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AIN Albany International

Filed: 28 Jul 21, 9:51am

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:June 30, 2021
OR
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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per shareAINThe New York Stock Exchange (NYSE)
Class B Common Stock, $0.001 par value per shareAINThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 July 16, 2021.



ALBANY INTERNATIONAL CORP.
TABLE OF CONTENTS



ITEM 1. FINANCIAL STATEMENTS

ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Net sales$234,519 $225,990 $456,880 $461,754 
Cost of goods sold132,791 123,010 266,606 269,302 
Gross profit101,728 102,980 190,274 192,452 
Selling, general, and administrative expenses42,009 38,543 79,203 78,649 
Technical and research expenses9,762 8,873 19,243 18,003 
Restructuring expenses, net(9)2,837 43 3,479 
Operating income49,966 52,727 91,785 92,321 
Interest expense, net4,218 3,823 7,787 7,800 
Other expense/(income), net862 1,091 1,462 16,660 
Income before income taxes44,886 47,813 82,536 67,861 
Income tax expense13,446 15,364 23,486 27,818 
Net income31,440 32,449 59,050 40,043 
Net income/(loss) attributable to the noncontrolling interest43 95 70 (1,420)
Net income attributable to the Company$31,397 $32,354 $58,980 $41,463 
Earnings per share attributable to Company shareholders - Basic$0.97 $1.00 $1.82 $1.28 
Earnings per share attributable to Company shareholders - Diluted$0.97 $1.00 $1.82 $1.28 
Shares of the Company used in computing earnings per share:
Basic32,375 32,328 32,363 32,320 
Diluted32,422 32,336 32,411 32,328 
Dividends declared per share, Class A and Class B$0.20 $0.19 $0.40 $0.38 
The accompanying notes are an integral part of the consolidated financial statements
3

ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(in thousands)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Net income$31,440 $32,449 $59,050 $40,043 
Other comprehensive income/(loss), before tax:
Foreign currency translation and other adjustments13,651 8,753 (1,788)(16,202)
Pension/postretirement settlements and curtailments378 378 
Amortization of pension liability adjustments:
Prior service credit(1,118)(1,114)(2,237)(2,228)
Net actuarial loss1,108 1,232 2,217 2,476 
Payments and amortization related to interest rate swaps included in earnings1,770 1,116 3,246 1,523 
Derivative valuation adjustment125 (1,366)(353)(12,130)
Income taxes related to items of other comprehensive income/(loss):
Pension/postretirement settlements and curtailments(113)(113)
Amortization of prior service cost335 278 671 557 
Amortization of net actuarial loss(332)(308)(665)(619)
Payments and amortization related to interest rate swaps included in earnings(457)(286)(838)(390)
Derivative valuation adjustment(44)349 91 3,102 
Comprehensive income/(loss)46,478 41,368 59,394 16,397 
Comprehensive income/(loss) attributable to the noncontrolling interest226 247 43 (1,159)
Comprehensive income/(loss) attributable to the Company$46,252 $41,121 $59,351 $17,556 
The accompanying notes are an integral part of the consolidated financial statements
4

ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
June 30, 2021December 31, 2020
ASSETS
Cash and cash equivalents$253,330 $241,316 
Accounts receivable, net190,937 188,423 
Contract assets, net113,225 139,289 
Inventories120,665 110,478 
Income taxes prepaid and receivable6,236 5,940 
Prepaid expenses and other current assets33,089 31,830 
Total current assets$717,482 $717,276 
Property, plant and equipment, net438,392 448,554 
Intangibles, net42,998 46,869 
Goodwill185,293 187,553 
Deferred income taxes33,102 38,757 
Noncurrent receivables, net34,466 36,265 
Other assets74,907 74,662 
Total assets$1,526,640 $1,549,936 
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable$55,348 $49,173 
Accrued liabilities108,007 125,459 
Current maturities of long-term debt
Income taxes payable12,233 16,222 
Total current liabilities175,588 190,863 
Long-term debt350,000 398,000 
Other noncurrent liabilities121,333 130,424 
Deferred taxes and other liabilities11,660 10,784 
Total liabilities658,581 730,071 
SHAREHOLDERS' EQUITY
Preferred stock, par value $5.00 per share; authorized 2,000,000 shares; NaN issued0 
Class A Common Stock, par value $.001 per share; authorized 100,000,000 shares; 39,142,483 issued in 2021 and 39,115,405 in 202039 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
Additional paid in capital435,230 433,696 
Retained earnings816,778 770,746 
Accumulated items of other comprehensive income:
Translation adjustments(85,384)(83,203)
Pension and postretirement liability adjustments(39,282)(39,661)
Derivative valuation adjustment(7,398)(9,544)
Treasury stock (Class A), at cost; 8,379,804 shares in 2021 and 8,391,011 shares in 2020(255,768)(256,009)
Total Company shareholders' equity864,217 816,066 
Noncontrolling interest3,842 3,799 
Total equity868,059 819,865 
Total liabilities and shareholders' equity$1,526,640 $1,549,936 
The accompanying notes are an integral part of the consolidated financial statements
5

ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
June 30,
Six Months Ended June 30,
2021202020212020
OPERATING ACTIVITIES
Net income$31,440 $32,449 $59,050 $40,043 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation15,971 15,498 32,560 31,004 
Amortization2,280 2,456 4,573 5,020 
Change in deferred taxes and other liabilities974 3,543 5,416 9,360 
Impairment of property, plant and equipment353 36 538 233 
Non-cash interest expense265 20 310 171 
Compensation and benefits paid or payable in Class A Common Stock1,639 1,198 1,626 516 
Provision for credit losses from uncollected receivables and contract assets27 114 (83)1,769 
Foreign currency remeasurement (gain)/loss on intercompany loans(723)194 (1,031)15,581 
Fair value adjustment on foreign currency options140 64 
Changes in operating assets and liabilities that provided/(used) cash:
Accounts receivable(129)11,511 (3,365)8,117 
Contract assets9,539 (11,169)25,643 (20,009)
Inventories(1,821)(4,878)(10,384)(24,628)
Prepaid expenses and other current assets(606)(301)(1,505)(2,457)
Income taxes prepaid and receivable1,156 29 (309)(208)
Accounts payable(4,580)(9,337)4,608 (10,383)
Accrued liabilities2,062 4,171 (17,423)(10,901)
Income taxes payable4,121 5,526 (3,956)1,955 
Noncurrent receivables1,099 628 1,587 397 
Other noncurrent liabilities(2,166)(464)(4,263)(524)
Other, net1,051 (552)1,908 (1,086)
Net cash provided by operating activities61,953 50,672 95,640 44,034 
INVESTING ACTIVITIES
Purchases of property, plant and equipment(10,302)(9,212)(22,836)(21,971)
Purchased software(286)(288)(46)
Net cash used in investing activities(10,588)(9,212)(23,124)(22,017)
FINANCING ACTIVITIES
Proceeds from borrowings8,000 70,000 
Principal payments on debt(34,002)(56,005)(56,009)(59,011)
Principal payments on finance lease liabilities(355)(329)(704)(6,463)
Taxes paid in lieu of share issuance(998)(490)
Proceeds from options exercised21 20 149 20 
Dividends paid(6,474)(6,141)(12,942)(12,280)
Net cash used in financing activities(40,810)(62,455)(62,504)(8,224)
Effect of exchange rate changes on cash and cash equivalents4,904 2,352 2,002 (5,296)
Increase/(decrease) in cash and cash equivalents15,459 (18,643)12,014 8,497 
Cash and cash equivalents at beginning of period237,871 222,680 241,316 195,540 
Cash and cash equivalents at end of period$253,330 $204,037 $253,330 $204,037 
The accompanying notes are an integral part of the consolidated financial statements
6

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, 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. AEC net sales to Safran were $54.0 million and $57.0 million in the first six months of 2021 and 2020, respectively. The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to $105.1 million and $127.1 million as of June 30, 2021 and December 31, 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 2020, approximately 46 percent of AEC sales were related to U.S. government contracts or programs.
7

The following tables show data by reportable segment, reconciled to consolidated totals included in the financial statements:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Net sales
Machine Clothing$159,921 $153,433 $308,127 $290,035 
Albany Engineered Composites74,598 72,557 148,753 171,719 
Consolidated total$234,519 $225,990 $456,880 $461,754 
Operating income/(loss)
Machine Clothing$55,902 $56,543 $106,264 $103,718 
Albany Engineered Composites7,164 8,299 10,102 15,922 
Corporate expenses(13,100)(12,115)(24,581)(27,319)
Operating income$49,966 $52,727 $91,785 $92,321 
Reconciling items:
Interest income(401)(348)(930)(795)
Interest expense4,619 4,171 8,717 8,595 
Other expense/(income), net862 1,091 1,462 16,660 
Income before income taxes$44,886 $47,813 $82,536 $67,861 

There were no material changes to total assets of the reportable segments in the first six months of 2021.
The table below presents restructuring costs by reportable segment (also see Note 4):
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Machine Clothing$10 $388 $(58)$1,030 
Albany Engineered Composites(48)2,248 41 2,248 
Corporate expenses29 201 60 201 
Total$(9)$2,837 $43 $3,479 

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. Changes in the estimated profitability of long-term contracts could be caused by increases or decreases in the contract value, revisions to customer delivery requirements, updated labor or overhead rates, factors affecting the supply chain, changes in the evaluation of contract risks and opportunities, or other factors. Changes in the estimated profitability of long-term contracts increased operating income by $4.3 million and $3.7 million for the second quarter and first half of 2021, respectively. Adjustments in the estimated profitability of long-term contracts increased operating income by $7.4 million and $6.4 million for the second quarter and first half of 2020, respectively.
8

We disaggregate revenue earned from contracts with customers for each of our business segments and product groups based on the timing of revenue recognition, and groupings used for internal review purposes.
The following table disaggregates revenue for each product group by timing of revenue recognition:
Three months ended June 30, 2021
(in thousands)
Point in Time Revenue
Recognition
Over Time Revenue
Recognition
Total
Machine Clothing$159,056 $865 $159,921 
Albany Engineered Composites
ASC0 26,170 26,170 
Other AEC4,432 43,996 48,428 
Total Albany Engineered Composites4,432 70,166 74,598 
                                         
Total revenue$163,488 $71,031 $234,519 
Six months ended June 30, 2021
(in thousands)Point in Time Revenue
Recognition
Over Time Revenue
Recognition
Total
Machine Clothing$306,397 $1,730 $308,127 
Albany Engineered Composites
ASC0 53,254 53,254 
Other AEC8,312 87,187 95,499 
Total Albany Engineered Composites8,312 140,441 148,753 
Total revenue$314,709 $142,171 $456,880 

Three months ended June 30, 2020
(in thousands)
Point in Time Revenue
Recognition
Over Time Revenue
Recognition
Total
Machine Clothing$152,585 $848 $153,433 
Albany Engineered Composites
ASC17,576 17,576 
Other AEC4,143 50,838 54,981 
Total Albany Engineered Composites4,143 68,414 72,557 
Total revenue$156,728 $69,262 $225,990 

9

Six months ended June 30, 2020
(in thousands)Point in Time Revenue
Recognition
Over Time Revenue
Recognition
Total
Machine Clothing$288,339 $1,696 $290,035 
Albany Engineered Composites
ASC55,470 55,470 
Other AEC10,463 105,786 116,249 
Total Albany Engineered Composites10,463 161,256 171,719 
Total revenue$298,802 $162,952 $461,754 
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 June 30,Six months ended June 30,
(in thousands)2021202020212020
Americas PMC$82,343 $81,225 $155,645 $154,902 
Eurasia PMC55,900 54,166 111,043 99,297 
Engineered Fabrics21,678 18,042 41,439 35,836 
Total Machine Clothing Net sales$159,921 $153,433 $308,127 $290,035 

As permitted by ASC 606, we only disclose the value of unsatisfied performance obligations for contracts with an original expected duration of greater than one 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 $149 million and $85 million as of June 30, 2021 and 2020, respectively, and related primarily to firm contracts in the AEC segment. Of the remaining performance obligations as of June 30, 2021, we expect to recognize as revenue approximately $48 million during 2021, $62 million during 2022, $24 million during 2023, and the remainder during 2024.


10

3. Pensions and Other Postretirement Benefit Plans
The Company has defined benefit pension plans covering certain U.S. and non-U.S. employees. The Company also provides certain postretirement benefits to retired employees in the U.S. and Canada. The Company accrues the cost of providing these benefits during the active service period of the employees.
The composition of the net periodic benefit cost for the six months ended June 30, 2021 and 2020, was as follows:
Pension plansOther postretirement benefits
(in thousands)2021202020212020
Components of net periodic benefit cost:
Service cost$1,090 $1,148 $66 $100 
Interest cost2,674 3,071 551 857 
Expected return on assets(3,211)(3,415)0 
Settlement0 145 0 
Curtailment0 233 0 
Amortization of prior service cost/(credit)7 16 (2,244)(2,244)
Amortization of net actuarial loss1,087 1,180 1,130 1,296 
Net periodic benefit cost$1,647 $2,378 $(497)$
The amount of net periodic 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. There were no such events in the first six months of 2021. In the second quarter of 2020, the Company recorded expense of $0.4 million related to curtailments and settlements.
Service cost for defined benefit pension and postretirement plans are reported in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. Other components of net periodic benefit cost are included in the line item Other (income)/expense, net in the Consolidated Statements of Income.

4. Restructuring
Restructuring costs in the first six months of 2021 were not significant. Restructuring costs in the first six months of 2020 were related to reductions in workforce at various AEC locations, principally in the United States, as well as related to discontinued operations at the Machine Clothing production facility in Sélestat, France. Since 2017, we have recorded $13.9 million of restructuring charges related to this action. 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 June 30,Six months ended June 30,
(in thousands)2021202020212020
Machine Clothing$10 $388 $(58)$1,030 
Albany Engineered Composites(48)2,248 41 2,248 
Corporate expenses29 201 60 201 
Total$(9)$2,837 $43 $3,479 

The table below presents the year-to-date changes in restructuring liabilities for 2021 and 2020, all of which are related to termination and other costs:
(in thousands)December 31,
2020
Restructuring
charges accrued
Payments
Currency
translation /other
June 30,
2021
Total termination and other costs$2,195 $43 $(1,485)$11 $764 
(in thousands)December 31,
2019
Restructuring
charges accrued
Payments
Currency
translation /other
June 30,
2020
Total termination and other costs$2,042 $3,479 $(1,410)$(5)$4,106 
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We expect that approximately $0.6 million of Accrued liabilities for restructuring at June 30, 2021 will be paid within one year and approximately $0.2 million will be paid the following year.

5. Other (Income)/Expense, net
The components of Other (Income)/Expense, net are:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Currency transaction (gains)/losses$175 $17 $341 $14,851 
Bank fees and amortization of debt issuance costs104 93 210 168 
Components of net periodic pension and postretirement cost other than service(4)754 (6)1,139 
Other587 227 917 502 
Total$862 $1,091 $1,462 $16,660 

Other (income)/expense, net included losses related to the revaluation of nonfunctional-currency balances of $0.3 million for the first six months of 2021, compared to losses of $14.9 million for the first six months of 2020, which principally resulted from an intercompany demand loan payable by a Mexican subsidiary. As a result of changes in business conditions that occurred in the first quarter of 2020, loan repayments on that intercompany loan are not expected in the foreseeable future and, beginning April 1, 2020, the revaluation effects are recorded in Other comprehensive income.
6. Income Taxes
The following table presents components of income tax expense for the three and six months ended June 30, 2021 and 2020:
Three months ended June 30,Six months ended
June 30,
(in thousands, except percentages)2021202020212020
Income tax based on income from continuing operations (1)$13,251 $16,262 $24,583 $23,571 
Provision for change in estimated tax rate(218)(490)(218)(490)
Income tax before discrete items13,033 15,772 24,365 23,081 
Discrete tax expense:
Exercise of U.S. stock options(14)(156)
Adjustments to prior period tax liabilities22 879 (1,421)767 
Revaluation of deferred tax assets due to tax rate change352 352 
Provision for/resolution of tax audits and contingencies, net0 (1,489)278 (1,733)
Write-off of net operating losses related to tax audit0 0 1,830 
Tax effect of non-deductible foreign exchange loss on intercompany loan0 (13)0 3,656 
Creation of valuation allowance0 222 0 222 
Other53 (7)68 (5)
Total income tax expense$13,446 $15,364 $23,486 $27,818 
(1) Calculated at estimated tax rates of 29.5% and 34.0%, respectively
Income tax expense for the quarter was 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.
In the second quarter of 2020, the Company recorded a net tax benefit of $1.5 million as a result of a US state tax audit settlement; the Company also recorded a net deferred tax expense of $1.0 million due to an adjustment of net operating losses related to settled audits. In the first quarter of 2020, the Company recorded a $1.8 million out-of-period charge related to developments in ongoing tax audits, which resulted in a corresponding decrease in deferred tax assets.
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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 June 30,Six months ended
June 30,
(in thousands, except market price and earnings per share)2021202020212020
Net income attributable to the Company$31,397 $32,354 $58,980 $41,463 
Weighted average number of shares:
Weighted average number of shares used in calculating basic net income per share32,375 32,328 32,363 32,320 
Effect of dilutive stock-based compensation plans47 48 
Weighted average number of shares used in calculating diluted net income per share32,422 32,336 32,411 32,328 
Average market price of common stock used for calculation of dilutive shares$87.53 $54.08 $83.48 $59.73 
Net income attributable to the Company per share:
Basic$0.97 $1.00 $1.82 $1.28 
Diluted$0.97 $1.00 $1.82 $1.28 

8. Accumulated Other Comprehensive Income (AOCI)
The table below presents changes in the components of AOCI for the period December 31, 2020 to June 30, 2021:
(in thousands)
Translation
adjustments
Pension and
postretirement
liability
adjustments
Derivative
adjustment
Total Other
Comprehensive
Income
December 31, 2020$(83,203)$(39,661)$(9,544)$(132,408)
Other comprehensive income/(loss) before reclassifications, net of tax(2,181)393 (262)(2,050)
Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax— 2,408 2,408 
Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax(14)(14)
Net current period other comprehensive income(2,181)379 2,146 344 
June 30, 2021$(85,384)$(39,282)$(7,398)$(132,064)
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The table below presents changes in the components of AOCI for the period December 31, 2019 to June 30, 2020:
(in thousands)
Translation
adjustments
Pension and
postretirement
liability
adjustments
Derivative
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(16,783)581 (9,028)(25,230)
Pension/postretirement curtailment loss, net of tax265 265 
Interest expense related to swaps reclassified to the Consolidated Statements of Income, net of tax1,133 1,133 
Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax186 186 
Net current period other comprehensive income(16,783)1,032 (7,895)(23,646)
June 30, 2020$(139,635)$(48,962)$(11,030)$(199,627)
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 six months ended June 30, 2021 and 2020:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:
Expense/(income) related to interest rate swaps included in Income before taxes (a)$1,770 $1,116 $3,246 $1,523 
Income tax effect(457)(286)(838)(390)
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income$1,313 $830 $2,408 $1,133 
Pretax pension and postretirement liabilities reclassified from Accumulated Other Comprehensive Income:
Pension/postretirement curtailment0 378 0 378 
Amortization of prior service credit(1,118)(1,114)(2,237)(2,228)
Amortization of net actuarial loss1,108 1,232 2,217 2,476 
Total pretax amount reclassified (b)(10)496 (20)626 
Income tax effect3 (143)6 (175)
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income$(7)$353 $(14)$451 
(a)Included in Interest expense, net are payments related to the interest rate swap agreements and amortization of swap buyouts (see Notes 14 and 15).
(b)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 3).

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:
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Six months ended June 30,
(in thousands, except percentages)20212020
Net income/(loss) of Albany Safran Composites (ASC)$1,343 $(13,612)
Less: Return attributable to the Company's preferred holding647 587 
Net income/(loss) of ASC available for common ownership$696 $(14,199)
Ownership percentage of noncontrolling shareholder10 %10 %
Net income/(loss) attributable to the noncontrolling interest$70 $(1,420)
Noncontrolling interest, beginning of year$3,799 $4,006 
Net income/(loss) attributable to the noncontrolling interest70 (1,420)
Changes in other comprehensive income attributable to the noncontrolling interest(27)261 
Noncontrolling interest, end of interim period$3,842 $2,847 

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 June 30, 2021 and December 31, 2020, Accounts receivable consisted of the following:
(in thousands)June 30,
2021
December 31,
2020
Trade and other accounts receivable$170,029 $167,370 
Bank promissory notes24,847 24,860 
Allowance for expected credit losses(3,939)(3,807)
Accounts receivable, net$190,937 $188,423 

The Company has Noncurrent receivables in the AEC segment that represent revenue earned, which has extended payment terms. The Noncurrent receivables will be invoiced to the customer over a 10-year period, which began in 2020. As of June 30, 2021 and December 31, 2020, Noncurrent receivables consisted of the following:
(in thousands)June 30,
2021
December 31,
2020
Noncurrent receivables$34,726 $36,539 
Allowance for expected credit losses(260)(274)
Noncurrent receivables, net$34,466 $36,265 


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.
Contract assets and Contract liabilities are reported on the Consolidated Balance Sheets in a net position on a contract-by-contract basis at the end of each reporting period.
As of June 30, 2021 and December 31, 2020, Contract assets and Contract liabilities consisted of the following:
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(in thousands)June 30,
2021
December 31,
2020
Contract assets$114,097 $140,348 
Allowance for expected credit losses(872)(1,059)
Contract assets, net$113,225 $139,289 
Contract liabilities$7,136 $8,206 

Contract assets decreased $26.1 million during the six-month period ended June 30, 2021. The decrease was primarily due to invoicing to customers exceeding revenue recognized for satisfied performance obligations for contracts that were in a contract asset position. There were 0 credit losses related to our Contract assets during the six month periods ended June 30, 2021 and June 30, 2020.
Contract liabilities decreased $1.1 million during the six-month period ended June 30, 2021, primarily due to revenue recognized from satisfied performance obligations exceeding amounts invoiced to customers that were in a contract liability position. Revenue recognized for the six-month periods ended June 30, 2021 and 2020 that was included in the Contract liability balance at the beginning of the year was $4.7 million and $2.1 million, respectively.

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. Once established, the original cost of the inventory less the related write-down represents the new cost basis of such inventories.
As of June 30, 2021 and December 31, 2020, Inventories consisted of the following:
(in thousands)June 30, 2021December 31, 2020
Raw materials$59,627 $57,789 
Work in process45,436 40,416 
Finished goods15,602 12,273 
Total inventories$120,665 $110,478 

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. 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, 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 2021, management applied the qualitative assessment approach in performing its annual evaluation of goodwill for the Company's Machine Clothing reporting unit and three AEC reporting units and
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concluded that each reporting unit’s fair value continued to exceed its carrying value. In addition, there were no amounts at risk due to the estimated spread between the fair and carrying values. Accordingly, 0 impairment charges were recorded.

14. Financial Instruments
Long-term debt, principally to banks and noteholders, consists of:
(in thousands, except interest rates)June 30, 2021December 31, 2020
Revolving credit agreement with borrowings outstanding at an end of period interest rate of 3.74% in 2021 and 3.50% in 2020 (including the effect of interest rate hedging transactions, as described below), due in 2024$350,000 $398,000 
Other debt, at an average end of period rate of 5.50% in 2020, paid in varying amounts through April 20210 
Long-term debt350,000 398,009 
Less: current portion0 (9)
Long-term debt, net of current portion$350,000 $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”). Under the Credit Agreement, $350 million of borrowings were outstanding as of June 30, 2021. The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio at the time of borrowing. At the time of the last borrowing on June 30, 2021, the spread was 1.625%. The spread was based on a pricing grid, which ranged from 1.500% to 2.000%, based on our leverage ratio. Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of June 30, 2021, we would have been able to borrow an additional $350 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 June 14, 2021, we entered into interest rate swap agreements for the period October 17, 2022 through October 27, 2024. These transactions have the effect of fixing the LIBOR portion of the effective interest rate (before addition of the spread) on $350 million of indebtedness drawn under the Credit Agreement at the rate of 0.838% during the period. Under the terms of these transactions, we pay the fixed rate of 0.838% and the counterparties pay a floating rate based on the one-month LIBOR rate at each monthly calculation date, which on June 16, 2021 was 0.08%.
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, which has been fully amortized into interest expense through March 2021.
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 June 16, 2021 was 0.08%, during the swap period. On June 16, 2021, the all-in-rate on the $350 million of debt was 3.735%.

These interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note 15. No cash collateral was received or pledged in relation to the swap agreements.
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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 June 30, 2021, our leverage ratio was 1.08 to 1.00 and our interest coverage ratio was 15.02 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 June 30, 2021.

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 June 30, 2021, or at December 31, 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:
June 30, 2021December 31, 2020
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)
Fair Value
Assets:
Cash equivalents$26,848 $$17,508 $
Other Assets:
Common stock of unaffiliated foreign public company (a)741 748 
Interest rate swaps261 
Liabilities:
Other noncurrent liabilities:
Interest rate swaps(9,270)(12,714)
(a)Original cost basis $0.5 million.

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 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 June 30, 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 $3.5 million for the six month period ended June 30, 2021, and $1.9 million for the six month period ended June 30, 2020. Additionally, non-cash interest income related to the amortization of swap buyouts totaled $0.3 million for the six month period ended June 30, 2021 and $0.4 million for the six month period ended June 30, 2020.

16. Contingencies
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Asbestos Litigation
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 3,617 claims as of June 30, 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,
Opening
Number of
Claims
Claims
Dismissed,
Settled, or
Resolved
New Claims
Closing
Number of
Claims
Amounts Paid
(thousands) to
Settle or
Resolve
20163,791 148 102 3,745 $758 
20173,745 105 90 3,730 55 
20183,730 152 106 3,684 100 
20193,684 51 75 3,708 25 
20203,708 152 59 3,615 57 
2021 (As of June 30)3,615 9 11 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 June 30, 2021, we had resolved, by means of settlement or dismissal, 37,957 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 7,709 claims as of June 30, 2021, only 12 claims have been filed against Brandon since January 1, 2012, and a 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.

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17. Changes in Shareholders’ Equity
The following table summarizes changes in Shareholders’ Equity for the period December 31, 2020 to June 30, 2021:
Class A
Common Stock
Class B
Common Stock
Additional paid-in capitalRetained earningsAccumulated other comprehensive income
Class A
Treasury Stock
Noncontrolling InterestTotal Equity
(in thousands)SharesAmountSharesAmountSharesAmount
December 31, 202039,115 $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 shares20 — — (13)— — — — — (13)
Options exercised— — — 128 — — — — — 128 
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, 202139,141 $39 1,618 $2 $433,811 $791,854 $(147,102)8,391 $(256,009)$3,616 $826,211 
Net income— — — — — 31,397 — — — 43 31,440 
Compensation and benefits paid or payable in shares— — — 692 — — — — — 692 
Options exercised— — — 21 — — — — — 21 
Shares issued to Directors'— — — 706 — — (11)241 — 947 
Dividends declared
Class A Common Stock, $0.20 per share— — — — — (6,150)— — — — (6,150)
Class B Common Stock, $0.20 per share— — — — — (323)— — — — (323)
Cumulative translation adjustments— — — — — — 13,774 — — 183 13,957 
Pension and postretirement liability adjustments— — — — — — (130)— — — (130)
Derivative valuation adjustment— — — — — — 1,394 — — — 1,394 
June 30, 202139,142 $39 1,618 $2 $435,230 $816,778 $(132,064)8,380 $(255,768)$3,842 $868,059 
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The following table summarizes changes in Shareholders’ Equity for the period December 31, 2019 to June 30, 2020:
Class A
Common Stock
Class B
Common Stock
Additional paid-in capitalRetained earningsAccumulated other comprehensive  income
Class A
Treasury Stock
Noncontrolling InterestTotal Equity
(in thousands)SharesAmountSharesAmountSharesAmount
December 31, 201939,099 $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 shares13 — — (682)— — — — — (682)
Options exercised— — — — — — — — — 
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, 202039,112 $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 — — — — — 466 
Options exercised— — — 20 — — — — — 20 
Shares issued to Directors'— — — 416 — — (15)317 — 733 
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, 202039,113 $39 1,618 $2 $432,738 $726,233 $(199,627)8,394 $(256,074)$2,847 $706,158 
(a)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.

18. Recent Accounting Pronouncements

As disclosed in our March 31, 2020 Form 10Q, in March 2020, ASU 2020-04, Reference Rate Reform, was issued to provide optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR. 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. For the Company’s cash flow hedges in which the designated hedged risk is LIBOR, the Company has adopted the portion of the guidance that allows it to assert that it remains probable that the hedged forecasted transaction will occur. The Company plans to adopt the remaining applicable provisions of this guidance beginning on July 1, 2021.

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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, 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;
In the Albany Engineered Composites segment, longer than expected timeframe for the aerospace industry to utilize existing inventories, and unanticipated reductions in demand, delays, technical difficulties, or cancellations in aerospace 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 been negatively impacted by well-documented declines in publication grades in the Company’s traditional markets, there has been some offsetting effect due to growth in 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 key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets,
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and continued strength in new product development, technical product support, and manufacturing technology. Some of the markets in which our products are sold are expected to have low levels of growth and we face pricing pressures in all markets. Despite these market pressures on revenue, the MC business retains the potential for maintaining stable earnings in the future. MC 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 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 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 11 percent of the Company’s consolidated Net sales in 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 2020, approximately 46 percent of AEC sales were related to U.S. government contracts or programs.

23


24

Consolidated Results of Operations
Net sales
The following table summarizes our Net sales by business segment:
Three months ended June 30,Six months ended June 30,
(in thousands, except percentages)20212020% Change20212020% Change
Machine Clothing$159,921 $153,433 4.2 %$308,127 $290,035 6.2 %
Albany Engineered Composites74,598 72,557 2.8 %148,753 171,719 -13.4 %
Total$234,519 $225,990 3.8 %$456,880 $461,754 -1.1 %
The following tables provide a comparison of 2021 Net sales, excluding the impact of currency translation effects, to 2020 Net sales:
(in thousands, except percentages)Net sales as reported, Q2 2021Increase due to changes in currency translation ratesQ2 2021 sales on same basis as Q2 2020 currency translation ratesNet sales as reported, Q2 2020% Change compared to Q2 2020, excluding currency rate effects
Machine Clothing$159,921 $5,281 $154,640 $153,433 0.8 %
Albany Engineered Composites74,598 1,088 73,510 72,557 1.3 %
Consolidated total$234,519 $6,369 $228,150 $225,990 1.0 %
(in thousands, except percentages)Net sales as reported, YTD 2021Increase due to changes in currency translation ratesYTD 2021 sales on same basis as 2020 currency translation ratesNet sales as reported, YTD 2020% Change compared to 2020, excluding currency rate effects
Machine Clothing$308,127 $10,142 $297,985 $290,035 2.7 %
Albany Engineered Composites148,753 2,267 146,486 171,719 -14.7 %
Consolidated total$456,880 $12,409 $444,471 $461,754 -3.7 %
Three month comparison
Changes in currency translation rates had the effect of increasing Net sales by $6.4 million during the second quarter of 2021, as compared to 2020, principally due to stronger Euro and Chinese Yuan Renminbi in 2021.
Excluding the effect of changes in currency translation rates:
Net sales increased 1.0% compared to the same period in 2020.
Net sales in MC increased 0.8% compared to the second quarter of 2020, principally due to growth in sales for packaging grades and engineered fabrics, partially offset by declines in other grades.
Net sales in AEC increased 1.3%, mainly due to an increase in sales for the LEAP and CH-53K programs, partially offset by a decline in sales on the Boeing 787 program.
Six month comparison
Changes in currency translation rates had the effect of increasing Net sales by $12.4 million during the first six months of 2021, as compared to 2020, principally due to stronger Euro and Chinese Yuan Renminbi in 2021.
Excluding the effect of changes in currency translation rates:
Net sales decreased 3.7% compared to the same period in 2020.
Net sales in MC increased 2.7% compared to the first six months of 2020, primarily due to growth in sales for packaging grades and Engineered Fabrics, partially offset by declines in other grades.
Net sales in AEC decreased 14.7%, primarily due to declines in sales for the Boeing 787 program.
Gross Profit
The following table summarizes Gross profit by business segment:
25

Three months ended June 30,Six months ended June 30,
(in thousands, except percentages)2021202020212020
Machine Clothing$84,597 $83,612 $160,990 $156,264 
Albany Engineered Composites17,131 19,368 29,284 36,188 
Total$101,728 $102,980 $190,274 $192,452 
% of Net sales43.4 %45.6 %41.6 %41.7 %
Three month comparison
The decrease in second quarter 2021 Gross profit, as compared to the same period in 2020, was due to a decline in AEC Gross profit, partially offset by higher Gross profit in MC . Gross profit as a percentage of sales:
Decreased from 54.5% in 2020 to 52.9% in 2021 in MC, due to higher input and fixed costs, partially offset by improved absorption.
Decreased from 26.7% in 2020 to 23.0% in 2021 in AEC, principally due to a smaller impact from changes in the estimated profitability of long-term contracts, which increased Gross profit by $4.3 million for the second quarter of 2021, compared to an increase of $7.4 million for the second quarter of 2020.

Six month comparison
Gross Profit for the first half of 2021 was slightly lower than the same period in 2020. Gross profit as a percentage of sales:
Decreased from 53.9% in 2020 to 52.2% in 2021 in MC, due to an increase in production costs and lower cost absorption.
Decreased from 21.1% in 2020 to 19.7% in 2021 in AEC, driven by changes in the estimated profitability of long-term contracts, which increased Gross profit by $3.7 million versus $6.4 million in the first half of 2021 and 2020, respectively.

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 June 30,Six months ended June 30,
(in thousands, except percentages)2021202020212020
Machine Clothing$28,685 $26,682 $54,784 $51,517 
Albany Engineered Composites10,014 8,821 19,140 18,018 
Corporate expenses13,071 11,913 24,522 27,117 
Total$51,770 $47,416 $98,446 $96,652 
% of Net sales22.1 %21.0 %21.5 %20.9 %
Three month comparison
The overall increase in STG&R expenses in the second quarter of 2021, compared to the same period in 2020, was driven by higher incentive compensation and travel expense, as well as research and development spending. Additionally, revaluation of nonfunctional currency assets and liabilities in Machine Clothing resulted in a second-quarter loss of $1.9 million in 2021, compared to a loss of $1.1 million for the same period in 2020.

Six month comparison
The overall increase in STG&R expenses in the first six months of 2021, compared to the same period in 2020, was due to the net effect of the following:
26

Revaluation of nonfunctional currency assets and liabilities in Machine Clothing, which resulted in a loss of $1.4 million in 2021, compared to a gain of $2.6 million for the first six months of 2020
Former CEO termination costs of $2.7 million were recorded in Corporate expenses during the first quarter of 2020
Higher incentive compensation in all business segments in 2021

Restructuring Expense, net
In addition to the items discussed above affecting Gross profit and STG&R expenses, Operating income was minimally affected by restructuring costs in the first six months of 2021, but totaled $3.5 million for the same period in 2020.
The following table summarizes Restructuring expenses, net by business segment:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Machine Clothing$10 $388 $(58)$1,030 
Albany Engineered Composites(48)2,248 41 2,248 
Corporate expenses29 201 60 201 
Total$(9)$2,837 $43 $3,479 

Machine Clothing restructuring charges or credits in both years mainly related to discontinued operations at its production facility in Sélestat, France, announced in 2017. The restructuring program was driven by the Company’s need to balance manufacturing capacity with demand. Since 2017, we have recorded $13.9 million of restructuring charges related to this action.

Operating Income
The following table summarizes operating income/(loss) by business segment:
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Machine Clothing$55,902 $56,543 $106,264 $103,718 
Albany Engineered Composites7,164 8,299 10,102 15,922 
Corporate expenses(13,100)(12,115)(24,581)(27,319)
Total$49,966 $52,727 $91,785 $92,321 

Other Earnings Items
Three months ended June 30,Six months ended June 30,
(in thousands)2021202020212020
Interest expense, net$4,218 $3,823 $7,787 $7,800 
Other expense/(income), net862 1,091 1,462 16,660 
Income tax expense13,446 15,364 23,486 27,818 
Net income/(loss) attributable to the noncontrolling interest43 95 70 (1,420)

Interest Expense, net
Year-to-date 2021 Interest expense, net, was lower as compared to 2020, due to lower average debt outstanding. See the Capital Resources section for further discussion of borrowings and interest rates.

Other (income)/expense, net
27

Three and Six month comparison
Other (income)/expense net included losses related to the revaluation of nonfunctional-currency balances of $0.3 million for the first six months of 2021, compared to losses of $14.9 million for the first six months of 2020, which principally resulted from an intercompany demand loan payable by a Mexican subsidiary. As a result of changes in business conditions that occurred in the first quarter of 2020, loan repayments on that intercompany loan are not expected in the foreseeable future and, beginning April 1, 2020, the revaluation effects are recorded in Other comprehensive income.

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 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.

Three and six month comparison
The Company’s effective tax rates for the second quarter of 2021 and 2020 were 30.0% and 32.1%, respectively, and for the first half of 2021 and 2020, were 28.5% and 41.0%, respectively. The tax rate is affected by recurring items, such as the income tax rate in the U.S. and 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. The decrease in the Q2 2021 income tax rate from continuing operations, excluding discrete items, was primarily driven by a decrease in losses in a foreign jurisdiction that were excluded in calculating the quarterly income tax provision. The effective tax rate for the six months ended June 30, 2020 was significantly affected by a non-recurring tax adjustment due to non-deductible foreign exchange losses, which occurred in the first quarter of 2020.
Significant items that impacted the effective tax rate in the second quarter of 2021 and 2020 included the following (percentages reflect the effect of each item as a percentage of income before income taxes):
Three months ended
June 30,
Six months ended
June 30,
2021202020212020
(in thousands, except percentages)Tax amount%Tax amount%Tax amount%Tax amount%
Continuing operations (excluding discrete items)13,251 29.5 %16,262 34.0 %24,365 29.5 %23,081 34.0 %
Exercise of U.S. stock options(14) %— — %(156)(0.2)%— — %
Adjustments to prior period tax liabilities22  %879 1.8 %(1,421)(1.7)%767 1.1 %
Revaluation of deferred tax assets due to tax rate change352 0.8 %— — %352 0.4 %— — %
Provision for/resolution of tax audits and contingencies, net  %(1,489)(3.1)%278 0.3 %(1,733)(2.6)%
Write-off of net operating losses related to tax audit  %— — %  %1,830 2.7 %
Tax effect of non-deductible foreign exchange loss on intercompany loan  %(13)(0.1)%  %3,656 5.4 %
Changes in valuation allowance  %222 0.5 %  %222 0.4 %
Other adjustments(165)(0.3)%(497)(1.0)%68 0.2 %(5)— %
Effective tax rate13,446 30.0 %15,364 32.1 %23,486 28.5 %27,818 41.0 %
For more information on income tax, see Note 6 to the Consolidated Financial Statements.
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Segment Results of Operations
Machine Clothing Segment
Machine Clothing accounted for 68% of our consolidated revenues during the six months of 2021. MC products are purchased primarily by manufacturers of paper and paperboard. 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.
We have incurred significant restructuring charges in recent years as we reduced MC manufacturing capacity and administrative positions in various countries.
Review of Operations
Three months ended June 30,Six months ended June 30,
(in thousands, except percentages)2021202020212020
Net sales$159,921 $153,433 $308,127 $290,035 
Gross profit84,597 83,612 160,990 156,264 
% of Net sales52.9 %54.5 %52.2 %53.9 %
STG&R expenses28,685 26,682 54,784 51,517 
Operating income55,902 56,543 106,264 103,718 
Net Sales
Three month comparison
Net sales increased by 4.2%.
Changes in currency translation rates had the effect of increasing second-quarter 2021 sales by $5.3 million compared to the same period in 2020. That currency translation effect was mainly due to stronger Euro and Chinese Yuan Renminbi in the second quarter of 2021, compared to 2020.
Excluding the effect of changes in currency translation rates, Net sales in MC increased 0.8% compared to the second quarter of 2020, principally due to growth in sales for packaging grades and engineered fabrics, partially offset by declines in other grades.

Six month comparison
Net sales increased by 6.2%.
Changes in currency translation rates had the effect of increasing 2021 sales by $10.1 million compared to the same period in 2020. That currency translation effect was principally due to stronger Euro and Chinese Yuan Renminbi in the first six months of 2021, compared to 2020.
Excluding the effect of changes in currency translation rates, Net sales in MC increased 2.7% compared to 2020, as growth in sales for packaging grades and Engineered Fabrics partially offset the declines in other grades.

Gross Profit
Three month comparison
29

The decrease in MC Gross profit margins was due to higher input and fixed costs, partially offset by improved absorption, in the second quarter of 2021.

Six month comparison
The decrease in MC Gross profit margins was due to an increase in production costs and lower cost absorption compared to the same period in 2020.

Operating Income
Three month comparison
The slight decrease in the second quarter of 2021 operating income, compared to the same period in 2020, was primarily due to a slight improvement in gross profit, partially offset by higher STG&R expenses.

Six month comparison
The increase in operating income in first half of 2021 was driven by higher gross profit, offset by higher STG&R expenses, compared to the same period in 2020.

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. Other significant AEC programs include components for the F-35, components for the CH-53K helicopter, fuselage frames for the Boeing 787, and the fan case for the GE9X engine.
Review of Operations
Three months ended June 30,Six months ended June 30,
(in thousands, except percentages)2021202020212020
Net sales$74,598 $72,557 $148,753 $171,719 
Gross profit17,131 19,368 29,284 36,188 
% of Net sales23.0 %26.7 %19.7 %21.1 %
STG&R expenses10,014 8,821 19,140 18,018 
Operating income7,164 8,299 10,102 15,922 

Net Sales
Three month comparison
The increase in Net sales was mainly due to higher sales in the LEAP and CH-53K programs, partially offset by a decline in sales in the Boeing 787 program.

Six month comparison
The decrease in Net sales was primarily due to lower sales in the Boeing 787 program.

Gross Profit
Three and six month comparison
30

The decrease in Gross profit was principally due to smaller impact from changes in the estimated profitability of long-term contracts.

Long-term contracts
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 35 percent of segment revenue for each of the first six months of 2021 and 40 percent for the same period of 2020. LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo and COMAC aircraft.
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 and six month comparison
The decrease in Operating income was driven by lower gross profit and higher STG&R expenses, offset by lower restructuring expenses.

Liquidity and Capital Resources
Cash Flow Summary
Six months ended
June 30,
(in thousands)20212020
Net income$59,050 $40,043 
Depreciation and amortization37,133 36,024 
Changes in working capital (a)(921)(57,804)
Changes in other noncurrent liabilities and deferred taxes1,153 8,836 
Other operating items(775)16,935 
Net cash provided by/(used in) operating activities95,640 44,034 
Net cash used in investing activities(23,124)(22,017)
Net cash (used in)/provided by financing activities(62,504)(8,224)
Effect of exchange rate changes on cash and cash equivalents2,002 (5,296)
(Decrease)/increase in cash and cash equivalents12,014 8,497 
Cash and cash equivalents at beginning of year241,316 195,540 
Cash and cash equivalents at end of period$253,330 $204,037 
(a)Includes Accounts receivable, Contract assets, Inventories, Accounts payable, and Accrued liabilities.

Operating activities
Cash flow provided by operating activities was $95.6 million in the first six months of 2021, compared to $44.0 million in the first six months of 2020. This improvement was due to improved working capital cash flows in AEC and an increase in consolidated Net income.
Cash paid for income taxes was $22.8 million and $16.5 million for the first six months of 2021 and 2020, respectively. The increase is primarily due to an increase in corporate income tax payments in Brazil, China and Switzerland related to prior year tax liabilities.
31

At June 30, 2021, we had $253.3 million of cash and cash equivalents, of which $215.2 million was held by subsidiaries outside of the United States.

Investing and Financing Activities
Capital expenditures for the first six months were $23.1 million in 2021 and $22.0 million in 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 to be insignificant. The majority of our cash balance at June 30, 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 June 30, 2021.
On October 27, 2020, we entered into a $700 million unsecured Four-Year Revolving Credit Facility Agreement (the “Credit Agreement”) which amended and restated the prior amended and restated $685 million Five-Year Revolving Credit Facility Agreement, which we had entered into on November 7, 2017 (the “Prior Agreement”). Under the Credit Agreement, $350 million of borrowings were outstanding as of June 30, 2021. The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio at the time of borrowing. At the time of the last borrowing on June 30, 2021, the spread was 1.625%. The spread was based on a pricing grid, which ranged from 1.500% to 2.000%, based on our leverage ratio. Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of June 30, 2021, we would have been able to borrow an additional $350 million under the Agreement.
For more information, see Note 14 to the Consolidated Financial Statements.
Off-Balance Sheet Arrangements
As of June 30, 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 18 to the Consolidated Financial Statements.
Non-GAAP Measures
This Form 10-Q contains certain non-GAAP measures, including: Net sales, and percent change in 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, former CEO termination costs, 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, while frequent in recent years, are reflective
32

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.
Net sales, or percent changes in 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 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; adding acquisition/integration 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 settlements and curtailments; foreign currency revaluation losses (or gains); and acquisition-related 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.
The following tables show the calculation of EBITDA and Adjusted EBITDA:
Three months ended June 30, 2021
(in thousands)Machine ClothingAlbany Engineered
Composites
Corporate expenses
and other
Total Company
Operating income/(loss) (GAAP)$55,902 $7,164 $(13,100)$49,966 
Interest, taxes, other income/(expense)  (18,526)(18,526)
Net income/(loss) (GAAP)55,902 7,164 (31,626)31,440 
Interest expense, net— — 4,218 4,218 
Income tax expense— — 13,446 13,446 
Depreciation and amortization expense5,138 12,194 919 18,251 
EBITDA (non-GAAP)61,040 19,358 (13,043)67,355 
Restructuring expenses, net10 (48)29 (9)
Foreign currency revaluation (gains)/losses1,908 (244)174 1,838 
Acquisition/integration costs— 300 — 300 
Pre-tax (income) attributable to noncontrolling interest— (65)— (65)
Adjusted EBITDA (non-GAAP)$62,958 $19,301 $(12,840)$69,419 
33

Three months ended June 30, 2020
(in thousands)Machine ClothingAlbany Engineered
Composites
Corporate expenses
and other
Total Company
Operating income/(loss) (GAAP)$56,543 $8,299 $(12,115)$52,727 
Interest, taxes, other income/(expense)  (20,278)(20,278)
Net income/(loss) (GAAP)56,543 8,299 (32,393)32,449 
Interest expense, net— — 3,823 3,823 
Income tax expense— — 15,364 15,364 
Depreciation and amortization expense4,981 11,971 1,002 17,954 
EBITDA (non-GAAP)61,524 20,270 (12,204)69,590 
Restructuring expenses, net388 2,248 201 2,837 
Foreign currency revaluation (gains)/losses973 30 20 1,023 
Acquisition/integration costs— 278 — 278 
Pre-tax (income) attributable to noncontrolling interest— (58)— (58)
Adjusted EBITDA (non-GAAP)$62,885 $22,768 $(11,983)$73,670 

Six months ended June 30, 2021
(in thousands)Machine ClothingAlbany Engineered
Composites
Corporate expenses
and other
Total Company
Operating income/(loss) (GAAP)$106,264 $10,102 $(24,581)$91,785 
Interest, taxes, other income/(expense)  (32,735)(32,735)
Net income/(loss) (GAAP)106,264 10,102 (57,316)59,050 
Interest expense, net— — 7,787 7,787 
Income tax expense— — 23,486 23,486 
Depreciation and amortization expense10,258 25,061 1,814 37,133 
EBITDA (non-GAAP)116,522 35,163 (24,229)127,456 
Restructuring expenses, net(58)41 60 43 
Foreign currency revaluation (gains)/losses1,415 332 341 2,088 
Acquisition/integration costs— 614 — 614 
Pre-tax (income) attributable to noncontrolling interest— (111)— (111)
Adjusted EBITDA (non-GAAP)$117,879 $36,039 $(23,828)$130,090 

34

Six months ended June 30, 2020
(in thousands)Machine ClothingAlbany Engineered
Composites
Corporate expenses
and other
Total Company
Operating income/(loss) (GAAP)$103,718 $15,922 $(27,319)$92,321 
Interest, taxes, other income/(expense)  (52,278)(52,278)
Net income/(loss) (GAAP)103,718 15,922 (79,597)40,043 
Interest expense, net— — 7,800 7,800 
Income tax expense— — 27,818 27,818 
Depreciation and amortization expense10,068 23,956 2,000 36,024 
EBITDA (non-GAAP)113,786 39,878 (41,979)111,685 
Restructuring expenses, net1,030 2,248 201 3,479 
Foreign currency revaluation (gains)/losses(2,688)727 14,850 12,889 
Former CEO termination costs— — 2,742 2,742 
Acquisition/integration costs— 576 — 576 
Pre-tax loss attributable to noncontrolling interest— 1,434 — 1,434 
Adjusted EBITDA (non-GAAP)$112,128 $44,863 $(24,186)$132,805 

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 the 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:
Three months ended June 30, 2021
(in thousands, except per share amounts)
Pre tax
Amounts
Tax
Effect
After tax
Effect
Per share
Effect
Restructuring expenses, net$(9)$(3)$(6)$0.00 
Foreign currency revaluation (gains)/losses1,838 781 1,057 0.03 
Acquisition/integration costs300 90 210 0.01 

Three months ended June 30, 2020
(in thousands, except per share amounts)
Pre tax
Amounts
Tax
Effect
After tax
Effect
Per share
Effect
Restructuring expenses, net$2,837 $953 $1,884 $0.06 
Foreign currency revaluation (gains)/losses1,023 536 487 0.02 
Acquisition/integration costs278 83 195 0.01 



35

Six months ended June 30, 2021
(in thousands, except per share amounts)
Pre tax
Amounts
Tax
Effect
After tax
Effect
Per share
Effect
Restructuring expenses, net$43 $12 $31 $0.00 
Foreign currency revaluation (gains)/losses2,088 646 1,442 0.04 
Acquisition/integration costs614 184 430 0.02 

Six months ended June 30, 2020
(in thousands, except per share amounts)
Pre tax
Amounts
Tax
Effect
After tax
Effect
Per share
Effect
Restructuring expenses, net$3,479 $1,145 $2,334 $0.07 
Foreign currency revaluation (gains)/losses (a)12,889 (1,009)13,898 0.44 
Former CEO termination costs2,742 713 2,029 0.06 
Acquisition/integration costs576 172 404 0.02 
(a)In Q1 2020, the company 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.

The following table provides a reconciliation of Earnings per share to Adjusted Earnings per share:
Three months ended June 30,Six months ended June 30,
Per share amounts (Basic)2021202020212020
Earnings per share (GAAP)$0.97 $1.00 $1.82 $1.28 
Adjustments, after tax:
Restructuring expenses, net 0.06  0.07 
Foreign currency revaluation (gains)/losses0.03 0.02 0.04 0.44 
Former CEO termination costs —  0.06 
Acquisition/integration costs0.01 0.01 0.02 0.02 
Adjusted Earnings per share (non-GAAP)$1.01 $1.09 $1.88 $1.87 

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.
The following table contains the calculation of net debt:
(in thousands)June 30, 2021March 31, 2021December 31, 2020
Current maturities of long-term debt$— $$
Long-term debt350,000 384,000 398,000 
Total debt350,000 384,002 398,009 
Cash and cash equivalents253,330 237,871 241,316 
Net debt (non GAAP)$96,670 $146,131 $156,693 

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
36

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.

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
The information set forth above under Note 16 in Item 1, “Notes to Consolidated Financial Statements.”
Item 1A. Risk Factors
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, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We made no share purchases during the second quarter of 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
Exhibit No.Description
31.1
31.2
32.1
99.1
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104Cover page formatted as Inline XBRL and contained in Exhibit 101
37

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: July 28, 2021By/s/ Stephen M. Nolan
Stephen M. Nolan
Chief Financial Officer and Treasurer
(Principal Financial Officer)
38