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Contingencies | 12 Months Ended
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Dec. 31, 2023
Commitments and Contingencies Disclosure [Abstract] |
Contingencies | Contingencies Product liability The Company and its subsidiaries face an inherent business risk of exposure to product liability claims arising from the alleged failure of our products to prevent the types of personal injury or death against which they are designed to protect. Product liability claims are categorized as either single incident or cumulative trauma. Single incident product liability claims. Single incident product liability claims involve incidents of short duration that are typically known when they occur and involve observable injuries, which provide an objective basis for quantifying damages. Management has established reserves for the single incident product liability claims of its various subsidiaries, including, asserted single incident product liability claims and incurred but not reported ("IBNR") single incident claims. To determine the reserves, Management makes reasonable estimates of losses for single incident claims based on the number and characteristics of asserted claims, historical experience, sales volumes, expected settlement costs, and other relevant information. The reserve for single incident product liability claims was $1.3 million and $1.4 million at December 31, 2023 and December 31, 2022, respectively. Single incident product liability expense was nominal for the three years ended December 31, 2023, 2022 and 2021. Single incident product liability exposures are evaluated on an annual basis, or more frequently if changing circumstances warrant. Adjustments are made to the reserve as appropriate. The reserve has not been discounted to present value and does not include future amounts which will be spent to defend the claims. Cumulative trauma product liability claims. Cumulative trauma product liability claims involve alleged exposures to harmful substances (e.g., silica, asbestos and coal dust) that occurred years ago and may have developed over long periods of time into diseases such as silicosis, asbestosis, mesothelioma, or coal worker’s pneumoconiosis. A former subsidiary of the Company, MSA LLC, which was divested as described below, has been named as a defendant in various lawsuits related to such claims. These lawsuits mainly involve respiratory protection products allegedly manufactured and sold by MSA LLC or its predecessors. Management previously established a reserve for MSA LLC's potential exposure to cumulative trauma product liability claims. Prior to its divestiture, MSA LLC's total cumulative trauma product liability reserve was $395.1 million, including $13.4 million for claims settled but not yet paid and related defense costs, as of December 31, 2022. The reserve included estimated amounts related to asserted and IBNR asbestos, silica, and coal dust claims expected to be resolved through the year 2075. The reserve was not discounted to present value and did not include future amounts which will be spent to defend the claims. Defense costs were recognized in the Consolidated Statements of Income as incurred. At December 31, 2022, $65.1 million of the total reserve for cumulative trauma product liability claims was recorded in the Insurance and product liability line within other current liabilities in the Consolidated Balance Sheets and the remainder, $330.0 million, was recorded in the Product liability and other noncurrent liabilities line. Prior to the divestiture, MSA LLC's cumulative trauma product liability reserve was based upon an estimate of MSA LLC’s current and potential future liability for cumulative trauma product liability claims, in accordance with applicable accounting principles. See further discussion on the process and assumptions used to derive this estimate in Note 20— Contingencies of the consolidated financial statements in Part II Item 8 of MSA's Form 10-K for the year ended December 31, 2022. On January 5, 2023, the Company entered into a membership interest purchase agreement (the “Purchase Agreement”) with Sag Main Holdings, LLC (the “Buyer”). The Buyer is a joint venture between R&Q Insurance Holdings Ltd. (“R&Q”) and Obra Capital, Inc. (“Obra”). Under the Purchase Agreement, on January 5, 2023, the Company transferred to the Buyer all of the issued and outstanding limited liability company interests of MSA LLC (the “Sale”). In connection with the closing, the Company contributed $341.2 million in cash and cash equivalents, while R&Q and Obra contributed an additional $35.0 million. As MSA LLC was the obligor for the claims to which the Company's legacy cumulative trauma product liability reserves and the policyholder of the related insurance assets, the rights and obligations related to these items remained with MSA LLC when it transferred to the Buyer's ownership pursuant to the Purchase Agreement. In addition, pursuant to the Purchase Agreement, the Buyer and MSA LLC have agreed to indemnify the Company and its affiliates for legacy cumulative trauma product liabilities and other product liabilities, and a subsidiary of the Company has agreed to indemnify MSA LLC for all other historical liabilities of MSA LLC. This indemnification is not subject to any cap or time limitation. In connection with the sale, the Company and its Board of Directors received a solvency opinion from an independent advisory firm that MSA LLC was solvent and adequately capitalized after giving effect to the transaction. Following the completion of the sale and the transfer of MSA LLC to the Buyer, the Company no longer has any obligation with respect to pending and future cumulative trauma product liability claims relating to these matters. As such, all legacy cumulative trauma product liability reserves, related insurance assets, and associated deferred tax assets of the divested subsidiary were derecognized from our balance sheet and the Company incurred a tax-effected loss on the divestiture of MSA LLC of $199.6 million, including transaction related costs of $5.6 million. R&Q and Obra's joint venture has assumed management of the divested subsidiary, including the management of its claims and associated assets. Below is a summary of the impact of the divestiture of MSA LLC on our Consolidated Statements of Income for the year ended December 31, 2023:
(In millions) | Year Ended December 31, 2023
Cash and cash equivalents | $ | (341.2) |
Current insurance receivables | (17.3) |
Notes receivable, insurance companies | (5.9) |
Noncurrent insurance receivables | (110.3) |
Notes receivable, insurance companies, noncurrent | (38.7) |
Current product liability | 65.1 |
Noncurrent product liability | 324.7 |
Loss on divestiture of MSA LLC before transaction costs | (123.6) |
Transaction costs | (5.6) |
Loss on divestiture of MSA LLC | (129.2) |
Income tax expense (a) | (70.4) |
Tax-effected loss on divestiture of MSA LLC | $ | (199.6) |
(a) Related to the write-off of deferred tax asset related to product liability reserve
Insurance Receivable and Notes Receivable, Insurance Companies Many years ago, MSA LLC purchased insurance policies from various insurance carriers that, subject to common contract exclusions, provided coverage for cumulative trauma product liability losses (the "Occurrence-Based Policies"). Prior to the divestiture of MSA LLC, when adjustments were made to amounts recorded in the cumulative trauma product liability reserve, we calculated amounts due to be reimbursed pursuant to the terms of the negotiated Coverage-In-Place Agreements, including cumulative trauma product liability losses and related defense costs, and we recorded the amounts probable of reimbursement as insurance receivables. Insurance receivables at December 31, 2022 totaled $127.6 million, of which $17.3 million was reported in Prepaid expenses and other current assets in the Consolidated Balance Sheets and $110.3 million was reported in Insurance receivables and other noncurrent assets. A summary of insurance receivables balance and activity related to cumulative trauma product liability losses and divestiture of MSA LLC is as follows:
(In millions) |  | 2023 |  | 2022 |  |
Balance beginning of period |  | $ | 127.6 |  |  | $ | 130.2 |  |  |
Divestiture of MSA LLC |  | (127.6) |  |  | — |  |  |
Additions |  | — |  |  | 1.8 |  |  |
Collections |  | — |  |  | (4.4) |  |  |
Balance end of period |  | $ | — |  |  | $ | 127.6 |  |  |
Prior to the divestiture of MSA LLC, notes receivable from insurance companies at December 31, 2022 totaled $44.6 million of which $5.9 million was reported in Notes receivable, insurance companies, current in the Consolidated Balance Sheets and $38.7 million was reported in Notes receivable, insurance companies, noncurrent. A summary of notes receivables from insurance companies balance is as follows:
|  | December 31,
(In millions) |  | 2023 |  | 2022
Balance beginning of period |  | $ | 44.6 |  |  | $ | 48.5 |
Divestiture of MSA LLC |  | (44.6) |  |  | — |
Additions |  | — |  |  | 1.2 |
Collections |  | — |  |  | (5.1) |
Balance end of period |  | $ | — |  |  | $ | 44.6 |
Other Litigation Globe, a subsidiary of the Company, is defending claims in which plaintiffs assert that certain products allegedly containing per- and polyfluoroalkyl substances (“PFAS”) have caused harm, including injury or health issues. PFAS are a large class of substances that are widely used in everyday products. Specifically, Globe builds firefighter turnout gear from technical fabrics sourced from a small pool of specialty textile manufacturers. These protective fabrics have been tested and certified to meet current National Fire Protection Association safety standards, and some of them as supplied to Globe contain or historically have contained PFAS to achieve performance characteristics such as water, oil, or chemical resistance. Globe believes it has valid defenses to these claims. These matters are at a very early stage with numerous factual and legal issues to be resolved. Defense costs relating to these lawsuits are recognized in the Consolidated Statements of Income as incurred. Globe is also pursuing insurance coverage and indemnification related to the lawsuits. As of February 7, 2024, Globe was named as a defendant in approximately 467 lawsuits comprised of about 10,578 claims, plus one action filed on behalf of a putative class of Florida firefighters and certain of their dependents. Certain of these lawsuits include MSA Safety Inc. or other Globe affiliates as defendants. MSA LLC is also a defendant in a number of PFAS lawsuits and the Buyer assumed responsibility for these and any similar future claims specific to MSA LLC in connection with the divestiture on January 5, 2023. Product Warranty The Company provides warranties on certain product sales. Product warranty reserves are established in the same period that revenue from the sale of the related products is recognized, or in the period that a specific issue arises as to the functionality of the Company's product. The determination of such reserves requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. The amounts of the reserves are based on established terms and the Company's best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. If actual return rates and/or repair and replacement costs differ significantly from estimates, adjustments to recognize additional cost of sales may be required in future periods. The following table reconciles the changes in the Company's accrued warranty reserve:
|  | December 31,
(In thousands) |  | 2023 |  | 2022 |  | 2021
Beginning warranty reserve |  | $ | 15,230 |  |  | $ | 12,423 |  |  | $ | 11,428 |
Warranty payments |  | (9,794) |  |  | (10,631) |  |  | (8,987) |
Warranty claims |  | 8,899 |  |  | 14,544 |  |  | 10,225 |
Provision for product warranties and other adjustments |  | (47) |  |  | (1,106) |  |  | (243) |
Ending warranty reserve |  | $ | 14,288 |  |  | $ | 15,230 |  |  | $ | 12,423 |
Warranty expense for the years ended December 31, 2023, 2022 and 2021 was $8.9 million, $13.4 million and $10.0 million, respectively and is included in Costs of products sold on the Consolidated Statements of Income.

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