What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-04-29 · 139 added, 66 removed, 199 unchanged (51% of the section changed)

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Business Environment Overview and Trends

Please refer to the Business Environment Overview and Trends in the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.

During the second quarter of 2024, the MC segment continued to see challenges in Europe, and, to a lesser degree, softness in North America and China.

However, our global backlog remains stable.

The integration of Heimbach continues to be on track with our internal plans.

We transitioned Heimbach’s PMC businesses onto our SAP platform in July, an integral step to integrate Heimbach into the MC business.

The AEC segment continues to increase production levels on commercial, defense, and space programs.

For the first half of 2024, the AEC segment has been awarded over $900 million in awards mostly on defense programs, and modest awards on commercial and space programs.

While both major large aircraft manufacturers, Boeing and Airbus SE, had earlier announced increases in build rates in 2024 compared to 2023, due to continued quality issues at Boeing, Boeing has slowed their production rate on 737 MAX.

Additionally, Airbus SE has given indications that their expected ramp on the A320 will be pushed out beyond previous expectations.

We have decreased our LEAP production forecast for the remainder of 2024 and we are working with our customer, Safran, to determine the appropriate production volumes for our LEAP production into 2025.

Also, please refer to the Business Environment Overview and Trends in the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.

The Annual Report on Form 10-K, along with the Company's other filings, can be found on the Securities and Exchange Commission's website, www.sec.gov, as well as on the Company's website:

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The following table summarizes our Net revenues by business segment:

Three months ended March 31,

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

(in thousands, except percentages)

2024 2023 % Change

2024 2023 % Change 2024 2023 % Change

Machine Clothing $ 193,578 $ 159,217 21.6 % $ 378,795 $ 312,439 21.2 %

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Total $ 331,994 $ (1,347) $ 333,341 $ 274,123 21.6 %

(in thousands, except percentages)

Net revenues as reported, YTD 2024 (Decrease)/ increase due to changes in currency translation rates YTD 2024 revenues on same basis as 2023 currency translation rates Net revenues as reported, YTD 2023 % Change compared to 2023, excluding currency rate effects

Machine Clothing $ 378,795 $ (1,726) $ 380,521 $ 312,439 21.8 %

Albany Engineered Composites

266,529 2 266,527 230,780 15.5 %

Total $ 645,324 $ (1,724) $ 647,048 $ 543,219 19.1 %

Three month comparison

Net revenues increased 21.1% compared to the same period in 2023, driven by $39.8 million of Net revenues from the Heimbach acquisition and higher Net revenues in AEC, partially offset by lower organic Net revenues at MC.

MC's Net revenues increased 20.9% compared to the first quarter of 2023, driven by Heimbach Net revenues of $37.9 million.

This was partially offset by $5.3 million of lower Net revenues in the rest of the segment, driven primarily by weakness in publication globally, and in all grades in Europe.

This decrease was partially offset with increases in revenues in North America.

MC's Net revenues increased 21.6% compared to the second quarter of 2023, driven by Heimbach Net revenues of $39.8 million.

This was partially offset by $4.3 million of lower Net revenues in the rest of the segment, due to decreased sales in pulp, packaging and publication grades, net of increased sales in tissue grades and engineered fabrics.

Changes in currency translation rates had the effect of decreasing Net revenues $1.1 million.

AEC's Net revenues increased 10.6%, primarily driven by growth on commercial and space programs, partially offset by lower revenues on defense programs.

Changes in currency translation rates had the effect of increasing Net revenues $0.2 million.

AEC's Net revenues increased 20.5%, primarily driven by growth on CH-53K, Boeing 787 Frames, and other commercial and space programs.

Changes in currency translation rates had had an insignificant effect on Net revenues.

Six month comparison

Net revenues increased 18.8% compared to the same period in 2023, driven by $77.7 million of Net revenues from the Heimbach acquisition and higher Net revenues in AEC, partially offset by lower organic Net revenues at MC.

MC's Net revenues increased 21.2% compared to the same period in 2023, driven by Heimbach Net revenues of $77.7 million.

This was partially offset by $9.6 million of lower Net revenues in the rest of the segment, driven primarily by weakness in publication globally, and in most grades in Europe, as well as decreased sales in packaging grades.

Changes in currency translation rates had the effect of decreasing Net revenues $1.7 million.

AEC's Net revenues increased 15.5%, primarily driven by growth on commercial and space programs, including Boeing 787 Frames, as well as growth on certain defense programs, including CH-53K.

Changes in currency translation rates had an insignificant effect on Net revenues.

The following table summarizes Gross profit by business segment:

Three months ended March 31,

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

(in thousands, except percentages)

2024 2023 2024 2023

Machine Clothing $ 88,873 $ 80,919 $ 173,528 $ 158,774

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% of Net revenues 33.9 % 37.5 % 34.3 % 37.2 %

Three month comparison

The increase in 2024 Gross profit, as compared to the same period last year, was driven by higher sales in both segments.

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Excluding Heimbach, MC's gross profit margin increased to 51.7% in 2024.

• AEC's gross profit margin remained largely in line with the prior year, increasing from 18.5% in 2023 to 18.8% in 2024, driven by a favorable shift in program revenue mix.

Changes in the estimated profitability of long-term contracts decreased operating income by $0.9 million in 2024, as compared to a decrease of $0.7 million during the same period last year.

• AEC's gross profit margin decreased from 19.0% in 2023 to 17.0% in 2024, driven primarily by changes in the estimated profitability of long-term contracts, which decreased gross profit by $5.0 million in 2024, as compared to a decrease of $1.9 million during the same period last year.

Six month comparison

The increase in Gross profit during the first half of 2024, as compared to the same period in 2023, was driven by higher sales in both segments.

Gross profit as a percentage of revenues was as follows:

• MC's gross profit margin decreased from 50.8% in 2023 to 45.8% in 2024.

This margin decrease was primarily attributable to lower gross margin at Heimbach.

Excluding Heimbach, MC's gross profit margin increased to 51.9% in 2024.

• AEC's gross profit margin decreased from 18.7% in 2023 to 17.8% in 2024, driven primarily by changes in the estimated profitability of long-term contracts, which decreased gross profit by $7.6 million in 2024, as compared to a decrease of $4.0 million during the same period last year, partially offset by a favorable shift in revenue mix.

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

The following table summarizes SG&A expenses by business segment:

Three months ended March 31,

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

(in thousands, except percentages)

2024 2023 2024 2023

Machine Clothing $ 26,618 $ 20,682 $ 55,622 $ 43,755

Albany Engineered Composites

8,798 9,185 16,308 16,751

Corporate expenses 20,099 16,893 38,420 34,733

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% of Net revenues 16.7 % 17.0 % 17.1 % 17.5 %

Consolidated SG&A expenses increased 13.1% as compared to 2023, however, as a percentage of Net revenues it decreased from 18.0% in 2023 to 17.5% in 2024.

Three month comparison

Consolidated SG&A expenses increased 18.7% as compared to 2023, however, as a percentage of Net revenues, SG&A expenses decreased from 17.0% in 2023 to 16.7% in 2024.

• MC SG&A expenses increased $5.9 million as compared to 2023, with a $7.4 million increase related to Heimbach, offset by a $1.5 million decrease due to changes in currency translation rates.

• In AEC, SG&A expenses remained largely in line with the prior year, decreasing $0.4 million.

• Corporate SG&A expenses increased $3.2 million, principally due to Heimbach IT-related costs and acquisition and integration related expenses.

Six month comparison

Consolidated SG&A expenses increased 15.9% as compared to 2023, however, as a percentage of Net revenues, SG&A expenses decreased from 17.5% in 2023 to 17.1% in 2024.

The overall increase in SG&A expenses in the first six months of 2024, compared to the same period in 2023, was due to the net effect of the following:

• MC SG&A expenses increased $11.9 million as compared to 2023, of which $16.5 million of the increase related to Heimbach.

Excluding Heimbach, MC's SG&A decreased $3.3 million, driven primarily by changes in currency translation rates, which reduced expenses by $2.8 million, as well as lower consulting fees and incentive compensation costs.

• In AEC, SG&A expenses remained largely in line with the prior year.

• Corporate SG&A expenses increased $0.5 million, principally due to acquisition and integration related expenses.

Excluding Heimbach, MC's SG&A decreased $4.6 million, driven primarily by changes in currency translation rates, which reduced expense by $4.9 million, partially offset by higher employee-related compensation.

• In AEC, SG&A expenses remained largely in line with the prior year, decreasing $0.4 million.

• Corporate SG&A expenses increased $3.7 million, principally due to Heimbach IT-related costs and acquisition and integration related expenses.

Technical and Research

The following table summarizes technical and research expenses by business segment:

Three months ended March 31,

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

(in thousands, except percentages)

2024 2023 2024 2023

Machine Clothing $ 7,504 $ 6,386 $ 15,024 $ 12,184

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4,356 3,932 9,501 8,411

$ 11,860 $ 10,318 $ 24,525 $ 20,595

% of Net revenues 3.6 % 3.8 % 3.8 % 3.8 %

Consolidated Technical and research expenses increased 23.2% as compared to 2023, and as a percentage of Net revenues increased from 3.8% in 2023 to 4.0% in 2024.

Three month comparison

Consolidated Technical and research expenses increased 14.9% as compared to 2023, and as a percentage of Net revenues decreased from 3.8% in 2023 to 3.6% in 2024.

• MC Technical and research expenses increased $1.1 million as compared to 2023, of which $1.6 million was due to the addition of Heimbach.

Excluding Heimbach, material and labor costs were lower as compared to the prior year, driving the decrease in expenses.

• AEC Technical and research expenses increased $0.4 million as compared to 2023, due to increases in research material and labor costs.

Six month comparison

Consolidated Technical and research expenses increased 19.1% as compared to 2023, but as a percentage of Net revenues remained unchanged at 3.8% in both 2023 and 2024.

• MC Technical and research expenses increased $2.8 million as compared to 2023, of which $3.1 million was due to the addition of Heimbach.

Excluding Heimbach, labor costs were lower as compared to the prior year, driving decreases in expenses.

• AEC Technical and research expenses increased $1.1 million as compared to 2023, due to increases in research material and labor costs.

Restructuring Expense, net

In addition to the items discussed above affecting Gross profit, SG&A and Technical and research expenses, Operating income was affected by restructuring expense, net, of $2.2 million in the three months ended March 31, 2024, compared to an insignificant amount in in the same period of 2023.

The following table summarizes restructuring expenses by business segment:

Three months ended March 31,

(in thousands) 2024 2023

In addition to the items discussed above affecting Gross profit, SG&A and Technical and research expenses, Operating income was affected by restructuring expense, net, of $2.1 million in the three months ended June 30, 2024, compared to $0.1 million in in the same period of 2023;

and $4.3 million in the six months ended June 30, 2024, compared to $0.1 million in the same period in 2024.

The following table summarizes Restructuring expenses, net by business segment:

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

(in thousands, except percentages) 2024 2023 2024 2023

Machine Clothing $ 1,066 $ 125 $ 1,087 $ 145

Albany Engineered Composites 922 — 3,110 —

Corporate expenses 115 — 115 —

Consolidated total $ 2,103 $ 125 $ 4,312 $ 145

% of Net revenues 0.7 % 0.0 %

Restructuring costs in the first quarter of 2024 were primarily related to reductions in workforce at various AEC locations, while restructuring charges for the first quarter of 2023 were not significant.

There were no charges related to the impairment of assets for the periods presented.

Restructuring expenses, net in the second quarter of 2024 at MC were primarily related to actions taken to cease operations at the Company's MC forming fabric manufacturing facility in Chungju, South Korea.

This led to a $1.0 million charge to Restructuring expenses, net related to workforce reductions, as well as a $0.5 million charge to Cost of goods sold for the write-off of inventory.

We expect to incur additional restructuring expenses related to this action throughout the remainder of the year.

At AEC, restructuring activities were related to reductions in the workforce at various AEC locations, which resulted in restructuring expenses of $0.9 million during the second quarter and $3.1 million during the first half of 2024.

Restructuring expenses incurred at MC and AEC during 2023 were not significant.

Operating Income

The following table summarizes operating income/(loss) by business segment:

Three months ended March 31,

(in thousands) 2024 2023

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

(in thousands, except percentages) 2024 2023 2024 2023

Machine Clothing $ 53,685 $ 53,726 $ 101,795 $ 102,690

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Other Earnings Items

Three months ended March 31,

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

(in thousands) 2024 2023 2024 2023

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Interest expense/(income), net, was largely in line with the prior year.

See the Working Capital, Liquidity and Capital Structure section for further discussion of borrowings and interest rates.

Financial Instruments in the Notes to Consolidated Financial Statements for further discussion of borrowings and interest rates.

Other (Income)/Expense, net

Other (income)/expense, net, included foreign currency related transactions which resulted in income of $1.3 million in the three months ended March 31, 2024, as compared to losses of $0.1 million in the same period last year.

Other (income)/expense, net, also included gains on changes in fair value of derivative instruments, gains on sales of fixed assets, and rental income.

Other (income)/expense, net, included foreign currency related transactions which resulted in losses of $0.2 million and gains of $1.1 million in the three and six months ended June 30, 2024, respectively, as compared to gains of $4.2 million and $4.1 million in the same period last year.

In addition, changes in the fair value of derivative instruments included losses of $4.4 million and $4.3 million in the three and six months ended June 30, 2024, as compared to gains of $0.1 million and $0.1 million in the same period last year, driven by currency rate movements, most notably the Brazilian Real and Mexican Peso.

Net periodic pension and postretirement costs, other than service costs, were $0.7 million and $1.3 million in the three and six months ended June 30, 2024, respectively, as compared to benefits of $0.1 million and $0.2 million in the same period last year.

Other (income)/expense, net, also included net

proceeds of $0.5 million from the divestiture of assets related to Heimbach during the three and six months ended June 30, 2024, as well as bank fees, amortization of debt issuance costs, and rental income.

Effective Income Tax Rate

Three months ended March 31,

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

2024 2023 2024 2023

Effective income tax rate 27.9 % 42.8 % 28.6 % 36.3 %

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tax costs on foreign pre-tax earnings, and by discrete items that may occur in any given year but are not consistent from year to year.

The Company’s effective tax rate for the first quarter of 2024 was 29.2%, higher compared to 28.2% for the same period in 2023, mainly due to an unfavorable change in the jurisdictional mix of earnings forecasted for 2024.

The Company’s effective tax rate for the second quarter of 2024 was 27.9%, lower compared to 42.8% for the same period in 2023, mainly due to favorable discrete tax adjustments in the current period compared to unfavorable discrete tax adjustments in the prior period.

For the first half of 2024, the Company's effective tax rate was 28.6%, lower compared to 36.3% for the same period in 2023, mainly due to favorable discrete tax adjustments in the current period compared to unfavorable discrete tax adjustments in the prior period.

For more information, see Note 6 , Income Taxes, in the Notes to the Consolidated Financial Statements.

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and global legislative action related to Pillar Two for potential impacts.

On January 17, 2024, the House Ways and Means Committee announced a draft legislation called "The Tax Relief for American Families and Workers Act of 2024".

This act would restore 100% bonus depreciation for property placed in service after December 31, 2022 and before January 1, 2026;

and retroactively restore the ability to deduct domestic research and experimentation costs that were required to be capitalized beginning in 2022 under Section 174.

On January 31, 2024, the United States House of Representatives voted to approve this bill, which is now with the United States Senate.

We will continue to monitor the status of this legislation and assess the potential impact, if passed.

Segment Results of Operations

Machine Clothing Segment

The MC segment accounted for 59% of our consolidated revenues during the first three months of 2024.

The MC segment accounted for 58% and 59% of our consolidated revenues during the three and six months ended June 30, 2024, respectively.

A summary of selected financial results for MC is as follows:

Review of Operations

Three months ended March 31,

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

(in thousands, except percentages)

2024 2023 2024 2023

Net revenues $ 193,578 $ 159,217 $ 378,795 $ 312,439

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Technical and research expenses

7,504 6,386 15,024 12,184

Operating income 53,685 53,726 101,795 102,690

Net revenues increased by 20.9%, driven by Heimbach Net revenues of $37.9 million.

This was partially offset by $5.3 million of lower Net revenues in the rest of the segment, driven primarily by weakness in publication globally, and in all grades in Europe.

This decrease was partially offset with increases in North America.

For the three months ended June 30, 2024, Net revenues increased by 21.6% as compared to the prior year, driven by Heimbach Net revenues of $39.8 million.

This was partially offset by $4.3 million of lower Net revenues in the rest of the segment, driven primarily by decreased sales in pulp, packaging and publication grades, net of increased sales in tissue grades and engineered fabrics.

Changes in currency translation rates had the effect of decreasing Net revenues $1.1 million.

Gross profit increased by $6.8 million as compared to the prior year, driven by the higher sales noted above;

For the six months ended June 30, 2024, Net revenues increased by 21.2% as compared to the prior year, driven by Heimbach Net revenues of $77.7 million.

Changes in currency translation rates had the effect of decreasing Net revenues $1.7 million.

For the three months ended June 30, 2024, Gross profit increased by $8.0 million as compared to the same period in the prior year, driven by the higher sales noted above;

however, gross profit margin decreased from 50.8% in 2023 to 45.9% in 2024.

This margin decrease was primarily driven by lower gross margins at Heimbach.

Excluding Heimbach, MC's gross profit margins increased to 52.1% in 2024 as a result of higher revenues in North America.

Excluding Heimbach, MC's gross profit margins increased to 51.7% in 2024.

For the six months ended June 30, 2024, Gross profit increased by $14.8 million as compared to the same period in the prior year, driven by the higher sales noted above;

however, gross profit margin decreased from 50.8% in 2023 to 45.8% in 2024.

This margin decrease was primarily driven by lower gross margins at Heimbach.

Excluding Heimbach, MC's gross profit margins increased to 51.9% in 2024.

Operating Income

Operating income decreased year-over-year, due to higher SG&A and Technical and research expenses from the Heimbach acquisition in addition to Heimbach's lower gross profit margins.

For the three months ended June 30, 2024, Operating income was largely in line with the prior year.

The addition of Heimbach increased SG&A expenses by $7.4 million and increased Technical and research expenses by $1.6 million.

Excluding Heimbach, SG&A decreased $3.3 million, driven primarily by changes in currency translation rates, which reduced expenses $2.8 million, as well as lower consulting fees and incentive compensation costs.

Excluding Heimbach, SG&A decreased $1.5 million and Technical and research expenses decreased $0.5 million, driven primarily by changes in currency translation rates and reduced material and labor costs.

For the six months ended June 30, 2024, Operating income decreased $0.9 million, principally due to lower gross profit margins and higher SG&A and Technical and research expenses from the Heimbach acquisition.

The addition of Heimbach increased SG&A expenses by $16.3 million and increased Technical and research expenses by $3.1 million.

Excluding Heimbach, SG&A decreased $4.9 million due to changes in currency translation rates, partially offset by higher employee-related compensation, and Technical and research expenses decreased $0.3 million, driven by reduced labor costs.

Albany Engineered Composites ("AEC") Segment

The AEC segment accounted for 41% of our consolidated revenues during the first three months of 2024.

The AEC segment accounted for 42% and 41% of our consolidated revenues during the three and six months ended June 30, 2024, respectively.

A summary of selected financial results for AEC is as follows:

Review of Operations

Three months ended March 31,

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

(in thousands, except percentages)

2024 2023 2024 2023

Net revenues $ 138,416 $ 114,906 $ 266,529 $ 230,780

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SG&A expenses

8,798 9,185 16,308 16,751

Technical and research expenses

4,356 3,932 9,501 8,411

Operating income 9,434 8,668 18,622 18,086

For the three months ended March 31, 2024, Net revenues increased 10.6% as compared to the prior year, driven by growth on commercial and space programs of approximately $17.0 million, partially offset by lower revenues on defense programs.

Changes in currency translation rates had the effect of increasing Net revenues $0.2 million.

For the three months ended June 30, 2024, Net revenues increased 20.5% as compared to the prior year, driven by growth on CH-53K, Boeing 787 Frames, and other commercial and space programs.

Changes in currency translation rates had an insignificant effect on Net revenues.

For the six months ended June 30, 2024, Net revenues increased 15.5%, primarily driven by growth on commercial and space programs, including Boeing 787 Frames, as well as growth on certain defense programs, including CH-53K.

Changes in currency translation rates had an insignificant effect on Net revenues.

AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement.

Revenue earned under these arrangements accounted for approximately 40 percent of segment revenue for the first three months of 2024 and 2023.

Revenue earned under these arrangements accounted for approximately 40 percent of segment revenue for the first six months of 2024 and 2023.

In addition, AEC has long-term contracts in which the selling price is fixed.

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

For the three months ended March 31, 2024, Gross profit increased $2.6 million as compared to the same period last year, and gross profit margin remained largely in line with the prior year, increasing from 18.5% in 2023 to 18.8% in 2024.

The increase in profit margin was driven primarily by a favorable shift in program revenue mix to commercial programs.

For the three months ended June 30, 2024, Gross profit increased $1.7 million as compared to the same period last year, and as a percentage of revenues decreased from 19.0% in 2023 to 17.0% in 2024.

The decrease in profit margin was driven primarily by unfavorable changes in the estimated profitability of long-term contracts as noted below.

For the six months ended June 30, 2024, Gross profit increased $4.3 million as compared to the same period last year, and gross profit margin decreased from 18.7% in 2023 to 17.8% in 2024.

The decrease in profit margin was driven primarily by unfavorable changes in the estimated profitability of long-term contracts as noted below, partially offset by a favorable shift in revenue mix.

Operating Income

For the three months ended March 31, 2024, Operating income decreased $0.2 million, principally due to a $0.7 million increase in Technical and research expenses, as well as restructuring expenses of $2.2 million, as described above.

Changes in the estimated profitability of long-term contracts decreased operating income by $0.9 million in 2024, as compared to a decrease of $0.7 million during the same period last year.

For the three months ended June 30, 2024, Operating income increased $0.8 million, principally due to an increase of $23.5 million in Net revenues and an increase of $1.7 million in Gross profit, offset by restructuring expenses of $0.9 million, as described above.

For the six months ended June 30, 2024, Operating income increased $0.5 million, principally due to an increase of $35.7 million in Net revenues, an increase of $4.3 million in Gross profit, and a reduction of $0.4 million in SG&A, offset by an increase of $1.1 million in Technical and research expenses and restructuring expenses of $3.1 million, as described above.

Changes in the estimated profitability of long-term contracts decreased operating income by $5.0 million for the second quarter of 2024 and decreased operating income $7.6 million for the first half of 2024.

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

Working Capital, Liquidity and Capital Structure

Cash Flow Summary

Three months ended March 31,

Six months ended June 30,

(in thousands)

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(a) Includes Accounts receivable, Contract assets, Inventories, Accounts payable, and Accrued liabilities.

Net cash provided by operating activities was $9.6 million in 2024, compared to net cash used in activities of $16.4 million in the same period last year.

The increase was driven by improved levels of working capital at both segments and lower tax payments during the current period.

Net cash used in investing activities primarily include capital expenditures totaling $26.9 million and $16.3 million for the first three months of 2024 and 2023, respectively, including investments in new aerospace programs and to improve productivity in our MC segment.

Net cash provided by operating activities during the first six months of 2024 was $93.0 million, compared to $14.7 million in the same period last year.

The increase was primarily driven by improved levels of working capital at both

segments, but was most pronounced at AEC, which invested a much more significant amount in working capital during 2023 related to the expanded CH-53K scope of work and the build-up of inventory in the LEAP program as compared to 2024.

Net cash used in investing activities primarily included capital expenditures totaling $45.6 million and $35.0 million for the first six months of 2024 and 2023, respectively, including investments in new aerospace programs and to improve productivity in our MC segment.

Net cash used in financing activities during 2024 was $98.2 million as compared to net cash provided by financing activities of $29.3 million in 2023.

The change was primarily due to lower borrowings that were more than offset by a significant increase in principal payments on debt during the current period.

The change was primarily due to lower borrowings and a significant increase in principal payments on debt during 2024.

Liquidity and Capital Structure

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Our subsidiaries outside of the United States may also maintain working capital lines with local banks.

Under our $800 million unsecured committed Amended Credit Agreement, $429.0 million of borrowings were outstanding as of March 31, 2024.

Under our $800 million unsecured committed Amended Credit Agreement, $370.0 million of borrowings were outstanding as of June 30, 2024.

In addition, we have borrowings outstanding at our newly acquired Heimbach subsidiary of $7.1 million, of which $2.7 million was considered current.

As of March 31, 2024, we had cash and cash equivalents of $125.4 million and available borrowings under our Amended Credit Agreement of $371.0 million, for a total liquidity of approximately $496.4 million.

As of June 30, 2024, we had cash and cash equivalents of $116.4 million and available borrowings under our Amended Credit Agreement of $430.0 million, for a total liquidity of approximately $546.4 million.

We believe cash flows from operations and the availability of funds under our Amended Credit Agreement will be adequate to fund our operations and business needs over the next twelve months.

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Financial Instruments in the Notes to Consolidated Financial Statements.

As of March 31, 2024, $109.0 million of our total cash and cash equivalents were held by non-U.S.

As of June 30, 2024, $100.2 million of our total cash and cash equivalents were held by non-U.S.

subsidiaries.

The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the U.S.

were in excess of $155.0 million, as of March 31, 2024 and are intended to remain indefinitely invested in foreign operations.

were in excess of $120.0 million, as of June 30, 2024 and are intended to remain indefinitely invested in foreign operations.

Our cash planning strategy includes repatriating current earnings in excess of working capital requirements from certain countries in which our subsidiaries operate.

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We have also returned cash to shareholders through dividends and share repurchases.

During the first three months of 2024, we paid $8.1 million in dividends and had no share repurchases.

During the first six months of 2024, we paid $16.2 million in dividends and had no share repurchases.

Off-Balance Sheet Arrangements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis