10-K

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended: December 31, 2001

OR

o 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: 0-16214

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

Delaware (State or other jurisdiction of incorporation organization)	14-0462060 (IRS Employer or Identification No.)
1373 Broadway, Albany, New York (Address of principal executive offices)	12204 (Zip Code)

Registrant's telephone number, including area code    518-445-2200

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of each exchange on which registered
Class A Common Stock ($0.001 par value)	New York Stock Exchange and Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None (Title of Class)

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [    ]

        The aggregate market value of Class A Common Stock held on February 15, 2002 by non-affiliates of the registrant was $636,758,349.

        The registrant had 25,631,298 shares of Class A Common Stock and 5,867,457 shares of Class B Common Stock outstanding as of February 15, 2002.

DOCUMENTS INCORPORATED BY REFERENCE	PART
Registrant's Annual Report to Shareholders for the year ended December 31, 2001.	II
Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on May 9, 2002.	III

PART I

Item 1. BUSINESS

        Albany International Corp. ("the Registrant") designs, manufactures and markets paper machine clothing for each section of the paper machine. It manufactures and sells more paper machine clothing worldwide than any other company. Paper machine clothing consists of large continuous belts of custom designed and custom manufactured, engineered fabrics that are installed on paper machines and carry the paper stock through each stage of the paper production process. Paper machine clothing is a consumable product of technologically sophisticated design that is made with synthetic monofilament and fiber materials. The design and material composition of paper machine clothing can have a considerable effect on the quality of paper products produced and the efficiency of the paper machines on which it is used. The Registrant produces a substantial portion of its monofilament requirements.

        Practically all press fabrics are woven tubular or endless from monofilament yarns on large, specially designed looms. After weaving, the base press fabric goes to a needling operation where a thick fiber layer, called a batt, is laid on the base just before passing through the needling machine. The needles are equipped with tiny barbs that grab batt fibers locking them into the body of the fabric. After needling, the composite fabrics are usually washed, and water is removed. The fabric then is heat set, treatments and coatings may be applied, and it is measured and trimmed to width.

        The Registrant's manufacturing process is similar for forming fabrics and drying fabrics, except that there is normally no needling operation in the construction of those fabrics. Most monofilament screens are woven flat on wide looms. The fabrics are seamed to produce an endless loop, and heat stabilized by running them around two large cylinders under heat and drawn out by tension. After heat setting, the fabrics are seamed and boxed.

        In addition to paper machine clothing, the Registrant manufactures other engineered products for the non-woven industry, corrugator belts, filtration media and high performance doors. Albany Door Systems, which includes Rapid Roll Doors®, is the operation of the Company that developed high speed, high performance doors, which grew from the application of the Company's coated fabric technology. Since the inception of Rapid Roll Doors in the early 1980's, manufacturing operations in North America, Europe and Australia have supplied over 100,000 installations worldwide.

Industry Factors

        There are approximately 1,100 paper machines in the United States located in approximately 560 paper mills. It is estimated that there are approximately 4,700 paper machines in the world which produce at least 50 tons of paper per day. Additionally, there are many smaller paper machines. Demand for paper machine clothing is tied to the volume of paper production, which in turn reflects economic growth. According to published data, world paper production volumes have grown at an annual rate of approximately 3.0% over the last ten years. The Registrant anticipates continued growth for the long-term in world paper production. The profitability of the paper machine clothing business has generally been less cyclical than the profitability of the papermaking industry.

        Because the paper industry has been characterized by an evolving but essentially stable manufacturing technology based on the wet forming papermaking process, which requires a very large capital investment, the Registrant does not believe that a commercially feasible substitute technology that does not employ paper machine clothing is likely to be developed and incorporated into the paper production process by paper manufacturers in the foreseeable future. Accordingly, the prospects for continued demand for paper machine clothing appear excellent.

        Over the last few years, paper manufacturers have generally reduced the number of suppliers of paper machine clothing per machine position. In addition, eight major paper machine clothing

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companies have been reduced to four through mergers or acquisitions. These factors have increased opportunities for market leaders, including the Registrant, to expand their market share.

International Operations

        The Registrant maintains manufacturing facilities in Australia, Brazil, Canada, China, Finland, France, Germany, Great Britain, Italy, Mexico, The Netherlands, South Korea, Sweden and the United States. The Registrant has 50% interests in an entity in South Africa and an entity in Russia which are engaged primarily in the engineered fabrics business. The Registrant also has a 50% interest in an entity in England which is engaged in the Albany Door Systems business (see Note 1 of Notes to Consolidated Financial Statements).

        The Registrant's geographically diversified operations allow it to serve the world's paper markets more efficiently and to provide superior technical service to its customers. The Registrant benefits from the transfer of research and development product innovations between geographic regions. The worldwide scope of the Registrant's manufacturing and marketing efforts also limits the impact on the Registrant of economic downturns that are limited to a geographic region.

        The Registrant's widespread presence subjects it to certain risks, including controls on foreign exchange and the repatriation of funds. However, the Registrant has been able to repatriate earnings in excess of working capital requirements from each of the countries in which it operates without substantial governmental restrictions and does not foresee any material changes in its ability to continue to do so in the future. In addition, the Registrant believes that the risks associated with its operations and locations outside the United States are those normally associated with doing business in these locations.

Marketing, Customers and Backlog

        Paper machine clothing is custom designed for each user depending upon the type, size and speed of the papermaking machine, the machine section, the grade of paper being produced, and the quality of the pulp stock used. Technical expertise, judgment and experience are critical in designing the appropriate clothing for each position on the machine. As a result, the Registrant employs highly skilled sales and technical service personnel in 25 countries who work directly with paper mill operating management. The Registrant's technical service program in the United States gives its service engineers field access to the measurement and analysis equipment needed for troubleshooting and application engineering. Sales, service and technical expenses are major cost components of the Registrant. The Registrant employs approximately 1,050 people in the sales and technical functions combined, many of whom have engineering degrees or paper mill experience. The Registrant's market leadership position reflects the Company's commitment to technological innovation.

        Typically, the Registrant experiences its highest quarterly sales levels in the fourth quarter of each fiscal year. The Registrant believes that this pattern only partially reflects seasonal shifts in demand for its products but is more directly related to purchasing policies of the Registrant's customers.

        Payment terms granted to customers reflect general competitive practices. Terms vary with product and competitive conditions, but generally require payment within 30 to 90 days, from the date of invoice, depending on the country of operation. Historically, bad debts were insignificant. However, several paper companies declared bankruptcy during 2001 and, therefore, bad debt expense increased. The largest customer of the Company accounts for approximately 5% of the Company's net sales. Management does not believe that the loss of any one customer would have a material adverse effect on the Registrant's business.

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        The Registrant's order backlogs at December 31, 2001 and 2000 were approximately $595 million and $604 million, respectively. Order backlog at December 31, 2001 is generally expected to be invoiced during the next 12 months.

Research and Development

        The Registrant invests heavily in research, new product development and technical analysis to maintain its leadership in the paper machine clothing industry. The Registrant's expenditures fall into two primary categories, research and development and technical expenditures. Research and development expenses totaled $23.2 million in 2001, $23.3 million in 2000, and $23.6 million in 1999. While most research activity supports existing products, the Registrant engages in research for new products. New product research has focused primarily on more sophisticated paper machine clothing and has resulted in a stream of products such as PRINTEX, KRAFTEX and MICROTEX forming fabrics, DYNATEX, SEAMDYNATEX, and APERTECH press fabrics, process belts such as TRANSBELT |, VENTABELT, GLOSSBELT and PRESSBELT, as well as AEROGROOVE, AERO 2000, SPIRALNETICS and AEROGRIP which are dryer fabrics. Technical expenditures totaled $23.7 million in 2001, $26.2 million in 2000, and $24.5 million in 1999. Technical expenditures are focused on design, quality assurance and customer support.

        Although the Registrant has focused most of its research and development efforts on paper machine clothing products and design, the Registrant also has made progress in developing non-paper machine clothing products, such as PRIMALOFT, a synthetic down alternative. PRIMALOFT is widely used in technical outdoor apparel as well as premium comforters and pillows. The Registrant conducts its major research at its operations in Mansfield, Massachusetts and Halmstad, Sweden. Additionally, the Registrant conducts process and product design development activities at manufacturing locations in Selestat, France; Goppingen, Germany; Albany, New York; and Menasha, Wisconsin.

        The Registrant holds a number of patents, trademarks and licenses, none of which are material to the continuation of the Registrant's business. All brand names and product names are trademarks of Albany International Corp. The Registrant has licensed some of its patents to one or more competitors, mainly to enhance customer acceptance of the new products. The revenue from such licenses is less than 1% of consolidated net sales.

Raw Materials and Inventory

        Primary raw materials for the Registrant's products are synthetic fibers, which are generally available from a number of suppliers. The Registrant, therefore, is not required to maintain raw material inventories in excess of its current needs to assure availability. In addition, the Registrant manufactures monofilament, a basic raw material for all types of paper machine clothing, at its facility in Homer, New York, which supplies approximately 31% of its world-wide monofilament requirements. This manufacturing capability assists the Registrant in its negotiations with monofilament producers for the balance of its supply requirements, and enhances the ability of the Registrant to develop proprietary products.

Competition

        While there are a number of small regional paper machine clothing suppliers worldwide, only four compete on a global basis. Market shares vary depending on the country and the type of paper machine clothing produced. In the paper machine clothing market, the Registrant believes that it has a market share of approximately 36% in the United States and Canadian markets, taken together, 26% in the rest of the world and approximately 30% in the world overall. Together, the United States and Canada constitute approximately 37% of the total world market for paper machine clothing.

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        Competition is intense in all areas of the Registrant's business. While price competition is, of course, a factor, the primary bases for competition are the performance characteristics of the Registrant's products, which are principally technology-driven, and the quality of customer service. The Registrant, like its competitors, provides diverse services to customers through its sales and technical service personnel including: (1) consulting on performance of the paper machine; (2) consulting on paper machine configurations, both new and rebuilt; (3) selection and custom manufacture of the appropriate paper machine clothing; and (4) storing fabrics for delivery to the user.

Employees

        The Registrant employs 6,769 persons, of whom approximately 69% are engaged in manufacturing the Registrant's products. Wages and benefits are competitive with those of other manufacturers in the geographic areas in which the Registrant's facilities are located. The Registrant considers its relations with its employees in general to be excellent.

Executive Officers of Registrant

        The following table sets forth certain information with respect to the executive officers of the Registrant:

Name	Age	Position
Frank R. Schmeler	63	Chairman of the Board and Chief Executive Officer
Michel J. Bacon	52	Group Vice President—Europe
William M. McCarthy	51	Group Vice President—Canada, Pacific and Latin America
Edward Walther	58	Group Vice President—United States
Michael C. Nahl	59	Senior Vice President and Chief Financial Officer
Edward R. Hahn	57	Senior Vice President—Chief Technical Officer
Frank Kolf	56	Senior Vice President—Administration and Development
Dieter Polt	59	Senior Vice President—Industrial Products
Thomas H. Hagoort	69	General Counsel and Secretary
Richard A. Carlstrom	58	Vice President—Controller
Thomas H. Curry	53	Vice President—Sales and Marketing United States
David C. Michaels	46	Vice President—Treasury and Tax
Kenneth C. Pulver	58	Vice President—Corporate Communications
John C. Treanor	63	Treasurer
Charles J. Silva, Jr.	42	Assistant General Counsel and Assistant Secretary

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Frank R. Schmeler joined the Registrant in 1964. He has served the Registrant as Chairman of the Board since 2001, Chief Executive Officer since 2000, as President from 1998 to 2001, Chief Operating Officer from 1997 to 2000, Executive Vice President from 1997 to 1998, Senior Vice President from 1988 to 1997, Vice President and General Manager of the Felt Division from 1984 to 1988, Division Vice President and General Manager, Albany International Canada from 1978 to 1984 and as Vice President of Marketing, Albany International Canada from 1976 to 1978. He has been a Director of the Registrant since 1997.

Michel J. Bacon joined the Registrant in 1978. He has served the Registrant as Group Vice President since 2001, Senior Vice President from 1996 to 2001, Vice President and General Manager of Albany International Canada from 1991 to 1996, Vice President of Operations, Albany International Canada Press Division from 1989 to 1991 and as Vice President of Marketing, Albany International Canada from 1987 to 1989.

William M. McCarthy joined the Registrant in 1977. He has served the Registrant as Group Vice President since 2001, Senior Vice President from 1997 to 2001, and since 1991 has held various positions for Press Fabrics U.S. including Vice President and General Manager, Vice President-Marketing and Technical Director. From 1988 to 1991 he was Technical Director for Continental Europe-Press Fabrics.

Edward Walther joined the Registrant in 1994. He has served the Registrant as Group Vice President since 2001, as Executive Vice President from 1997 to 2001, Senior Vice President from 1995 to 1997 and as Vice President and General Manager—Continental Europe from 1994 to 1995. Prior to joining the Registrant, he held various marketing and managerial positions with a company in the paper machine clothing business.

Michael C. Nahl joined the Registrant in 1981. He has served the Registrant as Senior Vice President and Chief Financial Officer since 1983 and prior to 1983 as Group Vice President. From 1965 to 1979 he served in marketing, financial, logistical, analytical and management positions for the Exxon Corporation and from 1979 to 1981 he was with General Refractories Corporation as Director of Strategic Planning, Vice President and Chief Financial Officer. He is a Director of UCAR International Inc.

Edward R. Hahn joined the Registrant in 1971. He has served the Registrant as Senior Vice President since 2000 and as Vice President-Research and Development and Executive Director of Albany International Research Company from 1995 to 2000, as Vice President and General Manager of Press Fabrics U.S. from 1990 to 1995, as Vice President of Euroscan Press and Dryer Divisions from 1987 to 1990 and as Vice President of Operations for Nordiskafilt from 1986 to 1987.

Frank Kolf joined the Registrant in 2001 as Senior Vice President. Prior to joining the Registrant, he served as Executive Vice President for the Wangner Group and as Director of Strategic Corporate Controlling with Carl Schenck AG.

Dieter Polt joined the Registrant in 2001 as Senior Vice President. Prior to joining the Registrant, he served as President and Chief Executive Officer of the Wangner Group and held senior management positions in the instrumentation industry.

Thomas H. Hagoort joined the Registrant in 1991. He has served the Registrant as General Counsel and Secretary since 1997 and as General Counsel from 1991 to 1997. From 1968 until December 31, 1990 he was a partner in Cleary, Gottlieb, Steen and Hamilton, an international law firm with headquarters in New York City.

Richard A. Carlstrom joined the Registrant in 1972. He has served the Registrant as Vice President-Controller since 1993, as Controller since 1980, as Controller of a U.S. division from 1975 to 1980.

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Thomas H. Curry joined the Registrant in 1992. He has served the Registrant as Vice President-Sales and Marketing U.S. since 1999 and from 1995 to 1999 held various positions for Press Fabrics U.S. including Vice President-General Manager and Vice President-Marketing and from 1992 to 1995 held various sales and marketing positions for the U.S. Dryer Division.

David C. Michaels joined the registrant in 1987. He has served the Registrant as Vice President-Treasury and Tax since 2000 and previously served as Director of Tax. Prior to 1987, he held various financial and tax positions at Veeco Instruments, Inc.

Kenneth C. Pulver joined the Registrant in 1968. He has served the Registrant as Vice President-Corporate Communications since 1997 and as Vice President of Operations for Primaloft from 1992 to 1997. From 1984 to 1992 he served in various marketing positions with Albany Engineered Systems.

John C. Treanor joined the Registrant in 1970. He has served the Registrant as Treasurer since 1997, as Controller of Albany International Europe from 1992 to 1997 and as Controller of Albany International Canada from 1985 to 1992.

        Charles J. Silva, Jr.    joined the Registrant in 1994. He has served the Registrant as Assistant General Counsel and Assistant Secretary since 1996 and as Assistant General Counsel from 1994 to 1996. Prior to 1994, he was an associate with Cleary, Gottlieb, Steen and Hamilton, an international law firm with headquarters in New York City.

        The Registrant believes it is in compliance with all Federal, State and local provisions which have been enacted or adopted regarding the discharge of materials into the environment, or otherwise relating to the protection of the environment, and does not have knowledge of environmental regulations which do or might have a material effect on future capital expenditures, earnings, or competitive position.

        The Registrant is incorporated under the laws of the State of Delaware and is the successor to a New York corporation which was originally incorporated in 1895 and which was merged into the Registrant in August 1987 solely for the purpose of changing the domicile of the corporation. Upon such merger, each outstanding share of Class B Common Stock of the predecessor New York corporation was changed into one share of Class B Common Stock of the Registrant. References to the Registrant that relate to any time prior to the August 1987 merger should be understood to refer to the predecessor New York corporation.

Item 2. PROPERTIES

        The Registrant's principal manufacturing facilities are located in the United States, Canada, Europe, Brazil, Mexico, Australia, South Korea and China. The aggregate square footage of the Registrant's operating facilities in the United States and Canada is approximately 2,744,000 square feet, of which 2,523,000 square feet are owned and 221,000 square feet are leased. The Registrant's facilities located outside the United States and Canada comprise approximately 4,212,000 square feet, of which 3,337,000 square feet are owned and 875,000 square feet are leased. The Registrant considers these facilities to be in good condition and suitable for their purpose. The capacity associated with these facilities is adequate to meet production levels required and anticipated through 2002. The Registrant's expected 2002 capital expenditures of about $35 million will provide sufficient capacity for anticipated growth.

        The Registrant believes it has modern, efficient production equipment. In the last five years, excluding acquisitions, it has spent $187 million on new plants and equipment or upgrading existing facilities.

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Item 3. LEGAL PROCEEDINGS

        The Registrant and many other companies are defendants in suits brought in various courts in the United States by plaintiffs who allege that they have suffered personal injury as a result of exposure to asbestos-containing products. The Registrant was defending against 7,749 such claims as of February 28, 2002. This compares with 7,347 claims as of December 31, 2001, 1,997 plaintiffs as of December 31, 2000, and 2,276 claims as of December 31, 1999. These suits allege a variety of lung and other diseases based on alleged exposure to products previously manufactured by the Registrant. The bulk of these suits have been brought in Mississippi and Louisiana, with smaller numbers in North Carolina and other states. The Registrant anticipates that additional claims will be filed against it and related companies in the future but is unable to predict the number and timing of such future claims.

        These suits typically involve claims against anywhere from twenty to over two hundred defendants, and the complaints often fail to identify the plaintiffs' work history or the nature of the plaintiffs' alleged exposure to the Registrant's products. However, the Registrant's production of asbestos-containing paper machine clothing products was limited to certain synthetic dryer fabrics marketed during the period from 1967 to 1976 and used in paper mills. (Such fabrics generally had a useful life of from three to twelve months.) It has been the Registrant's experience to date that a significant number of the plaintiffs in these cases were never employed in paper mills, and that a significant number of other plaintiffs did not have any contact with any asbestos-containing paper machine clothing sold by the Registrant. It is the position of the Registrant and the other paper machine clothing defendants that there was insufficient exposure to asbestos from any paper machine clothing products to cause asbestos-related injury in any plaintiff. Furthermore, asbestos contained in the Registrant's synthetic products was encapsulated in a resin-coated yarn woven into the interior of the fabric, further reducing the likelihood of fiber release.

        While the Registrant believes it has meritorious defenses to these claims, it has settled certain of these cases for amounts it considers reasonable given the facts and circumstances of each case. All of the amounts the Registrant has paid to date to defend and resolve these cases have been covered by insurance, and the Registrant's insurer Liberty Mutual has defended each case under a standard reservation of rights. As of February 15, 2002, the Registrant had resolved, by means of settlement or outright dismissal, 2,195 asbestos-related personal injury claims for $1,135,000. All of this amount was paid by the Registrant's insurance carrier.

Brandon Drying Fabrics, Inc.

        Brandon Drying Fabrics, Inc. ("Brandon"), a subsidiary of Geschmay Corp., is also a separate defendant in most of these cases, and remains a defendant in a number of cases settled by the Registrant. Brandon was defending against 9,179 claims as of February 28, 2002. This compares with 8,759 claims pending as of December 31, 2001, 3,598 claims as of December 31, 2000 and 1,887 claims as of December 31, 1999. The Registrant acquired Geschmay Corp., formerly known as Wangner Systems Corporation, in 1999.

        Brandon Drying Fabrics, Inc. was created in 1978 in connection with the purchase of certain assets from Abney Mills, a South Carolina textile manufacturing entity. Brandon Sales, Inc. was a wholly owned subsidiary of Abney and its assets were among those purchased from Abney Mills. After the purchase, Brandon Drying Fabrics, Inc. manufactured drying fabrics under its own name, none of which contained asbestos. It is believed that Abney Mills ceased production of asbestos-containing products prior to the 1978 purchase. Affidavits obtained from former Abney Mills employees confirm that belief.

        Under the terms of the Assets Purchase Agreement between Brandon Drying Fabrics, Inc. and Abney Mills, Abney Mills agreed to indemnify, defend and hold Brandon Drying Fabrics, Inc. harmless from any actions or claims on account of products manufactured by Abney Mills and its related corporations prior to the date of the sale, whether or not the product was sold subsequent to the date

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of the sale. It appears that Abney Mills has since been dissolved. Nevertheless, a representative of this dissolved entity has been notified of the pendency of these actions and demand has been made that it assume the defense of these actions.

        Because Brandon Drying Fabrics, Inc. did not manufacture asbestos-containing products, and because it does not believe that it was the legal successor to, or otherwise responsible for obligations of, Abney Mills with respect to products manufactured by Abney Mills, it believes it has strong defenses to the claims that have been asserted against it. In some instances, plaintiffs have voluntarily dismissed claims against it, while in others it has entered into what it considers to be reasonable settlements. As of February 15, 2002, Brandon Drying Fabrics, Inc. has resolved, by means of settlement or dismissal, 708 claims for a total of $129,499. Brandon Drying Fabric, Inc.'s insurance carriers have agreed to indemnification and defense costs related to these proceedings of 88.2% of the total, subject to the standard reservation of rights. The remaining 11.8% is being sought from an insurance company that denies that it issued a policy. Brandon's internal records demonstrate otherwise, and Brandon has filed suit against this company as well as its other carriers. Based on advice of counsel, Brandon is confident that it will prevail in establishing 100% indemnification and defense cost coverage.

Mount Vernon

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

        The Registrant believes that all asbestos-related claims against it or Brandon Drying Fabrics, Inc. are without merit. Based upon its understanding of the insurance policies available, how settlement amounts have been allocated to various policies, its recent settlement experience, the absence of any judgments against the Registrant or Brandon Drying Fabrics, Inc., and the defenses available, the Registrant currently does not anticipate any material liability relating to the resolution of the aforementioned pending proceedings in excess of existing insurance limits. Consequently, the Registrant does not believe, based upon currently available information, that the ultimate resolution of the aforementioned proceedings will have a material adverse effect on the financial position, results of operations or cash flows of the Registrant.

        Although the Registrant cannot predict the number and timing of future claims, based upon the foregoing factors and the trends in claims against it to date, the Registrant does not anticipate that additional claims likely to be filed against it or Brandon Drying Fabrics, Inc. in the future will have a material adverse effect on its financial position, results of operations or cash flows. However, the Registrant is aware that litigation is inherently uncertain, especially when the outcome is dependent primarily on determinations of factual matters to be made by juries. The Registrant is also aware that numerous other defendants in asbestos cases, as well as others who claim to have knowledge and expertise on the subject, have found it difficult to anticipate the volume of future asbestos claims. For these reasons, there can be no assurance that the foregoing conclusions will not change.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        There were no matters submitted during the fourth quarter of 2001 to a vote of security holders.

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PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        "Stock and Shareholders" and "Quarterly Financial Data" on page 42 of the Annual Report are incorporated herein by reference.

        Restrictions on dividends and other distributions are described in Note 6, on page 24 of the Annual Report. Such description is incorporated herein by reference.

Item 6. SELECTED FINANCIAL DATA

        "Eleven Year Summary" on pages 40 and 41 of the Annual Report is incorporated herein by reference.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        "Financial Review" on pages 35 to 39 of the Annual Report is incorporated herein by reference.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The following consolidated financial statements of the Registrant and its subsidiaries, included on pages 16 to 34 in the Annual Report, are incorporated herein by reference:

        Report of Independent Accountants

        Consolidated Statements of Income and Retained Earnings—years ended December 31, 2001, 2000, and 1999

        Consolidated Statements of Comprehensive Income—years ended December 31, 2001, 2000 and 1999

        Consolidated Balance Sheets—December 31, 2001 and 2000

        Consolidated Statements of Cash Flows—years ended December 31, 2001, 2000 and 1999

        Notes to Consolidated Financial Statements

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

a)

Directors. The information set out in the section captioned "Election of Directors" of the Proxy Statement is incorporated herein by reference.



b)

Executive Officers of Registrant. Information about the officers of the Registrant is set forth in Item 1 above.

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Item 11. EXECUTIVE COMPENSATION

        The information set forth in the sections of the Proxy Statement captioned "Executive Compensation", "Summary Compensation Table", "Option/SAR Grants in Last Fiscal Year", "Option/SAR Exercises During 2001 and Year-End Values", "Pension Plan Table", "Compensation and Stock Option Committee Report on Executive Compensation", "Compensation and Stock Option Committee Interlocks and Insider Participation", "Stock Performance Graph", and "Directors' Fees" is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information set out in the section captioned "Share Ownership" of the Proxy Statement is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        None.

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE AND REPORTS ON FORM 8-K

(a)(1)	Financial Statements. The consolidated financial statements included in the Annual Report are incorporated by reference in Item 8.
(a)(2)	Schedule. The following financial statement schedule for each of the three years in the period ended December 31, 2001:
	Report of Independent Accountants on Financial Statement Schedule
	Schedule II—Valuation and Qualifying Accounts
(a)(3)	Exhibits
3(a)	Certificate of Incorporation of Registrant.(3)
3(b)	Bylaws of Registrant.(10)
4(a)	Article IV of Certificate of Incorporation of Registrant (included in Exhibit 3(a)).
4(b)	Specimen Stock Certificate for Class A Common Stock.(1)

Credit Agreement

10(i)(i)	Credit Agreement, dated as of August 11, 1999 (the "Credit Agreement") among the Registrant, certain banks listed therein, The Chase Manhattan Bank, as Administrative Agent, Chase Manhattan International Limited, as London Agent, Citibank N.A., as Syndication Agent and Banc One Capital Markets, Inc., as Documentation Agent. (9)
10(i)(ii)	Amendment No. 1, dated as of December 22, 1999, to the Credit Agreement. (11)
10(j)(I)	Receivables Sale Agreement, dated as of September 28, 2001, among the Registrant, as the Collection Agent, Albany International Receivables Corporation, as the Seller, ABN AMRO Bank N.V., as the Agent the Committed Purchasers party thereto and Amsterdam Funding Corporation. (11)
10(j)(ii)	Purchase and Sale Agreement, dated as of September 28, 2001, among the Registrant, Geschmay Corp., Albany International Research Co., Albany International Techniweave, Inc., Albany International Canada Inc., M&I Door Systems LTD, as Originators, and Albany International Receivables Corporation as Buyer. (11)

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Stock Options

10(m)(i)	Form of Stock Option Agreement, dated as of August 1, 1983, between the Registrant and each of five employees, together with schedule showing the names of such employees and the material differences among the Stock Option Agreements with such employees. (1)
10(m)(ii)	Form of Amendment of Stock Option Agreement, dated as of July 1, 1987, between the Registrant and each of the five employees identified in the schedule referred to as Exhibit 10(m)(i). (1)
10(m)(iii)	1988 Stock Option Plan. (2)
10(m)(iv)	1992 Stock Option Plan. (4)
10(m)(v)	1997 Executive Stock Option Agreement. (7)
10(m)(vi)	1998 Stock Option Plan. (8)

Executive Compensation

10(n)	Pension Equalization Plan adopted April 16, 1986, naming two current executive officers and one former executive officer of Registrant as "Participants" thereunder. (1)
10(n)(i)	Supplemental Executive Retirement Plan. (5)
10(o)(I)	Form of Executive Deferred Compensation Plan adopted September 1, 1985, as amended and restated as of August 8, 2001. (11)
10(o)(ii)	Form of Directors' Deferred Compensation Plan adopted September 1, 1985, as amended and restated as of August 8, 2001. (11)
10(o)(iii)	Deferred Compensation Plan of Albany International Corp., as amended and restated as of August 8, 2001. (11)
10(o)(iv)	Centennial Deferred Compensation Plan, as amended and restated as of August 8, 2001. (11)

Other Exhibits

13	Annual Report to Security Holders for the year ended December 31, 2001.
21	Subsidiaries of Registrant.
23	Consent of PricewaterhouseCoopers LLP.
24	Powers of Attorney.

(b)

No reports on Form 8-K were filed during the fourth quarter of 2001.

        All other schedules and exhibits are not required or are inapplicable and, therefore, have been omitted.

(1)

Previously filed as an Exhibit to the Company's Registration Statement on Form S-1, No. 33-16254, as amended, declared effective by the Securities and Exchange Commission on September 30, 1987, which previously-filed Exhibit is incorporated by reference herein.

(2)

Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated August 8, 1988, which previously-filed Exhibit is incorporated by reference herein.

(3)

Previously filed as an Exhibit to the Registrant's Registration Statement on Form 8-A, File No. 1-10026, declared effective by the Securities and Exchange Commission on August 26, 1988 (as to The Pacific Stock Exchange, Inc.), and on September 7, 1988 (as to The New York Stock Exchange, Inc.), which previously-filed Exhibit is incorporated by reference herein.

12

(4)

Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated January 18, 1993, which previously-filed Exhibit is incorporated by reference herein.

(5)

Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated June 30, 1994, which previously-filed Exhibit is incorporated by reference herein.

(6)

Previously filed as an Exhibit to the Registrant's Current Report on Form 8-K dated March 15, 1996, which previously-filed Exhibit is incorporated by reference herein.

(7)

Previously filed as an Exhibit to the Registrant's Current Report on Form 10-K dated March 16, 1998, which previously-filed Exhibit is incorporated by reference herein.

(8)

Previously filed as an Exhibit to the Registrant's Current Report on Form 10-Q dated August 10, 1998, which previously-filed Exhibit is incorporated by reference herein.

(9)

Previously filed as an Exhibit to the Registrant's Current Report on form 8-K dated September 21, 1999, which previously-filed Exhibit is incorporated by reference herein.

(10)

Previously filed as an Exhibit to the Registrant's Current Report on Form 10-Q dated November 10, 1999, which previously-filed Exhibit is incorporated by reference herein.

(11)

Previously filed as an Exhibit to the Registrant's Current Report on Form 10-Q dated November 12, 2001, which previously-filed Exhibit is incorporated by reference herein.

13

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 22nd day of March, 2002.

ALBANY INTERNATIONAL CORP.
by	/s/  MICHAEL C. NAHL Michael C. Nahl Principal Financial Officer Senior Vice President and Chief Financial Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
* (Frank R. Schmeler)	Chairman of the Board and Chief Executive Officer	March 22, 2002
/s/  MICHAEL C. NAHL (Michael C. Nahl)	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	March 22, 2002
* (Richard A. Carlstrom)	Vice President-Controller (Principal Accounting Officer)	March 22, 2002
* (Thomas R. Beecher Jr.)	Director	March 22, 2002
* (Charles B. Buchanan)	Director	March 22, 2002
* (James L. Ferris Ph.D.)	Director	March 22, 2002
* (Erland E. Kailbourne)	Director	March 22, 2002

14

* (Francis L. McKone)	Director	March 22, 2002
* (Dr. Joseph G. Morone)	Director	March 22, 2002
* (Christine L. Standish)	Director	March 22, 2002
* (John C. Standish)	Director	March 22, 2002
* (Allan Stenshamn)	Director	March 22, 2002
* (Barbara P. Wright)	Director	March 22, 2002

*By
/s/  MICHAEL C. NAHL Michael C. Nahl
Attorney-in-fact

15

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULE

To The Board of Directors and
Shareholders of Albany International Corp.

        Our audits of the consolidated financial statements referred to in our report dated January 25, 2002 appearing in the 2001 Annual Report to Shareholders of Albany International Corp. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Albany, New York
January 25, 2002

SCHEDULE II

ALBANY INTERNATIONAL CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)

Column A		Column B		Column C				Column D		Column E
				Additions
Description		Balance at Beginning of Period		Charged to Expense		Charged to Intangibles(A)		Deductions(B)		Balance at End of Period
Allowance for doubtful accounts Year ended December 31:
	2001	$	7,688	$	4,878	$	—	$	2,078	$	10,488
	2000	$	8,768	$	1,008	$	—	$	2,088	$	7,688
	1999	$	5,504	$	2,071	$	2,838	$	1,645	$	8,768

(A)

Represents the allowance for doubful accounts opening balance sheet amount for the Geschmay group, which was acquired in 1999.

(B)

Includes accounts written off as uncollectible, recoveries and the effect of currency exchange rates.

QuickLinks

PART I

Item 1. BUSINESS
Item 2. PROPERTIES

Item 3. LEGAL PROCEEDINGS
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Item 6. SELECTED FINANCIAL DATA
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 11. EXECUTIVE COMPENSATION
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE AND REPORTS ON FORM 8-K

SIGNATURES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULE
SCHEDULE II
ALBANY INTERNATIONAL CORP. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (Dollars in thousands)

EX-13

              FINANCIAL SECTION




                                                      
 Contents


Report of Management.                                       16
                                                      

Report of Independent Accountants......................     16

Consolidated Statements of Income and Retained
Earnings...............................................     17

Consolidated Statements of Comprehensive Income........     18

Consolidated Balance Sheets............................     19

Consolidated Statements of Cash Flows..................     20

Notes to Consolidated Financial Statements.............     21

Financial Review.......................................     35

Eleven Year Summary....................................     40

Quarterly Financial Data...............................     42


                                                                              15

REPORT OF MANAGEMENT

   Management of Albany International Corp. is responsible for the integrity and
objectivity of the accompanying financial statements and related information.
These statements have been prepared in conformity with accounting principles
generally accepted in the United States of America, and include amounts that are
based on our best judgments with due consideration given to materiality.
   Management maintains a system of internal accounting controls designed to
provide reasonable assurance, at reasonable cost, that assets are safeguarded
and that transactions and events are recorded properly. A program of internal
audits and management reviews provides a monitoring process that allows the
Company to be reasonably sure the system of internal accounting controls
operates effectively.
   The financial statements have been audited by PricewaterhouseCoopers LLP,
independent accountants. Their role is to express an opinion as to whether
management's financial statements present fairly, in all material respects, in
conformity with accounting principles generally accepted in the United States of
America, the Company's financial condition and operating results. Their opinion
is based on procedures which include reviewing and evaluating certain aspects of
selected systems, procedures and internal accounting controls, and conducting
such tests as they deem necessary.
   The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with the independent accountants, management and
internal audit to review their work and confirm that they are properly
discharging their responsibilities. In addition, the independent accountants are
free to meet with the Audit Committee without the presence of management to
discuss results of their work and observations on the adequacy of internal
financial controls, the quality of financial reporting and other relevant
matters.
[SIG]
Frank R. Schmeler
CHAIRMAN OF THE BOARD AND AND CHIEF EXECUTIVE OFFICER
[SIG]
Michael C. Nahl
SENIOR VICE PRESIDENT CHIEF FINANCIAL OFFICER

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF ALBANY INTERNATIONAL CORP.

   In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings, of comprehensive income
and of cash flows present fairly, in all material respects, the financial
position of Albany International Corp. and its subsidiaries at December 31, 2001
and 2000, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
   As discussed in Note 6 to the consolidated financial statements, on
January 1, 2001 the Company adopted Statement of Financial Accounting Standards
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.

[LOGO]

January 25, 2002

16

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ALBANY INTERNATIONAL CORP.


 For the Years Ended December 31,                         2001             2000           1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                             

STATEMENTS OF INCOME
Net sales                                             $836,696         $852,934       $778,366
Cost of goods sold                                     497,301          515,649        458,930
- ----------------------------------------------------------------------------------------------
   Gross profit                                        339,395          337,285        319,436

Selling and general expenses                           186,441          184,123        177,481
Technical and research expenses                         46,950           49,528         48,096
Restructuring, net                                      21,892               --         16,872
- ----------------------------------------------------------------------------------------------
   Operating income                                     84,112          103,634         76,987
Interest income                                         (1,977)          (1,336)        (1,248)
Interest expense                                        30,893           43,158         26,800
Other expense/(income), net                              2,833             (755)          (481)
- ----------------------------------------------------------------------------------------------
   Income before income taxes                           52,363           62,567         51,916

Income taxes                                            19,374           25,027         22,325
- ----------------------------------------------------------------------------------------------
   Income before associated companies                   32,989           37,540         29,591

Equity in earnings of associated companies                 342              545            631
- ----------------------------------------------------------------------------------------------
   Income before cumulative effect of change in
     accounting principle, net of taxes                 33,331           38,085         30,222

Cumulative effect of change in accounting principle,
 net of taxes                                           (1,129)              --             --
- ----------------------------------------------------------------------------------------------
   Net income                                           32,202           38,085         30,222

RETAINED EARNINGS
Retained earnings, beginning of period                 314,639          276,554        255,586
Less dividends                                           1,568               --          9,254
- ----------------------------------------------------------------------------------------------
Retained earnings, end of period                      $345,273         $314,639       $276,554
- ----------------------------------------------------------------------------------------------

Earnings per share--basic:
Income before cumulative effect of change in
 accounting principle                                 $   1.07         $   1.24       $   1.00
Cumulative effect of change in accounting principle      (0.03)            0.00           0.00
- ----------------------------------------------------------------------------------------------
Net income                                            $   1.04         $   1.24       $   1.00
- ----------------------------------------------------------------------------------------------

Earnings per share--diluted:
Income before cumulative effect of change in
 accounting principle                                 $   1.06         $   1.24       $   0.99
Cumulative effect of change in accounting principle      (0.03)            0.00           0.00
- ----------------------------------------------------------------------------------------------
Net income                                            $   1.03         $   1.24       $   0.99
- ----------------------------------------------------------------------------------------------


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

                                                                              17

   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
   ALBANY INTERNATIONAL CORP.




                                                                            
 For the Years Ended December 31,                          2001            2000          1999

(IN THOUSANDS)
NET INCOME                                             $ 32,202        $ 38,085      $ 30,222
                                                                            

Other comprehensive (loss)/income, before tax:
   Foreign currency translation adjustments             (29,259)        (45,090)      (37,141)
   Pension liability adjustment                         (20,043)          1,680        12,965
   Derivative valuation adjustments:
      Transition adjustment as of January 1, 2001        (4,888)             --            --
      Current period decline in fair value               (8,204)             --            --

Income taxes related to items of other comprehensive
 income/(loss)                                           13,083             276            --
- ---------------------------------------------------------------------------------------------
   Comprehensive (loss)/ income                        ($17,109)       ($ 5,049)     $  6,046
- ---------------------------------------------------------------------------------------------


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

18

        CONSOLIDATED BALANCE SHEETS
        ALBANY INTERNATIONAL CORP.




                                                                       
 At December 31,                                                   2001            2000

(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
                                                                       
Current assets:
Cash and cash equivalents                                     $   6,153      $    5,359
Accounts receivable, less allowance for doubtful accounts
   ($10,488 in 2001; $7,688 in 2000)                            143,156         236,810
Note receivable                                                  21,103              --
Inventories
   Finished goods                                                97,789         119,619
   Work in process                                               46,638          54,408
   Raw material and supplies                                     29,649          42,846
Prepaid expenses                                                  5,288           7,534
Deferred taxes                                                   16,170          27,711
- ---------------------------------------------------------------------------------------
   Total current assets                                         365,946         494,287
- ---------------------------------------------------------------------------------------
Property, plant and equipment, at cost, net                     339,102         387,658
Investments in associated companies                               4,374           4,300
Intangibles                                                     140,333         161,709
Deferred taxes                                                   48,539          19,095
Other assets                                                     33,635          45,203
- ---------------------------------------------------------------------------------------
   Total assets                                               $ 931,929      $1,112,252
- ---------------------------------------------------------------------------------------
LIABILITIES
Current liabilities:
Notes and loans payable                                       $  28,786      $   37,760
Accounts payable                                                 42,555          47,005
Accrued liabilities                                              87,924          80,678
Current maturities of long-term debt                              4,837          44,092
Income taxes payable and deferred                                21,970          12,499
- ---------------------------------------------------------------------------------------
   Total current liabilities                                    186,072         222,034
- ---------------------------------------------------------------------------------------
Long-term debt                                                  248,146         398,087
Other noncurrent liabilities                                    156,055         129,741
Deferred taxes and other credits                                 25,012          37,473
- ---------------------------------------------------------------------------------------
   Total liabilities                                            615,285         787,335
- ---------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES                                        --              --

SHAREHOLDERS' EQUITY
Preferred stock, par value $5.00 per share; authorized
   2,000,000 shares; none issued                                     --              --
Class A Common Stock, par value $.001 per share; authorized
   100,000,000 shares; issued 27,711,738 in 2001 and
   27,138,064 in 2000                                                28              27
Class B Common Stock, par value $.001 per share; authorized
   25,000,000 shares; issued and outstanding 5,867,476 in
   2001 and 5,869,457 in 2000                                         6               6
Additional paid in capital                                      234,213         223,897
Retained earnings                                               345,273         314,639
Accumulated items of other comprehensive income:
   Translation adjustments                                     (194,950)       (165,691)
   Derivative valuation adjustment                               (8,248)             --
   Pension liability adjustment                                 (14,027)         (2,223)
- ---------------------------------------------------------------------------------------
                                                                362,295         370,655
Less treasury stock, at cost                                     45,651          45,738
- ---------------------------------------------------------------------------------------
   Total shareholders' equity                                   316,644         324,917
- ---------------------------------------------------------------------------------------
   Total liabilities and shareholders' equity                 $ 931,929      $1,112,252
- ---------------------------------------------------------------------------------------


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

                                                                              19

    CONSOLIDATED STATEMENTS OF CASH FLOWS
    ALBANY INTERNATIONAL CORP.




                                                                            
 For the Years Ended December 31,                         2001             2000          1999

(IN THOUSANDS)
OPERATING ACTIVITIES
                                                                            
Net income                                           $  32,202        $  38,085      $ 30,222
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Equity in earnings of associated companies             (342)            (545)         (631)
   Depreciation and amortization                        57,546           62,216        55,874
   Provision for deferred income taxes, other
   credits and long-term liabilities                   (18,634)           6,108        (1,127)
   Increase in cash surrender value of life
   insurance, net of premiums paid                      (1,434)            (728)       (1,110)
   Unrealized currency transaction (gains)/losses       (1,040)          (3,172)       (5,802)
   (Gains)/losses on disposition of assets              (1,323)           2,152         2,914
   Shares contributed to ESOP                            4,835            4,489         4,337
   Tax benefit of options exercised                        577               --             8
Changes in operating assets and liabilities:
   Accounts receivable                                  30,066            1,654        (1,179)
   Sale of accounts receivable                          63,878               --            --
   Note receivable                                     (21,103)              --            --
   Inventories                                          42,797           18,809        13,300
   Prepaid expenses                                      2,245               (2)       (1,368)
   Accounts payable                                     (4,449)           4,357          (511)
   Accrued liabilities                                  11,967           (8,313)        3,938
   Income taxes payable                                 10,848            3,280        (2,588)
   Other, net                                            5,642            2,192         1,821
- ---------------------------------------------------------------------------------------------
   Net cash provided by operating activities           214,278          130,582        98,098
- ---------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
   Purchases of property, plant and equipment          (25,831)         (36,866)      (34,953)
   Purchased software                                   (2,407)            (978)       (2,929)
   Proceeds from sale of assets                          6,828            8,938           464
   Acquisitions, net of cash acquired                       --           (1,037)     (247,236)
   Proceeds from life insurance policies                10,602               --            --
   Loans to other companies                                 --               --        (3,000)
   Distributions from associated companies                  --               --           148
   Premiums paid for life insurance                     (1,161)          (1,161)       (1,187)
- ---------------------------------------------------------------------------------------------
   Net cash used in investing activities               (11,969)         (31,104)     (288,693)
- ---------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
   Proceeds from borrowings                             67,400           18,921       581,064
   Principal payments on debt                         (265,158)        (102,048)     (366,503)
   Proceeds from options exercised                       4,907               --           165
   Debt issuance costs                                      --               --        (4,905)
- ---------------------------------------------------------------------------------------------
   Net cash (used in)/provided by financing
   activities                                         (192,851)         (83,127)      209,821
- ---------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash flows           (8,664)         (18,017)      (18,069)
- ---------------------------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents           794           (1,666)        1,157
Cash and cash equivalents at beginning of year           5,359            7,025         5,868
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year             $   6,153        $   5,359      $  7,025
- ---------------------------------------------------------------------------------------------


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  1. ACCOUNTING POLICIES

  BASIS OF CONSOLIDATION

     The consolidated financial statements include the accounts of Albany
     International Corp. and its subsidiaries (the "Company") after elimination
     of intercompany transactions. Beginning in 2001, the Company has one
     subsidiary that is a qualified special purpose entity which is not
     consolidated in accordance with Financial Accounting Standard (FAS)
     No. 140, "Accounting for Transfers and Servicing of Financial Assets and
     Extinguishment of Liabilities" (see Note 6). The Company has 50% interests
     in an entity in South Africa, an entity in England and an entity in Russia.
     The consolidated financial statements include the Company's original
     investment in these entities, plus its share of undistributed earnings or
     losses, in the account "Investments in associated companies."

  REVENUE RECOGNITION

     The Company records sales when persuasive evidence of an arrangement
     exists, delivery has occurred, the selling price is fixed and
     collectibility is reasonably assured. The Company limits the concentration
     of credit risk in receivables by closely monitoring credit and collection
     policies. The allowance for doubtful accounts is adequate to absorb
     estimated losses.

     The Company records the costs of freight associated with the shipment of
     goods as a reduction to net sales. These freight costs were $16,797,000 in
     2001, $17,431,000 in 2000, and $14,320,000 in 1999.

  ESTIMATES

     The preparation of the consolidated financial statements in conformity with
     accounting principles generally accepted in the United States of America
     requires management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the consolidated financial statements
     and the reported amounts of revenues and expenses during the reporting
     period. Actual results could differ from those estimates.

  TRANSLATION OF FINANCIAL STATEMENTS

     Assets and liabilities of non-U.S. operations are translated at year-end
     rates of exchange, and the income statements are translated at the average
     rates of exchange for the year. Gains or losses resulting from translating
     non-U.S. currency financial statements are recorded in "Other comprehensive
     income" and accumulated in shareholders' equity in the caption "Translation
     adjustments".

     Gains or losses resulting from currency transactions denominated in a
     currency other than the entity's local currency, forward exchange contracts
     which are not designated as hedges for accounting purposes and futures
     contracts are generally included in income. Changes in value of forward
     exchange contracts which are effective as hedges for accounting purposes
     are generally recorded, net of tax, in "Other comprehensive income" and
     accumulated in shareholders' equity in the caption "Translation
     adjustments."

  RESEARCH EXPENSE

     Research expense, which is charged to operations as incurred, was
     $23,224,000 in 2001, $23,287,000 in 2000, and $23,567,000 in 1999.

  CASH AND CASH EQUIVALENTS

     Cash and cash equivalents consist of cash and highly liquid short-term
     investments with original maturities of three months or less.

  INVENTORIES

     Inventories are stated at the lower of cost or market and are valued at
     average cost.

  PROPERTY, PLANT AND EQUIPMENT

     Depreciation is recorded using the straight-line method over the estimated
     useful lives of the assets for financial reporting purposes; accelerated
     methods are used for income tax purposes. Useful lives for buildings, and
     machinery and equipment are 25 to 40 years, and 3 to 10 years,
     respectively.

     Significant additions or improvements extending assets' useful lives are
     capitalized; normal maintenance and repair costs are expensed as incurred.

     The cost of fully depreciated assets remaining in use are included in the
     respective asset and accumulated depreciation accounts. When items are sold
     or retired, related gains or losses are included in net income.

                                                                              21

  INTANGIBLES AND OTHER ASSETS

     The excess purchase price over fair values assigned to assets acquired has
     been amortized on a straight-line basis over 20 to 40 years. Beginning in
     2002, the Company will adopt the provisions of FAS No. 142 "Goodwill and
     Other Intangible Assets" which will eliminate the prior practice of
     goodwill amortization and instead adopt an impairment-only approach (see
     Note 4).

     Patents, trade names and technology, at cost, are amortized on a
     straight-line basis over 8 to 12 years.

     Goodwill and other long-lived assets are reviewed for impairment whenever
     changes in circumstances indicate that the carrying amount may not be
     recoverable.

     Computer software purchased for internal use, at cost, is amortized on a
     straight-line basis over 5 years and is included in "Other assets."

  DERIVATIVES

     Gains or losses on forward exchange contracts that function as an economic
     hedge against currency fluctuation effects on future revenue streams are
     recorded in "Other (income)/ expense, net". All open positions on forward
     exchange contracts are valued at fair value using the estimated forward
     rate of a matching contract.

     Gains or losses on forward exchange contracts that are designated as a
     hedge of a foreign operation's net assets and/or long-term intercompany
     loans are recorded in "Translation adjustments", a separate component of
     shareholders' equity. These contracts reduce the risk of currency exposure
     on foreign currency net assets and do not exceed the foreign currency
     amount being hedged. To the extent the above criteria are not met, or the
     related assets are sold, extinguished, or terminated, activity associated
     with such hedges is recorded in "Other (income)/expense, net".

     Gains or losses on futures contracts are recorded in "Other
     (income)/expense, net". Open positions are valued at fair value using
     quoted market rates.

  INCOME TAXES

     The Company accounts for taxes in accordance with the asset and liability
     method. Deferred income taxes are recognized for the tax consequences of
     "temporary differences" by applying enacted statutory tax rates applicable
     for future years to differences between financial statement and tax bases
     of existing assets and liabilities. The effect of tax rate changes on
     deferred taxes is recognized in the income tax provision in the period that
     includes the enactment date.

     It is the Company's policy to accrue appropriate U.S. and non-U.S. income
     taxes on earnings of subsidiary companies which are intended to be remitted
     to the parent company in the near future.

     The provision for taxes is reduced by investment and other tax credits in
     the years such credits become available.

  PENSION PLANS

     Substantially all employees are covered under either Company or government
     sponsored pension plans. For principal Company sponsored plans, pension
     plan expenses are based on actuarial determinations. The plans are
     generally trusteed or insured and accrued amounts are funded as required in
     accordance with governing laws and regulations.

  EARNINGS PER SHARE

     Net income per share is computed using the weighted average number of
     shares of Class A Common Stock and Class B Common Stock outstanding during
     each year. Diluted net income per share includes the effect of all
     potentially dilutive securities.

  RECENT ACCOUNTING PRONOUNCEMENTS

     In August 2001, FAS No. 143, "Accounting for Asset Retirement Obligations"
     was issued. FAS No. 143 requires entities to record the fair value of a
     liability for an asset retirement obligation in the period in which it is
     incurred commencing for fiscal years beginning after June 15, 2002. The
     Company does not expect the adoption of FAS No. 143 to have a material
     effect on its financial statements.

     In October 2001, FAS No. 144 "Accounting for the Impairment or Disposal of
     Long-Lived Assets", was issued. FAS No. 144 requires that long-lived assets
     be measured at the lower of carrying amount or fair value less cost to
     sell. The Company is required to adopt this Standard on January 1, 2002.
     The Company does not expect the adoption of FAS No. 144 to have a material
     effect on its financial statements.

22

  2. EARNINGS PER SHARE

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



- -------------------------------------------------------
                                       
      (IN THOUSANDS)           2001      2000      1999

- -------------------------------------------------------
INCOME AVAILABLE TO
                                       
       COMMON STOCK-
       HOLDERS:
      Income available to
       common stock-
       holders              $32,202   $38,085   $30,222
- -------------------------------------------------------
      WEIGHTED AVERAGE
       NUMBER OF SHARES:
      Weighted averange
       number of shares
       used in net income
       per share             31,089    30,632    30,340
      Effect of dilutive
       securites: stock
       options                  259         4       143
- -------------------------------------------------------
      Weighted average
       number of shares
       used in diluted net
       income per share      31,348    30,636    30,483
- -------------------------------------------------------


     Options to purchase 2,190,500 shares of common stock at prices ranging from
     $19.38 to $25.56 per share were outstanding at December 31, 2001, but were
     not included in the computation of diluted net income per share because the
     options' exercise price was greater than the average market price of the
     common shares.

  3. PROPERTY, PLANT AND EQUIPMENT

     The components of property, plant and equipment are summarized below:



- ------------------------------------------------------
                                        
      (IN THOUSANDS)                   2001       2000

- ------------------------------------------------------
LAND                               $ 26,620   $ 28,995
                                        
      Buildings                     161,295    173,983
      Machinery and equipment       527,417    547,581
- ------------------------------------------------------
                                    715,332    750,559
- ------------------------------------------------------
      Accumulated depreciation      376,230    362,901
- ------------------------------------------------------
                                   $339,102   $387,658
- ------------------------------------------------------


     There was no construction in progress in 2001 and 2000.

     Depreciation expense was $45,792,000 in 2001, $49,937,000 in 2000 and
     $47,669,000 in 1999.
     Expenditures for maintenance and repairs are charged to income as incurred
     and amounted to $18,643,000 in 2001, $20,300,000 in 2000, and $17,305,000
     in 1999.

     Capital expenditures were $25,831,000 in 2001, $36,866,000 in 2000 and
     $34,953,000 in 1999. At the end of 2001, the Company was committed to
     $13,663,000 of future expenditures for new equipment and facilities.

  4. INTANGIBLES

     The components of intangibles are summarized below:



- ------------------------------------------------------
                                        
      (IN THOUSANDS)                   2001       2000

- ------------------------------------------------------
Excess purchase price over
                                        
       fair value of assets
       acquired                    $157,407   $170,374
      Patents, trade names and
       technology                    20,320     20,320
      Accumulated amortization      (46,300)   (38,786)
      Deferred unrecognized pen-
       sion cost (see Note 12)        8,906      9,801
- ------------------------------------------------------
                                   $140,333   $161,709
- ------------------------------------------------------


     Amortization expense was $7,514,000 in 2001, $9,077,000 in 2000, and
     $5,173,000 in 1999.

     The change in excess purchase price over fair value of assets acquired
     (goodwill) resulted primarily from the effect of translation.

     In June 2001, FAS No. 142 "Goodwill and Other Intangible Assets" was
     issued. FAS No. 142 changes the accounting for goodwill from an
     amortization method to an impairment-only approach. Amortization of
     goodwill, including goodwill recorded in past business combinations, will
     cease January 1, 2002, when the Company adopts this Standard. Goodwill
     amortization was approximately $6,800,000 in 2001. The Company is currently
     assessing, but has not yet determined, the outcome of the impairment test
     required by FAS No. 142.

  5. ACCRUED LIABILITIES

     Accrued liabilities consist of:



- ------------------------------------------------------
                                         
      (IN THOUSANDS)                    2001      2000

- ------------------------------------------------------
SALARIES AND WAGES                   $23,584   $22,782
                                         
      Employee benefits               16,207    19,168
      Returns and allowances           4,990     5,293
      Interest                         2,222     3,555
      Restructuring costs (see
       Note 16)                       24,279    14,319
      Other                           16,642    15,561
- ------------------------------------------------------
                                     $87,924   $80,678
- ------------------------------------------------------


                                                                              23

  6. FINANCIAL INSTRUMENTS
     Notes and loans payable at December 31, 2001 and 2000 were short-term debt
     instruments with banks, denominated in local currencies with a weighted
     average interest rate of 7.14% in 2001 and 7.08% in 2000.

     Long-term debt at December 31, 2001 and 2000, principally to banks and
     bondholders, exclusive of amounts due within one year, consists of:



- ---------------------------------------------------------
                                           
      (IN THOUSANDS)                      2001       2000

- ---------------------------------------------------------
August 1999 credit agreement
                                           
      which terminates in 2004 with
      borrowings outstanding at an
      average interest rate of 5.44%
      in 2001 and 7.90% in 2000.      $229,000   $373,280
      Various notes and mortgages
      relative to operations
      principally outside the United
      States, at an average interest
      rate of 5.68% in 2001 and
      5.32% in 2000, due in varying
      amounts through 2008.              6,468     11,742
      Industrial revenue financings
      at an average interest rate of
      6.09% in 2001 and 5.96% in
      2000, due in varying amounts
      through 2009.                     12,678     13,065
- ---------------------------------------------------------
                                      $248,146   $398,087
- ---------------------------------------------------------


     The weighted average interest rate for all debt was 5.56% in 2001 and 7.70%
     in 2000.

     Principal payments due on long-term debt for the next five years are: 2002,
     $4,837,000; 2003, $2,281,000; 2004, $230,976,000; 2005, $1,242,000; 2006
     $1,115,000.

     Interest paid was $32,169,000 in 2001, $40,647,000 in 2000, and $26,779,000
     in 1999.

     In August 1999, the Company entered into a $750 million credit agreement
     with its banks. This facility included a $250 million term loan that was
     fully prepaid during 2001. The remaining $500 million is a revolving loan
     with the banks' commitment to lend terminating in 2004. This agreement
     includes commitment fees and variable interest rates based on various loan
     pricing methods. The interest rate margin is determined by the Company's
     leverage ratio. The credit agreement contains various covenants which
     include limits on the disposition of assets, cash dividends, and the
     Company's ability to purchase its Common Stock. Additionally, the credit
     agreement specifies a minimum interest coverage of 3.0, a maximum leverage
     ratio of 3.0 and a limitation on guarantees to non U.S. subsidiaries. The
     Company cannot purchase its Common Stock or pay cash dividends unless, and
     only to the extent that, the leverage ratio, as defined in the credit
     agreement, is less than 2.75. The December 31, 2001 leverage ratio was
     below 2.0. Borrowings are collateralized by a pledge of shares of, and
     intercompany loans to, certain subsidiaries of the Company. In the event of
     nonperformance by any bank on its commitment to extend credit, the Company
     could not borrow the full amount of the facility. However, the Company does
     not anticipate nonperformance by any bank.

     Under the August 1999 credit agreement, the Company could have borrowed an
     additional $210,000,000 at December 31, 2001. The Company's ability to
     borrow additional amounts under the Credit Agreement is conditional upon
     the absence of any material adverse change.

     During 2000, the Company entered into swap agreements that hedge a portion
     of its interest rate exposure. Under the terms of the agreements, each
     party makes payments on a notional amount of $100,000,000. The Company pays
     a blended fixed rate of 7.17% and the counterparties pay a floating rate
     based on LIBOR. These swap agreements expire on June 6, 2005. As of
     December 31, 2001, the blended rate receivable from the counterparties was
     2.0%. On January 2, 2001, the Company entered into four additional swap
     agreements which fixed interest rates on an additional notional amount of
     $100,000,000. The blended fixed rate payable by the Company under these
     agreements is 5.65% and the counterparties pay a floating rate, based on
     LIBOR which, at December 31, 2001 was 2.0%. These agreements expire on
     August 11, 2005. The total cost of the swap agreements of $3,423,000 in
     2001 and $167,000 in 2000 was recorded as "Interest expense". With the
     exception of the portion of debt which has been hedged, the estimated fair
     value of the Company's long-term debt excluding current maturities is
     considered to be the carrying value on the basis that the significant
     components are variable rate debt.

     At December 31, 2001, the Company had no open forward exchange contracts.
     Periodically, the Company also enters into futures contracts primarily to
     hedge in the short-term against interest rate fluctuations. During 2001,
     the Company did not enter into any of these contracts. The "Interest rate
     protection agreements" component of "Other (income)/ expense, net" includes
     (gains)/losses on futures

24

     contracts, based on fair value, of $(382,000) in 2000 and $1,125,000 in
     1999.

     All financial instruments are held for purposes other than trading. For all
     positions there is risk from the possible inability of the counterparties
     (major financial institutions) to meet the terms of the contracts and the
     risk of unfavorable changes in interest and currency rates which may reduce
     the benefit of the contracts. However, for most closed forward exchange
     contracts, both the purchase and sale sides of the Company's exposures were
     with the same financial institution. The Company seeks to control risk by
     evaluating the credit worthiness of counterparties and by monitoring the
     currency exchange and interest rate markets, hedging risks in compliance
     with internal guidelines and reviewing all principal economic hedging
     contracts with designated directors of the Company.

     On January 1, 2001, the Company adopted the provisions of FAS No. 133,
     "Accounting for Derivative Instruments and Hedging Activities". This
     Standard requires that all derivative instruments are recognized on the
     balance sheet at their fair value and changes in fair value are recognized
     immediately in earnings, unless the derivatives qualify as hedges in
     accordance with the Standard. The change in fair value for those
     derivatives that qualify as hedges is recorded in shareholders' equity in
     the caption, "Derivative valuation adjustment". The Company's interest rate
     swaps qualify as cash flow hedges as defined in the Standard and,
     accordingly, changes in the fair value are recognized in "Other noncurrent
     liabilities" and "Other comprehensive income". Subsequently, amounts will
     be reclassified to "Interest expense, net" in accordance with the Standard.
     On the date of adoption, the Company recognized an initial transition
     adjustment of $4,888,000. During 2001, the fair value of the interest rate
     swaps declined an additional $8,204,000. The Company has a lease for
     manufacturing facilities with an embedded derivative which must be
     recognized in earnings in accordance with this Standard. The cumulative
     after-tax effect of this change in accounting principle was $1,129,000.
     Included in other (income)/expense is $(1,482,000) related to changes in
     fair value of this derivative during 2001.

     During 2001, the Company entered into a trade accounts receivable
     securitization program whereby it sells designated North American accounts
     receivable, with no recourse. The accounts receivable are sold on an
     ongoing basis to a subsidiary of the Company which is a qualified special
     purpose entity and, in accordance with FAS No. 140, is not consolidated in
     the Company's financial statements. The Company receives fees for
     collecting accounts receivable and for performing certain other
     administrative functions. The amount of accounts receivable sold is subject
     to change based upon certain criteria and was approximately $63,878,000 as
     of December 31, 2001. In addition to cash received from the sale of
     accounts receivable, the Company has a note receivable in the amount of
     $21,103,000 as of December 31, 2001. The note is subject to monthly
     fluctuation based on the amount of receivables sold and bears interest at
     variable rates. As of December 31, 2001, the interest rate was 2.87% and
     interest income for 2001 was $193,000. The estimated fair value of the note
     receivable is considered to be the carrying value on the basis that the
     note carries a variable interest rate and the proceeds of the sale have
     been reduced by a discount factor. Included in other (income)/expense are
     costs of $1,794,000 representing initial transaction costs and the
     discounts applied in the sale of accounts receivable. The discount factor
     is based on timing of cash receipts, interest rates and anticipated credit
     losses.

  7. COMMITMENTS AND CONTINGENCIES

     Albany International Corp. and its affiliate, Brandon Drying Fabrics Inc.,
     are defendants in a number of proceedings for injuries allegedly suffered
     as a result of exposure to asbestos-containing products. The Company
     marketed asbestos-containing dryer fabrics during the period from 1967 to
     1976. Such fabrics generally had a life of from three to twelve months. At
     February 28, 2002, there were 9,970 plaintiffs pursuing claims against
     Albany International Corp., Brandon Drying Fabrics, or both. This compares
     with 9,467 claimants as of December 31, 2001, 4,099 claimants as of
     December 31, 2000 and 2,429 claimants as of December 31, 1999. The Company
     anticipates that additional claims will be filed against it in the future
     but is unable to predict the timing and number of such future claims.

     The Company believes that all asbestos-related claims against it are
     without merit. Based upon its understanding of the insurance policies
     available, how settlement amounts have been

                                                                              25

     allocated to various policies, recent settlement experience, the absence of
     any judgments against the Company, and the defenses available, the Company
     currently does not anticipate any material liability relating to the
     resolution of the above proceedings in excess of existing insurance limits.
     Consequently, the Company does not believe, based upon currently available
     information, that the ultimate resolution of these claims will have a
     material adverse effect on its financial position, results of operations or
     cash flows.

     Although the Company cannot predict the number and timing of future claims,
     based upon the foregoing factors and the trends in claims against it to
     date, the Company does not anticipate that additional claims likely to be
     filed in the future will have a material adverse effect on its financial
     position, results of operations or cash flows. However, the Company is
     aware that litigation is inherently uncertain, especially when the outcome
     is dependent primarily on determinations of factual matters to be made by
     juries. The Company is also aware that numerous other defendants in
     asbestos cases, as well as others who claim to have knowledge and expertise
     on the subject, have found it difficult to anticipate the volume of future
     asbestos claims. For these reasons, there can be no assurance that the
     foregoing conclusions will not change.

     Stockholders and other interested persons are encouraged to read the
     discussion of these matters set forth in the Company's periodic reports
     filed with the Securities and Exchange Commission on Forms 10-K and 10-Q.

     Principal leases are for machinery and equipment, vehicles and real
     property. Certain leases contain renewal and purchase option provisions at
     fair market values. There were no significant capital leases. Total rental
     expense amounted to $22,197,782, $22,671,000, and $23,298,000 for 2001,
     2000, and 1999, respectively.

     Future rental payments required under operating leases that have initial or
     remaining noncancelable lease terms in excess of one year as of
     December 31, 2001 are: 2002, $18,820,000: 2003, $14,605,000; 2004,
     $10,249,000; 2005, $8,527,000; 2006, $6,162,000; and thereafter,
     $7,017,000.

     The Company has issued a letter of credit to a bank that loaned money to a
     joint venture partner. The bank can draw upon the letter of credit if the
     joint venture partner defaults on the loan. The letter of credit is
     denominated in South African Rand and is approximately $2,800,000.

  8. SHAREHOLDERS' EQUITY

     The Company has two classes of Common Stock, Class A Common Stock, par
     value $.001 and Class B Common Stock, par value $.001 which have equal
     liquidation rights. Each share of the Company's Class A Common Stock is
     entitled to one vote on all matters submitted to shareholders and each
     share of Class B Common Stock is entitled to ten votes. Class A and
     Class B Common Stock will receive equal dividends as the Board of Directors
     may determine from time to time. The Class B Common Stock is convertible
     into an equal number of shares of Class A Common Stock at any time. At
     December 31, 2001, 10,457,346 shares of Class A Common Stock were reserved
     for the conversion of Class B Common Stock and the exercise of stock
     options.

     In January 1998, the Board authorized the purchase of 3,000,000 shares of
     Class A Common Stock, in the open market or otherwise, at such prices as
     management may from time to time consider to be advantageous to the
     Company's shareholders. Since January 1998, the Company has purchased
     1,616,900 shares of its Class A Common Stock pursuant to this authorization
     and of the shares purchased, none were purchased during 2001, 2000 or 1999.

     In November 2001, the Board authorized payment of a cash dividend of $.05
     per share. The dividend was paid January 4, 2002.

     As discussed in Note 6, the Company is restricted from purchasing its
     Common Stock or paying cash dividends when the leverage ratio, as defined
     in the credit agreement, is 2.75 or higher.

     During 1999, the Company declared a 2.0% stock dividend which resulted in a
     subsequent distribution of 483,621 shares of Class A Common Stock and
     115,081 shares of Class B Common Stock. As a result of the stock dividend,
     additional paid-in capital increased $9,215,000, treasury stock decreased
     $39,000 and retained earnings decreased $9,254,000.

26

     Changes in shareholders' equity for 2001, 2000, and 1999 are as follows:



- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
                                                                  Class A           Class B                     Treasury Stock
                                                               Common Stock      Common Stock     Additional       (Class A)
                                                              ---------------   ---------------    Paid in     -----------------
      (IN THOUSANDS)                                          Shares   Amount   Shares   Amount    Capital     Shares     Amount

- --------------------------------------------------------------------------------------------------------------------------------
Balance: January 1, 1999                                      26,082      $26    5,785       $6     $206,428    2,240   $ 46,592
                                                                                                   
      Shares contributed to ESOP                                 199       --       --       --        3,622      (29)      (646)
      Options exercised                                            8       --       --       --          173       --         --
      Stock dividends                                            484        1      115       --        9,215       (2)       (39)
      Conversion of Class B shares to Class A shares              31       --      (31)      --           --       --         --
      Shares issued to Directors                                  --       --       --       --            5       (3)       (64)
- --------------------------------------------------------------------------------------------------------------------------------
      Balance: December 31, 1999                              26,804      $27    5,869       $6     $219,443    2,206   $ 45,843
      Shares contributed to ESOP                                 334       --       --       --        4,489       --         --
      Shares issued to Directors                                  --       --       --       --          (35)      (5)      (105)
- --------------------------------------------------------------------------------------------------------------------------------
      Balance: December 31, 2000                              27,138      $27    5,869       $6     $223,897    2,201   $ 45,738
      Shares contributed to ESOP                                 261       --       --       --        4,835       --         --
      Conversion of Class B shares to Class A shares               2       --       (2)      --           --       --         --
      Options exercised                                          311        1       --       --        5,483       --         --
      Shares issued to Directors                                  --       --       --       --           (2)      (4)       (87)
- --------------------------------------------------------------------------------------------------------------------------------
      Balance: December 31, 2001                              27,712      $28    5,867       $6     $234,213    2,197   $ 45,651
- --------------------------------------------------------------------------------------------------------------------------------


  9. OTHER (INCOME)/EXPENSE, NET

     The components of other (income)/expense, net, as further described in
     Note 6, are:



- --------------------------------------------------------
                                        
      (IN THOUSANDS)            2001      2000      1999

- --------------------------------------------------------
CURRENCY TRANSACTIONS        )(1,932   )(4,012   )(5,807
                                        
      Interest rate
       protection
       agreements                 --      (382)    1,125
      Lease with embedded
       derivative             (1,482)       --        --
      Sale of accounts
       receivable              1,794        --        --
      Sale of buildings       (1,323)       --        --
      Amortization of debt
       issuance costs and
       loan origination
       fees                    2,258     2,328     1,624
      Other                    3,518     1,311     2,577
- --------------------------------------------------------
                             $ 2,833   $  (755)  $  (481)
- --------------------------------------------------------


                                                                              27

10. INCOME TAXES
     Income taxes currently payable are provided on taxable income at the
     statutory rate applicable to such income.

     The components of income taxes are:



- ------------------------------------------------------------------
                                                 
      (IN THOUSANDS)                    2001       2000       1999

- ------------------------------------------------------------------
Current:
                                                 
         U.S. Federal               $  5,545   $  5,506   $  2,959
         U.S. State                    1,024      1,360      1,303
         Non-U.S.                     29,012     21,177     23,068
- ------------------------------------------------------------------
                                      35,581     28,043     27,330
- ------------------------------------------------------------------
       Deferred:
         U.S. Federal                 (5,633)    (4,212)     1,407
         U.S. State                     (897)      (578)       143
         Non-U.S.                     (9,677)     1,774     (6,555)
- ------------------------------------------------------------------
                                     (16,207)    (3,016)    (5,005)
- ------------------------------------------------------------------
                                    $ 19,374   $ 25,027   $ 22,325
- ------------------------------------------------------------------


     U.S. (loss)/income before income taxes was $(2,775,000) in 2001,
     $(4,469,000) in 2000, and $8,625,000 in 1999.

     Taxes paid, net of refunds, were $18,902,000 in 2001, $18,362,000 in 2000,
     and $23,711,000 in 1999.

     A comparison of the federal statutory rate to the Company's effective rate
     is as follows:



- ----------------------------------------------------------
                                            
                                       2001   2000    1999

- ----------------------------------------------------------
U.S. STATUTORY RATE                    %035   %035   %0 35
                                            
       State taxes                     (0.5)   1.0     1.6
       Non-U.S. tax rates,
        repatriation of earnings, and
        other net charges associated
        with prior years                1.5    3.9     5.4
       Other                            1.0    0.1     1.0
- ----------------------------------------------------------
       Effective tax rate              37.0%  40.0%   43.0%
- ----------------------------------------------------------


     The significant components of deferred income tax (benefit)/expense
     attributed to income from operations for the years ended December 31, 2001,
     2000, and 1999 are as follows:



- ------------------------------------------------------------------
                                                 
      (IN THOUSANDS)                     2001      2000       1999

- ------------------------------------------------------------------
DEFERRED TAX BENEFIT                 )(10,388   )(2,727   ) (3,138
                                                 
       Adjustments to deferred tax
        assets and liabilities for
        enacted changes in tax laws
        and rates                      (1,729)     (282)       112
       Utilization/(benefit) of
        operating loss
        carryforwards                  (4,090)       (7)    (1,979)
- ------------------------------------------------------------------
                                     $(16,207)  $(3,016)  $ (5,005)
- ------------------------------------------------------------------


     The Company has not recognized deferred income taxes on $218,027,000 of
     undistributed earnings of its international subsidiaries because management
     considers such earnings to be permanently reinvested. If the earnings were
     distributed, the Company may be subject to both U.S. income taxes and
     foreign withholding taxes. Determination of the amount of this unrecognized
     deferred income tax liability is not practical.

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and liabilities at December 31, 2001
     and 2000 are presented below:
                   -----------------------------------------------



                                         U.S.              Non-U.S.
                                   -----------------   -----------------
(IN THOUSANDS)                        2001      2000      2001      2000
                                                     
- ------------------------------------------------------------------------
       Accounts receivable,
        principally due to
        allowance for doubtful
        accounts                   $ 1,439   $   545   $   387   $   435
       Inventories, principally
        due to additional costs
        inventoried for tax
        purposes, pursuant to the
        Tax Reform Act of 1986       2,884     2,850       (31)     (907)
       Tax loss carryforwards           --        --     3,220    13,196
       Other                            --     9,944     8,271     1,648
- ------------------------------------------------------------------------
       Total current deferred tax
        assets                       4,323    13,339    11,847    14,372
- ------------------------------------------------------------------------
       Sale lease back
        transaction                    935       512        --        --
       Deferred compensation        12,365    11,304        --        --
       Plant, equipment and
        depreciation               (14,088)  (15,396)    2,208       211
       Postretirement benefits      23,087    17,462       706        --
       Tax loss carryforwards           --        --    11,414        --
       Other                         8,272     4,958     3,640        44
- ------------------------------------------------------------------------
       Total noncurrent deferred
        tax assets                  30,571    18,840    17,968       255
- ------------------------------------------------------------------------
       Total deferred tax assets   $34,894   $32,179   $29,815   $14,627
- ------------------------------------------------------------------------
       Total current deferred tax
        liabilities                $    --   $    --   $ 8,103   $ 7,404
- ------------------------------------------------------------------------
       Plant, equipment and
        depreciation                    --        --    19,950    26,965
       Other                            --        --    (5,162)       --
- ------------------------------------------------------------------------
       Total noncurrent deferred
        tax liabilities                 --        --    14,788    26,965
- ------------------------------------------------------------------------
       Total deferred tax
        liabilities                $    --   $    --   $22,891   $34,369
- ------------------------------------------------------------------------


     The Company expects to use 22% of the non-U.S. deferred tax loss
     carryforwards in 2002 and the remainder has no expiration. The Company has
     restructured its operations to reduce or eliminate losses and has
     reorganized in certain countries to ensure that the loss carryforwards will
     be utilized. Accordingly, a valuation allowance is not needed on the U.S.
     and non-U.S. deferred tax assets of $14,634,000 since it is more likely
     than not that the net deferred tax assets will be used in the future. The
     Company has deferred tax loss carryforwards of $2,139,000 for which a full
     valuation has been recorded. The Company has alternative minimum tax credit
     carryforwards of $1,265,000 which have no expiration.

28

11. OPERATING SEGMENT AND GEOGRAPHIC DATA
     In accordance with Financial Accounting Standard No. 131, "Disclosures
     About Segments of an Enterprise and Related Information", the internal
     organization that is used by management for making operating decisions and
     assessing performance is used as the source of the Company's reportable
     segments. The accounting policies of the segments are the same as those
     described in the "Accounting Policies" footnote.

     The primary segment of the Company is Engineered Fabrics which includes
     developing, manufacturing, marketing and servicing custom designed
     engineered fabrics used in the manufacture of paper, paperboard and
     products in other process industries. Another segment of the Company,
     Albany Door Systems, is an aggregation of the Company's operations that
     manufacture, market and service high performance doors. The segment Applied
     Technologies is made up of operations that manufacture products with
     applications outside of the core businesses of the Company.

     The following table shows data by operating segment, reconciled to
     consolidated totals included in the financial statements.



- -----------------------------------------------------------------
                                              
      (IN THOUSANDS)               2001         2000         1999

- -----------------------------------------------------------------
NET SALES
                                              
         Engineered Fabrics  $  698,187   $  707,751   $  633,373
         Albany Door
           Systems              102,273      103,692      104,354
         Applied
           Technologies          36,236       41,491       40,639
- -----------------------------------------------------------------
       Consolidated total    $  836,696   $  852,934   $  778,366
- -----------------------------------------------------------------

       DEPRECIATION AND
        AMORTIZATION
         Engineered Fabrics  $   47,818   $   53,329   $   46,890
         Albany Door
           Systems                2,659        2,255        2,304
         Applied
           Technologies           2,097        2,711        3,402
         Corporate                4,972        3,921        3,278
- -----------------------------------------------------------------
       Consolidated total    $   57,546   $   62,216   $   55,874
- -----------------------------------------------------------------




- -----------------------------------------------------------------
                                              
      (IN THOUSANDS)               2001         2000         1999

- -----------------------------------------------------------------
OPERATING INCOME
                                              
         Engineered Fabrics  $  156,936   $  150,653   $  138,658
         Restructuring of
           operations           (21,892)          --      (16,872)
- -----------------------------------------------------------------
                                135,044      150,653      121,786
         Albany Door
           Systems                9,556        8,152        6,520
         Applied
           Technologies           1,651        3,397        4,802
         Research expense       (23,224)     (23,287)     (23,567)
         Unallocated
           expenses             (38,915)     (35,281)     (32,554)
- -----------------------------------------------------------------
         Operating income
           before
           reconciling
           items                 84,112      103,634       76,987
         Reconciling items:
           Interest income        1,977        1,336        1,248
           Interest expense     (30,893)     (43,158)     (26,800)
           Other (expense)/
              income, net        (2,833)         755          481
- -----------------------------------------------------------------
       Consolidated income
        before income taxes  $   52,363   $   62,567   $   51,916
- -----------------------------------------------------------------

       OPERATING ASSETS
         Engineered Fabrics  $1,074,047   $1,267,794   $1,368,167
         Albany Door
           Systems               66,178       68,703       64,040
         Applied
           Technologies          95,083       83,578       89,945
         Reconciling items:
           Accumulated
              depreciation     (376,230)    (362,901)    (348,148)
           Deferred tax
              assets             64,709       46,806       33,402
           Investments in
              associated
              companies           4,374        4,300        4,389
           Other                  3,768        3,972       (4,953)
- -----------------------------------------------------------------
       Consolidated total
        assets               $  931,929   $1,112,252   $1,206,842
- -----------------------------------------------------------------

       CAPITAL EXPENDITURES
         Engineered Fabrics  $   22,448   $   33,137   $   28,757
         Albany Door
           Systems                  605          531        1,638
         Applied
           Technologies           2,635        2,790        4,302
         Corporate                  143          408          256
- -----------------------------------------------------------------
       Consolidated total    $   25,831   $   36,866   $   34,953
- -----------------------------------------------------------------


                                                                              29

     The following table shows data by geographic area. Net sales are based on
     the location of the operation recording the final sale to the customer.



- -----------------------------------------------------------------
                                                
      (IN THOUSANDS)                   2001       2000       1999

- -----------------------------------------------------------------
NET SALES
                                                
         United States             $329,787   $334,253   $310,070
         Canada                      57,873     63,397     58,060
         Sweden                      81,624     80,828     83,714
         Germany                     94,697     98,131     69,375
         Other countries            272,715    276,325    257,147
- -----------------------------------------------------------------
         Consolidated total        $836,696   $852,934   $778,366
- -----------------------------------------------------------------
       PROPERTY, PLANT AND
        EQUIPMENT, AT COST, NET
         UNITED STATES             $122,985   $134,487   $133,127
         Canada                      17,530     20,356     22,916
         Sweden                      34,968     42,638     51,778
         Germany                     48,678     55,144     64,004
         Other countries            114,941    135,033    163,347
- -----------------------------------------------------------------
         Consolidated total        $339,102   $387,658   $435,172
- -----------------------------------------------------------------


12. PENSION PLANS

     The Company has a noncontributory, qualified defined benefit pension plan
     covering U.S. employees, a noncontributory, nonqualified pension plan
     covering certain U.S. executives and both contributory and noncontributory
     pension plans covering non-U.S. employees. Employees are covered primarily
     by plans which provide pension benefits that are based on the employee's
     service and average compensation during the three to five years before
     retirement or termination of employment. The qualified defined benefit
     pension plan is closed to new participants.
     The following table sets forth the components of amounts recognized in the
     Company's balance sheet.


- ------------------------------------------------------
      (IN THOUSANDS)                   2001       2000
- ------------------------------------------------------
                                        
      Projected benefit
       obligation in excess of
       plan assets                 $(62,655)  $(44,047)
      Unrecognized net loss          40,839     14,784
      Prior service cost not yet
       recognized in net periodic
       pension cost                   9,095     10,059
      Remaining unrecognized net
       obligation                       231        247
      Contributions                     704        675
- ------------------------------------------------------
      Accrued pension liability    $(11,786)  $(18,282)
- ------------------------------------------------------


     The projected benefit obligation, accumulated benefit obligation, and fair
     value of plan assets for the pension plans with accumulated benefit
     obligation in excess of plan assets were $201,477,000, $182,166,000, and
     $138,996,000 respectively, for 2001 and $160,799,000, $140,517,000, and
     $113,370,000, respectively, for 2000.

     The weighted average expected long-term rate of return for these plans was
     9.0% for 2001 and 2000. The weighted average discount rate was 6.8% for
     2001 and 7.1% for 2000. In 2001 and 2000, the weighted average rate of
     increase in future compensation levels was 4.7%.

     The following table sets forth the reconciliation of beginning and ending
     balances of benefit obligations and fair value of plan assets, and the
     funded status of the plans.


- ------------------------------------------------------
      (IN THOUSANDS)                   2001       2000
- ------------------------------------------------------
                                        
      Change in benefit
       obligation:
        Benefit obligation at
          beginning of year        $206,947   $204,126
        Service cost                  6,084      6,498
        Interest cost                14,287     14,146
        Participant contributions       687      1,137
        Plan amendments                  --      1,977
        Benefits paid               (14,193)   (13,587)
        Actuarial loss (gain)         2,020     (1,769)
        Exchange rate loss           (6,480)    (5,581)
- ------------------------------------------------------
        Benefit obligation at end
          of year                  $209,352   $206,947
- ------------------------------------------------------
      Change in plan assets:
        Fair value of plan assets
          at beginning of year     $162,900   $156,010
        Actual return on plan
          assets                     (8,990)    18,710
        Employer contributions       10,064      4,856
        Participant contributions       687      1,137
        Benefits paid               (14,193)   (13,587)
        Administrative expenses        (875)      (878)
        Exchange rate loss           (2,896)    (3,348)
- ------------------------------------------------------
      Fair value of plan assets
       at end of year              $146,697   $162,900
- ------------------------------------------------------


     Amounts recognized in the balance sheet are as follows:


- ------------------------------------------------------
      (IN THOUSANDS)                   2001       2000
- ------------------------------------------------------
                                        
      Accrued pension liability    $(42,958)  $(30,306)
      Intangible asset                8,906      9,801
      Accumulated other
       comprehensive income          22,266      2,223
- ------------------------------------------------------
      Net amount recognized at
       year-end                    $(11,786)  $(18,282)
- ------------------------------------------------------


     The Company was required to accrue an additional minimum liability for
     those plans for which accumulated plan benefits exceeded plan assets. The
     liability at December 31, 2001 and 2000 respectively, of $31,172,000 and
     $12,024,000 was offset by an asset amounting to $8,906,000 and $9,801,000
     (included in intangibles) and a charge to equity of $22,266,000 and
     $2,223,000.

30

     Net pension cost included the following components:


- --------------------------------------------------------------------
      (IN THOUSANDS)                      2001       2000       1999
- --------------------------------------------------------------------
                                                   
       Service cost                   $  6,084   $  6,498   $  6,927
       Interest cost on projected
        benefit obligation              14,287     14,146     13,775
       Expected return on assets       (14,142)   (13,504)   (12,557)
       Net amortization and deferral     1,120      1,215      1,287
- --------------------------------------------------------------------
       Net periodic pension cost      $  7,349   $  8,355   $  9,432
- --------------------------------------------------------------------


     Annual pension cost charged to operating expense for all Company plans,
     including all statutory and defined contribution plans, was $11,645,000 for
     2001, $13,791,000 for 2000, and $13,518,000 for 1999.

13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
     In addition to providing pension benefits, the Company provides certain
     medical, dental and life insurance benefits for its retired United States
     employees. Substantially all of the Company's U.S. employees may become
     eligible for these benefits, which are subject to change, if they reach
     normal retirement age while working for the Company. Retirees share in the
     cost of these benefits. The Company's non-U.S. operations do not offer such
     benefits to retirees.
     The Company accrues the cost of providing postretirement benefits during
     the active service period of the employees. The Company currently funds the
     plan as claims are paid.

     The following table reflects the status of the postretirement benefit plan:


- ------------------------------------------------------
      (IN THOUSANDS)                   2001       2000
- ------------------------------------------------------
                                        
      Change in benefit
       obligation:
      Benefit obligation at
       beginning of year           $ 75,620   $ 62,389
      Service cost                    1,907      1,848
      Interest cost                   5,647      5,862
      Plan participants'
       contribution                   1,054        581
      Amendments                     (1,798)    (8,654)
      Acquisitions                       --      3,177
      Actuarial loss                  6,458     16,317
      Benefits paid                  (6,715)    (5,900)
- ------------------------------------------------------
      Benefit obligation at end
       of year                     $ 82,173   $ 75,620
- ------------------------------------------------------
      Change in plan assets:
      Fair value of plan assets
       at beginning of year              --         --
      Employer contributions          5,661      5,319
      Plan participants'
       contributions                  1,054        581
      Benefits paid                  (6,715)    (5,900)
- ------------------------------------------------------
      Fair value of plan assets
       at end of year                    --         --
- ------------------------------------------------------
      Funded status                  82,173     75,620
      Unrecognized prior service
       cost                           9,409      8,558
      Unrecognized net (loss)       (29,901)   (24,588)
- ------------------------------------------------------
      Accrued postretirement cost  $ 61,681   $ 59,590
- ------------------------------------------------------


     Net periodic postretirement benefit cost included the following:


- -----------------------------------------------------------------
      (IN THOUSANDS)                       2001     2000     1999
- -----------------------------------------------------------------
                                                  
      Service cost of benefits earned    $1,907   $1,848   $1,357
      Interest cost on accumulated
       postretirement
      benefit obligation                  5,647    5,862    4,389
      Amortization of gains and losses     (947)     (97)      --
      Amortization of unrecognized net
       loss                               1,146      971       60
- -----------------------------------------------------------------
      Net periodic postretirement
       benefit cost                      $7,753   $8,584   $5,806
- -----------------------------------------------------------------


     For measuring the expected postretirement benefit obligation, a
     7.0 percent annual rate of increase in the per capita cost of covered
     health care benefits was assumed for 2001. The rate was assumed to decrease
     to 5.0 percent for 2005 and remain at that level thereafter.

     The weighted average discount rate was 7.25% for 2001 and 7.5% for 2000 and
     1999.

     A one percentage point increase in the health care cost trend rate would
     result in a $11,116,000 increase in the accumulated postretirement benefit
     obligation as of December 31, 2001 and an increase of $1,194,000 in the
     aggregate service and interest cost components of the net periodic
     postretirement benefit cost.

                                                                              31

14. TRANSLATION ADJUSTMENTS
     The Consolidated Statements of Cash Flows were affected by translation as
     follows:


- ------------------------------------------------------------
      (IN THOUSANDS)              2001       2000       1999
- ------------------------------------------------------------
                                           
      Change in cumulative
       translation
       adjustments            $ 29,259   $ 44,814   $ 37,141
      Other noncurrent
       liabilities               2,749      3,392      1,756
      Deferred taxes               118      5,911      3,816
      Long-term debt               411      1,205        549
      Investments in
       associated companies     (1,018)      (634)      (167)
      Net fixed assets         (15,141)   (24,835)   (16,900)
      Other assets              (7,714)   (11,836)    (8,126)
- ------------------------------------------------------------
      Effect of exchange
       rate changes           $  8,664   $ 18,017   $ 18,069
- ------------------------------------------------------------


     Shareholders' equity was affected by translation as follows: decrease from
     translation of non-U.S. financial statements of $28,296,000, $39,454,000,
     and $34,982,000, and from remeasurement of loans of $963,000, $5,360,000,
     and $2,159,000 in 2001, 2000, and 1999 respectively.

15. STOCK OPTIONS AND INCENTIVE PLANS

     During 1988, 1992 and 1998, the shareholders approved stock option plans
     for key employees. The 1988 and 1992 plans, under which options can no
     longer be granted, each provided for the granting of up to 2,000,000 shares
     of Class A Common Stock. The 1998 plan currently provides for the granting
     of up to 4,500,000 shares of Class A Common Stock. In addition, in 1997 the
     Board of Directors granted one option outside these plans for 250,000
     shares of Class A Common Stock. Options are normally exercisable in five
     cumulative annual amounts beginning 12 months after date of grant. Option
     exercise prices are normally equal to and are not permitted to be less than
     the market value on the date of grant. The option granted by the Board in
     1997 is not exercisable unless the Company's share price reaches $48 per
     share and is then limited to 10% of the total number of shares multiplied
     by the number of full years of employment elapsed since the grant date.
     During 2000, the Board of Directors approved an amendment to increase the
     period after retirement to exercise options from 5 years to 10 years. This
     amendment, however, does not change the original termination date of each
     option. Unexercised options generally terminate twenty years after date of
     grant for all plans.

     For the purpose of applying FAS No. 123, "Accounting for Stock-Based
     Compensation", the fair value of each option granted is estimated on the
     grant date using the Black-Scholes Single Option model. No adjustments were
     made for certain factors which are generally recognized to reduce the value
     of option contracts. These factors include limited transferability, a 20%
     per year vesting schedule, a share price threshold with vesting based on
     years of employment and the risk of forfeiture of the non-vested portion if
     employment is terminated. The cash dividend yield assumed was 1.0% for the
     2001 calculation. No dividend was assumed for 2000 and 1999. The expected
     volatility was 27.6% in 2001, 26.8% in 2000, 25.5% in 1999. The expected
     life of the options varies based on employee group and ranges from 12 to
     20 years. The risk-free interest rate ranges from 5.7% to 5.9% in 2001,
     5.3% to 5.7% in 2000, 6.6% to 6.9% in 1999. The Company applies Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees", in accounting for the stock option plans. Accordingly, no
     compensation cost has been recognized in 2001, 2000, or 1999. Had
     compensation cost and fair value been determined pursuant to FAS No. 123,
     net income would decrease from $32,202,000 to $30,075,000 in 2001,
     $38,085,000 to $34,147,000 in 2000, and $30,222,000 to $28,567,000 in 1999.
     Earnings per share would decrease from $1.04 to $0.97 in 2001, $1.24 to
     $1.11 in 2000, $1.00 to $0.94 in 1999. Diluted earnings per share would
     decrease from $1.03 to $0.96 in 2001, $1.24 to $1.11 in 2000, $0.99 to
     $0.94 in 1999. The weighted average fair value of options granted during
     2001, 2000, and 1999, for the purposes of FAS 123, is $11.41, $7.35 and
     $10.98 per share, respectively.

     Activity with respect to these plans is as follows:


- ---------------------------------------------------------------------
      (IN THOUSANDS)                   2001         2000         1999
- ---------------------------------------------------------------------
                                                  
      Shares under option at
       January 1                  4,234,750    3,927,650    3,550,750
      Options granted               433,500      348,300      411,750
      Options cancelled              60,325       41,200       26,300
      Options exercised             311,230           --        8,550
- ---------------------------------------------------------------------
      Shares under option at
       December 31                4,296,695    4,234,750    3,927,650
      Options exercisable at
       December 31                2,959,305    2,896,200    2,518,950
      Shares available for
       options                      293,175      168,150      476,750
- ---------------------------------------------------------------------


32

     The weighted average exercise price is as follows:


- -----------------------------------------------------------
                                     2001     2000     1999
- -----------------------------------------------------------
                                            
      Shares under option at
       January 1                   $17.98   $18.65   $19.00
      Options granted               20.45    10.56    15.69
      Options cancelled             16.06    18.70    19.76
      Options exercised             15.77    --       19.26
- -----------------------------------------------------------
      Shares under option at
       December 31                  18.42    17.98    18.65
      Options exercisable at
       December 31                  18.31    18.18    17.97
- -----------------------------------------------------------


     The following is a summary of the status of options outstanding at
     December 31, 2001:


- ---------------------------------------------------------------
                                                 Exercisable
                        Outstanding Options
                       ---------------------       Options
                          Weighted            -----------------
                           Average  Weighted           Weighted
                         Remaining   Average            Average
Exercise               Contractual  Exercise           Exercise
Price Range    Number         Life     Price   Number     Price
- ---------------------------------------------------------------
                                        
      $10.56  331,945        18.88    $10.56   77,905    $10.56
 15.00-15.50  575,000         7.38     15.39  575,000     15.39
 15.69-16.25  528,350        16.00     15.85  320,000     15.96
       16.75  430,000         8.33     16.75  430,000     16.75
 17.63-18.75  240,900        11.75     18.65  240,900     18.65
       19.38  382,250        16.84     19.38  250,050     19.38
       19.75  392,150        15.29     19.75  331,850     19.75
       20.45  433,000        19.85     20.45      500     20.45
       22.25  733,100        13.89     22.25  733,100     22.25
       25.56  250,000        15.85     25.56       --        --
- ---------------------------------------------------------------


     The Company's voluntary deferred compensation plans provide that a portion
     of certain employees' salaries are deferred in exchange for amounts payable
     upon their retirement, disability or death. The deferred compensation
     liability is included in the caption "Other noncurrent liabilities" and was
     $29,003,000 and $26,580,000 at December 31, 2001 and 2000, respectively.
     During a period selected by the participants in accordance with the
     provisions of each plan, voluntary withdrawals are also permitted under
     some circumstances. The Company is the beneficiary of life insurance
     policies on the lives of certain plan participants. The Company's expense
     for all plans, net of the increase in cash surrender value, was $3,058,000
     in 2001, $1,780,000 in 2000, and $2,037,000 in 1999. The increase in cash
     value, net of premiums, was $1,434,000 in 2001, $728,000 in 2000, and
     $1,110,000 in 1999.

     The Company maintains a voluntary savings plan covering substantially all
     employees in the United States. The Plan, known as "Prosperity Plus," is a
     401(k) plan under the U.S. Internal Revenue Code. Employees may contribute
     from 1% to 15% of their regular wages which under Section 401(k) are tax
     deferred. The Company matches between 50% and 100% of each dollar

     contributed by employees up to 10% of their wages in the form of Class A
     Common Stock which is contributed to an Employee Stock Ownership Plan. The
     investment of employee contributions to the plan is self directed. The cost
     of the plan amounted to $4,086,000 in 2001, $4,150,000 in 2000, and
     $3,774,000 in 1999.

     The Company's profit-sharing plan covers substantially all employees in the
     United States. After the close of each year, the Board of Directors
     determines the amount of the profit sharing contribution and whether the
     contribution will be made in cash or in shares of the Company's Class A
     Common Stock. Contributions are only made to current active participants in
     Prosperity Plus. The expense recorded for this plan was $1,448,000 in 2001,
     $974,000 in 2000, and $581,000 in 1999.

16. ACQUISITIONS AND RESTRUCTURING

   2000 ACQUISITIONS

     In September, the Company acquired all the shares of Portsam AB, a Swedish
     company that provides services for high performance doors. The purchase
     price was approximately $1.1 million.

   1999 ACQUISITIONS

     In April, the Company purchased all of the shares of Jansen Tortechnik, a
     manufacturer of high quality sectional overhead doors located in Surwold,
     Germany for approximately $7,700,000.

     In August, the Company completed the purchase of all of the outstanding
     capital stock of the paper machine clothing business of the Geschmay group
     for approximately $250,000,000. Geschmay's principal operations are located
     in Europe and the United States. The fair market value of assets and
     liabilities was determined by valuations and appraisals. The excess
     purchase price over fair value is amortized on a straight-line basis over
     20 years (see Note 4).

                                                                              33

   RESTRUCTURING

     In 2001, the Company recorded a charge for restructuring of operations of
     $21,892,000 that included $13,714,000 for termination benefits, $4,106,000
     for plant rationalization costs, $6,465,000 for losses on disposal of
     assets, and a reversal of accruals from previous restructuring programs of
     $2,393,000. There are approximately 600 employee terminations related to
     this restructuring.

     In 1999, the Company recorded a charge for restructuring of operations of
     $16,872,000 that included $12,956,000 for termination benefits, $1,540,000
     for plant rationalization costs and $2,376,000 for losses on disposal of
     fixed assets. Approximately 500 employees were terminated as part of this
     restructuring.

     The components of restructuring related accruals, consist of:



- --------------------------------------------------------
                                           
      (IN THOUSANDS)                      2001      2000

- --------------------------------------------------------
TERMINATION COSTS                      $17,532   $11,248
                                           
      Plant rationalization costs        2,327        --
      Lease Obligations                  4,658     3,071
- --------------------------------------------------------
                                       $24,517   $14,319
- --------------------------------------------------------


     The change in accrued restructuring costs is the net result of actual
     payments for restructuring costs of $5,229,000, new accruals of $17,820,000
     and reversal of accruals related to previous restructuring programs of
     $2,393,000.

34

FINANCIAL REVIEW

Critical Accounting Policies and Assumptions

The Company's discussion and analysis of its financial condition and results of
operation are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America (GAAP). The preparation of these financial
statements requires the Company to make estimates and judgements that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities.

The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required.

The Company has interest rate swap agreements that fix the rate of interest on
$200 million of the Company's debt. The Company has determined that the swaps
qualify for hedge accounting in accordance with GAAP, and therefore, changes in
the fair value of these swaps are recorded in shareholders' equity in the
caption, "Derivative valuation adjustment". Future events, such as a change in
the Company's underlying debt arrangements, could require that the Company
record changes in fair value in earnings.

Albany International Corp. and its affiliate, Brandon Drying Fabrics Inc., are
defendants in a number of proceedings for injuries allegedly suffered as a
result of exposure to asbestos-containing products. The Company marketed
asbestos-containing dryer fabrics during the period from 1967 to 1976. Such
fabrics generally had a life of from three to twelve months. At February 28,
2002, there were 9,970 plaintiffs pursuing claims against Albany International
Corp., Brandon Drying Fabrics, or both. This compares with 9,467 claimants as of
December 31, 2001, 4,099 claimants as of December 31, 2000 and 2,429 claimants
as of December 31, 1999. The Company anticipates that additional claims will be
filed against it in the future but is unable to predict the timing and number of
such future claims.

The Company believes that all asbestos-related claims against it are without
merit. Based upon its understanding of the insurance policies available, how
settlement amounts have been allocated to various policies, its recent
settlement experience, the absence of any judgments against the Company, and the
defenses available, the Company currently does not anticipate any material
liability relating to the resolution of the above proceedings in excess of
existing insurance limits. Consequently, the Company does not believe, based
upon currently available information, that the ultimate resolution of these
claims will have a material adverse effect on its financial position, results of
operations or cash flows.

Although the Company cannot predict the number and timing of future claims,
based upon the foregoing factors and the trends in claims against it to date,
the Company does not anticipate that additional claims likely to be filed in the
future will have a material adverse effect on its financial position, results of
operations or cash flows. However, the Company is aware that litigation is
inherently uncertain, especially when the outcome is dependent primarily on
determinations of factual matters to be made by juries. The Company is also
aware that numerous other defendants in asbestos cases, as well as others who
claim to have knowledge and expertise on the subject, have found it difficult to
anticipate the volume of future asbestos claims. For these reasons, there can be
no assurance that the foregoing conclusions will not change.

Stockholders and other interested persons are encouraged to read the discussion
of this matter set forth in the Company's periodic reports filed with the
Securities and Exchange Commission on Forms 10-K and 10-Q.

Review of Operations

- --2001 VS. 2000

Net sales decreased $16.2 million or 1.9% as compared with 2000. Net sales were
reduced by $28.9 million from the effect of a stronger U.S. dollar as compared
to 2000. Excluding currency effects, net sales increased 1.5% as compared to
2000.

In the Engineered Fabrics segment, net sales in the United States decreased 2.8%
in 2001 as compared to 2000. Trade sales in Canada were flat in U.S. dollars,
but increased 4.1% in local currency. European sales decreased 2.2% in U.S.
dollars, but increased 2.9% in local currencies. In the Albany Door Systems
segment, 2001 sales were down 1.4% when measured in U.S. dollars, but were up
4.4% excluding currency effects. In the Applied Technologies segment, net sales
were down 12.7% in comparison to 2000.

                                                                              35

Gross profit was 40.6% of net sales in 2001 as compared to 39.5% in 2000.
Excluding the effects of currency fluctuation and costs in both years related to
the relocation of assets, gross profit was 40.8% in 2001 and 40.7% in 2000.

In 2001, the Company recorded a $21.9 million charge for restructuring of
operations related to a $25 million cost reduction initiative that was announced
in July 2001. The charge included $13.7 million for termination benefits,
$4.1 million for plant rationalization costs, $6.5 million for losses on
disposal of assets, and a reversal of accruals from previous restructuring
initiatives of $2.4 million. Cost of goods sold includes costs of $1.6 million
in 2001 and $9.7 million in 2000 for the relocation of equipment.

Selling, general, technical and research expenses decreased 0.1% in 2001 as
compared to 2000. Excluding the effect of the stronger U.S. dollar, these costs
increased 2.7%, principally due to lower currency remeasurement gains on
receivables and a one-time insurance benefit received in 2000.

Operating income before restructuring rose 2.3% in comparison to 2000. In the
Engineered Fabrics segment, operating income before restructuring was 22.5% of
net sales in 2001, compared to 21.3% in 2000. The higher percentage in 2001 is
primarily due to higher asset relocation costs in 2000. In the Albany Door
Systems segment, operating income as a percentage of net sales was 9.3% in 2001
in comparison to 7.9% in 2000. The increase is primarily attributable to
operating efficiency improvements. In the Applied Technologies segment,
operating income was lower as the global economic slowdown negatively impacted
results.

Other (income)/expense, net was $2.8 million of expense in 2001 compared to
$0.8 million of income in 2000. Currency transactions generated income of
$1.9 million in 2001 and $4.0 million in 2000. Income or losses from currency
transactions generally result from economic hedges which can have either a
positive or negative effect on other (income)/expense, net in any particular
period. The specific hedges in place are changed from time to time depending on
market conditions and cash flow forecasts of various non-U.S. operations and are
intended to partially offset the effects of translation on operating income (see
Notes 6 and 9 of Notes to Consolidated Financial Statements). During 2001, the
Company entered into a program to sell a portion of its North American trade
accounts receivable (see Notes 1, 6 and 9 of Notes to Consolidated Financial
Statements). Other (income)/expense includes costs of $1.8 million associated
with this program. Also included in other (income)/expense for 2001 is a gain of
$1.3 million related to the sale of buildings.

Interest expense decreased $12.3 million as compared with 2000. This decrease
was due to lower average debt and interest rates during 2001, as compared to
2000. During 2001, the Company repaid $198.2 million of debt. This repayment of
debt included the utilization of $40.9 million of proceeds from the sale of
accounts receivable.

The tax rate for 2001 was 37%, compared to 40% in 2000. The lower tax rate
resulted from improvements in the tax efficiency of the Company's global
operations.

The Company recorded a charge in 2001 of $1.1 million for the cumulative effect
of a change in accounting principle, net of tax. The charge relates to the
adoption of Financial Accounting Standard (FAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Company has a lease for
manufacturing facilities in Italy that must be accounted for as an adjustment to
income in accordance with this Standard.

Diluted net income per share was $1.03 in 2001 compared to $1.24 in 2000.
Excluding the cumulative effect of the change in accounting principle,
restructuring charges, and asset relocation costs in both years, diluted
earnings per share were $1.54 in 2001 compared to $1.43 per share in 2000.

- --2000 VS. 1999

Net sales increased $74.6 million or 9.6% as compared with 1999. Net sales were
reduced by $32.4 million from the effect of a stronger U.S. dollar as compared
to 1999. Acquisitions completed in 1999 added $87.4 million to net sales.
Excluding these two factors, net sales increased 2.5% as compared to 1999.

In the Engineered Fabrics segment, net sales in the United States increased 9.2%
in 2000 as compared to 1999. Excluding the 1999 acquisitions, net sales in the
United States decreased 0.7% over the same period. Trade sales in Canada
increased 8.0% while European sales increased 17.7% in 2000 as compared to 1999.
Excluding the effect of the stronger U.S. dollar and acquisitions net sales in
Europe increased 2.0%. In the Albany Door Systems segment, net sales in 2000
were 0.7% lower than 1999. In the Applied Technologies segment, net sales were
2.1% higher in comparison to 1999.

Gross profit was 39.5% of net sales in 2000 as compared to 41.0% in 1999.
Excluding the effect of 1999 acquisitions and currency fluctuation, gross profit
in 2000 was 41.2%.

36

In 1999, the Company recorded a charge for restructuring of operations of
$16.9 million. The charge included $13.0 million for termination benefits,
$1.5 million for plant rationalization costs and $2.4 million for losses on
disposal of fixed assets. In connection with the integration of Geschmay into
Albany International, 2000 cost of goods sold includes a charge of $9.7 million
for the relocation of equipment.

Selling, general, technical and research expenses, excluding acquisitions,
decreased 6.1% in 2000 as compared to 1999. Excluding the additional effect of
the stronger U.S. dollar, these costs decreased 2.6%.

Operating income before restructuring rose 10.5% in comparison to 1999 due
mainly to the effect of 1999 acquisitions. In the Engineered Fabrics segment,
operating income before restructuring was 21.3% of net sales in 2000, compared
to 21.9% in 2000. The decrease in percentage is primarily due to asset
relocation costs in 2000. In the Albany Door Systems segment, operating income
as a percentage of net sales was 7.9% in 2000 in comparison to 6.2% in 1999. The
increase is primarily attributable to operating efficiency improvements. In the
Applied Technologies segment, operating income was lower primarily due to asset
relocation charges in 2000.

Other (income)/expense, net includes the net effect of currency transactions and
interest rate protection agreements. Other income was slightly higher in 2000
compared to 1999.

Interest expense increased $16.4 million as compared with 1999. This increase
was due to higher average debt and interest rates resulting from the
August 1999 credit agreement.

The tax rate for 2000 was 40%, compared to 43% in 1999. The lower tax rate
resulted from determining, during 2000, the amount of nondeductible expenses
likely to arise from the Geschmay acquisition.

Diluted net income per share was $1.24 in 2000 compared to $0.99 in 1999.
Excluding equipment relocation charges from 2000 results, and excluding
restructuring charges from 1999 results, diluted earnings per share were $1.43
in 2000 compared to $1.31 per share in 1999. Approximately $0.07 of this
improvement was due to a reduction in the tax rate. During the fourth quarter of
2000, the Company intentionally slowed down production in order to reduce
inventory levels. The slowdown resulted in a reduction in earnings per share of
approximately $0.09.

INTERNATIONAL ACTIVITIES

The Company conducts more than half of its business in countries outside of the
United States. As a result, the Company experiences transaction and translation
gains and losses because of currency fluctuations. The Company periodically
enters into foreign currency contracts to hedge this exposure (see Notes 6, 9
and 14 of Notes to Consolidated Financial Statements). The Company believes that
the risks associated with its operations and locations outside the United States
are not other than those normally associated with operations in such locations.

Operating margins related to the Company's geographic regions in 2001 as
compared to 2000 increased in Canada and decreased in the United States and
Europe. Total operating income, excluding the 2001 restructuring charges and
currency fluctuation, increased 7.3% as compared to 2000. Operating income,
before the restructuring charges, as a percent of net sales for the United
States was 13.8% in 2001, 14.1% in 2000, and 16.9% in 1999; for Canada was 23.3%
in 2001, 21.8% in 2000, and 17.6% in 1999; for Europe was 8.3% in 2001, 8.8% in
2000, and 7.1% in 1999; and combined for the rest of the countries where the
Company has operations, the percentages were 17.6% in 2001, 10.7% in 2000, and
8.8% in 1999.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2001 the Company's order backlog was $594.9 million, a decrease
of approximately 1.5% from the prior year-end.

Accounts receivable decreased $93.7 million from December 31, 2000. Included in
the decrease is the sale of a portion of the Company's North American trade
accounts receivable. In exchange for the accounts receivable sold, the Company
received cash of $40.9 million and a note for $21.1 million. The note is subject
to monthly fluctuation based on the amount of receivables sold and bears
interest at variables rates. As of December 31, 2001, the interest rate was
2.87%. The effect of the stronger U.S. dollar reduced accounts receivable by
$10.2. Excluding currency effects and the sale of accounts receivable, the
combination of accounts and note receivable decreased $21.5 million from
December 31, 2000.

Inventories decreased $42.8 million from December 31, 2000. Excluding the effect
of currency fluctuation, inventories decreased $36.3 million. The decrease in
inventories was due to a global initiative to reduce inventories at all
operations.

Cash flow provided by operating activities was $214.3 million in 2001 compared
with

                                                                              37

$130.6 million in 2000 and $98.1 million in 1999. Adjusted free cash flow per
share, defined as cash flow provided by operating activities, minus capital
expenditures, cash dividends and increases in cash from accounts receivable sold
has grown from $2.08 in 1999, to $3.06 in 2000, to $4.75 in 2001. The strong
cash flow in 2001 enabled the Company to reduce debt by $198.2 million during
the year. The Company also reduced its leverage ratio to below 2.0. Reductions
in the leverage ratio during 2001 had the effect of both reducing restrictions
under the loan agreement and reducing the interest rate on a portion of the
Company's debt.

Capital expenditures were $25.8 million in 2001, $36.9 million in 2000, and
$35.0 million in 1999. Capital expenditures in 2002 are expected to be about
$35 million. The Company will continue to finance these expenditures with cash
from operations and existing credit facilities.

In August 1999, the Company entered into a $750 million credit agreement with
its banks. This facility included a $250 million term loan that was fully
prepaid during 2001. The remaining $500 million is a revolving loan with the
banks' commitment to lend terminating in 2004. This agreement includes
commitment fees and variable interest rates based on various loan pricing
methods. The interest rate margin is determined by the Company's leverage ratio.
The credit agreement contains various covenants that include limits on the
disposition of assets, cash dividends, and the Company's ability to purchase its
Common Stock. Additionally, the credit agreement specifies minimum interest
coverage of 3.0, a maximum leverage ratio of 3.0 and a limitation on guarantees
to non-U.S. subsidiaries. Borrowings are collateralized by a pledge of shares
of, and intercompany loans to, certain subsidiaries of the Company.

A cash dividend of $.05 per share was declared in November 2001 for payment in
January 2002.

As of December 31, 2001, the Company has the following cash flow obligations:

                             Payments Due by Period
                               In USD (Millions)



- ---------------------------------------------------------------
                                           
                                  Less      One   Three
                                  Than       to      to   After
                                   One    Three    Five    Five
                         Total    Year    Years   Years   Years

- ---------------------------------------------------------------
Total debt              $281.8   $33.6   $233.3   $ 2.4   $12.5
                                           
Operating leases          65.4   18.8     24.9    14.7      7.0
- ---------------------------------------------------------------
                        $347.2   $52.4   $258.2   $17.1   $19.5
- ---------------------------------------------------------------


As described in Note 6 of Notes to Consolidated Financial Statements, the banks'
commitment to lend under the Company's primary debt agreement terminates in
2004. Under this debt agreement, the Company could have borrowed an additional
$210 million at December 31, 2001. The Company's ability to borrow additional
amounts under the credit agreement is conditional upon the absence of any
material adverse change.

The Company has issued a letter of credit to a bank that loaned money to a joint
venture partner. The bank can draw upon the letter of credit if the joint
venture partner defaults on the loan. The letter of credit is denominated in
South African Rand and is approximately $2.8 million.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, FAS No. 142 "Goodwill and Other Intangible Assets" was issued. FAS
No. 142 changes the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of goodwill, including goodwill recorded
in past business combinations, will cease January 1, 2002, when the Company
adopts this Standard. Goodwill amortization was approximately $6.8 million in
2001. The Company is currently assessing, but has not yet determined, the
outcome of the impairment test required by FAS No. 142.

In August 2001, FAS No. 143, "Accounting for Asset Retirement Obligations" was
issued. FAS No. 143 requires entities to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred
beginning for fiscal years commencing after June 15, 2002. The Company does not
expect the adoption of FAS No. 143 to have a material effect on its financial
statements.

In October 2001, FAS No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets", was issued. FAS No. 144 requires that long-lived assets be
measured at the lower of carrying amount or fair value less cost to sell. The
Company is required to adopt this Standard on January 1, 2002. The Company does
not expect the adoption of FAS No. 144 to have a material effect on its
financial statements.

MARKET RISK SENSITIVITY

The Company has market risk with respect to foreign currency exchange rates and
interest rates. The market risk is the potential loss arising from adverse
changes in these rates as discussed below.

The Company has manufacturing plants in 15 countries and sales worldwide and
therefore is subject to foreign currency risk. This risk is composed of both
potential losses from the translation of foreign currency financial statements
and the remeasurement of foreign currency

38

transactions. To manage this risk, the Company periodically enters into forward
exchange contracts to either hedge the net assets of a foreign investment or to
provide an economic hedge against future cash flows. The total net assets of
foreign operations and foreign currency, long-term intercompany loans subject to
potential loss amount to approximately $694 million. The potential loss in fair
value resulting from a hypothetical 10% adverse change in quoted foreign
currency exchange rates amounts to $69.4 million. Furthermore, related to
foreign currency transactions, the same 10% change would cause an additional
loss of $5.9 million. Actual results may differ.

Including the effect of the interest rate swap agreements, the Company has fixed
the interest rate on approximately 77% of its total debt. Except for the portion
of debt that is either fixed rate or hedged, the fair value of the Company's
long-term debt at December 31, 2001 is estimated to be the carrying value as the
significant components are variable rate debt.

OUTLOOK

Global economic conditions and the strong dollar will continue to affect the
Company's primary markets during the first half of the year. Without evidence of
improvement, the Company will assume continued economic weakness and run its
business accordingly.

With uncertainty for the industries served continuing into 2002, the Company
will focus on areas within its direct control. The primary focus in 2002 will
continue to be debt reduction, cost control, and the introduction of new
products and process improvements for customers. In all of these activities, the
Company's highest priority remains improving returns to shareholders. The
Company believes it has sufficient capacity to take advantage of any economic
upturn as it occurs.

During 2002, the Company anticipates expenses of approximately $6 million
related to relocating equipment in connection with the 2001 restructuring. The
Company estimates that the restructuring will generate savings of approximately
$13 million for 2002, in comparison to 2001. The Company anticipates that, based
on currently projected income by region, the Company will benefit from further
improvements in the tax rate, which is expected to decline to 35% in 2002.

FORWARD-LOOKING STATEMENTS

This annual report contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. These statements include
statements about such matters as future earnings, pricing, markets, cost
reductions, debt reductions, exchange rates, new products, paper industry
consolidation and outlook, tax rate, capital expenditures, depreciation and
amortization, equipment relocation expenses, contingencies, adoption of new
accounting standards and operating efficiency. Actual future events and
circumstances (including future performance, results and trends) could differ
materially from those set forth in such statements due to various factors. These
factors include even more competitive marketing conditions resulting from
customer consolidations, possible softening of customer demand, unanticipated
events or circumstances related to recently acquired businesses, the occurrence
of unanticipated events or difficulties relating to divestiture, joint venture,
operating, capital, global integration and other projects, changes in currency
exchange rates, changes in general economic and competitive conditions,
technological developments, and other risks and uncertainties, including those
detailed in the Company's filings with the Securities and Exchange Commission.

                                                                              39

ELEVEN YEAR SUMMARY
ALBANY INTERNATIONAL CORP.



                                                                 2001               2000               1999             1998
                                                                                                        
                ------------------------------------------------------------------------------------------------------------
                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                SUMMARY OF OPERATIONS
                Net sales                                    $836,696         $  852,934         $  778,366         $722,653
                Cost of goods sold                            497,301            515,649            458,930          417,375
                Operating income (3),(5)                       84,112            103,634             76,987           70,608
                Interest expense, net                          28,916             41,822             25,552           19,310
                Income before income taxes                     52,363             62,567             51,916           51,704
                Income taxes                                   19,374             25,027             22,325           20,163
                Income before associated companies             32,989             37,540             29,591           31,541
                Income/(loss) before cumulative effect of a
                 change in accounting principle                33,331             38,085             30,222           31,772
                Cumulative Effect of Accounting Change, net
                 of tax                                        (1,129)                --                 --               --
                Net income/(loss) (2),(4)                      32,202             38,085             30,222           31,772
                    Net income/(loss) per share              $   1.04               1.24               1.00             1.02
                    Diluted net income/(loss) per share      $   1.03               1.24               0.99             1.01
                Average number of shares outstanding           31,089             30,632             30,340           31,073
                Capital expenditures                           25,831             36,866             34,953           38,825
                Cash dividends declared                         1,568                 --                 --            3,140
                    Per Class A common share                     0.05                 --                 --            0.105
                    Per Class B common share                     0.05                 --                 --            0.105

                FINANCIAL POSITION
                Current assets                               $365,946         $  494,287         $  508,073         $409,713
                Current liabilities                           186,072            222,034            176,964          220,038
                Current ratio                                     2.0                2.2                2.9              1.9
                Property, plant and equipment, net            339,102            387,658            435,172          325,109
                Total assets                                  931,929          1,112,252          1,206,842          866,366
                Long-term debt                                248,146            398,087            521,257          181,137
                Shareholders' equity                          316,644            324,917            325,407          314,850
                    Per share                                   10.09              10.55              10.68            10.42
                Total capital (1)                             598,413            804,856            889,677          613,993
                Total debt to total capital                     47.1%              59.6%              63.4%            48.7%
                Return on shareholders' equity                  10.2%              11.7%               9.3%            10.1%

                NUMBER OF EMPLOYEES                             6,769              6,929              7,164            6,011


          ----------------------------------------

              (1) 1991 and prior includes all debt, deferred taxes and other
                  credits and shareholders' equity. Following the adoption of
                  FAS No. 109 "Accounting for Income Taxes" in 1992, total
                  capital includes all debt and shareholders' equity.

              (2) In 1992, the Company elected to adopt FAS No. 106,
                  "Employers' Accounting for Postretirement Benefits Other Than
                  Pensions", effective January 1, 1992, and recognize the
                  accumulated liability. This adoption resulted in a charge of
                  $27,431,000, net of tax of $16,813,000, and a reduction of
                  1992 operating income of $2,798,000. The Company's election
                  to adopt FAS No. 109, as of January 1, 1992, resulted in an
                  increase to 1992 income of $20,142,000. During the fourth
                  quarter of 1992, the Company elected an early payment of a
                  $3,000,000 tax exempt financing for $1,357,000 which resulted
                  in an extraordinary gain of $1,019,000, net of tax.

40




        1997       1996       1995       1994       1993       1992       1991
                                                 
- ------------------------------------------------------------------------------

    $710,079   $692,760   $652,645   $567,583   $546,120   $561,084   $557,218
     404,982    399,311    379,696    338,991    345,468    366,756    359,184
      99,619     96,785     88,827     62,821     40,051     18,893     44,488
      15,467     15,833     20,009     16,820     16,115     18,829     20,090
      79,631     80,940     69,842     41,677     24,566      3,282     19,752
      31,055     31,570     27,208     17,921      9,679      1,247     10,803
      48,576     49,370     42,634     23,756     14,887      2,035      8,949
      49,059     48,306     43,011     23,882     15,003     (3,114)    10,794
          --         --         --         --         --         --         --
      49,059     48,306     43,011     23,882     15,003     (3,114)    10,794
        1.52       1.51       1.36       0.76       0.54      (0.12)      0.40
        1.50       1.50       1.29       0.76       0.53      (0.12)      0.40
      32,312     31,907     31,737     31,476     28,035     26,858     26,707
      50,804     53,473     41,921     36,322     30,940     20,219     40,067
      12,921     12,159     11,708     10,488      9,361      8,950      8,903
        0.42       0.40     0.3875       0.35       0.35       0.35       0.35
        0.42       0.40     0.3875       0.35       0.35       0.35       0.35

    $373,323   $384,627   $364,207   $319,947   $270,034   $256,422   $259,917
     170,440    176,746    126,945    115,863    101,069    112,955    106,220
         2.2        2.2        2.9        2.8        2.7        2.3        2.4
     321,611    339,461    342,150    320,719    302,829    308,618    362,456
     796,897    831,917    802,232    727,157    661,314    652,745    680,706
     173,654    187,100    245,265    232,767    208,620    239,732    250,423
     343,108    332,330    304,942    274,632    247,223    193,975    247,231
       10.63      10.38       9.57       8.70       7.87       7.20       9.23
     594,560    586,890    567,460    525,119    467,320    456,773    551,240
       42.3%      43.4%      46.3%      47.7%      47.1%      57.5%      48.2%
       14.3%      14.5%      14.1%       8.7%       6.1%      -1.6%       4.4%

       5,881      5,854      5,658      5,404      5,286      5,678      5,726


(3) In 1992, the Company reported a charge of $12,045,000 for
    restructuring of certain operations, including plant closings in
    Norway and Germany and other workforce reductions.

(4) In 1996, the Company recorded a one-time, extraordinary, non-cash
    charge to income of $1,296,000, net of tax of $828,000, related
    to the redemption of 5.25% convertible subordinated debentures.

(5) In 1998, the Company reported a charge of $20,191,000 for
    restructuring of certain operations in the United States and
    Europe.

                                                                              41

QUARTERLY FINANCIAL DATA
(unaudited)



- -----------------------------------------------------------------------------------------------------------
                                                                                       
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)         1ST              2ND               3RD                   4TH

- -----------------------------------------------------------------------------------------------------------
2001
                                                                                       
- -----------------------------------------------------------------------------------------------------------
Net sales                                      $ 208.5          $ 207.1          $  202.7          $  218.4
Gross profit                                      87.1             85.9              76.9              89.5
Net income before cumulative effect of a
 change in accounting principle                   12.3             10.9               9.4               0.7
Net income                                        11.2             10.9               9.4               0.7
Net income per share before cumulative
 effect of a change in accounting
 principle                                         .40              .35               .30               .02
Net income per share                               .37              .35               .30               .02
Diluted income per share before cumulative
 effect of a change in accounting
 principle                                         .39              .35               .30               .02
Diluted income per share                           .36              .35               .30               .02
Cash dividends per share                            --               --                --               .05
Class A Common Stock prices:
  High                                           19.44            22.88             21.10             21.85
  Low                                            12.94            17.58             14.55             14.79
- -----------------------------------------------------------------------------------------------------------
2000
- -----------------------------------------------------------------------------------------------------------
Net sales                                      $ 215.7          $ 213.0          $  201.1          $  223.1
Gross profit                                      87.3             85.3              79.4              85.3
Net income per share                              10.0              9.4               9.4               9.3
Net income per share                               .33              .31               .30               .30
Diluted net income per share                       .33              .31               .30               .30
Cash dividends per share                            --               --                --                --
Class A Common Stock prices:
  High                                           15.50           15.375            15.125           14.3125
  Low                                            12.75          12.9375           11.9375             9.625
- -----------------------------------------------------------------------------------------------------------
1999
- -----------------------------------------------------------------------------------------------------------
Net sales                                      $ 181.6          $ 175.8          $  196.6          $  224.4
Gross profit                                      75.0             73.7              78.4              92.3
Net income/(loss)                                 11.2              9.3              10.7              (1.0)
Net income /(loss) per share                       .37              .31               .35              (.03)
Diluted net income/(loss) per share                .37              .30               .35              (.03)
Cash dividends per share                            --               --                --                --
Class A Common Stock prices:
  High                                           22.25            25.00            23.063            17.313
  Low                                           17.625           18.688            14.813            13.813
- -----------------------------------------------------------------------------------------------------------


STOCK AND SHAREHOLDERS
   The Company's Class A Common Stock is traded principally on the
New York Stock Exchange. At December 31, 2001 there were
approximately 4,600 shareholders.

42

CORPORATE INFORMATION

TRANSFER AGENT, DIVIDEND DISTRIBUTION AGENT AND REGISTRAR

For assistance with shareholder account questions such as change of address,
lost certificates, change of ownership, dividend reinvestment plan, and other
similar matters, contact:

FOR MAIL:

Shareholder Communications Team
Computershare Investor Services LLC
Post Office Box A-3504
Chicago, Illinois 60690-3504
Telephone: (312) 360-5395
Fax: (312) 601-4332
Email: webqueries@computershare.com

FOR OTHER DELIVERIES:

Shareholder Communications Team
Computershare Investor Services LLC
Two North LaSalle St., 2nd Floor
Chicago, Illinois 60602

NOTICE OF ANNUAL MEETING

The Annual Meeting of the Company's shareholders will be held on Thursday,
May 9, 2002, at 10:00 a.m. at Albany International U.S. Press Fabrics, Route 4,
East Greenbush, New York.

STOCK LISTING

Albany International is listed on the New York Stock Exchange and the Pacific
Stock Exchange (Symbol AIN). Stock tables in newspapers and financial
publications list Albany International as "AlbanyInt."

FORM 10-K AND OTHER INFORMATION

The Company's Annual Report to the Securities and Exchange Commission on
Form 10-K will be available in April. To obtain a copy of the 10-K and other
financial information, including Form 10-Q (issued in May, August, and
November), without charge, contact our Investor Relations Department at:

Investor Relations Department
Albany International Corp.
Post Office Box 1907
Albany, New York 12201-1907
Telephone: (518) 445-2284
Fax: (518) 447-6343
E-mail: investor_relations@albint.com

FINANCIAL INFORMATION ONLINE

You can access our financial information, including the annual report,
Form 10-K, Form 10-Q, and press releases, via the Internet by visiting our
Website at http://www.albint.com.

EQUAL EMPLOYMENT OPPORTUNITY

Albany International, as a matter of policy, does not discriminate against any
employee or applicant for employment because of race, color, religion, sex,
national origin, age, physical or mental disability, or status as a disabled or
Vietnam-Era veteran. This policy of nondiscrimination shall be applicable to
matters of hiring, upgrading, promotions, transfers, layoffs, terminations,
rates of pay, selection for training, recruitment, and recruitment advertising.
The company maintains affirmative action programs to implement its EEO policy.

                                                                              43

DIRECTORS AND OFFICERS

DIRECTORS

Thomas R. Beecher, Jr.(2,3)
PRESIDENT, BALLYNOE INC.

Charles B. Buchanan(3)
RETIRED VICE PRESIDENT AND SECRETARY-ALBANY
INTERNATIONAL CORP.

Erland E. Kailbourne(1,2)
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
FLEET NATIONAL BANK (NEW YORK REGION)

Francis L. McKone(2,3)

Dr. Joseph G. Morone(1)
PRESIDENT, BENTLEY COLLEGE

Frank R. Schmeler(3)
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

Christine L. Standish(2)

Allan Stenshamn(1,2)
PARTNER, LANDAHL ADVOKATBYRA

Barbara P. Wright (1,2)
PARTNER, FINCH, MONTGOMERY, WRIGHT & EMMER

John C. Standish(3)

James L. Ferris, Ph.D.(1)
PRESIDENT, AND CHIEF EXECUTIVE OFFICER
THE INSTITUTE OF PAPER SCIENCE AND TECHNOLOGY

(1)Member, Audit Committee
(2)Member, Compensation and Stock Option Committee
(3)Member, Employee Benefits Committee

OFFICERS

Frank R. Schmeler
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

Edward Walther
GROUP VICE PRESIDENT-UNITED STATES

Michel J. Bacon
GROUP VICE PRESIDENT-EUROPE

William M. McCarthy
GROUP VICE PRESIDENT-CANADA, PACIFIC AND LATIN AMERICA

Michael C. Nahl
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

Edward R. Hahn
SENIOR VICE PRESIDENT-CHIEF TECHNICAL OFFICER

Frank Kolf
SENIOR VICE PRESIDENT-ADMINISTRATION AND DEVELOPMENT

Dieter Polt
SENIOR VICE PRESIDENT-INDUSTRIAL PRODUCTS

Thomas H. Hagoort
GENERAL COUNSEL AND SECRETARY

Richard A. Carlstrom
VICE PRESIDENT-CONTROLLER

Thomas H. Curry
VICE PRESIDENT-SALES AND MARKETING UNITED STATES

David C. Michaels
VICE PRESIDENT-TREASURY AND TAX

Kenneth C. Pulver
VICE PRESIDENT-CORPORATE COMMUNICATIONS

John C. Treanor
TREASURER

Charles J. Silva, Jr.
ASSISTANT GENERAL COUNSEL AND ASSISTANT SECRETARY

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EX-21

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EXHIBIT 21

SUBSIDIARIES OF REGISTRANT

Affiliate	Percent Ownership		Percent Ownership		Country
	Direct		Indirect
Albany International Corp.					United States
Albany International Holdings One, Inc.	100	%			United States
Albany International Holdings Two, Inc.	100	%			United States
Albany International Research Co.	100	%			United States
Albany International Techniweave Inc.	100	%			United States
Geschmay Corp.	100	%			United States
Geschmay Export Corp.			100	%	Virgin Islands
Albany International Pty., Ltd.			100	%	Australia
Nomafa Gesellschaft GmbH			100	%	Austria
Albany Nordiskafilt GmbH			100	%	Austria
Albany International Feltros E Telas Industrials Ltds.			100	%	Brazil
Albany Engenharia de Sisternas Industria e Com. Ltda.			100	%	Brazil
AI Finance Canada, Inc.			100	%	Canada
Albany International Canada Inc.			100	%	Canada
Geschmay Canada, Ltd.			100	%	Canada
M&I Door Systems, Ltd.			100	%	Canada
Albany International Receivables Corporation			100	%	Cayman Islands
Albany International (China) Co., Ltd.	100	%			China
Schieffer Skandinavien A/S			67	%	Denmark
Albany Fennofelt OY			100	%	Finland
Metco Form OY			100	%	Finland
Albany International France, S.A.S.			100	%	France
Albany International S.A.S.			100	%	France
Cofpa S.A.			100	%	France
Nomafa S.A.R.L.			100	%	France
Nomafa GmbH			100	%	Germany
Albany Door Systems GmbH			100	%	Germany
Albany Germany GmbH & Co. KG			100	%	Germany
Albany International Germany Holding GmbH			100	%	Germany
Albany International Germany Three GmbH			100	%	Germany
Albany International GmbH & Co. KG			100	%	Germany
Albany International GmbH, Eschenbach			100	%	Germany
Albany International Verwaltungs GmbH			100	%	Germany
Albany Nordiskafilt GmbH-Germany			100	%	Germany
Schieffer Tor-und Schutzsysteme GmbH			100	%	Germany
Wurttembergische Filztuchfabrik D. Geschmay GmbH & Co. KG			100	%	Germany
AI Financial Services Company			100	%	Ireland

Albany International Italia S.p.A.			100	%	Italy
Albany International S.p.A.			100	%	Italy
Albany Nordiskafilt Kabushiki Kaisha			100	%	Japan
Albany International Korea, Inc.			100	%	Korea
Telas Industriales de Mexico, S.A. de C.V.	100	%			Mexico
Albany International de Mexico S.A. de C.V.			100	%	Mexico
Albany International Service Company S.A. de C.V.			100	%	Mexico
Martel Wire S.A. de C.V.			100	%	Mexico
Albany International B.V.			100	%	Netherlands
Nomafa B.V.			100	%	Netherlands
Albany Nordiskafilt AS			100	%	Norway
Schieffer Polska Sp. zo.o.			65	%	Poland
Nevo-Cloth Ltd.			50	%	Russia
Geschmay Asia Private Limited			100	%	Singapore
Nordiskafilt S.A. (Proprietary) Ltd.			100	%	South Africa
Beier Albany and Company (Proprietary Limited)			50	%	South Africa
Albany Nordiska S.A.			100	%	Spain
Albany International AB			100	%	Sweden
Albany Door Systems AB			100	%	Sweden
Portsam AB			100	%	Sweden
Nomafa AG			100	%	Switzerland
Loading Bay Specialists Limited			50	%	United Kingdom
Albany International Ltd.	28	%	72	%	United Kingdom

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EXHIBIT 21 SUBSIDIARIES OF REGISTRANT

EX-23

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EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

        We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-23163, 33-28028, 33-33048, 333-90069 and 333-76078) of Albany International Corp. of our report dated January 25, 2002 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated January 25, 2002 relating to the financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Albany, New York
March 21, 2002

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EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS

EX-24

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EXHIBIT 24

POWERS OF ATTORNEY

        KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and officers of Albany International Corp., a Delaware corporation ("the Company") which contemplates that from time to time it will file with the Securities and Exchange Commission ("the SEC") under, or in connection with, the provisions of the Securities Exchange Act of 1934, as amended, or rules and regulations promulgated thereunder, reports (including, without limitation, reports on Forms 8-K, 10-Q and 10-K), statements and other documents (such reports, statements and other documents, together with amendments, supplements and exhibits thereto, are collectively hereinafter referred to as "1934 Act Reports"), hereby constitutes and appoints Frank R. Schmeler, Michael C. Nahl, Richard A. Carlstrom, Thomas H. Hagoort, David C. Michaels, John C. Treanor and Charles J. Silva, and each of them with full power to act without the others, his or her true and lawful attorneys-in-fact and agents, with full and several power of substitution, for him and her and in his or her name, place and stead, in any and all capacities, to sign any or all 1934 Act Reports and any or all other documents relating thereto, with power where appropriate to affix the corporate seal of the Company thereto and to attest said seal, and to file any or all 1934 Act Reports, together with any and all other information and documents in connection therewith, with the SEC, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        The appointment of any attorney-in-fact and agent hereunder shall automatically terminate at such time as such attorney-in-fact and agent ceases to be an officer of the Company. Any of the undersigned may terminate the appointment of any of his or her attorneys-in-fact and agents hereunder by delivering written notice thereof to the Company.

        IN WITNESS WHEREOF, the undersigned have duly executed this Power of Attorney this 12^th day of February, 2002.

/s/  FRANK R. SCHMELER Frank R. Schmeler Chairman of the Board and Director (Chief Executive Officer)	/s/  MICHAEL C. NAHL Michael C. Nahl Senior Vice President (Chief Financial Officer)
/s/  RICHARD A. CARLSTROM Richard A. Carlstrom Controller (Principal Accounting Officer)	/s/  FRANCIS L. MCKONE Francis L. McKone Director
/s/  CHARLES B. BUCHANAN Charles B. Buchanan Director	/s/  THOMAS R. BEECHER, JR. Thomas R. Beecher, Jr. Director

/s/  ALLAN STENSHAMN Allan Stenshamn Director	/s/  BARBARA P. WRIGHT Barbara P. Wright Director
/s/  JOSEPH G. MORONE, PH.D. Joseph G. Morone, Ph.D. Director	/s/  CHRISTINE L. STANDISH Christine L. Standish Director
/s/  ERLAND E. KAILBOURNE Erland E. Kailbourne Director	/s/  JAMES L. FERRIS James L. Ferris Director
/s/  JOHN C. STANDISH John C. Standish Director

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EXHIBIT 24 POWERS OF ATTORNEY