed Consolidated Balance Sheets.

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

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 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 gain position as of September 30, 2022.

The reported carrying amount of our fixed rate long-term debt was $ 261.4 million and $ 274.3 million at September 30, 2022, and December 31, 2021, respectively.

The fair value of this debt was $ 207.4 million and $ 279.8 million at September 30, 2022, and December 31, 2021, respectively.

Our investments in available-for-sale marketable securities, primarily fixed income, were transferred to Sag Main Holdings, LLC, as part of our MSA LLC divestiture as described in Note 17—Contingencies.

Prior to the divestiture, these investments were valued at fair value using quoted market prices for similar securities or pricing models.

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

The amortized cost basis of our investments was $ 9.9 million as of December 31, 2022.

The fair value was $ 9.9 million as of December 31, 2022, which was reported in Investments, short-term in the accompanying unaudited Condensed Consolidated Balance Sheets.

Prior to the divestiture, changes in fair value were recorded in Other comprehensive (loss) income, net of tax.

No impairment losses relating to these securities occurred during the three months ended March 31, 2023.

All investments in marketable securities had maturities of one year or less and were in an unrealized loss position as of December 31, 2022.

The reported carrying amount of our fixed rate long-term debt was $ 260.3 million and $ 266.5 million at March 31, 2023, and December 31, 2022, respectively.

The fair value of this debt was $ 217.1 million and $ 218.3 million at March 31, 2023, and December 31, 2022, respectively.

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

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

The reserve for single incident product liability claims was $ 1.4 million at both September 30, 2022 and December 31, 2021.

Single incident product liability expense was minimal during the nine months ended September 30, 2022 and a benefit of $ 0.1 million during the nine months ended September 30, 2021.

The reserve for single incident product liability claims was $ 1.5 million at March 31, 2023, and $ 1.4 million December 31, 2022.

Single incident product liability expense was $ 0.1 million during both the three months ended March 31, 2023 and the three months ended March 31, 2022.

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

One of the Company's subsidiaries, Mine Safety Appliances Company, LLC ("MSA LLC"), was named as a defendant in 1,544 lawsuits comprised of 4,193 claims as of September 30, 2022.

Prior to the divestiture described below, one of the Company's former subsidiaries, Mine Safety Appliances Company, LLC ("MSA LLC"), was named as a defendant in various lawsuits related to such 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 cumulative trauma product liability lawsuits and asserted cumulative trauma product liability claims activity is as follows:

Nine Months Ended September 30, 2022 Year Ended

December 31, 2021

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

New lawsuits 204 432

Settled and dismissed lawsuits ( 335 ) ( 379 )

Open lawsuits, end of period 1,544 1,675

Nine Months Ended September 30, 2022 Year Ended

December 31, 2021

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

New claims 405 2,134

Settled and dismissed claims ( 766 ) ( 458 )

Asserted claims, end of period 4,193 4,554

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

MSA LLC is also 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.

Although activity in the case has been minimal in the many years since inception, the CCPA claim has been severed and expedited for trial.

MSA LLC contends that the November 28, 2022 trial date is premature and has sought a continuance.

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.

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

MSA LLC's total cumulative trauma product liability reserve was $ 410.3 million, including $ 33.5 million for claims settled but not yet paid and related defense costs, as of September 30, 2022 and $ 409.8 million, including $ 2.5 million for claims settled but not yet paid and related defense costs, as of December 31, 2021.

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

Prior to its divestiture, 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, as of December 31, 2022.

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

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

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

At September 30, 2022, $ 58.1 million of the total reserve for cumulative trauma product liability claims is recorded in the Insurance and product liability line within other current liabilities in the unaudited Condensed Consolidated Balance Sheets and the remainder, $ 352.2 million, is recorded in the Product liability and other noncurrent liabilities line.

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

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 with payments potentially spread across the fourth quarter of 2022 through the first quarter of 2023.

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

Total cumulative trauma liability losses were $ 4.0 million and $ 9.7 million for the three and nine months ended September 30, 2022 and primarily related to defense of cumulative trauma product liability claims.

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

Uninsured cumulative trauma product liability losses, which were included in Product liability expense on the unaudited Condensed Consolidated Statements of Income, were $ 4.0 million and $ 9.7 million for the three and nine months ended September 30, 2022 and $ 10.7 million and $ 25.2 million for the three and nine months ended September 30, 2021, respectively, and represent the total cumulative trauma liability losses net of any estimated insurance receivables as discussed below.

We will complete our annual review of MSA LLC's cumulative trauma product liability reserve in the fourth quarter as described below.

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

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

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

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

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

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

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

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

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

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

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

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

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

As a result of all of these factors, it is typically unclear until late into litigation 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 or analysis 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.

The reserve was not discounted to present value and did not include future amounts which will be spent to defend the claims.

Defense costs were recognized in the unaudited Condensed Consolidated Statements of Operations as incurred.

At December 31, 2022, $ 65.1 million of the total reserve for cumulative trauma product liability claims was recorded in the Insurance and product liability line within other current liabilities in the Consolidated Balance Sheet and the remainder, $ 330.0 million, is recorded in the Product liability and other noncurrent liabilities line.

Prior to the divestiture, MSA LLC's cumulative trauma product liability reserve was based upon an estimate of MSA LLC’s current and potential future liability for cumulative trauma product liability claims, in accordance with applicable accounting principles.

See further discussion on the process and assumptions used to derive this estimate in Note 20—Contingencies of the consolidated financial statements in Part II Item 8 of MSA's Form 10-K for the year ended December 31, 2022.

On January 5, 2023, the Company entered into a membership interest purchase agreement (the “Purchase Agreement”) with Sag Main Holdings, LLC (the “Buyer”).

The Buyer is a joint venture between R&Q Insurance Holdings Ltd.

(“R&Q”) and Obra Capital, Inc.

Under the Purchase Agreement, on January 5, 2023, the Company transferred to the Buyer all of the issued and outstanding limited liability company interests of MSAC LLC (the “Sale”).

In connection with the closing, the Company contributed $ 341.2 million in cash and cash equivalents, while R&Q and Obra contributed an additional $ 35.0 million.

As MSA LLC was the obligor for the Company's legacy cumulative trauma product liability reserves and policyholder of the related insurance assets, the rights and obligations related to these items transferred upon the sale to the Buyer.

In addition, pursuant to the Purchase Agreement, the Buyer and MSA LLC have agreed to indemnify the Company and its affiliates for legacy cumulative trauma product liabilities and other product liabilities, and the Company has agreed to indemnify MSA LLC for all other historical liabilities of MSA LLC.

This indemnification is not subject to any cap or time limitation.

In connection with the sale, the Company and its Board of Directors received a solvency opinion from an independent advisory firm that MSA LLC was solvent and adequately capitalized after giving effect to the transaction.

Following the completion of the sale and thus transfer, the Company no longer has any obligation with respect to pending and future cumulative trauma product liability claims relating to these matters.

As such, all legacy cumulative trauma product liability reserves, related insurance assets, and associated deferred tax assets of the divested subsidiary were derecognized from our balance sheet and the Company incurred a tax-effected loss on the divestiture of MSA LLC of $ 199.6 million, including transaction related costs of $ 5.6 million.

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

Below is a summary of the impact of the divestiture of MSA LLC on our unaudited Condensed Consolidated Statements of Operations for the quarter ended March 31, 2023:

(In millions) Three Months Ended March 31, 2023

Cash and cash equivalents $ ( 341.2 )

Current insurance receivables ( 17.3 )

Notes receivable, insurance companies ( 5.9 )

Noncurrent insurance receivables ( 110.3 )

Notes receivable, insurance companies, noncurrent ( 38.7 )

Current product liability 65.1

Noncurrent product liability 324.7

Loss on divestiture of MSA LLC before transaction costs ( 123.6 )

Transaction costs ( 5.6 )

Loss on divestiture of MSA LLC ( 129.2 )

Income tax expense (a)

Tax-effected loss on divestiture of MSA LLC $ ( 199.6 )

(a) Related to the write-off of deferred tax asset related to product liability reserve

Insurance Receivable and Notes Receivable, Insurance Companies

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

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

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

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

These amounts are not subject to current coverage litigation.

Insurance receivables at September 30, 2022 totaled $ 125.9 million, of which $ 10.6 million is reported in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheets and $ 115.3 million is reported in Insurance receivables and other noncurrent assets.

Prior to the divestiture of MSA LLC, when adjustments were made to amounts recorded in the cumulative trauma product liability reserve, we calculated 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 recorded the amounts probable of reimbursement as insurance receivables.

Insurance receivables at December 31, 2022 totaled $ 127.6 million, of which $ 17.3 million was reported in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheets and $ 110.3 million was reported in Insurance receivables and other noncurrent assets.

The vast majority of the $ 125.9 million insurance receivables balance at September 30, 2022 is attributable to reimbursement believed to be due under the terms of signed Coverage-In-Place Agreements and a portion of this amount represents the estimated recovery of IBNR amounts not yet incurred.

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

(In millions) Nine Months Ended September 30, 2022 Year Ended

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

(In millions) Three Months Ended March 31, 2023 Year Ended

December 31, 2022

Balance beginning of period $ 127.6 $ 130.2

Divestiture of MSA LLC ( 127.6 ) —

Additions — 1.8

1 unchanged sentence

Balance end of period $ — $ 127.6

We record formal notes receivable due from scheduled payment streams according to negotiated settlement agreements with insurers.

These amounts are not subject to current coverage litigation.

Notes receivable from insurance companies at September 30, 2022, totaled $ 44.3 million, of which $ 5.9 million is reported in Notes receivable, insurance companies, current in the unaudited Condensed Consolidated Balance Sheets and $ 38.4 million is reported in Notes receivable, insurance companies, noncurrent.

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

Prior to the divestiture of MSA LLC, notes receivable from insurance companies at December 31, 2022 totaled $ 44.6 million of which $ 5.9 million was reported in Notes receivable, insurance companies, current in the unaudited Condensed Consolidated Balance Sheets and $ 38.7 million was reported in Notes receivable, insurance companies, noncurrent.

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

(In millions) Nine Months Ended September 30, 2022 Year Ended

(In millions) Three Months Ended March 31, 2023 Year Ended

December 31, 2022

Balance beginning of period $ 44.6 $ 48.5

Divestiture of MSA LLC ( 44.6 ) —

Additions — 1.2

1 unchanged sentence

Balance end of period $ — $ 44.6

The vast majority of the insurance and notes receivables balances at September 30, 2022, are attributable to reimbursement under the terms of signed agreements with insurers and are not currently subject to litigation.

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

The determination that the recorded insurance and notes receivables are probable of collection is based on the terms of the settlement agreements reached with the insurers, our history of collection, and the advice of MSA LLC's outside legal counsel and consultants.

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

Other Litigation

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

Globe, a subsidiary of the Company, is defending claims in which plaintiffs assert that certain products allegedly containing per- and polyfluoroalkyl substances (“PFAS”) have caused harm, including injury or health issues.

PFAS are a large class of substances that are widely used in everyday products.

2 unchanged sentences

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

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

Globe believes it has valid defenses to these claims.

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

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

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

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

Globe is also pursuing insurance coverage and indemnification related to the lawsuits.

As of May 2, 2023, Globe was named as a defendant in 75 lawsuits comprised of approximately 4,870 claims, plus one action filed on behalf of a putative class of Florida firefighters and certain of their dependents.

MSA LLC is also a defendant in a number of PFAS lawsuits and the Buyer assumed responsibility for these and any similar future claims specific to MSA LLC in connection with the divestiture on January 5, 2023.

Product Warranty

4 unchanged sentences

If actual return rates and/or repair and replacement costs differ significantly from estimates, adjustments to recognize additional cost of sales may be required in future periods.

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

(In thousands) Nine Months Ended September 30, 2022 Year Ended

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

(In thousands) Three Months Ended March 31, 2023 Year Ended

December 31, 2022

4 unchanged sentences

Ending warranty reserve $ 15,142 $ 15,230

Warranty expense was $ 9.0 million and $ 6.8 million for the nine months ended September 30, 2022 and 2021, respectively, and is included in Costs of products sold on the unaudited Condensed Consolidated Statements of Income.

Warranty expense was $ 2.4 million and $ 1.9 million for the three months ended March 31, 2023, and 2022, respectively, and is included in Costs of products sold on the unaudited Condensed Consolidated Statements of Operations.

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

What changed 10-Q

Item 1. Financial Statements