What changed in this filing

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Item 1. Financial Statements

2022-04-26 compared with 2021-10-26 · 135 added, 257 removed, 464 unchanged (46% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net sales $ 244,169 $ 222,362

6 unchanged sentences

Interest expense, net 3,609 3,569

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

Other expense/(income), net ( 3,928 ) 600

2 unchanged sentences

Net income $ 28,075 $ 27,609

Net income/(loss) attributable to the noncontrolling interest 80 1 150 ( 1,419 )

Net income attributable to the noncontrolling interest 338 27

Net income attributable to the Company $ 27,737 $ 27,582

10 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income $ 28,075 $ 27,609

1 unchanged sentence

Foreign currency translation and other adjustments ( 1,551 ) ( 15,439 )

Pension/postretirement settlements and curtailments — — — 378

Amortization of pension liability adjustments:

Prior service cost/ (credit) ( 1,119 ) ( 1,114 ) ( 3,356 ) ( 3,342 )

Net actuarial loss/ (gain) 1,103 1,244 3,320 3,720

Prior service credit ( 1,123 ) ( 1,119 )

Net actuarial loss 971 1,109

Payments and amortization related to interest rate swaps included in earnings 1,696 1,476

1 unchanged sentence

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

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

Amortization of prior service cost/ (credit) 336 274 1,007 831

Amortization of net actuarial loss/ (gain) ( 331 ) ( 306 ) ( 996 ) ( 925 )

Amortization of prior service credit 344 336

Amortization of net actuarial loss ( 297 ) ( 333 )

Payments and amortization related to interest rate swaps included in earnings ( 430 ) ( 381 )

7 unchanged sentences

(in thousands, except share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and cash equivalents $ 307,415 $ 302,036

30 unchanged sentences

authorized 25,000,000 shares;

issued and outstanding 1,154 in 2021 and 1,617,998 in 2020

none issued and outstanding in 2022 and 104 in 2021

Additional paid in capital 437,748 436,996

16 unchanged sentences

Three Months Ended

September 30, Nine Months Ended September 30,

2021 2020 2021 2020

OPERATING ACTIVITIES

Net income $ 28,075 $ 27,609

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

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

Depreciation 15,597 16,589

1 unchanged sentence

Change in deferred taxes and other liabilities 1,792 4,442

Impairment of property, plant and equipment 25 303 563 536

Impairment of property, plant, equipment, and inventory 2,868 185

Non-cash interest expense 282 45

1 unchanged sentence

Provision for credit losses from uncollected receivables and contract assets 1,858 ( 110 )

Foreign currency remeasurement loss/(gain) on intercompany loans 480 169 ( 551 ) 15,750

Foreign currency remeasurement (gain)/loss on intercompany loans ( 2,385 ) ( 308 )

Fair value adjustment on foreign currency options ( 977 ) 139

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

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

Accounts receivable ( 15,674 ) ( 3,236 )

9 unchanged sentences

Other, net ( 398 ) 857

Net cash provided by operating activities 52,859 39,659 148,499 83,693

Net cash (used in)/provided by operating activities ( 5,391 ) 33,686

INVESTING ACTIVITIES

6 unchanged sentences

Principal payments on finance lease liabilities ( 390 ) ( 349 )

Purchase of Treasury shares ( 42,230 ) —

Taxes paid in lieu of share issuance ( 770 ) ( 998 )

1 unchanged sentence

Dividends paid ( 6,742 ) ( 6,468 )

Net cash used in financing activities ( 6,835 ) ( 23,479 ) ( 69,339 ) ( 31,703 )

Net cash provided by/(used in) financing activities 26,875 ( 21,694 )

Effect of exchange rate changes on cash and cash equivalents ( 351 ) ( 2,901 )

Increase in cash and cash equivalents 32,887 11,267 44,901 19,764

Increase/(decrease) in cash and cash equivalents 5,379 ( 3,445 )

Cash and cash equivalents at beginning of period 302,036 241,316

13 unchanged sentences

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Albany International Corp.’s Annual Report on Form 10-K for the year ended December 31, 2021.

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 in September 2021, and anticipates receiving the remaining balance in 2022.

Accordingly, the Company recognized $ 5.8 million in its Consolidated Statements of Income for the quarter and year-to-date ended September 30, 2021, and reflected cash received to date as an operating activity within the Consolidated Statements of Cash Flows.

Reportable Segments and Revenue Recognition

In accordance with applicable disclosure guidance for enterprise segments and related information, the internal organization that is used by management for making operating decisions and assessing performance is used as the basis for our reportable segments.

Machine Clothing:

The Machine Clothing (“MC”) segment supplies permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel, nonwovens, fiber cement and several other industrial applications.

3 unchanged sentences

Paper machine clothing products are customized, consumable products of technologically sophisticated design that utilize polymeric materials in a complex structure.

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.

AEC net sales to Safran were $ 81.6 million and $ 73.6 million in the first nine months of 2021 and 2020, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to $ 103.4 million and $ 127.1 million as of

September 30, 2021 and December 31, 2020, respectively.

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

Albany Engineered Composites:

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 (“Safran”) owns a 10 percent noncontrolling interest.

AEC, through ASC, is the exclusive supplier of 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 cases for CFM's LEAP engine) accounted for approximately 12 percent of the Company's consolidated Net sales in 2021.

AEC net sales to Safran were $ 40.4 million and $ 27.7 million in the first three months of 2022 and 2021, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to $ 83.7 million and $ 79.6 million as of March 31, 2022 and December 31, 2021, respectively.

Other significant programs 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.

1 unchanged sentence

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

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands)

2021 2020 2021 2020

Machine Clothing

13 unchanged sentences

Interest expense

4,388 3,727 13,105 12,322

AMJP grant ( 5,832 ) — ( 5,832 ) —

Other expense/(income), net ( 3,928 ) 600

Income before income taxes

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

$ 39,073 $ 37,649

A subsidiary within our Machine Clothing segment has been a partner in a joint venture (“JV”) that supplies paper machine clothing products to local papermakers in Russia.

In March 2022, we made the decision to cease doing business in Russia, including giving notice to our JV partner of our intent to exit the venture.

As a result, we recognized $ 1.8 million expense in the consolidated statement of operations, representing reserves against the risk of uncollectible customer receivables and obsolescence of certain inventory destined for Russian customers.

We also wrote down the net book value of our investment in the aforementioned JV to reflect our intent to exit such venture, resulting in $ 0.8 million impairment loss during the first quarter of 2022.

The table below presents restructuring costs by reportable segment:

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands) 2022 2021

3 unchanged sentences

Total $ 254 $ 52

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

Restructuring liabilities at quarter-end were less than $ 1 million, related to termination and other costs, which are expected to be substantially paid within one year.

In 2020, AEC reduced its workforce at various locations, principally in the U.S., leading to restructuring charges of $ 2.6 million for the first nine months of 2020.

Machine Clothing restructuring charges for the first nine months of 2020 were principally related to the plant closure of its MC production facility in Sélestat, France that was announced in 2017.

Revenue Recognition:

Products and services provided under long-term contracts represent a significant portion of sales in the Albany Engineered Composites segment and we account for these contracts using the percentage of completion (actual cost to estimated cost) method.

2 unchanged sentences

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

Changes in the estimated profitability of long-term contracts increased operating income by $ 2.1 million and $ 2.4 million for the three and nine month periods

ended September 30, 2021, respectively.

Adjustments in the estimated profitability of long-term contracts increased operating income by $ 3.5 million and $ 9.5 million for the three and nine month periods ended September 30, 2020, respectively.

Changes in the estimated profitability of long-term contracts decreased operating income by $ 0.7 million during the first three months of 2022, compared to an insignificant effect in the same period last year.

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

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

Three months ended September 30, 2021

Three months ended March 31, 2022

(in thousands)

8 unchanged sentences

Total revenue $ 157,076 $ 87,093 $ 244,169

Nine months ended September 30, 2021

(in thousands) Point in Time Revenue

Recognition Over Time Revenue

Recognition Total

Machine Clothing $ 459,703 $ 2,595 $ 462,298

Albany Engineered Composites

ASC — 80,158 80,158

Other AEC 11,901 134,965 146,866

Total Albany Engineered Composites 11,901 215,123 227,024

Total revenue $ 471,604 $ 217,718 $ 689,322

Three months ended September 30, 2020

Three months ended March 31, 2021

(in thousands)

9 unchanged sentences

$ 151,221 $ 71,141 $ 222,362

Nine months ended September 30, 2020

(in thousands) Point in Time Revenue

Recognition Over Time Revenue

Recognition Total

Machine Clothing $ 426,238 $ 2,544 $ 428,782

Albany Engineered Composites

ASC — 72,771 72,771

Other AEC 14,942 157,258 172,200

Total Albany Engineered Composites 14,942 230,029 244,971

Total revenue $ 441,180 $ 232,573 $ 673,753

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

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands)

2021 2020 2021 2020

Americas PMC $ 76,616 $ 73,302

3 unchanged sentences

$ 154,062 $ 148,206

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.

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

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 155 million and $ 81 million as of September 30, 2021 and 2020, respectively, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of September 30, 2021, we expect to recognize as revenue approximately $ 29 million during 2021, $ 66 million during 2022, $ 37 million during 2023, and the remainder during 2024.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 263 million and $ 76 million as of March 31, 2022 and 2021, respectively, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of March 31, 2022, we expect to recognize as revenue approximately $ 79 million during 2022, $ 45 million during 2023, $ 38 million during 2024, and the remainder thereafter.

Pensions and Other Postretirement Benefit Plans

2 unchanged sentences

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

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

The composition of the net periodic benefit cost for the three months ended March 31, 2022 and 2021, was as follows:

Pension plans

6 unchanged sentences

Expected return on assets

Settlement — 145 — —

Curtailment — 233 — —

( 1,706 ) ( 1,606 ) — —

Amortization of prior service cost/(credit) ( 1 ) 3 ( 1,122 ) ( 1,122 )

Amortization of net actuarial loss

500 544 471 565

Net periodic benefit cost $ 565 $ 824 $ ( 317 ) $ ( 248 )

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

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

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

Pension Plus Plan (the "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 nine month period ended September 30, 2021.

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

There were no such events in the first three months of 2022 or 2021.

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

2 unchanged sentences

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

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

(in thousands)

2021 2020 2021 2020

Currency transaction (gains)/losses $ ( 3,741 ) $ 166

Bank fees and amortization of debt issuance costs

74 96 284 264

Components of net periodic pension and postretirement cost other than service ( 6 ) 384 ( 12 ) 1,523

2,213 ( 3,076 ) 3,130 ( 2,574 )

Components of net periodic pension and postretirement cost other than service cost ( 136 ) ( 2 )

Total $ ( 3,928 ) $ 600

Other (income)/expense, net included losses related to the revaluation of nonfunctional-currency balances of $ 0.8 million for the first nine months of 2021, compared to losses of $ 14.7 million for the first nine months of 2020, which principally resulted from an intercompany demand loan payable by a Mexican subsidiary.

As a result of changes in

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

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

Three months ended September 30, Nine months ended

September 30,

Other (income)/expense, net, included foreign currency related transactions which resulted in gains of $ 3.7 million in the first three months of 2022, as compared to losses of $ 0.2 million in the same period last year.

Current year gains were primarily driven by the remeasurement of intercompany demand loans payable by a Mexican subsidiary.

The following table presents components of income tax expense for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

(in thousands, except percentages)

2021 2020 2021 2020

Income tax based on income from continuing operations (1) $ 10,942 $ 11,332

Provision for change in estimated tax rate 397 ( 1,196 ) 179 ( 1,687 )

Income tax before discrete items

10,942 11,332

Discrete tax expense:

1 unchanged sentence

stock options ( 9 ) ( 142 )

Adjustments to prior period tax liabilities ( 674 ) ( 1,750 ) ( 2,095 ) ( 983 )

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

Provision for/resolution of tax audits and contingencies, net — ( 46 ) 278 ( 1,779 )

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

Tax effect of non-deductible foreign exchange loss on intercompany loan — 3 — 3,658

Creation of valuation allowance — 8 — 230

Impact of amended tax returns ( 81 ) ( 645 )

Adjustments of prior year estimated taxes 104 ( 751 )

Changes in uncertain tax positions 6 278

Other 36 ( 32 )

3 unchanged sentences

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

In the third quarter of 2021, the Company recorded a net tax benefit of $ 0.7 million related to U.S.

adjustments of prior period liabilities.

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

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

In the third quarter of 2020, the Company recorded a net tax benefit of $ 1.8 million related to U.S.

adjustments of prior period liabilities.

In the second quarter of 2020, the Company recorded a net tax benefit of $ 1.5 million as a result of a U.S.

state tax audit settlement;

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

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

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

amended tax returns and a U.S.

adjustment of prior year estimated taxes.

Additionally, the Company recorded an expense of $ 0.3 million related to the establishment of a foreign uncertain tax position.

Earnings Per Share

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

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

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

2021 2020 2021 2020

Net income attributable to the Company $ 27,737 $ 27,582

3 unchanged sentences

Effect of dilutive stock-based compensation plans:

Stock options — 3

RSU and MPP shares 84 46

Weighted average number of shares used in calculating diluted net income per share 31,961 32,401

4 unchanged sentences

Accumulated Other Comprehensive Income (AOCI)

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

The table below presents changes in the components of AOCI for the period December 31, 2021 to March 31, 2022:

(in thousands)

postretirement

adjustment Total Other

Comprehensive

6 unchanged sentences

Net current period other comprehensive income ( 1,730 ) 74 10,018 8,362

September 30, 2021 $ ( 100,327 ) $ ( 39,059 ) $ ( 5,525 ) $ ( 144,911 )

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

March 31, 2022 $ ( 107,610 ) $ ( 38,416 ) $ 8,404 $ ( 137,622 )

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

(in thousands) Translation

postretirement

adjustment Total Other

Comprehensive

1 unchanged sentence

Other comprehensive income/(loss) before reclassifications, net of tax ( 15,955 ) 516 ( 343 ) ( 15,782 )

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

Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax — — 1,095 1,095

1 unchanged sentence

Net current period other comprehensive income ( 15,955 ) 509 752 ( 14,694 )

September 30, 2020 $ ( 119,814 ) $ ( 49,436 ) $ ( 10,409 ) $ ( 179,659 )

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

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

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

Three months ended September 30, Nine months ended September 30,

The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Statement of Income that were affected for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

(in thousands)

2021 2020 2021 2020

Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:

5 unchanged sentences

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

Pension/postretirement curtailment — — — 378

Amortization of prior service credit ( 1,123 ) ( 1,119 )

9 unchanged sentences

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

Nine months ended September 30,

Three months ended March 31,

(in thousands, except percentages) 2022 2021

5 unchanged sentences

Noncontrolling interest, beginning of year $ 3,638 $ 3,799

Net income/(loss) attributable to the noncontrolling interest 150 ( 1,419 )

Net income/(loss) attributable to noncontrolling interest 338 27

Changes in other comprehensive income attributable to the noncontrolling interest 56 ( 210 )

4 unchanged sentences

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

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

As of March 31, 2022 and December 31, 2021, Accounts receivable consisted of the following:

(in thousands)

September 30,

2022 December 31,

7 unchanged sentences

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

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

As of March 31, 2022 and December 31, 2021, Noncurrent receivables consisted of the following:

(in thousands)

September 30,

2022 December 31,

9 unchanged sentences

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

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

As of March 31, 2022 and December 31, 2021, Contract assets and Contract liabilities consisted of the following:

(in thousands)

September 30,

2022 December 31,

4 unchanged sentences

Contract liabilities $ 5,293 $ 6,959

Contract assets decreased $ 23.4 million during the nine-month period ended September 30, 2021.

Contract assets decreased $ 0.3 million during the three-month period ended March 31, 2022.

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

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

Contract liabilities decreased $ 2.0 million during the nine-month period ended September 30, 2021, primarily due to revenue recognized from satisfied performance obligations exceeding amounts invoiced to customers that were in a contract liability position.

Revenue recognized for the nine-month periods ended September 30, 2021 and 2020 that was included in the Contract liability balance at the beginning of the year was $ 5.3 million and $ 3.5 million, respectively.

There were no impairment losses related to our Contract assets during the three month periods ended March 31, 2022 and March 31, 2021.

Contract liabilities decreased $ 1.7 million during the three-month period ended March 31, 2022, primarily due to revenue recognized from satisfied performance obligations exceeding amounts invoiced to customers that were in a contract liability position.

Revenue recognized for the three-month periods ended March 31, 2022 and 2021 that was included in the Contract liability balance at the beginning of the year was $ 4.8 million and $ 4.3 million, respectively.

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

4 unchanged sentences

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

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

As of March 31, 2022 and December 31, 2021, Inventories consisted of the following:

(in thousands)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Raw materials $ 58,493 $ 58,689

5 unchanged sentences

Goodwill and Other Intangible Assets

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

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.

Our reportable segments are consistent with our operating segments.

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.

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.

When a quantitative assessment is performed, 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.

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.

2 unchanged sentences

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

Accordingly, no impairment charges were recorded.

Financial Instruments

1 unchanged sentence

(in thousands, except interest rates)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.42 % in 2022 and 3.74 % in 2021 (including the effect of interest rate hedging transactions, as described below), due in 2024

$ 427,000 $ 350,000

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

Long-term debt 350,000 398,009

current portion

Long-term debt, net of current portion $ 350,000 $ 398,000

We had no current maturities of Long-term debt as of March 31, 2022 or December 31, 2021.

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

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

Under the Credit Agreement, $ 427 million of borrowings were outstanding as of March 31, 2022.

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

At the time of the last borrowing on September 16, 2021, the spread was 1.625 %.

At the time of the last borrowing on March 31, 2022, the spread was 1.625 %.

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

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

Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of March 31, 2022, we would have been able to borrow an additional $ 273 million under the Agreement.

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

3 unchanged sentences

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 September 16, 2021 was 0.09 %.

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, which has been fully 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.

Under the terms of these transactions, we pay the fixed rate of 2.11 % and the counterparties pay a floating rate based on the one-month LIBOR rate at each monthly calculation date, which on September 16, 2021 was 0.09 %, during the swap period.

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

44 %, during the swap period.

On March 16, 2022, the all-in-rate on the $ 350 million of debt was 3.735 %.

These interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note 14.

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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 September 30, 2021, our leverage ratio was 1.07 to 1.00 and our interest coverage ratio was 14.51 to 1.00.

As of March 31, 2022, our leverage ratio was 1.32 to 1.00 and our interest coverage ratio was 14.80 to 1.00.

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

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

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

We were in compliance with all debt covenants as of March 31, 2022.

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

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

We had no Level 3 financial assets or liabilities at March 31, 2022, or at December 31, 2021.

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(in thousands)

3 unchanged sentences

Interest rate swaps 13,519 — 3,328

Other noncurrent liabilities:

Interest rate swaps — ( 1,941 ) — ( 5,176 )

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The fair value of our interest rate swaps are derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve, and is included in Other assets and/or Other noncurrent liabilities in the Consolidated Balance Sheets.

Amounts determined to be due within one year are reclassified to Other current assets and/or Accrued liabilities in the Consolidated Balance Sheets.

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

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

As of March 31, 2022, these interest rate swaps were determined to be highly effective hedges of interest rate cash flow risk.

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

Interest (income)/expense related to payments under the active swap agreements totaled $ 5.3 million for the nine month period ended September 30, 2021, and $ 3.7 million for the nine month period ended September 30, 2020.

Additionally, non-cash interest income related to the amortization of swap buyouts totaled $ 0.3 million for the nine month period ended September 30, 2021 and $ 0.9 million for the nine month period ended September 30, 2020.

Interest (income)/expense related to payments under the active swap agreements totaled $ 1.7 million for the three month period ended March 31, 2022, and $ 1.7 million for the three month period ended March 31, 2021.

Additionally, non-cash interest income related to the amortization of swap buyouts totaled $0.0 million for the three month period ended March 31, 2022 and $ 0.3 million for the three month period ended March 31, 2021.

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.

(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:

Three months ended March 31,

(in thousands) 2022 2021

Derivatives not designated as hedging instruments

Foreign currency options (gains)/losses $ ( 977 ) $ 140

Contingencies

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

We were defending 3,625 claims as of September 30, 2021.

We were defending 3,616 claims as of March 31, 2022.

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

3 unchanged sentences

2021 3,615 32 26 3,609 93

2017 3,745 105 90 3,730 55

2018 3,730 152 106 3,684 100

2019 3,684 51 75 3,708 25

2020 3,708 152 59 3,615 57

2021 (As of September 30) 3,615 9 19 3,625 $ —

2022 (As of March 31) 3,609 2 9 3,616 $ —

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.

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

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

As of March 31, 2022, we had resolved, by means of settlement or dismissal, 37,982 claims.

The total cost of resolving all claims was $ 10.5 million.

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

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

While Brandon was defending against 7,709 claims as of March 31, 2022, only twelve claims have been filed against Brandon since January 1, 2012, and only $ 15,000 in 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.

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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.

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.

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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.

Although we cannot predict the number and timing of future claims, based on the foregoing

factors, the trends in claims filed against us, and available insurance, we also do not currently anticipate that potential future claims will have a material adverse effect on our financial position, results of operations, or cash flows.

Although we cannot predict the number and timing of future claims, based on the foregoing factors, the trends in claims filed against us, and available insurance, we also do not currently anticipate that potential future claims will have a material adverse effect on our financial position, results of operations, or cash flows.

Changes in Shareholders’ Equity

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

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2021 to March 31, 2022:

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income Class A

Accumulated items of other comprehensive income

Treasury Stock

5 unchanged sentences

Options exercised — — — — 7 — — — — — 7

Dividends declared

Class A Common Stock, $ 0.20 per share

— — — — — ( 6,150 ) — — — — ( 6,150 )

Class B Common Stock, $ 0.20 per share

— — — — — ( 324 ) — — — — ( 324 )

Cumulative translation adjustments — — — — — — ( 15,955 ) — — ( 210 ) ( 16,165 )

Pension and postretirement liability adjustments — — — — — — 509 — — — 509

Derivative valuation adjustment — — — — — — 752 — — — 752

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

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

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

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

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

Dividends declared

Class A Common Stock, $ 0.20 per share

— — — — — ( 6,150 ) — — — — ( 6,150 )

Class B Common Stock, $ 0.20 per share

— — — — — ( 323 ) — — — — ( 323 )

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

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

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

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

Net income — — — — — 30,862 — — — 80 30,942

Compensation and benefits paid or payable in shares — — — — 845 — — — — — 845

Options exercised 1 — — — 4 — — — — — 4

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

Purchase of Treasury shares (a) — — — — — — — 515 ( 43,937 ) — ( 43,937 )

Dividends declared

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— — — — — — — — — — —

Conversion of Class B shares to Class A shares (b) 1,617 2 ( 1,617 ) ( 2 ) — — — — — — —

Cumulative translation adjustments — — — — — — ( 1,730 ) — — 56 ( 1,674 )

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Derivative valuation adjustment — — — — — — 10,018 — — — 10,018

September 30, 2021 40,760 $ 41 1 $ — $ 436,079 $ 841,162 $ ( 144,911 ) 8,380 $ ( 255,768 ) $ 3,730 $ 880,333

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

March 31, 2022 40,781 $ 41 — $ — $ 437,748 $ 884,133 $ ( 137,622 ) 9,180 $ ( 324,080 ) $ 4,032 $ 864,252

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

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income Class A

items of other comprehensive income

Treasury Stock

2 unchanged sentences

December 31, 2020 39,115 $ 39 1,618 $ 2 $ 433,696 $ 770,746 $ ( 132,408 ) 8,391 $ ( 256,009 ) $ 3,799 $ 819,865

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

Net income — — — — — 27,582 — — — 27 27,609

Compensation and benefits paid or payable in shares 20 — — — ( 13 ) — — — — — ( 13 )

13 — — — ( 682 ) — — — — — ( 682 )

Options exercised 6 — 128 — — — — — 128

6 unchanged sentences

Cumulative translation adjustments — — — — — — ( 15,955 ) — — ( 210 ) ( 16,165 )

— — — — — — ( 25,747 ) — — 109 ( 25,638 )

Pension and postretirement liability adjustments — — — — — — 509 — — — 509

Derivative valuation adjustment — — — — — — 752 — — — 752

— — — — — — ( 7,708 ) — — — ( 7,708 )

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

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

Compensation and benefits paid or payable in shares — — — — 466 — — ( 15 ) 317 — 783

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

Shares issued to Directors' — — — — 416 — — — — — 416

Dividends declared

Class A Common Stock, $ 0.20 per share

— — — — — ( 5,835 ) — — — — ( 5,835 )

Class B Common Stock, $ 0.20 per share

— — — — — ( 307 ) — — — — ( 307 )

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

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

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

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

Net income — — — — — 29,589 — — — 1 29,590

Compensation and benefits paid or payable in shares — — — — 80 — — — — — 80

Options exercised 1 — — — 5 — — — — — 5

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

Dividends declared

Class A Common Stock, $ 0.19 per share

— — — — — ( 5,837 ) — — — — ( 5,837 )

Class B Common Stock, $ 0.19 per share

— — — — — ( 307 ) — — — — ( 307 )

Cumulative translation adjustments — — — — — — 19,821 — — 201 20,022

Pension and postretirement liability adjustments — — — — — — ( 474 ) — — — ( 474 )

Derivative valuation adjustment — — — — — — 621 — — — 621

September 30, 2020 39,114 $ 39 1,618 $ 2 $ 432,823 $ 749,678 $ ( 179,659 ) 8,394 $ ( 256,074 ) $ 3,049 $ 749,858

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

(b) In the third quarter of 2021, Standish Family Holdings, LLC and J.S.

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

Morgan Securities LLC 1,566,644 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.

Costs associated with the Transaction were borne directly by the Selling Stockholders.

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.

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.

(a) In October 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.

During the three months period ending March 31, 2022, the Company repurchased 514,686 shares totaling $ 43.9 million.

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

What changed 10-Q

Item 1. Financial Statements