UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended:	~~September 30, 2020~~March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from __________ to __________

Commission file number: 1-10026


ALBANY INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)

Delaware


(State or other jurisdiction of incorporation or organization)

216 Airport Drive, Rochester, New Hampshire


(Address of principal executive offices)

14-0462060


(IRS Employer Identification No.)

03867


(Zip Code)

603-330-5850


(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	AIN	The New York Stock Exchange (NYSE)
Class B Common Stock, $0.001 par value per share	AIN	The New York Stock Exchange (NYSE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 30.7 million shares of Class A Common Stock and 1.6 million shares of Class B Common Stock outstanding as of ~~October 21, 2020.~~April 16, 2021.

ALBANY INTERNATIONAL CORP.

TABLE OF CONTENTS


		Page No.
Part I Financial information
Item 1.	Financial Statements
	Consolidated ~~Statements~~statements of ~~Income~~income –three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~2020	3
	Consolidated ~~Statements~~statements of ~~Comprehensive Income~~comprehensive income/(loss) – three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~2020	4
	Consolidated ~~Balance Sheets~~balance sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	5
	Consolidated ~~Statements~~statements of ~~Cash Flows~~cash flows – three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~2020	6
	Notes to ~~Consolidated Financial Statements~~consolidated financial statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2920
	Forward-looking statements	2920
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4431
Item 4.	Controls and Procedures	4431
Part II Other Information
Item 1.	Legal Proceedings	4431
Item 1A.	Risk Factors	4432
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4532
Item 3.	Defaults upon Senior Securities	4532
Item 4.	Mine Safety Disclosures	4532
Item 5.	Other Information	4532
Item 6.	Exhibits	4532

Index

ITEM 1. FINANCIAL STATEMENTS

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net sales	Net sales	$	211,999	$	271,133	$	673,753	$	796,454	Net sales	$	222,362	$	235,764
Cost of goods sold	Cost of goods sold	124,697		167,026		393,999		495,394		Cost of goods sold	133,816		146,292

Gross profit	Gross profit	87,302		104,107		279,754		301,060		Gross profit	88,546		89,472
Selling, general, and administrative expenses	Selling, general, and administrative expenses	39,518		39,841		118,167		121,602		Selling, general, and administrative expenses	37,195		40,106
Technical and research expenses	Technical and research expenses	8,301		8,832		26,304		28,323		Technical and research expenses	9,481		9,130
Restructuring expenses, net	Restructuring expenses, net	710		(244)		4,189		1,139		Restructuring expenses, net	52		642

Operating income	Operating income	38,773		55,678		131,094		149,996		Operating income	41,818		39,594
Interest expense, net	Interest expense, net	2,242		3,987		10,042		13,035		Interest expense, net	3,569		3,977
Other expense/(income), net	Other expense/(income), net	(2,745)		(1,628)		13,915		(1,906)		Other expense/(income), net	600		15,569

Income before income taxes	Income before income taxes	39,276		53,319		107,137		138,867		Income before income taxes	37,649		20,048
Income tax expense	Income tax expense	9,686		13,194		37,504		35,075		Income tax expense	10,040		12,454

Net income	Net income	29,590		40,125		69,633		103,792		Net income	27,609		7,594
Net income/(loss) attributable to the noncontrolling interest	Net income/(loss) attributable to the noncontrolling interest	1		116		(1,419)		539		Net income/(loss) attributable to the noncontrolling interest	27		(1,515)
Net income attributable to the Company	Net income attributable to the Company	$	29,589	$	40,009	$	71,052	$	103,253	Net income attributable to the Company	$	27,582	$	9,109

Earnings per share attributable to Company shareholders - Basic	Earnings per share attributable to Company shareholders - Basic	$	0.92	$	1.24	$	2.20	$	3.20	Earnings per share attributable to Company shareholders - Basic	$	0.85	$	0.28

Earnings per share attributable to Company shareholders - Diluted	Earnings per share attributable to Company shareholders - Diluted	$	0.91	$	1.24	$	2.20	$	3.20	Earnings per share attributable to Company shareholders - Diluted	$	0.85	$	0.28

Shares of the Company used in computing earnings per share:	Shares of the Company used in computing earnings per share:									Shares of the Company used in computing earnings per share:
Basic	Basic	32,337		32,306		32,326		32,293		Basic	32,352		32,312

Diluted	Diluted	32,344		32,317		32,333		32,305		Diluted	32,401		32,320

Dividends declared per share, Class A and Class B	Dividends declared per share, Class A and Class B	$	0.19	$	0.18	$	0.57	$	0.54	Dividends declared per share, Class A and Class B	$	0.20	$	0.19

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

Index

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME~~INCOME/(LOSS)

(in thousands)

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net income	Net income	$	29,590	$	40,125	$	69,633	$	103,792	Net income	$	27,609	$	7,594

Other comprehensive income/(loss), before tax:	Other comprehensive income/(loss), before tax:									Other comprehensive income/(loss), before tax:
Foreign currency translation and other adjustments	Foreign currency translation and other adjustments	19,249		(22,041)		3,047		(24,243)		Foreign currency translation and other adjustments	(15,439)		(24,955)
Pension/postretirement settlements and curtailments		0		0		378		0
Amortization of pension liability adjustments:	Amortization of pension liability adjustments:									Amortization of pension liability adjustments:
Prior service credit	Prior service credit	(1,114)		(1,105)		(3,342)		(3,315)		Prior service credit	(1,119)		(1,114)
Net actuarial loss	Net actuarial loss	1,244		1,118		3,720		3,357		Net actuarial loss	1,109		1,244
Payments and amortization related to interest rate swaps included in earnings	Payments and amortization related to interest rate swaps included in earnings	1,219		(245)		2,742		(1,117)		Payments and amortization related to interest rate swaps included in earnings	1,476		407
Derivative valuation adjustment	Derivative valuation adjustment	(385)		(1,532)		(12,515)		(10,796)		Derivative valuation adjustment	(478)		(10,764)

Income taxes related to items of other comprehensive income/(loss):	Income taxes related to items of other comprehensive income/(loss):									Income taxes related to items of other comprehensive income/(loss):
Pension/postretirement settlements and curtailments		0		0		(113)		0
Amortization of pension liability adjustment		(32)		(4)		(94)		(13)
Amortization of prior service cost										Amortization of prior service cost	336		279
Amortization of net actuarial loss										Amortization of net actuarial loss	(333)		(311)
Payments and amortization related to interest rate swaps included in earnings	Payments and amortization related to interest rate swaps included in earnings	(311)		62		(701)		285		Payments and amortization related to interest rate swaps included in earnings	(381)		(104)
Derivative valuation adjustment	Derivative valuation adjustment	98		392		3,200		2,759		Derivative valuation adjustment	135		2,753
Comprehensive income		49,558		16,770		65,955		70,709
Comprehensive income/(loss)										Comprehensive income/(loss)	12,915		(24,971)
Comprehensive income/(loss) attributable to the noncontrolling interest	Comprehensive income/(loss) attributable to the noncontrolling interest	202		103		(957)		520		Comprehensive income/(loss) attributable to the noncontrolling interest	(183)		(1,406)
Comprehensive income/(loss) attributable to the Company	Comprehensive income/(loss) attributable to the Company	$	49,356	$	16,667	$	66,912	$	70,189	Comprehensive income/(loss) attributable to the Company	$	13,098	$	(23,565)

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

Index

ALBANY INTERNATIONAL CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	215,304	$	195,540	Cash and cash equivalents	$	237,871	$	241,316
Accounts receivable, net	Accounts receivable, net	210,326		218,271		Accounts receivable, net	188,066		188,423
Contract assets, net	Contract assets, net	104,853		79,070		Contract assets, net	121,767		139,289
Inventories	Inventories	113,107		95,149		Inventories	117,022		110,478
Income taxes prepaid and receivable	Income taxes prepaid and receivable	6,560		6,162		Income taxes prepaid and receivable	7,362		5,940
Prepaid expenses and other current assets	Prepaid expenses and other current assets	30,485		24,142		Prepaid expenses and other current assets	32,306		31,830
Total current assets	Total current assets	$	680,635	$	618,334	Total current assets	$	704,394	$	717,276

Property, plant and equipment, net	Property, plant and equipment, net	442,469		466,462		Property, plant and equipment, net	435,976		448,554
Intangibles, net	Intangibles, net	48,281		52,892		Intangibles, net	44,675		46,869
Goodwill	Goodwill	184,287		180,934		Goodwill	184,374		187,553
Deferred income taxes	Deferred income taxes	38,387		51,621		Deferred income taxes	33,436		38,757
Noncurrent receivables, net	Noncurrent receivables, net	36,228		41,234		Noncurrent receivables, net	34,945		36,265
Other assets	Other assets	60,405		62,891		Other assets	74,366		74,662
Total assets	Total assets	$	1,490,692	$	1,474,368	Total assets	$	1,512,166	$	1,549,936

LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	Accounts payable	$	46,740	$	65,203	Accounts payable	$	54,533	$	49,173
Accrued liabilities	Accrued liabilities	119,221		125,885		Accrued liabilities	104,988		125,459
Current maturities of long-term debt	Current maturities of long-term debt	12		20		Current maturities of long-term debt	2		9
Income taxes payable	Income taxes payable	12,936		11,611		Income taxes payable	7,439		16,222
Total current liabilities	Total current liabilities	178,909		202,719		Total current liabilities	166,962		190,863

Long-term debt	Long-term debt	418,000		424,009		Long-term debt	384,000		398,000
Other noncurrent liabilities	Other noncurrent liabilities	134,903		132,725		Other noncurrent liabilities	124,167		130,424
Deferred taxes and other liabilities	Deferred taxes and other liabilities	9,022		12,226		Deferred taxes and other liabilities	10,826		10,784
Total liabilities	Total liabilities	740,834		771,679		Total liabilities	685,955		730,071

SHAREHOLDERS' EQUITY	SHAREHOLDERS' EQUITY					SHAREHOLDERS' EQUITY
Preferred stock, par value $5.00 per share; authorized 2,000,000 shares; NaN issued	Preferred stock, par value $5.00 per share; authorized 2,000,000 shares; NaN issued	0		0		Preferred stock, par value $5.00 per share; authorized 2,000,000 shares; NaN issued	0		0
Class A Common Stock, par value $0.001 per share; authorized 100,000,000 shares; 39,113,172 issued in 2020 and 39,098,792 in 2019		39		39
Class B Common Stock, par value $0.001 per share; authorized 25,000,000 shares; issued and outstanding 1,617,998 in 2020 and 2019		2		2
Class A Common Stock, par value $.001 per share; authorized 100,000,000 shares; 39,141,483 issued in 2021 and 39,115,405 in 2020						Class A Common Stock, par value $.001 per share; authorized 100,000,000 shares; 39,141,483 issued in 2021 and 39,115,405 in 2020	39		39
Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares; issued and outstanding 1,617,998 in 2021 and 2020						Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares; issued and outstanding 1,617,998 in 2021 and 2020	2		2
Additional paid in capital	Additional paid in capital	432,823		432,518		Additional paid in capital	433,811		433,696
Retained earnings	Retained earnings	749,678		698,496		Retained earnings	791,854		770,746
Accumulated items of other comprehensive income:	Accumulated items of other comprehensive income:					Accumulated items of other comprehensive income:
Translation adjustments	Translation adjustments	(119,814)		(122,852)		Translation adjustments	(99,158)		(83,203)
Pension and postretirement liability adjustments	Pension and postretirement liability adjustments	(49,436)		(49,994)		Pension and postretirement liability adjustments	(39,152)		(39,661)
Derivative valuation adjustment	Derivative valuation adjustment	(10,409)		(3,135)		Derivative valuation adjustment	(8,792)		(9,544)
Treasury stock (Class A), at cost; 8,394,022 shares in 2020 and 8,408,770 shares in 2019		(256,074)		(256,391)
Treasury stock (Class A), at cost; 8,391,011 shares in 2021 and 8,391,011 shares in 2020						Treasury stock (Class A), at cost; 8,391,011 shares in 2021 and 8,391,011 shares in 2020	(256,009)		(256,009)
Total Company shareholders' equity	Total Company shareholders' equity	746,809		698,683		Total Company shareholders' equity	822,595		816,066
Noncontrolling interest	Noncontrolling interest	3,049		4,006		Noncontrolling interest	3,616		3,799
Total equity	Total equity	749,858		702,689		Total equity	826,211		819,865
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	1,490,692	$	1,474,368	Total liabilities and shareholders' equity	$	1,512,166	$	1,549,936

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

Index

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
OPERATING ACTIVITIES	OPERATING ACTIVITIES									OPERATING ACTIVITIES
Net income	Net income	$	29,590	$	40,125	$	69,633	$	103,792	Net income	$	27,609	$	7,594
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:										Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation	Depreciation	16,285		15,672		47,289		46,659		Depreciation	16,589		15,506
Amortization	Amortization	1,997		1,582		7,017		6,305		Amortization	2,293		2,564
Change in deferred taxes and other liabilities	Change in deferred taxes and other liabilities	3,074		13,548		12,434		12,802		Change in deferred taxes and other liabilities	4,442		5,817
Provision for write-off of property, plant and equipment		303		(5)		536		1,101
Non-cash interest (income)/expense		(309)		151		(138)		454
Impairment of property, plant and equipment										Impairment of property, plant and equipment	185		197
Non-cash interest expense										Non-cash interest expense	45		151
Compensation and benefits paid or payable in Class A Common Stock	Compensation and benefits paid or payable in Class A Common Stock	80		790		596		1,413		Compensation and benefits paid or payable in Class A Common Stock	(13)		(682)
Fair value adjustment on foreign currency option		(64)		0		0		0
Provision for credit losses from uncollected receivables and contract assets	Provision for credit losses from uncollected receivables and contract assets	(105)		332		1,664		1,136		Provision for credit losses from uncollected receivables and contract assets	(110)		1,655
Foreign currency remeasurement loss/(gain) on intercompany loans		169		(1,049)		15,750		(2,656)
Foreign currency remeasurement (gain)/loss on intercompany loans										Foreign currency remeasurement (gain)/loss on intercompany loans	(308)		15,387
Fair value adjustment on foreign currency options										Fair value adjustment on foreign currency options	139		64

Changes in operating assets and liabilities that provided/(used) cash:	Changes in operating assets and liabilities that provided/(used) cash:									Changes in operating assets and liabilities that provided/(used) cash:
Accounts receivable	Accounts receivable	(2,048)		(10,282)		6,069		(8,276)		Accounts receivable	(3,236)		(3,394)
Contract assets	Contract assets	(7,923)		(9,605)		(27,932)		(6,558)		Contract assets	16,104		(8,840)
Inventories	Inventories	4,585		(3,760)		(20,043)		(21,927)		Inventories	(8,563)		(19,750)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(4,532)		131		(6,989)		(4,057)		Prepaid expenses and other current assets	(899)		(2,156)
Income taxes prepaid and receivable	Income taxes prepaid and receivable	(454)		304		(662)		662		Income taxes prepaid and receivable	(1,465)		(237)
Accounts payable	Accounts payable	(5,108)		363		(15,491)		7,837		Accounts payable	9,188		(1,046)
Accrued liabilities	Accrued liabilities	2,838		3,407		(8,063)		(8,762)		Accrued liabilities	(19,485)		(15,072)
Income taxes payable	Income taxes payable	1,786		(5,611)		3,741		1,619		Income taxes payable	(8,077)		(3,571)
Noncurrent receivables	Noncurrent receivables	(228)		(339)		169		(679)		Noncurrent receivables	488		(231)
Other noncurrent liabilities	Other noncurrent liabilities	111		(2,251)		(413)		(4,411)		Other noncurrent liabilities	(2,097)		(60)
Other, net	Other, net	(388)		(6)		(1,474)		139		Other, net	857		(534)
Net cash provided by operating activities		39,659		43,497		83,693		126,593
Net cash provided by/(used in) operating activities										Net cash provided by/(used in) operating activities	33,686		(6,638)

INVESTING ACTIVITIES	INVESTING ACTIVITIES									INVESTING ACTIVITIES
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(9,349)		(13,442)		(31,320)		(48,846)		Purchases of property, plant and equipment	(12,534)		(12,759)
Purchased software	Purchased software	(109)		(257)		(155)		(306)		Purchased software	(2)		(46)
Net cash used in investing activities	Net cash used in investing activities	(9,458)		(13,699)		(31,475)		(49,152)		Net cash used in investing activities	(12,536)		(12,805)

FINANCING ACTIVITIES	FINANCING ACTIVITIES									FINANCING ACTIVITIES
Proceeds from borrowings	Proceeds from borrowings	0		0		70,000		20,000		Proceeds from borrowings	8,000		70,000
Principal payments on debt	Principal payments on debt	(17,005)		(58,006)		(76,016)		(95,014)		Principal payments on debt	(22,007)		(3,006)
Principal payments on finance lease liabilities	Principal payments on finance lease liabilities	(335)		(298)		(6,798)		(876)		Principal payments on finance lease liabilities	(349)		(6,134)
Taxes paid in lieu of share issuance	Taxes paid in lieu of share issuance	0		0		(490)		(971)		Taxes paid in lieu of share issuance	(998)		(490)
Proceeds from options exercised	Proceeds from options exercised	5		33		25		105		Proceeds from options exercised	128		0
Dividends paid	Dividends paid	(6,144)		(5,814)		(18,424)		(17,435)		Dividends paid	(6,468)		(6,139)
Net cash used in financing activities		(23,479)		(64,085)		(31,703)		(94,191)
Net cash (used in)/provided by financing activities										Net cash (used in)/provided by financing activities	(21,694)		54,231

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	4,545		(7,207)		(751)		(7,266)		Effect of exchange rate changes on cash and cash equivalents	(2,901)		(7,648)

Increase/(decrease) in cash and cash equivalents		11,267		(41,494)		19,764		(24,016)
(Decrease)/increase in cash and cash equivalents										(Decrease)/increase in cash and cash equivalents	(3,445)		27,140
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	204,037		215,233		195,540		197,755		Cash and cash equivalents at beginning of period	241,316		195,540
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	215,304	$	173,739	$	215,304	$	173,739	Cash and cash equivalents at end of period	$	237,871	$	222,680

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

Index

ALBANY INTERNATIONAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Significant Accounting Policies

Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of results for such periods. Albany International Corp. (Albany, the Registrant, the Company, we, us, or our) consolidates the financial results of its subsidiaries for all periods presented. The results for any interim period are not necessarily indicative of results for the full year.

The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in Albany International Corp.’s Consolidated Financial Statements and accompanying Notes. Actual results could differ materially from those estimates.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Albany International Corp.’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

~~Effective January 1, 2020, we 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 new standard. The effect of the application of CECL during the first quarter of 2020 is further described in Notes 11 and 12.2020.

2. Reportable Segments and Revenue Recognition

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 Machine Clothing (“MC”) segment supplies permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel, nonwovens, fiber cement and several other industrial applications. We sell our MC products directly to customer end-users in countries across the globe. Our products, manufacturing processes, and distribution channels for MC are substantially the same in each region of the world in which we operate.

We design, manufacture, and market paper machine clothing (used in the manufacturing of paper, paperboard, tissue and towel) for each section of the paper machine and for every grade of paper. Paper machine clothing products are customized, consumable products of technologically sophisticated design that utilize polymeric materials in a complex structure.

The Albany Engineered Composites (“AEC”) segment, including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group (“Safran”) owns a 10 percent noncontrolling interest, provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries. AEC’s largest program relates to CFM International’s LEAP engine. Under this program, AEC through ASC, is the exclusive supplier of advanced composite fan blades and cases under a long-term supply contract. The manufacturing spaces used for the production of parts under the long-term supply agreement are owned by Safran, and leased to the Company at either a market rent or a minimal cost. All lease expense is reimbursable by Safran to the Company due to the cost-plus nature of the supply agreement. In the fourth quarter of 2019, Safran leased manufacturing space from AEC ~~for the GE9X program. Rent paid by Safran under this lease amounted to $0.7 million for the first nine months of 2020. AEC Net~~net sales to Safran ~~substantially all of which~~ were ~~through ASC, were $73.6~~$27.7 million and ~~$175.2~~$38.0 million in the first ~~nine~~three months of 2021 and 2020, ~~and 2019,~~ respectively.

The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to ~~$119.8~~$107.7 million and ~~$114.5~~$127.1 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Other significant programs by AEC include the F-35, Boeing 787, Sikorsky CH-53K and JASSM, as well as the fan case for the GE9X engine. In ~~2019,~~2020, approximately 2546 percent of AEC sales were related to U.S. government contracts or programs.

Index

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


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020
Net sales	Net sales									Net sales
Machine Clothing	Machine Clothing	$	138,747	$	151,324	$	428,782	$	450,673	Machine Clothing	$	148,206	$	136,602
Albany Engineered Composites	Albany Engineered Composites	73,252		119,809		244,971		345,781		Albany Engineered Composites	74,156		99,162
Consolidated total	Consolidated total	$	211,999	$	271,133	$	673,753	$	796,454	Consolidated total	$	222,362	$	235,764
Operating income/(loss)	Operating income/(loss)									Operating income/(loss)
Machine Clothing	Machine Clothing	$	45,699	$	51,906	$	149,418	$	145,688	Machine Clothing	$	50,363	$	47,175
Albany Engineered Composites	Albany Engineered Composites	6,828		17,345		22,749		44,598		Albany Engineered Composites	2,938		7,623
Corporate expenses	Corporate expenses	(13,754)		(13,573)		(41,073)		(40,290)		Corporate expenses	(11,483)		(15,204)
Operating income	Operating income	$	38,773	$	55,678	$	131,094	$	149,996	Operating income	$	41,818	$	39,594
Reconciling items:	Reconciling items:									Reconciling items:
Interest income	Interest income	(1,485)		(851)		(2,280)		(2,037)		Interest income	(529)		(447)
Interest expense	Interest expense	3,727		4,838		12,322		15,072		Interest expense	4,098		4,424
Other expense/(income), net	Other expense/(income), net	(2,745)		(1,628)		13,915		(1,906)		Other expense/(income), net	600		15,569
Income before income taxes	Income before income taxes	$	39,276	$	53,319	$	107,137	$	138,867	Income before income taxes	$	37,649	$	20,048

There were no material changes ~~in the~~to total assets of the reportable segments in the first ~~nine~~three months of ~~2020.~~2021.

The table below presents restructuring costs by reportable segment (also see Note 5)4):


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020
Machine Clothing	Machine Clothing	$	384	$	(211)	$	1,414	$	1,125	Machine Clothing	$	(69)	$	642
Albany Engineered Composites	Albany Engineered Composites	358		(33)		2,606		18		Albany Engineered Composites	89		0
Corporate expenses	Corporate expenses	(32)		0		169		(4)		Corporate expenses	32		0
Total	Total	$	710	$	(244)	$	4,189	$	1,139	Total	$	52	$	642

Products and services provided under long-term contracts represent a significant portion of sales in the Albany Engineered Composites segment and we account for these contracts using the percentage of completion (actual cost to estimated cost) method. That method requires significant judgment and estimation, which could be considerably different if the underlying circumstances were to change. 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. ~~In 2020, net adjustments to~~Adjustments in the estimated profitability of long-term contracts increased ~~gross profit~~operating income by ~~$3.5 million and $9.5~~$0.9 million for the ~~three and nine month periods, respectively, ended September 30, 2020. In 2019, net adjustments~~first quarter of 2020, compared to ~~the estimated profitability of long-term contracts increased gross profit by $3.2 million and $8.8 million~~an insignificant effect for the ~~three and nine month periods, respectively, ended September 30, 2019.~~

first quarter of 2021.

Index

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 ~~tables disaggregate~~table disaggregates revenue for each product group by timing of revenue recognition:


		Three months ended September 30, 2020							Three months ended March 31, 2021
(in thousands)	(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total		(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total

Machine Clothing	Machine Clothing	$	137,899	$	848	$	138,747	Machine Clothing	$	147,341	$	865	$	148,206

Albany Engineered Composites	Albany Engineered Composites							Albany Engineered Composites
ASC	ASC	0		17,301		17,301		ASC	0		27,084		27,084
Other AEC	Other AEC	4,479		51,472		55,951		Other AEC	3,880		43,192		47,072
Total Albany Engineered Composites	Total Albany Engineered Composites	4,479		68,773		73,252		Total Albany Engineered Composites	3,880		70,276		74,156

Total revenue	Total revenue	$	142,378	$	69,621	$	211,999	Total revenue	$	151,221	$	71,141	$	222,362

Nine months ended September 30, 2020
(in thousands) Point in Time Revenue
Recognition Over Time Revenue
Recognition Total
Machine Clothing $ 426,238 $ 2,544 $ 428,782
Albany Engineered Composites
ASC 0 72,771 72,771
Other AEC 14,942 157,258 172,200
Total Albany Engineered Composites 14,942 230,029 244,971
Total revenue $ 441,180 $ 232,573 $ 673,753

Three months ended September 30, 2019
(in thousands) Point in Time Revenue
Recognition Over Time Revenue
Recognition Total
Machine Clothing $ 150,524 $ 800 $ 151,324
Albany Engineered Composites
ASC 0 56,414 56,414
Other AEC 6,708 56,687 63,395
Total Albany Engineered Composites 6,708 113,101 119,809
Total revenue $ 157,232 $ 113,901 $ 271,133

~~Index~~


		Nine months ended September 30, 2019							Three months ended March 31, 2020
(in thousands)	(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total		(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total

Machine Clothing	Machine Clothing	$	448,273	$	2,400	$	450,673	Machine Clothing	$	135,754	$	848	$	136,602

Albany Engineered Composites	Albany Engineered Composites							Albany Engineered Composites
ASC	ASC	0		170,551		170,551		ASC	0		37,894		37,894
Other AEC	Other AEC	22,850		152,380		175,230		Other AEC	6,320		54,948		61,268
Total Albany Engineered Composites	Total Albany Engineered Composites	22,850		322,931		345,781		Total Albany Engineered Composites	6,320		92,842		99,162

Total revenue	Total revenue	$	471,123	$	325,331	$	796,454	Total revenue	$	142,074	$	93,690	$	235,764

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


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020

Americas PMC	Americas PMC	$	70,663	$	82,763	$	225,565	$	239,686	Americas PMC	$	73,302	$	73,677
Eurasia PMC	Eurasia PMC	50,923		50,330		150,220		155,849		Eurasia PMC	55,143		45,131
Engineered Fabrics	Engineered Fabrics	17,161		18,231		52,997		55,138		Engineered Fabrics	19,761		17,794
Total Machine Clothing Net sales	Total Machine Clothing Net sales	$	138,747	$	151,324	$	428,782	$	450,673	Total Machine Clothing Net sales	$	148,206	$	136,602

~~In accordance with~~As permitted by ASC 606, we ~~do not~~only disclose the value of unsatisfied performance obligations for contracts with an original expected duration of greater than one ~~year or less.~~year. Contracts in the MC segment are generally for periods of less than a year. 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 ~~$81~~$76 million and $82 million as of ~~both September 30,~~March 31, 2021 and 2020, ~~and 2019~~respectively, and related primarily to firm contracts in the AEC segment. Of the remaining performance obligations as of ~~September 30, 2020,~~March 31, 2021, we expect to recognize as revenue approximately ~~$36~~$51 million during ~~2020~~2021 and the remainder during ~~2021.~~2022.

~~3. Business Acquisition~~

On November 20, 2019, the Company acquired CirComp GmbH, a privately-held developer and manufacturer of high-performance composite components located in Kaiserslautern, Germany for $32.4 million. The Company also agreed to pay approximately $5.5 millionthat will become due as certain post-closing obligations are performed. Expense related to that agreement will be recognized over the five year performance period. The Company funded the acquisition using a combination of cash on hand and funds drawn on its revolving credit facility. In March 2020, the Company purchased, in cash, the primary operating facility in Germany for $5.8 million, which resulted in the recording of land and building assets, and the removal of the Right of use assets and associated lease liabilities included in the acquisition-date balance sheet.

The seller provided representations, warranties and indemnities customary for acquisition transactions, including indemnities for certain customer claims identified, before closing. The acquired entity is part of the AEC segment. CirComp specializes in designing and manufacturing customized engineered composite components for aerospace and other demanding industrial applications.

~~The following table summarizes the allocation of the purchase price to the fair value of the assets and liabilities acquired:~~

~~Index~~


~~(in thousands)~~	~~November 20, 2019~~
~~Assets acquired~~
~~Cash~~	$	~~1,607~~
~~Accounts receivable~~	~~986~~
~~Contract assets~~	~~1,992~~
~~Inventories~~	~~525~~
~~Prepaid expenses and other current assets~~	~~452~~
~~Right of use assets~~	~~5,686~~
~~Property, plant and equipment~~	~~4,884~~
~~Amortizable intangible assets~~	~~10,302~~
~~Goodwill~~	~~17,676~~
~~Total assets acquired~~	$	~~44,110~~

~~Liabilities assumed~~
~~Accounts payable~~	$	65
~~Accrued liabilities~~	~~2,777~~
~~Lease liabilities~~	~~502~~
~~Deferred income taxes~~	~~3,182~~
~~Other noncurrent liabilities~~	~~5,184~~
~~Total liabilities assumed~~	$	~~11,710~~

~~Net assets acquired~~	$	~~32,400~~
~~Purchase of business, net of cash acquired~~	$	~~30,793~~

During the first six months of 2020, management identified adjustments to the provisional value of assets and liabilities acquired reported in the Form 10-K for the year ended December 31, 2019, which resulted in a decrease to Contract assets of $0.3 million, an increase to Accrued liabilities of $0.5 million, an increase to Amortizable intangible assets of $0.3 million, a decrease to Deferred income tax liabilities of $0.2 million, and an increase to Goodwill of $0.3 million. Management's review of the purchase price allocation has been completed.

Acquired Goodwill of $17.7 million reflects the Company’s belief that the acquisition complements and expands Albany’s portfolio of proprietary, advanced manufacturing technologies for composite components, increases the Company’s position as a leading innovator in advanced materials processing and automation, and opens a geographic footprint in Europe to better serve our global customer base. The acquisition significantly increases the Company’s opportunities for future growth. The goodwill is non-deductible for tax purposes.

119

Index

4.3. Pensions and Other Postretirement Benefit ~~Plans~~

~~Pension~~ Plans

The Company has defined benefit pension plans covering certain U.S. and non-U.S. employees. The U.S. qualified defined benefit pension plan has been closed to new participants since October 1998, and benefits accrued under this plan have been frozen since February 2009. As a result of the freeze, employees covered by the pension plan will receive, at retirement, benefits already accrued through February 2009 but no new benefits accrue after that date. Benefit accruals under the U.S. Supplemental Executive Retirement Plan ("SERP") were similarly frozen. The eligibility, benefit formulas, and contribution requirements for plans outside of the U.S. vary by location.

~~Other Postretirement Benefits~~

The Company also provides certain postretirement benefits to retired employees in the U.S. and Canada. The Company accrues the cost of providing ~~postretirement~~these benefits during the active service period of the employees. ~~The Company currently funds the plans as claims are paid.~~

The composition of the net periodic benefit cost for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ was as follows:

Pension plans Other postretirement benefits
(in thousands) 2020 2019 2020 2019
Components of net periodic benefit cost:
Service cost $ 1,728 $ 1,892 $ 150 $ 142
Interest cost 4,621 5,368 1,285 1,585
Expected return on assets (5,139) (6,155) 0 0
Settlement cost 145 0 0 0
Curtailment cost 233 0 0 0
Amortization of prior service cost/(credit) 24 51 (3,366) (3,366)
Amortization of net actuarial loss 1,776 1,687 1,944 1,670
Net periodic benefit cost $ 3,388 $ 2,843 $ 13 $ 31


	Pension plans				Other postretirement benefits
(in thousands)	2021		2020		2021		2020
Components of net periodic benefit cost:
Service cost	$	545	$	580	$	33	$	50
Interest cost	1,338		1,550		276		428
Expected return on assets	(1,606)		(1,723)		0		0
Amortization of prior service cost/(credit)	3		8		(1,122)		(1,122)
Amortization of net actuarial loss	544		596		565		648
Net periodic benefit cost	$	824	$	1,011	$	(248)	$	4

The amount of net periodic ~~pension~~benefit cost 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. ~~In the second quarter of 2020, the Company recorded expense of $0.4 million related to curtailments and settlements.~~ There were no ~~curtailments~~such events in the first three months of 2021 or ~~settlements in other quarters.~~2020.

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

Other components of net periodic benefit cost are ~~presented in the income statement separately from the service cost component and outside a subtotal of income from operations,~~included in the line item Other (income)/expense, net in the Consolidated Statements of Income.

5.4. Restructuring

~~In 2020, AEC reduced its workforce at various locations, principally~~Restructuring costs in the ~~United States, leading to restructuring charges~~first quarter of ~~$2.6 million for the first nine months of 2020.~~

2021 were not significant while Machine Clothing restructuring charges for the first ~~nine~~three months of 2020 ~~and 2019 were~~ principally related to ~~the plant closure of~~discontinued operations at its MC production facility in Sélestat, ~~France that was announced in 2017.~~France. Since 2017, we have recorded ~~$13.3~~$13.9 million of restructuring charges related to this action.

~~Index~~

There were 0 charges related to the impairment of assets for the periods presented.

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

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Machine Clothing $ 384 $ (211) $ 1,414 $ 1,125
Albany Engineered Composites 358 (33) 2,606 18
Corporate expenses (32) 0 169 (4)
Total $ 710 $ (244) $ 4,189 $ 1,139

Nine Months Ended September 30, 2020
Total
restructuring
costs incurred
Termination
and other
costs
Impairment of assets
(in thousands)
Machine Clothing $ 1,414 $ 1,414 $ 0
Albany Engineered Composites 2,606 2,606 0
Corporate expenses 169 169 0
Total $ 4,189 $ 4,189 $ 0


Nine Months Ended September 30, 2019		Total restructuring costs incurred		Termination and other costs		Impairment of assets
									Three months ended March 31,
(in thousands)	(in thousands)							(in thousands)	2021		2020
Machine Clothing	Machine Clothing	$	1,125	$	1,081	$	44	Machine Clothing	$	(69)	$	642
Albany Engineered Composites	Albany Engineered Composites	18		18		0		Albany Engineered Composites	89		0
Corporate expenses	Corporate expenses	(4)		(4)		0		Corporate expenses	32		0
Total	Total	$	1,139	$	1,095	$	44	Total	$	52	$	642

~~We expect that approximately $2.8 million of Accrued liabilities for restructuring at September 30, 2020 will be paid within one year and approximately $0.3 million will be paid the following year.~~ The table below presents the year-to-date changes in restructuring liabilities for ~~2020~~2021 and ~~2019,~~2020, all of which are related to termination and other costs:


(in thousands)	(in thousands)	December 31, 2019		Restructuring charges accrued		Payments		Currency translation /other		September 30, 2020		(in thousands)	December 31, 2020		Restructuring charges accrued		Payments		Currency translation /other		March 31, 2021
Total termination and other costs	Total termination and other costs	$	2,042	$	4,189	$	(3,186)	$	46	$	3,091	Total termination and other costs	$	2,195	$	52	$	(1,216)	$	(15)	$	1,016


(in thousands)	(in thousands)	December 31, 2018		Restructuring charges accrued		Payments		Currency translation /other		September 30, 2019		(in thousands)	December 31, 2019		Restructuring charges accrued		Payments		Currency translation /other		March 31, 2019
Total termination and other costs	Total termination and other costs	$	5,570	$	1,095	$	(4,195)	$	(360)	$	2,110	Total termination and other costs	$	2,042	$	642	$	(731)	$	(92)	$	1,861

We expect that approximately $0.8 million of Accrued liabilities for restructuring at March 31, 2021 will be paid within one year and approximately $0.2 million will be paid the following year.

Index

5. Other (Income)/Expense, net

The components of Other (Income)/Expense, net are:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020
Currency transaction (gains)/losses	Currency transaction (gains)/losses	$	(148)	$	(2,028)	$	14,702	$	(3,724)	Currency transaction (gains)/losses	$	166	$	14,834
Bank fees and amortization of debt issuance costs	Bank fees and amortization of debt issuance costs	96		81		264		262		Bank fees and amortization of debt issuance costs	107		75
Components of net periodic pension and postretirement cost other than service	Components of net periodic pension and postretirement cost other than service	384		278		1,523		840		Components of net periodic pension and postretirement cost other than service	(2)		385
Other	Other	(3,077)		41		(2,574)		716		Other	329		275
Total	Total	$	(2,745)	$	(1,628)	$	13,915	$	(1,906)	Total	$	600	$	15,569

Other ~~(Income)~~(income)/~~Expense,~~expense, net ~~for the first three months of 2020 included~~includes losses related to the revaluation of nonfunctional-currency balances of $0.2 million for the first three months of 2021, compared to losses of $14.8 million for the first three months of 2020, which principally resulted from an intercompany demand ~~loans~~loan payable by a Mexican ~~subsidiaries combined with the effects of a much weaker peso in 2020.~~subsidiary. As a result of changes in business

~~Index~~

conditions that occurred in the first quarter of 2020, ~~certain~~ loan repayments on that intercompany loan are ~~no longer~~not expected in the foreseeable future and, beginning April 1, 2020, ~~the~~ revaluation effects ~~for those loans~~ are ~~being~~ recorded in Other comprehensive income. ~~This resulted in a gain of $0.6 million, and a loss of $0.6 million being recorded in Other comprehensive income in the second and third quarters of 2020, respectively.~~

~~Other (income)/expense, net, for the first nine months of 2019 included gains related to the revaluation of nonfunctional-currency balances of $3.7 million.~~

~~In the third quarter 2020 Other income/expense, net we recorded other income of $2.6 million related to a successful claim for a rebate of foreign sales tax paid in previous years.~~

7.6. Income Taxes

The following table presents components of income tax expense for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2020		2019		2020		2019		(in thousands, except percentages)	2021		2020
Income tax based on income from continuing operations, at estimated tax rates of 32.2% and 27.5%, respectively		$	12,666	$	14,662	$	34,550	$	38,256
Provision for change in estimated tax rate		(1,196)		(692)		0		0
Income tax based on income from continuing operations, at estimated tax rates of 30.1% and 36.5%, respectively										Income tax based on income from continuing operations, at estimated tax rates of 30.1% and 36.5%, respectively	$	11,332	$	7,309
Income tax before discrete items	Income tax before discrete items	11,470		13,970		34,550		38,256		Income tax before discrete items	11,332		7,309
Discrete tax expense:	Discrete tax expense:									Discrete tax expense:
Exercise of U.S. stock options	Exercise of U.S. stock options	(7)		(55)		(7)		(111)		Exercise of U.S. stock options	(142)		0
Adjustments to prior period tax liabilities	Adjustments to prior period tax liabilities	(1,750)		(160)		(983)		187		Adjustments to prior period tax liabilities	(1,443)		(112)
Provision for/resolution of tax audits and contingencies, net	Provision for/resolution of tax audits and contingencies, net	(46)		(558)		(1,779)		(2,785)		Provision for/resolution of tax audits and contingencies, net	278		(244)
Out-of-period adjustments to deferred tax assets		0		0		1,830		(1,366)
Out-of-period adjustments										Out-of-period adjustments	0		1,830
Tax effect of non-deductible foreign exchange loss on intercompany loan	Tax effect of non-deductible foreign exchange loss on intercompany loan	3		0		3,658		0		Tax effect of non-deductible foreign exchange loss on intercompany loan	0		3,668
Changes in valuation allowance		8		(11)		230		830
Other	Other	8		8		5		64		Other	15		3
Total income tax expense	Total income tax expense	$	9,686	$	13,194	$	37,504	$	35,075	Total income tax expense	$	10,040	$	12,454

The ~~third quarter~~first-quarter estimated annual effective tax rate on continuing operations was ~~32.2~~30.1 percent in ~~2020,~~2021, compared to ~~27.5~~36.5 percent for the same period in ~~2019.~~2020.

Income tax expense for the quarter was ~~determined~~computed in accordance with ASC 740-270, Income Taxes – Interim Reporting. Under this method, loss jurisdictions, which cannot recognize a tax benefit with regard to their generated losses, are excluded from the annual effective tax rate (AETR) calculation and their taxes will be recorded discretely in each quarter.

The Company’s tax rate is affected by recurring items such as the income tax rate in the U.S. and in non-U.S. jurisdictions and the mix of income earned in those jurisdictions, including changes in losses and income from excluded loss jurisdictions, and the impact of discrete items in the respective quarter. The ~~higher~~decrease in the estimated Q1 2021 income tax rate iswas primarily driven by ~~an increase~~a decrease in losses in a foreign jurisdiction that iswere excluded in calculating the quarterly income tax provision.

The Company records the residual U.S. and foreign taxes on certain amounts of foreign earnings that have been targeted for repatriation to the U.S. These amounts are not considered to be indefinitely reinvested, and the Company accrued for the tax cost on these earnings to the extent they cannot be repatriated in a tax-free manner. The Company has targeted for repatriation ~~$156.4~~$203 million of current year and prior year earnings of the Company’s foreign

Index

operations. If these earnings were ~~repatriated,~~distributed, the Company would be subject to foreign withholding taxes of ~~$2.8~~$3.4 million and state income taxes of ~~$2.6~~$2.0 million, which have already been recorded.

The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including major jurisdictions such as the United States, Brazil, Canada, France, Germany, Italy, Mexico, and Switzerland. The open tax years in these jurisdictions range from ~~2007~~2015 to ~~2020.~~2021. The Company is currently under audit in U.S and certain non-U.S. tax ~~jurisdictions, including but not limited~~jurisdictions.

In the first quarter of 2021, the Company recorded a net tax benefit of $1.4 million related to ~~Canada~~a U.S. adjustment of prior period liabilities and,

~~Index~~

additionally, the ~~state~~Company recorded an expense of ~~Utah.~~$0.3 million related to the establishment of a foreign uncertain tax position. In the first quarter of 2020, the Company recorded a $1.8 million out-of-period ~~immaterial~~ charge related to developments in ongoing tax audits, which resulted in a corresponding decrease in deferred tax assets. ~~In the second quarter of 2020, a U.S. state tax audit was settled, resulting in a net tax benefit of $1.5 million in that quarter.~~

In 2020, the Company recorded a net tax benefit of $1.0 million related to the adjustment of prior period liabilities. In the third and second quarter of 2020, respectively, the Company recorded a net tax benefit of $1.8 million related to U.S. adjustments of prior period liabilities, and deferred tax expense of $1.0 million due to an adjustment of net operating losses related to settled audits. Additionally, the Company recorded a $0.2 million valuation allowance on the net deferred tax assets of one of its foreign subsidiaries in the second quarter of 2020.

One of the Company’s subsidiaries in Mexico has an intercompany loan payable in U.S. dollars. As a result of the weaker Mexican peso, the Company recorded a revaluation loss of $12.7 million in the first quarter of 2020. That foreign currency loss is not deductible under Mexican tax law, which had a $3.7 million discrete tax impact in the first quarter of 2020. This intercompany loan was designated as a long-term loan as of April 1, 2020 and, as such, the subsequent foreign currency impacts are not recorded in the income statement.

8.7. Earnings Per Share

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 September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands, except market price and earnings per share)	(in thousands, except market price and earnings per share)	2020		2019		2020		2019		(in thousands, except market price and earnings per share)	2021		2020

Net income attributable to the Company	Net income attributable to the Company	$	29,589	$	40,009	$	71,052	$	103,253	Net income attributable to the Company	$	27,582	$	9,109

Weighted average number of shares:	Weighted average number of shares:									Weighted average number of shares:
Weighted average number of shares used in calculating basic net income per share	Weighted average number of shares used in calculating basic net income per share	32,337		32,306		32,326		32,293		Weighted average number of shares used in calculating basic net income per share	32,352		32,312
Effect of dilutive stock-based compensation plans:	Effect of dilutive stock-based compensation plans:									Effect of dilutive stock-based compensation plans:
Stock options	Stock options	7		11		7		12		Stock options	3		8
RSU shares										RSU shares	46		0

Weighted average number of shares used in calculating diluted net income per share	Weighted average number of shares used in calculating diluted net income per share	32,344		32,317		32,333		32,305		Weighted average number of shares used in calculating diluted net income per share	32,401		32,320

Average market price of common stock used for calculation of dilutive shares	Average market price of common stock used for calculation of dilutive shares	$	51.81	$	82.99	$	57.05	$	76.45	Average market price of common stock used for calculation of dilutive shares	$	79.30	$	65.47

Net income attributable to the Company per share:	Net income attributable to the Company per share:									Net income attributable to the Company per share:
Basic	Basic	$	0.92	$	1.24	$	2.20	$	3.20	Basic	$	0.85	$	0.28
Diluted	Diluted	$	0.91	$	1.24	$	2.20	$	3.20	Diluted	$	0.85	$	0.28

9.8. Accumulated Other Comprehensive Income (AOCI)

The table below presents changes in the components of AOCI for the period December 31, ~~2019~~2020 to ~~September 30, 2020:~~March 31, 2021:

1512

Index


(in thousands)	(in thousands)	Translation adjustments		Pension and postretirement liability adjustments		Derivative valuation adjustment		Total Accumulated Other Comprehensive Income		(in thousands)	Translation adjustments		Pension and postretirement liability adjustments		Derivative valuation adjustment		Total Other Comprehensive Income
December 31, 2019		$	(122,852)	$	(49,994)	$	(3,135)	$	(175,981)
December 31, 2020										December 31, 2020	$	(83,203)	$	(39,661)	$	(9,544)	$	(132,408)
Other comprehensive income/(loss) before reclassifications, net of tax	Other comprehensive income/(loss) before reclassifications, net of tax	3,038		9		(9,315)		(6,268)		Other comprehensive income/(loss) before reclassifications, net of tax	(15,955)		516		(343)		(15,782)
Pension/postretirement curtailment loss, net of tax		0		265		0		265
Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax	Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax	0		0		2,041		2,041		Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax	0		0		1,095		1,095
Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax	Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax	0		284		0		284		Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax	0		(7)		0		(7)
Net current period other comprehensive income	Net current period other comprehensive income	3,038		558		(7,274)		(3,678)		Net current period other comprehensive income	(15,955)		509		752		(14,694)
September 30, 2020		$	(119,814)	$	(49,436)	$	(10,409)	$	(179,659)
March 31, 2021										March 31, 2021	$	(99,158)	$	(39,152)	$	(8,792)	$	(147,102)

The table below presents changes in the components of AOCI for the period December 31, ~~2018~~2019 to ~~September 30, 2019:~~March 31, 2020:

(in thousands) Translation
adjustments Pension and
postretirement
liability
adjustments Derivative
valuation
adjustment Total Accumulated Other
Comprehensive
Income
December 31, 2018 $ (115,976) $ (47,109) $ 4,697 $ (158,388)
Other comprehensive income/(loss) before reclassifications, net of tax (23,177) 280 (8,037) (30,934)
Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax 0 0 (832) (832)
Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax 0 29 0 29
Adjustment related to prior period change in opening valuation allowance 0 (1,346) 0 (1,346)
Net current period other comprehensive income (23,177) (1,037) (8,869) (33,083)
September 30, 2019 $ (139,153) $ (48,146) $ (4,172) $ (191,471)


(in thousands)	Translation adjustments		Pension and postretirement liability adjustments		Derivative valuation adjustment		Total Other Comprehensive Income
December 31, 2019	$	(122,852)	$	(49,994)	$	(3,135)	$	(175,981)
Other comprehensive income/(loss) before reclassifications, net of tax	(25,747)		792		(8,011)		(32,966)
Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax	0		0		303		303
Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax	0		98		0		98
Net current period other comprehensive income	(25,747)		890		(7,708)		(32,565)
March 31, 2020	$	(148,599)	$	(49,104)	$	(10,843)	$	(208,546)

The components of our Accumulated Other Comprehensive Income that are reclassified to the Statement 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 Statement of Income that were affected for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


	Three months ended March 31,
(in thousands)	2021		2020
Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:
Expense/(income) related to interest rate swaps included in Income before taxes (a)	$	1,476	$	407
Income tax effect	(381)		(104)
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income	$	1,095	$	303

Pretax pension and postretirement liabilities reclassified from Accumulated Other Comprehensive Income:
Amortization of prior service credit	(1,119)		(1,114)
Amortization of net actuarial loss	1,109		1,244
Total pretax amount reclassified (b)	(10)		130
Income tax effect	3		(32)
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income	$	(7)	$	98

1613

Index

Three months ended September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:
Expense/(income) related to interest rate swaps included in Income before taxes (a) $ 1,219 $ (245) $ 2,742 $ (1,117)
Income tax effect (311) 62 (701) 285
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income $ 908 $ (183) $ 2,041 $ (832)
Pretax pension and postretirement liabilities reclassified from Accumulated Other Comprehensive Income:
Pension/postretirement curtailment $ 0 $ 0 $ 378 $ 0
Amortization of prior service credit (1,114) (1,105) (3,342) (3,315)
Amortization of net actuarial loss 1,244 1,118 3,720 3,357
Total pretax amount reclassified (b) 130 13 756 42
Income tax effect (32) (4) (207) (13)
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income $ 98 $ 9 $ 549 $ 29

(a)Included in Interest expense, net are payments related to the interest rate swap agreements and amortization of swap buyouts (see Notes 1514 and ~~16)~~15).

(b)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4)3).

~~10.~~9. Noncontrolling Interest

Effective October 31, 2013, Safran S.A. (Safran) acquired a 10 percent equity interest in a new Albany subsidiary, Albany Safran Composites, LLC (ASC). 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:


		Nine months ended September 30,							Three months ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2020			2019			(in thousands, except percentages)	2021			2020
Net (loss)/income of Albany Safran Composites (ASC)		$	(13,310)		$	6,368
Net income/(loss) of Albany Safran Composites (ASC)								Net income/(loss) of Albany Safran Composites (ASC)	$	585		$	(14,849)
Less: Return attributable to the Company's preferred holding	Less: Return attributable to the Company's preferred holding	884			974			Less: Return attributable to the Company's preferred holding	318			302
Net (loss)/income of ASC available for common ownership		$	(14,194)		$	5,394
Net /income/(loss) of ASC available for common ownership								Net /income/(loss) of ASC available for common ownership	$	267		$	(15,151)
Ownership percentage of noncontrolling shareholder	Ownership percentage of noncontrolling shareholder	10		%	10		%	Ownership percentage of noncontrolling shareholder	10		%	10		%
Net (loss)/income attributable to noncontrolling interest		$	(1,419)		$	539
Net /income/(loss) attributable to the noncontrolling interest								Net /income/(loss) attributable to the noncontrolling interest	$	27		$	(1,515)

Noncontrolling interest, beginning of year	Noncontrolling interest, beginning of year	$	4,006		$	3,031		Noncontrolling interest, beginning of year	$	3,799		$	4,006
Net (loss)/income attributable to noncontrolling interest		(1,419)			539
Changes in other comprehensive income attributable to noncontrolling interest		462			(19)
Net income/(loss) attributable to noncontrolling interest								Net income/(loss) attributable to noncontrolling interest	27			(1,515)
Changes in other comprehensive income attributable to the noncontrolling interest								Changes in other comprehensive income attributable to the noncontrolling interest	(210)			109
Noncontrolling interest, end of interim period	Noncontrolling interest, end of interim period	$	3,049		$	3,551		Noncontrolling interest, end of interim period	$	3,616		$	2,600

~~11.~~10. Accounts Receivable

Accounts receivable includes trade receivables. In connection with certain sales in Asia, the Company accepts a bank promissory note as customer payment. The notes may be presented for payment at maturity, which is less than one year. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Accounts receivable consisted of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	March 31, 2021		December 31, 2020
Trade and other accounts receivable	Trade and other accounts receivable	$	191,035	$	201,427	Trade and other accounts receivable	$	165,005	$	167,370
Bank promissory notes	Bank promissory notes	23,169		18,563		Bank promissory notes	26,837		24,860
Allowance for expected credit losses	Allowance for expected credit losses	(3,878)		(1,719)		Allowance for expected credit losses	(3,776)		(3,807)
Accounts receivable, net	Accounts receivable, net	$	210,326	$	218,271	Accounts receivable, net	$	188,066	$	188,423

~~Index~~

The Company has Noncurrent receivables in the AEC segment that represent revenue earned, which has extended payment terms. The Noncurrent receivables ~~are~~will be invoiced to the customer ~~with 2% interest,~~ over a 10-year period, ~~that~~which began in 2020. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Noncurrent receivables consisted of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	March 31, 2021		December 31, 2020
Noncurrent receivables	Noncurrent receivables	$	36,611	$	41,234	Noncurrent receivables	$	35,209	$	36,539
Allowance for expected credit losses	Allowance for expected credit losses	(383)		0		Allowance for expected credit losses	(264)		(274)
Noncurrent receivables, net	Noncurrent receivables, net	$	36,228	$	41,234	Noncurrent receivables, net	$	34,945	$	36,265

~~As described in Note 1, effective January 1, 2020, the Company adopted the provisions of~~ ~~ASC 326~~, ~~Current Expected Credit Losses (CECL).~~ The overarching purpose of the new standard is to provide greater transparency and understanding of the Company’s credit risk. The CECL accounting update replaces the incurred loss impairment methodology under current 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 the new 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. 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. 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.

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. The risk of loss due to credit default increases when one or more events occur that can have a detrimental impact on estimated future cash flows of that financial asset. Evidence that a financial asset is subject to greater credit risk include observable data about significant financial difficulty of the customer, a breach of contract, such as a default or past due event, or it becomes probable that the customer will enter bankruptcy or other financial reorganization, among other factors. It may not be possible to identify a single discrete event, but rather, the combined effect of several events may cause an increase in risk of loss.

The probability of default is driven by the relative financial health of our customer base and that of the industries in which we do business, as well as the broader macro-economic environment. A changing economic environment or forecasted economic scenario can lead to a different probability of default and can suggest that credit risk has changed. Such is the case with the global COVID-19 pandemic, which has increased uncertainty and poses a significant challenge to the macro-economic environment. Management believes this has increased the probability of credit default, causing the Company to increase the allowance for expected credit losses during the current year.

At each reporting period, the Company will recognize the amount of change in current expected credit losses as an allowance gain or loss in Selling, general, and administrative expenses in the Consolidated Statements of Income.

Financial assets are written-off when the Company has no reasonable expectation of recovering the financial asset, either in its entirety, or a portion thereof. This is the case when the Company determines that the customer does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

~~The following table presents the year-to-date (increases)/decreases in the allowance for credit losses for Accounts receivable:~~

(in thousands) December 31,
2019
CECL
transition
adjustment
Charges
Currency
translation
Other September 30,
2020
Specific customer reserves $ (1,719) $ (44) $ 12 $ 42 $ 74 $ (1,635)
Incremental expected credit losses 0 (1,139) (1,109) 8 (3) (2,243)
Accounts receivable expected credit losses $ (1,719) $ (1,183) $ (1,097) $ 50 $ 71 $ (3,878)

~~Index~~

~~The following table presents the year-to-date (increases)/decreases in the allowance for credit losses for Noncurrent receivables:~~

(in thousands) December 31,
2019
CECL
transition
adjustment
Charges
Currency
translation
Other September 30,
2020
Noncurrent receivables expected credit losses $ 0 $ (206) $ (185) $ 8 $ 0 $ (383)

~~12.~~11. Contract Assets and Liabilities

Contract assets includes unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized, and revenue recognized exceeds the amount billed to the customer. Contract assets are transferred to Accounts receivable, net when the entitlement to pay becomes unconditional. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract liabilities are included in Accrued liabilities in the Consolidated Balance Sheets.

Index

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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Contract assets and Contract liabilities consisted of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	March 31, 2021		December 31, 2020
Contract assets	Contract assets	$	105,626	$	79,070	Contract assets	$	122,688	$	140,348
Allowance for expected credit losses	Allowance for expected credit losses	(773)		0		Allowance for expected credit losses	(921)		(1,059)
Contract assets, net	Contract assets, net	$	104,853	$	79,070	Contract assets, net	$	121,767	$	139,289

Contract liabilities	Contract liabilities	$	7,913	$	5,656	Contract liabilities	$	7,899	$	8,206

Contract assets ~~increased $25.8~~decreased $17.5 million during the ~~nine-month~~three-month period ended ~~September 30, 2020.~~March 31, 2021. The ~~increase~~decrease was primarily due to ~~an increase in unbilled~~invoicing to customers exceeding revenue ~~related to the satisfaction of~~recognized for satisfied performance obligations ~~in excess of the amounts billed to customers~~ for contracts that were in a contract asset position. There were 0 impairment losses related to our Contract assets during the ~~nine~~three month periods ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~

~~As described in Notes 1 and 11, effective January 1, 2020, the Company adopted the provisions of ASC 326,~~ ~~Current Expected Credit Losses (CECL).~~

~~The following table presents the year-to-date (increases)/ decreases in the allowance for credit losses for Contract assets:~~

(in thousands) December 31,
2019
CECL
transition
adjustment
Charges
Currency
translation
Other September 30,
2020
Contract assets expected credit losses $ 0 $ (403) $ (382) $ 4 $ 8 $ (773)

March 31, 2020.

Contract liabilities ~~increased $2.3~~decreased $0.3 million during the ~~nine-month~~three-month period ended ~~September 30, 2020,~~March 31, 2021, primarily due to ~~increased billings in excess of~~ revenue recognized from satisfied performance obligations ~~for contracts~~exceeding amounts invoiced to customers that were in a contract liability position. Revenue recognized for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ that was included in the Contract liability balance at the beginning of the year was ~~$3.5~~$4.3 million and ~~$6.1~~$1.9 million, respectively.

~~13.~~12. Inventories

Costs included in inventories are raw materials, labor, supplies and allocable depreciation and overhead. Raw material inventories are valued on an average cost basis. Other inventory cost elements are valued at cost, using the first-in, first-out method. The Company writes down the inventories for estimated obsolescence, and to lower of cost or net realizable value based upon assumptions about future demand and market conditions. If actual demand or market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required.

~~Index~~

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

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Inventories consisted of the following:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	March 31, 2021		December 31, 2020
Raw materials	Raw materials	$	65,117	$	52,960	Raw materials	$	60,391	$	57,789
Work in process	Work in process	35,207		31,744		Work in process	41,593		40,416
Finished goods	Finished goods	12,783		10,445		Finished goods	15,038		12,273
Total inventories	Total inventories	$	113,107	$	95,149	Total inventories	$	117,022	$	110,478

~~14.~~13. Goodwill and Other Intangible Assets

Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually. 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. Impairment is the condition that exists when the carrying amount of a reporting unit, including goodwill, exceeds its fair value. Our reportable segments are consistent with our operating segments.

Determining the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates, and future market conditions, among others. Goodwill and other long-lived assets are reviewed for impairment whenever events, such as significant changes in the business climate, plant closures, changes in product offerings, or other circumstances indicate that the carrying amount may not be recoverable.

To determine fair value, we utilize two market-based approaches and an income approach. Under the market-based approaches, we utilize information regarding the Company, as well as publicly available industry information, to determine earnings multiples and sales multiples. Under the 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,

Index

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 2020, management applied the quantitative assessment approach in performing its annual evaluation of goodwill and concluded that no impairment provision was required. As part of this evaluation, the Company considered projected cash flows and market multiples for the Company’s Machine Clothing reporting unit and three AEC reporting units. Management performed these quantitative assessments ~~as to whether the fair value of each reporting unit was less than its carrying value as of June 30, 2020~~ and concluded ~~that it was more likely than not~~ 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 spread between the fair and carrying values. Accordingly, no0 impairment charges were recorded.

~~We are continuing~~ Management is scheduled to amortize certain patents, trade names, customer relationships, customer contracts and technology assets that have finite lives. The gross carrying value, accumulated amortization and net values of intangible assets andperform the 2021 annual goodwill ~~as of September 30, 2020 and December 31, 2019, were as follows:~~

~~Index~~

As of September 30, 2020
Weighted average amortization life
in years
Gross carrying amount Accumulated amortization Net carrying amount
(in thousands)
Amortized intangible assets:
AEC Trademarks and trade names 6-15 $ 208 $ (148) $ 60
AEC Technology 10-15 6,522 (871) 5,651
AEC Intellectual property 15 1,250 (68) 1,182
AEC Customer contracts 6 17,471 (13,110) 4,361
AEC Customer relationships 8-15 51,763 (14,768) 36,995
AEC Other intangibles 5 322 (290) 32
Total amortized intangible assets $ 77,536 $ (29,255) $ 48,281
Unamortized intangible assets:
MC Goodwill $ 69,884 $ 0 $ 69,884
AEC Goodwill 114,403 0 114,403
Total unamortized intangible assets: $ 184,287 $ 0 $ 184,287

As of December 31, 2019
Weighted average amortization life
in years
Gross carrying amount Accumulated amortization Net carrying amount
(in thousands)
Amortized intangible assets:
AEC Trademarks and trade names 6-15 $ 208 $ (135) $ 73
AEC Technology 10-15 6,191 (387) 5,804
AEC Intellectual property 15 1,250 (7) 1,243
AEC Customer contracts 6 17,471 (10,927) 6,544
AEC Customer relationships 8-15 51,255 (12,108) 39,147
AEC Other intangibles 5 322 (241) 81
Total amortized intangible assets $ 76,697 $ (23,805) $ 52,892
Unamortized intangible assets:
MC Goodwill $ 67,672 $ 0 $ 67,672
AEC Goodwill 113,262 0 113,262
Total unamortized intangible assets: $ 180,934 $ 0 $ 180,934
impairment test during the second quarter.

~~The changes in intangible assets, net and goodwill from December 31, 2019 to September 30, 2020, were as follows:~~

~~Index~~

(in thousands) December 31,
2019
Other
Changes
Amortization
Currency
Translation
September 30,
2020
Amortized intangible assets:
AEC Trademarks and trade names $ 73 $ 0 $ (13) $ 0 $ 60
AEC Technology 5,804 0 (480) 327 5,651
AEC Intellectual property 1,243 0 (61) 0 1,182
AEC Customer contracts 6,544 0 (2,183) 0 4,361
AEC Customer relationships 39,147 329 (2,626) 145 36,995
AEC Other intangibles 81 0 (49) 0 32
Total amortized intangible assets $ 52,892 $ 329 $ (5,412) $ 472 $ 48,281
Unamortized intangible assets:
MC Goodwill $ 67,672 $ 0 $ 0 $ 2,212 $ 69,884
AEC Goodwill 113,262 335 0 806 114,403
Total unamortized intangible assets: $ 180,934 $ 335 $ 0 $ 3,018 $ 184,287

~~Estimated amortization expense of intangibles for the years ending December 31, 2020 through 2024, is as follows:~~

Year
Annual amortization
(in thousands)
2020 $ 7,200
2021 7,100
2022 4,900
2023 4,200
2024 4,200

~~15.~~14. Financial Instruments

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


(in thousands, except interest rates)	(in thousands, except interest rates)	September 30, 2020		December 31, 2019		(in thousands, except interest rates)	March 31, 2021		December 31, 2020

Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.17% in 2020 and 3.43% in 2019 (including the effect of interest rate hedging transactions, as described below), due in 2022		$	418,000	$	424,000
Other debt, at an average end of period rate of 5.50% in both 2020 and 2019, due in varying amounts through 2021		12		29
Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.56% in 2021 and 3.50% in 2020 (including the effect of interest rate hedging transactions, as described below), due in 2024						Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.56% in 2021 and 3.50% in 2020 (including the effect of interest rate hedging transactions, as described below), due in 2024	$	384,000	$	398,000
Other debt, at an average end of period rate of 5.50% in both 2021 and 2020, due in varying amounts through 2021						Other debt, at an average end of period rate of 5.50% in both 2021 and 2020, due in varying amounts through 2021	2		9
Long-term debt	Long-term debt	418,012		424,029		Long-term debt	384,002		398,009
Less: current portion	Less: current portion	(12)		(20)		Less: current portion	(2)		(9)
Long-term debt, net of current portion	Long-term debt, net of current portion	$	418,000	$	424,009	Long-term debt, net of current portion	$	384,000	$	398,000

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”). ~~The~~Under the Credit Agreement, ~~matures on October 27, 2024. Under the Prior Agreement, $418~~$384 million of borrowings were outstanding as of ~~September 30, 2020.~~March 31, 2021. The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio at the time of ~~borrowing, with an option to borrow at base rate.~~borrowing. At the time of the last borrowing on ~~September 28, 2020,~~March 31, 2021, the spread was ~~1.375%~~1.625%. ~~Under the Prior Agreement, the~~The spread was based on a pricing grid, which ranged from ~~1.250%~~1.500% to ~~1.750% and, after giving effect to the amendments, the applicable spread under the Credit Agreement increased by 25 basis points, now ranging from 1.50% to 2.00%~~2.000%, ~~in each case,~~ based on our leverage ratio. ~~Under the Prior Agreement, we were required to maintain a~~Based on our maximum 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. Under the prior agreement, our leverage ratio was 1.50 to 1.00~~ and our ~~interest coverage ratio was 14.62~~Consolidated EBITDA, and without modification to ~~1.00~~any other credit agreements, as of ~~September 30, 2020 and, at that date,~~March 31, 2021, we would have been able to borrow an additional ~~$267 million.~~

~~Index~~

$316 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).

On November 27, 2017, we terminated our interest rate swap agreements, originally entered into on May 9, 2016, that had effectively fixed the interest rate on $300 million of revolving credit borrowings, in order to enter into a new interest rate swap with a greater notional amount, and the same maturity as the Credit Agreement. We received $6.3 million when the swap agreements were terminated, ~~and that payment will be~~which has been fully amortized into interest expense through March 2021.

On May 6, 2016, we terminated other interest rate swap agreements that had effectively fixed the interest rate on $120 million of revolving credit borrowings, in order to enter into a new interest rate swap with a greater notional amount, and the same maturity as the Credit Agreement. We paid $5.2 million to terminate the swap agreements, which were fully amortized into interest expense through June 2020.

On November 28, 2017, we entered into interest rate swap agreements for the period December 18, 2017 through October 17, 2022. 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 2.11% during the period. Under the terms of these transactions, we pay the fixed rate of 2.11% and the counterparties pay a floating rate based on the one-month LIBOR rate at each monthly calculation date, which on ~~September~~March 16, ~~2020~~2021 was ~~0.16%~~0.11%, during the swap period. On ~~September~~March 16, ~~2020,~~2021, the all-in-rate on the $350 million of debt was ~~3.485%~~3.735%.

These interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note ~~16.~~15. No cash collateral was received or pledged in relation to the swap agreements.

Index

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 March 31, 2021, our leverage ratio was 1.20 to 1.00 and our interest coverage ratio was 15.72 to 1.00. We may purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50 to 1.00, and may make acquisitions with cash, provided our leverage ratio does not exceed the limits noted above.

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

We were in compliance with all debt covenants as of ~~September 30, 2020.~~March 31, 2021.

~~16.~~15. 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 ~~September 30, 2020,~~March 31, 2021, or at December 31, ~~2019.~~2020.

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:

September 30, 2020

December 31, 2019

March 31, 2021

December 31, 2020

Quoted
prices in
active
markets

Significant
other
observable
inputs

Quoted
prices in
active
markets

Significant
other
observable
inputs

Quoted

prices in

active

markets

Significant

other

observable

inputs

Quoted

prices in

active

markets

Significant

other

observable

inputs

(in thousands)

(Level 1)

(Level 2)

(Level 1)

(Level 2)

(in thousands)

(Level 1)

(Level 2)

(Level 1)

(Level 2)

Fair Value

Assets:

Cash equivalents

28,705

16,375

Cash equivalents

14,390

17,508

Other Assets:

Common stock of unaffiliated foreign public company (a)

872

839

Common stock of unaffiliated foreign public company (a)

762

748

Liabilities:

Other noncurrent liabilities:

Interest rate swaps

(14,357)

ᵇ

(5,518)

ᶜ

Interest rate swaps

(10,918)

(12,714)

(a)Original cost basis $0.5 million.

~~(b)Net of $1.2 million receivable floating leg and $15.6 million liability fixed leg.~~

~~Index~~

~~(c)Net of $15.2 million receivable floating leg and $20.7 million liability fixed leg.~~

Cash equivalents include short-term securities that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities.

The common stock of the unaffiliated foreign public company is traded in an active market exchange. The shares are measured at fair value using closing stock prices and are recorded in the Consolidated Balance Sheets as Other assets. Changes in the fair value of the investment are reported in the Consolidated Statements of Income.

We operate our business in many regions of the world, and currency rate movements can have a significant effect on operating results. Foreign currency instruments are entered into periodically, and consist of foreign currency option contracts and forward contracts that are valued using quoted prices in active markets obtained from independent pricing sources. These instruments are measured using market foreign exchange prices and are recorded in the Consolidated Balance Sheets as Other current assets and Accounts payable, as applicable. Changes in fair value of these instruments are recorded as gains or losses within Other (income)/expense, net.

When exercised, the foreign currency instruments are net settled with the same financial institution that bought or sold them. For all positions, whether options or forward contracts, there is risk from the possible inability of the financial institution to meet the terms of the contracts and the risk of unfavorable changes in interest and currency rates, which may reduce the value of the instruments. 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.

Changes in exchange rates can result in revaluation gains and losses that are recorded in Selling, general and administrative expenses or Other (income)/expense, net. Revaluation gains and losses occur when our business units have cash, intercompany (recorded in Other (income)/expense, net) or third-party trade (recorded in selling, general and administrative expenses) receivable or payable balances in a currency other than their local reporting (or functional) currency.

Operating results can also be affected by the translation of sales and costs, for each non-U.S. subsidiary, from the local functional currency to the U.S. dollar. The translation effect on the Consolidated Statements of Income is dependent on our net income or expense position in each non-U.S. currency in which we do business. A net income position exists when sales realized in a particular currency exceed expenses paid in that currency; a net expense position exists if the opposite is true.

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. Unrealized gains and losses on the swaps flow through the caption Derivative valuation adjustment in the Shareholders’ equity section of the Consolidated Balance Sheets. As of ~~September 30, 2020,~~March 31, 2021, 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. Interest (income)/expense related to payments under the active swap agreements totaled ~~$3.7~~$1.7 million for the ~~nine~~three month period ended ~~September 30, 2020,~~March 31, 2021, and ~~$(0.8)~~$0.5 million for the ~~nine~~three month period ended ~~September 30, 2019.~~March 31, 2020. Additionally, non-cash interest income related to the amortization of swap buyouts totaled ~~$0.9 million for the nine month period ended September 30, 2020 and~~ $0.3 million for the ~~nine~~three month period ended ~~September 30, 2019.~~March 31, 2021 and $0.1 million for the three month period ended March 31, 2020.

~~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 September 30, Nine months ended September 30,
(in thousands) 2020 2019 2020 2019
Derivatives not designated as hedging instruments
Foreign currency options gains/(losses) $ 0 $ 0 $ (64) $ 0

~~17.~~16. Contingencies

Asbestos Litigation

2417

Index

Albany International Corp. 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 ~~3,616~~3,617 claims as of ~~September 30, 2020.~~March 31, 2021.

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


Year ended December 31,	Year ended December 31,	Opening Number of Claims	Claims Dismissed, Settled, or Resolved	New Claims	Closing Number of Claims	Amounts Paid (thousands) to Settle or Resolve		Year ended December 31,	Opening Number of Claims	Claims Dismissed, Settled, or Resolved	New Claims	Closing Number of Claims	Amounts Paid (thousands) to Settle or Resolve
2015		3,821	116	86	3,791	$	164
2016	2016	3,791	148	102	3,745	758		2016	3,791	148	102	3,745	$	758
2017	2017	3,745	105	90	3,730	55		2017	3,745	105	90	3,730	55
2018	2018	3,730	152	106	3,684	100		2018	3,730	152	106	3,684	100
2019	2019	3,684	51	75	3,708	25		2019	3,684	51	75	3,708	25
2020 (As of September 30)		3,708	133	41	3,616	$	57
2020								2020	3,708	152	59	3,615	57
2021 (As of March 31)								2021 (As of March 31)	3,615	5	7	3,617	$	0

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. Due to the fact that information sufficient to meaningfully estimate a range of possible loss of a particular claim is typically not available until late in the discovery process, we do not believe a meaningful estimate can be made regarding the range of possible loss with respect to pending or future claims and therefore are unable to estimate a range of reasonably possible loss in excess of amounts already accrued for pending or future claims.

While we believe we have meritorious defenses to these claims, we have settled certain claims for amounts we consider reasonable given the facts and circumstances of each case. Our insurance carrier has defended each case and funded settlements under a standard reservation of rights. As of ~~September 30, 2020,~~March 31, 2021, we had resolved, by means of settlement or dismissal, ~~37,930~~37,954 claims. The total cost of resolving all claims was $10.4 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.

The Company’s subsidiary, Brandon Drying Fabrics, Inc. (“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 ~~7,710~~7,709 claims as of ~~September 30, 2020,~~March 31, 2021, only ~~twelve~~12 claims have been filed against Brandon since January 1, 2012, and noa negligible amount of 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. Since 2004, Brandon’s insurance carriers have covered 100% of indemnification and defense costs, subject to policy limits and a standard reservation of rights.

In some of these asbestos cases, the Company is named both as a direct defendant and as the “successor in interest” to Mount Vernon Mills (“Mount Vernon”). 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. Mount Vernon is contractually obligated to indemnify the Company against any liability arising out of such products. We deny any liability for products sold by Mount Vernon prior to the acquisition of the Mount Vernon assets. Pursuant to its contractual indemnification obligations, Mount Vernon has assumed the defense of these claims. 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. 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.

2518

Index

~~18.~~17. Changes in Shareholders’ Equity

The following table summarizes changes in Shareholders’ Equity for the period December 31, ~~2019~~2020 to ~~September 30, 2020:~~March 31, 2021:

Class A
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
(in thousands) Shares Amount Shares Amount Shares Amount
December 31, 2019 39,099 $ 39 1,618 $ 2 $ 432,518 $ 698,496 $ (175,981) 8,409 $ (256,391) $ 4,006 $ 702,689
Adoption of accounting standards (a) — — — — — (1,443) — — — — (1,443)
Net income — — — — — 9,109 — — — (1,515) 7,594
Compensation and benefits paid or payable in shares 13 — — — (682) — — — — — (682)
Options exercised — — — — — — — — — — 0
Shares issued to Directors — — — — — — — — — — —
Dividends declared
Class A Common Stock, $0.19 per share — — — — — (5,834) — — — — (5,834)
Class B Common Stock, $0.19 per share — — — — — (307) — — — — (307)
Cumulative translation adjustments — — — — — — (25,747) — — 109 (25,638)
Pension and postretirement liability adjustments — — — — — — 890 — — — 890
Derivative valuation adjustment — — — — — — (7,708) — — — (7,708)
March 31, 2020 39,112 $ 39 1,618 $ 2 $ 431,836 $ 700,021 $ (208,546) 8,409 $ (256,391) $ 2,600 $ 669,561
Net income — — — — — 32,354 — — — 95 32,449
Compensation and benefits paid or payable in shares — — — — 466 — — (15) 317 — 783
Options exercised 1 — — — 20 — — — — — 20
Shares issued to Directors — — — — 416 — — — — — 416
Dividends declared
Class A Common Stock, $0.19 per share — — — — — (5,835) — — — — (5,835)
Class B Common Stock, $0.19 per share — — — — — (307) — — — — (307)
Cumulative translation adjustments — — — — — — 8,964 — — 152 9,116
Pension and postretirement liability adjustments — — — — — — 142 — — — 142
Derivative valuation adjustment — — — — — — (187) — — — (187)
June 30, 2020 39,113 $ 39 1,618 $ 2 $ 432,738 $ 726,233 $ (199,627) 8,394 $ (256,074) $ 2,847 $ 706,158
Net income — — — — — 29,589 — — — 1 29,590
Compensation and benefits paid or payable in shares — — — — 80 — — — — — 80
Options exercised — — — — 5 — — — — — 5
Shares issued to Directors — — — — — — — — — — —
Dividends declared
Class A Common Stock, $0.19 per share — — — — — (5,837) — — — — (5,837)
Class B Common Stock, $0.19 per share — — — — — (307) — — — — (307)
Cumulative translation adjustments — — — — — — 19,821 — — 201 20,022
Pension and postretirement liability adjustments — — — — — — (474) — — — (474)
Derivative valuation adjustment — — — — — — 621 — — — 621
September 30, 2020 39,113 $ 39 1,618 $ 2 $ 432,823 $ 749,678 $ (179,659) 8,394 $ (256,074) $ 3,049 $ 749,858

~~Index~~


	Class A 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
(in thousands)	Shares	Amount		Shares	Amount								Shares	Amount
December 31, 2020	39,115	$	39	1,618	$	2	$	433,696	$	770,746	$	(132,408)	8,391	$	(256,009)	$	3,799	$	819,865
Net income	—	—		—	—		—		27,582		—		—	—		27		27,609
Compensation and benefits paid or payable in shares	20	—		—	—		(13)		—		—		—	—		—		(13)
Options exercised	6	—		—	—		128		—		—		—	—		—		128
Shares issued to Directors'	—	—		—	—		—		—		—		—	—		—		0
Dividends declared
Class A Common Stock, $0.20 per share	—	—		—	—		—		(6,150)		—		—	—		—		(6,150)
Class B Common Stock, $0.20 per share	—	—		—	—		—		(324)		—		—	—		—		(324)
Cumulative translation adjustments	—	—		—	—		—		—		(15,955)		—	—		(210)		(16,165)
Pension and postretirement liability adjustments	—	—		—	—		—		—		509		—	—		—		509
Derivative valuation adjustment	—	—		—	—		—		—		752		—	—		—		752
March 31, 2021	39,141	$	39	1,618	$	2	$	433,811	$	791,854	$	(147,102)	8,391	$	(256,009)	$	3,616	$	826,211

The following table summarizes changes in Shareholders’ Equity for the period December 31, ~~2018~~2019 to ~~September 30, 2019:~~March 31, 2020:


		Class A 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			Class A 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
(in thousands)	(in thousands)	Shares	Amount		Shares	Amount								Shares	Amount						(in thousands)	Shares	Amount		Shares	Amount								Shares	Amount
December 31, 2018		37,450	$	37	3,234	$	3	$	430,555	$	589,645	$	(158,388)	8,419	$	(256,603)	$	3,031	$	608,280
December 31, 2019																					December 31, 2019	39,099	$	39	1,618	$	2	$	432,518	$	698,496	$	(175,981)	8,409	$	(256,391)	$	4,006	$	702,689
Adoption of accounting standards ~~(b)~~(a)	Adoption of accounting standards ~~(b)~~(a)	—	—		—	—		—		35		—		—	—		—		35		Adoption of accounting standards ~~(b)~~(a)	—	—		—	—		—		(1,443)		—		—	—		—		(1,443)
Net income	Net income	—	—		—	—		—		29,190		—		—	—		218		29,408		Net income	—	—		—	—		—		9,109		—		—	—		(1,515)		7,594
Compensation and benefits paid or payable in shares	Compensation and benefits paid or payable in shares	25	—		—	—		(547)		—		—		—	—		—		(547)		Compensation and benefits paid or payable in shares	13	—		—	—		(682)		—		—		—	—		—		(682)
Options exercised	Options exercised	3				—		44		—		—		—	—		—		44		Options exercised	0				—		0		—		—		—	—		—		0
Shares issued to Directors		—	—		—	—		—		—		—		—	—		—		—
Shares issued to Directors'																					Shares issued to Directors'	—	—		—	—		—		—		—		—	—		—		0
Dividends declared	Dividends declared																				Dividends declared
Class A Common Stock, $0.18 per share		—	—		—	—		—		(5,231)		—		—	—		—		(5,231)
Class B Common Stock, $0.18 per share		—	—		—	—		—		(582)		—		—	—		—		(582)
Class A Common Stock, $0.19 per share																					Class A Common Stock, $0.19 per share	—	—		—	—		—		(5,834)		—		—	—		—		(5,834)
Class B Common Stock, $0.19 per share																					Class B Common Stock, $0.19 per share	—	—		—	—		—		(307)		—		—	—		—		(307)
Cumulative translation adjustments	Cumulative translation adjustments	—	—		—	—		—		—		(654)		—	—		(8)		(662)		Cumulative translation adjustments	—	—		—	—		—		—		(25,747)		—	—		109		(25,638)
Pension and postretirement liability adjustments	Pension and postretirement liability adjustments	—	—		—	—		—		—		(1,487)		—	—		—		(1,487)		Pension and postretirement liability adjustments	—	—		—	—		—		—		890		—	—		—		890
Derivative valuation adjustment	Derivative valuation adjustment	—	—		—	—		—		—		(2,851)		—	—		—		(2,851)		Derivative valuation adjustment	—	—		—	—		—		—		(7,708)		—	—		—		(7,708)
March 31, 2019		37,478	$	37	3,234	$	3	$	430,052	$	613,057	$	(163,380)	8,419	$	(256,603)	$	3,241	$	626,407
Net income		—	—		—	—		—		34,054		—		—	—		205		34,259
Compensation and benefits paid or payable in shares		—	—		—	—		958		—		—		(10)	212		—		1,170
Options exercised		2	—		—	—		28		—		—		—	—		—		28
Shares issued to Directors		—	—		—	—		—		—		—		—	—		—		—
Dividends declared
Class A Common Stock, $0.18 per share		—	—		—	—		—		(5,523)		—		—	—		—		(5,523)
Class B Common Stock, $0.18 per share		—	—		—	—		—		(291)		—		—	—		—		(291)
Conversion of Class B shares to Class A shares, rounding		1,616	2		(1,616)	(1)		(1)		—		—		—	—		—		—
Cumulative translation adjustments		—	—		—	—		—		—		(1)		—	—		2		1
Pension and postretirement liability adjustments		—	—		—	—		—		—		(40)		—	—		—		(40)
Derivative valuation adjustment		—	—		—	—		—		—		(4,695)		—	—		—		(4,695)
June 30, 2019		39,096	$	39	1,618	$	2	$	431,037	$	641,297	$	(168,116)	8,409	$	(256,391)	$	3,448	$	651,316
Net income		—	—		—	—		—		40,009		—		—	—		116		40,125
Compensation and benefits paid or payable in shares		—	—		—	—		790		—		—		—	—		—		790
Options exercised		2	—		—	—		33		—		—		—	—		—		33
Shares issued to Directors		—	—		—	—		—		—		—		—	—		—		—
Dividends declared
Class A Common Stock, $0.18 per share		—	—		—	—		—		(5,524)		—		—	—		—		(5,524)
Class B Common Stock, $0.18 per share		—	—		—	—		—		(291)		—		—	—		—		(291)
Conversion of Class B shares to Class A shares, rounding		—	—		—	—		—		—		—		—	—		—		—
Cumulative translation adjustments		—	—		—	—		—		—		(22,522)		—	—		(13)		(22,535)
Pension and postretirement liability adjustments		—	—		—	—		—		—		490		—	—		—		490
Derivative valuation adjustment		—	—		—	—		—		—		(1,323)		—	—		—		(1,323)
September 30, 2019		39,098	$	39	1,618	$	2	$	431,860	$	675,491	$	(191,471)	8,409	$	(256,391)	$	3,551	$	663,081
March 31, 2020																					March 31, 2020	39,112	$	39	1,618	$	2	$	431,836	$	700,021	$	(208,546)	8,409	$	(256,391)	$	2,600	$	669,561

(a)~~As described in Note 1, the~~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)The Company adopted ASC 842,~~ ~~Leases~~ ~~effective January 1, 2019, which resulted in an increase to Retained earnings of less than $0.1 million.~~

~~Index~~

~~19.~~18. Recent Accounting Pronouncements

In August 2018, an accounting update was issued which aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing defined benefit plan disclosures. We are required to adopt this update for our 2020 annual filing which will result in minor changes to footnote disclosures in future filings.

In December 2019, an accounting update was issued which removes certain exceptions for recognizing deferred taxes for investments and performing intra-period tax allocations. The update also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. We plan to adopt the new standard as of January 1, 2021 and we are assessing the potential impact on our financial statements.

In March 2020, an accounting update was issued which provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR. In January 2021, an additional accounting update was issued to extend certain optional expedients to derivative contracts modified as a result of rate reform, including certain derivatives that do not reference LIBOR or other reference rates that are expected to be discontinued. The expedients and exceptions provided by this update will not be available after December 31, ~~2022, other than for certain hedging relationships entered into prior.~~2022. We are currently assessing the potential impact on our financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations and financial condition of the Company. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes.

Forward-looking statements

This quarterly report and the documents incorporated or deemed to be incorporated by reference in this quarterly report contain statements concerning our future results and performance and other matters that are “forward-looking” statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” ”look for,” “will,” “should,” “guidance,” “guide” and similar expressions identify forward-looking statements, which generally are not historical in nature. Because forward-looking statements are subject to certain risks and uncertainties, (including, without limitation, those set forth in the Company’s most recent Annual Report on Form 10-K or prior Quarterly Reports on Form 10-Q) actual results may differ materially from those expressed or implied by such forward-looking statements.

There are a number of risks, uncertainties, and other important factors that could cause actual results to differ materially from the forward-looking statements, including, but not limited to:

•Conditions in the industries in which our Machine Clothing and Albany Engineered Composites segments compete, along with the general risks associated with macroeconomic ~~conditions;~~conditions, including continuation of COVID-19 pandemic effects for an extended period of time;

•In the Machine Clothing segment, greater than anticipated declines in the demand for publication grades of paper, or lower than anticipated growth in other paper grades; ~~and continuation of coronavirus effects for an extended period;~~

•In the Albany Engineered Composites segment, ~~extended weakness in commercial~~longer than expected timeframe for the aerospace ~~activity, further delays in the Boeing 737 MAX return~~industry to ~~service, or~~utilize existing inventories, and unanticipated reductions in demand, delays, technical difficulties, or ~~delays/~~cancellations in ~~other~~ aerospace ~~programs;~~programs that are expected to generate revenue and drive long-term growth;

•Failure to achieve or maintain anticipated profitable growth in our Albany Engineered Composites segment; and

•Other risks and uncertainties detailed in this report.

Further information concerning important factors that could cause actual events or results to be materially different from the forward-looking statements can be found in “Business Environment Overview and Trends” sections of this quarterly report, as well as in Item 1A-“Risk Factors” section of our most recent Annual Report on Form 10-K. Although we believe the expectations reflected in our other forward-looking statements are based on reasonable assumptions, it is not possible to foresee or identify all factors that could have a material and negative impact on our future performance. The forward-looking statements included or incorporated by reference in this report are made on the basis of our assumptions and analyses, as of the time the statements are made, in light of our experience and perception of historical conditions, expected future developments, and other factors believed to be appropriate under the circumstances.

Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained or incorporated by reference in this report to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based.

Business Environment Overview and Trends

Our reportable segments, Machine Clothing (“MC”) and Albany Engineered Composites (“AEC”), draw on the same advanced textiles and materials processing capabilities, and compete on the basis of product-based advantage that is grounded in those core capabilities.

The MC segment is the Company’s long-established core business and primary generator of cash. While it has ~~suffered from~~been negatively impacted by well-documented declines in publication grades in the Company’s traditional markets, ~~the paper and paperboard industry~~there has ~~stabilized~~been some offsetting effect due to growth in ~~recent years, driven by~~ demand for packaging and tissue grades, as well as the expansion of paper consumption and production in Asia and South America. We feel we are ~~now~~ well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets,

Index

and continued strength in new product development, technical product support, and manufacturing

~~Index~~

technology. ~~Because~~Some of the markets in which our products are sold are expected to have low levels of growth and we face pricing pressures ~~and industry overcapacity, the machine clothing and paper industries will continue to face top line pressure.~~in all markets. Despite ~~continued~~these market ~~pressure~~pressures on revenue, the MC business retains the potential for maintaining stable earnings in the future. ItMC has been a significant generator of cash, and we seek to maintain the cash-generating potential of this business by maintaining the low costs that we have achieved through continuous focus on ~~cost reduction~~cost-reduction initiatives, and competing vigorously by using our differentiated and technically superior products to reduce our customers’ total cost of operation and improve their paper quality.

The AEC segment provides ~~long-term~~significant longer term growth potential for our Company. Our strategy is to grow by focusing our proprietary 3D-woven technology, as well as our non-3D technology capabilities, on high-value aerospace (both commercial and defense) applications, while at the same time performing successfully on our portfolio of growth programs. AEC (including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group owns a 10 percent noncontrolling interest) supplies a number of customers in the aerospace industry. AEC’s largest aerospace customer is the SAFRAN Group and sales to SAFRAN, through ASC, (consisting primarily of fan blades and cases for CFM’s LEAP engine) accounted for approximately 2211 percent of the Company’s consolidated Net sales in ~~2019.~~2020. AEC, through ASC, also supplies 3D-woven composite fan cases for the GE9X engine. AEC’s current portfolio of non-3D programs includes components for the F-35, fuselage components for the Boeing 787, components for the CH-53K helicopter, vacuum waste tanks for Boeing 7-Series aircraft, and missile bodies for Lockheed Martin’s JASSM air-to-surface missiles. AEC is actively engaged in research to develop new applications in both commercial and defense aircraft engine and airframe markets. In ~~2019,~~2020, approximately 2546 percent of AEC sales were related to U.S. government contracts or programs.

A number of countries, including the United States, have issued orders grounding Boeing 737 MAX aircraft. If these groundings cause a further decrease in demand in production for this aircraft, it could have an adverse impact on demand for LEAP engines, which, in turn, could have an adverse impact on demand for our LEAP engine parts. The Company is continuing to monitor developments with our customer. Considerable uncertainty exists with respect to the return-to-service of the 737-MAX and the subsequent ramp-up in our production of LEAP-1B components, which may lead to additional impacts to our revenues from LEAP-1B components in 2020 and future periods. The nature of our cost-plus fee arrangement, however, should somewhat mitigate the impact of such factors on gross margin rate in such future periods. In April 2020, the Company announced the temporary closure of all three of its LEAP production facilities, resulting from depressed demand, due to the ongoing Boeing 737 MAX situation and a pause in production of the Airbus A320neo family. As a result, the year-over-year comparisons for LEAP revenue in the fourth quarter are expected to continue to be unfavorable.

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Consolidated Results of Operations

Net sales

The following table summarizes our Net sales by business segment:


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2020		2019		% Change		2020		2019		% Change		(in thousands, except percentages)	2021	2020	% Change
Machine Clothing	Machine Clothing	$	138,747	$	151,324	(8.3)	%	$	428,782	$	450,673	(4.9)	%	Machine Clothing	$148,206	$136,602	8.5	%
Albany Engineered Composites	Albany Engineered Composites	73,252		119,809		(38.9)	%	244,971		345,781		(29.2)	%	Albany Engineered Composites	74,156	99,162	-25.2	%
Consolidated total		$	211,999	$	271,133	(21.8)	%	$	673,753	$	796,454	(15.4)	%
Total														Total	$222,362	$235,764	-5.7	%

The following tables provide a comparison of ~~2020~~2021 Net sales, excluding the impact of currency translation effects, to ~~2019~~2020 Net sales:

(in thousands, except percentages) Net sales as reported, Q3 2020 Increase due to changes in currency translation rates Q3 2020 sales on same basis as Q3 2019 currency translation rates Net sales as reported, Q3 2019 % Change compared to Q3 2019, excluding currency rate effects
Machine Clothing $ 138,747 $ 1,837 $ 136,910 $ 151,324 (9.5) %
Albany Engineered Composites 73,252 350 72,902 119,809 (39.2) %
Consolidated total $ 211,999 $ 2,187 $ 209,812 $ 271,133 (22.6) %
(in thousands, except percentages) Net sales as reported, YTD 2020 Decrease due to changes in currency translation rates YTD 2020 sales on same basis as 2019 currency translation rates Net sales as reported, YTD 2019 % Change compared to 2019, excluding currency rate effects
Machine Clothing $ 428,782 $ (1,287) $ 430,069 $ 450,673 (4.6) %
Albany Engineered Composites 244,971 (136) 245,107 345,781 (29.1) %
Consolidated total $ 673,753 $ (1,423) $ 675,176 $ 796,454 (15.2) %


(in thousands, except percentages)	Net sales as reported, Q1 2021		Increase due to changes in currency translation rates		Q1 2021 sales on same basis as Q1 2020 currency translation rates		Net sales as reported, Q1 2020		% Change compared to Q1 2020, excluding currency rate effects
Machine Clothing	$	148,206	$	4,861	$	143,345	$	136,602	4.9	%
Albany Engineered Composites	74,156		1,178		72,978		99,162		-26.4	%
Total	$	222,362	$	6,039	$	216,323	$	235,764	-8.2	%

Three month comparison

•Changes in currency translation rates had the effect of increasing Net sales by ~~$2.2~~$6.0 million during the ~~third~~first quarter of ~~2020,~~2021, as compared to ~~2019,~~2020, principally due to the stronger euro in ~~2020.~~2021.

•Excluding the effect of changes in currency translation rates:

•Net sales decreased ~~22.6%~~8.2% compared to the same period in ~~2019.~~2020.

•Net sales in MC ~~decreased 9.5%~~increased 4.9% compared to the ~~third~~first quarter of ~~2019, driven by declines across all major product~~2020, principally due to growth in sales for packaging and other grades, which more than offset decreases in sales for publication grades.

•Net sales in AEC decreased ~~39.2% primarily driven by a significant decline in the LEAP program. Net sales also decreased in the Boeing 787 program. Those declines were partially offset by growth in the F-35 and CH53K platforms.~~

~~Nine month comparison~~

•~~Changes in currency translation rates had the effect of decreasing Net sales by $1.4 million during the first nine months of 2020, as compared to 2019,~~26.4% principally due to ~~the weaker Chinese renminbi in 2020.~~

•~~Excluding the effect of changes in currency translation rates:~~

•~~Net sales decreased 15.2% compared to the same period in 2019.~~

•~~Net sales in MC decreased 4.6% compared to the first nine months of 2019. A decline~~declines in sales for ~~the publication, tissue and pulp grades sales was partially offset by an increase in packaging grades.~~

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•~~Net sales in AEC decreased 29.1% primarily driven by declines in~~ the LEAP and Boeing 787 ~~program sales partially offset by growth on the F-35 and CH-53K platforms.~~programs.

Gross Profit

The following table summarizes Gross profit by business segment:

Three months ended September 30, Nine months ended September 30,
(in thousands, except percentages) 2020 2019 2020 2019
Machine Clothing $ 71,471 $ 79,225 $ 227,734 $ 234,040
Albany Engineered Composites 15,831 24,882 52,020 67,020
Consolidated total $ 87,302 $ 104,107 $ 279,754 $ 301,060
% of Net sales 41.2 % 38.4 % 41.5 % 37.8 %


	Three months ended March 31,
(in thousands, except percentages)	2021			2020
Machine Clothing	$	76,393		$	72,652
Albany Engineered Composites	12,153			16,820
Total	$	88,546		$	89,472
% of Net sales	39.8		%	37.9		%

Three month comparison

The decrease in ~~2020~~2021 Gross profit, as compared to the same period in ~~2019,~~2020, was principally due to the effect of lower Net sales in AEC, partially offset by an increase in ~~gross profit as a percentage of~~Machine Clothing Net sales. Gross profit as a percentage of sales:

•Decreased from ~~52.4%~~53.2% in ~~2019~~2020 to 51.5% in ~~2020~~2021 in Machine Clothing, principally due to an increase in production costs and lower ~~absorption of fixed costs due to the lower Net sales, partially offset by favorable foreign currency exchange rates (Brazilian real and Mexican peso).~~cost absorption.

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•~~Increased~~Decreased from ~~20.8% in 2019 to 21.6%~~17.0% in 2020 to 16.4% in 2021 in AEC, ~~driven by a favorable mix~~principally due to changes in ~~program revenue and an increase in favorable adjustments to~~ the estimated profitability of long-term contracts, which increased ~~third quarter 2020~~ Gross profit by ~~$3.5 million, compared to $3.3~~$0.9 million in the ~~third~~first quarter of ~~2019.~~

~~Nine month comparison~~

~~The decrease in~~ 2020, ~~Gross~~but had an insignificant effect on gross profit ~~as compared to~~for the same period ~~in 2019, was principally due to the effect~~ of ~~lower Net sales in AEC, partially offset by an increase in gross profit as a percentage of sales. Gross profit as a percentage of sales:~~

•Increased from 51.9% in 2019 to 53.1% in 2020 in Machine Clothing, principally due to lower depreciation expense. The gross profit margin in 2020 was also favorably impacted by a weaker Brazilian real and Mexican peso.

•~~Increased from 19.4% in 2019 to 21.2% in 2020 in AEC, principally due to a favorable shift in the mix of program revenue.~~2021.

Selling, Technical, General, and Research (STG&R)

Selling, Technical, General and Research (STG&R) expenses include; selling, general, administrative, technical and research expenses.

The following table summarizes STG&R expenses by business segment:

Three months ended September 30, Nine months ended September 30,
(in thousands, except percentages) 2020 2019 2020 2019
Machine Clothing $ 25,386 $ 27,529 $ 76,903 $ 87,227
Albany Engineered Composites 8,646 7,572 26,664 22,404
Corporate expenses 13,787 13,572 40,904 40,294
Consolidated total $ 47,819 $ 48,673 $ 144,471 $ 149,925
% of Net sales 22.6 % 18.0 % 21.4 % 18.8 %

~~Index~~


	Three months ended March 31,
(in thousands, except percentages)	2021			2020
Machine Clothing	$	26,099		$	24,835
Albany Engineered Composites	9,126			9,197
Corporate expenses	11,451			15,204
Total	$	46,676		$	49,236
% of Net sales	21.0		%	20.9		%

Three month comparison

The overall decrease in STG&R expenses in the ~~third~~first quarter of ~~2020,~~2021, compared to the same period in ~~2019,~~2020, was principally due to the net effect of the following individually significant items:

•In MC, STG&R expenses increased due to revaluation of nonfunctional currency assets and liabilities which resulted in ~~third-quarter losses~~a first-quarter gain of ~~$1.3~~$0.5 million in ~~2020,~~2021, compared to ~~gains~~a gain of ~~$1.0~~$3.7 million in ~~2019.~~2020. That effect was ~~offset by lower travel and incentive compensation expense.~~

•~~In AEC, STG&R expenses increased $1.1 million, principally due STG&R costs of CirComp, which the Company acquired in November 2019.~~

•~~Corporate expenses increased in 2020 due to higher incentive compensation expense,~~ partially offset by lower travel ~~expenses as a result~~costs and effects of ~~the COVID-19 pandemic.~~

~~Nine month comparison~~

~~The overall decrease~~cost reduction initiatives in ~~STG&R expenses in the first nine months of 2020, compared to the same period in 2019, was principally due to the net effect of the following individually significant items:~~

2020.

•In ~~MC, the following items impacted STG&R expenses~~

◦~~Revaluation of nonfunctional currency assets and liabilities resulted in a gain of $1.3 million in the first nine months of 2020, compared to a gain of $0.7 million in 2019.~~

◦~~Travel expenses were significantly lower in 2020, as a result of the COVID-19 pandemic.~~

◦~~Changes in currency translation rates had the effect of decreasing STG&R by $1.5 million.~~

◦~~The factors above were partially offset by a charge of $1.0 million in the first quarter of 2020 for additional estimated credit losses recognized in accordance with ASC 326.~~

•In AEC, STG&R expenses increased due to expenses at CirComp, which the Company acquired in November 2019, and a charge of $0.5 million in the first quarter of 2020 for additional estimated credit losses recognized in accordance with ASC 326.

•Corporate, STG&R expenses ~~increased~~decreased principally due to former CEO termination costs ~~and higher incentive compensation expense partially offset by lower professional fees and travel expenses.~~recorded in the first quarter of 2020.

Restructuring Expense, net

In addition to the items discussed above affecting Gross profit, and STG&R expenses, operating income was affected by restructuring costs of ~~$4.2~~$0.1 million in the first ~~nine~~three months of ~~2020, compared to $1.1~~2021, and $0.6 million for the same period ~~of 2019.~~in 2020.

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

In 2020, AEC reduced its workforce at various locations, principally in the United States, leading to restructuring charges of $2.6 million for the first three quarters of 2020. As a result of these actions, annual cost savings associated with this action will principally lower Cost of goods sold and Selling, general, and administrative expenses in 2020.


	Three months ended March 31,
(in thousands)	2021		2020
Machine Clothing	$	(69)	$	642
Albany Engineered Composites	89		—
Corporate expenses	32		—
Total	$	52	$	642

Machine Clothing restructuring charges ~~for the first nine months of 2020 and 2019 were~~or credits in both years principally related to ~~dthe plant closure of~~discontinued operations at its MC production facility in Sélestat, France ~~that was~~ announced in 2017. The restructuring program was driven by the Company’s need to balance manufacturing capacity with demand. Since 2017, we have recorded ~~$13.3~~$13.9 million of restructuring charges related to this action.

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~~For more information on our restructuring charges, see Note 5 to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference.~~

Operating Income

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


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020
Machine Clothing	Machine Clothing	$	45,699	$	51,906	$	149,418	$	145,688	Machine Clothing	$	50,363	$	47,175
Albany Engineered Composites	Albany Engineered Composites	6,828		17,345		22,749		44,598		Albany Engineered Composites	2,938		7,623
Corporate expenses	Corporate expenses	(13,754)		(13,573)		(41,073)		(40,290)		Corporate expenses	(11,483)		(15,204)
Consolidated total		$	38,773	$	55,678	$	131,094	$	149,996
Total										Total	$	41,818	$	39,594

Other Earnings Items


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020
Interest expense, net	Interest expense, net	$	2,242	$	3,987	$	10,042	$	13,035	Interest expense, net	$	3,569	$	3,977
Other expense/(income), net	Other expense/(income), net	(2,745)		(1,628)		13,915		(1,906)		Other expense/(income), net	600		15,569
Income tax expense	Income tax expense	9,686		13,194		37,504		35,075		Income tax expense	10,040		12,454
Net income/(loss) attributable to the noncontrolling interest	Net income/(loss) attributable to the noncontrolling interest	1		116		(1,419)		539		Net income/(loss) attributable to the noncontrolling interest	27		(1,515)

Interest Expense, net

Year-to-date ~~2020~~2021 Interest expense, net, was lower as compared to ~~2019~~2020, principally due to lower average ~~debt and lower interest rate. The successful resolution of a claim for rebate of foreign sales tax paid reduced interest expense,net by $0.9 million.~~debt. See the Capital Resources section for further discussion of borrowings and interest rates.

Other ~~(Income)~~(income)/~~Expense,~~expense, net

Three ~~and nine~~ month comparison

The ~~increase~~decrease in Other (income)/expense, net included the following individually significant items:

•~~The revaluation of nonfunctional currency cash and intercompany balances resulted in a gain of $2.0 million in the third quarter of 2019 compared to a gain of $0.1 million for the same period of 2020.~~

•For the first ~~nine months~~quarter of ~~2020,~~each year, revaluation of nonfunctional currency cash and intercompany balances resulted in a loss of ~~$14.7~~$0.2 million in 2021, compared to a ~~net gain~~loss of ~~$3.7~~$14.8 million in ~~2019.~~2020. The loss in 2020 principally resulted from an intercompany demand ~~loans~~loan payable by a Mexican ~~subsidiaries, combined with the effects of a much weaker peso in 2020.~~

•~~In the third quarter of 2020, the Company successfully resolved a claim for a rebate of foreign sales tax paid in previous years, resulting in a gain of $2.6 million.~~subsidiary.

Income Tax

The Company has operations, which constitute a taxable presence in 18 countries outside of the United States. The majority of these countries had income tax rates that are above the United States federal tax rate of ~~21%~~21 percent during the periods reported. The jurisdictional location of earnings is a significant component of our effective tax rate each year. The rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of our total earnings. From period to period, the jurisdictional mix of earnings can vary as a result of operating fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges.

~~Index~~

Three ~~and nine~~ month comparison

The Company’s effective tax rates for the ~~third~~first quarter of 2021 and 2020 were 26.7% and ~~2019 were 24.7% and 24.7%, respectively, and for the first three quarters of 2020 and 2019, were 35.0% and 25.3%~~62.1%, respectively. The tax rate is affected by recurring items, such as the income tax rate in the U.S. and in non-U.S. jurisdictions and the mix of income earned in those jurisdictions. The tax rate is also affected by U.S. tax costs on foreign earnings, and by discrete items that may occur in any given year but are not consistent from year to year. It should be noted that the effective tax rate for the first quarter of 2020 was significantly affected by a non-recurring tax adjustment due to non-deductible foreign exchange losses, as illustrated in the table below.

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Significant items that impacted the effective tax rate in the ~~third quarters~~first quarter of ~~2020~~2021 and ~~2019~~2020 included the following (percentages reflect the effect of each item as a percentage of income before income taxes):

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
(in thousands, except percentages) Tax Amount % Tax Amount % Tax Amount % Tax Amount %
Continuing Operations (excluding discrete items) $ 12,666 32.2 % $ 14,662 27.5 % $ 34,550 32.2 % $ 38,256 27.5 %
Audit settlements (8) — % — — % (1,500) (1.4) % — — %
Changes in uncertain tax positions (38) (0.1) % (558) (1.0) % (279) (0.3) % (2,785) (2.0) %
Out-of-period adjustments to deferred tax assets — — % — — % 1,830 1.7 % — — %
Impact of Mexico foreign currency revaluation losses — — % — — % 3,658 3.4 % — — %
Changes in opening valuation allowance — — % (20) — % — — % (1,366) (1.0) %
Changes in valuation allowance 8 — % (11) — % 230 0.2 % 830 0.6 %
Adjustment of prior year taxes (1,750) (4.5) % (160) (0.3) % (983) (0.9) % 187 0.1 %
Other tax adjustments (1,192) (2.9) % (719) (1.5) % (2) 0.1 % (47) 0.1 %
Effective Tax Rate $ 9,686 24.7 % $ 13,194 24.7 % $ 37,504 35.0 % $ 35,075 25.3 %


	Three months ended March 31,
	2021				2020
(in thousands, except percentages)	Tax amount		%		Tax amount		%
Continuing operations (excluding discrete items)	$	11,332	30.1	%	$	7,309	36.5	%

Provision for/resolution of tax audits and contingencies, net	278		0.7	%	(244)		(1.2)	%
Adjustments to prior period tax liabilities	(1,443)		(3.8)	%	(112)		(0.6)	%
Out-of-period adjustments	—		—	%	1,830		9.1	%
Tax effect of non-deductible foreign exchange loss on intercompany loan	—		—	%	3,668		18.3	%
Other adjustments	(127)		(0.3)	%	3		0.0	%
Effective tax rate	$	10,040	26.7	%	$	12,454	62.1	%

For more information on income tax, see Note 76 to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference.

Segment Results of Operations

Machine Clothing Segment

Machine Clothing is our primary business segment and accounted for ~~64%~~67% of our consolidated revenues during the first ~~nine~~three months of ~~2020.~~2021. MC products are purchased primarily by manufacturers of paper and paperboard.

While the MC business has suffered from well-documented declines in publication grades in the Company’s traditional markets, the paper and paperboard industry is still expected to grow slightly on a global basis, driven by demand for packaging and tissue grades as well as the expansion of paper consumption and production in Asia and South America. We feel we are well-positioned in these markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology. Recent technological advances in paper machine clothing, while contributing to the papermaking efficiency of customers, have lengthened the useful life of many of our products and had an adverse impact on overall paper machine clothing demand.

Additionally, we face pricing pressures in all of our markets.

The Company’s manufacturing and product platforms position us well to meet these shifting demands across product grades and geographic regions. Our strategy for meeting these challenges continues to be to grow share in all markets, with new products and technology, and to maintain our manufacturing footprint to align with global demand, while we offset the effects of inflation through continuous productivity improvement.

~~Index~~

We have incurred significant restructuring charges in recent ~~periods~~years as we reduced MC manufacturing capacity and administrative positions in various countries.

Review of Operations

Three months ended September 30, Nine months ended September 30,
(in thousands, except percentages) 2020 2019 2020 2019
Net sales $ 138,747 $ 151,324 $ 428,782 $ 450,673
Gross profit 71,471 79,225 227,734 234,040
% of Net sales 51.5 % 52.4 % 53.1 % 51.9 %
STG&R expenses 25,386 27,529 76,903 87,227
Operating income 45,699 51,906 149,418 145,688


	Three months ended March 31,
(in thousands, except percentages)	2021			2020
Net sales	$	148,206		$	136,602
Gross profit	76,393			72,652
% of Net sales	51.5		%	53.2		%
STG&R expenses	26,099			24,835
Operating income	50,363			47,175

Net Sales

Three month comparison

•Net sales ~~decreased~~increased by ~~8.3%~~8.5%.

•Changes in currency translation rates had the effect of increasing ~~third-quarter 2020~~first-quarter 2021 sales by ~~$1.8~~$4.9 million compared to the same period in ~~2019.~~2020. That currency translation effect was principally due to the stronger euro in the ~~third~~first quarter of ~~2020,~~2021, compared to ~~2019.~~2020.

Index

•Excluding the effect of changes in currency translation rates, Net sales in MC ~~decreased 9.5% compared to the third quarter of 2019, driven by declines across all major product grades.~~

~~Nine month comparison~~

•~~Net sales decreased by~~increased 4.9%.

•Changes in currency translation rates had the effect of decreasing sales for the first nine months of 2020 by $1.3 million compared to the same period in 2019. That currency translation effect was principally due to the weaker Chinese renminbi in the first nine months of 2020, compared to 2019.

•~~Excluding the effect of changes in currency translation rates, Net sales in MC decreased 4.6%~~ compared to the first ~~nine months~~quarter of ~~2019. A decline~~2020, as growth in sales for ~~the~~packaging and other grades more than offset declines in publication ~~tissue and pulp grades was partially offset by an increase in packaging~~ grades.

Gross Profit

Three ~~and Nine~~ month comparison

•The ~~decrease~~increase in ~~third-quarter~~ MC Gross profit was principally due to ~~lower Net~~higher sales ~~which led to lower fixed cost absorption,~~as noted above, partially offset by ~~favorable foreign currency movements (a weaker Brazilian real and Mexican peso).~~

•~~The~~a decrease in ~~year-to-date MC~~ gross profit percentage that was principally due to an increase in production costs and lower ~~depreciation expense. Gross profit was also favorably impacted by a weaker Brazilian real and Mexican peso in~~cost absorption compared to 2020.

Operating Income

~~Index~~

Three month comparison

The ~~decrease~~increase in ~~operating~~Operating income was principally due to the net effect of ~~lower Gross profit,~~higher sales, partially offset by ~~lower~~higher STG&R expenses.

~~Nine month comparison~~

~~The decrease in operating income was principally due to the net effect of lower Gross profit, partially offset by lower STG&R expenses.~~

Albany Engineered Composites Segment

The Albany Engineered Composites (AEC) segment, including Albany Safran Composites, LLC (ASC), in which our customer SAFRAN Group owns a 10 percent noncontrolling interest, provides highly engineered advanced composite structures to customers primarily in the aerospace (both commercial and defense) industry. AEC’s largest program relates to CFM International’s LEAP engine. AEC, through ASC, is the exclusive supplier of advanced composite fan blades and cases for this program under a long-term supply contract. The LEAP engine is used on the Airbus A320neo and Boeing 737 MAX family of ~~jets, the latter of which is currently under a grounding order, as described above.~~jets. Other significant AEC programs include components for the F-35, fuselage frames for the Boeing 787, components for the CH53-K helicopter, and the fan case for the GE9X engine.

Review of Operations


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2020			2019			2020			2019			(in thousands, except percentages)	2021			2020
Net sales	Net sales	$	73,252		$	119,809		$	244,971		$	345,781		Net sales	$	74,156		$	99,162
Gross profit	Gross profit	15,831			24,882			52,020			67,020			Gross profit	12,153			16,820
% of Net sales	% of Net sales	21.6		%	20.8		%	21.2		%	19.4		%	% of Net sales	16.4		%	17.0		%
STG&R expenses	STG&R expenses	8,646			7,572			26,664			22,404			STG&R expenses	9,126			9,197
Operating income	Operating income	6,828			17,345			22,749			44,598			Operating income	2,938			7,623

Net Sales

Three ~~and nine~~ month comparison

The decrease in Net sales was principally due to lower sales in the LEAP and Boeing 787 ~~program sales~~programs, partially offset by growth on the F-35 and CH-53K ~~platforms, which is consistent with the outlook for these programs provided by the Company in its last quarterly report.~~platforms.

Gross Profit

Three ~~and nine~~ month comparison

The decrease in Gross profit of $4.7 million was principally due to the decrease in Net ~~sales, partially offset by an increase in gross profit percentage, which was partially due to a favorable shift~~sales. Adjustments in the ~~mix~~estimated profitability of ~~program revenue.~~long-term contracts increased operating income by $0.9 million for the first quarter of 2020, compared to an insignificant effect for the first quarter of 2021.

Long-term contracts

Index

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 2940 percent of segment revenue for each of the first ~~nine~~three months of ~~2020~~2021 and ~~47 percent in 2019.~~2020. LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo and COMAC aircraft. ~~A number of countries, including the United States, have issued orders grounding Boeing 737 MAX aircraft. If these groundings cause a continued reduction in~~

~~Index~~

production of this aircraft, this would have an adverse impact on demand for our LEAP engine parts. Such a decrease could, in turn, trigger an increase in demand for A320neo aircraft, which could somewhat offset this negative impact.

In addition, AEC has long-term contracts in which the selling price is fixed. In accounting for those contracts, we estimate the profit margin expected at the completion of the contract and recognize a pro-rata share of that profit during the course of the contract using a cost-to-cost approach. Changes in estimated contract profitability will affect revenue and gross profit when the change occurs, which could have a significant favorable or unfavorable effect on revenue and gross profit in any reporting period. 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. Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow.

Operating Income

Three month comparison

The ~~sum~~decrease in Operating income of ~~net adjustments to the estimated profitability of long-term contracts increased AEC Gross profit by $9.5~~$4.7 million in the first ~~nine months of 2020, compared to an increase of $8.8 million for the first nine months of 2019.~~

~~Operating Income~~

~~Three month comparison~~

~~The decrease in operating income of $10.5 million in the third~~ quarter of ~~2020 was principally due to the decrease in Net sales, as described above.~~

~~Nine month comparison~~

~~The decrease in operating income of $21.8 million in the first nine months of 2020~~2021 was principally due to the decrease in Net sales, as described above.

Liquidity and Capital Resources

Cash Flow Summary


		Nine months ended September 30,					Three months ended March 31,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020
Net income	Net income	$	69,633	$	103,792	Net income	$	27,609	$	7,594
Depreciation and amortization	Depreciation and amortization	54,306		52,964		Depreciation and amortization	18,882		18,070
Changes in working capital (a)	Changes in working capital (a)	(65,460)		(37,686)		Changes in working capital (a)	(5,992)		(48,102)
Changes in other noncurrent liabilities and deferred taxes	Changes in other noncurrent liabilities and deferred taxes	12,021		8,391		Changes in other noncurrent liabilities and deferred taxes	2,345		5,757
Other operating items	Other operating items	13,193		(868)		Other operating items	(9,158)		10,043
Net cash provided by operating activities		83,693		126,593
Net cash provided by/(used in) operating activities						Net cash provided by/(used in) operating activities	33,686		(6,638)
Net cash used in investing activities	Net cash used in investing activities	(31,475)		(49,152)		Net cash used in investing activities	(12,536)		(12,805)
Net cash used in financing activities		(31,703)		(94,191)
Net cash (used in)/provided by financing activities						Net cash (used in)/provided by financing activities	(21,694)		54,231
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(751)		(7,266)		Effect of exchange rate changes on cash and cash equivalents	(2,901)		(7,648)
Increase/(decrease) in cash and cash equivalents		19,764		(24,016)
Cash and cash equivalents at beginning of period		195,540		197,755
(Decrease)/increase in cash and cash equivalents						(Decrease)/increase in cash and cash equivalents	(3,445)		27,140
Cash and cash equivalents at beginning of year						Cash and cash equivalents at beginning of year	241,316		195,540
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	215,304	$	173,739	Cash and cash equivalents at end of period	$	237,871	$	222,680

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

Operating activities

Cash flow provided by operating activities was ~~$83.7 million and $126.6~~$33.7 million in the first ~~nine~~three months of ~~2020 and 2019.~~2021, compared to cash flow used by operating activities of $6.6 million in the first three months of 2020. The ~~decrease of~~improvement in cash ~~generated~~provided by operating activities in ~~2020~~2021 was ~~primarily~~ due to ~~increased~~improved working capital cash flows in AEC and ~~decreased income from the LEAP program, which is consistent with the outlook for this program provided by the Company~~an increase in ~~its last quarterly report.~~

~~Index~~

Net income.

Cash paid for income taxes ~~remained relatively flat year over year at $21.9~~was $15.7 million and ~~$21.4~~$9.6 million for the first ~~nine~~three months of 2021 and 2020, respectively. The increase is primarily due to an increase in corporate income tax payments in Brazil, China and ~~2019, respectively.~~

Switzerland related to prior year tax liabilities.

At ~~September 30, 2020,~~March 31, 2021, we had ~~$215.3~~$237.9 million of cash and cash equivalents, of which ~~$180.1~~$209.0 million was held by subsidiaries outside of the United States.

Index

Investing and Financing Activities

Capital expenditures for the first ~~nine~~three months were ~~$31.5~~$12.5 million in ~~2020~~2021 and ~~$49.2~~$12.8 million in ~~2019.~~

In March 2020, the Company purchased, in cash, the primary CirComp GmbH operating facility in Germany for $5.8 million. This resulted in the recording of land and building assets, and the removal of the Right of use assets and associated lease liabilities that were included in the acquisition-date balance sheet, and is reflected as Principal payments on finance lease liabilities in Financing activities in the Consolidated Statements of Cash Flow.2020.

Dividends have been declared each quarter since the fourth quarter of 2001. Decisions with respect to whether a dividend will be paid, and the amount of the dividend, are made by the Board of Directors each quarter. Future cash dividends will also depend on debt covenants and on the Board’s assessment of our ability to generate sufficient cash flows.

Capital Resources

We finance our business activities primarily with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below. Our subsidiaries outside of the United States may also maintain working capital lines with local banks, but borrowings under such local facilities tend ~~not~~ to be ~~significant.~~insignificant. The majority of our cash balance at ~~September 30, 2020~~March 31, 2021 was held by non-U.S. subsidiaries. Based on cash on hand and credit facilities, we anticipate that the Company has sufficient capital resources to operate for the foreseeable future. We were in compliance with all debt covenants as of ~~September 30, 2020.~~

March 31, 2021.

For more information, see Note 1514 to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference.

Off-Balance Sheet Arrangements

As of ~~September 30, 2020,~~March 31, 2021, we have no off-balance sheet arrangements required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

The information set forth under Note 1918 contained in Item 1, “Notes to Consolidated Financial Statements”, which is incorporated herein by reference.

Non-GAAP Measures

~~Index~~

This Form 10-Q contains certain non-GAAP measures, including: ~~net~~Net sales, and percent change in ~~net~~Net sales, excluding the impact of currency translation effects (for each segment and on a consolidated basis); EBITDA and Adjusted EBITDA (for each segment and on a consolidated basis, represented in dollars or as a percentage of net sales); Net debt; and Adjusted earnings per share (or Adjusted EPS). Such items are provided because management believes that they provide additional useful information to investors regarding the Company’s operational performance.

Presenting Net sales and increases or decreases in Net sales, after currency effects are excluded, can give management and investors insight into underlying sales trends. EBITDA, Adjusted EBITDA and Adjusted EPS are performance measures that relate to the Company’s continuing operations. EBITDA, or net income with interest, taxes, depreciation, and amortization added back, is a common indicator of financial performance used, among other things, to analyze and compare core profitability between companies and industries because it eliminates effects due to differences in financing, asset bases and taxes. An understanding of the impact in a particular quarter of specific restructuring costs, ~~acquisition and related retention agreement expenses,~~ former CEO ~~severance~~termination costs, ~~integration expenses,~~acquisition/integrations costs, currency revaluation, pension settlement/curtailment charges, inventory write-offs associated with discontinued businesses, or other gains and losses, on net income (absolute as well as on a per-share basis), operating income or EBITDA can give management and investors additional insight into core financial performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect. Restructuring expenses, ~~in the MC segment,~~ while frequent in recent years, are reflective of significant reductions in manufacturing capacity and associated headcount in response to shifting markets, and not of the profitability of the business going forward as restructured.

Index

Net sales, or percent changes in ~~net~~Net sales, excluding currency rate effects, are calculated by converting amounts reported in local currencies into U.S. dollars at the exchange rate of a prior period. These amounts are then compared to the U.S. dollar amount as reported in the current period. The Company calculates EBITDA by removing the following from Net income: Interest expense net, Income tax expense, and Depreciation and amortization expense. Adjusted EBITDA is calculated by: adding to EBITDA costs associated with restructuring, former CEO ~~severance~~termination costs, and inventory write-offs associated with discontinued businesses; adding charges and credits related to pension plan settlements and curtailments; adding (or subtracting) revaluation losses (or gains); subtracting (or adding) gains (or losses) from the sale of buildings or investments; ~~subtracting insurance recovery gains in excess of previously recorded losses;~~ adding ~~acquisition and related retention agreement expenses; adding~~ acquisition/integration ~~expenses~~costs and subtracting (or adding) Income (or loss) attributable to the non-controlling interest in Albany Safran Composites (ASC). Adjusted earnings per share (Adjusted EPS) is calculated by adding to (or subtracting from) net income attributable to the Company per share, on an after-tax basis: restructuring charges; former CEO severance costs; inventory write-offs associated with discontinued businesses; charges and credits related to pension ~~settlement/~~settlements and curtailments; ~~the effect of changes in the income tax rate;~~ foreign currency revaluation losses (or gains); and acquisition-related ~~expenses; and losses (or gains) from the sale of investments.~~

expenses.

EBITDA, Adjusted EBITDA, and Adjusted earnings per share as defined by the Company may not be similar to similarly named measures of other companies. Such measures are not considered measurements under GAAP, and should be considered in addition to, but not as substitutes for, the information contained in the Company’s statements of income.

~~Index~~

The following tables show the calculation of EBITDA and Adjusted EBITDA:

Three months ended September 30, 2020
(in thousands) Machine Clothing Albany Engineered
Composites Corporate expenses
and other Total Company
Operating income/(loss) (GAAP) $ 45,699 $ 6,828 $ (13,754) $ 38,773
Interest, taxes, other income/(expense) — — (9,183) (9,183)
Net income/(loss) (GAAP) 45,699 6,828 (22,937) 29,590
Interest expense, net — — 2,242 2,242
Income tax expense — — 9,686 9,686
Depreciation and amortization expense 5,074 12,236 972 18,282
EBITDA (non-GAAP) 50,773 19,064 (10,037) 59,800
Restructuring expenses 384 358 (32) 710
Foreign currency revaluation (gains)/losses 1,422 (226) (144) 1,052
Acquisition/integration costs — 291 — 291
Pre-tax (income) attributable to noncontrolling interest — (22) — (22)
Adjusted EBITDA (non-GAAP) $ 52,579 $ 19,465 $ (10,213) $ 61,831
Three months ended September 30, 2019
(in thousands) Machine Clothing Albany Engineered
Composites Corporate expenses
and other Total Company
Operating income/(loss) (GAAP) $ 51,906 $ 17,345 $ (13,573) $ 55,678
Interest, taxes, other income/(expense) — — (15,553) (15,553)
Net income/(loss) (GAAP) 51,906 17,345 (29,126) 40,125
Interest expense, net — — 3,987 3,987
Income tax expense — — 13,194 13,194
Depreciation and amortization expense 5,149 11,087 1,018 17,254
EBITDA (non-GAAP) 57,055 28,432 (10,927) 74,560
Restructuring expenses (211) (33) — (244)
Foreign currency revaluation (gains)/losses (1,021) 341 (2,026) (2,706)
Pre-tax (income) attributable to noncontrolling interest — (161) — (161)
Adjusted EBITDA (non-GAAP) $ 55,823 $ 28,579 $ (12,953) $ 71,449


Three months ended March 31, 2021
(in thousands)	Machine Clothing		Albany Engineered Composites		Corporate expenses and other		Total Company
Operating income/(loss) (GAAP)	$	50,363	$	2,938	$	(11,483)	$	41,818
Interest, taxes, other income/(expense)	—		—		(14,209)		(14,209)
Net income/(loss) (GAAP)	50,363		2,938		(25,692)		27,609
Interest expense, net	—		—		3,569		3,569
Income tax expense	—		—		10,040		10,040
Depreciation and amortization expense	5,122		12,865		895		18,882
EBITDA (non-GAAP)	55,485		15,803		(11,188)		60,100
Restructuring expenses, net	(69)		89		32		52
Foreign currency revaluation (gains)/losses	(492)		575		167		250
Acquisition/integration costs	—		314		—		314
Pre-tax (income) attributable to noncontrolling interest	—		(46)		—		(46)
Adjusted EBITDA (non-GAAP)	$	54,924	$	16,735	$	(10,989)	$	60,670

4129

Index


Nine months ended September 30, 2020
Three months ended March 31, 2020										Three months ended March 31, 2020
(in thousands)	(in thousands)	Machine Clothing		Albany Engineered Composites		Corporate expenses and other		Total Company		(in thousands)	Machine Clothing		Albany Engineered Composites		Corporate expenses and other		Total Company
Operating income/(loss) (GAAP)	Operating income/(loss) (GAAP)	$	149,418	$	22,749	$	(41,073)	$	131,094	Operating income/(loss) (GAAP)	$	47,175	$	7,623	$	(15,204)	$	39,594
Interest, taxes, other income/(expense)	Interest, taxes, other income/(expense)	—		—		(61,461)		(61,461)		Interest, taxes, other income/(expense)	—		—		(32,000)		(32,000)
Net income/(loss) (GAAP)	Net income/(loss) (GAAP)	149,418		22,749		(102,534)		69,633		Net income/(loss) (GAAP)	47,175		7,623		(47,204)		7,594
Interest expense, net	Interest expense, net	—		—		10,042		10,042		Interest expense, net	—		—		3,977		3,977
Income tax expense	Income tax expense	—		—		37,504		37,504		Income tax expense	—		—		12,454		12,454
Depreciation and amortization expense	Depreciation and amortization expense	15,142		36,192		2,972		54,306		Depreciation and amortization expense	5,087		11,985		998		18,070
EBITDA (non-GAAP)	EBITDA (non-GAAP)	164,560		58,941		(52,016)		171,485		EBITDA (non-GAAP)	52,262		19,608		(29,775)		42,095
Restructuring expenses		1,414		2,606		169		4,189
Restructuring expenses, net										Restructuring expenses, net	642		—		—		642
Foreign currency revaluation (gains)/losses	Foreign currency revaluation (gains)/losses	(1,265)		501		14,705		13,941		Foreign currency revaluation (gains)/losses	(3,661)		697		14,830		11,866
Former CEO termination costs	Former CEO termination costs	—		—		2,742		2,742		Former CEO termination costs	—		—		2,742		2,742
Acquisition/integration costs	Acquisition/integration costs	—		867		—		867		Acquisition/integration costs	—		298		—		298
Pre-tax loss attributable to noncontrolling interest		—		1,412		—		1,412
Pre-tax expense attributable to noncontrolling interest										Pre-tax expense attributable to noncontrolling interest	—		1,492		—		1,492
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	164,709	$	64,327	$	(34,400)	$	194,636	Adjusted EBITDA (non-GAAP)	$	49,243	$	22,095	$	(12,203)	$	59,135

Nine months ended September 30, 2019
(in thousands)		Machine Clothing		Albany Engineered Composites		Corporate expenses and other		Total Company
Operating income/(loss) (GAAP)		$	145,688	$	44,598	$	(40,290)	$	149,996
Interest, taxes, other income/(expense)		—		—		(46,204)		(46,204)
Net income/(loss) (GAAP)		145,688		44,598		(86,494)		103,792
Interest expense, net		—		—		13,035		13,035
Income tax expense		—		—		35,075		35,075
Depreciation and amortization expense		16,674		33,059		3,231		52,964
EBITDA (non-GAAP)		162,362		77,657		(35,153)		204,866
Restructuring expenses		1,125		18		(4)		1,139
Foreign currency revaluation (gains)/losses		(734)		655		(3,716)		(3,795)
Pre-tax (income) attributable to noncontrolling interest		—		(722)		—		(722)
Adjusted EBITDA (non-GAAP)		$	162,753	$	77,608	$	(38,873)	$	201,488

The Company discloses certain income and expense items on a per-share basis. The Company believes that such disclosures provide important insight into the underlying quarterly earnings and are financial performance metrics commonly used by investors. The Company calculates the quarterly per-share amount for items included in continuing operations by using anthe income tax rate based on either the tax rates in specific countries or the estimated tax rate applied to total company results. The after-tax amount is then divided by the weighted-average number of shares outstanding for each period. Year-to-date earnings per-share effects are determined by adding the amounts calculated at each reporting period.

The following tables show the earnings per share effect of certain income and expense items:

~~Index~~

Three months ended September 30, 2020
(in thousands, except per share amounts) Pre tax
Amounts Tax
Effect After tax
Effect Per share
Effect
Restructuring expenses $ 710 $ 232 $ 478 $ 0.01
Foreign currency revaluation (gains)/losses 1,052 526 526 0.02
Acquisition/integration costs 291 87 204 0.01
Three months ended September 30, 2019
(in thousands, except per share amounts) Pre tax
Amounts Tax
Effect After tax
Effect Per share
Effect
Restructuring expenses $ (244) $ (67) $ (177) $ (0.01)
Foreign currency revaluation (gains)/losses (2,706) (744) (1,962) (0.06)


Three months ended March 31, 2021 (in thousands, except per share amounts)	Pre tax Amounts		Tax Effect		After tax Effect		Per share Effect
Restructuring expenses, net	$	52	$	15	$	37	$	0.00
Foreign currency revaluation (gains)/losses	250		(135)		385		0.01
Acquisition/integration costs	314		94		220		0.01

Nine months ended September 30, 2020
(in thousands, except per share amounts) Pre tax
Amounts Tax
Effect After tax
Effect Per share
Effect
Restructuring expenses $ 4,189 $ 1,377 $ 2,812 $ 0.08
Foreign currency revaluation (gains)/losses(a) 13,941 (483) 14,424 0.46
Former CEO termination costs 2,742 713 2,029 0.06
Acquisition/integration costs 867 259 608 0.03
Nine months ended September 30, 2019
(in thousands, except per share amounts) Pre tax
Amounts Tax
Effect After tax
Effect Per share
Effect
Restructuring expenses $ 1,139 $ 330 $ 809 $ 0.02
Foreign currency revaluation (gains)/losses (3,795) (1,073) (2,722) (0.08)


Three months ended March 31, 2020 (in thousands, except per share amounts)	Pre tax Amounts		Tax Effect		After tax Effect		Per share Effect
Restructuring expenses, net	$	642	$	192	$	450	$	0.01
Foreign currency revaluation (gains)/losses (a)	11,866		(1,545)		13,411		0.42
Former CEO termination costs	2,742		713		2,029		0.06
Acquisition/integration costs	298		89		209		0.01

(a)In Q1 2020, the company ~~recorded~~incurred losses of approximately $17 million in jurisdictions where it cannot record a ~~tax~~ benefit from the losses, which results in an unusual relationship between the pre-tax and after-tax amounts.

Index

The following table contains the calculation of Adjusted ~~Earnings per share:~~EPS:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
Per share amounts (Basic)	Per share amounts (Basic)	2020		2019		2020		2019		Per share amounts (Basic)	2021		2020
Earnings per share (GAAP)	Earnings per share (GAAP)	$	0.92	$	1.24	$	2.20	$	3.20	Earnings per share (GAAP)	$	0.85	$	0.28
Adjustments, after tax:	Adjustments, after tax:									Adjustments, after tax:
Restructuring expenses		0.01		(0.01)		0.08		0.02
Restructuring expenses, net										Restructuring expenses, net	—		0.01
Foreign currency revaluation (gains)/losses	Foreign currency revaluation (gains)/losses	0.02		(0.06)		0.46		(0.08)		Foreign currency revaluation (gains)/losses	0.01		0.42
Former CEO termination costs	Former CEO termination costs	—		—		0.06		—		Former CEO termination costs	—		0.06
Acquisition/integration costs	Acquisition/integration costs	0.01		—		0.03		—		Acquisition/integration costs	0.01		0.01
Adjusted Earnings per share		$	0.96	$	1.17	$	2.83	$	3.14
Adjusted Earnings per share (non-GAAP)										Adjusted Earnings per share (non-GAAP)	$	0.87	$	0.78

Net debt is, in the opinion of the Company, helpful to investors wishing to understand what the Company’s debt position would be if all available cash were applied to pay down indebtedness. The Company calculates Net debt by subtracting Cash and cash equivalents from Total debt. Total debt is calculated by adding Long-term debt, Current maturities of long-term debt, and Notes and loans payable, if any.

~~Index~~

The following table contains the calculation of net debt:


(in thousands)	(in thousands)	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		(in thousands)	March 31, 2021		December 31, 2020		March 31, 2020
Current maturities of long-term debt	Current maturities of long-term debt	$	12	$	17	$	20	$	20	Current maturities of long-term debt	$	2	$	9	$	20
Long-term debt	Long-term debt	418,000		435,000		491,002		424,009		Long-term debt	384,000		398,000		491,002
Total debt	Total debt	418,012		435,017		491,022		424,029		Total debt	384,002		398,009		491,022
Cash and cash equivalents	Cash and cash equivalents	215,304		204,037		222,680		195,540		Cash and cash equivalents	237,871		241,316		222,680
Net debt		$	202,708	$	230,980	$	268,342	$	228,489
Net debt (non GAAP)										Net debt (non GAAP)	$	146,131	$	156,693	$	268,342

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For discussion of our exposure to market risk, refer to “Quantitative and Qualitative Disclosures about Market Risk”, which is included as an exhibit to this Form 10-Q.

Item 4. Controls and Procedures

a) Disclosure controls and procedures.

The principal executive officer and principal financial officer, based on their evaluation of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that the Company’s disclosure controls and procedures are effective for ensuring that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in filed or submitted reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. ~~We continue the process of implementing our internal control over financial reporting structure over the CirComp acquisition and expect that this effort will be completed in 2020.~~

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Index

The information set forth above under Note 1716 in Item 1, “Notes to Consolidated Financial Statements” is incorporated herein by reference.

Item 1A. Risk Factors

~~In addition to the items below, for~~There have been no material changes in risks since December 31, 2020. For discussion of risk factors, refer to Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

The COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business, and such impacts may have a material adverse effect on our results of operations, financial condition and cash flows

The public health crisis caused by the COVID-19 pandemic and the measures being taken by governments, businesses, and the public at large to limit COVID-19's spread has had, and are expected to continue to have, certain negative effects on the markets we serve. These effects include deteriorating general economic conditions in many

~~Index~~

regions of the world, increased unemployment, decreases in disposable income, decline in consumer confidence, and changes in consumer spending habits. Certain adverse impacts specific to the Company include, without limitation:

•We have experienced larger-than-anticipated declines in demand for MC fabrics used to make certain paper grades, specifically publication paper grades, that could be COVID-19 related. The above effects are likely to continue to have an adverse impact on demand for publication paper grades, and perhaps other grades of paper, including without limitation packaging paper grades, as well as on demand for non-woven fabrics and fiber cement products used in the construction industry; such impacts would in turn adversely impact demand for the MC products used to manufacture such paper grades or building products. A decline in revenues would lead to lower gross profit on those products and the possibility of unabsorbed fixed manufacturing costs.

•The Albany Engineered Composites segment generates a significant portion of its revenue from commercial aerospace programs and contracts for the U.S. Department of Defense (DOD). The COVID-19 pandemic has significantly impacted passenger air travel which, in turn, has impacted and is likely to continue to impact the commercial aerospace programs that provide a source of revenue for the Company. Such programs could be delayed or canceled which, in addition to a loss of revenue and gross profit, could lead to write-offs for Company investments for those programs. The pandemic has resulted in significant costs for the U.S. government, which could lead to program delays or cancellations, and a corresponding decrease in our revenues. The U.S. Presidential election later in 2020 could increase the uncertainties associated with DOD programs.

•Disruptions in supply chains may place constraints on our ability to source key raw materials and services which could impact our ability to deliver products to customers as scheduled, or could increase manufacturing or delivery costs.

•We have experienced, and may continue to experience, adverse fluctuations in foreign currency exchange rates, particularly an increase in the value of the U.S. dollar against certain key foreign currencies, which negatively affected results in the first quarter of 2020, and could continue to negatively affect, our results of operations and financial condition.

•During periods of economic weakness, the Company may be exposed to greater risk for credit risk. Additionally, we could be required to record significant impairment charges with respect to noncurrent assets, including goodwill and other intangible assets, whose fair values may be negatively affected by the effects of the COVID-19 pandemic on our operations.

2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We made no share purchases during the ~~third~~first quarter of ~~2020.~~2021. We remain authorized by the Board of Directors to purchase up to 2 million shares of our Class A Common Stock.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

~~Index~~


Exhibit No.			Description
31.1			Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.
31.2			Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.
32.1			Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).
99.1			Quantitative and qualitative disclosures about market risks as reported at March 31, ~~September 30, 2020.~~2021 .
101.INS			XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema Document.
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			XBRL Taxonomy Extension Label Linkbase Document.
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.
104			Cover page formatted as Inline XBRL and contained in Exhibit 101

4632

Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		ALBANY INTERNATIONAL CORP.
		(Registrant)

Date: ~~October 29, 2020~~April 27, 2021	By	/s/ Stephen M. Nolan
		Stephen M. Nolan Chief Financial Officer and Treasurer (Principal Financial Officer)

4733


	Three months ended September 30, 2019
(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total

Machine Clothing	$	150,524	$	800	$	151,324

Albany Engineered Composites
ASC	0		56,414		56,414
Other AEC	6,708		56,687		63,395
Total Albany Engineered Composites	6,708		113,101		119,809

Total revenue	$	157,232	$	113,901	$	271,133


(in thousands)	December 31, 2019		CECL transition adjustment		Charges		Currency translation		Other		September 30, 2020
Specific customer reserves	$	(1,719)	$	(44)	$	12	$	42	$	74	$	(1,635)
Incremental expected credit losses	0		(1,139)		(1,109)		8		(3)		(2,243)
Accounts receivable expected credit losses	$	(1,719)	$	(1,183)	$	(1,097)	$	50	$	71	$	(3,878)


As of September 30, 2020	Weighted average amortization life in years	Gross carrying amount		Accumulated amortization		Net carrying amount
(in thousands)
Amortized intangible assets:
AEC Trademarks and trade names	6-15	$	208	$	(148)	$	60
AEC Technology	10-15	6,522		(871)		5,651
AEC Intellectual property	15	1,250		(68)		1,182
AEC Customer contracts	6	17,471		(13,110)		4,361
AEC Customer relationships	8-15	51,763		(14,768)		36,995
AEC Other intangibles	5	322		(290)		32
Total amortized intangible assets		$	77,536	$	(29,255)	$	48,281

Unamortized intangible assets:
MC Goodwill		$	69,884	$	0	$	69,884
AEC Goodwill		114,403		0		114,403
Total unamortized intangible assets:		$	184,287	$	0	$	184,287


As of December 31, 2019	Weighted average amortization life in years	Gross carrying amount		Accumulated amortization		Net carrying amount
(in thousands)

Amortized intangible assets:
AEC Trademarks and trade names	6-15	$	208	$	(135)	$	73
AEC Technology	10-15	6,191		(387)		5,804
AEC Intellectual property	15	1,250		(7)		1,243
AEC Customer contracts	6	17,471		(10,927)		6,544
AEC Customer relationships	8-15	51,255		(12,108)		39,147
AEC Other intangibles	5	322		(241)		81
Total amortized intangible assets		$	76,697	$	(23,805)	$	52,892

Unamortized intangible assets:
MC Goodwill		$	67,672	$	0	$	67,672
AEC Goodwill		113,262		0		113,262
Total unamortized intangible assets:		$	180,934	$	0	$	180,934


(in thousands)	December 31, 2019		Other Changes		Amortization		Currency Translation		September 30, 2020

Amortized intangible assets:
AEC Trademarks and trade names	$	73	$	0	$	(13)	$	0	$	60
AEC Technology	5,804		0		(480)		327		5,651
AEC Intellectual property	1,243		0		(61)		0		1,182
AEC Customer contracts	6,544		0		(2,183)		0		4,361
AEC Customer relationships	39,147		329		(2,626)		145		36,995
AEC Other intangibles	81		0		(49)		0		32
Total amortized intangible assets	$	52,892	$	329	$	(5,412)	$	472	$	48,281

Unamortized intangible assets:
MC Goodwill	$	67,672	$	0	$	0	$	2,212	$	69,884
AEC Goodwill	113,262		335		0		806		114,403
Total unamortized intangible assets:	$	180,934	$	335	$	0	$	3,018	$	184,287


Year	Annual amortization (in thousands)
2020	$	7,200
2021	7,100
2022	4,900
2023	4,200
2024	4,200


(in thousands, except percentages)	Net sales as reported, Q3 2020		Increase due to changes in currency translation rates		Q3 2020 sales on same basis as Q3 2019 currency translation rates		Net sales as reported, Q3 2019		% Change compared to Q3 2019, excluding currency rate effects
Machine Clothing	$	138,747	$	1,837	$	136,910	$	151,324	(9.5)	%
Albany Engineered Composites	73,252		350		72,902		119,809		(39.2)	%
Consolidated total	$	211,999	$	2,187	$	209,812	$	271,133	(22.6)	%

(in thousands, except percentages)	Net sales as reported, YTD 2020		Decrease due to changes in currency translation rates		YTD 2020 sales on same basis as 2019 currency translation rates		Net sales as reported, YTD 2019		% Change compared to 2019, excluding currency rate effects
Machine Clothing	$	428,782	$	(1,287)	$	430,069	$	450,673	(4.6)	%
Albany Engineered Composites	244,971		(136)		245,107		345,781		(29.1)	%
Consolidated total	$	673,753	$	(1,423)	$	675,176	$	796,454	(15.2)	%