UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(√)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:March 31, 2024
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:September 30, 2017

OR

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number:1-10026

ALBANY INTERNATIONAL CORP.

(Exact name of registrant as specified in its charter)

 Delaware 14-0462060
 (State(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
(IRS Employer Identification No.)

03867
incorporation or organization) 
 216 Airport Drive, Rochester, New Hampshire 03867
 (Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code518-445-2200


603-330-5800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per shareAINThe New York Stock Exchange (NYSE)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [ √ ]☒ No [    ]

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.

See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer[ √ ] ☒Accelerated filer[    ] ☐
Non-accelerated filer[    ] ☐Smaller reporting company[    ] ☐
Emerging growth company[    ] 
☐

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

Act. ☐

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

☒

The registrant had 29.031.2 million shares of Class A Common Stock and 3.2 million shares of Class B Common Stock outstanding as of October 24, 2017.

1

April 15, 2024.



ALBANY INTERNATIONAL CORP.

TABLE OF CONTENTS

Page No.
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49
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49
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Item 1. Legal Proceedings50
Item 1A. Risk Factors50
50
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51
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51
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31




ITEM 1. FINANCIAL STATEMENTS

ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
       
2017 2016 2017 2016
       
$222,141 $191,272Net sales$636,989 $566,793
142,706 118,852Cost of goods sold418,595 343,557
       
79,435 72,420Gross profit218,394 223,236
41,076 38,042   Selling, general, and administrative expenses123,799 120,997
10,553 9,232   Technical and research expenses30,788 29,640
5,503 326   Restructuring expenses, net10,220 7,653
       
22,303 24,820Operating income53,587 64,946
4,429 3,681   Interest expense, net13,042 9,610
         (1,155)             242   Other expense/(income), net                  980          (2,103)
       
19,029 20,897Income before income taxes39,565 57,439
3,809 7,488   Income tax expense12,138 20,613
       
        15,220         13,409 Net income             27,427         36,826
             (49)             340Net income/(loss) attributable to the noncontrolling interest                  202            (111)
$15,269 $13,069 Net income attributable to the Company$27,225 $36,937
       
$0.47 $0.41Earnings per share attributable to Company shareholders - Basic$0.85 $1.15
       
$0.47 $0.41Earnings per share attributable to Company shareholders - Diluted$0.85 $1.15
       
   Shares of the Company used in computing earnings per share:   
32,187 32,104  Basic32,160 32,079
       
32,214 32,141  Diluted32,193 32,118
       
$0.17 $0.17Dividends declared per share, Class A and Class B$0.51 $0.51
       
       
The accompanying notes are an integral part of the consolidated financial statements
       


ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(in thousands)
(unaudited)
       
       
Three Months Ended Nine Months Ended
September 30, September 30,
       
2017 2016 2017 2016
       
$15,220 $13,409Net income$27,427 $36,826
       
   Other comprehensive income/(loss), before tax:   
        11,974               36Foreign currency translation adjustments        39,348           2,651
                 -                  -Pension/postretirement plan remeasurement                 -            (170)
   Amortization of pension liability adjustments:   
         (1,113)          (1,113)   Prior service credit         (3,339)          (3,338)
          1,350           1,296   Net actuarial loss          4,050           3,870
            295           1,100Expense related to interest rate swaps included in earnings          1,238           1,686
             (96)             497Derivative valuation adjustment         (1,094)          (6,936)
       
   Income taxes related to items of other comprehensive income/(loss):   
                 -                  -Pension/postretirement plan remeasurement                 -               65
             (71)              (55)Amortization of pension liability adjustment           (213)            (160)
           (112)            (418)Expense related to interest rate swaps included in earnings           (470)            (641)
              36            (189)Derivative valuation adjustment            415           2,636
        27,483         14,563Comprehensive income        67,362         36,489
             (43)             340Comprehensive income/(loss) attributable to the noncontrolling interest            221            (112)
$27,526 $14,223Comprehensive income attributable to the Company$67,141 $36,601
       
The accompanying notes are an integral part of the consolidated financial statements

ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

 September 30, December 31,
 2017 2016
ASSETS   
  Cash and cash equivalents$153,465 $181,742
  Accounts receivable, net        199,938         171,193
  Inventories        157,143         133,906
  Income taxes prepaid and receivable           8,133            5,213
  Prepaid expenses and other current assets          12,690            9,251
      Total current assets531,369 501,305
    
  Property, plant and equipment, net        451,966         422,564
  Intangibles, net          56,997           66,454
  Goodwill        166,010         160,375
  Income taxes receivable and deferred          81,244           68,865
  Contract receivables          29,688           14,045
  Other assets          32,343           29,825
      Total assets$1,349,617 $1,263,433
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
  Notes and loans payable$186 $312
  Accounts payable          45,121           43,305
  Accrued liabilities        103,498           95,195
  Current maturities of long-term debt          51,765           51,666
  Income taxes payable          12,493            9,531
      Total current liabilities213,063 200,009
    
  Long-term debt        453,578         432,918
  Other noncurrent liabilities        105,318         106,827
  Deferred taxes and other liabilities          13,002           12,389
      Total liabilities784,961 752,143
    
SHAREHOLDERS' EQUITY   
  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 37,392,353 in 2017   
    and 37,319,266 in 2016                37                 37
  Class B Common Stock, par value $.001 per share;   
    authorized 25,000,000 shares; issued and   
    outstanding 3,233,998 in 2017 and 2016                  3                   3
  Additional paid in capital        428,088         425,953
  Retained earnings        533,670         522,855
  Accumulated items of other comprehensive income:   
    Translation adjustments         (92,523)        (133,298)
    Pension and postretirement liability adjustments         (52,648)          (51,719)
    Derivative valuation adjustment              917               828
  Treasury stock (Class A), at cost 8,431,335 shares in 2017     
   and 8,443,444 shares in 2016       (256,876)        (257,136)
      Total Company shareholders' equity        560,668         507,523
  Noncontrolling interest           3,988            3,767
 Total equity564,656 511,290
      Total liabilities and shareholders' equity$1,349,617 $1,263,433
    
The accompanying notes are an integral part of the consolidated financial statements

ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)

Three Months Ended     Nine Months ended
September 30,     September 30,
           
2017 2016     2017 2016
   OPERATING ACTIVITIES   
$15,220 $13,409Net income$27,427 $36,826
   Adjustments to reconcile net income to net cash provided by operating activities:   
        15,522         16,470Depreciation        45,367         44,736
          2,608           1,975Amortization          7,889           6,488
           (168)            (275)Change in other noncurrent liabilities          (2,522)          (5,010)
         (3,263)          (1,712)Change in deferred taxes and other liabilities       (10,620)            (640)
          1,086             333Provision for write-off of property, plant and equipment          1,916           1,409
            211                  -Non-cash interest expense            634                  -
            195             350

 

Compensation and benefits paid or payable in Class A Common Stock

          1,865           1,882
          4,149                  -Write-off of intangible assets in a discontinued product line          4,149                  -
   Changes in operating assets and liabilities that provided/(used) cash, net of impact of business acquisition:   
         (4,645)           4,794Accounts receivable         (19,781)          (6,492)
         (3,944)          (5,511)Inventories          (17,210)        (12,886)
           (599)            (481)Prepaid expenses and other current assets         (3,167)          (3,302)
                 -            (100)Income taxes prepaid and receivable         (2,817)           1,737
         (4,769)          (4,443)Accounts payable         (2,704)          (1,544)
          5,425           4,418Accrued liabilities          4,525          (3,736)
          3,472           4,932Income taxes payable          2,964           3,999
         (8,107)                  -Contract receivables       (15,643)                  -
         (4,495)          (4,974)Other, net           (557)        (10,252)
17,898 29,185Net cash provided by operating activities21,715 53,215
           
   INVESTING ACTIVITIES   
                 -                  -Purchase of business, net of cash acquired                 - (187,000)
       (15,319)        (21,924)Purchases of property, plant and equipment       (61,724)        (50,029)
           (147)            (591)Purchased software           (538)          (1,262)
                 -           4,686Proceeds from sale or involuntary conversion of assets                 -           6,422
(15,466) (17,829)Net cash used in investing activities(62,262) (231,869)
           
   FINANCING ACTIVITIES   
        13,076         13,265Proceeds from borrowings        45,335       232,795
         (3,569)            (871)Principal payments on debt       (24,711)        (23,695)
                 -                  -Debt acquisition costs                 -          (1,771)
                 -                  -Swap termination payment                 -          (5,175)
                 -                  -Taxes paid in lieu of share issuance         (1,364)          (1,272)
            356               64Proceeds from options exercised            531             454
         (5,470)          (5,457)Dividends paid       (16,396)        (16,354)
4,393 7,001Net cash provided by financing activities3,395 184,982
           
          7,848           1,788Effect of exchange rate changes on cash and cash equivalents          8,875           4,729
           
        14,673         20,145(Decrease)/increase in cash and cash equivalents        (28,277)        11,057
      138,792       176,025Cash and cash equivalents at beginning of period      181,742       185,113
$153,465 $196,170Cash and cash equivalents at end of period$153,465 $196,170
           
The accompanying notes are an integral part of the consolidated financial statements

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
20242023
Net revenues$313,330 $269,096 
Cost of goods sold204,644 169,778 
Gross profit108,686 99,318 
Selling, general, and administrative expenses54,835 48,479 
Technical and research expenses12,665 10,277 
Restructuring expenses, net2,209 20 
Operating income38,977 40,542 
Interest expense/(income), net3,319 3,290 
Other (income)/expense, net(2,982)(455)
Income before income taxes38,640 37,707 
Income taxes11,271 10,621 
Net income27,369 27,086 
Net income attributable to the noncontrolling interest78 197 
Net income attributable to the Company$27,291 $26,889 
Earnings per share attributable to Company shareholders - Basic$0.87 $0.86 
Earnings per share attributable to Company shareholders - Diluted$0.87 $0.86 
Shares of the Company used in computing earnings per share:
Basic31,209 31,131 
Diluted31,291 31,217 
Dividends declared per Class A share$0.26 $0.25 
The accompanying notes are an integral part of the consolidated financial statements
1
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(in thousands)
(unaudited)
Three Months Ended
March 31,
20242023
Net income$27,369 $27,086 
Other comprehensive income/(loss), before tax:
Foreign currency translation(11,831)13,440 
Amortization of pension liability adjustments:
Prior service credit(38)(1,031)
Net actuarial loss178 346 
Payments and amortization related to interest rate swaps included in earnings(4,038)(3,223)
Derivative valuation adjustment1,194 (662)
Income taxes related to items of other comprehensive income/(loss):
Amortization of prior service credit11 315 
Amortization of net actuarial loss(54)(105)
Payments and amortization related to interest rate swaps included in earnings1,022 815 
Derivative valuation adjustment(302)168 
Comprehensive income13,511 37,149 
Comprehensive income attributable to the noncontrolling interest124 435 
Comprehensive income attributable to the Company$13,387 $36,714 
The accompanying notes are an integral part of the consolidated financial statements
2
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
March 31, 2024December 31, 2023
Assets
Cash and cash equivalents$125,412 $173,420 
Accounts receivable, net305,495 287,781 
Contract assets, net179,223 182,281 
Inventories166,025 169,567 
Income taxes prepaid and receivable11,686 11,043 
Prepaid expenses and other current assets57,331 53,872 
Total current assets845,172 877,964 
Property, plant and equipment, net589,970 601,989 
Intangibles, net42,839 44,646 
Goodwill178,704 180,181 
Deferred income taxes24,153 22,941 
Noncurrent receivables, net— 4,392 
Other assets117,342 102,901 
Total assets$1,798,180 $1,835,014 
Liabilities and Shareholders' Equity
Accounts payable$80,778 $87,104 
Accrued liabilities118,181 142,988 
Current maturities of long-term debt4,445 4,218 
Income taxes payable8,586 14,369 
Total current liabilities211,990 248,679 
Long-term debt434,689 452,667 
Other noncurrent liabilities151,121 139,385 
Deferred taxes and other liabilities26,815 26,963 
Total liabilities824,615 867,694 
Commitments and Contingencies (Note 16)
Shareholders' Equity:
Preferred stock, par value $5.00 per share; authorized 2,000,000 shares; none issued— — 
Class A Common Stock, par value $0.001 per share; authorized 100,000,000 shares; 40,898,219 issued in 2024 and 40,856,910 in 202341 41 
Additional paid in capital449,028 448,218 
Retained earnings1,030,111 1,010,942 
Accumulated items of other comprehensive income:
Translation adjustments(137,017)(124,901)
Pension and postretirement liability adjustments(16,964)(17,346)
Derivative valuation adjustment6,955 9,079 
Treasury stock (Class A), at cost; 9,661,845 shares in 2024 and 2023(364,665)(364,665)
Total shareholders' equity967,489 961,368 
Noncontrolling interest6,076 5,952 
Total equity973,565 967,320 
Total liabilities and shareholders' equity$1,798,180 $1,835,014 
The accompanying notes are an integral part of the consolidated financial statements
3
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
20242023
Cash flows from operating activities:
Net income$27,369 $27,086 
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation20,556 15,864 
Amortization1,748 1,503 
Change in deferred taxes and other liabilities(675)(887)
Impairment of property, plant and equipment49 100 
Non-cash interest expense256 280 
Compensation and benefits paid or payable in Class A Common Stock810 378 
Provision for credit losses from uncollected receivables and contract assets365 309 
Foreign currency remeasurement (gain) on intercompany loans(792)(1,732)
Fair value adjustment on foreign currency options280 58 
Changes in operating assets and liabilities that provided/(used) cash:
Accounts receivable(17,061)(13,702)
Contract assets2,982 (4,403)
Inventories1,917 (12,360)
Prepaid expenses and other current assets(6,525)(2,191)
Income taxes prepaid and receivable(721)(693)
Accounts payable7,730 5,214 
Accrued liabilities(22,739)(23,137)
Income taxes payable(5,466)(10,996)
Noncurrent receivables(178)867 
Other noncurrent liabilities506 7 
Other, net(814)2,042 
Net cash provided by/(used in) operating activities9,597 (16,393)
Cash flows from investing activities:
Purchases of property, plant and equipment(26,859)(16,275)
Purchased software(21)— 
Net cash used in investing activities(26,880)(16,275)
Cash flows from financing activities:
Proceeds from borrowings43,237 58,000 
Principal payments on debt(60,750)(6,000)
Taxes paid in lieu of share issuance(2,446)(3,136)
Dividends paid(8,110)(7,778)
Net cash (used in)/provided by financing activities(28,069)41,086 
Effect of exchange rate changes on cash and cash equivalents(2,656)4,064 
(Decrease)/increase in cash and cash equivalents(48,008)12,482 
Cash and cash equivalents at beginning of period173,420 291,776 
Cash and cash equivalents at end of period$125,412 $304,258 
The accompanying notes are an integral part of the consolidated financial statements
4
ALBANY INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Significant Accounting Policies

Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements containinformation reflects all adjustments necessary for a fair presentation of results for such periods. Albany International Corp. (“Albany”'s ("Albany", the "Registrant", the "Company", "we", "us", or "our") consolidates the financial position, results of its subsidiaries for all periods presented. The results for any interim period are not necessarily indicative of resultsoperations and cash flows for the full year.

The preparationinterim periods presented, but do not require all disclosures required by the accounting principles generally accepted in the United States ("GAAP"). All such adjustments are of a normal recurring nature, unless otherwise disclosed in this report. Certain amounts in prior year financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires managementand notes thereto have been reclassified to make estimates and assumptions that affect the amounts reported in Albany International Corp.’s Consolidated Financial Statements and accompanying Notes. Actual results could differ materially from those estimates.

conform to current year presentation. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Risk Factors,” “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” “Quantitative and Qualitative Disclosures about Market Risk” and the Consolidated Financial Statements and Notes thereto included in Items 1A, 3, 7, 7A and 8, respectively, of the Albany International Corp.Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

2023.

Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. 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.
Recent Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

2.Business Acquisition

Reportable Segments and Revenue Recognition

The Company is organized based on the nature of its products and is composed of two reportable segments, Machine Clothing ("MC") and Albany Engineered Composites ("AEC"), each overseen by a Segment President. These segments are reflective of how the Company's Chief Executive Officer, who is its Chief Operating Decisions Maker ("CODM"), reviews operating results for the purpose of allocating resources and assessing performance. The Company has not aggregated operating segments for purposes of identifying reportable segments.

Machine Clothing:
5
The Machine Clothing (“MC”) segment supplies permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel products, nonwovens, fiber cement and for several other industrial applications. Paper machine clothing products are customized, consumable products of technologically sophisticated design that utilize polymeric materials in a complex structure. We manufacture belts for each section of the paper machine and for every grade of paper. We sell our MC products directly to customer end-users in countries across the globe. MC's products, manufacturing processes, and distribution channels are substantially the same in each region of the world in which we operate.
On April 8, 2016,August 31, 2023, the Company acquiredcompleted the outstanding sharesacquisition of Harris Corporation’s composite aerostructures business for cashHeimbach GmbH (“Heimbach”), a privately-held manufacturer of $187 million, plus the assumption of certain liabilities.paper machine clothing and technical textiles. The Company funded the cash payable at closing by utilizing proceeds from a $550 million, unsecured credit facility agreement that was completed April 8, 2016. The acquired entity is located in Salt Lake City, Utah (“SLC”) and is partfinancial results of the acquired company are included in the Machine Clothing reportable segment.
Albany Engineered Composites:
The Albany Engineered Composites (“AEC”) segment.

7

segment provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries. The Consolidated Statementsegment includes Albany Safran Composites, LLC (“ASC”), in which our customer, the SAFRAN Group (“SAFRAN”) owns a 10 percent noncontrolling interest. AEC, through ASC, is the exclusive supplier to the LEAP program of Incomeadvanced composite fan blades and fan cases under a long-term supply contract, where revenue is determined by a cost-plus-fee agreement. The LEAP engine is used on the Airbus A320neo, Boeing 737 MAX, and COMAC 919 aircraft. AEC's largest aerospace customer is the SAFRAN Group and sales to SAFRAN (consisting primarily of fan blades and cases for 2016 includes operational activityCFM International's LEAP engine) accounted for approximately 16 percent of the acquired businessCompany's consolidated Net revenues in 2023.

AEC net sales to SAFRAN were $50.1 million and $45.3 million in the first three months of 2024 and 2023, respectively. The total of Accounts receivable, Contract assets and Noncurrent receivables due from SAFRAN amounted to $89.6 million and $93.8 million as of March 31, 2024 and December 31, 2023, respectively.
Other significant programs for onlyAEC include the period subsequent to the closing, which affects comparability of year to date results. The following table shows total Company pro forma resultsSikorsky CH-53K, F-35, JASSM, and Boeing 787 programs. AEC also supplies vacuum waste tanks for the nine month periodBoeing commercial programs, and specialty components for the Rolls Royce lift fan on the F-35, as well as the fan case for the GE9X engine. For the year ended September 30, 2016 as if the acquisition had occurred on January 1, 2015.

(in thousands, except per share amounts)

Unaudited - Pro forma
Nine months ended

September 30, 2016

Combined Net sales$588,978
Combined Income before income taxes$59,812
Pro forma increase/(decrease) to income before income taxes:
Acquisition expenses5,367
Interest expense related to purchase price(1,133)
Acquisition accounting adjustments:
Depreciation and amortization on property, plant and equipment, and intangible assets(1,696)
Valuation of contract inventories2,036
Interest expense on capital lease obligation323
Interest expense on other obligations(143)
Pro forma Income before income taxes$64,566
Pro forma Net Income$41,286

8

December 31, 2023, approximately 39 percent of AEC revenues were related to U.S. government contracts or programs.

3. Reportable Segments

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

 Three months ended September 30,Nine months ended September 30,
(in thousands)2017201620172016
Net sales        
Machine Clothing$150,694 $143,248 $440,093 $437,445 
Albany Engineered Composites (AEC)71,447 48,024 196,896 129,348 
Consolidated total$222,141 $191,272 $636,989 $566,793 
Operating income/(loss)        
Machine Clothing42,674 40,039 119,352 112,583 
Albany Engineered Composites(9,301)(4,529)(32,242)(14,083)
Corporate expenses(11,070)(10,690)(33,523)(33,554)
Operating income$22,303 $24,820 $53,587 $64,946 
Reconciling items:        
Interest income(355)(675)(801)(1,347)
Interest expense4,784 4,356 13,843 10,957 
Other expense/(income), net(1,155)242 980 (2,103)
Income before income taxes$19,029 $20,897 $39,565 $57,439 

There were no material changes in the total assets of the reportable segments in the first nine months of 2017.

In the third

Three months ended March 31,
(in thousands)20242023
Net revenues
Machine Clothing$185,217 $153,222 
Albany Engineered Composites128,113 115,874 
Consolidated revenues$313,330 $269,096 
Operating income/(loss)
Machine Clothing$48,110 $48,964 
Albany Engineered Composites9,188 9,418 
Corporate expenses(18,321)(17,840)
Consolidated Operating income$38,977 $40,542 
Reconciling items:
Interest income(1,123)(1,102)
Interest expense4,442 4,392 
Other (income)/expense, net(2,982)(455)
Income before income taxes$38,640 $37,707 
First quarter of 2017, the Company decided to discontinue the Bear Claw® line of hydraulic fracturing components used in the oil and gas industry,results include Heimbach, which was partacquired August 31, 2023. Heimbach contributed $37.9 million of net revenues and $(2.9) million of operating loss for the Harris aerostructures business acquired by AEC in 2016. This decision resulted in a non-cash restructuring chargethree months ended March 31, 2024.
Corporate expenses include global information system costs of $4.5$8.3 million and $6.2 million for the write-offthree months ended March 31, 2024 and 2023, respectively.
Revenue Recognition:
6
Products and services provided under long-term contracts represent a significant portion of intangible assetsrevenues in the Albany Engineered Composites segment and equipment,we account for these contracts over time, primarily using the percentage of completion (actual cost to estimated cost) method. That method requires significant judgment and a $3.2 million chargeestimation, which could be considerably different if the underlying circumstances were to Cost of goods sold forchange. When adjustments in estimated contract revenues or costs are required, any changes from prior estimates are included in earnings in the write-off of inventory. 

Inperiod the second quarter of 2017, the Company recorded a charge to Cost of goods sold of approximately $15.8 million associated with revisionschange occurs. Changes in the estimated profitability of two AEC contracts. long-term contracts could be caused by increases or decreases in the contract value, revisions to customer delivery requirements, updated labor or overhead rates, factors affecting the supply chain, changes in the evaluation of contract risks and opportunities, or other factors. Changes in the estimated profitability of long-term contracts decreased operating income by $0.9 million during the first three months of 2024, compared to a decrease of $0.7 million in the same period last year.

We disaggregate revenue earned from contracts with customers for each of our business segments and product groups based on the timing of revenue recognition, and groupings used for internal review purposes.
The charge was principally due to second-quarter 2017 downward revisionsfollowing table disaggregates revenue for each product group by timing of estimated customer demandrevenue recognition for the components manufacturedthree months ended March 31, 2024:
Three months ended March 31, 2024
(in thousands)
Point in Time Revenue
Recognition
Over Time Revenue
Recognition
Total
Machine Clothing$184,235 $982 $185,217 
Albany Engineered Composites:
   ASC— 49,739 49,739 
   Other AEC5,757 72,617 78,374 
Total Albany Engineered Composites5,757 122,356 128,113 
                                         
Total revenues$189,992 $123,338 $313,330 
The following table disaggregates revenue for each product group by AEC relatedtiming of revenue recognition for the three months ended March 31, 2023:
Three months ended March 31, 2023
(in thousands)
Point in Time Revenue
Recognition
Over Time Revenue
Recognition
Total
Machine Clothing$152,278 $944 $153,222 
Albany Engineered Composites:
   ASC— 44,532 44,532 
   Other AEC5,793 65,549 71,342 
Total Albany Engineered Composites5,793 110,081 115,874 
Total revenues$158,071 $111,025 $269,096 










7
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 BR 725 and A380 programs. The charge included a $4.0 million write-offpaper machine clothing was sold:
Three months ended March 31,
(in thousands)20242023
Americas PMC$83,501 $83,378 
Eurasia PMC76,190 51,737 
Engineered Fabrics25,526 18,107 
Total Machine Clothing Net revenues$185,217 $153,222 
We do not disclose the value of program inventory costs, and a reserveunsatisfied performance obligations for future lossescontracts with an original expected duration of $11.8 million, which is included in Accrued liabilitiesone year or less. Contracts in the Consolidated Balance Sheets. Total reservesMC segment are generally for future contract losses were $11.1periods of less than a year and certain contracts in the AEC segment are relatively short duration firm-fixed-price orders. Remaining performance obligations on contracts that had an original duration of greater than one year totaled $752 million and $821 million as of September 30, 2017,March 31, 2024 and $0.1 million2023, respectively, and related primarily to firm fixed price contracts in the AEC segment. Of the remaining performance obligations as of DecemberMarch 31, 2016.

The Albany Engineered Composites (AEC) segment, including Albany Safran Composites, LLC (ASC), in which our customer SAFRAN Group (Safran) owns a 10 percent noncontrolling interest, provides highly engineered, advanced composite structures2024, we expect to customers inrecognize as revenue approximately $127 million during 2024, $168 million during 2025, $143 million during 2026, and the aerospace and defense industries. AEC’s largest program relates to CFM International’s LEAP engine. Under this program, AEC through ASC, is the exclusive supplier of advanced composite fan blades and cases under a long-term supply contract. The manufacturing spaces used for the production of parts under the long-term supply agreement are owned by Safran, and leased to the Company at a minimal cost.  All lease expense is reimbursable by Safran to the Company due to the cost-plus nature of the supply agreement. AEC net sales to Safran in 2017 were $25.6 million in the first quarter, $30.1 million in the second quarter, and $28.3 million in the third quarter. AEC net sales to Safran in 2016 were $17.1 million in the first quarter, $18.5 million in the second quarter, and $17.4 million in the third quarter. The

9

remainder thereafter.


total of invoiced receivables, unbilled receivables and contract receivables due from Safran amounted to $57.0 million and $37.1 million as of September 30, 2017 and December 31, 2016, respectively.

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

 Three months ended
September 30,

Nine months ended

September 30,

(in thousands)2017201620172016
Restructuring expenses, net        
Machine Clothing$96 ($212)$1,012 $5,921 
Albany Engineered Composites5,407 640 9,208 1,787 
Corporate expenses- (102)- (55)
Consolidated total$5,503 $326 $10,220 $7,653 

4.

3. Pensions and Other Postretirement Benefit Plans

Pension Plans

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

Other Postretirement Benefits

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


The composition of the net periodic benefit plancost/(income) for the three months ended March 31, 2024 and 2023, was as follows:

Pension plansOther postretirement benefits
(in thousands)2024202320242023
Components of net periodic benefit cost/(income):
Service cost$497 $281 $12 $15 
Interest cost1,532 1,063 354 468 
Expected return on assets(1,358)(971)— — 
Amortization of prior service cost/(income)(7)(8)(31)(1,023)
Amortization of net actuarial loss187 139 (9)207 
Net periodic benefit cost/(credit)$851 $504 $326 $(333)
The amount of net benefit cost/(credit) is determined at the beginning of each year and generally only varies from quarter to quarter when a significant event occurs, such as a curtailment or a settlement. There were no such events in the first three months of 2024 or 2023.
Service cost for defined benefit pension and postretirement plans are reported in the nine months ended September 30, 2017 and 2016, wassame line item as follows:

 Pension plansOther postretirement benefits
(in thousands)2017201620172016
Components of net periodic benefit cost:
Service cost$1,960 $1,991 $183 $190 
Interest cost5,507 6,110 1,660 1,832 
Expected return on assets(6,004)(6,763)- - 
Curtailment gain- (130)- - 
Amortization of prior service cost/(credit)27 28 (3,366)(3,366)
Amortization of net actuarial loss1,943 1,756 2,107 2,114 
Net periodic benefit cost$3,433 $2,992 $584 $770 

5.other compensation costs arising from services rendered by the pertinent employees during the period. Other components of net periodic benefit cost are included in the line item Other (income)/expense, net in the Consolidated Statements of Income.


4. Restructuring

Machine Clothing

Restructuring costs in the first quarter of 2024 were related to reductions in workforce at various AEC locations, while restructuring costscharges for the first nine months of 2017 were principally related to additional costs for restructuring actions taken in 2016. Machine Clothing restructuring costs in 2016 were principally related to plant closure costs in Göppingen, Germany and the cessation of research and development activities at the production facility in Sélestat, France.

In October 2017, the Company announced the initiation of discussions with the local works council regarding a proposal to discontinue operations at its Machine Clothing production facility in Sélestat, France. The consultations are subject to applicable law and are ongoing. At this time, the Company has not recorded any restructuring charge related to this proposal.

AEC incurred restructuring charges of $9.2 million in the first nine months of 2017. In the third quarter of 2017, the Company decided to discontinue the Bear Claw® line of hydraulic fracturing components used in the oil and gas industry, which led to non-cash restructuring2023 were not significant. There were no charges totaling $4.5 million relatingrelated to the impairment of long-lived assets. Other restructuring charges in 2017 principally related to work force reductions in Salt Lake City, Utah and Rochester, New Hampshire.

AEC restructuring expenses in 2016 were principally related toassets for the consolidation of legacy programs into Boerne, Texas.

periods presented.





8
The following table summarizes charges reported in the Consolidated Statements of Income under “Restructuring"Restructuring expenses, net”net":

 Three months ended September 30,

Nine months ended

September 30,

(in thousands)2017201620172016
Machine Clothing$96 ($212)$1,012 $5,921 
Albany Engineered Composites5,407 640 9,208 1,787 
Corporate Expenses- (102)- (55)
 Total$5,503 $326 $10,220 $7,653 

Three months ended March 31,
(in thousands)20242023
Machine Clothing$21 $20 
Albany Engineered Composites2,188 — 
Total$2,209 $20 
Nine months ended September 30, 2017Total restructuring costs incurred   Termination and other costs  Impairment of plant and equipmentImpairment of intangible asset
(in thousands)
Machine Clothing$1,012 $1,012 $- $- 
Albany Engineered Composites9,208 4,173 886 4,149 
Corporate Expenses- - - - 
Total$10,220 $5,185 $886 $4,149 

Nine months ended September 30, 2016Total restructuring costs incurred   Termination and other costs  Impairment of plant and equipmentBenefit plan curtailment/
settlement
(in thousands)
Machine Clothing$5,921 $5,751 $300 ($130)
Albany Engineered Composites1,787 1,498 289 - 
Corporate Expenses(55)(55)- - 
Total$7,653 $7,194 $589 ($130)

We expect that approximately $4.0 million of Accrued liabilities for restructuring at September 30, 2017 will be paid within one year and approximately $0.4 million will be paid in the following year.

The table below presents the year-to-date changes in restructuring liabilities for 20172024 and 2016,2023, all of which are related to termination and other costs:

 December 31,Restructuring CurrencySeptember 30,
(in thousands)2016charges accruedPaymentstranslation /other2017
      
Total termination and other costs$5,559$5,185($6,370)$24 $4,398

 December 31,Restructuring CurrencySeptember 30,
(in thousands)2015charges accruedPaymentstranslation /other2016
      
Total termination and other costs$10,177$7,194($9,862)$2$7,511

12

(in thousands)December 31, 2023Restructuring
charges accrued		PaymentsCurrency
translation /other		March 31, 2024
Total termination and other costs$— $2,209 $(221)$(1)$1,987 

6.

(in thousands)December 31, 2022Restructuring
charges accrued		PaymentsCurrency
translation /other		March 31, 2023
Total termination and other costs$— $20 $(20)$— $— 

5. Other Expense/(Income),/Expense, net

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

 Three months ended September 30,Nine months ended September 30,
(in thousands)  2017201620172016
Currency transaction losses/(gains)$261 ($312)$2,310 ($2,361)
Bank fees and amortization of debt issuance costs116 106 375 652 
Gain on insurance recovery(2,000)- (2,000)- 
Other468 448 295 (394)
Total($1,155)$242 $980 ($2,103)

In

Three months ended March 31,
(in thousands)20242023
Currency transaction (gains)/losses$(1,292)$60 
Bank fees and amortization of debt issuance costs43 59 
Components of net periodic pension and postretirement cost other than service cost668 (125)
Other(2,401)(449)
Total other (income)/expense, net$(2,982)$(455)
Other (income)/expense, net, included foreign currency related transactions which resulted in gains of $1.3 million in the third quarterfirst three months of 2017,2024, as compared to losses of $0.1 million in the Company recorded an insurance recoverysame period last year. The stronger Mexican Peso and weaker Euro during the three months ended March 31, 2024 led to a net gain of $2.0 millionon foreign currency related transactions, as compared to the theftsame period last year. Other (income)/expense, net, also included gains on changes in Japan that was reported infair value of derivative instruments, gains on sales of fixed assets, and rental income.

6. Income Taxes
The Company's effective income tax rate for the fourth quarter of 2016.

7. three months ended March 31, 2024 and 2023, is as follows:

Three months ended March 31,
20242023
Effective income tax rate29.2 %28.2 %
Income Taxes

The following table presents components of income tax expense for the three and nine months ended September 30, 2017 and 2016:

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands)2017201620172016
Income tax based on income from continuing operations, at estimated tax rates of 36.4% and 37.5%, respectively$6,935 $7,838 $14,420 $21,545 
Provision for change in estimated tax rates741 (424)- - 
Income tax before discrete items7,676 7,414 14,420 21,545 
         
Discrete tax expense:        
Provision for/resolution of tax audits and contingencies, net- - 961 (825)
Adjustments to prior period tax liabilities(73)(11)606 (254)
Other discrete tax adjustments, net(7)85 (62)113 
Provision for/adjustment to beginning of year valuation allowance(3,787)- (3,787)- 
Enacted tax legislation- -   34 
Total income tax expense$3,809 $7,488 $12,138 $20,613 

The third quarter estimatedwas computed in accordance with ASC 740-270, Income Taxes – Interim Reporting. Under this method, loss jurisdictions which cannot recognize a tax benefit with regard to their generated losses are excluded from the annual effective tax rate on continuingcalculation and their taxes will be recorded discretely in each quarter.

9
Our 2024 estimated annual effective tax rate primarily reflects the 21% federal tax rate, the impact of taxation upon foreign operations, was 36.4 percent in 2017, compared to 37.5 percentand forecasted permanent differences. Our actual effective tax rates were 29.2% and 28.2% for the same period in 2016.

three months ended March 31, 2024 and 2023, respectively. The Company recordseffective tax rate for the residual U.S. and foreign taxes on certain amounts of foreign earnings that have been targeted for repatriationthree months ended March 31, 2024 included a $2.4 million benefit related to the U.S. These amounts are not considered to be permanently reinvested,true-up for prior year estimated taxes treated as a discrete tax benefit and an additional increase of $1.2 million in the Company accruedvaluation allowance treated as a discrete tax expense. The rate for the tax cost on these earningsfirst quarter of 2024 was higher than the first quarter of 2023 mainly due to the extent they cannot be repatriated in a tax-free manner. At September 30, 2017 the Company calculated a deferred tax liability of $3.7 million on $62.8 million of non-U.S. earnings that have been targeted for future repatriation to the U.S.

The Company conducts business globally and, as a result, files income tax returnsan unfavorable change in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal coursejurisdictional mix of business thepre-tax earnings forecasted for 2024.

The Company is subject to examination by taxing authorities throughoutaudit in the world, including major jurisdictions such as the United States, Brazil, Canada, France, Germany, Italy, Mexico,U.S. and Switzerland. Thevarious foreign jurisdictions. Our open tax years in thesefor major jurisdictions generally range from 20072013-2024. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years. Audit outcomes and the timing of audit settlements are subject to 2016. The Company is currently under audit in non-U.S. tax jurisdictions, including but not limited to Canada and Italy.

13

significant uncertainty. It is reasonably possible that overwithin the next twelve12 months, the amount of unrecognized tax benefits related to federal tax matters under audit may decrease by up to $0.2$0.8 million from the reevaluation of uncertain tax positions arising in examinations, in appeals, or in the courts, or from the closure of tax statutes of limitations.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of September 2017, primarily as the Company achieved three years of cumulative pretax income in Canada and Japan, management determined that there was sufficient positive evidence to conclude that it is more likely than not that additional deferred tax assets of $3.4 million in Canada and $0.4 million in Japan are realizable. Therefore, in the third quarter of 2017, we reversed previously recorded valuation allowances which resulted in a discrete tax benefit of $3.8 million.

In March 2016, an accounting update was issued which simplifies several aspects related to accounting for share-based payment transactions, including the income tax consequences. The income tax consequences which relate to accounting for excess tax benefits have been adopted prospectively, resulting in recognition of excess tax benefits against income tax expense, rather than additional paid-in capital, of $0.1 million for the nine months ended September 30, 2017. No adjustment was necessary related to the deferred tax balances. The Company adopted this updatebased on January 1, 2017.

8.current estimates.


7. Earnings Per Share

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

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands, except market price and earnings per share)2017201620172016
 
Net income attributable to the Company$15,269 $13,069 $27,225 $36,937 
         
Weighted average number of shares:        
Weighted average number of shares used in        
calculating basic net income per share32,187 32,104 32,160 32,079 
Effect of dilutive stock-based compensation plans:        
Stock options27 37 33 39 
         
Weighted average number of shares used in        
calculating diluted net income per share32,214 32,141 32,193 32,118 
         
Average market price of common stock used        
for calculation of dilutive shares$53.49 $42.03 $49.49 $38.97 
         
Net income per share:        
Basic$0.47 $0.41 $0.85 $1.15 
Diluted$0.47 $0.41 $0.85 $1.15 

14

Three months ended March 31,
(in thousands, except market price and earnings per share)20242023
Net income attributable to the Company$27,291 $26,889 
Weighted average number of shares:
Weighted average number of shares used in calculating basic net income per share31,209 31,131 
Effect of dilutive stock-based compensation plans:
Restricted stock units and multi-year awards82 86 
Weighted average number of shares used in calculating diluted net income per share31,291 31,217 
Net income attributable to the Company per share:
Basic$0.87 $0.86 
Diluted$0.87 $0.86 


8. Accumulated Other Comprehensive Income ("AOCI")
The table below presents changes in the components of AOCI for the period from December 31, 2023 to March 31, 2024:
(in thousands)
Translation
adjustments
Pension and
postretirement
liability
adjustments
Derivative
valuation
adjustment
Total Other
Comprehensive
Income
December 31, 2023$(124,901)$(17,346)$9,079 $(133,168)
Other comprehensive income/(loss) before reclassifications, net of tax(12,116)285 892 (10,939)
Interest (expense)/income related to swaps reclassified to the Consolidated Statements of Income, net of tax— — (3,016)(3,016)
Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax— 97 — 97 
Net current period other comprehensive income(12,116)382 (2,124)(13,858)
March 31, 2024$(137,017)$(16,964)$6,955 $(147,026)
10
The table below presents changes in the components of AOCI for the period from December 31, 2022 to March 31, 2023:
(in thousands)
Translation
adjustments
Pension and
postretirement
liability
adjustments
Derivative
valuation
adjustment
Total Other
Comprehensive
Income
December 31, 2022$(146,851)$(15,783)$17,707 $(144,927)
Other comprehensive income/(loss) before reclassifications, net of tax13,881 (441)(494)12,946 
Interest (expense)/income related to swaps reclassified to the Consolidated Statements of Income, net of tax— — (2,408)(2,408)
Pension and postretirement liability adjustments reclassified to Consolidated Statements of Income, net of tax— (475)— (475)
Net current period other comprehensive income13,881 (916)(2,902)10,063 
March 31, 2023$(132,970)$(16,699)$14,805 $(134,864)
The components of AOCI that are reclassified to the Consolidated Statements of Income relate to our pension and postretirement plans and interest rate swaps.
The table below presents the expense/(income) amounts reclassified from AOCI, and the line items of the Consolidated Statements of Income that were affected for the three months ended March 31, 2024 and 2023:
Three months ended March 31,
(in thousands)20242023
Pre-tax Derivative valuation reclassified from Accumulated Other Comprehensive Income:
Other (income)/expense, net related to interest rate swaps included in Income before taxes$(4,038)$(3,223)
Income tax effect1,022 815 
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income$(3,016)$(2,408)
Pre-tax pension and postretirement liabilities reclassified from Accumulated Other Comprehensive Income:
Amortization of prior service credit$(38)$(1,031)
Amortization of net actuarial loss178 346 
Total pre-tax amount reclassified (a)140 (685)
Income tax effect(43)210 
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income$97 $(475)

(a)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 3. Pensions and Other Postretirement Benefit Plans).

9. Noncontrolling Interest

Interests

Effective October 31, 2013, Safran S.A. (Safran) acquired a 10 percent equity interest in Albany Safran Composites, LLC ("ASC").
On August 31, 2023, the Company acquired all the outstanding shares of Heimbach, a privately held manufacturer of paper machine clothing with headquarters in Düren, Germany. In July 2021, Heimbach acquired 85% of Arcari, SRL (“Arcari”). Arcari is a manufacturer of textile and plastic industrial technical products and conveyor belts. On the date of the acquisition, the fair value of the noncontrolling interest in Arcari was $0.5 million. For the three months ended March 31, 2024, the net income/(loss) attributable to Arcari’s noncontrolling interest was less than $0.1 million and the noncontrolling interest balance at March 31, 2024 was $0.5 million.

11
The table below presents a reconciliation of income attributable to the noncontrolling interest and noncontrolling equity:

 Nine months ended
September 30,
(in thousands)20172016
Net income/(loss) of Albany Safran Composites, LLC ("ASC")$2,805 ($374)
Less: Return attributable to the Company's preferred holding782 732 
Net income/(loss) of ASC available for common ownership$2,023 ($1,106)
Ownership percentage of noncontrolling shareholder10%10%
Net income/(loss) attributable to noncontrolling interest$202 ($111)
     
Noncontrolling interest, beginning of year$3,767 $3,690 
Net income/(loss) attributable to noncontrolling interest202 (111)
Changes in other comprehensive income attributable to noncontrolling interest19 (1)
Noncontrolling interest$3,988 $3,578 

10. Accumulated Other Comprehensive Income (AOCI)

The table below presents changesequity in the components of AOCI for the period December 31, 2016 to September 30, 2017:

(in thousands)Translation adjustmentsPension and postretirement liability adjustmentsDerivative valuation adjustmentTotal Other Comprehensive Income
December 31, 2016($133,298)($51,719)$828 ($184,189)
Other comprehensive income/(loss) before reclassifications40,775 (1,427)(679)38,669 
Interest expense related to swaps reclassified to the Statement of Income, net of tax- - 768 768 
Pension and postretirement liability adjustments reclassified to Statement of Income, net of tax- 498 - 498 
Net current period other comprehensive income40,775 (929)89 39,935 
September 30, 2017($92,523)($52,648)$917 ($144,254)

The table below presents changes in the components of AOCI for the period December 31, 2015 to September 30, 2016:

(in thousands)Translation adjustmentsPension and postretirement liability adjustmentsDerivative valuation adjustmentTotal Other Comprehensive Income
December 31, 2015($108,655)($48,725)($1,464)($158,844)
Other comprehensive income/(loss) before reclassifications2,216 330 (4,300)(1,754)
Interest expense related to swaps reclassified to the Statement of Income, net of tax- - 1,045 1,045 
Pension and postretirement liability adjustments reclassified to Statement of Income, net of tax- 372 - 372 
Net current period other comprehensive income2,216 702 (3,255)(337)
September 30, 2016($106,439)($48,023)($4,719)($159,181)

The table below presents the expense/(income) amounts reclassified, and the line items of the Statements of Income that were affected for the periods ended September 30, 2017 and 2016.

 Three months ended September 30,Nine months ended September 30,
(in thousands)2017201620172016
Pretax Derivative valuation reclassified from Accumulated Other Comprehensive Income:    
Expense related to interest rate swaps included in Income
before taxes(a)		$295 $1,100 $1,238 $1,686 
Income tax effect(112)(418)(470)(641)
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income$183 $682 $768 $1,045 
         
Pretax pension and postretirement liabilities reclassified from Accumulated Other Comprehensive Income:  
Amortization of prior service credit($1,113)($1,113)($3,339)($3,338)
Amortization of net actuarial loss1,350 1,296 4,050 3,870 
Total pretax amount reclassified (b)237 183 711 532 
Income tax effect(71)(55)(213)(160)
Effect on net income due to items reclassified from Accumulated Other Comprehensive Income$166 $128 $498 $372 

(a)Included in Interest expense are payments related to the interest rate swap agreements and amortization of swap buyouts (see Note 15).
(b)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4).

16

Company’s subsidiaries:

ASC Noncontrolling InterestThree months ended March 31,
(in thousands, except percentages)20242023
Net income of Albany Safran Composites (ASC)$1,014 $2,282 
Less: Return attributable to the Company's preferred holding308 308 
Net income of ASC available for common ownership$706 $1,974 
Ownership percentage of noncontrolling shareholder10 %10 %
Net income attributable to the noncontrolling interest$71 $197 
Noncontrolling interest, beginning of year$5,423 $4,494 
Net income attributable to noncontrolling interest71 197 
Changes in other comprehensive income attributable to the noncontrolling interest57 238 
ASC Noncontrolling interest, end of interim period$5,551 $4,929 
Arcari Noncontrolling interest, end of interim period$525 $— 
Total Noncontrolling interest, end of interim period$6,076 $4,929 

11.

10. Accounts Receivable

Accounts receivable, net includes trade receivablesTrade and revenue in excessother accounts receivable and Bank promissory notes, net of progress billings on long-term contracts in the Albany Engineered Composites segment. The Company maintains allowancesAllowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company determines the allowance based on historical write-off experience, customer-specific facts and economic conditions. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

As of September 30, 2017 and December 31, 2016, Accounts receivable consisted of the following:

(in thousands)  

September 30,

2017

December 31,

2016

Trade and other accounts receivable$157,171 $146,460 
Bank promissory notes19,525 15,759 
Revenue in excess of progress billings30,957 15,926 
Allowance for doubtful accounts(7,715)(6,952)
Total accounts receivable$199,938 $171,193 

expected credit losses. In connection with certain salesrevenues in Asia, the Company accepts a bank promissory note as customer payment. The notes may be presented for payment at maturity, which is less than one year.

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

(in thousands)March 31, 2024December 31, 2023
Trade and other accounts receivable$287,862 $272,351 
Bank promissory notes22,699 20,690 
Allowance for expected credit losses(5,066)(5,260)
Accounts receivable, net$305,495 $287,781 
The Company also has Contracthad Noncurrent receivables in the AEC segment that represent revenue earned, which hashad extended payment terms. The ContractIn 2023, the payment terms were amended and the Noncurrent receivables will be invoiced to the customer, with 2% interest, over a 10-year period startingare now included in 2020.

Trade and other accounts receivable. As of September 30, 2017March 31, 2024 and December 31, 2016, Contract2023, Noncurrent receivables consisted of the following:

   
(in thousands)  

September 30,

2017

December 31,

2016

Contract receivable$29,688$14,045

(in thousands)March 31, 2024December 31, 2023
Noncurrent receivables$—$4,414 
Allowance for expected credit losses—(22)
Noncurrent receivables, net$—$4,392 

11. Contract Assets and Liabilities
Contract assets include unbilled amounts typically resulting from revenues under contracts when the over time method of revenue recognition is utilized, and revenue recognized exceeds the amount billed to the customer. Contract assets are transferred to Accounts receivable, net when the entitlement to pay becomes unconditional and the customer is invoiced. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract liabilities are included in Accrued liabilities in the Consolidated Balance Sheets.
Contract assets and Contract liabilities are reported on the Consolidated Balance Sheets in a net position on a contract-by-contract basis at the end of each reporting period.
12
As of March 31, 2024 and December 31, 2023, Contract assets and Contract liabilities consisted of the following:
(in thousands)March 31, 2024December 31, 2023
Contract assets$180,122 $183,189 
Allowance for expected credit losses(899)(908)
Contract assets, net$179,223 $182,281 
Contract liabilities$6,034 $7,127 
Contract assets, net decreased $3.1 million during the three months ended March 31, 2024. The decrease was primarily due to a decrease in unbilled revenue primarily related to commercial and defense programs, partially offset by an increase in unbilled revenue on space programs. There were no impairment losses related to our Contract assets during the three months ended March 31, 2024 and March 31, 2023.
Contract liabilities decreased $1.1 million during the three months ended March 31, 2024, primarily due to revenue recognized from satisfied performance obligations exceeding customer advance payments for commercial and defense programs. Revenue recognized for the three months ended March 31, 2024 and 2023 that was included in the Contract liability balance at the beginning of the year was $3.5 million and $6.7 million, respectively.

12. Inventories

Costs included in inventories are raw materials, labor, supplies and allocable depreciation and overhead. Raw material inventories are valued on an average cost basis. Other inventory cost elements are valued at cost, using the first-in, first-out method. The Company writes down the inventories for estimated obsolescence and to lower of cost or net realizable value based upon assumptions about future demand and market conditions. If actual demand or market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. Once established, the original cost of the inventory less the related write-down represents the new cost basis of such inventories. The AEC segment has long-term contracts under which we incur engineering and development costs that are allocable to parts that will be delivered over multiple years. These costs are included in Work in process in the table below.

17

As of September 30, 2017March 31, 2024 and December 31, 2016, inventories2023, Inventories consisted of the following:

(in thousands)  September 30,  
2017		December 31,
2016
Raw materials$45,142$37,691
Work in process                 83,129                 58,715
Finished goods                 28,872                 37,500
Total inventories$157,143$133,906

(in thousands)March 31, 2024December 31, 2023
Raw materials$77,391 $79,611 
Work in process63,764 67,743 
Finished goods24,870 22,213 
Total inventories$166,025 $169,567 












13

13. Goodwill and Other Intangible Assets

Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually. Goodwill represents

The following table sets forth the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination.

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

To determine fair value, we utilize two market-based approaches and an income approach. Under the market-based approaches, we utilize information regarding the Company as well as publicly available industry information to determine earnings multiples and sales multiples. Under the income approach, we determine fair value based on estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.

In the second quarter of 2017, the Company applied the qualitative assessment approach in performing its annual evaluation of goodwill and concluded that no impairment provision was required. There were no amounts at risk due to the large spread between the fair, and carrying value, of each reporting unit.

In the third quarter, the Company decided to discontinue the Bear Claw® line of hydraulic fracturing components used in the oil and gas industry, which was part of the Harris aerostructures business acquired by AEC in 2016. This decision resulted in a non-cash write-off of intangibles for $4.1 million to restructuring expense, which is presented as other changes in the table below for intangible assets and goodwill as of September 30, 2017. The write-off represents the full carrying value of intangible assets associated with the Bear Claw® product line as, based upon anticipated cash flows and the Company’s plan to exit the business, we determined the product line to have no fair value as of September 30, 2017. Due to the decision to exit this product line, management performed an interim assessment of goodwill and concluded that no goodwill was allocable to the Bear Claw® product line, and no impairment provision was required.

18

We are continuing to amortize certain patents, trade names, customer relationships, customer contracts and technology assets that have finite lives. The gross carrying value, accumulated amortization and net values of intangible assets and goodwill as of March 31, 2024 and December 31, 2016 to September 30, 2017, were as follows:

As of September 30, 2017

(in thousands)

 Weighted average amortization life in yearsGross carrying amountAccumulated amortizationNet carrying amount
      
Amortized intangible assets:     
AEC trade names15$43$27 $16
AEC technology15228142 86
Customer relationships15           48,5284,956 43,572
Customer contracts6              18,2115,114 13,097
Other intangibles5                  742516 226
Total amortized intangible assets $67,752$10,755 $56,997
                        
Unamortized intangible assets:     
MC Goodwill $70,280 $- $70,280
AEC Goodwill            95,730                                       -                    95,730
Total unamortized intangible assets: $166,010 $- $166,010

As of December 31, 2016
(in thousands)		Weighted average amortization life in yearsGross carrying amountAccumulated amortizationNet carrying amount
      
Amortized intangible assets:     
AEC trade names15$43$23 $20
AEC technology15228124 104
Customer relationships15           49,4902,481                    47,009
Customer contracts6           20,4202,561                     17,859
Other intangibles5               1,720258                        1,462
Total amortized intangible assets $71,901$5,447 $66,454
                        
Unamortized intangible assets:     
MC Goodwill $64,645 $- $64,645
AEC Goodwill            95,730                                        -                    95,730
Total unamortized intangible assets: $160,375 $- $160,375
2023:

March 31, 2024
(in thousands)Amortization 
life in years		Gross carrying amountAccumulated amortizationNet carrying amount
Finite-lived assets:
AEC Trademarks and trade names6-15$208 $(189)$19 
AEC Technology10-156,033 (2,824)3,209 
AEC Intellectual property151,250 (360)890 
AEC Customer relationships8-1569,290 (44,721)24,569 
Heimbach Developed technology98,789 (572)8,217 
Total Finite-lived intangible assets$85,570 $(48,666)$36,904 
Indefinite-lived intangible assets:
Heimbach Trade name$5,935 $— $5,935 
MC Goodwill65,785 — 65,785 
AEC Goodwill112,919 — 112,919 
Total Indefinite-lived intangible assets:$184,639 $— $184,639 

December 31, 2023
(in thousands)Amortization 
life in years		Gross carrying amountAccumulated amortizationNet carrying amount
Finite-lived assets:
AEC Trademarks and trade names6-15$208 $(186)$22 
AEC Technology10-156,161 (2,735)3,426 
AEC Intellectual property151,250 (339)911 
AEC Customer relationships8-1569,360 (43,875)25,485 
Heimbach Developed technology99,042 (310)8,732 
Total Finite-lived assets$86,021 $(47,445)$38,576 
Indefinite-lived intangible assets:
Heimbach Trade name$6,070 $— $6,070 
MC Goodwill66,873 — 66,873 
AEC Goodwill113,308 — 113,308 
Total Indefinite-lived intangible assets:$186,251 $— $186,251 









14
The changes in intangible assets, net and goodwill from December 31, 20162023 to September 30, 2017,March 31, 2024, were as follows:

(in thousands)December 31,
2016		AmortizationOther
Changes		Currency TranslationSeptember 30,
2017
           
Amortized intangible assets:          
AEC trade names$20 $(4)$- $- $16 
AEC technology104 (18)0 - 86 
Customer relationships47,009 (2,475)(962)- 43,572 
Customer contracts17,859 (2,553)(2,209)- 13,097 
Other intangibles1,462 (258)(978)- 226 
Total amortized intangible assets$66,454 ($5,308)($4,149)$- $56,997 
           
Unamortized intangible assets:          
MC Goodwill$64,645 $-   $5,635 $70,280 
AEC Goodwill95,730 -   - 95,730 
Total unamortized intangible assets:$160,375 $- $- $5,635 $166,010 

Estimated amortization expense of intangibles for the years ending December 31, 2017 through 2021, is as follows:

 Annual amortization
Year(in thousands)
2017 $6,865
2018                             6,232
2019                             6,232
2020                             6,232
2021                             6,162

20

(in thousands)December 31, 2023Other
Changes		AmortizationCurrency
Translation		March 31, 2024
Finite-lived intangible assets:
AEC Trademarks and trade names$22 $— $(3)$— $19 
AEC Technology3,426 — (142)(75)3,209 
AEC Intellectual property911 — (21)— 890 
AEC Customer relationships25,485 — (870)(46)24,569 
Heimbach Developed technology8,732 — (262)(253)8,217 
Total Finite-lived intangible assets$38,576 $— $(1,298)$(374)$36,904 
Indefinite-lived intangible assets:
Heimbach Trade name$6,070 $— $— $(135)$5,935 
MC Goodwill66,873 — — (1,088)65,785 
AEC Goodwill113,308 — — (389)112,919 
Total Indefinite-lived assets:$186,251 $— $— $(1,612)$184,639 


14. Financial Instruments

Long-term debt,

Debt principally to banks and bondholders, consists of:

(in thousands, except interest rates)September 30,
2017		December 31,
2016
     
Private placement with a fixed interest rate of 6.84%, final payment was made October 25, 2017$50,000 $50,000 
Revolving credit agreement with borrowings outstanding at an end of period interest rate of 2.74% in 2017 and 2.58% in 2016 (including the effect of interest rate hedging transactions, as described below), due in 2021440,000 418,000 
     
Obligation under capital lease, matures 202215,343 16,584 
     
Long-term debt505,343 484,584 
     
Less: current portion(51,765)(51,666)
     
Long-term debt, net of current portion$453,578 $432,918 

A noteof a revolving credit agreement and guaranty (“Prudential Agreement”) was originally entered intoforeign bank debt assumed in October 2005 with the Prudential Insurance Companyacquisition of America, and certain other purchasers, with interest at 6.84%. Heimbach.

The final principal payment underfollowing table represents the PrudentialCompany's outstanding debt:
(in thousands, except interest rates)March 31, 2024December 31, 2023
Borrowings under the Amended Credit Agreement(1)$429,000 $446,000 
Foreign bank debt10,134 10,885 
Total bank debt439,134 456,885 
Less: Current maturities of long-term debt4,445 4,218 
Long-term debt$434,689 $452,667 
(1) the credit facility matures in August 2028. At the end of March 31, 2024 and December 31, 2023, the interest rate in effect was 3.34% and 3.49%, respectively, including the effect of interest rate hedging transactions, as described below.
Amended Credit Agreement of $50.0 million was made on October 25, 2017. As of September 30, 2017, the fair value of this debt was $50.9 million.

On April 8, 2016,August 16, 2023, we entered into a $550$800 million unsecured committed Five-Year Revolving Credit Facility Agreement (the “Credit“Amended Credit Agreement”) which amended and restated the prior $400 million Agreement, entered into on June 18, 2015 (the “Prior Agreement”). Under the Credit Agreement, $440 million of borrowings were outstanding as of September 30, 2017. The applicable interest rate for borrowings was LIBORunder the Amended Credit Agreement is based on Term SOFR plus a spread, which is based on our leverage ratio (as defined in the Amended Credit Agreement) at the time of borrowing. Ata borrowing as follows:
Leverage RatioCommitment FeeABR SpreadTerm Benchmark/ Daily
Simple SOFR Spread
<1.00:1.000.275%0.500%1.500%
≥ 1.00:1.00 and < 2.00:1.000.300%0.625%1.625%
≥ 2.00:1.00 and < 3.00:1.000.325%0.750%1.750%
≥ 3.00:1.000.350%1.000%2.000%
As of March 31, 2024, the time ofapplicable interest rate for borrowings under the last borrowing on September 25, 2017, the spread was 1.500%. The spreadAmended Credit Agreement was based on a pricing grid,one-month term SOFR plus the spread, which ranged from 1.250% to 1.750%,was 1.625%.
As of March 31, 2024, there was $429 million of borrowings outstanding under the Amended Credit Agreement and we had borrowings available of $371 million, 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 September 30, 2017, we would have been able to borrow an additional $110 million under(as defined in the Agreement.

Amended Credit Agreement).

15
The Amended Credit Agreement contains customary terms as well asincluding affirmative covenants, negative covenants and events of default comparabledefault. Under the Amended Credit Agreement, we are required to thosemaintain a leverage ratio (as defined in the Prior Agreement. Credit Agreement) of not greater than 3.75 to 1.00, or 4.25 to 1.00 after a significant acquisition. We are also required to maintain a minimum interest coverage ratio (as defined in the Credit Agreement) of greater than 3.00 to 1.00.
As of March 31, 2024, our leverage ratio was 1.17 to 1.00 (as defined in the Amended Credit Agreement) and our interest coverage ratio was 14.38 to 1.00. If our leverage ratio exceeds 3.50 to 1.00, then we are restricted in paying dividends to a maximum amount of $40 million in a calendar year. As of March 31, 2024, we were in compliance with all applicable covenants. We anticipate continued compliance in each of the next four quarters while continuing to monitor future compliance based on current and future economic conditions.
The Borrowingsborrowings are guaranteed by certain of the Company's subsidiaries.

Company’s subsidiaries, including all significant U.S. subsidiaries (subject to certain exceptions), as defined in the Amended Credit Agreement. Our ability to borrow additional amounts under the Amended Credit Agreement is conditional upon the absence of any defaults, as well as the absence of any material adverse change (as defined in the Amended Credit Agreement).

The Company has a long-term capital lease obligation for real property in Salt Lake City, Utah. The lease has an implied interest rate of 5.0% and matures in 2022.

21

Interest Rate Swaps

The following schedule presents future minimum annual lease payments under the capital lease obligation and the present value of the minimum lease payments, as of September 30, 2017.

Years ending December 31,(in thousands)
2017$606 
20182,473 
20192,473 
20202,520 
20212,520 
Thereafter7,373 
Total minimum lease payments17,965 
Less:  Amount representing interest(2,622)
   
Present value of minimum lease payments$15,343 

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

On May 9, 2016,

In 2021, we entered into interest rate hedgesswap agreements for the period May 16, 2016of October 17, 2022 through March 16, 2021.October 27, 2024. These transactions havehad the effect of fixing the LIBOR portion of the effective interest rate (before addition of the spread) on $300$350 million of indebtedness drawn underindebtedness. We amended the Credit Agreement atswap agreements on June 29, 2023 replacing the LIBOR (in preparation for the cessation of LIBOR) with SOFR and adjusting the spread.
We pay a fixed blended rate of 1.245% during the period. Under the terms of these transactions, we pay the fixed rate of 1.245%0.8828% through October 27, 2024 on $350 million and the counterparties pay a floating rate based on the one-month LIBOR rateterm SOFR at each monthly calculation date, which on SeptemberMarch 18, 20172024 was 1.245%5.33%. As of March 31, 2024, plus the applicable spread, during the swap period. On September 18, 2017, the all-in-rateall-in rate on the $300 million$350M of debt was 2.745%2.51%.

These Upon the expiration of the interest rate swap on October 27, 2024, our interest cost will increase significantly. Beginning in October 2024, our interest cost will be calculated using a floating rate based on the one-month term SOFR.

The interest rate swaps are accounted for as a hedge of future cash flows, as further described in Note 15, of the Notes to Consolidated Financial Statements. Fair-Value Measurements. No cash collateral was received or pledged in relation to the swap agreements.

Under

Foreign Bank Debt
On August 31, 2023, the Credit Agreement and Prudential Agreement, we are currently required to maintain a leverage ratio (as definedCompany acquired Heimbach. The Company assumed Heimbach’s bank debt in the agreements)amount of not greater than 3.50$32.7 million. The bank debt is held by several European financial institutions, with maturity dates ranging from June 30, 2024 to 1.00June 30, 2031. At March 31, 2024 and minimum interest coverage (as defined)December 31, 2023, the foreign debt was $10.1 million and $10.9 million, respectively, of 3.00 to 1.00.

As of September 30, 2017, our leverage ratiowhich $4.4 million and $4.2 million, respectively, was 2.55 to 1.00 and our interest coverage ratio was 9.38 to 1.00. We may purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50 to 1.00, and may make acquisitions with cash provided our leverage ratio would not exceed 3.50 to 1.00 after giving pro forma effect to any such acquisition.

Indebtedness under each of the Prudential Agreement and the Credit Agreement is ranked equally in right of payment to all unsecured seniorclassified as Current maturities on long-term debt.

We were in compliance with all debt covenants as of September 30, 2017.


15. Fair-Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting principles establishThe Company uses a three-level fair value hierarchy forthat prioritizes the inputs used in measuringto measure fair value that maximizesvalue. This hierarchy requires the Company to maximize the use of observable

22

inputs and minimizesminimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices in markets that are not active or other inputs that are observable or can be corroborated by requiring that the most observable inputs be used when available. market data.
•Level 3 - Unobservable inputs that are unobservable data points for the assetsupported by little or liability, and include situations in which there is little, if any,no market activity forand are significant to the assetfair value of the assets or liability. liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
We had no Level 3 financial assets or liabilities at March 31, 2024 or at December 31, 2016 or September 30, 2017.

2023, other than certain pension assets as indicated in our December 31, 2023 Annual Report on Form 10-K.



16
The following table presents the fair-value hierarchy for our Level 1 and Level 2 financial and non-financial assets and liabilities, which are measured at fair value on a recurring basis:

 September 30, 2017December 31, 2016
 Quoted prices in active markets Significant other observable inputs Quoted prices in active markets Significant other observable inputs 
         
(in thousands)(Level 1) (Level 2) (Level 1) (Level 2) 
Fair Value        
Assets:        
   Cash equivalents$18,246 $- $8,468 $- 
   Other Assets:        
      Common stock of unaffiliated foreign public company880(a)- 762(a)- 
      Interest rate swaps- 5,293(b)- 5,784(c)
         

(a)Original cost basis $0.5 million
(b)Net of $18.2 million receivable floating leg and $12.9 million liability fixed leg
(c)Net of $21.4 million receivable floating leg and $15.6 million liability fixed leg

March 31, 2024December 31, 2023
Quoted
prices in
active
markets
Significant
other
observable
inputs
Quoted
prices in
active
markets
Significant
other
observable
inputs
(in thousands)(Level 1)(Level 2)(Level 1)(Level 2)
Fair Value
Assets:
Cash equivalents$19,892 $— $27,157 $— 
Foreign currency option contracts— 1,533 — 1,725 
Foreign currency forward contracts— 269 — 199 
Other Assets:
Common stock of unaffiliated foreign public company (a)759 — 682 — 
Interest rate swaps— 9,404 — 12,214 
Liabilities
Foreign currency forward contracts— (160)— — 
(a)Original cost basis $0.5 million.
Cash equivalents include short-term securities that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities.

The common stockinterest rate swaps are accounted for as hedges of future cash flows. The fair value of our interest rate swaps is derived from a discounted cash flow analysis based on the terms of the unaffiliated foreign public companycontract and the interest rate curve, and is tradedincluded in an active market exchange. The shares are measured at fair value using closing stock prices and are recordedOther assets and/or Other noncurrent liabilities in the Consolidated Balance Sheets asSheets. Amounts determined to be due within one year are reclassified to Other assets. The securities are classified as available for sale,current assets and/or Accrued liabilities in the Consolidated Balance Sheets. Unrealized gains and as a result any unrealized gain or loss is recordedlosses on the interest rate swaps flow through the caption Derivative valuation adjustment in the Shareholders’ Equityequity section of the Consolidated Balance Sheets rather thanSheets. Amounts accumulated in Other comprehensive income are reclassified as interest expense/(income), net when the Consolidated Statements of Income. Whenrelated interest payments (that is, the security is sold or impaired, gainshedged forecasted transactions), affect earnings. Interest expense/(income) related to payments under the active swap agreements totaled $(4.0) million for the three months ended March 31, 2024, and losses are reported on$(3.2) million for the Consolidated Statements of Income. Investments are considered to be impaired when a decline in fair value is judged to be other than temporary.

three months ended March 31, 2023.

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

When exercised, the foreign currency instruments are net settlednet-settled with the same financial institution that bought or sold them. For all positions, whether options or forward contracts, there is a risk from the possible inability of the financial institution to meet the terms of the contracts and the risk of

23

unfavorable changes in interest and currency rates, which may reduce the value of the instruments. We seek to controlmitigate risk by evaluating the creditworthiness of counterparties and by monitoring the currency exchange and interest rate markets while reviewing the hedging risks and contracts to ensure compliance with our internal guidelines and policies.

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

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

The interest rate swaps are accounted for as hedges of future cash flows. The fair value of our interest rate swaps are derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve, and is included in Other assets and/or Other noncurrent liabilities in the Consolidated Balance Sheets. Unrealized gains and losses on the swaps flow through the caption Derivative valuation adjustment in the Shareholders’ equity section of the Consolidated Balance Sheets, to the extent that the hedges are highly effective. As of September 30, 2017, these interest rate swaps were determined to be highly effective hedges of interest rate cash flow risk. Any gains and losses related to the ineffective portion of the hedges will be recognized in the current period in earnings. 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 expense related to the current swaps totaled $0.6 million for the nine month period ended September 30, 2017 and $1.2 million for the nine month period ended September 30, 2016. Additionally, interest expense related to the swap buyouts totaled $0.6 million for the nine month period ended September 30, 2017 and $0.5 million of the nine month period ended September 30, 2016.

Gains and

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

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands)2017201620172016
     
Derivatives not designated as hedging instruments   
Foreign currency options (losses)/gains($2)($218)($131)$237

Three months ended March 31,
(in thousands)20242023
Derivatives not designated as hedging instruments:
Foreign currency options (gains)/losses$(118)$16 

17

16. 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

24

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 3,7273,613 claims as of September 30, 2017.

March 31, 2024.

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

Year ended December 31,Opening Number of ClaimsClaims Dismissed,Settled, or ResolvedNew ClaimsClosing Number of ClaimsAmounts Paid (thousands) to Settle or Resolve
2012          4,446             90             107          4,463 $530
2013          4,463            230              66          4,299              78
2014          4,299            625             147          3,821             437
2015          3,821            116              86          3,791             164
2016          3,791            148             102          3,745             758
2017 (as of September 30)          3,745             75              57          3,727 $10

(in thousands, except number of claims)
Opening
Number of
Claims
Claims
Dismissed,
Settled, or
Resolved
New Claims
Closing
Number of
Claims
Amounts Paid to
Settle or
Resolve
For the period ended December 31, 20233,598 19 27 3,606 $74 
For the period ended March 31, 20243,606 4 11 3,613 $9 
We anticipate that additional claims will be filed against the Company and related companies in the future but are unable to predict the number and timing of such future claims. Due to the fact that information sufficient to meaningfully estimate a range of possible loss of a particular claim is typically not available until late in the discovery process, we do not believe a meaningful estimate can be made regarding the range of possible loss with respect to pending or future claims and therefore are unable to estimate a range of reasonably possible loss in excess of amounts already accrued for pending or future claims.

While we believe we have meritorious defenses to these claims, we have settled certain claims for amounts we consider reasonable given the facts and circumstances of each case. Our insurance carrier has defended each case and funded settlements under a standard reservation of rights. As of September 30, 2017March 31, 2024, we had resolved, by means of settlement or dismissal, 37,564 claims. The38,045 claims at a total cost of resolving all claims was $10.2$10.7 million. Of this amount, almost 100% was paid by our insurance carrier, who has confirmed that we have approximately $140 million of remaining coverage under primary and excess policies that should be available with respect to current and future asbestos claims.

The Company’s subsidiary, Brandon Drying Fabrics, Inc. (“Brandon”), is also a separate defendant in many of the asbestos cases in which Albany is named as a defendant, despite never having manufactured any fabrics containing asbestos. While Brandon was defending against 7,7067,676 claims as of September 30, 2017,March 31, 2024, only eighttwelve claims have been filed against Brandon since January 1, 2012, and noonly $15,000 in settlement costs have been incurred since 2001. Brandon was acquired by the Company in 1999 and has its own insurance policies covering periods prior to 1999. Since 2004, Brandon’s insurance carriers have covered 100% of indemnification and defense costs, subject to policy limits and a standard reservation of rights.

In some of these asbestos cases, the Company is named both as a direct defendant and as the “successor in interest” to Mount Vernon Mills (“Mount Vernon”). We acquired certain assets from Mount Vernon in 1993. Certain plaintiffs allege injury caused by asbestos-containing products alleged to have been sold by Mount Vernon many years prior to this acquisition. Mount Vernon is contractually obligated to indemnify the Company against any liability arising out of such products. We deny any liability for products sold by Mount Vernon prior to the acquisition of the Mount Vernon assets. Pursuant to its contractual indemnification obligations, Mount Vernon has assumed the defense of these claims. On this basis, we have successfully moved for dismissal in a number of actions.

We currently do not anticipate, based on currently available information, that the ultimate resolution of the aforementioned proceedings will have a material adverse effect on the financial position, results of operations, or cash flows of the Company. Although we cannot predict the number and timing of future claims, based on the foregoing factors, the trends in claims filed against us, and available insurance, we also do not currently anticipate that potential future claims will have a material adverse effect on our financial position, results of operations, or cash flows.

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18

17. Changes in Shareholders’ Equity

The following table summarizes changes in Shareholders’ Equity:

(in thousands)

Common Stock Class A and B

Additional paid in capitalRetained earningsAccumulated items of other comprehensive income/(loss)Treasury stockNoncontrolling InterestTotal Equity
December 31, 2016$40 $425,953 $522,855 ($184,189)($257,136)$3,767 $511,290 
Net income- - 27,225 - - 202 27,427 
Compensation and benefits paid or payable in shares- 1,604 - - 260 - 1,864 
Options exercised- 531 - - - - 531 
Dividends declared- - (16,410)- - - (16,410)
Cumulative translation adjustments- - - 40,775 - 19 40,794 
Pension and postretirement liability adjustments- - - (929)- - (929)
Derivative valuation adjustment- - - 89 - - 89 
September 30, 2017$40 $428,088 $533,670 ($144,254)($256,876)$3,988 $564,656 

Equity for the period December 31, 2023 to March 31, 2024:

Class A
Common Stock
Additional paid-in capital
Retained 
earnings
Accumulated items of other comprehensive income
Class A
Treasury Stock
Noncontrolling InterestTotal Shareholders' Equity
(in thousands)SharesAmountSharesAmount
December 31, 202340,856 $41 $448,218 $1,010,942 $(133,168)9,662 $(364,665)$5,952 $967,320 
Net income— — — 27,291 — — — 78 27,369 
Compensation and benefits paid or payable in shares42 — 810 — — — — — 810 
Dividends declared on Class A Common Stock, $0.26 per share— — — (8,122)— — — — (8,122)
Cumulative translation adjustments— — — — (12,116)— — 46 (12,070)
Pension and postretirement liability adjustments— — — — 382 — — — 382 
Derivative valuation adjustment— — — — (2,124)— — — (2,124)
March 31, 202440,898 $41 $449,028 $1,030,111 $(147,026)9,662 $(364,665)$6,076 $973,565 

The following table summarizes changes in Shareholders’ Equity for the period December 31, 2022 to March 31, 2023:
Class A
Common Stock
Additional paid-in capital
Retained 
earnings
Accumulated items of other comprehensive income
Class A
Treasury Stock
Noncontrolling InterestTotal 
Shareholders' Equity
(in thousands)SharesAmountSharesAmount
December 31, 202240,785 $41 $441,540 $931,318 $(144,927)9,675 $(364,923)$4,494 $867,543 
Net income— — — 26,889 — — — 197 27,086 
Compensation and benefits paid or payable in shares58 — 378 — — — — — 378 
Dividends declared on Class A Common Stock, $0.25 per share— — — (7,792)— — — — (7,792)
Cumulative translation adjustments— — — — 13,881 — — 238 14,119 
Pension and postretirement liability adjustments— — — — (916)— — — (916)
Derivative valuation adjustment— — — — (2,902)— — — (2,902)
March 31, 202340,842 $41 $441,917 $950,415 $(134,864)9,675 $(364,923)$4,929 $897,515 

18. Recent Accounting Pronouncements

In May 2014, an accounting update was issued that replacesBusiness Combination

On August 31, 2023, the existing revenue recognition framework regarding contractsCompany acquired all the outstanding shares of Heimbach, a privately-held manufacturer of paper machine clothing with customers. We will adoptheadquarters in Düren, Germany. For the standard on January 1, 2018 using the cumulative effect method for transitioningthree months ended March 31, 2024, there were no material adjustments to the new standard. Inassets acquired and liabilities assumed.

19. Subsequent Events
On April 19, 2024, we announced a plan to discontinue manufacturing at our Machine Clothing segment, we currently record revenue forChungju, South Korea operation, and to transfer production to other international manufacturing facilities owned by the sale of a product when persuasive evidence of an arrangement exists, delivery has occurred, title has been transferred, the selling price is fixed, and collectability is reasonably assured. In this segment, we often have contracts with customers wherebyCompany. This action will enable the Company satisfies its performance obligation relatedto align forming fabric capacity with the local market demand and the needs of customers. The company remains committed to the manufacturelocal papermaking industry and delivery of a product before title has transferredwill continue to provide customers with strong expertise in Product Application, Sales and Marketing Service through the customer. Undercurrent Sales, Service & Application teams located in South Korea. The Company estimates the new accounting standard, this will result in earlier recognition of revenuecash outflows associated with these contracts. The selling price of products may include a performance obligation to provide certain support services for no additional cost. When we adopt the new standard, it is probable that, for some of these arrangements, we will need to allocate a portion of the associated revenue to such services. We currently estimate less than 5% of revenue will be allocated to such services. While we currently expect that the timing of revenue recognition and the line-item description of Machine Clothing revenue will be affected by the new standard, we do not expect a significant effect in total annual Machine Clothing revenue. We are continuing to assess the effect that the new revenue recognition will have on the Albany Engineered Composites (AEC) segment. One change that we anticipate is that we currently use the units-of-delivery method for some long-term contracts, which is considered an output method. Under the new standard, we expect that revenue for these contracts will be recognized over time using an input method as the measure of progress, which is expected to result in earlier recognition of revenue. We are currently unable to determine the full effect that the new standard will have on our financial statements. We are also currently unable to quantify the cumulative effect of adopting the new standard. The new standard will also require some additional footnote disclosures, including footnote disclosure of 2018 results under the current standard.

In January 2016, an accounting update was issued which requires entities to present separately in Other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This accounting

26

update is effective for reporting periods beginning after December 15, 2017. We have not determined the impact of this update on our financial statements.

In February 2016, an accounting update was issued which requires lessees to recognize most leases on the balance sheet. The update may significantly increase reported assets and liabilities. This accounting update is effective for reporting periods beginning after December 15, 2018. We have not determined the impact of this update on our financial statements.

In March 2016, an accounting update was issued which simplifies several aspects related to the accounting for share-based payment transactions, including the income tax consequences, statutory tax withholding requirements, and classification of excess tax benefits and cash paid to a tax authority in lieu of share issuances to employees on the statements of cash flows. The update also affects presentation in the Statements of Cash Flows of income tax effects of shares withheld for incentive compensation, and the exercise of stock options. We adopted this accounting update on January 1, 2017 and it had an insignificant effect on income tax expense. The updates affecting the Statements of Cash Flows have been applied retrospectively as follows:

-As a result of the change affecting cash payments of taxes in lieu of share issuance, operating cash flows for the nine month period ending September 30, 2016 were increased $1.3 million and financing cash flows were decreased by the same amount.
-As a result of the change affecting classification of excess tax benefits, operating cash flows for the nine month period ending September 30, 2016 cash flows were increased $0.1 million and financing cash flows were decreased by the same amount.

In October 2016, an accounting update was issued which modifies the recognition of income tax effects on intracompany transfers of assets, other than inventory. This accounting update is effective for reporting periods beginning after December 15, 2017. We have not determined the effect of this update on our financial statements.

In November 2016, an accounting update was issued which provides clarification of how changes in restricted cash should be reported in the statement of cash flows. This accounting update is effective for reporting periods beginning after December 15, 2017. We do not expect this update to have a material impact on our financial statements.

In January 2017, an accounting update was issued which provides the definition of a business for the purposes of business combination accounting. This accounting update is effective for reporting periods beginning after December 15, 2017 and isrestructuring to be applied prospectively. Accordingly, thereapproximately $6 million, which will be no effect on prior business combinations. We have not determined the impact of the update due to the absence of transactions that would be impacted.

In January 2017, an accounting update was issued which simplifies the process for determining the amount of goodwill impairment. We adopted this standard as of January 1, 2017include employee-related costs, asset write-offs, and it did not have any effect on the conclusions reached in our periodic goodwill impairment assessment.

In March 2017, an accounting update was issued which requires that service cost for defined benefit pension and postretirement plans be reported in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. Additionally, the other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. This accounting update is effective for reporting periods beginning after December 15, 2017. We expect that the principal effect of adopting this standard will be to reclassify a portion of our pension and postretirement costs to Other expense/(income).

27

equipment transfer costs.

19

In May 2017, an accounting update was issued to provide clarity as to when a company must account for changes to stock-based compensation programs as award modifications. Award modifications require an update to the value of the award, resulting in an adjustment to compensation expense. We have not made changes to awards in recent years that would be affected by this update, but such changes are possible in future periods. We are currently evaluating the potential impact of this update. The update is effective for periods beginning after December 15, 2017.

In August 2017, an accounting update was issued which simplifies the application of hedge accounting to better align the financial reporting of hedging relationships with a company’s risk management activities. We are currently evaluating the potential impact of this update, which must be adopted by January 1, 2019, but may be adopted early.



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

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

Forward-looking statements

Statements

This quarterly report and the documents incorporated or deemed to be incorporated by reference in this quarterly report contain statements concerning our future results and performance and other matters that are “forward-looking” statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “anticipate,“project,” ”may,” “plan,” “project,"forecast," ”look for,” “will,” “should”“should,” “guidance,” “guide” and variations of such words or similar expressions are intended, butidentify forward-looking statements, which generally are not the exclusive means, to identify forward-looking statements.historical in nature. Because forward-looking statements are subject to certain risks and uncertainties, (including, without limitation, those set forth in the Company’s most recent Annual Report on Form 10-K or prior Quarterly Reports on Form 10-Q) actual results may differ materially from those expressed or implied by thesuch 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;
·In the Machine Clothing segment, declines in demand for paper in certain regions and market segments that continues at a rate that is greater than anticipated, and growth in demand in other segments or regions that is lower or slower than anticipated;
·In the Albany Engineered Composites segment, unanticipated reductions in demand, delays, technical difficulties or cancellations in aerospace programs that are expected to drive growth;
·Failure to achieve or maintain anticipated profitable growth in our Albany Engineered Composites segment;
·Other risks and conditions in the industries in which our Machine Clothing and Albany Engineered Composites segments compete, along with general risks associated with macroeconomic conditions; and
·Other risks and uncertainties detailed in this report.

•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 higher interest rates, inflationary pressures, or the effects of another pandemic, for an extended period of time;

•Across the entire Company, increasing labor, raw material, energy, and logistics costs due to supply chain constraints and inflationary pressures. These challenges have only increased as a result of the ongoing Russia-Ukraine war and the conflict in the Middle East;

•Harm caused by changes in our relationships or contracts with suppliers and customers;

•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, unanticipated reductions in demand, delays, technical difficulties, and cancellations in aerospace programs that are expected to generate revenue and drive long-term growth;

•Inability of our Machine Clothing or Albany Engineered Composite segments to create additional production capacity in a timely manner or the occurrence of other manufacturing or supply difficulties (including as a result of geopolitical crises, natural disaster, public health crises and epidemics/pandemics, regulatory or otherwise);

•Changes in geopolitical conditions impacting countries where the Company does or intends to do business;

•Failure to achieve or maintain anticipated profitable growth;

•Failure to achieve our strategic initiatives and other goals, including, but not limited to, our sustainability goals;

•In the Albany Engineered Composites segment, the estimates and expectations based on aircraft production rates provided by Airbus, Boeing and others;

•In the Albany Engineered Composites segment, risks and uncertainties associated with the successful implementation and ramp up of significant new programs, including the ability to manufacture the products to the detailed specifications required and recover start-up costs and other investments in the programs;

•Adverse impacts from inflation, an economic slowdown or recession and by disruption in capital and credit markets that might impede our access to credit, increase our borrowing costs and impair the financial soundness of our customers and suppliers;
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•Risks and uncertainties associated with the successful integration of our Heimbach Group acquisition;

•Expectations regarding our ability to attract, motivate, and retain the workforce necessary to execute our business strategy;

•Adverse impacts from fluctuations in foreign currency exchange rates;

•Harm caused by large customer purchase reductions, payment defaults or contract non-renewal;

•In the Albany Engineered Composites segment, our contracts with government entities involve future funding and compliance risks;

•Costly and disruptive legal disputes and settlements;

•Future levels of indebtedness and capital expenditures;

•Adverse impacts from changes in tax legislation or challenges to our tax positions;

•Cybersecurity incidents or significant computer system compromises or data breaches;

•Significant problems with information systems or networks;

•Failure to adequately integrate Heimbach into our business systems and processes within the expected timeframe or, failure to or delayed realization of anticipated benefits of the acquisition could adversely impact the Company’s business, financial condition and results of operations; 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” sections of this quarterly report, as well as in the “RiskItem 1A-“Risk Factors” section of our most recent Annual Report on Form 10-K. Statements expressing our assessments of the growth potential of the Albany Engineered Composites segment are not intended as forecasts of actual future growth, and should not be relied on as such. While we believe such assessments to have a reasonable basis, such assessments are, by their nature, inherently uncertain. This report sets forth a number of assumptions regarding these assessments, including projected timing and volume of demand for

29

aircraft and for LEAP aircraft engines. Such assumptions could prove incorrect. Although we believe the expectations reflected in our other forward-looking statements are based on reasonable assumptions, it is not possible to foresee or identify all factors that could have a material and negative impact on our future performance. The forward-looking statements included or incorporated by reference in this report are made on the basis of our assumptions and analyses, as of the time the statements are made, in light of our experience and perception of historical conditions, expected future developments, and other factors believed to be appropriate under the circumstances.

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

Business Environment Overview and Trends

Our reportable segments, Machine Clothing (MC)

Pleaserefer to the Business Environment Overview and Albany Engineered Composites (AEC), drawTrends in the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023. The Annual Report on Form 10-K, along with the Company's other filings, can be found on the same advanced textilesSecurities and materials processing capabilities, and compete on the basis of proprietary, 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 the paper and paperboard industry in our traditional geographic markets has suffered from well-documented declines in publication grades, the industry is still expected to grow slightly on a global basis, driven by demand for packaging and tissue grades,Exchange Commission's website, www.sec.gov, as well as on the expansion of paper consumption and production in Asia and South America. We feel we are now 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, field services, and manufacturing technology. Because of pricing pressures and industry overcapacity, the machine clothing and paper industries will continue to face top line pressure. Nonetheless the business has potential to generate consistent earnings and cash flow in the future. The business 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 achieved through restructuring, and competing vigorously by using our differentiated products and services to reduce our customers’ total cost of operation and improve their paper quality.

The AEC segment provides significant growth potential for our Company both near and long term. Our strategy is to grow by focusing our proprietary 3D-woven technology, as well as our conventional non-3D technology, on high-value aerospace and defense applications, while at the same time performing successfully on our portfolio of growth programs. AEC (including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group owns a 10 percent noncontrolling interest) supplies a number of customers in the aerospace industry. AEC’s largest aerospace customer is the SAFRAN Group and sales to SAFRAN accounted for approximately 11% of the Company’s consolidated net sales in 2016. Through ASC, AEC develops and sells 3D-woven composite aerospace components to SAFRAN, with the most significant program at present being the production of fan blades and other components for the LEAP engine. AEC (through ASC) also supplies 3D-woven composite fan cases for the GE9X engine. AEC’s current portfolio of non-3D-woven programs includes components for the F-35 Joint Strike Fighter, fuselage components for the Boeing 787, components for the CH-53K helicopter, vacuum waste tanks for Boeing 7-Series aircraft, and missile bodies for Lockheed Martin’s JASSM air-to-surface missiles. AEC is actively engaged in research to develop new applications in the aircraft engine, airframes, and automotive markets.

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Company's website: www.albint.com.







21

Consolidated Results of Operations

On April 8, 2016, the Company acquired the outstanding shares of Harris Corporation’s composite aerostructures business for cash of $187 million, plus the assumption of certain liabilities. The acquired entity is part of the AEC segment.

Since the acquisition occurred early in the second quarter of 2016, the Statement of Income for first nine months of 2016 does not include any operational results of the acquired entity for the first quarter of 2016. In order to assist with comparison of year to date results, the following table presents operational results of the acquired business for the first quarter of 2017:

(in thousands)

Three months ended

March 31, 2017

Net sales$20,200
Gross profit2,245
Selling, technical, general and research expenses3,172
Restructuring expense1,699
Operating loss(2,626)
Interest expense, net(332)
Loss before income taxes(2,958)

Net sales

revenues

The following table summarizes our net salesNet revenues by business segment:

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands, except percentages)20172016% Change20172016% Change
Machine Clothing$150,694$143,2485.2%$440,093$437,4450.6%
Albany Engineered Composites         71,447       48,02448.8%    196,896      129,34852.2%
Total$222,141$191,27216.1%$636,989$566,79312.4%

Three month

Three months ended March 31,
(in thousands, except percentages)20242023% Change
Machine Clothing$185,217 $153,222 20.9 %
Albany Engineered Composites128,113 115,874 10.6 %
Total$313,330 $269,096 16.4 %
The following tables provide a comparison

of 2024 Net revenues, excluding currency translation effects, to 2023 Net revenues:
(in thousands, except percentages)Net revenues as reported, Q1 2024(Decrease)/ increase due to changes in currency translation ratesQ1 2024 revenues on same basis as Q1 2023 currency translation ratesNet revenues as reported, Q1 2023% Change compared to Q1 2023, excluding currency rate effects
Machine Clothing$185,217 $(598)$185,815 $153,222 21.3 %
Albany Engineered Composites128,113 221 127,892 115,874 10.4 %
Total$313,330 $(377)$313,707 $269,096 16.6 %
·Changes in currency translation rates had the effect of increasing net sales by $2.3 million during the third quarter of 2017 as compared to 2016.
·Excluding the effect of changes in currency translation rates:
·Net sales increased 15.0% compared to the same period in 2016.
·Net sales in MC increased 4.0%.
·Net sales in AEC increased 47.8%.

31

Net revenues increased 16.4% compared to the same period in 2023, driven by $37.9 million of Net revenues from the Heimbach acquisition and higher Net revenues in AEC, partially offset by lower organic Net revenues at MC.

·The increase in MC net sales was principally due to strong performance in the tissue, packaging and pulp grades, which more than offset continuing declines in the publication grades.
·AEC sales increased $23.4 million, principally due to growth in the LEAP, 787 fuselage frames and CH-53K programs.

Nine month comparison

·Changes in currency translation rates had the effect of decreasing net sales by $1.6 million during the first nine months of 2017 as compared to 2016.
·Excluding the effect of changes in currency translation rates:
·Net sales increased 12.7% compared to the same period in 2016.
·Net sales in MC increased 0.9%.
·Net sales in AEC increased 52.4%.
·MC net sales grew in the tissue, packaging and pulp grades, which more than offset continuing declines in the publication grades.
·AEC sales increased $67.5 million, principally due to the inclusion of nine months of results of the SLC business, and growth in the LEAP, 787 fuselage frames and CH-53K programs.

MC's Net revenues increased 20.9% compared to the first quarter of 2023, driven by Heimbach Net revenues of $37.9 million. This was partially offset by $5.3 million of lower Net revenues in the rest of the segment, driven primarily by weakness in publication globally, and in all grades in Europe. This decrease was partially offset with increases in revenues in North America. Changes in currency translation rates had the effect of decreasing Net revenues $0.6 million.
AEC's Net revenues increased 10.6%, primarily driven by growth on commercial and space programs, partially offset by lower revenues on defense programs. Changes in currency translation rates had the effect of increasing Net revenues $0.2 million.
Gross Profit

The following table summarizes grossGross profit by business segment:

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands, except percentages)2017201620172016
Machine Clothing$73,028 $68,104 $213,081 $208,628 
Albany Engineered Composites6,638 4,556 5,872 15,329 
Corporate expenses(231)(240)(559)(721)
Total$79,435 $72,420 $218,394 $223,236 
% of Net sales35.8%37.9%34.3%39.4%

Three month comparison

During the third quarter of 2017, the Company decided to discontinue the Bear Claw® line of hydraulic fracking components used in the oil and gas industry, which was part of the Harris aerostructures business acquired by AEC in 2016. This decision resulted in a $3.2 million charge to Cost of goods sold for the write-off of inventory.

Three months ended March 31,
(in thousands, except percentages)20242023
Machine Clothing$84,655 $77,855 
Albany Engineered Composites24,031 21,463 
Total$108,686 $99,318 
% of Net revenues34.7 %36.9 %
The overall increase in 2017 gross2024 Gross profit, as compared to the same period last year, was driven by higher sales in 2016,both segments. Gross profit as a percentage of revenues was principally due to the net effect of the following individually significant items:

·An increase in MC gross profit, principally due to higher sales and strong productivity.

32

as follows:

·AEC gross profit increased $2.1 million due to the net effect of the following:
·The 2017 write-off of Bear Claw® inventory which reduced gross profit by $3.2 million.
·An increase in net sales, as described above, and higher productivity.

Nine month comparison

The decrease in 2017•MC's gross profit margin decreased from 50.8% in 2023 to 45.7% in 2024. This margin decrease was primarily attributable to lower gross margin at Heimbach. Excluding Heimbach, MC's gross profit margin increased to 52.1% in 2024.

•AEC's gross profit margin remained largely in line with the prior year, increasing from 18.5% in 2023 to 18.8% in 2024, driven by a favorable shift in program revenue mix. Changes in the estimated profitability of long-term contracts decreased operating income by $0.9 million in 2024, as compared to a decrease of $0.7 million during the same period in 2016, was principally due to the net effect of the following individually significant items:

·A $4.5 million increase in MC gross profit, principally due to higher sales and strong productivity.
·AEC gross profit decreased $9.5 million due to the net effect of the following:
·In the second quarter of 2017, the Company recorded a charge to Cost of goods sold of $15.8 million associated with revisions in the estimated profitability of two AEC contracts. The charge was principally due to second-quarter 2017 downward revisions of estimated customer demand for the components manufactured by AEC related to the two contracts.
·The write-off of Bear Claw® inventory in the third quarter of 2017 for $3.2 million.
·Inclusion of nine months of results for the acquired SLC business (compared to six months for 2016), which generated $2.2 million of gross profit in the first quarter of 2017.
·An increase in net sales, as described above, and higher productivity.

last year.


22

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

Administrative ("SG&A")

The following table summarizes STG&RSG&A expenses by business segment:

 
 Three months ended
September 30,		Nine months ended
September 30,
(in thousands, except percentages)2017201620172016
Machine Clothing$30,258 $28,276 $92,716 $90,125 
Albany Engineered Composites10,532 8,445 28,907 27,624 
Corporate expenses10,839 10,553 32,964 32,888 
Total$51,629 $47,274 $154,587 $150,637 
% of Net sales23.2%24.7%24.3%26.6%

Three month comparison

The increase in STG&R

Three months ended March 31,
(in thousands, except percentages)20242023
Machine Clothing$29,004 $23,073 
Albany Engineered Composites7,510 7,566 
Corporate expenses18,321 17,840 
Total$54,835 $48,479 
% of Net revenues17.5 %18.0 %
Consolidated SG&A expenses in 2017,increased 13.1% as compared to 2023, however, as a percentage of Net revenues it decreased from 18.0% in 2023 to 17.5% in 2024.
•MC SG&A expenses increased $5.9 million as compared to 2023, of which $9.2 million of the increase related to Heimbach. Excluding Heimbach, MC's SG&A decreased $3.3 million, driven primarily by changes in currency translation rates, which reduced expenses by $2.8 million, as well as lower consulting fees and incentive compensation costs.
•In AEC, SG&A expenses remained largely in line with the prior year.
•Corporate SG&A expenses increased $0.5 million, principally due to acquisition and integration related expenses.
Technical and Research
The following table summarizes technical and research expenses by business segment:
Three months ended March 31,
(in thousands, except percentages)20242023
Machine Clothing$7,520 $5,798 
Albany Engineered Composites5,145 4,479 
Total$12,665 $10,277 
% of Net revenues4.0 %3.8 %
Consolidated Technical and research expenses increased 23.2% as compared to 2023, and as a percentage of Net revenues increased from 3.8% in 2023 to 4.0% in 2024.
•MC Technical and research expenses increased $1.7 million as compared to 2023, of which $1.6 million was due to the addition of Heimbach.
•AEC Technical and research expenses increased $0.7 million as compared to 2023, due to increases in research material and labor costs.
Restructuring Expense, net
In addition to the items discussed above affecting Gross profit, SG&A and Technical and research expenses, Operating income was affected by restructuring expense, net, of $2.2 million in the three months ended March 31, 2024, compared to an insignificant amount in in the same period in 2016, was principally due to the net effect of the following individually significant items:

·In MC, revaluation of nonfunctional currency assets and liabilities resulted in third-quarter losses of $1.1 million in 2017, and $0.1 million in 2016.
·Changes in currency translation rates increased 2017 MC STG&R expenses by approximately $0.7 million.
·Research and development expenses in AEC increased third quarter 2017 STG&R expenses by $1.2 million.
·Adjustments to the SLC acquisition accounting that occurred in the fourth quarter of 2016 resulted in an increase in 2017 STG&R expenses of $0.5 million.

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2023.

Nine month comparison

The increase in STG&R expenses in 2017, compared to the same period in 2016, was principally due to the net effect of the following individually significant items:

·In MC, revaluation of nonfunctional currency assets and liabilities resulted in losses of $4.4 million in 2017, and $1.6 million in 2016.
·STG&R expenses of the SLC business were $3.2 million in the first quarter of 2017. There were no STG&R expenses in the comparable period of 2016 due to the timing of the acquisition.
·AEC research and development expenses increased $1.4 million in 2017.
·2016 acquisition expenses were $5.4 million.

Research and Development

The following table is a subset of the STG&R expenses table above and summarizes expenses associated with internally funded research and development by business segment:

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands)2017201620172016
Machine Clothing$4,229$3,937$13,273$12,695
Albany Engineered Composites        3,828        2,656        9,683          8,247
Total$8,057$6,593$22,956$20,942

Restructuring Expense

The following table summarizes restructuring expenses by business segment:

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands)2017201620172016
Machine Clothing$96 ($212)$1,012 $5,921 
Albany Engineered Composites5,407 640 9,208 1,787 
Corporate expenses- (102)- (55)
Total$5,503 $326 $10,220 $7,653 

AEC incurred restructuring charges of $9.2 million

Three months ended March 31,
(in thousands)20242023
Machine Clothing$21 $20 
Albany Engineered Composites2,188 — 
Consolidated total$2,209 $20 
% of Net revenues0.7 %0.0 %
23

Restructuring costs in the first nine months of 2017. In the third quarter of 2017, the Company decided2024 were primarily related to discontinue the Bear Claw® line of hydraulic fracturing components usedreductions in the oil and gas industry, which led to non-cashworkforce at various AEC locations, while restructuring charges totaling $4.5

34

million relatingfor the first quarter of 2023 were not significant. There were no charges related to the impairment of long-lived assets. Other restructuring charges in 2017 principally related to work force reductions in Salt Lake City, Utah and Rochester, New Hampshire.

AEC restructuring expenses in 2016 were principally related to the consolidation of legacy programs into Boerne, Texas.

Machine Clothing restructuring costsassets for the first nine months of 2017 were principally related to additional costs for restructuring actions taken in 2016. Machine Clothing restructuring costs in 2016 were principally related to plant closure costs in Göppingen, Germany and the cessation of research and development activities at the production facility in Sélestat, France.

In October 2017, the Company announced the initiation of discussions with the local works council regarding a proposal to discontinue operations at its Machine Clothing production facility in Sélestat, France. The consultations are subject to applicable law and are ongoing. At this time, the Company has not recorded any restructuring charge related to this proposal.

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

periods presented.

Operating Income

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

 
 

Three months ended

September 30,

Nine months ended

September 30,

(in thousands)2017201620172016
Machine Clothing$42,674 $40,039 $119,352 $112,583 
Albany Engineered Composites(9,301)(4,529)(32,242)(14,083)
Corporate expenses(11,070)(10,690)(33,523)(33,554)
Total$22,303 $24,820 $53,587 $64,946 

Three months ended March 31,
(in thousands)20242023
Machine Clothing$48,110 $48,964 
Albany Engineered Composites9,188 9,418 
Corporate expenses(18,321)(17,840)
Total$38,977 $40,542 
% of Net revenues12.4 %15.1 %
Changes in operating income were primarily attributable to the drivers noted above.
Other Earnings Items

 Three months ended September 30,Nine months ended September 30,
(in thousands)2017201620172016
Interest expense, net$4,429 $3,681 $13,042 $9,610 
Other expense/(income), net(1,155)242 980 (2,103)
Income tax expense3,809 7,488 12,138 20,613 
Net income/(loss) attributable to the noncontrolling interest(49)340 202 (111)

Three months ended March 31,
(in thousands)20242023
Interest expense, net$3,319 $3,290 
Other (income)/expense, net(2,982)(455)
Income tax expense11,271 10,621 
Net income attributable to the noncontrolling interest78 197 
Interest Expense,Expense/(Income), net

Interest expense,expense/(income), net, increased $3.4 millionwas largely in the first nine months of 2017 principally due to borrowings to fund the 2016 acquisition, and the interest associatedline with the capital lease obligation assumed in the acquisition.prior year. See the Working Capital, ResourcesLiquidity and Capital Structure section for further discussion of borrowings and interest rates.

35

Other Expense/Income,(Income)/Expense, net

The change in

Other expense/(income),/expense, net, included foreign currency related transactions which resulted in income of $1.3 million in the following individually significant items:

Three month comparison

·For the third quarter of each year, foreign currency revaluations of cash and intercompany balances resulted in losses of $0.3 million in 2017, and gains of $0.3 million in 2016.
·In the third quarter of 2017, the Company recorded an insurance recovery gain of $2.0 million related to the theft in Japan that was reported in the fourth quarter of 2016.

Nine month comparison

·For the first nine months of each year, foreign currency revaluations of cash and intercompany balances resulted in losses of $2.3 million in 2017, and gains of $2.4 million in 2016.
·In the third quarter of 2017, the Company recorded an insurance recovery gain of $2.0 million related to the theft in Japan that was reported in the fourth quarter of 2016.

three months ended March 31, 2024, as compared to losses of $0.1 million in the same period last year. Other (income)/expense, net, also included gains on changes in fair value of derivative instruments, gains on sales of fixed assets, and rental income.

Effective Income Tax

Rate

Three months ended March 31,
20242023
Effective income tax rate29.2 %28.2 %
The Company has operations whichthat constitute a taxable presence in 1822 countries outside of the United States. AllThe majority of these countries had income tax rates that were belowabove the United States’States federal tax rate of 35%21 percent during the periods reported. The jurisdictional location of earnings is a significant component of our effective tax rate each year. The rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of our total earnings. From period to period, the jurisdictional mix of earnings can vary as a result of operating fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges.

Three month comparison

The Company’s effective tax rate for the third quarter of 2017 and 2016 were 20.0% and 35.8%, respectively.

The tax rate is affected by recurring items, such as the income tax rate in the U.S. and in non-U.S. jurisdictions and the mix of pre-tax income earned in those jurisdictions. The tax rate is also affected by U.S. tax costs on foreign pre-tax earnings, that have been or will be repatriated to the U.S., and by discrete items that may occur in any given year but are not consistent from year to year.

Significant items that impacted the tax rate in the third quarter of 2017 included the following (percentages reflect the effect of each item as a percentage of Income before income taxes):

·The income tax rate on continuing operations, excluding discrete items, was 36.4%.
·A $0.1 million [-0.4%] tax benefit due to changes of uncertain tax positions.
·A $3.8 million [-19.9%] tax benefit related to the release of valuation allowances.
·A $0.8 million [3.9%] net tax expense related to a change in the estimated tax rate for the year.

Significant items that impacted the tax rate in the third quarter of 2016 included the following:

·The income tax rate on continuing operations, excluding discrete items, was 37.5%.

36

·A $0.4 million [-2.0%] net tax benefit related to a change in the estimated tax rate for the year.
·A $0.1 million [0.3%] net tax expense related to other discrete items.

Nine month comparison

The Company’s effective tax ratesrate for the first nine-month periodsquarter of 2017 and 2016 were 30.7% and 35.9% respectively. The tax rate is affected by recurring items, such as2024 was 29.2%, higher compared to 28.2% for the income tax ratesame period in 2023, mainly due to an unfavorable change in the jurisdictional mix of earnings forecasted for 2024. For more information, see Note 6, Income Taxes, in the Notes to the Consolidated Financial Statements.

24

The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15 percent intended to be effective on January 1, 2024. While the U.S. has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation. As currently designed, Pillar Two will ultimately apply to our worldwide operations. Although we do not expect these rules to materially increase our global tax costs in 2024, there remains uncertainty as to the final Pillar Two model rules. We will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.
On January 17, 2024, the House Ways and Means Committee announced a draft legislation called "The Tax Relief for American Families and Workers Act of 2024". This act would restore 100% bonus depreciation for property placed in non-U.S. jurisdictions and the mix of income earned in those jurisdictions. The tax rate is also affected by U.S. tax costs on foreign earnings that have been or will be repatriated to the U.S., and discrete items that may occur in any year but are not consistent from year to year.

Significant items that impacted the 2017 tax rate included the following (percentages reflect the effect of each item as a percentage of income before income taxes):

·The income tax rate on continuing operations, excluding discrete items, was 36.4%.
·A $0.4 million [1.1%] tax expense due to changes of uncertain tax positions.
·A $0.2 million [0.5%] tax expense related to the true-up of prior years’ estimated taxes.
·A $1.0 million [2.4%] tax expense related to provisions for and settlements of income tax audits.
·A $3.8 million [-9.5%] tax benefit related to the release of valuation allowances.
·A $0.1 million [-0.2%] tax benefit related to the exercise of stock options.

Significant items that impacted the 2016 tax rate included the following (percentages reflect the effect of each item as a percentage of income excluding the building insurance gainservice after December 31, 2022 and before income taxes):

·The income tax rate on continuing operations, excluding discrete items, was 37.5%.
·A $0.8 million [-1.4%] discrete income tax benefit related to provisions for and settlements of income tax audits.
·A $0.3 million [-0.4%] net tax benefit due to changes in/establishment of uncertain tax positions.
·A $0.1 million [0.2%] net tax expense related to other discrete items.

January 1, 2026; and retroactively restore the ability to deduct domestic research and experimentation costs that were required to be capitalized beginning in 2022 under Section 174. On January 31, 2024, the United States House of Representatives voted to approve this bill, which is now with the United States Senate. We will continue to monitor the status of this legislation and assess the potential impact, if passed.


Segment Results of Operations

Machine Clothing Segment

Business Environment and Trends

The MC is our primary business segment and accounted for 77%59% of our consolidated revenues during the first ninethree months of 2017.2024. A summary of selected financial results for MC products are purchased primarilyis as follows:
Review of Operations
Three months ended March 31,
(in thousands, except percentages)20242023
Net revenues$185,217 $153,222 
Gross profit84,655 77,855 
% of Net revenues45.7 %50.8 %
SG&A expenses29,004 23,073 
Technical and research expenses7,520 5,798 
Operating income48,110 48,964 
Net Revenues
Net revenues increased by manufacturers20.9%, driven by Heimbach Net revenues of paper and paperboard.

According to RISI, Inc., global production$37.9 million. This was partially offset by $5.3 million of paper and paperboard is expected to grow at an annual ratelower Net revenues in the rest of approximately 2% over the next five years,segment, driven primarily by secular demandweakness in publication globally, and in all grades in Europe. This decrease was partially offset with increases in AsiaNorth America. Changes in currency translation rates had the effect of decreasing Net revenues $0.6 million.

Gross Profit
Gross profit increased by $6.8 million as compared to the prior year, driven by the higher sales noted above; however, gross profit margin decreased from 50.8% in 2023 to 45.7% in 2024. This margin decrease was primarily driven by lower gross margins at Heimbach. Excluding Heimbach, MC's gross profit margins increased to 52.1% in 2024 as a result of higher revenues in North America.
Operating Income
Operating income decreased year-over-year, due to higher SG&A and South America, with stabilizationTechnical and research expenses from the Heimbach acquisition in the mature marketsaddition to Heimbach's lower gross profit margins. The addition of EuropeHeimbach increased SG&A expenses by $9.2 million and North America.

Shifting demand for paper, across different paper gradesincreased Technical and research expenses by $1.6 million. Excluding Heimbach, SG&A decreased $3.3 million, driven primarily by changes in currency translation rates, which reduced expenses $2.8 million, as well as across geographical regions, continues to drive the elimination of papermaking capacity in areas with significant established capacity, primarily in publication grades in the mature markets of Europelower consulting fees and North America. At the same time, the newest, most efficient machines are being installed in areas of growing demand,

37

incentive compensation costs.

including Asia and South America generally, as well as tissue and towel paper grades in all regions. 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.

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

We have incurred significant restructuring charges in recent periods as we reduced MC manufacturing capacity in the United States, Germany, France, Canada, and Sweden.

MC Review of Operations

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands, except percentages)2017201620172016
Net sales$150,694 $143,248 $440,093 437,445 
Gross profit73,028 68,104 213,081 208,628 
% of net sales48.5%47.5%48.4%47.7%
STG&R expenses30,258 28,276 92,716 90,125 
Operating income42,674 40,039 119,352 112,583 

Net Sales

Three month comparison

·Net sales increased by 5.2%.
·Changes in currency translation rates had the effect of increasing 2017 sales by $1.8 million. Excluding that effect, net sales increased 4.0%.
·The increase in MC net sales was principally due to strong performance in the tissue, packaging and pulp grades, which more than offset continuing declines in the publication grades.

Nine month comparison

·Net sales increased by 0.6%.
·Changes in currency translation rates had the effect of decreasing 2017 sales by $1.3 million. Excluding that effect, net sales increased 0.9%.
·The increase in MC net sales was principally due to strong performance in the tissue, packaging and pulp grades, which more than offset continuing declines in the publication grades.

38



Gross Profit

Three month comparison

·The increase in MC gross profit was principally due to higher sales and strong productivity.

Nine month comparison

·The increase in MC gross profit was principally due to higher sales and strong productivity.

Operating Income

Three month comparison

·The increase in operating income was principally due to higher gross profit, as described above.

Nine month comparison

·The increase in operating income was principally due to higher gross profit in 2017, and a $4.9 million reduction in restructuring expenses in 2017.


25

Albany Engineered Composites ("AEC") Segment

Business Environment and Trends

The Albany Engineered Composites (AEC) segment, including Albany Safran Composites, LLC (ASC), in which our customer SAFRAN Group owns a 10 percent noncontrolling interest, provides highly engineered advanced composite structures to customers primarily in the aerospace and defense industries. AEC’s largest program relates to CFM International’s LEAP engine. AEC, through ASC, is the exclusive supplier of advanced composite fan blades and cases for this program under a long-term supply contract. Other significant AEC programs include components for the F-35 Joint Strike Fighter, fuselage frame components for the Boeing 787, and the fan case for the GE9X engine.

The AEC segment also includesaccounted for 41% of our consolidated revenues during the Company’s April 2016 acquisitionfirst three months of Harris Corporation’s composite aerostructures business2024. A summary of selected financial results for cash of $187 million, plus the assumption of certain liabilities.

AEC is as follows:

Review of Operations

 Three months ended
September 30,		Nine months ended
September 30,
(in thousands, except percentages)2017201620172016
Net sales$71,447 $48,024 $196,896 $129,348 
Gross profit/(loss)6,638 4,556 5,872 15,329 
% of net sales9.3%9.5%3.0%11.9%
STG&R expenses10,532 8,445 28,907 27,624 
Operating loss(9,301)(4,529)(32,242)(14,083)

39

Three months ended March 31,
(in thousands, except percentages)20242023
Net revenues$128,113 $115,874 
Gross profit24,031 21,463 
% of Net revenues18.8 %18.5 %
SG&A expenses7,510 7,566 
Technical and research expenses5,145 4,479 
Operating income9,188 9,418 

Net Sales

Three month comparison

·AEC sales increased $23.4 million, principally due to growth in the LEAP, 787 fuselage frames and CH-53K programs.

Nine month comparison

Revenues

For the three months ended March 31, 2024, Net salesrevenues increased $67.510.6% as compared to the prior year, driven by growth on commercial and space programs of approximately $17.0 million, partially offset by lower revenues on defense programs. Changes in 2017, principally due tocurrency translation rates had the effect of the following individually significant items:

·The acquired business in Salt Lake City had sales of $20.2 million in the first quarter of 2017.
·The remainder of the increase was principally due to growth in the LEAP, 787 fuselage frames and CH-53K programs.

Gross Profit

Three month comparison

·AEC gross profit increased $2.1 million due to the net effect of the following:
·The 2017 write-off of Bear Claw® inventory which reduced gross profit by $3.2 million.
·An increase in net sales, as described above, and higher productivity.

Nine month comparison

·AEC gross profit decreased $9.5 million due to the net effect of the following:
·In the second quarter of 2017, the Company recorded a charge to Cost of goods sold of $15.8 million associated with revisions in the estimated profitability of two AEC contracts. The charge was principally due to second-quarter 2017 downward revisions of estimated customer demand for the components manufactured by AEC related to the two contracts.
·The write-off of Bear Claw ® inventory in the third quarter of 2017 for $3.2 million.
·Inclusion of nine months of results for the acquired SLC business (compared to six months for 2016), which generated $2.2 million of gross profit in the first quarter of 2017.
·An increase in net sales, as described above, and higher productivity.

Long-term contracts

increasing Net revenues $0.2 million.

AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is determined by cost, plus a defined profit margin.cost-plus-fee agreement. Revenue earned under these arrangements accounted for approximately 43 and 4140 percent of segment revenue for the first ninethree months of 20172024 and 2016, respectively.

2023.

In addition, AEC has long-term contracts in which the total contractselling 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 or units of delivery 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.

40

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

In

For the second quarterthree months ended March 31, 2024, Gross profit increased $2.6 million as compared to the same period last year, and gross profit margin remained largely in line with the prior year, increasing from 18.5% in 2023 to 18.8% in 2024. The increase in profit margin was driven primarily by a favorable shift in program revenue mix to commercial programs.
Operating Income
For the three months ended March 31, 2024, Operating income decreased $0.2 million, principally due to a $0.7 million increase in Technical and research expenses, as well as restructuring expenses of 2017, the Company recorded a charge of approximately $15.8$2.2 million, associated with revisionsas described above.
Changes in the estimated profitability of two AEC contracts. The charge was principally due to second-quarter 2017 downward revisions of estimated customer demand for the components manufacturedlong-term contracts decreased operating income by AEC related to the two contracts.

AEC has a contract for the manufacture of composite components for the Rolls-Royce BR 725 engine, which powers Gulfstream’s G-650 business jet. The contract obligates AEC to supply these components for the life of the BR 725 program. During the second quarter of 2017, the Company revised its estimate of the profitability of this contract and determined that a charge of $10.2 million should be recorded as a provision for anticipated losses through the end of the program. The charge is driven primarily by a reduction in the estimated future demand for these components. The Company previously recorded a charge of $14$0.9 million in the second quarter of 2015 for this program, including $11 million for the write-off of development costs for nonrecurring engineering and tooling, and $3 million for anticipated future losses.

AEC’s subsidiary, Albany Aerospace Composites LLC, has a contract for the manufacture of composite struts for the Airbus A380, under which it is obligated2024, as compared to supply composite wing box struts through 2020 and floor beam struts through 2023. During the second quarter of 2017, the Company revised its estimate of the profitability of this contract and determined that a charge of $5.6 million should be recorded as a provision for anticipated losses through contract completion. The revision is driven by a decrease in estimated demand for these componentsof $0.7 million during the contract term, as well as by program inefficiencies.

Other than the charges noted above, changes in contract estimates increased gross profit by $0.3 million in the first nine months of 2017, and decreased gross profit by $1.2 million for the same period of 2016.

The value of fixed price contracts increased significantly due to the acquisition. The table below provides a summary of long-term fixed price contracts that were in process at the end of each period.

   
(in thousands)

September 30,

2017

 

December 31,

2016

Revenue earned year-to-date on incomplete long-term contracts$76,671$77,190
   
Contracts in process as of period end:  
Total value of contracts                           562,487                       351,779
Revenue recognized to date                           131,707                         55,091
Revenue to be recognized in future periods                           430,780                       296,688

Operating Loss

Three month comparison

·The operating loss increased by $4.8 million, compared to the third quarter of 2016, principally due to a $4.8 million increase in restructuring charges, and the Bear Claw® inventory write-off of $3.2 million.

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last year.


·The effect of those charges was partially offset by higher sales and strong productivity, as described above.

Nine month comparison

·The operating loss increased by $18.2 million, compared to the first nine months of 2016, principally due to the net effect of the following:
·The $67.5 million increase in net sales in 2017.
·The $15.8 million charge associated with the revision of contract estimates.
·An increase of $7.4 million in restructuring charges.
·The inventory write-off of $3.2 million for Bear Claw®.
·Operating expenses in 2016 included $5.4 million of acquisition expenses.

26

Working Capital, Liquidity and Capital Resources

Structure

Cash Flow Summary

 

Nine months ended

September 30,

(in thousands)20172016
Net income$27,427 $36,826 
Depreciation and amortization53,256 51,224 
Changes in working capital(54,390)(32,476)
Changes in other noncurrent liabilities and deferred taxes(13,142)(5,650)
Other operating items8,564 3,291 
Net cash provided by operating activities21,715 53,215 
Net cash used in investing activities(62,262)(231,869)
Net cash provided by financing activities3,395 184,982 
Effect of exchange rate changes on cash and cash equivalents8,875 4,729 
(Decrease)/increase in cash and cash equivalents(28,277)11,057 
Cash and cash equivalents at beginning of year181,742 185,113 
Cash and cash equivalents at end of period$153,465 $196,170 

Operating activities

Cash flow from operating activities was $21.7 million for the first nine months of 2017, compared to $53.2 million of

Three months ended March 31,
(in thousands)20242023
Net income$27,369 $27,086 
Depreciation and amortization22,304 17,367 
Changes in working capital (a)(27,171)(48,388)
Changes in other noncurrent liabilities and deferred taxes(169)(880)
Other operating items(12,736)(11,578)
Net cash provided by operating activities9,597 (16,393)
Net cash used in investing activities(26,880)(16,275)
Net cash used in financing activities(28,069)41,086 
Effect of exchange rate changes on cash and cash equivalents(2,656)4,064 
Decrease in cash and cash equivalents(48,008)12,482 
Cash and cash equivalents at beginning of year173,420 291,776 
Cash and cash equivalents at end of period$125,412 $304,258 
(a)Includes Accounts receivable, Contract assets, Inventories, Accounts payable, and Accrued liabilities.
Net cash provided by operating activities forwas $9.6 million in 2024, compared to net cash used in activities of $16.4 million in the same period of 2016.last year. The decrease in 2017increase was principally due to higherdriven by improved levels of Accounts receivableworking capital at both segments and Inventorieslower tax payments during the current period.
Net cash used in the AEC segment, reflecting growth in key programs. Cash paid for income taxes was $21.7investing activities primarily include capital expenditures totaling $26.9 million and $18.2$16.3 million for the first ninethree months of 20172024 and 2016, respectively.

At September 30, 2017, we had $153.52023, respectively, including investments in new aerospace programs and to improve productivity in our MC segment.

Net cash used in financing activities during 2024 was $28.1 million as compared to net cash provided by financing activities of cash and cash equivalents, of which $140.8 million was held by subsidiaries outside of the United States. 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 permanently reinvested, and the Company accrued for the tax cost on these earnings to the extent they cannot be repatriated in a tax-free manner. At September 30, 2017, the Company calculated a deferred tax liability of $3.7 million on $62.8 million of non-U.S. earnings that have been targeted for future repatriation to the U.S. Our current plans do not anticipate that we will need funds generated from foreign operations to fund our domestic operations or satisfy debt obligations in the United States. In the event that such funds were to be needed to fund

42

operations in the U.S., and if associated accruals for U.S. tax have not already been provided, we would be required to accrue and pay additional U.S. taxes to repatriate these funds.

Investing and Financing Activities

Capital expenditures for the first nine months were $62.3$41.1 million in 2017 and $51.3 million in 2016.2023. The change was primarily due to lower borrowings that were more than offset by a significant increase in 2017 was primarily related to the ramp in AEC programs.

On April 8, 2016, the Company acquired the outstanding shares of Harris Corporation’s composite aerostructures business for cash of $187 million, plus the assumption of certain liabilities. The Company funded the cash payable at closing by utilizing proceeds from a $550 million, unsecured credit facility agreement that was completed April 8, 2016.

Dividends have been declared each quarter since the fourth quarter of 2001. Decisions with respect to whether a dividend will be paid, and the amount of the dividend, are made by the Board of Directors each quarter. To the extent the Board declares cash dividends in the future, we expect to pay such dividends out of operating cash flows. Future cash dividends will also dependprincipal payments on debt covenantsduring the current period.

Liquidity and on the Board’s assessment of our ability to generate sufficient cash flows.

Capital Resources

Structure

We finance our business activities primarilyprincipally with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below. Our subsidiaries outside of the United States may also maintain working capital lines with local banks, but borrowings under such local facilities tend not to be significant. Substantially all ofbanks.
Under our cash balance at September 30, 2017 was held by non-U.S. subsidiaries. Based on cash on hand and credit facilities, we anticipate that the Company has sufficient capital resources to operate for the foreseeable future. We were in compliance with all debt covenants as of September 30, 2017.

On April 8, 2016, we entered into a $550$800 million unsecured Five-Year Revolving Credit Facility Agreement (the “Credit Agreement”) which amended and restated the Prior $400 million Agreement, entered into on June 18, 2015 (the “Prior Agreement”). Under thecommitted Amended Credit Agreement, $440$429.0 million of borrowings were outstanding as of September 30, 2017. The applicable interest rate forMarch 31, 2024. In addition, we have borrowings was LIBOR plus a spread, based onoutstanding at our leverage ratio at the timenewly acquired Heimbach subsidiary of borrowing. At the time of the last borrowing on September 25, 2017, the spread was 1.500%. The spread was based on a pricing grid, which ranged from 1.250% to 1.750%, 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 September 30, 2017, we would have been able to borrow an additional $110 million under the Agreement.

On May 6, 2016, we terminated our interest rate swap agreements that had effectively fixed the interest rate on up to $120$10.1 million, of revolving creditwhich $4.4 million was considered current.

As of March 31, 2024, we had cash and cash equivalents of $125.4 million and available borrowings in order to enter intounder our Amended Credit Agreement of $371.0 million, for a new interest rate swap with a greater notional amount,total liquidity of approximately $496.4 million. We believe cash flows from operations and the same maturity as theavailability of funds under our Amended Credit Agreement. We paid $5.2 million to terminate the swap agreements and that costAgreement will be amortized into interest expense through June 2020.

On May 9, 2016, we entered into interest rate hedges foradequate to fund our operations and business needs over the period May 16, 2016 through March 16, 2021. These transactions have the effect of fixing the LIBOR portion of the effective interest rate (before addition of the spread) on $300 million of indebtedness drawn under the Credit Agreement at the rate of 1.245% during the period. Under the terms of these transactions, we pay the fixed rate of 1.245% and the counterparties pay a floating rate based on the one-month LIBOR rate at each monthly

43

calculation date, which on September 18, 2017 was 1.245%, plus the applicable spread, during the swap period. On September 18, 2017, the all-in-rate on the $300 million of debt was 2.745%.

As of September 30, 2017, our leverage ratio was 2.55 to 1.00 and our interest coverage ratio was 9.38 to 1.00. We may purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50 to 1.00, and may make acquisitions with cash provided our leverage ratio would not exceed 3.50 to 1.00 after giving pro forma effect to any such acquisition.

next twelve months. For more information on credit agreements, see Note 1414. Financial Instruments in the Notes to Consolidated Financial Statements.

As of March 31, 2024, $109.0 million of our total cash and cash equivalents were held by non-U.S. subsidiaries. The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the Consolidated Financial StatementsU.S. were in Item 1,excess of $155.0 million, as of March 31, 2024 and are intended to remain indefinitely invested in foreign operations. Our cash planning strategy includes repatriating current earnings in excess of working capital requirements from certain countries in which our subsidiaries operate. 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, which is incorporated herein by reference.

currently considered to be indefinitely reinvested in foreign operations, may also result in additional taxes.

We have also returned cash to shareholders through dividends and share repurchases. During the first three months of 2024, we paid $8.1 million in dividends and had no share repurchases.

27

Off-Balance Sheet Arrangements

As of September 30, 2017, we have no

The Company is party to certain off-balance sheet arrangements, required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

The information set forth under Note 18 contained in Item 1, “Notes to Consolidated Financial Statements”, which is incorporated herein by reference.

Non-GAAP Measures

This Form 10-Q containsincluding certain non-GAAP metrics, including: percent change in net sales excluding currency rate effects (for each segment and the Company as a whole); EBITDA and Adjusted EBITDA (for each segment and the Company as a whole); net debt; and net income per share attributable to the Company, excluding adjustments. Such items are provided because management believes that, when reconciled from the GAAP items to which they relate, they provide additional useful information to investors regarding the Company’s operational performance.

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

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. That amount is then compared to the U.S. dollar amount reported in the current period.guarantees. The Company calculates EBITDA by removing the following from Net income: Interest expense net, Income tax

44

expense, Depreciationprovides financial assurance, such as payment guarantee and amortization. Adjusted EBITDA is calculated by: addingletters of credit and surety bonds, primarily to EBITDA costs associated with restructuring, inventory write-offs associated with discontinued businessessupport workers’ compensation programs and pension settlement charges; adding (or subtracting) revaluation losses (or gains); subtracting (or adding) gains (or losses) from the salecustoms clearance, of buildings or investments; subtracting insurance recovery gains in excess of previously recorded losses; subtracting (or adding) Income (or loss) attributable to the non-controlling interest in Albany Safran Composites (ASC); and adding expenses related to the Company’s acquisition of Harris Corporation’s composite aerostructures division. Adjusted EBITDA may also be presented as a percentage of net sales by dividing it by net sales. Net income per share attributable to the Company, excluding adjustments, is calculated by adding to (or subtracting from) net income attributable to the Company per share, on an after-tax basis: restructuring charges; inventory write-offs associated with discontinued businesses; discrete tax charges (or gains) and the effect ofless than $12 million. There were no material changes in the income tax rate; foreign currency revaluation losses (or gains); acquisition expenses; and losses (or gains) from the sale of investments.

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

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

Three months ended September 30, 2017
(in thousands)Machine ClothingAlbany Engineered CompositesCorporate expenses and otherTotal Company
Operating income/(loss) (GAAP)$42,674 ($9,301)($11,070)$22,303 
Interest, taxes, other income/expense- - (7,083)(7,083)
Net income/(loss) (GAAP)42,674 (9,301)(18,153)15,220 
Interest expense, net- - 4,429 4,429 
Income tax expense- - 3,809 3,809 
Depreciation and amortization8,380 8,591 1,159 18,130 
EBITDA (non-GAAP)51,054 (710)(8,756)41,588 
Restructuring expenses, net96 5,407 - 5,503 
Foreign currency revaluation losses1,114 137 266 1,517 
Write-off of inventory in a discontinued product line- 3,155 - 3,155 
Pretax loss attributable to the noncontrolling interest in ASC- 136 - 136 
Adjusted EBITDA (non-GAAP)$52,264 $8,125 ($8,490)$51,899 

45

off-balance sheet arrangements during 2024.

Three months ended September 30, 2016
(in thousands)Machine ClothingAlbany Engineered CompositesCorporate expenses and otherTotal Company
Operating income/(loss) (GAAP)$40,039 ($4,529)($10,690)$24,820 
Interest, taxes, other income/expense- - (11,411)(11,411)
Net income/(loss)  (GAAP)40,039 (4,529)(22,101)13,409 
Interest expense, net- - 3,681 3,681 
Income tax expense- - 7,488 7,488 
Depreciation and amortization9,032 8,027 1,386 18,445 
EBITDA (non-GAAP)49,071 3,498 (9,546)43,023 
Restructuring expenses, net(212)640 (102)326 
Foreign currency revaluation (gains)/losses86 - (308)(222)
Pretax income attributable to the noncontrolling interest in ASC- (428)- (428)
Adjusted EBITDA (non-GAAP)$48,945 $3,710 ($9,956)$42,699 

Nine months ended September 30, 2017
(in thousands)Machine ClothingAlbany Engineered Composites*Corporate expenses and otherTotal Company
Operating income/(loss) (GAAP)$119,352 ($32,242)($33,523)$53,587 
Interest, taxes, other income/expense- - (26,160)(26,160)
Net income/(loss) (GAAP)119,352 (32,242)(59,683)27,427 
Interest expense, net- - 13,042 13,042 
Income tax expense- - 12,138 12,138 
Depreciation and amortization25,098 24,613 3,545 53,256 
EBITDA (non-GAAP)144,450 (7,629)(30,958)105,863 
Restructuring expenses, net1,012 9,208 - 10,220 
Foreign currency revaluation losses4,427 171 2,318 6,916 
Write-off of inventory in a discontinued product line- 3,155 - 3,155 
Pretax income attributable to the noncontrolling interest in ASC- (178)- (178)
Adjusted EBITDA(non-GAAP)$149,889 $4,727 ($28,640)$125,976 

* Includes charge of $15.8 million related to revisions in the estimated profitability of two long-term contracts.

46

Nine months ended September 30, 2016
(in thousands)Machine ClothingAlbany Engineered CompositesCorporate expenses
and other		Total Company
Operating income/(loss) (GAAP)$112,583 ($14,083)($33,554)$64,946 
Interest, taxes, other income/expense- - (28,120)(28,120)
Net income/(loss) (GAAP)112,583 (14,083)(61,674)36,826 
Interest expense, net- - 9,610 9,610 
Income tax expense- - 20,613 20,613 
Depreciation and amortization27,845 17,778 5,601 51,224 
EBITDA (non-GAAP)140,428 3,695 (25,850)118,273 
Restructuring expenses, net5,921 1,787 (55)7,653 
Foreign currency revaluation (gains)/losses1,646 5 (2,355)(704)
Acquisition expenses- 5,367 - 5,367 
Pretax loss attributable to the noncontrolling interest in ASC- 36 - 36 
Adjusted EBITDA (non-GAAP)$147,995 $10,890 ($28,260)$130,625 

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

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

Three months ended September 30, 2017Pre taxTaxAfter taxPer Share
(in thousands, except per share amounts)AmountsEffectEffectEffect
Restructuring expenses, net$5,503$2,003$3,500$0.11
Foreign currency revaluation losses            1,517               552           965              0.03
Write-off of inventory in a discontinued product line            3,155            1,167        1,988              0.06
Unfavorable effect of change in income tax rate                     -               741           741              0.02
Net discrete income tax benefit                     -            3,866        3,866              0.12

Three months ended September 30, 2016Pre taxTaxAfter taxPer Share
(in thousands, except per share amounts)AmountsEffectEffectEffect
Restructuring expenses, net$326$122$204$0.01
Foreign currency revaluation gains               222                 83          1390.00
Favorable effect of change in income tax rate                     -               425          425              0.01
Net discrete income tax charge                     -                 74             740.00

Nine months ended September 30, 2017Pre taxTaxAfter taxPer Share
(in thousands, except per share amounts)AmountsEffectEffectEffect
Restructuring expenses, net$10,220$3,721$6,499$0.20
Foreign currency revaluation losses            6,916            2,516       4,400              0.14
Write-off of inventory in a discontinued product line            3,155            1,167       1,988              0.06
Net discrete income tax benefit                    -            2,281       2,281              0.07
Charge for revision to estimated profitability of AEC contracts         15,821            5,854       9,967              0.31

Nine months ended September 30, 2016Pre taxTaxAfter taxPer Share
(in thousands, except per share amounts)AmountsEffectEffectEffect
Restructuring expenses, net$7,653$2,965$4,688$0.15
Foreign currency revaluation gains               704               256           448              0.01
Acquisition expenses            5,367            1,933        3,434              0.11
Net discrete income tax benefit                    -               932           932              0.03

The following table contains the calculation of net income per share attributable to the Company, excluding adjustments:

 Three months ended
September 30,		Nine months ended
September 30,
Per share amounts (Basic)201720162017*2016
Net income attributable to the Company  (GAAP)$0.47 $0.41 $0.85 $1.15 
Adjustments:        
Restructuring expenses, net0.11 0.01 0.20 0.15 
Discrete tax adjustments and effect of change in income tax rate(0.10)(0.01)(0.07)(0.03)
Foreign currency revaluation losses/(gains)0.03 - 0.14 (0.01)
Write-off of inventory in a discontinued product line0.06 - 0.06 - 
Acquisition expenses- - - 0.11 
Net income attributable to the Company, excluding adjustments  (non-GAAP)$0.57 $0.41 $1.18 $1.37 

* Includes charge of $0.31 per share for revisions in estimated profitability of two AEC contracts.

The following table contains the calculation of AEC Adjusted EBITDA margin:

                 For the three month periods ending:
(in thousands, except percentages)

September 30,

2017

June 30,
2017*

March 31,
2017

September 30,

2016

AEC Adjusted EBITDA (non-GAAP)$8,125 ($8,586)$5,188 $3,710 
AEC Net sales (GAAP)71,447 68,999 56,450 48,024 
AEC Adjusted EBITDA margin (non-GAAP)11.4%-12.4%9.2%7.7%

* Includes charge of $15.8 million in Q2 2017 for revisions in estimated profitability of two AEC contracts.

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The following table contains the calculation of net debt:

(in thousands)September 30,
2017		June 30,
2017		March 31,
2017		December 31,
2016
Notes and loans payable$186$249$274$312
Current maturities of long-term debt             51,765        51,732          51,699           51,666
Long-term debt           453,578      444,030        428,477         432,918
Total debt           505,529      496,011$480,450         484,896
Cash and cash equivalents           153,465      138,792        143,333         181,742
Net debt$352,064$357,219$337,117$303,154













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Item 3. Quantitative and Qualitative Disclosures about Market Risk

For discussion

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 ourboth 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 $718.9 million. The potential loss in fair value resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates amounts to $71.9 million. Furthermore, related to foreign currency transactions, we have exposure to marketvarious nonfunctional currency balances totaling $154.9 million. This amount includes, on an absolute basis, exposures to assets and liabilities held in currencies other than our local entities’ functional currencies. On a net basis, we had $55.6 million of foreign currency assets as of March 31, 2024. 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% in currency rates could result in an adjustment to the income statement of approximately $5.6 million. Actual results may differ from these estimates.

Interest Rate Risk

We are exposed to interest rate fluctuations with respect to our variable rate debt, depending on general economic conditions.

On March 31, 2024, we had the following variable rate debt:

(in thousands, except interest rates)
Current Maturities of Long-Term Debt
Foreign Bank Debt$40
Long-term debt
Credit agreement with borrowings outstanding, net of fixed rate portion, at an end of period interest rate of 7.05% in 2024, due in 2028$79,000
Foreign Bank Debt39
Total$79,079
Assuming borrowings were outstanding for an entire year, an increase of one percentage point in weighted average interest rates would increase interest expense by $0.8 million. To manage interest rate risk, referwe may periodically enter into interest rate swap agreements to “Quantitative and Qualitative Disclosures about Market Risk”,effectively fix the interest rates on variable debt to a specific rate for a period of time. Our current interest rate swap agreements expire in October 2024, which will result in a significant increase in our interest cost, which will be calculated using a floating rate based on the one-month term SOFR at that time, which was 5.33% as of March 31, 2024. (See Note14. Financial Instruments in the Notes to the Consolidated Financial Statements in Item 1, which is included as an exhibit to this Form 10-Q.

incorporated herein by reference).

Item 4. Controls and Procedures

a) Disclosure controls and procedures.

a) Disclosure controls and procedures.
The principal executive officer and principal financial officer, based on their evaluation of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that the Company’s disclosure controls and procedures were notare effective for ensuring that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in filed or submitted reports is accumulated
29

and communicated to the Company’s management, including its principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

Remediation Plans for Material Weaknesses

(b) Changes in Internal Control over Financial Reporting

In the fourth quarter of 2016, and as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2016, we identified material weaknesses in our internal control over financial reporting as described below:

The Company did not establish effective reporting lines, appropriate authorities, responsibilities and monitoring activities for financial reporting processes and internal controls, as well as the assignment of banking signatory authorities, limits and responsibilities, at its subsidiary in Japan and certain other foreign locations. As a result, the Company lacked effective written entity and process level controls over initiation, authorization, processing and recording of transactions and safeguarding of assets managed by a third party service provider at the Japan location. In addition, the Company did not have effective management review controls over the assessment of a potential reserve for a loss contract due to a failure to understand and document the design requirements and operation of an effective management review control.

49

reporting.

Beginning in the fourth quarter of 2016, we immediately commenced active steps towards remediating the material weaknesses. These efforts include:

(a)a review of financial reporting processes relating to the subsidiary in Japan, and enhancements and additions to the internal controls for that entity;

(b)increasing senior financial and accounting management monitoring of financial reporting at smaller Company locations, establishing effective reporting lines, and appropriate authorities, and responsibilities and monitoring for financial reporting activities, and assignment of banking signatory authorities, limits and responsibilities at such locations;

(c)Enhancing management review controls and procedures for the assessment of potential reserves for loss contracts and additional training regarding the required documentation of design and operating effectiveness of internal control over financial reporting.

We are working to remediate the material weaknesses as quickly and efficiently as possible and believe that such efforts will effectively remediate the reported material weaknesses by the end of 2017. However, the material weaknesses will not be considered remediated until the remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Notwithstanding the material weaknesses described above, our management has concluded that the financial statements included elsewhere in this quarterly report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with generally accepted accounting principles.

(b) 

Changes in internal control over financial reporting.

There werewas no changeschange in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the last fiscal quarter ended September 30, 2017 that has materially affected, or areis reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.


PART II – OTHER INFORMATION


Item 1. LEGAL PROCEEDINGS

The information set forth above under Note 1616.Commitments and Contingencies in Item 1, “NotesNotes to Consolidated Financial Statements”Statements is incorporated herein by reference.


Item 1A. Risk Factors

There have been no material changes in risks since December 31, 2016. For discussion offrom the risk factors refer to Item 1A ofpreviously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.

2023.

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

We made no share purchases during the thirdfirst quarter of 2017. We remain authorized by2024.
On October 25, 2021, the Company's Board of Directors authorized the Company to purchaserepurchase shares of up to 2$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. We currently remain authorized to repurchase shares of our Class A Common Stock.

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up to $90.6 million.


Item 3. Defaults Upon Senior Securities

None.


Item 4. Mine Safety Disclosures

Not Applicable.


Item 5. Other Information

None.

Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2024, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Albany International Corp. securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

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Item 6. Exhibits

Exhibit No.Description
10(n)(viii)Description 

31.1 10(m)(xxi)
10(l)(xvi)
10(l)(xvii)
31.1

31.2

32.1

101.INSXBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104Cover page formatted as Inline XBRL and contained in Exhibit 101

99.1 Quantitative and qualitative disclosures about market risks as reported at September 30, 2017. 

101 

The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in extensible Business Reporting Language (XBRL), filed herewith: 

(i)Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016.

(ii)Consolidated Statements of Comprehensive Income/(Loss) for the three and nine months ended September 30, 2017 and 2016.

(iii)Consolidated Balance Sheets at September 30, 2017 and December 31, 2016.

(iv)Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2017 and 2016.

(v)Notes to Consolidated Financial Statements.

As provided in Rule 406T of Regulation S-T, this information shall not be deemed “filed” for purposes of Sections 11 and 12 of the Securities Act and Section 18 of the Securities Exchange Act or otherwise subject to liability under those sections. 

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SIGNATURES

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

ALBANY INTERNATIONAL CORP.
(Registrant)

Date: October 31, 2017

By/s/ John B. Cozzolino
ALBANY INTERNATIONAL CORP.
John B. Cozzolino(Registrant)
Date: April 29, 2024By/s/ Robert D. Starr
Robert D. Starr
Executive Vice President and Chief Financial Officer and Treasurer

(Principal Financial Officer)

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