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Item 1. Financial Statements

2023-07-26 compared with 2023-04-26 · 208 added, 148 removed, 430 unchanged (45% of the section changed)

4 unchanged sentences

Three Months Ended

Net sales $ 269,096 $ 244,169

June 30, Six Months Ended

2023 2022 2023 2022

Net revenues $ 274,123 $ 261,369 $ 543,219 $ 505,538

Cost of goods sold 171,419 160,776 341,197 313,341

4 unchanged sentences

Operating income 45,501 50,715 86,043 89,469

Interest expense, net 3,290 3,609

Interest expense/(income), net 3,106 3,933 6,396 7,542

Other (income)/expense, net ( 4,511 ) ( 7,045 ) ( 4,966 ) ( 10,973 )

9 unchanged sentences

Diluted 31,269 31,378 31,243 31,668

Dividends declared per share, Class A and Class B $ 0.25 $ 0.21

Dividends declared per Class A share $ 0.25 $ 0.21 $ 0.50 $ 0.42

The accompanying notes are an integral part of the consolidated financial statements

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net income $ 26,826 $ 39,369 $ 53,912 $ 67,444

Other comprehensive income/(loss), before tax:

Foreign currency translation and other adjustments 13,440 ( 1,551 )

Foreign currency translation ( 2,818 ) ( 39,319 ) 10,622 ( 40,870 )

Amortization of pension liability adjustments:

14 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

March 31, 2023 December 31, 2022

(in thousands, except share and per share data)

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 300,916 $ 291,776

22 unchanged sentences

Total liabilities 791,429 774,712

COMMITMENTS AND CONTINGENCIES (Note 15)

SHAREHOLDERS' EQUITY

24 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

OPERATING ACTIVITIES

Net income $ 53,912 $ 67,444

Adjustments to reconcile net income to net cash used in operating activities:

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

Depreciation 32,299 31,276

4 unchanged sentences

Compensation and benefits paid or payable in Class A Common Stock 2,274 2,447

Provision/(recovery) for credit losses from uncollected receivables and contract assets 309 1,858

Foreign currency remeasurement (gain)/loss on intercompany loans ( 1,732 ) ( 2,385 )

Provision for credit losses from uncollected receivables and contract assets 493 1,326

Foreign currency remeasurement (gain) on intercompany loans ( 3,198 ) ( 1,260 )

Fair value adjustment on foreign currency options ( 123 ) ( 381 )

11 unchanged sentences

Other, net 2,881 4,784

Net cash used in operating activities ( 16,393 ) ( 5,391 )

Net cash provided by operating activities 14,675 37,713

INVESTING ACTIVITIES

28 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, 2022.

On June 14, 2023, the Company entered into an agreement to acquire Heimbach GmbH ("Heimbach"), a privately-held manufacturer of paper machine clothing and technical textiles located in Düren, Germany.

The Company will acquire Heimbach for a purchase price of approximately € 153 million, including net debt of approximately € 21 million.

Albany expects to fund the acquisition using cash on hand.

The transaction is subject to regulatory approvals and other customary closing conditions.

Reportable Segments and Revenue Recognition

11 unchanged sentences

The LEAP engine is used on the Airbus A320neo, Boeing 737 MAX, and COMAC 919 aircraft.

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 16 percent of the Company's consolidated Net sales in 2022.

AEC net sales to SAFRAN were $ 45.3 million and $ 40.4 million in the first three months of 2023 and 2022, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from SAFRAN amounted to $ 80.2 million and $ 80.8 million as of March 31, 2023 and December 31, 2022, respectively.

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

AEC net sales to SAFRAN were $ 93.5 million and $ 83.1 million in the first six months of 2023 and 2022, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from SAFRAN amounted to $ 88.9 million and $ 80.8 million as of June 30, 2023 and December 31, 2022, respectively.

Other significant programs by AEC include the Sikorsky CH-53K, F-35, JASSM, and Boeing 787 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 2022, approximately 46 percent of AEC sales were related to U.S.

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.

For the year ended December 31, 2022, approximately 46 percent of AEC revenues were related to U.S.

government contracts or programs.

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

Three months ended March 31,

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

(in thousands)

2023 2022 2023 2022

Machine Clothing

1 unchanged sentence

Albany Engineered Composites 114,906 109,699 230,780 199,806

Consolidated total

$ 269,096 $ 244,169

Consolidated revenues $ 274,123 $ 261,369 $ 543,219 $ 505,538

Operating income/(loss)

3 unchanged sentences

Corporate expenses ( 16,893 ) ( 13,681 ) ( 34,733 ) ( 25,766 )

( 17,840 ) ( 12,085 )

Operating income $ 40,542 $ 38,754

Consolidated Operating income $ 45,501 $ 50,715 $ 86,043 $ 89,469

Reconciling items:

1 unchanged sentence

Interest expense

4,944 4,779 9,340 9,040

Other (income)/expense, net ( 4,511 ) ( 7,045 ) ( 4,966 ) ( 10,973 )

1 unchanged sentence

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 over time, primarily using the percentage of completion (actual cost to estimated cost) method.

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

That method requires significant judgment and estimation, which could be considerably different if the underlying circumstances were to change.

1 unchanged sentence

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 decreased operating income by $ 0.7 million during the first three months of 2023, compared to a decrease of $ 0.7 million in the same period last year.

Changes in the estimated profitability of long-term contracts decreased operating income by $ 1.9 million for the second quarter of 2023 and decreased operating income $ 4.0 million for the first half of 2023.

Adjustments in the estimated profitability of long-term contracts increased operating income by $ 1.2 million and decreased operating income $ 0.6 for the second quarter and first half of 2022, respectively.

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

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

Three months ended March 31, 2023

The following table disaggregates revenue for each product group by timing of revenue recognition for the three months ended June 30, 2023:

Three months ended June 30, 2023

(in thousands)

3 unchanged sentences

Albany Engineered Composites:

— 44,532 44,532

ASC — 47,417 47,417

Other AEC 3,511 63,978 67,489

1 unchanged sentence

3,511 111,395 114,906

Total revenue $ 158,071 $ 111,025 $ 269,096

Three months ended March 31, 2022

Total revenues $ 161,784 $ 112,339 $ 274,123

The following table disaggregates revenue for each product group by timing of revenue recognition for the three months ended June 30, 2022:

Three months ended June 30, 2022

(in thousands)

3 unchanged sentences

Albany Engineered Composites:

— 39,712 39,712

ASC — 41,661 41,661

Other AEC 5,018 63,020 68,038

1 unchanged sentence

5,018 104,681 109,699

Total revenue

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

Total revenues $ 155,788 $ 105,581 $ 261,369

The following table disaggregates revenue for each product group by timing of revenue recognition for the six months ended June 30, 2023:

Six months ended June 30, 2023

(in thousands)

Point in Time Revenue

Recognition Over Time Revenue

Recognition Total

Machine Clothing $ 310,551 $ 1,888 $ 312,439

Albany Engineered Composites:

ASC — 91,949 91,949

Other AEC 9,304 129,527 138,831

Total Albany Engineered Composites 9,304 221,476 230,780

Total revenues $ 319,855 $ 223,364 $ 543,219

The following table disaggregates revenue for each product group by timing of revenue recognition for the six months ended June 30, 2022:

Six months ended June 30, 2022

(in thousands) Point in Time Revenue

Recognition Over Time Revenue

Recognition Total

Machine Clothing $ 303,933 $ 1,799 $ 305,732

Albany Engineered Composites:

ASC — 81,373 81,373

Other AEC 8,931 109,502 118,433

Total Albany Engineered Composites 8,931 190,875 199,806

Total revenues $ 312,864 $ 192,674 $ 505,538

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

Three months ended March 31,

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

(in thousands)

2023 2022 2023 2022

Americas PMC $ 94,154 $ 79,062 $ 177,532 $ 155,678

1 unchanged sentence

Engineered Fabrics 16,522 20,240 34,629 42,200

Total Machine Clothing Net sales

$ 153,222 $ 154,062

Total Machine Clothing net revenues $ 159,217 $ 151,670 $ 312,439 $ 305,732

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 relatively short duration firm-fixed-price orders.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 821 million and $ 263 million as of March 31, 2023 and 2022, respectively, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of March 31, 2023, we expect to recognize as revenue approximately $ 126 million during 2023, $ 135 million during 2024, $ 129 million during 2025, and the remainder thereafter.

Contracts in the MC segment are generally for periods of less than a year and certain contracts in the AEC segment are relatively short duration firm-fixed-price orders.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 792 million and $ 579 million as of June 30, 2023 and 2022, respectively, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of June 30, 2023, we expect to recognize as revenue approximately $ 78 million during 2023, $ 131 million during 2024, $ 148 million during 2025, 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 three months ended March 31, 2023 and 2022, was as follows:

The composition of the net periodic benefit cost/ (income) for the six months ended June 30, 2023 and 2022, was as follows:

Pension plans

2 unchanged sentences

2023 2022 2023 2022

Components of net periodic benefit cost:

Components of net periodic benefit cost/(income):

$ 565 $ 708 $ 30 $ 57

2 unchanged sentences

( 1,955 ) ( 3,405 ) — —

Amortization of prior service cost/(credit) ( 8 ) ( 1 ) ( 1,023 ) ( 1,122 )

Amortization of prior service cost/(income) ( 16 ) ( 1 ) ( 2,045 ) ( 2,244 )

Amortization of net actuarial loss

279 997 414 941

Net periodic benefit cost/(credit) $ 504 $ 565 $ ( 333 ) $ ( 317 )

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

There were no such events in the first three months of 2023 or 2022.

Net periodic benefit cost/(income) $ 1,014 $ 1,127 $ ( 664 ) $ ( 635 )

The amount of net benefit cost/(income) 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 six months of 2023 or 2022.

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 March 31,

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

(in thousands)

2023 2022 2023 2022

Currency transaction (gains)/losses $ ( 4,193 ) $ ( 7,284 ) $ ( 4,133 ) $ ( 11,024 )

2 unchanged sentences

( 231 ) 296 ( 679 ) 148

Total $ ( 455 ) $ ( 3,928 )

Other (income)/expense, net, included foreign currency losses of $ 0.1 million in the first three months of 2023, as compared to gains of $ 3.7 million in the same period last year.

The weaker Euro and Renminbi during the three month period ended March 31, 2023 led to a net loss on foreign currency related transactions, compared to a stronger Euro and Renminbi in the same period last year.

The following table presents components of income tax expense for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

Total other (income)/expense, net $ ( 4,511 ) $ ( 7,045 ) $ ( 4,966 ) $ ( 10,973 )

Other (income)/expense, net, included foreign currency related transactions which resulted in gains of $ 4.2 million and $ 4.1 million in the three and six months ended June 30, 2023, respectively, as compared to gains of $ 7.3 million and $ 11.0 million in the same period last year.

The stronger Euro and Mexican Peso during the three and six months ended June 30, 2023 led to a lesser gain on foreign currency related transactions.

The following table presents components of income tax expense for the three and six months ended June 30, 2023 and 2022:

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

(in thousands, except percentages) 2023 2022 2023 2022

Income tax based on income from continuing operations (1) $ 11,058 $ 10,942

Income tax based on income from operations (1) $ 13,909 $ 15,165 $ 24,967 $ 26,107

Provision for change in estimated tax rate 124 66 124 66

8 unchanged sentences

Impact of long range tax planning — — ( 443 ) —

Withholding tax related to internal restructuring 3,026 — 3,026 —

Other 330 2 540 38

Total income tax expense/(benefit) $ 20,080 $ 14,458 $ 30,701 $ 25,456

(1) Calculated at estimated annual tax rates of 29.3 % and 28.0 %, respectively.

(1) Income tax is calculated at estimated annualized effective tax rate of 29.7 % and 28.2 % for the three and six months ended June 30, 2023 and 2022, respectively.

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

2 unchanged sentences

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

Three months ended March 31,

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

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

2023 2022 2023 2022

Net income attributable to the Company $ 26,672 $ 39,201 $ 53,561 $ 66,938

3 unchanged sentences

Effect of dilutive stock-based compensation plans:

Stock options — —

RSU and MPP shares 95 110 91 97

4 unchanged sentences

Accumulated Other Comprehensive Income ("AOCI")

The table below presents changes in the components of AOCI for the period December 31, 2022 to March 31, 2023:

The table below presents changes in the components of AOCI for the period from December 31, 2022 to June 30, 2023:

(in thousands)

4 unchanged sentences

11,313 ( 691 ) 2,642 13,264

Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax — — ( 2,408 ) ( 2,408 )

Interest (expense)/income related to swaps reclassified to the Consolidated Statements of Income, net of tax — — ( 5,155 ) ( 5,155 )

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

1 unchanged sentence

Net current period other comprehensive income 11,313 ( 1,640 ) ( 2,513 ) 7,160

March 31, 2023 $ ( 132,970 ) $ ( 16,699 ) $ 14,805 $ ( 134,864 )

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

June 30, 2023 $ ( 135,538 ) $ ( 17,423 ) $ 15,194 $ ( 137,767 )

The table below presents changes in the components of AOCI for the period from December 31, 2021 to June 30, 2022:

(in thousands) Translation

3 unchanged sentences

Other comprehensive income/(loss) before reclassifications, net of tax ( 41,391 ) 521 11,228 ( 29,642 )

Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax — — 1,266 1,266

Interest (expense)/income related to swaps reclassified to the Consolidated Statements of Income, net of tax — — 2,139 2,139

Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax — ( 213 ) — ( 213 )

Net current period other comprehensive income ( 41,391 ) 308 13,367 ( 27,716 )

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

June 30, 2022 $ ( 147,271 ) $ ( 38,182 ) $ 11,753 $ ( 173,700 )

The components of AOCI that are reclassified to the Consolidated Statements 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 Consolidated Statements of Income that were affected for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Consolidated Statements of Income that were affected for the three and six months ended June 30, 2023 and 2022:

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

(in thousands)

2023 2022 2023 2022

Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:

Expense/(income) related to interest rate swaps included in Income before taxes $ ( 3,223 ) $ 1,696

Other (income)/expense, net related to interest rate swaps included in Income before taxes $ ( 3,678 ) $ 1,168 $ ( 6,901 ) $ 2,864

Income tax effect 931 ( 295 ) 1,746 ( 725 )

4 unchanged sentences

Amortization of net actuarial loss

347 967 693 1,938

Total pretax amount reclassified (a) ( 683 ) ( 155 ) ( 1,368 ) ( 307 )

2 unchanged sentences

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 3.

Pensions and Other Postretirement Benefit Plans ).

Noncontrolling Interest

2 unchanged sentences

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

Three months ended March 31,

Six months ended June 30,

(in thousands, except percentages) 2023 2022

9 unchanged sentences

Accounts Receivable

Accounts receivable includes trade receivables.

In connection with certain sales in Asia, the Company accepts a bank promissory note as customer payment.

Accounts receivable, net includes Trade and other accounts receivable and Bank promissory notes, net of Allowance for expected credit losses.

In connection with certain revenues in Asia, the Company accepts a bank promissory note as customer payment.

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

As of March 31, 2023 and December 31, 2022, Accounts receivable consisted of the following:

(in thousands)

As of June 30, 2023 and December 31, 2022, Accounts receivable consisted of the following:

(in thousands) June 30,

2023 December 31,

1 unchanged sentence

Bank promissory notes 18,859 23,439

20,196 23,439

Allowance for expected credit losses ( 3,666 ) ( 3,097 )

Accounts receivable, net $ 242,189 $ 200,018

$ 216,035 $ 200,018

The Company has Noncurrent receivables in the AEC segment that represent revenue earned, which has extended payment terms.

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

As of March 31, 2023 and December 31, 2022, Noncurrent receivables consisted of the following:

(in thousands)

As of June 30, 2023 and December 31, 2022, Noncurrent receivables consisted of the following:

(in thousands) June 30,

2023 December 31,

4 unchanged sentences

Contract Assets and Liabilities

Contract assets includes unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized, and revenue recognized exceeds the amount billed to the customer.

Contract assets are transferred to Accounts receivable, net when the entitlement to pay becomes unconditional.

Contract assets include unbilled amounts typically resulting from revenues under contracts when the cost-to-cost method of revenue recognition is utilized, and revenue recognized exceeds the amount billed to the customer.

Contract assets are transferred to Accounts receivable, net when the entitlement to pay becomes unconditional and the customer is invoiced.

Contract liabilities include advance payments and billings in excess of revenue recognized.

1 unchanged sentence

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

As of March 31, 2023 and December 31, 2022, Contract assets and Contract liabilities consisted of the following:

(in thousands)

As of June 30, 2023 and December 31, 2022, Contract assets and Contract liabilities consisted of the following:

(in thousands) June 30,

2023 December 31,

4 unchanged sentences

Contract liabilities $ 6,796 $ 15,176

Contract assets increased $ 5.1 million during the three-month period ended March 31, 2023.

The increase was primarily due to an increase in unbilled revenue related to the satisfaction of performance obligations, in excess of the amounts billed to customers for contracts that were in a contract asset position.

There were no impairment losses related to our Contract assets during the three month periods ended March 31, 2023 and March 31, 2022.

Contract liabilities decreased $ 2.9 million during the three-month period ended March 31, 2023, 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, 2023 and 2022 that was included in the Contract liability balance at the beginning of the year was $ 6.7 million and $ 4.8 million, respectively.

Contract assets, net decreased $ 3.4 million during the six months ended June 30, 2023.

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

There were no impairment losses related to our Contract assets during the six months ended June 30, 2023 and June 30, 2022.

Contract liabilities decreased $ 8.4 million during the six months ended June 30, 2023, primarily due to revenue recognized from satisfied performance obligations exceeding amounts invoiced to customers that were in a contract liability position.

Revenue recognized for the six months ended June 30, 2023 and 2022 that was included in the Contract liability balance at the beginning of the year was $ 11.7 million and $ 5.5 million, respectively.

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

4 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, Inventories consisted of the following:

(in thousands)

March 31, 2023 December 31, 2022

As of June 30, 2023 and December 31, 2022, Inventories consisted of the following:

(in thousands) June 30, 2023 December 31, 2022

Raw materials $ 78,251 $ 74,631

7 unchanged sentences

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.

In the second quarter of 2023, management applied the qualitative assessment approach in performing its annual evaluation of goodwill for the Company's Machine Clothing reporting unit and two AEC reporting units and concluded that each reporting unit’s fair value continued to exceed its carrying value.

4 unchanged sentences

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.

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

1 unchanged sentence

Long-term debt, principally to banks and noteholders, consists of:

(in thousands, except interest rates) March 31, 2023 December 31, 2022

(in thousands, except interest rates) June 30, 2023 December 31, 2022

Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.68 % in 2023 and 3.16 % in 2022 (including the effect of interest rate hedging transactions, as described below), due in 2024

$ 487,000 $ 439,000

We had no current maturities of Long-term debt as of March 31, 2023 or December 31, 2022.

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, entered into on November 7, 2017 (the “Prior Agreement”).

Under the Credit Agreement, $ 491 million of borrowings were outstanding as of March 31, 2023.

The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio (as defined in the Credit Agreement) at the time of borrowing.

At the time of the last borrowing on March 30, 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 (as defined in the Credit Agreement), and without modification to any other credit agreements, as of March 31, 2023, we would have been able to borrow an additional $ 209 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.

The Borrowings are guaranteed by certain of the Company’s subsidiaries.

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).

We had no current maturities of Long-term debt as of June 30, 2023 or December 31, 2022.

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

On June 23, 2023, we entered into the first Amendment to the Credit Agreement (the Credit Agreement and the First Amendment, collectively, the "Amended Credit Agreement") to replace the LIBOR-based reference interest rate option with a reference interest rate option based on the Term Secured Overnight Financing Rate ("Term SOFR") plus an applicable credit spread adjustment (subject to a minimum floor of 0.00 %).

The Amendment did not make any other material changes to the terms and conditions of the Credit Agreement, including the representations and warranties, events of default, affirmative and negative covenants.

The applicable interest rate for borrowings is based on Term SOFR plus a spread, which is based on our leverage ratio (as defined in the Amended Credit Agreement) at the time of a borrowing as follows:

Leverage Ratio Commitment Fee ABR Spread Total Spread

0.275 % 0.500 % 1.500 %

≥ 1.00 :1.00 and < 2.00 :1.00

0.300 % 0.625 % 1.625 %

≥ 2.00 :1.00 and < 3.00 :1.00

0.325 % 0.750 % 1.750 %

0.350 % 1.000 % 2.000 %

As of June 30, 2023, however, the applicable interest rate for borrowings was based on LIBOR plus the spread, which was 1.625 %.

As of June 30, 2023, there was $ 487 million of borrowings outstanding under the Amended Credit Agreement.

As of June 30, 2023, we had borrowings available of $ 213 million, based on our maximum leverage ratio and our Consolidated EBITDA (as defined in the Amended Credit Agreement).

The Amended Credit Agreement contains customary terms, as well as affirmative covenants, negative covenants and events of default.

As of June 30, 2023, we were in compliance with all applicable covenants.

We anticipate continued compliance in each of the next four quarters while continuing to monitor its future compliance based on current and future economic conditions.

The borrowings are guaranteed by certain of the Company’s subsidiaries as defined in the Amended Credit Agreement.

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

The monthly calculation date is the 16th of each month, and on March 16, 2023, one-month LIBOR was 4.73 %.

On March 16, 2023, the all-in-rate on the $ 350 million of debt was 2.463 %.

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 Amended Credit Agreement at the rate of 0.838 % during the period.

Under the terms of these transactions, we paid the fixed rate of 0.838 % and the counterparties paid a floating rate based on the one-month LIBOR rate at each monthly calculation date.

The Amended Credit Agreement monthly calculation date is the 16th of each month, and on June 16, 2023, one-month LIBOR was 5.16 %.

As of June 16, 2023, the all-in-rate on the $ 350 million of debt was 2.463 %.

On June 29, 2023, the Company amended each Swap agreement, in accordance with the practical expedients included in Accounting Standards Codification (“ASC”) 848, Reference Rate Reform, to replace the LIBOR Benchmark with a Term SOFR Benchmark.

As a result of the amendments, we will pay a fixed blended rate of 0.7683 % (plus a credit spread adjustment as defined in the Amended Credit Agreement) through October 27, 2024 on $ 350 million of borrowings under the Amended Credit Agreement.

The effective date of the amended Swap agreements is July 17, 2023.

On October 17, 2022, our interest rate swap agreements that were in effect from December 18, 2017 terminated.

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Under the terms of those transactions, we paid the fixed rate of 2.11 % and the counterparties paid a floating rate based on the one-month LIBOR rate at each monthly calculation date.

The all-in-rate on the $ 350 million of debt was 3.735 %.

The all-in-rate on the $ 350 million of debt was 3.735 % at the time the swap agreements terminated.

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

Fair-Value Measurements .

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

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

As of March 31, 2023, our leverage ratio was 1.47 to 1.00 and our interest coverage ratio was 14.76 to 1.00.

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

As of June 30, 2023, our leverage ratio was 1.49 to 1.00 and our interest coverage ratio was 14.36 to 1.00.

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

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

We were in compliance with all debt covenants as of March 31, 2023.

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").

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.

Amendments to the Reference Rate Reform standard have helped 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, 2024.

We adopted certain provisions of this standard 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.

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

Fair-Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

Accounting principles establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

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

We had no Level 3 financial assets or liabilities at March 31, 2023, or at December 31, 2022.

The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value.

This hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

• Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

We had no Level 3 financial assets or liabilities at June 30, 2023 or at December 31, 2022.

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in thousands)

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

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.

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 interest rate swaps flow through the caption Derivative valuation adjustment in the Shareholders’ equity section of the Consolidated Balance Sheets.

As of March 31, 2023, 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), affect earnings.

Interest (income)/expense related to payments under the active swap agreements totaled $( 3.2 ) million for the three month period ended March 31, 2023, and $ 1.7 million for the three month period ended March 31, 2022.

On June 29, 2023, the Company amended each Swap agreement, in accordance with the practical expedients included in ASC 848, Reference Rate Reform, to replace the LIBOR Benchmark with a Term SOFR Benchmark (See Note 13.

Financial Instruments for additional information).

As of June 30, 2023, 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/(income), net when the related interest payments (that is, the hedged forecasted transactions), affect earnings.

Interest expense/(income) related to payments under the active swap agreements totaled $( 6.9 ) million for the six months ended June 30, 2023, and $ 2.9 million for the six months ended June 30, 2022.

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

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(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,

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

(in thousands) 2023 2022 2023 2022

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Foreign currency options (gains)/losses $ ( 138 ) $ 596 $ ( 123 ) $ ( 381 )

Contingencies

Commitments and Contingencies

Asbestos Litigation

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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 3,597 claims as of March 31, 2023.

We were defending 3,601 claims as of June 30, 2023.

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:

Year ended December 31, Opening

(in thousands, except number of claims) Opening

New Claims Closing

(thousands) to

2022 3,609 43 32 3,598 125

2023 (As of March 31) 3,598 4 3 3,597 $ —

Amounts Paid to

As of December 31, 2022 3,609 43 32 3,598 $ 125

As of June 30, 2023 3,598 4 7 3,601 $ 4

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 March 31, 2023, we had resolved, by means of settlement or dismissal, 38,028 claims.

The total cost of resolving all claims was $ 10.6 million.

As of June 30, 2023, we had resolved, by means of settlement or dismissal, 38,032 claims at a total cost of $ 10.6 million.

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.

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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 March 31, 2023, only twelve claims have been filed against Brandon since January 1, 2012, and only $ 15,000 in settlement costs have been incurred since 2001.

While Brandon was defending against 7,702 claims as of June 30, 2023, 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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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.

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.

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Changes in Shareholders’ Equity

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2022 to March 31, 2023:

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2022 to June 30, 2023:

Additional paid-in capital

Retained earnings

Accumulated items of other comprehensive income

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Noncontrolling Interest

Total Shareholders' Equity

(in thousands)

2 unchanged sentences

Compensation and benefits paid or payable in shares 58 — 378 — — — — — 378

Dividends declared

Class A Common Stock, $ 0.25 per share

— — — — — ( 7,792 ) — — — — ( 7,792 )

Class B Common Stock, $ 0.25 per share

Dividends declared on Class A Common Stock, $ 0.25 per share

— — — ( 7,792 ) — — — — ( 7,792 )

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March 31, 2023 40,842 $ 41 $ 441,917 $ 950,415 $ ( 134,864 ) 9,675 $ ( 364,923 ) $ 4,929 $ 897,515

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

Net income — — — 26,672 — — — 154 26,826

Compensation and benefits paid or payable in shares — — 811 — — — — — 811

Shares issued to Directors' — — 828 — — ( 12 ) 258 — 1,086

Dividends declared on Class A Common Stock, $ 0.25 per share

— — — ( 7,795 ) — — — — ( 7,795 )

Cumulative translation adjustments — — — — ( 2,568 ) — — 179 ( 2,389 )

Pension and postretirement liability adjustments — — — — ( 724 ) — — — ( 724 )

Derivative valuation adjustment — — — — 389 — — — 389

June 30, 2023 40,842 $ 41 $ 443,556 $ 969,292 $ ( 137,767 ) 9,663 $ ( 364,665 ) $ 5,262 $ 915,719

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2021 to June 30, 2022:

Additional paid-in capital

Retained earnings

items of other comprehensive income

Accumulated items of other comprehensive income Class A

Treasury Stock

Noncontrolling Interest

Shareholders' Equity

(in thousands)

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

Dividends declared

Class A Common Stock, $ 0.21 per share

— — — — — ( 6,661 ) — — — — ( 6,661 )

Class B Common Stock, $ 0.21 per share

Dividends declared on Class A Common Stock, $ 0.21 per share

— — — ( 6,661 ) — — — — ( 6,661 )

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

Net income — — — 39,201 — — — 168 39,369

Compensation and benefits paid or payable in shares 4 — 902 — — — — — 902

Shares issued to Directors' — — 800 — — ( 13 ) 285 — 1,085

Purchase of Treasury shares (a) — — — — — 508 ( 41,128 ) — ( 41,128 )

Dividends declared on Class A Common Stock, $ 0.21 per share

— — — ( 6,529 ) — — — — ( 6,529 )

Cumulative translation adjustments — — — — ( 39,661 ) — — ( 91 ) ( 39,752 )

Pension and postretirement liability adjustments — — — — 234 — — — 234

Derivative valuation adjustment — — — — 3,349 — — — 3,349

June 30, 2022 40,785 $ 41 $ 439,450 $ 916,805 $ ( 173,700 ) 9,675 $ ( 364,923 ) $ 4,109 $ 821,782

(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.

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

The Company did not repurchase shares during the three months ended March 31, 2023.

During the six months ended June 30, 2022, the Company repurchased 1,022,717 shares totaling $ 85.1 million.

The Company did not repurchase shares during the six months ended June 30, 2023.

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