What changed in this filing

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Item 1. Financial Statements

2021-07-28 compared with 2021-04-27 · 158 added, 103 removed, 519 unchanged (33% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net sales $ 234,519 $ 225,990 $ 456,880 $ 461,754

23 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net income $ 31,440 $ 32,449 $ 59,050 $ 40,043

1 unchanged sentence

Foreign currency translation and other adjustments 13,651 8,753 ( 1,788 ) ( 16,202 )

Pension/postretirement settlements and curtailments — 378 — 378

Amortization of pension liability adjustments:

4 unchanged sentences

Income taxes related to items of other comprehensive income/(loss):

Pension/postretirement settlements and curtailments — ( 113 ) — ( 113 )

Amortization of prior service cost 335 278 671 557

9 unchanged sentences

(in thousands, except share data)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Cash and cash equivalents $ 253,330 $ 241,316

49 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

2021 2020 2021 2020

OPERATING ACTIVITIES

Net income $ 31,440 $ 32,449 $ 59,050 $ 40,043

Adjustments to reconcile net income to net cash provided by/(used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 15,971 15,498 32,560 31,004

19 unchanged sentences

Other, net 1,051 ( 552 ) 1,908 ( 1,086 )

Net cash provided by/(used in) operating activities 33,686 ( 6,638 )

Net cash provided by operating activities 61,953 50,672 95,640 44,034

INVESTING ACTIVITIES

9 unchanged sentences

Dividends paid ( 6,474 ) ( 6,141 ) ( 12,942 ) ( 12,280 )

Net cash (used in)/provided by financing activities ( 21,694 ) 54,231

Net cash used in financing activities ( 40,810 ) ( 62,455 ) ( 62,504 ) ( 8,224 )

Effect of exchange rate changes on cash and cash equivalents 4,904 2,352 2,002 ( 5,296 )

(Decrease)/increase in cash and cash equivalents ( 3,445 ) 27,140

Increase/(decrease) in cash and cash equivalents 15,459 ( 18,643 ) 12,014 8,497

Cash and cash equivalents at beginning of period 237,871 222,680 241,316 195,540

23 unchanged sentences

Under this program, AEC through ASC, is the exclusive supplier of advanced composite fan blades and cases under a long-term supply contract.

AEC net sales to Safran were $ 27.7 million and $ 38.0 million in the first three months of 2021 and 2020, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to $ 107.7 million and $ 127.1 million as of March 31, 2021 and December 31, 2020, respectively.

AEC net sales to Safran were $ 54.0 million and $ 57.0 million in the first six months of 2021 and 2020, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to $ 105.1 million and $ 127.1 million as of June 30, 2021 and December 31, 2020, respectively.

Other significant programs by AEC include the F-35, Boeing 787, Sikorsky CH-53K and JASSM, as well as the fan case for the GE9X engine.

2 unchanged sentences

The following tables show data by reportable segment, reconciled to consolidated totals included in the financial statements:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands)

2021 2020 2021 2020

Machine Clothing

13 unchanged sentences

Interest expense

4,619 4,171 8,717 8,595

Other expense/(income), net 862 1,091 1,462 16,660

1 unchanged sentence

$ 44,886 $ 47,813 $ 82,536 $ 67,861

There were no material changes to total assets of the reportable segments in the first three months of 2021.

There were no material changes to total assets of the reportable segments in the first six months of 2021.

The table below presents restructuring costs by reportable segment (also see Note 4):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands) 2021 2020 2021 2020

6 unchanged sentences

When adjustments in estimated contract revenues or costs are required, any changes from prior estimates are included in earnings in the period the change occurs.

Adjustments in the estimated profitability of long-term contracts increased operating income by $ 0.9 million for the first quarter of 2020, compared to an insignificant effect for the first quarter of 2021.

Changes in the estimated profitability of long-term contracts could be caused by increases or decreases in the contract value, revisions to customer delivery requirements, updated labor or overhead rates, factors affecting the supply chain, changes in the evaluation of contract risks and opportunities, or other factors.

Changes in the estimated profitability of long-term contracts increased operating income by $ 4.3 million and $ 3.7 million for the second quarter and first half of 2021, respectively.

Adjustments in the estimated profitability of long-term contracts increased operating income by $ 7.4 million and $ 6.4 million for the second quarter and first half of 2020, respectively.

We disaggregate revenue earned from contracts with customers for each of our business segments and product groups based on the timing of revenue recognition, and groupings used for internal review purposes.

The following table disaggregates revenue for each product group by timing of revenue recognition:

Three months ended March 31, 2021

Three months ended June 30, 2021

(in thousands)

8 unchanged sentences

Total revenue $ 163,488 $ 71,031 $ 234,519

Three months ended March 31, 2020

Six months ended June 30, 2021

(in thousands) Point in Time Revenue

Recognition Over Time Revenue

Recognition Total

Machine Clothing $ 306,397 $ 1,730 $ 308,127

Albany Engineered Composites

ASC — 53,254 53,254

Other AEC 8,312 87,187 95,499

Total Albany Engineered Composites 8,312 140,441 148,753

Total revenue $ 314,709 $ 142,171 $ 456,880

Three months ended June 30, 2020

(in thousands)

9 unchanged sentences

$ 156,728 $ 69,262 $ 225,990

Six months ended June 30, 2020

(in thousands) Point in Time Revenue

Recognition Over Time Revenue

Recognition Total

Machine Clothing $ 288,339 $ 1,696 $ 290,035

Albany Engineered Composites

ASC — 55,470 55,470

Other AEC 10,463 105,786 116,249

Total Albany Engineered Composites 10,463 161,256 171,719

Total revenue $ 298,802 $ 162,952 $ 461,754

The following table disaggregates MC segment revenue by significant product groupings (paper machine clothing (PMC) and engineered fabrics), and, for PMC, the geographical region to which the paper machine clothing was sold:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands)

2021 2020 2021 2020

Americas PMC $ 82,343 $ 81,225 $ 155,645 $ 154,902

6 unchanged sentences

Most contracts in the AEC segment are short duration firm-fixed-price orders representing performance obligations with an original maturity of less than one year.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 76 million and $ 82 million as of March 31, 2021 and 2020, respectively, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of March 31, 2021, we expect to recognize as revenue approximately $ 51 million during 2021 and the remainder during 2022.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 149 million and $ 85 million as of June 30, 2021 and 2020, respectively, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of June 30, 2021, we expect to recognize as revenue approximately $ 48 million during 2021, $ 62 million during 2022, $ 24 million during 2023, and the remainder during 2024.

Pensions and Other Postretirement Benefit Plans

2 unchanged sentences

The Company accrues the cost of providing these benefits during the active service period of the employees.

The composition of the net periodic benefit cost for the three months ended March 31, 2021 and 2020, was as follows:

The composition of the net periodic benefit cost for the six months ended June 30, 2021 and 2020, was as follows:

Pension plans

6 unchanged sentences

Expected return on assets ( 3,211 ) ( 3,415 ) — —

( 1,606 ) ( 1,723 ) — —

Settlement — 145 — —

Curtailment — 233 — —

Amortization of prior service cost/(credit) 7 16 ( 2,244 ) ( 2,244 )

Amortization of net actuarial loss 1,087 1,180 1,130 1,296

544 596 565 648

Net periodic benefit cost $ 1,647 $ 2,378 $ ( 497 ) $ 9

The amount of net periodic benefit cost is determined at the beginning of each year and generally only varies from quarter to quarter when a significant event occurs, such as a curtailment or a settlement.

There were no such events in the first three months of 2021 or 2020.

There were no such events in the first six months of 2021.

In the second quarter of 2020, the Company recorded expense of $ 0.4 million related to curtailments and settlements.

Service cost for defined benefit pension and postretirement plans are reported in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period.

1 unchanged sentence

Restructuring

Restructuring costs in the first quarter of 2021 were not significant while Machine Clothing restructuring charges for the first three months of 2020 principally related to discontinued operations at its MC production facility in Sélestat, France.

Restructuring costs in the first six months of 2021 were not significant.

Restructuring costs in the first six months of 2020 were related to reductions in workforce at various AEC locations, principally in the United States, as well as related to discontinued operations at the Machine Clothing production facility in Sélestat, France.

Since 2017, we have recorded $ 13.9 million of restructuring charges related to this action.

1 unchanged sentence

The following table summarizes charges reported in the Consolidated Statements of Income under “Restructuring expenses, net”:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands) 2021 2020 2021 2020

14 unchanged sentences

Total termination and other costs $ 2,042 $ 3,479 $ ( 1,410 ) $ ( 5 ) $ 4,106

We expect that approximately $ 0.8 million of Accrued liabilities for restructuring at March 31, 2021 will be paid within one year and approximately $ 0.2 million will be paid the following year.

We expect that approximately $ 0.6 million of Accrued liabilities for restructuring at June 30, 2021 will be paid within one year and approximately $ 0.2 million will be paid the following year.

Other (Income)/Expense, net

The components of Other (Income)/Expense, net are:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in thousands)

2021 2020 2021 2020

Currency transaction (gains)/losses $ 175 $ 17 $ 341 $ 14,851

Bank fees and amortization of debt issuance costs

104 93 210 168

Components of net periodic pension and postretirement cost other than service ( 4 ) 754 ( 6 ) 1,139

587 227 917 502

Total $ 862 $ 1,091 $ 1,462 $ 16,660

Other (income)/expense, net includes losses related to the revaluation of nonfunctional-currency balances of $ 0.2 million for the first three months of 2021, compared to losses of $ 14.8 million for the first three months of 2020, which principally resulted from an intercompany demand loan payable by a Mexican subsidiary.

As a result of changes in business conditions that occurred in the first quarter of 2020, loan repayments on that intercompany loan are not expected in the foreseeable future and, beginning April 1, 2020, revaluation effects are recorded in Other comprehensive income.

The following table presents components of income tax expense for the three months ended March 31, 2021 and 2020:

Three months ended March 31,

Other (income)/expense, net included losses related to the revaluation of nonfunctional-currency balances of $ 0.3 million for the first six months of 2021, compared to losses of $ 14.9 million for the first six months of 2020, which principally resulted from an intercompany demand loan payable by a Mexican subsidiary.

As a result of changes in business conditions that occurred in the first quarter of 2020, loan repayments on that intercompany loan are not expected in the foreseeable future and, beginning April 1, 2020, the revaluation effects are recorded in Other comprehensive income.

The following table presents components of income tax expense for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30, Six months ended

(in thousands, except percentages)

Income tax based on income from continuing operations, at estimated tax rates of 30.1 % and 36.5 %, respectively

2021 2020 2021 2020

Income tax based on income from continuing operations (1) $ 13,251 $ 16,262 $ 24,583 $ 23,571

Provision for change in estimated tax rate ( 218 ) ( 490 ) ( 218 ) ( 490 )

Income tax before discrete items 13,033 15,772 24,365 23,081

3 unchanged sentences

Adjustments to prior period tax liabilities 22 879 ( 1,421 ) 767

Revaluation of deferred tax assets due to tax rate change 352 — 352 —

Provision for/resolution of tax audits and contingencies, net — ( 1,489 ) 278 ( 1,733 )

Out-of-period adjustments — 1,830

Write-off of net operating losses related to tax audit — — — 1,830

Tax effect of non-deductible foreign exchange loss on intercompany loan — ( 13 ) — 3,656

Creation of valuation allowance — 222 — 222

Other 53 ( 7 ) 68 ( 5 )

Total income tax expense $ 13,446 $ 15,364 $ 23,486 $ 27,818

$ 10,040 $ 12,454

The first-quarter estimated annual effective tax rate on continuing operations was 30.1 percent in 2021, compared to 36.5 percent for the same period in 2020.

(1) Calculated at estimated tax rates of 29.5 % and 34.0 %, respectively

Income tax expense for the quarter was computed in accordance with ASC 740-270, Income Taxes – Interim Reporting.

Under this method, loss jurisdictions, which cannot recognize a tax benefit with regard to their generated losses, are excluded from the annual effective tax rate (AETR) calculation and their taxes will be recorded discretely in each quarter.

The Company’s tax rate is affected by recurring items such as the income tax rate in the U.S.

and in non-U.S.

jurisdictions and the mix of income earned in those jurisdictions, including changes in losses and income from excluded loss jurisdictions, and the impact of discrete items in the respective quarter.

The decrease in the estimated Q1 2021 income tax rate was primarily driven by a decrease in losses in a foreign jurisdiction that were excluded in calculating the quarterly income tax provision.

The Company records the residual U.S.

and foreign taxes on certain amounts of foreign earnings that have been targeted for repatriation to the U.S.

These amounts are not considered to be indefinitely reinvested, and the Company accrued for the tax cost on these earnings to the extent they cannot be repatriated in a tax-free manner.

The Company has targeted for repatriation $ 203 million of current year and prior year earnings of the Company’s foreign

If these earnings were distributed, the Company would be subject to foreign withholding taxes of $ 3.4 million and state income taxes of $ 2.0 million, which have already been recorded.

The Company conducts business globally and, as a result, files income tax returns in the U.S.

federal jurisdiction and various state and foreign jurisdictions.

In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including major jurisdictions such as the United States, Brazil, Canada, France, Germany, Italy, Mexico, and Switzerland.

The open tax years in these jurisdictions range from 2015 to 2021 .

The Company is currently under audit in U.S and certain non-U.S.

tax jurisdictions.

In the first quarter of 2021, the Company recorded a net tax benefit of $ 1.4 million related to a U.S.

adjustment of prior period liabilities and, additionally, the Company recorded an expense of $ 0.3 million related to the establishment of a foreign uncertain tax position.

In the second quarter of 2020, the Company recorded a net tax benefit of $ 1.5 million as a result of a US state tax audit settlement;

the Company also recorded a net deferred tax expense of $ 1.0 million due to an adjustment of net operating losses related to settled audits.

In the first quarter of 2020, the Company recorded a $ 1.8 million out-of-period charge related to developments in ongoing tax audits, which resulted in a corresponding decrease in deferred tax assets.

1 unchanged sentence

The amounts used in computing earnings per share and the weighted average number of shares of potentially dilutive securities are as follows:

Three months ended March 31,

Three months ended June 30, Six months ended

(in thousands, except market price and earnings per share)

2021 2020 2021 2020

Net income attributable to the Company $ 31,397 $ 32,354 $ 58,980 $ 41,463

3 unchanged sentences

Effect of dilutive stock-based compensation plans 47 8 48 8

Stock options 3 8

RSU shares 46 —

Weighted average number of shares used in calculating diluted net income per share 32,422 32,336 32,411 32,328

4 unchanged sentences

Accumulated Other Comprehensive Income (AOCI)

The table below presents changes in the components of AOCI for the period December 31, 2020 to March 31, 2021:

The table below presents changes in the components of AOCI for the period December 31, 2020 to June 30, 2021:

(in thousands)

postretirement

adjustment Total Other

Comprehensive

6 unchanged sentences

Net current period other comprehensive income ( 2,181 ) 379 2,146 344

March 31, 2021 $ ( 99,158 ) $ ( 39,152 ) $ ( 8,792 ) $ ( 147,102 )

The table below presents changes in the components of AOCI for the period December 31, 2019 to March 31, 2020:

June 30, 2021 $ ( 85,384 ) $ ( 39,282 ) $ ( 7,398 ) $ ( 132,064 )

The table below presents changes in the components of AOCI for the period December 31, 2019 to June 30, 2020:

(in thousands) Translation

postretirement

adjustment Total Other

Comprehensive

1 unchanged sentence

Other comprehensive income/(loss) before reclassifications, net of tax ( 16,783 ) 581 ( 9,028 ) ( 25,230 )

Pension/postretirement curtailment loss, net of tax — 265 — 265

Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax — — 1,133 1,133

1 unchanged sentence

Net current period other comprehensive income ( 16,783 ) 1,032 ( 7,895 ) ( 23,646 )

March 31, 2020 $ ( 148,599 ) $ ( 49,104 ) $ ( 10,843 ) $ ( 208,546 )

June 30, 2020 $ ( 139,635 ) $ ( 48,962 ) $ ( 11,030 ) $ ( 199,627 )

The components of our Accumulated Other Comprehensive Income that are reclassified to the Statement of Income relate to our pension and postretirement plans and interest rate swaps.

The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Statement of Income that were affected for the three months ended March 31, 2021 and 2020:

Three months ended March 31,

The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Statement of Income that were affected for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30, Six months ended June 30,

(in thousands)

2021 2020 2021 2020

Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:

5 unchanged sentences

Pretax pension and postretirement liabilities reclassified from Accumulated Other Comprehensive Income:

Pension/postretirement curtailment — 378 — 378

Amortization of prior service credit ( 1,118 ) ( 1,114 ) ( 2,237 ) ( 2,228 )

9 unchanged sentences

The table below presents a reconciliation of income attributable to the noncontrolling interest and noncontrolling equity in the Company’s subsidiary Albany Safran Composites, LLC:

Three months ended March 31,

Six months ended June 30,

(in thousands, except percentages) 2021 2020

5 unchanged sentences

Noncontrolling interest, beginning of year $ 3,799 $ 4,006

Net income/(loss) attributable to noncontrolling interest 27 ( 1,515 )

Net income/(loss) attributable to the noncontrolling interest 70 ( 1,420 )

Changes in other comprehensive income attributable to the noncontrolling interest ( 27 ) 261

4 unchanged sentences

The notes may be presented for payment at maturity, which is less than one year.

As of March 31, 2021 and December 31, 2020, Accounts receivable consisted of the following:

As of June 30, 2021 and December 31, 2020, Accounts receivable consisted of the following:

(in thousands)

8 unchanged sentences

The Noncurrent receivables will be invoiced to the customer over a 10-year period, which began in 2020.

As of March 31, 2021 and December 31, 2020, Noncurrent receivables consisted of the following:

As of June 30, 2021 and December 31, 2020, Noncurrent receivables consisted of the following:

(in thousands)

10 unchanged sentences

Contract assets and Contract liabilities are reported on the Consolidated Balance Sheets in a net position on a contract-by-contract basis at the end of each reporting period.

As of March 31, 2021 and December 31, 2020, Contract assets and Contract liabilities consisted of the following:

As of June 30, 2021 and December 31, 2020, Contract assets and Contract liabilities consisted of the following:

(in thousands)

5 unchanged sentences

Contract liabilities $ 7,136 $ 8,206

Contract assets decreased $ 17.5 million during the three-month period ended March 31, 2021.

Contract assets decreased $ 26.1 million during the six-month period ended June 30, 2021.

The decrease was primarily due to invoicing to customers exceeding revenue recognized for satisfied performance obligations for contracts that were in a contract asset position.

There were no impairment losses related to our Contract assets during the three month periods ended March 31, 2021 and March 31, 2020.

Contract liabilities decreased $ 0.3 million during the three-month period ended March 31, 2021, primarily due to revenue recognized from satisfied performance obligations exceeding amounts invoiced to customers that were in a contract liability position.

Revenue recognized for the three-month periods ended March 31, 2021 and 2020 that was included in the Contract liability balance at the beginning of the year was $ 4.3 million and $ 1.9 million, respectively.

There were no credit losses related to our Contract assets during the six month periods ended June 30, 2021 and June 30, 2020.

Contract liabilities decreased $ 1.1 million during the six-month period ended June 30, 2021, primarily due to revenue recognized from satisfied performance obligations exceeding amounts invoiced to customers that were in a contract liability position.

Revenue recognized for the six-month periods ended June 30, 2021 and 2020 that was included in the Contract liability balance at the beginning of the year was $ 4.7 million and $ 2.1 million, respectively.

Costs included in inventories are raw materials, labor, supplies and allocable depreciation and overhead.

4 unchanged sentences

Once established, the original cost of the inventory less the related write-down represents the new cost basis of such inventories.

As of March 31, 2021 and December 31, 2020, Inventories consisted of the following:

As of June 30, 2021 and December 31, 2020, Inventories consisted of the following:

(in thousands)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Raw materials $ 59,627 $ 57,789

12 unchanged sentences

Under the market-based approaches, we utilize information regarding the Company, as well as publicly available industry information, to determine earnings multiples and sales multiples.

Under the income approach, we determine fair value based on estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital,

which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.

In the second quarter of 2020, management applied the quantitative assessment approach in performing its annual evaluation of goodwill and concluded that no impairment provision was required.

As part of this evaluation, the Company considered projected cash flows and market multiples for the Company’s Machine Clothing reporting unit and three AEC reporting units.

Management performed these quantitative assessments and concluded that each reporting unit’s fair value continued to exceed its carrying value.

Under the income approach, we determine fair value based on estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.

In the second quarter of 2021, management applied the qualitative assessment approach in performing its annual evaluation of goodwill for the Company's Machine Clothing reporting unit and three AEC reporting units and

concluded that each reporting unit’s fair value continued to exceed its carrying value.

In addition, there were no amounts at risk due to the estimated spread between the fair and carrying values.

Accordingly, no impairment charges were recorded.

Management is scheduled to perform the 2021 annual goodwill impairment test during the second quarter.

Financial Instruments

1 unchanged sentence

(in thousands, except interest rates)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.74 % in 2021 and 3.50 % in 2020 (including the effect of interest rate hedging transactions, as described below), due in 2024

$ 350,000 $ 398,000

Other debt, at an average end of period rate of 5.50 % in both 2021 and 2020, due in varying amounts through 2021

Other debt, at an average end of period rate of 5.50 % in 2020, paid in varying amounts through April 2021

Long-term debt 350,000 398,009

2 unchanged sentences

On October 27, 2020, we entered into a $ 700 million unsecured Four-Year Revolving Credit Facility Agreement (the “Credit Agreement”) which amended and restated the prior amended and restated $ 685 million Five-Year Revolving Credit Facility Agreement, which we had entered into on November 7, 2017 (the “Prior Agreement”).

Under the Credit Agreement, $ 384 million of borrowings were outstanding as of March 31, 2021.

Under the Credit Agreement, $ 350 million of borrowings were outstanding as of June 30, 2021.

The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio at the time of borrowing.

At the time of the last borrowing on March 31, 2021, the spread was 1.625 %.

At the time of the last borrowing on June 30, 2021, the spread was 1.625 %.

The spread was based on a pricing grid, which ranged from 1.500 % to 2.000 %, based on our leverage ratio.

Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of March 31, 2021, we would have been able to borrow an additional $ 316 million under the Agreement.

Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of June 30, 2021, we would have been able to borrow an additional $ 350 million under the Agreement.

The Credit Agreement contains customary terms, as well as affirmative covenants, negative covenants and events of default that are comparable to those in the Prior Agreement.

1 unchanged sentence

Our ability to borrow additional amounts under the Credit Agreement is conditional upon the absence of any defaults, as well as the absence of any material adverse change (as defined in the Credit Agreement).

On June 14, 2021, we entered into interest rate swap agreements for the period October 17, 2022 through October 27, 2024.

These transactions have the effect of fixing the LIBOR portion of the effective interest rate (before addition of the spread) on $ 350 million of indebtedness drawn under the Credit Agreement at the rate of 0.838 % during the period.

Under the terms of these transactions, we pay the fixed rate of 0.838 % and the counterparties pay a floating rate based on the one-month LIBOR rate at each monthly calculation date, which on June 16, 2021 was 0.08 %.

On November 27, 2017, we terminated our interest rate swap agreements, originally entered into on May 9, 2016, that had effectively fixed the interest rate on $ 300 million of revolving credit borrowings, in order to enter into a new interest rate swap with a greater notional amount, and the same maturity as the Credit Agreement.

2 unchanged sentences

Under the terms of these transactions, we pay the fixed rate of 2.11 % and the counterparties pay a floating rate based on the one-month LIBOR rate at each monthly calculation date, which on March 16, 2021 was 0.

11 %, during the swap period.

On March 16, 2021, the all-in-rate on the $ 350 million of debt was 3.735 %.

On June 16, 2021, the all-in-rate on the $ 350 million of debt was 3.735 %.

These interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note 15.

1 unchanged sentence

Under the Credit Agreement, we are currently required to maintain a leverage ratio (as defined in the agreement) of not greater than 3.50 to 1.00 and minimum interest coverage (as defined) of 3.00 to 1.00.

As of March 31, 2021, our leverage ratio was 1.20 to 1.00 and our interest coverage ratio was 15.72 to 1.00.

As of June 30, 2021, our leverage ratio was 1.08 to 1.00 and our interest coverage ratio was 15.02 to 1.00.

We may purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50 to 1.00, and may make acquisitions with cash, provided our leverage ratio does not exceed the limits noted above.

Indebtedness under the Credit Agreement is ranked equally in right of payment to all unsecured senior debt.

We were in compliance with all debt covenants as of March 31, 2021.

We were in compliance with all debt covenants as of June 30, 2021.

Fair-Value Measurements

2 unchanged sentences

Level 3 inputs are unobservable data points for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability.

We had no Level 3 financial assets or liabilities at March 31, 2021, or at December 31, 2020.

We had no Level 3 financial assets or liabilities at June 30, 2021, or at December 31, 2020.

The following table presents the fair-value hierarchy for our Level 1 and Level 2 financial and non-financial assets and liabilities, which are measured at fair value on a recurring basis:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(in thousands)

2 unchanged sentences

Common stock of unaffiliated foreign public company (a) 741 — 748 —

Interest rate swaps — 261 — —

Other noncurrent liabilities:

6 unchanged sentences

Unrealized gains and losses on the swaps flow through the caption Derivative valuation adjustment in the Shareholders’ equity section of the Consolidated Balance Sheets.

As of March 31, 2021, these interest rate swaps were determined to be highly effective hedges of interest rate cash flow risk.

As of June 30, 2021, these interest rate swaps were determined to be highly effective hedges of interest rate cash flow risk.

Amounts accumulated in Other comprehensive income are reclassified as Interest expense, net when the related interest payments (that is, the hedged forecasted transactions), and amortization related to the swap buyouts, affect earnings.

Interest (income)/expense related to payments under the active swap agreements totaled $ 1.7 million for the three month period ended March 31, 2021, and $ 0.5 million for the three month period ended March 31, 2020.

Additionally, non-cash interest income related to the amortization of swap buyouts totaled $ 0.3 million for the three month period ended March 31, 2021 and $ 0.1 million for the three month period ended March 31, 2020.

Interest (income)/expense related to payments under the active swap agreements totaled $ 3.5 million for the six month period ended June 30, 2021, and $ 1.9 million for the six month period ended June 30, 2020.

Additionally, non-cash interest income related to the amortization of swap buyouts totaled $ 0.3 million for the six month period ended June 30, 2021 and $ 0.4 million for the six month period ended June 30, 2020.

Contingencies

2 unchanged sentences

is a defendant in suits brought in various courts in the United States by plaintiffs who allege that they have suffered personal injury as a result of exposure to asbestos-containing paper machine clothing synthetic dryer fabrics marketed during the period from 1967 to 1976 and used in certain paper mills.

We were defending 3,617 claims as of March 31, 2021.

We were defending 3,617 claims as of June 30, 2021.

The following table sets forth the number of claims filed, the number of claims settled, dismissed or otherwise resolved, and the aggregate settlement amount during the periods presented:

7 unchanged sentences

2020 3,708 152 59 3,615 57

2021 (As of March 31) 3,615 5 7 3,617 $ —

2021 (As of June 30) 3,615 9 11 3,617 $ —

We anticipate that additional claims will be filed against the Company and related companies in the future, but are unable to predict the number and timing of such future claims.

2 unchanged sentences

Our insurance carrier has defended each case and funded settlements under a standard reservation of rights.

As of March 31, 2021, we had resolved, by means of settlement or dismissal, 37,954 claims.

As of June 30, 2021, we had resolved, by means of settlement or dismissal, 37,957 claims.

The total cost of resolving all claims was $ 10.4 million.

2 unchanged sentences

(“Brandon”), is also a separate defendant in many of the asbestos cases in which Albany is named as a defendant, despite never having manufactured any fabrics containing asbestos.

While Brandon was defending against 7,709 claims as of March 31, 2021, only twelve claims have been filed against Brandon since January 1, 2012, and a negligible amount of settlement costs have been incurred since 2001.

While Brandon was defending against 7,709 claims as of June 30, 2021, only twelve claims have been filed against Brandon since January 1, 2012, and a negligible amount of settlement costs have been incurred since 2001.

Brandon was acquired by the Company in 1999, and has its own insurance policies covering periods prior to 1999.

10 unchanged sentences

Changes in Shareholders’ Equity

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2020 to March 31, 2021:

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2020 to June 30, 2021:

Additional paid-in capital

Retained earnings

Accumulated items of other comprehensive income

Accumulated other comprehensive income Class A

Treasury Stock

5 unchanged sentences

Options exercised 6 — — — 128 — — — — — 128

Shares issued to Directors' — — — — — — — — — — —

Dividends declared

7 unchanged sentences

March 31, 2021 39,141 $ 39 1,618 $ 2 $ 433,811 $ 791,854 $ ( 147,102 ) 8,391 $ ( 256,009 ) $ 3,616 $ 826,211

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2019 to March 31, 2020:

Net income — — — — — 31,397 — — — 43 31,440

Compensation and benefits paid or payable in shares — — — — 692 — — — — — 692

Options exercised 1 — — — 21 — — — — — 21

Shares issued to Directors' — — — — 706 — — ( 11 ) 241 — 947

Dividends declared

Class A Common Stock, $ 0.20 per share

— — — — — ( 6,150 ) — — — — ( 6,150 )

Class B Common Stock, $ 0.20 per share

— — — — — ( 323 ) — — — — ( 323 )

Cumulative translation adjustments — — — — — — 13,774 — — 183 13,957

Pension and postretirement liability adjustments — — — — — — ( 130 ) — — — ( 130 )

Derivative valuation adjustment — — — — — — 1,394 — — — 1,394

June 30, 2021 39,142 $ 39 1,618 $ 2 $ 435,230 $ 816,778 $ ( 132,064 ) 8,380 $ ( 255,768 ) $ 3,842 $ 868,059

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2019 to June 30, 2020:

Additional paid-in capital

Retained earnings

items of other comprehensive income

Accumulated other comprehensive income Class A

Treasury Stock

19 unchanged sentences

March 31, 2020 39,112 $ 39 1,618 $ 2 $ 431,836 $ 700,021 $ ( 208,546 ) 8,409 $ ( 256,391 ) $ 2,600 $ 669,561

Net income — — — — — 32,354 — — — 95 32,449

Compensation and benefits paid or payable in shares — — — — 466 — — — — — 466

Options exercised 1 — — — 20 — — — — — 20

Shares issued to Directors' — — — — 416 — — ( 15 ) 317 — 733

Dividends declared

Class A Common Stock, $ 0.19 per share

— — — — — ( 5,835 ) — — — — ( 5,835 )

Class B Common Stock, $ 0.19 per share

— — — — — ( 307 ) — — — — ( 307 )

Cumulative translation adjustments — — — — — — 8,964 — — 152 9,116

Pension and postretirement liability adjustments — — — — — — 142 — — — 142

Derivative valuation adjustment — — — — — — ( 187 ) — — — ( 187 )

June 30, 2020 39,113 $ 39 1,618 $ 2 $ 432,738 $ 726,233 $ ( 199,627 ) 8,394 $ ( 256,074 ) $ 2,847 $ 706,158

(a) The Company adopted the provisions of ASC 326, Current Expected Credit Losses (CECL) effective January 1, 2020, which resulted in a decrease to Retained earnings of $ 1.4 million.

Recent Accounting Pronouncements

In March 2020, an accounting update was issued which provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR.

In January 2021, an additional accounting update was issued to extend certain optional expedients to derivative contracts modified as a result of rate reform, including certain derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued.

The expedients and exceptions provided by this update will not be available after December 31, 2022.

We are currently assessing the potential impact on our financial statements.

As disclosed in our March 31, 2020 Form 10Q, in March 2020, ASU 2020-04, Reference Rate Reform, was issued to provide optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR.

The expedients and exceptions provided by this update will not be available after December 31, 2022, other than for certain hedging relationships entered into prior.

For the Company’s cash flow hedges in which the designated hedged risk is LIBOR, the Company has adopted the portion of the guidance that allows it to assert that it remains probable that the hedged forecasted transaction will occur.

The Company plans to adopt the remaining applicable provisions of this guidance beginning on July 1, 2021.

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

What changed 10-Q

Item 1. Financial Statements