annual report and 10-K20 22 L
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our strategy
Focus on markets in which we have the basis for sustainable
competitive advantage through the application of advanced material
engineering and consistent investments in talent and technology,
while delivering exceptional value to our customers.
our objective
Maintain the market leadership position and profitability of our
Machine Clothing business, while growing our Albany Engineered
Composites business.
our investment proposition
• Industry leader in Machine Clothing with proprietary solutions
delivering predictable and strong free cash flow1.
• Highly attractive & differentiated composites business with ample
opportunity to grow both near and long-term.
• Long history of strong balance sheet, solid execution, and prudent
capital management.
4,200
EMPLOYEES
23
facilities
11
COUNTRIES
AIN
(NYSE)
Albany International is a leading developer and manufacturer of
engineered components, using advanced materials processing and
automation capabilities, with two core businesses. Machine Clothing is
the world’s leading producer of custom-designed, consumable fabrics
and process belts essential for the manufacture of all grades of paper
products. Albany Engineered Composites is a growing designer and
manufacturer of advanced materials-based engineered components for
demanding aerospace applications, supporting both commercial and
military platforms.
Albany International is headquartered in Rochester, New Hampshire,
operates 23 facilities in 11 countries, employs approximately 4,200 people
worldwide, and is listed on the New York Stock Exchange (Symbol AIN).
Additional information about the Company and its products and services
can be found at www.albint.com.
1 Free Cash Flow, a non-GAAP measure is defined as Net cash provided by operating activities
– Capital expenditures. For 2022: $128.2 million - $96.3 million = $31.9 million
FINANCIAL HIGHLIGHTS
2022
US $ million, except per share
Q1 Q2 Q3 Q4
Albany Engineered Composites $ 90.1
$154.1
Machine Clothing
$109.7
$151.7
$107.2
$153.4
$118.5
$150.3
Net sales:
$244.2
$261.4
$260.6
$268.8
Operating income
Net income attributable
to the Company
$ 38.8
$ 50.7
$ 53.6
$ 37.9
$ 27.7
$ 39.2
$ 10.7
$ 18.1
Earnings per share - basic
Earnings per share - diluted
$ 0.87
$ 0.87
$ 1.25
$ 1.25
$ 0.34
$ 0.34
$ 0.58
$ 0.58
Years ended
US $ million,
except per
share data
Dec
31
2018 2019 2020 2021 2022
Albany Engineered Composites
$370.6 $ 452.9 $327.7 $310.2 $ 425.4
Machine Clothing
Total Revenue
$611.9 $ 601.3 $573.0 $619.0 $ 609.5
$982.5 $1,054.1 $900.6 $929.2 $1,034.9
Albany Engineered Composites
$ 52.6 $ 88.1 $ 69.9 $ 55.9 $ 77.5
Machine Clothing
Gross profit
$297.4 $ 309.6 $301.1 $322.4 $ 312.3
$349.7 $ 397.7 $371.1 $378.4 $ 389.8
Operating income
$137.4 $ 193.6 $166.1 $178.0 $ 181.0
Net income attributable to
$ 82.9 $ 132.4 $ 98.6 $118.5 $ 95.8
the Company
Earnings per share - basic
$2.57 $4.10 $3.05 $3.66 $3.06
Earnings per share - diluted
$2.57 $4.10 $3.05 $3.65 $3.04
Adjusted Earnings per share - diluted $2.82 $4.11 $3.72 $3.57 $3.89
Table Of CONTENTS
2 CEO LETTER 6 GLOBAL LOCATIONS 7 FORM 10-K
1
22
Resilient Operations
and Organic Growth in 2022
22Letter to
Shareholders
Our Engineered Composites (AEC) segment
grew top line sales revenues by nearly 40%,
and its Adjusted EBITDA was $79 million,
up about $10 million from 2021’s results.
We benefited from recovering commercial
aviation production led by more than 50%
growth in the LEAP program. The business
also benefitted from the additional work we
won late in 2021 on the Sikorsky CH-53K
helicopter program. It’s a meaningful step up
for us, and with revenues of $100 million, the
CH-53K is now our largest defense program.
It is expected to grow further as the program
moves toward full-rate production. Additional
new business in 2022 came from a variety
of smaller commercial, defense and space
programs. These wins add another layer to
the segment’s growth.
My fellow shareholders,
I am pleased to report another strong year in
2022. Our employees continued to do a great
job for customers. We delivered solid results for
shareholders while adeptly managing through
the continuing COVID pandemic, supply chain
disruptions, inflation, and tight labor markets.
Our success is driven by our people.
As a company, Albany achieved sales revenue
of $1.035 billion in 2022, up about 11% from
2021. Gross profit, Operating income, and
Adjusted EBITDA all moved higher as well.
We finished 2022 with a strong balance sheet
and healthy order books.
Our Machine Clothing (MC) segment
maintained its global leadership position in
the paper machine clothing market. MC’s
financial results continued to be impressive
with gross margins over 50% and Adjusted
EBITDA margins of 37%, despite the head-
winds of inflation, supply chain disruptions,
tight labor markets, currency shifts, and
slowdowns in Europe and China.
2
Strategy
Our goal is to position Albany as the
“Partner of Choice” in the markets we serve.
This is, at its core, an organic growth
strategy driven by a combination of technology
leadership and operational excellence.
Our Machine Clothing segment is recognized
as the global leader in its field with the most
advanced technology, cutting-edge products
and technical support. The products MC
produces are critical to the operation of our
customers’ paper machines. We invest more
than any other competitor in developing the
next generation of belts and felts used in
paper making. Our technologists and service
technicians are second to none when it comes
to supporting our customers in their quest to
improve efficiencies, quality and cost in their
paper production processes.
Demand for our machine clothing solutions
is underpinned by long-term secular trends
driving demand for paper of all kinds—
global growth in higher-value tissue and
hygiene products, e-commerce and
packaging demand, and a continued shift
to sustainability as “paper replaces plastic”
in more and more applications. We have
positioned our global footprint, product
offerings and technical services to take
advantage of these long-term positive trends.
We expect to do so profitably, delivering
Adjusted EBITDA margins in the mid-30%
range with excellent cash flow.
Our Engineered Composites segment
continues to build its reputation in
Aerospace markets as a leader in advanced
composite engineering, design, and
manufacturing. We continue to invest in
the next generation of composite
materials and their industrialization,
building on the success of our proprietary
3D Woven Composite materials used in
the LEAP program.
In addition, we are expanding our material
capabilities in composites and diversifying our
business mix by adding new customers and
new programs. Between 2021 and 2026,
we expect to double our AEC revenues and
are targeting Adjusted EBITDA margins in
the low-to-mid 20% range.
Success requires that we invest in our
people to ensure we build a culture that
fosters technological leadership, customer
collaboration and operational execution that
are best-in-class. It starts with our people.
Our goal is to
position Albany
as the“Partner of
Choice” in the
markets we serve.
This is, at its core,
an organic growth
strategy driven by
a combination
of technology
leadership and
operational
excellence.
3
NET SALES
USD MILLIONS
22
21
20
19
18
1,034.9
929.2
900.6
1,054.1
982.5
253.5
ADJUSTED EBITDA (2)
USD MILLIONS
22
21
20
19
18
228.9
25O.9
251.9
265.4
24.5%
ADJUSTED EBITDA MARGIN (3)
22
21
20
19
18
23.3%
28.0%
25.2%
27.0%
(2) Adjusted EBITDA is defined as net income excluding interest, income taxes,
depreciation and amortization, excluding costs or benefits that are not
reflective of the Company’s ongoing or expected future operational
performance. Such excluded costs or benefits do not consist of normal,
recurring cash items necessary to generate revenues or operate our
business. See item 7 in the 2022 Form 10-K for a reconciliation of
Adjusted EBITDA to Net Income.
(3) Adjusted EBITDA divided by Net sales.
4
People
We believe our employees are our greatest
competitive advantage. Our values start with
safety, because we know that a safe working
environment is an absolute prerequisite for
a high-performance organization. We have
deliberately built a culture dedicated to foster
innovation, bolster our competitive market
position, deliver the best products and
solutions to our customers, and provide an
environment where our people can reach
their highest potential.
We provide programs and initiatives that
support employees as they develop new skills
and gain valuable experience. Employees
receive training relevant to their current and
evolving roles and responsibilities. And beyond
that, multi-level leadership development
programs, mentoring programs, and career
pathing are designed to enable our team
members to advance their careers here
at Albany.
Sustainability
Earlier in this letter I mentioned the central
importance of technology leadership to
our prospects for long-term value creation.
Historically our technology leadership has
served as an underpinning in our 125+ years
of success and leadership in the Machine
Clothing business.
As we look forward, our customers
continue to seek solutions to improve their
environmental footprint. We believe our
culture of innovation has a role to play in
addressing those customer challenges.
Our products and solutions across Machine
Clothing and Engineered Composites enable
our customers to improve efficiency – driving
positive sustainability and financial outcomes.
We have deliberately built a culture
dedicated to foster innovation, bolster our
competitive market position, deliver the
best products and solutions to our customers,
and provide an environment where our
people can reach their highest potential.
We support our customers to ultimately
create more sustainable processes and
end products by enhancing resource
efficiency, reducing energy consumption,
and improving fuel efficiency. Through our
partnerships and our own research and
technology investments, we continue to
develop and bring to market innovative
products and proprietary process
technologies that align with our customers’
evolving needs as demand for products
with ever lower environmental footprints
continues to increase.
We continue to thoughtfully move forward
when it comes to sustainability. We are
committed to better quantifying our
environmental footprint, setting meaningful
long-term goals, and implementing programs
to further reduce our environmental impact.
For those of you with an interest in learning
more about our efforts, I encourage you to
read our 2022 Sustainability Report which
will be available on our website.
Finally, I want to thank our employees who
delivered another year of outstanding
performance in 2022. I’m looking forward
to the opportunities that 2023 will bring.
With warm regards,
A. William Higgins
President & Chief Executive Officer
5
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France
Commercy AEC
St. Junien MC
GERMANY
Kaiserlautern AEC
Switzerland
Neuhausen MC HQ
Sweden
Halmstad MC R&D
CANADA
Cowansville, Québec MC
Perth, Ontario MC
ENGLAND
Bury, Lancashire MC R&D
CHINA
Hangzhou MC
Panyu MC
MEXICO
Cuautitlán MC
Querétaro AEC
USA
CORPORATE OFFICES
Rochester, NH
Albany, NY
Boerne, TX AEC
Homer, NY MC R&D
Kaukauna, WI MC R&D
Rochester, NH AEC R&D HQ
St. Stephen, SC MC
Salt Lake City, UT AEC
6
ITALY
Ballò di Mirano (VE) MC
S. KOREA
Chungju MC
BRAZIL
Indaial MC
22
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2022
OR
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)
Registrant’s telephone number, including area code 603-330-5850
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, $0.001 par value per
share
Class B Common Stock, $0.001 par value per
share
AIN
AIN
The New York Stock Exchange (NYSE)
The New York Stock Exchange (NYSE)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the Common Stock held by non-affiliates of the registrant on June 30, 2022, the last business day of the
registrant’s most recently completed second quarter, computed by reference to the price at which Common Stock was last sold on such a date, was
$2.4 billion.
The registrant had 31.1 million shares of Class A Common Stock and no shares of Class B Common Stock outstanding as of February 17,
2023.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 12, 2023.
PART
III
[This page intentionally left blank]
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
Item 6.
Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships, Related Transactions and Director Independence
Item 14. Principal Accountant Fees and Services
Item 15. Exhibits and Financial Statement Schedules
PART IV
10
16
28
28
28
28
29
31
33
49
50
106
106
107
108
108
109
110
110
111
[This page intentionally left blank]
Forward-Looking Statements
This annual report and the documents incorporated or deemed to be incorporated by reference in this annual
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 of 1933, as amended (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,” “plan,” “project,” “may,” “will,” “should,” and variations of such words or similar
expressions are intended, but are not the exclusive means, to identify forward-looking statements. Because forward-
looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or
implied by the 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;
•
•
•
•
Across the entire Company, increasing labor, raw material, energy, and logistic costs due to supply chain
constraints and inflationary pressures; these challenges have only increased as a result of the ongoing
Russia-Ukraine war
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 and other periodic reports.
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” as well as
in Item 1A - “Risk Factors.” 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 annual 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 annual 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.
Item 1.
Business
PART I
Albany International Corp. (the Registrant, the Company, we, us, or our) and its subsidiaries are engaged in two
business segments.
The Machine Clothing (“MC”) segment supplies consumable permeable and impermeable belts used in the
manufacture of paper, paperboard, tissue and towel, pulp, nonwovens, fiber cement and several other industrial
applications. Within the pulp and paper industry these belts are referred to as “machine clothing” or “paper machine
clothing.” In other industries we serve the products we produce are generally referred to as “processing belts.”
We design, manufacture, and market paper machine clothing for each section of the paper machine and for
every grade of paper. We manufacture and sell approximately twice as much paper machine clothing worldwide than
any other company. Paper machine clothing products are customized, consumable products of technologically
sophisticated design that utilize polymeric materials in a complex structure. The design and material composition of
paper machine clothing can have a considerable effect on the quality of paper products produced and a meaningful
effect on the energy and resource efficiency of the paper machines on which it is used. Principal paper machine
clothing products include forming, pressing, and drying fabrics, and process belts. A forming fabric assists in paper
sheet formation and conveys the very wet sheet through the forming section. Pressing fabrics are designed to carry
the sheet through the press section, where water is pressed from the sheet as it passes through the press nip. In the
drying section, drying fabrics manage air movement and hold the sheet against heated cylinders to enhance drying to
a final moisture content between 4% to 9%, depending on the grade.
Process belts are used in the press section to increase dryness and enhance sheet properties, as well as in
other sections of the machine to improve runnability and enhance sheet qualities.
The MC segment also supplies engineered processing belts used in the manufacturing process in the pulp,
corrugator, nonwovens, fiber cement, building products, and textile industries.
The MC segment sells its products directly to customer end-users in countries across the globe. MC products,
manufacturing processes, and distribution channels are substantially the same in each region of the world in which we
operate. The sales of paper machine clothing forming, pressing, and drying fabrics, individually and in the aggregate,
accounted for more than 10 percent of our consolidated Net sales during one or more of the last three years. No
individual customer accounted for as much as 10 percent of MC segment Net sales in any of the periods presented. A
majority of MC segment Net sales in the year ended December 31, 2022 were for use in the production of the growing
grades of tissue, containerboard, other paper categories, and other engineered fabrics, while less than 20% of MC
segment Net sales were for the production of the declining newsprint and printing and writing papers categories.
The Albany Engineered Composites (“AEC”) segment, provides highly engineered, advanced composite
structures to customers in the commercial and defense aerospace industries. The segment includes Albany Safran
Composites, LLC (“ASC”), in which our customer, SAFRAN Group ("SAFRAN"), owns a 10 percent noncontrolling
interest. AEC, through ASC, is the exclusive supplier to the LEAP program of advanced composite fan blades and fan
cases under a long-term supply contract. The LEAP engine is used on the Airbus A320neo, Boeing 737 MAX, and
COMAC 919 aircrafts. AEC’s largest aerospace customer is SAFRAN and sales to SAFRAN (consisting primarily of
fan blades and cases for CFM’s LEAP engine) accounted for approximately 16 percent of the Company’s
consolidated Net sales in 2022. Other significant AEC programs include the production of structures and parts for the
Sikorsky CH-53K helicopter, F-35 fighter jet, Joint Air-to-Surface Standoff Missile ("JASSM"), and Boeing 787
platforms. AEC also supplies vacuum waste tanks for most of the Boeing 7X7 aircraft, as well as the fan case for the
GE9X engine. In 2022, approximately 46% of the AEC segment’s sales were related to U.S. government contracts or
programs.
See “Business Environment Overview and Trends” under Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, for a discussion of general segment developments in recent years.
10
Following is a table of Net sales by segment for 2022, 2021, and 2020.
(in thousands)
Machine Clothing
Albany Engineered Composites
Consolidated total
2022
2021
2020
$
609,461 $
619,015 $
572,955
425,426
$ 1,034,887 $
310,225
929,240 $
327,655
900,610
The table setting forth certain sales, operating income, and balance sheet data that appears in Note 3, is
included in “Reportable Segments and Geographic Data,” of the Consolidated Financial Statements, included under
Item 8 of this Form 10-K.
International Operations
Our Machine Clothing business segment maintains manufacturing facilities in Brazil, Canada, China, France,
Italy, Mexico, South Korea, Sweden, the United Kingdom, and the United States. MC's global manufacturing footprint
is designed to most efficiently meet regional customer requirements. Our AEC business segment maintains
manufacturing facilities in the United States, France, Mexico, and Germany to meet customer demand in those
regions.
Our global presence subjects us to certain risks, including tariffs and other restrictions on trade, and controls on
foreign exchange and the repatriation of funds. While the direct impact of recent developments in global trade and
tariff policy has not been significant, there is risk that the impact of such developments on companies in our supply
chain will be reflected in higher costs from affected suppliers. We have a cash repatriation strategy that targets a
certain amount of foreign current year earnings that are not indefinitely reinvested. Changes in the trade or regulatory
compliance in any country that we have significant cash balances could make it difficult to repatriate foreign earnings
cost-effectively in the future.
Effect of Global Macroeconomic and Political Climate
The war between Russia and Ukraine is affecting the economic and global financial markets and exacerbating
ongoing economic challenges caused by impacts of the ongoing COVID-19 pandemic, including rising inflation and
global supply chain disruptions.
Our MC segment has historically generated approximately 2% of its annual net sales from customers in Russia
and Ukraine. In addition, a subsidiary within our Machine Clothing segment has been a partner in a joint venture
(“JV”) that supplies paper machine clothing products to local papermakers in Russia. In March 2022, we made the
decision to cease doing business in Russia, including giving notice to our JV partner of our intent to exit the venture.
As a result, we recognized $1.5 million expense in cost of goods sold and in Selling, General, and Administrative
expense, representing reserves against the risk of obsolescence of certain inventory destined for Russian customers
and uncollectible receivables from Russian customers, respectively. In the first quarter of 2022, we also wrote down
the net book value of our investment in the aforementioned JV to reflect our intent to exit such venture, resulting in
$0.8 million impairment loss included in Other (income)/expense, net.
Our cessation of doing business in Russia resulted in a reduction of approximately $10 million in annual net sales
in the MC segment during 2022.
During 2022, our segments saw higher input costs due to increased energy costs, tight supply market, and global
logistics challenges. Our MC segment experienced higher energy prices, higher labor costs, and increased raw
material prices. We continued to identify alternatives to secure materials in the face of intense supply constraints.
Logistics costs have begun to stabilize compared to the same period last year, though they remained higher than pre-
pandemic levels.
We anticipate inflationary pressure and energy cost escalation to be a primary input cost pressure in the near
term.
The ultimate financial impact due to the aforementioned global macroeconomic conditions and political climate is
difficult to predict. During 2022, MC segment input costs increased approximately $10 million as a result of these
factors, or an unfavorable impact to the segment gross margin of approximately 140 basis points for the year.
Our Albany Engineered Composites segment does not have significant direct exposure in Russia. However, it has
not been immune from supply chain disruptions. Increasing fuel prices coupled with higher demand has resulted in
increased freight costs during the quarter, along with ongoing logistic constraints, higher labor costs, and increases in
raw material prices. Due to the nature of AEC’s contracts with its customers, we currently anticipate passing through
a portion of such cost increases to the customers.
11
Until the effects of the macroeconomic conditions and political climate on global markets subside, there can be no
assurance that our input costs will not continue to rise beyond our current estimate, thus unfavorably impacting our
future results of operations, financial position and liquidity.
Research and Development and Technology
We invest in research, new product development, and technical analysis with the objective of maintaining our
technological leadership in each business segment. While much of our research activity supports existing products,
we also engage in significant research and development activities for new technology platforms, products and product
enhancements.
MC segment products are custom-designed for each user, depending on the type, size, and speed of the
machine, and the products being produced. Product design is also a function of the machine section, the grade of
product being produced, and the quality of the stock used. Technical expertise, judgment, and experience are critical
in designing the appropriate clothing for each machine, position, and application. As a result, many employees in
sales and technical functions have engineering degrees, paper mill experience, or other manufacturing experience in
the markets in which they operate. Our market leadership position reflects our commitment to technological
innovation. This innovation has resulted in new MC products and/or enhancements across all of our product lines.
Albany Engineered Composites designs, develops and manufactures advanced composite parts for complex
aerospace applications, using a range of core technologies, including its proprietary 3D-woven reinforced composites
technology, traditional 2D laminated composite structures, automated material placement, filament winding, through-
thickness reinforcement, braiding, and thermoplastic pultrusion.
In addition to continuous significant investment in core research and development activities in pursuit of new
proprietary products and manufacturing processes, experienced research and development employees in each
business segment also work collaboratively with customers, OEMs and suppliers on targeted development efforts to
introduce new products and applications in their respective markets.
Company-funded research expenses totaled $31.4 million in 2022, $29.6 million in 2021, and $25.8 million in
2020. In 2022, these costs were 3.0 percent of total Company Net sales, including $15.4 million, or 3.6 percent of Net
sales, in our AEC segment. Research and development in the AEC segment includes both Company-sponsored and
customer-funded activities. Some customer funded research and development may be on a cost sharing basis, in
which case, amounts charged to the collaborating entity are credited against research and development costs. For
customer-funded research and development in which we anticipate funding to exceed expenses, we include amounts
charged to the customer in Net sales. Cost of sales associated with customer-funded research was $5.2 million in
2022, $5.2 million in 2021, and $5.1 million in 2020.
We have developed, and continue to develop, proprietary intellectual property germane to the industries we
serve. Our intellectual property takes many forms, including patents, trademarks, trade names and domains, and
trade secrets. Our trade secrets include, among other things, manufacturing know-how and unique processes and
equipment. Because intellectual property in the form of patents is published, we often forgo patent protection and
preserve the intellectual property as trade secrets. We aggressively protect our proprietary intellectual property,
pursuing patent protection when appropriate. Our active portfolio currently contains over 2,300 patents, and
approximately 160 new patents are typically granted each year. While we consider our total portfolio of intellectual
property, including our patents, to be an important competitive advantage, we do not believe that any single patent is
critical to the continuation of our business. All brand names and product names are trade names of Albany
International Corp. or its subsidiaries. We have from time to time licensed some of our patents and/or know-how to
one or more competitors, and have been licensed under some competitors’ patents, in each case mainly to enhance
customer acceptance of new products. The revenue from such licenses is less than 1 percent of consolidated net
sales.
Raw Materials
Primary raw materials for our MC products are polymer monofilaments and fibers, which have generally been
available from a number of suppliers. In addition, we manufacture polymer monofilaments, a basic raw material for all
types of machine clothing, at our facility in Homer, New York, which supplies approximately 24 percent of our
worldwide monofilament requirements. In the AEC segment, the primary raw materials are carbon fiber and resin.
While there are a number of potential suppliers of carbon fiber and other raw materials used by AEC, the use of
certain suppliers may be mandated by customer agreements, and alternative suppliers would be subject to material
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qualification or other requirements that may preclude or delay their availability. In the case of mandated suppliers,
AEC endeavors to enter into long-term supply agreements to help mitigate price and availability risks. Currently, the
primary raw materials used in each segment are derived from petroleum, and are therefore sensitive to changes in the
price of petroleum and petroleum intermediates.
Competition
In the paper machine clothing market, we believe that we had a worldwide market share of approximately 30
percent in 2022.
Price and technology are the primary means of competitive differentiation in the industry. Albany’s Machine
Clothing product portfolio is broad and deep, with products for every part of the machine and a wide range of machine
types and paper grades. The Company’s research and development team works closely with the sales and technical
organization to develop new products to meet changes in customer needs, and also pursues targeted joint
development activities with customers and equipment manufacturers to create new products. Albany’s experienced
sales and technical team members – many of whom have worked in the industries that we serve - work closely with
each customer to acquire deep understanding of the customer’s combination of raw materials, manufacturing
equipment, manufacturing processes, and paper, pulp, nonwovens or other product being produced – a combination
that is unique to each customer, plant and machine. This experience and knowledge, combined with knowledge of
and experience with the Company’s own extensive product portfolio, allows the sales and technical teams to ensure
that the appropriate machine clothing products are being supplied for each part of the machine, to customize those
products as needed for best performance, and to continuously propose new products that offer each customer the
possibility of even better performance and increased savings. Our paper machine clothing solutions enable our
customers to reduce energy consumption, improve resource efficiency, and help maintain and improve water quality.
These efforts – which effectively integrate the Company’s experience and technological expertise into each product
we sell – are reflected in the Company’s strong competitive position in the marketplace. Some of the Company’s
paper machine clothing competitors also supply paper machines, papermaking equipment, and aftermarket parts and
services, and often bundle clothing with original or rebuilt machines and/or aftermarket services.
The primary competitive factors in the markets in which our Albany Engineered Composites segment competes
are product performance, delivery performance, quality, and price. Achieving lower weight without sacrificing strength
is the key to improving fuel efficiency, which helps reduce the carbon footprint of global aviation, and is a critical
performance requirement in the aerospace industry. Our broad array of capabilities in composites enables us to offer
customers the opportunity to displace metal components and, in some cases, conventional composites with lower-
weight, high-strength, and potentially high-temperature resistant composites. The dominant competitive factor is the
relative importance the customer places on these performance benefits, which include fuel savings/ emissions
reductions due to lower weight, against the possible cost advantage of more traditional metal and composite
components.
Human Capital Resources
Albany International recognizes that its long, successful history and future opportunities are directly linked to
dedicated, engaged and diverse employees that serve the Company in all business operations. Albany currently
employs approximately 4,100 people, with significant operations in North America, South America, Europe and Asia.
Wages and benefits are competitive with those of other manufacturers in the geographic areas in which our facilities
are located. A number of hourly employees outside of the United States are members of various unions. In general,
we consider our relations with employees to be excellent. Employees participate in regular training programs
appropriate for their responsibility and extensive optional training programs have been developed for those who seek
professional and personal growth opportunities. All employees are required to participate in safety training on a
regular basis. We have systematically and continuously reduced our Total Recordable Incident Rate (TRIR) by
approximately 65% since 2019 to 0.48 in 2022.
The Company’s Executive Vice President- Human Resources and Chief Human Resources Officer meets
regularly with the Chief Executive Officer to align Human Capital strategy, plan and initiatives with business strategy
and goals. Albany’s Human Capital Resources plan ensures that we provide a rewarding employee experience across
the company. We continuously review our Human Capital Resources metrics, including safety metrics and action
plans, to promote an emotionally and physically safe and inclusive working environment.
Our Diversity, Equity and Inclusion (DE&I) Council develops a holistic and actionable DE&I strategy that seeks
diversity, nurtures inclusion, amplifies innovation and empowers champions. Our hiring strategy recruits candidates
from a broad range of hiring sources that target people with diverse backgrounds and skills to fill open positions within
the Company. Approximately 26% of our global workforce were women in 2022. Our Empowering Women Leaders
Network aims to continue increasing representation of women at all levels to contribute to the Company’s business
success through relationships, and partnerships.
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Executive Officers of the Registrant
The following table sets forth certain information with respect to the executive officers of the Company as of
February 24, 2023:
A. William Higgins, 64, President and Chief Executive Officer, joined the Company in 2020. He has served the
Company as President and Chief Executive Officer since January 2020. He has been a director of the Company since
2016 and served as Chairman of the Board from February 2019 until January 2020. From 2005 to 2012 he served
CIRCOR International, Inc. in a variety of senior organizational positions, including Chief Executive Officer and
Chairman. Prior to joining CIRCOR, he held a variety of senior management positions with Honeywell International
and AlliedSignal.
Stephen M. Nolan, 53, Chief Financial Officer and Treasurer, joined the Company in 2019. He has served the
Company as Chief Financial Officer and Treasurer since April 2019. Prior to joining the Company, he served as Chief
Financial Officer of Esterline and previously held the same role at Vista Outdoor, Inc. He previously worked in a
number of strategic and operational management roles at ATK, including Senior Vice President for Strategy and
Business Development and several business unit leadership positions. Earlier in his career, Mr. Nolan served in
corporate development and strategy roles at Raytheon Company and as a strategy consultant at McKinsey &
Company.
Daniel A. Halftermeyer, 61, President – Machine Clothing, joined the Company in 1987. He has served the
Company as President – Machine Clothing since February 2012. He previously served the Company as President –
Paper Machine Clothing and Engineered Fabrics from August 2011 to February 2012, as President – Paper Machine
Clothing from January 2010 until August 2011, Group Vice President – Paper Machine Clothing Europe from 2005 to
August 2008, Vice President and General Manager – North American Dryer Fabrics from 1997 to March 2005, and
Technical Director – Dryer Fabrics from 1993 to 1997. He held various technical and management positions in St.
Stephen, South Carolina, and Sélestat, France, from 1987 to 1993.
Greg Harwell, 59, President – Albany Engineered Composites, joined the Company in 2019. He has served the
Company as President - Albany Engineered Composites since November 2019. Prior to joining the company, he
served as President of Aerostructures for Precision Castparts (PCC) managing all aspects of the organization for the
Aerostructures division. He also served as Vice President and General Manager in charge of Global Operations
Strategy at Alcoa Fastening Systems and Rings, and before November 2014 was responsible for multiple operations
within Alcoa Fastening Systems. From June 2019 until he joined Albany International, Mr. Harwell was a consultant to
Arlington Capital Partners, providing M&A advisory services.
Alice McCarvill, 58, Executive Vice President- Human Resources and Chief Human Resources Officer, joined the
Company in 2018. She has served the Company as Executive Vice President- Human Resources and Chief Human
Resources Officer since February 2019. She joined the Company in March 2018 as Executive Vice President- Human
Resources. Prior to 2018 she was Group VP Human Resources for Arconic Engineered Products and Solutions.
Joseph M. Gaug, 59, Vice President- General Counsel and Secretary, joined the Company in 2004. He has
served the Company as Vice President- Secretary and General Counsel since May 2020. He previously served as
Associate General Counsel from 2004 and as Associate General Counsel and Assistant Secretary from 2006 to May
2020. Prior to 2004 he was a principal at McNamee, Lochner, Titus & Williams, PC.
Robert A. Hansen, 65, Senior Vice President and Chief Technology Officer, joined the Company in 1981. He has
served the Company as Senior Vice President and Chief Technology Officer since January 2010. He previously
served as Vice President – Corporate Research and Development from April 2006 to January 2010, and Director of
Technical and Marketing – Europe Press Fabrics from 2004 to April 2006. From 2000 to 2004, he served as Technical
Director – Press Fabrics, Göppingen, Germany. Before 2000, he served the Company in a number of technical
management and research and development positions in Europe and the U.S.
Elisabeth Indriani, 47, Vice President – Controller, joined the Company in 2021. Prior to joining the Company,
she was the Global Controller at Century Aluminum Company, where she oversaw accounting and financial reporting,
led global policy and process transformation initiatives, and was a business partner in financial planning and analysis,
M&A due diligence, investor relations, treasury, financing and tax structuring transactions. Earlier in her career, Ms.
Indriani served as an Audit Senior Manager with Deloitte and Touche LLP – as a member of the Industry Professional
Practice Director group, she authored Deloitte interpretive accounting guides and was a frequent speaker at Deloitte
accounting and advisory events, in addition to advising clients on the application of accounting standards on complex
transactions.
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Governance
We are incorporated under the laws of the State of Delaware and are the successor to a New York corporation
originally incorporated in 1895, which was merged into the company in August 1987 solely for the purpose of
changing the domicile of the corporation. References to the Company that relate to any time prior to the August 1987
merger should be understood to refer to the predecessor New York corporation.
We embrace uncompromising honesty and behave ethically and fairly. We are committed to following the laws,
regulations, standards, and ethical practices everywhere we do business. Ethics and compliance play an integral part
in our decision making and business operations. Our Corporate Governance Guidelines, Business Ethics Policy, and
Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and Controller, and the charters of the Audit,
Compensation, and Governance Committees of the Board of Directors are available at the Corporate Governance
section of our website (www.albint.com).
Data security is a top priority at the Company. To protect our Company and customer data, we employ industry
best practices and adhere to the CIS 20 and NIST SP 800-171 cyber security frameworks. Our Data Security strategy
is overseen by the Audit Committee of our Board of Directors, regularly reviewed at the executive level, directed by
our Chief Information Officer, and managed by our Enterprise Cyber Security (ECS) team. Information on our
approach to data security is available in the Sustainability section of our website (www.albint.com).
Our current reports on Form 8-K, quarterly reports on Form 10-Q, and annual reports on Form 10-K are
electronically filed with the Securities and Exchange Commission (the “SEC”), and all such reports and amendments
to such reports filed subsequent to November 15, 2002, have been and will be made available, free of charge,
through our website (www.albint.com) as soon as reasonably practicable after such filing. The public may read and
copy any materials filed by the Company with the SEC at the SEC’s Public Reading Room at 100 F Street, N.E.,
Room 1580, Washington, D.C. The public may obtain information on the operation of the Public Reading Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains a website (www.sec.gov) that contains reports, proxy,
information statements, and other information regarding issuers that file electronically with the SEC.
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Item 1A. RISK FACTORS
The risks and uncertainties described below are those that we have identified as material, but are not the only
risks and uncertainties facing the Company. This list is not all-inclusive or necessarily in order of importance. If any of
the events contemplated by the following risks occur, our business, financial condition, or results of operations could
be materially adversely affected. Some of these risks are described below and in the documents incorporated by
reference, and investors should take these risks into account when evaluating any investment decision involving the
Company.
Risks related to our business and operations
The effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar
events on our business, operating results, financial condition and cash flows are uncertain
The public health crisis caused by the COVID-19 pandemic and the measures being taken by governments,
businesses, and the public at large to limit COVID-19's spread has had, and are expected to continue to have, certain
negative effects on the markets we serve. These effects include deteriorating general economic conditions in many
regions of the world, increased unemployment, decreases in disposable income, decline in consumer confidence, and
changes in consumer spending habits. In the U.S. and in several other countries these effects appear to be on the
wane. Nevertheless, the evolution of the pandemic, governments’ responses to the pandemic, and individuals’
behavior in response to the pandemic and its effects, in aggregate, continue to impact business conditions in varied
and unpredictable ways. Certain adverse impacts specific to the Company include, without limitation:
• During 2022, some employees in various plants contracted the COVID-19 virus, which led to workforce
absences of employees that contracted the virus and others that may have been exposed. Highly contagious
diseases such as COVID-19 create the risk that we may need to shut down one of our facilities for an extended period
of time, which could increase our costs and affect our ability to meet commitments to customers. In 2022, although
we did not shut down any of our plants due to COVID-19, production at some plants was affected by government
shutdown orders in areas adjacent to those plants. There is no guarantee that future government shutdown orders, or
our own future shutdowns, should they occur, will not have a more significant impact on our production.
• Behavioral changes that have occurred during the pandemic have impacted demand for various products that
are made with MC fabrics. The above effects could have an adverse impact on demand for publication paper grades,
and perhaps other grades of paper, including without limitation packaging paper grades, as well as on demand for
non-woven fabrics and fiber cement products used in the construction industry; such impacts would in turn adversely
impact demand for the MC products used to manufacture such paper grades or building products. A decline in
revenues would lead to lower gross profit on those products and the possibility of unabsorbed fixed manufacturing
costs.
• The Albany Engineered Composites segment generates a significant portion of its revenue from commercial
aerospace programs and contracts for the U.S. Department of Defense. The COVID-19 pandemic has significantly
impacted passenger air travel which, in turn, has impacted and is likely to continue to impact the commercial
aerospace programs that provide a source of revenue for the Company. Such programs could be delayed or canceled
which, in addition to a loss of revenue and gross profit, could lead to write-offs for Company investments for those
programs. The pandemic has resulted in significant costs for the U.S. government, which could lead to program
delays or cancellations, and a corresponding decrease in our revenues.
• Disruptions in supply chains have placed constraints on our ability to source key raw materials and services
which could impact our ability to deliver products to customers as scheduled. Additionally, manufacturing or delivery
costs could increase.
• While we do not anticipate material impairments on our assets as a result of COVID-19, changes in our
expectations for net sales, earnings potential and cash flows associated with our intangible assets and goodwill that
fall below our current projections could result in such assets being impaired.
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A number of industry factors have had, and in future periods could have, an adverse impact on
sales, profitability and cash flow in the Company’s MC and AEC segments
Significant consolidation and rationalization in the paper industry in recent years have reduced global
consumption of paper machine clothing in certain markets and for certain grades. Developments in digital media have
adversely affected demand for newsprint and for printing and writing grades of paper, which has had, and is likely to
continue to have, an adverse effect on demand for paper machine clothing in those markets. At the same time,
technological advances in papermaking, including in paper machine clothing, while contributing to the papermaking
efficiency of customers, have in some cases lengthened the useful life of our products and reduced the number of
pieces required to produce the same volume of paper. These factors have had, and in the future are likely to have, an
adverse effect on paper machine clothing sales.
The market for paper machine clothing in recent years has been characterized by continuous pressure to provide
more favorable commercial terms, which has continued to place pressure on our operating results. We expect such
pressure to remain intense in all paper machine clothing markets, especially during periods of customer consolidation,
plant closures, or when major contracts are being renegotiated. The emergence of Chinese competitors exacerbates
this risk.
Similar pressures exist in the markets in which AEC competes. During 2019, Net sales under the LEAP contract
exceeded $210 million. Due to the grounding of the Boeing 737 MAX, the destocking of the supply chain and the
impact of the pandemic on air travel, Net sales generated by the LEAP contract were approximately $100 milllion in
each of 2020 and 2021, before improving to $165 million in 2022.
Additionally, many of AEC’s customers, as well as the companies supplied by our customers are under pressure
to achieve acceptable returns on their substantial investments in recent years in new technologies, new programs and
new product introductions. This has contributed to a relentless focus on reducing costs, resulting in continuous
pressure for cost reduction and pricing improvement throughout the supply chain. The recent wave of consolidation in
the aerospace industry could continue or intensify these pressures.
The long-term organic growth prospects of AEC are subject to a number of risks
The prospect of future successful organic growth in AEC depends in large part on its ability to maintain and grow
a healthy pipeline of potential new products and applications for its technologies, to transform a sufficient number of
those potential opportunities into commercial supply agreements, and to then execute its obligations under such
agreements. In addition, existing and future supply agreements, especially for commercial and defense aerospace,
are subject to the same curtailment or cancellation risks as the programs they support.
AEC is currently working on a broad portfolio of potential new product applications in the aerospace industry.
These development projects may or may not result in commercial supply opportunities. In the event that AEC
succeeds in developing products and securing contracts to manufacture and supply them, it will face the same
industrialization and manufacturing ramp-up risks that it currently faces in its existing contracts, and AEC may or may
not be successful in meeting its obligations under these contracts. Failure to manage these development,
commercialization and execution risks could have a material adverse impact on AEC’s prospects for revenue growth.
In addition to dealing with these development and manufacturing execution risks, future AEC growth will likely
require increasingly larger amounts of cash to fund the investments in equipment, capital, and development efforts
needed to achieve this growth. Until AEC is able to consistently generate cash flows sufficient to fund its existing
operations and any future investment to support its growth, it will remain dependent on the MC segment’s ability to
generate cash. A significant decline in MC sales, operating income or cash flows could therefore have a material
adverse impact on AEC’s growth.
The U.S. Government’s Department of Defense (“DoD”) Cybersecurity Maturity Model Certification (“CMMC”)
program introduces new and unique risks for DoD contractors
Under the applicable federal regulations for DoD contractors, AEC is required to comply with the agencies
current cybersecurity regulations. In addition to these current regulations, AEC will be required to comply with the new
CMMC program requirements on future contracts as they are flowed down from our DoD prime customers in the
coming years. Given the current and planned future portfolio of U.S. Government-related business, AEC expects to be
required to comply fully with the highest levels of the planned CMMC framework and will potentially be subject to third-
party or U.S. Government audit to certify our compliance. The CMMC compliance requirements are complex and the
costs are significant. To the extent that AEC is unable to comply with the CMMC or other related cybersecurity
17
requirements, AEC may be unable to maintain or grow its business on programs with the DoD and its prime
customers.
AEC is subject to significant risks related to the potential manufacture and sale of defective or non-
conforming products
AEC manufactures and sells products that are incorporated into commercial and military aircraft. If AEC were to
supply products with manufacturing defects, or products that failed to conform to contractual requirements, we could
be required to recall and/or replace them, and could also be subject to substantial contractual damages or warranty
claims from our customers. AEC could also be subject to product liability claims if such failures were to cause death,
injury or losses to third parties, or damage claims resulting from the grounding of aircraft into which such defective or
non-conforming products had been incorporated. We are required to meet, and maintain continuous independent
certification, to certain international industry standards including AS/EN9100 quality management system standards
and Nadcap Special Processes certifications that are designed to assure rigorous quality standards are maintained
throughout the aerospace industry supply chain. Additionally, we maintain product liability insurance and other
insurance at levels we believe to be prudent and consistent with industry practice to help mitigate these risks, these
coverages may not be sufficient to fully cover AEC’s exposure for such risks, which could have a material adverse
effect on AEC’s results of operations and cash flows.
Deterioration of global economic conditions could have an adverse impact on the Company’s business and
results of operations
The Company identifies in this section a number of risks, the effects of which may be exacerbated by an
unfavorable economic climate. For example, a recession could lead to lower consumption in all paper grades
including tissue and packaging, which would not only reduce consumption of paper machine clothing but could also
increase the risk of greater price competition in the machine clothing industry.
Similarly, in the Company’s AEC segment, a decline in global or regional economic conditions could result in
lower orders for aircraft or aircraft engines, or the cancellation of existing orders, which would in turn result in reduced
demand for the AEC components utilized on such aircraft or engines. Demand for AEC’s light-weight composite
aircraft components is driven by demand for the lighter, more fuel-efficient aircraft engine and other applications into
which they are incorporated, such as the CFM LEAP engine. Fuel costs are a significant part of operating costs for
airlines and, in many cases, may constitute a carrier’s single largest operating expense. A sustained drop in oil prices,
and related decline in the price of jet fuel, could prompt airlines to defer orders or delivery dates for such newer, more
fuel-efficient airframes and aircraft engines, as the urgency to reduce fuel consumption may be lessened. In addition,
any economic conditions that led to sustained high interest rates could affect the airline’s ability to finance new aircraft
and engine orders.
Weak or unstable economic conditions also increase the risk that one or more of our customers could be unable
to pay outstanding accounts receivable, whether as the result of bankruptcy or an inability to obtain working capital
financing from banks or other lenders. Furthermore, both the MC and AEC business segments manufacture products
that are custom-designed for a specific customer application. In the event of a customer liquidity issue, the Company
could also be required to write off amounts that are included in Contract assets,net or Inventories. In the case of AEC,
such write-offs could also include investments in equipment, tooling, and non-recurring engineering, some of which
could be significant depending on the program.
The Company continues to experience increasing labor, raw material, energy, and logistic costs due to
supply chain constraints and inflationary pressures
The Company is a significant user of raw materials that are based on petroleum or petroleum derivatives.
Increases in the prices of petroleum or petroleum derivatives, particularly in regions that are experiencing higher
levels of inflation, could increase our costs, and we may not be able to fully offset the effects through price increases,
productivity improvements, and cost-reduction programs.
There is a limited number of suppliers of polymer fiber and monofilaments, key raw materials used in the
manufacture of machine clothing, and of carbon fiber and carbon resin, key raw materials used by AEC. In addition,
there are a limited number of suppliers of some of the equipment used in each of the MC and AEC segments. The
risks associated with limited suppliers increased as a result of the COVID-19 pandemic, which has put pressure on
the supply chain in general, and transportation companies that deliver raw materials to us and our products to
customers, in particular. While we have been able to meet our raw material and equipment needs, the limited number
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of suppliers of these items creates the potential for disruptions in supply. AEC currently relies on single suppliers
under contracts they have with SAFRAN to meet the carbon fiber and carbon resin requirements for the LEAP
program. Lack of supply, delivery delays, or quality issues relating to supplied raw materials or for our key
manufacturing equipment could harm our production capacity. Such could require the Company to attempt to qualify
one or more additional suppliers, which could be a lengthy, expensive and uncertain process. These disruptions could
make it difficult to supply our customers with products on time, which could have a negative impact on our business,
financial condition, and results of operations.
The Company also relies on the labor market in many regions of the world to meet our operational requirements,
advance our technology and differentiate products. Low rates of unemployment in key geographic areas in which the
Company operates can lead to high rates of turnover and loss of critical talent, which could in turn lead to higher labor
costs.
Our ability to attract and retain business and employees may depend on our reputation in the marketplace
We believe our brand names and our reputation are important corporate assets that help distinguish our products
and services from those of our competitors and also contribute to our efforts to recruit and retain talented employees.
However, our reputation is susceptible to material damage by events such as disputes with customers or competitors,
cybersecurity incidents or service outages, internal control deficiencies, delivery failures, compliance violations,
government investigations or legal proceedings. We may also experience reputational damage from employees,
advocacy groups, regulators, investors and other stakeholders that disagree with the way we conduct our business.
Similarly, our reputation could be damaged by actions or statements by current or former customers, suppliers,
employees, competitors, joint venture partners, adversaries in legal proceedings, legislators or government regulators,
as well as members of the investment community or the media, including social media influencers.
Our brand and reputation are also associated with our public commitments to various corporate environmental,
social and governance (“ESG”) initiatives, including our goals for sustainability and inclusion and diversity. Our failure
to achieve our commitments could harm our reputation and adversely affect our relationships with customers and
suppliers or our talent recruitment and retention efforts. In addition, positions we take or do not take on social issues
may be unpopular with some of our employees or with our customers or potential customers, which may in the future
impact our ability to attract or retain employees or customers. We also may choose not to conduct business with
potential customers or suppliers or discontinue or not expand business with existing customers due to these positions.
There is a risk that negative or inaccurate information about the Company, even if based on rumor or
misunderstanding, could adversely affect our business. Damage to our reputation could be difficult, expensive and
time-consuming to repair, could make potential or existing customers reluctant to select us for new opportunities or
could negatively impact our relationships with existing customers and suppliers, resulting in a loss of business, and
could adversely affect our talent recruitment and retention efforts. Damage to our reputation could also reduce
investor confidence in us, materially adversely affecting our share price.
Some of the Company’s competitors in the MC segment have the capability to make and sell paper machines
and papermaking equipment as well as other engineered fabrics
Although customers historically have tended to view the purchase of paper machine clothing and the purchase of
paper machines as separate purchasing decisions, the ability to bundle fabrics with new machines and after-market
services could provide an advantage to our competitors. This underscores the importance of our ability to maintain the
technological competitiveness and value of our products, and a failure to do so could have a material adverse effect
on our business, financial condition, and results of operations.
Moreover, we cannot predict how the nature of competition in this segment may continue to evolve as a result of
future consolidation among our competitors, or consolidation involving our competitors and other suppliers to our
customers.
Conditions in the paper industry have required, and could further require, the Company to reorganize
its operations, which could result in significant expense and could pose risks to the Company’s operations
In the recent past, we engaged in significant restructuring that included the closing of manufacturing operations.
These restructuring activities were intended to match manufacturing capacity to shifting global demand, and also to
improve the efficiency of manufacturing and administrative processes. Future shifting of customer demand, the need
to reduce costs, or other factors could cause us to determine in the future that additional restructuring steps are
required. Restructuring involves risks such as employee work stoppages, slowdowns, or strikes, which can threaten
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uninterrupted production, maintenance of high product quality, meeting of customers’ delivery deadlines, and
maintenance of administrative processes. Increases in output in remaining manufacturing operations can likewise
impose stress on these remaining facilities as they undertake the manufacture of greater volume and, in some cases,
a greater variety of products. Competitors can be quick to attempt to exploit these situations. Although we plan each
step of the process carefully, and work to reassure customers who could be affected that their requirements will
continue to be met, we could lose customers and associated revenues if we fail to execute properly.
Natural disasters at one or more of our facilities could make it difficult for us to meet our supply obligations
to our customers
AEC’s production of LEAP engine components is currently located in three facilities. A natural disaster at any of
these locations could have a significant adverse effect on AEC’s ability to timely satisfy orders for LEAP components.
Production of almost all of AEC’s other legacy and growth programs – including components for the F-35, fuselage
components for the Boeing 787, components for the CH-53K helicopter, and missile bodies for Lockheed Martin’s
JASSM air-to-surface missiles – is located primarily in facilities in Salt Lake City, Utah or Boerne, Texas.
Significant consolidation of manufacturing operations in our MC segment over the past decade has reduced the
number of facilities available to produce our products, and increased utilization significantly at remaining facilities. Not
all product lines are produced at, or capable of being produced at, all facilities. We have Machine Clothing facilities
located near Mexico City, which has been identified as an area vulnerable to flood, storm surge and earthquake risks,
and in the Pearl River Delta area of China, which has been identified as vulnerable to flood, storm and storm surge
risks.
A significant interruption in the operation of any one or more of our plants, whether as the result of a natural
disaster or other causes, could significantly impair our ability to timely meet our supply obligations to customers being
supplied from an affected facility. While the occurrence of a natural disaster or other business interruption event in an
area where we have a facility may not result in any direct damage to the facility itself, it may cause disruptions in local
transportation and public utilities on which such locations are reliant, and may also hinder the ability of affected
employees to report for work. Although we carry property and business interruption insurance to help mitigate the risk
of property loss or business interruption that could result from the occurrence of such events, such coverage may not
be adequate to compensate us for all loss or damage that we may incur.
The Company’s insurance coverage may be inadequate to cover other significant risk exposures
See "The Company is subject to legal proceedings and legal compliance risks, and has been named as
defendant in a large number of suits relating to the actual or alleged exposure to asbestos-containing
products." In addition to asbestos-related claims, the Company may be exposed to other liabilities related to the
products and services we provide. AEC is engaged in designing, developing, and manufacturing components for
commercial jet aircraft and defense and technology systems and products. We expect this portion of the business to
grow in future periods. Although we maintain insurance for the risks associated with this business, there can be no
assurance that the amount of our insurance coverage will be adequate to cover all claims or liabilities. In addition,
there can be no assurance that insurance coverage will continue to be available to us in the future at a cost that is
acceptable. Any material liability not covered by insurance could have a material adverse effect on our business,
financial condition, and results of operations.
The Company has significant manufacturing operations outside of the U.S., which could involve
many uncertainties
We currently have manufacturing facilities outside the U.S. In 2022, 43% percent of consolidated Net sales were
generated by our non-U.S. subsidiaries. Operations outside of the U.S. are subject to a number of risks and
uncertainties, including: governments may impose limitations on our ability to repatriate funds; governments may
impose withholding or other taxes on remittances and other payments from our non-U.S. operations, or the amount of
any such taxes may increase; an outbreak or escalation of any insurrection or armed conflict may occur; governments
may seek to nationalize our assets; or governments may impose or increase investment barriers or other restrictions
affecting our business. In addition, emerging markets pose other uncertainties, including the protection of our
intellectual property, pressure on the pricing of our products, and risks of political instability. The occurrence of any of
these conditions could disrupt our business or prevent us from conducting business in particular countries or regions
of the world.
20
The military invasion of Ukraine by Russia, and the ensuing sanctions are likely to continue to have an impact on
our business. We have already stopped shipping our products to Russia and are in the process of winding down a
small joint venture in that country which supplied dryer fabrics to local papermakers, resulting in lost sales and
possible future write-offs. However, we also expect that there could be further indirect impacts. For instance, the
conflict has already caused disruption in the availability of shipping options between Asia and Europe. Supply chain
disruptions could make it more difficult to find favorable pricing and reliable sources for the raw materials we need,
putting upward pressure on our costs and increasing the risk that we may be unable to acquire the materials or
services we need to continue to make and deliver certain products. Moreover, these same pressures could hinder our
customers’ ability to source materials needed for their own manufacturing efforts, thereby reducing or slowing their
demand for our products. There can be no assurance that we will be able to pass through input cost increases to our
customers or to fully offset them via operational efficiencies. If we are unsuccessful in managing such cost increases,
they could have a material adverse effect on our business, financial position, results of operations, and liquidity.
Geopolitical tensions have heightened elsewhere as well, including between China and Taiwan. MC has
significant manufacturing operations in China and vendors that support AEC import significant materials from China,
and any escalation in this region could also disrupt our business.
Changes in U.S. trade policy with foreign countries, or other changes in U.S. laws and policies governing foreign
trade, as well as any responsive or retaliatory changes in regulations or policies by such countries, could have an
adverse impact on our business, either directly or in the form of increased costs due to their impacts on our supply
chain. While the direct impact to date of recent developments in global trade and tariff policy has not been significant,
there is a risk that the impact of such developments on companies in our supply chain will be reflected in higher costs
from affected suppliers.
In addition, our global presence subjects us to certain risks, including controls on foreign exchange and the
repatriation of funds. While we have been able to repatriate current earnings in excess of working capital
requirements from certain countries in which we operate without substantial governmental restrictions, there can be
no assurance that we will be able to cost effectively repatriate foreign earnings in the future.
We might not be successful at acquiring, investing in or integrating businesses, entering into joint ventures
or divesting businesses
We have a history of making acquisitions and we expect to opportunistically seek to make acquisitions in the
future. We are subject to numerous risks as a result of our acquisition strategy, including, but not limited to, the
following:
• We may invest time and capital pursuing acquisitions that do not materialize
• We may incur costs and expenses associated with any unidentified or potential liabilities of the acquired
companies
• We may not achieve anticipated revenue and cost benefits from the acquisitions
• We may encounter unforeseen difficulties in integrating the acquired operations into our existing operations
Our past or future acquisitions might not ultimately improve our competitive position and business.
We also periodically evaluate, and have engaged in, the disposition of assets and businesses. Divestitures could
involve difficulties in the separation of operations, services, products and personnel, the diversion of management’s
attention, the disruption of our business and the potential loss of key employees. After reaching an agreement with a
buyer for the disposition of a business, the transaction may be subject to the satisfaction of pre-closing conditions,
including obtaining necessary regulatory and government approvals, which, if not satisfied or obtained, may prevent
us from completing the transaction. Divestitures may also involve continued financial involvement in or liability with
respect to the divested assets and businesses, such as indemnities or other financial obligations, in which the
performance of the divested assets or businesses could impact our results of operations. Any divestiture we
undertake could adversely affect our results of operations.
Risks related to our contracts
AEC is subject to significant financial risk related to potential quality escapes that could cause
customer recalls, or production shortfalls that could cause delays in customer deliveries
AEC manufactures critical aerospace parts and must meet increasingly demanding quality, delivery, and cost
targets across a broad spectrum of programs and facilities. AEC’s ability to realize its full financial objectives will
depend on how effectively it meets these challenges. Failure to accomplish these customer quality, delivery, and cost
21
targets on any key program could result in material losses to the Company and have a material adverse impact on the
amount and timing of anticipated AEC revenues, segment operating income, and cash flows, which could in turn have
a material adverse impact on our consolidated financial results.
Long-term supply contracts in our Albany Engineered Composites segment pose certain risks
AEC has a number of long-term contracts with fixed pricing, and is likely to enter into similar contracts in the
future. While long-term contracts provide an opportunity to realize steady and reliable revenues for extended periods,
they pose a number of risks, such as program cancellations, reductions or delays in orders by AEC’s customers under
these contracts, the termination of such contracts or orders, or the occurrence of similar events over which AEC has
no or limited control.
Accounting for long-term contracts and related assets requires estimates and judgments related to our progress
toward completion and the long-term performance on the contract. Significant judgments include potential risks
associated with the ability and cost to achieve program schedule, including customer-directed delays or reductions in
scheduled deliveries, and technical and other specific contract requirements including customer activity levels and
variable consideration based upon that activity. Due to the size and long-term nature of many of AEC contracts, the
estimation of total revenues and cost at completion is complicated and subject to many variables. Management must
make assumptions and estimates regarding contract revenue and cost (which may include estimates of variable
consideration, including award fees and penalties), including, but not limited to, labor productivity and availability,
complexity and scope of the work to be performed, availability and cost of materials, length of time to complete the
performance obligation, availability and timing of funding from our customers, as well as overhead cost rates.
Because of the significance of management’s judgments and estimation processes, it is likely that materially different
amounts could be recorded if we used different assumptions or if the underlying circumstances were to change.
Changes in underlying assumptions, circumstances or estimates may adversely affect our future results of operations
and financial condition.
Sales of components for a number of programs that are currently considered to be important to the future
revenue-growth of AEC are pursuant to short-term purchase orders for a finite period or number of parts, or short-term
supply agreements with terms of one to four years. Such programs include airframe components for the F-35, forward
fuselage frames for the Boeing 787, and aft transition assembly including skins and longerons for the CH-53K
helicopter. As a result, while AEC reasonably expects to continue as a supplier on these programs as long as it meets
its obligations, there can be no assurance that this will be the case, or that, in programs where it is currently a sole
supplier, this sole supplier status will continue. Even if AEC’s status as a supplier is extended or renewed, there can
be no assurance that such extension or renewal will be on the same or similar commercial or other terms. Any failure
by AEC to maintain its current supplier status under these programs, or any material change in their commercial or
other terms, could have a material adverse effect on AEC’s future revenues and segment operating income.
AEC derives a significant portion of its revenue from contracts with the U.S. Government's Department of
Defense, which are subject to unique risks
The funding of DoD programs is subject to congressional appropriations. Many of the DoD programs in which we
participate may last several years, but they are normally funded annually. Changes in military strategy and priorities
may affect future opportunities and/or existing programs. Long-term DoD contracts and related orders are subject to
cancellation, delay or restructure, if appropriations for subsequent performance periods are not made. The termination
or reduction of funding for existing or new DoD programs could result in a material adverse effect on our earnings,
cash flow and financial position.
Additionally, our business funded by the U.S. Government is subject to extensive federal and DoD agency
acquisition regulations. As a result, specific business systems and processes, as well as our proposed contract costs,
are subject to audits by U.S. Government agencies. U.S. Government representatives may audit our compliance with
these required federal regulations, and such audits could result in adjustments to allowable contract costs. Any costs
found to be improperly allocated to a specific contract will not be reimbursed, and such costs already reimbursed must
be refunded. Certain business systems or processes found to be non-compliant to federal and agency regulations
could result in a suspension of work until such compliance issues are corrected. If any audit uncovers improper or
illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination
of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business
with the U.S. Government. Realization of any of these risks could result in a material adverse effect on our earnings,
cash flow and financial position.
22
See also “The U.S. Government’s Department of Defense Cybersecurity Maturity Model Certification
(“CMMC”) program introduces new and unique risks for DoD contractors”
The loss of one or more major customers could have a material adverse effect on sales and profitability
One customer (SAFRAN) accounted for approximately 40 percent of Net sales in the AEC segment in 2022,
substantially all of which was under an exclusive long-term supply agreement relating to parts for the LEAP engine.
Although we are an exclusive supplier of such parts, our customer is not obligated to purchase any minimum quantity
of parts, and cancellation or significant reduction in demand for the LEAP program would have a material adverse
impact on AEC’s Net sales and profitability. LEAP engines are currently used on the Boeing 737 MAX, Airbus
A320neo and COMAC 919 aircraft. The grounding of the Boeing 737 MAX led to lower deliveries of parts, resulting in
lower revenues during 2021 and 2022. While the grounding has now been lifted, the Boeing 737 MAX orders and
deliveries have yet to return to pre-grounding levels, which could result in longer than expected return to such levels in
the future and in lower LEAP revenues for a longer period.
The LEAP long-term supply agreement contains certain events of default that, if triggered, could result in
termination of the agreement by the customer, which would also have a material adverse impact on segment sales
and profitability.
A substantial portion of AEC’s non-LEAP revenue in the near term, and revenue growth opportunity in the longer
term, is dependent upon a small number of customers and programs. Unlike the 3D-woven composite components
supplied by ASC, parts supplied for such non-LEAP programs are capable of being made by a number of other
suppliers. Such programs include airframe components for the F-35, forward fuselage frames for the Boeing 787, and
sponsons, tail-rotor pylons, horizontal stabilizers and struts for the CH-53K helicopter. Any failure by AEC to maintain
its current supplier status under these programs, or any material change in their commercial or other terms, could
have a material adverse effect on AEC’s future sales and operating income.
Our top ten customers in the MC segment accounted for a significant portion of our Net sales in 2022. The loss
of one or more of these customers, or a significant decrease in the amount of machine clothing they purchase from
us, could have a material adverse impact on MC's net sales and profitability. We could also be subject to similar
impacts if one or more such customers were to suffer financial difficulties and be unable to pay us for products they
have purchased. While we normally enter into long-term supply agreements with significant MC customers, the
agreements generally do not obligate the customer to purchase any products from us, and may be terminated by the
customer at any time with appropriate notice.
Risks related to information technology and cybersecurity
We are dependent on information technology networks and systems to securely process, transmit and store
electronic information and to communicate among our locations around the world and with our employees,
customers and suppliers. The failure to prevent attacks on our operational systems or infrastructure could
result in disruptions to our businesses, loss or disclosure of regulated data, or the loss or disclosure of
confidential and proprietary intellectual property or other assets
As the breadth and complexity of this infrastructure continues to grow, including the increasing reliance on, and
use of, mobile technologies and cloud-based services, and as many of our employees continue to work remotely
following the coronavirus pandemic, the risk of security incidents and cyberattacks has increased. Cybersecurity
threats are constantly expanding and evolving, becoming increasingly sophisticated and complex, increasing the
difficulty of detecting and defending against them and maintaining effective security measures and protocols.
Our information technology systems, processes and sites may suffer interruptions or failures which may
affect our ability to conduct our business
Our information technology systems may be damaged or cease to function properly due to any number of
causes, such as catastrophic events, power outages and security breaches (including destructive malware such as
ransomware) resulting in unauthorized access or cyber-attacks. If our business continuity plans, incident response
capabilities, and security controls do not function effectively, we may experience partial or complete interruptions in
our operations, which may adversely impact our business, financial condition, results of operations and cash flows.
23
We face legal, reputational and financial risks from any failure to protect customer and/or Company data
from security incidents or cyberattacks
Such incidents could lead to shutdowns or disruptions of or damage to our systems and those of our customers
and suppliers, and unauthorized disclosure of sensitive or confidential information, potentially including personal data
and proprietary business information. Unauthorized disclosure of, denial of access to, or other incidents involving
sensitive or confidential Company, employee, customer or supplier data, whether through systems failure, employee
negligence, fraud, misappropriation, or cybersecurity, ransomware or malware attacks, or other intentional or
unintentional acts, could damage our reputation and our competitive positioning in the marketplace, disrupt our or our
customer’s business, cause us to lose customers and result in significant financial exposure and legal liability.
We are subject to numerous laws and regulations designed to protect this information, such as the European
Union’s General Data Protection Regulation (“GDPR”) and the United Kingdom’s GDPR, as well as various other U.S.
federal and state laws governing the protection of privacy, health or other personally identifiable information and data
privacy and cybersecurity laws in other regions. We are subject to U.S. federal procurement regulations such as the
DFARS clause 252.204-7012, based on the NIST 800-171 framework whose goal is protecting controlled unclassified
information in non-federal systems and organizations. In 2022 we continued efforts to comply with the U.S.
Department of Defense Cybersecurity Maturity Model Certification (CMMC) which will impact us in the coming years
as it is incorporated into DFARS 252.204-7012 clauses in our contracts for government programs.
These laws and regulations continue to evolve, are increasing in complexity and number and increasingly conflict
among the various countries in which we operate, which has resulted in greater compliance risk and cost for us.
Various privacy laws impose compliance obligations regarding the handling of personal data, including the cross-
border transfer of data, and significant financial penalties for noncompliance. If any person, including any of our
employees, negligently disregards or intentionally breaches our established controls with respect to Company,
employee, customer or supplier data, or otherwise mismanages or misappropriates that data, we could be subject to
significant litigation, monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or
more jurisdictions. These monetary damages might not be subject to a contractual limit of liability or an exclusion of
consequential or indirect damages and could be significant. In addition, our liability insurance, which includes cyber
insurance, might not be sufficient in type or amount to cover us against claims related to security incidents,
cyberattacks and other related incidents.
Risks related to our financial matters
Fluctuations in currency exchange rates could adversely affect the Company’s business, financial
condition, and results of operations
We operate our business in many regions of the world, and currency rate movements can have a significant
effect on operating results. The effect of currency rate changes on gross profit in the MC segment can be difficult to
anticipate because we use a global sourcing and manufacturing model. Under this model, while some non-U.S. sales
and associated costs are in the same currency, other non-U.S. sales are denominated in currencies other than the
currency in which most costs of such sales are incurred. At the same time, the geographic sources of materials
purchased (and the currencies in which these purchases are denominated) can vary depending on market forces, and
the Company may also shift production of its products between manufacturing locations, which can result in a change
in the currency in which certain costs to produce such products are incurred.
Changes in exchange rates can result in revaluation gains and losses that are reflected in our Consolidated
Statements of Income. Revaluation gains and losses occur when our business units hold financial assets or liabilities
denominated in a currency other than their functional currency. Operating results can also be affected by the
translation of sales and costs from each non-U.S. subsidiary’s functional currency to the U.S. dollar.
Changes in the value of foreign currencies relative to the U.S. dollar could impact the reported level, in U.S.
dollars, of Net Sales and operating expenses which are denominated in those currencies.
Changes in currency exchange rates could adversely affect the Company’s business, financial condition or
results of operations.
24
We have a substantial amount of indebtedness. At December 31, 2022, the Company had outstanding long-
term debt of $439 million
At December 31, 2022, our leverage ratio (as defined in our primary borrowing agreement) was 1.25, and we
had borrowed $439 million under our $700 million revolving credit facility. While we feel that we generate sufficient
cash from operations and have sufficient borrowing capacity to make required capital expenditures to maintain and
grow our business, any decrease in our cash generation could result in higher leverage. Higher leverage could hinder
our ability to make acquisitions, capital expenditures, or other investments in our businesses, pay dividends, or
withstand business and economic downturns. Our primary borrowing agreement contains a number of covenants and
financial ratios that the Company is required to satisfy. The most restrictive of these covenants pertain to prescribed
leverage and interest coverage ratios and asset dispositions. Any breach of any such covenants or restrictions would
result in a default under such agreement that would permit the lenders to declare all borrowings under such
agreement to be immediately due and payable and, through cross-default provisions, could entitle other lenders to
accelerate their loans. In such an event, the Company would need to modify or restructure all or a portion of such
indebtedness. Depending on prevailing economic conditions at the time, the Company might find it difficult to modify
or restructure the debt on attractive terms, or at all.
We use interest rate swaps to manage the interest cost associated with our borrowings. Borrowings under the
revolving credit facility and the interest rate swaps are currently based on LIBOR, which is expected to be phased out
and replaced starting in 2024. Future changes in the interest rate benchmark could affect the Company’s cost of
borrowing and its cash flows, or the effectiveness of the hedges, which could have an effect on net income.
As of December 31, 2022, we had approximately $261 million of additional borrowing capacity under our $700
million revolving credit facility. Incurrence of additional indebtedness could increase the above-described risks
associated with higher leverage. In addition, any such indebtedness could contain terms that are more restrictive than
our current facilities.
Significant changes in critical estimates and assumptions related to pension and other postretirement
benefit (“OPEB”) costs and liabilities could affect our earnings and pension contributions in future periods
The determination of our pension and other postretirement benefit plans’ expense or income involves significant
judgments, specifically related to our discount rate, long-term return on assets, and other actuarial assumptions. We
establish our discount rate assumption annually and review whether to change our long-term return on assets
assumption annually. These estimates and actuarial assumptions could change significantly as a result to changes in
economic, legislative, and/or demographic profiles. Such changes could result in unfavorable changes to our pension
and OPEB expense and funded status, and our cash contributions thereof, which could have a negative impact on our
results of operations. Further, the difference between actual investment returns and our long-term return on asset
assumptions would result in a change to our pension and OPEB expense, funded status, as well as our required
contributions to the plans. We manage our plan assets in accordance with our investment management objectives,
and they are subject to market volatility and other conditions. Differences may also arise due to changes in
regulatory, accounting and other requirements applicable to pension plans.
The Company is exposed to the risk of increased expense in health-care related costs
We are largely self-insured for some employee and business risks, including health care programs in the United
States. Losses under all of these programs are accrued based upon estimates of the ultimate liability for claims
reported and an estimate of claims incurred but not reported, with assistance from third-party actuaries and service
providers. However, these liabilities are difficult to assess and estimate due to unknown factors, including the severity
of an illness and the number of incidents not reported. The accruals are based upon known facts and historical trends,
and management believes such accruals to be adequate. The Company also maintains stop-loss insurance policies to
protect against catastrophic claims above certain limits. If actual results significantly differ from estimates, our financial
condition, results of operations, and cash flows could be materially impacted by losses under these programs, as well
as higher stop-loss premiums in future periods.
25
Unanticipated changes in tax laws or exposure to additional tax liabilities could affect our future profitability
We are subject to income taxes in both the United States and various non-U.S. jurisdictions. Unanticipated
changes in foreign and domestic tax laws, regulations, or policies, or their interpretation and application by regulatory
bodies, or exposure to additional tax liabilities could affect our future profitability and cash flows. Our domestic and
international tax liabilities are dependent upon the distribution of income among these jurisdictions. Our future results
of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of
earnings in countries with differing statutory tax rates, as well as changes in the overall profitability of the Company,
tax legislation, and generally accepted accounting principles.
As of December 31, 2022, we have approximately $50.1 million net operating loss (“NOL”) carryforward in
various taxing jurisdictions. Our ability to utilize the NOL carryforward could be adversely impacted by several factors,
including but not limited to significant changes to tax legislation and lower than expected future earnings of the
Company.
We are subject to tax audits by various tax authorities in many jurisdictions. The open tax years in these
jurisdictions range from approximately 2014 to 2022. We regularly assess the potential outcomes of examinations by
tax authorities in determining the adequacy of our provision for income taxes. The results of tax audits and
examinations of previously filed tax returns or related litigation and continuing assessments of our tax exposures
could materially affect our financial results.
Risks related to our legal and regulatory environment
The Company may fail to adequately protect its proprietary technology, which would allow competitors
or others to take advantage of its research and development efforts
Proprietary trade secrets are a source of competitive advantage in each of our segments. If our trade secrets
were to become available to competitors, it could have a negative impact on our competitive strength. We employ
measures to maintain the confidential nature of these secrets, including maintaining employment and confidentiality
agreements; maintaining clear policies intended to protect such trade secrets; educating our employees about such
policies; clearly identifying proprietary information subject to such agreements and policies; and vigorously enforcing
such agreements and policies. Despite such measures, our employees, consultants, and third parties to whom such
information may be disclosed in the ordinary course of our business may breach their obligations not to reveal such
information, and any legal remedies available to us may be insufficient to compensate our damages.
The Company is subject to legal proceedings and legal compliance risks
We are subject to a variety of legal proceedings. Litigation is an inherently unpredictable process and
unanticipated negative outcomes are always possible. An adverse outcome in any period could have an adverse
impact on the Company’s operating results for that period.
We are also subject to a variety of legal compliance risks. While we believe that we have adopted appropriate
risk management and compliance programs, the global and diverse nature of our operations means that legal
compliance risks will continue to exist and related legal proceedings and other contingencies, the outcome of which
cannot be predicted with certainty, are likely to arise from time to time. Failure to resolve successfully any legal
proceedings related to compliance matters could have an adverse impact on our results in any period.
Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements,
and violation of these regulations could harm our business
We are subject to numerous, and sometimes conflicting, legal regimes on matters as diverse as anti corruption,
import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and
disclosure control obligations, securities regulation, ESG initiatives, anti-competition, anti-money-laundering, data
privacy and protection, government compliance, wage-and-hour standards, employment and labor relations and
human rights. The global nature of our operations further increases the difficulty of compliance.
Compliance with diverse legal requirements is costly, time-consuming and requires significant resources.
Violations of one or more of these regulations in the conduct of our business could result in significant fines,
enforcement actions or criminal sanctions against us and/or our employees, prohibitions on doing business and
damage to our reputation. Violations of these regulations in connection with the performance of our obligations to our
26
customers also could result in liability for significant monetary damages, fines, enforcement actions and/or criminal
prosecution or sanctions, unfavorable publicity and other reputational damage and restrictions on our ability to
effectively carry out our contractual obligations and thereby expose us to potential claims from our customers. Due to
the varying degrees of development of the legal systems of the countries in which we operate, local laws may not be
well developed or provide sufficiently clear guidance and may be insufficient to protect our rights.
In particular, in many parts of the world, including countries in which we operate and/or seek to expand, practices
in the local business community might not conform to international business standards and could violate anti
corruption laws, or regulations, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010. The
Company provides and all employees must participate in regular training activities with respect to the Company's
business ethics standards and expectations. Our employees, subcontractors, suppliers, and agents, any companies
we may acquire and their employees, subcontractors, suppliers and agents, and other third parties with which we
associate, could take actions that violate policies or procedures designed to promote legal and regulatory compliance
or applicable anti corruption laws or regulations. Violations of these laws or regulations by us, our employees or any
of these third parties could subject us to criminal or civil enforcement actions (whether or not we participated or knew
about the actions leading to the violations), including fines or penalties, disgorgement of profits and suspension or
disqualification from work, including U.S. federal contracting, any of which could materially adversely affect our
business, including our results of operations and our reputation.
Increasing stakeholder environmental, social and governance (ESG) expectations, physical and transition risks
associated with climate change, emerging ESG regulation, contractual requirements, and policy requirements may
pose risk to our market outlook, brand and reputation, financial outlook, cost of capital, global supply chain and
production continuity, which may impact our ability to achieve long-term business objectives. Changes in
environmental and climate change laws or regulations could lead to additional operational restrictions and compliance
requirements upon us or our products, require new or additional investment in product designs, result in carbon offset
investments or otherwise could negatively impact our business and/or competitive position. Increasing industry
performance standards, increasing sustainability disclosure requirements in the U.S. and globally, and requirements
on manufacturing and product air pollutant emissions, especially greenhouse gas (GHG) emissions, may result in
increased costs or reputational risks and could limit our ability to manufacture and/or market certain of our products at
acceptable costs, or at all. Physical impacts of climate change, increasing global chemical restrictions and bans, and
water and waste requirements may drive increased costs to us and our suppliers and impact our production continuity
and data facilities.
Changes in laws and regulations could also mandate significant and costly changes to the way we conduct our
business or could impose additional taxes. Such changes may result in contracts being terminated, greater costs to
us, or could have a negative impact on our ability to obtain future work from government customers.
Certain provisions of our Certificate of Incorporation, our Bylaws and Delaware law could hinder, delay
or prevent a change in control of us that you might consider favorable, which could also adversely affect
the price of our Class A Common Stock
Certain provisions under our Certificate of Incorporation, our Bylaws and Delaware law could discourage, delay
or prevent a transaction involving a change in control of the Company, even if doing so would benefit our
stockholders. These provisions could delay or prevent a change in control and could limit the price that investors
might be willing to pay in the future for shares of our Class A Common Stock.
Our Certificate of Incorporation authorizes our board of directors to issue new series of preferred stock without
stockholder approval. Depending on the rights and terms of any new series created, and the reaction of the market to
the series, the rights or value of our Class A Common Stock could be negatively affected. For example, subject to
applicable law, our board of directors could create a series of preferred stock with superior voting rights to our existing
common stock. The ability of our board of directors to issue this new series of preferred stock could also prevent or
delay a third party from acquiring us, even if doing so would be beneficial to our stockholders.
We may not pay cash dividends on our Common Stock
It is our current practice to pay cash dividends on our common stock. There can be no assurance, however, that
we will pay dividends in the future in the amounts that we have in the past, or at all. Our board of directors may
change the timing and amount of any future dividend payments or eliminate the payment of future dividends in its sole
discretion, without any prior notice to our stockholders. Our ability to pay dividends will depend upon many factors,
including our financial position and liquidity, results of operations, legal requirements, restrictions that may be imposed
by the terms of our current and future credit facilities and other debt obligations and other factors deemed relevant by
27
our board of directors. For example, we have a substantial amount of indebtedness and while we feel that we
generate sufficient cash from operations and have sufficient borrowing capacity to make required capital expenditures
to maintain and grow our business, any decrease in our cash generation could result in higher leverage. Higher
leverage could hinder our ability to make acquisitions, capital expenditures, or other investments in our businesses,
pay dividends, or withstand business and economic downturns.
In the future, we may also enter into other credit agreements or other borrowing arrangements or issue debt
securities that, in each case, restrict or limit our ability to pay cash dividends on our Common Stock. In addition, since
a significant portion of our cash is generated from operations of our subsidiaries, our ability to pay dividends is in part
dependent on the ability of our subsidiaries – some of which are located outside of the United States – to make
distributions to us. Such distributions will be subject to their operating results, cash requirements and financial
condition, as well as our ability to repatriate cash held by non-U.S. subsidiaries. Any change in the level of our
dividends or the suspension of the payment thereof could adversely affect the market price of our Common Stock.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about
our business, our stock price and trading volume could decline
The trading market for our Class A Common Stock depends in part on the research and reports that securities or
industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our
Class A Common Stock or publishes inaccurate or unfavorable research about our business, our stock price would
likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly,
demand for our Class A Common Stock could decrease, which could cause our stock price and trading volume to
decline.
Future sales of shares by us or our existing stockholders could cause our stock price to decline
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could
occur, could cause the market price of our common stock to decline or might make it more difficult for us to sell equity
securities in the future at a time and at a price that we deem appropriate.
As of February 17, 2023 we had 31.1 million shares of Class A Common Stock outstanding and no shares of
Class B Common Stock outstanding. In addition, shares of Class A Common Stock are issuable upon the exercise of
outstanding stock options or the vesting of outstanding equity awards, and certain shares are reserved for future
issuance under our equity compensation plans.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2.
PROPERTIES
Our principal manufacturing facilities are located in Brazil, Canada, China, France, Germany, Italy, Mexico, South
Korea, Sweden, the United Kingdom, and the United States. The aggregate square footage of our operating facilities
in the United States is approximately 2.0 million square feet, of which 1.1 million square feet are owned and 0.9
million square feet are leased. Our facilities located outside the United States comprise approximately 3.5 million
square feet, of which 3.0 million square feet are owned and 0.5 million square feet are leased. We consider these
facilities to be in good condition and suitable for our purpose. The capacity associated with these facilities is adequate
to meet production levels required and anticipated through 2023.
Item 3.
LEGAL PROCEEDINGS
The information set forth above is described in Note 21 of the Consolidated Financial Statements, included under
Item 8 of this Form 10-K.
Item 4.
MINE SAFETY DISCLOSURES
None.
28
PART II
Item 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
We have two classes of Common Stock, Class A Common Stock and Class B Common Stock, each with a par
value of $0.001 and equal liquidation rights. Our Class A Common Stock is principally traded on the New York Stock
Exchange under the symbol AIN. According to Broadridge, as of December 31, 2022, there were over 20,000
beneficial owners of our Class A Common Stock, including employees owning shares through our 401(k) defined
contribution plan. Our Class B Common Stock does not trade publicly. As of December 31, 2022, there were no
outstanding Class B shares. Dividends are paid equally on shares of each class. Our cash dividends, and the high
and low prices per share of our Class A Common Stock, were as follows for the periods presented:
Quarter Ended
March 31
June 30
September 30
December 31
Cash dividends per share
Class A Common Stock prices:
High
Low
Cash dividends per share
Class A Common Stock prices:
High
Low
2022
2021
$
$
$
$
$
$
0.21 $
0.21 $
0.21 $
0.25
91.25 $
80.84 $
87.91 $
75.94 $
97.20 $
77.50 $
104.34
81.62
0.20 $
0.20 $
0.20 $
0.21
88.01 $
92.26 $
88.88 $
69.52 $
81.80 $
75.13 $
89.92
79.31
The graph below matches the cumulative 5-Year total return of holders of Albany International Corp.’s common
stock with the cumulative total returns of the Russell 2000 index and a customized peer group of eighteen companies
included in the customized peer group which are: Barnes Group Inc, Bwx Technologies Inc, Curtiss-Wright Corp,
Enpro Industries Inc, Esco Technologies Inc, Franklin Electric Co Inc, Graco Inc, Heico Corp, Hexcel Corp, Kadant
Inc, Kaman Corp, Mercury Systems Inc, Nordson Corp, Spx Technologies Inc, Teledyne Technologies Inc, Trimas
Corp, Triumph Group Inc and Woodward Inc. The graph assumes that the value of the investment in our common
stock, in each index, and in the peer group (including reinvestment of dividends) was $100 on December 31, 2017
and tracks it through December 31, 2022.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
*$100 invested on 12/31/17 in stock or index, including reinvestment of dividends.
Copyright© 2023 Russell Investment Group. All rights reserved.
29
Among Albany International Corp., the Russell 2000 Index,and a Peer GroupAlbany International Corp.Russell 2000Peer GroupDec-17Dec-18Dec-19Dec-20Dec-21Dec-22$0$25$50$75$100$125$150$175$200 Fiscal year ending December 31.
December 31,
2017
2018
2019
2020
2021
2022
Albany International
Corp.
Russell 2000
Peer Group
100.00
100.00
100.00
102.66
88.99
91.25
126.05
111.70
124.78
123.64
134.00
133.75
150.38
153.85
158.91
169.27
122.41
150.66
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Restrictions on dividends and other distributions are described in Note 17 of the Consolidated Financial
Statements, included under Item 8 of this Form 10-K.
Disclosures of securities authorized for issuance under equity compensation plans are included under Item 12 of
this Form 10-K.
Issuer Purchases of Equity Securities during the year ended December 31, 2022
Total number of
shares
purchased
Average
price paid
per share
Total number of shares
purchased as part of publicly
announced program
Approx. dollar value of shares
that may yet be purchased
under the program (in
thousands)
Period
January 1 to
January 31, 2022
February 1 to
February 28, 2022
March 1 to March
31, 2022
April 1 to April 30,
2022
May 1 to May 31,
2022
June 1 to June 30,
2022
July 1 to July 31,
2022
August 1 to August
31, 2022
September 1 to
September 30, 2022
October 1 to
October 31, 2022
November 1 to
November 30, 2022
December 1 to
December 31, 2022
140,879 $
85.24
140,879 $
145,164
86.29
228,643
85.51
236,091
82.21
271,940
80.98
—
—
—
—
—
—
—
—
—
—
—
—
—
—
145,164
228,643
236,091
271,940
—
—
—
—
—
—
—
163,722
151,244
131,688
112,418
90,561
90,561
90,561
90,561
90,561
90,561
90,561
90,561
90,561
Total
1,022,717
1,022,717
In 2021, the Company's Board of Directors authorized the Company to repurchase shares of up to $200 million
through open market purchases, privately negotiated transactions or otherwise, and to determine the prices, times
and amounts. The program does not obligate the Company to acquire any particular amount of common stock, and it
may be suspended or terminated at any time at the Company's discretion. The share repurchase program does not
have an expiration date. The timing and amount of any share repurchases will be based on the Company’s liquidity,
general business and market conditions, debt covenant restrictions and other factors, including alternative investment
opportunities and capital structure. In total the Company has repurchased 1,308,003 shares for a total cost of
$109.4M, of which 1,022,717 shares were repurchased in 2022 for $85.1 million and 285,286 shares were
repurchased in 2021 for $24.3 million.
30
Item 6.
SELECTED FINANCIAL DATA
The following selected historical financial data have been derived from our Consolidated Financial Statements in
Item 8. The data should be read in conjunction with those financial statements and Management’s Discussion and
Analysis of Financial Condition and Results of Operations in Item 7.
(in thousands, except per share
amounts)
Summary of Operations
2022
2021
2020
2019
2018
Net sales (3) (4)
$ 1,034,887 $
929,240 $
900,610 $ 1,054,132 $
982,479
Cost of goods sold (3) (4) (5)
645,105
550,849
529,538
656,431
632,730
Restructuring and other (6)
106
1,331
5,736
2,905
15,570
Operating income/(loss) (1) (3) (5)
181,022
178,011
166,080
193,576
137,408
Interest expense, net
Income from continuing operations
Net income attributable to the Company
Earnings per share attributable to
Company Shareholders- Basic
Earnings per share attributable to
Company Shareholders- Diluted
Dividends declared per share
Weighted average number of shares
outstanding - basic
14,000
96,508
95,762
14,891
118,768
118,478
13,584
97,243
98,589
16,921
133,383
132,398
3.06
3.66
3.05
4.10
3.04
0.88
3.65
0.81
3.05
0.77
4.10
0.73
18,124
83,019
82,891
2.57
2.57
0.69
31,339
32,348
32,329
32,296
32,252
Capital expenditures, including software
96,348
53,699
42,390
67,955
82,886
Financial position
Cash
Property, plant and equipment, net (2)
(3)
Total assets (1) (2) (3) (4)
Current liabilities (2) (3)
Long-term debt (2)
$
291,776 $
302,036 $
241,316 $
195,540 $
197,755
445,658
436,417
448,554
466,462
462,055
1,642,255
1,556,064
1,549,936
1,474,368
1,417,992
211,316
208,166
190,863
202,719
189,306
439,000
350,000
398,000
424,009
523,707
Total noncurrent liabilities (2) (3)
563,396
470,293
539,208
568,960
620,406
Total liabilities (2) (3) (4)
Total equity (1) (2) (4)
774,712
678,459
730,071
771,679
809,712
867,543
877,605
819,865
702,689
608,280
(1)
(2)
(3)
(4)
In 2020, we adopted the provisions of ASC 326, Current Expected Credit Losses (CECL), using the
modified retrospective (or cumulative effect) method for transition. Under this transition method, periods prior
to 2020 were not restated and the cumulative effect of initially applying the new standard was recorded as an
adjustment to Retained earnings at January 1, 2020.
In 2019, we adopted the provisions of ASC 842, “Leases”, using the modified retrospective (or cumulative
effect) method for transition. Under this transition method, periods prior to 2019 have not been restated and
the cumulative effect of initially applying the new standard was recorded as an adjustment to Retained
earnings at January 1, 2019.
In 2019, we acquired the outstanding shares of CirComp GmbH for net cash of $36.3 million, which includes
approximately $5.5 million of deferred payments.
In 2018, we adopted the provisions of ASC 606, “Revenue from contracts with customers”, using the modified
retrospective (or cumulative effect) method for transition. Under this transition method, periods prior to 2018
have not been restated and the cumulative effect of initially applying the new standard was recorded as an
adjustment to Retained earnings at January 1, 2018.
31
(5)
In 2018, we adopted the provisions of ASU 2017-07, “Compensation – Retirement Benefits: improving the
presentation of net periodic pension cost and net periodic postretirement benefit cost”. This update resulted in
some pension costs being presented on different line items in the Consolidated Statement of Income. As
required by that update, we have reclassified pension costs for periods prior to 2018.
(6)
During the period 2018 through 2022, we recorded restructuring charges related to organizational changes
and cost reduction initiatives.
32
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“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 included under Item 8 of this Form 10-K.
The MD&A generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form
10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February
25, 2022, incorporated herein by reference.
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,
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 the 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 ("SAFRAN") and sales to SAFRAN, through ASC,
(consisting primarily of fan blades and cases for CFM’s LEAP engine) accounted for approximately 16 percent of the
Company’s consolidated Net sales in 2022. 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 CH-53K helicopter,
components for the F-35, missile bodies for Lockheed Martin’s JASSM air-to-surface missiles, fuselage components
for the Boeing 787, and vacuum waste tanks for Boeing 7-Series aircraft. AEC is actively engaged in research to
develop new applications in both commercial and defense aircraft engine and airframe markets. In 2022,
approximately 46 percent of AEC sales were related to U.S. government contracts or programs.
33
Consolidated Results of Operations
Net sales
The following table summarizes our Net sales by business segment:
Years ended December 31,
Machine Clothing
Albany Engineered Composites
Total
% change
(in thousands, except percentages)
2022
2021
2020
$ 609,461
425,426
$ 619,015
310,225
$ 572,955
327,655
$ 1,034,887
$ 929,240
$ 900,610
11.4 %
3.2 %
-14.6 %
Changes in currency translation rates had the effect of decreasing 2022 Net sales by $28.5 million (3% of
Net sales) driven by the weaker Euro, as compared to 2021.
Excluding the effect of changes in currency translation rates: consolidated Net sales increased 14.4%, Net
sales in MC increased 1.8% compared to 2021, driven by increased sales of packaging, pulp and tissue grades, and
AEC experienced significant growth during 2022, with Net sales increasing 39.6%, primarily driven by CH-53K and
LEAP programs.
Backlog
Backlog in the MC segment was $172 million at December 31, 2022 and $190 million December, 31 2021.
Backlog in the AEC segment increased to $414 million at December 31, 2022, compared to $347 million at December
31, 2021. The increase in AEC’s backlog was primarily due to increased demand on the CH-53K program. All of the
backlog in MC and approximately 65% of the AEC backlog is expected to be invoiced during the next 12 months.
Gross Profit
The following table summarizes Gross profit by business segment:
Years ended December 31,
Machine Clothing
Albany Engineered Composites
Total
% of Net Sales
(in thousands, except percentages)
2022
2021
2020
$ 312,285
$ 322,457
$ 301,144
77,497
55,934
69,928
$ 389,782
$ 378,391
$ 371,072
37.7 %
40.7 %
41.2 %
The increase in 2022 Gross profit, as compared to 2021, was principally due to increased Net sales at AEC.
Gross profit as a percentage of sales:
•
•
At MC, decreased from 52.1% in 2021 to 51.2% in 2022 in MC, due to an increase in input costs
At AEC, was largely in line with the prior year, increasing from 18.0% in 2021 to 18.2% in 2022
34
Selling, Technical, General, and Research (STG&R)
Selling, technical, general and research (STG&R) expenses include selling, general, administrative, technical,
product engineering and research expenses.
The following table summarizes STG&R by business segment:
Years ended December 31,
Machine Clothing
Albany Engineered Composites
Corporate expenses
Total
% of Net Sales
(in thousands, except percentages)
2022
2021
2020
$ 105,979
$ 105,602
$ 107,594
45,918
56,757
39,742
53,705
35,571
56,091
$ 208,654
$ 199,049
$ 199,256
20.2 %
21.4 %
22.1 %
Consolidated STG&R expenses increased 5% as compared to 2021, but represented a smaller percentage of
Net Sales.
•
•
At MC, STG&R remained largely in line with the prior year.
At AEC, Selling and general expenses increased $3.7 million related to investments in business
development activities, and Research expense increased $2.5 million related to investments in new
technologies and enhanced capabilities.
Research and Development
The following table is a subset of the STG&R table above and summarizes expenses associated with internally
funded research and development by business segment:
Years ended December 31,
Machine Clothing
Albany Engineered Composites
Total
Restructuring
(in thousands)
2022
2021
2020
$
$
16,060 $
16,710 $
15,922
15,353
12,891
9,828
31,413 $
29,601 $
25,750
In addition to the items discussed above affecting Gross profit and STG&R expenses, operating income was
affected by restructuring expense, net, which was insignificant in both the current and prior year, and was related
primarily to the winding down of restructuring actions taken in prior periods. For more information on our restructuring
charges, see Note 5 of the Consolidated Financial Statements, included under Item 8 of this Form 10-K.
Operating Income
The following table summarizes operating income/(loss) by business segment:
Years ended December 31,
Machine Clothing
Albany Engineered Composites
Corporate expenses
Total
(in thousands)
2022
2021
2020
$
206,214 $
215,654 $
31,579
(56,771)
181,022 $
16,160
(53,803)
178,011 $
$
190,805
31,536
(56,261)
166,080
35
Other Earnings Items
Years ended December 31,
Interest expense, net
Pension settlement expense
AMJP grant
Other (income)/expense, net
Income tax expense
Net income/(loss) attributable to the noncontrolling interest
Interest Expense
$
2022
(in thousands)
2021
14,000 $
49,128
—
(14,086)
35,472
746
14,891 $
—
(5,832)
3,021
47,163
290
2020
13,584
—
—
13,422
41,831
(1,346)
Interest expense, net, decreased over the prior year as a result of higher interest earned on Cash and cash
equivalents, in addition to decreased interest expense on Finance leases during the fourth quarter. See the Working
Capital, Liquidity and Capital Structure section for further discussion of borrowings and interest rates.
Pension settlement expense
In the third quarter of 2022, the Company took actions to settle certain pension plan liabilities in the U.S., leading
to charges totaling $49.1 million. No similar charges were incurred in the prior year. See Note 4 to the Consolidated
Financial Statements for additional information.
AMJP grant
During the third quarter of 2021, the Company was awarded an Aviation Manufacturing Jobs Protection Program
("AMJP") grant of $5.8 million, under the American Rescue Plan of the U.S. Department of Transportation. No such
award was granted during 2022. See Note 1 to the Consolidated Financial Statements for additional information.
Other (income)/expense, net
In 2022, Other (income)/expense, net included gains related to the revaluation of nonfunctional-currency
balances of $10.0 million, as compared to a gain of $1.2 million during 2021, principally resulting from a weaker Euro
throughout the course of 2022. Also in 2022, the Company recorded a gain of $3.4 million on the sale of IP addresses
that the Company had no future critical need to retain. There were no similar gains of this nature in the previous two
years.
36
Income Taxes
Significant items that impacted the effective tax rate in the years 2022, 2021 and 2020, included the following
(percentages reflect the effect of each item as a percentage of income before income taxes):
(in thousands, except percentages)
Tax Amount
%
Tax Amount
%
Tax Amount
%
2022
Year Ended December 31,
2021
2020
Continuing Operations (Excluding Discrete Items)
$
40,497
30.7% $
50,045
30.2% $
39,544
28.4%
Changes in uncertain tax positions
Impact of amended tax returns
(780)
(98)
(0.6)
(0.1)
232
(2,098)
0.1
(1.2)
252
500
0.2
0.3
Tax effect of non-deductible foreign exchange loss on
intercompany loan
Changes in opening valuation allowance
Provision for/adjustment to beginning of year valuation
allowances
True-up of prior year estimated taxes
Enacted tax legislation and rate change
US Pension Plan and interest rate swap settlements -
Release of Residual Tax Effect
Foreign withholding on incremental earnings
repatriation
Impact of non-election of high tax exclusion under
GILTI *
Other tax adjustments
—
—
—
—
—
—
—
—
3,801
2.7
—
—
(802)
(0.6)
957
0.6
168
0.1
(1,436)
(587)
(1.1)
(0.4)
(4,926)
(3.8)
1,518
1,723
363
1.2
1.3
0.3
(1,584)
(1.0)
(2,420)
(1.8)
352
0.2
—
—
—
—
—
—
(741)
(0.5)
—
—
—
—
—
—
—
(14)
—
0.2
Effective Tax Rate
$
35,472
26.9% $
47,163
28.4% $
41,831
30.1%
* Global Intangible Low-Taxed Income
Our tax planning initiatives included repatriating additional earnings to the U.S. and managing overall cash taxes in
the short term. Such initiatives resulted in discrete adjustments that increased our 2022 effective tax rate, partially
offset by true ups of prior year estimated taxes and the release of residual tax effects due to termination of our U.S.
Pension Plan and settlements of interest rate swaps.
For more information on income tax, see Note 7 to the Consolidated Statements in item 8.
Segment Results of Operations
Machine Clothing Segment
Machine Clothing is our primary business segment and accounted for 59 percent of our consolidated revenues
during 2022. MC products are purchased primarily by manufacturers of paper and paperboard. We believe 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
37
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.
Review of Operations
Years ended December 31,
Net sales
% change from prior year
Gross profit
% of net sales
STG&R expenses
Operating income
(in thousands, except percentages)
2021
$ 619,015
2020
$ 572,955
2022
$ 609,461
-1.5 %
8.0 %
-4.7 %
312,285
322,457
301,144
51.2 %
52.1 %
52.6 %
105,979
206,214
105,602
215,654
107,594
190,805
Net Sales
Net sales decreased 1.5%. Changes in currency translation rates, driven by a weaker Euro, had the effect of
decreasing 2022 sales by $20.8 million compared to 2021. Excluding the effect of changes in currency translation
rates, Net sales in MC increased 1.8% compared to 2021, driven by growth in sales of packaging, pulp and tissue
grades.
Gross Profit
The decrease in MC Gross profit was primarily driven by changes in currency translation rates, principally the
weaker Euro, as well as increases in input costs, causing a decrease in Gross margin from 52.1% in 2021 to 51.2%
in 2022.
Operating Income
The decrease in Operating income was principally due to the decrease in Gross profit. STG&R expenses
remained largely in line with the prior year.
Albany Engineered Composites Segment
The Albany Engineered Composites (“AEC”) segment, provides highly engineered, advanced composite
structures to customers in the commercial and defense aerospace industries. The segment includes Albany Safran
Composites, LLC (“ASC”), in which our customer, SAFRAN Group, owns a 10 percent noncontrolling interest, AEC,
through ASC, is the exclusive supplier to the LEAP program of advanced composite fan blades and fan cases under a
long-term supply contract. The LEAP engine is used on the Airbus A320neo, Boeing 737 MAX, and COMAC 919
aircraft. AEC’s largest aerospace customer is SAFRAN and sales to SAFRAN (consisting primarily of fan blades and
cases for CFM’s LEAP engine) accounted for approximately 16 percent of the Company’s consolidated Net sales in
2022. Other significant programs by AEC include the Sikorsky CH-53K, F-35, JASSM, and Boeing 787 programs.
AEC also supplies vacuum waste tanks for the Boeing 7-Series programs, and specialty components for the Rolls
Royce lift fan on the F-35, as well as the fan case for the GE9X engine. In 2022, approximately 46 percent of AEC
sales were related to U.S. government contracts or programs.
Review of Operations
Years ended December 31,
Net sales
% change from prior year
Gross profit
% of net sales
STG&R expenses
Operating income/(loss)
38
(in thousands, except percentages)
2022
425,426
2021
310,225
$
$
2020
327,655
$
37.1 %
77,497
18.2 %
45,918
31,579
-5.3 %
55,934
18.0 %
39,742
16,160
-27.7 %
69,928
21.3 %
35,571
31,536
Net Sales
AEC experienced significant growth during 2022, with Net sales increasing approximately $115 million,
primarily due to CH-53K and LEAP programs. Excluding the effect of changes in currency translation rates, the
increase in Net sales was 39.6%.
AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is
determined by a cost-plus-fee agreement. Revenue earned under these arrangements accounted for approximately
40 percent of segment revenue for 2022 and 2021. LEAP engines are currently used on the Airbus A320neo, Boeing
737 MAX, and COMAC 919 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.
Gross Profit
The increase in Gross profit was primarily due to increased Net Sales due to growth on CH-53K and LEAP
programs. Gross margin remained largely in line with the prior year.
Operating Income/(Loss)
Operating income nearly doubled year over year, increasing $15.4 million in 2022, principally due to an increase
in Gross profit, as described above, partially offset by an increase in Selling and general expenses of $3.7 million
related to investments in business development activities, and an increase in Research expense of $2.5 million
related to investments in new technologies and enhanced capabilities.
Working Capital, Liquidity and Capital Structure
Working Capital
Payment terms granted to paper industry and other machine clothing customers reflect general competitive
practices. Terms vary with product, competitive conditions, and the country of operation. In some markets, customer
agreements require us to maintain significant amounts of finished goods inventory to assure continuous availability of
our products.
In addition to supplying paper, paperboard, and tissue companies, the MC segment is a leading supplier to the
nonwovens (which includes the manufacture of products such as diapers, personal care, and household wipes),
building products, and tannery and textile industries. These non-paper industries have a wide range of customers,
with markets that vary from industrial applications to consumer use products. The AEC segment primarily serves
customers in the commercial and defense aerospace market through both engine and airframe applications. AEC's
working capital levels rose sharply in the last few years in line with the segment's growth.
In the MC segment, the Chinese New Year, summer months, and the end of the year are often periods of lower
production for some of our customers, which, in the past contributed to seasonal variation in sales and orders. In
recent years, shorter order cycles and lower inventory levels throughout the supply chain have become a more
significant factor in quarterly sales. The impact of these combined factors on any quarter can be difficult to predict,
and can make quarterly comparisons less meaningful than annual comparisons. While seasonality is generally not a
significant factor in the Albany Engineered Composites segment, the commercial terms of the supply agreement
governing the LEAP program resulted in fourth quarter sales volatility in recent years.
39
Cash Flow Summary
For the years ended December 31,
Net income
Depreciation and amortization
Changes in working capital(a)
Changes in long-term liabilities, deferred taxes and other credits
Non-cash portion of pension settlement expense
Other operating items
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash flows
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
$
(in thousands)
2022
2021
2020
96,508 $
69,049
(63,478)
(18,629)
42,657
2,107
128,214
(96,348)
(23,652)
(18,474)
(10,260)
118,768 $
74,255
16,488
(1,532)
—
9,496
217,475
(53,699)
(99,635)
(3,421)
60,720
302,036
241,316
97,243
72,705
(60,727)
8,664
411
21,957
140,253
(42,390)
(60,669)
8,582
45,776
195,540
Cash and cash equivalents at end of year
$
291,776 $
302,036 $
241,316
_________________________
(a)
Includes Accounts receivable, Contract assets, Inventories, Accounts payable and Accrued liabilities.
Net cash provided by operating activities was $128.2 million in 2022, compared to $217.5 million in the same
period last year. The decrease in net cash provided by operating activities was driven primarily by the following. AEC
generated working capital cash inflows in Accounts receivable and Contract assets during 2021 (due to significant
deliveries of LEAP components throughout the year), while during 2022, AEC invested in working capital as it
prepared to execute on its expanded CH-53K scope of work. The Company made contributions of approximately
$12.6 million to the U.S. pension plan during 2022, in connection with the termination of such plan (see discussion in
Note 4 to the Consolidated Financial Statements). In addition, the timing of customer and vendor invoice payments,
as well as higher incentive compensation payouts during 2022 compared to the same period in 2021, contributed to
reduced net cash provided by operating activities.
We strategically deploy our cash with a focus on investing in our business and new technologies to provide our
customers with enhanced capabilities, increase shareholder value, and position ourselves to take advantage of new
business opportunities as they arise. Based on such strategy, we have continued to invest in our business and
technologies through capital expenditures, research and development, and when appropriate, selective business
acquisitions. Our capital expenditures totaled $96.3 million and $53.7 million for 2022 and 2021, respectively,
comprised of both sustaining and return seeking projects. In the recent past, a portion of our capital expenditures
consisted of investments to improve operational productivity, in addition to producing a meaningful impact on energy
and resource efficiency.
Net cash used in financing activities during 2022 was $23.7 million compared to $99.6 million in 2021, driven by
increased borrowings during the current year that were partially used to fund repurchases of shares.
Liquidity and Capital Structure
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.
Under our $700 million unsecured credit agreement, $439 million of borrowings were outstanding as of December
31, 2022. We believe cash flows from operations and availability under our Credit Agreement will be adequate to
cover our operations and business needs over the next twelve months. As of December 31, 2022, we had cash and
cash equivalents of $292 million and availability under our Credit Agreement of $261 million, for a total liquidity of
approximately $553 million. For more information on the revolving credit agreement, see Note 13 to the Consolidated
Financial Statements.
As of December 31, 2022, $273.2 million of our total cash and cash equivalents was held by non-U.S.
subsidiaries. The accumulated undistributed earnings of the Company’s foreign operations not targeted for
40
repatriation to the U.S. were in excess of $201 million at December 31, 2022, and are intended to remain indefinitely
invested in foreign operations. Our cash planning strategy includes repatriating current earnings in excess of working
capital requirements from certain countries in which our subsidiaries operate. While we have been successful in such
endeavor to date, there can be no assurance that we will be able to cost effectively repatriate funds in the future.
Repatriating such cash from certain jurisdictions may also result in additional withholding taxes.
We have also returned cash to shareholders through dividends and share repurchases. During 2022, we paid
$26.5 million in dividends and repurchased 1 million shares of our Class A Common shares at a cost of $85 million
under the $200 million share repurchase program that our Board approved in October 2021.
At December 31, 2022, we had no off-balance sheet arrangements. We have contractual commitments to repay
debt, make payments under leases, contribute to our pension and postretirement plans, and settle obligations related
to agreements to purchase goods and services, income taxes, compensation plans, and as applicable, interest rate
swaps. We estimate these contractual commitments amount to approximately $588 million as of December 31, 2022,
of which we expect to pay $44 million within the next year. Such commitments are not representative of all our future
cash requirements, which will vary based on future needs.
Critical Accounting Policies and Estimates
For the discussion of our accounting policies, see Note 1 to the Consolidated Financial Statements. The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make assumptions and estimates that directly affect the amounts reported in the
Consolidated Financial Statements. Each of these assumptions is subject to uncertainties and changes in those
assumptions or judgments which can affect our results of operations. In addition to the accounting policies stated in
Item 8, financial statement amounts and disclosures are significantly influenced by market factors, judgments and
estimates as described below.
Revenue Recognition
Contracts with customers in the Machine Clothing segment have various terms that can affect the point in time
when revenue is recognized. The contractual terms are closely monitored in order to ensure revenue is recognized in
the proper period.
Products and services provided under long-term contracts represent a significant portion of sales in the Albany
Engineered Composites segment. AEC’s largest source of revenue is derived from the LEAP contract under a cost-
plus-fee agreement. The fee is variable based on our success in achieving certain cost targets. Revenue is
recognized over time as costs are incurred. Under this contract, there is significant judgment involved in determining
applicable contract costs and the amount of revenue to be recognized.
We also have fixed price long-term contracts, for which we use the percentage of completion (incurred cost to
total 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.
AEC has long-term aerospace contracts under which there are two phases: a phase during which the production
part is designed and tested, and a phase of supplying production parts. During the design and testing phases, we
perform pre-production or nonrecurring engineering services, which are normally considered a fulfillment activity,
rather than a performance obligation. Fulfillment activities that create resources that will be used in satisfying
performance obligations in the future, and are expected to be recovered, are capitalized in Other assets. The
capitalized costs are amortized into Cost of goods sold over the period which the asset is expected to contribute to
future cash flows, including anticipated renewal periods. Accumulated capitalized costs are written-off when those
costs are determined to be unrecoverable.
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 loss provisions include contract
options that are probable of exercise, excluding any profitable options that might be expected to follow. Contract
losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or
administrative costs, which are treated as period expenses. We are required to limit our estimate of contract values to
the period of the legally enforceable contract. While certain contracts are expected to be profitable over the course of
the program life when including expected renewals, our estimate of contract revenues and costs is limited to the
estimated value of enforceable rights and obligations, excluding anticipated renewals. In some cases, the contract
period may result in a loss contract provision at the inception of the contract.
41
Pension and Postretirement Liabilities
We sponsor several pension and postretirement benefit plans. Our liabilities under these defined benefit plans
are determined using methodologies that involve several actuarial assumptions, the most significant of which are the
discount rate, health care cost inflation rate and the long-term rate of return on plan assets. We review our actuarial
assumptions on an annual basis and make modifications to the assumptions when appropriate.
Discount Rate Selection
We select a discount rate for purposes of measuring obligations under defined benefit plans by matching cash
flows separately for each plan to the yields on high-quality zero coupon bonds. We use the RATE: Link 60-90 model
(the "RATE Link"). We believe the projected cash flows used to determine RATE Link provide a good approximation of
the timing and amounts of our defined benefit payments under our plans and no adjustments to RATE Link has been
made.
Measurement of our postretirement benefit obligations requires the use of several assumptions about factors
that will affect the amount and timing of future benefit payments. The assumed health care cost trend rates are the
most critical estimates for measurement of the postretirement benefit obligation. Changes in the health care cost trend
rates have a significant effect on the amounts reported for the health care benefit obligation.
Long-term Rate of Return on Plan Assets Assumption
Our expected long-term rate of return on plan assets is derived from our asset allocation strategies and
anticipated future long-term performance of individual asset classes. Our analysis gives consideration to recent plan
performance and historical returns; however, the assumptions are primarily based on long-term, prospective rates of
return. The weighted average long-term rate of return on plan assets for our defined benefit pension plans is 3.2% for
2022.
Based on information provided by actuaries and other relevant sources, the Company believes that the
assumptions used to estimate expenses, assets and liabilities of pensions and postretirement benefits are
reasonable; however, changes in these assumptions could impact the Company’s financial position, results of
operations or cash flows.
Income Taxes
We regularly assess the likelihood that deferred tax assets are expected to be realized through the reversal of
existing temporary differences and/or future taxable income. To the extent we believe that it is more likely than not
that a deferred tax asset will not be realized, a valuation allowance is established. The amount of a valuation
allowance is based upon our best estimate of our ability to realize the deferred tax assets.
Goodwill and Intangible assets
Goodwill is not amortized, but is tested for impairment at least annually. Estimating the fair value of reporting
units requires the use of estimates and significant judgments, including but not limited to revenue growth rates,
operating margins, discount rates, and future market conditions. It is possible that these judgments and estimates
could change in future periods.
The determination of the fair value of intangible assets acquired in a business acquisition is subject to many
estimates and assumptions. Among such estimates and assumptions are royalties, discount rate and useful life. We
review amortizable intangible asset groups for impairment whenever events and changes in circumstances indicate
that the related carrying amounts may not be recoverable.
Recent Pronouncements
In March 2022, the SEC issued a proposed rule to enhance and standardize disclosures regarding cybersecurity
risk management, strategy, governance, and incident reporting by public companies. The proposed rules are
intended to provide more consistent, comparable and decision-useful information so that investors can better evaluate
the Company’s exposure to cybersecurity risks, incidents, and strategies to mitigate risks and incidents. We will
continue to monitor developments around this proposed rule.
Also in March 2022, the SEC issued a proposed rule that would enhance and standardize the climate-related
disclosures provided by public companies. Under the proposed rule, we would be required to provide quantitative and
qualitative disclosures in registration statements and annual reports that include climate-related financial impact and
expenditure metrics as well as a discussion of climate-related impacts on financial estimates and assumptions, all of
42
which would be presented in a footnote to the financial statements. Such disclosures would also be subject to
management's internal control over financial reporting ("ICFR") and external audit. As a Company, we have long been
committed to sustainable practices and corporate social responsibility and have more recently taken steps to
articulate our values and goals, some of which are summarized in our published sustainability report that is included
at our website www.albint.com. In 2020, we began establishing more formalized and scalable approaches to our
sustainability practices, reporting and systems, in order to ensure we prioritize efforts that are impactful to our
business and stakeholders. We have begun to incorporate certain climate-related disclosures and risk factors in our
existing disclosures to this point. We will continue to monitor developments around this proposed rule, which once
finalized, is expected to allow for a multi-year phased transition to achieving compliance.
In October 2022, the SEC adopted final rules regarding the recovery of erroneously awarded incentive-based
executive compensation. The rules direct US securities exchanges to establish standards to require listed
issuers to develop and implement a written policy providing for the recovery of incentive-based compensation
received by current and former executive officers in the event of a required accounting restatement when that
compensation was based on an erroneously reported financial reporting measure. The new rule and related
amendments include a number of new disclosure requirements, including requiring issuers to file their recovery policy
as an exhibit to their annual reports and establishing new cover page disclosures on Forms 10-K indicating whether
the financial statements included in the filing reflect the correction of an error and whether the error correction
required an incentive-based compensation recovery analysis. The exchanges must file proposed listing standards to
implement the SEC’s directive no later than February 26, 2023 (which is 90 days after the final rules were published in
the Federal Register), and those listing standards must be effective no later than November 28, 2023. We will be
required to adopt a recovery policy no later than 60 days after the listing standards become effective.
In November 2022, the Federal Acquisition Regulatory Council proposed new rules that would require many
federal contractors to provide certain climate-related disclosures. The proposed rule has a stated intent of prompting
suppliers to take action on measuring and managing greenhouse gas (GHG) emissions reductions via public
transparency. The proposal would require “major” federal contractors, as defined, to provide public disclosure of:
• scope 1, scope 2, and relevant scope 3 GHG emissions;
• climate-related financial risk factors based on the Task Force on Climate-Related Financial Disclosures (TCFD)
framework; and
• GHG reduction targets established in line with the Science Based Targets initiative (SBTi). Major contractors
without existing targets would be required to establish them.
Smaller contractors, defined as “significant,” would be required to provide disclosure of scope 1 and scope 2
GHG emissions. “Major” contractors are those receiving more than $50 million in federal contracts, while
“significant” contractors are those receiving from $7.5 to $50 million in federal contracts. These thresholds are
based on the size of contracts awarded and not on related revenue in any given year. There are also limited
exceptions. Based on our business with the federal government, we are highly likely to be considered a "significant" or
"major" federal contractor in a given year and would be subject to the requirements in this proposal, if passed. We will
continue to monitor developments around this proposed rule, which if finalized, is expected to allow for a multi-year
phased transition to achieving compliance.
Non-GAAP Measures
This Form 10-K contains certain non-GAAP measures that should not be considered in isolation or as a substitute
for the related GAAP measures. Such non-GAAP measures include net sales and percent change in net sales,
excluding the impact of currency translation effects; EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin; Net
debt; Net leverage ratio; and Adjusted earnings per share (or Adjusted EPS). Management believes that these non-
GAAP measures provide additional useful information to investors regarding the Company’s operational performance.
Presenting Net sales and change in Net sales, after currency effects are excluded, provides management and
investors insight into underlying sales trends. 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.
EBITDA (calculated as net income excluding interest, income taxes, depreciation and amortization), Adjusted
EBITDA, and Adjusted EPS are performance measures that relate to the Company’s continuing operations. The
Company defines Adjusted EBITDA as EBITDA excluding costs or benefits that are not reflective of the Company’s
ongoing or expected future operational performance. Such excluded costs or benefits do not consist of normal,
43
recurring cash items necessary to generate revenues or operate our business. Adjusted EBITDA margin represents
Adjusted EBITDA expressed as a percentage of net sales.
The Company defines Adjusted EPS as basic earnings per share (GAAP), adjusted by the after tax per share
amount of costs or benefits not reflective of the Company’s ongoing or expected future operational performance. The
income tax effects are calculated using the applicable statutory income tax rate of the jurisdictions where such costs
or benefits were incurred or the effective tax rate applicable to total company results.
The Company’s Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted EPS may not be comparable to
similarly titled measures of other companies.
Net debt aids investors in understanding the Company’s debt position if all available cash were applied to pay
down indebtedness.
Net leverage ratio informs the investors of the Company's financial leverage at the end of the reporting period,
providing an indicator of the Company's ability to repay its debt.
We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to
rely on any single financial measure.
The following tables show the calculation of EBITDA and Adjusted EBITDA:
Consolidated results
Years ended December 31,
Net income (GAAP)
Interest expense, net
Income tax expense
Depreciation and amortization expense
EBITDA (non-GAAP)
Restructuring expenses, net
Foreign currency revaluation (gains)/losses
Dissolution of business relationships in Russia
Pension settlement expense
IP address sales
Aviation Manufacturing Jobs Protection (AMJP) grant
Former CEO termination costs
Acquisition/integration costs
$
(in thousands)
2022
96,508 $
14,000
35,472
69,049
215,029
106
(9,829)
2,275
49,128
(3,420)
—
—
1,057
2021
118,768 $
14,891
47,163
74,255
255,077
1,331
(1,442)
—
—
—
(4,731)
—
1,166
Pre-tax (income)/loss attributable to noncontrolling interest
Adjusted EBITDA (non-GAAP)
(817)
(510)
$
253,529 $
250,891 $
2020
97,243
13,584
41,831
72,705
225,363
5,736
15,444
—
—
—
—
2,742
1,272
1,348
251,905
44
Year ended December 31, 2022
Net income/(loss) (GAAP)
Interest expense, net
Income tax expense
Depreciation and amortization expense
EBITDA (non-GAAP)
Restructuring expenses, net
Foreign currency revaluation (gains)/losses (a)
Dissolution of business relationships in Russia
Pension settlement expense
IP address sales
Acquisition/integration costs
Pre-tax (income) attributable to noncontrolling interest
Adjusted EBITDA (non-GAAP)
Year ended December 31, 2021
Net income/(loss) (GAAP)
Interest expense, net
Income tax expense
Depreciation and amortization expense
EBITDA (non-GAAP)
Restructuring expenses, net
(in thousands)
Machine
Clothing
Albany
Engineered
Composites
Corporate
expenses and
other
Total Company
206,214
—
—
19,483
225,697
92
(520)
1,494
—
—
—
—
$
226,763 $
31,579
—
—
46,202
77,781
—
672
—
—
—
1,057
(817)
78,693 $
(141,285)
14,000
35,472
3,364
(88,449)
14
(9,981)
781
49,128
(3,420)
—
—
(51,927) $
(in thousands)
96,508
14,000
35,472
69,049
215,029
106
(9,829)
2,275
49,128
(3,420)
1,057
(817)
253,529
Machine
Clothing
Albany
Engineered
Composites
Corporate
expenses and
other
Total Company
$
215,654 $
16,160 $
(113,046) $
118,768
—
—
20,191
235,845
1,202
—
—
50,402
66,562
32
50
1,101
1,166
(510)
14,891
47,163
3,662
(47,330)
97
(1,185)
(5,832)
—
—
14,891
47,163
74,255
255,077
1,331
(1,442)
(4,731)
1,166
(510)
Foreign currency revaluation (gains)/losses (a)
(307)
AMJP grant
Acquisition/integration costs
Pre-tax (income) attributable to noncontrolling interest
—
—
—
Adjusted EBITDA (non-GAAP)
$
236,740 $
68,401 $
(54,250) $
250,891
Year ended December 31, 2020
Net income/(loss) (GAAP)
Interest expense, net
Income tax expense
Depreciation and amortization expense
EBITDA (non-GAAP)
Restructuring expenses, net
Foreign currency revaluation (gains)/losses (a)
Former CEO termination costs
Acquisition/integration costs
Pre-tax loss attributable to noncontrolling interest
(in thousands)
$
Machine
Clothing
Albany
Engineered
Composites
Corporate
expenses and
other
Total Company
190,805 $
—
—
20,304
211,109
2,746
1,743
—
—
—
31,536 $
—
—
48,496
80,032
2,821
130
(125,098) $
13,584
41,831
3,905
(65,778)
169
13,571
—
1,272
1,348
2,742
—
—
97,243
13,584
41,831
72,705
225,363
5,736
15,444
2,742
1,272
1,348
Adjusted EBITDA (non-GAAP)
$
215,598 $
85,603 $
(49,296) $
251,905
45
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 earnings and are financial performance metrics
commonly used by investors. The Company calculates the 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:
Year ended December 31, 2022
Restructuring expenses, net
Foreign currency revaluation (gains)/losses (a)
Dissolution of business relationships in Russia
Pension settlement expense
Tax impact of stranded OCI benefit from Tax Cuts and
Job Act (TCJA) for pension liability
IP address sales
Acquisition/integration costs
Year ended December 31, 2021
Restructuring expenses, net
Foreign currency revaluation (gains)/losses (a)
AMJP grant
Acquisition/integration costs
Year ended December 31, 2020
Restructuring expenses, net
Foreign currency revaluation (gains)/losses (a) (c)
Former CEO termination costs
Acquisition/integration costs
(in thousands, except per share amounts)
Pre tax
Amounts
Tax
Effect
After tax
Effect
Per Share
Effect
$
106 $
34 $
72 $
(9,829)
(2,582)
(7,247)
2,275
49,128
305
11,947
1,970
37,181
—
(3,420)
1,057
5,217
(872)
316
(5,217)
(2,548)
741
(in thousands, except per share amounts)
0.01
(0.23)
0.06
1.20
(0.17)
(0.08)
0.04
Pre tax
Amounts
Tax
Effect
After tax
Effect
Per Share
Effect
$
1,331 $
(1,442)
(4,731)
1,166
399 $
(323)
(1,404)
349
932 $
(1,119)
(3,327)
817
0.02
(0.04)
(0.11)
0.04
(in thousands, except per share amounts)
Pre tax
Amounts
Tax
Effect
After tax
Effect
Per Share
Effect
$
5,736 $
15,444
2,742
1,272
1,862 $
896
713
380
3,874 $
14,548
2,029
892
0.11
0.46
0.06
0.04
46
The following table contains the calculation of full-year Adjusted EPS, excluding adjustments:
Years ended December 31,
Earnings per share (GAAP)
Adjustments, after tax (c):
Restructuring expenses, net
Foreign currency revaluation (gains)/losses (a)
Dissolution of business relationships in Russia
Pension settlement expense
IP address sales
Tax impact of stranded OCI benefit from TCJA for pension liability (b)
AMJP grant
Former CEO termination costs
Acquisition/integration costs
Adjusted earnings per share (non-GAAP)
Per share amounts (Basic)
2022
2021
2020
$
3.06 $
3.66 $
3.05
0.01
(0.23)
0.06
1.20
(0.08)
(0.17)
—
—
0.04
3.89 $
0.02
(0.04)
—
—
—
—
(0.11)
—
0.04
3.57 $
0.11
0.46
—
—
—
—
—
0.06
0.04
3.72
$
(a) Foreign currency revaluation (gains)/losses represent unrealized gains and losses arising from the remeasurement of
monetary assets and liabilities denominated in non-functional currencies on the balance sheet date.
(b) Our Adjusted EPS excluded the benefit from the reclassification of stranded income tax effects caused by the TCJA
associated with the US pension plan liability that was eliminated in September 2022, a one-time event that would not recur in the
future. Such stranded income tax effect represented a one-time benefit that distorted the effective tax rate for the quarter and year-
to-date ended September 30, 2022 , and would not be indicative of ongoing or expected future income tax rate at the Company.
Management believes excluding pension settlement expense and its income tax impact, including the stranded income tax effects,
from its Adjusted EBITDA and Adjusted EPS for the quarter and year-to-date ended September 30, 2022 would provide investors a
transparent view and enhanced ability to better assess the Company’s ongoing operational and financial performance.
(c) In 2020, the company recorded losses of approximately $14 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.
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:
As of December 31,
Current maturities of long-term debt
Long-term debt
Total debt
Cash and cash equivalents
Net debt
(in thousands)
2022
2021
2020
$
$
— $
— $
439,000
439,000
291,776
147,224 $
350,000
350,000
302,036
47,964 $
9
398,000
398,009
241,316
156,693
47
Net leverage ratio informs the investors of the Company's financial leverage at the end of the reporting period,
providing an indicator of the Company's ability to repay its debt. The Company calculates net leverage ratio by
subtracting cash and cash equivalents from total debt, and then dividing by trailing twelve months Adjusted EBITDA.
The calculation of net leverage ratio is as follows:
Total Company
(in thousands)
Net income/(loss) (GAAP)
Interest expense, net
Income tax expense
Depreciation and amortization expense
EBITDA (non-GAAP)
Restructuring expenses, net
Foreign currency revaluation (gains)/losses (a)
Dissolution of business relationships in Russia
Pension settlement expense
IP address sales
Acquisition/integration costs
Pre-tax (income) attributable to noncontrolling interest
Year ended
December 31, 2022
96,508
14,000
35,472
69,049
215,029
106
(9,829)
2,275
49,128
(3,420)
1,057
(817)
Adjusted EBITDA (non-GAAP)
$
253,529
(in thousands, except for net leverage ratio)
December 31, 2022
Net debt (non-GAAP)
Adjusted EBITDA (non-GAAP)
Net leverage ratio (non-GAAP)
$
147,224
253,529
0.58
48
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have market risk with respect to foreign currency exchange rates and interest rates. The market risk is the
potential loss arising from adverse changes in these rates as discussed below.
Foreign Currency Exchange Rate Risk
We have manufacturing plants and sales transactions worldwide and therefore are subject to foreign currency
risk. This risk is composed of both potential losses from the translation of foreign currency financial statements and
the remeasurement of foreign currency transactions. To manage this risk, we periodically enter into forward exchange
contracts either to hedge the net assets of a foreign investment or to provide an economic hedge against future cash
flows. The total net assets of non-U.S. operations and long-term intercompany loans denominated in nonfunctional
currencies subject to potential loss amount to approximately $683.3 million. The potential loss in fair value resulting
from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates amounts to $68.3 million.
Furthermore, related to foreign currency transactions, we have exposure to various nonfunctional currency balances
totaling $194.1 million. This amount includes, on an absolute basis, exposures to assets and liabilities held in
currencies other than our local entity’s functional currency. On a net basis, we had $161.2 million of foreign currency
assets as of December 31, 2022. As currency rates change, these nonfunctional currency balances are revalued, and
the corresponding adjustment is recorded in the income statement. A hypothetical change of 10 percent in currency
rates could result in an adjustment to the income statement of approximately $16.1 million. Actual results may differ.
Interest Rate Risk
We are exposed to interest rate fluctuations with respect to our variable rate debt, depending on general
economic conditions.
On December 31, 2022, we had the following variable rate debt:
(in thousands, except interest rates)
Long-term debt
Credit agreement with borrowings outstanding, net of fixed rate portion, at an end of
period interest rate of 5.88% in 2022, due in 2024
Total
$89,000
$89,000
Assuming borrowings were outstanding for an entire year, an increase of one percentage point in weighted
average interest rates would increase interest expense by $0.9 million. To manage interest rate risk, we may
periodically enter into interest rate swap agreements to effectively fix the interest rates on variable rate debt to a
specific rate for a period of time. (See Note 18 of the Consolidated Financial Statements, included under Item 8 of this
Form 10-K).
49
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income for the years ended December 31, 2022, 2021, and 2020
51
54
Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021, and 2020
55
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020
Notes to Consolidated Financial Statements
56
57
58
50
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Albany International Corp.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Albany International Corp. and subsidiaries (the
Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive
income, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related
notes and financial statement Schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission, and our report dated February 24, 2023 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Evaluation of estimated total contract costs at completion for Albany Engineered Composites revenue
recognition for certain firm-fixed-price contracts
As discussed in Note 2 to the consolidated financial statements, a portion of the Albany Engineered
Composites (AEC) segment revenue is earned under short duration, firm-fixed-price orders that are placed under
definitive agreements, with revenue recognized over time as costs are incurred. Under the cost-to-cost measure
of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to
the total estimated costs at completion of the performance obligation. Revenue is recorded proportionally as
costs are incurred.
51
We identified the evaluation of estimated total contract costs at completion for AEC revenue recognition for
certain firm-fixed-price contracts as a critical audit matter. A high degree of auditor judgment was required to
evaluate the estimates of total contract costs at completion because of the varied nature and inherent
complexities of the contractual performance obligations.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls over the AEC revenue process. This
included controls related to developing forecasted estimated total contract costs. For certain contracts, we
compared the Company’s historical estimates of costs to actual costs incurred to assess the Company’s ability to
estimate accurately. We read relevant agreements, including amendments, and inquired of financial and
operational personnel of the Company to identify factors that should be considered within the cost to complete
estimates. We inspected the Company’s analysis of contract status, including forecasted costs, which we
compared against historical costs.
We have served as the Company’s auditor since 2014.
/s/ KPMG LLP
Albany, New York
February 24, 2023
52
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Albany International Corp.:
Opinion on Internal Control Over Financial Reporting
We have audited Albany International Corp. and subsidiaries' (the Company) internal control over financial reporting
as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related
consolidated statements of income, comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2022, and the related notes and financial statement Schedule II - Valuation and
Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 24, 2023
expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management's Report on Internal Control over Financial Reporting (Item 9A). Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ KPMG LLP
Albany, New York
February 24, 2023
53
Albany International Corp.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
(in thousands, except per share amounts)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Technical and research expenses
Restructuring expenses, net
Operating income
Interest income
Interest expense
Pension settlement expense
Aviation Manufacturing Jobs Protection (AMJP) grant
Other expense/(income), net
Income before income taxes
Income tax expense
Net income
Net income/(loss) attributable to the noncontrolling interest
Net income attributable to the Company
Earnings per share attributable to Company shareholders — Basic
Earnings per share attributable to Company shareholders — Diluted
Dividends declared per share, Class A and Class B
2022
2021
2020
$ 1,034,887 $
645,105
389,782
929,240 $
550,849
378,391
168,713
39,941
106
181,022
(3,835)
17,835
49,128
—
(14,086)
131,980
35,472
96,508
746
160,127
38,922
1,331
178,011
(2,500)
17,391
—
(5,832)
3,021
165,931
47,163
118,768
290
900,610
529,538
371,072
163,909
35,347
5,736
166,080
(2,748)
16,332
—
—
13,422
139,074
41,831
97,243
(1,346)
$
$
$
$
95,762 $
118,478 $
98,589
3.06 $
3.04 $
3.66 $
3.65 $
3.05
3.05
0.88 $
0.81 $
0.77
The accompanying notes are an integral part of the consolidated financial statements.
54
Albany International Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31,
(in thousands)
Net income
Other comprehensive income, before tax:
Foreign currency translation and other adjustments
Reclassification of loss on pension settlement
Pension/postretirement plan remeasurement
Amortization of pension and postretirement liability adjustments:
Prior service credit
Net actuarial loss
Payments and amortization related to interest rate swaps included
in earnings
Derivative valuation adjustment
Income taxes related to items of other comprehensive income:
Reclassification of loss on pension settlement
Pension/postretirement plan remeasurement
Amortization of pension and postretirement liability adjustments
Payments and amortization related to interest rate swaps included
in earnings
Derivative valuation adjustment
Comprehensive income
2022
2021
2020
$
96,508 $
118,768 $
97,243
(40,971)
(20,808)
42,657
(2,292)
—
(2,259)
38,927
411
13,407
(4,497)
(4,475)
3,260
4,625
(4,474)
5,004
468
25,396
(16,459)
(370)
408
6,852
3,764
—
1,463
(52)
(118)
(1,734)
(6,425)
(952)
3,982
(12,622)
(128)
(3,017)
(148)
(1,028)
3,259
97,565
105,192
140,816
Comprehensive income/(loss) attributable to the noncontrolling interest
856
(161)
(207)
Comprehensive income attributable to the Company
$
96,709 $
105,353 $
141,023
The accompanying notes are an integral part of the consolidated financial statements.
55
Albany International Corp.
CONSOLIDATED BALANCE SHEETS
At December 31,
(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Contract assets, net
Inventories
Income taxes prepaid and receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Intangibles, net
Goodwill
Deferred income taxes
Noncurrent receivables, net
Other assets
Total assets
Liabilities
Current liabilities:
Accounts payable
Accrued liabilities
Current maturities of long-term debt
Income taxes payable
Total current liabilities
Long-term debt
Other noncurrent liabilities
Deferred taxes and other liabilities
Total liabilities
Commitments and Contingencies
Shareholders’ Equity
2022
2021
$
291,776 $
200,018
148,695
139,050
7,938
50,962
838,439
302,036
191,985
112,546
117,882
1,958
32,394
758,801
445,658
33,811
178,217
15,196
27,913
103,021
436,417
39,081
182,124
26,376
31,849
81,416
$ 1,642,255 $ 1,556,064
$
69,707 $
126,385
—
15,224
211,316
439,000
108,758
15,638
774,712
68,954
124,325
—
14,887
208,166
350,000
107,794
12,499
678,459
Preferred stock, par value $5.00 per share; authorized 2,000,000 shares; none issued
Class A Common Stock, par value $.001 per share; authorized 100,000,000 shares;
issued 40,785,434 in 2022 and 40,760,577 in 2021
Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares;
issued and outstanding 0 in 2022 and 104 in 2021
Additional paid-in capital
Retained earnings
Accumulated items of other comprehensive income:
Translation adjustments
Pension and postretirement liability adjustments
Derivative valuation adjustment
—
41
—
41
—
441,540
931,318
—
436,996
863,057
(146,851)
(15,783)
17,707
(105,880)
(38,490)
(1,614)
Treasury stock (Class A), at cost; 9,674,542 shares in 2022 and 8,665,090 shares in
2021
Total Company shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and shareholders’ equity
(364,923)
863,049
4,494
867,543
(280,143)
873,967
3,638
877,605
$ 1,642,255 $ 1,556,064
The accompanying notes are an integral part of the consolidated financial statements.
56
Albany International Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
(in thousands)
OPERATING ACTIVITIES
Net income
2022
2021
2020
$
96,508 $ 118,768 $
97,243
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation
Amortization
Change in deferred taxes and other liabilities
Impairment of property, plant, equipment, and inventory
Non-cash interest expense
Non-cash portion of pension settlement expense
Compensation and benefits paid or payable in Class A Common Stock
Provision/(recovery) for credit losses from uncollected receivables and
contract assets
Foreign currency remeasurement (gain)/loss on intercompany loans
Fair value adjustment on foreign currency options
Changes in operating assets and liabilities that provided/(used) cash:
Accounts receivable
Contract assets
Inventories
Prepaid expenses and other current assets
Income taxes prepaid and receivable
Accounts payable
Accrued liabilities
Income taxes payable
Noncurrent receivables
Other noncurrent liabilities
Other, net
Net cash provided by operating activities
INVESTING ACTIVITIES
Purchases of property, plant and equipment
Purchased software
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds from borrowings
Principal payments on debt
Principal payments on finance lease liabilities
Debt acquisition costs
Purchase of Treasury shares
Taxes paid in lieu of share issuance
Proceeds from options exercised
Dividends paid
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
62,480
6,569
(8,496)
1,808
1,118
42,657
4,527
1,408
(4,434)
(509)
(14,301)
(36,434)
(24,541)
(4,134)
(6,005)
8,572
3,226
183
3,911
(10,133)
4,234
128,214
65,130
9,125
12,181
856
875
—
3,146
(1,299)
(3,150)
169
(7,734)
25,446
(9,942)
(998)
3,944
9,492
(774)
(477)
4,355
(13,713)
2,075
217,475
63,328
9,377
11,101
1,173
(290)
411
1,505
1,628
14,246
—
31,522
(59,122)
(13,685)
(7,811)
113
(15,586)
(3,856)
5,939
4,158
(2,437)
1,296
140,253
(93,675)
(2,673)
(96,348)
(52,793)
(906)
(53,699)
(41,463)
(927)
(42,390)
162,000
(73,000)
(654)
—
(84,780)
(770)
17
(26,465)
(23,652)
(18,474)
8,000
(56,009)
(1,438)
—
(23,449)
(998)
153
(25,894)
(99,635)
(3,421)
75,000
(101,020)
(7,214)
(2,432)
—
(490)
55
(24,568)
(60,669)
8,582
(10,260)
60,720
45,776
302,036
241,316
195,540
Cash and cash equivalents at end of period
$ 291,776 $ 302,036 $ 241,316
The accompanying notes are an integral part of the consolidated financial statements.
57
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
1. Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of Albany International Corp. and its subsidiaries (the
Company, Albany, we, us, or our) after elimination of intercompany transactions.
A subsidiary within our Machine Clothing segment has held a 50 percent interest as partner in a joint venture
(“JV”) that supplies paper machine clothing products to local papermakers in Russia. Our consolidated financial
statements include our original investment in the entity, plus our share of undistributed earnings or losses, in the
account “Other Assets.” In March 2022, we made the decision to cease doing business in Russia, including giving
notice to our JV partner of our intent to exit the venture, resulting in our full write-off of the net book value of our
investment.
The Company owns 90 percent of the common equity of Albany Safran Composites, LLC (ASC) which is
reported within the Albany Engineered Composites (AEC) segment. Additional information regarding that entity is
included in Note 10.
Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Estimates are used in the accounting for, among others, revenue recognition, contract profitability, allowances for
doubtful accounts, rebates and sales allowances, inventory allowances, financial instruments, including derivatives,
pension and other postretirement benefits, goodwill and intangible assets, contingencies, income taxes, and other
accruals. Our estimates are based on historical experience and on various other assumptions, which are believed to
be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results
reported in future periods may differ from those estimates. Estimates and assumptions are reviewed periodically, and
the effects of any revisions are reflected in the consolidated financial statements in the period they are determined to
be necessary.
Revenue Recognition
In our Machine Clothing (MC) business segment, we recognize revenue at the point in time when we satisfy our
performance obligations related to the manufacture and delivery of products. In our Albany Engineered Composites
(AEC) business segment, revenue from most long-term contracts is recognized over time using an input method as
the measure of progress. The classification of revenue in excess of progress billings on long-term contracts is
included in Contract assets, net, which are rights to consideration that are conditional on something other than the
passage of time, such as completion of remaining performance obligations.
We are required to limit our estimate of contract values to the period of the legally enforceable contract. While
certain contracts are expected to be profitable over the course of the program life when including expected renewals,
our estimate of contract revenues and costs is limited to the estimated value of enforceable rights and obligations,
excluding anticipated renewals. This contract period may result in a loss contract provision at contract inception.
Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable
options that often follow. For contracts with anticipated losses, a provision for the entire amount of the estimated
remaining loss is charged against income in the period in which the loss becomes known. Contract losses are
determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost
allocations, which are treated as period expenses.
Products and services provided under long-term contracts represent a significant portion of sales in the Albany
Engineered Composites segment. We have a contract with a major customer for which revenue is recognized under a
cost-plus-fee agreement. We also have fixed price long-term contracts, for which we use the percentage of completion
(incurred cost to total estimated cost) method. That method requires significant judgment and estimation, which could
be considerably different if the underlying circumstances were to change. When adjustments in estimated contract
58
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
1. Accounting Policies — (continued)
revenues or costs are required, any changes from prior estimates are included in earnings in the period the change
occurs. The sum of net adjustments to the estimated profitability of long-term contracts increased AEC operating
income by $0.5 million, $6.2 million and $9.9 million in 2022, 2021 and 2020, respectively. The favorable effects in
2021 and 2020 were largely due to changes in customer demand and to a lesser extent, efficiency improvements
during the ramp-up of several programs, and the effects in 2022 were more muted.
Additional accounting policies related to revenue from contracts with customers are set forth in Note 2.
We limit the concentration of credit risk in receivables by closely monitoring credit and collection policies. We
record allowances for sales returns as a deduction in the computation of net sales. Such provisions are recorded on
the basis of written communication with customers and/or historical experience. Any value added taxes that are
imposed on sales transactions are excluded from net sales.
Cost of Goods Sold
Cost of goods sold includes the cost of materials, provisions for obsolete inventories, labor and supplies,
shipping and handling costs, depreciation of manufacturing facilities and equipment, purchasing, receiving,
warehousing, and other expenses. Cost of goods sold also includes provisions for loss contracts and charges for the
write-off of inventories that result from an exit activity.
Selling, General, Administrative, Technical, and Research Expenses
Selling, general, administrative, and technical expenses are primarily comprised of wages, incentive
compensation, benefits, travel, professional fees, revaluation of trade foreign currency balances, and other costs, and
are expensed as incurred. Selling expense includes costs related to contract acquisition and provisions for expected
credit losses on financial assets measured at amortized cost. Research expenses are charged to operations as
incurred and consist primarily of compensation, supplies, and professional fees incurred in connection with intellectual
property. Total company research expense was $31.4 million in 2022, $29.6 million in 2021, and $25.8 million in 2020.
The Albany Engineered Composites segment participates in both company-sponsored, and customer-funded
research and development. Some customer-funded research and development may be on a cost-sharing basis and
considered to be a collaborative arrangement, in which case both parties are active participants and are exposed to
the risks and rewards dependent on the success of the activity. In such cases, amounts charged to the collaborating
entity are credited against research and development expense. For customer-funded research and development in
which we anticipate funding to exceed expenses, we include amounts charged to the customer in Net sales, while
expenses are included in Cost of goods sold.
Restructuring Expense
We may incur expenses related to exiting a line of business or restructuring of our operations, which could
include employee termination costs, costs to consolidate or close facilities, or costs to terminate contractual
relationships. Restructuring expenses may also include impairment of Property, plant and equipment, as described
below under “Property, Plant and Equipment”. Employee termination costs include severance pay and social costs for
periods after employee service is completed. Termination costs related to an ongoing benefit arrangement are
recognized when the amount becomes probable and estimable. Termination costs related to a one-time benefit
arrangement are recognized at the communication date to employees. Costs related to contract termination,
relocation of employees, outplacement and the consolidation or the closure of facilities, are recognized when incurred.
Income Taxes
Deferred income taxes are recognized for the tax consequences of temporary differences and tax attributes by
applying enacted statutory tax rates applicable for future years to differences between existing assets and liabilities for
financial reporting and income tax return purposes. The effect of tax rate changes on deferred taxes is recognized in
the income tax provision in the period that includes the enactment date. A valuation allowance is established, as
needed, to reduce net deferred tax assets to the amount expected to be realized. In the event it becomes more likely
than not that some or all of the deferred tax asset valuation allowances will not be needed, the valuation allowance
will be adjusted.
59
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
1. Accounting Policies — (continued)
In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions. We
assess our income tax positions and record tax benefits for all years subject to examination based upon
management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax
positions where it is more likely than not that a tax benefit will be sustained, we have determined the amount of the tax
benefit to be recognized by estimating the largest amount of tax benefit that has a greater than 50 percent likelihood
of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.
For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit
has been recognized in the financial statements. Where applicable, associated interest and penalties have also been
recognized. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of
income tax expense.
We have not elected to reclassify stranded tax effects from AOCI to retained earnings.
Earnings Per Share
Basic net income or loss per share is computed using the weighted average number of shares of Class A
Common Stock and Class B Common Stock outstanding during each year. Diluted net income per share includes the
effect of all potentially dilutive securities. If we report a net loss from continuing operations, the diluted loss per share
is equal to the basic earnings per share calculation.
Translation of Financial Statements
Assets and liabilities of non-U.S. operations are translated at year-end rates of exchange, and the income
statement accounts are translated at average monthly exchange rates. Gains or losses resulting from translating non-
U.S. currency financial statements into U.S. dollars are recorded in other comprehensive income and accumulated in
Shareholders’ equity in the caption “Translation adjustments”.
Selling, general, and administrative expenses include foreign currency gains and losses resulting from third party
balances, such as receivables and payables, which are denominated in a currency other than the entity’s functional
currency. Gains or losses resulting from cash and short-term intercompany loans and balances denominated in a
currency other than the entity’s functional currency, and foreign currency options are generally included in Other
expense, net. Gains and losses on long-term intercompany loans not intended to be repaid in the foreseeable future
are recorded in other comprehensive income.
The following table summarizes foreign currency transaction gains and losses recognized in the income
statement:
(in thousands)
(Gains)/losses included in:
Selling, general, and administrative expenses
Other (income)/expense, net
Total transaction (gains)/losses
2022
2021
2020
$
$
(554) $
(263) $
(9,996)
(10,550) $
(1,179)
(1,442) $
1,875
13,569
15,444
The following table presents foreign currency gains on long-term intercompany loans that were recognized in
Other comprehensive income:
(in thousands)
2022
2021
2020
Loss/(gain), before tax, on long-term intercompany loan
$
— $
(66) $
(4,985)
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of
three months or less.
60
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
1. Accounting Policies — (continued)
Accounts Receivable
Accounts receivable includes trade receivables and bank promissory notes. In connection with certain sales in
Asia Pacific, 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.
Effective January 1, 2020, the Company adopted the provisions of ASC 326, Current Expected Credit Losses
(CECL), using the effective date (or modified retrospective) approach for transition. Under this transition method,
periods prior to 2020 were not restated. The pre-tax cumulative effect of initially applying the new standard was an
increase in credit loss reserves of $1.8 million, primarily for Accounts receivable and Contract assets. Including tax
effects, Retained earnings was reduced by $1.4 million as a result of transitioning to the CECL standard.
The overarching purpose of the CECL standard is to provide greater transparency and understanding of the
Company’s credit risk. This accounting update replaces the incurred loss impairment methodology under previous
GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of
reasonable and supportable information to inform credit loss estimates. Under this standard, the Company recognizes
an allowance for expected credit losses on financial assets measured at amortized cost, such as Accounts receivable,
Contract assets and Noncurrent receivables. The allowance is determined using a CECL model that is based on an
historical average three-year loss rate and is measured by financial asset type on a collective (pool) basis when
similar risk characteristics exist, at an amount equal to lifetime expected credit losses. The estimate reflects the risk of
loss due to credit default, even when the risk is remote, and considers available relevant information about the
collectability of cash flows, including information about past events, current conditions, and reasonable and
supportable expected future economic conditions.
The Company also has Noncurrent receivables in the AEC segment that represent revenue earned which have
extended payment terms. The Noncurrent receivables are invoiced to the customer, with 2% interest, over a 10-year
period that started in 2020.
See additional information, including accounting policies related to our adoption of the CECL update, set forth in
Notes 2 and 11.
Contract Assets and Contract 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 payment 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 Sheet.
See additional information, including accounting policies related to our adoption of the CECL update, set forth in
Notes 11 and 12.
Inventories
Costs included in inventories are raw materials, labor, supplies and allocable depreciation and overhead. Raw
materials inventory is 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. Write-downs of inventories
are charged to Cost of goods sold. 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.
See additional information set forth in Notes 2 and 13.
61
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
1. Accounting Policies — (continued)
Leases
We determine if an arrangement is a lease at inception. A contract is, or contains a lease if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether
a contract conveys the right to control the use of an identified asset, we assess whether:
•
•
•
The contract involves the use of an identified asset. This may be specified explicitly or implicitly, and should be
physically distinct or represent substantially all of the capacity of a physically distinct asset,
The lessee has the right to obtain substantially all of the economic benefits from use of the asset throughout the
period of use, and
The lessee has the right to direct the use of the asset, which is demonstrated when the lessee has decision-
making rights that are most relevant to changing how and for what purpose the asset is used.
Judgment is required in the determination of whether a contract contains a lease, the appropriate classification,
allocation of consideration, and the determination of the discount rate for the lease. Key estimates and judgments
include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present
value, (2) lease term and (3) lease payments.
We have certain lease agreements with lease and non-lease components. For most of these leases, we account
for the lease and non-lease components as a single lease component, in accordance with the practical expedient that
is available for ongoing accounting. Additionally, for certain other leases, such as for vehicles, we apply a portfolio
approach. Such new leases are classified as finance or operating, with classification affecting the pattern and
classification of expense recognition in the income statement. Expenses related to operating leases are recognized on
a straight-line basis, while those determined to be finance leases are recognized following a front-loaded expense
profile, in which interest and amortization are presented separately in the income statement.
Operating lease ROU assets are included in Other assets in the Consolidated Balance Sheets, while finance
lease ROU assets are included in Property, plant, and equipment, net. Lease liabilities for both operating and finance
leases are included in Accrued liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets.
See additional information set forth in Note 20.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, or if acquired as part of a business combination, at fair
value. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets for
financial reporting purposes. In some cases, accelerated methods are used for income tax purposes. Significant
additions or improvements extending assets’ useful lives are capitalized; normal maintenance and repair costs are
expensed as incurred. The cost of fully depreciated assets remaining in use is included in the respective asset and
accumulated depreciation accounts. When items are sold or retired, related gains or losses are included in net
income.
Computer software purchased for internal use, at cost, is amortized on a straight-line basis over five to eight
years, depending on the nature of the asset, after being placed into service, and is included in property, plant, and
equipment. We capitalize internal and external costs incurred related to the software development stage. Capitalized
salaries, travel, and consulting costs related to the software development were immaterial in 2022 and 2021.
We review the carrying value of property, plant and equipment and other long-lived assets for impairment
whenever events and circumstances indicate that the carrying value of an asset group may not be recoverable from
the estimated future cash flows expected to result from its use and eventual disposition.
See additional information set forth in Note 14.
62
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
1. Accounting Policies — (continued)
Goodwill, Intangibles, and Other Assets
The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at
their estimated fair values at the date of acquisition.Goodwill represents the excess of the purchase price over the fair
value of the net tangible and identifiable intangible assets acquired in each business combination. Intangible assets
from acquired businesses are recognized at fair value on the acquisition date and consist of customer relationships,
customer contracts, technology, intellectual property and other intangible assets. Goodwill and intangible assets with
indefinite useful lives are not amortized, but are tested for impairment at least annually.
We perform an impairment test of our goodwill at least annually in the second quarter or more frequently
whenever events or changes in circumstances indicate the carrying value of goodwill may be impaired. Such events
or changes in circumstances may include a significant deterioration in overall economic conditions, changes in the
business climate of our industry, a decline in our market capitalization, operating performance indicators, competition,
reorganizations of our business, or the disposal of all or a portion of a reporting unit.
Our goodwill has been allocated to and is tested for impairment at a level referred to as the reporting unit, which
is our business segment level or a level below the business segment. The level at which we test goodwill for
impairment requires us to determine whether the operations below the business segment constitute a self-sustaining
business for which discrete financial information is available and segment management regularly reviews the
operating results.
We may use qualitative or quantitative approaches when testing goodwill for impairment. When we use the
qualitative approach, we perform a qualitative evaluation of events and circumstances impacting the reporting unit to
determine the likelihood of goodwill impairment. Based on that qualitative evaluation, if we determine it is more likely
than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary.
Otherwise, we perform a quantitative impairment test. To perform the quantitative impairment test, we compare the fair
value of a reporting unit to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying
value, goodwill of the reporting unit is not impaired. If the carrying value of the reporting unit, including goodwill,
exceeds its fair value, a goodwill impairment loss is recognized in an amount equal to that excess.
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. 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. Under the income approach, we determine fair value based on estimated future cash flows of each
reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent
risk of a reporting unit and the rate of return an outside investor would expect to earn.
In the second quarter of 2022, management applied the qualitative assessment approach in performing its
annual evaluation of goodwill for the Company's Machine Clothing reporting unit and two AEC reporting units and
concluded that each reporting unit’s fair value continued to exceed its carrying value. In addition, there were no
amounts at risk due to the estimated excess between the fair and carrying values. Accordingly, no impairment charges
were recorded.
Impairment assessments inherently involve management judgments regarding a number of assumptions such as
those described above. Due to the many variables inherent in the estimation of a reporting unit’s fair value and the
relative size of our recorded goodwill, differences in assumptions could have a material effect on the estimated fair
value of one or more of our reporting units and could result in a goodwill impairment charge in a future period. See
additional information set forth in Note 18.
For some AEC contracts, we perform pre-production or nonrecurring engineering services. These costs are
normally considered a fulfillment activity, rather than a performance obligation. Fulfillment activities that create
resources that will be used in satisfying performance obligations in the future, and are expected to be recovered, are
capitalized to Other assets, which is classified as a noncurrent asset in the Consolidated Balance Sheets. The
capitalized costs are amortized into Cost of goods sold over the period over which the asset is expected to contribute
to future cash flows, which includes anticipated renewal periods.
63
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
1. Accounting Policies — (continued)
Included in Other assets is $16.2 million in 2022 and $32.5 million in 2021 for defined benefit pension plans
where plan assets exceed the projected benefit obligations. Other assets also includes financial assets of $0.6 million
in 2022 and $0.7 million in 2021. See additional information set forth in Note 18.
Stock-Based Compensation
We have incentive compensation plans that authorize the issuance of stock-based awards for key employees,
which are designed to reward short and long-term contributions and provide incentives for recipients to remain with
the Company. We issue stock-based awards in the form of restricted stock units and performance stock units that
generally vest between one and five years from the grant date and can be settled in cash or shares. Expenses
associated with these awards are recognized over each respective vesting period. Liability based awards are settled
in cash, while equity based awards are settled in stock. See additional information for stock-based compensation
plans in Note 22.
Unexercised options generally terminate twenty years after the date of grant for all plans, and must be
exercised within ten years of retirement. We recognized no stock option expense during 2022, 2021, or 2020 and
there are currently no remaining unvested options for which stock-option compensation costs will be recognized in
future periods. No stock options have been granted since 2002.
Derivatives
We use derivatives from time to time to reduce potentially large adverse effects from changes in currency
exchange rates and interest rates. We monitor our exposure to these risks and evaluate, on an ongoing basis, the risk
of potentially large adverse effects versus the costs associated with hedging such risks.
We may use interest rate swaps in the management of interest rate exposures and foreign currency derivatives
in the management of foreign currency exposure related to assets and liabilities (including net investments in
subsidiaries located outside the U.S.) denominated in foreign currencies. When we enter into a derivative contract, we
make a determination whether the transaction is deemed to be a hedge for accounting purposes. For those contracts
deemed to be a hedge, we formally document the relationship between the derivative instrument and the risk being
hedged. In this documentation, we specifically identify the asset, liability, forecasted transaction, cash flow, or net
investment that has been designated as the hedged item, and evaluate whether the derivative instrument is expected
to reduce the risks associated with the hedged item. To the extent these criteria are not met, we do not use hedge
accounting for the derivative.
All derivative contracts are recorded at fair value, as a net asset or a net liability. Changes in the fair value of the
hedge are recorded, net of tax, in other comprehensive income. For transactions that are designated as hedges, we
perform an evaluation of the effectiveness of the hedge. We measure the effectiveness of hedging relationships both
at inception and on an ongoing basis. The related gains and losses of derivative instruments, including those
designated in hedge accounting relationships, are included as operating activities in the consolidated statements of
cash flows.
For derivatives that are designated and qualify as hedges of net investments in subsidiaries located outside the
United States, changes in the fair value of derivatives are reported in other comprehensive income as part of
Translation adjustments.
Pension and Postretirement Benefit Plans
As described in Note 4, we have pension and postretirement benefit plans covering substantially all employees.
Our Pension Plus Plan in the United States was settled during the third quarter of 2022.This was a qualified defined
benefit pension plan that was previously terminated in the third quarter of 2021, and prior to that point was closed to
new participants and had frozen accrual of benefits.
We have liabilities for postretirement benefits in the U.S. and Canada. A majority of the liability relates to the U.S.
plan. Effective January 2005, our postretirement benefit plan in the U.S. was closed to new participants, except for
certain life insurance benefits. In September 2008, we changed the cost sharing arrangement under this program
such that increases in health care costs are the responsibility of plan participants and, in August 2013, we reduced the
life insurance benefit for retirees and eliminated that benefit for active employees.
64
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
1. Accounting Policies — (continued)
The pension plans are generally trusteed or insured, and accrued amounts are funded as required in accordance
with governing laws and regulations. The annual expense and liabilities recognized for defined benefit pension plans
and postretirement benefit plans are developed from actuarial valuations. Inherent in these valuations are key
assumptions, including discount rates and expected return on plan assets, which are updated on an annual basis. We
consider current market conditions, including changes in interest rates, in making these assumptions. Discount rate
assumptions are based on the population of plan participants and a mixture of high-quality fixed-income investments
with durations that match expected future payments. The assumption for expected return on plan assets is based on
historical and expected returns on various categories of plan assets.
Government Grants
The Company recognizes government grants only when there is reasonable assurance that we will comply with
the conditions attached to them and the grants will be received. Government grants are recognized in the
Consolidated Statements of Income on a systematic basis over the periods in which we recognize as expenses the
related costs for which the grants are intended to compensate. A government grant that becomes receivable as
compensation for expenses or losses already incurred or for the purpose of giving immediate financial support with no
future related costs is recognized in the Consolidated Statements of Income of the period in which it becomes
receivable.
During the third quarter of 2021, the Company was awarded an Aviation Manufacturing Jobs Protection Program
("AMJP") grant of $5.8 million, under the American Rescue Plan of the U.S. Department of Transportation. The AMJP
grant is an income related grant, the purpose of which is to provide payroll assistance to eligible U.S. aircraft
manufacturing/repair businesses who were impacted due to the COVID-19 downturn during 2020. In order to receive
the grant, AEC was required to make several commitments, including a commitment that the company would not
involuntarily furlough or lay-off employees within this segment during the period the grant was intended to cover. All
conditions were met and the Company recognized $5.8 million in its Consolidated Statements of Income for the year
ended December 31, 2021. The Company received $2.9 million in cash during 2021 and the remainder during 2022
and reflected cash received as an operating activity within the Consolidated Statements of Cash Flows over the
periods cash was received.
Subsequent Events
We review for subsequent events up through the date when our consolidated financial statements are available
for issuance.
2. Revenue Recognition
We account for a contract when it has approval and commitment from both parties, the rights of the parties are
identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is
probable. Revenue is measured based on the consideration specified in the contract with the customer, and excludes
any amounts collected on behalf of third parties. We recognize revenue when we satisfy a performance obligation by
transferring control over a product or service, or a series of distinct goods or services, to the customer which occurs
either at a point in time, or over time, depending on the performance obligation in the contract. A performance
obligation is a promise in the contract to transfer a distinct good or service to the customer, and is the unit of account.
“Control” refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from the product.
A contract’s transaction price is allocated to each material distinct performance obligation and is recognized as
revenue when, or as, the performance obligation is satisfied.
In our MC segment, our primary performance obligation in most contracts is to provide solution-based, custom-
designed fabrics and belts to the customer. We satisfy this performance obligation upon transferring control of the
product to the customer at a specific point in time. Contracts with customers in the MC segment have various terms
that can affect the point in time when revenue is recognized. Generally, the customer obtains control when the product
has been received at the location specified by the customer, at which time the only remaining obligations under the
65
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
2. Revenue Recognition — (continued)
contract may be fulfillment costs, in the form of shipping and handling, which are accrued when control of the product
is transferred.
In the MC segment, contracts with certain customers may also obligate us to provide various product-related
services at no additional cost to the customer. When this obligation is material in the context of the contract with the
customer, we recognize a separate performance obligation and allocate revenue to those services on a relative
estimated standalone selling price basis. The standalone selling price for these services is determined based upon an
analysis of the services offered and an assessment of the price we might charge for such services as a separate
offering. As we typically provide such services on a stand-ready basis, we recognize this revenue over time. Revenue
allocated to such service performance obligations is the only MC revenue that is recognized over time.
In our AEC segment, we primarily enter into contracts to manufacture and deliver highly engineered advanced
composite products to our customers. A significant portion of AEC revenue is earned under short duration, firm-fixed-
price orders that are placed under a master agreement containing general terms and conditions applicable to all
orders placed under the master agreement. To determine the proper revenue recognition method, we evaluate
whether two or more orders or contracts should be combined and accounted for as one single contract, and whether
the combined or single contract contains single or multiple performance obligations. This evaluation requires
significant judgment, and the decision to combine a group of contracts, or to allocate revenue from the combined or
single contract among multiple performance obligations, could have a significant impact on the amount of revenue
and profit recorded in a given period. For most AEC contracts, the nature of our promise (or our performance
obligation) to the customer is to provide a significant service of integrating a complex set of tasks and components
into a single project or capability, which will often result in the delivery of multiple highly interdependent and
interrelated units.
At the inception of a contract, we determine the transaction price based on the consideration we expect to
receive for the products or services being provided under the contract. For contracts where a portion of the price may
vary, we estimate variable consideration at the most likely amount, which is included in the transaction price to the
extent it is probable that a significant reversal of cumulative revenue recognized will not occur. We analyze the risk of
a significant revenue reversal and if necessary constrain the amount of variable consideration recognized in order to
mitigate this risk.
We estimate the transaction price based on our current rights, and do not contemplate future modifications
(including unexercised options) or follow-on contracts until they become legally enforceable. Many AEC contracts are
subsequently modified to include changes in specifications, requirements or price, which may create new or change
existing enforceable rights and obligations. Depending on the nature of the modification, we consider whether to
account for the modification as an adjustment to the existing contract or as a separate contract. Generally, we are able
to conclude that such modifications are not distinct from the existing contract, due to the significant integration of the
obligations, and the interrelated nature of tasks, provided for in the modification and the existing contract. Therefore,
such modifications are accounted for as if they were part of the existing contract, and we accumulate the values of
such modifications in our estimates of contract value.
Revenue is recognized over time for a large portion of our contracts in AEC as most of our contracts have
provisions that are deemed to transfer control to the customer over time. Revenue is recognized based on the extent
of progress towards completion of the performance obligation. The selection of the method to measure progress
toward completion requires judgment and is based on the nature of the products or services to be provided. We
generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of assets to
the customer which occurs as we incur costs to produce the contract deliverables. Under the cost-to-cost measure of
progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the
total estimated costs at completion of the performance obligation. Revenue, including profit, is recorded proportionally
as costs are incurred. Accounting for long-term contracts requires significant judgment and estimation, which could be
considerably different if the underlying circumstances were to change. When any adjustments of estimated contract
revenue or costs are required, any changes from prior estimates are included in revenues or earnings in the period in
which the change occurs.
66
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
2. Revenue Recognition — (continued)
In other AEC contracts, revenue is recognized at a point in time because the products are offered to multiple
customers, or we do not have an enforceable right to payment until the product is shipped or delivered to the location
specified by the customer in the contract.
AEC’s largest source of revenue is derived from the LEAP contract (see Note 10) under a cost-plus-fee
agreement. The fee is variable based on our success in achieving certain cost targets. Revenue is recognized over
time as costs are incurred. Under this contract, there is judgment involved in determining applicable contract costs
and expected margin, and therefore, in determining the amount of revenue to be recognized.
Payment terms granted to MC and AEC customers reflect general competitive practices. Terms vary with
product, competitive conditions, and the country of operation.
The following table provides a summary of the composition of each business segment:
Segment
Reporting Unit
Machine Clothing (MC) Machine Clothing
Principal Product or Service
Paper machine clothing: Permeable
and impermeable belts used in the
manufacture of paper, paperboard,
tissue and towel, and pulp
Engineered fabrics: Belts used in the
manufacture of nonwovens, fiber
cement and several other industrial
applications
Principal Locations
World-wide
Albany Engineered
Composites (AEC)
Albany Safran
Composites (ASC)
Airframe and engine
Components (Other
AEC)
3D-woven, injected composite
components for aircraft engines
Composite airframe and engine
components for military and
commercial aircraft
Rochester, NH
Commercy, France
Queretaro, Mexico
Salt Lake City, UT
Boerne, TX
Queretaro, Mexico
Kaiserslautern, Germany
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.
67
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
2. Revenue Recognition — (continued)
The following table presents disaggregated revenue for each product group by timing of revenue recognition:
(in thousands)
Machine Clothing
Albany Engineered Composites
ASC
Other AEC
Total Albany Engineered Composites
Total revenue
(in thousands)
Machine Clothing
Albany Engineered Composites
ASC
Other AEC
Total Albany Engineered Composites
Total revenue
(in thousands)
Machine Clothing
Albany Engineered Composites
ASC
Other AEC
Total Albany Engineered Composites
For the year ended December 31, 2022
Point in Time
Revenue Recognition
Over Time
Revenue Recognition
Total
$
605,863
$
3,598 $
609,461
—
19,167
19,167
165,775
240,484
406,259
165,775
259,651
425,426
625,030
$
409,857 $
1,034,887
For the year ended December 31, 2021
Point in Time
Revenue Recognition
Over Time
Revenue Recognition
Total
615,556
$
3,459 $
619,015
—
15,972
15,972
109,803
184,450
294,253
631,528
$
297,712 $
109,803
200,422
310,225
929,240
For the year ended December 31, 2020
Point in Time
Revenue Recognition
Over Time
Revenue Recognition
Total
569,563
$
3,392 $
572,955
$
$
$
$
—
18,343
18,343
98,411
210,901
309,312
98,411
229,244
327,655
900,610
Total revenue
$
587,906
$
312,704 $
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:
(in thousands)
Americas PMC
Eurasia PMC
Engineered Fabrics
Total Machine Clothing Net sales
For the year ended December 31,
2022
2021
2020
$
$
321,170 $
317,907 $
207,115
81,176
219,506
81,602
609,461 $
619,015 $
297,490
202,181
73,284
572,955
68
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
2. Revenue Recognition — (continued)
We do not disclose the value of unsatisfied performance obligations for contracts with an original expected
duration of one year or less. 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 $553 million as of December 31, 2022, $278 million as of December 31, 2021, and
$86 million as of December 31, 2020, and related primarily to firm contracts in the AEC segment. Of the remaining
performance obligations as of December 31, 2022 we expect to recognize as revenue approximately $131 million
during 2023, $98 million during 2024, $56 million during 2025, and the remainder thereafter.
3. Reportable Segments and Geographic Data
In accordance with applicable disclosure guidance for enterprise segments and related information, the internal
organization that is used by management for making operating decisions and assessing performance is used as the
basis for our reportable segments.
The accounting policies of the segments are the same as those described in Note 1. Corporate expenses include
wages and benefits for corporate headquarters personnel, costs related to information systems development and
support, and professional fees related to legal, audit, and other activities. These costs are not allocated to the
reportable segments because the decision-making for these functions lies outside of the segments.
Machine Clothing:
The Machine Clothing (“MC”) segment supplies permeable and impermeable belts used in the manufacture of
paper, paperboard, tissue and towel, pulp, nonwovens, fiber cement and several other industrial applications. 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.
Albany Engineered Composites:
The Albany Engineered Composites (“AEC”) segment, provides highly engineered, advanced composite
structures to customers in the commercial and defense aerospace industries. The segment includes Albany Safran
Composites, LLC (“ASC”), in which our customer, SAFRAN Group, owns a 10 percent noncontrolling interest, AEC,
through ASC, is the exclusive supplier to the LEAP program of advanced composite fan blades and fan cases under a
long-term supply contract.
The LEAP engine is used on the Airbus A320neo, Boeing 737 MAX, and COMAC 919 aircrafts. AEC’s largest
aerospace customer is SAFRAN and sales to SAFRAN (consisting primarily of fan blades and cases for CFM’s LEAP
engine) accounted for approximately 16 percent of the Company’s consolidated Net sales in 2022. In 2022, SAFRAN
leased manufacturing space from AEC for the GE9X program. Rent paid by SAFRAN under this lease amounted to
$0.9 million in both 2022 and 2021. AEC Net sales to SAFRAN were $169.3 million in 2022, $111.6 million in 2021,
and $99.0 million in 2020. The total of Accounts receivable, Contract assets and Noncurrent receivable due from
SAFRAN amounted to $80.8 million and $79.6 million as of December 31, 2022 and 2021, respectively.
Other significant programs by AEC include the Sikorsky CH-53K, F-35, JASSM, and Boeing 787 programs. AEC
also supplies vacuum waste tanks for the Boeing 7-Series programs, and specialty components for the Rolls Royce
lift fan on the F-35. In 2022, approximately 46 percent of AEC sales were related to U.S. government contracts or
programs.
69
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
3. Reportable Segments and Geographic Data — (continued)
The following tables show data by reportable segment, reconciled to consolidated totals included in the financial
statements:
(in thousands)
Net Sales
Machine Clothing
Albany Engineered Composites
Consolidated total
Depreciation and amortization
Machine Clothing
Albany Engineered Composites
Corporate expenses
Consolidated total
Operating income/(loss)
Machine Clothing
Albany Engineered Composites
Corporate expenses
Operating income
Reconciling items:
Interest income
Interest expense
Pension settlement expense
AMJP grant
Other expense, net
Income before income taxes
2022
2021
2020
$
609,461 $
425,426
619,015 $
310,225
572,955
327,655
$ 1,034,887 $
929,240 $
900,610
19,483
46,202
3,364
20,191
50,402
3,662
$
69,049 $
74,255 $
20,304
48,496
3,905
72,705
206,214
31,579
215,654
16,160
190,805
31,536
(56,771)
(53,803)
(56,261)
$
181,022 $
178,011 $
166,080
(3,835)
(2,500)
17,835
49,128
17,391
—
—
(5,832)
(2,748)
16,332
—
—
(14,086)
3,021
13,422
$
131,980 $
165,931 $
139,074
A subsidiary within our Machine Clothing segment has been a partner in a joint venture (“JV”) that supplies
paper machine clothing products to local papermakers in Russia. In March 2022, we made the decision to cease
doing business in Russia, including giving notice to our JV partner of our intent to exit the venture. As a result, we
recognized $1.5 million expense in the consolidated statement of operations, representing reserves against the risk of
uncollectible customer receivables and obsolescence of certain inventory destined for Russian customers. We also
wrote down the net book value of our investment in the aforementioned JV to reflect our intent to exit such venture,
resulting in $0.8 million impairment loss during the first quarter of 2022.
In the third quarter, we took actions to settle certain pension plan liabilities in the U.S., leading to charges totaling
$49.1 million, which were included as Corporate expenses and other. This led to a reduction of unfunded pension
liabilities of $6.2 million.
The table below presents restructuring costs by reportable segment (also see Note 5):
(in thousands)
Restructuring expenses, net
Machine Clothing
Albany Engineered Composites
Corporate expenses
Consolidated total
2022
2021
2020
$
$
92 $
1,202 $
—
14
32
97
106 $
1,331 $
2,746
2,821
169
5,736
In the measurement of assets utilized by each reportable segment, we include Inventories, Accounts receivable,
net, Contract assets, net, Noncurrent receivables, net, Property, plant and equipment, net, Intangibles, net and
Goodwill.
70
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
3. Reportable Segments and Geographic Data — (continued)
The following table presents assets and capital expenditures by reportable segment:
(in thousands)
Segment assets
Machine Clothing
Albany Engineered Composites
Reconciling items:
Cash
Income taxes prepaid, receivable and deferred
Prepaid and Other assets
Consolidated total assets
Capital expenditures and purchased software
Machine Clothing
Albany Engineered Composites
Corporate expenses
Consolidated total
2022
2021
2020
$
455,390 $
717,972
459,182 $
652,702
443,476
713,955
291,776
23,134
153,983
241,316
44,697
106,492
$ 1,642,255 $ 1,556,064 $ 1,549,936
302,036
28,334
113,810
$
20,093 $
73,614
2,641
20,177 $
31,012
2,510
$
96,348 $
53,699 $
15,792
23,718
2,880
42,390
In 2022, the Company extended the lease of its primary manufacturing facility in Salt Lake City, Utah, which
resulted in a lease classification change from Finance to Operating and included a non-cash increase of $37.1 million
to both Other assets and to Other noncurrent liabilities in the Consolidated Balance Sheets. Due to the non-cash
nature of the transaction, those increases are excluded from amounts reported in the Consolidated Statements of
Cash Flows.
The following table shows data by geographic area. Net sales are based on the location of the operation
recording the final sale to the customer. Net sales recorded by our entity in Switzerland are derived from products sold
throughout Europe and Asia, and are invoiced in various currencies.
(in thousands)
Net sales
United States
Switzerland
France
Brazil
China
Mexico
Italy
Other countries
Consolidated total
Property, plant and equipment, at cost, net
United States
Mexico
China
France
Canada
Sweden
United Kingdom
Germany
Other countries
Consolidated total
2022
2021
2020
$
586,779 $
119,069
497,231 $
128,698
503,473
128,328
76,826
66,175
63,914
58,519
20,074
43,531
68,929
62,925
67,098
37,547
21,523
45,289
$ 1,034,887 $
929,240 $
$
278,500 $
258,453 $
42,320
33,432
31,382
14,264
11,388
9,699
9,562
15,111
40,699
41,039
33,802
14,139
12,355
10,156
9,652
16,122
$
445,658 $
436,417 $
55,914
60,259
57,007
39,859
12,424
43,346
900,610
263,201
41,738
40,898
41,107
9,672
12,109
10,731
10,808
18,290
448,554
71
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
4. Pensions and Other Postretirement Benefit Plans
Pension Plans
The Company has defined benefit pension plans covering certain U.S. and non-U.S. employees.
In the third quarter of 2022, we took actions to settle pension plan liabilities related to the U.S. Pension Plus Plan,
leading to charges totaling $49.1 million. This led to a reduction of unfunded pension liabilities of $6.2 million. This
was a qualified defined benefit pension plan that was previously terminated in the third quarter of 2021, and prior to
that point was closed to new participants and had frozen accrual of benefits.
The December 31, 2022 benefit obligations for remaining U.S. pension and postretirement plans were calculated
using the Pri-2012 mortality table with MP-2021 generational projection. For U.S. pension funding purposes, the
Company uses the plan’s IRS-basis current liability as its funding target, which is determined based on mandated
assumptions. Benefit accruals under the U.S. Supplemental Executive Retirement Plan (“SERP”), which is an
unfunded plan, have been frozen.
The eligibility, benefit formulas, and contribution requirements for plans outside of the U.S. vary by location.
Benefits under the Company's pension plan in Switzerland utilize a cash balance interest crediting rate for
determination of plan liabilities. As of December 31, 2022, the benefit obligation for that plan amounted to
$2.9 million.
In addition to providing pension benefits, the Company provides various medical, dental, and life insurance
benefits for certain retired United States employees. U.S. employees hired prior to 2005 may become eligible for
these benefits if they reach normal retirement age while working for the Company. Benefits provided under this plan
are subject to change. Retirees share in the cost of these benefits. Any new employees hired after January 2005 who
wish to be covered under this plan will be responsible for the full cost of such benefits. In September 2008, we
changed the cost-sharing arrangement under this program such that increases in health care costs are the
responsibility of plan participants. In August 2013, we reduced the life insurance benefit for retirees and eliminated the
benefit for active employees. The Company also provides certain postretirement life insurance benefits to retired
employees in Canada. As of December 31, 2022, the accrued postretirement liability was $34.8 million in the U.S. and
$0.8 million in Canada. The Company accrues the cost of providing postretirement benefits during the active service
period of the employees. The Company currently funds the plans as claims are paid.
Accounting guidance requires the recognition of the funded status of each defined benefit and other
postretirement benefit plan. Each overfunded plan is recognized as an asset and each underfunded plan is
recognized as a liability. Company pension plan data for U.S. and non-U.S. plans has been combined for both 2022
and 2021, except where indicated below.
The Company’s pension and postretirement benefit costs and benefit obligations are based on actuarial
valuations that are affected by many assumptions, the most significant of which are the assumed discount rate,
expected rate of return on pension plan assets, and mortality. Each of the assumptions is reviewed and updated
annually, as appropriate. The assumed rates of return for pension plan assets are determined for each major asset
category based on historical rates of return for assets in that category and expectations of future rates of return
based, in part, on simulated future capital market performance. The assumed discount rate is based on yields from a
portfolio of currently available high-quality fixed-income investments with durations matching the expected future
payments, based on the demographics of the plan participants and the plan provisions.
Gains and losses arise from changes in the assumptions used to measure the benefit obligations, and
experience different from what had been assumed, including asset returns different than what had been expected.
The Company amortizes gains and losses in excess of a “corridor” over the average future service of the plan’s
current participants. The corridor is defined as 10 percent of the greater of the plan’s projected benefit obligation or
market-related value of plan assets. The market-related value of plan assets is also used to determine the expected
return on plan assets component of net periodic cost. The Company’s market-related value for its U.S. plan is
measured by first determining the absolute difference between the actual and the expected return on the plan assets.
72
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
4. Pensions and Other Postretirement Benefit Plans — (continued)
The absolute difference in excess of 5 percent of the expected return is added to the market-related value over two
years; the remainder is added to the market-related value immediately.
To the extent the Company’s unrecognized net losses and unrecognized prior service costs, including the
amount recognized through accumulated other comprehensive income, are not reduced by future favorable plan
experience, they will be recognized as a component of the net periodic cost in future years.
The following table sets forth the plan benefit obligations:
(in thousands)
Benefit obligation, beginning of year
Service cost
Interest cost
Plan participants' contributions
Actuarial (gain)/loss
Benefits paid
Settlements and curtailments
Plan amendments and other
Foreign currency changes
Benefit obligation, end of year
Accumulated benefit obligation
Weighted average assumptions used to
determine benefit obligations, end of year:
Discount rate — U.S. plan
Discount rate — non-U.S. plans
Cash balance interest crediting rate - Switzerland
pension plan
Compensation increase — U.S. plan
Compensation increase — non-U.S. plans
As of December 31, 2022
As of December 31, 2021
Pension plans
Other
postretirement
benefits
Pension plans
Other
postretirement
benefits
$ 230,790
1,371
$ 44,884
114
$ 245,800
2,192
$ 47,977
132
4,917
132
(46,995)
(7,946)
(90,568)
(25)
(7,946)
1,221
—
(6,658)
(3,234)
—
(605)
(64)
5,467
175
(7,163)
(9,399)
(3,694)
(122)
(2,466)
1,103
—
(995)
(3,338)
—
—
5
$ 83,730
$ 35,658
$ 230,790
$ 44,884
$ 78,153
$
—
$ 223,320
$
—
5.49 %
5.15 %
2.15 %
N/A
3.08 %
5.55 %
5.20 %
—
N/A
2.75 %
2.63 %
2.41 %
0.25 %
—
2.70 %
2.83 %
3.05 %
—
—
2.75 %
During 2022, pension benefit obligations decreased by $147 million, $91.6 million of which was related to the US
Pension Plus plan settlement, and $47.0 million of which was driven by net actuarial gains, principally resulting from
higher discount rates, in addition to employer contributions of $7.9 million. Other postretirement benefit obligations
decreased by $9.2 million in 2022, primarily driven by net actuarial gains and payments made by the Company to
participants of the plan.
During 2021, pension benefit obligations decreased by $15.0 million, $7.2 million of which was driven by net
actuarial gains, principally resulting from higher discount rates, in addition to employer contributions of $9.4 million.
Other postretirement benefit obligations decreased by $3.1 million in 2021, primarily driven by payments made by the
Company to participants of the plans.
73
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
4. Pensions and Other Postretirement Benefit Plans — (continued)
The following sets forth information about plan assets:
(in thousands)
As of December 31, 2022
As of December 31, 2021
Pension plans
Other
postretirement
benefits
Pension plans
Other
postretirement
benefits
Fair value of plan assets, beginning of year
$
225,327 $
— $
239,051 $
Actual return on plan assets, net of expenses
Employer contributions
Plan participants' contributions
Benefits paid
Settlements
Foreign currency changes
(57,868)
15,071
132
(7,946)
(90,568)
(9,219)
—
3,234
—
(3,234)
—
—
(2,648)
2,431
175
(9,399)
(3,694)
(589)
Fair value of plan assets, end of year
$
74,929 $
— $
225,327 $
—
—
3,338
—
(3,338)
—
—
—
The funded status of the plans was as follows:
(in thousands)
Fair value of plan assets
Benefit obligation
Funded status
Accrued benefit cost, end of year
Amounts recognized in the consolidated balance
sheet consist of the following:
Noncurrent asset
Current liability
Noncurrent liability
Net amount recognized
Amounts recognized in accumulated other
comprehensive income consist of:
Net actuarial loss
Prior service cost/(credit)
Net amount recognized
As of December 31, 2022
As of December 31, 2021
Pension plans
Other
postretirement
benefits
Pension plans
Other
postretirement
benefits
$
$
$
74,929 $
— $
225,327 $
—
83,730
35,658
230,790
44,884
(8,801) $
(35,658) $
(5,463) $
(44,884)
(8,801) $
(35,658) $
(5,463) $
(44,884)
$
16,234 $
— $
32,504 $
—
(1,974)
(3,660)
(7,116)
(3,627)
(23,061)
(31,998)
(30,851)
(41,257)
$
(8,801) $
(35,658) $
(5,463) $
(44,884)
$
$
17,915 $
(134)
17,781 $
8,958 $
52,138 $
17,483
(4,574)
4,384 $
256
52,394 $
(8,458)
9,025
The composition of the net pension plan funded status as of December 31, 2022 was as follows:
(in thousands)
Pension plans with pension assets
Pension plans without pension assets
Total
U.S. plan
Non-U.S. plans
Total
$
$
— $
(4,161)
(4,161) $
16,234 $
(20,874)
(4,640) $
16,234
(25,035)
(8,801)
The net underfunded balance in the U.S. principally relates to the Supplemental Executive Retirement Plan.
74
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
4. Pensions and Other Postretirement Benefit Plans — (continued)
The composition of the net periodic benefit plan cost for the years ended December 31, 2022, 2021, and 2020,
was as follows:
(in thousands)
2022
2021
2020
2022
2021
2020
Pension plans
Other postretirement benefits
Components of net periodic benefit
cost:
Service cost
Interest cost
Expected return on assets
$ 1,371
4,917
(5,979)
$ 2,192
5,467
(6,564)
$ 2,279
6,172
(6,853)
$
114
1,221
—
$
132
1,103
—
$
200
1,712
—
Amortization of prior service cost/
(credit)
(8)
13
14
(4,488)
(4,488)
(4,488)
Amortization of net actuarial loss
Settlement
Curtailment (gain)/loss
Net periodic benefit cost
1,377
49,128
—
$ 50,806
2,365
—
2,412
148
1,883
—
—
$ 3,473
263
$ 4,435
—
$ (1,270)
$
2,260
—
—
(993)
2,592
—
—
16
$
Weighted average assumptions
used to determine net cost:
Discount rate — U.S. plan
Discount rate — non-U.S. plans
Cash balance interest crediting
rate - Switzerland pension plan
Expected return on plan assets —
U.S. plan
Expected return on plan assets —
non-U.S. plans
Rate of compensation increase —
U.S. plan
Rate of compensation increase —
non-U.S. plans
2.63 %
2.41 %
2.65 %
1.91 %
3.40 %
2.31 %
2.83 %
3.05 %
2.38 %
2.75 %
3.27 %
3.05 %
0.25 %
0.05 %
0.25 %
3.07 %
2.74 %
3.54 %
3.31 %
2.89 %
3.45 %
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— %
2.70 %
2.71 %
2.81 %
2.75 %
2.75 %
3.00 %
Pretax (gains)/losses on plan assets and benefit obligations recognized in other comprehensive income for the
years ended December 31, 2022, 2021, and 2020, was as follows:
(in thousands)
2022
2021
2020
2022
2021
2020
Pension plans
Other postretirement benefits
Settlements/curtailments
Asset/liability loss/(gain)
Amortization of actuarial
(loss)
Amortization of prior service
cost/(credit)
Other
Currency impact
Cost/(benefit) in Other
comprehensive income
$
(49,128) $
16,828
— $
(411) $
— $
— $
1,927
(8,053)
(6,658)
(995)
—
(4,794)
(1,377)
(2,365)
(2,412)
(1,883)
(2,260)
(2,592)
8
—
(13)
—
(944)
(612)
(14)
(204)
670
3,884
—
15
4,488
—
2
4,488
—
3
$
(34,613) $
(1,063) $
(10,424) $
(4,642) $
1,235 $
(2,895)
75
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
4. Pensions and Other Postretirement Benefit Plans — (continued)
Investment Strategy
Our investment strategy for pension assets differs for the various countries in which we have defined benefit
pension plans. Some of our defined benefit plans do not require funded trusts and, in those arrangements, the
Company funds the plans on a “pay as you go” basis. The largest of the funded defined benefit plans is in the United
Kingdom.
United States plan:
Since the settlement of the U.S. Pension Plus Plan during the third quarter of 2022, there have been no
investments made to the remaining plans in the United States.
Non-United States plans:
For the countries in which the Company has funded pension trusts, the investment strategy may also be liability
driven or, in other cases, to achieve a competitive, total investment return, achieving diversification between and
within asset classes and managing other risks. Investment objectives for each asset class are determined based on
specific risks and investment opportunities identified. Actual allocations to each asset class vary from target
allocations due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully
implement investment allocation positions, and the timing of benefit payments and contributions.
Fair-Value Measurements
The following tables present plan assets as of December 31, 2022, and 2021, using the fair-value hierarchy,
which has three levels based on the reliability of inputs used, as described in Note 18. Certain investments that are
measured at fair value using net asset value (NAV) as a practical expedient are not required to be categorized in the
fair value hierarchy table. The total fair value of these investments is included in the table below to permit
reconciliation of the fair value hierarchy to amounts presented in the funded status table above. As of December 31,
2022 and 2021, there were no investments expected to be sold at a value materially different than NAV.
(in thousands)
Assets at Fair Value as of December 31, 2022
Quoted prices
in active
markets Level 1
Significant
other
observable
inputs Level 2
Significant
unobservable
inputs Level 3
Common Stocks and equity funds
$
— $
— $
— $
Debt securities
Insurance contracts
Cash and short-term investments
Total investments in the fair value hierarchy
Investments at net asset value:
Common Stocks and equity funds
Fixed income funds
Limited partnerships
Total plan assets
—
—
548
1,003
—
—
$
548 $
1,003 $
—
2,418
—
2,418
$
Total
—
1,003
2,418
548
3,969
13,069
57,891
—
74,929
76
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
4. Pensions and Other Postretirement Benefit Plans — (continued)
(in thousands)
Assets at Fair Value as of December 31, 2021
Quoted prices
in active
markets Level 1
Significant
other
observable
inputs Level 2
Significant
unobservable
inputs Level 3
Total
Common Stocks and equity funds
$
— $
— $
— $
—
Debt securities
Insurance contracts
—
—
98,252
—
Cash and short-term investments
Total investments in the fair value hierarchy
724
724 $
—
98,252 $
$
Investments at net asset value:
Common Stocks and equity funds
Fixed income funds
Limited partnerships
Total plan assets
—
3,861
—
3,861
98,252
3,861
724
102,837
18,963
101,843
1,684
225,327
$
The following tables present a reconciliation of Level 3 assets held during the years ended December 31, 2022
and 2021:
(in thousands)
Insurance contracts -
December 31,
2021
Net realized
gains
Net unrealized
gains
Net purchases,
issuances
and
settlements
Net transfers
(out of) Level 3
December 31,
2022
total level 3 assets
$
3,861 $
— $
20 $
(1,463) $
— $
2,418
December 31,
2020
Net realized
gains
Net unrealized
gains
Net purchases,
issuances
and
settlements
Net transfers
(out of) Level 3
December 31,
2021
(in thousands)
Insurance contracts -
total level 3 assets
$
3,819 $
— $
24 $
18 $
— $
3,861
The asset allocation for the Company’s U.S. and non-U.S. pension plans for 2022 and 2021, and the target
allocation, by asset category, are as follows:
Asset category
Equity securities
Debt securities
Real estate
Other(1)
United States Plan
Non-U.S. Plans
Target
Allocation
Percentage of plan assets
at plan measurement date
2022
2021
Target
Allocation
Percentage of plan assets
at plan measurement date
2022
2021
N/A
N/A
N/A
N/A
— %
N/A
N/A
N/A
N/A
— %
98 %
2 %
— %
14 %
81 %
1 %
4 %
15 %
76 %
1 %
8 %
13 %
80 %
1 %
6 %
— %
100 %
100 %
100 %
100 %
(1)
Other includes hedged equity and absolute return strategies, and private equity. The Company has
procedures to closely monitor the performance of these investments and compares asset valuations to
audited financial statements of the funds.
77
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
4. Pensions and Other Postretirement Benefit Plans — (continued)
The targeted plan asset allocation is based on an analysis of the actuarial liabilities, a review of viable asset
classes, and an analysis of the expected rate of return, risk, and other investment characteristics of various
investment asset classes.
At the end of 2022 and 2021, the projected benefit obligation, accumulated benefit obligation, and fair value of
plan assets for pension plans with projected benefit obligation and an accumulated benefit obligation in excess of plan
assets were as follows:
(in thousands)
Projected benefit obligation
Fair value of plan assets
(in thousands)
Accumulated benefit obligation
Fair value of plan assets
Plans with projected
benefit obligation in
excess of plan assets
2022
2021
$
28,458 $
3,422
142,007
104,041
Plans with accumulated
benefit obligation in
excess of plan assets
2022
2021
$
25,941 $
139,600
3,422
104,041
Information about expected cash flows for the pension and other benefit obligations are as follows:
(in thousands)
Pension plans
Other postretirement
benefits
Expected employer contributions and direct employer payments in the next
fiscal year
$
2,151 $
Expected benefit payments
2023
2024
2025
2026
2027
4,495
4,809
5,181
5,513
5,337
2028-2032
29,238
3,660
3,660
3,541
3,408
3,281
3,158
13,928
78
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
5. Restructuring
Restructuring activities have decreased in the last two years. Restructuring expense, net during this period has
been related primarily to the winding down of restructuring actions taken in years previous. The following table
summarizes charges reported in the Consolidated Statements of Income under “Restructuring expenses, net”:
Year ended December 31, 2022 (In thousands)
Machine Clothing
Albany Engineered Composites
Corporate expenses
Total
Year ended December 31, 2021 (In thousands)
Machine Clothing
Albany Engineered Composites
Corporate expenses
Total
Year ended December 31, 2020 (In thousands)
Machine Clothing
Albany Engineered Composites
Corporate expenses
Total
Total
restructuring
costs incurred
Termination
and other costs
Impairment of
assets
$
$
92 $
—
14
92 $
—
14
106 $
106 $
—
—
—
—
Total
restructuring
costs incurred
Termination
and other
costs
Impairment of
assets
$
1,202 $
1,202 $
32
97
32
97
$
1,331 $
1,331 $
—
—
—
—
Total
restructuring
costs incurred
Termination
and other costs
Impairment of
assets
$
2,746 $
2,746 $
2,821
169
2,821
169
$
5,736 $
5,736 $
—
—
—
—
In 2020, AEC reduced its workforce at various locations, principally in the United States, leading to restructuring
charges, and MC recorded charges related to the discontinuance of operations in the Selestat, France location.
As of December 31, 2022, there is no remaining balance in Accrued liabilities for restructuring.
The table below presents the changes in restructuring liabilities for 2022 and 2021, all of which related to
termination costs:
(in thousands)
December 31,
2021
Restructuring
charges
accrued
Payments
Currency
translation/
other
December 31,
2022
Total termination and other costs
$
1,045 $
106 $
(1,079) $
(72) $
—
(in thousands)
December 31,
2020
Restructuring
charges
accrued
Payments
Currency
translation/
other
December 31,
2021
Total termination and other costs
$
2,195 $
1,331 $
(2,469) $
(12) $
1,045
79
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
6. Other expense/(income), net
The components of Other expense/(income), net, are:
(in thousands)
Currency transactions
Sale of IP addresses
Bank fees and amortization of debt issuance costs
Components of net periodic pension and postretirement cost other
than service
Other
Total
2022
2021
2020
$
$
(9,996) $
(3,420)
313
(1,077)
94
(14,086) $
(1,179) $
—
373
156
3,671
3,021 $
13,569
—
367
1,561
(2,075)
13,422
In 2022, Other (income)/expense, net included gains related to the revaluation of nonfunctional-currency
balances of $10.0 million, as compared to a gain of $1.2 million during 2021, principally resulting from a weaker Euro
throughout the course of 2022.
As a result of changes in business conditions that occurred in the first quarter of 2020, certain loan repayments
were no longer expected in the foreseeable future and, beginning April 1, 2020, the revaluation effects for those loans
were recorded in Other comprehensive income, which resulted in a pre-tax gain of $5.0 million being recorded in
Other comprehensive income in 2020. The same loans had an insignificant effect on Other comprehensive income in
2021 and 2022.
In 2022, the Company recorded a gain of $3.4 million on the sale of IP addresses that the Company had no
future critical need to retain. There were no similar gains of this nature in the previous two years.
7. Income Taxes
Provision for income taxes consisted of the following:
For the year ended December 31
(in thousands)
Income before income taxes:
U.S.
Non-U.S.
Income tax expense/(benefit)
Current:
Federal
State
Non-U.S.
Deferred:
Federal
State
Non-U.S.
Total income tax expense
80
2022
2021
2020
20,422 $
63,708 $
63,375
111,558
131,980 $
102,223
165,931 $
75,699
139,074
9,781 $
5,126
28,605
43,512 $
3,348 $
2,663
29,319
35,330 $
(9,592) $
(1,866)
3,418
9,911 $
(24)
1,946
(8,040) $
11,833 $
35,472 $
47,163 $
1,415
2,028
26,916
30,359
11,211
192
69
11,472
41,831
$
$
$
$
$
$
$
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
7. Income Taxes — (continued)
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:
For the year ended December 31
U.S. federal statutory tax rate
State taxes, net of federal benefit
Non-U.S. local income taxes
U.S. permanent adjustments
Foreign permanent adjustments
Foreign rate differential
Net U.S. tax on non-U.S. earnings and foreign withholdings
Provision for/(resolution) of tax audits and contingencies, net
U.S. Pension Settlement - Release of Residual Tax Effect
Tax effect of non-deductible foreign exchange loss on intercompany
loan
Impact of amended tax returns
Return to provision
Other adjustments
Effective income tax rate
2022
2021
2020
21.0 %
2.5
3.8
1.4
(2.1)
3.1
3.5
0.3
(4.0)
—
(0.1)
(1.1)
(1.4)
21.0 %
1.8
2.5
1.1
0.3
1.2
2.1
0.1
—
—
(1.3)
(1.4)
1.0
26.9 %
28.4 %
21.0 %
1.8
3.2
0.1
—
0.6
1.2
0.5
—
2.7
—
(1.6)
0.6
30.1 %
The Company recorded a net tax benefit of $5.2 million for the release of the residual tax effects that were
stranded within other comprehensive income related to the U.S. pension settlement. The residual tax effects were
created as a result of the remeasurement of deferred tax assets and liabilities originally established in other
comprehensive income in accordance with the Tax Cuts and Jobs Act lowering the U.S. corporate tax rate from 35%
to 21% as of December 31, 2017.
The Company's subsidiary in Mexico has an intercompany loan payable in U.S. dollars. As a result of the weaker
Mexican peso, the Company recorded a revaluation loss in 2020 which is not deductible under Mexican tax law,
leading to a $3.8 million discrete tax charge.
The Company has operations which constitute a taxable presence in 18 countries outside of the United States.
The Company is subject to audit in the U.S. and various foreign jurisdictions. Our open tax years for major
jurisdictions generally range from 2014-2022.
During the periods reported, income outside of the U.S. was heavily concentrated within Brazil (34% tax rate),
China (25% tax rate), and Mexico (30% tax rate). The foreign rate differential of these jurisdictions was partially offset
by Switzerland (7.8% tax rate). As a result, the foreign income tax rate differential was primarily attributable to these
tax rate differences.
On August 16th, 2022, The Inflation Reduction Act (“IRA”) was enacted, including various provisions which
become effective for tax years beginning after December 31, 2022. Included within the IRA were provisions for a
newly enacted Stock Repurchase Excise Tax, Corporate Alternative Minimum Tax, among others. None of the
enacted provisions within the IRA are expected to have a material effect to the Company.
81
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
7. Income Taxes — (continued)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
certain assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the
Company’s deferred tax assets and liabilities are as follows:
U.S.
Non-U.S.
2022
2021
2022
2021
$
436 $
428 $
1,300 $
For the year ended December 31
(in thousands)
Deferred tax assets:
Accounts receivable, net
Inventories
Incentive compensation
Property, plant, equipment and intangibles, net
Pension, post retirement benefits - non-current
Tax loss carryforwards
Tax credit carryforwards
Derivatives
Leases
Reserves
Deferred revenue
Other
1,807
4,619
—
9,141
239
2,635
—
7,597
721
761
47
1,450
4,580
—
12,912
217
4,643
468
1,658
991
239
329
1,707
21,544
1,791
30,165
(8)
(9)
(9,778)
(10,650)
27,995 $
27,906 $
11,766 $
19,515
5,827 $
6,308 $
— $
Deferred tax assets before valuation allowance
28,003
27,915
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrepatriated foreign earnings
Property, plant, equipment and intangibles, net
Basis difference in partner capital
Basis difference in investment
$
$
Derivatives
Leases
Deferred revenue
Other
3,084
2,161
4,173
5,941
11,609
—
—
5,356
2,466
3,985
—
2,950
—
—
Total deferred tax liabilities
Net deferred tax (liability)/asset
32,795
(4,800) $
21,065
6,841 $
$
Deferred income tax assets, net of valuation allowances, are expected to be realized through the reversal of
existing taxable temporary differences and future taxable income. In 2022, the Company recorded immaterial
movements in its valuation allowance, which are included in Schedule II in Item 15.
82
1,111
1,333
1,892
—
14,201
—
—
—
—
—
—
—
—
—
—
1,378
1,752
1,084
4,339
—
19,821
—
—
—
—
—
—
—
—
—
—
—
6,440
419
6,859
4,907 $
10,829
602
11,431
8,084
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
7. Income Taxes — (continued)
As of December 31, 2022, the Company's net operating loss, capital loss and tax credit carryforwards were as
follows:
(in thousands)
Jurisdiction
U.S. Federal
U.S. State
U.S. State
Non-U.S.
Non-U.S.
Expiration Period
2025 - 2040
2027 - 2041
Indefinite
2025 - 2030
Indefinite
Net Operating
and Capital
Loss
Carryforwards
$
— $
Tax Credit
Carryforwards
2,792
402
—
—
—
3,973
—
9,094
37,008
Balance at end of year
$
50,075 $
3,194
The Company records the residual U.S. and foreign taxes on certain amounts of foreign earnings that have been
targeted for repatriation to the U.S. These amounts are not considered to be indefinitely reinvested, and the Company
accrued for the tax cost on these earnings to the extent they cannot be repatriated in a tax-free manner. The
Company has targeted for repatriation $215.3 million of current year and prior year earnings of the Company’s foreign
operations. If these earnings were distributed, the Company would be subject to foreign withholding taxes of $4.4
million and U.S. income taxes of $1.5 million which have already been recorded.
The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the
U.S. were approximately $201.6 million, and are intended to remain indefinitely invested in foreign operations.
No additional income taxes have been provided on the indefinitely invested foreign earnings at December 31,
2022. If these earnings were distributed, the Company could be subject to income taxes and additional foreign
withholding taxes. Determining the amount of unrecognized deferred tax liability related to any additional outside basis
difference in these entities is not practical due to the complexities of the hypothetical calculation.
The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits. If
recognized, $0.8 million would impact the effective tax rate at December 31, 2022:
(in thousands)
2022
2021
2020
Unrecognized tax benefits balance at January 1,
$
1,459 $
5,491 $
Increase in gross amounts of tax positions related to prior years
Decrease in gross amounts of tax positions related to prior years
Increase in gross amounts of tax positions related to current years
Decrease due to settlements with tax authorities
Decrease due to lapse in statute of limitations
Currency translation
Unrecognized tax benefits balance at December 31,
$
399
(929)
37
—
—
(174)
792 $
278
(4,236)
—
—
(39)
(35)
1,459 $
5,834
540
(637)
—
—
(300)
54
5,491
The Company recognizes interest and penalties related to unrecognized tax benefits within its global operations
as a component of income tax expense. The Company recognized immaterial interest and penalties related to the
unrecognized tax benefits noted above, for the years 2022, 2021 and 2020.
83
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
8. 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:
(in thousands, except market price and earnings per share)
2022
2021
2020
Net income attributable to the Company
Weighted average number of shares:
Weighted average number of shares used in calculating basic net
income per share
Effect of dilutive stock-based compensation plans:
Stock options
Long-term incentive plans
Weighted average number of shares used in calculating diluted net
income per share
Average market price of common stock used for calculation of dilutive
shares
Net income per share:
Basic
Diluted
$
95,762 $
118,478 $
98,589
31,339
32,348
32,329
—
116
2
113
7
20
31,455
32,463
32,356
87.27 $
82.88 $
58.56
3.06 $
3.04 $
3.66 $
3.65 $
3.05
3.05
$
$
$
Shares outstanding, net of treasury shares, were 31.1 million as of December 31, 2022, 32.1 million as of
December 31, 2021, and 32.3 million as of December 31, 2020.
84
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
9. Accumulated Other Comprehensive Income (AOCI)
The table below presents changes in the components of AOCI from January 1, 2020 to December 31, 2022:
(in thousands)
January 1, 2020
Other comprehensive income/(loss) before
reclassifications
Pension/postretirement settlements and curtailments,
net of tax
Pension/postretirement plan remeasurement, net of
tax
Interest expense related to swaps reclassified to the
Statements of Income, net of tax
Pension and postretirement liability adjustments
reclassified to Statements of Income, net of tax
Net current period other comprehensive income
December 31, 2020
Other comprehensive income/(loss) before
reclassifications
Pension/postretirement plan remeasurement, net of
tax
Interest expense related to swaps reclassified to the
Statements of Income, net of tax
Pension and postretirement liability adjustments
reclassified to Statements of Income, net of tax
Net current period other comprehensive income
December 31, 2021
Other comprehensive income/(loss) before
reclassifications
Pension settlement expense, net of tax
Pension/postretirement plan remeasurement, net of
tax
Interest expense related to swaps reclassified to the
Statements of Income, net of tax
Pension and postretirement liability adjustments
reclassified to Statements of Income, net of tax
Translation
adjustments
Pension and
postretirement
liability
adjustments
Derivative
valuation
adjustment
Total Other
Comprehensive
Income
$
(122,852) $
(49,994) $
(3,135) $
(175,981)
39,649
(722)
(9,363)
29,564
—
—
—
—
283
10,390
—
382
—
—
283
10,390
2,954
2,954
—
382
39,649
(83,203) $
10,333
(39,661) $
$
(6,409)
(9,544) $
43,573
(132,408)
(22,677)
1,869
2,812
(17,996)
—
—
—
(22,677)
(796)
—
(796)
—
98
1,171
5,118
—
7,930
5,118
98
(13,576)
$
(105,880) $
(38,490) $
(1,614) $
(145,984)
(40,971)
—
—
—
—
—
26,198
18,971
—
(22,000)
26,198
(2,663)
—
(828)
—
350
—
(2,663)
350
(828)
1,057
Net current period other comprehensive income
(40,971)
22,707
19,321
December 31, 2022
$
(146,851) $
(15,783) $
17,707 $
(144,927)
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.
85
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
9. Accumulated Other Comprehensive Income (AOCI) — (continued)
The table below presents the expense/(income) amounts reclassified, and the line items of the Statement of
Income that were affected for the years ended December 31, 2022, 2021, and 2020.
(in thousands)
2022
2021
2020
Pretax Derivative valuation reclassified from Accumulated Other
Comprehensive Income:
Expense related to interest rate swaps included in Income before
taxes(a)
Income tax effect
Effect on net income due to items reclassified from Accumulated
Other Comprehensive Income
Pretax pension and postretirement liabilities reclassified from
Accumulated Other Comprehensive Income:
Pension/postretirement settlements and curtailments
Amortization of prior service credit
$
$
$
Amortization of net actuarial loss
Total pretax amount reclassified(b)
Income tax effect
468 $
(118)
6,852 $
(1,734)
3,982
(1,028)
350 $
5,118
$2,954
42,657 $
(4,497)
— $
(4,475)
3,260
41,420
4,625
150
(16,051)
(52)
411
(4,474)
5,004
941
(276)
Effect on net income due to items reclassified from Accumulated
Other Comprehensive Income
________________________
$
25,369 $
98 $
665
(a)
(b)
Included in interest expense, net are payments related to the interest rate swap agreements and amortization
of swap buyouts (see Notes 17 and 18).
These accumulated other comprehensive income components are included in the computation of net periodic
pension cost (see Note 4).
10. 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). Under the terms of the transaction agreements, ASC will be the
exclusive supplier to SAFRAN of advanced 3D-woven composite parts for use in aircraft and rocket engines, thrust
reversers and nacelles, and aircraft landing and braking systems (the “SAFRAN Applications”). AEC may develop and
supply parts other than advanced 3D-woven composite parts for all aerospace applications, as well as advanced 3D-
woven composite parts for any aerospace applications that are not SAFRAN Applications (such as airframe
applications) and any non-aerospace applications.
The agreement provides SAFRAN an option to purchase Albany’s remaining 90 percent interest upon the
occurrence of certain bankruptcy or performance default events, or if Albany’s Engineered Composites business is
sold to a direct competitor of SAFRAN. The purchase price is based initially on the same valuation of ASC used to
determine SAFRAN’s 10 percent equity interest, and increases over time as LEAP production increases.
In accordance with the operating agreement, Albany received a $28 million preferred holding in ASC which
includes a preferred return based on the Company’s revolving credit agreement. The common shares of ASC are
owned 90 percent by Albany and 10 percent by SAFRAN.
86
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
10. Noncontrolling Interest — (continued)
The table below presents a reconciliation of income attributable to the noncontrolling interest and noncontrolling
equity in the Company’s subsidiary Albany Safran Composites, LLC:
(in thousands, except percentages)
Net income/(loss) of Albany Safran Composites (ASC)
Less: Return attributable to the Company's preferred holding
Net income/(loss) of ASC available for common ownership
Ownership percentage of noncontrolling shareholder
Net income/(loss) attributable to noncontrolling interest
Noncontrolling interest, beginning of year
Net income/(loss) attributable to noncontrolling interest
Changes in other comprehensive income attributable to noncontrolling interest
Noncontrolling interest, end of year
2022
8,720
1,262
7,458
10 %
746
3,638
746
110
4,494
$
$
$
$
$
$
$
$
$
2021
4,227
1,325
2,902
10 %
290
3,799
290
(451)
$
3,638
11. Accounts Receivable
As of December 31, 2022 and 2021, Accounts receivable consisted of the following:
(in thousands)
Trade and other accounts receivable
Bank promissory notes
Allowance for expected credit losses
Accounts receivable, net
December 31,
2022
December 31,
2021
$
179,676 $
168,046
23,439
(3,097)
26,284
(2,345)
$
200,018 $
191,985
The Company has Noncurrent receivables in the AEC segment that represent revenue earned, which has
extended payment terms. The Noncurrent receivables are invoiced to the customer over a 10-year period, which
began in 2020. As of December 31, 2022 and December 31, 2021, Noncurrent receivables were as follows:
(in thousands)
Noncurrent receivables
Allowance for expected credit losses
Noncurrent receivables, net
December 31,
2022
December 31,
2021
$
$
28,053 $
32,049
(140)
(200)
27,913 $
31,849
As described in Note 1, effective January 1, 2020, the Company adopted the provisions of ASC 326, Current
Expected Credit Losses (CECL). This accounting update replaces the incurred loss impairment methodology under
previous GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range
of reasonable and supportable information to inform credit loss estimates. Under this standard, the Company
recognizes an allowance for expected credit losses on financial assets measured at amortized cost, such as Accounts
receivable, Contract assets and Noncurrent receivables. The allowance is determined using a CECL model that is
based on an historical average three-year loss rate and is measured by financial asset type on a collective (pool)
basis when similar risk characteristics exist, at an amount equal to lifetime expected credit losses. The estimate
reflects the risk of loss due to credit default, even when the risk is remote, and considers available relevant
information about the collectability of cash flows, including information about past events, current conditions, and
reasonable and supportable expected future economic conditions.
87
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
11. Accounts Receivable— (continued)
While an expected credit loss allowance is recorded at the same time the financial asset is recorded, the
Company monitors financial assets for credit impairment events to assess whether there has been a significant
increase in credit risk since initial recognition, and considers both quantitative and qualitative information. The risk of
loss due to credit default increases when one or more events occur that can have a detrimental impact on estimated
future cash flows of that financial asset. Evidence that a financial asset is subject to greater credit risk includes
observable data about significant financial difficulty of the customer, a breach of contract, such as a default or past
due event, or it becomes probable that the customer will enter bankruptcy or other financial reorganization, among
other factors. It may not be possible to identify a single discrete event, but rather, the combined effect of several
events that may cause an increase in risk of loss.
The probability of default is driven by the relative financial health of our customer base and that of the industries
in which we operate, as well as the broader macro-economic environment. A changing economic environment or
forecasted economic scenario can lead to a different probability of default and can suggest that credit risk has
changed.
At each reporting period, the Company will recognize the amount of change in current expected credit losses as
an allowance gain or loss in Selling, general, and administrative expenses in the Consolidated Statements of Income.
Financial assets are written-off when the Company has no reasonable expectation of recovering the financial asset,
either in its entirety, or a portion thereof. This is the case when the Company determines that the customer does not
have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-
off.
The following tables present the (increases)/decreases in the allowance for credit losses for Accounts receivable:
(in thousands)
December 31,
2021
(Charge)/
benefit
Currency
translation Other
December 31,
2022
Specific customer reserves
$
(1,392) $
(1,331) $
50 $
597 $
(2,076)
Incremental expected credit
losses
Accounts receivable expected
credit losses
(953)
(93)
25
—
(1,021)
$
(2,345) $
(1,424) $
75 $
597 $
(3,097)
(in thousands)
Specific customer reserves
Incremental expected credit
losses
Accounts receivable expected
credit losses
December 31,
2020
(Charge)/
benefit
Currency
translation Other
December 31,
2021
$
(1,742) $
(187) $
116 $
421 $
(1,392)
(2,065)
1,074
38
—
(953)
$
(3,807) $
887 $
154 $
421 $
(2,345)
The following tables present the (increases)/decreases in the allowance for credit losses for Noncurrent
receivables:
(in thousands)
December 31,
2021
(Charge)/
benefit
Currency
translation Other
December 31,
2022
Noncurrent receivables expected
credit losses
$
(200) $
62 $
(2) $ — $
(140)
88
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
11. Accounts Receivable— (continued)
(in thousands)
December 31,
2020
(Charge)
/ benefit
Currency
translation Other
December 31,
2021
Noncurrent receivables expected
credit losses
$
(274) $
72 $
2 $ — $
(200)
12. Contract Assets and Liabilities
Contract assets and Contract liabilities (included in Accrued liabilities) are reported in the Consolidated Balance
Sheets in a net position, on a contract-by-contract basis at the end of each reporting period. Contract assets and
contract liabilities are summarized as follows:
(in thousands)
Contract assets
Allowance for expected credit losses
Contract assets, net
Contract liabilities
December 31,
2022
December 31,
2021
$
149,443 $
(748)
113,249
(703)
$
148,695 $
112,546
$
15,176 $
6,959
Contract assets increased $36.1 million during the year ended December 31, 2022. The increase was primarily
due to an increase in unbilled revenue related to the satisfaction of performance obligations, notably for the Sikorsky
CH-53K program, in excess of the amounts billed. Other than the allowance for expected credit losses, there were no
other provisions for losses related to our Contract assets during the years ended December 31, 2022 and 2021.
The following tables present the (increases)/ decreases in the allowance for credit losses for Contract assets:
(in thousands)
Contract assets
expected credit
losses
(in thousands)
Contract assets
expected credit
losses
December 31,
2021
(Charge)/
benefit
Currency
translation
Other
December 31,
2022
$
(703) $
(45) $
— $
— $
(748)
December 31,
2020
(Charge)/
benefit
Currency
translation
Other
December 31,
2021
$
(1,059) $
339 $
16 $
1 $
(703)
Contract liabilities increased $8.2 million during the year ended December 31, 2022, primarily due to amounts
invoiced to customers for contracts that were in a contract liability position exceeding the revenue recognition from
satisfied performance obligations. Revenue recognized for the years ended December 31, 2022 and 2021 that was
included in the Contract liability balance at the beginning of the year was $5.7 million and $5.8 million, respectively.
89
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
13. Inventories
As of December 31, 2022 and 2021, inventories consisted of the following:
(in thousands)
Raw materials
Work in process
Finished goods
Total inventories
December 31,
2022
December 31,
2021
$
74,631 $
50,516
13,903
$
139,050 $
58,689
44,839
14,354
117,882
14. Property, Plant and Equipment
The table below sets forth the components of property, plant and equipment as of December 31, 2022 and 2021:
(in thousands)
2022
2021
Estimated useful life
Land and land improvements
$
14,059 $
14,832 25 years for improvements
Buildings
Right of use assets (a)
Machinery and equipment
Furniture and fixtures
Computer and other equipment
Software
Capital expenditures in progress
Property, plant and equipment, gross
Accumulated depreciation and amortization
Property, plant and equipment, net
247,136
243,584 15 to 40 years
—
10,971 10 to 15 years
1,053,700
1,067,059 5 to 15 years
8,158
21,570
66,794
92,620
7,857 5 years
19,135 3 to 10 years
63,379 5 to 8 years
64,238
1,504,037
1,491,055
(1,058,379)
(1,054,638)
$
445,658 $
436,417
(a)
In 2022, the Company extended the lease of its primary manufacturing facility in Salt Lake City, Utah, which
resulted in a lease classification change from Finance to Operating, resulting in the reclassification of the
Right of use asset from Property, plant, and equipment to Other assets.
Depreciation expense was $62.5 million in 2022, $65.1 million in 2021, and $63.3 million in 2020. Software
amortization is recorded in Selling, general, and administrative expense and was $1.7 million in 2022, $1.9 million in
2021, and $2.1 million in 2020.
Capital expenditures, including purchased software, were $96.3 million in 2022, $53.7 million in 2021, and $42.4
million in 2020. Unamortized software cost was $5.9 million, $3.9 million, and $4.8 million in each of the years ended
December 31, 2022, 2021, and 2020, respectively. Expenditures for maintenance and repairs are charged to income
as incurred and amounted to $20.7 million in 2022, $19.3 million in 2021, and $17.7 million in 2020.
90
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
15. Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable
intangible assets acquired in each business combination. Goodwill and intangible assets with indefinite useful lives
are not amortized, but are tested for impairment at least annually at the reporting unit level, using either a qualitative
or quantitative approach. Impairment is the condition that exists when the carrying amount of a reporting unit,
including goodwill, exceeds its fair value.
In the second quarter of 2022, management applied the qualitative assessment approach in performing its
annual evaluation of goodwill for the Company's Machine Clothing reporting unit and two AEC reporting units and
concluded that each reporting unit’s fair value continued to exceed its carrying value. In addition, there were no
amounts at risk due to the estimated excess between the fair and carrying values. Accordingly, no impairment charges
were recorded.
We are continuing to amortize certain patents, trademarks and names, customer contracts, relationships and
technology assets that have finite lives.The changes in intangible assets and goodwill from December 31, 2020 to
December 31, 2022, were as follows:
(in thousands, except for years)
Finite-Lived intangible
assets:
AEC Trademarks and
trade names
AEC Technology
AEC Intellectual property
AEC Customer contracts
AEC Customer
relationships
Total Finite-Lived intangible
assets, net
Indefinite-Lived intangible
assets:
MC Goodwill
AEC Goodwill
Total Indefinite-Lived
intangible assets
Amortization
life in years
Balance at
December 31,
2021
Amortization
Currency
Translation
Balance at
December 31,
2022
6-15
10-15
15
6
8-15
$
45 $
(11) $
— $
4,712
1,077
720
(554)
(83)
(720)
(274)
—
—
34
3,884
994
—
32,527
(3,474)
(154)
28,899
$
39,081 $
(4,842) $
(428) $
33,811
$
68,329 $
113,795
— $
—
(2,888) $
(1,019)
65,441
112,776
$
182,124 $
— $
(3,907) $
178,217
91
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
15. Goodwill and Other Intangible Assets — (continued)
(in thousands, except for years)
Finite-Lived intangible
assets:
AEC Trademarks and trade
names
AEC Technology
AEC Intellectual property
AEC Customer contracts
AEC Customer
relationships
AEC Other intangibles
Total Finite-Lived intangible
assets, net
Indefinite-Lived intangible
assets:
MC Goodwill
AEC Goodwill
Total Indefinite-Lived
intangible assets
Amortization
life in years
Balance at
December 31,
2020
Amortization
Currency
Translation
Balance at
December 31,
2021
6-15
10-15
15
6
8-15
5
$
57 $
(12) $
— $
5,744
1,160
3,632
36,260
16
(629)
(83)
(2,912)
(3,503)
(16)
(403)
—
—
(230)
—
45
4,712
1,077
720
32,527
—
$
46,869 $
(7,155) $
(633) $
39,081
$
72,290 $
115,263
— $
—
(3,961) $
(1,468)
68,329
113,795
$
187,553 $
— $
(5,429) $
182,124
As of December 31, 2022, the gross carrying amount and accumulated amortization of Finite-Lived intangible
assets was $77.8 million and $44.0 million, respectively.
Amortization expense related to Finite-lived intangible assets was reported in the Consolidated Statement of
Income as follows: $0.8 million in Cost of goods sold and $4.0 million in Selling, general and administrative expenses
in 2022; $3.0 million in Cost of goods sold and $4.2 million in Selling, general and administrative expenses in 2021;
and $3.0 million in Cost of goods sold and $4.3 million in Selling, general and administrative expenses in 2020.
Estimated amortization expense of intangibles for the years ending December 31, 2023 through 2027, is as follows:
Annual
amortization
(in thousands)
4,100
$
4,100
4,100
4,100
4,100
Year
2023
2024
2025
2026
2027
92
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
16. Accrued Liabilities
Accrued liabilities consist of:
(in thousands)
Salaries, wages and benefits
Contract liabilities
Returns and allowances
Dividends
Pension and postretirement
Operating and Finance lease liabilities
Other tax
Contract loss reserve
Freight
Professional fees
Other
Total
2022
2021
$
57,867 $
54,254
15,176
9,084
7,778
6,683
5,929
10,274
2,359
1,966
3,439
5,830
6,959
9,798
6,742
10,742
5,336
9,041
3,608
4,031
3,926
9,888
$
126,385 $
124,325
17. Financial Instruments
Long-term debt, principally to banks, consists of:
(in thousands, except interest rates)
2022
2021
Revolving credit agreement with borrowings outstanding at an end of period interest
rate of 3.16% in 2022 and 3.74% in 2021 (including the effect of interest rate
hedging transactions, as described below), due in 2024
$
439,000 $
350,000
We had no current maturities of Long-term debt as of December 31, 2022 or December 31, 2021. Principal
payments of $439 million are due on long-term debt in 2024. Cash payments of interest amounted to $16.0 million in
2022, $14.9 million in 2021 and $15.1 million in 2020.
On October 27, 2020, we entered into a $700 million unsecured Four-Year Revolving Credit Facility Agreement
(the “Credit Agreement”) which amended and restated the prior amended and restated $685 million Five-Year
Revolving Credit Facility Agreement, which we had entered into on November 7, 2017 (the “Prior Agreement”). Under
the Credit Agreement, $439 million of borrowings were outstanding as of December 31, 2022. The applicable interest
rate for borrowings was LIBOR plus a spread, based on our leverage ratio at the time of borrowing. At the time of the
last borrowing on December 30, 2022, the spread was 1.625%. The spread was based on a pricing grid, which
ranged from 1.500% to 2.000%, based on our leverage ratio. Based on our maximum leverage ratio and our
Consolidated EBITDA, and without modification to any other credit agreements, as of December 31, 2022, we would
have been able to borrow an additional $261 million under the Agreement.
The Credit Agreement contains customary terms, as well as affirmative covenants, negative covenants and
events of default that are comparable to those in the Prior Agreement. The Borrowings are guaranteed by certain of
the Company’s subsidiaries.
Our ability to borrow additional amounts under the Credit Agreement is conditional upon the absence of any
defaults, as well as the absence of any material adverse change (as defined in the Credit Agreement).
93
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
17. Financial Instruments — (continued)
On June 14, 2021, we entered into interest rate swap agreements for the period October 17, 2022 through
October 27, 2024. These transactions have the effect of fixing the LIBOR portion of the effective interest rate (before
addition of the spread) on $350 million of indebtedness drawn under the Credit Agreement at the rate of 0.838%
during the period. Under the terms of those transactions, we pay the fixed rate of 0.838% and the counterparties pay
a floating rate based on the one-month LIBOR rate at each monthly calculation date. The monthly calculation date is
the 16th of each month, and on December 16, 2022, one month LIBOR was 4.33%. On December 16, 2022, the all-
in-rate on the $350 million of debt was 2.463%.
On October 17, 2022 our interest rate swap agreements that were in effect from December 18, 2017 terminated.
These transactions had the effect of fixing the LIBOR portion of the effective interest rate (before addition of the
spread) on $350 million of indebtedness drawn under the Credit Agreement at the rate of 2.11% during the period.
Under the terms of those transactions, we paid the fixed rate of 2.11% and the counterparties paid a floating rate
based on the one-month LIBOR rate at each monthly calculation date. The all-in-rate on the $350 million of debt
was 3.735%.
These interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note 18. No
cash collateral was received or pledged in relation to the swap agreements.
Under the Credit Agreement, we are currently required to maintain a leverage ratio (as defined in the agreement)
of not greater than 3.50 to 1.00 and minimum interest coverage (as defined) of 3.00 to 1.00.
As of December 31, 2022, our leverage ratio was 1.25 and our interest coverage ratio was 15.17. We may
purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50, and may
make acquisitions with cash provided our leverage ratio does not exceed the limits noted above.
Indebtedness under the Credit Agreement is ranked equally in right of payment to all unsecured senior debt. We
were in compliance with all debt covenants as of December 31, 2022.
Currently, our Credit Agreement and certain of our derivative instruments reference one-month USD LIBOR-
based rates, which are set to discontinue after June 30, 2023. Regulators in the U.S. and other jurisdictions have
been working to replace these rates with alternative reference interest rates that are supported by transactions in
liquid and observable markets, such as the Secured Overnight Financing Rate (SOFR) for USD LIBOR. Our Credit
Agreement contains provisions specifying alternative interest rate calculations to be employed when LIBOR ceases to
be available as a benchmark and we have adhered to the ISDA IBOR Fallbacks Protocol, which will govern our
derivatives upon the final cessation of USD LIBOR. Amendments to the Reference Rate Reform standard have
helped limit the accounting impact from contract modifications, including hedging relationships, due to the transition
from LIBOR to alternative reference rates that are completed by December 31, 2024. We adopted certain provisions
of this standard during 2021. While we currently do not expect a significant impact to our operating results, financial
position or cash flows from the transition from LIBOR to alternative reference interest rates, we will continue to
monitor the impact of this transition until it is completed.
18. Fair-Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants at the measurement date. Accounting principles establish a hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that
the most observable inputs be used when available. Level 3 inputs are unobservable data points for the asset or
liability, and include situations in which there is little, if any, market activity for the asset or liability. We had no Level 3
financial assets or liabilities at December 31, 2022, or at December 31, 2021, other than certain pension assets (see
Note 4).
94
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
18. Fair-Value Measurements — (continued)
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:
(in thousands)
Fair Value
Assets:
Cash equivalents
Other Assets:
December 31, 2022
December 31, 2021
Quoted prices
in active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Quoted prices
in active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
$
6,533 $
—
$
20,665 $
—
Common stock of unaffiliated foreign public
company (a)
Interest rate swaps
602
—
—
23,605
702
—
—
3,328
Liabilities:
Other noncurrent liabilities:
Interest rate swaps
_____________________
(a)
Original cost basis $0.5 million
—
—
—
(5,176)
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.
Amounts determined to be due within one year are reclassified to Other current assets and/or Accrued liabilities in the
Consolidated Balance Sheets. Unrealized gains and losses on the swaps flow through the caption Derivative
valuation adjustment in the Shareholders’ equity section of the Consolidated Balance Sheets. As of December 31,
2022, 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 $0.5 million in 2022, $7.1
million in 2021 and $5.4 million in 2020. Additionally, non-cash interest income related to the amortization of swap
buyouts totaled $0.0 million in 2022, $0.3 million in 2021, and $1.4 million in 2020.
We operate our business in many regions of the world, and currency rate movements can have a significant
effect on operating results. Foreign currency instruments are entered into periodically, and consist of foreign currency
option contracts and forward contracts that are valued using quoted prices in active markets obtained from
independent pricing sources. These instruments are measured using market foreign exchange prices and are
recorded in the Consolidated Balance Sheets as Other assets and Accounts payable, as applicable. Changes in fair
value of these instruments are recorded as gains or losses within Other (income)/expense, net.
When exercised, the foreign currency instruments are net settled with the same financial institution that bought or
sold them. For all positions, whether options or forward contracts, there is risk from the possible inability of the
financial institution to meet the terms of the contracts and the risk of unfavorable changes in interest and currency
rates, which may reduce the value of the instruments. We seek to mitigate risk by evaluating the creditworthiness of
counterparties and by monitoring the currency exchange and interest rate markets while reviewing the hedging risks
and contracts to ensure compliance with our internal guidelines and policies.
95
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
18. Fair-Value Measurements — (continued)
(Gains)/losses related to changes in fair value of derivative instruments that were recognized in Other (income)/
expense, net in the Consolidated Statements of Income were as follows:
(in thousands)
Derivatives not designated as hedging
instruments
2022
2021
2020
Foreign currency options (gains)/losses
$
(509)
169
64
19. Other Noncurrent Liabilities
As of December 31, 2022 and 2021, Other Noncurrent Liabilities consisted of the following:
(in thousands)
Operating leases
Finance leases
Postretirement benefits other than pensions
Pension liabilities
Interest rate swap agreements
Incentive and deferred compensation
Other
Total
2022
2021
$
50,190 $
—
31,998
23,061
—
1,395
2,114
11,001
14,515
41,257
30,850
5,176
3,257
1,738
$
108,758 $
107,794
Pension and postretirement liabilities decreased during 2022 as a result of actions taken to settle the U.S.
Pension Plus plan, which, in addition to significant net actuarial gains, lead to a reduction in unfunded pension
liabilities.
20. Leases
We are generally the lessee in our lease transactions. Lessees are required to recognize a lease liability and a
right of use (ROU) asset for leases with terms greater than 12 months, in accordance with the practical expedient that
is available for ongoing accounting.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent an
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized
on the commencement date based on the present value of lease payments over the lease term, using the rate implicit
in the lease. If that rate is not readily determinable, the rate is based on the Company’s incremental borrowing rate.
The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease
terms may include options to extend or terminate the lease. Our ROU assets include the values associated with the
additional periods when it is reasonably certain that we will exercise the option. We review the carrying value of ROU
assets for impairment whenever events and circumstances indicate that the carrying value of an asset group may not
be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.
We have entered into operating and finance leases for offices, manufacturing facilities, warehouses, vehicles,
and certain equipment. Our leases have remaining lease terms of 1 year to 12 years, some of which include options
to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year.
96
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
20. Leases — (continued)
The components of lease expense were as follows:
(in thousands)
Finance lease
Amortization of right-of-use asset $
Interest on lease liabilities
Operating lease
Fixed lease cost
Variable lease cost
Short-term lease cost
Total lease expense
$
December 31, 2022
December 31, 2021
December 31, 2020
For the years ended
416 $
529
6,036
438
1,025
8,444 $
997 $
1,353
5,283
(259)
1,037
8,411 $
1,056
1,475
5,448
314
996
9,289
Supplemental cash flow information related to leases was as follows:
(in thousands)
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash outflows from operating
leases
Operating cash outflows from finance leases
Financing cash outflows from finance leases
$
Right-of-use assets obtained in exchange for
lease obligations:
Operating leases
Finance leases
$
December 31, 2022
December 31, 2021
December 31, 2020
For the years ended
6,612 $
529
654
38,559 $
—
5,233 $
1,353
1,438
2,189 $
—
5,300
1,475
7,214
4,017
—
The initial recognition of each ROU asset and lease liability at lease commencement is a noncash transaction
that is excluded from amounts reported in the Consolidated Statements of Cash Flows.
In 2022, the Company extended the lease of its primary manufacturing facility in Salt Lake City, Utah, which
resulted in a lease classification change from Finance to Operating and included a non-cash increase of $37.1 million
to both Other assets and to Other noncurrent liabilities in the Consolidated Balance Sheets. Due to the non-cash
nature of the transaction, those increases are excluded from amounts reported in the Consolidated Statements of
Cash Flows.
97
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
20. Leases — (continued)
Supplemental balance sheet information related to leases was as follows:
(in thousands)
Operating leases
Right of use assets included in Other assets
Lease liabilities included in
Accrued liabilities
Other noncurrent liabilities
Total operating lease liabilities
Finance leases
Right-of-use assets included in Property, plant and equipment, net
Lease liabilities included in
Accrued liabilities
Other noncurrent liabilities
Total finance lease liabilities
December 31, 2022
December 31, 2021
$
$
$
$
$
$
48,475 $
14,366
5,929 $
50,190
56,119 $
3,730
11,001
14,731
— $
7,979
— $
—
— $
1,606
14,515
16,121
Additional information for leases existing at December 31, 2022 and 2021 was as follows:
December 31, 2022
December 31, 2021
Weighted average remaining lease term
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases
Maturities of lease liabilities as of December 31, 2022 were as follows:
Operating leases
$
$
(in thousands)
Year ending December 31,
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less imputed interest
Total
98
6 years
8 years
4.4 %
8.0 %
11 years
0 years
5.3 %
—
8,734
7,586
6,970
6,985
6,775
36,834
73,884
(17,765)
56,119
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
20. Leases — (continued)
Maturities of lease liabilities as of December 31, 2021 were as follows:
(in thousands)
Year ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less imputed interest
Total
Operating leases
Finance leases
$
$
4,737 $
3,412
2,199
1,801
1,782
2,789
16,720
(1,989)
14,731 $
2,838
3,004
3,004
3,004
3,004
6,501
21,355
(5,234)
16,121
99
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
21. Commitments and Contingencies
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 3,598 claims as of December 31, 2022.
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,
2020
2021
2022
Opening
Number of
Claims
3,708
3,615
3,609
Claims
Dismissed,
Settled, or
Resolved
152
32
43
New Claims
59
26
32
Closing
Number of
Claims
3,615
3,609
3,598
Amounts Paid
(thousands) to
Settle or
Resolve
$57
93
$125
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 December 31, 2022 we had resolved, by means
of settlement or dismissal, 38,022 claims. The total cost of resolving all claims was $10.6 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.
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.
22. Incentive Plans
We have incentive compensation plans that authorize the issuance of stock-based awards for key employees,
which are designed to reward short and long-term contributions and provide incentives for recipients to remain with
the Company. We issue stock-based awards in the form of restricted stock units and performance stock units that
generally vest between one and five years from the grant date and can be settled in cash or shares. Expenses
associated with these awards are recognized over each respective vesting period. Liability based awards are settled
in cash, while equity based awards are settled in stock.
The Albany International 2017 Incentive Plan provides key members of management with incentive
compensation based on achieving certain performance or service measures. Awards can be paid in cash, shares of
Class A Common Stock, Options, or other stock-based or incentive compensation awards pursuant to the Plan.
Participants may elect to receive shares net of applicable income taxes.
100
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
22. Incentive Plans — (continued)
Annual awards granted under this plan resulted in cash payments of $4.5 million in 2022 and $3.1 million in 2021
as a result of performance in the preceding year.
The Compensation Committee granted the executive management team a multi-year incentive compensation
award in each of 2020, 2021 and 2022. Each of these awards vests over three years from the grant date, and the
extent of payout is dependent upon the achievement of certain performance metrics during the vesting period, as
defined by the Compensation Committee. Payout is scheduled to occur no later than 90 days after the end of the
vesting period. If a participant terminates employment prior to the award becoming fully vested, the person may
forfeit all or a portion of the incentive compensation award. The grant date share price is determined when the awards
are approved each year and that price is used to measure the cost for the share-based portion of an award. Expense
associated with these awards is recognized over the vesting period. In connection with these awards, we recognized
expense of $3.9 million in 2022, $3.7 million in 2021 and $4.8 million in 2020. The net impact to earnings for the
respective years was $2.7 million, $2.6 million, and $3.4 million. Based on current estimates of achievement of certain
performance metrics, we anticipate recognizing $1.2 million of expense in 2022 and $0.3 million of expense in 2023
and 2024, respectively.
Beginning in 2021, the executive management team also receives restricted stock units that vest annually on
December 31 and pay out no later than 90 days after the vesting period ends. The grant date share price is the date
when the award is approved by the Compensation Committee and is used to measure the cost of the award. We
recognized $1.5 million of expense in 2022 associated with these restricted stock units. The net impact to earnings
was $1.0 million.
As of December 31, 2022, there were 860,629 shares of Company stock authorized for the payment of awards
under these plans. Information with respect to these plans is presented below:
Shares potentially payable at January 1, 2020
Forfeitures
Payments
Shares accrued based on 2020 performance
Shares potentially payable at December 31, 2020
Forfeitures
Payments
Shares accrued based on 2021 performance
Shares potentially payable at December 31, 2021
Forfeitures
Payments
Shares accrued based on 2022 performance
Shares potentially payable at December 31, 2022
Number of
shares
Weighted
average grant
date value
per share
Year-end
intrinsic value
(000's)
81,712 $
65.06 $
5,316
—
(20,680) $
36,808 $
97,840 $
—
(31,722) $
41,512 $
107,630 $
—
(35,897) $
64,208 $
135,941 $
47.35
73.43
71.95 $
7,040
66.25
78.06
75.99 $
84.27
86.00
79.11 $
8,179
10,754
In 2012, the Company adopted a Phantom Stock Plan ("PSP") whereby awards under this program vest over
a 5 year period and are paid annually in cash based on current market prices of the Company’s stock. Under this
program, employees may earn more or less than the target award based on the Company’s results in the year of the
award. Expense recognized for this plan amounted to $8.6 million in 2022, $6.6 million in 2021, and $5.4 million in
2020. The net impact to earnings for the respective years was $6.0 million, $4.6 million, and $3.9 million. Based on
awards outstanding at December 31, 2022, we expect to record approximately $16 million of compensation cost from
2023 to 2026. The weighted average period for recognition of that cost is approximately 2 years.
101
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
22. Incentive Plans — (continued)
The determination of compensation expense for the PSP is based on the number of outstanding share units, the
end-of-period share price, and Company performance. Information with respect to the PSP is presented below:
Number of
shares
Weighted
average value
per
share
Cash paid for
share based
liabilities
(000's)
Share units potentially payable at January 1, 2020
215,072
Grants
Changes due to performance
Payments
Forfeitures
Share units potentially payable at December 31, 2020
Grants
Changes due to performance
Payments
Forfeitures
Share units potentially payable at December 31, 2021
Grants
Changes due to performance
Payments
Forfeitures
Share units potentially payable at December 31, 2022
73.04 $
5,848
63,104
27,921
(80,808) $
(11,441)
213,848
56,536
52,296
(68,622) $
74.22 $
5,093
(5,644)
248,414
49,863
34,539
(81,421) $
85.69 $
6,977
(24,644)
226,751
During 2020, 2021 and 2022, the Company granted restricted stock units to executives. The amount of
compensation expense is subject to change in the market price of the Company’s stock and was recorded in Selling,
general, and administrative expenses. The vesting and payments due under these grants will occur in various periods
from 2020 to 2024. Expense recognized for these grants was $1.5 million in 2022, $0.6 million in 2021, and $0.4
million in 2020. The net impact to earnings for the respective years was $1.0 million, $0.4 million, and $0.3 million.
Based on awards outstanding at December 31, 2022, we expect to record approximately $1.0 million of compensation
cost during 2023.
The Company maintains a voluntary savings plan covering substantially all employees in the United States. The
Plan, known as the Prosperity Plus Savings Plan, is a qualified plan under section 401(k) of the U.S. Internal Revenue
Code. The Company matches, in the form of cash, between 50 percent and 100 percent of employee contributions up
to a defined maximum. The investment of employee contributions to the plan is self-directed. The Company’s cost of
the plan amounted to $6.6 million in 2022, $6.2 million in 2021, and $6.5 million in 2020.
The Company’s profit-sharing plan covers substantially all employees in the United States. After the close of
each year, the Board of Directors reviews and approves the amount of the profit-sharing contribution. Company
contributions to the plan are in the form of cash. The expense recorded for this plan was $4.6 million in 2022, $4.8
million in 2021, and $3.6 million in 2020.
102
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
23. Shareholders’ Equity
We have two classes of Common Stock, Class A Common Stock and Class B Common Stock, each with a par
value of $0.001 and equal liquidation rights. Each share of our Class A Common Stock is entitled to one vote on all
matters submitted to shareholders, and each share of Class B Common Stock is entitled to 10 votes. Class A and
Class B Common Stock will receive equal dividends as the Board of Directors may determine from time to time. The
Class B Common Stock is convertible into an equal number of shares of Class A Common Stock at any time. As of
December 31, 2022, there were no Class B Common Stock outstanding nor any were anticipated to be issued.
In 2019, a public offering of a portion of the Standish Family shares reduced the number of Class A Common
Stock reserved for the conversion of Class B shares, by 1.6 million. In 2021, Standish Family Holdings, LLC and J.S.
Standish Company (the "Selling Stockholders") agreed to sell to J.P. Morgan Securities LLC all of its ownership in the
Company's Class A common stock. Such constituted a sale of nearly all of the remaining 1.6 million shares of the
Company’s Class A Common Stock, par value $0.001 per share, to be issued upon conversion of an equal number of
shares of the Company’s Class B common stock, par value $0.001 per share, at a price per share of $75.9656 (the
"Transaction"). Immediately following the Transaction, the Selling Stockholders and related persons (including
Christine L. Standish and John C. Standish) hold in the aggregate shares of the Company’s common stock entitling
them to cast less than one percent of the combined votes entitled to be cast by all stockholders of the Company.
In 2021, the Company's Board of Directors authorized the Company to repurchase shares of up to $200 million
through open market purchases, privately negotiated transactions or otherwise, and to determine the prices, times
and amounts. The program does not obligate the Company to acquire any particular amount of common stock, and it
may be suspended or terminated at any time at the Company's discretion. The share repurchase program does not
have an expiration date. The timing and amount of any share repurchases will be based on the Company’s liquidity,
general business and market conditions, debt covenant restrictions and other factors, including alternative investment
opportunities and capital structure. As of December 31, 2022, the Company has repurchased in total 1,308,003
shares for a total cost of $109.4 million. Of this, 1,022,717 shares were purchased in 2022 for $85.1 million and
285,286 shares were purchased in 2021 for $24.4 million.
Activity in Shareholders’ equity for 2020, 2021, and 2022 is presented below:
(in thousands)
Class A
Common Stock
Class B
Common Stock
Shares
Amount
Shares
Amount
Additional
paid-in
capital
Retained
earnings
Accumulated
items of other
comprehensive
income
Class A
Treasury Stock
Shares
Amount
Noncontrolling
Interest
Total Equity
January 1, 2020
39,099 $
—
—
13
3
—
39
—
—
—
—
—
1,618 $
2 $ 432,518 $ 698,496 $
(175,981)
8,409 $ (256,391) $
4,006 $
702,689
—
—
—
—
—
—
—
—
—
—
—
98,589
—
(1,443)
622
55
501
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(18)
382
(1,346)
97,243
—
—
—
—
(1,443)
622
55
883
—
—
—
—
—
(23,651)
—
—
—
—
(23,651)
—
—
—
—
—
—
—
—
—
(1,245)
—
—
—
39,649
—
—
—
—
—
—
—
—
10,333
—
—
—
—
—
(1,245)
1,139
40,788
—
10,333
103
Net income
Adoption of
accounting
standards (a)
Compensation and
benefits paid or
payable in shares
Options exercised
Shares issued to
Directors'
Dividends declared
Class A
Common
Stock,
$0.77 per
share
Class B
Common
Stock,
$0.77 per
share
Cumulative
translation
adjustments
Pension and
postretirement
liability
adjustments
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
23. Shareholders’ Equity — (continued)
(in thousands)
Class A
Common Stock
Class B
Common Stock
Class A
Treasury Stock
Shares
Amount
Shares
Amount
Additional
paid-in
capital
Retained
earnings
Accumulated
items of other
comprehensive
income
Shares
Amount
Noncontrolling
Interest
Total Equity
—
39,115 $
—
20
7
—
—
—
39
—
—
—
—
—
—
—
—
—
(6,409)
—
—
—
(6,409)
1,618 $
2 $ 433,696 $ 770,746 $
(132,408)
8,391 $ (256,009) $
3,799 $
819,865
—
—
—
—
—
—
—
—
—
—
—
118,478
2,441
153
706
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(11)
241
290
118,768
—
—
—
2,441
153
947
—
285
(24,375)
—
(24,375)
—
—
—
—
—
(25,520)
—
—
—
—
(25,520)
—
—
—
—
1,618
2
(1,618)
(2)
—
—
—
—
—
—
—
—
—
—
—
—
—
(647)
—
—
—
—
—
—
—
—
(22,677)
—
1,171
7,930
—
—
—
—
—
—
—
—
—
(647)
—
(451)
(23,128)
—
—
1,171
7,930
—
—
40,760 $
—
24
1
—
—
—
—
—
—
—
—
41
—
—
—
—
—
—
—
—
—
— $ — $ 436,996 $ 863,057 $
(145,984)
8,665 $ (280,143) $
3,638 $
877,605
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
95,762
3,727
17
800
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(13)
285
—
1,023
(85,065)
—
(27,501)
—
—
—
—
(40,971)
—
—
—
—
—
(3,491)
—
26,198
—
—
—
—
—
746
96,508
—
—
—
—
3,727
17
1,085
(85,065)
—
(27,501)
110
(40,861)
—
—
(3,491)
26,198
Derivative
valuation
adjustment
December 31,
2020
Net income
Compensation and
benefits paid or
payable in shares
Options exercised
Shares issued to
Directors'
Purchase of
Treasury shares
(b)
Class A
Common
Stock,
$0.81 per
share
Class B
Common
Stock,
$0.81 per
share
Conversion of
Class B shares to
Class A shares (c)
Cumulative
translation
adjustments
Pension and
postretirement
liability
adjustments
Derivative
valuation
adjustment
December 31,
2021
Net income
Compensation and
benefits paid or
payable in shares
Options exercised
Shares issued to
Directors'
Purchase of
Treasury shares
(d)
Dividends declared
Class A
Common
Stock,
$0.88 per
share
Cumulative
translation
adjustments
Pension and
postretirement
liability
adjustments
Settlement of
certain pension
liabilities
104
ALBANY INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
23. Shareholders’ Equity — (continued)
(in thousands)
Class A
Common Stock
Class B
Common Stock
Class A
Treasury Stock
Shares
Amount
Shares
Amount
Additional
paid-in
capital
Retained
earnings
Accumulated
items of other
comprehensive
income
Shares
Amount
Noncontrolling
Interest
Total Equity
Derivative
valuation
adjustment
December 31,
2022
—
—
—
—
—
—
19,321
—
—
—
19,321
40,785 $
41
— $ — $ 441,540 $ 931,318 $
(144,927)
9,675 $ (364,923) $
4,494 $
867,543
(a)
(b)
(c)
(d)
As described in Note 1, the Company adopted the provisions of ASC 326, Current expected credit losses
(CECL) effective January 1, 2020, which resulted in a decrease to Retained earnings of $1.4 million.
On October 25, 2021, the Company's Board of Directors authorized the Company to repurchase shares of up
to $200 million through open market purchases, privately negotiated transactions or otherwise, and to
determine the prices, times and amounts. In 2021, the Company repurchased 285,286 shares totaling $24.4
million.
In the third and fourth quarters of 2021, Standish Family Holdings, LLC executed a secondary offering of
Albany shares. As a result of the offerings, 1.6 million shares of Class B Common Stock previously owned by
Standish Family Holdings, LLC were converted to Class A Common Stock and then sold to third parties. Costs
associated with the offering were charged directly to Standish Family Holdings, LLC.
In 2022, as part of the Share Repurchase program, the Company repurchased 1,022,717 shares totaling
$85.1 million.
105
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company, with the participation of its management, including its Chief Executive Officer and Chief Financial
Officer, has carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) as of December 31, 2022. Such
disclosure controls and procedures are designed to ensure that information required to be disclosed in reports under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
Commission's rules and forms, and to ensure that information required to be disclosed under the Exchange Act is
accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
Based on and as of the date of this evaluation, the Chief Executive Officer and the Chief Financial Officer have
concluded that the Company’s disclosure controls and procedures were effective as of such date.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The
Company’s internal control system is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States of America and includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on
the financial statements.
Because of its limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may
deteriorate.
Management, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and
oversight of the Board of Directors, conducted an assessment of the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2022 using the criteria set forth by the 2013 Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.
Based on management’s assessment, we have concluded that our internal control over financial reporting was
effective at December 31, 2022. Our independent registered accounting firm has issued a report on the effectiveness
of our internal control over financial reporting which is included under Item 8.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during our fourth fiscal quarter of 2022 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
106
/s/ A. William Higgins
A. William Higgins
President and
Chief Executive
Officer
and Director
(Principal Executive Officer)
/s/ Stephen M. Nolan
Stephen M. Nolan
/s/ Elisabeth Indriani
Elisabeth Indriani
Chief Financial
Officer
and Treasurer
(Principal Financial Officer)
Vice President and
Controller
(Principal Accounting Officer)
Item 9B. OTHER INFORMATION
None.
107
PART III
The information required by Items 10, 11, 12, 13, and 14 is set forth under the headings below and when
applicable is incorporated herein by reference to the Company’s 2023 Proxy Statement (“Proxy Statement”) to be filed
with the SEC within 120 days after December 31, 2022 in connection with the solicitation of proxies for the Company’s
2023 annual meeting of shareholders.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
a)
b)
c)
d)
e)
f)
g)
h)
i)
Directors. The information set out in the section captioned “Election of Directors”, will be filed
within the Proxy Statement.
Executive Officers. Information about the officers of the Company is set forth in Item 1 above.
Significant Employees. Same as Executive Officers.
Nature of any family relationship between any director, executive officer, person nominated
or chosen to become a director or executive officer. The information set out in the section
captioned “Certain Business Relationships and Related Person Transactions”, will be filed within
in the Proxy Statement.
Business experience, during the past five years, of each director, executive officer,
person nominated or chosen to become director or executive officer, and significant
employees. Information about the officers of the Company is set forth in Item 1 above and the
information set out in the section captioned “Election of Directors” in the Proxy Statement.
Involvement in certain legal proceedings by any director, person nominated to become a director
or executive officer. The information set out in the section captioned “Election of Directors”, will be
filed within the Proxy Statement.
Certain promoters and control persons. None.
Audit Committee Financial Expert. The information set out in the section captioned “Corporate
Governance”, will be filed within the Proxy Statement.
Code of Ethics. The Company has adopted a Code of Ethics that applies to all of its employees,
directors, and officers, including the Chief Executive Officer, Chief Financial Officer and Vice
President- Controller. A copy of the Code of Ethics is filed as Exhibit 10(p) and is available at the
Corporate Governance section of the Company’s website (www.albint.com), within the investor
materials section. A copy of the Code of Ethics may be obtained, without charge, by writing to:
Investor Relations Department, Albany International Corp., 216 Airport Drive, Rochester, New
Hampshire 03867. Any amendment to the Code of Ethics will be disclosed by posting the
amended Code of Ethics on the Company’s website. Any waiver of any provision of the Code of
Ethics will be disclosed by the filing of a Form 8-K.
Item 11.
EXECUTIVE COMPENSATION
The information required by this item is set forth in the sections of the Company’s 2023 Proxy Statement
captioned “Executive Compensation Earned,” “Summary Compensation Table,” “CEO Pay Ratio,” “Grants of Plan-
Based Awards,” “Outstanding Equity Awards At Fiscal Year-End,” “Option Exercises and Stock Vested,” “Pension
Benefits,” “Nonqualified Deferred Compensation,” “Director Compensation,” “Compensation Committee Report,”
“Compensation Discussion and Analysis,” and “Compensation Committee Interlocks and Insider Participation” is
incorporated herein by reference.
108
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this item is set forth in the section captioned “Share Ownership” in the Company’s
2023 Proxy Statement is incorporated herein by reference.
Equity Compensation Plan Information
Number of securities to be
issued upon
exercise of outstanding
options, warrants,
and rights
Weighted average
exercise price of
outstanding options,
warrants, and rights
Number of securities
remaining available
for future issuance under
equity
compensation plans
(excluding securities
reflected in column (a))
(a)
(b)
(c)
— (1)
—
— (1)
—
—
—
860,629 (2),(3),(4),(5)
—
860,629 (2),(3),(4),(5)
Plan Category
Equity compensation plans
approved by security
holders
Equity compensation plans
not approved by security
holders
Total
_______________________
(1)
(2)
(3)
(4)
(5)
Does not include 68,561, 46,534, and 59,200 shares that may be issued pursuant to 2020, 2021 and 2022,
respectively, performance incentive awards granted to certain executive officers pursuant to the 2017
Incentive Plan. Such awards are not “exercisable,” but will be paid out to the recipients in accordance with
their terms, subject to certain conditions.
Reflects the number of shares that may be issued pursuant to future awards under the 2011 Incentive Plan
and 2017 Incentive Plan. Additional shares of Class A Common Stock are available for issuance under the
2011 Incentive Plan (see note 3 below) as well as under the Directors’ Annual Retainer Plan (see note 5
below). No additional shares are available under any of the stock option plans pursuant to which outstanding
options were granted.
102,542 shares available for future issuance under the 2011 Incentive Plan. The 2011 Incentive Plan allows
the Board from time to time to increase the number of shares that may be issued pursuant to awards granted
under that Plan, provided that the number of shares so added may not exceed 500,000 in any one calendar
year, and provided further that the total number of shares then available for issuance under the Plan shall not
exceed 1,000,000 at any time. Shares of Common Stock covered by awards granted under the 2011 Incentive
Plan are only counted as used to the extent they are actually issued and delivered. Accordingly, if an award is
settled for cash, or if shares are withheld to pay any exercise price or to satisfy any tax-withholding
requirement, only shares issued (if any), net of shares withheld, will be deemed delivered for purposes of
determining the number of shares available under the Plan. If shares are issued subject to conditions that
may result in the forfeiture, cancellation, or return of such shares to the Company, any shares forfeited,
canceled, or returned shall be treated as not issued. Assuming full exercise by the Board of its power to
increase annually the number of shares available under the 2011 Incentive Plan, the maximum number of
additional shares that could yet be issued pursuant to the Plan awards (including those set forth in column (c)
above) would be 1,360,629. No new shares have been awarded under this plan during 2018 or 2019.
758,087 shares available for future issuance under the 2017 Incentive Plan. Shares of Common Stock
covered by awards granted under the 2017 Incentive Plan are only counted as used to the extent they are
actually issued and delivered, including shares withheld to satisfy tax requirement. Accordingly, if an award is
settled for cash, or if shares are withheld to pay any exercise price, only shares issued (if any), net of shares
withheld, will be deemed delivered for purposes of determining the number of shares available under the
Plan. If shares are issued subject to conditions that may result in the forfeiture, cancellation, or return of such
shares to the Company, any shares forfeited, canceled, or returned shall be treated as not issued. The Plan
awards (including those set forth in column (c) above) would be 758,087.
The Directors’ Annual Retainer Plan provides that the aggregate dollar amount of the annual retainer payable
for service as a member of the Company’s Board of Directors is $195,000, $120,000 of which is required to
109
be paid in shares of Class A Common Stock, the total number of shares to be paid to each Director each year
shall be determined by the closing price of a share of such stock on the day of the Annual Meeting at which
the election of directors for such year occurs ("the Valuation Price"), as such Valuation Price is reported for
such day in the Wall Street Journal, rounded down to the nearest whole number. Directors are expected to
hold shares with a value of $585,000 or three times the value of the annual retainer. Directors may elect to
receive, in stock, all of the retainer payable in shares of Common Stock. A director and related persons, who
owns shares of Common Stock with a value of at least $585,000 may elect to receive, in cash, all or any
portion of the retainer otherwise payable in shares of Common Stock.
Item 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item is set forth in the section captioned “Election of Directors” in the Company’s
2023 Proxy Statement is incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our independent registered public accounting firm is KPMG LLP, Albany, NY, Auditor Firm ID: 185.
The information required by this item is set forth in the section captioned “Independent Auditors” in the
Company’s 2023 Proxy Statement is incorporated herein by reference.
110
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
Exhibit Num
ber
Exhibit Description
Filed
Herewith
3 (a)
3 (b)
4.1
4 (a)
4 (b)
Amended and Restated Certificate of Incorporation
of Company
Bylaws of Company
Description of the Company's securities registered
pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended.
Article IV of Certificate of Incorporation of Company
Specimen Stock Certificate for Class A Common Stock
Credit Agreement
10(k)(xx)
$700 Million Five-Year Revolving Credit
Facility Agreement among Albany International Corp.,
the other Borrowers named therein, the Lenders Party
thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, dated as of October 27, 2020
Restricted Stock Units
10(l)(vi)
2003 Restricted Stock Unit Plan, as amended May
7, 2008
2011 Performance Phantom Stock Plan as adopted
on May 26, 2011
Form of Restricted Stock Unit Award for units
granted on August 28, 2018
Form of Restricted Stock Unit Award for units
granted on April 1, 2019
Form of Restricted Stock Unit Award for units
granted on November 4, 2019
Form of 2011 Performance Stock Bonus agreement
Form of 2021 Restricted Stock Unit Award Agreement
10(l)(viii)
10(l)(xi)
10(l)(xii)
10(l)(xiii)
10(l)(xiv)
10(l)(xv)
Stock Options
10(m)(i)
1992 Stock Option Plan
10(m)(vii)
1998 Stock Option Plan, as amended and restated as
of August 7, 2003
Executive Compensation
10(m)(ix)
10(m)(xvii) Form of 2011 Annual Performance Bonus Agreement
10(m)(xviii) Form of 2011 Multi-Year Performance
2011 Incentive Plan
10(m)(xix)
10(l)(viii)
10(n)(i)
10(n)(ii)
Bonus Agreement
Form of 2021 Multi-year Performance Bonus
Agreement
Form of Severance Agreement between the
Company and certain corporate officers or key
executives
Supplemental Executive Retirement Plan, adopted as
of January 1, 1994, as amended and restated as
of January 1, 2008
2017 Incentive Plan
Incorporated by Reference
Form
8-K
8-K
8-K
8-K
S-1, No.
33-16254
8-K
8-K
Period
Ending
Filing Date
06/02/15
02/23/11
08/05/21
06/02/15
09/30/87
10/29/20
05/13/08
10-Q
6/30/11
08/09/11
8-K
09/04/18
10-Q
3/31/19
05/01/19
10-K
10-K
8-K
8-K
12/31/19
12/31/19
02/28/20
02/28/20
02/25/21
01/18/93
10-Q
9/30/03
11/06/03
8-K
8-K
8-K
8-K
8-K
8-K
Def 14A
06/01/11
03/29/11
03/29/11
02/25/21
01/04/16
01/02/08
03/29/17
111
Exhibit Num
ber
10(n)(iii)
10(n)(iv)
10(n)(v)
10(n)(vi)
10(o)(iv)
10(p)
10(q)
10(t)
10(u)(vii)
10.2
11
21
23
24
31(a)
31(b)
32(a)
Exhibit Description
Form of Incentive Award, dated April 1, 2019,
between the Company and Stephen M. Nolan
Form of Sign on Bonus Agreement, dated November
4,2019, between the Company and Greg Harwell
Form of Retention Bonus Agreement, dated January
21, 2020, between the Company and Stephen M.
Nolan
Form of 2021 Annual Performance Bonus Agreement
Directors’ Annual Retainer Plan, as amended
and restated as of February 23, 2018
Code of Ethics
Directors Pension Plan, amendment dated as
of January 12, 2005
Form of Indemnification Agreement
Employment agreement, dated January 21, 2020,
between the Company and A. William Higgins
Amended and restated LLC operating agreement
by and between Albany Engineered Composites
and Safran Aerospace Composites, Inc. 10% equity
interest in ASC for $28 million
Statement of Computation of Earnings per share
(provided in Footnote 8 to the Consolidated Financial
Statements)
Subsidiaries of Company
Consent of Independent Registered Public
Accounting Firms
Powers of Attorney
Certification of A. William Higgins required pursuant to
Rule 13a-14(a) or Rule 15d-14(a)
Certification of Stephen M. Nolan required pursuant
to Rule 13a-14(a) or Rule 15d-14(a)
Certification of A. William Higgins and Stephen
M. Nolan required pursuant to Rule 13a-14(b) or
Rule 15d-14(b) and Section 1350 of Chapter 63 of
Title 18 of the United States Code
Incorporated by Reference
Filed
Herewith
Form
Period
Ending
Filing Date
10-Q
3/31/19
05/01/19
10-K
12/31/19
02/28/20
8-K
8-K
Def 14A
10-K
12/31/03
8-K
8-K
01/23/20
02/25/21
03/28/18
03/11/04
01/13/05
04/12/06
10-K
12/31/19
02/28/20
10-K
12/31/13
02/26/14
10-K
10-K
10-K
10-K
12/31/22
02/24/23
12/31/22
02/24/23
12/31/22
02/24/23
12/31/22
02/24/23
10-K
12/31/22
02/24/23
10-K
12/31/22
02/24/23
10-K
12/31/22
02/24/23
X
X
X
X
X
X
X
112
The following information from the Registrant’s Annual Report on Form 10-K for the year ended December 31,
2022, formatted in Inline XBRL (Extensive Business Reporting Language), filed herewith:
101(i)
101(ii)
101(iii)
101(iv)
101(v)
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
X
10-K
12/31/22
Consolidated Statements of Income for the years
ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income
for the years ended December 31, 2022, 2021, and
2020
Consolidated Balance Sheets as of December 31,
2022 and 2021
Consolidated Statements of Cash Flows for the years
ended December 31, 2022, 2021, and 2020
Notes to Consolidated Financial Statements
XBRL Instance Document – the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
XBRL Taxonomy Extension Schema Document
12/31/22
12/31/22
10-K
10-K
12/31/22
12/31/22
10-K
10-K
X
X
X
X
2/24/23
2/24/23
2/24/23
2/24/23
2/24/23
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
Cover page formatted as Inline XBRL and contained in Exhibit 101
113
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 24th day of
February, 2023.
SIGNATURES
ALBANY INTERNATIONAL CORP.
By /s/ Stephen M. Nolan
Stephen M. Nolan
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the
following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature
Title
Date
*
A. William Higgins
President and Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Stephen M. Nolan
Stephen M. Nolan
Chief Financial Officer and Treasurer
(Principal Financial Officer)
*
Elisabeth Indriani
Vice President–Controller
(Principal Accounting Officer)
February 24, 2023
February 24, 2023
February 24, 2023
Chairman of the Board and Director
February 24, 2023
*
Erland E. Kailbourne
*
Katharine Plourde
*
Mark J. Murphy
*
John R. Scannell
Director
Director
Director
*
Kenneth W. Krueger
Director
*
J. Michael McQuade
*
Christina M. Alvord
*
Russell E. Toney
Director
Director
Director
*By /s/ Stephen M. Nolan
Stephen M. Nolan
Attorney-in-fact
114
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
SCHEDULE II
ALBANY INTERNATIONAL CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Column A
Column B
Column C
Column D
Column E
Description
Allowance for doubtful accounts
Year ended December 31:
2022
2021
2020 (b)
Allowance for sales returns
Year ended December 31:
2022
2021
2020
Valuation allowance deferred tax assets
Year ended December 31:
2022
2021
2020
__________________________
Balance at
beginning of
period
Charge
to expense
Other (a)
Balance at end
of the period
$
3,248 $
1,408 $
(672) $
5,140
1,719
(1,299)
1,628
(593)
1,793
3,984
3,248
5,140
$
9,552 $
9,668
11,249
6,130 $
6,022
3,199
(6,612) $
(6,138)
(4,780)
9,070
9,552
9,668
$
10,659 $
10,270 $
9,102
(839) $
949 $
391
(34) $
(560)
777
9,786
10,659
10,270
(a) Amounts sold, written off, or recovered, and the effect of changes in currency translation rates, are
included in Column D. 2020 includes $1.8 million transition adjustment related to the adoption of ASC 326.
(b) Beginning in 2020, Allowance for doubtful accounts includes valuation accounts established for contract
assets and noncurrent receivables as a result of the adoption of ASC 326. See Notes 11 and 12 for details.
115
CORPORATE INFORMATION
Investor Relations
The Company's Investor Relations Department may be contacted at:
Investor Relations Department
Albany International Corp.
216 Airport Drive
Rochester, NH 03867
Telephone: (603) 330-5850
Fax: (603) 994-3974
E-mail: investor.relations@albint.com
Transfer Agent and Registrar
Computershare
PO box 43006
Providence, RI 02940-3006
Telephone (toll-free): 1-877-277-9931
Web: www.computershare.com/investor
Shareholder Services
As an Albany International shareholder, you are invited to take advantage of our convenient shareholder
services.
Computershare maintains the records for our registered shareholders and can help you with a variety of
shareholder-related services at no charge, including:
• Change of name and/or address
• Consolidation of accounts
• Duplicate mailings
• Dividend reinvestment enrollment
•
•
•
Lost stock certificates
Transfer of stock to another person
Additional administrative services
Access your investor statements online 24 hours a day, 7 days a week at Investor Center. For more information,
go to www.computershare.com/investor.
Notice of Annual Meeting
As part of our company-wide efforts to address the public health risks presented by the novel coronavirus
pandemic, we will hold our Annual Meeting virtually this year. The Annual Meeting of the Company’s shareholders will
be held virtually on Friday, May 12, 2023 at 9:00 a.m. EDT. Access details for the virtual meeting will be published in
the Company’s 2023 Proxy filed with the Securities and Exchange Commission.
Equal Employment Opportunity
Albany International, as a matter of policy, does not discriminate against any employee or applicant for
employment because of race, color, religion, sex, sexual orientation, national origin, age, physical or mental disability,
or status as a disabled or Vietnam-era veteran. This policy of nondiscrimination is applicable to matters of hiring,
upgrading, promotions, transfers, layoffs, terminations, rates of pay, selection for training, recruitment, and recruitment
advertising. The Company maintains affirmative action programs to implement its EEO policy.
116
Trademarks and Trade Names
INLINE, KRAFTLINE, PRINTLINE, HYDROCROSS, SEAM HYDROCROSS, HYDROMAX, SEAMPLANE,
SEAM KMX, SPRING, VENTABELT EVM, VENTABELT XTS, VENTABELT XTR, TRANSBELT GX, TRANSBELT
GXM, SPIRALTOP, AEROPULSE, AEROPOINT, DURASPIRAL, TOPSTAT, SUPRASTAT, PROVANTAGE,
PROVANTAGE LC, PACKLINE, PACKTEX, PROLUX, KRAFTEX, FIBRETEX, ULTRA XT, DYNATEX, AEROCLEAN,
SPIRALRUN, X-COR, K-COR, NOVALACE, DEXWIN, TWINCONE, FILAWIN, AIRSTRUT, SOFTLINE, and
CARBON-24 are all trade names of Albany International Corp.
Directors and Officers
Directors
Erland E. Kailbourne, Chairman 2,3
Retired – Chairman and Chief Executive Officer,
Fleet National Bank (New York Region)
A. William Higgins
President and Chief Executive Officer
Katharine L. Plourde1,3
Former Principal and Analyst,
Donaldson, Lufkin & Jenrette, Inc.
Kenneth Krueger1,3
Former Interim President and Chief Executive Officer
Manitowoc Company Inc.
Mark J. Murphy1,3
Chief Financial Officer,
Micron Technology
J. Michael McQuade2
Strategic Advisor to the President,
Carnegie Mellon University
Russell E. Toney2
President, Specialty Products Group,
Dover Corporation
1 Member, Audit Committee
2 Member, Compensation Committee
3 Member, Governance Committee
Officers
A. William Higgins
President and Chief Executive Officer
Daniel A. Halftermeyer
President – Machine Clothing
John R. Scannell2
Retired Chief Executive Officer,
Moog Inc.
Christina M. Alvord2
Former President, Southern and Gulf Coast Division,
Vulcan Materials Company
Stephen M. Nolan
Chief Financial Officer and Treasurer
Greg Harwell
President – Engineered Composites
Alice McCarvill
Executive Vice President Human Resources
and Chief Human Resources Officer
Robert A. Hansen
Senior Vice President and Chief Technology Officer
Elisabeth Indriani
Vice President – Controller
Joseph M. Gaug
Vice President – General Counsel and Secretary
117
SUBSIDIARIES OF REGISTRANT
Affiliate
Albany International Corp.
AEC Advanced Programs, Inc.
Albany International Holdings Two, Inc.
Albany International Machine Clothing Corp
Albany International Research Co.
Albany Engineered Composites, Inc.
Albany Safran Composites, LLC
Brandon Drying Fabrics, Inc.
Geschmay Corp.
Geschmay Forming Fabrics Corp.
Geschmay Wet Felts, Inc.
Transglobal Enterprises, Inc.
Albany Aerostructures Composites, LLC
Albany International Pty., Ltd.
Albany International Tecidos Tecnicos Ltda.
Albany International Canada Corp.
Albany International (China) Co., Ltd.
Albany International Engineered Textiles (Hangzhou) Co., Ltd.
Albany International OY
Albany Safran Composites, S.A.S
Albany International France, S.A.S.
Albany International Germany GmbH
CirComp GmbH
Albany International Italia S.r.l.
Albany International Japan Kabushiki Kaisha
Albany International Korea, Inc.
Albany Engineered Composites Mexico, S. de R.L. de C.V.
Albany Safran Composites Mexico, S. de R.L. de C.V.
Albany Engineered Composites Services Company, S. de R.L. de C.V.
Albany Mexico Services, S. de R.L. de C.V.
Albany International de Mexico S.A. de C.V.
100%
100%
Albany International B.V.
Nevo-Cloth Ltd.
Albany International S.A. Pty. Ltd.
Albany International AB
Albany International Holding AB
Albany International Holding (Switzerland) AG
Albany International Europe GmbH
Albany Engineered Composites Ltd.
Albany International Ltd.
Exhibit 21
Percent
Ownership
Percent
Ownership
Country of
Incorporation
Direct
Indirect
100%
100%
100%
100%
100%
100%
100%
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
Australia
Brazil
Canada
China
China
Finland
France
France
Germany
Germany
Italy
Japan
Korea
Mexico
Mexico
Mexico
Mexico
Mexico
Netherlands
Russia
South Africa
Sweden
Sweden
Switzerland
Switzerland
United Kingdom
United Kingdom
90%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
Consent of Independent Registered Public Accounting Firm
Exhibit 23
We consent to the incorporation by reference in the registration statements (Nos. 333-218122, 333-218121,
333-195269, 333-190774, 333-140995, 333-76078, 333-90069, 033-60767) on Form S-8 and in the registration
statement (No. 333-231776) on Form S-3ASR of our reports dated February 24, 2023, with respect to the
consolidated financial statements of Albany International Corp. and subsidiaries and the effectiveness of internal
control over financial reporting.
/s/ KPMG LLP
Albany, New York
February 24, 2023
Powers of Attorney
Exhibit 24
I hereby constitute and appoint A. William Higgins, Stephen M. Nolan, Elisabeth Indriani, and Joseph M. Gaug, as my
true and lawful attorney-in-fact and agent, with full power of substitution, for me and in my name, in any and all capacities, to sign
on my behalf the Annual Report on Form 10-K of Albany International Corp. for the fiscal year ended December 31, 2022, and
any amendment or supplement thereto; and to file such Annual Report on Form 10-K, and any such amendment or supplement,
with the Securities and Exchange Commission and any other appropriate agency pursuant to applicable laws and regulations.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of February, 2023.
/s/ Erland E. Kailbourne
Erland E. Kailbourne
Chairman of the Board and Director
/s/ Stephen M. Nolan
Stephen M. Nolan
Chief Financial Officer and Treasurer
(Principal Financial Officer)
/s/ John R. Scannell
John R. Scannell
Director
/s/ Kenneth W. Krueger
Kenneth W. Krueger
Director
/s/ Mark J. Murphy
Mark J. Murphy
Director
/s/ Russell E. Toney
Russell E. Toney
Director
/s/ A. William Higgins
A. William Higgins
President and Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Elisabeth Indriani
Elisabeth Indriani
Vice President - Controller
(Principal Accounting Officer)
/s/ Katharine L. Plourde
Katharine L. Plourde
Director
/s/ J. Michael McQuade
J. Michael McQuade
Director
/s/ Christina M. Alvord
Christina M. Alvord
Director
Exhibit 31(a)
Certification of the Chief Executive Officer
I, A. William Higgins, certify that:
1.
I have reviewed this report on Form 10-K of Albany International Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: February 24, 2023
By /s/ A. William Higgins
A. William Higgins
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31(b)
Certification of the Chief Financial Officer
I, Stephen M. Nolan, certify that:
1.
I have reviewed this report on Form 10-K of Albany International Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: February 24, 2023
By /s/ Stephen M. Nolan
Stephen M. Nolan
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Exhibit 32(a)
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title
18, United States Code), A. William Higgins, the Chief Executive Officer, and Stephen M. Nolan, the Chief Financial Officer
and Treasurer, of Albany International Corp., a Delaware corporation (“the Company”), do each hereby certify, to such
officer’s knowledge, that the annual report on Form 10-K for the fiscal year ended December 31, 2022 (“the Form 10-K”) of
the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the
information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations
of the Company for the period covered by the report.
Dated: February 24, 2023
By
By
/s/ A. William Higgins
A. William Higgins
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Stephen M. Nolan
Stephen M. Nolan
Chief Financial Officer and Treasurer
(Principal Financial Officer)
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216 Airport Drive, Rochester, NH 03867 USA
Tel: 603 330 5850 • Fax: 603 994 3835 • www.albint.com • investor.relations@albint.com