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What changed in ALBANY INTERNATIONAL CORP /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ALBANY INTERNATIONAL CORP /DE/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+361 added−295 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-24)

Top changes in ALBANY INTERNATIONAL CORP /DE/'s 2023 10-K

361 paragraphs added · 295 removed · 217 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeShe joined the Company in March 2018 as Executive Vice President- Human Resources. Prior to 2018 she was Group VP Human Resources for Arconic Engineered Products and Solutions. Joseph M. Gaug, 59, Vice President- General Counsel and Secretary, joined the Company in 2004. He has served the Company as Vice President- Secretary and General Counsel since May 2020.
Biggest changeMcCarvill has served the Company as Executive Vice President – Human Resources and Chief Human Resources Officer since February 2019 . She joined the Company in March 2018 as Executive Vice President- Human Resources. Prior to 2018 she was Group VP Human Resources for Arconic Engineered Products and Solutions. Joseph M.
Item 1. Business Albany International Corp. (the Registrant, the Company, we, us, or our) and its subsidiaries are engaged in two business segments. The Machine Clothing (“MC”) segment supplies consumable permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel, pulp, nonwovens, fiber cement and several other industrial applications.
Item 1. Business Albany International Corp. (the Registrant, the Company, Albany, we, us, or our) and its subsidiaries are engaged in two business segments. The Machine Clothing (“MC”) segment supplies consumable permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel, pulp, nonwovens, fiber cement and several other industrial applications.
The sales of paper machine clothing forming, pressing, and drying fabrics, individually and in the aggregate, accounted for more than 10 percent of our consolidated Net sales during one or more of the last three years. No individual customer accounted for as much as 10 percent of MC segment Net sales in any of the periods presented.
The sales of paper machine clothing forming, pressing, and drying fabrics, individually and in the aggregate, accounted for more than 10 percent of our consolidated Net revenues during one or more of the last three years. No individual customer accounted for as much as 10 percent of MC segment Net revenues in any of the periods presented.
Achieving lower weight without sacrificing strength is the key to improving fuel efficiency, which helps reduce the carbon footprint of global aviation, and is a critical performance requirement in the aerospace industry.
Achieving lower weight without sacrificing strength is the key to improving fuel efficiency, which helps reduce the carbon emissions footprint of global aviation, and is a critical performance requirement in the aerospace industry.
In the drying section, drying fabrics manage air movement and hold the sheet against heated cylinders to enhance drying to a final moisture content between 4% to 9%, depending on the grade.
In the drying section, drying fabrics manage air movement and hold the sheet against heated cylinders to enhance drying to a final moisture content between 4 percent to 9 percent, depending on the grade.
Our active portfolio currently contains over 2,300 patents, and approximately 160 new patents are typically granted each year. While we consider our total portfolio of intellectual property, including our patents, to be an important competitive advantage, we do not believe that any single patent is critical to the continuation of our business.
Our active portfolio currently contains over 2,300 patents, and approximately 100 new patents are typically granted each year. While we consider our total portfolio of intellectual property, including our patents, to be an important competitive advantage, we do not believe that any single patent is critical to the continuation of our business.
In addition, we manufacture polymer monofilaments, a basic raw material for all types of machine clothing, at our facility in Homer, New York, which supplies approximately 24 percent of our worldwide monofilament requirements. In the AEC segment, the primary raw materials are carbon fiber and resin.
In addition, we manufacture polymer monofilaments, a basic raw material for all types of machine clothing, at our facility in Homer, New York, which supplies approximately 25 percent of our worldwide monofilament requirements. In our AEC segment, the primary raw materials are carbon fiber and resin.
While there are a number of potential suppliers of carbon fiber and other raw materials used by AEC, the use of certain suppliers may be mandated by customer agreements, and alternative suppliers would be subject to material 6 Index qualification or other requirements that may preclude or delay their availability.
While there are a number of potential suppliers of carbon fiber and other raw materials used by AEC, the use of certain suppliers may be mandated by customer agreements, and alternative suppliers would be subject to material qualification or other requirements that may preclude or delay their availability.
He held various technical and management positions in St. Stephen, South Carolina, and Sélestat, France, from 1987 to 1993. Greg Harwell, 59, President – Albany Engineered Composites, joined the Company in 2019. He has served the Company as President - Albany Engineered Composites since November 2019.
He held various technical and management positions in St. Stephen, South Carolina, and Sélestat, France, from 1987 to 1993. Greg Harwell, 60, President – Albany Engineered Composites, joined the Company in 2019. Mr. Harwell has served the Company as President – Albany Engineered Composites since November 2019.
Technical expertise, judgment, and experience are critical in designing the appropriate clothing for each machine, position, and application. As a result, many employees in sales and technical functions have engineering degrees, paper mill experience, or other manufacturing experience in the markets in which they operate. Our market leadership position reflects our commitment to technological innovation.
Technical expertise, judgment, and experience are critical in designing the appropriate clothing for each machine, position, and application. As a result, many employees in sales and technical functions have engineering degrees, paper mill experience, or other manufacturing experience in the markets in which we operate. Our market leadership position reflects our commitment to technology innovation.
AEC’s largest aerospace customer is SAFRAN and sales to SAFRAN (consisting primarily of fan blades and cases for CFM’s LEAP engine) accounted for approximately 16 percent of the Company’s consolidated Net sales in 2022.
AEC’s largest aerospace customer is SAFRAN and sales to SAFRAN (consisting primarily of fan blades and cases for CFM’s LEAP engine) accounted for approximately 16 percent of the Company’s consolidated Net revenues in 2023.
Some customer funded research and development may be on a cost sharing basis, in which case, amounts charged to the collaborating entity are credited against research and development costs. For customer-funded research and development in which we anticipate funding to exceed expenses, we include amounts charged to the customer in Net sales.
Some customer funded research and development may be on a cost sharing basis, in 6 Index which case, amounts charged to the collaborating entity are credited against research and development costs. For customer-funded research and development in which we anticipate funding to exceed expenses, we include amounts charged to the customer in Net revenues.
Other significant AEC programs include the production of structures and parts for the Sikorsky CH-53K helicopter, F-35 fighter jet, Joint Air-to-Surface Standoff Missile ("JASSM"), and Boeing 787 platforms. AEC also supplies vacuum waste tanks for most of the Boeing 7X7 aircraft, as well as the fan case for the GE9X engine.
Other significant AEC programs include the production of structures, parts and sub-assemblies for the Sikorsky CH-53K helicopter, F-35 fighter jet, Joint Air-to-Surface Standoff Missile ("JASSM"), and Boeing 787 aircraft. AEC also supplies vacuum waste tanks for most Boeing commercial aircraft, as well as the fan case for the GE9X engine.
Some of the Company’s paper machine clothing competitors also supply paper machines, papermaking equipment, and aftermarket parts and services, and often bundle clothing with original or rebuilt machines and/or aftermarket services. The primary competitive factors in the markets in which our Albany Engineered Composites segment competes are product performance, delivery performance, quality, and price.
Some of the Company’s paper machine clothing competitors also supply paper machines, papermaking equipment, and aftermarket parts and services, and often bundle machine clothing products with original or rebuilt machines and/or aftermarket services. The primary competitive factors in the markets in which our AEC segment competes are product performance, delivery performance, quality, and price.
A majority of MC segment Net sales in the year ended December 31, 2022 were for use in the production of the growing grades of tissue, containerboard, other paper categories, and other engineered fabrics, while less than 20% of MC segment Net sales were for the production of the declining newsprint and printing and writing papers categories.
A majority of MC segment Net revenues in the year ended December 31, 2023 were for use in the production of the growing grades of tissue, containerboard, other paper categories, and other engineered fabrics, while less than 20 percent of MC segment Net revenues were for the production of the declining newsprint and printing and writing papers categories.
Our current reports on Form 8-K, quarterly reports on Form 10-Q, and annual reports on Form 10-K are electronically filed with the Securities and Exchange Commission (the “SEC”), and all such reports and amendments to such reports filed subsequent to November 15, 2002, have been and will be made available, free of charge, through our website (www.albint.com) as soon as reasonably practicable after such filing.
Our current reports on Form 8-K, quarterly reports on Form 10-Q, and annual reports on Form 10-K, proxy statements for our annual stockholders' meetings and amendments to those reports are electronically filed with the Securities and Exchange Commission (the “SEC”), and all such reports and amendments to such reports filed subsequent to November 15, 2002, have been and will be made available, free of charge, through our website at www.albint.com as soon as reasonably practicable after such filing.
International Operations Our Machine Clothing business segment maintains manufacturing facilities in Brazil, Canada, China, France, Italy, Mexico, South Korea, Sweden, the United Kingdom, and the United States. MC's global manufacturing footprint is designed to most efficiently meet regional customer requirements.
International Operations Our MC business segment maintains manufacturing facilities in Belgium, Brazil, Canada, China, France, Germany, Italy, Mexico, South Korea, Spain, Sweden, Switzerland, the United Kingdom, and the United States. MC's global manufacturing footprint is designed to most efficiently meet regional customer requirements.
Cost of sales associated with customer-funded research was $5.2 million in 2022, $5.2 million in 2021, and $5.1 million in 2020. We have developed, and continue to develop, proprietary intellectual property germane to the industries we serve. Our intellectual property takes many forms, including patents, trademarks, trade names and domains, and trade secrets.
Cost of goods sold associated with customer-funded research was $6.4 million in 2023, $5.2 million in 2022, and $5.2 million in 2021. We have developed, and continue to develop, proprietary intellectual property germane to the industries we serve. Our intellectual property takes many forms, including patents, trademarks, trade names and domains, and trade secrets.
From June 2019 until he joined Albany International, Mr. Harwell was a consultant to Arlington Capital Partners, providing M&A advisory services. Alice McCarvill, 58, Executive Vice President- Human Resources and Chief Human Resources Officer, joined the Company in 2018. She has served the Company as Executive Vice President- Human Resources and Chief Human Resources Officer since February 2019 .
From June 2019 until he joined Albany International, Mr. Harwell was a consultant to Arlington Capital Partners, providing M&A advisory services. Alice McCarvill, 59, Executive Vice President – Human Resources and Chief Human Resources Officer, joined the Company in 2018. Ms.
MC segment products are custom-designed for each user, depending on the type, size, and speed of the machine, and the products being produced. Product design is also a function of the machine section, the grade of product being produced, and the quality of the stock used.
Our MC segment products are custom-designed for each user, depending on the type, size, and speed of the machine, and the products being produced. Products are specifically designed for each section and position on a machine, the grade of product being produced, and the quality of the stock used.
Our Data Security strategy is overseen by the Audit Committee of our Board of Directors, regularly reviewed at the executive level, directed by our Chief Information Officer, and managed by our Enterprise Cyber Security (ECS) team. Information on our approach to data security is available in the Sustainability section of our website (www.albint.com).
Our Data Security strategy is overseen by the Audit Committee of our Board of Directors, regularly reviewed at the executive level, directed by our Chief Information Officer, and managed by our Enterprise Cyber Security (ECS) team. For information on our approach, see Item 1C, Cybersecurity in this Part I and the Sustainability section of our website at www.albint.com.
The Albany Engineered Composites (“AEC”) segment, provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries. The segment includes Albany Safran Composites, LLC (“ASC”), in which our customer, SAFRAN Group ("SAFRAN"), owns a 10 percent noncontrolling interest.
The financial results of the acquired company are included in the MC reportable segment. The Albany Engineered Composites (“AEC”) segment, provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries. The segment includes Albany Safran Composites, LLC (“ASC”), in which our customer, SAFRAN Group ("SAFRAN"), owns a 10 percent noncontrolling interest.
To protect our Company and customer data, we employ industry best practices and adhere to the CIS 20 and NIST SP 800-171 cyber security frameworks.
To protect our Company and customer data, we employ industry best practices and adhere to the Center for Internet Security ("CIS") 20 and National Institute of Standards and Technology ("NIST") SP 800-171 cyber security frameworks.
The dominant competitive factor is the relative importance the customer places on these performance benefits, which include fuel savings/ emissions reductions due to lower weight, against the possible cost advantage of more traditional metal and composite components.
The dominant competitive factor is the relative 7 Index importance the customer places on these performance benefits, which include fuel savings/emissions reductions due to lower weight, against the possible cost advantage of more traditional metal and composite components. Human Capital Resources The health and safety of our employees is our highest priority, and drives the successful execution of our business.
He has served the Company as Senior Vice President and Chief Technology Officer since January 2010. He previously served as Vice President – Corporate Research and Development from April 2006 to January 2010, and Director of Technical and Marketing – Europe Press Fabrics from 2004 to April 2006.
He previously served as Vice President – Corporate Research and Development from April 2006 to January 2010, and Director of Technical and Marketing – Europe Press Fabrics from 2004 to April 2006. From 2000 to 2004, he served as Technical Director – Göppingen, Germany.
He previously served as Associate General Counsel from 2004 and as Associate General Counsel and Assistant Secretary from 2006 to May 2020. Prior to 2004 he was a principal at McNamee, Lochner, Titus & Williams, PC. Robert A. Hansen, 65, Senior Vice President and Chief Technology Officer, joined the Company in 1981.
Prior to 2004 he was a principal at McNamee, Lochner, Titus & Williams, PC. Robert A. Hansen, 66, Senior Vice President and Chief Technology Officer, joined the Company in 1981. Mr. Hansen has served the Company as Senior Vice President and Chief Technology Officer since January 2010.
Company-funded research expenses totaled $31.4 million in 2022, $29.6 million in 2021, and $25.8 million in 2020. In 2022, these costs were 3.0 percent of total Company Net sales, including $15.4 million, or 3.6 percent of Net sales, in our AEC segment. Research and development in the AEC segment includes both Company-sponsored and customer-funded activities.
Technical and research expenses totaled $40.6 million in 2023, $39.9 million in 2022, and $38.9 million in 2021. In 2023, these costs were 3.5 percent of total Company Net revenues, including $16.0 million, or 3.3 percent of Net revenues, in our AEC segment. Research and development in the AEC segment include both Company-sponsored and customer-funded activities.
(in thousands) 2022 2021 2020 Machine Clothing $ 609,461 $ 619,015 $ 572,955 Albany Engineered Composites 425,426 310,225 327,655 Consolidated total $ 1,034,887 $ 929,240 $ 900,610 The table setting forth certain sales, operating income, and balance sheet data that appears in Note 3, is included in “Reportable Segments and Geographic Data,” of the Consolidated Financial Statements, included under Item 8 of this Form 10-K.
(in thousands) 2023 2022 2021 Machine Clothing $ 670,768 $ 609,461 $ 619,015 Albany Engineered Composites 477,141 425,426 310,225 Total net revenues $ 1,147,909 $ 1,034,887 $ 929,240 The table that sets forth certain Net revenues, operating income, and balance sheet data appears in Note 3, Reportable Segments and Geographic Data, of the Notes to the Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Albany’s Machine Clothing product portfolio is broad and deep, with products for every part of the machine and a wide range of machine types and paper grades.
Competition Price and technology are the primary means of competitive differentiation in the industry. Our MC product portfolio is broad and deep, with products for every part of the machine and a wide range of machine types and paper grades.
Employees participate in regular training programs appropriate for their responsibility and extensive optional training programs have been developed for those who seek professional and personal growth opportunities. All employees are required to participate in safety training on a regular basis.
Our learning management system provides our employees with over 8,000 courses to choose from, in a flexible format, allowing employees to participate in regular training programs appropriate for their responsibility, and extensive optional training programs have been developed for those who seek professional and personal growth opportunities.
Approximately 26% of our global workforce were women in 2022. Our Empowering Women Leaders Network aims to continue increasing representation of women at all levels to contribute to the Company’s business success through relationships, and partnerships.
Our Empowering Women Leaders Network aims to continue increasing representation of women at all levels to contribute to the Company’s business success through relationships and partnerships. As part of our DE&I strategy, employees attend an annual DE&I training session to create awareness of the importance of DE&I as part of Albany’s culture.
From 2000 to 2004, he served as Technical Director – Press Fabrics, Göppingen, Germany. Before 2000, he served the Company in a number of technical management and research and development positions in Europe and the U.S. Elisabeth Indriani, 47, Vice President – Controller , joined the Company in 2021.
Before 2000, he served the Company in a number of technical management and research and development positions in Europe and the U.S. John J. Tedone, 59, Vice President – Controller and Chief Accounting Officer , joined the Company in 2023. Prior to joining the Company, Mr.
The revenue from such licenses is less than 1 percent of consolidated net sales. Raw Materials Primary raw materials for our MC products are polymer monofilaments and fibers, which have generally been available from a number of suppliers.
All brand names and product names are trade names of Albany International Corp. or its subsidiaries. Raw Materials Primary raw materials for our MC products are polymer monofilaments and fibers, which have generally been available from a number of suppliers.
See “Business Environment Overview and Trends” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for a discussion of general segment developments in recent years. 4 Index Following is a table of Net sales by segment for 2022, 2021, and 2020.
In 2023, approximately 39 percent of the AEC segment’s revenues were related to U.S. government contracts or programs. 5 Index See “Business Environment Overview and Trends” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for a discussion of general segment developments in recent years.
This innovation has resulted in new MC products and/or enhancements across all of our product lines. Albany Engineered Composites designs, develops and manufactures advanced composite parts for complex aerospace applications, using a range of core technologies, including its proprietary 3D-woven reinforced composites technology, traditional 2D laminated composite structures, automated material placement, filament winding, through-thickness reinforcement, braiding, and thermoplastic pultrusion.
AEC designs, develops and manufactures advanced composite parts and sub-assemblies for complex aerospace applications, using a range of core technologies, including its proprietary 3D-woven reinforced composites technology, traditional 2D laminated composite structures, automated fiber placement for both thermoplastics and thermoset composites as well as rigid installation for through-thickness reinforcements, and braided structures.
Our Diversity, Equity and Inclusion (DE&I) Council develops a holistic and actionable DE&I strategy that seeks diversity, nurtures inclusion, amplifies innovation and empowers champions. Our hiring strategy recruits candidates from a broad range of hiring sources that target people with diverse backgrounds and skills to fill open positions within 7 Index the Company.
We continuously review leading and lagging People metrics. To further our Diversity, Equity and Inclusion (DE&I) impact, our DE&I Council develops a holistic and actionable DE&I strategy that seeks diversity, nurtures inclusion, amplifies innovation and empowers champions.
Executive Officers of the Registrant The following table sets forth certain information with respect to the executive officers of the Company as of February 24, 2023: A. William Higgins, 64, President and Chief Executive Officer , joined the Company in 2020. He has served the Company as President and Chief Executive Officer since January 2020.
For more information on the risk of sustainability- and climate-related regulation, see Item 1A - Risk Factors. 10 Index Executive Officers The following table sets forth certain information with respect to the executive officers of the Company as of February 26, 2024: Gunnar Kleveland, 54, President and Chief Executive Officer , joined the Company in 2023.
Nolan served in corporate development and strategy roles at Raytheon Company and as a strategy consultant at McKinsey & Company. Daniel A. Halftermeyer, 61, President – Machine Clothing, joined the Company in 1987. He has served the Company as President – Machine Clothing since February 2012.
Halftermeyer has served the Company as President – Machine Clothing since February 2012.
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In 2022, approximately 46% of the AEC segment’s sales were related to U.S. government contracts or programs.
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On August 31, 2023, the Company completed the acquisition of Heimbach GmbH ("Heimbach"), a privately-held manufacturer of paper machine clothing and technical textiles, as further described in Note 24, Business Combination, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K .
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Effect of Global Macroeconomic and Political Climate The war between Russia and Ukraine is affecting the economic and global financial markets and exacerbating ongoing economic challenges caused by impacts of the ongoing COVID-19 pandemic, including rising inflation and global supply chain disruptions.
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Following is a table of Net revenues by segment for years ended December 31, 2023, 2022, and 2021.
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Our MC segment has historically generated approximately 2% of its annual net sales from customers in Russia and Ukraine. In addition, a subsidiary within our Machine Clothing segment has been a partner in a joint venture (“JV”) that supplies paper machine clothing products to local papermakers in Russia.
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This innovation has resulted in new products and enhancements across all of our product lines.
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In March 2022, we made the decision to cease doing business in Russia, including giving notice to our JV partner of our intent to exit the venture.
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Our objective is always zero injuries at work, and our entire workforce from the Board of Directors to our teams on the shop floor work together towards this goal. We track and review safety metrics throughout the year, including Total Recordable Incident Rate ("TRIR") and proactive safety actions taken.
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As a result, we recognized $1.5 million expense in cost of goods sold and in Selling, General, and Administrative expense, representing reserves against the risk of obsolescence of certain inventory destined for Russian customers and uncollectible receivables from Russian customers, respectively.
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Our Board of Directors further reinforces our culture of safety by tying a portion of each Executive Officer's compensation to the achievement of TRIR goals across the entire company. Our talented and innovative people are truly our greatest advantage. We are unwavering in our commitment to nurture a thriving people-first and high-engagement workplace culture defined by mutual respect.
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In the first quarter of 2022, we also wrote down the net book value of our investment in the aforementioned JV to reflect our intent to exit such venture, resulting in $0.8 million impairment loss included in Other (income)/expense, net.
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We strive to foster an inclusive and equitable culture where diversity of experiences, backgrounds, and skills are valued, respected, and celebrated. We believe that an inclusion-based culture has the power to enhance innovation, nurture an environment where our people can reach their highest potential, and deliver the best solutions to our customers.
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Our cessation of doing business in Russia resulted in a reduction of approximately $10 million in annual net sales in the MC segment during 2022. During 2022, our segments saw higher input costs due to increased energy costs, tight supply market, and global logistics challenges. Our MC segment experienced higher energy prices, higher labor costs, and increased raw material prices.
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We believe in the power of open and transparent communication throughout the organization and endeavor to ensure our employees’ voices are heard. We currently employ approximately 5,600 people, with significant global operations in North America, South America, Europe and Asia. Our Employee Value Proposition enables us to provide an outstanding Albany employee experience and strengthen our high-performance organization.
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We continued to identify alternatives to secure materials in the face of intense supply constraints. Logistics costs have begun to stabilize compared to the same period last year, though they remained higher than pre-pandemic levels. We anticipate inflationary pressure and energy cost escalation to be a primary input cost pressure in the near term.
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We ensure that our global employees receive inclusive and competitive compensation, benefits, and total rewards for their critical contributions at Albany. For employees in the U.S. this includes 401(k) match and profit sharing contribution, paid time off, personal days off, health and dental insurance, pet insurance, reward and recognition programs, and strong commitment to employee well-being and work/life balance.
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The ultimate financial impact due to the aforementioned global macroeconomic conditions and political climate is difficult to predict. During 2022, MC segment input costs increased approximately $10 million as a result of these factors, or an unfavorable impact to the segment gross margin of approximately 140 basis points for the year.
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Our talent management strategy focuses on a three-pronged approach: developing and growing our internal talent, hiring the best talent from the market, and leveraging our internship program to identify and build the next generation of talent. To develop internal talent, our talent management process focuses on identifying opportunities for career growth and development within the organization.
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Our Albany Engineered Composites segment does not have significant direct exposure in Russia. However, it has not been immune from supply chain disruptions. Increasing fuel prices coupled with higher demand has resulted in increased freight costs during the quarter, along with ongoing logistic constraints, higher labor costs, and increases in raw material prices.
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We are committed to enhancing the employee experience, which includes consistent learning and development to support our employees as they enhance their knowledge, unleash their full potential and reach their career aspirations. We have defined curriculum by disciplines and functions. We also provide a variety of continuous learning opportunities through on-the-job training, virtual training, instructor-led training, and external learning opportunities.
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Due to the nature of AEC’s contracts with its customers, we currently anticipate passing through a portion of such cost increases to the customers. 5 Index Until the effects of the macroeconomic conditions and political climate on global markets subside, there can be no assurance that our input costs will not continue to rise beyond our current estimate, thus unfavorably impacting our future results of operations, financial position and liquidity.
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All employees are required to participate in safety, ethics and compliance training on a regular basis. Our Chief Human Resources Officer meets regularly with the Chief Executive Officer and the Senior Leadership Team to align People strategy, plan and initiatives with business strategy and goals. Our People Resources plan ensures that we provide a rewarding employee experience across the Company.
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All brand names and product names are trade names of Albany International Corp. or its subsidiaries. We have from time to time licensed some of our patents and/or know-how to one or more competitors, and have been licensed under some competitors’ patents, in each case mainly to enhance customer acceptance of new products.
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Our hiring strategy recruits candidates from a broad range of hiring sources that target diverse backgrounds, skills and competencies to fill our open positions with the most qualified candidate. Approximately 27 percent of our global workforce were women in 2023 and 30 percent of our U.S. workforce identified as a ‘U.S. minority’, as defined by the Equal Employment Opportunity Commission.
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Competition In the paper machine clothing market, we believe that we had a worldwide market share of approximately 30 percent in 2022. Price and technology are the primary means of competitive differentiation in the industry.
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Further, we ensure DE&I training is fully integrated into our continuous learning culture. 8 Index Our journey on DE&I continues with the establishment of Employee Resource Groups to champion DE&I and foster a diverse and inclusive environment.
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Human Capital Resources Albany International recognizes that its long, successful history and future opportunities are directly linked to dedicated, engaged and diverse employees that serve the Company in all business operations. Albany currently employs approximately 4,100 people, with significant operations in North America, South America, Europe and Asia.
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We fully support global human rights and have aligned our policies and procedures with the United Nations Global Compact and the Universal Declaration of Human Rights, among others. In 2023 we issued a standalone Human Rights Policy to further affirm our commitment to human rights throughout our value chain.
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Wages and benefits are competitive with those of other manufacturers in the geographic areas in which our facilities are located. A number of hourly employees outside of the United States are members of various unions. In general, we consider our relations with employees to be excellent.
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Sustainability Product Stewardship Our business is centered around driving success for our customers. Our products are designed for performance and consistency, while enabling our customers to improve their environmental footprint through more sustainable and efficient processes and end products.
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We have systematically and continuously reduced our Total Recordable Incident Rate (TRIR) by approximately 65% since 2019 to 0.48 in 2022. The Company’s Executive Vice President- Human Resources and Chief Human Resources Officer meets regularly with the Chief Executive Officer to align Human Capital strategy, plan and initiatives with business strategy and goals.
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As described above, our paper machine clothing products enable our paper-making customers to reduce their own environmental footprint by reducing their energy consumption, improving resource efficiency, and helping maintain and improve water quality. Energy is one of the top three cost components in the paper making process.
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Albany’s Human Capital Resources plan ensures that we provide a rewarding employee experience across the company. We continuously review our Human Capital Resources metrics, including safety metrics and action plans, to promote an emotionally and physically safe and inclusive working environment.
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Our machine clothing solutions use innovative technologies to reduce the amount of heat energy required for paper production. We continue to innovate and remain focused on developing and bringing to market proprietary products aimed at improving the energy and resource efficiency needed for our customers’ products and their production processes.
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He has been a director of the Company since 2016 and served as Chairman of the Board from February 2019 until January 2020. From 2005 to 2012 he served CIRCOR International, Inc. in a variety of senior organizational positions, including Chief Executive Officer and Chairman.
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In aerospace, weight savings that drive fuel efficiency are essential for aircraft producers, if the industry is to achieve its goals for sustainable aviation. This fundamental design goal has driven the increased use of lightweight composite structures in an ever-broadening sphere of aerospace applications.
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Prior to joining CIRCOR, he held a variety of senior management positions with Honeywell International and AlliedSignal. Stephen M. Nolan, 53, Chief Financial Officer and Treasurer, joined the Company in 2019. He has served the Company as Chief Financial Officer and Treasurer since April 2019.
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We have applied learnings from our 128+ years of experience manufacturing machine clothing to pioneer 3D weaving technologies to manufacture our composite material. The process involves layering and interweaving fibers in a precise, computer-controlled process to create complex, high-strength parts that allows for the production of lightweight and strong composite parts with high-performance properties.
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Prior to joining the Company, he served as Chief Financial Officer of Esterline and previously held the same role at Vista Outdoor, Inc. He previously worked in a number of strategic and operational management roles at ATK, including Senior Vice President for Strategy and Business Development and several business unit leadership positions. Earlier in his career, Mr.
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This technology has the ability to produce parts with complex geometries and high-performance properties, such as high strength, stiffness and resistance to impact and fatigue making it well-suited for use in aerospace, defense and industrial applications.
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Prior to joining the Company, she was the Global Controller at Century Aluminum Company, where she oversaw accounting and financial reporting, led global policy and process transformation initiatives, and was a business partner in financial planning and analysis, 8 Index M&A due diligence, investor relations, treasury, financing and tax structuring transactions. Earlier in her career, Ms.
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These structurally demanding applications have historically been served by heavier, metallic structures, and traditional laminated composites do not possess the required structural characteristics that 3D woven can offer. As such, our proprietary 3D woven technology expands the role that lightweight composites can serve as the next generation of aircraft is designed and built.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

101 edited+40 added−11 removed97 unchanged
Biggest changeAdditionally, manufacturing or delivery costs could increase. • While we do not anticipate material impairments on our assets as a result of COVID-19, changes in our expectations for net sales, earnings potential and cash flows associated with our intangible assets and goodwill that fall below our current projections could result in such assets being impaired. 10 Index A number of industry factors have had, and in future periods could have, an adverse impact on sales, profitability and cash flow in the Company’s MC and AEC segments Significant consolidation and rationalization in the paper industry in recent years have reduced global consumption of paper machine clothing in certain markets and for certain grades.
Biggest changeAdditionally, manufacturing or delivery costs could increase. 14 Index • While we do not anticipate material impairments on our assets as a result of the COVID-19 pandemic, changes in our expectations for net revenues, earnings potential and cash flows associated with our intangible assets and goodwill that fall below our current projections could result in such assets being impaired.
The risks associated with limited suppliers increased as a result of the COVID-19 pandemic, which has put pressure on the supply chain in general, and transportation companies that deliver raw materials to us and our products to customers, in particular.
The risks associated with limited suppliers increased as a result of the COVID-19 pandemic, which has put pressure on the supply chain in general, and on transportation companies that deliver raw materials to us and our products to customers, in particular.
Lack of supply, delivery delays, or quality issues relating to supplied raw materials or for our key manufacturing equipment could harm our production capacity. Such could require the Company to attempt to qualify one or more additional suppliers, which could be a lengthy, expensive and uncertain process.
Lack of supply, delivery delays, or quality issues relating to supplied raw materials or for our key manufacturing equipment could harm our production capacity. Such issues could require the Company to attempt to qualify one or more additional suppliers, which could be a lengthy, expensive and uncertain process.
These disruptions could make it difficult to supply our customers with products on time, which could have a negative impact on our business, financial condition, and results of operations. The Company also relies on the labor market in many regions of the world to meet our operational requirements, advance our technology and differentiate products.
These disruptions could make it difficult to supply our customers with products on time, which could have a negative impact on our business, financial condition, and results of operations. The Company also relies on the labor market in many regions of the world to meet our operational requirements, advance our technology and differentiate our products.
Significant consolidation of manufacturing operations in our MC segment over the past decade has reduced the number of facilities available to produce our products, and increased utilization significantly at remaining facilities. Not all product lines are produced at, or capable of being produced at, all facilities.
Significant consolidation of manufacturing operations in our MC segment over the past decade has reduced the number of facilities available to produce our products, and increased utilization significantly at remaining facilities. Not all product lines are produced at, or are capable of being produced at, all facilities.
However, our reputation is susceptible to material damage by events such as disputes with customers or competitors, cybersecurity incidents or service outages, internal control deficiencies, delivery failures, compliance violations, government investigations or legal proceedings. We may also experience reputational damage from employees, advocacy groups, regulators, investors and other stakeholders that disagree with the way we conduct our business.
However, our reputation is susceptible to material damage by events such as disputes with customers or competitors, cybersecurity incidents or service outages, internal control deficiencies, delivery failures, regulatory compliance violations, government investigations or legal proceedings. We may also experience reputational damage from employees, advocacy groups, regulators, investors and other stakeholders that disagree with the way we conduct our business.
Additionally, we maintain product liability insurance and other insurance at levels we believe to be prudent and consistent with industry practice to help mitigate these risks, these coverages may not be sufficient to fully cover AEC’s exposure for such risks, which could have a material adverse effect on AEC’s results of operations and cash flows.
Additionally, although we maintain product liability insurance and other insurance at levels we believe to be prudent and consistent with industry practice to help mitigate these risks, these coverages may not be sufficient to fully cover AEC’s exposure for such risks, which could have a material adverse effect on AEC’s results of operations and cash flows.
The above effects could have an adverse impact on demand for publication paper grades, and perhaps other grades of paper, including without limitation packaging paper grades, as well as on demand for non-woven fabrics and fiber cement products used in the construction industry; such impacts would in turn adversely impact demand for the MC products used to manufacture such paper grades or building products.
The above effects could continue to have an adverse impact on demand for publication paper grades, and perhaps other grades of paper, including without limitation packaging paper grades, as well as on demand for non-woven fabrics and fiber cement products used in the construction industry; such impacts would in turn adversely impact demand for the MC products used to manufacture such paper grades or building products.
Furthermore, both the MC and AEC business segments manufacture products that are custom-designed for a specific customer application. In the event of a customer liquidity issue, the Company could also be required to write off amounts that are included in Contract assets,net or Inventories.
Furthermore, both the MC and AEC business segments manufacture products that are custom-designed for a specific customer application. In the event of a customer liquidity issue, the Company could also be required to write off amounts that are included in Contract assets or Inventories.
We are subject to numerous risks as a result of our acquisition strategy, including, but not limited to, the following: • We may invest time and capital pursuing acquisitions that do not materialize • We may incur costs and expenses associated with any unidentified or potential liabilities of the acquired companies • We may not achieve anticipated revenue and cost benefits from the acquisitions • We may encounter unforeseen difficulties in integrating the acquired operations into our existing operations Our past or future acquisitions might not ultimately improve our competitive position and business.
We are subject to numerous risks as a result of our acquisition strategy, including, but not limited to, the following: • We may invest time and capital pursuing acquisitions that do not materialize; • We may incur costs and expenses associated with any unidentified or potential liabilities of the acquired companies; • We may not achieve anticipated revenue and cost benefits from the acquisitions; 19 Index • We may encounter unforeseen difficulties in integrating the acquired operations into our existing operations; and • Our past or future acquisitions might not ultimately improve our competitive position and business.
Violations of these regulations in connection with the performance of our obligations to our 20 Index customers also could result in liability for significant monetary damages, fines, enforcement actions and/or criminal prosecution or sanctions, unfavorable publicity and other reputational damage and restrictions on our ability to effectively carry out our contractual obligations and thereby expose us to potential claims from our customers.
Violations of these regulations in connection with the performance of our obligations to our customers also could result in liability for significant monetary damages, fines, enforcement actions and/or criminal prosecution or sanctions, unfavorable publicity and other reputational damage and restrictions on our ability to effectively carry out our contractual obligations and thereby expose us to potential claims from our customers.
Failure to accomplish these customer quality, delivery, and cost 15 Index targets on any key program could result in material losses to the Company and have a material adverse impact on the amount and timing of anticipated AEC revenues, segment operating income, and cash flows, which could in turn have a material adverse impact on our consolidated financial results.
Failure to accomplish these customer quality, delivery, and cost targets on any key program could result in material losses to the Company and have a material adverse impact on the amount and timing of anticipated AEC revenues, segment operating income, and cash flows, which could in turn have a material adverse impact on our consolidated financial results.
There is no guarantee that future government shutdown orders, or our own future shutdowns, should they occur, will not have a more significant impact on our production. • Behavioral changes that have occurred during the pandemic have impacted demand for various products that are made with MC fabrics.
There is no guarantee that future government shutdown orders, or our own future shutdowns, should they occur, will not have a more significant impact on our production. • Behavioral changes that have occurred during and since the pandemic have impacted demand for various products that are made with MC fabrics.
Increasing industry performance standards, increasing sustainability disclosure requirements in the U.S. and globally, and requirements on manufacturing and product air pollutant emissions, especially greenhouse gas (GHG) emissions, may result in increased costs or reputational risks and could limit our ability to manufacture and/or market certain of our products at acceptable costs, or at all.
Increasing industry performance standards, increasing sustainability disclosure requirements in the U.S. and globally, and requirements on manufacturing and product air pollutant emissions, especially GHG emissions, may result in increased costs or reputational risks and could limit our ability to manufacture and/or market certain of our products at acceptable costs, or at all.
Government's Department of Defense, which are subject to unique risks The funding of DoD programs is subject to congressional appropriations. Many of the DoD programs in which we participate may last several years, but they are normally funded annually. Changes in military strategy and priorities may affect future opportunities and/or existing programs.
Government Department of Defense, which are subject to unique risks. The funding of DoD programs is subject to congressional appropriations. Many of the DoD programs in which we participate may last several years, but they are normally funded annually. Changes in military strategy and priorities may affect future opportunities and/or existing programs.
Operating results can also be affected by the translation of sales and costs from each non-U.S. subsidiary’s functional currency to the U.S. dollar. Changes in the value of foreign currencies relative to the U.S. dollar could impact the reported level, in U.S. dollars, of Net Sales and operating expenses which are denominated in those currencies.
Operating results can also be affected by the translation of Net revenues and costs from each non-U.S. subsidiary’s functional currency to the U.S. dollar. Changes in the value of foreign currencies relative to the U.S. dollar could impact the reported level, in U.S. dollars, of Net revenues and operating expenses which are denominated in those currencies.
Our ability to pay dividends will depend upon many factors, including our financial position and liquidity, results of operations, legal requirements, restrictions that may be imposed by the terms of our current and future credit facilities and other debt obligations and other factors deemed relevant by 21 Index our board of directors.
Our ability to pay dividends will depend upon many factors, including our financial position and liquidity, results of operations, legal requirements, restrictions that may be imposed by the terms of our current and future credit facilities and other debt obligations and other factors deemed relevant by our Board of Directors.
Risks related to our legal and regulatory environment The Company may fail to adequately protect its proprietary technology, which would allow competitors or others to take advantage of its research and development efforts Proprietary trade secrets are a source of competitive advantage in each of our segments.
Risks related to our legal and regulatory environment The Company may fail to adequately protect its proprietary technology, which would allow competitors or others to take advantage of its research and development efforts. 24 Index Proprietary trade secrets are a source of competitive advantage in each of our segments.
For example, we have a substantial amount of indebtedness and while we feel that we generate sufficient cash from operations and have sufficient borrowing capacity to make required capital expenditures to maintain and grow our business, any decrease in our cash generation could result in higher leverage.
For example, we have a substantial amount of indebtedness and while we feel that we generate sufficient cash from operations and have sufficient borrowing capacity to make required capital expenditures 26 Index to maintain and grow our business, any decrease in our cash generation could result in higher leverage.
Highly contagious diseases such as COVID-19 create the risk that we may need to shut down one of our facilities for an extended period of time, which could increase our costs and affect our ability to meet commitments to customers.
Highly contagious diseases such as COVID-19 create the risk that we may need to shut down one or more of our facilities for an extended period of time, which could increase our costs and affect our ability to meet commitments to customers.
Weak or unstable economic conditions also increase the risk that one or more of our customers could be unable to pay outstanding accounts receivable, whether as the result of bankruptcy or an inability to obtain working capital financing from banks or other lenders.
Weak or unstable economic conditions also increase the risk that one or more of our customers might be unable to pay outstanding accounts receivable, whether as the result of bankruptcy or an inability to obtain working capital financing from banks or other lenders.
These effects include deteriorating general economic conditions in many regions of the world, increased unemployment, decreases in disposable income, decline in consumer confidence, and changes in consumer spending habits. In the U.S. and in several other countries these effects appear to be on the wane.
These effects included deteriorating general economic conditions in many regions of the world, increased unemployment, decreases in disposable income, decline in consumer confidence, and changes in consumer spending habits. In the U.S. and in several other countries these effects appear to be on the wane.
Certain adverse impacts specific to the Company include, without limitation: • During 2022, some employees in various plants contracted the COVID-19 virus, which led to workforce absences of employees that contracted the virus and others that may have been exposed.
Certain adverse impacts specific to the Company include, without limitation: • During 2023, 2022 and 2021, some employees in various plants contracted the COVID-19 virus, which led to workforce absences of employees that contracted the virus and others that may have been exposed.
In addition, positions we take or do not take on social issues may be unpopular with some of our employees or with our customers or potential customers, which may in the future impact our ability to attract or retain employees or customers.
In addition, positions we take or do not take on environmental or social issues may be unpopular with some of our employees, suppliers, customers or potential customers, which may in the future impact our ability to attract or retain employees, suppliers or customers.
This underscores the importance of our ability to maintain the technological competitiveness and value of our products, and a failure to do so could have a material adverse effect on our business, financial condition, and results of operations.
This underscores the importance of our ability to maintain the 17 Index technological competitiveness and value of our products, and a failure to do so could have a material adverse effect on our business, financial condition, and results of operations.
The loss of one or more of these customers, or a significant decrease in the amount of machine clothing they purchase from us, could have a material adverse impact on MC's net sales and profitability.
The loss of one or more of these customers, or a significant decrease in the amount of machine clothing they purchase from us, could have a material adverse impact on MC's Net revenues and profitability.
Restructuring involves risks such as employee work stoppages, slowdowns, or strikes, which can threaten 13 Index uninterrupted production, maintenance of high product quality, meeting of customers’ delivery deadlines, and maintenance of administrative processes.
Restructuring involves risks such as employee work stoppages, slowdowns, or strikes, which can threaten uninterrupted production, maintenance of high product quality, meeting of customers’ delivery deadlines, and maintenance of administrative processes.
While we have been able to meet our raw material and equipment needs, the limited number 12 Index of suppliers of these items creates the potential for disruptions in supply. AEC currently relies on single suppliers under contracts they have with SAFRAN to meet the carbon fiber and carbon resin requirements for the LEAP program.
While we have been able to meet our raw material and equipment needs, the limited number of suppliers of these items creates the potential for disruptions in supply. AEC currently relies on single suppliers under contracts we have with SAFRAN to meet the carbon fiber and carbon resin requirements for the LEAP program.
These factors have had, and in the future are likely to have, an adverse effect on paper machine clothing sales. The market for paper machine clothing in recent years has been characterized by continuous pressure to provide more favorable commercial terms, which has continued to place pressure on our operating results.
These factors have had, and in the future are likely to have, an adverse effect on paper machine clothing net revenues. The market for paper machine clothing in recent years has been characterized by continuous pressure to provide more favorable commercial terms, which has continued to place pressure on our operating results.
We are subject to U.S. federal procurement regulations such as the DFARS clause 252.204-7012, based on the NIST 800-171 framework whose goal is protecting controlled unclassified information in non-federal systems and organizations. In 2022 we continued efforts to comply with the U.S.
We are subject to U.S. federal procurement regulations such as the DFARS clause 252.204-7012, based on the NIST 800-171 framework whose goal is protecting controlled unclassified information in non-federal systems and organizations. In 2023, we continued efforts to comply with the forthcoming U.S.
Although we maintain insurance for the risks associated with this business, there can be no assurance that the amount of our insurance coverage will be adequate to cover all claims or liabilities. In addition, there can be no assurance that insurance coverage will continue to be available to us in the future at a cost that is acceptable.
Although we maintain insurance for the risks associated with our businesses, there can be no assurance that the amount of our insurance coverage will be adequate to cover all claims or liabilities. In addition, there can be no assurance that insurance coverage will continue to be available to us in the future at a cost that is acceptable.
Realization of any of these risks could result in a material adverse effect on our earnings, cash flow and financial position. 16 Index See also “The U.S.
Realization of any of these risks could result in a material adverse effect on our earnings, cash flow and financial position. See also “The U.S.
Any failure by AEC to maintain its current supplier status under these programs, or any material change in their commercial or other terms, could have a material adverse effect on AEC’s future sales and operating income. Our top ten customers in the MC segment accounted for a significant portion of our Net sales in 2022.
Any failure by AEC to maintain its current supplier status under these programs, or any material change in their commercial or other terms, could have a material adverse effect on AEC’s future Net revenues and operating income. Our top ten customers in the MC segment accounted for a significant portion of our Net revenues in 2023.
Increasing stakeholder environmental, social and governance (ESG) expectations, physical and transition risks associated with climate change, emerging ESG regulation, contractual requirements, and policy requirements may pose risk to our market outlook, brand and reputation, financial outlook, cost of capital, global supply chain and production continuity, which may impact our ability to achieve long-term business objectives.
Increasing stakeholder environmental, social and governance expectations, physical and transition risks associated with climate change, emerging sustainability and social regulation, contractual requirements, and policy requirements may pose risk to our market outlook, brand and reputation, financial outlook, cost of capital, global 25 Index supply chain and production continuity, which may impact our ability to achieve long-term business objectives.
We are subject to numerous laws and regulations designed to protect this information, such as the European Union’s General Data Protection Regulation (“GDPR”) and the United Kingdom’s GDPR, as well as various other U.S. federal and state laws governing the protection of privacy, health or other personally identifiable information and data privacy and cybersecurity laws in other regions.
We are subject to numerous laws and regulations designed to protect this information, such as the European Union’s General Data Protection Regulation (“GDPR”) and the United Kingdom’s GDPR, the Cybersecurity Law of the People's Republic of China, as well as various other U.S. federal and state laws governing the protection of privacy, health or other personally identifiable information and data privacy and cybersecurity laws in other regions.
Although we plan each step of the process carefully, and work to reassure customers who could be affected that their requirements will continue to be met, we could lose customers and associated revenues if we fail to execute properly.
Although we plan each step of the process carefully, and work to reassure customers who could be affected that their requirements will continue to be met, we could lose customers and associated revenues if we fail to execute properly on any restructuring.
Additionally, many of AEC’s customers, as well as the companies supplied by our customers are under pressure to achieve acceptable returns on their substantial investments in recent years in new technologies, new programs and new product introductions.
Additionally, many of AEC’s customers, as well as the companies supplied by our customers, are under pressure to improve returns on their substantial investments in recent years in new technologies, new programs and new product introductions.
Differences may also arise due to changes in regulatory, accounting and other requirements applicable to pension plans. The Company is exposed to the risk of increased expense in health-care related costs We are largely self-insured for some employee and business risks, including health care programs in the United States.
Differences may also arise due to changes in regulatory, accounting and other requirements applicable to pension plans. The Company is exposed to the risk of increased expense in health-care related costs. We are largely self-insured for some employee and business risks, including health care programs in the U.S.
Future sales of shares by us or our existing stockholders could cause our stock price to decline Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline or might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline or might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Long-term supply contracts in our Albany Engineered Composites segment pose certain risks AEC has a number of long-term contracts with fixed pricing, and is likely to enter into similar contracts in the future.
Long-term supply contracts in our AEC segment pose certain risks. AEC has a number of long-term contracts with fixed pricing, and is likely to enter into similar contracts in the future.
Any failure by AEC to maintain its current supplier status under these programs, or any material change in their commercial or other terms, could have a material adverse effect on AEC’s future revenues and segment operating income. AEC derives a significant portion of its revenue from contracts with the U.S.
Any failure 20 Index by AEC to maintain its current supplier status under these programs, or any material change in their commercial or other terms, could have a material adverse effect on AEC’s future revenues and segment operating income. AEC derives a significant portion of its revenue from contracts related to U.S.
In addition, since a significant portion of our cash is generated from operations of our subsidiaries, our ability to pay dividends is in part dependent on the ability of our subsidiaries – some of which are located outside of the United States – to make distributions to us.
In addition, since a significant portion of our cash is generated from operations of our subsidiaries, our ability to pay dividends is in part dependent on the ability of our subsidiaries – some of which are located outside of the U.S. – to make distributions to us.
Demand for AEC’s light-weight composite aircraft components is driven by demand for the lighter, more fuel-efficient aircraft engine and other applications into which they are incorporated, such as the CFM LEAP engine. Fuel costs are a significant part of operating costs for airlines and, in many cases, may constitute a carrier’s single largest operating expense.
Customer demand for AEC’s lightweight composite aircraft components is driven by market demand for the lighter, more fuel-efficient aircraft engine and other applications into which they are incorporated, such as the CFM International LEAP engine. Fuel costs are a significant part of operating costs for airlines and, in many cases, may constitute a carrier’s single largest operating expense.
The long-term organic growth prospects of AEC are subject to a number of risks The prospect of future successful organic growth in AEC depends in large part on its ability to maintain and grow a healthy pipeline of potential new products and applications for its technologies, to transform a sufficient number of those potential opportunities into commercial supply agreements, and to then execute its obligations under such agreements.
The prospect of future successful organic growth in AEC depends in large part on its ability to maintain and grow a healthy pipeline of potential new products and applications for its technologies, to transform a sufficient number of those potential opportunities into commercial supply agreements, and to then execute its obligations under such agreements.
As of December 31, 2022, we have approximately $50.1 million net operating loss (“NOL”) carryforward in various taxing jurisdictions. Our ability to utilize the NOL carryforward could be adversely impacted by several factors, including but not limited to significant changes to tax legislation and lower than expected future earnings of the Company.
As of December 31, 2023, we have approximately $130.7 million of net operating loss (“NOL”) carryforwards in various taxing jurisdictions. Our ability to utilize the NOL carryforward could be adversely impacted by several factors, including but not limited to significant changes to tax legislation and lower than expected future earnings of the Company.
Although we carry property and business interruption insurance to help mitigate the risk of property loss or business interruption that could result from the occurrence of such events, such coverage may not be adequate to compensate us for all loss or damage that we may incur.
Although we carry property and business interruption insurance to help mitigate the risk of property loss or business interruption that could result from the occurrence of such events, such coverage may not be adequate to compensate us for all loss or damage that we may incur. The Company’s insurance coverage may be inadequate to cover other significant risk exposures.
Despite such measures, our employees, consultants, and third parties to whom such information may be disclosed in the ordinary course of our business may breach their obligations not to reveal such information, and any legal remedies available to us may be insufficient to compensate our damages.
Despite such measures, our employees, consultants, and third parties to whom such information may be disclosed in the ordinary course of our business may breach their obligations not to reveal such information, and any legal remedies available to us may be insufficient to compensate our damages. The Company is subject to legal proceedings and legal compliance risks.
The Company is subject to legal proceedings and legal compliance risks We are subject to a variety of legal proceedings. Litigation is an inherently unpredictable process and unanticipated negative outcomes are always possible. An adverse outcome in any period could have an adverse impact on the Company’s operating results for that period.
We are subject to a variety of legal proceedings in multiple jurisdictions where we conduct business. Litigation is an inherently unpredictable process and unanticipated negative outcomes are always possible. An adverse outcome in any period could have an adverse impact on the Company’s operating results for that period. We are also subject to a variety of legal compliance risks.
In 2022, although we did not shut down any of our plants due to COVID-19, production at some plants was affected by government shutdown orders in areas adjacent to those plants.
Although we did not shut down any of our plants due to COVID-19 during the height of the pandemic, production at some plants was affected by government shutdown orders in areas adjacent to those plants.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our Class A Common Stock could decrease, which could cause our stock price and trading volume to decline.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our Class A Common Stock could decrease, which could cause our stock price and trading volume to decline. Future sales of shares by us or our existing stockholders could cause our stock price to decline.
While long-term contracts provide an opportunity to realize steady and reliable revenues for extended periods, they pose a number of risks, such as program cancellations, reductions or delays in orders by AEC’s customers under these contracts, the termination of such contracts or orders, or the occurrence of similar events over which AEC has no or limited control.
While long-term contracts provide an opportunity to realize steady and reliable revenues for extended periods, they pose a number of risks, such as program cancellations, reductions or delays in orders by AEC’s customers under these contracts, the termination of such contracts or orders, changes in the customers’ requirements that may not entitle AEC to additional compensation or payment, or the occurrence of similar events over which AEC has no or limited control.
Nevertheless, the evolution of the pandemic, governments’ responses to the pandemic, and individuals’ behavior in response to the pandemic and its effects, in aggregate, continue to impact business conditions in varied and unpredictable ways.
Nevertheless, the evolution of the pandemic, or a new pandemic, governments’ responses to such pandemic(s), and individuals’ behavior in response to pandemic and its effects, in aggregate, continue to impact business conditions in varied and unpredictable ways.
We are subject to tax audits by various tax authorities in many jurisdictions. The open tax years in these jurisdictions range from approximately 2014 to 2022. We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes.
We are subject to tax audits by various tax authorities in many jurisdictions. Following the acquisition of Heimbach, the open tax years in these jurisdictions range from approximately 2009 to 2023. We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes.
A decline in revenues would lead to lower gross profit on those products and the possibility of unabsorbed fixed manufacturing costs. • The Albany Engineered Composites segment generates a significant portion of its revenue from commercial aerospace programs and contracts for the U.S. Department of Defense.
A decline in revenues would lead to lower gross profit on those products and the possibility of unabsorbed fixed manufacturing costs. • The AEC segment generates a significant portion of its revenue from commercial aerospace programs, as well as from contracts related to U.S. Department of Defense programs.
Increases in the prices of petroleum or petroleum derivatives, particularly in regions that are experiencing higher levels of inflation, could increase our costs, and we may not be able to fully offset the effects through price increases, productivity improvements, and cost-reduction programs.
The Company is a significant user of raw materials that are based on petroleum or petroleum derivatives. Increases in the prices of petroleum or petroleum derivatives, particularly in regions that are experiencing higher levels of inflation, could increase our costs, and we may not be able to fully offset the effects through price increases, productivity improvements, and cost-reduction programs.
If AEC were to supply products with manufacturing defects, or products that failed to conform to contractual requirements, we could be required to recall and/or replace them, and could also be subject to substantial contractual damages or warranty claims from our customers.
AEC manufactures and sells products that are incorporated into commercial and military aircraft. If AEC were to supply products with manufacturing defects, or products that failed to conform to contractual requirements, we could be required to recall and/or replace them, and could also be subject to substantial contractual damages or warranty claims from our customers.
Our information technology systems, processes and sites may suffer interruptions or failures which may affect our ability to conduct our business Our information technology systems may be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages and security breaches (including destructive malware such as ransomware) resulting in unauthorized access or cyber-attacks.
Our information technology systems may be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages and security breaches (including destructive malware such as ransomware) resulting in unauthorized access or cyber-attacks.
Our ability to attract and retain business and employees may depend on our reputation in the marketplace We believe our brand names and our reputation are important corporate assets that help distinguish our products and services from those of our competitors and also contribute to our efforts to recruit and retain talented employees.
We believe our brand names and our reputation are important corporate assets that help distinguish our products and services from those of our competitors and also contribute to our efforts to recruit and retain talented employees.
Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violation of these regulations could harm our business We are subject to numerous, and sometimes conflicting, legal regimes on matters as diverse as anti corruption, import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, ESG initiatives, anti-competition, anti-money-laundering, data privacy and protection, government compliance, wage-and-hour standards, employment and labor relations and human rights.
We are subject to numerous, and sometimes conflicting, legal regimes on matters as diverse as anti corruption, import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, sustainability and climate initiatives, human capital requirements, anti-competition, anti-money-laundering, data privacy and protection, government compliance, wage-and-hour standards, employment and labor relations and human rights.
Certain provisions of our Certificate of Incorporation, our Bylaws and Delaware law could hinder, delay or prevent a change in control of us that you might consider favorable, which could also adversely affect the price of our Class A Common Stock Certain provisions under our Certificate of Incorporation, our Bylaws and Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, even if doing so would benefit our stockholders.
Certain provisions of our Certificate of Incorporation, our Bylaws and Delaware law could hinder, delay or prevent a change in control of us that you might consider favorable, which could also adversely affect the price of our Class A Common Stock.
If actual results significantly differ from estimates, our financial condition, results of operations, and cash flows could be materially impacted by losses under these programs, as well as higher stop-loss premiums in future periods. 19 Index Unanticipated changes in tax laws or exposure to additional tax liabilities could affect our future profitability We are subject to income taxes in both the United States and various non-U.S. jurisdictions.
If actual results significantly differ from estimates, our financial condition, results of operations, and cash flows could be materially impacted by losses under these programs, as well as higher stop-loss premiums in future periods. Unanticipated changes in tax laws or exposure to additional tax liabilities could affect our future profitability.
In addition, shares of Class A Common Stock are issuable upon the exercise of outstanding stock options or the vesting of outstanding equity awards, and certain shares are reserved for future issuance under our equity compensation plans. Item 1B. UNRESOLVED STAFF COMMENTS None.
As of February 16, 2024, we had 31.2 million shares of Class A Common Stock outstanding. In addition, shares of Class A Common Stock are issuable upon the vesting of outstanding equity awards, and certain shares are reserved for future issuance under our equity compensation plans. Item 1B. UNRESOLVED STAFF COMMENTS None.
Some of the Company’s competitors in the MC segment have the capability to make and sell paper machines and papermaking equipment as well as other engineered fabrics Although customers historically have tended to view the purchase of paper machine clothing and the purchase of paper machines as separate purchasing decisions, the ability to bundle fabrics with new machines and after-market services could provide an advantage to our competitors.
Although customers historically have tended to view the purchase of paper machine clothing and the purchase of paper machines as separate purchasing decisions, the ability to bundle fabrics with new machines and after-market services could provide an advantage to our competitors.
Low rates of unemployment in key geographic areas in which the Company operates can lead to high rates of turnover and loss of critical talent, which could in turn lead to higher labor costs.
Low rates of unemployment in key geographic areas in which the Company operates can lead to high rates of turnover and loss of critical talent, which could in turn lead to higher labor costs. Our ability to attract and retain business and employees may depend on our reputation in the marketplace.
If our business continuity plans, incident response capabilities, and security controls do not function effectively, we may experience partial or complete interruptions in our operations, which may adversely impact our business, financial condition, results of operations and cash flows. 17 Index We face legal, reputational and financial risks from any failure to protect customer and/or Company data from security incidents or cyberattacks Such incidents could lead to shutdowns or disruptions of or damage to our systems and those of our customers and suppliers, and unauthorized disclosure of sensitive or confidential information, potentially including personal data and proprietary business information.
If our business continuity plans, incident response capabilities, and security controls do not function effectively, we may experience partial or complete interruptions in our operations, which may adversely impact our business, financial condition, results of operations and cash flows. We face legal, reputational and financial risks from any failure to protect customer and/or Company data from security incidents or cyberattacks.
Although we are an exclusive supplier of such parts, our customer is not obligated to purchase any minimum quantity of parts, and cancellation or significant reduction in demand for the LEAP program would have a material adverse impact on AEC’s Net sales and profitability. LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo and COMAC 919 aircraft.
Although we are an exclusive supplier of such parts, and although this is a cost-plus-fee arrangement, our customer is not obligated to purchase any minimum quantity of parts, and cancellation or significant reduction in demand for the LEAP program would have a material adverse impact on AEC’s Net revenues and profitability.
Such changes could result in unfavorable changes to our pension and OPEB expense and funded status, and our cash contributions thereof, which could have a negative impact on our results of operations.
These estimates and actuarial assumptions could change significantly as a result to changes in economic, legislative, and/or demographic profiles. Such changes could result in unfavorable changes to our pension and OPEB expense and funded status, and our cash contributions thereof, which could have a negative impact on our results of operations.
In addition to these current regulations, AEC will be required to comply with the new CMMC program requirements on future contracts as they are flowed down from our DoD prime customers in the coming years. Given the current and planned future portfolio of U.S.
Under the applicable federal regulations for DoD contractors, AEC is required to comply with the agency's current cybersecurity regulations. In addition to these current regulations, AEC will be required to comply with the new CMMC program requirements on future contracts as they are flowed down from our DoD prime customers in the coming years.
The LEAP long-term supply agreement contains certain events of default that, if triggered, could result in termination of the agreement by the customer, which would also have a material adverse impact on segment sales and profitability.
LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo and COMAC 919 aircraft. The LEAP long-term supply agreement contains certain events of default that, if triggered, could result in termination of the agreement by the customer, which would also have a material adverse impact on segment Net revenues and profitability.
Unanticipated changes in foreign and domestic tax laws, regulations, or policies, or their interpretation and application by regulatory bodies, or exposure to additional tax liabilities could affect our future profitability and cash flows. Our domestic and international tax liabilities are dependent upon the distribution of income among these jurisdictions.
We are subject to income taxes in both the U.S. and various non-U.S. jurisdictions. Unanticipated changes in foreign and domestic tax laws, regulations, or policies, or their interpretation and application by regulatory bodies, or exposure to additional tax liabilities could affect our future profitability and cash flows.
The Company’s insurance coverage may be inadequate to cover other significant risk exposures See " The Company is subject to legal proceedings and legal compliance risks, and has been named as defendant in a large number of suits relating to the actual or alleged exposure to asbestos-containing products." In addition to asbestos-related claims, the Company may be exposed to other liabilities related to the products and services we provide.
The Company has been named as defendant in a large number of suits relating to the actual or alleged exposure to "asbestos-containing products." In addition to asbestos-related claims, the Company may be exposed to other liabilities related to cyber incidents and the products and services we provide.
The effect of currency rate changes on gross profit in the MC segment can be difficult to anticipate because we use a global sourcing and manufacturing model.
The effect of currency rate changes on gross profit in the MC segment can be difficult to anticipate because we use a global sourcing and manufacturing model. Under this model, while some non-U.S. Net revenues and associated costs are in the same currency, other non-U.S.
We expect such pressure to remain intense in all paper machine clothing markets, especially during periods of customer consolidation, plant closures, or when major contracts are being renegotiated. The emergence of Chinese competitors exacerbates this risk. Similar pressures exist in the markets in which AEC competes. During 2019, Net sales under the LEAP contract exceeded $210 million.
We expect such pressure to remain intense in all paper machine clothing markets, especially during periods of customer consolidation, plant closures, or when major contracts are being renegotiated. The emergence of Asian competitors exacerbates this risk. Similar pressures in the markets in which AEC competes along with labor shortages could have an impact on AEC revenues.
The failure to prevent attacks on our operational systems or infrastructure could result in disruptions to our businesses, loss or disclosure of regulated data, or the loss or disclosure of confidential and proprietary intellectual property or other assets As the breadth and complexity of this infrastructure continues to grow, including the increasing reliance on, and use of, mobile technologies and cloud-based services, and as many of our employees continue to work remotely following the coronavirus pandemic, the risk of security incidents and cyberattacks has increased.
As the breadth and complexity of this infrastructure continues to grow, including the increasing reliance on, and use of, mobile technologies and cloud-based services, and as many of our employees continue to work remotely following the coronavirus pandemic, the risk of security incidents and cyberattacks has increased.
Changes in currency exchange rates could adversely affect the Company’s business, financial condition or results of operations. 18 Index We have a substantial amount of indebtedness.
Changes in currency exchange rates could adversely affect the Company’s business, financial condition or results of operations. We have a substantial amount of indebtedness. At December 31, 2023, the Company had outstanding long-term debt of $453 million.
At December 31, 2022, the Company had outstanding long-term debt of $439 million At December 31, 2022, our leverage ratio (as defined in our primary borrowing agreement) was 1.25, and we had borrowed $439 million under our $700 million revolving credit facility.
At December 31, 2023, our leverage ratio (as defined in our primary borrowing agreement) was 1.25 to 1.00, and we had borrowed $446 million under our $800 million revolving credit facility.
Our brand and reputation are also associated with our public commitments to various corporate environmental, social and governance (“ESG”) initiatives, including our goals for sustainability and inclusion and diversity. Our failure to achieve our commitments could harm our reputation and adversely affect our relationships with customers and suppliers or our talent recruitment and retention efforts.
Our brand and reputation are also associated with our sustainability strategy, including our public commitments related to climate and the environment and DE&I. Our failure to achieve our commitments could harm our reputation and adversely affect our relationships with customers and suppliers or our talent recruitment and retention efforts.
Physical impacts of climate change, increasing global chemical restrictions and bans, and water and waste requirements may drive increased costs to us and our suppliers and impact our production continuity and data facilities. Changes in laws and regulations could also mandate significant and costly changes to the way we conduct our business or could impose additional taxes.
Physical impacts of climate change, increasing global chemical restrictions and bans, and water and waste requirements may drive increased costs to us and our suppliers and impact our production continuity and data facilities.
The COVID-19 pandemic has significantly impacted passenger air travel which, in turn, has impacted and is likely to continue to impact the commercial aerospace programs that provide a source of revenue for the Company.
The COVID-19 pandemic significantly impacted passenger air travel which, in turn, impacted, and may continue to impact, the commercial aerospace programs that provide a source of revenue for the Company. Such programs could be delayed or canceled, which, in addition to a loss of revenue and gross profit, could lead to write-offs for Company investments for those programs.
Until AEC is able to consistently generate cash flows sufficient to fund its existing operations and any future investment to support its growth, it will remain dependent on the MC segment’s ability to generate cash. A significant decline in MC sales, operating income or cash flows could therefore have a material adverse impact on AEC’s growth. The U.S.
Until AEC is able to consistently generate cash flows sufficient to fund its existing operations and any future investments needed to support its growth, it will remain dependent on the MC segment’s ability to generate cash.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. PROPERTIES Our principal manufacturing facilities are located in Brazil, Canada, China, France, Germany, Italy, Mexico, South Korea, Sweden, the United Kingdom, and the United States. The aggregate square footage of our operating facilities in the United States is approximately 2.0 million square feet, of which 1.1 million square feet are owned and 0.9 million square feet are leased.
Biggest changeThe aggregate square footage of our operating facilities in the United States is approximately 2.1 million square feet, of which 1.2 million square feet are owned and 0.9 million square feet are leased.
Our facilities located outside the United States comprise approximately 3.5 million square feet, of which 3.0 million square feet are owned and 0.5 million square feet are leased. We consider these facilities to be in good condition and suitable for our purpose. The capacity associated with these facilities is adequate to meet production levels required and anticipated through 2023.
Our facilities located outside the United States 29 Index comprise approximately 5.6 million square feet, of which 4.8 million square feet are owned and 0.8 million square feet are leased. We consider these facilities to be in good condition and suitable for our purpose.
Removed
Item 3. LEGAL PROCEEDINGS The information set forth above is described in Note 21 of the Consolidated Financial Statements, included under Item 8 of this Form 10-K. Item 4. MINE SAFETY DISCLOSURES None. 22 Index PART II
Added
Item 2. PROPERTIES Our principal manufacturing facilities are located in Belgium, Brazil, Canada, China, France, Germany, Italy, Mexico, South Korea, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Added
The capacity associated with these facilities is adequate to meet production levels required and anticipated through 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur cash dividends, and the high and low prices per share of our Class A Common Stock, were as follows for the periods presented: Quarter Ended March 31 June 30 September 30 December 31 2022 Cash dividends per share $ 0.21 $ 0.21 $ 0.21 $ 0.25 Class A Common Stock prices: High $ 91.25 $ 87.91 $ 97.20 $ 104.34 Low $ 80.84 $ 75.94 $ 77.50 $ 81.62 2021 Cash dividends per share $ 0.20 $ 0.20 $ 0.20 $ 0.21 Class A Common Stock prices: High $ 88.01 $ 92.26 $ 88.88 $ 89.92 Low $ 69.52 $ 81.80 $ 75.13 $ 79.31 23 Index The graph below matches the cumulative 5-Year total return of holders of Albany International Corp.’s common stock with the cumulative total returns of the Russell 2000 index and a customized peer group of eighteen companies included in the customized peer group which are: Barnes Group Inc, Bwx Technologies Inc, Curtiss-Wright Corp, Enpro Industries Inc, Esco Technologies Inc, Franklin Electric Co Inc, Graco Inc, Heico Corp, Hexcel Corp, Kadant Inc, Kaman Corp, Mercury Systems Inc, Nordson Corp, Spx Technologies Inc, Teledyne Technologies Inc, Trimas Corp, Triumph Group Inc and Woodward Inc.
Biggest changeOur cash dividends, and the high and low prices per share of our Class A Common Stock, were as follows for the periods presented: Quarter Ended March 31 June 30 September 30 December 31 2023 Cash dividends per share $ 0.25 $ 0.25 $ 0.25 $ 0.26 Class A Common Stock prices: High $ 113.72 $ 93.28 $ 96.89 $ 98.96 Low $ 85.28 $ 84.92 $ 83.53 $ 78.48 2022 Cash dividends per share $ 0.21 $ 0.21 $ 0.21 $ 0.25 Class A Common Stock prices: High $ 91.25 $ 87.91 $ 97.20 $ 104.34 Low $ 80.84 $ 75.94 $ 77.50 $ 81.62 31 Index The graph below compares the cumulative 5-Year total return of holders of Albany International Corp.’s common stock with the cumulative total returns of the Russell 2000 index and a customized peer group of nineteen companies included in the customized peer group which are: Astronics Corp, Idex Corp, Barnes Group Inc, Enpro Inc, Tredegar Corp, Ducommun Inc, Curtiss-Wright Corp, Watts Water Technologies Inc, Hexcel Corp, Nordson Corp, Glatfelter Corp, Heico Corp, Esco Technologies Inc, Enerpac Tool Group Corp, Rogers Corp, Trimas Corp, Kadant Inc, National Presto Industries Inc, and Mativ Holdings Inc.
The graph assumes that the value of the investment in our common stock, in each index, and in the peer group (including reinvestment of dividends) was $100 on December 31, 2017 and tracks it through December 31, 2022. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* *$100 invested on 12/31/17 in stock or index, including reinvestment of dividends.
The graph assumes that the value of the investment in our common stock, in each index, and in the peer group (including reinvestment of dividends) was $100 on December 31, 2018 and tracks it through December 31, 2023. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* *$100 invested on 12/31/18 in stock or index, including reinvestment of dividends.
Copyright© 2023 Russell Investment Group. All rights reserved. Fiscal year ending December 31.
Copyright© 2024 Russell Investment Group. All rights reserved. Fiscal year ending December 31.
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. 25 Index
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. The Company made no share repurchases during 2023.
Restrictions on dividends and other distributions are described in Note 17 of the Consolidated Financial Statements, included under Item 8 of this Form 10-K.
Restrictions on dividends and other distributions are described in Note 17, Financial Instruments of the Notes to the Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES We have two classes of Common Stock, Class A Common Stock and Class B Common Stock, each with a par value of $0.001 and equal liquidation rights.
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES We have Class A Common Stock with a par value of $0.001. Our Class A Common Stock is principally traded on the New York Stock Exchange under the ticker symbol AIN.
Our Class A Common Stock is principally traded on the New York Stock Exchange under the symbol AIN. According to Broadridge, as of December 31, 2022, there were over 20,000 beneficial owners of our Class A Common Stock, including employees owning shares through our 401(k) defined contribution plan. Our Class B Common Stock does not trade publicly.
According to Broadridge, as of December 31, 2023, there were over 50,000 beneficial owners of our Class A Common Stock, including employees owning shares through our 401(k) defined contribution plan. Dividends are paid on our Class A Common Stock.
December 31, 2017 2018 2019 2020 2021 2022 Albany International Corp. 100.00 102.66 126.05 123.64 150.38 169.27 Russell 2000 100.00 88.99 111.70 134.00 153.85 122.41 Peer Group 100.00 91.25 124.78 133.75 158.91 150.66 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
December 31, 2018 2019 2020 2021 2022 2023 Albany International Corp. 100.00 122.79 120.44 146.48 164.88 166.07 Russell 2000 100.00 125.52 150.58 172.90 137.56 160.85 Peer Group 100.00 136.04 145.75 173.93 164.96 190.56 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Removed
As of December 31, 2022, there were no outstanding Class B shares. Dividends are paid equally on shares of each class.
Added
Disclosures of securities authorized for issuance under equity compensation plans are included under Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, of this Annual Report on Form 10-K. 32 Index In 2021, the Company's Board of Directors authorized the Company to repurchase shares of up to $200 million through open market purchases, privately negotiated transactions or otherwise, and to determine the prices, times and amounts.
Removed
Disclosures of securities authorized for issuance under equity compensation plans are included under Item 12 of this Form 10-K. 24 Index Issuer Purchases of Equity Securities during the year ended December 31, 2022 Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Approx. dollar value of shares that may yet be purchased under the program (in thousands) January 1 to January 31, 2022 140,879 $ 85.24 140,879 $ 163,722 February 1 to February 28, 2022 145,164 86.29 145,164 151,244 March 1 to March 31, 2022 228,643 85.51 228,643 131,688 April 1 to April 30, 2022 236,091 82.21 236,091 112,418 May 1 to May 31, 2022 271,940 80.98 271,940 90,561 June 1 to June 30, 2022 — — — 90,561 July 1 to July 31, 2022 — — — 90,561 August 1 to August 31, 2022 — — — 90,561 September 1 to September 30, 2022 — — — 90,561 October 1 to October 31, 2022 — — — 90,561 November 1 to November 30, 2022 — — — 90,561 December 1 to December 31, 2022 — — — 90,561 Total 1,022,717 1,022,717 90,561 In 2021, the Company's Board of Directors authorized the Company to repurchase shares of up to $200 million through open market purchases, privately negotiated transactions or otherwise, and to determine the prices, times and amounts.
Added
Issuer Purchases of Equity Securities during the three months ended December 31, 2023 Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Approx. dollar value of shares that may yet be purchased under the program (in thousands) October 1 to October 31, 2023 — — — 90,561 November 1 to November 30, 2023 — — — 90,561 December 1 to December 31, 2023 — — — 90,561 Total — — 90,561 Item 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following tables show the calculation of EBITDA and Adjusted EBITDA: Consolidated results (in thousands) Years ended December 31, 2022 2021 2020 Net income (GAAP) $ 96,508 $ 118,768 $ 97,243 Interest expense, net 14,000 14,891 13,584 Income tax expense 35,472 47,163 41,831 Depreciation and amortization expense 69,049 74,255 72,705 EBITDA (non-GAAP) 215,029 255,077 225,363 Restructuring expenses, net 106 1,331 5,736 Foreign currency revaluation (gains)/losses (9,829) (1,442) 15,444 Dissolution of business relationships in Russia 2,275 — — Pension settlement expense 49,128 — — IP address sales (3,420) — — Aviation Manufacturing Jobs Protection (AMJP) grant — (4,731) — Former CEO termination costs — — 2,742 Acquisition/integration costs 1,057 1,166 1,272 Pre-tax (income)/loss attributable to noncontrolling interest (817) (510) 1,348 Adjusted EBITDA (non-GAAP) $ 253,529 $ 250,891 $ 251,905 39 Index (in thousands) Year ended December 31, 2022 Machine Clothing Albany Engineered Composites Corporate expenses and other Total Company Net income/(loss) (GAAP) 206,214 31,579 (141,285) 96,508 Interest expense, net — — 14,000 14,000 Income tax expense — — 35,472 35,472 Depreciation and amortization expense 19,483 46,202 3,364 69,049 EBITDA (non-GAAP) 225,697 77,781 (88,449) 215,029 Restructuring expenses, net 92 — 14 106 Foreign currency revaluation (gains)/losses (a) (520) 672 (9,981) (9,829) Dissolution of business relationships in Russia 1,494 — 781 2,275 Pension settlement expense — — 49,128 49,128 IP address sales — — (3,420) (3,420) Acquisition/integration costs — 1,057 — 1,057 Pre-tax (income) attributable to noncontrolling interest — (817) — (817) Adjusted EBITDA (non-GAAP) $ 226,763 $ 78,693 $ (51,927) $ 253,529 (in thousands) Year ended December 31, 2021 Machine Clothing Albany Engineered Composites Corporate expenses and other Total Company Net income/(loss) (GAAP) $ 215,654 $ 16,160 $ (113,046) $ 118,768 Interest expense, net — — 14,891 14,891 Income tax expense — — 47,163 47,163 Depreciation and amortization expense 20,191 50,402 3,662 74,255 EBITDA (non-GAAP) 235,845 66,562 (47,330) 255,077 Restructuring expenses, net 1,202 32 97 1,331 Foreign currency revaluation (gains)/losses (a) (307) 50 (1,185) (1,442) AMJP grant — 1,101 (5,832) (4,731) Acquisition/integration costs — 1,166 — 1,166 Pre-tax (income) attributable to noncontrolling interest — (510) — (510) Adjusted EBITDA (non-GAAP) $ 236,740 $ 68,401 $ (54,250) $ 250,891 (in thousands) Year ended December 31, 2020 Machine Clothing Albany Engineered Composites Corporate expenses and other Total Company Net income/(loss) (GAAP) $ 190,805 $ 31,536 $ (125,098) $ 97,243 Interest expense, net — — 13,584 13,584 Income tax expense — — 41,831 41,831 Depreciation and amortization expense 20,304 48,496 3,905 72,705 EBITDA (non-GAAP) 211,109 80,032 (65,778) 225,363 Restructuring expenses, net 2,746 2,821 169 5,736 Foreign currency revaluation (gains)/losses (a) 1,743 130 13,571 15,444 Former CEO termination costs — — 2,742 2,742 Acquisition/integration costs — 1,272 — 1,272 Pre-tax loss attributable to noncontrolling interest — 1,348 — 1,348 Adjusted EBITDA (non-GAAP) $ 215,598 $ 85,603 $ (49,296) $ 251,905 40 Index The Company discloses certain income and expense items on a per-share basis.
Biggest changeThe following tables show the calculation of consolidated EBITDA and consolidated Adjusted EBITDA: (in thousands) Years ended December 31, 2023 2022 2021 Net income (GAAP) $ 111,610 $ 96,508 $ 118,768 Interest expense, net 13,601 14,000 14,891 Income tax expense 48,846 35,472 47,163 Depreciation and amortization expense 76,733 69,049 74,255 EBITDA (non-GAAP) 250,790 215,029 255,077 Restructuring expenses, net 282 106 1,331 Foreign currency revaluation (gains)/losses 1,296 (9,829) (1,442) CEO transition expenses 2,719 — — Inventory step-up impacting Cost of goods sold 5,480 — — Dissolution of business relationships in Russia — 2,275 — Pension settlement expense — 49,128 — IP address sales — (3,420) — Aviation Manufacturing Jobs Protection (AMJP) grant — — (4,731) Acquisition/integration costs 5,194 1,057 1,166 Pre-tax (income)/loss attributable to noncontrolling interest (665) (817) (510) Adjusted EBITDA (non-GAAP) $ 265,096 $ 253,529 $ 250,891 45 Index (in thousands) Year ended December 31, 2023 Machine Clothing Albany Engineered Composites Corporate expenses and other Total Company Net income/(loss) (GAAP) $ 199,378 $ 41,587 $ (129,355) $ 111,610 Interest expense, net — — 13,601 13,601 Income tax expense — — 48,846 48,846 Depreciation and amortization expense 23,891 49,030 3,812 76,733 EBITDA (non-GAAP) 223,269 90,617 (63,096) 250,790 Restructuring expenses, net 282 — — 282 Foreign currency revaluation (gains)/losses (a) 4,117 63 (2,884) 1,296 CEO transition expenses — — 2,719 2,719 Inventory step-up impacting Cost of goods sold 5,480 — — 5,480 Acquisition/integration costs 984 1,081 3,129 5,194 Pre-tax (income) attributable to noncontrolling interest (24) (641) — (665) Adjusted EBITDA (non-GAAP) $ 234,108 $ 91,120 $ (60,132) $ 265,096 (in thousands) Year ended December 31, 2022 Machine Clothing Albany Engineered Composites Corporate expenses and other Total Company Net income/(loss) (GAAP) $ 206,214 $ 31,579 $ (141,285) $ 96,508 Interest expense, net — — 14,000 14,000 Income tax expense — — 35,472 35,472 Depreciation and amortization expense 19,483 46,202 3,364 69,049 EBITDA (non-GAAP) 225,697 77,781 (88,449) 215,029 Restructuring expenses, net 92 — 14 106 Foreign currency revaluation (gains)/losses (a) (520) 672 (9,981) (9,829) Dissolution of business relationships in Russia 1,494 — 781 2,275 Pension settlement expense — — 49,128 49,128 IP address sales — — (3,420) (3,420) Acquisition/integration costs — 1,057 — 1,057 Pre-tax (income) attributable to noncontrolling interest — (817) — (817) Adjusted EBITDA (non-GAAP) $ 226,763 $ 78,693 $ (51,927) $ 253,529 (in thousands) Year ended December 31, 2021 Machine Clothing Albany Engineered Composites Corporate expenses and other Total Company Net income/(loss) (GAAP) $ 215,654 $ 16,160 $ (113,046) $ 118,768 Interest expense, net — — 14,891 14,891 Income tax expense — — 47,163 47,163 Depreciation and amortization expense 20,191 50,402 3,662 74,255 EBITDA (non-GAAP) 235,845 66,562 (47,330) 255,077 Restructuring expenses, net 1,202 32 97 1,331 Foreign currency revaluation (gains)/losses (a) (307) 50 (1,185) (1,442) Former CEO termination costs — 1,101 (5,832) (4,731) Acquisition/integration costs — 1,166 — 1,166 Pre-tax loss attributable to noncontrolling interest — (510) — (510) Adjusted EBITDA (non-GAAP) $ 236,740 $ 68,401 $ (54,250) $ 250,891 46 Index The Company discloses certain income and expense items on a per-share basis.
While it has been negatively impacted by well-documented declines in publication grades in the Company’s traditional markets, there has been some offsetting effect due to growth in demand for packaging and tissue grades, as well as the expansion of paper consumption and production in Asia and South America.
While it has been negatively impacted by declines in publication grades in the Company’s traditional markets, there has been some offsetting effect due to growth in demand for packaging and tissue grades, as well as the expansion of paper consumption and production in Asia and South America.
AEC’s current portfolio of non-3D programs includes components for the CH-53K helicopter, components for the F-35, missile bodies for Lockheed Martin’s JASSM air-to-surface missiles, fuselage components for the Boeing 787, and vacuum waste tanks for Boeing 7-Series aircraft. AEC is actively engaged in research to develop new applications in both commercial and defense aircraft engine and airframe markets.
AEC’s current portfolio of non-3D programs includes components for the CH-53K helicopter, components for the F-35, missile bodies for Lockheed Martin’s JASSM air-to-surface missiles, fuselage components for the Boeing 787 aircraft, and vacuum waste tanks for Boeing commercial aircraft. AEC is actively engaged in research to develop new applications in both commercial and defense aircraft engine and airframe markets.
The Company calculates net leverage ratio by subtracting cash and cash equivalents from total debt, and then dividing by trailing twelve months Adjusted EBITDA.
The Company calculates consolidated net leverage ratio by subtracting Cash and cash equivalents from total debt, and then dividing by trailing twelve months Adjusted EBITDA.
Some of the markets in which our products are sold are expected to have low levels of growth and we face pricing pressures in all markets. Despite these market pressures on revenue, the MC business retains the potential for maintaining stable earnings in the future.
Some of the markets 33 Index in which our products are sold are expected to have low levels of growth and we face pricing pressures in all markets. Despite these market pressures on revenue, the MC business retains the potential for maintaining stable earnings in the future.
We feel we are well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology.
We believe we are well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology.
Such non-GAAP measures include net sales and percent change in net sales, excluding the impact of currency translation effects; EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin; Net debt; Net leverage ratio; and Adjusted earnings per share (or Adjusted EPS). Management believes that these non-GAAP measures provide additional useful information to investors regarding the Company’s operational performance.
Such non-GAAP measures include net revenues and percent change in net revenues, excluding the impact of currency translation effects; EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin; Net debt; Net leverage ratio; and Adjusted Diluted earnings per share (or Adjusted EPS). Management believes that these non-GAAP measures provide additional useful information to investors regarding the Company’s operational performance.
The Company defines Adjusted EBITDA as EBITDA excluding costs or benefits that are not reflective of the Company’s ongoing or expected future operational performance. Such excluded costs or benefits do not consist of normal, 38 Index recurring cash items necessary to generate revenues or operate our business. Adjusted EBITDA margin represents Adjusted EBITDA expressed as a percentage of net sales.
The Company defines Adjusted EBITDA as EBITDA excluding costs or benefits that are not reflective of the Company’s ongoing or expected future operational performance. Such excluded costs or benefits do not consist of normal, recurring cash items necessary to generate revenues or operate our business. Adjusted EBITDA margin represents Adjusted EBITDA expressed as a percentage of net revenues.
In accounting for those contracts, we estimate the profit margin expected at the completion of the contract and recognize a pro-rata share of that profit during the course of the contract using a cost-to-cost approach.
In accounting for these contracts, we estimate the profit margin expected at the completion of the contract and recognize a pro-rata share of that profit during the course of the contract using a cost-to-cost approach.
Presenting Net sales and change in Net sales, after currency effects are excluded, provides management and investors insight into underlying sales trends. Net sales, or percent changes in net sales, excluding currency rate effects, are calculated by converting amounts reported in local currencies into U.S. dollars at the exchange rate of a prior period.
Presenting Net revenues and change in Net revenues, after currency effects are excluded, provides management and investors insight into underlying sales trends. Net revenues, or percent changes in net revenues, 44 Index 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.
The Company defines Adjusted EPS as basic earnings per share (GAAP), adjusted by the after tax per share amount of costs or benefits not reflective of the Company’s ongoing or expected future operational performance.
The Company defines Adjusted EPS as diluted earnings per share (GAAP), adjusted by the after tax per share amount of costs or benefits not reflective of the Company’s ongoing or expected future operational performance.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 25, 2022, incorporated herein by reference.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023, incorporated herein by reference.
(b) Our Adjusted EPS excluded the benefit from the reclassification of stranded income tax effects caused by the TCJA associated with the US pension plan liability that was eliminated in September 2022, a one-time event that would not recur in the future.
(b) Our Adjusted EPS excluded the benefit from the reclassification of stranded income tax effects caused by the TCJA associated with the U.S. pension plan liability that was eliminated in September 2022, a one-time event that would not recur in the future.
In some cases, the contract period may result in a loss contract provision at the inception of the contract. 36 Index Pension and Postretirement Liabilities We sponsor several pension and postretirement benefit plans.
In some cases, the contract period may result in a loss contract provision at the inception of the contract. Pension and Postretirement Liabilities We sponsor several pension and postretirement benefit plans.
Income Taxes We regularly assess the likelihood that deferred tax assets are expected to be realized through the reversal of existing temporary differences and/or future taxable income. To the extent we believe that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established.
Income Taxes 43 Index We regularly assess the likelihood that deferred tax assets will be realized through the reversal of existing temporary differences and/or future taxable income. To the extent we believe that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established.
Also in 2022, the Company recorded a gain of $3.4 million on the sale of IP addresses that the Company had no future critical need to retain.
During 2022, the Company recorded a gain of $3.4 million on the sale of IP addresses that the Company had no future critical need to retain.
Our analysis gives consideration to recent plan performance and historical returns; however, the assumptions are primarily based on long-term, prospective rates of return. The weighted average long-term rate of return on plan assets for our defined benefit pension plans is 3.2% for 2022.
Our analysis gives consideration to recent plan performance and historical returns; however, the assumptions are primarily based on long-term, prospective rates of return. The weighted average long-term rate of return on plan assets for our defined benefit pension plans is 5.2 percent for 2023.
See the Working Capital, Liquidity and Capital Structure section for further discussion of borrowings and interest rates. Pension settlement expense In the third quarter of 2022, the Company took actions to settle certain pension plan liabilities in the U.S., leading to charges totaling $49.1 million. No similar charges were incurred in the prior year.
See the Working Capital, Liquidity and Capital Structure section for further discussion of borrowings and interest rates. Pension settlement expense During 2022, the Company took actions to settle certain pension plan liabilities in the U.S., leading to charges totaling $49.1 million. No similar charges were incurred during 2023.
We have contractual commitments to repay debt, make payments under leases, contribute to our pension and postretirement plans, and settle obligations related to agreements to purchase goods and services, income taxes, compensation plans, and as applicable, interest rate swaps.
Other Sources/Uses of Capital We have contractual commitments to repay debt, make payments under leases, contribute to our pension and postretirement plans, and settle obligations related to agreements to purchase goods and services, income taxes, compensation plans, and as applicable, interest rate swaps.
AEC’s largest aerospace customer is the SAFRAN Group ("SAFRAN") and sales to SAFRAN, through ASC, (consisting primarily of fan blades and cases for CFM’s LEAP engine) accounted for approximately 16 percent of the Company’s consolidated Net sales in 2022. AEC, through ASC, also supplies 3D-woven composite fan cases for the GE9X engine.
AEC’s largest aerospace customer is the SAFRAN Group ("SAFRAN") and sales to SAFRAN, through ASC, (consisting primarily of fan blades and cases for CFM International’s LEAP engine) accounted for approximately 16 percent of the Company’s consolidated Net revenues in 2023. AEC, through ASC, also supplies 3D-woven composite fan cases for the GE9X engine.
We estimate these contractual commitments amount to approximately $588 million as of December 31, 2022, of which we expect to pay $44 million within the next year. Such commitments are not representative of all our future cash requirements, which will vary based on future needs.
We estimate these contractual commitments amount to approximately $716 million as of December 31, 2023, of which we expect to pay $58 million within the next year. Such commitments are not representative of all our future cash requirements, which will vary based on future needs.
Excluding the effect of changes in currency translation rates, the increase in Net sales was 39.6%. AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement. Revenue earned under these arrangements accounted for approximately 40 percent of segment revenue for 2022 and 2021.
Excluding the effect of changes in currency translation rates, the increase in Net revenues was 11.7 percent. AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement. Revenue earned under these arrangements accounted for approximately 40 percent of segment revenue for 2023 and 2022.
While certain contracts are expected to be profitable over the course of the program life when including expected renewals, our estimate of contract revenues and costs is limited to the estimated value of enforceable rights and obligations, excluding anticipated renewals.
We are required to limit our estimate of contract values to the period of the legally enforceable contract. While certain contracts are expected to be profitable over the course of the program life when including expected renewals, our estimate of contract revenues and costs is limited to the estimated value of enforceable rights and obligations, excluding anticipated renewals.
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes included under Item 8 of this Form 10-K. The MD&A generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes included under Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. The MD&A generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Revenue Recognition Contracts with customers in the Machine Clothing segment have various terms that can affect the point in time when revenue is recognized. The contractual terms are closely monitored in order to ensure revenue is recognized in the proper period. Products and services provided under long-term contracts represent a significant portion of sales in the Albany Engineered Composites segment.
Revenue Recognition Contracts with customers in the MC segment have various terms that can affect the point in time when revenue is recognized. The contractual terms are closely monitored in order to ensure revenue is recognized in the proper period. Products and services provided under long-term contracts represent a significant portion of net revenues in the AEC segment.
The AEC segment provides significant longer term growth potential for the Company. Our strategy is to grow by focusing our proprietary 3D-woven technology, as well as our non-3D technology capabilities, on high-value aerospace (both commercial and defense) applications, while at the same time performing successfully on our portfolio of growth programs.
Our strategy is to grow by focusing our proprietary 3D-woven technology, as well as our non-3D technology capabilities, on high-value aerospace (both commercial and defense) applications, while at the same time performing successfully on our portfolio of growth programs.
While seasonality is generally not a significant factor in the Albany Engineered Composites segment, the commercial terms of the supply agreement governing the LEAP program resulted in fourth quarter sales volatility in recent years. 34 Index Cash Flow Summary (in thousands) For the years ended December 31, 2022 2021 2020 Net income $ 96,508 $ 118,768 $ 97,243 Depreciation and amortization 69,049 74,255 72,705 Changes in working capital (a) (63,478) 16,488 (60,727) Changes in long-term liabilities, deferred taxes and other credits (18,629) (1,532) 8,664 Non-cash portion of pension settlement expense 42,657 — 411 Other operating items 2,107 9,496 21,957 Net cash provided by operating activities 128,214 217,475 140,253 Net cash used in investing activities (96,348) (53,699) (42,390) Net cash used in financing activities (23,652) (99,635) (60,669) Effect of exchange rate changes on cash flows (18,474) (3,421) 8,582 Increase/(decrease) in cash and cash equivalents (10,260) 60,720 45,776 Cash and cash equivalents at beginning of year 302,036 241,316 195,540 Cash and cash equivalents at end of year $ 291,776 $ 302,036 $ 241,316 _________________________ (a) Includes Accounts receivable, Contract assets, Inventories, Accounts payable and Accrued liabilities.
While seasonality is generally not a significant factor in the Albany Engineered Composites segment, the commercial terms of the supply agreement governing the LEAP program resulted in fourth quarter sales volatility in recent years. 40 Index Cash Flow Summary (in thousands) For the years ended December 31, 2023 2022 2021 Net income $ 111,610 $ 96,508 $ 118,768 Depreciation and amortization 76,733 69,049 74,255 Changes in working capital (a) (44,214) (63,478) 16,488 Changes in long-term liabilities, deferred taxes and other credits (11,829) (18,629) (1,532) Non-cash portion of pension settlement expense — 42,657 — Other operating items 15,756 2,107 9,496 Net cash provided by operating activities 148,056 128,214 217,475 Net cash used in investing activities (217,899) (96,348) (53,699) Net cash used in financing activities (52,641) (23,652) (99,635) Effect of exchange rate changes on cash flows 4,128 (18,474) (3,421) Increase/(decrease) in cash and cash equivalents (118,356) (10,260) 60,720 Cash and cash equivalents at beginning of year 291,776 302,036 241,316 Cash and cash equivalents at end of year $ 173,420 $ 291,776 $ 302,036 _________________________ (a) Includes Accounts receivable, Contract assets, Inventories, Accounts payable and Accrued liabilities.
The following table contains the calculation of net debt: (in thousands) As of December 31, 2022 2021 2020 Current maturities of long-term debt $ — $ — $ 9 Long-term debt 439,000 350,000 398,000 Total debt 439,000 350,000 398,009 Cash and cash equivalents 291,776 302,036 241,316 Net debt $ 147,224 $ 47,964 $ 156,693 42 Index Net leverage ratio informs the investors of the Company's financial leverage at the end of the reporting period, providing an indicator of the Company's ability to repay its debt.
The following table contains the calculation of consolidated net debt: 48 Index (in thousands) As of December 31, 2023 2022 2021 Current maturities of long-term debt $ 4,218 $ — $ — Long-term debt 452,667 439,000 350,000 Total debt 456,885 439,000 350,000 Cash and cash equivalents 173,420 291,776 302,036 Net debt $ 283,465 $ 147,224 $ 47,964 Consolidated net leverage ratio informs the investors of the Company's financial leverage at the end of the reporting period, providing an indicator of the Company's ability to repay its debt.
See Note 4 to the Consolidated Financial Statements for additional information. AMJP grant During the third quarter of 2021, the Company was awarded an Aviation Manufacturing Jobs Protection Program ("AMJP") grant of $5.8 million, under the American Rescue Plan of the U.S. Department of Transportation. No such award was granted during 2022.
AMJP grant During 2021, the Company was awarded an Aviation Manufacturing Jobs Protection Program ("AMJP") grant of $5.8 million, under the American Rescue Plan of the U.S. Department of Transportation. No such award was granted during 2022 or 2023.
The following tables show the earnings per share effect of certain income and expense items: (in thousands, except per share amounts) Year ended December 31, 2022 Pre tax Amounts Tax Effect After tax Effect Per Share Effect Restructuring expenses, net $ 106 $ 34 $ 72 $ 0.01 Foreign currency revaluation (gains)/losses (a) (9,829) (2,582) (7,247) (0.23) Dissolution of business relationships in Russia 2,275 305 1,970 0.06 Pension settlement expense 49,128 11,947 37,181 1.20 Tax impact of stranded OCI benefit from Tax Cuts and Job Act (TCJA) for pension liability — 5,217 (5,217) (0.17) IP address sales (3,420) (872) (2,548) (0.08) Acquisition/integration costs 1,057 316 741 0.04 (in thousands, except per share amounts) Year ended December 31, 2021 Pre tax Amounts Tax Effect After tax Effect Per Share Effect Restructuring expenses, net $ 1,331 $ 399 $ 932 $ 0.02 Foreign currency revaluation (gains)/losses (a) (1,442) (323) (1,119) (0.04) AMJP grant (4,731) (1,404) (3,327) (0.11) Acquisition/integration costs 1,166 349 817 0.04 (in thousands, except per share amounts) Year ended December 31, 2020 Pre tax Amounts Tax Effect After tax Effect Per Share Effect Restructuring expenses, net $ 5,736 $ 1,862 $ 3,874 $ 0.11 Foreign currency revaluation (gains)/losses (a) (c) 15,444 896 14,548 0.46 Former CEO termination costs 2,742 713 2,029 0.06 Acquisition/integration costs 1,272 380 892 0.04 41 Index The following table contains the calculation of full-year Adjusted EPS, excluding adjustments: Per share amounts (Basic) Years ended December 31, 2022 2021 2020 Earnings per share (GAAP) $ 3.06 $ 3.66 $ 3.05 Adjustments, after tax (c): Restructuring expenses, net 0.01 0.02 0.11 Foreign currency revaluation (gains)/losses (a) (0.23) (0.04) 0.46 Dissolution of business relationships in Russia 0.06 — — Pension settlement expense 1.20 — — IP address sales (0.08) — — Tax impact of stranded OCI benefit from TCJA for pension liability (b) (0.17) — — AMJP grant — (0.11) — Former CEO termination costs — — 0.06 Acquisition/integration costs 0.04 0.04 0.04 Adjusted earnings per share (non-GAAP) $ 3.89 $ 3.57 $ 3.72 (a) Foreign currency revaluation (gains)/losses represent unrealized gains and losses arising from the remeasurement of monetary assets and liabilities denominated in non-functional currencies on the balance sheet date.
The following tables show the diluted earnings per share effect of certain income and expense items: (in thousands, except per share amounts) Year ended December 31, 2023 Pre tax Amounts Tax Effect After tax Effect Per Share Effect Restructuring expenses, net $ 282 $ 70 $ 212 $ 0.01 Foreign currency revaluation (gains)/losses (a) 1,296 416 880 0.03 CEO transition expenses 2,719 — 2,719 0.09 Inventory step-up impacting Cost of goods sold 5,480 1,211 4,269 0.14 Withholding tax related to internal restructuring — (3,026) 3,026 0.10 Acquisition/integration costs 5,194 951 4,243 0.14 (in thousands, except per share amounts) Year ended December 31, 2022 Pre tax Amounts Tax Effect After tax Effect Per Share Effect Restructuring expenses, net $ 106 $ 34 $ 72 $ 0.01 Foreign currency revaluation (gains)/losses (a) (9,829) (2,582) (7,247) (0.23) Dissolution of business relationships in Russia 2,275 305 1,970 0.06 Pension settlement expense 49,128 11,947 37,181 1.20 Tax impact of stranded OCI benefit from Tax Cuts and Job Act (TCJA) for pension liability — 5,217 (5,217) (0.17) IP address sales (3,420) (872) (2,548) (0.08) Acquisition/integration costs 1,057 316 741 0.04 (in thousands, except per share amounts) Year ended December 31, 2021 Pre tax Amounts Tax Effect After tax Effect Per Share Effect Restructuring expenses, net $ 1,331 $ 399 $ 932 $ 0.02 Foreign currency revaluation (gains)/losses (a) (1,442) (323) (1,119) (0.04) AMJP grant (4,731) (1,404) (3,327) (0.11) Acquisition/integration costs 1,166 349 817 0.04 47 Index The following table contains the calculation of full-year consolidated Adjusted EPS, excluding adjustments: Per share amounts Years ended December 31, 2023 2022 2021 Earnings per share attributable to Company shareholders - Basic (GAAP) $ 3.56 $ 3.06 $ 3.66 Effect of dilutive stock-based compensation plans (0.01) (0.02) (0.01) Earnings per share attributable to Company shareholders - Diluted (GAAP) $ 3.55 $ 3.04 $ 3.65 Adjustments, after tax: Restructuring expenses, net 0.01 0.01 0.02 Foreign currency revaluation (gains)/losses (a) 0.03 (0.23) (0.04) CEO transition expenses 0.09 — — Inventory step-up impacting Cost of goods sold 0.14 — — Dissolution of business relationships in Russia — 0.06 — Pension settlement expense — 1.20 — IP address sales — (0.08) — Tax impact of stranded OCI benefit from TCJA for pension liability (b) — (0.17) — AMJP grant — — (0.11) Withholding tax related to internal restructuring 0.10 — Acquisition/integration costs 0.14 0.04 0.04 Adjusted Diluted earnings per share (non-GAAP) $ 4.06 $ 3.87 $ 3.56 (a) Foreign currency revaluation (gains)/losses represent unrealized gains and losses arising from the remeasurement of monetary assets and liabilities denominated in non-functional currencies on the balance sheet date.
Our subsidiaries outside of the United States may also maintain working capital lines with local banks, but borrowings under such local facilities tend to be insignificant. Under our $700 million unsecured credit agreement, $439 million of borrowings were outstanding as of December 31, 2022.
Our subsidiaries outside of the United States may also maintain working capital lines with local banks. Under our $800 million unsecured credit agreement, $446 million of borrowings were outstanding as of December 31, 2023.
Working Capital, Liquidity and Capital Structure Working Capital Payment terms granted to paper industry and other machine clothing customers reflect general competitive practices. Terms vary with product, competitive conditions, and the country of operation. In some markets, customer agreements require us to maintain significant amounts of finished goods inventory to assure continuous availability of our products.
Terms vary with product, competitive conditions, and the country of operation. In some markets, customer agreements require us to maintain significant amounts of finished goods inventory to assure continuous availability of our products.
Net cash used in financing activities during 2022 was $23.7 million compared to $99.6 million in 2021, driven by increased borrowings during the current year that were partially used to fund repurchases of shares. Liquidity and Capital Structure We finance our business activities primarily with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below.
Net cash used in financing activities during 2023 was $52.6 million compared to $23.7 million in 2022, driven by increased principal payments on debt and increased dividends paid to shareholders during 2023. Liquidity and Capital Structure We finance our business activities primarily with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below.
AEC’s largest source of revenue is derived from the LEAP contract under a cost-plus-fee agreement. The fee is variable based on our success in achieving certain cost targets. Revenue is recognized over time as costs are incurred. Under this contract, there is significant judgment involved in determining applicable contract costs and the amount of revenue to be recognized.
AEC’s largest source of revenue is derived from the LEAP contract under a cost-plus-fee agreement. The fee may vary within a narrow range based on our success in achieving certain cost targets. Revenue is recognized over time as costs are incurred.
Gross Profit The following table summarizes Gross profit by business segment: (in thousands, except percentages) Years ended December 31, 2022 2021 2020 Machine Clothing $ 312,285 $ 322,457 $ 301,144 Albany Engineered Composites 77,497 55,934 69,928 Total $ 389,782 $ 378,391 $ 371,072 % of Net Sales 37.7 % 40.7 % 41.2 % The increase in 2022 Gross profit, as compared to 2021, was principally due to increased Net sales at AEC.
Gross Profit The following table summarizes Gross profit by business segment: (in thousands, except percentages) Years ended December 31, 2023 2022 2021 Machine Clothing $ 331,558 $ 312,285 $ 322,457 Albany Engineered Composites 92,160 77,497 55,934 Total $ 423,718 $ 389,782 $ 378,391 % of net revenues 36.9 % 37.7 % 40.7 % The increase in 2023 Gross profit, as compared to 2022, was principally due to increased Net revenues in both segments and the acquisition of Heimbach.
The amount of a valuation allowance is based upon our best estimate of our ability to realize the deferred tax assets. Goodwill and Intangible assets Goodwill is not amortized, but is tested for impairment at least annually.
The amount of a valuation allowance is based upon our best estimate of our ability to realize the deferred tax assets.
Critical Accounting Policies and Estimates For the discussion of our accounting policies, see Note 1 to the Consolidated Financial Statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make assumptions and estimates that directly affect the amounts reported in the Consolidated Financial Statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make assumptions and estimates that directly affect the amounts reported in the Consolidated Financial Statements. Each of these assumptions is subject to uncertainties and changes in those assumptions or judgments which can affect our results of operations.
In 2022, approximately 46 percent of AEC sales were related to U.S. government contracts or programs. 28 Index Consolidated Results of Operations Net sales The following table summarizes our Net sales by business segment: (in thousands, except percentages) Years ended December 31, 2022 2021 2020 Machine Clothing $ 609,461 $ 619,015 $ 572,955 Albany Engineered Composites 425,426 310,225 327,655 Total $ 1,034,887 $ 929,240 $ 900,610 % change 11.4 % 3.2 % -14.6 % Changes in currency translation rates had the effect of decreasing 2022 Net sales by $28.5 million (3% of Net sales) driven by the weaker Euro, as compared to 2021.
Consolidated Results of Operations Net Revenues The following table summarizes our Net revenues by business segment: (in thousands, except percentages) Years ended December 31, 2023 2022 2021 Machine Clothing $ 670,768 $ 609,461 $ 619,015 Albany Engineered Composites 477,141 425,426 310,225 Total net revenues $ 1,147,909 $ 1,034,887 $ 929,240 % change 10.9 % 11.4 % 3.2 % Changes in currency translation rates had the effect of decreasing 2023 Net revenues by $0.8 million, driven by the weaker Renminbi, which was partially offset by the stronger Euro, as compared to 2022.
For more information on the revolving credit agreement, see Note 13 to the Consolidated Financial Statements. As of December 31, 2022, $273.2 million of our total cash and cash equivalents was held by non-U.S. subsidiaries.
For more information on the revolving credit agreement, see Note 17, Financial Instruments, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. 41 Index As of December 31, 2023, $133 million of our total cash and cash equivalents was held by non-U.S. subsidiaries.
All of the backlog in MC and approximately 65% of the AEC backlog is expected to be invoiced during the next 12 months.
The increase in AEC’s backlog was primarily due to growth on the LEAP and CH-53K programs. All of the backlog in MC and approximately 75 percent of the AEC backlog is expected to be invoiced during the next 12 months.
We believe cash flows from operations and availability under our Credit Agreement will be adequate to cover our operations and business needs over the next twelve months. As of December 31, 2022, we had cash and cash equivalents of $292 million and availability under our Credit Agreement of $261 million, for a total liquidity of approximately $553 million.
We believe cash flows from operations and the availability of funds under our Amended Credit Agreement will be adequate to fund our operations and business needs over the next twelve months.
The capitalized costs are amortized into Cost of goods sold over the period which the asset is expected to contribute to future cash flows, including anticipated renewal periods. Accumulated capitalized costs are written-off when those costs are determined to be unrecoverable.
Fulfillment activities that create resources that will be used in satisfying performance obligations in the future, and are expected to be recovered, are capitalized in Other assets. The capitalized costs are amortized into cost of goods sold over the period which the asset is expected to contribute to future cash flows, including anticipated renewal periods.
For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known. Contract loss provisions include contract options that are probable of exercise, excluding any profitable options that might be expected to follow.
Accumulated capitalized costs are written-off when those costs are determined to be unrecoverable. For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known.
The accumulated undistributed earnings of the Company’s foreign operations not targeted for 35 Index repatriation to the U.S. were in excess of $201 m illion at December 31, 2022, and are intended to remain indefinitely invested in foreign operations.
The Company has targeted for repatriation $160.8 million of current year and prior year earnings of the Company’s foreign operations. The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the U.S. were approximately $154.8 million, and are intended to remain indefinitely invested in foreign operations.
Operating Income The following table summarizes operating income/(loss) by business segment: (in thousands) Years ended December 31, 2022 2021 2020 Machine Clothing $ 206,214 $ 215,654 $ 190,805 Albany Engineered Composites 31,579 16,160 31,536 Corporate expenses (56,771) (53,803) (56,261) Total $ 181,022 $ 178,011 $ 166,080 30 Index Other Earnings Items (in thousands) Years ended December 31, 2022 2021 2020 Interest expense, net $ 14,000 $ 14,891 $ 13,584 Pension settlement expense 49,128 — — AMJP grant — (5,832) — Other (income)/expense, net (14,086) 3,021 13,422 Income tax expense 35,472 47,163 41,831 Net income/(loss) attributable to the noncontrolling interest 746 290 (1,346) Interest Expense Interest expense, net, decreased over the prior year as a result of higher interest earned on Cash and cash equivalents, in addition to decreased interest expense on Finance leases during the fourth quarter.
Other Earnings Items The following table summarizes other earnings items that are presented below Operating income: (in thousands) Years ended December 31, 2023 2022 2021 Interest expense, net $ 13,601 $ 14,000 $ 14,891 Pension settlement expense — 49,128 — AMJP grant — — (5,832) Other (income)/expense, net (6,163) (14,086) 3,021 Income tax expense 48,846 35,472 47,163 Net income/(loss) attributable to the noncontrolling interest 490 746 290 Interest Expense/(income), net Interest expense/(income), net, decreased over the prior year as a result of higher interest earned on Cash and cash equivalents, in addition to lower interest expense on finance leases.
We will continue to monitor developments around this proposed rule, which if finalized, is expected to allow for a multi-year phased transition to achieving compliance . Non-GAAP Measures This Form 10-K contains certain non-GAAP measures that should not be considered in isolation or as a substitute for the related GAAP measures.
Non-GAAP Measures This Form 10-K contains certain non-GAAP measures that should not be considered in isolation or as a substitute for the related GAAP measures.
Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative costs, which are treated as period expenses. We are required to limit our estimate of contract values to the period of the legally enforceable contract.
Contract loss provisions include contract options that are probable of exercise, excluding any profitable options that might be expected to follow. Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative costs, which are treated as period expenses.
Operating Income/(Loss) Operating income nearly doubled year over year, increasing $15.4 million in 2022, principally due to an increase in Gross profit, as described above, partially offset by an increase in Selling and general expenses of $3.7 million related to investments in business development activities, and an increase in Research expense of $2.5 million related to investments in new technologies and enhanced capabilities.
Gross profit margin increased from 18.2 percent in 2022 to 19.3 percent in 2023. Operating Income/(Loss) Operating income increased $10.0 million in 2023, principally due to an increase in Gross profit, as described above, partially offset by a $4.0 million increase in SG&A expenses related to incentive compensation, personnel-related costs, and investments in business development activities.
Each of these assumptions is subject to uncertainties and changes in those assumptions or judgments which can affect our results of operations. In addition to the accounting policies stated in Item 8, financial statement amounts and disclosures are significantly influenced by market factors, judgments and estimates as described below.
In addition to the accounting policies stated in Note 1, Accounting Policies, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, the financial statement amounts and disclosures are significantly influenced by market factors, judgments and estimates as described below.
Changes in currency translation rates, driven by a weaker Euro, had the effect of decreasing 2022 sales by $20.8 million compared to 2021. Excluding the effect of changes in currency translation rates, Net sales in MC increased 1.8% compared to 2021, driven by growth in sales of packaging, pulp and tissue grades.
Net revenues also increased due to better performance in tissue and packaging grades, which was partially offset by lower revenues in engineered fabrics. Changes in currency translation rates had the effect of decreasing 2023 Net revenues by $2.6 million, driven by the weaker Renminbi, which was partially offset by the stronger Euro, as compared to 2022.
For more information on our restructuring charges, see Note 5 of the Consolidated Financial Statements, included under Item 8 of this Form 10-K.
See Government Grants under Note 1, Accounting Policies, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information.
Backlog Backlog in the MC segment was $172 million at December 31, 2022 and $190 million December, 31 2021. Backlog in the AEC segment increased to $414 million at December 31, 2022, compared to $347 million at December 31, 2021. The increase in AEC’s backlog was primarily due to increased demand on the CH-53K program.
Backlog in the MC segment was $256 million at December 31, 2023, which included $72 million related to Heimbach, and $172 million at December, 31 2022. Backlog in the AEC segment increased to $494 million at December 31, 34 Index 2023, compared to $414 million at December 31, 2022.
When adjustments in estimated contract revenues or costs are required, any changes from prior estimates are included in earnings in the period the change occurs. AEC has long-term aerospace contracts under which there are two phases: a phase during which the production part is designed and tested, and a phase of supplying production parts.
AEC has long-term aerospace contracts under which there are two phases: a phase during which the production part is designed and tested, and a phase of supplying production parts. During the design and testing phases, we perform pre-production or nonrecurring engineering services, which are normally considered a fulfillment activity, rather than a performance obligation.
Research and Development The following table is a subset of the STG&R table above and summarizes expenses associated with internally funded research and development by business segment: (in thousands) Years ended December 31, 2022 2021 2020 Machine Clothing $ 16,060 $ 16,710 $ 15,922 Albany Engineered Composites 15,353 12,891 9,828 Total $ 31,413 $ 29,601 $ 25,750 Restructuring In addition to the items discussed above affecting Gross profit and STG&R expenses, operating income was affected by restructuring expense, net, which was insignificant in both the current and prior year, and was related primarily to the winding down of restructuring actions taken in prior periods.
Restructuring In addition to the items discussed above affecting Gross profit, SG&A and Technical and research expenses, operating income was affected by Restructuring expenses, net, which was insignificant in both the current and prior year, and was related primarily to the winding down of restructuring actions taken in prior periods.
Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow. Gross Profit The increase in Gross profit was primarily due to increased Net Sales due to growth on CH-53K and LEAP programs. Gross margin remained largely in line with the prior year.
Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow. Gross Profit Net revenues growth on key programs, as noted above, contributed to improved overhead absorption, driving a Gross profit increase of $14.7 million as compared to 2022.
Based on such strategy, we have continued to invest in our business and technologies through capital expenditures, research and development, and when appropriate, selective business acquisitions. Our capital expenditures totaled $96.3 million and $53.7 million for 2022 and 2021, respectively, comprised of both sustaining and return seeking projects.
Based on such strategy, we have continued to invest in our business and technologies through capital expenditures, research and development, and when appropriate, selective business acquisitions. In the third quarter of 2023, the Company acquired Heimbach, a privately-held manufacturer of paper machine clothing with headquarters in Düren, Germany, for net cash of $133.5 million, funded using cash on hand.
The calculation of net leverage ratio is as follows: Total Company Year ended (in thousands) December 31, 2022 Net income/(loss) (GAAP) 96,508 Interest expense, net 14,000 Income tax expense 35,472 Depreciation and amortization expense 69,049 EBITDA (non-GAAP) 215,029 Restructuring expenses, net 106 Foreign currency revaluation (gains)/losses (a) (9,829) Dissolution of business relationships in Russia 2,275 Pension settlement expense 49,128 IP address sales (3,420) Acquisition/integration costs 1,057 Pre-tax (income) attributable to noncontrolling interest (817) Adjusted EBITDA (non-GAAP) $ 253,529 (in thousands, except for net leverage ratio) December 31, 2022 Net debt (non-GAAP) $ 147,224 Adjusted EBITDA (non-GAAP) 253,529 Net leverage ratio (non-GAAP) 0.58 43 Index
The calculation of the consolidated net leverage ratio is as follows: Year ended (in thousands) December 31, 2023 Net income/(loss) (GAAP) $ 111,610 Interest expense, net 13,601 Income tax expense 48,846 Depreciation and amortization expense 76,733 EBITDA (non-GAAP) 250,790 Restructuring expenses, net 282 Foreign currency revaluation (gains)/losses (a) 1,296 CEO transition expenses 2,719 Inventory step-up impacting Cost of goods sold 5,480 Acquisition/integration costs 5,194 Pre-tax (income) attributable to noncontrolling interest (665) Adjusted EBITDA (non-GAAP) $ 265,096 (in thousands, except for net leverage ratio) December 31, 2023 Net debt (non-GAAP) $ 283,465 Adjusted EBITDA (non-GAAP) 265,096 Net leverage ratio (non-GAAP) 1.07
Review of Operations (in thousands, except percentages) Years ended December 31, 2022 2021 2020 Net sales $ 425,426 $ 310,225 $ 327,655 % change from prior year 37.1 % -5.3 % -27.7 % Gross profit 77,497 55,934 69,928 % of net sales 18.2 % 18.0 % 21.3 % STG&R expenses 45,918 39,742 35,571 Operating income/(loss) 31,579 16,160 31,536 33 Index Net Sales AEC experienced significant growth during 2022, with Net sales increasing approximately $115 million, primarily due to CH-53K and LEAP programs.
A summary of AEC's selected financial results is as follows: Review of Operations (in thousands, except percentages) Years ended December 31, 2023 2022 2021 Net revenues $ 477,141 $ 425,426 $ 310,225 % change 12.2 % 37.1 % -5.3 % Gross profit 92,160 77,497 55,934 % of net revenues 19.3 % 18.2 % 18.0 % SG&A expenses 34,597 30,565 26,852 Technical and research expenses 15,976 15,353 12,890 Operating income/(loss) 41,587 31,579 16,160 Net revenues 39 Index AEC's Net revenues increased 12.2 percent primarily due to revenue growth across AEC's portfolio of commercial programs including LEAP, Boeing 787 Frames, GE9x and other commercial programs.
Review of Operations (in thousands, except percentages) Years ended December 31, 2022 2021 2020 Net sales $ 609,461 $ 619,015 $ 572,955 % change from prior year -1.5 % 8.0 % -4.7 % Gross profit 312,285 322,457 301,144 % of net sales 51.2 % 52.1 % 52.6 % STG&R expenses 105,979 105,602 107,594 Operating income 206,214 215,654 190,805 Net Sales Net sales decreased 1.5%.
A summary of MC's selected financial results is as follows: Review of Operations (in thousands, except percentages) Years ended December 31, 2023 2022 2021 Net revenues $ 670,768 $ 609,461 $ 619,015 % change 10.1 % -1.5 % 8.0 % Gross profit 331,558 312,285 322,457 % of net revenues 49.4 % 51.2 % 52.1 % SG&A expenses 107,246 81,391 79,570 Technical and research expenses 24,651 24,588 26,032 Operating income 199,378 206,214 215,654 Net revenues MC's Net revenues increased 10.1 percent in 2023, driven by the acquisition of the Heimbach business in August, which contributed Net revenues of $51.2 million.
Net cash provided by operating activities was $128.2 million in 2022, compared to $217.5 million in the same period last year. The decrease in net cash provided by operating activities was driven primarily by the following.
Net cash provided by operating activities was $148.1 million in 2023, compared to $128.2 million in the same period last year. The increase was driven by higher Net income, improved levels of working capital at MC, and lower cash outflows related to other liabilities. In the previous year, the Company made contributions of approximately $12.6 million to the U.S.
The following table summarizes STG&R by business segment: (in thousands, except percentages) Years ended December 31, 2022 2021 2020 Machine Clothing $ 105,979 $ 105,602 $ 107,594 Albany Engineered Composites 45,918 39,742 35,571 Corporate expenses 56,757 53,705 56,091 Total $ 208,654 $ 199,049 $ 199,256 % of Net Sales 20.2 % 21.4 % 22.1 % Consolidated STG&R expenses increased 5% as compared to 2021, but represented a smaller percentage of Net Sales. • At MC, STG&R remained largely in line with the prior year. • At AEC, Selling and general expenses increased $3.7 million related to investments in business development activities, and Research expense increased $2.5 million related to investments in new technologies and enhanced capabilities.
The following table summarizes technical and research expenses by business segment: (in thousands, except percentages) Years ended December 31, 2023 2022 2021 Machine Clothing $ 24,651 $ 24,588 $ 26,032 Albany Engineered Composites 15,976 15,353 12,890 Total technical and research expenses $ 40,627 $ 39,941 $ 38,922 % of net revenues 3.5 % 3.9 % 4.2 % Consolidated Technical and research expenses increased 1.7 percent as compared to 2022, however, as a percentage of Net revenues, it decreased from 3.9 percent in 2022 to 3.5 percent in 2023.
See Note 1 to the Consolidated Financial Statements for additional information. Other (income)/expense, net In 2022, Other (income)/expense, net included gains related to the revaluation of nonfunctional-currency balances of $10.0 million, as compared to a gain of $1.2 million during 2021, principally resulting from a weaker Euro throughout the course of 2022.
Other (income)/expense, net Other (income)/expense, net included foreign currency related transactions that resulted in gains of $2.9 million during 2023 and gains of $10.0 million during 2022. During 2023, the stronger Mexican Peso primarily drove transaction gains on nonfunctional currency monetary liabilities, while during 2022, the weaker Euro primarily drove transaction gains related to nonfunctional currency monetary assets.
Removed
Excluding the effect of changes in currency translation rates: consolidated Net sales increased 14.4%, Net sales in MC increased 1.8% compared to 2021, driven by increased sales of packaging, pulp and tissue grades, and AEC experienced significant growth during 2022, with Net sales increasing 39.6%, primarily driven by CH-53K and LEAP programs.
Added
On August 31, 2023, we acquired Heimbach, a privately-held manufacturer of paper machine clothing headquartered in Düren, Germany, which provides MC with an increase in scale and complementary technology that further drives MC's differentiated manufacturing sales and service network.
Removed
Gross profit as a percentage of sales: • At MC, decreased from 52.1% in 2021 to 51.2% in 2022 in MC, due to an increase in input costs • At AEC, was largely in line with the prior year, increasing from 18.0% in 2021 to 18.2% in 2022 29 Index Selling, Technical, General, and Research (STG&R) Selling, technical, general and research (STG&R) expenses include selling, general, administrative, technical, product engineering and research expenses.
Added
See Note 24, Business Combination, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information. The AEC segment provides significant longer term growth potential for the Company.
Removed
There were no similar gains of this nature in the previous two years. 31 Index Income Taxes Significant items that impacted the effective tax rate in the years 2022, 2021 and 2020, included the following (percentages reflect the effect of each item as a percentage of income before income taxes): Year Ended December 31, 2022 2021 2020 (in thousands, except percentages) Tax Amount % Tax Amount % Tax Amount % Continuing Operations (Excluding Discrete Items) $ 40,497 30.7% $ 50,045 30.2% $ 39,544 28.4% Changes in uncertain tax positions (780) (0.6) 232 0.1 252 0.2 Impact of amended tax returns (98) (0.1) (2,098) (1.2) 500 0.3 Tax effect of non-deductible foreign exchange loss on intercompany loan — — — — 3,801 2.7 Changes in opening valuation allowance — — — — — — Provision for/adjustment to beginning of year valuation allowances (802) (0.6) 957 0.6 168 0.1 True-up of prior year estimated taxes (1,436) (1.1) (1,584) (1.0) (2,420) (1.8) Enacted tax legislation and rate change (587) (0.4) 352 0.2 — — US Pension Plan and interest rate swap settlements - Release of Residual Tax Effect (4,926) (3.8) — — — — Foreign withholding on incremental earnings repatriation 1,518 1.2 — — — — Impact of non-election of high tax exclusion under GILTI * 1,723 1.3 — — — — Other tax adjustments 363 0.3 (741) (0.5) (14) 0.2 Effective Tax Rate $ 35,472 26.9% $ 47,163 28.4% $ 41,831 30.1% * Global Intangible Low-Taxed Income Our tax planning initiatives included repatriating additional earnings to the U.S. and managing overall cash taxes in the short term.
Added
In 2023, approximately 39 percent of AEC net revenues were related to U.S. government contracts or programs.
Removed
Such initiatives resulted in discrete adjustments that increased our 2022 effective tax rate, partially offset by true ups of prior year estimated taxes and the release of residual tax effects due to termination of our U.S. Pension Plan and settlements of interest rate swaps. For more information on income tax, see Note 7 to the Consolidated Statements in item 8.
Added
Excluding the effect of changes in currency translation rates, consolidated Net revenues increased 11 percent. Net revenues in MC increased 10.5 percent, excluding the effect of changes in currency translation rates, compared to 2022, driven by the acquisition of the Heimbach business in August 2023, which contributed Net revenues of $51.2 million.
Removed
Segment Results of Operations Machine Clothing Segment Machine Clothing is our primary business segment and accounted for 59 percent of our consolidated revenues during 2022. MC products are purchased primarily by manufacturers of paper and paperboard.
Added
MC net revenues also improved due to better performance in tissue and packaging grades, which was partially offset by lower revenues from engineered fabrics. AEC's Net revenues increased 11.7 percent, excluding the effect of changes in currency translation rates, primarily due to revenue growth across AEC's portfolio of commercial programs including LEAP, Boeing 787 Frames, GE9X and other commercial programs.
Removed
We believe we are well-positioned in these markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology.
Added
Recurring production revenues for defense programs grew year-over-year, however, the defense growth was more than offset by lower non-recurring revenues associated with the start-up of the CH-53K aft transition program. Backlog Backlog represents the summation of the value of all firm, open orders from customers at both segments.
Removed
Recent technological advances in paper machine clothing, while contributing to the papermaking efficiency of customers, have lengthened the useful life of many of our products and had an adverse impact on overall paper machine clothing demand. Additionally, we face pricing pressures in all of our markets.
Added
The change in gross profit as a percentage of revenues for each segment is as follows: • MC gross profit margin decreased from 51.2 percent in 2022 to 49.4 percent in 2023 in MC.
Removed
The Company’s manufacturing and product platforms position us well to meet these shifting demands across product grades and geographic regions.
Added
This margin decrease was partially driven by increased cost of goods sold at Heimbach, which included the non-recurring amortization of the fair value step-up of acquired inventory of $5.5 million.
Removed
Our strategy for meeting these challenges continues to be to grow share in 32 Index 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.
Added
In addition, gross profit margin decreased as a result of increased input costs, mainly due to the inflationary environment, and lower overhead absorption. • AEC gross profit margin increased from 18.2 percent in 2022 to 19.3 percent in 2023. Growth in LEAP and other commercial programs contributed to improved overhead absorption, which improved gross profit margins.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−0 removed2 unchanged
Biggest changeOn December 31, 2022, we had the following variable rate debt: (in thousands, except interest rates) Long-term debt Credit agreement with borrowings outstanding, net of fixed rate portion, at an end of period interest rate of 5.88% in 2022, due in 2024 $89,000 Total $89,000 Assuming borrowings were outstanding for an entire year, an increase of one percentage point in weighted average interest rates would increase interest expense by $0.9 million .
Biggest changeOn December 31, 2023, we had the following variable rate debt: (in thousands, except interest rates) Current maturities of long-term debt: Foreign bank debt (at an end of period rate ranging from 5.22% to 5.52% in 2023) $ 43 Long-term debt: Credit agreement with borrowings outstanding, net of fixed rate portion, at an end of period interest rate of 7.08% in 2023, due in 2028 96,000 Foreign bank debt (at an end of period rate ranging from 5.22% to 5.52% in 2023) 49 Total $ 96,092 Assuming borrowings were outstanding for an entire year, an increase of one percentage point in weighted average interest rates would increase interest expense by $1.0 million .
To manage this risk, we periodically enter into forward exchange contracts either to hedge the net assets of a foreign investment or to provide an economic hedge against future cash flows. The total net assets of non-U.S. operations and long-term intercompany loans denominated in nonfunctional currencies subject to potential loss amount to approximately $683.3 million.
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 $716.5 million.
A hypothetical change of 10 percent in currency rates could result in an adjustment to the income statement of approximately $16.1 million. Actual results may differ. Interest Rate Risk We are exposed to interest rate fluctuations with respect to our variable rate debt, depending on general economic conditions.
A hypothetical change of 10 percent in currency rates could result in an adjustment to the income statement of approximately $2.9 million. Actual results may differ. Interest Rate Risk We are exposed to interest rate fluctuations with respect to our variable rate debt, depending on general economic conditions.
This amount includes, on an absolute basis, exposures to assets and liabilities held in currencies other than our local entity’s functional currency. On a net basis, we had $161.2 million of foreign currency assets as of December 31, 2022. As currency rates change, these nonfunctional currency balances are revalued, and the corresponding adjustment is recorded in the income statement.
This amount includes, on an absolute basis, exposures to assets and liabilities held in currencies other than our local entities' functional currency. On a net basis, we had $29.4 million of foreign currency assets as of December 31, 2023. As currency rates change, these nonfunctional currency balances are revalued, and the corresponding adjustment is recorded in the income statement.
The potential loss in fair value resulting from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates amounts to $68.3 million. Furthermore, related to foreign currency transactions, we have exposure to various nonfunctional currency balances totaling $194.1 million.
The potential loss in fair value resulting 49 Index from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates amounts to $71.7 million. Furthermore, related to foreign currency transactions, we have exposure to various nonfunctional currency balances totaling $117.3 million.
To manage interest rate risk, we may periodically enter into interest rate swap agreements to effectively fix the interest rates on variable rate debt to a specific rate for a period of time. (See Note 18 of the Consolidated Financial Statements, included under Item 8 of this Form 10-K). 44 Index
To manage interest rate risk, we may periodically enter into interest rate swap agreements to effectively fix the interest rates on variable rate debt to a specific rate for a period of time.
Added
(See Note 18, Fair-Value Measurements , of the Notes to the Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K). 50 Index

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