What changed in this filing

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Item 1. Financial Statements

2024-10-30 compared with 2024-08-06 · 152 added, 119 removed, 655 unchanged (29% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

24 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

19 unchanged sentences

(in thousands, except share and per share data)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash and cash equivalents $ 127,222 $ 173,420

46 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

8 unchanged sentences

Provision/(recovery) for credit losses from uncollected receivables and contract assets 40 641

Foreign currency remeasurement gain on intercompany loans ( 2,580 ) ( 3,198 )

Foreign currency remeasurement loss/(gain) on intercompany loans 2,263 ( 4,704 )

Fair value adjustment on foreign currency contracts 1,105 581

Gain on sale of assets ( 515 ) —

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 17,980 ( 18,172 )

11 unchanged sentences

Cash flows from investing activities:

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

Purchases of property, plant and equipment ( 61,985 ) ( 48,850 )

5 unchanged sentences

Principal payments on debt ( 142,691 ) ( 51,479 )

Debt acquisition costs — ( 4,108 )

Taxes paid in lieu of share issuance ( 2,832 ) ( 3,136 )

15 unchanged sentences

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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.

Our estimates are based on historical experience and on various other assumptions, which are believed to be reasonable under the circumstances.

Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.

23 unchanged sentences

ASU 2024-01 should be applied either (1) retrospectively to all prior periods presented in the financial statements or (2) prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments.

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

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

In March 2024, the U.S.

Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No.

33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors.

This rule would require registrants to disclose certain climate-related information in registration statements and annual reports.

In April 2024, the SEC voluntarily stayed the final rule as a result of legal challenges that are pending judicial review.

The disclosure requirements would apply to the Company's fiscal year beginning January 1, 2025, pending resolution of the stay.

The Company is currently evaluating the final rule to determine its impact on the Company's disclosures.

Reportable Segments and Revenue Recognition

The Company is organized based on the nature of its products and is composed of two reportable segments, Machine Clothing ("MC") and Albany Engineered Composites ("AEC"), each overseen by a Segment President.

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

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.

13 unchanged sentences

AEC's largest aerospace customer is the SAFRAN Group and sales to SAFRAN (consisting primarily of fan blades and cases for CFM International's LEAP engine) accounted for approximately 16 percent of the Company's consolidated Net revenues in 2023.

AEC net sales to SAFRAN were $ 101.3 million and $ 93.5 million in the first six months of 2024 and 2023, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from SAFRAN amounted to $ 85.8 million and $ 93.8 million as of June 30, 2024 and December 31, 2023, respectively.

AEC net sales to SAFRAN were $ 142.2 million and $ 140.8 million in the first nine months of 2024 and 2023, respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from SAFRAN amounted to $ 89.9 million and $ 93.8 million as of September 30, 2024 and December 31, 2023, respectively.

Other significant programs for AEC include the Sikorsky CH-53K, F-35, JASSM, and Boeing 787 programs.

3 unchanged sentences

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

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

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

(in thousands)

16 unchanged sentences

Income before income taxes $ 19,503 $ 36,361 $ 92,441 $ 120,974

Second quarter 2024 results include Heimbach, which was acquired August 31, 2023.

Heimbach contributed $ 39.8 million and $ 77.7 million of net revenues and $ 0.5 million and $( 2.4 ) million of operating income/(loss) for the three and six months ended June 30, 2024, respectively.

Corporate expenses include global information system costs of $ 8.1 million and $ 6.8 million for the three months ended June 30, 2024 and 2023, respectively, and $ 16.4 million and $ 13.0 million for the six months ended June 30, 2024 and 2023, respectively.

Results for 2024 include Heimbach, which was acquired August 31, 2023.

Heimbach contributed $ 27.8 million and $ 105.5 million of net revenues and $( 4.3 ) million and $( 6.7 ) million of operating loss for the three and nine months ended September 30, 2024, respectively.

Heimbach contributed $ 15.6 million of Net revenues and an operating loss of $( 0.5 ) million for the three and nine months ended September 30, 2023, respectively.

Corporate expenses include global information system costs of $ 7.8 million and $ 6.3 million for the three months ended September 30, 2024 and 2023, respectively, and $ 24.2 million and $ 19.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Revenue Recognition:

3 unchanged sentences

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

Changes in the estimated profitability of long-term contracts 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.

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

The cumulative changes in the estimated profitability of long-term contracts decreased operating income by $ 22.4 million for the third quarter of 2024 and decreased operating income by $ 28.3 million for the first nine months of 2024.

The negative change in the estimated profitability in the third quarter of 2024 was driven by a few large complex programs, including approximately $ 13.3 million for various CH-53K programs, approximately $ 6.5 million on our Gulfstream program, approximately $ 2.2 million on our F-35 program, and $ 0.4 million, net, on all other programs.

Adjustments in the estimated profitability of long-term contracts increased operating incomes by $ 0.9 million and decreased operating income by $ 4.1 million for the third quarter and first nine months of 2023, respectively.

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

The following table disaggregates revenue for each product group by timing of revenue recognition for the three months ended June 30, 2024:

Three months ended June 30, 2024

The following table disaggregates revenue for each product group by timing of revenue recognition for the three months ended September 30, 2024:

Three months ended September 30, 2024

(in thousands)

8 unchanged sentences

Total revenues $ 186,192 $ 112,194 $ 298,386

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

Three months ended June 30, 2023

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

Three months ended September 30, 2023

(in thousands)

8 unchanged sentences

Total revenues $ 170,598 $ 110,508 $ 281,106

The following table disaggregates revenue for each product group by timing of revenue recognition for the six months ended June 30, 2024:

Six months ended June 30, 2024

The following table disaggregates revenue for each product group by timing of revenue recognition for the nine months ended September 30, 2024:

Nine months ended September 30, 2024

(in thousands)

8 unchanged sentences

Total revenues $ 574,789 $ 368,921 $ 943,710

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

Six months ended June 30, 2023

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

Nine months ended September 30, 2023

(in thousands) Point in Time Revenue

9 unchanged sentences

and for PMC, the geographical region to which the paper machine clothing was sold:

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

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

(in thousands)

6 unchanged sentences

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

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 1.1 billion and $ 792 million as of June 30, 2024 and 2023, respectively, and related primarily to firm fixed price contracts in the AEC segment.

Of the remaining performance obligations as of June 30, 2024, we expect to recognize as revenue approximately $ 86 million during 2024, $ 191 million during 2025, $ 155 million during 2026, and the remainder thereafter.

Remaining performance obligations on contracts that had an original duration of greater than one year totaled $ 1.1 billion and $ 759 million as of September 30, 2024 and 2023, respectively, and related primarily to firm fixed price contracts in the AEC segment.

Of the remaining performance obligations as of September 30, 2024, we expect to recognize as revenue approximately $ 40 million during 2024, $ 167 million during 2025, $ 147 million during 2026, and the remainder thereafter.

Pensions and Other Postretirement Benefit Plans

2 unchanged sentences

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

The composition of the net periodic benefit cost/(income) for the six months ended June 30, 2024 and 2023, was as follows:

The composition of the net periodic benefit cost/(income) for the nine months ended September 30, 2024 and 2023, was as follows:

Pension plans

13 unchanged sentences

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

There were no material curtailments or settlements during the first six months of 2024 or 2023.

There were no material curtailments or settlements during the first nine months of 2024 or 2023.

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

1 unchanged sentence

Restructuring

Restructuring costs at MC in the second quarter of 2024 were related primarily 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 and a $ 0.5 million charge recorded 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 workforce at various AEC locations.

Restructuring charges for the second quarter of 2023 were not significant.

At MC, restructuring actions were taken in the second and third quarters of 2024 to cease operations at the Company's MC forming fabric manufacturing facility in Chungju, South Korea, and at the Company's Heimbach engineered fabric manufacturing facility in Rochdale, UK.

The principal driver of $ 3.3 million in Restructuring expenses, net for the first nine months of 2024 related to workforce reductions, fixed asset impairments and related costs, as well as charges of $ 1.3 million in Costs of goods sold for the write-off of inventory.

We expect to incur additional restructuring expenses related to these actions throughout the remainder of the year.

Restructuring expenses incurred at MC during 2023 were not significant.

At AEC, restructuring activities were related to reductions in the workforce at various AEC locations, which resulted in restructuring expenses of $ 3.1 million for the first nine months of 2024.

Restructuring expenses incurred at AEC during 2023 were not significant.

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands) 2024 2023 2024 2023

4 unchanged sentences

The following tables summarizes charges by type of expense reported in the Consolidated Statements of Income under "Restructuring expenses, net" and "Cost of goods sold":

Six months ended June 30, 2024 Total

Nine months ended September 30, 2024 Total

restructuring

6 unchanged sentences

Total $ 7,871 $ 6,584 $ 1,287

Six months ended June 30, 2023 Total

Nine months ended September 30, 2023 Total

restructuring

9 unchanged sentences

charges accrued Payments Currency

translation /other June 30, 2024

translation /other September 30, 2024

Total termination and other costs $ — $ 6,584 $ ( 4,064 ) $ 90 $ 2,610

1 unchanged sentence

charges accrued Payments Currency

translation /other June 30, 2023

translation /other September 30, 2023

Total termination and other costs $ — $ 227 $ ( 227 ) $ — $ —

1 unchanged sentence

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

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

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

(in thousands)

3 unchanged sentences

Bank fees and amortization of debt issuance costs

48 49 169 140

Components of net periodic pension and postretirement cost other than service cost 663 ( 15 ) 1,995 ( 260 )

1 unchanged sentence

Total other (income)/expense, net $ 3,257 $ 56 $ 5,932 $ ( 4,910 )

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.

The Company's effective income tax rate for the three and six months ended June 30, 2024 and 2023, is as follows:

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

Other (income)/expense, net, included foreign currency related transactions which resulted in losses of $ 1.8 million and $ 0.7 million in the three and nine months ended September 30, 2024, respectively, as compared to losses of $ 0.5 million and gains of $ 3.6 million in the same periods last year.

In addition, changes in the fair value of derivative instruments included gains of $ 0.5 million and losses of $ 3.8 million in the three and nine months ended September 30, 2024, as compared to losses of $ 0.7 million and $ 0.6 million in the same period last year, driven by currency rate movements, most notably the Brazilian Real and Mexican Peso.

Other (income)/expense, net, also included net losses of $ 0.7 million from the divestiture of assets related to Heimbach during the nine months ended September 30, 2024, as well as bank fees, amortization of debt issuance costs, and rental income.

The Company's effective income tax rate for the three and nine months ended September 30, 2024 and 2023, is as follows:

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

2024 2023 2024 2023

3 unchanged sentences

Our 2024 estimated annual effective tax rate primarily reflects the 21% federal tax rate, the impact of state and local taxation, the impact of taxation upon foreign operations, and forecasted permanent differences.

Our actual effective tax rates were 27.9 % and 42.8 % for the three months ended June 30, 2024 and 2023, respectively.

Our actual effective tax rates were 28.6 % and 36.3 % for the six months ended June 30, 2024 and 2023, respectively.

The effective tax rate for the three months ended June 30, 2024 included a net discrete tax benefit of $ 1.4 million, which decreased our effective tax rate by 4.2 %.

This discrete tax benefit is mostly attributable to the true-up of prior year estimated taxes and the release of an uncertain tax position due to a favorable audit settlement.

The rate for the second quarter of 2024 was lower than the second quarter of 2023 mainly due to favorable discrete tax adjustments in the current period compared to unfavorable discrete tax adjustments in the prior period.

The effective tax rate for the six months ended June 30, 2024 included a net discrete tax benefit of $ 2.5 million, which decreased our effective tax rate by 3.4 %.

This discrete tax benefit is mostly attributable to the true-up for prior year estimated taxes, an increase in the valuation allowance and a net decrease in uncertain tax positions.

The rate for the six months ended June 30, 2024 was lower than the six months ended June 30, 2023 mainly due to favorable discrete tax adjustments in the current period compared to unfavorable discrete tax adjustments in the prior period.

Our actual effective tax rates were 6.6 % and 25.3 % for the three months ended September 30, 2024 and 2023, respectively.

Our actual effective tax rates were 23.9 % and 33.0 % for the nine months ended September 30, 2024 and 2023, respectively.

The effective tax rate for the three months ended September 30, 2024 included a net discrete tax benefit of $ 8.5 million.

This discrete tax benefit is mostly attributable to the true-up of prior year estimated taxes and the release of a valuation allowance in a non-U.S.

jurisdiction due to positive evidence indicating that a full valuation allowance was no longer required.

The rate for the third quarter of 2024 was lower than the third quarter of 2023 mainly due to favorable discrete tax adjustments in the current period compared to unfavorable discrete tax adjustments in the prior period, partially offset by an unfavorable change in the jurisdictional mix of earnings compared to the prior period.

The effective tax rate for the nine months ended September 30, 2024 included a net discrete tax benefit of $ 11.0 million.

This discrete tax benefit is mostly attributable to the true-up for prior year estimated taxes, a net decrease in valuation allowances and a net decrease in uncertain tax positions.

The rate for the nine months ended September 30, 2024 was lower than the nine months ended September 30, 2023 mainly due to favorable discrete tax adjustments in the current period compared to unfavorable discrete tax adjustments in the prior period, partially offset by an unfavorable change in the jurisdictional mix of earnings compared to the prior period.

The Company is subject to audit in the U.S.

6 unchanged sentences

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

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

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

(in thousands, except earnings per share) 2024 2023 2024 2023

10 unchanged sentences

Accumulated Other Comprehensive Income ("AOCI")

The table below presents changes in the components of AOCI for the period from December 31, 2023 to June 30, 2024:

The table below presents changes in the components of AOCI for the period from December 31, 2023 to September 30, 2024:

(in thousands)

7 unchanged sentences

Net current period other comprehensive income ( 12,472 ) 5 ( 7,914 ) ( 20,381 )

June 30, 2024 $ ( 154,304 ) $ ( 16,718 ) $ 4,115 $ ( 166,907 )

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

September 30, 2024 $ ( 137,373 ) $ ( 17,341 ) $ 1,165 $ ( 153,549 )

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

(in thousands) Translation

6 unchanged sentences

Net current period other comprehensive income ( 4,326 ) ( 1,606 ) ( 4,750 ) ( 10,682 )

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

September 30, 2023 $ ( 151,177 ) $ ( 17,389 ) $ 12,957 $ ( 155,609 )

The components of AOCI that are reclassified to the Consolidated Statements of Income relate to our pension and postretirement plans and interest rate swaps.

The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Consolidated Statements of Income that were affected for the three and six ended June 30, 2024 and 2023:

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

The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Consolidated Statements of Income that were affected for the three and nine ended September 30, 2024 and 2023:

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

(in thousands)

22 unchanged sentences

Arcari is a manufacturer of textile and plastic industrial technical products and conveyor belts.

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

For the six months ended June 30, 2024, the net income/(loss) attributable to Arcari’s noncontrolling interest was less than $ 0.1 million and the noncontrolling interest balance at June 30, 2024 was $ 0.6 million.

For the nine months ended September 30, 2024, the net income/(loss) attributable to Arcari’s noncontrolling interest was less than $ 0.1 million and the noncontrolling interest balance at September 30, 2024 was $ 0.4 million.

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

ASC Noncontrolling Interest Six months ended June 30,

ASC Noncontrolling Interest Nine months ended September 30,

(in thousands, except percentages) 2024 2023

10 unchanged sentences

Arcari Noncontrolling interest, end of interim period

$ 447 $ 1,587

Total Noncontrolling interest, end of interim period $ 5,679 $ 6,794

3 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, Accounts receivable consisted of the following:

(in thousands) June 30, 2024 December 31, 2023

As of September 30, 2024 and December 31, 2023, Accounts receivable consisted of the following:

(in thousands) September 30, 2024 December 31, 2023

Trade and other accounts receivable $ 254,194 $ 272,351

4 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, Noncurrent receivables consisted of the following:

(in thousands) June 30, 2024 December 31, 2023

As of September 30, 2024 and December 31, 2023, Noncurrent receivables consisted of the following:

(in thousands) September 30, 2024 December 31, 2023

Noncurrent receivables $ — $ 4,414

7 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, Contract assets and Contract liabilities consisted of the following:

(in thousands) June 30, 2024 December 31, 2023

As of September 30, 2024 and December 31, 2023, Contract assets and Contract liabilities consisted of the following:

(in thousands) September 30, 2024 December 31, 2023

Contract assets $ 196,765 $ 183,189

3 unchanged sentences

Contract liabilities $ 7,122 $ 7,127

Contract assets, net increased $ 7.0 million during the six months ended June 30, 2024.

The modest increase was primarily due to an increase in unbilled revenue, primarily related to commercial and space programs.

There were no impairment losses related to our Contract assets during the six months ended June 30, 2024 and June 30, 2023.

Contract liabilities decreased $ 0.5 million during the six months ended June 30, 2024, primarily due to revenue recognized from satisfied performance obligations exceeding customer advance payments for commercial and defense programs.

Revenue recognized for the six months ended June 30, 2024 and 2023 that was included in the Contract liability balance at the beginning of the year was $ 3.8 million an d $ 11.7 million, respectively.

Contract assets, net increased $ 13.5 million during the nine months ended September 30, 2024.

The increase was primarily due to an increase in unbilled revenue, primarily related to commercial and space programs.

There were no impairment losses related to our Contract assets during the nine months ended September 30, 2024 and September 30, 2023.

Contract liabilities are essentially flat for the period ended September 30, 2024 compared to December 31, 2023, primarily due to revenue recognized from satisfied performance obligations were essentially offset by customer advance payments for commercial and defense programs.

Revenue recognized for the nine months ended September 30, 2024 and 2023 that was included in the Contract liability balance at the beginning of the year was $ 3.7 million and $ 14.4 million, respectively.

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

4 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, Inventories consisted of the following:

(in thousands) June 30, 2024 December 31, 2023

As of September 30, 2024 and December 31, 2023, Inventories consisted of the following:

(in thousands) September 30, 2024 December 31, 2023

Raw materials $ 84,257 $ 79,611

5 unchanged sentences

Goodwill and Other Intangible Assets

The following table sets forth the gross carrying value, accumulated amortization and net values of intangible assets and goodwill as of June 30, 2024 and December 31, 2023:

June 30, 2024

The following table sets forth the gross carrying value, accumulated amortization and net values of intangible assets and goodwill as of September 30, 2024 and December 31, 2023:

September 30, 2024

(in thousands) Amortization

39 unchanged sentences

$ 186,251 $ — $ 186,251

The changes in intangible assets, net and goodwill from December 31, 2023 to June 30, 2024, were as follows:

The changes in intangible assets, net and goodwill from December 31, 2023 to September 30, 2024, were as follows:

(in thousands) December 31, 2023 Other

Changes Amortization Currency

Translation June 30, 2024

Translation September 30, 2024

Finite-lived intangible assets:

17 unchanged sentences

Accordingly, no impairment charges were recorded.

In the third quarter, the Company revised its estimates and assumptions used in certain program estimates at completion of its AEC reporting unit.

As a result, on October 3, 2024, the Company reported a preliminary update to its full year outlook to reflect revised revenue and profitability expectations for the AEC segment.

As a result of the change in estimates of certain program revenues and profits, we performed a qualitative assessment of the AEC reporting unit’s goodwill for impairment and concluded that goodwill was not impaired.

The excess of the fair value of the AEC reporting unit over its carrying value reduced approximately 26 % from previous quarters;

and fair value continues to exceed the carrying value by more than 20 %.

Financial Instruments

1 unchanged sentence

The following table represents the Company's outstanding debt:

(in thousands, except interest rates) June 30, 2024 December 31, 2023

(in thousands, except interest rates) September 30, 2024 December 31, 2023

Borrowings under the Amended Credit Agreement (1) $ 360,000 $ 446,000

4 unchanged sentences

(1) the credit facility matures in August 2028.

At the end of June 30, 2024 and December 31, 2023, the interest rate in effect was 2.75 % and 3.49 %, respectively, including the effect of interest rate hedging transactions, as described below.

At the end of September 30, 2024 and December 31, 2023, the interest rate in effect was 2.50 % and 3.49 %, respectively, including the effect of interest rate hedging transactions, as described below.

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”).

On August 16, 2023, we entered into a $ 800 million unsecured committed Five-Year Revolving Credit Facility Agreement (the “Amended Credit Agreement”), which matures in August of 2028.

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:

7 unchanged sentences

0.350 % 1.000 % 2.000 %

As of June 30, 2024, 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 June 30, 2024, there was $ 370 million of borrowings outstanding under the Amended Credit Agreement and we had borrowings available of $ 430 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.

As of September 30, 2024, the applicable interest rate for borrowings under the Amended Credit Agreement was based on one-month term SOFR plus the spread, which was 1.50 %.

As of September 30, 2024, there was $ 360 million of borrowings outstanding under the Amended Credit Agreement and we had borrowings available of $ 440 million, based on our maximum leverage ratio and our Consolidated EBITDA (as defined in the Amended Credit Agreement).

Under the Amended Credit Agreement, we are required to maintain a leverage ratio (as defined in the 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 Credit Agreement) of greater than 3.00 to 1.00.

As of June 30, 2024, our leverage ratio was 0.98 to 1.00 (as defined in the Amended Credit Agreement) and our interest coverage ratio was 14.70 to 1.00.

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

As of June 30, 2024, we were in compliance with all applicable covenants.

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 September 30, 2024, our leverage ratio was 0.99 to 1.00 and our interest coverage ratio was 15.39 to 1.00.

As of September 30, 2024, 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.

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Interest Rate Swaps

In 2021, we entered into interest rate swap agreements for the period of October 17, 2022 through October 27, 2024.

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.

We amended the swap agreements on June 29, 2023 replacing the LIBOR (in preparation for the cessation of LIBOR) with SOFR and adjusting the spread.

We pay a fixed blended rate of 0.88 % through October 27, 2024 on $ 350 million and the counterparties pay a floating rate based on the one-month term SOFR at each monthly calculation date, which on June 17, 2024 was 5.33 %.

As of June 30, 2024, the all-in rate on the $ 350 M of debt was 2.51 %.

Upon the expiration of the interest rate swap on October 27, 2024, our interest cost will increase significantly.

Beginning in October 2024, our interest cost will be calculated using a floating rate based on the one-month term SOFR.

From time to time, the Company enters into interest rate swap contracts to manage the interest rate risk associated with its outstanding variable-interest rate borrowings.

Such contracts are intended to economically hedge the reference rate component of future interest payments associated with outstanding borrowings under the Company’s Amended Credit Agreement.

In 2021, we entered into interest rate swap agreements for the period of October 17, 2022 through October 27, 2024, to hedge $ 350 million of variable-interest rate indebtedness.

The interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note 15, Fair-Value Measurements .

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

Foreign Bank Debt

On August 31, 2023, the Company acquired Heimbach.

The Company assumed Heimbach’s bank debt in the amount of $ 32.7 million.

The bank debt is held by several European financial institutions, with maturity dates ranging from February 1, 2025 to June 30, 2031.

At June 30, 2024 and December 31, 2023, the foreign debt was $ 7.1 million and $ 10.9 million, respectively, of which $ 2.7 million and $ 4.2 million, respectively, was classified as Current maturities on long-term debt.

As of September 30, 2024, the all-in rate on the $ 350 million of debt was 2.38 %.

Upon the expiration of the interest rate swap on October 28, 2024, our interest cost will increase significantly.

Beginning in October 2024, our interest cost will be calculated using a floating rate based on the one-month term SOFR.

Fair-Value Measurements

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

We had no Level 3 financial assets or liabilities at June 30, 2024 or at December 31, 2023, other than certain pension assets as indicated in our December 31, 2023 Annual Report on Form 10-K.

We had no Level 3 financial assets or liabilities at September 30, 2024 or at December 31, 2023, other than certain pension assets as indicated in our December 31, 2023 Annual Report on Form 10-K.

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:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands)

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Foreign currency option contracts

— 1,048 — 1,725

Foreign currency forward contracts

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Amounts accumulated in Other comprehensive income are reclassified as interest expense/(income), net when the related interest payments (that is, the hedged forecasted transactions), affect earnings.

Interest expense/(income) related to payments under the active swap agreements totaled $( 8.2 ) million for the six months ended June 30, 2024, and $( 6.9 ) million for the six months ended June 30, 2023.

Interest expense/(income) related to payments under the active swap agreements totaled $( 10.9 ) million for the nine months ended September 30, 2024, and $( 10.9 ) million for the nine months ended September 30, 2023.

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

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(Gains)/losses related to changes in fair value of derivative instruments that were recognized in Other (income)/expense, net in the Consolidated Statements of Income were as follows:

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

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

(in thousands) 2024 2023 2024 2023

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

We were defending 3,623 claims as of June 30, 2024.

We were defending 3,642 claims as of September 30, 2024.

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

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For the period ended December 31, 2023 3,598 19 27 3,606 $ 74

For the period ended June 30, 2024 3,606 5 22 3,623 $ 10

For the period ended September 30, 2024 3,606 9 45 3,642 $ 13

We anticipate that additional claims will be filed against the Company and related companies in the future but are unable to predict the number and timing of such future claims.

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

As of June 30, 2024, we had resolved, by means of settlement or dismissal, 38,046 claims at a total cost of $ 10.7 million.

As of September 30, 2024, we had resolved, by means of settlement or dismissal, 38,050 claims at a total cost of $ 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.

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

While Brandon was defending against 7,676 claims as of June 30, 2024, only twelve claims have been filed against Brandon since January 1, 2012, and only $ 15,000 in settlement costs have been incurred since 2001.

While Brandon was defending against 7,676 claims as of September 30, 2024, only twelve claims have been filed against Brandon since January 1, 2012, and only $ 15,000 in settlement costs have been incurred since 2001.

Brandon was acquired by the Company in 1999 and has its own insurance policies covering periods prior to 1999.

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We acquired certain assets from Mount Vernon in 1993.

Certain plaintiffs allege injury caused by asbestos-containing products alleged to have been sold by Mount Vernon many

years prior to this acquisition.

Certain plaintiffs allege injury caused by asbestos-containing products alleged to have been sold by Mount Vernon many years prior to this acquisition.

Mount Vernon is contractually obligated to indemnify the Company against any liability arising out of such products.

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On this basis, we have successfully moved for dismissal in a number of actions.

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.

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.

Changes in Shareholders’ Equity

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2023 to June 30, 2024:

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2023 to September 30, 2024:

Additional paid-in capital

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Total Shareholders' Equity

(in thousands)

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

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June 30, 2024 40,908 $ 41 $ 452,461 $ 1,046,612 $ ( 166,907 ) 9,662 $ ( 364,665 ) $ 5,806 $ 973,348

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

Net income — — — 18,029 — — — 192 18,221

Compensation and benefits paid or payable in shares 9 — 195 — — — — — 195

Dividends declared on Class A Common Stock, $ 0.26 per share

— — — ( 8,127 ) — — — — ( 8,127 )

Dividends paid to noncontrolling interests — — — — — — — ( 166 ) ( 166 )

Cumulative translation adjustments — — — — 16,931 — — ( 153 ) 16,778

Pension and postretirement liability adjustments — — — — ( 623 ) — — — ( 623 )

Derivative valuation adjustment — — — — ( 2,950 ) — — — ( 2,950 )

September 30, 2024 40,917 $ 41 $ 452,656 $ 1,056,514 $ ( 153,549 ) 9,662 $ ( 364,665 ) $ 5,679 $ 996,676

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

Additional paid-in capital

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

Net income — — — 27,109 — — — 45 27,154

Compensation and benefits paid or payable in shares 15 — 2,914 — — ( 1 ) — — 2,914

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

— — — ( 7,799 ) — — — — ( 7,799 )

Initial equity related to Noncontrolling interest in Arcari — — — — — — — 1,632 1,632

Cumulative translation adjustments — — — — ( 15,639 ) — — ( 145 ) ( 15,784 )

Pension and postretirement liability adjustments — — — — 34 — — — 34

Derivative valuation adjustment — — — — ( 2,237 ) — — — ( 2,237 )

September 30, 2023 40,857 $ 41 $ 446,470 $ 988,602 $ ( 155,609 ) 9,662 $ ( 364,665 ) $ 6,794 $ 921,633

Business Combination

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

For the three and six months ended June 30, 2024, there were no material adjustments to the assets acquired and liabilities assumed.

For the three and nine months ended September 30, 2024, there were no material adjustments to the assets acquired and liabilities assumed.

As of September 30, 2024, management’s review of the purchase price allocation has been completed.

Subsequent Events

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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 1. Financial Statements