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Item 8. Financial Statements and Supplementary Data

2024-02-26 compared with 2023-02-24 · 633 added, 572 removed, 1439 unchanged (46% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021

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Evaluation of estimated total contract costs at completion for Albany Engineered Composites revenue recognition for certain firm-fixed-price contracts

As discussed in Note 2 to the consolidated financial statements, a portion of the Albany Engineered Composites (AEC) segment revenue is earned under short duration, firm-fixed-price orders that are placed under definitive agreements, with revenue recognized over time as costs are incurred.

As discussed in Note 2 to the consolidated financial statements, a portion of the Albany Engineered Composites (AEC) segment revenue is earned under firm-fixed-price orders that are placed under definitive agreements, with revenue recognized over time as costs are incurred.

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

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement Schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 26, 2024 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Heimbach during 2023, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, Heimbach’s internal control over financial reporting associated with 14 percent of total consolidated assets (of which 8 percent related to property, plant, and equipment, net, and intangible assets included within the scope of the assessment) and 4 percent of total consolidated revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2023.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Heimbach.

Basis for Opinion

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

Other expense/(income), net ( 14,086 ) 3,021 13,422

Other (income)/expense, net

( 6,163 ) ( 14,086 ) 3,021

Income before income taxes

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48,846 35,472 47,163

96,508 118,768 97,243

Net income/(loss) attributable to the noncontrolling interest

746 290 ( 1,346 )

Net income 111,610 96,508 118,768

Net income attributable to the noncontrolling interest

Net income attributable to the Company $ 111,120 $ 95,762 $ 118,478

Earnings per share:

Basic earnings per share attributable to Company shareholders

$ 3.56 $ 3.06 $ 3.66

Earnings per share attributable to Company shareholders — Basic

Diluted earnings per share attributable to Company shareholders

$ 3.55 $ 3.04 $ 3.65

Earnings per share attributable to Company shareholders — Diluted

Dividends declared per share

$ 1.01 $ 0.88 $ 0.81

Dividends declared per share, Class A and Class B

Weighted average shares outstanding:

31,171 31,339 32,348

31,276 31,455 32,463

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

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Total assets $ 1,835,014 $ 1,642,255

Liabilities and Shareholders' Equity

Current liabilities:

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Total liabilities 867,694 774,712

Commitments and Contingencies

Commitments and Contingencies (Note 21)

Shareholders’ Equity:

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issued 40,856,910 in 2023 and 40,785,434 in 2022

Class B Common Stock, par value $ .001 per share;

authorized 25,000,000 shares;

issued and outstanding 0 in 2022 and 104 in 2021

Additional paid-in capital 448,218 441,540

441,540 436,996

Retained earnings 1,010,942 931,318

931,318 863,057

Accumulated items of other comprehensive income:

Translation adjustments ( 124,901 ) ( 146,851 )

( 146,851 ) ( 105,880 )

Pension and postretirement liability adjustments ( 17,346 ) ( 15,783 )

( 15,783 ) ( 38,490 )

Derivative valuation adjustment 9,079 17,707

17,707 ( 1,614 )

Treasury stock (Class A), at cost;

9,674,542 shares in 2022 and 8,665,090 shares in 2021

9,661,845 shares in 2023 and 9,674,542 in 2022

( 364,665 ) ( 364,923 )

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Noncontrolling interest

Total equity 867,543 877,605

Total liabilities and shareholders’ equity

Total shareholders' equity

967,320 867,543

Total liabilities and shareholders’ equity $ 1,835,014 $ 1,642,255

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

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Fair value adjustment on foreign currency options ( 139 ) ( 509 ) 169

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

Changes in operating assets and liabilities that provided/(used) cash, net of impact of business acquisition:

Accounts receivable ( 11,038 ) ( 14,301 ) ( 7,734 )

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INVESTING ACTIVITIES

Purchase of business, net of cash acquired ( 133,470 ) — —

Purchases of property, plant and equipment ( 83,560 ) ( 93,675 ) ( 52,793 )

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and its subsidiaries (the Company, Albany, we, us, or our) after elimination of intercompany transactions.

On August 31, 2023, the Company completed the acquisition of Heimbach GmbH ("Heimbach"), a privately-held manufacturer of paper machine clothing and technical textiles, as further described in Note 24, Business Combination , of the Notes to the Consolidated Financial Statements .

The financial results of the acquired company are included in the Machine Clothing reportable segment since the date of the acquisition.

The Company owns 90 percent of the common equity of Albany Safran Composites, LLC ("ASC") which is reported within the AEC segment.

The Company also owns 85 percent of Arcari, SRL ("Arcari"), a manufacturer of textile and plastic industrial technical products and conveyor belts, which is a subsidiary of Heimbach GmbH, the paper machine clothing manufacturer recently acquired by the Company and reported within the MC segment.

Additional information regarding noncontrolling interest is included in Note 10, Noncontrolling Interest , of the Notes to the Consolidated Financial Statements.

A subsidiary within our Machine Clothing segment has held a 50 percent interest as partner in a joint venture (“JV”) that supplies paper machine clothing products to local papermakers in Russia.

Our consolidated financial statements include our original investment in the entity, plus our share of undistributed earnings or losses, in the account “Other Assets.” 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, resulting in our full write-off of the net book value of our investment.

The Company owns 90 percent of the common equity of Albany Safran Composites, LLC (ASC) which is reported within the Albany Engineered Composites (AEC) segment.

Additional information regarding that entity is included in Note 10.

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

Our consolidated financial statements included our original investment in the entity, plus our share of undistributed earnings or losses, in the account “Other Assets.” In March 2022, we ceased doing business in Russia, including providing notice to our JV partner of our intent to exit the venture, resulting in the full write-off of the net book value of our investment.

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

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

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Revenue Recognition

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

In our Albany Engineered Composites (AEC) business segment, revenue from most long-term contracts is recognized over time using an input method as the measure of progress.

In our MC business segment, we recognize revenue at the point in time when we satisfy our performance obligations related to the manufacture and delivery of products.

In our AEC business segment, revenue from most long-term contracts is generally recognized over time using an input method as the measure of progress.

The classification of revenue in excess of progress billings on long-term contracts is included in Contract assets, net, which are rights to consideration that are conditional on something other than the passage of time, such as completion of remaining performance obligations.

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This contract period may result in a loss contract provision at contract inception.

Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow.

For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known.

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

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

We have a contract with a major customer for which revenue is recognized under a

Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable

ALBANY INTERNATIONAL CORP.

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Accounting Policies — (continued)

cost-plus-fee agreement.

options that often follow.

For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known.

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

Products and services provided under long-term contracts represent a significant portion of Net revenues in the AEC segment.

We have a contract with a major customer for which revenue is recognized under a cost-plus-fee agreement.

We also have fixed price long-term contracts, for which we use the percentage of completion (incurred cost to total estimated cost) method.

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

The sum of net adjustments to the estimated profitability of long-term contracts increased AEC operating income by $ 0.5 million, $ 6.2 million and $ 9.9 million in 2022, 2021 and 2020, respectively.

The favorable effects in 2021 and 2020 were largely due to changes in customer demand and to a lesser extent, efficiency improvements during the ramp-up of several programs, and the effects in 2022 were more muted.

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

The sum of net adjustments to the estimated profitability of long-term contracts decreased AEC Operating income by $ 4.1 million in 2023, and increased AEC Operating income by $ 0.5 million and $ 6.2 million in 2022 and 2021, respectively.

The unfavorable effects in 2023 related to additional reserves taken on certain contracts and inflationary factors decreasing anticipated margins.

The favorable effects in 2022 and 2021 were largely due to changes in customer demand and to a lesser extent, efficiency improvements during the ramp-up of several programs.

Additional accounting policies related to revenue from contracts with customers are set forth in Note 2, Revenue Recognition , of the Notes to the Consolidated Financial Statements.

We limit the concentration of credit risk in receivables by closely monitoring credit and collection policies.

We record allowances for sales returns as a deduction in the computation of net sales.

We record allowances for sales returns as a deduction in the computation of Net revenues.

Such provisions are recorded on the basis of written communication with customers and/or historical experience.

Any value added taxes that are imposed on sales transactions are excluded from net sales.

Any value added taxes that are imposed on sales transactions are excluded from Net revenues.

Cost of Goods Sold

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Cost of goods sold also includes provisions for loss contracts and charges for the write-off of inventories that result from an exit activity.

Selling, General, Administrative, Technical, and Research Expenses

Selling, general, administrative, and technical expenses are primarily comprised of wages, incentive compensation, benefits, travel, professional fees, revaluation of trade foreign currency balances, and other costs, and are expensed as incurred.

Selling, General, and Administrative (SG&A) Expenses

Selling, general, and administrative expenses are primarily comprised of wages, incentive compensation, benefits, travel, professional fees, revaluation of trade foreign currency balances, information system costs, and other costs, and are expensed as incurred.

Selling expense includes costs related to contract acquisition and provisions for expected credit losses on financial assets measured at amortized cost.

Research expenses are charged to operations as incurred and consist primarily of compensation, supplies, and professional fees incurred in connection with intellectual property.

Total company research expense was $ 31.4 million in 2022, $ 29.6 million in 2021, and $ 25.8 million in 2020.

The Albany Engineered Composites segment participates in both company-sponsored, and customer-funded research and development.

General and administrative expenses include corporate expenses of $ 73.1 million in 2023, $ 56.8 million in 2022 and $ 53.7 million in 2021.

Corporate expenses include global information system costs of $ 27.3 million in 2023, $ 22.7 million in 2022 and $ 21.2 million in 2021.

Technical and Research Expenses

Technical and research expenses are charged to operations as incurred and consist primarily of compensation, supplies, and professional fees incurred in connection with intellectual property.

Total company technical and research expense was $ 40.6 million in 2023, $ 39.9 million in 2022, and $ 38.9 million in 2021.

The AEC segment participates in both company-sponsored, and customer-funded research and development.

Some customer-funded research and development may be on a cost-sharing basis and considered to be a collaborative arrangement, in which case both parties are active participants and are exposed to the risks and rewards dependent on the success of the activity.

In such cases, amounts charged to the collaborating entity are credited against research and development expense.

For customer-funded research and development in which we anticipate funding to exceed expenses, we include amounts charged to the customer in Net sales, while expenses are included in Cost of goods sold.

For customer-funded research and development in which we anticipate funding to exceed expenses, we include amounts charged to the customer in Net revenues, while expenses are included in Cost of goods sold.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

Restructuring Expense

We may incur expenses related to exiting a line of business or restructuring of our operations, which could include employee termination costs, costs to consolidate or close facilities, or costs to terminate contractual relationships.

We may incur expenses related to exiting a line of business or restructuring of our operations or organizational structure, which could include employee termination costs, costs to consolidate or close facilities, or costs to terminate contractual relationships.

Restructuring expenses may also include impairment of Property, plant and equipment, as described below under “Property, Plant and Equipment”.

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

The effect of tax rate changes on deferred taxes is recognized in

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

the income tax provision in the period that includes the enactment date.

The effect of tax rate changes on deferred taxes is recognized in the income tax provision in the period that includes the enactment date.

A valuation allowance is established, as needed, to reduce net deferred tax assets to the amount expected to be realized.

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

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

We have not elected to reclassify stranded tax effects from Accumulated items of other comprehensive income (AOCI) to retained earnings.

Earnings Per Share

Basic net income or loss per share is computed using the weighted average number of shares of Class A Common Stock and Class B Common Stock outstanding during each year.

Basic net income or loss per share is computed using the weighted average number of shares of Class A Common Stock outstanding during each year.

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

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Gains and losses on long-term intercompany loans not intended to be repaid in the foreseeable future are recorded in other comprehensive income.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

The following table summarizes foreign currency transaction gains and losses recognized in the income statement:

Years ended December 31,

(in thousands) 2023 2022 2021

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

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

Cash and Cash Equivalents

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

Effective January 1, 2020, the Company adopted the provisions of ASC 326, Current Expected Credit Losses (CECL), using the effective date (or modified retrospective) approach for transition.

Under this transition method, periods prior to 2020 were not restated.

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

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

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

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

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

In accordance with ASC 326, Current Expected Credit Losses ("CECL"), the Company recognizes an allowance for expected credit losses on financial assets measured at amortized cost, such as Accounts receivable, Contract assets and Noncurrent receivables.

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

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

The Noncurrent receivables are invoiced to the customer, with 2 % interest, over a 10 -year period that started in 2020.

See additional information, including accounting policies related to our adoption of the CECL update, set forth in Notes 2 and 11.

See additional information set forth in Note 11, Accounts Receivable , of the Notes to the Consolidated Financial Statements.

Contract Assets and Contract Liabilities

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Contract liabilities are included in Accrued liabilities in the Consolidated Balance Sheet.

See additional information, including accounting policies related to our adoption of the CECL update, set forth in Notes 11 and 12.

See additional information set forth in Note 12, Contract Assets and Liabilities , of the Notes to the Consolidated Financial Statements.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

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

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

See additional information set forth in Notes 2 and 13.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

See additional information set forth in Note 2, Revenue Recognition , and Note 13, Inventories , of the Notes to the Consolidated Financial Statements.

We determine if an arrangement is a lease at inception.

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Expenses related to operating leases are recognized on a straight-line basis, while those determined to be finance leases are recognized following a front-loaded expense profile, in which interest and amortization are presented separately in the income statement.

Operating lease ROU assets are included in Other assets in the Consolidated Balance Sheets, while finance lease ROU assets are included in Property, plant, and equipment, net.

Operating lease right of use asset ("ROU") assets are included in Other assets in the Consolidated Balance Sheets, while finance lease ROU assets are included in Property, plant, and equipment, net.

Lease liabilities for both operating and finance leases are included in Accrued liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets.

See additional information set forth in Note 20.

See additional information set forth in Note 20, Leases , of the Notes to the Consolidated Financial Statements.

The Company relies on bank financing as an important source of liquidity for business activities.

Outstanding debt is classified as current or long-term based on the maturity of the of the Company's financing arrangements.

See additional information set forth in Note 17, Financial Instruments , of the Notes to the Consolidated Financial Statements.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

Property, Plant and Equipment

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We capitalize internal and external costs incurred related to the software development stage.

Capitalized salaries, travel, and consulting costs related to the software development were immaterial in 2022 and 2021.

Capitalized salaries, travel, and consulting costs related to the software development were not material in 2023 and 2022.

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

See additional information set forth in Note 14.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

See additional information set forth in Note 14, Property, Plant and Equipment, Net , of the Notes to the Consolidated Financial Statements.

Business Combinations

The total purchase consideration for an acquisition is measured at the fair value of the assets acquired and liabilities assumed as of the acquisition date.

Costs that are directly attributable to the acquisition are expensed as incurred.

Identifiable assets acquired, liabilities assumed, and noncontrolling interests in an acquisition are measured initially at their fair values at the acquisition date.

We recognize goodwill if the fair value of the total purchase consideration and any noncontrolling interest is in excess of the net fair value of the identifiable assets acquired and the liabilities assumed.

We include the results of operations of the acquired business in the consolidated financial statements beginning on the acquisition date.

Goodwill, Intangibles, and Other Assets

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

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

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

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

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

Otherwise, we perform a quantitative impairment test.

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

In the second quarter of 2022, 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.

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

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

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

See additional information set forth in Note 18.

See additional information set forth in Note 15, Goodwill and Other Intangible Assets , of the Notes to the Consolidated Financial Statements.

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

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The capitalized costs are amortized into Cost of goods sold over the period over which the asset is expected to contribute to future cash flows, which includes anticipated renewal periods.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

Included in Other assets is $ 19.3 million in 2023 and $ 16.2 million in 2022 for defined benefit pension plans where plan assets exceed the projected benefit obligations.

Other assets also includes financial assets of $ 0.6 million in 2022 and $ 0.7 million in 2021.

See additional information set forth in Note 18.

Other assets also include financial assets of $ 0.7 million in 2023 and $ 0.6 million in 2022.

See additional information set forth in Note 18, Fair-Value Measurements , of the Notes to the Consolidated Financial Statements.

Stock-Based Compensation

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

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

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

We recognized no stock option expense during 2022, 2021, or 2020 and there are currently no remaining unvested options for which stock-option compensation costs will be recognized in future periods.

No stock options have been granted since 2002.

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

See additional information for stock-based compensation plans in Note 22, Stock-Based Compensation , of the Notes to the Consolidated Financial Statements.

From time to time, we use derivatives to mitigate potentially large adverse effects from changes in currency exchange rates and interest rates.

We monitor our exposure to these risks and evaluate, on an ongoing basis, the risk of potentially large adverse effects versus the costs associated with hedging such risks.

We may use interest rate swaps in the management of interest rate exposures and foreign currency derivatives in the management of foreign currency exposure related to assets and liabilities (including net investments in subsidiaries located outside the U.S.) denominated in foreign currencies.

We may use interest rate swaps in the management of interest rate exposures and foreign currency derivatives to manage foreign currency exposure related to assets and liabilities (including net investments in subsidiaries located

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

outside the U.S.) denominated in foreign currencies.

When we enter into a derivative contract, we make a determination whether the transaction is deemed to be a hedge for accounting purposes.

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

All derivative contracts are recorded at fair value, as a net asset or a net liability.

Changes in the fair value of the hedge are recorded, net of tax, in other comprehensive income.

For transactions that are designated as hedges, we perform an evaluation of the effectiveness of the hedge.

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

All derivative contracts are recorded at fair value, as a net asset or a net liability on the Consolidated Balance Sheets.

The changes in fair values of derivative contracts are recorded each period in earnings or accumulated other comprehensive income, depending on whether a derivative is effective as part of the hedged transaction.

Gains and losses on derivative contracts reported in accumulated other comprehensive income are subsequently included in earnings in the periods in which earnings are affected by the hedged item.

For transactions that are designated as an effective hedge, we perform an evaluation of the effectiveness of the hedge on the date of inception and on an ongoing basis.

The related gains and losses of derivative instruments, including those designated in hedge accounting relationships, are included as operating activities in the Consolidated Statements of Cash Flows.

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

Pension and Postretirement Benefit Plans

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

Our Pension Plus Plan in the United States was settled during the third quarter of 2022.This was a qualified defined benefit pension plan that was previously terminated in the third quarter of 2021, and prior to that point was closed to new participants and had frozen accrual of benefits.

We have liabilities for postretirement benefits in the U.S.

A majority of the liability relates to the U.S.

Effective January 2005, our postretirement benefit plan in the U.S.

was closed to new participants, except for certain life insurance benefits.

In September 2008, we changed the cost sharing arrangement under this program

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

such that increases in health care costs are the responsibility of plan participants and, in August 2013, we reduced the life insurance benefit for retirees and eliminated that benefit for active employees.

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

The Company does not engage in derivative instruments for speculative or trading purposes.

See Note 17, Financial Instruments, of the Notes to the Consolidated Financial Statements for additional information.

Pension, Postretirement, and Other Benefit Plans

As described in Note 4, Pension, Postretirement, and Other Benefit Plans , of the Notes to the Consolidated Financial Statements, we have pension and postretirement benefit plans covering substantially all employees.

The pension plans are generally trusteed or insured, and accrued amounts are funded as required in accordance with governing laws and regulations.

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Inherent in these valuations are key assumptions, including discount rates and expected return on plan assets, which are updated on an annual basis.

We consider current market conditions, including changes in interest rates, in making these assumptions.

We consider current market conditions, including changes in interest rates, in determining these assumptions.

Discount rate assumptions are based on the population of plan participants and a mixture of high-quality fixed-income investments with durations that match expected future payments.

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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.

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

In order to receive the grant, AEC was required to make several commitments, including a commitment that the Company would not involuntarily furlough or lay-off employees within this segment during the period the grant was intended to cover.

All conditions were met and the Company recognized $ 5.8 million in its Consolidated Statements of Income for the year ended December 31, 2021.

The Company received $ 2.9 million in cash during 2021 and the remainder during 2022 and reflected cash received as an operating activity within the Consolidated Statements of Cash Flows over the periods cash was received.

Subsequent Events

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

The Company received $ 2.9 million in cash during 2021 and the remainder

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounting Policies — (continued)

during 2022 and reflected cash received as an operating activity within the Consolidated Statements of Cash Flows over the periods cash was received.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The guidance is to be applied retrospectively to all prior periods presented in the financial statements.

Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign).

ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes.

The guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Revenue Recognition

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We satisfy this performance obligation upon transferring control of the product to the customer at a specific point in time.

Contracts with customers in the MC segment have various terms

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

that can affect the point in time when revenue is recognized.

Contracts with customers in the MC segment have various terms that can affect the point in time when revenue is recognized.

Generally, the customer obtains control when the product has been received at the location specified by the customer, at which time the only remaining obligations under the contract may be fulfillment costs, in the form of shipping and handling, which are accrued when control of the product is transferred.

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Revenue allocated to such service performance obligations is the only MC revenue that is recognized over time.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

In our AEC segment, we primarily enter into contracts to manufacture and deliver highly engineered advanced composite products to our customers.

A significant portion of AEC revenue is earned under short duration, firm-fixed-price orders that are placed under a master agreement containing general terms and conditions applicable to all orders placed under the master agreement.

To determine the proper revenue recognition method, we evaluate whether two or more orders or contracts should be combined and accounted for as one single contract, and whether the combined or single contract contains single or multiple performance obligations.

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

We assess each contract at its inception to determine whether it should be combined with other contracts.

When making this determination we consider factors such as whether two or more contracts were negotiated and executed at or near the same time or were negotiated with an overall profit objective.

If combined, we treat the combined contracts as a single contract for revenue recognition purposes.

We evaluate the products or services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations.

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

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

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

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

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

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

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

In other AEC contracts, revenue is recognized at a point in time because the products are offered to multiple customers, or we do not have an enforceable right to payment until the product is shipped or delivered to the location specified by the customer in the contract.

AEC’s largest source of revenue is derived from the LEAP contract (see Note 10) under a cost-plus-fee agreement.

The fee is variable based on our success in achieving certain cost targets.

AEC’s largest source of revenue is derived from the LEAP contract (see Note 10, Noncontrolling Interest , of the Notes to the Consolidated Financial Statements) under a cost-plus-fee agreement.

The fee may vary within a narrow range based on our success in achieving certain cost targets.

Revenue is recognized over time as costs are incurred.

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Terms vary with product, competitive conditions, and the country of operation.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

The following table provides a summary of the composition of each business segment:

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

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

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

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Total Albany Engineered Composites 20,546 456,595 477,141

Total revenue $ 625,030 $ 409,857 $ 1,034,887

Total net revenues $ 687,536 $ 460,373 $ 1,147,909

For the year ended December 31, 2022

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Total Albany Engineered Composites 19,167 406,259 425,426

Total revenue $ 631,528 $ 297,712 $ 929,240

Total net revenues $ 625,030 $ 409,857 $ 1,034,887

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

For the year ended December 31, 2021

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Total Albany Engineered Composites 15,972 294,253 310,225

Total revenue $ 587,906 $ 312,704 $ 900,610

Total net revenues $ 631,528 $ 297,712 $ 929,240

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:

For the year ended December 31,

Years ended December 31,

(in thousands) 2023 2022 2021

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Engineered Fabrics 71,176 81,176 81,602

Total Machine Clothing Net sales $ 609,461 $ 619,015 $ 572,955

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Revenue Recognition — (continued)

Total Machine Clothing net revenues $ 670,768 $ 609,461 $ 619,015

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

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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 $ 553 million as of December 31, 2022, $ 278 million as of December 31, 2021, and $ 86 million as of December 31, 2020, and related primarily to firm contracts in the AEC segment.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 1.2 billion as of December 31, 2023, $ 553 million as of December 31, 2022, and $ 278 million as of December 31, 2021, and related primarily to firm contracts in the AEC segment.

Of the remaining performance obligations as of December 31, 2023 we expect to recognize as revenue approximately $ 179 million during 2024, $ 178 million during 2025, $ 156 million during 2026, and the remainder thereafter.

Reportable Segments and Geographic Data

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.

The accounting policies of the segments are the same as those described in Note 1.

The Company is organized based on the nature of its products and is composed of two reportable segments each overseen by a Segment President.

These segments are reflective of how the Company's Chief Executive Officer, who is its Chief Operating Decision Maker ("CODM"), reviews operating results for the purpose of allocating resources and assessing performance.

The Company has not aggregated operating segments for purposes of identifying reportable segments.

As of December 31, 2023, the operating segments were Machine Clothing (“MC”), and Albany Engineered Composites ("AEC”).

The accounting policies of the segments are the same as those described in Note 1, Accounting Policies , of the Notes to the Consolidated Financial Statements.

Corporate expenses include wages and benefits for corporate headquarters personnel, costs related to information systems development and support, and professional fees related to legal, audit, and other activities.

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Machine Clothing:

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

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Reportable Segments and Geographic Data — (continued)

The MC segment supplies permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel, pulp, nonwovens, fiber cement and several other industrial applications.

We sell our MC products directly to customer end-users in countries across the globe.

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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, 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 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 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.

In 2023, SAFRAN leased manufacturing space from AEC for the GE9X program.

Rent paid by SAFRAN under this lease amounted to $ 0.9 million in both 2022 and 2021.

AEC Net sales to SAFRAN were $ 169.3 million in 2022, $ 111.6 million in 2021, and $ 99.0 million in 2020.

Rent paid by SAFRAN under this lease amounted to $ 1.0 million in 2023 and $ 0.9 million in 2022.

AEC sales to SAFRAN were $ 187.6 million in 2023, $ 169.3 million in 2022, and $ 111.6 million in 2021.

The total of Accounts receivable, Contract assets and Noncurrent receivable due from SAFRAN amounted to $ 93.8 million and $ 80.8 million as of December 31, 2023 and 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.

In 2022, approximately 46 percent of AEC sales were related to U.S.

AEC also supplies vacuum waste tanks for Boeing commercial programs, and specialty components for the Rolls Royce lift fan on the F-35.

In 2023, approximately 39 percent of AEC net revenues were related to U.S.

government contracts or programs.

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

Years ended December 31,

(in thousands)

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49,030 46,202 50,402

Corporate expenses

3,812 3,364 3,662

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41,587 31,579 16,160

Corporate expenses

( 73,071 ) ( 56,771 ) ( 53,803 )

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AMJP grant — — ( 5,832 )

Other expense, net

Other (income)/expense, net

( 6,163 ) ( 14,086 ) 3,021

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$ 160,456 $ 131,980 $ 165,931

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 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.

In the third quarter, we took actions to settle certain pension plan liabilities in the U.S., leading to charges totaling $ 49.1 million, which were included as Corporate expenses and other.

Results for the year ended December 31, 2023 include the newly acquired Heimbach for the period of ownership, which began September 1, 2023.

Heimbach contributed Net revenues of $ 51.2 million and reduced Operating income by $ 6.3 million, which included depreciation expense on Property, plant, and equipment, net of $ 4.0 million, and amortization expense on Intangibles, net of $ 0.3 million.

In the third quarter of 2022, we took actions to settle certain pension plan liabilities in the U.S., leading to charges totaling $ 49.1 million, which were included as Corporate expenses and other.

This led to a reduction of unfunded pension liabilities of $ 6.2 million.

The table below presents restructuring costs by reportable segment (also see Note 5):

A subsidiary within our MC segment has been a partner in a JV that supplies paper machine clothing products to local papermakers in Russia.

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

As a result, in 2022, we recognized $ 1.5 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.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Reportable Segments and Geographic Data — (continued)

The table below presents restructuring costs by reportable segment (also see Note 5, Restructuring , of the Notes to the Consolidated Financial Statements):

Years ended December 31,

(in thousands)

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Corporate expenses

Consolidated total

Total restructuring expenses, net

$ 282 $ 106 $ 1,331

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Reportable Segments and Geographic Data — (continued)

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

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

As of December 31,

(in thousands)

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156,772 153,983 113,810

Consolidated total assets

$ 1,835,014 $ 1,642,255 $ 1,556,064

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Corporate expenses 2,385 2,641 2,510

Consolidated total

Total capital expenditures and purchased software

$ 84,429 $ 96,348 $ 53,699

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The following table shows data by geographic area.

Net sales are based on the location of the operation recording the final sale to the customer.

Net sales recorded by our entity in Switzerland are derived from products sold throughout Europe and Asia, and are invoiced in various currencies.

Net revenues are based on the location of the operation recording the final sale to the customer.

Net revenues recorded by our entity in Switzerland are derived from products sold throughout Europe and Asia, and are invoiced in various currencies.

Years ended December 31,

(in thousands)

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United States $ 649,500 $ 586,779 $ 497,231

$ 586,779 $ 497,231 $ 503,473

Switzerland 115,207 119,069 128,698

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Mexico 58,874 58,519 37,547

Italy 20,074 21,523 12,424

Germany 32,239 4,461 5,308

Other countries 79,854 59,144 61,504

43,531 45,289 43,346

Consolidated total

Total Net revenues

$ 1,147,909 $ 1,034,887 $ 929,240

Property, plant and equipment, at cost, net

Property, plant and equipment, net

United States $ 303,578 $ 278,500 $ 258,453

$ 278,500 $ 258,453 $ 263,201

Mexico 42,320 40,699 41,738

China 57,070 33,432 41,039

Germany 52,934 9,562 9,652

Mexico 46,759 42,320 40,699

France 31,069 31,382 33,802

Canada 14,264 14,139 9,672

Sweden 11,388 12,355 12,109

United Kingdom 18,306 9,699 10,156

Germany 9,562 9,652 10,808

Canada 15,318 14,264 14,139

Spain 14,804 — —

Other countries 62,151 26,499 28,477

15,111 16,122 18,290

Consolidated total

Total Property, plant and equipment, net

$ 601,989 $ 445,658 $ 436,417

Pensions and Other Postretirement Benefit Plans

Pension Plans

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

In the third quarter of 2022, we took actions to settle pension plan liabilities related to the U.S.

Pension Plus Plan, leading to charges totaling $ 49.1 million.

This led to a reduction of unfunded pension liabilities of $ 6.2 million.

This was a qualified defined benefit pension plan that was previously terminated in the third quarter of 2021, and prior to that point was closed to new participants and had frozen accrual of benefits.

The December 31, 2022 benefit obligations for remaining U.S.

pension and postretirement plans were calculated using the Pri-2012 mortality table with MP-2021 generational projection.

pension funding purposes, the Company uses the plan’s IRS-basis current liability as its funding target, which is determined based on mandated assumptions.

Benefit accruals under the U.S.

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

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

vary by location.

Pension, Postretirement, and Other Benefit Plans

Voluntary Savings Plan

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

The Plan, known as the Prosperity Plus Savings Plan, is a qualified plan under section 401(k) of the U.S.

Internal Revenue Code.

The Company matches, in the form of cash, between 50 percent and 100 percent of employee contributions up to a defined maximum.

The investment of employee contributions to the plan is self-directed.

The Company’s cost of the plan amounted to $ 7.3 million in 2023, $ 6.6 million in 2022, and $ 6.2 million in 2021.

The plan allows for discretionary matching contributions.

The Company uses such discretion to provide profit sharing contributions to eligible plan participants.

Such contributions are based on Company performance and vary from year to year and contributions are generally made in the first quarter following the Company’s fiscal year-end.

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

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

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

The expense recorded for this plan was $ 4.9 million in 2023, $ 4.6 million in 2022, and $ 4.8 million in 2021.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

Benefits under the Company's pension plan in Switzerland utilize a cash balance interest crediting rate for determination of plan liabilities.

As of December 31, 2022, the benefit obligation for that plan amounted to $ 2.9 million.

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

employees hired prior to 2005 may become eligible for these benefits if they reach normal retirement age while working for the Company.

Benefits provided under this plan are subject to change.

Retirees share in the cost of these benefits.

Any new employees hired after January 2005 who wish to be covered under this plan will be responsible for the full cost of such benefits.

In September 2008, we changed the cost-sharing arrangement under this program such that increases in health care costs are the responsibility of plan participants.

In August 2013, we reduced the life insurance benefit for retirees and eliminated the benefit for active employees.

The Company also provides certain postretirement life insurance benefits to retired employees in Canada.

As of December 31, 2022, the accrued postretirement liability was $ 34.8 million in the U.S.

and $ 0.8 million in Canada.

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

The Company currently funds the plans as claims are paid.

Pension, Postretirement, and Other Benefit Plans — (continued)

Pension and Postretirement Plans

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

The eligibility, benefit formulas, and contribution requirements for plans vary by location.

As of December 31, 2023, U.S.

benefit obligations exist through the U.S.

Supplemental Executive Retirement Plan (“SERP”), a frozen unfunded pension plan, and the U.S.

postretirement welfare plan ("PRW"), which provides various medical, dental, and life insurance benefits.

Pension Plus Plan, a qualified defined benefit pension plan was terminated in 2021 and settled during 2022, leading to charges totaling $ 49.1 million.

Outside the U.S., the Company sponsors defined benefit pension plans covering certain employees, including employees at our newly acquired Heimbach GmbH, and certain postretirement life insurance benefits to retired employees in Canada.

Accounting guidance requires the recognition of the funded status of each defined benefit and other postretirement benefit plan.

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The market-related value of plan assets is also used to determine the expected return on plan assets component of net periodic cost.

The Company’s market-related value for its U.S.

plan is measured by first determining the absolute difference between the actual and the expected return on the plan assets.

The absolute difference in excess of 5 percent of the expected return is added to the market-related value over two years;

the remainder is added to the market-related value immediately.

To the extent the Company’s unrecognized net losses and unrecognized prior service costs, including the amount recognized through accumulated other comprehensive income, are not reduced by future favorable plan experience, they will be recognized as a component of the net periodic cost in future years.

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Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

Pension, Postretirement, and Other Benefit Plans — (continued)

The following table sets forth the plan benefit obligations:

As of December 31, 2023 As of December 31, 2022

(in thousands)

Pension plans

(in thousands, except percentages)

Pension plans Other

postretirement benefits

Pension plans

Other postretirement benefits

Pension plans Other postretirement benefits

Benefit obligation, beginning of year

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Compensation increase — U.S.

N/A N/A N/A N/A

Compensation increase — non-U.S.

2.89 % 2.75 % 3.08 % 2.75 %

During 2022, pension benefit obligations decrease d by $ 147 million, $ 91.6 million of which was related to the US Pension Plus plan settlement, and $ 47.0 million of which was driven by net actuarial gains, principally resulting from higher discount rates, in addition to employer contributions of $ 7.9 million.

During 2023, pension benefit obligations increase d by $ 74.6 million, largely related to the acquisition of Heimbach GmbH, which resulted in an increase of $ 64.9 million, in addition to net actuarial losses, which resulted in an increase of $ 6.3 million.

Other postretirement benefit obligations decreased by $ 7.0 million in 2023, primarily driven by net actuarial gains and payments made by the Company to participants of the plan .

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

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

During 2022, pension benefit obligations decreased by $ 147 million, $ 91.6 million of which was related to the U.S.

Pension Plus plan settlement and $ 47.0 million of which was driven by net actuarial gains, principally resulting from higher discount rates, in addition to employer contributions of $ 7.9 million.

Other postretirement benefit obligations decreased by $ 9.2 million in 2022, primarily driven by net actuarial gains and payments made by the Company to participants of the plan .

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

Pension, Postretirement, and Other Benefit Plans — (continued)

The following sets forth information about plan assets:

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— — ( 90,568 ) —

( 832 ) — — —

Foreign currency changes

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(in thousands)

Pension plans

Other postretirement benefits

Pension plans

Other postretirement benefits

Pension plans Other postretirement benefits Pension plans Other postretirement benefits

Fair value of plan assets

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Accrued benefit cost, end of year $ ( 45,635 ) $ ( 28,684 ) $ ( 8,801 ) $ ( 35,658 )

$ ( 8,801 ) $ ( 35,658 ) $ ( 5,463 ) $ ( 44,884 )

Amounts recognized in the consolidated balance sheet consist of the following:

Amounts recognized in the consolidated balance sheets consist of the following:

Noncurrent asset $ 19,296 $ — $ 16,234 $ —

$ 16,234 $ — $ 32,504 $ —

Current liability ( 5,500 ) ( 2,808 ) ( 1,974 ) ( 3,660 )

( 1,974 ) ( 3,660 ) ( 7,116 ) ( 3,627 )

Noncurrent liability ( 59,431 ) ( 25,876 ) ( 23,061 ) ( 31,998 )

( 23,061 ) ( 31,998 ) ( 30,851 ) ( 41,257 )

Net amount recognized

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Net actuarial loss $ 22,512 $ 1,991 $ 17,915 $ 8,958

$ 17,915 $ 8,958 $ 52,138 $ 17,483

Prior service cost/(credit) ( 132 ) ( 484 ) ( 134 ) ( 4,574 )

( 134 ) ( 4,574 ) 256 ( 8,458 )

Net amount recognized

$ 22,380 $ 1,507 $ 17,781 $ 4,384

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pension, Postretirement, and Other Benefit Plans — (continued)

The composition of the net pension plan funded status as of December 31, 2023 was as follows:

(in thousands)

plan Non-U.S.

Pension plans with pension assets

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$ ( 3,799 ) $ ( 41,836 ) $ ( 45,635 )

The net underfunded balance in the U.S.

principally relates to the Supplemental Executive Retirement Plan.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

The underfunded balance in the U.S.

relates to the Supplemental Executive Retirement Plan.

The composition of the net periodic benefit plan cost for the years ended December 31, 2023, 2022, and 2021, was as follows:

Pension plans

Other postretirement benefits

(in thousands)

Pension plans Other postretirement benefits

(in thousands, except percentages)

2023 2022 2021 2023 2022 2021

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Curtailment (gain)/loss

— — 263 — — —

Net periodic benefit cost

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Discount rate — U.S.

2.63 % 2.65 % 3.40 % 2.83 % 2.38 % 3.27 %

plan 5.49 % 2.63 % 2.65 % 5.55 % 2.83 % 2.38 %

Discount rate — non-U.S.

2.41 % 1.91 % 2.31 % 3.05 % 2.75 % 3.05 %

plans 5.15 % 2.41 % 1.91 % 5.20 % 3.05 % 2.75 %

Cash balance interest crediting rate - Switzerland pension plan 2.15 % 0.25 % 0.05 % — — —

Expected return on plan assets — U.S.

3.07 % 2.74 % 3.54 % — — —

plan N/A 3.07 % 2.74 % N/A N/A N/A

Expected return on plan assets — non-U.S.

3.31 % 2.89 % 3.45 % — — —

plans 5.21 % 3.31 % 2.89 % N/A N/A N/A

Rate of compensation increase — U.S.

— — — — — — %

plan N/A N/A N/A N/A N/A N/A

Rate of compensation increase — non-U.S.

2.70 % 2.71 % 2.81 % 2.75 % 2.75 % 3.00 %

plans 3.08 % 2.70 % 2.71 % 2.75 % 2.75 % 2.75 %

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pension, Postretirement, and Other Benefit Plans — (continued)

Pretax (gains)/losses on plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31, 2023, 2022, and 2021, was as follows:

Pension plans

Other postretirement benefits

Pension plans Other postretirement benefits

(in thousands)

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$ 4,600 $ ( 34,613 ) $ ( 1,063 ) $ ( 2,877 ) $ ( 4,642 ) $ 1,235

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

Investment Strategy

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Some of our defined benefit plans do not require funded trusts and, in those arrangements, the Company funds the plans on a “pay as you go” basis.

The largest of the funded defined benefit plans is in the United Kingdom.

United States plan:

Since the settlement of the U.S.

Pension Plus Plan during the third quarter of 2022, there have been no investments made to the remaining plans in the United States.

Non-United States plans:

The largest of the funded defined benefit plans are in Canada and the United Kingdom.

For the countries in which the Company has funded pension trusts, the investment strategy may also be liability driven or, in other cases, to achieve a competitive, total investment return, achieving diversification between and within asset classes and managing other risks.

2 unchanged sentences

Fair-Value Measurements

The following tables present plan assets as of December 31, 2022, and 2021, using the fair-value hierarchy, which has three levels based on the reliability of inputs used, as described in Note 18.

The following tables present plan assets as of December 31, 2023, and 2022, using the fair-value hierarchy, which has three levels based on the reliability of inputs used, as described in Note 18, Fair-Value Measurements , of the Notes to the Consolidated Financial Statements.

Certain investments that are measured at fair value using net asset value ("NAV") as a practical expedient are not required to be categorized in the fair value hierarchy table.

1 unchanged sentence

As of December 31, 2023 and 2022, there were no investments expected to be sold at a value materially different than NAV.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pension, Postretirement, and Other Benefit Plans — (continued)

Assets at Fair Value as of December 31, 2023

4 unchanged sentences

Insurance contracts — — 3,478 3,478

— — 3,451 3,451

Cash and short-term investments 5,740 — — 5,740

5 unchanged sentences

Total plan assets $ 112,688

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

Assets at Fair Value as of December 31, 2022

(in thousands)

Quoted prices in active markets Level 1

Significant other observable inputs Level 2

Significant unobservable inputs Level 3

Quoted prices in active markets Level 1 Significant other observable inputs Level 2 Significant unobservable inputs Level 3 Total

Common Stocks and equity funds

14 unchanged sentences

(in thousands)

December 31, 2021 Net realized gains

Net unrealized gains

Net purchases, issuances

and settlements Net transfers (out of) Level 3

December 31, 2022

December 31, 2022 Net realized gains Net unrealized gains Net purchases, issuances

and settlements Net transfers (out of) Level 3 December 31, 2023

Insurance contracts -

1 unchanged sentence

$ 2,418 $ — $ 18 $ 5,161 $ — $ 7,597

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pension, Postretirement, and Other Benefit Plans — (continued)

(in thousands)

December 31, 2020 Net realized gains

Net unrealized gains

Net purchases, issuances

and settlements

Net transfers (out of) Level 3

December 31, 2021

December 31, 2021 Net realized gains Net unrealized gains Net purchases, issuances

and settlements Net transfers (out of) Level 3 December 31, 2022

Insurance contracts -

3 unchanged sentences

pension plans for 2023 and 2022, and the target allocation, by asset category, are as follows:

United States Plan

Percentage of plan assets at plan measurement date

United States Plan Non-U.S.

Allocation Percentage of plan assets at plan measurement date Target

Allocation Percentage of plan assets at plan measurement date

Asset category 2023 2022 2023 2022

2022 2021 2022 2021

Equity securities

N/A N/A — % 14 % 15 % 13 %

N/A N/A N/A 14 % 13 % 15 %

Debt securities

N/A N/A 98 % 81 % 76 % 80 %

N/A N/A 2 % 1 % 1 % 1 %

N/A N/A — % 4 % 8 % 6 %

N/A N/A N/A 71 % 73 % 76 %

N/A N/A N/A 3 % 3 % 1 %

N/A N/A N/A 12 % 11 % 8 %

— % — % — % 100 % 100 % 100 %

(1) Other includes hedged equity and absolute return strategies, and private equity.

(1) Other includes hedged equity and absolute return strategies, as well as private equity.

The Company has procedures to closely monitor the performance of these investments and compares asset valuations to audited financial statements of the funds.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pensions and Other Postretirement Benefit Plans — (continued)

The targeted plan asset allocation is based on an analysis of the actuarial liabilities, a review of viable asset classes, and an analysis of the expected rate of return, risk, and other investment characteristics of various investment asset classes.

7 unchanged sentences

Fair value of plan assets

3,422 104,041

Plans with accumulated

4 unchanged sentences

Fair value of plan assets 17,041 3,422

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Pension, Postretirement, and Other Benefit Plans — (continued)

Information about expected cash flows for the pension and other benefit obligations are as follows:

(in thousands)

Pension plans

Other postretirement benefits

Pension plans Other postretirement benefits

Expected employer contributions and direct employer payments in the next fiscal year

6 unchanged sentences

2028 10,333 2,448

2028-2032 29,238 13,928

2029 to 2033 50,314 10,873

ALBANY INTERNATIONAL CORP.

4 unchanged sentences

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

Year ended December 31, 2022 (In thousands) Total restructuring costs incurred

Termination and other costs

Impairment of assets

Year ended December 31, 2023 (in thousands) Total restructuring costs incurred Termination and other costs Impairment of assets

Machine Clothing

1 unchanged sentence

Albany Engineered Composites

Corporate expenses

Total restructuring expense

$ 282 $ 282 $ —

Year ended December 31, 2021 (In thousands) Total restructuring costs incurred

Termination and other costs

Impairment of assets

Year ended December 31, 2022 (in thousands) Total restructuring costs incurred Termination and other costs Impairment of assets

Machine Clothing

1 unchanged sentence

Albany Engineered Composites

Corporate expenses

Total restructuring expense

$ 106 $ 106 $ —

Year ended December 31, 2020 (In thousands) Total restructuring costs incurred

Termination and other costs

Impairment of assets

Year ended December 31, 2021 (in thousands) Total restructuring costs incurred Termination and other costs Impairment of assets

Machine Clothing

1 unchanged sentence

Albany Engineered Composites

2,821 2,821 —

Corporate expenses

Total restructuring expense

$ 1,331 $ 1,331 $ —

In 2020, AEC reduced its workforce at various locations, principally in the United States, leading to restructuring charges, and MC recorded charges related to the discontinuance of operations in the Selestat, France location.

As of December 31, 2023, there is no remaining balance in Accrued liabilities for restructuring.

The table below presents the changes in restructuring liabilities for 2022 and 2021, all of which related to termination costs:

The table below presents the changes in restructuring liabilities for 2023 and 2022:

(in thousands)

December 31, 2021 Restructuring charges accrued

Currency translation/other

December 31, 2022

December 31, 2022 Restructuring charges accrued Payments Currency translation/other December 31, 2023

Total termination and other costs

1 unchanged sentence

(in thousands)

2020 Restructuring charges accrued

Currency translation/other

December 31, 2021

2021 Restructuring charges accrued Payments Currency translation/other December 31, 2022

Total termination and other costs

2 unchanged sentences

Notes to Consolidated Financial Statements

Other expense/(income), net

Other (income)/expense, net

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

Years ended December 31,

(in thousands)

5 unchanged sentences

Other ( 3,366 ) 94 3,671

Total other (income)/expense, net

$ ( 6,163 ) $ ( 14,086 ) $ 3,021

In 2022, Other (income)/expense, net included gains related to the revaluation of nonfunctional-currency balances of $ 10.0 million, as compared to a gain of $ 1.2 million during 2021, principally resulting from a weaker Euro throughout the course of 2022.

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

The same loans had an insignificant effect on Other comprehensive income in 2021 and 2022.

In 2022, the Company recorded a gain of $ 3.4 million on the sale of IP addresses that the Company had no future critical need to retain.

There were no similar gains of this nature in the previous two years.

Other (income)/expense, net included foreign currency related transactions that resulted in gains of $ 2.9 million during 2023 and gains of $ 10.0 million during 2022.

During 2023, the stronger Mexican Peso primarily drove transaction gains on nonfunctional currency monetary liabilities, while during 2022, the weaker Euro primarily drove transaction gains related to nonfunctional currency monetary assets.

During 2022, the Company recorded a gain of $ 3.4 million on the sale of IP addresses that the Company had no future critical need to retain.

There were no similar gains of this nature during 2023.

Provision for income taxes consisted of the following:

For the year ended December 31

Years ended December 31,

(in thousands) 2023 2022 2021

18 unchanged sentences

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

For the year ended December 31 2022 2021 2020

Years ended December 31,

2023 2022 2021

federal statutory tax rate 21.0 % 21.0 % 21.0 %

8 unchanged sentences

Pension Settlement - Release of Residual Tax Effect — ( 4.0 ) —

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

Change in valuation allowances

( 1.2 ) ( 0.6 ) 0.6

Impact of amended tax returns — ( 0.1 ) ( 1.3 )

2 unchanged sentences

Effective income tax rate 30.4 % 26.9 % 28.4 %

The Company recorded a net tax benefit of $ 5.2 million for the release of the residual tax effects that were stranded within other comprehensive income related to the U.S.

In 2022, the Company recorded a net tax benefit of $ 5.2 million for the release of the residual tax effects that were stranded within other comprehensive income related to the U.S.

pension settlement.

The residual tax effects were created as a result of the remeasurement of deferred tax assets and liabilities originally established in other comprehensive income in accordance with the Tax Cuts and Jobs Act lowering the U.S.

corporate tax rate from 35% to 21% as of December 31, 2017.

The Company's subsidiary in Mexico has an intercompany loan payable in U.S.

As a result of the weaker Mexican peso, the Company recorded a revaluation loss in 2020 which is not deductible under Mexican tax law, leading to a $ 3.8 million discrete tax charge.

corporate tax rate from 35 percent to 21 percent as of December 31, 2017.

No similar charges were incurred during 2023.

The Company has operations which constitute a taxable presence in 22 countries outside of the United States.

2 unchanged sentences

Our open tax years for major jurisdictions generally range from 2009-2023.

We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.

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

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

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

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

The foreign rate differential of these jurisdictions was partially offset by Switzerland ( 15.2 percent tax rate).

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

On August 16th, 2022, The Inflation Reduction Act (“IRA”) was enacted, including various provisions which become effective for tax years beginning after December 31, 2022.

Included within the IRA were provisions for a newly enacted Stock Repurchase Excise Tax, Corporate Alternative Minimum Tax, among others.

None of the enacted provisions within the IRA are expected to have a material effect to the Company.

Cash payments for taxes amounted to $ 54.5 million in 2023, $ 50.0 million in 2022, and $ 32.5 million in 2021.

ALBANY INTERNATIONAL CORP.

13 unchanged sentences

Tax credit carryforwards 3,167 2,635 19 —

Derivatives — 468 — —

Leases 8,685 7,597 2,463 611

17 unchanged sentences

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

In 2022, the Company recorded immaterial movements in its valuation allowance, which are included in Schedule II in Item 15.

In 2023, the Company recorded immaterial movements in its valuation allowance, which are included in Schedule II in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K.

ALBANY INTERNATIONAL CORP.

5 unchanged sentences

State 2027 - 2042 1,889 541

State Indefinite — —

2025 - 2033 12,983 —

13 unchanged sentences

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

If recognized, $ 0.8 million would impact the effective tax rate at December 31, 2022:

If recognized, the $ 2.7 million would impact the effective tax rate as of December 31, 2023 as follows:

(in thousands) 2023 2022 2021

3 unchanged sentences

Increase in gross amounts of tax positions related to current years 196 37 —

Decrease due to settlements with tax authorities — — —

Decrease due to lapse in statute of limitations ( 656 ) — ( 39 )

1 unchanged sentence

Unrecognized tax benefits balance at December 31, $ 2,741 $ 792 $ 1,459

Of the $ 2.7 million total unrecognized tax benefits balance as of December 31, 2023, $ 1.3 million is related to unrecognized tax benefits acquired in the Heimbach acquisition.

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

The Company recognized immaterial interest and penalties related to the unrecognized tax benefits noted above, for the years 2022, 2021 and 2020.

The Company recognized $ 0.5 million, $ 0.1 million and $ 0.1 million interest and penalties related to the unrecognized tax benefits noted above, for the years 2023, 2022 and 2021, respectively.

It is reasonably possible that within the next 12 months, unrecognized tax benefits related to international tax matters may decrease by up to $ 0.7 million based on current estimates.

ALBANY INTERNATIONAL CORP.

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:

Years ended December 31,

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

10 unchanged sentences

31,276 31,455 32,463

Average market price of common stock used for calculation of dilutive shares

$ 87.27 $ 82.88 $ 58.56

Net income per share:

13 unchanged sentences

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

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

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

5 unchanged sentences

Other comprehensive income/(loss) before reclassifications ( 40,971 ) — 18,971 ( 22,000 )

Pension settlement expense, net of tax — 26,198 — 26,198

Pension/postretirement plan remeasurement, net of tax — ( 2,663 ) — ( 2,663 )

5 unchanged sentences

Other comprehensive income/(loss) before reclassifications 21,950 ( 3,357 ) 2,623 21,216

Pension settlement expense, net of tax — 26,198 — 26,198

Pension/postretirement plan remeasurement, net of tax — 3,629 — 3,629

12 unchanged sentences

Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:

Expense related to interest rate swaps included in Income before taxes (a)

(Income)/Expense related to interest rate swaps included in Income before taxes (a)

$ ( 15,062 ) $ 468 $ 6,852

15 unchanged sentences

________________________

(a) Included in interest expense, net are payments related to the interest rate swap agreements and amortization of swap buyouts (see Notes 17 and 18).

(b) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4).

(a) Reported as Interest expense, net in our Consolidated Statements of Income, are payments related to the interest rate swap agreements and amortization of swap buyouts (see Note 17, Financial Instruments , and Note 18, Fair-Value Measurements , of the Notes to the Consolidated Financial Statements).

(b) Reported as Other (income)/expense, net in our Consolidated Statements of Income, the accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4, Pension, Postretirement, and Other Benefit Plans , of the Notes to the Consolidated Financial Statements).

Noncontrolling Interest

1 unchanged sentence

("SAFRAN") acquired a 10 percent equity interest in a new Albany subsidiary, Albany Safran Composites, LLC ("ASC").

Under the terms of the transaction agreements, ASC will be the exclusive supplier to SAFRAN of advanced 3D-woven composite parts for use in aircraft and rocket engines, thrust reversers and nacelles, and aircraft landing and braking systems (the “SAFRAN Applications”).

Under the terms of the transaction agreements, ASC will be the exclusive supplier to SAFRAN of advanced 3D-woven composite parts in accordance with agreed upon scope parameters defined between both companies, for use in aircraft and rocket engines, thrust reversers and nacelles, and aircraft landing and braking systems (the “SAFRAN Applications”).

AEC may develop and supply parts other than advanced 3D-woven composite parts for all aerospace applications, as well as advanced 3D-woven composite parts for any aerospace applications that are not SAFRAN Applications (such as airframe applications) and any non-aerospace applications.

3 unchanged sentences

The common shares of ASC are owned 90 percent by Albany and 10 percent by SAFRAN.

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Noncontrolling Interest — (continued)

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:

manufacturer recently acquired by the Company and reported within the MC segment.

On August 31, 2023, the date of the Heimbach acquisition, the fair value of the noncontrolling interest in Arcari was $ 0.5 million.

Net income/(loss) attributable to Arcari's noncontrolling interest was less than $ 0.1 million during 2023.

The table below presents a reconciliation of income attributable to the noncontrolling interest and noncontrolling equity in the Company’s subsidiaries:

ASC Noncontrolling Interest:

(in thousands, except percentages)

8 unchanged sentences

Changes in other comprehensive income attributable to noncontrolling interest

Noncontrolling interest, end of year

ASC noncontrolling interest, end of year

$ 5,423 $ 4,494

Arcari Noncontrolling Interest:

(in thousands, except percentages)

Initial equity related to Noncontrolling interest in Arcari

Net income attributable to noncontrolling interest

Changes in other comprehensive income attributable to noncontrolling interest

Arcari noncontrolling interest, end of year

Total noncontrolling interest, end of year

$ 5,952 $ 4,494

Accounts Receivable

6 unchanged sentences

Accounts receivable, net $ 287,781 $ 200,018

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

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

The Company had Noncurrent receivables in the AEC segment that represented revenue earned, for which the customer had extended payment terms beyond one year.

In 2023, the payment terms were amended and a portion of the Noncurrent receivables are now included in Trade and other accounts receivable.

The remaining Noncurrent receivables is expected to be collected in the first quarter of 2025.

As of December 31, 2023 and December 31, 2022, Noncurrent receivables were as follows:

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounts Receivable— (continued)

(in thousands) December 31,

3 unchanged sentences

Noncurrent receivables, net $ 4,392 $ 27,913

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

Effective January 1, 2020, the Company adopted the provisions of ASC 326, Current Expected Credit Losses ("CECL").

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

1 unchanged sentence

The estimate reflects the risk of loss due to credit default, even when the risk is remote, and considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable expected future economic conditions.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounts Rec— (continued)

While an expected credit loss allowance is recorded at the same time the financial asset is recorded, the Company monitors financial assets for credit impairment events to assess whether there has been a significant increase in credit risk since initial recognition, and considers both quantitative and qualitative information.

14 unchanged sentences

Accounts receivable expected credit losses $ ( 3,097 ) $ ( 611 ) $ ( 114 ) $ ( 1,438 ) $ ( 5,260 )

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounts Receivable— (continued)

(in thousands)

13 unchanged sentences

Noncurrent receivables expected credit losses $ ( 140 ) $ 123 $ ( 5 ) $ — $ ( 22 )

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accounts Rec— (continued)

(in thousands)

16 unchanged sentences

Other than the allowance for expected credit losses, there were no other provisions for losses related to our Contract assets during the years ended December 31, 2023 and 2022.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Contract Assets and Liabilities — (continued)

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

9 unchanged sentences

$ ( 703 ) $ ( 45 ) $ — $ — $ ( 748 )

Contract liabilities increased $ 8.2 million during the year ended December 31, 2022, primarily due to amounts invoiced to customers for contracts that were in a contract liability position exceeding the revenue recognition from satisfied performance obligations.

Contract liabilities decreased $ 8.0 million during the year ended December 31, 2023, primarily due to revenue recognition from satisfied performance obligations exceeding the amounts invoiced to customers for contracts that were in a contract liability position.

Revenue recognized for the years ended December 31, 2023 and 2022 that was included in the Contract liability balance at the beginning of the year was $ 15.2 million and $ 5.7 million, respectively.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

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

9 unchanged sentences

$ 169,567 $ 139,050

Property, Plant and Equipment

On August 31, 2023, the Company completed the acquisition of Heimbach.

Included in the fair value of assets acquired was $ 41.9 million of inventories.

See Note 24, Business Combination , of the Notes to the Consolidated Financial Statements for additional information .

Property, Plant and Equipment, net

The table below sets forth the components of property, plant and equipment as of December 31, 2023 and 2022:

3 unchanged sentences

Buildings 302,086 247,136 15 to 40 years

Right of use assets (a) — 10,971 10 to 15 years

Machinery and equipment 1,207,504 1,053,700 5 to 15 years

6 unchanged sentences

Property, plant and equipment, net $ 601,989 $ 445,658

(a) In 2022, the Company extended the lease of its primary manufacturing facility in Salt Lake City, Utah, which resulted in a lease classification change from Finance to Operating, resulting in the reclassification of the Right of use asset from Property, plant, and equipment to Other assets.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Property, Plant and Equipment, net — (continued)

On August 31, 2023, the Company completed the acquisition of Heimbach.

Included in the fair value of assets acquired was $ 125.1 million of property, plant and equipment.

See Note 24, Business Combination , of the Notes to the Consolidated Financial Statements for additional information .

Depreciation expense was $ 70.4 million in 2023, $ 62.5 million in 2022, and $ 65.1 million in 2021.

4 unchanged sentences

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable

intangible assets acquired in each business combination.

Goodwill and intangible assets with indefinite useful lives

are not amortized, but are tested for impairment at least annually at the reporting unit level, using either a qualitative

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, however, these assets are tested for impairment at least annually at the reporting unit level, using either a qualitative or quantitative approach.

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

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 Engineered Composites 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.

In the third quarter of 2023, the Company acquired all the outstanding shares of Heimbach.

The preliminary fair values of the identifiable intangible assets obtained totaled $ 14.9 million and consisted of the Heimbach trade name and developed technology.

The fair value of the trade name was $ 6.0 million and is considered an indefinite-lived asset because of Heimbach's rich brand heritage and customer service to the paper machine clothing industry.

The fair value of the developed technology was $ 8.9 million and includes intellectual property-related technologies as well as know-how developed by Heimbach;

and is being amortized over its economic period of benefit, which is 9 years.

See Note 24, Business Combination , of the Notes to the Consolidated Financial Statements, for additional information.

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Goodwill and Other Intangible Assets — (continued)

or quantitative approach.

Impairment is the condition that exists when the carrying amount of a reporting unit,

including goodwill, exceeds its fair value.

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.

We are continuing to amortize certain patents, trademarks and names, customer contracts, relationships and

technology assets that have finite lives.

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

The changes in intangible assets and goodwill from December 31, 2021 to December 31, 2023, were as follows:

1 unchanged sentence

Amortization life in years

Balance at December 31, 2021 Amortization

Balance at December 31, 2022 Acquisition

Currency Translation

7 unchanged sentences

994 — ( 83 ) — 911

AEC Customer contracts 6

720 ( 720 ) — —

AEC Customer relationships 8 - 15

28,899 — ( 3,480 ) 66 25,485

Heimbach Developed technology

— 8,918 ( 310 ) 124 8,732

Total Finite-Lived intangible assets, net $ 33,811 $ 8,918 $ ( 4,452 ) $ 299 $ 38,576

Indefinite-lived intangible assets:

Heimbach Trade name

$ — $ 5,982 $ — $ 88 $ 6,070

65,441 — — 1,432 66,873

112,776 — — 532 113,308

Total Indefinite-lived intangible assets

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Goodwill and Other Intangible Assets — (continued)

$ 178,217 $ 5,982 $ — $ 2,052 $ 186,251

(in thousands, except for years)

Amortization life in years

Balance at December 31,

2020 Amortization Currency

Amortization life in years Balance at December 31,

2021 Other Changes Amortization Currency

Translation Balance at December 31,

10 unchanged sentences

32,527 — ( 3,474 ) ( 154 ) 28,899

AEC Other intangibles 5

16 ( 16 ) — —

Total Finite-Lived intangible assets, net $ 39,081 $ — $ ( 4,842 ) $ ( 428 ) $ 33,811

3 unchanged sentences

Total Indefinite-lived intangible assets

$ 182,124 $ — $ — $ ( 3,907 ) $ 178,217

As of December 31, 2023, the gross carrying amount and accumulated amortization of Finite-lived intangible assets was $ 87.1 million and $ 48.5 million, respectively.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Goodwill and Other Intangible Assets — (continued)

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

5 unchanged sentences

(in thousands)

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Accrued Liabilities

Accrued liabilities consist of:

Accrued liabilities as of December 31, 2023 and 2022 consist of the following:

(in thousands)

10 unchanged sentences

Other 9,671 5,830

Total $ 126,385 $ 124,325

Total accrued liabilities $ 142,988 $ 126,385

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Financial Instruments

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

Debt principally consists of a revolving credit agreement and foreign bank debt assumed in the acquisition of Heimbach.

The following table represents our outstanding debt as of December 31, 2023 and 2022:

(in thousands, except interest rates) 2023 2022

Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.16 % in 2022 and 3.74 % in 2021 (including the effect of interest rate hedging transactions, as described below), due in 2024

Borrowings under the Amended Credit Agreement (1)

$ 446,000 $ 439,000

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

Principal payments of $ 439 million are due on long-term debt in 2024.

Foreign bank debt 10,885 —

Total bank debt 456,885 439,000

Current maturities of long-term debt 4,218 —

Long-term debt $ 452,667 $ 439,000

(1) The credit facility matures in August 2028.

At the end of the December 31, 2023 and December 31, 2022, the interest rate in effect was 3.49 percent and 3.16 percent, respectively, including the effect of interest rate hedging transactions, as described below.

Principal payments on long-term debt are due in amounts of $ 3.4 million in 2025, $ 1.3 million in 2026, $ 1.2 million in 2027, $ 446.4 million in 2028 and $ 0.4 million in 2029 and beyond.

Cash payments of interest amounted to $ 18.7 million in 2023, $ 16.0 million in 2022 and $ 14.9 million in 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, $ 439 million of borrowings were outstanding as of December 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 December 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, and without modification to any other credit agreements, as of December 31, 2022, we would have been able to borrow an additional $ 261 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).

Amended Credit Agreement

On August 16, 2023, we entered into a $ 800 million unsecured committed Five-Year Revolving Credit Facility Agreement (the “Amended Credit Agreement”), which amended and restated the prior $ 700 million committed Four-Year Revolving Credit Facility Agreement, entered into on October 27, 2020 (the “Prior Agreement”).

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

The Borrowings are guaranteed by certain of the Company's subsidiaries, including all significant U.S.

subsidiaries (subject to certain exceptions), as were borrowings under the Prior Agreement.

On June 23, 2023, we entered into the first Amendment to the Prior 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 0.0 %).

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

These amendments are also reflected in the Amended Credit Agreement.

The applicable interest rate for borrowings under the Amended Credit Agreement 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 Term Benchmark/ Daily

Simple SOFR 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 %

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Financial Instruments — (continued)

As of December 31, 2023, the applicable interest rate for borrowings under the Amended Credit Agreement was based on one-month term SOFR plus the spread, which was 1.625 %.

As of December 31, 2023, there was $ 446 million of borrowings outstanding under the Amended Credit Agreement and we had borrowings available of $ 354 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 including affirmative covenants, negative covenants and events of default.

Under the Amended Credit Agreement, we are required to maintain a leverage ratio (as defined in the Amended Credit Agreement) of not greater than 3.75 to 1.00, or 4.25 to 1.00 after a significant acquisition.

We are also required to maintain a minimum interest coverage ratio (as defined in the Amended Credit Agreement) of greater than 3.00 to 1.00.

As of December 31, 2023, our leverage ratio was 1.25 to 1.00 (as defined in the Amended Credit Agreement) and our interest coverage ratio was 14.13 to 1.00.

If our leverage ratio exceeds 3.50 to 1.00, we will be restricted in paying dividends to a maximum amount of $ 40 million in a calendar year.

As of December 31, 2023, we were in compliance with all applicable covenants.

We anticipate continued compliance in each of the next four quarters while continuing to monitor 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).

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

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 those 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 December 16, 2022, one month LIBOR was 4.33 %.

On December 16, 2022, t he all-in-rate on the $ 350 million of debt was 2.463 %.

These transactions had 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 Prior 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.

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 pay a fixed blended rate of 0.7683 % (plus a credit spread adjustment as defined in the Swap Agreements) through October 27, 2024 on $ 350 million of borrowings under the Amended Credit Agreement and the counterparties pay a floating rate based on the one-month term SOFR at each monthly calculation date, which on December 18, 2023 was 5.36 %.

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

As of December 18, 2023, the all-in-rate on the $ 350 million of debt was 2.51 %.

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

These transactions had 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 2.11 % during the period.

These transactions had the effect of fixing the LIBOR portion of the effective interest rate (before the addition of the spread) on $ 350 million of indebtedness drawn under the Prior Agreement at the rate of 2.11 % during the period.

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 %.

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

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 18, Fair-Value Measurements , of the Notes to the Consolidated Financial Statements.

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

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

As of December 31, 2022, our leverage ratio was 1.25 and our interest coverage ratio was 15.17 .

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

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

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

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.

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 December 31, 2022, or at December 31, 2021, other than certain pension assets (see Note 4).

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

Assumed Foreign Bank Debt

With the August 31, 2023 acquisition of Heimbach, the Company assumed bank debt in the amount of $ 32.7 million, held by several European financial institutions with interest rates ranging from 0.98 percent to 5.52 percent and maturity dates ranging from September 25, 2023 to June 30, 2031.

Certain bank agreements allowed for

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Fair-Value Measurements — (continued)

the repayment of the debt upon demand by certain financial institutions in the event of a change in control.

As a result, $ 18.6 million of the debt was repaid in the fourth quarter of 2023.

At December 31, 2023, the balance of Heimbach's debt was $ 10.9 million, of which $ 4.2 million was classified as Current maturities on long-term debt.

Fair-Value Measurements

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 December 31, 2023, or at December 31, 2022, other than certain pension assets (see Note 4, Pension, Postretirement, and Other Benefit Plans , of the Notes to the Consolidated Financial Statements).

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:

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Cash equivalents $ 27,157 $ — $ 6,533 $ —

Foreign currency option contracts

Foreign currency forward contracts

Other Assets:

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Interest rate swaps — 12,214 — 23,605

Other noncurrent liabilities:

Interest rate swaps — — — ( 5,176 )

_____________________

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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.

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.

Amounts determined to be due within one year are reclassified to Other current assets in the Consolidated Balance Sheets.

Unrealized gains and losses on the

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

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

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 17, Financial Instruments , of the Notes to the Consolidated Financial Statements for additional information).

As of December 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), and amortization related to the swap buyouts, affect earnings.

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 (income)/expense related to payments under the active swap agreements totaled $( 15.0 ) million in 2023, $ 0.5 million in 2022 and $ 7.1 million in 2021.

Additionally, non-cash interest income related to the amortization of swap buyouts totaled $ 0.0 million in 2022, $ 0.3 million in 2021, and $ 1.4 million in 2020.

Additionally, non-cash interest expense (income) related to the remaining amortization of swap buyouts was $( 0.3 ) million in 2021.

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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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.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Fair-Value Measurements — (continued)

(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:

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Operating leases $ 50,637 $ 50,190

Finance leases — 14,515

Postretirement benefits other than pensions 25,876 31,998

Pension liabilities 59,431 23,061

Interest rate swap agreements — 5,176

Incentive and deferred compensation 1,957 1,395

Other 1,484 2,114

Total $ 108,758 $ 107,794

Pension and postretirement liabilities decreased during 2022 as a result of actions taken to settle the U.S.

Pension Plus plan, which, in addition to significant net actuarial gains, lead to a reduction in unfunded pension liabilities.

Total other noncurrent liabilities $ 139,385 $ 108,758

On August 31, 2023, the Company completed the acquisition of Heimbach.

Included in the fair value of liabilities assumed was $ 35.3 million of pension liabilities, net, of which $ 33.6 million was recorded to Other noncurrent

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

liabilities, and the remainder was recorded to Accrued liabilities in our Consolidated Balance Sheets.

See Note 24, Business Combination , of the Notes to the Consolidated Financial Statements for additional information .

We are generally the lessee in our lease transactions.

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Notes to Consolidated Financial Statements

Leases — (continued)

The components of lease expense were as follows:

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Due to the non-cash nature of the transaction, those increases are excluded from amounts reported in the Consolidated Statements of Cash Flows.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Leases — (continued)

Supplemental balance sheet information related to leases was as follows:

6 unchanged sentences

Total operating lease liabilities $ 57,972 $ 56,119

Finance leases

Right-of-use assets included in Property, plant and equipment, net $ — $ 7,979

Lease liabilities included in

Accrued liabilities $ — $ 1,606

Other noncurrent liabilities — 14,515

Total finance lease liabilities $ — $ 16,121

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Additional information for leases existing at December 31, 2023 and 2022 was as follows:

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Operating leases 10 years 11 years

Finance leases 0 years 8 years

Weighted average discount rate

Operating leases 5.4 % 5.3 %

Finance leases — 8.0 %

Maturities of lease liabilities as of December 31, 2023 were as follows:

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Year ending December 31,

Thereafter 36,834

Total lease payments 73,884

Less imputed interest ( 17,765 )

Total $ 56,119

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Leases — (continued)

Maturities of lease liabilities as of December 31, 2021 were as follows:

(in thousands) Operating leases Finance leases

Year ending December 31,

2024 $ 10,627

2023 3,412 3,004

2024 2,199 3,004

2025 1,801 3,004

2026 1,782 3,004

Thereafter 32,990

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The total cost of resolving all claims was $ 10.7 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.

Of this amount, almost 100 percent 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.

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.

Incentive Plans

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

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

Stock-Based Compensation

We have cash-based and stock-based incentive compensation plans that can be awarded for key employees, which are designed to reward short and long-term contributions and used as retention incentives for key senior management.

We grant stock-based awards in the form of restricted stock units that are generally settled with the issuance of Class A shares.

We grant performance phantom stock units that are treated as liability-based awards and are generally settled in cash.

The vesting periods generally range between one and five years from the grant date.

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

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

The Albany International 2017 Incentive Plan provides key members of management with incentive compensation based on achieving certain performance or service measures.

Awards can be paid in cash, shares of Class A Common Stock, Options, or other stock-based or incentive compensation awards pursuant to the Plan.

Participants may elect to receive shares net of applicable income taxes.

Performance and Retention Awards

The Albany International 2017 and 2023 Long-term Incentive Plans provide senior executive members of management with incentive compensation based on achieving certain performance or service measures.

Awards can be settled in cash or shares of Class A Common Stock.

If the settlement is in the form of Class A Common Stock, participants may elect to receive shares net of applicable income taxes.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Incentive Plans — (continued)

Annual awards granted under this plan resulted in cash payments of $ 4.5 million in 2022 and $ 3.1 million in 2021 as a result of performance in the preceding year.

The Compensation Committee granted the executive management team a multi-year incentive compensation award in each of 2020, 2021 and 2022.

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

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

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

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

Stock-Based Compensation — (continued)

Annual Performance Period Awards

Annual cash-based incentives were granted to executives as annual performance period ("APP") awards.

Cash payments of $ 3.9 million in 2023, $ 4.5 million in 2022 and $ 3.1 million in 2021 were made as a result of the performance in the preceding year.

In addition, due to the vesting of certain compensation costs for the former CEO who retired during 2023, an additional $ 0.9 million in cash payments were made.

Multi-Year Performance Plan Awards

Long-term performance incentives were granted to executives as multi-year performance plan ("MPP") awards in each of 2021, 2022 and 2023.

Each of these awards vests three years after the grant date, and the extent of payout is dependent upon the achievement of certain performance metrics during the three-year performance period, as defined by the Compensation Committee of the Board of Directors.

Settlement of the awards are scheduled to occur no later than 90 days after the end of the performance period.

If a participant terminates employment prior to the award becoming fully vested, the participant forfeits a portion of the MPP award.

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

MPP awards are generally settled in shares.

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

1 unchanged sentence

The net impact to earnings for the respective years was $ 4.3 million, $ 2.7 million, and $ 2.6 million.

Based on current estimates of achievement of certain performance metrics, we anticipate recognizing $ 1.2 million of expense in 2022 and $ 0.3 million of expense in 2023 and 2024, respectively.

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

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

We recognized $ 1.5 million of expense in 2022 associated with these restricted stock units.

Based on current estimates of achievement of certain performance metrics, we anticipate recognizing $ 1.6 million of expense in 2024 and $ 0.5 million of expense in 2025.

Restricted Stock Unit Awards

Long-term restricted stock unit awards (“RSU”) were granted to executives and vest annually and settle in shares no later than 90 days after the vesting period ends.

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

We recognized $ 4.2 million of expense in 2023 associated with these RSU’s which included $ 1.7 million as a result of accelerated vesting for the former CEO who retired during 2023.

The net impact to earnings was $ 3.5 million.

Expense recognized for RSU’s was $ 1.5 million in 2022 and $ 0.6 million in 2021, and the net impact to earnings during these respective years was $ 1.0 million and $ 0.4 million.

Based on RSU’s outstanding at December 31, 2023, we expect to record approximately $ 1.8 million of expense in 2024 and $ 1.5 million of expense in 2025.

In addition, during 2023, RSU awards with performance conditions were issued as special retention incentives to certain executives.

The 2023 expense for these awards was $ 0.9 million, for which the net impact to earnings was $ 0.8 million.

Based on awards outstanding at December 31, 2023, we expect to record approximately $ 2.1 million of expense in 2024.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Stock-Based Compensation — (continued)

As of December 31, 2023, there were 1,631,328 shares of Company stock authorized for the payment of awards under these plans.

Information with respect to these plans is presented below:

(in thousands, except number of shares and weighted average grant date value per share)

Number of shares Weighted average grant date value

13 unchanged sentences

Shares potentially payable at December 31, 2023 138,808 $ 84.41 $ 11,717

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

Performance Phantom Stock

Long-term cash retention incentives with a performance component were granted to members of management as Phantom Stock Plan ("PSP") awards.

Awards under this plan vest over a 3 to 5 year period and are paid annually in cash based on current market prices of the Company’s stock.

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

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

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Incentive Plans — (continued)

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

Information with respect to the PSP is presented below:

Number of shares Weighted average value per

share Cash paid for share based

liabilities (000's)

Share units potentially payable at January 1, 2020 215,072

Grants 63,104

Changes due to performance 27,921

Payments ( 80,808 ) $ 73.04 $ 5,848

Forfeitures ( 11,441 )

Share units potentially payable at December 31, 2020 213,848

Grants 56,536

Changes due to performance 52,296

Payments ( 68,622 ) $ 74.22 $ 5,093

Forfeitures ( 5,644 )

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

Grants 49,863

Changes due to performance 34,539

Payments ( 81,421 ) $ 85.69 $ 6,977

Forfeitures ( 24,644 )

Share units potentially payable at December 31, 2022 226,751

During 2020, 2021 and 2022, the Company granted restricted stock units to executives.

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

The vesting and payments due under these grants will occur in various periods from 2020 to 2024.

Expense recognized for these grants was $ 1.5 million in 2022, $ 0.6 million in 2021, and $ 0.4 million in 2020.

The net impact to earnings for the respective years was $ 1.0 million, $ 0.4 million, and $ 0.3 million.

Based on awards outstanding at December 31, 2022, we expect to record approximately $ 1.0 million of compensation cost during 2023.

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

The Plan, known as the Prosperity Plus Savings Plan, is a qualified plan under section 401(k) of the U.S.

Internal Revenue Code.

The Company matches, in the form of cash, between 50 percent and 100 percent of employee contributions up to a defined maximum.

The investment of employee contributions to the plan is self-directed.

The Company’s cost of the plan amounted to $ 6.6 million in 2022, $ 6.2 million in 2021, and $ 6.5 million in 2020.

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

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

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

The expense recorded for this plan was $ 4.6 million in 2022, $ 4.8 million in 2021, and $ 3.6 million in 2020.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Non-employee Director stock compensation

The Company’s independent Directors are paid an annual retainer, of which a certain amount is required to be paid in shares.

The total number of shares paid to each independent Director is determined by the share closing price on the day of the Annual Meeting at which the election of Directors occurs.

This resulted in compensation expense of $ 1.1 million in 2023, $ 1.1 million in 2022, and $ 0.8 million in 2021 that was distributed in the form of shares.

Shareholders’ Equity

We have two classes of Common Stock, Class A Common Stock and Class B Common Stock, each with a par value of $ 0.001 and equal liquidation rights.

Each share of our Class A Common Stock is entitled to one vote on all matters submitted to shareholders, and each share of Class B Common Stock is entitled to 10 votes.

Class A and Class B Common Stock will receive equal dividends as the Board of Directors may determine from time to time.

The Class B Common Stock is convertible into an equal number of shares of Class A Common Stock at any time.

As of December 31, 2022, there were no Class B Common Stock outstanding nor any were anticipated to be issued.

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

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

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

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

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

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

Standish and John C.

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

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

We currently have one class of Common Stock, Class A Common Stock, with a par value of $ 0.001 .

Each share is entitled to one vote on all matters submitted to shareholders, and will receive dividends as approved by the Board of Directors.

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.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Shareholders’ Equity — (continued)

opportunities and capital structure.

As of December 31, 2023, the Company has repurchased in total 1,308,003 shares for a total cost of $ 109.4 million.

Of this, 1,022,717 shares were purchased in 2022 for $ 85.1 million and 285,286 shares were purchased in 2021 for $ 24.4 million.

We are currently authorized to repurchase shares up to $ 90.6 million.

Activity in Shareholders’ equity for 2021, 2022, and 2023 is presented below:

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Net income — — — — — 118,478 — — — 290 118,768

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

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

1 unchanged sentence

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

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

Dividends declared

3 unchanged sentences

— — — — — ( 647 ) — — — — ( 647 )

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

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

Pension and postretirement liability adjustments — — — — — — 1,171 — — — 1,171

Derivative valuation adjustment — — — — — — 7,930 — — — 7,930

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

ALBANY INTERNATIONAL CORP.

2 unchanged sentences

(in thousands) Class A

Additional paid-in capital Retained earnings Accumulated items of other

Common Stock Class B

Common Stock Additional paid-in capital Retained earnings Accumulated items of other

comprehensive income Class A

Treasury Stock

Noncontrolling Interest Total Equity

Treasury Stock Noncontrolling Interest Total Equity

Shares Amount Shares Amount Shares Amount

Derivative valuation adjustment — — — — — — ( 6,409 ) — — — ( 6,409 )

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

January 1, 2022 40,760 $ 41 — $ — $ 436,996 $ 863,057 $ ( 145,984 ) 8,665 $ ( 280,143 ) $ 3,638 $ 877,605

Net income — — — — — 95,762 — — — 746 96,508

2 unchanged sentences

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

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

Purchase of Treasury shares (c) — — — — — — — 1,023 ( 85,065 ) — ( 85,065 )

Dividends declared

Class A Common Stock, $ 0.81 per share

— — — — — ( 27,501 ) — — — — ( 27,501 )

Class B Common Stock, $ 0.81 per share

— — — — — ( 647 ) — — — — ( 647 )

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

Cumulative translation adjustments — — — — — — ( 40,971 ) — — 110 ( 40,861 )

Pension and postretirement liability adjustments — — — — — — ( 3,491 ) — — — ( 3,491 )

Settlement of certain pension liabilities — — — — — — 26,198 26,198

Derivative valuation adjustment — — — — — — 19,321 — — — 19,321

December 31, 2022 40,785 $ 41 — $ — $ 441,540 $ 931,318 $ ( 144,927 ) 9,675 $ ( 364,923 ) $ 4,494 $ 867,543

(in thousands) Class A

Additional paid-in capital Retained earnings Accumulated items of other

comprehensive income Class A

Treasury Stock

Noncontrolling Interest Total Equity

Shares Amount Shares Amount Shares Amount

January 1, 2023 40,785 $ 41 — $ — $ 441,540 $ 931,318 $ ( 144,927 ) 9,675 $ ( 364,923 ) $ 4,494 $ 867,543

Net income — — — — — 111,120 — — — 490 111,610

Compensation and benefits paid or payable in shares 71 — — — 5,851 — — — — — 5,851

Options exercised 1 — — — 17 — — — — — 17

Shares issued to Directors' — — — — 827 — — ( 13 ) 258 — 1,085

Purchase of Treasury shares (d) — — — — — — — 1,023 ( 85,065 ) — ( 85,065 )

Dividends declared

1 unchanged sentence

— — — — — ( 31,496 ) — — — — ( 31,496 )

Initial equity related to Noncontrolling interest in Arcari — — — — — — — — — 509 509

Cumulative translation adjustments — — — — — — 21,950 — — 459 22,409

Pension and postretirement liability adjustments — — — — — — ( 1,563 ) — — — ( 1,563 )

Settlement of certain pension liabilities — — — — — — 26,198 — — — 26,198

Derivative valuation adjustment — — — — — — ( 8,628 ) — — — ( 8,628 )

December 31, 2023 40,856 $ 41 — $ — $ 448,218 $ 1,010,942 $ ( 133,168 ) 9,662 $ ( 364,665 ) $ 5,952 $ 967,320

ALBANY INTERNATIONAL CORP.

1 unchanged sentence

Shareholders’ Equity — (continued)

(in thousands) Class A

Additional paid-in capital Retained earnings Accumulated items of other

comprehensive income Class A

Treasury Stock

Noncontrolling Interest Total Equity

Shares Amount Shares Amount Shares Amount

Derivative valuation adjustment — — — — — — 19,321 — — — 19,321

December 31, 2022 40,785 $ 41 — $ — $ 441,540 $ 931,318 $ ( 144,927 ) 9,675 $ ( 364,923 ) $ 4,494 $ 867,543

(a) As described in Note 1, the Company adopted the provisions of ASC 326, Current expected credit losses (CECL) effective January 1, 2020, which resulted in a decrease to Retained earnings of $ 1.4 million.

(b) 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.

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

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

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

(b) Class B Stock had a par value of $ 0.001 , was entitled to 10 votes on all matters submitted to shareholders, and received dividends as approved by the Board of Directors.

In 2021, Standish Family Holdings, LLC executed a secondary offering of Albany shares.

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

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

(d) In 2022, as part of the Share Repurchase program, the Company repurchased 1,022,717 shares totaling $ 85.1 million.

Since December 31, 2022, there were no Class B Common Stock outstanding nor will any Class B shares be issued.

Business Combination

On August 31, 2023, the Company acquired all of the outstanding shares of Heimbach, a privately-held manufacturer of paper machine clothing with headquarters in Düren, Germany.

Heimbach is a global supplier of paper machine clothing for the production of all grades of paper and cardboard on all machine types as well as high-tech textile products used in a variety of sectors, such as the food processing, chemicals, construction materials and automotive industries.

Heimbach is now a division under the MC segment.

The Paper Machine Clothing ("PMC") industry has attractive dynamics and the acquisition of Heimbach provides increased scale and complementary technology that further drives the MC segment's differentiated manufacturing, sales and service network.

The acquisition was accounted for under the acquisition method in accordance with ASC 805, Business Combinations.

The acquisition was funded using cash on-hand.

The following table summarizes the total consideration paid, excluding debt assumed, for the acquisition of Heimbach:

(in thousands) August 31, 2023

Cash consideration $ 145,816

Indemnity release ( 1,750 )

Total consideration paid $ 144,066

The assets acquired and the liabilities assumed were recorded based on their preliminary fair values at the date of acquisition as follows:

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Business Combination — (continued)

(in thousands) August 31, 2023

Assets acquired:

Cash and cash equivalents $ 12,347

Accounts receivable 51,569

Inventories 41,864

Property, plant and equipment 125,117

Other intangible assets 14,901

Other current assets 7,745

Other noncurrent assets $ 6,703

Total assets acquired $ 260,246

Liabilities assumed:

Assumed debt $ 32,700

Accounts payable 8,243

Accrued liabilities 27,674

Other noncurrent liabilities 35,910

Income taxes payable 288

Deferred tax liabilities 10,856

Total liabilities assumed $ 115,671

Net assets acquired $ 144,575

Noncontrolling interest $ ( 509 )

Total consideration $ 144,066

For the period ended December 31, 2023, the Company incurred acquisition related costs of $ 4.1 million.

These costs are included in Selling, general and administrative expenses in the Consolidated Statements of Income.

The purchase price allocation for the acquisition was based upon a preliminary valuation and the Company’s estimates and assumptions are subject to change as the Company obtains additional information during the measurement period.

During the fourth quarter of 2023, the Company identified immaterial measurement period adjustments primarily related to fair value estimates.

The measurement period adjustments resulted from the refinement of inputs used to calculate the fair value of trade receivables, inventory, equipment, developed technologies, and accrued expenses based on facts and circumstances that existed as of the Acquisition Date.

The Company is still completing the valuations of certain pension liabilities, which is expected to be completed during the first six months of 2024.

The fair values of property, plant and equipment of $ 125.1 million were determined using the cost-approach because the cost-approach was considered appropriate for the valuation analysis, and because sufficient information was available for this use.

Since August 31, 2023, the Company recorded $ 4.0 million of depreciation expense.

The fair values of the identifiable intangible assets totaling $ 14.9 million, consisting of the Heimbach trade name and developed technology, was determined using the income approach, specifically, a relief from royalty method.

The fair value of the trade name was $ 6.0 million and is considered an indefinite-lived asset because of Heimbach's rich brand heritage and customer service to the paper machine clothing industry dating back to 1811.

The fair value of the developed technology was $ 8.9 million and includes intellectual property-related technologies as well as know-how developed by Heimbach and is being amortized over its economic period of benefit, which is 9 years.

ALBANY INTERNATIONAL CORP.

Notes to Consolidated Financial Statements

Business Combination — (continued)

amortization period represents the estimated useful life of the asset.

Since August 31, 2023, the Company recorded $ 0.3 million of intangible amortization expense.

The fair values of assets acquired included $ 3.4 million of operating lease right-of-use assets, as well as $ 3.4 million of operating lease liabilities assumed, of which $ 1.2 million was considered current and recorded to Accrued liabilities in our Consolidated Balance Sheets.

Debt assumed included $ 32.7 million aggregate outstanding amount of bank debt with several European financial institutions with interest rates ranging from 0.98 percent to 5.52 percent and maturity dates ranging from September 25, 2023 to June 30, 2031.

Bank agreements allowed for the repayment of the debt upon demand by certain financial institutions in the event of a change in control.

Some of the assumed bank debt may become due upon notification by those financial institutions before the maturity date of the bank agreements.

During the fourth quarter of 2023, we repaid $ 18.6 million of the debt assumed.

At December 31, 2023, the balance of the foreign debt was $ 10.9 million, of which $ 4.2 million was classified as Current maturities on long-term debt.

The preliminary fair value of the liabilities assumed include $ 35.3 million of pension liabilities for various defined benefit plans.

Heimbach's results of operations have been included in the Company's financial statements for the period subsequent to the completion of the acquisition on August 31, 2023.

Heimbach contributed $ 51.2 million of revenue and a $ 6.3 million operating loss for the period ended December 31, 2023.

Pro Forma Information (Unaudited)

The following table reflects the unaudited pro forma operating results of the Company for the years ended December 31, 2023 and 2022 which assumes the acquisition of Heimbach occurred on January 1, 2022.

The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances.

The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition of Heimbach been effective January 1, 2022, nor are they intended to be indicative of results that may occur in the future.

The underlying pro forma information includes the historical results of the Company and Heimbach adjusted for certain items discussed below.

The pro forma information does not include the effects of any synergies, cost reduction initiatives or anticipated integration costs related to the acquisition.

Years ended December 31,

(in thousands) 2023 2022

Net revenues $ 1,265,379 $ 1,206,420

Net income attributable to the Company $ 109,710 $ 91,583

These pro forma results include adjustments such as inventory step-up, amortization of acquired intangible assets, depreciation of acquired property, plant and equipment and the adoption of U.S.

accounting standards.

Material pro forma adjustments directly attributable to the acquisition of Heimbach for the year ended December 31, 2022 primarily include an increase in cost of goods sold of $ 5.5 million related to the step-up of acquired inventory.

The pro forma information for the year ended December 31, 2023 includes an increase in selling, general and administrative costs of $ 4.1 million for acquisition-related costs.

Subsequent Events

We evaluated subsequent events through the issuance date of these financial statements in Form 10-K.

No material subsequent events were identified that require disclosure.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data