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What changed in MSA Safety Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MSA Safety Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+252 added−259 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-16)

Top changes in MSA Safety Inc's 2023 10-K

252 paragraphs added · 259 removed · 199 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe “M” stands for modular, which is a critical design element that allows this platform to meet the many varied needs of customers around the world. We sell breathing apparatus across both the Americas and International segments. 4 Table of Contents Fixed gas and flame detection instruments ("FGFD").
Biggest changeThe MSA M1 SCBA, which is our primary breathing apparatus product in the International segment, represents the most advanced and ergonomic SCBA we have launched in the International markets. The “M” stands for modular, which is a critical design element that allows this platform to meet the many varied needs of customers around the world.
To best serve these customer preferences, we have organized our business into four geographic operating segments that are aggregated into three reportable geographic segments: Americas, International and Corporate. Segment information is presented in Note 8—Segment Information of the consolidated financial statements in Part II Item 8 of this Form 10-K.
To best serve these customer preferences, we have organized our business into four geographic operating segments that are aggregated into three reportable segments: Americas, International and Corporate. Segment information is presented in Note 8—Segment Information of the consolidated financial statements in Part II Item 8 of this Form 10-K.
We believe that understanding end-user requirements is critical to increasing MSA's market share. The in-depth customer training and education provided by our sales associates to our customers is critical to ensuring proper use of many of our products, such as SCBA and gas detection instruments.
We believe that understanding end-user requirements is critical to increasing MSA's market share. The in-depth customer training and education provided by our sales associates to our customers is critical to ensuring proper use of many of our products, such as SCBA and detection instruments.
MSA also partners with a number of non-profit and community-based organizations to help to build a pipeline of future talent with differing backgrounds, thoughts, experiences, and perspectives. Approximately 52% of our U.S. workforce self-identifies as diverse. This includes women who comprise approximately 41% of our U.S. workforce. Among associates within executive pay grades, 41% self-identify as diverse.
MSA also partners with a number of non-profit and community-based organizations to help to build a pipeline of future talent with differing backgrounds, thoughts, experiences, and perspectives. Approximately 53% of our U.S. workforce self-identifies as diverse. This includes women who comprise approximately 40% of our U.S. workforce. Among associates within executive pay grades, 46% self-identify as diverse.
We dedicate significant resources to research and development, which allows us to produce innovative safety products that are often first to market. Our global product development teams include cross-functional associates throughout the Company, including research and development, marketing, sales, operations and quality management.
We dedicate significant resources to research and development, which allows us to produce innovative safety products that are often first to market and usually protected by intellectual property. Our global product development teams include cross-functional associates throughout the Company, including research and development, marketing, sales, operations and quality management.
MSA maintains a portfolio of non-core products. Non-core products reinforce and extend the core offerings, drawing upon our customer relationships, distribution channels, geographical presence and technical experience. These products are complementary to the core offerings and sometimes reflect more episodic or contract-driven growth patterns. Key non-core products include air-purifying respirators ("APR"), eye and face protection, ballistic helmets and gas masks.
Non-core products reinforce and extend the core offerings, drawing upon our customer relationships, distribution channels, geographical presence and technical experience. These products are complementary to the core offerings and sometimes reflect more episodic or contract-driven growth patterns. Key non-core products include air-purifying respirators, eye and face protection, ballistic helmets and gas masks.
Americas segment sales tend to be strong during the oil and gas market turnaround seasons late in the first quarter, early in the second quarter and then again at the end of the third quarter and beginning of the fourth quarter.
Americas segment sales tend to be strong during the energy sector's turnaround seasons late in the first quarter, early in the second quarter and then again at the end of the third quarter and beginning of the fourth quarter.
Our hand-held portable gas detection instruments are used to detect the presence or absence of various gases in the air. The product line is used by oil, gas and petrochemical workers, general industrial workers, miners, utility workers, first responders or anyone working in a confined space environment.
Our hand-held portable gas detection instruments are used to detect the presence or absence of various gases in the air. The product line is used by energy, utility, general industrial workers as well as first responders or anyone working in a confined space environment.
The Company’s leading market positions across nearly all of its core products are supported and enabled by a strong commitment to investing in new product development that continually raises the bar for safety equipment performance, all while upholding an unwavering commitment to integrity.
The Company’s leading market positions across various products in our portfolio are supported and enabled by a strong commitment to investing in new product development that continually raises the bar for safety equipment performance, all while upholding an unwavering commitment to integrity.
Our Ultima®X5000 and S5000 gas monitors enhance facility and worker safety while lowering overall cost of ownership for our customers through differentiated sensor technology. These systems utilize a wide array of sensor technologies including electrochemical, catalytic, infrared and ultrasonic. • Flame detectors and open-path infrared gas detectors.
One of our flagship products is the Ultima ® X5000 and S5000 gas monitors which enhances facility and worker safety while lowering overall cost of ownership for our customers through differentiated sensor technology. These systems utilize a wide array of sensor technologies including electrochemical, catalytic, infrared and ultrasonic. • Flame detectors and open-path infrared gas detectors.
These instruments are used for plant-wide monitoring of toxic gases and for detecting the presence of flames. These systems use infrared optics to detect potentially hazardous conditions across long distances, making them suitable for use in such applications as offshore oil rigs, storage vessels, refineries, pipelines and ventilation ducts.
These instruments are used for plant-wide monitoring of toxic gases and for detecting the presence of flames. These systems use infrared optics to detect potentially hazardous conditions across long distances, making them suitable for use in applications such as processing industries, storage vessels and HVAC ducts.
Our ALTAIR ® 2X, ALTAIR 4XR and ALTAIR 5X Multigas Detectors, with our internally developed XCell ® sensor technology, provide faster response times and unsurpassed durability. During 2022, we launched the ALTAIR ® io™ 4 gas detection wearable, designed with fully integrated connectivity for real-time visibility across worksites.
Our ALTAIR ® 2X, ALTAIR 4XR and ALTAIR 5X Multigas Detectors, with our internally developed XCell ® sensor technology, provide faster response times and unsurpassed durability. Our newest multigas detector, the ALTAIR ® io™ 4, is a portable gas detection wearable designed with fully integrated connectivity for real-time visibility across worksites.
Key products include: • Permanently installed gas detection monitoring systems. This product line is used to monitor for combustible and toxic gases and oxygen deficiency in virtually any application where continuous monitoring is required. Our systems are used for gas detection in the oil and gas industry, petrochemical, pulp and paper, wastewater, refrigerant monitoring, pharmaceutical production and general industrial applications.
This product line is used to monitor for combustible and toxic gases and oxygen deficiency in virtually any application where continuous monitoring is required. Our systems are used for gas detection in energy, pulp and paper, wastewater, refrigerant monitoring, pharmaceutical production and general industrial applications.
The Company's core products include breathing apparatus where self-contained breathing apparatus ("SCBA") is the principal product, fixed gas and flame detection systems, portable gas detection instruments, industrial head protection products, firefighter helmets and protective apparel and fall protection devices.
The Company's product portfolio includes firefighter safety gear where core products include self-contained breathing apparatus ("SCBA"), protective apparel and helmets; detection where core products include fixed gas and flame detection ("FGFD") systems and portable gas detection instruments; and industrial personal protective equipment ("PPE") where core products include industrial head protection and fall protection devices.
First, our "MOVE" (Meaningful, Ongoing, Vital Exchanges) Performance Management philosophy is a core element of associate engagement. Exchanges between associates and supervisors provide a flexible, ongoing feedback loop to drive and enhance the engagement of associates, while facilitating the achievement of our strategic goals. Second, the MSA Leader model sets the expectations of MSA people leaders.
Exchanges between associates and supervisors provide a flexible, ongoing feedback loop to drive and enhance the engagement of associates, while facilitating the achievement of our strategic goals. Second, the MSA Leader model sets the expectations of MSA people leaders.
In our Americas segment, the majority of our sales are made through distribution. In our International segment, sales are made through both indirect and direct sales channels. For the year ended December 31, 2022, no individual customer represented more than 10% of our sales.
Customers — Our customers generally fall into two categories: distributors and end-users. In our Americas segment, the majority of our sales are made through distribution. In our International segment, sales are made through both indirect and direct sales channels. For the year ended December 31, 2023, no individual customer represented more than 10% of our sales.
The Company's comprehensive product line, which are governed by rigorous safety standards across highly regulated industries, is used by workers around the world in a broad range of markets, including fire service, the oil, gas and petrochemical industry, construction, industrial manufacturing applications, heating, ventilation, air conditioning and refrigeration ("HVAC-R"), utilities, mining and the military.
The Company's comprehensive product line, which is governed by rigorous safety standards across highly regulated industries, is used to protect workers and facility infrastructures around the world in a broad range of markets, including fire service, energy, utility, construction and industrial manufacturing applications as well as heating, ventilation, air conditioning and refrigeration ("HVAC-R").
During periods of economic expansion or contraction and following significant catastrophes, our sales by quarter have varied from this seasonal pattern. Government-related sales tend to increase in the fourth quarter.
Seasonality — Our operating results are not significantly affected by seasonal factors. During periods of economic expansion or contraction and following significant catastrophes, our sales by quarter have varied. Government-related sales tend to increase in the fourth quarter.
We sell portable gas detection instruments in both our Americas and International segments. MSA also leverages proprietary Internet of Things solutions and wireless solutions to connect our hardware products directly to our cloud offering ("MSA Grid"). MSA Grid offers solutions for both fleet management and live monitoring while interfacing directly with the breadth of MSA hardware products.
We sell portable gas detection instruments in both our Americas and International segments. 5 Table of Contents MSA also leverages proprietary Internet of Things solutions and wireless solutions to connect certain MSA hardware products directly to our cloud offering ("MSA Grid").
We believe our team-based, cross-geographical and cross-functional approach to new product development is a source of competitive advantage. Our approach to the new product development process allows us to tailor our product offerings and product line strategies to satisfy distinct customer preferences and industry regulations that vary across our operating segments.
Our approach to the new product development process allows us to tailor our product offerings and product line strategies to satisfy distinct customer preferences and industry regulations that vary across our operating segments.
We determine race and gender diversity based on our employees’ self-identification or other information compiled to meet the requirements of the U.S. government, compiled as of December 31, 2022. We count a diverse woman as one individual. Leadership and Development —MSA provides programs to enable continuous learning, growth and development opportunities.
We determine race and gender diversity based on our employees’ self-identification or other information compiled to meet the requirements of the U.S. government, compiled as of December 31, 2023. We count a diverse woman as one individual for purposes of the calculating the aforementioned statistics.
Our main competitors vary by region and product. We believe that participants in this industry compete primarily on the basis of product characteristics (such as functional performance, technology, cost of ownership, comfort, design and style), brand name recognition and after-market service support.
We believe that participants in this industry compete primarily on the basis of product characteristics (such as functional performance, technology, cost of ownership, comfort, design and style), brand name recognition and after-market service support. We believe we compete favorably within each of our operating segments as a result of our high quality, innovative offerings and strong brand trust and recognition.
MSA + ™ . Our new safety solutions platform that integrates safety hardware technology, cloud software solutions and safety services was launched in 2022. By integrating our offerings and coupling them with subscription pricing, MSA improved access to our solutions and facilitates the digital transformation of safety programs while further accelerating our recurring revenue business. Non-core products.
By integrating these products with our cloud services and coupling them with subscription pricing, MSA improves access to our solutions and facilitates the digital transformation of safety programs while further accelerating our recurring revenue business. Non-core products. MSA maintains a portfolio of non-core products.
Typical applications of these instruments include the detection of an oxygen deficiency in confined spaces or the presence of combustible or toxic gases. The FGFD product line generates a meaningful portion of overall revenue from recurring business including replacement components and related service. We sell these instruments in both our Americas and International segments.
The FGFD product line generates a meaningful portion of overall revenue from recurring business including replacement components and related service. We sell these products in both our Americas and International segments. Key products include: • Fixed gas detection monitoring systems.
Their use is often mandated by government and industry regulations, which are increasingly enforced on a global basis. 6 Table of Contents The safety products market is highly competitive, with participants ranging in size from small companies focusing on a single type of PPE to several large multinational corporations that manufacture and supply many types of sophisticated safety products.
The safety products market is highly competitive, with participants ranging in size from small companies focusing on a single type of PPE to several large multinational corporations that manufacture and supply many types of sophisticated safety products. Our main competitors vary by region and product.
We believe our dedication and commitment to innovation and research and development allows us to produce state-of-the-art safety products that are often first to market and exceed industry standards. Our primary engineering groups are located in the United States, Germany and China.
Research and Development — To achieve and maintain our market leading positions, we operate several sophisticated research and development facilities. We believe our dedication and commitment to innovation and research and development allows us to produce state-of-the-art safety products that are often first to market and exceed industry standards.
In the opinion of management, compliance with current environmental protection laws will not have a material adverse effect on our financial condition. See Item 1A—Risk Factors, for further information regarding our environmental risks which could impact the Company. Seasonality — Our operating results are not significantly affected by seasonal factors. Sales are generally higher during the second and fourth quarters.
Environmental Matters — Our facilities and operations are subject to laws and regulations relating to environmental protection and human health and safety. In the opinion of management, compliance with current environmental protection laws will not have a material adverse effect on our financial condition. See Item 1A—Risk Factors, for further information regarding our environmental risks which could impact the Company.
As a result of our sales associates working closely with end-users, they gain valuable insight into customer preferences and needs. To better serve our customers and to ensure that our sales associates are among the most knowledgeable and professional in the industry, we place significant emphasis on training our sales associates in product application, industry standards and regulations.
To better serve our customers and to ensure that our sales and marketing associates are among the most knowledgeable and professional in the industry, we place significant emphasis on training our sales associates in product application, industry standards and regulations.
Please refer to MSA's Form SD filed on May 25, 2022 for further information on our conflict minerals analysis.
Please refer to MSA's Form SD filed on May 25, 2023 for further information on our conflict minerals analysis. Form SD may be obtained free of charge at www.sec.gov.
We have close supplier relationship programs with our key raw material distributors and strategic supplier partners. Although we generally do not have long-term supply contracts with all suppliers, thus far we have not experienced any significant problems in obtaining adequate raw materials by prioritizing formal supply agreements with our select strategic supplier partners.
Although we do not have long-term supply contracts with all suppliers, we have engaged in formal supply agreements with select strategic supplier partners. We work to establish long term agreements with all key partners to ensure a robust supply pipeline and have not experienced any significant problems in obtaining adequate raw materials.
Approximately 20% of our global workforce is covered by collective bargaining agreements or works councils. Overall, we consider our employee relations to be good. Our culture is important to our success. To that end, we maintain seven core values that define our culture. They are Integrity, Customer Focus, Diversity and Inclusion, Innovation and Change, Engagement, Teamwork and Speed and Agility.
Our culture is important to our success. To that end, we maintain seven core values that define our culture. They are Integrity, Customer Focus, Diversity and Inclusion, Innovation and Change, Engagement, Teamwork and Speed and Agility.
The V-Series brand of fall protection equipment is inspired by MSA's iconic V-Gard hard hat, which is used by millions of workers around the world. Additionally, we recently launched a patent-pending Personal Fall Limiter with a smart hook connector that uses radio -frequency identification ("RFID") technology to alert wearers when they are not secured to an anchorage point.
MSA’s V-Series ® fall protection equipment has transformed the Company’s harness and self-retracting lanyard portfolio, with over 50 fall protection products launched over the past several years. Additionally, we recently launched a patent-pending Personal Fall Limiter with a smart hook connector that uses radio-frequency identification ("RFID") technology to alert wearers when they are not secured to an anchorage point.
Our global product development teams include cross-geographic and cross-functional members from various areas throughout the Company, including research and development, marketing, sales, operations and quality management. These teams are responsible for setting product line strategies based on their understanding of customers' needs and available technology, as well as the opportunities and challenges they foresee in each product area.
These teams are responsible for setting product line strategies based on their understanding of customers' needs and available technology, as well as the opportunities and challenges they foresee in each product area. We believe our team-based, cross-geographical and cross-functional approach to new product development is a source of competitive advantage.
The primary materials that we source from third parties include electronic components, high density polyethylene, chemical filter media, rubber and plastic components, eye and face protective lenses, air cylinders, certain metals and ballistic resistant, flame resistant and non-ballistic fabrics. We purchase these materials both domestically and internationally, and we believe our supply sources are both well established and reliable.
For example, we rely on integrated manufacturing capabilities for breathing apparatus, gas masks, ballistic helmets, hard hats and circuit boards. The primary materials that we source from third parties include electronic components, high density polyethylene, chemical filter media, rubber and plastic components, eye and face protective lenses, air cylinders, certain metals and ballistic resistant, flame resistant and non-ballistic fabrics.
Our strongest sales of head protection products have historically been in the Americas segment. Firefighter helmets and protective apparel. We offer a complete line of fire helmets that includes our Cairns ® and Gallet ® helmet brands.
We sell breathing apparatus across both the Americas and International segments. Firefighter helmets and protective apparel. We offer a complete line of fire helmets that includes our Cairns ® and Gallet ® helmet brands. Our Cairns helmets are primarily used by firefighters in North America while the Gallet helmets are primarily used by firefighters across our International segment.
We distribute fire service products primarily through specially trained local and regional distributors who provide advanced training and service capabilities to volunteer and paid municipal fire departments. Because of our broad and diverse product line and our desire to reach as many markets and market segments as possible, we have over 2,200 authorized distributor locations worldwide.
We distribute fire service products primarily through specially trained local and regional distributors who provide advanced training and service capabilities to volunteer and paid municipal fire departments.
Competition —The global safety products market is broad and highly fragmented with few participants offering a comprehensive line of safety products. The sophisticated safety products market in which we compete is comprised of both core and non-core offerings and is a subset of the larger safety market. We maintain leading positions in nearly all of our core products.
The sophisticated safety products market in which we compete is comprised of both core and non-core offerings and is a subset of the larger safety market. We maintain leading positions across various products in our portfolio. Over the long-term, we believe global demand for safety products will continue to grow.
Our engineers and technical associates work closely with the safety industry’s leading standards-setting groups and trade associations to develop industry specific product standards and to anticipate their impact on our product line. Segments — We tailor our product offerings and distribution strategy to satisfy distinct customer preferences that vary across geographic regions.
Our engineers and technical associates work closely with the safety industry’s leading standards-setting groups and trade associations to develop industry specific product standards and to anticipate their impact on our product line. We leverage the MSA Business System ("MBS") to develop and introduce innovative safety solutions, secure new business opportunities, and operate with greater efficiency and purpose.
With new hardware and software upgrades always under development, this platform continues to evolve to meet our customers’ needs. Our newest breathing apparatus product, the MSA M1 SCBA, represents the most advanced and ergonomic SCBA we have ever launched for our International markets.
Our primary breathing apparatus product in the Americas segment, the MSA G1 SCBA, is a platform that offers many differentiated features. With new hardware and software upgrades always under development, this platform continues to evolve to meet our customers’ needs.
Our permanently installed fixed gas and flame detection instruments are used in oil, gas and petrochemical applications, wastewater, heating, ventilation and air conditioning ("HVAC") and general industrial production facilities to detect the presence or absence of various gases in the air.
Our permanently installed FGFD systems are used in energy and utility applications, HVAC-R and general industrial production facilities to detect the presence or absence of various gases in the air. Typical applications of these systems include the detection of an oxygen deficiency in confined spaces or the presence of combustible or toxic gases.
Core products, as mentioned above, include breathing apparatus where SCBA is the principal product, fixed gas and flame detection systems, portable gas detection instruments, industrial head protection products, firefighter helmets and protective apparel and fall protection devices. Core products comprised approximately 90% and 89% of sales in 2022 and 2021, respectively.
MSA's corporate strategy includes a focus on providing customers a number of core products, where we have leading market positions and a distinct competitive advantage. Core products, as mentioned above, include breathing apparatus where SCBA is the principal product, firefighter helmets and protective apparel, FGFD, portable gas detection instruments, industrial head protection products and fall protection devices.
Through this cloud technology, MSA provides services that enhance worker safety and accountability by adding this layer of transparency that does not normally exist in industrial settings. Industrial head protection. We offer a complete line of industrial head protection and accessories that includes the iconic V-Gard ® helmet brand, a bellwether product in MSA's portfolio for over 50 years.
We offer a complete line of industrial head protection and accessories that includes the iconic V-Gard ® helmet brand, a bellwether product in MSA's portfolio for over 50 years. We offer customers a wide range of color choices and we are a leader in the application of customized logos.
In addition to our patents, we have also developed or acquired a substantial body of manufacturing know-how that we believe provides a significant competitive advantage over our competitors.
In addition to our patents, we have also developed or acquired a substantial body of manufacturing know-how that we believe provides a significant competitive advantage over our competitors. 7 Table of Contents Raw Materials and Suppliers — Many of the components of our products are formulated, machined, tooled or molded in-house and by select tier one supplier partners, which comprise approximately two-thirds of our cost of sales.
In spite of some market-softening, especially in the consumer space, the demand for industrial-based electronic components continues to outpace supply. For these industrial-based electronic components, lead times remain extended and the overall market constrained, which is not unique to MSA. We continue to navigate these supply chain issues.
For these key electronic components (specifically, components manufactured in larger process nodes), lead times remain extended and the overall market constrained, which is not unique to MSA. We continue to effectively navigate these supply chain issues, as we have close supplier relationship programs with our key raw material distributors and strategic supplier partners.
Our products protect people against a wide variety of hazardous or life-threatening situations. The following is a brief description of each of our product categories: Core products. MSA's corporate strategy includes a focus on driving sales of core products, where we have leading market positions and a distinct competitive advantage.
Products — We design, manufacture, and sell a comprehensive line of safety products and solutions to protect workers and facility infrastructures around the world. Our products protect people and critical infrastructure against a wide variety of hazardous or life-threatening situations. The following is a brief description of each of our product categories: Core products.
This approach to Total Rewards is designed to help MSA attract, retain and motivate high-performing individuals who foster an innovative culture and drive business results. 8 Table of Contents Environmental Matters — Our facilities and operations are subject to laws and regulations relating to environmental protection and human health and safety.
We further strive to provide above-market compensation opportunities for associates who exceed goals and expectations. This approach to total rewards is designed to help MSA attract, retain and motivate high-performing individuals who foster an innovative culture and drive business results.
Our Cairns helmets are primarily used by firefighters in North America while the Gallet helmets are primarily used by firefighters across our International segment. Globe ® Holding Company, LLC ("Globe") and B T Q Limited ("Bristol Uniforms"), are both leading innovators and providers of firefighter personal protective equipment ("PPE") and boots.
Globe Holding Company, LLC ("Globe") and B T Q Limited ("Bristol Uniforms"), two of our subsidiaries, are both leading innovators and providers of firefighter turnout gear and boots. Detection FGFD systems.
The SCBA functions together with various MSA cloud-based software modules and proprietary accessories to create a complete and customizable solution for our customers. Our primary breathing apparatus product in the Americas segment, the MSA G1 SCBA, is a revolutionary platform that offers many differentiated features.
SCBA are used by first responders, manufacturing and process industry plant workers and others entering an environment deemed immediately dangerous to life and health. The SCBA functions together with various MSA cloud-based software modules and proprietary accessories to create a complete and customizable solution for our customers.
Over the long-term, we believe global demand for safety products will continue to grow. Purchases of these products are non-discretionary, protecting workers' health in hazardous and life-threatening work environments.
Purchases of these products are non-discretionary, protecting workers' health and critical infrastructure in hazardous and life-threatening work environments. Their use is often mandated by government and industry regulations, which are increasingly enforced on a global basis.
Form SD may be obtained free of charge at www.sec.gov. 7 Table of Contents Human Capital —As of December 31, 2022, the Company employed approximately 5,000 people worldwide, of which approximately 2,200 were employed in the United States and 2,800 were employed outside of the United States.
Human Capital —As of December 31, 2023, the Company employed approximately 5,100 people worldwide, of which approximately 2,200 were employed in the United States and 2,900 were employed outside of the United States. Approximately 20% of our global workforce is covered by collective bargaining agreements or works councils. Overall, we consider our employee relations to be good.
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Item 1. Business Overview — Established in 1914, MSA Safety Incorporated is the global leader in the development, manufacture and supply of safety products and software that protect people and facility infrastructures. Recognized for their market leading innovation, many MSA products integrate a combination of electronics, software, mechanical systems and advanced materials to protect users against hazardous or life-threatening situations.
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Item 1. Business Overview — MSA Safety Incorporated 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.
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Products — We design, manufacture, and sell a comprehensive line of safety products and solutions to protect the health and safety of workers and facility infrastructures around the world in the fire service, the oil, gas and petrochemical industry, construction, industrial manufacturing applications, HVAC-R, utilities, mining and the military.
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The MBS is our approach to working at our best - at our most efficient and most empowered. It is a combination of behaviors, processes and tools that provide a framework to drive continuous improvement and create intentional problem-solving practices that are consistent across the organization.
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The following is a brief description of our core product offerings: Breathing apparatus products. The primary breathing apparatus product is the SCBA. SCBA are used by first responders, petrochemical plant workers and anyone entering an environment deemed immediately dangerous to life and health.
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We strive to serve our customers and help them solve their safety and compliance challenges while creating value for our shareholders. As part of our differentiated development process, we embed ourselves with our customers to deeply understand their processes, pain points and desired outcomes.
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We offer customers a wide range of color choices and we are a world leader in the application of customized logos. Our industrial head protection products have a wide user base, including oil, gas and petrochemical workers, steel and construction workers, miners and industrial workers. Our Fas-Trac ® III Suspension system was designed to provide enhanced comfort without sacrificing safety.
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Our commitment to MBS has enabled us to drive customer satisfaction and profitable growth while generating significant improvements in operating results. Segments — We tailor our product offerings and distribution strategy to satisfy distinct customer preferences that vary across geographic regions.
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MSA's firefighter safety PPE offering in the Americas segment protects firefighters from head to toe, with Cairns Helmets, our industry leading G1 SCBA, and Globe turnout gear and boots.
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Core products comprised approximately 91% and 90% of sales in 2023 and 2022, respectively. 4 Table of Contents The following is a brief description of our core product offerings within each of our Firefighter Safety, Detection and Industrial PPE portfolios: Firefighter Safety Breathing apparatus products. The Company's primary breathing apparatus product is the SCBA.
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MSA's firefighter safety PPE offering in the International segment includes the XF1 Gallet Helmet and Bristol Uniforms turnout gear, in addition to the M1 SCBA described above. 5 Table of Contents Fall protection. Our broad line of fall protection equipment includes harnesses, lanyards, self-retracting lifelines, engineered systems and confined space equipment.
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MSA Grid offers solutions for both fleet management and live monitoring while interfacing directly with the breadth of available MSA hardware products. Through this cloud technology, MSA provides services that enhance worker safety and accountability through additional transparency that does not normally exist in industrial settings. Industrial PPE Industrial head protection.
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Fall protection equipment is used by workers in the construction industry, oil, gas and petrochemical market, utilities industry, aerospace industry, general industrial applications and anyone working at height. MSA’s new V-Series fall protection equipment has transformed the Company’s harness and self-retracting lanyard portfolio, with approximately 50 new fall protection products launched over the past several years.
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We recently introduced the V-Gard C1™ hard hat with patent-pending ReflectIR™ thermal barrier technology which helps to reduce temperatures inside the hard hat for a cooling effect to the wearer. Our industrial head protection products have a wide user base, including energy, utility, non-residential construction and industrial workers. Fall protection.
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Ballistic helmet and gas mask sales are the primary sales to our military customers and were approximately $55 million globally in 2022 compared to $43 million in 2021. We have patents and pending patents across substantially all of our products. Customers — Our customers generally fall into two categories: distributors and end-users.
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Our broad line of fall protection equipment includes harnesses, lanyards, self-retracting lifelines, engineered systems and confined space equipment. Fall protection equipment is used by workers in the construction, energy, utilities and aerospace industries as well as general industrial applications and anyone working from height in both our Americas and International segments.
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MSA maintains a diversified portfolio of safety products that protect workers and facility infrastructure across a broad array of end markets. While the Company sells its products through distribution, which can limit end-user visibility, the Company provides estimated ranges of end market exposure to facilitate understanding of its growth drivers.
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MSA + ™ . Our safety solutions platform that integrates safety hardware technology, cloud software solutions and safety services was launched in 2022. MSA+ offerings span across our portfolio to include certain products across Firefighter Safety, Detection and Industrial PPE offerings.
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The Company estimates that approximately 35%-40% of its overall revenue is derived from the fire service market and approximately 25%-30% of its revenue is derived from the energy market. The remaining revenue is split among construction, utilities, general industrial applications, military and mining.
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As a result of our sales and marketing associates working closely with end-users, they gain valuable insight into customer preferences and needs.
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We believe we compete favorably within each of our operating segments as a result of our high quality, innovative offerings and strong brand trust and recognition. Research and Development — To achieve and maintain our market leading positions, we operate several sophisticated research and development facilities.
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Because of our broad and diverse product line and our desire to reach as many markets and market segments as possible, we have over 2,100 authorized distributor locations worldwide. 6 Table of Contents Competition —The global safety products market is broad and highly fragmented with few participants offering a comprehensive line of safety products.
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Raw Materials and Suppliers — Many of the components of our products are formulated, machined, tooled or molded in-house and by select tier one supplier partners, which comprise approximately two-thirds of our cost of sales. For example, we rely on integrated manufacturing capabilities for breathing apparatus, gas masks, ballistic helmets, hard hats and circuit boards.
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Our primary engineering groups are located in the United States, Germany, France, China and South Africa. Our global product development teams include cross-geographic and cross-functional members from various areas throughout the Company, including research and development, marketing, sales, operations and quality management.
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We further strive to provide above-market compensation opportunities for associates who exceed goals and expectations.
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We purchase these materials both domestically and internationally, and we work to ensure our supply sources are both well established and reliable. In spite of some market-softening, especially in the consumer space, the demand for certain industrial-based electronic components continues to outpace supply.
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Leadership and Development —MSA provides programs to enable continuous learning, growth and development opportunities. 8 Table of Contents First, our "MOVE" (Meaningful, Ongoing, Vital Exchanges) Performance Management philosophy is a core element of associate engagement.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to integrate or successfully manage businesses that we have recently acquired or may acquire in the future, we may not realize anticipated cost savings, improved manufacturing efficiencies and increased revenue, which may result in material adverse short and long-term effects on our consolidated operating results, financial condition and liquidity.
Biggest changeAcquisitions involve a number of risks including: • failure of the acquired businesses to achieve the results we expect; • diversion of our management’s attention from operational matters; • our inability to retain key personnel of the acquired businesses; • risks associated with unanticipated or underestimated events or liabilities; • negative impacts due to evolving legal or regulatory landscape; • potential disruption of our existing business; and • customer dissatisfaction or performance problems at the acquired businesses. 13 Table of Contents If we are unable to integrate or successfully manage businesses that we have recently acquired or may acquire in the future, we may not realize anticipated cost savings, improved manufacturing efficiencies and increased revenue, which may result in material adverse short and long-term effects on our consolidated operating results, financial condition and liquidity.
Congress, the Organization for Economic Co-operation and Development (or, OECD) and other government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies.
Congress, the Organization for Economic Co-operation and Development ("OECD") and other government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies.
A sustained labor shortage or increased turnover rates within our employee base have led and could lead to increased costs such as increased overtime to meet demand and increased wages to attract and retain employees.
A sustained labor shortage or increased turnover rates within our employee base have led and could lead to increased costs such as increased overtime to meet demand or increased wages to attract and retain employees.
We may be unable to hire or retain and develop a highly skilled and diverse global workforce or effectively manage changes in our workforce and respond to shifts in labor availability. It it important to our business to hire, retain and develop a highly skilled and diverse global workforce.
We may be unable to hire, retain or develop a highly skilled and diverse global workforce or effectively manage changes in our workforce and respond to shifts in labor availability. It is important to our business to hire, retain and develop a highly skilled and diverse global workforce.
If we are unable to protect our intellectual property, our business could be materially and adversely affected. Our success depends, in part, on our ability to obtain and enforce patents, maintain trade secret protection and operate without infringing on the proprietary rights of third parties .
If we are unable to protect our intellectual property, our business could be materially and adversely affected. Our success depends, in part, on our ability to obtain and enforce patents, maintain trade secret protection and know-how and operate without infringing on the proprietary rights of third parties .
Our success depends in large part on the continued contributions of our key management, engineering and sales and marketing personnel, many of whom are highly skilled and would be difficult to replace. Our success also depends on the abilities of new personnel to function effectively, both individually and as a group.
Our success depends in large part on the continued contributions of our key management, engineering, sales and marketing and other key personnel, many of whom are highly skilled and would be difficult to replace. Our success also depends on the abilities of personnel to function effectively, both individually and as a group.
We could experience unplanned or increased turnover of employees with key capabilities, or fail to develop adequate succession plans for leadership positions or hire and retain a workforce with the skills and in the locations we need to operate and grow our business.
We could experience unplanned or increased turnover of employees, fail to develop adequate succession plans for leadership positions, or fail to hire and retain a workforce with the skills and in the locations we need to operate and grow our business.
Like many companies, from time to time, we have experienced attempts on our computer systems by unauthorized outside parties. Because the techniques used by computer hackers and others to access or sabotage networks continually evolve and generally are not recognized until launched against a target, we may be unable to anticipate, prevent or detect these attacks.
From time to time, we have experienced attempts on our computer systems by unauthorized outside parties. Because the techniques used by computer hackers and others to access or sabotage networks continually evolve and generally are not recognized until launched against a target, we may be unable to anticipate, prevent or detect these attacks.
To date, we have not experienced any material breaches or material losses related to cyber-attacks.
To date, we have not experienced any known material breaches or material losses related to cyber-attacks.
We are subject to numerous, and sometimes conflicting, laws and regulations on matters as diverse as anti-corruption, import/export controls, product content requirements, trade restrictions, tariffs, taxation, sanctions, internal and disclosure control obligations, securities regulation, anti-competition, data privacy, Brexit changes and labor relations, among others.
We are subject to numerous, and sometimes conflicting, laws and regulations on matters as diverse as anti-corruption, import/export controls, product content requirements, trade restrictions, tariffs, taxation, sanctions, internal and disclosure control obligations, securities regulation, anti-competition, data privacy and security, and labor relations, among others.
On January 5, 2023, the Company divested MSA LLC, a wholly owned subsidiary that holds legacy product liability claims relating to coal dust, asbestos, silica, and other exposures, to a joint venture between R&Q Insurance Holdings Ltd. and Obra Capital, Inc.
On January 5, 2023, the Company divested Mine Safety Appliances Company, LLC ("MSA LLC"), a wholly owned subsidiary that holds legacy product liability claims relating to coal dust, asbestos, silica, and other exposures, to a joint venture between R&Q Insurance Holdings Ltd. and Obra Capital, Inc.
If we are unable to attract, effectively integrate and retain management, engineering, sales and marketing or other key personnel, then the execution of our growth strategy and our ability to react to changing market requirements may be impeded, and our business could suffer as a result.
If we are unable to attract, effectively integrate and retain management, engineering, sales and marketing or other key personnel, then the execution of our company strategy and our ability to adapt and react to changing market requirements may be impeded, and our business could suffer as a result.
We could also fail to attract and develop personnel with key emerging capabilities that we need to continue to respond to changing consumer and customer needs and grow our business, including skills in the areas of manufacturing, engineering, sales, service, and various functional support areas.
We could also fail to attract and develop personnel with key emerging capabilities that we need to continue to respond to changing end user and customer needs and grow our business, including skills in the areas of manufacturing, engineering, sales, service, and various functional support areas.
We have also been negatively affected and could continue to be negatively affected by labor shortages or constraints experienced by our partners, including our external manufacturing partners and freight providers.
We have also been negatively affected and could continue to be negatively affected by labor shortages and other constraints experienced by our partners, including our external manufacturing partners and freight providers.
We have incurred and may incur restructuring charges primarily related to severance costs for staff reductions associated with our ongoing initiatives to drive profitable growth and right size our operations as well as programs to adjust our operations in response to current business conditions. For example, in 2022, 151 positions were eliminated in response to the changing business environment.
We have incurred and may incur restructuring charges primarily related to severance costs for staff reductions associated with our ongoing initiatives to drive profitable growth and right size our operations as well as programs to adjust our operations in response to current business conditions. For example, in 2023, 152 positions were eliminated in response to the changing business environment.
Foreign Corrupt Practices Act, and similar local laws; • difficulty in hiring and retaining qualified employees; • the ability to effectively negotiate with labor unions in foreign countries; • the need to take extra security precautions for our international operations; • costs and difficulties in managing culturally and geographically diverse international operations; • pandemics, severe weather events, or other disasters; and • risks associated with the United Kingdom's decision to exit the European Union, including disruptions to trade and free movement of goods, services and people to and from the United Kingdom; increased foreign exchange volatility with respect to the British pound; and additional legal and economic uncertainty.
Foreign Corrupt Practices Act, and similar local laws; • difficulty in hiring, retaining and motivating qualified employees; • difficulty in the ability to effectively negotiate with labor unions in foreign countries; • the need to take extra security precautions for our international operations; • costs and difficulties in managing culturally and geographically diverse international operations; • pandemics, severe weather events, or other disasters; and 16 Table of Contents • risks associated with disruptive political events, such as the United Kingdom's decision to exit the European Union, including disruptions to trade and free movement of goods, services and people to and from the United Kingdom; increased foreign exchange volatility with respect to the British pound; and additional legal and economic uncertainty.
GENERAL RISK FACTORS Damage to the reputation of MSA or to one or more of our product brands could adversely affect our business. Developing and maintaining our reputation, as well as the reputation of our brands, is a critical factor in our relationship with customers, distributors and others.
GENERAL RISK FACTORS Damage to the reputation of MSA or to one or more of our product brands could adversely affect our business. Developing and maintaining our reputation, as well as the reputation of our brands, is a critical factor in our relationship with customers, distributors, end users, suppliers, associates, and others.
These actions could result in liability for significant monetary damages, fines and/or criminal prosecution, unfavorable publicity and other reputational damage and have a material adverse effect on our business, consolidated results of operations and financial condition. We are subject to various environmental laws and any violation of these laws could adversely affect our results of operations.
These actions could result in liability for significant monetary damages, unfavorable publicity and other reputational damage and have a material adverse effect on our business, consolidated results of operations and financial condition. 10 Table of Contents We are subject to various environmental laws and any violation of these laws could adversely affect our results of operations.
Violations of one or more of these laws or regulations in the conduct of our business could result in significant fines, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation.
Violations of one or more of these laws or regulations in the conduct of our business could result in significant fines, criminal prosecution or sanctions and/or civil penalties against us or our officers or other personnel, prohibitions on doing business and damage to our reputation.
These risks include the following: • Scarcity of parts and components necessary to manufacture our products; • unexpected changes in regulatory requirements; • changes in trade policy or tariff regulations; • changes in tax laws and regulations; • unintended consequences due to changes to the Company's legal structure; • additional valuation allowances on deferred tax assets due to an inability to generate sufficient profit in certain foreign jurisdictions; • intellectual property protection difficulties or intellectual property theft; • difficulty in collecting accounts receivable; • complications in complying with a variety of foreign laws and regulations, some of which may conflict with U.S. laws; • foreign privacy laws and regulations; • trade protection measures and price controls; • trade sanctions and embargoes; • nationalization and expropriation; • increased international instability, potential instability of foreign governments or impacts from geopolitical conflict such as supplier or transportation disruptions; • effectiveness of worldwide compliance with MSA's anti-bribery policy, the U.S.
Further examples of such risks include the following: • Scarcity or unavailability of parts and components necessary to manufacture our products; • unexpected changes in regulatory requirements; • changes in trade policy or tariff regulations; • changes in tax laws and regulations; • unintended consequences due to changes to the Company's legal structure; • additional valuation allowances on deferred tax assets due to an inability to generate sufficient profit in certain foreign jurisdictions; • intellectual property protection difficulties or intellectual property theft; • difficulty in collecting accounts receivable; • complications in complying with a variety of foreign laws and regulations, some of which may conflict with U.S. laws; • foreign privacy laws and regulations that impede our ability to effectively do business; • negative impacts from trade protection measures and price controls; • trade sanctions and embargoes; • nationalization and expropriation of assets; • increased international instability, potential instability of foreign governments or impacts from geopolitical conflict or wars, such as supplier or transportation disruptions; • lack of effective compliance with MSA's anti-bribery policy, the U.S.
We believe that participants in this industry compete primarily on the basis of product characteristics (such as functional performance, technology, cost of ownership, comfort, design and style), price, service and delivery, customer support, the ability to meet the special requirements of customers, brand name trust and recognition, and e-business capabilities.
Our main competitors vary by region and product. We believe that participants in this industry compete primarily on the basis of product characteristics (such as functional performance, technology, cost of ownership, comfort, design and style), price, service and delivery, customer support, the ability to meet the special requirements of customers, brand name trust and recognition, purchasing options, and e-business capabilities.
The divested subsidiary MSA LLC and the Purchaser have indemnified us with respect to MSA LLC’s cumulative trauma product liability losses and other defined exposures.
The divested subsidiary MSA LLC and the Purchaser each have agreed to indemnify us with respect to MSA LLC’s cumulative trauma product liability losses and other defined exposures.
Collectively, these outcomes could materially and adversely affect our business, results of operations and financial condition. Pandemics or disease outbreaks such as COVID-19 could result in a widespread health crisis that could adversely affect the economies of developed and emerging markets, potentially resulting in an economic downturn that could affect customers’ demand for our products in certain industrial-based end-markets.
Pandemics or disease outbreaks such as COVID-19 could result in a widespread health crisis that could adversely affect the economies of developed and emerging markets, potentially resulting in an economic downturn that could affect customers’ demand for our products in certain industrial-based end markets.
Our inability to comply with these standards could result in declines in revenue, profitability and cash flow. Changes in laws and regulations could reduce the demand for our products or require us to re-engineer our products, thereby creating opportunities for our competitors.
Our inability to comply with these standards could result in declines in revenue, profitability and cash flow. Changes in laws, regulations, or the standards themselves, including changes related to federal, national, state or provincial elections, could reduce the demand for our products or require us to re-engineer our products, thereby creating opportunities for our competitors.
Any type of product injury claim may result in losses in excess of available insurance coverage and have a material adverse effect on our business, operating results, financial condition and liquidity.
Any type of product injury claim may result in losses in excess of limits or beyond the coverage afforded by available insurance and have a material adverse effect on our business, reputation, operating results, financial condition and liquidity.
The proper functioning and security of our information systems is critical to the operation and reputation of our business. This includes the systems that support and operate our Safety io and MSA+™ platforms. Our information systems may be vulnerable to damage or disruption from natural or man-made disasters, computer viruses, power losses or other system or network failures.
This includes the systems that support and operate our Safety io and MSA+ platforms. Our information systems may be vulnerable to damage or disruption from natural or man-made disasters, computer viruses, power losses or other system or network failures.
While we attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks remain potentially vulnerable to advanced persistent threats.
While we attempt to mitigate the aforementioned risks by employing a number of measures, including employee training, monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks, facilities, business partners and associates remain potentially vulnerable to advanced persistent threats.
It is therefore possible that in the future we may suffer an attack, unauthorized parties may gain access to personal information in our possession and we may not be able to identify any such incident in a timely manner. Our continued success depends on our ability to protect our intellectual property.
It is therefore possible that we may suffer a cyber attack with a material breach or material loss, unauthorized parties may gain access to personal information in our possession and we may not be able to identify any such incident in a timely manner. 14 Table of Contents Our continued success depends on our ability to protect our intellectual property.
Occurrence of any of these conditions could deplete our institutional knowledge base and erode our competitiveness. We are experiencing continuing a tight and competitive labor market and could face unforeseen challenges in the availability of labor.
Occurrence of any of these conditions could deplete our institutional knowledge base and erode our competitiveness. 15 Table of Contents We continue to experience a tight and competitive labor market and could face unforeseen challenges in the availability of labor.
We could incur substantial costs as a result of noncompliance with or liability for cleanup pursuant to these environmental laws. Such laws continue to change, and we may be subject to more stringent environmental laws in the future.
We could incur substantial costs as a result of noncompliance with or liability for cleanup pursuant to these environmental laws, which could have a material adverse effect on our business, consolidated results of operations and financial condition. Such laws continue to change, and we may be subject to more stringent environmental laws in the future.
See Note 13—Goodwill and Intangible Assets of the consolidated financial statements in Part II Item 8 of this Form 10-K for the carrying amounts of goodwill in each of our reporting segments and details on indefinite-lived intangible assets that we hold.
See Note 13—Goodwill and Intangible Assets of the consolidated financial statements in Part II Item 8 of this Form 10-K for the carrying amounts of goodwill in each of our reporting segments and details on indefinite-lived intangible assets that we hold. 17 Table of Contents Failure to incorporate, or improperly incorporating, Artificial Intelligence (AI) could damage our business.
Environmental social and governance, often referred to as ESG, reporting and disclosure requirements continue to evolve, with increasing investor expectations and additional regulatory requirements anticipated. Failure to accurately and timely meet these expectations and requirements may result in reputational damage, regulatory penalties and litigation among other consequences.
As reporting and disclosure requirements continue to evolve, the Company anticipates increasing investor expectations and additional regulatory requirements, among other demands related to our ESG activities. Failure to accurately and timely meet these expectations and requirements may result in reputational damage, regulatory penalties and litigation among other consequences.
As of December 31, 2022, we had $308.6 million of variable rate borrowings under our revolving credit facility. A 50 basis point increase or decrease in interest rates could result in $1.4 million of additional interest expense.
As of December 31, 2023, we had $292.1 million of variable rate borrowings under our senior revolving credit facility and 2023 term loan credit agreement. A 50 basis point increase or decrease in interest rates could result in $1.7 million of additional interest expense. 18 Table of Contents
Some laws and directives may also hinder our ability to move certain products across borders. Economic conditions can also influence order patterns. These factors could negatively impact our consolidated results of operations and cash flow.
Some laws and directives may also hinder our ability to move certain products across borders. Economic conditions can also influence order patterns.
Our inability to successfully manage price fluctuations due to market demand, currency risks or material shortages, or future price fluctuations (whether due to inflationary pressures or otherwise) could have a material adverse effect on our business and our consolidated results of operations and financial condition.
Our inability to successfully manage price fluctuations due to market demand, currency risks or material shortages, or future price fluctuations (whether due to inflationary pressures or otherwise) could have a material adverse effect on our business and our consolidated results of operations and financial condition. 11 Table of Contents Our plans to continue to improve productivity and reduce complexity may not be successful, which could adversely affect our ability to compete.
The safety products market is highly competitive, with participants ranging in size from small companies focusing on single types of safety products, to large multinational corporations that manufacture and supply many types of safety products. Our main competitors vary by region and product.
The competitive pressures faced by us could materially and adversely affect our business, results of operations and financial condition. The safety products market is highly competitive, with participants ranging in size from small companies focusing on single types of safety products, to large multinational corporations that manufacture and supply many types of safety products.
Our inability to maintain the proprietary nature of our technologies could have a material adverse effect on our consolidated results of operations and financial condition. 15 Table of Contents RISKS RELATED TO HUMAN CAPITAL MANAGEMENT If we lose any of our key personnel or are unable to attract, train and/or retain qualified personnel or plan the succession of senior management, our ability to manage our business and continue our growth could be negatively impacted.
RISKS RELATED TO HUMAN CAPITAL MANAGEMENT If we lose any of our key personnel or are unable to attract, train and/or retain qualified personnel or properly plan the succession of senior management, our ability to manage our business and continue our growth could be negatively impacted.
Failure to achieve and maintain a diverse workforce, compensate our employees competitively and fairly, maintain a safe and inclusive environment or promote the well-being of our employees could affect our reputation and also result in lower performance and an inability to retain valuable employees. 16 Table of Contents RISKS RELATED TO DOING BUSINESS INTERNATIONALLY We have significant international operations and are subject to the risks of doing business in foreign countries and global supply chains.
Failure to achieve and maintain a diverse workforce, compensate our employees competitively and fairly, maintain a safe and inclusive environment or promote the well-being of our employees could affect our reputation and also result in lower performance and an inability to retain valuable employees.
In addition, we may be required to or may voluntarily recall or redesign certain products or components due to concern about product safety, quality, ease of use or customer confidence.
In addition, we may be required to or may voluntarily recall or redesign certain products or components due to concern about product safety, quality, ease of use or customer confidence. We continue to review, update, and execute the Company's quality management processes appropriately to meet changing market demands, technology, and product standards.
Additionally, market anticipation of significant new standards can cause customers to accelerate or delay buying decisions. 10 Table of Contents We are subject to various federal, state and local laws and regulations across our global organization and any violation of these laws and regulations could adversely affect our results of operations.
We are subject to various federal, state and local laws and regulations across our global organization and any violation of these laws or regulations could adversely affect our results of operations.
We have significant operations in a number of countries outside the U.S., including some in emerging markets.
We are subject to risks arising from adverse changes in global economic conditions. We have significant operations in a number of countries outside the U.S., including some in emerging markets.
These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information.
These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. Our inability to maintain the proprietary nature of our technologies could have a material adverse effect on our consolidated results of operations and financial condition.
Additionally, divestitures may expose us to alleged potential liabilities which could adversely affect our business. One of our operating strategies is to selectively pursue acquisitions. Any future acquisitions will depend on our ability to identify suitable acquisition candidates and successfully consummate such acquisitions.
Our inability to successfully identify, consummate and integrate current and future acquisitions or to realize anticipated cost savings and other benefits could adversely affect our business. Additionally, divestitures may expose us to alleged potential liabilities which could adversely affect our business. One of our operating strategies is to selectively pursue acquisitions.
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, which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows. 11 Table of Contents RISKS RELATED TO SUPPLY AND MANUFACTURING Our future results are subject to the risk that purchased components and materials are unavailable or available at excessive cost due to material shortages, excessive demand, currency fluctuation, inflationary pressure and other factors.
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, which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows.
Although the Company uses instruments to hedge certain foreign currency risks, these hedges only offset a portion of the Company’s exposure to foreign currency fluctuations. In addition, because our consolidated financial statements are stated in U.S. dollars, such fluctuations may affect our consolidated results of operations and financial position, and may affect the comparability of our results between financial periods.
In addition, because our consolidated financial statements are stated in U.S. dollars, such fluctuations may affect our consolidated results of operations and financial position, and they may affect the comparability of our results between financial periods.
Regulatory approvals for our products may be delayed or denied for a variety of reasons that are outside of our control.
Regulatory approvals for our products may be delayed or denied for a variety of reasons that are outside of our control. Additionally, market anticipation of significant new standards can cause customers to accelerate or delay buying decisions.
Any sustained interruption in our receipt of adequate supplies or services could have a material adverse effect on our business, results of operations and financial condition.
It is possible that any of our supplier relationships could be terminated or otherwise disrupted, or that our suppliers may be unable to timely deliver quality components, materials or services to us. Any sustained interruption in our receipt of adequate supplies or services could have a material adverse effect on our business, results of operations and financial condition.
The markets in which we compete are highly competitive, and some of our competitors have greater financial and other resources than we do. The competitive pressures faced by us could materially and adversely affect our business, results of operations and financial condition.
A significant reduction in available government funding could result in declines in our consolidated results of operations and cash flow. The markets in which we compete are highly competitive, and some of our competitors have greater financial and other resources than we do.
It is also possible that other major productivity and streamlining programs may be required in the future. RISKS RELATED TO ECONOMIC, MARKET AND COMPETITIVE CONDITIONS Unfavorable economic and market conditions could materially and adversely affect our business, results of operations and financial condition. We are subject to risks arising from adverse changes in global economic conditions.
It is also possible that other major productivity and streamlining programs may be required in the future. We are subject to risks related to various U.S. and foreign climate regulations and any changes in these regulations related to climate disclosure and penalties for non-compliance could adversely affect our results of operations.
However, the ultimate amounts to be contributed are dependent upon, among other things, interest rates, underlying asset returns and the impact of legislative or regulatory changes related to pension funding obligations.
However, the ultimate amounts to be contributed are dependent upon, among other things, interest rates, underlying asset returns and the impact of legislative or regulatory changes related to pension funding obligations. For further information regarding our pension plans, refer to Note 15—Pensions and Other Post-retirement Benefits of the consolidated financial statements in Part II Item 8 of this Form 10-K.
Any one or more of these risks could have a negative impact on the success of our international operations and, thereby, have a material adverse effect on our business, consolidated results of operations and financial condition. 17 Table of Contents Because we derive a significant portion of our sales from the operations of our foreign subsidiaries, future currency exchange rate fluctuations could adversely affect our results of operations and financial condition, and could affect the comparability of our results between financial periods.
Any one or more of these risks could have a negative impact on the success of our global operations and, thereby, have a material adverse effect on our business, consolidated results of operations and financial condition.
Our operations outside of the United States account for a significant portion of our net sales. The results of our foreign operations are generally reported in local currency and then translated into U.S. dollars at the applicable exchange rates for inclusion in our consolidated financial statements.
The results of our foreign operations are generally reported in local currency and then translated into U.S. dollars at the applicable exchange rates for inclusion in our consolidated financial statements. The exchange rates between some of these currencies and the U.S. dollar have fluctuated significantly in recent years and may continue to do so in the future.
We have business operations in more than 40 international locations. In 2022, approximately one-half of our net sales were made by operations located outside the United States. We also rely on global supply chains or otherwise source critical components and raw materials from suppliers based in foreign countries, which at times are used in manufacturing operations across our global footprint.
RISKS RELATED TO DOING BUSINESS INTERNATIONALLY We have significant international operations and are subject to the risks of doing business in foreign countries and global supply chains. We have business operations in more than 40 international locations. In 2023, approximately one-half of our net sales were made by operations located outside the United States.
For further information regarding our pension plans, refer to Note 15—Pensions and Other Post-retirement Benefits of the consolidated financial statements in Part II Item 8 of this Form 10-K. 18 Table of Contents If we fail to meet our debt service requirements or the restrictive covenants in our debt agreements or if interest rates increase, our results of operations and financial condition could be materially and adversely affected.
If we fail to meet our debt service requirements or the restrictive covenants in our debt agreements or if interest rates increase, our results of operations and financial condition could be materially and adversely affected.
In certain cases, components could be sole sourced or otherwise not easily substituted due to the highly regulated nature of our products. Therefore, our operations and sourcing strategies are subject to supply shortages, sourcing delays, or disruption due to various geopolitical, economic, disasters, and other risks and uncertainties, which could have a material adverse effect on our business.
Therefore, our operations and sourcing strategies could face supply shortages, sourcing delays, changes in customer demand, or disruption due to various geopolitical, economic and natural disasters, as well as other risks and uncertainties related to doing business across borders, which could have a material adverse effect on our business.
It is possible that volatility in the oil, gas and petrochemical industry, whether related to economic, climate-related energy policy, or other conditions, could negatively impact our business and could result in declines in our consolidated results of operations and cash flow. 12 Table of Contents Pandemics or disease outbreaks, such as COVID-19, may cause unfavorable economic or market conditions which could impact demand patterns and/or disrupt global supply chains and manufacturing operations.
A portion of MSA's sales are made to customers in the energy market. It is possible that volatility in the energy market, whether related to economic, climate-related energy policy, or other conditions, could negatively impact our business and could result in declines in our consolidated results of operations and cash flow.
Our cost structure in future periods is somewhat dependent upon our ability to maintain increased productivity without backfilling certain positions.
Our cost structure in future periods is somewhat dependent upon our ability to maintain increased productivity without backfilling certain positions. If our programs are not successful, there could be a material adverse effect on our business and consolidated results of operations.
These risks include delays, the failure of new products and product line extensions to achieve anticipated levels of market acceptance and the risk of failed product introductions. 14 Table of Contents RISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION A failure of our information systems or a cybersecurity breach could materially and adversely affect our business, results of operations and financial condition.
RISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION A failure of our information systems or a cybersecurity breach could materially and adversely affect our business, results of operations and financial condition. The proper functioning and security of our information systems is critical to the operation and reputation of our business.
Our plans to continue to improve productivity and reduce complexity may not be successful, which could adversely affect our ability to compete. MSA has integrated parts of its European operating segment that have historically been individually managed entities, into a centrally managed organization model.
MSA periodically evaluates the efficiency of our business, which may result in changes to the way that we operate. For example, MSA has integrated parts of its European operating segment that have historically been individually managed entities, into a centrally managed organization model.
A reduction in the spending patterns of government agencies or delays in obtaining government approval for our products could materially and adversely affect our net sales, earnings and cash flow. The demand for our products sold to the fire service market, the homeland security market and other government agencies is, in large part, driven by available government funding.
These factors could negatively impact our consolidated results of operations and cash flow. 12 Table of Contents A reduction in the spending patterns of government customers or delays in obtaining government approval for our products could materially and adversely affect our net sales, earnings and cash flow.
Government budgets are set annually, and we cannot assure that government funding will be sustained at similar levels in the future. A significant reduction in available government funding could result in declines in our consolidated results of operations and cash flow.
The demand for our products sold to the fire service market, the homeland security market and other government customers is, in large part, driven by available government funding. Government budgets are set annually, and we cannot assure that government funding will be sustained at similar levels in the future.
The exchange rates between some of these currencies and the U.S. dollar have fluctuated significantly in recent years and may continue to do so in the future. A weakening of the currencies in which sales are generated relative to the currencies in which costs are denominated would decrease our results of operations and cash flow.
A weakening of the currencies in which sales are generated relative to the currencies in which costs are denominated would decrease our results of operations and cash flow. Although the Company uses instruments to hedge certain foreign currency risks, these hedges only offset a portion of the Company’s exposure to foreign currency fluctuations.
Removed
We depend on various components, materials and services from supply chain partners to manufacture our products. It is possible that any of our supplier relationships could be terminated or otherwise disrupted, or that our suppliers may be unable to timely deliver to us.
Added
Environmental social and governance, often referred to as ESG, has continued to be an area of focus from investors, customers, employees, and lawmakers, who at times may have competing, inconsistent, or varying interests. ESG-related regulations at both state and national levels are requiring heightened attention, including climate-related disclosures.
Removed
A portion of MSA's sales are made to customers in the oil, gas and petrochemical market. We estimate that between approximately 25% - 30% of our global business is sold into the energy market vertical with the most significant exposure in industrial head protection, portable gas detection and FGFD.
Added
RISKS RELATED TO SUPPLY AND MANUFACTURING Our future results are subject to the risk that purchased components and materials are unavailable or available at excessive cost due to material shortages, excessive demand, currency fluctuation, inflationary pressure and other factors. We depend on various components, materials and services from supply chain partners to manufacture our products.
Removed
Approximately 10% - 15% of consolidated revenue, primarily in industrial head protection and portable gas detection, is more exposed to a pullback in employment trends across the energy market. Another 5% - 10% of consolidated revenue, primarily in FGFD is more exposed to a pullback in capital equipment spending within the energy market.
Added
The issue of climate variability is receiving increasing attention nationally and worldwide. Some scientific experts are predicting a worsening of weather volatility in the future associated with climate variability.
Removed
If our programs are not successful, there could be a material adverse effect on our business and consolidated results of operations. 13 Table of Contents Our inability to successfully identify, consummate and integrate current and future acquisitions or to realize anticipated cost savings and other benefits could adversely affect our business.
Added
Climate changes that have significant physical effects, such as increased frequency and severity of storms, floods, wildfires, droughts and other climatic events, could have an adverse effect on our supply chain, our business and our consolidated results of operations and financial condition. Moreover, our operations (and the operations of many of our key suppliers) emit greenhouse gases directly.
Removed
Acquisitions involve a number of risks including: • failure of the acquired businesses to achieve the results we expect; • diversion of our management’s attention from operational matters; • our inability to retain key personnel of the acquired businesses; • risks associated with unanticipated events or liabilities; • potential disruption of our existing business; and • customer dissatisfaction or performance problems at the acquired businesses.
Added
Restrictions on emissions of methane or carbon dioxide that may be imposed could adversely impact the demand for, price of and value of our products and reserves. For example, current and future laws or regulations limiting such emissions could increase our own costs.
Removed
When the $315.0 million of variable rate debt undertaken to complete the MSA, LLC divestiture is taken into account, a 50 basis point increase or decrease in interest rates could result in $3.0 million of additional interest expense.
Added
At this time, it is not possible to accurately estimate how potential future laws or regulations addressing greenhouse gas emissions would impact our business. RISKS RELATED TO ECONOMIC, MARKET AND COMPETITIVE CONDITIONS Unfavorable economic and market conditions could materially and adversely affect our business, results of operations and financial condition.
Removed
Please refer to Note 20—Contingencies of the consolidated financial statements in Part II Item 8 of this Form 10-K for additional information regarding the divestiture. 19 Table of Contents
Added
Pandemics or disease outbreaks, such as COVID-19, may cause unfavorable economic or market conditions which could impact demand patterns and/or disrupt global supply chains and manufacturing operations. Collectively, these outcomes could materially and adversely affect our business, results of operations and financial condition.
Added
Any future acquisitions will depend on our ability to identify suitable acquisition candidates and successfully consummate such acquisitions.
Added
These risks include delays, the failure of new products and product line extensions to achieve anticipated levels of market acceptance, disruptive products, technologies and services introduced by competitors, and the risk of failed product introductions.
Added
We also rely on global supply chains or otherwise source critical components and raw materials from suppliers based in foreign countries, which at times are used in manufacturing operations across our global footprint. In certain cases, components could be sole sourced or otherwise not easily substituted due to the highly regulated or complex nature of our products.
Added
Because we derive a significant portion of our sales from the operations of our foreign subsidiaries, future currency exchange rate fluctuations could adversely affect our results of operations and financial condition and could affect the comparability of our results between financial periods. Our operations outside of the United States account for a significant portion of our net sales.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeThe primary manufacturing locations in the International segment are located in Berlin, Germany; Bristol, United Kingdom; Châtillon-sur-Chalaronne, France, Devizes, United Kingdom; Galway, Ireland; and Suzhou, China. Our primary research and development centers are located in Berlin, Germany; Cranberry Township, PA; and Suzhou, China.
Biggest changeThe primary manufacturing locations in the International segment are located in Berlin, Germany; Bristol, United Kingdom; Châtillon-sur-Chalaronne, France, Devizes, United Kingdom; Galway, Ireland; Chelalate, Morocco; and Suzhou, China. Our primary research and development centers are located in Berlin, Germany; Cranberry Township, PA; Suzhou, China; and Johannesburg, South Africa.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

5 edited+2 added−1 removed0 unchanged
Biggest changeVice President and President, MSA Americas segment since June 2022. Bob Leenen (c) 49 Sr. Vice President and President, MSA International segment since June 2022. Lee B. McChesney (d) 51 Sr. Vice President, Chief Financial Officer and Treasurer since October 2022. Stephanie L. Sciullo (e) 38 Sr.
Biggest changeBlanco (b) 57 President and Chief Operating Officer since June 2023. Lee B. McChesney (c) 52 Sr. Vice President, Chief Financial Officer and Treasurer since October 2022. Richard W. Roda (d) 51 Vice President, Secretary and Chief Legal Officer since June 2023. Stephanie L. Sciullo (e) 39 Sr. Vice President and President, MSA Americas segment since June 2023.
Item 4. Mine Safety Disclosures Not applicable. 20 Table of Contents Information about our Executive Officers The following sets forth the names and ages of our executive officers as of February 16, 2023: Name Age Title Nishan J. Vartanian (a) 63 Chairman, President and Chief Executive Officer since May 2020. Steven C. Blanco (b) 56 Sr.
Item 4. Mine Safety Disclosures Not applicable. 22 Table of Contents Information about our Executive Officers The following sets forth the names and ages of our executive officers as of February 16, 2024: Name Age Title Nishan J. Vartanian (a) 64 Chairman and Chief Executive Officer since June 2023. Steven C.
Vice President and Chief Legal Officer, Corporate Social Responsibility & Public Affairs since June 2022. (a) Prior to his present position, Mr. Vartanian was President and Chief Executive Officer since May 2018. (b) Prior to his present position, Mr. Blanco served as Vice President and President, MSA Americas segment since August 2017. (c) Prior to his present position, Mr.
(a) Prior to his present position, Mr. Vartanian served as Chairman, President and Chief Executive Officer since May 2020 and President and Chief Executive Officer since May 2018. (b) Prior to his present position, Mr. Blanco served as Sr. Vice President and President, MSA Americas segment since June 2022 and Vice President and President, MSA Americas segment since August 2017.
McChesney was Vice President, Corporate Finance and Chief Financial Officer, Global Tools and Storage for Stanley Black & Decker's (a manufacturer of industrial tools and household hardware) since January 2021; Chief Financial Officer, Global Tools and Storage and Corporate FP&A since November 2019; and prior thereto served as President, Hand Tools, Accessories and Storage since 2016.
(a manufacturer of industrial tools and household hardware) since January 2021; Chief Financial Officer, Global Tools and Storage and Corporate FP&A since November 2019; and prior thereto served as President, Hand Tools, Accessories and Storage since 2016. (d) Prior to his present position, Mr.
(e) Prior to her present position, Ms. Sciullo was Vice President and Chief Legal Officer, Corporate Social Responsibility & Public Affairs since August 2021; Vice President and Chief Legal Officer since January 2020; and prior thereto served as Deputy General Counsel since 2016. 21 Table of Contents PART II
Vice President and Chief Legal Officer, Corporate Social Responsibility & Public Affairs since June 2022; Vice President and Chief Legal Officer since January 2020; and prior thereto served as Deputy General Counsel since 2016. 23 Table of Contents PART II
Removed
Leenen served as Vice President and President, MSA International segment since September 2017. (d) Prior to his present position, Mr.
Added
(c) Prior to his present position, Mr. McChesney served as Vice President, Corporate Finance and Chief Financial Officer, Global Tools and Storage for Stanley Black & Decker, Inc.
Added
Roda served as Deputy General Counsel, Secretary and Chief Compliance Officer since January 2020; and prior thereto served as Associate General Counsel, Corporate Secretary and Chief Compliance Officer since December 2016. (e) Prior to her present position, Ms. Sciullo served as Sr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1 — October 31, 2022 — $ — — 203,214 November 1 — November 30, 2022 — $ — — 193,458 December 1 — December 31, 2022 231 $ 134.47 — 189,191 The share repurchase program authorizes up to $100.0 million in repurchases of MSA common stock in the open market and in private transactions.
Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1 — October 31, 2023 28 $ 146.31 — 172,786 November 1 — November 30, 2023 — — — 156,653 December 1 — December 31, 2023 101 $ 165.29 — 161,580 The share repurchase program authorizes up to $100.0 million in repurchases of MSA common stock in the open market and in private transactions.
We do not have any other share repurchase programs. 22 Table of Contents Comparison of Five-Year Cumulative Total Return The following paragraph compares the most recent five-year performance of MSA stock with (1) the Standard & Poor’s 500 Composite Index, (2) S&P Midcap 400 Index and (3) S&P Midcap 400 Industrials.
We do not have any other share repurchase programs. 24 Table of Contents Comparison of Five-Year Cumulative Total Return The following paragraph compares the most recent five-year performance of MSA stock with (1) the Standard & Poor’s 500 Composite Index, (2) S&P Midcap 400 Index and (3) S&P Midcap 400 Industrials.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN ASSUMES INITIAL INVESTMENT OF $100 Among MSA Safety Incorporated, the S&P 500 Index, S&P Midcap 400, and S&P Midcap 400 Industrials Assumes $100 invested on December 31, 2017 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN ASSUMES INITIAL INVESTMENT OF $100 Among MSA Safety Incorporated, the S&P 500 Index, S&P Midcap 400, and S&P Midcap 400 Industrials Assumes $100 invested on December 31, 2018 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Used with permission. All rights reserved. Copyright 1980-2023. Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
Used with permission. All rights reserved. Copyright 1980-2024. Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol “MSA.” On February 10, 2023, there were 153 registered holders of our shares of common stock.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol “MSA.” On February 9, 2024, there were 142 registered holders of our shares of common stock.
Removed
Value at December 31, 2017 2018 2019 2020 2021 2022 MSA Safety Incorporated $ 100.00 $ 123.58 $ 168.18 $ 201.44 $ 205.77 $ 199.25 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 S&P Midcap 400 100.00 88.92 112.21 127.54 159.12 138.34 S&P Midcap 400 Industrials 100.00 85.11 113.67 132.41 170.07 150.52 Prepared by Zacks Investment Research, Inc.
Added
Value at December 31, 2018 2019 2020 2021 2022 2023 MSA Safety Incorporated $ 100.00 $ 136.09 $ 163.01 $ 166.51 $ 161.23 $ 191.06 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P Midcap 400 100.00 126.20 143.44 178.95 155.58 181.15 S&P Midcap 400 Industrials 100.00 133.55 155.57 199.82 176.84 232.43 Prepared by Zacks Investment Research, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+21 added−37 removed43 unchanged
Biggest changeAdjusted operating income Year Ended December 31, 2022 (In thousands) Americas International Corporate Consolidated Net sales $ 1,043,238 $ 484,715 $ — $ 1,527,953 GAAP operating income 239,137 Restructuring charges (Note 3) 7,965 Currency exchange losses, net 10,255 Product liability expense (Note 20) 20,590 Acquisition related costs (Note 14) (a) 12,440 Adjusted operating income (loss) 267,392 60,923 (37,928) 290,387 Adjusted operating margin % 25.6 % 12.6 % Depreciation and amortization (a) 34,334 12,256 520 47,110 Adjusted EBITDA 301,726 73,179 (37,408) 337,497 Adjusted EBITDA % 28.9 % 15.1 % 28 Table of Contents Adjusted operating income Year Ended December 31, 2021 (In thousands) Americas International Corporate Consolidated Net sales $ 908,068 $ 492,114 $ — $ 1,400,182 GAAP operating income 22,780 Restructuring charges (Note 3) 16,433 Currency exchange losses, net 216 Product liability expense (Note 20) 185,264 Acquisition related costs (Note 14) (a) 15,884 Adjusted operating income (loss) 202,496 73,279 (35,198) 240,577 Adjusted operating margin % 22.3 % 14.9 % Depreciation and amortization (a) 31,236 13,718 463 45,417 Adjusted EBITDA 233,732 86,997 (34,735) 285,994 Adjusted EBITDA % 25.7 % 17.7 % (a) Acquisition related costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during due diligence and integration.
Biggest changeThese costs are included in selling, general and administrative expense in the Consolidated Statements of Income. 30 Table of Contents Adjusted operating income Year Ended December 31, 2022 (In thousands) Americas International Corporate Consolidated Net sales $ 1,043,238 $ 484,715 $ — $ 1,527,953 GAAP operating income 239,137 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 income (loss) 267,392 60,923 (37,928) 290,387 Adjusted operating margin % 25.6 % 12.6 % Depreciation and amortization 34,334 12,256 520 47,110 Adjusted EBITDA 301,726 73,179 (37,408) 337,497 Adjusted EBITDA % 28.9 % 15.1 % (a) Transaction costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred during acquisitions and divestitures.
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 and China or are purchased from third-party vendors. Corporate .
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 .
MSA Safety Incorporated ("MSA") is organized into four geographical operating segments that are aggregated into three reportable geographic 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.
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.
These financial measures include organic 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.
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.
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, 2022 compared to the year ended December 31, 2021.
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.
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, 2022. 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, 2022 actuarial valuations.
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.
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 2022, we performed a quantitative test at October 1, 2022.
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.
On January 5, 2023, the Company divested Mine Safety Appliances LLC ("MSA LLC") a wholly owned subsidiary that holds legacy product liability claims relating to coal dust, asbestos, silica, and other exposures, to a joint venture between R&Q Insurance Holdings Ltd. and Obra Capital, Inc.
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.
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, 2022, based on our quantitative test, the fair value of the trade name asset exceeded its carrying value by approximately 37%.
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%.
For a discussion on the year ended December 31, 2021 compared to the year ended December 31, 2020, 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, 2021 filed with the Securities and Exchange Commission on February 19, 2021.
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.
At December 31, 2022, approximately 46% 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 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.
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.
On October 1 st 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.
At December 31, 2022, $589.9 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.
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.
At October 1, 2022, based on our quantitative test, the fair values of each of our reporting units exceeded their respective carrying value by at least 42%. 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.
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 1 st of each year, or more frequently if indicators of impairment exist.
There were no business combinations during 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.
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.
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, 2022, the Company has $1.5 million of restricted cash in support of these arrangements.
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 $8.2 million to our pension plans in 2023 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 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.
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 and divestiture of MSA LLC on January 5, 2023. Income taxes.
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.
CUMULATIVE TRANSLATION ADJUSTMENTS The year-end position of the U.S. dollar relative to international currencies at December 31, 2022, resulted in a translation loss of $19.5 million being recorded to cumulative translation adjustments shareholders' equity account for the year ended December 31, 2022, compared to a translation loss of $25.4 million being recorded to the cumulative translation adjustments account during 2021.
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.
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS None 34 Table of Contents
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS None 36 Table of Contents
Net income was $179.6 million for the year ended December 31, 2022, or $4.56 per diluted share, compared to $21.3 million, or $0.54 per diluted share, for the year ended December 31, 2021. 29 Table of Contents 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.
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. 31 Table of Contents 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.
To best serve these customer preferences, we have organized our business into four geographical operating segments that are aggregated into three reportable geographic segments: Americas, International and Corporate. In 2022, 68% and 32% of our net sales were made by our Americas and International segments, respectively. Americas .
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 .
Adjusted operating income (loss) is reconciled above to the nearest GAAP financial measure, Operating income (loss), and excludes restructuring, currency exchange, product liability expense, and acquisition related costs. Adjusted EBITDA is reconciled above to the nearest GAAP financial measure, Operating income (loss) and excludes depreciation and amortization expense.
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.
Adjustments are made to the reserve as appropriate. 32 Table of Contents Cumulative trauma product liability claims involve exposures to harmful substances that occurred over many years and may have developed over long periods of time into diseases.
Adjustments are made to the reserve as appropriate. 34 Table of Contents 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.
We expect total interest expense for 2023 to be between $48 million and $50 million. 31 Table of Contents The Company had outstanding bank guarantees and standby letters of credit with banks as of December 31, 2022 totaling $9.3 million, of which $1.5 million relate to the senior revolving credit facility.
We expect total interest expense for 2024 to be approximately $40 million. 33 Table of Contents 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.
We remain active in 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 $113.4 million for the year ended December 31, 2022, compared to providing cash of $203.9 million in 2021.
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.
We capitalized approximately $8.7 million and $8.1 million of software development costs during the years ended December 31, 2022 and 2021, respectively. Depreciation expense for capitalized software development cost of $7.9 million and $4.9 million during the years ended December 31, 2022 and 2021, was recorded in costs of products sold on the Consolidated Statements of Income.
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.
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 .
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.
This compared to restructuring charges of $16.4 million during the year ended December 31, 2021, primarily related to our ongoing initiatives to drive profitable growth and acquisition integration activities. We remain focused on executing programs to optimize our cost structure. Currency exchange .
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 .
Interest expense on fixed rate debt over the next five years is expected to be approximately $7.5 million in 2023, $7.3 million in 2024, $7.0 million in 2025, $6.8 million in 2026 and $6.6 million in 2027.
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.
Net Sales Year Ended December 31, 2022 versus December 31, 2021 (Percent Change) Americas International Consolidated GAAP reported sales change 14.9% (1.5)% 9.1% Currency translation effects 0.2% 8.5% 3.1% Constant currency sales change 15.1% 7.0% 12.2% Less: Acquisitions (2.8)% (1.6)% (2.3)% Organic constant currency change 12.3% 5.4% 9.9% Note: Constant currency sales change and Organic constant currency sales change are non-GAAP financial measure provided by the Company to give a better understanding of the Company's underlying business performance.
Net Sales Year Ended December 31, 2023 versus December 31, 2022 (Percent Change) Americas International Consolidated GAAP reported sales change 18.4% 13.9% 17.0% 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.
Investing activities. Investing activities used cash of $4.5 million for the year ended December 31, 2022, compared to using $415.5 million in 2021. The decrease in cash used in investing activities as compared to the same period in 2021 was primarily related to the absence of acquisitions.
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 significant cash obligations as of December 31, 2022, are as follows: (In millions) Total 2023 2024 2025 2026 2027 Thereafter Long-term debt $ 575.2 $ 7.4 $ 7.4 $ 7.4 $ 316.0 $ 7.4 $ 229.6 Operating leases 52.2 10.0 7.5 5.2 4.1 3.4 22.0 Inventory costing method change tax 8.0 2.7 2.7 2.6 — — — Transition tax 2.0 0.7 1.3 — — — — Totals $ 637.4 $ 20.8 $ 18.9 $ 15.2 $ 320.1 $ 10.8 $ 251.6 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.
Our significant cash obligations as of December 31, 2023, are as follows: (In millions) Total 2024 2025 2026 2027 2028 Thereafter Long-term debt $ 604.3 $ 26.5 $ 32.8 $ 256.1 $ 32.8 $ 32.8 $ 223.3 Operating leases 63.9 11.1 9.5 7.9 6.4 5.5 23.5 Inventory costing method change tax 5.3 2.7 2.6 — — — — Transition tax 1.3 1.3 — — — — — Totals $ 674.8 $ 41.6 $ 44.9 $ 264.0 $ 39.2 $ 38.3 $ 246.8 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.
During the years ended December 31, 2022, 2021 and 2020 corporate general and administrative costs were $40.3 million, $37.6 million, and $28.5 million, respectively.
During the years ended December 31, 2023, and 2022 corporate general and administrative costs were $52.7 million and $40.3 million, respectively.
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. 27 Table of Contents Product liability expense.
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. 29 Table of Contents Product liability expense.
To the extent that a balance remains when the facility matures in 2026, we expect to refinance the remaining balance through new borrowing facilities.
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.
Net sales for the International segment were $484.7 million for the year ended December 31, 2022, a decrease of $7.4 million, or 1.5%, compared to $492.1 million for the year ended December 31, 2021. Constant currency sales in the International segment increased 7.0% compared to the prior year period with organic constant currency growth of 5.4%.
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.
As a result of the transaction, MSA will derecognize 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.
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.
The Company believes our healthy balance sheet and access to significant capital at the year ended December 31, 2022, positions us well to navigate through challenging business conditions. Operating activities. Operating activities provided cash of $157.5 million in 2022, compared to providing cash of $199.1 million in 2021.
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. 32 Table of Contents Operating activities. Operating activities provided cash of $92.9 million in 2023, compared to providing cash of $157.5 million in 2022.
Selling, general, and administrative expenses Year Ended December 31, 2022 versus December 31, 2021 (Percent Change) Consolidated GAAP reported change 1.8% Currency translation effects 2.9% Constant currency change 4.7% Less: Acquisitions and strategic transaction costs (0.7)% Organic constant currency change 4.0% Note: Constant currency SG&A change and Organic constant currency SG&A change are non-GAAP financial measure provided by the Company to give a better understanding of the Company's underlying business performance.
Please refer to the Selling, general and administrative expenses table for a reconciliation of the year-over-year expense change. 28 Table of Contents Selling, general, and administrative expenses Year Ended December 31, 2023 versus December 31, 2022 (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 sales increased by 12.2% for the year ended December 31, 2022. Please refer to the Net Sales table below for a reconciliation of the year over year sales change.
Please refer to the Net Sales table below for a reconciliation of the year over year sales change.
The more critical judgments and estimates used in the preparation of our consolidated financial statements are discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K for the year ended December 31, 2022. During 2021, the Company made acquisitions that raised business combinations to a critical accounting policy and estimate.
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.
Impact of Changes in Actuarial Assumptions Change in Discount Rate Change in Expected Return Change in Market Value of Assets (In thousands) 1% (1)% 1% (1)% 5% (5)% (Decrease) increase in net benefit cost $ (7,875) $ 9,942 $ (5,682) $ 5,682 $ (1,482) $ 1,333 (Decrease) increase in projected benefit obligation (61,274) 77,324 — — — — Increase (decrease) in funded status 61,274 (77,324) — — 25,853 (25,853) 33 Table of Contents Goodwill and Indefinite-lived Intangible Assets.
Impact of Changes in Actuarial Assumptions Change in Discount Rate Change in Expected Return Change in Market Value of Assets (In thousands) 1% (1)% 1% (1)% 5% (5)% (Decrease) increase in net benefit cost $ (906) $ 1,035 $ (5,767) $ 5,767 $ (384) $ 355 (Decrease) increase in projected benefit obligation (55,749) 67,271 — — — — Increase (decrease) in funded status 55,749 (67,271) — — 28,106 (28,106) 35 Table of Contents Goodwill and Indefinite-lived Intangible Assets.
These costs are included in SG&A expense in the unaudited Condensed Consolidated Statements of Income. Acquisition-related costs also include the acquisition related amortization, which is included in Cost of products sold in the Consolidated Statements of Income. Note: Adjusted operating income (loss) and adjusted EBITDA are non-GAAP financial measures.
These costs are included in selling, general and administrative expense in the Consolidated Statements of Income. Note: Adjusted operating income (loss) and adjusted EBITDA are non-GAAP financial measures.
Approximately $308.6 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 5.13% as of December 31, 2022. We expect to generate sufficient operating cash flow to make payments against this amount each year.
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.
R&Q and Obra have assumed management of the divested subsidiary, including the management of its claims. The divestiture enhances operating cash flow predictability by eliminating costs associated with defending and settling the transferred claims. 30 Table of Contents Please refer to Note 20—Contingencies of the consolidated financial statements in Part II Item 8 of this Form 10-K for additional information.
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. 26 Table of Contents BUSINESS OVERVIEW MSA is the global leader in advanced safety products, technology and solutions.
Research and development expense was $57.0 million for the year ended December 31, 2022, a decrease of $0.8 million, or 1.4%, compared to $57.8 million for the year ended December 31, 2021. Research and development expense was 3.7% of net sales in 2022, compared to 4.1% of net sales in 2021.
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.
These factors include, among other things, supply chain constraints, raw material or semiconductor availability, the risk of additional COVID lockdowns, industrial employment rates, interest rate changes, military conflict, currency exchange volatility, the pace of economic recovery, as well as geopolitical risk, particularly as it relates to energy uncertainty which could affect operations and suppliers based in Germany and broader Europe.
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 20—Contingencies of the consolidated financial statements in Part II Item 8 of this Form 10-K for further information. On July 1, 2021, the Company acquired Bacharach, Inc. and its affiliated companies ("Bacharach") in a transaction valued at $329.4 million, net of cash acquired.
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.
Please refer to Note 20—Contingencies of the consolidated financial statements in Part II Item 8 of this Form 10-K for additional information. GAAP operating income. Consolidated operating income for the year ended December 31, 2022 was $239.1 million compared to $22.8 million for the year ended December 31, 2021.
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.
Corporate segment adjusted operating loss for the year ended December 31, 2022 was $37.9 million, an increase of $2.7 million, or 8%, compared to an adjusted operating loss of $35.2 million for the year ended December 31, 2021 due primarily to increased costs to support higher business activity.
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.
We expect total interest expense for 2023 to be between $48 million and $50 million, this increase is primarily related to the additional long-term debt to divest MSA LLC as of January 5, 2023. We expect non-cash pension income to decline by $8 million compared to 2022. Income taxes.
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.
At December 31, 2022, approximately 82% of our borrowings are denominated in US dollars, which limits our exposure to currency exchange rate fluctuations. At December 31, 2022, the Company had cash and cash equivalents, including restricted cash, totaling $164.4 million, and access to sufficient capital, providing ample liquidity and flexibility to continue to maintain our balanced capital allocation strategy.
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.
There are a number of other evolving factors that will continue to influence our revenue and earnings outlook.
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 increases primarily reflect an increase in centrally managed functions. 25 Table of Contents Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net Sales 2022 2021 Dollar Increase (Decrease) Percent Increase (Decrease) (In millions) Consolidated $1,527.9 $1,400.2 $127.7 9.1% Americas 1,043.2 908.1 135.1 14.9% International 484.7 492.1 (7.4) (1.5)% Net Sales.
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. 27 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net Sales 2023 2022 Dollar Increase Percent Increase (In millions) Consolidated $1,787.7 $1,527.9 $259.8 17.0% Americas 1,235.6 1,043.2 192.4 18.4% International 552.1 484.7 67.4 13.9% Net Sales.
Total spend on both software development and research and development activities was $65.7 million and $65.9 million during the years ended December 31, 2022 and 2021. Restructuring charges. During the year ended December 31, 2022, the Company recorded restructuring charges of $8.0 million primarily related to our ongoing international initiatives to drive profitable growth and right size operations.
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.
Total other expense, net, for the year ended December 31, 2022, was $0.6 million, a decrease of $1.4 million compared to other income, net, of $0.8 million for the year ended December 31, 2021, driven primarily by higher interest expense, related to rising interest rate environment, and a write-down of an equity investment, partially offset by higher pension income, resulting from higher expected rate of return on plan assets.
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.
Product liability expense during the year ended December 31, 2022 was $20.6 million compared to $185.3 million for the year ended December 31, 2021. Product liability expense for both periods primarily relates to increases in MSA LLC's reserve for cumulative trauma product liability claims and defense costs incurred for these claims.
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 .
During 2022, we had net payments on long-term debt of $13.0 million as compared to net proceeds on long-term debt of $293.2 million during the same period in 2021 to fund the acquisitions of Bacharach and Bristol and buy-out our minority partner in our China business.
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.
Net sales for the year ended December 31, 2022, were $1.53 billion, an increase of $127.7 million, from $1.40 billion for the year ended December 31, 2021, driven by strategic price increases, volume growth, and acquisitions, partially offset by foreign currency translation. We saw strong growth across most of our core products and across both reporting segments.
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.
Pricing and productivity efforts were partially offset by inflation, inventory and product warranty charges. 26 Table of Contents Selling, general and administrative expenses. Selling, general and administrative ("SG&A") expenses were $338.9 million for the year ended December 31, 2022, an increase of $6.0 million, or 1.8%, compared to $332.9 million for the year ended December 31, 2021.
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.
The increase in adjusted operating income is primarily attributable to higher sales volumes driven by the full year impact of the Bacharach acquisition and organic business activity, partially offset by higher SG&A expenses to support business growth.
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.
Gross profit for the year ended December 31, 2022 was $673.8 million, an increase of $58.5 million, or 9.5%, compared to $615.3 million for the year ended December 31, 2021. The ratio of gross profit to net sales was 44.1% in 2022 compared to 43.9% in 2021.
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.
Constant currency SG&A change is calculated by deducting the percentage impact from currency translation effects from the overall percentage change in SG&A. Organic constant currency SG&A change is calculated by deducting the percentage impact from acquisitions and related strategic transaction costs and currency translation effects from the overall percentage change in SG&A. Research and development expense.
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.
Net sales for the Americas segment were $1,043.2 million for the year ended December 31, 2022, an increase of $135.1 million, or 14.9%, compared to $908.1 million for the year ended December 31, 2021. During 2022, constant currency sales in the Americas segment increased 15.1% or on an organic constant currency basis increased 12.3%, excluding acquisitions.
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.
Overall, selling, general and administrative expenses were 22.2% of net sales in 2022 compared to 23.8% of net sales in 2021. Organic constant currency SG&A increased $13 million or 4.0%, demonstrating leverage on revenue growth. This increase was driven by wage inflation and strategic investments to support revenue growth.
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.
As a result of the transaction, we will derecognize in the first quarter of 2023 all legacy cumulative trauma product liability reserves, related insurance assets, and associated deferred tax assets of the divested subsidiary from our balance sheet and recognize a loss of approximately $200 million.
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.
In the case of MSA LLC, the subsidiary's combined cumulative trauma product liability reserve is based upon estimates of its liability for asserted and IBNR cumulative trauma product liability claims.
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.
Refer to Note 14—Acquisitions of the consolidated financial statements in Part II Item 8 of this Form 10-K for further information. During July 2021, the Company purchased the remaining 10% noncontrolling interest in MSA (China) Safety Equipment Co., Ltd. from our former China partner for $19.0 million, inclusive of a $5.6 million distribution.
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.
We paid cash dividends of $71.5 million during 2022, compared to $68.6 million, exclusive of a $5.6 million dividend to our former noncontrolling interest partner in China as part of the buy-out, during 2021. We also used cash of $34.4 million during 2022 to repurchase shares, compared to using $6.2 million during the same period in 2021.
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.
Removed
In connection with the closing, MSA contributed $341 million in cash and cash equivalents, while R&Q and Obra contributed an additional $35 million.
Added
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.
Removed
Headquartered near Pittsburgh in New Kensington, Pa., Bacharach is a leader in gas detection technologies used in the heating, ventilation, air conditioning and refrigeration ("HVAC-R") markets. Bacharach’s advanced instrumentation technologies help protect lives and the environment, while also increasing operational efficiency for its diversified customer base.
Added
During 2023, constant currency sales in the Americas segment increased 17.5% compared to the prior year driven by volume growth and pricing actions.
Removed
Bacharach's portfolio of gas detection and analysis products are used to detect, measure and analyze leaks of various gases that are commonly found in both commercial and industrial settings. Bacharach has strong expertise in the refrigerant leak detection market with customers in the HVAC-R, food retail, automotive, commercial and industrial refrigeration, and military markets.
Added
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.
Removed
On January 25, 2021, the Company acquired 100% of the common stock of B T Q Limited, including Bristol Uniforms and Bell Apparel ("Bristol") in an all-cash transaction valued at $63.0 million, net of cash acquired.
Added
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.
Removed
Bristol, which is headquartered in the United Kingdom ("U.K."), is a leading innovator and provider of protective apparel to the fire, rescue services, and utility sectors.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−1 removed3 unchanged
Biggest changeAt December 31, 2022, we had $308.6 million of variable rate borrowings under our revolving credit facility. A 50 basis point increase or decrease in interest rates could have a $1.4 million impact on future pre-tax earnings under our current capital structure.
Biggest changeAt 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. 37 Table of Contents
A hypothetical 10% increase in December 31, 2022 forward exchange rates would result in a $10.3 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.
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.
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, 2022, we had open foreign currency forward contracts with a U.S. dollar notional value of $103.0 million.
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.
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, 2022, we had $266.5 million of fixed rate debt which matures at various dates through 2036.
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 $8.0 million.
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.
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, 2022 by approximately $62.8 million and $6.5 million, or 4.1% and 3.6%, respectively.
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.
Removed
A 50 basis point increase or decrease in interest rates could have a $3.0 million impact on future pre-tax earnings when the additional $315.0 million of variable rate debt undertaken to complete the MSA, LLC divestiture is taken into account. 35 Table of Contents

Other MSA 10-K year-over-year comparisons