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Item 1. Financial Statements

2023-08-01 compared with 2023-05-02 · 216 added, 120 removed, 509 unchanged (40% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share values) 2023 2022 2023 2022

5 unchanged sentences

Restructuring charges (Note 3) 3,350 57 5,097 2,247

Currency exchange losses, net 4,175 3,271

Currency exchange losses (gains), net 3,110 ( 1,463 ) 7,285 1,809

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

Product liability expense (Note 17) — 2,926 3 5,698

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

Operating income 95,008 61,536 34,947 104,204

Interest expense 13,175 4,578 24,651 8,196

1 unchanged sentence

Total other expense (income), net 7,525 ( 1,841 ) 15,201 ( 4,566 )

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

Income before income taxes 87,483 63,377 19,746 108,770

Provision for income taxes (Note 10) 20,393 15,684 102,829 25,535

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

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

Net income (loss) $ 67,090 $ 47,693 $ ( 83,083 ) $ 83,235

Earnings (loss) per share attributable to common shareholders (Note 9):

Basic $ 1.71 $ 1.21 $ ( 2.12 ) $ 2.12

3 unchanged sentences

MSA SAFETY INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three Months Ended March 31,

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

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

Other comprehensive gains, net of tax:

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

Net income (loss) $ 67,090 $ 47,693 $ ( 83,083 ) $ 83,235

Other comprehensive gains (losses), net of tax:

Foreign currency translation adjustments

(Note 6) 5,039 ( 31,606 ) 16,233 ( 25,714 )

Pension and post-retirement plan actuarial gains, net of tax (Note 6) 115 2,330 554 4,594

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

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

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

Unrealized (loss) gain on available-for-sale securities (Note 6) — ( 9 ) 2 ( 18 )

Total other comprehensive income (loss), net of tax 5,154 ( 29,285 ) 16,789 ( 21,138 )

Comprehensive income (loss) $ 72,244 $ 18,408 $ ( 66,294 ) $ 62,097

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

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CONDENSED CONSOLIDATED BALANCE SHEETS

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

(In thousands) June 30, 2023 December 31, 2022

Cash and cash equivalents $ 146,897 $ 162,902

46 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2023 2022

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Deferred income tax benefit (Note 10) ( 393 ) ( 1,526 )

Loss on asset dispositions, net 739 4

(Gain) loss on asset dispositions, net ( 713 ) 124

Pension contributions (Note 14) ( 4,092 ) ( 3,829 )

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Property disposals and other investing 2,674 —

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

Cash Flow Used in Investing Activities ( 15,648 ) ( 5,598 )

Financing Activities

5 unchanged sentences

Exercise of stock options (Note 7) 542 298

Employee stock purchase plan (Note 7) 497 486

Cash Flow From (Used in) Financing Activities 196,589 ( 29,773 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 5,651 ) ( 10,474 )

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

Decrease in cash, cash equivalents and restricted cash ( 15,551 ) ( 5,869 )

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

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Comprehensive

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

Net income 47,693 —

Foreign currency translation adjustments — ( 31,606 )

Pension and post-retirement plan adjustments, net of tax of $ 950

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

Common dividends ($ 0.46 per share)

Preferred dividends ($ 0.5625 per share)

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

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

Net income 67,090 —

Foreign currency translation adjustments — 5,039

Pension and post-retirement plan adjustments, net of tax of $ 46

Common dividends ($ 0.47 per share)

Preferred dividends ($ 0.5625 per share)

Balances June 30, 2023 $ 1,038,750 $ ( 141,928 )

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

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Preferred dividends ($ 1.125 per share)

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

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

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

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Preferred dividends ($ 1.125 per share)

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

Balances June 30, 2023 $ 1,038,750 $ ( 141,928 )

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

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

The December 31, 2022, Balance Sheet data was derived from the audited Consolidated Balance Sheet, but does not include all disclosures required by accounting principles generally accepted in the United States of America ("U.S.

The December 31, 2022, Balance Sheet data was derived from the audited Consolidated Balance Sheets, but does not include all disclosures required by accounting principles generally accepted in the United States of America ("U.S.

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

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

(In thousands) March 31, 2023

(In thousands) June 30, 2023

Gross cash pool position $ 84,369

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Note 3— Restructuring Charges

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.

During the three and six months ended June 30, 2023, we recorded restructuring charges of $ 3.4 million and $ 5.1 million, respectively.

Americas segment restructuring charges of $ 2.2 million during the six months ended June 30, 2023, were related to manufacturing footprint optimization activities.

International segment restructuring charges of $ 1.5 million during the six months ended June 30, 2023, were related to ongoing initiatives to drive profitable growth and rightsize our operations including the expansion of our European Shared Service Center in Warsaw, Poland.

During the three and six months ended June 30, 2022, we recorded restructuring charges of $ 0.1 million and $ 2.2 million, respectively.

International segment restructuring charges of $ 2.1 million during the six months ended June 30, 2022, were primarily related to the expansion of our European Shared Service Center in Warsaw, Poland.

Americas segment restructuring charges of $ 0.3 million during the six months ended June 30, 2022, were primarily related to initiatives to optimize our manufacturing footprint .

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

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

Restructuring charges (adjustments) 1.4 ( 0.3 ) 0.6 1.7

Restructuring charges 2.2 1.5 1.4 5.1

Currency translation — 0.1 — 0.1

Cash payments ( 2.9 ) ( 4.1 ) ( 1.2 ) ( 8.2 )

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

Reserve balances at June 30, 2023 $ 1.0 $ 10.3 $ 0.7 $ 12.0

Note 4— Inventories

The following table sets forth the components of inventory:

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

(In thousands) June 30, 2023 December 31, 2022

Finished products $ 100,992 $ 97,142

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

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

(In thousands) June 30, 2023 December 31, 2022

Land $ 4,321 $ 4,884

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Changes in accumulated other comprehensive loss were as follows:

Three Months Ended

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

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Balance at beginning of period $ ( 49,896 ) $ ( 55,032 ) $ ( 50,335 ) $ ( 57,296 )

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

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

Amortization of prior service credit (Note 14) ( 24 ) ( 48 ) ( 48 ) ( 96 )

Recognized net actuarial losses (Note 14) 185 3,328 370 6,656

Tax expense (benefit) 278 ( 1,016 )

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

Tax (benefit) expense ( 46 ) ( 950 ) 232 ( 1,966 )

Total amount reclassified from accumulated other comprehensive loss, net of tax, into net income (loss) 115 2,330 554 4,594

Balance at end of period $ ( 49,781 ) $ ( 52,702 ) $ ( 49,781 ) $ ( 52,702 )

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Balance at beginning of period $ — $ ( 14 ) $ ( 2 ) $ ( 5 )

Unrealized net gains (losses) on available-for-sale securities (Note 16) 2 ( 9 )

Unrealized net (losses) gains on available-for-sale securities (Note 16) — ( 9 ) 2 ( 18 )

Balance at end of period $ — $ ( 23 ) $ — $ ( 23 )

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Balance at end of period $ ( 92,147 ) $ ( 117,553 ) $ ( 92,147 ) $ ( 117,553 )

(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).

(a) Reclassifications out of accumulated other comprehensive loss and into net income (loss) 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 both March 31, 2023 and December 31, 2022.

There are 71,340 shares issued and 52,998 shares held in treasury at both June 30, 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 shares of preferred stock purchased and subsequently held in treasury during the three months ended March 31, 2023, or 2022.

There were no shares of preferred stock purchased and subsequently held in treasury during the six months ended June 30, 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 March 31, 2023, or December 31, 2022.

No shares have been issued as of June 30, 2023.

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 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.

There were 62,081,391 shares issued as of June 30, 2023 and December 31, 2022.

No new shares were issued during the six months ended June 30, 2023 or 2022.

There were 39,290,833 and 39,213,064 shares outstanding at June 30, 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.

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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 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.

During the six months ended June 30, 2023, no shares were repurchased under the program.

During the six months ended June 30, 2022, 231,835 shares were repurchased under the program.

There were 22,790,558 and 22,868,327 Treasury shares at June 30, 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 26,774 and 28,366 Treasury shares issued for these purposes during the three months ended March 31, 2023, and 2022, respectively.

There were 105,894 and 110,696 Treasury shares issued for these purposes during the six months ended June 30, 2023 and 2022, respectively.

Common stock activity is summarized as follows:

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

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

(In thousands) Common

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Treasury shares purchased for stock compensation programs — ( 184 ) — ( 272 )

Employee stock purchase program 432 65 424 62

Share repurchase program — — — ( 28,225 )

Balance at end of period $ 294,364 $ ( 362,025 ) $ 267,645 $ ( 359,314 )

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

(In thousands) Common

Stock Treasury

Balance at beginning of period $ 281,980 $ ( 359,838 ) $ 260,121 $ ( 328,776 )

Stock compensation expense 13,029 — 8,358 —

Restricted and performance stock awards ( 1,434 ) 1,434 ( 1,461 ) 1,461

Stock options exercised 357 185 203 95

Treasury shares purchased for stock compensation programs — ( 3,871 ) — ( 3,931 )

Employee stock purchase program 432 65 424 62

Share repurchase program — — — ( 28,225 )

Balance at end of period $ 294,364 $ ( 362,025 ) $ 267,645 $ ( 359,314 )

Note 8— Segment Information

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

The Company is organized into four geographical operating segments that are based on management responsibilities:

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

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(In thousands, except percentages) Americas International Corporate Consolidated

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Net sales to external customers $ 308,378 $ 138,921 $ — $ 447,299

Operating loss ( 60,061 )

Operating income 95,008

Restructuring charges (Note 3) 3,350

Currency exchange losses, net 3,110

Amortization of acquisition-related intangible assets 2,315

Adjusted operating income (loss) 94,816 21,743 ( 12,776 ) 103,783

Adjusted operating margin % 30.7 % 15.7 %

Depreciation and amortization 12,574

Adjusted EBITDA 103,977 24,949 ( 12,569 ) 116,357

Adjusted EBITDA margin % 33.7 % 18.0 %

Three Months Ended June 30, 2022

Net sales to external customers $ 252,386 $ 119,927 $ — $ 372,313

Operating income 61,536

Restructuring charges (Note 3) 57

Currency exchange gains, net ( 1,463 )

Product liability expense (Note 17) 2,926

Amortization of acquisition-related intangible assets 2,318

Transaction costs (a)

Adjusted operating income (loss) 57,141 17,207 ( 8,735 ) 65,613

Adjusted operating margin % 22.6 % 14.3 %

Depreciation and amortization 11,604

Adjusted EBITDA 65,461 20,370 ( 8,614 ) 77,217

Adjusted EBITDA margin % 25.9 % 17.0 %

(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.

(In thousands, except percentages) Americas International Corporate Consolidated

Six Months Ended June 30, 2023

Net sales to external customers $ 588,645 $ 256,916 $ — $ 845,561

Operating income 34,947

Restructuring charges (Note 3) 5,097

Currency exchange losses, net 7,285

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

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Adjusted EBITDA margin % 31.3 % 17.1 %

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Net sales to external customers $ 478,034 $ 224,971 $ — $ 703,005

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Total sales by product group was as follows:

Three Months Ended March 31, 2023 Consolidated Americas International

Three Months Ended June 30, 2023 Consolidated Americas International

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

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Total $ 447,299 100 % $ 308,378 100 % $ 138,921 100 %

Three Months Ended March 31, 2022 Consolidated Americas International

Three Months Ended June 30, 2022 Consolidated Americas International

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

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Total $ 372,313 100 % $ 252,386 100 % $ 119,927 100 %

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.

Six Months Ended June 30, 2023 Consolidated Americas International

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

Fixed Gas & Flame Detection $ 199,490 24 % $ 127,530 22 % $ 71,960 28 %

Breathing Apparatus 177,952 21 % 122,037 21 % 55,915 22 %

Firefighter Helmets & Protective Apparel 127,926 15 % 101,176 17 % 26,750 10 %

Portable Gas Detection 105,353 12 % 76,155 13 % 29,198 11 %

Industrial Head Protection 90,071 11 % 69,717 12 % 20,354 8 %

Fall Protection 65,039 8 % 42,933 7 % 22,106 9 %

Other 79,730 9 % 49,097 8 % 30,633 12 %

Total $ 845,561 100 % $ 588,645 100 % $ 256,916 100 %

Six Months Ended June 30, 2022 Consolidated Americas International

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

Fixed Gas & Flame Detection $ 163,575 23 % $ 105,135 22 % $ 58,440 26 %

Breathing Apparatus 162,901 23 % 115,008 24 % 47,893 21 %

Firefighter Helmets & Protective Apparel 96,360 14 % 68,513 14 % 27,847 12 %

Portable Gas Detection 81,635 12 % 57,456 12 % 24,179 11 %

Industrial Head Protection 79,881 11 % 62,188 13 % 17,693 8 %

Fall Protection 51,275 7 % 33,282 7 % 17,993 8 %

Other 67,378 10 % 36,452 8 % 30,926 14 %

Total $ 703,005 100 % $ 478,034 100 % $ 224,971 100 %

Note 9—E arnings (Loss) per Share

Basic earnings (loss) 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 (loss) 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.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share values) 2023 2022 2023 2022

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

Net income (loss) $ 67,090 $ 47,693 $ ( 83,083 ) $ 83,235

Preferred stock dividends ( 10 ) ( 10 ) ( 20 ) ( 20 )

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

Net income (loss) attributable to common equity 67,080 47,683 ( 83,103 ) 83,215

Dividends and undistributed earnings allocated to participating securities ( 8 ) ( 8 ) ( 8 ) ( 13 )

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

Net income (loss) attributable to common shareholders 67,072 47,675 ( 83,111 ) 83,202

Basic weighted-average shares outstanding 39,274 39,266 39,249 39,279

Stock-based compensation awards (a)

135 155 — 193

Diluted weighted-average shares outstanding 39,409 39,421 39,249 39,472

Antidilutive shares — — 158 —

(Loss) earnings per share:

Earnings (loss) per share:

Basic $ 1.71 $ 1.21 $ ( 2.12 ) $ 2.12

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Note 10— Income Taxes

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.

The Company's effective tax rate for the three months ended June 30, 2023, was 23.3 %, which differs from the United States of America ("U.S.") federal statutory rate of 21% primarily due to state income taxes.

The Company's effective tax rate for the three months ended June 30, 2022, was 24.7 %, which differs from the U.S.

federal statutory rate of 21% primarily due to state income taxes and increased profitability in higher tax jurisdictions.

The Company's effective tax rate for the six months ended June 30, 2023, was 520.8 %, 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 Company's effective tax rate for the six months ended June 30, 2022, was 23.5 %, which differs from the U.S.

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

At June 30, 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 June 30, 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 $ 0.3 million at March 31, 2023.

The Company's liability for accrued interest related to uncertain tax positions was $ 0.3 million at June 30, 2023.

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

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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,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

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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:

A summary of stock option activity for the six months ended June 30, 2023, is as follows:

Shares Weighted Average

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Exercised ( 11,533 ) 46.99

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

Outstanding and exercisable at June 30, 2023 46,623 $ 46.35

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 three months ended March 31, 2023, is as follows:

A summary of restricted stock activity for the six months ended June 30, 2023, is as follows:

Shares Weighted Average

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Forfeited ( 4,343 ) 138.89

Unvested at March 31, 2023 170,262 $ 138.20

Unvested at June 30, 2023 171,589 $ 140.45

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

The final number of shares to be issued for performance stock units granted in the first quarter of 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.

The following weighted average assumptions were used in estimating the fair value of the performance stock units granted for the six months ended June 30, 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 three months ended March 31, 2023, is as follows:

A summary of performance stock unit activity for the six months ended June 30, 2023, is as follows:

Shares Weighted Average

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Forfeited ( 2,306 ) 139.97

Unvested at March 31, 2023 196,973 $ 146.05

Unvested at June 30, 2023 196,323 $ 146.04

(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) March 31, 2023 December 31, 2022

(In thousands) June 30, 2023 December 31, 2022

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

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2023 Term Loan credit agreement maturing in 2026, net of debt issuance costs 242,971 —

2023 Senior Notes payable through 2028, 5.25 %, net of debt issuance costs

Senior revolving credit facility maturing in 2026, net of debt issuance costs 259,822 307,031

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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 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 Company has a weighted average revolver interest rate of 6.14 % as of June 30, 2023.

At June 30, 2023, $ 637.2 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 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.

As of June 30, 2023, the Company has outstanding £ 48.8 million (approximately $ 61.9 million at June 30, 2023) of 3.4 % Series B Senior Notes due January 22, 2031.

Remaining maturities of this note are £ 6.1 million (approximately $ 7.7 million at June 30, 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.

The NYL Note Facility provided for (i) the issuance of $ 100.0 million of 2.69 % Series A Senior Notes due July 1, 2036, and (ii) the establishment of an uncommitted note issuance facility whereby the Company may request, subject to NYL Investors’ acceptance in its sole discretion, the issuance of up to $ 200.0 million aggregate principal amount of senior unsecured notes.

On June 29, 2023, the Company issued $ 50 million of 5.25 % Series B Senior Notes due July 1, 2028, pursuant to the NYL Note Facility (the "Notes").

The Notes bear interest at 5.25 % per annum, payable semi-annually, and mature on July 1, 2028.

The Notes provide for a principal payment of $ 25 million on July 1, 2027, with the remaining $ 25 million due on July 1, 2028.

The Notes may be redeemed at the Company’s option prior to their maturity at a make-whole redemption price calculated as provided in the NYL Note Facility.

The proceeds of the Notes were used on June 29, 2023, to pay down an equivalent amount of borrowings under the Company’s revolving credit facility with PNC Bank, National Association, as Administrative Agent.

The Revolving Credit Facility, Prudential Note Agreement and NYL Note Facility require the Company to comply with specified financial covenants, including a requirement to maintain a minimum fixed charges coverage ratio of not less than 1.50 to 1.00 and a consolidated leverage ratio not to exceed 3.50 to 1.00;

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in each case calculated on the basis of the trailing four fiscal quarters.

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 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.

The Company will apply the optional expedients in ASC 848, Reference Rate Reform , to this modification and potential future modifications driven by reference rate reform, accounting for the modifications as a continuation of the existing contracts.

During August 2021 and June 2023, respectively, the Company amended its Revolving Credit Facility to transition from Sterling LIBOR reference rates to Sterling Overnight Interbank Average Rate ("SONIA") reference rates and from U.S.

LIBOR reference rates to Secured Overnight Financing Rate ("SOFR") reference rates.

The Company will apply the optional expedients in ASC 848, Reference Rate Reform, to these modifications driven by reference rate reform, accounting for the modifications as a continuation of the existing contracts.

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

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

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

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

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.

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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 Company had a Term Loan interest rate of 6.76 % as of June 30, 2023.

As of June 30, 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 June 30, 2023, totaling $ 9.8 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 March 31, 2023, the Company has $ 1.7 million of restricted cash in support of these arrangements.

At June 30, 2023, the Company has $ 2.0 million of restricted cash in support of these arrangements.

Note 13— Goodwill and Intangible Assets, Net

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

Changes in goodwill during the six months ended June 30, 2023, were as follows:

(In thousands) Goodwill

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Currency translation 5,640

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:

Balance at June 30, 2023 $ 626,262

At June 30, 2023, goodwill of $ 447.6 million and $ 178.7 million related to the Americas and International reportable segments, respectively.

Changes in intangible assets, net, during the six months ended June 30, 2023, were as follows:

(In thousands) Intangible Assets

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Currency translation 2,470

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.

Net balance at June 30, 2023 $ 275,305

At June 30, 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 March 31,

Three Months Ended June 30,

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

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

Six Months Ended June 30,

Service cost $ 3,768 $ 6,198 $ 106 $ 164

Interest cost 11,836 7,226 546 296

Expected return on plan assets ( 19,812 ) ( 24,836 ) — —

Amortization of prior service cost (credit) 74 72 ( 122 ) ( 168 )

Recognized net actuarial losses 94 6,036 276 620

Net periodic benefit (income) cost (a)

$ ( 4,040 ) $ ( 5,304 ) $ 806 $ 912

(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 Operations.

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 made contributions of $ 4.1 million and $ 3.8 million to our pension plans during the six months ended June 30, 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, 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.

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 Operations.

The notional amount of open forward contracts was $ 106.6 million and $ 103.0 million at June 30, 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) March 31, 2023 December 31, 2022

(In thousands) June 30, 2023 December 31, 2022

Derivatives not designated as hedging instruments:

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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,

Six Months Ended June 30,

(In thousands) 2023 2022

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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.

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.

Our investments in available-for-sale marketable securities, primarily fixed income, were transferred to Sag Main Holdings, LLC, on January 5, 2023, 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.

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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 reported carrying amount of our fixed rate long-term debt was $ 311.9 million and $ 266.5 million at June 30, 2023, and December 31, 2022, respectively.

The fair value of this debt was $ 268.3 million and $ 218.3 million at June 30, 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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Single incident product liability claims involve incidents of short duration that are typically known when they occur and involve observable injuries, which provide an objective basis for quantifying damages.

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

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

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

The reserve for single incident product liability claims was $ 1.5 million 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.

The reserve for single incident product liability claims was $ 1.5 million at June 30, 2023, and $ 1.4 million December 31, 2022.

Single incident product liability expense was $ 0.1 million during both the six months ended June 30, 2023 and the six months ended June 30, 2022.

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

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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.

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 Sheets 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.

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(“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”).

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 MSA 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.

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 a subsidiary of 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.

Following the completion of the sale and 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:

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 (no additional impact for the quarter ended June 30, 2023):

(In millions) Three Months Ended March 31, 2023

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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

(In millions) Six Months Ended June 30, 2023 Year Ended

December 31, 2022

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

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

(In millions) Six Months Ended June 30, 2023 Year Ended

December 31, 2022

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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.

As of July 27, 2023, Globe was named as a defendant in 137 lawsuits comprised of approximately 8,231 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 Sag Main Holdings, LLC (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

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

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

(In thousands) Six Months Ended June 30, 2023 Year Ended

December 31, 2022

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Ending warranty reserve $ 15,102 $ 15,230

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.

Warranty expense was $ 4.7 million and $ 4.8 million for the six months ended June 30, 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