SEC Filing | Albany International Corp

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ain-20210630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended:	June 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from __________ to __________

Commission file number: 1-10026


ALBANY INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)

Delaware


(State or other jurisdiction of incorporation or organization)

216 Airport Drive, Rochester, New Hampshire


(Address of principal executive offices)

14-0462060


(IRS Employer Identification No.)

03867


(Zip Code)

603-330-5850


(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	AIN	The New York Stock Exchange (NYSE)
Class B Common Stock, $0.001 par value per share	AIN	The New York Stock Exchange (NYSE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The registrant had 30.7 million shares of Class A Common Stock and 1.6 million shares of Class B Common Stock outstanding as of July 16, 2021.

ALBANY INTERNATIONAL CORP.

TABLE OF CONTENTS


		Page No.
Part I Financial information
Item 1.	Financial Statements
	Consolidated statements of income – three and six months ended June 30, 2021 and 2020	3
	Consolidated statements of comprehensive income/(loss) – three and six months ended June 30, 2021 and 2020	4
	Consolidated balance sheets as of June 30, 2021 and December 31, 2020	5
	Consolidated statements of cash flows – three and six months ended June 30, 2021 and 2020	6
	Notes to consolidated financial statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Forward-looking statements	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36
Part II Other Information
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37

Index

ITEM 1. FINANCIAL STATEMENTS

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales	$	234,519	$	225,990	$	456,880	$	461,754
Cost of goods sold	132,791		123,010		266,606		269,302

Gross profit	101,728		102,980		190,274		192,452
Selling, general, and administrative expenses	42,009		38,543		79,203		78,649
Technical and research expenses	9,762		8,873		19,243		18,003
Restructuring expenses, net	(9)		2,837		43		3,479

Operating income	49,966		52,727		91,785		92,321
Interest expense, net	4,218		3,823		7,787		7,800
Other expense/(income), net	862		1,091		1,462		16,660

Income before income taxes	44,886		47,813		82,536		67,861
Income tax expense	13,446		15,364		23,486		27,818

Net income	31,440		32,449		59,050		40,043
Net income/(loss) attributable to the noncontrolling interest	43		95		70		(1,420)
Net income attributable to the Company	$	31,397	$	32,354	$	58,980	$	41,463

Earnings per share attributable to Company shareholders - Basic	$	0.97	$	1.00	$	1.82	$	1.28

Earnings per share attributable to Company shareholders - Diluted	$	0.97	$	1.00	$	1.82	$	1.28

Shares of the Company used in computing earnings per share:
Basic	32,375		32,328		32,363		32,320

Diluted	32,422		32,336		32,411		32,328

Dividends declared per share, Class A and Class B	$	0.20	$	0.19	$	0.40	$	0.38

The accompanying notes are an integral part of the consolidated financial statements

Index

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	31,440	$	32,449	$	59,050	$	40,043

Other comprehensive income/(loss), before tax:
Foreign currency translation and other adjustments	13,651		8,753		(1,788)		(16,202)
Pension/postretirement settlements and curtailments	—		378		—		378
Amortization of pension liability adjustments:
Prior service credit	(1,118)		(1,114)		(2,237)		(2,228)
Net actuarial loss	1,108		1,232		2,217		2,476
Payments and amortization related to interest rate swaps included in earnings	1,770		1,116		3,246		1,523
Derivative valuation adjustment	125		(1,366)		(353)		(12,130)

Income taxes related to items of other comprehensive income/(loss):
Pension/postretirement settlements and curtailments	—		(113)		—		(113)
Amortization of prior service cost	335		278		671		557
Amortization of net actuarial loss	(332)		(308)		(665)		(619)
Payments and amortization related to interest rate swaps included in earnings	(457)		(286)		(838)		(390)
Derivative valuation adjustment	(44)		349		91		3,102
Comprehensive income/(loss)	46,478		41,368		59,394		16,397
Comprehensive income/(loss) attributable to the noncontrolling interest	226		247		43		(1,159)
Comprehensive income/(loss) attributable to the Company	$	46,252	$	41,121	$	59,351	$	17,556

The accompanying notes are an integral part of the consolidated financial statements

Index

ALBANY INTERNATIONAL CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)


	June 30, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	253,330	$	241,316
Accounts receivable, net	190,937		188,423
Contract assets, net	113,225		139,289
Inventories	120,665		110,478
Income taxes prepaid and receivable	6,236		5,940
Prepaid expenses and other current assets	33,089		31,830
Total current assets	$	717,482	$	717,276

Property, plant and equipment, net	438,392		448,554
Intangibles, net	42,998		46,869
Goodwill	185,293		187,553
Deferred income taxes	33,102		38,757
Noncurrent receivables, net	34,466		36,265
Other assets	74,907		74,662
Total assets	$	1,526,640	$	1,549,936

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	$	55,348	$	49,173
Accrued liabilities	108,007		125,459
Current maturities of long-term debt	—		9
Income taxes payable	12,233		16,222
Total current liabilities	175,588		190,863

Long-term debt	350,000		398,000
Other noncurrent liabilities	121,333		130,424
Deferred taxes and other liabilities	11,660		10,784
Total liabilities	658,581		730,071

SHAREHOLDERS' EQUITY
Preferred stock, par value $5.00 per share; authorized 2,000,000 shares; none issued	—		—
Class A Common Stock, par value $.001 per share; authorized 100,000,000 shares; 39,142,483 issued in 2021 and 39,115,405 in 2020	39		39
Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares; issued and outstanding 1,617,998 in 2021 and 2020	2		2
Additional paid in capital	435,230		433,696
Retained earnings	816,778		770,746
Accumulated items of other comprehensive income:
Translation adjustments	(85,384)		(83,203)
Pension and postretirement liability adjustments	(39,282)		(39,661)
Derivative valuation adjustment	(7,398)		(9,544)
Treasury stock (Class A), at cost; 8,379,804 shares in 2021 and 8,391,011 shares in 2020	(255,768)		(256,009)
Total Company shareholders' equity	864,217		816,066
Noncontrolling interest	3,842		3,799
Total equity	868,059		819,865
Total liabilities and shareholders' equity	$	1,526,640	$	1,549,936

The accompanying notes are an integral part of the consolidated financial statements

Index

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
OPERATING ACTIVITIES
Net income	$	31,440	$	32,449	$	59,050	$	40,043
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	15,971		15,498		32,560		31,004
Amortization	2,280		2,456		4,573		5,020
Change in deferred taxes and other liabilities	974		3,543		5,416		9,360
Impairment of property, plant and equipment	353		36		538		233
Non-cash interest expense	265		20		310		171
Compensation and benefits paid or payable in Class A Common Stock	1,639		1,198		1,626		516
Provision for credit losses from uncollected receivables and contract assets	27		114		(83)		1,769
Foreign currency remeasurement (gain)/loss on intercompany loans	(723)		194		(1,031)		15,581
Fair value adjustment on foreign currency options	1		—		140		64

Changes in operating assets and liabilities that provided/(used) cash:
Accounts receivable	(129)		11,511		(3,365)		8,117
Contract assets	9,539		(11,169)		25,643		(20,009)
Inventories	(1,821)		(4,878)		(10,384)		(24,628)
Prepaid expenses and other current assets	(606)		(301)		(1,505)		(2,457)
Income taxes prepaid and receivable	1,156		29		(309)		(208)
Accounts payable	(4,580)		(9,337)		4,608		(10,383)
Accrued liabilities	2,062		4,171		(17,423)		(10,901)
Income taxes payable	4,121		5,526		(3,956)		1,955
Noncurrent receivables	1,099		628		1,587		397
Other noncurrent liabilities	(2,166)		(464)		(4,263)		(524)
Other, net	1,051		(552)		1,908		(1,086)
Net cash provided by operating activities	61,953		50,672		95,640		44,034

INVESTING ACTIVITIES
Purchases of property, plant and equipment	(10,302)		(9,212)		(22,836)		(21,971)
Purchased software	(286)		—		(288)		(46)
Net cash used in investing activities	(10,588)		(9,212)		(23,124)		(22,017)

FINANCING ACTIVITIES
Proceeds from borrowings	—		—		8,000		70,000
Principal payments on debt	(34,002)		(56,005)		(56,009)		(59,011)
Principal payments on finance lease liabilities	(355)		(329)		(704)		(6,463)
Taxes paid in lieu of share issuance	—		—		(998)		(490)
Proceeds from options exercised	21		20		149		20
Dividends paid	(6,474)		(6,141)		(12,942)		(12,280)
Net cash used in financing activities	(40,810)		(62,455)		(62,504)		(8,224)

Effect of exchange rate changes on cash and cash equivalents	4,904		2,352		2,002		(5,296)

Increase/(decrease) in cash and cash equivalents	15,459		(18,643)		12,014		8,497
Cash and cash equivalents at beginning of period	237,871		222,680		241,316		195,540
Cash and cash equivalents at end of period	$	253,330	$	204,037	$	253,330	$	204,037

The accompanying notes are an integral part of the consolidated financial statements

Index

ALBANY INTERNATIONAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Significant Accounting Policies

Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of results for such periods. Albany International Corp. (Albany, the Registrant, the Company, we, us, or our) consolidates the financial results of its subsidiaries for all periods presented. The results for any interim period are not necessarily indicative of results for the full year.

The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in Albany International Corp.’s Consolidated Financial Statements and accompanying Notes. Actual results could differ materially from those estimates.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Albany International Corp.’s Annual Report on Form 10-K for the year ended December 31, 2020.

2. Reportable Segments and Revenue Recognition

In accordance with applicable disclosure guidance for enterprise segments and related information, the internal organization that is used by management for making operating decisions and assessing performance is used as the basis for our reportable segments.

The Machine Clothing (“MC”) segment supplies permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel, nonwovens, fiber cement and several other industrial applications. We sell our MC products directly to customer end-users in countries across the globe. Our products, manufacturing processes, and distribution channels for MC are substantially the same in each region of the world in which we operate.

We design, manufacture, and market paper machine clothing (used in the manufacturing of paper, paperboard, tissue and towel) for each section of the paper machine and for every grade of paper. Paper machine clothing products are customized, consumable products of technologically sophisticated design that utilize polymeric materials in a complex structure.

The Albany Engineered Composites (“AEC”) segment, including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group (“Safran”) owns a 10 percent noncontrolling interest, provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries. AEC’s largest program relates to CFM International’s LEAP engine. Under this program, AEC through ASC, is the exclusive supplier of advanced composite fan blades and cases under a long-term supply contract. AEC net sales to Safran were $54.0 million and $57.0 million in the first six months of 2021 and 2020, respectively. The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to $105.1 million and $127.1 million as of June 30, 2021 and December 31, 2020, respectively. Other significant programs by AEC include the F-35, Boeing 787, Sikorsky CH-53K and JASSM, as well as the fan case for the GE9X engine. In 2020, approximately 46 percent of AEC sales were related to U.S. government contracts or programs.

Index

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


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020
Net sales
Machine Clothing	$	159,921	$	153,433	$	308,127	$	290,035
Albany Engineered Composites	74,598		72,557		148,753		171,719
Consolidated total	$	234,519	$	225,990	$	456,880	$	461,754
Operating income/(loss)
Machine Clothing	$	55,902	$	56,543	$	106,264	$	103,718
Albany Engineered Composites	7,164		8,299		10,102		15,922
Corporate expenses	(13,100)		(12,115)		(24,581)		(27,319)
Operating income	$	49,966	$	52,727	$	91,785	$	92,321
Reconciling items:
Interest income	(401)		(348)		(930)		(795)
Interest expense	4,619		4,171		8,717		8,595
Other expense/(income), net	862		1,091		1,462		16,660
Income before income taxes	$	44,886	$	47,813	$	82,536	$	67,861

There were no material changes to total assets of the reportable segments in the first six months of 2021.

The table below presents restructuring costs by reportable segment (also see Note 4):


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020
Machine Clothing	$	10	$	388	$	(58)	$	1,030
Albany Engineered Composites	(48)		2,248		41		2,248
Corporate expenses	29		201		60		201
Total	$	(9)	$	2,837	$	43	$	3,479

Products and services provided under long-term contracts represent a significant portion of sales in the Albany Engineered Composites segment and we account for these contracts using the percentage of completion (actual cost to estimated cost) method. That method requires significant judgment and estimation, which could be considerably different if the underlying circumstances were to change. When adjustments in estimated contract revenues or costs are required, any changes from prior estimates are included in earnings in the period the change occurs. Changes in the estimated profitability of long-term contracts could be caused by increases or decreases in the contract value, revisions to customer delivery requirements, updated labor or overhead rates, factors affecting the supply chain, changes in the evaluation of contract risks and opportunities, or other factors. Changes in the estimated profitability of long-term contracts increased operating income by $4.3 million and $3.7 million for the second quarter and first half of 2021, respectively. Adjustments in the estimated profitability of long-term contracts increased operating income by $7.4 million and $6.4 million for the second quarter and first half of 2020, respectively.

Index

We disaggregate revenue earned from contracts with customers for each of our business segments and product groups based on the timing of revenue recognition, and groupings used for internal review purposes.

The following table disaggregates revenue for each product group by timing of revenue recognition:


	Three months ended June 30, 2021
(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total
Machine Clothing	$	159,056	$	865	$	159,921

Albany Engineered Composites
ASC	—		26,170		26,170
Other AEC	4,432		43,996		48,428
Total Albany Engineered Composites	4,432		70,166		74,598

Total revenue	$	163,488	$	71,031	$	234,519


	Six months ended June 30, 2021
(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total
Machine Clothing	$	306,397	$	1,730	$	308,127

Albany Engineered Composites
ASC	—		53,254		53,254
Other AEC	8,312		87,187		95,499
Total Albany Engineered Composites	8,312		140,441		148,753

Total revenue	$	314,709	$	142,171	$	456,880



	Three months ended June 30, 2020
(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total
Machine Clothing	$	152,585	$	848	$	153,433

Albany Engineered Composites
ASC	—		17,576		17,576
Other AEC	4,143		50,838		54,981
Total Albany Engineered Composites	4,143		68,414		72,557

Total revenue	$	156,728	$	69,262	$	225,990

Index



	Six months ended June 30, 2020
(in thousands)	Point in Time Revenue Recognition		Over Time Revenue Recognition		Total

Machine Clothing	$	288,339	$	1,696	$	290,035

Albany Engineered Composites
ASC	—		55,470		55,470
Other AEC	10,463		105,786		116,249
Total Albany Engineered Composites	10,463		161,256		171,719

Total revenue	$	298,802	$	162,952	$	461,754

The following table disaggregates MC segment revenue by significant product groupings (paper machine clothing (PMC) and engineered fabrics), and, for PMC, the geographical region to which the paper machine clothing was sold:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020
Americas PMC	$	82,343	$	81,225	$	155,645	$	154,902
Eurasia PMC	55,900		54,166		111,043		99,297
Engineered Fabrics	21,678		18,042		41,439		35,836
Total Machine Clothing Net sales	$	159,921	$	153,433	$	308,127	$	290,035

As permitted by ASC 606, we only disclose the value of unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Contracts in the MC segment are generally for periods of less than a year. Most contracts in the AEC segment are short duration firm-fixed-price orders representing performance obligations with an original maturity of less than one year. Remaining performance obligations on contracts that had an original duration of greater than one year totaled $149 million and $85 million as of June 30, 2021 and 2020, respectively, and related primarily to firm contracts in the AEC segment. Of the remaining performance obligations as of June 30, 2021, we expect to recognize as revenue approximately $48 million during 2021, $62 million during 2022, $24 million during 2023, and the remainder during 2024.

Index

3. Pensions and Other Postretirement Benefit Plans

The Company has defined benefit pension plans covering certain U.S. and non-U.S. employees. The Company also provides certain postretirement benefits to retired employees in the U.S. and Canada. The Company accrues the cost of providing these benefits during the active service period of the employees.

The composition of the net periodic benefit cost for the six months ended June 30, 2021 and 2020, was as follows:


	Pension plans				Other postretirement benefits
(in thousands)	2021		2020		2021		2020
Components of net periodic benefit cost:
Service cost	$	1,090	$	1,148	$	66	$	100
Interest cost	2,674		3,071		551		857
Expected return on assets	(3,211)		(3,415)		—		—
Settlement	—		145		—		—
Curtailment	—		233		—		—
Amortization of prior service cost/(credit)	7		16		(2,244)		(2,244)
Amortization of net actuarial loss	1,087		1,180		1,130		1,296
Net periodic benefit cost	$	1,647	$	2,378	$	(497)	$	9

The amount of net periodic benefit cost is determined at the beginning of each year and generally only varies from quarter to quarter when a significant event occurs, such as a curtailment or a settlement. There were no such events in the first six months of 2021. In the second quarter of 2020, the Company recorded expense of $0.4 million related to curtailments and settlements.

Service cost for defined benefit pension and postretirement plans are reported in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. Other components of net periodic benefit cost are included in the line item Other (income)/expense, net in the Consolidated Statements of Income.

4. Restructuring

Restructuring costs in the first six months of 2021 were not significant. Restructuring costs in the first six months of 2020 were related to reductions in workforce at various AEC locations, principally in the United States, as well as related to discontinued operations at the Machine Clothing production facility in Sélestat, France. Since 2017, we have recorded $13.9 million of restructuring charges related to this action. There were no charges related to the impairment of assets for the periods presented.

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


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020
Machine Clothing	$	10	$	388	$	(58)	$	1,030
Albany Engineered Composites	(48)		2,248		41		2,248
Corporate expenses	29		201		60		201
Total	$	(9)	$	2,837	$	43	$	3,479

The table below presents the year-to-date changes in restructuring liabilities for 2021 and 2020, all of which are related to termination and other costs:


(in thousands)	December 31, 2020		Restructuring charges accrued		Payments		Currency translation /other		June 30, 2021
Total termination and other costs	$	2,195	$	43	$	(1,485)	$	11	$	764


(in thousands)	December 31, 2019		Restructuring charges accrued		Payments		Currency translation /other		June 30, 2020
Total termination and other costs	$	2,042	$	3,479	$	(1,410)	$	(5)	$	4,106

Index

We expect that approximately $0.6 million of Accrued liabilities for restructuring at June 30, 2021 will be paid within one year and approximately $0.2 million will be paid the following year.

5. Other (Income)/Expense, net

The components of Other (Income)/Expense, net are:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020
Currency transaction (gains)/losses	$	175	$	17	$	341	$	14,851
Bank fees and amortization of debt issuance costs	104		93		210		168
Components of net periodic pension and postretirement cost other than service	(4)		754		(6)		1,139
Other	587		227		917		502
Total	$	862	$	1,091	$	1,462	$	16,660

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

6. Income Taxes

The following table presents components of income tax expense for the three and six months ended June 30, 2021 and 2020:


	Three months ended June 30,				Six months ended June 30,
(in thousands, except percentages)	2021		2020		2021		2020
Income tax based on income from continuing operations (1)	$	13,251	$	16,262	$	24,583	$	23,571
Provision for change in estimated tax rate	(218)		(490)		(218)		(490)
Income tax before discrete items	13,033		15,772		24,365		23,081
Discrete tax expense:
Exercise of U.S. stock options	(14)		—		(156)		—
Adjustments to prior period tax liabilities	22		879		(1,421)		767
Revaluation of deferred tax assets due to tax rate change	352		—		352		—
Provision for/resolution of tax audits and contingencies, net	—		(1,489)		278		(1,733)
Write-off of net operating losses related to tax audit	—		—		—		1,830
Tax effect of non-deductible foreign exchange loss on intercompany loan	—		(13)		—		3,656
Creation of valuation allowance	—		222		—		222
Other	53		(7)		68		(5)
Total income tax expense	$	13,446	$	15,364	$	23,486	$	27,818
(1) Calculated at estimated tax rates of 29.5% and 34.0%, respectively

Income tax expense for the quarter was computed in accordance with ASC 740-270, Income Taxes – Interim Reporting. Under this method, loss jurisdictions, which cannot recognize a tax benefit with regard to their generated losses, are excluded from the annual effective tax rate (AETR) calculation and their taxes will be recorded discretely in each quarter.

In the second quarter of 2020, the Company recorded a net tax benefit of $1.5 million as a result of a US state tax audit settlement; the Company also recorded a net deferred tax expense of $1.0 million due to an adjustment of net operating losses related to settled audits. In the first quarter of 2020, the Company recorded a $1.8 million out-of-period charge related to developments in ongoing tax audits, which resulted in a corresponding decrease in deferred tax assets.

Index

7. Earnings Per Share

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


	Three months ended June 30,				Six months ended June 30,
(in thousands, except market price and earnings per share)	2021		2020		2021		2020
Net income attributable to the Company	$	31,397	$	32,354	$	58,980	$	41,463

Weighted average number of shares:
Weighted average number of shares used in calculating basic net income per share	32,375		32,328		32,363		32,320
Effect of dilutive stock-based compensation plans	47		8		48		8

Weighted average number of shares used in calculating diluted net income per share