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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the historical financial statements and other financial information included elsewhere in this annual report on Form 10-K. This discussion may contain forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the sections of this annual report entitled “Forward-Looking Statements” and “Risk Factors.”

This section generally discusses the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022. For a discussion on the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on February 16, 2023.

MSA Safety Incorporated ("MSA") is organized into four geographical operating segments that are aggregated into three reportable segments: Americas, International and Corporate. The Americas segment is comprised of our operations in North America and Latin America geographies. The International segment is comprised of our operations of all geographies outside of the Americas. Certain global expenses are allocated to each segment in a manner consistent with where the benefits from the expenses are derived. Please refer to Note 8—Segment Information of the consolidated financial statements in Part II Item 8 of this Form 10-K for further information.

On January 5, 2023, the Company divested Mine Safety Appliances LLC ("MSA LLC") a wholly owned subsidiary that held 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, MSA contributed $341.2 million in cash and cash equivalents, while R&Q and Obra contributed an additional $35.0 million. As a result of the transaction, MSA derecognized all legacy cumulative trauma product liability reserves, related insurance assets, and associated deferred tax assets of the divested subsidiary from its balance sheet in the first quarter of 2023. R&Q and Obra have assumed management of the divested subsidiary, including the management of its claims. Refer to Note 20—Contingencies of the consolidated financial statements in Part II Item 8 of this Form 10-K for further information.

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BUSINESS OVERVIEW

MSA is the global leader in advanced safety products, technology and solutions. Driven by its singular mission of safety, the Company has been at the forefront of safety innovation since 1914, protecting workers and facility infrastructure around the world across a broad range of diverse end markets while creating sustainable value for shareholders.

We tailor our product offerings and distribution strategy to satisfy distinct customer preferences that vary across geographic regions. To best serve these customer preferences, we have organized our business into four geographical operating segments that are aggregated into three reportable segments: Americas, International and Corporate. In 2023, 69% and 31% of our net sales were made by our Americas and International segments, respectively.

Americas. Our largest manufacturing and research and development facilities are located in the United States. We serve our markets across the Americas with manufacturing facilities in the U.S., Mexico and Brazil. Operations in the other countries within the Americas segment focus primarily on sales and distribution in their respective home country markets.

International. Our International segment includes companies in Europe, the Middle East and Africa ("EMEA") and the Asia Pacific region. In our largest International subsidiaries (in Germany, France, U.K., Ireland and China), we develop, manufacture and sell a wide variety of products. In China, the products manufactured are sold primarily in China as well as in regional markets. Operations in other International segment countries focus primarily on sales and distribution in their respective home country markets. Although some of these companies may perform limited production, most of their sales are of products manufactured in our plants in Germany, France, the U.S., U.K., Ireland, Morocco and China or are purchased from third-party vendors.

Corporate. The Corporate segment primarily consists of general and administrative expenses incurred in our corporate headquarters, costs associated with corporate development initiatives, legal expense, interest expense, foreign exchange gains or losses and other centrally-managed costs. Corporate general and administrative costs comprise the majority of the expense in the Corporate segment. During the years ended December 31, 2023, and 2022 corporate general and administrative costs were $52.7 million and $40.3 million, respectively. These increases reflect an increase in centrally managed functions and is primarily the result of higher variable compensation expense related to sales growth and improved performance results from prior year.

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Net Sales 2023 2022 DollarIncrease PercentIncrease

(In millions)

Net Sales. Net sales for the year ended December 31, 2023, were $1.8 billion, an increase of $0.3 billion, from $1.5 billion for the year ended December 31, 2022, driven by volume growth and pricing actions. We saw healthy growth across product categories and both reporting segments. Constant currency sales increased by 16.1% for the year ended December 31, 2023. Please refer to the Net Sales table below for a reconciliation of the year over year sales change.

Net Sales Year Ended December 31, 2023 versus December 31, 2022

(Percent Change) Americas International Consolidated

Currency translation effects (0.9)% (0.7)% (0.9)%

Constant currency sales change 17.5% 13.2% 16.1%

Note: Constant currency sales change is a non-GAAP financial measure provided by the Company to give a better understanding of the Company's underlying business performance. Constant currency sales change is calculated by deducting the percentage impact from currency translation effects from the overall percentage change in net sales.

Net sales for the Americas segment were $1.2 billion for the year ended December 31, 2023, an increase of $0.2 billion, or 18.4%, compared to $1.0 billion for the year ended December 31, 2022. During 2023, constant currency sales in the Americas segment increased 17.5% compared to the prior year driven by volume growth and pricing actions. This growth was driven by increases in all products, particularly firefighter protective apparel and detection associated with healthy demand and improved output as well as backlog conversion as a result of continued progress with the supply chain and by applying the MSA Business System mindset.

Net sales for the International segment were $552.1 million for the year ended December 31, 2023, an increase of $67.4 million, or 13.9%, compared to $484.7 million for the year ended December 31, 2022. Constant currency sales in the International segment increased 13.2% compared to the prior year period. This growth was driven by strength across most core products, particularly detection and breathing apparatus.

We expect to generate mid-single digit sales growth in 2024 with incremental margin and cash flow conversion aligned with our long-term targets. We expect to have greater visibility in the first half of the year and we will continue to be agile in the event the operating environment differs meaningfully from our expectations. There are a number of other evolving factors that will continue to influence our revenue and earnings outlook. These factors include, among other things, supply chain constraints, raw material availability, industrial employment rates, interest rate changes, military conflict, currency exchange volatility, the pace of economic recovery, and geopolitical risk. These or other conditions could impact our future results and growth expectations into 2024.

Refer to Note 8—Segment Information to the consolidated financial statements in Part II Item 8 of this Form 10-K, for information regarding sales by product group.

Gross profit. Gross profit for the year ended December 31, 2023 was $852.1 million, an increase of $178.3 million, or 26.5%, compared to $673.8 million for the year ended December 31, 2022. The ratio of gross profit to net sales was 47.7% in 2023 compared to 44.1% in 2022. Volume leverage, price/cost management, favorable product mix and productivity efforts contributed to the gross profit improvement.

Selling, general and administrative expenses. Selling, general and administrative ("SG&A") expenses were $396.6 million for the year ended December 31, 2023, an increase of $57.7 million, or 17.0%, compared to $338.9 million for the year ended December 31, 2022. Overall, selling, general and administrative expenses were 22.2% of net sales in both periods. Constant currency SG&A increased $55 million or 16.4%, to support our revenue growth. The increase in SG&A was driven by the higher level of sales, increased variable compensation and inflation. Please refer to the Selling, general and administrative expenses table for a reconciliation of the year-over-year expense change.

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(Percent Change) Consolidated

GAAP reported change 17.0%

Currency translation effects (0.6)%

Constant currency change 16.4%

Note: Constant currency SG&A change is a non-GAAP financial measure provided by the Company to give a better understanding of the Company's underlying business performance. Constant currency SG&A change is calculated by deducting the percentage impact from currency translation effects from the overall percentage change in SG&A.

Research and development expense. Research and development expense was $68.0 million for the year ended December 31, 2023, an increase of $11.0 million, or 19.3%, compared to $57.0 million for the year ended December 31, 2022. Research and development expense was 3.8% of net sales in 2023, compared to 3.7% of net sales in 2022.

We capitalized approximately $12.1 million and $8.7 million of software development costs during the years ended December 31, 2023 and 2022, respectively. Amortization expense for capitalized software development cost of $10.4 million and $7.9 million during the years ended December 31, 2023 and 2022, was recorded in costs of products sold on the Consolidated Statements of Income. Refer to Note 1—Significant Accounting Policies of the consolidated financial statements in Part II Item 8 of this Form 10-K for further details regarding our software development costs.

MSA remains committed to dedicating significant resources to research and development activities, including the development of technology-based safety solutions. As we continue to invest a significant portion of our new product development into technology-based safety solutions, we anticipate that the historical relationship of research and development expense to net sales will continue to evolve; however, we do not anticipate reductions in the relative level of total spend on research and development activities on an annual basis. Total spend on both software development and research and development activities was $80.1 million and $65.7 million during the years ended December 31, 2023 and 2022.

Restructuring charges. During the year ended December 31, 2023, the Company recorded restructuring charges of $9.9 million primarily related to our ongoing manufacturing footprint optimization activities and other initiatives to adjust our cost structure and improve productivity. This compared to restructuring charges of $8.0 million during the year ended December 31, 2022, primarily related to our ongoing international initiatives to drive profitable growth and right size operations. We remain focused on executing programs to optimize our cost structure.

Currency exchange. Currency exchange losses were $17.1 million during the year ended December 31, 2023, compared to $10.3 million during the year ended December 31, 2022. Currency exchange activity for both periods related primarily due to foreign currency exposure on unsettled inter-company balances and recognized exchange loss for our Argentina affiliate operating in a hyper-inflationary environment. During 2022, we also recognized non-cash cumulative translation losses as a result of our plan to close a foreign subsidiary.

Refer to Note 18—Derivative Financial Instruments of the consolidated financial statements in Part II Item 8 of this Form 10-K for information regarding our currency exchange rate risk management strategy.

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Product liability expense. Product liability expense during the year ended December 31, 2023 was minimal due to our divestiture of MSA LLC. This compared to $20.6 million for the year ended December 31, 2022, which related primarily to defense costs incurred for cumulative trauma product liability claims as well as an increase in MSA LLC's reserve for cumulative trauma product liability claims resulting from the annual valuation.

Loss on divestiture of MSA LLC. The $129.2 million pre-tax loss on divestiture of MSA LLC for the year ended December 31, 2023 relates to the derecognition of all legacy cumulative trauma product liability reserves and related insurance assets of the divested subsidiary during the first quarter of 2023. The loss also includes a $341.2 million contribution of cash and cash equivalents, as well as transaction related costs of $5.6 million. Refer to Note 20—Contingencies to the consolidated financial statements in Part II Item 8 of this Form 10-K for further information.

GAAP operating income. Consolidated operating income for the year ended December 31, 2023 was $231.3 million compared to $239.1 million for the year ended December 31, 2022. The decrease in operating income was primarily driven by the loss on divestiture of MSA LLC, partially offset by strong operating results driven by higher sales and gross profit.

Adjusted operating income. Americas adjusted operating income for the year ended December 31, 2023 was $359.6 million, an increase of $92.2 million or 34%, compared to $267.4 million for the year ended December 31, 2022. The increase in adjusted operating income is primarily attributable to higher sales and gross profit, partially offset by higher SG&A expenses to support business growth.

International adjusted operating income for the year ended December 31, 2023 was $89.7 million, an increase of $28.8 million, or 47%, compared to adjusted operating income of $60.9 million for the year ended December 31, 2022. The increase in adjusted operating income is primarily attributable to higher sales and gross profit.

Corporate segment adjusted operating loss for the year ended December 31, 2023 was $51.6 million, an increase of $13.7 million, or 36%, compared to an adjusted operating loss of $37.9 million for the year ended December 31, 2022 due primarily to higher performance based compensation expense related to sales growth and improved results from prior year.

The following tables represent a reconciliation from GAAP operating income to adjusted operating income (loss) and adjusted EBITDA. Adjusted operating margin % is calculated as adjusted operating income (loss) divided by net sales and adjusted EBITDA margin % is calculated as adjusted EBITDA divided by net sales.

Adjusted operating income Year Ended December 31, 2023

(In thousands) Americas International Corporate Consolidated

Restructuring charges (Note 3) 9,892

Currency exchange losses, net 17,079

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

Product liability expense (Note 20) 3

Amortization of acquisition-related intangible assets 9,246

Transaction costs(a) 965

Adjusted operating margin % 29.1 % 16.2 %

Adjusted EBITDA % 32.1 % 18.7 %

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Adjusted operating income Year Ended December 31, 2022

(In thousands) Americas International Corporate Consolidated

Restructuring charges (Note 3) 7,965

Currency exchange losses, net 10,255

Product liability expense (Note 20) 20,590

Amortization of acquisition-related intangible assets 9,207

Transaction costs(a) 3,233

Adjusted operating margin % 25.6 % 12.6 %

Adjusted EBITDA % 28.9 % 15.1 %

Note: Adjusted operating income (loss) and adjusted EBITDA are non-GAAP financial measures. Adjusted operating income (loss) is reconciled above to the nearest GAAP financial measure, Operating income (loss), and excludes restructuring, currency exchange, product liability expense, loss on divestiture of MSA LLC, transaction costs and acquisition-related amortization. Adjusted EBITDA is reconciled above to the nearest GAAP financial measure, Operating income (loss) and excludes depreciation and amortization expense. Adjusted operating margin % and Adjusted EBITDA % are operating ratios derived from non-GAAP financial measures.

Total other expense (income), net. Total other expense, net, for the year ended December 31, 2023, was $24.6 million, an increase of $24.0 million compared to $0.6 million for the year ended December 31, 2022, due primarily to increased interest expense related to higher interest rates and increased debt balances associated with the MSA LLC divestiture as well as decreased pension income driven by a lower expected rate of return. We expect total interest expense for 2024 to be approximately $40 million, this decrease is primarily related to significant long-term debt payments made during 2023. We expect non-cash pension income to increase by $2 million compared to 2023.

Income taxes. The reported effective tax rate for the year ended December 31, 2023 was 71.6% compared to 24.7% for the year ended December 31, 2022. This significant variance from the prior year is 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 partially offset by a $5.3 million tax adjustment for Switzerland tax reform. Refer to Note 20— Contingencies to consolidated financial statements in Part II Item 8 of this Form 10-K for further information on the MSA LLC divestiture.

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.

We are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ materially from the tax amounts recorded in our consolidated financial statements.

Net income attributable to MSA Safety Incorporated. Net income was $58.6 million for the year ended December 31, 2023, or $1.48 per diluted share, compared to $179.6 million, or $4.56 per diluted share, for the year ended December 31, 2022.

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Non-GAAP Financial Information

To supplement our Consolidated Financial Statements presented in accordance with generally accepted accounting principles (“GAAP”), we use, and this report includes, certain non-GAAP financial measures. These financial measures include constant currency changes, financial measures excluding the impact of acquisitions and related acquisition related costs (including acquisition related amortization), adjusted operating income, adjusted operating margin percentage, adjusted EBITDA and adjusted EBITDA margin percentage. We believe that the use of these non-GAAP financial measures provide investors with additional useful information and provide a more complete understanding of our operating performance and trends, and facilitate comparisons with the performance of our peers. Management also uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use, and computational methods with respect thereto, may differ from the non-GAAP financial measures and key performance indicators, and computational methods, that our peers use to assess their performance and trends.

The presentation of these non-GAAP financial measures does not comply with U.S. GAAP. These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for, or superior to, our reported results prepared in accordance with GAAP. When non-GAAP financial measures are disclosed, the Securities and Exchange Commission's Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. For an explanation of these measures, together with a reconciliation to the most directly comparable GAAP financial measure, please refer to the reconciliations referenced above in Management's Discussion & Analysis.

We may also provide financial information on a constant currency basis, which is a non-GAAP financial measure. These references to a constant currency basis do not include operational impacts that could result from fluctuations in foreign currency rates, which are outside of management's control. To provide information on a constant currency basis, the applicable financial results are adjusted by translating current and prior period results in local currency to a fixed foreign exchange rate. This approach is used for countries where the functional currency is the local country currency. This information is provided so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby facilitating period-to-period comparisons of business performance. Constant currency information is not recognized under U.S. GAAP and it is not intended as an alternative to U.S. GAAP measures.

LIQUIDITY AND CAPITAL RESOURCES

Our main source of liquidity is operating cash flows, supplemented by borrowings. Our principal liquidity requirements are for working capital, capital expenditures, principal and interest payments on debt, declared dividend payments and acquisitions. At December 31, 2023, approximately 52% of our long-term debt is at fixed interest rates with repayment schedules through 2036. The remainder of our long-term debt is at variable rates on an unsecured revolving credit facility that is due in 2026. At December 31, 2023, approximately 83% of our borrowings are denominated in US dollars, which limits our exposure to currency exchange rate fluctuations.

At December 31, 2023, the Company had cash and cash equivalents, including restricted cash, totaling $148.4 million, and access to sufficient capital, providing ample liquidity and flexibility to continue to maintain our balanced capital allocation strategy that prioritizes growth investments, funding our dividends and servicing debt obligations. Cash, cash equivalents and restricted cash decreased $16.0 million during the year ended December 31, 2023. The cash flow activity reflects strong operating results and working capital performance being offset by the MSA LLC divestiture as discussed below. This compared to cash increasing $23.0 million during the same period in 2022.

At December 31, 2023, $838.1 million of the existing $900.0 million senior revolving credit facility was unused, including letters of credit issued under the facility. The facility also provides an accordion feature that allows the Company to access an additional $400.0 million of capacity pending approval by MSA’s board of directors and from the bank group.

We believe MSA's healthy balance sheet and access to significant capital at the year ended December 31, 2023, positions us well to navigate through challenging business conditions and supply chain constraints or other unexpected events.

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Operating activities. Operating activities provided cash of $92.9 million in 2023, compared to providing cash of $157.5 million in 2022. The decreased operating cash flow as compared to the same period in 2022 was primarily related to the contribution of $341.2 million in the divestiture of MSA LLC. Refer to Note 20—Contingencies to the consolidated financial statements in Part II Item 8 of this Form 10-K for further information. This decrease was mostly offset by working capital improvement, notably for inventories, which was the result of a more normal supply chain environment and focus for the business and improved operating results. Sustainable progress across all elements of net working capital are being delivered through the principles of the MSA Business System.

Investing activities. Investing activities used cash of $40.0 million for the year ended December 31, 2023, compared to using $4.5 million in 2022. The increase in cash used in investing activities as compared to the same period in 2022 was primarily related to the absence of short-term investment activity. 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 20—Contingencies to the consolidated financial statements in Part II Item 8 of this Form 10-K. We remain committed to evaluating additional acquisition opportunities that will allow us to continue to grow in key end markets and geographies.

Financing activities. Financing activities used cash of $52.3 million for the year ended December 31, 2023, compared to using cash of $113.4 million in 2022. During 2023, we had net proceeds on long-term debt of $23.9 million to fund the MSA LLC divestiture as compared to net payments on long-term debt of $13.0 million during the same period in 2022. Since the MSA LLC divestiture in January 2023, we have paid down $289.0 million of our outstanding borrowings. We paid cash dividends of $73.5 million during 2023, compared to $71.5 million during 2022. We used cash of $4.0 million during 2023 to repurchase shares related to our employee stock compensation transactions. We used cash of $34.4 million during 2022, including $30.4 million related to our share repurchase program with the remainder related to employee stock compensation transactions.

CUMULATIVE TRANSLATION ADJUSTMENTS

The year-end position of the U.S. dollar relative to international currencies at December 31, 2023, resulted in a translation gain of $21.7 million being recorded to cumulative translation adjustments shareholders' equity account for the year ended December 31, 2023, compared to a translation loss of $19.5 million being recorded to the cumulative translation adjustments account during 2022.

COMMITMENTS AND CONTINGENCIES

We are obligated to make future payments under various contracts, including debt and lease agreements. Our significant cash obligations as of December 31, 2023, are as follows:

Inventory costing method change tax 5.3 2.7 2.6 — — — —

Transition tax 1.3 1.3 — — — — —

The significant obligations table does not include obligations to taxing authorities due to uncertainty surrounding the ultimate settlement of amounts and timing of these obligations.

We expect to meet our future debt service obligations through cash provided by operations. Approximately $60.8 million of debt payable in 2026, included in the table above, relates to our unsecured senior revolving credit facility that has a weighted average interest rate of 6.22% as of December 31, 2023. We expect to generate sufficient operating cash flow to make payments against this amount each year. To the extent that a balance remains when the facility matures in 2026, we expect to refinance the remaining balance through new borrowing facilities. Interest payments on fixed rate debt over the next five years are excluded from the table above and are expected to be approximately $9.8 million in 2024, $9.6 million in 2025, $9.3 million in 2026, $8.5 million in 2027 and $7.0 million in 2028. We expect total interest expense for 2024 to be approximately $40 million.

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The Company had outstanding bank guarantees and standby letters of credit with banks as of December 31, 2023 totaling $9.1 million, of which $1.1 million relate to the senior revolving credit facility. These 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 December 31, 2023, the Company has $2.0 million of restricted cash in support of these arrangements.

We expect to make net contributions of $5.0 million to our pension plans in 2024 which are primarily associated with our International segment. We have not been required to make contributions to our U.S. based qualified defined benefit pension plan in many years.

We have purchase commitments for materials, supplies, services and property, plant and equipment as part of our ordinary conduct of business.

Please 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 Company's product liabilities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures. We evaluate these estimates and judgments on an on-going basis based on historical experience and various assumptions that we believe to be reasonable under the circumstances. However, different amounts could be reported if we had used different assumptions and in light of different facts and circumstances. Actual amounts could differ from the estimates and judgments reflected in our consolidated financial statements. A summary of the Company's significant accounting policies is included in Note 1—Significant Accounting Policies to the consolidated financial statements in Part II, Item 8 of this Form 10-K.

The more critical judgments and estimates used in the preparation of our consolidated financial statements are discussed below. During 2021, the Company made acquisitions that raised business combinations to a critical accounting policy and estimate. There were no business combinations during 2023 or 2022.

Business combinations. In accordance with the accounting guidance for business combinations, the Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed will be recognized as goodwill. The valuations of the acquired assets and liabilities will impact the determination of future operating results. In addition to using management estimates and negotiated amounts, the Company uses a variety of information sources to determine the estimated fair values of acquired assets and liabilities including: third-party appraisals for the estimated value and lives of identifiable intangible assets and property, plant and equipment; third-party actuaries for the estimated obligations of defined benefit pension plans and similar benefit obligations; and legal counsel or other experts to assess the obligations associated with legal, environmental and other contingent liabilities.

The business and technical judgment of management was used in determining which intangible assets have indefinite lives and in determining the useful lives of finite-lived intangible assets in accordance with the accounting guidance for goodwill and other intangible assets.

Cumulative trauma product liability. The Company and its subsidiaries face an inherent business risk of exposure to product liability claims arising from the alleged failure of our products to prevent the types of personal injury or death against which they are designed to protect. Product liability claims are categorized as either single incident or cumulative trauma.

Single incident product liability claims involve incidents of short duration that are typically known when they occur and involve observable injuries, which provide a more objective basis for quantifying damages. The Company estimates its subsidiaries' liability for single incident product liability claims based on expected settlement costs for asserted single incident product liability claims and an estimate of costs for single incident product liability claims incurred but not reported ("IBNR"). Single incident product liability exposures are evaluated on an annual basis, or more frequently if changing circumstances warrant. Adjustments are made to the reserve as appropriate.

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Cumulative trauma product liability claims relate to the Company's now-divested subsidiary, MSA LLC and involve exposures to harmful substances that occurred over many years and may have developed over long periods of time into diseases. 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 Company's product liability claims and divestiture of MSA LLC on January 5, 2023. Prior to the divestiture, MSA LLC's cumulative trauma product liability reserve was based upon an estimate of MSA LLC’s then current and potential future liability for cumulative trauma product liability claims, in accordance with applicable accounting principles. See further discussion on the process and assumptions used to derive this estimate in Note 20— Contingencies of the consolidated financial statements in Part II Item 8 of MSA's Form 10-K for the year ended December 31, 2022.

Income taxes. We recognize deferred tax assets and liabilities using enacted tax rates to record the tax effect of temporary differences between the book and tax basis of recorded assets and liabilities. We record valuation allowances to reduce deferred tax assets to the amounts that we estimate are probable to be realized. When assessing the need for valuation allowances, we consider projected future taxable income and prudent and feasible tax planning strategies. Should a change in circumstances lead to a change in our judgments about the realizability of deferred tax assets in future years, we adjust the related valuation allowances in the period that the change in circumstances occurs.

We record an estimated income tax liability based on our best judgment of the amounts likely to be paid in the various tax jurisdictions in which we operate. We record tax benefits related to uncertain tax positions taken or expected to be taken on a tax return when such benefits meet a more likely than not threshold. We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. The tax liabilities ultimately paid are dependent on a number of factors, including the resolution of tax audits, and may differ from the amounts recorded. Tax liabilities are adjusted through income when it becomes probable that the actual liability differs from the amount recorded.

Pensions and other post-retirement benefits. We sponsor certain pension and other post-retirement benefit plans. Accounting for the net periodic benefit costs and credits for these plans requires us to estimate the cost of benefits to be provided well into the future and to attribute these costs over the expected work life of the employees participating in these plans. These estimates require our judgment about discount rates used to determine these obligations, expected returns on plan assets, rates of future compensation increases, rates of increase in future health care costs, participant withdrawal and mortality rates and participant retirement ages. Differences between our estimates and actual results may significantly affect the cost of our obligations under these plans and could cause net periodic benefit costs and credits to change materially from year-to-year. Discount rates and plan asset valuations are point-in-time measures. The discount rate assumptions used in determining projected benefit obligations for our U.S. and foreign plans were based on the spot rate method at December 31, 2023. Expected returns on plan assets are based on capital market expectations by asset class.

The following table summarizes the impact of changes in significant actuarial assumptions on our December 31, 2023 actuarial valuations.

Impact of Changes in Actuarial Assumptions

Change in DiscountRate Change in ExpectedReturn Change in Market Value of Assets

(In thousands) 1% (1)% 1% (1)% 5% (5)%

(Decrease) increase in projected benefit obligation (55,749) 67,271 — — — —

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Goodwill and Indefinite-lived Intangible Assets. 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. 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 Accounting Standards Codification ("ASC") Topic 350. In 2023, we performed a quantitative test at October 1, 2023. Quantitative testing involves comparing the estimated fair value of each reporting unit to its carrying value. 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. A number of assumptions and estimates are involved in the application of the DCF model, including sales volumes and prices, costs to produce, tax rates, capital spending, discount rates, and working capital changes. Cash flow forecasts are generally based on approved business unit operating plans for the early years and historical relationships in later years. The market approach methodology measures value through an analysis of peer companies. The analysis entails measuring the multiples of EBITDA at which peer companies are trading.

In the event the carrying value is in excess of the estimated fair value of a reporting unit per the weighted average of the DCF and market approach models, an impairment loss equal to such excess would be recognized, which could materially and adversely affect reported consolidated results of operations and shareholders’ equity. At October 1, 2023, based on our quantitative test, the fair values of each of our reporting units exceeded their respective carrying value by at least 76%.

The intangible asset with an indefinite life is also subject to impairment testing on October 1st of each year, or more frequently if indicators of impairment exist. The impairment test compares the fair value of the intangible asset with its carrying amount. We perform a quantitative assessment of the indefinite lived trade name intangible asset as outlined in ASC 350 by comparing the estimated fair value of the trade name intangible asset to its carrying value. We estimate the fair value using the relief from royalty income approach. A number of significant assumptions and estimates are involved in the application of the relief from royalty model, including sales volumes and prices, royalty rates and tax rates. Forecasts are based on sales generated by the underlying trade name assets and are generally based on approved business unit operating plans for the early years and historical relationships in later years. At October 1, 2023, based on our quantitative test, the fair value of the trade name asset exceeded its carrying value by approximately 39%.

RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS

None

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of adverse changes in the value of a financial instrument caused by changes in currency exchange rates, interest rates and equity prices. We are exposed to market risks related to currency exchange rates and interest rates.

Currency exchange rates. We are subject to the effects of fluctuations in currency exchange rates on various transactions and on the translation of the reported financial position and operating results of our non-U.S. companies from local currencies to U.S. dollars. A hypothetical 10% strengthening or weakening of the U.S. dollar would increase or decrease our reported sales and net income for the year ended December 31, 2023 by approximately $71.3 million and $10.1 million, or 4.0% and 17.3%, respectively.

When appropriate, we may attempt to limit our transactional exposure to changes in currency exchange rates through forward contracts or other actions intended to reduce existing exposures by creating offsetting currency exposures. At December 31, 2023, we had open foreign currency forward contracts with a U.S. dollar notional value of $110.9 million. A hypothetical 10% increase in December 31, 2023 forward exchange rates would result in a $11.1 million increase in the fair value of these contracts.

Interest rates. We are exposed to changes in interest rates primarily as a result of borrowing and investing activities used to maintain liquidity and fund business operations. Because of the relatively short maturities of temporary investments and the variable rate nature of our revolving credit facility, these financial instruments are reported at carrying values which approximate fair values.

At December 31, 2023, we had $312.2 million of fixed rate debt which matures at various dates through 2036. The incremental increase in the fair value of fixed rate long-term debt resulting from a hypothetical 10% decrease in interest rates would be approximately $9.4 million. However, our sensitivity to interest rate declines and the corresponding increase in the fair value of our debt portfolio would unfavorably affect earnings and cash flows only to the extent that we elected to repurchase or retire all or a portion of our fixed rate debt portfolio at prices above carrying values.

At December 31, 2023, we had $292.1 million of variable rate borrowings under our revolving credit facility. A 50 basis point increase or decrease in interest rates could have a $1.7 million impact on future pre-tax earnings under our current capital structure.

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Item 8. Financial Statements and Supplementary Data

Management’s Reports to Shareholders

Management’s Report on Responsibility for Financial Reporting

Management of MSA Safety Incorporated (the Company) is responsible for the preparation of the consolidated financial statements included in this annual report. The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and include amounts that are based on the best estimates and judgments of management. The other financial information contained in this annual report is consistent with the consolidated financial statements.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on our assessment and those criteria, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2023.

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

/s/ NISHAN J. VARTANIAN

Nishan J. VartanianChairman and Chief Executive Officer

/s/ LEE B. MCCHESNEY

Lee B. McChesneySenior Vice President and Chief Financial Officer

February 16, 2024

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of MSA Safety Incorporated

Opinion on Internal Control over Financial Reporting

We have audited MSA Safety Incorporated’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, MSA Safety Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows, and changes in retained earnings, accumulated other comprehensive loss and noncontrolling interests for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) 2 and our report dated February 16, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

February 16, 2024

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of MSA Safety Incorporated

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MSA Safety Incorporated (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows, and changes in retained earnings, accumulated other comprehensive loss and noncontrolling interests for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) 2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Divestiture of MSA LLC

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2014.

Pittsburgh, Pennsylvania

February 16, 2024

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MSA SAFETY INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

Year ended December 31,

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

Net income attributable to noncontrolling interests — — (448)

Dividends per common share $ 1.87 $ 1.82 $ 1.75

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

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MSA SAFETY INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year ended December 31,

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on available-for-sale securities (Note 6) 2 3 (4)

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

Comprehensive income attributable to noncontrolling interests — — (356)

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

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MSA SAFETY INCORPORATED

CONSOLIDATED BALANCE SHEETS

December 31,

(In thousands, except share amounts) 2023 2022

Assets

Investments, short-term (Note 19) — 9,905

Notes receivable, insurance companies (Note 20) — 5,931

Prepaid expenses and other current assets 39,634 44,344

Operating lease right-of-use assets, net (Note 17) 53,298 44,142

Notes receivable, insurance companies, noncurrent (Note 20) — 38,695

Insurance receivable (Note 20) and other noncurrent assets 19,811 136,853

Liabilities

Notes payable and current portion of long-term debt (Note 12) $ 26,522 $ 7,387

Noncurrent operating lease liabilities (Note 17) 44,495 35,345

Product liability (Note 20) and other noncurrent liabilities 4,479 336,889

Commitments and contingencies (Note 20)

Shareholders' Equity

Preferred stock, 4.5% cumulative, $50 par value (Note 7) $ 3,569 $ 3,569

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

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MSA SAFETY INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,

Operating Activities

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

Loss on asset write-down and dispositions, net 173 6,290 788

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

Changes in:

Investing Activities

Proceeds from maturities of short-term investments (Note 19) — 119,000 160,000

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

Financing Activities

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

Supplemental cash flow information:

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

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MSA SAFETY INCORPORATED

CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS,

ACCUMULATED OTHER COMPREHENSIVE LOSS AND NONCONTROLLING INTERESTS

Foreign currency translation adjustments — (25,354) —

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

(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) (68,545) — —

Preferred dividends ($0.5625 per share) (41) — —

Foreign currency translation adjustments — (19,453) —

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

Common dividends ($1.82 per share) (71,456) — —

Preferred dividends ($0.5625 per share) (41) — —

Foreign currency translation adjustments — 21,682 —

Unrecognized net gains on available-for-sale securities (Note 19) — 2 —

Common dividends ($1.87 per share) (73,447) — —

Preferred dividends ($0.5625 per share) (41) — —

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

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MSA SAFETY INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Significant Accounting Policies

General Information and Basis of Presentation—The consolidated financial statements of MSA Safety Incorporated ("MSA" or "the Company") are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and require management to make certain judgments, estimates, and assumptions. These may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. They also may affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates upon subsequent resolution of identified matters.

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

Noncontrolling Interests—Noncontrolling interests reflect noncontrolling shareholders’ investments in certain consolidated subsidiaries and their proportionate share of the income and accumulated other comprehensive loss of those subsidiaries. During July 2021, the Company purchased the remaining noncontrolling interests in MSA (China) Safety Equipment Co., Ltd. See Note 14—Acquisitions for further detail.

Currency Translation—The functional currency of all significant non-U.S. subsidiaries is the local country currency. Assets and liabilities of these operations are translated at year-end exchange rates. Income statement accounts are translated using the average exchange rates for the reporting period. Translation adjustments for these subsidiaries are reported as a component of shareholders’ equity and are not included in net income. Foreign currency transaction gains and losses are included in net income for the reporting period.

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, 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. Restricted cash balances were $2.0 million and $1.5 million at December 31, 2023 and 2022, respectively. These balances were used to support letter of credit balances.

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—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. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets, generally as follows: buildings 20 to 40 years, and machinery and equipment 3 to 10 years. Expenditures for significant renewals and improvements are capitalized. Ordinary repairs and maintenance are expensed as incurred. 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. Properties, plant, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or asset groups may not be recoverable.

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Software Development Costs—Software development costs are costs incurred to create, enhance and deploy the Company’s broad range of wireless technology and cloud-based computing safety services. Software development costs, other than software development costs qualifying for capitalization, are expensed as incurred. Costs of computer software developed or obtained for internal use that are incurred in the preliminary project and post implementation stages are expensed as incurred. Certain costs incurred during the application and development stage, which primarily include compensation and related expenses, are capitalized. Additionally, costs of upgrades and enhancements are capitalized when it is probable that the upgrades and enhancements will result in added functionality. During 2023, 2022 and 2021, respectively, there was approximately $12.1 million, $8.7 million and $8.1 million of software development costs capitalized. The Company has unamortized computer software development costs of $18.2 million and $16.5 million as of December 31, 2023 and 2022, respectively, included in property, plant and equipment, net.

Capitalized costs are amortized through cost of products sold using the straight-line method over the estimated useful life, which is normally three years, beginning in the period in which the software is ready for its intended use or when the upgrade or enhancement is deployed. 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. We use our incremental borrowing rate ("IBR") at the recognition date in determining the present value of future payments for leases that do not have a readily determinable implicit rate. Our IBR reflects a fully secured rate based on our credit rating, taking into consideration the repayment timing of the lease and any impacts due to the economic environment in which the lease operates.

Our lease payments are largely fixed. Variable lease payments that depend on an index or a rate are included in the lease payments and are measured using the prevailing index or rate at the measurement date, with differences between the calculated lease payment and the actual lease payment being expensed in the period of the change. Other variable lease payments, including utilities, consumption and common area maintenance as well as repairs, maintenance and mileage overages on vehicles, are expensed during the period incurred. A majority of our real estate leases include options to extend the lease and options to early terminate the lease. Leases with an early termination option generally involve a termination payment. If we are reasonably certain to exercise an option to extend a lease, the extension period is included as part of the right-of-use asset and the lease liability. Some of our leases contain residual value guarantees. These are guarantees made to the lessor that the value of an underlying asset returned to the lessor at the end of a lease will be at least a specified amount. Our leases do not contain restrictions or covenants that restrict us from incurring other financial obligations. For our leases, we have elected to not apply the recognition requirements to leases of less than twelve months. These leases are expensed on a straight-line basis and are not included within the Company's operating lease asset or liability.

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, 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. For finance leases, the amortization of the right-of-use asset is included in depreciation and amortization, and the interest is included in interest expense.

Lessor Arrangements—The Company derives a portion of its revenue from various leasing arrangements where the Company is the lessor, primarily fire service contracts entered into by Bristol which was acquired in January 2021 (Note 14). Such arrangements provide for monthly payments covering equipment provided, maintenance and interest. These arrangements meet the criteria to be accounted for as sales-type leases under Accounting Standards Codification ("ASC") 842 and contain both lease and non-lease components. For a component to be separate, the customer would be able to benefit from the right of use of the component separately or with other resources readily available to the customer and the right of the use is not highly dependent or highly interrelated with the other rights to use the other underlying assets or components.

Revenue from equipment provided is considered a lease component and recognized with point in time revenue recognition upon lease commencement. Upon the recognition of such revenue, an asset is established for the investment in sales-type leases. 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.

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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, 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. Indefinite lived intangible assets are assessed for possible impairment annually on October 1st or whenever circumstances change such that the recorded value of the asset may not be recoverable. We performed a quantitative assessment of the indefinite lived trade name intangible asset as outlined in ASC 350 by comparing the estimated fair value of the trade name intangible asset to its carrying value. We estimate the fair value using the relief from royalty income approach. A number of assumptions and estimates are involved in the application of the relief from royalty model, including sales volumes and prices, royalty rates and tax rates. Forecasts are based on sales generated by the underlying trade name assets and are generally based on approved business unit operating plans for the early years and historical relationships in later years. Based on these assessments, no impairments were identified during the years ended December 31, 2023, 2022 or 2021.

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. 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. A number of assumptions and estimates are involved in the application of the DCF model, including sales volumes and prices, costs to produce, tax rates, capital spending, discount rates, and working capital changes. Cash flow forecasts are generally based on approved reporting unit operating plans for the early years and historical relationships in later years. The market approach methodology measures value through an analysis of peer companies. 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.

Revenue Recognition—We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Revenue from the sale of products is recognized when there is persuasive evidence of an arrangement and control passes to the customer, which generally occurs either when product is shipped to the customer or, in the case of most U.S. distributor customers, when product is delivered to the distributor's delivery site. We establish our shipping terms according to local practice and market characteristics. We do not ship product unless we have an order or other documentation authorizing shipment to our customers. Our payment terms vary by the type and location of our customer and the products offered. The term between invoicing and when payment is due is not significant. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Amounts billed and due from our customers are classified as receivables on the Consolidated Balance Sheets. We make appropriate provisions for credit losses which have historically been insignificant in relation to our net sales. Certain contracts with customers, primarily distributor customers, have an element of variable consideration that is estimated when revenue is recognized under the contract to the extent that it is material to the individual contract. Variable consideration includes volume incentive rebates, performance guarantees, price concessions and returns. Rebates are based on achieving a certain level of purchases and other performance criteria that are documented in established distributor programs. These rebates are estimated based on projected sales to the customer and accrued as a reduction of net sales as they are earned by the customer. The rebate accrual is reviewed monthly and adjustments are made as the estimate of projected sales changes. Product returns, including an adjustment for restocking fees if it is material, are estimated based on historical return experience and revenue is adjusted. Sales, value add and other taxes collected with revenue-producing activities and remitted to governmental authorities are excluded from revenue.

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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. We have elected to recognize the cost for shipping and handling as an expense when control of the product has passed to the customer. These costs are included within the Cost of products sold line on the Consolidated Statements of Income. Amounts billed to customers for shipping and handling are included in net sales.

Product Warranties—Estimated expenses related to product warranties and additional service actions are charged to Cost of products sold in the period in which the related revenue is recognized or when significant product quality issues are identified.

Research and Development—Research and development costs are expensed as incurred.

Income Taxes—Deferred income taxes are recognized for temporary differences between financial and tax reporting. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. We record tax benefits related to uncertain tax positions taken or expected to be taken on a tax return when such benefits meet a more likely than not threshold. We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. Deferred taxes are booked for available cash in excess of working capital for non-U.S. subsidiaries as these earnings are not considered to be permanently reinvested.

Stock-Based Compensation—We recognize expense for employee and non-employee director stock-based compensation based on the grant date fair value of the awards. Except for retirement-eligible participants, for whom there is no requisite service period, this expense is recognized ratably over the requisite service periods following the date of grant. For retirement-eligible participants, this expense is recognized over an accelerated period of at least one year.

Derivative Instruments—We may use derivative instruments from time to time to minimize the effects of changes in currency exchange rates. We do not enter into derivative transactions for speculative purposes and do not hold derivative instruments for trading purposes. Changes in the fair value of derivative instruments designated as fair value hedges are recorded in the balance sheet as adjustments to the underlying hedged asset or liability. Changes in the fair value of derivative instruments that do not qualify for hedge accounting treatment are recognized in the Consolidated Statements of Income and Consolidated Statements of Cash Flows as Currency exchange losses, net in the current period.

Commitments and Contingencies—For asserted claims and assessments, liabilities are recorded when a loss is deemed to be probable and the amount of the loss is reasonably estimable. Management assesses the probability of an unfavorable outcome with respect to asserted claims or assessments based on many factors such as the nature of the matter, available defenses and case strategy, progress of the matter, views and opinions of legal counsel and other advisors, applicability and success of appeals processes, and the outcome of similar historical matters, among others. 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 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. If an unfavorable outcome is probable, management assesses whether the amount of potential loss can be reasonably estimated and, if so, accrues the most reasonable estimate of the loss (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 an unfavorable outcome is reasonably possible but less than probable, or the amount of loss cannot be reasonably estimated, then the matter is disclosed and no liability is recorded. Legal matters are reviewed on a continuous basis to determine if there has been a change in management’s judgment regarding the likelihood and/or estimate of a potential loss. Please refer to Note 20 — Contingencies for further details on product liability related matters.

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. We mitigate our exposure to credit risk by performing ongoing credit evaluations and, when deemed necessary, requiring letters of credit, credit insurance, prepayments, guarantees or other collateral. No individual customer represented more than 10% of our sales or receivables as of December 31, 2023 or 2022 or for any of the three years ended December 31, 2023.

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Note 2—Cash and Cash Equivalents

Several of the Company's affiliates participate in a notional cash pooling arrangement to manage global liquidity requirements. As part of a master netting arrangement, the participants combine their cash balances in pooling accounts at the same financial institution with the ability to offset bank overdrafts of one participant against positive cash account balances held by another participant. Under the terms of the master netting arrangement, the financial institution has the right, ability and intent to offset a positive balance in one account against an overdrawn amount in another account. Amounts in each of the accounts are unencumbered and unrestricted with respect to use. As such, the net cash balance related to this pooling arrangement is included in Cash and cash equivalents in the Consolidated Balance Sheets.

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

(In thousands) December 31, 2023

Gross cash pool position $ 91,249

Less: cash pool borrowings (88,509)

Net cash pool position $ 2,740

Note 3—Restructuring Charges

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 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 $2.3 million during the year ended December 31, 2022, were related to

various optimization activities. International segment restructuring charges of $5.1 million during the year ended December 31, 2022, were primarily related to the implementation of our new European Shared Service Center in Warsaw, Poland. Corporate segment restructuring charges of $0.6 million during the year ended December 31, 2022, were primarily related to programs to

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

A total of 151 positions were eliminated in 2022. There were 24 positions eliminated in the Americas segment, 123 in the International segment, and 4 in the Corporate segment.

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

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

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

A total of 143 positions were eliminated in 2021. There were 66 positions eliminated in the Americas segment, 71 in the International segment, and 6 in the Corporate segment.

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

(in millions) Americas International Corporate Total

Currency translation and other adjustments (0.1) (0.2) — (0.3)

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

Currency translation and other adjustments 0.1 (1.3) — (1.2)

Cash payments / utilization (4.0) (8.4) (0.4) (12.8)

Currency translation and other adjustments (0.1) 0.1 — —

Cash payments / utilization (3.9) (8.6) (2.6) (15.1)

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

Note 4—Inventories

The following table sets forth the components of inventory:

December 31,

Note 5—Property, Plant, and Equipment

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

December 31,

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Note 6—Reclassifications Out of Accumulated Other Comprehensive Loss

MSA Safety Incorporated Noncontrolling Interests

Pension and other post-retirement benefits(a)

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

Amounts reclassified from accumulated other comprehensive loss into net income:

Amortization of prior service credit (Note 15) (84) (199) (95) — — —

Total other comprehensive income $ 7,683 $ 6,961 $ 58,256 $ — $ — $ —

Available-for-sale securities

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

Unrealized gain (loss) on available-for-sale securities (Note 19) 2 3 (4) — — —

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

Foreign currency translation

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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 were 71,340 shares issued and 52,998 shares held in treasury at both December 31, 2023 and 2022. The Treasury shares at cost line of the Consolidated Balance Sheets includes $1.8 million related to preferred stock. There were no shares of preferred stock purchased and subsequently held in treasury during the years ended December 31, 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 December 31, 2023 or 2022.

Common Stock—The Company has authorized 180,000,000 shares of no par value common stock. There were 62,081,391 shares issued as of December 31, 2023 and December 31, 2022. There were 39,317,212 and 39,213,064 shares outstanding at December 31, 2023 and 2022, respectively.

Treasury Shares—The Company's stock repurchase program authorizes up to $100.0 million to repurchase MSA common stock in the open market and in private transactions. The share repurchase program has no expiration date. The maximum number of shares that may be purchased is calculated based on the dollars remaining under the program and the respective month-end closing share price. Under the program, there were no shares repurchased during 2023, 251,408 shares repurchased during 2022 and no shares repurchased during 2021. We do not have any other share repurchase programs. There were 22,764,179 and 22,868,327 Treasury shares at December 31, 2023 and 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 132,797 and 219,214 Treasury shares issued for these purposes during the years ended December 31, 2023 and 2022, respectively.

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Common stock activity is summarized as follows:

Shares Dollars

(Dollars in thousands) Issued Treasury CommonStock TreasuryCost

Restricted stock expense — — 6,562 —

Restricted stock forfeitures — — (765) —

Stock option expense — — 90 —

Stock option forfeitures — — (9) —

Performance stock expense — — 13,227 —

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

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

Restricted stock expense — — 7,715 —

Restricted stock forfeitures — — (1,227) —

Stock option expense — — 49 —

Performance stock expense — — 15,843 —

Performance stock forfeitures — — (2,730) —

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

Restricted stock expense — — 9,476 —

Restricted stock forfeitures — — (1,414) —

Stock option expense — — 11 —

Stock option forfeitures — — (11) —

Performance stock expense — — 23,546 —

Performance stock forfeitures — — (1,585) —

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

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Note 8—Segment Information

We are organized into four geographical operating segments that are based on management responsibilities: Northern North America, Latin America, Europe, Middle East & Africa, and Asia Pacific. The operating segments have been aggregated (based on economic similarities, the nature of their products, end-user markets and methods of distribution) into three reportable segments: Americas, International, and Corporate.

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

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

Adjusted operating income (loss), adjusted operating margin, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA margin are the measures used by the chief operating decision maker to evaluate segment performance and allocate resources. Adjusted operating income (loss) is defined as operating income excluding restructuring charges, currency exchange gains (losses), product liability expense, 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. Adjusted EBITDA is defined as adjusted operating income (loss) plus depreciation and amortization. Adjusted EBITDA margin is defined as adjusted EBITDA divided by segment net sales to external customers.

The accounting principles applied at the operating segment level in determining operating income (loss) are generally the same as those applied at the consolidated financial statement level. Sales and transfers between operating segments are accounted for at market-based transaction prices and are eliminated in consolidation.

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Reportable segment information is presented in the following table:

Restructuring charges (Note 3) 9,892

Currency exchange losses, net 17,079

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

Product liability expense (Note 20) 3

Amortization of acquisition-related intangible assets 9,246

Transaction costs(b) 965

Adjusted operating margin % 29.1 % 16.2 %

Adjusted EBITDA margin % 32.1 % 18.7 %

Noncash items:

Restructuring charges (Note 3) 7,965

Currency exchange losses, net 10,255

Product liability expense (Note 20) 20,590

Amortization of acquisition-related intangible assets 9,207

Transaction costs(b) 3,233

Adjusted operating margin % 25.6 % 12.6 %

Adjusted EBITDA margin % 28.9 % 15.1 %

Noncash items:

Restructuring charges (Note 3) 16,433

Currency exchange losses, net 216

Product liability expense (Note 20) 185,264

Amortization of acquisition-related intangible assets 8,764

Transaction costs(b) 7,120

Adjusted operating margin % 22.3 % 14.9 %

Adjusted EBITDA margin % 25.7 % 17.7 %

Noncash items:

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

Geographic information on tangible long-lived assets, net, based on country of origin:

Total Net sales by product portfolio was as follows:

2023 Consolidated Americas International

(In thousands) Dollars Percent Dollars Percent Dollars Percent

2022 Consolidated Americas International

(In thousands) Dollars Percent Dollars Percent Dollars Percent

2021 Consolidated Americas International

(In thousands) Dollars Percent Dollars Percent Dollars Percent

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Note 9—Earnings per Share

Basic earnings per share attributable to MSA Safety Incorporated common shareholders is computed by dividing net income, after the deduction of preferred stock dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to MSA Safety Incorporated common shareholders assumes the issuance of common stock for all potentially dilutive share equivalents outstanding not classified as participating securities. Participating securities are defined as unvested stock-based compensation awards that contain nonforfeitable rights to dividends.

Amounts attributable to MSA Safety Incorporated common shareholders:

Preferred stock dividends (41) (41) (41)

Stock options and other stock-based awards 166 175 276

Antidilutive stock-based awards — — —

Earnings per share:

Note 10—Income Taxes

Components of income before income taxes

Provision for income taxes

Current

Deferred

On June 10, 2021 the United Kingdom ("U.K.") Parliament announced royal assent for Bill No. 12, on the Finance Act of 2021. 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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Reconciliation of the U.S. federal income tax rates to our effective tax rate:

U.S. federal income tax rate 21.0 % 21.0 % 21.0 %

Divestiture (Note 20) 46.6 % — % — %

State income taxes-U.S. 3.7 % 2.9 % (7.0) %

Nondeductible compensation 1.9 % 1.2 % 15.3 %

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 (0.4) % (0.8) % (18.3) %

Valuation allowances (0.2) % 0.8 % 7.0 %

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

Effective income tax rate 71.6 % 24.7 % 7.7 %

Components of deferred tax assets and liabilities:

December 31,

Deferred tax assets

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

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

Accrued expenses and other reserves 4,566 5,738

Reserve for doubtful accounts 1,562 —

Deferred tax liabilities

At December 31, 2023, we had net operating loss carryforwards of approximately $50.4 million. All net operating loss carryforwards without a valuation allowance may be carried forward for a period of at least six years.

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A reconciliation of the change in the tax liability for unrecognized tax benefits for the years ended December 31, 2023 and 2022 is as follows:

Adjustments for tax positions related to the current year — 100

Adjustments for tax positions related to prior years (1,116) 155

Settlements — —

Statute expiration (992) —

The total amount of unrecognized tax benefits, if recognized, would reduce our future effective tax rate. We have recognized tax benefits associated with these liabilities in the amount of $0.6 million and $2.7 million at December 31, 2023 and 2022, respectively.

We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. Our liability for accrued interest and penalties related to uncertain tax positions was $0.2 million and $1.1 million at December 31, 2023 and 2022, respectively.

We file a U.S. federal income tax return along with various state and foreign income tax returns. Examinations of our U.S. federal returns have been completed through 2018. Various state and foreign income tax returns may be subject to tax audits for periods after 2015.

On August 16, 2022, President Biden signed the Inflation Reduction Act which includes a new minimum tax on certain large corporations and an excise tax on stock buybacks. We do not anticipate this legislation will have a material impact for the company.

Note 11—Stock Plans

The 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. Stock options are granted at market prices and expire after ten years. Stock options are exercisable beginning three years after the grant date. Restricted stock and restricted stock units are granted without payment to the Company and generally vest three years after the grant date. Restricted stock and restricted stock units are valued at the market value of the stock on the grant date. Performance stock units with a market condition are valued at an estimated fair value using a Monte Carlo simulation model. The final number of shares to be issued for performance stock units may range from zero to 240% of the target award based on achieving the specified performance targets over the performance period and further range based upon the achieved market metric over the performance period. In general, unvested stock options, restricted stock and performance stock units are forfeited if the participant’s employment with the Company terminates for any reason other than retirement, death or disability. We issue Treasury shares for stock option exercises and grants of restricted stock and performance stock. Please refer to Note 7—Capital Stock for further information regarding stock compensation share issuance. As of December 31, 2023, there were 1,869,407 and 68,439 shares, respectively, reserved for future grants under the management and non-employee directors’ equity incentive plans.

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Stock-based compensation expense was as follows:

Stock options — 49 81

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

A summary of option activity follows:

Shares WeightedAverageExercise Price Exercisable atYear-end

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

Stock Options Outstanding and Exercisable

Range of Exercise Prices Shares Weighted-Average

Exercise Price Remaining Life

Cash received from the exercise of stock options was $1.5 million, $4.7 million and $5.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. The tax benefit we realized from these exercises was $0.9 million, $1.9 million and $4.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Stock options become exercisable when they are vested. The aggregate intrinsic value of stock options exercisable and outstanding at December 31, 2023 was $3.3 million.

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Restricted stock awards and restricted stock units are valued at the market value of the stock on the grant date. A summary of restricted stock unit activity follows:

Shares Weighted AverageGrant DateFair Value

A summary of performance stock unit activity follows:

Shares Weighted AverageGrant DateFair Value

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. The fair values of restricted stock vested during the years ended December 31, 2023, 2022 and 2021 were $5.4 million, $5.9 million and $6.2 million, respectively. The fair value of performance stock units vested during the years ended December 31, 2023, 2022 and 2021 was $6.8 million, $5.6 million and $5.5 million, respectively.

On December 31, 2023, there was $21.1 million of unrecognized stock-based compensation expense. The weighted average period over which this expense is expected to be recognized was approximately 1.7 years.

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Note 12—Long-Term Debt

Long-Term Debt

December 31,

Long-term debt, net of debt issuance costs $ 575,170 $ 565,445

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. 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. At December 31, 2023, $838.1 million of the existing $900.0 million senior revolving credit facility was unused, including letters of credit issued under the facility. The facility also provides an accordion feature that allows the Company to access an additional $400.0 million of capacity pending approval by MSA’s board of directors and from the bank group.

On July 1, 2021, the Company entered into a Third Amended and Restated Multi-Currency Note Purchase and Private Shelf Agreement (the “Prudential Note Agreement”) with PGIM, Inc. (“Prudential”). 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. 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.

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. The acquisition was partially financed by $200.0 million of 2.69% Senior Notes from the Prudential Note Agreement and NYL Note Facility. The remaining purchase price was financed under the Revolving Credit Facility.

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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; 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 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.

Approximate maturities on our long-term debt over the next five years are $26.5 million in 2024, $32.8 million in 2025, $256.1 million in 2026, $32.8 million in 2027, $32.8 million in 2028 and $223.3 million thereafter.

The Company had outstanding bank guarantees and standby letters of credit with banks as of December 31, 2023, totaling $9.1 million, of which $1.1 million relate to the senior revolving credit facility. The letters of credit serve to cover customer requirements in connection with certain sales orders and insurance companies. The Company is also required to provide cash collateral in connection with certain arrangements. At December 31, 2023, the Company has $2.0 million of restricted cash in support of these arrangements.

Note 13—Goodwill and Intangible Assets

Changes in goodwill during the years ended December 31, 2023 and 2022, were as follows:

Measurement period adjustment — (1,041)

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

Changes in intangible assets, net of accumulated amortization, during the years ended December 31, 2023 and 2022, were as follows:

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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 $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

Acquisition of Bacharach

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

Headquartered near Pittsburgh in New Kensington, PA, Bacharach is a leader in gas detection technologies used in the HVAC-R markets. This acquisition expanded MSA’s gas detection portfolio and leverages MSA’s product and manufacturing expertise into new markets.

Bacharach's operating results are included in our consolidated financial statements from the acquisition date within the Americas, International and Corporate reportable segments. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting.

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

(In millions) July 1, 2021

Current assets (including cash of $11.7 million) $ 32.1

Property, plant and equipment and other noncurrent assets 4.3

Customer relationships 123.0

Developed technology 20.5

Total assets acquired 388.4

Total liabilities assumed (47.3)

Net assets acquired $ 341.1

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Assets acquired and liabilities assumed in connection with the acquisition were recorded at fair values. Fair values were determined by management, based in part on an independent valuation performed by a third party valuation specialist. The valuation methods used to determine the fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges; the relief from royalty method for trade name and developed technologies; and the cost method for assembled workforce was included in goodwill. A number of significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on Bacharach pre-acquisition forecasts, coupled with estimated MSA sales synergies. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships, developed technology and trade name acquired in the Bacharach transaction are being amortized over periods of 21 years, 7 to 9 years and 20 years, respectively. The step up to fair value of acquired inventory as part of the purchase price allocation totaled $2.3 million. The amortization of the inventory step up was included in Cost of products sold in the Consolidated Statements of Income for the year ended December 31, 2021.

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Bacharach with our operations. Goodwill of $193.5 million related to the Bacharach acquisition was recorded, with $154.6 million and $38.9 million allocated to the Americas reportable segment and International reportable segment, respectively. This Goodwill is non-deductible for tax purposes.

Acquisition of Bristol Uniforms and Bell Apparel

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

Bristol, which is headquartered in the U.K., is a leading innovator and provider of protective apparel to the fire, rescue services, and utility sectors. The acquisition strengthens MSA's position as a global market leader in fire service personal protective equipment products, which include breathing apparatus, firefighter helmets, thermal imaging cameras, and firefighter protective apparel, while providing an avenue to expand its business in the U.K. and key European markets. 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 utility market.

Bristol's operating results are included in our consolidated financial statements from the acquisition date as part of the International reportable segment. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting.

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

Current assets (including cash of $13.3 million) $ 37.1

Net investment in sales-type leases, noncurrent 29.0

Property, plant and equipment and other noncurrent assets 12.0

Customer relationships 4.5

Trade name and other intangible assets 1.4

Goodwill 4.9

Total assets acquired 88.9

Total liabilities assumed (12.6)

Net assets acquired $ 76.3

Table of Contents

Assets acquired and liabilities assumed in connection with the acquisition were recorded at fair values. Fair values were determined by management, based in part on an independent valuation performed by a third party valuation specialist. The valuation methods used to determine the fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges; the relief from royalty method for trade name; and the cost method for assembled workforce which is included in goodwill. A number of significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on Bristol pre-acquisition forecasts, coupled with estimated MSA sales synergies. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships and trade name acquired in the Bristol transaction will be amortized over a period of 15 years. The step up to fair value of acquired inventory as part of the purchase price allocation totaled $1.5 million. The amortization of the inventory step up was included in Cost of products sold in the Consolidated Statements of Income for the year ended December 31, 2021.

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Bristol with our operations. Goodwill of $4.9 million related to the Bristol acquisition has been recorded in the International reportable segment and is non-deductible for tax purposes.

The operating results of the Bristol and Bacharach acquisitions have been included in our consolidated financial statements from their respective acquisition dates. Our results for the year ended December 31, 2021, include combined net sales and net loss of $67.2 million and $6.3 million, respectively.

The following unaudited pro forma information presents our combined results as if the Bristol and Bacharach acquisitions had occurred at the beginning of 2021. The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the combined company's results. There were no material transactions between MSA and Bristol or Bacharach during the periods presented that are required to be eliminated. The unaudited pro forma combined financial information does not reflect cost savings, operating synergies or revenue enhancements that the combined companies may achieve or the costs to integrate the operations or the costs necessary to achieve cost savings, operating synergies or revenue enhancements.

Pro forma combined financial information (Unaudited)

Year Ended December 31,

(In millions, except per share amounts) 2021

Basic earnings per share 0.26

Diluted earnings per share 0.26

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

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting under existing U.S. GAAP. MSA has been treated as the acquirer.

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

During July 2021, the Company purchased the remaining 10% noncontrolling interest in MSA (China) Safety Equipment Co., Ltd. from our partner in China for $19.0 million, inclusive of a $5.6 million distribution.

MSA US Equity

MSA · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

MSA US Equity☆

MSA · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

MSA US Equity