What changed in this filing

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Item 1. Business

2023-02-24 compared with 2022-02-25 · 34 added, 12 removed, 154 unchanged (23% of the section changed)

19 unchanged sentences

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

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.

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 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, Boeing 737 MAX, and COMAC 919 aircrafts.

AEC’s largest aerospace customer is SAFRAN and sales to SAFRAN (consisting primarily of fan blades and cases for CFM’s LEAP engine) accounted for approximately 16 percent of the Company’s consolidated Net sales in 2022.

Other significant AEC programs include the production of structures and parts for the Sikorsky CH-53K helicopter, F-35 fighter jet, Joint Air-to-Surface Standoff Missile ("JASSM"), and Boeing 787 platforms.

AEC also supplies vacuum waste tanks for most of the Boeing 7X7 aircraft, as well as the fan case for the GE9X engine.

In 2022, approximately 46% of the AEC segment’s sales were related to U.S.

18 unchanged sentences

Changes in the trade or regulatory compliance in any country that we have significant cash balances could make it difficult to repatriate foreign earnings cost-effectively in the future.

Effect of Global Macroeconomic and Political Climate

The war between Russia and Ukraine is affecting the economic and global financial markets and exacerbating ongoing economic challenges caused by impacts of the ongoing COVID-19 pandemic, including rising inflation and global supply chain disruptions.

Our MC segment has historically generated approximately 2% of its annual net sales from customers in Russia and Ukraine.

In addition, 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 $1.5 million expense in cost of goods sold and in Selling, General, and Administrative expense, representing reserves against the risk of obsolescence of certain inventory destined for Russian customers and uncollectible receivables from Russian customers, respectively.

In the first quarter of 2022, 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 included in Other (income)/expense, net.

Our cessation of doing business in Russia resulted in a reduction of approximately $10 million in annual net sales in the MC segment during 2022.

During 2022, our segments saw higher input costs due to increased energy costs, tight supply market, and global logistics challenges.

Our MC segment experienced higher energy prices, higher labor costs, and increased raw material prices.

We continued to identify alternatives to secure materials in the face of intense supply constraints.

Logistics costs have begun to stabilize compared to the same period last year, though they remained higher than pre-pandemic levels.

We anticipate inflationary pressure and energy cost escalation to be a primary input cost pressure in the near term.

The ultimate financial impact due to the aforementioned global macroeconomic conditions and political climate is difficult to predict.

During 2022, MC segment input costs increased approximately $10 million as a result of these factors, or an unfavorable impact to the segment gross margin of approximately 140 basis points for the year.

Our Albany Engineered Composites segment does not have significant direct exposure in Russia.

However, it has not been immune from supply chain disruptions.

Increasing fuel prices coupled with higher demand has resulted in increased freight costs during the quarter, along with ongoing logistic constraints, higher labor costs, and increases in raw material prices.

Due to the nature of AEC’s contracts with its customers, we currently anticipate passing through a portion of such cost increases to the customers.

Until the effects of the macroeconomic conditions and political climate on global markets subside, there can be no assurance that our input costs will not continue to rise beyond our current estimate, thus unfavorably impacting our future results of operations, financial position and liquidity.

Research and Development and Technology

30 unchanged sentences

In the AEC segment, the primary raw materials are carbon fiber and resin.

While there are a number of potential suppliers of carbon fiber and other raw materials used by AEC, the use of certain suppliers may be mandated by customer agreements, and alternative suppliers would be subject to material qualification or other requirements that may preclude or delay their availability.

qualification or other requirements that may preclude or delay their availability.

In the case of mandated suppliers, AEC endeavors to enter into long-term supply agreements to help mitigate price and availability risks.

Currently, the primary raw materials used in each segment are derived from petroleum, and are therefore sensitive to changes in the price of petroleum and petroleum intermediates.

In the paper machine clothing market, we believe that we had a worldwide market share of approximately 30 percent in 2021, while the two largest competitors each had a market share of approximately half of ours.

In the paper machine clothing market, we believe that we had a worldwide market share of approximately 30 percent in 2022.

Price and technology are the primary means of competitive differentiation in the industry.

18 unchanged sentences

All employees are required to participate in safety training on a regular basis.

We have systematically and continuously reduced our Total Recordable Incident Rate (TRIR) by approximately 78% since 2010 to 0.68 in 2021, during which time we had no fatalities.

We have systematically and continuously reduced our Total Recordable Incident Rate (TRIR) by approximately 65% since 2019 to 0.48 in 2022.

The Company’s Executive Vice President- Human Resources and Chief Human Resources Officer meets regularly with the Chief Executive Officer to align Human Capital strategy, plan and initiatives with business strategy and goals.

2 unchanged sentences

Our Diversity, Equity and Inclusion (DE&I) Council develops a holistic and actionable DE&I strategy that seeks diversity, nurtures inclusion, amplifies innovation and empowers champions.

Our hiring strategy recruits candidates from a broad range of hiring sources that target people with diverse backgrounds and skills to fill open positions within the Company.

Our hiring strategy recruits candidates from a broad range of hiring sources that target people with diverse backgrounds and skills to fill open positions within

Approximately 26% of our global workforce were women in 2022.

22 unchanged sentences

Prior to joining the company, he served as President of Aerostructures for Precision Castparts (PCC) managing all aspects of the organization for the Aerostructures division.

He also served as Vice President and General Manager in charge of Global Operations Strategy at Alcoa Fastening Systems and Rings, and before November 2014 was responsible for multiple operations

within Alcoa Fastening Systems.

He also served as Vice President and General Manager in charge of Global Operations Strategy at Alcoa Fastening Systems and Rings, and before November 2014 was responsible for multiple operations within Alcoa Fastening Systems.

From June 2019 until he joined Albany International, Mr.

14 unchanged sentences

Elisabeth Indriani, 47, Vice President – Controller , joined the Company in 2021.

Prior to joining the Company, she was the Global Controller at Century Aluminum Company, where she oversaw accounting and financial reporting, led global policy and process transformation initiatives, and was a business partner in financial planning and analysis, M&A due diligence, investor relations, treasury, financing and tax structuring transactions.

M&A due diligence, investor relations, treasury, financing and tax structuring transactions.

Earlier in her career, Ms.

15 unchanged sentences

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 1. Business