ALBANY INTERNATIONAL CORP DE
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 26, 2025
AIN$67.28+0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-26.
0000819793-24-000012
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0000819793-25-000007
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 159 previous paragraphs and 153 current paragraphs.
76 unchanged; 26 reworded; 48 added; 56 removed; 1 previous and 3 current paragraphs rearranged.
Tables are not compared: 21 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (48)
Current report
We conduct our business under two reportable segments: Machine Clothing (“MC”) and Albany Engineered Composites (“AEC”) each rooted in similar materials sciences know-how that forms a common approach to customer
Current report
value proposition in design and manufacturability. MC competes on the basis of its deep industry knowledge, customer reputation and customer service and global advanced textile manufacturing capabilities, which has enabled it to develop a robust and market leading product offering that can be tailored to customer specific requirements. AEC competes on the basis of its innovative technology solutions, extensive composite manufacturing capabilities and capacity that enable it to offer high quality specific part and assembly solutions that achieve its customers’ application performance requirements.
Current report
General
Current report
Global, economic, and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, potential changes in U.S. government policy positions, including changes in Department of Defense policies or priorities, geopolitical conflicts and strained intercountry relations, U.S. and non-U.S. tax law changes, foreign currency exchange rates, sanctions, tariffs, energy costs and supply, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses.
Current report
Prior to the acquisition of Heimbach, the MC segment experienced declining revenues due to changing global market consumption of publication grade paper. The MC segment expects revenues to continue to decline for publication grade paper into 2025 and beyond, however, we see an offsetting effect due to growth in demand for packaging, and to a lesser degree, tissue grade products. During 2024, the MC segment saw stronger revenue in tissue, pulp, and engineered fabrics, and weaker revenue in packaging and publication grades, with softness in Asia, particularly China, and Europe. Going into 2025, the MC segment expects a modest recovery in Europe beginning in late 2025; however, China's recovery remains unclear. The MC segment's backlog continues to be stable going into 2025.
Current report
In August, 2023, the Company acquired Heimbach, a privately-held manufacturer of paper machine clothing headquartered in Düren, Germany, which provides the MC segment with an increase in scale and complementary technology that further drives MC's differentiated manufacturing sales and service network. Unlocking the full benefits and value of Heimbach is a complex integration process that is well underway and tracking to expectations. It is a multi-year program that started with harmonizing Heimbach operations with our legacy MRP systems and establishing a new global customer and operations organization. There is a disciplined focus to realize not only the combined benefits from procurement and overhead, but also to leverage best practices in manufacturing and a deep realignment of our operational footprint. During 2024, the Company announced several initiatives to further rationalize MC's operating footprint, including the closure of the South Korea facility, the consolidation of activities and facilities across the United Kingdom and the closure of Heimbach's Switzerland facility.
Current report
The AEC segment's strategy is to continue to build on its global brand by leveraging its industry leading performance to drive future growth through technology differentiation. This includes continued investment in AEC's proprietary 3D-woven technology to accelerate solutions that can be offered across a set of broader applications; and by leveraging the AEC's non-3D technology capabilities and capacity, on high-value aerospace (both commercial and defense) applications, and other emerging markets such as space and advance air mobility ("AAM"). The AEC segment provides longer-term growth potential for the Company and the AEC segment continues to penetrate new programs and applications, as well as ramping up production on certain long-term programs, such as the CH-53K and other commercial aircraft programs that have not yet returned to pre-COVID production rates.
Current report
The AEC segment is dependent on global supply chains and has experienced disruptions in recent years. In addition, higher inflation levels increased material costs, higher labor rates and other supplier costs that have impacted the AEC segment’s results of operations. The AEC segment attempts to mitigate raw material and supplier costs by entering into long-term supply agreements. However, in some cases, higher raw material and supplier costs adversely impacted certain firm-fixed price programs resulting in lower program gross margins. In addition, as the AEC segment ramps-up larger complex programs, such as CH-53K and Gulfstream, it continues to face challenges in staffing and training its workforce to support production rates, which has impacted operational productivity, particularly at its Salt Lake City facility, and contributed to increased labor and scrap costs.
Current report
As a result of the higher costs and operational challenges, the AEC segment updated labor, material input and scrap assumptions and estimates for certain long-term programs that resulted in negative cumulative changes in estimated profitability in the amount of $43.2 million in 2024, primarily related to the CH-53K, Gulfstream, F-35 and GE Platforms programs. Although the AEC segment believes it has action plans to mitigate these cost increases, the AEC segment may continue to experience similar issues into 2025 as it ramps up production levels on key programs.
Current report
Net revenues increased 7.2% compared to 2023, driven by an increase of Net revenues from the Heimbach acquisition in 2023 and marginally higher Net revenues in AEC, partially offset by lower organic Net revenues at MC.
Current report
MC's Net revenues increased 11.8% compared to 2023 driven by an increase in Heimbach Net revenues of $95.0 million as well as better performance in tissue, pulp, and engineered fabrics. This was partially offset by $14.0 million of lower Net revenues in the rest of the segment, driven primarily by weakness in publication and packaging globally. Changes in currency translation rates had the effect of decreasing Net revenues $1.9 million.
Current report
AEC's Net revenues increased 0.7%, primarily driven by growth on certain commercial and space programs, which were partially offset by lower revenues on the LEAP, F-35 and CH-53K programs. Changes in currency translation rates had an insignificant effect on Net revenues.
Current report
•MC's gross profit margin decreased from 49.4% in 2023 to 46.1% in 2024. This margin decrease was primarily attributable to lower gross margin at Heimbach.
Current report
•AEC's gross profit margin decreased from 19.3% in 2023 to 11.6% in 2024, driven primarily by changes in the estimated profitability of long-term contracts, which decreased gross profit by $43.2 million in 2024, as compared to a decrease of $4.1 million during 2023, partially offset by a favorable shift in program revenue mix.
Current report
Certain prior year amounts have been reclassified in order to conform to current year presentation. Global information system costs previously included in Corporate expenses are allocated to the segments in the above presentation. Management believes this presentation better reflects the performance of the segments and is how management will review segment performance on a going forward basis. Global information system costs were $31.9 million in 2024, $27.3 million in 2023, and $22.7 million in 2022. Corporate expenses include global information system costs of $1.0 million in 2024, $2.1 million in 2023 and $1.0 million in 2022. For more information on our segments, see 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.
Current report
Consolidated SG&A expenses decreased 1.9% as compared to 2023 and as a percentage of Net revenues, SG&A expenses decreased from 18.7% in 2023 to 17.1% in 2024.
Current report
The overall decrease in SG&A expenses was due to the net effect of the following:
Current report
•MC SG&A expenses increased $4.9 million as compared to 2023, with a $13.5 million increase related to Heimbach, partially offset by a $8.2 million decrease due to changes in currency translation rates and a $0.5 million decrease due to personnel-related costs.
Current report
•In AEC, SG&A expenses decreased $1.4 million, driven by a $0.8 million decrease in marketing costs and a $0.6 million decrease in personnel-related costs, partially offset by an increase in global information systems costs.
Current report
•Corporate SG&A expenses decreased $7.5 million, driven by a $4.4 million decrease in personnel-related costs, a decrease of $1.9 million in professional fees, and a decrease of $1.1 million in global information system costs.
Current report
Consolidated Technical and research expenses increased 13.5% as compared to 2023 and as a percentage of Net revenues increased from 3.5% in 2023 to 3.7% in 2024.
Current report
•MC Technical and research expenses increased $5.2 million as compared to 2023, driven primarily by a $5.1 million increase related to Heimbach.
Current report
The following table summarizes Restructuring expenses, net, by business segment:
Current report
At MC, restructuring actions were taken throughout 2024 in order to cease operations at several facilities, including at the Company's MC forming fabric manufacturing facility in Chungju, South Korea, at the Company's Heimbach engineered fabric manufacturing facility in Rochdale, UK, and at the Company's Heimbach paper machine clothing facility in Olten, Switzerland. These actions drove $11.2 million of restructuring charges during 2024, of which $9.5 million in Restructuring expenses, net was due to workforce reductions, fixed asset impairments, and related costs and $1.7 million in Costs of goods sold was due to the write-off of inventory. We expect to incur additional restructuring expenses related to these actions into 2025.
Current report
At AEC, restructuring activities were related to reductions in the workforce at various AEC locations, which resulted in restructuring expenses of $3.6 million for the year ended 2024.
Current report
Restructuring expenses incurred at MC and AEC during 2023 were not significant.
Current report
During the first quarter of 2025, the Company decided to consolidate headquarters in Portsmouth, NH. This change impacts approximately 100 employees, will take place over the next year and a half, and will cost an estimated $7 million over that period related to retention, relocation, severance, and professional costs.
Current report
Interest expense/(income), net, decreased over the prior year primarily due to lower average debt balances, in part offset by less interest income earned on cash equivalents during the current year. In addition, our 2021 interest rate swap contracts expired in the fourth quarter of 2024. Although we entered into new interest rate swap contracts in the fourth quarter, our interest cost will increase significantly in 2025 and beyond. For more information, 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.
Current report
Other (income)/expense, net included foreign currency related transactions that resulted in gains of $3.9 million in 2024 and $2.9 million in 2023. In addition, changes in the fair value of derivative instruments included losses of $3.5 million in 2024 and gains of $0.4 million in 2023, driven by currency rate movements, most notably the Brazilian Real and Mexican Peso. Other (income)/expense also included bank fees, amortization of debt issuance costs, and rental income. See Note 6, Other (Income)/Expense, net, 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.
Current report
The Company has continuously monitored its ability to realize deferred tax assets as it pertains to Heimbach GmbH due to their existing net operating loss carryovers. After reviewing the positive and negative evidence available as of December 31, 2024, we continue to assert that we will more likely than not be able to utilize the net deferred tax assets. Net operating losses, which make up the majority of the deferred tax assets, have an unlimited carryforward period in Germany and we expect continued improvements in the business post-acquisition due to synergies and efficiencies that will be realized in the near future. The current net deferred tax asset position at Heimbach GmbH as of December 31, 2024 is $8.4 million. If it was determined that a valuation allowance was required, a deferred tax expense of $8.4 million as of December 31, 2024 would be required to create a reserve against those net deferred tax assets. The assessment of the need for a valuation allowance could change in future periods if additional negative evidence is observed. The amount of the tax expense needed to book the valuation allowance could also change depending on additional activities.
Current report
Net revenues increased 11.8% as compared to 2023, driven by the addition of Heimbach Net revenues of $95.0 million as well as better performance in tissue, pulp, and engineered fabrics. This was partially offset by $14.0 million of lower Net revenues in the rest of the segment, driven primarily by weakness in publication and packaging globally. Changes in currency translation rates had the effect of decreasing Net revenues $1.9 million.
Current report
Heimbach contributed total Net revenues of $141.6 million and $51.2 million in 2024 and 2023, respectively. Heimbach reduced MC's Operating income by $20.0 million and $6.3 million in 2024 and 2023, respectively. Included in Heimbach's 2024 operating loss is $8.8 million of non-recurring restructuring and acquisition-related costs.
Current report
Gross profit increased by $14.5 million as compared to 2023, driven by the higher sales noted above; however, gross profit margin decreased from 49.4% in 2023 to 46.1% in 2024. This margin decrease was primarily driven by lower gross margins at Heimbach.
Current report
Operating income decreased $4.8 million or 2.5% as compared to 2023. The strong Gross profit performance noted above was more than offset by increased SG&A, Technical and Research, and Restructuring expenses. SG&A expenses increased $4.9 million as compared to 2023, with a $13.5 million increase related to Heimbach, partially offset by a $8.2 million decrease due to changes in currency translation rates and a $0.5 million decrease due to personnel-related costs. Technical and research expenses increased $5.2 million as compared to 2023, driven primarily by a $5.1 million increase related to Heimbach. In addition, Restructuring expenses increased $9.2 million related to announcements during the year to cease operations at multiple manufacturing facilities, further reducing Operating income.
Current report
Backlog at MC represents the summation of the value of all firm, open orders from customers. Backlog in the MC segment was $236 million at December 31, 2024. All of the backlog in MC as of December 31, 2024 is expected to be recognized as revenues during the next 12 months.
Current report
Net revenues increased 0.7%, primarily driven by growth on certain commercial and space programs, which were partially offset by lower revenues on the LEAP, F-35 and CH-53K programs. Changes in currency translation rates had an insignificant effect on Net revenues.
Current report
Gross profit decreased $36.4 million as compared to last year and Gross profit margin decreased from 19.3% in 2023 to 11.6% in 2024. The reduction was driven primarily by cumulative changes in the estimated profitability of long-term contracts, which decreased gross profit by $43.2 million in 2024, as compared to a decrease of $4.1 million during 2023. The unfavorable effects in 2024 related to higher labor, material and scrap costs. The negative change in estimated profitability in 2024 was primarily driven by a few large complex programs, including approximately $25.5 million for the various CH-53K programs, $11.4 million on our Gulfstream program, $3.9 million on our F-35 program, and $2.2 million on our GE Platforms program. The unfavorable effects in 2023 related to additional reserves taken on certain contracts and inflationary factors decreasing anticipated margins.
Current report
Operating income decreased $39.0 million, principally due to reduced Gross profit as noted above. This was partially offset by a decrease in SG&A expenses of $1.4 million, driven by a $0.8 million decrease in marketing costs and a $0.6 million decrease in personnel-related costs. Technical and research expenses increased $0.3 million as compared to 2023, driven by increased research material and labor costs. Restructuring activities were related to reductions in the workforce at various AEC locations and resulted in restructuring expenses of $3.6 million, further reducing Operating income.
Current report
Backlog
Current report
Backlog at AEC represents the aggregate dollar value of products and services for the given term of our contracts with customers where we have enforceable rights, including both funded and unfunded contract scope, for which products have not been provided or services have not been performed, but excluding unexercised contract options and potential orders under ordering-type contracts. For new contract awards, the initial backlog recorded may only reflect a portion of the total value of the contract award, particularly for ordering-type contracts. Backlog may increase over time as the orders placed against a contract include enforceable rights. For our ASC LEAP contract with our partner Safran, our backlog reflects the agreed business plan values with Safran for the subsequent full twelve-month calendar year.
Showing the first 40 of 48 passages. Open the source sections for the rest.
Removed paragraphs (56)
Previous report
Our reportable segments, Machine Clothing (“MC”) and Albany Engineered Composites (“AEC”) draw on the same advanced textiles and materials processing capabilities, and compete on the basis of product-based advantage that is grounded in those core capabilities.
Previous report
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. Excluding the effect of changes in currency translation rates, consolidated Net revenues increased 11 percent.
Previous report
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. MC net revenues also improved due to better performance in tissue and packaging grades, which was partially offset by lower revenues from engineered fabrics.
Previous report
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. 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.
Previous report
Backlog represents the summation of the value of all firm, open orders from customers at both segments. 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,
Previous report
2023, compared to $414 million at December 31, 2022. 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.
Previous report
•MC gross profit margin decreased from 51.2 percent in 2022 to 49.4 percent in 2023 in MC. 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. In addition, gross profit margin decreased as a result of increased input costs, mainly due to the inflationary environment, and lower overhead absorption.
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•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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Consolidated SG&A expenses increased 27.4 percent as compared to 2022. SG&A expenses also increased as a percentage of Net Revenues from 16.3 percent in 2022 to 18.7 percent in 2023. The change in SG&A by segment is driven by the following:
Previous report
•MC SG&A expenses increased $25.9 million as compared to 2022, of which $20.5 million of the increase relates to the acquisition of Heimbach and $4.6 million was due to changes in currency translation rates. Excluding Heimbach and changes in currency translation rates, MC's SG&A increase was modest at $0.8 million driven primarily by higher wages.
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•AEC SG&A expenses increased $4.0 million as compared to 2022, of which $1.7 million was due to increased incentive compensation and personnel-related costs and $0.9 was related to investments in business development, including increases in marketing and trade show activities.
Previous report
•Corporate SG&A expenses increased $16.3 million principally due to non-recurring acquisition-related costs and other non-recurring strategic costs of $4.6 million, $2.7 million of vesting of retirement compensation
Previous report
costs for the former CEO, $4.3 million in higher employee-related compensation and $3.1 million of IT-related costs.
Previous report
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. The change in Technical and research expenses by segment is driven by the following:
Previous report
•MC Technical and research expenses remained largely consistent with the prior year, increasing only marginally.
Previous report
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. See the Working Capital, Liquidity and Capital Structure section for further discussion of borrowings and interest rates.
Previous report
AMJP grant
Previous report
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. 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.
Previous report
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.
Previous report
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. There were no similar gains of this nature during 2023.
Previous report
On January 17, 2024, the House Ways and Means Committee announced a draft legislation called "The Tax Relief for American Families and Workers Act of 2024". This act would restore 100% bonus depreciation for property placed in service after December 31, 2022 and before January 1, 2026; and retroactively restore the ability to deduct domestic research and experimentation costs that were required to be capitalized beginning in 2022 under Section 174. On January 31, 2024, the United States House of Representatives voted to approve this bill, which will now go to the United States Senate. We will continue to monitor the status of this legislation and assess the potential impact, if passed.
Previous report
Review of Operations
Previous report
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 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.
Previous report
MC gross profit increased $19.3 million, driven by the additional gross profit from Heimbach's revenues and organic revenue growth. Gross profit margin decreased from 51.2 percent in 2022 to 49.4 percent in 2023. 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. In addition, gross profit margin decreased as a result of increased input costs, mainly due to the inflationary environment, and lower overhead absorption.
Previous report
The decrease in Operating income as compared to 2022 was principally due to Heimbach's operating loss of $6.3 million and increases in SG&A expenses as discussed above.
Previous report
Review of Operations
Previous report
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. These increases amounted to approximately $63.0 million. Recurring production revenues for defense programs grew year-over-year, however, the growth was more than offset by lower non-recurring revenues associated with the start-up of the CH-53K aft transition program. These net decreases amounted to approximately $11.0 million. Excluding the effect of changes in currency translation rates, the increase in Net revenues was 11.7 percent.
Previous report
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. Gross profit margin increased from 18.2 percent in 2022 to 19.3 percent in 2023.
Previous report
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. The sum of net adjustments to the estimated profitability of long-term contracts decreased AEC operating income by $4.1 million in 2023, compared to an increase in AEC operating income of $0.5 million in 2022.
Previous report
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. Pension plan, in line with the Company's plan to reduce pension obligations over time. No similar payment was made during the current year (see discussion in Note 4, Pension, Postretirement, and Other Benefit Plans, of the Notes to the Consolidated Financial Statementsin Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K).
Previous report
We strategically deploy our cash with a focus on investing in our business and new technologies to provide our customers with enhanced capabilities, increase shareholder value, and position ourselves to take advantage of new business opportunities as they arise. Based on such strategy, we have continued to invest in our business and technologies through capital expenditures, research and development, and when appropriate, selective business acquisitions. 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. Net cash used in investing activities also included capital expenditures totaling $84.4 million in 2023, compared to $96.3 million in the same period last year, including investments to improve productivity and produce a meaningful impact on energy and resource efficiency.
Previous report
Bank debt at the Company's Heimbach subsidiary, of which $32.7 million was assumed in the acquisition, is held by several European financial institutions. Since August 31, 2023 the Company paid down approximately $22 million of this debt ($18.6 million during the fourth quarter of 2023), reducing outstanding debt borrowings at the Company's Heimbach subsidiary to approximately $11 million as of December 31, 2023, of which $4.2 million is classified as Current maturity on long-term debt (see Note 24, Business Combination and Note 17, Financial Instruments, of the Notes to the Consolidated Financial Statementsin Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information).
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Critical Accounting Policies and Estimates
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Non-GAAP Measures
Previous report
This Form 10-K contains certain non-GAAP measures that should not be considered in isolation or as a substitute for the related GAAP measures. Such non-GAAP measures include net 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.
Previous report
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,
Previous report
excluding currency rate effects, are calculated by converting amounts reported in local currencies into U.S. dollars at the exchange rate of a prior period. These amounts are then compared to the U.S. dollar amount as reported in the current period.
Previous report
EBITDA (calculated as net income excluding interest, income taxes, depreciation and amortization), Adjusted EBITDA, and Adjusted EPS are performance measures that relate to the Company’s continuing operations. The Company defines Adjusted EBITDA as EBITDA excluding costs or benefits that are not reflective of the Company’s ongoing or expected future operational performance. Such excluded costs or benefits do not consist of normal, recurring cash items necessary to generate revenues or operate our business. Adjusted EBITDA margin represents Adjusted EBITDA expressed as a percentage of net revenues.
Previous report
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. The income tax effects are calculated using the applicable statutory income tax rate of the jurisdictions where such costs or benefits were incurred or the effective tax rate applicable to total Company results.
Previous report
The Company’s Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted EPS may not be comparable to similarly titled measures of other companies.
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Reworded paragraphs (26)
Previous wording
The MC segment is the Company’s long-established core business and primary generator of cash. 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. 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. Some of the markets
Current wording
MC believes it is well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology. Some of the markets in which MC's products are sold are expected to have volume trends that are in line with global GDP. MC continues to face pricing pressures in all markets. Despite these market pressures on revenue growth, the MC segment is expected to improve earnings in the future through cost controls and manufacturing productivity efficiencies.
Previous wording
in which our products are sold are expected to have low levels of growth and we face pricing pressures in all markets. Despite these market pressures on revenue, the MC business retains the potential for maintaining stable earnings in the future. MC has been a significant generator of cash, and we seek to maintain the cash-generating potential of this business by maintaining the low costs that we have achieved through continuous focus on cost-reduction initiatives, and competing vigorously by using our differentiated and technically superior products to reduce our customers’ total cost of operation and improve their paper quality. 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. 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.
Current wording
The MC segment has been a significant generator of cash for the Company. The Company seeks to maintain the cash-generating potential of this business by maintaining lower costs through a continued focus on cost-reduction initiatives and strategic investment, and by vigorously using our differentiated and technically superior products to reduce our customers’ total cost of operation and improve their paper quality.
Previous wording
The AEC segment provides significant longer term growth potential for the Company. Our strategy is to grow by focusing our proprietary 3D-woven technology, as well as our non-3D technology capabilities, on high-value aerospace (both commercial and defense) applications, while at the same time performing successfully on our portfolio of growth programs. AEC (including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group owns a 10 percent noncontrolling interest) supplies a number of customers in the aerospace industry. AEC’s largest aerospace customer is the SAFRAN Group ("SAFRAN") and sales to SAFRAN, through ASC, (consisting primarily of fan blades and cases for CFM 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. 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. In 2023, approximately 39 percent of AEC net revenues were related to U.S. government contracts or programs.
Current wording
The AEC segment (including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group owns a 10% noncontrolling interest) supplies a number of customers in the aerospace industry. AEC’s largest aerospace customer is the SAFRAN Group ("SAFRAN") and sales to SAFRAN, through ASC, (consisting primarily of fan blades and cases for CFM International’s LEAP engine) accounted for approximately 14% of the Company’s consolidated Net revenues in 2024. The AEC segment, through ASC, also supplies 3D-woven composite fan cases for the GE9X engine. Outside of ASC, the AEC segment also supplies 3D-woven composite vanes for the F-35 liftfan.
Previous wording
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 change in gross profit as a percentage of revenues for each segment is as follows:
Current wording
The decrease in Gross profit during 2024, as compared to 2023, was driven by increased cost assumptions that adjusted the expected profitability of certain long-term contracts in the AEC segment. Gross profit as a percentage of revenues was as follows:
Previous wording
•AEC Technical and research expenses increased $0.6 million as compared to 2022, due to increases in research material and labor costs.
Current wording
•AEC Technical and research expenses increased $0.3 million as compared to 2023, driven by increased research material and labor costs.
Previous wording
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. For more information on our restructuring charges, see Note 5, Restructuring, of the Notes to the Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Current wording
In addition to the items discussed above affecting Gross profit, SG&A and Technical and research expenses, Operating income was affected by Restructuring expense, net, of $13.4 million in 2024, as compared to $0.3 million in 2023.
Previous wording
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. See Note 4, Pension, Postretirement, and Other Benefit Plans, 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.
Current wording
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 2024 or 2023. See Note 4, Pension, Postretirement, and Other Benefit Plans, 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.
Previous wording
For more information on income tax, see Note 7, Income Taxes, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Current wording
The effective tax rate represents the combined federal, state and foreign tax effects attributable to pretax earnings. For more information on income tax, see Note 7, Income Taxes, of the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Previous wording
The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15 percent intended to be effective on January 1, 2024. While the U.S. has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation. As currently designed, Pillar Two will ultimately apply to our worldwide operations. Although we do not expect these rules to materially increase our global tax costs in 2024, there remains uncertainty as to the final Pillar Two model rules. We will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.
Current wording
The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% effective on January 1, 2024. While the U.S. has indicated that it will not adopt the Pillar Two rules, various other governments around the world are enacting legislation. As currently designed, Pillar Two will ultimately apply to our worldwide operations. We have evaluated the impact of these rules and have determined that it did not materially increase our global tax costs in 2024. We will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.
Previous wording
The MC segment accounted for 58 percent of our consolidated revenues during 2023. A summary of MC's selected financial results is as follows:
Current wording
The MC segment accounted for 61% of our consolidated revenues during 2024. A summary of MC's selected financial results is as follows:
Previous wording
The AEC segment accounted for 42 percent of our consolidated net revenues during 2023. A summary of AEC's selected financial results is as follows:
Current wording
The AEC segment accounted for 39% of our consolidated net revenues during 2024. A summary of AEC's selected financial results is as follows:
Previous wording
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. LEAP engines are currently used on the Airbus A320neo, Boeing 737 MAX, and COMAC 919 aircraft.
Current wording
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 37% of segment revenue for 2024 and 2023.
Previous wording
In addition, AEC has long-term contracts in which the selling price is fixed. 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. Changes in estimated contract profitability will affect revenue and gross profit when the change occurs, which could have a significant favorable or unfavorable effect on revenue and gross profit in any reporting period. For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known. Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations, which are treated as period expenses. Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow.
Current wording
In addition, AEC has long-term contracts in which the selling price is fixed. In accounting for those contracts, we estimate the profit margin expected at the completion of the contract and recognize a pro-rata share of that profit during the course of the contract using a cost-to-cost approach. Changes in estimated contract profitability will affect revenue and gross profit when the change occurs, which could have a significant favorable or unfavorable effect on revenue and gross profit in any reporting period. For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known. Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations, which are treated as period expenses. Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow.
Previous wording
In addition to supplying paper, paperboard, and tissue companies, the MC segment is a leading supplier to the nonwovens (which includes the manufacture of products such as diapers, personal care, and household wipes), building products, and tannery and textile industries. These non-paper industries have a wide range of customers, with markets that vary from industrial applications to consumer use products. The AEC segment primarily serves customers in the commercial and defense aerospace market through both engine and airframe applications. AEC's working capital levels rose sharply in the last few years in line with the segment's growth.
Current wording
In addition to supplying paper, paperboard, and tissue companies, the MC segment is a leading supplier to the nonwovens (which includes the manufacture of products such as diapers, personal care, and household wipes), building products, and tannery and textile industries. These non-paper industries have a wide range of customers, with markets that vary from industrial applications to consumer use products. The AEC segment primarily serves customers in the commercial and defense aerospace market through both engine and airframe applications. AEC's working capital levels rose sharply in the last several years in line with the segment's growth.
Previous wording
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.
Current wording
Net cash used in financing activities was $183.8 million during 2024 as compared to $52.6 million during 2023. The significant increase in net cash used during 2024 was due to increased principal payments on debt, increased share repurchases, and increased dividends paid to shareholders.
Previous wording
Under our $800 million unsecured credit agreement, $446 million of borrowings were outstanding as of December 31, 2023. 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.
Current wording
Under our $800 million unsecured credit agreement, $318.5 million of borrowings were outstanding as of December 31, 2024. 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.
Previous wording
As of December 31, 2023, we had cash and cash equivalents of $173.4 million and availability under our Credit Agreement of $354 million, for a total liquidity of approximately $527 million. 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.
Current wording
As of December 31, 2024, we had cash and cash equivalents of $115.3 million and availability under our Credit Agreement of $481.5 million, for a total liquidity of approximately $596.8 million. Bank debt at the Company's Heimbach subsidiary was paid down to less than $0.1 million as of December 31, 2024. 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.
Previous wording
As of December 31, 2023, $133 million of our total cash and cash equivalents was held by non-U.S. subsidiaries. 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. Our cash planning strategy includes repatriating current earnings in excess of working capital requirements from certain countries in which our subsidiaries operate. While we have been successful in such endeavor to date, there can be no assurance that we will be able to cost effectively repatriate funds in the future. Repatriating such cash from certain jurisdictions, that is currently considered to be indefinitely reinvested in foreign operations, may also result in additional taxes.
Current wording
As of December 31, 2024, $97.6 million of our total cash and cash equivalents was held by non-U.S. subsidiaries. The Company has targeted for repatriation $163.0 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 $132.9 million, and are intended to remain indefinitely invested in foreign operations. Our cash planning strategy includes repatriating current earnings in excess of working capital requirements from certain countries in which our subsidiaries operate. While we have been successful in such endeavor to date, there
Previous wording
We have also returned cash to shareholders through dividends and share repurchases. We paid dividends of $31 million and $26 million during 2023 and 2022, respectively. There were no share repurchases in 2023.
Current wording
We have also returned cash to shareholders through dividends and share repurchases. We paid dividends of $32.5 million and $31.2 million during 2024 and 2023, respectively. The Company repurchased 182,901 shares during 2024 for $14.2 million. In total, the Company repurchased 1,490,904 shares for a total cost of $124.0 million since 2021. On February 21, 2025, the Company's Board of Directors authorized the Company to repurchase shares up to $250 million, which replaces the 2021 authorization.
Previous wording
The Company is party to certain off-balance sheet arrangements, including certain guarantees. The Company provides financial assurance, such as payment guarantee and letters of credit and surety bonds, primarily to support workers’ compensation programs and customs clearance, of less than $7 million. There were no material changes in the Company’s off-balance sheet arrangements during 2023.
Current wording
The Company is party to certain off-balance sheet arrangements, including certain guarantees. The Company provides financial assurance, such as payment guarantee and letters of credit and surety bonds, primarily to support workers’ compensation programs and customs clearance, of less than $12 million. There were no material changes in the Company’s off-balance sheet arrangements during 2024.
Previous wording
We have contractual commitments to repay debt, make payments under leases, contribute to our pension and postretirement plans, and settle obligations related to agreements to purchase goods and services, income taxes, compensation plans, and as applicable, interest rate swaps. We estimate these contractual commitments amount to approximately $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.
Current wording
We have contractual commitments to repay debt, make payments under leases, contribute to our pension and postretirement plans, and settle obligations related to agreements to purchase goods and services, income taxes, compensation plans, and as applicable, interest rate swaps. We estimate these contractual commitments amount to approximately $538 million as of December 31, 2024, of which we expect to pay $62 million within the next year. Interest payments on debt are expected to be approximately $18 million in 2025, $18 million in 2026, $19 million in 2027, and $12 million in 2028, and principal payments on debt of $318 million are not due until 2028. For more information on the revolving credit agreement, see Note 17, Financial Instruments, for payments related to leases see Note 20, Leases, and for payments related to pension and postretirement plans see Note 4, Pension, Postretirement, and Other Benefit Plans, as included in the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Payments for these commitments are not representative of all our future cash requirements, which will vary based on future needs.
Previous wording
We also have fixed price long-term contracts, for which revenue is generally recognized over time using an input method as the measure of progress. This method requires significant judgment and estimation, which could be considerably different if the underlying circumstances were to change. When adjustments in estimated contract revenues or costs are required, any changes from prior estimates are included in earnings in the period the change occurs.
Current wording
We also have fixed price long-term contracts, for which revenue is generally recognized over time using an input method as the measure of progress. This method requires significant judgment and estimation, which could be considerably different if the underlying circumstances were to change. When adjustments in estimated contract
Previous wording
Our expected long-term rate of return on plan assets is derived from our asset allocation strategies and anticipated future long-term performance of individual asset classes. Our analysis gives consideration to recent plan performance and historical returns; however, the assumptions are primarily based on long-term, prospective rates of return. The weighted average long-term rate of return on plan assets for our defined benefit pension plans is 5.2 percent for 2023.
Current wording
Our expected long-term rate of return on plan assets is derived from our asset allocation strategies and anticipated future long-term performance of individual asset classes. Our analysis gives consideration to recent plan performance and historical returns; however, the assumptions are primarily based on long-term, prospective rates of return. The weighted average long-term rate of return on plan assets for our defined benefit pension plans is 4.98% for 2024.
Previous wording
We complete valuation procedures and record the resulting fair value of the acquired assets and assumed liabilities in accordance with the acquisition method under ASC 805, Business Combinations. The acquisition methodology requires management to make assumptions and apply judgment to determine the fair value of assets acquired and liabilities assumed. If estimates or assumptions used to complete the enterprise valuation and estimates of the fair value of the acquired assets and assumed liabilities significantly differed from assumptions made, the resulting difference could materially affect the fair value of net assets.
Current wording
We complete valuation procedures and record the resulting fair value of the acquired assets and assumed liabilities in accordance with the acquisition method under ASC 805, Business Combinations. The acquisition methodology requires management to make assumptions and apply judgment to determine the fair value of assets acquired and liabilities assumed. If estimates or assumptions used to complete the enterprise valuation and estimates of the fair value of the acquired assets and assumed liabilities significantly differ from assumptions made, the resulting difference could materially affect the fair value of net assets.
Previous wording
In determining the fair value of the tangible assets, including property, plant and equipment, we consider the cost-approach and the market-approach, which estimates the cost to replace the asset, less accrued depreciation resulting from physical deterioration, functional obsolescence and external obsolescence. In the determination of the fair value of the identified intangible assets, we use cash flow models following the income approach, specifically, a relief from royalty method methodology. Inputs include estimated revenue growth rates, gross margins, operating expenses, and estimated attrition, royalty and discount rates. Goodwill is recorded as the difference in the fair value of the acquired assets and assumed liabilities and the purchase price, as applicable. The Heimbach acquisition did not result in any goodwill.
Current wording
In determining the fair value of the tangible assets, including property, plant and equipment, we consider the cost-approach and the market approach, which estimates the cost to replace the asset, less accrued depreciation resulting from physical deterioration, functional obsolescence and external obsolescence. In the determination of the fair value of the identified intangible assets, we use cash flow models following the income approach, specifically, a relief from royalty method methodology. Inputs include estimated revenue growth rates, gross margins, operating expenses, and estimated attrition, royalty and discount rates. Goodwill is recorded as the difference in the fair value of the acquired assets and assumed liabilities and the purchase price, as applicable.
Previous wording
See Note 1, Accounting Policies, of the Notes to the Consolidated Financial Statements for Recent Accounting Pronouncements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Current wording
See"Recent Accounting Pronouncements" 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.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The AEC segment'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, vacuum waste tanks for Boeing commercial aircraft and components and structures for other commercial, business jet, defense, and space and AAM programs. In 2024, approximately 36% of AEC net revenues were related to U.S. government contracts or programs.
Current report — wording carried from elsewhere
can be no assurance that we will be able to cost-effectively repatriate funds in the future. Repatriating such cash from certain jurisdictions, which is currently considered to be indefinitely reinvested in foreign operations, may also result in additional taxes.
Current report — wording carried from elsewhere
revenues or costs are required, any changes from prior estimates are included in earnings in the period the change occurs.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The effective tax rate represents the combined federal, state and foreign tax effects attributable to pretax earnings.