What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-16 compared with 2023-02-16 · 235 added, 260 removed, 1186 unchanged (29% of the section changed)

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/s/ NISHAN J.

Chairman, President and Chief Executive Officer

Chairman and Chief Executive Officer

Senior Vice President and Chief Financial Officer

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

Valuation of cumulative trauma product liability claims

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

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

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

At December 31, 2022, the Company’s reserve for cumulative trauma product liability claims was $395.1 million, representing its best estimate of the expected losses related to these claims.

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

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

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

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

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

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

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

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

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

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

Divestiture of MSA LLC

Description of the Matter As more fully described in Note 20 to the consolidated financial statements, on January 5, 2023, the Company entered into a membership interest purchase agreement (the “Purchase Agreement”) with Sag Main Holdings, LLC (the “Buyer”) under which the Company transferred to the Buyer all of the issued and outstanding limited liability company interests of MSA LLC (the “Sale”).

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 remained with MSA LLC when it transferred to the Buyer's ownership pursuant to the Purchase Agreement.

Following the completion of the Sale and the transfer of MSA LLC to the Buyer, the Company no longer has any obligation with respect to pending and future cumulative trauma product liability claims relating to MSA LLC.

As such, all legacy cumulative trauma product liability reserves and related insurance assets were derecognized.

The Company incurred a pre-tax loss on divestiture of MSA LLC of $129.2 million during the year ended December 31, 2023.

Auditing management’s evaluation of the divestiture of MSA LLC and the corresponding derecognition of the legacy cumulative trauma product liability reserves and related insurance assets was challenging and required additional audit effort given the complexity of the accounting guidance and the evaluation of the Purchase Agreement and other related agreements to assess whether the criteria were met to derecognize the legacy cumulative trauma product liability reserves and related insurance assets.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of relevant internal controls over the Company’s divestiture of MSA LLC, including the controls related to the evaluations performed to determine whether the criteria to derecognize the legacy cumulative trauma product liability reserves and related insurance assets were met.

To test the Company’s accounting evaluations surrounding the divestiture of MSA LLC, we performed audit procedures which included, among others:

reading the minutes of the meetings of the board of directors and the committees of the board, reading the Purchase Agreement and related agreements to evaluate whether any provisions or circumstances were present that would provide the Company the power or control over the divested assets and liabilities or that may provide for any characteristics of continuing involvement in the management of the legacy cumulative trauma product liability reserves and related insurance assets, performing a search for new or contrary evidence, and obtaining a representation letter from the Company.

We engaged professionals with specialized skill and knowledge to assist in performing these procedures.

Our procedures also included evaluating the sufficiency of the Company’s disclosures with respect to the divestiture of MSA LLC described in Note 20 to the consolidated financial statements.

/s/ Ernst & Young LLP

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Currency exchange losses, net 17,079 10,255 216

Loss on divestiture of MSA LLC (Note 20) 129,211 — —

Product liability expense (Note 20) 3 20,590 185,264

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Net income $ 58,583 $ 179,630 $ 21,788

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments (Note 6) 21,682 ( 19,453 ) ( 25,354 )

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Reclassifications from accumulated other comprehensive loss into net income (Note 6) 101 2,912 267

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

Total other comprehensive income (loss), net of tax 29,468 ( 9,577 ) 33,165

Comprehensive income 88,051 170,053 54,953

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Income taxes payable (Note 10) 19,972 6,149

Accrued restructuring (Note 3) and other current liabilities 100,822 113,451

Other current liabilities 92,545 100,822

Total current liabilities 332,818 345,865

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Preferred stock, 4.5 % cumulative, $ 50 par value (Note 7)

$ 3,569 $ 3,569

Common stock, no par value ( 180,000,000 shares authorized;

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Depreciation and amortization 60,773 56,317 50,317

Tax-effected loss on divestiture of MSA LLC (Note 20) 199,578 — —

Stock-based compensation (Note 11) 30,023 19,650 18,908

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Product liability payments (Note 20) ( 5,250 ) ( 36,755 ) ( 39,548 )

Contribution on divestiture of MSA LLC (Note 20) ( 341,186 ) — —

Trade receivables

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Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 16,671 ) ( 16,631 ) ( 7,193 )

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

(Decrease) increase in cash, cash equivalents and restricted cash ( 16,020 ) 22,990 ( 19,596 )

Beginning cash, cash equivalents and restricted cash 164,428 141,438 161,034

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

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

Distributions to noncontrolling interests ( 5,632 ) — —

Common dividends ($ 1.75 per share)

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

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

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

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

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

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

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

Common dividends ($ 1.82 per share)

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

Highly liquid investments consist of money market funds which were $ 1.9 million and $ 8.7 million at December 31, 2022 and 2021, respectively.

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

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

This requirement may impact the value of these fund shares.

Highly liquid investments, consisting of money market funds totaling $ 1.9 million at December 31, 2022, were liquidated and included in the cash contributed in the MSA LLC divestiture transaction.

Refer to Note 20—Contingencies to the consolidated financial statements in Part II Item 8 of this Form 10-K for further discussion on the divestiture of MSA LLC on January 5, 2023.

Prior to the divestiture, these funds were valued at net asset value (“NAV”) and were required to price and transact at a NAV per share that fluctuated based upon the pricing of the underlying portfolio of securities.

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

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These balances were used to support letter of credit balances.

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

Cost is determined using the FIFO method.

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

Cost is determined using the first-in, first-out ("FIFO") method.

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

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

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

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

Investment securities — Prior to the divestiture of MSA LLC as discussed above, the Company held investment securities, primarily consisting of fixed income securities which were classified as available-for-sale.

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

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

Property and Depreciation— Property is recorded at cost.

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Ordinary repairs and maintenance are expensed as incurred.

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

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

Depreciation expense for the years ended December 31, 2023, 2022 and 2021 was $ 41.8 million, $ 36.7 million and $ 33.0 million, respectively.

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

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

Software development amortization expense was $ 10.4 million, $ 7.9 million and $ 4.9 million during the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2023, the Company had remaining maintenance performance obligations of approximately $ 32.9 million which are expected to be recognized to revenue over approximately 4 years.

Lease revenues and interest earned by the Company, included in the Consolidated Statements of Income, were not material to any of the years ended December 31, 2023, 2022 and 2021.

Net investment in sales-type leases of $ 6.3 million and $ 14.6 million were included in Prepaid expenses and other current assets and Insurance receivable and other noncurrent assets, respectively, in the Consolidated Balance Sheets as of December 31, 2023.

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

The portion in Insurance receivable and other noncurrent assets at December 31, 2023 is expected to be collected within six years .

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

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Based on these assessments, no impairments were identified during the years ended December 31, 2023, 2022 or 2021.

Goodwill is not amortized, but is subject to impairment assessments.

On October 1st of each year, or more frequently if indicators of impairment exist or if a decision is made to sell a business, we evaluate goodwill for impairment.

Judgment is involved in determining if an indicator of impairment has occurred.

Such indicators may include a decline in expected cash flows, a significant adverse change in the business climate, unanticipated competition, slower growth rates, or negative developments in equity and credit markets, among others.

All goodwill is assigned to and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment.

The evaluation of impairment involves using either a qualitative or quantitative approach as outlined in ASC Topic 350.

In 2022, we performed a two-step quantitative test at October 1, 2022.

Step 1 of the quantitative testing involves comparing the estimated fair value of each reporting unit to its carrying value.

Goodwill is not amortized, but evaluated for impairment at least annually or whenever events or changes in circumstance indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The Company may perform either a qualitative assessment of potential impairment or proceed directly to a quantitative assessment of potential impairment.

If the Company chooses not to perform a qualitative assessment, or if it chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then the Company will perform a quantitative assessment.

A quantitative test for goodwill impairment is performed by determining the fair value of the related reporting units.

The Company estimates the fair value of the reporting unit with which the goodwill is associated and compares it to the carrying value.

If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit's carrying value over its fair value.

Fair value is measured based on the discounted cash flow method and relative market-based approaches.

In 2023, we performed a quantitative test at October 1, 2023.

We estimate reporting unit fair value using a weighted average of fair values determined by discounted cash flow ("DCF") and market approach methodologies, as we believe both are important indicators of fair value.

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

Management performed its evaluation and determined the fair value of each reporting unit is greater than the carrying amount and, accordingly, the Company has not recorded any impairment charges related to goodwill.

There has been no impairment of our goodwill during the years ended December 31, 2023, 2022 or 2021.

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

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

Depending on the terms of the arrangement, we may defer revenue for which we have a future obligation, including leases where the Company is the lessor, connected safety subscriptions, training, extended warranty, software subscriptions, maintenance and technical services, until such time that the obligation has been satisfied.

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

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Once an unfavorable outcome is assessed to be probable, management evaluates estimates of the potential loss, and the most reasonable loss estimate is recorded (or, if the estimate of the loss is a range, and no amount within the range is considered to be a better estimate than any other amount, the minimum amount in the range is recorded).

If a loss is deemed to be reasonably possible but less than probable and/or such loss cannot be reasonably estimated, then the matter is disclosed and no liability is recorded.

If a material loss is deemed to be reasonably possible but not probable, the matter is disclosed and no liability is recorded.

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

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

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

Concentration of credit and business risks— We sell to customers in a broad mix of industries and are exposed to credit risk in the event of nonpayment.

Changes in these industries or other developments may significantly affect our financial performance and management's estimates.

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During the years ended December 31, 2023, 2022 and 2021, we recorded restructuring charges of $ 9.9 million, $ 8.0 million and $ 16.4 million, respectively.

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

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

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

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

These charges were primarily related to our ongoing initiatives to adjust our cost structure and improve productivity.

Americas segment restructuring charges of $ 3.1 million during the year ended December 31, 2023, were related to manufacturing footprint optimization activities.

International segment restructuring charges of $ 4.7 million during the year ended December 31, 2023, were related to ongoing initiatives to drive profitable growth and improve productivity.

Corporate segment restructuring charges of $ 2.1 million during the year ended December 31, 2023, were related to footprint optimization activities and management restructuring.

A total of 152 positions were eliminated in 2023.

There were 62 positions eliminated in the Americas segment, 75 in the International segment, and 15 in the Corporate segment.

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

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

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

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

various optimization activities.

Corporate segment restructuring charges of $ 0.6 million during the year ended December 31, 2022, were primarily related to programs to

realign the organization and adjust our operations in response to current business conditions.

A total of 151 positions were eliminated in 2022.

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

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

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

Americas segment restructuring charges of $ 4.6 million during the year ended December 31, 2021, were primarily related

to integration related activities and costs associated with our global Fixed Gas & Flame Detection manufacturing footprint

optimization as well as programs to adjust our operations in response to current business conditions.

International segment restructuring charges of $ 11.2 million during the year ended December 31, 2021, were primarily related to our initiatives to

drive profitable growth and right size our operations.

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Reserve balances at December 31, 2023 $ 0.8 $ 9.0 $ — $ 9.8

Restructuring reserves at December 31, 2022 and 2021 are included in Accrued restructuring and other current liabilities in our Consolidated Balance Sheets.

Restructuring reserves at December 31, 2023 and 2022 are included in Other current liabilities in our Consolidated Balance Sheets.

Note 4— Inventories

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

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

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

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

Unrecognized net actuarial gains (losses) 8,654 ( 2,862 ) 54,384 — — —

Tax (expense) benefit ( 1,514 ) 703 ( 12,804 ) — — —

Total other comprehensive gain (loss) before reclassifications, net of tax 7,140 ( 2,159 ) 41,580 — — —

Amounts reclassified from accumulated other comprehensive loss into net income:

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

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

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

(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.

The reclassifications are included in Currency exchange losses, net, within the Consolidated Statements of Income.

Note 7— Capital Stock

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

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

Under the program, there were no shares repurchased during 2023, 251,408 shares repurchased during 2022 and no shares repurchased during 2021.

We do not have any other share repurchase programs.

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Performance stock expense — — 13,227 —

Performance stock forfeitures — — ( 755 ) —

Employee stock purchase plan — 5,730 772 83

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

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

Acquisition of noncontrolling interest — — ( 4,751 ) —

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

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Stock option expense — — 49 —

Stock option forfeitures — — ( 9 ) —

Performance stock issued — 55,447 ( 880 ) 880

Performance stock expense — — 15,843 —

Performance stock forfeitures — — ( 2,730 ) —

Employee stock purchase plan — 7,412 779 112

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

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

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

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

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Stock option expense — — 11 —

Stock option forfeitures — — ( 11 ) —

Performance stock issued — 53,407 ( 855 ) 855

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Treasury shares purchased — ( 28,649 ) — ( 3,961 )

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

Balances December 31, 2023 62,081,391 ( 22,764,179 ) $ 312,324 $ ( 361,684 )

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Americas, International, and Corporate.

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

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

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

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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 excluding restructuring charges, currency exchange gains (losses), product liability expense, loss on divestiture of Mine Safety Appliances Company, LLC ("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.

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Restructuring charges (Note 3) 9,892

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

Currency exchange losses, net 17,079

Loss on divestiture of MSA LLC (Note 20) 129,211

Product liability expense (Note 20) 3

Acquisition related costs (a) (Note 14)

Amortization of acquisition-related intangible assets 9,246

Transaction costs (b)

Adjusted operating income (loss) 359,617 89,699 ( 51,600 ) 397,716

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Restructuring charges (Note 3) 7,965

Currency exchange losses, net (Note 6) 216

Currency exchange losses, net 10,255

Product liability expense (Note 20) 20,590

Acquisition related costs (a) (Note 14)

Amortization of acquisition-related intangible assets 9,207

Transaction costs (b)

Adjusted operating income (loss) 267,392 60,923 ( 37,928 ) — 290,387

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Restructuring charges (Note 3) 16,433

Currency exchange losses, net (Note 6) 8,578

Currency exchange losses, net 216

Product liability expense (Note 20) 185,264

Acquisition related costs (a) (Note 14)

COVID-19 related costs 757

Amortization of acquisition-related intangible assets 8,764

Transaction costs (b)

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

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Noncash items:

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

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

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

Capital expenditures 25,148 11,408 7,281 — 43,837

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

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

(b) 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 Consolidated Statements of Income

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

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

Geographic information on Net sales to external customers, based on country of origin:

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Total $ 265,175 $ 251,694 $ 257,971

Total Net sales by product group was as follows:

Total Net sales by product portfolio was as follows:

2023 Consolidated Americas International

(In thousands) Dollars Percent Dollars Percent Dollars Percent

Breathing Apparatus $ 371,176 24 % $ 265,558 25 % $ 105,618 22 %

Fixed Gas & Flame Detection (a)

Firefighter Safety (a)

$ 684,224 38 % $ 501,676 41 % $ 182,548 33 %

Firefighter Helmets & Protective Apparel (b)

Detection (b)

634,915 36 % 419,312 34 % 215,603 39 %

Portable Gas Detection 173,660 11 % 121,934 12 % 51,726 11 %

Industrial Head Protection 163,253 11 % 127,485 12 % 35,768 7 %

Fall Protection 110,094 7 % 69,225 7 % 40,869 8 %

Industrial PPE and Other (c)

468,508 26 % 314,606 25 % 153,902 28 %

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(In thousands) Dollars Percent Dollars Percent Dollars Percent

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

Fixed Gas & Flame Detection (a)

Firefighter Safety (a)

$ 578,935 38 % $ 416,427 40 % $ 162,508 34 %

Firefighter Helmets & Protective Apparel (b)

Detection (b)

529,735 35 % 349,543 34 % 180,192 37 %

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

Industrial Head Protection 143,601 10 % 108,869 12 % 34,732 7 %

Fall Protection 117,731 8 % 69,108 8 % 48,623 10 %

Industrial PPE and Other (c)

419,283 27 % 277,268 26 % 142,015 29 %

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(In thousands) Dollars Percent Dollars Percent Dollars Percent

Breathing Apparatus $ 329,179 24 % $ 220,650 25 % $ 108,529 23 %

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

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

Portable Gas Detection 142,581 11 % 90,545 10 % 52,036 11 %

Industrial Head Protection 125,921 9 % 92,075 11 % 33,846 7 %

Fall Protection 103,075 8 % 58,060 7 % 45,015 10 %

Firefighter Safety (a)

$ 526,326 38 % $ 354,426 39 % $ 171,900 35 %

Detection (b)

461,779 33 % 292,058 32 % 169,721 34 %

Industrial PPE and Other (c)

412,077 29 % 261,584 29 % 150,493 31 %

Total $ 1,400,182 100 % $ 908,068 100 % $ 492,114 100 %

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

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

(a) Firefighter Safety includes Breathing Apparatus and Firefighter Helmets and Protective Apparel, and includes sales from the Bristol acquisition from January 25, 2021 onward (International).

(b) Detection includes Fixed Gas and Flame Detection and Portable Gas detection, and includes sales from the Bacharach acquisition from July 1, 2021 onward (Americas and International).

Note 9— Earnings per Share

1 unchanged sentence

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

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

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

Amounts attributable to MSA Safety Incorporated common shareholders:

8 unchanged sentences

Diluted weighted-average shares outstanding 39,473 39,407 39,449

Antidilutive stock options — — —

Antidilutive stock-based awards — — —

Earnings per share:

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12, on the Finance Act of 2021.

This bill will increase the statutory rate from 19% to 25% in April 2023.

This bill increased the statutory rate from 19% to 25% in April 2023.

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

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federal income tax rate 21.0 % 21.0 % 21.0 %

Divestiture (Note 20) 46.6 % — % — %

State income taxes-U.S.

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Nondeductible compensation 1.9 % 1.2 % 15.3 %

Valuation allowances 0.8 % 7.0 % 0.8 %

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

Research and development credit ( 0.8 ) % ( 0.4 ) % ( 5.3 ) %

Taxes on non-U.S.

income ( 0.6 ) % 0.1 % ( 10.9 ) %

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

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

Taxes on non-U.S.

income - U.S., Canadian & European reorganization ( 0.5 ) % — % — %

Employee share-based payments ( 0.4 ) % ( 0.8 ) % ( 18.3 ) %

Valuation allowances ( 0.2 ) % 0.8 % 7.0 %

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

Other 0.9 % ( 0.4 ) % 6.3 %

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Deferred tax assets

Product liability $ 72,950 $ 71,709

Capitalized research and development $ 28,822 $ 26,988

Net operating losses and tax credit carryforwards 10,964 10,696

Accrued expenses and other reserves 5,738 4,627

Share-based compensation 5,528 4,562

Inventory 7,281 —

Accrued expenses and other reserves 4,566 5,738

Reserve for doubtful accounts 1,562 —

Product liability 655 72,950

Other 7,218 5,068

4 unchanged sentences

Goodwill and intangibles ( 83,100 ) ( 80,383 )

Property, plant and equipment ( 18,735 ) ( 17,088 )

Employee benefits ( 24,958 ) ( 18,899 )

Inventory — ( 1,264 )

Property, plant and equipment ( 15,541 ) ( 18,735 )

Other ( 2,680 ) ( 4,359 )

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

The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues above €750.0 million (referred to as Pillar 2), with effective dates beginning in January 2024.

While it is uncertain whether the U.S.

will enact legislation to adopt Pillar 2, we meet the overall revenue threshold and therefore fall within the scope of Pillar 2.

At this time, we do not expect Pillar 2 to have a material impact on our effective tax rate or our consolidated results of operation, financial position, and cash flows.

We continue to monitor the potential financial impacts and compliance requirements of Pillar 2.

Note 11— Stock Plans

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

The 2023 Management Equity Incentive Plan and its predecessor, the 2016 Management Equity Incentive Plan, provide for various forms of stock-based compensation for eligible employees through May 2033 including stock options, restricted stock awards, restricted stock units and performance stock units.

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

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Exercised ( 103,545 ) 44.91

Forfeited ( 210 ) 43.75

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

Exercised ( 31,394 ) 46.90

Forfeited ( 226 ) 49.44

Outstanding December 31, 2023 26,536 $ 45.95 26,536

For various exercise price ranges, characteristics of outstanding and exercisable stock options at December 31, 2023 were as follows:

Stock Options Outstanding

Range of Exercise Prices Shares Weighted-Average

Exercise Price Remaining Life

$ 33.01 – $ 45.00

33,148 $ 44.50 2.41

$ 45.01 – $ 57.93

25,008 49.10 2.21

$ 33.01 – $ 57.93

58,156 $ 46.48 2.32

Stock Options Exercisable

Stock Options Outstanding and Exercisable

Range of Exercise Prices Shares Weighted-Average

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Performance adjustments 5,357 88.45

Forfeited ( 6,765 ) 111.60

Unvested at December 31, 2021 193,335 129.86

2 unchanged sentences

Performance adjustments ( 22,147 ) 99.84

Forfeited ( 18,485 ) 147.66

Unvested at December 31, 2022 178,760 146.28

4 unchanged sentences

Unvested at December 31, 2023 189,221 $ 146.17

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

The 2023 performance adjustments above relate primarily to 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.

During the years ended December 31, 2023, 2022 and 2021, the total intrinsic value of stock options exercised (the difference between the market price on the date of exercise and the option price paid to exercise the option) was $ 3.7 million, $ 8.6 million and $ 13.0 million, respectively.

12 unchanged sentences

99,733 99,711

2023 Term Loan credit agreement maturing in 2026, net of debt issuance costs 230,604 —

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 59,602 307,031

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

Under the amended agreement, the Company may elect either a Base rate of interest (“BASE”) or an interest rate based on the London Interbank Offered Rate (“LIBOR”).

The BASE is a daily fluctuating per annum rate equal to the highest of (i) 0.00 %, (ii) the Prime Rate, (iii) the Federal Funds Open Rate plus one half of one percent ( 0.5 %), (iv) the Overnight Bank Funding Rate, plus one half of one percent ( 0.5 %), or (v) the Daily LIBOR Rate plus one percent ( 1.00 %).

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

The agreement was amended in August 2021 and June 2023 to transition from Sterling LIBOR reference rates and U.S.

LIBOR reference rates.

Under the amended agreement, the Company may elect either a Base rate of interest (“BASE”) or an interest rate based on Secured Overnight Financing Rate (“SOFR”).

The BASE is a daily fluctuating per annum rate equal to the highest of (i) 0.00 %, (ii) the Overnight Bank Funding Rate, plus 0.5 %, (iii) the Prime Rate (iv) the Daily Simple SOFR rate, plus 1.00 %.

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

The Company has a weighted average revolver interest rate of 6.22 % as of December 31, 2023.

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

The Company has outstanding £ 48.8 million (approximately $ 62.2 million at December 31, 2023) of 3.4 % Series B Senior Notes due January 22, 2031.

Remaining maturities of this note are £ 6.1 million (approximately $ 7.8 million at December 31, 2023) due annually 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.

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

except during an acquisition period, defined as four consecutive fiscal quarters beginning with the quarter of acquisition, in which case the consolidated net leverage ratio shall not exceed 4.00 to 1.00;

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

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

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

On 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.

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

1 unchanged sentence

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

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

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

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

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

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

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

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 SOFR reference rates.

The Company applied 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 did not require remeasurement at the modification date or a reassessment of previous accounting determinations.

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

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 SOFR.

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 6.45 % as of December 31, 2023.

The Revolving Credit Facility, Term Loan 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;

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

All credit facilities excluded MSA LLC prior to the divestiture of this subsidiary on January 5, 2023, as discussed further in Note 20.

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

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At December 31, 2023, the Company has $ 2.0 million of restricted cash in support of these arrangements.

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

Please refer to Note 20—Contingencies for additional information.

Note 13— Goodwill and Intangible Assets

2 unchanged sentences

Balance at January 1 $ 620,622 $ 636,858

Additions — 199,454

Measurement period adjustment — ( 1,041 )

1 unchanged sentence

Balance at December 31 $ 627,534 $ 620,622

2022 $ 620,622 $ 636,858

At December 31, 2023, goodwill of $ 447.6 million and $ 179.9 million related to the Americas and International reportable segments, respectively.

2 unchanged sentences

Net balance at January 1 $ 281,853 $ 306,948

Additions — 164,426

Amortization expense ( 18,085 ) ( 19,137 )

3 unchanged sentences

Intangible Assets:

Weighted Average Useful Life (years) Gross Carrying Amount Accumulated Amortization and Reserves Net Carrying Amount Gross Carrying Amount Accumulated Amortization and Reserves Net Carrying Amount

Weighted Average Useful Life (years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Customer relationships 19 $ 181.8 $ ( 46.5 ) $ 135.3 $ 178.7 $ ( 35.3 ) $ 143.4

6 unchanged sentences

At December 31, 2023, the above intangible assets balance includes a trade name related to the Globe acquisition with an indefinite life totaling $ 60.0 million.

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

Intangible asset amortization expense over the next five years is expected to be approximately $ 17.9 million in 2024, $ 17.7 million in 2025, $ 17.3 million in 2026, $ 17.2 million in 2027, and $ 17.0 million in 2028.

Note 14— Acquisitions

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On July 1, 2021, we acquired 100 % of the common stock of Bacharach in an all cash transaction valued at $ 329.4 million, net of cash acquired.

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

Headquartered near Pittsburgh in New Kensington, PA, Bacharach is a leader in gas detection technologies used in the HVAC-R markets.

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

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

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

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

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

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MSA has been treated as the acquirer.

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

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

Total transaction costs were $ 1.0 million, $ 3.2 million and $ 7.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Transaction costs are included in Selling, general and administrative expenses in the Consolidated Statements of Income.

Acquisition of Noncontrolling Interest

22 unchanged sentences

Settlements ( 1,574 ) ( 260 ) — —

Transfers (b)

— ( 19,312 ) — —

Acquisitions — 26,231 — 926

Currency translation 3,645 ( 7,929 ) — —

5 unchanged sentences

Participant contributions 347 257 276 259

Acquisitions — 25,476 — —

Settlements ( 1,574 ) ( 260 ) — —

Benefits paid ( 26,140 ) ( 26,377 ) ( 2,406 ) ( 2,585 )

Transfers (b)

— ( 19,312 ) — —

Administrative expenses paid ( 57 ) ( 54 ) — —

17 unchanged sentences

(a) Actuarial gains for both periods relate primarily to the increase/decrease in discount rates used in measuring plan obligations as of December 31, 2023 and 2022, respectively.

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

Pension Benefits Other Benefits

6 unchanged sentences

Recognized net actuarial losses 186 11,704 17,458 550 1,242 1,597

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

Settlement/curtailment loss (gain) 15 ( 354 ) ( 2,234 ) (b)

Net periodic benefit (income) cost (a)

110 unchanged sentences

(In thousands) 2023 2022 2021

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

Components of net periodic benefit income other than service cost (Note 15) $ 14,107 $ 22,286 $ 8,321

Interest income 8,184 4,155 3,256

9 unchanged sentences

Year Ended December 31,

(In thousands, except percentage and year amounts) 2022 2021

(In millions, except percentage and year amounts) 2023 2022

Operating lease cost recognized as rent expense $ 12.0 $ 15.0

5 unchanged sentences

Right-of-use assets obtained in exchange for new operating lease liabilities $ 19.3 $ 6.4

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

Weighted-average remaining lease term (in years):

6 unchanged sentences

At December 31, 2023, future lease payments under operating leases were as follows:

(In thousands) Operating Leases

2023 $ 10,043

(In millions) Operating Leases

After 2028 23.5

3 unchanged sentences

Noncurrent operating lease liabilities $ 44.5

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

(a) Included in Other current liabilities on the Consolidated Balance Sheets.

Note 18— Derivative Financial Instruments

10 unchanged sentences

Foreign exchange contracts:

accrued restructuring and other current liabilities $ 85 $ 128

other current liabilities $ 242 $ 85

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

14 unchanged sentences

With the exception of our investments in marketable securities and fixed rate long-term debt both as disclosed below, we believe that the reported carrying amounts of our remaining 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 $ 9.9 million and $ 49.0 million as of December 31, 2022, and 2021, respectively.

The fair value of our investments was $ 9.9 million and $ 49.0 million as of December 31, 2022, and 2021, respectively, which was reported in Investments, short-term in the accompanying 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 gains or losses relating to these securities have been recognized.

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

Our investments in available-for-sale marketable securities, primarily fixed income, were owed by our now-divested subsidiary MSA LLC and were part of our MSA LLC divestiture as described in Note 20—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 of our investments was $ 9.9 million as of December 31, 2022, which was reported in Investments, short-term in the accompanying Consolidated Balance Sheets.

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

No impairment losses relating to these securities occurred during the year ended December 31, 2023.

The reported carrying amount of fixed rate long-term debt, including the current portion of long-term debt, was $ 312.2 million and $ 266.5 million at December 31, 2023, and 2022, respectively.

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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 December 31, 2022 and December 31, 2021.

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

The reserve for single incident product liability claims was $ 1.3 million and $ 1.4 million at December 31, 2023 and December 31, 2022, respectively.

Single incident product liability expense was nominal for the three years ended December 31, 2023, 2022 and 2021.

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

2 unchanged sentences

Cumulative trauma product liability claims.

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

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

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

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.

A former subsidiary of the Company, MSA LLC, which was divested as described below, has been 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.

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

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

See "Subsequent Event," below.

2022 2021 2020

Open lawsuits, beginning of period 1,675 1,622 1,605

New lawsuits 300 432 402

Settled and dismissed lawsuits ( 475 ) ( 379 ) ( 385 )

Open lawsuits, end of period 1,500 1,675 1,622

2022 2021 2020

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

New claims 520 2,134 917

Settled, inactive and dismissed claims ( 1,020 ) ( 458 ) ( 495 )

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

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

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

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

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

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

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

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

See "Subsequent Event," below.

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

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

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

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

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

At December 31, 2022, $ 65.1 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 Consolidated Balance Sheet and the remainder, $ 330.0 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 Consolidated Balance Sheet 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.

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

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

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

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

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

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

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

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

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

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

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 Consolidated Statements of Income 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 Sheets and the remainder, $ 330.0 million, was 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,

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 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 claims to which the Company's legacy cumulative trauma product liability reserves and the policyholder of the related insurance assets, the rights and obligations related to these items remained with MSA LLC when it transferred to the Buyer's ownership pursuant to the Purchase Agreement.

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 the transfer of MSA LLC to the Buyer, 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 Consolidated Statements of Income for the year ended December 31, 2023:

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

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

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

See "Subsequent Event," below.

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

These amounts are not subject to current coverage litigation.

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

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

The vast majority of the $ 127.6 million insurance receivables balance at December 31, 2022, is attributable to reimbursement believed to be due under the terms of signed Coverage-In-Place Agreements and a portion of this amount represents the estimated recovery of IBNR amounts not yet incurred.

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

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 Consolidated Balance Sheets and $ 110.3 million was reported in Insurance receivables and other noncurrent assets.

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) 2023 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 receivables 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 December 31, 2022 totaled $ 44.6 million, of which $ 5.9 million is reported in Notes receivable, insurance companies, current on the Consolidated Balance Sheet and $ 38.7 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 on the Consolidated Balance Sheet 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 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:

1 unchanged sentence

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 receivables balances at both December 31, 2022 and 2021, is attributable to reimbursement under the terms of signed agreements with insurers and is not currently subject to litigation.

The collectability of MSA LLC's insurance receivables and notes receivables is regularly evaluated and the Company believes that the amounts recorded are probable of collection.

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

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

Subsequent Event

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

and Obra Capital, Inc.

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

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

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

Other Litigation

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

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.

Specifically, Globe builds turnout gear from technical fabrics sourced from a small pool of specialty textile manufacturers.

These protective fabrics have been tested and certified to meet industry standards, and some of them contain PFAS to achieve water, oil, or chemical resistance.

No manufacturer of firefighter protective clothing is currently able to meet National Fire Protection Association safety standards while offering coats or pants that are completely PFAS free.

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

Specifically, Globe builds firefighter turnout gear from technical fabrics sourced from a small pool of specialty textile manufacturers.

These protective fabrics have been tested and certified to meet current National Fire Protection Association safety standards, and some of them as supplied to Globe contain or historically have contained PFAS to achieve performance characteristics such as water, oil, or chemical resistance.

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 Consolidated Statement of Income as incurred.

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

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

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

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

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

As of February 7, 2024, Globe was named as a defendant in approximately 467 lawsuits comprised of about 10,578 claims, plus one action filed on behalf of a putative class of Florida firefighters and certain of their dependents.

Certain of these lawsuits include MSA Safety Inc.

or other Globe affiliates as defendants.

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

16 unchanged sentences

Gross profit 181,398 213,796 218,761 238,183 852,138

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

Earnings per share (1)

Net (loss) income attributable to MSA Safety Incorporated ( 150,173 ) 67,090 65,256 76,410 58,583

(Loss) earnings per share (1)

Basic $ ( 3.83 ) $ 1.71 $ 1.66 $ 1.94 $ 1.49

3 unchanged sentences

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

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

Earnings (loss) per share (1)

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

Earnings per share (1)

Basic $ 0.90 $ 1.21 $ 1.15 $ 1.31 $ 4.58

4 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data