What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-25 compared with 2021-02-25 · 352 added, 508 removed, 1680 unchanged (34% of the section changed)

29 unchanged sentences

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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

10 unchanged sentences

We read relevant agreements, including amendments, and inquired of financial and operational personnel of the Company to identify factors that should be considered within the cost to complete estimates.

We inspected the Company’s analysis of the contracts’ status, including forecasted costs, which we compared against historical costs.

We inspected the Company’s analysis of contract status, including forecasted costs, which we compared against historical costs.

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

49 unchanged sentences

17,391 16,332 19,650

Other (income)/expense, net

13,422 ( 1,557 ) 4,037

Aviation Manufacturing Jobs Protection (AMJP) grant ( 5,832 ) — —

Other expense/(income), net 3,021 13,422 ( 1,557 )

Income before income taxes

24 unchanged sentences

Pension settlements and curtailments

411 450 1,494

Pension/postretirement plan remeasurement

65 unchanged sentences

authorized 25,000,000 shares;

issued and outstanding 1,617,998 in 2020 and 2019

issued and outstanding 104 in 2021 and 1,617,998 in 2020

Additional paid-in capital

30 unchanged sentences

Change in deferred taxes and other liabilities 12,181 11,101 13,702

Provision for write-off of property, plant and equipment 1,173 3,119 3,707

Non-cash interest (income)/expense ( 290 ) 605 459

Impairment of property, plant and equipment 856 1,173 3,119

Non-cash interest expense 875 ( 290 ) 605

Write-off of pension liability adjustments due to settlement/curtailment — 411 450

2 unchanged sentences

Foreign currency remeasurement (gain)/loss on intercompany loans ( 3,150 ) 14,246 ( 3,730 )

Fair value adjustment on foreign currency options 169 — —

Changes in operating assets and liabilities that provided/(used) cash:

21 unchanged sentences

Debt acquisition costs — ( 2,432 ) —

Purchase of Treasury shares ( 23,449 ) — —

Taxes paid in lieu of share issuance ( 998 ) ( 490 ) ( 971 )

18 unchanged sentences

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Estimates are used in accounting for, among other things, revenue recognition, contract profitability, allowances for doubtful accounts, rebates and sales allowances, inventory allowances, pension benefits, goodwill and intangible assets, contingencies, income tax related balances, and other accruals.

Estimates are used in the accounting for, among others, revenue recognition, contract profitability, allowances for doubtful accounts, rebates and sales allowances, inventory allowances, pension and other postretirement benefits, goodwill and intangible assets, contingencies, income taxes, and other accruals.

Our estimates are based on historical experience and on various other assumptions, which are believed to be reasonable under the circumstances.

2 unchanged sentences

Revenue Recognition

Effective January 1, 2018, the Company adopted the provisions of ASC 606, Revenue from contracts with customers , using the modified retrospective (or cumulative effect) method for transition.

Under this transition method, periods prior to 2018 were not restated and the cumulative effect of initially applying the new standard was recorded as an adjustment to Retained earnings at January 1, 2018.

The standard replaces numerous requirements in U.S.

GAAP, including industry-specific requirements, and provides companies with a single model for recognizing revenue from contracts with customers.

We applied the new accounting standard to contracts which were not completed by December 31, 2017.

In our Machine Clothing (MC) business segment, we recognize revenue when we satisfy our performance obligations related to the manufacture and delivery of products.

7 unchanged sentences

Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations, which are treated as period expenses.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

Products and services provided under long-term contracts represent a significant portion of sales in the Albany Engineered Composites segment.

3 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.

The sum of net adjustments to the estimated profitability of long-term contracts increased AEC operating income by $ 9.9 million and $ 10.8 million in 2020 and 2019, respectively, and decreased AEC operating income by $ 2.0 million in 2018.

The favorable effects in 2020 and 2019 were largely attributable to efficiency improvements during the ramp-up of several programs.

The sum of net adjustments to the estimated profitability of long-term contracts increased AEC operating income by $ 6.2 million, $ 9.9 million and $ 10.8 million in 2021, 2020 and 2019, respectively.

The favorable effects in

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

2021, 2020 and 2019 were largely due to changes in customer demand and to a lesser extent, efficiency improvements during the ramp-up of several programs.

Additional accounting policies related to revenue from contracts with customers are set forth in Note 2.

22 unchanged sentences

Costs related to contract termination, relocation of employees, outplacement and the consolidation or the closure of facilities, are recognized when incurred.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

Deferred income taxes are recognized for the tax consequences of temporary differences and tax attributes by applying enacted statutory tax rates applicable for future years to differences between existing assets and liabilities for financial reporting and income tax return purposes.

2 unchanged sentences

In the event it becomes more likely than not that some or all of the deferred tax asset valuation allowances will not be needed, the valuation allowance will be adjusted.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions.

4 unchanged sentences

We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense.

We have not elected to reclassify stranded tax effects from AOCI to retained earnings.

Earnings Per Share

1 unchanged sentence

Diluted net income per share includes the effect of all potentially dilutive securities.

If we report a net loss from continuing operations, the diluted loss is equal to the basic earnings per share calculation.

If we report a net loss from continuing operations, the diluted loss per share is equal to the basic earnings per share calculation.

Translation of Financial Statements

Assets and liabilities of non-U.S.

operations are translated at year-end rates of exchange, and the income statement accounts are translated at average exchange rates.

operations are translated at year-end rates of exchange, and the income statement accounts are translated at average monthly exchange rates.

Gains or losses resulting from translating non-U.S.

6 unchanged sentences

(in thousands) 2021 2020 2019

Losses/(gains) included in:

(Gains)/losses included in:

Selling, general, and administrative expenses $ ( 263 ) $ 1,875 $ 1,281

Other expense, net 13,569 ( 4,471 ) ( 67 )

Total transaction losses/(gains) $ 15,444 $ ( 3,190 ) $ ( 341 )

Other (income)/expense, net ( 1,179 ) 13,569 ( 4,471 )

Total transaction (gains)/losses $ ( 1,442 ) $ 15,444 $ ( 3,190 )

The following table presents foreign currency gains on long-term intercompany loans that were recognized in Other comprehensive income:

(in thousands) 2021 2020 2019

Gain (before tax) on long-term intercompany loan $ ( 4,985 ) $ — $ —

Loss/(gain), before tax, on long-term intercompany loan $ ( 66 ) $ ( 4,985 ) $ —

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of three months or less.

Accounts Receivable

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Accounting Policies — (continued)

Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of three months or less.

Accounts Receivable

Accounts receivable includes trade receivables and bank promissory notes.

4 unchanged sentences

The pre-tax cumulative effect of initially applying the new standard was an increase in credit loss reserves of $ 1.8 million, primarily for Accounts receivable and Contract assets.

Including tax effects, Retained earnings was reduced by $ 1.4 million as a result of transitioning to the new standard.

The overarching purpose of the new standard is to provide greater transparency and understanding of the Company’s credit risk.

The CECL accounting update replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

Under the new standard, the Company recognizes an allowance for expected credit losses on financial assets measured at amortized cost, such as Accounts receivable, Contract assets and Noncurrent receivables.

Including tax effects, Retained earnings was reduced by $ 1.4 million as a result of transitioning to the CECL standard.

The overarching purpose of the CECL standard is to provide greater transparency and understanding of the Company’s credit risk.

This accounting update replaces the incurred loss impairment methodology under previous GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

Under this standard, the Company recognizes an allowance for expected credit losses on financial assets measured at amortized cost, such as Accounts receivable, Contract assets and Noncurrent receivables.

The allowance is determined using a CECL model that is based on an historical average three-year loss rate and is measured by financial asset type on a collective (pool) basis when similar risk characteristics exist, at an amount equal to lifetime expected credit losses.

17 unchanged sentences

See additional information set forth in Notes 2 and 13.

Effective January 1, 2019, we adopted the provisions of ASC 842, Leases, using the effective date (or modified retrospective) approach for transition.

Under this transition method, periods prior to 2019 have not been restated, and the cumulative effect of initially applying the new standard was recorded as an adjustment to Retained earnings at January 1, 2019.

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Accounting Policies — (continued)

Effective January 1, 2019, we adopted the provisions of ASC 842, Leases, using the effective date (or modified retrospective) approach for transition.

The new standard is intended to increase transparency and comparability among organizations by requiring the recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet.

27 unchanged sentences

Capitalized salaries, travel, and consulting costs related to the software development were immaterial in 2021 and 2020.

We review the carrying value of property, plant and equipment and other long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset group may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.

See additional information set forth in Note 14.

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Accounting Policies — (continued)

See additional information set forth in Note 14.

Goodwill, Intangibles, and Other Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination.

The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition.Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination.

Intangible assets from acquired businesses are recognized at fair value on the acquisition date and consist of customer relationships, customer contracts, technology, intellectual property and other intangible assets.

Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually.

Our reportable segments are consistent with our operating segments.

We perform an impairment test of our goodwill at least annually in the second quarter or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may be impaired.

Such events or changes in circumstances may include a significant deterioration in overall economic conditions, changes in the business climate of our industry, a decline in our market capitalization, operating performance indicators, competition, reorganizations of our business, or the disposal of all or a portion of a reporting unit.

Our goodwill has been allocated to and is tested for impairment at a level referred to as the reporting unit, which is our business segment level or a level below the business segment.

The level at which we test goodwill for impairment requires us to determine whether the operations below the business segment constitute a self-sustaining business for which discrete financial information is available and segment management regularly reviews the operating results.

We may use qualitative or quantitative approaches when testing goodwill for impairment.

When we use the qualitative approach, we perform a qualitative evaluation of events and circumstances impacting the reporting unit to determine the likelihood of goodwill impairment.

Based on that qualitative evaluation, if we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary.

Otherwise, we perform a quantitative impairment test.

To perform the quantitative impairment test, we compare the fair value of a reporting unit to its carrying value, including goodwill.

If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired.

If the carrying value of the reporting unit, including goodwill, exceeds its fair value, a goodwill impairment loss is recognized in an amount equal to that excess.

Determining the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates, and future market conditions, among others.

To determine fair value, we utilize two market-based approaches and an income approach.

Under the market-based approaches, we utilize information regarding the Company, as well as publicly available industry information, to determine earnings 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 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 excess between the fair and carrying values.

Accordingly, no impairment charges were recorded.

Impairment assessments inherently involve management judgments regarding a number of assumptions such as those described above.

Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our recorded goodwill, differences in assumptions could have a material effect on the estimated fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period.

See additional information set forth in Note 18.

Intangible assets acquired in a business combination are recognized at fair value and amortized to Cost of goods sold or Selling, general and administrative expenses over the estimated useful lives of the assets.

We review amortizable intangible asset groups for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

We have an investment in a company in Russia that is accounted for under the equity method of accounting and is included in Other assets.

1 unchanged sentence

If the financial condition of the investee were to no longer support their valuation, we would record an impairment provision.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

For some AEC contracts, we perform pre-production or nonrecurring engineering services.

6 unchanged sentences

Stock-Based Compensation

We have stock-based compensation plans for key employees.

No options have been granted since 2002.

We have incentive compensation plans that authorize the issuance of stock-based awards for key employees, which are designed to reward short and long-term contributions and provide incentives for recipients to remain with the Company.

We issue stock-based awards in the form of restricted stock units and performance stock units that generally vest between one and five years from the grant date and can be settled in cash or shares.

Expenses associated with these awards are recognized over each respective vesting period.

Liability based awards are settled in cash, while equity based awards are settled in stock.

See additional information for stock-based compensation plans in Note 22.

No stock options have been granted since 2002.

Unexercised options generally terminate twenty years after the date of grant for all plans, and must be exercised within ten years of retirement.

We recognized no stock option expense during 2021, 2020, or 2019 and there are currently no remaining unvested options for which stock-option compensation costs will be recognized in future periods.

See information for other stock-based compensation plans in Note 22.

We use derivatives from time to time to reduce potentially large adverse effects from changes in currency exchange rates and interest rates.

3 unchanged sentences

For those contracts deemed to be a hedge, we formally document the relationship between the derivative instrument and the risk being hedged.

In this documentation, we specifically identify the asset, liability, forecasted transaction, cash flow, or net investment that has been designated as the hedged item, and evaluate whether the derivative instrument is expected

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

to reduce the risks associated with the hedged item.

To the extent these criteria are not met, we do not use hedge accounting for the derivative.

3 unchanged sentences

We measure the effectiveness of hedging relationships both at inception and on an ongoing basis.

The related gains and losses of derivative instruments, including those designated in hedge accounting relationships, are included as operating activities in the consolidated statements of cash flows.

For derivatives that are designated and qualify as hedges of net investments in subsidiaries located outside the United States, changes in the fair value of derivatives are reported in other comprehensive income as part of Translation adjustments.

Pension and Postretirement Benefit Plans

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

As described in Note 4, we have pension and postretirement benefit plans covering substantially all employees.

11 unchanged sentences

The assumption for expected return on plan assets is based on historical and expected returns on various categories of plan assets.

Government Grants

The Company recognizes government grants only when there is reasonable assurance that we will comply with the conditions attached to them and the grants will be received.

Government grants are recognized in the Consolidated Statements of Income on a systematic basis over the periods in which we recognize as expenses the related costs for which the grants are intended to compensate.

A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support with no future related costs is recognized in the Consolidated Statements of Income of the period in which it becomes receivable.

During the third quarter of 2021, the Company was awarded an Aviation Manufacturing Jobs Protection Program ("AMJP") grant of $ 5.8 million, under the American Rescue Plan of the U.S.

Department of Transportation.

The AMJP grant is an income related grant, the purpose of which is to provide payroll assistance to eligible U.S.

aircraft manufacturing/repair businesses who were impacted due to the COVID-19 downturn during 2020.

The Company received $ 2.9 million in cash during the third quarter of 2021, and anticipates receiving the remaining balance in 2022.

Accordingly, the Company recognized $ 5.8 million in its Consolidated Statements of Income for the year ended December 31, 2021, and reflected cash received to date as an operating activity within the Consolidated Statements of Cash Flows.

Recent Accounting Pronouncements

In December, 2019, an accounting update was issued which removes certain exceptions for recognizing deferred taxes for investments and performing intra-period tax allocations.

The update also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

We plan to adopt the new standard as of January 1, 2021 and do not expect it will have a material effect on our financial statements.

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.

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.

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

In October 2020, an accounting update was issued which clarifies various topics in the Codification by providing consistency in codification wording and moving existing disclosure requirements to the relevant disclosure sections.

We are required to adopt the new standard for fiscal years beginning after December 15, 2020 and we are assessing the potential impact on our financial statements.

In November 2021, an accounting update was issued which requires new annual disclosures for entities receiving government assistance.

The standard is effective for annual periods in fiscal years beginning after December 15, 2021.

We do not expect it will have a material effect on our financial statements.

Subsequent Events

We review for subsequent events up through the date when our consolidated financial statements are available for issuance.

Revenue Recognition

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

Effective January 1, 2018, the Company adopted the provisions of ASC 606, Revenue from contracts with customers , using the modified retrospective (or cumulative effect) method for transition.

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

1 unchanged sentence

We recognize revenue when we satisfy a performance obligation by transferring control over a product or service, or a series of distinct goods or services, to the customer which occurs either at a point in time, or over time, depending on the performance obligation in the contract.

A performance obligation is a promise in the contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606.

A performance

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

obligation is a promise in the contract to transfer a distinct good or service to the customer, and is the unit of account.

“Control” refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from the product.

13 unchanged sentences

This evaluation requires significant judgment, and the decision to combine a group of contracts, or to allocate revenue from the combined or single contract among multiple performance obligations, could have a significant impact on the amount of revenue and profit recorded in a given period.

For most AEC contracts, the nature of our promise (or our performance obligation) to the customer is to manage the contract and provide a significant service of integrating a complex set of tasks and components into a single project or capability, which will often result in the delivery of multiple highly interdependent and interrelated units.

At the inception of a contract, we estimate the transaction price based on our current rights, and do not contemplate future modifications (including unexercised options) or follow-on contracts until they become legally enforceable.

For most AEC contracts, the nature of our promise (or our performance obligation) to the customer is to provide a significant service of integrating a complex set of tasks and components into a single project or capability, which will often result in the delivery of multiple highly interdependent and interrelated units.

At the inception of a contract, we determine the transaction price based on the consideration we expect to receive for the products or services being provided under the contract.

For contracts where a portion of the price may vary, we estimate variable consideration at the most likely amount, which is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur.

We analyze the risk of a significant revenue reversal and if necessary constrain the amount of variable consideration recognized in order to mitigate this risk.

We estimate the transaction price based on our current rights, and do not contemplate future modifications (including unexercised options) or follow-on contracts until they become legally enforceable.

Many AEC contracts are subsequently modified to include changes in specifications, requirements or price, which may create new or change existing enforceable rights and obligations.

2 unchanged sentences

Therefore, such modifications are accounted for as if they were part of the existing contract, and we accumulate the values of such modifications in our estimates of contract value.

Revenue is recognized over time for a large portion of our contracts in AEC as most of our contracts have provisions that are deemed to transfer control to the customer over time.

Revenue is recognized based on the extent of progress towards completion of the performance obligation.

The selection of the method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided.

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Revenue Recognition — (continued)

Revenue is recognized over time for a large portion of our contracts in AEC as most of our contracts have provisions that, under the guidance in ASC 606, are deemed to transfer control to the customer over time.

Revenue is recognized based on the extent of progress towards completion of the performance obligation.

The selection of the method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided.

We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of assets to the customer which occurs as we incur costs to produce the contract deliverables.

generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of assets to the customer which occurs as we incur costs to produce the contract deliverables.

Under the cost-to-cost measure of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

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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 presents disaggregated revenue for each product group by timing of revenue recognition:

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Revenue Recognition — (continued)

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

For the year ended December 31, 2021

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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:

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

For the year ended December 31,

4 unchanged sentences

Total Machine Clothing Net sales $ 619,015 $ 572,955 $ 601,254

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

In accordance with ASC 606-10-50-14, we do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

We do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

Contracts in the MC segment are generally for periods of less than a year.

1 unchanged sentence

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 278 million as of December 31, 2021, $ 86 million as of December 31, 2020, and $ 82 million as of December 31, 2019, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of December 31, 2020 we expect to recognize as revenue approximately $ 64 million during 2021, with the remainder to be recognized in 2022.

Of the remaining performance obligations as of December 31, 2021 we expect to recognize as revenue approximately $ 98 million during 2022, $ 44 million during 2023, $ 34 million during 2024, and the remainder thereafter.

Reportable Segments and Geographic Data

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Albany Engineered Composites :

The Albany Engineered Composites (“AEC”) segment, including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group (“Safran”) owns a 10 percent noncontrolling interest, provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries.

AEC’s largest program relates to CFM International’s LEAP engine.

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

The manufacturing spaces used for the production of parts under the long-term supply agreement are owned by Safran, and leased to the Company at either a market rent or a minimal cost.

All lease expense is reimbursable by Safran to the Company due to the cost-plus nature of the supply agreement.

The Albany Engineered Composites (“AEC”) segment, provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries.

The segment includes Albany Safran Composites, LLC (“ASC”), in which our customer, SAFRAN Group, owns a 10 percent noncontrolling interest, AEC, through ASC, is the exclusive supplier to the LEAP program of advanced composite fan blades and fan cases under a long-term supply contract.

The LEAP engine is used on the Airbus A320neo and Boeing 737 MAX family of jets.

AEC’s largest aerospace customer is the SAFRAN Group and sales to SAFRAN (consisting primarily of fan blades and

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Reportable Segments and Geographic Data — (continued)

cases for CFM’s LEAP engine) accounted for approximately 12 percent of the Company’s consolidated Net sales in 2021.

In 2021, Safran leased manufacturing space from AEC for the GE9X program.

Rent paid by Safran under this lease amount to $ 0.9 million in 2020.

Rent paid by Safran under this lease amounted to $ 0.9 million in both 2021 and 2020.

AEC Net sales to Safran were $ 111.6 million in 2021, $ 99.0 million in 2020, and $ 226.8 million in 2019.

The total of Accounts receivable, Contract assets and Noncurrent receivable due from Safran amounted to $ 79.6 million and $ 127.1 million as of December 31, 2021 and 2020, respectively.

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

Other significant programs served by AEC include the F-35, Boeing 787, Sikorsky CH-53K, and JASSM programs.

AEC also supplies vacuum waste tanks for the Boeing 7-Series programs, and specialty components for the Rolls Royce lift fan on the F-35, as well as the fan case for the GE9X engine.

In 2021, approximately 47 percent of AEC sales were related to U.S.

government contracts or programs.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Reportable Segments and Geographic Data — (continued)

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

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17,391 16,332 19,650

AMJP grant ( 5,832 ) — —

Other expense, net

14 unchanged sentences

$ 1,331 $ 5,736 $ 2,905

In the measurement of assets utilized by each reportable segment, we include Inventories, Accounts receivable, net, Contract assets, net, Noncurrent receivables, net, Property, plant and equipment, net, Intangibles, net and Goodwill.

On November 20, 2019, the Company acquired CirComp GmbH, resulting in a $ 35.3 million increase in AEC assets.

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Reportable Segments and Geographic Data — (continued)

On November 20, 2019, the Company acquired CirComp GmbH, resulting in a $ 35.3 million increase in AEC assets.

The following table presents assets and capital expenditures by reportable segment:

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31,012 23,718 48,753

Corporate expenses

2,880 2,495 2,535

Corporate 2,510 2,880 2,495

Consolidated total

$ 53,699 $ 42,390 $ 67,955

At the January 1, 2018 date of adoption of ASC 606, MC assets increased by $ 22.5 million, and AEC assets decreased by $ 14.1 million.

Excluded from segment assets are cash, tax related assets, prepaid and other current assets, and certain other assets not directly associated with segment operations.

In 2018, AEC finalized a modification to the lease of its primary manufacturing facility in Salt Lake City, Utah, which increased the manufacturing space and extended the minimum lease period until December 31, 2029.

The lease modification resulted in a non-cash increase of $ 12.7 million to both Property, plant and equipment, net, and to Long-term debt in the Consolidated Balance Sheets in 2018.

Effective January 1, 2019, we adopted the provisions of ASC 842, Leases, which resulted in changes to the amount and classification of the associated assets and liabilities, as depicted in Note 20.

Due to the non-cash nature of the modification and subsequent adoption of the new Lease accounting standard, changes during both 2018 and 2019 are excluded from amounts reported in the Consolidated Statements of Cash Flows.

ALBANY INTERNATIONAL CORP.

9 unchanged sentences

128,698 128,328 146,571

France 68,929 55,914 91,783

China 67,098 57,007 48,586

Brazil 62,925 60,259 64,666

37,547 39,859 73,039

55,914 91,783 85,386

39,859 73,039 48,534

Other countries

5 unchanged sentences

$ 258,453 $ 263,201 $ 275,965

41,738 45,640 40,343

41,107 43,986 50,245

40,898 41,799 48,686

China 41,039 40,898 41,799

Mexico 40,699 41,738 45,640

France 33,802 41,107 43,986

Canada 14,139 9,672 9,509

Sweden 12,355 12,109 8,652

10,808 10,577 27

United Kingdom 10,156 10,731 11,047

10,731 11,047 12,042

10,550 10,795 12,396

Germany 9,652 10,808 10,577

Other countries

2 unchanged sentences

$ 436,417 $ 448,554 $ 466,462

(a) In 2019, the Company acquired CirComp GmbH, which resulted in an increase in Property, plant and equipment of $ 10.6 million.

Pensions and Other Postretirement Benefit Plans

1 unchanged sentence

The Company has defined benefit pension plans covering certain U.S.

qualified defined benefit pension plan has been closed to new participants since October 1998 and, as of February 2009, benefits accrued under this plan were frozen.

As a result of the freeze, employees covered by the pension plan will receive, at retirement, benefits accrued through February 2009, but no benefits accrue after that date.

Pension Plus Plan (or the "Plan"), is a qualified defined benefit pension plan that has been closed to new participants since October 1998 and, as of February 2009, benefits accrued under the Plan were frozen.

As a result of the freeze, employees covered by the Plan will receive, at retirement, benefits accrued through February 2009, but no benefits accrue after that date.

Benefit accruals under the U.S.

Supplemental Executive Retirement Plan (“SERP”), which is an unfunded plan, were similarly frozen.

pension plan accounts for 44 percent of consolidated pension plan assets, and 45 percent of consolidated pension plan obligations.

Pension Plus Plan accounts for 44 percent of consolidated pension plan assets, and 48 percent of consolidated pension plan obligations.

The eligibility, benefit formulas, and contribution requirements for plans outside of the U.S.

vary by location.

On July 29, 2021, the Company notified the participants of the U.S.

Pension Plus Plan of its intent to terminate the Plan.

In order to facilitate such termination, the Company has amended the Plan to, among other things, establish the termination date and set forth the procedures for termination.

The Company also filed the necessary application with the Internal Revenue Service requesting the issuance of a determination letter regarding the Plan’s qualification status at termination.

The Plan was terminated on September 30, 2021.

This has not resulted in a curtailment or settlement charge during the year ended December 31, 2021;

however, the year-end liability on the Consolidated Balance Sheets reflects assumptions and estimates of the impending settlement of the plan.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

The December 31, 2021 benefit obligations for the U.S.

3 unchanged sentences

As of December 31, 2021, the benefit obligation for that plan amounted to $ 5.4 million.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

In addition to providing pension benefits, the Company provides various medical, dental, and life insurance benefits for certain retired United States employees.

65 unchanged sentences

Compensation increase — U.S.

— N/A — 3.00 %

Compensation increase — non-U.S.

2.70 % 2.75 % 2.71 % 2.75 %

During 2021, pension benefit obligations decreased by $ 15.0 million, $ 7.2 million of which was driven by net actuarial gains, principally resulting from higher discount rates, in addition to employer contributions of $ 9.4 million.

Other postretirement benefit obligations decreased by $ 3.1 million in 2021, primarily driven by payments made by the company to participants of the plans.

During 2020, pension benefit obligations increased by $ 18.6 million, $ 13.3 million of which was driven by net actuarial losses, principally resulting from a lower discount rate.

Other postretirement benefit obligations decreased by $ 6.4 million in 2020, as changes in demographic data assumptions which resulted from a 2020 experience study, were partially offset by lower discount rates.

During 2019, lower average discount rates had the effect of significantly increasing both pension and other postretirement benefit obligations.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

The following sets forth information about plan assets:

19 unchanged sentences

$ 225,327 $ — $ 239,051 $ —

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

The funded status of the plans was as follows:

72 unchanged sentences

Rate of compensation increase — U.S.

— — — N/A 3.00 % —

— — — — — 3.00 %

Rate of compensation increase — non-U.S.

80 unchanged sentences

Net purchases, issuances

and settlements

Net transfers (out of) Level 3

and settlements Net transfers (out of) Level 3

December 31, 2021

68 unchanged sentences

In 2018, the plan was approved by the French Labor Ministry which led to restructuring expense of $ 10.7 million in 2018, which included severance and outplacement costs for the approximately 50 positions that were terminated under this plan.

In 2019, restructuring charges were $ 0.9 million.

In 2020, restructuring charges were $ 1.2 million.

In 2019, restructuring charges were $ 0.9 million, in 2020, restructuring charges were $ 1.2 million, and in 2021, restructuring charges were $ 0.4 million.

Since 2017, we have recorded $ 14.3 million of restructuring charges related to this action.

10 unchanged sentences

Albany Engineered Composites

2,821 2,821 —

Corporate expenses

9 unchanged sentences

$ 5,736 $ 5,736 $ —

$ 2,905 $ 1,269 $ 1,636

Year ended December 31, 2019 (In thousands) Total restructuring costs incurred

7 unchanged sentences

( 57 ) ( 57 ) —

$ 2,905 $ 1,269 $ 1,636

We expect that approximately $ 0.9 million of Accrued liabilities for restructuring at December 31, 2021 will be paid within one year and approximately $ 0.1 million will be paid the following year.

15 unchanged sentences

$ 2,042 $ 5,736 $ ( 5,668 ) $ 85 $ 2,195

Other (income)/expense, net

The components of Other (income)/expense, net, are:

Other expense/(income), net

The components of Other expense/(income), net, are:

(in thousands)

2 unchanged sentences

$ ( 1,179 ) $ 13,569 $ ( 4,471 )

Bank fees and amortization of debt issuance costs

Bank fees and other costs 373 367 348

Pension settlements and curtailments

3 unchanged sentences

$ 3,021 $ 13,422 $ ( 1,557 )

In 2020, Other (income)/expense, net included losses related to the revaluation of nonfunctional-currency balances of $ 13.6 million, which principally resulted from intercompany demand loans payable by Mexican subsidiaries combined with the effects of a much weaker peso in 2020.

As a result of changes in business conditions that occurred in the first quarter of 2020, certain loan repayments are no longer expected in the foreseeable future and, beginning April 1, 2020, the revaluation effects for those loans are being recorded in Other comprehensive income, which resulted in a pre-tax gain of $ 5.0 million being recorded in Other comprehensive income in 2020.

In 2021, Other (income)/expense, net included gains related to the revaluation of nonfunctional-currency balances of $ 1.2 million, as compared to a loss of $ 13.6 million during 2020, principally resulting from the effect of variations in the strength of the peso on intercompany demand loans payable by Mexican subsidiaries.

As a result of changes in business conditions that occurred in the first quarter of 2020, certain loan repayments were no longer expected in the foreseeable future and, beginning April 1, 2020, the revaluation effects for those loans were recorded in Other comprehensive income, which resulted in a pre-tax gain of $ 5.0 million being recorded in Other comprehensive income in 2020.

The same loans had an insignificant effect on Other comprehensive income in 2021.

In 2020, the Company recorded other income of $ 2.6 million related to a successful claim for a rebate of foreign sales tax paid in previous years.

In 2019, the Company took actions to freeze accrued benefits under the United Kingdom defined benefit pension plan, which resulted in a curtailment charge of $ 0.5 million.

In 2018, the Company took actions to settle a portion of its non-U.S.

defined benefit pension plan liabilities, which resulted in a settlement charge of $ 2.2 million.

Also in 2018, the Company recorded a pension curtailment gain of $ 0.7 million related to the restructuring in Sélestat, France.

The following tables present components of income tax expense/(benefit) and income before income taxes on continuing operations:

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

(in thousands)

2020 2019 2018

Income tax based on income from continuing operations, at estimated tax rates of 28 %, 28 %, and 31 %, respectively

$ 39,544 $ 49,977 $ 36,044

Income tax before discrete items 39,544 49,977 36,044

Discrete tax expense/(benefit):

Net impact of mandatory deemed repatriation — — ( 1,003 )

Provision for/resolution of tax audits and contingencies, net 752 ( 2,874 ) 1,286

Adjustments to prior period tax liabilities ( 2,420 ) ( 1,637 ) ( 1,284 )

Provision for/adjustment to beginning of year valuation allowances 168 ( 525 ) ( 4,882 )

Enacted tax legislation — ( 112 ) 2,067

Tax effect of non-deductible foreign exchange loss on intercompany loan 3,801 — —

Other ( 14 ) — —

Total income tax expense $ 41,831 $ 44,829 $ 32,228

Provision for income taxes consisted of the following:

For the year ended December 31

(in thousands)

2021 2020 2019

Income/(loss) before income taxes:

Income before income taxes:

$ 63,708 $ 63,375 $ 76,024

1 unchanged sentence

$ 165,931 $ 139,074 $ 178,212

Income tax provision

Income tax expense/(benefit)

$ 3,348 $ 1,415 $ 780

8 unchanged sentences

$ 47,163 $ 41,831 $ 44,829

The significant components of deferred income tax expense/(benefit) are as follows:

(in thousands)

2020 2019 2018

Net effect of temporary differences

$ 5,262 $ ( 18 ) $ ( 4,657 )

Foreign tax credits

7,173 12,530 9,437

Retirement benefits

401 ( 752 ) 2,360

Net impact to operating loss carryforwards

( 1,532 ) 1,314 1,046

Enacted changes in tax laws and rates

( 112 ) 2,067

Adjustment to beginning-of-the-year valuation allowance balance for changes in circumstances

168 ( 525 ) ( 4,882 )

$ 11,472 $ 12,437 $ 5,371

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

A reconciliation of the U.S.

federal statutory tax rate to the Company’s effective income tax rate is as follows:

2020 2019 2018

For the year ended December 31 2021 2020 2019

federal statutory tax rate

3 unchanged sentences

permanent adjustments 1.1 0.1 —

Foreign permanent adjustments

0.2 0.4 ( 0.4 )

Foreign rate differential

2 unchanged sentences

Provision for/(resolution) of tax audits and contingencies, net 0.1 0.5 ( 1.6 )

0.5 ( 1.6 ) 1.1

Research and development and other tax credits

( 0.4 ) ( 0.3 ) ( 0.1 )

Provision for/adjustment to beginning of year valuation allowances

0.2 ( 0.3 ) ( 4.2 )

Enacted tax legislation and rate change

— ( 0.1 ) 1.8

Tax effect of non-deductible foreign exchange loss on intercompany loan — 2.7 —

Impact of amended tax returns ( 1.3 ) — —

Return to provision and other adjustments

5 unchanged sentences

The Company has operations which constitute a taxable presence in 18 countries outside of the United States.

The majority of these countries had income tax rates that are above the United States federal tax rate of 21 % during 2020.

The jurisdictional location of earnings is a significant component of the Company’s effective tax rate each year.

The rate impact of this component is influenced by the specific location of non-U.S.

earnings and the level of the Company’s total earnings.

From period to period, the jurisdictional mix of earnings can vary as a result of operating fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges.

The foreign income tax rate differential that is included above in the reconciliation of the effective tax rate includes the difference between tax expense calculated at the U.S.

federal statutory tax rate of 21 % and the expense accrued based on the different statutory tax rates that apply in the jurisdictions where the income or loss is earned.

The Company is subject to audit in the U.S.

and various foreign jurisdictions.

Our open tax years for major jurisdictions generally range from 2012-2021.

During the periods reported, income outside of the U.S.

was heavily concentrated within Brazil (blended 34 % tax rate), China ( 25 % tax rate), and Mexico ( 30 % tax rate).

The foreign rate differential of these jurisdictions was partially offset by Switzerland ( 7.8 % tax rate).

As a result, the foreign income tax rate differential was primarily attributable to these tax rate differences.

On July 20, 2020, The Treasury Department and the IRS released final regulations and proposed regulations under Section 951A and Section 954, relating to the treatment of income that is subject to a high rate of foreign tax under the global intangible low-taxed income (GILTI) and subpart F income regimes.

The final regulations adopted a high-tax exclusion for GILTI purposes, which can be elected on an annual basis.

These final regulations may be applied retroactively to tax years beginning after December 31, 2017.

The Company expects to elect the GILTI high-tax exclusion for the 2020 tax year.

By making the election, the Company will reduce its taxable income by approximately $ 15 million.

After taking the GILTI foreign tax credits into consideration, the net impact of making the election is a tax reduction of $ 0.7 million, or 0.5 %.

The Company will also use $ 0.7 million less carryover foreign tax credits, which can be utilized in a future year.

The Company will review the impact of making the high-tax election retroactively for the 2018 and 2019 tax years to determine the potential benefits of making the election.

The primary benefit of making the election retroactively would be the preservation of foreign tax credits that could then be utilized in future years.

Making the election retroactively isn't expected to have a significant impact on the Company's financial reporting.

was heavily concentrated within Brazil ( 34 % tax rate), China ( 25 % tax rate), and Mexico ( 30 % tax rate).

The foreign rate differential of these jurisdictions was partially offset

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

The Proposed Regulations generally conform the high-tax exception under the subpart F regime with the high-tax exclusion under the GILTI regime, and adopt a single election under Section 954(b)(4) applicable for purposes of both subpart F income and tested income.

The proposed regulations adopt a unified election for subpart F and tested income that applies the rules of the GILTI high-tax exclusion for both tested income and subpart F income.

The proposed regulations generally apply to tax years beginning after the date of publication of the Treasury decision adopting such rules as final regulations in the Federal Register.

Once the final regulations are published, the Company will determine annually whether making the election is beneficial.

This election isn't expected to have a material impact on the Company's financial reporting.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting purposes and income tax return purposes.

by Switzerland ( 7.8 % tax rate).

As a result, the foreign income tax rate differential was primarily attributable to these tax rate differences.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting purposes and income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

For the year ended December 31 U.S.

(in thousands)

2021 2020 2021 2020

Noncurrent deferred tax assets:

Deferred tax assets:

Accounts receivable, net $ 428 $ 672 $ 1,378 $ 1,453

1,450 762 1,752 1,995

Accrued liabilities, deferred compensation 4,490 4,730 1,064 1,386

Incentive compensation 4,580 4,490 1,084 1,064

Property, plant, equipment and intangibles, net — — 4,339 2,382

Other noncurrent liabilities 12,498 14,885 82 1,048

Pension, post retirement benefits - non-current 12,912 12,498 — 82

Tax loss carryforwards

3 unchanged sentences

Derivatives 468 3,283 — —

Other noncurrent liabilities, reserves 2,704 2,953 — —

Reserves 991 2,704 — —

Deferred revenue 239 1,471 — —

Noncurrent deferred tax assets before valuation allowance

— — 1,791 638

Deferred tax assets before valuation allowance 25,928 35,633 30,165 33,077

valuation allowance

( 9 ) ( 9 ) ( 10,650 ) ( 10,261 )

Total noncurrent deferred tax assets

35,624 46,052 22,816 22,908

Total deferred tax assets $ 25,919 $ 35,624 $ 19,515 $ 22,816

$ 35,624 $ 46,052 $ 22,816 $ 22,908

Noncurrent deferred tax liabilities:

Deferred tax liabilities:

Unrepatriated foreign earnings

1 unchanged sentence

Property, plant, equipment and intangibles, net 5,356 3,122 — —

Deferred gain

2,911 3,391 — —

Flow-through deferred tax liabilities 6,881 6,205 — —

Basis difference in partner capital 2,466 2,911 — —

Basis difference in investment 3,985 6,881 — —

Deferred revenue — — 10,829 11,989

963 519 602 —

Total noncurrent deferred tax liabilities

$ 17,212 $ 16,712 $ 11,989 $ 11,629

Net deferred tax liabilities

$ 17,212 $ 16,712 $ 11,989 $ 11,629

Total deferred tax liabilities $ 19,078 $ 17,212 $ 11,431 $ 11,989

Net deferred tax asset

1 unchanged sentence

Deferred income tax assets, net of valuation allowances, are expected to be realized through the reversal of existing taxable temporary differences and future taxable income.

In 2020, the Company recorded the following movements in its valuation allowance:

$ 0.1 million increase due to the net recording of valuation allowances, $ 0.3 million increase in a valuation allowance due to a net increase in the related deferred tax assets, and $ 0.7 million increase due to the effect of the changes in currency translation rates.

In 2021, the Company recorded immaterial movements in its valuation allowance, which are included in Schedule II in Item 15.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

At December 31, 2020, the Company had available approximately $ 90.6 million of net operating loss carryforwards, for which the Company has a deferred tax asset of $ 24.6 million, with expiration dates ranging from one year to indefinite that may be applied against future taxable income.

The Company believes that it is more likely than not that certain benefits from these net operating loss carryforwards will not be realized and, accordingly, the Company has recorded a valuation allowance of $ 10.3 million as of December 31, 2020.

Additionally, management has evaluated its ability to utilize its other non-U.S.

tax attributes during the various carryforward periods and has concluded that the Company will more likely than not be able to utilize the remaining non-U.S.

tax attributes.

Included in the net operating loss carryforward is approximately $ 8.5 million of state net operating loss carryforwards that are subject to various business apportionment factors and multiple jurisdictional requirements when utilized.

In addition, the Company had available a foreign tax credit carryforward of $ 0.2 million that will begin to expire in 2025, U.S.

research and development credit carryforwards of $ 9.0 million and $ 0.9 million, respectively, that will begin to expire in 2025.

The Company reported a U.S.

net deferred tax asset of $ 18.4 million at December 31, 2020, which contained $ 9.8 million of tax attributes with limited lives.

Although the Company is in a cumulative book income position for the three-year period ending December 31, 2020, management has evaluated its ability to utilize these tax attributes during the carryforward period.

The Company’s future profits from operations, available tax elections and tax planning opportunities more likely than not will generate income of sufficient character to utilize the remaining tax attributes except for a small amount of state net operating losses for which we recorded a valuation allowance of less than $ 0.1 million.

As of December 31, 2021, the Company's net operating loss, capital loss and tax credit carryforwards were as follows:

(in thousands) Expiration Period Net Operating and Capital Loss Carryforwards Tax Credit Carryforwards

Federal 2025 - 2040 $ — $ 4,802

State 2027 - 2035 3,471 400

State Indefinite 52 —

2025 - 2030 22,383 —

Indefinite 43,154 —

Balance at end of year $ 69,060 $ 5,202

The Company records the residual U.S.

8 unchanged sentences

If these earnings were distributed, the Company could be subject to income taxes and additional foreign withholding taxes.

Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practical.

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits, $ 1.3 million of which, if recognized, would impact the effective tax rate:

Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practical due to the complexities of the hypothetical calculation.

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits.

If recognized, $ 1.5 million would impact the effective tax rate at December 31, 2021:

(in thousands)

2021 2020 2019

Unrecognized tax benefits balance at January 1st

$ 5,834 $ 3,790 $ 4,509

Unrecognized tax benefits balance at January 1, $ 5,491 $ 5,834 $ 3,790

Increase in gross amounts of tax positions related to prior years

4 unchanged sentences

Decrease due to settlements with tax authorities

— — ( 1,626 )

Decrease due to lapse in statute of limitations

1 unchanged sentence

Currency translation

54 35 ( 264 )

Unrecognized tax benefits balance at December 31, $ 1,459 $ 5,491 $ 5,834

The Company recognizes interest and penalties related to unrecognized tax benefits within its global operations as a component of income tax expense.

The Company recognized interest and penalties related to the unrecognized tax benefits noted above of $ 0.2 million or less in each of 2020, 2019 and 2018.

As of December 31, 2020, 2019 and 2018, the Company had approximately $ 0.1 million, $ 0.1 million, and $ 0.4 million respectively, of accrued interest and penalties related to unrecognized tax benefits.

The Company recognized immaterial interest and penalties related to the unrecognized tax benefits noted above, for the years 2021, 2020 and 2019.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

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 2008 to 2020.

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

tax jurisdictions, including but not limited to Canada, Italy and Switzerland.

In the first quarter of 2020, the Company recorded a $ 1.8 million out-of-period immaterial charge related to developments in an ongoing U.S.

state tax audit, which resulted in a corresponding decrease in deferred tax assets.

In the second quarter of 2020, the U.S.

state tax audit was settled.

As a result of the audit settlement, the Company recorded a net tax benefit of $ 1.5 million.

As of December 31, 2020, and 2019, current income taxes prepaid and receivable consisted of the following:

(in thousands)

Prepaid taxes

$ 5,234 $ 4,399

Taxes receivable

Total current income taxes prepaid and receivable

$ 5,940 $ 6,162

As of December 31, 2020, and 2019, non-current deferred taxes and other liabilities consisted of the following:

(in thousands) 2020 2019

Deferred income taxes $ 9,518 $ 11,002

Other liabilities 1,266 1,224

Total noncurrent deferred taxes and other liabilities $ 10,784 $ 12,226

Taxes paid, net of refunds, amounted to $ 25.1 million in 2020, $ 25.9 million in 2019 and $ 28.1 million in 2018.

Earnings Per Share

17 unchanged sentences

$ 3.65 $ 3.05 $ 4.10

Shares outstanding, net of treasury shares, were 32.3 million as of December 31, 2020, 2019 and 2018.

Shares outstanding, net of treasury shares, were 32.1 million as of December 31, 2021, and 32.3 million as of 2020 and 2019.

ALBANY INTERNATIONAL CORP.

9 unchanged sentences

Other comprehensive income/(loss) before reclassifications ( 6,876 ) ( 525 ) ( 10,523 ) ( 17,924 )

Pension/postretirement settlements and curtailments — 1,146 — 1,146

Pension/postretirement plan remeasurement — 443 — 443

Pension/postretirement settlements and curtailments, net of tax — 376 — 376

Pension/postretirement plan remeasurement, net of tax — ( 1,437 ) — ( 1,437 )

Interest expense related to swaps reclassified to the Statements of Income, net of tax — — 2,691 2,691

Pension and postretirement liability adjustments reclassified to Statements of Income, net of tax — 47 — 47

Adjustment related to prior period change in opening valuation allowance — ( 1,346 ) — ( 1,346 )

Net current period other comprehensive income ( 6,876 ) ( 2,885 ) ( 7,832 ) ( 17,593 )

December 31, 2019

$ ( 122,852 ) $ ( 49,994 ) $ ( 3,135 ) $ ( 175,981 )

Other comprehensive income/(loss) before reclassifications 39,649 ( 722 ) ( 9,363 ) 29,564

Pension/postretirement settlements and curtailments — 376 — 376

Pension/postretirement plan remeasurement — ( 1,437 ) — ( 1,437 )

Pension/postretirement settlements and curtailments, net of tax — 283 — 283

Pension/postretirement plan remeasurement, net of tax — 10,390 — 10,390

Interest expense related to swaps reclassified to the Statements of Income, net of tax — — 2,954 2,954

Pension and postretirement liability adjustments reclassified to Statements of Income, net of tax — 382 — 382

Adjustment related to prior period change in opening valuation allowance — ( 1,346 ) — ( 1,346 )

Net current period other comprehensive income 39,649 10,333 ( 6,409 ) 43,573

December 31, 2020

$ ( 83,203 ) $ ( 39,661 ) $ ( 9,544 ) $ ( 132,408 )

Other comprehensive income/(loss) before reclassifications ( 22,677 ) 1,869 2,812 ( 17,996 )

Pension/postretirement settlements and curtailments — 283 — 283

Pension/postretirement plan remeasurement — 10,390 — 10,390

Pension/postretirement settlements and curtailments, net of tax — — — —

Pension/postretirement plan remeasurement, net of tax — ( 796 ) — ( 796 )

Interest expense related to swaps reclassified to the Statements of Income, net of tax — — 5,118 5,118

2 unchanged sentences

December 31, 2021

$ ( 105,880 ) $ ( 38,490 ) $ ( 1,614 ) $ ( 145,984 )

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.

19 unchanged sentences

Total pretax amount reclassified (b)

941 510 2,215

Income tax effect

28 unchanged sentences

Changes in other comprehensive income attributable to noncontrolling interest

( 451 ) 1,139

Noncontrolling interest, end of year

17 unchanged sentences

As described in Note 1, effective January 1, 2020, the Company adopted the provisions of ASC 326, Current Expected Credit Losses (CECL).

This accounting update replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

6 unchanged sentences

A changing economic environment or forecasted economic scenario can lead to a different probability of default and can suggest that credit risk has changed.

Such is the case with the global COVID-19 pandemic, which has increased uncertainty and poses a significant challenge to the macro-economic environment.

Management believes this has increased the probability of credit default, causing the Company to increase the allowance for expected credit losses during 2020.

At each reporting period, the Company will recognize the amount of change in current expected credit losses as an allowance gain or loss in Selling, general, and administrative expenses in the Consolidated Statements of Income.

1 unchanged sentence

This is the case when the Company determines that the customer does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

The following table presents the (increases)/decreases in the allowance for credit losses for Accounts receivable in 2020:

The following tables present the (increases)/decreases in the allowance for credit losses for Accounts receivable:

(in thousands) December 31,

adjustment Charges Currency

2020 (Charge)/ benefit Currency

translation Other December 31,

2 unchanged sentences

Accounts receivable expected credit losses $ ( 3,807 ) $ 887 $ 154 $ 421 $ ( 2,345 )

The following table presents the (increases)/decreases in the allowance for credit losses for Noncurrent receivables in 2020:

(in thousands)

December 31, 2019

(Charge)/ benefit Currency

December 31, 2020

Specific customer reserves

$ ( 1,719 ) $ ( 44 ) $ ( 43 ) $ ( 42 ) $ 106 $ ( 1,742 )

Incremental expected credit losses

$ — $ ( 1,139 ) $ ( 857 ) $ ( 46 ) $ ( 23 ) $ ( 2,065 )

Accounts receivable expected credit losses

$ ( 1,719 ) $ ( 1,183 ) $ ( 900 ) $ ( 88 ) $ 83 $ ( 3,807 )

The following tables present the (increases)/decreases in the allowance for credit losses for Noncurrent receivables:

(in thousands) December 31,

adjustment Charges Currency

2020 (Charge)/ benefit Currency

translation Other December 31,

Noncurrent receivables expected credit losses $ ( 274 ) $ 72 $ 2 $ — $ ( 200 )

(in thousands)

December 31, 2019

(Charge)/ benefit Currency

December 31, 2020

Noncurrent receivables expected credit losses

$ — $ ( 206 ) $ ( 71 ) $ 3 $ — $ ( 274 )

Contract Assets and Liabilities

1 unchanged sentence

Contract assets and contract liabilities are summarized as follows:

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Contract Assets and Liabilities — (continued)

(in thousands)

4 unchanged sentences

Contract liabilities $ 6,959 $ 8,206

Contract assets increased $ 60.2 million during the year ended December 31, 2020.

Contract assets increase when there is an increase in unbilled revenue related to the satisfaction of performance obligations in excess of the amounts billed to customers for contracts that are in a contract asset position.

The 2020 increase in Contract assets, approximately half of which was related to the LEAP program, was driven by delays in the Boeing 737 MAX return to service and a challenging economic environment in 2020, which caused a slowdown in several key aerospace programs.

Contract assets decreased $ 26.7 million during the year ended December 31, 2021, driven by cash inflows due to significant deliveries of LEAP components, which were delayed in the prior year due to slowdowns in the Boeing 737 MAX program.

Other than the allowance for expected credit losses, there were no other provisions for losses related to our Contract assets during the years ended December 31, 2021 and 2020.

The following table presents the 2020 (increases)/ decreases in the allowance for credit losses for Contract assets:

The following tables present the (increases)/ decreases in the allowance for credit losses for Contract assets:

(in thousands) December 31,

adjustment Charges Currency

2020 (Charge)/ benefit Currency

translation Other December 31,

Contract assets expected credit losses $ ( 1,059 ) $ 339 $ 16 $ 1 $ ( 703 )

Contract liabilities increased $ 2.6 million during the year ended December 31, 2020, primarily due to increased billings in excess of revenue recognized from satisfied performance obligations for contracts that were in a contract liability position.

(in thousands)

December 31, 2019

(Charge)/ benefit Currency

December 31, 2020

Contract assets expected credit losses

$ — $ ( 403 ) $ ( 657 ) $ ( 5 ) $ 6 $ ( 1,059 )

Contract liabilities decreased $ 1.2 million during the year ended December 31, 2021, primarily due to revenue recognition from satisfied performance obligations exceeding the amounts invoiced to customers for contracts that were in a contract liability position.

Revenue recognized for the years ended December 31, 2021 and 2020 that was included in the Contract liability balance at the beginning of the year was $ 5.8 million and $ 3.8 million, respectively.

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The table below sets forth the components of property, plant and equipment as of December 31, 2021 and 2020:

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Property, Plant and Equipment — (continued)

(in thousands)

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Capital expenditures, including purchased software, were $ 53.7 million in 2021, $ 42.4 million in 2020, and $ 68.0 million in 2019.

Unamortized software cost was $ 4.8 million in 2020, $ 5.3 million and $ 6.9 million as of December 31, 2019 and 2018, respectively.

Unamortized software cost was $ 3.9 million, $ 4.8 million, and $ 5.3 million in each of the years ended December 31, 2021, 2020, and 2019, respectively.

Expenditures for maintenance and repairs are charged to income as incurred and amounted to $ 19.3 million in 2021, $ 17.7 million in 2020, and $ 19.8 million in 2019.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination.

Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually at the reporting unit level, using either a qualitative or quantitative approach.

Impairment is the condition that exists when the carrying amount of a reporting unit, including goodwill, exceeds its fair value.

Our reportable segments are consistent with our operating segments.

Goodwill and other long-lived assets are reviewed for impairment whenever events, such as significant changes in the business climate, plant closures, changes in product offerings, or other circumstances indicate that the carrying amount may not be recoverable.

To determine fair value, we utilize two market-based approaches and an income approach.

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.

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.

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.

ALBANY INTERNATIONAL CORP.

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Goodwill and Other Intangible Assets — (continued)

On November 20, 2019, the Company acquired CirComp GmbH, a privately-held developer and manufacturer of high-performance composite components located in Kaiserslautern, Germany.

The assets acquired include goodwill of $ 17.7 million and amortizable intangible assets of $ 10.3 million, including measurement period adjustments recorded in 2020.

We are continuing to amortize certain patents, trademarks and names, customer contracts, relationships and technology assets that have finite lives.

The changes in intangible assets and goodwill from December 31, 2019 to December 31, 2021, were as follows:

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Balance at December 31, 2021

Amortized intangible assets:

Finite-Lived intangible assets:

AEC Trademarks and trade names 6 - 15

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16 — ( 16 ) — —

Total amortized intangible assets $ 52,892 $ 329 $ ( 7,259 ) $ 907 $ 46,869

Unamortized intangible assets:

Total Finite-Lived intangible assets $ 46,869 $ — $ ( 7,155 ) $ ( 633 ) $ 39,081

Indefinite-Lived intangible assets:

$ 72,290 $ — $ — $ ( 3,961 ) $ 68,329

115,263 — — ( 1,468 ) 113,795

Total unamortized intangible assets $ 180,934 $ 335 $ — $ 6,284 $ 187,553

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Goodwill and Other Intangible Assets — (continued)

Total Indefinite-Lived intangible assets $ 187,553 $ — $ — $ ( 5,429 ) $ 182,124

(in thousands, except for years)

1 unchanged sentence

Balance at December 31,

2018 Acquisition Amortization Currency

2019 Other Changes Amortization Currency

Translation Balance at December 31,

Amortized intangible assets:

Finite-Lived intangible assets:

AEC Trademarks and trade names 6 - 15

10 unchanged sentences

81 — ( 65 ) — 16

Total amortized intangible assets $ 49,206 $ 9,973 $ ( 6,309 ) $ 22 $ 52,892

Unamortized intangible assets:

MC Goodwill $ 68,652 $ — $ — $ ( 980 ) $ 67,672

AEC Goodwill 95,730 17,343 — 189 113,262

Total unamortized intangible assets $ 164,382 $ 17,343 $ — $ ( 791 ) $ 180,934

As of December 31, 2020, the gross carrying amount and accumulated amortization of amortized intangible assets was $ 78.0 million and $ 31.1 million, respectively.

Amortization expense related to intangible assets was reported in the Consolidated Statement of Income as follows:

Total Finite-Lived intangible assets $ 52,892 $ 329 $ ( 7,259 ) $ 907 $ 46,869

Indefinite-Lived intangible assets:

$ 67,672 $ — $ — $ 4,618 $ 72,290

113,262 335 — 1,666 115,263

Total Indefinite-Lived intangible assets $ 180,934 $ 335 $ — $ 6,284 $ 187,553

On November 20, 2019, the Company acquired CirComp GmbH, a privately-held developer and manufacturer of high-performance composite components located in Kaiserslautern, Germany.

The assets acquired include goodwill of $ 17.7 million and amortizable intangible assets of $ 10.3 million, including measurement period adjustments recorded in 2020.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Goodwill and Other Intangible Assets — (continued)

As of December 31, 2021, the gross carrying amount and accumulated amortization of Finite-Lived intangible assets was $ 78.3 million and $ 39.2 million, respectively.

As of December 31, 2020, the gross carrying amount and accumulated amortization of Finite-Lived intangible assets was $ 78.0 million and $ 31.1 million, respectively.

Amortization expense related to Finite-lived intangible assets was reported in the Consolidated Statement of Income as follows:

$ 3.0 million in Cost of goods sold and $ 4.2 million in Selling, general and administrative expenses in 2021;

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(in thousands)

Salaries and wages

$ 23,571 $ 22,878

Contract loss reserve

11,250 17,190

Employee benefits

12,952 14,235

Salaries, wages and benefits $ 54,254 $ 47,178

Pension and postretirement 10,742 5,941

Returns and allowances 9,798 10,560

10,560 11,249

Accrual for compensated absences

10,655 10,445

Contract liabilities 6,959 8,206

Lease liability - Operating lease

Lease liability - Financing lease

Postretirement medical benefits – current portion

Restructuring costs

Dividends 6,742 6,469

Operating and Financing lease liabilities 5,336 5,871

Contract loss reserve 3,608 11,250

Other tax 9,041 9,866

Freight 4,031 3,474

Professional fees 3,926 3,451

Pension liability – current portion

Workers' compensation

20,954 18,642

Other 9,888 13,193

$ 124,325 $ 125,459

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Financial Instruments

3 unchanged sentences

$ 350,000 $ 398,000

Other debt, at an average end of period rate of 5.50 % in both 2020 and 2019, due in varying amounts through 2021

Other debt, at an average end of period rate of 5.50 % in both 2021 and 2020, final payment was made on April 20, 2021

Long-term debt

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Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of December 31, 2021, we would have been able to borrow an additional $ 350 million under the Agreement.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Financial Instruments — (continued)

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.

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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 December 16, 2021 was 0.11 %.

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.

We received $ 6.3 million when the swap agreements were terminated and that payment will be amortized into interest expense through March 2021.

On May 6, 2016, we terminated other interest rate swap agreements that had effectively fixed the interest rate on $ 120 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.

We paid $ 5.2 million to terminate the swap agreements, which were fully amortized into interest expense through June 2020.

We received $ 6.3 million when the swap agreements were terminated and that payment was amortized into interest expense through March 2021.

On November 28, 2017, we entered into interest rate swap agreements for the period December 18, 2017 through October 17, 2022.

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

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Financial Instruments — (continued)

These interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note 18.

No cash collateral was received or pledged in relation to the swap agreements.

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 December 31, 2020, our leverage ratio was 1.34 to 1.00 and our interest coverage ratio was 14.39 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.

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

As of December 31, 2021, our leverage ratio was 1.04 and our interest coverage ratio was 14.69 .

We may purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50 , 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 December 31, 2021.

Currently, our Credit Agreement and certain of our derivative instruments reference one-month USD LIBOR-based rates, which are set to discontinue after June 30, 2023.

Regulators in the U.S.

and other jurisdictions have been working to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such as the Secured Overnight Financing Rate (SOFR) for USD LIBOR.

Our Credit Agreement contains provisions specifying alternative interest rate calculations to be employed when LIBOR ceases to be available as a benchmark and we have adhered to the ISDA IBOR Fallbacks Protocol, which will govern our derivatives upon the final cessation of USD LIBOR.

ASU 2020-04, Reference Rate Reform, helps limit the accounting impact from contract modifications, including hedging relationships, due to the transition from LIBOR to alternative reference rates that are completed by December 31, 2022.

We adopted certain provisions of ASU 2020-04 during 2021.

While we currently do not expect a significant impact to our operating results, financial position or cash flows from the transition from LIBOR to alternative reference interest rates, we will continue to monitor the impact of this transition until it is completed.

Fair-Value Measurements

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Cash equivalents $ 20,665 $ — $ 17,508 $ —

$ 17,508 $ — $ 16,375 $ —

Other Assets:

Common stock of unaffiliated foreign public company (a)

Interest rate swaps — 3,328 — —

Other noncurrent liabilities:

Interest rate swaps — ( 5,176 ) — ( 12,714 )

— ( 12,714 ) (b) — ( 5,518 ) (c)

_____________________

(a) Original cost basis $ 0.5 million

(b) Net of $ 1.0 million receivable floating leg and $ 13.7 million liability fixed leg.

Cash equivalents include short-term securities that are considered to be highly liquid and easily tradable.

These securities are valued using inputs observable in active markets for identical securities.

The common stock of the unaffiliated foreign public company is traded in an active market exchange.

The shares are measured at fair value using closing stock prices and are recorded in the Consolidated Balance Sheets as Other assets.

Changes in the fair value of the investment are reported in the Consolidated Statements of Income.

We operate our business in many regions of the world, and currency rate movements can have a significant effect on operating results.

Foreign currency instruments are entered into periodically, and consist of foreign currency option contracts and forward contracts that are valued using quoted prices in active markets obtained from independent pricing sources.

These instruments are measured using market foreign exchange prices and are recorded in the Consolidated Balance Sheets as Other current assets and Accounts payable, as applicable.

Changes in fair value of these instruments are recorded as gains or losses within Other (income)/expense, net.

When exercised, the foreign currency instruments are net settled with the same financial institution that bought or sold them.

For all positions, whether options or forward contracts, there is risk from the possible inability of the financial institution to meet the terms of the contracts and the risk of unfavorable changes in interest and currency rates, which may reduce the value of the instruments.

We seek to mitigate risk by evaluating the creditworthiness of counterparties and by monitoring the currency exchange and interest rate markets while reviewing the hedging risks and contracts to ensure compliance with our internal guidelines and policies.

Changes in exchange rates can result in revaluation gains and losses that are recorded in Selling, general and administrative expenses or Other (income)/expense, net.

Revaluation gains and losses occur when our business units have cash, intercompany (recorded in Other (income)/expense, net) or third-party trade (recorded in selling, general and administrative expenses) receivable or payable balances in a currency other than their local reporting (or functional) currency.

Operating results can also be affected by the translation of sales and costs, for each non-U.S.

subsidiary, from the local functional currency to the U.S.

The translation effect on the Consolidated Statements of Income is dependent on our net income or expense position in each non-U.S.

currency in which we do business.

A net income position exists when sales realized in a particular currency exceed expenses paid in that currency;

a net expense position exists if the opposite is true.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Fair-Value Measurements — (continued)

The interest rate swaps are accounted for as hedges of future cash flows.

4 unchanged sentences

Interest (income)/expense related to payments under the active swap agreements totaled $ 7.1 million in 2021, $ 5.4 million in 2020 and $( 0.6 ) million in 2019.

Additionally, non-cash interest income related to the amortization of swap buyouts totaled $ 1.4 million in 2020, $ 0.5 million in 2019, and $ 0.6 million in 2018, and is expected to reduce interest expense by $ 0.4 million in 2021.

Gains/(losses) related to changes in fair value of derivative instruments that were recognized in Other (income)/expense, net in the Consolidated Statements of Income were as follows:

Years ended December 31,

(in thousands)

2020 2019 2018

Derivatives not designated as hedging instruments

Foreign currency options gains/(losses)

$ ( 64 ) $ — $ ( 61 )

Additionally, non-cash interest income related to the amortization of swap buyouts totaled $ 0.3 million in 2021, $ 1.4 million in 2020, and $ 0.5 million in 2019.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Other Noncurrent Liabilities

8 unchanged sentences

Incentive and deferred compensation 3,257 2,286

Restructuring 287 700

Other 1,738 3,197

4 unchanged sentences

For that lease, transitional guidance required the derecognition of existing assets and liabilities and a reassessment of lease classification.

We determined that the lease met the criteria for recording as a finance lease

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Leases — (continued)

and we determined the January 1, 2019 values of the ROU asset and lease liability on the basis of that reassessment.

We determined that the lease met the criteria for recording as a finance lease and we determined the January 1, 2019 values of the ROU asset and lease liability on the basis of that reassessment.

The change in the SLC lease-related assets and liabilities resulted in a $ 0.3 million pre-tax reduction to retained earnings at the date of adoption.

9 unchanged sentences

Key estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) lease term and (3) lease payments.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Leases — (continued)

We are generally the lessee in our lease transactions.

9 unchanged sentences

Our leases have remaining lease terms of 1 year to 8 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Leases — (continued)

The components of lease expense were as follows:

21 unchanged sentences

The initial recognition of each ROU asset and lease liability at lease commencement is a noncash transaction that is excluded from amounts reported in the Consolidated Statements of Cash Flows.

In March 2020, the Company purchased, in cash, the primary CirComp GmbH operating facility in Germany for $ 5.8 million.

This resulted in the recording of land and building assets, and the removal of the finance lease right of use assets and associated lease liabilities.

The purchase in included with Principal payments on finance lease liabilities in the Consolidated Statements of Cash Flows.

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Leases — (continued)

In March 2020, the Company purchased, in cash, the primary CirComp GmbH operating facility in Germany for $ 5.8 million.

This resulted in the recording of land and building assets, and the removal of the finance lease right of use assets and associated lease liabilities.

The purchase is included with Principal payments on finance lease liabilities in the Consolidated Statements of Cash Flows.

Supplemental balance sheet information related to leases was as follows:

61 unchanged sentences

2021 3,615 32 26 3,609 $ 93

2018 3,730 152 106 3,684 100

2019 3,684 51 75 3,708 25

2020 3,708 152 59 3,615 $ 57

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.

5 unchanged sentences

Of this amount, almost 100 % was paid by our insurance carrier, who has confirmed that we have approximately $ 140 million of remaining coverage under primary and excess policies that should be available with respect to current and future asbestos claims.

The Company’s subsidiary, Brandon Drying Fabrics, Inc.

(“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 7,710 claims as of December 31, 2020, only twelve claims have been filed against Brandon since January 1, 2012, and no 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.

Since 2004, Brandon’s insurance carriers have covered 100 % of indemnification and defense costs, subject to policy limits and a standard reservation of rights.

In some of these asbestos cases, the Company is named both as a direct defendant and as the “successor in interest” to Mount Vernon Mills (“Mount Vernon”).

We acquired certain assets from Mount Vernon in 1993.

Certain plaintiffs allege injury caused by asbestos-containing products alleged to have been sold by Mount Vernon many years prior to this acquisition.

Mount Vernon is contractually obligated to indemnify the Company against any liability arising out of such products.

We deny any liability for products sold by Mount Vernon prior to the acquisition of the Mount Vernon assets.

Pursuant to its contractual indemnification obligations, Mount Vernon has assumed the defense of these claims.

On this basis, we have successfully moved for dismissal in a number of actions.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Commitments and Contingencies — (continued)

We currently do not anticipate, based on currently available information, that the ultimate resolution of the aforementioned proceedings will have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

1 unchanged sentence

Incentive Plans

Executive Management share-based compensation:

In 2017, shareholders approved the Albany International 2017 Incentive Plan.

3 unchanged sentences

Annual awards granted under this plan resulted in cash payments of $ 3.1 million in 2021 and $ 2.4 million in 2020 as a result of performance in in the preceding year.

Awards that were granted in 2018, 2019 and 2020, with a performance period of three years , have payments scheduled for March 2021, 2022 and 2023.

If a participant terminates employment prior to the award becoming fully vested, the person may forfeit all or a portion of the incentive compensation award.

The grant date share price is determined when the awards are approved each year and that price is used for measuring the cost for the share-based portion of an award.

Expense associated with these awards is recognized over the vesting period of the performance period which is generally one to three years .

In connection with these awards, we recognized expense of $ 4.8 million in 2020, $ 4.9 million in 2019 and $ 3.4 million in 2018.

For share-based awards that are dependent on performance after 2020, we expect to record additional compensation expense of approximately $ 1.1 million in 2021 and $ 0.4 million in 2022.

Shares payable under these plans generally vest immediately prior to payment.

Prior to the 2017 Incentive Plan, multi-year awards were granted under a plan approved in 2011.

That plan provided key members of management with incentive compensation based on achieving certain performance targets over a three year period.

Such awards were paid out partly in cash and partly in shares of Class A Common Stock.

In March 2020, we issued 12,930 shares and made cash payments totaling $ 0.7 million.

In March 2019, we issued 25,473 shares and made cash payments totaling $ 1.0 million.

In March 2018, we issued 33,425 shares and made cash payments totaling $ 1.3 million.

Expense associated with these awards was recognized over the three year vesting period.

In connection with this plan, we recognized expense of $ 0.8 million in 2018 and an insignificant amount of expense thereafter.

There are no unvested share-based awards in this Plan that are dependent on performance after 2020.

Therefore, we do not expect to record additional compensation expense in future periods.

As of December 31, 2020, there were 1,102,542 shares of Company stock authorized for the payment of awards under these plans.

Information with respect to these plans is presented below:

The Compensation Committee granted the executive management team a multi-year incentive compensation award in each 2019, 2020 and 2021.

Each of these awards vests over three years from the grant date, and the extent of payout is dependent upon the achievement of certain performance metrics during the vesting period, as defined by the Compensation Committee.

Payout is scheduled to occur no later than 90 days after the end of the vesting period.

If a participant terminates employment prior to the award becoming fully vested, the person may

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Incentive Plans — (continued)

forfeit all or a portion of the incentive compensation award.

The grant date share price is determined when the awards are approved each year and that price is used to measure the cost for the share-based portion of an award.

Expense associated with these awards is recognized over the vesting period.

In connection with these awards, we recognized expense of $ 3.7 million in 2021, $ 4.8 million in 2020 and $ 4.9 million in 2019.

The net impact to earnings for the respective years was $ 2.6 million, $ 3.4 million, and $ 3.5 million.

Based on current estimates of achievement of certain performance metrics, we anticipate recognizing $ 1.4 million of expense in 2022 and $ 0.3 million of expense in 2023 and 2024, respectively.

Beginning in 2021, the executive management team also receives restricted stock units that vest annually on December 31 and pay out no later than 90 days after the vesting period ends.

The grant date share price is the date when the award is approved by the Compensation Committee and is used to measure the cost of the award.

We recognized $ 0.6 million of expense in 2021 associated with these restricted stock units.

The net impact to earnings was $ 0.4 million.

As of December 31, 2021, there were 1,070,820 shares of Company stock authorized for the payment of awards under these plans.

Information with respect to these plans is presented below:

Number of shares Weighted average grant date value

13 unchanged sentences

Shares potentially payable at December 31, 2021 107,630 $ 75.99 $ 8,179

Other Management share-based compensation:

In 2012, the Company adopted a Phantom Stock plan whereby awards under this program vest over a 5 year period and are paid annually in cash based on current market prices of the Company’s stock.

In 2012, the Company adopted a Phantom Stock Plan ("PSP") whereby awards under this program vest over a 5 year period and are paid annually in cash based on current market prices of the Company’s stock.

Under this program, employees may earn more or less than the target award based on the Company’s results in the year of the award.

Expense recognized for this plan amounted to $ 6.6 million in 2021, $ 5.4 million in 2020, and $ 6.3 million in 2019.

The net impact to earnings for the respective years was $ 4.6 million, $ 3.9 million, and $ 4.5 million.

Based on awards outstanding at December 31, 2021, we expect to record approximately $ 15 million of compensation cost from 2022 to 2025.

The weighted average period for recognition of that cost is approximately 2 years.

The determination of compensation expense for other management share-based compensation plans is based on the number of outstanding share units, the end-of-period share price, and Company performance.

Information with respect to these plans is presented below:

The determination of compensation expense for the PSP is based on the number of outstanding share units, the end-of-period share price, and Company performance.

Information with respect to the PSP is presented below:

ALBANY INTERNATIONAL CORP.

20 unchanged sentences

Share units potentially payable at December 31, 2021 248,414

During 2018, 2019 and 2020, the Company granted restricted stock units to four executives.

During 2019, 2020 and 2021, the Company granted restricted stock units to executives.

The amount of compensation expense is subject to change in the market price of the Company’s stock and was recorded in Selling, general, and administrative expenses.

1 unchanged sentence

Expense recognized for these grants was $ 0.6 million in 2021, $ 0.4 million in 2020, and $ 1.1 million in 2019.

Based on awards outstanding at December 31, 2020, we expect to record approximately $ 1.5 million of compensation cost from 2021 to 2022.

The net impact to earnings for the respective years was $ 0.4 million, $ 0.3 million, and $ 0.8 million.

Based on awards outstanding at December 31, 2021, we expect to record approximately $ 0.2 million of compensation cost during 2022.

The Company maintains a voluntary savings plan covering substantially all employees in the United States.

5 unchanged sentences

The Company’s profit-sharing plan covers substantially all employees in the United States.

After the close of each year, the Board of Directors determines the amount of the profit-sharing contribution.

After the close of each year, the Board of Directors reviews and approves the amount of the profit-sharing contribution.

Company contributions to the plan are in the form of cash.

9 unchanged sentences

In 2019, a public offering of a portion of the Standish Family shares reduced the number of Class A Common Stock reserved for the conversion of Class B shares, by 1.6 million.

At December 31, 2020, 1.6 million shares of Class A Common Stock were reserved for the conversion of Class B Common Stock and the exercise of stock options.

In August 2006, we announced that the Board of Directors authorized management to purchase up to 2 million additional shares of our Class A Common Stock.

The Board’s action authorizes management to purchase shares from time to time, in the open market or otherwise, whenever it believes such purchase to be advantageous to our shareholders, and it is otherwise legally permitted to do so.

We have made no share purchases under the August 2006 authorization.

In 2021, Standish Family Holdings, LLC and J.S.

Standish Company (the "Selling Stockholders") agreed to sell to J.P.

Morgan Securities LLC all of its ownership in the Company's Class A common stock.

Such constituted a sale of nearly all of the remaining 1.6 million shares of the Company’s Class A Common Stock, par value $ 0.001 per share, to be issued upon conversion of an equal number of shares of the Company’s Class B common stock, par value $ 0.001 per share, at a price per share of $ 75.9656 (the "Transaction").

Immediately following the Transaction, the Selling Stockholders and related persons (including Christine L.

Standish and John C.

Standish) hold in the aggregate shares of the Company’s common stock entitling them to cast less than one percent of the combined votes entitled to be cast by all stockholders of the Company.

In 2021, the Company's Board of Directors authorized the Company to repurchase shares of up to $200 million through open market purchases, privately negotiated transactions or otherwise, and to determine the prices, times and amounts.

The program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended or terminated at any time at the Company's discretion.

The share repurchase program does not have an expiration date.

The timing and amount of any share repurchases will be based on the Company’s liquidity, general business and market conditions, debt covenant restrictions and other factors, including alternative investment opportunities and capital structure.

Through December 31, 2021, the Company has repurchased 285,286 shares for a total of cost of $ 24.4 million.

Activity in Shareholders’ equity for 2019, 2020, and 2021 is presented below:

7 unchanged sentences

Net income attributable to the Company — — — — — 132,398 — — — 985 133,383

Adoption of accounting standards (a),(b) — — — — — ( 5,068 ) — — — ( 327 ) ( 5,395 )

Adoption of accounting standards (a) — — — — — 35 — — — — 35

Compensation and benefits paid or payable in shares 26 — — — 1,311 — — — — — 1,311

6 unchanged sentences

— — — — — ( 1,763 ) — — — — ( 1,763 )

Conversion of Class B shares to Class A shares (b) 1,616 2 ( 1,616 ) ( 1 ) — ( 1 ) — — — — —

Cumulative translation adjustments — — — — — — ( 6,876 ) — — ( 10 ) ( 6,886 )

3 unchanged sentences

Net income attributable to the Company — — — — — 98,589 — — — ( 1,346 ) 97,243

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Shareholders’ Equity — (continued)

Adoption of accounting standards (c) — — — — — ( 1,443 ) — — — — ( 1,443 )

5 unchanged sentences

— — — — — ( 23,651 ) — — — — ( 23,651 )

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Shareholders’ Equity — (continued)

Class B Common Stock, $ 0.77 per share

— — — — — ( 1,245 ) — — — — ( 1,245 )

Conversion of Class B shares to Class A shares (d) 1,616 2 ( 1,616 ) ( 1 ) — ( 1 ) — — — — —

Cumulative translation adjustments — — — — — — 39,649 — — 1,139 40,788

3 unchanged sentences

Net income attributable to the Company — — — — — 118,478 — — — 290 118,768

Adoption of accounting standards (e) — — — — — ( 1,443 ) — — — — ( 1,443 )

Compensation and benefits paid or payable in shares 20 — — — 2,441 — — — — — 2,441

1 unchanged sentence

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

Purchase of Treasury shares (d) — — — — — — — 285 ( 24,375 ) — ( 24,375 )

Dividends declared

3 unchanged sentences

— — — — — ( 647 ) — — — — ( 647 )

Conversion of Class B shares to Class A shares (e) 1,618 2 ( 1,618 ) ( 2 ) — — — — — — —

Cumulative translation adjustments — — — — — — ( 22,677 ) — — ( 451 ) ( 23,128 )

2 unchanged sentences

December 31, 2021 40,760 $ 41 — $ — $ 436,996 $ 863,057 $ ( 145,984 ) 8,665 $ ( 280,143 ) $ 3,638 $ 877,605

(a) As described in Note 2, the Company adopted ASC 606 effective January 1, 2018, which resulted in a decrease to Retained earnings of $ 5.6 million and a $ 0.3 million decrease to Noncontrolling interest.

(b) The Company adopted ASU 2016-16 effective January 1, 2018, which resulted in a $ 0.5 million increase to Retained earnings.

(c) As described in Note 20, the Company adopted ASC 842, Leases effective January 1, 2019, which resulted in an increase to Retained earnings of less than $ 0.1 million.

(d) In the second quarter of 2019, Standish Family Holdings, LLC executed a secondary offering of Albany shares.

As a result of the offering, 1.6 million shares of Class B Common Stock previously owned by Standish Family Holdings, LLC were converted to Class A Common Stock and then sold to third parties.

Costs associated with the offering were charged directly to Standish Family Holdings, LLC.

(e) As described in Note 1, 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.

Business Acquisition

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Business Acquisition — (continued)

On November 20, 2019, the Company acquired CirComp GmbH, a privately-held developer and manufacturer of high-performance composite components located in Kaiserslautern, Germany for $ 32.4 million.

The Company also agreed to pay approximately $ 5.5 million that will become due, as certain post-closing obligations are performed.

Expense related to that agreement will be recognized over the five -year performance period.

The Company funded the acquisition using a combination of cash on hand and funds drawn on its revolving credit facility (see Note 17).

In March 2020, the Company purchased, in cash, the primary operating facility in Germany for $ 5.8 million, which resulted in the recording of land and building assets, and the removal of the Right of use assets and associated lease liabilities included in the acquisition-date balance sheet.

The seller provided representations, warranties and indemnities customary for acquisition transactions, including indemnities for certain customer claims identified, before closing.

The acquired entity is part of the AEC segment.

CirComp specializes in designing and manufacturing customized engineered composite components for aerospace and other demanding industrial applications.

The following table summarizes the allocation of the purchase price to the fair value of the assets and liabilities acquired:

(in thousands)

November 20, 2019

Assets acquired

Accounts receivable

Contract assets

Prepaid expenses and other current assets

Right of use assets related to finance lease 5,686

Property, plant and equipment

Amortizable intangible assets (see Note 15)

Total assets acquired

Liabilities assumed

Accounts payable

Accrued liabilities

Lease liabilities

Deferred income taxes

Other noncurrent liabilities

Total liabilities assumed

Net assets acquired

Purchase of business, net of cash acquired

During the first six months of 2020, management identified adjustments to the provisional value of assets and liabilities acquired reported in the Form 10-K for the year ended December 31, 2019, which resulted in a decrease to Contract assets of $ 0.3 million, an increase to Accrued liabilities of $ 0.5 million, an increase to Amortizable intangible assets of $ 0.3 million, a decrease to Deferred income tax liabilities of $ 0.2 million, and an increase to Goodwill of $ 0.3 million.

Management's review of the purchase price allocation has been completed.

Acquired Goodwill of $ 17.7 million reflects the Company’s belief that the acquisition complements and expands Albany’s portfolio of proprietary, advanced manufacturing technologies for composite components, increases the Company’s position as a leading innovator in advanced materials processing and automation, and opens a geographic footprint in Europe to better serve our global customer base.

The acquisition significantly increases the Company’s opportunities for future growth.

The goodwill is non-deductible for tax purposes.

(a) As described in Note 20, the Company adopted ASC 842, Leases effective January 1, 2019, which resulted in an increase to Retained earnings of less than $ 0.1 million.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Business Acquisition — (continued)

The following table presents operational results of the acquired entity that are included in the Consolidated Statements of Income (unaudited):

(in thousands, except per share amounts)

November 20 to December 31, 2019

Operating loss

Loss before income taxes

Net loss attributable to the Company

Loss per share:

Results in the above table include $ 0.1 million of expenses related to the $ 5.5 million of deferred payments noted above.

In addition to the amounts reported in the above table, the Company incurred approximately $ 0.5 million of expenses, principally professional fees, related to the acquisition.

The Consolidated Statements of Income reflect operational activity of the acquired business for only the period subsequent to the closing, which has an effect, however insignificant, on the comparability of results.

Shareholders’ Equity — (continued)

(b) In the second quarter of 2019, Standish Family Holdings, LLC executed a secondary offering of Albany shares.

As a result of the offering, 1.6 million shares of Class B Common Stock previously owned by Standish Family Holdings, LLC were converted to Class A Common Stock and then sold to third parties.

Costs associated with the offering were charged directly to Standish Family Holdings, LLC.

(c) As described in Note 1, 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.

(d) On October 25, 2021, the Company's Board of Directors authorized the Company to repurchase shares of up to $ 200 million through open market purchases, privately negotiated transactions or otherwise, and to determine the prices, times and amounts.

In 2021, the Company repurchased 285,286 shares totaling $ 24.4 million.

(e) In the third and fourth quarters of 2021, Standish Family Holdings, LLC executed a secondary offering of Albany shares.

As a result of the offerings, 1.6 million shares of Class B Common Stock previously owned by Standish Family Holdings, LLC were converted to Class A Common Stock and then sold to third parties.

Costs associated with the offering were charged directly to Standish Family Holdings, LLC.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data